Bigger, but Not Necessarily Better

By Darren Spirk

This article was published in US News and World Report on July 5, 2016. Read it HERE

TANGIER, Morocco — At cafés on Tangier’s Mediterranean coast, rows of young Moroccans sit facing the hazy, yet ever present outline of Spain a mere 8.5 miles away. The idea of escaping to Spain is deep-set in Tangier. Stories often surface of overnight boats transporting Moroccan migrants. Some even attempt to swim the distance and drown. Driving this exodus is unemployment in Morocco which stands at close to 40 percent, according to the World Bank.

“I don’t have a chance to get a job here,” says Mouad Hlime, 23, sitting alone at Tangier’s Café Hafa, famous for its expansive view of the Mediterranean Sea. Despite graduating from Ista, a post-secondary school providing training in the textile business, Hlime is unemployed.

“Here in Tangier, and all of Morocco,” he says, “if you don’t know someone who works for the government, you can’t get a job.

Morocco’s King, Mohammed VI, seeks to fix Tangier’s economic problems with the Tanger-Med project, located 25 miles east of the city, which will soon offer one of the largest ports in the Mediterranean. Tanger-Med is part of a global trend of megaprojects that pour significant money into industrializing and modernizing countries to create new centers for business and tourism. Morocco has strongly embraced this idea of development – not just the port but the Rabat-Salé Bouregreg Valley, the Casablanca Marina, the Tangier-Metropolis project and the high-speed TGV train.

Experts, however, say that investment-heavy megaprojects fail to solve the deep-rooted problems in the economies of developing countries such as Morocco. Workers are given little chance at senior-level jobs and generally receive temporary positions with low wages, analysts say. To place a country such as Morocco on the path to long-term economic gains, reforms that address Morocco’s poor education system and opaque public sector are needed.

“The king has this passion, or this superficial understanding of how economic development works,” says Riccardo Fabiani, a senior analyst at the Eurasia Group, a political risk consultancy. “He thinks building megaprojects is basically sufficient to kick start the economic development of Morocco. He doesn’t understand that there are broader issues with the Moroccan economy: high illiteracy rates, poor education outcomes, lack of competition in many domestic sectors – all series of issues that basically undermine the ability of Morocco to develop.”

Launched by the king in 2003 and put into operation in 2007, the Tanger-Med port is part of a 70 billion Moroccan Dirham (approximately $7 billion) integrated project comprising 1,000 hectares for the port complex and a 5,000 hectare industrial platform. The port has become a global hub between the East and West, allowing it to connect these two disparate markets.

Tanger-Med serves over 160 ports across the world and seeks to become one of the world’s top 20 ports. Container operations in the first phase of the port, named Tanger-Med I, has reached capacity at 3 million 20-foot equivalent units (TEU), while construction is currently underway on Tanger-Med II with predictions to bring total capacity up to 8 million TEU. The port also offers a ferry terminal that managed approximately 250,000 trucks and served over 2 million passengers last year.

Morocco is the top recipient of Foreign Direct Investment in North Africa, with France and the UAE as its two biggest investors. The Tangier Free Zone is a protected free trade environment where foreign companies can operate tax-free. The presence of foreign companies raises the ire of residents in Tangier, who participated in three weeks of protests last October and November against what they consider to be the high bills of French utilities company Amendis. Thousands of Tangier citizens took to the streets on October 31, 2015 in the country’s largest protest since the 2011 Arab Spring, chanting “Amendis go home. Tangier is not yours.”

 Yet Morocco continues to draw in foreign investors to fund the many megaprojects initiated by the King.

Wessal Capital, a joint private equity venture created by Morocco, Saudi Arabia, Qatar, Kuwait and the UAE for Moroccan tourism development, has supplied billions of dollars to Morocco’s megaprojects. Gulf investment in Morocco has increased since inviting the North African kingdom to join the Gulf Cooperation Council in 2011. Those same four countries agreed to offer Morocco $5 billion in aid between 2012 and 2017, separate from Wessal Capital’s funds.

