The Moorish Wanderer

Open Society Project. Part I: The Economy

My latest readings are taking over; Karl Popper’s ‘Open Society’ and LBJ’s biography are a great read. Catchy.

But seriously though; why can’t we think of a broad, far-reaching concept like the Great Society, and apply it to Morocco? The same ailments are there; poor education record, growing inequalities, racial problems do not arise, though we do have ethnicity problems- and as it turns out, Moroccans are quite racist when it comes to Sub-Saharan residents, even natives in Morocco.

Bully Boy. Alternatively the most liberal US President since FDR (that doesn't absolve him from the Vietnam War, though)

Or perhaps we do have some sort of scheme. That’s called ‘The Grand Design’, a rough translation of ‘المشاريع الكبرى’: Tangier-Med seaport, a brand new highway network, and even the expected high-speed TGV Tangier-Casablanca. This is just to mention a few things the official line likes to boast about.The trouble with such policies can be summarized in two items:

– Transparency issues: I sometimes watch TV, and figures are sometimes displayed when it comes to these projects, something in the line of: ‘the project His Majesty has inaugurated yesterday in Oulad s5ar has a total cost of MAD 400 Million. The project, part of His Majesty’s Grand Design, will yield approximately 2500 jobs’. Interesting and informative, but not enough. Just so to remind the readers, this is money that has been spent on a project the taxpayer has not been consulted about, and upon which spending modalities they have little, if no say at all. I’m all for grand projects and strategic investment, but if I, tax payer, cannot have some effective mean in questioning the validity of such spending, then whatever comes next is irrelevant. My money, my voice.

Parliament and government are incompetent partly because the political establishment did not renew itself by looking at the best and brightest (but rather by recruiting fools and heirs) but mainly because they have been denied real power and ultimately responsibility before the Moroccan people. I seriously doubt someone like Abbas El Fassi would remain Istiqlal (and government) leader for very long if the party or the governing coalition was actually governing and with a popular mandate.

Cost-Benefits analysis: such projects are usually presented to the executive (or legislative branch, whatever the ongoing political system) with failure standards, targets, cost per spending and expected profits, a razzmatazz of reports and projections that can shut down a failing project before it goes off course. Let us have a look at the Dam policy as an illustrative instnace. The one many of our citizens’ minds have been hammered with for so many years, that whenever an argument on whether Morocco is on the ‘right tracks’ our very own Godwin point is reached: “the Dams were not such a bad idea, were they?” Of course not. There are good ideas and bad ideas; Only good ideas work, and the Monarch (whether the late Hassan II or Mohamed VI) always have good ideas. The Dams’ building project was incommensurate, a symbol of Hassan II’s megalomania (like the Casablanca Mosque he built in a time of depression and structural adjustment program) that did little to prevent droughts like in 1995. The Dams French engineers and companies built were not suited for Morocco; and this national pride did very little to save small agricultural business to close down, and farmers to move to cities. It did not prevent Morocco’s main potential (agriculture) from lifting itself altogether from its dependency on rainfall. Can we say for sure that the Tangier Med seaport is going to be a success? Are we presented with documented material on the projects gains from buying a MAD 20 Billion high-speed train for Morocco?

This lengthy introduction is not another bitter attack on these investments; it is there to clarify my position on such ventures: My own perception of strategic investments is the backbone of this ambitious –somewhat pretentious- ‘Open Society’ thing. I believe that strategic investment is an important undertaking, which stakes the nation’s finances and potential on a long, if not very long term. The least we can do is to allow the broadest possible public debate on such spending. If in liberal democracies, a democratically elected government has to present the public with all guarantees the taxpayers’ money is not going to be wasted, then a semi-democratic, autocratic monarchy with a handful of technocrats nesting in the Royal Cabinet taking charge of the virtually everything definitely loses the moral argument they ‘know what’s best for the nation’. Grande Ecole graduates and McKinsey-style consultants might be bright minds (and from experience, this is rarely the case) but they lack the proper understanding of strategic thinking. And why should they be endowed with such quality? The latter are hired on missions, the former are trained to find immediate solutions. Just what the Makhzen ordered: short-term plugs for structural weaknesses.

Let us think over the Open Society on public investment: we need to address two important sectors to give us a head start in a versatile world: exports and education.

