GOM PITCHES MCC ON DRAFT MCA COMPACT

UNCLAS SECTION 01 OF 03 RABAT 001768

SIPDIS

SENSITIVE

STATE ALSO FOR NEA/MAG AND NEA/PI

E.O. 12958: N/A
TAGS: ECON EAID KMCA MO
SUBJECT: GOM PITCHES MCC ON DRAFT MCA COMPACT

REF: RABAT 1070

(U) This cable is sensitive but unclassified. Please
protect accordingly.

Summary:
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1. (SBU) Summary: On August 15 and 16, Prime Minister
Jettou, Foreign Affairs Minister Delegate Fassi Fihri, and
more than a dozen other Government of Morocco (GOM)
officials gave a first glimpse of Morocco's draft Millennium
Challenge Account (MCA) proposal to Millennium Challenge
Corporation (MCC) Senior Director for Francophone Africa
Michael Grossman. The GOM's ambitious and complex MCA
presentation embeds a proposed USD 675 million MCA program
in a USD 925 million rural poverty reduction plan and was
designed to flow from and be consistent with King Mohammed
VI's National Human Development Initiative, launched on May
18 (reftel),and the World Bank's new Country Assistance
Strategy. Morocco hopes its MCA program will create 110
thousand new jobs and reduce poverty from 30 to 20 percent
in a "corridor of poverty" stretching from the Rif
mountains, along the Atlas mountains, toward the desert in
the East. Morocco's MCA compact proposal will create
revenue-generating activities for vulnerable communities,
reduce poverty through "human development" and ensure
environmental sustainability. Detailed program plans --
including costs, timelines, impacts, sustainability,
baseline data, and monitoring and evaluation mechanisms --
are still needed. While broad consultations have ostensibly
taken place at the grass roots level, a national-level
effort must be made as the compact development process moves
forward. Grossman and GOM officials agreed to a follow-on
DVC in early September and an MCC team visit to Morocco in
late September. End Summary

A Good Start
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2. (SBU) MCC Senior Director for Francophone Africa Michael
Grossman's August 15-16 visit to Morocco prompted Moroccan
Government (GOM) officials to present a concrete, but
preliminary draft proposal for accessing MCA funds. The
"draft proposal" was presented to Grossman, DCM and
EconCouns on August 15 jointly by a 15 person interagency
team. The team, led by the Prime Minister's office, also
comprised the Ministries of Agriculture, Finance, Interior,
Foreign Affairs, Forestry, Interior, and the agencies
responsible for developing Morocco's northern and eastern
regions. Dr. Haya Bouhia, the Prime Minister's Harvard-
educated economic advisor who previously worked at the World
Bank, presented the GOM's vision for using up to USD 675
million in MCA funds to contribute to Morocco's USD 925
million rural development program. The presentation, which
thoroughly described the structure and context of the
proposed "integrated and comprehensive" development program
lacked detail on specific cost figures and did not include
identification and description of particular development
programs and activities. Grossman commented that the draft
proposal was "a good start," but much work remained to be
done.


3. (SBU) The GOM's USD 925 million proposed rural
development program targets three main areas -- the Rif
mountains in the north (USD 270 million),central Morocco's
Atlas mountain ridge (USD 250 million),and the trans-Atlas
desert region toward the Algerian border (USD 400 million).
The proposal will contribute to the new National Initiative
for Human Development (INDH),announced by King Mohammed VI
on May 18 (reftel). The government's INDH plan, which was
presented to the King on August 20 (septel),addresses three
main goals in a "participatory approach with integrated and
coherent planning" with thorough monitoring and result-
orientation. The three INDH goals are: ameliorating the
social deficit in impoverished rural and urban areas,
creating revenue generating economic activities and
employment, and assisting marginalized groups with basic
needs. Moroccan officials say the INDH and the component
MCA program are completely consistent with the World Bank's
new Country Assistance Strategy (CAS) for Morocco. In
addition to improving general governance, the CAS aims to
accelerate job creation and reduce poverty through four
initiatives: improving competitiveness and the investment
climate, increasing access to basic services, improving the
education system, and expanding access to water and
sanitation.


