25 January 2008
Morocco cemented its reputation as a stable and open destination for foreign investment over the past year despite suicide bombings in April. Economic diversification has been one of the key stories of 2007, with steady growth in newer sectors such as outsourcing and information technology (IT). Meanwhile, stalwarts such as tourism and real estate continue to perform well. However, an unpredictable agricultural sector still has the power to seriously undermine growth, as last summer's failed harvests demonstrated.
September saw the election of a new government under liberal conservative Abbas El Fassi. The Istiqlal (Independence) Party won the elections, which passed without disturbance, with 52 seats. While Morocco remains politically stable, low voter turnout of 37% indicates dissatisfaction with the legislature's failure to tackle the problems of unemployment, uneven development and poor agricultural performance.
El Fassi's cabinet has approved a series of pro-business tax reforms that have been welcomed by the corporate sector and are expected to be implemented in the near future. The business tax rate is to be lowered from 36% to 30%, while the new government has pledged to reduce the value-added tax (VAT) from its current level of 20% to 18% by 2012. Taxes for small and medium-sized enterprises are slated to drop to 25%, while micro-enterprises will be taxed at just 2.5%. The cuts are aimed at stimulating consumption and enabling companies to employ more staff. Morocco's unemployment rate of 10% was among the most hotly debated issues in the run-up to the election.
Overall economic growth was strong for the first half of 2007, until a fall in agricultural production caused GDP growth to drop by 7.6% in the third quarter of the year, according to the Moroccan high commissariat for planning. Summer droughts resulted in a 66% decrease in agricultural productivity, highlighting the sector's instability. Morocco remains ill prepared to cope with frequent droughts; irrigation systems are underdeveloped and the sector is heavily reliant on cereal crops. However, the government took steps towards modernising the sector in 2007, allocating Dh25m ($3.3m) for agricultural research.
Meanwhile, 2007 brought significant developments in private sector agriculture, with the launch of a large olive oil production scheme by Moroccan investment fund Oléa Capital. This scheme will produce a projected 30,000 tonnes of olive oil per year, with a firm focus on the export market. Oléa Capital aims to tap into the growing demand for high quality olive oil in Europe and North America. The project is expected to see the planting of around 10,000 ha of land with over 2m olive trees and will use modern production techniques to process the oil. Oléa Capital will give a boost to a sector in need of success stories, according to Tariq Sijilmassi, president of Crédit Agricole du Maroc.
Another area of progress was Morocco's tourism sector, which went from strength to strength in 2007. The perceived threat of terrorism has done little to dampen consumer appetite for holidays and second homes in Morocco. The expansion of budget flights has had a clear effect on the number of tourist arrivals in 2007 with the number of visitors from the UK having increased by 43% last year, largely as a result of new budget airline links between London and Marrakech.
El Fassi has pledged to build on the foundations for tourism growth laid by his predecessor Driss Jetou. The national tourism plan Vision 2010 aims to increase visitor arrivals to 10m per year and places emphasis on developing infrastructure to support this increase.
New tourism development corridors are beginning to open up in the north and east of the country, due to new budget flight routes from Europe and the state's Plan Azur, a blueprint for intelligent seaside tourism. The plan aims to build six new resorts across the country, all in previously undeveloped areas. The north of the country is a particular focus of interest, with a large resort under development at Port Lixus, as part of the plan.
Morocco's drive for tourism development has not been universally welcomed. A significant increase in the number of swimming pools, hotels and golf courses will put a huge drain on Morocco's already strained water supply and has attracted criticism from local residents and farmers.
Even so, Morocco showed healthy signs in 2007 of diversifying its economy away from its reliance on traditional industries such as tourism and agriculture. IT and outsourcing from Gulf Cooperation Council countries have emerged as areas of strong growth. Morocco's IT industry grew at an average rate of 10% between 2004 and 2006 and is slated for further growth. The sector currently employs 42,000 people in 1500 firms nationwide.
Like the rest of the Middle East and North Africa region, Morocco has been slow to capitalise on the global rise of the outsourcing industry. However, Morocco stands to benefit from rising demand for Arabic language call-centres and from a shift in international outsourcing patterns. India, the undisputed leader of the call-centre industry, is now sending work to other emerging markets. In June, India-based Tata Consultancy Services formalised an agreement for contact centres in Morocco.
Morocco is increasingly positioning itself as a key telecommunications partner for companies across the region, providing both a strong Arabic-speaking outsourcing destination, as well as sustaining major growth and investment opportunities in the kingdom, said Bachir Rachdi, chairman of the Moroccan Federation of Information Technologies, Telecommunications and Offshoring.