Exports are Morocco’s lifeline. According to a rating agency officer I happen to know, it is the only parameter that prevents Morocco from reaching a confirmed ‘Investment-Grade’ status: obviously, whatever investment is undertaken, or indeed any serious spending will be conditioned on the amount of foreign currency the Moroccan economy can field. Equally, foreign investors will be all the more interested in investing if our foreign currency position is strong and structurally viable. We cannot count indefinitely on Phosphate exports, or the Diaspora’s transfers, or even Tourism for funding our expenditure. We can no longer rely on cheap exports like textile (that destroy value, rather than create it) or low-tech devices (the new pride of these ‘Grand Design’ schemes). And as it is, the Royal Cabinet and the government have been ill-advised by McKinsey and other consultancy firms: How in the world did they come up with these ‘Strategic Advantages’? in fairness, the grim alternative was to get the advice of civil service expertise; A body which has been either drained of its competence or independence of mind, or indeed systematically shut down of all genuine decision-making.

As we look to the exports structure, several observations can be made:

* Agriculture and other traditional exports have a low value per exported ton: consider the 2009 export figures: Agricultural goods represent 10% of our exports and have a value of 5.915 MAD per ton.Two-thirds of our exports, the Mining industry, fare better with an average value of 11.981,1 MAD per ton, but when excluding lead, copper and iron, mining industry value averages only 8.648,72 MAD. Overall, exports in 2009 had an average value of 7075.7 MAD, and with weighted averages, about 6676,1 MAD.

Structure moves very little during the last 8 years (BKAM Charts)

* These numbers need to be compared to imports: average value for 2009 was 7232.93 MAD per ton, a weighted average of 7240,59 MAD. These computations show the differential in value between our exports and imports (mainly due to the over-reliance on low added value exports to make up for this shortfall by increasing quantities (that fail but to cover only 42 to 45% of imports)

In these conditions, how can Morocco chose sectors that can insure a good transition for strategic investment? I don’t claim expertise (not like a Consultant would do) but there’s an idea worth considering: shift efforts to the fishing industry. That encompasses fishing -as a primary sector activity- and all related activities: canned fish and other related food industry, but also shipyards. Building ships can help the industry expand beyond the scope of domestic demand and markets.

Shipyards all over the coast: We do have about 3.500 kilometres-long coastline, with about 28 significant coastal cities, out of which 8 are large enough to be equipped with such infrastructures. initial investment might be costly at first, but then it is easily offset, first by local demand for bigger and more reliable ships. And building on the experience of coastal ship, we can even consider a further step by building ships with a larger autonomy range, ships that can fish south of Mauritanian coasts, all the way down Senegal, Mali, or even on other continents –including North Europe.

Consider the fish-based flour: its value per ton is about 8.000 MAD, and all combined fishing products about 14.768,9 MAD/Ton. Ceteris Paribus, an increase of 10% in fishing exports reduces the gap in terms of added value per ton from a 7.240MAD (Imports) and 7.075,7MAD (Exports) to 7.542,1 MAD per ton. This does not bridge the trade balance deficit significantly (only about 2%, the effect of an absolute increase of 1% over these exports) but it addresses one of our structural weaknesses, i.e. the lack of high-added value in our exports; Believe it or not, an investment in fishing industry, even as a primary activity, does boost the total exported value per ton. The effect of a much bolder, much more ambitious investment in canned fishing product, shipyards and related industries and activities is bound to be more productive, with the ultimate objective to bring up Exports/Imports ratio from 45% to a more sustainable 60-70% and improve substantially our terms of trade.

Where can we find the ships then? Moroccan ports can either buy hulls for benchmarking (and these usually cost no more than a 2-3 million dollars, even less so when the ship is more than 20 years-old) or buy plans for specific ship classes. The idea is to provide our fishery industry with a brand new fleet (compared to the existing one) able to fish on our coasts, and even provide for long-range class ships. At the moment, Morocco has 2.500 boats and other ships. Instead of relying on old ships that cannot sail away from the coasts, efforts should be put in buying new ones, with a larger autonomy range. Under assumption that all the 2.500 boats have been scraped and replaced with newer, larger boats, total investment cost would match that of the High-speed train. The difference is that the new fleet can increase its yield and diversify it (by acquiring fishing rights in Mauritania or Senegal). as it is, fishing exports (a total value of MAD 15.72 Billion in 2009) can finance such investment over a short period of time (at a moderate discount rate of 4%, exports can pay for the upgrade in 5 years’ time with no significant exaction on exports revenues) and over the intermediate and longer run, generate profits in foreign currency.

