Overseas Business Risk – Morocco
Political and Economic
Morocco is a constitutional monarchy. King Mohammed VI who came to the throne in 1999, retains much of the executive power, but the Parliament is democratically elected. Morocco has a bicameral Parliament consisting of an Upper House or Chamber of Counsellors, and a Lower House or Chamber of Representatives, directly elected by voters.
The Moroccan Government sees itself as a force for stability in the region. Morocco has played a solid role in support of the Middle East Peace Process and in a number of UN peacekeeping operations. The country has made remarkable progress over the past few years in democratisation, respect for human rights and social and economic reform. A vibrant civil society and a vocal press contribute to one of the most open and tolerant of Middle East and North Africa countries.
Moroccan and Algerian relations are strained over the question of Western Sahara. The border between Algeria and Morocco is still closed. Since Spain’s withdrawal in 1976, Western Sahara has been a disputed territory. Initially Morocco and Mauritania moved in, and since 1979, when Mauritania renounced its territorial claims, Morocco has occupied the territory apart from an eastern strip controlled by the Polisario. The UK views the sovereignty of the Western Sahara as undetermined, pending a UN-led solution to the dispute.
Morocco-Spain relations have been traditionally good, although Morocco has also repeatedly called for Spain to end the continuing occupation of the enclaves of Ceuta and Melilla.
Morocco and the EU have a history of close political and economic ties. The EU is Morocco’s most important trading partner. On October 13, 2008, the European Union granted Morocco "advanced status", reflecting the EU’s decision to strengthen trade and political ties as well as to reward Morocco for its economic and democratic reform process. In June 2011, the Parliamentary Assembly of the Council of Europe (PACE) granted the Moroccan parliament the "Partner for Democracy" status.
Morocco also has good relations with the US, which granted Morocco major non-Nato ally status in June 2004.
In 2011, Morocco joined the G8 Deauville partnership which will make available a financing of about $ 38 billion to support political and economic reforms in four MENA countries: Egypt, Tunisia, Jordan and Morocco.
Following the “Arab Spring” which has shaken the Middle East and North Africa in late 2010 and early 2011, there have been several protests and demonstrations in Morocco from February 20th, although smaller and more subdued. King Mohamed VI has taken steps to address some of the demands, including a call for major constitutional reforms to move the country towards more democracy.
Morocco’s draft new constitution was approved by voters on Friday 1 July. It hands more power to the government, strengthens the independence of the judiciary and enhances human rights. Dominant authority still rests with the King. New Parliamentary elections took place on 25 November 2011. Results saw the victory of a moderate Islamist opposition party (Justice and Development Party – PJD).
In line with the new Constitution, the new Prime Minister, Abdelilah Benkirane, was appointed by the King from this winning party. Government members were appointed by the King based on the Prime Minister’s recommendations. PJD formed a coalition government in January 2012, with the Istiqlal Party as junior partner.
The new government priorities are focused on social issues, with particular emphasis on healthcare, education, employment, housing and justice. The access of PJD to power has also dismantled previous traditional alliances
However a political crisis developed in 2013 leading to conservative Istiqlal Party’s decision to withdraw from the coalition government. In July 2013, the centre-right National Rally of Independents (RNI), started talks to join the Islamist-led government. After months of negotiations and major PJD concessions to RNI, a new coalition government was formed in October 2013. To satisfy all parties in the coalition, the number of ministers was raised from 30 to 39.
Over the last decade, Morocco has significantly liberalised its trade regime and strengthened its financial sector. Modern laws have been passed to regulate the stock market and the banking industry and the tax system has been somewhat simplified.
These reforms have enhanced the overall productivity of the economy and heightened its resilience to shocks. Morocco’s positive record helped it qualify for a $ 6.2 billion loan from the IMF under the Precautionary and Liquidity Line (PLL). However, further key local reforms are needed to restore macro-economic balance, reform the subsidies fund and implement tax reform.
In 2012, Morocco had a GDP of $96 bn and a GDP per capita of $2,970. According to the IMF GDP growth was 4.9% in 2011 and dropped to 2.7% in 2012. Inflation has remained at around 1% over the last three years, but HCP forecast that it will rise to 2.5% in 2013 due to the impact of rising global energy and food prices. The budget deficit in 2012 reached a record level at 7.4% of GDP but the Government hopes to reduce this to 4.8% in 2013 and 4.9% in 2014. Estimated public debt as a ratio of GDP was 65% in 2011 (2011 estimate for UK is 79.5%) and reached 71% in 2012, leading to increased external borrowing.
