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Ci
ryD
REGIONAL DEVELOPMENT
IN MOROCCO: POLICIES AND FINANCIAL FLOWS
by
Leila Zlaoui
to the Department of Urban Studies and Planning
on May 20 in partial fulfillment of the
requirements for the Degree of Master in City Planning
Submitted
ABSTRACT
Since the early 1970's the Moroccan government has implemented a
set of policies aimed at developing lagging regions and reducing
regional disparities. These policies involve institutional as
well as economic and financial vehicles for the promotion of
lagging regions economies.
Despite their variety, these policies were unable to influence
the financial servicing patterns in favor of the less developed
regions and counteract the tendency towards spatial
concentration.
The analysis of the financing patterns of the major public,
private, and international financial institutions shows that
whenever the financial rate of return on investment is considered
a main criterion, capital flows in priority into developed
regions.
The evaluation of the policies reveals two major issues. First,
the theoretical principles underlying the policies adopted are
based on assumptions that do not hold true in the context of
developing countries. Second, even when some of the critical
variables for regional development were identified, the measures
undertaken to deal with them were not the most adequate to solve
the problems involved.
Thesis Supervisor:
Biswapriya Sanyal
Assistant Professor of
Urban Studies and Planning
1
ACKNOWLEDGEMENTS
To Ali,
Rabia, and all the others...
I would like to express my thanks to Bish Sanyal and Ralph
Gakenheimer for their advice, support, and understanding.
2
TABLE OF CONTENTS
Page No
ABSTRACT
1
ACKNOWLEDGEMENTS
2
TABLE OF CONTENTS
3
LIST OF FIGURES
6
LIST OF TABLES
7
LIST OF ACRONYMS
8
TABLE OF EXCHANGE RATE
9
1.
INTRODUCTION
10
2.
REGIONAL DEVELOPMENT FRAMEWORK
12
2.1.
Before
12
2.2.
After
2.3.
Regional
3.
REGIONAL DEVELOPMENT POLICIES
23
3.1.
Administrative Deconcentration
23
3.2.
Creation/Strengthening of New Channels for
Independence
Independence
15
Disparities: Highlights
Allocation of Public Resources for
18
the
Regional
Development
3.3.
Industrial
25
Decentralization and Development Pole
Strategy
27
4.
EVALUATION
29
4.1.
Institutional
Aspects
29
3
4.2
Regional
Distribution of Large Projects Approved
by ODI
4.3.
31
Distribution of Public Funds for Regional/Local
Development
34
4.3.1.
Special Regional
4.3.2.
Local
4.3.3.
Communal Supply Fund
4.4.
Regional Distribution of World
Authority Development Fund
Projects From
4.5.
Development Fund
Regional
1962 to
Bank Funded
1985
37
Distribution of the Lending Activities of
Institutions
41
Banque Nationale Pour Le Developpement
Economique BNDE
4.5.2.
35
36
Three Major Moroccan Financial
4.5.1.
34
41
Caisse Nationale Pour Le Credit
Agricole CNCA
42
4.5.3.
Credit
44
4.5.4.
Conclusion on the empirical
5.
REGIONAL DEVELOPMENT IN THIRD WORLD COUNTRIES:
Immobilier et Hotelier CIH
findings
THEORIES AND REALITIES
5.1.
Regional Development:
5.2.
General Limitations
Neoclassical
50
Theoretical Background
to
Policy
5.4.
Specific Limitations
51
Implications
52
in the Context of Developing
Countries
5.5.
Business and Tax
50
the Validity of the
Location Theory
5.3.
45
53
Incentives:
Empirical Findings
56
5.5.1.
Effect of Tax
Incentives on the Location
Decision of Firms
56
5.5.2.
Opportunity Cost of Tax
5.5.3.
Impact on Employment and Growth
58
6.
CONCLUSION
61
7.
RECOMMENDATIONS
64
Incentives
56
ANNEXES
67
BIBLIOGRAPHY
69
5
LIST OF FIGURES
No
Page No
1.
Morocco
2.
Distribution of
Industrial Activities 1967
20
3.
Distribution of
Industrial Activities
1976
21
4.
Distribution of
Industrial Activities 1979
22
5.
Provincial Boundaries
13
1973 and Economic
Regions
6.
24
Location of Large Projects Having Benefited
From State Assistance 1973--1980
6
33
LIST OF TABLES
No
Page No
1.
Distribution of Manufacturing
2.
Regional
Distribution of Large Projects
Approved
by ODI
3.
31
Development
1978--1979
34
1978--1980
35
Distribution of FEC Projects Financed Under
1983 World Bank Loan Mor-2722
6.
36
Regional Distribution of Bank Funded Projects
Regular
7.
Operations,
Regional
1962--1985
38
Distribution of BNDE Lending
12-31-1979
8.
Regional
in
9.
41
Distribution of BNDE Agreements
1980, 81,
82, and 84
CNCA, Regional
Potential
10.
18
Grants Made by Local Authority Development
Fund,
5.
1973--1980
Grants Made by Special Regional
Fund,
4.
Industry
Regional
Housing
42
Distribution of Real
and
Customers
43
Distribution of CIH Lending
1978--1984
to
44
11.
Ranking of
12.
CNCA, Detailed Table
67
13.
Regional
68
Lending
Institutions
46
Distribution of CIH'S Hotel
1978--1984
7
LIST OF ACRONYMS
BNDE
:
BANQUE NATIONALE POUR LE DEVELOPPEMENT ECONOMIQUE
National Bank For Economic Development
CIH
:
CREDIT
IMMOBILIER ET HOTELIER
Lending
CNCA
:
Institution For
CAISSE NATIONALE POUR LE CREDIT AGRICOLE
Lending
FDCLG
Housing And Tourism
: FONDS
Institution For
Agriculture
DE DEVELOPPEMENT DES COLLECTIVITES LOCALES ET DE
LEUR GROUPEMENT.
Local
FEC
:
Government
FONDS D"EQUIPEMENT COMMUNAL
Communal
FSDR
:
FONDS
Infrastructure Fund
SPECIAL DE DEVELOPPEMENT REGIONAL
Special Regional
ODI
:
:
Development Fund
OFFICE DU DEVELOPPEMENT INDUSTRIEL
Office For
wB
Development Fund
Industrial Development
WORLD BANK
ABBREVIATIONS
DH
:
Moroccan Dirham
N.a
:
Non Available
Non Regional.:
Oth. Regions
Non Regionalized
: Other Regions
e
TABLE OF EXCHANGE RATE 1
1965
us
5.00 DH
1975
US
4.14
1976
us
4.43 DH
1977
us
4.40 DH
1978
us
4.30 DH
1979
us
4.00 DH
1980
us
3.70 DH
1981
us
4.25 DH
1982
us
5.30 DH
1983
us
6.10 DH
1984
us
6.99 DH
1985
us
9.50 DH
DH
1. Picked randomly for each of the years indicated.
9
1.
INTRODUCTION
In Morocco, as
disparities are
factors. These
national
in many
the result
factors
resources and
developing countries, regional
of historical,
led to the current
income, and
disparities and develop
equity and crucial
for social
and social
distribution of
the regional
access to production factors and markets.
regional
political
differences
The goal
lagging regions
is
to reduce
important
attention to regional
implemented
regional
well
through
lagging
the five year plans
in order
involve
financial vehicles for
to reduce
institutional
as
the promotion of
regions economies.
The purpose of this thesis
the financial
is to evaluate
flows in Morocco, and thereby
effectiveness of the policy tools used
towards
paid
issues. A set of policies were
disparities. These policies
as economic and
for
stability.
Since the early 70's, the Moroccan government has
careful
in
the
those policies and
investigate the
to direct
financial
flows
lagging regions.
The approach
involves
two main steps. First
the regional
development policies and the financial flows patterns are
explored. Then theoretical
explanations for
observed are discussed.
I have also tried
critical
regional
variables that
into account
to
the discrepancies
identify the
development policies should take
in the context of developing countries, and examined
how they were dealt with
in the case of Morocco.
10
The central hypothesis is that because regional policies are
based on assumptions
that
do not hold
developing countries, despite their
not
of
able to
influence
in
the context of
variety these policies are
the financing servicing patterns
the less developed regions and counteract
spatial
the
in favor
tendency towards
concentration.
My analysis combines both empirical
literature.
