Morocco’s Moves to Improve Economy Are Paying Off

Country Continues to Improve Growth Results

Although the overall economic news in North Africa is mixed, due to the impact of the decline in oil prices and a lackluster rainy season, Morocco’s economic diversification priorities are enabling it to balance out the negatives with continued growth and development.

One sign of the economy’s health is that, as Reuters reports, “Morocco’s central bank cut its benchmark interest rate on Tuesday to 2.25 percent from 2.5 percent, loosening monetary policy for the first time in more than a year to boost growth hit by one of the worst droughts in the past decade.” The outsized impact of the agricultural sector on the economy affects both the country’s gross domestic product, revised downward from 2.1 to 1%, and gainful employment, as fully 40% of the workforce is engaged in the agricultural sector.

On the other hand, since Morocco imports more than 90% of its energy needs, its economy is benefitting from the drop in energy prices by reducing deficits, supporting cutbacks of energy subsidies, and enabling policy makers to consider a broader range of options in promoting growth. This good news is supplemented, of course, by the continued growth in the renewable energy sector, which will further drive down oil and gas imports and contribute to increased foreign reserves through export sales to neighboring countries

“We don’t have any concerns regarding inflationary pressures … So we can give some support to the economic activity,” Central Bank Governor Abdellatif Jouahri told reporters. The bank last cut rates in December 2014. In line with IMF recommendations, additional structural reforms are being implemented, including a more flexible exchange rate, reducing the euro’s weighting in the currency basket, and more emphasis on targeting inflation.

According to the article, “Morocco has already done more than most North African countries to make painful changes required by international lenders to curb its deficit, such as ending fuel subsidies and freezing public sector hiring. The government still controls the prices of wheat, sugar and cooking gas.”

Banking and Auto Manufacturing Sectors Drives Harder into Africa

In an FT article, Finance Minister Mohamed Boussaid spoke about the changes in the financial sector that are boosting growth. He noted that Moroccan banks are in 22 African countries, and about 17% of their activities are in Africa. “Europe will always remain a primary partner for Morocco, but Africa is now seen as the future in terms of growth and economic potential.”

Hassan el-Basri, head of risk at Banque Centrale Populaire (BCP), which has large holdings in seven sub-Saharan countries, says their impetus is that “These countries represent a real growth potential given the level of banking penetration, which remains one of the weakest in the world.”

The banking sector is dominated by BCP, Attijariwafa Bank (AWB), and Banque Marocaine du Commerce Exterieur (BMCE), which together hold 65% of the country’s banking assets. While this may be dangerous in some countries, the article noted that “most acknowledge that strong regulation by the central bank has so far contained this risk.”

Risk will be further mitigated with new players entering the financial sector as there are opportunities beyond the large company portfolios held by the Big 3. Minister Boussaid indicated as much, saying that “We are concerned by financing, especially of SMEs, which do not have enough capital.” By addressing their needs and with new mid-sized players in the sector serving the middle class, financial services will become even stronger.

blog biz2The success of automobile manufacturing is another star in Morocco’s African economic strategy. As reported by the FT, it is now, along with aeronautics manufacturing, the largest contributor to the country’s GDP. The Renault factory in Tanger produced 229,000 cars in 2015 and is the largest car factory in Africa. Jean-Francois Gal, director of the factory, notes that “We are in a perfect location at the gates of Europe,” and the bulk of its output is shipped to markets in France, Spain, and Germany.

The plant has created more than 7000 jobs and attracted some 150 supply-chain manufacturers that supply Renault and export to Europe and other markets. This extensive network attracted Peugeot Citroen to invest in a plant in Kenitra, on the Atlantic Coast north of the capital Rabat, with an initial capacity of 90,000 vehicles, mainly for the African market.

The goal for the sector, according to Hakim Abdelmoumen, president of the Moroccan Association for Automotive Industry and Trade, is 90,000 jobs by 2020, in addition to the 100,000 that already exist. This rapid expansion of the industry is having an important side benefit – attracting expatriate Moroccans with managerial and technical experience to return from overseas and lend their talents to this important sector.

