Tangiers established as Morocco's epicentre of a burgeoning, industry-rich region

In the late 1990s King Mohammed VI chose to use Tangiers as a catalyst for the transformation of northern Morocco by turning the historically sidelined region into an engine of the national economy.

While the region had lagged behind much of the country for decades, the late 1990s saw the launch of King Mohammed VI’s economic development plan, leveraging Tangiers’ strategic location at the Strait of Gibraltar – where the Atlantic Ocean meets the Mediterranean Sea – for the growth of the region.

At the confluence of these key maritime routes is the cornerstone of the city’s multi-sector development strategy: the Tanger-Med port complex. Built throughout the 2000s, it has become central to the city’s development strategy and has helped the city attract an increasing number of multinational companies in a range of sectors, including automotive and aeronautics, logistics, energy and tourism.

Today, the Tangiers-Tétouan-Al Hoceima region is the third-highest contributor to Morocco’s overall GDP, behind first-place Greater Casablanca at 32.2% and second-place Rabat-Salé-Kenitra at 16%. Tangiers has become Morocco’s third-largest city, having experienced strong inward migration over the decade to 2017, and now has roughly 1m inhabitants, according to figures from the High Commission for Planning, the governmental statistical organisation.

TANGIERS-METROPOLIS: This progression can be traced to King Mohammed VI’s regional development ambitions. Since 2013 the Tangiers-Metropolis programme has aimed to direct Dh7.7bn (€713m) worth of public and private investment into the city by strengthening its transportation network, expanding industrial zones, updating urban infrastructure and raising Tangiers’ profile as a tourism destination. Several transportation projects are under way to increase the city’s connectivity and reduce congestion within its growing urban fabric, including plans to build the Rocade des deux Mers – a ring road linking the Mediterranean and the Atlantic – with new access roads between the highway and the city. In addition, the Tangiers-Tétouan connection, a 30-km highway will link Tangiers to the cultural destination city of Tétouan, a cultural tourism destination, and the rest of the region for an estimated investment of Dh3bn (€277.8m). As part of the urban renovation programme to decrease road congestion, 12 subterranean parking garages with a total capacity of 3000 vehicles are under construction at the Promenade of Tanger, known locally as the Corniche de Tanger.

Overall, the investments of the Tangiers-Metropolis programme have an impact on nearly all sectors of the regional economy, including education – 25 new schools are to be built with 250 prefabricated classrooms designated for conversion into permanent structures – and the health sector, with the ongoing construction of University Hospital Centre of Tangiers, financed by the Qatari Fund for Development. This Dh2.33bn (€215.8m) project will include 771 new patient beds covering both basic health services and complicated surgeries. Located near an oncology hospital and the future pharmaceutical and medical school, it is set to become the health centre of the north.

INFRASTRUCTURE PROJECTS: Tangiers also benefits from large-scale infrastructure projects meant to strengthen its position as a leading economic centre in Africa. In 2017, the flagship project Mohammed VI Tangiers Tech City was officially launched by a consortium composed of China’s Haite Group, Morocco’s Banque Marocaine du Commerce Extérieure (BMCE) Bank of Africa and the regional council representing the Moroccan government, for a total investment of $10bn (€8.3bn). The new city will be deployed over 2000 ha near Tangiers and will include a wide range of industries and services, from urbanism to aeronautics, automobiles to pharmaceuticals, telecommunications to renewable energy, transport and logistics, and the food industry. The president of the Chamber of Commerce, Industry and Services of Tangiers-Tétouan-Al Hoceima, Omar Moro, told OBG, the “effects of the project will be beneficial not only for the Tangiers-Tétouan-Al Hoceima region, but for the kingdom of Morocco as a whole”.

The tech city is expected to create 100,000 jobs locally, transfer advanced technology and train 6,000 people. It will also generate an estimated $300m (€27.8m) in tax revenues while attracting investment from 200 multinational corporations. Other major infrastructure projects are also under way, including Morocco’s first high-speed railway between Tangiers and Casablanca – the ligne à grande vitesse (LGV). The project – equivalent to a total investment of Dh20bn (€1.9bn) and largely financed by international and private partners – is being implemented by the French national railway company, Société Nationale des Chemins de Fer Français, in collaboration with Morocco’s national railway company, Office National des Chemins de Fer. The first segment of the LGV, a 200-km stretch connecting Tangiers to Kenitra, is expected to begin service by the end of the first half of 2018 and will boost passenger traffic on the national rail network by an estimated average annual growth rate of between 7% and 8% (see analysis).