Exports/Imports in 2009

Textile is the most explicit example of value destruction; following the Office des Changes figures for 2009, the synthetic textile fibre used in textile industry valued at MAD 15,855  per ton. However, value per ton for exported clothing was, for the same time period, MAD 4151,5, a differential only fur production makes up for. The idea that textile is a leading industry (as it makes up for about 19% of total exports) is a failure in view of these figures. If anything, we should move away from such heavily-subsidized industries to more productive ones. The argument about labour is irrelevant; out of the 1.267 million employed in industry, 108.000 work in the textile sector with little or no training. In the event of a booming shipyard industry (or any other booming industry) a workforce transfer would not entail much re-training, and under the condition of an unemployment benefit, wouldn’t cost more than MAD 700 Million a year for the whole employed workforce.

Other industries can be considered for possible investment, but in any case, these should meet a couple of of criteria: first, the added value per ton, net of re-export, should be positive (which is not the case for textile and outsourced services). Second, the amount of foreign currency it brings to the national economy. We need the cash to finance all the scheduled investment.

Speaking of which, the government balance sheet needs to be expanded and improved. Although I will deal with the subject in another post, the primary focus here is to increase government budget; Though it is desirable not to burden the economy with further taxes, a sensible rethinking of income and consumption taxes can actually yield money and be fairer to the less well-off. According to previous computations run on income and consumption distribution, conservative measures (upper bracket for income tax at 40%, and 20% on VAT) yield MAD 68,53 Billion, an increase of 23.% of government receipts, or a contribution to an increase of 50% in public investment. The objective is to scrap together enough resources to boost public investment to an annual expense of MAD 100 Billion on average, and sustain such expenditure over a period of at least 5 years.

Next piece will try and consider policies to make civil service more efficient and reduce bureaucracy.

Wandering Thoughts, Vol.9

Posted in Ancient Times, Happy Times, Flash News, Read & Heard, The Wanderer, Wandering Thoughts by Zouhair ABH on March 9, 2011

Enjoy the little things. Perhaps I am turning into a crap Buddha. I could never enjoy the little things. There’s always that sense of urgency, that even at that very moment I am typing this post, there’s a feeling of time waste. Like there is something more urgent to do, more important (like my MSc thesis, for instance, or taking out the garbage). It actually depends on what one defines as ‘little things’: books are not ‘little things’. Reading is a serious activity, however trivial the book is. These menacing pages plough seeds of compunction, hanging like vocal reproaches: ‘why wouldn’t you finish up the book?’

Karl Popper in 1990.

Karl Popper (1902-1994) Image via Wikipedia

Oh, I am reading ‘From Russia With Love’; With all due respect to Sean Connery’s talent and Harry Saltzman’s artistic craftsmanship, the movie is not up to scratch. Just to set the record straight: up to the Pierce Brosnan period, James Bond movies were artistic jewels. But right now, the novels –at least the one I am reading now- are way more engaging, more exciting. I’m also re-reading Karl Popper -I read a book of his in French at first,  and in English now- it seems my concentration span has shrunk since the days I read it first. Ah, happy days, prep school days…

There is no specific subject in the wandering thoughts series. Perhaps it is just a pretext not to post on something serious (or as I like to re-write such sentences, to look like I am posting on something serious). Something superficial, like Dita Von Teese: I keep bringing up the subject, but that is so because of the numerous visits from Burlesque-related keywords (every time I tag a post with her name, total visits increase by some dozen Google search results). Ego has to be satisfied from time to time, and for a blogger to stand up, take up the microphone and spill their political guts, it either takes a lot of balls, or an ego so huge the Internet is not enough to satisfy.

