King Mohammad VI is continuing his father's legacy of gradual structural reform that started in the 1980s under the guidance of the IMF. However, despite the structural and administrative changes his father introduced, he still inherited an inefficient, debt-burdened and bureaucratic economy with a 50% illiteracy rate. Although corruption rates have declined slightly, bribes and royal favors are an integral part of the economy.
In the short term, Morocco is benefiting from a strong euro and the devaluation of the Dirham by exporting textiles (40% of exports) and high quality leather goods. Tourism, especially from Europe, is a major source of revenue as are cash remittances from Morocco's citizens working abroad. The production and export of cannabis also play a major role in the Moroccan economy, particularly in northern Morocco.
However, this is not enough for long-term sustainable growth. The government is considering several large-scale public infrastructure projects. One is a gas pipeline from Algeria to Europe to pass through Morocco and Spain. Another is an underwater sea power line to integrate the Spanish and Moroccan electricity networks. Port facilities are being further developed and Morocco's coastal areas and the mineral-producing interior are linked by an expanding road and rail network.
Morocco has also made large-scale progress in attracting foreign investment to secure better water provision for its expanding population The plan is directed towards boosting the standard of living where half the population live and a third of the population lack clean running water. Mohammad is aware of the need to guarantee a cheap and reliable source for energy in the Kingdom and it is likely that there will be
In stark contrast to neighboring Algeria, the previous King Hasan II took a particularly severe line against the threat of Islamic fundamentalism and largely crushed the Islamic movements on Moroccan soil. This has not deterred every attack and Moroccan society was shocked by the attack in 2003.
On another level, the controversy over Western Sahara is continuing. There are still threats of social unrest and the political situation with the Western Sahara is far from solved.
Negotiations with the US over a free trade accord have been moving apace with three rounds concluded before the halfway point of 2003 and talk of the agreement being finalised before the end of the year
Negotiations are progressing on the subject of a U.S.-Morocco Free Trade Agreement by the end of 2003. -- The U.S. is focusing technical assistance and development programs to help Morocco meet the free trade agreement's significant obligations and to advance Morocco's efforts to reform sectors such as agriculture.
Morocco has also undertaken a free trade agreement with Europe for industrial with the gradual easing of tariffs until the end of tariffs in 2010.
The present government is committed to continuing privatization. This will create many investment opportunities in the fields of The market has potential for growth but is afflicted by poor literacy and educational standards as well as the lack of modern accounting techniques and computer competency in most businesses.
The government received a huge one-off payment for the sale of telecom company in early 2000. There have been intense complaints that this sum has not been invested wisely by the government.
It is unlikely that the government will undertake a serious program of privatization largely because of the pressure from
Mergers and Acquisitions
As elsewhere the pace has slowed down in recent years yet Morocco is trying to develop acquisitions in the field of minerals and meals.
Morocco has achieved a degree of financial stability helped by a strong EURO. On the one hand, textile exports to Europe constitute 40% of all exports and well over 20% of foreign earnings. On the other hand, tourism, mainly from Europe, is a major source of revenue. When the EURO was losing value, Moroccan exports were severely hit because of the stiff competition in the tourism and textile markets. Morocco is competing directly with the Asian economies in those fields.
Inflation has remained at levels consistent with that of partner countries, the current account has turned into a surplus while foreign exchange reserves reached eight months of imports at the end of 2001."
However, the IMF notes, Morocco's growth performance has not been strong enough to reduce poverty and has been volatile due to the impact of recurrent drought conditions on agricultural output, resulting in high unemployment rates and indicating that social indicators still need significant improvement. The report also notes that economic conditions improved in 2002, despite a less favorable international environment which was marked by a decline in tourism and external demand. "Real GDP growth reached 4.5% reflecting a further rise in agricultural output and somewhat higher growth in the non-agricultural sector. The external position strengthened further with an increase in foreign exchange reserves to the equivalent of 9.4 months of imports, external debts indicators improved markedly while inflation remained subdued." Fiscal deficit (excluding privatization receipts and including Hassan II fund expenditures) dropped significantly to 4.5% of GDP from 5.8% of GDP in 2001 and against a budget target of 6.8% of GDP, as the government debt-to-GDP ratio continued to decline, the IMF further says.
