MOROCCO PORT REFORM: EYE ON THE FTA

					  UNCLAS RABAT 000527 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EB/TRA/OTP AND NEA/MAG 
 
E.O. 12958: N/A 
TAGS: ECON EWWT ETRD MO
SUBJECT: MOROCCO PORT REFORM: EYE ON THE FTA 
 
REF: RABAT 0276 
 
					

1. Summary: Morocco is making wide-ranging reforms to its
port sector, a key piece of an economy which handles 98
percent of the country's of foreign trade. A law passed in
December 2005 opens the sector to private operators, breaking
the state's monopoly over commercial cargo services and
creating an independent regulatory agency to oversee the
sector. The reforms should lower costs for importers and
exporters, improving the conditions for trade. The GOM's
stated goal for the liberalization is to get Morocco ready
for what Transport Minister Karim Ghellab called "maritime
transport in the era of free trade." End Summary.



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Port Reform: FTA in Sight


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2. Commercially, Morocco is an island. Its eastern border
with Algeria has been closed for more than a decade, and the
country is surrounded by the Sahara desert to the south and
by the sea to the north and west. As such, a full 98 percent
of Morocco's foreign trade comes and goes via the country's
12 international seaports, making the sector one of utmost
importance to the economic well-being of the state.



3. Moroccan ports currently operate under a unique system of
dual cargo handling, with state operator/regulator ODEP
holding a monopoly on dockside cargo handling and a few
private stevedoring companies operating an oligopoly over all
on-board cargo loading and unloading activities. This
duality drives up costs for shippers, importers and
exporters; as a result, handling costs for an average
container are around $220 in Moroccan ports versus $130-$150
for most Mediterranean ports.



4. A law passed in December 2005 will break ODEP's monopoly
over land-based cargo handling and open the sector to
competition from private firms, creating price and service
competition. It will allow the same firm to handle cargo on
board ships and on the dock and weaken the oligopoly
situation currently enjoyed by on-board stevedoring firms.




5. The new law splits ODEP into two separate entities; an
independent regulator called the National Ports Agency (ANP),
which will serve as the national ports authority, and the new
Ports Exploitation Company (SODEP), a government-owned
commercial operator that will compete with private firms for
the business of on-loading and off-loading cargo. SODEP will
inherit ODEP's existing commercial activities, along with its
infrastructure, employees and equipment.



6. The National Ports Agency, ODEP's regulatory progeny,
will perform a standard regulatory role, coordinating the
different actors within the ports, administering commercial
port operations, launching tenders and approving new entrants
into the field. SODEP, the state operator's commercial
offspring, is expected to start operating in the fall of


2006. It will initially remain a state company but may
eventually be privatized.



7. The reform law, which was largely based on a study done
by Drewry Shipping Consultants from the UK, will go into
force gradually during 2006 as decrees of application are
created. Minister of Transport Karim Ghellab chose his
right-hand man at the Ministry - the young and able
technocrat and former policy director Mohammed Abdeljalil -
to guide ODEP through the reform period.



8. The legislation was hotly contested by ports workers -
joined by national labor union UMT - who fiercely resisted
job losses by ODEP workers or any change to their status as
state employees. The government successfully resisted
pressure to water down the reforms and assuaged workers'
demands by negotiating terms that guarantee current ODEP
workers no drop in salary or benefits.



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Open for Business


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9. The GOM's aims are to achieve a better, cleaner
regulation by isolating the regulator from the commercial
operator, and to lower costs by opening stevedoring functions
to competition. National Ports Director Jamal Benjelloun
said the reforms are essential to accommodate the country's
rapid opening to foreign trade, citing the U.S.-Morocco FTA,
Morocco's deepening engagements with the European Union, and
with newer free trade partners like Turkey, Jordan, Egypt and
Tunisia.



10. ODEP director Abdeljalil said another key motivation for
restructuring the sector was to decentralize commercial
control of port operations and prevent one company from
immobilizing a port through strikes.



11. Comment: These reforms are a smart move and are well
overdue, since without an efficient, competitive port system
the country will not be able to fulfill its ambitions to
expand and diversify its foreign trade. The government has
bravely weathered criticism from port workers unions and
withstood pressure to dilute out the reforms. We expect to
see a better-functioning sector in the years to come. End
Comment.

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Riley