Rabat - During King Mohammed VI’s 18 year reign, the face of Morocco has drastically changed. Since the 2000s, the kingdom’s GDP has practically doubled to hit all time records. Not only has this newfound wealth helped the country reduce its poverty rate by half, but it has also set Morocco on the road to become one of the leading developing countries in the region.
Rabat – During King Mohammed VI’s 18 year reign, the face of Morocco has drastically changed. Since the 2000s, the kingdom’s GDP has practically doubled to hit all time records. Not only has this newfound wealth helped the country reduce its poverty rate by half, but it has also set Morocco on the road to become one of the leading developing countries in the region.
Since his ascension to the throne in 1999, Mohammed VI has been well aware of the difficulties he would face reigning over a kingdom in a precarious economic state. As he stated in his very first speech as crowned King, there is no magical wand that could create a new way of managing public affairs – only hard work can help Morocco rise again.
Today, on both economic and institutional fronts, Mohammed VI has proven his words to be wise and efficient. Over the past two decades, Morocco’s economic dynamic has been fueled by the acceleration of investment in infrastructure and the realization of major structuring projects.
The rebirth of industry
For decades, Morocco had neglected its industry. The kingdom followed the Spanish model, taking advantage of its attractive climate to promote tourism and real estate. Economic growth through this approach, however, has become less effective, especially since Morocco relied on its cheap labor to bet on textiles, before China ravaged the sector in 2001 with even lower costs.
While Morocco had succeeded in the services sectors (banks, telephony, and transport), the persistence of unemployment, due to a high proportion of enterprises working in the informal sector, as well as the deterioration of the trade balance, persuaded the government to put industry back on the agenda.
This industrial agenda was in fact soon after pursued through three of the six “global businesses of Morocco,” the automobile (represented by Renault), electronics, and aeronautics (Safran, Bombardier) industries, whose production continues to increase at an accelerated rate. But these businesses benefited mainly Tangier and Casablanca, where the companies were established, and their benefits did not spread even through a highly fragmented Moroccan industrial fabric.
In April 2014, Moulay Hafid Elalamy, former Minister of Industry and Trade, launched an “Industrial Acceleration Plan” backed by a fund of MAD 20 billion. Inspired by the model of the French competition clusters and the Italian industrial clusters, this plan aimed to cooperate, in a favorable environment, with SMEs wishing to export more added value.
With a significant geopolitical position and expertise, Morocco managed to emerge as a spearhead of the automotive industry on the African continent. The country became the second largest vehicle producer in Africa after South Africa, with a market share of 35 percent in 2014, compared with 5 percent in 2003.
In April 2016, in the presence of King Mohammed VI, Renault signed several agreements with the Moroccan government to strengthen its operations in Morocco. The French automotive giant and its suppliers will invest nearly MAD 10 billion in the kingdom in order to build an industrial ecosystem.
The liberalization of the economy
Over the past two decades, Morocco has taken important steps to liberalize its economy. It has implemented various incentives to attract investors, signing free trade agreements and opening up new markets. The reign of Mohammed VI is synonymous with the opening of the Moroccan economy.
The kingdom’s economy experienced a serious crisis in the early 1980s, which resulted in a significant deterioration of internal and external balances. External indebtedness was also very high, at 12.8 percent of GDP. On the external front, Morocco faced a severe shortage of foreign exchange.
One of the measures in line with a liberalized economy turned out to be be an imminent reform of the exchange rate regime.
Setting up an optimal exchange rate regime is no easy feast for any world economy. Fixed, flexible, or a variant of these two regimes: each has its advantages and disadvantages. For middle-income countries such as Morocco, the choice is no longer about fixed or floating exchange rates, but about the degree of flexibility that can best support its economic expansion.
First of all, it must be understood that this structural reform is necessary for a country that can no longer reconcile a fixed exchange rate, an independent monetary policy, and a desire for economic openness. The instability of the current high-risk world economy would force Morocco to devalue its currency strongly and face significant economic and social consequences in the face of a major external shock.
A more flexible exchange rate would enable the kingdom to link monetary policy more closely to the domestic economy and less to an external anchoring. It would also make it possible for Morocco to mitigate any negative effects stemming from the weak economic diversification. The country would thus gain freedom of action and independence in the management of its economy.
The liberalization of the Moroccan economy has provided positive elements in terms of the growth of national GDP, the development of foreign direct investment, the emergence of a middle class, and the modernization of the agriculture and industry and services.
Business Climate: In continuous improvement
Strengthening the competitiveness and attractiveness of the national economy has been a priority for Morocco since the ascension of King Mohammed VI to the throne.
Today, the kingdom boasts a favorable business climate on the African continent and in the MENA region. The World Bank’s latest “Doing Business 2017” report on the business climate ranks Morocco 68th out of 183 countries in the world. Its findings reveal that the Moroccan economy has continued to climb through this ranking, winning five places compared to the previous edition and no less than 53 places if we go back five years earlier (128th place in 2010).
What is the secret of this ascent? The kingdom’s political stability is a key factors, setting it apart from other North African countries and reassuring investors. Other assets include the qualification of HR, its national economic growth rate, and its low cost of production.
At the same time, Morocco has embarked on numerous reforms to improve its business climate. An efficient regulatory framework, investment incentives, the fight against tax evasion, the modernization of the financial sector, encouragement of entrepreneurship, and more, are all projects upon which Morocco has capitalized.
Morocco has distinguished itself by its good performance in cross-border trade, access to bank loans, the granting of building permits, the payment of taxes, and the execution of contracts.
For this year, the “Doing Business” ranking incorporates a new methodology that distinguishes Morocco, especially with the quality of institutions in terms of supporting the business environment. The biggest progress has been the transfer of ownership and the creation of businesses.