In June, King Mohammed VI hosted Renault CEO Carlos Ghosn to celebrate the first export of Moroccan-assembled cars to France and Spain. The visit demonstrated the good relations between Morocco and French carmakers and aimed to develop the activity of Société Marocaine de Constructions Automobiles (SOMACA) for the local and foreign markets, notably towards the EU.

SOMACA is a Moroccan-French car company in which Renault has an 80% capital share. Philippe Cornet, the chief executive, announced that the company plans to export between 5,000 and 10,000 Logan cars a year to the EU, mainly to the French and Spanish markets. It is also planning to expand its exports to the Belgian and German markets by 2008. SOMACA will also export some 5,000 units to Egypt, Jordan and Tunisia. The success of further SOMACA operations is set to contribute to attracting new investments in car part manufacturers. The present success of Morocco’s automotive sector makes a marked change from the difficulties it was suffering just 5 years ago.

The Logan was introduced into the Moroccan market in 2006 and has become the leading brand in the low-cost car segment of the market, with some 13,000 units produced in 2006. SOMACA plans to assemble some 40,000 vehicles in 2007, including the Renault Kangoo, the Peugeot Partner, and the Citroën Berlingo.

Attracting investment

“It’s a first for the Moroccan automobile industry, which made a great leap forward with this announcement,” said Cornet. He also added that it is the first time Morocco has exported a finished industrial product to Europe apart from textiles. With a 19.6% share of the passenger car and LCV market, Renault leads the Moroccan market, which has grown by 17% since the beginning of 2005.

After Romania in 2004 and Russia in spring 2005, Morocco is the third country to launch Logan production. Renault has invested $30 million in the project. In fact, Morocco is the first country where the Group’s three brands — Renault, Dacia and Renault Samsung Motors — are sold simultaneously.

As part of a drive to attract foreign investors to reinforce the sub-contracting in the auto spare parts segment in Morocco, the Investment Directorate (ID) announced in May the establishment of an industrial free trade zone in the automobile sector, named Tanger Auto City (TAC).

“This new concept of specialized industrial zones aims to attract investors and automobile equipment makers employed by manufacturers especially those based on the European continent,” said Hassan Bernoussi, the director of ID, during a conference organized by the Moroccan MBA Association (MMA) in May in Casablanca.

The setting up of TAC reflects the government’s willingness significantly to improve what Morocco can offer in terms of foreign direct investment (FDI) options in developing sectors such as the automotive sector.

According to Salaheddine Mezouar, the minister for the automotive industry, the share of the automobile industry in gross domestic product (GDP) rose from 16.7% in 2004 to 19.6% in 2005. Mezouar noted that the automotive industry in Morocco encompasses 300 companies and provides 30,000 jobs and $2.5 billion in turnover. Considered more modernized than other industries, it generates 6% of total processing industry production and 12% of exports of industrial goods, which increased from $71 million in 1996 to $285 million in 2002. “The sector represents more than 40% of investments, or $130 million, which allowed the creation of more than 12,000 jobs in 6 years in the free trade zone alone,” said Omar Chaib, the zone’s commercial director.

Mohammed Ali Enneifer, the CEO of COFICAB, an auto cable company already based in the TAC agrees. According to Enneifer the production capacity in the Moroccan auto sector has risen by 4.3% year-on-year. “The integration of the Automotive City will help out existing companies by consolidating subcontracting and transferring foreign know-how to local companies,” he said.

Tanger Free Trade Zone (FTZ) is an example of the potential of the TAC. The FTZ has succeeded in attracting FDI due to its competitive legal and fiscal framework. Its special status allows for 100% foreign ownership, exemption from import and export tax and VAT on goods and on company tax for 5 years and a rate reduction thereafter. These benefits have attracted investors in the automotive sector, which is already the most developed sector in the FTZ.

Despite the recent announcement of car exports to Europe, the impact of TAC project may be limited on a local level. According to Bouchaib Barhoumy, the CEO of Yazaki, a Japanese company specialized in auto cable beams, the impact could be greater if, rather than spare parts, TAC concentrates on the development of the production of finished products to be exported.

With construction work on schedule, the 550-square- kilometer Special Development Zone, also known as the Tanger-Med port, will be operational in July according to recent government announcements. The first customers looking to use the Tanger-Med facilities are now able to set up in the northern city of Tangier. The zone is designed to emerge as a key transit point for container traffic between the US and the Mediterranean region.

When the Moroccan government launched the Tanger-Med project in 2002 in the north of the country, its aim was to develop this region as a strategic center for transshipment, industry and trade. The project was managed by a governmental agency with privately-held company status, the Tanger-Med Special Agency.

Among the services and facilities offered by the port are a 53km extension to the Casablanca-Tangier highway, and a 45km railway connecting the port to the city of Tangier. The close proximity of the port will ensure the quick and efficient movement of goods and effective connectivity to regional and international markets.