In diversifying its economic base, moving up the value chain to industrial manufacturing, and developing agricultural strategies that encourage better use of technology, irrigation, seed selection, and production and marketing, Morocco continues to build positive economic indicators that facilitate growth and competitive strength.

Red Lines of Dubious Value – Mostly, Better Not Draw Them

I have used the expression ‘red line’ before in reference to defining constrained topics in media and political discourse in Morocco. That got me thinking about how often, aside from President Obama’s now infamous red line on chemical agent use by Syria, that red lines have influenced foreign policy, or not.

A quick Wikipedia search brought up a most interesting coincidence. The phrase first arose as a result of Western machinations in the Middle East after World War I. It first appeared in English in the “Red Line Agreement” of 1928 when the oil companies with the connivance of the governments of the UK, US, and France, were dividing up the last vestiges of the Ottoman Empire. “At the time of signature, the borders of the empire were not clear and to remedy the problem an Armenian businessman named Calouste Gulbenkian, took a red pencil to draw in an arbitrary manner the borders of the divided empire.”

This is the same Calouste Gulbenkian who is credited with opening up Iraqi oil fields to the West though his part ownership in a company he helped form called Royal Dutch Shell! As you would expect, the phrase caught on quickly and became part of the UN’s lexicon. Of course France has its own name for this concept, the “yellow line” (franchir la ligne jaune). I wonder if it has variants in China, Russia, and other hot spots?

But I digress. My favorite variation of this expression is President Bush 41’s statement addressing Saddam Hussein in August 1990 that the United States had “drawn a line in the sand” in the deserts of the Arabian Peninsula to protect Saudi Arabia, free Kuwait, and maybe see Saddam on his way. Little thought was given by his speechwriters to the image of “lines in the sand” indicating nothing to people who see shifting sands, erasing lines, daily.

assadThen the now infamous “red line” by President Obama in what many consider a failed Syria policy regarding the use of chemical weapons by Syria, which Senator John McCain observed was “apparently written in disappearing ink,” due to the perception the red line had been crossed with no action.

In Geneva, we hear the Syrian government calling President Bashar’s future a “red line,” asserting that his fate should be decided by the people of Syria, without any intention, it seems, of saying how that should happen, or when, or who will participate.

Speaking of red lines, what about the curtailing of the use of barrel bombs on civilians; the targeting of hospitals and schools in Yemen and Syria; the wholesale destruction of religious and cultural heritage sites; and red lines around non-existent safe zones that have yet to materialize.

Invoking red lines does not prevent actions and activities that further undermine the stability and security of the MENA region. Who will draw the red lines for Iran’s increasingly belligerent behavior, echoing its counterpart in North Korea? What is the use of red lines when it comes to separating an increasingly belligerent Israeli government from stripping Palestinians of even more land and reducing their access to their own neighborhoods? Are there red lines limiting Palestinian attacks on Israeli citizens, regardless of their motivations?

With the useless use of “red line” as a concept and a reality, one could anticipate that the wordsmiths for the world’s leaders would try to move beyond rhetoric to focusing on sustainable solutions. But, to coin a phrase, “words speak louder than actions” in diplomacy surrounding issues in the MENA region, and possibly the South China Sea, the Korean Peninsula, and other examples where fatigue undermines resolve to engender order through resolution.

Although there is no strategic progress in more meaningful diplomatic discourse on the horizon, a good start would be to avoid provocative and vacuous rhetoric and admit that sometimes problems will not be resolved as easily as holding a referendum, or swapping notes, or drawing a red line.

Morocco Speeds Ahead in Renewable Energy

Power Purchasing Agreement Provides Momentum to Reach National Goal

Morocco’s leadership in renewable energy received a strong jolt of support this past week with the announcement of a finalist for 850MW of wind-power projects to be awarded to an international consortium headed by NAREVA, a Moroccan energy company.

Upon signing of the contract, still to be finalized, the consortium will develop, design, finance, construct, operate and maintain five wind projects: a 150MW facility in Midelt, 100MW in Tanger and 200MW in Jbel Lahdid in northern Morocco, and 300MW at Tiskrad and 100MW in Boujdour in the south.

