Morocco 2013 Oriental Region

ECONOMY TOURISM TELECOMS & IT INDUSTRY CONSTRUCTION EDUCATION TRANSPORT REAL ESTATE AGRICULTURE

ORIENTAL CONTENTS 3

ISBN 978-1-907065-77-4

Editor-in-Chief: Andrew Jeffreys Editorial Director: Peter Grimsditch

Chairman: Michael Benson-Colpi Director of Field Operations: Elizabeth Boissevain

Regional Editor: Robert Tashima Editorial Manager: Willem Oosterveld

Regional Director: Karine Loehman Country Director: Miranda Stobbs

Project Coordinator: Mahmoud El Hafoudi

Chief Sub-editor: Alistair Taylor Deputy Chief Sub-editor: Jennie Patterson Web Editor: Barbara Isenberg Sub-editors: Sam Inglis, Sean Cox, Nothing’s quiet on William Zeman, Danya Chudacoff, Mariah Pittman, Krystell Jimenez, Oliver Ayyildiz, Martin Stegman, Esther the eastern front Parker Contributing Sub-editor: Miia Page 5 23 Living off the land: The region aims to increase Bogdanoff agricultural yields and expand agro-industry for Analysts: Cailin Birch, Yinka Ibukun, The Oriental region’s economy has tradition- export markets Francisco Serrano, Genevieve ally relied on agriculture, industry and mining. Theodorakis, Ruairi Patterson Infrastructure upgrades, including a highway 25 Pushing for industry: Better connected Senior Editorial Researcher: Susan running from Oujda to Fez, implemented over transport infrastructure eases exporting Manoğlu Editorial Researchers: Souhir Mzali, the last 10 years are expected to boost the Thomas Bacon, Adeline Oka, Jenna tourism sector’s contribution to the mix. 27 Digging it up: Legal reforms and added Oelschlegel incentives should boost mining investment Art Director: Yonca Ergin Deputy Art Director: Cemre Strugo Art Editor: Meltem Muzmuz 5 Nothing’s quiet on the eastern front: Growing 29 Funding growth: A new development fund is Graphic Assistant: İlayda Gedik investment and national integration boost the putting small businesses on the map through Illustrations: Shi-Ji Liang Photography Editor: Mark Hammami region equity investment Photographer: Gregory Dziedzic

Production Manager: Selin Bolu 15 Interview: Mohamed Mbarki, Director, Agence de l’Oriental Operations Manager: Yasemin Dirice Logistics & Distribution Coordinator: Esen Bar›n 17 Rural potential: Niche tourism is offering Operations Assistant: Öznur Usta investment opportunities away from beach Field Operations Executive: Meltem resorts Okur Field Operations Coordinator: Zeynep Akdamar 19 Next door neighbour: An open border could further boost economic cooperation

21 A welcome facelift: Revamped centres and development of cultural spaces in the capital

A welcome facelift Page 21

With the Oujda Urban Development Plan 2010- 16, the region's capital city is undergoing a transformation, which will include 56 projects aimed at improving the city at a total cost of Dh2.1bn (€186.7m). Residential and commer- cial spaces will be built to meet demand. The iconic train station is also being restored in the hopes of adding to the city’s historic appeal.

THE REPORT Morocco 2013

ORIENTAL OVERVIEW 5

Some 4% of new projects fall under the category of tourism

Nothing’s quiet on the eastern front Growing investment and national integration boost the region