The Fund ascribes improved business confidence and brightened economic outlook to commitment made by the government which came to power following September 2002 elections to revive economic reforms. It further forecasts that thanks to improved business confidence and more favorable weather conditions since late 2002, the ongoing economic revival could gain momentum and speed up growth in 2003 to 5.5%.
It also expects the external current account surplus to narrow, reflecting higher imports linked to a recovery in private investment. For 2003, the IMF predicts proceeds from privatization to help external reserves to remain close to nine months of imports, money growth to reach 7% and inflation to fall to about 2% and continued fiscal consolidation to result in a 2003 fiscal outcome better than in 2002.
The report also says the IMF executive directors have commended the Moroccan authorities for this positive performance and supported the new government resolve to accelerate the pace of structural reform and private sector development in a context of continued macro-economic stability and fiscal consolidation. Government's pledge to continue public sector and judiciary reform, strengthen governance, improve the business environment and reform the labor market and the trade and financial sectors were also welcomed by the IMF.
The government was advised to build on recent progress by taking further actions to achieve a durable strengthening of Morocco's fiscal position and lead to a reduction of the fiscal deficit to about 4% of GDP in 2003 and to below 3% of GDP over the medium term, consistent with a further substantial decline in the public-to-GDP ratio.
Directors also welcomed the Moroccan authorities' decision to broadly stabilize the number of civil servants in 2003 and encouraged them to carry on with a comprehensive civil service reform that will allow a further reduction of the wage bill over the medium term.
Likewise, the IMF recommends reducing food subsidies, while ensuring that an adequate safety net is put in place to alleviate the impact on the poor. Directors note that the country's financial system is unlikely to be a source of risk in the short term and that the commercial banks are in a reasonably good position to withstand adverse shocks. Morocco was urged to press ahead with plans to deepen financial sector reforms, in particular in the area of banking supervision for which the IMF is providing technical assistance.
Bank Al-Maghrib, Morocco's central bank, was also recommended for skilful monetary management which by mopping up excess liquidity, has been instrumental in keeping inflation at a low level.
Microfinance institutions are now legal and permitted to charge adequate interest rates. More than 60 lending offices open nationwide provide credit each year to more than 40,000 families/individuals, providing machinery and working capital. Other USAID activities facilitated the privatization of 55 public enterprises valued at about $1.6 billion.
Between 1971 and 1997, the total fertility rate declined from 7.0 to 3.1, and the infant mortality declined from 91 per 1000 to 57.6 per 1,000.
Girls’ enrollment in sixth grade has more than doubled since 1994-95, and completion rates have almost doubled.
From 1994 through 2000, through USAID’s work with Government agencies, almost 950,000 low-income residents have been provided water and sanitation connections. In addition, 3,680,000 residents in 37 municipalities throughout Morocco have improved environmental services (e.g., water provision, liquid and solid waste management, and green space management).
In Fez, USAID is helping take chromium out of the water system and recycling it for tanners to use again. In Drarga, USAID’s municipal wastewater treatment plant eliminates almost all nitrates and solid waste so that farmers can re-use about 150 cubic meters of water per day. In Tagla, farmers now use 20% less water for irrigated agriculture, while yields increased.
The urban areas in Morocco have been well served by a highly developed banking system of public credit institutions and private banks. A large number of Moroccans still put their savings in jewelry or real estate or, as
is the case in the rural areas, in livestock or land, and they did not make use of the banks' credit facilities for private consumption purchases. Nonetheless, Morocco was very monetized, and currency was widely used, even in remote local markets.
When Morocco regained its independence in 1956, it created a new monetary institution and a new currency, the Moroccan dirham. The dirham was divided into 100 centimes, and dirham were issued in denominations of five, 10, 20, and 50 centimes. The banking system consisted of the central bank (Banque du Maroc), commercial banks with about 170 branches around the country, a number of miscellaneous banks, and several government specialized financial institutions. The financial system also included insurance companies and a stock exchange in Casablanca.
The central bank was created in 1959 as a public institution having all of its capital subscribed by the state. The bank, which was the sole issuer of currency, held and administered foreign exchange, extended credit to commercial banks, and acted as a banker to the government, to other banks, to credit institutions, and to certain state enterprises. Paper money issued by the central bank was backed by gold on convertible currency (or the currency of Morocco's major trade partners) in the amount of at least one-ninth of all dirhams in circulation.
