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Thu 26 Nov 2009 04:00 AM

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Morocco's red tape turns Gulf investors away

Morocco still remains a marginal market for investors due to poor infrastructure, poor legal framework & excessive red tape.

Morocco's red tape turns Gulf investors away
Morocco's red tape turns Gulf investors away
Morocco’s economy is tipped for significant growth over the next 20 years.

The North African country still remains a marginal market for investors due to its poor infrastructure, lack of proper legal framework and excessive red tape, say MENA-based executives.

TIhe government of Morocco is aiming to attract more Gulf investment, but turning that goal into a reality is proving difficult.

"I think that the government's vision of easing the way for Gulf investments is not compatible with the regulations that they place which take a long time to complete," said Ahmed Al Kandari, general manager of Kuwait's Al Kandari General Trading and Contracting.

The kingdom's poor infrastructure is also discouraging additional investments to be made in the agricultural field, Al Kandari added.

"It's really a shame because Morocco could be our gateway to the African markets. But if we try to ship food it would rot by the time it reaches the destination due to the [country's] bad infrastructure."

Other rules, such as the employment of Moroccan nationals in new projects, are also seen as a setback by some Arab investors.

"The minimum wage for a Moroccan is much higher than say someone from Asia, so this is another factor than is keeping Gulf investors from expanding here," Kandari added.

In terms of the banking sector, the lack of a legal framework that would guarantee the rights of institutions is keeping large Gulf financial firms away, said Ali Hamad Al Mesaifri, first executive manger of Qatar International Bank.

"There is a reason why Gulf banks are not present in Morocco; it's because the country still lacks the legal framework we need to operate in," he said, adding that the financial crisis has put many banks' expansion plans on hold.

The economic slowdown has also caused Arab investors to think twice about new ventures amid shrinking liquidity levels, said Mohamed bin Brahim Al Touijri, assistant secretary general for economic affairs at The Arab League.

"Short term, high return investments is what many Gulf investors are seeking and that's why they are not that interested in Morocco because most of the projects here have to be long term," said Al Touijri.

He added that even investments in tourism are seen as low return as the kingdom mainly attracts visitors from European countries, who are seen to be low spenders compared to Arab tourists.

"That's why we are seeing that many of the Gulf tourism projects here are being cancelled or put on hold... it's just not worth it for the investors at this point."

Despite being a viable tourism destination, Morocco lags behind the UAE in terms of hotel development. More than 120,000 hotel rooms are in the pipeline in the MENA region, according to STR Global's October report, but Morocco will contribute just 6,640.

The UAE will be responsible for the lion's share, with 53,789 extra rooms.

This could partly explain why the UAE has toppled Egypt as the top ranking MENA country brand in the fifth annual Country Brand Index (CBI).

The CBI identifies emerging global trends in the world's travel and tourism sector. While the UAE snatched the top spot, Morocco trailed at the bottom of the top ten MENA rankings.

It is not all bad news, however. A global construction report compiled by Oxford Economics found that, over the next 20 years, Morocco's economy will experience one of the highest levels of growth in the MENA region.

There are still some Gulf companies willing to make the move. Emaar Hospitality Group plans to build two hotels in the north African state under The Address Hotels + Resorts brand.

Marriott International, which manages the Ritz-Carlton and Marriott brands, also plans to add another 70 hotels to its portfolio, and Morocco is part of these growth plans.

Getting to these new hotels shouldn't pose any problems as the UAE-based low-cost airline Air Arabia already has a base in the city of Casablanca.

The kingdom also features in the expansion plans of a number of Gulf developers.

Morocco is high on Saudi developer Tanmiyat's agenda, while Dubai's Arabtec is looking to the underdeveloped state to help bolster its profits, which fell some 35 percent in the third quarter.

The telecom sector is also on the Gulf's radar, with UAE-based Etisalat expressing interest in entering the market.

However, while issues with red tape remain, these plans may not get off the ground.

Morocco has an investment grade rating of BBB- from ratings agency Fitch, but sub-investment grade ratings from Moody's and Standard & Poor's.

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Reda 10 years ago

i'm posting my comment not only because i'm moroccan, but because i know how the investment are made in my country. first of all, we are in a country highly oriented to foreign investments, i would recommend just to view the amount of emirati/saudi investment in the country. then i will recommend to visit the right organisms like CMPD who are there to orient any new business to the right channel. May i remind you with incentives given by the government to every company investing minimum of 27 millions USD. then we need to understand that the social law in the country is protecting the employee, which is not the culture in the middle east, but you will find out that we are not far from european standards in terms of employement speaking about banking and agriculture, i might agree that we have a long way to go, but i'm sure that with the speed of execution of big formatting projects, we should be up to speed in couple of years, Big banks like citybank, caixa, BNP paribas, are already set in the country, and trust they will never risk to open one branch if conditions are not gathered.. some investors are willing to get the land free, no taxes, and a big welcome, this time is over. the country is open for people who have a serious business plan based in facts and not in dreams. i would be happy to advice, if those gentelmen need more advice on the way to get their investment launched in the right way