IFC 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 U.S.A. ifc.org Contacts ZEINAB PARTOW | [email protected] MARIEM MALOUCHE | [email protected] CREATING MARKETS IN MOROCCO A SECOND GENERATION OF REFORMS: BOOSTING PRIVATE SECTOR GROWTH, JOB CREATION AND SKILLS UPGRADING Country Private Sector Diagnostic OCTOBER 2019 October 2019 IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit www.ifc.org. © International Finance Corporation 2019. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. Photos: Shutterstock CREATING MARKETS IN MOROCCO A SECOND GENERATION OF REFORMS: BOOSTING PRIVATE SECTOR GROWTH, JOB CREATION AND SKILLS UPGRADING Country Private Sector Diagnostic ACKNOWLEDGEMENTS The Morocco Country Private Sector Diagnostic (CPSD) was led by Mariem Malouche and Zeinab Partow, and included contributions from Michel Bacher, Fahmi Ben Abdelkader, Jorgen Billetoft, Daniel Camos Daurella, Arnaud Dornel, Souad Elmallem, Arthur Denis Pascal Foch, Lea Iungmann, Ihssane Loudiyi, Marta Caminas Mora, Peter McConaghy, Graciela Miralles Murciego, and Carlo Rossotto. In addition, the team is thankful for the industry-specific, in-depth knowledge and guidance provided by Kudret Akgun, Hind Kadiri, Nasser Kadiri, Salah-Eddine Kandri, Anica Nerlich, Chris Richards, Kristina Turilova, and Houda Zinoun. The team is grateful to the valuable comments provided by the peer reviewers Fadila Caillaud, Emiliano Duch, Youssef Saadani, and Henri Sfeir. The team also thanks Ufalia Maria Acosta for administrative support in Washington; Houda Cherkaoui and Abdurrahman Bashir Karwa for administrative support in Morocco; and Peter Milne for editing. This work was carried out at the request and under the guidance of IFC and World Bank Leadership. The team is grateful for the ongoing support and guidance throughout the entire preparation of the CPSD by Mona Haddad, Marie Francoise Marie-Nelly, Mouayed Makhlouf, Najy Ben Hassine, Xavier Reille, Alejandro Alvarez de la Campa, Jean Pesme, Fadila Caillaud, Jaafar Friaa, and Gabriel Sensenbrenner. CONTENTS 7 EXECUTIVE SUMMARY 16 I. DEVELOPMENT OBJECTIVE 18 II. COUNTRY CONTEXT 18 A. MACROECONOMIC CONTEXT 20 B. THE STATE OF THE PRIVATE SECTOR 34 III. LEVELING THE PLAYING FIELD FOR ALL MARKET PLAYERS 34 A. ENHANCING MARKET COMPETITION FOR THE BENEFIT OF THE PRIVATE SECTOR 42 B. CHANNELING DOMESTIC CAPITAL TOWARD TRADABLE PRODUCTIVE SECTORS 45 C. RECOMMENDATIONS 46 IV. ENTREPRENEURSHIP AND SME DEVELOPMENT 47 A. FOSTERING ENTREPRENEURIAL TALENT AND CULTURE 50 B. IMPROVING ACCESS TO FINANCE, FINANCIAL INCLUSION, AND INTER-FIRM CREDIT 56 C. EXPANDING THE DIGITAL ECONOMY 58 D. INCREASING SME PARTICIPATION IN PUBLIC PROCUREMENT 60 E. IMPROVING ACCESS TO LAND 61 F. RECOMMENDATIONS 64 V. INFRASTRUCTURE: RESPONDING TO EMERGING CHALLENGES 64 A. THE STATE OF MOROCCO’S INFRASTRUCTURE 65 B. STATUS OF PUBLIC AND PRIVATE SECTOR FINANCING OF INFRASTRUCTURE 67 C. INSTITUTIONAL CONSTRAINTS TO PRIVATE SECTOR INFRASTRUCTURE FINANCE 69 D. SECTOR-SPECIFIC ISSUES 72 E. RECOMMENDATIONS 73 VI. SECTOR DEEP DIVES 73 A. TERTIARY EDUCATION 77 B. VOCATIONAL TRAINING 82 C. AUTOMOTIVE INDUSTRY 87 D. AEROSPACE INDUSTRY 95 ANNEXES 119 BIBLIOGRAPHY 123 REFERENCES Abbreviations and acronyms ADD Agence de développement du digital GEI Global Entrepreneurship Index ADM Autoroutes du Maroc GEM Global Entrepreneurship Monitor ADSL Asymmetric Digital Subscriber Line GIMAS Groupement des Industries Marocaines AFD Agence française de développement Aéronautiques et Spatiales HCP AMDI Agence marocaine de développement Haute commissariat au plan des investissements ICT Information and Communication AMICA Association Marocaine pour l’Industrie et Technology la Construction Automobile IFC International Finance Corporation AMITH Association marocaine des industries du IFI International Financial Institution textile et de l’habillement IGD Institut a gestion déléguée ANRE Autorité nationale de régulation de IMA Institut des métiers de l’aéronautique l’électricité IPP Independent Power Producer ANRT Agence nationale de règlementation des télécommunications ISMALA Institut spécialisé d’aéronautique et de la logistique aéroportuaire