The central bank had a broad array of monetary policy instruments , such as interest rate levels, obligations to purchase treasury bonds, and the maintenance of reserves. Unlike other developing countries Morocco has had a history of effective monetary and credit policy.
The central bank determined the foreign exchange rate, and until 1973 the exchange rate between the dirham and the French franc was fixed. Since then, buying and selling rates against the franc have been established daily on the basis of the movement of a basket of currencies from Morocco's principal trade partners. The rate of exchange of the dirham against all other currencies has therefore been established on the basis of the daily dirham-French franc rate and the cross rates between those currencies and the French franc. Commercial banks have been permitted to offset purchases and sales of foreign currencies on behalf of their customers but must use the rates established by the central bank and must report daily the balance of their foreign exchange operations. No foreign exchange market existed in Morocco to permit banks to trade with each other, and imports or exports of the dirham were not permitted.
In 1985 Morocco had 15 commercial banks, two specialized private institutions, and two savings banks. There was a high degree of concentration in total bank assets; two commercial banks-Banque Centrale Populaire (Popular Central Bank) and Banque Commerciale du Maroc (Commercial Bank of Morocco)- accounted for 44 percent of total assets, and six others for another 47 percent. The number of commercial bank branches totaled 643 in 1982. Banks were concentrated along the Atlantic coast, and 25 percent of the branches were in Casablanca. Commercial bank lending was predominantly short term. The Exchange Office, an agency under the Ministry of Finance, more directly controlled the foreign exchange transactions through import certificates and export licenses. Import orders required a signed commitment from the importer and a visa from the Exchange Office, which also made sure they were in accordance with trade restrictions. In addition, since 1983 most import businesses were required to deposit with a bank for a period of six months 25 percent of the value of the imported goods. Exports of most goods did not need a license; the proceeds were not subject to taxes but had to be received within 90 days of the arrival of the products at their destination and had to be deposited immediately at the central bank.
The Exchange Office also had to approve the transfer of money from foreign employees working in Morocco to their country of origin. The amount allowed was 30 percent if the family of the employee was living with the individual and 50 percent if the family was in the country of origin. Again with prior authorization of the Exchange Office, nonresident aliens could open accounts either in convertible dirhams or in foreign currency denominations as long as the latter was not in currency notes but in bank drafts or traveler's checks.
The nominal exchange rate of the dirham has gone through three stages since 1973. It remained stable between 1973 and 1980, declined in 1980 and 1982, and has been depreciating further since 1983. Overall, from 1976 to 1982 the dirham appreciated against the currency of France, its main trading partner, and against that of Spain, its main competitor. The real exchange rate, which took into account the increasing cost of imported products in Morocco, showed a considerable appreciation of the dirham against the French franc, the Tunisian dinar, and the United States dollar. A devaluation of the dirham was recommended by the IMF to improve the trade deficit, and the government was able to devalue its currency by around 12 percent in 1983
against the dollar and another 12 percent during the first six months of 1984. The nominal exchange rate of the dirham against the dollar was DH6.26 to US $1 in late 1982, DH8.06 to US $1 in late 1983, and DH9 to US $1 in late 1984, and DH9.5 to US $1 in early 1985.
A large number of public financial institutions that specialized in different sectors of the economy offered loans at favorable terms for sectors in which investment was desired. The most important of these institutions were the Deposit and Investment Fund (Caisse de Depot et de Gestion-CDG), the National Economic Development Bank (Banque Nationale pour le Development Economique-BNDE), the National Agricultural Credit Bank (Caisse Nationale de Credit Agricole-CNCA), and the Construction and Hotel Credit Organization (Credit Immobilier et Hotelier-CIH). The CDG was established in 1959 as an autonomous public entity to receive and invest public sector deposits. Certain savings and retirement funds, including the National Social Security Fund, were legally bound to hold their deposits with the CDG, and other cooperative and mutual institutions could voluntarily do so. The CDG used its resources to purchase treasury bonds or other government securities, to make loans to
public enterprises and local governments, and to make direct investments in various sectors, including tourism.
