What Makes Business Better in Morocco?

Changing Business Perceptions One Company at a Time

I recently attended a rather thoughtful business conference on US-Arab Business, aptly titled the “C3 US-Arab Business Summit 2014.” C3 stands for collaboration, community, and commerce, and its founder, Ransel Potter, has developed the summits for the “sharing of best practices in an effort to advance ‘commercial diplomacy’ between the two regions.”

The sessions moved beyond the usual “how-to” guides and success stories to focus on issues such as the impact of water, advocacy, and cultural ethnicities on regional relationships; the importance of intellectual property protection; opportunities in infrastructure development; and the insights into how women can become more integrated into a country’s economy, ably presented by spokespersons who have practical experience in promoting women in the workforce.

Gulf Cooperation Council: Bahrain, Kuwait, Oman, Saudi Arabia, UAE

Gulf Cooperation Council: Bahrain, Kuwait, Oman, Saudi Arabia, UAE

This year, several topics highlighted issues that continue to challenge governments as well as private sectors: for example, why corporations should consider local human capital development in their strategic planning, the importance of knowledge transfer in the health and sciences sectors, and how to communicate with Gen Y.

For me, there is great sensibility in this type of program approach that explains business opportunities within the larger context of the regional and cultural environment. Yet I found that, true to the line in the movie Jerry Maguire, “Show me the money” was also a driving force, as the great majority of presentations dealt with the Gulf Cooperation Council (GCC) countries whose enormous energy-export driven sovereign wealth funds and pool of experienced local companies overwhelm market opportunities in non-energy exporting countries.

Business Sense

Addressing the market prospects in a smaller economy like Morocco’s is a challenge I often face in these kinds of forums. And I was quite alone. The only other country from the Maghreb was Tunisia, whose representatives focused on social, educational, and cultural issues. So where does one start? The first step is to move beyond the “Casablanca” effect and Rick’s Café and describe the wholesale changes that Morocco has made in its business environment in the last 15 years. Companies are surprised to learn that more than 100 US firms are active in Morocco, and some of the giants of the industry, like Cargill, Boeing, and GE, have a significant presence there.

Morocco is rapidly expanding its industrial base

Morocco is rapidly expanding its industrial base

More importantly, Morocco is not just a market of some 32 million people but actually serves as an effective and efficient platform for driving business into west, central, and Atlantic Africa stretching to Nigeria. With its infrastructure, networks, cultural understanding, and long historical ties, Morocco is well positioned to enable US firms to navigate three challenges in opening new markets: finding the right partners, dealing with local governments and regulations, and minimizing risk by making informed choices.

I have worked in the GCC so I can understand and appreciate the attraction of the glitter, but doing business there is not for the faint of heart. As Danny Sebright, President of the US-UAE Business Council remarked, for small firms, one trip to the Gulf may consume their entire year’s market research budget. When one considers that the GCC itself is heavily invested in Morocco, then the benefits of investing in a smaller, regionally focused market become clear. Gulf countries appreciate Morocco’s stability, keen appreciation for business partnerships, and recognition that it can only thrive through global commerce – these are at the center of the country’s commercial ethos. So if one is intent on following the money, then it makes sense to look at opportunities in Morocco across a broad range of sectors, in the country and throughout the region.

What is driving the remake of how Morocco does business?

Its recipe for growth is changing the country’s economic profile

Recent reports on growth trends in Morocco focused on the seismic shifts in the make up of its economy. Now less reliant on the

A leading business review cites Morocco's progress

A leading business review cites Morocco’s progress

export of agricultural commodities, growth is spread across many sectors, reflecting both the goals of raising job quality and promoting valued-added and downstream products in existing sectors.

For example, Zawya e-News identified how manufacturing in the automotive and aeronautics sectors have become engines for moving Morocco’s new economy forward. Building on its latest industrial development plan, the country has seen automotive

exports jump 37.2 percent year-on-year, electronic exports up 25.2 percent, and aeronautical exports up 14.1 percent. Exports rose more than five percent during the period despite a drop of 13.3 percent in phosphates exports and little expansion in agricultural exports.

According to the Financial Times, there are multiple benefits to the growth of automotive manufacturing. “The country’s auto sector will help push GDP growth up 4.5 to 5 per cent in 2015-2016, from 2.5 per cent in 2014, predicted Capital Economics in a note, making Morocco ‘North Africa’s best performing economy over the coming years’.” Despite this trend, agriculture still has a significant impact on the economy, providing 15-20 percent of GDP, depending on rainfall and market conditions. So the government continues to push ahead with agricultural reforms as well, promoting better water and crop use, accommodating changes in water supplies, and improving access to regional and international markets.