4. (SBU) Moroccan officials explained that the MCA-funded
component on the nation-wide INDH endeavor is an "integrated
rural development program" targeting Morocco's poorest
provinces. Morocco's MCA compact proposal, they argue, will
create revenue generating activities for vulnerable
communities, reduce poverty through "human development" and
ensure environmental sustainability. The ambitious goal is
to reduce poverty in the three areas -- dubbed the "corridor
of poverty" -- from 30 percent to 20 percent by 2010
(consistent with the UN Millennium Development Goals) and to
create 110 thousand new jobs. Twenty-five percent of
Moroccans (about 7.3 million) live in the "corridor of
poverty," accounting for 43 percent of the rural poor. The
GOM specifically proposed access to basic social services
and infrastructure, development of revenue-generating
activities and employment, capacity building and access to
finance, and natural resource protection and environmental
sustainability as the four components of the compact,
however, did not expound upon specific development
activities or tools that might shed important light on the
costs associated, anticipated impact, ability to monitor and
evaluate, and feasibility. The Moroccans explained that in
addition to the largest piece, the USD 200 million human
development component (assumed to be vocational training,
technical assistance, and education),Morocco's USD 675
million MCA proposal would include, inter alia, tree-
planting (USD 150 million),irrigation (USD 30 million)
livestock production (USD 15 million),rural tourism (USD 75
million) and sanitation (USD 100 million)

Jettou: Programs are "Ripe" for Implementation
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5. (SBU) Subsequent to the presentation, Grossman, the
Ambassador and EconCouns met with Prime Minister Driss
Jettou. Jettou, joined by Minister-Delegate for Economic
Affairs Talbi, the Primature Secretary General and Bouhia,
was remarkably well briefed on the details of the Moroccan
MCA compact presentation. The Prime Minister reviewed GOM
efforts to bolster education, provide health care coverage,
housing, and to invest in water, electricity, and
transportation infrastructure, especially in remote regions.
Jettou explained that MCA would contribute to Morocco's
endeavors in the "corridor of poverty" to add actions and
activities that would "solve the social deficit." He
reiterated that Morocco's overall MCA vision -- helping
Morocco attain its development goals -- is drawn from King
Mohammed VI's May 18 human development speech (reftel).
Grossman gave a quick overview of MCC structure and function
and reiterated the need for a single GOM MCA contact person.
Jettou noted that a person of stature (later revealed to be
former Casablanca Wali and current Chief of the Agence du
Nord Driss Benhima) had been identified to lead
implementation of the five year MCA compact. The Prime
Minister promised to provide Grossman the names of a small
steering group for compact negotiations. Grossman noted
that the next stage -- identification and refinement of
specific project details -- was likely to be challenging.
He also noted that the Moroccan presentation implied a
complex and complicated plan that may take much effort to
coordinate and manage. Jettou responded that the programs
that make up the plan are "well known proposals" that are
well-organized and "ripe" for implementation. These
proposals -- on water, trees, palmeries, livestock, and
rural tourism -- fit into a larger national strategy,
support FTA implementation, and address poverty. "We are
ready," he said, "we are just waiting for the financing."


