prospects of economic synergies between morocco, jordan and the gcc

8/3/2019 Prospects of Economic Synergies Between Morocco, Jordan and the GCC

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Prospects of Economic Synergies:

Jordan, Morocco and the GCC

October 30th 2011

Ikaraam Ullah

Prospects of Economic Synergies: Jordan, Morocco and the GCC, October 30th 2011


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Page 1

Introduction GCC Convergence Criteria

Synergies

Labour force

Goods and Services

Investment synergies

Concluding remarks

Outline


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In May 2011, the Gulf Cooperation Council (GCC) announced the bid towelcome Jordan and Morocco to join the council.

Short-term need to create opportunities across the region.

Long-term need to develop non-oil sector to diversify away from

hydrocarbons.

Post-oil: High dependency GCC budget dependence (~80%) on finitehydrocarbon resources which are vulnerable to price shocks

GCC and Morocco/Jordan share economic synergies that lead to

mutually beneficial goals.

Introduction


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Convergence


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Labour Force


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0

20

40

60

80

100

0 20 40 60 80 100

Percentage of labour force

Contribution to GDP

Very Important

Veryimportant

Jordan

Morocco

Key

GCC

Labour force participation

Source: Dubai Chamber based on data from IMF and World Bank

Size of circle indicatesrelative value of sector


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0

20

40

60

80

100

0 20 40 60 80 100


Contribution to GDP

Very Important

Veryimportant

Agriculture

Services

Jordan

Morocco

Key

GCC

Industry


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0

20

40

60

80

100

0 20 40 60 80 100


Contribution to GDP

Very Important

Veryimportant

Agriculture

Services

Jordan

Morocco

Key

GCC

Industry


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0

20

40

60

80

100

0 20 40 60 80 100


Contribution to GDP

Very Important

Veryimportant

Agriculture

Services

Jordan

Morocco

Key

GCC

Industry


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Expansion of GCC Labour ForcePopulation

(millions)

Labour Force

(millions)

Est. Unemployed

(actual)

Jordan 6.1 1.7 200,000

Morocco 31.9 11.6 1,100,000

GCC 42.1 16.2

GCC

'Enlarged'48 80 18 30

Adding ... Jordan increases GCC labour force by ~10%

Morocco increases GCC labour force by ~72%

both countries increases GCC labour force by 82%

Source: IMF and World Bank estimates, ILO and Dept. of Statistics (Jordan)


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0 10 20 30 40 50

0 10 20 30 40 50

No schooling

Less than Secondary

Secondary

Intermediate Diploma

Bachelor & Above

No schooling

Less than secondary

Secondary

Intermediate Diploma

Bachelor & Above

% of unemployed

% of unemployed

Education Profile of Available Labour

Morocco

~ 1,100,000

Jordan

~ 200,000

Source: Dept. of Statistics, Jordan & ILO

ICT &services?

Agriculture?


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Pay and

Productivity

Innovation Global

Index

Poland 45 57 46

Turkey 75 58 61

Tunisia 81 43 40Romania 55 99 64

Jordan 72 70 71

Morocco 37 79 73

Competitiveness Rankings, 2011

productive

good

Source: World Economic Forum, Global Competitiveness Report 2011


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Moroccan Trade


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Moroccan Trade, 2010

Trade geographically tied to Europe

Room for increased tradethrough diversification

Source: Dubai Chamber based on COMTRADE statistics, *excluding Brasil

0.4 0.91.7 2.0 2.1 2.7 2.7

5.6

16.2

0.1 0.2 0.6 0.6 0.7 0.3

2.3 2.5

10.4

-18

-14

-10

-6

-2

2

6

10

14

18

-18

-14

-10

-6

-2

2

6

10

14

18

ASEAN 5 South

America*

Other

MENA

North

Africa

North

America

GCC Other

regions

BRICs EU

US $bn US $bn

Exports

Imports


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-1

0

1

2

3

4

5

6

7

8

-1 0 1 2 3 4 5

Imports (US$bn)

Exports (US$bn)

Morocco Benefits

Other

country

benefits

Saudi Arabia

Bahrain, Kuwait,

Oman, Qatar, UAE

Source: Dubai Chamber based on COMTRADE statistics

Externalinfluence


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-1

0

1

2

3

4

5

6

7

8

-1 0 1 2 3 4 5

Imports (US$bn)

Exports (US$bn)

