Morocco is a great sourcing destination for several reasons, including its strategic location, its skilled workforce, and its free trade agreements with Europe and the United States. The country also offers several other advantages, such as its low-cost labour and its business-friendly environment.

Background

The Kingdom of Morocco is in the Maghreb region of North Africa bordered by both the Mediterranean Sea and Atlantic Ocean, directly facing Spain across the straits of Gibraltar. A population of over 37million it is the only Monarchy in North Africa.

Morocco’s economy has grown steadily over the past 5 years, averaging 4% annual growth. This growth has been driven by several main export products and services:

1. Tourism: Morocco is a popular tourist destination, and tourism has been a major driver of economic growth. In 2021, Morocco received over 13 million tourists, generating $8.6 billion in revenue. 
2. Foreign direct investment: Morocco has attracted significant foreign direct investment (FDI) in recent years. In 2021, FDI inflows to Morocco totalled $2.3 billion. This FDI has helped to finance new projects in a variety of sectors, including manufacturing, tourism, and infrastructure. 
3. Exports: Morocco’s exports have also grown steadily in recent years. In 2021, Morocco’s exports totalled $27.5 billion. This growth has been driven by strong demand for Moroccan goods in Europe and the United States. 
4. Domestic demand: Moroccan consumers have had more disposable income, which has led to increased spending on goods and services.

ET2C International

We are a leading Global Sourcing company with over twenty years’ experience working with our clients. Our team of 250 colleagues are based in seven offices in key sourcing markets across Asia.

We work with our clients to make their global sourcing simple, becoming their bridge to their supply partners. Where time zones, language, business communication expectations or QC can become challenging.

Our team of experts can help you build and deliver your sourcing strategy and ensure you are working with the right factory partners. Giving you independent feet on the ground and confidence with fast responses, removing time zone and language challenges. If you would like to explore sourcing opportunities within Morroco or to discuss your future supply chain challenges. Please contact@et2cint.com

 Government support for business

The Moroccan government has implemented several reforms to improve the business environment and invested in infrastructure projects and educational reform. Morocco export products are vitally important to economic growth. The reforms and investments made so far to support major exports are proving successful. As a result, Morocco’s economy is expected to continue to grow in the coming years. The IMF projects that Morocco’s economy will grow by 3.5% in 2023 and 4.5% in 2024. Morocco’s economic growth strategy is focused on four main pillars:

1. Investment in infrastructure: Morocco has invested heavily in infrastructure in recent years, including roads, railways, ports, and airports. This has helped to improve the country’s connectivity and make it more attractive to foreign investors.
2. Diversification of the economy: Morocco is diversifying its economy away from traditional sectors such as agriculture and tourism. The government is promoting the development of new sectors such as manufacturing, IT, and renewable energy.
3. Human capital development: Morocco is investing in human capital development by improving the quality of education and training. This is helping to create a more skilled workforce, which is essential for attracting foreign investment and promoting economic growth.
4. Regional integration: Morocco is a member of the African Union and the Arab Maghreb Union. The government is promoting regional integration to create a larger market for Moroccan goods and services.

These four pillars are essential for Morocco’s economic growth strategy. By investing in infrastructure, diversifying the economy, developing human capital, and promoting regional integration, Morocco is well-positioned to achieve sustainable economic growth in the years to come.

Export diversification building on Agricultural heritage

The diversification of the economy is supporting Morocco’s main export products. Morocco’s focus on expanding its export business has seen the development of manufacturing industry alongside Agriculture as part of Plan Maroc Vert. Morocco’s  economic growth strategy has several core elements :

1. The Plan Maroc Vert(Green Morocco Plan): This plan is aimed at modernizing Morocco’s agricultural sector and making it more competitive.
2. The Tanger Med Special Economic Zone: This zone is designed to attract foreign investment and promote the development of manufacturing and logistics industries.
3. The Mohammed VI Polytechnic University: This university is being built to train the skilled workforce that Morocco needs to achieve its economic growth goals.
4. Investment in transport infrastructure: As a key enabler to economic growth Morocco has invested in a wide range of infrastructure projects.

