Morocco’s political private sector

By  Samia Bin Charqui.

In the Kingdom of Morocco, one will find the biggest mall in the Middle East and Africa, a three century old ruling dynasty that still holds power, and a staggering 52.3% literacy rate, the lowest in the region. Separately, these elements represent major factors in Moroccan society which have contributed to and are a result of the authoritarian regime headed by King Mohammad VI. While Mohammad VI focuses on the expansion of industries which require hard labor in the place of an educated workforce, over half of Moroccans suffer from illiteracy and the socio-economic consequences that often accompany illiteracy.

Projects like the Morocco Mall, the biggest mall in the Middle East and Africa, are not only mainly funded by foreign investors, but with the 200 high-end fashion stores, only a small percentage of the already wealthy elites from the population will be able to enjoy  its luxuries. Additionally, political officials such as Karim Lamrani, who cross over into the private sector, act as instruments for the state’s economic and political agenda, as what often occurs in authoritarian regimes. With the recent Wikileaks disclosing the level of corruption the monarchy is involved in with the private sector, especially the real estate industry, it is imperative to assess the economic and political agenda of the King, his motives, and the impact of those policies on Moroccan society. The economic policies which the monarchy has pursued and continues to pursue seek to solidify its wealth and hegemony, and that of the circle of elites who sway between the political stage and private sector, at the expense of a majority of the Moroccan population.

The case of Morocco is unique in a number of ways. Unlike its North African neighbors, Morocco is ruled by a King who comes from a dynasty which has ruled Morocco for over 3 centuries. The reign of the Alaouite dynasty is rooted in neo-traditionalism, with claims of familial lineage to the Prophet Muhammad, adding a sense of religious authority to the King, who is also given the title of Amir al-Muminin (Commander of the Faithful).  In addition to the King’s religious role in Morocco, he is the single ruler in the Kingdom, with the Constitution of Morocco giving him unchecked power, essentially making him the ‘state.’  However, the King’s role in Moroccan society does not end in the religious or political realm. As the head of Société Nationale d’Investissement, the largest holding company in Morocco, King Mohammad VI is also the senior business partner of Morocco’s private sector. Understanding the King’s all-encompassing role in Morocco is imperative in addressing his policies and how his policies sustain the authoritarian regime in more ways than one.

After colonialism, development was the number one priority for the state. As a result, most of the state’s effort was placed in the public sector. As Richards and Waterbury indicate, “The Middle Eastern state took upon itself the challenge of moving the economy unto an industrial footing, shifting population to the urban areas, educating and training its youth wherever they lived, raising agricultural productivity to feed the nonagricultural population, redistributing wealth, building a credible military force, and doing battle with international trade and financial regimes that held it in thrall.”[1] Through these initiatives, the public sector became the largest employer and provider of welfare in the state. The state also applied import substitution industrialization, ISI, which sought to boost domestic independence through the limiting of imports and the maintaining of profit within the borders. With a majority of the population depending on the state for income and other basic needs, citizens were exchanging political freedoms for welfare. Eventually the public sector became bloated and inefficient as the population grew exponentially and the state could no longer guarantee the population its entitlements. The state would have to look towards the private sector as a source of capital, but it would do so on the basis of political loyalty instead of economic efficiency. All these policies were crafted on the basis of short-term solutions, which in turn proved to be detrimental for the state in the long-run politically, economically, and socially.  Beginning in the 1980’s under King Hassan II, the state of Morocco began a process of privatizing its state-owned enterprises. The manner in which Morocco was privatizing was not just to maintain hegemony, but to also reproduce power. Morocco is a prime example of how selective privatization and the specific appointment of former state officials to positions in the private sector were used as instruments for the state’s political and economic agenda, leading to a general neglect of the human development of Moroccans.

