Doing Business In

Re-structured for growth

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Morocco continues its upward trend. This year will see challenges from ongoing efforts in the energy and extractive sectors, but the reforms that King Mohamed VI initiated after he came to the throne in 1999 are taking hold.

The basics of the Moroccan economy remain stable in spite of the crisis and the country displays a degree of resilience in the face of external shock, with a growth in gross domestic product (GDP) of 4.9% in 2009 and 3.3% in 2010. Nevertheless, the crisis has highlighted structural weaknesses, in particular in certain export-oriented sectors such as textiles and clothing.

The continuation of the macroeconomic and structural reforms put in place over the past decade, combined with the revival of non-agricultural activities and demand from Morocco’s partners, offer favorable prospects for growth and the economy should expand by 4.6% in 2011 and 5.0% in 2012.

The Moroccan economy has been, traditionally, dependent on the agricultural sector but over the past decade has embarked upon a diversification of its structure. More and more growth comes from the secondary and tertiary sectors.

The main drivers of growth in 2010 were the good performance of non-agricultural activities and a revival of the sectors most heavily hit by the crisis in 2009. Non-agricultural activities were affected by the 2009 international crisis but recovered in 2010 to reach their pre-crisis level. They recorded an improvement in added value of 5% and the trend is expected to continue in 2011, helped by growth rates in the secondary and tertiary sectors of 5% and 5.6% respectively.

Extractive activities (notably phosphates) were hard hit by the crisis in 2009, with a drop in their added value of 23.8% compared with the previous year. But the mining sector met expectations in 2010 as demand picked up, in particular from the US and Brazil, and recorded growth of 10%. This trend was expected to be confirmed in 2011 (up by 11.5%), driven by strong external demand and the major investment program of the Office Cherifien des Phosphates (OCP) which hopes to increase its production capacity in mining, chemicals and fertilizers.

Production of thermal and hydraulic energy rose by 34.7% and 16.7% respectively during the first ten months of 2010, compared with the same period in 2009, and contributed to electricity production, making up for the drop in imports from Spain and Algeria and the fall in production from the Tahaddart power plant.

The international crisis and its debilitating effect on the economies of Morocco’s trading partners had a major impact on processing industries, which are strongly oriented towards exports and account, on average, for 16.5% of the total added value of the secondary sector. But the revival in industrial activity, which began in 2009, continued in 2010, with the exception of the textile and clothing sector, in particular leather, and aeronautics, which continued to show substandard performances. Processing industries recorded progress of 3.1% in 2010 and should continue to grow at a rate of 3.6% in 2011.

economy1The international crisis affected the tertiary sector only moderately, which managed to maintain its 2009 growth rate in spite of a slight drop in tourism. In 2010 it recorded growth of around 5%, supported by the good performance of the primary and secondary sectors and healthy national and foreign demand. This progress was expected to continue in 2011 and reach 5.6%.

Tourism benefited in 2010 from the recovery in global tourism. Arrivals rose by 12% in the first ten months of the year compared with the same period in 2009 with a total of 7.9 million tourists. The number of overnight stays in classified establishments also rose by 11.5%, mainly concentrated in the cities of Marrakech, Agadir and Casablanca, which between them accounted for two thirds of the extra overnight stays. Occupancy rates rose by two points during the first ten months of the year compared with same period in 2009, reaching 45%. Receipts from tourism rose by 6.6% over the period.

Internal demand continues to play its role as an engine of growth. It was boosted in particular by the good cereals harvest, the control of inflation, a revival in transfers from Moroccans living abroad, the availability of consumer credit (up by an annual rate of 8.7% at the end of October 2010) and steps to support household purchasing power in the 2010 budget. These include a revision of income tax rates that came into effect at the beginning of 2010 which lowered the maximum rate to 38% from 40% and raised the tax threshold from 24,000 Moroccan dirhams (MAD) to MAD 30,000 ($2,700 to $3,400). Household consumption, which accounted for an average 58% of GDP during the period 2005-09, rose by 4.1% in 2010 and should continue its strong performance in 2011, with an increase of 5.6%.

