The Moorish Wanderer

Thesis Working Paper n°2

Posted in Dismal Economics, Read & Heard by Zouhair ABH on January 11, 2011

Description of the Monetary Policy as a bargaining process between two players:

a. Players features: The Central Bank (CB) and a representative private firm (PF) bargain for a pair are respectively were i(e) and Y(e) the equilibrium interest rate and output.

Each player has specific preference utility function, where the bank seeks to stabilize output via interest rate (in optimal settings, it would systematically set up interest rates so as to maximize potential output). We assume for the time being that the central bank does not take into account inflation directly into its computations (inflation is captured by the potential output). Central Bank’s preferences are captured by an altered version of the Taylor Equation such:

The Private firm, on the other hand, has a preference for high output and low interest rates, which means that its utility function is such:

This is due to the fact that the firm prefers low interest rates for valuation purposes and investment cost. High output generates higher profits and higher levels of cash flows (leading to higher valuation again).

It can be inferred from these preferences that both players have contradicting interests (and in facts the Firm does not take into account the potential output) and so the bargaining model is an attempt to seek an equilibrium.

b. Game: The game is a mapping

 

Where :

 

 

 

 

The bargaining is a standard Rubinstein-Osborne model, where the set of agreement pairs is described as follows:

 

The game starts with the Central Bank announcing a pair . The firm has the choice of accepting the pair or rejecting it. If it accepts it, the game is over, and the economy produces Y(e) at an interest rate i(e).

If it rejects the Bank’s proposal, then the game moves to stage 2, whereby it’s the firm’s turn to propose a pair

The bank has in turn the choice of settling for it, or moves to stage 3, and proposes another pair,

and so on and so forth. We assume that the actions take in a finite time set T, but at each period t, the proposed set from one player or the other is such:

This can be explained as the ‘price of disagreement’. For the central bank, it is damaging its policy-making credibility, or because danger of inflation, when not dealt with at the time, compels the bank to be more stringent in pushing for scheduled higher interest rates and lower output target (and by computation, a negative output gap). As for the firm, the punitive discount rate can be explained either by the uncertainty risk or because of the future negative effects non controlled inflation has on its valuation or profits.

The assumptions described in Osborne & Rubinstein on the extensive form hold: each player has a continuum of choices over the pair (i,Y). For this game to lead to a subgame perfect equilibrium, the following properties are to be verified:

1/Disagreement is the worst outcome: that can be easily verified with the punitive time factor: at every node of bargaining, the worst outcome is to reject the offer, as the utility derived from the next stage is lower than the previous one.

2/ Desirability for a particular outcome is embedded in both players’ preferences as described earlier on

3/ Time is valuable, and is also verified with the punitive discount factor δ.

4/ Continuity: the assumption of continuity needs to be discussed. As specified before, both players have defined intervals respectvely for interest rates and output. The series are therefore bounded but also converge to equilibrium state because it is the

most desirable at every node of the bargaining process:

 

 

 

5/ Stability is also defined by the effect of discount time factor.

6/ Increasing loss to delay: the discount factor also fulfils the condition.

This game has therefore a perfect subgame equilibrium. That means, at every node of the game, the reached equilibrium is part of the larger game, and because utility out of a Nash agreement is higher at stage t-1 compared to stage t, both parties have every incentive to agree right from the start. Next piece is dealing with the requirements the Central Bank has to meet in order to be credible in its decision/announcement.

Stability First: Foreign Exchange Terms

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, The Wanderer by Zouhair ABH on December 26, 2010

Last issue of Bank Al Maghrib was of great interest especially the foreign exchange bit. Apart from its comparatively low productivity per exported output, one of the curses of Moroccan economy is its inability to field enough foreign reserves to hold a long-term shadow exchange rate, or just to attract confidence and therefore more diversified foreign investment.

downward trend in terms of trade and a high volatility in capital cashflows. The relationship is cardinal: Morocco is not a financial center, so most of its currency flows must be secured from goods exports, as FDIs are growing more and more volatile (Source: Finance Ministry)

Following the November issue of the “Revue Mensuelle de la Conjoncture Economique, Monétaire et Financière“, the Foreign Trade balance is definitely worsening. Indeed, the Goods and Services balance is in a MAD 114.5 Bn deficit, which means that it aggravated by 5.1% compared to last year. This is mostly due to the fact that imports increased by 13%. However, cover rate (i.e. Exports/Imports ratio) climbed back to the average of the past decade to 48% (from an average f 46% in the last 3 years); and so one of our structural weaknesses is that of exports’ inability to match the imports. In value of course, especially -but not only- when it comes to energy imports. Indeed, the digest does underline the fact the deterioration of the present goods and services balance deficit was due to the increase of 34.8% of energy-based imports. “L’expansion des achats de produits pétroliers est due à l’accroissement du prix moyen de la tonne importée de pétrole brut et du volume, respectivement de 40,6% et de 19,3%. Le prix moyen de la tonne importée s’est en effet établi à 4.689 de dirhams, au lieu de 3.334 dirhams pendant la même période de 2009. Quant aux importations de demi-produits, chiffrées à 45,5 milliards de dirhams, elles ont enregistré une croissance de 18,3%, attribuable pour l’essentiel à la hausse des achats de produits chimiques, de fer et acier et de matières plastiques, respectivement de 23,4%, de 17,9% et de 15,8%.” This is one way of explaining why our imports do not cover exports fully: the cost per exchanged good is in favour of imports, which means that value -in terms of capitalistic or skilled labour intensity- is lower in the exports when compared to exports, excluding energy goods (whose prices are market future, thus encompassing the expectations rather than any cost of production or indeed any efficient factors’ combination). The total average cost of imported ton was for the first semester 2010, MAD 7.663 per ton, while the total average cost per export ton was, for the same time period, MAD 6.41 per ton. (Office des Changes Figures) Oil and energy-based goods do not represent the most expensive imports (Their weighted average was MAD 4.05 per ton, but the strain they put on the balance deficit is due to their intrinsic volatility. On the other hand, some imported quantities can be substituted away due to the fact electricity is mainly produced by means of conventional fossil fuel. Seeking new sources of energy would result in an expanding GDP, a net creation in jobs and partial resorption of the deficit in goods and services balance. Furthermore, more efficient energy sources would enhance production, and thus increase exports productivity (again, reducing the balance of commerce deficit) cutting by half the MAD 114.52 Bn deficit is possible if import of MAD 52 Bn in energy-based goods can be halved one way or the other. In facts, there are other ways around to cut the deficit, especially any re-exports. However, this is not my subject. I wanted to discuss the effects on foreign reserves and perhaps some ways to finesse it.