On the other hand, in an institutional framework that excludes everyone that does not belong to the Master Race, or the offspring of a local notable, and/or did not graduate from a Grande Ecole (all right, I may fall into that category, but that’s not the point), or affect an indefectible support for the official line. After all these draconian filters have been applied, the field is wide empty, with either the product of con-sanguine mating, or the by-product of local baronetcies that are actually groomed for leadership. The aspiring Rastignac like me have only their anger to voice and their bitterness to nurse. On top of that, the field is mined. Talk about Moroccan meritocracy (actually, I heard that lousy line from someone).

‘The Wanderer is bitter about something’, one might think. Damn straight, and it might explain why I would be supporting constitutional reforms or indeed opening up power to outsiders and mavericks, and at the same time ousting some patronyms from power.

Petit-bourgeois reflex: I am prevented from joining in power; therefore I support any mechanism that allows me to be powerful. Constitutional reforms allow me to get political power, therefore I support them. A very cynical view indeed, but it is rooted in the obvious observation that a lot of key positions are trusted by young heirs, albeit with some prestigious degrees; Ah, there goes the unmasked thrust of an ambitious careerist. Not so simple. As Pareto did say, a society crumbles when the incumbent elite slips into an aggregate of effete, inbred, mafia-like apparatus. And when things do go tumbling down, the non-governmental elite goes away too. And there goes the petit-bourgeois instinct again: loosen up the co-optation mechanisms: marriages for instance. Diversify upper-intermediate echelon, affirmative action for Amazighs and ‘Aroubis. I don’t know, something, anything to keep the rabble -like me- happy and at the same time reach a more peaceful status-quo. [It feels good to voice one’s frustrations, doesn’t it ? Thank you for contributing to my group therapy]

The trouble with what many still fail to recognize as the Makhzen, is that it cannot be reduced to a set of historical institutions, in the western sense (i.e. in the Weberian sense). Makhzen also encompasses less formalized items: tribal loyalties, family ties. It’s a bit like Victorian England: purchased positions, family influence and hermetic elite. But there’s something else to it: a mixture of rigid bureaucracy and the idea of submission that goes with it. Hierarchy is not a matter of technical organization; it evolves into a disciple-master relationship.  So in that sense, Makhzenian ‘way-of-life’ extends to all forms of social organization: families, mainstream political parties, charities, etc. The hierarchy relationship is just a make-believe. This rotten superstructure is the blocking institutional element that prevents the radical changes we need. The trouble is, it looks a bit like a Quixotian struggle: The windmills are there, but they are not there.

So that was the politics two-bits. Keep it wandering.

Twitter is such a wonderful instrument: as you may know, the blogoma lacks formal connections between its distinguished members. I mean in that sense that bloggers, like writers, do not take the trouble to engage in meaningful discussions (I might be missing scores of fruitful blog-epistolary correspondence) so we do our best to compensate on twitter. 140 characters do not help however, to formalize these discussions, which are doomed to remain chit-chat. But a couple of days ago, there was some interesting chit-chat about Economics in Arabic. An interesting suggestion came by to post on economics in French, or better still, in Arabic. I’d love to, but -as far as both languages are concerned- there is a formidable obstacle -among others- that prevents me stepping up and meet the challenge: lack of proper vocabulary.

French language has exhausted very early its vocabulary span to keep-up with the essentially Anglo-saxon scientific production in the economic field. Sometimes, it goes as far as literally using the same words: ‘Averse au Risque‘ for ‘Risk Aversion’, for instance. Native French economists seem to be either poorly educated in English language (an ordeal I had unfortunately to put up with time and again) or with little or no imagination to come up with alternative translations. In terms of scientific production (and I refer here to breakthrough academia) the French academic world is senile if not already dead (did you see the way they treat their PhD Student? And I don’t blame the state-controlled scientific research schemes, I blame the political will to adopt Anglo-saxon procedures with half-measures). plus their clinging to their language as the primary language is just ridiculous.

