The COVID-19 crisis exposed the fragility of the traditional Global Value Chains (GVCs) model characterized by fragmented and globally distributed production processes. This disruption can be explained by structural and cyclical causes. The World Bank’s World Development Report 2020 described a downturn in world trade and GVCs long before COVID-19. Many factors were already fostering a reorganization of GVCs, such as the rise of protectionist movements and ecological concerns, the increase in wage costs in emerging countries and the emergence of Industry 4.0 technologies involving significant relocation and reshoring of industrial activities. By Hafsa EL BEKRI & Hicham SEBTI*
Given its strategic location at the crossroads of Europe, the Mediterranean and Africa, Morocco has a clear comparative advantage to become one of the top performing countries and leading actor in the main regional industries. Morocco could thus benefit from a GVCs restructuring on a regional basis — particularly in a Euro-Mediterranean-Africa area – in terms of increasing and diversifying demand, attracting capital and developing capacities for innovation.
Lessons from the Coronavirus pandemic and opportunities for Morocco
Besides the current upheaval sweeping the world, the transformation of GVCs requires involved countries to make societal, ecological, and technological transitions. The new avenues that could foreshadow future GVCs policies can be outlined around four broad orientations. Morocco is no exception.
First, the COVID-19 crisis might lead to long-lasting structural effects on GVCs with the possibility of reframing industrial strategies through a relocation movement (reshoring and/or near-shoring). The reorganization of GVCs on more intraregional ties clustered around Europe-Mediterranean-Africa area in particular can be an opportunity for Morocco, in terms of increasing and diversifying demand, integrating industrial sectors and developing capacities for innovation.
Second, the discussion on sustainability in GVCs addresses issues of ecological transition processes in the Moroccan industry. With that regard, Morocco has undertaken important steps towards implementing low-carbon strategies, through a proactive policy of mass-investment in renewable energies, reconversion of energy-intensive industrial processes, as well as an increased acceptance of corporate social responsibility.
Third, the digital transformation generates opportunities for both the economy and society. To meet the promising opportunities of the digital transition, Morocco needs to deepen and
accelerate the transformation of activities, processes, skills and organizational models of its economy.
In that perspective, technological intensive changes (Automation, robotics and 3D printing, etc.) require duplication of investments in human capital and technological innovation driven by public initiatives as well as innovative start-ups.
Finally, preparing Morocco’s human capital for tomorrow’s challenges is a major stake. Morocco’s large youth population could be an engine of economic growth. To achieve its full potential, this vital human resource needs a stimulating environment that allows inclusion of young people into the social and economic life of the country through education, training, promotion of the social inclusion of the most vulnerable populations, improvement in quality of life in both social and cultural aspects, and greater progress towards gender equality.
How will Morocco benefit from the ongoing value chains restructuring?
The opportunities and challenges of GVCs reorganization are expressed differently within each of the key industries. In the automotive sector, Morocco aims to achieve a local integration rate of 86% by 2025 and develop technological innovation for a smart, sustainable mobility. For this purpose, Morocco is strengthening its ecosystem by attracting leading manufacturers and suppliers in missing segments.
Recognized for the quality of its diversified and competitive aeronautical base, Morocco intends as well to strengthen the resilience of its aeronautical ecosystem in a gloomy global economic context. To get ready for the sector’s rebound, Morocco is gradually moving towards more value adding activities such as R&D and investing in human resources and capacity building.
Furthermore, given the climate and crop biodiversity of Morocco and the favorable commercial framework (free trade agreements), the Agro-food industry has shown an outstanding dynamism in Morocco. The challenge in this sector is to improve Morocco’s competitiveness in foreign markets, to increase value-added products for export, to enhance domestic productive capacity and to improve the income of agricultural workers, especially women and small farmers.
Morocco aims as well to become a pharma manufacturing hub for Africa through the creation of a competitive cluster. The emergence of a dynamic ecosystem of the pharmaceutical industry in Morocco relies on the investment in R&D and the development of manufacturing capacities to meet the needs of pharmaceuticals, especially for African countries.
Morocco needs to boost the competitiveness of its textile industry by developing a strategy that meets the challenges of new consumer’s expectations such as more ethical consumption (slow fashion, carbon-free products) and more innovative products (technical and intelligent textiles).
The current reflection on the new development model, launched by King Mohamed VI, and fuelled by the COVID-19 crisis effects should lead to building a more resilient economy and reinforcing the Moroccan competitiveness.
The social, ecological, and technological transitions as well as the COVID-19 context define the new framework for reinventing the industrial strategy of Morocco. Investing in high-skilled human capital, innovation and infrastructures would help to create performing ecosystems in several strategic sectors – mainly the automotive, aeronautical, pharmaceutical and textiles – and would ensure the repositioning of Morocco as a leading actor of the new GVCs organization.
*Hafsa EL BEKRI Is a professor of international economy at Euromed Business School-Université Euromed of Fez and an Analyst for Think-Tank Institut Marocain intelligence Stratégique (www.imis.ma). Hicham SEBTI holds a management PHD from University Paris-Dauphine and is the Director of Euromed Business School-Université Euromed of Fez.