MOROCCO is situated on the extreme northwestern corner of Africa and is bordered by Mauritania and Algeria, both to the south and east.
Morocco’s varied geography includes no less than four separate mountain ranges, in addition to lush river valleys, beautiful sandy coasts, and wide expanses of desert. The three most prominent mountain ranges, which run parallel to each other from the southwest to the northeast, are the Middle Atlas, the High Atlas, and the Anti-Atlas. The ascent of the country’s highest peak, Jebel Toukbal (13,665 ft./4,165 m.), is a spectacular and not particularly difficult High Atlas trek. The Moroccan coastline, which fronts onto both the Mediterranean and the Atlantic, offers plenty of great beaches as well as a number of fascinating old coastal cities. In the southeast, Morocco’s mountain ranges yield inexorably to the desolate expanse of the Sahara. The rivers that flow down this side of the High Atlas support long, narrow, and lush river valleys that resemble linear oases.
The climate in Morocco is reliably dry, although small amounts of rain do fall between November and March. Temperature varies considerably by season and locale. While the southern and southeastern desert regions can reach extremely high
temperatures during the hot summer months, the higher altitudes of the mountains are cool in summer evenings and freezing in winter. Most travellers find the early summer months to be the most comfortable time to visit, as rain is not a threat and temperatures are warm during the day and pleasantly cool at night.
The Moroccan economy displayed a degree of resilience in a particularly diﬃcult economic context, growing by 3.2% in 2012, driven by internal consumption and public investment.
Funding the economy remains a major challenge if the country is to maintain its momentum, and continuing reform is essential to check the rise in public spending, particularly of the compensation fund (Caisse de compensation), that pays subsidies for oil and basic goods.
Morocco has a coherent strategy in place since the early 2000s to achieve its medium-term vision and has made a good start on structural change, with Morocco’s phosphate industry – the world’s biggest producer and exporter – playing a key role both from a ﬁnancial point of view and as a source of growth for other sectors of the economy, though the textile industry is among those needing to reposition quickly in the face of international competition.
Thanks to its economic development model, which combines openness, liberalisation and structural reform, Morocco has shown resilience in a diﬃcult national and international context. Nevertheless the slowdown in activity in Europe, which is the country’s chief economic partner, and below-average agricultural production resulted in a distinct slowdown in growth, which was 3.2% in 2012. That rate makes it impossible to reduce the high level of unemployment, especially among young graduates and women. However, growth should pick up in 2013 to reach around 4.6%, driven by the consolidation of internal demand. Some industries have been given a boost by the implementation of the 2009-15 National Pact for Industrial Emergence (Pacte national d’émergence industrielle, [PNEI]) and they should make a vigorous contribution to growth.
The PNEI is the result of strategic choices made at the start of the 2000s to encourage the emergence of new centres of growth, competitiveness and jobs. Morocco has focused on encouraging niche industries for export and on international promotion of emerging services to businesses. As a result, relocation of services, the automotive sector and transport and logistics are all thriving.
The economic programme of Prime Minister Abdelilah Benkirane calls for the programme commitments of the previous governments to continue, in particular in respect of social policies and public investment, while bringing down the budget deﬁcit to 3% by 2016. It should be noted that the early reform of the compensation fund, a socially sensitive issue, is a prerequisite for achieving this goal of cutting the deﬁcit.
The fund provides subsidies for basic necessities such as cereals and sugar as well as petroleum products and in 2012 absorbed almost 20% of state revenues. Its cost amounts to nearly 6% of gross domestic product (GDP). Steps were taken in June 2012 to limit the explosion in spending but the fund still cost almost MAD 53 billion (Moroccan dinars) compared with the MAD 32 billion originally forecast. Foreign exchange reserves have been falling fast since 2008 while remittances from Moroccans overseas have been declining, so that ﬁnancing the fund’s activity is the next challenge facing the country’s economy.
While funding of public infrastructure and the ﬂagship projects of the PNEI can still be covered by calling on the external market and foreign investors, household savings need to be reinvigorated. To this end banks will need to make extra eﬀorts to mobilise these savings to avoid rationing credit in job-creating sectors such as property and small- and medium-sized enterprises (SMEs) and industries (SMIs).
On the political front administrative reforms are being speeded up so that articles 156 and 167 of the new 2011 constitution relating to government administration can come into eﬀect. But the Islamist government is the subject of criticism over progress on such major issues as the reform of the justice system or the ﬁght against corruption. It is worth remembering that the Islamist Justice and Development Party (Parti de la justice et du développement, [PJD]) won the November 2011 elections by campaigning against corruption.
At 3.2% GDP growth was below the forecast 5.0% owing to sluggish world demand and a below-average performance in agriculture, but should pick up in 2013 to reach 4.6%, driven by a rise of 4.8% in non- agricultural GDP and a growth in agricultural added value of around 5.0%. Growth in the agricultural sector was hit by inadequate rainfall in the 2011/12 season but prospects for 2013 are brighter because of better weather conditions and the entry into service of two agropôles focusing on agricultural production, agri-food (processing and distribution), technological innovation and scientiﬁc research in the Meknès and Oriental regions.
