OECD Investment Policy Reviews MOROCCO OECD Investment Policy Reviews Morocco 2010 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the CzechRepublic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. ISBN 978-92-64-07960-1 (print) ISBN 978-92-64-07961-8 (PDF) DOI 10.1787/9789264079618-en Series: OECD Investment Policy Reviews ISSN 1990-0929 (print) ISSN 1990-0910 (online) Also available in French: Examens de l’OCDE des politiques de l’investissement : Maroc 2010 Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2010 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. FOREWORD Foreword I n November2009, Morocco became the 42nd adherent to the OECD Declaration on International Investment and Multinational Enterprises in recognition of the country’s progress in investment policy reforms aimed at enhancing its international competitiveness and integration into the world economy. As an adherent to the Declaration, Morocco commits to providing national treatment to foreign investors and to promoting responsible business conduct. The country in turn benefits from similar assurance from other adhering governments to treat Moroccan investors abroad fairly and to encourage their multinational enterprises operating in Morocco to contribute to economic, social and environmental progress. Implementation of the Declaration also requires establishing by Morocco of a National Contact Point responsible for promoting observance of the OECD Guidelines for Multinational Enterprises, an integral part of the OECD Declaration. As an adherent, Morocco will participate in the work of the OECD Investment Committee. This publication is based on the report supporting the OECD Investment Committee in the process of Morocco’s adherence to the OECD Declaration. The examination took place in October2009 at OECD headquarters in Paris in the presence of the Moroccan delegation led by Mr. Nizar Baraka, Minister-Delegate to the Prime Minister in charge of General and Economic Affairs. The report was prepared by Blanka Kalinova, Senior Economist in the Investment Division headed by Pierre Poret in the OECD Directorate for Financial and Enterprises Affairs (DAF), in close co-operation with the Moroccan authorities. OECD INVESTMENT POLICY REVIEWS: MOROCCO 2010 © OECD 2010 3 TABLE OF CONTENTS Table of Contents Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Chapter 1.The Role of Foreign Direct Investment inMorocco’s Economic Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1. Principal trends in foreign direct investment. . . . . . . . . . . . . . . . . . 14 2. Foreign investor participation in privatisation programmes . . . . . 17 3. Foreign direct investment in Morocco from a comparative perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Chapter 2.Morocco’s Adherence to the OECD Declaration on International Investment and Multinational Enterprises and Related Decisions and Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . 23 1. Exceptions to National Treatment instrument notified byMorocco 24 2. Measures notified by Morocco for transparency . . . . . . . . . . . . . . . 28 3. Morocco’s adherence to the OECD Guidelines for Multinational Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4. Conflicting requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5. International investment incentives and disincentives . . . . . . . . . 34 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Chapter 3.Morocco’s Policy Framework for Investment . . . . . . . . . . . . . . . 37 1. Investment policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2. Investment promotion and facilitation . . . . . . . . . . . . . . . . . . . . . . . 49 3. Trade policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 4. Competition policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 5. Corporate governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6. Policies for promoting responsible business conduct . . . . . . . . . . . 67 7. Human resource development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 8. Infrastructure development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 9. Public governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Annex A. Morocco’s Exceptions to National Treatment Instrument . . . 79 Annex B. Statistical Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 OECD INVESTMENT POLICY REVIEWS: MOROCCO 2010 © OECD 2010 5 TABLE OF CONTENTS Annex C. Bilateral Investment Promotion and Protection Agreements and Double-taxation Treaties Concluded by Morocco. . . . . . . 90 Annex D. Moroccan Participation in International Organisations and Adherence to International Conventions. . . . . . . . . . . . . . 94 Annex E. Morocco’s FDI Regulatory Restrictiveness Index . . . . . . . . . . . 97 Annex F. Summary of the Main Provisions of the OECD Declaration on International Investment andMultinational Enterprises . 101 Tables 1.1. Foreign-owned banks in Morocco. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.1. Free trade agreements (FTAs) signed by Morocco . . . . . . . . . . . . . 64 B.1. Foreign direct investment flows of OECD countries and Morocco 86 B.2. Annual net flows of foreign direct investment to Morocco, by sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 B.3. Stock of foreign direct investment in Morocco, by sector, 2004-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 B.4. Stock of foreign direct investment in Morocco, by country, 2004-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 B.5. Stock of Moroccan direct investment abroad, by sector, 2004-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 B.6. Stock of Moroccan direct investment abroad, by country, 2004-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 B.7. USD/MAD exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 C.1. Bilateral investment promotion and protection agreements concluded by Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 C.2. Double-taxation treaties concluded by Morocco . . . . . . . . . . . . . . 92 Figures 1.1. FDI inflows to Morocco, 2000-2009. . