1

Investment Opportunities in the Moroccan Market

1- Introduction

Since King Mohammed VI came to the throne in 1999, Morocco has known an exceptional

turning point in its economic growth and social transformation starting with the adoption of

new strategic political reforms and the introduction of a wide range of new sectorial

roadmaps to boost the economic activity in order to maintain the stable course over the

previous years in comparison to other countries that were directly affected by the financial

and economic crisis, and more recently, by the Arab Spring turmoil and debt crisis in the

Euro zone.

The number of reforms put in place opened doors to the country to sign various free trade

agreements with European countries, Turkey, the United States and 17 Arab countries

without forgetting the role Morocco plays in the Sub-Saharan Africa region (Agadir

Agreement, 2013; WorldBank, 2013a; WorldBank, 2013b; NFTC, 2005; WTO, 2009; WTO,

1994; ECT, 2000). To continue its economic development, Morocco launched several

megaprojects such as the Renewable Energy Plan, the Green Plan for the Agriculture Sector,

the National Pact for Industrial Development, the Tourism Vision 2020 and the Halieutis Plan

for the Fishery Industry (Kapferer and Gaston-Breton, 2010; OECD, 2013).

2011 marked one of significant political changes for Morocco with a revised constitution

declaring Morocco’s vision to build a democratic state of law and to “consolidate and

strengthen the institutions for a modern state founded on principles of participation,

accountability and good governance” (OECD, 2013).

2- FDI’s opportunities and Industrial Emergence: Free Zones and

Offshoring

Over the last years, 5 sectors attracted more than 75% of the total inflow of FDI including

telecommunications, real estate, tourism, industry and banking.

Since 2008, FDI in the industry sector is on a continuous rise. The economic profile of

Morocco is changing. This proves the relevance of the National Pact for Industrial

Emergence (Emergence, 2013). Morocco has focused on encouraging niche industries for

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export and promoting internationally emerging services to businesses. As a result, relocation

of services, the automotive sector and transport and logistics are all thriving (Figure 1).

Figure 1: A Business Environment Favourable to Investment (Source: Authors own contribution from

Emergence (2013))

Driven by major projects such as Renault and Bombardier, automotive and aerospace will

undoubtedly continue to attract foreign investment, bringing technology transfer and

industrial know-how and revenue-generating export, which is very important for the balance

of our trade balance. 2012 has marked the history of FDI in Morocco; it is for the first time in

the economic history of Morocco as industry ranks first among economic sectors received the

largest FDI per year with 26% out of the total (Figure 2).

3

Figure 2: Morocco Leading North Africa in terms of FDI Inflows (Source: Authors own contribution

extracted from AMDI’s report (2013))

A number of very important foreign investments have been made in Morocco, example of

Canada’s Bombardier in Aeronautics, United States’ Dell largest business center in Europe

(NFTC, 2005), Middle East and Africa, France’s Renault in the automotive sector, Japan’s

Mitsui in Infrastructure and Renewable Energy, Jordan’s Hikma in Pharmaceuticals,

Turkey’s Makyoll and Tekfen in Infrastructure (WorldBank, 2013a) and the Franco-German

Alstom & Nexans in the Rail Industry (WorldBank, 2013b). In relation to foreign investment,

Morocco has proven its determination to attract FDIs (Oxford Business Group, 2011), by

taking advantage of the opportunities brought by globalisation, through establishing a number

of Free Zones and Offshoring Parks in the most influent and important cities of the kingdom

such as: Casablanca, Rabat, Tangier, Nador and so on. According to AMDI (2013), initial

indicators of FDIs for 2013 in Morocco was accounted to 20.70 billion dirhams MAD in

August 2013 which shows a significant increase of 31.9% over 15.69 billion dirhams MAD

in FDIs from the previous year.

In its resolve to be part of the offshoring era and gain a worldwide recognition, and with joint

efforts from both the public and private sectors, Morocco has launched several projects for

offshoring parks and was able to be acknowledged among the other known offshoring

destinations of the world. Thus, benefiting from the geographical location of the kingdom, its

culture of openness, the competitive labour cost and human resources and other financial

4

incentives1, there are currently offshoring parks realised in 5 major cities in Morocco (Figure

3).

