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Khalil

Morocco is known for its diversity of geography, climate, people and culture. The country is bordered by Algeria to the east, Mauritania to the south and the Mediterranean to the north. This has allowed the country to enjoy privileged relations and intermingled influences for over 3000 years, thereby strengthening its cultural richness. The society is marked by both tradition and modernity. The main challenge is to find the equilibrium between ancestral traditions and a progressive opening to the Western world in the globally integrated era.

ISBN: 978-1-902339-08-5
ISSN (Online): 1759-7560
ISSN (Print): 1759-7552

POLITICS

King Mohammed VI has pursued major economic and social reforms since his accession to the throne in 1999. While ultimate political power remains firmly attached to the throne, significantly more space has been opened up for freedom of expression and other hallmarks of liberal democracy. The process has not gone nearly far enough to satisfy some parties, but even opposition politicians acknowledge that the space in which they operate has been greatly expanded. One of the biggest reforms has been reducing inequality for Morocco’s women, with 2007 adding more protection to the measures passed in 2004. The government has also committed to economic diversification. Agriculture remains the backbone of the economy, but a severe drought crippled the sector in 2007. Widespread poverty is regarded as a serious long-term threat because Morocco, like many countries, faces the ever-present danger of Islamic extremism. The country’s own primary Islamic political movements remain moderate, but economic dislocation helps maintain large numbers of disaffected young people who make attractive recruits for militant groups. Morocco maintains economic and political ties to a number of nations, including free trade agreements with the US and the EU, however relations remain strained between Rabat and Algiers over the former’s claim to Western/Moroccan Sahara and the latter’s support for the Polisario Front movement. Rabat’s moderating role, especially in the Arab-Israeli conflict, has won it recognition in Washington as a Major Non-NATO Ally. In 2008, Morocco’s fortunes will be influenced by the learning curve of a new cabinet, headed by Prime Minister Abbas El Fassi. The product of a highly competitive and extremely inconclusive election, the policy contents of the new government’s popular mandate remain unclear. Determining the actual will of the public on specific issues will therefore involve considerable trial and error, making it very likely that few if any ministries will stray far from the usual trend of slow but steady reform established over the past decade or so.

This chapter provides interviews with Abbas El Fassi, Prime Minister; Bernard Kouchner, French Foreign Affairs Minister; and Omar Bongo Ondimba, President of Gabon, while HM King Mohammed VI provides a viewpoint on the country’s priorities, and Benita Ferrero-Waldner, European Commissioner for External Relations and Neighbourhood Policy, provides a viewpoint on Morocco-EU ties.

Khalil

ECONOMY

The Moroccan economy is much more robust than just a few years ago, with steady yearly growth in the region of 4-5% from 2000 to 2007, including 4.9% year-on-year growth in 2003-2007. Economic growth is far more diversified, with new service and industrial poles developing and even the agriculture sector being rehabilitated. The services sector accounts for just over half of GDP and industry, made up of mining, construction and manufacturing, is an additional quarter. The most important growth poles can be found in the tourism, telecoms and textile sectors. Morocco does, however, still depend to an inordinate degree on agriculture. The sector accounts for only around 14% of GDP but 40-45% of the Moroccan population still lives off the land. In a semi-arid country, it is difficult to assure good rainfall and Morocco’s GDP varies depending on the weather. Fiscal prudence has allowed for consolidation, with both the deficit and debt falling as a percentage of GDP. Monetary prudence has helped to control inflation and maintain interest rates at a low enough level to support investment. Morocco’s development is also based on an export-oriented model that has seen it gain important market share abroad. That is not to say that Morocco’s economic profile does not show its risks. Although unemployment has fallen steadily, the jobs that have been created are low-wage and precarious, and unemployment is high. Morocco’s export profile, including services, is mostly low in the value chain and overly focused on a few Western European economies. The import bill has soared, and although inflation has been kept in check, this has been at the expense of an increasingly expensive subsidy system. Low domestic household earnings and limited regional integration have failed to make either Morocco or the Maghreb important markets in their own right. As Morocco approaches the end of the first decade in the century, the economy shows signs of increasing maturity and can be considered an emerging market, but growth needs to average 6-8% for economic development to really take off.

