Morocco

• The Moroccan economy displayed a degree of resilience in a particularly difficult economic context, growing by 3.2% in 2012, driven by internal consumption and public investment. However this growth cut into foreign exchange reserves and deepened the fiscal deficit.

• Funding the economy remains a major challenge if the country is to maintain its momentum, and continuing reform is essential to check the rise in public spending, particularly of the compensation fund (Caisse de compensation), that pays subsidies for oil and basic goods.

• Morocco has a coherent strategy in place since the early 2000s to achieve its medium-term vision and has made a good start on structural change, with Morocco's phosphate industry – the world's biggest producer and exporter – playing a key role both from a financial point of view and as a source of growth for other sectors of the economy, though the textile industry is among those needing to reposition quickly in the face of international competition.

Thanks to its economic development model, which combines openness, liberalisation and structural reform, Morocco has shown resilience in a difficult national and international context. Nevertheless the slowdown in activity in Europe, which is the country’s chief economic partner, and below-average agricultural production resulted in a distinct slowdown in growth, which was 3.2% in 2012. That rate makes it impossible to reduce the high level of unemployment, especially among young graduates and women. However, growth should pick up in 2013 to reach around 4.6%, driven by the consolidation of internal demand. Some industries have been given a boost by the implementation of the 2009-15 National Pact for Industrial Emergence (Pacte national d’émergence industrielle, [PNEI]) and they should make a vigorous contribution to growth.

The PNEI is the result of strategic choices made at the start of the 2000s to encourage the emergence of new centres of growth, competitiveness and jobs. Morocco has focused on encouraging niche industries for export and on international promotion of emerging services to businesses. As a result, relocation of services, the automotive sector and transport and logistics are all thriving.

The economic programme of Prime Minister Abdelilah Benkirane calls for the programme commitments of the previous governments to continue, in particular in respect of social policies and public investment, while bringing down the budget deficit to 3% by 2016. It should be noted that the early reform of the compensation fund, a socially sensitive issue, is a prerequisite for achieving this goal of cutting the deficit. The fund provides subsidies for basic necessities such as cereals and sugar as well as petroleum products and in 2012 absorbed almost 20% of state revenues. Its cost amounts to nearly 6% of gross domestic product (GDP). Steps were taken in June 2012 to limit the explosion in spending but the fund still cost almost MAD 53 billion (Moroccan dinars) compared with the MAD 32 billion originally forecast. Foreign exchange reserves have been falling fast since 2008 while remittances from Moroccans overseas have been declining, so that financing the fund’s activity is the next challenge facing the country’s economy. While funding of public infrastructure and the flagship projects of the PNEI can still be covered by calling on the external market and foreign investors, household savings need to be reinvigorated. To this end banks will need to make extra efforts to mobilise these savings to avoid rationing credit in job-creating sectors such as property and small- and medium-sized enterprises (SMEs) and industries (SMIs).

On the political front administrative reforms are being speeded up so that articles 156 and 167 of the new 2011 constitution relating to government administration can come into effect. But the Islamist government is the subject of criticism over progress on such major issues as the reform of the justice system or the fight against corruption. It is worth remembering that the Islamist Justice and Development Party (Parti de la justice et du développement, [PJD]) won the November 2011 elections by campaigning against corruption.

At 3.2% GDP growth was below the forecast 5.0% owing to sluggish world demand and a below-average performance in agriculture, but should pick up in 2013 to reach 4.6%, driven by a rise of 4.8% in non-agricultural GDP and a growth in agricultural added value of around 5.0%.

Growth in the agricultural sector was hit by inadequate rainfall in the 2011/12 season but prospects for 2013 are brighter because of better weather conditions and the entry into service of two agropôles focusing on agricultural production, agri-food (processing and distribution), technological innovation and scientific research in the Meknès and Oriental regions. The establishment of communal farmland managers (agrégateurs) in various sectors of the industry, as part of the Green Morocco Plan, should be a driving force. The process consists of a voluntary coming together of farmers around an operator responsible for optimising production and getting the best value from agricultural output as well as marketing it. Furthermore the agreement on liberalising trade in agricultural produce reached between Morocco and the European Union (EU) in 2012 should also have positive consequences for the country. It provides for a rise in export quotas, an increase in the number of products enjoying quota-free access and continuing protection of sensitive Moroccan sectors.

Exports and landings of fish rose but the sector continues to suffer from major problems along the value chain. The ambitious Plan Halieutis, launched in 2009, has brought some relief in three important aspects: i) progress in the sustainable management of fisheries resources; ii) the completion of a competitiveness centre at Agadir; and iii) the development of fish-farming. In this area the national aquaculture development agency (Agence nationale de développement de l’aquaculture) has formulated a number of initiatives covering regulation, legislation and coastal planning for aquaculture and training in the Nord region.

