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From Promises to Partnerships to Projects to Results

US-Africa Leaders Summit Opens Business Forum to Promote Opportunities and Collaboration

Spending time with members of the Moroccan delegation to the US-Africa Leaders Summit, which included a high-level business forum on Tuesday, one gets the feeling that, regardless of what the US is able to do to re-establish its leadership in Africa, Morocco is committed to moving ahead with its ambitious industrialization, energy, agri-business, tourism, and other development priorities.

Among the government and business leaders, there is unanimity on four points: Morocco needs to work very hard to promote jobs throughout the economy and the country; valued jobs are largely created through public-private partnerships that match skilled employees with employers who actively participate in training the workforce; international investors are a key component in the eco-system of stakeholders who are critical for economic growth; and much of this growth will result from Morocco’s ambitious efforts to become the premier gateway for business in west, central, and Atlantic Coast Africa.

Moroccan minister El Alamy

Moroccan Minister of Trade, Investment, Industry, and Digital Technology, Moulay Hafid ElAlamy, leads efforts to attract FDI

The government’s business side is well represented at the business forum, beginning with Minister Elalamy was quite active in the private sector before becoming Minister nine months ago, with interests in Africa and throughout Morocco. Minister Bouhdoub was also recruited from the private sector, and his portfolio, focusing on small and medium sized enterprises (SMEs) and the informal economy, highlights two of the critical areas facing policy makers. They are joined by Amina Benkhadra, former Minister of Energy and now Director General of the National Office of Hydrocarbons and Mines (ONHYM), probably the country’s leading proponent of mining and hydrocarbon and renewable energy policies.

The business delegation is quite impressive, featuring long-established leaders who bring both experience and vision to their roles. Mostafa Terrab is the CEO of OCP Group, Morocco’s phosphates producer, which manages an array of training programs in communities in which it works and also for the larger workforce. Its global policy footprint focuses on issues of energy, food, and water security and feeding the rapidly growing countries of Africa. Miriem Behsalah Chaqroun, a businesswoman and President of the Moroccan Confederation of Businesses (CGEM), makes its clear in her interviews and meetings that enabling small and medium-size companies to actively participate in Morocco’s growth is vital to promote significant job opportunities.

Karim Hajji, CEO of the Casablanca Stock Exchange (CSE), noted that CSE is soon launching an initiative focusing on outreach programs to grow small and medium-size companies through training in the core elements of running a business, including planning, financing, management, labor relations, dealing with government regulations, legal issues, and entrepreneurism. His colleague Mohammed El Kettani, chairman/CEO of Attijariwafa Bank, points to the Bank’s network of operations in 14 African countries as well as four in Europe and four in the Middle East as an indicator of how Moroccan banks can serve the needs of international investors wanting to work in Africa and want a stable and developed infrastructure to support their offices.

Othman Benjelloun, CEO of BMCE Bank, heads one of the largest banks in Africa, with a money management firm and investment fund specifically targeting Africa. As a senior leader in the group, he speaks from several generations of experience with markets from the US and Europe to Africa and Asia.

President’s Aspirations for US-Africa Collaboration

President Obama started by saying “I’ve made it clear that the United States is determined to be a partner in Africa’s success – a good partner, an equal partner, and a partner for the long term…we want to build genuine partnerships that create jobs and opportunities for all our peoples and that unleash the next era of Africa growth.” Conscious of the need for concrete actions to enable this collaboration, the President pointed to new projects by Blackstone (energy investments), Coca-Cola (potable water treatment and distribution), GE (infrastructure projects), and Marriott (hotels) totaling more than $14 billion.

Moroccan Ministers speak at the US Chamber

Moroccan Ministers speak at the US Chamber

Despite a very contentious year with Congress, Obama pledged to keep pushing to renew the African Growth and Opportunity Act (AGOA), which gives preferential treatment to trade with most African countries in sectors that enhance local job opportunities. Additional steps included pushing for EX-IM Bank reauthorization, $7 billion in US trade financing support, a new advisory business council to support efforts in Africa, and more money for Power Africa, the project to double the access to electricity in sub-Saharan Africa.

What does this have to do with Morocco? Although there seems to be some deafness at the State Department regarding Morocco’s potential contributions to Power Africa, Amina Benkhadra quickly points out at least four. Morocco has vast experience in rural electrification – which now covers more than 95 percent of the country, over difficult terrain. It can supply the training and expertise to energy companies in other countries. Morocco relies on public-private partnerships (PPPs) for more than 60 percent of its energy and is well-schooled in the negotiations and management of PPPs, the key factor in energy projects across the continent. Morocco has the engineers and technicians who can train African workers to assume responsibility for their power systems, from installation, to testing, to operations and maintenance. Finally, Morocco is the most experienced African country in solar, wind, and hydropower generation, and its projects and expertise would benefit the overall strategy of Power Africa.

