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January 2008
Are IT & outsourcing bringing Morocco closer to Gulf investors, asks Sarah Simmons
Sandwiched by Tunisia and the disputed territories of the Western Sahara bordering the Atlantic Ocean, Morocco is Africa's fifth largest economic power, and the world's leading exporter of phosphate.

Territorial disputes and the terrorist attacks of 2003 have done little to tarnish Morocco's image and tourism, with agribusiness and industry still providing a large portion of its income. This however, hasn't stopped Morocco's government from developing ambitious plans for non-traditional sectors.

The choice of skiing in the Atlas Mountains, lounging on the beaches of Agadir or visiting the Sahara entice many of 2.5 million tourists to Morocco a year. Tourism is the second best earner of foreign exchange after overseas workers' remittances accounting for 7% of GDP and employs 6% of the workforce.

Investment in tourism is still growing with Morocco's Eastern region investment totalling $340 million in 2006, up from $23.2 million in 2005, according to a survey of the Commerce, Industry and Services Chamber. The competitive global tourism environment, however, means Morocco needs to diversify. FDI into other sectors is now actively sought and its effects are starting to take shape.

FDI in the telcos sector, for example, has represented more than 50% of total FDI between 1998-2005. Now boasting 400,000 ASDL connections, Morocco has the largest population of broadband users in Africa. This opens opportunities for suppliers, operators and those looking for outsourcing partners.

Marketing intelligence group, IDC says Morocco's IT market has expanded from $403.88 million in 2001 to $638.69 million in 2006. The industry has more than 1,500 ICT firms employing over 41,000 people. This places Morocco in prime position to be one of the leading suppliers of IT services in the Middle East.

"The Gulf region has mushroomed into the business centre for the Middle East," said Jyoti Lalchandani, VP and regional MD, IDC ME&A.

"The side-effect has been rising costs, with both office buildings and IT services providers charging premium prices as demand has soared. Until recently, there were few options for outsourcing IT at

low-cost to providers that truly understand the Middle East. Morocco has emerged as a viable location for off-shore IT investment and services."

In sustaining this growth the government has committed to a public-private agreement and strategy for expanding the country's ICT sector to $9 billion by 2012. This will help solidify Morocco's position as a premiere centre for outsourcing.

In addition to the telcos sector, real estate, industry, tourism, agribusiness and finance also present opportunities. At a November forum in Rabat, president of the Gulf Chambers of Commerce and Industry Union, Salah Salem Ben Ameir Shamsi, said: "A number of foreign countries are showing confidence in Morocco and have invested there. This demonstrates that the country's laws favour investment and that the Moroccan authorities are encouraging and supporting foreign investors."

Shamsi called on Gulf investors to capitalise on Morocco's supply of qualified labour and high-quality technical expertise.

Mohamed Ben Youssef, director general of the Arab Industrial Development and Mining Organisation, added that Morocco's manufacturing industry is a major growth sector and contributes approximately 16% of GDP.

Morocco's banking and finance sector is also witnessing strong growth. This is due in part to the legislative reforms, falling interest rates and the promotion of microfinance. The Kingdom also has the second largest insurance market in Africa and with imminent relaxation of currency controls, FDI in this sector will be easier.

The growth of tourism and exports means infrastructure changes have been crucial to the development of Morocco's economy. Journey times have been reduced and airports are on target to receive 10 million foreign tourists a year by 2010.

Consumer confidence seems to be improving with 2006 seeing growing demand in the domestic market. This is due in part to the expanding middle class, higher rural productivity and a tightening job market. In addition, more Moroccans are buying cars meaning consumers will distribute spend and discover choice across a larger geographical area.

Marketing however still has a long way to go. Some foreign brands have ignored the golden rule of cultural adaptation and have not yet customised their products and advertising for the local market.

According to Khalil Hachimi, director, Aujourd'hui Le Maroc, Morocco's lack of press freedom has long been an issue and strictures have decreased considerably. Most press is in Arabic or French with Morocco Today the main English paper.

TV is in need of structural reform but still brings in the most advertising revenue. Radio is still popular in rural areas, where illiteracy is high and many do not have the cash for a TV.

In terms of ad spend, telcos spend the most. Iman Lahlou, media director, Leo Burnett in Morocco says the leading advertisers are Maroc Telecom, Meditelecom and Wana .

"P&G used to be the third largest advertiser but they lost share with the introduction of the new teleco operator, Wana " says Lahlou.

"Media investment has increased during the last 10 years with a majority of the investment coming from multinationals and big national groups. Morocco has a diversified but frail economy as it still depends on agriculture. Some dynamic sectors include IT and telcos."

In addition to Leo Burnett, foreign PR and marketing firms are beginning to set up shop in major cities. Strategies such as BTL are being introduced and will boost activity in the sector.

Morocco, however, still has plenty to do.

Oil exploration has yet to reach to its full potential: the rising cost of materials could pose a problem for the growing real estate sector, affecting many Gulf investors. Investors need secure returns and, therefore, Morocco's legal framework for property rights and commercial laws need to be strengthened. Child labour, counterfeits and illicit contraband are rife and Morocco ranks among the world's largest producers and exporters of illegal drugs.

The future includes: the implementation of the signed FTAs with the EU, which take effect 2010; a proposal from the President of France, Nicolas Sarkozy calling for a 'Mediterranean Union' consisting of 16 MENA and European states, to increase its business ties with Europe; and growth from the Vision 2012 programme, as agriculture becomes less important and other sectors are expected to become stronger.

A call from the Union of the Maghreb Banks for a single currency in the region may spur trade exchange and mutual investments; and Morocco's proposed 2008 budget includes ambitious measures to improve education, housing and healthcare while enhancing the country's economic competitiveness.

Country name: Kingdom of Morocco
Capital: Rabat
Population: 33,757,175 (July 2007 est.)
Age structure: 0-14 years: 31% (male 5,339,730/ female 5,140,482)
15-64 years: 63.9% (male 10,750,240/ female 10,815,470)
65 years and over: 5.1% (male 740,686/ female 970,567) (2007 est.)
Population growth rate: 1.528% (2007 est.)
Ethnic groups: Arab-Berber 99.1%, other 0.7%
Languages: Arabic (official), Berber dialects, French is used for business and government
Literacy: definition: age 15 and over can read and write
Total population: 52.3%
Male: 65.7%
Female: 39.6% (2004 census)
GDP (purchasing power parity): $152.5 billion (2006 est.)
GDP (official exchange rate): $58.13 billion (2006 est.)
GDP - real growth rate: 9.4% (2006 est.)
GDP - per capita: $4,600 (06 est.)
Labour force: 10.86 million (2006 est.)
Industries: phosphate rock mining and processing, food processing, leather goods, textiles, construction, tourism
Main lines in use: 1.266 million (2006)
Mobile cellular: 16.005 million (2006)
Internet users: 6.1 million (2006)

Source: CIA World Factbook 2007

© Gulf Marketing Review 2008