Investment benefited from the improvement in economic activity and the vitality of public and private investment. Gross fixed capital formation at current prices (GFCF) progressed by 6.9% in 2010, after falling back by 0.6% the previous year. Credits for equipment financing had advanced by 25.8% at the end of the first eight months of 2010 compared with the same period in 2009. Imports of capital goods, other than aircraft, saw a similar advance with an annual growth rate of 5.1%. GFCF should maintain its strong performance in 2011 with growth of 7.4% over 2010. At the same time its contribution to growth should rise from 2.3% in 2010 to 2.5% in 2011.

Fiscal Policy

The budget deficit increased in 2010 due to higher spending. Estimates for 2011 suggest a moderate decline due to lower spending growth which will be mainly financed by internal resources, unlike the 2010 deficit which took advantage of favorable financing on the international market.

Monetary Policy

Inflation as measured by the variation in the cost of living index continued to be very moderate in 2010, remaining at under 1%. The prices of food and nonfood goods rose respectively by 0.4 % and 0.9 %. ●

This article was edited from the African Development Bank’s annual publication, African Economic Outlook, 2012 edition. Further information can be found at www.africaneconomicoutlook.org, or by contacting the AfDB communications department: penelope.depontet@afdb.org

Note : The most recent economic forecast for Morocco from the African Development Bank is expected to be released by June 15, 2012.

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Posté dans Afrique, Economie, Maroc, Présentation | Tagué

Enlightened monarchy

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government1The Kingdom of Morocco is the westernmost country in North Africa. With a population of about 32 million inhabitants and an area of 710,850 square kilometers, Morocco is part of the Maghreb region, which also includes Tunisia, Algeria, Mauritania, and Libya, with which it shares cultural, historical and linguistic ties.

Morocco is a constitutional monarchy with an elected parliament. Executive power is exercised by the government and King Mohamed VI. Legislative power is vested in both the government and the two chambers of parliament, the Assembly of Representatives and the Assembly of Councillors. The king can also issue decrees called dahirs having the force of law. The political capital is Rabat, but the largest city is Casablanca. Other main cities include Marrakech, Tetouan, Tangier, Salé, Fez, Agadir, Meknes, Oujda, Kenitra and Nador.

In Africa, Morocco constitutes the fifth largest economy, even though it is only ranked 9th in terms of population.

Morocco’s economy is free-market. Government reforms and steady yearly growth in the region of 4% to 5% since 2000 have helped to diversify and strengthen the Moroccan economic base. The major resources of the Moroccan economy are financial services, real estate and tourism, followed by agriculture and manufacturing. Economic growth drivers are diversified, with new service and industrial poles in cities such as Casablanca and Tangier.

governmentIndustry and mining contribute about one-third of the annual GDP. Construction and manufacturing provide about 23%. The industries that recorded the highest growth are tourism, telecoms, information technology and textiles. Morocco is the world’s thirdlargest producer of phosphorus (after China and the US). Morocco is the world’s biggest exporter of phosphates, whether as raw material or processed as fertilizer.

The services sector accounts for just over half of GDP. Morocco, however, still depends heavily on agriculture, which accounts for 14% of GDP but fully 40% to 45% of employment. Sales of fish and seafood are important as well.

Tourism and workers’ remittances have played a critical role since the Kingdom’s independence. The production of textiles, clothing and leather goods is part of a growing manufacturing sector, which is also seeing higher added-value sectors having good growth: automotive, electronics and aeronautics to name a few. ●

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Posté dans Afrique, Gouvernement, Maroc, Présentation | Tagué

Top 7 reasons to invest in Morocco

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1

Stable political environment

Morocco is the safest and most stable country in the Middle East and North Africa region for investors. Morocco is a democratic and social constitutional monarchy. Since coming to the throne in 1999, King Mohamed VI has pursued many democratic reforms. The King appoints the prime minister who then appoints a cabinet of 22 ministers. The Parliament consists of the Chamber of Counselors (the upper house) and the Chamber of Representatives (the lower house). The 270 counselors are elected indirectly by local councils, professional organizations, and labor syndicates to serve nine-year terms. Onethird of the upper house is elected every three years. The 395 representatives are elected by popular vote to serve five-year terms.

