Linking Communications & Development – One Professional’s Story

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Just spoke with Dr. Salmane El Allami, a professor at Mohammed V University who had attended a UN sponsored conference on how IT-facilitated development can help alleviate poverty. He was representing the Rhamna Foundation for Sustainable Development, which works to advance the lives of people living in the Rhamna region north of Marrakech. We started out talking about his background, and what emerged is a lesson in how even the smallest interactions can have great consequences.

He first came to the US in 1987 on a United States Information Service exchange program marking the 200th anniversary of the US-Morocco Friendship Treaty, our longest continuous treaty that is still in force. He was a university student who fell in love with English in high school and, unable to major in journalism or media at his university, took his degree in English literature. He stayed for six weeks, and it changed his life. Later, when pursuing his doctorate at the Sorbonne, he was struck by the lack of an area study of US-Arab relations. He received permission to do self-directed research on the topic of Arab Americans in the US, starting his field work in 1991. While in the DC metro area, he interviewed dozens of Arab Americans to better understand their integration into US society, and the role of religion in that transition. As importantly, he acquired knowledge in media and social-research techniques that became key to his career.

Much of our conversation focused on his study of the perceptions of Morocco’s National Human Development Initiative (INDH) and a follow up evaluation of INDH projects. INDH is a grassroots campaign launched by King Mohammed VI to build sustainable alternatives to the grinding poverty and lack of resources that afflict the hundreds of communities targeted by the program. It brings together stakeholders, government officials, the private sector, and NGOs to ascertain the challenges and the resources available, and then to bring together partners to develop solutions. This is what he has been doing both through his organization called Anfasse and also as a board member of the Rhamna Foundation.

And he has not left his love of media behind. When he moved to Mohammed V University, he started the Higher Institute of Information and Communication in Rabat to train young Moroccans in media. This year, he will launch a private effort called the All Media Development Training Center – a three-year program for media professionals to advance their craft and acquire skills in political communications, strategic communications, and similar specializations. He has also made a number of documentary films on subjects such as the crisis in Arab Higher Education, research in the Arab World, and the challenges of teaching and preserving Arabic. In addition, next month, he is taking his work on the road, bringing movies to rural areas where children have not been exposed to films, teaching them the essential skills of movie-making.

He sees all of this as inter-related – focusing on capacity-building for Moroccans to take charge of their lives and resources. He believes that this is the genius of INDH, “the most important development project in Morocco.” In the past, development programs lacked coherence, he says, with very little coordination, sporadic efforts, and no central strategy. Today’s INDH is based on firm principles of inclusion, sustainability, and a philosophy of development that puts people at the center of the projects. “We want them to learn how to do things on their own…it’s a paradigm shift that builds their capacity to positively affect their lives.” So there is a balance between government interventions and building up small businesses and other forms of income generation. For example, more than one million women have been affected by INDH since 2005.

Rhamna Foundation is a local partner for INDH and is focused on partners and stakeholders working together. Fortunately, Office Chérifien des Phosphates (OCP), the world’s largest exporter of phosphates, has a major facility in the region. It is partnering with Rhamna to build the first green city in Morocco as well as participating in projects such as improving local schools and launching the Mohammed VI Polytechnic Institute to enhance marketable skills of local graduates.

Dr. El Allami is quite enthusiastic about the future. He believes that this innovative strategy of involving stakeholders in a detailed analysis and conceptualization of the region’s needs, encompassing all sectors of economic and human development, is the key to success. “By matching projects to the specific needs of the area and bringing in other parties from the government and private sector, we are giving people the tools they need to manage their futures.” And it started in part with a six-week visit to the US by someone who fell in love with English in high school.

Partners can make a difference in driving economic growth

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Over the past several weeks, I have been looking at media coverage of events and activities related to how Morocco is confronting its challenges in driving economic growth. One particular theme that merits more attention is how external partners, whether bilateral or multilateral, can play a significant role in enabling Morocco to maximize its reform efforts.

On March 18, the Carnegie Endowment for International Peace (CEIP) held a panel on “Economic Turmoil in Arab Countries – Can Partners Help?” that raised several key points. First of all, the drive for sustainable development must be internally driven; otherwise the needed political will is absent. Without national leadership, the longer term efforts to reform are marginalized and politicized. Secondly, greater stability in the MENA region benefits donor countries and agencies by supporting an environment in which growing prosperity, jobs, and opportunities reduce conflict and promote greater cooperation within and among countries.

While it is too soon to make conclusive assessments of these partnership arrangements, details of recent programs provide insights into their priorities. The first example is a recent press release on projects funded by the World Bank in Morocco. The funding has two components. The first is a $160 million loan to improve the competitiveness of Moroccan companies. It includes simplifying the regulatory environment and strengthening the capacity of Moroccan agencies tasked with business and investment development. Interestingly, as reported in my blog last week, this follows on a European Bank for Reconstruction and Development trade facilitation funding agreement with BMCE bank in Morocco. The programs should be mutually supportive.

