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The Best Intentions Do Not Always Make Great Policy

To Fix Its Middle East Policy, US Must Support Assets while Confronting Challenges

If you think the label “silly season” only describes tsunamis whirling around the national elections, you’re missing an important contest among US think tanks to frame policy options for the next administration. What’s interesting about the exercise is that it doesn’t matter who wins, since the same realities, domestic and foreign, face whoever is elected.

Options and solutions proposed by think tanks, in any case, reflect their particular points of view, priorities, and insights into what the previous administration has done right or wrong, or didn’t pay enough attention to, or ignored at America’s peril. And this is especially clear with countries where our interests diverge, such as China, and more intriguing with those countries where the US has shared interests, such as the Middle East and North Africa (MENA). What is also clear from past administrations is that the MENA region is where good intentions regarding countries from Morocco to Iraq often fail to deliver consistently sound and actionable policies.

The Center for a New American Security (CNAS) recently launched its foray into this tangle of good intentions with the analysis, “Reset, Negotiate, Institutionalize – A Phased Middle East Strategy for the Next President.” It is well-reasoned and documented, enumerates feasible steps, and clearly focuses on protecting what remains of America’s alliances in the region without jeopardizing our ability to adapt to changing circumstances.

That said, whether it’s CNAS, SAIS, CSIS, AEI, CEIP, or any other of the more than 100 foreign policy think tanks in Washington, DC, almost any position on an issue can be found. For example, the recent GCC Heads of State meeting generated pro and anti Saudi Arabia and pro and anti Iran articles, providing support for obviously opposing views, all reflecting someone’s definitions of America’s national interests in the region.

And then there is the question of priorities – when will Morocco, for example, receive the same attention as the UAE or Qatar? All are allies and have important regional roles to play in promoting stability and security, yet it seems that unless  a country or a region is in triage, it has to speak up loudly and visibly to be heard.

Secretary Kerry Greets King Mohammed VI

Secretary Kerry Greets King Mohammed VI

Morocco is an excellent case in point. The only mention of Morocco in the CNAS report is as the host for the talks to constitute a government in Libya. Absent from the only map in the report is everything west of the Levant. No mention is made of the growing threats to North Africa, and Morocco in particular, from Daesh and other extremists, nor is there any commentary on the flow of fighters from the region to the Syria-Iraq war zones and back.

Yet Morocco has steadfastly support America’s interests throughout the region, and for this, Daesh has issued numerous threats against the country. Morocco plays a key role in Jerusalem through King Mohammed VI’s role as head of the Jerusalem Committee. It also has the most robust security service cooperating with the EU and the US in combating terrorists who have already caused great damage to Europe’s sense of equanimity and attitudes towards immigrants fleeing combat zones.

Morocco recently became co-chair of the Global Counterterrorism Forum, and the country’s special counterterrorism bureau recently intercepted jihadists intent on bringing chemical weapons into Europe through Morocco. What more can be asked of our ally? If the report is an example, without being more proactive, the US is in danger of a growing breach with our friends.

It is in this context that King Mohammed spoke out at the recent GCC-Morocco Summit about the impact of not respecting old and tested friendships. “There have been new alliances which may lead to disunity and a reshuffling of roles and functions in the region. In fact, these are attempts to foment strife and create chaos, and no country would be spared. It could have serious consequences for the region, even the world at large.”

The king then went on to detail how Morocco was diversifying its “partnerships at political, strategic and economic levels,” to include Russia, China, and India. He believes that the GCC and Morocco and Jordan “Are facing conspiracies which seek to undermine our collective security. They want to destabilize the few countries which have managed to safeguard their security, stability and political systems.”

So when think tanks look at the MENA region, it may be more impactful to think beyond conflicts in the Levant and Gulf to also address threats to America’s interests at the other end of the Mediterranean. For example, the CNAS report recommends that as a first step, the next president make a trip “focused on America’s closest regional partners,” starting with the Levant and the Gulf, “and possibly Egypt,” clearly aimed at damping down instability in Iraq and Syria.

Yet the conflict and chaos that drive these priorities are inexorably moving across the region and will metastasize if not confronted with a robust US and EU led strategy in partnership with friends like Morocco.

What Makes Business Better in Morocco?

Changing Business Perceptions One Company at a Time

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

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

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

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

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

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

Business Sense

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

Morocco is rapidly expanding its industrial base

Morocco is rapidly expanding its industrial base

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

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

Maroc Business Matters” January 2014

This is the first installment of a periodic blog, “Maroc Business Matters,” which will review news that highlights Morocco’s economic progress with a particular focus on what moves trade and investment forward. Unlike much of the region, which continues to experience political turmoil eroding business confidence, Morocco continues to build its bona fides as the platform for business in Europe, Africa, and the Middle East. This is Morocco’s story.

