Employment and competitiveness in Morocco Wednesday 23 March 2016 1
HCP: Unemployment figures in Morocco Introduction: Summary of salient points from the HCP memo on the labour market situation in 2015: Active population aged 15 and above: 11,827,000 people Global volume of unemployment: 1,148,000 people Unemployment rate: 9.7% (9.9% in 2014) Number of jobs created: 33,000 (32,000 in services + 18,000 in C&PW + 15,000 in industry, including craft trades, 32,000 in the agriculture and fishery sectors) Young people (aged 15-24) who are not employed, in education or in training: 27.9% Depending on the qualification, the rate of unemployment amongst people with no qualifications has reduced from 4.7% to 4.1%, whereas for people with qualifications, the rate has increased from 17.2% to 17.3%. 2
Other indicators and truths The unemployment rate alone is not the only indicator for measuring employment: Under-employment & the quality of employment are two further indicators that provide information and a means of cross-referencing on employment within a country. 91% of jobs in Morocco are created by the private sector. etc. There are many statistics on employment in Morocco: HCP, Employment Observatory, etc. There are many truths and half-truths & occasionally even untruths: because, to a large extent, statistics can be used to say whatever one wants to say. But there appears to be one truth that is not contested by anyone. 3
One single truth counts: Growth However, one single truth is shared by everyone involved, both economically and socially: Growth is the only driver for creating employment This can be verified at the macro as well as the micro level: At the macro level: 1% of growth in Morocco creates 29,000 jobs per year At the micro level: An SME only recruits if its order book is growing. According to Keynes: Low global demand, low rate of interest, high savings, therefore, low investment, consequently low GDP & low growth: Result: Unemployment increases. 4
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Process of customs dismantling in Morocco vs FTA 6
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Deterioration of Moroccan commercial deficit with EU 8
Sharp decrease in rate of coverage of imported goods by exports with EU, falling from 82% in 2000 to 58% in 2011 9
Downward trend for the Moroccan market at EU level, compared with trend maintained by competitors 10
Significant increase in imported goods originating from the United States since FTA with the US came into force in 2006 11
Increase in commercial deficit since US-Morocco FTA came into force in 2006 12
Even lower level of rate of coverage of imported goods originating from the US 13
Strong momentum in trade between Morocco and Turkey since 2006, particularly in terms of imports 14
Growth of commercial deficit at the level of bilateral trade between Morocco and Turkey 15
Growth in commercial trade Morocco - country of the Agadir Agreement 16
Growth of commercial deficit Morocco - country of the Agadir Agreement 17
Deterioration of rates of coverage of imported goods originating from countries party to the Agadir Agreement 18
Deterioration of commercial deficit with principal partners with which Morocco is associated by FTAs 19
Principal factors limiting the potential of FTAs agreed by Morocco 20
What about Morocco's competitiveness? I- Cost of investment & operation: Cost of land and property: Remains very expensive, Cost of energy: Too expensive vs competitors with oil Cost of finance: too expensive vs EU (negative interest rates vs CEB). II- HR & social costs Social cost: 30% social security costs vs IPE* for which the company is responsible, Pension level vs final salary, Taxation cost: IR*, VAT, IS*, etc, Legal cost: Limited flexibility, CDI separation, labour legislation, right to strike, Labour cost: the highest GMW after South Africa, duration W*, Training cost: Double penalty (PTT & fees). 21
Weight of industrial sector in Moroccan GDP? Trend in number of business closures? Breakdown of Moroccan GDP by sector The only sector that is creating sustainable employment is the industrial sector, Yet the weight of this sector in the Moroccan GDP has fallen from 17 to 13% in 5 years. There are 6500 SME closures in Morocco every year: This causes us to question the sustainability of our economic structure. 22
What about the informal economy in Morocco? 23
Four key causes for the informal economy, according to the IMF 1- The rigidity of the labour market, accounts for 37% of the informal economy for Lebanon and Egypt. This figure is 29% for Morocco and Syria, 20% for Jordan and 15% for Tunisia. The IMF attributes this rigidity to the "lengthy and onerous procedures for entering the market, strict work regulations, and high labour costs", which, according to the IMF, provide reasons for companies and workers to circumvent employment contract formalities. 2- Furthermore, the IMF states that the weakness of institutions and governance accounts for 32% of the informal economy in Lebanon, as against 29% in Egypt, 27% in Jordan, 22% in Tunisia and Syria and 17% in Morocco. Poor institutional quality may assume the form of poor quality public services, or regulations that are not properly executed, or too much corruption. 24
Four key causes for the informal economy, according to the IMF 3- According to the IMF, the rigidity of regulations on the goods market accounts for 32% of the underground economy in Syria and 27% in Tunisia. 4- Taxes account for some 37% of the informal economy in both Tunisia and Morocco. Indeed, both these countries have a high rate of corporation tax (30% whereas the average for developing countries would normally be 20%). In Morocco, a survey revealed, according to the IMF, that "50% of Moroccan businesses cite high taxes as being the main reason for not registering their activities". 25
Thank you 26