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Maghreb Business Notes: Algeria Show Progress in Auto and Energy Sectors Despite Decrease in FDI; Morocco-Nigeria Summit Moves Ahead with Gas Pipeline and Other Projects; Gas Pipeline and Processing Facility Planned for Inland Morocco Field – Jean R. AbiNader

Jean R. AbiNader, Moroccan American Center

Jean R. AbiNader, Moroccan American Center

Jean R. AbiNader
June 14, 2018

Good news for Algeria’s auto manufacturing sector according to the latest assessment by the Oxford Business Group (OBG), which also noted progress in the country’s energy sector. Following the government’s upgrading of its investment incentives for the automobile sector and regulations limiting vehicle imports, several companies announced new investments. SEAT, part of the Volkswagen Group, will ramp up production at its assembly plant in Relizane City where it produces several brands including the Arona subcompact crossover, the Leon compact, the Volkswagen Polo, and the Skoda Fabia. 

Renault is expanding its new truck production to 1000 vehicles in 2018 to meeting rising demand for commercial and heavy-duty vehicles. Peugeot is eyeing a 75,000 units a year facility near Oran, while similar moves are being considered by Kia and Hyundai.

On the energy side, the report also highlighted three fields that have come on line in the last year that are expected to boost overall gas production by around 9B cubic meters a year, thus helping to feed both increased domestic demand and provide rising exports for badly needed foreign exchange. All will be linked to the gas processing facility at Hassi R’mel.  for ex and will be connected to the newly constructed, 765-km GR5 pipeline, which will transport gas to processing facilities at Hassi R’mel in the country’s central north.

Other sectors requiring foreign investment were not as successful according to an article in the North Africa Post. UN statistics report that FDI dropped some 26% to $1.2 billion in 2017.  While some of this can be attributed to Algeria’s tough ownership law requiring 51% local control, investors are also put off by regulations that seem opaque and arbitrary. Among international rankings, Algeria is not faring well. In the 2018 Economic Freedom Index published by the Heritage Foundation, Algeria was ranked among the 10 worst performing countries. It ranked 166th in the Doing Business Index, which put it far behind Egypt at 128th and Tunisia at 88th and close to Iraq (168th) and Syria (174th).  

Morocco attracted $2.7 billion in FDI in 2017, an increase of 23% according to the same UN report. The big winners are the automobile manufacturing sector and finance. With its emphasis on supply chain projects, the government confirmed that 26 investments totaling some $1.45 billion were made in the automobile parts sector by the end of 2017. Banking relations with China are also growing, and the overall growth of the diversified investment is welcome news for the country.

 The news from Africa was also positive for Morocco. The African Development Bank agreed to loan Morocco around $250 million to support Morocco’s Green Plan (MPV) to accelerate development of the agricultural sector. The funding will strengthen competitiveness in the sector by encouraging better use of technology, promote value chains to enhance job opportunities, expand export potential by better market linkages, and support sustainable management of natural resources.

Despite public concerns raised by several Nigerian sources over Morocco’s desire to join ECOWAS, the recent Morocco-Nigeria summit is moving mega-projects between the two countries forward.  Nigerian President Muhammadu Buhari visited Morocco last week and signed several landmark cooperation deals in energy, agriculture, industry, phosphates, and fertilizers.

At the top of the agenda is an are agreement between The OCP group, Morocco’s state-owned company, with its partners in Nigeria to build a fertilizers plant adapting fertilizers to the soil and agriculture in the country. Building a domestic industry in Nigeria will also provide fertilizer products at competitive prices and support the country’s agricultural development plan.

The other key agreement was a joint declaration to move ahead with a gas pipeline from Nigeria through West Africa and Morocco to Europe, following King Mohammed VI’s visit to Nigeria in December 2016. The two parties chose a combined on shore-off shore option that will directly affect, according to some sources, upwards of 300 million people. Stretching some 3500 miles and connecting 13 countries, the pipeline will provide needed energy access for the world’s fasting growing populations. Stable energy supplies will support new industries and jobs, improve health outcomes, and promote regional trade and investment. The next steps are to attract international financing and build partnerships with the beneficiary countries. The declaration also commits the partners to a responsible environmental policy.

Domestic energy news was also positive for Morocco as Sound Energy announced plans to build a 20 inch pipeline to connect it field in eastern Morocco to a gas plant it will build on the Atlantic coast. The consortium partners will fund the project, which is expected to produce 60 million cubic feet per day of natural gas. It has signed an agreement with Spanish groups Enagas, Elecnor, and Fomento for the front end engineering and design (“FEED”) and conditional construction and financing of the infrastructure required. Known as a “BOOT” (build-own-operate-transfer) project approach, it enables Sound to continue the project without having to raise additional funding.

Finally, on a critical domestic front, Morocco has committed to begin implementation of far-reaching business development projects in Jerada district. Work on 15 projects will begin immediately under the guidance of the National Initiative for Human Development (INDH) in cooperation with the regional government, the Oriental Council. Close to $80,000 has been allocated over three years targeting youth with small business projects to enable them to better access the local economy and improve their socioeconomic status. It has been reported that 1600 applications have already been received from potential youth beneficiaries, according to the story in Morocco World News. In addition to the initiative, Jerada authorities launched the construction of a concrete mold ‘formwork’ factory which will create approximately 500 sustainable jobs and attract investments of approximately $21 million.

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