This chapter starts with an overview of the socio-economic context and development trajectory of Morocco before summarising the main findings and recommendations of the Investment Policy Review.
OECD Investment Policy Reviews: Morocco 2024 (Abridged version)
OECD Investment Policy Reviews
Abstract
Morocco is one of the top investment destinations in the Middle East and North Africa (MENA) region. Building on major structural reforms undertaken at the turn of the century, it has since made far-reaching progress to diversify and modernise its economy and reform public institutions, leading to positive effects on living standards. Substantial improvements to the business climate and infrastructure, combined with macroeconomic and political stability, have propelled investment and growth in high-productivity sectors within global value chains (GVCs).
These benefits of investment have so far been largely concentrated in certain economic centres or zones and within certain sectors. Over the past ten years, economic growth has been subject to volatility, due in particular to various exogenous factors. For instance, the rate of growth of the Moroccan economy fell from an annual average of 4.6% over the period 2003-2012 to 2.5% over the period 2013-2022. There is room for the economy to create more jobs for a rapidly expanding Moroccan population, and it is still heavily dominated by the informal sector. Considerable inequalities persist between regions and between social and income groups. Businesses report difficulties with entrepreneurship and a lack of local skills (CSMD, 2021[1]). While overall investment is strong relative to GDP, and trends in foreign investment are positive, the public sector continues to drive investment-related growth. Increasing foreign and domestic private capital formation will be key to reaching higher and more sustainable levels of growth.
Recognising the limits of its development trajectory, Morocco has created a new reform momentum to support more sustainable and broad-based economic and social development (CSMD, 2021[2]). Many of these reforms stem from policy recommendations outlined in a comprehensive proposal for a New Development Model, prepared by a special commission in 2021 (CSMD, 2021[2]). The government considers boosting private investment key to advancing these goals. Private investment can help drive productivity growth, skills development, job creation, innovation, digital transformation, regional development and the green transition – all key development goals.
There is hence a renewed reform impetus to improve the investment climate. Over the past few years, the government has introduced a new Investment Charter, which establishes the various investment support mechanisms covering all project and stakeholder categories, defines the governance principles, and provides a framework for the reform projects designed to facilitate the act of investing in Morocco, aimed at streamlining administrative procedures. The Investment Charter also defines the principles of investment governance and the reforms needed to make it easier to invest in Morocco. To this end, the creation of a Ministry of Investment, Convergence and Evaluation of Public Policy (MICEPP) responsible for defining the country's investment policy is in line with the high royal instructions aimed at giving the policy strategic and cross-functional importance, by placing it at the heart of the country's economic recovery. The new Charter also endorses the recommendations of the New Development Model and the Government Programme, which make investment the driving force behind Morocco’s economic recovery.
The aim of this framework law is to breathe new life into Morocco's investment climate. As a framework law, the Charter's purpose is to maximise the impact of investment, particularly in terms of stable job creation, equitable regional development, prioritisation of growth sectors for the national economy, and sustainable development. It sets out the government's fundamental objectives, establishes the various investment support mechanisms, defines the principles of their governance and provides a framework for the reforms to be implemented in order to facilitate the act of investing. In order to provide investors with a transparent and intelligible framework MICEPP, in coordination with the public administrations concerned, is committed to speeding up the business climate projects set out in the 2023-2026 roadmap.
New measures have strengthened the role of the regions in promoting and facilitating investment, in particular through the Regional Investment Centres (CRI). The adoption of Act No. 22.24 amending and supplementing Act No. 47-18 reforming the Regional Investment Centres and creating unified regional investment commissions is an important step forward in this direction. The aim is to strengthen their strategic role as facilitators and catalysts for investment at the regional level. These reforms, along with others that are more recent or still in the pipeline, are concrete measures aimed at improving the business environment and the investment policy framework. They also send a strong signal to investors that Morocco is committed to reform, not only to maintain a stable and attractive investment environment, but also to maximise the impact of investment on sustainable development.
Structural constraints still impede the full implementation of these reforms, however. While there is a strong commitment from the most senior levels of government, translating this across public institutions at the national and sub-national (regional) level is less straightforward. For example, several connected priorities are at the heart of the government's action to improve the business climate, notably simplifying administrative procedures and processes, decentralising and devolving administrative decisions and investor support, and digitising and dematerialising public services. Realising this in practice will require substantial capacity building of public officials at all levels, and businesses will require guidance to adapt to these changes. To this end, successful implementation of Morocco’s project of advanced regionalisation – increasing power and responsibilities to regions as outlined in the 2011 Constitution – will be key to improving business procedures and attracting investment throughout the country, thereby supporting sustainable regional development.
More broadly, for investment to contribute positively to Morocco’s economic and social goals, the government will also have to advance concurrent reforms to enable domestic suppliers and workers to meet the demands of investors in more diverse, productive, and higher-skilled sectors. Morocco has witnessed the success of a coordinated strategy to boost competitiveness and exports in target sectors - most notably automobile and aeronautics manufacturing, as well as business services exports - albeit without sufficient linkages created with the local economy. As part of its new development trajectory, inspired by the New Development Model, the government aims to undertake ambitious reforms to improve skills, innovation, digitalisation, and competitiveness of the economy. Progress in these areas will be key to fostering linkages with investors, particularly foreign firms, which can in turn support positive spillovers.
The government has an opportunity to further strengthen its reform efforts to support a sound and transparent investment environment that advances sustainable and inclusive growth. this second OECD Investment Policy Review of Morocco identifies several areas for reform and provides policy recommendations for the government to consider (Box 1.1). The Review includes a special thematic focus on how investment can support two potential levers of development: regionalisation and digitalisation. After an overarching background of Morocco’s development path and summary of the main findings and recommendations (Chapter 1), the review analyses the trends and impacts of FDI on Morocco (Chapter 2), the legal framework for investment (Chapter 3), Morocco's approach to bilateral and regional investment agreements (Chapter 4), measures to promote and facilitate investment (Chapter 5), investment as a means of enhancing regional development (Chapiter 6), policies to promote and enable responsible business conduct (Chapter 7) and investment for the digital transformation (Chapter 8).
The Policy Framework for Investment (PFI) helps governments mobilise private investment in support of sustainable development, thereby contributing to the prosperity of countries and their citizens and to the fight against poverty. It offers a list of key questions to be examined by any government seeking to create a favourable investment climate. The PFI was first developed in 2006 by representatives of 60 OECD and non-OECD governments in association with business, labour, civil society and other international organisations and endorsed by OECD ministers. Designed by governments to support international investment policy dialogue, co-operation, and reform, it has been extensively used by over 30 countries as well as regional bodies to assess and reform the investment climate. The PFI was updated in 2015 to take into account this experience and changes in the global economic landscape.
The PFI is a flexible instrument that allows countries to evaluate their progress and to identify priorities for action in 12 policy areas: investment policy; investment promotion and facilitation; trade; competition; tax; corporate governance; promoting responsible business conduct; human resource development; infrastructure; financing investment; public governance; and investment in support of green growth. Three principles apply throughout the PFI: policy coherence, transparency in policy formulation and implementation, and regular evaluation of the impact of existing and proposed policies.
The added value of the PFI lies in bringing together the different policy elements and stressing the overarching issue of governance. The aim is not to break new ground in individual policy areas but to tie them together to ensure policy coherence. It does not provide ready-made reform agendas but rather helps to improve the effectiveness of any reforms that are ultimately undertaken. By encouraging a structured process for formulating and implementing policies at all levels of government, the PFI can be used in various ways and for various purposes by different stakeholders, including for self-evaluation and reform design by governments and for peer reviews in regional or multilateral discussions.
The PFI looks at the investment climate from a broad perspective. It is not just about increasing investment but about maximising the economic and social returns. Quality matters as much as quantity as far as investment is concerned. It also recognises that a good investment climate should be good for all firms – foreign and domestic, large and small. The objective of a good investment climate is also to improve the flexibility of the economy to respond to new opportunities as they arise – allowing productive firms to expand and uncompetitive ones (including state-owned enterprises) to close. The government needs to be agile: responsive to the needs of firms and other stakeholders through systematic public consultation and able to change course quickly when a given policy fails to meet its objectives. It should also create a department for reform within the government itself. Most importantly, it needs to ensure that the investment climate supports sustainable and inclusive development.
The PFI was created in response to this complexity, fostering a flexible, whole-of-government approach which recognises that investment climate improvements require not just policy reform but also changes in the way governments go about their business.
For more information on the PFI, see: https://www.oecd.org/en/publications/policy-framework-for-investment-2015-edition_9789264208667-en.html.
1.2.1. Structural reforms have driven major economic and social improvements
Driven by a strong commitment to reform, Morocco has made impressive economic and social progress over the past three decades. Structural reforms since the 1990s to open the economy and promote macroeconomic and political stability, along with strong public investment in infrastructure and improvements to the business climate, helped stabilise previously volatile economic growth. GDP growth averaged just under 5% in the first decade of the new millennium, above regional peers (MENA regional growth averaged 4.4%) (Figure 1.1) (World Bank, 2023[3]). Effective industrial policies starting in 2005 helped increase trade, with notable successes in integrating key sectors into global value chains. Likewise, standards of living have improved steadily. Real GDP per capita (PPP) has doubled since 1990 and increased by almost 50% over the past 20 years (Figure 1.1). Most households now have access to basic infrastructure (electricity and water), as well as the Internet (Chapter 8). Poverty rates are one-third of their levels in 2000, and access to education and healthcare have increased considerably (World Bank, 2023[3]). Since 2021, Morocco has also embarked on a major reform programme aimed at extending social protection to the entire population.
Underscoring these achievements are notable reforms to strengthen public governance, which are key to a sound investment climate and to advance sustainable development. The 2011 Constitution enshrined principles of inclusive governance, rule of law and participatory democracy, including through advanced regionalisation to devolve powers to the regions. The government has advanced numerous reforms to implement these principles in practice and make government more effective and transparent. The measures taken have, for example, modernised public administration and improved its efficiency, including through changes to regulatory and budgetary frameworks, public management, and inter-governmental coordination mechanisms (OECD, 2023[4]).
