Elections, Vote Spread and District Representation
The post was going to be about yet another (boring) summary of parliamentary politics, supplemented perhaps with equally boring statistics about why opposition parties find it so though to get a majority, regardless of institutional motives. My assumption about the whole thing in Moroccan politics is that institutional barriers – corruption, gerrymandering the historical tampering of the Ministry of Interior in each and every election up to, say 2002, are secondary to statistical realities.
First off, consider the number of invalidated ballots between 1963 and 2011, both in absolute terms and relative to valid ballots. It went from 3.67% in 1963, to 24.4% in 2011. The last Tangier By-election produced a little over 26% of invalidated ballots. Nonetheless, I for one would buy into the ‘nihilist’ viewpoint on turnout and invalidated ballots: by every measure of vote dispersion, these have proven to be potential vote winners, ‘King-makers’ as a matter of fact.
Multipartism hurts strong majorities: between 1997 and 2007, spread votes (the percentage of invalidated ballots relative to votes’ dispersion normalised to the number of competing parties) increased significantly, and could have been higher if more political parties participated in the 2011 Elections.
Let me explain: in all the ballot systems the Moroccan elections tried over the past half a century, the common element was for a candidate (or a list of candidates) to get most votes, but also to make their margin is large enough. Roughly speaking, Block Vote, Party Block Vote and Proportional Representation are conditioned on four factors: the winning majority, the margin with respect to the second candidate, the minor’s performance, i.e. the closest contender to the electoral threshold, and finally the number of competing candidates.
The two last factors seem contradictory, but in most districts, the cumulative share of ultra-minor parties (those with less than 6% of the total vote) is close to or larger than the candidate list with a plurality of votes. To sum up, the politics of legislative elections between large and small parties is that of a zero-sum game. Every vote cast in favour of small candidate lists tend to increase voter dispersion, and deprive larger, national parties from getting a seat on the margin, especially so when the competing lists have some ideological affinities.
Consider the first general election of 1963: Invalidated votes could have bridged about a third of aggregate dispersion of electoral votes.
In 5 provinces, these votes could have decided between the contenders, meaning the election was close enough for the invalidated ballots to matter: these provinces accounted for 31 seats out of 144 in the new Parliament, and could have delivered an absolute majority to a UNFP-Istiqlal coalition, or indeed consolidate FDIC’s own plurality. And there goes my argument: aside from gerrymandering, voter intimidation and disenfranchisement, the surest way to ‘control’ the outcome of an election at the local level remains more effective, more discrete and less controversial than any other strategy to manipulate elections. After all, representatives of Interior are registrars in all polling stations, and depending on the district, they have the final say as to how a ballot should be examined. If anything, there goes hard proof of election meddling: exceptionally high percentages of invalidated votes can be reasonably considered to be an indicator.
There is an ever more insidious way to manipulate elections, and it has shown its effectiveness in 2002: there were about 26 parties competing for 295 seats on local ballot, and as a result, the dispersion of votes increased, rendering invalidated votes even more important in determining the winner of a closely (and bitterly, like the Rabat 2007 Election) contested election. The 2002 Election outcome was perhaps the best argument for election reforms. Speaking of which, I have found some interesting results as to how the number of seats should be allocated, given some nation-wide indicators.
It is pretty much a given to allocate the most populated districts with the largest number of seats. Yet there are some instances where small districts get about the same number of seats than those in metropolitan areas. Consider Azilal and El-Jadida districts: both have been allocated 6 seats each, yet El Jadida has twice as many registered voters. Same goes for Oued-Dahab (registered population: 19,000) with two seats, same as Tata (registered population: 60,000). So the proposed idea is to get rid of arbitrary distribution of seats, and instead use the nation-wide distribution to get a standard figure per seat: 43,000 votes per seat (plus or minus 139 votes). Assuming a fixed minimum number of seats per district (there are about 16 districts out of 92 with a registered population of less than 43,000) the number of representatives elected on local ballot can be brought down to 282 or 289 (depending on the minimum number of seats)
Local |Votes/|Min |Max |Spread|Seats| Ballot |Seat |Seat|Seat|Votes |Total| --------+------+----+----+------+-----| Existing|43,847| 2 | 9 |18,626| 305 | --------+------+----+----+------+-----| Option 1|43,391| 1 | 10 | 139 | 282 | --------+------+----+----+------+-----| Option 2|43,391| 2 | 10 | 139 | 289 | --------------------------------------
In electoral terms, this means 34 seats are going to be deflated to 16, so as to get near-commensurate representation.