The establishment of communal farmland managers (agrégateurs) in various sectors of the industry, as part of the Green Morocco Plan, should be a driving force. The process consists of a voluntary coming together of farmers around an operator responsible for optimising production and getting the best value from agricultural output as well as marketing it. Furthermore the agreement on liberalising trade in agricultural produce reached between Morocco and the European Union (EU) in 2012 should also have positive consequences for the country. It provides for a rise in export quotas, an increase in the number of products enjoying quota-free access and continuing protection of sensitive Moroccan sectors.
Regarded as an engine of national industry the automotive sector beneﬁted from the start of production at the Renault car plant in Tangier in February 2012. This project has already increased the sector’s exports by more than 20% compared with 2011. The aeronautics sector has also recorded sustained growth since the implementation of the PNEI in 2009. This includes the aéropôle at Nouceur and the MidParc integrated industrial platform (Plateforme industrielle intégrée MidParc), which is dedicated to aeronautics, the space industry and electronics. An institute for aeronautical professions (Institut des métiers de l’aéronautique) also came into service in 2011 with the aim of eventually training 800 professionals a year.
Growth in the sector was reinforced by the installation of operators such as EADS, Boeing, Safran and Bombardier. Bombardier has announced plans to invest USD 200 million with activities due to begin in 2013. As a result of the measures put in place since 2008 and the investments made, export turnover in the sector has risen by an average 18.3% a year. Electronics industries have beneﬁted from a number of developments in the PNEI, but have made only modest progress. The gloomy world economic context saw a 14.4% drop in the value of electronic component exports. Nevertheless the sector should beneﬁt in the medium term from Alstom’s plans to build an industrial unit for the manufacture of cables and components for the railway industry.
The plan should eventually generate almost EUR 310 million in export earnings and create 5 000 jobs over 10 years. Another key sector of the national economy is agribusiness which accounts for almost a quarter of exports, 8% of GDP and 19% of industrial employment.
The construction sector maintained its strong performance with a growth rate of 5.2%. The renewal of activities linked to social housing, which accounts for 60.0% of building, means that the upward trend should continue with a growth rate of 5.5% expected in 2013. The tertiary sector accounts for more than 50% of total added value. It was buoyed by the good performance of primary and secondary activities and by vigorous trade, transport and telecommunications activity. Growth in 2012 was 4.6% and should be maintained at that level in 2013.
Tourism should increase by 4% in 2013, after a lower rise of 2% in 2012, beneﬁting from the relative instability in Tunisia and Egypt. Trade should beneﬁt from the completion of the 2008-12 Plan Rawaj for the modernisation of internal commerce.
Postal and telecommunications services should maintain their growth thanks to the 2013 digital Morocco programme (Maroc Numérique 2013) for public access to broadband Internet, computerisation of SMEs and development of online government services. Growth continued to be driven by domestic demand: household consumption rose by 3.2% in 2012 and should rise to 4.2% in 2013, thanks to measures to support the middle classes and to extend social protection such as health coverage and pensions, and to the support fund for social cohesion (Fonds d’appui à la cohésion sociale) to help the most disadvantaged. After increasing by 5.5% in 2012 investment should continue to rise by 5.9% in 2013, driven by accelerating public investment and the creation of an investment monitoring committee (Commission de suivi des investissements) seeking to identify barriers to their implementation.
Economic Cooperation, Regional Integration & Trade
Morocco is committed to regional integration with the Mediterranean region and the Union of the Arab Maghreb (Union du Maghreb Arabe, UMA), and in sub-Saharan Africa. The country has signed several bilateral and multilateral free-trade agreements to link its economy to the Euro-Mediterranean and Arab context and to consolidate its relations with the main centres of growth in the global economy. These various agreements have given Morocco a favourable environment for the growth of foreign direct investment (FDI) and access to a market of 55 countries with more than a billion potential consumers.
Economic & Political Governance
The legislative, regulatory and institutional reforms that Morocco has embarked upon were continued in 2011 and 2012 with the aim of improving the business climate and laying foundations more likely to attract foreign and domestic investors. Further progress has been made in this area, particularly in promoting investment. Furthermore Morocco emerges as the country in the Middle East and North Africa that has most improved its business regulations. Since 2005 the country has implemented 15 reforms in this ﬁeld. Nevertheless, having risen 21 places in the World Bank report Doing Business 2012, rising from 115th place to 94th out of 185 countries, Morocco fell back four places in the rankings in the 2013 report.
This drop was chieﬂy due to a relapse in the areas of registering property, obtaining credit and dealing with construction permits, although its performance in the category of starting a business showed a clear improvement.