Tanger-Med port offers logistic facilities accessible by sea, land and air for investors. The container terminal has 2,100 meters of berths with two container terminals operated by APM terminals and Eurogate-Contship. These possess 3.5m TEUs of nominal capacity and allow a draught up to 18 meters, well within the range of even the largest bulk freight transporters.

The ro-ro terminal has a capacity of eight berths, connection to the railway passenger station and the capacity for 5m passengers, 1m cars and 500,000 trucks per annum.

With a berth at 15 meters water depth and an open area of 15 hectares, the bulk and general cargo terminal looks to target the grain business.

Already planning the extension

The hydrocarbons terminal is designed to offer bunkering services to vessels calling at the port and to supply the port hinterland with refined oil products. It has a capacity of 2m tons per year. If all goes according to the plan, Tanger-Med will receive its first commercial ship in July. In fact, because about half of the project was completed within 18 months, there are already plans for its extension. Muhammad Said Benameur, the chief project director, said that, “Since the Tanger-Med has been a success, notably in terms of timing, we have already endorsed its extension before the first zone even started to be operational.” The second phase of the project will be 100% funded by the private sector, he added.

Tanger-Med already plans to raise its capacity as traffic across the Gibraltar strait is expected to increase significantly. “We expect sea traffic to rise by 7% or 8% in the next five to eight years worldwide,” said the president of TMSA, Said Elhadi. “Knowing that the number of containers crossing the Strait of Gibraltar represents about 20% of global traffic, Tanger-Med will consequently be directly affected by worldwide growth, which will eventually have major consequences for the region.”

Elhadi added, “The terminals will see a rapid increase in traffic in the coming years. Tanger Med II has been launched in preparation of our existing and potential customers’ needs. The project will help to increase significantly the capacity of the port facilities from 2012-2013 onwards.”

The existing Tangier Free Zone demonstrates the potential of Tangier-Med. The July 25 edition of pan-Arab daily al-Sharq al-Awsat reported that following its establishment in 1999, it had created some 16,000 jobs. The daily also reported that approximately 115 Moroccan and foreign companies were located in the area, with another 77 companies expected to set up shop. As a result, total jobs provided by the free zone was expected to reach 22,000 by the end of 2007.

One important development was the announcement in June that Dubai’s Jebel Ali Free Zone Authority International had been awarded the 10-year logistics free zone management concession at the port, an important achievement for the company, which already has free zone management experience outside Dubai, in both Djibouti and at Malaysia’s Port Klang Free Zone.

The establishment of Tanger-Med should also help to boost the development of Morocco’s northern region. The director of the Regional Center for Investment, Jelloul Samsseme, said that the port would help to reinforce the region’s existing infrastructure, create new export-oriented free trade zones and raise the skill level of the workforce in the region.

On the same note, the general director of the Agency for the Promotion and Economic Development of Northern Provinces, Fouad Brini, told the press that Tanger-Med will be a positive development in integrating the north of Morocco with the rest of the kingdom and facilitate the integration between the northern provinces themselves, especially by setting up facilities that will encourage large-scale trade and industrial activities in the region.

Work has started on the motorway crossing Algeria from east to west, which is designed to be part of a 7,000km road network across the Maghreb. The government has labeled it the largest road project in the Mediterranean and North Africa.

The idea of a trans-Maghreb motorway was first floated in the 1970s — the plan was that it would be integrated into a trans-African route. Three decades later, the first sod was turned earlier this year on the Algerian segment, a project that is estimated to cost $11 billion, the bill being fully paid by the Algerian state. President Abdelaziz Bouteflika was present at the commencement ceremony at Hammadi, east of Algiers.

The six-lane “East-West” motorway project is the centerpiece in the government’s $80 billion program of investment in Algeria’s transport infrastructure. Around 25,000km of roads are being improved, and new ports and airports constructed, with existing facilities being modernized and expanded.

A step toward integration

The construction contracts for the motorway have been awarded to two parties; Japanese consortium Kojal is to build a 400km section in the east of the country, while the Chinese group CITIC/CRRC will take responsibility for the 528km in the west and center of Algeria. The motorway will present challenges for the contractors; the road will have a total of 538 bridges and 13 tunnels, as well as links to other roads.

The full length of the six-lane motorway, scheduled for completion in late 2009 or early 2010, will be 1,213km. It will pass through 24 of the country’s 48 provinces and, it is hoped, bring significant economic benefits.

Indeed, the project should start to benefit the country even during construction. In March, public works minister Amar Ghoul described the infrastructure projects as “a workshop meant to provide jobs to the Algerian jobless.” Once completed, economic activity generated by the East-West motorway should create at least 100,000 jobs, according to official forecasts. It will also pass through the Algerian cities of Annaba, Constantine, Setif, Algiers, Oran and Tlemcen, which the government is trying to develop as manufacturing centers.

The road will link Morocco, Algeria and Tunisia via a major motorway for the first time, boosting trade and economic co-operation and integration. Both the International Monetary Fund and the World Bank have encouraged stronger economic ties in the region. All three countries are members of the Arab Maghreb Union (AMU), as are Libya and Mauritania. Currently, only 3% of all foreign trade volume of the bloc is generated by inter-union trade, and poor infrastructure connecting the countries is partly to blame, as are poor foreign relations.

