Eyes on all horizons: A concerted effort is being made to boost trade volumes

Historically referred to as the land behind the beyond, or the land at the end of the world, Morocco has long capitalised on its location between Europe, the Middle East and Africa. The kingdom has in recent years begun to try to position itself as a gateway to West Africa, strengthening bilateral ties with countries such as Gabon and Côte d’Ivoire, but there is a more immediate attraction for investors: the existing free trade agreements (FTAs) that provide access to 55 countries with more than 1bn customers, who between them generate 60% of global GDP.

With its traditional primary trade partner Europe still grappling with economic difficulties, the last few years have been of significant benefit in some ways for Morocco, prompting the country to strengthen its links with trading partners beyond the Eurozone – something it did with vigour in 2013. While it is somewhat premature to try to determine the impact of these new agreements, data from the Ministry of Economy and Finance does show a positive trend for some countries where new agreements were signed. For example, in the first half of 2013 exports to Libya increased by 43%, to Qatar by 14%, to Japan by 83% and to Singapore by 3%. The EU remains Morocco’s largest trading partner for imports and exports, but beyond this, its main import markets included China, the US, Saudi Arabia, Russia and Turkey. Morocco’s main export markets were Brazil, the US, India, Turkey, Japan and Singapore in the first half of 2013.

EUROPE: Given its proximity and historical ties, Europe has long been Morocco’s main trading partner, with the country benefitting from advanced status with the EU since 2008, meaning the regions have a high level of cooperation in areas such as the economy, legislation and regulation. In 2000 the Association Agreement entered into force, followed in 2012 by the Agricultural Agreement, establishing a free trade area between the EU and Morocco for industrial and agricultural products, respectively. Then, in 2013, Morocco and the EU launched negotiations with a view to establishing a deep comprehensive FTA (DCFTA). This DCFTA is intended to complement the existing agreements but is focused on regulatory convergence in areas such as intellectual property, competition policy, energy, investment protection, services and technical barriers to trade. If a DCFTA is signed, it could be the first such deal finalised by the EU, following the suspension of negotiations on an earlier similar accord with Ukraine in late 2013. However, it could still be some years before a DCFTA is actually inked; the EU and Ukraine initiated talks in 2008, for example, and were only on the verge of finalisation in 2013. While the ultimate impact of the DCFTA could be years away, in a report commissioned by the EU, research firm Ecorys estimated that it could boost annual GDP in Morocco by 1.6%, imports by 8.4% and exports by 15.3% in the long run.

THE US: Morocco’s bilateral ties with the US stretch back to the late 1700s, when it was one of the first to recognise the fledgling North American country. Trade ties were further cemented in 2004 when an FTA was signed to reduce trade barriers between the two countries – the first such US agreement in the region. It led to a 2.5-fold increase in Moroccan exports to the US in 2013 versus 2003 to $977m, although US exports to Morocco have increased almost five-fold to $2.3bn. More recently, Morocco has sought to deepen its ties with the US, signing a trade facilitation agreement in November 2013 that aims to expedite the processing of goods by Customs on both sides. There have been some concerns over the impact of the FTA on Moroccan exports, given that products shipped to the US have seen less of a boost than those going in the opposite direction, and requirements for US inputs in Moroccan textile exports have limited growth. However, there have been efforts to stoke demand for Moroccan goods, such as the American Chamber of Commerce (AmCham) in Morocco’s export incubator project. “This aims to boost Moroccan exports to the US through identification of innovative products in Morocco that have real added value for export to the US,” said Rabia El Alama, the managing director at AmCham in Morocco. “Once a product is identified, AmCham will collaborate with the producer to maximise its value on the US market through rebranding, repackaging, labelling, marketing, promotion and other major product adjustments.”

DIVERSIFICATION: Closer to home, Morocco has been looking to stoke trade with its neighbours in North Africa, although consumer confidence and household consumption in Tunisia, Egypt and Libya are still lower than they were before the Arab Spring. In July 2013 Morocco signed a trade agreement with Libya which will initially focus on tourism, industry and property, and aims to rehabilitate trade between the two countries, which has fallen by over 40% since the ousting of Muammar Gaddafi. A shipping line between the countries was also inaugurated in 2013 to help facilitate trade.