Note: GDP per capita, PPP constant 2017 international $
Source: (World Bank, 2023[3]), (OECD, 2023[5]) for 2023 & 2024 growth projections.
Several of these reforms merit further mention for their contribution to economic growth. Improvements to the business climate were a major priority and have made Morocco more attractive to foreign investors. In 2009, the creation of the Comité National de l’Environnement des Affaires (CNEA) strengthened coordination of initiatives across ministries and public-private dialogue, with a steering body reporting directly to the Chief Executive. Advancements are reflected in Morocco’s ranking in international indices. Before the World Bank discontinued its Doing Business report (in 2020), Morocco ranked 53 out of 190 economies, 75 places above its position in 2010. One notable reform involved making business registration more efficient and less costly. In 2020, it took nine days to register a business, far below the MENA regional average of 20 days (World Bank, 2020[6]). At the end of March 2023, the government adopted a decree setting out the conditions and procedures for setting up and supporting businesses electronically, which, according to authorities, will reduce the time required to register a business to 3-6 days. Over the past few years, Morocco has taken continuous steps to streamline and digitise administrative procedures. (Chapter 5). These and other reforms have helped attract foreign firms, with foreign investment stock rising by 113% between 2000 and 2010 (Chapter 2). These investments reached record levels in 2024. At the end of May 2024, FDI receipts stood at 16.2 billion dirhams, up 20% compared to 2023, representing the second highest amount of FDI for the first five months of a year in the Kingdom's economic history.
Strong public investment in infrastructure has also contributed positively to the business climate and has helped to position Morocco as a regional logistics and export hub between Europe and Africa. The quality of air transport, roads and ports in the economic centres ranks comparably to advanced countries and is significantly higher than regional peers (World Economic Forum, 2019[7]). Following an expansion in 2019, the Tanger-Med industrial hub became the largest commercial shipping port in Africa and the Mediterranean (US Department of State, 2023[8]). In 2023, it was ranked 19th in the world in terms of activity and the 4th most efficient port globally according to the World Bank's Container Port Performance Index. Concurrently, investment in clean energy infrastructure has created new economic opportunities while advancing the country’s green transition. The Noor Ouarzazate Solar Complex is the largest concentrated solar power plant in the world.
One of Morocco’s key economic advancements has been the success of its industrial policy aimed at diversifying exports to higher value-added activities. The Industrial Emergence Plan (2005-2013), reviewed in 2009 to introduce new approaches, and the Industrial Acceleration Plan (2014-2020), launched in 2014 to define new strategic choices, set targeted strategies to develop key export sectors, notably automobiles, aeronautics, electronics, textiles and agrobusiness manufacturing, as well as offshore services. This involved substantial public investment in infrastructure and connectivity, the creation of special economic zones (including those developed and managed by Tanger Med), fiscal and financial incentive packages, and skills training programmes. With 12 free trade agreements, Morocco offers market access to some 100 countries worldwide, representing almost 2.5 billion consumers. Morocco has concluded trade agreements with the European Union, the United States, Türkiye, the United Kingdom, the European Free Trade Association, the African Continental Free Trade Area, the Greater Arab Free Trade Area, the Agadir Agreement (Egypt, Jordan, Tunisia) and the United Arab Emirates. These policies have driven strong investment and export growth. Greenfield FDI in the automotive sector more than doubled between 2013 and 2022 compared to the decade prior and tripled in electronics manufacturing (fDi Markets, 2023[9]). By 2013, automobiles had become Morocco’s leading export sector, accounting for more than a quarter of total exports (Office des Changes, 2022[10]) and by 2018, Morocco had become Africa’s largest automobile manufacturer. Automotive manufacturing also helped create more than a quarter of all jobs in the industrial sector (between 2014-2018) (DEPF, 2020[11]).
Growth in more technologically advanced sectors has helped boost labour productivity in manufacturing. In 2019, output per industrial worker was nearly double the national average and more than three times agricultural worker output (Lopez-Acevedo et al., 2021[12]). Productivity growth within manufacturing, and between manufacturing sub-sectors, has driven much of total productivity growth since the early 2000s (OECD, 2018[13]). Sectoral strategies have also increased net services exports. Tourism, which has long been the main services export, continued to grow during this period, as did higher value-added businesses services including IT, knowledge and business processing outsourcing (ibid.).
These developments, alongside fiscal and monetary reforms, improved macroeconomic stability before the Covid-19 crisis (see below). In 2019, the current account deficit was down to 3.4% of GDP (from 9.5% in 2012), due in part to the successes of industrial plans in diversifying exports. Official reserves increased by more than 50% from 2012 to 2019, improving Morocco’s external position. The removal of most fuel and food subsidies and reforms to reduce the overall public wage bill helped reduce the fiscal deficit to 3.8% in 2019 (from 6.6% in 2012). Other more structural reforms, including fiscal decentralisation in 2015, slightly reduced and stabilised government debt at around 60% of GDP. Monetary policy also helped keep inflation low and stable (at 1% in 2019) (Cardarelli and Koranchelian, 2023[14]).
1.2.2. But growth has lost momentum over the past decade
Despite these positive developments, growth and productivity gains have slowed since 2010. GDP growth averaged 2.5% in the past decade (2013-2022), compared to 4.6% in the ten years prior (Figure 1.1). This is partly due to significant external shocks: the recession that hit key trading partners in Europe after 2008, and more recently the global pandemic, which drastically cut demand and activity in key sectors in 2020, notably tourism. More frequent droughts have also had a sizable effect on overall output, due to the continued importance of the agricultural sector.
Decelerated growth also reflects the slow pace of structural transformation of the economy. The value added of agriculture has gradually declined, from between 12-18% of GDP in the 1980s and 1990s to around 10% by 2000, replaced primarily by gains in services (World Bank, 2023[3]; HCP, 2023[15]). But Morocco’s economic structure has not changed over the past two decades (Figure 1.2). Despite the sectoral gains outlined above, manufacturing still accounts for around 15% of GDP (the secondary sector including extractive industries and construction makes up around one-quarter of the economy). While this is similar to peers in MENA, by comparison, in Asian countries with strong industrial-led growth, manufacturing represents between 25-30% of GDP (Vietnam, Malaysia and Thailand). Over the past decade, the share of employment in services has grown modestly, reaching 43% in 2021, while the proportion of workers in agriculture has declined, though agriculture still accounts for 30-35% of total employment. Industrial employment (manufacturing and construction), on the other hand, has remained stable at around 20% (World Bank, 2023[3]).
Note: industrial employment includes employment in mining and quarrying, manufacturing, construction, and public utilities (electricity, gas, and water)
Source: (World Bank, 2023[3]).
Many developing and emerging economies have seen value added and employment in manufacturing stagnate or decline over the past decade, with the economy turning towards services. This trend (sometimes referred to as “premature deindustrialisation”) is due in part to global trade and technological change, which have put pressure on prices and the international competitiveness of the manufacturing sector, hindering structural transformation of the economy towards industry (Rodrik, 2015[16]). Manufacturing tends to be more export-oriented (rather than dependent on domestic consumption) and technologically advanced, with higher labour productivity and employment opportunities for low-skilled workers than most services (McMillan, Rodrik and Verduzco-Gallo, 2014[17]; Rodrik, 2013[18]). However, manufacturing-driven growth has challenges, including remaining competitive in the global economy, and reducing negative environmental impacts of heavy industry (Aiginger and Rodrik, 2020[19]; Dadush, 2015[20]). While Morocco has developed some higher value-added and tradable services (including in finance and the offshoring sector), services remain in large part low-skilled, with a high incidence of informal work (Lopez-Acevedo et al., 2021[12]). As the forthcoming "OECD Economic Surveys: Morocco 2024" report points out, this informality, coupled with the small size of Moroccan businesses, prevents them from performing better (OECD, 2024, forthcoming[21]).
The modest shift in labour and capital between sectors has limited wider productivity and economic growth. There have nevertheless been notable improvements within specific sectors, which have driven most of the economy’s productivity gains (OECD, 2018[13]). National figures also mask some notable economic developments at the regional level, as some regions have seen a shift in the economy towards more productive sectors. For example, in the Tanger-Tetouan-Al Hoceima region, manufacturing value added (% of GDP) increased by eight percentage points between 2012 and 2019 (HCP, 2023[15]). Manufacturing is the primary job creator in the region, accounting for 40% of employment in 2022 (Observatoire Marocain de la TPME, 2023[22]). Growth in high-value added service sectors including ICT and financial services has contributed to services-led growth in Rabat and Casablanca. Productivity growth in services increased by around 50% in Rabat between 2010 and 2018 due to the presence of these sectors and efficiency gains in the public sector (Lopez-Acevedo et al., 2021[12]). While these regions provide examples of growth models, they also highlight that economic development has been highly uneven across the country, with growth concentrated in key economic centres (see below).
The importance of the services sector in Morocco also illustrates that GDP growth, as measured by expenditure, has been largely driven by consumption. Reliance on domestic demand limits growth potential to the moderate size of the domestic market and makes growth more vulnerable to external shocks. The role of investment in growth has decreased since the global financial crisis in 2008 and, as outlined later in this chapter, has been dominated by public investment. Substantial scope exists to increase private investment to support new industries, jobs, exports, and ultimately more sustainable growth (Figure 1.3).
Note: 2008-2014 based on data BASE 2007; 2015-2022 based on data BASE 2014.
Source: HCP, updated from (OECD, 2018[13]).
1.2.3. The economy has not created enough jobs for a flourishing working-age population
These dynamics of growth have been unable to create enough quality jobs for the growing population. While the unemployment rate of 10% has remained stable over the past 20 years, and is similar to regional peers, the labour participation rate has noticeably declined (Figure 1.4). In 2022, it stood at 45%, indicating that more than half of the working age population was not in the labour force. While this is comparable to other MENA economies, it is much lower than peers outside of the region (the labour participation rate is 60% in OECD countries and 66% in Malaysia).
