Encouraging The Investments

The government has attempted to liberalize the internal competitive environment, and to provide incentives to external parties to encourage their investments within Morocco. State-owned enterprises have been privatized in telecommunications, aviation and energy, with more privatizations slated to continue in industrials and financial services. The government has instituted tax breaks and other financial incentives for investments above $20 million. As well, the government has set up a free-zone in Tangiers for export-oriented industries, and has set up BPO office parks with access to financial incentives and high-quality infrastructure.  Given Morocco‘s poor performance on various ―ease of doing business indicators, Morocco has attempted to address some of its shortcomings. The government initiated ―one-stop shop investment centers (Called Centres Regionaux d’Investissement, or CRI) to help in setting up new ventures. This helps to account for Morocco‘s relatively good ranking in the category of starting a new business. As well, the government launched the Moukawalati (Arabic for (my enterprise) program in July 2006, to act as an incubator for domestic businesses.

Increasing the Availability of Housing

The Government-initiated Villes sans bidonvilles (Cities without Slums) is a series of public-private partnerships to develop new satellite cities near major metropolitan areas. The FOGARIM program provides loans partially guaranteed by the government to foster home ownership among low income populations

Competitive Environment

On the country level, the first priority is to improve the competitive environment; market irregularities inhibit the employment of factor inputs, even if those factor inputs exist.

1_Liberalize Trade Environment

 Given the current high levels of trade restrictiveness, Morocco needs to focus on opening up its markets, which would decrease the overall cost of goods and services provided in Morocco. While recently signed free trade agreements were positive, Morocco needs to continue to commit to free trade, exploring how Morocco can gain access to more markets, with further unilateral decreases in tariff rates, as well as examining how non-tariff barriers may be hindering trade (high port costs may be one example).

2_Liberalize Labor Market

Given the fact that labor productivity in many cases is below mandated wage levels, and the existence of high costs of hiring/firing, the Moroccan government should work on improving labor market flexibility, which should in turn translate into higher labor productivity. While reducing the minimum wage would be politically infeasible, further minimum wage increases should be slowed to below the rate of inflation, to allow productivity to catch up. In addition, excessive severance payment requirements should be decreased. Given the potential societal and political backlash, this should be a slow and gradual process, and maintained hand-in-hand with the ongoing poverty alleviation and unemployment-reduction policies, in order to minimize societal disruption.

3_Reduce burdensome tax regime

 The government should consider rebalancing its taxation policy, in both personal and corporate taxes. Personal income tax gradations should be reviewed to ensure that use of high-skilled labor is not dis-incentivized. While the recent reduction in corporate income tax was a positive step in spurring further growth, the government should continue to monitor peer countries‘ tax regimes to ensure Moroccan competitiveness.

4_Improve key ‘Ease of Doing Business factors’ 

Given the gaps in Morocco‘s ease of doing business ranking, the Moroccan government should continue its efforts to improve the domestic business environment. In the short term, this includes enacting a review of judiciary systems to improve contract enforcement, improving bankruptcy legislation, establishing more efficient property registration centers, and ensuring that all government policies/regulations/investment incentives are transparent and clear. To ensure continuous improvement in the long term, the Moroccan government should develop a formal consultative body, with private sector participation, so that government officials can receive feedback from private sector players with regards to areas for further improvement.