Morocco - Economic developments and prospects

RESTRICTED Report No. EMA-Z7a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION ECONOMIC DEVELOPMENTS AND PROSPECTS IN MOROCCO September 30, 1970 Europe, Middle East and North Africa Department to F IL COPYJ  CURRENCY EQUIVALENTS 1 Dirham (DH) = $ 0.1974 1 Million DH = $ 197,400 $1.00 = DH 5.o6 $1 million DH 5,O6O,OOO ABBREVIATIONS BNDE - Banque Nationale pour le Developpement Economique CmX - Caisse de D6pot et de Gestion CIH - Cr6dit Immobilier et Hotelier CNCA - Caisse Nationale de Credit Agricole CNSS - Caisse Nationale de Securite Sociale COSUMAR - Compagnie Sucriere Marocaine et de Raffinage COTEF - Complexe Textile de Fes- CT - Centre de Travaux DERRO - Developpement Economique Rural du Rif Occidental OCE - Office de Commercialisation et d'Exportation OCIC - Office Cherifien Interprofessionnel des Cereales OCP - Office Ch6rifien des Phosphates ONCF - Office National des Chemins de Fer ONE - Office National d'Electricite ONMT - Office National Marocain de Tourisme ONT - Office National de Transport ONTS - Office National du The et du Sucre ORMVA - Offices Regionaux de Mise en Valeur Agricole REI - Rggie des Exploitations Industrielles SAMIR - Soci6t6 Anonyme Marocaine Italienne de Raffinage SOCAP - Societe de Cr6dit Agricole et de Prevoyance SUBM - Sucrerie de Beni-Mellal SUNAB - Sucrerie Nationale du Beht SUNAG - Sucrerie Nationale du Gharb SUTA - Sucrerie du Tadla TPS - Taxe sur les produits et taxe sur les services n.i.e. - not included elsewhere  This report was prepared by a mission wbich visited Morocco from April 4 to May 1, 1970. The mission was composed of: Emond Asfour, Chief of Mission; Robert Armstrong, General Economist; Claude Brochu, Agriculturist, FAQ; Anthony Dawson, Manpower Specialist, ILO; Giulio Fossi, Planning Specialist; Wolfgang Joppich, Agricultural Economist, Consultant; Djordje Jovanovic, Economist; and Walter Stolber, Flscal Specialist. Some of the findings of an industrial mission from the Bank which visited Morocco at the same time were utilized in the part of the report dealing with industry and mining.   TABLE OF CONTENTS Pate No. BASIC DATA SUMMARY AND CONCLUSIONS ................i 1. RECENT ECONOMIC PERFORMANCE . ................ 1 Introduction .................1............... Economic Growth .................., 2 Savings and Investments ................ 3 Private Investment .................., 5 II. POPULATION, MANPOWER AND EMPLOYMENT ......... 7 Population and Family Planning .... .......... 7 Manpower .................................... 8 Employment ........ .......................... 10 Emigration ........ .......................... 11 Employment Planning and Policy .... .......... 12 Employment in Rural Areas .............. 13 Promotion Nationale and Public Works ... 14 Low Cost Housing ....................... 14 Other Sectors .......................... 15 Unemployed Youth ........... ............ 15 Wages ........... ............................ 16 III. AGRICULTURE ................. 17 Summary ......,., . ............. 17 Production and Trade ............. 18 Inputs and Supporting Services . .21 Marketing and Price Policy . .23 Land Tenure . .24 Investment Program . .26 Cropping Pattern in Developed Irrigation Areas ..27 Programming and Preinvestment Studies. 28 IV. INDUSTRY, MINING AND POWER . .30 Power ..30 Mining ..30 Manufacturing Industry. 32 Structure and Growth .32 Constraints to Growth of Manufacturing . 33 Investment .36 Industrial Development Policy. 37  TABLE OF CONTENTS (Cont'd) Page No. V. TOURISM ...... . ............................... 40 VI. THE PUBLIC SECTOR ........................... 43 Summary . .................................... 43 Public Savings and Investment .... ........... 43 Public Investment ........................... 46 Financing Government Expenditures .... ....... 49 Budget Revenues and Expenditures .... ........ 51 Local Government Finance .................... 53 Potential for Increasing Public Savings ..... 54 VII. MONEY, PRICES, CREDIT AND INTEREST .... ...... 57 Slumary .. ................................... 57 Money Supply ............... ................. 57 Prices .................... .................. 59 Banking and Credit ............ .. ............ 59 Interest Rates ................ .............. 61 VIII. EXTERNAL TRADE AND FINANCE .65 Summary . . ............................. 65 External Trade ........ ...................... 65 The E.E.C. Agreement and Direction of Trade . 67 Services and Transfers . ..................... 68 The Capital Account ...... ................... 70 Exchange Reserves ....... .................... 72 Mediur-Term Prospects . ..... .. . .......... .... . 73 External Debt and Creditworthiness .......... 76 NOTES ON DEVELOPMENT PLANNING ..... .......... 78 Prograing Units .. ......................... 80 Budgetary Coordination .......... .. .......... 80 Regional Development .. ...................... 81 NOTE ON INCENTIVES FOR PRIVATE INVESTMENT ... 83 Fiscal Incentives ........................... 83 Credit Incentives ..... ...................... 85 Promotion .................................... 86  BASIC DATA Area: : 172,000 sq. miles Population : 15.5 million Rate of growth (1960-70), total : 2.9d per annum current : 3.2% per annum Political Status : Independent Kingdom sinoe 1956 Gross Domestic Product at market prices (1969) : DH 15.8 billion or $3.1 billion Rate of growth, in real terms (per annum) 1960-1966 : 2.6% 1966-1969 : 6.4 Per capita (1969) : DH 1,050 or $207 Structure of GDP (' of total) 1963 1969 Agriculture 29 28 Electricity 2 3 Mining 5 5 Industry and handicrafts 12 12 Construction and public works 4 5 Commerce 21 20 Transport and other services 16 16 Government 10 11 Total 100 100 Investment and Savings (% of GDP) 1963-69 Average 1969 Gross investment 12.8 12.9 of which: fixed investment (12.3) (13.8) stock changes (0-5) (-0.9) Gross domestic savings 11.8 11.5 Resource gap 1.0 1.4 Resource gap as % of total investment 8.1 10.3 Central Government Transactions (Cash basis) (in millions of DH) 1966 1967 1968 1969 Current Surplus 20 190 230 520 Government development expend. -520 -860 -920 -1010 Debt repayment -100 -50 -110 -90 Other accounts 70 -130 -200 -230 Total deficit -530 -850 -1000 -810 financed from: Foreign loans 260 290 220 250 Internal borrowing, net 100 100 240 350 Treasury deposits 150 160 270 10 Central Bank 20 300 270 200  Money and Credit (end of period, mill. DH) 1966 1967 1968 1969 Money supply (including