This low rate reflects in part the large informal sector, though social dynamics are also a significant factor. National female labour force participation is just 20%, down from 25% two decades ago and less than half the rate in other emerging economies (Figure 1.4). Among Moroccan youth (15-24-year-olds), just one quarter are active in the labour market, and another quarter are not in education, employment or training (NEET). Youth unemployment in cities is as high as 47% (HCP, 2023[23]).
The high inactivity rate reflects both demographic change and the limits of Morocco’s economic growth. Economic growth has been stronger in capital- rather than labour-intensive sectors. Some of these sectors have helped increase productivity, but not jobs (growth of higher-technology manufacturing over more labour-intensive textiles). Other industries, like construction and public works, have created few jobs relative to investment (OECD, 2018[13]). Overall, as outlined above, growth has not propelled a more dynamic private sector. On average, the Moroccan economy generated half as many jobs per year between 2010 and 2019 compared to the previous decade (72 thousand compared to 144 thousand) (Bank Al-Maghrib, 2022[24]). This is below the pace needed to keep up with the growth of the working age population (on average 89 thousand per year) (ibid).
The labour market is also not supplying enough quality jobs, particularly for low-educated workers. Around half of the active labour force does not have a diploma. Among low-educated workers, less than half have salaried employment, and 45% work in agriculture (HCP, 2023[25]; HCP, 2023[23]). While some regions have seen an increase in employment in high-productivity industrial and services jobs, most workers leaving agriculture have transitioned to low-skill, often informal, service jobs (Lopez-Acevedo et al., 2021[12]) including in commerce and real estate, both of which have low value added. The labour market has not yet created enough jobs with potential for skills upgrading or stable salaried employment for low-educated workers. Some estimates suggest that the informal sector accounts for as much as 80% of total employment and one-third of output (Cardarelli et al., 2022[26]; Roche Rodriguez et al., 2023[27]). Informal jobs lack social protection and job security (key components of quality work), while costing the government in tax revenue and productivity. However, the wide-spread introduction of mandatory health insurance has made it possible to offer basic compulsory medical cover, guaranteeing universal access to healthcare. On-the-job skills training is however infrequent, with just 1.4% of salaried employees reporting receiving training paid by their employer in the past year (HCP, 2023[25]).
As the forthcoming "OECD Economic Surveys: Morocco 2024" report points out, major reforms are underway to extend social insurance coverage and tackle informality in order to improve Morocco's labour market. The report also emphasises the need to step up efforts to strengthen the integration of women into the labour market (OECD, 2024, forthcoming[21]).
For high-educated workers, the private sector is also not supplying enough positions to meet demand. Around one-third of highly educated employees (baccalaureate and higher-education diplomas) work in the public sector (HCP, 2023[25]). Around 40% of unemployed workers hold an advanced degree. Though the labour force participation rate is higher among advanced degree holders than the national average, at 56%, this is lower than overall participation rates in other countries (Figure 1.4) (HCP, 2023[23]).
Note: Labor force participation rate, total (% of total population aged 15+), Labor force participation rate, female (% of female population aged 15+), both modelled ILO estimates.
Source: (World Bank, 2023[3]).
1.2.4. Persistent inequality undercuts growth prospects
Crucially, economic development has done little to address inequality across regions, and income and population groups. Economic activity is highly concentrated geographically. Four regions have accounted for nearly 70% of GDP growth (on average) over the past seven years (Casablanca-Settat, Tanger-Tetouan-Al Hoceima, Fes-Meknes, and Rabat-Sale-Kenitra) (HCP, 2023[28]). These regions also account for nearly 60% of the population (HCP, 2023[23]). The north of the country (particularly Casablanca and Tanger) receives the most foreign investment, particularly in those sectors with the highest value added (Chapter 6). As noted, some regions have developed competitive advantages in sectors with strong growth potential and higher firm performance, but many regions are falling behind. Two-thirds of regions have a nominal GDP per capita below the national average (CSMD, 2021[2]). This uneven development significantly hinders more widespread economic growth.
As with economic output, labour prospects vary significantly across Morocco. The top five regions (those above plus Marrakech-Safi, all of which have large urban centres) account for more than 70% of all employment (HCP, 2023[25]). Moreover, all net job creation between 2010-2019 has been in these five regions (where jobs grew by around 430 000, compared to a decline of 22,000 in the rest of the country) (Lopez-Acevedo et al., 2021[12]). Agriculture still accounts for two-thirds of rural employment (HCP, 2023[25]). This both reflects, and contributes to, lower income, skills, and educational attainment in rural regions (Figure 1.5). More than 70% of active workers in rural areas do not have a diploma, twice the rate among workers in urban areas. Just 4% of rural workers have an advanced degree (compared to 28% of urban workers), and, while there has been some improvement, the literacy rate among the rural adult population (15 years and older) is just 50%. Rural jobs also appear to be less stable, with less social protection; three-quarters of salaried employees in rural areas do not have an employment contract, compared to half of urban salaried employees. Less than one-quarter of rural employees have medical insurance linked to their employer (HCP, 2023[25]).
Source: (HCP, 2023[23]).
Reducing inequality between these areas is one of the government’s top priorities. Advanced regionalisation, set out in the 2011 Constitution, seeks to decentralise and devolve power to the regions to promote more tailored regional development. Despite significant reforms towards regionalisation, the process has been incomplete and faces several constraints (Chapter 6). As outlined in Chapter 5, improving regional governance, ensuring regions have sufficient financial resources, and promoting coherence and effective implementation of development plans are key to advancing regional development and reducing inequalities.
Economic growth over the past few decades has also not reduced inequalities across social and income groups and income inequality remains high. The Gini coefficient has averaged around 40 over the past two decades, above regional peers (Egypt 30, Tunisia 36, Jordan 34). Income and wealth distribution has also not changed and remains concentrated; the top 10% of the population holds around 50% of national income (pre-tax) and nearly two-thirds of net personal wealth. This is similar to peers in the region (though lower than wealth concentration in some other regions, including Latin America) (WID, 2023[29]).
Also reflecting low social mobility is continued inequality between social groups in terms of income, employment, job opportunities and skills development. The gap is particularly striking for women and young people. As noted above, female labour force participation is low, at around 19% in 2023. Among young females (15-24-year-olds), 37.3% are not in education, employment or training (NEET) despite improvements in education (HCP, 2023[25]). According to the government, women earn on average 11.2% less than men. This trend is even more prevalent in urban areas, where the average salary for men is 23% higher than the average salary for women among the working population aged 18-60. The female share of total labour income has improved slightly since 1990, but at just 14%, it is lower than peers in and outside the region (Figure 1.6) (WID, 2023[29]). Moreover, only a few women reach management levels, as evidenced by the small percentage of companies with female senior executives (5% compared to 7% in the MENA region and 17% in OECD countries) (Chapter 2).
Female share of labour income
Source: (WID, 2023[29]).
Reducing the gender gap would contribute significantly to economic growth and is one of the government's priorities. According to an IMF estimate of the impact of the government's planned structural reforms in various areas (including health, education, the product market and governance reforms), boosting female employment would generate around three-quarters of potential output gains in the long term (Balima, Bizimana and Dua, 2023[30]).
1.2.5. Recent shocks add to economic and social pressures
The Covid-19 pandemic and aftermath, along with other recent shocks including those linked to climate change, have added to the challenges to develop more inclusive economic growth. Morocco has responded resiliently to these pressures with sound policy measures, which have helped it to address the most immediate effects and begin an economic rebound. But boosting private investment will be key to supporting growth, addressing development objectives and maintaining macroeconomic stability.
The global pandemic had a severe effect on the Moroccan economy. Strict lockdown measures and a global reduction in demand led to an abrupt decline in domestic consumption, exports and imports. GDP contracted by 7.2% overall in 2020, the sharpest one-year decline in Morocco’s modern history. Key economic sectors including tourism, construction and agriculture were particularly affected. Agriculture also suffered from a drought, the third in as many years, highlighting its vulnerability to climate change. According to government surveys, nearly 40% of businesses laid off workers in 2020 and 2021, and one-quarter of business owners anticipated a severe risk of insolvency. In 2021, around 40% of businesses reported their activity was still down by half compared to pre-pandemic levels (HCP, 2021[31]; HCP, 2022[32]). A 2022 government study found that the crisis undid almost seven years of progress in reducing poverty and vulnerability (HCP, 2022[33]).
The government responded to the economic and social effects of the pandemic with a series of policy measures, including a regulatory framework for mandatory health insurance, substantial financial support to cover health care costs, wage subsidies, public guarantees for business loans granted specifically during the crisis, particularly to SMEs, and tax payment deferrals. This response, coupled with the wider global recovery in demand, helped drive an initial strong recovery in 2021, when GDP grew by nearly 8%. But many of the social and economic impacts will take longer to address. Bank Al-Maghrib, like other central banks, developed a multi-faceted response to the economic and social impact of the pandemic, activating monetary policy instruments, easing prudential requirements for banks and stepping up the digitalisation of banking services.
In the longer-term, more frequent and severe droughts underscore the importance of mitigation efforts to address the effects of climate change. The large role of the agricultural sector in the economy means droughts pose a significant risk to overall economic stability and national food security. Furthermore, Morocco is one of the most water-scarce countries in the world; estimates suggest that reduced water availability and crop yields due to climate change could reduce GDP by as much as 6.5% (World Bank, 2022[34]).
The economy faced new shocks in 2022 and 2023. Russia’s war of aggression against Ukraine – which led to a global rise in food and energy prices – and a new drought contributed to a slowdown in GDP to 1.5% and a sharp increase in inflation. In 2023, the growth rate of the Moroccan economy improved to a quarterly average of 3.4%.
Government spending nevertheless remains high. Collective spending measures since 2020 (including higher energy and wheat subsidies) have been key to addressing the effects of these different shocks, and Morocco’s stable macroeconomic position before 2020 gave it the policy space to respond effectively (Cardarelli and Koranchelian, 2023[14]). But high spending has put pressure on the fiscal deficit and government debt. In the wake of the series of crises in 2020 and 2021, the three major sovereign credit rating agencies (Moody’s, S&P and Fitch) downgraded Morocco to just below investment grade, reflecting global and domestic economic contractions, reduced external finances, and high government spending. In 2024, the agencies revised their outlook for Morocco from stable to positive, reflecting the resilience of the Moroccan economy. The improvement in the country's economic prospects was, according to the agencies, an exception in the region and on the continent this year. Maintaining macroeconomic stability is important to remain resilient to future shocks and support investor confidence. Similarly, private investment is vital to counteract public budgetary pressures.
