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Morocco: Market Profile

Picture: Morocco factsheet
Picture: Morocco factsheet

1. Overview

Morocco has attracted increasingly more investments since the country’s privatisation programme started in 1993 and due to the liberalisation of its markets. Foreign investments in Morocco have expanded from the traditional domains of textiles, fishing, and agriculture to those presenting greater value addition, such as energy, infrastructure, transport, telecommunications, financial services, and others. The European Union (EU) is Morocco’s primary trading partner, providing almost two thirds of Morocco’s imports and receiving over 60% of Morocco’s exports. Over the medium term, Morocco's economic outlook will remain broadly positive, provided the government remains committed to implementing deep and comprehensive reforms to boost job creation and skills development. The current account deficit is expected to slightly improve in 2019, driven by sustained export growth, tourism receipts and remittances, which will offset increasing imports.

Source: Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

October 2016
Parliamentary elections. King Mohammed picked Abdelilah Benkirane for a second term as prime minister after his party won the most seats.

March 2017
King Mohammed dismissed Abdelilah Benkirane from his post as prime minister due to his failure to form a coalition government. The king chose former PDJ secretary-general Saad-Eddine El Othmani as Benkirane's successor.

November 2018
Africa’s fastest train has started operating in Morocco, halving the time it took to travel between Casablanca and Tangier. It took seven years and USD2.4 billion – funded by the governments of Morocco, France, Saudi Arabia, Kuwait, and the UAE - to build the high-speed railway line.

Source: BBC country profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Morocco real GDP and inflation
Graph: Morocco real GDP and inflation
Graph: Morocco GDP by sector (2017)
Graph: Morocco GDP by sector (2017)
Graph: Morocco unemployment rate
Graph: Morocco unemployment rate
Graph: Morocco current account balance
Graph: Morocco current account balance

e = estimate
Sources: IMF, Fitch Solutions
Date last reviewed: March 22, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Morocco merchandise trade
Graph: Morocco merchandise trade

Source: WTO
Date last reviewed: March 22, 2019

Graph: Morocco major export commodities (2017)
Graph: Morocco major export commodities (2017)
Graph: Morocco major export markets (2017)
Graph: Morocco major export markets (2017)
Graph: Morocco major import commodities (2017)
Graph: Morocco major import commodities (2017)
Graph: Morocco major import markets (2017)
Graph: Morocco major import markets (2017)

Sources: Trade Map, Fitch Solutions
Date last reviewed: March 22, 2019

4.2 Trade in Services

Graph: Morocco trade in services
Graph: Morocco trade in services

Source: WTO
Date last reviewed: March 22, 2019

5. Trade Policies

  • The Moroccan government's commitment to expanding international trade and striking further free trade agreements (FTAs) has seen a reduction in tariff and non-tariff barriers.

  • The weighted average import tariff in Morocco, at 3% in 2015, is among the lowest in the MENA region, indicating lower-cost imports for both businesses and consumers and boosting the country's appeal as an investment destination. Higher most favoured nation (MFN) tariffs are applicable to some items, particularly agricultural products and clothing, but generally businesses benefit from competitive trade tariffs.

  • The customs process can be somewhat slow and burdensome, with bureaucracy remaining a barrier to trade, but generally documentary and customs compliance is more efficient than in other MENA states. Other non-tariff barriers such as inspections and onerous quality standards pose minimal obstacles.

  • The government imposes a restriction on prepayment for import orders at a maximum of 30% of the total cost in order to manage foreign currency outflows. This leaves businesses reliant on trade financing such as letters of credit, which can prove costly and pose a potential barrier to trade.

Sources: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

Morocco re-joined the African Union (AU) in January 2017. Its application in June 2017 to join the Economic Community of West African States (ECOWAS) has also been accepted.

6.2 Multinational Trade Agreements

Active

  • Morocco-United States: The FTA came into force in January 2006. The United States is a trading partner of Morocco's and this agreement has resulted in Morocco reducing its tariffs on imports from the United States.

  • Tunisia, Egypt, Jordan and Morocco: While none of these countries is within the top five exporting or importing partners of Morocco, this agreement serves to encourage inter-regional trade in the MENA region.

  • Morocco-Turkey: The FTA came into force in January 2006.

