24 August 2016

Following the introduction of a new investment charter last month, the Moroccan government has signed Dh7.5bn (€691.6m) worth of international investment agreements.

A combined 30 contracts with companies from the UK, Canada, Brazil, China, India and Russia were inked the day after the new charter was announced. According to government statements, the agreements are expected to create around 39,000 jobs.

Investment incentives

Under the new charter, which is part of law 60-16 and replaces the previous investment charter implemented in 1995, investment promotion activities will be restructured under a centralised agency and free zones will be developed in each of the country's 12 regions.

Incentives will also be extended to qualifying companies not located inside the free zones, including comparable benefits for export-oriented industries and a five-year corporate tax exemption for new industrial companies.

Importantly, the new charter also recognises indirect exporter status, which should help support Morocco's large automotive industry - and in particular its subcontractors, who will benefit from this new status.

Auto industry to see gains

According to Moulay Hafid Elalamy, minister of industry, trade, investment and digital economy, the auto industry's local integration rate is projected to reach 65% over the coming years, suggesting significant growth prospects for local industry.

Indeed, 21 of the 30 investment agreements inked in July were with companies from the automotive industry, such as UK automotive parts manufacturer Delphi, which signed a framework agreement for seven new facilities, set to be rolled out through to 2021.

The deal includes a new Dh400m (€36.7m) plant at the Agropolis industrial park in Meknès, which will manufacture electrical distribution systems, and a research and development centre. The new investments are expected to create a combined 13,000 jobs, according to local media reports.

A Dh2.69bn (€246.9m) agreement was also signed with Canadian supplier Linamar, which plans to open Morocco's first engine component production facility, creating around 1000 jobs.

The plant will supply leading international automakers, including Ford, Volkswagen and Peugeot Citroën, whose new factory in Kenitra is expected to come on-line in 2019, producing around 200,000 vehicles per year.

The auto industry features prominently in the country's Industrial Acceleration Plan (Plan d'Accélération Industrielle, PAI) 2014-20, which aims to improve Morocco's trade balance, increase the industrial sector's contribution from 14% to 23% of GDP and create 500,000 new jobs through the development of "ecosystems", or productive industrial clusters, aimed at stimulating growth and enhancing competition. A new engine and transmission cluster was established earlier this year, following the creation of a handful of other auto clusters, including ones focused on cabling, interior and seats, metal and stamping, and batteries.

In addition to agreements in the automotive industry, nine projects worth Dh600m (€55.3m) were signed with the textiles industry, and four industrial units worth a total of Dh260m (€24m) are in the pipeline for aeronautics.

Consolidating investment activities

As part of the new charter, the country's various trade and investment promotion agencies - including Maroc Export, the Moroccan Investment Development Agency and the Office of Fairs and Exhibitions in Casablanca - were consolidated under the newly created Moroccan Agency for Investment Development and Export (Agence Marocaine de Développement des Investissements et des Exportations, AMDIE).

AMDIE falls under the purview of the Ministry of Industry, Trade, Investment and Digital Economy and is charged with strengthening the coordination of operations, as well as streamlining the financial and human resources dedicated to investment promotion.

A General Directorate for Trade, a General Directorate for Industry and an agency dedicated to development of the digital economy and e-government were also created under the new charter.

Regional investment climate

While many of the kingdom's regional counterparts have seen a decline in foreign investment over the last five years, foreign direct investment in Morocco rose by 11% between 2010 and 2015 to reach Dh39bn (€3.6bn).

Much of the increase has been focused on industry, with investors attracted by initiatives like the PAI and other government-led incentives programmes.  

In their most recent sovereign notes, ratings agencies Standard and Poor's (S&P) and Fitch cited Morocco's focus on industrial development as key to the country's stable outlook.

"We expect economic activity to remain vulnerable to volatility in the agricultural sector and external demand fluctuations from Europe, notably in tourism," S&P wrote in April. "Nevertheless, investments in newly developed industries such as the automotive sector should improve economic diversification, and help GDP growth and exports over the medium term."

© Oxford Business Group 2016