Construction, tourism and agri-business helped diversify Fez-Meknes economy

Boasting a dynamic and diversified economy, the Fez-Meknes region contributed 9.4% to Morocco’s national GDP in 2018, fourth by economic output behind the Casablanca-Settat, Rabat-Salé-Kenitra and Tanger-Tetouan-Al Hoceima regions. Established in 2015 as one of 12 distinct administrative areas through the territorial reorganisation mandated by the constitution of 2011, Fez-Meknes covers an area of over 40,000 sq km and forms a crossroads between several prominent economic centres on the country’s coasts.

The region itself is divided into two prefectures – the cities of Fez and Meknes – as well as seven provinces: Sefrou, Boulemane, Moulay Yacoub, Ifrane, El Hajeb, Taza and Taounate. The region as a whole has developed significantly in recent years, and over the 2001-15 period its annual growth rate exceeded the national rate by an average of 3.5%. Recent regional strategy has focussed on continuing this trend, while focusing on initiatives that will ensure that development is inclusive, particularly of the region’s rural communities.

Fez

The region’s largest city, Fez, was settled in 789 by Idriss I, who is widely recognised as the founder of Morocco and was himself a direct descendent of the Prophet Muhammad. His successor, Idriss II, consolidated power and territorial gains and named Fez the dynastic capital, owing to proximity to water resources, the abundance of available construction materials and its strategic position with respect to north-south and east-west routes of migration and communication. The city’s halves were unified in 1070, leading to the construction of an administrative centre, a royal palace and a new market, and by the late 12th century, Fez had become one of the largest cities in the world.

The quartering of Fez did not happen until the French colonial era, when the city was extended beyond the historic walls of the medina and it lost its status as the kingdom’s capital. The colonial city was constructed to include an industrial zone, a military base and a railway station, and its design followed a protectorate policy of segregation between European settlers and local residents. This resulted in the establishment of separate urban entities, with a modern, colonial city bifurcated from a walled-off, historic medina, in a pattern that prevailed in urban settlements throughout the country.

Fez underwent a series of significant transformations following Morocco’s declaration of independence from France in 1956, characterised by the filling of free spaces within the city’s walls, the extension of old districts, the outgrowth of informal housing and a marked widening of socio-economic disparities.

Meknes

Meknes, 60 km south-west of Fez, was founded as a military establishment by the Almoravids in the 11th century and was named capital of the Moroccan sultanate by the Alawite ruler Moulay Ismaïl in the late 17th century. The Alawites’ expansion of the city followed a Hispano-Moorish style, characterised by high walls punctuated by monumental gates, in a harmonious mix of prevailing Islamic and European styles.

The Alawites also invested heavily in Meknes to transform it from a small town into an imperial city in order to counter the historical strength of Fez. Meknes itself declined in the post-Ismaïli period, though the establishment of the French protectorate renewed interest in reviving its former imperial importance. The Prost Plan of 1916 elaborated the protectorate’s vision of urban architecture and redefined the contours of Meknes – among other cities – with a new network of avenues, streets, squares and other public spaces.

Historically, the developments of both cities have been closely linked. Both cities have functioned together and separately as the metropolitan heart of the agricultural economy in central Morocco’s Saïss plain, which stretches between the Rif and Middle Atlas mountain ranges. The cities also share a certain affinity in that they were both established as a result of their advantageous geographies, and their particular fortunes are linked to the development of their economic, political and agricultural circumstances. The creation of the Fez-Meknes region in September 2015 from the merger of several existing prefectures has formalised the interdependence of their economic strategies, activities and outlook, and served as an impetus for the creation of a cooperative development programme.

Demographics Trends

According to the latest census data from the Higher Commission for Planning (Haut Commissariat au Plan, HCP), Fez-Meknes was home to a population of 4.24m in 2014, with that figure projected to have risen by 2.6% to 4.35m in 2018. More than 60% of the population lived in cities in 2014, with 1.15m in Fez and 836,000 in Meknes, and the urban share of the total population is expected to reach 65% by 2023. Even so, urban growth has been relatively slow in recent years, and the region is losing demographic significance compared to the wider country, as Fez-Meknes, long a destination for internal migration, is increasingly becoming a source of emigration to other regions.

Major Economic Indicators

According to the HCP’s latest jobs survey, the rate of unemployment – or the share of the eligible labour force aged 15 and older neither employed nor enrolled in school – in Fez-Meknes stood at 9.3% in 2018, slightly below the national average of 9.8% and down marginally from the 9.5% recorded in 2017. In 2018 rural unemployment in the region was better than rural employment nationwide, 2.6% against 3.5%, though the rate of urban joblessness was higher in Fez-Meknes than in the kingdom as whole, 14.7% against 14.2%. Moreover, the region’s 12.4% share of the national population exceeded the 10.8% share of all unemployed Moroccans living in Fez-Meknes, indicating that the region’s demographic weight exceeds its unemployment burden in the national economy.