1.3.1. A new reform agenda: moving from public to private investment-driven growth
The government recognises the challenges of achieving more widespread and inclusive economic growth, and has therefore given fresh impetus to reforms. A key focus of these policies and proposals is building a productive and diversified economy that creates quality jobs and reduces inequality. Many of these ambitions are outlined in the New Development Model (NMD), a comprehensive set of policy recommendations prepared by a special commission appointed by the King in 2019-2021. The NMD identifies the obstacles to social and economic development and proposes specific strategic goals for 2035. Many of these reforms are being considered or adopted by the government, across different policy areas. The NMD outlines four priority areas for reform and five levers for transformation to kick-start this new development process (Table 1.1).
The NMD places the dynamism of the private sector at the heart of this model, and considers investment – particularly private investment – as central to achieving economic transformation. It recommends creating more favourable conditions to increase private domestic and foreign investment and better allocating investment towards more productive sectors that can in turn support diversification and upscaling of industries, as well as job creation and skills development. Private investment will also be key to financing the NMD’s different policy objectives (CSMD, 2021[2]).
One of the government’s key goals (also outlined in the NMD) is to reverse the ratio of public to private investment. Overall investment as a share of GDP in Morocco has been strong, averaging just under 30% over the past decade (Figure 1.7). This is on a par with countries that experienced strong investment-driven growth, and, unlike regional peers, this rate has not declined with various economic shocks over the past two decades. But returns on this investment, in terms of economic growth, have been lower than peers in the region (Ali et al., 2023[35]).
Gross fixed capital formation as a % of GDP
Source: (World Bank, 2023[3]).
This is due in part to the outsized role of public investment, which comprises up to two-thirds of gross fixed capital formation (Figure 1.8). Public investment has helped develop key infrastructure, essential to improving the operating environment for businesses and Morocco’s attractiveness as an investment destination. Most of gross fixed capital formation over the past decade has been in construction and public projects, which means that Morocco now has a high-quality infrastructure. But public investment is less efficient at supporting growth of productive and innovative sectors, and overreliance on public funding can crowd out private investment. The public sector is also limited in the amount it can finance while maintaining macroeconomic stability, particularly considering recent shocks that have reduced fiscal policy space (ibid). Investment can potentially play a much stronger role in economic growth (Figure 1.3), but only through higher levels of private investment.
Note: This Figure compares the amount of public investment in annual budgets with total gross fixed capital formation. In the national accounts, there is no breakdown of GFCF between the private and public sectors. It should be noted that the non-financials sector also includes public institutions and enterprises. The Ministry of Economy and Finance has estimated the share of public investment using this method. Public investment includes confirmed investments by the state and state-owned enterprises in the social sector, infrastructure and production sectors.
Source: Public Investment: (Ministère de l'Économie et des Finances, 2023[36]); GFCF data both panels: HCP.
1.3.2. Foreign investment in particular can bring additional benefits
Private investment is key to more dynamic and sustainable economic growth. As an important complement to domestic investment, FDI may bring additional advantages in support of sustainable development objectives. Foreign firms are likely to bring direct benefits such as new technology, better gender practices and creation of quality jobs. They can also have indirect spillover effects on the economy, through value chains with domestic firms, market interactions, and mobility of workers between domestic and foreign-owned companies. This can facilitate knowledge spillovers, contribute to the development of human capital and the diffusion of cleaner technologies, and in turn raise productivity and living standards. These benefits do not always materialise, however, as policies and institutions play a critical role in realising the potential benefits of FDI and minimising negative effects and trade-offs (OECD, 2022[37]).
Due in part to the positive effect of reforms on improving the investment climate in Morocco, FDI inflows have steadily increased over the past two decades, making it one of the largest investment destinations in the MENA region (Chapter 2). Despite volatility of inflows during periods of global economic turbulence (notably in 2008 and 2020), the overall trend has remained positive (Figure 1.9). In 2018, FDI flows reached an all-time high of USD 3.6 billion, followed by a sharp fall in subsequent years to USD 1.4 billion in 2020 during the Covid-19 crisis. FDI flows then bounced back to USD 2.3 billion in 2022 but the FDI stock has grown far more slowly over the past ten years than in the previous decade (31% increase between 2011-2020, compared to 113% in the decade before) (ibid).
Note: the sector classification follows the official classification provided by the data source.
Source: Panel A: OECD elaboration based on UNCTAD (United Nations Conference on Trade and Development); Panel B: OECD elaboration based on Moroccan Foreign Exchange Office.
FDI has helped develop the private sector over the last few decades. OECD analysis (detailed in Chapter 2 and summarised below) finds that FDI in Morocco is positively associated with productivity, innovation, job creation and integration into GVCs. FDI is concentrated in sectors that are more productive and with greater employment potential. Foreign firms are on average more likely to engage in R&D and use more foreign technologies than domestic firms. They also have on average higher shares of permanent workers, suggesting that they offer more stable employment opportunities than domestic firms (Figure 1.10).
However, as with economic development more broadly, these benefits appear to be highly concentrated in key economic centres or zones and within certain sectors. For example, local firms have struggled to integrate into the automotive value chain. Most tier 1 and 2 equipment manufacturers are multinational firms, and local SMEs are often only employed as tier 3 or 4 subcontractors (Amachraa, 2023[38]). For investment to contribute positively to Morocco’s economic and social goals, the government will also have to advance concurrent reforms to enable domestic suppliers and workers to meet the demands of investors in more diverse, productive, and higher-skilled sectors. As the forthcoming "OECD Economic Surveys: Morocco 2024" report points out, the range of activities and the sophistication of exports need to be broadened (OECD, 2024, forthcoming[21]).
National and local governments have made concerted efforts to promote wider distribution of FDI across different regions to promote positive spillovers of investment beyond key economic centres. Between 2008 and 2017, two regions – Tanger-Tetouan-Al Hoceima (TTA) and Casablanca-Settat (CS) – captured 60-70% of all greenfield FDI (Chapter 6). Other regions (including Rabat-Sale-Kenitra) have attracted a growing share of greenfield projects in the past five years, but foreign investment remains concentrated in economic hubs. FDI impact also varies by region. Job creation from greenfield projects is 30% higher in TTA than CS, due to its concentration of labour-intensive industries (Chapter 6). In CS, higher concentration of technology-intensive service sectors means foreign firms in the region are more likely to use foreign technology and introduce new products or services than foreign firms in TTA (ibid). This highlights the importance of place-based strategies to attract investment and reap its benefits at the sub-national level, leveraging each region’s unique value proposition.
Are foreign firms more performant than domestic firms? Yes if score >0
Note: The figure shows indicators that measure the performance of foreign firms compared to domestic firms for a given outcome and the respective 95% confidence interval. See (OECD, 2019[39]) for a description of the methodology. Data for Egypt and Tunisia refer to 2020. Data for Morocco, Jordan, Portugal and Czech Republic refer to 2019.
Source: OECD elaboration based on World Bank Enterprise Surveys.
1.3.3. Renewed impetus to improve the investment and business climate
Recognising the importance of increasing private investment and the potential positive spillovers of investment on development aims, the government has advanced a series of legal and institutional changes to the investment policy framework, in line with the priorities outlined in the NMD. These include a new Ministry for Investment, Convergence and Evaluation of Public Policies (MICEPP),which reports to the Head of Government; and continued reforms to strengthen Regional Investment Centres (CRI). Guiding the reforms is a new Investment Charter. The framework law, adopted in 2022, seeks to establish a transparent and structured framework for investors, outlining new investment support mechanisms, action plans to improve the business climate, and efforts to promote both unified and regionalised investment governance. Strategic objectives include reaching EUR 50 billion in private investment by 2026 and creating 500 000 jobs (AMDIE, 2023[40]).
The Charter is in line with the implementation of the high royal instructions of the King and endorses the recommendations of the New Development Model and the Government Programme, which make investment the driving force behind Morocco’s economic recovery. It sets out the State's fundamental objectives, establishes the various investment support mechanisms, defines the principles of their governance and provides a framework for the reforms to be implemented to facilitate investment. The aim of Charter is to breathe new life into Morocco's investment climate and to increase the impact of investment, particularly by creating jobs, supporting equitable development across regions, encouraging investment in sectors with high growth potential, and promoting sustainable development more broadly. It does so primarily through a new package of financial incentives available to firms that advance these aims. More generous incentives are available in less developed regions. According to the authorities, since the implementation of the new Charter, five National Investment Commission meetings have been held, during which 115 investment projects have been approved for a total of 173 billion dirhams, enabling the projected creation of 96 000 direct and indirect jobs. The majority of these investments involve Moroccan capital.
The Charter also outlines reforms to improve the business climate, including streamlining procedures and decentralising administrative functions. Several connected priorities are at the heart of the government's action to improve the business climate: simplifying administrative procedures and processes, decentralising and transferring administrative decisions and investor support to regions, improving the mobilisation and visibility of real estate earmarked for productive investment, improving logistics competitiveness and regional coordination mechanisms to improve the business climate, and digitising and dematerialising public services. These goals fit into the broader objectives of digital development and administrative reform, both of which are among the five levers of change of the NMD (Table 1.1) (CSMD, 2021[2]).
The objectives designed to improve the business climate, a strategic lever for stimulating investment and entrepreneurship, have been broken down into specific projects and measures. These are presented in a multi-year roadmap for 2023-2026 drawn up in close collaboration with all corporate partners and stakeholders (public sector, private sector, banking sector, regions). This roadmap incorporated the recommendations of the NMD, the Government Programme, the new Investment Charter and the measures arising from the ongoing public-private dialogue and the from the regions.
