Investments in Morocco Poised for Growth in 2014

By all indicators, with the rainfall to date supporting a strong showing for Morocco’s GDP, there are also strong signs that the rate of Foreign Direct Investment (FDI) will match or exceed the projected 4.2+% GDP growth rate.

Investors are buoyed by the continued steps being taken by the government to improve the budget balance, rein in subsidies, generate more jobs, and reduce red tape for companies.

The US government, through the International Trade Administration section of the Commercial Service recently held a webinar on infrastructure opportunities in Morocco. Here is the report from Senior Commercial Officer in Casablanca Douglas Wallace.

The U.S. Embassy in Rabat organized a very successful Morocco Infrastructure video-conference/webinar on December 19, 2013. Twenty U.S. companies participated in the event, which featured presentations by Charge d’Affaires Matt Lussenhop, Senior Commercial Officer Douglas Wallace, and Senior Commercial Specialist Thanae Bennani.

Lussenhop and Wallace emphasized Morocco’s growing strategic importance both in terms of its ongoing stability in light of the regional Arab Spring, as well as its growing role as a regional manufacturing and export platform based on the strength of the Tanger Med port and historic trade links through southern Europe and West Africa.

Bennani provided details about trends and opportunities in Morocco’s energy, water, transportation, logistics and tourism sectors.

This event was timed to act as the first salvo in recruiting US firms for the March 10-11, 2014 U.S.-Morocco Business Development Conference in Rabat organized by the Moroccan Government.

This program and the announcement of the second US-Morocco Business Development Conference in March continue efforts started by then-Secretary of State Hillary Clinton in September 2012 as part of the Morocco-US Strategic Dialogue.

At that time, the role of economic dimension of the Strategic Dialogue was to “consider establishing subgroups to address a variety of issues discussed in the working group, such as enhancing regional integration, expanding trade, promoting investment, improving Morocco’s investment climate, strengthening the food security infrastructure and promoting energy development.”

Realizing that the private sector and civil society have key roles to play in the country’s development, the Conference is the primary vehicle for engaging the private sectors from both countries.

Continued recognition of Morocco’s moving ahead

In a recent article in Modern Ghana, the reporter noted how much Morocco had accomplished since the accession to the throne of King Mohammed VI in 1999. Among the key points he cited are:

  • Morocco is one of only a handful of African countries slated to reach many of the UN’s Millennium Development Goals (MDGs) ahead of 2015 – looking at improvements in rural electrification, access to health services, and primary education.
  • The African Development Bank (AfDB) is the largest donor to Morocco; its 2012-2016 strategy provides funding focused in two areas: support for development of ‘green’ infrastructure and strengthening of governance and social inclusion. The World Bank and the EU are also helping fund Morocco’s development.
  • Morocco is home to more than 100 international companies, including The Boeing Company, Bombardier Inc. and United Technologies Corporation. In addition, the country’s education system supports the burgeoning aeronautical sector, with more than 10,000 engineers graduating every year, which is expected to grow with the opening of the Moroccan Aerospace Institute.
  • Morocco has the highest internet penetration in Africa, and it also has a slight lead over South Africa in the returns of the Business Process Outsourcing (BPO) sector, which provides back office services to major international companies.

These accomplishments are a few of the milestones to date as Morocco faces challenges in youth employment, reducing budget deficits, rationalizing government expenditures for wages and pensions, and expanding its trade and investment activities throughout the region. With continuing economic growth matched by positive trends in the country’s reform agenda, Morocco may well meet its employment targets for youth and women by the end of this decade.

Maroc Business Matters” January 2014

This is the first installment of a periodic blog, “Maroc Business Matters,” which will review news that highlights Morocco’s economic progress with a particular focus on what moves trade and investment forward. Unlike much of the region, which continues to experience political turmoil eroding business confidence, Morocco continues to build its bona fides as the platform for business in Europe, Africa, and the Middle East. This is Morocco’s story.

