10 Aug Morocco’s relentless focus on development and progression
Minister of Industry, Trade, and Green and Digital Economy, Moulay Hafid Elalamy, explains the open economy’s rapid advances in industrialization, digitization and sustainability
BF: In June 2020, Bank Al-Maghrib, Morocco’s central bank, forecast a contraction of 5.2% for the country’s economy this year due to the impact of Covid-19. Nevertheless, the reaction of the country to the pandemic has been swift and solid, which has resulted in a lower number of cases and fatalities than seen by some of its European and African neighbours. How did your country rebound from this crisis?
MHE: I must admit that, even as the Minister of Industry and as someone who is very close to the industrial sectors, I was pleasantly surprised by the reactions of our operators. In cases of pandemics, accidents or natural disasters, you will see two types of reactions: one is the standard reaction of people who are paralysed and stop moving completely. They may think that by not moving, the pandemic won’t affect them and they hope to avoid it completely. The other type of person is one who is in the centre of the action. They tell themselves that they won’t let their lives be affected. They will get back up on their feet and try to rebuild from the destruction that has been left behind.
I discovered that our industry, broadly speaking, fits more into the second category than into the first. Businesses took a hit – perhaps their clients fit into the first category, or they had less demand, or maybe even the clients of their clients are suffering as well. In these cases, demand lowers across the board. When you are working in export, your principals will ask for less of your supply. In your own country, consumption goes down as well, and thus your production may have to be lowered or even stopped.
I found many operators who tackled the challenge like warriors. They went over the hill and they worked hard. Those in the agri-food industry, for example, didn’t stop for a single second. Their workers came to meetings daily. People travelled day and night to feed the rest of the population, with a mission to save the world. It’s extraordinary. My own team caught this “bug” and completely infected me with their energy. We were in a near frenzy, telling ourselves that we will get out of this mess and that we would work hard to do so.
Our international partners who rely on us for supplies in the agri-food industry and others sectors did not see a rise in prices. In some cases, people could have easily taken advantage of the situation for profit. This wasn’t the case. People could have created rarity by putting less product on the market, resulting in inflation. I didn’t see many people taking advantage of this situation. When someone did, everyone pointed that person out, saying that this was not the moment – we are navigating a pandemic and we have to act in solidarity, working hand in hand.
When our European and British friends contacted us to ask for masks, at first, we didn’t have any. We had to transform the Moroccan textile industry to be able to produce these masks that were in such high demand. In China, they were completely overwhelmed and were incapable of satisfying demand – the entire world needed masks. We saw people working miracles in Morocco.
I’ll give another example: hand sanitiser is made from ethanol, which is the alcoholic base of the product. We had an ethanol factory that burned down eight months before the pandemic, so we were unable to produce ethanol. At the level of the international markets, this became a danger. We asked ourselves how we would solve this problem and made an announcement that we would have the factory up and running again in 15 days.
Everyone was very surprised and didn’t think it was possible. The factory was completely rebuilt and refurbished in seven days and nights, and we produced 240 hectolitres of ethanol seven days later. Without the urgency of the pandemic, we might not have been able to pull this off, but we knew that we needed the product as soon as possible. In this case, I can go a week without sleep and it’s no problem for me. There were some extraordinary visceral reactions from people all over the country who worked hard to get things done.
Another illustration is the production of technologically very advanced respirators. The Massachusetts Institute of Technology was the first entity to put design guidelines for a first-generation ventilator on open source. It is not a particularly efficient or useful ventilator but we started out with that model. Then we asked the eight aeronautical engineering companies in Morocco if they could come together to work on a version of this ventilator. They wound up making one of the best ventilators in the world – it’s more precise than the best one in the world today. The Moroccan ventilator was in competition and became more precise than the best one in the world.
That is the type of success story we are capable of. We went from the production of zero masks daily to 14 million per day. This led to a surplus in Morocco, and the King of Morocco offered this surplus to other countries in Africa. This also opened up sales to any country that wanted to buy masks.
BF: Last year, we saw the incredible industrial centre that you developed by the Port of Tanger Med. This follows the government’s investment model that involves it collaborating with international investors, which can lead to significant profits for those foreign entities. Following this worldwide pandemic, will you be continuing to work within this model and will this new Covid-19 collaborative approach add a new dimension to your already growing industrial sector?
MHE: This is always a question we get from other countries, excluding France. Some people have the impression that the French enjoy some form of privilege in Morocco, so to speak, and that only the French can operate here – this is an error. Morocco has always had an important economic relationship with France, which was our number one economic partner in investment and trade for decades. The French knew Morocco, the language is shared and so the French played an important role in the country.