Growth continues across multiple sectors

Minister Lahcen Haddad

Minister Lahcen Haddad

At a recent tourism conference in Rabat, Minister of Tourism Lahcen Haddad gauged the progress made from 2010 to 2013. Revenues grew more than 78 percent, to $1.3 billion. Flight capacity increased by 10 percent and some 50,000 jobs were created. While the rest of the region was experiencing turmoil, Morocco’s tourist arrivals increased by eight percent and bed capacity grew by 30,000 units. The national tourism master plan is being reset to diversify both the types and locations of tourist destinations in order to spread the impact of the sector to benefit other regions.

According to World Bank data, just under 30 percent of the 2013 GDP was generated by manufacturing, which underscores the importance of Morocco’s continuing progress in economic reforms and incentivizing foreign direct investment. This is reflected in the government’s industrial investment strategy, wherein 34 percent of the funds are directed towards training Moroccans in market-focused skills and 24 percent is allocated to the incentives programs. Additionally, the central bank announced a new policy easing financing access for small and medium-sized firms engaged in industrial sectors or exports.

The IMF commented that “The newly developed industries will play even bigger roles in years to come and will further improve the resilience of the economy to external shocks.” Traditional industries are also re-tooling their market strategies. OCP, the country’s largest company and global phosphate leader, has signed multiple agreements to extend its production and distribution facilities in Africa and elsewhere, creating products that focus on the continent’s specific needs from cocoa to undernourished soils.

Morocco’s economic growth strategy is strongly supported by multilateral institutions such as the World Bank, International Monetary Fund, various Gulf sovereign wealth funds, the European Bank for Reconstruction and Development, and others. The African Development Bank, for example, recently approved a $125 million loan to support an ongoing program to upgrade Morocco’s financial sector – a key component in building a vibrant private sector. Beginning in December, the program will build on previous efforts in 2009 and 2011 that “focus on creating requisite conditions for inclusive economic growth.” In practical terms this includes: improving access to financial services by individuals and small and medium-sized firms; deepening capital markets by enabling the creation or broadening of financial instruments to raise capital and support loans; and strengthen governance in the financial sector through efficient regulations that enhance business development. According to the Bank, “The program is expected to benefit all Moroccans by improving conditions for sustainable and inclusive economic growth that would positively impact their living conditions.”

From the largest manufacturing facilities to the grassroots entrepreneurs, Morocco is undertaking a significant transition to a modern, diverse economy that will have a beneficial impact across all regions of the country, provide much-needed jobs, and reduce the country’s reliance on foreign assistance and energy imports. At the same time, Morocco is using this growing capacity to build and expand its footprint in Africa and elsewhere, through a balanced and inclusive economic growth strategy.

Another Nail in the Coffin of the “Washington Consensus”

Moroccan King calls for respecting each country’s challenges

At the annual session of the General Assembly of the United Nations (UNGA), countries seek to project their vision for the world, appeals are made, agendas offered, and then the work begins. The UN itself is an extra-ordinary organization composed of multiple departments and agencies with missions to achieve and defend important causes and hopefully bring about a more stable, inclusive global community. In the span of a month, delegates grapple with macro-concerns such as climate change, security issues including terrorism, and basic concerns with gender, youth, and equality of opportunity.

Africa reaching for global partnerships

Africa reaching for global partnerships

In the US, these proceedings attract little attention outside of those constituencies that see the UN as a type of platform for highlighting their issues and promoting solutions. It is somewhat of a coincidence that PBS has just shown “The Roosevelts,” which surveyed both the death of the League of Nations and the instrumental role of Eleanor Roosevelt in shaping some of the earliest efforts to promote human rights and dignity. And yet, I don’t think those viewers then turned on their televisions to find out what the UN was doing, even as President Obama was making his address and the US assumed the chair of the Security Council.

Why such limited interest in the UN? Well, one reason is that Americans believe that we are more effective and efficient in carrying out policy. Another is the disrepute the UN earned in the 70s and 80s for mismanagement and contentiousness, which cast a lingering pall on the organization’s image. Lately, when Americans tune into the UN, it seems that its primary role is assembling coalitions to do battle against forces that would undermine stability and security in some part of the world, or to engage in debates on global issues that have little success for resolution (think environmental standards).

King Mohammed VI calls for long term partnerships to promote African development

King Mohammed VI calls for long term partnerships to promote African development

Yet, from time to time, the UN’s routine agenda is interrupted by an insightful and challenging message that is both thoughtful and a call to action. When King Mohammed VI sent Morocco’s Head of Government, Abdelilah Benkirane, to deliver the King’s message, most pundits anticipated a focus on the current crises in the region. So there was some surprise when King Mohammed took on the issue of the treatment of developing countries by the West, and then offered viable options for building partnerships for sustainable economic growth.

Challenges “Patronizing” Views of Developing Countries

Sustainable development is the central theme of this year’s 69th UNGA. While there have been many attempts at defining it conceptually and practically, the King’s remarks reflect Morocco’s experiences and continued challenges. More importantly, his speech was built not on a wishful foundation but on the hard-earned lessons that the Kingdom incorporates into its policy deliberations.