Morocco’s trade deficit rose 7.9 percent to a record
197.2 billion dirhams ($23.6 billion) in 2012 as a result of more grain and energy imports and less remittances and tourism receipts. This has put much pressure on Morocco’s foreign reserves. To reduce trade deficit and boost exports, Morocco is reinforcing support to key sectors such as automobile manufacturing, aeronautics, agriculture, offshoring and textiles.The first semester of 2013 registered a decrease in trade deficit, mainly due to a reduction in oil and gas imports.
Agriculture remains an important part of the economy, employing around 40% of the population and representing around 16% of GDP, a percentage that is falling but remains substantial.
Low rainfall and unusually low temperatures in early 2012 have resulted in lower cereal crop yields and increased cereal imports. However, increased spring rainfall led to a record breaking cereal harvest of 97 million quintals. HCP (national High Planning Commission) forecast growth to reach 4.4% in 2013 thanks to a 14% increase in agricultural GDP.
Recent figures reveal a 4.5% growth in quarter 3 of 2013. As global economic conditions improve, growth is expected to accelerate to an annual average of 4.8% in 2014-17.
The structure of Morocco’s economy is still dominated by unqualified labour engaged in primary activities such as agriculture. To increase its skilled workforce and create a more competitive economy, the government needs to improve its educational standards
Unemployment reached 9% in 2011, a level maintained in 2012. Unemployment among the educated and the youth remains high.Businessman reading newspaper
18% of Moroccan youth are unemployed and 28% of the unemployed are graduates. To help create jobs, several strategic plans have been devised in various key sectors including export promotion, agriculture and fisheries, industry, IT, aeronautics and automotive. The government is also seeking a US$100 million loan from the World Bank for an employment and skills improvement project to address youth unemployment.
There is a large public sector, and long-term challenges include managing freer trade with the US and EU, raising living standards, and improving education and job prospects for Morocco’s youth. The authorities realize that reducing poverty and providing jobs is key to domestic security and development.
The new government has made several announcements stressing their intention to improve governance, reform the justice system, and increase transparency in order to boost the economy and attract foreign investors.
Morocco has displayed clear regional ambitions with projects such as the Tanger Med and Nador West med ports and the upcoming Casablanca finance city. It has signed Free Trade Agreements with the EU and the US for a gradual liberalization of trade and dismantling of customs tariffs by 2012/13. Morocco has also signed free trade agreements with Turkey, Jordan, Tunisia and Egypt and maintains growing business ties with Sub-Saharan African countries.
Negotiations on an EU-Morocco fisheries agreement resumed in 2012 after an extension of the previous agreement was rejected by the European Parliament in late 2011 for environmental and economical reasons. A new four year agreement was signed in July 2013.
In February 2012, the European Parliament voted in favour of a Protocol, which will enable Morocco’s participation in seven EU programmes in the areas of customs, energy, entrepreneurship, ICT policy, consumer policy, air traffic management, research and health.
UK exports of goods and services to Morocco spiked in 2010, totalling £673m – up to 44% compared to 2009 figures. The upward trend continued in 2011 as exports increased by 9.8% to a total of £739m. Moroccan exports to the UK in 2011 totalled £719m.
Export of UK goods increased by a further 11% in 2012 at £605.2m.Morocco is currently the UK’s leading export market in the Maghreb (North Africa) and one of the top 6 in the whole MENA Region.
Although French is the main language of business and commerce, Moroccans are increasingly Anglophile and are keen to diversify away from their traditional trading partners. The economy is opening up to new suppliers, and British products have a good reputation.
Resident or non-resident foreign nationals are entitled to invest freely in Morocco in most economic sectors without any prior authorisation. The country has put in place a legal and fiscal framework intended to attract foreign investors, which enables the latter to freely repatriate their capital and profits, although any financial transaction must be declared to the Exchange Office (Office des Changes).
The Investment Promotion and Protection Agreement and Double Taxation Agreement with the UK allow for the protection of existing and future investments. In line with its positive approach towards investment, Morocco has made impressive efforts to improve its regulatory environment. Regional Investment Centres were established in 2002 in the main centres in order to provide ‘one-stop shops’ to facilitate the investment process by eliminating complicated bureaucratic procedures. The development of industrial free trade and logistics zones have also brought foreign investment to the north of Morocco. Companies located in these zones benefit from major tax incentives.
With regards to dispute resolution, Morocco is a member of the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID). Morocco has also signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (with reservations) from 1958 and the Convention on the Settlement of Disputes between States and Nationals of Other States from 1965. While Morocco adheres to its international conventions and agreements, many reports indicate that the country’s judiciary is non-transparent and slow. This leads most foreign companies to settle disputes through arbitration instead of using local courts. Establishment of commercial courts in 1998 has improved commercial law operations, although enforcement of decisions still constitutes a problem. Therefore, companies are advised to include arbitration clauses in all their contracts.
Some of the King’s priorities identified in 2009 were the improvement of the business environment and the fairness and efficiency of the judicial system. To that effect, the CNEA (Comite National de l’Environnement des Affaires), national committee for the business environment was created in 2009.