Simon Gray, the Maghreb Country Director for the World Bank, commented, “Morocco has engaged in a number of promising reforms to liberalize and promote investment in key sectors over the last decade. The impact of these reforms on growth and job creation will be further enhanced by addressing the remaining rigidities in the institutional and regulatory business environment especially as they pertain to small and medium enterprises.” The reforms include addressing government payment delays, bureaucratic red tape, unfair competition, and lack of predictability in implementing rules and regulations.

Also approved by the World Bank is a $6.44 million grant to help small farmers implement land and biodiversity conservation measures in targeted regions. An interesting component of this project is using animal feed generated from by-products from agri-food chains including olive oil, cactus, and argan. This is the latest project by the World Bank in support of the Plan Maroc Vert program, which targets doubling the added-value and jobs in the agricultural sector by 2020.

A Zawya article, “Strong macro drives Morocco’s investment appeal,” notes, “Morocco has emerged as the most stable North African country, after King Mohammad VI navigated through a tricky period during the Arab Spring. A new democratically elected government with powers has led to a relatively stable country compared to the painful transitions in North African peers Tunisia, Libya and Egypt.” It goes on to list hallmarks of EU-Morocco cooperation:

  • Morocco is the first North African state to embark on Deep and Comprehensive Free Trade Agreements (DCFTAs) with the European Union.
  • An EU-Morocco Association Agreement came into effect in 2000.
  • Negotiations for a new European Neighborhood Plan (ENP) for the period 2013-2017 were concluded in November 2012 and a formal adoption process is under way.
  • An agreement on liberalization of trade in agriculture came into force on October 1, 2012.
  • The guidelines for a new Fisheries Partnership Agreement were adopted by the EU in February 2012, and negotiations are ongoing.
  • Morocco remains the largest recipient of EU assistance in the ENP-south region with EUR 580.5 million earmarked for 2011-13 with a focus on social and economic development, environmental protection, and institutional support (i.e. justice and human rights).

A recent IMF report pointed out that higher economic growth, lower unemployment, better health and educational outcomes, better access to basic infrastructure, and a marked reduction in poverty rates are tangible evidence of Morocco’s progress in fostering inclusive growth. The only black mark is youth unemployment, which remains particularly high.

It is too soon to write the headlines for Morocco’s economic future, yet it is clear that providing a platform in support of solid political, social, and economic reforms is a key role for external partners. Targeted and results-focused assistance programs, developed through frank and constructive dialogue with recipient countries, are keys to achieving tangible outcomes that promote inclusive growth and enhance stability. In this period of budgetary constraints among all the partners, it is helpful for American taxpayers to know that the US is not alone in working hard to promote security and prosperity in the MENA region.

Indicators Up Yet Gaps Remain in Morocco’s Economic Growth

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Over the past two weeks, several stories seem to indicate that Morocco is on the right track for economic growth in 2013. As with the other Maghreb countries, Morocco faces many challenges ranging from quality of labor to a somewhat confusing regulatory environment in attracting foreign investment. Yet, tourism is up over last year, the EU has launched talks for a free trade agreement, a major Moroccan bank has signed a trade finance credit line with the Europeans, and, at least on the economic side, most analysts believe that GDP growth will exceed 3 percent.

Reuters carried the story on the EU’s intention to negotiate a free trade agreement with Morocco as part of the EU’s response to the Arab uprisings. It is significant in that the first treaty will be negotiated with Morocco, another indicator of its perceived stability and commitment to opening its markets further. Trade between Morocco and the EU topped 24 billion euros in 2011, and the EU is hoping to further expand its activities in the services sector as well. The EU’s goal was well stated by Marielle De Sarnez, a French member of the European Parliament, “Smooth negotiations of the free trade agreement are crucial because they serve as an example for other countries in the southern Mediterranean…this agreement will also allow in the long term greater regional integration for the Maghreb countries.”

Her sentiments were echoed by Vice-President of the European Investment Bank (EIB), Philippe de Fontaine Vive, on the sidelines of the EIB’s annual review. He noted that Morocco is the first recipient under a new program of the FEMIP (Facility for Euro-Mediterranean Investment and Partnership) that commits nearly one billion euros of financing “to support the transition to a new form of innovative and more inclusive growth in Morocco.”   More than a dozen major projects were funded in 2012, in areas as diverse as transportation infrastructure (including the extension of rural roads), agriculture, technological innovation, solar energy, education and health sectors, in addition to the medina renovation programs in Fez and Meknes, and coming to Casablanca. He went on to say that “This shows both that the EIB is there to support the process of democratic transition and that Morocco has the capacity in diverse sectors to be able to mount innovative projects, the most emblematic in the year 2012 has been the solar project at Ouarzazate, for which we coordinated the European funding.”

