Morocco: an Assessment of Opportunities and Risks for Foreign Direct Investment

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Morocco: An Assessment of Opportunities and Risks for Foreign Direct Investment

The following paper assesses Morocco and the opportunities and risks for foreign direct investment in that country. Political and economic risks are discussed, and specific sectors which are ideal for foreign direct investment are identified.

Morocco: An Assessment of Opportunities and Risks for Foreign Direct Investment Executive Summary
The following analysis reviews Morocco as well as risks and opportunities for foreign direct investment (FDI) in the country. The report provides a political risk assessment as well as trade facts, agreements, and reform measures. Three specific sectors which are ideal for foreign direct investment are also identified.

From a political and policy standpoint, Morocco is an ideal country for FDI. The government is relatively stable and supportive of the US government. Though Morocco’s legal system is also open to foreign investment, enforcement and corruption continue to be major competitive disadvantages to doing business in the country. Additionally, a complex tax system and high rates constrain business opportunities.

In 2005, Morocco entered into a free trade agreement (FTA) with the United States. This FTA has dramatically reduced tariffs on consumer and industrial products. As a result, many investment opportunities have been created. Morocco has also agreed to publish current trade and investment laws, outlaw bribery, and offer intellectual property rights which parallel those received under US law.

Morocco is a country with great economic potential. It is an ideal site for investors looking for inexpensive production, but tolerant of volatility. The FTA has pressured Morocco to both improve and accelerate reform measures. As a result, risks associated with FDI in Morocco have decreased substantially. As this trend continues, Morocco will develop into a center of international trade and FDI in Northern Africa. 1.0 Introduction to Morocco (Geography & Language)

Morocco (officially known as the Kingdom of Morocco) is situated in northwestern Africa. Morocco has over 2,000 miles of coastline, stretching from the Atlantic Ocean, past the Strait of Gibraltar into the Mediterranean Sea. It shares international borders with Spain to the north (both via a water border and land borders with multiple Spanish enclaves), Algeria to the east, and Mauritania to the south (via the Western Sahara). Morocco is slightly larger than the state of California (US Department of State, Morocco). Morocco is the third most populous Arabic country, following Egypt and Sudan (CIA, The World Factbook – Morocco). The population was estimated at 34 million in July 2008 (CIA, The World Factbook – Morocco). The official language is classical Arabic, though the country uses a distinctive tongue called Dareeja or Moroccan Arabic. Additionally, Berber dialects are spoken in rural areas. Though not an official language, French is taught in schools and used throughout government, commerce, and economics. Effective in late 2002, a national education reform provides for English instruction beginning in the fourth year of schooling. French, however, will remain the “unofficial second language” due to Morocco’s close social and economic ties with France and other Francophone countries. 2.0 Political Risk Assessment Factors for Inward FDI to Morocco Political Structure – Morocco is a constitutional, pro-western monarchy. There are no serious challenges to the rule of King Mohammad IV, and his government is seen as relatively stable. Mohammad IV still controls the ministries of defense, foreign affairs, the interior, as well as the parliament, which remains weak (Economist Country Briefing). In general, other political parties in the government do not have strong bases. However, the opposition Islamist party “Parti de la Justice”, which has the second largest number of seats in Parliament, has...
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