The Moroccan government officially became committed to privatization on December 11, 1989, after a parliamentary vote.[2] A list of 77 enterprises and 37 hotels, representing mostly the financial, energy, and tourism industry were due to be divested by 1998. When King Hassan II began the process of privatization, Khosrowshahi points out how enterprises from the transportation, communication, and mining industries were notably absent from the list of enterprises to go up for divestiture.[3] The financial, energy, and tourism industries were amongst the most efficient and developed industries at the time. He states, “The firms on Morocco’s privatization list were chosen on the basis of specific criteria which included operation in a competitive environment, little over-employment, profitability, and having the legal form of corporations (sociétés anonymes).”[4] The state’s goal in divesting its most advanced and profitable state-owned enterprises ironically negates the purpose behind privatization, which is to mainly combat the inefficiency caused by the state’s mismanagement of the public sector. By 1996, two of the major companies, Shell Oil and Banque marocaine du commerce extérieur (BMCE), were amongst the most quickly bought out enterprises. The selective privatization resulted in $1.3 billion in revenue for the state with just 25 of the 77 enterprises sold, and an average 11.9% turnover for the state in the divestment of its remaining SOE’s.[5] What this represents is the state’s short-term policy of accumulating wealth rather than development and efficiency. By doing the exact opposite of what would have been the appropriate process of privatization, mainly divesting its most inefficient industries to create incentives for competition, it only laid down the base for future wealth-driven policies and monopolistic practices for the state’s interest at the expense of the population, essentially a zero-sum gain.

The state of Morocco’s interest in capital and hegemony rather than development is evident in a number of its policies. In 1996, Morocco signed a free-trade agreement with the European Union[6], followed by another free-trade agreement with the United States in 2004.^[7] While these free-trade agreements facilitated a soaring rise in trade, it also made way for billions in foreign investment towards the private sector. Through the King’s control over the holding company Omnium Nord-Africain and its parent company, Société nationale d’investissement, he was able to dictate the direction of foreign investment. Just one year after the free-trade agreement with the EU was signed, in 1997, the services which provided electricity, sanitation, and water to the city of Casablanca, the largest and densest in Morocco, were outsourced to the French company, Lyonnaise des Eaux (LYDEC).[8] In 1998, Rabat’s electric, sanitary, and water services were also outsourced to a Spanish and Portuguese company, REDAL, which was later bought out by the French company Veolia in 2002.[9] Instead of directing capital towards the development of its own infrastructure, Morocco’s easy-way-out policy by outsourcing basic services reflects its anti-human development and pro-economic development policies.  Moreover, the initial classified nature of the negotiation and agreement between the companies and the government is a matter of morals and ethics. Subjecting the population’s basic needs of water, sanitation, and electricity to foreign and privately owned companies along with the implications of free market prices, which fluctuate on the basis of supply and demand demonstrate a general disregard towards the population. The disconnect between the foreign companies and the local population is evident through the various reports of contractual violations, in particular on the part of LYDEC, who removed controls on capital just three years after the contract was signed, invested 54% less than stated in the contract, and prematurely allocated dividends to foreign suppliers and shareholders three years prior to the contracted date of 2009.[10]

Another example of Morocco’s short-term economic planning is through its focus on the tourism industry, which is the country’s biggest source of foreign income[11]. The recently appointed Minister of Tourism, Yassir Zenagui, has appeared on multiple international media outlets, including CNN, promoting Moroccan tourism, expressing Moroccan government’s goal of 20 million tourists per year by 2020.[12] Morocco’s state-owned airline company, Royal Air Maroc has also recently added Moscow to its list of growing cities from which direct flights to Morocco are offered[13]. The government has also recently sparked controversy for its allocation of tax money towards the annual Mawazine Festival in Rabat, which is one of the biggest international music festivals in the world[14], featuring a star-studded lineup, including Shakira, Kanye West, Lionel Richie, Yusuf Islam, Quincy Jones, Julian Marley, and many others. The festival, which is taking place the end of May 2011, is free and open to the public. Interestingly, upon visiting the website for the festival, the visitor is greeted with a massive banner at the top of the webpage stating, “Sous le haut patronage de sa majesté roi Mohammed VI,” which translates to “Under the high patronage of his majesty the King Mohamamd VI.” The amount to which the government is allocating towards the festival remains undisclosed, however the website lists the event’s sponsors, amongst which Al Maabar International Investments and Jorf Lasfar Energy Company[15] are stated as the highest sponsors, both of whom are based in Abu Dhabi and heavily invested in Morocco’s private sector. Other sponsors mentioned on the website are companies which the royal family holds a majority of the shares, such as, RMA Watanya, Compagnie Générale Immobilière, or public companies like Groupe OCP in addition to the Ministry of Tourism[16]. Debates have ensued throughout all levels of Moroccan society, from various Facebook conversations that I noticed between students, up to the Parliament, on whether or not the Moroccan government should be putting tax money towards a music festival considering the current economic, political, and social conditions.  Overall, Morocco’s focus on tourism development leads to more negative consequences on the Moroccan population than positive, while the state, foreign investors, and already wealthy elite benefit the most. A focus on tourism development as a primary industry could have potentially detrimental impacts for the country in the long-run. With most of the jobs which cater to tourism requiring labor in the place of education, people are less-likely to pursue an education. This is heavily reflective on Morocco’s low literacy rate of 52.3%, the lowest in the region.[17] An industry such as tourism is easily affected by internal and external factors which are out of the control of any entity, including the state. Morocco has experienced several terrorist attacks since 2001, more recently in Marrakech’s iconic Argana Café on April 28, killing 17 people, most of whom were tourists.[18]

