Jean R. AbiNader
May 14, 2020
Morocco, with strong leadership from King Mohammed VI, is committed to finding opportunities to restructure and redirect its economy to be better prepared for other potential calamities such as the COVID-19 pandemic. The economy is already facing a downturn due to drought which may result in as much as a 42% decline in 2019-2020 cereal production. However, given advances in the agricultural sector over the past few years, overall agricultural GDP is not expected to decline more that 5%.
In other agricultural news, the FAO designated a Moroccan digital tracking system the best innovative initiative in the Middle East and North Africa (MENA) for the protection of farmers and vulnerable groups against COVID-19 contamination. By digitizing the processes of cultivation and harvesting, the innovation facilitates the management of key stages of cultivation. The program benefits all sizes of farms and is one of the results of the 2008 Green Morocco Plan which funded a range of initiatives and programs to make agriculture one of the main growth engines of national economy by stabilizing production and thereby increasing its contribution to GDP growth, job creation, and poverty reduction.
To enable farmers and companies in the agricultural sector to access financing during the pandemic, Credit Agricole has signed a $54 million line of credit with the French Development Agency to enable micro-, small-, and mid-sized companies to secure funding at reduced rates for seeds, equipment, and social services for rural families and marginalized people during the pandemic.
The line of credit is in addition to $1.6 million that is intended to support sustainable agricultural projects that contribute to the deployment of more sustainable and local agriculture including integrated irrigation, energy efficiency, organic farming, agricultural waste treatment, and local farming.
In manufacturing, a number of analysts believe that the global infrastructure of value supply chains may undergo dramatic alterations because of the virus. As the US is experiencing, there is now more consciousness about factors other than costs and speed of delivery that must be taken into account.
With the growing concern for excessive reliance on China’s role in global manufacturing, a great deal of analysis is being given to medium and long term alternatives to reduce vulnerabilities in supply chains in major sectors such as the automobile, textiles, electronics or, more worryingly, the pharmaceutical and health industries. For example, China monopolizes more than 15% of the world export market. When its labor force was constrained by the virus coupled with the dramatic rise in demand for medical and protective equipment, the fragility of the current system became terribly, in some case, obvious.
Other factors calling into question the primacy of global supply chains are the rising wage costs in Asia no longer offset by productivity gains, the growing utilization of robotics and AI in production, resurgent protectionism in the US and Europe, trade and tariff regimes that penalize some categories of imports, and growing concern for the environmental impact on labor and nature due to a lack of monitoring by foreign companies.
While there are several scenarios of options moving forward, Morocco is in a unique position to “up its game” by becoming a regional leader in supply chain production as it has the capacity to expand its industrial base quickly to meet demands in Europe and the US through the kinds of partnerships it already has with automobile and aeronautical manufacturers. This kind of regional relocation will only have an incremental impact on costs balanced against a more reliable and convenient supply chain. This would mean that companies reorganize their production systems and those of their partner suppliers, as Boeing has done in Morocco, to take advantage of the human, material, and energy resources available and accessible in Africa.
As a recent paper pointed out, “In the automotive, textile, and electronic components sectors for example, Morocco could benefit from the repatriation in a Euro-Mediterranean area of part of the productions currently carried out in Asia. This movement could also be accompanied by flows of Asian FDI wishing to retain their European customers by setting up in Morocco.” This is already obvious in the automotive sector which serves as a model for other industries.
Another possible, though currently unlikely, benefit from the pandemic is extending this proposed value chain model across the Maghreb so that Tunisia and Algeria work with Morocco to become hubs of a vital supply chain for Europe and Africa, with some outreach to US markets. All three have well-qualified human resources who need training for industry 4.0 opportunities – use of digital technology, artificial intelligence, agile organizational infrastructure, and supportive government and legal infrastructure. Algeria already has energy links to Tunisia and Morocco to reduce those costs, and all three would greatly benefit from expanding 5G networks and backbones throughout the region.
If Algeria, Morocco, and Tunisia can manage the pandemic with some success, they could emerge with new energies to explore opportunities to resurrect the AMU on a practical basis that responds to the basic needs of their citizens for opportunities and dignity. It’s a stretch, but it’s better than the status quo.
Consistent with this concept was a presentation by Economist Abdelghani Youmni who highlighted the potential of public-private partnerships (PPP) and foreign investment in facilitating Morocco’s post-COVID economic recovery. He believes that Morocco can attract global investors using the PPP model which has had great success in the country. Youmni believes that Europe, with its aging population, should consider integrating its businesses with North Africa, building upon the success of existing ties between international companies and Morocco. He noted that “An industrially strong Morocco could be a reliable partner where environmentally responsible European companies could establish joint ventures.” Exactly why a stronger and multifaceted value supply chain reorientation to the Maghreb makes great business sense.