Non-agricultural activities partly compensated for the poor performance of the agricultural sector and grew by 4.5%, split between the secondary sector (3.7%) and the tertiary sector (4.6%). This trend should continue in 2013, with growth forecast at 4.1% and 4.6% respectively.

Extractive activities, 94.0% of which are accounted for by phosphates, represent 5.6% of the added value of the secondary sector, almost 3.5% of GDP and more than a quarter of exports. They grew by 4.0% in 2012, which should rise to 6.0% in 2013 thanks to vigorous international demand from Brazil and India and to strategic targets decided by the the national phosphates agency (Office chérifien des phosphates, OCO): to consolidate the country’s position as world market leader, diversify markets and reposition itself on markets with high potential, particularly in Africa.

Processing industries account for almost 15.0% of added value in the industrial sector and in 2012 benefited from the good performance of several activities aimed at export or the domestic market. The added value of processing industries rose by 2.3% and should grow by 2.8% in 2013.

Regarded as an engine of national industry the automotive sector benefited from the start of production at the Renault car plant in Tangier in February 2012. This project has already increased the sector’s exports by more than 20% compared with 2011.

The aeronautics sector has also recorded sustained growth since the implementation of the PNEI in 2009. This includes the aéropôle at Nouceur and the MidParc integrated industrial platform (Plateforme industrielle intégrée MidParc), which is dedicated to aeronautics, the space industry and electronics. An institute for aeronautical professions (Institut des métiers de l’aéronautique) also came into service in 2011 with the aim of eventually training 800 professionals a year. Growth in the sector was reinforced by the installation of operators such as EADS, Boeing, Safran and Bombardier. Bombardier has announced plans to invest USD 200 million with activities due to begin in 2013. As a result of the measures put in place since 2008 and the investments made, export turnover in the sector has risen by an average 18.3% a year.

Electronics industries have benefited from a number of developments in the PNEI, but have made only modest progress. The gloomy world economic context saw a 14.4% drop in the value of electronic component exports. Nevertheless the sector should benefit in the medium term from Alstom’s plans to build an industrial unit for the manufacture of cables and components for the railway industry. The plan should eventually generate almost EUR 310 million in export earnings and create 5 000 jobs over 10 years.

Another key sector of the national economy is agribusiness which accounts for almost a quarter of exports, 8% of GDP and 19% of industrial employment. But it suffers from a number of handicaps, particularly inadequate levels of investment, poor competitiveness arising from weaknesses in research and innovation, and an irregular and low-quality supply of raw materials to processing plants. It also suffers from a high concentration of exports to the EU and a specialisation in products with low added value. In the first 10 months of 2012 only exports of canned and fresh fish recorded double-digit increases, while all other products showed falls.

The construction sector maintained its strong performance with a growth rate of 5.2%. The renewal of activities linked to social housing, which accounts for 60.0% of building, means that the upward trend should continue with a growth rate of 5.5% expected in 2013.

The tertiary sector accounts for more than 50% of total added value. It was buoyed by the good performance of primary and secondary activities and by vigorous trade, transport and telecommunications activity. Growth in 2012 was 4.6% and should be maintained at that level in 2013. Tourism should increase by 4% in 2013, after a lower rise of 2% in 2012, benefiting from the relative instability in Tunisia and Egypt. Trade should benefit from the completion of the 2008-12 Plan Rawaj for the modernisation of internal commerce. Postal and telecommunications services should maintain their growth thanks to the 2013 digital Morocco programme (Maroc Numérique 2013) for public access to broadband Internet, computerisation of SMEs and development of online government services.

Growth continued to be driven by domestic demand: household consumption rose by 3.2% in 2012 and should rise to 4.2% in 2013, thanks to measures to support the middle classes and to extend social protection such as health coverage and pensions, and to the support fund for social cohesion (Fonds d’appui à la cohésion sociale) to help the most disadvantaged. After increasing by 5.5% in 2012 investment should continue to rise by 5.9% in 2013, driven by accelerating public investment and the creation of an investment monitoring committee (Commission de suivi des investissements) seeking to identify barriers to their implementation.

In a difficult economic context, mainly related to the international crisis, Morocco has chosen an expansionist fiscal policy to support domestic demand. Since 2002 the fiscal balance has been through three phases: a reduction of the deficit up to 2006, followed by two years with a small surplus and then a countercyclical period since 2009. At the end of 2012, the budget deficit reached 7.5% of GDP but should be reined back to 5.3% in 2013. To meet the macroeconomic stability commitment set out in the June 2011 constitution, the government has pledged to reduce the deficit to 3.0% by 2016, an aim which will largely depend on the swift implementation of compensation fund reform.

