While Morocco has made, over the past few years, notable progress in the World Bank\u2019s Doing Business<\/i> index. This, however, had almost no economic impact because the country did not make tangible progress in the fields of governance, economic freedom, property rights protection, and fight against corruption<\/span><\/h4>\n<\/blockquote>\n <\/p>\n
Download article<\/a><\/span><\/h5>\n <\/p>\n
Introduction<\/strong><\/h5>\nIn October 2019, Morocco\u2019s Prime Minister said that he was happy Morocco ranked well in the World Bank\u2019s 2020 \u201cDoing Business\u201d<\/em> Index and moved up by 7 places to reach the 53rd<\/sup> place globally. During his monthly plenary session at the House\u00a0of\u00a0Representatives\u00a0devoted to the subject of “Business Climate”, Prime Minister underlined that “improving Business Climate will not only have positive impact on investors and businesses, but also on the general public, particularly through its contribution in fighting poverty, reducing social inequalities, and improving the living conditions of ordinary citizens[1]<\/sup><\/a>.This view was expressed\u00a0within a context of an ongoing debate\u00a0over the last three years about the limitation of the current development model. This limitation which has resulted in King Mohammed VI appointing a special committee[2]<\/sup><\/a> to put together a new development model, expected to present its findings by the end of June 2020. All of this has taken place under unstable economic circumstances which were worsened by the impact of the Novel Coronavirus\u00a0(COVID-19) and the risk of another possible drought season.<\/p>\nBased on the Doing Business<\/em> reports, one may presume that Morocco’s progress in the ease of Doing Business <\/em>ranking is an indicator of improvement in the country\u2019s business conditions. However, a more in-depth look at the economic reality on the ground may reveal otherwise. Morocco\u2019s achievements in ranking have not been reflected on the reality of investment nor the economic growth in recent years. Growth rates between 2012 and 2018 remained extremely modest. This was 1.06% in 2016 (which is quite low given the challenges faced by Moroccan economy) and did not exceed, at best, 4.53% between 2013 and 2015, which remains largely inadequate for an effective economic take-off.<\/p>\nInstead of seeing Morocco’s progress in the “Business Climate” index reflected on its economic growth rate, we saw the opposite. Over the 1998\u20132008 decade, and at the time when Morocco ranked off the top 100 on the Doing Business<\/em> index, Morocco reported growth rates ranging from 3% and 7%. While in the course of the 2009-2019 decade, when Morocco’s ranking improved, growth rates were often considerably lower.<\/p>\n <\/p>\n
Graph 1: Development of Morocco\u2019s Economic Growth<\/em><\/p>\n![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Picture-1.png\")
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Source: World Bank<\/em><\/p>\n <\/p>\n
The contradiction between increased ranking in Doing Business <\/em>index and low growth rates is due to the nature of the institutional environment in Morocco, particularly the fragile rule of law institutions, poorgovernance and protection of property rights, and corruption. These indicators reflect the structural barriers to investment, which made the World Bank’s Doing Business <\/em>ranking more of a technical endeavour that does not accurately capture the reality and complexity of the Business Climate in the country.<\/p>\nIn an effort to understand this contradiction, this paper\u00a0seeks to look critically into the World Bank’s Doing Business<\/em> Index and approach the Business Climate from an alternative perspective using complex indicators that take into account the quality of political and economic institutions as crucial indicators affecting Business Climate in any country. In this regard, this paper will rely on national and international reports, notably reports by the World Bank, the Fraser Institute, the Heritage Foundation’s\u00a0reports on economic freedom and property rights, and the\u00a0World Economic Forum\u2019s report on global competitiveness, in addition to other national reports issued by official institutions such as the Economic, Social, and Environmental Council and Transparency Morocco.<\/p>\n <\/p>\n
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Doing Business Index\u00a0<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nThe Doing Business<\/em> project is one of the well-known reports of the World Bank, often issued amid certain political controversy and massive media coverage. This report is based on the aggregation of 10 basic indicator\u00a0sets that measure aspects of \u201cbusiness practice\u201d in 190 countries across the globe, including indicators on the regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. To measure these indicators, the authors of the report fill out forms with input from more than 13,000 accountants and lawyers residing in the 190 countries. Experts overseeing the drafting of the report also travel to a number of countries to conduct workshops and interviews with their counterparts in those countries in order to ensure the accuracy of the numbers provided in the filled-in forms. They also take into account the views of government officials about the data collected, before including it in the final version of the report.<\/p>\nThis report was hardly criticized when Paul Romer[3]<\/sup><\/a>,\u00a0former Chief Economist\u00a0at the\u00a0World Bank<\/em>, set off a storm of criticism in a statement to the Wall Street Journal<\/em> on 12 January 2018 when\u00a0he questioned the institution\u2019s methodology. Romer said the irregularities in how the survey\u2019s methodology is conducted affected the ranking of countries. These irregularities, according to the economist, clearly manifested themselves in the shift in the ranking of Chile, which dropped from the 44th<\/sup> to 55th<\/sup> after 2006. An investigation was completed subsequently in order to improve the ranking of some countries. Romer ended up resigning from the World Bank. In the same year, he was awarded the Nobel Prize[4]<\/a> in Economics in recognition of his contributions to the development of the economic growth theory.<\/p>\n <\/p>\n
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Improvements merely on paper<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nIn a notable development, the ease of\u00a0Doing Business<\/em>[5]<\/a> in Morocco\u00a0has reached an all-time high after moving from\u00a0130 in\u00a02009 to 53\u00a0in\u00a02019, which is considered one of the best improvements\u00a0in\u00a0performance globally. Morocco ranked 16th<\/sup> in\u00a0the\u00a0Dealing with Construction Permits (the best ranking ever for Morocco), while it ranked 119th<\/sup> in Getting Credit index.<\/p>\n <\/p>\n
Graph 2: improvements of Doing Business in Morocco<\/em><\/p>\n![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Picture-2.png\")
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Source: World Bank<\/p>\n
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The 2020 report listed a set of measures\u00a0adopted by the Moroccan Government and helped Morocco improved to\u00a053\u00a0in\u00a02019 from 60\u00a0in\u00a02018 (Graph 2). These include the ease to obtain a building permit by issuing one electronically, facilitation of the procedures required to obtain electricity connection, streamlining the property registration procedure by reducing the number of days required for its conduction, strengthening minority investor protections by expanding shareholders\u2019 role in major transactions, promoting independent directors, increasing transparency on directors\u2019 employment in other companies, and making it easier to request general meetings [6]<\/a>.<\/p>\nThe\u00a0report also mentioned\u00a0the efforts undertaken by the government in the fields of tax reform, facilitation of foreign trade by introducing e-payment of port fees, streamlining paperless customs clearance, and extending hours of port operation. Morocco also made enforcing contracts easier by introducing an automated system that randomly assigns cases to judges and publishing court measurement performance reports[7]<\/a>.<\/p>\n <\/p>\n
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Difficulties of\u00a0Doing Business in Morocco<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nDespite the fact that these measures were mainly aimed at improving Doing Business<\/em> and at promoting\u00a0new\u00a0business creation, the reality\u00a0of the Moroccan economy on the ground shows the marginal impact\u00a0of these technical measures. With respect to investment growth rate[8]<\/sup><\/a>, Morocco reported less than 10% investment growth rate between 2009 and 2019, while reported a negative rate in 2013, 2014, and 2017 – years during which Morocco boasted about its improved global ranking in Doing Business<\/em> index.<\/p>\nIn terms of the economic growth (Graph 1), and since Morocco has joined the 100 best countries for Doing Business<\/em> in 2012, the country\u2019s growth rate did not exceed 5% in any year. The\u00a0highest<\/a> rate<\/a>\u00a0was 4.5% and was recorded in 2013 and 2015. In other years, this has progressed at a modest rate (1.06% in 2016) and about 3% in 2012, 2014, and 2018, according to World Bank data[9]<\/sup><\/a>. When we compare the last decade (2009-2019) to the one that preceded it (1998-2008), we are able to see considerable variations\u00a0between the two decades. Morocco has achieved important economic growth rates during the first decade that were not achieved during the one that followed. The county\u2019s GDP\u00a0growth rate\u00a0was 7.57% in 2006 when its ranking on the Ease of\u00a0Doing Business was 102, and the GDP growth rate was 5.92% in 2008 and 5.2% in 2011 when the ranking was 129th and 114th respectively.<\/p>\nThe difficulty of Doing Business in Morocco was confirmed by the World Bank too. In a previous report, the World Bank mentioned that the Business Climate in Morocco is “complex and lacks transparency[10]<\/sup><\/a>“, although this very same report which primarily focused on the economic situation in Morocco, did recognize that the country has already succeeded in improving some of the indicators used to measure the Business Climate. It, however, underlined that “the reality on the ground seems completely different in terms of starting businesses, obtaining permits, or getting credit. In more general terms, the relationship with the public service remains a frustrating one for investors[11]<\/sup><\/a>. According to the same report, Business Climate in Morocco is characterized by bureaucracy and economic actors\u2019 inability to make projections into the future. This makes the level of trust required by economic actors to invest in the medium or long term very limited[12]<\/sup><\/a>.<\/p>\nAs for the perceptions of investors and entrepreneurs, it clearly shows to what extent citizens believe in the difficulty of Doing Business <\/em>in Morocco. In the 2019 Economic, Social, and Environmental Council\u2019s report[13]<\/a>, which included the results of an expanded national survey on Moroccan citizens’ perception of the new development model, one of the questions asked\u00a0to 5818 citizens was about the ease of Doing Business <\/em>in Morocco[14]<\/a>. According to the findings, “60.65% of respondents said that Doing Business <\/em>is “extremely difficult”, while only a small percentage of 2.58% of them said it was “very accessible”. Yet, more than 60% who said it was “very difficult” are based in the regions of Casablanca-Settat and Rabat-Kenitra both of which have the highest percentage of businesses (industrial and services).<\/p>\n <\/p>\n
Table 1: Do you think entrepreneurial work in Morocco is currently easy?<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Sans-titre-4-1.jpg\")
