The Moroccan administration revealed its new national strategy for the promotion of industry in mid-February at a ceremony attended by King Mohamed VI, various ministers and prominent figures from the private sector. The National Pact for Industrial Emergence outlines multi-sector reforms designed to stimulate the industrial sector for the period of 2009 to 2015. Minister of Industry, Commerce, and New Technology, Ahmed Reda Chami, said that the pact’s 111 measures will rely on coordination between the public and private sectors to increase foreign direct investment (FDI), support small and medium-sized enterprises (SMEs), expand human resources capacity and improve the country’s business climate, which continually receives low ratings in international rankings on account of high levels of corruption.
Strong in stating quantifiable objectives, the strategy seeks to raise the volume of exports by $11 billion, create 220,000 lasting industrial jobs and to increase industrial gross domestic product (GDP) by $10 billion. Chami said that industry currently only accounts for 16 percent of Morocco’s GDP and 13 percent of jobs.
Dependence on agriculture has long been a source of economic vulnerability in Morocco, where half the population lives in rural areas and relies directly or indirectly on agricultural yield. Recurring periods of heavy drought starting in the 1960s fueled a rapid urbanization. Urban poverty has swelled with each new wave of rural migrants and the need to absorb these into some sort of workforce has proven an enduring challenge.
High joblessness and a crushing urban poverty rate — 35.4 percent among 15 to 24 year olds — have helped make the development of the industrial sector a pressing economic and political incentive in recent years. Industry made moderate progress in some areas under former King Hassan II, whose rule of the country (1961-1999) is credited with the molding of modern Morocco. Mining and phosphates, manufacturing and food processing for export and national consumption, textile, leather, and handicraft production were all cultivated during this time.
Backtracking or forward march?
King Mohamed VI, who inherited the throne from his father in 1999, has carefully cultivated a public image as a “modernizer” over the past 10 years. Using his power to push sharia reforms into effect against strong Islamist-party opposition, he set up the Truth and Reconciliation Committee to address human rights abuses inflicted under his father’s reign, and installed a new nationwide focus on industrialization — twice.
In 2005, former Prime Minister Driss Jettou presented the Emergence Plan to the king for his signature. This national strategy, the current administration’s first attempt to revolutionize the fabric of Moroccan industry, also laid out specific objectives, like creating 440,000 jobs and augmenting industrial GDP by 1.6 percent, over a 10-year horizon period. So naturally, the introduction of a new plan with different focal points and modified objectives just four years later came as a surprise for many analysts.
Minister Chami and other signatories of the new National Pact have been careful to clarify that the new plan was formulated “in a spirit of continuity with the Emergence Plan,” and that there has been no rupture or backsliding in industrial policy. The Emergence Plan is generally considered a successful initiative, and is credited with the thriving Casanearshore business park, which has won accords with 30 foreign companies in just one year, and the TangierMed industrial zone. So why did the government introduce a new industrial strategy only halfway through the 2005-2015 strategy’s mandate?
First, the 2005 plan was formulated at a time of prosperity and perky economic performance, before the global financial crisis kicked in. The 2009 pact, which commits $7 billion to industrial upgrades over the next six years, comes in the eye of the financial storm, and shows that the country is confident in its financial standing and economic potential. At a time when many countries are scaling back, the pact is a robust move to boost investment and productivity. Boosting investment now will also help carry Morocco through some of the indirect negative consequences of the global slowdown, as tourism and some exports take a hit. Enhancing industrial competitivity and infrastructure will ensure the continuity of capital flows, both at home and abroad. “The National Pact is a long-term strategy to correct structural deficits,” Chami said, “whereas the crisis is short-term.”
Furthermore, the 2009 Pact adds new, ultra-modern sectors to the country’s industrial strategy, which in 2005 was moving towards offshoring, automobiles and aeronautics. These sectors remain strategic investments, but the 2009 Pact introduces high profit margin sectors of biotechnology, microelectronics, and nanotechnology to the mix. A new smart city is planned for the microelectronic and nanotechnology industries, as well as a center for technological research and development. “With these projects, and thanks to the strategic role played by our partners, we will quickly be able to attract semi-conductor businesses and thermal energy and materials production, with the aim of installing an initial nucleus of complementary and innovative companies,” Chami said. Scientific research institutes helmed by Moroccans living abroad are also able to make significant contributions, through organizations like the Moroccan Association for Scientific Innovation and Research (MASCIR) and the Institute of Nanomaterials and Nanotechnologies.
At a time when many countries are scaling back, Morocco’s pact is a robust move to boost investment and productivity
Private-public partnership
The 2009-2015 National Plan for Industrial Emergence, a blueprint for widening the scope of the industrial sector, includes cross-sector reforms and envisions a robust role for the private sector. In addition to the nine ministers who signed and conferred on the pact, the different federations of the Confédération Générale des Entreprises du Maroc (CGEM) and the Groupement Professionnel des Banques du Maroc (GPBM) also played a role in its articulation. The GPBM committed $343 million to financing for the program, and overall the plan anticipates a private investment totaling $5.7 billion. The $1.4 billion state budget for the program will be managed by private investment funds, which will coordinate with banks and the administration to promote SME development. “Today many businesses have strong potential but lack capital,” said Chami, who specified that SMEs will be strengthened by improved credit access and the option of augmenting their capital stock.
Legal measures are also included in the plan, especially new organs of arbitration, and legal authorities to combat corruption and money laundering. The enforcement of business law reforms will be of particular importance in increasing foreign investment flows into the industrial sector, as Morocco continues to lag behind regional competitors like Algeria and Tunisia in terms of transparency and overall business climate.
Fortunately, Morocco’s financial institutions — called upon to extend credit and stimulate competitivity among SMEs — are standing strong in the face of the crisis. Othmane Benjelloun, representing the National Association of Moroccan Bankers at the ceremony, said there was a 15 to 20 percent growth in lending in the first six weeks of 2009. “The crisis has had no effect on the Moroccan financial sector,” he said, confirming that the Banque Marocaine de Commerce Exterieur, of which he is CEO, is moving forward with plans to penetrate all 55 African territories in no more than 15 years.
A united front among qualified political actors will also go a long way towards the achievement of the plan’s principal objectives. The World Bank and the IMF have both urged Morocco to work on coordinating interministerial cooperation. Chami, who holds an MBA from UCLA, previously served as regional director of Microsoft’s Emerging Markets Asia Division (2001-2003) and then as president of its Southeast Asia division (2003-2004) in Singapore, before returning to Morocco to take control of the Groupe Saham, where he managed insurance and information technology subsidiaries. Appointed minister of trade, industry, and new technologies in 2007, Chami is the engineer and spokesperson for the 2009-2015 plan, which was formulated in collaboration with management consulting cabinet McKinsey. His technological savvy and international experience are strong indicators that he is highly qualified to lead in his domain.
Coordinating with other ministers will be the key to developing the wide-ranging components of the plan — from vocational schools to anti-corruption justice system reforms to privately-managed investment funds — that will deliver on the boldly ambitious promises of the National Pact for Industrial Emergence.
