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German Marshall Fund Report Links Morocco’s “Geo-Economics” to US Interests in Africa

In late October, the German Marshall Fund of the United States (GMF) released a policy brief “Morocco’s New Geo-Economics: Implications for U.S.-Moroccan Partnership.” Authored by Dr. Ian Lesser, Executive Director of GMF’s Brussels Office and its Senior Director for Foreign and Security Policy, the paper was reviewed by a roundtable of experts whose insights were incorporated into the final document.

It is fitting that the paper was released during the week that marks the founding of the United Nations. As the world’s leadership in the 21st century has moved beyond a handful of Western powers and the Soviet Union to a broader, more diffuse global network in which regional alliances and relationships are increasingly significant, Morocco’s maturing strategic role in Africa points to how emerging states linked together by a wide range of interests are reshaping models of bilateral and multilateral relations.

As Dr. Lesser explains, the US-Morocco relationship is longstanding, and “Morocco’s strategic significant for the United States has been shaped…by Morocco’s proximity to areas of vital U.S. economic interest.” He points to several trends that have reinforced the “geo-economic dimension of Morocco’s international posture and its importance to U.S. interests. From African development to global food security, from new transport hubs to renewable energy…Morocco’s focus is increasingly drawn south and west, to Africa and to the wider Atlantic.”

For Morocco, this growing outreach is driven by four overlapping trends in the region. First of all, traditional trade and investment ties to Europe are increasingly weaker due to the recent economic stagnation in the EU. This is clear from slowdowns in foreign direct investment (FDI), purchases of Moroccan products, tourism, and remittances from Europe. In looking for new business partners, Morocco has several differentiated marketing strategies: more tourism promotion globally, with initiatives along both sides of the Atlantic basin (regular flights to Sao Paulo are a recent example) and into Asia; the Moroccan Investment Development Agency (AMDI) has an eight-city road show covering markets in Asia, North America, and Europe to highlight opportunities in Morocco; and Moroccan firms are benefiting from government subsidies to attend trade shows and expand their export operations.

The second trend is the growth in trade and investment agreements linking Morocco to a potential market of one billion consumers, from the US and EU to Africa, the Mediterranean, and the Gulf. With its rapidly expanding manufacturing and logistics/distribution capabilities, Morocco is fast becoming a key regional hub for business activity north and south, into Europe and Africa.

The Africa Imperative

A third component in Morocco’s evolution as a regional economic player is its commitment to renewable energies and the potential for “substantial offshore oil and gas resources,” which would both reduce Morocco’s “high national expenditure on imported energy and domestic energy subsidies” and provide the backbone for expanding power transmission to meet the growing demand in African markets. With most projections for economic growth pointing to sub-Saharan Africa as the next great opportunity, Morocco is well-positioned to increase its already sizeable presence on the continent into an effective network for economic growth. 

Regional stability and security issues are the fourth element that affects Morocco’s regional designs. Although Morocco is committed to regional integration across North Africa, the continued stalemate with Algeria frustrates that ambition. For now, it appears that Maghreb relations will be more bilateral, building on shared business interests. So Morocco is looking elsewhere for growth to drive job creation to absorb local demand and provide a reservoir of talent for opportunities in target markets. It recognizes the importance of linking jobs, economic stability, and public security throughout the region. “To be sure, political and security factors are also at play in Morocco’s growing African interests, especially in light of the rapidly evolving terrorism, insurgency, and trafficking scene affecting Atlantic Africa and the Sahel – the dark side of regional geo-economics.” It is no surprise that King Mohammed VI has made Africa a priority in his travels, speeches, and support for economic and policy conferences focusing on Africa.

Dr. Lesser points out that “Morocco’s expanding economic role looking south shows every sign of becoming a structural factor in regional development and a more significant facet of U.S. interest in, and cooperation with, Morocco.” To this end, the policy paper concludes with several recommendations for US policymakers:

  • Morocco’s growing Atlantic engagement should be made an explicit part of the US-Morocco strategic partnership.
  • The US should renew its commitment to greater regional economic cooperation and integration in the Maghreb.
  • In the context of transatlantic trade negotiations (TTIP), consideration should be given to implications for the US-Morocco FTA and ways to streamline the current provisions on roles of origin and other constraints to extend the value of the FTA to other African countries.
  • The private sector should be more broadly integrated into US-Morocco Strategic Dialogue.
  • Morocco’s growing role in Africa should be part of the agenda with Washington and with European partners.

