European Business Talks Exclusively to Mr Mohammed BENCHAABOUN, Minister of Economy and Finance about the rising global economic powerhouse that Morocco is becoming and their plans for the future.
Africa is home to seven of the world’s ten fastest growing economies and by 2050 the continent’s population is expected to overtake India’s and Chinas, doubling to 2 billion people. What can Morocco, the gateway to Africa, offer to enrich the corporate landscape?
Morocco enjoys an outstanding geographical position at the crossroads of the Arab world, the African continent and Europe. This position naturally offers our country the opportunity to serve as a gateway for European companies and investors seeking business opportunities in Africa.
In this regard, Moroccan authorities have deployed tremendous efforts over the last few years to establish Morocco’s position as a regional economic and financial hub, through several sectoral and structural reforms aimed at enhancing the business environment and strengthening industrial and export infrastructure, with a major focus on diversifying trade and investment partners, including in Africa.
Morocco has also developed a large network of bilateral agreements, comprising of 26 Bilateral Investment Treaties (BIT) and 20 double taxation agreements with its African partners. These agreements aim to create a stable and conducive legal environment for the development of bilateral investments, in line with our strategy to consolidate Morocco’s position as the second largest African investor on the continent and the largest investor in western Africa.
Likewise, as an active member of the African Union, Morocco is part of the new African Continental Free Trade Area (AfCFTA), which entered into force in May 2019. This free trade area, the world’s largest in terms of number of participating countries, will grant Morocco-based companies access to a market of 1.2 billion people and a gross domestic product (GDP) of $2.5 trillion, across all member States of the African Union.
In this regard, Moroccan companies are well poised to seize the opportunity of increased intra-african trade under the AfCFTA agreement, drawing on the support and wide-ranging regional experience of Moroccan banks operating in Africa and the resolute commitment of Moroccan authorities to pave the way for stronger economic and trade relations with our African partners.
Last but not least, it is worth mentioning that our Casablanca Finance City, Africa’s leading financial center, is home to the Africa 50 fund, which is an infrastructure investment platform that contributes to Africa’s growth by developing and investing in profitable projects. It serves as a catalyst for public capital while mobilizing private sector financing to meet increasing financing needs for infrastructure projects in our continent.
Morocco has chosen manufacturing as a strategic sector for its socio-economic development. Can you elaborate on these opportunities and tell European Business Magazine readers why now is a good time to look to Morocco for business partnerships and development? Additionally, how can the country’s impressive capacity for innovation assist in the rapidly changing global market?
Morocco has been engaged for several years in an accelerated process of industrialization, reflecting
its firm desire to bring out new export sectors with higher technological content, to strengthen the country’s attractiveness to foreign investments and to improve its positioning in global value chains.
By way of illustration, the automotive sector emerged as the leading exporting sector since 2014, with a share in total exports that doubled in less than ten years to reach 24%. Automobile production thus reached 402,000 units in 2018 against barely 10,000 vehicles in 2004, with a level of local integration of over 50% and a market share of nearly 40% on the African continent. The aeronautics industry is also booming, with exports that have more than doubled since 2007 and a local integration rate reaching 38% against 17% in 2014, exceeding the initial target of 32% set for the 2020 horizon.
The implementation of the 2014-2020 Industrial Acceleration Plan was based on concrete measures, in particular the establishment of ecosystems for a more integrated industry, which enabled the implementation of several investment projects with positive results in terms of added value creation and employment positions.
With the outbreak of the COVID-19 pandemic, the Moroccan industry has shown great capacity to cope with this new context and meet the pressing needs of the domestic market. Indeed, our manufacturers have mobilized quickly to meet Morocco’s supply needs with sanitary and hygiene products, pharmaceuticals and foodstuffs. Several textile factories have also converted into manufacturing protective masks and textiles for medical use, and major automotive and aeronautical players have embarked on the manufacturing of respirators.
For the future, we have already defined a new 2021-2023 industrial recovery strategy, which aims to confirm the industrial position of the Kingdom and to conquer new markets using public procurement as a catalyst. To this end, the new Plan aims to replace 34 billion DH of imports by local production, by targeting eight main sectors namely, textiles, transport, mechanical and metallurgical industries, plastics, electrical and electronics, agri-food, Para chemistry and leather. To do this, a first bank of 100 projects has already been set up in the various sectors mentioned above, with support for Moroccan entrepreneurs in setting up their projects and securing their financing.