While these topline comparisons are favourable to the region, others suggest that the regional labour market lags behind national standards in terms of the quality of work. For instance, at 16.2%, Fez-Meknes had the highest rate of underemployment among the 12 administrative regions in 2017 and nearly double the national average of 9.8%. Moreover, the region was home that same year to the highest share of employees – 72.2% – who were salaried but did not receive health coverage from their employers, against a national average of 58.1%. Lastly, Fez-Meknes fell below the national rate of workforce participation – 43.6% against 46.7% – though the comparison was more favourable in the rural areas – 53.7% against 54% – than in the its cities, where the disparity was wider, 37.7% against 42.4%.

As is the case across the country, unemployment, particularly among youth, women and city dwellers, is expected to remain a challenge in the years to come. An analysis by KPMG suggested that in order to keep pace with recent demographic projections, the region would need to annually create 20,000 new jobs between 2017 and 2030 just to sustain its current rate of employment.

This job creation will need to be concentrated in urban areas as work opportunities in rural communities decline. Employment in agriculture has grown by just 1% in recent years, despite undergoing annual growth of 4%, as innovation and mechanisation have replaced farmhands and rendered them jobless. This displacement is expected to continue swelling the outskirts of Fez, Meknes and other, smaller settlements on the Saïss plain as rural labourers migrate in search of work.

The industrial sector is the site of more than a thousand independent businesses. However, it provides permanent jobs to fewer than 50,000 people, despite a public goal, first formulated in a regional industrial policy in 2006, to lift that figure to 88,000 by 2015. Thus, manufacturers are not expected to meet the demand driven by this influx of urbanising jobseekers.

An HCP report published in September 2018 indicates that the tertiary sector – or market and non-market services – contributed 45.6% to regional GDP in 2016, compared to 20.8% in the secondary sector (industry, mining, water and electricity, and public works) and 19.8% in the primary sector, encompassing agriculture, forestry and fishing). Moreover, while agriculture remains the region’s largest employer by activity, the tertiary sector has become the its foremost creator of new jobs, though the benefits conferred by these new positions are partly diminished by the prevalence of informal work in service provision.

The National Observatory for Human Development assessed the share of residents living in poverty in Fez-Meknes in 2017 at 22.7%, compared to a national rate of 19.6% That overall figure obscures the fact that more than one-third – 37.1% – of the region’s rural residents fell below the poverty line. In addition, the vulnerability rate – or the percentage of people who would likely become impoverished by an exogenous economic shock, such as a medical emergency or the consequences of a natural disaster – is likely much higher still. Lastly, regional per capita income stood just above Dh21,300 (€1916) in 2016, slightly less than three-quarters of the national average of Dh29,390 (€2643), as regional GDP grew by 2.5% on 2016, in line with the national growth rate of 2.6%.

Moreover, regional growth has been burdened by low educational attainment, particularly among women. Although illiteracy fell from 44.5% to 34.7% between 2004 and 2014, women remained nearly twice as likely as men – 45.3% against 23.7% – to be illiterate in Fez-Meknes, increasing pressure to improve schooling access as part of a balanced development strategy.

Development Plan

The Regional Development Programme (Programme de Développement Régional, PDR) for Fez-Meknes was launched by the publication of dahir (royal decree) No. 2.16.299 of June 29, 2016. It functions as the reference document for the organisation of projects to promote integrated, inclusive and sustainable development in the region. Its first phase, undertaken by the Regional Council of Fez-Meknes (Conseil Régional Fez-Meknes, CRFM) in partnership with KPMG, produced an analysis of prevailing challenges to economic growth, as well a responsive strategic vision. In December 2017 the CRFM followed up by approving a provisional budget of Dh33.2bn (€3bn) to fund 197 projects over the course of a fiveyear period, concentrated in measures to improve the region’s competitiveness and increase its appeal to private investors both domestically and abroad.

The PDR and CRFM have identified several key challenges to securing the region’s development. Mohand Laenser, the CRFM’s current president and a former minister of the interior, emphasised the need to improve the connectivity of the region with other major economic centres. Although Fez-Meknes encompasses more than 18% of the national road network, more could be done to increase its links to other cities. In particular, road connections to the north and south could be strengthened by the construction of highways to the port complex at Tanger-Med and to Marrakech, respectively. The construction of a fast highway between Taourirt and Nador would improve the connection of Fez-Meknes to the port at West Nador, to which the region is already strategically linked by railway.

Furthermore, existing roads should be repaired, while new construction could open commercial access to some smaller villages and towns in the region, in a measure that could help to alleviate urban-rural inequality. Other projects to improve connectivity, such as a Meknes-Rabat rail via Khemisset, are currently being studied by the Ministry of Equipment and Transport.

Logistics

entral to improving intra- and inter-regional connectivity is the strengthening of logistics infrastructure in Fez-Meknes to facilitate the promotion of exports, particularly of the region’s agricultural and industrial products. The Moroccan Development Agency (Agence Marocaine de Développement, AMG) has launched a network of multi-flux logistics zones, wherein businesses will be able to share storage and distribution infrastructure to economise merchandise flows. Within Fez-Meknes the AMG has already promoted the 70-ha Kandar Sidi Khyar zone, which will serve agri-business and construction activities, and the 130-ha Agropolis zone, which is already partially operational in servicing agro-industrial processing in Meknes, as sites for such logistics investments.

