Identifier
Created
Classification
Origin
07CASABLANCA102
2007-06-07 09:15:00
UNCLASSIFIED
Consulate Casablanca
Cable title:  

PROS AND CONS OF INVESTING IN MOROCCO

Tags:  ECON EFIN KDEM MO 
pdf how-to read a cable
VZCZCXRO8213
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHCL #0102/01 1580915
ZNR UUUUU ZZH
R 070915Z JUN 07
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 7723
INFO RUEHRB/AMEMBASSY RABAT 7984
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 0280
RUEHFR/AMEMBASSY PARIS 0560
RUEHNK/AMEMBASSY NOUAKCHOTT 2261
UNCLAS SECTION 01 OF 02 CASABLANCA 000102 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN KDEM MO
SUBJECT: PROS AND CONS OF INVESTING IN MOROCCO

UNCLAS SECTION 01 OF 02 CASABLANCA 000102

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN KDEM MO
SUBJECT: PROS AND CONS OF INVESTING IN MOROCCO


1. (SBU) Summary. Morocco is an increasingly attractive investment
destination, as evidenced by the on-going series of events in
Casablanca and other cities to discuss opportunities for potential
investors. Many factors make Morocco a good place for Americans to
invest, including the FTA, flexibility in setting business terms,
and a qualified, low-cost workforce. At the same time, challenges
remain. They include: a questionable supply of skilled workers;
lack of capacity to serve the U.S. market; bureaucratic and
regulatory obstacles; and a weak judicial system. End Summary.

--------------
THE PROS OF INVESTING IN MOROCCO
--------------


2. (U) The newly-released 2007 Morocco Trade and Investment Guide,
published by the American Chamber of Commerce, lists the reasons
that Morocco offers a "welcoming business environment." At the top
of the list are low labor costs, proximity to Europe and the U.S.,
political and economic stability, and prime tourist attractions.
Also mentioned are reforms such as stricter enforcement of
intellectual property laws and an improved labor code.


3. (U) The Free Trade Agreement (FTA) between Morocco and the U.S.,
and its "investor-friendly rules," is also a key incentive.
Companies such as Paris Texas - Chapstar have found that they can
deliver Moroccan-made specialized fabrics to the U.S. market at a
lower cost than similar goods manufactured in Egypt or China, thanks
to the tariff relief provided by the FTA. More and more companies,
including Italian shoe manufacturers and others, are seeking ways to
take advantage of FTA benefits.


4. (SBU) Another incentive is the flexibility offered by a country
that actively promotes and is eager for investment. Anwar Dahab,
Managing Director of Dell Computer Morocco, says that his company
particularly appreciated the ability to negotiate its terms when it
set up shop in 2003. Dahab noted that he has worked directly with
Prime Minister Driss Jettou to design an incentive package for the
company's upcoming move to Casablanca's new Casashore. Dahab
conceded that Morocco did not immediately deliver on all its
promised incentives for its initial investment, but that it has been
able to resolve the problem, and appreciates the responsiveness and
flexibility that Morocco offers investors.



5. (U) Morocco also seems able to provide a qualified and relatively
low-cost workforce in many areas. Dell, for example, went from 700
employees at the end of 2004 to 1400 just a year later. The ability
to expand so rapidly testifies to a pool of qualified workers in
some key sectors. In addition, unemployment is a significant
problem in Morocco, further inducing the government to provide
incentives to businesses that bring jobs to the country.

--------------
THE CONS OF INVESTING IN MOROCCO
--------------


6. (U) Despite the advantages of investing in Morocco, there are
challenges as well. Language and cultural barriers can make doing
business difficult, and companies often have trouble finding
information about Moroccan businesses in English. Sometimes the
information they do find is written so poorly that it puts off
potential partners or investors. As in any country, potential
investors can also be victimized by unscrupulous local economic
operators. The problem is compounded by the slow pace and
complexity of the Moroccan judicial system, which is widely
perceived to be a key impediment to foreign investment.


7. (U) The labor market story is also not uniformly positive,
notwithstanding Dell's experience. Morocco's aggressive tourism
promotion policy aims to create 80,000 additional rooms by 2010,
generating 72,000 new jobs. Already, however, some new
establishments in Marrakech and other popular destinations report
difficulty in recruiting qualified staff. Similarly, Morocco's goal
of training 10,000 engineers by 2010 is also falling behind
schedule. In addition, investors are sometimes surprised to find
that when it comes to labor costs, Morocco may be inexpensive
compared to Europe or the U.S., but it is not a low-cost country
compared to many other emerging markets.


8. (U) Another potential concern for investors is the ability of
Moroccan businesses to satisfy the demands of the U.S. market.
Speakers at the recent Moroccan-American Bridges conference pointed
out that Moroccan exporters are sometimes so busy filling orders for
other markets, usually Europe, that they have little excess capacity
for the U.S. and little ability to increase production quickly.
Another speaker noted that this problem also exists in the
agribusiness sector, as does that of reliability and standards.

CASABLANCA 00000102 002 OF 002




9. (SBU) While Morocco has put a great deal of effort into
instituting reforms that improve the investment climate, there is
still work to be done. Regulations in many areas remain opaque and
time-consuming, a problem compounded by the judicial shortcomings
cited above. To cite one key example, implementation of Morocco's
new 2004 labor code remains extremely problematic. Even companies
that fully comply with its provisions can find themselves dragged
into court by disgruntled employees, where they can face judgments
that have little relation to the underlying facts of the case. On
the whole, Morocco is reform-minded and moving forward, but
investors still need to be cautious about perceived versus actual
benefits from newly instituted changes.


10. (SBU) Unfortunately, the rise of terrorism in Morocco is an
issue that potential U.S. investors have to consider, particularly
for those interested in the tourism sector. Following recent
suicide bombings in Casablanca, however, Moroccans have been quick
to note that their experiences with terrorism are similar to those
in many Western countries. According to Anwar Dahab of Dell
Computer, "Morocco is a stable country and terrorism in Morocco is
like what happened in Madrid or London." In other words, it happens
everywhere now and does not indicate fundamental instability. At
the same time, the GOM has stepped up efforts to track and capture
terrorists in Morocco, and is keenly aware of the negative impact
terrorist acts could have on the country's ability to encourage
Foreign Direct Investment as an integral part of its growth
strategy.


11. (SBU) Comment. Morocco offers many compelling reasons for
American businesses to invest in the country. Several U.S.
companies, including Dell Computer, Colony Capital, International
Paper, Fruit of the Loom and Century 21, have had positive
experiences. The GOM's eagerness to court international investors,
however, sometimes masks the challenges of investing in Morocco.
Not only is Morocco anxious to downplay any downsides to investing
here, but many of the country's reforms and initiatives are very
new, requiring time and tweaking before investors can benefit fully
from them. End Comment.

GREENE