These recommendations are part of a common-sense approach to recognizing how the US can support Morocco’s growing global engagement, which enables Morocco to enlarge its leadership role while contributing to security, stability, and prosperity in a critically important part of the world.

Defining a nation-state in the 21st century – part 1

With the growing onslaught of ethnic and minority conflicts in much of the emerging world, it often appears that we are on the edge of shaking out the structure of the Westphalian state system without a clear notion of what is to come. More than a dozen countries in the Middle East and North Africa, South Asia, and Latin America are going through significant crises in terms of governance and the emergence of new players in the political space. While the likelihood of more Sudan/South Sudan or Yugoslavia splits is not clear, the options for a greater number of federations and autonomous units cannot be ignored.

A recent publication helps frame a strategic discussion about avoiding the next Egypt or Mali by recognizing what promotes national stability and integrity. “Pathways to Freedom: Political and Economic Lessons from Democratic Transitions” is a volume of essays published by the Council on Foreign Relations, edited by Isobel Coleman and Terra Lawson-Remer. It is useful both for what is says and what it cannot. Based on the case studies in the collection, the generalizations offered in the first chapter “Statistical Evidence” put several assumptions about trends in national development under the microscope. Its conclusion: “Quantitative evidence has been relatively successful in explaining long-run democratic trajectories, but it cannot predict revolutions or coups in the short term, and it is impossible to know when or how particular reforms might happen. Three priorities emerge from quantitative analysis…increasing the capacity for nonviolent protests against autocratic regimes…support for multiparty elections…maximizing access to mass media…to safeguard democratic progress already achieved…in the short run, promoting democracy and prosperity may be incompatible.” The final point is unfortunately underscored by the continuing unrest in Arab countries where greater employment opportunities have yet to be achieved.

Recommendations

Apropos this observation is the first recommendation in the final chapter: “New democratic governments should move quickly to adopt policies aimed at materially improving the lives of the poor and dealing with unemployment,” with the caveat “without creating dependency on unsustainable and distortionary economic policies in the longer term.” In Egypt, Libya, or elsewhere, the mantra of jobs, jobs, jobs has yet to dominate the debate within governments, although it is certainly the priority on the Arab street. Employment and more equitable distribution of subsidies will not disappear from the agenda despite the difficulties of implementation.

The second recommendation focuses on judicial reform. “Rule of law reforms that establish a fair and level playing field and that prevents elites from bending the rules to serve their interests are critical.” Again a telling caveat: don’t use outside models; rather work “with local partners to bolster domestic pressures for reforms…take a bottom-up, capacity-building approach that supports the ability of average citizens to exercise their rights and the legal system’s ability to implement laws consistently and fairly.” Without an integrative model that is respectful of local jurisprudence and without ensuring that citizens can employ the law as it is intended, judicial reform may become a hollow exercise.

I particularly find the third recommendation instructive and reasonable for start-up governments. “Transitional countries should decentralize in ways that help deepen and sustain democratization efforts.” It is important that governments are present in a positive way in people’s lives. Investing in a higher degree of social services has two immediate benefits: it creates jobs for the new service providers, who should be recruited from and trained in local communities; and it shrinks the space for opportunities for services provided by forces that may not support the inclusive goals of the new regime.
The fourth recommendation takes a glass-half-full perspective on elections. “Conducting even flawed elections under authoritarian governments is worthwhile” primarily because they give the outside world an opportunity to critique the process and give local groups experience in organizing. One can see this clearly in the ability of the Islamic parties, particularly those like Morocco’s PJD, which spent time as an opposition party, quickly seizing center stage as broad political reforms are implemented.