The structural commerce balance deficit compels the Moroccan economy to finance it by getting real money (service like tourism, or FDIs) into the domestic market, foreign currency money. The Moroccan economy has to face two broad challenges in managing the foreign currency reserves: it has to sustain the announced peg, and to pay for any outflows of these hard currencies as well (whether in terms of exports, or for FDIs when the investors want to cash out their dividends). The first decision is basically a matter of policy-making: there was an official decision that the local currency -the Moroccan Dirham- needs to sustain a certain level of exchange rate with dominant currencies, either large commercial partner (Euro for France or Spain) or because strategic goods are labelled in Dollar (Phosphate, Oil and Gas).

Crawling pegs: Euro fixing is tighter compared to USD -mainly because significant commercial partners trade in Euro (Bank Al Maghrib Data)

This crawling peg though, is not credible for the forex markets: either because of interest rates and/or inflation rate differential with the significant currencies, or because the foreign reserves Bank Al Maghrib holds are not deemed sufficient to sustain it. The peg is an artificial exchange rate, to be sure. And speculators can from time to time arbitrage the Dirham (it is true the currency is not that important in terms of foreign trade, but if the differential is above market levels, then arbitrage is possible, even over small amounts, dozens of millions are gained usually) and thus increase the exchange rate with say the Euro. BAM will indeed from time to time buy up some Dirhams on these markets to sustain the desired level and needs to pay it up from the foreign reserves it holds. This can be observed on the exchange rate Bank Al Maghrib sustains with the Dollar, and more specifically the Euro. Basically, an idea can be tossed around about the variables that could have an effect on our foreign reserves , are mainly due to differentials between our own business cycle, and those of significant partners. Because our currency has tied itself to, say the Euro, differentials in inflation rate, in interest rate, in output gap and in an array of less , significant but non negligible other micro-variables, all of which make the official exchange rate more or less artificial, and so, more or less easy to manage. Ideally, the central bank would seek ‘smoothing’ the exchange rate by synchronising our business cycles with those of our partners. The trouble is, we do not have the same structures, the same weaknesses or strengths countries like France or Spain’s. The ensuing peg can therefore differ from the real exchange rate Morocco sustains with the Euro. This differential results in speculation attacks on the Dirham’s value, thus a pretty useless waste of precious foreign reserves. The problem can be solved either by abandoning fixed or pegged exchange rate -with its drawbacks and benefits- or do the courageous thing, that is, to look for commercial partners with congenial business cycles, or the least thing to do is to diversify a bit (and I got an interesting theory about that. Not mine, but something about diversifying risk) so as not to be fettered with an expensive exchange rate. This money can be used for other things: investment in infrastructures, paying back foreign debt, alleviating pressure on the domestic debt market, or even to pour it so that our exports can create value instead of destroying it.

Real Exchange rates. Starting from the 80's (financial liberalization in France and ECC entry for Spain) each country took a separate path but both countries remain significant markets for the exporters.

The depletion of our foreign reserves can, with reasonable assumptions and extrapolations, be delineated as the effect of constant desynchronizing of our economy, and that of the Euro-zone, France in particular. Let us walk through the figures here. Consider the real exchange rates of France and Spain compared to that of Morocco. Prima facie evidence shows a seemingly good correlation between our exchange rate and their over a long period of time (and 50 years is a long time series as far as Moroccan economics is concerned). However, statistical computations would show that starting from the 1980’s, figures wildly diverge, which means that in real terms, the relative prices of goods produced in Morocco, in Spain and in France are getting more and more different from each others. The assumption that our business cycles are desynchronizing is not inherently extravagant, and the observations on real exchange rate just shows it. The question is now how to move away from this unhealthy relationship to a state in which not only our reserves would stand a larger chance than a snow ball in hell, but also, how to actually make foreign exchange in goods and services worthwhile.

Real Exchange rates of some Scandiniavian countries are similar to those of Morocco

First, we need a benchmark of similar countries in terms of exchange rate -we while then move to another, more detailed argument. Computations on the U-Penn world table allowed for 4 countries to compare to Morocco as follows (graph on the side). The group countries is unlikely, to be sure. But the fluctuations since the 1980’s do prove that there is a certain convergence, if not a good synchronization of Morocco’s and the Scandinavian countries’ cycles. The fact that some are Euro-dominated currencies is not important, as the currency is not an aggregate  of Euro economies. Let us now examine their structural imports to see if there’s some opportunities Moroccan business can leap on and get us some honours (this does not exculpate them from looking into other sectors to invest in).

Beforehand, I wanted to discuss the differences between imports and exports values (for Morocco), more specifically, the clothing industry. For the 2009 figures, the Office des Changes reports an average price MAD 15,855  per ton for the synthetic textile fibre used for clothing. The average price for exported clothing was, for the same time period, %AD 4151,5. Synthetic fibre is a key component in textile products, thus actually destroying value for imports. When it comes to overall clothing however, figures are trickier: the nominal value for exported clothing items is MAD 23,180 which could lead to think that value is created out of fibre input; However, the nomenclature subsumes other items that do not require the synthetic fibres for their industrial process: the complete name for clothing rubric is ‘ARTICLES D’HABILLEMENT ET FOURRURES‘ which includes Fur as well. The breakdown shows that Fur items have actually a value of MAD 19533, which is part of the overall clothing exports nomenclature- fur does not need synthetic input, the wildlife supplies it.

It is, without a doubt, a sad indictment of how competitive one of our leading export. Not only do they specialize in poor capitalistic and skilled labour-intensive goods, but they actually are gradually destroying value, rather than creating it. This explains partially why Morocco is running a balance deficit. What applies to clothing and textile could apply to other industries as well, but because clothing exports make up for 20%, along Chemical products (15%) and Food industry (14,1%), I rest my case.

Now, what sort of imports Scandinavian countries like Sweden, Norway and Denmark? Sweden imports more than $ 16 Bn. worth of manufactured goods and continues in doing so, chiefly clothing and textile (surprise, surprise !). Denmark imports similar pieces of goods and amounts in Dollar. It is true Morocco suffers from juggernaut Chines competition, but that is due to the fact that our clothing industry competes on the same sectors, and quite often on the same markets. If textile business were to put their heads together into increasing productivity, or indeed increasing the level of capitalistic and skilled labour contribution in output, that would insure far better quality, and the little extra in production cost can be passed on to consumers like Scandinavian without much losses in terms of competitiveness, as long as Moroccan textile can differentiate itself as a “good quality” product.

That’s were challenges lie: how to increase the average cost of exported ton, so as to create value, and subsequently cut down the trade deficit. In order to provide resources for these policies, our exports need to look somewhere else, get rid of the small and shrinking niches they got so comfortable in, and start looking for new markets. The positive externalities would have far-reaching consequences: a more diversified pool of export markets would render us less dependent on our traditional partners’ business cycles, with all the benefits on our foreign reserves and the Dirham value.

