Morocco’s Progress Makes Regional Integration Even More Vital

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European Union Supports Greater Cross-border Cooperation

A recent article in Magharebia, “Morocco: European Union Backs Moroccan Reforms,” focused on the latest grant from the EU in support of a wide range of ongoing reforms. Yet the subtext of the article, emphasizing the need for greater regional collaboration, hints at the EU’s concern for sustainable economic growth as the strongest antidote to radicalism.

 

credit: damienpoussier.com

credit: damienpoussier.com

The story starts by noting that “The grant is aimed at three [programs] improving governance and rule of law, jobs and sustainable growth, access to basic services, and support for civil society.” As the EU continues to redefine its social, economic, and political links to its southern neighbors, its emphasis has shifted from funding good intentions to rewarding positive outcomes. This “results” focus has reshaped how the EU determines what kinds of and how much assistance it will extend, moving it away from platitudes and vague notions of accountability to a more realistic set of metrics for determining the targeting and impact of programming.

The agreement with Morocco, signed November 5, makes Morocco the largest recipient of EU programs and signals, along with the EU’s growing support for Tunisia, that the EU is quite serious about seeing direct benefits to the citizens of those countries. Moroccan Finance Minister Mohamed Boussaid told Magharebia that the funding shows that Morocco is making the right, if difficult decisions across a range of policies, from subsidies and pension reforms to revisions proposed for its judicial and media laws.

Rupert Joy, EU Ambassador to Morocco credit: map.ma

Rupert Joy, EU Ambassador to Morocco
credit: map.ma

Rupert Joy, the EU Ambassador to Morocco, echoed Minister Boussaid’s sentiments. “These new grants for the period 2014-2017 represent the EU acknowledgement of the uniqueness of its partnership with Morocco.” They “reflect EU determination to support the Moroccan government in its efforts to meet people’s aspirations and to turn the reforms initiated in 2011 into tangible progress,” the ambassador added.

Analysts were quick to point out that the EU is using its support programs to nudge the North African countries towards greater cooperation and cross-border economic integration. A Peterson Institute study in 2008 showed the promise of regional integration; since then, a number of additional studies by European and international organizations indicate the benefits to be had from closer economic cooperation.

The broad outlines of the future are taking shape daily. The Maghreb countries are complementary in terms of their core economic strengths (Morocco and Tunisia in services, tourism, agri-business, and manufacturing; Libya and Algeria in hydrocarbons/energy; Mauritania in mining and transportation). The future prospect of a region-wide consumer market fueled by a growing middle class is evident as private sectors play a larger role in both human and economic development across borders.

Ahmed Charfi, a noted economist, told Magharebia that greater regional integration will speed up the pace of development in all of the countries and generate even greater opportunities to meet their needs. “There are two things that are fundamental to development: democracy and promotion of the regional economy,” he said. “If the countries of the Maghreb combine their efforts, they can jointly tackle social problems such as unemployment, regional and social inequalities and poverty . . . Together, they can make rapid progress.”

Morocco does not see its progress in isolation from its neighbors. From the World Bank’s latest report lauding Morocco’s sustainable development strategy, to recent agreements with Tunisia that bring the countries closer together across a broad range of development initiatives, to its growing role as a platform for business in Africa, Morocco has truly transformed its mission from one of domestic growth and stability to becoming a key player in the security and stability of the region. Objective policy analysts agree that only a vibrant economic Maghreb union will have the resilience and strength to meet the aspirations of the region.

Message from the King of Morocco: Knowledge is the Only Resource Whose Value Increases When it is Shared

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US and Morocco Sound Strong Support for Global Entrepreneurship

The fifth Global Entrepreneurship Summit kicked off this week with a meeting between Vice President Joseph Biden and King Mohammed VI and opening remarks by Secretary of Commerce Penny Pritzker at the Summit’s Women’s Entrepreneurship Day event. Held in a special tented facility in Marrakech, the Summit, which seeks to promote greater support and resources for entrepreneurs, especially in Muslim-majority countries, has brought together more than 3,000 private and public sector participants.

In an article in the Washington Post, Vice President Biden was quoted as saying, “The secret people don’t know is that our diversity is the reason for our incredible strength. But the world and the United States will be more peaceful and prosperous, when the brightest, the most innovative, the greatest risk takers believe they can reach their potential at home.” He went on to add that every country should understand the benefits of supporting entrepreneurship broadly, for men and women, as both a boon for economic development and an effective tool in combating radicalism and extremism.

