|06RABAT73||2006-01-18 07:44:00||UNCLASSIFIED||Embassy Rabat|
UNCLAS RABAT 000073
STATE FOR EB/IFD/OIA
STATE PLEASE PASS TO USTR
USDOC FOR MAC/ANESA
TREASURY FOR OASIA
TAGS: EINV ETRD EFIN ELAB OPIC KTDB PGOV MO
SUBJECT: MOROCCO 2006 INVESTMENT CLIMATE STATEMENT
REF: 05 STATE 202943
THE FOLLOWING IS THE 2006 INVESTMENT CLIMATE STATEMENT
A.1. Openness to Foreign Investment
The Moroccan government actively encourages foreign
investment and is taking measurable steps to improve the
investment climate for foreign and domestic investors.
Moroccan officials hope that the implementation of the U.S.-
Morocco Free Trade Agreement (FTA) on January 1, 2006 will
encourage more U.S. investors in Morocco to take advantage
of duty-free access to both the U.S. and European markets.
In addition to tariff elimination, the FTA with Morocco
includes investment provisions and commitments to increase
access to the Moroccan services sector for American firms.
King Mohamed VI and the present government have made
attracting foreign and domestic investment a high priority.
With the assistance of the U.S. Agency for International
Development (USAID), the government is streamlining
paperwork associated with investment and has established a
series of Regional Investment Centers to decentralize and
accelerate investment-related bureaucratic procedures.
The October 1995 investment code applies equally to foreign
and Moroccan investors, with the exception of foreign
exchange provisions, which favor foreign investors. Foreign
investment is now permitted in most sectors, with the
notable exception of phosphate mining. Foreign investment
is permitted in the agricultural sector, although foreigners
are prohibited from owning agricultural land. The law does
allow for long-term leases of up to 99 years; it also allows
agricultural land to be purchased if it will be used for non-
agricultural uses, e.g. tourism.
Morocco welcomes foreign participation in its privatization
program, and does not pre-screen or select foreign
A.2. Conversion and Transfer Policies
The Moroccan dirham is convertible for all current
transactions and for some capital transactions, notably
capital repatriation by foreign investors if the original
investment is registered with the foreign exchange office.
Foreign exchange regulations allow expatriate employees to
repatriate 100 percent of their salaries.
Foreign exchange is readily available through commercial
banks for the repatriation of dividends and capital by
foreign investors, for remittances by foreign residents, and
for payments for foreign technical assistance, royalties and
licenses. No prior government approval is required.
The Central Bank sets the exchange rate for the dirham
against a basket of currencies of its principal trading
partners. In April 2001, the exchange rate was effectively
devalued by five percent as a result of a realignment of the
basket of currency. However, the dirham has appreciated in
relation to the dollar since 2003 due to strong influence of
the Euro in Morocco's currency basket. Changes in the rates
of individual currencies reflect changes in cross rates.
Many international and domestic observers believe that the
dirham is overvalued.
A.3. Expropriation and Compensation
There have been no significant expropriations in Morocco
since the early 1970s. The Embassy is not aware of any
recent, confirmed instances of private property being
expropriated for other than public purposes, or being
expropriated in a manner that is discriminatory or not in
accordance with established principles of international law.
A.4. Dispute Settlement
The Embassy is not aware of any U.S. companies currently
involved in investment disputes with the Moroccan
Minor disputes are generally resolved with the relevant
government agency. There is a consensus among Moroccan
business leaders that the recent establishment of a network
of commercial courts has somewhat improved commercial law
operations, although enforcement of decisions still seems to
be a problem. Morocco is a member of the International
Center for the Settlement of Investment Disputes (ICSID) and
a party to the 1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (with reservations)
and the 1965 Convention on the Settlement of Investment
Disputes between States and Nationals of Other States.
A.5. Performance Requirements/Incentives
There are no foreign investor performance requirements or
requirements regarding local value added, substitution of
imports or employment of Moroccan workers. Incentives for
foreign investors have been created under the Free Trade
Zone laws, as well as under the Investment Code for large-
scale investments. Incentives can include reduced land
acquisition costs and tax breaks. Also, if the value of a
foreign investment is more than USD 21.5 million, investors
can sign a special investment contract with Morocco that
brings additional negotiated incentives. In addition, the
Moroccan government offers specific incentives elating to
tourism designed to help Morocco achive the goal of
attracting 10 million tourists by2010.