Morocco continues to improve economic basics – report card from the IMF

This past month, a high level IMF staff team visited Morocco to assess its performance as called for under the Precautionary and Liquidity Line (PLL) agreed in August 2012. This 24-month agreement makes available around US$6 billion as a support mechanism for Morocco’s liquidity. The delegation also gathered data to prepare a comprehensive profile of the performance of the Moroccan economy.

According to the statement issues by the head of the team, Jean-Francois Dauphin, Morocco’s economy is improving “Despite an unfavorable regional and global economic context…” He cites a low inflation rate, a decline in the external current account deficit, and expected 4-5 percent GDP growth rate, among other factors. Mr. Dauphin noted that the Moroccan economy needs to “strengthen competitiveness, ensure stronger and more job-rich growth, and improve social protection, particularly for the most vulnerable segments of the population.”

As part of its strategic economic policy, the government of Morocco has a full agenda in Parliament including a new organic budget law, reform of the judicial system, strengthening the powers of the transparency agency, and broadening support for entrepreneurs and small and medium-sized enterprises.

 Attracting new manufacturing partners through expanding free zones

Indicative of Morocco’s push to create jobs by attracting foreign direct investment (FDI), good news is coming from Midparc, one of the primary new-generation industrial parks, which has already landed Canadian aircraft manufacturer Bombardier. This new free zone covers more than 300 acres close to the seaport and Mohammed V International Airport in Casablanca.

GCC continues to invest in Morocco – Qatar latest to step up

As part of its commitment under a Gulf Cooperation Council (GCC) agreement to provide US$5 billion to Morocco over five years, Qatar signed a US$1.5 billion agreement this past month. As Reuters reports “Four Gulf states – Qatar, Saudi Arabia, Kuwait and the United Arab Emirates – agreed in 2012 to provide aid worth a total $5 billion to Morocco in the period 2012-2017 to build up its infrastructure, strengthen its economy and foster tourism.”

The welcome assistance pact was signed during a recent visit of the Emir of Qatar to Morocco and will help the country reduce its budget deficit by 10 percent in 2014.  Details have yet to be announced although previous packages from Saudi Arabia, Kuwait, and the United Arab Emirates (UAE) have focused on investments in key growth sectors such as agriculture, tourism, and financial services.

Morocco committed to become regional financial center

The emphasis on investing in financial services is putting smart money on smart business, considering Morocco’s deep and broad commitment to this sector through Francophone Africa.  Over the past five years, Moroccan banks have greatly expanded their footprint throughout the region and the government has launched the Casablanca Financial City as the nexus for regional financial services. A recent Forbes article credited Morocco’s strategic geographic position and political stability, especially when compared with the rest of North Africa and the Middle East, as key reasons that foreign manufacturers were flocking to Morocco to establish factories — among them Renault, Bombardier Aerospace, and Dell.

A paper prepared by the Wharton School concluded that tax incentives for expatriate companies and employees, lack of customs duties, proximity to Europe, and less government regulations, “along with Morocco’s position as a stepping stone to the rest of North, West, and Central Africa, are expected to drive much of the interest in the CFC.”

Morocco ups efforts to go green, abetted by the World Bank

Morocco recently garnered a US$300 million loan from the World Bank to promote a “more sustainable and inclusive development model.” Simon Gray, Director of the World Bank Maghreb team pointed out that “Morocco is putting the green agenda at the forefront of its development priorities to secure a resilient and strong economy providing opportunities to vulnerable populations. The Program will introduce sustainable practices in agriculture and develop new sectors such as eco-tourism and aquaculture which have the potential to create jobs and diversify revenues in rural areas, where 70 percent of Morocco’s poor live.”

Andrea Liverani, World Bank Task team leader noted that “The shift to green growth is a homegrown strategic agenda, deeply rooted in the minds of policymakers. The Development Policy Loan series backs this policy priority and complements the World Bank’s package of support in areas such as such as energy, water and agriculture.”