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Source: The Economic, Social, and Environmental Council<\/p>\n
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Indicators for governance and Business Climate<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nThe technical measures taken by government to improve Business Climate are important but remain largely insufficient. Business Climate is not only dependent on regulations set out by bureaucrats, but it is also affected by the nature of political and economic institutions and the quality of the human capital. In this regard, many other international reports confirm the fragility of governance institutions in Morocco. These include the “Worldwide Governance Indicators” (WGI) published by researchers in the World Bank[15]<\/sup><\/a>. \u00a0Since 1996, WGI reports has been covering six major dimensions of governance worldwide, including: (1) voice and accountability, (2) political stability and absence of violence and terrorism, (3) government effectiveness, (4) Regulatory quality, (5) rule of law, and (6) control of corruption. These components combine together political and economic indicators produced by over 40 data sources[16]<\/sup><\/a> worldwide, which makes it the closest accurate description of the quality of institutions in each of the countries covered in this report.<\/p>\nMorocco’s indicators have revealed poor quality of economic and political institutions. Despite the progress made during the period between 2008 and 2018 in terms of voice and accountability, political stability, and the absence of violence and terrorism, the rule of law, and control of corruption, the country has not been able to exceed the 50-point threshold (out of 100) which reflects a medium level governance. In the same period, Morocco\u2019s score in government effectiveness and regulatory quality dropped compared to the period 1996-2002.<\/p>\n
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Graph 3: Worldwide Governance Indicators: The Case of Morocco<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Fig-3-.png\")
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Source: Worldwide Governance Indicators<\/p>\n
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These indicators provide a general overview of \u200b\u200bthe quality of political and economic institutions in Morocco. Fluctuation in the development of these indicators reflects the volatility and confusion of political reforms which largely remain unfulfilled promises for the past two decades. This also shows the deficiencies of “incomplete set of reforms” which produce setbacks that threaten the country’s sustainable political and economic development.<\/p>\n
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![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Sans-titre-4-2.jpg\")
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In addition to governance, vulnaribility and the fragility of political-economic policies, Morocco, in the last two decades, has been suffering from the erosion of an important economic institution in charge of protecting private property rights. According to several indicators[17]<\/sup><\/a>, Morocco has been on a downward trend in protecting private property rights. This explains, partly, the slowdown in private investment, hence, the economic downturn in the country.<\/p>\n <\/p>\n
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Property Rights Protection and Private Investment<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nResearchers have often linked protection of property rights to economic progress. The property rights institution is considered one of the major economic institutions in promoting private investment. Without private property protection, the efforts of the unprotected investors can be looted which could damage investment incentives.<\/p>\n
Economists Acemoglu and Johnson (2005)[18]<\/sup><\/a> have shown in their research on \u201cProperty Rights Institution\u201d that it has a considerable long-term impact on economic growth, investment, and financial development. Besides, \u201cthe contracting institutions” (which are in charge of executing these contracts with clients) are only important for the format of the financial intermediatary. The two economists explained this by the fact that individuals often find ways to amend the terms of their official and unofficial contracts in order to avoid the damaging effects of the fragile contracting bodies. However, they have a harder time in alleviating the effects of having their properties confiscated or looted due to poor government\u2019s property rights protection.<\/p>\nProperty rights protection and the execution of contracts require robust legal institutions. In fact, Economies without strong legal bodies capable of protecting property rights share a feature of having low incentives for human and material investments as well as for the promotion of innovation and creativity. The private property protection indicator is one of the most important indicators which are overlooked by the World Bank\u2019s \u201cDoing Business<\/em>\u201d report. This may because the World Bank experts are convinced that governments\u2019 commitment in this regard is difficult to achieve. This type of reform would require a considerable long time in comparison with the change in technical indicators adopted to conduct the report.<\/p>\nIn this context, several international reports have confirmed the Moroccan government\u2019s weakness in private property protection. The Heritage Foundation\u2019s \u201cEconomic Freedom\u201d Index[19]<\/sup><\/a> (Graph n\u00b0 4) indicates the Moroccan government\u2019s inability to protect private property. Morocco\u2019s data has shown a drop in government\u2019s commitment to protect private property in the years that followed 1997. This has continued until 2007, after which Morocco saw a sustained, albeit\u00a0slow,\u00a0improvement\u00a0in this index. This latter has relatively continued to progress untill 2019, but has never managed to go back to the same level reached in the early 1990s. This is mainly due to the Moroccan justice system\u2019s inability to protect private property rights, except when it involves powerful economic cronies.<\/p>\n <\/p>\n
Graph 4: Protection of Private Property Rights in Morocco<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Picture-4.png\")
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Source: The Heritage Foundation<\/em><\/p>\n <\/p>\n
These results have also been confirmed by the Fraser Institute\u2019s data, which devotes a considerable part of their annual \u201cEconomic Freedom\u00a0of the World\u201d report to examining private property protection. Morocco\u2019s private property protection rate between 2007 and 2017 was less than 6.5 out of 10 (with ten referring to full protection of private property). For the independence of the judiciary, which is in charge of protecting the properties of both individuals and investors, the rate has been less than the 5 points out of 10 throughout the entire period.<\/p>\n
This is an unpromising indicator for private investors who need solid justice institutions to protect their properties.<\/p>\n
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Graph 5: Protection of Private Property Rights in Morocco<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Picture-5.png\")
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Source: Fraser Institute<\/p>\n
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In the\u00a0World Economic Forum’s 2019 Global Competitiveness Report, Morocco scored 71.6 points out of 100 in the protection of private property indicator[20]<\/sup><\/a>, which is a good score (Finland, which came first, scored 93.4 points). As for the pillar of \u201cInstitutions”, which assesses security, property rights, social capital, checks and balances, transparency and ethics, public-sector performance, future orientation of government, and corporate governance, Morocco has only scored 60 points out of 100 in 2019 [21]<\/a>, which highlights the fragility of the overall institutional framework of the country.<\/p>\nProbably, the government has recognized investors\u2019 lack of trust\u00a0in\u00a0the justice system. This what explain the message of the King Mohamed VI to the participants in the second session of Marrakech International Justice Conference<\/em> held on 21 October 2019, as he said \u201ccreating the right conditions for investment requires not only the overhaul of incentive legislation, but also the provision of legal and economic guarantees that ensure confidence in the judicial system and provide full security for investors\u201d[22]<\/sup><\/a>. This is considered an official ackowledgment of the Moroccan judiciary\u2019s inability to protect private investments and the inadequacy of improvement in Morocco\u2019s \u201cDoing Business <\/em>” ranking and the technics adopted by the World Bank in encouraging investors and safeguarding their rights.<\/p>\nIn fact, Moroccan citizens tend to be suspicious\u00a0of\u00a0their justice system. The Moroccan Institute for Policy Analysis\u2019s \u201cTrust\u00a0in\u00a0Institutions\u00a0Index\u201d has shown that 49.6% of Moroccans surveyed do not trust their justice system[23]<\/sup><\/a>. Deterioration of private property rights protection in Morocco in the last couple of decades is not solely attributed to the justice system\u2019s incapability to guarantee the private property protection but also to the State’s failure in enforcing the market and competitiveness regulations, strengthening economic freedom, and fighting corruption and leveraging strong lobbies.<\/p>\n <\/p>\n
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Economic freedom and quality of Business Climate<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nAs noted earlier, Doing Business <\/em>is primarily linked to the nature and quality of the economic institutions. The\u00a0Economic Freedom indexes issued by the Heritage Foundation\u00a0and the\u00a0Fraser Institute are leading measures that asssess the quality of institutions worldwide. Both indexes underlined Morocco\u2019s regression in the ease of \u201cDoing Business <\/em>” and free markets throughout recent years. This is one of the factors which explains the contrast between the improved \u201cDoing Business<\/em>\u201d ranking and the country\u2019s economy which is characterized by bureaucracy, corruption, and lack of economic freedom.<\/p>\n <\/p>\n
Graph 6: Economic Freedom and Business Freedom Indexes in Morocco<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Picture-6.png\")
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Source: The Heritage Foundation<\/p>\n
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Some of the 13 indicators used in measuring for the Heritage Foundation report have more significant impact on Business Climate and Doing Business <\/em>in any country. These indicators include property rights protection (which we examined earlier), economic freedom, freedom of investment, fiscal freedom, labor freedom, monetary freedom, and trade freedom.<\/p>\n <\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Sans-titre-4-3.jpg\")
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Considering these indicators (Graph 6), data relevant to Morocco from 1995 all through 2019 shows that only 3 indicators out of 13 have exceeded 70 points out of 100, while, the rest of component measures are limited between 50 and 70 points. There are also 3 components with less than 50 points up until 2019. These are: labor market freedom, justice system effeciency, and governmental integrity.<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Sans-titre-4-4.jpg\")
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Source\u00a0: The Fraser Institute<\/p>\n