Figure 3: Map of Integrated Industrial Parks in Morocco (Source: Authors own contribution

extracted from AMDI’s report (2013))

The first four parks stated below are undertaken by a Moroccan public institution called CDG

(Caisse de Dépôt et de Gestion) through its subsidiary MEDZ (Caisse de Dépôt et de Gestion,

2012) while the fifth park is carried out by the TMSA (Tangier Mediterranean Special

Agency), which is also representing the State for the project, and the offshoring parks are as

follow:

Casablanca Nearshore Park (MedZ Sourcing, 2012c): it was founded in 2006 in the country’s

biggest city of Casablanca in a strategic location at a near distance from the International

Airport of Mohamed V and also close to the city centre. The park provides a closed and

secured work territory intended for firms specialising in activities such as customer

relationship management (CRM), software development and back office banking, and it has

already attracted up to 100 multinational companies including IBM, HP and DELL.

1 Full Exemption from custom fees and simplified customs procedures, Full exemption from corporate tax for

first 5 years and a rate of 8.75% for the following 20 years; Full exemption from income tax for first 5 years and

a reduction of 80% for the following 20 years; and No restrictions on capital or dividend transfers.

5

Technopolis Rabatshore Park (MedZ Sourcing, 2012b): the park was established in 2008 and

it is located at the intersection of three major highways connecting it to Tangier, Fez and

Casablanca and it is also at a close distance from the International Airport of Rabat. The

structure of the park provides an innovative work space matching international standards and

it aims to attract projects and investments related to new technology sectors.

Fez Shore Park (MedZ Sourcing, 2012a): following the success of Casanearshore and

Technopolis, Fez Shore was an additional step towards the strategy of the country regarding

offshoring, and the first stage of the project was realised and started off in 2012. Fez Shore

Park occupies a strategic location in the city of Fez, which is considered as the cultural and

spiritual capital of the kingdom, and similarly to the first two offshoring parks stated above,

the Fez shore is in close proximity of the city centre, the International Airport of Fez and the

major highways. Additionally, the park aims to offer an integrated work space established in

an urban environment and intended for activities of computer services, data processing and

business processes.

Oujda Shore Park (MedZ Sourcing, 2013d): located in Oujda, which is the capital city of the

oriental region of the kingdom, this park is part of the Oujda Technopole project

commissioned by the king of Morocco in 2011 and it ensures that the oriental region takes

part into the offshoring era in Morocco. Therefore, June 2013 has marked the opening of the

first part of the offshoring park, which is established at a close distance from the International

Airport of Oujda and national motorway network. Furthermore, the Oujda Shore targets

clients specialised in computer services, business processes and customer management.

TetouanShore (TangerMed TetouanShore, 2010): situated in the strategic north region of

Morocco Tangier-Tetouan, this park is another offshoring platform that has seen the light in

2012. Similarly to the other parks in the rest of the country, TetouanShore offers to its clients,

in addition to the fiscal advantages, an important infrastructure through its campus of ready to

use offices and services matching best quality standards, and thus, becoming an attractive

destination especially to Spanish and French speaking interested parties. Additionally, the

park is dedicated to activities including business process outsourcing (BPO), information

technology outsourcing (ITO) and call centres.

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Additionally, as a proof of its strong will to join the club of top offshoring destinations in the

world, Morocco has won the award of Offshoring Destination of the year in 2012 provided by

the European Outsourcing Association in London (National Outsourcing Association, 2012).

Furthermore, as part of the reforms and development programs instructed in the national pact

in order to boost the industrial sector, and in order to encourage and facilitate FDI, Free

Zones in Morocco have also witnessed an important growth. Therefore, in the past recent

years Morocco has established sector-specific zones that offer clearly defined territories with

special tax and customs regulations, and examples of these zones include (Oxford Business

Group, 2011):

A number of Free zones in Tangier, which is considered as the leading site of these

enterprises with its port installations and advantageous geographical location, and it

incorporates industrial and logistic zones such as the Tanger Free Zone (TZF), TangerMed,

