The Geopolitical & Economic History of Morocco
The Mediterranean/African Star of Automotive & Aerospace Manufacturing
Morocco is a semi-constitutional monarchy (meaning, the King shares executive power with the prime minister) and has 38M people who live in the country. Morocco is 95% Arab-Berber. It is classified as a lower-middle income country by the World Bank and has medium human development by the United Nations. The average Moroccan makes $3620 USD a year in 2021 based on market exchange rates. If adjusted for purchasing power, the average Moroccan makes closer to ~$9000 a year.
Despite its significant influence in Africa and its relative success, Morocco has faced several economic challenges requiring assistance. Since gaining independence in 1956, the country has received 20 International Monetary Fund (IMF) emergency, non-concessional (market-based) loans to avoid bankruptcy: 14 standby arrangements (short term, 1-2 year emergency aid & loans), two extended fund facilities (medium term, ~3-4 year emergency loans), and four precautionary and liquidity lines of credit (6 month to 2 year emergency loans to nations with vulnerabilities). As a result, Morocco has a credit rating of BB+, which is a step below the safe “investment grade debt” category. As of April 2023, Morocco received a new $5B flexible credit line from the IMF, designed for crisis prevention. Despite Morocco’s numerous financial challenges, Morocco is still the 3rd best nation to lend to in Africa and is on track to becoming an upper-middle income country (i.e., South Africa, Turkey, Mexico, and Brazil).
Evidence of Development in Morocco:
Millions of Moroccans are move from villages to cities, increasing the urbanization rate (Morocco’s urbanization rate is 64%). The young people are getting productive urban jobs in manufacturing and services, which pays more than subsistence farming.
Morocco is the automotive and aerospace manufacturing hub of Africa, overtaking South Africa in 2018. Morocco has over 17K aerospace jobs. 40% of them are women. Rabat is now becoming the aerospace city. The Moroccan car industry employs 220K people and exports 400K cars a year. Besides car manufacturers, car part suppliers like Takata, Treves, GMD and etc. are also setting up shop in Morocco.
Current Challenges:
Morocco has a big output gap. (Morocco is not yet producing enough jobs for its youth. Youth unemployment is 32%, roughly a third of youth are unemployed.
66% of Moroccan jobs are low paying, long hour, untaxed informal jobs. These jobs are 30% of the Moroccan economy.
Morocco is still a net importer of food, which implies that the country does not produce enough food for its population.
Morocco and Algeria hate each other. Algeria broke off all diplomatic relations with Morocco in 2021. Morocco failed to defeat Algeria and conquer Western Algerian (historically Moroccan) territory after Algeria became independent in 1963. (West Algeria possesses oil, iron, gas, and manganese) and the two nations have hated each other since.
Morocco, in 1975, tried to reclaim its Southern territory in “Western Sahara”/Sahrawi Arab Democratic Republic, but Algeria has funded the Sahrawi people to fight Moroccan control. Western Sahara/the Southern Provinces has Morocco’s highest quality phosphate (the resource used to make fertilizer) .
Morocco ended up controlling the Southern Territories/Western Sahara, leaving thousands of Sahrawi refugees living in the Algeria. Some people in the UN would call Morocco’s occupation “Apartheid”. Morocco denies any allegations that its control of Western Sahara is tantamount to apartheid.
How come Morocco has become a car & aerospace hub?
In order to become a destination for East Asian, North American, and European manufacturing, a nation needs to have abundant electricity (>70% of population needs access). Otherwise, there will be unpredictable power outages that will hinder the factory production of cars and airplanes. Right now, Morocco has near universal electricity access because Morocco imports 90% of its energy needs to provide electricity for its people. Morocco’s electricity comes from coal (37%), hydroelectricity (16%), fuel oil (8%), natural gas (18%), and wind & solar (21%).
However, Morocco still lags behind China, Turkey and South Africa (which has been plagued with electricity issues, lately).
History:
Morocco has been ruled by indigenous Berber dynasties since the 8th century. There were times Morocco controlled parts of Portugal & Spain for centuries. During the zenith of the Berber kingdoms’ power, Morocco held sway over African territories encompassing present-day Morocco, parts of Algeria, Mauritania, and Mali. The Moroccan kingdom, armed with European cannons, famously destroyed the West African, Songhai empire in 1591. If we mapped all the territory that Moroccan Kings had control over in Africa, then it would look like the map below:
The Alawi dynasty came to power in Morocco in 1631 and continues to rule the country to this day. However, in the 1800s, Morocco’s development lagged behind Europe, which was undergoing industrialization. During the 1830s and 1840s, Morocco faced conflicts with France and Spain, resulting in their defeat.
By 1912, France and Spain partitioned Morocco. After the 1912 Treaty of Fez, Morocco was a Protectorate of France. During this period, Morocco created a stock market in Casablanca in 1929. The Casablanca Stock Exchange is the third largest in Africa after South Africa and Nigeria.