The government’s commitment to reform is clear, but significant gaps remain in achieving these goals. Improving the quality of public services and easing of procedures for investors, including through digitalisation, will require more time and investment. Two other aspects are also essential: substantial capacity building of public officials at all levels and a need to accompany businesses in these changes. Important broader challenges remain to the investment climate, including corruption, taxation and informality. The government is on a positive reform trajectory. This Review highlights the important progress made and makes suggestions for areas of further reform, while stressing the importance of successful implementation of recent initiatives.
Based on an updated version of the Policy Framework for Investment, this second OECD Investment Policy Review of Morocco identifies several potential areas for reform to build a sound and transparent investment environment to support more sustainable and inclusive economic growth. The following section summarises the findings and assessments from each of the subsequent policy chapters of this Review. The numerous policy options mix concrete measures that can be implemented relatively quickly and more aspirational recommendations, which will require more fundamental changes in the way the government does business. Some measures can only be implemented in the long term, while the government is already considering others. The aim is to provide a list of policy options for the government to consider as it continues to advance reforms to its investment climate.
1.4.1. FDI trends and impacts in Morocco
Morocco has attracted increasing levels of FDI over the past few decades, on the back of major structural economic reforms and strong economic performance, as well as a strategic geographical location that has made it the gateway to the African market, particularly for European investors. In 2018, FDI flows reached a record level of USD 3.6 billion, followed by a sharp fall in subsequent years to USD 1.4 billion in 2020 during the Covid-19 crisis before recovering to USD 2.3 billion in 2022. FDI has also become increasingly important to the Moroccan economy over time, as shown by the growing proportion of FDI stock in the country's GDP.
The FDI stock is heavily focused on services, particularly telecommunications, finance and tourism, all sectors that have managed to attract increasing FDI flows after major privatisation and liberalisation programmes. In manufacturing, the automotive, aerospace and textile industries account for a significant proportion of FDI stock. The construction sector is another important destination, as reflected in major foreign investment projects for the development of urban health, tourism and industrial facilities. Greenfield FDI projects predominate in manufacturing, particularly motor vehicles, non-metallic mineral products, metals and electronics. A significant proportion of greenfield FDI is also directed towards mining and energy, with 40% going into renewable energy projects (solar, wind and hydro).
European firms are the main investors in Morocco, accounting for almost 55% of the total FDI stock in 2022. Companies from the MENA region represented 25% of investors in 2022 (27% in 2021). France is the leading foreign investor in Morocco, traditionally in the automotive, aerospace and rail industries, and more recently in renewable energy. The United Arab Emirates and Spain follow in second and third place respectively, particularly in construction, tourism and automotive sectors. Other European countries, such as Switzerland, the United Kingdom and Belgium, are also starting to become significant investors in Morocco. The United States invested heavily in Morocco in the 2010s, particularly in the automotive, aerospace and agri-food sectors. In recent years, despite the predominance of French investment, Morocco has seen some diversification in the investment base, with more and more investors coming from Asia, other Middle Eastern countries and other European countries.
The first Investment Policy Review of Morocco, conducted in 2010, noted the important role that FDI has played in the country's economic development, with positive spillovers on employment, productivity, labour skills and the internationalisation of the economy. This second Review coincides with the emergence of new challenges for Morocco, including the need to build a more inclusive and sustainable economy. Together with domestic investment, FDI can play a major role in achieving some of Morocco's pressing sustainable development goals, such as creating more and better jobs, reducing social and regional inequalities and disparities, and ensuring the environmental sustainability of the economy.
By stimulating productivity, innovation, job creation and integration into GVCs, FDI has strongly boosted the development of the Moroccan private sector over the last few decades. FDI is concentrated in the services and manufacturing sectors, which are more productive and contribute significantly to cumulative value added and employment. These sectors also create more jobs, with greenfield FDI in Morocco generating almost four jobs per million US dollars invested, more than the average for OECD and MENA countries.
On average, foreign firms are more productive, more likely to engage in R&D and use more foreign technologies than domestic firms.1 Because they are more focused on trade, with a higher proportion of their sales coming from exports and a greater share of their inputs being imported, foreign firms are becoming major players in Morocco's integration into the GVCs through their role as important access points to international markets.
FDI also makes a positive contribution to Morocco's major social and environmental objectives. While there are no significant differences between Moroccan and foreign firms in terms of wages and the proportion of skilled workers, foreign firms have higher shares of permanent workers on average, suggesting that they offer more stable employment opportunities. Foreign firms were also more resilient to the Covid-19 crisis and recovered more quickly than domestic firms.
Foreign firms perform no better than domestic firms when it comes to gender equality, with no significant difference in terms of female employment and senior management positions held by women. That said, female participation in ownership is higher in foreign companies. FDI seems to be encouraging the decarbonisation of the Moroccan economy. It is widespread in less polluting sectors, and the proportion devoted to renewable energies (9%) is higher than the average in the MENA region (5%) and close to the OECD average (9.6%). Furthermore, foreign firms are more energy-efficient than their domestic counterparts, which suggests that they have an important role to play in the diffusion of cleaner technologies.
Although FDI is diversified across sectors, it is nevertheless extremely concentrated in terms of source countries, with France, the United Arab Emirates and Spain alone accounting for 57% of total stock in 2022. This dependence on a small group of investors makes Morocco more vulnerable to the economic and political situations in these countries. To reduce the country's exposure to external shocks, it is important to attract FDI from other countries, particularly in the MENA region.
Foreign firms operating in Morocco outperform domestic firms in terms of innovation and trade but their contribution in terms of productivity and wages is moderate. Capacity building by Moroccan firms can help them build stronger value chain linkages (e.g. supplier relations) with foreign firms and benefit from their presence. Developing local capacities requires initiatives in a number of areas, such as skills, innovation and the local business environment. Better company-level data would make it possible to more effectively measure the impact of FDI on productivity and other factors, and to formulate recommendations more specific to the Moroccan case.
Foreign firms could do more to help reduce gender disparities. The influence of factors specific to the host country and the source countries requires further examination, but measures to remove barriers to women's participation can help women take advantage of the (more stable) employment opportunities offered by foreign companies, especially in service sectors likely to employ large numbers of women. These measures could take the form of a gender-sensitive regulatory and legal framework, programmes to help women acquire the skills sought by foreign companies, and social services (e.g. childcare). In order to consolidate the place of Moroccan women in the economic fabric, the new Investment Charter provides for a gender ratio bonus.
FDI is concentrated in less polluting sectors, with a large proportion allocated to renewable energies. At the same time, the greater energy sobriety of foreign companies is indicative of the potential for improving the environmental performance of Moroccan companies, by encouraging the dissemination and adoption of cleaner technologies introduced by foreign firms for example.
1.4.2. The legal framework for investment
An effective investment policy is built on solid institutions and good public governance. Good regulation, transparency, openness and integrity are the prerequisites for a successful investment policy. The way in which the investment policy is developed and modified has an impact on investment decisions (OECD, 2015[41]). Accordingly, studying the different components of the investment policy, in particular with regards to openness, the quality of the regulations in place and the mechanisms for enforcing contracts and settling disputes, is therefore key to assessing the investment-friendly environment.
In Morocco, the gradual liberalisation of the economy during the 1990s and its subsequent opening up to FDI has generated considerable opportunities, making the country one of the main investment destinations in the Middle East and North Africa region (OECD, 2021[42]). With the aim of further encouraging private sector growth and promoting investment, Morocco introduced its first major investment legislation in 1995 (the 1995 Investment Charter), which remained in force until it was replaced in 2022 by the enactment of Framework Law No. 03-22 forming the Investment Charter. In addition, following the ministerial restructuring of October 2021, a new ministry for Investment, Convergence and Evaluation of Public Policies (MICEPP) was created.
The country's new Investment Charter recognises the principle of non-discrimination in investment, guaranteeing equal treatment for investors, irrespective of nationality. It applies to foreign and domestic investments in all economic sectors, with the exception of the agricultural sector, which remains subject to specific regulations. The Charter guarantees the right to the free conversion and repatriation of invested capital and profits once tax obligations have been met, as well as the protection of intellectual property rights. It also mentions the inclusion in investment agreements of clauses relating to legal or arbitration proceedings, as well as out-of-court settlements.
In addition to the new Investment Charter, the legal corpus governing investment in Morocco includes laws relating to business law. The sustained pace of reform has contributed significantly to making Morocco an attractive and secure destination for foreign investment and these laws provide investors with a modern framework that is conducive to investment. Certain specific laws, in particular those relating to expropriation and land tenure, could be updated to modernise the existing legal systems.
The Moroccan judicial system also has a fundamental role to play in strengthening Morocco's competitiveness and economic growth, and its proper functioning is essential in creating the conditions for a healthy and competitive business climate. Morocco's judicial system includes specialised commercial courts to deal with economic and commercial disputes. In recent years, Morocco has introduced a number of initiatives to improve access to justice, particularly to the judicial system. At the same time, Morocco is gradually providing investors with alternative dispute resolution mechanisms to settle commercial and investment disputes, notably by devoting a separate law to arbitration and conventional mediation, and by setting up institutions such as the Kingdom's Mediator. In this respect, Morocco is encouraged to follow the recommendation set out in the NMD concerning the creation of a business advocate (défenseur de l’entreprise), which would not only make it easier to detect disputes upstream, but would also help prevent potential disputes and relieve the pressure on the legal system.
Assess the costs and benefits of maintaining restrictions on foreign investment in certain sectors that do not affect national defence and security and that remain partially inaccessible to foreign investors, such as some service sectors. Indeed, restrictions on FDI in service sectors are likely to inhibit potential economy-wide productivity gains, as reduced competition in these sectors would be likely to indirectly affect downstream activities.
Continue to assess and update priorities for the regulatory framework. The legal regime governing investment, in particular the Investment Charter and Moroccan business law, provide investors with a modern framework that is conducive to investment. In the interests of clarity and predictability, and in order to avoid a legal vacuum, implementing decrees could be issued more quickly after the enactment of the Investment Charter. To improve the transparency and predictability of the legal framework for investment, Morocco could strengthen the process of public consultation and engagement with stakeholders when drafting new laws, in order to further increase investor confidence in the country's legal and regulatory environment.