This comes as no surprise to Morocco-watchers as it has set an ambitious target of more than 40 percent of its energy from renewable sources by 2024. According to a recent article, after a slight decline worldwide in 2013, wind power is expecting strong growth in 2014 in Morocco, the US, and South Africa.

Look for more economic news on Morocco in the next posting of Maroc Business Matters.

USAID Expands Civil Society Capacity Building Programs in Morocco: Part 2

In my previous posting, I previewed some of the key features related to youth employment programs in the recently announced Country Development Cooperation Strategy (CDCS) 2013-2017 for Morocco launched by USAID during the November visit of His Majesty King Mohammed VI with President Obama.

The major sections of the strategy with the relevant goals and objectives are:

 CDCS Goal: Advance Moroccan initiatives for peaceful reform

Development Objective 1: Employability of target youth enhanced

  • Access to quality employability services improved
  • Improved alignment of workforce programs to market needs

Development Objective 2: Increased Civic Participation in Governance

  • More responsive and representative political parties
  • Civil society contribution to public policy increased

Development Objective 3: Enhanced educational attainment for children at primary level

  • Reading skills of primary level students improved
  • Learning delivery systems improved

Youth employment efforts include providing mechanisms for increased data and metrics to assess training efforts being made by the government, NGOs, and the private sector; more programs focused on enabling women and youth to acquire market-ready skills; and greater stakeholder engagement to “collaborate with the Ministry of Employment and other relevant actors in identifying and advancing creative and flexible working arrangements that incentivize the hiring of Moroccan youth.”

In the section on increased civic participation, USAID mentions its long-time support for civil society in Morocco and its assessment that the quickening pace of political reforms opens additional space for public policy engagement. Its particular focus is on enabling civil society, especially the political parties, to play a more robust and responsible role as outlined in the 2011 Constitution.

Engaging civil society in building Morocco’s future

As the CDCS notes, “Article 12 of the new Moroccan Constitution states that “The associations [and NGOs] interested in public matters … contribute, within the framework of participative democracy, in the enactment, the implementation and the evaluation of the decisions and the initiatives of the elected institutions and of the public powers.” Given this mandate, “Thus, civil society and political parties are now constitutionally empowered to participate in governance. By increasing the capacity of civil society to engage the government on behalf of citizens and facilitating the development of institutionalized mechanisms of civic participation in government decision-making, Morocco will be better situated to implement its reform agenda in a peaceful and sustainable manner.”

The key targets defined by USAID for capacity building are women, NGOs, and political parties. It bases its priorities on the initiatives included in the 2011 Constitution as well as the public’s simmering dissatisfaction with the political parties. As the report notes: “Moroccan citizens have long been detached from political parties due to a lack of clear policy vision or consideration for citizen involvement, particularly by women and youth, in public-policy making.” To repair this situation, “USAID will help political parties to improve their credibility by increasing the transparency and accountability of their internal operations, developing platforms reflective of citizen needs, and enhancing the involvement and leadership of youth and women in politics.”

Among the various tools that USAID has defined as part of its agenda with political parties are “the effective use of public opinion to inform policy agendas, the development of youth and women branches at the national and local levels and the development of individual plans to strengthen internal party capacity.” It is critical to Morocco’s reform aspirations that political parties become more focused on building constituencies that coalesce around specific political platforms that address local, regional, and national issues, as well as facilitate greater inclusiveness across age, gender, and ethnic lines.

The CDCS is in many ways an affirmation of the long-standing friendship and cooperation between Morocco and the US.

It also highlights the central importance of implementing the initiatives in the 2011 Constitution for broadening citizen participation in public policy making, including regionalization, enhanced roles for women and youth, and increased stakeholder engagement across all areas of human development.

While other North African states are struggling to maintain secure and safe public spaces, Morocco is moving ahead with its second decade of political reforms. Its results to date have earned support from the US and the international community, and the CDCS and other agreements both confirm Morocco’s path and offer partnerships to proactively move ahead.

