Morocco puts in an impressive performance in Investment Monitor’s 2022 Inward FDI Performance Index, which measures a country’s inward investment levels against its gross domestic product (GDP) using GlobalData’s FDI Projects Database, which tracks greenfield projects.
Morocco, with a score of 4.1, received more than four times its fair share of inward greenfield foreign direct investment (FDI) compared with what could be expected given its level of GDP. In that regard, Morocco is performing exceedingly well in FDI terms.
The country placed first for FDI in Africa and third in the Middle East and North Africa region based on the aforementioned index, attracting 95 projects in 2021. The United Arab Emirates (UAE) ranks first with an index score of 8.2, while Bahrain places second scoring 5.1.
Morocco ranks first in Africa for FDI performance
There are some impressive figures behind Morocco's performance in Investment Monitor’s 2022 Inward FDI Performance Index. Although Morocco witnessed an 11% decline in FDI between 2019 and 2020, with project numbers dropping from 82 to 73, inward investment rebounded in 2021 to surpass pre-pandemic levels. Morocco recorded 95 FDI projects in 2021, a 27.4% increase from 2020 (significantly above the global average increase of 18.1%). In terms of capital investment, Morocco recorded a 51.7% increase on 2020's figures in 2021, to $2.15bn, according to data from the UN Conference on Trade and Development.
In 2019 and 2020, Morocco ranked third in the Middle East and North Africa in terms of inward FDI projects, behind the UAE and Saudi Arabia. Despite witnessing an increase in FDI in 2021, Morocco dropped to fifth position after being overtaken by Qatar (which saw project numbers jump from 30 to 103) and Egypt (which witnessed an increase from 61 to 116).
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Regionally, one-third of Morocco’s 2021 inward investment went to the Casablanca-Settat region, home to port cities Casablanca and Mohammedia. Tanger-Tetouan-Al Hoceima, the northernmost region of Morocco, ranked second, attracting 19 projects, while Rabat-Sale-Kenitra in north-west Morocco ranked third with 11 projects. At a city level Casablanca, Morocco’s most populous city, attracted the highest level of FDI with 23 projects. Tangier placed second with 14 projects, five of which were focused on logistics, while the country’s capital, Rabat, placed third with eight projects.
Business and professional services was the leading sector for FDI, with project numbers rising from eight in 2020 to 17. Logistics and tourism ranked joint-second with 12 projects each while automotives, which was the leading sector in 2019 and 2020, dropped to fourth place, recording ten projects in 2021. Software and IT services placed fifth with nine projects, a jump from four projects recorded in 2019 and one in 2020. Morocco’s top five sectors accounted for 63.16% of its total inward FDI.
Western Europe maintained its leading position for inward FDI in Morocco in 2021 with 49 projects, an increase from 40 in 2020. Asia-Pacific ranked second with 14 projects while North America placed third with 13. At a country level, France was the leading source country for FDI coming into Morocco, accounting for one-fifth of its total investment. France-based companies invested in 19 projects in 2021, primarily focused on software and IT services, automotive, electronics and logistics. The US ranked second with 11 projects (increasing its investments from seven in 2020), while China placed third, almost doubling its project count from four to seven.
How can Morocco heighten its appeal to foreign investors?
Unlike many other Middle East and North African countries, Morocco’s economy is diversified, thanks in part to a series of reforms undertaken at government level to reduce its dependence on agriculture, phosphate and tourism.
Morocco began its economic reform process in 2004 when ruling monarch King Mohammed VI laid out extensive plans to capitalise on the country’s strategic location through the creation of industrial free zones and ports. The industrial reform process was further enhanced by the implementation of the Industrial Acceleration Plan 2014–2020, which aimed to create 500,000 new jobs and increase industry’s share of GDP from 14% to 23% by the end of 2020. These strategic development programmes resulted in the creation of 54 industrial systems in partnership with 32 professional associations and universities, five industrial free zones and 117,000 new jobs across aerospace, textiles, food and automotive industries.
Spurred on by its previous success, the Moroccan government introduced phase two of its Industrial Acceleration Plan, to be implemented between 2021 and 2025. According to Moroccan head of government Saad Eddine El Othmani, the second phase aims to consolidate “the achievements made within the framework of the first phase of the plan and their generalisation to all regions, by integrating small and medium-sized enterprises and by placing industry at the heart of technological transformations”.
The phase two plan will also focus on regional development, the creation of a strategic investment fund to support private sector companies and the restructuring of state-owned enterprises. It further aims to undertake research and development initiatives to adopt technologically advanced methods of production.
Trade agreements encourage diversification and reduce risk
To further facilitate trade and investment, Morocco has concluded preferential trade agreements with 62 countries as well as an association agreement with the EU, which aims to eliminate the double taxation of income. Morocco is the only country in Africa to have signed a free-trade agreement with the US, which facilitates the elimination of a 95% tariff on qualified industrial and consumer goods. In 2021, Morocco also began free-trade negotiations with Canada and several West African countries.
Due to the ongoing diversification of its trading partners, inward FDI in Morocco will be less dependent on a few countries, thus enhancing its appeal while reducing its economic risk. Morocco has the benefit of a strategic geographical position. It can offer its investors a springboard into the wider African continent while maintaining close proximity to Europe.
The Moroccan government has prioritised the country’s economic success and has seen the benefits of well-thought-out initiatives. In 2021, it released a new development model that aims to boost economic growth by 2035 and reduce social and economic disparities within the country. Such strategic initiatives will encourage FDI and facilitate further economic progression in the coming years.