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Fatima Zahra Mechyakha is an International Exchange Alumni of the United States Department in Washington DC. and a Master Graduate from the leading Business School in Morocco ISCAE Group. She specializes in finance, economics and business administration, with a particular interest in writing and entrepreneurship. Fatima Zahra has written extensively in French and English in different websites and run currently a social venture under the name of Road To Success. [/symple_box]
The following researsh was conducted under the supervision of Prof. Dr. Osman Çevik, Karamanoglu Mehmetbey University, Turkey.
Abstract
In the last few years, the Moroccan economy has been developed and modernized thanks to many ambitious and challenging reforms that the government has undertaken to enhance the country’s business climate. A set of measures have been applied to attract Foreign Direct Investments (FDI)(1) and to improve the Moroccan position on the African continent and on a global scale. Hence, the new constitution of 2011 constitutes a major basis of the society’s democratization, and a renewed state of law more amply. At the time of major political tensions in Arab countries, Morocco’s political landscape has been relatively stable and has been able to make major strides in the areas of trade, investment and privatization (2) policies. Also, the Moroccan government has been working on communication to set up a positive image to investors regarding its business climate. It continues to improve its infrastructure in order to increase territorial linkages, reinforce anti-corruption measures, support employment-generating activities and develop managerial skills. Simplifying administrative procedures and improving institutional co-ordination are also some important areas that the Moroccan authorities have been working on. The 5th Global entrepreneurship summit (GES) hosted in Morocco and Africa for the first time in 2014, can be considered as a concretization of the efforts made by Moroccan government. Despite all the efforts that have been deployed by the Moroccan authorities to reinforce the economic and business tissue, there still many flaws that interrupts the effective regulations and hence affect negatively the business climate.
Introduction
Part of the MENA region (Middle East and North Africa, Morocco, known by Al Maghreb in Arabic, is the only Monarchy in North Africa and is a blend of African, Arab, Berber and European cultures. The kingdom of Morocco has long maintained close diplomatic, cultural and economic ties with Europe, mainly with France, and has grown a stable and tolerant reputation. Located on the north-western tip of Africa, the kingdom of Morocco encompasses a landmass of 446,500 sq km. Morocco is known by its attractive position, sitting astride both the Mediterranean Sea and Atlantic Ocean, with 1835 km of coastline.
The Western Sahara is under Moroccan control and the government regards it as its sovereign territory. Morocco borders Mauritania to the South. Rabat is the national capital of Morocco, Casablanca is the largest city in Morocco and both cities are located along the northern part of the kingdom’s Atlantic coast. Fez is considered as the former royal capital. Tangiers is on the country’s northern coast and the southern city of Marrakech was named in 2015 by TripAdvisor as the world’s best destination in the world.
The Gross domestic product of Morocco is one of the most mixed in the region. The main spheres of the kingdom include agriculture, tourism, textiles and garments industry, and services. The kingdom has been so fortunate and beneficiated from a long period of economic stability. The inflation has not exceeded 4% since 1996 and the growth rate is maintained approximately around 5 %.( Institute of International Finance; Barclays Capital, Macroeconomic indicators of the Kingdom of Morocco, 2014).
The Moroccan economical system, since the Morocco’s independence in 1956 from France, has known a huge expansion in years following decolonization. Hence, Morocco has modernized its economy and made a remarkable progress towards the development of a business regulatory environment. There were two important waves of the reform process. It began with structural reform in the 1980s and was followed by the privatization of several sectors, investment in infrastructure and the modernization of the financial sector. Between 1996 and 2006, the Moroccan government has signed several Free Trade Agreements with a number of partners, including the United States, the European Union, and various neighboring states. (USAID, Improving the Business Climate in Morocco Program, October 2009, page N°3). This new privileged status among powerful commercial partners has motivated Morocco’s efforts to improve the business environment, with focus on administrative simplification and streamlining the process for handling investment applications.
Hence, a new investment attraction strategy is developed in Morocco. Its rationale is to encourage foreign companies (Europe, America, Middle East, etc.) to outsource some of their services and activities to certain areas in Morocco, areas known as free zones or offshore. The concept of offshoring, used to refer to these activities is relatively new; it is added to the arsenal vocabulary related to the field of foreign direct investment and techniques of their attraction by the host country. For Morocco, it is positioning this new activity within a broader framework, the development of information and communication technology sector (ICT) in a bet to see to what extent this new pole competitiveness can fit into the overall strategy of Emergence Plan3 within the Moroccan economy framework. For Moroccan policy makers, they’ve been trying to improve their economy’s regulatory environment for business climate. According to doing business database, Morocco has been ranked as the 71st country on a global scale in terms of flexibility and business performance, succeeding Egypt and the regional average of the MENA region. (World Bank Group, Doing business 2015, going beyond efficiency, Economy profile 2015, Morocco, 12th Edition, 2014, and page N ° 8).