I was intrigued that King Mohammed put Morocco’s development strategy within the larger context of the world’s current turmoil and instability at the end of the speech. His words indicated quite clearly that his concern for equitable treatment within the global community preceded much of today’s conflicts.

“The world stands at a crossroads today. Either the international community supports developing countries to help them achieve progress and ensure security and stability, or we shall all face the consequences of more conflicts and greater fanaticism, violence and terrorism – all of which feed on feelings of injustice and exclusion – and no part of the world shall be safe.”

New technologies rapidly adopted and developed in Africa

New technologies rapidly adopted and developed in Africa

“As the world grows more acutely aware of the cross-border threats posed by the lack of sustainable and human development, and as we realize that ours is ultimately a common destiny, I am sure there will be a global awakening regarding the need to work for a more secure, more equitable and more humane world.”

In this framework, he noted that “Achieving sustainable development is one of the pressing challenges facing mankind. It is particularly important, in this respect, to strike a balance between the requirements for economic and social progress and the protection of the environment, on the one hand, and the safeguard of the rights of future generations, on the other.”

Sounding as progressive as any Western monarch, King Mohammed VI made his case for treating each country based on its particular profile rather than a one-size fits all prescription. “Aware of these critical challenges, I have sought to set up a distinctive development model rooted in the culture and in the specific national values of the Moroccan people – a model which also takes into account the need for positive interaction with international principles and objectives in this area.”

In his remarks, the King focused on the need for a healthier relationship, actually partnership, between developing countries and those who had colonized Africa and Asia; a partnership that recognizes that each country has its own path to follow “…having taken into consideration its historical development, cultural heritage, human and natural resources, specific political circumstances, as well as Its economic choices and the obstacles and challenges facing it.”

Just as he has done on his tours to multiple African countries, he called for respect for each country’s road to development promoting economic and political progress within the context of a country’s defining values and principles. The King singled out the injustice of asking former colonies to adopt Western models in short periods of time and with conditions imposed externally.

Yet King Mohammed did not overlook the responsibility of developing countries to step up to the challenges of authentic, inclusive, equitable development incorporating over time a balanced approach to sustainable growth. Reflecting on the work being done on intangible capital – “factors related to the living conditions of the population, such as security, stability, human resources, institutional development and the quality of life and of the environment…,” the King noted that “the right conditions need to be created, in theory and in practice, to move on to the next stage with regard to promoting both democracy and development, without interference in the internal affairs of states. In return, the latter should commit to good governance.”

Open for sustainable growth and development

Open for sustainable growth and development

King Mohammed challenges both developed and developing countries to redefine their relationships as partnerships reflecting shared interests that will lead to progress in economic and political policies. It is clear that the King believes shortcuts or facile solutions are not sustainable, and he emphasizes approaches rooted in the soil of the countries working to advance. It cannot be said that this King avoids controversy. Whether in dealing with Islamic extremists, the Assad regime, Jerusalem, or North-South relations, Morocco stands clearly in the camp of those who promote coordination, collaboration, and constructive engagement as an instrumental strategy for growth.

It is this visionary stance that enables Morocco to “punch above its weight.”

3.2.1. Launch…of Global Entrepreneurship Summit to be held in Morocco

US-led Initiative Highlights Morocco’s Role as Trade & Investment Platform

After a flurry of meetings in late August and early September, the US and Morocco launched the overall outline of the program for the Global Entrepreneurship Summit (GES) to be held in Marrakech, Morocco November 19-21. The GES website provides the breakdown of the sessions and themes while speakers are still being invited.

Blog GES 1It is expected that Vice President Joe Biden will head the US contingent, which will include members from the State, Commerce, and Education Departments, and from other agencies with a remit focusing on employment and entrepreneurship programming. Under the theme of “Harnessing the Power of Technology for Innovation and Entrepreneurship,” some 3000 entrepreneurs, heads of state, government officials, and leaders of businesses ranging from small and medium-sized enterprises (SMEs) to multinational corporations will be on hand to discuss how “Technology creates opportunities and enriches the human capacity for dynamic collaboration. It builds social capital, promotes human development and facilitates the exchange of information and ideas.”

On November 19th, the featured program will be a “Women’s Entrepreneurship Day Celebration Lunch” as delegates gather for meetings, sessions, side-bar events, and opportunities to promote their ideas, projects, and experiences in entrepreneurship. The conference will reach beyond technology applied to ICT and examine its role in promoting water management, alternative energy, sustainable agri-business, and business development, among other areas.

Among topics to be addressed on November 20-21: lessons learned moving from talent to entrepreneurship; regional connectivity to promote business across boundaries; the importance of smart cities in adapting technology to human development; social entrepreneurship; innovations in entrepreneurship and financing; and the central issue of building and sustaining an ecosystem to support entrepreneurs.

