Helping hand: Partnerships are the foundation of growing trade volumes

While Morocco has good relations with a broad range of countries, it has long maintained particularly close ties with three key partners, namely the US, Europe (both the EU as a bloc and several key member states individually, above all France) and Gulf Cooperation Council (GCC) countries. The areas of cooperation between the kingdom and these partners include trade, investment and security; all three have also been significant sources of private capital flows and economic assistance in recent years. The kingdom continues to deepen its relationship with the trio, for example recently beginning negotiations for an expanded free trade agreement with the EU.

DEEPENING TRADE TIES: Morocco has long had close ties to Europe due to its proximity to the continent and shared history, notably in the form of French and Spanish colonial rule. A number of agreements and initiatives underpin current relations between the kingdom and the EU; the most important of these is an Association Agreement that binds the bloc and Morocco into a free trade area (primarily covering manufactured goods and industrial products), into which the two partners entered in 2000. In 2008 the EU also granted Morocco “advanced status” under the European Neighbourhood Policy (ENP), the framework under which the EU conducts relations with non-accession countries, making Morocco the first country to receive the status. The kingdom has received more financial assistance under the ENP than any other country, totalling €580.5m from 2011 to 2013.

Relations between Morocco and the EU continue to deepen and include topics ranging from trade to migration via a mobility partnership. In May 2013 the two began negotiations on a “deep and comprehensive trade agreement”, which will encompass areas such as services and intellectual property rights and which marks a new generation of agreements overlapping with liberalisation, as well as free trade provisions already covered by the Association Agreement. Four rounds of negotiations have already taken place.

FRENCH CONNECTION: Furthermore in December 2013 the EU and Morocco adopted a new action plan under the ENP for the period from 2013 to 2017. The EU as a bloc is by far Morocco’s most important trading partner (see overview), though Europe’s comparative importance to Moroccan foreign commerce has been falling over the last decade, from 74% of all trade in 2003 to 60% in 2012, while that of Africa, the Americas and above all Asia has been rising. On a country-by-country basis EU member France is the kingdom’s largest trade partner, accounting for 15.3% of total Moroccan external trade in 2012, followed by Spain with 14.2%. In 2012, bilateral trade volumes between France and Morocco passed €8bn, with France receiving more than one-fifth of the kingdom’s total exports. France is also the largest source of foreign direct investment (FDI) in Morocco, accounting for around 40% of total FDI in the kingdom between 2003 and 2012. According to statements from the French Ministry of Foreign Affairs, France now holds just over half of the total FDI stock in Morocco, with inflows in 2012 surpassing €919m. More than 750 French-owned firms operate in Morocco, including BNP Paribas, Renault and Alcatel, with a total employment footprint numbering more than 80,000. France is also the largest source market for remittances and capital transfers, accounting for around 40% of all Moroccan expatriate transfers, or approximately €2.1bn.

ACROSS THE STRAIGHT: Relations with Spain are also close, although they have also been subject to debates over the enclaves of Ceuta and Melilla and Perejil island; the dispute over the last of these sparked a brief military incident between the two countries in 2002, though no one was hurt. Still, that did not stop Spain from taking the top spot as Morocco’s largest exporter, surpassing France to account for 12.9% of the market in 2012. Spanish exports to the kingdom rose by nearly one-third year-on-year. Investment volumes are equally large, with hundreds of Spanish firms active in Morocco in sectors ranging from telecoms to electricity. According to Reuters, Morocco accounts for more than half of Spain’s total investment on the African continent. The dispute over Western/Moroccan Sahara has also occasionally hampered economic ties between Morocco and the bloc as a whole. For example, in 2011 the European Parliament blocked the extension of a fisheries agreement between Morocco and the EU that included waters off the Western Sahara, saying it did not sufficiently take into account the rights of inhabitants of the territory. In response Morocco ejected EU fishing boats from its waters. However, in July 2013 the two signed a new four-year fisheries agreement, which the European Parliament approved in December. Under the deal the EU will pay Morocco €40m a year, up from €36m, to allow access for 126 registered vessels to fish for select species in Moroccan (including Sahrawi) waters. The deal dovetails with efforts by Morocco to increase local value addition and sustainability, as the protocol not only outlines specific ceilings for the different types of fish that can be sourced, but also explicitly promotes local on-shore storage and processing by EU vessels.