Morocco was the highest climber in the World Bank’s 2012 Ease of Doing Business rankings, rising from 115th to 93th thanks to the simplification of its administrative procedures and major tax reforms.
However, recent rankings from the Doing Business 2013 report, show that Morocco is down four positions, ranking 97th out of a total of 185 countries. Major negative indicators were the property registration/transfer, building permits, and debt recovery issues. Poor implementation of the legal framework and excessive bureaucracy reinforce negative perceptions about ease of doing business in the country.
In the 2012-2013 World Economic Forum’s Global Competitiveness Report, Morocco improved from the 73rd rank in 2011 to 70th out of 148 in 2012.
The 2013 Financial Law made of the improvement of the business environment a priority so as to boost foreign investment. Measures included the simplification and standardization of 30 administrative procedures, drafting a new investor’s guide, reforming the law on public tenders, reinforcing the powers of the Competition Council, reforming the SME and the investment charters and the law on Limited Companies.
Human Rights and Business
Morocco has ratified over 50 ILO conventions on labour rights but still needs to adopt measures in order to meet these commitments.
Morocco has ratified the convention on the Right to Organise and Bargain Collectively but has not yet ratified the convention on Freedom of Association. Some trade unions are subjected to harassment due to cumbersome administrative procedures and the growth of subcontracting and temporary employment makes it difficult for workers to organise in trade unions. Although local law prohibits antiunion discrimination, there were cases of employee dismissal by the employer following involvement in trade union activities. The Moroccan Constitution guarantees workers the right to strike, although sit-ins are not permitted and the government can break up demonstrations in public areas held without authorisation.
Morocco has ratified conventions on the minimum age for employment. Local law protects children against exploitation at work but this is applied only in some economic sectors and breach sanctions are not sufficiently dissuasive or not enforced. Child labour is prevalent in rural areas and the informal sector. The government has taken measures to restrict child labour by adopting a National Plan for Children.
Morocco has ratified conventions on equal remuneration and discrimination. Although significant progress has been made in improving women literacy, this is not sufficient to remove male-female disparity. Most female unskilled workers are employed in the textile and food sectors. Abuses such as poor working conditions, low remuneration or limited access to vocational training, were reported in the textile and clothing sector. A large portion of women is also engaged in informal work.
Women are represented in many highly skilled managerial positions in Morocco and there has been a rise in women entrepreneurship. However, equality of opportunity for men and women is often not implemented, leading to a higher rate of unemployment among women graduates.
In July 2012, Morocco and the European Union signed an agreement offering Morocco a grant of 45 million euros to finance the implementation of a government plan for gender equality. The programme’s objectives include the promotion of an equality culture, the development of specific and targeted policies and a greater representation of women in decision-making positions (political and administrative).
To promote human development, Morocco established agencies such as the National Initiative for Human Development (INDH). A Social Responsibility Charter was introduced and a Corporate Social Responsibility label attributed by the General Confederation of Moroccan Enterprises – CGEM – to companies respecting charter principles. The creation of the National Council for Human Rights (CNDH) and the National Observatory for Human Development (ONDH) strengthens the country’s commitment in protecting citizen rights and promoting their development.
Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In 2012 Morocco ranked 88 out of 176 countries (ranked 80th in 2008) in the Transparency International’s corruption perception index (CPI). This shows that corruption is still deeply rooted, which slows down the country’s development, despite a series of measures and actions to fight it. The problem is partly due to the low salaries in the public sector.
The transformation of corruption from a taboo topic to a legitimate subject for public-policy discussion and analysis came as a result of:
the dynamism and political courage displayed by a few NGOs such as Maroc 2020 and Transparency Maroc
the increased influence of a group of modern entrepreneurs who have come to dominate Morocco’s employers federation, the Confédération Générale des Entreprises du Maroc (CGEM)
pressures, direct and indirect, by donors
To aid the push for greater transparency, the CGEM created in 1998 an Ethics Committee (Comité d’Ethique et de Déontologie) to affirm the CGEM’s commitment to work – in partnership with the government, civil society, trade unions, donors, the media and the general public – toward the adoption of specific measures aimed at strengthening the rule of law, eliminating all forms of corruption and fraud both within a firm and in its relation to its economic and political environment, and elaborating professional codes of ethics.
Public procurement was allegedly stained by corrupt practices with negative consequences for both the cost and quality of public services, despite the fact that government tender processes have been reformed to increase transparency. The new public procurement code in place since 1998, requiring open bidding made it more difficult to have preferential deals with selected partners.
The Moroccan authorities started a campaign in 2006 to combat smuggling rings and pledged to end the culture of impunity that was alleged to exist within the security forces. This resulted in the dismissal of several senior security officials.
