Investment Charter: unearthed 10 year old ambition, explained

The latest version of the Investment Charter recently presented before King Mohammed VI has finally been approved by the Ministerial Council after years of deadlock.

In gestation since 2016, the Charter is now ready to enter the legislative circuit for its adoption by Parliament. This long awaited entry into the legislative process coincides with the operational launch of the Mohammed VI Investment Fund, two years after its creation.

The Executive is following up on the urgent royal call to boost investments in the country, particularly public investments, as the primary lever for economic growth and prosperity.

But what exactly is the Investment Charter ? What are its goals ? and how has it changed since the idea first came to light nearly two governments ago ?

The Investment Charter, a road map for smart spending

An ambitious project closely based on the New Development Model, the charter is overall a plan detailing sectors the government should invest in, while maximizing ROI.

In simpler terms, it’s a large-scale financial strategy that will eventually enable the recovery of the various sectors of the Moroccan economy impacted by the COVID-19 crisis, and the recent international fluctuations on the international market, promote job creation and limit territorial inequalities.

The objective of the investment charter is to set the action of the State in terms of investment promotion for the next 10 to 15 years. The charter replaces the investment codes of the different public sectors, except for the agricultural sector, and looks for innovative ways to attract private investments that complement the public spending.

Currently, the overall investment trend in Morocco weighs heavily on the state budget, as public investment constitutes two thirds of the overall total in Morocco, while private investment represents only about one third.

The new charter aims to increase the share of private investment to two thirds of total investment by 2035.

The Charter, which presents a unified and coherent framework and directs investment towards the State’s strategic priorities, “is inclusive and clear,” according to officials’ unionized opinion.

This long awaited Charter concerns all investments, large or small, and is addressed to all Moroccan and foreign investors in the various regions of the Kingdom without exception, excluding investments in agriculture, which remain subject to exclusive legislative and regulatory texts.

65th’s a charm

Since its theoretical conception, 65 versions of the charter had been presented, before this final draft.

The reasons for the blockage of the draft Investment Charter at the Secretariat General of the Government was said to be due to a number of regulatory frameworks that were not yet present, and that constitute the organizational and fiscal backbone of the charter.

Now that the Akhannouch government is on its second annual finance bill, tax increases for bigger companies simultaneous with incentives from the charter are expected to encourage investments that are of strategic importance to the Kingdom.

The charter’s approval was also delayed considering that important bodies such as the Mohammed VI Investment Fund, and other strategic plans, namely the New Development Model, we’re norme ready yet. The approval of the charter has been accelerated this week, partially due to the legislative and regulatory climate being ready for its implementation.

The finalization and approval of the final draft of the Charter is also synonymous with the entry into force of several standards, but most importantly that of establishing regions as the main engine of investment.

Since the adoption of the Regional Investment Councils’ (CRIs) decree, the blockage encountered on several measures has now been overcome, and the necessity of de-centralised regional economic growth is a pressant demand.

A lever for advanced regionalization

The charter aims to optimize investment throughout the Kingdom by utilizing Moroccan Regional Investment Centers (CRI) to their fullest potential.

Regional economic disparity is among the biggest bottlenecks for the economic boost the government aims to achieve. By directing investment to Morocco’s most “marginalized” regions, the executive hopes to overcome the centralization of capital and jobs the country has been experiencing.

With support for the digital transition and improvement of the business climate, which will allow investors to have the necessary approvals for the realization of their projects quickly and efficiently, the chart will additionally propose eased procedures for investing in certain regions.

Incentives, incentives, incentives…

What officials are currently promising with the new charter is that strong and highly attractive incentives are now provided for, which will unlock the full potential of the Moroccan economy throughout the territory.

The charter proposes common premiums in support of investments, with an additional territorial premium encouraging investment in the least favored provinces in the Kingdom, and an additional sectoral premium to boost the promising sectors.

In order to boost the growth sectors of the national economy, the project also plans exclusive support measures for strategic projects, namely in defense or pharmaceutical industries. Of course, the charter additionally plans to encourage very small, small and medium-sized enterprises, in addition to a mechanism for the development of Moroccan investments abroad.

Indeed, the charter pays particular attention to the small and medium-sized enterprises, which constitute a considerable part of the Moroccan economic fabric, and that have been the focus of many initiatives in recent years.

Liquidity at the forefront

During his latest speech to the primary legislative body in the country, King Mohammed VI focused the nation’s interest on liquidity: in a literal sense, considering the unprecedented drought and water scarcity Morocco is experiencing, and a figurative one, in emphasizing the importance and urgency of investment in the country.

The royal directive has proven timely, considering the international context and climate crisis. But as with most projects in Morocco, the success of these promising strategies remains highly contingent on execution, which for an Akhannouch government in its infancy and plagued by unprecedented hurdles both on the domestic and international fronts, may constitute the political challenge of a lifetime.