Commerce Secretary Penny Pritzker at the Global Entrepreneurship Summit

Commerce Secretary Penny Pritzker at the Global Entrepreneurship Summit

Secretary Pritzker, speaking to more than 300 women on the opening day, reflected on her own business experience and on the necessity of building holistic support systems for all entrepreneurs. “I must say that I am so inspired by the women at this summit – all of you. Your dynamism; your fearlessness; your courage to not only enter the workforce, but to start a business is so inspiring to me. Your appetite for risk, your vision for your companies, and, indeed, your vision for your societies, comprise the very definition of the entrepreneurial spirit.”

She noted that innovation and entrepreneurism have been central to the growth of the US economy and that one of her priorities is to share lessons learned globally. “The opportunity for business creators to thrive is the foundation for a rising middle class, for security and stability, and for broad based prosperity.”

Reflecting on the themes of inclusive and sustainable growth, the Secretary pointed out that “Societies can only reach their full economic potential if they tap into 100 percent of their talent pool. That means embracing the ideas and aspirations of our youth. That means enabling women to get a good education and secure the capital needed to start their own companies. That means allowing women to dictate their own futures. That means empowering you – and all women entrepreneurs. When women entrepreneurs take risks and succeed, societies change for the better.”

King Mohammed VI Underlines Morocco’s Commitment to Innovation and Entrepreneurism

In his address at the opening of the Summit, King Mohammed VI spoke quite forcefully about the benefits of promoting innovation and entrepreneurism.

“In keeping with its core values and basic principles, Morocco believes wholeheartedly in the Summit’s objectives. It has been devoting its energies to promoting human and sustainable development and investing in entrepreneurship. My country also encourages the sharing of expertise and know-how and maximizing the complementary strengths of all parties, particularly between the countries of the South.”

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After summarizing Morocco’s commitment to regional development, the King embraced the notion that being an entrepreneur is not a function of luck but requires much more. “One is not born an entrepreneur; one becomes an entrepreneur by embarking on the road to success in an interactive process involving hard work, learning and a capacity to deal with challenges. Entrepreneurs are people who challenge the established order and the status quo. They do not hesitate to respond – at their own level – to needs that are yet to be identified, that are unmet or that are new.”

Reflecting on Morocco’s challenges to accelerate economic growth, the King tied together the notions of social and human development with the role of entrepreneurs. “Entrepreneurship and innovation are twin values; they are both springboards for freedom, social mobility and prosperity, provided the business environment is favorable and the required conditions are met.” He restated Morocco’s commitment to working with the private sector to promote a favorable environment for business to thrive and expressed his belief that it all begins with adequate education.

“Education is an essential step, a prerequisite for the maturation process that leads people to think critically and to hone their skills so that they are able to seize an economic, technological or social opportunity when they see one. Therefore, it is up to us to provide future generations with an education that goes beyond the mere ‘accumulation-transmission’ process in order to develop creativity, responsiveness and inventiveness.”

The King sees how all of these ingredients – education, innovation, entrepreneurship, creativity – have vital implications for Africa and beyond. “To overcome the pessimism that has plagued our continent, our governments should instill self-confidence in our young people so that they can believe in their ability to learn and to become entrepreneurs. To this end, we need to nurture positive examples and turn success stories into models to emulate. The same applies to female entrepreneurship, which holds so much promise for our economies and our societies that we all need to encourage it; otherwise, we will be depriving ourselves of a huge potential.”

The value of entrepreneurship in achieving sustainable and inclusive growth is relevant in the context of Morocco’s aspirations, as well as those of young people across the globe. “We must not confuse technological innovation with technical sophistication. The so-called low-tech innovations – just like more sophisticated technologies – can help us meet specific needs, especially in developing countries. Innovations of this kind are often helpful in terms of supporting social development and improving the well-being of the population.”

As the Summit proceeds, there are special sessions focused on innovators from Africa, women, successful entrepreneurs sharing their stories and offer support, as well as experts in finance, marketing, business plan development, and the other elements of the entrepreneurship eco-system. It is an opportunity to go beyond showcasing what has been done to investing in future entrepreneurs who can change the business face of many countries.

