Spirit of Optimism in the Kingdom of Morocco
Tuesday, September 8th, 2009
Policy of openness on the course to success – direction set toward alignment with the European Union as the key to sustained development - Security for foreign investments
Something akin to a new era began in 1999 when, after the death of his highly esteemed father, Hassan II, a young king took over the throne of Morocco, an Arab country with relatively few natural resources, whose northern tip is separated from Europe by the twelve kilometer-wide Straits of Gibraltar. For more than 300 years, the Alaouite Dynasty has ruled the North African kingdom with its well over 30 million inhabitants living on a 458,730 square kilometer area of land, who, on July 30, 2009, will celebrate the 10th anniversary of King Mohammed VI’s ascension to the throne as a national holiday. The young king, a direct descendant of the Prophet, but who is affectionately called “M6” despite his state office and all his religious dignity, cautiously yet consequently struck out on new paths, particularly in the economy and society, despite some resistance from the conservative parliament.
Today, Morocco is an attractive economic location thanks to the ambitious reform programs of its political leader, who wields far more power than any of the crowned heads of Europe. With the traditional title of “Commander of the Faithful,” he is also the highest religious authority of this Sunni Islamic state; a modern monarch who knows the advantages of close political involvement in the economy. It was not by chance that he chose the subject “The Cooperation between the European Union and the Union of the Arab Maghreb” for his graduate thesis in France. He appointed experts to key positions in the government and business, preferring those who had been educated in France or the USA. He clearly aligned his strategy to the Western business model. He based all individual measures on this; such as the streamlining of the state apparatus through systematic reductions in staff, privatization of the economy, substantial tax reforms, liberalization of the business and investment laws, and the independence of the central bank; although initially the structure of the economy as a whole has only marginally been changed in the last two decades. Agriculture, phosphate production, and tourism continue to remain the pillars of the national economy.
Morocco on the way to becoming an important hub of trade with the West
Although not yet all of the measures have totally taken grip, which is not to be expected considering Mohammed VI’s relatively short period of time in office and not least of all considering the global economic crisis, a sense of optimism prevails in the country. The transport infrastructure, the rail and road networks as well as airports, is being briskly expanded. Construction has been booming for several years. The King wants to develop Morocco into the trading hub between Europe and the United States and whole of the North African region. The Euro-Mediterrane Association Agreement entered into with the European Union aims at free trade by 2010. Special trade agreements with the USA and Turkey have been in effect since the beginning of 2006. The so-called Agadir Agreement with Tunisia, Egypt, and Jordan perceptibly supports trade in the region.
An economy supported by the government and low cost labor attract foreign investors. The traditionally important tourist trade has a great potential for development. Weak points for economic development continue to be sustained high unemployment and strong population growth – 30.3 percent of all Moroccans were under 15 years-of-age in 2005, while persons over 65 only made up 5.2 percent of the total population. The rate of literacy (52 % in 2006) and school attendance (94 % primary grades, 39 % secondary grades) continue to leave much to be desired in comparison to North African neighbors. In the year of reference, public spending for education amounted to only six percent of the gross national product and has only marginally improved since then. A convincing, broad impact on education is not yet discernible.
Plan Maroc Vert
Obstacles of a different kind continue to be the weakening effects of drought that occasionally give farmers a hard time, for example in 1995; although basically this economic sector is largely able to supply the needs of the Moroccan population. All the same, the agricultural sector, which contributes about 16 percent of the country’s net product, remains the Achilles heel of the economy. Due to the extensive methods of cultivation, agriculture is dependent in a special way on weather conditions. That is why the Minister for Agriculture and Maritime Fishing, Aziz Akhannouch, is focusing on a new basic orientation of this economic sector with a major stress on ecology.
