Why Morocco attracts foreign investment
Since the early 2000s, Morocco has proved to be an attractive country for foreign investors. Before the first Arab revolt in Tunis toppled president Zine el-Abidine Ben Ali, Tunisians were only too happy to boast that their record in attracting foreign investors was second to none in the Arab world. That boast was somewhat exaggerated but the country’s record was impressive. That truth no longer holds and Morocco’s allure for international investors is not hard to explain.
In the midst of the turmoil in the Middle East, North Africa and much of Africa, Morocco looks — and is — stable. King Mohammed VI succeeded his father 17 years ago and no major political or security upsets have been recorded. The monarchy weathered the Arab revolts through a mixture of political concessions, not all of which were cosmetic, and an iron (security) hand in a velvet (political and public relations) glove. The media are very tightly controlled. The Islamists have just won their second general election in five years but, as always, the buck stops at the palace. Key advisers of the monarch are as powerful as their predecessors were under the preceding reign of Hassan II.
The sectors that have most benefited from the flows of investment, worth $3.9 billion in 2015 were the car and aircraft industries, specifically from companies such as PSA, Stelia, Figeac, Aero and Delfingen.
France, Spain and Saudi Arabia remain the leading sources of investment but the African Development Bank and the European Development Bank are active. The opening of the Noor solar power plant, which has benefited from $660 million (for a total cost of $2.2 billion) from these two banks, has proved to be a landmark.
Renault’s decision to invest $1.6 billion in a giant car factory in Meloussa near Tangier to produce 150,000 cars a year in 2012 was a signal to the world that Morocco was succeeding in leveraging its proximity to Europe and the crossroads of important maritime routes.
A note of caution is necessary: The car industry may have created 70,000 jobs in recent years but as many have been lost by the closure of many small domestic garment manufacturers. Foreign investment creates few jobs while the state spends a lot on infrastructure to attract the likes of Renault and Peugeot.
Furthermore, the state seems to be mistrustful of domestic investors, which is a grave mistake. There is plenty of domestic capital in Morocco, both human and financial. To which should be added the $100 billion of domestic capital held by Moroccans abroad which, if people were more confident about the future of their country, could be invested in the kingdom.
The successful launch and development of the intercontinental port have opened the area around Tangier in the poorer north of the country to investment and become a hub for car assembly and spare parts manufacturing. Aircraft parts manufacturing, which a few years ago attracted Canadian company Bombardier, remains concentrated around Casablanca.
Foreign direct investment (FDI) has been spurred by the development of roads in Morocco, which now reach south to Agadir and west to Oujda. Faster train service between Tangier, Rabat and Marrakech, a major magnet of tourism and international conventions have helped to expand le Maroc utile from a narrow coastal strip between Casablanca and Kenitra north of Rabat a quarter of a century ago to a much larger geographical area that stretches from Tangier to Agadir and inland to Oujda near the country’s frontier with Algeria.
All major investment decisions are made by the monarch, who can choose to wave certain rules in the investment code. The lines of decision-making in Morocco function well in this respect and make major corporations, which invest in real estate, banking, tourism and manufacturing, feel welcome. The senior civil service is well-educated and, on the whole, untainted by corruption.
The same, however, cannot be said when small foreign companies are involved. They need powerful partners in Morocco. Furthermore, at the local level, corruption is much more common and negotiating the administrative layers of decision-making can be frustrating. For Moroccans without solid political backing it can be well-nigh impossible. Another caveat is to avoid sectors, such as food processing, in which the monarch’s economic interests are paramount.
Morocco also benefits from its policy of actively promoting its commercial and banking links with West African countries. Although this is not an easy game and requires tenacity, it has helped many Moroccan companies and helped buttress Casablanca as a major hub of international air traffic. The city is also building itself up as a regional centre of finance.
Beyond the bold statistics, the policy actively pursued by King Mohammed VI is encouraging more young Moroccan engineers, bankers and civil service to become more open-minded, more attuned to the world beyond the borders of what was, a generation ago, a very inward-looking country.
This does not detract from the fact that one-third of Moroccans are illiterate and that the wealthy seem to be getting wealthier while many Moroccans live on the bare essentials. If such obvious social disparities and lack of training are not addressed many jobs will not be created and medium-term stability will not be assured. Foreign investment without sufficient domestic investment does not guarantee long-term stability.
The ultimate prize, that of a more open Maghreb, remains beyond Morocco’s reach as relations with neighbouring Algeria remain in deep freeze because the countries are at loggerheads over the international status of the Western Sahara. Commercial relations with Algeria, from which Morocco buys natural gas from a pipeline that runs from Algeria to the Iberian peninsula, not to mention a multimillion-dollar black market in goods between the two countries, remain far more important than officials in Rabat like to admit. Morocco’s economic progress is slow, at times shaky, but real.