Backing this up is the fact that Morocco already has at least four power projects in Africa and, thanks to the more than 100 agreements signed by Morocco over the last six months, is poised to take on even more partnerships in Africa for power generation. So Morocco is already modeling the types of initiatives the US is coming to appreciate and support. And the Moroccan delegation has as one of its priorities that the US recognize the great potential of triangular projects wedding US finance, Moroccan expertise, and local African market requirements.

Moroccan Business Delegation at Launch of Paper on Morocco at Africa Center, Atlantic Council

Moroccan Business Delegation at Launch of Paper on Morocco at Africa Center, Atlantic Council

An excellent example is the Memorandum of Understanding signed during the summit by the US Overseas Private Investment Corporation (OPIC), Morocco’s Attijariwafa Bank, and Wells Fargo, which gives Attijariwafa a new credit line to expand lending to its SME customers, both in Morocco and African countries where the bank is present, and also facilitates American entrepreneurs’ access to the continent. The goal of intensifying its ties with American partners, says Attijariwafa, is “making Morocco a hub of trade and investments flows to Africa.”

Where Will This Go?

Looking ahead, President Obama also emphasized his priority on empowering young African leaders, some of whom are part of the Young African Leaders Initiative (YALI). He announced that the 2014 Global Entrepreneurship Summit (GES) will be held in Morocco and in Sub-Saharan Africa in 2015. President Obama noted four elements “essential to Africa’s growth” that would be discussed at the US-Africa Leaders Summit the next day: the need for rule of law, regulatory reform, and good governance to safeguard human and investment capital and promote transparency; agricultural development given the large portion of Africa dependent on farming; rebuilding a strong health infrastructure; and promoting security and peace, “because the future belongs to those who build, not to those who destroy.”

From promises to partnerships to projects to results…is a generational challenge. Business thrives over the long term in a stable and predictable environment. Africa at this point is as much a challenge as an opportunity. Transnational and regional collaboration for economic growth will help stabilize areas experiencing difficulties despite their potential. Morocco has much to offer; it is a proven partner for the US; and it is, perhaps, a very smart option for rebuilding the US presence and influence in Africa.

IMF’s Christine Lagarde on Need for Strengthening “the Middle”

Speaks in Morocco on challenges of post-Arab Spring economic and human development

In Rabat on May 8, Christine Lagarde, the Managing Director of the International Monetary Fund (IMF), provided her analysis and prognosis of the “The Arab Countries in Transition—Strengthening the Economic Middle,” an insightful overview of the challenges and trends in the region.

Lagarde noted that despite the overwhelmingly economic and political nature of the demands for change, all were grounded in a basic human need for dignity. She quoted noted Moroccan author Fatima Mernissi, “Dignity is to have a dream, a strong dream that gives you a vision, a world where you have a place, where your contribution, however small it may be, will change things.”

More than three years after the Arab Spring began in December 2010, unfinished reform and development agendas throughout the region are complex, difficult to manage in the short term, and vary widely in responses and successes. What began as demonstrations about lack of jobs and transparency across the region turned political as people felt that they lacked the levers by which to effect policy changes. And now that many political participation issues are being resolved in the transition countries, some are moving forward to consolidate growth strategies.

Citing Morocco as an example she said: “Countries like Morocco are reaping the fruits of their efforts by diversifying and spurring both exports and foreign investment—especially in high value-added areas like cars, aeronautics, and electronics.”

Yet Lagarde is clear that there is much still to be done if the goals of people and governments are to be met. “So the great challenges for the next step of the transition are clear: How to create the jobs needed to meet the aspirations of a rising generation. How to create a vibrant and dynamic economy that offers opportunities to all.” It is this link between economic needs and the elusiveness of ready solutions that frustrates both governments and society. What seem at street level to be easy answers, such as increased pay, subsidies, and public employment, are in fact corrosive factors that undermine a country’s capacity for economic growth in the medium and long term. “These tasks are daunting. To make inroads, we would need to see growth rates doubling from the current levels of around 3 percent. We also need to see growth feeding into jobs to a far greater extent than is currently the case.”

Success Comes from Building the Middle

Lagarde has no illusions about the difficulties ahead, but she believes that strengthening the “middle” of the economy, society, and state economic policies can lead to progress and solutions. “Strengthening the economic middle means giving a shot in the arm to small- and medium-sized enterprises (SMEs) in the formal sector. These are the kinds of firms that form the backbone of a healthy economy, and— in other regions of the world—are the main engines of job creation.”

Leather and brass souk in Morocco

Souk in Morocco

Note her emphasis “in other regions of the world” since, in the MENA region, SMEs generate less than 20 percent of the jobs in the formal sector. Moreover, because informal companies have no access to formal financing, are not protected by the regulatory environment, cannot guarantee labor rates and benefits, and lack the ability to access formal distribution channels, they are doomed to remain small players in creating jobs and wealth. Policies that transition the informal sector into a valued player in a country’s economic growth strategy are an essential ingredient in building the private sector and rewarding entrepreneurs.

