Outside the Bubble

Morocco’s Development Story: Opportunities and Challenges

Morocco has attracted tourists for decades with its dramatic landscapes, bustling medinas, and camel trek adventures into the Sahara. It is now drawing the attention for another reason: foreign investment. The same conditions that made tourism one of the country’s fastest growing economic sectors – proximity to Europe, improved infrastructure, and political stability – are now being cited as reasons to invest in Morocco. A recent roundtable discussion organized by the Morocco Finance Club held at the Harvard Club in New York focused on current investment opportunities and challenges the North African country faces.  The event was organized by Aymen A. Mohib.

“In the wake of the Arab Spring there is a need to reevaluate the economic investment climate,” said Aymen A. Mohib, President and Co-Founder of the club in response to a question about his motivations for organizing the panel. Even in the wake of Hurricane Sandy, which paralyzed lower Manhattan and made travel into the city difficult, the conference drew almost 100 government officials, banking executives, students and others, all eager to learn about investment conditions in Morocco, and to meet prospective business partners.

Ghita Filali, the Moroccan Investment Development Agency (MIDA) representative to the United States, discussed some of the recent measures taken by the Moroccan government to make the country more investor friendly. Filali talked about efforts to enhance investor protection, simplify and modernize the tax code, and other legal reforms, including a landmark referendum passed in June 2011. Apart from allowing for greater civil liberties, the amended constitution grants greater property rights, allows free competition and free enterprise. Some Morocco analysts say that the reform was intended as much an overture to outside investors as it was to limit the fallout of the Arab Spring.

With seven international offices promoting investment in Morocco, MIDA provides assistance to investors by facilitating contact with local authorities, helping to navigate the regulatory framework and finding local partners. As one of four bodies created in the past few years, the group aims to improve the business climate and boost Morocco’s investment potential.

Another group, the Casablanca Finance City (CFC), was also represented at the roundtable. The CFC is part of the government’s financial sector development strategy with the mission of positioning Morocco as the financial hub of North and West Africa. Morocco boasts a developed banking sector and the most developed capital markets in the region, said CFC representative Lamia Merzouki. “It’s already considered the first destination in Africa for foreign direct investment.”

It is not just government officials touting an improved economic climate at the panel. In 2011, Fitch Ratings, one of the big three credit ratings agencies, gave Morocco an investment grade of BBB as a “stable prospect” on the scale of AAA to D. The World Bank ranked Morocco 56 out of 185 countries for ease of starting business in its 2013 rankings. As a result of Morocco’s growing middle class and bilateral agreements, trade with the U.S. has tripled since 2005.

Experts say that in addition to the energy, textiles, fishing, and agriculture sectors, retail and housing, and value added sectors such as IT and aeronautics are now replete with investment opportunities.

While the outlook is positive, challenges still remain. Developing human capital is one of the most important challenges Morocco faces. In particular, providing effective education and job training has been a persistent challenge in spite of the amount of resources devoted to their improvement. The current adult literacy rate is 56 percent and 79 percent for those ages 15-24 years old. As participation in education continues to increase this rate is expected to rise. Improving the quality of the workforce is an important factor to the economy’s continued success.

Of Morocco’s 33 million citizens, 64 percent are under the age of 30. According to Mehdi Fichtali, director of a boutique investment bank currently conducting research at Georgetown University, Morocco’s young people are choosing to study topics like history and geography causing their marketable skills to differ from market demands, not unlike the skills gap in the U.S.

But the government is dedicating considerable resources to train more youth in engineering and business related majors. The World Bank calls Morocco’s youth unemployment a ‘very serious problem.’ While youth unemployment remains unbearably high, Morocco’s educated youth have difficulty finding suitable employment. This has led to emigration of skilled workers, the same brain drain that has affected most lower-middle-income countries in Africa like Senegal, Gambia, and Mozambique.

Organizers of the Economic Climate and Investment Opportunities and Challenges in Morocco panel hope that increased foreign investment could drive unemployment figures down, attract some of the highly skilled Moroccan diaspora to return home, and further increase the country’s political stability.

January 29, 2013
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