6. (SBU) Grossman's August 16 meeting with Foreign Affairs
Minister-Delegate Taib Fassi Fihri was friendly and
relatively informal. Fassi Fihri -- joined by Reda
Oudghiri, advisor to MFA Bilateral Affairs Director Amrani --
apologized for the GOM delay in completing an MCA
presentation, but noted the importance of coordinating MCA
ideas with the King's INDH vision that would "crown" all
efforts. Fassi Fihri told Grossman, DCM, and EconCouns that
MCA would enable Morocco to accelerate the rhythm of the
INDH plan while encouraging transparency, inclusion, and
consultation. He reiterated the dire need in the "cooridor
of poverty" stretching from the Rif to the Oasis region, and
repeated the GOM mantra that MCA's contribution would be to
create revenue-enhancing activities to alleviate poverty.
Grossman said that any reaction to the very complex Moroccan
draft proposal would be premature, but that he believe it
was good start. Grossman asked Fassi Fihri for a GOM point
of contact. The Minister-Delegate responded that MFA
"generalists" coordinate the government-wide MCA effort, but
a small GOM MCA team including Bouhia, Oudghiri, and
Ministry of Finance officials would be named very soon.
"The Prime Minister is the final arbiter, of course," Fassi
Fihri noted. Grossman noted that signing an MCA compact is
just one step in a long process, a process in which much of
the work is Morocco's to do. They concluded the meeting by
agreeing on next steps (see para. 9. below).

Consultative Process
--------------


7. (U) When Grossman and emboffs raised MCA's required
"consultative process," GOM officials, including PM Jettou
and Foreign Affairs Minister-Delegate Fassi Fihri noted that
the "bottom-up" proposals that make up the coherent MCA
strategy were developed in cooperation with grass roots
stakeholders by "associative" and representative
institutions. Furthermore, they noted, the INDH and the
World Bank's CAS (upon which the MCA proposal is ultimately
based) resulted from open consultative processes.
Nonetheless, GOM officials agreed that when the compact
proposal was complete, a formal consultative process (e.g.
seminars, workshops, or informal hearings) that included
civil society and private sector would take place before
compact negotiations begin in earnest.


8. (SBU) Subsequent to the formal meetings, Grossman spent
several hours consulting with Bouhia to clarify MCC
expectations and timelines and to explain MCA processes.
Most importantly, the GOM will need to provide details of
specific programs or projects that will e.g. "create revenue-
generating activities" or "protect the environment." The
GOM needs to provide the "what, when, where, why, how, by
whom and how much." The GOM will need to provide a more
detailed presentation of the expected impact on economic
growth of the proposed MCA program. In addition, the GOM
will need to analyze and recommend potential changes in the
institutional or policy environment that will optimize the
returns on MCA-financed investments. Bouhia emerged from
these meetings enthusiastic about the ultimate prospects and
mobilized to "roll up her sleeves," but a little daunted by
the sheer amount of work to be done.

Next Steps
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9. (SBU) Having agreed that Morocco's visions and ideas
are an appropriate point of departure for more detailed and
technical discussions, Grossman and GOM officials agreed to
meet by video conference during the second week of
September. An MCC team will return to Morocco in late
September to assist the Moroccans with drafting a proposed
compact that lays out specific details of projects' cost,
impact, feasibility, etc. While the GOM did not, as
requested identify a single working level MCA point of
contact, the GOM committed to provide by late August the
name of a small steering group (most likely three to four
people drawn from the PM's office, MFA and Finance Ministry)
that would act as primary MCC interlocutor.

Comment
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10. (SBU) Comment: Jettou, Fassi Fihri and other GOM
officials are well-briefed and delivered the exact same
talking points. Morocco's MCA presentation is an ambitious
and complex undertaking and at USD 675 million potentially
the largest MCA compact to date. The GOM has succeeded in
embedding its MCA ideas in the broader national human
development initiative (INDH) and in its comprehensive plan
to reduce rural poverty. The Moroccans have at least
considered the consultative processes which may have
occurred and those that will be necessary. Missing are
detailed plans - including costs, timelines, impacts,
sustainability, baseline data, and monitoring and evaluation
mechanisms - for the programs under the GOM's proposed MCA
structure. While the GOM refuses to name "the" MCA contact,
the small steering group Jettou and Fassi Fihri promised to
establish will help facilitate information flow and
coordination.


11. (U) MCC's Michael Grossman cleared this cable.


RILEY