Lagarde then addressed the importance of the second key “middle.” “Global experience tells us that we need a strong middle class to drive an economy forward. A strong middle class sustains consumption and invests in the future. A strong middle class makes societies more cohesive, and lays the groundwork for stability and prosperity. A strong middle class is also home to the kinds of entrepreneurs we need for today’s modern economy.”

One of the essential vehicles for growing a middle class is the kind of public-private partnerships Morocco is supporting that match the professional and technical expertise of private sectors with the economic and financial goals and policies of governments.  Through its incentives for investment, training, and site selection, and reforms to the education and training sectors, the government of Morocco is striving to promote entrepreneurism and mobility to the middle class through the third “middle” – balanced economic growth policies.

“Looking ahead, the state needs to step back from some areas and step forward in others. It needs to provide fewer blanket subsidies, and more of a basic safety net for people who fall through the cracks. Perhaps most importantly, it needs to become less of an employer, and more of an effective and impartial regulator and enabler of the private sector—the ultimate source of good jobs.” She adds, “Just look at Morocco. Over the past couple of years, it has managed to cut its subsidy bill while increasing spending on programs aimed at improving access to health and education for the poorest.”

Of particular interest to Lagarde is the importance of broadening opportunities for women. After recounting statistics that show the critical contribution greater female participations can make to a country’s GDP, she said “So it is imperative to let women contribute, by removing outdated obstacles and introducing enabling polices. After all, it was Ibn Rushd who said that ‘treating women like a burden to the men is one of the reasons for poverty.’ The logic is clear—greater opportunities for women mean greater rewards for everyone.”

Growth and Dignity

Christine Lagarde, IMF, in Morocco

Christine Lagarde, IMF

Christine Lagarde is no stranger to the challenges facing the MENA region and emerging economies globally. She has provided important leadership in the IMF’s response to crises ranging from the Ukraine to sub-Saharan Africa. And the IMF is evolving, with greater attention to its role as a facilitator rather than a guardian of strict and rigid growth mandates. Her focus on the “middles” represents a clear and deliberate enunciation of how Arab countries can move ahead in response to their particular needs for growing their economies and their societies.

Dignity does not derive from food and energy subsidies, shadow employment, or passive participation in society. Citizens want to feel that they are invested in by their governments and in turn they can invest in their country’s future. Valued jobs and a vibrant public space are vital ingredients in securing the stability and economic growth that nurture and protect the “middles” Lagarde describes. This is the daily agenda for the leadership and civil society in Morocco, where they are working to realize both economic and political agendas that encourage and facilitate human and economic development.

Unemployment Numbers Mask Job Solutions

In an interview published in the newspaper “L’Economiste,” Moroccan Minister of Employment and Social Affairs Abdeslam Seddiki, made it clear that “to solve the problem of unemployment, we should not count only on growth.”

He went on to say that “according to estimates, 1 percent of growth rate generates an average of 30,000 jobs, and we have a labor market that is witnessing an annual arrival of 180,000 job applications. To meet these arrivals, we need a growth rate of 6 percent, without including the existing stock of unemployed people.”

He pledged to work towards “setting the balance between innovative investment” and those in more traditional sectors that produce direct jobs and “investment in infrastructure that creates indirect employment.”

This distinction is quite important, particularly in the high tech and tourism sectors, since they often create many more indirect jobs than the core employment generate by a specific project.

For example, both high tech and tourism projects have three phases: development, start-up, and operations. During development, many of the employees are related to the planning phase, are engaged off-site and overseas, may be largely expatriates, and perform high-value and capital intensive (as opposed to labor intensive) functions.

Abdeslam SeddikiStart-up requires looking to a broader employment pool to attract qualified expatriate and local employees to provide the services required to bring the project to the operational stage. These workers may or may not stay with the project beyond the short and medium term as their special skills are not needed once the project is up and running.

It is during the operations phase that most long-term jobs are created because other functions are needed, ranging from logistics and maintenance support to marketing and packaging, household services, administrative tasks, and whatever else is needed to sustain the project.

Operations management looks to purchase local goods and services from the most cost-efficient and acceptable sources, thus creating opportunities for indirect jobs that support the project in the functional areas mentioned above.

This is where government programs that promote local business development can play a facilitating role as a broker between the project and the skills and resources available locally.

Morocco is moving in this direction as the Ministry of Employment and Social Affairs is focusing government training programs on a more collaborative relationship with investors in order to anticipate what jobs and local companies will be needed by various projects over the medium and long term.

Government plays a key role in enabling job growth

This is also the target of entrepreneurs in Morocco – finding where opportunities exist locally, regionally, and internationally for their products and services.

Saad Jennane, founder of Kipintouch (left), with Abdelhamid Chakiri of Shorein, Mehdi Tamli of Secret4sale, and Meryem Bennani of Creative Group. Wamda

At the recent Casablanca-based New Work Labs competition called PitchLab, the winner, Kipintouch’s founder Saad Jennane noted that Moroccan entrepreneurs must have a global mindset, not just focused on Morocco.

“We can target the world or an entire region like the Middle East.”