The majority of Algeria’s non-energy exports are transported by road, on an often congested and run-down network; according to the ministry of transport, 90% of all traffic consists of freight vehicles.

Ghoul has emphasized the importance of linking the East-West motorway with others in the region and has been in talks with counterparts in Tunisia and Morocco on this issue.

The motorway has not been welcomed in all quarters, however. In late June, environmentalists warned that under current plans the road would pass through the El Kala national park, which lies on the Mediterranean coast, for a distance of 15 kilometers.

The park covers an area of wetlands and forests which are the habitat of many of the country’s distinctive flora and fauna including birds of prey, fox, lynx, tortoise and wild cat which the environmentalists said would be put at risk by the motorway.

The government immediately responded to the claims, with Ghoul saying that a last-minute re-routing was impossible, as it could increase the project’s costs by $2 billion. However, this was followed by an equally swift volte face, with the government declaring that construction work in the region would be suspended and a different route found.

“We have ordered the national motorways agency to widen the consultation to academics, experts, national associations and our partners,” Ghoul told the local press. “Today, we can affirm as for us that there is no longer a problem concerning El Kala park.”

Once completed, the motorway should bring with it huge benefits to the country. There is little doubt of the need for a major, modern motorway across Algeria, and the region, where development has been hamstrung by poor infrastructure. If agreements can be reached on joining it to other roads of similar capacity in the rest of the Maghreb, the plans first conceived in the 1970s will become a reality.

Tunisia’s 11th Development Plan has set out a road map to boosting growth through tax reforms, investment and economic restructuring.

In July, parliament unanimously approved the Development Plan, which had been presented by Prime Minister Mohammed Ghannouchi. It is the latest five-year economic plan, taking the economy into the second decade of the twenty-first century. The draft plan has been two years in the making, and Ghannouchi said that it was based on extensive consultation, an assessment of the results of past plans and a thorough analysis of developments at the national and international level.

The program combines economic reforms designed to boost investment and encourage and diversify the private sector, while boosting social services. In a move to encourage foreign direct investment (FDI), the Development Plan includes large-scale changes to the tax system. Corporate tax will be lowered from 35% to 30%, while businesses will be given a rebate equal to the increase on VAT.

Customs duties on a range of equipment and materials imported from certain countries which have free-trade agreements with Tunisia will be lifted, taking the proportion of duty-exempted imports to 80% of the total.

Strong growth

Tunisia’s strong GDP growth of 4.5% over the past decade is forecast to increase to 6.1% due to the expansion of the service sector, which will account for 50% of the economy within the next few years, and the restructuring and liberalization of other sectors and the economy in general. The Development Plan envisages that the increase in growth will help improve incomes. Per capita income grew from $2,300 in 2001 to $3,000 by the end of 2006, Ghannouchi said. The program foresees this increasing to $4,400 by the end of its remit.

The program envisages cutting unemployment to 13.4% by 2011, from 14.3% at present, made possible in part by infrastructure and industry projects.

The reforms to taxation and government spending, coupled with growth, should reduce the budget deficit to 2.2% of GDP by the end of 2011, from 2.9% at the end of 2006. The Development Plan sets out a maximum of 3.1% for the budget deficit, and 2.6% for the current account deficit (CAD). It also targets a reduction in foreign debt from 47.9% to 39.1% of GDP over the course of its implementation.

After parliament approved the 11th Development Plan, Ghannouchi emphasized that the coming five years will present challenges as well as opportunities for Tunisia. These include tougher international and domestic competition and potential increases in the price of raw materials.

“The targets set by the 11th Development Plan are ambitious and are meant to formalize Tunisians’ determination to achieve new results on the path of progress and prosperity,” he said.

The cost of the plan to the government is estimated at $45.5 billion, 35% more than the 10th Development Plan. The government aims to fund the package partly through $6 billion in foreign investments, with an additional $9.8 billion from international loans and partnership agreements with other countries in the Mediterranean and MENA regions.

Program is well costed

At a meeting to discuss the funding of the Development Plan, European Investment Bank (EIB) vice president Phillipe de Fontaine Vive announced that the financial arm of the EIB, the FEMIB, would be increasing its loans to private sector companies by 50%. Furthermore, the government is encouraging a diversification of private funding.

There is a consensus among economists that the program is well costed and that the country does not face serious external or internal risks over the next half decade, so investment will continue to come in and the government’s fiscal position will be strong enough to fund much of the plan. The US envoy to Tunisia, Robert F. Godec, recently described Tunisia as a “stable country with zero risks for foreign investments.” The recently-released African report of the World Economic Forum (WEF) also singled out Tunisia as an oasis of stability in the continent, a statement which should further boost investor confidence. While in the past Tunisia was considered a highly controlled marketplace, with strong repatriation controls, the system is changing rapidly as the government homes in on the link between trade and growth.