To this end a number of steps are planned to increase public revenues. The tax reforms embarked upon several years ago should be continued. These include widening the tax base, strengthening tax administration and elimination of non-productive tax breaks, to improve the net contribution of public institutions and businesses and to get better value from the state’s private domain. The implementation of some of these measures has already begun. In addition, with a view to containing public spending, the government plans to pursue its programme to rationalise the state’s life style, strengthen public-private partnerships, reform the Organic Law relating to Finance Law, and speed up reform of public procurement. Above all, it intends to continue the reform of the compensation fund, which costs around 6% of GDP.

Public spending was burdened in 2012 by major expenditure linked to transfers and subsidies, compensation, social dialogue and anti-drought programmes aimed at alleviating unfavourable economic conditions. Recurrent expenditure, price support funding excepted, was due to rise by 8.6% to reach 25.5% of GDP in 2013 because of the creation of 24 000 budgeted jobs and the rise in spending on equipment. Spending on compensation should amount to 4.4% of GDP. State investment should continue in 2013, reflecting the determination of the authorities to maintain their backing for economic activity.

Excluding privatisation, recurrent income should rise by around 11% in 2013 compared with 2012, as a result of the increase in both fiscal and non-fiscal revenues. All types of income should therefore see a positive trend, thanks to the revival of economic activity and internal demand forecast for 2013.

Inflation, measured by changes in the consumer price index (CPI), remained at a relatively moderate level in 2012, rising to 1.8% at the end of October. Prices of food and non-food products rose respectively by 2.6% and 1.1%. For the whole of 2012 forecasters predict inflation slightly above 1.3%. This inflationary control is the result of a monetary policy that targets inflation and of government intervention through the compensation fund. So, in the absence of any real inflationary pressures the Central Bank of Morocco (Bank Al Maghrib, BAM) decided to maintain its main rate at 3.0% at its last meeting in September 2012.

The annual rate of growth of the money supply, as measured by the M3 aggregate, slowed at the end of October, increasing by 3.6% compared with 5.0% the previous year. This reflects a fall in short-term deposits and a lower rate of growth of current accounts, together with a greater fall in the monetary assets of private non-financial companies, as well as a slower rate of growth of household assets. The annual growth rate of bank loans also slowed slightly, from 7.0% in 2011 to 5.4% at the end of October 2012. Small- and medium-sized enterprises (SMEs) still have problems gaining access to bank financing, chiefly because most of them do not meet the financial conditions required by the banks. As a result, bank lending to SMEs accounts for less than 30.0% of bank lending on the domestic market. The Moroccan dirham (MAD) is pegged to a basket of currencies dominated by the euro (EUR) and had appreciated against the euro by 1.0% and fallen by 4.6% against the US dollar (USD) at the end of October 2012 compared with same period in 2011.

Morocco is committed to regional integration with the Mediterranean region and the Union of the Arab Maghreb (Union du Maghreb Arabe, UMA), and in sub-Saharan Africa. The country has signed several bilateral and multilateral free-trade agreements to link its economy to the Euro-Mediterranean and Arab context and to consolidate its relations with the main centres of growth in the global economy. These various agreements have given Morocco a favourable environment for the growth of foreign direct investment (FDI) and access to a market of 55 countries with more than a billion potential consumers. Nevertheless trade with the UMA is very low and the benefits of integration in this sub-region still face political constraints.

Some of these agreements have helped boost exports but the worsening trade balance is becoming a source of worry and is beginning to weigh upon the financing capacity of the economy. It is true that in the development context a steep rise in imports of capital and intermediate goods and energy (the price of which has soared on the world market), reflects sustained investment. But for some years the balance of finished consumer goods has also shown a growing deficit. The sharp rise in imports of some products, such as vehicles or general purpose equipment, reflects the country’s inability to meet some of its consumer needs through domestic production. The surpluses in services and current transfers made it possible until 2006 to offset the deficit in the trade balance but today they can only limit the effect of this deficit on the current account, which has been in structural deficit since 2007.

In 2012 the current account deficit amounted to 8.6% of GDP. The rate of coverage of imports by exports fell to 48%, 1% lower than in 2011. If services are included the rate was 70%.

For more than a decade Morocco has conducted a policy of active external debt management, with early repayments and the conversion of debt into investment. The country’s public debt was, as a result, on a downwards trajectory until 2011, when the rising price of raw materials on the world market made it necessary to adopt a policy of active support for domestic demand to counter the effect on the country’s growth of the decline in demand from abroad. This led to a worsening of the budget deficit and recourse to foreign debt.