Bonds, Yield and Morocco’s Future

Posted in Dismal Economics, Moroccan Politics & Economics, Moroccanology, The Wanderer by Zouhair ABH on October 3, 2010

Morocco succeeded in levying some fresh money on the international capital markets at good conditions. So that’s € 1.Bn at 4.563% interest to be paid over 10 years at our disposal; Let us just hope it would be put to good use. It is, in all fairness, a good deal. the fixed income market is still quite volatile due to lagging credit crunch effects, especially on the long-term rates. It is a good deal, provided the money is wisely used to create stream of currency cash flows as well as wealth and output expansion at once. Otherwise, it will be difficult for Morocco to meet the payments ahead.

April 2010, the Moroccan finance ministry mandated three international banks -HSBC, Barclays Capital & Natixis- to prospect for funds on the international capital markets. The ministry targeted a $ 500Mn levy, but retracted forthwith two months later, arguing that the “present mood in the international markets does not allow for favourable terms for a loan”. (at that time, the Greek and Spanish crisis was banging hard, and eventually the required risk premium was too high) Late September 2010 however, and due to a high demand for low-risk investment grade emerging markets debt, Morocco secured a good deal, the total offer was twice more than the initial target levy, at a low premium discount. The bond is Euro-dominated, with about 57% European holding and 19% of Middle-east and North Africa origin. Now this should, in my opinion, be good news (time and again), in the sense that the Finance Ministry managed to secured large sums of money at low price. The question remains, how is it going to be spent? If, as La Vie Eco suggested late May 2010, the government plans to use the money and reimburse an outstanding total debt of MAD 36 Bn (Finance Ministry Figures, Q1 2010) then where would the money come from to pay the coupons, and ultimately, the principal in 10 years’ time? Over the last 3 years, the average annual foreign middle and long-term service debt was about MAD 2.621 Bn, that is 52% of the effective coupon Morocco has to service with the new borrowing. It would be foolish to contemplate such policy that reminds us of earlier times, when Morocco was desperately borrowing money to pay back previous contracted debts. It is foolish because of our reliance on foreign currencies. Let us suppose for the sake of argument that there will be benefits in halving our foreign deficit. It would mean that (a) Morocco can borrow some more for other purposes, and (b) the economy is prepared to divert an annual amount of MAD 513Mn in Foreign Currencies and pay back its debt in 10 years time, whatever the economic conjecture impact on Morocco (by means of comparison, the coupon represents about 10-15% of the average annual interest paid on medium and long term debt).

 

The graph measures changes in investors risk appetite for FX emerging markets (Investment-Grade only) Source: Fixed-Income Strategy Monthly survey October 2010, Amundi Asset Management

 

While the first assumption can be translated into seemingly sensible policy of substituting debt, the second one shades great doubts on its soundness, and ultimately exposes its main contradictions. Indeed, the terms upon which the bond emission was agreed are not likely the be met in the present course of time. You will notice the graph on the opposite side that volatility (and thus, required risk premium) has risen sharply since the end of September. If the Ministry goes out on the market in the next months, and bearing in mind the present trend, it will be difficult to reiterate the feat of levying such amount at such low price. The bottom line is, the Bond cannot be used to reduce the level of debt. I had the funny assumption that the government could use the money and invest it in turns in the market for a higher return and capture some profit in the process. I could develop some more later, but it just makes turn around and go back to square one. The last strategy we are left with is therefore to actually spend the money i.e. inject some liquidity in the economic circuit. The way the money is pumped up in the economy will certainly determine its course for the next decade. Let us start off with some figures to understand how a billion Euro is not only too large a sum of money to be trifled with, but it might be a blessing in disguise to renovate some of our public economic policies as well.

The recent upgrade in Morocco’s sovereign debt rating in March 2010 finally came into concrete result, in the sense that the present market pricing of our debt gives a quantitative aspect to the rating upgrade. It also means the international capital markets, on which Morocco did not issue debt since 2007, reacted favourably to a new investment-grade debt that is deemed to be yielding enough to attract high demand, but on the same time with low risk with respect to other top-tier “junk” bonds.

 

Foreign Debt. while the outstanding amount declined rapidly from 1998 to 2006, and steadily since then. Paid interest however is relatively volatile across time period

 

The starting point is of course the considerable effort the Finance Ministry consented in order to reduce public deficit and public debt. And indeed the efforts have been must successful. It must be pointed out however, outstanding and interest debt did not fall in the same fashion; In fact, paid interest are comparatively more volatile to the remaining debt, due to a heterogeneous debt structure (an aggregate of common yet distinct maturities as well as an undeniable currency effect) but the fact remains it is quite difficult to forecast how likely the service debt would impact the economy. Please bear in mind the graph did not take into account the present bond emission, which when accrued, drives the paid interest to a two-fold increase for Q4 2010 and onward.

The Ministry (and la Vie Eco as well it seems) keep on comparing the level of debt to the GDP. Though it provides a good idea of how indebted a country is, or how likely a country is able to pay back its debt, it is, in all fairness not accurate nor a good indicator of the actual capabilities in paying back the debt. We should instead look at how well our foreign trade is performing. The reason for such choice is clear: because Moroccan Dirham is not a worldwide currency, we cannot expect the whole economy to pay back a debt. The stream of currency cash flow it generates through trade would instead. Our terms of trades, as well as our present balance of payment are the essential key to understand how crucial the bond emission is, and how equally important it is that we do not mess up with the money. As pointed before, the terms of trades are steadily degrading; Our exports are losing value with respect to the imports’, and the currency reserve is subsequently (but also due to other factors as well) degrading. According to the Office Des Changes and Bank Al Maghrib Figures, not only the balance of good deficit is deepening, but the capital balance does not follow suit (in the opposite direction that is) in facts, while the trade deficit steadily gets worse, capital net inflows are comparatively volatile, a volatility that has a sizeable impact on the national currency holdings. One might ask the question: why should we bother about capital inflows? Does it have any relation with our growth? As a matter of fact, it does. The import structure is very capital intensive. Indeed, according to the Office des Changes statistical survey, 44.6% of the total imports between January and August 2010 were capital-intensive: agricultural and industrial equipment, but also consumption goods such as cars, electronic and household equipment. Oddly enough, Oil imports do not amount to such values (Oil represents less than 8% of total 2010 imports). To sum up, the imports, capital and high skill intensive are less and less met by equal export value, and that could give some idea on how the bond emission could be used.