The preferred bidder status award was made by ONEE, the Moroccan Office National de l’Electricité et de l’Eau Potable, to the consortium which includes Nareva as well as Enel Green Power (EGP) and Siemens Wind Power. Total investment is estimated at around $1.1 billion.

According to EGP CEO Francesco Venturini, “We are leveraging on our knowledge and expertise, in collaboration with our partners, to contribute to Morocco’s ambitious energy plan that has renewables at its core. The country is an example in North Africa of reliability and transparency in supporting the development of renewable technologies.”

The overall project requires creating two financial vehicles to guarantee the deliverables at a reasonable cost to Morocco. EGP and Nareva will create limited liability companies called “special purpose vehicles” for each of the five sites to insulate the project from any financial issues of the parent company.

In addition, the project was conceived under the Power Purchasing Agreement (PPA) passed into law in 2013 that enables companies to pursue power projects based on an agreed purchase price by the government, amounting to a sovereign guarantee for projects that are financially sound and efficiently operated. The agreement with ONEE runs for 20 years on the facilities that will come online between 2016 and 2020.

These target dates fit within Morocco’s current goal of 42% power from renewables by 2020, which was projected by King Mohammed VI at COP21 to be 52% by 2030.

Separately, Siemens agreed to build a rotor blade factory at an investment of more than $110 million that will result in up to 700 jobs in a factory to be located in Tanger. The facility will serve African, Middle Eastern, and European wind markets upon completion in spring 2017.

Markus Tacke, CEO of Siemens Wind Power and Renewables Division, noted “We invest where we see strong business opportunities. Morocco is the perfect location from which to serve the growing onshore wind power markets in Africa, the Middle East and Europe. The economy is strong, the political climate is stable, and Morocco has a young, skilled and motivated workforce. These factors make Tangier the ideal site for this new state-of-the-art factory.”

Siemens has had a permanent presence in Morocco since 1956 and has already been involved in several major renewable energy projects, including the 300-MW Tarfaya wind farm project.

With additional investment opportunities identified in hydropower, biomass, and even nuclear power, Morocco is well on its way to meet and possibly exceed its energy goals.

American Firms Launch Consortium to Build Hydrocarbon Terminal in Morocco

Site of Nador West Med Port to Boost Regional Capacity Responsibly

In a promising boost to Morocco’s efforts to construct a modern port at Nador on the Mediterranean coast, a US-based investment advisory company, lixia Capsia Gestionis (LixCap, has assembled a consortium to build and manage a “break and build” bulk hub for the storage and re-export of hydrocarbons and its products.

Nador West Med (NWM), as the new port is known, is ideally suited for the project. It is a natural deep-water harbor, with extensive surface area on land and sea encompassing a free trade zone, a friendly FDI regime thanks to the only US FTA in the region and a pool of Moroccan government incentives, land availability, low labor costs, and extensive land and sea routes to Europe, North, and West Africa.

Given the success of the Tanger-Med Port as a platform connecting Europe, the Middle East, North and West Africa, and beyond, NWM is a natural extension of that project, especially as a specialized venue for hydrocarbon logistics. The concept is to use NWM as a storage facility for off-take that is transiting the Mediterranean from GCC and producers around the Basin. Given the aging of refining facilities in Europe, it makes sense to locate new facilities in NWM that meet global environmental standards and support the large infrastructure needs of industry.

As noted in the project’s executive summary, “A specially-commissioned Wood Mackenzie study indicates that promising opportunities exist for diesel, kerosene, gasoline, LPG and bunker fuel at NWM. To take advantage of this opportunity, the port authority of NWM is building an industrial free trade zone…allowing private sector operators to develop market-based business opportunities.”

What this means is that national oil companies, bulk hydrocarbon traders, the international oil companies, and third-party storage companies can use this location to store products, refine them according to a customer’s specifications, and ship in a tight timeframe. This is especially promising for the domestic market in Morocco, which has experienced shortages and disruptions at the country’s only refinery.

As the summary makes clear, “Strategic location and a long history of political stability under the business-friendly monarchy make Morocco a compelling investment destination…Morocco has sensible environmental regulation harmonized with European norms.” NWM is fully financed by international lenders, including the European Bank for Reconstruction and Development, the European Investment Bank, and the International Finance Corporation.