By the beginning of 2013 treasury debt had deepened to 58.0% of GDP. At the end of August 2012 internal financing of the state, chiefly made up of treasury bills issued by auction, amounted to four times the volume borrowed during the equivalent period in 2011. As a result outstanding internal debt rose by 10.7% compared with the level at the end of December 2011.

The worsening of the budget deficit, estimated at 7.5% for 2012, and the balance of payments current account deficit (8.6% in 2012), as a result of the rise in oil prices and the increase in subsidies, led the agency Standard and Poor's (S&P) to downgrade its rating of the country’s long-term debt from stable to negative. But the agency did keep Morocco at the level of Investment Grade which it had awarded in 2010.

Prospects for treasury debt for 2012/13 suggest a slight increase with the result that it should be around 60% of GDP. This is attributed to a December 2012 international bond issue worth MAD 1.5 billion. But the country plans to cut treasury debt to a targeted 50% of GDP from 2014 onwards.

Debt service charges should rise in 2013 by 10.6% over their 2012 level to account for 2.5% of GDP. The increase can be attributed to higher domestic and external debt interest charges, expected to grow by 8.2% and 25.6% respectively.

The legislative, regulatory and institutional reforms that Morocco has embarked upon were continued in 2011 and 2012 with the aim of improving the business climate and laying foundations more likely to attract foreign and domestic investors. Further progress has been made in this area, particularly in promoting investment. Furthermore Morocco emerges as the country in the Middle East and North Africa that has most improved its business regulations. Since 2005 the country has implemented 15 reforms in this field. Nevertheless, having risen 21 places in the World Bank report Doing Business 2012, rising from 115^th place to 94^th out of 185 countries, Morocco fell back four places in the rankings in the 2013 report.

This drop was chiefly due to a relapse in the areas of registering property, obtaining credit and dealing with construction permits, although its performance in the category of starting a business showed a clear improvement.

In the 2012 Heritage Foundation Index of Economic Freedom (IEF), Morocco scores 77.2 out of 100 in respect of business freedom, 1.5 points up on the 2011 ranking. But the report says that while the procedures for setting up and registering private enterprises have been streamlined there has been no real improvement in eliminating the bureaucratic obstacles to private investment. The country still faces major challenges in improving its business climate in the long term.

The country’s financial system plays a key role in economic growth and has shown a degree of resilience in the context of the world financial crisis. The banking sector is one of largest, perhaps the largest, in the region and represents 110% of GDP. Financial intermediation has grown progressively, with efforts made by the banking sector to foster financial inclusiveness having raised the bank account penetration rate to more than 50%. In addition the authorities have taken a number of steps to promote greater access to banking services and encourage saving, especially in rural areas. In addition the Basel III financial standards, in particular those concerning capital and liquidity, are being progressively implemented. In this context the central bank has raised the equity ratio to 12% and the mandatory level of core capital to 9%, with effect from June 2013.

Nevertheless the sector is having some trouble in meeting the funding needs of the economy with the resources raised, in the light of the booming investment the country has experienced since 2007, the explosion in demand for credit and a slowdown in clients’ deposits. The banking sector has accordingly been in recurrent deficit since 2007 and the country’s central bank (Bank Al-Maghrib, BAM) has had to intervene regularly and significantly in the market to meet the cash flow needs of the banks. To this end when the country’s banks’ liquidity requirements reached almost MAD 74.8 billion for the month of October 2012 alone (compared with MAD 72.3 billion in September) the bank intervened chiefly through seven-day scheduled transactions, the outstanding amounts of which reached MAD 61 billion by the end of October 2012, to ensure the funding of the economy and stabilise monetary interest rates. The BAM says that there are no perceptible signs of difficulty at the level of indicators such as the rate of rejection of credit applications, but the sector needs to intensify its efforts to mobilise household savings to avoid an eventual rationing of credit in sectors that provide jobs, such as construction, SMEs and SMIs.

The capital market is still limited and it makes an inadequate contribution to financing the economy, in particular in the production sector and promising sectors of activity. The indices on the Casablanca Stock Exchange, its capitalisation and volume of trading, all showed significant drops in 2012. The operators in the SME sector and the ministry of the economy and finance should shortly be holding discussions with a view to making it easier for SMEs to gain access to the capital market, the aim being to create a specific stock market for them.

Administrative reforms are being actively pursued with the aim of implementing the good governance principles endorsed by the new 2011 constitution. These include in particular Articles 156 and 157 which deal with the functioning of government, regional and local authorities and other public bodies. Three priorities underpin the action plan of the ministry of public service and modernisation of the administration: improve the quality and effectiveness of public services; pay greater attention to public opinion; and modernise the management of human resources.