In the 2012 Heritage Foundation Index of Economic Freedom (IEF), Morocco scores 77.2 out of 100 in respect of business freedom, 1.5 points up on the 2011 ranking. But the report says that while the procedures for setting up and registering private enterprises have been streamlined there has been no real improvement in eliminating the bureaucratic obstacles to private investment. The country still faces major challenges in improving its business climate in the long term.
The country’s ﬁnancial system plays a key role in economic growth and has shown a degree of resilience in the context of the world ﬁnancial crisis. The banking sector is one of largest, perhaps the largest, in the region and represents 110% of GDP. Financial intermediation has grown progressively, with eﬀorts made by the banking sector to foster ﬁnancial inclusiveness having raised the bank account penetration rate to more than 50%. In addition the authorities have taken a number of steps to promote greater access to banking services and encourage saving, especially in rural areas. In addition the Basel III ﬁnancial standards, in particular those concerning capital and liquidity, are being progressively implemented. In this context the central bank has raised the equity ratio to 12% and the mandatory level of core capital to 9%, with effect from June 2013.
The capital market is still limited and it makes an inadequate contribution to ﬁnancing the economy, in particular in the production sector and promising sectors of activity. The indices on the Casablanca Stock Exchange, its capitalisation and volume of trading, all showed signiﬁcant drops in 2012. The operators in the SME sector and the ministry of the economy and ﬁnance should shortly be holding discussions with a view to making it easier for SMEs to gain access to the capital market, the aim being to create a specific stock market for them.
Public Sector Management, Institutions & Reform
Administrative reforms are being actively pursued with the aim of implementing the good governance principles endorsed by the new 2011 constitution. These include in particular Articles 156 and 157 which deal with the functioning of government, regional and local authorities and other public bodies. Three priorities underpin the action plan of the ministry of public service and modernisation of the administration: improve the quality and eﬀectiveness of public services; pay greater attention to public opinion; and modernise the management of human resources.
To address the quality and eﬀectiveness of public services, the priority is to have clear, simpliﬁed procedures that are harmonised nationally. Until now procedures have been over-complicated and varied too much from one jurisdiction to another for there to be an eﬀective claims or complaints system. This has minimised the impact of initiatives such as “Stop Corruption”, which was launched at the end of 2010 by the central body Natural Resource Management & Environment.
Morocco has an active development strategy for renewable energies (sun and wind), and another for water production and management. The country is heavily dependent on imports for its energy needs which represent 95% of its supply. Its water resources are already low (730m3 per inhabitant per year) and could drop by a quarter by 2030, with demand exacerbated by recurrent droughts and a downward trend in rainfall.
The implementation of the energy strategy launched in November 2009 accelerated in 2012. The contract for the ﬁrst phase of the solar park at Ouarzazate was awarded in September 2012 to the Acwa Power group. Worth around USD 9 billion the strategy aims to build ﬁve solar parks with a capacity of 2000 megawatts by 2020 at Ouarzazate, Ain Bni Mathar, Foum Al Oued, Boujdour and Sebkhat Tah.
This is expected to make annual savings equivalent to 1 million tonnes of oil and 3.7 million tonnes of CO2. In this context the World Bank has made two loans totalling USD 297 million, repayable over 30 to 40 years.
The African Development Bank (AfDB) has made a loan of EUR 359 million to ﬁnance a wind energy and rural electriﬁcation programme which has also attracted USD 125 million from the Clean Technology Fund. The integrated wind power programme aims to generate 2 000 megawatts (MW). Morocco’s coastline is believed to have the capacity to produce 6 000 MW from wind farms. Five projects of 720 MW should be fully operational in 2013.
Bilateral Trade with India
The bilateral trade has grown to $1.712 billion in 2010 from $573.87 million in 2005 with balance of trade in favour of Morocco ($611 million). The major portion of bilateral trade is made up of import of phosphates and fertilisers by India and import of textiles, transport equipment and machinery by Morocco
Indian firms can invest in Moroccan firms to gain direct and preferential access to several markets with which the African country has signed free trade agreements (FTAs).
This was discussed at the Indo-Morocco Joint Commission Meeting, co-chaired by Mr Anand Sharma, Union Minister of Commerce and Industry and Moroccan Minister of Trade Finance, Mr Abdellatif Mazouz in April 2013.
Morocco has FTAs with European, African, Arabic and American markets at bilateral and regional levels.
Morocco also proposed exploring the possibilities of tripartite cooperation involving Morocco, India and Sub-Saharan African countries.. The potential sectors of cooperation are chemical and fertilisers, mining, IT, pharmaceuticals, automobiles, tourism and textiles. There are possibilities for trade in agricultural commodities and food processing.
The National Board of Electricity of Morocco proposed to implement partnership with its Indian counterparts in energy efficiency; rural electrification; execution of transport networks and production facilities related to the transport network.
They also proposed to establish strategic partnerships with the Indian industrial operators for executing projects.
Mr. Ajay Kumar Gupta
MD, Kamtech Associates Private Limited