An overview of the business climate environment in Morocco
In recent years, Moroccan authorities have been successful in attracting a relatively consistent flow of foreign capital, mainly relying on the national privatization program, the conversion of foreign debt into investments and the operations of public services concessions. Other sectors have taken over, including banking, tourism, energy and industry. Thanks to a set of measures that have improved the business climate in Morocco.
The new legal framework
Aware of the fact that investment is a key factor to ensure sustainable and sustained economic growth, Morocco has liberalized its economy by easing procedures, providing better protection to private operators through introducing new laws aiming at improving investment conditions and, thus, acquiring significant flow of domestic and foreign private capital. This new Legal framework is in full accordance with international human rights standards, including labor code, copyrights, industrial property, freedom of pricing and competition, arbitration and mediation, and personal data protection.
The labor code matches the basic principles set by the Constitution and international standards as defined in the UN conventions and specialized organizations that operates within the aforementioned field. It includes, prohibition of all forms of cork coercion, effective abolition of child labor, prohibition of discrimination in terms of employment and professions and equal wages. The copyrights measures aim to harmonize national legislation with the commitments made by Morocco in the framework of the international treaties and agreements. The industrial property is an exclusive right that gives its holder the right to enjoy the benefits or use the property concerned. Also, the law has introduced new provisions such as the trademark opposition system, border measures for suspected counterfeit goods, protection of sound marks and olfactory marks and trademark submission in electronic form. Concerning the freedom of pricing and competition, the 06-99 Law on free pricing and competition sets the rules for the protection of competition and aims to boost economic efficiency, improve the welfare of consumers and ensure transparency and fairness in trade relations. Furthermore, the Law prohibits anti-competitive economic practices that may prevent, restrict or distort competition in the domestic market. These practices are: unlawful agreement, abuse use of a dominant position and abuse use of a position of economic dependency. (Moroccan legal file, Decree no. 1-00-225, of 2 Rabil I, 1421 promulgating law no. 06-99, 5 June 2000).
Besides, the 06-99 law, the Law No. 09-08 on the protection of individuals with regard to processing of personal data introduced a set of legal provisions aimed at protecting the identity, rights and individual and collective freedoms as well as privacy against all attacks that may affect them through use of computers. The Law defines, among others and with precision, the right of access to databases containing personal data, to object to certain treatments, to request correction of erroneous data and delete outdated information or those whose purpose of treatment was performed. (Moroccan legal file, Decree no. 02-09-165, promulgating law no. 09-08, adopted in December 2008).
The arbitration legal arsenal is characterized by a series of innovations aimed at harmonizing the Moroccan trade law with international principles. Among the novelties of this paper are broadening the scope of arbitration to legal entities under public law. The implementation of the arbitration judgments relating to these acts remains however subject to the exequatur which returns to the administrative jurisdiction in the competence of which the judgment will be executed, or in the administrative court of Rabat, when the arbitration judgment concerns the whole national territory. (Invest in Morocco, Investment guide, March 2015, page N°12).
Free trade agreements in Morocco
Within the framework of its global openness and liberalization strategy, Morocco has set up during the last decade a legal framework conducive to developing its commercial relations with some of its potential partners, through the conclusion of free trade agreements either bilaterally or regionally.
These agreements are made with many countries, including the European-union, which constitutes the first partner of Morocco. The Association Agreement between Morocco and the European Union signed on February 26, 1996 which came into force on March 1st, 2000, provides for gradual establishment of an industrial free-trade zone in 2012 and progressive liberalization of agricultural trade. For industrial goods, the Agreement provides for gradual dismantling over 12 years of products originating from the EU within the framework of 3 lists against free access of Moroccan industrial products. (Invest in Morocco, Morocco-European Union association agreement, March 2000).
Besides, Morocco and the United States signed an FTA on June 15, 2004. It entered into force on July 1 2005. This is a comprehensive agreement that covers all sectors of economic activity, ranging from the trade goods and services, to TRIPS, social and environmental issues, etc. In exclusively economic and commercial vocation, this agreement aims to organize the development of trade in goods and services between the two countries in a controlled frame, given the differences in terms of socioeconomic development.
Morocco and Turkey have also a free trade agreement. Under the process of Euro-Mediterranean regional integration, Morocco and Turkey signed a FTA in Ankara, April 7, 2004. It provides for the gradual establishment of an industrial free trade zone over a period of 10 years from the date of entry into force with an asymmetrical treatment in favor of Morocco. Industrial products of Moroccan origin will benefit from total exemption upon the entry into force of the Agreement. Regarding agricultural products, there was an exchange of concessions.