A second axis of this strategy relates to improving the competitiveness of the Kingdom with the objective of becoming the most competitive global base for Europe. Finally, a third axis concerns the positioning of the Kingdom as a carbon-free and circular industrial base, by mobilizing part of the Kingdom’s renewable energies to meet energy needs of the industrial fabric at the best possible cost.
Morocco has made substantial progress in the digital sector and digital technologies. With new technologies and working methods emerging as a result of the COVID-19 pandemic, what opportunities will evolve in Morocco from this increased digitisation?
The era of digitization and the digital transition of economies is now becoming urgent. With the COVID-19 crisis, this transition was accompanied, at the national level, by an acceleration in the use of digital technologies due, in particular, to the organizational transformation of work with the mass deployment of teleworking and distance education. It has also forced the use of e-commerce which has emerged, in this context, as a vector for the growth of domestic and export trade transactions. Moreover, under the influence of the pandemic, the dematerialization of certain services has been widely deployed.
The health crisis has indeed given a boost to digitalization efforts, which will undoubtedly play a major role in post-COVID-19 Morocco. It will undoubtedly offer opportunities to stimulate the growth and
competitiveness of our economy while promoting its inclusion. This situation has led Moroccan companies to completely rethink their organizational models, as 41% of them consider that the lock-down pushed them to adopt new technological and digital approaches to alleviate the impact of the crisis.
The question of using digital and dematerialized services is an acute one. In this context, the digital transformation is considered by the Government as a strategic lever for the improvement of public services. To this end, several public administrations have adopted digital tools to promote teleworking and have chosen to limit the physical exchange of documents and administrative letters. In order to support this dynamic, the Digital Development Agency launched, in June 2020, several digital initiatives to promote and facilitate remote working within Moroccan administrations.
Despite its negative impact on the trade sector, the COVID-19 crisis has further revealed the potential of e-commerce. Companies that have relied on this niche have been more resilient and able to cushion the downside shocks of the pandemic on their businesses. Moreover, the performance of contactless mobile payments in Morocco increased by 710% between the end of March and the end of May 2020, compared to the same period of the previous year, which indicates the potential to be seized through an acceleration of the digitalization of domestic trade.
In addition, public companies operating in the field of transport and logistics have operated a shift in their processes in order to make the services provided to professionals and citizens more efficient, by proceeding with the dematerialization of documents and procedures.
Morocco’s virus management has been noticed and praised in Europe. Very early on the kingdom took the decision to close its borders and set up guidelines for supply, mobilising the industrial sector to fight the disease and revealing innovative and engineering capabilities. Can you tell our readers a bit more about your methods and procedures, and how is Morocco placed for an economic recovery post Covid-19?
Morocco was among the first countries to succeed in demonstrating exemplary proactivity in anticipating the risks and consequences of the Covid-19 pandemic. In response to this crisis, Morocco has placed the life of its citizens at the forefront of priorities, by taking bold measures to stem the spread of the pandemic, and by deploying unprecedented support mechanisms for the benefit of social classes whose vulnerability has been exacerbated by the crisis.
In this context, and in accordance with His Majesty’s Instructions, a proactive and multidimensional response strategy has been put in place in order to limit the health, economic and social repercussions of this pandemic. Thus, a special solidarity fund was created, dedicated to the management of the COVID-19 pandemic. This fund has made it possible to raise more than $ 3 billion to date. Likewise, targeted support measures have been taken in favor of households and businesses to mitigate the impact of the lock-down and preserve the productive potential of the economy.
With the objective of supporting the gradual restart of the activity and creating the conditions for a vigorous economic recovery at the end of the COVID-19 crisis, we are working on the acceleration of the implementation of our national economy recovery plan, through the mobilization of all available means in terms of financing, incentive mechanisms and solidarity measures.
This plan, which will cover transversal measures as well as sector-specific measures, will be endowed with nearly 120 billion DH to support the economic recovery, including 45 billion DH allocated to the
financing of investment projects by appealing to public private partnerships (PPP) and strengthening the capital of companies, especially small businesses, for the purposes of their development within the framework of the “Mohammed VI Investment Fund”. The remaining 75 billion DH will be granted in the form of State-guaranteed loans for the benefit of all business segments.
