With its long coastline and varied geography, Morocco has long been established as a popular tourist destination but it has also been in the headlines for all the wrong reasons, for instance a flow of illegal migrants seeping through the country to attempt entry into Spain and the EU. It is this latter perception of the country that the government is aggressively trying to dispel by highlighting a diversified economy that has benefited from investor-friendly reforms and is now yielding numerous opportunities.

Position is crucial


“Globalisation has resulted in intense competition. The government has been obliged to define a place for the country in the global economy; it was crucial to position the country correctly,” says Hassan Bernoussi, director of investments for the Moroccan government.

Working with global consulting firm McKinsey, the government has developed an industrial strategy, targeting high-potential sectors in which Morocco has a competitive lead, or the ability to develop one. These include the agro-food industry, textiles, offshoring services, electronics, the automotive and aeronautical industries, as well as further development of the tourism sector.

“Morocco does not have abundant natural resources or a highly developed infrastructure,” explains Rachid Talbi El Alami, minister delegate to the prime minister in charge of general and economic affairs. “Our strength is our human capital, which is young and dynamic.”

He points out that the education reform that began in 2000 is starting to show results. Islamic schooling is out and a more ‘pragmatic’ approach has been adopted, modelled on the US system. The objective is to produce school-leavers and graduates with the appropriate skills to contribute to the economy.

Economic reforms

Widespread economic reform began in the 1990s and has since included improvements to the banking system, corporate laws and the labour code. The strategy has been to focus on legislative change, macroeconomic stability and anti-corruption measures.

Other moves include:

  • the adoption of an investment charter that is non-discriminatory to foreign investors and makes provisions for cutting investment costs and simplifying administrative procedures;
  • the opening up of most sectors to foreign investment and ownership;
  • the liberalisation of foreign trade and exchange control;
  • the modernisation of the legal framework; and
  • the withdrawal of state involvement in certain sectors of the economy, which has boosted private sector development.

With respect to privatisation, road and air transport, energy, telecoms and banking have all been substantially liberalised. About $2.5bn in FDI is forecast to have entered the country in 2005.

The country’s investment proposition is built on three pillars: a cost-effective and generally skilled workforce, a growing domestic market of 30 million consumers and an excellent quality of life – as shown by a vibrant and successful hospitality industry. It also has free trade agreements with the EU and the US, providing investors with a geographically well-positioned launch pad into these markets.

In addition, the country is politically stable and has a track record of excellence in key sectors, a stable exchange rate and macroeconomic stability.

Slow but sure growth

Morocco’s economy is relatively small – gross domestic product (GDP) is estimated at $61bn in 2005 – but it has enjoyed uninterrupted growth since 2000. In 2005, GDP is forecast to expand by 4.1%, modestly down from the 4.4% recorded last year but still more than double the population growth, which is averaging about 1.6%. Despite strong economic growth, prices remain in check, and this year inflation is expected to average 2.6%, only slightly higher than last year.

Other than a widening budget deficit, the country’s other economic indicators are in good shape, with a surplus on the current account and shrinking external debt burden. Standard & Poor’s rates its sovereign debt BB with a positive outlook.

The main economic activities in the agro-food sector include the production of food fats and oils, the production of flour and grits, fishing, fruit and vegetable production, dairy, cereal processing, beverages and tobacco. According to the most recent data, the agro-food industry was equivalent to one third of Morocco’s industrial output and employed 19% of the workforce.

One of the country’s key attractions is a diverse climate that permits cultivation of a wide range of fresh produce. The government supports this by leasing state-owned farm land, in a move designed to safeguard domestic supply and increase the volume of goods for export. Government aid is available for certain sectors, such as cereals, fruit and vegetables.

The textiles and clothing sectors, which account for 42% of all industrial jobs, enjoy special priority. With the global industry facing severe competitive pressures, Moroccan producers have been refined down to makers of traditional textiles for the domestic market and a core of highly efficient, cost-effective apparel makers that export the bulk of their production. Given the country’s long historical links to these sectors, it benefits from skilled labour at a competitive price. Trade deals with the EU, US, Turkey, Jordan and Egypt have all increased access to the export market.

Although the sector is well developed, there are still investment opportunities in jeans and sportswear, women’s lingerie and the processing of wool, fur, cotton, and synthetic and artificial fabrics for weaving.

Besides helpful domestic conditions, Morocco also benefits from close proximity and preferential access to European markets, a factor that has stimulated trade volumes and been the driver behind foreign investment in the country.

Outsourcing centres

The liberalisation of telecommunications has been a boon for Morocco’s offshoring sector: in 2004, it was valued at Dh26bn ($2.8bn). Morocco has emerged as a preferred destination for French-speaking contact centres, with the number of facilities increasing from three in 2000 to more than 70 presently. With a young, motivated and often multilingual workforce –with proficiency in Spanish as well as French – it looks set to benefit from the worldwide trend to outsourcing such functions to lower-cost environments.

Morocco is also at the early stage of developing outsourced information technology and back-office processing sectors. Software development is a growing area of activity.

The electronics industry is more than 50 years old and is thriving in areas such as the assembly of electronic boards, integrated circuits and telephone exchanges. Growth areas include assembly of microelectronic and micromechanical components, fine and precise cable assemblies, and fibre optics. Although existing independently of each other, Morocco’s automotive and aeronautics sectors share the common achievement of occupying a niche in global supply chains, building up a lengthening track record of industry expertise. The automotive industry, which is the more established of the two, is valued at Dh6.7bn and employs more than 26,000 workers, most of them skilled.


There are investment opportunities in the manufacture of spare parts, including cable assemblies, filters, connectors, exhaust pipes, seats and headrests, wiring, tyres, electronic parts, plastic parts and precision-machined parts.

The small aeronautics sector is closely tied to the fortunes of European aerospace companies, particularly Airbus, whose subsidiaries have invested in Morocco on the back of the A380 programme. The sector is nonetheless growing rapidly, with a six-fold increase in turnover to Dh1.5bn is forecast by 2008.

Competency and know-how has been established in several specialised areas, with opportunities at various stages in the supply chain for connectors, cable assemblies, pods, composites and air ducts, surface treatment (and even related services, such as repair and maintenance of aircraft engines), mechanical research and design, structural calculations, resistance analysis and electrical design.

Morocco is long-established on the tourist map but it still plans to double the number of international visitors to the country to 10 million a year by 2010. Vast undeveloped tracts of the country’s 3500km coastline are tempting developers – and as one of the major employers and earners of foreign exchange, the tourism sector also enjoys strong government support.