The report also addresses positive actions by the international community, including “support[ing] civil society and independent media under authoritarian regimes through civic exchanges, capacity building, and bottom-up technology transfers.” There is a strong economic support role for technology transfer, technical assistance, sharing best practices, and supporting civil society empowerment. The report notes that “foreign governments and international and regional organizations must strive to compensate for bad [neighbors] by mobilizing to give domestic democratic reformers support in economic restructuring and investing for inclusive growth … access to preferential trade, investment, and security agreements should be conditioned on the implementation of homegrown governance reforms that improve accountability in the long term.” A particularly important caveat addresses the need to support the growth of a middle class “rather than promote economic ties that increase the overall growth and wealth but concentrate these gains in the hands of elites.”

The details in the report are more robust than what is summarized here, and the whole thing is worth reading for its analytics and as a measure of policy options being pursued by the US in the Middle East and elsewhere. The report closes with the following: “Even with the best circumstances and wisest decisions by policymakers and publics, the road to democratic consolidation is long and difficult. But there are no failed aspirations for human freedom: dreams of liberty and opportunity are sometimes long deferred, but they cannot be forever denied.”

Amen to that. Next week, I take a look at the 2013 Failed States Index for more lessons on state-building.

Can Corporate Social Responsibility Aid Reform in the Maghreb?

The Rise of Corporate Social Responsibility – A Tool for Sustainable Development in the Middle East argues that companies can contribute to sustainable economic development in the MENA region through corporate social responsibility (CSR). The report was issued by Booz & Company’s Ideation Center, its “think tank in the Middle East [providing] thought leadership through insightful research, analysis, and dialogue that is true to the Middle East’s dynamics.”

The report raises several questions; some are existential, while others focus on distinguishing between short-term – “give him a fish” – approaches and long-term “teach him to fish” options. I have never been a great fan of CSR, simply because it is not, in my analysis, a substitute for investments in sustainable economic development that directly create jobs. This report takes a different tack, saying that “Companies, as good corporate citizens, must become involved in sustainable development and contribute to the broader improvement of their societies … [by aligning] themselves with these national goals [job creation, poverty alleviation, and the environment] that are built around sustainable development, using the powerful tool of CSR initiatives to help achieve them.” CSR, in their assessment, is both a social force for reducing economic inequality and a means of improving environmental conditions. Their case studies in the region are helpful yet do not address the core issue: can CSR have a long-term impact beyond philanthropy that supports greater opportunities for more equitable economic growth?

What is CSR?

Perhaps the first issue is definitional, as the United Nations Development Project (UNDP) defines sustainable development as “distributing the benefits of economic growth equitably, regenerating the environment rather than destroying it, and empowering people rather than marginalizing them.” Is this consistent with what the region is thinking? According to the Booz report, “Companies and government officials interviewed in our study most frequently cited the need for robust job creation to nurture economic growth and spread benefits among the population as the most salient issue.” This is the dilemma, as few of the examples provided in the report are about job creation. More are about philanthropy, which, while laudable, does not necessarily lead to enhancing job growth over the medium to long term.

I am not saying that CSR is not important. In fact it is a key component of a mature approach to economic growth; but it lacks a defined connection to job creation. As the report highlights, “half of the region’s population is under the age of 25…among those 14-24 years of age, approximately 25 percent lack a job…” So building homes for the poor, insisting on higher environmental standards for manufacturing facilities, and encouraging literacy are laudable, yet my assessment is that these programs must be part of a larger coherent CSR strategy that is wedded to generating meaningful employment if it is to go beyond alleviating short-term social and environmental issues.

And the challenges for recruiting partners into CSR programs can be quite daunting, as there are few if any incentives for employees to participate. Less than 14 percent of firms surveyed have formal CSR-related key performance indicators, “and just 11 percent include CSR performance in their bonus schemes.” So to make CSR effective over time, the report points to a process to close the gap between a company’s individual CSR programs and a country’s national development priorities.

Another challenge is that countries diverge in their CSR priorities, making it critical to define local needs rather than using an imported template. In the MENA, the focus is on issues ranging from alleviating poverty and supporting charities and community projects to education and employability. There is not a broad consciousness of the need to address environmental issues, which is a priority elsewhere. “Executives [in the MENA] are struggling to relate environmental issues to profitability and long-term business objectives.” In many cases, environmental concerns are still seen as external to the company rather than incorporated into its internal operations.

