What will it take to enhance Morocco’s competitiveness?
In recent years, the concept of “competitiveness” has emerged as a new paradigm in economic development. The Global Competitiveness Report of the World Economic Forum defines competitiveness as the “set of institutions, policies, and factors that determine the level of productivity of a country and provide economic prosperity to its citizens.” This broad definition encompasses a wide number of potential policy actions in several areas. Boosting competitiveness depends on multiple factors, including the efficiency of government institutions, the quality of infrastructure, macroeconomic stability, the quality of health and education, training, the level of competition, the efficiency of labor and financial markets and the support for innovation. In view of this long list, the next question becomes: which policy actions should be prioritized by policy makers?
In Morocco, a structural transformation of the economy that will lead to stronger growth and job creation will require a coordinated set of policies in several key areas. It will involve maintaining the stability of the macroeconomic environment, improving the business environment, developing a trade policy that better supports the competitiveness of Moroccan products, developing a financial sector that better serves smaller firms, ensuring a labor force that is better trained, and effective social protection and labor market institutions.
Over the past decade, Morocco has made good progress in carrying out reforms in several of these areas, but their actual impact, albeit positive, has been insufficient. Productivity, export diversification and technological intensity still lag behind other emerging countries. The key indicators for the private sector show a relatively weak entry and exit of firms in the Moroccan economy, which translates into relatively weak economic and productivity growth prospects.
There is a strong need to increase the impact of reforms as a catalyst for a stronger response from private investors. Weaknesses remain in the business environment, especially in areas – like regulatory reform – that require significant public agency coordination, and where a gap remains between the laws and their application. While sector-specific and industrial development plans are in place (Programme Emergence, Maroc Export Plus, Plan Azur, Plan Maroc Vert, Plan Halieutis, Vision 2015 for craft) and Morocco adopted an ambitious Free Trade Agreement (FTA) agenda, some areas of trade policy – including trade logistics and trade finance – remain weak. Financial sector reforms have been impressive in Morocco, but there is room to further improve domestic Small and Medium Enterprises (SMEs) access to credit.
Looking forward, the challenge will be in the implementation and coordination of all the policies that affect private sector development, investment and job creation. The success of the sectoral programs underway will depend on the ability to coordinate, implement and evaluate policies at various levels and through various agencies. This has proven to be especially difficult in the past when strong inter-agency coordination was required, in particular to address persistent cross-cutting constraints in the business environment that undermine and dilute the impact of the variety of interventions and support plans that have been launched. The rules and regulations governing the business environment are cumbersome and often inconsistently applied by the respective authorities in charge of enforcing them. These cross-cutting issues affect mostly domestic SMEs, which are the primary source of job creation in Morocco.
A US$160 million World Bank loan will support ongoing reforms aimed at addressing these issues. Through improved transparency in the business environment, standardized procedures for businesses all over the territory and reinforced capacity of key institutions such as the National Committee for Business Environment, the Competition Council and the Investment Commission, an environment more conducive to growth will be created. With the sum total of these reforms, Morocco may finally achieve the holy grail of enhanced competitiveness.