Furthermore, The Arab free trade zone exchanges came into force on January 1st, 1998. It aims to gradually establish a free trade zone among member countries of the Arab League (except Algeria, Djibouti, Comoros and Mauritania). This Program provides for gradual dismantling, until complete exemption on January 1, 2005. However, difficulties remain regarding its implementation.
Morocco has signed on February 25, 2004, a quadrilateral FTA with Egypt, Tunisia and Jordan under the Agadir Declaration, signed May 8, 2001. The Agreement aims at establishing a quadripartite free trade zone, while remaining open to all Mediterranean Arab countries. It states a total exemption of customs duties starting from the date of entry into force (January 1st, 2005) for all industrial and agricultural products with the exception of some products excluded for security, health and environmental reasons.
A modernized and simplified Tax system
The Moroccan tax system, for the sake of simplification, rationalization and modernization, has been codified under the General Tax Code (CGI). The government adopted the “Investment Charter” in 1995. This charter mainly provides company exemptions for “VAT” and corporate tax for 5 years. Also, there are industrial parks (Bouskoura, Meknès, etc.), Technoparks (Casa Technopark) and free zones (Tangier one is particularly enjoying tax and special customs benefits). (Invest in Morocco website, Business climate, Taxes).
The main taxes in the Moroccan system are: The Income Tax (IT) applies to income and profits of natural persons and legal entities that have not opted for Corporate Tax. The Corporate tax applies mandatorily to income and profits of capital companies, public institutions and other corporations that carry out lucrative transactions and on an irrevocable basis to partnerships. And, the Value added Tax (VAT) applies to industrial, craft, commercial and liberal activities, as well as import operations. Retailers’ income is also taxable when their turnover accomplished during the year exceeds or equals 2,000,000 DH.
Moreover, in order to encourage investment and promote certain sectors, the existing legislative provisions relating to tax incentives envisage tax exemptions in terms of common law and at the sectorial level. (PKF Worldwide Tax Guide, Morocco Tax guide, 2012).
Attractive incentives for investors
In addition to the tax exemptions granted under the common law, Moroccan law provides specific financial, tax and customs advantages to investors, as part of agreements or investment contracts to be concluded with the State, provided that they meet the required criteria. Morocco’s strengths are mainly, the legal framework and assistance measures very favorable to the investors, a skilled workforce with relatively low salaries, a strategic position, not far from Europe, and a strong growth, considered as one of the fastest emerging countries. The Moroccan government launches the Investment Promotion Fund (IFP) that manages operations relating to the state’s taking charge of the cost of some advantage granted to the investments that meet the criteria, within the framework of contracts, and in accordance with the investment charter and its implementation decree. It lands support by taking charge of 20% of the expenses of land acquisition necessary for the realization of the investment. The IFP participates in the expenses of external infrastructure with up to 5% of the overall amount of the investment program, and also, participates in the expense of vocational training provided as part of the investment program with up to 20% of the cost of this training.
These advantages are cumulative, provided that the state’s participation does not exceed 5% of the total investment program. However, if the investment project is expected in a suburban or rural area or in the case of investment in spinning, weaving and textiles finishing, the participation of State may reach 10% of the total investment program. (Invest in Morocco website, Business climate, IFP).
Besides, Businesses that commit to making an investment of an amount equal to or greater than two hundred (200) million dirhams can benefit, as part of agreements to be concluded with the government, from exemption from import duty and the value added tax applicable to goods, materials and tools needed for their project and imported directly by the companies or on their behalf. This exemption is also granted to the parts, spare parts and accessories imported at the same time as capital goods, machinery and equipment for which they are intended. The investment must be made within thirty-six (36) months from the date of the signature of the abovementioned agreement. (Invest in Morocco website, Business climate, Import Duty Exemptions).
Equipment goods, materials and tools needed to achieve investment projects involving an amount higher than or equal to MAD 200 million are exempt from VAT on imports within the framework of an agreement concluded with the State, in favor for the beneficiaries during a period of thirty six (36) months from the start of business. This exemption is also granted to parts, spare parts and accessories imported at the same time as the aforesaid equipment. (Invest in Morocco website, Business climate, VAT Exemptions).
Protection of investors
As part of foreign investment promotion efforts, Morocco has ratified international conventions relating to the guarantee and protection of investment. The promotion of foreign investment in Morocco is not only limited to the adherence to international multilateral conventions but extends to the bilateral ones, as part of strengthening relations with key partners. So many treaties, agreements and conventions for the promotion and protection of investments and avoidance of double taxation have been signed throughout the recent decades. The main provisions of these agreements and conventions concern the following aspects: Treatment of permitted investments, free transfer of capital and income, the non-expropriation of investment, except for public utility reasons and following a court decision (on a nondiscriminatory basis and to pay a prompt and adequate compensation), disputes with recourse to domestic courts or international arbitration at the choice of the investor.
