FINANCIAL SERVICES VOLUNTEER CORPS MEETS WITH

UNCLAS CASABLANCA 001295 SIPDIS SIPDIS STATE FOR NEA/PI AND NEA/MAG SENSITIVE E.O. 12958: N/A TAGS: ECON EFIN EIND ETRD MO SUBJECT: FINANCIAL SERVICES VOLUNTEER CORPS MEETS WITH PRIME MINISTER This message is sensitive, but unclassified. Please protect accordingly ¶1. (SBU) Summary: Representatives of the Financial Services Volunteer Corps (FSVC),accompanied by Ambassador and Econoff, met with Prime Minister Jettou on December 2 to discuss FSVC's programs and solicit Jettou's thoughts on Morocco's financial sector. Jettou described Morocco's business environment as traditionally "protected" from competition and disoriented by the challenges of recent trade agreements and globalization. He characterized many businesses as "undercapitalized, debt burdened and lacking good management". He also discussed proposed GOM initiatives for debt-refinancing of Small and Medium sized enterprises (SMEs) and new tax exemption incentives and asked about FSVC programs regarding SMEs. End summary ¶2. (SBU) Jettou began by thanking FSVC for its work with Bank Al Maghrib (the Moroccan Central Bank)and raised the issue of how to develop the environment for SMEs. FSVC discussed its efforts to help implement Bank Al Maghrib Governor Jouhari's internal development plan, highlighting a program using public affairs professionals from the U.S. Federal Reserve to assist Bank Al Maghrib officials to better communicate policies. FSVC explained that its priorities are job creation and economic growth, aligning itself with the economic priorities of Jettou's administration. FSVC President Andrew Spindler then proceeded to describe recent activities directed toward SME development, including a program to promote successful SME Initial Public Offerings (IPOs) on the Casablanca Stock Exchange. ¶3. (SBU) The Prime Minister described how small enterprises (and Moroccan businesses generally) have been traditionally sheltered from competition, but how with the advent of trade agreements and a quickened pace of globalization, it is impossible to protect industries from international competitors. "Our businesses need to learn to compete" Jettou explained, adding that too many Moroccan enterprises are undercapitalized, debt burdened and lack good management. AMB agreed and added that many also fail to invest sufficiently in business development and expansion. ¶4. (SBU) Jettou expressed the need to bridge the gap between micro credit lending (maximum of approximately US $2,000) and commercial bank lending (minimum of approximately US $50,000) in order to help SMEs. He explained that US $25,000 is the "magic number" and acknowledged a current internal GOM debate over whether it is more effective to employ incentives to raise micro credit levels or decrease those of banks. Jettou also mentioned GOM programs to refinance SME debt and provide tax exemption incentives to attract skilled younger workers to Morocco. The Prime Minister closed the meeting with assurances that the GOM is committed to passing all FTA-related legislation in time for January 1, 2006 implementation date, and that the last pieces of legislation are currently before Parliament. ¶5. (SBU) Comment: Jettou's private sector background and reputation as a technocrat lend credibility to his candid appraisal of private sector insecurity on the implications of free trade agreements and greater globalization. New GOM initiatives focused on promoting economic growth and job creation through SME financing and creative use of tax exemptions bode well for improvement of the business climate and success of the soon-to-be implemented FTA. Jettou conducted the entire meeting in English, (Jettou is known for beginning meetings with American interlocutors in English before quickly returning to French) reflecting his increasing comfort and interest in discussing business and financial sector-related issues with Americans. End comment GREENE