This chapter provides interviews with Salaheddine Mezouar, Minister of Economy and Finance; Ahmed Chami, Minister of Industry, Trade and New Technologies; Abdellatif Maâzouz, Minister of Foreign Trade; Ambassador John Danilovich, CEO, Millennium Challenge Corporation; and José Montilla, President, Generalitat de Catalunya.

Khalil

BANKING

In 2007 the economic environment remained conducive to further growth of banking activity in Morocco following a very good year for the sector in 2006. In 2007 macroeconomic growth, excluding the agricultural sector, remained quite robust, providing the background for dynamic growth in banking credits. Total assets of the banking sector increased by 21.6% to Dh654.7bn ($85.1bn), which is above the previous year’s high annual growth rate of 18.1%. The structure of the domestic sector has remained steady in the past two years, with the landscape dominated by three major local banks. The state has started to remove itself from the domestic sector by surrendering part of its share capital in public banks. At end-2007 public capital still held controlling stakes in five banks and four financing companies. Meanwhile, foreign ownership in the local financial sector continues to grow, with foreign institutions controlling five banks and eight financing companies as well as holding significant stakes in four banks and three financing companies. The introduction of additional Islamic banking products is also likely in the future.

This chapter provides interviews with Abdellatif Jouahri, Governor, Bank Al Maghrib, Robert Rubin, former Executive Committee Chairman and current Director and Senior Counselor, Citigroup and a roundtable with Othman Benjelloun, President, BMCE Bank; Mohammed Benchaâboun, President, Banque Centrale Populaire; Mohamed El Kettani, President, Attijariwafa Bank, while Mohamed Damak, Rating Specialist, Standard & Poor’s, provides a viewpoint on risks and opportunities in Moroccan banking.

CAPITAL MARKETS

In 2007 the capitalisation of the Moroccan stock market increased by 40.5% to Dh586.3bn ($76.2bn), up from the Dh417.1bn ($54.2bn) recorded the previous year. This substantial jump is largely attributed to the 10 new share issues on the Casablanca Stock Exchange over the course of the year, as well as the several secondary issues that also took place in 2007. The market capitalisation-to-GDP ratio also moved in step with the upward trend, now accounting for 96.5% of GDP, up from 71.1% of GDP in 2006, and is comparable to the ratios characteristic of many developed Western economies. The major industrial leaders of the market are banking, telecoms and real estate, which together make up almost two-thirds of market capitalisation. The volume of activity on the stock market, including shares and bonds, also increased significantly in 2007, reaching Dh359.7bn ($46.8bn), an increase of 161.1% on 2006, when total volumes amounted to Dh166.4bn ($21.6bn). There is a widespread belief among market professionals that the market capitalisation and trading volumes will probably continue their upward trend, supported by a positive macroeconomic background, and the latest technology developments, such as on-line securities trading, and the potential introduction of derivatives trading. Education of the public is also seen as an important issue and despite the improvements made in recent years, there is still a need to develop a level of professionalism of operators and to make professional training courses compulsory, as they are still offered on a voluntary basis.

This chapter provides an interview with Fath-Allah Berrada, Chairman, Casablanca Stock Exchange while Younes Benjelloun, Partner & Board Member, CFG Group, provides a viewpoint on the financialisation of the economy. The chapter provides bond and stock analyses by CFG Group on Maroc Telecom, Addoha, ONA, Société des Brasseries du Maroc, and Centrale Laitière.

Khalil

INSURANCE

The insurance sector in Morocco is witnessing dynamic growth, driven foremost by developments in life insurance, which has superseded motor insurance in the past two years as the leading segment of the market with around one-third of total premiums. Behind life and auto insurance, accident, work-related accident, fire and transport insurance were the largest contributors. Total premiums reached Dh17.7bn ($2.3bn) in 2007, ranking Morocco as one of the largest insurance markets in the Arab world behind Saudi Arabia and the UAE. The insurance penetration rate is 2.87% of GDP, while the insurance density is $69 per person. More broadly, the Moroccan insurance sector is already consolidated, with five large players controlling the market. The sector is set to be opened up to foreign competition from 2010 onward, and the consolidation of insurance companies into larger entities should strengthen the local players to better compete with eventual competition from foreign insurers. There is also the possibility that new insurance niches such as takaful (Islamic insurance) and microinsurance products will become part of the Moroccan market in the medium-term, but they are unlikely to appear in the near future.