Making Contacts for Building Business

With a strong emphasis on allocating time for B2B meetings between entrepreneurs and potential investors and government officials, GES will host an online MARKETPLACE module to encourage participants to spend time meeting with their peers and specialists to discuss common interests and “opportunities for technology transfer, investment, mentoring and growing and scaling businesses (expertise in certain sectors, with certain technologies, regions and countries, potential investment offers, training and so on) as well as request help in areas they need (on-the-ground support in countries, potential partnerships and so on).” The MARKETPLACE will be an ongoing legacy of the Summit to facilitate follow up and continued interactions among participants.

Minister Delegate Mamone Bouhdoub talks business

Minister Delegate Mamoune Bouhdoub talks business

According to a story in the Business Standard, “the selection of Morocco as host country reflects the active role it plays in the overall economic development of the African continent, the kingdom’s leadership in supporting entrepreneurship and the integration of youth and women into the economy.” The article mentions that a key goal for Morocco at the conference is to promote concrete steps by global investors to “finance start-ups and new ventures with a strong emphasis on financing ventures for women entrepreneurs.”

Consistent with its own efforts to stimulate economic growth through a myriad of programs and partnerships with the private sector, Morocco is making a statement about the need for sustainable and inclusive growth touching all sectors of society.

Morocco’s Mojo Moving Financial Markets!

Continues to Strengthen its Regional Leadership Role

A recent Bloomberg report, “Morocco Mojo Building from Moody’s to Record Bond Yields,” pointed out that “Moroccan bond yields are tumbling to records as an increase in issuance boosts liquidity amid a stable political backdrop, according to Standard Chartered Plc.” It also noted that “Moody’s Investors Service raised Morocco’s credit rating outlook to stable from negative last week, citing progress on subsidy cuts and booming industrial exports.” What’s driving Morocco’s continued good news in the financial world was underscored in the June 2014 newsletter released by the Moroccan Investment Development Agency (AMDI), which cited the following statistics:

  • Foreign Direct Investment (FDI) increased by more than 23 percent in 2013, to more than $5 billion, with the largest deals in food processing.
  • FDI increased for the third year in a row, mirroring the recovery in Europe with French FDI up 20 percent.
  • Industrial investments in 2013 represented 39 percent of FDI
AMDI Newsletter

AMDI Newsletter

The newsletter cited other sources with good economic news ranging from Foreign Policy’s Baseline Profitability Index (BPI), which ranked Morocco third in the Arab world, and the only Maghreb country listed; to the World Economic Forum’s “The Global Enabling Trade Report 2014,” in which Morocco improved by 21 places. AON, a global insurance broker and expert in risk management gave Morocco the best mark in the region for business climate, and Morocco was only one of two Africa countries to make AON’s list in its Global Risk Management Survey.

Success Growing in Diverse Sectors

It is no surprise, given its stability and strong investments in the sector, that Morocco was named as the number one country in North Africa in terms of the importance of tourism by the World Travel and Tourism Council (WTTC) in its Travel and Tourism Economic Impact 2014 report. And the financial sector also received accolades at the 2014 Africa CEO Forum, when Attijariwafa Bank was named African Bank of the Year 2014.

The supply chain for the automotive industry continued its expansion as Saint Gobain announced a new $18 million windshield glass and glazing factory in the Kenitra Atlantic Free Zone, joining Lear Corporation’s launch of its fourth factory for electrical wiring that will employ upwards of 1700 people; and Yazaki’s is opening its third plant for automobile wiring targeting 3000 jobs.

The balanced growth of the industrial sector is demonstrated by the $26 million steel sheet processing and preparation plan being constructed by the Spanish firm Bamesa with a capacity of 100,000 tons a year. The French firm LH Aviation, noted for its light aircraft, opened its first manufacturing facility valued at some $20 million; and Elephant Vert announced its plans for two fertilizer and pesticide factories with an investment of $58 million.

In the IT sector, Lacamobile, the world leader in low cost call centers, is setting up its first facility in Morocco that will employ 1000 people; while Ingenico, tops globally in electronic payment solutions, has chosen Morocco as its headquarters for serving African clients.

The rapidly developing new town of Zenata scored two coups in 2014: the announcement of the first IKEA store in Morocco located in its city commercial center; and a planned shopping center, whose manager will be Sonae Sierra, a Portuguese firm that will be investing more than $15 million in its first foray into Morocco.

Why Not Morocco?

It is not surprising that AMDI focuses on the positives of investing in Morocco; there can be no understating how that country’s success is critical to the region’s economic health. Morocco is making a positive contribution to its own development

Morocco's growing exports lead economic regional integration

Morocco’s growing exports lead economic regional integration

and that of its neighbors by creating value centers for economic activity that serve regional and international markets. Its achievements to date would not be possible if companies did not believe in the stability and vision of the country and the efforts made by the government and private sector to be business-friendly and reliable partners. The companies are profitable, valued jobs are being created, and Morocco is demonstrating its well-earned regional role as a leader in economic growth.