A common practice on the part of authoritarian regimes is to appoint former state officials into high positions in the private sector as instruments of the state. In the case of Morocco, this occurrence is no different. Sater discusses the role of CGEM in representing the major companies of the Moroccan private sector, however the four presidents appointed by King Hassan II were names people associated more with the state; Mohammad Amor as minister of work and social affairs, Bensalem Guessous as minister of finance, Driss Qeytouni as successor of Guessous’ position as minister of finance followed by his position as president of the economic commission in parliament, and Mohamed Bennani as director of the Ministry of Health’s cabinet and director of general affairs in the Ministry of the Interior.[19] Karim Lamrani, for example, served as prime minister twice under King Hassan II. Amongst his other titles were director of Groupe Office Chérifien des Phosphates, Morocco’s only phosphate producer and exporter, Head of SNI, Société Nationale d’Investissement, the country’s largest holding company), member of King Hassan II’s private economic council, finance minister, advisor to former King Hassan II, and member of the current King Mohammad VI’s committee of experts in charge of the promotion of investments[20]. Placing former state officials in strategic positions in the private sector ensures the execution of the state’s economic and political agenda, while bestowing loyal players in the state with a certain amount of wealth and a portion of the power in return for allegiance. Those players, in turn, install family members into high positions, essentially dominating any given company, creating a web of alliances which feed back to the state. In an interview with Karim Lamrani’s grand-son, Adam Lamrani, he stated that after getting his degree in political science at New York University, he found pursuing a career with his family in Morocco’s private sector more financially rewarding[21]. Not far into the conversation did he mention his recent plans to open an Abercrombie and Fitch franchise in Marrakech, a feat that would have been difficult to achieve without the well-established connections of his family in both the state and private sector[22]. Additionally, Adam Lamrani told me how his two other siblings have positions in the Ministry of Interior and the Ministry of Foreign Affairs, and other members of his family who are heavily invested in Morocco’s private sector through different industries.[23]