Meloussa 1 and Meloussa 2. The Tanger Free Zone is a zone dedicated to export and fields

such as aeronautics, textile, electronics and the automotive sector and it has attracted, since

its establishment in 1999, over 500 enterprises such as Delphi and Yazaki. Additionally, due

to its continuous growth, TZF has been ranked 8th

out of the 25 top free zones in 2010-2011

by the British magazine Foreign Direct Investment (Oxford Business Group, 2011), and it

was selected as the 6th

best free zone in the world by the Financial Times’ FDI magazine

(Tanger Free Zone, 2013). Furthermore, according to the TZF director (Tanger

Mediterranean Special Agency, 2012), in addition to the Tanger Free Zone, the TangerMed

industrial complex comprises a Logistics Free Zone intended for post-processing activities

and logistics and the Industrial Free Zones Meloussa 1 and 2 dedicated to the automotive

industry (e.g.: the new Renault plant).

There is also the Atlantic Free Zone (AFZ) in the city of Kenitra, where this project was

launched in 2010, and it incorporates a large Free Trade Zone and provides an ideal location

for firms from all industrial sectors that intend to establish a logistic or production centre in

Morocco (Edonia Properties, 2013). The AFZ involves a number of areas intended for

logistic and industrial facilities, show room, offices as well as the area High Tech and the

electronics city, and it has already attracted a number of international companies such as

Fujikura, Hirschman, Lear and Delphi. Additionally, this free zone is at a close distance from

the kingdom’s capital Rabat and it is linked through railway and highway to the major

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International Airports (i.e.: Rabat, Casablanca, Fez and Tangier), and also to two of the main

ports of the country (i.e.: Casablanca and TangerMed).

The integrated industrial park for aerospace industry “MidParc” (MidParc, 2013), a platform

dedicated to business aviation, recently inaugurated by His Majesty King Mohammed VI on

the 30th

September, 2013. The platform, whose total cost amounts to MAD 888 million

MAD, covers an area of 124.4 ha. The first portion, will host the Canadian aircraft

manufacturer Bombardier's first factory in Africa. The inauguration of the "MidParc"

integrated industrial platform was also marked by the signing of four investment agreements

between the State and four companies (Sagem Morocco, EADS Maroc, MK Aero Simra

Maroc), and two agreements for the creation of an investment fund devoted to aerospace

industry and securing the electricity supply for the platform. These projects with an

investment of over 120 million MAD will create 268 new direct jobs and generate a total

turnover of MAD 403 million. The Bombardier factory in Morocco will contribute

considerably to the development of the aerospace industry due to the anticipated economic

effects in terms of increased Moroccan exports and development of local industry. With an

investment of about 200 million U.S. dollars, the Bombardier project will ultimately create

850 direct jobs and 4,400 indirect jobs. The implementation of Bombardier adds to the list of

large contractors (EADS, Boeing, the Safran Group, Daher, Souriau, Zodiac Aerospace, and

Air France Industries) and confirms, once again, the ability of Morocco to host a quality

aviation platform.

Moreover, there are a number of Free Zones planned in cities such as Dakhla, Laayoune and

Nador, and the industrial zones in Nouaceur, Oujda, Kenitra and Tangier will also have Free

Trade Zones status (Oxford Business Group, 2012; Moroccan Investment Development

Agency, 2009).

3- Moroccan FDI’s Challenges

The investment is a national priority for the Government and it has been made clear on

several occasions by the Head of Government. Thus and according to AMDI’s report (2011),

a special impetus shall be given to public and private investment, particularly by activating a

number of indicators:

8

Good economic governance, through: the implementation of strategies and development sites

in Morocco while ensuring their integration and coordination; the warranty of a healthy

competition; the fight against the economy of rent, corruption, privileges and favors.

Territorial development through the upgrade of the region in order to turn them into

development drivers.

The development and promotion of domestic demand as a driver of growth, the strengthening

of public investment and the citizens purchasing power.

The improvement of the productivity by leveraging modern technologies and the

development of a new professional training strategy.

The continued efforts to improve the business environment conducted under the National

Committee of the Business Environment (CNEA), as Morocco won 21 positions in the 2012

edition of Doing Business rankings and was named "Best reformer".