• The construction of a new high-speed rail line between Tangier and Casablanca. This line is scheduled to be completed in 2023 and will cut the travel time between the two cities from four hours to two hours.
• The expansion of the port of Tanger Med. Tanger Med is Morocco’s largest port and is one of the busiest ports in Africa. The expansion project will increase the port’s capacity by 70%.
• The construction of a new highway between Casablanca and Rabat. This highway is scheduled to be completed in 2022 and will reduce the travel time between the two cities from two hours to one hour.

These investments are expected to boost trade between Morocco and Europe and make Morocco a more attractive destination for foreign investment.

Major Investors in Moroccan Infrastructure

China has become a major investor in Morocco due to its strategic position and free trade agreements with both Europe and United States. Chinese investment has encompassed a range of strategic initiatives.

• Tangier-Med II port:This is a new deep-water port located in Tangier. It is the largest port in Morocco and one of the largest in Africa. The port was built by a Chinese company, China Harbor Engineering Company (CHEC), and was financed by the China Development Bank.
• Noor Ouarzazate solar power plant: This is a large solar power plant located in Ouarzazate. It is the largest solar power plant in Africa and one of the largest in the world. The plant was built by a consortium of Chinese and Moroccan companies and was financed by the Export-Import Bank of China.
• Casablanca-Rabat high-speed rail line: This is a new high-speed rail line that connects Casablanca and Rabat. The line is 186 kilometers long and was built by a consortium of Chinese and Moroccan companies. The line was financed by the China Development Bank.
• Kenitra Atlantic port:This is a new port located in Kenitra. The port is being built by a Chinese company, China Communications Construction Company (CCCC), and is financed by the China Development Bank.

Moroccon Main Export Markets

Morocco benefits from a strong strategic location for Global Sourcing. It has access to a skilled and cost effective labour force. Free trade agreements with USA and Europe make it an ideal country to use as a sourcing destination. Key export product categories are

Agriculture

Morocco is known for exporting products such as citrus fruits, vegetables, olives, and fish. This diversity of produce allows them to fulfil internal consumption and have enough left over for export. It enjoys a Mediterranean climate, characterized by mild, wet winters and hot, dry summers. This climate, along with a network of rivers and groundwater reserves, facilitates irrigation and agricultural production. Additionally, the country has made substantial investments in water management and irrigation systems, enhancing agricultural productivity.

Textiles

The textile industry in Morocco has a long history which has developed a highly skilled and low labour cost. Close proximity to Europe and Free Trade agreements make Morocco a major exporter of textiles to the world.

Machinery

The Moroccan government has focused on diversifying its major exports to include engineering and machinery. It has established several industrial parks that specialize in the production of machinery. These parks offer businesses several advantages, such as access to infrastructure, skilled labour, and tax breaks.

The Moroccan government has also provided financial assistance to machinery businesses, such as loans and grants.

Doing business in Morocco

The government is business friendly making it easy to operate a business in Morroco. The significant infrastructure investment is also a crucial enabler to making business simpler.

However, it’s important to note that sourcing from Morocco can also come with challenges. Language barriers, cultural differences, intellectual property protection, and ensuring supply chain transparency are factors that require careful consideration and management.

Explore the effects of El Niño on global sourcing and shipping and how to build a robust risk mitigation plan to proactively address the potential trading impacts of El Niño.

Introduction

Global weather patterns play a significant role in shaping various industries, including global sourcing and shipping. One such weather phenomenon is El Niño, which occurs periodically and affects sea surface temperatures in the central-east equatorial Pacific. El Nino is more than an interesting and infrequent weather pattern. It has demonstrated the potential to disrupt economies, sourcing strategies, and global trade.

Understanding El Niño

El Niño, a Spanish term meaning “the boy,” refers to the warming of sea surface temperatures in the tropical eastern Pacific. This climate event typically occurs every few years and has significant implications for weather patterns worldwide. When sea temperatures in the tropical eastern Pacific rise 0.5°C above the long-term average, an El Niño is declared.

The effects of El Niño are most strongly felt in the tropical eastern Pacific, where warmer-than-average weather conditions prevail. The phenomenon was named El Niño de Navidad (the boy of Christmas) centuries ago by Peruvian fishermen, who observed its occurrence during the holiday season.