The consortium promoting the project received a grant from the US Trade and Development Agency (USTDA) to perform a market analysis and pre-FEED engineering study to interest global operators and investors. In addition to LixCap, the engineering lead is Lonquist & Co. based in Houston. Both companies have operations in Morocco, and LixCap won the 2015 AMCHAM-OCP Morocco Trade and Investment Award. The team is support by Jacobs Engineering, which brings its critical EPC skills and specific hydrocarbon expertise to the project.

While the construction is not expected to be completed until 2020, given the vagaries of the hydrocarbon markets and the growing needs in Africa, the timing for the hydrocarbon terminal seems right on target.

Working Through Challenges, Morocco Maintains Focus on Progress

At a time when countries in the Middle East and North Africa (MENA) as well as the EU and US are struggling to balance civil liberties and heightened security measures, it is helpful to look at other factors contributing to a country’s stability and progress. This was the overall theme in articles published by earlier this year, in conjunction with the International New York Times.

The series featured interviews with leaders in Morocco’s public and private sector, and articles covering some of the more visible development projects that are changing the face and tempo of the country.

For example, the interview with the Head of Government, Abdelilah Benkiran, provided a much needed antidote to the fixation on the role of religion in the Islamic-led government. Disagreements both major and minor (read abortion and gay rights to ads for alcoholic beverages on television) take up most of the media space with little insight, in the English-language press, about the PJD’s overall philosophy of governance. One message that sounded almost libertarian: “I believe that the government should disengage itself from all of the sectors that the private sector or civil society would take better charge of,” says Benkiran, “and refocus the available resources towards the citizens, the sectors and the regions that need them most.”

Given the current contentious climate in Morocco over a new media/press law, rights for juveniles, treatment of immigrants and migrants, enhanced rights for women, implementation of programs that equalize treatment of the Amazigh language, and the place of English in the educational system, recognizing private-public sector partnerships in concrete terms may go a long way to building consensus on policies to move forward.

Another article in the report looked at education and progress in economic development, which are closely linked because of the challenge to Morocco’s educational system to turn out qualified human resources. As the report notes, “With top-down educational reform now the focus of ambitious investment programs to transform the labour market, the country is ready to realise its potential both as regional hub and global competitor.” International donors, various ministries, NGOs, and civil society top the list of major players in redefining and empowering education and training in Morocco.

The series also surveyed efforts by the government to improve the quality of its workforce development strategies. “A major element in delivering Vision 2030, a roadmap to wholesale education improvements, are efforts to broaden Morocco’s talent pool via a significant increase in the number of scholarships and closer alignment with vocational training to better prepare its graduates for the job market.” Only by addressing the education sector broadly, from improving retention rates after primary school to improving the quality of products generated by universities, will concrete progress be achieved.

This raises additional concerns beyond the various players in the training and educational system, such as providing the technical infrastructure to support efforts that sustain institutional players and are also vital to the continued growth of entrepreneurism. “With the National Broadband Plan aiming to achieve broadband coverage for 100 percent of the population by 2022, Morocco’s nascent tech start-ups are ready to rise.” Extensive broadband is essential for the growth of technology and knowledge industries as well as its role as an enabler for existing industries to retool and reach new markets.

“Today, Morocco is the continent’s second-largest pharmaceutical exporter, with seven to eight percent of production now leaving the country, largely southward.  Following the expansion of its …state-of-the art manufacturing plant, however, Laprophan is looking not just to boost exports to Africa but also to the Middle East, Europe and the Americas.”

Morocco’s story would not be complete without acknowledging its vision to become a regional leader. “Today, although there is still much to be done, the country has nevertheless achieved the privileged status of a stable, peaceful Arab nation, governed smoothly by a democratically elected Islamist party. The successful transition from traditional kingdom to a modern global player, envied throughout the Arab and Muslim world, means that today more than ever Morocco is a key force in the region.”

The article focusing on Africa points out that “Numerous institutional and societal advances have laid the foundation for this stability, while economic reforms have succeeded in improving the day-to-day life of the Moroccan people and positioned the country comfortably and sustainably in the global arena.”

