FATHALLAH OUALALOU Minister of Finance and Economy in the outgoing government

hen the Universal Exhibition opens in Tangiers in 2012, it will be Morocco’s window to the world. The event will showcase not only the kingdom’s rich cultural legacy, but also its emerging economy. Reforms have transformed the country into a textbook case for small open economies. Looking back, it all makes sense to Minister of Finance and Economy in the outgoing government Fathallah Oualalou. He remembers how the process was triggered by the WTO’s ministerial meeting in Marrakech in 1994. More than 60 agreements were finalized that year, including a precursor to the IT agreement.

“After that, we signed a free trade agreement (FTA) with the European Union and, of course, the FTA with the U.S. The dates are important because they have contributed to the opening, which in turn became an agent of economic growth,” says Mr. Oualalou. For him, the story of Morocco in the last decade is one of convergence with post-industrial economies. Bilateral trade with the U.S. grew 44 percent at the end of 2006 to $1.39 billion. The process involves a new investment framework, commercial links, liberalization of services and free flows of capital. At the same time, there is a sense that minority rights are being recognized for the first time, as well as women’s rights.

“With Mohamed VI as king, Morocco is reconciled with itself,” says Mr. Oualalou. In 2007, GDP will grow 7.3 percent according to the IMF projection. Mr. Oualalou is confident that growth will surpass 8.1 percent. Since 2001, the economy has grown at an average 5 percent per year. More importantly, non-agricultural output is steadily gaining ground. Sectors such as telecoms, IT, tourism, construction, aviation and automobile manufacturing are finally taking off. Privatization of Maroc Telecom, for example, led to a more open field for cellular operators. Before privatization, 700,000 Moroccans were subscribed to a phone company. The number now is 17 million. Meanwhile, Maroc Telecom has branched into markets in Mauritania, Gabon and Burkina Faso.

Finance is a special case. Morocco began to target macroeconomic weaknesses through its newly independent central bank. As a result, inflation has been less than 2 percent in the last ten years. Institutions like the Casablanca Stock Exchange (CASE), Crédit Agricole du Maroc and the Banque Marocaine pour le Commerce Extérieur (BMCE), which is linked to the Othman Benjelloune Group, have all contributed to the élan. After consolidation in the 1990s, the total number of banks has gone from 16 to 8. The sector includes the Crédit Immobilier et Hospitalier (CIH) and Attijari-Wafabank, which is a branch of the ONA conglomerate. Subsidiaries of French banks also have a presence in Morocco. For Mr. Oualalou, the degree to which all are implicated in the nation’s economic development is a healthy sign.

“Reforms in the financial sector have been going on for over 14 years now. Today, it is a sector that monitors investments and instills trust,” he says. Indeed, legislation and consolidation have been so efficient that some argue the financial system is too modern for the rest of the economy. Competition is good, but policymakers believe more attention to housing mortgages and trade finance for SMEs would be even better.

As Morocco deepens its reform process, an equilibrium point will be found in the midst of all the political and economic opening. “I’m proud of our country’s policies in the process toward democratization,” says Mr. Oualalou.

The 2008 budget makes history

Next year’s budget will allocate more than 55 percent to social programs such as healthcare and education

In September Minister of Finance Fathallah Oualalou outlined the main points of government spending in 2008. “This will be the first budget to be part of the budgetary reform program, which will set the tone not only for the 2008 budget, but also for 2009 and 2010,” said Mr. Oualalou. In Morocco, the years up to 2010 are considered crucial in terms of economic development. Poverty reduction has been given a new priority as the government seeks to build roads, carry out water supply programs and bring electricity to rural areas.

For the first time in history, the budget will address environmental concerns related to sewage and garbage disposal. It opens the way to innovative recycling programs to help maintain the country’s environmental balance as agribusiness banks on organic farming and pesticide-free fruit exports.

The 2008 budget will also concentrate resources on emerging economic sectors such as offshore services, communications infrastructure, craftsmanship and public works, including the Tangiers Med II highway.