Wessal Capital has invested heavily in projects in Casablanca and Rabat in particular. The king’s Casablanca Marina project will transform the area between the old medina and the Hassan II mosque into an affluent center for tourists and elites boasting yachting marinas, luxury hotels and even a grand aquarium. Rabat’s Bouregreg Valley Development Project will develop new residential and professional neighborhoods while making the city more modern and accommodating to tourists with additions like a new grand theater. Tangier is set to get a similar facelift from the Tangier-Metropolis project, with the goal of Tangier becoming both a global business hub and metropolitan tourist center.

 The king also plans to connect Casablanca, Rabat and Tangier via a new, high-speed train based on the French TGV model. Though this $3 billion project was set to be completed late last year, Mehdi Lahlou, an economics professor at Rabat’s National Institute of Statistics and Applied Economics, predicts it will not be ready until 2018-2023.

Morocco’s larger goal is to use the megaproject trend to become a global economic leader. Tanger-Med follows in the footsteps of projects that provided quick economic booms in places like Singapore and Dubai, home to two of the world’s busiest ports. Morocco is in turn encouraging other countries to replicate Tanger-Med’s emphasis on foreign investment to drive development through the use of tax-free zones. Representatives from various countries gathered in Tangier last November to mark the inauguration of the Association of African Free Zones.

“Morocco has made the wise choice to open its economy thanks to free trade agreements with more than 55 countries,” Nizar Baraka, the former minister of economy and finance,said in an interview published by the in January. Baraka, who the king appointed as head of the Economic Social and Environmental Council in 2013, added that the ambition of Morocco’s government is to make the country an international investment and export destination.

The most publicized partnership at Tanger-Med has been with the French car company Renault. They built a second factory near the port – the first is in Casablanca – and its production has been rapidly increasing over the past few years. Their output doubled from 50,300 vehicles in 2012 to 101,000 in 2013, went up to 174, 245 in 2014 and reached 260,000 at the end of 2015.

 Port officials highlight the potential for rapid job creation from foreign companies like Renault investing in Tanger-Med.

“The 400 companies [at Tanger-Med] were able to create over 60,000 jobs,” says Rachid Houari, the director of Port Tanger-Med 1. “The Renault plant is among those companies, creating 1,000 jobs in 2015.”

But others are critical of Renault’s ability to contribute positively to Morocco’s economy.

Wages are only part of the problem for Fabiani, who specializes in the North African region. He argues that the bigger issue lies in foreign companies’ lack of integration with the broader Moroccan economy.

“You manage to attract Renault,” says Fabiani, “but Renault will try to avoid employing Moroccans in high-level positions within the factory because they don’t trust Moroccan engineers – the quality of human capital in Morocco is pretty low – and the reason is that the education system in Morocco is largely insufficient.”

 Many job opportunities at Tanger-Med are short-term, low-level positions. Second-year economics student and Tangier citizen Yassine Boushlous, 23, recounts his time as a temporary worker for APM Terminals, the leading container operator at the port.

“I worked there for around 15 days and I got 150 dirham (approximately $15) a day,” says Boushlous. He provided clerical work for APM, but the company offered no further work after this period.

“There are some job opportunities,” he says, “but not big ones – just for trainers. They just need people for a week or two. People can get jobs there, but then they fire them.”

 To fix Morocco’s systemic issues, economics professor Mehdi Lahlou from Rabat’s National Institute of Statistics and Applied Economics suggests that the country directly address its internal problems.

“There are structural reforms needed,” says Lahlou. “One of the most important is the reform of the education system. We also need a reform of the whole public sector, to look for more democracy and more transparency.”

“The port is managed by a semi-public enterprise, and it’s very opaque,” he says. “We don’t have any important information about how it’s led, what’s its capital, who is the owner of the capital, and so on.”

Yet the King’s economic policy remains focused not from within the country but without: foreign companies that bring development straight to Morocco with the hope it will spread to average citizens. Many citizens of Tangier remain unconvinced.

“There is an administration in the old medina where everyone applies for jobs, offers their CVs,” says Zineb Edalaoui, 25, who completed her baccalaureate and two additional years but is still unemployed. “They [citizens of Tangier] don’t get any help. They get nothing.”

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