To address the quality and effectiveness of public services, the priority is to have clear, simplified procedures that are harmonised nationally. Until now procedures have been over-complicated and varied too much from one jurisdiction to another for there to be an effective claims or complaints system. This has minimised the impact of initiatives such as “Stop Corruption”, which was launched at the end of 2010 by the central body for the prevention of corruption (Instance centrale de prévention de la corruption), active since 2007. In the management of public affairs a government programme for 2012-16 provides for the gradual introduction of a system of contracts between the state and public institutions and enterprises (Établissements et entreprises publics, EPP), combined with audits of performance objectives. Human resources management policy promises a progressive overhaul of the status of the civil service, which dates back to 1958, and the modernisation of training. In 2013 the process of merging the National School of Government (École nationale d'administration) and the Higher Institute of Government (Institut supérieur de l’administration) should be speeded up.

Meanwhile, the government wants to establish a more local system of government, more responsive to the voices of ordinary people, in line with its decentralisation process. Beyond the development of electronic government to improve response times, the action plan for the next two years provides for the establishment of opinion polls on key areas of people’s lives and open government based on greater transparency. Much remains to be done to make this political will a reality however. Regional bodies have hitherto not had the means, the human resources nor the delegated power needed to effectively represent central government at regional level.

Morocco has an active development strategy for renewable energies (sun and wind), and another for water production and management. The country is heavily dependent on imports for its energy needs which represent 95% of its supply. Its water resources are already low (730m³ per inhabitant per year) and could drop by a quarter by 2030, with demand exacerbated by recurrent droughts and a downward trend in rainfall.

The implementation of the energy strategy launched in November 2009 accelerated in 2012. The contract for the first phase of the solar park at Ouarzazate was awarded in September 2012 to the Acwa Power group. Worth around USD 9 billion the strategy aims to build five solar parks with a capacity of 2 000 megawatts by 2020 at Ouarzazate, Ain Bni Mathar, Foum Al Oued, Boujdour and Sebkhat Tah. This is expected to make annual savings equivalent to 1 million tonnes of oil and 3.7 million tonnes of CO_2. In this context the World Bank has made two loans totalling USD 297 million, repayable over 30 to 40 years. The African Development Bank (AfDB) has made a loan of EUR 359 million to finance a wind energy and rural electrification programme which has also attracted USD 125 million from the Clean Technology Fund. The integrated wind power programme aims to generate 2 000 megawatts (MW). Morocco’s coastline is believed to have the capacity to produce 6 000 MW from wind farms. Five projects of 720 MW should be fully operational in 2013.

A number of schemes have been initiated to promote energy efficiency, covering energy efficiency codes in construction, more widespread energy audits in industry and the introduction of a “20-20”social tariff system with incentives to save energy.¹ The time zone was shifted to GMT+1.

The national water strategy envisages building 50 large dams and 1 000 smaller constructions by 2030, the reforestation of more than 1.5 million hectares and stronger incentives to save water.

The Islamist Justice and Development Party (Parti de la justice et du développement, PJD) took office on 3 January 2012 after its victory in the November 2011 elections and faces expectations not only in the social domain but also on such major political issues as reform of the judicial system and the fight against corruption, its main campaign theme.

Protests in the big cities against unemployment and the cost of living, called by the trade unions and then the 20 February Movement, were a feature of 2012. There were further demonstrations in the interior, in regions such as Taza (Rif) and Imiter (High Atlas), where local people staged demonstrations lasting several months against the company Société métallurgique, which exploits one of Africa’s largest silver deposits.

The government is attracting criticism for the lack of progress in the fight against corruption in public services. Morocco dropped eight places to 88^th out of 176 countries surveyed in the 2012 Transparency International ratings. A judicial inquiry opened in August at the request of King Mohammed VI in response to complaints from Moroccans living abroad that revealed “fraudulent behaviour of corruption and harassment” on the part of some members of the security service assigned to border posts. About 40 were arrested. There were also calls for the reforms promised by the new constitution and the modernisation of the judiciary to be implemented. After a petition was signed by 1 800 magistrates the government launched national dialogue on 28 May 2012, overseen by a high court which is preparing a national conference on justice system reform in early 2013.

In the area of security the authorities seized more than 250 tonnes of drugs and broke up several terrorist cells responsible for recruiting for Al-Qaeda in the Islamic Maghreb (Al-Qaida au Maghreb islamique, AQMI) and the Movement for Unity and Jihad in Western Africa (Mouvement pour l'unicité et le djihad en Afrique de l'Ouest, MUJAO) which have invaded the north of Mali. Talks with the Algerian-backed Polisario Front were suspended on 29 November 2012 after nine fruitless sessions since August 2009. The mandate of the United Nations mission for a referendum in Western Sahara (Mission des Nations Unies pour l'organisation d'un référendum au Sahara Occidental, Minurso) expires on 30 April 2013 and the mission now plans to undertake shuttle diplomacy with the interested parties and neighbouring states. Since 1 January 2012, Morocco has been a non-permanent member of the UN Security Council with a two-year mandate.