Morocco Benefits

Other

country

benefits

Saudi Arabia

France

Bahrain, Kuwait,

Oman, Qatar, UAE

Spain


Diversification of flow

MOROCCO:Manufacturing


Externalinfluence


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Moroccan Imports


Imports from GCC

Fuels 68%

Plastics 12%

Sulphur 5%

Inorganic chemicals 4%

Aluminium articles 4%

Pulp 2%

Categories < 2% 6%

World Imports

Machinery 13%

Electronics 10%

Mineral fuels 9%

Vehicles 8%

Cereals 5%

Iron & Steel 3%

Plastics 3%

Articles NES 3%

Plastics articles 2%

Sugars 2%

Categories < 2% 42%

Diversification of product

US$ 2.7bn

US$ 34.4bn


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Moroccan Exports


Exports to GCC

Precious stones& metals

76%

Fruit & nuts 7%

Animal products 6%

Categories < 2% 12%

World Exports

Electronic

equipment 14%

Apparel 13%

Fertilizers 9%

Phosphate & limes 8%

Apparel accessories 7%

Vegetables 6%

Precious metals 6%

Fruit & nuts 6%

Footwear 3%

Fish 3%

Mineral fuels 3%

Meat 2%

Categories < 2% 20%

Diversification of product

US$ 0.3bn

US$ 17.7bn


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Morocco GCC OECD

Cost (US$)

Exports 700 582 1,048

Imports 1,000 615 1,107

Duration (days)

Exports 14 14 11Imports 17 16 12

Morocco: Trade Costs vs. OECD averages

Free trade agreements:

European Free Trade Association EFTA, Free Trade Agreement -

FTA (US), Morocco and Turkey, Morocco/WAEMU, Arab FreeTrade Zone, Morocco-Arab Countries Trade Agreement, Arab-Maghreb Union

Source: World Bank Doing Business 2011, Morocco Trade & Invest portal


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Moroccan Investment


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-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

% %

GDP growth

(% year) Unemployment

Morocco: GDP growth and unemployment

More than a decade of solid growth

Falling unemployment 198089 199099 200008

12.8 0.6 0.1

Arab ODA (US$bn)

Source: IMF World Economic Outlook, October 2011, World Bank MENA Vice Presidency


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0

2

4

6

8

10

12

14-8

-6

-4

-2

0

2

4

6

8

10

12

14

% yearDirham

(MAD)

Inflation

Dirham/US$

Dirham/Euro

Morocco: Inflation and Exchange Rates

Stable

Stable

Source: IMF


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0

10

20

30

40

0

5

10

15

20

25

30

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% of GDP % of exports

Debt Service Ratio (RHS)

External Debt (LHS)

Morocco: External debt position

Improving debtposition

Source: IMF World Economic Outlook, October 2011


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Morocco: Foreign Direct Investment

Improving FDI

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

US $bn US $bn

Outflows

Inflows

Source: UNCTAD


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European Union 63%

France 37

Spain 8

Germany 3

Italy 3

Portugal 7

United Kingdom 3

GCC 24%

Kuwait 18United Arab Emirates 3

Saudi Arabia 2

Other countries 11%

Jordan 3

Swtizerland 4

United States 3

Moroccan Foreign Direct Investment, 2009

Less competition =potential upside?

Source: Moroccan Foreign Exchange Office


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Morocco: Agriculture

Recently created Agency for Agricultural Development (ADA) oversees

the implementation of Green Morocco Plan

Development competitive agriculture vital for the national economythrough the realization of projects with high added value in bothproduction and agro-food.

Support to smallholder agriculture through the professionalization of

small farms in difficult rural areas needed to promote greaterproductivity, greater recovery of production and sustainability of farmincome.


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Morocco: Agro-IndustriesSummary

Agricultural sector employs over 4 million people

About 100,000 in agro-industry.

Companies dealing in agriculture or stock breeding, and agriculturalcooperatives, were exempt from corporate tax until December last year.

New permissions are possible and should be discussed as per

contract with the government. Agricultural equipment and products are exempt from value-added tax(TVA) and companies exporting products and services are exempt fromcorporate tax (IS) for a period of five years. Thereafter, firms pay 50% ofthe standard IS rate.


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Renewable Energy & the EU-MENA Supergrid

US$ 555 bn

Source: Trans-Mediterranean Renewable Energy Cooperation (TREC)


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Morocco Solar Energy MasterplanKey facts

Abundant solar resources (a potential of 2 600

kWh/m/year) Target: 14% of electrical energy in Moroccofrom solar sources by 2020.

Strategic position at the heart of an energy hub(connection with Spanish Network through two

electric lines 400kV/700 MW)

Le Projet Marocain de l'Energie Solaire

Integrated electricity production driven from solar energy with a totalcapacity of 2000 MW in Ouarzazate, Ain Bni Mathar, Foum Al Oued,

Boujdour and Sebkhat Tah. Concentrated Solar Power (CSP) andPhotovoltaic technologies likely technologies


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Morocco Solar Energy MasterplanRegulation & Funding

Sector regulated under the Renewable Energy Law (No. 13-09)which aims to promote energy production from renewableresources for markets or export.

