Morocco

Morocco’s economic performance remained strong in 2009, despite poor international conditions. Initially, the instability of financial markets, soaring oil prices, and the loss of impetus of the country’s major trading partners led to fears of the worst. However, the fundamentals have remained stable, attesting to greater ability to withstand external shocks. Gross domestic product (GDP) growth reached 5% in 2009, buoyed by an exceptional agricultural campaign, vigorous domestic demand and economic support measures. These latter were introduced to counteract the effects of the crisis, perceived since the second quarter of 2008.

The Moroccan economy, however, continues to suffer from certain weaknesses that the international crisis risks exacerbating in the short term. There are persistent worries about the health of the balance of trade, and the competitiveness of exports as well as their strong concentration on European markets.

In addition, the crisis had a negative impact on tourist revenues and transfers from Moroccan residents abroad. These two principal sources of foreign currency have thus far offset the deficit in the balance of trade and have enabled the current account to remain positive. Growth should thus remain unchanged in 2010, and not exceed 4.3%.

Structural and sector reforms in recent years have contributed to establishing the foundations of a modern and open economy. The crisis prompted the authorities to redouble their efforts to modernise the public sector, launch large infrastructure projects, develop the private sector and protect the environment.

Despite the worldwide recession in 2009, the Moroccan economy met its growth target, with a rate of 5%, against initial forecasts of 5.4%.

The persistently large agricultural sector contributes 14% to GDP, but the economy is increasingly reliant on services. Like industry, services suffered from the setback of the crisis in the last quarter of 2008. GDP growth excluding the primary sector should reach around 4.3% in 2009, against an annual average of 6% since 2003.

The agricultural sector benefitted from highly favourable climatic conditions during the 2008/09 campaign.  A record production of durum wheat, soft wheat and barley were estimated. The harvest should reach 102 million quintals, almost double the previous harvest. The added value of agriculture increased by 24% over 2007/08.

Cereals dominate, followed closely by vegetables and citrus fruit. Their production increased by 10% in 2008/09. However, citrus fruit exports fell by 17.1% between January and August 2009 over the same period in 2008, due to the collapse in foreign demand. This was most marked in Russia, where demand contracted by 24.7%.

The strong rains of 2009 having fed the water table, agriculture should be less vulnerable to climatic vagaries in 2010. Official forecasts expect a 2.4% contraction of the primary sector in 2009, due to difficulties in the fishing sub-sector. Performance, however, remains better than in 2007, a year when agricultural growth contracted by 20.8% for lack of rain.

Livestock grew by 4.3% in 2009, a more moderate pace than in 2008. The good rainfall improved the quality of pastures and led to a relative fall in the price of cattlefeed. In contrast, poultry production suffered from a heatwave that affected the country during the summer of 2009, leading to losses of 1.5% in production between January and August 2009, over the previous year.

Fishing, a significant component of agriculture, began the year badly in 2009, but recovered from the start of the second quarter. Catches increased by 11% in volume between January and September 2009 over the same period in 2008. However, with the collapse in European demand, their value fell by 12.3% due to the 40% fall in revenues from octopus sales. This product alone represents a quarter of the total value of landings. The export of fish and shellfish decreased by 19.9% between January and October 2009 over the same period in 2008.

For their part, non-agricultural activities affected by the crisis recovered somewhat in the second quarter of 2009. In the twelve months before June 2009, non-agricultural growth reached 2%, compared with 1.9% in the twelve months before December 2008 and 1.3% in the twelve months before March 2009. Official projections nevertheless forecast a recovery of 4.4% of non-agricultural GDP in 2010, following measures put in place to support the sectors most affected by the crisis.

The mining sector was hard hit. Between January and the end of August 2009, the world market for phosphate fell by 74% compared to the same period in 2008. The production of crude phosphate and phosphate fertilizers also declined by 52.3% and 42.4% respectively over the period. The downward spiral eased at the end of September 2009, with a fall restored to 18.7% and 7.3% of phosphate and fertilizer production respectively, year on year. The turnover of the Sharifian Phosphate Office (OCP), buoyed by exceptional conditions in 2008, fell only slightly during the first nine months of 2009, rising to 15 billion Moroccan dirhams (MAD).

