Labour productivity has been increasing and FDI flows have been strong, but domestic private investment is low, and Moroccan firms face obstacles in performing better.
Morocco’s labour productivity gap with the global efficiency frontier remains large, although it has narrowed. Multinationals in a few sectors drive manufacturing productivity, but linkages with the local economy could be strengthened. Local value-added remains focused on less sophisticated activities. Moroccan firms are internationally competitive in a decreasing number of products and export less high-tech, though more medium-high-tech goods than in the past. Widespread informality and small firm sizes set back productivity growth.
Investment by the public sector and state-owned enterprises (SOEs) has been strong, and the new Charte de l’Investissement aims to raise private investment through subsidies and measures to improve business conditions. While infrastructure is relatively good, capital formation has been dominated by the public sector and investment efficiency has been low. Public sector investment should be better targeted and managed. New incentives and supporting measures, such as providing land and improving the business climate, aim to raise private investment. Ensuring that incentives are balanced between new and established sectors would help broaden the industrial base.
Efforts have been made to improve the business climate. The Competition Council has been strengthened. SOEs play a significant role in the economy and their governance could be further strengthened in line with on-going reforms to ensure a level playing field.
The anti-corruption framework has been strengthened, but more can be done. Firms report bribes adding to transaction costs in interactions with the public administration. Continuing efforts to tackle corruption and making further progress to move transactions online would reduce the scope for corruption.
Innovation activity and spending are low and the take-up of digital technologies by Moroccan firms and workers is slow. Ensuring continuing competitive internet access, greater consumer protection in e-commerce and targeted digital training for workers would help to make the most of new digital opportunities. Developing better support for innovation would help create new business opportunities.
Skills and educational outcomes should be reinforced to support a more productive economy. Basic literacy and numeracy skills have improved, but educational outcomes remain relatively weak and many young people still leave school at an early age. A major reform to the school system is underway to improve teaching. A workplace-based vocational and more market-oriented tertiary education would better prepare young people for the labour market and improve the match of supply to skills needs.