Assess the possibilities for improving protection against expropriation. The law governing expropriation sometimes lacks clarity and is therefore likely to confuse investors. Reforming the law on expropriation would make it possible to further clarify the expropriation process and bring the level of protection against expropriation in line with international standards (in particular by including protection against indirect expropriation). Simplifying the expropriation process (as well as the compensation process) could also make it more accessible to investors, who continue to report problems with the complexity of the procedure, leading to delays in obtaining the due compensation.
Consider updating and modernising the existing land tenure system. The complexity of Morocco's legislative structure and its dual judicial system can be an obstacle to the clarity, transparency and efficiency of the land tenure system. This risks creating overlaps or gaps in legislation, making it harder for investors to understand, and more difficult to apply. New laws, or even their consolidation into a single law, could clarify existing categories of land rights and reduce conflicts between customary and formal law. With the aim of further harmonising the land tenure system, Morocco should also continue to encourage and promote the need for land registration, which ensures an individual, definitive and indefeasible title to land. In order to remedy property speculation and rising property prices, particularly in the industrial sector, Morocco could also consider introducing long-term leases.
Continue to strengthen the intellectual property (IP) rights regime. Morocco's legal regime governing IP rights is solid and comprehensive. Nevertheless, certain shortcomings remain, particularly in terms of law enforcement and user protection. The regime can be made more effective by ensuring that existing regulations are enforced, by facilitating access to legal action and redress for rights holders and, above all, by increasing the number of staff dedicated to combating infringements in this area. The government is well aware of these concerns and is developing initiatives to address them. Improving investor confidence in the enforcement of intellectual property rights in the country is a prerequisite for attracting new investment in R&D, new technologies, and innovation.
Continue judicial map reviews on a regular basis, in order to guarantee access to justice throughout Morocco and improve the efficiency and speed of the justice system.
Increase the number of judges, particularly at the Court of Cassation (Supreme Appeal Court), and review the conditions for appeal in order to reduce the caseload at the highest court.
Consider a reform of the prerequisites for access to national courts, in particular the introduction of compulsory recourse to judicial mediation under certain conditions, to reduce bottlenecks in the legal system.
Assess the possibility of making exequatur and the procedure for recognising international decisions unilateral, to make the enforcement of international arbitration sentences more effective.
Create a Business Advocate. Implementing the recommendation in the NMD concerning the creation of a business advocate (défenseur de l’entreprise) would not only make it easier to detect disputes upstream, but would also help to prevent potential disputes and relieve the pressure on the judicial system.
1.4.3. Morocco's approach to bilateral investment treaties
International investment law, in particular bilateral and regional investment treaties, is an integral part of the investment climate, complementing the national legal framework for investment and providing an additional level of security for foreign investors (OECD, 2015[43]).
Like many countries around the world and in the region, Morocco has entered into a large number of international investment agreements (IIAs) designed to provide foreign investors with additional, autonomous protection specific to their investment, in addition to the guarantees afforded by the national legal framework governing investment. These treaties, most often in the form of bilateral investment treaties (BITs) or regional investment agreements, are an essential component of the legal framework governing FDI, and play a decisive role in promoting a regulatory environment conducive to investment.
In order to benefit from the procedural and substantive protections provided by an IIA, investors must satisfy a series of specific conditions. For example, the concepts of “foreign investor” and “investment” as stipulated in an IIA can limit its scope of application, particularly with regard to the nationality of the investor and the nature of the investment.
In terms of substantive protections, IIAs generally protect foreign investors against expropriation and discriminatory treatment (via the principles of national treatment and most-favoured-nation treatment), and guarantee investors fair and equitable treatment. These protections add to the guarantees afforded by the national laws of the host country. In terms of procedural safeguards, IIAs frequently provide investors with a dispute resolution mechanism to guarantee their rights against any breach by the host state of its obligations under the agreement.
One of the traditional reasons for governments to sign investment treaties is to attract foreign investment. This approach is now being challenged by a growing body of empirical literature on the real factors driving FDI flows and the proliferation of IIAs (OECD, n.d.[44]) (UNCTAD, 2023[45]).
It is worth taking a closer look at Morocco's investment treaty policy. This review, in particular the examination of this policy, shows that like many countries, Morocco has concluded a significant number of investment treaties, and has a large number of so-called “first generation” treaties, which include vague protections that can have adverse consequences for Morocco. Indeed, when dealing with these first-generation treaties, the arbitrators responsible for settling investment disputes have considerable scope for interpreting these protections, often resulting in divergent or inconsistent readings that are damaging for the host state.
Presumably mindful of these considerations, Morocco's recent BITs reflect good practice in this area, and, more importantly, the BIT model introduced by Morocco in 2019 fully incorporates these considerations in order to limit potential risks. That said, first-generation BITs remain in force in the Moroccan contractual sphere and so limit the extent of Morocco's efforts.
Examine possibilities for renegotiating, clarifying and exiting investment treaties. Given the risks of "treaty shopping", Morocco should review its treaty network holistically. Indeed, despite Morocco's considerable efforts in respect of investment treaties, and the introduction of a new BIT model in line with the latest best practices, treaties concluded by Morocco containing vague and unqualified provisions may give rise to undesirable interpretations in the context of Investor-State Dispute Settlements (ISDS).
Morocco could consider updating these treaties, in particular to align them with government strategy, Morocco's current priorities and more recent investment treaty policy practice.
Morocco should also seek to minimise inconsistencies between international obligations entered into with different countries and explore the possibility of harmonising regional investment treaty policies through existing regional frameworks.
In many cases, these objectives can be achieved by amendments or joint interpretations agreed with the treaty partners. Terminating or replacing old investment treaties by common consent or unilateral action may be an appropriate last resort to manage exposure and safeguard the government's right to regulate in the public interest.
Engage in international efforts to balance treaty-based investor protection and associated governance mechanisms. Morocco should actively engage with current international efforts to strike a balance between investor protection and the right to regulate. Clearer specification of key provisions in first generation BITs would likely help reflect government intent and ensure greater scope for government regulation.
Continue to engage in multilateral fora on shareholder reflective loss claims. Morocco should continue to participate in multilateral fora such as the OECD,(in particular in the programme of work on the Future of Investment Treaties, the first part of which relates to the alignment of investment treaties with the 2015 Paris Agreement and net zero, with the second part linked to the study of the transition of the specific substantive provisions of the old generation treaties towards the current models. Morocco should also continue to engage with UNCITRAL (Working Group III on Investor-State Dispute Settlement Reform), especially with a view to contributing to the discussions on the approach adopted in ISDS on the subject of shareholder reflective loss claims, insofar as only a government-led reform is likely to resolve the existing divergences in this area.
Proactively manage risks arising from existing investment treaties. The Ministry of Economy and Finance, which is responsible for designing, drafting and negotiating international investment treaties, as well as defending Morocco in international investment disputes, the Moroccan Investment and Export Development Agency (AMDIE), the Ministry of Justice and the Ministry of Foreign Affairs, should continue to develop dispute prevention and case management tools for ISDS. The Ministry of Economy and Finance, in collaboration with the relevant departments, could also consider efforts to raise awareness of Morocco's investment treaties and the importance of Morocco's international obligations under its investment treaties in the day-to-day operations of the various government agencies and officials who regularly interact with foreign investors.
1.4.4. Promoting and facilitating investment in Morocco
Policies to promote and facilitate investment can contribute to the host country's competitiveness through targeted measures to attract investors, and services to facilitate their installation or growth. Such initiatives are fundamental to foster an attractive investment climate and leverage the contribution of multinational enterprises to national development objectives. They are particularly important in terms of addressing the shocks caused by Covid-19, as a result of which the economic contraction and decline in FDI in 2020, as well as the pressure on public budgets, are not without consequence on the policies and institutions responsible for promoting and facilitating investment in Morocco. It is important, however, that these promotion and facilitation efforts complement - and do not replace - measures to ensure a sound investment policy framework, such as those discussed in the various chapters of this Review (OECD, 2015[46]).
Morocco has high ambitions to make its economy more attractive and competitive, and "strengthening the capacity to attract FDI" is one of the objectives of the NMD (Royaume du Maroc, 2021[47]). While the contribution of private investment to achieving sustainable development objectives is essential in the recovery from the Covid-19 crisis, the tools for promoting and facilitating investment must be relevant for and adapted to achieving the goals of the NMD.
After the 2021 legislative elections, the Moroccan authorities reviewed their institutional framework for promoting and facilitating investment in order to give it fresh impetus. The MICEPP was created in accordance with the high royal instructions of the King, which aim to give investment policy a strategic and horizontal importance. As part of this drive, and under the aegis of this new ministry, Framework Law No. 03-22 forming the Investment Charter was enacted at the end of 2022 and a new business climate roadmap was unveiled in 2023 with the aim of boosting and promoting international and domestic private investment in Morocco. At an operational level, AMDIE, under the supervision of the new ministry, is at the centre of the strategic framework for investment promotion at the national level. It is supported by the initiatives of the CRIs at sub-national level, which, since May 2023, report to the Head of Government, who has delegated some of his responsibilities to the MICEPP. With this new both unified and regionalised investment governance, Morocco intends to make its investment policy more coordinated and coherent, and to strengthen convergence and synergies in terms of investment at central and regional level.
AMDIE is responsible for implementing the incentive scheme set out in the Investment Charter and provides the secretariat for the National Investment Commission, chaired by the Head of Government, which is responsible for approving new investment agreements. Although AMDIE's human and financial resources were affected by the Covid-19 crisis, it has nevertheless used this as an opportunity to speed up its digital transition, following the example of many investment promotion agencies (IPAs) across the OECD. While remaining active in all its traditional functions of investment promotion and facilitation, AMDIE has gradually switched the focus to developing a national brand image, notably with the Morocco NOW initiative launched in 2021. AMDIE aligns its investment promotion strategy with the government's general guidelines and sectoral economic strategies. For many years, its actions to target and prioritise foreign investors have not been selective enough, focusing on certain sectors of the economy but prioritising relatively few countries or investment projects. However, since 2022, more prospecting has taken place in a group of priority countries, reflecting an increased willingness on the part of the authorities to make investment promotion activities more selective and therefore more effective. To improve the impact of its action, AMDIE has also introduced monitoring and evaluation tools, although some indicators could be further developed.
