Business Update on Morocco – Jean R. AbiNader
Jean R. AbiNader
March 16, 2020
This past month has seen a burst of new information on the performance of Morocco’s economy, especially the business sector. End-of-year reports are mostly positive despite an uptick in the national debt, non-performing loans, and little change in the employment outlook. Morocco weathered its latest IMF review and received plaudits for its performance and the country’s health services received welcome support from the African Development Bank.
Of more than passing interest is the story that Japan is now the largest private employer in the kingdom. The most recent count shows that there are 71 Japanese companies with close to 40,000 employees in the automotive and solar power industries. Japan is the fifth largest investor in Morocco and its companies base many of their African operations in Morocco. Trade between the two countries is projected to continue expanding in response to new opportunities on the continent.
Morocco has been chosen to host the IMF/World Bank Group October 2021 Annual Meeting in Marrakech. On a recent visit to the country, IMF managing director, Kristalina Georgieva said that Morocco has implemented reforms to achieve inclusive growth, improve governance, and fight corruption, “leading the way in the region and the continent.” She noted positively Morocco’s investments in Africa, its movement towards a more flexible exchange rate, and the country’s commitment to a new development model. Georgieva also said that “Morocco is considered to be one of the few countries in Africa to have 22% of its GDP in the form of income, while most countries suffer from financial difficulties.” This is an important milestone for Morocco as it is the first time the annual meeting will be held in Africa. She pointed out that Morocco was chosen to be a world economic and financial capital for “its history, its culture, and its economic dynamism.”
In 2019, the African Development Bank (AfDB) loaned Morocco $3 billion for some 35 projects, making it the largest recipient in Africa. Projects include the energy sector (31.5%), transportation (19.8%), water and sanitation (15.5%), multi-sectoral and social development operations (12.7%), the private sector (11.2%), and agriculture (9.4%). The most recent loan of $204 million will finance a four-year program to improve health services under social security coverage. Its goal is to achieve 80% coverage in the country by 2023, including hospital construction, upgrading hospital units/clinics in rural areas, and improvements to 31 social service centers. The program will also strengthen medical coverage for self-employed workers and improve their access to quality health services.
On the banking front, Moroccan families are facing stiff challenges in making ends meet. The Central Bank recently reported that the number of unpaid loans in the country had doubled over the past decade, despite steady growth in giving out loans the past five years. While Non-Performing-Loans are only 7.7% of total loans, this represents some $7.3 billion, causing a headache for the banks’ balance sheets. Bank loans have increased 10.9% in the past year to $100 billion, twice the level in 2014 and representing some 88% of GDP.
A very intriguing study was recently released that rates how a country’s legal and regulatory systems enable or discourage illicit financial flows. The Financial Secrecy Index gave Morocco a better ranking in terms of secrecy and transparency that many European and Asian countries. Among the criteria are laws in the country regarding beneficial ownership information transparency (who owns and controls companies), data on who owns real estate, anti-money laundering laws, and mechanism for international cooperation. The top 10 (worst) are the Cayman Islands, US, Switzerland, Hong Kong, Luxembourg, Japan, Netherlands, British Virgin Islands, and the UAE. The ten best (of 133 countries) are
Gambia, Brunei, Trinidad and Tobago, Slovenia, Monserrat, Nauru, St. Lucia, and the Cook Islands. Morocco placed 72, and you can find the details here.
Morocco’s uneven economic performance underscores the challenges Morocco faces as its continues to diversity its economy, builds its skilled workforce, and enables greater performance by the private sector through reforms, promoting entrepreneurship, and strengthening the role of small and medium-sized enterprises.
Two important agreements signed with the College of Europe will help build the capabilities of Moroccan professionals in foreign affairs and European studies. One focuses on promoting cooperation with the College on training related to diplomacy, international law, and international relations involving exchanges of diplomats and students. Also included are exchanges of lecturers and experts in fields related to diplomacy, sharing expertise in training design and implementation, and conferences between the parties to enable Moroccans to acquire more sophisticated and expansive diplomatic training.
The second Memorandum of Understanding focuses on setting up a selection committee for Moroccans applying for the program to award scholarships in politics and governance, law, economics, international and diplomatic relations, and interdisciplinary studies.