As I have written previously, without an enabling environment, from access to finance and administrative support to friendly legal and regulatory regimes, obstacles will force entrepreneurs to abandon their efforts.

A second major area on which the government is focusing its efforts is the informal sector in Morocco. With an estimated value equivalent to 60 percent of Morocco’s GDP, bringing the informal sector into the marketplace through ease of entry regulations that encourage and reward these small firms will formalize the tens of thousands of informal jobs that are outside the country’s official employment roles.

This would have three immediate impacts: increased tax revenue and participation in social security and related programs, increased opportunities for collaboration among these largely micro-enterprises to enable them to have access to banking and administrative services, and, most importantly, for those with ambition, to provide the means for growth by attracting funding to expand their businesses.

The government’s role in ensuring a positive and business-friendly regulatory environment and in making training and resources accessible is vital and critical to the success of this effort.

The Minister, who noted that the “pressure on the labor market is still high, said that his department can act immediately on existing employment creation policies, namely the Taehil, the Idmaj and Moukawalati programs.

The Taehil program provides pre-employment training partly paid by the government with private sector partners. The Idmaj provides employment training for those with disabilities; and the Moukawalati project is the core entrepreneurship program in Morocco that is built on a public-private sector partnership.

Through greater collaboration with the private sector, more involvement of industry in boosting local sources and skills, and with increased joint investments in training, education, and entrepreneurship development, Morocco can generate the growth in jobs that will meet its needs in the coming decade.

Originally posted at Morocco on the Move. Slideshow photo of Twin Center in Casablanca by YoTut/Flickr.

Unlocking Morocco’s Potential: Hearing from the Experts

A panel organized by the Financial Times on growing business opportunities in Morocco was held in New York this week. It was part of a series of programs done in association with the Moroccan Agency for Investment Development (AMDI) to highlight Morocco’s geo-strategic and geo-economic importance as a platform for accessing markets of close to a billion consumers in Europe, Africa, North Africa, and the Middle East.

The impressive panel was moderated by Ed Crooks, former BBC economics correspondent, currently the US Industry and Energy Editor for the FT. He opened the program by pointing out that Morocco has enjoyed consistent growth and stability that is attractive to international investors, a point echoed by Adil Chikhi, the Director of Development & Strategic Marketing at AMDI.

A veteran international player, Mr. Chikhi has broad experience in managing business transactions on all continents. He utilizes his extensive background in “creating a new environment for investors in Morocco,” by focusing AMDI resources on supporting “new companies and partners” for the country.

Adil pointed out that Morocco has developed national plans in key sectors, including tourism, automotive and aerospace parts manufacturing, ITC, pharmaceuticals, and value-added agro-industry.

Hildegard Gacek, Managing Director for the Southern and Eastern Mediterranean at the European Bank for Reconstruction and Development (EBRD), addressed her organization’s priorities in Morocco, including support for the economy by reducing risk exposure for equity investors through financing, and providing long-term loans to support new projects.

Hildegard noted that Morocco, unlike other countries in the region, has a market economy and strong financial sector. She endorsed private-public-partnerships (PPPs) as a useful vehicle to attract Foreign Direct Investment (FDI) and commented that the government, which dominates some sectors of the economy, should allow more space for the private sector, for example, in renewable energy, where there are many opportunities along the value-chain from the mega-projects awarded by the government.

An indicator of how far Morocco has evolved in advancing its financial sector was clear from the presentation by Hamid Tawfiki, CEO of CDG Capital, in which he spoke about the changes that CDG has undergone.

Since he arrived from the private sector just two years ago, CDG has greatly expanded its role as both a steward of savings (pension funds) and an investor/developer in the Moroccan economy.

As a quasi-government institution, it is committed to having a strong social impact through its investment activities, acts as an incubator for new projects, and attracts co-investors from around the world.

It has moved beyond managing pension funds to participating in the banking sector as an investor and through its own bank, and in being a co-investor in mega-projects such as the Tangier-Med port and Renault’s manufacturing facilities.

A key presentation was by Najwa El Iraki, the Head of Business Development at Casablanca Finance City (CFC). If anyone has questions about Morocco’s focus on building business in Africa, CFC is the place for answers. Established three years ago, its primary mission is to serve as the hub for financial services to the south, including francophone and other sub-Saharan countries.

With more than a decade of experience in the financial sector, Ms. El Iraki is a good example of the strong team that supports Morocco’s growth strategies. Specialized investment funds, boutique financial services companies, and financial services providers will find a welcoming home at CFC.

Since its creation in July 2009, AMDI has become the leading source of information and data on investment in Morocco, providing services that enable prospective investors and companies to gather market information on opportunities, meet prospective partners and investors, contact the right government offices, and provide technical expertise on establishing businesses and registering to do business in Morocco.

AMDI also plays an important role as an advocate for the private sector, making recommendations to the government regarding policies and procedures to support investors.  The panel will visit Frankfurt, Seoul, and Tokyo during the remainder of the year.