Morocco’s Priority on Developing New Energy Sources Is Paying Dividends

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The IEA lauds the country’s national energy policy

It is only natural to think of the Middle East and North Africa (MENA) when talking about global energy issues. Yet aside from informed estimates from national energy institutions and consulting groups, few countries have collaborated with the International Energy Agency (IEA) to assess their national strategies and seek recommendations for guiding their country’s energy policies.

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Morocco, which depends on external sources for 91 percent of its energy, recently asked the IEA to undertake the first-ever detailed review of its energy policies – the first IEA study in all of MENA. The report was released in Rabat at the end of October by IEA Executive Director Maria van der Hoeven, who was quite candid about the progress that Morocco has made in less than 20 years.

“Under political guidance from the highest level, Morocco has shown an admirable determination to play to its strengths, and in our view the National Energy Strategy set out in 2009 has taken Morocco very much in the right direction.” The comprehensive assessment was quite broad in scope, including attention to the challenges of climate change, priorities for hydrocarbon and renewable energies, government regulatory regimes and reforms, and cooperation with international and regional bodies.

According to a story published by the IEA, Morocco was an early advocate of developing long-term strategies to deal with climate change. It ratified the UN Framework Convention on Climate Change in 1995 and the Kyoto Protocol in 2002. It established national goals for reducing greenhouse gas (GHG) emissions as early as 2009. The European Bank for Reconstruction and Development, the World Bank, and the UN are among the multilateral institutions supporting Morocco’s vision for the energy sector.

 Facing Down Energy Dependence

Along with its concern for GHG emissions, Morocco has had a robust energy policy in place since the 1990s, recognizing the impact of energy on economic and social development.

blog energy 2Perhaps the best example of this is the campaign since 1995 to provide access to electricity for rural populations. Today, 98 percent of Morocco has power supplies, compared with 18 percent just 20 years ago. The report noted, “This is a very impressive achievement for which the government of Morocco deserves enormous credit. This development has contributed to a consistent economic growth rate of between 4% and 5% per year, although it has also led to a strong increase in electricity demand.”

 

To respond to this growing demand, the government launched a National Energy Strategy in 2009 with five specific objectives: optimize the fuel mix in the power sector – reducing overall dependence on hydrocarbons; accelerate the development of renewable energy from solar, wind, and hydro-power; promote energy efficiency across the country; provide incentives for foreign investment in energy projects; and promote greater regional integration of power systems and sources.

Regarding the current energy mix, the IEA encouraged Morocco to continue to restructure and reduce energy subsidies, while maintaining a security net for the least affluent. With a new coal fire plant coming on line with high efficiency utilization, the reliance on diesel fuel will decrease, and power costs will come down as global energy prices become more competitive. As a final recommendation, Morocco was advised to set up an independent regulatory agency to facilitate competition, maintain price equity, and provide incentives for future research and development.

Morocco’s willingness to reach out to the IEA for a reality check of its energy policies, its awareness and actions on the steps needed to restructure the energy sector for greater efficiency and cost savings, and its attractiveness to international investors to participate in the sector combine to make Morocco a very attractive partner for decades to come. Taken together with the gradually emerging positive news about on and off shore exploration, the opportunities are quite attractive, especially given the stability and accessibility of Morocco as a regional market leader.

Morocco Continues Growth on Strong Economic Fundamentals

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Will it be enough to provide needed jobs, improve GDP performance?

During the past week, several reports and interviews provided insights into Morocco’s economic performance, including challenges and strategies to expanding opportunities for growth. An article in the Business Standard noted an interview with World Bank Managing Director for Finance, Bertrand Badre, who said that “Morocco showed great institutional and economic stability amid the turmoil that has been going on over the past few years regionally.” He was referring to the financial meltdown of 2007-2008, resulting in a continued global slowdown, as well as the Arab Spring.

The article mentioned that “Badre also highlighted the construction of infrastructure and the advanced urbanization taking place in Morocco, which are ‘very important’ for the World Bank because of Morocco’s pivotal role in the West African and sub-Saharan region.” He also noted that the country must do more to diversify its economy to create more centers for growth and enable more stakeholders to participate in the formal economy. The reporter concluded that “Besides its macroeconomic, institutional, and economic stability, Morocco has an asset of location in the crossroads of sub-Saharan Africa and Europe, in addition to openness on the Atlantic.”