  • Agadir Agreement: The FTA came into force in March 2007. The signatories are Egypt, Jordan, Morocco and Tunisia.

  • European Free Trade Association (EFTA)-Morocco: The FTA came into force in December 1999 and includes Iceland, Liechtenstein, Norway, Switzerland and Morocco.

  • EU-Morocco: The FTA came into force in March 2000. The EU is Morocco's largest trading partner, accounting for over 59% of its trade in 2017.  Morocco is the EU’s 22nd trading partner representing 1% of the EU’s total trade with the world. The EU's imports from Morocco are dominated by machinery and transport equipment, agricultural products), and textiles and clothing. The EU's exports to Morocco are dominated by machinery and transport equipment, followed by fuels, metals and minerals, textiles and clothing, and agricultural products. Two-way trade in services amounted to EUR8.8 billion in 2016 with EU imports of services representing EUR5.2 billion and exports EUR3.6 billion. Negotiations for a Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Morocco were launched on 1 March 2013. Four negotiating rounds have taken place so far, the most recent in April 2014. The overall goal of the negotiations is to create new trade and investment opportunities and ensure a better integration of Morocco's economy into the EU single market. The DCFTA also aims at supporting ongoing economic reforms in Morocco and at bringing the Moroccan legislation closer to that of the EU in trade-related areas.

  • Global System of Trade Preferences among Developing Countries (GSTP): The partial scope agreement came into force in April 1989.

  • Pan-Arab Free Trade Area (PAFTA): The FTA came into force in January 1998.

Ratification Pending

  • Association Agreement with the EU: The EU accounts for around 60% of Morocco's exports and, therefore, trade flows are further encouraged. As of February 12, 2019 the European Parliament voted in favour of the agreement. Morocco now has to complete the ratification process to finalise the adoption of the agreement.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Morocco FDI stock
Graph: Morocco FDI stock
Graph: Morocco FDI flow
Graph: Morocco FDI flow

Source: UNCTAD
Date last reviewed: March 22, 2019

7.2 Foreign Direct Investment Policy

  1. Foreign direct investment (FDI) in Morocco is welcomed into a wide range of sectors and has traditionally been channelled into sectors such as textiles manufacturing, autos, real estate, finance and tourism. Recent investment announcements have included renewable energy projects (notably the world's largest concentrated solar power plant), as well as autos production plants and port expansion.

  2. Morocco's openness to FDI means that foreign investors face few regulatory or policy obstacles when entering the country's market. Most sectors have no restrictions on foreign ownership and there is no mechanism for mandatory government screening of approval of projects. The only meaningful barriers to foreign investment concern caps on foreign involvement in air and maritime transport and fisheries, and the presence of state-owned enterprises (SOEs), which limit private sector activity in some sectors, notably phosphate mining. In general, these barriers do not pose a major concern for foreign investors in Morocco, and the government's favourable attitude towards FDI means that investor sentiment is little affected by them.

  3. Foreign participation in companies in the air and maritime transport and maritime fishery sectors is capped at 49%. Foreign ownership of agricultural land is not permitted, though leases of up to 99 years are available. The government has a monopoly on the phosphate mining industry through the 95% state-owned Office Chérifien des Phosphates, restricting foreign participation to downstream industries, such as fertiliser production.

  4. SOEs continue to operate in some sectors of the economy, notably phosphate mining. While this precludes foreign involvement in these industries, SOEs do not significantly distort the playing field against foreign or private firms in most sectors.

Sources: WTO - Trade Policy Review, Government Sources

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
4 free trade zones (FTZs) are available across the country, including Tangier, Fes, Casablanca, Marrakech, Agadir, LaayounBusinesses’ operations in these areas enjoy the following benefits:
- Exemption from customs regulations
- Exemption from foreign exchange controls
- Exemption from taxes and tariffs paid on goods entering and leaving the zone
- Corporate income tax (CIT) holiday for 5 years
- Reduced CIT rate of 8.75% applicable after the fifth year, for a maximum of 20 years
Casablanca Finance CityBusinesses’ operations in these areas enjoy the following benefits:
- Reduced CIT rate of 8.75%, rising to 10% after the first five years
Investment Charter IncentivesQualifying businesses enjoy the following:
- CIT holiday for 5 years for exporting companies
- Reduced CIT rate of 17.5% applicable after the fifth year
- Investment aid of 30% of the cost of commercial premises, and 15% of new capital goods, up to a maximum of 15% of project value or MAD30 million

