Morocco increases role for the private sector

In line with a global trend to increase private sector activity in infrastructure development, Morocco is now host to several major public-private partnership (PPP) projects, including the kingdom’s largest power station and port at Jorf Lasfar and Tanger-Med, respectively. PPP success has left the government keen to boost the number of such projects, and privately financed public infrastructure initiatives in particular, in the process expanding government services and infrastructure without upfront investment. This interest in PPPs has gained traction under a new law to enhance clarity around the regulatory framework governing contracts.

Benefits 

While procedures vary depending on the arrangement involved, many PPP contracts require a private partner to put up capital for infrastructure projects, allowing for investment without the government having to borrow up-front. This puts an obligation on the government to pay the service provider for their use over the lifetime of the project, which is not necessarily cheaper than building such projects themselves; the extent of any benefits are also subject to uncertainty, given the long timeframes involved. Nevertheless, the ability to launch projects without upfront capital costs is attractive to the government in light of ongoing efforts to reduce its large fiscal deficit and public debt (see Economy chapter). “There is a need for investment, but public finances are limited, so we are likely to see more PPP projects every year,” said Inés Pérez-Durante Bayona, economic and commercial counsellor at the Spanish Embassy to Morocco.

The government has also suggested that it could benefit from the expertise of service providers under PPP contracts. “We want to move from the traditional model of state funding to private investments via PPPs,” Aziz Rabbah, minister of equipment, transport and logistics, told guests at the Port Finance International Morocco conference in September 2014.

Existing Projects

Major areas in which PPPs are under way or planned include transport (in particular ports), energy and utilities, higher education, and agriculture. Among the largest project already in place is Jorf Lasfar independent power plant, 130 km south of Casablanca, which is the biggest coal-fired thermal power station in the Middle East and North Africa. The plant supplies more than half of the kingdom’s electricity and is undergoing a $1.6bn expansion project that will eventually raise capacity to 2056 MW.

Another major project is the Dh35bn (€3.81bn) port development at Tanger-Med, scheduled for completion by 2016. Total cargo reached 34.9m in 2013, according to the Tanger-Med Port Authority, with private port operators helping to finance and build in return for operating concessions for the port’s terminals.

As with many markets, there have been stumbles with the implementation of some PPP projects. Partnerships with private firms in the utilities sector, for example, have faced opposition over tariff and pricing changes, as well as questions over access, with privately managed water utilities in major cities attracting protests over pricing and other issues in the late 2000s and during the so-called 20 February protests in 2011.

New Law

The closest thing the country has to PPP legislation is a 2006 law on outsourced public services. However, in December 2014 the Parliament approved a new PPP law, with legislation published in the kingdom’s official bulletin in March 2015. Under the new law, a PPP unit attached to the Ministry of Economy and Finance has been set up to identify new projects. The law allows for private finance initiative-style PPP deals by permitting a private partner to lead planning, financing, construction, maintenance and the operation of projects necessary for public service, and allows for contracts from five to 30 years. State-backed firms are also allowed to issue PPP contracts under the law, though restrictions have been imposed. These relate to projects in defence, education and health, which are forbidden, with the state holding authority to cancel contracts should the private service provider violate regulations or refuse to renegotiate service prices, as well as where it is seen as necessary for “public interest.”

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The Report: Morocco 2015

Trade & Investment chapter from The Report: Morocco 2015

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