Between 2000 and 2009, education and training were identified as national priorities. Measures undertaken included improving infrastructure and teacher training, the organisation of school transport in rural areas and social help for disadvantaged families through direct financial aid or provision of equipment. The education budget has risen progressively to reach 6% of GDP in 2012.

School enrolment for the 6-11 age group rose to 90.5% in 2009 against 52.4% in 1990. The biggest improvement was seen in rural areas where the rate rose from 35.9% to 90.6%, and especially among girls, whose enrolment rate almost quadrupled during the period. Morocco is on the way to achieving the second of the Millennium Development Goals (MDGs) which relates to primary schooling. The 2008-12 emergency plan saw the enrolment rate reach 97.9% in 2012. Now a new strategic plan covering the period 2013-16 aims to make primary education universal. A law creating a national agency to combat illiteracy (Agence nationale de la lutte contre l’analphabétisme) is due to be implemented in 2013.

Nevertheless efforts need to be intensified to counter the problem of school drop-outs. UNESCO says that the number of years of education which a child in Morocco can expect is still the lowest in the Maghreb. In secondary education the net rate of enrolment was only about 44% in 2009. The Najah programme devoted to schooling and educational success seeks to achieve a target high school completion rate of 60% for students in the 2010 cohort.

Efforts should also continue in the field of adult literacy where the rate of 60.1% contrasts with the 77.5% in Tunisia. This, combined with high school drop-out rates, reinforces the problem of child labour. A study by the High Commission for Planning, (Haut commissariat au plan, HCP) showed that while there has been a marked fall since 1999 there were still 123 000 children aged between 7 and 15, mostly boys, working in Morocco in 2011. In 90% of cases in rural areas they are family workers, while in the urban areas they are mainly employed in the service sector (54.3%) and industry and crafts (26.5%). The HCP also reports a further 30 000 minors employed as domestic workers.

Several basic health indicators have shown major improvements, the result of sustained efforts in public provision since 1990. The level of per capita public spending on health has risen fourfold to reach MAD 314 in 2009, while the number of doctors has grown at a rate of 6.6% a year and the number of institutions offering health care by 2.4% a year. The rate of infant mortality (deaths among those aged under a year) fell in 2011 to 30.2 per thousand live births. The rate of deaths among children aged under five was 36.3 per thousand live births in 2010. The level of maternal mortality has fallen by half in five years, and stood at 112 per one hundred thousand live births in 2010. The prevalence of HIV/AIDS among adults aged 15 to 49 was stable at around 0.1%. However obesity is beginning to become a public health challenge in Morocco. A study by the HCP revealed that the problem of “serious and morbid” obesity has been growing in the last 10 years and now affects one adult in five, or 3.6 million people, while another 6.7 million are in a state of pre-obesity. Finally, at a time when there are very large numbers of people retiring, adapting the health infrastructure and medical and paramedical services poses additional challenges.

The policy implemented to combat poverty has had positive results. Even so pockets of poverty and inequality, both rural-urban and gender specific, remain a major challenge that the government is trying to meet through the second phase of its national initiative for human development (INDH2) programme.

The INDH was launched in 2005 and the country succeeded in targeting socially vulnerable groups more accurately, with the government using a new approach to aid them economically, targeting income-generating activities and social protection measures such as health coverage for the most disadvantaged. Morocco has thereby already achieved the first MDG relating to poverty reduction. The poverty rate, defined by a threshold of USD 1 per person per day, fell from 3.5% in 1990 to 0.6% in 2008. Using the government’s threshold (of MAD 3 834 in urban areas and MAD 3 569 in rural areas), poverty fell from 15.3% in 2001 to 8.9% in 2007 and vulnerability from 22.8% to 17.5%.² The first phase of the INDH (2006-10) succeeded in building on progress combating rural poverty and social exclusion and vulnerability in towns and cities. It targeted 403 rural districts and 264 urban neighbourhoods benefiting more than 5.2 million people, or around 40% of the poor, through 2 000 projects in various fields.

The second (2011-15) phase of the programme draws on previous experience and targets its budget of more than MAD 17 billion at mountainous areas and rural communes with a poverty rate above 14%, compared with a rate of 30% in INDH1. Health, education, roads, water, sanitation and electricity are the priority sectors. The current programme aims to speed up the implementation of the “towns without slums” projects and build 440 000 new social housing units by 2016, to reduce the deficit in this type of housing, currently put at 840 000 units.