As it happens, these changes have a net neutral effect on the largest parties’ electoral advantages – this is particularly true given the fact that most gains are centered around the Souss-Massa, Tansift-Haouz and Doukkala regions, all of which have a relatively homogeneous representation in Parliament (most of the big political parties have at least one representative from their districts) yet the changes operated prior to the general election last year were modest.
As one looks upon the districts with most losses, those in the South for instance, their over-representation is tightly linked to their turnout: Taounate had a 45% turnout and Azilal a little under 70%. As for the Southern districts, their average turnout was around 62%. So this is perhaps the internal logic to the distribution of seats per district: those regions with higher turnouts tend to be allocated disproportionately larger number of seats, even as their populations (registered or otherwise) are smaller than nationwide means. A rational politician (and Istiqlal, USFP and RNI have been quite clever at this) do their best to control these districts – because they get seats with a minimal number of votes.
There are 55 seats eliminated from 38 districts, and 32 seats added to 22 districts.
The Roof is On Fire, Keep Calm and Carry On
The season of Budget Bill is upon us. and from what I can surmise, the planning staff at the Finances ministry is dead set on using the 5.5% growth for 2012-2016, and the target for reducing budget deficit to 3% of GDP by 2016 is maintained nonetheless.
I posted a short blog on how unreallistic these figures are, in the face of gloomy global, conjecture (even more gloomy as the IMF cut its global growth projection last week) pressure on Morocco’s foreign exchange reserves and the urge to cut the subsidies.
year| Deficit | Deficit| Deficit |(Bn dirhams)| % GDP |Reduction ----+------------+--------+--------- 2012| -49,6 | -6,1% | +4.9 2013| -45,1 | -5,3% | +4.7 2014| -40,7 | -4,5% | +4.2 2015| -35,8 | -3,7% | +5.1 2016| -29,9 | -2,9% | +5.8
The short communiqué on the MINEFI website points out projected growth for 2012 is 4.5% (close to IMF’s 4.3% prediction 3 months ago) and 4.8% deficit. There is a small difference between that figure and the 5.3% budget deficit for 2013 mentioned in the IMF report – which means there is margin for the government in its intent to implement this dramatic deficit reduction plan; It is dramatic, because a deficit-cutting plan from 6.1% to 4.8% means there are 11.03Bn net cuts in the budget – which in turns means larger revenues and/or expenses adjustments.
And here is the clincher: There are going to be 24,000 new openings in public service payroll – and since most of these are going into relatively high-paying jobs – in fact, they are most likely to be centered around the median entry public service salary (about 7,000 a month) 2Bn in additional expenses.
So there it is: a tax increase is unavoidable -in fact, desirable, provided discretionary loopholes are closed, though it is not certain Mr Benkirane has the guts to take on the special interests benefitting from the status-quo, and so are the cuts to subsidies.
PS: IMF seems to have considerably upgraded Morocco’s outlook on GDP growth to… 5.5% (up from the previous 4.3%) strange.
Standard and Poor’s, Hatchet Man?
So it it true then. In itself, the outlook switch to ‘Negative’ is not such a bad piece of news, although it gives reason to worry about the future. If anything, I would have expected S&P to be a bit more Johnny on the Spot.
VIDEO: What’s Behind The Change Of Outlook On Our Sovereign Rating On Morocco? Daniel Raleigh explains on #CMTV ow.ly/eqnY7
— Standard & Poor’s (@standardpoors) October 12, 2012
Let us first read the actual words S&P used to explain its outlook update (because it is only an outlook update, not a downgrade, mind you)
- We are affirming our investment-grade long- and short-term foreign and local currency sovereign credit ratings on Morocco at ‘BBB-/A-3′ and ‘BBB/A-2′, respectively. - We expect economic reforms, and particularly petroleum subsidy cuts, to diminish Morocco’s external and fiscal deficits. - We are revising the outlook to negative from stable. This reflects our view that the Moroccan authorities are finding it more challenging to reduce the vulnerabilities created by the twin deficits in the context of a difficult external environment, while maintaining Morocco’s traditional political and social stability. - The negative outlook reflects our view that we could lower the ratings if the fiscal and current account deficits do not narrow significantly, if social pressures escalate and impair reform progress, or if economic performance is materially harmed by a weakening external economic environment.
S&P worries are just as justified as those of, the IMF when the PLL was extended to Morocco: the current account and budget deficit have significantly deteriorated during year, and as a result fiscal consolidation is to be expected.