Morocco has signed agreements with several countries to avoid double taxation with respect to income tax. These agreements establish the list of taxes and income concerned the rules for mutual administrative assistance and the principle of non-discrimination.
Morocco has concluded agreements with 51 countries including France, Spain, Egypt, Italy, Lebanon, Libya, Portugal, Tunisia and Turkey for guarantee of overseas investments against every risk of nationalization and compulsory purchase. Those define the framework of protection of overseas investments for each signatory country.
Reinforcement of Moroccan position
In order to ensure a clear and transparent framework for investment for the benefit of national and international operators, the National Committee of Business Environment was created in December 2009.This high-level body is chaired by the Prime Minister. It is composed of representatives of public and private sectors and aims to identify and implement measures to enhance Morocco’s attractiveness.
After a decade of various reforms aiming to promote investment and develop business climate, Morocco has decided to harmonize all the initiatives. Thus, under the National Pact for Industrial Emergence signed in 2009 between the Moroccan government and the private sector represented by the CGEM4 and GPBM5, it was decided to create a public-private authority in charge of coordinating reforms related to the business environment. Hence, the CNEA was created to prepare the annual program with prioritized measures of improving the business environment, to coordinate the efforts of the Government to ensure effective implementation of the adopted measures, to institutionalize public-private dialogue and engage the private sector in identifying priority reforms, to develop a communication strategy to raise awareness of local and international investors to reforms initiated by Morocco and to assess the impacts of reforms through quantitative indicators.
The revival of the national economy through private investment, including foreign direct investment (FDI) is one of the main priorities of the Moroccan authorities. Thus, several initiatives have been led by His Majesty King “Mohammed IV” for the promotion and support for investment.
Moroccan authorities tried to increase their influence on sub-Saharan Africa as they are aware of the geopolitical importance of that region. Therefore, getting closer to Sub-Saharan countries has been set as a top priority of its foreign policy, in order to keep its strategic interests. By becoming a leading continental power, Morocco aims at competing with countries such as Algeria that usually tends to isolate its neighbor from the rest of Africa. The reinforcement of Moroccan position in Africa remains essential as it could offer the kingdom both economic dynamism and support on sensitive diplomatic cases.
The strong relations established with more than 40 African countries are the strength of its policy. The huge raise of diplomatic missions in sub-Saharan Africa allows “the Moroccan flag to float everywhere on the continent”. Morocco’s political influence is growing and so is the trust of the states it is working with. The kingdom keeps defending African’s cause, either directly, thanks to its participation in different operations to maintain peace, in Ivory Coast for example, or either indirectly, supporting, in all of the international summits he’s intended, the human and social development in the sub-Saharan area. Morocco also reached its goal as it has been elected to represent Africa at the UN Security Council for the period 2011-2013. The increase of the cooperation between Morocco and its new continental partners is resulting today in the proliferation of joint commissions aiming at strengthening the strategic and political framework of their relationship.
Morocco also relies on cultural diplomacy to set up its policy. Furthermore, the kingdom uses its religious connections with South Saharan’s countries to increase its authority. In May 2013, in Rabat, the capital city, an African day took place, where an “African Unity” street was inaugurated and conferences on Africa and Morocco relations were organized.
The 2014th Global Entrepreneurship Summit, Marrakech Morocco
The kingdom of Morocco was the first country to host the 5th GES on the African continent. GES 2014 brought together over 3000 entrepreneurs, together with heads of state, high level government officials, global entrepreneurs, small medium enterprises (SMEs), corporate leaders, and young entrepreneurs. There was also be an “Innovation Village” where entrepreneurs and innovators from Africa and around the world were able to promote their projects and share new ideas on myriad topics including ICT, water management, and alternative energy.
The United States has played a prominent role in organizing five Global Entrepreneurship Summits (GES) that have elevated entrepreneurship on the global agenda and inspired new generations of innovators. Hence, this summit plays a huge role of promoting the Moroccan image and position on a global scale, by bringing one of the top world investors for the first time, to Africa.
Promoting Tourism sector in Morocco
Morocco is a tourist destination that has many strengths and clear potential that allowed it to become a highly popular tourist destination. With varied and contrasting landscapes (3500 km of coastline, mountains, deserts …), a rich cultural heritage (imperial cities, old towns, food and crafts), Morocco is a unique and diverse touristic experience only 2h30 flight from major European cities.