– See more at: http://moroccoonthemove.com/2013/10/10/unlocking-moroccos-potential-hearing-experts-jean-r-abinader/#sthash.ZRtFo4cO.dpuf

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!

Morocco in a rising Africa: Expand opportunities, extend friendships

Last week, the annual meetings of the African Development Bank (AfDB) were held in Marrakech, Morocco under the theme “The Structural Transformation of Africa.” It has been 29 years since Morocco last hosted the meeting and the event and its location demonstrate how few divides now exist between north and sub-Saharan Africa.

In the past, policy analysts and companies treated North Africa as part of the Middle East; to many, Africa began at South Africa, and extended upwards to Nigeria and Kenya, encompassing the largely English-speaking areas of the continent.

While that is still the dominant perspective, leaders in the Maghreb have increasingly forged closer and more robust economic, commercial, and political ties with their counterparts in central and West Africa.

Some of these efforts were clearly political, as with Gaddafi’s investments throughout the continent. Other ties have grown out of the need to have common efforts against smugglers, militants, terrorists, and extremists who populate the poorly guarded territories along common borders. The bottom line is that building long-term south-south relations is now a permanent feature of intra-African affairs.

In his message to the annual meetings, King Mohammed VI of Morocco emphasized that Africa’s human capacity and natural resources are great assets in the economic and social development that is occurring. He also noted that “we must root out the causes of national and regional conflicts so that peace may prevail throughout Africa.”

The King called for “major projects at the level of sub-regional groupings, and to insure the sustainability and optimal management of our resources, for the mutual benefit of our populations.” In outlining his vision, the King calls for Africans to take the leadership in the development of their countries without becoming dependent on foreign entities.

King Mohammed VI also spoke to the need “to ensure food security for all our African peoples and to reduce our dependence…through the creation of a common African agricultural market. Finally, we should promote support and assistance programs to reduce social and spatial inequalities and ensure inclusive, shared growth.”

These challenges echo themes of conferences held earlier this year in Morocco on south-south dynamics, most recently the 8th Morocco International Exhibition of Agriculture in Meknes, where attendees discussed topics related to regional markets, food security, and innovations in agriculture.

Yet the AfDB’s mission is built around the capabilities of its 79 members (54 African, 25 non-African) to not only grow their GDPs but put into practice the means of further reducing poverty, inequality, and discrimination. Despite a doubling of GDP since 2000, great disparities remain and there is an over-reliance on FDI to drive growth that is often uneven among and within countries.

As reported in the final communiqué of the meetings, there is a need to use the current UN discussions on revising the Millennium Development Goals (MDG) to set realistic goals regarding the inclusion of youth, women, and other vulnerable groups.

The final AfDB statement included a strong emphasis on committing higher levels of investment in human and infrastructure development, promoting strategies that accelerate economic growth including support to small and medium-size enterprises (SMEs), improving human capacity and skills development especially for youth, and renewed efforts to build efficient regional markets through joint public-private investments.

In his remarks at the closing session, Nizar Baraka, who was named “Minister of Finance of the Year” in Africa, pointed out that a key outcome of the meetings was to review, evaluate, and discuss AfDB’s activities to better develop strategies to mobilize financial resources for the structural transformation of Africa so as to better serve the African people and “meet their expectations for a dignified life, social mobility, and job opportunities.”

Morocco garnered additional awards including Best Bank of North Africa to Attijariwafa Bank and Best Development Financing Institution to Credit Agricole, which was cited for “working hard…to build a model of sustainable and efficient financing for development in rural areas, with good management practices.”

These institutions and their counterparts throughout Africa are key players in the fact that 13 of the 20 fastest growing countries in the world in 2012 are in Africa. In its third annual financial review, the AfDB noted that regional economic integration is the “key factor” for African producers to develop regional value chains, to achieve economies of scale, and become competitive internationally.

And for AfDB, the private sector is the main engine of growth and poverty alleviation, providing 90% of the jobs, two-thirds of the investments, and 70% of the earnings growth on the continent.

Morocco and the rest of the Maghreb will gain mutual benefits from a heightened involvement in Africa, one that shares a common vision for dynamic human and economic growth.

Indicators Up Yet Gaps Remain in Morocco’s Economic Growth

Over the past two weeks, several stories seem to indicate that Morocco is on the right track for economic growth in 2013. As with the other Maghreb countries, Morocco faces many challenges ranging from quality of labor to a somewhat confusing regulatory environment in attracting foreign investment. Yet, tourism is up over last year, the EU has launched talks for a free trade agreement, a major Moroccan bank has signed a trade finance credit line with the Europeans, and, at least on the economic side, most analysts believe that GDP growth will exceed 3 percent.

Reuters carried the story on the EU’s intention to negotiate a free trade agreement with Morocco as part of the EU’s response to the Arab uprisings. It is significant in that the first treaty will be negotiated with Morocco, another indicator of its perceived stability and commitment to opening its markets further. Trade between Morocco and the EU topped 24 billion euros in 2011, and the EU is hoping to further expand its activities in the services sector as well. The EU’s goal was well stated by Marielle De Sarnez, a French member of the European Parliament, “Smooth negotiations of the free trade agreement are crucial because they serve as an example for other countries in the southern Mediterranean…this agreement will also allow in the long term greater regional integration for the Maghreb countries.”