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 20%
  • Corporate Income Tax: 10-37%

Sources: National sources, Fitch Solutions

8.1 Important Updates to Taxation Information

  • As of January 1, 2018, Moroccan CIT is levied using a progressive rate scale (instead of a proportional rate scale). Credit institutions and insurance companies remain subject to a flat rate of 37%. Furthermore,  the capital gains on non-depreciable assets recorded following a merger/demerger operation cannot be offset against available losses.
  • Starting January 1, 2019, the CIT rate applicable to the income ranging from MAD300,001 to MAD1,000,000 was reduced.
  • Starting January 1, 2019, a 'social cohesion contribution' will be levied at 2.5% on companies with a tnet taxable income exceeding MAD40 miliion.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax- 10% on income below MAD300,000

- 17.5% on income between MAD300,001-1,000,000

- 31% on income above MAD1,000,001

- 37% on insurance companies and credit institutions
Branch Tax15% on after tax profits of branch offices
Withholding Tax- 15% on dividends paid to non-residents

- 10-30% on interest

- 10% on royalties
Professional Tax10-30% on the rental value of business premises
Value Added Tax
20%

Sources: National sources, Fitch Solutions
Date last reviewed: March 22, 2019

9. Foreign Worker Requirements

9.1 Foreign Worker Permits

Companies wishing to employ foreign workers in Morocco for more skilled positions must apply for work permits (attestation de travail) from the National Agency for the Promotion and Employment of Skills (Agence Nationale de Promotion de l'Emploi et des Compétences). Required documents to obtain a permit are relatively standard: employment contract, copies of degrees, copies of passport and application form. The process is free, but can take several weeks and Moroccan bureaucracy can be complicated to navigate for foreigners.

9.2 Visa/Travel Restrictions

Citizens from 68 countries (including many European and MENA countries, but not Algeria) do not need visas for stays up to 90 days. Foreigners from countries that require a visa to enter Morocco as visitors must apply in person at the Moroccan consular post where they currently reside. Business visas for 90-day stays cost USD27 for one entry and USD40.5 for two entries.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Ba1 (Stable)20/11/2018
Standard & Poor'sBBB- (Negative)23/03/2010
Fitch Ratings
BBB- (Stable)13/11/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201720182019
Ease of Doing Business Index
68/19069/19060/190
Ease of Paying Taxes Index
41/19025/19025/190
Logistics Performance Index
N/A109/160N/A
Corruption Perception Index
81/18073/180N/A
IMD World CompetitivenessN/AN/AN/A

Sources: World Bank, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201720182019
Economic Risk Index Rank N/A95/20296/202
Short-Term Economic Risk Score
51.348.350.0
Long-Term Economic Risk Score53.152.453.0
Political Risk Index Rank N/A70/20275/202
Short-Term Political Risk Score67.967.970.6
Long-Term Political Risk Score69.969.969.2
Operational Risk Index Rank N/A82/20181/201
Operational Risk Score52.552.853.2

Source: Fitch Solutions
Date last reviewed: March 22, 2019

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
High trade exposure to the Eurozone markets poses a medium-term risk to Morocco's growth in the event of a significant drawdown in demand. Approximately two-thirds of the country's goods exports are absorbed by its northern neighbours. As a consequence, the export sector is highly vulnerable to any economic downturn in the Eurozone, particularly in light of global trade tensions and risks stemming from the United Kingdom's planned separation from the EU. The tourism industry also relies extensively on visitors from France, Spain, the Benelux countries and the United Kingdom, and any downturn in the security situation would harm growth. Over the longer term, the economy will benefit from greater exposure to emerging markets in the Middle East and North Africa and in Sub-Saharan Africa.

OPERATIONAL RISK
Morocco offers a number of strategic advantages across its operational risk profile which make it a more attractive location for investment than many of its regional peers. In particular, relatively high levels of security, an integrated supply chain network, openness to foreign investment and well developed financial markets contribute to an environment conducive to business. However, key risks are present in the country's labour market, including low levels of educational attainment, which dampen the competitiveness of the workforce. As a result, businesses may face elevated labour costs and limited availability of skilled workers. Morocco also has one of the highest income and personal tax rates in the Middle East and North Africa region, representing a notable drawback to the country's appeal for businesses.