I have used
the theoretical
the empirical
data and
theoretical
findings as a support for
search, whose conclusions frame
the policy
recommendations.
The results of
are evaluated
implemented
the Moroccan regional
through
(i)
the analysis of the policies
throughout the several development plans,
the analysis of the financial
and mixed Moroccan financial
activities
development experience
and
(ii)
servicing patterns of major public
institutions, and World Bank
in Morocco.
11
lending
2.
REGIONAL DEVELOPMENT FRAMEWORK
This chapter reviews
the spatial
political
at
the historical
trends
that have shaped
distributions of economic activities,
events that
have led
to
as well
the adoption of policies aimed
a more even spatial distribution of activities and
This historical
and political
as the
background
understanding of the nature and the
is
important
income.
to our
limitations of the policy
tools adopted by the Moroccan authorities.
2.1
Before Independence
The regional
precolonial,
problems of Morocco are a heritage of
colonial
and
post colonial
each showing maladjustments and poor
economies and geopolitics
adaptation from one stage to
the next.
In precolonial
times sharp contrasts already existed between
the different regions of Morocco,
and rural
areas. The pattern of towns was
central place
between
as well
that
as between the urban
the result of the
Morocco occupied as point
the of
intersection
the Arabic and European commercial spheres. The most
important cities
(Fes, Meknes and Marrakech) were
inland road network on which
located on an
camels and beasts of burden were
relied on as a means of transport. This type of communication
induced a semi
autonomous urban system
linkages necessary for control
in which the urban
by the monarchy and for
12
trade were
loose,
and permitted considerable provincial autonomy.
addition,
In
the urban network was characterized by a hierarchy of
urban and village market centers, complemented by the system of
weekly markets
balanced
The country was
(souk).
thus endowed with a well
urban hierarchy characterized by a dominantly
location of towns. The precolonial spatial
presented
an important
agricultural
communities
particularity:
and were over
the mountains with
limited
populated;
potential
were
while the plains, with
inhabited by nomadic
communities and were poorly populated. Various factors
caused this contrast:
prevalent
pattern however,
resources were inhabited by sedentary rural
important agricultural
pastoral
inland
tax
epidemics, wars and
invasions, but also
system in the accessible plains which
territory controlled by
the Sultan
FIGURE
(De Mas
1:
1978).
MoroccoO
qw. ooA
"d. rOOD
~Source: DE MAS P. 1976
13
formed
the
the
Under
the forty years of French domination, the most
important change was the shift of the urban concentration to
Atlantic
center,
of
coast with
the selection of Rabat
Casablanca as
the economical
as the governmental
center,
and the construction
the new ports of Kenitra and Mohammedia. The rail and road
network
were designed to
drain the resources from the colony
the metropolis. They radiated
over
to
like a half web out of Casablanca
the country.
By
itself the
logic
the development of the
of the colonial
industries near
system was
development of the
raw materials
Second most
local
internal market, but towards
as well
as finished or
industries depended upon
leading to
the recently created
ports. First economic activities were not oriented
towards
the
the exports of
intermediate products.
imports;
and finally,
the
market was essentially composed of the European population
living
on the Atlantic
Coast:
the farmers in the fertile
agricultural
plains;
apparatus
the two main cities of Rabat
A.
the
in
and the administrative and political
and Casablanca
(Kaioua
1984).
The precolonial
spatial
peculiarities
poor mountainous regions,
existed
newer
low density
(high density population
in the rich plains) which
in Morocco did not change during
and greater disparities building
agriculture increased
14
the colonial
period, but
up on the previous ones
were induced. The plains were taken over
Modern mechanized
in
by French settlers.
the yield and the value
added of these areas without
densities.
leading
to
higher population
In the mountainous regions, with
agriculture,
the imbalance between
the agricultural potential
traditional
the size of the population and
worsened. This worsening was the
result of the explosive growth of the population within the
limited cultivable areas, without
the possibility of using
the
plains already occupied by the French settlers as an outlet.
The spanish colonization of
Prerif,
the northern
zone, Rif and
made this region an economically peripheral area cut off
from the rest of the country which was under
protectorate
(De Mas
the French
1978).
2.2. After Independence
The
integration of the old Spanish zone
protectorate at
the
into
the former French
independence of the country
immediately
caused great hardship
the cost of
living for
and substantial
the population.
region experienced massive social
in
In 1958 and
1956
increases in
1959,
the
unrest.
The orientation of the first Moroccan five year plan -- Plan
Quinquennal
1960-1964-- was
largely influenced by these events.
The plan was characterized by:
independence from external
government of
industry;
the key
an effort
influence; extreme control
sectors of the
reform of the political
Morocconization
,
to achieve economic
economy in particular
structure by way of
modernization and democratization;
lessening of social
and regional
15
by the
disparities.
and
In contrast with
the later
plans, maximum growth was not
only objective of the first version of the first five year
This plan was prepared
government
in
1959 by a cabinet under the
officials who sympathized with
the
the
plan.
leadership
ideas of the
progressive parties.
The economic policy conveyed
implication of
less power for
by the plan, with
the King,
from the King himself and the political
dissolved
in May
encountered opposition
parties. The cabinet was
1960, and a new version of the Plan was written
between May and November
proposals
its
1960.
The new version
lacked the reform
that had characterized the previous one.
priority was given to
the different economic
reform, and social
industry;
and the control by government of
sectors was clearly
and regional
Instead
limited. Agrarian
inequalities received no
attention.
The period of 1961-1964 started with the sudden death of
King Mohamed V and
Hassan II.
the accession to
the throne of his son
The new King's endeavour was focused
on the authority
of the monarch -- aiming for a position of unlimited power
( De
Mas 1978).
The next
two plans gave the priority respectively
reorganization of the monetary situation, and
agriculture. The social and regional
to
social
the
irrigated
inequalities received no
attention. The strategy of the sixties was that
growth would
to
maximum economic
lead to a decrease in the income differences among
groups and regions. This strategy
16
lamentably failed. As
in the
indicated
poorest
respectively 25% and
of the population consumed
10%
the
1973-1977 plan, while the richest and
of the total
consumption, by 1972 they consumed 37% and
respectively
(Plan 1973-1977, p.
14 quoted
1972.
This
led
admitted that
condition of
in
the attempts on the King
to reforms
his policy which was aimed at
of a fairer distribution of national
a program of national
regarding regional
of
the
in 1971
and
The King
improving the
the rich, had failed. The
the poor without hurting
new government he constituted dedicated
later
life
in politics and planning.
1.2%
1978).
in De Mas
The worsened economic situation at the beginning
seventies culminated
3.3%
to
itself
the realization
income. Eighteen months
reform involving decisive measures
planning was formulated.The regional
development program has been carried out since.
Despite
it
the wide variety of
involves, the results of
regional
planning are much
the fifteen years of Moroccan
less conclusive than
Currently the population
is concentrated
prosperous plains and coastal areas of
country. The most
on the coast,
Casablanca
expected.
in the fertile and
the Northwest
important urban and economic
notably Rabat
and policy tools
institutional
of the
concentrations are
(seat of the government) and
(economic capital).
The
inland areas are marked by
the older urban concentrations of Fes,
17
Meknes and Marrakech.
2.3 Regional Disparities:
Highlights
The northern and primarily coastal
location of economic
activities has severely affected development elsewhere. According
to a
1984 World Bank study':
"manufacturing industry
region of Casablanca
employment
(69%),
second
important region
19%
of
and exports
is the Northwest
(40%).
The
(Tanger, Rabat)
of output,
18%
of
16% of exports. The region of Tensift
(Marrakech and Safi)
(9%) and exports
place
(64%),
the number of firms, 12%
employment, and
Oriental,
(57%),
in terms of number of firms
output
with
in the
is heavily concentrated
is also
(29%).
important
The four other
in terms of output
regions
(South,
Center-North, and Center-South) have a negligible
in Moroccan manufacturing".
The following table summarizes these data.
TABLE 1
Distribution of manufacturing
Regions
Firms
%A
Output
industry
Employment
%A
%
Exports
%
Center
North West
Tensift
Oth.Regions
57
19
N.a
N.a
69
12
9
N.a
64
18
N.a
N.a
40
16
29
N.a
Total
100
100
100
100
3 World Bank:
Promotion, 1984
Morocco:
Industrial
18
Incentives and Export
and 4 show
the increasing concentration of Moroccan
Figures 2,
3,
industrial
activities as measured
and
1979.
