Morocco and Tunisia
Research paper
Published 26 February 2020
Updated 30 June 2022
ISBN: 978 1 78413 383 2
Over the past two decades, China has increased its presence in North Africa in terms of trade and investment. This paper looks at China’s policy within the context of its Africa and Middle East policies to better understand its approach to Morocco and Tunisia.
Pragmatism best characterizes China’s relations with Morocco. Chinese leaders are aware that Morocco is a pro-Western state, but its strategic location makes it a valuable asset. Morocco’s ties to the Gulf monarchies are also considered in China’s calculations as are Morocco’s recent diplomatic offensive in sub-Saharan Africa and its membership of the African Union. Relations have been steady and are reflected in the numerous high-level official visits between the two countries55 and in their shared positions on non-interference in domestic affairs, win-win co-development, equality, stability and cooperation. Furthermore, China has openly supported Morocco’s political stability. During the uprising in February 2011, for instance, it supported the regime while formally encouraging it to consider the needs of the population.56
Sino–Moroccan relations have grown considerably even if their promise remains unfulfilled. King Mohammed VI has sought to recalibrate the country’s foreign policy away from the West. Although still decidedly anchored in the Western camp, under King Mohammed VI Morocco has sought investments from China.57 Between 2011 and 2015, Chinese FDI in the country increased by 195 per cent, with a 93 per cent increase between 2014 and 2015,58 largely due to the investment in the Noor solar plant in 2014.59 In May 2016, President Xi and King Mohammed announced the establishment of a strategic partnership between the two countries and signed numerous agreements in a variety of economic sectors,60 many of which have yet to be realized.
While it has often been argued that, for economic reasons, China takes a neutral stance on the conflict in Western Sahara – between the Algeria-backed Sahrawi independence movement and Morocco, which has occupied the territory since 1975 – it is doubtful whether the prospects of lucrative gains alone fully explain Beijing’s position. Algeria’s close relationship with China might explain the latter’s reluctance to get involved in the politics of Western Sahara. China has adopted a seemingly disinterested position, yet at times it gives the impression of being inclined to favour the Moroccan ‘offer’ of ‘large autonomy’ to the Sahrawis instead of a referendum on self-determination as UN resolutions on Western Sahara have stipulated since the 1970s.61 Beijing’s policy on the dispute is based on the principle of respect for sovereignty and the territorial integrity of states. Officially, China favours a peaceful political settlement within the UN framework, encouraging the Sahrawi Polisario Front and Morocco to commit to Security Council resolutions calling for negotiations to reach a fair, lasting and acceptable settlement.
Economic relations with China are only one aspect of Morocco’s global vision to attract investments. The strategic partnership is part of an attempt to diversify the economy and to attract the maximum number of partners to invest in, and trade with, the country. This does not mean loosening Morocco’s traditional ties with the European Union or the US, which granted Morocco major non-NATO ally status and a free-trade agreement signed in 2006. King Mohammed has stressed that ‘Morocco is free in its decisions and choices, and is not the exclusive preserve of any country; it will continue to honour the commitments it makes to its partners, and the latter [China] should not think that their interests will be affected’.62
In 2005, Morocco launched its Industrial Emergence Plan 2020. The objective was ‘to modernize and strengthen the competitiveness of the industrial sector through, inter alia, targeting strategic sectors in Morocco, with a view to increasing Moroccan exports, modernizing and strengthening the pillars of the Moroccan economy.’63 In 2014, the authorities launched the even more ambitious Industrial Acceleration Plan, which aimed to create 500,000 jobs, half through FDI, and to increase industry’s (processing and manufacturing) share of GDP from 14 per cent to 23 per cent by 2020.64 These targets now seem unlikely to be met, despite initial optimism.65 The success of this programme depends on its development of ‘networks, or productive industrial clusters’.66 This approach aims to ensure technology transfers and further business integration to improve quality and productivity. It is necessary to promote closer economic relations with China and other potential investing countries to meet these goals.
Moroccan and Chinese businesses signed 15 agreements during King Mohammed’s 2016 visit to Beijing,67 along with a strategic partnership between the two countries.68 During this visit it was announced that Chinese citizens were no longer required to obtain visas to travel to Morocco.
