Moroccan Industry Between Reforms Failure and Recovery Promises

By Loubna Flah

Morocco World News

Casablanca, September 12, 2012

Industry is one of the most important levers of economic development. It has the potential of creating quantitative and qualitative changes in economy since it remains a key sector in the production of goods and services in addition to its capacity to create job opportunities and stimulate domestic growth.

Industry can be significantly aided by technological development. Investment in scientific research related to industry is liable to increase its efficiency and to reduce the cost of the production process, especially in the manufacturing sector.

Though the Moroccan economy depends, to an inordinate degree, on agriculture, industry and mining contribute about one third of the annual GDP. It is noteworthy that Morocco is the third largest producer of Phosphates after the United States and China.

Textiles and clothing remain one of the key manufacturing sectors in Morocco. The textiles production employs nearly 40% of the labor force. The overall contribution of industrial activity to industry fluctuates between 25 % and 35 % every year depending on the performance of agriculture, which is highly dependent on rainfall.

Large part of the manufacturing facilities is owned by the private sector but the government owns the phosphate-chemical fertilizer industry and much of the sugar-milling capacity through either partnership or joint financing.

Blessed by its geographical proximity to Europe where it has most of its top trading partners, namely France and Spain, flexibility in investment policies and the convenience of Free Trade Agreement, Morocco could make large benefits from its exports to Europe.

Yet, Moroccan textiles industry is facing a fierce competition from Asian countries especially China that is constantly increasing its share in the European market.

The Emergence Plan, a Fuzzy Promise

The government had launched in 2005 the Emergence Plan in order to give a new impetus to the Moroccan industry. The Emergence Plan is a 10 year strategy that targets the Industrial sector in the first place.

In an attempt to further liberalize the Moroccan economy, the Emergence Plan set adequate strategies to achieve additional MAD 91 billion and create up to 440 000 job opportunities. On the long term, industry is expected to reduce trade deficit by 50% and contribute by an annual growth rate of 1,6 %.

The Emergence Plan was designed to improve the output of 6 key sectors namely Off Shoring and Near-shoring, Industrial sub-contracting, Agro-business, Seafood Processing, Textiles and Handicrafts.

Yet, the performance of Moroccan industry has been declining steadily for the last two decades. According to the Moroccan daily Le Soir, the contribution of industry to the GDP has dropped sharply from 17% in the period between 1990 and 2000 to 13% in the last decade.

Benkirane Government and Industrial Revival

In the framework letter sent to the different ministries, Mr. Benkirane announced the major reform axes outlined in the 2013 finance bill. Supremacy will be given to health, education and economic competitiveness.

According to the Global Competitiveness Report published by the World Economic Forum, Morocco has jumped markedly high from the 73th rank in 2011 to the 70th rank in 2012. In the span of three years, Morocco gradually moved upward from the 75th rank in 2010 to the 73th rank in 2011 and 70 in 2012.

The head of government has set the revival of Moroccan industry as a top priority in the preparation for the 2013 finance bill. Nevertheless Moroccan economists remain skeptical of the government’s ability to energize the industry sector in a short time.

Mr. Abdeslam Seddiki, expert in economics considers that the 2013 finance bill lacks strategic projects to achieve higher performance in industry. He adds “Morocco does not boast a solid industry. The bulk of industrial activity relies on contract manufacturing.”

Seven years later after its implementation, many experts conclude the failure of the emergence plan mainly due to a global incoherence in economic policies.

In its 2011 report the High Commission for Planning (HCP) ascribes the failure of the management of economic and social development in Morocco to lack of comprehensive strategies, lack of engagement of different players in economy, lack of post-projects evaluation, lack of coordination in addition to the heavy reliance on foreign investment.

Mr. Seddiki wonders how the incumbent government can talk about an industrial revival without mentioning the sectors targeted, the economic model, the operating strategies and the potential economic partners.

Another hurdle that undermines prospects for economic development remains the dependency on energy imports. In fact, Morocco imports 98%of its energy needs from the international market.

It is also noteworthy that the greatest part of investment loans granted by national banks goes to more capital intensive sectors such as real estate. According to the Moroccan daily Le Soir, the demand for real estate loans has reached 216,9 MAD billion in July 2012.

In its latest Index of Industrial, Energy and Mining Production report released in June 2012, the High Commission for Planning (HCP) reports a decrease by 1,7% in the manufacturing sector resulting from a contraction in petroleum refining.

The report reveals also a decrease by 0,5 % in the extractive industry with a stagnation in the production and distribution of electricity.

This said, national economics experts remain apprehensive towards a potential deindustrialization marked by a considerable reduction of industrial activity and a sharp decline in the output of manufactured goods.

As the government strategy announced in the 2013 finance bill lacks visibility and precision, the promises for an economic recovery seems to be groundless and illusory.