NEW CEO OF MILLENNIUM CHALLENGE CORPORATION VISITS

UNCLAS SECTION 01 OF 03 RABAT 000225

SIPDIS

SIPDIS

SENSITIVE

STATE FOR NEA/PI AND NEA/MAG

E.O. 12958
TAGS: EAGR EAID ECON SOCI KMCA MO
SUBJECT: NEW CEO OF MILLENNIUM CHALLENGE CORPORATION VISITS
MOROCCO

REF: 05 RABAT 02151

SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY


1. (U) Summary. New Millennium Challenge Corporation (MCC)
CEO, Ambassador John Danilovich, visited Morocco January 24-
27 to review and discuss the country's progress in preparing
its compact proposal to use MCC funds. Danilovich and his
staff met with Prime Minister Driss Jettou, the GOM's
Millennium Challenge Account (MCA) team, numerous
ministries, civil society organizations, visited several
rural development organizations, were interviewed by a local
business paper, and held a press conference. The MCC team
reinforced upon the GOM the importance of a broad
consultative process and the need to focus on economic
growth in developing a successful compact proposal. They
also articulated the necessity of conducting thorough market
analysis to ensure the projected results of economic growth
programs. After initial resistance to these oft repeated
goals, the GOM showed increased acceptance of MCC's program
requirements and reached a compromise agreement. The GOM
promised a new compact proposal within 60 days that meets
MCC's requirements. End summary.

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OPENING STATEMENTS
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2. (U) The trip to Morocco, and later Benin, was
Danilovich's first official travel overseas in his new
capacity. Traveling with him were his Chief of Staff, Matt
McLean; Senior Country Director, Michael Grossman; Associate
Country Director, Magda Ismail; Press Officer, Davy Kong;
and Executive Assistant, Christian Vanderbrouk. After an
initial briefing with the Embassy's country team,
Ambassadors Riley and Danilovich met privately with Jettou
and the leaders of the GOM's MCA team, Economic Advisor,
Haya Bouhia; and Director of the Agency for the Development
of the North, Driss Benhima. An expanded meeting followed
which included the entire MCC team, the GOM's MCA team,
numerous other GOM officials, as well as television and
print reporters and cameras.


3. (SBU) The expanded meeting started with the Moroccans
emphasizing important links with their proposed compact
proposal to the King's National Initiative for Human
Development (INDH) and the three poorest rural regions of
Morocco. Jettou suggested that in his opinion, all INDH
projects should be eligible for inclusion in the compact
proposal, but that the GOM would let the MCC team choose
which INDH projects it wanted to support. He also offered
to come to the U.S. to help finalize the compact
negotiations. Benhima noted that the INDH remains a work in
progress, to which Grossman responded that MCC and the GOM
should work together to complete the parts expected to
become part of their compact.


4. (SBU) Grossman continued that while the GOM was on the
right track, MCC would like to see the consultative process
expanded even further. While it was evident that there was
consultation in the three regions targeted to receive aid in
the current proposal, MCC would like to see the consultative
process implemented nationally, so that no region or group
was excluded before the process began. Grossman added that
more market analysis was needed for portions of the current
proposal, such as rural tourism, to determine that the GOM's
anticipated demand for services was accurate. He concluded
by reminding the GOM that since the MCC must be held
accountable to American taxpayers, it cannot just trust the
GOM's claims that certain projects are worthwhile;
supporting analysis was also required.


5. (SBU) The Prime Minister suggested that "as we complete
one part of the proposal and agree on it, that we set it
aside, as we did with the U.S.-Morocco Free Trade
Agreement." He expressed that he was bothered by the fact
that even after many months of discussion, all aspects of
the MCA program were on the table. Grossman then encouraged
the GOM to keep lines of communication open.

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ENGAGING THE MINISTRIES
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6. (SBU) On January 25, the MCC team, Ambassador Riley and
econoff held a series of meetings with the Ministries of
Finance, Interior, Agriculture, Land Management, and the

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Agency for the Development of the North. The MCC team
reasserted that a broader consultative was necessary and
Ambassador Danilovich stressed that the next two days would
be very important to gaining an understanding of each other.


