Innovative solutions still key to economic growth prospects in Morocco

Galvanising the competitiveness of Moroccan firms is an important component of modernising the economy and boosting job creation. While there have been improvements, the adoption of innovation programmes and the establishment of a viable support system for entrepreneurs and start-ups have lagged, in part due to the regulatory environment.

The 2017 Global Innovation Index (GII), jointly published by Cornell University, INSEAD and the World Intellectual Property Organisation (WIPO), ranked Morocco 72nd out of 128 countries, the same as in the previous year’s edition but six places higher than in 2015. Morocco was ranked third highest in Africa, after South Africa and Mauritius, which achieved 57th and 64th position, respectively. The kingdom also surpassed its immediate neighbours in the Maghreb, with Tunisia ranked 74th and Algeria 108th.

CHALLENGES: However, the GII study outlines several variables that make it harder for firms and individuals to pursue long-term innovation strategies. The country’s innovation investment climate achieved a ranking of 109th, while innovation linkages also scored towards the bottom, pointing to the difficulties of connecting university-level research with industry and the marketplace. Another area for improvement underlined in the GII report is business sophistication, as well as the share of knowledge-intensive employment in the overall workforce. According to some stakeholders, part of the problem is the way economic growth is perceived.

“The government sees foreign direct investment and outsourcing as the only means to create both growth and employment. This is where the paradigm shift needs to happen,” Adnane Addioui, co-founder of the Moroccan Centre for Innovation and Social Entrepreneurship, told OBG. “The government has no policy for innovation at the moment. And this has been the trend over the past 10 years. There hasn’t really been a support system for start-up creation as a source of new employment.” In some respects, however, Morocco has established constructive conditions for innovation, which the GII notes. The index documents the existing ease of creating new businesses, the large number of engineering and sciences graduates, and the high rate of e-participation. However, coordinating these positive developments to form a cohesive enabling environment has proved challenging.

R&D EXPENDITURE: Although Morocco is well positioned in comparison to some of its closest neighbours, the kingdom’s expenditure in research and development (R&D) is still lagging some way behind that of more advanced economies. According to figures from UNESCO, Morocco currently spends the equivalent of 0.7% of GDP each year on R&D activities, while countries like the US, Germany and Austria spend approximately 3%. Meanwhile, Japan and South Korea go even further, spending 3.6% and 4.3%, respectively.

Patent applications in Morocco have risen from 561 in 2004 to 1303 in 2016, according to WIPO. However, the majority of these continue to be filed by non-residents, with only 237 filed by Moroccans in 2016. This underscores the prominence of foreign firms in the kingdom’s economy, but still demonstrates an improvement on the 104 patents filed by Moroccans in 2004.

ENTREPRENEURSHIP: Regulation to promote entrepreneurial activity could be helpful in this regard. Although it is not legally difficult to create a new company, Morocco lacks regulations on exit strategies for angel investors, and an overall legal strategy to regulate and improve conditions for start-up investment. “This is an important void, because you need to encourage people to invest in emerging firms,” Addioui told OBG. “Especially for small amounts of investment, which can sometimes mean the success or failure of a start-up.”

Facilitating private sector innovation in sectors such as health and education, where constrained public resources can limit service improvements, could be an effective way to foster business activity while also addressing some of the nation’s key challenges.