The preservation of macroeconomic balances, especially considering the difficult

international context.

The diversification of the external markets and the development of exportable products and

business services through an integrated industrial policy.

4- FTAs’ Analysis of Morocco’s attractiveness for FDIs

Despite the continuing global economic and financial crisis and debt crisis in Europe, the

world’s foreign direct investment (FDI) has known an increase by 16% in 2011, according to

the latest report of the UNCTAD "World Investment Report", published in July 2012. Thus,

the FDI rate was accounted to 1,524 trillion dollars, exceeding the average level before the

crisis which was the period between 2005 and 2007. For its part, Morocco has experienced a

60% increase in FDI flows in 2011 reaching 2.5 billion dollars, after three consecutive years

of decline (UNCTAD, 2012).

FDIs in emerging economies have experienced a sharp increase in the range of 20.8% to 748

billion US dollars equivalent to 49 % of global FDI. Considering FDI flows in emerging

countries in 2011, it has reached a new high of 684 billion US dollars, an increase of 11% and

a 45% share of global FDI. However, this increase does not reveal differences between

different regions. FDI flows to Asia continued to grow, and those to Latin America and the

Caribbean and countries in transition have experienced above-average growth. In contrast,

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FDI flows to Africa seem to continue the downward trend of the previous year whereas the

European Union and North America show increases 32 % and 21 % respectively compared to

2010 levels (AMDI, 2011).

If we take the example of Morocco, there was a 60% increase in FDI flows in 2011

(UNCTAD, 2012) accounted to 2.5 billion US dollars, after three consecutive years of

decline. According to the same report, FDI inflows amounted to 2.5 billion US dollars against

1.6 billion in 2010. Contributing 6% of FDI to Africa in 2011 and 33% of FDI to North

Africa, Morocco has done better than countries like Tunisia and Egypt, whose FDI flows fell

during this year (Figure 4).

Figure 4: Share of Morocco in Africa’s FDI flows (AMDI, 2011)

Source: Calculation DEPF based on data from the Office des Changes

In overall, a brief analysis shows that Morocco's ability to attract FDI can be described as

positive. However, it is difficult to establish a correlation between improving the

attractiveness of Morocco and the entry into force of the free trade agreements (FTA) (WTO,

1994). The increase in FDI is volatile and irregular and often coincided with privatisation or

sale of shares in state-owned enterprises. One of the fundamental objectives of FTAs signed

by Morocco is improving the country's attractiveness for FDI where any assessment of these

agreements is to be reviewed on the basis of this reference frame. Hence and before

considering the impact of FTAs on FDI, the interaction between these agreements and

Morocco's competitiveness in attracting investments, it is necessary to give an overview of

FTA in relation to FDI (WTO, 2009).

10

Despite the diversification of its partners, the European Union is the main trading partner of

Morocco (WorldBank, 2013b; ECT, 2000). The institutional framework for relations between

the two parties has been strengthened by the Association Agreement, signed in 1996 and

entered into force in March 2000. Morocco aspired through this agreement to develop its

export trade with the European Union and attract more FDI (WorldBank, 2013b; WTO, 2009;

WTO, 1994; ECT, 2000). To strengthen its trading further, Morocco is signing more FTAs to

improve its attractiveness for FDIs. After the entry into force of FTAs, Morocco has known a

remarkable increase in FDI inflows which have reached a record level of 38 billion Dirhams

(MAD) in 2007 against 5 billion US dollars in 2000 (AMDI, 2011). These flows have

declined towards the end of the decade mainly because of the negative impact of the global

economic and financial crisis (Figure 5).

Figure 5: Non EU FDI doubled between 2004 and 2011(AMDI, 2011; UNCTAD, 2012)

Source: Calculation DEPF based on data from the Office des Changes

FTAs could then reflect the effects of the regional integration of Morocco on its

attractiveness to FDI policy (OECD, 2013). In other words, the substantial change in the flow

of investment between 2000 and 2010 could be an indicator related to those agreements

where the government’s policies interfere especially to improve the climate of business and

to establish new sectorial strategies.