When looking south, one can’t help but be impressed with the results of King Mohammed VI’s “economic diplomacy.” “Today, 55 percent of Royal Air Maroc’s traffic goes to African countries, making Casablanca a regional hub. Morocco is also now the best-connected African country by sea routes, according to a United Nations Conference on Trade and Development (UNCTAD) report, and has seen a 20 percent increase in 2015 in the number of containers going through its ports.”

In a related interview, US Ambassador to Morocco Dwight Bush, provided three reasons why he is optimistic about Morocco. The first is its open and progressive business climate. The second is security throughout the country that has resulted “principally because you have a moderate, progressive Islamic state headed by King Mohammed VI who has a vision of his country, his people and their participation both internally and on the continent to try to help other countries to come along as well.”

The third item for Ambassador Bush mentions is Morocco’s political progress. “From a political perspective, Morocco has been ahead of many others in the region.” He sums up his view in what is a fitting conclusion to the series. “The hope is that Morocco continues to show by example how to work effectively to move the country forward, recognizing that you have needs for security as well as liberties and freedoms. And so in addition to our commercial and investment orientation, we work with the Moroccans to expand civil society and political institutions.”

It is a series worth exploring in detail.

Arabic Language and North African Studies Program Enters 17th Year at Al-Akhawayn

Intensive Residential Program Offers Diverse Options

Experience shows that adults learn most languages, including Arabic, better when they are in an environment of immersion in the culture. This reality is behind the design and delivery of the program on Arabic Language and North African Studies (ARANAS) at Al-Akhawayn University in Ifrane (AUI). It provides participants diverse opportunities to develop language skills, learn about North Africa, and experience Moroccan culture through a wide range of interactions and activities including field trips, independent travel, community work, student and faculty engagement, and up to 190 hours of classroom and other cultural contact.

Now entering its 17th year, ARANAS has hosted more than 800 students of 36 nationalities, many affiliated with North American universities. The program awards academic credits that can be applied to the students’ degree program at their home universities. Options to enhance their learning experience include homestays, learning by doing, films and cultural events, local travel and field trips, and assignments to write Arabic reports on projects in the local community.

ARANAS offers three summer program options: a semester of Modern Standard Arabic (MSA) in four weeks, a year of MSA in eight weeks, or a special session of MSA in three weeks. All language faculty are native Arabic speakers experienced in teaching Arabic as a foreign language, and many have previous experience in the US. As anyone who has studied MSA knows, that form of Arabic is not encountered outside print and broadcast media. Arabs speak in their local dialects, and Morocco is no exception. Students are introduced to the Moroccan Arabic dialect through immersion activities in the local community, where they learn how to handle basic needs such as shopping, transportation, banking, and similar situations.

In addition to Arabic language courses, students who elect to pursue North African Studies study side by side with Moroccan university students on subjects ranging from Islamic Civilization and Issues in Contemporary North Africa to North African Literature and Moroccan Cinema. The North African Studies faculty is drawn from the fulltime faculty at AUI with specialized fields of study including the history and culture of the Amazigh and Islamic Art and Architecture.

With regard to language acquisition, the goal of ARANAS is to equip students with speaking, listening, reading, and writing skills and the cultural competency to display appropriate behaviors in basic situations. Similarly, those who also take the North African Studies courses will hopefully gain the background to grasp the complexity of issues in North Africa through studying the history, politics, economics, and recent developments in the region.

With the deadline for registration fast approaching, AUI is hoping that this summer will engage a diverse body of students from North America and elsewhere who are looking for a secure, stable, inviting, and exciting milieu in which to hone their Arabic language and cultural competency skills.

American University of Leadership Morocco Has Ambitious Educational Strategy

Highlights Role for Expat Moroccans in Developing Skilled Workforce

Dr. Anass Lahlou does not have small dreams…they are super-sized, multicultural, and multidimensional when it comes to higher education, especially educating Moroccans for the global economy. From his experiences with AMS, a well-respected training and education firm in the Washington, DC area, he became convinced that traditional approaches for preparing youth to meet diverse market labor needs were not effective in content, cost, or time. So he began working with his networks to develop innovative models for equipping young people with professional, business, and soft skills that would serve them throughout their lives.