 

11th Edition of Morocco’s Tourism Conference Slated for September 29

Focus on Building Local Tourism Capabilities

The Moroccan Ministry of Tourism, in conjunction with key government and private sector stakeholders, will open its 11th Tourism Conference on Monday, September 29. The conference will focus on two major themes: growing the tourist potential throughout Morocco and strategies for attracting investment to promote tourism development.

Minister Lahcen Haddad speaks to CNN

Minister Lahcen Haddad speaks to CNN

Minister of Tourism Lahcen Haddad noted that Vision 2020, the national plan for Tourism, aims to make the most of Morocco’s touristic potential and to ensure fair and equitable distribution of tourism wealth throughout the national territory.” He will be joined in the opening session by the Prime Minister, as well as officials from the National Confederation of Tourism, the mayor of Rabat, the Spanish Minister of Industry, Energy, and Tourism, and the General Secretary of the UN World Trade Organization (UNWWTO).

Morocco plans to develop at least eight additional tourism destination areas, each having its own distinctive character and distributed among the coastal, cultural, and ecological attractions of the Kingdom. In developing a comprehensive strategy to guide robust and sustainable development, the conference will discuss how to vary the development according to the unique environment of each site, including needed infrastructure, local regulatory governance to protect the environment and guide growth, and the marketing and logistics conditions that need to be addressed.

Branding Morocco’s Tourism

blog 26Sep 1In surveys that identify perceptions of Morocco, tourism ranks consistently on or near the top, especially in Europe and North America. Vision 2020 seeks to exploit that favorable image by creating even more diverse destinations to appeal to a broader tourist base. Fortunately, with more than a decade of dedicated analysis and development in the tourism sector, Morocco has learned a great deal about what attracts and holds the interests of travelers. Experts from Marrakech and Bilbao, Spain, will share their experiences and make recommendations for enhancing Morocco’s tourism industry. But none of this is possible without sufficient and targeted financing.

Vision 2020’s goal is to make Morocco one of the top 20 destinations worldwide and a model of sustainable development throughout the region. This can only be achieved through a diverse, high-quality tourism industry that makes the most of what Morocco has to offer and provides the services that tourists demand. According to the plan, Morocco will double the current number of hotel beds; provide incentives and programs to direct tourism investment to the target sectors of entertainment, sports, and leisure; add value to the presentation and promotion of Morocco’s cultural and artisanal heritage; and develop the right hospitality infrastructure for each of the new sites.

Encouraging Private-Public-Partnerships for African Development

Africa50 Infrastructure Fund Sets its Mission

Casablanca Finance City (CFC) took another step forward in its goal to be the financial services hub for business in West, Central, and Atlantic Africa when the African Development Bank (AfDB) opened its Africa50 Fund headquarters in the CFC this week. The purpose of the Fund is to build private-public partnerships (PPPs) to finance national and regional infrastructure projects “to accelerate the continent’s development rate.” The concept crystallized in 2012 when African leaders “called for innovative solutions to facilitate and accelerate infrastructure delivery in Africa.” This led to a recommendation for a PPP Fund that would reflect the lessons learned in critical sectors including energy, transportation, and water, and pursue projects that are development-oriented and commercially operated. Key to the Fund’s ethos is that “operational decisions will be made by a management team selected solely on technical merit and demonstrated managerial competence.”

African50 Fund Operational at Casablanca Finance City

African50 Fund Operational at Casablanca Finance City

Africa50 has two business areas – project development and project finance. The project development arm aims to increase the number of bankable infrastructure projects through substantial increases in early-stage project development activities working in tandem with highly skilled development experts. Project finance focuses on developing and launching investment vehicles needed to attract additional infrastructure financing.

The Fund’s goal is to shorten the time “between project idea and financial close from a current average of 7 years to under 3 years, thereby delivering a critical mass of infrastructure in Africa in the short-to-medium term.” The investors/shareholders are African countries, the AfDB and other development financiers, African diaspora and high net worth individuals, and institutional investors, including pension and sovereign wealth funds.

What’s at Stake

In an AllAfrica.com interview on the Africa50 Fund, AfDB president Donald Kaberuka pointed out that Africa currently only has about half of the $92 billion needed annually for infrastructure. “We have to build a vehicle with an equity base based on Africa’s own pools of savings. And on those bases we go into the market to raise money.” Tas Anvaripour, Africa50 director, believes that eventually, “Africa50 will be able to finance infrastructure projects across the continent with an estimated value of more than $100 billion.” This is not beyond reach, Ms. Anvaripour indicated, pointing out that AfDB “during the past six years, has financed 49 infrastructure projects totaling more than $30 billion.”

RAM1The Africa50 Fund’s presence in CFC validates Morocco’s key role in African development and furthers the extensive business and financial services that its banks already provide in the region. With its emphasis on building PPPs for infrastructure projects, the Fund has a ready partner in Morocco, which has financed the bulk of its energy development through PPPs. Morocco’s consistent efforts to improve its economy and business climate make it a natural fit for the new Fund.