Morocco was not a colony but a protectorate of France. While Malians, Burkinabes, and Chadians were forced to find gold or pick cotton, Morocco has some nominal autonomy. 400K French settlers moved to Morocco and France controlled every aspect of power from the Moroccan King.
By 1946, the Moroccan King, Mohammed ben Youssef of the Alaouite dynasty was a nationalist who demanded independence. As the French tried empowering Berber chiefs to undermine the King, the King was able to unite urban and rural people to create riots. France wasn’t able to hold on to power much longer.
By 1956, Morocco won its independence.
African vs. European Interests
Morocco was Pan-African initially. North Africa & Ghana, Guinea, Mali were part of the Casablanca Group. This group wanted a strong, unified African Federation. However, other African countries (like Ivory Coast or Nigeria) did not want that, so a compromise institution called the Organization of African Unity was formed. After the Organization of African Unity (OAU) recognized Western Sahara, this angered Morocco and Morocco left the OAU in 1984. Then Morocco tried joining the European Economic Community in 1987, but Europe said because Morocco is not in Europe.
By 2017, Morocco rejoined the African Union (the successor of the OAU), and started investing in Sub-Saharan Africa like crazy - 85% of Morocco’s foreign direct investment went to Sub-Saharan Africa in 2018 and Morocco is trying to join the Economic Community of West African States. The optimistic Pan-Africanist says Morocco is doing this to strengthen African brotherhood ties. Meanwhile, the cynic thinks this is Morocco’s lobbying effort to make the African Union recognize Morocco’s sovereignty over Western Sahara. The true answer is probably both.
Moroccan Independence:
King Mohammed (1956-1961) & King Hassan II (1961-1999)
Morocco started a series of government-led, five-year plans to modernize Morocco. The government owned manufacturing enterprises, hotels, and banks and used foreign investment to fund its efforts. Also increased spending on social services, cheap housing, and food subsidies. Some efforts hit growth targets and some plans failed to hit targets.
In early to mid 70s, Morocco started to “Moroccanize” the economy, which meant increasing Moroccan citizens’ share of ownership, management, and employment in foreign industry operating in Morocco. 2000 foreign owned firms allocated at least 50% of their shares to the Moroccan government or Moroccan investors. In addition, Morocco instituted land reform by taking the land and 2000 farms owned by Europeans. Overall Morocco grew decently fast (~3% per year on average, adjusted for inflation) from 1960 to 1980.
Between 1981-1985, Hassan had an ambitious 5 year plan to make Morocco self-sufficient in food, develop hydroelectric stations, find oil, expand irrigated land, increase hospitals and start decentralizing the economy to regions. Morocco made progress but Morocco financed most of these projects with foreign loans. By mid 1980s, due to capital flight, Morocco again needed financial assistance from the IMF from 1980 to 1993.
By the mid 1980s, the IMF conditioned Morocco to privatize government owned enterprises, devalued their currency, and changed price policies to encourage local production. Saudi Arabia forgave ~$3B in Moroccan debt and the Paris & London club allowed debt rescheduling. Growth was not as quick from 1980 to 2000s (1.4%). Meanwhile, the Sub-Saharan Africa didn’t grow at all at that period.
Muhammed VI (1999-Present)
In 2006, America and Morocco signed a free trade agreement, which eliminated tariffs on 95% of consumer and industrial goods in each other’s countries. In 2016 duties were phased out. As of 2022, 150 American firms operate in Morocco.
In 2011 was the Arab Spring, an event in which many Moroccans protested for more democracy. Small reforms were done such as the reduction of the King’s ability to appoint diplomatic and high administrative posts.
From 2012-2020, Morocco borrowed ~$12B from the IMF to protect Morocco from liquidity crises.
From 2017 to 2021, Morocco has had a steady compound annual growth rate around 3% for its real per capita GDP (Math: ($3795.4/$3288.5) ^(.2)-1)) . If Morocco continues to grow at this rate, Morocco will be an upper-middle income economy this decade. What is especially important about Morocco is its manufacturing growth.
Morocco’s Export Industries
Morocco’s billion-dollar export industries to the world are selling cars, chemical fertilizers, insulated wire, phosphoric acid, clothes, calcium phosphates and aircraft parts. Morocco produces 152K university graduates a year (Morocco’s labor force is 12M, so university grads are slightly over 1% of the labor force) and is now harnessing its workforce to get jobs in automotive, phosphates, and aerospace. Firms are creating subsidiaries in Morocco in order to do business like Morocco’s Spirit Casablanca, a subsidiary of America’s Spirit Aerospace systems.
Morocco is the close proximity, cheap manufacturing, shipping, and transport cost, assembly nation for the European Union cars and North American aerospace. It makes perfect sense for Morocco to be the assembly plant of Europe. Morocco is just 9 miles across the straits of Gibraltar from Spain. The economy is already mainly electrified, and with its strategic location and government support offering low tax, industrial parks for multinationals (like the Midparc Free Zone and Tanger Free Zone in Melloussa).
Cars:
The Moroccan car industry employs 220K people and exports 400K cars a year. Besides car manufacturers, car part suppliers like Takata, Treves, GMD and etc. are also setting up shop in Morocco.