The report is quite interesting in fact: beyond the inevitable media tension over the outlook update (and all the ensuing misunderstandings) S&P’s assessment is fascinating as to how the current government can or will deal with these issues. First off, they seem to challenge the Moroccan position as to the promises made before the IMF:
The total subsidy bill was equivalent to a substantial 6% of GDP in 2011. The government began to reduce untargeted fuel subsidies in mid-2012, but will need to take more steps to restore Morocco’s traditional fiscal stability. While the government has expressed its intent to press ahead with further subsidy reform, we believe this will be politically contentious and could undermine social cohesion, leading to further delays. We also note that, to date, no concrete timetable for reforms has been laid out.
Does it mean we should kiss goodbye to the 2016 target of less than 3% deficit to GDP? The report does not say. It is painfully clear however the efforts on behalf of our government to trim the Compensation Fund do not look credible, precisely because they refused to communicate any precise timetable as to how the subsidies will be cut. It seems IMF has been for once overly optimistic as to Morocco’s future economic performance.
Much more concerning is S&P’s pessimistic analysis of future growth: while it is expected exports would benefit from a structural boost (provided by FDIs flowing into Morocco during the past decade) growth is also expected to be weak, with all ensuing political risks. In fact, the report lays out quite explicitly the doomsday scenario:
We expect the progress of political and economic reforms, and the authorities’ ongoing efforts to contain consumer price inflation, to limit popular unrest to sporadic outbursts. However, if unemployment remains stubbornly high, living costs spike, or political reforms disappoint popular expectations, there is a risk of sustained and large-scale unrest that could also lead to a downgrade.
This outlook update will most certainly have a negative impact on the expected new dollar-denominated bond issue. Remember the good news on March 2010, when the Moroccan sovereign debt got its Investment-Grade label, a testimony to a decade-long period of fiscal conservatism and discipline. The yields on the 2017 Eurobond have decreased 110bps in less than one month, and spreads to benchmark yields contracted 50bps. If it was not for the global uncertainty triggered by the Arab Spring, the yields would have stayed below 4.5% – is was the coupon attached to the 2010 issue; on the other hand, Moroccan sovereign spreads during the first 6 months in 2011 rose moderately, which means the yield increase is of a systemic nature.
the yield could have stabilized itself below the 4.5% if it was not for the high level of uncertainty during the first half of 2011
The impact of this piece of news can be verified in the next couple of days on the other Eurobond; If its price goes below 99.3 in less than a week, it would not only confirm the sensitiveness of the 2020 Eurobond to country-specific market news, but would also allow to make some predictions as to the expected coupon for the next bond issue, and these point to a figure close to 5.4% than it is to the 4.53% embedded in the Bond issue two years ago.
News can go both ways: there has been indeed a positive impact on Morocco’s foreign debt when it was upgraded to Investment Grade in 2010- and subsequently allowed for a second bond issue at a relatively low 4.53% coupon. Nonetheless, given the pressure on public finances, the government has little choice but to go to international markets for a third bond issue, handicapped with this S&P new assessment.
Note: the S&P report can be read below
FRANKFURT (Standard & Poor’s) Oct. 11, 2012–Standard & Poor’s Ratings Services today affirmed its long- and short-term foreign currency sovereign credit ratings on the Kingdom of Morocco at ‘BBB-/A-3′ and its long- and short-term local currency ratings at ‘BBB/A-2′. The transfer and convertibility assessment for Morocco remains ‘BBB+’. At the same time, we revised our outlook on Morocco to negative from stable.
The ratings on Morocco are supported by its macroeconomic management approach, which has traditionally focused on achieving stability. This has contributed to strong economic growth relative to peers, low consumer price inflation, relatively low external leverage, and moderate government debt levels. The ratings are constrained by comparatively low prosperity (relative to similarly rated peers) and by social pressures, which we believe have increased since the Arab Spring, but remain much lower than in neighboring countries.
The general government balance had been broadly balanced during the past decade. However, deficits rose to over 4% of GDP in 2011 and this year as spending, especially on fuel subsidies, has increased and driven the primary balance deeper into deficit. We expect that cuts in subsidies will see a primary surplus return in 2013 and the net general government debt peak at an estimated 41% of GDP in 2012.
The total subsidy bill was equivalent to a substantial 6% of GDP in 2011. The government began to reduce untargeted fuel subsidies in mid-2012, but will need to take more steps to restore Morocco’s traditional fiscal stability.