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Another look at Morocco’s performance came from Fitch Outlook, the ratings agency. Under the headline “Fitch confirms Morocco’s Investment Grade with Stable Outlook,” Morocco’s state news agency reported that Morocco’s grade remained stable as a result of its “macroeconomic stability in an unstable international and regional environment and the resilience of GDP growth, despite a drop in the foreign demand of Europe.”

Once again, Morocco received recognition for its ongoing efforts to decrease its budget deficit, due to controls on current expenditures, reductions in subsidies, falling energy costs, “the consolidation of public finances, acceleration of exports by new industrial sectors, and improvement in the overall” business environment.

Strong Economic Medicine while Forward-leaning into Africa

Morocco’s exception to the tumult in the region was also noted in a Financial Times interview with Finance Minister Mohamed Boussaid. “Good news is a rare commodity in the Arab world these days. Violence is raging across Syria and Iraq, Egypt has retrenched into authoritarianism and Libya is in chaos. Even Tunisia, which is managing its transition to democracy with aplomb, is facing huge economic challenges. But in the far west corner of North Africa, Morocco has so far been spared much of the pain of the last four years.”

Morocco has managed to reduce its fiscal deficit from 7.4 percent of GDP in 2012 to 5.5 percent by the following year, “and remains on target for further reduction this year, as Rabat slashes subsidies and reforms its economy. The country’s economic and political stability – rare commodities in the region – have already brought returns. Tourists numbers were up by 7 per cent in 2013 as many Europeans, scared off by the unrest in Egypt and Tunisia, traveled instead to Morocco.”

blog growth 2The article went on to note the growth of automotive manufacturing and the positive response to the government’s “€1bn Eurobond – its first euro-denominated bond in four years,” as additional indicators of Morocco’s success. While the rest of the Arab world, racked by falling oil prices and increasing instability due to the impact of the conflicts in Syria, Iraq, Yemen, and their spillover to neighboring countries, “Many analysts predict Morocco will be North Africa’s best performing economy in coming years. Although growth slowed slightly this year because of low agricultural yields and weak growth in Europe – Morocco’s main export market — the International Monetary Fund (IMF) estimates GDP will grow at around 4.7 percent in 2015.”

Boussaid credits this success to “reforms begun more than a decade ago, including investment in major infrastructure projects and programmes for industry and renewables, particularly solar energy.” The minister also talked at length about Morocco’s partnership strategy in sub-Saharan Africa. Its goal is to become “a platform for production and export to African countries through Casablanca Finance City (CFC), a new regional finance hub.”

More than 60 multinational banks, insurance companies, professional and legal services, private equity, and asset management companies have signed up for offices in the CFC. Already headquarters for the African Development Bank’s new $3bn Africa50 Fund that will finance infrastructure on the continent, CFC hopes that up to 100 companies will be based in its special zone.

Still Tough Going Ahead

While the IMF has projected healthy growth for Morocco in 2015, the outlook for the rest of the region is not as positive, according to Marketwatch. Regional instability coupled with the continued weakness is the global economic system, are a drag on economic expansion, and Morocco feels this impact directly.

“One major contributor to recent socioeconomic ills has been double-digit unemployment rates in many Middle Eastern countries. But the IMF’s baseline gross domestic product growth projections aren’t high enough to reduce unemployment in a meaningful way, it said. Unemployment is of special concern among oil importers such as Egypt, Jordan, Morocco and Tunisia, which have some of the highest jobless rates in the region, especially among young people.”

The government has implemented a broad range of incentives to encourage agencies and investors to accelerate the pace of training and education to align workers’ skills with market needs. Yet the slowdown in FDI and the need to increase domestic private investment are constraining opportunities for job growth. “To solve the jobs riddle, Middle Eastern countries needed ‘deep, multifaceted transformation’ that buttressed the private sector and raised living standards. The region needs sustained, stronger and more inclusive growth to markedly reduce unemployment–a critical issue facing nearly all countries in the region,” said Masood Ahmed, IMF’s Director of the Middle East and Central Asia Department.

To maintain its momentum, Morocco is implementing a multifaceted growth strategy that focuses both on key sectors and driving job growth. It is tackling government policies and regulations to maximize flexibility in labor markets, property ownership, and public expenditures so that the private sector and people of Morocco have access to resources needed to expand economic opportunities and build a healthy, sustainable, and inclusive job market.