This chapter provides an interview with Fouad Douiri, President, RMA Watanya.

Khalil

CONSTRUCTION & REAL ESTATE

In 2007 the Moroccan construction sector recorded added value of some DH35.2bn ($4.6bn), which represents an 11% increase on the previous year. Since 2002 the market has witnessed impressive growth in virtually all segments and is likely to continue to perform well in the near future. The sector employs more than 800,000 people and has contributed an average of 6-6.5% to Morocco’s GDP in recent years. In 2007 the government passed the second five-year plan, which aims to invest some DH280bn ($36.4bn) between 2008 and 2012. Like the first government plan, infrastructure, housing and tourism are to be the main recipients of government investment. Development projects, such as the tourist cities of Plan Azur and urban master plans in Rabat and Casablanca, are major opportunities for the construction sector. Despite high oil prices and the rising cost of construction, the future looks bright. The kingdom is gaining ground as a major tourist and second-home destination. It is rapidly developing its infrastructure to become a major transport centre and to establish itself as an industrial export base.

The Moroccan real estate market has been thriving across the board since 2000. While the vast majority of homes built are social and middle-class housing, the biggest margins are to be made in the luxury segment, which increasingly manages to attract foreign buyers. Foreign direct investment in real estate more than tripled from DH1.8bn ($234m) in 2002 to DH7.3bn ($949m) in 2007. Taking into account Morocco’s rapid population growth and the ongoing urbanisation trend, there will be substantial demand for affordable and middle-class housing for years to come. Although the market runs the risk of overheating, there is also considerable demand for high-end housing and tourist homes. Arguably most opportunities are to be found in the commercial market, which can be generally characterised by a shortage of modern office and retail space.

This chapter provides interviews with Anas Sefrioui, President-Director General, Addoha Group, and Lemghari Essakl, General Manager, Bouregreg Valley Development Agency.

Khalil

TOURISM

The total number of visitors to Morocco has increased dramatically since Vision 2010, the development plan for the industry that was launched in 2001, but a closer look at the sector reveals uneven progress and indications are that the rate of growth maybe be slowing down. Tourism attracts more investment than any other sector and accounts for 6% of GDP. Hotel capacity, tourist arrivals and receipts are all rising. The World Travel and Tourism Council recently predicted that Moroccan tourism will see annual growth of 4% in real terms between now and 2017. The kingdom faces regional competition from Tunisia, Egypt and Turkey and although the number of tourists visiting Morocco rose 69% between 2001 and 2007, the other countries are making up for lost ground. Still, tourists are visiting Morocco from the traditional European countries and the Moroccan National Tourism Office is also targeting new markets in Eastern Europe, the Middle East, Japan, China and the northeastern part of the US. New resorts are being built with large investments, particularly on the Mediterranean coast. A plan for the nationwide development of rental properties is also on the way. The tourism sector has great potential and government support, but there is a risk of insufficient diversification of the product on offer and inadequate provision for leisure facilities.

This chapter provides an interview with Mohamed Boussaid, Minister of Tourism and Crafts.

TRANSPORT

With billions of dollars committed to improving the country’s infrastructure, Morocco aims to become a world player in terms of marine transport. The government is well aware that a well-oiled transport sector is essential to accelerate growth in such key economic sectors as agriculture, tourism and industry. The 2008-2012 investment plan aims to invest $16.3bn and will contribute to major projects such as the combined port and industrial complex of the Tanger-Med and the construction of a high-speed train between Tangier and Casablanca. The plan will also improve and expand the existing highway system and expand the Casablanca Mohammed V International Airport. Morocco’s transport sector is one of the kingdom’s most dynamic, and will remain so for years to come. The improvements in infrastructure will boost other sectors and will also help the country in its goal of attracting 10m tourists by 2010.

This chapter provides interviews with Mohamed Rabie Khlie, General Manager and President, National Railway Office of Morocco (ONCF), and Jawad Ziyat, Founder, Jet4You.