While the government has expressed its intent to press ahead with further subsidy reform, we believe this will be politically contentious and could undermine social cohesion, leading to further delays. We also note that, to date, no concrete timetable for reforms has been laid out. Higher global oil prices–while currently not expected by Standard & Poor’s–could also impair progress, as could weak economic performance in European export markets and sources of trade, investment, remittances, and tourists.
Morocco’s external financing needs used to be contained due to low external debt and a current account close to balance or in surplus. Since the onset of the global financial crisis, however, the current account deficit has risen fast, reaching by our estimate an average of over 7.5% of GDP during 2011-2013, partly fuelled by rising oil prices and a poor harvest in 2012.
Morocco’s narrow net external debt ratio has therefore quickly deteriorated. As recently as the middle of last decade the Moroccan economy was a net creditor, by that measure, of more than 20% of current account receipts (CARs). By contrast, we forecast a net debtor position of 28% in 2012.
Although official foreign exchange reserves have fallen sharply from their peak, we estimate immediate gross external financing needs at a still-moderate 93% of CARs plus usable reserves (in 2012) and expect them to stabilize at around 100% by the middle of the decade (from less than 70% before 2007). Immediate refinancing risks are further mitigated by an IMF precautionary liquidity line equivalent to $6.2 billion.
We also recognize that past FDI (averaging about 2% of GDP during the last decade) will likely improve export performance. Nevertheless, we believe that economic rebalancing over the medium term will remain difficult and may lead to lower GDP growth, which could heighten risks to political and social
Tangier By-Election
So results from the Tangier and Marrakesh by-elections are up; PJD holds on to these, but the 25/11 effect has most likely waned out.
First off, let us just make sure to point out some summary statistics about the Tangiers-Assilah district; there are 407,042 eligible adults for registration (computed from the 2004 Census) and only 269,000 to 299,000 registered voters. When it comes to the overall weight the PJD vote carries up North, about 1 adult in 9 voted PJD in November, and only 1 in 15 during this by-election. So clearly, just as it was the case for last November 25th, actual majority votes are not registered anywhere, and certainly not in the Tangier-Tetuan region.
@moorishwanderer @bzerkdi Résultats de Tanger. twitter.com/Un_Marocain/st…
— Un Marocain (@Un_Marocain) October 6, 2012
These figures are too aggregated to allow for any meaningful, detailed analysis of the local political landscape, and certainly are not detailed enough to provide input for a ‘mid-term’ assessment of PJD’s electoral popularity; yet it looks as though this is some high watermark many observers have been looking for, though I would wait for the local elections (presumably scheduled for 2013) to make that judgement; but from what looks to be final results, there has been a swing of 15% against PJD and in favour of its nearest competitor. In absolute terms, while PJD maintains its hegemony as the main party, its lead over the second competitor narrows down from 33,000 to 14,800 – though there has been a swap between UC and PAM. In terms of electoral coefficient, the swing has been weakly more moderate – about 12.5%, which translated into losing one seat, thus gaining only two of the three opened slots.
In absolute numbers, PJD has undoubtedly lost votes: they had 43,000 in 2011, now they managed only 26,000. In relative contribution to turnout decline, smaller and other non-competing parties account for almost half the 41,030 shortfall in voters; on the other hand, PJD’s own vote decline accounts for 40%; when only those parties with more than 6% threshold are considered, about 84% of the overall turnout decline can be attributed to the sole PJD electoral performance. In short, this means the fall in turnout from last year is due to disaffected PJD supporters, who did not bother to turnout to polling station.
A lower 6% threshold should have guaranteed all seats for PJD, but because their turnout was weaker than aggregate results, they failed to do so.
One last comment: because smaller parties decided to get out of the race this year, the competition over the district suddenly the relative performances of the main parties (PJD, UC, PAM) becomes more prominent, as measures of concentration attest to that. It is getting less competitive in terms of number of competing parties, but the margin of victory (so to speak) has significantly narrowed for PJD in a reputed stronghold.
Stimulus v. Austerity in Morocco
@Capdema is set on releasing a ‘white-paper’ of sorts, a Budget proposal for the next decade if you will. This project, with which I was closely associated, provides the blueprints for fiscal consolidation, as well as a set of bold policy proposals on both sides of the balance sheet.