Since 2016, there has been a modest increase in trade between the two countries, Chinese exports to Morocco have noticeably risen, but from a very low base. According to Morocco’s most recent annual data, total trade with China increased from $4 billion in 2016 to $5.3 billion in 2018. Chinese exports to Morocco accounted for the bulk of this increase, rising from $3.8 billion to $5 billion over the same period. The Chinese share of Morocco’s total imports rose to almost 10 per cent in 2018 from 9.1 per cent in 2016 and 7.5 per cent in 2014. Over the same period, Morocco’s exports to China have remained negligible, annually accounting for only about 1 per cent of total exports. The EU remains the predominant trading partner, accounting for more than half of Morocco’s imports and about two-thirds of its exports.69
|
($ billion, unless stated) |
2014 |
2015 |
2016 |
2017 |
2018 |
|---|---|---|---|---|---|
|
Imports from China |
3.51 |
3.14 |
3.81 |
4.08 |
5.04 |
|
Total imports |
46.54 |
38.12 |
41.86 |
45.20 |
51.25 |
|
Imports from China/total (%) |
7.5 |
8.2 |
9.1 |
9.0 |
9.8 |
|
Imports from EU |
23.93 |
20.36 |
23.33 |
25.72 |
28.64 |
|
Imports from EU/total (%) |
51.4 |
53.4 |
55.7 |
56.9 |
55.9 |
|
Exports to China |
0.27 |
0.24 |
0.23 |
0.31 |
0.27 |
|
Total exports |
23.89 |
22.33 |
23.01 |
25.67 |
29.32 |
|
Exports to China/total (%) |
1.1 |
1.1 |
1.0 |
1.2 |
0.9 |
|
Exports to EU |
15.13 |
14.23 |
14.97 |
17.07 |
19.45 |
|
Exports to EU/total (%) |
63.3 |
63.7 |
65.1 |
66.5 |
66.3 |
Source: Office des Changes (2018), Annual Report.
Note: Figures were converted from MAD to USD using Official exchange rate (LCU per US$, period average) from https://databank.worldbank.org/reports.aspx?source=2&series=PA.NUS.FCRF&country=MAR#.
Morocco’s main imports from China include plastics, textiles, mobile phones, electronic goods and mechanical and electrical equipment. China is not an obvious or readily accessible market for Morocco’s principal exports including cars, automotive parts, fresh food products, textiles and phosphates.
Morocco continues to have a trade imbalance with China as it has done with most of its traditional partners for the last two decades.70 Morocco’s exports to China are mainly low value-added products, such as ores, slag and ash, but they do include some high value-added items such as aircraft and spacecraft.71 Meanwhile, Morocco imports are a more diverse range of goods from China most of which are high value-added products, such as electronic equipment, coffee, spices, knitted or crocheted fabric, vehicles, iron or steel products and plastics.72
Since 2005, Morocco has pursued a consistent labour-intensive industrial development strategy and built a solid foundation for its manufacturing industry by establishing industrial parks and vocational training for large segments of the labour force. It has also endeavoured to improve the business environment to attract investors.73 According to Dong Liu, an economist at the Chinese Academy of Social Sciences, Morocco possesses a promising environment for the expansion of labour-intensive industrial manufacturing, which gives Morocco a comparative advantage for the potential relocation of manufacturing from China to Morocco.74
Morocco’s reforms kicked off the development of new industries with high value-added products, as seen in many industrial parks, which tend to include automobile assembly and auto-parts production. Since 2016, the automobile industry has become the country’s main driver of export revenue. The sector produced 400,000 passenger vehicles in 2018.75 The largest producer of vehicles is Renault, which established a modern plant outside Tangiers. In July 2019, the PSA Group started up a plant in Kenitra, north of Rabat, with the capacity to produce 200,000 cars per year, with options to develop electric vehicle lines over the next few years.76
Morocco’s reforms kicked off the development of new industries with high value-added products, as seen in many industrial parks, which tend to include automobile assembly and auto-parts production.
Chinese companies looking to Morocco as a production base, such as in the automotive industry, have to take account of the scale of the operations already put in place by major European firms, like Renault and PSA. One option is for Chinese companies to enter the feeder industry market, following in the footsteps of Citic Dicastal, which has set up a $400 million plant that will produce aluminium wheels for the cars made in the PSA factory in Kenitra.77 Another possibility for Chinese firms is to set up a completely new car plant, as has been envisaged by BYD, one of China’s leading electric vehicle producers. However, since the initial agreement between the Moroccan government and BYD was announced in December 2017, there has been little progress with the project. The delays have prompted a number of negative commentaries in the Moroccan media.78
Delays have also plagued a project to set up a Chinese hi-tech industrial zone in northern Morocco. Among the agreements announced in 2016 was a deal with a Chinese developer, Haite, to build the Mohammed VI Tanger Tech City – a $10 billion, 7.7 square-mile industrial and technology site intended to house 300,000 people and to create 100,000 jobs. This is a rather ambitious project aiming to capitalize on Tangier’s proximity to Europe, and the projected infrastructure projects to support it (the modern port of Tanger Med, a highway network, a high-speed train line, and industrial and logistics areas). The development was to be divided into zones specializing in aerospace, automobiles, telecoms and a multitude of other sectors. The aim was to attract about 200 multinational corporations as well as 100 Chinese companies wishing to have access to European markets. The finance for the construction of the city would be accessed over a 10-year period, with the funds coming from Haite and the Moroccan private bank BMCE, as well as from the Moroccan government.79
The construction of the Mohammed VI Tanger Tech City stalled, however, because of a dispute between Haite and the authorities over the ownership of the site.80 Construction finally began after the signing of a memorandum of understanding for its development between BMCE and the China Communications Construction Company and its subsidiary, the China Road and Bridge Corporation in April 2019. Speaking about the reasons for Haite’s withdrawal from the project, Ilyas El Omari, the head of the Tangier-Tetouan-Alhoceima region stated that, ‘There were disagreements on the ownership of the city among other issues. Our partners are Chinese but this does not mean that the city belongs to Chinese’.81 The development will now take place in three phases and cover up to 2.7 square miles rather than the 7.7 square miles initially projected. According to a statement issued by BMCE bank in September 2019, work has started and the zone will be ready to receive its first investors by the end of the year.82 There is no evidence though that investments have materialized yet.
