OBG talks to Nizar Baraka, Minister of Economy and Finance

Interview: Nizar Baraka

How can Morocco’s export potential be better used?

NIZAR BARAKA: The 2013 Finance Law introduces measures that should help boost exports. First of all, we need to accelerate the implementation of export-oriented sectoral strategies and expand support to other areas, like the pharmaceuticals, metallurgical and chemical industries. Another important aspect is to diversify our target markets. We want to reinforce our presence in Africa and speed up access to its markets, while also gaining a stronger foothold in Arab nations, the Gulf in particular. Indeed, we recently signed an advanced status agreement with the Gulf Cooperation Council. The third point is to put in place export promotion measures by way of “export growth contracts” signed with export-oriented firms, helping them get access to new markets by increasing their visibility.

What changes would make the current compensation system more sustainable?

BARAKA: Ensuring that spending on compensation remains sustainable, from a budgetary point of view, is a key government priority. Such spending is reaching very high levels now, so our objective is to bring it down to 3% of GDP by 2016. For 2013, we have limited such spending to 4.4% of GDP, down from 6.5% in 2012. It will take major effort to achieve this reduction. To protect vulnerable groups, we have put in place a Social Cohesion Fund financed by high-income earning individuals and companies with high profit margins. The fund financed projects like the Tayssir initiative, reducing school leaving by giving parents financial incentives to keep their children in school. It also pays for aid programmes for families with handicapped members. These projects should help mitigate the effects that rising commodities prices have on expenditures.

How has the IMF precautionary credit line helped to boost international investor confidence?

BARAKA: The precautionary credit line has been obtained for the purpose of withstanding sudden and large-scale exogenous shocks, such as a major currency crisis in the eurozone, given the close links between the Dirham and the euro; an economic crisis in Europe, given that 60% of our trade is conducted with the EU; or a major increase in the price of raw materials.

This reassurance does not diminish our efforts to implement reforms to better manage our domestic and foreign trade accounts. In fact, it was our own decision to rein in the budget deficit, the aim being to reduce this to 3% by 2016. We fixed it a 4.8% for 2013. In December 2012 we issued a $1.5bn sovereign bond at favourable interest rates: 4.25% for a 10-year bond and 5.5% for a 30-year bond. These are lower than those for developed countries in the Mediterranean basin and for most, if not all, African countries. Hence, there exists a genuine confidence in our capacity to maintain political stability and face up to our financial difficulties. Indeed, this confidence is reflected in the fact that we have been able to attract more foreign direct investment, which rose by 14% in 2012 over 2011.

How do the fiscal incentives proposed in the 2013 Finance Law boost small business competitiveness?

BARAKA: To support small and medium-sized enterprises (SMEs), we have taken a series of measures. First, we want to help improve SME productivity and to reduce their production costs, in particular in relation to logistics costs and import of raw materials through substantial reductions of Customs fees for the agricultural, agro-food and pharmaceuticals sectors. Second, corporate taxes for SMEs will be reduced from 30% to 10%. We have also taken some measures to help SMEs increase their equity positions. For instance, we have set up funds to improve access to financing backed by the state and we have instituted programmes to spur productivity and to promote the introduction of more efficient technologies. The Rawaj programme, for instance, supports SMEs with distribution issues. Finally, we are also taking measures to help SMEs list on the Casablanca Stock Exchange by offering fiscal incentives.