360° Analysis

Tanger Med: Renault’s Investment in Morocco


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July 06, 2014 18:51 EDT

Amid migrant issues, Renault’s investment in Tangier will benefit the company as well as the Moroccan economy.

According to the United Nations World Investment Report, Morocco is the top recipient of foreign direct investment (FDI) in North Africa, with France as the leading contributor. Morocco has become a coveted investment destination in the region due to its political stability, steady economic growth, strategic geographic position and thriving ports.

Free Trade Zone

The Moroccan government started to develop the Tanger Med port in the early 2000s, designating it as the centerpiece for future FDI in the country. Despite its advantageous location, northern Morocco was relatively underdeveloped in terms of infrastructure, and the project was designed to fill this gap. The government envisions the port as becoming the largest in Africa. Located less than ten miles from Europe, it is already one of the busiest ports in the African continent. Authorities expect it to have an 8 million container capacity by 2017.

In tandem with the port, the government is also seeking to further develop its Free Trade Zone in the region. The Tangier Exportation Free Zone is a protected free trade environment, where companies from around the world can operate tax-free. It functions as an industrial platform that offers numerous logistical benefits. Covering 345 hectares of land at the junction of the biggest maritime route in the world, several multinational companies have invested in this zone. Renault has recently poured in $1.5 billion.

Renault’s interests in Morocco are primarily formed by its desire to consolidate control of the Moroccan automotive market, and by the unique opportunities afforded to it by operating out of Tangier. Renault is currently the dominant company in the Moroccan car market. The Dacia and Renault brands, both owned and operated by Renault, account for 20% and 17% of the market, respectively. Renault already operates a plant in Casablanca, and the increased output out of this new plant will allow the company to maintain its market share as the Moroccan automotive industry grows.

However, this plant serves a far greater purpose for Renault than simply maintaining control of the Moroccan market. The Tangier industrial zone offers a number of significant benefits for industrial operations. First and foremost, Renault’s plant is located very close to the Tanger Med port, allowing for easy and efficient shipment of goods. This port is situated in a key geostrategic location, at the intersection between Africa and Europe.

Renault plans to leverage the location of this port, as it will ship to Europe, Turkey, Africa and South America from Tangier. Furthermore, the port has developed a number of logistics and post-processing services dedicated to the automotive industry, which add greater value to Renault’s operations in Tangier.

Moroccan Economy

The Renault plant is also of great importance to Morocco’s interests in relation to their overall economic standing, and the role that Tanger Med is designed to play in their economy moving forward.

This dramatic increase in Moroccan production is easy to explain. Actu-Eco reports that automobile factory workers in France are paid an average of $40.72 per hour. In Morocco, salaries for the same work are as low as $6.10 per hour. The Renault plant alone has created over 6,000 direct jobs and 30,000 indirect jobs.

The development of the port has not been without problems. Labor strikes slowed the construction process, and the global economic crisis served to delay the expansion of projects in the region. Morocco’s economy was also negatively affected through the decreased levels of trade with France and other European Union countries, which resulted from the poor performance of these developed economies throughout and in the aftermath of the financial crisis.

The presence of such a well-known European brand like Renault has helped boost the image of the Tanger Med area as a legitimate destination for foreign investment. Renault was one of the first companies to enter the space and has been very successful since establishing its operations. In 2013, Renault experienced an 81% increase in the number of vehicles transported through the Tanger Med port. The presence of a successful Renault operation signals that the region can facilitate and catalyze successful business. This serves to attract even more FDI to the country. As such, it is essential for Morocco to support the continued success of the Renault plant.

The win-win nature of this relationship has meant that over the past three years, the French automobile giant has moved much of its operations out of Europe and into Morocco. According to the Committee of French Automobile Manufacturers, Renault produced over 100,000 vehicles at its Tangier factory in 2013 alone. That is 485 vehicles per day, roughly twice the number of cars built there in 2012.

The French news corporation Actu-Eco claims that Renault will continue to increase production at the factory, in hopes of eventually producing 400,000 vehicles a year. Not incidentally, the Renault stock price has performed remarkably in the past two years, far outpacing the CAC 40. The French benchmark has risen by 20%, while the carmaker’s stock (RNO.PA) has grown 60%.

This dramatic increase in Moroccan production is easy to explain. Actu-Eco reports that automobile factory workers in France are paid an average of $40.72 per hour. In Morocco, salaries for the same work are as low as $6.10 per hour. The Renault plant alone has created over 6,000 direct jobs and 30,000 indirect jobs, according to Tanger Automotive City. A recent article in El Pais claims that migrant workers are flooding into Tangier from all over Morocco and the rest of Africa.

Challenges for Tangier

Economic development has been accompanied by a sharp rise in the population of Tangier, which has doubled over the past 20 years and now numbers more than 1 million inhabitants. This has led to a number of complications. While many come to the city for employment, many others see the ports as a crossing point into Europe. A good number of migrants are without documents or economic means, and are forced to undertake prolonged stays in the city. Some neighborhoods have been transformed into multicultural refuges, resulting in growing friction with the police.

Moroccan authorities, eager to focus on the economic development of the region, are addressing these problems. The governor of Tangier, Mohammed Yaakoubi, has recognized the need to meet the challenges arising from the demographic boom. In November 2013, the government said an “exceptional operation” would take place in the new year to sort out the status of the tens of thousands of sub-Saharan Africans residing illegally in Morocco. The government had promised to revise its immigration policy in response to concerns expressed by King Mohammed VI about the conditions of migrants in the country.

As long as international companies continue to be drawn to the region, so too will the many workers who will come to fill those factories. As the port continues to see an increase in traffic for Europe, more and more individuals will seek to cross those crucial ten miles. Authorities need to address these issues in tandem.

*[This article was prepared by Ethnographic Edge in collaboration with the Research Institute of Geopolitics and Geo-Economics (IRGG) of the ESCA School of Management, Casablanca, using web intelligence provided by Recorded Future. The article was published by Fair Observer in partnership with Ethnographic Edge.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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