Morocco cemented its reputation as a stable and open destination for foreign investment over the past year despite suicide bombings in April. Economic diversification has been one of the key stories of 2007, with steady growth in newer sectors such as outsourcing and information technology (IT). Meanwhile, stalwarts such as tourism and real estate continue to perform well. However, an unpredictable agricultural sector still has the power to seriously undermine growth, as last summer's failed harvests demonstrated.
September saw the election of a new government under liberal conservative Abbas El Fassi. The Istiqlal (Independence) Party won the elections, which passed without disturbance, with 52 seats. While Morocco remains politically stable, low voter turnout of 37% indicates dissatisfaction with the legislature's failure to tackle the problems of unemployment, uneven development and poor agricultural performance.
El Fassi's cabinet has approved a series of pro-business tax reforms that have been welcomed by the corporate sector and are expected to be implemented in the near future. The business tax rate is to be lowered from 36% to 30%, while the new government has pledged to reduce the value-added tax (VAT) from its current level of 20% to 18% by 2012. Taxes for small and medium-sized enterprises are slated to drop to 25%, while micro-enterprises will be taxed at just 2.5%. The cuts are aimed at stimulating consumption and enabling companies to employ more staff. Morocco's unemployment rate of 10% was among the most hotly debated issues in the run-up to the election.
Overall economic growth was strong for the first half of 2007, until a fall in agricultural production caused GDP growth to drop by 7.6% in the third quarter of the year, according to the Moroccan high commissariat for planning. Summer droughts resulted in a 66% decrease in agricultural productivity, highlighting the sector's instability. Morocco remains ill prepared to cope with frequent droughts; irrigation systems are underdeveloped and the sector is heavily reliant on cereal crops. However, the government took steps towards modernising the sector in 2007, allocating Dh25m ($3.3m) for agricultural research.
Meanwhile, 2007 brought significant developments in private sector agriculture, with the launch of a large olive oil production scheme by Moroccan investment fund Oléa Capital. This scheme will produce a projected 30,000 tonnes of olive oil per year, with a firm focus on the export market. Oléa Capital aims to tap into the growing demand for high quality olive oil in Europe and North America. The project is expected to see the planting of around 10,000 ha of land with over 2m olive trees and will use modern production techniques to process the oil. Oléa Capital will give a boost to a sector in need of success stories, according to Tariq Sijilmassi, president of Crédit Agricole du Maroc.
Another area of progress was Morocco's tourism sector, which went from strength to strength in 2007. The perceived threat of terrorism has done little to dampen consumer appetite for holidays and second homes in Morocco. The expansion of budget flights has had a clear effect on the number of tourist arrivals in 2007 with the number of visitors from the UK having increased by 43% last year, largely as a result of new budget airline links between London and Marrakech.
El Fassi has pledged to build on the foundations for tourism growth laid by his predecessor Driss Jetou. The national tourism plan Vision 2010 aims to increase visitor arrivals to 10m per year and places emphasis on developing infrastructure to support this increase.
New tourism development corridors are beginning to open up in the north and east of the country, due to new budget flight routes from Europe and the state's Plan Azur, a blueprint for intelligent seaside tourism. The plan aims to build six new resorts across the country, all in previously undeveloped areas. The north of the country is a particular focus of interest, with a large resort under development at Port Lixus, as part of the plan.
Morocco's drive for tourism development has not been universally welcomed. A significant increase in the number of swimming pools, hotels and golf courses will put a huge drain on Morocco's already strained water supply and has attracted criticism from local residents and farmers.
Even so, Morocco showed healthy signs in 2007 of diversifying its economy away from its reliance on traditional industries such as tourism and agriculture. IT and outsourcing from Gulf Cooperation Council countries have emerged as areas of strong growth. Morocco's IT industry grew at an average rate of 10% between 2004 and 2006 and is slated for further growth. The sector currently employs 42,000 people in 1500 firms nationwide.
Like the rest of the Middle East and North Africa region, Morocco has been slow to capitalise on the global rise of the outsourcing industry. However, Morocco stands to benefit from rising demand for Arabic language call-centres and from a shift in international outsourcing patterns. India, the undisputed leader of the call-centre industry, is now sending work to other emerging markets. In June, India-based Tata Consultancy Services formalised an agreement for contact centres in Morocco.
Morocco is increasingly positioning itself as a key telecommunications partner for companies across the region, providing both a strong Arabic-speaking outsourcing destination, as well as sustaining major growth and investment opportunities in the kingdom, said Bachir Rachdi, chairman of the Moroccan Federation of Information Technologies, Telecommunications and Offshoring.
© Oxford Business Group 2008