In the field of health, the system of medical aid to the very poor, known as Ramed, was extended to the whole of the country in April 2012. Ramed was launched in 2008 and provides free or partly-free health care in public hospitals to people living below the poverty line or in vulnerable conditions. It is estimated that 8.5 million people qualify, of whom 4 million are deemed to live in total poverty. At the end of August 2012 around 366 281 households had already been registered; just over 1 million potential beneficiaries. Other measures concern the regular upgrading of the minimum wage (Salaire moyen interprofessionnel garanti; Smig) and retirement pensions. Finally, an improved employment contract provides for two new measures, including social coverage for those taking part in the Idmaj jobs programme, which is aimed at the long-term unemployed.

Despite the creation of an authority for equality and the fight against all forms of discrimination, much still remains to be done to adapt the country’s legislation and promote gender equality. The penal code still includes articles which are incompatible with the international conventions that Morocco has ratified. Several demonstrations calling for revision of the law on women’s rights followed the suicide in March 2012 of a 16 year old woman who had been compelled to marry a man who had raped her so the offender could escape a jail term. There were repeated calls from non-governmental organisations (NGOs) and associations for the withdrawal or amendment of certain articles of the penal code, in particular article 490 dealing with rape, and provisions governing sexual harassment. The campaign also proposed the amendment of a number of discriminatory dispositions in the family code. The law effectively sanctions sexual harassment since it requires a witness, which means that it is difficult to apply in practice.

Structural inequalities remain in access to jobs and executive positions in the absence of a government strategy to combat them. Women make up only 21.7% of workers in the non-farm sector and the new government has only one woman minister. In these circumstances the targets relating to gender equality will not be achieved by 2015. The most significant progress is limited to the educational sector and measures of positive discrimination such as the proportion of women in the parliament (16.7% in November 2011 compared with 0.7% in 1997).

During the past 20 years the Moroccan economy has diversified, in terms of both sectors and geography, with the emergence in the 2000s of new and competitive sectors and of new regional centres of growth. This welcome structural change owes its momentum in part to several active and coherent policy measures aimed at promoting certain sectors of the economy, and in part to the positive role played by phosphates which have generated financial strength and growing knock-on effects on the rest of the economy. Even so, some sectors, such as textiles, need to reposition themselves very quickly in the face of international competition, to stop job losses.

Since the early 2000s the country has made the strategic choices to encourage industrial subcontracting for export and to attract the emerging opportunities arising from the relocation of services from abroad. Specific strategies have been progressively implemented in seven sectors where Morocco has competitive advantages. These advantages are based on its geographical position as a crossroads (between Europe, Africa and the Gulf), trade agreements, and the international growth of several sectors of the economy: the off-shoring of services, automobiles, aeronautics, electronics, textiles and leather, agri-food and seafood processing. Off-shoring, or delocalisation, of call centres, (which hardly existed in 2000), and back-office activities, case processing and maintenance services in information and communications technologies (ICT) have all taken off in a big way. Off-shoring had a turnover of MAD 6.8 billion in 2011 and provided 52 000 jobs. Morocco is now the principal destination of French-speaking call centres and is developing new niche activities such as human resources, accounting and financial services. The aim is to reach 100 000 jobs in 2015 and a turnover of MAD 20 billion. Similarly, logistics activities are booming thanks to investment in commercial infrastructure and related transport, such as Port Tanger Med. The greatest success in this respect has been the automobile sector. The value of exports rose six-fold between 2004 and 2011, reaching MAD 22.6 billion and the number of jobs practically doubled to 56 300. The sector reached a new level with the entry into service in 2012 of the Renault plant at Tanger, where low-cost models are produced. The project has already increased the sector’s exports by more than 20% compared with 2011 and production capacity should double, reaching 400 000 units in 2015 and representing 6 000 direct jobs. In addition, the two free zones at Kenitra and “Tanger Automotive City” should attract groups of sub-contractors and eventually generate 30 000 new jobs.

The country’s strategy aims to intensify this structural momentum. The state and the private sector have accordingly put in place a specific contract programme for the period 2009-15, the PNEI, which contains objectives and precise and budgeted measures for each of the seven sectors targeted. The PNEI plans for, among other things, investment of more than MAD 50 billion and the creation of 220 000 jobs requiring qualifications by 2015. The state has a role to play in four key areas: i) the supply of infrastructure and industrial parks in the form of integrated industrial platforms (known as P2I); ii) a supply of services to investors that conforms to international standards, as well as financial and administrative incentives; iii) a research and development (R&D) plan covering outlet opportunities, including a list of foreign businesses to be approached; and iv) assumption of responsibility for the training of qualified human resources for jobs as engineers, technicians and equipment operators. Furthermore the national agency for investment development, (Agence marocaine pour le développement des investissements, AMDI) has been given the task of conducting an active promotional campaign among the foreign investors and businesses targeted.