American citizens may enter Morocco for aperiod of three
months without a visa. A residence permit is required to
remain in Morocco for moe than three months. Resident
foreigners who wih to travel outside the country and return
to Moocco must apply for a return visa that is valid fo
one year. However, American citizens are exempt from this
A.6. Right to Private Owership and Establishment
Private ownership is prmitte in all but a few sectors that
are specifcally reserved for the state, such as phosphate
ining, power generation and foreign ownership of
griculture land (except when purchased for use in on-
agricultural enterprises, e.g. tourism). Th government
passed a law in February 2003 liberaizing the audiovisual
sector and lifting the govrnment monopoly over all radio
and television trasmissions; although it may take some time
beforenew radio and television stations actually beginoperating. Apart from these few exceptions, privae
entities may freely establish, acquire, and dipose of
interests in business enterprises.
A.7 Protection of Property Rights
The U.S.-Morocco FTA, in force as of January 1, 2006,
contains some of the strongest Intellectual Property
protections in any free trade agreement. In December 2005,
the Moroccan parliament passed amendments to its existing
intellectual property legislation that bring Morocco into
compliance with the FTA Intellectual Property provisions.
Morocco has a non-discriminatory legal system that is
accessible to foreign investors. The commercial courts,
established in 1998, have begun to mitigate the weakness in
commercial proceedings. A system of commercial arbitration
was also created in April 1998.
Secured interests in property are recognized and enforced
through the "Administration de la Conservation Fonciere."
The GOM has also passed a law permitting the development of
a secondary mortgage market.
A.8. Transparency of the Regulatory System
Although not perfect, Morocco's regulatory system is
becoming increasingly transparent. One of the most
important reforms in recent years is the requirement that
significant government projects must be publicly announced
through a competitive call for tender. Liberalization of
the foreign exchange allocation system, the import regime,
and the financial services sector has also reduced the
government's role in the economy.
In accordance with the provisions of the FTA, the government
is working to ensure that its procedures are transparent,
efficient and quick. Still, routine permits, especially
those required by local governments, can be difficult to
obtain. In response to these problems, the government has
launched reforms to streamline bureaucratic procedures.
A.9. Efficient Capital Markets and Portfolio Investment
The Moroccan government has adopted a number of measures to
liberalize the banking system in recent years. While these
reforms have introduced additional competition in the
banking sector, in practice, banks do not compete
extensively on deposit and lending rates, except for large
customers. In January 2005, the Moroccan parliament passed
a bill granting the Central Bank greater autonomy. Morocco
also passed a comprehensive financial sector bill in 2005
designed to strengthen banking supervision and improve risk
management practices in the banking sector.
Credit is allocated on market terms, and foreign investors
are able to obtain credit on the local market. There are
some cross-shareholding arrangements, but they are not
tailored to exclude foreign investment. The Embassy has not
heard of any efforts by the private sector or industry to
restrict foreign participation in standard setting
organizations. The government has actively sought out the
participation of foreign investors for discussions on
improving the business climate in Morocco.
Moroccan banks are generally sound, reflecting in part the
limited competition within the sector, or from other
financial institutions, e.g. a corporate bond market. While
the overall rate of non-performing assets in the banking
system is 12.0 percent, a 13.5 percent cap on the interest
banks can charge on all credits restricts local banks from
lending to higher categories of risk.
Some foreign banks are critical of what they view as a lack
of proportionate participation in the Moroccan Bankers'
Association. Moroccan banks are largely in compliance with
the Basel I standards and seem poised to be stay up to date
with Basel II compliance, which the Moroccan Central Bank
will require by 2008. Banks are supervised on a
consolidated basis and must provide statements audited by
certified public accountants. Morocco is moving to enact a
comprehensive anti-money laundering law in line with FATF
and Egmont Group recommendations.
The Casablanca Stock Exchange (CSE) was founded in 1929 and
re-launched as a private institution in 1993. The Exchange
prospered during the early 1990s, but from late 1998 through
2002 suffered a long, severe bear market, markedly reduced
trading volumes, a decline in listings to approximately 50
companies and a reduction of market capitalization to the
equivalent of USD 8.3 billion at the end of 2002 at same
A marked rebound in 2003 followed by healthy performance in
2004 and 2005 reflect a return in investor confidence.
Market capitalization at end 2003 increased to MAD 115.5
billion or USD 13.2 billion at current rates, a 32.5 percent
increase in local currency terms and a 60 percent increase
in dollar terms over 2002. Performance (end 2004) was strong
with the market up roughly 12 percent over 2003 in local
currency terms, and roughly 17 percent in dollar terms. 2005
market capitalization increased MAD 12.4 billion to reach
MAD 253.3 billion or USD 29 billion.
A.10. Political Violence
A series of terrorist bombings took place in Casablanca on
May 16, 2003. U.S. Government facilities were not the
target of these attacks, and no Americans were killed or
injured. Moroccan security services have moved quickly and
effectively to round up terrorists associated with the May
16 attack, but the potential for further attacks remains.