Law allows the right for an operator to produce electricity fromrenewable energy sources on behalf of a consumer or a group ofconsumers connected to the national grid.

Energy Development Fund to the equivalent to $ 1 billion from theKingdom of Saudi Arabia ($ 500 million), UAE ($300 million) and thecontribution of the Hassan II Fund for Economic and SocialDevelopment ($200 million).


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Morocco Solar Energy StakeholdersAgencies

Energy Investment Corporation (EIS) was established in 2010 with

a capital of one billion dirhams capital endorsed by the state (71%) andthe Hassan II Fund for Economic and Social Development (29%)

Moroccan Agency For Solar Energys (MASEN) mission is toensure the implementation of the Moroccan Solar Plan

National Agency for the Development of Renewable Energy and

Energy Efficiency (ADEREE) aims to contribute to the implementationof government policy on renewable energy and energy efficiency

Moroccan Association of Solar Industries and Windmills(AMISOLA) was created to promote the interests of industrialists andMoroccan professionals working in the renewable energy sector

National Electricity Office (ONE) is well known for its current role inelectrical generation


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Jordanian Trade


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Jordanian Trade, 2010

Exports toother MENAcountriesstrongest

Integrated into GCC

0.80.9

1.9

0.9

2.5

4.23.9

0.5

0.9

0.4

1.8

0.9

0.5

1.2

-5

-4

-3

-2

-1

0

1

2

-5

-4

-3

-2

-1

0

1

2

North Africa North

America

Asia Other MENA BRICs EU GCC

US $bn US $bn

Exports

Imports


d d


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0

500

1,000

1,500

2,000

2,500

0 200 400 600 800 1,000 1,200

Jordanaian

Imports (US$m)

Jordanian Exports

(US$m)Jordan Benefits

UAE

Bahrain, Oman

Saudi

Arabia


External influence


J d i T d 2010


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0

500

1,000

1,500

2,000

2,500

0 200 400 600 800 1,000 1,200

Jordanaian

Imports (US$m)

Jordanian Exports

(US$m)Jordan Benefits

China

UAE

Bahrain, Oman

Saudi

Arabia

USA

India

Germany

Egypt


JORDAN:Processing andManufacturing?

External influence


J d I t

Diversification of product imports


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Jordan Imports

World Imports

Fuels 22%

Machinery 9%

Vehicles 8%

Electrical equipment 5%

Plastics 4%

Iron & steel 3%

Pharmaceutical 3%

Cereals 3%

Iron or steel articles 3%

Fabric 2%

Organic chemicals 2%

Categories < 2% 36%

Imports from GCC

Fuels 63%

Plastics 8%

Organic chemicals 3%

Iron and steel 3%

Sugars 3%Categories < 2% 20%

Source: Dubai Chamber based on COMTRADE statisticsSource: Dubai Chamber based on COMTRADE statistics

US$ 3.9bn

US$ 15.2bn

J d E t

Diversification of product exports


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Jordan Exports

Exports to GCC

Pharmaceutical

products19%

Vegetables 14%


Machinery 7%

Paper & pulp 7%


Precious stones 3%

Live animals 3%

Categories < 2% 32%

World Exports

Fertilizers 15%Apparel 13%

Pharmaceutical 10%

Vegetables 6%

Salt & sulphur 6%

Precious metals 5%



Machinery 4%

Paper & pulp 3%

Aluminium 3%

Plastics 3%

Categories < 2% 25%


US$ 1.2bn

US$ 6.2bn

Jordan Trade Costs s OECD a erages


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Jordan GCC OECD

Cost (US$)

Exports 825 582 1,048

Imports 1,335 615 1,107

Duration (days)

Exports 14 14 11Imports 18 16 12

Jordan: Trade Costs vs. OECD averages

Free trade agreements:

Greater Arab Free Trade Area (GAFTA); Jordan - EU Free Trade

Association (EFTA); Jordan

US Free Trade Agreement andother FTAs: Singapore; Canada; Turkey

Source: World Bank Doing Business 2011, Jordan Trade & Invest portals


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Jordanian Investment

Jordan: GDP growth and unemployment


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-2

0

2

4

6

8

10

12

14

16

18

20

-2

0

2

4

6

8

10

12

14

16

18

20

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

% %

GDP growth

(% year)

Unemployment

Jordan: GDP growth and unemploymentFalling unemployment

198089 199099 200008

6.1 1.5 0.8

Arab ODA (US$bn)

Source: IMF World Economic Outlook, October 2011, World Bank MENA Vice Presidency

Jordan: Inflation and Exchange Rates


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0.50

0.75

1.00

1.25-4

-2

0

2

4

6

8

10

12

14

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

% yearDinar

(JOD)

Inflation

Dinar/US$ (fixed)