After a slowdown at the end of 2008 and start of 2009, electricity production increased by 3.4% in the first ten months of the year. Electricity consumption increased by 2.9% over the same period.

Industry also suffered the effects of the international crisis. Its contribution to growth deteriorated in 2008, going from 0.7% in the first quarter of 2008 to a negative contribution in value (-0.5%) in the next three quarters. The added value of industrial activities excluding refining declined by 4% in the last quarter of 2008 and by 0.8% in the first quarter of 2009, before rebounding with positive growth of 0.2% in the second quarter of 2009 and by 2.1% in the third quarter, in annual rates.

Textiles and clothing, automobiles and electronics were worst affected by the crisis. Layoffs in the automobile, textile and clothing sectors hit 10% of the workforce between January and May 2009, followed by almost 7.5% in June and July. The combined losses in textiles and clothing reached MAD 346 million between January and August 2009, versus MAD 2.2 billion for the automobile sector and MAD 1.35 billion for electronics.

The food and chemicals industries, which escaped relatively lightly, increased by 2.5 and 4.9% in the second quarter of 2009 over the same period in 2008. The food industry benefitted from robust domestic demand, particularly for tinned fish and milk products. The good performance of the chemical industry is attributable to stronger local demand for pesticides, insecticides and other agricultural products due to the good agricultural campaign.

After a difficult start to the year, construction activities began to recover in the third quarter of 2009. Sales of cement – a good indicator of the sector’s health – expanded by 3.5% between January and October 2009 over the same period in 2008. Mortgage credits increased by MAD 18.4 billion between January and October 2009, a 10% year-on-year increase.

The slight recovery recorded by industry at the end of 2009 gave rise to optimistic forecasts for 2010. Indeed, the secondary sector should grow by 4.5% in 2010, after falling by 0.3% in 2009, thanks to construction, energy and mining. The establishment of the National Pact for Industrial Emergence should play a role, so too should measures adopted to secure the country’s energy supply.

In the tertiary sector, the results are mixed. Tourism did not suffer too much from the recession. Although arrivals did fall by 10.5% in the first quarter of 2009, then by 6.5% in the second quarter over the same periods the previous year, activity subsequently recovered over the summer, compensating for the losses of the start of the year. At the end of July 2009, almost 5 million tourists had visited Morocco, a 8.3% increase over the same period in 2008. Tourism revenues accounted for 7.2% of GDP in 2009, while remittances from Moroccans abroad reached 6.8% of GDP. Visits to the country by these emigrants increased by 14.8% during this period. Overnight stays rebounded somewhat in July 2009 (up by 4%) after a strong decrease at the start of the year.

With mobile telephony and Internet, telecommunications remained dynamic throughout 2009. There are now more than 21 million mobile phone subscribers and the sub-sector grew by 12.5% between January and September 2009 over the same period in 2008. Internet subscriptions increased by 52%, thanks to the popularity of 3G Internet. Internet subscriptions were at 1.05 million in September 2009. The number of 3G subscribers posted record growth of 182.9%, year on year, between January and September 2009. Fixed lined subscrptions increased by 19.7%, to reach 3.4 million subscribers by end September 2009.

Transportation suffered from the international situation and from the fall in domestic demand. A recovery began in the third quarter of 2009, after two quarters of contraction in maritime and rail freight. The value added of transportation increased by 3.4% in the second quarter, after falling by 2.9% between January and March. This positive development is driven by exports of phosphates and derivatives, as well as by passenger transport by train. Air transport was strongly disrupted by staff strikes. Still, air traffic increased by 2.5% over the previous year between January and October 2009. With dealers cutting prices, new car sales increased by 32.3% by the second quarter of 2009 over the previous year.

Domestic demand increased by 6.8% in 2009 and should expand further by 7.7% in 2010. Supported by a reduction in income tax and salary adjustments, it was also driven by the excellent agricultural harvest, an unemployment rate below 10% and a rise in consumer credit, up by 19.3% between January and October 2009 over the same period in 2008. As a consequence, domestic demand in part offset the decline in external demand. Household demand should contribute 4.3% to growth in 2009 and 4.6% in 2010. It should be supported by a new income tax cut, scheduled for January 2010, by the dynamism of the labour market and by the maintenance of inflation at around 2.9% in 2010.