Can Anything be Done to Push Broad-based Economic Growth in North Africa?

After more than three years, what we’ve learned about increasing jobs and growth

Now that the “Arab Spring” has become an integral part of any analysis of the future of the Middle East/North Africa (MENA) region, it is worthwhile to see what we are learning about two core issues raised during the demonstrations – increasing youth employment and economic growth. While governments have worked with international agencies and donors to launch or revise programs addressing these concerns, and the related issues of governance and transparency, three challenges persist: scalability – what to do to make small-scale programs succeed when greatly expanded; sustainability – how to make the programs cost effective so that funding costs do not limit the utility and shelf-life of the efforts; and inclusiveness – how to impact beneficiaries in the broadest possible demographics of gender, ethnicity, age, and education.

Meeting of Maghreb Employers Union

Government, Donors, Private Sector partners for growth

Morocco is a good example of the challenges faced by policy makers and intermediaries who manage the programs. It has always had technical and vocational programs for young people, and the government has been working for the past two years to include other key inputs, such as market needs to shape skills training and career support for graduates to help them find jobs. So by the end of 2014, Morocco will roll out new and improved programs that aim to close the gap between skilled workers and job opportunities. With an overall target of 60,000 jobs for graduates per year, the Minister of Employment Abdeslam Seddiki noted that as of 2016, some 10,000 unemployed people will benefit from these specific programs in addition to jobs generated by other agencies, international donors, and the private sector.

USAID, the World Bank, various EU agencies, and others are funding and running programs in Morocco dealing with youth employment. There is concern that more needs to be done to ensure collaboration among the donors to maximize the impact and lessons learned. If a stable, economically active country such as Morocco faces problems with ensuring consistent, cooperative, measureable efforts for job creation, others in the region that are less stable are in much more difficult situations.

A Different Formula

A sacred cow that is coming under scrutiny is microfinance. It is no surprise that programs in limited environments, such as microfinance schemes in poorer urban communities and rural areas are an attractive first alternative. The common wisdom is that if a program just provides loans and oversight, people, especially women, will find ways to use loans

Promoting the growth of the informal economy can be facilitated by cash transfers

Promoting the growth of the informal economy can be facilitated by cash transfers

productively. But a growing body of research shows that “it ain’t necessarily so.” So much of the success of microfinance loans depends on the metrics of success. Repayment rates have long been the staple metric. Yet a number of recent convincing studies using rate of expansion of existing business activities and levels of beneficiary consumption as indicators show the limitations of microfinance programs, especially when they are introduced across more populated and economically diverse locations.

In a recent intriguing article in Foreign Affairs, the authors review several studies of the option of cash grants instead of microfinance loans. Some general conclusions are that recipients have more insights regarding how to expand their business and acquire the needed skills than external agencies. This is particularly relevant as there is a prevailing perception that the informal economy, where most of these recipients work, is “bad” because it deprives a country of a significant portion of the population’s contribution to GDP. The authors report that “many of the poor are working below their potential because they lack the capital, credit, or insurance products necessary to grow their businesses. In the absence of financial services, which can take decades to develop, cash can fill the gap.”

While they recognize that cash grants are not appropriate or effective in every case, “the evidence is stacking up faster in favor of cash than it is for a lot of the alternatives, and direct cash transfers deserve to shed their reputation of being eccentric.” If one goes further and links the impact of better and more effective assistance programs with the dynamic role played by the informal sector in terms of basic business experience, then the value of utilizing rather than constraining this human energy becomes apparent. In a recent video released by the Initiative for Global Development (IGD), Austin Okere, Founder/CEO of Computer Warehouse Group made the point quite emphatically. He said that there are 17.7 million companies in the informal economy in sub-Saharan Africa. If each added just one employee, they would create more jobs than the African governments combinedare able to generate.

Hernando De Soto addresses MENA growth

Hernando De Soto addresses MENA growth

A similar effort is underway in Egypt, where the Sisi government is trying to make good on its economic development promises. They have recruited famed economist Hernando de Soto, who long ago studied property rights in Egypt and was consulted by both the Mubarak and Morsi governments for advice as to how to free up Egypt’s moribund economy. His answer was quite simple, “This is where most of the country’s resources that can give you…the high growth rates are…it’s the informal economy.” Rather than try to constrain its vitality through more regulation, de Soto recommends an extensive plan to integrate the informal economy into the economic system by reforms and incentives to drive economic growth. The bottom line, as in this proposed initiative and the others, is to develop strategies that generate large-scale employment and robust and sustained inclusive economic growth.

 

Mobilizing Human Capital

The paths to linking effective strategies for growth and employment are still unclear. A major effort is underway at the Brookings Institution, with partners in sub-Saharan Africa, to assess programs addressing youth unemployment to gauge effectiveness and lessons learned. So far, the studies indicate far more about lessons learned than what works under a variety of conditions. What’s critical to the studies is that they are done on a country-by-country basis by local NGOs, thus providing vital first-hand data and insights that might not be obvious to outsiders.