After a decade of investment, Morocco’s Oriental region A ROYAL INITIATIVE: Much of the drive to equip the In 2012 the Oriental is ready to build a strong reputation in the Mediter- Oriental with the necessary means for development attracted Dh7.9bn ranean. Nestled between the Algerian border and the started in March 2003, with a visit by King Mohammed (€703.2m) of private investment in 256 projects; Mediterranean Sea, Morocco’s Eastern Region is strate- VI. The push by the monarchy, which also sought to the overwhelming majority gically located along the southern European basin. improve development in other previously ignored of these are in the building After decades of underdevelopment, it has become regions, such as the North, represents a new econom- and construction sector. the recipient of extensive governmental investment. ic positioning of the region, with an emphasis on gen- Morocco’s government has often channelled funds erating domestic consumption and output rather than into the central areas of the country, with urban, relying on neighbouring Algeria to galvanise trade-driv- industrial areas in cities like Tangier in the north and en economic expansion. Historically, the Oriental’s econ- Oujda in the east suffering as a result. For years, the omy has been based on agriculture, animal rearing, Oriental, as the Eastern Region is known, suffered industry and mining. It has also benefitted from fish- from insufficient transport connections to the rest of ing along its Mediterranean coastline and had relied the country and a lack of the infrastructure neces- significantly on cross-border trade with Algeria. sary for supporting the development of family-owned In the 1960s, however, in what would prove to be businesses and strategic industries. Adding to this, the the first blow to the region, a large portion of mining closure of the Algerian border almost 20 years ago activity stopped, prompting heavy unemployment (a dealt a serious blow to an area of the country with trend that has continued, standing at 17.7% in 2011). strong cultural and family links with its neighbour. And after a political spat between Morocco and Alge- However, an increased focus by the government on ria following a terrorist attack in a hotel in Marrakech, devolving some decision-making powers as well as which was stoked by ongoing tension over the Moroc- improving both growth and social development indi- can/Western Sahara, the border between the two cators in areas outside of Casablanca and Rabat has countries was closed in 1994, during Algeria’s civil war. led to a shift in policy and the influx of government These factors, in addition to low agricultural yields, support of the kingdom’s regional governments. encouraged a migration wave to both other parts of ADDING INTEREST: As a result, over the past 10 years, the country and to Europe. One-third of Moroccans liv- infrastructural upgrades of road, air and sea transport ing abroad today come from the region. links have greatly improved the business environment COMPOSITION OF THE REGION: The Royal Initiative in the Eastern Region. And with the establishment of for Development of the Eastern Region launched a comprehensive regional development strategy focus- Agence de l’Oriental in 2006, with the goal of helping ing on industrial expansion, tourism promotion and the region’s local authorities to establish development agricultural output, the Oriental is hoping to see a sig- strategies and stimulate economic activity. Additional- nificant expansion in both trade and capital flows over ly derived from the royal initiative was the creation of the medium term. Attracting private investment has the Regional Investment Fund, put in place to support The Royal Initiative for been a main priority. According to figures by the Region- local business growth through equity investment in the Development of the al Investment Centre in Oujda, the Oriental attracted region’s companies (see analysis). Eastern Region created Dh7.9bn (€703.2m) of private investment in 256 dif- The Eastern Region is located in the north-eastern Agence de l’Oriental and the Regional Investment ferent projects in 2012. About 83% of new projects were corner of the kingdom, with a 200-km Mediterranean Fund to help stimulate in the building and construction sector, along with 6% coastline to the north. To the east lies Algeria, where activity and develop local in secondary industries and 4% in the tourism sector. the border is closed only a few kilometres away from businesses.