Building effective partners

The report also talks about the importance of proactive government and civil society participation and encouragement of CSR. On this theme, a very interesting CSR project is run by SEDCO Holding, a Saudi Sharia-compliant wealth management company. After a national survey indicated that young Saudis have few skills in managing their personal finances, SEDCO initiated a financial literacy program for university students. It is a private-public partnership that involves an international NGO, resulting in a great example of how CSR can make an economic impact beyond charity. Smarter consumers make smarter decisions and can transfer this knowledge into their own business practices. This is a forward-thinking project that benefits all of the stakeholders and provides best practices that can be emulated elsewhere.

A positive recent development noted in the report is the notion of corporate governance – responsible and accountable company leadership. “It was only within the last 10 years that an Arabic word for corporate governance, hawkamah, was coined.” In the transition from family-owned private firms to corporate-managed public entities, a company’s identity shifts beyond the personality of the founders to values expressed in their corporate mission. It is this redefinition of company identities that holds the most promise for the inclusion of CSR in a firm’s objectives.

Just as long as you don’t forget that the bottom line is profitability and job growth!

Consensus and capacity-building: Tipping the scales in favor of reform

After a year away, I returned to Morocco for 10 days. I am sure that I will find the visit both challenging and satisfying. My central interest is to better understand the tangible governance issues facing the PJD-led government. It continues to struggle with advancing its agenda through parliament and achieving a consensus among its coalition partners on policies that effectively attack unemployment, the budget deficit, corruption, and social reforms. Most organic laws required to enable reforms promised in the 2011 constitution are still either being drafted or pushed off to a later agenda. And, as Morocco moves towards implementing its regionalization strategy, there is still a long way to go to enable officials and civil society to acquire the skills associated with effective local government.

While the policy debates on issues ranging from the latest version of the media law to subsidy and judicial reforms and strengthening protection for whistleblowers are well reported in the press, many critics are claiming that there are few results after 16 months in office. My assumption is that this is politics as usual in any democracy, especially a hybrid like Morocco. But there is more going on here that I want to explore.

In a country where labor issues can bring thousands of people into the streets, it is remarkable, but not surprising, that a common platform addressing labor mobility, training for work, and an open regulatory environment has not been vetted and moved through parliament yet. As in the US, political leaders seem to have a block against cooperating on issues despite the reality that their constituencies voted for change, not for stalemate.

Morocco badly needs to restructure the labor environment to enable workers to acquire skills and access to jobs while employers will benefit from more flexibility in responding to variable market conditions and a reduction in restraints on employee hiring and firing. This is not to say that important steps have not already been taken. As I’ve written previously, the government is moving incrementally to improve the labor force by broadening and upgrading technical and vocational training and by setting up a system to certify on-the-job skills acquisition. These steps however have not made a significant dent in the unemployment and underemployment rates.

An equally daunting task is focused on reducing and realigning the government’s subsidies to better serve the less well off in a country where a significant portion of the population is in the informal economy. Today, rich and poor equally benefit from fuel and food subsidies and the government is exploring options that not only relieve human needs but also encourage small business expansion. One proposal that I heard last night is to subsidize small farmers rather than the price of imports to the wholesalers. Of course, I asked if this was just another form of welfare that could grow into corporate subsidies, which like in the US distort market prices. But that is not the approach that Morocco is considering. Greater support to local growers would include training and equipment for better crop practices ranging from higher quality seed and watering to the use of fertilizer and more efficient cultivation, storage, and distribution. This would expand their capacity for more production, new employees, and fresh local supplies to market.

Whether it’s better labor practices or rationalizing subsidies, at the heart of the movement to reform is human development. Last week, I met with Mariam, a very capable, multilingual woman IT graduate from the top school in Morocco. She graduated months ago and still doesn’t have a job. Less than 30 percent of her classmates have found employment. One woman friend found an unpaid internship in Turkey through an organization that places capable graduates, for a fee, in positions scattered around the world. Now, Mariam is seriously looking at a position in India…ironic, isn’t it that Morocco is sending its talented young people, at their own expense, to fuel the IT capabilities of other countries.