Morocco continues to improve economic basics – report card from the IMF

This past month, a high level IMF staff team visited Morocco to assess its performance as called for under the Precautionary and Liquidity Line (PLL) agreed in August 2012. This 24-month agreement makes available around US$6 billion as a support mechanism for Morocco’s liquidity. The delegation also gathered data to prepare a comprehensive profile of the performance of the Moroccan economy.

According to the statement issues by the head of the team, Jean-Francois Dauphin, Morocco’s economy is improving “Despite an unfavorable regional and global economic context…” He cites a low inflation rate, a decline in the external current account deficit, and expected 4-5 percent GDP growth rate, among other factors. Mr. Dauphin noted that the Moroccan economy needs to “strengthen competitiveness, ensure stronger and more job-rich growth, and improve social protection, particularly for the most vulnerable segments of the population.”

As part of its strategic economic policy, the government of Morocco has a full agenda in Parliament including a new organic budget law, reform of the judicial system, strengthening the powers of the transparency agency, and broadening support for entrepreneurs and small and medium-sized enterprises.

 Attracting new manufacturing partners through expanding free zones

Indicative of Morocco’s push to create jobs by attracting foreign direct investment (FDI), good news is coming from Midparc, one of the primary new-generation industrial parks, which has already landed Canadian aircraft manufacturer Bombardier. This new free zone covers more than 300 acres close to the seaport and Mohammed V International Airport in Casablanca.

GCC continues to invest in Morocco – Qatar latest to step up

As part of its commitment under a Gulf Cooperation Council (GCC) agreement to provide US$5 billion to Morocco over five years, Qatar signed a US$1.5 billion agreement this past month. As Reuters reports “Four Gulf states – Qatar, Saudi Arabia, Kuwait and the United Arab Emirates – agreed in 2012 to provide aid worth a total $5 billion to Morocco in the period 2012-2017 to build up its infrastructure, strengthen its economy and foster tourism.”

The welcome assistance pact was signed during a recent visit of the Emir of Qatar to Morocco and will help the country reduce its budget deficit by 10 percent in 2014.  Details have yet to be announced although previous packages from Saudi Arabia, Kuwait, and the United Arab Emirates (UAE) have focused on investments in key growth sectors such as agriculture, tourism, and financial services.

Morocco committed to become regional financial center

The emphasis on investing in financial services is putting smart money on smart business, considering Morocco’s deep and broad commitment to this sector through Francophone Africa.  Over the past five years, Moroccan banks have greatly expanded their footprint throughout the region and the government has launched the Casablanca Financial City as the nexus for regional financial services. A recent Forbes article credited Morocco’s strategic geographic position and political stability, especially when compared with the rest of North Africa and the Middle East, as key reasons that foreign manufacturers were flocking to Morocco to establish factories — among them Renault, Bombardier Aerospace, and Dell.

A paper prepared by the Wharton School concluded that tax incentives for expatriate companies and employees, lack of customs duties, proximity to Europe, and less government regulations, “along with Morocco’s position as a stepping stone to the rest of North, West, and Central Africa, are expected to drive much of the interest in the CFC.”

Morocco ups efforts to go green, abetted by the World Bank

Morocco recently garnered a US$300 million loan from the World Bank to promote a “more sustainable and inclusive development model.” Simon Gray, Director of the World Bank Maghreb team pointed out that “Morocco is putting the green agenda at the forefront of its development priorities to secure a resilient and strong economy providing opportunities to vulnerable populations. The Program will introduce sustainable practices in agriculture and develop new sectors such as eco-tourism and aquaculture which have the potential to create jobs and diversify revenues in rural areas, where 70 percent of Morocco’s poor live.”

Andrea Liverani, World Bank Task team leader noted that “The shift to green growth is a homegrown strategic agenda, deeply rooted in the minds of policymakers. The Development Policy Loan series backs this policy priority and complements the World Bank’s package of support in areas such as such as energy, water and agriculture.”

This comes as no surprise to Morocco-watchers as it has set an ambitious target of more than 40 percent of its energy from renewable sources by 2024. According to a recent article, after a slight decline worldwide in 2013, wind power is expecting strong growth in 2014 in Morocco, the US, and South Africa.

Look for more economic news on Morocco in the next posting of Maroc Business Matters.

Education and Employment: Bridging the Divide (Part 1/2)

In the Middle East and North Africa, rates of unemployed young women are eight times that of men. This is the first of a two part series.