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Chart 2 above illustrates the development of Economic Freedom Index in Morocco and its ranking internationally. The measure of this index includes five aspects: size of government, legal structure and property rights, access to sound money, freedom of trade, regulation of credit, labor and business. The above table shows a drop in Morocco\u2019s global ranking from 71st<\/sup> in 1995 to 92nd<\/sup> in 2017. Table 2 indicates that Morocco was not among the top 100 countries in\u00a0terms of economic freedom between 2009 and 2017, which is the same period during which Moroccan officials continuously pictured improvement in Doing Business<\/em> ranking as a sign of economic reform and investment and growth. However, results at these two levels confirm that an improvement in Doing Business<\/em> index does not guarantee any economic growth or increase in investment if a country is deteriorating in the fields of economic freedom and property rights protection. During that same period, and regardless of improvements in Economic Freedom Index, the improvement remained very small, shifting from 5.8 to 6.69 in 23 years, at a time during which many countries took a huge leap forward in liberating their economies and, therefore, reaping economic benefits in terms of growth and attraction of foreign investments.<\/p>\nThe data presented by the Heritage Foundation, the Fraser Institute, and World Economic Forum emphasize the vulnerability of economic liberation in Morocco, domination of rentier economy, stagnation of laws, influence of intervention of the State and its elites in the economy, and absence of free competition in the markets. The rentier nature and the crony capitalism block the growth of a competitive and innovative private sector with a capacity to enjoy gains on the level of productivity.<\/p>\n
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Rentier economy: corruption and crony capitalism<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nCorruption affects Business Climate and hampers economic development. It can also curb growth and eliminate incentives for creativity[25]<\/a>, if combined with the lack of enforcement of competition laws, lack of property rights protection, and the existence of an ineffective justice system. Some economists argue\u00a0that the high perceived levels of corruption, the weakness of political and economic institutions and lack of political stability would result in fluctuations in the macro-economic indicators and hamper economic development of the country[26]<\/a>.<\/p>\nIn addition, the Heritage Foundation\u2019s data proves the existence of widespread corruption in Morocco. The Freedom from Corruption factor has declined from 50 points in 1995 to 39.2 in 2019. This drop had clear repercussions on investment, direct foreign investment attractiveness, and economic development, particularly if compared to the achievements of other emerging countries over the last two decades. This decline was also confirmed by the 2019 Transparency International\u2019s figures according to which Morocco dropped in ranking from 73rd<\/sup> to 80th<\/sup> (out of 180 countries). Morocco\u2019s ranking also dropped from 43 points to 41 in 2019 Corruption Perceptions Index between 2018 and 2019[27]<\/a>, which also showed that the widespread of corruption in Morocco is a structural problem. During this decade, the corruption index remained less than 50 points (out 100), which is very high even in comparison with African countries less developed than Morocco, as it is shown in the following graph.<\/p>\n <\/p>\n
Graph 7: Morocco\u2019s Corruption Perception Index in Comparison with Other Countries<\/p>\n
![\"\"](\"https:\/\/mipa.institute\/wp-content\/uploads\/2020\/05\/Fig-7-.png\")
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Source: Our World in Data<\/p>\n
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The findings of the Trust in Institutions Index, produced by MIPA, confirmed Moroccan citizens\u2019 suffering of widespread corruption and rentier economy. 74.1% of those surveyed said they were not satisfied with the government efforts to fight against corruption[28]<\/a>. This gained significant momentum particularly during a wave of unprecedented economic boycott in 2018 against 3 companies[29]<\/a> which are, according to the boycotting consumers, an embodiment of monopoly and combination of money and power. Despite the intensity of this unprecedented boycotting campaign, government and governance bodies, namely the Competition Council, have not managed so far to set effective mechanisms to unbundle the monopoly of some markets in Morocco until this day, despite the existence of the Free Pricing and Competition Law, which also remains merely words on paper. While citizens boycott products in markets due to the lack of competition and high costs, entrepreneurs\u2019 boycott can be seen in their refrain from investing in a Business Climate that lacks clarity and sufficient guarantees.<\/p>\n <\/p>\n
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Conclusions and Recommandations<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nMorocco\u2019s improved ranking in Doing Business<\/em> is not necessarily a guarantee for private investment and economic growth. Promoting investment is associated with a set of institutional reforms and in particular reforms related to the system of governance, promoting property rights protection, labor markets freedom, fight against corruption, and fighting conflict of interest. The state\u2019s continued process of economic liberalization, promoting economic freedom, guaranteeing fair competition in market economies, and reforming the Moroccan public service can build trust between local private investors and can contribute in attracting more direct foreign investments.<\/p>\nAny Business Climate reform in Morocco must set as a primary objective attracting more foreign investments. This can only be achieved through adapting the quality of Moroccan political and economic institutions to the same institutional standards in the fastest growing emerging economies and other economically developed nations, particularly in terms of protection of property rights, competitive markets, and decreasing the\u00a0state’s\u00a0intervention\u00a0in the\u00a0economy as well as that of its elites.<\/p>\n
For governance, institutions such as the Competition Council, the\u00a0National\u00a0Commission for\u00a0Integrity\u00a0and Anti-Corruption, and the Economic, Social, and Environmental Council are required to play bigger roles in supporting economic freedom and free competition. Their constitutional role, which is a part and parcel of their core powers, set the ground for solid institutional regulations that can guarantee a solid and positive climate for business and entrepreneurship through the acceleration of economic freedom and commitment to the enforcement of Law N\u00b0 99-06 on Freedom of Pricing and Competition.<\/p>\n
The work of the\u00a0special committee\u00a0in\u00a0charge\u00a0of the new development model and their recommendations regarding the reform of Business Climate in Morocco should go beyond the technical measures proposed by the Doing Business<\/em> report. It should introduce a more comprehensive institutional reform plan, while taking into account that a decade of technical reforms did not achieve any significant results for the country\u2019s economic growth.<\/p>\n <\/p>\n
Footnotes<\/span><\/h5>\n[1]<\/a>– Head of Government portal: \u201cHead of Government: The effects of business climate reform are positive on both citizens and investors\u201d (https:\/\/cutt.ly\/ardCQKX<\/b><\/a>)<\/small><\/p>\n[2]<\/a> – A Royal Committee was appointed and assigned the task of putting together a new development model for Morocco. This came following the announcement by the King during a speech on 13 October 2017 during the opening of the first parliamentary session of the second legislative year of the tenth legislative term, that the current model has reached its end<\/small><\/p>\n[3]<\/a>– Josh Zumbrun. World Bank Competitiveness Rankings Weren\u2019t Manipulated, Audit Shows. The Wall Street Journal: https:\/\/cutt.ly\/it9dD3j<\/b><\/a>(Accessed: 20 February 2020).<\/small><\/p>\n[4]<\/a>– The Nobel Prize website: https:\/\/cutt.ly\/tt9dLT6<\/a> (Accessed: 25 February 2020)<\/small><\/p>\n[5]<\/a>– World Bank Group. (2020): Doing Business 2020: Comparing Business Regulation in 190 Economies. Washington DC.<\/small><\/p>\n[6]<\/a>– Ibid.<\/small><\/p>\n[7]<\/a>– Ibid.<\/small><\/p>\n[8]<\/a>– World Bank, Gross fixed capital formation (annual % growth): https:\/\/cutt.ly\/pt9dVDv<\/b><\/a> (Accessed: 13 April 2020)<\/b><\/small><\/p>\n[9]<\/a>– World Bank, GDP growth (annual %): https:\/\/cutt.ly\/Ut9dMin<\/b><\/a> (Accessed: 13 April 2020)<\/b><\/small><\/p>\n[10]<\/a>– Chauffour, J. P. (2017).\u00a0Le Maroc \u00e0 l’horizon 2040: Investir dans le capital immat\u00e9riel pour acc\u00e9l\u00e9rer l\u2019\u00e9mergence \u00e9conomique<\/em>. The World Bank., p 150.<\/small><\/p>\n[11]<\/a>– Ibid. Op.cit, p 150.<\/small><\/p>\n[12]<\/a>– Ibid. Op.cit, p 158.<\/small><\/p>\n[13]<\/a>– Previously chaired by Chakib Benmoussa, Head of the New Development Model Committee. Members of this latter include Ahmed Reda Al-Shami, current Chairman of the Council.<\/small><\/p>\n[14]<\/a>– The Economic, Social, and Environmental Council (2019) – Morocco’s New Development Model: nput of the Economic, Social, and Environmental Council – p. 145.<\/small><\/p>\n[15]<\/a>– World Bank. The Worldwide Governance Indicators (WGI): info.worldbank.org\/governance\/wgi\/<\/a><\/small><\/p>\n[16]<\/a>– The authors of WGI report combine data from a large number of reports produced by research institutes, including: African Development Bank CPIA, Afrobarometer, Asian Development Bank CPIA, Business Enterprise Environment Survey, Bertelsmann Transformation Index, Freedom House Countries at the Crossroads, Economist Intelligence Unit, Freedom House, World Economic Forum Global Competitiveness Survey, Global Integrity, Gallup World Poll, Heritage Foundation Index of Economic Freedom, CIRI Human Rights Database, IFAD Rural Sector Performance Assessments, Institutional Profiles Database, Latinobarometro, World Bank Country Policy and Institutional Assessments, Political Risk Services International Country Risk Guide, US State Department Trafficking in People report, Vanderbilt University Americas Barometer Survey, IMD World Competitiveness Yearbook, World Justice Project et IHS Global Insight Country Risk Rating.<\/small><\/p>\n[17]<\/a>– In this article, we shall rely on the indexes of the Heritage Foundation and the Canadian Fraser Institute, which are considered some of the most important institutes which provide statistics with regards to protection of property rights worldwide.<\/small><\/p>\n[18]<\/a>– D. Acemoglu, Johnson S. 2005. \u201cUnbundling institutions\u201d. Journal of Political Economy 113 (5), 949-995, p.949.<\/small><\/p>\n[19]<\/a>– This index confirms property is considered to be considerably protected when the index is close to 100 points, whereas private property is considered not protected at all when the index is close to 0.<\/small><\/p>\n[20]<\/a> – World Economic Forum, Executive Opinion Survey: https:\/\/cutt<\/strong><\/em>.ly<\/strong><\/em>\/Ct9fjG0<\/strong><\/em> (Accessed: 13 April 2020).<\/u><\/small><\/p>\n[21]<\/a> – World Economic Forum, Executive Opinion Survey: https:\/\/cutt<\/strong><\/em>.ly<\/strong><\/em>\/3t9fQX1<\/strong><\/em>(Accessed: 23 April 2020).<\/small><\/p>\n[22]<\/a> The Prime Minister\u2019s site: \u201cHis Majesty the King addressing the participants in the second session of the Marrakech International Justice Conference”.<\/small><\/p>\n[23]<\/a>– Moroccan Institute for Policy Analysis (2019): Quality and Trust in Institutions Index: Primary Findings (https:\/\/mipa.institute\/7141<\/a> )<\/small><\/h4>\n[24]<\/a>– Rachid, Aourraz. (2018): Why did Morocco\u2019s New Currency Policy Falter?