19
in terms of
jobs, between 1967
Figure 2
Distribution of
Industrial Activities
1967'
Tetouan
Lache
e
e
Rabat
Casablanca
8 Jadida
Number of Jobs
- 2000
500
o
+.
1ek m-
Source: KAIOUA A.
Sowm:D.NOfN.G.M.,r*71419.
1984
20
Less than 100
Figure 3
Distribution of
Industrial Activities
1976'
Tanger
, Nador
Larache 4
Ksar al K&br
Jerada
o
Casablanca
E Jadida
0 Midelt
Number of Jobs
12000
6000
2 000
Souwns :
0
.
Source:
Reperdoire desItabilsemens ndustrfeis 1976,
Dlrin do l7ndusrfe,
R"b
FchkwODI Groupe Hult.
lblin ,s* aJour pour
100km
KAIOUA A.
1974
1984
21
0
Mining center
Figure 4
Distribution of
Industrial Activities
1979,*'
Tanger
Tetouan
KWnitra
&Taa
,nt.IA
Cmsane.
U.
sotat
Safi
Errachidiae
Number of Jobs
Esaoura
108000
11000
Agadir
0
10010
2000
Souce: AnnuaKonpiMe Mwro n* 7, 1979
(
Mining non included
00. Source: KAIOUA A.
1984
22
3.
REGIONAL DEVELOPMENT POLICIES
The regional
development
policies defined and
Moroccan authorities throughout the
1973-77,
the
implemented by
1978-80 and
1981-86 development plans, are based upon three main principles:
(i)
administrative deconcentration,(ii)
financial
resources for regional
industrial
and
allocation of public
local
investment decentralization
development,
and
(iii)
in relation to the
creation of development poles.
3.1. Administrative Deconcentration and Regional Administration
The structure of
reflects
local
its antecedents
institutions in Morocco clearly
in the French centralized state
administrative tradition. There are basically
two
institutions
in Morocco:
(i)
protect, and
advance the
interest of the central
the regional,
governments
provincial and
led by
institutions that
municipal
locally elected
types of
represent,
government at
levels, and
officials at
local
(ii)
local
the municipal
level.
(i)
In
1971,
grouping
the Government created seven Economic
Regions,
together several provinces generally around an
urban development pole, as a "framework for economic
(Law of June
16,
of the regional
1961).
The regional
consultative assembly
action"
administration consists
(regrouping member of
the elected provincial assemblies and representatives of
23
the
Chambers of Agriculture, Commerce, Craft,
provincial
governors
Industry),
(representatives appointed by
proposals prepared by
role
through
inputs for economic planning
submission to the national
the King
the region's major
administration departments. To date
has been to provide
the
representatives of central
and regional
in the provinces),
and
government of investment
its consultative assembly.
FIGURE 5
Boundaries 1973 and Economic Regions?
Provincial
.
Provinces
Situation 1973
..
-
(ii)
As part of
RM
N
1"
.
f.i m
.
.
atc
the decentralization process, an
important
number of new provinces were created. Provinces and their
chief executives, the Governors, constitute the main
intermediary between the central and municipal
levels of
government. Governors are directly appointed by the King.
'7.
Source:
DE MAS.
1978
24
Administratively
they are responsible
Their primary function
Interior.
is
the Minister
to
to carry out the
to maintain
Ministry of Interior's twin responsibilities:
law and order,
and financial
and
the political, administrative
to oversee
affairs of
local
governments.
assemblies were formed and given
provincial
of
In
(at
1963 elected
least
theoretically) more power and responsibilities. Each
financed by subsidies from the central
by the Governor, and
Minister of
(iii)
(which is entirely
approves the provincial budget
assembly
may be
Interior over
In 1976,
government,
prepared
imposed on the province by the
the assembly's objections).
local authority chart
the adoption of the
(Charte Communale) established a directly elected municipal
council
in the communes, and was
power and responsibilities of
Currently, at
the municipal
share responsibility
council
by
intended
the
local
increase the
communities.
two parallel
level,
affairs:
for municipal
elected locally, and the pacha or
the central
to
structures
the municipal
the caid
appointed
government and representing central
interests.
3.2. Allocation of Financial Public Resources for Regional/Local
Development
Local
governments
central government
subsidies,
and
to
in Morocco
finance
depend
(through
loans) a substantial
25
to a
large extent on the
transfers, grants,
share of their expenditures.
Despite the regionalization carried out
institutional
through
framework which facilitated
involvement of the regions
an increased
in the preparation of the plans, many
difficulties were encountered
mechanisms necessary to
the new
regarding the methods and
information was
achieve regionalization:
not regionalized;
the possible locations for projects were not
always specified;
the Secretariat for Planning found
to regionalize
difficult
ministries. Because of
the investments of the different
the difficulties
distribution by regions under
decided
it extremely
in allocating budgetary
the capital
budget,
the Government
to establish/strengthen three channels of financing for
regional
(i)
development purposes.
The Communal
Communal
or FEC)
source of
Infrastructure Fund
created
in 1959.
loans available to
local
(Fonds d'Equipement
It constitutes the only
governments for
infrastructure and development projects.In the last
FEC has grown rapidly, and
municipal
(ii)
development projects
The Special Regional
Developpement Regional
1973
its role and capacity
(iii)
to finance
is being strengthened.
Development Fund
or FSDR) which
(Fonds Special de
was established in
to finance by means of central subsidies and grants,
infrastructure projects in the
fund
decade
least
developed regions. This
is now being phased out.
The local
Government Development Fund
(Fonds de
Developpement des Collectivites Locales et de leur
Groupement
or FDCLG) which was established
26
in 1976 as part
of the decentralization reform. This Fund
of central
subsidies and
Ministry of Interior,
entrusted
grants.
and
It
is a chief source
is administered by the
the Government has recently
the provinces with the
local
distribution of the
funds.
3.3 Investment Decentralization and Regional Development Poles.
The goal
of deconcentrating investments
and private funding.
In order
involved both public
to counterbalance the appeal
Casablanca-Rabat-Kenitra axis,
five cities were proposed
1973-77 development plan as future economic development
Oujda, Agadir,
Marrakech, Fes and Tanger.
deconcentrate private investments, the
offered
10 years
tax
In order
of
in the
poles:
to
1973 investment code
incentives for enterprises establishing
themselves outside Casablanca. The exemption allowed was
100%
for some provinces. However,
according
tendency to concentrate most
of the
around Casablanca-Mohammedia
is not declining. As a result,
to
the 1921-1986 Plan,
industrial
investments
decentralization of private investment under the
development plan, was also being stimulated by
provide serviced
land at a reasonable cost
through the Office of
Developpement
the
in and
1981-1986
(a)
an effort to
to entrepreneurs
Industrial Development
(Office du
Industriel, ODI),(b) employment premiums calculated
on the basis of the number of
with personnel
the
jobs generated, and
training for enterprises
in poor provinces.
27
interested
(c)
in
assistance
locating
In addition, the plan adopted new measures to
development process away from
deeper
into
the arid
the fringe of
zones. These measures
irrigated areas and
involve
livestock raising,
amelioration and organization of
move the rural
the
the
development of small and medium scale waterworks, the promotion
of small
shift
and medium size enterprises, and so on. They mark a
away from the
characterized
Spatially
large scale
irrigation projects which had
agricultural policy
they imply a shift
rainfed agriculture and
in the
1960's and early 70's.
toward the mountainous regions of
the arid zones.
4. EVALUATION
The set of policies implemented in Morocco
integrates
three essential and complementary components of a regional
development program:
(a) Institutional changes --aimed at transferring
authority, and responsibility from the central,
regional/local level.
This transfer
power,
to the
is properly supposed to
be one of the conditions, and also one of the factor of
regional development.
(b) Public social and infrastructure investment --aimed at
improving regional conditions (health, education, training,
infrastructure),
creating greater external economies and
therefore increasing their potential for development.
(c) Tax and other
incentives aimed at
inducing private
developers to invest in lagging regions.
In the following section we will review the impact of the
policies; examine the distribution of industrial
investment); and
investigate the financial servicing patterns by looking at the
spatial distribution of the activities of different financial
institutions: public institutions in charge of the funding of
development projects, national banks lending to private sector,
international
4.1.
lending for development projects.
