In 2008 the EU upgraded its Association Agreement with Morocco to “advanced status”, granting the kingdom most of the commercial advantages of being part of the EU but without participation in the bloc’s political institutions. The kingdom now is undertaking the painstaking work of harmonising its laws and regulations with EU requirements, which should help further boost foreign direct investment (FDI) from Europe and increase trade volumes. By fixing the EU standard as its benchmark, the harmonisation process may have added benefits, such as attracting non-European FDI as well.

FUNDING: The EU and Morocco have long had close ties. The EU is Morocco’s top trading partner, and the kingdom is the largest aid recipient under the EU’s European Neighbourhood Policy, receiving an average of €2m per year. The EU also funds specific projects in Morocco, such as extending financial assistance for the promotion of gender equity and rural development in the region of Al Hoceima in the kingdom’s north.

The European Investment Bank (EIB), which lends to Morocco, tends to follow EU standards, and aligning with its policies will help the government fund its objectives. In 2012 EIB lent Morocco €280m for electrification and solar power projects, €62.5m for water and water management projects and also supported industry with €172m for an infrastructural modernisation process by the OCP. It also lent €5m for the development of small and medium-sized enterprises, €340m for road works and €100m to build technological parks in 2012.

AGREEMENTS: In February 2012 Morocco received Dh2bn (€177.8m) from the EU in support of the harmonisation process that began four years ago. The current process, which will bring Morocco to the closest EU partnership level below full membership, comes 26 years after Morocco applied to join the EU. Within the framework of this preferential relationship, a series of contracts were signed in 2012 between Morocco and the EU to consolidate economic ties. On March 1, 2012 the two parties signed a free trade agreement for all industrial products. This is significant, as Morocco has been developing its industrial sector to drive export-led growth. In October 2012, an agreement was signed allowing 98% of agricultural produce to be traded between the two free of Customs duties. In November, Morocco and the EU signed a contract on procedures for settling disputes between the two parties.

The first tranche of the harmonisation funding, Dh1bn (€88.9m), targets nine sectors: industry, transportation, fishing, agriculture, employment, water, education, consumer protection and human rights. The upgrade to advanced status has motivated a number of legislative changes to improve local corporate governance. Moroccan legislators are currently discussing a law to extend powers of the Competition Council. At present, the council can only follow up on investigation requests on malpractices, but under the new law it will be able to carry out its own queries. The official anti-corruption body, the Central Authority for the Prevention of Corruption, also expects its powers to be extended. “Transposing [many of the] the technical, industrial, antitrust and other EU norms, this creates a homogenous framework that brings the two economies together and allows more trade,” Caroline Sorgues, who oversees issues related to business climate and industrial policy for the EU’s Morocco mission, told OBG.

PROGRAMMES: Within the context of its European Neighbourhood Policy initiatives, the EU is working on the full body text of a free trade agreement that will allow Morocco to participate in the internal market of the European trade bloc. Dialogue is also underway with the aim of making it easier for nationals of the EU and Morocco to visit and temporarily work in each other’s countries. In addition to its promotion of social welfare programmes, the EU is supporting the Moroccan government in its process to strengthen its fiscal, management and transport policies. In the wake of the Arab Spring, the EU provided immediate funding targeted at job creation and good governance. However, despite the gains already made, completion of Morocco’s advanced status mission is still an ongoing process.