The postcard image of Morocco’s regal palaces, labyrinthine souks and age-old traditions that prove so popular among tourists is undergoing a make-over. Located at the farthest edge of north Africa, 14 kilometres away from Europe’s southern tip, this kingdom is poised to make lucrative gains from refining its FDI strategy.
At the helm of this is Invest In Morocco (AMDI), Morocco’s national investment agency, which, in conjunction with the Moroccan government, is refining the country’s image as an FDI destination. This is being done through improving Moroccan institutions and expanding its network base, with a view to attracting the key movers and shakers in the international business world in order to make Morocco a regional investment hub of the future.
The Europe effect
As the developed economies of Europe experienced financial contraction during the 2008 global financial crisis, it was inevitable that Morocco, heavily reliant on its trade ties with its European partners, would experience knock-on disruptions to its primary sectors. The economies of France and Spain have traditionally been Morocco's principal investors, accounting for 50% and 17%, respectively, of the country's FDI at the end of 2007 according to the Organisation for Economic Co-operation and Development. Yet both were hit badly by the global financial crisis. Adding to this mire is the 'Arab Spring' that swept north Africa and the Middle East early in 2011. Morocco’s economic resilience in coping with these shocks has been remarkable.
The country weathered the knock-on effects of the political and economic turbulence, prompting the credit ratings agency Standard & Poor’s (S&P) to affirm its rating of the country’s long- and short-term foreign currency sovereign credit at BBB- and A-3, respectively, and reporting a GDP growth of 5% in 2011. It is this economic consistency that leads AMDI to attest that Morocco is a competitive destination for FDI.
"We believe the international crisis may be an opportunity for Morocco," says Fatallah Sijilmassi, director-general of AMDI. "It creates the framework whereby international companies are now looking for places they can expand their businesses, make costs reductions and find political and economic stability. When you are such a company examining all these parameters, in this time of turbulence where nothing is as easy reading as it used to be, my guess is Morocco is your best bet."
The figures support this optimism. AMDI’s Activity Report reveals FDI inflows into Morocco from its four principal trading partners, namely France, Spain, the United Arab Emirates and Switzerland, rose by 49%, 76%, 80% and 38%, respectively, in 2010. Additionally, Morocco’s Investment Commission recorded a 61% increase in the number of projects it approved last year, from 56 projects in 2009 to 90 in 2010, with a total investment value of $7.2bn (Dh59.4bn).
"Morocco continues to offer foreign investors a competitive value proposition in light of these global developments," says Ahmed Fassi Fihri, AMDI’s investment promotions director. "Our research shows our country continued to grow at an average growth rate of 7%, between 2001 and 2010, despite the crisis."
Due to conservative and cautious economic policies pursued by the country’s central bank, Bank Al-Maghrib, Standard & Poor’s rated Morocco as "stable" in its report, maintaining improved macroeconomic resilience, economic growth, low inflation and a broad political consensus on structural reforms as significant in its conclusion. “Our stable outlook on Morocco reflects our view that the prospects for the Moroccan economy are relatively good for this year and over the medium term,” says Aurelie Martin, associate director of sovereign ratings at S&P. “We reaffirmed Morocco’s investment grade rating as we believe the macro-economic environment is stable and conducive to further growth.”
Indeed, a moderate government debt burden was cited by the ratings agency as a key factor, and it announced expectations that exports, tourism and remittances will continue to recover, despite the protracted economic slowdown among Morocco’s main trade partners in western Europe.
"Morocco gives foreign investors an interesting internal market," says Mr Fassi Fihri. "We have a growing middle class and its growing needs have helped our economy. Expenditure in areas such as cars, property and holidays has rapidly increased, so all of these needs of the expanding middle class have led to robust domestic consumption, and this presents foreign investors with attractive business opportunities." With a population of about 31.6 million, Morocco boasts a burgeoning middle class, and this could crucially aid the country in developing a diversified economy and manufacturing base.
AMDI is aware of this, and it is working hard to harness Morocco’s potential. Working in line with the government’s efforts to diversify its economy and client portfolio, AMDI is engaged in managing a large amount of incentive policies, aimed at offering international investors opportunities that allow them to conduct their business with more ease in Morocco.
"We offer investors an aggressive incentive policy, be it fiscal, financial, infrastructural or administrative incentives," says Mr Sijilmassi. “Our strategy is proactive. We do not wait until an international investor is interested. We identify which company, sector and country can be interested in the Moroccan market. Once we have identified them, we talk to them. We say the world is what it is today, and we offer them a solution worth considering. This solution is Morocco. We then give them the chance to investigate how we can build a business case together, for their company’s benefit.”
Although surrounded by neighbours that are awash with oil and natural gas reserves, Morocco is not resource rich. Yet it does maintain a geographic advantage. With the Mediterranean rim on its north and the Atlantic Ocean along its west coast, lying along the Maghreb that neighbours the Middle East, and situated north of sub-Saharan Africa, AMDI is looking to capitalise on Morocco’s location.
