BEIRUT — The Moroccan government has approved a proposed 2025 budget that exempts defense firms from taxes, in what’s seen as an attempt to boost military production and encourage foreign and national defense producers to invest in the kingdom.
“This draft decree aims to enable the manufacturers of defense and security equipment, weapons and ammunition to secure a temporary exemption from corporate tax,” government spokesperson Mustapha Baitas said on Friday.
The budget proposal is reportedly expected to increase the defense budget slightly from $124 billion MAD ($12.4 billion USD) in 2024 to $133 billion MAD ($13.32 billion USD) in 2025.
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Moroccan defense expert Abdel Hamid Harfi told Breakiing Defense that the tax exemption comes as the North African nation is aiming to boost its reputation as an incubator for military industries. That, in turn, “creates added value and benefit from Morocco’s international relations and partnerships as a good platform for export-oriented industrial investment, and within the framework of granting military industries the same privileges granted to civilian industries such as automobile industries and others,” he said.
Harfi said that the income tax exemption is not the first for defense firms, as the Moroccan government approved a few months ago a complete exemption from value-added tax for a specific number of years.
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Taken together, “these privileges would enhance the appeal of the emerging sector for foreign and local investors wishing to invest in this sector in the Kingdom,” Harfi said.
In addition to the tax breaks, Harfi noted that Morocco has established “two industrial zones that are scheduled to host military industrial units, where the construction of a number of factories has actually begun.”
Senior advisor at Gulf State Analytics Theodore Karasik said that it is likely that “Morocco seeks to boost its industry in several industrial parks while diversifying potential clients that had been steered away before because of taxation. Morocco seeks greater knowledge transfer and advanced weapons testing and production.”
Like most Arab states, Morocco is still in the development phase of its defense industrial base. “Up to now, there are experiences of some Moroccan firms in the field of the military industry, limited to military UAV industry that is still in the scientific research and development phase, military clothing manufacture, and 3D printing techniques of spare parts,” Harfi said.
He highlighted that UAV development in Morocco is intended to create a competitive outcome capable of meeting the national needs as well as those of friendly countries.
Elsewhere, Morocco has joined forces with US-based Lockheed Martin and Belgian firms Sabca and Sabena to maintain and support F-16 and C-130 Hercules aircraft locally.