Demonstrations occur frequently in Morocco and usually
center on domestic issues. During periods of heightened
regional tension, large demonstrations may take place in
major cities. Although these demonstrations have been
peaceful, well organized, and well controlled by the police,
some have been anti-American with isolated incidents of
violence. The last instance of mass domestic political
violence was rioting in Fez in December 1990.
The sparsely settled Western Sahara was long the site of
armed conflict between the Moroccan government and the
Polisario Front, which demands independence. A cease-fire
has been in effect since 1991 in the U.N. administered area,
but the territory remains disputed between Morocco, Algeria,
and the Polisario, and lack of resolution to the dispute
hampers economic and political integration in the region.
Morocco has a broad body of laws and regulations to combat
corruption. Corruption nevertheless exists and U.S.
companies have at times identified it as an obstacle to
doing business in Morocco.
The previous government of Prime Minister Youssoufi made
efforts to strengthen transparency and the rule of law. It
initiated cooperation with Moroccan civil society and
business organizations as well as with the World Bank and
foreign donors on measures to fight corruption more
effectively and launched a high-profile public education
campaign. Since coming to power in 2002, the new government
of Prime Minister Jettou has continued to support such
efforts; however it is worth noting Morocco has fallen
precipitously in ranking by the Transparency International
corruption index over the past four years, from 52nd in 2002
to 78th place in 2005. The worsening of corruption is well
publicized in Morocco and Transparency International
attributes the dramatic increase to weak enforcement of anti-
corruption related laws.
Offering and accepting bribes are illegal in Morocco.
Punishments range from fines to jail sentences. Bribes to a
foreign official are not tax deductible.
B. Bilateral Investment Agreements
The U.S. and Morocco are party to a comprehensive Free Trade
Agreement (FTA) to provide duty free access to over 95% of
goods and services. The agreement also opened up investment
opportunities in government procurement, e-commerce,
telecommunications and financial services. The FTA's
investment rules, including increased transparency in rules
and regulations, protections against nationalization,
ability to repatriate profits and assurances of non-
discriminatory "national treatment", build upon previous
agreements. The U.S. Morocco FTA went into effect on
January 1, 2006.
Morocco also recently completed a Free Trade Agreement with
Turkey that also came into effect on January 1, 2006 and is
expected to complete the Agadir Initiative, a free trade
agreement with Tunisia, Egypt, and Jordan.
C. OPIC and other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) is a self-
sustaining, U.S. government agency that encourages U.S.
Businesses to invest in developing countries and emerging
market economies. OPIC's key products are loan guarantees,
direct loans and investment insurance against foreign
political risk, expropriation and convertibility. Morocco
has had an OPIC agreement since 1961, which was most
recently updated in March 1995. Similar agreements are in
effect with the agencies of France, Sweden, the United
Kingdom, and Switzerland. Morocco is also a member of the
Multilateral Investment Guarantee Agency (MIGA) and the
Kuwait-based Arab Investment Guarantee Organization (OAGI).
Once strong and politically influential, the Moroccan trade
union movement is now fragmented and no longer possesses the
political clout it carried 45 years ago when it helped lead
the country to independence. Nevertheless, five of the 19
trade union federations retain the potential to influence
political life. Although unions claim a higher membership,
Morocco has about 600,000 unionized workers, less than six
percent of the 10.9 million workforce.
Moroccan labor law and practice draw from French models.
Labor law makes firing workers for cause cumbersome.
Tripartite negotiations between government, management, and
labor resulted in a new Labor Code that went into effect on
June 7, 2004. The government continues to rely on a
tripartite process to reach accords on a reduction in the
workweek from 48 to 44 hours, and on a 10 percent increase
in the minimum wage. The new labor code details restrictions
on the number of overtime hours worked per week and rate of
pay for holidays, nightshift work, and routine overtime.
Morocco has ratified the International Labor Organization
(ILO) convention covering the right to organize and bargain
collectively, and any group of eight workers can organize.
Article 14 of the Constitution gives workers the right to
strike, but no detailed law exists to define it. For a
union to engage in collective bargaining it must have at
least 35 percent of the enterprise's workforce as registered
members. The Ministry of Interior occasionally intervenes,
especially if the government believes strategic interests
are threatened. There are mandatory procedures governing
the settlement of disputes, though the government settles
them on a case-by-case basis. The number of workdays lost to
strikes has diminished markedly from over 135,000 in 2000 to
less than 23,500 in 2004.
The official national unemployment figure is 11.0 percent
with urban unemployment at approximately 18.0 percent. The
minimum wage is currently 2,010 dirhams per month,
approximately 240 USD.