Targeting activities are geared towards the growth sectors identified in the new Investment Charter, namely: industry, culture, renewable energies, logistics and transport, aquaculture, tourism and leisure, digital technology, waste processing and recovery, and outsourcing.
Facilitating investment is a whole-of-government task in many countries around the world, and Morocco is no exception. For many years, the authorities have focused on improving the business environment, resulting in significant advances that are recognised internationally. Recently, the simplification, dematerialisation and devolution of administrative procedures and formalities for investors have been at the heart of Morocco's business climate reforms. One of the mains aims in the creation of the MICEPP is to make investing easier and to increase private investment to two-thirds of total investment by 2035. Since 2022, the authorities have been preparing a new roadmap for improving the business climate, with the aim of unlocking the full potential of investors and making it easier to do business. This roadmap, drawn up in consultation with all public and private stakeholders, addresses several strategic projects aimed at improving structural conditions for investment and entrepreneurship, supporting the transformation of the national economy and strengthening its competitiveness, developing an environment conducive to entrepreneurship and innovation, and strengthening ethics, integrity and the prevention of corruption.
The country has also been involved in negotiations on Investment Facilitation for Development (IFD) at the World Trade Organisation (WTO), which should lend impetus to its domestic reforms when the agreement is implemented. AMDIE and the CRIs complement these initiatives with facilitation services for new investors and follow-up services for established investors, including conciliation services at the level of the CRIs, alongside the regional business environment committees working on the implementation of the national roadmap for improving the business environment.
Take full advantage of a new, more coherent institutional framework and the new Investment Charter to give the investment promotion and facilitation policy a boost and a more central role in government policy, with the Ministry, AMDIE and the CRIs positioned as institutional leaders with distinct and complementary roles. To this end, it might be appropriate to strengthen AMDIE's role as the national focal point for foreign investors, even for sectors of activity that are not currently under its responsibility.
Clarify AMDIE's mandates, which are relatively numerous and broad in scope, and strengthen coordination mechanisms with other national and sub-national public bodies with similar mandates. Continue to implement a solid governance policy for AMDIE, based around a functional and balanced Board of Directors.
Make AMDIE more proactive and focused on FDI promotion beyond the administration of the Investment Charter incentive scheme, by strengthening its investment generation and facilitation operations, which are the core functions of IPAs. A more focused and selective investment attraction strategy would be appropriate, with better defined priority sectors and prioritisation by country as well as by project or investor. AMDIE's increased presence abroad could also help to better target potential investors and optimise its prospecting activities.
Develop more performance indicators for AMDIE, in particular results indicators, to ensure that the agency's activities meet their objectives and to better measure the impact of FDI on the local economy. Ensure that AMDIE's CRM platform is operational as soon as possible and, as far as possible, linked to the CRMs of the CRIs to ensure optimum coordination of activities between the different levels of government.
Continue and increase efforts to simplify administrative procedures for businesses, including through greater and broader digitalisation, and reduce redundant or unnecessary procedures in order to facilitate new investment and encourage reinvestment and expansion. To this end, the Moroccan authorities could consider moving from an authorisation system to a specifications system, under which new investments are authorised from the outset if they meet a certain number of criteria.
Continue Morocco's active participation in WTO negotiations on Investment Facilitation for Development, prepare the implementation of the agreement, and consider making AMDIE the contact point.
Strengthen AMDIE's facilitation and monitoring services for investors, including by setting up the Aftercare Centre to provide greater support for established companies. Strengthen programmes to promote business links between multinationals and local SMEs and, in so doing, ensure optimum coordination between the various stakeholders involved.
1.4.5. Investment in Morocco's regional development
Morocco's progress towards advanced regionalisation, which began more than a decade ago, has been marked by major reforms aimed at boosting productivity and private investment in support of regional development. While the underlying impact of these reforms, starting with the 2022 Investment Charter, has yet to fully materialise, they have already led to greater policy coherence, more integrated national strategies for investment and regional development, and a more inclusive national and sub-national governance framework for investment. The continued implementation of the Investment Charter and the advanced regionalisation reforms should help improve the local business climate and, in turn, enhance the attractiveness of the region for foreign and domestic investment while making better use of investment for sustainable development.
The geographic distribution of FDI in Morocco reflects the significant social and economic disparities between the country's regions. Although essential for reducing funding deficits and supporting sustainable development, FDI is unevenly distributed and concentrated in coastal and metropolitan areas. While uneven distribution of investment occurs in most OECD countries, strong and persistent regional FDI disparities in Morocco can be an obstacle to balanced regional economic growth. Indeed, regional FDI disparities in the CS, TTA and Oriental regions are greater than the differences in GDP. This suggests that the sub-national concentration of FDI and the motivations of investors cannot be explained solely by factors such as the size of the local market. That said, the regional concentration of greenfield FDI is declining, with over 70% of projects since 2018 attributed to regions other than CS and TTA.
Mobilising private investment for regional development has become a national priority, as can be seen in the investment strategies and reforms undertaken since the start of advanced regionalisation. This integrated approach aims to advance strategic objectives in line with Morocco's NMD, in particular by leveraging distinct regional characteristics and attractiveness factors. Strategic priorities to encourage investment are increasingly defined by various government entities at national and sub-national levels, as is also the case in OECD countries. Under the new Investment Charter, reducing regional disparities is a top priority (less so in the investment laws of other countries) and offering higher, expenditure-based incentives to less developed regions, which, together with other laws, provides a framework linking investment to regional development.
Investment policies are defined by the government, in accordance with the new Investment Charter, and implemented at regional level by the CRIs and the Unified Regional Investment Committees (CRUI). They comprise a range of policies aimed at shaping regional attractiveness, including incentives, trade links and special economic zones. FDI is traditionally focused on attracting new business. However, using CRIs to support the expansion of existing foreign projects, particularly in less developed regions, could prove effective and have a significant impact on local employment. There is currently a shift in investment policy from tax incentives to improving the local business environment. Each region faces specific challenges, be it between urban and rural areas of Morocco or coastal and hinterland regions, ranging from connectivity infrastructure in the Oriental region to the availability of sufficiently skilled workers in TTA.
The review of the Investment Charter sent out a strong signal in favour of unified, strengthened and devolved governance of investment policy, in the wake of other key laws, such as Organic Law 111-14 on the Regions, the National Charter on Administrative Devolution, the reforms redefining the mandate and governance of the CRIs and the creation of CRUIs. Although this has improved the institutional framework for investment at several levels, difficulties remain that require a more comprehensive approach to investment policy-making and the implementation of existing laws and regulations, including the Investment Charter, and the allocation of human and financial resources commensurate with the reformed mandates of the Regional Councils and the CRIs to attract investment and improve the local business climate. Since 2023, the CRIs have been attached to the Head of Government, who has delegated some of his responsibilities to the MICEPP. However, the scope of mandates is not always clear, and the complementarities between AMDIE and the CRIs are less evident than in OECD countries. A bill is currently being drafted to rethink the positioning of the CRIs to make them a benchmark for investment, which should strengthen the strategic role of the CRIs as facilitators and catalysts for investment at the local level.
Continue to improve the coherence of national and sub-national strategies for investment, regional development and sector plans. More coherent strategies in these areas will help promote competitive and thriving regions by aligning national objectives with local development objectives. The involvement of sub-national bodies such as CRIs in the development of these national strategies will help highlight sub-national priorities and capacities. Sub-national bodies should better integrate national FDI attractiveness priorities into Regional Development Programmes (RDPs) and CRIs' investment promotion strategies where they exist.
Pursue efforts to integrate a "place-based" pillar into the national private investment strategy in order to strengthen coherence, clarity of mandates and existing coordination mechanisms. The pillar should consider investment promotion at the sub-national level as a shared responsibility of MICEPP, AMDIE, CRIs, Regional Councils and other relevant stakeholders, including private sector representatives. The pillar sets investment targets based on regional priorities and assets, identifies investment promotion efforts and clarifies the mandates of national and sub-national entities and related coordination mechanisms to ensure that the actions of AMDIE and the CRIs are complementary. This pillar must be consistent with the RDPs.
Ensure that the human and financial resources allocated to the CRIs and Regional Councils correspond to their investment mandates. The success of advanced regionalisation in Morocco requires more financial autonomy (or additional financial resources from the central government) to match the responsibilities of the sub-national bodies involved in investment policy, in particular the revised mandates of the CRIs in 2019. Sub-national institutions have a deeper understanding of local strengths and challenges, making CRIs valuable “institutional plumbers” when it comes to supporting investors and solving the issues associated with their operations.
Develop policies to improve the business climate and attract FDI that incorporate the regional dimension. This includes building better connectivity infrastructure in hinterland regions and anticipating skills gaps in fast-growing, export-oriented regions such as TTA. Prioritising the expansion of existing FDI projects can be a cost-effective and efficient approach to local development. The CRI's Economic Impetus and Territorial Offer cluster, in cooperation with the Investor's House hub, could put more emphasis on promoting the expansion of existing projects towards higher value-added activities such as R&D in advanced regions and stimulating the development of new jobs in regions with high unemployment.
Improve the collection, availability and dissemination of data on foreign and domestic private investment at the sub-national level, including the impact of investment on sustainable development. This involves close coordination between the various ministries and bodies, including HCP, Office des Changes, MICEPP, AMDIE and the CRIs.
1.4.6. Policies to promote responsible business conduct
Responsible Business Conduct (RBC) is a considerable asset for attracting new, high-quality investment and preserving it within the region. It also enables companies to participate more broadly in the value chain, regardless of their size, structure or sector of activity. RBC standards require all companies to exercise due diligence to mitigate the potential or actual negative impacts of all their activities, products and services, while contributing to sustainable development in the countries where they operate.
Since its accession to the OECD Declaration on International Investment and Multinational Enterprises (the Declaration) in November 2009, Morocco has worked diligently to establish a framework conducive to the development of RBC practices. Morocco's legal, policy and institutional frameworks illustrate its firm commitment to promoting the use of OECD instruments and facilitating the integration of Moroccan companies into global supply chains. At a time when RBC policies are becoming increasingly important, Morocco's ability to comply with international standards will be a decisive factor for its reputation on the global market. The national strategies put in place in the areas covered by the Declaration, particularly in terms of environmental protection, human rights, labour law and the fight against corruption, are further proof of this.