The government made the rooting out of corruption a top priority, ratified the United Nations Convention against Corruption (UNCAC) in 2007 and created an anti-corruption commission, the Instance Centrale de Prévention de la Corruption (ICPC). The goal is to improve the business climate and make it more attractive. The agency aims to serve as a means of suggestion, consultation, and communication to help the government fully implement its anti-corruption policies, and to encourage further transparency in the public sector.
Morocco is also a founding member of the international anti-money laundering institution. Being firmly committed to fighting corruption, in early 2007 the parliament passed law 43-05 regulating the fight against money laundering so as to reinforce the transparency of financial transactions.
In 2008, the government created a unit tasked with gathering information on money laundering (Unite de Traitement du Renseignement Financier) with representatives from the central bank, the stock market regulator, the ministry of justice, the ministry of interior, the ministry of finance, customs and the police department.
During his visit to Morocco in October 2011, Foreign Secretary William Hague launched the UK’s Arab Partnership programme in Morocco to support reforms related to political participation, fight against corruption, and good governance.
Tackling corruption and improving good governance is also one major objective of Morocco’s new government. The anti-corruption programme will be structured around six areas: improving the judicial system, reinforcing the powers of the ICPC, tackling the educational side, strengthening partnerships with NGOs, enlarging international cooperation and launching a public awareness campaign.
There is a general threat from terrorism in Morocco. Attacks could be indiscriminate, including in places frequented by foreigners.
Since early 2011 there have been occasional demonstrations and protests in a number of places across the country. In general, demonstrations have been peaceful but there have been isolated incidents of vandalism and looting. You should follow local and international developments in the media. You should also take sensible security precautions and maintain a high level of vigilance at all times. Avoid political gatherings and demonstrations. Always observe instructions given by the local security authorities.
Protective Security Advice
Violent crime is not a major problem in Morocco, but it is growing.
Whilst driving, you should avoid stopping at the side of the road and drive defensively, with vehicle doors locked and windows closed at all times.
Petty crime, such as pick pocketing and bag snatching, continues to increase. Crime and aggressive begging near ATM machines are increasing. You should remain vigilant and alert to intimidation and potential confidence tricks.
There have been reports of demonstrations in a number of locations across Morocco, some of which have led to incidents of vandalism and looting in Tangier, Marrakech and other locations. You should avoid political gatherings and demonstrations, and respect any advice or instruction from local security authorities.You should also follow news reports and be alert to developments in the Middle East that might trigger public disturbances.
Morocco has a poor road safety record. Accidents are especially frequent on busy major routes but also on narrower secondary roads. Some roads and streets can also be in a very poor condition and get worse in bad weather. In November 2010, severe weather in the Casablanca region as well as other regions across Morocco caused serious flooding problems leading to accidents and several road closures. You are advised to exercise extreme caution when travelling on roads in bad weather.
Morocco has a relatively complete regulatory and legislative system for the protection of intellectual property. It is a member of the World Intellectual Property Organisation (WIPO) and is a party to several international conventions and agreements: Berne copyright convention for artistic and literary works, Paris convention for industrial property, Brussels satellite convention, and Madrid, Nice, Hague agreements for the protection of intellectual property.
While Moroccan laws are generally adequate, enforcement is sometimes lacking.
Counterfeiting of clothing, luggage and other consumer goods, as well as the illegal copying of computer software and artistic works such as DVDs and CDs frequently occur. The Moroccan Government is already taking tough measures to combat the black market in response to calls from major players to crack down on smuggling and imitation products so as to create fair trade. The decrease of customs duties will affect prices and may minimise the role currently played by the black market.
To help the enforcement of intellectual property rights, an Anti-Counterfeiting Trade Agreement (ACTA) was signed in October 2011 by eight countries. These include Morocco, Australia, Canada, Japan, New Zealand, Singapore, South Korea, and the US.
At an initial stage, it is essential for foreign companies to protect their trademarks in Morocco by applying for trademark protection with the Moroccan Office for Industrial and Commercial Property in Casablanca (). Full details on how to proceed can be found in English on OMPIC’S website. The Moroccan Copyright Office in Rabat (), supervises copyright and related rights for literary and artistic works.
Morocco’s ratification of a number of international and regional agreements and conventions shows the country’s commitment to fight organised crime (drug trafficking, terrorism, illegal migration). On the fight against cyber-criminality, the Moroccan government has also taken the necessary measures to upgrade the relevant services.
Drug trafficking (cannabis, cocaine) provide a profitable and thriving business between Morocco and southern Spain. But organised crime presents no direct threat to UK businesses in Morocco.
Problems do occasionally arise with the export of textile goods: items are stolen from the factories to turn up in local markets. The police do take action to confiscate the items when the thefts are reported, but their resale value is limited, if non-existent.