US partnering with Morocco to support its human development – Part 1

What better way to start a new year than to review events of the last quarter and see what the indicators tell us about how Morocco is progressing. The highlight of 2013 was, of course, the meeting in November between President Obama and King Mohammed VI to renew and upgrade the bilateral partnership. The well-crafted diplomatic statement that was released detailed modes of cooperation and coordination between the two long-time allies, and several agreements were signed or announced that defined the way forward.

One of the agreements that addresses key issues discussed by the King and President Obama is the USAID Country Development Cooperation Strategy (CDCS) 2013-2017, which describes how USAID will help support Morocco’s efforts “to improve workforce development practices, enhance citizen participation and increase the quality of primary education.” Some useful facts: the first US economic assistance agreement with Morocco was signed on April 2, 1957; the CDCS —is part of the larger framework of the US-Morocco Strategic Dialogue launched on September 13, 2012. “one of only six such bilateral agreements in existence.”

Supporting the reform agenda

There are numerous references in the CDCS to the importance of Morocco’s reform agenda and the constructive actions of King Mohammed VI in response to the Arab Spring. It points out that while the entire region experienced some level of unrest, “a reformist constitution and strong political will have positively positioned Morocco for accelerating progress towards development goals.” The CDCS places continued political reform at the center of Morocco’s development agenda and welcomes the dynamic link between reform and progress that is evident in Morocco’s 2011 Constitution. “Given this unprecedented democratic opening, Morocco is well positioned to make significant improvements to democratic processes, allowing the country to implement its reform agenda in a pluralistic and sustainable manner.”

The momentum of political reform includes broadening opportunities for greater civic engagement by Moroccans at all levels, complemented by increased economic activity that deals with the central issues of unemployment and market related education. For most of the last decade, Morocco’s economic performance has been steady, and the CDCS links continued political progress and sustained economic growth. “Implementing the needed reforms to create more inclusive growth is therefore essential to preserving solid economic performance in a challenging external environment.”

The Moroccan economy has been negatively impacted over the past three years by the decline of investments from and exports to the Eurozone, as well as fewer remittances from Moroccans working abroad. To offset these trends, Morocco is greatly expanding its presence in Africa and broadening its development agenda to support greater political and economic participation. And it is in the areas of employment promotion, greater opportunities for women, capacity building for civil society, and political party reform that USAID is poised to make important contributions under the new plan.

USAID focuses on short and medium-term workforce empowerment

As detailed in the CDCS, USAID believes that it can work with partners throughout the country to help reach Morocco’s development goals. “Due to the experience of past projects in Morocco and civic participation best practices from work done around the world, USAID is in a unique position to help Moroccan Civil Society Organizations (CSO) and public institutions nurture civic participation in public decision-making during this critical juncture in Morocco’s democratic evolution. From issues of workforce development to civil society capacity building, USAID has worked with stakeholders throughout Morocco to define a multifaceted strategy on the issues of employment and capacity building.

“USAID is proposing to enhance youth employability by focusing on the transition from education to employment for university and vocational students and recent graduates. The Mission will take an integrative approach to help Morocco adopt demand-led education and training systems that are both flexible and aligned to high-impact sectors and industries.” Projects described in the CDCS supplement existing programs, collaborate with a variety of stakeholders, and have a particular focus on raising opportunities for women. Among its many efforts, “USAID will work closely with the Ministry of Employment to strengthen its planning and monitoring and evaluation capabilities, while advocating for flexible hiring practices beneficial to youth.” Rather than focus on specific sectors, which is being done by other donors, government agencies, and private industry, USAID resources will target potential employees regardless of their industry or service.

Drawing on its global experience, communicating broadly and collaborating with stakeholders, providing data and metrics that will facilitate best and sustainable practices and taking an integrated strategy in delivering its programs and projects will enable USAID and Mission Director Dana Mansuri to further enhance their effectiveness as proactive partners in Morocco’s development.