The Major Projects
International Consultant and Teacher at the National Institute of Statistics and Applied Economics in Rabat

Successful opening up of the economy after the infrastructure challenge

Since its structural adjustment policy's launch in the early 1980s, Morocco has been seeking means to set deadlines for its economic and commercial opening. Putting an end to companies enforced Moroccanisation policy, it provided the private sector with opportunities for investment in network infrastructures, once only reserved to the public sector. The kingdom initiated the transfer of a larger part of the industrial, commercial and fiancial portfolio- assembled over the previous thirty years. The idea was to turn the national and foreign private sector into main growth drivers, generating jobs and releasing purchasing power.

With this in mind, the Kingdom undertook series of reforms designed to highlight its competitiveadvantages, consolidate its longstanding commercial bases and foster the emergenceof new global activity sectors likely to spur future economic growth. Restructuring costs engendered by productive sectors' modernisation and commercial economy opening, along with the need to meet citizens' aspirations with regards to access to decent jobs and living conditions' improvement, required major effort in infrastructures setup and public services upgrading, in particular within filds of education, healthcare, housing and urban planning, drinking water, electrifiation and telecommunications. The reforms also aimed to improve the business environment and stimulate productivity amongst all sizes companies.

In order to achieve all this, the Moroccan government set itself on stabilizing the macroeconomic framework and balancing public fiances so as to create adequate investment capacity without increasing fical pressure on the private sector. Investment capacities improved considerably over the new millennium's fist decade, in parallel with controlled foreign debt evolution. A whole range of measures designed to improve the business environment was applied in filds of banking and fiance, regulatory frameworks for businesses, labour law, competiveness policy, judicial system upgrading, public markets, and controlling and combatting corruption. Sectorial policies and programmes were drafted and implemented into the infrastructures (energy, roads, transportation and telecommunications), tourism, manufacturing industries, teleservices, fihing and agriculture sectors. Programmes were implemented designed to improve citizens' living environment through projects combatting poverty as well as promoting social housing and health insurance spread. At local authority level, programmes were set up for drinking-water's distribution development and wastewater disposal networks, as well as solid waste's collection, processing and recycling.

Over the last decade, potential workers migration and discouragement, those who have given up their jobseeker status to become inactive (a trend expressed by lower overall activity rates, in particular for women), along with an increase in initial studies average duration, have attenuated tensions on the job market: the unemployment rate has gone down.

A very large part of the active population is occupied within the informal economy, working in low productivity conditions. This productive system section is usually unable to make any direct contributions to national or local fical resources, or to fiance its workers' social protection. Although a number of the informal economy's niches have shown clear proof of vivacity, most very small businesses continue to suffer from underemployment, while the family farming sector has a long way to go in ensuring its workers (most of them young) family assistance, decent jobs or future prospects. Trade balance has become increasingly adverse over the last ten years. How should we interpret such trade defiit aggravation, or external constraints tightening and restrictions on public fiances?

Opportunities for adapting the dirham exchange rate that presented themselves in the late 1990s were not taken advantage of. Lowering of customs tariffs resulting from implementation of free exchange agreements with the EU and the USA was not compensated by any depreciation of the dirham or suffiient productivity gains. Nonetheless, the country's new openness to trade obliged businesses to restructure. Pressures on payroll cost (the result of growing social demands), along with a rise in living standards associated with migratory movement towards Europe and tourism, led to an increase in capital allocation to protected sectors: construction, infrastructures and services. In parallel, Moroccan State continued to subsidise hydrocarbon prices (diesel and butane in particular) and, to a lesser extent, bread wheat flur and sugar. By doing so, it limited its margin for fiancial manoeuvre without bringing about any signifiant reduction in payroll costs or boosting competitiveness, the largest subsidies being allocated to higher and intermediate categories of consumers.

More vigorous measures bearing on social housing cost and promoting public transportation would enable the Kingdom to do without subsidies on hydrocarbons, which have become an increasingly burdensome tool for social stabilisation, and would help reduce the trade defiit. The challenge of attracting investors to the manufacturing sector, however, still remains to be met. The State has to fid a way of adjusting sector prices, which remain exposed compared to those in the non-tradable sector. This might be obtained through implementation of internal taxation measures, in particular by reducing taxes on salaries in the export sector. Such a measure would be a substitute for a devaluation whose impact on prices and revenues balance would be hard to control. Under present socio-political conditions, any dirham devaluation would inevitably disrupt Morocco's current fragile social peace.