An acquaintance reviewed the document, and one of the many observations they have made caught my attention: the Budget proposal basically takes the side of fiscal consolidation (austerity, if you will) as a sort of ‘There is No Alternative’ policy decision. Maybe it is; Perhaps some mechanisms embedded in the proposal seemed too harsh and too controversial for an otherwise consensus-seeking mindset in Morocco, prevalent among policy-makers and pundits alike.
But then again, this is the beauty of policy-making: choices are made depending on ideologies, or perhaps, according to each one’s Weltschauung. A traditional left-winger in Morocco (including the vast majority of my own PSU) though it makes sense to get value for money from government expenditure, would find it hard to support policies designed to contain the size and cost of the civil service payroll. They would cheer the introduction of a de facto wealth tax on the rich, yet express scepticism to the idea of tax cuts to corporations. Strangely enough, the voices of pro-fiscal consolidation in Morocco are very far and between, and I mean, voices that advocate specifics in terms of deficit and debt reduction for instance.
I would like to discuss two aspects of that fiscal consolidation government and pundits alike want to see happening, yet fail to make it happen in terms of government policies: Subsidies and Tax exemptions.
Ceteris Paribus, the Compensation Fund accounted for less than a third of the Budget Deficit in 1979-2007, but then since 2008, it has been on par.
The Compensation Fund has long been a pain in the neck: it is inefficient, it showers the richest households and big corporations with government subsidies, and a small fraction of these actually reach the targeted populations (let us put these at the conservative estimate of the bottom 20% income households) But for the past 30 years (say between 1980 and 2007) the aggregate crowding-out effect of this fund has been relatively low compared to GDP – less than 1.61% of GDP, yet for the past 4 years, the system has proven to be unsustainable; the current narrative about the ‘Compensation Problem’ shifts the blame to international markets and the upward pressure on commodities’ prices. Actually, the increased reliance on domestic consumption to sustain growth over the past 5 years means richer households would consume more of these subsidized goods, hence putting pressure on the compensation fund to require more funding from the Budget.
Tax exemptions in themselves cost about as much as the Budget deficit – about 33 Bn in 2012, but they stir government policies in the targeted sectors for different tax credits, exemptions and moratoriums. But, it is quite difficult to argue a reasonable case for some of these, unless political calculations are considered as well. The agricultural sector is pampered beyond reason (there are tax exemptions as well as direct subsidies) with official talking points arguing the very existence of the generous moratorium is of social value. It is as though the 120-odd Bn dirhams are evenly distributed among Moroccan farmers, when it really is not, and the figure speak for it.
But I digress. The central question remains: do we go for Stimulus or Fiscal Consolidation? As a matter of fact, the two options are not mutually exclusive: a fiscal reform can be nested in an ambitious spending program, but for policy evaluation purposes the picture is blurred a bit. Yet let us consider the Stimulus option as fairly as possible. The bottom line is simple enough to make it government policy: push output growth as close as possible to 6.5% for a short period of time. But that’s about it: it is the very nature of a stimulus package to be short-lived – or perhaps the lefty punditocracy is referring to the Welfare State?
How would one go for a Stimulus in Morocco? We are already spending good money in public investments (Budget and State-managed companies put in 188Bn in investments for 2012) so perhaps we might consider some scheme to boost consumption; the Compensation Fund is already taking care of it, but not as efficiently as one might have hoped it to be, so a reform has to be included into the stimulus. The tricky part is to get other policy measures alongside the Compensation Reform, because it will harm growth and household consumption, and the latest HCP figures on that matter provide evidence to that effect. As for massive recruitment in the civil service, it will not do good, especially when the new civil service labour force is ill-suited to their selected job: is it enough to get more teachers and nurses, when quality is in higher demand?
So tax cuts are the way to go, specifically on distortionary taxes, like VAT and/or Income tax, which means there are 81Bn to be cut, with perhaps a targeted 31Bn worth of various taxes and duties on imports; on the other side of the balance sheet, potentially 50Bn, the Compensation Fund have to be cut one way or the other. Let us suppose this tax cuts-based stimulus wants to go back to direct fiscal pressure observed in the early 1990s, which means there are 2.07% worth of tax cuts to be enacted, 17Bn that is. This means 2,554dhs worth of tax cuts on average to Moroccan households, and that contributes a full percentage point to output in 2012, close to 4% GDP. The remaining .8% (to get to potential output) can be scrapped somewhere, surely, but it cannot go beyond 2014.
Unfortunately, I cannot go on about what a Stimulus-based budget policy can do, but it seems to me the exogenous factors from Morocco’s commercial partners are best matched with structural reforms, and these are better served in an austerity-based government program.
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