Her sentiments were echoed by Vice-President of the European Investment Bank (EIB), Philippe de Fontaine Vive, on the sidelines of the EIB’s annual review. He noted that Morocco is the first recipient under a new program of the FEMIP (Facility for Euro-Mediterranean Investment and Partnership) that commits nearly one billion euros of financing “to support the transition to a new form of innovative and more inclusive growth in Morocco.”   More than a dozen major projects were funded in 2012, in areas as diverse as transportation infrastructure (including the extension of rural roads), agriculture, technological innovation, solar energy, education and health sectors, in addition to the medina renovation programs in Fez and Meknes, and coming to Casablanca. He went on to say that “This shows both that the EIB is there to support the process of democratic transition and that Morocco has the capacity in diverse sectors to be able to mount innovative projects, the most emblematic in the year 2012 has been the solar project at Ouarzazate, for which we coordinated the European funding.”

It is the capacity of local agencies and institutions that is the focus of a $75 million trade finance facility between the European Bank for Reconstruction and Development (EBRD) and Banque Marocaine du Commerce Exterieur (BMCE Bank). The financing line is to support international and intraregional trade transactions with both guarantee and cash advance facilities. It will support trade activities by “facilitating the distribution of imported goods and contribute to the overall growth of small and medium-sized enterprises (SMEs).” How this growth is perceived in-country was the focus of an article in the Financial Times by Chris Wright that highlighted the perceptions of fellow travelers on the train from Casablanca to Rabat. Comparing the views of a Brit, a Saudi, and a Moroccan leaves one with the impression that while Morocco is doing better than others affected by the Arab uprisings, it still has many challenges ahead before its recovery and growth are assured.

A key insight into what needs to be done came from Oussama Romdhani, former Tunisian minister of communication. In an article in the World Affairs Journal, he proposed that “A durable recovery will require far-reaching policy reforms addressing the chronic mismatch between educational training and the job market. In this particular concern, US advice and assistance could help North African countries modernize their inefficient higher education and vocational training systems.” The gap between jobs and skills in Morocco continues to draw the attention and resources of both the government and the private sector. It is difficult to attract foreign direct investment without an available qualified workforce that operates within a relatively open and free labor market. The government has initiated a series of programs that address the skills side but still lags behind in freeing up its regulatory environment to facilitate a more dynamic labor sector. Hopefully, as the growth prospects continue to improve, there will be time to address the structural reforms needed in the labor market that will accelerate the trend towards greater prosperity.

IMF report card gives Morocco thumbs up – for now



IMF report card shows challenges to sustained economic growth in Morocco

While there is a great deal of common wisdom about what the Arab governments need to do to more effectively participate in the global economy, there is much less certainty about how to get there. With no magic formula to follow, there is growing attention to the role of multilateral institutions in supporting progressive policies. For example, as Morocco continues to move forward with its economic reform agenda, the Executive Board of the International Monetary Fund (IMF) completed its first review of Morocco’s performance required under a two-year Precautionary Liquidity Line (PLL) arrangement. Agreed last August, the PLL arrangement makes available approximately $6.3 billion over two years to support the government’s program of economic reforms. The PLL provides access to liquidity against external shocks such as decreases in exports caused by shrinking markets in Europe or factors such as an excessive jump in imported energy prices.
The IMF recognizes that some form of fiscal backup is needed by countries with sound economic fundamentals and a history of moving on reforms so that their efforts continue despite factors beyond their short and medium term control. So the PLL is not a handout or a subsidy; it is meant to facilitate the government’s capacity to continue to make the needed hard decisions that will strengthen the Moroccan economy over the long run.
In its statement following the Board meeting, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, commented on the report. She praised Morocco’s “overall sound macroeconomic policies” and noted that the “worsening of the external environment and a below-average harvest” were threatening further progress.
The PLL brings into sharp relief the conundrum facing Arab governments attempting to respond to popular demands to increase jobs, broaden subsidies, and reduce barriers to accessing markets through government intervention. As Mohsin Khan pointed out in his article last week, the temptation to implement short term fixes through government employment programs, increased general subsidies, and protectionist measures end up mortgaging the country’s future fiscal health. And this is what Morocco is trying to avoid. By attacking subsidies over a four year period, and using the PLL as a safety net to avoid excessive borrowing and budgetary imbalances, the government is hoping to achieve “stronger and more inclusive growth.”
Ms. Shafik mentioned that “The arrangement…has provided Morocco with an insurance against external risks and supported the authorities’ economic strategy.” This gives the government breathing room to “move ahead with the reforms of the general subsidy system and the pension system and to better target social protection.”
Nemat Shafik is no stranger to the dislocations that accompany deep economic reforms. As the youngest ever vice–president of the World Bank and a member of the senior management team at the International Finance Corporation, she has spent several decades promoting reform policies that include “Efforts to strengthen competitiveness and better equip the economy to respond to external shocks…” She strongly emphasizes the role of the private sector and notes that “The planned fiscal consolidation and structural reforms, such as those to improve the business climate and professional training, will help underpin external sustainability.” I have always been impressed with Nemat’s wisdom and clarity, and Morocco will clearly benefit from the IMF’s support and sound advice.
One of the outcomes of the Arab uprisings is the challenge of facilitating growth without compromising the future solvency of the country. While the Gulf countries have the resources to weather short and medium term challenges, countries such as Morocco face strong domestic pressure against painful changes that affect their citizens even if they can bankrupt the country. So the PLL tests Morocco’s commitment by providing short and medium term support to facilitate the long term health of the economy. It is a partnership worth applauding and supporting.