The authors are releasing the studies individually so that researchers can do both country-specific and comparative analyses. “A number of lessons can be drawn from these country-focused studies,” they point out. First of all, know your beneficiaries, their backgrounds, demographics, social indicators, past and current experience in the informal and formal sectors, relevance of ethnicity or minority status, motivational profiles, and educational backgrounds.

Secondly, there is data that supports the effectiveness of government-sponsored vouchers and subsidies when they allow individuals to make choices that reflect their ambitions. This is particularly relevant to those who have experience in the informal economy and have a strong entrepreneurial sense of what is needed to expand and grow their business. Finally, they stress the importance of good data, not just focusing on unemployment rates, but digging deeper into categories of unemployment, quality of available jobs, and mismatches between jobs and potential employees.

Good Decisions Require Reliable Information and Critical Insight

While these studies focus on sub-Saharan Africa, the same types of challenges exist in the Maghreb, and the same in-depth

Fez - combining the best of old and new

Fez – combining the best of old and new

assessments are needed to understand not only what works and what doesn’t but why. A good starting point for this undertaking is to parse the recently released report on the impact of the first National Initiative for Human Development campaign in Morocco. The report categorizes the results of this most important effort to lift people out of poverty through introducing sustainable development projects. In his most recent Throne Day speech, King Mohammed VI tasked the Economic, Social and Environmental Council to look at the human development indicators in the country for the past five years and come up with recommendations to ensure equitable growth that supports the quality of Morocco’s “intangible capital.” It is this integration of political will, well-developed research, strategic thinking, and close attention to all stakeholders that will provide the clearest insights and policies for advancing growth and employment throughout Africa.

After the US Africa Leaders Summit: Key Challenge is Making Good on Promises

In a recent article published in Yale Global Online, Dr. J. Peter Pham, Director of the Africa Center at the Atlantic Council, concluded that “Whether [a recurring US-Africa Leaders Summit] happens or not depends on the Obama administration’s stewardship of the initiatives showcased during the summit, including the ability to work with Congress to authorize and fund projects, and also on whether the momentum of the gathering is sufficient to shift the Africa narrative in the minds of American decision makers and the general public who will influence policy and business decisions in the years ahead.”

This is the key challenge facing the Obama Administration – can it make good on the proposed initiatives announced during the Summit, or will the agenda of noteworthy programs fall prey to gridlock in Congress and a distracted Administration? Bipartisan recognition of the importance of more aggressively addressing opportunities in Africa – foreign policy and economic efforts included – was previewed in advance of the Summit by The Heritage Foundation in an issue brief, “Congress Should Upgrade the African Growth and Opportunity Act.”

AGOA Report Brookings African Growth Initiative

AGOA Report Brookings African Growth Initiative

Commonly referred to as AGOA, the current legislation expires September 30, 2015, and Congress is moving slowly towards renewing the law, which provides duty-free access for many African products to the US market. In return, countries are certified for AGOA eligibility if they continue progress towards a market-based economic system, implement democratic reforms including rule of law and human rights protections, and show improvement in their human development indicators. Unfortunately, AGOA only applies to sub-Saharan African countries, thus requiring another set of incentives for the Maghreb/North Africa.

Why Not Broaden the Summit To-Do List?

It is important to repeat the last point – much of what is being proposed for Africa by the Heritage Foundation and the US Government applies only to sub-Saharan Africa (SSA); and this remnant of old-school labeling of Africa ignores important trade and investment trends emerging across West and East Africa in particular. For example, as detailed in the Atlantic Council’s paper on Morocco’s multiple ties to Africa, which launched just in advance of the Summit, Morocco is broadening and deepening its historic ties to Francophone and adjacent regions of Africa through investments and trade, encouraged by King Mohammed VI as part of his economic diplomacy. But when the Heritage Foundation talks about the need to upgrade AGOA, it only looks at the African Union (AU), which has its own internal contradictions that can stand in the way of promoting greater integration of any kind.

That is not to say that Heritage’s recommendations are not critical; thoughtful analysts agree that the five goals mentioned are vital to AGOA’s success: extend AGOA for at least 10 years, encourage regional economic integration, provide additional incentives, facilitate greater bilateral private sector engagement, and support an FTA among African countries.

By not including North Africa, however, the paper overlooks key facts: Morocco is the second largest African investor in

Morocco's growing exports targeted for greater government support

Morocco’s growing exports targeted for greater government support

Africa; it is the only country in Africa that has an FTA with the US, which includes incentives to link with AGOA counties; it has one of the most robust transportation systems in the region; its power generation strategy complements plans for electrification of underserved areas in SSA; and its network of companies investing in Africa is an excellent conduit for foreign companies basing operations in Morocco to conduct trade and investment in Africa. Other Maghreb countries also have much to offer – from utilizing traditional south-south trade routes to encourage greater market integration and ease of the movement of goods and capital, to achieving economies of scale in the discovery, management, and transmission of hydrocarbons.