ONA, Omnium Nord Africain, a holding company owned by the King, was recently exposed by the recent Wikileaks to being involved in high levels of corruption by forcing bribes from investors in the real estate industry.^[24] The following is an excerpt from the leaked cable referencing the corruption: “XXXXXXXXXXXX said major institutions and processes of the Moroccan state are used by the Palace to coerce and solicit bribes in the real estate sector. While corrupt practices existed during the reign of King Hassan II, XXXXXXXXXXXX explained, they have become much more institutionalized with King Mohammed VI. Institutions such as the royal family’s holding company, Omnium Nord Africain (ONA), which now clears most large development projects, regularly coerce developers into granting beneficial rights to ONA, he claimed.”[25] Essentially, most of the individual companies listed under ONA were monopolies; the largest exporter of phosphates in the world, Lesieur, the only producer in cooking oil, COSUMAR, the only sugar refiner, etc.[26] A few months after the Wikileaks disclosed the practices of corruption, the King announced a merger of ONA and its parent company, SNI.[27] The merger consequently led to a soar in the King’s assets with turnovers quadrupling from 22.53 billion dirhams, to 102.6 billion dirhams.^[28] The merger will supposedly place more autonomy within the hands of foreign investors, most likely a claim to counter the information revealed by the Wikileaks, yet the decisions behind what is described as “large scale projects” will continue to be made by the King.  The ambiguity of the language leads one to believe that the merger will not only place more of the private sector under the control of the King, but with all the foreign investments filtering through SNI, the King will be able to oversee the direction of these investments in a more efficient manner than he would have when ONA and SNI were two separate entities. It is imperative to note that after the merger, assets of Lesieur, Attijarawafa, Morocco’s largest bank, and COSUMAR, amongst others, are reportedly being sold in large quantities to French foreign investors, the country which has privately invested the most in Morocco, coincidentally also the country that colonized Morocco for nearly 44 years. On May 5^th, the 2^nd annual industry meeting was held in Casablanca with the King in attendance, along with a speech from World Bank president, Robert Zoellick.[29] During the meeting, the government signed agreements with seven other industries investing in Morocco; however, the contents of these agreements have yet to be disclosed to the public.

Under the direction of SNI, some of the notable projects underway in Morocco include the Morocco Mall, which is set to be the biggest mall in Africa and the Middle East. The Morocco Mall boasts over 200 high-end boutiques and stores, an IMAX theater, amusement park, and much more. The Morocco Mall website cites Groupes Aksal and Nesk Investment as the source of capital for the project. Little information is available from both, with the Groupes Aksal’s website under construction; however the Nesk Investment website states they are based in Saudi Arabia. While these projects will provide wide scale employment, it is mostly low-skill labor which requires little to no education. The availability of jobs which require low-skill over education is extremely harmful to a population which suffers from an already low level of human development with a .567 on the UNDP’s Human Development Index, ranking it 114 out of 169 countries listed[30]. Another noteworthy project underway in Morocco is the Bouregrag Valley project, which is being funded by Al Maabar International Investments based in Abu Dhabi. The project will make way for luxurious residential and business quarters in the outskirts of the capital city of Rabat. With pricing beginning in around $700 per square meter[31], in a country where the gross national income per capita is $4,628[32], it is well above the range of affordability for a majority Moroccans. While Morocco continues to paint an image of economic development through the investment of such projects, it conceals and neglects the underlying issues of human development in the country, while serving an already flourishing circle of elites.

It is evident that Morocco’s role in rendering the public sector inefficient is causing the growth of a private sector dictated by political interests instead of economic welfare, leading to possible long-term consequences in human development. The King’s role as what can be best described as senior business partner of Morocco’s private sector has led to the amassment of his own personal wealth of nearly $2.5 billion, at the expense of the Moroccan population. And while he continues to use his position for his own interests, the Moroccan people are not remaining silent about the inherent contradiction between his title of Amir al-Muminin, along with his role in the private sector.

As uprisings spread throughout North Africa and the Middle East, Morocco is not prone to the calls of reform, justice, democracy, and the eradication of corruption. The FEB20 Movement in Morocco has been calling for constitutional reforms which place a check on the King’s power, along with removing himself from the private sector. The rise in the movement, along with the recent bombing in Marrakech has sparked negative reactions by both tourists and foreign investors, who have expressed doubt in the image of stability Morocco has tried to paint by covering the reality of the situation. Tourists have expressed concern about traveling to Morocco in the future, and Al Maabar International Investments has halted all projects in Morocco.[33] These instances ought to push Morocco towards changing its economic policies to include human development as a major priority, especially education. Policies geared towards the accumulation of wealth for the top portion of the population are not only disadvantageous to the majority, but simply not sustainable, as is evident through the manifestation of anti-government protests throughout the region.

DISCLAIMER: This article was submitted to Mamfakinch, who found it interesting and worthy of publication. The statements and opinions therein are however those of its author

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[12] Yassir Zenagui. (Minister of Tourism, Morocco), interview with CNN,