Source: Fitch Solutions
Date last reviewed: March 7, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Morocco short term political risk index
Graph: Morocco short term political risk index
Graph: Morocco long term political risk index
Graph: Morocco long term political risk index
Graph: Morocco short term economic risk index
Graph: Morocco short term economic risk index
Graph: Morocco long term economic risk index
Graph: Morocco long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Political and Economic Risk Indices
Date last reviewed: March 22, 2019

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Morocco Score53.239.863.554.854.6
MENA Average47.549.348.048.744.1
MENA Position (out of 18)8173
8
8
Global Average49.649.749.9
49.049.8
Global Position (out of 201)8116050
74
83

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Morocco vs global and regional averages
Graph: Morocco vs global and regional averages
Country
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk Index
Crime and Security Risk Index
UAE72.767.879.068.775.3
Qatar66.063.961.971.666.5
Bahrain64.958.469.571.560.1
Oman63.351.061.664.576.0
Saudi Arabia61.663.062.162.758.6
Jordan58.654.960.659.060.0
Kuwait55.152.351.552.564.1
Morocco53.239.863.554.854.6
Egypt48.446.046.156.445.3
Tunisia47.342.356.947.342.8
Lebanon43.447.9
51.841.432.4
Iran42.848.736.650.835.1
Algeria41.544.0
31.242.947.9
West Bank and Gaza34.246.437.232.021.2
Libya27.244.421.729.313.4
Iraq27.043.724.428.611.3
Syria26.642.923.827.012.7
Yemen21.930.625.015.816.1
Regional Averages47.549.348.048.744.1
Emerging Markets Averages46.7
48.145.547.446.0
Global Markets Averages49.649.749.949.049.8

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: March 22, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Morocco

Graph: Major export commodities to Morocco (2018)
Graph: Major export commodities to Morocco (2018)
Graph: Major import commodities from Morocco (2018)
Graph: Major import commodities from Morocco (2018)

Note: Graph shows the main Hong Kong exports to/imports from Morocco (by consignment)

Graph: Merchandise exports to Morocco
Graph: Merchandise exports to Morocco
Graph: Merchandise imports from Morocco
Graph: Merchandise imports from Morocco

Note: Graph shows Hong Kong exports to/imports from Morocco (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: March 22, 2019


2017
Growth rate (%)
Number of Moroccan residents visiting Hong Kong6,326
-0.8

Source: Hong Kong Tourism Board


2017Growth rate (%)
Number of African residents visiting Hong Kong142,512
-11.6

Sources: Hong Kong Tourism Board, Fitch Solutions
Date last reviewed: March 22, 2019

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of Moroccan companies in Hong KongN/AN/A
- Regional headquarters
- Regional offices
- Local offices


11.3 Treaties and Agreements between Hong Kong and Morocco

Morocoo and mainland China have a bilateral investment treaty which came into force in March 1995.

Sources: Government Sources, Fitch Solutions

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The Arab Chamber of Commerce & Industry (ARABCCI) was established in Hong Kong in 2006 as a leading organisation at promoting commercial tied between Hong Kong/mainland China and the Arab World.

The Arab Chamber of Commerce & Industry
Address: 20/F, Central Tower, 28 Queens Road, Central, Hong Kong
Email: info@arabcci.org, secretariat@arabcci.org
Tel: (852) 2159 9170

Source: The Arab Chamber of Commerce & Industry

Honorary Consulate of The Kingdom of Morocco
Address: 60 Peak Road, The Peak, Hong Kong
Liaison Visa Office: Room 3401, New World Tower, 18 Queen's Road Central, Central, Hong Kong
Tel: (852) 2138 3388

Source: Protocol Division Government Secretariat, Hong Kong

11.5 Visa Requirements for Hong Kong Residents

Hong Kong residents are granted 30 days visa-free access.

Source: Visa On Demand
Date last reviewed: March 22, 2019

Content provided by Picture: Fitch Solutions – BMI Research