Strategically located at the entrance to the Mediterranean Sea, Morocco has for several centuries served as one of the main trading points between Europe and Africa. Since the mid-1980s, the government has implemented a successful reform program characterized by the substitution of external debt for internal debt; this measure has effectively reduced the public debt exposure to fluctuations in the international financial markets.

Ambitious longer term development initiatives include a program to invest US$7 billion in tourism assets over the next 10 years in order to attract 10 million tourists annually and bring the sector's percentage of GDP to 20 percent versus 7.7 percent currently.

Morocco is also endeavoring to electrify 1,500 villages per year over the next decade. Morocco's domestic energy reserves are negligible, but its promising hydrocarbon potential has begun to materialize with a major oil discovery at Talsint a year ago. Current exploration activity involving a number of multinational firms is brisk, particularly offshore.

Renovation of the Rabat airport and modernization of the highway system has begun. Output from the electronics sector has doubled over the last five years due to incentives to attract foreign investment.

In 1993, the government began opening up to private sector participation the country's key infrastructure sectors: telecommunications, transportation, utilities and energy generation and distribution.

The process of privatization has also reached the financial sector. While only a portion of the banks has been privatized, the government has made great strides in the abolition of direct credit control and liberalization of interest rates. Still, further privatization efforts are needed to reduce the large percentage of the economy controlled by public enterprises, representing 13 percent of GDP as of 1997.

Closer integration with the European Union (EU), through the Association Agreement, provides an important opportunity for regaining economic momentum, but also raises challenges in terms of increasing external competitiveness and modernizing social and economic institutions.