Structural Transformation and Industrial Policy in Morocco

The manufacturing sector in Morocco emerged in the sixties and early seventies with the support of import substitution policies. Manufacturing firms took advantage of the high protection rates as well as non-tariff barriers. Since the early eighties, Morocco’s policymakers, faced by internal and external macro-economic imbalances, gradually shifted to trade openness and privatization. The process of market-oriented economic reforms accelerated in the nineties with the aim of putting the economy on a higher efficiency track through exposure to stronger domestic and international competition. Three decades later, Morocco’s economy had not achieved the expected progress. Morocco’s manufacturing sector continues to suffer from structural weaknesses stemming from its excessive specialization in a few industries that are either natural resource based or use intensive unskilled labor. Exports remain mostly undiversified, exhibit low technological content and depend heavily on a few markets. The purpose of this paper is to examine the links between industrial policies implemented in Morocco and such inadequate outcomes. The paper first investigates the process of structural change in Morocco and the evolving importance of the manufacturing sector. It also measures the degree of export diversification and sophistication. The role of factor accumulation versus total factor productivity is also covered. The paper provides, in a second part, an overview of the instruments and processes of industrial policies adopted since the nineties with reference when relevant, to earlier periods. It also investigates the extent to which the outcomes can be related to those instruments or the way in which they were implemented. A specific emphasis is put on identifying policy-shifts and the role of political economy factors in triggering them. Morocco offers an interesting case of how industrial policy has been smoothly transformed in the context of liberalization and privatization in order to continue to serve the purpose of rent-distribution, private sector control and the exercise of power. Resources and regulatory functions of some government institutions may have shrunk or weakened in the era of economic liberalization. Nevertheless, the State’s role in regulation and control has mutated over the years and now it is directly involved in new spheres of power.