A few years ago, the Spanish took the number one spot and Morocco’s biggest economic partner for the past five years has been Spain and not France. The biggest foreign employer in Morocco is the Japanese company Sumitomo. Yes, France is present, and I hope it will stay that way. However, Morocco is not reserved for the French, nor do they have a special status. They have lost much of the markets where they weren’t competitive or if their products weren’t up to a certain quality. Today, Morocco is completely open to economic relations. We have free trade agreements with 56 countries, including Great Britain. The free trade agreement is the exact same as the one we have with France, because the agreement is not with France, but with Europe. Great Britain is still part of that agreement and, since Brexit, we have signed another agreement with the UK that is identical to the previous free trade agreement with Europe. It is up to the operators to take advantage of this situation.
It is true that certain countries understood what Morocco could offer them more quickly than others. First, there is France – no surprises there, because relations are old and well established. Then, there is Spain, then Germany and then the US. We have Boeing, which spends $1 billion annually on aviation equipment manufactured in Morocco. We have large American companies that make very technologically advanced products here. There are several Japanese companies that have set up in Morocco as well.
While other countries continue to imagine that relations between France and Morocco give France an advantage, which is a problem, France complains of the opposite. They don’t find it normal that given our ancestral relations, they don’t have an advantage. On one side, some believe France has a privileged relationship. On another side, France sometimes doesn’t understand that as we are always open and transparent, France might lose out in the market. This is the choice of transparency, of a country that wants to be open. Today, we have 56 free trade agreements, but we want to have more.
BF: Morocco has successfully created pro-business legislation that has had a great impact on its attractiveness for foreign investment. Morocco is also positioning itself as a logistics and manufacturing hub for Europe and Africa and a new investment law is in the making. Could you inform our readers what changes the new law is going to bring in?
MHE: The reality of the changes will be marginal. This is because the terms for investors in Morocco are already extremely favourable. When you invest in Morocco, you can invest with the possibility of keeping 100% of your capital, you can reap 100% of your profits and the value added if that applies. If you set up in a Moroccan Industrial Acceleration Zone and your products are destined for exports, you can benefit from advantageous conditions and these zones can create ecosystems. Taxes in Morocco are very clear and we are going to lower taxes even more for production. Everything is facilitated to have interconnected “plug-and-play” zones. Morocco is a very attractive logistics destination, just 14km from Europe, and Morocco is open towards many countries – for example, we have Renault, which exports to 74 countries and their pieces are manufactured here.
In all honesty, whatever more that is done to the law will only be marginal and is more for the little investors than for the big ones. We have many systems in place and the big investors already have many major advantages.
In the automobile industry, we are third globally in terms of competitivity – the first is India, second is China and third is Morocco. Our ambition in the next two to three years is to be in the same position as India, meaning we want to have the same competitivity. In order to do that, we have had to rebuild our system to have the collection of elements necessary to provide for the same amount of competitivity. We are certain that what we are doing will make us as competitive as India within two or three years, with two added advantages.
Number one, when you export from Morocco to Europe, the cost of transport is nothing like the cost of transport from India. This makes us even more competitive. We also have a complimentary strategy: the world is starting to turn to lower carbon-emitting vehicles and the energy produced in Morocco will allow us have a completely carbon-neutral industry. We have already started this process.
I am talking about quality and competitivity. We have the quality, we have proven this and are doing extremely complex things in industry. For example, parts of plane reactors are manufactured in Morocco. We want to continue to advance our competitivity until we are tied or have surpassed first place in the world. We want to have an agility and flexibility that allows us to manufacture and ship pieces on demand in record time – with the Straits of Gibraltar, we can ship products to Europe in just a few hours’ time. We also want to assume a responsible and sustainable strategy towards a carbon-neutral future.
BF: What do you see as the most promising sectors in Morocco for investment from the UK?
MHE: It would suffice to look at what the UK imports and it imports lots of products from the automobile industry. Great Britain has not optimised the costs of its vehicles, meaning that they are not very popular abroad and their cars have become very expensive. It is a very select population that buys a Jaguar. What we need is to work intelligently so that we can satisfy demand. Globalisation means that we can’t produce everything in one country and we can’t put all our eggs in one basket. It is important to constitute an optimal puzzle of production. There are certain things that should absolutely be kept within the UK and there are also industries that should be revived in the UK because those industries may have been neglected elsewhere.
The pandemic helped us realise that we cannot be too dependent on one country. If I only had one supplier, I would be in trouble, because that supplier could get Covid-19 just like anyone else. The minimum that I must do is to aim for an optimisation of price as well as supplying sources. When a shareholder thinks long term, he cannot permit himself to think about mono-sourcing because that factory may experience a pandemic, tsunami or other catastrophe. There could even be a souring of relations between the two countries, which would render trade more difficult. Thus, the diversification of sources is important. Many companies in the world still function today by mono-sourcing. This is very dangerous and normally results in a firing if an investigation finds that a CEO has been sourcing from only one location. Studies show that, normally, if the source only comes from one place, the CEO is putting that company at risk.