An Elusive Target: Inclusive Economic Growth in the Maghreb

 Some of the governments in the Maghreb are facing a dilemma: how do they balance the demands from their citizens for more jobs, services, transparency, and training, when they don’t have the budgets to address short term needs without mortgaging their futures. They are caught in a bind; on the one hand, economic growth has stagnated due to decreased trade and investment with their major partners in Europe. This leads to contracting markets, decreasing FDI, and fiscal policies directed at cutting costs.

On the other hand, governments, energy and non-energy producers alike, are under pressure to generate economic expansion that either stimulates growth through exports or benefits from increased external monies from tourism and remittances. Governments from Mauritania to Libya are struggling to implement policies that both build stronger, more transparent and robust economies, while providing at least some relief to citizens with high expectations for jobs and services.

On June 13, The Center for Strategic and International Studies (CSIS) hosted, “Building Stability through Inclusive Economic Growth in the Maghreb,” which brought together experts and a senior US government official to offer their insights on the prospects for development that will benefit the broadest range of stakeholders. This notion of “inclusive economic growth” is the latest buzzword for describing the new social contracts that are emerging, albeit with some difficulty, between government and its people.

My takeaways from the presentations are that we have both learned a lot and understand a little, and that is especially true for the new governments struggling to meet rising expectations that are rapidly becoming demands. While, in hindsight, we saw everything coming, the dilemma for those countries experiencing the greatest change, i.e., Tunisia and Libya, is the lack of certain assumptions about how to proceed.

The conference focused on “political-economic factors shaping economic growth strategies,” which basically means “what do governments want to do and what tools do they have to make it happen,” and the proposition of greater regional trade and investment as an effective option for growth.

While there was agreement on the long term need for jobs, reducing wealth disparity, reforming business regulations and the financial sector, and better integration with the global economy, it is the short-terms fixes that are generating concerns. Mohsin Khan of the Atlantic Council called them a “populist economic model” that promotes government employment programs, food and fuel subsidies, cash transfers, increases in direct taxes, expansionary low interest rates, and other immediate remedies.

The obvious consequences of these actions are that governments are increasing their debt in the short and medium term without a clear formula for how to pay for these expenses down the road. The impact is broadly felt across the region’s economies in terms of decreased value of the local currency, higher inflation offset by government subsidies for basic goods, budget deficits, and deferred reforms.

Over the longer term, Maghreb countries need to reduce the role of state owned enterprises, build friendlier and more transparent business environment, strengthen robust financial sectors, and figure out how to operationalize “inclusive growth.” Conference participants did not have any magic bullets as to how to balance the short term consequences with long term imperatives.

Yet there is a case to be made for greater regional trade and investment as a vehicle for growth. The often-quoted statistics about the low level of intra-regional trade make it obvious that any real growth will be beneficial. The ground-breaking Peterson Institute study in late 2008, the IMF series on the Maghreb private sector, and the latest World Bank study on the growth potential of regional integration, all point to the benefits of greater cooperation. In his remarks, Geoff Porter concluded that more economic integration is inevitable, that businesses across the region are optimistic about cooperating for the future, and that regional political obstacles are fading in importance for the private sector.

Given the still transitory nature of most of the Maghrebi governments, Morocco and Mauritania being the only exceptions, another expert source underscored how “much has changed and has not changed,” citing concerns that a populist economic model may impede the needed reforms to spur domestic investment and hopes that subsidies over time would lead to a new, more targeted social safety net strategy for each country.

The presentations mirrored the reality on the ground…no startling breakthroughs in how to satisfy citizens weary of politicians’ promises and impatient with policies that seem to benefit only those already in power. Most of the panelists were complimentary to Morocco for its stable transition under a new constitution, but its new government faces the same demands as the others.

Conflicting perceptions of what needs to be done and what can be done by governments and the private sector do not make it clear how the benefits of the short term solutions will play out over time. Since, with the advent of the Arab uprisings, it is clear that economic and political reforms are two sides of the same coin, the path forward is neither obvious nor readily accessible for most decision-makers who must craft effective solutions that do more than buy time.

