AVERAGE 4% GDP GROWTH SINCE 2008

Morocco 2020 | ECONOMY | VIP INTERVIEW

TBY talks to Mohamed Benchaâboun, Minister of Economy and Finance of Morocco, on recent achievements, green energy, and the Tanger Med port.

After just over a year of your appointment as Minister, what achievements are you most proud of?

Allow me first of all to emphasize that, under the leadership of His Majesty King Mohammed VI, Morocco has strongly boosted its reform process by launching large-scale projects accelerating the process of structural transformation of our economy and achieving strong and more inclusive growth, thus speeding up our country's economic emergence. In line with this, we have developed a pragmatic and more results-oriented approach to address the issues facing this department. In the macroeconomic field, we are exploring alternative solutions to reconcile consolidating macroeconomic stability with social and infrastructure needs. We intend to involve the private sector to a greater extent in the construction of infrastructure through PPPs to enhance the effectiveness of public investment and to better target social expenditure. Regarding reform, our action will be directed toward those able to concretely improve business environment, in particular SMEs, and thereby promote investment, employment, and inclusiveness. We resolved, last year, the problem of the VAT credit, which was weighing heavily on companies' cash flows. We are now committed to reimbursing any credit accumulated over the year and to simplify the VAT system to reinforce its neutrality. A second problem addressed concerns the extension of payment periods, which generated additional costs for companies. We have set up an observatory of payment periods and created an electronic platform dedicated to processing complaints from suppliers of public establishments and companies. These efforts have led to a significant reduction in the time taken for public procurement contracts, which now only takes 35 days, as compared to 80 days previously. For public companies and establishments, the average payment period decreased as well, taking only 48.7 days in September 2019 instead of 78 days in 2017. Regarding access to financing for businesses, and more particularly for SMEs and very small enterprises (VSE), we recently launched an integrated business support and financing program. This program, which is the result of several meetings and working sessions with the central bank and commercial banks, is focused on three major axes: the financing of entrepreneurship, the coordination of actions in support for entrepreneurship at regional level and financial inclusion in rural areas. A number of concrete measures have also been taken in order to support This project in particular the disposal of personal guarantees, the reduction of credit costs with a preferential interest rate of 2% in urban areas and 1.75% in rural areas and the creation of a special allocation account “Fund dedicated to financing entrepreneurship" within the framework of the 2020 finance law. A committee responsible for coordinating and monitoring the execution of parent measures for entrepreneurial support will soon be created." We have also adopted a National Financial Inclusion Strategy which aims to integrate into the financial system, in addition to the rural populations targeted by the funding support program, populations who have difficulty accessing financial services, such as youth, women, and VSEs. These devices are accompanied by other financial mechanisms, notably collaborative funding or "crowdfunding", which aims to ensure new sources of financing for SMEs and young innovative project leaders.

Despite global turmoil, Morocco's economic growth remains constant. What are its key drivers?

Indeed, despite global market outlooks and a reoccurring drought for several years, GDP growth has averaged nearly 4% since 2008. This performance is the result of the increased diversification of our productive base through integrated sectorial policies. For example, the Green Morocco plan has made our agriculture less dependent on the vagaries of the climate by developing new, high value-added sectors. Meanwhile, the Industrial Acceleration plan has encouraged the emergence of new export sectors with higher technological content, notably in the automotive, offshore, aeronautics, and electronics sectors.
As such, automotive production reached 402,000 units in 2018, as compared to 10,000 vehicles in 2004, with a local integration level of more than 50% and a market share of nearly 40% at the level of the African continent. And in order to reduce our energy dependency, we have made significant progress in renewable energy programs, raising the share of renewable energy to around 34% of installed electrical power, with a 2030 target of 52%.

What is the impact of the port of Tanger Med and its respective extension on the Moroccan economy?

An open and competitive economy would not be possible without the development of substantial infrastructure and an efficient supply base. We have built, in a short time, 1,800km of highways, ports, and integrated industrial zones to make of our proximity to Europe a real competitive advantage and fully exploit our strategic position as a gateway to Africa.
The Tangier Med complex is an industrial platform for more than 900 companies representing an annual business volume of MAD80 million in the automotive, aeronautics, logistics, textiles, and trade sectors. The dynamic activity around this port has contributed to improve the performance of the Moroccan economy by making Morocco an attractive destination for international investments and by positioning the country as a regional hub for the production and export of goods and services to the global market.

Reducing debt and public spending and balancing the deficit are among the objectives of the new finance bill. How will the government ensure the achievement of these objectives?

The maintenance of macroeconomic balances is the subject of continuous efforts to control expenditure, improve the yield of tax revenues, and mobilize non-tax revenues. Thus, within the framework of the 2020 budget bill, we are going to pursue these efforts through rationalization of public expenditure; improving the efficiency of investment expenditure; increasing the mobilization of tax and customs revenues; improving the governance and transparency of public institutions and companies; and introducing new financing mechanisms to reduce the treasury's debt. Simultaneously, the government has committed itself to pursuing structural reforms to strengthen its productive base and making it possible to control budget deficit and sustain growth, thereby reducing recourse to debt. These reforms will focus on a tax reform that will recommend a framework for the next five years; implementing provisions of an organic budget law and strengthening the correlation between performance and evaluation and accountability principles; implementing a new approach to the management of public investment projects; insuring that investment projects are chosen on the basis of their social and economic impact; and the pension system.