How to Make Promises into Realities

Enacting the US-Africa Leaders post-Summit agenda depends in large part on securing support from Congress, most immediately for the AGOA renewal/expansion and funding for announced initiatives. Related, but not on the agenda, is renewing funding for EX-IM Bank, a critical cog in America’s trade and investment strategy. For example, the US has promised an additional $300 million a year to promote Power Africa – to double access to electricity across SSA. Funding is to come from EX-IM, which may disappear if Congress doesn’t act. To support US exports and investments, a new seven billion dollars in financing for the Doing Business in Africa Campaign was announced, again with no clear inclusion of North Africa. The Millennium Challenge Corporation and others will also be playing a major part in fulfilling the Administration’s promises, with no clear indication that Congress is on board.

It will be challenging for the Administration to undertake its ambitious agenda without the cooperation of the Congress; but Congress itself held a very active event with the African delegations during the Summit. So, the goodwill appears to be rising for ramping up Africa-US ties across the board. Whether or not this can be kept on track and develop sufficient momentum will be indicated first of all by Congressional actions on AGOA and EX-IM Bank. This is a defining moment in US-Africa relations, and it should include all of Africa and benefit from the experience of those who are making regional economic integration a reality.

Economy Takes Center Stage in Moroccan King’s Revolution Day Speech

Calls for Continued Emphasis on Growth and Human Development

This week, King Mohammed VI of Morocco made a speech on “King and People’s Revolution Day,” marking the exile of his grandfather King Mohammed V, which began Morocco’s drive for independence from France. He addressed the challenges that Morocco faces as an emerging nation if it is to continue its growth in a stable, equitable environment.

Rather than single out any specific strategy, the King pointed out that “there is no single model of an emerging nation. Each country has its own development process, which is based on its human, economic and natural resources, as well as on its cultural heritage. It is also contingent on the obstacles and difficulties each nation has to face.” He then tied together several streams of activities that are requisites for a balanced national strategy.

He began by noting the beneficial results of having well detailed and thoughtful planning, both in terms of the general economy and specific sectors, such as agriculture and fishing. The King also mentioned how economic reforms are part and parcel of Morocco’s ability to attract investments in industrial sectors.

OCP encourages entrepreneurs through annual competitions

OCP encourages entrepreneurs through annual competitions

King Mohammed then focused on the contributions that resulted from the dynamism generated by the infrastructure priorities of the government, including ports, industrial zones, and renewable energies. After complimenting the Office Cherifien des Phosphates (OCP) for its global leadership in food security, the King gave particular attention to the renewable energy sector, which “is a further illustration of our capacity to rise to the challenge, thanks to an early clear vision, as well as precise priority planning to meet our country’s needs and reduce foreign energy dependence by relying on our own renewable resources.”

Challenges Continue                                                                                                         

Another area mentioned by King Mohammed was the need to build on existing trade and investment agreements and commitments to enhance the country’s competitiveness and improve job prospects of Moroccans. He said, “Morocco needs to take a few more steps to confidently move forward and join emerging nations.” Referring to trade agreements that Morocco has with Arab and African countries, the EU, and the US, and improving ties with Russia and China, he went on to say that “the gains achieved should not, however, be a motive for self-satisfaction, but a strong catalyst for further efforts and continued mobilization. As a matter of fact, if the Moroccan economy is to emerge, it should rely on its potential and the joint efforts of all actors; otherwise it is bound to miss a historic opportunity.”

Among the challenges the King singled out was competitiveness of export companies. “Unfortunately, Morocco is clearly lagging behind in this respect because of a weak, disorganized industrial sector and competition from the informal sector. In such a situation, strong corporations and businesses have to be set up to boost the immunity of the national economy, both to enhance international competitiveness and develop partnerships with small businesses in order to stimulate growth at home.”

Morocco is rapidly expanding its industrial base

Morocco is rapidly expanding its industrial base

Never far from his thinking is the invaluable contribution to the country’s future that can be made by a skilled work force. “The key to enhancing competitiveness and meeting development and job market needs is to have qualified human resources. The latter are also necessary to be in tune with the evolution and diversification of the national economy.” Young people are particularly important, and the King noted, “Thanks to their patriotism and creative genius, I am confident that our young people can achieve their country’s development and ensure its access to the club of emerging nations.”

King Mohammed then linked improved job prospects to the overall reform agenda of the country, as he believes that good governance is essential for balanced economic growth to be achieved. “It is a fact that to catch up with emerging nations, we have to continue improving the business environment. This can be achieved especially by pressing ahead with administrative and judicial reforms, combating corruption and moralizing public life, which is not exclusively the State’s responsibility, but that of society as a whole, individuals and associations.” Labor unions received a specific nod for their role in advancing Morocco’s future while contributing to social stability.