The development will have road and rail links. According to news reports, Morocco will provide tax incentives to companies in the food, automotive, aeronautical, renewable energy, chemical and textile industries to encourage them to locate themselves in the tech city. As initially projected, it will also benefit from the Tanger Med Port, which at present is being enlarged.83 Chinese enterprises built the 952-metre King Mohammed VI Bridge and are potentially taking part in the construction of a multi-billion, high-speed rail connecting Marrakesh to Agadir, as part of larger infrastructure projects.
Some observers remain sceptical as to whether this development will become a reality under the new agreement and attract the intended investments.84 However, the most important question is not whether the two sides will complete the project but how they tackle the obstacles that Sino–Moroccan economic relations face. As the academic Dong Liu suggests, ‘Only by properly responding to the relevant obstacles can China–Morocco production capacity cooperation be fully implemented… Chinese enterprises face many obstacles in both subjective and objective aspects when investing in Morocco.’85 He points out that, while 100 Chinese companies are anticipated to move to Tanger Tech City, there are only a few Chinese enterprises currently active in Morocco.
Protectionism has also discouraged Chinese enterprises from investing in the country. Morocco has imposed strict restrictions on the domestic sale of free-trade-zone products and high tariffs on intermediate products needed for industrial production. With these measures in place, Chinese enterprises struggle to reduce the cost of exports to Morocco through the traditional model of setting up assembly plants in a host country.86
Another obstacle is the issue of integration. Chinese enterprises have difficulty integrating into the established European industrial chain in Morocco. This is because emerging industries in the country mainly integrate into the French industrial system. Chinese companies are more familiar with participating in the industrial system of North America and East Asia. In Europe, they engage mostly with German companies and have little interaction with French counterparts precisely because of the different industrial chains. Thus, overall favourable production conditions in Morocco hold risks for Chinese enterprises. This has a big impact on smaller Chinese firms who see the difficulties that large established companies have in Morocco and are put off as a result. It remains to be seen whether many Chinese companies actually establish factories in Morocco and engage in production cooperation with Moroccan companies.
Chinese enterprises have difficulty integrating into the established European industrial chain in Morocco. This is because emerging industries in the country mainly integrate into the French industrial system. Chinese companies are more familiar with participating in the industrial system of North America and East Asia.
The inefficiency of the Moroccan government, a lack of trust in the business environment, restrictive business laws, and low levels of human capital all continue to challenge the Sino–Moroccan economic relationship.87
Agriculture is a growing sector for economic relations between the two countries with rising demand for foreign food in China. Therefore, Morocco has begun exporting citrus to China. The country’s integration into EU food-supply chains, which requires high-quality standards, appeals to Chinese consumers.88 China is also extending its cooperation with Morocco in the fisheries sector, particularly in aquaculture and seafood processing. According to the World Bank, in 2016, total fisheries production was 1.45 million tonnes in Morocco and 81.5 million tonnes in China.89
The number of Chinese tourists visiting Morocco has grown significantly in the last two years. Up to 2016, when there was a visa requirement for Chinese citizens to visit Morocco, about 20,000 Chinese tourists visited the country every year. That number grew to 118,000 in 2017, 180,000 in 2018,90 and 200,000 in 2019.91 However, this is insignificant when compared to the total number of tourists, nearly 8 million, who visited Morocco by July 2019.92 Minister of Tourism Mohamed Sajid’s prediction of 500,000 Chinese tourists a year by 2020 is still a long way off.93
In August 2019, the National Office for Tourism announced a partnership with the leading Chinese online tourism agency trip.com.94 In September 2019, Royal Air Maroc announced that it would offer three flights per week from Casablanca to Beijing as of January 2020.95
In addition to this significant rise in cooperation with China, Morocco signed a memorandum of understanding in November 2017 to join the BRI and it became a member of the China-led Asian Infrastructure Investment Bank in December 2018. The main question for Morocco is how to closely cooperate with China without risking its ties with the EU and the US.