Investment was stable, despite the uncertain context. Indeed, equipment credits increased by 24.8% between January and October 2009 over the same period in 2008. Gross fixed capital formation at current prices increased by 9.1% in 2009 and should increase by 6.3% in 2010. Its contribution to growth should exceed 3% in 2009 and 2.2% in 2010. Foreign direct investment (FDI) represented 3.6% of GDP in 2009, with France remaining the leading issuing country with a 30% share, followed by Kuwait and the United States.

The impact of the international crisis derailed the trend of rising government revenue that had prevailed since 2007. The fiscal balance, in surplus of 0.2% and 0.4% of GDP in 2007 and 2008, slipped into deficit in 2009, to the level of 2.9%. The deficit should deepen in 2010 and reach 4%.

Tax revenues declined by 10.7% in 2009, limited to MAD 150 billion, due to the 12.5% fall in revenue from direct taxation. Income tax revenues should recede further in 2010 following a lowering of the tax rate, which should go from 40 to 38% in January 2010. Revenue from corporate taxes declined by 11.2% in 2009, due to the recession. Non-tax revenues grew by 5% in 2009, thanks to a 31.9% increase in monopoly revenues. A reversal of this trend is however expected in 2010, with non-tax receipts falling by 2.8%.

Ordinary expenditure increased less rapidly in 2009 than in 2008, due to the contraction in compensation expenditure. It rose by more than 90% in 2008, before contracting by 64.8% in 2009, and should continue to decline in 2010 with an estimated contraction of 51.6%. Likewise, spending on goods and services fell slightly from 5.5% of GDP in 2008 to 5.4% in 2009 due to the 9.3% fall in equipment expenditure in 2009. In terms of the 2010 forecasts, ordinary expenditure should rebound to MAD 156.4 billion, a 4.3% increase over 2009. Lastly, investment spending increased by 13.3% in 2009 over the previous year, to reach MAD 43.2 billion. It should continue to grow at a rate of 20% in 2010, affirming the willingness of the public powers to maintain their support of the national economy during the world recession, through projects with strong economic and social returns.

The public debt went from 53.5% of GDP in 2007 to 47.3% in 2008 and 46.7% in 2009. This decline is partly the result of active management of the debt, begun in 2008 with reforms aimed at developing the market for Treasury assets. The objective, which is to bring the fiscal defict to less than 3% of GDP in 2010, should contribute to stabilising the debt ratio and offering greater room for manœuvre in the control of monetary policy.

In order to preserve household purchasing power and the competitivity of the economy, inflation should not exceed 2.9% in 2010, following controlled growth in 2009 (1%). Inflation has been maintained at this level through a prudent monetary policy of targeting inflation and ongoing intervention measures of the State via the equalisation fund. In the absence of inflationary pressure, Bank Al-Maghreb (BM) reduced its market rate by 25 basis points in March 2009, to bring it to 3.25%. Throughout 2009, BM reduced the base money rate from 15% to 8%, taking into account liquidity requirements which resulted from the fall in foreign currency receipts. The interest rate was untouched so as to contain inflationary pressure.

Money supply increased by 6.4% between January and October 2009 over the same period in 2008. This increase was explained by the average 10.5% rise in credits to the economy, variously distributed according to credit types (at least 19.3% for consumption credits, 24.8% for equipment credits, 12.1% for mortgages). Indexed to a basket of currencies dominated by the euro, the exchange rate of the Moroccan dirham was MAD 11.4 to the euro in October 2009, versus MAD 11.11 in 2008. In contrast, the dollar continued to depreciate against the dirham, going from MAD 8.71 per dollar in October 2008 to MAD 7.73 in October 2009, or a 11.3% fall in one year.