<\/p>\n
Introduction<\/strong><\/h5>\nIn October 2019, Morocco\u2019s Prime Minister said that he was happy Morocco ranked well in the World Bank\u2019s 2020 \u201cDoing Business\u201d<\/em> Index and moved up by 7 places to reach the 53rd<\/sup> place globally. During his monthly plenary session at the House\u00a0of\u00a0Representatives\u00a0devoted to the subject of “Business Climate”, Prime Minister underlined that “improving Business Climate will not only have positive impact on investors and businesses, but also on the general public, particularly through its contribution in fighting poverty, reducing social inequalities, and improving the living conditions of ordinary citizens[1]<\/sup><\/a>.This view was expressed\u00a0within a context of an ongoing debate\u00a0over the last three years about the limitation of the current development model. This limitation which has resulted in King Mohammed VI appointing a special committee[2]<\/sup><\/a> to put together a new development model, expected to present its findings by the end of June 2020. All of this has taken place under unstable economic circumstances which were worsened by the impact of the Novel Coronavirus\u00a0(COVID-19) and the risk of another possible drought season.<\/p>\nBased on the Doing Business<\/em> reports, one may presume that Morocco’s progress in the ease of Doing Business <\/em>ranking is an indicator of improvement in the country\u2019s business conditions. However, a more in-depth look at the economic reality on the ground may reveal otherwise. Morocco\u2019s achievements in ranking have not been reflected on the reality of investment nor the economic growth in recent years. Growth rates between 2012 and 2018 remained extremely modest. This was 1.06% in 2016 (which is quite low given the challenges faced by Moroccan economy) and did not exceed, at best, 4.53% between 2013 and 2015, which remains largely inadequate for an effective economic take-off.<\/p>\nInstead of seeing Morocco’s progress in the “Business Climate” index reflected on its economic growth rate, we saw the opposite. Over the 1998\u20132008 decade, and at the time when Morocco ranked off the top 100 on the Doing Business<\/em> index, Morocco reported growth rates ranging from 3% and 7%. While in the course of the 2009-2019 decade, when Morocco’s ranking improved, growth rates were often considerably lower.<\/p>\n <\/p>\n
Graph 1: Development of Morocco\u2019s Economic Growth<\/em><\/p>\n<\/p>\n
Source: World Bank<\/em><\/p>\n <\/p>\n
The contradiction between increased ranking in Doing Business <\/em>index and low growth rates is due to the nature of the institutional environment in Morocco, particularly the fragile rule of law institutions, poorgovernance and protection of property rights, and corruption. These indicators reflect the structural barriers to investment, which made the World Bank’s Doing Business <\/em>ranking more of a technical endeavour that does not accurately capture the reality and complexity of the Business Climate in the country.<\/p>\nIn an effort to understand this contradiction, this paper\u00a0seeks to look critically into the World Bank’s Doing Business<\/em> Index and approach the Business Climate from an alternative perspective using complex indicators that take into account the quality of political and economic institutions as crucial indicators affecting Business Climate in any country. In this regard, this paper will rely on national and international reports, notably reports by the World Bank, the Fraser Institute, the Heritage Foundation’s\u00a0reports on economic freedom and property rights, and the\u00a0World Economic Forum\u2019s report on global competitiveness, in addition to other national reports issued by official institutions such as the Economic, Social, and Environmental Council and Transparency Morocco.<\/p>\n <\/p>\n
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Doing Business Index\u00a0<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nThe Doing Business<\/em> project is one of the well-known reports of the World Bank, often issued amid certain political controversy and massive media coverage. This report is based on the aggregation of 10 basic indicator\u00a0sets that measure aspects of \u201cbusiness practice\u201d in 190 countries across the globe, including indicators on the regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. To measure these indicators, the authors of the report fill out forms with input from more than 13,000 accountants and lawyers residing in the 190 countries. Experts overseeing the drafting of the report also travel to a number of countries to conduct workshops and interviews with their counterparts in those countries in order to ensure the accuracy of the numbers provided in the filled-in forms. They also take into account the views of government officials about the data collected, before including it in the final version of the report.<\/p>\nThis report was hardly criticized when Paul Romer[3]<\/sup><\/a>,\u00a0former Chief Economist\u00a0at the\u00a0World Bank<\/em>, set off a storm of criticism in a statement to the Wall Street Journal<\/em> on 12 January 2018 when\u00a0he questioned the institution\u2019s methodology. Romer said the irregularities in how the survey\u2019s methodology is conducted affected the ranking of countries. These irregularities, according to the economist, clearly manifested themselves in the shift in the ranking of Chile, which dropped from the 44th<\/sup> to 55th<\/sup> after 2006. An investigation was completed subsequently in order to improve the ranking of some countries. Romer ended up resigning from the World Bank. In the same year, he was awarded the Nobel Prize[4]<\/a> in Economics in recognition of his contributions to the development of the economic growth theory.<\/p>\n <\/p>\n
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Improvements merely on paper<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nIn a notable development, the ease of\u00a0Doing Business<\/em>[5]<\/a> in Morocco\u00a0has reached an all-time high after moving from\u00a0130 in\u00a02009 to 53\u00a0in\u00a02019, which is considered one of the best improvements\u00a0in\u00a0performance globally. Morocco ranked 16th<\/sup> in\u00a0the\u00a0Dealing with Construction Permits (the best ranking ever for Morocco), while it ranked 119th<\/sup> in Getting Credit index.<\/p>\n <\/p>\n
Graph 2: improvements of Doing Business in Morocco<\/em><\/p>\n<\/p>\n
Source: World Bank<\/p>\n
<\/p>\n
The 2020 report listed a set of measures\u00a0adopted by the Moroccan Government and helped Morocco improved to\u00a053\u00a0in\u00a02019 from 60\u00a0in\u00a02018 (Graph 2). These include the ease to obtain a building permit by issuing one electronically, facilitation of the procedures required to obtain electricity connection, streamlining the property registration procedure by reducing the number of days required for its conduction, strengthening minority investor protections by expanding shareholders\u2019 role in major transactions, promoting independent directors, increasing transparency on directors\u2019 employment in other companies, and making it easier to request general meetings [6]<\/a>.<\/p>\nThe\u00a0report also mentioned\u00a0the efforts undertaken by the government in the fields of tax reform, facilitation of foreign trade by introducing e-payment of port fees, streamlining paperless customs clearance, and extending hours of port operation. Morocco also made enforcing contracts easier by introducing an automated system that randomly assigns cases to judges and publishing court measurement performance reports[7]<\/a>.<\/p>\n <\/p>\n
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Difficulties of\u00a0Doing Business in Morocco<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nDespite the fact that these measures were mainly aimed at improving Doing Business<\/em> and at promoting\u00a0new\u00a0business creation, the reality\u00a0of the Moroccan economy on the ground shows the marginal impact\u00a0of these technical measures. With respect to investment growth rate[8]<\/sup><\/a>, Morocco reported less than 10% investment growth rate between 2009 and 2019, while reported a negative rate in 2013, 2014, and 2017 – years during which Morocco boasted about its improved global ranking in Doing Business<\/em> index.<\/p>\nIn terms of the economic growth (Graph 1), and since Morocco has joined the 100 best countries for Doing Business<\/em> in 2012, the country\u2019s growth rate did not exceed 5% in any year. The\u00a0highest<\/a> rate<\/a>\u00a0was 4.5% and was recorded in 2013 and 2015. In other years, this has progressed at a modest rate (1.06% in 2016) and about 3% in 2012, 2014, and 2018, according to World Bank data[9]<\/sup><\/a>. When we compare the last decade (2009-2019) to the one that preceded it (1998-2008), we are able to see considerable variations\u00a0between the two decades. Morocco has achieved important economic growth rates during the first decade that were not achieved during the one that followed. The county\u2019s GDP\u00a0growth rate\u00a0was 7.57% in 2006 when its ranking on the Ease of\u00a0Doing Business was 102, and the GDP growth rate was 5.92% in 2008 and 5.2% in 2011 when the ranking was 129th and 114th respectively.<\/p>\nThe difficulty of Doing Business in Morocco was confirmed by the World Bank too. In a previous report, the World Bank mentioned that the Business Climate in Morocco is “complex and lacks transparency[10]<\/sup><\/a>“, although this very same report which primarily focused on the economic situation in Morocco, did recognize that the country has already succeeded in improving some of the indicators used to measure the Business Climate. It, however, underlined that “the reality on the ground seems completely different in terms of starting businesses, obtaining permits, or getting credit. In more general terms, the relationship with the public service remains a frustrating one for investors[11]<\/sup><\/a>. According to the same report, Business Climate in Morocco is characterized by bureaucracy and economic actors\u2019 inability to make projections into the future. This makes the level of trust required by economic actors to invest in the medium or long term very limited[12]<\/sup><\/a>.<\/p>\nAs for the perceptions of investors and entrepreneurs, it clearly shows to what extent citizens believe in the difficulty of Doing Business <\/em>in Morocco. In the 2019 Economic, Social, and Environmental Council\u2019s report[13]<\/a>, which included the results of an expanded national survey on Moroccan citizens’ perception of the new development model, one of the questions asked\u00a0to 5818 citizens was about the ease of Doing Business <\/em>in Morocco[14]<\/a>. According to the findings, “60.65% of respondents said that Doing Business <\/em>is “extremely difficult”, while only a small percentage of 2.58% of them said it was “very accessible”. Yet, more than 60% who said it was “very difficult” are based in the regions of Casablanca-Settat and Rabat-Kenitra both of which have the highest percentage of businesses (industrial and services).<\/p>\n <\/p>\n
Table 1: Do you think entrepreneurial work in Morocco is currently easy?<\/p>\n
<\/p>\n
Source: The Economic, Social, and Environmental Council<\/p>\n
\u00a0<\/strong><\/p>\n\n- \n
Indicators for governance and Business Climate<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nThe technical measures taken by government to improve Business Climate are important but remain largely insufficient. Business Climate is not only dependent on regulations set out by bureaucrats, but it is also affected by the nature of political and economic institutions and the quality of the human capital. In this regard, many other international reports confirm the fragility of governance institutions in Morocco. These include the “Worldwide Governance Indicators” (WGI) published by researchers in the World Bank[15]<\/sup><\/a>. \u00a0Since 1996, WGI reports has been covering six major dimensions of governance worldwide, including: (1) voice and accountability, (2) political stability and absence of violence and terrorism, (3) government effectiveness, (4) Regulatory quality, (5) rule of law, and (6) control of corruption. These components combine together political and economic indicators produced by over 40 data sources[16]<\/sup><\/a> worldwide, which makes it the closest accurate description of the quality of institutions in each of the countries covered in this report.<\/p>\nMorocco’s indicators have revealed poor quality of economic and political institutions. Despite the progress made during the period between 2008 and 2018 in terms of voice and accountability, political stability, and the absence of violence and terrorism, the rule of law, and control of corruption, the country has not been able to exceed the 50-point threshold (out of 100) which reflects a medium level governance. In the same period, Morocco\u2019s score in government effectiveness and regulatory quality dropped compared to the period 1996-2002.<\/p>\n
<\/p>\n
Graph 3: Worldwide Governance Indicators: The Case of Morocco<\/p>\n
<\/p>\n
Source: Worldwide Governance Indicators<\/p>\n
<\/p>\n