So there we are: we need money because the terms of trade are less and less in our favour. The borrowed money could be invested in machinery, industrial plants and agricultural investment, or, equally, to please the growing crowd of would-be middle-class aspirations and allow for some rise in wages in order to secure cheap publicity. A blogger colleague offered to vote for the Finance Minister’s party in order to bind him with the debt and urge him to spend it wisely. M. Mezouar does not have to, and even if he wants, he couldn’t. He is just overseeing the spending modalities; As for the strategic thinking, the decisions are taken higher up. a Bloomberg analyst reported M. Mezouar stating that: “The government forecasts economic growth to reach 5 percent in 2011, increasing by 0.5 percent annually through 2013”. I don’t know about this forecast, but it does not say a thing about the economy’s ability to pay back each year MAD 513Mn. In facts, if growth is fuelled by domestic demand, that would be bad news indeed, for domestic demand consumes high amounts of capital-intensive (and ultimately, expensive) goods that are not produced in Morocco. If anything, M. Mezouar has the opportunity of an easy ride: There is an election in 2012, and he could easily tempted to back up substantial tax cuts (or wage increase) to win him some popularity. Now this is all politics, and it does not say much about how the money could expand the economy. As mentioned before, the money could be in turn invested in another sovereign debt as well. Which one then? the US Treasury Bonds? Well, the higher yield is 3.40% for a 20-years maturities; What about the French or German debts then? same level of return and it is riskier to invest the money in another emerging country. The only viable alternative (or as Thatcher used to say, TINA) is to boost the exports with the billion in hand. The targeted sectors would be the semi-manufactured goods, consumption and equipment goods (all of which make up for 68% of the total exports) That involves tax cuts and tax incentives the government cannot deliver; The inflow will actually be used by the treasury and the central bank, subsequently pumped up in the financial markets and would end up in the private banks’ hands. The problem lies in the way the banks will use the money; The most dynamic sector (and for the banks, quite lucrative one might say) is real estate, a sector that is notoriously unable to deliver currency cash flow. So how’s to trust?

The idea of employing the CDG fund remains therefore the least disagreeable solution. Mezouar loses every authority over the money, and the sovereign fund gets it all, which is all for the best to generate cash. As an institutional investor, the CDG will look for the best opportunities to offset the money. The core question remains: would this benefit to all Moroccans? or rather, would it benefit to those working in export industries? Wait and See I think, until the first coupon payment that is.

Meanwhile, as another blogger stated: “Moroccans, keep in mind this ISIN code: XS0546649822. You will answer for it in 2020 “

Morocco: Economic Outlook 2009-2010

The holidays are up. My academic obligations will start off shortly, and I will be off for a couple of weeks. I will do my best to come back with some interesting pieces when time allows for it.

a week ago, the BAM’s governor, Abedellatif Jouahri presented His Majesty the King with the Bank’s Annual Report for 2009.

A. Jouhari, The Central Banker

I guess the team in charge of this piece had to work some extra hours, because the report came in a little late (late July instead of late August), but it was overall first class as usual. My aim here is not only to provide you with a digest, but also bring its figures together with those other facts and figures the HCP uploaded recently too.The two would ultimately give us an insight of how the Moroccan economy is likely to perform for this year.

First, the Bank’s report has a different “flavour”, if I may say so, from the other reports. 2009 was indeed a year of recession and economic difficulties, but I couldn’t help but feel a bit of ambivalence when I read the following lines about the national economy’s performance: “Cette évolution reflète la forte contraction de la demande extérieure, notamment de la zone euro, adressée à certaines branches industrielles, ainsi que le ralentissement dans le secteur du tourisme et du transport”. The evolution here is that of non-Agricultural GDP (a near-zero growth of 1.4% over the year) Then, there was this: “la nécessité d’accompagner un atterrissage en douceur de notre économie en 2009 […]” This seemingly harmless sentence hides some pretty tough economic conjecture and even thougher future policies for the months to come. A soft landing is usually an euphemism for a recession, or, in our case, a very low economic growth, something we cannot afford in the present circumstances, I shall explain why.

That was the first impression on the preface. The dominant mood suggests that our economy is already unable to sustain the present global economic downturn, and the indicators show that we are quite vulnerable in terms of economic resilience. However, before we go any further, it must be pointed out that our overall growth for 2009 stood at a good level (BAM estimates are 6.9%, something about 5% of real growth) and inflation is in the process of being maintained to low and stable levels over a certain period of time. These are good news of course, but as shown later on, no one can claim credit for them.

Let us now take a closer look to the figures laid in the documents. The consensus is that the Moroccan economy, though it has somewhat successfully dealt with the global economic recession, remains quite weak in case another exogenous negative shock comes along. And even though the public authorities invested large sums of money to support and consolidate the economy, there remains structural hardships that are yet to be addressed. Why would one talk of economic weaknesses? Well, for instance, the report points out -and this is strictly about national economics- that financial markets are far too over-valued: “[des] fortes hausses, en décalage par rapport aux fondementaux, qu’ont connus certains compartiments du marché des actifs et de celui du crédit”. It is understandable why foreign investors were a bit averse to put their money in the Casablanca Stock Exchange (CSE), mainly because the financial assets were over-valued. It spared us the painful effect of a financial meltdown (because of the toxic assets), but the speed foreign in which investments dropped down surely led to a climate of indecision and ultimately, doubts over the real values of bonds and shares on Casablanca stock exchange.

The essential thing to focus on was that it prevented the financial sector from being drown up by toxic assets, thus proving the Moroccan banks’ resilience: “Concernant le secteur bancaire, qui a fait preuve d’une grande résilience, il a vu ses indicateurs poursuivre leur orientation à la hausse en 2009. Le retour graduel de la progression du crédit à un rythme compatible avec la croissance économique n’a pas impacté la rentabilité des banques.” But it certainly has put a strain on the available liquidities: “Les évolutions monétaires et financières se sont caractérisées, dans un contexte de fonctionnement normal des différents marchés, par le ralentissement de la progression de la monnaie et du crédit“, something that prompted the Central Bank to lower the main rates and loosen a bit the required reserves: “S’agissant de la gestion de la liquidité, le Conseil a réduit le taux de la réserve monétaire à trois reprises, le ramenant à 8%, permettant ainsi aux banques de continuer à assurer un financement approprié de l’économie. Bank Al-Maghrib a, par ailleurs, mis à la disposition des banques sur le marché monétaire toutes les ressources requises et a mobilisé tous les instruments de politique monétaire disponibles, pour leur assurer un refinancement adéquat.

I. The Economic Growth for 2009. The bank admits it in its own words: the economy remained stable and relatively strong because of a remarkable harvest. And many, if not all foreign exchange-oriented sectors suffered severe repercussions from the economic difficulties our foreign markets had to deal with. The total 2009 economic growth breakdown looked as following in the graph proves the eminent role Agricultural GDP played.