The performance of trade confirmed the fears provoked by the international crisis and the slowdown of economic activity in Morocco’s partner countries. Year-on-year, imports and exports fell by 19.2% and 23.3% in value during the first three quarters of 2009. The coverage rate fell by 3.7 percentage points during this period, from 73.9% at the end of October 2008 to 70.2% one year later. The trade deficit reached MAD 122.2 billion for the first ten months of the year, a 14.8% drop over the same period in 2008. The external current account deficit reached 4.9% of GDP in 2008 and should reach 6.3% in 2009 then 4% in 2010.

Imports of energy products declined by 34.4% during the first ten months of 2009, following the fall in volume imports of crude oil and the decline of the average import price, which went from MAD 5 886.5/tonne to MAD 3 423.7/tonne from one year to the next. Imports of semi-finished and raw goods fared similarly to energy products, recording a value fall of 27.6% and 53.9%, respectively over their October 2008 levels. In addition, good rainfall and the excellent cereals harvest made it possible to reduce food imports by 24.8% at the end of October 2009, compared with the same period in 2008.

In line with forecasts reflecting the world recession, Moroccan exports fell by 28.2% in value in 2009, after having increased by 36.2% in 2008. This poor performance is largely explained by the concentration of exports on a limited number of countries that suffered the worst effects of the crisis, as well as by the significant fall (by 66.5%) in exports of phosphates and derivatives.

 

 

Excluding phosphates and derivatives, exports contracted by 13.9% in value between January and October 2009, less affected by the recession. This fall will be reduced, thus going from 19.1% in the second quarter to 6% in the third quarter, thanks to the recovery of exports of fish and electronic components. In textiles and leather, clothing exports fell but those of shoes grew by 9.4% between January and October 2009, on a year-on-year basis.

Trade with Arab Maghreb Union (AMU) countries reached nearly 1 billion US dollars (USD) in 2008. Trade has increased each year but remains below the regional potential. Morocco has increased its trade agreements with sub-Saharan Africa too.

Morocco’s good performances in recent years are the result of structural and sectoral reforms implemented by the government. These policies substantially contributed to laying the foundations of a modern and open economy. The international recession prompted the public authorities to ramp up various sectoral plans, including modernising the public sector, developing infrastructure and the private sector, and protecting the environment. The objective consists of boosting the economy’s ability to withstand external shocks and to maintain a positive growth perspective.

Since 2007, reforms to modernise the financial sector have been underway in order to facilitate corporate access to credit and improve the legal and regulatory framework of business. The Financial Sector Development Support Programme (PADESFI) is supported by the African Development Bank (AfDB) and the World Bank. By reforming the national guarantee system and adopting a development plan for the central guarantee fund, it should boost support for SME financing.

Under the framework of the industrial emergence contract, concluded between the State and the private sector, the creation of a public-private committee was planned for 2009. This committee is charged with identifying measures that could improve the business environment, coordinating their implementation and evaluating their impact. It will act in cooperation with various public and private partners. The committee will focus on procedures for granting authorisations and creating companies, judicial procedures, the publication of court rulings and facilitating access to land for investment projects. This mechanism will reinforce efforts to rationalise corporate taxation, improve procedures and delays in creating companies (by creating a one-stop shop) and speed up customs clearance procedures for mechandise. Efforts have also been undertaken to develop special investment zones.

The strategy monitoring committee, established in February 2009, is responsible for monitoring the international situation. It has also taken significant measures aimed at supporting those companies most affected by the crisis in the textile, leather and automobile equipment sectors. These measures revolve around three components. The first is of a social nature and entails the public authorities underwriting employer contributions to social security for a six-month renewable period with the aim of safeguarding employment. The second – a financial component –  reinforces State guarantees to banks to finance company working capital funds. The third - a trade component - underwrites prospection fees and gives preferential conditions for export insurance, so as to discover new opportunities. In total, 1 098 companies were identified as having been seriously affected by the crisis, of which 906 were in the textile sector and 115 in the leather industry. The cost of these measures is estimated at MAD 1.3 billion, with almost MAD 800 million being allocated to employer contributions to social security.

Despite these advances, The World Bank Doing Business report published in 2009 and 2010 stated that Morocco continues to face great challenges to improving its business environment. Among these is the modernisation of the judicial system, facilitating SME access to credit and increasing labour market flexibility.