It is the capacity of local agencies and institutions that is the focus of a $75 million trade finance facility between the European Bank for Reconstruction and Development (EBRD) and Banque Marocaine du Commerce Exterieur (BMCE Bank). The financing line is to support international and intraregional trade transactions with both guarantee and cash advance facilities. It will support trade activities by “facilitating the distribution of imported goods and contribute to the overall growth of small and medium-sized enterprises (SMEs).” How this growth is perceived in-country was the focus of an article in the Financial Times by Chris Wright that highlighted the perceptions of fellow travelers on the train from Casablanca to Rabat. Comparing the views of a Brit, a Saudi, and a Moroccan leaves one with the impression that while Morocco is doing better than others affected by the Arab uprisings, it still has many challenges ahead before its recovery and growth are assured.

A key insight into what needs to be done came from Oussama Romdhani, former Tunisian minister of communication. In an article in the World Affairs Journal, he proposed that “A durable recovery will require far-reaching policy reforms addressing the chronic mismatch between educational training and the job market. In this particular concern, US advice and assistance could help North African countries modernize their inefficient higher education and vocational training systems.” The gap between jobs and skills in Morocco continues to draw the attention and resources of both the government and the private sector. It is difficult to attract foreign direct investment without an available qualified workforce that operates within a relatively open and free labor market. The government has initiated a series of programs that address the skills side but still lags behind in freeing up its regulatory environment to facilitate a more dynamic labor sector. Hopefully, as the growth prospects continue to improve, there will be time to address the structural reforms needed in the labor market that will accelerate the trend towards greater prosperity.

Is there a future for Islamic Finance in Morocco?

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Islamic finance in Morocco: Right tool to meet economic challenges?

While no one is claiming that Islamic finance will change the business face of Morocco, experience elsewhere indicates that it can generate important vehicles for improving access to financing resources. To the uninitiated, Islamic finance is based on two key principles, the prohibition of interest (riba) on the use of money, and conformity with other principles of Sharia law that regulate profit and loss. Islamic finance has had its fits and starts over the past two decades due to its weak competitive position vis-à-vis traditional modes of financing. The global financial crisis of the last decade has focused attention on Islamic financial instruments since they prohibit the speculation inherent in derivatives and other instruments that led to the collapse of banks and financial sectors worldwide.

In 2012, it is estimated that more than a trillion dollars is circulating in Islamic financial instruments. Yet there is no international authority that governs how these products are generated and regulated. In order to provide a “Sharia compliant” product, the originator must have a religious ruling (fatwa) by recognized Islamic authorities that approves the product. Although the roots of Islamic finance are in the Levant, the first significant growth occurred in Malaysia and was copied a decade later by Bahrain, Qatar and the Emirates of Dubai and Ras Al-Khaimah. Many international banks have set up sukuk (Islamic bonds) departments to tap into this quickly growing market.

Morocco is a good case study in why Islamic finance is growing at a time when the global financial system is struggling. Soon after the Moroccan government coalition led by an Islamic party was installed in 2012, Prime Minister Abdelilah Benkirane played host to the leader of Qatar International Islamic Bank (QIIB) who proposed both an Islamic bank and insurance company. Since that time, the government has been busy preparing the necessary laws to submit to parliament but the date has not yet been set. It is not simply a matter of setting up guidelines. While the licensing process is the first step, the challenges of getting products approved by Islamic authorities and getting the appropriate regulations vary from market to market. Moroccan officials have to decide which practices are best suited to their economy. The process then moves on to ensuring proper training of staff to sell and manage sukuk offerings. In the meantime, if European markets start to recover, there will be increased competition for investment dollars/euros that might otherwise be invested in sukuk.Islamic instruments are financially and psychologically attractive. Risk is controlled by limiting products to those tied to assets so that there is virtually no secondary or derivative market for speculators. In general, assets must be held for the duration of the contract/bond at a fixed value guaranteed by the asset holder so that there is greater stability in the transaction. In high risk environments, such as today’s, Islamic bonds have a higher valuation due to the controlled risk factor. Psychologically, Muslims have a higher confidence level in Sharia-compliant financial instruments and believe that the investments are reliable, conservative, aligned with their religious beliefs, and support the financial health of the community. So how would this help Morocco?

As Elhassan Eddez, deputy director of the Treasury at the Financial Ministry said, selling Islamic bonds helps issuers “reach conventional debt investors and sukuk investors at the same time…The sukuk market has a wider investor base.” It is also an international base, which means that Morocco could be attracting funds from throughout the Muslim world, including the Gulf States, Africa, and Asia. Hakim Azaiez, who heads investment at GCA Asset Management, noted, “A Moroccan sukuk bond will allow the government to potentially reduce its borrowing cost and tap new frontier markets…The demand is there for sovereign sukuk issues.” Given the large amount of capital intensive projects needed in Morocco, from social housing and education and health services facilities to transportation infrastructure, lower borrowing costs means more gets done with fewer dirhams – no surprise why this is attractive to a non-energy driven economy.

The key, as in any market, is to have a level competitive field between traditional and Islamic banks so that the country benefits from the choices it makes that best serve the Moroccan people. If Islamic finance can encourage a higher rate of personal savings, increase capital available in the market at reasonable rates, and promote greater transparency in government financial transactions, then it can have a significant impact on how Morocco does business and its support from the Moroccan people.