After more than two years, economic issues raised during the Arab Uprisings are still lingering on government agendas. Along with governance and transparency concerns, the most obdurate legacy for most countries is the demand for meaningful employment — a nettlesome priority that bedevils governments in the Middle East and North Africa (MENA), including the wealthy Gulf Cooperation Council (GCC) members.

A Complex and Interconnected Challenge

Current governments are burdened with trying to fix education and training regimes that did not prepare local management and workforces for competitive global markets. The lack of a qualified labor force is part of a web of symptoms that result in weak economic growth policies. In addition, opaque regulations are an obstacle to open and competitive markets, as well as restrictive financial regimes that continue to block attempts to broadly facilitate entrepreneurship and greater domestic and foreign investment. While there are some glimmers of improvement, after decades of neglect, the prospects for short-term solutions are limited.

Improving education and training requires an organic strategy that incorporates stakeholders across the employment spectrum, from labor and management to the labor pool, government ministries, the private sector, and all intermediary groups and institutions, including NGOs and civil society focused on concerns ranging from gender to healthy environments.

A core economic issue is the plight of youth, usually defined as those under 30, with little schooling through university education, who are marginally employed usually in the informal economy, unemployed, or seeking employment. The priority of youth employment was in the spotlight of the 2013 WEF in Amman, Jordan where experts in employment and education and advocates such as Queen Rania of Jordan were quite explicit about the challenges confronting the region. According to the 2013 World Bank development report on jobs, some 40 percent of men and 62 percent of women in the MENA are engaged in non-wage employment (farming and self-employment).

The International Labor Organization (ILO) put youth unemployment at 28.3 percent in 2012 and says it will not reverse course for the next five years, despite a global economic recovery the ILO projects at 30 percent by 2018. In his remarks at the WEF, Majid Jaafar, CEO of Crescent Petroleum, noted that on average, over 25 percent of the region’s youth are currently unemployed and the figure is rising — expected to exceed 30 percent within five years, and already exceeding 50 percent in some countries.

Challenges to Accelerating Youth Employment

While there is universal agreement on the centrality of improving job opportunities for youth in the MENA, realistic programs and goal-setting are constrained by four fundamental factors:

1.   Availability of jobs: Throughout the region, from Mauritania and Morocco to Qatar and Saudi Arabia, there is a jobs deficit due either to a lack of opportunities, a mismatch between the job skills and those of the labor pool, gender restrictions, or perceptions of young people concerning available jobs.

2.   Lack of investment in projects that create jobs for nationals: Either there is not enough local and foreign investment to drive job creation, or projects are capital (energy) or skills intensive (construction, infrastructure), limiting opportunities for inexperienced local hires.

3.   Inefficient ecosystem supporting new business development: Onerous local labor regulations, lack of reasonable access to financing for start-ups and business expansion that inhibits entrepreneurship, perceived threats to existing unions and industries, and insufficient resources for targeted training and education combine to stifle growth.

4.   Need to coordinate and target international and national economic and technical assistance programs: Too often, well-meaning efforts are in silos within government ministries or agencies, and do not benefit from a broader perspective on closing the gap between education and employment and applying value chain analysis and similar tools to better utilize human investment dollars.

Agencies look to addressing their specific objectives rather than seeing how their efforts impact other agencies. For example, entrepreneurship, technical, and vocational training will benefit from closer coordination and sharing of resources to align programs to provide skills for trainees that enable them to make choices, rather than limit their options to certain trades.

Given the wealth and demographic differences among the MENA countries, there are few cookie-cutter approaches or “lessons learned” that can be applied across the region. Rather, a series of principles need to be defined in each case, informed by similar efforts in other parts of the world. As the Arab Competitiveness Report 2013 points out:

“North African economies face significant challenges related to labour-market efficiency and institutions. More labour-market flexibility and more efficient allocation of talent, as well as a fundamental overhaul of the institutional framework, will be crucial for creating growth and employment in these countries [Libya, Morocco, Egypt, and Algeria].”

While the required reforms may be conceptually and technically straightforward, the political, social, and economic stakeholders in each country will inevitably shape the policy outcomes.

Take the issue of facilitating skills acquisition by youth. With the majority of the populations in MENA between the ages of 15-35, there are few prognosticators who are willing to divine how that demographic surge is to be absorbed, particularly if greater female employment is an objective.

Why it's important to promote US product standards in MENA countries

Although the US remains the world’s largest economy, its ability to export is inhibited when US products do not conform to local product standards, many of which are being defined by our competitors. Time to spend money to make money!