The Moroccan financial system held up well during the turbulence in the financial markets, thanks to reforms undertaken since 2002 and to the low level of foreign capital exchanges. The efforts to modernise and reform the financial sector continued in 2009 under the framework of PADESFI. They aim to upgrade the institutional, legislative and regulatory framework so that they better meet international standards. The current reform is focused on reinforcing banking supervision and protecting savings, in application of the Basil II accord. It also aims to improve capital market governance by rewriting the articles of association of the company that manages the Casablanca stock exchange. Lastly, it aims to rationalise the national system of guarantees, to strengthen SME access to financing. This last component operates via the restructuring of microcredit organisations and the modernisation of public financial institutions. Thus, the capital of Crédit Agricole (CA) and that of the Banque Centrale Populaire (BCP) were opened. Likewise, the financial services of the post office were professionalised, culminating in the creation of a postal bank. Access to banking services should emerge strengthened, as should SMEs’ and individuals’ access to financial services.

Public sector reform is a fundamental challenge for Morocco. The modernisation of the administration aims to build a viable macroeconomic framework via strict and decentralised management of budgetary resources. Reforms have been ongoing since 2002, via the Public Administration Reform Support Programme (PARAP), supported by the AfDB, World Bank and European Union (EU), the third phase of which covered the 2008/09 period. In 2010, the government will introduce a ten-year strategy aimed at improving the closeness of the administration to users.

Significant progress has been made in administrative reform. On the one hand, a multi-year budgetary planning tool using a medium-term sliding spending framework was implemented. On the other hand, a new human resource management culture based on skills and merit was established. Jobs and skills are referenced to increase short- and medium-term visibility, making it possible to define employment needs.  

In terms of infrastructure development, a national energy strategy was drawn up to remedy the kingdom’s strong external dependence, which measures as much as 96% of needs. This strategy revolves around several axes addressing, notably, the construction of an optimised electric energy mix and the development of renewable energy. This latter should provide around 10% of the energy balance and 18% of the electricity balance. The government also intends on continuing to restructure the sector in order to pilot and regulate the transformation of the national energy system. Emphasis will be placed on efficiency in the construction, transport and industry sectors. In construction, the authorities envisage developing an energy efficiency code.

In terms of logistics, Morocco has embarked on large building projects aimed at developing and modernising its infrastructure. The aim is to position the country regionally as a platform for production and trade. Drawing on a public-private partnership, the overhaul of the national logistics chain consists of building new capacity in transport infrastructure, but also strengthening the institutional framework of various modes of transport. An integrated and operational action plan for the sector intends to improve the logistical competitiveness of the country. This action plan is reinforced by the creation, in partnership with the private sector, of mechanisms to monitor and control the level of efficiency of logistics services, among which is the Observatory of Logistical Competitiveness (OCL).

A vast programme to modernise transport interconnections has also been launched. The road network should be extended by 1 800 km by 2015. A Tangiers-Mediterranean port complex should be established in the Strait of Gibraltar, with a capacity of 8.2 million twenty-foot equivalent units (TEU). The plan to reinforce transport infrastructure in the 2008-12 period is being carried out with the launch of a number of large projects, including a high-speed train (TGV) on the Tangiers-Casablanca axe. The volume of scheduled investments is estimated at more than MAD 120 billion (11 billion euros [EUR]).

Following the example of the international community, Morocco has committed to a process of overcoming environmental problems. In light of its advanced status with the EU, Morocco has established a climate change action plan with its partners in the Union for the Mediterranean (UM) in order to benefit from the technical and financial support needed. The principal projects deal with coastal protection, access to water and efficient water resource management, the energy sector and transportation infrastructure.

Incentive measures have been established, such as the Carbon Capital Fund Morocco (FCCM), created in 2009, which supports the Mechanism for Clean Development (MDP) arising from the Kyoto Agreement. As a carbon credits company, the FCCM is the first of its kind in Africa and has capital of EUR 26 million. The goal is to help Moroccan developers realise projects that conform with MDP principals over the 2009-17 period.

