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Morocco: Political Risks

Exclusive Analysis says protests may escalate in Morocco, but abolition of the monarchy is not a target.
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King Mohammed VI of Morocco

In June 2011, King Mohammed VI announced political reforms, involving changes to the constitution to empower parliament, the judiciary and provincial governments vis-à-vis the monarchy. This was in response to popular demonstrations for change in early 2011. A majority were in favour of proposed constitutional reforms when the amendments were put to a referendum on 1 July 2011. However, the king's powers are still extensive. Mohammed VI remains head of the military and can appoint officials to strategic positions.

Protests re-started in mid-September 2011, despite the promised reforms. There is a risk that protests will escalate if the king does not dismiss advisors whom the protesters accuse of corruption. However, none of the protests have called for abolition of the monarchy.

The king exerts power through a circle of royal advisors, Prime Minister Abbas el-Fassi and business partnerships with local and foreign companies. These groups were largely granted access to their positions through their loyalty to the king and are directly accountable to him. Protesters are currently directing their anger at individuals like Fouad al-Ali, a former deputy interior minister and effective leader of the Authenticity and Modernity Party (PAM), who is also the king's main confidant and troubleshooter.

Morocco is seeking to attract greater investment across a wide range of sectors - including IT, automotive, food processing, offshoring, electronics, and aerospace - and therefore has little incentive to throw the investment climate into doubt through contract cancellation or a similar act. This is affirmed by Morocco's stated goal of becoming the primary platform for exports in the southern Mediterranean, for instance via major infrastructure upgrades around Tangier. Pressure from the International Monetary Fund and the EU, as well as the US-Morocco free trade agreement, has created a relatively transparent investment climate compared with that in neighbouring countries such as Algeria. However, foreign investors will have to compete and cooperate with influential local business magnates with strong personal connections to the monarchy.

Furthermore, the monarchy's holding companies, including Omnium Nord Afrique (ONA) Holding, have interests in nearly every sector of Morocco's economy. While there have been some reports of loans being denied to rival companies to reduce competition, telecommunications company Mediel competes against ONA's telecoms interest Wana. This indicates that while the monarchy's share of the economy is significant, it does leave room for some competitors.

However, a persistent budget deficit, the need to increase subsidies, and the absence of hydrocarbon resources, all increase pressure on Morocco's government to increase taxes.

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