GDP contribution. Agriculture saved the day for 2009

There is no need to point out that the agricultural output is subject to none of the devised policies, as it is mainly function of the current climate. Therefore one can assert that no government body whatsoever can claim credit for those 5% growth. It is however quite alarming that the industry sector should suffer so much from a contraction in foreign demand. As indeed it was pointed out, export-oriented industries suffered from the present conjecture, such as chemical and para-chemical industry (-1,4% YoY) and electric/electronic industry (-0.8% YoY) and leather (-4.3% YoY).

The other sector that suffered from recession was construction. While domestic demand remained quite strong, it did not though sustain the drain on liquidities 2009 saw, therefore bringing to an end a constant growth for the past years (construction credit growth went down from 45.6% YoY to 12.8%). I am quite appreciative that our economy did quite good in terms of resilience and growth, but the intrinsic factors that made it so were unfortunately not the result of any policy, but rather the lucky coincidence of good harvest. In terms of consumption, growth was mainly of domestic nature, something our whole economic structure does not admit as such. As the reader might know, our economy is mainly, if not entirely export-oriented: we need foreign currencies for the huge projects the policy-makers are undertaking, for our imports and to fuel up our growth with larger exports, not to mention its role as a security pillow as it were, in case of unexpected changes in commodities’ prices. But now that foreign markets had shrunk to concerning proportions, domestic demand successfully got behind the national economy. That’s how it contributed in terms of GDP growth points:

GDP Growth Contribution In Terms Of Consumption 2006-2009

II. The endogenous variables: workforce and productivity. It is true unemployment decreased a bit in 2009. But surely the present growth does not contribute in abating unemployment a bit, something that should be obvious yet does not compute in Moroccan reality. There is something else that bothers me about our own productivity. Before I go on about it, productivity is, as far as I am concerned, productivity remains one of the best indicators of how an economy is doing in terms of competitiveness and innovation. Plus it allows for scale economies, thus enabling wage rises with virtually no inflation. Morocco has quite bizzare characteristics in terms of productivity. the average relative labour cost has risen over the year. That’s a statistics that is akin to measure marginal labour productivity, something that the Bank did, and it turned out that in the last quarters of 2009, labour cost has risen beyond apparent labour productivity. That effectively means real destruction of wealth, but oddly enough did not contribute to inflation. Do let me explain: demand-driven inflation is fuelled up whenever a general or substantially located rise of wages is effective, without any form of increased productivity.

Labour Cost vs Productivity Growth. Moroccan competitivity outranged by that of countries like Poland and Bulgaria

The figures here do not show any specific growth in terms of output per capita (something below 1% in 2009 YoY) but they do suggest that labour cost has risen (about 4%). However, it does not seem to have a sizeable impact on inflation (as shown later on). It does however show that we are losing ground to much more competitive countries in terms of labour productivity.

In other terms, we are dangerously losing the ground to international competition much more productive and less costly than our own labour force. It might have something to do with unions’ wage claims, but that remains to be proven. The report does not point it out, so the real source of the trouble is somewhere else. In any case, any wage rise in nominal terms is quickly blended and its effects swiftly abated. In facts, every time the minimum wage (SMIG) has been updated, real wage increased, but gradually declined until the next pay rise comes in. And remarkably enough, real minimum wage stood at a near-stationary level, as the graph suggests.

Real Minimum Wage increases by Lump intervals, but gradually decreases to its original level if not below

This proves that, even though labour cost handicapped our foreign exchange, minimum wage, the classic target of laissez-faire partisans, had had nothing to do with. Out of contradiction though, the Bank points: “[…]Parallèlement, les coûts salariaux ont connu un accroissement, suite notamment à la deuxième revalorisation du SMIG[…]“.

III. Inflation and Unemployment: I already mentioned in an earlier post that Morocco dealt successfully with inflation (although only the core one is maintained to low levels) but that has come to the expenses of unemployment. the 2009 YtD inflation has even been made into a deflation, with CPI going as far as -5%, for an overall annual inflation rate of 1%. This has to do with the fact that commodity prices dramatically fell during the year (or in other terms, future prices went down, thus allowing Morocco to buy strategic commodities at a lower-than-expected price) and of course the positive impact agricultural output has on CPI. “Le ralentissement de l’inflation est également attribuable, dans une moindre mesure, aux prix des carburants et lubrifiants. En effet, leurs tarifs ont connu une première baisse mensuelle de 5% en février 2009, en raison de la révision des prix de certains carburants, puis une deuxième de 1,4% en avril suite à l’alignement du prix du gasoil 50 ppm sur celui du gasoil ordinaire auquel il s’est substitué.” As for unemployement, I was a bit disappointed with the way they presented it. Basically, the graph shows a trend pointing to a possible negative correlation between unemployement and economic growth. ze3ma all we need is to increase output, and somehow unemployment will decrease. It is true there is a negative correlation between non-Agricultural GDP and unemployement (F-Test shows a probability of 11% both variances would be independent. Chi-2 test shows a 98% likelihood of statistical relation between both variables) but surely a linear regression cannot capture the exact relation between both variables. The regression’s R-Square is only 10.08%, i.e about only 1 out of 10 statistical couples (xi,yi) has been taken into account. In any case, the Bank admits implicitely a weak link between unemployement and economic growth: “Malgré le recul de la croissance non agricole, le taux de chômage urbain s’est replié de 0,9 point de pourcentage pour se situer à 13,8%. Parallèlement, l’essor de l’activité agricole n’a pas entraîné de baisse du taux de chômage rural, lequel a stagné à 4%. La baisse du taux de chômage a concerné essentiellement la tranche d’âge 25-34 ans et les diplômés, dont le taux a fléchi respectivement de 1 et de 1,4 point de pourcentage. Toutefois, le taux de chômage de ces catégories de la population demeure relativement élevé, se situant autour de 20%.” On a different but related subject, I read something interesting in a digest the HCP published on poverty (I can’t recall the weblink, but you can find it here): “En effet, si un point de croissance économique s’accompagnait, entre 1985 et 2001, d’une augmentation des inégalités de 0,13% et donnait lieu à une réduction de la pauvreté qui ne dépassait pas 1,7%, entre 2001 et 2007, une croissance économique équivalente (de 1 point) n’affectait que marginalement les inégalités (moins de 0,01%), et réduisait, de ce fait, la pauvreté de 2,7% […]Il convient cependant de noter que cette dynamique de l’ensemble ‘Croissance, inégalité et pauvreté’ ne s’est pas opérée, dans les mêmes proportions, au niveau local, voire régional, provincial ou communal“. The good news are, we have less and less people living below or on the threshold of poverty, and the figures are encouraging indeed, but it has a drawback too: economic growth brings inequality too, and following these figures, every GDP growth point increases income inequality by more than just 0.01%. The HCP itself shows the figures: the 10% well-off get about 40% of the national income. This kind of income inequality does not allow for everyone to get a fair share of GDP growth, surely.

IV. Foreign Exchange:

a picture speaks more than a thousand words, doesn't it?

2009 was quite bad in for our terms of exchange: Not only did we notice a worsening deficit commercial balance, but there was a drain on liquidities too, for the deficit took its tool from our balance of payment. Indeed, “Les sorties nettes au titre des revenus des capitaux se sont établies à 7,4 milliards de dirhams, contre 4,1 milliards de dirhams en 2008. En effet, le solde négatif des revenus privés, passé de 6,7 milliards de dirhams à 9,4 milliards de dirhams, s’est alourdi de 40,6%, en raison de la hausse de 33,4% des sorties au titre de la rémunération d’investissements étrangers au Maroc“. That was the price to pay. Abdellatif Jouhari might have pointed out that our economy was resilient, however in times like these our foreign investors had to cash in their investments, and we need every hard currency dime we have. Why so? In 2009, our total national investments amounted to 265 billion MAD. ([…]“Compte tenu d’une variation positive des stocks de 38,8 milliards de dirhams, l’investissement global s’est chiffré à 264,8 milliards de dirhams, en quasi stagnation en termes nominaux, après une augmentation de 31,2% un an auparavant. Sa contribution à la croissance est revenue de 4,1 points de pourcentage en 2008 à 2,6 points en 2009 et le taux d’investissement brut s’est établi à 30,7%”.) Our national savings amounted to 228 billion MAD. It is clear that about 37 billion MAD need to be found in order to finance the huge investments our country is undertaking. That means 5% of our GDP, while the payment deficit amount to 20% of GDP. In other terms, Morocco needs to levy 195 billion MAD to a. finance its deficit, and b. to finance its investment. Perhaps the recent upgrade in Morocco’s sovereign debt could allow for new sources of finance, but again, in a time like this, and especially for the sort of investments we have, rates are going to be a bit steep I am afraid.

Now, I hope the picture made things clearer for 2009, so we can now move to the 2010 HCP figures.

Recovery signs for non-Agricultural GDP

These show signs of recovery, as it were: “La sortie de l’économie marocaine de sa phase de ralentissement conjoncturel se confirme de plus en plus en ce début d’année. Le redressement des activités non-agricoles s’est poursuivi au premier trimestre 2010, avec une croissance de 5,6%, en variation annuelle, après 5,4%, réalisée un trimestre auparavant. Cette performance a été confortée, en grande partie, par l’amélioration du secteur minier et, dans une moindre mesure, par celle de l’industrie et des branches annexes.” In other terms. the non-agricultural activities are recovering from the previous year. Domestic demand seems to be behind the green shoots: it grew about 4.7% Q1 2010, a bit low compared to Q1 2009, but nonetheless an important contributor to the expected GDP growth (3.6% for Q1 2010 so far). Things are on average going well.

There are however a few things that should be taken seriously: the present state in which public finances are is quite difficult, which might allow for cuts and austerity programs. Indeed, public income has fallen by 4.3% while expenditures rose by 13.4%. Public deficit is now 4% of GDP. Nothing urgently serious, but the forecast is that things will get rougher: because domestic demand is driving growth, there is an expectation of high levels of imports, an increase exports cannot match entirely. That means a further drain in our currency reserves as well as a worsening balance of commerce deficit. Finally, it seems the monetary market suffers from that as well: “Le marché monétaire est resté déficitaire au cours de la première moitié de l’année 2010. Les interventions instantanées de Bank Al-Maghrib ont pu atténuer, quelque peu, l’écart entre le taux d’intérêt interbancaire (3,31%) et le taux directeur de Bank Al- Maghrib (3,25%). Le marché bancaire subit les conséquences de plusieurs facteurs restrictifs de liquidité, en l’occurrence l’importance du déficit de la balance commerciale et la baisse des recettes des investissements directs étrangers.”

Foreign Investors are pulling fast, causing a drain on currency reserves

To sum up, the Moroccan economy did well in these troubled times, and those of its sectors that suffered from the global crisis are on their way to recovery. However, most of the good results are not the effects of policies, and the present structural hardships, while being addressed with various policies, remain hindering every efforts to get our economy off the valley of the shadows and into the sun. There can be no worthy growth while the present unemployement rate is 9%, nor with income inequality Gini index of 0.46. In short, the present growth still benefits to the few, and not to the many. More radical policies, that’s what we need.

Take care and enjoy what’s left of holidays.

We’re All Part of the Masterplan

Summertime. I know I am some 2 months late, but summer have just started for me. It’s quite hot in here but it is also nice, for the mind just sleeps into farniente and skips out the important issues, or rather, those one is so focused on during the rest of the year.

Last week, I watched Moroccan television. It’s not a feat. I mean I don’t have a television, and I get my information elsewhere. But last week, I saw the TV coverage of His Majesty’s 11th anniversary as King of Morocco and Amir Al Mouminine. Beforehand, do allow me to put forward a disclaimer. As a Moroccan national, I am not at liberty to, or in the position of, nor accepting to bear the full consequences of making any direct criticism to His Majesty’s person. My post is in full accordance with Articles 23, 19 & 28 of the Constitution (1996 reform).

Officials and Notabilities from all over Morocco to pay tribute and respect to His Majesty the King (Picture Maghreb Arabe Press)

No, my post is actually about two things: first, how the Television -and more specifically, Al Oula– covered the news. My second point is of a more deep matter. It has to do with the strategic decisions for Morocco. The ones that get billions of Dirhams into projects that are supposed to last decades, generations, even.

These reflect the ideological course the dominant power wants Morocco to take, and I have my reservations on that, as a citizen and would-be taxpayer. I don’t mind the Mustapha Alaoui-style coverage, nor the endless comments during the Beya ceremonial, not even the ancient pageantry brought from ancestral centuries. And In fact, I did find the Crown Prince and the Princess Royal very cute, quite well-behaved as they were.

What I couldn’t stand is the unbearable propaganda beating, so to speak. There were special programs on television flattering Morocco as a huge potential, as a country full of opportunities. It reminded me of an earlier era, in which the Throne Jubilee took place in a wider time set, with even more obvious propaganda, but nonetheless, with the same rallying war cry: “Wa Goulou L’3am Zine“. Did Morocco change that much in a decade? Yes it did. We had only one highway in 1999, some 100km long. Now, It’s an actually asphalt carpet from Tangier to Agadir (thousands of kilometres), and there’s more to come. Unemployment and Inflation rates fell over the last decade. It might be true that inflation decreased at a rate well above that of unemployment, but no one can deny the progress.