TANGER-MED: The cornerstone of the regional development strategy is the Tanger-Med port complex, located at the heart of one of the busiest and deepest sea lanes in the world. Operational since 2007, Tanger-Med has served as a catalyst for the economic development of the region. The port complex possesses two container terminals, TC1 and TC2, with another two – TC3 and TC4 – currently being developed. The second phase of the port facility, known as Tanger-Med II, is also under way. Managed respectively by the Dutch firm APM Terminals and the German-Italian consortium EUROGATE-Contship, TC1 and TC2 reached their maximum annual berthing facility capacity of 3m twenty-foot equivalent units (TEUs) in 2014, making the Tanger-Med II upgrade even more urgent. Together, TC3 and TC4 will bring the berthing facility capacity of the Tanger-Med port complex to 8.2m TEUs. Construction began in 2010, led by a consortium of France’s Bouygues Travaux Publics, Belgium’s BESIX Group, Italy’s Saipem and Morocco’s SOMAGEC, with TC3 expected to be operational beginning November 2019. TC3 will be managed by Marsa Marocco, the state-owned port operator, while the concession of TC4 has been awarded to APM Terminals for a 30-year period. In addition to container terminals, Tanger-Med’s passenger and international road transport facilities can process up to 7m passengers and 700,000 trucks per year, with a hydrocarbons terminal outfitted for the movement of 5m tonnes of refined products annually, and a bulk and vehicle terminal with an annual capacity of 1m vehicles.

Tanger-Med has achieved part of its initial objectives, as Hartmut Goeritz, executive director of APM Terminals Tangier, told OBG: “Today, Tanger-Med is the largest gateway between Europe and Africa. The region has seen numerous investments, whether it is from APM Terminals, Haite, Siemens or Renault.” Goeritz also highlighted the impressive digital infrastructure of the port. The level of digitalisation at the Tangiers port complex will be further enhanced with the completion of Tanger-Med II, where TC4 will benefit from automated terminal operations as part of the integrated IT system.

TANGIERS FREE ZONE: Situated 12 km away from the Tanger-Med port facilities is the 500-ha Tanger Free Zone (TFZ). The TFZ was established in 1999 and is home to 475 companies out of the 750 firms operating in Tangiers’s free zones in 2017. Five other free zones in the region are managed alongside the TFZ by the Tanger-Med Special Agency – Renault’s Melloussa Park, Tangiers Automotive City (TAC), Fidneq Commercial Free Zone, Tétouan Park and Tétouanshore. The combined social impact of these zones is sizeable – especially TFZ, which has created a total of 65,000 jobs in a region where unemployment and the informal sector have been notable. Companies operating in Morocco continue to benefit from low labour costs – the minimum wage is around €260 per month – which contributes to the appeal of moving work to the region, although according to national laws, activity in the free zones must be primarily export-oriented. Further incentives to those considering relocating to the TFZ include a five-year exemption from corporate income tax, followed by a rate of 8.75% for the next 20 years, as well as exemption from value-added tax, local operating fees and urban taxes, and foreign currency controls.

AUTOMOTIVE ECOSYSTEMS: Given the accommodating business environment, several multinational companies have moved to Tangiers, including French auto manufacturer Renault in 2012, which marked the beginning of the development of automotive ecosystems, shaped by the government’s strategy to locally integrate the industry value chain.

The sector’s growth has been significant in recent years, with automotive exports outstripping phosphates, historically the country’s biggest foreign-exchange earner. As of 2016 Renault exports 73% of its local production, primarily to Europe and the MENA region, with a production level of 345,000 cars – 80% of which were produced in Tangiers, and 20% in Casablanca – for a total yearly turnover of €6bn.

Ayoub Daoudi, director of operations for North Africa of the global technology manufacturer TE Connectivity, told OBG, “The growth of Tangiers’ automotive ecosystems is driven by three major factors: a clear governmental strategy giving visibility to investors, Morocco’s cost competitiveness and the fact that an increasing number of companies are looking for new destinations outside of Eastern Europe.”