Jordan: Inflation and Exchange Rates

Stable

Source: IMF

Jordan: External debt position


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0

10

20

30

40

50

40

50

60

70

80

90

100

110

120

130

140

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% of GDP % of exports

Debt Service Ratio (RHS)

External Debt (LHS)

Jordan: External debt position

Improvingexternal debtposition

Source: IMF World Economic Outlook, October 2011

Jordan: Foreign Direct Investment


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Jordan: Foreign Direct Investment

Improving FDI

Source: UNCTAD

-1

0

1

2

3

4

-1

0

1

2

3

4

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

US $bn US $bn

Outflows

Inflows

Jordan ICT sector


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Jordan ICT sector

Int@j (Information Technology Association-Jordan) has been

promoting the sector over a decade. More than 80,000 jobs in the ICT sector and contributes approx 14%to GDP. Sector valued at $2.2 billion, with approximately $1bn in ITalone.

More than 270 secondary IT schools in the Kingdom.

Major export markets US (22%), GCC (~30%), Iraq (13%)

GCC spending in IT significant ~ $6.5bn, 2009-10

Online Content and Gaming

Business Process Outsourcing

E-learning

Online Content and Gaming


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Online Content and GamingEarly Success

Education in Jordan


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Education in JordanCurriculum and collaboration

Growing services industry driving qualification initiatives. Jordan is

among the region's highest spenders on education (+6% of GDPcompared to a MENA average of ~4%).

Educational industry in Jordan like other emerging markets: youngpopulation; strategic shift to the knowledge oriented sectors

Jordans educational standards attracted students from the Gulf

States, Far East, and the US.

Jordan on-cue with the demographic shift happening in the GCC

Opportunity may be appropriate to serve the training needs for thenext generation of GCC talent


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Outlook Risks

EU and US growth correlation (1990-2009)


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-0.4

-0.2

0.0

0.2

0.4

0.6

-0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6

Morocco

Tunisia

Jordan

Egypt

United States

Europe

Lebanon

Syria

EU and US growth correlation (1990 2009)

Morocco correlationwith US and Europe

high relative to MENA

Source: IMF Jordan 2010 Article IV Consultation, Business Cycle Linkages

GCC and Asia growth correlation (1990-2009)


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-0.2

0.0

0.2

0.4

0.6

-0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6

Morocco

Tunisia

Jordan

Egypt

GCC

Emerging Asia

LebanonSyria

g ( )

Also exposedto growth inGCC and Asia

Source: IMF Jordan 2010 Article IV Consultation, Business Cycle Linkages


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Summary

Benefits to the GCC


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Investment

- ICT (Jordan)- Education (Jordan)

- Solar (Morocco)

- Agriculture (Morocco)

social capital

technological transfer

creative & content driven industries

food security

Benefits to the GCC?

Goods

Wide range of products for product diversification

Labour Force (addition of Jordan and Morocco)

~ 1.7 million (Jordan)

~ 11.6 million (Morocco)

Post-Oil GCC


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Flexible labour markets

Targeting most competitiveindustries => maximizinggrowth

Reduce dependence on

hydrocarbons via broadrange of industries

Increasing tax-base

0

200

400

600

800

1,000

1,200

1,400

0 500 1,000 1,500

Scale of investment

Stakeholders

U

SA

Semi-

government

Large

Small

Private

sector

Medium

Government

Morocco

GCC

Jordan

Key

Post-Oil GCC


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Increasing tax-base

0

200

400

600

800

1,000

1,200

1,400

0 500 1,000 1,500

Trade

Scale of investment

Stakeholders

U

SA

Semi-

government

Large

Small

Private

sector

Medium

Government

Morocco

GCC

Jordan

Key

Post-Oil GCC


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Increasing tax-base

0

200

400

600

800

1,000

1,200

1,400

0 500 1,000 1,500

Agriculture

Trade

Scale of investment

Stakeholders

U

SA

Semi-

government

Large

Small

Private

sector

Solar Grid

Medium

Government

Morocco

GCC

Jordan

Key

Post-Oil GCC


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Increasing tax-base

0

200

400

600

800

1,000

1,200

1,400

0 500 1,000 1,500

Agriculture

Trade

Scale of investment

Stakeholders

U

SA

Semi-

government

Large

Small

Private

sector

Solar Grid

Medium

ICT

Education

Government

Morocco

GCC

Jordan

Key

Conclusion


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Take aways

Jordan and Morocco success stories: sound economicmanagement, unemployment is falling steadily.

Ample room for trade and investment diversification with GCC

Morocco:

- Proximity to and close economic relationship with Europe- Abundant natural resources (sun, wind)

Jordan:

- Strong focus on service oriented and knowledge industries

- Sound trading relationship with the United States


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prospects of economic synergies between morocco, jordan and the gcc

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