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Morocco Gets High Marks from KPMG Senior Officer, While Finance Minister Boussaid Raises Concerns with Uneven Development – Jean R. AbiNader

Jean R. AbiNaderMATIC
November 3, 2017

Jean R. AbiNader, Exec. Dir., Moroccan American Trade and Investment Center

Jean R. AbiNader, Exec. Dir., Moroccan American Trade and Investment Center

Morocco’s business environment was the factor addressed in an interview with Fouad Lahgazi, CEO and Senior Partner of KPMG (Morocco). He spoke to The New Economy about the ongoing evolution of Morocco’s investment and business climate and why stability is such an important factor in the country’s development.

While enumerating the many positive conditions that attract business to the country, he pointed specifically to the fact that “Morocco is now carving a reputation for its standout investment environment. This standing can be attributed to ardent political will, as well as a strong resolve that has animated local economic operators, from entrepreneurs to banks and other participants in the investment sphere.”

This did not happen quickly or without planning according to Lahgazi. Political stability and compliance with international standards of business practices, including a highly developed legal framework, are essential qualities that provide assurances to investors that their investments are protected.

He especially noted that “The government’s long-term economic and political strategies have led to the achievement of many objectives, such as the development of clean energy in solar and wind power, the growth of the automotive and aeronautic industries, and the establishment of large road and port infrastructures. Since Africa’s economy was opened to Morocco, numerous important agreements have been concluded with the majority of the continent’s countries. These developments have made Morocco an African hub for numerous economic activities.”

Lahgazi said that this progress was not without challenges, several of which are still being dealt with. As sectors grow, technologies are introduced, and as supply chains become more sophisticated, regulations must keep pace to ensure continued and sustainable growth. This is as true for manufacturing as it is for agriculture and tourism, the three sectors he mentioned as benefiting from effective government policies, innovations, and Morocco’s geographic location.

Another area of growth was Morocco’s “position as a financial hub and platform from which European countries can access the African market,” and he points to “the Casablanca Finance City Authority (CFC), which is committed to becoming an African beacon in the finance sector.”

Regarding the future, Lahgazi made two key points. First of all, investors are always focused on risk and profitability, meaning the country’s legal regime and political stability are enormously important, so Morocco must do its best to keep its laws abreast of changes in the investment environment. Secondly, the government should do its best to promote conditions that attract companies for the long term. As he concluded, “We are confident that our country [Morocco] will attract more investors and more capital in the years to come; the challenge is to develop the right activities and sectors for a win-win partnership with both current and future investors.”

Addressing challenges to Morocco’s economy was the subject of an address by the Moroccan Minister of Economy and Finance, Mohamed Boussaid, reported in Les Inspirations Eco. He enumerated five limitations that “block the path to better performance,” mainly low employment’s impact on growth, gender inequalities in the work force, uncompetitive exports, lack of qualified human capital, and poor governance.

Regarding growth and labor, the Minister pointed out that “employment does not follow the evolution of growth;” that is, although GDP growth has done relatively well, it has not significantly impacted job creation since many investments are made in capital intensive sectors, which are not labor intensive.

“The latest figures by the High Commission for Planning (HCP) show that unemployment is still strong. During the second quarter of 2017, the unemployment rate increased from 9.1 to 9.3 percent nationally and from 13.4 to 14 percent in urban areas,” according to a Morocco World News story on the remarks.

On the subject of gender inequality, he mentioned three areas of concern. Regarding the employment rate, women hold only 24% of jobs compared to 69% held by men. Gender parity is “clearly not respected” in the labor market. And women are primarily present in low-productivity sectors such as agriculture. The IMF has warned that without progress in closing gender gaps, the country is losing income from lost productivity. Its study states that “gender segregation currently costs the kingdom 46 percent of income per capita compared to countries where women are more present in the labor force market and entrepreneurship participation,” added Morocco World News.

In terms of uncompetitive exports, Morocco has not done well in negotiating agreements regarding the agricultural sector. Under the current rules with the EU, Moroccan vegetables are overpriced, and according to the Minister of Agriculture, Aziz Akhannouch, “the impact of the implementation of the Common Agricultural Policy (CAP), is potentially ‘catastrophic’ for sales of Moroccan fruit and vegetables.”

Another area of concern is the lack of skilled human resources, which Boussaid links to poor performance and retention of students on the primary and secondary levels.  “A 2015 report by the High Committee for Education has shown that the number of dropouts is still high, indicating that 4 million students have quit school in the past 12 years, 3 million of whom left before finishing middle school, 500,000 before finishing primary school, and 300,000 before finishing high school. With respect to scientific subjects, Morocco ranked second-to-last in the list.” This low ranking is ascribed to students’ inability to achieve an average grade in mathematics and physics and their difficulties in mastering Arabic,” added Les Inspirations Eco.

Finally, Minister Boussaid addressed the issue of poor economic and social governance, which he ascribes to “endemic” corruption in the country, recalling rankings from Transparency International Corruption Perceptions Index and Freedom House, which stated that “corruption is “rife in state institutions and the economy,” and that “despite the government’s rhetoric on combating corruption, it has a mixed record on enforcement.”

When taken together with the other factors mentioned by the Minister, it’s clear that the country has to do more to attract and grow sustainable investments that provide jobs, increase distributive wealth, and protect social and economic gains across the broader society that will incentivize youth to seek training and education in order to qualify for jobs in the competitive work environment.

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