Between 2005 and 2010, the number of tourists visiting Morocco has increased from 5.8 to over 9.3 million, and a mounts of foreign direct investments are around € 30 billion over this period combined. In addition, in 2009, Morocco was the only Mediterranean countries to have increased more than 6% while the world market decreased by 5%. (Invest in Morocco Website, Tourism sector)
To remove the constraints on the access to financial resources, Vision 2020 considers the establishment of an instrument for national and international investment mobilization: the Moroccan Fund for Tourism Development (FMDT6). Investment premiums will be implemented taking into account the level of risk perceived by investors for each type of product and for each destination.
To strengthen its commitment in supporting the implementation of Vision 2020, the banking sector is willing to mobilize a budget of 24 billion DH.
Aside from commercial banks responsible for financing the sector, funds for national investments were created to support the dynamic development of tourist projects.
Also, many investment incentives have been made to support this sector. For instance, the exemption of import duty preference for all capital equipment needed for the promotion and development of the project. VAT exemption for capital goods, machinery and equipment acquired in Morocco for a period of twenty four (24) months from the date of commencement of business of the company. The exemption from import VAT for a period of thirty six (36) months for capital goods, machinery and equipment acquired on importation. A total relief of the SI of turnover in foreign exchange business and hotel for a period of 5 years from the year in which the first accommodation was made in foreign currencies and a reduction of 17.5% over this period and a total exemption from IR to the amount of turnover in foreign currency by the hotel companies and for a period of 5 years and a reduction of 50% over this period. (Invest in Morocco Website, Tourism sector, Tax system)
Agriculture in the heart of Moroccan economy
The agricultural sector contributes with 19% to the national GDP, divided between agriculture (15%) and agro-industry (4%). This sector employs over 4 million people including about 100,000 in agro-industry.
The new agricultural strategy, Green Morocco Plan, established by the Ministry of Agriculture and fishing, aims to consolidate the success achieved and to meet new challenges facing Morocco’s competitiveness and opening of markets.
Green Morocco Plan has been designed to promote the development of the entire agricultural and territorial potential. The new Moroccan agricultural sector is meant to be open to all using different strategies depending on the targeted issues.
Green Morocco Plan will contribute to GDP with 174 billion dirhams, creating 1.15 million jobs by 2020 and triple the income of nearly 3 million people in rural areas.
The Green Morocco Plan focuses on two pillars. The acceleration of a modern and competitive agriculture, vital for the national economy. Through the realization of a thousand new projects with high added value in both productions and agro-food. Support to smallholder agriculture through the implementation or professionalization of 545 projects of small farms in difficult rural areas, thereby promoting greater productivity, greater recovery of production and sustainability of farm income. This second pillar also seeks the conversion of cereal crops with higher value added (or less sensitive to precipitation) and processing of local products.
To strengthen the projects of these two pillars, the VMS is based on projects consisting of the so-called cross-sector framework redesign and improvement of water policies, land tenure and the This plan revolves around the concept of aggregation for overcoming constraints to the fragmentation of land ownership patterns, while providing access to aggregated holdings of modern production techniques, finance and markets. It is based on the implementation of a new wave of investment around new players with high managerial ability.
The regional declination of the Green Morocco Plan in farm aims to build a regional vision and a regionalized agricultural production, eco-balance between two pillars and to mobilize regional and national funds, credit agencies, and investors as well as other donors wishing to support Morocco in the implementation of this Plan.
Industrial acceleration plan
The Industrial acceleration plan is a new approach based on the implementation of efficient ecosystems aiming at the integration of the value chains and the consolidation of the local relations between big firms and SMEs. The strategy that will extend over the 2014-2020 period is expected to generate half a million jobs in the sector and substantially increase the share of industry in GDP from the current 14% to 23 %. (Invest in Morocco Website, Industrial acceleration plan)
The changes to be introduced will help diversify and expand the industrial fabric and institute a better coordination and deeper partnership between large companies and SMEs. It will therefore reinforce the Moroccan Industry as a major leverage for growth and job creation.
The new strategy provides for the creation of the “FDI”, a public industrial investment fund endowed with 2 billion euros. It also focuses on supporting the transition of the informal sector to the formal economy with a series of incentives and tax measures. Also, the plan grants utmost importance to human resources, the aim being to respond better to Moroccan and foreign enterprises’ requirements.
The plan provides for other measures to better exploit and optimizes industrial zones and makes them more accessible to operators through rental offers. On the other hand, the strategy calls on all Moroccan economic operators to have “the Africa reflex” to upgrade Morocco’s partnership with African countries in order to confirm the position of Morocco as a gateway for international investment in the continent.