DIPLOMATIC PARTNERSHIP: Strong Moroccan-American ties date all the way back to the founding of the US, which Morocco was the first country to officially recognise. The kingdom aligned itself closely with the US and the wider Western bloc during the Cold War; more recently, one of the main planks of strong relations with the US has been security and cooperation on counter-terrorism issues in particular.

While security has been an important element of ties between the two countries since 2001, its centrality has increased again in recent years as a result of rising concerns over political upheaval in the Sahel region. The US declared the kingdom in 2004 a “major non-NATO ally”. That same year the two countries signed a free trade agreement that came into force in 2006, the first in the region. Trade has subsequently seen a significant jump in volume. US exports to the kingdom touched $2.3bn in 2013, while Moroccan goods and services flowing in the opposite direction hit $977m – up slightly from $932m the year before but up significantly from a decade earlier, when they were only $375m. The US is also Morocco’s largest individual supplier of arms, accounting for around 35% of Moroccan military imports between 2007 and 2012, according to the Stockholm International Peace Research Institute, slightly ahead of France, with 30.6%. The US is an important donor to the kingdom as well. Between 2009 and 2013 it provided average annual foreign assistance of around $33.4m to the kingdom; in addition to this, in September 2013 the US completed its Millennium Challenge Compact with Morocco, with which it provided $697m of investment in segments like agriculture and handicrafts over five years. Since the signing of the agreement, investment stock and inflows from the US to Morocco have almost tripled. US firms active in the country include Citibank, Coca-Cola and Lear Automotive, but the kingdom has sought to further boost US interest, sending over a doorknock mission in 2014 to promote manufacturing, tech and finance opportunities.

GULF INVESTMENT: Gulf Arab kingdoms have also long been an important partner to fellow (and sole North African) Arab monarchy Morocco. The country is a popular holiday destination for Gulf citizens, and most of the Gulf states have acted as important donors and sources of investment to the kingdom.

To date, Saudi Arabia has been the largest market in the MENA region, accounting for more than 70,000 arrivals in 2012. Recently, the Gulf states have continued to work to help provide capital and assistance to encourage development and provide greater fiscal flexibility. Against a backdrop of regional upheaval, in 2011 the GCC moved to bolster symbolic support for Morocco by inviting it and Jordan, the only other non-Gulf Arab kingdom, to join the bloc.

While this has yet to occur, in 2012 four of the GCC states agreed to provide the Morocco with $5bn in aid for the period until 2017. Morocco has also formed a “special strategic partnership” with the bloc, and in October 2013 they established eight bilateral working groups to deepen ties. In May 2013 the GCC also announced plans to establish a Moroccan food security fund worth some $1bn.

Capital has also gone to the services sector, in a bid to stimulate job creation. For example, a pair of new agreements were concluded in the second quarter of 2014 with the Gulf states of Kuwait, Saudi Arabia, Qatar and the UAE. The agreements, which were inked in partnership with the Moroccan government, are expected to provide up to 40% of the estimated funding to finance tourism projects planned in Casablanca, Tangiers and Rabat.

The total investment to carry out the selected projects – which include a variety of leisure facilities and renovated cultural areas – is valued at around €2bn, with the works expected to be completed within the next five years. The committed funds are to be split equally between the five partners, while the remainder is expected to be drawn from private investors as well as bank financing. The financing will be channelled through the Wessal Fund, a finance mechanism set up by the Gulf Cooperation Council and Morocco to support the development of tourism during the period of regional turbulence in 2011.

Individual Gulf states have also invested in the kingdom. For example, the Saudi-Moroccan Joint Commission for Bilateral Cooperation formed a Dh800m (€71.73m) investment fund to boost trade in 2013. The two countries are also studying the creation of a direct shipping link that would connect the ports of Tanger-Med, Radès and Jeddah. The volume of trade between Saudi Arabia and Morocco totalled around €3.3bn in 2012, although a large portion of this is comprised of Saudi Arabian oil exports to Morocco. In addition, Saudi Arabia also sends the most visitors from the Gulf to the country. In May 2014 a joint Saudi-Moroccan firm, Asma Invest, announced plans to invest $230m in the kingdom by 2015.

The UAE is also an important source of FDI for the kingdom, investing in real estate and tourism. The total stock of FDI from the emirates was Dh13.8bn (€1.2bn) for 2003-10 and appears set to increase. In late 2013 the UAE’s Etisalat agreed to purchase a stake in Maroc Telecom for $5.7bn. The deal will make Etisalat the second Gulf telecoms firm with in the country; Kuwait’s Zain has a 15% stake in Inwi, the smallest operator.

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