Monday, May 18, 2009
Morocco's Economy and Weathering the Global Financial Storm
Here is a good article from the Associated Press about how the main industries in Morocco are trying to deal with the global financial crisis. I think the reassurances that the government will step in to help people if things get too bad should be taken with a grain of salt, but besides that, it is very informative.
Morocco sheds jobs but hangs on in financial storm
By ALFRED de MONTESQUIOU – 1 day ago
SALE, Morocco (AP) — Clamor fills the factory as workers bent over their industrial sewing machines stitch together women's garments at galloping speed. Yet the vast workshop is only half full, its blank benches a testimony to how the global financial meltdown swings back at the developing world.
Morocco's diverse, open economy has served as a model to poorer nations in Africa and the Arab world, but it has also left the country exposed to global downturn as trade with the rich world shrinks. And many are now watching whether the ripple effects of international finance could turn nasty in a developing nation like this north African kingdom with strong political and migration ties to Europe.
Moroccan authorities fear some 20,000 jobs are being cut in the textile industry, about 10 percent of the national total. Others have vanished in the tourism industry, the backbone of the coastal country's economy. Carmaker Nissan froze plans for a car plant promising thousands more positions. Remittances are down, too, as Moroccans working in Europe face layoffs.
"We're worried more cuts will follow," said Naima Arour, shouting to make herself heard over the hammering of her sewing machine. "Without work, we starve here," she said, barely lifting her eyes from the collars she was hastily fixing to women's blouses.
The government is keeping a close watch on at-risk sectors and intervening to keep joblessness down and maintain stability. Unauthorized groups critical of Morocco's tolerant, Western-friendly liberal economy, including those on the Islamist fringes, recruit massively in the country's slums, where idle youth are a fertile target for extremists.
There are no unemployment benefits in Morocco. And the firing of one employee usually directly affects a whole family, rippling fast through the economy in working-class towns like Sale, where much of the country's textile industry lies.
Abdelhai Bessa, Arour's employer, says a sense of pride and habits of social and Muslim solidarity usually prevent Moroccan managers from firing staff until absolutely necessary. But he's already laid off more than 600 of the 2,000 people he employed.
"We're very dependent on international trends," said Bessa, a former unionized railway engineer who started his textile business from scratch in the 1990s and reached US$15 million in revenue last year, surfing on a decade of outsourcing to market Morocco's cheap labor to Europe.
His firm works primarily for upscale retailers in Britain, where consumers have been particularly hard hit by the financial crisis. Orders have dropped 85 percent for menswear and fancy children's dresses. One of his main customers went broke in December.
The Moroccan government, which unlike many Arab states has no oil revenues, heavily relies on foreign trade to sustain its projected 5.8 percent GDP growth in 2009, from a gross domestic product of US$90.5 billion last year. It says it carefully monitors which sectors are taking blows.
"When warning lights turn orange, we intervene," Ahmed Reda Chami, Morocco's industry and commerce minister, told The Associated Press.
Authorities have spent 1 billion dirham (nearly US$100 million) on a support package, whose measures include canceling some payroll taxes and offering government guarantees to companies seeking bank loans.
"If lights were to turn red, we could do much more," said Chami, who with seven other Cabinet ministers and several top business leaders is part of a "Strategic Watch Committee" set up by the government to follow the unfolding effects of world recession.
The government is racing to start unemployment benefits. While official unemployment is at a low 2.8 percent in the country of 34 million, it is estimated at 20 percent in urban areas.
Massive rainfall this year in this often arid north African country has led to a boom in agriculture, helping to compensate shrinking industry and tourism revenues, the minister said.
Small farmers and urban poor have seen much less wealth come their way in recent years than those in the tourist and service sectors. Many have grown wary of their country's modernization and opening to the West, and the authorized opposition Islamists are now the second-biggest force in parliament.
The government knows it can't let its policies backfire and insists the social effects of the slowdown are limited for now. "But we're not an isolated island, so of course we're cautious," said Chami.
Tourism managers say they've begun to feel a slump in popular destinations like the sunny southern town of Marrakech, and the Central Bank is worried remittances are falling from Europe, where many Moroccans go for work.
One of the biggest signs of downturn came from Nissan. The Japanese car marker and its French partner Renault had planned to invest 600 million euros ($794 million) to build a huge car factory in Tangiers. The project, which was slated to create 6,000 jobs and deliver 200,000 cars yearly starting in 2010, is part of a Moroccan flagship program to develop "Tanger Med," a new deep-water port aiming to become one of the Mediterranean's biggest.
But Nissan announced recently it was freezing its part of the investment because of worldwide difficulties in the car industry. Thierry Moulonguet, the executive vice president and CFO of Renault-Nissan, said that despite "drastic revisions" of its investment plans, Renault has decided to go forward with the Tanger Med factory on its own. Production will likely be downgraded and postponed until 2011, he said.
"The current difficulties absolutely don't challenge the attractiveness of the country," he said.
Renault's new, low-cost Logan cars were due to be built in Tangiers and sold to developing nations. Now they're also becoming a hit in wealthier countries amid crisis-hit consumers. Renault estimates the combined cost of wages and labor taxes in Morocco are about 40 percent less than in China, or about nine times cheaper than in France.
Authorities want to think the same thing. The tourism ministry has launched an advertising campaign in France that boasts "Moroccotherapy," the idea that gloomy Europeans can get a quick fix of sunny cultural diversity by taking a discounted two-hour flight to Moroccan resorts.
Bessa, the textile manager, is convinced that Morocco, with its tight-knit society and history of state intervention, is better resisting the onslaught than others. He says European retail customers are warning him they'll need his factory more when activity picks up, because so many Chinese firms — which had grabbed most of the ultra-low cost textile outsourcing — are going down the drain.
"It's going very difficult in Morocco," Bessa said. But when the global recession eventually ends, "those of us who weathered the storm will be in a very strong position."
Copyright © 2009 The Associated Press. All rights reserved.