The BNDE was also established in 1959 for the purpose of promoting the economic development of the country. Half its capital has been subscribed by the state and the other half by private Moroccans, foreign banks, and
international lending authorities. The BNDE has been particularly active in financing manufacturing, although legally it could provide loans for any purpose. For example, in 1977 it was designated the sole source of lending to the fishing industry. By 1977 it accounted for two-thirds of all industrial loans in the country. Although it could enter into equity participation with private investors, it acted mainly through loans that were limited to new investment. The BNDE could make long-term loans, could rediscount short- and medium-term loans, and could guarantee them. It was considered a well-managed banking organization by international financial agencies.
In 1961 several state agricultural credit institutions were absorbed into the CNCA, which at the headquarters level made loans only to credit organizations, public institutions, and cooperatives. Loans to individual farmers were made by regional or local branches or, if the borrower was in the low-income group, by agricultural credit and provident societies. The regional offices of the CNCA catered to medium and large farms, while the rural local branches lent to farmers with farm income under the equivalent of US $1,750. Losses on loans by the local branches were small, but the branches generally lost money because of the difference between administrative costs of the loans and the low interests rate charged. The whole pyramid of regional and local offices and societies was funded by the CNCA, and their lending activities were directed by it. The credit societies performed a training and educational function as well as a financial one.
Since the 1973 Moroccanization decrees all previously owned foreign commercial banks have become domestic banks. Most of them transferred part of their equity to Moroccans and changed their names. The financial system also included some 40 insurance companies and a stock exchange in Casablanca, where some capital needs could be met. The stock exchange was not very active, however, because most persons with investment funds preferred to invest in tangibles or in real estate, rather than in securities. Banks often traded securities between themselves, bypassing the exchange.
Monetary policy since independence has generally been liberal except for some temporary instances, such as the 1981-84 period in which the rising budget and balance of payments deficit required direct intervention. The money supply grew only moderately in 1982 to hold inflation in check but grew much faster in 1983 as a result of the imposition of import deposits. Price inflation, however, was reduced from about 12 to 14 percent in 1982 to about 10 percent in 1983 as a result of the latter year's austere budget. The largest price increases were those of foodstuffs, transport, and housing. The poor were the hardest hit.
Members urged Morocco to simplify its tariff structure, including with a view to addressing escalation. They also noted with concern that some one third of Morocco's applied rates exceed bindings and that variable duties are still used. Some Members also expressed concern about Morocco's local-content requirements.
Treaties for the Prevention of Double Taxation
There are six components to the Moroccan judicial system. The majority of legal matters fall within the jurisdiction of Regional Tribunals, which decide cases of personal property damages. Such judgments, excluding minor offenses punishable by a small fine, may be appealed to the Court of Appeals. The Court of Appeals also has a separate civil and criminal division. Despite previous announcements, the new Commerce Law, passed on May 18, 1996, did not establish special commercial courts. Courts of First Instance adjudicate crimes punishable by up to five years imprisonment and civil, personal status, or commercial cases. Monetary judgments of small amounts are not subject to appeal.
The decisions of all courts and tribunals may be reviewed by the Supreme Court. There is also the High Court of Justice that has jurisdiction over criminal and felonious matters allegedly committed by government officials. In addition, there are specialized Labor Tribunals which settle disputes by means of conciliation.
Under Moroccan law, the primary types of corporate structures available are: limited liability companies; private limited companies; limited partnerships with shares; general and limited partnerships; and joint-ventures, all of which generally conform to Western company forms of the same nomenclature. The two most widely used are the SA and the SARL, as described below.
Limited Liability Company
Limited liability companies (SA) must have a minimum of five shareholders who can be either legal entities or individuals. As with traditional limited liability companies, the shareholders' liability is limited to the amount of share equity the shareholder hold. Upon incorporation of the limited liability company, a quarter of the equity capital must be paid in advance if paid in cash contributions. If it is paid in contributions in kind, it must be fully paid upon incorporation. Both bearer and registered shares may be issued by the limited liability company. The minimum share value is 50 MDh. The company has no corporate name but a trade name, and there are generally no restrictions on the sale and transfer of shares to third parties.