In 1999, the Islamist danger, as it were, was on the verge of explosion. It did culminate with the May 2003 plot, but on the whole, their intensity abated. Our Sahara claim is as robust as it ever was, thanks to the autonomy plan. In 1999, 61 countries recognized the Polisario-led Sahrawi Republic. In 2010, Only 32 continued to do so. The liberal-oriented Moudouwana reform finally recognized gender equality, even as a principle, and a recent poll suggested it is supported by the majority of Moroccan women. On the whole, We enjoy much more liberties than a decade before.

That’s what we are told, anyway. And even though there are some elements of truth in this enthusiastic and optimistic speech, it is quite far-fetched to say that, first, Morocco is going the right way, and second, all these changes benefit to the Moroccan people. I watched for the whole week the Evening News.

I know, I could’ve skipped these and watched something else, on another channel, but again, as a would-be taxpayer, I am keen on looking for how the money is spent on the Public TV network. Let me be more specific in my criticism. The first is obviously about the exaggerated optimism. I don’t know about Al Oula staff, but I am quite concerned about our economic resilience, and even more concerned about social cohesion and rising inequalities among our society. What is more frightening, these so-called “Grand Workshops” are, I suspect, benefiting mainly to the well-off of our citizens, and it is unlikely to be of sizeable benefits to the less fortunate of our people. That, I can only speculate on, although with some rational basis.

In any case, I thought we were no longer to be fed with this grotesque propaganda, or at least that something has been done in order to alleviate its awfulness a bit. It seems that is not really the case, Mustapha –His Master’s Voice– Al Alaoui might have been replaced by someone else, the tone remains the same.

His Majesty with Gen. A. Bennani, Prince Royal Rashid, Crown Prince Hassan and Princess Royal Khadija (Picture Maghreb Arabe Press)I would like to turn next to the Royal speech. The following is not a comment on what have been said, but rather, the starting point of my proof. The speech has been wonderfully clear about the strategy. His Majesty underlined four main areas upon which He pressed government and officials to focus on."La nécessité de veiller à ce que l'Etat, sous Notre conduite, assume le rôle stratégique qui lui revient dans la détermination des options fondamentales de la nation, la réalisation des grands chantiers structurants, l'impulsion, l'organisation et l'encouragement de l'initiative privée et de l'ouverture économique maîtrisée."The state referred to is not government work. It has been long admitted -and accepted de facto- that the essential government work is not carried out by the elected government of M. Abass El Fassi, but by a dense network of agencies, foundations, autonomous authorities, all of which are partially free of Parliament and Governmental check, effectively under the King's supervision, who appoints their heads by Dahir. That of course, is a matter of institutional policy, upon which I shan't go through. We need a constitutional reform that should seek People empowerment, period."Quant au deuxième pilier, il consiste en la consolidation de l'édifice démocratique. A cet égard, Nous n'avons cessé d'oeuvrer au raffermissement de l'Etat de droit et à la mise en oeuvre de réformes profondes en matière juridique et institutionnelle, ainsi que dans le domaine de la protection des droits de l'homme."It is true sizeable progress has been made on this decade. The IER (Instance d'Equite et de Reconciliation) was without precedent in the MENA region. And even though their recommendations are yet to be fully implemented, there is a great deal of progress to be achieved. Oddly enough, it looks as though this comes as a belated answer to the stern report Amnesty International on the Police-state excesses Morocco lived the last few years, mainly on Press-State showdown and against Sahrawis activists. In any case, the progress made during the last 10 years is step by step squared ans squashed by a growing authoritarian policy."le troisième pilier constitue une nécessité impérieuse. Il s'agit, en l'occurrence, de placer le citoyen au coeur de l'opération de développement, comme Nous l'avons concrètement démontré à travers l'Initiative Nationale pour le Développement Humain qui a permis d'enregistrer, sur une période de cinq années, des résultats tangibles dans le combat contre la pauvreté, l'exclusion et la marginalisation."The early HCP data, as well as that of INDH office do no necessarily validate the idea deadlines were met on poverty struggle. I took a leaf of the HCP Social Indicators. For instance, between 1998 and 2007, child poverty (Children aged below 18) fell from 20.8% to 11,3%. Thanks to the good work carried out by local charities, as well as the INDH funding. This figure, 11.3% remains, by international standards, quite high. When compared to our MENA neighbours, like Egypt (9%), things are not all that good. The trouble is, it is not enough to make progress,it has to be in line with what other developing countries are doing, and in this case, we can't claim much credit when everyone does better, can we?Overall poverty with Urban/Rural breakdowns

In the same document, data indicates that poverty was cut down in a much larger proportion in the rural areas: “Le taux de pauvreté relative a connu entre 1998 et 2007, une baisse substantielle passant de 16,2% à 9,0% à l’échelle nationale (recul de 7,2 points). Par milieu de résidence, cette baisse est plus prononcée en milieu rural (de 24,1% à 14,5%) qu’en milieu urbain (de 9,5% à 4,8%).” Ok, good news. However, if the overall poverty abated, it is mainly due to the fact that most of it is of rural source. For instance, the 1998 figure points out that rural poverty makes up for 68%. In 2007, it went up to 70%. It is obvious that because rural poverty went down in absolute terms, overall poverty should do the same, but on a relatively smaller scale. The core question remains: what actually happened so that rural poverty was brought down? Is it because of the INDH effect?

The graph shows two distinct trends with the lowest point/boundary on 2000

Following the figures I found on this website, it seems that Agricultural production was on a high trend between 2000-2007 and on the opposite trend in the couple of years before. It is of economic trivia to assume that when the agricultural output is up, rural poverty, in absolute terms at least, goes down consequently. There is proof of that statement in various academia, but one cannot categorically state it as a fact holding for Morocco. We can assert however, that the income effect played a larger role than any hypothetical influence the INDH has, the income being mainly determined by how much it rained, no policy influenced thus the output growth.  One last thing though: No matter how good and involved the policy makers were in fighting poverty, income inequality, the supreme indicator of social justice, has risen in the last decade. Following the HCP figures, in 2007, 10% of the overall population fielded 40% of the national income. In 1998, they accounted for 30%. In other terms, and bearing in mind the national cake (i.e. the GDP) rose in real terms in a decade, the 10% most wealthy got a bigger share of a bigger cake. But of course, the main objective is to fight poverty, exclusion and marginalization.