States have become aware of this and I think corrections are being made. While the cards are being redistributed, there are things that we must all take into account. It’s hard to depend on someone when we all face the same problem. Why would I give out a mask to you if I need to give some to my own children? There are certain sectors where we must all be self-reliant. These types of problems will cause companies and countries to reintegrate certain sectors back into their economy, even if they aren’t necessarily competitive industries.
You also have a review of these emerging decisions. Some companies may choose to diversify, even if this diversification is more expensive, as a safety net. Companies have also realised that they need to work with people they are close to. If, for example, one day someone offers you double the usual price of a product, you will sell it to them. However, with very close business relationships, even if someone offers you double the price, you might reconsider selling so as not to deprive your close customer of that product. In business, the world has forgotten these relationships as a result of profit and exploitation, as well as annual results and bonuses. Today, we are paying an expensive bonus as a result.
This redistribution is being done now. We have already seen plenty of investors that have come to us in Morocco, saying that they no longer want to mono-source. Others say that they want to source in Morocco because we are close geographically and because we have always stayed true to our word. All that leads me to believe that the future will be slightly different. Those that won’t change will disappear during the next pandemic – they may be forgiven the first time, but they won’t be forgiven the second time. The next time around, people will expect that governments and companies take the right decisions to protect them correctly.
BF: The world is moving increasingly towards a digital economy. In your opinion, how is Morocco moving forward on this?
MHE: We established an agency called l’Agence de Développement du Digital. It aims to create digital services, to serve the population and serve ministries. People are still a bit reticent in the face of digitalisation. Some are afraid, others are anxious about their job security. The pandemic made all of these fears dissipate. This is because people are more concentrated on their health than their job security. Thus, we have made more progress towards digitalisation in three months than in five years. We have done incredible things.
We now have software to track people down to see if they have been in contact with Covid-infected patients, there is software to facilitate e-mails in secured companies, and we have encrypted video conferencing for sensitive companies and entities as well. We’ve even seen electronic signatures; we’ve seen it all. It has been a moment of joy for people who work in this sector and the reality is that the pandemic was a fantastic accelerator.
The world of IT technicians, with which I am familiar, has always spoken about development and the timeframe for development was always measured in years. If something was important, we said it would take two years. During this pandemic, we spoke about things in a measure of days. We developed tools extremely quickly, at speeds we haven’t seen before. The goals of different departments also became more flexible: instead of saying that certain tasks weren’t in their purview, there was quicker and more fluid cooperation. We have seen a new Morocco evolve in a very small amount of time.
BF: Morocco’s Industrial Acceleration Plan 2014/2020 has been the government’s policy framework for transforming and modernising the industrial sector. As its term is closing, what has been achieved?
MHE: We told ourselves that we wanted to create 500,000 new jobs between 2014 and 2020, and we surpassed that in 2019. This was an essential element. The second item is that we wanted to manufacture 600,000 vehicles. We are now at 700,000 vehicles. We wanted to be at a rate of integration above 50% and we are now at 62% in the automotive sector. In the aviation sector, we produce 42% of a complete plane.
There were many excellent achievements. This is great, but not so important – what is most important is what we can do tomorrow. The past is great, Morocco’s industrialisation has been demonstrated and the plan has confirmed that acceleration is indeed possible. Today, we are still focused on the future. The pandemic acted in many ways as a booster and helped us to develop some incredible things very quickly. We have seen that by putting people together in a collaborative space, we created the most technologically advanced hospital bed possible. We could not have imagined this previously. We have also created a diagnostic PCR test for Covid-19 and made infrared thermometers that take temperatures at a distance. All of this was done with 100% Moroccan products. Also, we discovered that we were printing books for schools internationally, so we reintegrated that sector into our country using Moroccan factories. I could go on and on. We will continue to put people together to work and collaborate. We will be relentless in developing and progressing.
We observed that we were satisfying international demands before serving domestic industrial demand in Morocco, so we are working towards correcting that. There is a real strategy of industrialisation in the country. As an example, we are at 62% rate of integration for an automobile, but we want to go up to 85%. We import glass and we make windshields, so we are in the process of taking sand to make glass, which will be used for vehicles and for buildings. Traditionally we have imported glass, but from now on we will use our sand to make our own glass. We also have aluminium and other important resources for Moroccan industrial companies.
We also want to continue to aim to be carbon-neutral and transform our economy in a sustainable way and by using natural gas. These are our goals for the next year. We are right in the middle of it and we want to achieve these goals in about 18 months. With the pandemic, we realised how quickly we could achieve our goals – I don’t see why we can’t do it again.