These indicators provide a general overview of \u200b\u200bthe quality of political and economic institutions in Morocco. Fluctuation in the development of these indicators reflects the volatility and confusion of political reforms which largely remain unfulfilled promises for the past two decades. This also shows the deficiencies of “incomplete set of reforms” which produce setbacks that threaten the country’s sustainable political and economic development.<\/p>\n
<\/p>\n
<\/p>\n
<\/p>\n
In addition to governance, vulnaribility and the fragility of political-economic policies, Morocco, in the last two decades, has been suffering from the erosion of an important economic institution in charge of protecting private property rights. According to several indicators[17]<\/sup><\/a>, Morocco has been on a downward trend in protecting private property rights. This explains, partly, the slowdown in private investment, hence, the economic downturn in the country.<\/p>\n <\/p>\n
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Property Rights Protection and Private Investment<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nResearchers have often linked protection of property rights to economic progress. The property rights institution is considered one of the major economic institutions in promoting private investment. Without private property protection, the efforts of the unprotected investors can be looted which could damage investment incentives.<\/p>\n
Economists Acemoglu and Johnson (2005)[18]<\/sup><\/a> have shown in their research on \u201cProperty Rights Institution\u201d that it has a considerable long-term impact on economic growth, investment, and financial development. Besides, \u201cthe contracting institutions” (which are in charge of executing these contracts with clients) are only important for the format of the financial intermediatary. The two economists explained this by the fact that individuals often find ways to amend the terms of their official and unofficial contracts in order to avoid the damaging effects of the fragile contracting bodies. However, they have a harder time in alleviating the effects of having their properties confiscated or looted due to poor government\u2019s property rights protection.<\/p>\nProperty rights protection and the execution of contracts require robust legal institutions. In fact, Economies without strong legal bodies capable of protecting property rights share a feature of having low incentives for human and material investments as well as for the promotion of innovation and creativity. The private property protection indicator is one of the most important indicators which are overlooked by the World Bank\u2019s \u201cDoing Business<\/em>\u201d report. This may because the World Bank experts are convinced that governments\u2019 commitment in this regard is difficult to achieve. This type of reform would require a considerable long time in comparison with the change in technical indicators adopted to conduct the report.<\/p>\nIn this context, several international reports have confirmed the Moroccan government\u2019s weakness in private property protection. The Heritage Foundation\u2019s \u201cEconomic Freedom\u201d Index[19]<\/sup><\/a> (Graph n\u00b0 4) indicates the Moroccan government\u2019s inability to protect private property. Morocco\u2019s data has shown a drop in government\u2019s commitment to protect private property in the years that followed 1997. This has continued until 2007, after which Morocco saw a sustained, albeit\u00a0slow,\u00a0improvement\u00a0in this index. This latter has relatively continued to progress untill 2019, but has never managed to go back to the same level reached in the early 1990s. This is mainly due to the Moroccan justice system\u2019s inability to protect private property rights, except when it involves powerful economic cronies.<\/p>\n <\/p>\n
Graph 4: Protection of Private Property Rights in Morocco<\/p>\n
<\/p>\n
Source: The Heritage Foundation<\/em><\/p>\n <\/p>\n
These results have also been confirmed by the Fraser Institute\u2019s data, which devotes a considerable part of their annual \u201cEconomic Freedom\u00a0of the World\u201d report to examining private property protection. Morocco\u2019s private property protection rate between 2007 and 2017 was less than 6.5 out of 10 (with ten referring to full protection of private property). For the independence of the judiciary, which is in charge of protecting the properties of both individuals and investors, the rate has been less than the 5 points out of 10 throughout the entire period.<\/p>\n
This is an unpromising indicator for private investors who need solid justice institutions to protect their properties.<\/p>\n
<\/p>\n
Graph 5: Protection of Private Property Rights in Morocco<\/p>\n
<\/p>\n
Source: Fraser Institute<\/p>\n
<\/p>\n
<\/p>\n
In the\u00a0World Economic Forum’s 2019 Global Competitiveness Report, Morocco scored 71.6 points out of 100 in the protection of private property indicator[20]<\/sup><\/a>, which is a good score (Finland, which came first, scored 93.4 points). As for the pillar of \u201cInstitutions”, which assesses security, property rights, social capital, checks and balances, transparency and ethics, public-sector performance, future orientation of government, and corporate governance, Morocco has only scored 60 points out of 100 in 2019 [21]<\/a>, which highlights the fragility of the overall institutional framework of the country.<\/p>\nProbably, the government has recognized investors\u2019 lack of trust\u00a0in\u00a0the justice system. This what explain the message of the King Mohamed VI to the participants in the second session of Marrakech International Justice Conference<\/em> held on 21 October 2019, as he said \u201ccreating the right conditions for investment requires not only the overhaul of incentive legislation, but also the provision of legal and economic guarantees that ensure confidence in the judicial system and provide full security for investors\u201d[22]<\/sup><\/a>. This is considered an official ackowledgment of the Moroccan judiciary\u2019s inability to protect private investments and the inadequacy of improvement in Morocco\u2019s \u201cDoing Business <\/em>” ranking and the technics adopted by the World Bank in encouraging investors and safeguarding their rights.<\/p>\nIn fact, Moroccan citizens tend to be suspicious\u00a0of\u00a0their justice system. The Moroccan Institute for Policy Analysis\u2019s \u201cTrust\u00a0in\u00a0Institutions\u00a0Index\u201d has shown that 49.6% of Moroccans surveyed do not trust their justice system[23]<\/sup><\/a>. Deterioration of private property rights protection in Morocco in the last couple of decades is not solely attributed to the justice system\u2019s incapability to guarantee the private property protection but also to the State’s failure in enforcing the market and competitiveness regulations, strengthening economic freedom, and fighting corruption and leveraging strong lobbies.<\/p>\n <\/p>\n
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Economic freedom and quality of Business Climate<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nAs noted earlier, Doing Business <\/em>is primarily linked to the nature and quality of the economic institutions. The\u00a0Economic Freedom indexes issued by the Heritage Foundation\u00a0and the\u00a0Fraser Institute are leading measures that asssess the quality of institutions worldwide. Both indexes underlined Morocco\u2019s regression in the ease of \u201cDoing Business <\/em>” and free markets throughout recent years. This is one of the factors which explains the contrast between the improved \u201cDoing Business<\/em>\u201d ranking and the country\u2019s economy which is characterized by bureaucracy, corruption, and lack of economic freedom.<\/p>\n <\/p>\n
Graph 6: Economic Freedom and Business Freedom Indexes in Morocco<\/p>\n
<\/p>\n
Source: The Heritage Foundation<\/p>\n
<\/p>\n
Some of the 13 indicators used in measuring for the Heritage Foundation report have more significant impact on Business Climate and Doing Business <\/em>in any country. These indicators include property rights protection (which we examined earlier), economic freedom, freedom of investment, fiscal freedom, labor freedom, monetary freedom, and trade freedom.<\/p>\n <\/p>\n
<\/p>\n
<\/p>\n
Considering these indicators (Graph 6), data relevant to Morocco from 1995 all through 2019 shows that only 3 indicators out of 13 have exceeded 70 points out of 100, while, the rest of component measures are limited between 50 and 70 points. There are also 3 components with less than 50 points up until 2019. These are: labor market freedom, justice system effeciency, and governmental integrity.<\/p>\n
<\/p>\n
Source\u00a0: The Fraser Institute<\/p>\n
<\/p>\n
Chart 2 above illustrates the development of Economic Freedom Index in Morocco and its ranking internationally. The measure of this index includes five aspects: size of government, legal structure and property rights, access to sound money, freedom of trade, regulation of credit, labor and business. The above table shows a drop in Morocco\u2019s global ranking from 71st<\/sup> in 1995 to 92nd<\/sup> in 2017. Table 2 indicates that Morocco was not among the top 100 countries in\u00a0terms of economic freedom between 2009 and 2017, which is the same period during which Moroccan officials continuously pictured improvement in Doing Business<\/em> ranking as a sign of economic reform and investment and growth. However, results at these two levels confirm that an improvement in Doing Business<\/em> index does not guarantee any economic growth or increase in investment if a country is deteriorating in the fields of economic freedom and property rights protection. During that same period, and regardless of improvements in Economic Freedom Index, the improvement remained very small, shifting from 5.8 to 6.69 in 23 years, at a time during which many countries took a huge leap forward in liberating their economies and, therefore, reaping economic benefits in terms of growth and attraction of foreign investments.<\/p>\nThe data presented by the Heritage Foundation, the Fraser Institute, and World Economic Forum emphasize the vulnerability of economic liberation in Morocco, domination of rentier economy, stagnation of laws, influence of intervention of the State and its elites in the economy, and absence of free competition in the markets. The rentier nature and the crony capitalism block the growth of a competitive and innovative private sector with a capacity to enjoy gains on the level of productivity.<\/p>\n
<\/p>\n
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Rentier economy: corruption and crony capitalism<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\nCorruption affects Business Climate and hampers economic development. It can also curb growth and eliminate incentives for creativity[25]<\/a>, if combined with the lack of enforcement of competition laws, lack of property rights protection, and the existence of an ineffective justice system. Some economists argue\u00a0that the high perceived levels of corruption, the weakness of political and economic institutions and lack of political stability would result in fluctuations in the macro-economic indicators and hamper economic development of the country[26]<\/a>.<\/p>\nIn addition, the Heritage Foundation\u2019s data proves the existence of widespread corruption in Morocco. The Freedom from Corruption factor has declined from 50 points in 1995 to 39.2 in 2019. This drop had clear repercussions on investment, direct foreign investment attractiveness, and economic development, particularly if compared to the achievements of other emerging countries over the last two decades. This decline was also confirmed by the 2019 Transparency International\u2019s figures according to which Morocco dropped in ranking from 73rd<\/sup> to 80th<\/sup> (out of 180 countries). Morocco\u2019s ranking also dropped from 43 points to 41 in 2019 Corruption Perceptions Index between 2018 and 2019[27]<\/a>, which also showed that the widespread of corruption in Morocco is a structural problem. During this decade, the corruption index remained less than 50 points (out 100), which is very high even in comparison with African countries less developed than Morocco, as it is shown in the following graph.<\/p>\n <\/p>\n
Graph 7: Morocco\u2019s Corruption Perception Index in Comparison with Other Countries<\/p>\n
<\/p>\n
Source: Our World in Data<\/p>\n
<\/p>\n
The findings of the Trust in Institutions Index, produced by MIPA, confirmed Moroccan citizens\u2019 suffering of widespread corruption and rentier economy. 74.1% of those surveyed said they were not satisfied with the government efforts to fight against corruption[28]<\/a>. This gained significant momentum particularly during a wave of unprecedented economic boycott in 2018 against 3 companies[29]<\/a> which are, according to the boycotting consumers, an embodiment of monopoly and combination of money and power. Despite the intensity of this unprecedented boycotting campaign, government and governance bodies, namely the Competition Council, have not managed so far to set effective mechanisms to unbundle the monopoly of some markets in Morocco until this day, despite the existence of the Free Pricing and Competition Law, which also remains merely words on paper. While citizens boycott products in markets due to the lack of competition and high costs, entrepreneurs\u2019 boycott can be seen in their refrain from investing in a Business Climate that lacks clarity and sufficient guarantees.<\/p>\n <\/p>\n