Institutional Aspects
The question of deconcentration versus decentralization is
29
the keystone for
measures
appreciating the impact
adopted
of the
in Morocco. Deconcentration in
refers to the delegation of responsibilities to
echelons of a structure which remains
the principle of a central
reassume at any
institutional
this context
the regional
in its entirety governed by
authority which
keeps the right
time the responsibility it delegated. On the
contrary,
decentralization presumes
body with
its own area of authority. The measures adopted
Morocco
at
to
the different
levels of
the existence of an elected
local government,
a deconcentraion than a decentralization
in
are more of
type.
The Economic Regions are principally a spatial framework
planning rather
than an essential
level
in the administrative
structure. The multiplication of the number of provinces
therefore of provincial
for
governors is also a way of
and
increasing the
controlling power of the central authority. The consultative
assemblies, elected body at the provincial
political
or
financial power.At
level do not have any
the municipal
council has to
share the responsibilities for
with
(appointed by the central
the Pacha
representing central
interests).
-- one modern, the other
different
level
the elected
municipal affairs
government and
Although these two hierarchies
traditional-- are supposed
to carry out
tasks, they often work together with some tension and
conflicts.
Actually these features,
i.e, the
importance of
the
Governor's role and the extent of his supervisory authority,
weakness of the provincial
consultative assemblies, and the
30
the
control
over
exerted by the
the municipal
local executive authority
council,
demonstrate
the yet
(Pacha, Caid)
excessive
centralization of the Moroccan administrative apparatus.
4.2. Regional Distribution of Large Projects Approved Through
the
Investment Code During the 1973-77 and 1978-80 Development Plans
The main objective of the regional
to stimulate
industrial
development
package was
investment outside the coastal Casablanca
Rabat Kenitra axis.
The following table
projects
indicates the regional
(involving amounts equal
to or
distribution of
larger than
Dirham) that have been approved by the Office for
Development
(ODI),
in application of the
large
10 Million
Industrial
Investment Code between
1973 and 1980. These projects benefitted from state assistance.
TABLE 2
Regional Distribution of Large Projects approved by O.D.I.
1973-1980
Amount
(in M. DH)
Regions
%
Share Per
Capita
(in DH)
Oriental
Center
North-West
Tensift
Center-North
Center-South
South
860.6
2327.2
1538.3
905.1
156.8
73.1
54.6
15%
39%
26%
15%
3%
1%
1%
583
419
375
307
65
48
23
Total
5915.7
100%
290
Source: Computed from data drawn from "L'Espace Industriel
Marocain
de Kenitra a Casablanca", KAOUIA Abdelkader,
1984 p.133.
Despite the official
discourse and the measures undertaken to
31
induce a decentralization of the productive apparatus,
absolute
terms the
Industrial
Northwest
Oriental
(26%).
and
benefitted
investments approved by O.D.I.,the Office for
Development, were heavily concentrated
Coast, especially
in
in
in the Atlantic
the developed regions of Center
(39%) and
However, on a per capita basis the regions of
to a lesser
extent Tensift
from a substantial
period. Oriental has
share of
the highest
share is above the national
turn out
to have
investments during
that
share per capita, and Tensift's
average. In contrast,
the three
regions of Center-North, Center-South and South were completely
neglected.
32
FIGURE 6
Location of Large Projects Having Benefitted From
198o"
State Assistance between 1973 and
A
4
AmUOA
~ L..~pb
&V(M Is &V hM3pbatim*ra
21a
A
uAeu
0. Source:
KAIOUA A.
19e4
33
A
SA
iii
4.3.Distribution of Public Funds for Regional/Local Development
Though there is no systematic data on the regional
distribution of public funds, some information is available on
the grants made by the Special Regional
Development Fund (FSDR)
in 1978-1979 and those made by the Local Government Development
Fund (FDCLG) in 1978-1960. The grants were made mainly to finance
projects in sewage and sanitation, drinking water, public health,
rural roads, electrification, and local staff training.
4.3.1. Special Regional Development Fund (FSDR)
Table 3 shows the distribution of grants made by Special
Regional Development Fund in 1978 and 1979.
TABLE 3
Grants Made By Special Regional Development
Fund, 1978-1979
(in DH)
Regions
Share
Per
Capita
Amount
%
South
Oriental
Center-South
Tensift
Center-North
Center
North-West
Non-Regional.
222321000
67588000
60693000
69511000
42649000
79743000
53590000
89569000
32%
10%
9%
10%
6%
12%
8%
13%
2424808
1475376
1512046
2944591
2397689
5559658
4105387
92
46
40
24
18
14
13
Total
685664000
100%
20419555
34
Population
Source: Computed from data drawn from Projet de Developpement
Economique et Social (Rabat: Avril 1981, Volume I, p. 6 6 ), Royaume
du Maroc. Population data are drawn from 1982 census.
On a per capita basis, Center
and North-West, which
two more developed regions of Morocco benefitted
grants. Most of the funds were used
one of the
to finance projects
less developed regions, received the
the funding.
The obvious explanation is
the Saharan territories, and
from FSDR
least
and Center-South.
regions such as South, Oriental
that
are the
in poor
South, which
is
lion's share of
the region contains
the funding pattern is one of the
response of Moroccan authorities
to
the claims for autonomy of
the Polisario front.
4.3.2. Local Authority Development Fund
table indicates the regional
The following
FDCLG grants from
(FDCLG)
1978 to
distribution of
1980:
TABLE 4
Grants Made By Local Authority Development
Fund From 1978 to 1980
(in DH)
Regions
Oriental
South
North-West
Center
Center-North
Tensift
Center-South
Non Regional.
Total
Amount
%
Population
Share
Per
Capita
72250000
103649000
173580000
204152000
89668000
106457000
54992000
293552000
7%
9%
16%
19%
8%
10%
5%
27%
1475376
2424808
4105387
5559658
2397689
2944591
1512046
49
43
42
37
37
36
36
1098300000
100%
20419555
54
Source: Computed from data drawn from Projet de Developpement
Economique et Social (Rabat: Avril 1981, Volume I, p.66), Royaume
35
du Maroc. Population data are drawn from
1982 census.
The funding pattern of FDCLG displays much
than FSDR. And even though
less variance
lagging regions such as Oriental
and
South benefitted from the highest per capita allocation, the
developed provinces of Northwest
substantial
and Center were attributed a
share of the funds.
4.3.3. Communal Supply Fund
(FEC)
Financing patterns of Communal
through
the
Supply Fund are appreciated
the regional distribution of FEC financed projects under
1983 World Bank
and expanding
loan "Mor-2272" aimed at strengthening FEC
its activities.
TABLE 5
Distribution of FEC Projects Financed
Under 1983 World Bank Loan Mor-2272
(in DH)
Regions
North-West
Center-North
Center
South
Oriental
Tensift
Center-South
Total
Share
Per
Capita
Amount
%
64125000
31625000
57513750
17612500
10812500
7000000
2187500
34%
17%
30%
9%
6%
4%
1%
4105387
2397689
5559658
2424808
1475376
2944591
1512046
16
13
10
7
7
2
1
191076250
100%
20419555
9
Population
Source: Computed from
FEC, Etat des Projets Soumis au
Refinancement au 30 Avril 1986. Population data are drawn from
1982 census.
36
The regional
Communal
distribution of the lending activities of
Supply Fund differ
substantially
from the distribution
patterns of FSDR and FCDLG. The main borrowers
(Center, 30%)
Casablanca
highest
(North-West, 34%)
and Rabat
ratios of DH per capita are
in
to be found
in Center-North. All other undeveloped
regions and
West and center-North are the coastal
and Mediterranean sides).
and
projects to a
technical
The
those two
areas benefit
areas of Morocco
They contain the most
municipalities of the country;
.
lending. Actually, Center, North-
from a negligible amount of FEC
managerial
are the regions of
(Atlantic
important
precisely those which have the
capabilities to propose fundable
lending institution
(FEC), and which can be
considered as secure borrowers.
4.4. Regional
Distribution of World Bank Funded Projects From
1962 to 1985
This part of the analysis
lending
to Morocco.