THE REPORT Morocco 2013 6 ORIENTAL OVERVIEW

The largest city is the the region’s capital and largest city, Oujda. Oujda is the based on 2009 figures. This is a challenge that author- regional capital, Oujda, region’s main urban centre with a population of 500,000 ities face when trying to improve the governance of which is home to the Oujda and Morocco’s easternmost city. It houses the region- local businesses and structures, especially in their Angads Airport and the Al Farabi Hospital, along with al council and it is the Oriental’s centre for business efforts to spur greater investment and activity. Bank- other key infrastructure. and government administration. It hosts the Oujda ing credit and capital investment in equity, which can Angads Airport, the Université Mohamed Premier and be harnessed to help grow local businesses, require strict the Al Farabi Hospital. The city is also undergoing major transparency rules. “Many companies in the region are urban renewal (see analysis). A brand new Dh525m family-owned and have part of their business in the (€46.7m) University Hospital Centre is under construc- informal sector, and it can take a long time to integrate tion and will improve health service provision in the them into the formal sector and encourage them to region and training capabilities for regional health staff. become more transparent,” said Ali Belhaj, the presi- To the west, the Oriental is linked to the adjourning dent of the regional council. regions of Taza-Al Hoceima-Taounate and Fez-Boul- TACKLING ISSUES: Such a high figure for informal mane. To the south-west, is the region of Meknés-Tafi- activity is not surprising nor particularly unique to the lalet. On a peninsula on the region’s Mediterranean region – estimates of the informal economy in Moroc- coast is the Spanish enclave of Melilla. co can range well above one-third of total activity. In a With a population of 2m people and an area of 82.8 sq lot of ways, the challenges of the Eastern Region remain km, the Eastern Region is the second biggest of the king- the same as other regions in Morocco, bar for the fact dom’s 16 regions in terms of area, occupying 11.6% of that, for several years, these have been compounded national land. The region is divided into the prefecture by its isolation and insufficient economic integration of Oujda-Angad and six provinces: Nador, Driouch, with other more developed parts of the kingdom. Berkane, Taourirt, Jerada and Figuig. These include 27 Unemployment is also an issue in a region that has urban communes and 87 rural ones. for years contributed heavily to the Moroccan diaspo- CHALLENGES: The closed border has had a significant ra, especially in Europe, where about 1m emigrating impact on the regional economy, particularly in terms Moroccans are from the Eastern Region. As a result, a of contraband and informal activity. The Regional Strate- number of broader national strategies should also help gic Plan for the Eastern Region, which was published unshackle growth drivers in the Oriental to varying in 2011 by the regional council, estimated that some degrees. The Green Morocco Plan – launched to devel- 46% of commerce activity in the region was informal, op the agricultural sector – is being translated into a ORIENTAL OVERVIEW 7

total of 77 agricultural development programmes across the region. Plan Azur, which oversaw the creation of six beach tourism areas, had an impact on the region’s north coast with the building of the Saïdia Resort. Morocco’s industry development strategy, the Nation- al Pact for Industrial Emergence (Pacte National pour l’Emergence Industrielle, PNEI), was put in place in 2005 to focus on the expansion of industrial capabilities up to 2015, and will manifest itself in the region through the establishment of industrial areas to attract new com- panies and increase production capabilities. HIGH AIMS: The regional government has also been aggressive about setting its own targets for growth. Local authorities want to create 137,500 new jobs and increase the number of people working from 538,700 in 2009 to 676,200 by 2020. To sustain this, the region is aiming to maintain an annual growth rate of 7.3% to raise regional GDP from Dh35bn (€3.1bn) in 2009 to Dh77bn (€6.85bn) in 2020. This goal might be difficult to achieve, considering the economic downturn in Europe and regional instability in neighbouring North Efforts are being made to improve rail and road networks African countries, as well as the kingdom’s overall connected the Oriental’s largest city to the country’s Despite recent turmoil in growth rate, which is half that. Significant work will motorway network. The coastal highway, known as La other nearby North African need to be done to make that target feasible – which Rocade Mediteranéenné, runs from Saïdia to Tangier, nations, the kingdom has set ambitious growth explains in part the extensive work going into the reducing travel time from the resort at Saïdia to the targets, one of which is to upgrading of both hard and soft infrastructure. country’s largest deepwater port at Tangier from some create a total of 137,500 “We need to think beyond the current internation- 11 hours to seven. It was built at a cost of Dh7.2bn new jobs by 2020. al context of financial crisis and make sure that we (€640m). The 120-km dual carriageway from Oujda to establish the infrastructure necessary for receiving Nador, currently under construction, should also ease national and international investment,” said Belhaj. transport of goods into the future Nador West Med port. Agence de l’Oriental, which promotes international Improvement of rural roads in the Berkane cooperation for regional development, has concluded province, the region’s largest agricultural exporting agreements in various areas, both at the bilateral and area by volume of produce, will also improve inter- multilateral levels. "These include a project with UNC- nal congestion and distribution. Investment is due TAD on attracting foreign investment; with UNDP to com- to reach Dh700m (€62.3m) over the next seven bat unemployment; an agreement with the Andalusian years, according to the governor of the Berkane authorities to promote the EU’s neighbourhood poli- province, Abdelhak Haoudi. Should the Algerian bor- cy; and a partnership with the French city of Lille to devel- der open, the region would also be connected to the op rural tourism,” Taoufiq Boudchiche, director of inter- Algerian highway network, facilitating easy access national cooperation at the agency, told OBG. to the nation’s two largest cities, Oran and Algiers. CONNECTING THE DOTS: Some of the largest strides, LIFT OFF: The region now has two airports. The larg- are being made in the area of infrastructural improve- er of these, Oujda Angads, is located approximately 10 ment, particularly to road and rail networks. “Highway km from the capital city. Equipped with two runways, links are definitely helping to bring logistics costs down. Transport spending has traditionally been slightly high- New investment projects by sector, 2012 er for companies based in the Oriental. In our case, some imported products might end up costing us an extra 8% because we have to bring them all the way here,” Ahmed Nasri, the regional director for hypermarket Construction 83% chain Marjane in the Eastern Region, told OBG. Transport has been one of the government’s top pri- Energy & mining 2% orities in the Eastern Region. Over the past few years, Tourism 4% increased connectivity has alleviated the region’s iso- lation and eased access for local industries that need Commerce 3% to send goods to other areas of the kingdom or reach Morocco’s main export points into European markets. Services 2% Much has been accomplished in terms of road trans- port and the regional road network now measures Industry 6% 6000 km. Three projects have specifically affected the

