The Moorish Wanderer

Open Society Project. Part I: The Economy (Continued)

What sort of budget would we have in a Open Society-upholding government? First, as mentioned before, investment budget would be much higher than the current level of expenditure, i.e. less than MAD 54 Billion. The idea is to take investment up to MAD 100 Billion; with a target of MAD 200 Billion over 5 to 7 years, and, more importantly, keep up a long-term average 10-years incremental increase rate of at least 2.77% with an ideal target of 3.93%. The lower bracket corresponds to the average real GDP growth over the last 20 years (thus taking into account depression years of the 1980s) and target level is the average GDP growth over the last decade.

Parallel to this ambitious program, there will be a need to downsize civil service human resources and expenses. Figures show that civil servant are spread evenly with respect to the Moroccan population, but reports also show a great deal of central bureaucracy (cost centres) that do no provide essential services. Furthermore, positions of education, health and local government are relatively underpaid when compared to these very same bureaucratic services. As a matter of principle, government money is taxpayers’ money. The idea that public sector is a last-resort recruiter for misfits should be definitely dropped. Indeed, it is a constitutional right for any citizen to apply for a government job, on the essential condition that they meet requirements, usually determined by their entrance exam results (difficult exams of course) and required degrees; Ideally, government civil service is an aggregate of competent, full-dedicated and bright minds fuelled by their public service spirit. That rules out unemployed graduates that are desperate for a job and settle in -as well as the arrogant Grande Ecole graduate with no idea whatsoever on how to actually run a country (those without the proper training and education, that is).

Whatever political allegiances one might hold and its derived policies on the matter of public administration, our own history with public service (even before 1912) unfortunately compel us to assume its actions to be evil, though the lesser of civil service’s evils is public investments, hence the heavy spendings commitment. Let me elaborate on that: traditionally, and I suspect many radical left-wingers in Morocco still hold it to be a good policy, the Moroccan left trusted the State to be the most efficient tool to achieve their objectives (I direct the reader to have a look to a post I wrote on the various stands regarding civil service). This might be due to a Trade-union tropism – and the history of struggle against the monarchy to take control of what was very early on, perceived to be the most powerful institution in post-1956 Morocco, but nonetheless, efficiency doesn’t compute in their design. What they don’t realize is that it will take on more bureaucracy, more waste of the taxpayers’ money, and ultimately the defeat of their projects. And in that respect, liberal Big-Statists -whether on the Right or on the Left- fail to notice the danger they are running into: behaving just like the Makhzen does, i.e. considering Moroccan citizens as irresponsible, with the indefatigable state intervention to run their lives. A genuine democratization goes through empowerment of communities and individuals, with a light touch regulation and intervention from the state (hence my stand on federalism and downsized civil service human resources).

It is high time the civil service factored in the concept of ‘Taxpayers’ money rather than ‘State money‘ and the promotion of a ‘self-reliance’ culture. Does it sound Blairite and Right-wing? Perhaps. But that is the most straightforward approach to break down the Makhzen system, and free individuals from a culture of dependency. “فلوس الشعب فين مشات” should be the watchword on every government spending.

Now, 2011 Budget figures show the following balance:

Finances Ministry 2011 Budget

Overall, government budget should be increased, but not in a discretionary fashion. Ideally, and alongside the increase of public investment within the assigned target, other government expenditures should be constrained with yearly inflation levels.

One way of doing so is to propose a reduction of central government wages by 5%, a moderate cut in the teaching corps (due to its ageing demographics) so as to match a student/pupils ratio of 12:1 as well as a pay rise to a median wage of MAD 17,000. [similar computations are run and observed on the health service] The first step for this to work is to spend, in two years’ time, windfall taxes from the fiscal reform to pay back the debt and terminate in that amount of time all debt payment (which amount to about xx). This expenditure, besides the positive effects it can have on government budget balance, is a strong signal the Moroccan government is committed to build up a reputation as a thrifty and efficient (in reference to Nigel Lawson‘s “primitive language”, but caring instead). The 5% cut mainly targets the high expenses account, such as the MAD 20 Billion of high salaries and the Civil List’s MAD 2.433 Billion.

There are several loopholes than can be filled, as well as policies that can either boost receipts (policies on income and VAT for instance) as well as reduce expenses (a shake-up of pay wage, or the detail analysis of ‘Charges Communes’). Furthermore, debt expenses should be phased out as early in the government’s legislature as possible, as these expenses represent a double exaction on the nation finances: first, 12.47% of total expenses were channelled to pay for debt; Knowing that about MAD 2.4 Billion of it is foreign-held, that means a direct annual pressure on total reserves of 5.98% which needs to be phased out as quickly as possible.

We need a cross-breed Prime Minister between Abdellah Ibrahim and Margaret Thatcher: strong Liberal credentials and a ruthless leadership

The alternative budget (with 2011 figures and holding all assumptions on Oil price and projected growth constant, as well as retaining specific items) would subsume the following projections:

1/ Military spendings to be cut by MAD 17 Billions, mainly by selling off obsolete or non operational hardware, and a reorganizing the military establishment. That means mainly a reduction in number of servicemen, the phasing out of compulsory military service (and the subsequent closing down of a number of military bases) and a re-organization of military units for more small outfits and more mobile forces. My own proposal for a radical change in defence strategy tries to make the numbers fit in, with an overall target of 2% GDP in defence spendings.

2/ Common expenses phased out: There are some MAD 36 Billion usually earmarked by the Finance Ministry as a common, inter-departmental  expenses. The trouble with such expenses is mainly the opacity.

3/ Reconsider accounting standards for SEGMA departments, if not an outright off-balance sheet outsourcing: this would save the public taxpayer about MAD 2 Billion. Even though SEGMA departments’ books have to be balanced, the budget often makes provision for subsidies, which on the long term weigh on public finances. If anything, an outright privatization of these SEGMA (Secteurs Gérés d’une Manière Autonome) might yield good money instead. For instance:
Golf Dar Es-Salam (receipts for MAD 18 Million)
The National Press (Imprimerie Officielle: MAD 13 Million)
Habous Ministry’s own Pligrimage Agency (20 Million)
Dar Annakhil Press (MAD 2 Million)

Overall reduce expenses by 53 Million, but saves capital account of about MAD 590 Million every year. Though it is difficult to put a fair valuation on these entities, if properly re-structured before privatized, a net yield could be around the Billion at least.

4/ Introduction of flat fees to replace ‘Grima’ applications. According to the 2007 Cour des Comptes audit report, 1749 ‘grimas‘ were delivered in 2007, an estimate of 3000 by 2011  (many of whom where for transport and fishing permits). Assuming a conservative estimated median flat fee of about MAD 10.000 per permit, the new system yields for 2011 about MAD 30 Million. This remains a conservative estimate, since many applicants eventually give up out of frustration (actual figures are more around 9000 applications. A detailed application listing (which doesn’t appear on the report) could allow  finesse discrimination (for instance by charging more on fishing permits than on taxi licenses) could yield even more. This policy -under assumption it remains tax-neutral- can actually contribute efficiently in fighting corruption, and bringing down one of its main features.

Budget balances with larger debt payment. A few items were retained due to a lack of detailed set of data

The Open Society project has the capacity to fund itself for the grand projects that lay ahead. This budget can next be broken down by regions (in accordance with the federalist option). [I haven’t got time for it, unfortunately]. Next piece will deal with the new Social Fabric.

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