The purpose
does not bear on all World Bank
It excludes most
lines of credit projects.
is to distinguish between regular operation projects,
i.e.,projects whose location was decided prior
to Bank approval
of the
location of
loan, and
subprojects
lines of credit
is unknown at
the
lines of credits, the loan is
financial
institution which
is
for which
the
time of approval.
typically made
then
In the case of
to a major
in charge of
lending
Moroccan
to
Moroccan private entrepreneurs. All subprojects are submitted for
World Bank approval
before funding. The analysis of
37
the lending
patterns of the Moroccan financial
lines of credit projects
institutions which manage Bank
is undertaken in
the next section of
this chapter. Regular projects analyzed represent 52% of Bank
lending
to Moroccoand
lines of credit 48%
$ of which 618 in Agriculture
and 922
which are financed by Moroccan financial
the regional distribution of
line of credit projects
institutions we assume
the lending activities of the
latter do
not depend on the source of the funds
managing.
Therefore World Bank
Industry,
which are
they are
expenditures in Agriculture and
in majority made through
projects, are considered as having
distribution as the Moroccan
1984
in Industrial Development
Finance projects). Regarding World Bank
that
(1,560 million of
line of credits
the same patterns of
institutions managing those funds.
TABLE 6
Regional Distribution of Bank Funded Projects
Regular Operations From 1962 to 1985
Region
Project
costs
X
Population
Share
Per
Capita
North West
Oriental
Center South
Tensift
Center
Center North
South
Subtotal
National Impact
Not Allocated
977
302
256
376
657
263
243
3074
659
391
24%
7%
6%
9%
16%
6%
6%
75%
16%
9%
4.105387
1.475376
1.512046
2.944591
5.559658
2.397689
2.424808
20.419555
20.419555
20.419555
238
205
169
128
118
110
100
151
32
19
Total
4124
100%
20.419555
268
Source: Location Analysis of World Bank Funded Projects in
Morocco. World Bank, EMENA Urban Projects Division, July 1986.
38
Though the developed regions of Northwest
received on aggregate
terms
expenditures, on a per
Northwest
to be
which has
more
South and
the
largest share of Bank
capita basis, with
the highest ratio,
in favor
of
and Center
the exception of
the distribution turns out
lagging regions such as Oriental,
Center
Tensift.
The analysis of the distribution of World Bank
expenditures
within the regions shows different patterns depending on the
nature of
the investment sector.
Investment
in the directly
productive sectors are concentrated
spatially;
infrastructure sector
is more dispersed;
in the social
investment
sectors that
it
investment
"While in the richest regions
in
the
and it
is
is most evenly distributed:
(North-West and Center),
expenditures have been dispersed between the different
provinces, in poorest regions,
concentrate
the trend has been to
them in one province usually coinciding with
the
province designated by the Moroccan authorities to play the
role of development pole. Social
most
sector
investments
are the
evenly distributed among regions and provinces among
the regions; educational
provinces,
projects have benefitted 27
and urban projects 23.
investments, with
Infrastructure
the exception of power projects which
benefitted 24 provinces, are more concentrated. Highway
projects benefitted
Agricultural
12 provinces and water
and to a larger extent
39
industrial
supply
10.
investments
whose location
is necessarily related with
the quality of economic
much
in
environment of the provinces are
less dispersed. Agricultural
15 provinces and
,
the resources and
IDF
investments have been made
(Industrial
Development
Finance)
in 4 provinces."'
' World Bank:
Projects, 1986.
Morocco:
Location Analysis of Bank Funded
40
4.5. Regional Distribution of
Major Moroccan Financial
4.5.1.
Institutions
Banque Nationale pour le Developpement
The National
1959.
the Lending Activities of Three
Bank for Economic
The following table shows
Development
Regional
TABLE 7
Distribution of BNDE
Region
Designation
Center
Casablanca &
Mohammedia
Rabat
Meknes
Fes
Tahla
Tetouan
Tanger
Oriental
Marrakech
Agadir
North West
Center South
Center North
North West
Oriental
Tensift
South
Oth.Regions
As shown
distribution of BNDE
lending
12-31-1979
Amount
('000 DH)
in
the table,
favor of companies
%
3671303
401533
236631
226715
108415
65849
364878
224834
179932
168468
1095109
6743568
BNDE, Les Operations de
in
1979.
Total
Source:
(BNDE) was created
the regional
interventions since its creation to
EconomiqueBNDE
la BNDE en
54%
6%
4%
3%
2%
1%
5%
3%
3%
2%
16%
100%
1979.
more than 50% of BNDE
whose headquarters
were
located
lending was in
in
Casablanca-
Mohamadia. Though the activities of many of them and especially
those in the fishing and maritime transport
whole country, the weight of Casablanca
41
sectors, span the
in BNDE's
lending remains
very important
(about 60%).
All
other regions
occupied a
negligible place in BNDE's activities.
After
1979,
the distribution of agreements did not evolve
lessening of
toward a
the concentration of economic activities.
TABLE 8
Regional Distribution of BNDE Agreements
1980, 81, 82, and 84
in
Region
1980
1981
1982
1984
South
Tensift
Center
North West
Center North
Oriental
Center South
14%
3%
49%
26%
5%
1%
2%
3%
3%
79%
9%
3%
2%
2%
8%
4%
59%
14%
7%
3%
5%
13%
1%
67%
13%
2%
2%
2%
100%
100%
100%
100%
Total
Source:
On
BNDE, Yearly Reports,
1981,
1982,
the contrary, Casablanca's region has seen
BNDE's lending
increase, reaching 79% in
Two other regions were allocated
lending:
North-West which
is for political
1984.
its share of
1981 and 67%
in
1984.
decent proportions of BNDE's
is the region ranked second with regard
to the concentration of economic
which
1980,
activities
in Morocco, and South
considerations the object of massive
investment.
4.5.2. Caisse Nationale Pour Le Credit Agricole
In a
Octobre
1982 document
1982",
CNCA
"Credit Agricole, Bilan et Perspectives.
CNCA, the National
42
Bank for Agricultural Credit
made an evaluation of
its activities, and presented an overview
of future prospects. The following
distribution of CNCA's real
customers are
table
indicates the regional
customers. Potential
and potential
identified by CNCA according
to
its
lending
criteria.
TABLE 9
CNCA Regional Distribution of Real
and Potential
Region
Real
Center
Tensift
North-West
Center North
Center South
Oriental
South
33%
21%
15%
12%
10%
5%
3%
27%
13%
19%
17%
8%
3%
12%
100%
100%
Total
Source: Credit Agricole Bilan et
Annex 1 Table 9.
Potential
Perspective, October
The regions of Center and Tensift
benefitted most from CNCA
lending
are
1982
those which
(benefits are measured
according
to the number of
lending).
These two regions include
customers:
Customers
lenders and
not
the volume of
more than 50% of
the real
the five other regions share less than 50% of
the
customers.
The distribution of potential
considered as CNCA's objectives for
Center
will
lending,
remain the major
customers, which can be
the
future, shows that Region
beneficiary of the
followed by North West where CNCA
43
institution's
intends to quadruple
the number of its customers
Oriental,
despite the substantial
number of their
regions
(see Table 2
customers, will
(see Table 2
concern to shift
fringe of
regions
the rural
irrigated
and the arid
projected
South and
increase of the
remain among the
in Annex).
CNCA customers does not meet
in Annex).
less benefitting
The prospective distribution of
1981-1986 Development Plan's
the
development process away from the
areas and deeper
into the mountainous
zones.
4.5.3. Credit Immobilier et Hotelier CIH
CIH lends
to the housing and hotel
indicates the regional
sectors. Table 10
distribution of CIH lending for housing
construction from 1978 to 1984.
TABLE 10
Regional
Distribution of CIH Lending To Housing
From 1978 to 1984
Location
1978
1979
1980
1981
1982
Casablanca
Rabat
Fes
Marrakech
Oujda
Agadir
Tanger
39%
36%
13%
7%
5%
N.a.
N.a.
45%
24%
N.a.
N.a.
N.a.
N.a.
N.a.
45%
30%
N.a.
N.a.
N.a.
N.a.
N.a.
46%
21%
N.a.
N.a.
N.a.
N.a.
N.a.
42%
28%
12%
9%
N.a.
8%
N.a.
Total
100%
100%
00%
100%
100%
Source: CIH Yearly Reports
The figures mentioned
1983
45%
17%
9%
8%
10%
8%
3%
100%
1984
47%
N.a.