flow of goods and movement of people to the region. Régional d'Investissement SOURCE: Centre A new 320-km highway running from Oujda to Fez has

THE REPORT Morocco 2013 8 ORIENTAL OVERVIEW

The port is nonetheless underused. Its proximity to the Spanish port at Melilla as well the lack of sufficient com- mercial cargo and container lines serving it has changed its focus to passenger traffic; 598,710 passengers and 2.5m tonnes of trade passed through it in 2011. Hop- ing to modify this, a feasibility study is under way by the regional office of the General Confederation of Moroccan Businesses (Confédération General des Entre- prises Marrocaines, CGEM) to assess the tonnage in the region that could be shipped through the Nador Port. “If we do not have enough tonnage, we might be able to work in conjunction with the neighbouring regions of Fez and Meknés,” said the Oriental regional presi- dent of CGEM, Abdelkrim Mehdi. A key component of the region’s attempt to boost maritime trade – and also increase access for both exporters and imports – is the Nador West Med Port, a Dh6bn (€533.4m) project cur- rently in progress that will not only try to replace the existing Nador Port, but also serve as the key maritime conduit for the Oriental to Europe and the Mediter- The Oujda Angads Airport is the larger of the region’s two airports ranean Basin. The project is slated for completion in The Nador West Med Port is the longer running some 3000 metres, it has the capac- five years (see analysis). under development with ity to receive commercial aircraft. Work was recently LAYING TRACKS: Railway links are fairly limited, and the overall aim of replacing completed on a new 30,000-sq-metre terminal that the country’s planned high-speed rail will – at least in the underused Nador Port and allowing improved has increased the airport’s capacity to 3m passengers its first phase – bypass the region. Currently, a 650-km access to Europe and the a year, but airport authorities expect capacity to be railroad links Oujda to Casablanca, and a new terminal Mediterranean Basin. raised to 3m passengers in the coming years. “We cur- station is in the works. An old one-way line established rently operate at one-fifth of potential capacity, receiv- between Oujda and the remote town of Buarfa is still ing some 600,000-700,000 passengers per year. The in operation today, mostly for tourism purposes through airport can thus be a great generator for economic the Oriental Desert Express to the south. The city of development,” said Mohcine Benhadouche, manager Nador is connected to Oujda by a 117-km line. There of Oujda Angads Airport. are plans for Nador West Med Port to be connected to The smaller Nador Aroui International Airport, 24 the national railway grid through the Nador line. km south of Nador, can receive up to 750,000 passen- PLUGGED IN: Over the years, the Oriental region has gers a year and has several daily flights to European received most of its energy from the Jerada coal-fuelled capitals. Also close by is the EU-regulated Melilla air- electricity plant, with a production capacity of 165 MW, port which has daily connections to several cities in as well as two hydroelectric stations in Mohamed Khamis Spain. In the south, the small Bouarfa aerodrome has El and Bou Ateg. It is also connected to the Algerian the potential to serve tourism expansion by cutting the grid, enabling it to receive an additional 950 MW from four-hour drive from Oujda to a short flight. This would its energy-rich neighbour. give foreign visitors easier access to the Figuig Oasis. However, solar energy is proving to be an attrac- UNDER STUDY: Only one small port serves the region: tive resource for both domestic production as well as the Nador Port at Beni Ansar, which can receive ships for export to Europe. Capacity was extended with the of up to 200 metres and is equipped with five quays. building of the Aïn Beni Mathar thermo-solar station, in the province of Jerada. The 472-MW plant was built Breakdown of investment projects by sector, 2012 at a total cost of around Dh4.6bn (€408.9m) and started production in 2010, using a combination of Total solar and gas energy production. The plant was pri- Activities No. of projets Investment (Dh m) Expected job creation marily financed by the African Development Bank in Textiles & leather 1 0.91 21 partnership with the Global Environment Facility and Agro industry 22 419.45 1081 the National Electric Authority. Wood, paper & cardboard 2 6.81 22 Solar capacity will also be increased through the Ironworks & electric enginering 18 57.3 310 construction of a 2000-ha solar park due to be estab- Chemicals 4 30.5 303 lished close to the Aïn Beni Mather plant. The new Construction & public works 58 5067.91 1635 park, which is scheduled to start operations by 2020, Energy & mining 84 157.72 761 will have a 400-MW production capacity and will be one Tourism 8 298.66 225 of the five solar parks to be built under the Moroccan Commerce 27 240.7 653 Solar Plan across the country. Indeed, the Oriental has Services 19 195.29 256 become one of the leading areas in terms of solar ener- Total 243 6475.24 5267 gy production in the country under the kingdom’s SOURCE: Centre Régional d'Investissement objective to increase its usage of renewable energies.