Solar and wind Energy
As part of its strategy towards energy use, Morocco gives priority to developing renewable energy and sustainable development. With abundant solar resources (a potential of 2 600 kWh/m²/year) and a strategic position at the heart of an energy hub (Connexion with Spanish Network through two electric lines 400kV/700 MW), Morocco offers a wide range of investment opportunities in the sector of thermal and photovoltaic solar energy, including the launch of the following structuring programs:
The Moroccan Project of Solar Energy: This integrated development project aims to set up in 2020 a capacity of electricity production driven from solar energy with a total capacity of 2000 MW in five major sites: Ouarzazate, Ain Bni Mathar, Foum Al Oued, Boujdour and Sebkhat Tah. The two technologies – Concentrated Solar Power (CSP) and Photovoltaic-are designated to be used in these stations. This program will increase by 14% the role of solar energy in total electricity capacity by 2020 and prevent the emission of 3.7 million tonnes of CO ² per year.
Development Program of the Moroccan market for solar water heaters (PROMASOL): This program involves the installation of 440,000 m2 of thermal solar sensors in 2012 and 1.7 million m2 in 2020. In terms of thermal energy produced annually, these figures will correspond to 1190 GWh by 2020. This program will avoid the emission of 920,000 tons of CO2 per year and create 920 permanent jobs.
Both plans were designed to fall under the criteria of a Clean Development Mechanism.
Morocco has undertaken a vast wind energy program, to support the development of renewable energy and energy efficiency in the country. The Moroccan Integrated Wind Energy Project, spanning over a period of 10 years with a total investment estimated at 31.5 billion dirhams, will enable the country to bring the installed capacity, from wind energy, from 280 MW in 2010 to 2000 MW in 2020. (Invest in Morocco Website, Solar & Wind Energy)
Information Communication and Technology (ICT)
ICT usage is essential for the emergence of the knowledge society and can actively contribute to human development, improvement of social cohesion and national economy growth. The challenge for Morocco in the ICT sector for years to come is not only to sustain the progress already made, but also to allow the insertion of Morocco in the global knowledge economy, through amplified and widely distributed integration of ICT across all act ors of society: government,governments, businesses and citizens. The Moroccan Numeric plan 2013 has been built around a clear vision and ambition for Morocco. By positioning Morocco among the top emerging countries in the Information Technology and Communication.
Initially endowed with a budget of 5.2 billion dirhams, the program aims to promote and develop new information technologies and has four strategic priorities: social transformation through information technology (IT); orientating public services towards users; computer rising small and medium-sized enterprises (SMEs); and developing the national IT industry.
Today, the Moroccan Numeric plan has achieved 9,000 jobs with 150, 000 teachers and 90,000 students connected to the Internet. Nearly 37,000 students received INJAZ (the scheme to enable students to acquire a computer and a USB 3G at a subsidized price), through the generalization of all masters and doctorate courses.
The level of unemployment amongst the young in the cities remains high at over 30 per cent and whilst the number of jobs created by the Morocco 2013 numeric plan cannot make a sizeable difference to the high level of youth unemployment immediately, better internet access and integration of ICT into the education system can only help in the long term. (NAU – Agencies, lemag.com Website, 2015)
OCP, as an international player since 1920
As a global leader in the phosphate and phosphate derivatives markets, OCP (Office Chérifien des Phosphates) is the leading state business company in the country and has been a key player in the international market since its founding in 1920.
OCP is integrated across the entire phosphate value chain, extracting, marketing and selling phosphate and its derivatives, phosphoric acid and fertilizers. We are the world’s largest exporter of phosphate rock and phosphoric acid, as well as one of the world’s largest producers of fertilizer.
Considered as one of the top 10 most largest Moroccan companies in the country, OCP is today , the world’s leading producer of phosphate rock and phosphoric acid as well as one of the leading global fertilizer players, with more than 90 years of history serving agriculture. OCP Group has access to Morocco’s phosphate rock reserves – the largest global reserve base according to USGS.
Fully integrated throughout the value chain, the Group’s activities range from mining mineral resources to producing high value-added products. With a global footprint and revenues of more than US$5.5 billion in 2013, the Group has 23,000 employees and serves every key agricultural market in the world. (Encyclopedia Wikipedia Online Database, 2015)
Besides OCP, there are other national companies that contribute efficiently in the development of Moroccan economy. For instance, La Samir7 and Maroc Telecom8 (The first Moroccan company that is rated on the Wall-street stock exchange) are a great example of these great contributions.
The ESEC Contribution to Moroccan Business climate
One of the main important actors in the Moroccan territory is the ESEC, the Economic, Social and Environmental Council developed a platform for the analysis and formulation of proposals for a New Development Model for the Kingdom’s Provinces. The new model is based on key provisions enshrined in the Constitution, on the international conventions ratified by Morocco as well as on the objectives set forth in the Social Charter developed by the ESEC.