Le quatrième pilier réside dans la volonté de doter l’économie nationale de moyens permettant sa mise à niveau et son décollage, pour la réalisation de projets structurants et la mise en oeuvre de plans ambitieux, lesquels ont d’ailleurs commencé à donner leurs fruits sur les plans stratégique, sectoriel et social.

The infrastructure, i.e. Airports, Highways, Seaports and Sea-terminals, all of which are necessarily indeed to our economic growth, do not necessarily benefit to the many, and I suspect it does only to the few, an idea I am about to expand.

the 10% well-off are eating up a bigger slice of the national cake

The “Maroc Vert” strategy, to start with, in every aspect of its guidelines, seems skewed towards large and mechanized agricultural fields. La Vie Eco drew up an interesting account of the strategy. Broadly speaking, the Plan articulates two sub-strategies, the second of which involves develop ping small agri-business:

Le second pilier du Plan Maroc Vert vise l’accompagnement solidaire de la petite agriculture à travers la réalisation de 545 projets d’intensification ou de professionnalisation des petites exploitations agricoles dans les zones rurales difficiles, favorisant ainsi une meilleure productivité, une plus grande valorisation de la production et une pérennisation du revenu agricole. Ce second pilier a également pour but la reconversion de la céréaliculture en cultures à plus forte valeur ajoutée (ou moins sensibles aux précipitations) et la valorisation des produits du terroir.

I have great doubts about this. While the first sub-strategy, the one targeting large farms and agro-industry has a large financial support of public money (The Agricultural Development Agency puts forwards a figure around 80 billion MAD) the money is made available for 961 projects with only 562.000 farmers (Fat farmers If I may say so), on the second part, 545 projects for 855.000 farmers (Those that should be helped and supported) get no more than 20 billion MAD. In other terms, and under the provision all farmers benefit from the Plan Maroc Vert, 39% of the farmers (most of whom are quite wealthy) get 80% of the funding. If it is a development strategy, it is a top-down one, with all the effects on inequality and income gap that are already there, and very likely to grow, especially with the practical procedure the PMV seeks to implement.

Aggregation, as the PMV calls it, is defined as follows: “L’agrégation est un partenariat volontaire entre différentes parties pour la réalisation d’un objectif commun. Ce système repose sur le fait d’intégrer un certain nombre d’agriculteurs (agrégés) autour d’un acteur (agrégateur) disposant d’une forte capacité managériale, financière et technique lui permettant d’optimiser le processus de production.” Of course it is. Unfortunately, there is little to be said about the balance of power, or any negociation balance between say, farmer a and smaller farmers x1, x2, … xn. Because in the final analysis, an even though the agrégateurs has to deal with irregular supply, they can always find another way round to it, while the little farmers cannot do otherwise. I would prefer this aggregation strategy to be working solely with cooperatives, because that’s how they do, and it is close to my heart, ideologically speaking of course.

But because our wealthiest farmers are not -and far from it- cooperatives, this aggregation thing is certainly going to be a diktat from the strong to the weak. There is a lot more to be said on the PMV, but I think I made my point: It benefits the few, not the many.

Haleutis: That one bears similar features to the PMV. However, it seems Europe has an interest in it. According to this website, the strategy aims to: “Le plan ” Halieutis ” prévoit la concrétisation d’un certain nombre de projets phares de transformation et de valorisation des produits de la mer, avec à leur tête la création de trois pôles de compétitivité, à savoir Tanger, Agadir, et Laâyoune-Dakhla, devant mobiliser des investissements de neuf milliards de DH.” Oh, that’s a De Facto recognition of our soverignty over the Sahara, or at least, over the fishing sea of it anyway. It goes on:

L’objectif ultime étant la mise en place d’un système de gouvernance sectorielle permettant un transfert de pouvoir graduel aux régions et au secteur privé. En parallèle, un travail d’organisation du secteur est lancé à travers l’organisation de la représentation professionnelle et l’encouragement d’une interprofession. Ce faisant, le secteur de la pêche marocaine bénéficiera certainement d’une synergie des efforts et d’une bonne gouvernance à la fois nationale, régionale et locale de nature à fédérer tous les opérateurs autour des décisions majeures bénéfiques pour la gestion et le développement du secteur.”

There is considerable doubt about any governance changes. For any Moroccan national, a fishing permit goes along with an “agreement”, the famous grima as it were. Powerful lobbies are using and abusing the system on that one, and I don’t believe there is going to be a real transfer of power to the private sector, or the regional authorities, or at least, it won’t be done so without heavy resistance from those living off the present privileges and perks. In any case, the deadline is 2020, so there is plenty of time to make the necessary changes, and let us hope for the best.

La Vie Eco discussed the strategy too. They did point out that, despite a coast of some 3500 km, the sea product consumption is quite low (some 12kg per capita following their figures) and the sector remains below its full potential. On Haleutis, I think it is wait and see.

Tourism and the 2020 vision: I think it is safe to say that we couldn’t make our 10 million tourists in 2010. The figures show that the main objective of 10 millions of tourists is a failure, Former Minister Bousaid admitted the facts, when he said the plan was way too ambitious. He was sacked and replaced with a young thristy technocrat that asserts the opposite. The objective itself is just the tip of the iceberg. Alongside, huge infrastructure investment were made, with billions of dirhams (about 70 billions MAD ) for some projects that were either abandoned (like Taghazout) or with actual low economic benefit to the locals. For instance, this article provides unvaluable insights of how leisure projects were forced on locals because it is a “machrou3 sidna” (His Majesty’s project). No credible study of actual economic outcome for the locals, no serious study of the enviromental impact. If it was not for their Gran

de Ecoles diplomas, I’d say the policy makers are jokers.

These are but a few points I wanted to discuss. There are other sectors within this Grand Design,  following this portal, and for some, sizeable progress has been made, it must be reckoned with.

2010 Objective too ambitious, says former Tourism Minister

However, I cannot but stress on my own diagnosic of the ongoing trend: Unless the present course of policies is shifted, the effect the current decisions have on Morocco’s future are going to be extremely random. It is true less and less people are living in poverty. It is also true that the gap income as well as social inequality is growing, carrying with it the seeds of resentment and social ras-le-bol.

The present set of policies does nothing but exacerbate it further, and I fear the policy makers are going to reap an unpleasant harvest of sorrow and anger.

Le second pilier du Plan Maroc Vert vise l’accompagnement solidaire de la petite agriculture à travers la réalisation de 545 projets d’intensification ou de professionnalisation des petites exploitations agricoles dans les zones rurales difficiles, favorisant ainsi une meilleure productivité, une plus grande valorisation de la production et une pérennisation du revenu agricole. Ce second pilier a également pour but la reconversion de la céréaliculture en cultures à plus forte valeur ajoutée (ou moins sensibles aux précipitations) et la valorisation des produits du terroir.