Private Limited Company
The private limited company (SARL) is an intermediate type between associations of persons and of capital, bearing resemblance to both partnerships and share companies. It is always a trading company, regardless of its corporate name and its minimum equity capital is 10,000 MDh. It may be formed by two or more members who are only liable to the amount of their share of the equity capital in the company. Unlike a general partnership, members of a private limited company do not need to be registered merchants. The private limited company must file a memorandum of association as part of its incorporation process. The capital stock has to be fully described and paid up as the company is formed. Stocks shall have the same face value and are not negotiable; they may be transferred only through contracts. "Parts Sociales" may be transferred to third parties outside the company only with the co-associates' consent.
In a general partnership, the partners are jointly and severally liable, without limitation, for the debts of the partnership. Partners may be individuals or corporations, however, they do have to be registered as merchants. There is no restriction on participation by foreign individuals or corporations in general partnerships.
In a limited partnership at least one partner must have unlimited liability while the others have limited liability. A partner whose liability is limited may not take part in the management of the partnership. Limited partnerships are relatively rare in Morocco.
Limited Partnership with Shares
This corporate form is essentially a joint stock company wherein the capital is divided into shares to be held by active and inactive partners. There must be at least one active partner who has unlimited liability with regard to the debts of the entity, and three inactive partners who are liable only to the extent of their shares in the equity capital. The limited partnership with shares is operated by the active partners or by external managers. The governing body is a board of trustees composed of at least three of the inactive partners.
A joint venture does not have a separate legal personality, and its existence is not normally disclosed to third parties, except to the tax authorities. Joint ventures are used for financial syndicates or to undertake specific construction contracts.
The branch affiliate or subsidiary of a foreign corporation is regarded as a separate legal entity. The Moroccan branch, however, has to disclose certain details regarding its parent-company, its representatives and its delegated powers. When registering a branch in Morocco, the foreign parent-company must submit its articles of incorporation along with the incorporation documents of the branch.
Foreigners may establish in Morocco sole proprietorships. In a sole proprietorship, the business is conducted under the responsibility of an individual personally liable for the debts of the business to the extent of all business and personal assets. The business must be registered with the Commerce Registry and with the tax authority.
Morocco has a relatively comprehensive regulatory and legislative system for the protection of intellectual property. Intellectual property rights, however, must be registered in both Casablanca and Tangier in order to be protected in Morocco.
Morocco is a member of the World Intellectual Property Organization (WIPO) and party to a number of other international agreements and conventions dedicated to the protection of intellectual property, including the Bern Copyright, Paris Industrial Property and Universal Copyright conventions, the Brussels Satellite Convention, and the Madrid, Nice and the Hague Agreements for the Protection of Intellectual Property.
Morocco was considering enactment of a new law on industrial property protection in a bid to stop unlicensed use of international brands or makes by local companies. Although Morocco is under various obligations due to its membership to GATT since 1994, the new Commerce Law of May 13, 1996 did not include any provisions strengthening intellectual property rights..
Any individual or legal entity may file an application for a patent with the Moroccan Patent Office in Casablanca. The Patent Office examines applications with regard to form only and not with regard to novelty or merit. The particulars of the application are published in the Official Gazette. No opposition procedure is provided, patents issued are valid for twenty years. Universal novelty of the invention is required by law to grant a patent, and working of patents issued is required by law to maintain the patent. Patents rights may be freely transferred to third parties, however, the transfer must be registered with the Patent Office in order to be effective against third parties.
The international classification of goods is followed in Morocco. Trademark applications are examined by the Trademark Office only with regard to form. Registered trademarks in the preceding year are published in a special trademark supplement of the Official Gazette. No opposition procedure is provided. A registered trademark is valid for twenty years from the date of registration renewable for additional twenty years periods.
Transfer of trademark rights must be registered with the Trademark Office within three months in order to be valid against third parties. Infringement of a registered trademark may be punishable under either the penal or civil laws of Morocco.
Moroccan law provides copyright protection for the literary or artistic expression of an idea, and there are no registration requirements to invoke such protection.
A copyright confers upon the author two principal rights: a property rightand an ethical right. The property right gives the author the exclusive right to exploit the copyrighted work for pecuniary gain. This right extends throughout the author's lifetime, and, thereafter, it is transferred to the benefit of the author's heirs for a period of fifty years.
