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Business Brief: Economic Development Still Lagging in Rural Areas; Telecoms Sector Heats Up; Nexteer Automotive Opens Facility; and IFC Ups Game in Morocco and Tunisia – Jean R. AbiNader

Jean R. AbiNader
April 10, 2018

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

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

For more than two years, the lack of jobs has driven Moroccans into the streets. Tensions in rural areas of Morocco still simmer and sometimes explode into demonstrations demanding improvements in social services, stable and valued job opportunities, and credible government efforts to boost the local economy. Morocco’s leaders are in a conundrum. In a country of limited financial resources and where politicians have few options for bringing about change quickly and effectively. So when negotiations take place and improvements don’t come quickly, then security becomes of paramount importance and the security services take over and conflict ensues.

As The Economist reported, “For over a year, fishermen, miners, and jobless graduates in northern Morocco have demanded more help from the government. To be fair, the government is acutely aware of the need to create more jobs. Even as the protests rage, workers are putting the finishing touches on Marchica, the first of seven eco-resorts planned for the northern coast under the country’s ten-year plan to increase tourism. “We can’t just build hospitals and schools,” says Sami Bouhmidi, one of Marchica’s managers. “We need to lay the foundations for investment and regeneration.”

And so the dilemma is how to manage expectations of people who have been out of work and deprived of essential services for too long, and who are tired of waiting for opportunities for prosperity. This is leading to unrest rather than the traditional acquiescence of previous generations. This is not to say that Morocco isn’t growing its workforce opportunities. Investments by European and Chinese firms have fueled a 70% growth in GDP per person since 2000. The many aerospace and automotive companies that dot the northern and central regions have made possible new roads, ports such as Tangier-Med, and advances in infrastructure that are the backbone for continued growth and progress. “Tourists are already flocking to the country in record numbers,” as previously noted on our website.

The article also points out that despite these advances, the economic future of many Moroccans hasn’t changed. Although poverty has declined, the cost of living has increased, young people find it difficult to afford to get married, and “as many as two-thirds of Moroccans entering the labor market fail to find work. The situation has grown dire in parts of the country. In much of the north, the youth unemployment rate is 40%, over twice the national average.

King Mohammed VI follows the protests closely, calling the government’s attention to the Rif area over the past two years to address “a political earthquake” and pressuring them to work harder to “reduce disparities between segments of the population, to correct inter-regional imbalances, or achieve social justice.” Unimplemented development plans led to more than a dozen firings of central and regional government officials, but it will take more than these reactions to quell the unrest over ineffective government programs, which are still perceived as too slow and too narrowly focused.

Despite the overwhelming presence of the security services in the Rif and other hotspots, King Mohammed “prefers to exercise soft power. He has championed development in the north, and made the Berber tongue, Tamazight, an official language.

There are no short-term solutions other than government handouts and public works, which it can ill-afford to do financially, and as other parts of the country are watching closely how it handles unrest in the north and will demand the same privileged treatment. In Jerada, for example, the previous major employer, The Morocco Coal Mine, closed some 20 years ago, and the promised government action plan never materialized according to local sources, leaving no other opportunities for jobs.  This left miners with one alternative, to mine illegally and under treacherous conditions and sell what little they could to local vendors. Though the marchers were called agitators by some, according to the article, they carried pictures of the King and the Moroccan flag to show their loyalty.

There is little appetite in the government to aggressively undertake the reforms and initiatives that already exist to diversify and grow local economies, entrepreneurs, and small and medium-sized enterprises. It is becoming increasing apparent that the King’s vision must be matched by proactive, risk-taking officials and the private sector, which is still a rare commodity in the Kingdom.

 

A major legal brouhaha over access to telecoms embroils INWI in a more than $600 million lawsuit claiming unfair competitions against Maroc Telecom (MT), the national provider of telecom services. The lawsuit concerns the unbundling of the telecoms infrastructure that was supposed to happen in 2015 as part of the privatization of the sector, particularly the ADSL, where Maroc Telecom continues to have 99.98% of the market share. Despite a 2016 warning from the National Agency of Telecom Regulation (ANRT) to present unbundling offers for other operators, MT is ignoring the order. As voice communication has become saturated, with a 126% penetration rate, the space for data services, which relay on ADSL, is increasingly critical.

 

Nexteer Automotive opened its first plant in Kenitra specializing in the production fo steering and transmission equipment for customers throughout Africa. “Our expertise and innovation has taken us to Africa, and specifically to Morocco,” said Mike Richardson, president of Nexteer Automotive. The new unit is estimated to cost between $40-45 million, and will start production in 2019, producing electric power steering systems. From a startup crew of 70 people in 2018, it will hire 500 people at full production. Exports of the products are destined for European and Africa customers. “Nexteer Automotive supplies nearly 52 automotive companies with steering and transmission systems. Among them, the 10 largest automakers in the world,” according to the press release.

 

The International Finance Corporation (IFC) plans to expand infrastructure investment of some $373 million in Morocco and Tunisia to help the governments form public-private partnerships to help finance infrastructure projects and to strengthen support for small and medium-sized enterprises (SMEs).

According to the story in Bloomberg and other sources, “IFC’s efforts are part of a broader drive to bring in foreign investments to ease high youth unemployment in both countries. With varying success, the two nations are attempting to implement International Monetary Fund-backed measures that include cutting red tape, reducing spending, and loosening currency restrictions.”

While Morocco has implemented some important changes to its monetary policy, for example, the recent move towards a flexible exchange rate, additional steps must be taken to stimulate job-producing growth. According to Sérgio Pimenta, IMF vice president for the Middle East and Africa, “The big development challenge and the opportunities is the issue of entrepreneurship, the missing middle of small and medium enterprises that are not as present as other countries that have similar level of GDP per capita.”

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