The Report: Morocco 2018

Economy

Despite the kingdom’s dependence on agriculture for strong GDP growth, efforts to strengthen other export sectors, coupled with diversification of trading partners, have allowed Morocco to develop a variety of competitive industries and increase their presence in international markets. Traditional segments such as phosphate production remain important, but a range of emerging manufacturing capabilities are helping to promote growth across a broader base of activities. Morocco has seen a recent influx of investment that has been translated into various projects, such as new industrial and infrastructure developments. With an emphasis on diversifying its commercial partners, Morocco’s African strategy has been raising the kingdom´s political and economic profile, and extending its clout across the continent.

This chapter contains interviews with Mohamed Boussaid, Minister of Economy and Finance; and Ahmed Lahlimi Alami, High Commissioner, High Commission for Planning.

Banking

Morocco’s banking sector is the most highly developed in North Africa in terms of penetration indicators and is also among the most advanced in the wider MENA region. The industry, which is in the midst of a recovery in lending growth, stands on the verge of another substantial step forward, thanks to the imminent launch of both an Islamic banking sector – backed by the creation of a wider Islamic finance system – and a new system of non-bank payment institutions. Plans are also under way to open up the microfinance segment to depositors and private operators, in addition to ongoing reforms to further bolster the financial system’s overall stability.

This chapter contains interviews with Abdellatif Jouahri, Governor, Bank Al Maghrib; and Abdulbasit Ahmad Al Shaibei, CEO, Qatar International Islamic Bank.

Capital Markets

One of the largest capital markets in Africa, Morocco’s bourse, the Casablanca Stock Exchange, has been slow to develop in recent years, with relatively few new listings, limited liquidity and a mixed performance. While initial public offers have been relatively few and far between since 2012, a wide range of recent reforms and more legislation in the pipeline appear could help boost investor interest. These changes should provide a range of new products and allow investors to make a profit during times of both rising and falling share prices. Relaxing listing conditions for smaller firms, which are often in greatest need of capital, will also provide a welcome change for the sector. The market’s strong performance in 2016 and 2017, the continuing development of Casablanca Finance City and efforts to make Morocco a regional financial centre more generally will add further momentum, cementing the kingdom’s status as one of Africa’s most important capital markets.

This chapter contains an interview with Hassan Laaziri, Chairman, Association of Moroccan Capital Investors and CEO, CDG Capital Private Equity.

Insurance

Already the leading insurance market in North Africa, as well as a major force in the African market, Morocco’s insurance industry continues to see growth and large-scale regulatory reform, with the foundation of an Islamic insurance segment as well as new forms of compulsory insurance. Factors such as the emergence of the kingdom’s middle class, growing awareness of insurance, remote sales of coverage and the imminent launch of takaful (sharia-compliant insurance) firms should help to sustain expansion rates in excess of GDP growth over the medium to long term. Coupled with growing industry interest in building a wider Moroccan presence in the sub-Saharan African market, these developments will assist in raising sector penetration and further consolidate Morocco’s status.

This chapter contains interviews with Ali Harraj, President, Wafa Assurance; and Youssef Fassi Fihri, CEO, Société Centrale de Réassurance.

Industry

The need to diversify production capacity and create jobs has been pushing Morocco to invest in its industrial sector. Industrial activities have traditionally focused on agro-industrial production; however, the kingdom is looking to leverage burgeoning segments such as automotive and aeronautics. Outlining the expansion of manufacturing under a series of government-led programmes, a host of emerging business lines are gradually becoming essential for generating exports. Through the creation of interlinked production clusters, both the government and private investors are setting the stage for industries such as automotive production, agro-industry and aeronautic components manufacturing to become central to the economy.

This chapter contains interviews with Amine Louali, President, Moroccan Steel Industry Association and Deputy CEO, Maghreb Steel; Noureddine Gnaou, CEO, Soremar Group; and Benbrahim El Andaloussi, President, Institut des Métiers de l’Aéronautique.

Agriculture

Agriculture remains a key contributor to Morocco’s economy, accounting for about 15% of GDP in 2016. The sector generates nearly 40% of employment and over 10% of exports, and the industry’s development plan has benefitted both agricultural productivity and resiliency. Numerous initiatives, such as incentives and measures to ease access to land, improve irrigation systems and contribute to segment-specific growth, should bolster prospects in the medium to long term. However, adding value to agricultural products remains an area for further progress. A public programme is seeking to incentivise the enhancement of production capacity, the development of exports, and the modernisation of marketing and distribution. The kingdom is also set to continue playing a key role in supporting growth of agricultural yields and battling the effects of climate change.

This chapter contains an interview with Hassan Sentissi, President, National Federation of Seafood Processing and Development Industries.

Tangiers

In the late 1990s King Mohammed VI chose to use Tangiers as a catalyst for the transformation of the north by turning the historically sidelined region into a motor of the national economy. In the past decade, the region has seen the launch of a new economic development plan, leveraging Tangier’s strategic location at the Strait of Gibraltar. At the confluence of these key maritime routes is the cornerstone of the city’s multi-sector development strategy: the Tanger-Med port complex, which unleashed the region economic potential. Ongoing projects such as the Mohammed VI Tech City bode well for the future of the region, which is well positioned to attract further global players in increasingly complex, technology-intensive industries. One of Tangiers’ key challenges for the future will be the extension of the benefits from increased foreign direct investment to the rest of the region, including more isolated areas such as Al Hoceima.