Four principles are at the heart of the model: Inclusive, sustainable human development, participation of representative stakeholders and local populations in all phases of policy development and implementation relating to the region’s development programs. Compliance with and effectiveness of the citizens’ basic human rights. And finally, consolidation of the role of the State as a regulator and guarantor of law enforcement. The new model calls for a vision and approaches that would be more participatory and inclusive. They should be based on a more responsible form of governance. These reorientations are inevitable to create real economic growth and promote constructive social relations conducive to cohesion and hope. (New Development Model for the Southern Provinces, ESEC, October 2013)
The EESC9 model calls for a more equitable social system based on social safety nets targeting the most vulnerable populations, based on criteria known to all. The new development model focuses not only on the search for sustainable and inclusive development that primarily benefits local people. It is also noteworthy for the goal of making the region a center for the transmission of wealth and progress at the continent level.
Just as important is the need to move from a rent-based economy that focuses on primary activities towards a system that boosts private investment which, in turn, creates wealth and jobs and guarantees transparency as well as compliance with the rules of fair competition. To create a fresh momentum for growth, the State must ensure a transition to a predictable framework that provides incentives for investment and market activities. To improve the business environment, private operators should be offered a tax system based on clear texts that would be applied for a long period of time. The tax system (advantageous corporate and income taxes, standardized VAT and local taxes) should make the provinces more attractive. It is also necessary to register and regulate public land through the enforcement of judgments and the settlement of disputes. In this respect, the preservation of traditional spaces (oases, collective land) would go hand in hand with measures and mechanisms to encourage land equipment and remediation for the promotion of economic activity in the framework of specialized economic zones. (New Development Model for the Southern Provinces, ESEC, October 2013)
Inside the future Moroccan Business climate strategy
The Moroccan economy has developed and modernized over recent years, thanks in large part to ambitious reforms that the government has
undertaken to improve the country’s business climate. However, challenges remain to spur growth, enhance competitiveness and generate needed jobs. To support Morocco in continuing to improve its business environment, the OECD and the Ministry of Economic and General Affairs launched a far-reaching evaluation of the country’s business climate to identify the policies necessary to attract investment at the national, regional and international levels.
The Business Climate Development Strategy for Morocco findings indicate that the country is progressively aligning with OECD best practices in several areas. The country has made major strides in the areas of trade, investment and privatization policy, and has also made progress in the promotion of SMEs, building successful public-private partnerships, and in the launching of several major infrastructure projects. However, Morocco still needs to communicate a more positive image to investors regarding its business climate, reinforce anti-corruption measures, reduce obstacles to land titling and ownership, continue to improve its infrastructure in order to increase territorial linkages, support employment-generating activities and develop managerial skills. Simplifying administrative procedures and improving institutional co-ordination are also areas for improvement. BCDS Morocco offers specific recommendations on how the policy, institutional and legal framework can be improved to enhance the business climate. (Morocco – Business Climate Development Strategy, OECD Publishing, June 2011)
The government maintained its policy of improving the business climate and encouraging private investment in 2014 so as to support economic transformation. These efforts gave Morocco a ranking of 71st out of 189 countries in the World Bank report Doing Business 2015.
Definitions:
(1) Foreign Direct investment (FDI) means the investments by which resident entities of an economy acquire or have acquired a lasting interest in an entity resident in a foreign economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the Investee Company and exercise a significant influence over the management of the first of the second. By convention, it is considered that there is interest and therefore sustainable direct investment when a company owns at least 10% of capital or voting rights of a company resident in a country other than his own. (OECD, Benchmark definition of FDI, 1999, page N°7)
(2) In its narrowest sense, privatization encompasses the whole or partial sale of state-owned companies to private investors. This narrow view is consistent with the 1983 debut of the word privatization in Webster’s Dictionary, where it was defined as “the process of changing from public to private control or ownership.” Interestingly, this definition remains essentially unchanged after a decade and a half of exposure to and experimentation with various forms of privatization. Privatization is not a new concept. In 1968, Peter Drucker suggested that government should spend more time governing and less time providing and that the public sector should either purchase services from the private sector, or simply stops producing. (Judy Layne, An overview of the privatization debate, June 2000, page N°20)
(3) The plan “Emergence” has developed a series of measures relating to emerging industries and pillar industries of the Moroccan economy. It consists of four pillars, three industrial sectors, namely the automotive, electronics and aerospace that is a service industry. The Emergence Plan is a target-oriented industrial strategy designed to achieve an additional GDP of MAD 91 billion and create up to 440,000 jobs. (Centre Marocain de Conjoncture, Morocco Business News website, Sectors)
(4) The CGEM is the representative of the private sector with the public authorities and institutions. It speaks on behalf of its 40,000 members and affiliates directly and ensures a favorable economic environment for business development. Since its creation in 1947, the General Confederation of Enterprises of Morocco (CGEM) provides representation and promotion of member companies operating in different sectors and of different sizes. The shares of the CGEM are based on the credibility, effectiveness and solidarity for its members. CGEM Morocco defends the interests of companies with public authorities and social powers. Its purpose is to act in favor of a successful and optimal environment for the Moroccan economy through the promotion of private initiative. (CGEM Website, presentation of CGEM)
(5) The GPBM is a professional association of trade unions and professional associations established in 1943. It is chaired by Mr. Othman Benjelloun, and under the general direction of Mr. El Hadi CHAIBAINOU. The headquarters of the GPBM is located in Casablanca. (Association professionnelle des sociétés de bourse, Website page, GPBM).
