A number of factors have helped to push inward investment into Morocco upward. However, officials are interested in continuing the trend by promoting regulatory reform and increasing the country’s position on key global rankings.
Figures from the UN Conference on Trade and Investment show that the value of foreign direct investment (FDI) inflows to Morocco stood at $2.65bn (€2.4bn) in 2017. That year, the kingdom was the second-largest target for FDI in North Africa – behind Egypt with $7.4bn, and ahead of Algeria with $1.2bn – and the fifth-largest on the continent, behind Egypt, Ethiopia ($3.6bn), Nigeria ($3.5bn) and Ghana ($3.3bn).
While this represented a 22.7% increase on $2.16bn in 2016, FDI inflows were down significantly on figures for the previous three years, with investment peaking at $3.6bn in 2014. The decline was likely related in part to the post-2014 fall in oil prices, given that several of Morocco’s major investors are oil-producing economies in the Gulf.
A turnaround is under way, however. The year 2018 saw strong growth in the value of FDI, suggesting that FDI could soon surpass its 2014 peak: inflows were up by 34% in 2018, to Dh32.8bn (€3bn), according to the Office des Changes. While this can be partly attributed to the price of oil, which saw a strong recovery from mid-2017 until October 2018, the kingdom’s stable and attractive investment environment is also shoring up FDI inflows.
France was the largest source of FDI inflows in 2018, and provided Dh5.5bn (€494.7m), or 19.3% of the total for the year, according to the Office des Changes. However, its contribution, though significant, has been broadly declining in recent years, from 22.5% in 2017 and a peak of 58.4% in 2010. In second place was the UAE with Dh3.58bn (€322m), or 12.4% of the total, followed by Spain with Dh2.59bn (€232.9m, 9%), Denmark with Dh1.72bn (€154.7m, 6%) and Japan at Dh1.65bn (€148.4m, 5.8%).
Gulf investment has fallen substantially in recent years, in line with the lower global oil prices. Inflows from the region’s top investors peaked at Dh6.7bn (€602.6m) from the UAE in 2015 and Dh3.9bn (€350.8m) from Saudi Arabia in 2014. To compare, in 2018 Saudi Arabia accounted for Dh492.1m (€44.3m) in FDI inflows.
With regard to FDI stock, France, the UAE and Spain are also the segment leaders. While figures for 2018 were unavailable, data from 2017 show France accounting for Dh207.1bn (€18.6bn), or 35.1% of the total, followed by the UAE with Dh125.5bn (€11.3bn, 22.3%) and Spain with Dh50bn (€4.5bn, 8.5%).
By sector, real estate was the largest target of gross FDI in 2018, comprising Dh5.7bn (€512.7m), or 20% of the total. This was followed by industry with Dh5.6bn (€503.7m), or 19.6% of inflows; energy and mines with Dh4.1bn (€368.8m, 11.6%); commerce with Dh3.3bn (€296.8m, 11.6%); and tourism with Dh2.5bn (€224.9m, 8.8%).
Noticeably absent from the leading FDI targets in 2018 was the insurance sector, which in 2017 accounted for Dh4.1bn (€368.8m) in inflows, placing it solidly in third place. This was likely the result of a deal agreed in 2016 by South African insurance provider Sanlam to acquire a 30% stake in Moroccan insurance-focused financial services firm Saham Finances, with the sale of a further 16.6% stake agreed to in 2017. However, the sector otherwise is usually a relatively minor contributor to inflows.
A breakdown of investment stock by sector shows that industry led the pack at the end of 2017, with a total of Dh137.8bn (€12.4bn), or 23.3% of the total. This was followed by real estate with Dh107.1bn (€9.6bn, 17.8%), telecoms with Dh80.5bn (€7.2bn, 13.7%), tourism with Dh56.7bn (€5.1bn, 9.6%), and energy and mines with Dh37bn (€3.3bn, 6.3%).
The authorities are proactively taking measures to attract more investment. Recent initiatives include a change to the tax code implemented in July 2018, under which new industrial companies active in one of 24 specified segments are exempt from corporate tax for their first five years of operation. Companies present in free zones already benefit from such an extension. The 2019 Finance Law, which was passed by Parliament in mid-December the previous year, set the government budget and includes a notable focus on foreign funding, including plans for the adoption of a new investment charter and the reform of the kingdom’s network of regional investment centres.
The kingdom is also working to attract more investment by improving its business environment. These efforts date back to 2010, which saw the establishment of the National Committee for Business Environment (Comité National de l’ Environnement des Affaires, CNEA). The work of the CNEA has focused partly on improving Morocco’s ranking in the World Bank’s ease of doing business index, though Thami El Maaroufi, adviser to the prime minister for improving the business environment, told OBG that it has never sought to focus on the rankings alone. “The doing business rankings are an excellent tool, but they are limited in the range of topics they cover, and also only measure the business environment in the economic capital of the country in question,” El Maaroufi said. “Some countries have focused all of their efforts on improving their score, but we wanted to address the work environment throughout the whole country. We also wanted to look at issues that are important to local companies but not captured in the rankings, such as payment delays, even if it meant that it would take longer to improve our position,” he added. As things have turned out, this has not been an issue, with the kingdom making rapid progress since the committee began its work in 2010, moving from 128th place that year to 60th place (out of 190 countries) on the ease of doing business index in the “Doing Business 2019” report. Morocco is the second-highest ranked country in the MENA region, behind the UAE (11th), and followed by Tunisia (80th), Egypt (120th), Algeria (157th) and Libya (186th). It ranks third on the continent, behind Mauritius (20th) and Rwanda (29th). The kingdom’s performance is due in large part to a 63 place rise in the resolving insolvency category, which was due to legislative reforms passed in 2018 regarding bankruptcy. “The previous bankruptcy law was not in line with international best practices,” El Maaroufi told OBG, adding that the process of revising the law took five years to complete. “We took care to make sure that the reforms were practical in the Moroccan context.”
The government hopes to further strengthen its position on the ease of doing business index in coming years through improving a number of processes, such as those dealing with the bankruptcy, property transfers and obtaining electricity connections. “There are currently a lot of people involved in property transfers, so we are working to simplify the process as well as facilitate some aspects, including, for example, allowing notaries to obtain all necessary documentation electronically,” El Maaroufi told OBG. With regard to electricity connections, he said the authorities were also working to simplify the procedures involved, as well as bring down costs and put in place a one-stop shop.
Looking ahead, Prime Minister Saad-Eddine El Othmani announced in December 2018 that the government intended to put a five-year national business environment strategy in place to run from 2020 to 2025. The move will support the target, announced in early 2017, of breaking into the top-50 countries in the “Doing Business” report by the end of the current administration’s term in 2021.
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