Beginning of fruitful business

Tanger Med port in Morocco, one of the largest ports in Africa. Photos provided to China Daily

Morocco is on the lookout for investment from China

Beyond the 1942 film Casablanca starring Humphrey Bogart and Ingrid Bergman, few Chinese have had any other exposure to Morocco. Yet as a gateway to Europe, the country, one of the world's oldest kingdoms, offers huge investment opportunities to Chinese business, which many are now keen to grasp.

"We are confident that we will be able to attract more Chinese companies with our diversified investment opportunities," says Ali El Yaacoubi, acting investment manager of the Moroccan Investment Development Agency, a government body that facilitates foreign investment into Morocco.

The Moroccan government's plan to attract more foreign investment with a series of well-planned incentives should also be an attractive proposition for Chinese businesses. Morocco is looking for ways to offset dwindling trade with Europe, its largest trade partner, he says.

"There are several private entities or individuals from China who are keen to set up small businesses in Morocco. But this is not our target audience. We want more big companies from China to invest in Morocco."

The Chinese embassy in Morocco says there are about 30 Chinese companies in Morocco. China's cumulative investment in Morocco was $170 million (123 million euros) by the end of last year, compare with the $2.54 billion investment that China invested during the first 10 months of last year in Africa.

Yaacoubi says most of the Chinese companies have invested in Africa for natural resources and infrastructure business. Though Morocco is not rich in natural resources, it has several other things that other African nations cannot offer.

"Our strategic position on the crossroads of the main trade routes linking America, Africa, Europe and the Middle East, as well as our openness thanks to free trade agreements with the United States, the EU, Turkey, Jordan, Tunisia and West Africa, create an ideal platform for accessing markets totaling more than 1 billion consumers. It is Morocco's competitive advantage."

Several big Chinese enterprises, such as Haier, have expressed keenness in setting up joint ventures in Morocco, primarily to use it as a manufacturing platform for targeting other markets, he says. The Chinese telecoms companies ZTE and Huawei already have a sizable presence in the country.

Apart from free trade agreements, Yaacoubi says, Morocco has also set up five free trade zones that offer several incentives for prospective investors. These include income and corporate tax exemptions for five years along with lower customs, import-export duties and other benefits.

Chinese companies can also take advantage of Morocco's close proximity to and connections with other major destinations in Africa. Yaacoubi says some Chinese companies have already moved their African headquarters to Morocco from Dubai. It takes just three to four hours to reach major African cities from Morocco, instead of the 14-hour flight from Dubai.

The added advantage for Chinese companies comes from the cheaper labor costs in Morocco vis-a-vis its European neighbors.

"Businesses can look for increased workforce productivity in Morocco. Labor costs are seven times lower than what one would need to pay in France."

Under Morocco's 2009 industrial development plan, it plans to develop six major industries - aerospace, automobiles, textiles and electronics, offshoring and agro-business - to attract more foreign investment, Yaacoubi says.

Mohamed Tazi, director of the Moroccan Association of Textile and Apparel Industries, says Chinese garment producers can look to gain better access to European and African markets if they set up manufacturing units in Morocco.

The textile industry has a strategic position in terms of employment and exports, and contributes to more than 13 percent of Morocco's GDP, he says.

Tazi says that most of the garments made in Morocco are exported to Europe or the US and bring in revenue of about 4 billion euros. Most of these are fast-fashion and ready-to-wear clothes.

With an eye on the future and increasing revenue, Tazi says, the association hopes to attract more entrepreneurs from China as it will help complete the local supply chain.

"We are looking for Chinese partners who can bring in designs, fabrics, productions, and accessories that will enable us to make faster deliveries. We are not looking for partners who just bring in money, but partners who are willing to work with us to realize common goals.

"The opportunities here are tremendous. Companies can even make money by just providing training services for garment manufacturing." Some garment companies from Hong Kong have already moved their factories to Morocco to gain easier market access, he says.

Somitex Morocco, which supplies fast-fashion clothes to UK retailers such as Marks & Spencer, Sainsbury's and Monsoon, is the biggest garment manufacturing company in Sale, a city in northwestern Morocco. It is looking to work with a Chinese company to produce more accessories and to expand production capacity.

"We have to import lace from the Middle East and Asia as the same cannot be produced locally. The long time taken to ship the goods from China has led to delayed shipments from our side," says Abdelhai Bessa, chairman of Somitex.

"If Chinese companies can set up fabrics and accessories factories in Morocco, it will be easier for us to procure the required products locally. It gives us more flexibility and enables us to be more responsive to consumer demand."

Bessa says labor costs are almost the same in Morocco and China, so it makes sense for companies to work together.

As with the textile industry, the automotive industry in Morocco is also looking to attract more companies from China. Morocco is already a major regional hub for exporting locally assembled vehicles to Europe and other countries in North Africa. The market is dominated by French and Japanese car makers.

Though Chinese car makers entered the Moroccan market in 2006, they are yet to make any vehicles locally. However, Chinese companies such as JAC, Chery and BYD have made considerable headway in the market.

Abdelaziz Meftah, director of the Moroccan Association for Automotive Industry and Trade, says it is persuading Chinese car companies to set up units in Morocco.

"Companies like Geely or Dongfeng can make vehicles at a lower cost in Morocco and then ship them to Europe. It will make their products much more competitive. We are already in talks with Geely to set up shop here," says Meftah without revealing any further details.

"The African economy is growing, as is demands for cars. Morocco is a perfect gateway for Chinese car brands to enter the vast African market," Meftah says, adding that the country has two major automotive industry centers, in Tangier and in Casablanca. There are also a few training institutions that can provide skilled technicians and engineers.

"Morocco is building itself into one of the world's major automotive industry bases, and we hope China can play a big role in this transformation."

Despite the abundant opportunities, Chinese investors still face several investment obstacles.

One is the complicated paperwork and the time it takes to issue visas. It takes several months for Chinese to get work permits, says Sun Shuzhong, the Chinese ambassador to Morocco.

"The cumbersome visa application process has hindered bilateral exchanges, forcing some Chinese entrepreneurs to give up the idea of investing in Morocco," Sun says.

He says to improve the situation, the two countries are looking at ways to simplify visa procedures. From March 6 this year, Chinese service passport holders have not needed a visa to enter Morocco, which Sun believes is the first step in making entry to the country easier.

"Chinese business people know very little about Morocco. They do not know its market or its investment environment, so to attract investors from China, we need to educate people from both countries."

Language barriers and cultural differences are other hurdles that Chinese business people must overcome, he says.

Despite those challenges, Sun says Chinese investors can play a big role in Morocco as long as they are aware of what the country can offer compared with other countries.

According to Driss Sekkat, business development manager with the Moroccan Investment Development Agency, eligible investors can also apply to the Hassan II Fund to have investment of up to 30 million dirham ($3.67 million; 2.67 euros) reimbursed.

The China African Development Fund has recently opened an office in Rabat, and the China Development Bank has teamed up with a local partner in Morocco to finance Chinese projects in Morocco. These are "the first steps that encourage Chinese entrepreneurs to invest in Morocco".

"I believe Morocco is one of the best investment destinations in Africa due to its low costs, political and economical stability, the free trade agreements and free trade zones, excellent infrastructure and convenient transport. All of these allow companies to gain better capabilities in delivery of goods to the domestic and global markets," Sekkat says.

liulu@chinadaily.com.cn

(China Daily Africa Weekly 04/25/2014 page16)