3

Strong growth

Morocco’s economy boasted an average growth rate of 5.1% between 2001 and 2010 despite the international financial and economic crisis. GDP grew 4.9% in 2009, the largest increase across the Mediterranean region. During the same period, inflation increased less than 2%, the lowest rate in the region. Overall treasury debt declined from 73% to 50% of GDP between 2000 and 2010. Strong domestic demand and public investment have contributed to the country’s growth. Household consumption grew by an average 8% per year between 2004 and 2010 to $52 billion (MAD 442 billion), while public investment nearly tripled during the same period to reach $20 billion (MAD 167 billion).

5

Enlightened government support

The Moroccan government stimulates or directs economic activity in strategic areas, including aeronautics, automotive, offshoring and tourism. In addition, incentives provide selected sectors (mining, export industries, tourism, real estate, handicrafts and maritime) with partial or total exemptions from VAT, income tax and import duties. Incentives are also available to businesses that invest in one of Morocco’s Free Trade Zones (FTZs). The Tangier FTZ offers incentives to investors who set up businesses on undeveloped land, including exemptions from duties and taxes associated with the acquisition of land, license and “urban taxes” for 15 years, VAT on all exported goods, and corporate taxes for five years, with a reduced 8.75% corporate tax thereafter.

7

Free trade agreements

In 2004, Morocco became the second Arab nation (after Jordan in 2000) to enter into a Free Trade Agreement with the US. In 2005, Morocco joined the EU Neighborhood Association for trade, and in 2008 was the first Arab country in the MENA region to be granted the coveted “Advanced Status” as a full trading partner. As a result, Morocco is the only country in North Africa to have completely free and open trade rights with the US and all the countries of the EU. Morocco has also entered into bilateral free trade agreements with most of the other countries of the MENA region and is now engaged in obtaining agreements with the rest of Africa, as well as numerous countries in the Americas, Asia, and the Pacific. As a result, Morocco today has more free and open trade agreements than any other nation in the MENA region and Africa.

2

The Occident of the Orient

Strategically positioned on both the Atlantic Ocean and the Mediterranean Sea, less than 14 kilometers from Europe, Morocco is a regional center for trade, manufacturing, warehousing, redistribution, sales, call centers, and an array of IT services reaching Europe, Africa, the Middle East, and the Americas. It is ideally positioned for shipping goods between the Americas, Africa and the Mediterranean. The massive harbor at Tangier provides much of the infrastructure for this. In addition, Morocco is party to trade agreements that allow it to reach a billion consumers duty-free. Morocco has a free market economy and one of the region’s lowest corruption levels. Due to its international nature, Morocco retains Western customs in food, drink and clothing. French language and culture is commonplace and the use of English is being widely adopted.

4

Proven returns on investment

Morocco has a consistent track record in gathering Foreign Direct Investment (FDI). Among the 22 countries of North and Western Africa, it is one of the largest recipients of foreign direct investment with more than $1.2 billion of inward FDI in 2010, as tracked by the World Bank.

6

Attractive business environment

Morocco’s domestic market of 32 million inhabitants is the second largest in the Maghreb. It also has the best road, rail and port network in North Africa. It has a simplified tax code with tax incentives for foreign businesses and a simplified customs schedule with two flat-rate tariffs on imported goods brought into Morocco to expand a business. The country has reformed its labor laws and clarified employment rules and the government is increasing funding for vocational training. Since the 1980s, the government has privatized 114 formerly state-run enterprises. Due to the Free Trade Agreement and WTO accession process, Morocco is a secure investment with legal safeguards in the form of “sectoral codes” that regulate business sectors and are applied equally to domestic and foreign investors.

Posté dans Afrique, Bonnes raisons, Maroc, Présentation | Tagué

Road to riches

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Morocco believes that a strong automotive manufacturing base can bring employment and export currencies. Fiat and Renault share that vision and is it now becoming a reality.

