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Morocco on the road to emergence

Interview - December 1, 2014

Morocco's Minister of Economy & Finance, H.E. Mohamed Boussaid, sat down to discuss what has been making his country an attractive place for investment and what he believes will shape Morocco's economy in the future.


Undoubtedly Morocco is an economic power, the 5th in Africa to consolidate a growth of 4.7% in 2013 due to political and economic reforms and an efficient financial sector and its ability to maximize trade relations and to attract foreign investment. However last week the IMF revised growth forecasts for Morocco downwards and estimated a 3.5% growth for 2014. What are the enemies of economic growth in Morocco?

To reply to the question of revision of growth by the IMF, it has not only affected Morocco, it has affected the whole world. And I think that nowadays Morocco can be satisfied with the growth rates it has had since 2000 because we have maintained an average since the beginning of the 2000s in nominal growth of 4.7% per year, while over the years of course there may be variations in growth rates. In that respect, the explanation from one year to the next can be found thanks to the contribution of agriculture. Today of course through the Green Morocco Plan, our agriculture is modernized and is moving towards a modern, irrigated, agriculture, which is able to stabilize agricultural value-added. But a large part of agriculture depends on rainfall, so a more or less dry year or a more or less humid one can have a negative or positive contribution to GDP. But overall since the 2000s the average growth is 4.7%. That is why in 2013 the growth was actually 4.7%, in 2012 it was 2.5%, and in 2014 we are at 3.5%. For 2014 we expect a 4.4% growth  

This increase in the rate of growth can be explained through a change of model of the Moroccan economy. This model is no longer driven by a sector, it is a model which is based on a sector diversification: the modernization of agriculture through the Green Morocco Plan, but also other sector plans which enable to place Morocco today in a much more stable, much more prosperous path, insofar as we rely on our own strengths, our own competitive advantages to attract other businesses which Morocco was not aware of not long ago. Since the beginning of the year, for example, the automotive sector has been the largest export sector. It goes far beyond the traditional export sectors. Morocco achieved a great performance in exports of around 32.6% increase for export of cars, 26% for electronics and 17% for aeronautics. So these are new professions that Morocco is attracting now through once again a strategic vision and sector plans that have enabled to achieve these outstanding results today.

The other aspect of diversification that Morocco undertakes is geographic diversification to diversify our partnerships worldwide. Of course there are our traditional strategic partners, Europe, the United States also, but today the horizon is opening a little more with the countries of the Middle East and much more with the countries of Sub-Saharan Africa.

So this double diversification, both sectorial and geographic, enables today to promote our economy and our growth, and improve the overall economic performance of our country.

This economic model is accompanied by a policy that aims to gradually regain the balance in our macroeconomic framework. Deficits are increasingly mastered and reduced, inflation remains below 1%, the unemployment rate remains relatively stable and our balance of payments is improving continuously. This priority given to macroeconomic aggregates but also the effort made to improve the performance of our economy, therefore this convergence, allows us today to be relatively well positioned to continue the march of progress in our country.

The assessment, which is nowadays made by our partners and the international financial institutions, is extremely positive. I would just like to give some examples: the IMF which you mentioned has decided to renew this precautionary liquidity line which is a guarantee that Morocco has with the IMF, it is a guarantee, it is a line which is at Morocco’s disposal, and which the country can draw from at any time. Although we did not need this line, we have renewed it. I hope we will not need to use it and I think that we will not need it, but it is an umbrella, a cover in case of any potential impact the economy might suffer.

Rating agencies also improve the appreciation they make of Morocco because for the past year Morocco has still been BBB-, but they have improved the outlook, the horizon, moving from a negative horizon to a stable one. The immediate response to all this extremely positive assessment of economic governance, of the economic performance of our country, enables us to attract today increasingly more foreign investors; and last year we have probably made the biggest increase of foreign investment attraction: around $4 billion, therefore an increase of more than 23%.

Morocco has become the second most attractive country in terms of foreign direct investment (FDI) in the African continent, after South Africa and before Egypt. What are the advantages of the Moroccan market for foreign investors?

In today’s very troubled world I think that the biggest advantage, the greatest strength, Morocco’s largest precious asset is its political stability and its economic stability.

An investor of course is looking for profitability and profit, which is quite normal - looking for lucrative business-, but if you take a profitable business, it must evolve in a safe environment. So I think the first thing investors look for is political stability, and this political stability in Morocco today comes from a long process of reforms and political expectations that started back in 2000. We often forget this trajectory.

Morocco reformed the political field very early on; it took on initiatives for the empowerment of women; it turned the page of the past through the instance equity-reconciliation. It reformed very early on the religious field for tolerance and openness to others and it improved its infrastructure because it also plays a role in the attractiveness of Morocco. Morocco also dealt with the social dimension because there is an economic growth but there is also a social dimension. Morocco, through his

Majesty the King, has implemented a major initiative called the National Initiative for Human Development which focuses on frail people, on people who live precariously and in poverty, to target them so that they can enjoy a little bit of the fruits of growth.