Other objectives outlined in the PDR include reducing the social deficit (or the negative difference between the incomes and expenditures of public welfare programmes), narrowing territorial economic disparities, providing financial support for rural economic activities, and promoting development in mountainous and other precarious areas. The PDR also recommends addressing unemployment through the establishment of a regionwide business and employment observatory, which could function as an intermediary between jobseekers and employers be matching skills with business needs.

Within the scope of the PDR, Fez-Meknes was the first region to establish a coordinated sectoral development strategy. However, the region cannot mobilise the sum of its Dh33.2bn (€3bn) in project investments without private support, and Laenser has stressed an imperative to develop innovative formulas to contract with various private stakeholders, particularly through public-private partnerships (PPPs).

Investment

Morocco’s 12 regions differ vastly from one another in geographical, demographic and economic terms, and the investment priorities in each region vary accordingly. The Regional Investment Centre for Fez-Meknes (Centre Régional d’Investissement Fès-Meknès, CRIFM) was founded in 2002 to define the unique needs and aims of private investors in the region.

The CRIFM liaises between entrepreneurs and competent authorities, such as the Moroccan Office of Industrial Property, the National Social Security Fund, various municipal government offices, the Commercial Court and tax collectors, in order to gather the documents necessary to establish and own a business. The CRIFM provides further support to investors in the region as a one-stop shop for various business activities.

In 2016 the CRIFM registered Dh2.88bn (€259m) in regional investments that generated 5252 jobs. Registered investments grew to Dh6.7bn (€603m) – a 132% increase – in 2017 and created 9533 jobs. In the first half of 2018 spending reached Dh3.24bn (€291m) and spending was projected to create 8166 new positions over the course of the year.

Although investments have been allocated across a wide range of economic activities, recent investor interest has been concentrated in housing construction and tourism; projects in the latter sector were the target of roughly Dh661m (€59.4m) in the first six months of 2018. The largest tourism project is the Vichy Thermalia Spa in Moulay Yacoub province, valued at Dh225m (€20.2m), followed by a Dh70m (€6.3m) investment in the Château Roslane Boutique Hôtel & Spa, which is located in El Hajeb province.

After tourism, industrial projects received the third most investment in early 2018, when 28 projects were under development. The largest was a Dh250m (€22.5m) facility, complete with fruit and vegetable cold storage unit resources to package fresh produce, in the Agropolis, a 130-ha industrial zone in Meknes.

“Significant developments have occurred in tourism and agro-business. Thanks to new air connections, the region is becoming a tourist centre with a focus on the European middle- to low-cost segment,” Omar Elyazghi, the managing director of CDG Développement, a branch of the state-owned financial institution Caisse de Dépôt et de Gestion, told OBG. “We also see operators growing in agriculture, both upstream and downstream of the production process. Dedicated agro-industrial zones will soon be added to boost this trend.”

The CRIFM offers a variety of incentives and subsidies to stimulate inward investment, such as foreign direct investment grants and bank loans available in industrial zones like the Agropolis. The CRFM is working to develop supplementary appeals to investors, such as job creation premiums and tax breaks.

Public-Private Partnerships

PPPs offer a way for public entities to access the private sector’s financial resources, sector expertise and innovative technologies, leading to greater efficiency and improved quality in service delivery. With a view to leveraging its own spending, public entities in Fez-Meknes are increasingly looking to finance their projects and initiatives by way of PPPs. “The construction and operation of motorways could be entrusted to private companies, at least in the case of the Nador part of the motorway network linking Fez to Oujda,” Mahfoud Moussaid, CRIFM Meknes division head, told OBG. “The PPP model is also relevant to the project to connect the highways between Fez, Meknes, Tangier and Tetouan.”

Regional agriculture, which encompasses 1.6m ha of farmland, could similarly benefit from the private sector’s increased involvement. Indeed, farming already derives numerous benefits from applications of the PPP model, as the state allows both Moroccan and foreign investors to apply through tenders to acquire land from the public domain in the form of long-term leases.

Outlook

The pace of regionalisation in Morocco has picked up significantly in recent years. Public support for this trend, which is supposed to foster more inclusive socio-economic development, has encouraged local stakeholders to strategically structure projects to boost region-by-region competitiveness. Fez-Meknes, one of the country’s largest regions by population, output and consumption, has accordingly launched many projects to lift growth. The region has identified the shortcomings it must tackle, as well as its existing strengths and those economic sectors with the most potential to add value to local economic activity. The region must address urban unemployment, rural poverty, illiteracy among women and economic precarity. It already has the resources to foster job creation, lift wages and build wealth, including fertile land, a rich cultural heritage and cities equipped with extensive industrial capacities. Phase two of the PDR has responded directly to a variety of achievable growth opportunities, especially in agri-business and tourism, and its implementation should improve the region’s competitiveness and stimulate value-adding investments in the local economy