"Morocco is an open economy and we have always considered this as an asset," says Mr Sijilmassi. "We are a member of the World Trade Organisation with several free trade agreements [FTAs] with our main partners in the EU, as well as Arab and Mediterranean countries, and the US. We also have several preferential trade agreements with African countries. This proximity and connectivity makes Morocco a good base for production and expanding activities into these markets."
It is this geographic position that AMDI plans to employ to promote Morocco as a strategic investment spot for foreign investors, both as a base to access Morocco’s domestic markets, as well as one to access other markets. "Our FTA with the US enables us to invite enterprises from countries without an FTA with the US to come to Morocco, because from here, they can enter the American market," says Mr Fassi Fihri. "We are close to other markets as well, thus businesses can use Morocco as a platform to access the European and Middle Eastern markets, as well as African markets."
A platform for opportunities
The African market forms an important component to AMDI’s geographic focus. With its collective GDP expected to expand from $1600bn in 2008 to $2600bn in 2020, according to estimates from McKinsey & Company, the continent’s markets present prospective investors with the potential for hugely lucrative gains. “We are conscious that Africa is an emerging continent,” says Mr Fassi Fihri. “Morocco can be a platform to access the continent, and it should be noted that today, several Moroccan enterprises have positioned themselves to make the most of these gains. For example, we have the second largest network of banks in Africa, and three Moroccan banks are key players in the continent, namely BMCE Bank, Attijariwafa Bank, and Banque Populaire.
"In the telecommunications sector, Maroc Telecom is already present in Mauritania, Mali and Gabon. AMDI’s message to foreign investors that do not know the African markets is: come to Morocco, and from there we will go and conquer the growing African market." The central theme of AMDI’s Morocco Investment Conference attests to this commitment. Scheduled to take place between 22 and 23 March 2012, 'Morocco: Gateway to Africa' will be at the centre of AMDI’s focus.
Morocco’s economic resilience is in no part down to luck. It is a culmination of government-led economic reforms that were launched during its privatisation process in the 1990s, which has since included reforms to the country’s legal framework, liberalisation of foreign trade and exchange controls, and the opening of several sectors to foreign investment and ownership. The African Economic Outlook report found that the global financial crisis served to prompt authorities to redouble their efforts to modernise the country's public sector, launch large infrastructure projects, develop the private sector and protect the environment.
“Morocco has built its strategies around a series of public-private sectoral strategies that have been developed by the private sector, in partnership with the government,” says Mr Sijilmassi. "These strategies focus on tourism, agriculture, energy, logistics, transportation and industry. Within the industrial sector, we have identified and targeted six sectors that we perceive Morocco to have a competitive advantage in. These are aeronautics, automotives, electronics, information technology, textiles and agro-industry. We have selected and targeted these to develop an environmental and incentives framework that international investors will feel is appropriate to operate their businesses in. Therefore all of our strategies aim to give both national and international investors transparency."
As a governmental institution, the Moroccan government’s sectoral strategy remains at the core of AMDI’s strategy, thus it is a central player that operates within the government’s sectoral framework. “AMDI’s principal aim is to manage the interaction between the international investors within these sectors, in line with the sectoral strategies,” says Mr Sijilmassi. “However, AMDI does not only act to attract businesses. We are also an agency that accompanies the business as it implements its presence in Morocco, and we stand by them throughout their enduring presence here.”
AMDI’s hard work seems to be paying off. In 2010, Morocco was one of the few countries in Africa to record an increase in the number of inward FDI projects, at 890. The fDiMarkets greenfield investment database also found that between January and October 2011, Morocco ranked second behind South Africa in attracting the highest number of FDI projects into Africa, representing 12% of all inward FDI investments into the country, leading fDiMagazine to crown it as the top 'African country of the future' for the first time in its regional benchmarking rankings.
Yet ranked 114 out of 183 countries by the World Bank on the Ease of Doing Business in 2011, fulfilling its ambitious FDI goals and reassuring investors that Morocco should be their country of choice may seem a tall order for AMDI. Furthermore, S&P maintains limited expenditure flexibility, coupled with significant social and infrastructure spending needs mean Morocco will continue to have sustained pressures for further reforms. Nevertheless, S&P maintains its optimistic outlook on Morocco’s medium-term prospects. “Our stable outlook on Morocco reflects our view that the prospects for the Moroccan economy are relatively good for this year and over the medium term, as we forecast low inflation and a growth rate of 4.5% over the medium term,” says Ms Martin.
Indeed, AMDI echoes this positive outlook, and Mr Sijilmassi asserts this is in large part due to the longevity of the sectoral strategies that have been elaborated for the end of 2015 or 2020. "These sectoral strategies are not related to any changes or specific governments, so there is stability in their sustainability," he explains. "Seeing is believing. I would like people to come and see Morocco and its business opportunities. It is an appropriate moment to see what we have done, and I would like to welcome as many people as possible to the Moroccan Investment Conference in 2012, because that would be a great opportunity to not only look at the Moroccan market but also at the African market, as I believe that this is the choice of the future."