He began with training small cadres of Moroccans in IT-related fields. His biggest challenge at that point, he told me, was finding enough Moroccan staff with US backgrounds who shared his approach to learning and leadership. The idea was to enable qualified students to obtain US degrees in Morocco, as he found that students were ready to move away from the limitations of the academic French model and towards the American system with its emphasis on critical thinking, problem solving, and student-centered learning.

In 2005, he set up a private institute for training and technology in Florida, where his original campus is located, receiving permission to operate in Morocco the following year. His American University of Leadership (AUL) was initially a bilingual French-English online platform, which he quickly expanded through partnerships and formal campus settings into a number of countries. He is very proud of the fact that of the resident students at the three campuses in Morocco, more than 20% receive scholarship support.

“My motivation, all along,” he explained, “is to make a difference in how students see education, not only as a degree but as a means of changing lives.” In 2010, he set his focus on Africa as well as Morocco, and to date has cooperative programs with universities in Burkina Faso, Gabon, Ivory Coast, Algeria, Senegal, and Russia, and agreements to move forward with Saudi Arabia and Dubai.

AUL-USA, the parent institution, is licensed by the Florida Commission for Independent Education (CIE)/FLDOE) and Accredited in Morocco by “ACBSP” Accreditation Council of Business Schools and Programs (under the auspices of the Council of Higher Education and Accreditation, CHEA). This year, he is the chair of the events committee of CHEA and will be hosting their annual conference at the Rabat campus.

What drives the instructional program is a commitment to upgrading the scientific, technical, business, and innovation climate in Morocco, focusing on Bachelor and Master of Science degrees in Business, and Small Business and Entrepreneurship, and a Doctorate of Business Administration. His ultimate goal, through a newly formed AUL Morocco Foundation, is to create a Knowledge City in Bouznika, between Rabat and Casablanca, as an epicenter for 20-30 international universities to share a common campus and offer highly specialized courses in English that are unavailable anywhere else in the country, focusing on research, business, innovation, and entrepreneurship.

An American Marocophile, Elisabeth Myers, who serves as a strategic advisor to AULM, became committed to Dr. Lahlou and his mission after attending a retreat with his faculty in Rabat this year. She saw their remarkable commitment; and she became convinced that what Dr. Lahlou is doing is “just what Morocco needs at this critical time of rapid growth.” She told me that his “vision is extraordinary. He is offering the substantive courses in business with the more important underlay of leadership. AUL Morocco is changing the mentality of students, one at a time, to embrace the efficient, the effective, the proactive, the reliable—plus all the other qualities of leadership necessary to move the country forward to excel in the global marketplace of the 21st century.”

Elisabeth believes that the Foundation and the Knowledge City will “magnify exponentially what is possible for students at AUL, provide the resources to promote technological innovation and entrepreneurship, and significantly contribute to Morocco’s economy.”

When asked what was most important to him in the next five years, Dr. Lahlou spoke about the need to aggressively involve expatriate Moroccans in AULM’s programs. Because of their language capabilities, training in Western practices, and commitment to practical scholarship, he believes that they can make a significant contribution to the country. To that end, he is holding an international conference June 3-4 at the Rabat campus to help private universities in Morocco refine their offerings to reflect best practices to improve education in the country.

Dr. Lahlou’s list of best practices includes instructional technologies, program designs, interactive engagement models, and public-private partnerships for designing courses, in order to make private schools better contributors to economic development. Dr. Lahlou feels strongly that expatriate Moroccan education professionals can play a key role in encouraging educational institutions in Morocco to gain insights into options for upgrading their offerings. To do so will require a significant investment in improving teaching and faculties at all levels, especially in English-language instruction.

It is timely that AULM’s view of major changes to enable Morocco’s education system to produce qualified human resources is gaining momentum as the country is rapidly expanding its technology and new business sectors. Dr. Lahlou’s vision, however, can only be realized, he believes, if all are given the chance to learn. He hopes that securing support for the AULM Foundation and its commitment to broad scholarship support for its students will mark a turning point for Moroccan education into the 21st century.