Morocco: Tourism Policy Backfires

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Kasbah Morocco Tourism
The village of old Kasbah in the Sahara desert which is built on the slope to a cliff. Some of the popular movies including Lawrence of Arabia, Kingdom of Heaven, Alexander and Prince of Persia were filmed here. Despite Morocco’s Vision 2010 tourism strategy making steady progress, credit crisis has hit the market badly. Photo-Alexander Cahlenstein

Morocco’s tourism policy, aimed at making the kingdom a hotspot for rich European tourists, has left its cash-strapped banks with little funds to provide loans to homebuyers and companies.

Morocco had set off on an ambitious program to attract tourists from all over the world and emulate the success of Dubai. Morocco’s Vision 2010 tourism strategy was focused on doubling the number of visitor beds to 230,000 by 2010. The kingdom had made steady progress, with half of the target achieved by 2008, but the credit crisis hit the market hardly.

Financing for holiday resorts and other projects in the tourism and hospitality industry was made easier to encourage investment in this sector. However, the global financial crisis left several of the builders bankrupt and struggling to repay their debts. As a result, loans to homebuyers and companies grew at the slowest pace in a decade last year.  The hapless situation forced the central bank to allow banks to reduce reserves to improve money circulation in the economy.

According to Gabriel Matar, the head of Middle East and North Africa hotels at Jones Lang LaSalle, lending for development surged in 2007, rising to an estimated USD 2.1 billion. As most of the debt would mature this year, higher property sales at bargain prices are expected. Companies are also expected to struggle to pay off or restructure their debts. Moroccan banks are currently calculating their overexposure to commercial real estate and would then develop an action plan to recover dues from these projects.

In recent years, mortgage growth has slowed as property developers are in a weak financial position and have failed to win the trust of financial institutions. The stalled projects are seen too big to be completed by Moroccan players, but foreign developers have already exited the kingdom’s market. However, some projects like Taghazout, which include a hotel, villas, polo club and a beach club, are being revived as the government aims to double tourists by 2020.

The Moroccan government remains confident about the future of tourism industry in the kingdom. In 2011, 9.3 million tourists, around 83 per cent of which were from Europe, visited Morocco. The developers also believe that this is a cyclical impact due to crisis in the euro-zone but the fundamentals remain strong for growth in the sector.





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