SIGNING A NEW CONTRACT

Morocco 2020/21 | INDUSTRY | FOCUS

While the work of the 2014-2020 Industrial Acceleration Plan is far from over, it has driven the industrial sector's development and led to a new relationship between the state and the private sector.

WHILE MANY OF ITS NEIGHBORS have experienced a rocky path in the aftermath of the Arab Spring, Morocco has dealt with its political and economic reckoning relatively well. This, in part, is due to the government's willingness to enact reforms and policies, both prior and post, to deal with unemployment, private-sector growth, and inequality. Part of the government's bid toward this goal was the Industrial Acceleration Plan 2014-2020 (PAI). Built off the National Pact for Industrial Emergence 2009-2014 (PNEI), PAI's major goals were to raise the industrial sector's contribution from 14% of GDP to 23% and create 500,000 jobs by 2020. Under the plan's umbrella was an Industrial Development Fund, which set aside USD2.18 billion to consolidate and modernize the country's industrial fabric. However, results have been mixed insofar as the long-term effects have not yet materialized. While industrial GDP grew from USD21.6 billion in 2009 to USD29.3 billion in 2018, the country's global competitiveness index has stagnated, according to African Development Bank numbers. According to Morocco's High Commission for Planning (HPC), higher productivity levels remain strictly in the realm of large companies, which make up only 11% of all companies in the sector. Furthermore, imports remain at 30% of GDP, compared to 17% of GDP for exports in 2016. This may be further impacted by the global slowdown prompted by COVID-19.

However, there has been consistent improvement since 2010 in certain sub-sectors, specifically automotive, aeronautic, electronics, and textile/apparel. The automotive sector has been especially prolific in attracting FDI into the country, which, in general, has increased by 28.6% between 2017 and 2018. French car manufacturer Groupe PSA has invested in an engine and vehicle plant in Kenitra, with an initial capacity of 100,000, which Groupe PSA hopes to double in 2020. Most importantly, the plant will look to use Moroccan suppliers, starting with an initial local integration rate of 60% and eventually increasing to 80%. Indeed, key to growing industrial sectoral capacity in the country is not just FDI but rather the creation of local companies to fill
in gaps in manufacturing supply chains. It is for this reason the electronics sub-sector is another important part of the industrial strategy, which has also seen leaps and bounds, thanks in part to increased production in the automotive industry. Unfortunately, like the automotive sector, the electronic sector is strongly export-oriented, meaning it is likely to be affected in the aftermath of COVID-19. Still, revenue/profit isn't everything. The relative success of both sub-sectors in previous years has contributed to another major plan milestone: job creation.

According to Morocco's Ministry of Trade and Industry, the automotive sector contributed 116,611 jobs between 2014 and 2018. Furthermore, according to the ministry's numbers, 405,496 jobs overall were created in the industry during the same time period. However, unemployment still continues to be a persistent problem for the country, with the rate hovering around 10%, according to the latest figures by the HPC, specifically in regard to youths. Perhaps a more lasting consequence of the policy is the opportunity it offers the government to restructure state-society relations. Indeed, as stated by Tina Hahn Georgeta and Vidican Auktor in a paper about Morocco's industrial policy, “The challenge for governments in the policymaking process is to take better into consideration the problems, needs, and wishes of different kinds of private enterprises as well as employees, while at the same time remaining independent of the attempt of individual entrepreneurs or lobby groups to capture government decisions." By seeing this policy as a way to strengthen relationships between the private and public sectors and to ensure more dialogue between those who run the economy and the state, Morocco can avoid the pitfalls that many countries in MENA faced post-Arab Spring.

In other terms, this policy can help to establish effective coordination mechanisms such as sectoral councils, public-private partnerships, or competitiveness councils, all which can help and work together with the government to bring about the greater structural change desired in Morocco's overall economy.