Tourism

Contributing 8.1% to GDP and accounting for 7.1% of employment in 2016, tourism holds an important place in Morocco’s economy, with 2017 garnering strong results. Despite having faced some challenges, the country has a number of favourable factors to build upon, such as its political stability, new infrastructure developments and multiplying air connections. While the sector is still far from achieving its 2020 target of 20m arrivals, the latest figures signal an uptick in activity, demonstrated by growing inflows, an increasing number of overnight stays and new infrastructure. Even with these successes, however, sector leaders have identified weaker areas to focus on, such as relatively low average occupancy rates. In the meantime, Morocco’s niche tourism segments – notably seaside, business, and meetings, incentives, conferences and exhibitions – are seeing marked progress, thanks to proactive source market diversification and targeted travel promotions.

Telecoms & IT

As operators and mobile users adopt new forms of mobile communications, the kingdom’s telecoms market is progressively moving away from the traditional voice-based business model. This is leading to new challenges in terms of regulation and market competition, but is also setting the stage for a new phase, wherein data forms a critical part of telecoms services. Despite slower growth, the industry is an important component of the economy, and not merely because of its trickle-down impact on other sectors. Morocco’s efforts to develop the ICT sector have produced noticeable results, and growing ICT and telecoms usage have allowed companies to create employment and make a larger contribution to exports. Government policy has similarly focused on increasing the role of ICT to bridge existing gaps between the state and citizens by establishing a series of e-government policies that have paved the way for business and citizens alike to interact with the state. However, improved service quality in rural areas is required for the sector to unlock further growth and expansion.

Energy

As operators and mobile users adopt new forms of mobile communications, the kingdom’s telecoms market is progressively moving away from the traditional voice-based business model. This is leading to new challenges in terms of regulation and market competition, but is also setting the stage for a new phase, wherein data forms a critical part of telecoms services. Despite slower growth, the industry is an important component of the economy, and not merely because of its trickle-down impact on other sectors. Morocco’s efforts to develop the ICT sector have produced noticeable results, and growing ICT and telecoms usage have allowed companies to create employment and make a larger contribution to exports. Government policy has similarly focused on increasing the role of ICT to bridge existing gaps between the state and citizens by establishing a series of e-government policies that have paved the way for business and citizens alike to interact with the state. However, improved service quality in rural areas is required for the sector to unlock further growth and expansion.

Construction & Real Estate

Supported by housing demand and infrastructure plans, Morocco’s construction companies have been able to maintain steady performances despite the negative effects of a host of local and international factors. The economic downturn in Europe and regional instability have dampened investment flows to the sector in recent years, while lower levels of credit to the real estate industry from banks have posed additional challenges for mixed-use projects. The Moroccan real estate sector has seen a steady recovery from the 2008 financial crisis. While high-end housing and luxury developments took a hit, prices for quality developments have remained steady as foreigners and Moroccans living abroad continue to look to real estate as a secure investment with long-term prospects. The government has pushed to increase the number of affordable homes through a series of incentives for developers, while commercial and office space developments have become increasingly important.

This chapter contains interviews with Tarafa Marouane, Chairman, SOMED Group; and Selma Belkhayat, Managing Director, Aswaq Management Services Morocco.

Transport

Improved connectivity is a key pillar of Morocco’s economic development strategy. The strategic decision to locate special economic zones close to the main intercontinental ports has boosted activity, and there are calls to develop additional zones beside the country’s airports. Moreover, internally, road and rail links can improve the business environment by reducing transport costs and spreading economic development nationwide. Upgrades will prove particularly effective in bringing investment to more isolated regions. With the kingdom’s beneficial location on the crossroads between Africa and Europe, Morocco is emerging as a continental transport and logistics hub.

Retail

As average incomes expand along with Morocco’s middle class, the retail sector is seeing a rising number of opportunities for development. Shopping malls have become the norm in the kingdom’s major cities, and while less-formal commerce still accounts for a large proportion of sales, the movement towards modern retail is underpinned by stable economic fundamentals that are expected to continue over the long term. As the kingdom becomes more closely integrated in the international economy, consumers are demanding a wider variety of retail options and experiences. This will present both challenges and opportunities for retail developers, as well as investors aiming to represent international brands in Morocco.

This chapter contains an interview with Moncef Belkhayat, President, DISLOG.

Education & Health

Morocco has made great strides in boosting school enrolment, and ensuring access to education has been a primary goal in recent decades. However, the chief challenge over the medium terms is ensuring finish their studies with not just academic qualifications, but also the skills needed to successful enter and contribute to the labour force. In the wake of the Arab Spring, Moroccan citizens approved a new constitution that promised a range of rights, including universal health care and access to quality health services. The authorities have since taken a number of steps to increase coverage, reduce costs, improve quality, and extend services in rural and otherwise isolated areas. Challenges remain in rural areas, however, and funding efforts are likely to be concentrated on building new health facilities and addressing the significant staff shortages that leave some clinics and hospitals in disuse.

Ayman Cheikh-Lahlou, President, Moroccan Pharmaceutical Industry Association, and CEO, Cooper Pharma; and Nawal Chraibi, Acting CEO, Moroccan Foundation for Advanced Science, Innovation and Research.

Tax & Accountancy

In conjunction with KPMG, this chapter contains an introduction to Morocco’s taxation system, including a breakdown of rates imposed on corporate income, regulations governing capital gains and double taxation, and a list of goods and services exempted from value-added tax.

This chapter contains a viewpoint from Fouad Lahgazi, Senior Partner, KPMG.

Legal Framework

In conjunction with Naciri & Associés Allen & Overy, this chapter contains an overview of the legal framework in which local and foreign investors operate in Morocco, with an overview of the regulations governing different sectors, the rules for investment and expatriate employment, and recently introduced legislation on trade and financial services.

This chapter contains a viewpoint from Hicham Naciri, Managing Partner, Naciri & Associés with Allen & Overy.

The Guide

The guide contains information on some of the leading hotels in Morocco and contact details for government ministries, embassies and business services, alongside useful tips for first-time or regular visitors.

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