In its annual report for the year 2020, submitted to King Mohammed VI, the Competition Council criticized the Industrial Acceleration Plan, in particular, the “industrial compensation” mechanism which raises a few remarks regarding its competitive neutrality and its ability to induce moral hazard problems.
As part of the analysis of the Moroccan public aid system for businesses, the Competition Council noted that, in addition to the interventions programmed and planned before the health crisis, immediate and vigorous interventions took place upon confirmation of the first contamination cases.
In this wake, aid was granted from off-budget funds to public enterprises and to national or foreign private enterprises (…) recalls the Council chaired by Ahmed Rahhou, highlighting the risks of harm to competition.
“The deployment of these transfers generates risks of harm to competition, as suggested by the specific case of processing industries,” says the report, stressing that these have historically experienced significant market imperfections, in particular. in particular, the observation of increasing returns, as well as an inertia of adjustments due to a low qualification of the workforce and a high cost of raw materials.
The poor relatives of the Industrial Acceleration Plan
These imperfections justified the implementation of several industrial strategies, including the Industrial Acceleration Plan (PAI) 2014-2020, recalls the report, specifying that the public incentives backed by this strategy are financed by the Industrial Development Fund and investments (FDII) which provides for installation subsidies, with a view to attracting world industrial leaders, able to bring together a set of national suppliers, in particular SMEs and very small businesses.
They will be able to integrate these “industrial ecosystems” by extending their activities or within the framework of a start-up or a subsidiary, or even a merger-acquisition.
Built on the principle of “industrial compensation”, this strategy is based on public support for the initial fixed costs considered high in the context of new investments, leading to a drop in marginal reproduction costs, in return for an integration rate. predefined local suppliers and a commitment to employ local labor.
Nevertheless, this incentive mechanism raises some remarks about its competitive neutrality and its capacity to induce moral hazard problems.
The limits of industrial compensation
The first remark raised in this sense by the experts of the Competition Council is in relation to the public assumption of responsibility for part of the investment program is based on “rules of preference” to determine the companies eligible for this aid. or to fix the extent of these, which alters their objectivity.
Hence the interest in taking into account competition law before setting the eligibility conditions, says the report.
The second remark concerns “offset contracts”, which represent the apparent form of industrial compensation, are based on a dual conception. On the one hand, by associating the incentives granted with contractual commitments, which guarantees them a certain legal certainty, while being akin to “structured rules of reason”. However, this transparency risks being hampered by a discriminatory choice of companies to be included in ecosystems, by excluding competing companies although they are eligible.
And on the other hand, in the context of the adjudication of a public order for the benefit of an international principal, where competition rules are supposed to apply through the Moroccan regulation of public contracts. , as well as ad hoc regulations subject to international competition.
Consequently, while being a lever to strengthen the presence of Moroccan companies in global value chains, these contracts should make the conditions of “effective competition” endogenous at the national and international level.
The third and final remark relates to access to incentives. This should allow all local businesses, especially SMEs and VSEs, to claim the same opportunities to modernize their productive processes with a view to integrating ecosystems that have been established or are in the process of being formed, which underlies a intrinsic harmonization of incentives.