Telecommunications
Infrastructure
Energy
Environmental
Agriculture
Textiles
Water

Morocco has a willingness to diversify away from France as their main source of supply.  Potential for business exists across many areas and opportunities appear to exist for Irish companies in the following sectors:

• Tourism
• New technologies, notably software, micro-processors and telecoms (which currently account for $400-$500 million in exports)
• Agriculture
• Pharmaceuticals 
• Textiles

The following areas offer the best prospects for investment in Morocco: further industrial development, the privatisation process and financial services, including the stock exchange.

Telecommunications

The sector has been opened to competition and is expanding rapidly with new services and new platforms, such as VSAT digital data transmission, entering the market.

The authorities hope that the sector will drive stronger GDP growth, creating jobs within the industry and supporting the growth of the private economy, Internet-based businesses, small manufacturers and service firms. Growth potential in the sector remains good: market penetration is still low (there are only 5.2 fixed lines for every 100 people and a long waiting list for mobile phone lines); the middle class and business community, although still small, are growing; and the regulatory regime has been light but effective.

The state telecommunications regulator, Agence nationale de régulation des télécommunications (ANRT), has overseen the liberalisation of the sector, and its independence from government - in 2002 it fought off a move to bring it under the control of the Ministry of Communications - has given confidence to foreign investors.

The government has said it will relaunch the liberalisation of the telecommunications sector in 2004, with the sale of a second fixed-line telephony licence. However, tenders for the licence are unlikely to be issued until later in the year, because the telecoms regulator, ANRT, wants to make sure that the licence is marketed correctly.

The first attempt to sell the licence, in 2002, failed to attract bidders. The low current demand for fixed-line services, the relatively large investments needed in comparison with mobile telephony networks and the issue of interconnection with the existing fixed-line network owned by Maroc Télécom (MT) could again discourage interest in the concession.

In January 2004 ANRT invited bids to undertake a feasibility study into the sale of the fixed-line licence, which could be made more attractive by combining it with a mobile phone licence. The subscriber base of the two existing mobile phone licence holders, MT and Meditel, has been growing fast, but there is still plenty of growth potential in the market.

The part-privatised telecoms company, MT, had around 5m mobile phone subscribers at the end of 2003, a rise of 9% from end-2002. Fully private mobile phone firm Meditel had 2m subscribers at end-November 2003; the company reported a 34% increase in earnings before tax to €68.5m (US$80m) in the first nine months of 2003.

In contrast, the fixed-line market remains depressed. MT, which is still the monopoly provider of fixed-line telephony, had 1.17m subscribers at end-November 2003, compared with 1.1m at end-2002. The company lost 400,000 fixed-line subscribers in 2000 and 2001 as customers moved over to mobile phones, whose cost was falling sharply as a result of competition between MT and Meditel. Although fixed-line subscriptions edged back up in 2003, the slow recovery of the fixed-line market will disappoint MT, which has a target of 2.2m fixed-line customers by 2005, and will probably discourage interest in a second fixed-line telephony licence.

Infrastructure

Funding for infrastructure development has traditionally been met through concessional loans and grants, but the Moroccan government is increasingly encouraging private participation. Favoured mechanisms for attracting private capital are build-operate-transfer (BOT) terms or long-term operating concessions.

Energy

Morocco is heavily dependent upon imported energy. Its own energy resources are limited to modest amounts of hydroelectric (HEP) and wind power, coal reserves that are close to depletion and negligible proven reserves of oil and gas; firewood is widely used in rural areas. An oil strike in the Haut Plateau region of the north-east in early 2000 raised hopes that Morocco might be able to meet its own oil needs, or even become an oil exporter, but subsequent tests on the discovery have proved disappointing.

There remains the possibility, however, that some oil and gas remains to be discovered offshore.  Most electricity is produced from imported coal and oil. Around 5m tonnes of coal and 422,000 tonnes of fuel oil were used in 2002 to generate electricity.

Environmental

Pollution, particularly from the phosphate industry, is a growing problem and the government is working to establish a regulatory framework that will curb environmental damage. Morocco's beaches and waterways are the hardest hit; a survey in 2000 found that 21% of the beaches are polluted while 50% are judged to be of only medium quality. The effluent from large coastal chemical complexes is largely to blame.

The World Bank has recommended that a comprehensive environmental policy be drawn up, linked to water use, pollution and agricultural development. The volume of wastewater produced in urban areas is expected to more than double in 1990-2020, rising from 410m cu metres to 900m cu metres. Increasingly, the management of water, wastewater and power systems is being contracted out to foreign companies.

Environmental schemes are often funded by concessionary loans from sources such as the Japanese and German governments, the European Investment Bank (EIB), the African Development Bank (AfDB) and the US Agency for International Development (USAID).

Agriculture

The agricultural sector is inefficient, suffering from the large proportion of small family holdings (the cultivated area is divided into 9.5m plots and half of all farms are under 3 ha), low mechanisation, low fertiliser and high-yielding seed use, the high cost of energy, the dearth of investment and, of course, the regular incidence of drought, which requires the government to set aside significant funds for drought-relief measures.

Textiles

Textiles were once at the forefront of export-led industrial growth, but latterly the sector has faced difficulties. The sector is a classic transformation industry, with most raw and semi-finished inputs, such as textile yarns and cloth, being imported and most of the cloth and clothing produced being exported. It grew rapidly from the early 1980s to the early 1990s, and textile exports now account for about one-third of total exports, with imports of fibres, yarns, cloth and accessories accounting for 12% of imports.

Growth has slowed, however, partly as a result of competition in export markets from Asian manufacturers who are more efficient and whose labour costs are lower; textile manufacturers have also blamed their declining competitiveness on the strong dirham (relative to their competitors' currencies), high energy costs and "excessive" social-security contributions. Production in the clothing industry contracted in 1999, 2000, 2001 and 2002 and scores of factories have closed. Manufacturers fear that the ending of quotas on textile exports to the EU from Asia, which will follow the dismantling of the Multi-Fibre Accords in 2005, will lead to further closures.

In late 2002 the government agreed to cut the social-security contributions and electricity costs of textile firms, as well as to help fund technical and financial restructuring, to help improve the sector's competitiveness. However a reduction in export sales to the EU in 2003 suggests that these measures have not yet had an impact.

Water

Annual water availability is currently around 14bn cu metres, of which 1.8bn cu metres is designated for drinking water and industrial needs, with the remainder used for irrigation. Water storage capacity in dams is scheduled to be increased to 40bn cu metres by 2020 through an extensive dam-building programme, begun in the 1960s, that foresees the building of two dams a year. Demand for water is expanding by an estimated 6% annually, and prices are likely to be raised in a bid to rationalise water use, particularly for agriculture.

The government is spending US$4bn up to 2005 to secure safe supplies of drinking water throughout the country. Urban areas will receive two-thirds of the funds. Furthermore, the authorities have introduced a three-year programme to upgrade the irrigation system, with the aim of stabilising the annual cereals harvest.

A World Bank report on Morocco's water resources has warned that the country could face a 30% drop in water availability per hectare of cultivated land unless improved water management techniques are introduced.

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