What about the Arab-speaking/writing academia? What words can be devised to refer to concepts? inflation is معدل التضخم but more sophisticated concepts are difficult to translate, or even to find words that can approximate the meaning. I looked up some vocabulary, and here’s what I’ve found:

Inflation: معدل التضخم
Goods & Services: بضاعة و خدمات
Deficit: عجز
Unemployment: بطالة
GDP: الناتج الوطني الخام
Monetary Creation: معدل طبع النقود
Recovery: إنتعاش
Capital: رأسمال
Labour: اليد العاملة
Import/Export: إستيراد و التصدير
Wage: أجر
Utility Function: نظرية المنفعة
and the killer, privatization: خصخصة

As long as the concepts are often used in media outlets, or belong to the basic notions of economics, there are plenty of words out there. But in hardcore academics, concepts like Risk aversion, liquidity trap, savings glut, etc… are simply missing, not because of lack of words, but because contrary to the more popular concepts, these belong essentially to a rarefied audience. And such as it is, the Arab-speaking research program is unable to come up with new concepts. At best, there might be some clever translation, but there you go.

Now, I haven’t given much thoughts about it, since I am utterly uninterested in the future of Arabic language: I can read and write it, and I enjoy a good reading when I find one,  but I simply cannot feel that fire and brimstone pan-Arab passion and Arab revival. I feel some ideological sympathy towards Gamal Abdel Nasser, but I don’t buy into this ‘great Arab nation’ grandiose project, not to mention the supra-national pet project of any political islamist movement, the much fantasied about Umma.

Tallyho Politics, The Reign of Amateur Policy-makers

The Political apparatus in Morocco is a shambles. I say shoot the old lot, bring the young and let them make mistakes. Sounds radical, doesn’t it?
Joke aside, it’s been a long time since the political parties in Morocco failed to devise policies, and when they do sketch some feeble argument, it is so diluted that if it ever was put into practise, they wouldn’t know where to start first. On the other hand, policy-makers in Morocco lead the charge with formidable support from McKinsey-style consultancy firms. The trouble is, a country like Morocco cannot be run like a corporation. And even if it is so in the minds of the young fellows at the Royal Cabinet (which I expect to join any moment now. There’s always hope, isn’t there?) the corporation is certainly not run in the best interest of its shareholders, only to the board’s benefit.

Policy and social engineering are worked out under the assumption that the objective is to maximize the country’s welfare. There remains a great deal of blur in defining what one might mean by that word: “welfare“. In fiscal matters, it may come to the idea of taxing individuals and companies more than others, while in social policy, it also means helping some social classes more than others. There’s also a great deal of ideology in policy-making, even among the high-brow circles of consultants: under the veneer of technocracy, there’s a political motivation behind strategic thinking like the ‘Plan Maroc Vert‘, ‘Halieutis and the INDH or indeed anything of the sort like the high-speed network.

Perhaps I am over-rating the Palace’s task force. It has been a question I often ask myself: how are decisions taken up there? Whether on economic policy, or on-the-spot decision crisis like the Aminatou Haidar case, or the issue of protest camps in Agdim Izik, how are decisions made up there? Do they meet in a war-room, delineating scenarii then discussing the likelihood of each one until they reach the best decision?  Because we know, we all know it’s not some old-fashioned fool that takes the decisions in Morocco (even global institutions like rating agencies know that) so it must be that the Royal Cabinet has some kind of modus operandi I assume to be ultra-rational (given the high proportion of  engineer and business graduate from the French Grandes Ecoles). And yet, it looks as though only fools and incompetents are in charge. Please allow me to expatiate; and ad absurdo reasoning would be best. Let’s consider the ONA-SNI case: if the firm is really set on pulling the country out of poverty and into prosperity, how come its dividend policy never shows it?

I mentioned before an opinion that has been formed on the economy front: there is, among other things, a consensus that the private business of His Majesty can pull the economy. The idea is that we need the Moroccan equivalent of Chaebol, the Korean conglomerate of Banks and Industries that played significant part in making South Korea what it is today: a first-class country that is now considered to be member of the G20 club, when, 50 years ago, its GDP per capita was lower than Morocco’s, and the best thing they could have ever manufactured at the time was T-shirts. The idea was therefore to imitate, as it were, the Korean experience with companies like SNI-ONA, or indeed Attijari Wafabank and other national heavyweights. The economic model sounds good: at the price of domestic monopoly, Morocco fields a first-class holding able to operate on global markets with the required size to win us some surplus that would be redistributed. In other words, the private monopoly captures the common surplus in order to expand, and then redistribute it through pay rise or investment in intangible assets. This is the semi-official line. The financial statements tell otherwise, though.

