An economic Saudi-Moroccan pact drives mutual benefits

The largest deal of its kind between two Arab countries on different continents focuses on collaboration and investment in cars, batteries, energy, and phosphates. It is all part of a bigger vision.

Morocco and Saudi Arabia have forged close links over recent years and know they could enjoy a mutually beneficial trade relationship
Axel Rangel Garcia
Morocco and Saudi Arabia have forged close links over recent years and know they could enjoy a mutually beneficial trade relationship

An economic Saudi-Moroccan pact drives mutual benefits

Saudi Arabia and Morocco are forging deeper economic ties after agreeing a multi-billion dollar cooperation pact in some key industrial areas.

It is one of its largest such transcontinental deals of its kind between Arab and African countries, and the ambition is broad.

The pair have shaken hands on collaborative work in areas such as phosphates, renewable energy, and electric cars and their batteries.

Proponents said shared expertise and increased bilateral trade between the two kingdoms would help power technological advances to the benefit of both, diversifying investments and sources of income.

Other Arab countries—such as the United Arab Emirates and Egypt—could join at a later stage, sources told Al Majalla.

Long-term strategies

The agreement is designed to power economic growth and social advancement in-line with Saudi Arabia’s Vision 2030 policies and Morocco’s plan to double its industrial exports via its New Development Model.

Last month, the Saudi Council of Ministers—chaired by King Salman bin Abdulaziz Al Saud—approved a memorandum of understanding between the Saudi Ministry of Industry and Mineral Resources and the Moroccan Ministry of Energy Transition and Sustainable Development.

It was struck on the sidelines of the International Mining Conference, hosted by Riyadh, during which 79 countries and 13 international organisations discussed the production of strategic minerals from the Atlantic Ocean to Central Asia.

Days later, Rabat hosted the 28th General Assembly of the Arab Organisation for Industrial Development and Mining in early June, letting ministers discuss ways to integrate their minerals industries.

Ministerial visits add focus

Saudi trade minister Bandar Alkhorayef said the Kingdom was “betting on industry to diversify the economy by formulating strategies targeting 12 sectors”, including those related to sustainability, security, and natural resources.

He visited industrial centres in Tangier and Casablanca that help power Morocco’s automobile and phosphates sectors. The Saudi-Moroccan cooperation will incorporate phosphate fertilisers, as well as the medical, military, technological, and energy sectors.

A worker supervises the assembly of vehicle parts on a production line at the Renault factory, on the outskirts of Tangier, Morocco, April 29, 2024.

The General Confederation of Moroccan Enterprises cited “numerous opportunities for cooperation... in innovative and strategic projects”.

The two countries need a permanent maritime link to connect the ports of Jeddah and Tangier to integrate their industrial projects and stimulate trade, a long-standing demand of the Saudi Moroccan Business Council.

Both sides agreed to “conduct in-depth studies” to identify joint industrial projects that could benefit from the technology, scientific research, or expertise.

Driving vehicle production

Cooperation in the automotive industry is a focus of ambition. Saudi Arabia wants to be one of the world’s top manufacturers and exporters of electric cars by 2030, producing 500,000 electric vehicles (EVs) annually by the end of the decade.

It already has its first EV brand: Ceer. This was unveiled by Saudi Crown Prince Mohammed bin Salman in November 2022. A manufacturing facility in Jeddah’s King Abdullah Economic City (KAEC) is under construction.

Once built, it will be the largest auto industrial facility in the Middle East, at over one million square metres.

Saudi Arabia wants to be one of the world's top manufacturers and exporters of electric cars by 2030, making 500,000 electric vehicles (EVs) annually

Ceer is a joint venture between the Saudi Public Investment Fund (PIF) and Taiwan's tech giant Foxconn. Last week, it signed a $2.2bn deal with South Korea's Hyundai for the latter to supply advanced electric vehicle drive systems. In parallel, PIF plans to develop an EV battery factory by 2028.

The vehicle manufacturing industry, including trailers and semi-trailers, has seen significant growth in recent years. Global automotive manufacturing revenues were around $2.52tn in 2023, with more than 72 million vehicles produced. Revenue from manufacturing other transport equipment was also up by about 8% annually.

Domestic demand will account for some of the custom. Total vehicle sales in Saudi Arabia were among the highest in the region in 2022.

Shifting gear up to EVs

Alkhorayef's tour of Tangier's car industry included one of Morocco's success stories: TE Connectivity, which specialises in manufacturing electrical parts and devices.

Referring to Saudi plans, he said: "The Kingdom is in the process of localising several qualitative industries, including the automotive industry, benefiting from the outstanding experiences in the automotive industry both regionally and globally, including the Moroccan experience, which is first in the Arab world in car production."

A Lucid sedan. Saudi Arabia's sovereign wealth fund owns a majority stake in the US-based manufacturer.

It coincided with the signing of a $13bn investment agreement between the Moroccan government and the Sino-German Gotion High-Tech Group.

As part of this, a large factory will be built in Kenitra, north of Rabat, to produce EV batteries and green hydrogen storage containers for car manufacturers worldwide. Gotion intends to increase its investment to $66bn by 2028, as demand for EVs grows.

Morocco produced 750,000 vehicles last year and plans to increase that to one million by 2025, transitioning from traditional combustion engines to EVs and hybrids.

Prospects of partnership

The Saudi-Moroccan partnership aims to make the Middle East an EV manufacturing hub by sharing capabilities, expertise, and experience.

It comes at a critical time, with the industry seemingly at a crossroads, with battery electric vehicles (BEVs), hybrid electric vehicles (HEVs), and hydrogen vehicles (HVs) all presenting options. The technology can cross sector divides, too, with uses in the aviation, maritime, and rail industries.

Analysts say the focus makes sense, given that the wider Arab region is rich in the natural resources needed for EV and battery production.

Beyond industry-specific initiatives, ties between Saudi Arabia and Morocco could set a precedent for creating a win-win economic relationship by working cooperatively to add value to the output of extractive industries, rather than simply exporting raw materials. Phosphates and fertilisers are one such area in which the kingdoms seek to do this.

Saudi-Morocco ties could set a precedent for creating a win-win trade relationship by working cooperatively to add value to extractive industries

Phosphates, a chemical that contains the mineral phosphorus, have a range of uses in the chemical industries, with applications in mining, medicine, and food, to name but a few. They are even used in matchsticks.

Phosphates' most well-known use is in various fertilisers to increase agricultural yields, enrich the soil, and improve food production. Some rare minerals and radioactive elements like uranium (for nuclear power) can be extracted using phosphates.

Playing to your strengths

The Middle East and North Africa hold more than 80% of the world's phosphate reserves, including 50 billion tonnes in Morocco, the largest exporter by far. Jordan, Saudi Arabia, Egypt, and Tunisia all produce smaller amounts.

Andrei Cojocaru
Morocco's phosphate resources are a key ingredient in the fertilisers that can help increase food production around the world.

The value of the raw phosphate market was estimated at $80bn in 2023, during which demand for phosphate fertilisers only increased in importance, with the ongoing Russia-Ukraine war affecting markets.

There have been new phosphate discoveries in Saudi Arabia, which already had 7.3bn tonnes. The Kingdom is now the second largest source of phosphates behind Morocco, contributing to Saudi Arabia's overall mineral wealth, which has been valued at $2.5tn.

Such numbers make the Moroccan-Saudi cooperation agreement a big talking point, not only in the relevant industries, but more widely, as they work together to transform the region's place in some vital global sectors.

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