7%
11%
4%
6%
3%
100%
1978,79,81,82,83,84.
in CIH annual
predominance of Casablanca and to a
reports clearly show
lesser extent of Rabat.
two cities benefitted from more than two thirds of the
44
the
These
institution's lending to housing every year.
The remaining
third
is shared between the rest of the country's biggest cities
(Fes,
Marrakech, Agadir, and Tanger).
CIH's hotel
diversified
and
1 in Annex) were more
than its expenditures in housing. The review of these
expenditures from 1978
Marrakech
(see Table
expenditures
to
(33%), followed
1984 shows a clear predominance of
by Casablanca and Center region (29%),
then by Agadir and South region (25%).
minor
borrowers with 11
and 2%
Fes and Tanger are
respectively.
4.5.4. Conclusion on the empirical findings
Table
13 summarizes for each
of its financing service;
(lowest),
institution
its status;
and ranked from 1 (highest) to 3
the three regions that benefitted most of
investments expenditures. We recall
North West, and to
that
its
the regions of Center,
a lesser extent Tensift are those which most
concentrate economic activities. Although the
include
the nature
table does not
information on absolute amounts, relative proportion and
per capita share of investments,
it allows us to sketch a global
picture of the distribution patterns, and to summarize the
partial conclusions drawn for each
institution.
45
individual financial
TABLE 11
Ranking of Institutions
FSDR
Public
FDCL
Center
North West
Tensift
South
Oriental
Center North
Center South
3
1
2
FEC BNDE
3
1
CNCA
1
2
1
3
2
Mixed-9
CIH.H&
1
2
Int'l
WBf
2
1
1
3
2
1
CIH.T 7
3
2
3
3
2
3
By drawing a line after Tensift to separate developed from
lagging regions, we can see that FSDR, FDCL, and World Bank
regular operations have primarily funded
all others have invested
lagging regions,
where
in priority in lagging region. In the
following section we will explore some clues to the distribution
patterns.
The financing pattern of the three public institutions
analyzed varies depending on the nature of the service they
provide. FSDR and FDCLG which finance development projects by
means of subsidies and grants, to a varying degree both give the
priority to lagging regions. FEC whose role is to finance
municipal development projects by means of loans, concentrate its
' Mixed institutions are partly private, partly public. They
manage funds from diverse sources including World Bank lines of credit
CIH lending for housing.
7
CIH lending for tourism.
* World Bank regular operations.
46
activities in the
Center,
All
lending
but also
two most developed regions of North West and
in the less developed
the other
Moroccan financial
institutions and direct
their
Center North.
institutions analyzed are
activities
in priority
towards the more developed regions of the country.
The distribution of World Bank
expenditures varies depending on the
regular operations
investment sector.
evenly distributed between the regions for
sectors
(urban, education...),
of projects
They are
the so called social
and more concentrated
in the case
in the directly productive sectors where the pattern
is assimilated to the distribution of lending activities of the
Moroccan financial
institutions.
Two parameters seem to determine the financing pattern in terms
of spatial distribution:
--
The nature of the financing service:
--
The nature of the investment sector: social versus
directly
grants versus
loans,
productive sector.
Contrary to what might have been expected,
funds, i.e.,
agency,
public
is not
institutions, national
a main determinant of
the source of the
banks, international
the distribution pattern.
Actually the fact that grants, subsidies and expenditures in
the social sectors display such
than lending and expenditures
suggests
a different distribution pattern
in the directly productive sectors
the following observation:
of policy tools used, whenever
investments
is taken
Despite the complete variety
the financial rate of return on
into account as a main criterium, capital
47
flows primarily into developed regions.
The conclusions of this evaluation leads to elicit the
following questions:
Why does the Moroccan regional
little effect on the
program have so
development
investments and financial
flows patterns?
-- Were wrong policies followed?
to assume that regional
In other world, was it wrong
development could be achieved by
administrative decentralization, redistribution of public
financial
resources through new channels, and by giving
incentives to private investment
-- Or,
were the measures
in lagging regions?
adopted to
implement these policies
wrong? Why administrative deconcentration (delegation of
power, authority, responsibilities)
instead of
administrative decentralization (transfer of power,
authority..)? Why not undertake fiscal decentralization
instead of creating or strengthening new channels to
allocate financial public resources from the central
regional/local
level.
Could the public resources used
those foregone through tax exemptions)
from
the developed to
used
in programs aimed
to the
(or
to direct investment
the lagging regions have been better
at the generation of local
resources
for development?
-- What were
results of
the effects of each one of
the program?
In order to answer these questions
consider
these choices on the
the political
and economical
48
it
is necessary to
conditions of Morocco,
as
well
as
the theoretical and conceptual
development policies
from which
framework
of regional
the Moroccan experience draws.
49
5.REGIONAL DEVELOPMENT IN THIRD WORLD COUNTRIES: THEORIES AND
REALITIES.
5.1. Theoretical Background
The objective of this section is to sketch the assumptions
underlying neoclassical
location theories, identify
why these assumptions may not hold
reasons why
they do not hold
true
in general,
true particularly
the reasons
and the
in the context of
developing countries.
Regional
or access
differences in availability of production factors
to production factors and to markets are at
of interregional
the origin
disparities.
According to neoclassical economic
characterized by a scarcity of natural
theory, core regions are
resources and of labor,
while peripheral areas suffer from a scarcity of capital and
technology. The determinant conceptual element
returns will
be high
is that factor
in areas of scarcity and low in areas of
abundance. Consequently, core regions which are characterized
by a scarcity of natural
resources and of
labor should have a
high return on labor and natural resources, whereas peripheral
regions should have high return on capital
and technology.
The main assumptions underlying the theory are:
-- Complete mobility and homogeneity of production factors
(except physical
capital:
buildings,
-- Decreasing marginal returns;
50
land..),
it has been argued that
agglomeration economies might be offset by higher per capita
absorption costs, congestion costs, and communication
diseconomies (Richardson, 1969),
knowledge on the part of producers and buyers and
-- Perfect
complete predictability,
-- Inexhaustible entrepreneurship and
-- Fully developed
technical skills,
transportation network.
resources and labor
Under these assumptions, natural
flow from peripheral areas to core regions, while capital
reduce
it
and
flow from core regions to peripheral regions. The
technology will
process would
should
increase factor supply
in areas of scarcity and
in areas of abundance eventually leading to an
equalization of factor prices over space
(Richardsoni969).
5.2. General Limitations of Neoclassical
Location Theory.
It appears that not all production factors tend
spatial equilibrium of supply and demand.The tendency
towards
towards
spatial equilibrium is counteracted by:
-- Different degrees of factors mobility
-- Heterogeneity of factors
-- Increasing factor returns at
spatial distribution of external
Labor
economies and scale economies.
is not homogeneous, and
labor moves from
this migration
the core due to the unequal
though
in aggregate terms
low wage areas to high wage areas, in reality
is highly selective and
its effects often
lead to
further polarization rather than equalization. Migrants from
51
peripheral
to core areas usually come from the more mobile and
high wage earners).
productive population strata (the potential
As a result migration, which reduces aggregate
level
reduces the average wage
(as
increasing it
also
the periphery rather than
at
neoclassical
would
labor supply,
theory
Furthermore,
imply).
migration, because of the selective character mentioned above,
diminishes the production potential
Tolding F.
W.,
Capital
flows, too,
shown that capital
is
tend towards regional
do not
studies
(Stohr W.,
cost
and capital
reason for such a pattern
is
high)
cost
is
capital
is
(where capital
The main
low).
is the higher productivity of capital
in core regions due to a comparative advantage
external
(where
to core regions
relatively
1978) have
Tolding F.
areas
flows from peripheral
and capital
"abundant"
(Stohr
1978).
equilibrium. Empirical
"scarce"
areas
of peripheral
in scale and
economies that do not seem to be often offset by high
per capita absorption costs,
congestion costs or communication
diseconomies.
5.3.
Policy Implications
The implications in terms of policies are that the major
instruments of regional development
in market and mixed economies
aim to change these disequilibrating flows. Because
market
major
capital,
economies,
migration
is
outside of direct
policy tools have concentrated on
and on creating greater
52
in most
policy control,
inverting flows of
external
economies in
peripheral
areas
through public
infrastructure
investment.
experience draws from that stream of
The Moroccan
thought.