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.2. Stocks of inward FDI in Morocco, 2007 . . . . . . . . . . . . . . . . . . . . . . 16 1.3. Stocks of inward FDI in Morocco, 2007 . . . . . . . . . . . . . . . . . . . . . . 17 E.1. Morocco’s FDI regulatory index by sectors and types of restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 E.2. FDI regulatory restrictiveness index: Average of Morocco’s and adherent countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 6 OECD INVESTMENT POLICY REVIEWS: MOROCCO 2010 © OECD 2010 OECD Investment Policy Reviews: Morocco 2010 © OECD 2010 Executive Summary S ince the1990s Morocco has been pursuing reforms that call for liberalising the economy through the progressive withdrawal of the state from economic activities, a broad programme of privatisation, and more openness to the outside world. The private sector and international investment are playing an essential role in this process, not only contributing financial resources but also helping to enhance the country’s competitiveness and facilitate its integration into the world economy. The Moroccan authorities have made great efforts to put in place an institutional, legal, economic and financial arsenal that is up to the task of creating a favourable investment climate. Morocco’s intention to adhere to the OECD Declaration on International Investment and Multinational Enterprises represents one of the objectives of the reform, confirming the country’s commitments to promote an open and transparent investment regime and responsible business conduct. The reforms undertaken by Morocco have stimulated the growth of its economy and encouraged its diversification and modernisation. Between2003 and2008, GDP rose on average by 5.1% a year and inflation remained under control, averaging less than 2% a year. In2008, the unemployment rate was below 10% and the poverty level declined. Despite the structural trade deficit, the current account on the balance of payments remained in surplus between2001 and2006 but recorded a deficit in2008 due to current crisis. Until recently, the stock of external public debt has diminished. Foreign direct investment (FDI) inflows have risen since2000, reaching a record level of USD2.8billion in2007, up by 16% from the previous year. In recent years FDI has taken on a greater role in the domestic economy: in2007, annual FDI inflows represented nearly 18% of gross fixed capital formation, and 5% of GDP. With nearly 70% of the FDI stock, France and Spain are the two main foreign investors in Morocco. In sectoral terms, telecommunications and manufacturing dominate (27% and 20% respectively of the end-2007FDI stock), but some categories of services such as tourism and banking are now also becoming important targets for FDI. In2009, the government expects growth to be maintained at 5.3%, thanks primarily to good performance of agriculture and the strength of domestic demand. The fallout from the world economic recession has been nevertheless felt in other sectors, especially those depending on external 7 EXECUTIVE SUMMARY demand. FDI flows which already declined in2008 (–13%) have continued to contract in2009: during the first half of2009, they dropped by almost 60% compared to the same period of the previous year. Faced with a world economic context that is clearly less favourable, and with fewer opportunities for privatisation, Morocco will need to step up its efforts to attract new investments and encourage reinvestment by investors already established in the country (seeChapter1). The fact that FDI was growing until recently reflects the significant progress that Morocco has made in improving investment conditions, especially by enhancing the transparency and predictability of policies and regulations governing investment. The main outcome here has been the adoption, in the framework of the free trade agreement concluded with the United States, of an approach that leaves all sectors free of restrictions except for those specified in a negative list. This move resulted in the establishment of the list of exceptions to National Treatment instrument notified by Morocco within the process of adhering to the OECD Declaration on International Investment and Multinational Enterprises (seeChapter2). Morocco places limits on foreign investment in the capital of air and maritime transport companies and maritime fisheries. Another important restriction notified by Morocco relates to foreign investors’ access to the ownership of land used for farming. According to the authorities, the impact of this measure is in practice attenuated by the fact that foreigners may arrange leases for up to 99years for agricultural lands. This has allowed a significant presence of foreign investors in this sector based on concessions agreements of agricultural land managed previously by public entities. The government is examining the possibility of abolishing this restriction as part of the agricultural modernisation programme. Moroccan nationality is required to establish a practice in architectural services and the reciprocity and residence requirements apply in accounting services. Among other measures affecting FDI that Morocco has notified for transparency with respect to the instrument of the OECD Declaration is the requirement to include Moroccan nationals on the boards of directors in certain sectors (maritime transport, audiovisual services, the governing bodies of private higher education institutions, and medical biology analysis laboratories). In the banking sector, Morocco has reserved a discretionary right to limit controlling foreign shareholding in the capital of major Moroccan banks under certain international agreements. However, Morocco has never exercised this right in practice and has decided not to ask to lodge an exception to National Treatment instrument for the purpose of the OECD Declaration in this sector. Based on the OECD FDI regulatory restrictiveness index, the average level of Morocco’s restrictions in nine sectors covered by this index is comparable with the average of 41countries that adhere to the OECD Declaration on 8 OECD INVESTMENT POLICY REVIEWS: MOROCCO 2010 © OECD 2010