Impact on Global Sourcing Strategies

El Niño can have various impacts on global sourcing strategies, both from the supply and demand side. Changing weather patterns associated with El Niño can lead to shifts in consumer behavior, affecting the demand for specific products. In areas experiencing increased temperatures or power outages, consumers may seek cooling products such as air conditioners, Fans and Generators leading to a surge in demand.

On the supply side, El Niño can disrupt agricultural production worldwide. It can cause droughts in some regions and heavy rainfall in others, directly impacting crop yields and livestock production. The agricultural sector’s vulnerability to El Niño necessitates careful planning and adaptation in global sourcing strategies.

Disruption of Shipping and Logistics

El Niño’s impact on weather conditions can disrupt maritime transportation, affecting global supply chains. Altered weather patterns, including storms and increased wave heights, can lead to port closures, shipment delays, and increased transportation costs. Trade flows may be affected, hindering the timely delivery of goods and increasing logistical challenges.

Natural Resources and Commodities 

El Niño has the potential to influence the availability and prices of various natural resources and commodities. Fishing industries can be negatively impacted, as El Niño disrupts marine ecosystems and alters fish migration patterns. Additionally, arable farming may suffer from water scarcity or excessive rainfall, affecting crop yields. The fluctuations in natural resources and commodities due to El Niño can have broad implications for global sourcing and trade. 

Scenario Planning, Adaptation and risk Mitigation  

Given the potential risks posed by El Niño, companies engaged in global sourcing should incorporate scenario planning and adapt their sourcing strategies accordingly. By anticipating the potential trading impacts of El Niño, businesses can make early adjustments to their supply chain management and mitigate potential disruptions. Developing a plan requires a proactive and comprehensive approach1.  

1.Monitor and Assess: Stay informed about El Niño forecasts and developments through reliable sources, such as meteorological agencies and climate monitoring organizations. Understand the potential impacts on key sourcing regions, transportation routes, and commodity markets relevant to your business. 

2. Diversify Sourcing: Identify regions and suppliers that are less susceptible to El Niño impacts. Diversify your sourcing base across different countries or regions to minimize the risk of disruptions caused by adverse weather conditions or agricultural supply constraints. Consider the resilience and climate patterns of potential sourcing locations.

3. Supplier Risk Assessment: Assess the vulnerability of your key suppliers to El Niño-related risks. Engage in open communication with suppliers to understand their contingency plans and evaluate their ability to manage disruptions caused by extreme weather events. 

4. Supply Chain Resilience: Strengthen your supply chain resilience by developing alternative sourcing options and multiple transportation routes. Collaborate with logistics providers to identify backup routes and modes of transportation in case of disruptions. 

5. Risk Insurance and Financial Planning: Consider obtaining appropriate insurance coverage to mitigate financial risks associated with supply chain disruptions. Evaluate your business interruption insurance, cargo insurance, and other relevant policies to ensure they cover potential losses caused by El Niño impacts. 

6. Continuous Monitoring and Communication: Regularly monitor the progress and severity of El Niño events and reassess your risk mitigation strategies accordingly. Establish a robust communication system within your organization and with suppliers to ensure prompt response and coordination in case of disruptions. Stay connected with industry associations and networks for updated information and best practices. 

By taking these steps, companies can enhance their preparedness and resilience to mitigate the risks associated with El Niño on global trade and sourcing. It’s crucial to regularly review and update your risk mitigation plan as El Niño patterns and risks evolve over time. 

Conclusion 

El Niño, a recurring weather phenomenon, can significantly impact global sourcing and shipping. From disrupting agricultural production to affecting energy generation, transportation, and commodity prices. It can also create demand in new categories as consumer and customers respond to the weather effects.  

Understanding the potential risks and incorporating adaptive strategies, companies can navigate the challenges posed by El Niño and ensure the resilience of their global sourcing operations. 

How can we help 

ET2C are a leading Global Sourcing Company, working with our clients for over 20 years to Make Global Sourcing Simple. We have over 250 colleagues based in seven offices across the globe to give you feet on the ground and become your bridge to your sourcing markets.  

If you would like to discuss El Nino potential impacts or building a risk mitigation plan please drop us a line at contact@et2cint.com  

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