The “Plan Maroc Vert,” which has the modernization and sustained development of the agricultural sector as its goal, has been able to record initial success since the start of 2008. The amount of investment carried out during the first year, predominantly from foreign investors, totaled twelve billion dirham (DH), which corresponds roughly to 1.063 billion euro. The monies were invested in environmental friendly livestock breeding, and grain, fruit and olive cultivation projects. The projects carried out within the framework of this development plan are meant to not only lower poverty in the rural areas of the country but also to create a total of up to 1.5 million new jobs. In addition, in view of the unusually large amount of precipitation in the current year, a record grain harvest is expected.
One infrastructure project after the other
A very important project to promote domestic economic structure is the creation of a deep sea port in Tangier, including integrated industry and duty free zones in the region. Two of the port’s container terminals are already in operation. Between 2003 and 2008, two billion euros have been spent on the “TangerMed I” project. By 2013, about the same amount is expected to flow into the construction of the harbor, transport connections and the development of industrial zones. TMSA (TangerMed Special Agency), the company responsible, is privately organized, with the Moroccan royal house significantly involved.
Another major industrial project concerns the mining and processing of the only natural resource Morocco has worth mentioning, namely phosphate. The Kingdom is the world’s leading exporter; due to the skyrocketing price of phosphate on the world market (from 44 USD per ton of raw phosphate to over 400 dollars within just two years) Moroccan export revenues have risen tremendously. The OCP, a state monopoly, has been producing about 28 million tons of raw phosphate annually and wants to jack up its capacity to 55 million tons a year by 2012. The expansion plans are accompanied by a great demand for mining equipment and processing technology. Among other things, the rail transport from the mines to the Jorf Lasfar processing platform and its integrated harbor is to be replaced by a pipeline. In addition, OCP offers an attractive structure in Jorf Lasfar for foreign companies to process raw phosphate into phosphoric acid or finished fertilizer themselves. This offer is already being taken advantage of by well-known Brazilian, Belgian, Pakistani and Indian fertilizer producers.
Electric power also offers extremely attractive possibilities for foreign investors. The annual demand for electricity has risen annually in the last five years by eight percent. The capacity of the power plants installed by 2008 totalling 5.292 kw is by far not enough for the peak periods. Expensive power imported from Spain and Algeria have considerably burdened the budget of the Moroccan electric company, ONE. Only in February of this year, the state provided ONE with fresh capital to cover its need to update the capacity of its power plants as well as its transmission networks and electric grids. The power plant program is not limited to the use of conventional energy sources; the construction of a coal power plant in Safi with an output of 1.320 kw is probably the most significant project.
The subject of renewable energy is also way at the top of the government’s timetable. A combination gas and solar thermal power plant is under construction in Ain Béni Mathar, with a 472 mw capacity. Altogether, it is planned that a purely solar power plant with a total output of good 500 mw will be built by 2015. The setting up of wind parks has already begun several years ago. By the close of 2012, wind wheels with a capacity of 1,000 mw will be either feeding their power into the net or serve, for example, to run large-scale desalination plants. The present weakness in the Moroccan power supply also lies in that about a third of the current output is supplied by 26 water power plants, whose reservoir lakes are used not only to produce power but also to irrigate agricultural land. These energy sources regularly fail, particularly in the hot summer months, because the water level is too low. The basic load then has to be carried by the conventional thermo power plants, which are almost unable to cope.
Even though renewable sources of energy are being promoted, they offer no solution to meeting the basic load in the long-term as long as the technical problem of storing the energy is not solved. In this respect, talk keeps returning to the alternative use of nuclear energy.
Lastly, the expansion of the transit infrastructure has a high ranking with the planned construction of a rapid transit railway (TGV) between Casablanca and Tangier. The public transport network is relatively good; a highway links the capital of Rabat with Casablanca. The roads and byways in rural areas, however, are oft times hopelessly covered with sand and, in keeping with the natural environment, especially so in the southern, semi-arid desert regions of the country.
Further glimpses into the economy
The export business is largely dependent on the demand from Europe and the USA and is therefore unable to extract itself from the global recession; which, however, only marginally diminishes the attractiveness of the Moroccan market. The infrastructure and industrial projects already initialized will continue to be carried out, albeit with some delays in the timetables. The domestic demand remains at a high level because of the excellent results from the agricultural sector. Economics Minister Salaheddine Mezouar sees economic growth in 2009 reaching over five percent despite breaches in the export market; only slightly less than the tentative estimate of 5.8 percent for 2008.