BAM Bank al-Maghrib ISP Internet Service Provider BTI Bertelsmann Stiftung Transformation Index HAO Holding d’aménagement Al Omrane CCG Caisse centrale de garantie HEM Institut des hautes études de management CDG Caisse de dépôt et de gestion JCAP Joint Capital Markets Assessment CEM Country Economic Memorandum Program CGEM Confédération générale des entreprises MAD Moroccan dirhams du Maroc MASEN Agence marocaine pour l’énergie solaire CGI Compagnie générale immobilière MFD Maximizing Finance for Development CNCP Commission nationale de la commande publique MFI Microfinance Institutions COFACE Compagnie Française d’Assurance pour MINEFI Ministère de l’Economie et des Finances le Commerce Extérieur MRO Maintenance, Repair and Overhaul CPSD Country Private Sector Diagnostic NAFTA North Atlantic Free Trade Agreement CSE Casablanca Stock Exchange NGO Non-Governmental Organization DEPP Direction des entreprises publiques et de OCP Office chérifien des phosphates la privatisation ODA Official Development Assistance ESITH Ecole Supérieure des Industries du Textile et de l’Habillement OECD Organization for Economic Cooperation and Development FDI Foreign Direct Investment OEM Original Equipment Manufacturer FENELEC Fédération national de l’électricité et de l’électronique OFFPPT Office de la formation professionnelle et de la promotion du travaille FIMME Fédération des Industries Métallurgiques Mécaniques et Electromécaniques OMPIC Office Marocain de la Propriété Industrielle et Commerciale FSAP Financial Sector Assessment Program ONCF Office nationale des chemins de fer FSU Fond de services universel des télécommunication ONCF Office nationale de chemins de fer GCC Gulf Cooperation Council ONEE Office nationale de l’eau et de l’électricité GDP Gross Domestic Product RAM Royal Air Maroc RPK Revenue Passenger Kilometers TFP Taxe de formation professionnelle SCD Systematic Country Diagnostic TFP Total Factor Productivity SME Small and Medium Enterprises TMSA Agence spéciale Tanger Méditerranée SNI Société nationale d’investissement TVET Technical and Vocational Education and Training SNTL Société nationale du transport et de la logistique VAT Value Added Tax SOE State-Owned Enterprise VC Venture Capital SOMACA Société Marocaine de Construction VSE Very small enterprise Automobile WDR World Development Report TIMSS Trends in International Mathematics and Science Study Executive Summary Morocco has steered significant resources towards did not post any Total Factor Productivity (TFP) gains. large investments in economic sectors identified as There appears to have been some improvement in the strategic to growth, and for increased productivity 2000s, with positive productivity gains, but these have and value addition. From offshoring to aerospace not been enough to sustain current growth. to electronics, these sectors have benefited from The composition of investment hints at what is behind substantial public resources and an array of generous the limited impact of Morocco’s significant investment incentives to attract foreign direct investment (FDI). effort. The public sector, investing mainly through The government’s efforts have successfully attracted State-Owned Enterprises (SOEs), accounts for half large foreign investors and created dynamic activity of all investment in the country. At least some of this in several sectors, including the automotive industry, investment has been expensive, with questionable aeronautics and renewable energy. Morocco has also value-for-money. While many of the investments have progressed in its Doing Business environment, moving been in infrastructure, whose full social and economic up nine places in the 2019 Doing Business ranking to impacts can only be observed in the longer-term, th 60 out of 190 economies compared to the previous projects selected for public financing at times do not year, and up from a ranking of 129 in 2009, reflecting take sufficient account of efficiency concerns and may many years of sustained reforms. not optimize the impact on productivity and job- Despite Morocco’s strikingly high investment rate, one creation. of the highest in the world at an average