87 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE Unlocking Morocco’s real estate potential through collective investment vehicles Alexander S. Damle Morocco ranks in the top 10 of the most developed countries in Africa yet continues to struggle with issues of savings mobilization and general GDP growth. This article analyzes Morocco’s 2016 implementation of organismes de placement collectif immobilier (real estate collective investment organizations) and their role in the country’s economic growth. After discussing these organizations across a variety of dimensions, strategies are proposed to mitigate risks facing such instruments in the Moroccan landscape. Introduction In 2016, the government of Morocco implemented new investment vehicles, known as organismes de placement collectif immobilier (OPCIs) (real estate collective investment organizations) (REITs to drive…, 2016). The OPCIs are a tax structure similar to real estate investment trusts (REITs) in the United States. These structures own, and in many cases operate, various forms of real estate that generate income through rent charged to tenants and property sales (M. Price, personal communication, November 17, 2023). The creation of OPCIs came about, in part, as means of attracting foreign investment for commercial real estate and economic development and of offering a new asset class to both domestic and foreign investors. The real estate sector in Morocco, as of 2016, comprised 38.6% of total foreign direct investments (REITs to drive…, 2016). Additionally, many commercial real estate assets sit on the balance sheets of companies in the country and are worth around 15% of GDP. Therefore, the main motivations behind Morocco passing legislation to implement OPCIs were to generate income on these otherwise static balance sheet assets and to give institutional investors, such as pension funds and insurance companies, an income-generating investment secured by real estate (Morocco’s real estate..., 2018). As a result, individuals could benefit indirectly from the institutions trading on their behalf. This article outlines the government’s initiatives for OPCIs, assesses challenges faced by these investment vehicles, and offers paths for the government and official bodies to address the issues with these investment vehicles. History of the Moroccan financial system The role of OPCIs in Morocco’s modern financial system can be contextualized in terms of Morocco’s economic evolution over the past few decades, the economic issues that the country has faced as a whole, and the ways the government approaches solving issues have shifted as a result. It is helpful to consider the conditions that existed in the years following Morocco’s independence from France in 1956. At the time, policies pushed for import substitution industrialization, which caused mining and manufacturing industries to suffer from plant inefficiencies and overstaffing. Moreover, a focus on agricultural self-reliance led Morocco to increase its production of agricultural goods for export. Unfortunately, the 1970s brought about global economic shocks, which reduced the demand for Moroccan exports, while weather-related shocks severely impacted agricultural production, a sector that contributed to over 20% of the country’s GDP. As a result, navigating economic changes in the 1970s proved an arduous endeavor for Morocco. During this time, the governmental budget deficit increased from 3% at the start of the 1970s to a staggering 14% at the start of the 1980s. Accompanying this growth in deficits was a large increase in the external debt (money owed to other countries) as a percentage of GDP, ballooning from 19.6% of GDP in 1970 to 51.6% in 1980. One factor that permeated the issues arising during this time appeared to be a rigid financial system (narrow bond and equity markets), which also contributed to limited capital use and savings by individuals (Eken et al., 1995). Issues of limited savings and economic rigidity are essential to a discussion of the relevance doi:10.18275/pbe-v042-013
RkJQdWJsaXNoZXIy MTA0OTQ5OA==