The Affiches Parisiennes Journal of Law and Legal Information, which provides information to Francophone accounting and financial services professionals, recently produced an overview of what their profession needs to know about the Maghreb in order to serve their business clients more effectively. It has insights that are worth noting by anyone interested in doing business in the region, and particularly Morocco.
As a bit of background, the report said that “The Maghreb countries have embarked on a policy of liberalizing their economies in order to capture domestic and foreign private capital flows.” While acknowledging that the process is not consistently implemented, the report also notes that there are important investment opportunities in the Maghreb due to its “privileged geographical position” near the European Union, “the most important trading area and the biggest market of the world;” its proximity to the Middle East; and its position “at the hub of the African market which represents one of the centers of global growth.” The journal then goes into a country-by-country analysis of what to expect and how financial professionals can use this knowledge to support their clients.
What About Morocco?
Wages and shipping costs are quite competitive. Monthly labor costs of less than $500 and average export costs for a shipping container around $700 are among the lowest in the world. Given government incentives in free zones, industrial estates, and as a function of external investments, companies can look forward to tax rebates or waivers for fixed periods of time. Especially for exporting firms, the advantages of locating in Morocco are multiple, ranging from overseas logistics and unit costs to human capital expenditures and reduced import duties. Despite its large burden of energy imports, Morocco has a low inflation rate and a steadily improving growth rate.
Legal regimes support growth strategies. From a legal perspective, Morocco has become very business-friendly, which is backed up by free trade agreements that allow duty-free access to key markets in Europe and the US.
Infrastructure is built to international standards. “Morocco, for example, is considered the first in Africa in terms of infrastructure quality according to Global Competitiveness Index – WEF 2016-2017. For more than a decade, it has launched large-scale projects aimed at raising its infrastructure to international standards, notably the Tangier-Med port, which entered service in 2007 with a global capacity of 9 million containers and an industrial platform close to 15,000 acres.” Tangier-Med will soon become the largest port in Africa and will be among the top five Mediterranean container ports. In addition, the high-speed rail system from Tangier to Casablanca will roll out next year, as will port upgrades in Kenitra, Casablanca, Dakhla, Laayoune, in conjunction with openings of free zones and industrial manufacturing hubs.
Human capital is a strong asset. The report points to human resources as “a major asset in the service of competitive investment and the creation of added value. The population is young and active. Human resources are qualified with thousands of graduates per year and diversity of training and public or private training institutions. A population is also characterized by great linguistic abilities.”
An improving business environment. Morocco is now ranked 2nd in Africa and 4th in the MENA region in the World Economic Fund Doing Business 2017. This will only improve as pending legislation regarding competition and price guidelines, labor standards, intellectual property protections passed and implemented. Simplifying administrative procedures, extending broadband services and protections, and continuing to adopt international business standards will make Morocco even more attractive to investors.
Well-defined national sectoral plans. The well-detailed and substantive government priorities defined for key sector plans provide guidance to investors and businesses regarding government initiatives and investments. For example, in Morocco, the Industrial Acceleration Plan, which supports the development of supply chains and industrial hubs, also includes infrastructure, logistics, financing, and training components in the projects listed.
The Vision 2020 plan for Tourism not only identifies potential tourism developments in various categories but also defines financing and legal options to encourage investors. This same kind of comprehensive package is found in the Renewable Energies 2020 and 2030 Plans, which set out goals for the sector and provide legislative references to the regulatory and pricing regimes of concern to investors.
For the agriculture sector, the Plan Maroc Vert 2020, identifies projects, financing, goals both for traditional and modern sectors, and integrated strategies for reaching benchmarks. In the Mining Sector 2025, the plan is to create 30,000 new jobs, backed up by licenses for specific types of projects and potential government and private sector partnerships.
The article also includes examples in the logistics sector, IT, and communications technologies.
The key to success for the accountancy firm. As in most of the countries in Africa and the MENA, the top concern reflects the bottom line reality. How does this knowledge prepare me to best serve my client, making the right decisions regarding projects, partners, financing, and meeting government requirements?
The article offers the following guidance:
- Determine project feasibility and decide if it is appropriate for the client.
- Don’t assume that what is written is the case for your client; investigate, analyze, become familiar with the factors that influence success and profitability, from tax codes and export licenses, to labor costs and trends, the regulatory environment, and managing local VAT and other considerations.
- Make sure all the legal issues are covered, from choice of company structure and location, to set-up and maintenance cost, local hires, and the fine points of the investment codes related to the business and its potential location, partners, and operational needs.
- Know the banking laws, exchange regulations, rules governing repatriation, the correspondence banking laws, and ownership and divestiture codes.
- Understand how land regulations work. Morocco is working with the Millennium Challenge Corporation to devise policies for land ownership/use in industrial estates, free zones, and similar commercial arrangements. As the article points out, “Land is a higher risk in the Maghreb due to the lack of comprehensive legal coverage of land use; special attention must be paid to avoid surprises.”
About the business culture. Importantly, the final section of the article deals with what one might expect, given the rapid digitalization of the business environment. “The culture of business in the Maghreb is based essentially on relationships and networks…In order to implement the client’s project successfully, it is necessary to prepare the ground by adopting an effective commercial strategy. We must be attentive to the interlocutors. It is better to begin by understanding the Maghreb business world and take the time to discover the local culture.”
And finally, there is good advice for any international business going into Morocco or elsewhere in the region: “The best advice we give to French accountants to support their clients in the Maghreb is to be helped by a local professional who has mastered the various and varied regulations in these countries.” Yes, we second that recommendation.