In Tangiers, two out of six free zones are dedicated to the automotive sector – namely Renault’s Melloussa Park and TAC – which continue to attract large companies such as Italy’s automotive equipment designer and manufacturer Magneti Marelli in late 2017 for an investment of €37m. In addition, in December 2016 the government signed agreements with foreign companies to build 26 plants – worth a total €13.8bn investment – that will supply machine parts for the local automotive industry, including Renault’s ecosystem in Tangiers. One goal of the Industrial Acceleration Plan 2014-20 (Plan d’accélération industrielle) is to raise the proportion of locally sourced parts in exported cars produced in Morocco from 40% to 65%. The sector continues its trajectory toward greater integration. “The automotive sector in Tangiers is moving from assembly manufacturing operations to more complex, technical operations,” Daoudi told OBG.

R&D: There is a strong potential for research and development in Tangiers, though the lack of skilled labour continues to be an obstacle, according to Daoudi. However, the creation of training centres dedicated to the automotive sector will help alleviate this issue in the long run. Currently there are 22 centres in TAC with approximately 12,000 graduates per year.

Future developments within the automotive industry will also be related to addressing King Mohammed VI’s continued interest in promoting green technologies, as recently illustrated in the 2017 agreement signed with BYD Auto to build an electric car factory and plants for electric batteries, buses and trains in Mohammed VI Tangiers Tech City with a view to creating yet another ecosystem within the automotive industry – one that is specifically oriented towards electric vehicles.

RENEWABLE ENERGY: The industrial potential of Tangiers and the northern region as a whole involves a wide range of sectors, including renewable energy. Tangiers plays an important role in the government’s target for renewables to make up 52% of the country’s energy mix by 2030. As well as being the site of several planned or existing wind farms, green industries are also taking advantage of the region’s manufacturing bases. Located within TAC, the first wind turbine blade plant in Africa and the Middle East opened in October 2017. The plant is financed and managed by Germany’s Siemens, which invested more than €100m in the project and employed more than 700 people in the production of B63-10 onshore blades. With a length of 63 metres they are among the largest single-piece composites in the world and are destined primarily for exports to Europe, the Middle East and Africa. The plant itself has been designed to accommodate the production of larger blades in direct anticipation of technological developments in the future. In terms of energy production and consumption, Glen Fallon, CEO of Siemens plant operations in Tahaddart, told OBG, “All energy in the north of Morocco is generally green, whereas Safi or Jorf Lasfar still predominantly use conventional energy sources.” This achievement has been made possible by the construction of important infrastructure in the region, notably the Tahaddart combined-cycle natural gas plant , which is among the country’s cleanest power plants. Located south of Tangiers, with a total capacity of 380 MW, the plant accounts for half of the installed power capacity in the Tangiers-Tétouan region and contributes 9% toward Morocco’s total electricity production. Established in 2005, operation of the Tahaddart plant has been allocated to a jointly held company, Electric Power Tahaddart (EET), under a 20-year concession that ends in 2025 from Morocco’s utility provider the National Office of Electricity and Drinking Water (Office National de l’Electricité et de l’Eau Potable, ONEE). Spain’s electrical utility company Endesa holds a 32% stake in the project and Germany’s Siemens a 20% share; ONEE holds the remaining 48% and commercialises all electricity produced.

In addition, the Tanger Dhar Saadane wind farm – known as Tanger I – entered into service in 2010 to add 140-MW capacity to local installation. Also part of furthering the national programme for renewable energy, Tanger II (150 MW) is currently under construction, along with five other wind-farm sites for a combined annual production capacity of 850 MW: Koudia El Biada in Tétouan (300 MW), Taza (150 MW), Tiskrad in Laâyoune (300 MW) and Boujdour (100 MW).

TOURISM: The increased connectivity between Tangiers’ transport infrastructure has contributed to the growth of the tourism industry, as exemplified by a 31% year-on-year (y-o-y) rise in tourist arrivals in the first half of 2017, or 327,319 visitors by the end of July 2017 compared to 250,187 for the same period in 2016. This trend is in line with the industry’s recent performance in Tangiers, with 9% growth in the number of tourists registered in hotels between 2015 and 2016.