5.4. Specific Conditions in the Context of Developing Countries
We have already seen the general
limitations to complete mobility
and homogeneity of production factors, and decreasing marginal
returns. We will
now examine the reasons
why the remaining
assumptions do not hold true in the context of developing
countries.
These assumptions are:
-- Fully developed
transportation network,
-- Perfect knowledge
and predictability,
-- Inexhaustible entrepreneurship and
technical
skills.
In most developing countries, the configuration of transport
network
is an inheritance of colonial
was not
designed to achieve national development requirements,
but
instead
times. Transport network
to drain resources from the colony to the metropolis.
As, a result rather
than being a lattice covering
national
transport network
territory,
towards great port cities.
transport
and communication
In addition, after
investment
between major urban centers, and to a
regions and
transport
typically
is made
converges
independence,
in priority
lesser extent between core
(respective) peripheries. Very
infrastructure
the whole
little investment
is made to connect peripheral
each other. These investment patterns
do not facilitate a
mobility of production factors in favor of remote and
53
areas
lagging
in
to
areas.
Information which
location theory,
is a central assumption in neoclassical
is not evenly available either. The more remote
a region is, the less is known about its production potentials,
cost and
timing of operation, local customs, chemical and
physical properties of local material
remote a region is,
and so on. Also, the more
the less likely it is that relevant
information on investment opportunities and management decisions
will reach it.
This constitutes a critical
issue in developing countries where
political and economic conditions change rapidly and often
unpredictably. Ministries are reorganized, regulations are
changed, costs and availability of funds
fluctuate, relative
factor price vary suddenly... Relevant information about these
matters is not channeled in a democratic and systematic way, but
through personal contact, rumor and so on.
Thus,
whereas
information
is
vitally
needed because of the
rapidity and frequency of changing situations, the sources and
modes of information are unperiodic,
unpredictable,
and require
cultivation of sources and personal contacts. Getting information
as well
as solving problems requires intangible and delicate
negotiations which are conducted through personal, face-to-face
contacts, and
lead to a tremendous pressure towards spatial
concentration.
Finally, entrepreneurship and technical skills are not
inexhaustible and evenly available. Universities are often
located
in major centers. Managers and
multitude of obvious personal
cities.
reasons prefer
to get them to
Inducements
technicians for a
to
live
in major
less developed areas are
likely to be expensive because of the compensation necessary
make up for
the advantages given up,
and not
so successful
to
in
this sense that it may attract only second raters.
None of
hold
the assumptions underlying classical
location theory
in the context of developing countries. Factor flows do not
follow
the expected pattern and do not
lead to an equalization of
factor prices overtime. Actually because of the uncertainties
attached
to the investment decision, higher return is required to
justify investment
in underdeveloped regions. These uncertainties
add to the certainty of having poorer communications, slower
deliveries,
incompetence, absence of supporting services...
uncertainties add to
costs. Both
the risks and
lead towards spatial
developed regions.
There ought
the certainties add
The
to the
concentration, and location
in
to be large and clear advantage to
justify location outside of developed centers (Alonso W.
55
1975)
5.5. Business and Tax Incentivess Empirical Findings
This section is an attempt to synthesize the main criticisms
that have been formulated against business and tax incentives
(tax exemption or alleviation) as a tool for
local or regional
development, as well as to investigate the major trends in terms
of alternative policies. The following argument draws from the
U.S. literature on the topic; however, the points retained are
those relevant to
the context of Third World countries.
There are three main sets of criticism regarding Business and Tax
incentives:
--
They have little effect on the location decision of
firms.
--They have a big opportunity cost
in terms of foregone tax
revenues and alternative use of these revenues by the public
sector.
--They have little impact on employment and growth.
5.5.1. Effect of tax incentives on the location decision of
firms.
Many surveys conducted on firms either expanding their
facilities or moving to a new location show that state and local
taxes or the availability of subsidized credits are not
considered as important factors in the location decision process
(Harrison B. & Kanter S.1978).
In most cases access to markets,
labor costs, and the availability of physical space were the
56
paramount
location consideration
Different sets of
these
interviews showed that
incentives did not
Tax
for
that would
not
incentives, therefore functioned as
the companies more than anything else.
incentives are ineffective precisely because state and
taxes are, themselves, relatively unimportant
local
1978).
the availability of
induce business behavior
have occurred otherwise. The
a windfall
(Harrison B. Kanter S.
determinants (Vaughan J.R.
location
1980).
The reason why they have such
constitute a cost
as
side policy and
little
effect
they do not
is
that
affect
Since uncertainty is usually greater with respect
they
revenues.
to expected
revenues than costs, exclusively cost side policies are
insufficient to
taken place in
the
induce investment
activity that would not have
the absence of the incentive. Furthermore, given
relative scale of the base against
applied,
is% How
their effect on the cost
important are state and
which the
side is
local
limited.
then the application of even a
such
a small base is unlikely to
most
firms.
In
the empirical
are consistently estimated at
added
state and
to
savings to
local taxes
from 0.5 to 3 percent of value
and from 2 to 5 percent of sales
Opportunity cost of Tax
is very
large rate of subsidy
(Harrison B.
1978).
5.5.2.
The question
If this ratio
yield significant
literature,
are
taxes as a percentage of
the typical firm's cost of doing business?
small,
incentives
incentives.
57
& Kanter
S.
each
Though tax
incentives have very
individual
firm's cost of doing business, and
location decisions,
terms a heavy cost
Tax
little effect on reducing
they nevertheless represent
for
in
influencing
in aggregate
the state.
incentives force
the state to forego the
which would have been collected
tax revenue
in the absence of
the policy.
These foregone revenues have other productive uses, and
goods and services which
purchased or provided
it
is the
those foregone revenues could have
that constitute the real
of the incentive. Moreover as these foregone
opportunity cost
tax revenues could
have financed new state spending having a positive multiplier
effect which
the tax
is also foregone,
incentives
then the net multiplier effect of
is negative.
5.5.3. Impact on employment and growth.
Various statistical
time, and
tests conducted at different periods of
in different places have
conclusions
(all quoted
led to
the following
in Harrison B. Kanter
-- There was no significant
S.
1978):
relationship between growth
manufacturing employment and per capita state and
collections among all
-- There was no
local
from
--
tax
the states (Bloom 1955).
significant relationship between state and
taxes and employment growth
1947 to
local
in
1953
(Thompson and
in the Michigan economy
Mattila 1959).
The rank ordering of eleven states
the burden of state and
local
58
in 1971
according to
taxation on ten specific
industries showed
that
there was
between this rank ordering
5.5.4. Trends
by small
correlation
and the state unemployment
rates.
in terms of alternative policies
Business and
generation.
no systematic
In
firms
tax
incentives aim at growth and
the U.S.,
two third of all
(those with
job
new jobs are generated
twenty and fewer
employees).
It
is the
smaller
corporations despite their higher
failure rates,
that are
seeking
out most
the large ones
are
new opportunities, while
mainly redistributing
their
operations
(D.Birch 1979).
body of literature suggests
that small
businesses are not only
the major
source of new
technical
innovation and tend
jobs, but are also
a major
A growing
source of
to be quite profitable (Daniels B.
1980).
Recent
economic
evaluations of government intervention
development stress
the following points:
limited
importance of large business
second
the limited ability of capital
third the
and fourth
efforts
events
to
must attempt
ensure economic
enterprises;
ability of states and
local
development
growth
in a context of national
and
1980).
thought out economic development
policies
to build on the comparative economic advantage of a
region to stimulate a diverse growing national
policies that
growth;
small
(Daniels B.
Consequently well
the
to
to encourage economic
international
first
in the development process;
limited availability of capital
the limited
to create
attempt
economy. Public
to stimulate economic growth should
59
target
small
businesses because of
capacity
their profitability and their
to generate jobs and to
innovate.
large
Public policies should
not exclusively focus on capital; many other market factors
such as
land,
markets for
labor, enerqy,
management,
the product-- must
be made
a business before that capital
B.
can
--
raw materials, and
appropriately available
improve
its viability
to
(Daniels
1980).
It
is widely recognized however,
problems
involved
sector are small,
difficult
to
experience
numbers.
are at
independent,
identify and
in identifying
It
is precisely
the origin of
difficult
there are many
businesses. Firms in
and volatile.