\n- \n
Conclusions and Recommandations<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\nMorocco\u2019s improved ranking in Doing Business<\/em> is not necessarily a guarantee for private investment and economic growth. Promoting investment is associated with a set of institutional reforms and in particular reforms related to the system of governance, promoting property rights protection, labor markets freedom, fight against corruption, and fighting conflict of interest. The state\u2019s continued process of economic liberalization, promoting economic freedom, guaranteeing fair competition in market economies, and reforming the Moroccan public service can build trust between local private investors and can contribute in attracting more direct foreign investments.<\/p>\nAny Business Climate reform in Morocco must set as a primary objective attracting more foreign investments. This can only be achieved through adapting the quality of Moroccan political and economic institutions to the same institutional standards in the fastest growing emerging economies and other economically developed nations, particularly in terms of protection of property rights, competitive markets, and decreasing the\u00a0state’s\u00a0intervention\u00a0in the\u00a0economy as well as that of its elites.<\/p>\n
For governance, institutions such as the Competition Council, the\u00a0National\u00a0Commission for\u00a0Integrity\u00a0and Anti-Corruption, and the Economic, Social, and Environmental Council are required to play bigger roles in supporting economic freedom and free competition. Their constitutional role, which is a part and parcel of their core powers, set the ground for solid institutional regulations that can guarantee a solid and positive climate for business and entrepreneurship through the acceleration of economic freedom and commitment to the enforcement of Law N\u00b0 99-06 on Freedom of Pricing and Competition.<\/p>\n
The work of the\u00a0special committee\u00a0in\u00a0charge\u00a0of the new development model and their recommendations regarding the reform of Business Climate in Morocco should go beyond the technical measures proposed by the Doing Business<\/em> report. It should introduce a more comprehensive institutional reform plan, while taking into account that a decade of technical reforms did not achieve any significant results for the country\u2019s economic growth.<\/p>\n <\/p>\n
Footnotes<\/span><\/h5>\n[1]<\/a>– Head of Government portal: \u201cHead of Government: The effects of business climate reform are positive on both citizens and investors\u201d (https:\/\/cutt.ly\/ardCQKX<\/b><\/a>)<\/small><\/p>\n[2]<\/a> – A Royal Committee was appointed and assigned the task of putting together a new development model for Morocco. This came following the announcement by the King during a speech on 13 October 2017 during the opening of the first parliamentary session of the second legislative year of the tenth legislative term, that the current model has reached its end<\/small><\/p>\n[3]<\/a>– Josh Zumbrun. World Bank Competitiveness Rankings Weren\u2019t Manipulated, Audit Shows. The Wall Street Journal: https:\/\/cutt.ly\/it9dD3j<\/b><\/a>(Accessed: 20 February 2020).<\/small><\/p>\n[4]<\/a>– The Nobel Prize website: https:\/\/cutt.ly\/tt9dLT6<\/a> (Accessed: 25 February 2020)<\/small><\/p>\n[5]<\/a>– World Bank Group. (2020): Doing Business 2020: Comparing Business Regulation in 190 Economies. Washington DC.<\/small><\/p>\n[6]<\/a>– Ibid.<\/small><\/p>\n[7]<\/a>– Ibid.<\/small><\/p>\n[8]<\/a>– World Bank, Gross fixed capital formation (annual % growth): https:\/\/cutt.ly\/pt9dVDv<\/b><\/a> (Accessed: 13 April 2020)<\/b><\/small><\/p>\n[9]<\/a>– World Bank, GDP growth (annual %): https:\/\/cutt.ly\/Ut9dMin<\/b><\/a> (Accessed: 13 April 2020)<\/b><\/small><\/p>\n[10]<\/a>– Chauffour, J. P. (2017).\u00a0Le Maroc \u00e0 l’horizon 2040: Investir dans le capital immat\u00e9riel pour acc\u00e9l\u00e9rer l\u2019\u00e9mergence \u00e9conomique<\/em>. The World Bank., p 150.<\/small><\/p>\n[11]<\/a>– Ibid. Op.cit, p 150.<\/small><\/p>\n[12]<\/a>– Ibid. Op.cit, p 158.<\/small><\/p>\n[13]<\/a>– Previously chaired by Chakib Benmoussa, Head of the New Development Model Committee. Members of this latter include Ahmed Reda Al-Shami, current Chairman of the Council.<\/small><\/p>\n[14]<\/a>– The Economic, Social, and Environmental Council (2019) – Morocco’s New Development Model: nput of the Economic, Social, and Environmental Council – p. 145.<\/small><\/p>\n[15]<\/a>– World Bank. The Worldwide Governance Indicators (WGI): info.worldbank.org\/governance\/wgi\/<\/a><\/small><\/p>\n[16]<\/a>– The authors of WGI report combine data from a large number of reports produced by research institutes, including: African Development Bank CPIA, Afrobarometer, Asian Development Bank CPIA, Business Enterprise Environment Survey, Bertelsmann Transformation Index, Freedom House Countries at the Crossroads, Economist Intelligence Unit, Freedom House, World Economic Forum Global Competitiveness Survey, Global Integrity, Gallup World Poll, Heritage Foundation Index of Economic Freedom, CIRI Human Rights Database, IFAD Rural Sector Performance Assessments, Institutional Profiles Database, Latinobarometro, World Bank Country Policy and Institutional Assessments, Political Risk Services International Country Risk Guide, US State Department Trafficking in People report, Vanderbilt University Americas Barometer Survey, IMD World Competitiveness Yearbook, World Justice Project et IHS Global Insight Country Risk Rating.<\/small><\/p>\n[17]<\/a>– In this article, we shall rely on the indexes of the Heritage Foundation and the Canadian Fraser Institute, which are considered some of the most important institutes which provide statistics with regards to protection of property rights worldwide.<\/small><\/p>\n[18]<\/a>– D. Acemoglu, Johnson S. 2005. \u201cUnbundling institutions\u201d. Journal of Political Economy 113 (5), 949-995, p.949.<\/small><\/p>\n[19]<\/a>– This index confirms property is considered to be considerably protected when the index is close to 100 points, whereas private property is considered not protected at all when the index is close to 0.<\/small><\/p>\n[20]<\/a> – World Economic Forum, Executive Opinion Survey: https:\/\/cutt<\/strong><\/em>.ly<\/strong><\/em>\/Ct9fjG0<\/strong><\/em> (Accessed: 13 April 2020).<\/u><\/small><\/p>\n[21]<\/a> – World Economic Forum, Executive Opinion Survey: https:\/\/cutt<\/strong><\/em>.ly<\/strong><\/em>\/3t9fQX1<\/strong><\/em>(Accessed: 23 April 2020).<\/small><\/p>\n[22]<\/a> The Prime Minister\u2019s site: \u201cHis Majesty the King addressing the participants in the second session of the Marrakech International Justice Conference”.<\/small><\/p>\n[23]<\/a>– Moroccan Institute for Policy Analysis (2019): Quality and Trust in Institutions Index: Primary Findings (https:\/\/mipa.institute\/7141<\/a> )<\/small><\/h4>\n[24]<\/a>– Rachid, Aourraz. (2018): Why did Morocco\u2019s New Currency Policy Falter?
Based on the Doing Business<\/em> reports, one may presume that Morocco’s progress in the ease of Doing Business <\/em>ranking is an indicator of improvement in the country\u2019s business conditions. However, a more in-depth look at the economic reality on the ground may reveal otherwise. Morocco\u2019s achievements in ranking have not been reflected on the reality of investment nor the economic growth in recent years. Growth rates between 2012 and 2018 remained extremely modest. This was 1.06% in 2016 (which is quite low given the challenges faced by Moroccan economy) and did not exceed, at best, 4.53% between 2013 and 2015, which remains largely inadequate for an effective economic take-off.<\/p>\n Instead of seeing Morocco’s progress in the “Business Climate” index reflected on its economic growth rate, we saw the opposite. Over the 1998\u20132008 decade, and at the time when Morocco ranked off the top 100 on the Doing Business<\/em> index, Morocco reported growth rates ranging from 3% and 7%. While in the course of the 2009-2019 decade, when Morocco’s ranking improved, growth rates were often considerably lower.<\/p>\n <\/p>\n Graph 1: Development of Morocco\u2019s Economic Growth<\/em><\/p>\n Source: World Bank<\/em><\/p>\n <\/p>\n The contradiction between increased ranking in Doing Business <\/em>index and low growth rates is due to the nature of the institutional environment in Morocco, particularly the fragile rule of law institutions, poorgovernance and protection of property rights, and corruption. These indicators reflect the structural barriers to investment, which made the World Bank’s Doing Business <\/em>ranking more of a technical endeavour that does not accurately capture the reality and complexity of the Business Climate in the country.<\/p>\n In an effort to understand this contradiction, this paper\u00a0seeks to look critically into the World Bank’s Doing Business<\/em> Index and approach the Business Climate from an alternative perspective using complex indicators that take into account the quality of political and economic institutions as crucial indicators affecting Business Climate in any country. In this regard, this paper will rely on national and international reports, notably reports by the World Bank, the Fraser Institute, the Heritage Foundation’s\u00a0reports on economic freedom and property rights, and the\u00a0World Economic Forum\u2019s report on global competitiveness, in addition to other national reports issued by official institutions such as the Economic, Social, and Environmental Council and Transparency Morocco.<\/p>\n <\/p>\n The Doing Business<\/em> project is one of the well-known reports of the World Bank, often issued amid certain political controversy and massive media coverage. This report is based on the aggregation of 10 basic indicator\u00a0sets that measure aspects of \u201cbusiness practice\u201d in 190 countries across the globe, including indicators on the regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. To measure these indicators, the authors of the report fill out forms with input from more than 13,000 accountants and lawyers residing in the 190 countries. Experts overseeing the drafting of the report also travel to a number of countries to conduct workshops and interviews with their counterparts in those countries in order to ensure the accuracy of the numbers provided in the filled-in forms. They also take into account the views of government officials about the data collected, before including it in the final version of the report.<\/p>\n This report was hardly criticized when Paul Romer[3]<\/sup><\/a>,\u00a0former Chief Economist\u00a0at the\u00a0World Bank<\/em>, set off a storm of criticism in a statement to the Wall Street Journal<\/em> on 12 January 2018 when\u00a0he questioned the institution\u2019s methodology. Romer said the irregularities in how the survey\u2019s methodology is conducted affected the ranking of countries. These irregularities, according to the economist, clearly manifested themselves in the shift in the ranking of Chile, which dropped from the 44th<\/sup> to 55th<\/sup> after 2006. An investigation was completed subsequently in order to improve the ranking of some countries. Romer ended up resigning from the World Bank. In the same year, he was awarded the Nobel Prize[4]<\/a> in Economics in recognition of his contributions to the development of the economic growth theory.<\/p>\n <\/p>\n In a notable development, the ease of\u00a0Doing Business<\/em>[5]<\/a> in Morocco\u00a0has reached an all-time high after moving from\u00a0130 in\u00a02009 to 53\u00a0in\u00a02019, which is considered one of the best improvements\u00a0in\u00a0performance globally. Morocco ranked 16th<\/sup> in\u00a0the\u00a0Dealing with Construction Permits (the best ranking ever for Morocco), while it ranked 119th<\/sup> in Getting Credit index.<\/p>\n <\/p>\n Graph 2: improvements of Doing Business in Morocco<\/em><\/p>\n Source: World Bank<\/p>\n <\/p>\n The 2020 report listed a set of measures\u00a0adopted by the Moroccan Government and helped Morocco improved to\u00a053\u00a0in\u00a02019 from 60\u00a0in\u00a02018 (Graph 2). These include the ease to obtain a building permit by issuing one electronically, facilitation of the procedures required to obtain electricity connection, streamlining the property registration procedure by reducing the number of days required for its conduction, strengthening minority investor protections by expanding shareholders\u2019 role in major transactions, promoting independent directors, increasing transparency on directors\u2019 employment in other companies, and making it easier to request general meetings [6]<\/a>.