unnamedA strong uptick in manufacturing activity in 2013, particularly in the automotive, aeronautics and electronics segments, has helped to strengthen Morocco?s trade balance. The number of both foreign and local manufacturers has multiplied in recent years, providing new sources of export revenue, which should help bolster efforts to reduce the twin fiscal and external deficits.

The value of automotive exports rose 23.2% year-on-year (y-o-y) to reach Dh31bn (?2.7bn) in 2013. This was complemented by growth of 20% in aeronautics exports (Dh8.09bn, ?717.6m) and 11.6% in electronics (Dh7.86bn, ?697.2m). This increase is driven to some extent by the presence of foreign majors such as the Canadian aeronautics firm Bombardier and the French automotive manufacturer Renault.

However, the industrial centres in Tangier and Casablanca have also developed a dense network of component and cabling suppliers, which have an important impact on the market. Just over half of automotive export revenue in 2013, Dh15.73bn (?1.4bn), came from the cabling segment, which experienced growth of 6.3% y-o-y.

The increase in foreign currency receipts from manufacturing will be critical to ensuring a sustainable diversification in exports. Phosphates and derivative products like fertilisers have traditionally represented roughly one-quarter of Moroccan external sales. However, global prices dropped due to the arrival of new producers and lower demand from key consumers in Europe and Asia in 2012-13. As a result, Morocco?s exports of phosphates and derivative products fell by 23.3% y-o-y to reach Dh37.1bn (?3.3bn) in 2013, although this should pick-up in the medium-term as the country expands production and value-added processing.

The rise in manufacturing activity has also helped to sustain overall exports. According to Morocco?s Office des Changes, total revenue from goods exports fell by less than one percentage point from Dh184.9bn (?16.4bn) in 2012 to Dh183.5bn (?16.3bn) in 2013. Combined with an annual drop in imports by 1.7%, this helped to raise the import coverage rate to 66.3%, its highest point in six years.

Specialising in automotive

Automotive exports grew exponentially from Dh12bn ($1.06bn) in 2009 to Dh31bn ($2.7bn) in 2013, rivalling phosphates, agriculture and textiles as the most productive sectors. This growth is largely due to the development of specialised industrial and free zones in the Tanger area. This area, located in north-west Morocco, sitting astride the Atlantic Ocean and the Mediterranean and 14 km from Europe across the Strait of Gibraltar, has long been a hub for industry and maritime trade. However, the development of six industrial and free-trade zones within an 80-km radius of Tangier?s port, the Greater Tanger-Med Industrial Platform, has helped to jumpstart the manufacturing sector in recent years.

The primary industrial park in this area, the 400-ha Tanger Free Zone (TFZ), was established in 1999. By 2013, it had attracted ?2bn in investment and grown to include 500 companies and nearly 45,000 jobs. The TFZ, which offers a set of fiscal incentives that applies to all free zones, has developed a strong specialisation in the automotive industry. The zone?s favourable wage standards, available specialised labour pool, and proximity to manufacturing centres in Europe have all contributed to attract automotive suppliers to Tanger. According to Mehdi Tazi-Riffi, general director of the TFZ Authority, companies can access an installed capacity of 5m vehicles within 48 hours from the Tanger-Med port.

While Tanger?s automotive focus is nothing new, the arrival of Renault in 2012 spurred on this specialisation. The French manufacturer alone accounts for ?1.1bn in investment in its Melloussa production plant, situated 30 km from the port on a dedicated 280-ha plot. Renault increased its production nearly 50% y-o-y to reach 100,940 vehicles in 2013, all from its low-cost subsidiary, Dacia. Approximately 90% of these vehicles were exported, which contributed to increase port traffic at Tanger-Med by nearly 40% last year. The sector is set to grow further in the near-term, as Renault launched the second phase of production in October 2013 that will increase production to 340,000 vehicles per year, with the goal of pushing this to 400,000 per year in the long-term.

One reason behind Renault?s operational expansion is the region?s dense network of component suppliers and subcontractors, which include a number of Tier 1 suppliers. Authorities hope that this network will attract a second large-scale manufacturer in the next 2-3 years, as the export model has already been proven. Nasser Eddine Obada, director general of Global Engines, told OBG, ?Renault has consolidated a new export-driven model of industrial development and should be followed by other car manufacturers during the next few years.?

A new free zone, the 300-ha Tangier Automotive City (TAC), located across the highway from Renault?s Melloussa plant, began to be commercialised in late 2013. The TAC is meant to absorb spill-over from the growing automotive industry and, ultimately, to accommodate a second major manufacturer. Thus far, the first 55-ha tranche has generated Dh600m (?53.2m) in planned investment. Six manufacturing and service projects are set to install operations in the zone, including the US-based Electrical Components International, and two Spanish firms, Europac and Turbo Cadiz. The first operations are set to begin between late 2014 and early 2015. Finding sufficient levels of trained human resources will continue to be a challenge for the rapidly expanding sector, but Tangier?s industrial growth and the particularly dynamic automotive segment will offer considerable economic benefit in the medium-term.


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