They are the most
to work with, and
there
them and assisting
them
their
dynamism and
their big
is no
in large
their
generation power,
these problems are not thought
in terms of policy recommendation is
approaches;
vitality which
that make them a
to rely on existing networks
to be unsolvable. The
to adopt
of
indirect
institutions rather
than building
large new ones
institutional
capacity within the communities themselves
on their
that
partner for the development administrator.
However
trend
in helping small
that
own behalf rather
(Daniels B.
than
to be
1980);
"acted
to
on";
build ongoing
to act
to promote
the
planning and financing of community based enterprises -- owned
wholly by
local
government or
controlled private business
and S.
Kanter
in partnership with
socially
(Barry Stein quoted by B.
1976).
60
Harrison
6. CONCLUSIDN
The ultimate objective of the Moroccan regional
program was to promote regional
flows
in favor
achieve
of
peripheral
incentives to
areas;
by changing capital
lagging regions. The policy tools used to
this goal were public
infrastructure;
development
development
investment
in health,
education and
induce private investment
in
and administrative deconcentration.
These policy tools address some of the variables identified
as being critical
to
regional
development
in developing
countries. These variables were agglomeration and external
economies;
transport network;
managerial
skills;
entrepreneurship and
and eventually
technical and
information, perfect
knowledge
and predictability.
Public
investment
improve transport
in
infrastructure has probably helped
to
communications within and between regions;
it
has probably helped to create
external
in some areas higher
economies, but none of
levels of
the peripheral areas of Morocco
can yet be considered as competitive in that regard as the two
developed regions of Center
Although public
and North-West.
investment
in education and
to make support staff skills available
entrepreneurship and high
level
training helped
locally, the problems of
managerial
and technical skills
can hardly be overcome because of the personal advantages
associated
with
life in big cities.
Administrative deconcentration
61
is supposed to
address the
issue of
information, knowledge and
predictability. And actually
an effective decentralization of administrative power and
services, by
transferring the power game at
even without changing
lessening of spatial
adopted
its rules-- would
centralized-- cannot,
--
the policy tool
-- delegation of
and decision making remain highly
in any case, achieve that goal.
We have already seen the
limited ability of tax
to generate growth and employment, and
tool
level
to a substantial
is deconcentration or
responsibilities whereas power
peripheral
lead
concentration. However
in Morocco, which
the local
areas. Besides the
to direct
limitations
incentives
investment to
inherent
to the policy
itself, centralization of administrative power, because
implies centralization of relevant
decision making and management,
decisions of firms.
developed
It pushes
information for business
strongly affects the
location
towards business location in
regions and hampers all
induce private investment in
it
the measures undertaken
to
lagging regions.
As we can see from the above, the analysis of the Moroccan
experience rises a set of different but
interlinked
issues. The
policy objective which was to promote regional development by
attracting external
capital
policy tools. These
latter were not aimed
growth potentialities of
to
the different
at developing the
the regions themselves. Such an
objective would have required
the national
the regions, framed the choice of
the definition in
the framework of
development strategy, of differentiated programs for
regions, based on each region's potentialities and
62
comparative advantages. The policy
attracting
fulfill
external capital
within
capital.
into
tools were just
the regions and
aimed at
trying
the regions the requirements of that
to
foreign
The whole battery of efforts was seriously hampered by
the excessive centralization of the Moroccan administrative
apparatus.
Actually the policy
extent,
tools adopted could,
address the critical variables for
in Third World Countries. They could
lagging regions, but
When
left
to
highest
a certain
regional
improve
development
the conditions of
they can hardly overcome capital
its own initiative, capital
return is highest.
to
And in most cases,
flow trend.
flows to where the
return on investments
is
in core regions.
In the current context of national
(debt crisis, austerity programs),
and
international events
which require a most efficient
utilization of scarce public and private resources, using public
resources
to try without much success to divert capital from the
areas of high return to peripheral
developing countries can afford
However regional
disparities are still
less than social
The following
a critical
is still a priority
and political
section sketches
alternative regional
luxury that few
anymore.
many LDC's and regional development
stake is no
regions is a
issue in
whose
stability.
the elements of an
development program, and presents the
rationale behind the policy recommendations.
63
7. RECOMMENDATIONS
Regional development policies should aim at strengthening
the local,
economical,
institutional and financial basis for
development. These objectives involve strengthening local
governments; retaining local capital by involving local elites in
the development process; assisting small businesses.
--
Strengthening
local governments
The goal of promoting
lagging regions economies cannot be
achieved without the support of strong local governments.
They are those who are better
informed as to the local
conditions, potentials and needs of the regions. Their
contributions to the programs definition and implementation
is crucial.
Strengthening
local governments
involves
decentralizing
administrative power and services. It implies giving to
local governments the prerogative to raise (through a fiscal
decentralization) and to generate (through public or mixed
economic projects) revenues at the local
level.
It also
implies that local governments have to be endowed with the
managerial
and technical skills
necessary for
local programs
definition implementation and management.
--
Retaining local capital
and involving local elites in the
development process
Local elites often have a tendency to reinvest their profits
and to consume outside their regions when these latter are
underdeveloped. Involving these elites in the development
64
process would change their
investment and consumption
patterns, and would make of
them the
development process.
long run they would constitute
In the
the necessary counterweight
local
motor
to centralizing
of the
trends and they
increase local
would constitute a coalition to help
autonomy.
--
businesses
Assisting small
Small
businesses
sector)
(in the formal as well
are known for being
innovative,
they ought
generators. As such
development policies. However
and
job and growth
they are also known for being
large failure rates.
are necessary to better
of operation, their problems,
informal
to be the first target of
independent, volatile, and for having
Extensive studies
in the
as
know their modes
their viability, their
linkages and so on.
Choices will have to be made between blind assistance on a
large scale, or selective assistance in the framework of
national
Careful
industrial
development strategies.
attention should be given to
assistance.
In order to
to
the chances of success,
increase
existing networks have
ongoing
institutional
finance programs for
best
the modalities of
reduce the costs of the programs and
local
governments and
to be the basis on which
capacity to define,
implement, and
assisting small businesses. They are
located to assess the needs as well as
implement, monitor
to build
to define,
the performances, and when necessary,
65
adjust
the programs.
66
-4
0
0
Is
cl.
Ln
(U
'0
CO*
(D
n
I.
0.
:D
-nj
4
3
191,400
1,095,300
12%
27%
8%
3%
13%
17%
100%.
5
1
6
7
134,500
298,000
91,200
30,300
143,600
South
Center
South Center
Oriental
Tensift
North Center
TOTAL
19%
%
2
Rank
206,300
PC
Northwest
Region
12,200
116,800
35,000
16,800
74,400
41,800
350,600
53,300
RC
2
4
3
7
1
5
6
Rank
100%
21%
12%
15%
3%
33%
10%
5%
%
32%
52%
22%
26%
9%
39%
38%
55%
% RC/PC
-
3n
0
C+
Cl-
-o
-0.
ga~
a.-+u m
wD
ocrorE
ID
0*M
CL
0-
c+
C,
Z
z
D
o
03
cr
103
0
(I
0
240,153
284,070
16,703
323,069
106,646
970,641
Apadir & South
Casablarca
& Center
Tanner & Ntrth
MrraiMch
Fes & Oriental
lm
Amwnt
MTAL
29,080
Anomt
100% 118,850
29% 60,795
2% 7,270
33% 20,470
11% 1,245
25%
%
1978
100%
I
51%
6%
17%
24%
%
97,325
11,350
32,370
27,290
26,315
Amnpt
1979
54,335
Awnt
30%
I
100% 182,013 100%
12% 28,810 16%
33% 93,245 51%
28%
5,623 3%
27%
_
1980
243,770
61,700
2,600
75,370
20,100
84,000
Amuount
1981
12,660
1,200
4 810
38,050
7,799
Auit
100% 64,519
25%
1%
31%
82
34%
X
1982
22,841
Annemt
100% 119,q47
20% 39,810
2% 4,459
72 48,412
59%
4,425
12%
Z
10"-
9,913
6R,945
1,174
48,34?
15,783
A.7n
100% 144,207
33%
4%
40
4?
147ft
'
14I%
1T
10"l
7
147
4R"
11IT
3I
0.
:3
0.
MD
0 0 r
W
0-4
0_
c)
0
0
I'
D
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