A Moroccan automotive technician worker makes roughly 90K Moroccan Dirham a year ($9K USD). That same technician in France would make 36K euros or ($38K USD). In other words, Moroccan workers make 40% less than French car workers. The trade off is, that Moroccans produce $12 for every hour worked while French make $59 for every hour worked due to differences in capital investment. So even though France saves 60% on cost, it loses 80% of labor productivity. This is why Europe does Research & Development in Europe, and make mass market assembly in places like Morocco, China, Turkey, or South Africa. The Tangier factory in Northern Morocco produces 340K cars a year and it is the largest car factory in Africa. European car firms like France’s Renault & Peugeot, Japanese firms like Sumitomo, and part suppliers like Japanese Yazaki and French Valeo have invested billions in Morocco. Automotive growth is so huge that it’s causing a reverse brain drain, making Moroccan managers and executives come back to Morocco.
Morocco's export of cars to France, and other countries, is facilitated through international trade. Morocco has developed a strong automotive industry and has attracted investments from global automakers due to factors such as its strategic location, competitive costs, and trade agreements. The vehicles produced in Morocco, including those by Renault Group Morocco, are exported to various markets, including France.
Morocco benefits from its trade deal with the EU. These agreements facilitate the export of Moroccan-made cars to France and other European countries.
It's worth noting that the export of cars from Morocco to France is not limited to Renault Group Morocco. Other carmakers, such as Peugeot, have also established manufacturing facilities in Morocco and export cars to various markets, including France.
Now China’s BYD will be making electric cars in Morocco with a plant located in Kenitra.
Agriculture:
Morocco exports nearly $8B in agricultural products a year, which mainly goes to Europe. Many of Morocco’s farms are developed, irrigated, and well financed.
Aircraft & Wire Bundles:
Morocco also has a fast growing, talented aerospace workforce. Morocco set up a “Midparc aeronautical zone” in Casablanca, and its free trade zone worked amazingly. Moroccans assemble aerospace parts for Boeing. fuselages for European Airbus, wing components and engines for Canadian Bombardier, Canadian Gal Aerospace, Swiss Pilatus Aircraft Chinese Comac, Brazilian Embraer, and the Russian Sukhoi. Morocco’s aerospace sector is competitive since the average Moroccan aerospace worker makes 39,530 Moroccan Dirham per year ($3926 or roughly $327 per month). This makes Morocco have a cheaper labor force for Western investment than other cheap assembly nations like Tunisia ($338 per month), Turkey ($430 per month), and South Africa ($1280 per month).
Collins aerospace, Safran, and Spirit Aerosystems are also adding Morocco to its supply chain. As of now, Morocco has 140 aerospace companies that manufacture finished aircrafts, provide maintenance, and build aerospace infrastructure.
Now Morocco is trying to generate domestic private investment in the aerospace industry instead of depending on just foreign investment. In 2001, Morocco’s state owned enterprise, Royal Air Maroc, made the 1st domestic aerospace firm with Boeing and Safran Electrical & Power being industrial partners. The firm is called Morocco Aero-Technical Interconnect Systems. They make wire bundles for the Boeing 737 Max and 777X. In 2011, Morocco made a vocational school to train Moroccans for aerospace assembly. The firm has revenues over $80M.
Now that Morocco and Israel have signed diplomatic relations. Morocco and Israel signed a partnership agreement that will bring more investments in Morocco by Israel aerospace organizations.
Chemical Fertilizers, Phosphoric Acid, & Calcium Phosphates:
Morocco’s government owned corporation, The Office Cherifien des Phosphates (OCP), is the world’s largest producer of phosphate and phosphate based products. It helps that Morocco has more phosphate reserves than any other country on earth by far. Nearly 70% of the world’s phosphate is in Morocco! Morocco’s OCP processes phosphate into mainly two things:
1. Phosphorous: used to make fertilizers to increase agricultural output
2. Phosphoric acid: used to make food, food additives, detergents, cosmetics, animal feed & electronics
It’s also used to make lithium ion-batteries.
OCP is one of the largest (phosphate, fertilizer, chemicals, and mineral industrial firms by revenue. In 2022, it made $115B Moroccan dinar or $11B USD. The company is 94% owned by the government and 6% owned by the commercial bank, Banque Populaire. OCP has subsidiaries in New York, Canada, Brazil, India, Singapore, China, and Ethiopia.
Morocco is now an aerospace and automotive factory shop for North America, Europe, Japan, South Korea and China. By now getting into the electric vehicle sector and by already having an established car and aerospace sector, Morocco can increase the nation’s productivity level through absorbing foreign technology, learning-by-doing, and competing with other export markets to gain more European/American/Chinese/Japanese investment. Morocco is playing “catchup growth” like China did in the 80s.
A company in Norway is claiming to have found massive phosphate reserves, possibly more than Morocco’s. They are not yet in production.
https://www.dw.com/en/eu-pins-hope-on-norway-raw-materials-discovery/a-56343829