Beyond these sectors the exploitation of major phosphate resources plays a growing role in the country’s vigorous structural change process, both by its financial impact and by its growing knock-on effect on the country’s economic and social fabric. Morocco is the world’s leading producer of phosphates with 18 million tonnes a year and the leading exporter with 36% of the world market for crude phosphates, 51% for phosphoric acid and 14% for fertilisers. The country possesses 70% of the world’s known reserves. The national phosphates agency (Office chérifien du phosphate, OCP) directly employs more than 20 000 staff and represents about 10% of the government’s fiscal receipts, as well as generating activities upstream and downstream of the sector thanks to a structured strategy. The process should be powered by the construction of a series of sun-power and wind-power parks capable of producing 4 000 MW by 2020 as part of a plan to develop alternative energies. A specialised institution is being planned to train the 5 300 engineers, 17 900 technicians and 23 900 workers needed for this development by 2020.

The financial contribution made by phosphates has significantly increased in recent years and they accounted for 28.3% of the country’s exports in 2011, against 16.2% in 2000, and more than MAD 48.4 billion in foreign currency earnings. The commercial and industrial strategy pursued by the OCP since 2006 has been to strengthen the country’s presence in the market in large emerging countries (India and Brazil’s share of Morocco’s fertiliser exports rose from 22% in 2000 to nearly 52% in 2011), and to win new markets in Africa where there is continuing expansion. In this area, partnerships have been established with Senegal, Gabon and Kenya. The OCP has also reinforced its positioning on the whole phosphate value chain, from extraction to industrial transformation activities. As a result the added value of the sector increased in 2011 by 41.3% compared with 2010. The group is seeking to improve productivity, lessen its dependence on artesian wells and reduce the costs of exploitation. To this end it is developing new extraction techniques, new methods of manufacturing fertilisers, a seawater desalination procedure and pipeline transport. The strategy is to double mining production and triple fertiliser production by 2020. With this in mind the OCP plans a large investment programme of around MAD 115 billion which will see three new mines and four new washing stations opened.

Although the potential for job creation in the mines remains very limited, the OCP, which became a limited company in 2008, plays a growing role in strengthening agricultural productivity and the chemical industry as well as in integrating Moroccan businesses into their upstream activities and in developing local skills. The OCP puts its major investment projects out to international tender while offering opportunities to local businessmen in contracts for construction, sub-contracting and industrial engineering. Between 2009 and 2015 MAD 10 billion is due to be reserved for SMEs and SMIs as part of the group’s investment plan. Foreign enterprises which accommodate Moroccan businesses will also be given favourable treatment in the bidding process. At the same time, with the Plan Maroc Vert, the OCP is publicising soil fertility testing among farmers so that fertilisers can be used accurately and effectively. In 2010, the group also launched the OCP Innovation Fund for Agriculture, with a budget of MAD 200 million aimed at fostering innovation and local entrepreneurial activity in farming and agro-industry. It is also participating in the national strategic plan for the chemical and parachemical industries, the aim of which is to triple turnover and double the number of jobs in the sector by 2020. Since 2011 it has set up a programme to promote skills, known as “OCP skills”, which will pay for the university training of 15 000 young people from mining areas and support local entrepreneurial projects.

In contrast the agri-food and textile sectors are suffering from a shortage of available raw materials and also from their international competitiveness. Medium-term prospects for the textile sector appear much more uncertain. In spite of the steps taken to develop new segments in the ready-to-wear trade with Europe and in new niche products (lingerie, home textiles and shoes) the sector is losing jobs and export market share. The sector accounted for 13% of GDP and employed nearly half a million people in 2011, (40% of the industrial workforce), but is suffering for a number of reasons; one of them the highly competitive world market since the ending of the multi-fibre agreement in 2005. It is also suffering from weak diversification of destinations but above all from the unavailability of inputs on the domestic market which is eroding the country’s competitive advantage in terms of costs and delivery times. Businesses are resorting to huge imports from Spain, France, Turkey and China. In respect of agro-industry, weaknesses in agricultural production, linked to problems with intermediation and distribution, prevent the exploitation of niche markets such as processing organic products or pre-cooked meals. The sector is failing to establish itself in the promising African markets for consumer goods. The building sector also has some unexploited advantages.

1. This tariff system came into effect in 2009 and gives clients incentives to cut their monthly consumption by at least 20% compared with the same month a year earlier. They are given a bonus equivalent to 20% of the value of the consumption saved.

2. According to the HCP in 2011, 1.7 million Moroccans emerged from poverty between 2001 and 2007 and 1.2 million escaped from vulnerability.