The attractiveness of Morocco for FDI has been characterised by significant growth since the

late 1990s, from an annual average of 8 billion MAD during the period 1996-2000 to 25

billion US Dollars between 2001 and 2010 (AMDI, 2011). The analysis of this remarkable

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increase in FDI is characterised by a slight irregularity due in large part to different

privatisations in the public sector. For instance and following a chronological order, this was

recorded in 2001 with a total of 30.6 billion MAD because to the privatisation of part of the

capital of Morocco Telecom (35%). After a decline in 2002, FDI flows have bounced back in

2003, following the privatisation of 80 % share of the Moroccan Radio and Television

Channels (RTM) for the benefit of the Franco-Spanish group Altadis which helped drain 14.1

billion MAD (1.6 billion US dollars). In 2005, FDI income was accounted to 26.7 billion

MAD because to the sale of 16 % stake in Morocco Telecom to Vivendi Universal, the

privatisation of four groups SUTA, SUCRAFOR, SURAC and SUNABEL for an additional

12 % share in Somaca and the privitisation of Crédit Mutuel for a share up to 10 % for the

benefit of the largest Moroccan insurance company RMA Wataniya. In 2007 and according

to the annual report proposed by AMDI (2010), FDI reached a record volume of 38 billion

MAD (5.2 billion US Dollars) as it was marked by three major privatisation operations

through Casablanca Stock Exchange with 4 % share of Maroc Telecom (4.57 billion MAD),

the redemption of COMANAV by the global leader in container shipping CMA- CGM (2.25

billion MAD) and the acquisition of the entire company dredging Drapor ports by the

company law Gabonese Sataram (327.6 million MAD). Morocco’s stategy for FDI has

subsequently suffered the negative effects of the financial and economic crisis. Thus, after an

upward trend in recent years , Morocco has experienced a decline of FDI inflows of 26.3% in

2008 compared to 2007 and 9.7 % in 2009 compared to 2008, s' set to 28 and 25 billion MAD

in 2008 and 2009. However, FDIs registered a recovery in 2010, with FDI up to 28%

compared to 2009, posting a 32.3 billion MAD in terms of the increase in the Crédit Mutuel

BMCE capital and entry of France Telecom in the capital of Méditel (AMDI, 2011).

The analysis of the geographical distribution of FDI inflows in Morocco shows that, despite

the diversification of sources of FDI known by Morocco since 2006, the European Union

remains one of Morocco’s largest partners with an average of 80% in total between 2000 and

2010 (WorldBank, 2013b). Despite a slight increase after the entry into force of the

Agreement with the United States, Morocco’s FDIs flows have declined since then especially

in 2010 marking the World recovery of the American’s FDIs of 31% compared to 2009

(NFTC, 2005).

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Morocco also benefited from signing another FTA called Agadir Agreement where FDIs

from Tunisia are marked by volatility and those from Egypt remain low. An increase is

mainly observed by the level of FDIs from Turkey after signing a free trade agreement

between Turkey and Morocco focusing more on the construction industry (WorldBank,

2013a; WTO, 2009). In this regard, investments from Arab Gulf countries have increased over

the last few years with a 3% share in average total inflows in 1996-1999 to 13% share during

the period 2000-2010. This mainly involves UAE2, Kuwait, Saudi Arabia and Qatar classified

during the period 2000-2010 respectively the 3rd, 6th, 11th and 13th largest source of

Morocco’s FDI (AMDI, 2011). The significant rise in revenues from these countries is mainly

due to the increase of petroleum products’ prices which have led these countries to diversify

their investments with other countries such as Morocco where sectors such as tourism and

real estate are targeted to pull up Morocco’s FDI flows to. Considering these two sectors,

they have recorded indeed a remarkable increase from 2006, accounting for nearly half of

total FDI between 2006 and 2008 and third in 2009 and 2010, against less than 15% before

2000 (AMDI, 2011). For example, Plan Azur which aims to develop six new resorts3, played

an important role in attracting these investments (OECD, 2013).