Morocco Launches Initiatives to Meet Economic Challenges

Morocco’s new government, King Mohammed VI, and the country’s private sector—with a significant assist from the international finance community—are focused on generating economic growth and job creation. While it certainly faces great challenges, Morocco is building from a much more stable and secure political and social base than its neighbors in the region. Its economic efforts have notched a number of business wins and undertaken key initiatives that hold promise as positive signposts for the future.

In this third installment of the MATIC (Moroccan American Trade & Investment Center) series on Morocco’s economy, I take a look at short and medium-term programs that target economic and job growth, and challenges from the declining European economy, drought, and the need to aggressively support new business development, that require more long-terms remedies.

According to the African Economic Outlook, Morocco is the most consistent non-energy producing economy in North Africa.  “In spite of the uncertainties raised by the Arab Spring, Morocco showed resilient growth in 2011, a trend expected to continue in 2012 and 2013 thanks in particular to robust domestic demand and steady progress in agricultural and non-agricultural production.” In addition to budget reforms, the government is keen to enhance the role of small and medium-sized enterprises (SMEs).

“Morocco’s SMEs have been the target of a broad set of initiatives in recent years by a variety of public and private institutions to help improve SME access to funding and capacity building. The access to funding by banks is still limited because of the security required…they are a major engine of the economy and currently account for around 93% of all registered businesses, 46% of employment, and 38% of GDP. Their overall contribution in terms of added value to the economy represents only 20%, due mainly to lack of financing and bureaucratic hurdles.” The article in North Africa United goes on to mention that:

Following a recent conference in Casablanca, the European Bank for Reconstruction and Development (EBRD) announced a plan to establish a new lending initiative, via local lenders, to improve access to credit for smaller firms by July…The bank has also announced it plans on providing venture capital to SMEs as a way of boosting financing, while at the same time providing advice, and improving back office functions.

As reported previously, the PNB NAPEO conference in Marrakesh in January stressed the importance of entrepreneurship in the region, targeting emerging and growing businesses are a prime vehicle for job and wealth creation. A range of programs emerging in Morocco matches aspiring entrepreneurs with business professions. Also, the US government has announced a $4 million program to assist young entrepreneurs in the Maghreb to obtain financing for their projects, while the Moroccan government has two programs managed by the National Agency for SME Promotion, (ANPME )— Moussanada and Imtiaz that specifically support SMEs through financing and advisory services. A detailed study of these initiatives and results has been published by the Oxford Business Group.

Multilateral agencies are also doing their part. A new World Bank project will help increase employment in Morocco by matching vocational skills and higher education systems with the needs of the labor market. A second project will strengthen the justice sector to deliver efficient and transparent services to citizens and businesses. The $100 million First Skills and Employment Development Policy Loan (DPL) and the $15.8 million Justice Sector Reform Investment loan were approved in May by the World Bank’s Board of Directors.

Social development programs are also being emphasized in the country’s growth strategies as both education and health care are essential for an effective workforce. King Mohammed VI recently inaugurated RAMED, a large-scale projects aimed at improving access to health care. It is based on the principles of social aid and nationwide solidarity for the benefit of disadvantaged people who are not eligible for mandatory health insurance, according to the Minister of Health El Hossein El Ouardi. He noted that this public system enables the beneficiaries to have access to health care in public hospitals and state-owned health services institutions. The government is also looking at “best practices” from Latin America and SE Asia regarding social safety needs serving the most disadvantaged. Spending in the public sector – up 25 percent from 2011 levels – has been allocated into funds for social programs, education, health, housing, and industrial relations, putting additional pressures on the budget.

Of the many challenges facing Morocco today, most pressing in the mind of the average Moroccan, is the gap between labor skills, available jobs, and efforts to restructure the educational system. According to government statistics, unemployment nationwide is conservatively estimated at 9 percent, with at least 30 percent unemployment among youth. To obtain some quick results in lowering unemployment, the government has generated thousands of public sector jobs. This projected increase by 40 percent of public sector jobs, “mostly in home affairs and education,” is accompanied by an investment of another 93.5 billion dirhams in public wages.

Subsidy reforms is the forefront of Morocco’s legislative agenda, since, as some argue, the program should more directly target the poor rather than all citizens since it is the wealthiest who are likely to consume the most goods that receive subsidies.

Will these initiatives contribute to improving the Moroccan economy? To be sure, the country is faced with a number of problems: a lackluster harvest and a slowing of foreign direct investment among them. Weakness in demand, particularly in Europe, where the country has many financial ties –reinforces the need to look for new international customers and investors. Economic realities have forced lawmakers to expand the national debt in order to pay for their initiatives.

It is the combination of government commitment, the King’s leadership, the heightened role of the private sector, and the support of the international community that holds the most promise for stable and continuous economic growth. The task of building a stronger economy by mobilizing the entrepreneurial spirit of Moroccans in tandem with other positive forces in the regional and globally has begun in earnest.

Derek Gildea and Garth Neuffer contributed to this article, which was originally published on Morocco On The Move.