The consistent effort to bring the country closer to the European Union has already made such progress that in October of last year the EU Commission granted Morocco “Statut Avancé” status and agreed to the gradual adoption of “Acquis Communautaire,” according to which all rights and duties of an EU country apply to the Maghreb nation. Morocco not only wants to integrate into the EU but also bring itself largely in line with the legal and social parameters of the EU. This means the country is already foreseeably creating an excellent basis for companies from the EU region to enter the market by offering the numerous investment benefits that comprise five chapters of the so-called Investment Charter, published in the official journal No. 4336 from December 6, 1995, which are available, by the way, to local investors as well.
For that reason, the smooth conducting of payment transactions with foreign countries is at the top of the financial market agenda. The government in the nation’s capital, Rabat (with a population of 700,000 and its sister city, Salé, with approx. 1.6 million people), is attempting to eliminate still existing obstacles. An administrative apparatus that remains quite ponderous does not exactly make the matter easier. All the same, Rabat is keeping its sights on the liberalization of payment transactions for the smooth financing of export businesses.
Automibile Industry takes a new direction
The automobile industry in Morocco began in 1960 with the founding of SOMACA (Moroccan Society of Automobile Construction) to meet the growing domestic demand. With the beginning of the 1990s, a decline in the number of cars locally assembled was noted, which led to a disadvantage in the industry’s supply. Subsequently, the policy makers developed a new strategy for the construction of more economic vehicles that laid an emphasis on granting cooperating automobile makers economic advantages as a considerable reward for components produced locally destined both for the assembly line as well as for export. In 1995, the government underwrote together with the car makers the economic car project that provided for a final, combined balloon payment of 50 percent and exemption from customs at import, as well as a perceptible reduction of VAT (7 %).
An automobile assembly plant is in the process of being built near the port of TangerMed. The first cars should be rolling off the assembly line by 2010. Renault/Nissan originally announced a final annual capacity of 400,000 units by 2013. With Nissan’s withdrawal being made final, Renault plans to carry out the project now on its own, but clearly reduced production figures are to be expected.
The Economy at a Glance
Leading import countries
France (16 %), Spain (10 %), Italy, USA, PR of China and Saudi Arabia (each 6 %), Russia and Germany (each 5 %).
Semi-finished goods (23 %), capital goods (21 %), energy and lubricants (20 %), consumer goods (19 %), food, drinks and tobacco (10 %)
Leading export countries
France (28 %), Spain (21 %), Great Britain (6 %), Italy (5 %), India (4 %).
Consumer goods (30 % – incl. 17 % ready-made clothing and 7 % cotton fabrics), semi-finished goods (28 % – incl. 8 % phosphoric acid, 6 % fertilizer and 5 % transistors), food, drinks and tobacco (18 %), capital goods (12 %), raw minerals (8 %)
Gross domestic product according to sector
Services 56 %
Industry 28 %
Agriculture 16 %
Employment according to sector
Agriculture 45 %
Services 35 %
Industry 20 %
Key Macro-Economic Figures
Gross domestic product 2006 (nominal)
65.6 billion USD (2006)
75.1 billion USD (2007, est.)
90.5 billion USD (2008, est.)
Gross domestic product per capita
2.152 USD (2006)
2.422 USD (2007, est.)
2.902 USD (2008, est.)
3.3 % (2006)
2,1 % (2007)
3,9 % (2008, est.)
9.7 % (2006)
9.8 % (2007)
9.2 % (2008, est.)
Foreign trade Imports:
21.3 billion USD (2006)
28.7 billion USD (2007)
34.8 billion USD (2008, est.)
11.9 billion USD (2006)
12.7 billion USD (2007)
16.1 billion USD (2008, est.)
(Berlin/Brussels), Business Editor,
Journalist specialized in tourism and
( AEJ / FIJET / TELI / UBJET )