New York- In recent years, Morocco has become a favorite investment destination for many of the world's global companies. From aircraft assembly to car manufacturing to solar energy, Morocco is distinguishing itself as an important industrial player in Africa and the Middle East.
New York- In recent years, Morocco has become a favorite investment destination for many of the world’s global companies. From aircraft assembly to car manufacturing to solar energy, Morocco is distinguishing itself as an important industrial player in Africa and the Middle East.
Every now and then, we read in the news that new American, French, German, or Korean companies have expressed interest in investing in Morocco and establishing a factory in the country. Bombardier, Airbus, Renault, and other major global companies have turned Morocco into a major production and marketing hub.
The success of these companies’ investments in Morocco is pushing other international companies to invest in the country, especially in the solar energy sector, in light of the government’s plan to increase the country’s share of renewable energy electricity production to 42 percent by 2020. This goal prompted a delegation of eleven major American companies specializing in the field of solar energy and infrastructure to visit Morocco last December and express their willingness to make Morocco the gateway for American investments in Africa.
The latest in the string of landmark investments in Morocco is FigeacAero, a French group specializing in mechanical aerospace, which recently announced it will open a production unit in Casablanca. The 25 million euros that the French company will invest will generate 500 direct jobs.
On Friday, King Mohammed VI chaired the signing ceremony of the establishment of France’s PSA Peugeot Citroen plant in the city of Kenitra. The direct result of this new plant will be the creation of 4,500 direct jobs and 20,000 indirect jobs by the time the factory will be operational in 2019.
The automotive industry has created 80,000 jobs in Morocco, representing about 10% of the country’s industrial workforce. In addition to its contribution to generating jobs and alleviating the scourge of unemployment among youth, these investments will also boost Moroccan exports, contributing to a reduction in Morocco’s trade imbalance.
Speaking at a press conference on Friday, Moulay Hafid Elalamy, Minister for Industry, Trade, Investment, and Digital Economy, said that the automotive industry was the “main driver of Morocco’s exports in 2012-2014 with sales standing at 40 billion dirhams.”
While observing this significant influx of investment in Morocco, one wonders why the kingdom is systematically chosen over its neighbors in North Africa, mainly Algeria, Tunisia, and Egypt.
Do companies select Morocco due mainly to the country’s infrastructure and geographical location? Is it due to the quality of its human resources and its business climate? Is Morocco’s political stability one of the factors that influences investors to use it as platform for the expansion of their businesses in Africa and the Middle East?
The main factors that drive international companies to move their activities to other countries are primarily related to the reduction in the costs of production and the increase in the margins of profit, in addition to the quality of available human resources and infrastructure.
Morocco, largest recipient of FDI in North Africa
Due to its geostrategic location, its proximity to Europe, the Middle East, and the Americas, its recent structural reforms designed to improve the business climate, and its institutional and macro-economic stability, Morocco is quickly becoming a magnet for foreign investments in big added value sectors.
According to a report released by the UN Conference on Trade and Development (UNCTAD) in January 2014, Morocco was North Africa’s largest recipient of foreign direct investments (FDI) in 2013, attracting a total of $3.5 billion. FDI in Morocco recorded an increase of 24 percent during the previous year, while it slowed in other North African countries due to the consequences of the so-called Arab Spring.
“Persistent political and social tensions continued to subdue flows to North Africa, where only Morocco registered solid growth of 24 percent to US$3.5 billion,” said the report.
According to a report published by the Emerging Markets Private Equity Association (EMPEA) last April, Morocco emerged as North Africa’s top investment destination for private equity, attracting 43% of the total invested in the region between 2010 and 2014.
There is no doubt that the quality of Morocco’s human resources and its expanding infrastructure, in terms of highways, railway, airports and ports, are among the factors that pushed PSA Peugeot Citreon to open a new production unit in Morocco. Carlos Antunes Tavares, Chairman of PSA Peugeot Citreon’s Managing Board, said as much on Friday in Rabat.
“Given its world-class infrastructure, notably in terms of car production and nexport logistics, in addition to the quality of training of human resources specializing in automobile industry, Morocco was chosen to host the new production plant of French car manufacturer PSA Peugeot Citroen,” Tavares said.
The quality of Morocco’s human resources is also what has pushed American automaker Ford to open offices in Casablanca and Tangier.
Political stability is what gives Morocco comparative advantage
But these factors alone would not suffice to convince global companies to take the risk of investing in Morocco. Investors are risk-averse, and no company would risk investing in a country that goes through political upheaval. Tunisia, Algeria, and Egypt have also high caliber human resources and an infrastructure that could meet the needs of these companies. But what gives Morocco a comparative advantage with its neighbors is its political stability.
No matter how skilled a country’s workforce may be and how developed its infrastructure is, it can’t gain the confidence of foreign investors if it does not enjoy political stability. In Morocco’s case, its political stability in comparison with its neighbors gives it leverage and renders it a major hub for foreign companies looking for new investment opportunities and seeking to expand their operations into other countries.
There is widespread uncertainty about Algeria’s political future because of the illness of President Bouteflika and the total secrecy regarding his successor. Tunisia and Egypt are still struggling to weather the consequences of the so-called Arab Spring, with different outcomes in both countries. Meanwhile, Morocco is the only country in the region that has managed to overcome the storm of Arab political turmoil and put into motion a slow but sure march towards a democratic political system.
However flawed Morocco’s new constitution, adopted in July 2011, may be, it offers the foundation for a true democratic system in the long run, while taking into account the particularities of Moroccan society, history, and religion.
Amidst the political turmoil brought about by the so-called Arab Spring, Morocco has shown the world the only instance of an Arab country ruled by an Islamist-led coalition where the leaders of the Islamist party coexist in harmony with the monarchy, the ultimate guarantor of the country’s stability.
In addition, another factor that gives Morocco more leverage and greater appeal to investors in comparison with its North African neighbors is its efficient counterterrorism strategy, which has enabled it to foil a large number of terrorist plots within the country and in its neighboring countries. While terrorism has been striking in North African countries, including Algeria, Tunisia, and Egypt, Morocco has stood strong and prevented the occurrence of such destabilizing disasters. In an interview with Jeune Afrique in its Sunday, June 21 edition, Mohammed Hassad, the Minister of Interior, said that Morocco dismantled 27 terrorist cells between 2013-2015.
It is this prominent role that Morocco has come to play in the global strategy to fight terrorism that has led a number of important French politicians, such as former President Nicolas Sarkozy, former Prime Minister Jean Pierre Raffarin, and former Interior Minister Charle Pasqua, to call on their government to resume dialogue with Rabat to reestablish cooperation between the two countries’ intelligence services following the Charlie Hebdo attacks in January. Additionally, the US Department of State praised Morocco in its 2014 report on Terrorism.
“Morocco has a comprehensive counterterrorism strategy that includes vigilant security measures, regional and international cooperation, and counter-radicalization policies,” read the US Country Reports on Terrorism 2014.
Moroccan officials should capitalize on the momentum created by investments to enable the kingdom to reinforce its position as the leading investment hub and the go-to destination for any major international company seeking to explore new horizons and expand its operations in Africa and the Middle East. Morocco possesses all the necessary ingredients to put it on the path toward becoming a fully-fledged emerging economy. But this can only be done through continued improvement of its business climate, the reform of its judiciary system, in line with international standards, and continuing focus on the rule of law, accountability and transparency.
Samir Bennis is the co-founder of and editor-in-chief of Morocco World News. You can follow him @Samir Bennis
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