A strategy entitled ‘Green Morocco’ was launched in 2009 to develop more efficient agriculture that is compatible with environmentally sustainable development. This entails controlling the use of non-renewable resources and restoring the sustainability of local ecosystems. Emphasis has been placed on water resource management, a major challenge for the kingdom. In addition, the effect of tourism on the environment prompted the public authorities to launch the Pavillion Bleu programme, aimed at responding to seaside pollution, in addition to the Clé Verte environmental protection programme.

The budgetary discipline of these last years made it possible to adopt a more incentive-driven tax framework and a policy focused on controlling public spending. Revenues have increased, thanks to the simplification and greater transparency of the tax system, and to measures to strengthen tax administration and to widen the tax base, particularly for VAT. In terms of spending, significant savings have been made in the public sector wage bill, thanks to a voluntary retirement programme begun in 2005. Tax revenues went from 22.5% of GDP in 2001 to almost 29% in 2009, while public spending grew at a slower pace over the same period, growing from just 22.5% to 25.1% of GDP.

The structure of fiscal revenue demonstrates the predominance of indirect taxes between 2000 and 2004, with an average of 41% of all tax revenues, versus 38% for direct taxes. From 2005, direct taxation increased, reaching an average of 45% of all tax revenues between 2005 and 2008. This performance is the result of a greater sensitivity of fiscal revenue to economic activity because of the taxation reforms implemented in 2005, combined with the modernisation of the tax administration. In 2008, direct taxes represented 11.8% of GDP and 48.8% of tax revenue, against 36% for indirect taxes. The increase in direct taxation reflects the rise of sectors that are large taxpayers (construction, telecommunications, banking and insurance). Customs receipts fell as a proportion of fiscal revenue, losing almost 9 points during the 2000-08 period. This trend is due to the effects of tarrif dismantling. Its impact on public finances remains muted however, due to the compensatory effect of increasing import-oriented VAT.

Fiscal revenue represented 85% of public revenue between 2005 and 2009, versus 12.3% for non-fiscal revenues. These latter fell by 15% in 2009, in the absence of privatisations. The level of non-fiscal receipts has fluctuated a great deal over the past three years, going from 12% of all budgetary income in 2007 to 8.5% and 9.7% in 2008 and 2009, respectively. The budget is becoming less and less reliant on these receipts.

Corporate tax contributed MAD 42 billion, against MAD 46.5 billion in 2008. Revenue drawn from this tax increased by 21.8% on average over the 2001-08 period. Corporate tax reached 6.7% of GDP in 2008 against 2.1% in 2001. This strong increase is chiefly due to the performance of the Moroccan economy, but also to improved collection capabilities. In 2007, just five sectors provided half of corporate taxes: finance, telecommunications, trade, property and mining.

Income tax generated revenue of MAD 32.9 billion in 2009, or additional income of MAD 5.3 billion and a 119.2% realisation rate on the 2008 Finance Law forecasts. Compared with 2007, income tax results are up by 17.3%. This performance is due in part to the good results of transfers of listed securities (MAD 1.9 billion versus MAD 822 million in 2007), the expansion of tax revenues on real estate profits (MAD 5.3 billion versus MAD 3.8 billion a year previously) and the MAD 770 million payment by the Sharifian Phosphate Office, following its recovery.

Adopted by Morocco in 1986, VAT has been marked by the periodic adoption (until 2005) of successive dispensatory measures that undermined its potential. VAT revenue nonetheless increased by an annual average of 11% between 1998 and 2007. The progress is chiefly due to household consumption and VAT reform. VAT revenue accounted for 8.1% of GDP in 2007 against 6.8% in 2006. Its share in total fiscal revenue went from 31.2% in 2006 to 33.1% in 2007. Almost 65% of VAT receipts also originate in five sectors: construction (26.7%), telecommunications (10%), food processing (10%), tobacco (10%), industrial and metallurgical engineering (9.5%) and the textile and leather industry (8.1%). 

With the dismantling of customs barriers under the association agreements signed with the EU, Morocco began a second phase of fiscal reform focused on improving the tax structure and the management of the tax system. The reform emphasised both equity and the need to gradually converge the tax system with international and European norms, with an added concern of avoiding an increase in fiscal pressure in order to support the profitability and competitiveness of companies.

