• Is the Programme Working?
  
  

Is the Programme Working?

It goes without saying that financial and structural reform is not something governments undertake just for the sake of improving their national accounts and being able to show foreigners an impressive list of new legislation. The idea of a reform programme is that it should benefit the "real economy" - the Moroccan people as a whole. It should lead to new companies being formed, managers investing in new plant, workers being made more productive - and their earning more, as well as being employed in greater numbers, and consumers being given more and better products and services. In short, it should lead to economic growth.

The question implied by the stock broker who was quoted at the beginning of this paper is whether this is happening in Morocco. The answer seems to be: "not really yet, though there are signs of stirrings in the economy".

There appears to be rather little new industrial investment taking place. Few new companies are being established. Potential entrepreneurs and existing factory owners claim they will be unable to compete with European goods when their market opens in the next decade. This, at least, is what they say, though their views should be heard partly in the context of the general complaining there has been about the Association treaty since it was signed. The reality is that it is thought about a third of existing industries will be able to compete perfectly well with European imports, a third will be able to adapt and a third will collapse.

The flows of foreign investment into Morocco increased sharply in the early 1990s, but have recently fallen back. They rose from $227m in 1990 to $660m in 1994, then dropped to $470m in 1995 and about $300m in 1996.

GDP growth has been slightly disappointing. The average for the 1990s has been 3.2 per cent, which would be acceptable for an industrialised economy but does not suggest a developing economy that is anywhere near taking off. If agriculture is taken out of the picture the rate is still only 4 per cent.

The dependence of much of the population on agriculture, which in a (rare) average year contributes 20 per cent of GDP, is one of Morocco’s problems. The country receives more rain than one might expect given its geographical position - and much more than Algeria - but there are big variations from year to year, and sometimes when the amount of rain would be adequate in total, it falls in the wrong season. Wheat farmers, who make up the most important part of the agricultural sector, enjoy only one good year in three; in a bad year their output may be only a third of what it is in a good one. The suffering of the farmers in bad years is felt quickly in other sectors of the economy. A good harvest in 1994, a bad one in 1995 and another good one in 1996 produced in succession GDP growth of 11.2 per cent, a decline of 6.5 per cent and growth of 9 per cent. Given the country’s climate, the fact is that cereals farming can no longer yield the standard of living to which Moroccans aspire, but it is difficult for farmers to switch to growing fruits and vegetables because the European markets are largely closed to them.

There remain big contrasts in wealth within the country, and there are no signs of these becoming smaller. In the countryside there are remarkable differences between the rich areas of the Gharb plain north of Kenitra, the hills around Meknes and the foothills of the Middle Atlas around Ifrane, and the poor areas of the Rif and the land between the Rif and the central plain. In the rich areas one sees big estates, land obviously giving high yields and fairly modern machinery; in the poor there is hardly any machinery and the farmers harvest sparse, weed-ridden crops by hand. Only part of the difference is accounted for by the richer areas’ more fertile soil and the greater sums of capital available on the big estates. Much of the poverty is caused by the government’s failure to invest in infrastructure - roads and dams - in the poor areas, or provide farmers with loans. The Rif has been out of favour since it rose in revolt in the late 1950s, and in recent years it has been left to cultivate and sell hashish. The region now presents a strange contrast between a very poor non-drugs agriculture, dilapidated roads and an obvious lack of other public services, and a rich drugs economy, seen in smart cars and modern houses.

The gap between rich and poor is equally noticeable in the towns. Unemployment in Morocco is put officially at around 16 per cent - the rate must be more than 30 per cent among the young - and as the population of 29 million is increasing by 2.5 per cent a year it does not seem likely that current GDP growth will produce enough jobs to reduce these figures. The poor are kept alive by jobs on the fringes of the drugs and smuggling businesses, help from members of their families who do have jobs or who are living abroad, and in the saddest cases by begging. In the bidonvilles of Casablanca it is easy to find people competing with the birds and animals, searching for food in the rubbish heaps.

For all the obvious poverty, and the appearance of immobility in large parts of the economy, there are some signs of change. In the last twelve months the Korean company, Daewoo, has committed itself to building a $200m plant to make electronics components, and SGS-Thompson has recently expanded its long established Moroccan operation, also making semi-conductors. It has invested $52m and hired a further 1600 people. The company had been thinking of closing its Moroccan plant, but through reorganising and retraining it turned round its operation and has become a regular port of call for other foreign businessmen thinking of investing in the country. One of the first privatised Moroccan industrial companies, the CIOR cement business, in which the Swiss firm, Holderbank, took a stake, is now much better managed, runs a better quality production operation and has become more profitable.

Most privatisation successes so far are in the services sector. Some of the privatised hotels have been refurbished and are now run by more efficient and motivated staffs. The CTM long distance bus company has not greatly improved the quality of its service, but relations between employees and the management have improved, the company is trying to increase its market share and it is diversifying. At the country’s gasoline stations cleanliness and the quality of service has been transformed, and the owners are closing the small stations they had in the centres of the towns and opening new ones in the outskirts. This change has resulted entirely from the privatisations of 1993 and 1994, which directly affected a majority of the country’s distribution companies and galvanised the rest into competing with them. Similarly the privatisation in early 1995 of the Banque Marocaine du Commerce Extérieur, which has become the most modern and energetic of the country’s banks, has had a ripple effect in the banking sector. There has been a remarkable spread of cash dispensing machines. In the telecommunications sector the prospect of privatisation and the loss of its monopoly has had a striking effect on the state telephone company, ONPT. In the last few years waiting times for telephones have been hugely reduced, calls have been made cheaper and bills have become more detailed.

Outside the range of foreign and privatised companies a number of manufacturing operations for satellite television dishes have been established, though most dishes are still imported. The expansion in the number of these "parabols" in the last few years - there are now thought to be two million in the country - is having a revolutionary effect within Moroccan society. Much of the population is now watching European television and is learning about standards of living, social customs and freedoms that are taken for granted in other countries.

One of the few major new companies to have been established by the private sector recently has been Regional Airlines, which is starting to operate routes between the main Moroccan holiday resorts and Casablanca, Rabat and Malaga in Spain. The management encountered resistance from the state airline, RAM, while it was setting up its operation, and it had some problems with the government’s demand that it pay tariffs on the American aircraft it was leasing, but it had strong backers in the form of the families which were behind the company and it was able to overcome its difficulties.