<\/p>\n The\u00a0report also mentioned\u00a0the efforts undertaken by the government in the fields of tax reform, facilitation of foreign trade by introducing e-payment of port fees, streamlining paperless customs clearance, and extending hours of port operation. Morocco also made enforcing contracts easier by introducing an automated system that randomly assigns cases to judges and publishing court measurement performance reports[7]<\/a>.<\/p>\n <\/p>\n Despite the fact that these measures were mainly aimed at improving Doing Business<\/em> and at promoting\u00a0new\u00a0business creation, the reality\u00a0of the Moroccan economy on the ground shows the marginal impact\u00a0of these technical measures. With respect to investment growth rate[8]<\/sup><\/a>, Morocco reported less than 10% investment growth rate between 2009 and 2019, while reported a negative rate in 2013, 2014, and 2017 – years during which Morocco boasted about its improved global ranking in Doing Business<\/em> index.<\/p>\n In terms of the economic growth (Graph 1), and since Morocco has joined the 100 best countries for Doing Business<\/em> in 2012, the country\u2019s growth rate did not exceed 5% in any year. The\u00a0highest<\/a> rate<\/a>\u00a0was 4.5% and was recorded in 2013 and 2015. In other years, this has progressed at a modest rate (1.06% in 2016) and about 3% in 2012, 2014, and 2018, according to World Bank data[9]<\/sup><\/a>. When we compare the last decade (2009-2019) to the one that preceded it (1998-2008), we are able to see considerable variations\u00a0between the two decades. Morocco has achieved important economic growth rates during the first decade that were not achieved during the one that followed. The county\u2019s GDP\u00a0growth rate\u00a0was 7.57% in 2006 when its ranking on the Ease of\u00a0Doing Business was 102, and the GDP growth rate was 5.92% in 2008 and 5.2% in 2011 when the ranking was 129th and 114th respectively.<\/p>\n The difficulty of Doing Business in Morocco was confirmed by the World Bank too. In a previous report, the World Bank mentioned that the Business Climate in Morocco is “complex and lacks transparency[10]<\/sup><\/a>“, although this very same report which primarily focused on the economic situation in Morocco, did recognize that the country has already succeeded in improving some of the indicators used to measure the Business Climate. It, however, underlined that “the reality on the ground seems completely different in terms of starting businesses, obtaining permits, or getting credit. In more general terms, the relationship with the public service remains a frustrating one for investors[11]<\/sup><\/a>. According to the same report, Business Climate in Morocco is characterized by bureaucracy and economic actors\u2019 inability to make projections into the future. This makes the level of trust required by economic actors to invest in the medium or long term very limited[12]<\/sup><\/a>.<\/p>\n As for the perceptions of investors and entrepreneurs, it clearly shows to what extent citizens believe in the difficulty of Doing Business <\/em>in Morocco. In the 2019 Economic, Social, and Environmental Council\u2019s report[13]<\/a>, which included the results of an expanded national survey on Moroccan citizens’ perception of the new development model, one of the questions asked\u00a0to 5818 citizens was about the ease of Doing Business <\/em>in Morocco[14]<\/a>. According to the findings, “60.65% of respondents said that Doing Business <\/em>is “extremely difficult”, while only a small percentage of 2.58% of them said it was “very accessible”. Yet, more than 60% who said it was “very difficult” are based in the regions of Casablanca-Settat and Rabat-Kenitra both of which have the highest percentage of businesses (industrial and services).<\/p>\n <\/p>\n Table 1: Do you think entrepreneurial work in Morocco is currently easy?<\/p>\n Source: The Economic, Social, and Environmental Council<\/p>\n \u00a0<\/strong><\/p>\n The technical measures taken by government to improve Business Climate are important but remain largely insufficient. Business Climate is not only dependent on regulations set out by bureaucrats, but it is also affected by the nature of political and economic institutions and the quality of the human capital. In this regard, many other international reports confirm the fragility of governance institutions in Morocco. These include the “Worldwide Governance Indicators” (WGI) published by researchers in the World Bank[15]<\/sup><\/a>. \u00a0Since 1996, WGI reports has been covering six major dimensions of governance worldwide, including: (1) voice and accountability, (2) political stability and absence of violence and terrorism, (3) government effectiveness, (4) Regulatory quality, (5) rule of law, and (6) control of corruption. These components combine together political and economic indicators produced by over 40 data sources[16]<\/sup><\/a> worldwide, which makes it the closest accurate description of the quality of institutions in each of the countries covered in this report.<\/p>\n Morocco’s indicators have revealed poor quality of economic and political institutions. Despite the progress made during the period between 2008 and 2018 in terms of voice and accountability, political stability, and the absence of violence and terrorism, the rule of law, and control of corruption, the country has not been able to exceed the 50-point threshold (out of 100) which reflects a medium level governance. In the same period, Morocco\u2019s score in government effectiveness and regulatory quality dropped compared to the period 1996-2002.<\/p>\n <\/p>\n Graph 3: Worldwide Governance Indicators: The Case of Morocco<\/p>\n Source: Worldwide Governance Indicators<\/p>\n <\/p>\n These indicators provide a general overview of \u200b\u200bthe quality of political and economic institutions in Morocco. Fluctuation in the development of these indicators reflects the volatility and confusion of political reforms which largely remain unfulfilled promises for the past two decades. This also shows the deficiencies of “incomplete set of reforms” which produce setbacks that threaten the country’s sustainable political and economic development.<\/p>\n <\/p>\n <\/p>\n In addition to governance, vulnaribility and the fragility of political-economic policies, Morocco, in the last two decades, has been suffering from the erosion of an important economic institution in charge of protecting private property rights. According to several indicators[17]<\/sup><\/a>, Morocco has been on a downward trend in protecting private property rights. This explains, partly, the slowdown in private investment, hence, the economic downturn in the country.<\/p>\n <\/p>\n Researchers have often linked protection of property rights to economic progress. The property rights institution is considered one of the major economic institutions in promoting private investment. Without private property protection, the efforts of the unprotected investors can be looted which could damage investment incentives.<\/p>\n Economists Acemoglu and Johnson (2005)[18]<\/sup><\/a> have shown in their research on \u201cProperty Rights Institution\u201d that it has a considerable long-term impact on economic growth, investment, and financial development. Besides, \u201cthe contracting institutions” (which are in charge of executing these contracts with clients) are only important for the format of the financial intermediatary. The two economists explained this by the fact that individuals often find ways to amend the terms of their official and unofficial contracts in order to avoid the damaging effects of the fragile contracting bodies. However, they have a harder time in alleviating the effects of having their properties confiscated or looted due to poor government\u2019s property rights protection.<\/p>\n Property rights protection and the execution of contracts require robust legal institutions. In fact, Economies without strong legal bodies capable of protecting property rights share a feature of having low incentives for human and material investments as well as for the promotion of innovation and creativity. The private property protection indicator is one of the most important indicators which are overlooked by the World Bank\u2019s \u201cDoing Business<\/em>\u201d report. This may because the World Bank experts are convinced that governments\u2019 commitment in this regard is difficult to achieve. This type of reform would require a considerable long time in comparison with the change in technical indicators adopted to conduct the report.<\/p>\n In this context, several international reports have confirmed the Moroccan government\u2019s weakness in private property protection. The Heritage Foundation\u2019s \u201cEconomic Freedom\u201d Index[19]<\/sup><\/a> (Graph n\u00b0 4) indicates the Moroccan government\u2019s inability to protect private property. Morocco\u2019s data has shown a drop in government\u2019s commitment to protect private property in the years that followed 1997. This has continued until 2007, after which Morocco saw a sustained, albeit\u00a0slow,\u00a0improvement\u00a0in this index. This latter has relatively continued to progress untill 2019, but has never managed to go back to the same level reached in the early 1990s. This is mainly due to the Moroccan justice system\u2019s inability to protect private property rights, except when it involves powerful economic cronies.<\/p>\n <\/p>\n Graph 4: Protection of Private Property Rights in Morocco<\/p>\n Source: The Heritage Foundation<\/em><\/p>\n <\/p>\n These results have also been confirmed by the Fraser Institute\u2019s data, which devotes a considerable part of their annual \u201cEconomic Freedom\u00a0of the World\u201d report to examining private property protection. Morocco\u2019s private property protection rate between 2007 and 2017 was less than 6.5 out of 10 (with ten referring to full protection of private property). For the independence of the judiciary, which is in charge of protecting the properties of both individuals and investors, the rate has been less than the 5 points out of 10 throughout the entire period.<\/p>\n This is an unpromising indicator for private investors who need solid justice institutions to protect their properties.<\/p>\n <\/p>\n Graph 5: Protection of Private Property Rights in Morocco<\/p>\n Source: Fraser Institute<\/p>\n <\/p>\n <\/p>\n In the\u00a0World Economic Forum’s 2019 Global Competitiveness Report, Morocco scored 71.6 points out of 100 in the protection of private property indicator[20]<\/sup><\/a>, which is a good score (Finland, which came first, scored 93.4 points). As for the pillar of \u201cInstitutions”, which assesses security, property rights, social capital, checks and balances, transparency and ethics, public-sector performance, future orientation of government, and corporate governance, Morocco has only scored 60 points out of 100 in 2019 [21]<\/a>, which highlights the fragility of the overall institutional framework of the country.<\/p>\n Probably, the government has recognized investors\u2019 lack of trust\u00a0in\u00a0the justice system. This what explain the message of the King Mohamed VI to the participants in the second session of Marrakech International Justice Conference<\/em> held on 21 October 2019, as he said \u201ccreating the right conditions for investment requires not only the overhaul of incentive legislation, but also the provision of legal and economic guarantees that ensure confidence in the judicial system and provide full security for investors\u201d[22]<\/sup><\/a>. This is considered an official ackowledgment of the Moroccan judiciary\u2019s inability to protect private investments and the inadequacy of improvement in Morocco\u2019s \u201cDoing Business <\/em>” ranking and the technics adopted by the World Bank in encouraging investors and safeguarding their rights.<\/p>\n In fact, Moroccan citizens tend to be suspicious\u00a0of\u00a0their justice system. The Moroccan Institute for Policy Analysis\u2019s \u201cTrust\u00a0in\u00a0Institutions\u00a0Index\u201d has shown that 49.6% of Moroccans surveyed do not trust their justice system[23]<\/sup><\/a>. Deterioration of private property rights protection in Morocco in the last couple of decades is not solely attributed to the justice system\u2019s incapability to guarantee the private property protection but also to the State’s failure in enforcing the market and competitiveness regulations, strengthening economic freedom, and fighting corruption and leveraging strong lobbies.<\/p>\n <\/p>\n As noted earlier, Doing Business <\/em>is primarily linked to the nature and quality of the economic institutions. The\u00a0Economic Freedom indexes issued by the Heritage Foundation\u00a0and the\u00a0Fraser Institute are leading measures that asssess the quality of institutions worldwide. Both indexes underlined Morocco\u2019s regression in the ease of \u201cDoing Business <\/em>” and free markets throughout recent years. This is one of the factors which explains the contrast between the improved \u201cDoing Business<\/em>\u201d ranking and the country\u2019s economy which is characterized by bureaucracy, corruption, and lack of economic freedom.