E. Foreign Trade Zones/Free Ports
There is a free trade zone in Tangier in northwestern
Morocco. The zone is open to both Moroccan and foreign
companies. The companies located in the zone may import
goods duty free and are exempt from other taxes. Moroccan
labor laws apply to the zone, but few, if any, firms are
unionized. There is also an offshore banking law covering
Foreign Direct Investment Statistics
The Moroccan foreign exchange office maintains balance of
payments statistics that include annual foreign exchange
inflows for private foreign investment. These statistics
differentiate between foreign direct investment (purchases
of companies or increases in capital), portfolio investment,
and short-term financing for current account expenditures
(e.g. lending to a subsidiary for purchases of equipment).
There are no statistics on the stock of foreign investment
in Morocco. However, foreign direct investment totaled
approximately 8.4 billion USD from 1967-2001. The following
tables are based on the balance of payments statistics.
Foreign direct investment in Morocco
(millions of USD)
Year Total FDI Percent of GDP
1997 800.9 3.3
1998 384.6 1.1
1999 945.6 2.7
2000 245.8 0.8
2001 2732.2 8.0
2002 555.6 1.3
2003 2430.0 5.5
2004 1070.5 2.2
2005 (proj) 2133.6 4.1
Private Foreign Investment Inflows* by Country of Origin
(Millions of USD)
Country 2000 2001 2002 2003 2004
United States 35.4 83.2 37.2 53.1 77.8
France 186.6 2474.3 210.1 316.9 822.9
Spain 56.7 85.7 34.7 1896.4 59.4
Germany 18.5 23.8 42.9 15.6 58.5
United Kingdom 49.3 26.7 29.9 29.2 57.0
Netherlands 229.3 15.3 20.2 7.7 14.9
Benelux 25.9 9.7 28.2 29.4 43.2
Saudi Arabia 13.5 7.4 14.8 17.1 86.2
Switzerland 23.8 41.6 32.2 37.5 93.6
Portugal 79.7 127.3 21.0 3.7 2.6
IFC 408.5 -- -- -- --
UAE 6.0 1.1 10.7 24.7 163.5
Others 42.1 59.0 82.4 68.4 290.8
Total 1175.3 2955.1 564.3 2499.7 1770.4
* Includes portfolio investment and short-term financing for
current account expenditures.
N.B. 2000 2001 2002 2003 2004 2005
Exchange rate (dh/USD) 10.6 11.2 11.0 9.57 8.86 8.88
GDP (billions of USD) 33.0 34.2 37.2 43.7 50.1 50.7
Private Foreign Investment Inflows* by Sector
(Millions of USD)
Sector 2000 2001 2002 2003 2004
Industry 106.8 222.1 186.2 1994.4 239.0
Fishing 1.3 -- 2.1 15.4 2.6
Tourism 12.1 29.5 10.1 34.5 190.0
Services 29.0 87.8 79.8 90.2 65.5
Transport 1.6 2.5 0.3 1.7 4.9
Public Works 7.9 13.3 0.6 7.4 11.9
Banking 67.5 31.8 35.6 8.4 186.1
Real Estate 55.0 73.0 114.9 176.7 231.1
Telecommunications 752.6 2354.8 36.3 65.6 677.3
Other 141.5 140.3 98.4 105.4 162.0
Total 1175.3 2955.1 564.3 2499.7 1770.4
* Includes portfolio investment and short-term financing for
current account expenditures.
Major Foreign Investors
Parent company: Goodyear
Sector: tire production
Number of employees: 600
Industries Marocaines Modernes
Parent company: Procter and Gamble
Sector: soaps and toiletries
Number of employees: 500
Jorf Lasfar Energy Company
Parent company: CMS Energy
Sector: independent power project
Number of Employees: 500
$1.2 billion joint venture with ABB
Coca-Cola Export Corporation
Parent company: The Coca-Cola Export Corporation
Number of employees: 3200
J.R.A. Morocco S.A.
Parent company: Jordache Enterprises Inc.
Sector: manufacture of jeans
Number of employees: 1000
Delphi Automotive (former Division of GM)
Sector: auto part manufacturer
Number of employees: 1500
Sector: food products
Number of employees: 60
Parent company: S.G.S. Thomson (France)
Sector: electronic components and semiconductor
Number of employees: 1,600
Pechiney - MMA
Parent company: Pechiney (France)
Sector: aluminum cookware manufacturing
Number of employees: 1,280
Parent company: Bouygues S.A. (France)
Sector: civil engineering
Number of employees: 1,000
Parent company: Renault S.A. (France)
Sector: motor vehicle assembly
Number of employees: 800
Parent company: C.G.E. (France)
Sector: electric cable and transformer manufacturing
Number of employees: 675
Parent company: Hoechst AG (Germany)
Sector pharmaceutical manufacturing
Number of employees: 350