I can’t help but put these concerns into a larger context – the daunting challenge of building consensus around reform policies that will benefit Moroccans and the simultaneous need to greatly enlarge capacity building training for the grassroots as well as the managers of Morocco. The promised policy of regionalization – devolving power to local governments – requires local communities and their leaders to have skills for administration and governance. The demand for more and better jobs requires policies that enable the transformation of a rigid economic regime into a market-friendly, results-driven, equal-opportunity economy that prioritizes achievement over status. Hopefully, in next week’s posting, there will be some success stories that I can share about where Morocco is heading.

Repairing the neglect of workforce development in the MENA

The World Bank has issued its fourth volume in the series Jobs for Shared Prosperity – Time for Action in the Middle East and North Africa. Well over 300 pages, the study provides its five main messages separately for those who need a super condensed summary. Reading through the messages, I noticed how clear it is that very few results can be achieved without strategies that integrate the resources and talents of the public and private sectors. Drawing on my experiences across the MENA region, there is much to be gained from cross-border sharing of best practices regardless of the differences in the economic profiles of the countries. Let’s look at the region in terms of the key messages of the study.

Message #1: Labor markets in the MENA make poor use of the available human talent and resources, thus inhibiting the economic potential of countries and people in the region. Current political dislocations aside, Arab countries, like much of the developing world, made post-independence choices that centralized economic growth around government institutions. Despite dramatic changes in society since then in population, education, middle class composition, ethnic/minority/gender issues, global market standards, etc., governments were slow to accommodate to the realities of today’s economies. Concurrently, vested interests working with their government counterparts too often dominated the private sector. This cronyism added to the obstacles inhibiting progressive economic policies. Human capital was collateral damage in this scenario since labor had little impact on employment standards in a system of regulated government-social services and little flexibility in labor markets.

Message #2: Change the rules to create a dynamic private sector that capitalizes on the full range of the region’s human capital. Government business regulations have been slow to shed their opacity; end interference in the business of business, and equitably protect the rights of owners and employees. A major incentive towards transparency is that all MENA countries require FDI, which requires attention to rule of law, accountability by government officials, and awareness of environmental impact. The WTO, bilateral trade agreements, and a host of multilateral treaties have helped shine a light on changes that must be made for an economy to be competitive.

Message #3: Let skills flow into productive private sector jobs by realigning employment conditions in both the private and the public sector and rethinking labor regulation. Lower the barriers holding back women who want to work. MENA governments can no longer be the employers of first or last resort. Coddling public sector employees in non-productive jobs limits economic efficiencies and distorts opportunities. Efforts to enhance the employment of youth and women will be advanced through adopting unemployment policies that enable transitions to the labor force and access to services that respect the needs of working families.

Message #4: Make young people employable by closing information gaps, improving quality and relevance of skills, and partnering with the private sector in training. These steps have become the mantra of US, international and local government programs to advance employment among young people. An interesting corollary to this focus on training programs is providing recognition to those who have acquired skills informally, through on-the-job experience. Morocco is piloting a program called Validation des Acquis de l’Experience Professionelle (VAEP) to provide accreditation to workers who can demonstrate proficiencies that qualify them for advanced positions. Piloted through a cooperative agreement with the French government, VAEP originally started with the building trades in 2008, was expanded to textiles and clothing in 2011, and is poised to move into hospitality and meat processing. The bottom line is that professional skills validation through transparent proficiency examinations will “make it possible for employees to obtain diplomas or certificates outside of their initial schooling,” according to the article in Le Soir.

Message #5: Use short-term interventions to respond to immediate needs while building credibility and consensus for medium-term, game changing reforms. Demands for jobs, training, market-focused education, and transparency will not be satiated by government promises. Public-private partnerships can be a critical vehicle for identifying quick start-up projects and programs that support jobs for those marginalized and underutilized in current labor markets. Government subsidies for employment can be used more efficiently when tied to needs identified by current and future employers. The success of longer-term reforms of labor regulations, jobs training and education, gender-related policies, and workplace health and safety rules can be facilitated by piloting initial efforts at these reforms in short-term programs that deliver jobs and generate data that supports new policies.