<\/p>\n <\/p>\n Graph 6: Economic Freedom and Business Freedom Indexes in Morocco<\/p>\n Source: The Heritage Foundation<\/p>\n <\/p>\n Some of the 13 indicators used in measuring for the Heritage Foundation report have more significant impact on Business Climate and Doing Business <\/em>in any country. These indicators include property rights protection (which we examined earlier), economic freedom, freedom of investment, fiscal freedom, labor freedom, monetary freedom, and trade freedom.<\/p>\n <\/p>\n <\/p>\n Considering these indicators (Graph 6), data relevant to Morocco from 1995 all through 2019 shows that only 3 indicators out of 13 have exceeded 70 points out of 100, while, the rest of component measures are limited between 50 and 70 points. There are also 3 components with less than 50 points up until 2019. These are: labor market freedom, justice system effeciency, and governmental integrity.<\/p>\n Source\u00a0: The Fraser Institute<\/p>\n <\/p>\n Chart 2 above illustrates the development of Economic Freedom Index in Morocco and its ranking internationally. The measure of this index includes five aspects: size of government, legal structure and property rights, access to sound money, freedom of trade, regulation of credit, labor and business. The above table shows a drop in Morocco\u2019s global ranking from 71st<\/sup> in 1995 to 92nd<\/sup> in 2017. Table 2 indicates that Morocco was not among the top 100 countries in\u00a0terms of economic freedom between 2009 and 2017, which is the same period during which Moroccan officials continuously pictured improvement in Doing Business<\/em> ranking as a sign of economic reform and investment and growth. However, results at these two levels confirm that an improvement in Doing Business<\/em> index does not guarantee any economic growth or increase in investment if a country is deteriorating in the fields of economic freedom and property rights protection. During that same period, and regardless of improvements in Economic Freedom Index, the improvement remained very small, shifting from 5.8 to 6.69 in 23 years, at a time during which many countries took a huge leap forward in liberating their economies and, therefore, reaping economic benefits in terms of growth and attraction of foreign investments.<\/p>\n The data presented by the Heritage Foundation, the Fraser Institute, and World Economic Forum emphasize the vulnerability of economic liberation in Morocco, domination of rentier economy, stagnation of laws, influence of intervention of the State and its elites in the economy, and absence of free competition in the markets. The rentier nature and the crony capitalism block the growth of a competitive and innovative private sector with a capacity to enjoy gains on the level of productivity.<\/p>\n <\/p>\n Corruption affects Business Climate and hampers economic development. It can also curb growth and eliminate incentives for creativity[25]<\/a>, if combined with the lack of enforcement of competition laws, lack of property rights protection, and the existence of an ineffective justice system. Some economists argue\u00a0that the high perceived levels of corruption, the weakness of political and economic institutions and lack of political stability would result in fluctuations in the macro-economic indicators and hamper economic development of the country[26]<\/a>.<\/p>\n In addition, the Heritage Foundation\u2019s data proves the existence of widespread corruption in Morocco. The Freedom from Corruption factor has declined from 50 points in 1995 to 39.2 in 2019. This drop had clear repercussions on investment, direct foreign investment attractiveness, and economic development, particularly if compared to the achievements of other emerging countries over the last two decades. This decline was also confirmed by the 2019 Transparency International\u2019s figures according to which Morocco dropped in ranking from 73rd<\/sup> to 80th<\/sup> (out of 180 countries). Morocco\u2019s ranking also dropped from 43 points to 41 in 2019 Corruption Perceptions Index between 2018 and 2019[27]<\/a>, which also showed that the widespread of corruption in Morocco is a structural problem. During this decade, the corruption index remained less than 50 points (out 100), which is very high even in comparison with African countries less developed than Morocco, as it is shown in the following graph.<\/p>\n <\/p>\n Graph 7: Morocco\u2019s Corruption Perception Index in Comparison with Other Countries<\/p>\n Source: Our World in Data<\/p>\n <\/p>\n The findings of the Trust in Institutions Index, produced by MIPA, confirmed Moroccan citizens\u2019 suffering of widespread corruption and rentier economy. 74.1% of those surveyed said they were not satisfied with the government efforts to fight against corruption[28]<\/a>. This gained significant momentum particularly during a wave of unprecedented economic boycott in 2018 against 3 companies[29]<\/a> which are, according to the boycotting consumers, an embodiment of monopoly and combination of money and power. Despite the intensity of this unprecedented boycotting campaign, government and governance bodies, namely the Competition Council, have not managed so far to set effective mechanisms to unbundle the monopoly of some markets in Morocco until this day, despite the existence of the Free Pricing and Competition Law, which also remains merely words on paper. While citizens boycott products in markets due to the lack of competition and high costs, entrepreneurs\u2019 boycott can be seen in their refrain from investing in a Business Climate that lacks clarity and sufficient guarantees.<\/p>\n <\/p>\n Morocco\u2019s improved ranking in Doing Business<\/em> is not necessarily a guarantee for private investment and economic growth. Promoting investment is associated with a set of institutional reforms and in particular reforms related to the system of governance, promoting property rights protection, labor markets freedom, fight against corruption, and fighting conflict of interest. The state\u2019s continued process of economic liberalization, promoting economic freedom, guaranteeing fair competition in market economies, and reforming the Moroccan public service can build trust between local private investors and can contribute in attracting more direct foreign investments.<\/p>\n Any Business Climate reform in Morocco must set as a primary objective attracting more foreign investments. This can only be achieved through adapting the quality of Moroccan political and economic institutions to the same institutional standards in the fastest growing emerging economies and other economically developed nations, particularly in terms of protection of property rights, competitive markets, and decreasing the\u00a0state’s\u00a0intervention\u00a0in the\u00a0economy as well as that of its elites.<\/p>\n For governance, institutions such as the Competition Council, the\u00a0National\u00a0Commission for\u00a0Integrity\u00a0and Anti-Corruption, and the Economic, Social, and Environmental Council are required to play bigger roles in supporting economic freedom and free competition. Their constitutional role, which is a part and parcel of their core powers, set the ground for solid institutional regulations that can guarantee a solid and positive climate for business and entrepreneurship through the acceleration of economic freedom and commitment to the enforcement of Law N\u00b0 99-06 on Freedom of Pricing and Competition.<\/p>\n The work of the\u00a0special committee\u00a0in\u00a0charge\u00a0of the new development model and their recommendations regarding the reform of Business Climate in Morocco should go beyond the technical measures proposed by the Doing Business<\/em> report. It should introduce a more comprehensive institutional reform plan, while taking into account that a decade of technical reforms did not achieve any significant results for the country\u2019s economic growth.<\/p>\n <\/p>\n [1]<\/a>– Head of Government portal: \u201cHead of Government: The effects of business climate reform are positive on both citizens and investors\u201d (https:\/\/cutt.ly\/ardCQKX<\/b><\/a>)<\/small><\/p>\n [2]<\/a> – A Royal Committee was appointed and assigned the task of putting together a new development model for Morocco. This came following the announcement by the King during a speech on 13 October 2017 during the opening of the first parliamentary session of the second legislative year of the tenth legislative term, that the current model has reached its end<\/small><\/p>\n [3]<\/a>– Josh Zumbrun. World Bank Competitiveness Rankings Weren\u2019t Manipulated, Audit Shows. The Wall Street Journal: https:\/\/cutt.ly\/it9dD3j<\/b><\/a>(Accessed: 20 February 2020).<\/small><\/p>\n [4]<\/a>– The Nobel Prize website: https:\/\/cutt.ly\/tt9dLT6<\/a> (Accessed: 25 February 2020)<\/small><\/p>\n [5]<\/a>– World Bank Group. (2020): Doing Business 2020: Comparing Business Regulation in 190 Economies. Washington DC.<\/small><\/p>\n [6]<\/a>– Ibid.<\/small><\/p>\n [7]<\/a>– Ibid.<\/small><\/p>\n [8]<\/a>– World Bank, Gross fixed capital formation (annual % growth): https:\/\/cutt.ly\/pt9dVDv<\/b><\/a> (Accessed: 13 April 2020)<\/b><\/small><\/p>\n [9]<\/a>– World Bank, GDP growth (annual %): https:\/\/cutt.ly\/Ut9dMin<\/b><\/a> (Accessed: 13 April 2020)<\/b><\/small><\/p>\n [10]<\/a>– Chauffour, J. P. (2017).\u00a0Le Maroc \u00e0 l’horizon 2040: Investir dans le capital immat\u00e9riel pour acc\u00e9l\u00e9rer l\u2019\u00e9mergence \u00e9conomique<\/em>. The World Bank., p 150.<\/small><\/p>\n [11]<\/a>– Ibid. Op.cit, p 150.<\/small><\/p>\n [12]<\/a>– Ibid. Op.cit, p 158.<\/small><\/p>\n [13]<\/a>– Previously chaired by Chakib Benmoussa, Head of the New Development Model Committee. Members of this latter include Ahmed Reda Al-Shami, current Chairman of the Council.<\/small><\/p>\n [14]<\/a>– The Economic, Social, and Environmental Council (2019) – Morocco’s New Development Model: nput of the Economic, Social, and Environmental Council – p. 145.<\/small><\/p>\n [15]<\/a>– World Bank. The Worldwide Governance Indicators (WGI): info.worldbank.org\/governance\/wgi\/<\/a><\/small><\/p>\n [16]<\/a>– The authors of WGI report combine data from a large number of reports produced by research institutes, including: African Development Bank CPIA, Afrobarometer, Asian Development Bank CPIA, Business Enterprise Environment Survey, Bertelsmann Transformation Index, Freedom House Countries at the Crossroads, Economist Intelligence Unit, Freedom House, World Economic Forum Global Competitiveness Survey, Global Integrity, Gallup World Poll, Heritage Foundation Index of Economic Freedom, CIRI Human Rights Database, IFAD Rural Sector Performance Assessments, Institutional Profiles Database, Latinobarometro, World Bank Country Policy and Institutional Assessments, Political Risk Services International Country Risk Guide, US State Department Trafficking in People report, Vanderbilt University Americas Barometer Survey, IMD World Competitiveness Yearbook, World Justice Project et IHS Global Insight Country Risk Rating.<\/small><\/p>\n [17]<\/a>– In this article, we shall rely on the indexes of the Heritage Foundation and the Canadian Fraser Institute, which are considered some of the most important institutes which provide statistics with regards to protection of property rights worldwide.<\/small><\/p>\n [18]<\/a>– D. Acemoglu, Johnson S. 2005. \u201cUnbundling institutions\u201d. Journal of Political Economy 113 (5), 949-995, p.949.<\/small><\/p>\n [19]<\/a>– This index confirms property is considered to be considerably protected when the index is close to 100 points, whereas private property is considered not protected at all when the index is close to 0.<\/small><\/p>\n [20]<\/a> – World Economic Forum, Executive Opinion Survey: https:\/\/cutt<\/strong><\/em>.ly<\/strong><\/em>\/Ct9fjG0<\/strong><\/em> (Accessed: 13 April 2020).<\/u><\/small><\/p>\n [21]<\/a> – World Economic Forum, Executive Opinion Survey: https:\/\/cutt<\/strong><\/em>.ly<\/strong><\/em>\/3t9fQX1<\/strong><\/em>(Accessed: 23 April 2020).<\/small><\/p>\n [22]<\/a> The Prime Minister\u2019s site: \u201cHis Majesty the King addressing the participants in the second session of the Marrakech International Justice Conference”.<\/small><\/p>\n [24]<\/a>– Rachid, Aourraz. (2018): Why did Morocco\u2019s New Currency Policy Falter? <\/p>\n\n
Doing Business Index\u00a0<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\n
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Improvements merely on paper<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\n
<\/p>\n\n
Difficulties of\u00a0Doing Business in Morocco<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\n
<\/p>\n\n
Indicators for governance and Business Climate<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\n
<\/p>\n<\/p>\n\n
Property Rights Protection and Private Investment<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\n
<\/p>\n<\/p>\n\n
Economic freedom and quality of Business Climate<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\n
<\/p>\n<\/p>\n<\/p>\n\n
Rentier economy: corruption and crony capitalism<\/strong><\/span><\/h5>\n<\/li>\n<\/ol>\n
<\/p>\n\n
Conclusions and Recommandations<\/span> <\/strong><\/h5>\n<\/li>\n<\/ol>\n
Footnotes<\/span><\/h5>\n
[23]<\/a>– Moroccan Institute for Policy Analysis (2019): Quality and Trust in Institutions Index: Primary Findings (https:\/\/mipa.institute\/7141<\/a> )<\/small><\/h4>\n