ONA Shareholders per share. the only public fund -CDG- has a ridiculous 2.73%

Now, doesn’t it strike you as odd that the fleuron of our largest firms should invest so little and distribute these high levels of dividends to the shareholders? Between 2004 and 2010 -prior to the smoke screen withdrawal of ONA SNI shares- the holding distributed an average of about 3/4 of its benefits (which reached the billion of Dirhams at least);

while the rare investments they undertook where mainly about mergers and real estate speculation. The Chaebols, on the other hand, had a gargantuan appetite for asset acquisition (which also meant that they favoured a rigorous dividend discipline, translated into high levels of savings – something that did not prevent them from using audacious financial structuring) and are, at the end of the day, radically different from our own sketchy, greedy, money-grabbing beloved conglomerate. So much for the economic new era

Even the ‘Grand Workshops’ our 8.00 o’clock news are so keen to laud, the fulsome praises elude the main question of: ‘who benefits from what’. Plan Maroc Vert is a favourite: the official line states that small farmers would benefit from cutting-edge policies like ‘aggregation’. For those who are not familiar with the plan, it has two main implementation strategies: the first one is export-oriented, very monopolistic that favours already existing large domains, industrial-like farms (among which [drum rolls…] the Royal Domains) the other one, which looks like it was hurriedly put together, is designed to help ‘directly’ the small farmers. Cooperatives, micro-credit, etc… just enough to keep their heads above the water. How could Plan Maroc vert be helpful when funding is so biased towards large, wealthy farmers?  Do we need to remind the readers of the figures? Yes we do, it’s always beneficial to  put things in prospective: MAD 80 billion is made available for 961 projects with only 562.000 farmers and 545 projects for 855.000 farmers (Those that should be helped and supported) get no more than MAD 20 billion.  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.

In economic terms, the policies are not, to say the least, caring about the majority. Unless they take the view that the common welfare is that of a privileged minority, the 10% sort that has 40% of the total national income, the sort of passengers able to pay for the TGV between Tangiers and Casablanca. Perhaps the idea is that already rich people would get richer and richer, till they reach a point of satiety such that they would spend money, to the benefit of the less-off. If that’s the view, this kind of rapacious capitalism is bound engender serious resentment from the excluded. Oh, wait it’s already happening !

(Credits to Al Wandida for circulating the video)

Now that the economic model proved its shortcomings, social and political strategies prove to be at best coy, and in any case dangerously hegemonic. Say the Moudouwana was a great improvement (although one can cast doubts whether it was just a return to the 1957 square) it was a show that was full of symbolism: to the liberal side, it was a clear signal that His Majesty is the one calling the shots, and their liberal agenda prospers as long as His pleasure allows it to. To the conservatives, he proved he could block whenever he wanted the perceived westernalization of Morocco, and  confirmed his role as the sole source of religous legitimacy. On this issue and on may others, His Majesty made his King Louis XIV’s apocryphal quote: ‘l’Etat, C’est Moi‘. And all the policies the little helping hand and the shadow army are not, in the long term, to His, or Morocco’s best interest.

FAEH: The Architect of His Majesty's political project.

The PAM project, on the other hand, is the only old-school trick: the infamous Front de Défense des Institutions Constitutionelles, Rassemblement National des Indépendants, Union Constitutionnelle or Parti Justice et Développement (Among Others) all roved to be temporary rough patches when the opposition was resolute in its stand. the PAM is a patch against the abnormal high abstention rate the 2007 general elections recorded; A motley of activists, a bizarre amalgam of renegade left-wingers, rural and Mafioso-like notables and hungry young opportunists. Does it restore confidence in partisan politics? The PAM designers are in for a shock, I dare say.

Events in Tunisia -to which I must confess my complete astonishment, why, a regime like Ben Ali’s to fold like a house of cards!- proved that an excessive concentration of wealth, power and legitimacy is, on the long run, a disastrous fuite en avant.

In these conditions, why should anyone try and give additional credit to a regime so stubbornly greedy, and how long should it take them to realize that monopolising bright minds -and neutralizing their most valuable assets, i.e. ideas- is not going to help them further, and fuels a resentment that I warn might develop into a incommensurable social conflagration.