Stagnation in the Chinese economy has had rapid repercussions throughout the global economy, leading many investors to step back from any significant activity until trends in emerging and frontier markets become less murky. Due to the outsized impact of China on commodity producers in Asia, the Middle East, and Africa, there is great uncertainty as to how it will play out in countries that rely on Chinese imports.
However, in recent rankings of key countries in Africa and the Middle East, Morocco’s continued positive performance serves as an antidote to investor pessimism regarding other markets in the region. In a study by fDi Intelligence, ” Middle East and African Countries of the Future 2015/16,” Morocco receives points for rigorous planning, strong economic fundamentals, and continued investment in policies and infrastructure that are business-friendly.
If one compares Morocco to other countries in Africa with its diversity of economies, Morocco’s rankings are quite impressive. It ranks #3 in terms of overall results in the fDi poll, #2 (after South Africa) in terms of economic potential, #2 for connectivity, and #4 in Africa for business friendliness.
Much of this success is due to Morocco’s moderate and progressive economic policies and conservative approach to global financial markets. As importantly, Morocco’s ties to the EU and the US as trading partners partially insulate it from overexposure to economies under stress. According to an article in Bloomberg.com, countries with little exposure to Chinese trade and investment are currently faring much better than those tied more closely to China. India, Morocco, and Poland are the top three countries in the rankings based on their overall stability and performance over the past year.
These results were underscored in an article in livemint.com that explored the same issue of dependence on Chinese imports. “More than $8 trillion has been wiped off the value of shares worldwide as China’s move fueled speculation that a further slowdown in the world’s second-largest economy will undermine demand for raw materials from countries including Brazil and Russia.”
In its coverage of the Bloomberg study, the Wall Street Journal commented that the decline will affect frontier markets more than emerging markets in the longer term. The Journal also points out that the study “notes that the best-performing regions have been frontier Europe and Asia and highlights Bangladesh, Sri Lanka and Morocco as countries that have been kind to investors.”
To continue to attract needed Foreign Direct Investment, especially in its lucrative renewable energy sector, Morocco has drafted legislation to sweeten the terms under which it will purchase energy from independent producers. According to seenews.com “When adopted, the new law, bill number 58-15, will allow renewable energy producers to sell surplus electricity to establishments connected to the high voltage or very high voltage grid of ONEE, the state owned utility responsible for the provision of electricity as well as the operation of the transmission system. The proposed changes will also raise the minimum capacity of hydro power projects to 30 MW from 12 MW at present.”
What this means is that independent producers will have more customer options, including the government, for selling energy at regulated prices, thus simplifying economic models for determining the success of investments in renewable energy.
These liberalizing efforts and the rankings recently published continue to demonstrate that Morocco has made choices that both meet the country’s goals of greater participation in the global economy and benefit its economy by attracting investments that generate much-needed employment.