Trade among North African countries as a proportion of overall trade is still minimal – below 3% in most cases – due in part to limited intra-regional infrastructure and high border transaction costs. This is despite a number of foundational agreements, including the Agadir Agreement linking Egypt, Jordan, Morocco and Tunisia, and the Arab Maghreb Union, which ties together Morocco, Algeria, Mauritania, Tunisia and Libya.

GCC: Relations with the rest of the Arab world have also strengthened. Morocco is part of the Greater Arab Free Trade Area, which liberalises the exchange of all goods through Customs exemptions between all Arab countries except Sudan and Yemen. But in recent years, links with Gulf states have grown. Emirati and Qatari real estate investors, telecoms companies and finance firms have moved into the kingdom, one of the most notable deals being Etisalat’s €4.3bn acquisition of Vivendi’s stake in Maroc Telecom. Links with Saudi Arabia were also strengthened, with the Saudi-Moroccan Business Council (SMBC) agreeing in August 2013 to create a maritime trading company – expected to be operational in 2014 – to boost trade between the countries. Estimates from the SMBC indicate the shipping line could increase trade between the two by at least 20% in 2014. The shipping line also aims to redress the trade imbalance between the two countries, which is dominated by crude exports from Saudi Arabia. The countries also agreed to create a joint investment fund to support the development of Saudi-Moroccan, Moroccan or Saudi Arabian companies, mainly in Morocco but also in other African markets, with Saudi Arabia expected to invest more than €870m in Moroccan development projects over the next five years.

AFRICA: One of the key themes underlying Morocco’s growing network of trade and investment agreements is its positioning in relation to African markets. With returns still low in OECD countries and risk in Africa decreasing, investors are increasingly turning to the continent for higher returns, and Morocco is well-positioned to serve as an export and investment platform to the West Africa sub-region. Driss Benomar, president of Alomra Group International, told OBG, “Particularly in the regional context, Morocco remains an attractive place for foreign investors, who can easily use Morocco as a springboard for expansion into Africa thanks to the country’s political stability and security.” If Morocco manages to make progress on the long awaited FTA with the Western African Economic and Monetary Union (Union Economique et Monétaire Ouest Africaine, UEMOA), it would solidify the king- dom’s investment case. UEMOA comprises eight countries, including Senegal, Côte d’Ivoire, Niger, Mali and Benin – markets where dozens of Moroccan firms already have a presence as a result of recent expansion, particularly in the banking sector. Trade with the UEMOA represented only 2.3% of Morocco’s exports in the first half of 2013, but the country has a significant trade surplus with the region. Eventual signing of this key FTA would further bolster the attraction of Morocco as an investment base into wider Africa.

NON-TRADE PARTNERSHIPS: The country is already using its proximity to sub-Saharan Africa to consolidate its economic links and improve its currency reserves in other areas beyond trade. In 2013 this was done by securing credit lines with countries that seek not only to invest in Morocco, but also to indirectly access and/or invest in what are often perceived as higher risk African countries. For example, in June 2013 Qatar National Bank signed a strategic partnership with Attijariwafa Bank aimed at boosting investment flows between the institutions, including the latter’s interests in Senegal, Congo, Cameroon, Côte d’Ivoire and Gabon. Elsewhere, in March 2013, the European Bank for Reconstruction and Development signed an agreement with BMCE to establish a €55m trade finance facility to help Moroccan firms engage more widely in international trade.

In August 2013, through a risk-sharing agreement with Citibank, the US’s Overseas Private Investment Corporation extended a $40m loan facility to Attijariwafa Bank to support loans to small and medium-sized enterprises. Walter Siouffi, general manager at Citibank Maghreb, told OBG that they are looking to expand the agreement, with a memorandum of understanding signed in November 2013 to increase the line to $100m and extend the target market to also include sub-Saharan countries where Attijariwafa Bank has affiliates.