Awareness of RBC principles and standards is also growing, through new initiatives by government, civil society and business associations, particularly aimed at small and medium-sized enterprises or in sectors identified as high-risk, such as energy, which is a key sector for Morocco.
The government is also increasingly aware of the strong role it can play as an economic player in its own right, and of the opportunities that public procurement and public enterprises can provide for pursuing wider policy objectives such as promoting RBC.
In this respect, Morocco set up a National Contact Point (NCP) in 2010, which has been exceptionally active and effective in the region. Since 19 January 2023, the Moroccan NCP has had a new tripartite organisation, which now includes representatives of the Confédération Générale des Entreprises Marocaines (CGEM)and the country's most representative trade unions. This structure enables it to deal with a wide range of issues covered by the OECD Guidelines for Multinational Enterprises (the Guidelines), in particular by involving the various members in efforts to promote the NCP's Guidelines and in dealing with specific circumstances in accordance with the provisions of its Rules of Procedure. The NCP has also made major advocacy efforts and is stepping up its information and promotional activities. The Moroccan NCP also helps to resolve problems that arise in the implementation of the Guidelines in specific circumstances, as demonstrated by the many referrals it has received to date.
Ensure that environmental and sustainable development laws and policies are implemented and enforced. The positive spillovers of the adoption of the National Charter for the Environment and Sustainable Development followed by the National Strategy for Sustainable Development can be boosted by ensuring the effective application of the latter through the adoption of complementary regulations and the necessary implementing measures, in particular to clarify the penalties applicable in the event of non-compliance with the obligations set out in the National Charter.
Strengthen human rights guarantees and speed up the implementation of existing laws and policies in this area. Despite a legal framework that is relatively conducive to the protection of human rights, measures to address the human rights challenges faced by the Moroccan population need to be strengthened, in particular by speeding up the implementation of gender equality in all areas. The National Action Plan for Democracy and Human Rights 2018-2021 does not appear to have been renewed after 2021, and Morocco could consider drawing up a new action plan in this area.
Strengthen the protection of labour rights. This is particularly relevant for the right of assembly and the right to strike, which are sometimes restricted in practice on the basis of Article 288 of the Moroccan Penal Code.
Pursue the promising reforms underway to combat corruption in the public and private sectors. Corruption remains a worrying problem despite the reforms being undertaken. It is therefore recommended to continue restructuring the national anti-corruption strategy. Companies should also be helped to fight corruption, in particular by developing and implementing preventive measures.
Prepare a National Action Plan (NAP) for RBC, in line with international best practice. This process would be an opportunity to gain multi-stakeholder support in key areas for Morocco's development trajectory, such as the textile sector. A participatory and inclusive NAP process is also an opportunity to strengthen awareness of the links between the different policy areas related to RBC in the country and to contribute to building the capacity of local industry to participate in global supply chains.
Continue to ensure clear communication of expectations in relation to RBC, in collaboration with the private sector, and facilitate meaningful stakeholder engagement in the design and implementation of policies and processes. In particular, awareness-raising and capacity-building activities for employers and workers should continue, especially in small and medium-sized enterprises and in sectors identified as high-risk, such as textiles. The implementation of international RBC instruments, including the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, can play an important role in achieving this objective.
Continue to encourage and promote RBC in the government's relations as an economic player in its own right. The OECD's due diligence guidance could be used as a basis for applying RBC in public procurement and in state-owned enterprises and institutions. The government should continue to take steps to define clear expectations and requirements for public institutions and enterprises in relation to RBC performance and due diligence.
Implement the recommendations made in the Report on the Peer Review of the Moroccan National Contact Point and update the Moroccan NCP's case handling procedures. Morocco must continue to implement the recommendations made during the peer review of the Moroccan NCP, which are still relevant, particularly in terms of the human and financial resources allocated to the NCP. The case handling procedure must also be updated to comply with the 2023 edition of the Guidelines. The NCP should also be given the resources it needs to support the government's efforts to promote RBC.
1.4.7. Investment in digital transformation
Digital transformation is no longer only a strategic choice given that digital technology, infrastructure, services and data are now an integral part of the global economy, profoundly affecting the way individuals, businesses and governments operate and interact. The digital transformation of the economy and society is creating new opportunities for economic growth and well-being, starting with gains in innovation, productivity, and economic and social inclusion. At the same time, it poses major challenges by changing, sometimes profoundly, the way we live and work. The Covid-19 pandemic has accelerated the pace of these changes and jobs, and public services and social interactions are now more dependent than ever on digital technologies. The pandemic highlighted the benefits of digital tools, but also the significant gaps - in terms of digital access and public policy - that remain when it comes to supporting digital change and harnessing the positive gains of digital transformation (OECD, 2020[48]).
Digital transformation is driven to a great extent by investment - in new businesses, new services, new processes and new skills, as well as in the infrastructure underpinning digital technologies. In addition to public funding, private investment and FDI in particular can advance digitalisation both through the direct activity of companies, and indirectly in their interactions with the host economy. Foreign companies tend to be more productive and digitally advanced than their domestic counterparts and by introducing new technologies, practices and skills, they can enhance a sector's productivity and digitalisation. Compared with domestic companies, foreign companies operating in Morocco are more productive, carry out more R&D activities and use more foreign technologies on average. Through their interactions with national companies, particularly their interactions with national suppliers, foreign companies can also facilitate the transfer of technology and digital skills to other segments of the economy. (OECD, 2021[49]). As with the other potential benefits of FDI, targeted policies and strategies are needed to bring about these positive spillovers.
Attracting investment in the digital economy can serve many of Morocco's development objectives, including the creation of more and better jobs, the development of entrepreneurship, competitiveness and economic opportunities in the regions, and the improvement of public services. In this respect, Morocco has implemented several important reforms, but it is important that it continues along this path in order to support the country's overall digital transformation. In addition, the government could build on the reforms already undertaken and consider new initiatives to improve the investment climate in digital-intensive sectors and encourage investors to make a positive contribution to digital development.
A wide range of policies influence investment in the digital economy, incorporating factors that affect a country's overall digital development, including access to, use of, and trust in digital technologies and data. The coverage and effectiveness of digital infrastructures, the digital skills of employees and consumers, and policies covering data protection, cybersecurity and online consumer protection are also critical to digital development. Equally important is the innovation ecosystem, which covers the opportunities available to entrepreneurs and the state of research and development at the national level, as well as the adaptation of labour market policies to new ways of working (OECD, 2020[50]). These factors, combined with influences on the general investment climate (including trade, tax and competition policy), combine to create a digital economy that is attractive to investors. Public authorities can also adopt specific policies to improve the investment climate for high-tech start-ups and incentivise the positive spillovers from this investment. Morocco has undertaken a number of important reforms to support the country's digital transformation and attract investment in the digital economy. These include developing infrastructure, adapting the legal and regulatory framework, promoting investment in high-tech manufacturing and ICT services (offshore), dematerialising public services and strengthening the digital skills of Moroccan citizens.
The challenge now is to fully implement these policies and ensure they are adopted by businesses and society as a whole. The priority is to support investors and consumers and make them aware of the new policies and technologies. Despite the fast pace of these developments and initiatives, further reforms are needed to remove the remaining obstacles to the growth of the digital economy. These include improving access to and the quality of digital infrastructure throughout the country, continuing to adapt the regulatory framework, and supporting entrepreneurship in digitally intensive sectors. Reforms could also further strengthen support for innovative start-ups and essential digital services (such as e-business), in addition to the initiatives explored in the chapter on digital transformation, and encourage wider digital take-up by businesses and consumers. Finally, fulfilling the government's stated digital ambitions will require sufficient dedicated resources, underscored by a strategy at the highest level of government, and full institutional capacity to implement reforms. It is encouraging that the government is in the process of developing such a strategy, with a new dedicated budget.
Continue to adapt the legal and regulatory framework to better serve investors in digitally intensive sectors, stimulate entrepreneurship and improve access to capital. Improving the investment climate for high-tech start-ups can support a broader digital transformation of the economy, as start-ups, which are usually digital pioneers, can foster a culture of entrepreneurship and innovation. Morocco could also look at what is holding back the development of digital services such as e-commerce, which can act as a catalyst for the digital transformation of other sectors. Supporting the development of these services requires advancing financial inclusion.
Consider introducing exceptions to foreign exchange regulations to improve domestic access to foreign ICT services, including cloud and marketing services. Without changing monetary policy, the government could consider specific exceptions allowing domestic companies to buy more innovative ICT services from abroad. The Office des Changes has taken some innovative steps in this direction, and could consider extending the scope of these measures.
Ensure that institutions have a clear mandate and adequate funding to achieve their objectives. Morocco is notably in the process of drawing up a high-level national strategy for digital development. National strategies are key tools for policy coordination, and a whole-of-government approach is particularly relevant to advancing digital transformation. This strategy could be better integrated into Morocco's investment promotion strategy, to ensure that investors are aware of investment opportunities in the digital economy and to encourage digital upgrading and skills enhancement.
Build on recent initiatives to promote the development of the digital economy, and support businesses and citizens as they adapt to the changes brought about by this transformation. A recent wave of reforms has provided Morocco with a legal framework capable of supporting the development of the digital economy. Additional reforms could further adapt existing legislation to the specific characteristics of the digital sector. Complementary policies are currently being designed to increase confidence in and use of digital tools, including e-government initiatives. This requires sufficient resources to train administrations and could include new measures to encourage businesses to adopt digital technologies and develop their digital skills.
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← 1. Foreign enterprises are defined by the OECD as enterprises in which a foreign investor owns 10 per cent or more of the ordinary shares and/or voting rights, directly or indirectly. The comparison with local enterprises, which follows the methodology of the FDI Qualities Policy Toolkit, is being used to highlight the areas in which foreign companies can make a greater contribution to Morocco's sustainable development.