To sum up and on the basis of these findings, it appears that Morocco has improved its

attractiveness for FDI. This change, however irregular and unstable, is better explained by the

privatisation of the country’s public enterprises shares. It is also explained by Morocco’s

establishment of some sectorial strategies in particular the "Vision 2020" for the tourism

sector and the "Emergence Plan" considered the national pact for industrial emergence 2009 –

2015 (Emergence, 2010; OECD, 2013).

5- Conclusion

A reform-oriented country for a long time, Morocco has especially thrived since the

beginning of the century under the leadership of his Majesty the King Mohamed VI.

2 In 2006, for example, Al Qudra Group Emirati has signed agreements with Adoha and Somed. Dubai Holding

group has the development of the Bouregreg (Project Amwaj) for 2 billion dollars US, while Emaar is investing

1.55 billion dollars US in the development of the cornice Rabat (Saphira project) and 1 4 billion dollars in

Oukaïmeden site.

3 This is mediterrania (Saidia), Plage Blanche (Guelmim), Taghazout (Agadir), Lixus (Larache), Mazagan (El

Jadida) and Mogador (Essaouira).

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Combined political, economic and social initiatives enabled Morocco to provide a favourable

framework for business and investment (appendix 1), with a strong macroeconomic

fundamentals, a significant GDP growth rate, a controlled inflation, a strong fiscal position, a

favourable attitude to free enterprise and competition, a very open foreign investment regime,

a competitive labour costs, a world-class infrastructure, a qualified workforce and an

ambitious sectorial strategies.

Given Morocco’s global ambitions, its natural and diverse goods it offers to other countries

and its strategic geographic proximity to Europe, its relations with the other Arab countries

and its leading role in Africa, Morocco has been an interesting target for international

investors in various sectors such as real estate, automobile, aeronautics and information and

communication technologies, banking sector, tourism and a number of other sectors. China

found in Morocco a new location to expand in given the advantages it offers, in addition to its

controlled costs and shared culture other facilities such as its geographical proximity for

China to set a bridge in with other African and Arab countries. Considering Morocco’s strong

presence in several markets from Europe to Asia and from Africa to America and given its

important role in the World trade (WTO, 1994), the Moroccan government is encouraging

new markets such as Canada, UEMOA, CEMAC, Chili, and particularly South Korea which

entered the Moroccan market through the industrial construction sector to hopefully extend

their activities from a range of industries and this reflects, not only the interest international

investors see in Morocco as a competitive and diverse business environment, but with their

contribution, it is an opportunity for the Moroccan government to improve its economy and

by then increase the position of Morocco globally (OECD, 2013).

6- Reference

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14

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7- Appendices

Appendix 1: What kind of incentives does the Moroccan government offers to

investors?

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The Investment Promotion Fund

• Eligibility: Investment ≥ 200 MDH or creation of more than 250 jobs

• A support up to 20% of the costs of land acquisition

• A support to external Infrastructure: up to 5% of the total investment amount

• Training: a support of up to 20% of the cost.

The Hassan II Fund

• Eligibility: Investment ≥ 10 M DH and amount of equipment goods ≥ 5 MDH

• Sectors: Automotive, aerospace, electronics, nanotechnology, microelectronics and

biotechnology

• Up to 30% of the cost of professional buildings on the basis of a maximum unit cost of

2,000 MAD/m2

• Up to 15% of cost of new equipment goods

Energy Fund

• Eligibility: ≥ 2.5 MDH in equipment goods

• Objectives:

- Financing of new energy production facilities, especially in the field of

renewable energies.

- Provide grants to projects holders

Moroccan Fund for Touristic Development

• Fund Assets: 15 billion MAD over 10 Years

• Objectives:

- Supporting the implementation of the "Vision 2020"

- Produce a strong impact on the Moroccan economy and ensure profitability

for investors.

• Eligibility: Infrastructure hotel, entertainment, leisure and business tourism and cultural

infrastructure for tourism.

Free Zones

• Unlimited exemption from customs duties

• Simplified customs procedures

• Corporate tax: 0% for 5 years and 8.75% for 20 years

17

• Professional Tax: Exemption for 15 years

• VAT: Unlimited exemption in respect of goods delivered and services rendered to the FZEs

from the territory subject

• No restrictions on capital repatriation and convertibility

• Free foreign currency transactions