While the entire region of Tangiers-Tétouan-Al Hoceima offers exceptionally varied natural sites that make it a leading tourist destination, it is the cultural heritage, tourist attractions and proximity to Europe which makes Tangiers the most attractive city destination of the north. At the crossroads of multiple cultures – geographically and historically – from Phoenician and Roman traders, to Portuguese, Spanish and British occupations, there are a host of sites which exemplify local Moroccan culture and historical foreign influences. In the short to medium term, the city’s leisure segment is likely to be boosted through the redevelopment of the Tangiers City Port and the inauguration of Tanja Marina Bay International.

Local tourism, however, continues to suffer from seasonality, with most visitors coming between the months of May and September. Traditionally a destination favoured by domestic tourists, proximity to Europe and the influx of multinational companies is bringing in an increasingly international mix, with foreigners outnumbering locals in 2017 (see analysis).

In order to boost the city’s tourism potential and achieve its target of 3.1m tourists by 2020, the government has undertaken a number of restoration projects, including the ongoing renovation of the historic medina, which includes the Kasbah and the Old Medina area. In addition, with the Tanger-Med port complex in place, the movement of the region’s international trade activity out of the historic Bay of Tangiers has created an opportunity for the city to convert the bay into a recreational port and tourist attraction.

Such favourable conditions have inspired international hotel brands develop locally, as illustrated by the 2017 opening of a second Hilton hotel in Tangiers – the Hilton Tanger City Centre Hotel & Residences – which will bolster existing hospitality infrastructure. As the city aims to develop the meetings, incentives, conferences and exhibitions (MICE) segment, and alternative tourism, an additional 26,247 beds will be built, bringing the total capacity to 40,769 beds (see analysis).

However, challenges remain due to the seasonal and increasingly high-end nature of the local tourism segment. Economic slowdowns in European source markets or perceived security risks may also jeopardise expected demand. Land acquisition difficulties and the aftermath of the 2008 crisis delayed a number of real estate and hospitality projects, notably the Al Houara resort on 2.5-km of the Atlantic coastline of Tangiers. Spread across 234 ha – including 60 ha of protected forest – and comprising 2560 hotel beds, the Dh4.8bn (€444.5m) resort project, developed by Qatari Diar is now back on track and will include two five-star hotels, villas and residences, an 18-hole golf course, a convention centre and various entertainment facilities. According to local media, the resort will welcome its first guests in the summer of 2018, increasing the accommodation capacity of the region and further moving towards the attainment of CPR’s 2020 objectives (see analysis).

NATIONAL SPORT CITY: Home to the Stade de Tanger, which is both the city’s biggest sports facility, at 45,000 seats, and its largest building, Tangiers is working to expand its sports and well-being facilities. In late 2017 the prefecture of Tangiers-Asilah set out a plan to establish itself as a national sports city. Coming under the umbrella of the Tangiers-Metropolis programme, the agenda seeks to establish the city as a sporting destination as well as cater to the well-being needs of residents. To diversify and expand its sport infrastructure further, the Tangiers-Asilah prefecture council took a loan from the Municipal Equipment Fund to finance the sport infrastructure for a total investment of Dh46m (€4.3m) with a focus on both the rural and the urban: six new football stadiums of 100 x 60 metres in the urban area and 12 smaller covered stadiums, of 44 x 24 metres, seven of which will be in neighbouring rural areas, all of which will be equipped with water-saving artificial turf. “While the launch of the Tangiers -Metropolis programme first addressed accessibility and congestion problems, the National Sport City aims to facilitate access to leisure and health services to young people,” said Mohammed Belbachir, director of the Urban Agency of Tangiers.

OUTLOOK: Supported by a multi-layered development strategy that addressed the main concerns of the local economy, the Tanger-Med port complex unleashed the region’s economic potential. Ongoing projects such as Mohammed VI’s Tangiers Tech City bode well for the future of the region, which is well positioned to continue to attract global players in increasingly complex, technology-intensive industries.

One of Tangiers’s key challenges for the future will be the extension of the benefits from increased foreign direct investments to the rest of the region, including more isolated areas, such as Al Hoceima and others.