Khalil

ENERGY

Morocco has very few reserves of its own and has been affected by the high oil prices of 2007 and early 2008. The country has to import 96% of its energy requirements and the national oil bill for the first quarter of 2008 was $1.1bn—69% higher than for the same period in 2007. The kingdom is working to diversify its energy sources, especially to develop renewable energy, with a particular focus on wind energy. Solar power and nuclear energy are also part of the strategy, but development of the former has been slow and there has been minimal progress on the latter, aside from an announcement of collaboration with France in 2007. The government plans to reorganise its subsidy system, which is a heavy burden on government finances. In the short term these subsidies are helping to ease the burden but they cannot keep rising indefinitely, and sooner or later the load will have to be shared out. In the short term, national consumption per capita is expected to rise from the current level of 0.4 tonnes of oil equivalent (toe) to as much as 0.90 toe in 2030, a good indication of development, but a massive challenge as well. The input of renewable energy is a matter of particular importance.

This chapter provides interviews with Amina Benkhadra, Minister of Energy, Mining, Water and Environment, and Peter Barker-Homek, CEO, Abu Dhabi National Energy Company (TAQA).

INDUSTRY & RETAIL

The Moroccan industrial sector looks set to continue the strong growth it has enjoyed in recent years. Industrial activity recorded a 5.5% increase in 2007, a slight rise over 2006, when the sector grew by 4.7%. Added value in the sector increased by 5.6% in 2007. Overall the contribution of industrial activity to GDP fluctuates between about 25% and 35% every year, depending on the performance of the agriculture sector. The industrial sector accounted for about 21.1% of employment in 2007 and the sector is a key component of the government’s effort to curb unemployment. The sector also attracts high levels of FDI and authorities have announced initiatives to improve the investment climate, with particular attention to off-shoring activities, automotive, aeronautics, electronics, food processing activities, products from the sea and textiles. Other important industrial sectors include mining, chemicals, construction materials and pharmaceuticals. The future of Morocco’s industrial segment looks bright, particularly as new initiatives make it more globally competitive in a variety of sectors.

The retail industry represents 12.8% of Morocco’s GDP and 1.2m people – 13% of the total workforce – are employed in the sector. Organised retail, however, represents only a fraction of domestic trade, as shoppers rely on the country’s 1151 souks, markets and approximately 700,000 independent groceries and shops. The rapid emergence of a middle class – around 30% of the population – combined with a young and increasingly urban population and a craving for international brands, is rapidly changing the ways Moroccans spend their money. Still average purchasing power remains low overall, forcing retailers to cater to a broad section of the population and to keep prices low. Despite the challenges, the retail sector has strong growth potential. The franchising segment will continue to grow, and while strong local brands are emerging, international brand names will continue to account for the biggest percentage increase in the sector’s turnover. Changing consumption habits, increasing purchasing power and the growing number of tourists should boost the development of malls and luxury shopping. However, independent stores and markets should continue to account for most domestic trade in the foreseeable future.

IN this chapter, Larbi Belarbi, President, Association Marocaine pour l’Industrie et le Commerce de l’Automobile (AMICA), provides a viewpoint on the automobile industry; Hamid Benbrahim El Andaloussi, President, Groupement des Industriels Marocains Aéronautique et Spatial, provides a viewpoint on aeronautics; and Salwa Idrissi, CEO, Aksal Group, provides a viewpoint on the sector’s potential.

Khalil

ENVIRONMENT

The shift to an environment-conscious approach in Morocco has brought about scores of investment opportunities, most being in the utility and renewable energy industries. In addition to the rise in sales of photovoltaic panels, the business of wind turbines is also surging despite soaring prices on international markets because of the growing demand. To work towards a programme of sustainable development, a number of technological updates need to be made, including improvements to automobiles, the quality of energy products and increasing the number of renewable energy-producing plants. The government also needs to promote water conservation and efficiency in order to prevent further scarcity. Despite these challenges, Morocco is working to conserve and protect its environment and its efforts were recognised when its Mohammed VI Foundation for Environment won the environmental prize National Energy Globe Award in Brussels in 2007.

This chapter provides an interview with Olivier Dietsch, CEO, Veolia Environment Morocco.