So it's this mosaic once more of reforms carried out very early on, crowned by the new constitution of 2011, which is in fact an outcome that helped Morocco both to guard  itself against all the social unrest that strikes the region, and that consolidates in a strong and irreversible manner this political and economic stability.

The second thing investors seek of course is the business environment. The country should be stable but business also needs to be done quickly and easily. And Morocco is improving - of course there is still a lot of pending work as again we are not yet fully satisfied of our business environment-, but there is certainly considerable improvement. The latest report of "Doing Business" allowed Morocco to move up 8 places in its ranking. And in the latest report by the WEF, the World Economic

Forum, regarding competitiveness, Morocco gained 5 places. This is a source of encouragement for us to continue working to further improve our business environment.

These are basically the two things that investors seek. And I think that today Morocco stands out and positions itself as actually being a real homeland for investors who understand that the overall country competitiveness gives them many chances of success, but who benefit also from what I have just said in reply to the first question, of this geographic diversification and the significant number of free trade agreements that Morocco has signed with the world – we signed with 55 countries including the European Union –  which represent 1 billion consumers, plus all the opening today to Africa, which make all these companies and these multinationals think about choosing Morocco as a  production and export platform to these countries.

We would like to know a little more on the revision of the Banking law, and the importance of making Morocco a financial hub located between Africa and Europe.

It is the law concerning particularly the supervision role of Bank Al-Maghrib, thus the Central Bank; it is the introduction of participatory banks – we do not say Islamic banks because they are participatory banks so through these new financial instruments – and a law which grants Bank Al-Maghrib the authority to control micro-credit companies: therefore the reform of the banking law which is currently under discussion in Parliament. Of course there are also in the pipeline, other financial instruments that will be placed in the adopted system, including the OPCI which are the collective real estate collective funds. There is the completion of the law concerning Casablanca Finance City – because it also falls within the financial market – which is now the regional financial hub located in Casablanca, and which is progressing very well. Casablanca was ranked in the GFCI, the Global Financial Cities Index, in 51st place. It gained almost 30 places in the world. For a young financial center it is very important to notice. And the Stock Exchange is ranked second in Africa after Johannesburg and ahead of Cape Town.

Effectively as a stock exchange, it is a dynamic one, a major stock exchange. The latest partnership signed with the London Stock Exchange to bring technology, therefore with the second world financial center which is the LSE, would improve its performance, transparency and the conditions of its transactions. We are also thinking of how to add more depth and liquidity to that stock market. Because since the 2008 crisis it has recorded, as indeed all world stock exchanges, underperformance.

Since the beginning of this year this performance is back. You look at the numbers: we are on a 10% increase of stock market indices of the Casablanca Stock Exchange.

Therefore the range of the whole planning of the financial market and the capital market reforms is underway.

We would like to know how your Ministry works to improve the penetration of the banking system in Morocco. It is also an essential part for the advanced regionalization of the country.

The use of banking facilities is progressing. Again I think that you will see the figures: the penetration rate of banking services is between 40% and 45%. Of course compared with other developed countries, this rate remains relatively low, but it has improved considerably in recent years. We have a sound financial system, which is a well managed, well supervised banking system. As evidence it has hardly been affected by the latest crisis, the financial crisis that has gripped the world and today it is a banking system that is in very good health regarding its ratios and its management. And it conforms fully to the Basel III rules, therefore its prudential rules. It is also a profitable sector: the results of the banking system are impressive. And better than that: our banking system has a vision and began its internationalization in a number of African countries. We have three banks in particular that are now installed in Gabon, Mali, Ivory Coast, in about twenty countries. So it is a system that dominates its market and is in the process of internationalization in a number of sub-Saharan countries.

And which also drew the attention of Spain’s banking institutions because there are many relationships between the financial institutions of the both countries?

Always! Santander and la Caixa are present. With Spain the relationship concerns practically all sectors. It emanates first from the excellent political relationship between the two countries, between the two sovereigns, his Majesty King Mohammed VI and his Majesty King Felipe VI who honored us with his last visit at the invitation of his Majesty the King. And the relationship between Morocco and Spain is a very strong and extremely privileged historical one. It has transcended time because firstly there is the issue of neighborliness, there are these historic links that Morocco manages calmly.

And today we see with a lot of optimism this economic link which has increasingly developed. I would like point out that since 2012 Spain is Morocco’s leading supplier. There is a very strong presence of Spanish companies in Morocco, and I was always told that the largest Spanish Chamber of Commerce abroad is the Spanish Chamber of Commerce in Morocco. This is important.

The presence of Spanish companies in Morocco is a success story. We wish to do much greater things together and differently. Earlier we spoke about Africa. Yes, today, perhaps the experience and know-how of French or Spanish companies with the availability and relations that Morocco has with a number of Sub-Saharan countries, diplomatic and political relations, enable to do things together to meet the needs expressed in these countries.