Until recently, Morocco was like most emerging markets when it came to cars – they were mostly imported. For the kingdom, the first step towards car manufacturing came in 1960 with its first automobile assembly plant, built for Somaca near Casablanca. The going was tough for the first 35 years, until an agreement was signed with Fiat in 1995 to assemble some models.

“We had to compete against a massive influx of used car imports, up to 90,000 vehicles per year,” explains Larbi Belarbi, the head of Somaca and also of the Moroccan auto federation, AMICA (L’Association Marocaine pour l’Industrie et le Commerce de l’Automobile).

In 2009, fully 93% of car registrations were new vehicles, whereas that figure had only been 32% in 2001. Alas, the Italian honeymoon only lasted until 2002 when Somaca ran into difficulties. Thankfully, Renault saw an opportunity and in 2003 acquired Somaca for the assembly of its Logan model and various light commercial vehicles.

The next step was Renault’s decision in September 2007 to invest on a massive plant near Tangier, capable of producing up to 400,000 vehicles per year in the near future. The investment included a first phase of €350 million ($435 million), and a second phase of €200 to €400 million ($250 million to $500 million) on a massive plant near Tangier. The Moroccan government was determined not to repeat the mistakes that caused the Fiat failure.

“The government realized it needed a strong auto manufacturing cluster to truly become a worldwide actor in the area,” explains Mr. Belarbi. “So the Tangier Free Zone was conceived with Renault as its queen bee and a swarm of component suppliers from all corners of the world as her attendants.”

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Moving up the value chain

Formerly all cars assembled in Morocco were CKD (complete knock down) with parts delivered to Morocco from other countries in pieces and assembled locally. Gradually local components started to be manufactured and used, such as electric wiring and textile seats. Local factories also started to do metal stamping for the bodywork and machining for engine parts. Today, about threequarters of the cars produced in Morocco are from local content.

The country’s two assembly plants are located in Tangier, where the Renault Logan is produced, and in Casablanca, where Somaca produces various models. Some of this production is exported to Spain and other European countries, as well as to North and sub-Saharan Africa.

automotive2Since 1996, the local production of automotive components has jumped from almost €200 million to over €800 million ($250 million to $1 billion) in 2009. The increasing use of local content has increased the number of component manufacturers in Morocco. These now supply both domestic and foreign markets, Spain in particular.

Moroccan component manufacturers have some strong competitive advantages, for example in areas requiring intensive use of skilled labor. These include electronic components, cloth seats and electric cabling, which itself accounts for more than 50% of Morocco’s automotive exports by value.

Morocco’s labor costs are highly competitive as well, about a fifth of those in Spain and less than one-tenth of those in France.

Even so, Morocco frets about the difference in levels of labor productivity and automation (i.e. robots), which are substantially higher in Spain. Moreover, local suppliers need to strengthen their steel foundry and stamping capabilities to compete in those areas.

Government strategic impulse

The Moroccan government has never been shy about its automotive ambitions. The sector is viewed as the top priority in the national industrial plan. Much of the funding for local and foreign investors comes from the Hassan II Fund, which provides subsidies of 50% for land acquisition, 30% for plant construction or acquisition, and 10% for equipment.

automotive3For the Ministry of Industry which oversees the fund, these investments are designed to make vehicle assembly a permanent part of the Moroccan industrial landscape, as well as to upgrade component manufacturing to international standards and stimulate R&D efforts on upstream activities. The plan is for Moroccan-designed and built vehicles to start rolling off local assembly lines one day soon.

Morocco has traveled a long way in the past 50 years. It now boasts 85% car ownership per capita, virtual autonomy in producing its own vehicles, and is even gaining valuable foreign currency from vehicle and component exports. ●


For more information:
AMICA (Moroccan Association of Auto Manufacturers and Distributors)
Ministry of Industry, Trade and New Technologies

Posté dans Afrique, Automobile, Maroc, Secteur d'activité, Transport | Tagué