www.oxfordbusinessgroup.com/country/Morocco

10 ORIENTAL OVERVIEW

Private and public real Authorities also hope that the added focus on and became majority shareholder of a cement facto- estate operators are renewable energy will spill over into local industrial ry in Oujda in 1992. “Construction activity in the region forming partnerships to capabilities. National renewable energy development has significantly increased since 2004, following the roy- build more than 33,000 affordable homes between plans include the goal of procuring 30% of the nec- al decree. Many of the big projects needed a lot of 2010 and 2020 at a total essary clean energy technology from Moroccan com- cement. Now, more projects are private and of a small- investment cost of Dh8.2bn panies. The Oujda Technopole, which is set to include er scale,” said Khalid Kaaouachi, the director of Holcim’s (€729m). 500 ha for industrial development, has already start- cement production unit in Oujda. ed commercialisation of a 107-ha section, of which Indeed, while it had been public spending that spurred 40 ha will be devoted to clean energy technologies the majority of initial development activity, nowadays and equipment firms (see analysis). construction companies in the region are increasingly CONSTRUCTION: Boosted by the slew of infrastructure catering to more private projects. Much of the Eastern development projects over the past decade, the region’s Region’s urban areas are now being renovated and construction materials sector, which has traditionally increasing the number of affordable housing units has been composed of small and medium locally based been one of the priorities. companies, has seen robust growth in recent years. Partnerships between private and public real estate The increase in the establishment of quarries, which operators are helping to build more than 33,000 afford- grew from three to 12 in the region between 2000 and able homes between 2010 and 2020, at a total invest- 2010 highlights the jump in activity. ment of Dh8.2bn (€729m). In the coming years some “The region has a lot of land available that could be 14,749 housing units will be built in the prefecture of developed for commercial purposes, which presents a Oujda-Angad, along with 11,608 units in the province good opportunity for the region,” said Driss Houar, the of Nador, 4470 in the province of Berkane and over 2000 CEO of Houar Enterprise, a construction firm in Oujda. units in the town of Jerada. The province of Nador, which has long been a cen- FINDING THE EDGE: Smaller roads in a number of the tre for the brick manufacturing industry, now has over region’s provinces are also currently under renovation. 23 local companies, some of which export across the Competition between local construction companies is country. Sonasid is present, with a steel production pushing prices down and affecting revenues. unit in Nador that manufactures 600,000 tonnes a year. “Prices offered for projects have decreased,” said Major foreign players are active as well. Swiss cement Noureddine El Gourdi, the administrative chief for manufacturer Holcim has been in the region since 1979 Société D & CRB, an Oriental-based construction group.