The World Bank’s Jobs for Shared Prosperity, like the Arab Human Development Reports of a decade ago, offers a serious and methodical critique of how to take an under-performing region and enhance its prospects by freeing its most abundant resource – its people – from antiquated and ineffective labor constraints. Empowering employees is at the heart of building local stability and prosperity in the MENA, and it is an agenda that can no longer be postponed.

Managing the dynamics of Morocco’s reforms, can a tidal wave be tamed?

“…the transformation of a country is no easy matter…What we take for granted—a concept of citizenship, respect for a constitution, competent governance and an independent judiciary—have to, in large part, be started from scratch…That requires immense patience…and…requires a long- term commitment by the West…” So wrote Jennifer Rubin in her daily blog, Right Turn: “The Arab Spring: No walk in the park.” She had just spoken to a Moroccan thought leader, Professor Rachid Benmokhtar Benabdallah, who was in Washington, DC to speak at the German Marshall Fund on reform in Morocco and the Economic, Social, and Environment Council (CESE) project on regionalization in the Saharan provinces.

Professor Benabdallah and I had several opportunities during his visit to discuss the prospects for reforms in Morocco and his degree of optimism regarding the outcomes. “People who have responsibility for change have to have some pessimism to make them work harder to achieve the right outcomes,” he said, “With the right tools and training, we can do a lot in Morocco but it is not easy and it is not quick.” He pointed out that the baseline for today’s steps forward is the report on the first 50 years of Morocco’s human development prepared at the behest of King Mohammed VI. It was this report that laid out the challenges facing the country as it develops a more equitable and inclusive society. It was a bombshell, similar in impact to the United Nations Development Programme’s Arab National Human Development Reports, both of which provided a framework for analyzing the achievements and deficiencies in the Arab world.

Professor Benabdallah pointed out that the 50 years assessment was much broader in scope than the UNDP studies and provided the logic for the National Initiative for Human Development (INDH), which is Morocco’s roadmap for eliminating poverty, building sustainable economic growth in poor and marginalized communities, and enhancing local governance and inclusion. After achieving very positive results in its first phase (2005-2010), INDH was renewed in 2011, dealing with many of the issues raised during the Arab uprisings. This, according to Professor Benabdallah, is the nexus of the current challenge – how to learn from the results accomplished so far to accelerate efforts that respond to the legitimate aspirations of those who are pessimistic about the government’s efforts to tackle serious problems in employment, education, social services, housing, transparency, and governance.

As a result of INDH and Morocco’s vibrant civil society, a strong base exists from which to move forward. A key ingredient is the government’s role in enabling local communities and leadership to generate the inclusive, kinetic projects that solve problems and build sustainable alternatives. The Professor was quite adamant about the importance of capacity and institution building as core principles of human development. He believes that communities that demonstrate their commitment to economic and social progress should have resources to support their strategies. According to Benabdallah, democracy doesn’t come as a result of political will alone; it requires institutions, capabilities, normative values, and a shared sense of purpose. This is the strongest lesson of INDH. “Communities and individuals have acquired new ‘value and dignity’ and adopted a ‘better look on the future’,” says INDH National Coordinator Nadira El Guermai. “They only needed someone to help them realize it – and this is an important part of INDH. This allows the person to say, I am someone, and able.”

Where to begin? Families, schools, and jobs are the most important facilitators of civic values, citizenship, and participation in society. The future is constrained when people are marginalized, when young people carry the twin burdens of distrust of institutions and few market-ready skills, if courts and administrative bodies do not implement laws to protect women and girls, and when social biases still affect someone’s job opportunities. Professor Benabdallah believes that the US and other countries can be “part of the solution” by making available best practices, technologies, and strategies for local governance that provide Moroccan communities with tools to engage each other and centers of power. He is bullish on Morocco’s future because the majority of Moroccan people are looking for change that is inclusive and sustainable. If the tools are coming and the reforms are moving forward, then sufficient time and resources to sustain reforms are the key.

Linking Communications & Development – One Professional’s Story

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

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

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

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

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

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

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

Partners can make a difference in driving economic growth

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

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

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

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

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

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

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

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

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

Is there a future for Islamic Finance in Morocco?

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

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

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

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

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

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