7. (SBU) After officials from the Ministry of Interior
presented an overview of the INDH and a list of priority
sectors for assistance, the MCC team impressed upon them
some of their concerns. Benhima admitted that the GOM does
not yet have a portfolio of detailed projects it would like
to undertake. In addition, some of the projects exceeded
the MCC's five-year time limit for completion. Once again,
Grossman reiterated MCC's need for the GOM to demonstrate
the ideas of economic growth, a consultative process,
measurability of results, and the proposed projects need to
be completed in a five year time frame.


8. (SBU) Minister of Agriculture Mohamed Laenser offered
the MCC team many growth projections and plans for raising
output. However, McLean questioned the validity of supply
side projections without sufficient demand side analysis.
When he asked who would buy this increased output of
agricultural products, GOM officials did not provide a clear
response. McLean added that the GOM's ideas might in
reality be very good but further analysis was necessary to
validate them. He added that reforming laws that affect
farmers might have a greater impact on the agricultural
sector than focusing on increasing production. He suggested
that changes in the areas of land ownership, property
rights, subsidies and water use might be more relevant to
help farmers; the GOM's compact proposal might require such
changes to have the desired effect. Ambassador Danilovich
strongly supported the idea of legislative changes to help
farmers.


9. (SBU) Ambassador Riley shared his experiences of seeing
numerous plots of land in Morocco that were too small to be
economically viable to farm but existing laws made selling
them for consolidation virtually impossible. He continued
that most farmers in Morocco are 60 to 70 years-old because
young people are moving to the cities. Grossman added that
perhaps MCC could be used to help make the needed changes by
showing the GOM what it needed to make its proposed ideas
succeed. The Minister acknowledged that the GOM had
undertaken limited land reform in the north of the country
and a law was being drafted regarding collective lands. He
added that people needed to be shown the profit in change.
The MCC team clearly made its point to the Minister that the
GOM has other issues to consider in the field of
agriculture.


10. (SBU) The Agency for the Development of the North
presented ideas for rural tourism and economic development
that did not pass MCC's scrutiny. Its $153 million job
creation project revealed a cost per job created of nearly
$130,000 in a country with an annual per capita income of
about $1,800. However, the Secretariat of Water followed
with a very sound presentation on water usage and improving
Morocco's water shortage problem. McLean later commented
that they had done real analysis and had developed real
solutions. The MCC team concluded the day by meeting with
19 members of civil society organizations to hear their
views on the situation in Morocco. Some of them reported
having been consulted by the GOM about what programs the
INDH should pursue but were not aware if the same thing had
happened for the MCA program. They were uniform in their
support for the INDH and what it meant to Morocco.

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LOCAL ASSOCIATIONS
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11. (U) On January 26, the MCC team and Ambassador Riley
were joined by former U.S. Ambassador to Morocco Frederick
Vreeland as they toured local development associations in El
Haouz province. The group visited several rural communities
where local associations were working on infrastructure,
farming, educational and numerous other types of projects to
better their lot in life. They were assisted with technical
assistance from their local or regional governments and
sometimes by USAID, Catholic Relief Services, or other donor
organizations, but most of the work was performed by the
local people. Most of the projects were related to
agriculture and included: olive oil production, bee keeping,
introducing new breeds of livestock that were better suited
for local conditions, crop diversification, cheese making,
milk pasteurization, and many more. Other programs included

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drinking water and irrigation systems, educational programs,
vocational training, and reforestation. El Haouz had been
ranked the poorest of 69 communities nationally just two
years before. However, it was said that, largely due to the
work of the associations, it had risen to 53rd place. The
GOM hopes to harness this type of community spirit to make
its plans for the MCA program a success.

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THE OUTCOME
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12. (SBU) The tour of Morocco concluded on January 27 with
a successful press conference in Casablanca and an interview
with the country's leading economic journal, L'Economiste.
Local press gave wide and favorable coverage of the MCC
visit. By the end of the trip, MCC and the Moroccan MCA
team had reached a better understanding of the requirements
on both sides for a viable proposal. A revised compact
proposal is expected within 60 days.

RILEY