The Government is also committed to deploying national preference in the field of public procurement to support the development of very small businesses, to accelerate the reforms required to improve the business environment, to upgrade the training and human capital development system to improve the training-job match and to accelerate the adoption of the amendment to the Law on payment terms and related decrees.
For its part, the private sector has undertaken to preserve jobs by maintaining a level greater than or equal to 80% of stable jobs, to allow undeclared workers to benefit from the social security system, to fight against informal practices, to reserve at least 50% of State-guaranteed loans to the reduction of business-to-business debt, to encourage finished or intermediate products with strong local content, to understand the opportunities offered by digitalization, to further develop continuing training and contribute to improving the training-job match, while ensuring compliance with the code of good corporate governance practices and health rules.
Morocco has exceptionally good ties with European countries, but the partnership between the EU and Morocco could become even more robust through industrial cooperation. Can you tell European Business Magazine readers more about how this can happen?
The relationship between the Kingdom of Morocco and the European Union showed a positive development as it is clearly demonstrated by the adoption of the Joint Political Declaration, on June 27, 2019 for shared prosperity. This development comes at a time when Morocco is trying to set up a new development model which opens up new opportunities including in terms of industrial cooperation.
In addition, the COVID-19 pandemic has highlighted the need to adopt new paradigms to ensure the security, continuity and fluidity of value chains.
This pandemic has also shown the Kingdom’s ability to respond effectively to its domestic demand, and even supply other countries, for important products such as paramedical products.
In this context, as a reliable and secure country, at the gateway to Europe, and a reservoir of competitiveness, Morocco aims to play a leading role in the implementation of regional value chains at the Euro-Mediterranean level.
Indeed, enhancing industrial cooperation between the EU and Morocco, in terms of integration of Morocco into the perimeter of nearshoring of European industries, will allow a better diversification and security of supply to European markets.
That’s why, we encourage European industrialists to pursue and accelerate their development in Morocco within the framework of new regional value chains, capitalizing on geographical proximity, reduced logistics costs and the Kingdom’s comparative advantages as well as the reduction of the environmental footprint of the supply chain.
Morocco has forged an international reputation as a reliable and credible partner. What can we expect to see from Morocco in 2021 and beyond?
Far-reaching reforms have been implemented at the institutional, structural and sectoral level and have made it possible to diversify our economy, ensure sustained growth and consolidate macroeconomic stability. This progress has resulted in the maintenance of the confidence our country enjoys with international institutions and foreign investors, despite an uncertain international and regional environment. These reforms have enabled our country to achieve remarkable performances in terms of improving the business climate, as evidenced by the “Doing Business” ranking where Morocco has gained 76 places since 2009.
Despite these positive results, our economy continues to face major challenges, including accelerating structural transformation, strengthening potential and inclusive growth, reducing youth unemployment, and reducing social and spatial disparities. These challenges have been amplified by the advent of the crisis linked to the COVID-19 pandemic which has created new challenges in Morocco, as everywhere else in the world, for years to come.
Our first concern in the coming years and of course from next year is the strengthening of the health care system and the generalization of social protection. This will take place through the rapid operationalization of the Single Social Register which will, in the short term, be a strategic planning instrument in the field of social policies and will promote precise targeting of public action in this area.
Our action will also focus on enhancing the human capital of our youth in particular. On this aspect, the realization, within the allotted time, of the vision 2015-2030 for the reform of education and training should, alongside the implementation of the employment strategy, ensure better integration of young people and women in the labor market while improving the productivity of the economy.
On the economic level, we are working with all stakeholders to enhance the competitiveness of our production base and raise the level of potential growth. To do this, we intend to step up sectoral and transversal reforms relating to the improvement of the business environment, the financial sector and economic governance and to identify a new generation of reforms in the light of recommendations resulting from the work of the Special Commission on Morocco’s development model.
Finally, it is imperative for us to rebuild our macroeconomic buffers after the COVID-19 crisis. In this regard, we intend to accelerate, particularly in the area of public finances, the reforms (i) of taxation by promoting tax fairness and better compliance with tax regulations; (ii) of subsidies through the establishment of a targeting system; and (iii) of the public sector, in particular the optimization of public portfolio management.