The ethical right protects an author's non-pecuniary interest in the literary or artistic work, which includes the protection of authorship and integrity. This right is perpetual, inalienable and remains with the author until death, and thereafter, with the author's heirs. Authors may sell all or part of their property rights, or the right to perform or reproduce the work, without forfeiting their ethical rights.
The employment contract binding the employer to each of his employees is governed by the Royal Decree dated August 13, 1913, which lays down a code of obligations and contracts. Such contract may be written or oral.
A decree of October 23, 1948 sets out a specimen contract applicable to all industrial and commercial establishments. It defines the reciprocal rights and duties of employer and employees. An employer, however, can make more favorable arrangements in his establishment, subject to agreement with the Minister of Labor.
Workers have the right to join together in unions for the protection of their rights and to strike in defense for their collective interests. Nevertheless, the Inspectorate of Labor endeavors to settle disputes by mediation. At the same time, if both parties agree, arbitration may avoid recourse to strike action or legal action before the Tribunal of first instance.
There is no legal requirement for employees to be involved in the management of companies or to be represented on the board of directors. Although there is no legislation requiring participation by labor in the profits of a business, a number of companies have implemented profit sharing plans.
The work week is limited to forty-eight hours, with no more than ten hours worked per day. Every employee is entitled to a weekly day of rest and a number of statutory paid holidays.
Salaries and Wages
There are no legislated wage controls in Morocco other than the minimum wage. Therefore, wages and salaries can be freely contracted between employees and employers. Apart from agreed pay increases, an indexing system enables the government to raise by decree all wages and salaries effectively paid when the Central Commission for Prices and Wages records an increase of aleast 5 percent in the cost of living.
Wages, whatever the method of remuneration (time rates, piece rates or job rates) must be paid at least twice a month, at a maximum of sixteen days' interval. Salaries must be paid at least once a month.
Health and Safety
The provision of medical services is compulsory in every firm employing more than fifty persons. Employers must provide the services of a doctor; alternatively, they may set up a joint service with other firms, supervised by a chairman. The operation of such health service is subject to inspection.
Every firm must observe standard safety regulations. Certain forms of work considered as dangerous are covered by special regulations, including, inter alia, employment of women and children. The Inspectorate of Labor ensures that these regulations are observed.
Termination of Employment
Dismissal of personnel may take place for a number of reasons, such as reduction of jobs in the particular branch, incapacity owing to age or insufficient aptitude or as a disciplinary measure owing to a serious offense. Except in the case of a serious offense, the worker is entitled to notice, which varies according to his seniority in the firm and the nature of his work. Such a dismissed worker is also entitled, after a year's service, to compensation proportionate to the length of his service with the firm.
Membership in the social security system (Caisse nationale de Sécurité Sociale or CNSS) is compulsory for all employers, and they are required to register all their workers. CNSS pays industrial and commercial workers family allowances and daily allowances in cases of illness, accident or occupational diseases not covered by workmens' compensation, allowances in case of death, disability pensions, old-age pensions and survivors' pensions.
All employers and employees are covered by the social security system. Foreign workers coming to take up employment in Morocco participate on the same basis as Moroccan nationals.
Morocco faces various environmental problems, including several arising from natural hazards. The main difficulties arise from Morocco's dependency on water and the economy's vulnerability to climatic change. Morocco is now defined as a "water-stressed" country. Per capita supplies and water quality are declining, rural areas are poorly served with water, and there are substantial losses in both irrigation (which currently accounts for 85 percent of water use) and drinking water systems in urban areas. In addition, the country suffers from oil pollution of its coastal waters.
In attempting to solve these difficulties, Morocco has made some progress toward defining a national environmental action plan, but overall institutional awareness and coordination are weak. Morocco is, however, a party to various international agreements regarding environmental protection issues such as biodiversity, climate change, endangered species, marine dumping, marine life conservation, nuclear test ban, ozone layer protection, protection of world cultural and natural heritage and the protection of the wetlands. It has also signed agreements for the establishment of a General Fisheries Council for the Mediterranean and of a Commission for Controlling the Desert Locust in the Near East. In addition, Morocco has signed but not ratified further agreements on desertification, environmental modification and the law of the sea.
Some exemption from taxes and other duties have been made available for persons and entities promoting or implementing environmental protection.