So I am very optimistic about the evolution of this presence of Spanish companies in Morocco. I believe that with the economic recovery that is taking shape in Spain, Morocco will remain a privileged partner for Spain.

Honestly, Morocco and Spain cannot play competition. However Morocco and Spain can play together complementarily, thus closely. And yet the horizon that Morocco can offer Spain, allows Spanish companies to improve, grow, and prosper much faster.

And if it’s not Spanish companies that will do it, perhaps there will be other companies in the world that will perfectly understand the privileged positioning of Morocco today and will do it. But I’m sure that the proximity between the two countries would therefore allow their taking advantage in spite of the difficulties. Because even when there are economic difficulties and crises, they are sometimes beneficial crises, they are crises which allow things to improve subsequently.

I think that now is the right time to bolster this relationship, by meeting more often because we do need to meet, we need to have a dialogue, to communicate. It is often the case: we don’t think of people who are nearby, even in human relations. You do not think of someone who is next to you all the time systematically.

I believe we need to think increasingly about one another and intensify, increase the frequency of meetings. I know that on the political level, political dialogue is carried out in an extremely favorable way. I also know that Spain, through the role it plays in the European Union, as member of the European Union, has an important role. I believe that the last agreement, the implementation of the fisheries agreement that was requested and, of course, with which we are satisfied due to its successful outcome, would allow the consolidation of these links.    

As for economic cooperation I believe it’s an everyday task. And it is a permanent and almost daily human relationship. The world is fast-moving, so you must always seize each and every opportunity that may arise, as soon as possible. And if you miss the window of opportunity, you have to wait a long time before it returns.

And in which sectors would you like to see a greater presence of Spanish companies?

I think in all sectors. Firstly there are Morocco’s priority sectors, but I honestly think that in industrial sectors in general, but the auto industry, aeronautics, off-shoring, in all these new Moroccan sectors there are substantial opportunities. The industrial sector in general but which would enable thereafter, as I said earlier, to meet the needs of Sub-Saharan Africa.   

The third set of important sectors is agriculture, with Spanish skills, but with all the strategic vision of the Moroccan Green Plan. There are Spaniards already today particularly in the North which have large farms of strawberries, raspberries, blueberries, mixed berries and others. I believe that the agricultural part and its corollary, agribusiness, is a great sector, a large area of partnership.

I am also thinking of everything that is related to the maritime sector. When I say maritime sector I mean shipping, shipyards.    

And the last point is that Morocco is on the eve of the launch of a much more avant-garde policy in terms of Public Private Partnership, which will affect large infrastructures, which will not be made following the conventional budgetary funding model, but finding partnerships with the private sector. I'll mention some sectors: perhaps airports, highways, hospitals and universities. So the field is quite broad and I think that there is an opportunity to be had, especially since we are just weeks away from the passing of a law which is in Parliament, which will be voted on very soon, for PPPs.

You were Minister of Tourism. Tourism is Morocco’s image abroad. Now you are the Minister of Finance and Economy. I would like to know your opinion on what the international image of Morocco in Europe, particularly in Spain is?

Morocco’s image in the world is generally a very positive image. Morocco’s vision, its seriousness, its credibility and its ability to reform is renowned. And Morocco’s social cohesion because Morocco is plural, is recognized as well as its institutional and economic model which is quite exceptional. Because Morocco which is at a crossroads – in terms of its geographical position it is closer to Europe and it is in Africa, it is an offshoot of an entire Arab/North Africa region – has managed to be daring; it has been able to rely on itself to tackle the real issues which probably other countries dare not even open.

I spoke earlier of women: there are models in Arab countries who do not dare. I can talk about Amazigh culture which is enshrined in the constitution. Perhaps a certain number of countries do not dare to imagine. We spoke about the religious field and how the reform of the religious field took place in a very peaceful manner. I spoke earlier of the equity and reconciliation instance that has turned the page on the past, and the establishment of institutions that deal today with human rights and the freedom of expression. I think that the capacity of Morocco to reform itself and move forward is its greatest asset; and the reform of justice today for example to have a much more efficient, much more effective justice. It opened also a big issue which is the retirement question (today we have problems with pension funds), it opened it with courage and determination to solve this problem.

I think that Morocco has managed again, each and every time, both to anticipate results and evolution of matters, of the world and of the region, but whenever a problem arises, it has dealt with it with frankness and with courage, and has tried to go all the way to settle it. I think it’s the image of a Morocco on the move, a tolerant Morocco. Naturally there are the intangibles, I’m not going to talk about intangible assets of tourism, landscapes, climate; tourists are looking for that, but they are also in search of a culture and of a Moroccan society which knows how to simultaneously combine and blend authenticity, its culture and its tradition with modernity.    

I spoke earlier of the reform of the judiciary. There is a great reform also today to solve issues of territorial development. It’s the advanced regionalization: that each region can have certain attributions and express its priorities as well as have a say in the planning of its priorities. Therefore the issue of regionalization is a structuring project.

Justice, retirement, regionalization!

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