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06RABAT1196 2006-06-19 18:40:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Rabat
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1. (SBU) Summary. On June 16, Prime Minister Driss Jettou
met with Ambassador Riley and the visiting team from the
Millennium Challenge Corporation (MCC) to discuss the
results of the MCC team's recent meetings with the
Government of Morocco's (GOM) Millennium Challenge Account
(MCA) team. The MCC representatives briefed Jettou on
progress, noting good results and that the two sides had
developed a new methodology with which to analyze potential
projects in Morocco's compact proposal to use MCA funds.
They added that they hoped the GOM will have a new and
condensed proposal ready by the end of July, but cautioned
that the MCA team would need to work full-time on the
proposal in order to meet that time frame. Jettou noted
that he had asked the MCA to be flexible and open minded to
the MCC's suggested changes to the current proposal.
However, he then reiterated the importance of each of the
elements in the current compact proposal. The recently
developed methodology will offer an important optic to
help guide future negotiations in developing an acceptable
compact proposal. End summary.

2. (SBU) The MCC's Senior Country Director, Michael
Grossman, told Jettou that he, Associate Country Director,
Magda Ismail, and Senior Economist, Steve Anderson, had
achieved good results during their three days of meetings
with the MCA team. The two sides had achieved their main
goal of developing a framework to analyze projects presented
in the GOM's compact proposal. Grossman presented the two
teams' mutual objective as, "stimulating economic growth by
increasing productivity and improving employment in high
potential sectors." He added that the teams were developing
a second set of criteria, based on determining the
suitability of public investment and the economic impact of
various projects, to help sharpen their focus even more.
The Ambassador emphasized the importance of this
accomplishment because it will provide the two sides on
agreed methodology to evaluate potential projects proposed
for inclusion in the compact. Jettou was pleased with the
methodology and noted the Moroccan public was watching the
MCA program with great interest. Grossman said the MCC
would stay in close contact with him and that MCC planned
two more visits to Morocco by early July.

3. (SBU) Jettou proceeded to discuss the benefits of most
of the programs included in the current compact proposal,
although he acknowledged Grossman's assertion that some of
them might need to be deleted. He noted the positive
results of existing programs in the fields of micro credit
lending, oases preservation, handicrafts, agriculture,
fishing, textiles and the King's National Initiative for
Human development (INDH). Jettou also discussed the
considerable work the GOM had done to identify potential
growth sectors (off-shoring, aviation, automobile
components, telecommunication, textiles, fishing and
handicrafts) through a study conducted by McKinsey and
Company. He said Morocco was opening its economy to the
world and was facing stiff competition on several fronts.
Therefore, the GOM was supporting large foreign investors
(in the range of $100 to $150 million), such as Fruit of the
Loom, with investment incentives. He added that after the
MCA compact proposal was accepted, he would introduce a new
private sector-led team to implement the plan.

4. (SBU) Grossman responded that most MCA member countries
retain some members of their compact negotiating team on
their implementation teams. Jettou agreed and even asked
MCC to suggest members of the future implementation team.
Grossman declined to suggest names, but recommended that
civil society members should also be included. He
added that the current MCA team should work on developing an
acceptable compact proposal on a full-time basis, rather
than their current part-time schedule, and Jettou agreed.

5. (SBU) Comment. The GOM will be pushed to deliver a new
condensed proposal by the end of July, but the MCC team's
current trip has helped to focus the GOM on the types of
programs it should pursue. Jettou showed strong interest in
getting the compact proposal completed by offering to
increase Morocco's MCA team to a full-time basis to complete
an acceptable proposal. The new methodology should help in
focusing the GOM's proposal, however, it remains to be seen
how readily the GOM will accept the need to eliminate
certain programs contained in the current compact