(6) The Moroccan Fund for Tourism Development was established in February 2011 by the Moroccan government to consolidate the financing of Moroccan tourism sector, by mobilizing national and international funds through a strategy of co-investment and management that meet the highest international standards. (Introduction to FMDT and Wessal Capital, MUNICH, December 2014)
(7) La société Anonyme Marocaine de l’Industrie du Raffinage (SAMIR) is a strategic supplier of petroleum products and a key player in the Moroccan industrial sector. SAMIR operates in two sites, Mohammedia, and Sidi-Kacem and has a refining capacity of 150,000 barrels/day and a storage capacity of 2 million m³. It aims to develop its refinery business and to become the most integrated refinery in the region. Through the modernization of its industrial processes and equipment, it becomes the third African country in 50ppm production, behind South Africa and Egypt. (Samir online website Database, 2015)
(8) IAM or Maroc Telecom is the main telecommunication company in Morocco, with around 11,178 employees. It has 8 regional delegations with 220 offices present on all the Moroccan territory. The company is listed on both the Casablanca Stock Exchange and Euronext Paris. On 20 February 2001 the Moroccan Government sold 35% of Maroc Telecom’s shares to French mass media company Vivendi. In July 2013, it was announced that the firm’s majority owner, Vivendi, would sell its 53% stake in the firm to Etisalat for around $4.2 billion. (Vivendi to announce Maroc Telecom sale to Etisalat , Sophie Sassard , 22 July 2013).
(9) The Economic, Social and Environmental Council (ESEC) is an independent constitutional institution. Established by His Majesty King February 21, 2011, it provides advisory missions to the Government and both Houses of Parliament. It gives its opinion on the general guidelines of the national economy and training. The relevance of its opinions, studies and proposals is related to the expertise mobilized, the ability to listen and convergence implementation of different components of society and forces of the country. To carry out its missions, the Council relies on comprehensive, cross-cutting themes he favors and encourages boldness and creativity in the production of its opinions and proposals. The composition, organization, powers and operation of the EESC shall be laid down by Organic Law No. 128-12. (ESEC online website Database, Presentation of the council, 2015)
References:
OECD, Benchmark definition of FDI, 1999, page N°7 Judy Layne, An overview of the privatization debate, June 2000, page N°20
Institute of International Finance; Barclays Capital, Macroeconomic indicators of Morocco, 2014
USAID, Improving the Business Climate in Morocco Program, October 2009, page N°3
World Bank Group, Doing business 2015, Economy profile 2015, Morocco, 12th Edition, 2014, and page N ° 8
Centre Marocain de Conjoncture, Morocco Business News website, Sectors
Moroccan legal file, Decree no. 1-00-225, of 2 Rabil I, 1421 promulgating law no. 06-99, 5 June 2000
Moroccan legal file, Decree no. 02-09-165, promulgating law no. 09-08, adopted in December 2008
Invest in Morocco, Investment guide, March 2015, page N°12
Invest in Morocco, Morocco-European Union association agreement, March 2000
PKF Worldwide Tax Guide, Morocco Tax guide, 2012 Invest in Morocco website, Business climate, Import Duty Exemptions
CGEM Website, presentation of CGEM
Association professionnelle des sociétés de bourse, Website page, GPBM
Invest in Morocco Website, Tourism sector
Introduction to FMDT and Wessal Capital, MUNICH, December 2014
Invest in Morocco Website, Industrial acceleration plan Invest in Morocco Website, Solar & Wind Energy
NAU – Agencies, lemag.com Website, 2015 Encyclopedia Wikipedia Online Database, 2015
New Development Model for the Southern Provinces, ESEC, October 2013
Samir online website Database, 2015
Vivendi to announce Maroc Telecom sale to Etisalat , Sophie Sassard , 22 July 2013
New Development Model for the Southern Provinces, ESEC, October 2013
Morocco – Business Climate Development Strategy, OECD Publishing, June 2011
ESEC online website Database, Presentation of the council, 2015
Morocco: country strategy paper 2012-2016, African Development Bank, African Economic Outlook, 2015
