Issue Briefs

Morocco’s Road to Development

Morocco’s Road to Development

Paolo von Schirach

August 08, 2022

WASHINGTON – Morocco: here is a North African economy working hard to promote domestic economic development by attracting foreign investments. What are the tools to achieve this strategic goal? Create and sustain a business friendly investment climate. According to the US State Department, 2021 Investment Climate Statements, here are the building blocks of this strategy:

“Morocco enjoys political stability, a geographically strategic location, and robust infrastructure, which have contributed to its emergence as a regional manufacturing and export base for international companies. Morocco actively encourages and facilitates foreign investment, particularly in export sectors like manufacturing, through positive macro-economic policies, trade liberalization, investment incentives, and structural reforms. Morocco’s overarching economic development plan seeks to transform the country into a regional business hub by leveraging its unique status as a multilingual, cosmopolitan nation situated at the tri-regional focal point of Sub-Saharan Africa, the Middle East, and Europe. The Government of Morocco implements strategies aimed at boosting employment, attracting foreign investment, and raising performance and output in key revenue-earning sectors, such as the automotive and aerospace industries. Morocco continues to make major investments in renewable energy, boasting a 4 GW current capacity, 5 GW under construction, and an additional 6 GW in theplanning phase.

There you have it. The end game is to make Morocco into a “regional business hub” via the creation of a business climate that encourages foreign investors looking for favorable conditions. The country plans to leverage its “unique status as a multilingual, cosmopolitan nation” in order to attract more investments in state of the art “automotive and aerospace” sectors, among others.

Good score in “Doing Business”

Along similar lines, Morocco made an effort to gain a recognizable space among countries seeking the attention of foreign investors. In recent years, the country steadily climbed the critically important World Bank “Doing Business” Rankings, a tool updated every year whose purpose is to measure the easiness of doing business in every country. Morocco is now number 53 in the world when it comes to easiness to do business. If you consider that neighboring Algeria ranks 157th and Egypt is at number 114, while Mexico, a middle income country that enjoys a privileged partnership with the US via a free trade agreement, is at number 60, it is clear that Morocco made a real effort to identify and progressively eliminate legal, regulatory and administrative constraints, and other obstacles that discourage foreign investors. Furthermore, according to the Corruption Perception Index, compiled and constantly updated by the well respected NGO Transparency International, at 87 Morocco is on par with Colombia, and in a better place than Brazil or Turkey. In the same index, fellow North African country Egypt is number 117. Clearly there is still room for improvement for Morocco. Its corruption perception score is fair, but not excellent. However, this ranking places Morocco ahead of most of Africa, and other North African countries.

Modern infrastructure

Regarding key maritime infrastructure, the Port of Tangier-Med is ranked 23rd in the world, and first in the Mediterranean. It is also the logistics node for a vast and diversified Moroccan industrial area that includes aerospace components manufacturers and automotive parts companies.

And then there is high speed rail. In fact Morocco has the only high speed rail service in Africa, connecting Tangier and Casablanca since 2018, with plans for extensions linking many other key cities. Some criticized this large investment in high speed rail as an expensive vanity project that absorbed limited state funds (note that France and some Gulf countries funded most of the project) that could have been used to improve Moroccan schools or hospitals. Still, there is no question that the availability of first world, first class high speed rail services places Morocco in a higher category among emerging countries. Super fast rail connections will enhance Morocco’s image as a growing, modern economy whose main actors are capable of partnering with high tech industries across the world.

Invest in sub-Saharan Africa

Looking at the country from a different perspective, we should note the equally important trend of Morocco’s growing ties with its neighbors in sub-Sub-Saharan Africa. According to the same US State Department Investment Climate Statement cited above:

“The Government of Morocco prioritizes investment in Africa. The African Development Bank ranks Morocco as the second biggest African investor in Sub-Saharan Africa, after South Africa, and the largest African investor in West Africa. According to the Department of Studies and Financial Forecasts, under the Ministry of Economy, Finance, and Administration Reform, $640 million, or 47 percent of Morocco’s total outward FDI, was invested in the African continent in 2019.”

Along the same lines, according to Morocco World News: “Two Moroccan banks are on the list of the top 10 largest banks in Africa for 2021. The two banks in question are Attijariwafa Bank, with total assets of $40.026 billion, and Credit Populair du Maroc (BCP), with total assets of $27.662 billion”.

All this clearly indicates that while Morocco makes efforts to attract more Foreign Direct Investment, FDI, the country is also pursuing a strategy of investments in sub-Saharan Africa. If this trend progresses, Morocco may well be poised to become an important bridge, a valuable connecting point, between companies in developed countries and Africa.

Major exporter of fertilizer and agribusiness services

Last but not least, Morocco managed to transform its enormous phosphates mineral riches into a diversified conglomerate, OCP, that now, in addition to minerals and fertilizers, sells agribusiness related consulting services to many international clients, including several African countries. OCP Africa, a subsidiary of the main Morocco based company, has grown significantly in recent years. Its diversified offerings can assist many African countries that still rely on old-fashioned agriculture technologies, so that they can transform and modernize their agriculture sectors. Via the targeted introduction of the appropriate fertilizers, combined with additional services that include soil analysis and the introduction of new generations of seeds, many African countries will see increased yields and overall improved productivity. This will clearly benefit millions of people employed in agriculture and overall food security. OCP Africa now operates in 16 African countries. It has a major plant in Ethiopia.

Invest in education and gender equality

In all this, we should not forget the continuing efforts on the part of the government in higher education. A promotion video produced by the Moroccan Investment and Export Development Agency states that the country every year produces 152,000 graduates with industrial skills. This is what investors seek and need: employable human capital, a well educated workforce that can be easily trained to perform complex tasks according to the highest international standards.

Besides, there is no question that Moroccan women enjoy a degree of freedom that is rather unique in the Arab world and other Muslim countries. Moroccan women can study, work, live on their own and run for political office. While there is still a major cultural divide between the more liberal urban societies and more conservative habits in the rural areas, overall Morocco has made major improvements over the last twenty years when it comes to promoting gender equality.

In the final analysis, while major challenges such as illiteracy and poverty remain, the road chosen by Morocco seems to be very productive. The recipe is simple, yet robust. Create a favorable business environment by eliminating impediments and bottlenecks. Create win-win partnerships with companies based in liberal democracies committed to a rules based international investment and trading regime. Fight corruption. Ensure rule of law. Educate young people and give them the freedom to engage in productive activities.

A simple recipe

It is a simple recipe. Yet, in many countries in which small elites cling to unwarranted privileges based on the exploitation of rent positions, the formula of freedom and markets is a non starter. Morocco’s leaders embraced this vision. More broad based prosperity followed. Let’s hope that this strategy will continue to be pursued in the years ahead, to the benefit of all Moroccans and also of all the countries in the developed West and in Africa that engage in productive partnerships with Morocco.

Paolo von Schirach is the President of the Global Policy Institute, a Washington DC think tank, and Professor of Political Science and International Relations at Bay Atlantic University, also in Washington, DC. He is also the Editor of the Schirach Report.