The tax administration was modified to improve collection, improve control and resolve disputes. Within each regional tax department, bodies have been established for large corporations, companies and individuals. Roles were redistributed between the central administration, which favours strategic projects, and external services, which focus on collection.

Morocco is a politically stable country, and civil society is becoming increasingly active. The municipal elections of June 2009 consolidated the decentralisation process. With a turnout of 52.4%, this election attracted more voters than the 2007 legislative elections (37% of voters). The Authenticity and Modernity Party (Parti authenticité et modernité, PAM), a new coalition of parties launched in August 2008 by friends of King Mohammed VI, won the election, with 21.7% of votes. The conservative Parti de l’Istiqlal placed second, winning 19.1% of votes. A 12% quota for women candidates was introduced in the municipal elections, enabling a record 3 428 women to be elected. Previously, the proportion of women elected in municipal elections had never exceeded 0.56%. 

The issue of Western Sahara continues to weigh on relations between Morocco and Algeria, reducing synergies within the Arab Maghreb Union (AMU). Negotiations to find a solution to this problem are ongoing, with the nomination in early 2009 of a new United Nations special envoy. Morocco remains in favour of holding a referendum on the status of Western Sahara, but rejects the notion of total independence. On the security front, police vigilance continues to weaken terrorist networks and threats within the kingdom.

Morocco has made progress in human development, thanks to programmes to combat poverty and structural reforms to health, education and training. These reforms form part of the National Initiative for Human Development (INDH), which since 2005 has built momentum that favours the inclusion of all stakeholders, through the realisation of projects. These projects target people with specific needs, such as street children or vulnerable women. The development of microfinance and income-generating activities remain the favoured tools in the fight against poverty and social exclusion. The birth of a network of community-based organisations and the creation of public bodies responsible for promoting social and solidarity-based organisations have made this an appropriate alternative to social development in Morocco. This mechanism enabled the poverty rate to be brought to the 9% mark in 2008, against 14% in 2001.

The healthcare system remains a government priority. A four-year strategic plan of action was launched in 2008. This plan, supported by the AfDB and the EU, should reinforce the efficiency of the health system, eliminate inequalities and meet the expectations of the population, as well as those of health professionals and other actors in the field. Its implementation revolves around four strategic axes. The first deals with repositioning the various stakeholders in the health system. The second focuses on increasing the availability and quality of treatment throughout the country. The third deals with medium- and long-term strategic planning to put in place specific and targeted plans against certain illnesses. The fourth is devoted to prevention, safety and health monitoring.

The prevalence of HIV/AIDS remains low, with a rate of 0.08% in 2009 – a level that has been stable since 2000. The policy of prevention and treatment of the pandemic appears to have been successful.

Under the reform of the Office of Compensation, programmes aim to better target disadvantaged groups via the RAMED programme – offering medical assistance to the economically worst off — and the Tayssir programme of cash payments linked to education. RAMED is the second component of the compulsory health coverage system and is aimed at vulnerable groups not covered by any health insurance and without sufficient resources to pay medical bills. In 2009, it was estimated that there were 8.5 million people would could benefit from RAMED, 4 million of whom were considered economically destitute.

In education, an emergency plan called Najah was launched in 2008 to bring the country up to international norms on educational quality. Supported by the AfDB, the World Bank, the EU, the Agence Française de Développement (AFD) and the European Investment Bank, this plan requires an estimated total budget of MAD 43.7 billion over the 2009-12 period so that the objectives of the National Education and Training Charter (CNEF) can be reached. The first ‘progress contract’ between the State and the National Agency for Employment and Skills Development (ANAPEC) is being continued, to give a new impetus to the job market and to combat poverty among young graduates. Youth unemployment was estimated at nearly 23% in 2009, with peaks in the cities, where it reached 26%. The government intends to bring this rate to 7% by 2012 through various programmes: ‘Taehil’ for training, ‘Idmaj’ to promote salaried employment, and ‘Mokawalati’ to support the creation of SMEs.