Second Day of the Moroccan Business Forum
The day began with a presentation by Rick Ortez, a Foreign Service officer with the US Commercial Service who participated in reconstruction efforts in Baghdad and worked in Jordan during the implementation of a Free Trade Agreement (FTA). The essence of his presentation can be summarized by one statement he made: “It shouldn’t be called a Free Trade Agreement. It should be called a Very Challenging Trade Agreement.” The establishment of a FTA with Morocco doesn’t mitigate the challenges of doing business between the two countries, it merely adds an incentive for both parties to work together to overcome those challenges.
Ortega echoed the concerns about energy in Morocco that were raised by the US Ambassador the first day. “If you haven’t experienced brownouts this year, you may next year. The grid is operating at capacity.” He cited opportunities for US businesses, such as energy, waste management, water sanitation, and medical devices.
For more detailed information about the FTA with Morocco, such as opportunities for American businesses in Morocco, visit www.export.gov. The site requires registration with a US address to access market reports.
Since the role of the US commercial service, which is funded by US tax payers, is to help generate American exports, his presentation did not cover opportunities to export Moroccan products to US markets. There was a presentation done the first day of the forum by a representative of the Fes regional investment center (CRI). However, the establishment of regional investment centers in Morocco is relatively new and has a way to go before it catches up to the services and research done by the US Commercial Service. The website www.invest.gov.ma has information about investment opportunities and services in Morocco.
The Moroccan auditing and consulting firm ABEL made a presentation on business best practices and answered some questions about taxes and American investment strategies. They noted that Moroccan tax law is documented, but that there is controversy over interpretation of tax law and accounting practices. They are currently participating in an effort to document tax law interpretation so that the accounting industry can be standardized. As anyone who has read IRS documents can attest, tax documentation makes for dense reading material. In Morocco, the documentation is a work in progress. ABEL advises finding a trustworthy partner in Morocco. They didn’t offer any particular advice on how identify trustworthy partners. Partnerships with Moroccan businesses require investments of time and face-to-face interactions. As with all successful business partnerships, the parties must find they share common ideal and values as well as common goals.
ABEL had some good advice for American businesses. In planning a business, they advised settle on a business structure and find a location before doing the business paper work. They advised allocate enough time for real estate research and acquisition because the process of gaining a lease or plot of land in Morocco is particularly cumbersome. They advise professionals work with a notary to make sure they get what they pay for. They also advised businesses plan for a laborious administrative process in terms of completing necessary paperwork.
A representative from the CRI stated that efforts are underway to facilitate the business start-up process and bring administrative procedures online. Parliament recently enacted a law on e-payment procedures to require property security measures for online payments. However, these efforts are still in a testing, development, and implementation stages.
The pay-off for setting-up a business in Morocco is that the business will be tax exempt for five years and have a 50% tax reduction for the life of the company. So, if you plan on being in Morocco for the long term, it may be worthwhile to structure your organization as a Moroccan business. The inverse is that as a US company importing products into Morocco you will pay a 10% value added tax, which the US government will credit to you on your years tax return as part of the FTA with Morocco. Successful Moroccan-based businesses who have been able to tap into US markets include Zid Zid Kids and Mustapha’s Fine Foods of Morocco.
Morocco has specific laws governing how Americans can de-invest from Morocco. American businesses must complete necessary paperwork to show transparency of the funds they invest in Morocco. Establish the intent to do business in Morocco is crucial. For example, if one has a desire to establish a boutique hotel in Morocco, one must establish and document that intent from the beginning if they later want to convert their investment back to US dollars. If you buy a house in Morocco as a purchase without establish and documenting the intent to later convert it to a maison d’hotel you will encounter difficulties getting your investment out of Morocco should you chose to do so.
Morocco has a long tradition of doing business with Europe. It is an attractive location for establishing an operation center for businesses interested in tapping into other North African markets. However, Morocco doesn’t have a lot of experience doing business with American companies. American companies have experience doing business world-wide, so they are more apt to take advantage of the benefits of a FTA. For example, a California almond producer shipped the quota of almonds to Morocco the day after the agreement was implemented. It is indeed surprising the amount of food imports and agricultural products into Morocco. There is lots of opportunity to improve agriculture in Morocco.
Moroccan businesses suffer from a lack of marketing, quality control, and order fulfillment. Whereas the American entrepreneur is driven by a desire to change the world, I see the Moroccan businesses person fairly content with the world the way it is. Finding a shared desire for change will be important in establishing business ties between the US and Morocco. While Morocco in itself is a powerful brand, they must compete with suppliers from India, China, and the rest of the world.
More coverage of the 2008 Morocco Business Forum: