Economic openness of Morocco: What the Legatum Institut recommends

Over the past decade, Morocco has undergone significant changes that have seen the country make progress on many fronts, climbing the rankings for three of the four pillars of the Economic Openness Index.

Thus, since the beginning of the millennium, “ GDP per capita increased by more than 70% in real terms. The absolute and relative poverty rates fell, respectively from 7.1% to 1.4% and from 21.4% to 19.7% between 2012 and 2017 », Notes the Legatum Institute in a study of the case of Morocco in terms of economic openness.

However, he notes, Morocco’s ranking for governance has fallen: The country is poorly ranked in terms of political responsibility, and the effectiveness of the government has seen a decline in executive constraints, the rule of law and regulatory quality.

To explain this state of affairs, the study observes that “ the economy is characterized by a set of highly concentrated markets, which are often the result of government interventions that restrict entry, facilitate domination or create inequalities ”.

There is also a parallel and poorer Morocco, with an informal economy providing up to 40% of all jobs. “, Adds the analysis, which specifies that” even before the economic impact of the coronavirus pandemic, progress was slowing: the growth rate of GDP per capita during 2010-2019 was half that of the previous ten years (…). However, the economic system would benefit from a greater place given to a dynamic and innovative private sector which could allow successful small businesses to establish themselves in the market and distribute prosperity. “.

And to highlight that “ Among several exogenous problems that Morocco is now facing, two stand out: In the short term, the impact of the coronavirus pandemic threatens two main dynamic sectors of activity of Morocco, namely international trade and tourism, and to long term, the impact of a recent drought on Morocco’s large agricultural sector, which has highlighted the country’s vulnerability to climate change “.

Although Morocco has many strengths to navigate these difficult waters, this report highlights areas in which further reforms would prepare the country to capitalize on its strengths and take the next step in economic development.

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In its study, the Legatum Institut focused on the structural factors of Economic Openness, assessing to what extent Morocco has the four fundamental characteristics of open economies.

These are access to Markets and Infrastructures, the Investment environment, the conditions for Business Creation and ultimately, governance which is supported by the rule of law as well as by integrity and government efficiency.

While stressing that the country “has several assets and significant economic potential, with prudent macroeconomic management that could foster future prosperity, the study identified”four limitations ” to greater economic openness of Morocco

Invest in infrastructure

To this end, it recommends investing more in infrastructure, in particular in water resources and in high-speed infrastructure.

Three other areas of infrastructure are relatively poor quality by international standards: Broadband coverage and road and rail infrastructure, adds the analysis.

In terms of broadband coverage, she believes that “Morocco should take the necessary measures to make the National Telecommunications Regulatory Agency independent from government ministers, increase competition by introducing a market access regime, and apply a series of measures including the promotion of public-private partnerships. and making full use of the universal service fund ”.

Encourage competition

According to the Legatum Institut, the kingdom should also tackle “ increase the growth and dynamism of the economy by gradually increasing the role of the private sector in key sectors of the economy ”, the latter being“ hampered by a lack of competition ”.

So, he considers, “ to promote growth and dynamism, the State could limit its direct intervention in the economy and reduce the chances of privileged access to markets from which national companies benefit. More specifically, Morocco could introduce competition principles in key support sectors such as energy and telecoms, ensure that private and public companies are subject to the same rules and strengthen public procurement “.

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In the agricultural sector, the study calls for a “ gradual opening of agricultural markets ”, in the sense that“ an agricultural strategy should offer better opportunities for small and large farms to transform the agri-food sector into a stable source of growth, competitiveness and economic development in rural areas ” .

Make the labor market more flexible

The labor market is one of Morocco’s major weaknesses, and remains marked by “ low inclusion of young people and women in particular, slow employment growth and a high degree of informality », Underlines the Study.

She says that to make the labor market more flexible, “ the country can slow down the increase in the minimum wage, lower the cost of layoffs, facilitate the use of layoffs for small businesses, make limited-term contracts more flexible, but also introduce a more extensive form of unemployment insurance ”.

Strengthen governance

The Moroccan case study notes in this regard that “to unlock the potential of the national economy, the state could tackle both corruption and significantly reduce the prevalence of state-owned enterprises in the economy, as well as the associated distortions “.

To achieve this, she believes, the role of the National Authority for Probity, Prevention and the Fight against Corruption (INPPLC) should be strengthened by promoting its autonomy and independence and by allocating it the necessary resources. .

In addition, the study adds, “Morocco could create legally independent regulators in all sectors of public utility who can set up new regulations and ensure the application of those already existing. These regulators should not have government representatives on their boards, the government only having to provide strategic guidance ”.

To conclude that “Morocco’s recent history and development have shown that with real political will, the Kingdom can carry out its reforms. By pursuing this path and applying the recommendations suggested in this case study, Morocco would become more competitive in the global economy. “.

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