Khalil

IT & TELECOMS :

The IT sector generated a turnover of Dh7bn ($910,000m), which represented an 11% increase compared to 2006. The number of Moroccan internet subscribers in 2007 amounted to 526,080, representing an increase of 31.6% compared to the previous year and a 100% increase compared to 2005. The national penetration for internet subscription remains low, even though it increased from 0.38% in 2004 to 1.72% in 2007. Yet over 90% of subscribers have a broadband ADSL connection, which is one of the highest ratios in the world. The future of the Moroccan IT sector was laid out in M@roc 2006-12. The plan aims to increased the combined value of the telecoms and IT sector from Dh24bn ($3.1bn) in 2004 to Dh60bn ($7.8bn) in 2012. While the telecoms sector remains the big earner, with Dh33bn ($4.3bn), the IT and off shore industries should generate Dh21bn ($2.7bn) each by 2012. In addition, the number of employees should increase from 40,000 to 125,000. The government hopes that adding more local content to the internet will increase usage. There have also been efforts to add more computers to schools and universities. E-commerce is likely to take off in the next few years, especially as the use of credit cards is gaining more ground in Morocco. Although computer and internet use have made a great leap forward in the past five years, the IT market still finds itself in infancy and offers great potential for further development.

The telecoms sector increased in value from Dh25.6bn ($3.3bn) in 2006 to Dh33.3bn ($4.2bn) in 2007. With a workforce of some 41,000 employees, the sector contributes 7% to annual GDP and is one of the country’s leading recipients of foreign direct investment (FDI). Under the development plan, the sector should employ 125,000 people by 2012 and contribute 10% of GDP. With the penetration rates of 69.4% from mobile phones and 8.95% for fixed lines, the Moroccan telecoms industry is set to continue to grow. The call centre industry – partially as a result of offshore initiatives, such as Casanearshore and Rabat Technoplis – will continue to expand. However, the worldwide call centre industry is highly competitive and education is the key to success if Morocco truly intends to become a leading international player in this industry,

This chapter provides interviews with Mohamed Horani, President, Moroccan Federation of Information Technologies, Telecommunications & Offshoring (APEBI), and Mohamed Elmandjra, CEO, Méditel.

Khalil

MEDIA AND ADVERTISING

In its 2007 report on Morocco, Reporters Without Borders acknowledged that issues previously regarded as taboo were now commonly covered. The future of Western Sahara, the rise of Islamism, terrorism, corruption and morally sensitive matters such as sexuality, HIV/AIDS, abortion and religion now regularly receive attention. Still arrests of journalists for critical coverage of the King and Islam persist. There are also increasing numbers of libel charges pressed against newspapers. Despite this, the Moroccan media sector is vibrant, with more than 17 dailies and some 20 weekly magazines. But it is unclear how many can survive in what remains a small market and consolidation is in order in the longer run. Meanwhile, the rolling out of private TV channels, while not ruled out entirely, seems unlikely to happen for the moment, as the authorities appear to be protecting the state’s monopoly on broadcast television. Finally, the internet can no longer be ignored, and although web surfers are still predominantly urban, young, educated and of the middle and upper classes, decreasing prices for ADSL and expanded coverage could rapidly change the picture.

According to the Moroccan Advertisers Group (Groupement des Announceurs du Maroc, GAM), Dh3.9bn ($507m) was spent in 2007, a near-fourfold increase on the Dh1.1bn ($143m) spent in 2000. There is still room for growth, as the market remains underdeveloped by international standards. Advertising expenditure represented just over 0.6% of GDP in 2007, compared with 1% in Egypt and 1.5 % to 2% in EU countries. Morocco’s 10 biggest advertising spenders account for about 35% of the total, with telecoms, consumer goods and services companies making up a large percentage of that amount. Television retained the lion’s share of advertising expenditure, with 55% of above-the-line advertising. In a 2006 poll, GAM found that 94% of its members used outdoor advertising, although 81% companied about problems, mainly caused by quality issues and delays. The potential for expansion is huge, and while telecoms should remain the largest advertising segment, fast-growing sectors of the economy such as retail, automobile and real estate are providing advertising companies with new opportunities.

This chapter provides an interview with Khalil Hachimi Idrissi, President, Moroccan Federation of Newspaper Editors.