MOROCCAN PRIME MINISTER UNVEILS AMBITIOUS BUT

C O N F I D E N T I A L SECTION 01 OF 02 RABAT 001652

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/25/2017
TAGS: PGOV ECON EFIN MO
SUBJECT: MOROCCAN PRIME MINISTER UNVEILS AMBITIOUS BUT
VAGUE ECONOMIC PROGRAM

REF: RABAT 1647

RABAT 00001652 001.2 OF 002


Classified By: Economic Counselor Stuart Smith, reasons 1.4 (b) & (d).


1. (SBU) Summary: In his inaugural speech to Parliament on
October 24, incoming Prime Minister Abbas El-Fassi outlined
an ambitious but vague economic program that largely
represents continuation of efforts undertaken by Prime
Minister Jettou and his team. Fassi pledged to seek to
raise Morocco's growth rate from its recent average of 5
percent to six percent a year, reduce employment to 7 percent
by creating 250,000 new jobs each year, reform Morocco's
agricultural sector, devolve planning authority to the
country's regions, and develop "a new social contract."
These initiatives largely track with priorities the King
identified in his Throne Day speech. The speech was the sole
topic at an extended Council of Ministers' meeting chaired by
the King in Marrakech earlier on October 24, as a result of
which El-Fassi was two hours late in appearing before
Parliament. Opposition leaders criticized the Prime Minister
for this "slight" to Parliament, and also dismissed the
speech, characterizing it as a "list of promises" rather than
a coherent program. End Summary.


2. (U) Prime Minister El-Fassi's inaugural discourse strongly
accentuated economic and social initiatives, but also touched
on political priorities including the Western Sahara and
reform of the Moroccan press code. Not surprisingly, given
that his government is based on the same coalition (save for
the Mouvement Populaire's departure to the ranks of the
opposition) and includes many familiar faces, much of the
government's roadmap represented continuation of the
priorities of the outgoing government of Driss Jettou. Thus
the goal of enhanced growth and reduced unemployment (with
targets of 6 percent annually for the former and 7 percent
for the latter at the end of the government's term in 2012),
will be pursued through actions to support small and
medium-sized companies, and continuation and intensification
of the "grands chantiers" (or major projects) launched in
recent years. The government also pledged to "make Morocco a
platform for investment and exports" by improving the
business environment and doubling investment during its term,
to fully implement and extend the Vision 2010 program for
tourism, and to continue extensive construction of "social
housing" to replace the shantytowns that dot the country.


3. (U) El-Fassi promised increased attention to a number of
the areas where the outgoing government's record was seen as
weak, including "urgent reform" of Morocco's judiciary
(albeit without mentioning specific proposals),and further
simplification and lightening of Morocco's onerous fiscal
regime. As reflected in its 2008 budget proposal, the
government will reduce the company tax from 35 to 30 percent
(from 39.5 to 35 percent for banks),and ultimately plans to
reduce Morocco's 20 percent value added tax as well. Like
most preceding governments, El-Fassi also pledged action to
reform the country's tangled system of subsidies for basic
commodities like fuel, gas, flour and bread. At the same
time, cognizant of recent protests over price increases for
many such basic goods, he promised that 19 billion dirhams
(approximately 2.4 billion USD) would be devoted to the
system, an amount equal to 2/3's of the government's planned
investments in 2008. El Fassi promised, however, that this
total would be "rationally managed" to ensure it reached its
intended beneficiaries.


4. (U) This increased expenditure on compensation is one part
of what El-Fassi termed a "new social contract," aimed at
improving the purchasing power and quality of life of the
Moroccan public by increasing salaries and holding the line
on prices. The vision was short on details, but will
apparently be based in part on revitalizing the country's
competition council, reducing the number of intermediaries in
distribution networks (through the Rawaj program for internal
commerce) and ultimately raising salaries for the lowest-paid
workers. Another new emphasis was on agricultural reform,
committing the government to a "new approach" that will take
account of recent droughts, water shortages, and the
consequences of Morocco's free trade agreements.


5. (U) Finally, El-Fassi also outlined a new approach to
planning for development, arguing that too often programs
have been introduced from the top down, with the result that

RABAT 00001652 002.2 OF 002


they fail to take into account specific local conditions.
His government, he said, would turn to a new system of
contracts between the national government and the regions, to
permit the regions themselves to identify their priorities,
and then formulate national strategy based on these
proposals.


6. (SBU) Political topics were only briefly touched upon in
the course of El-Fassi's 90 minute discourse. Beyond his
commitment to accelerate judicial reform, he made ritual
mention of Morocco's Western Sahara policy, and pledged to
continue the country's democratic opening, including through
adoption of a new press code. With many reports crediting
the government's composition to Palace intervention (reftel),
the Palace's intent to closely monitor the government's
actions was evident in the fact that the speech was the sole
topic of an extended Council of Ministers' meeting chaired by
the King in Marrakech. As a result, El-Fassi and the
government were late in returning to Rabat to deliver the
message, and kept deputies waiting for several hours.


7. (SBU) After the Council of Ministers' meeting, Abbas spoke
briefly to the press, offering warm remarks about the need
for good relations with Algeria. Though he did not focus on
the issue in his speech, this was seen by observers as a
positive gesture from a traditional hard-liner on
Morocco-Algeria relations.


8. (C) Comment: There were many empty seats in a chamber that
was filled in recent days for both the King and for French
President Sarkozy. El-Fassi's speech was long on
generalities and short on specifics, a fact seized upon by
opposition critics. A spokesman for the Justice and
Development Party indicted El-Fassi for "lack of vision and
coherence," while members of the the Mouvement Populaire
noted the absence of any "concrete proposals" in his
discourse and speculated (uncharitably) that he "doesn't know
what he said." There was also apparently some dissension in
the government camp about parts of the speech: press reports
indicate that new Minister of Economy and Finance Mezouar
took umbrage at some specific growth and tax provisions,
feeling they had not been properly vetted with him and his
department.


9. (C) Comment Continued: Whatever its perceived failures,
the speech did make clear that while El-Fassi's government
represents continuity rather than rupture, increased
attention will be devoted to problem areas such as the
judiciary, education, Morocco's fiscal regime, and
agriculture. These are all areas that cry out for urgent
attention, but the critical reaction El-Fassi received makes
clear that he will not enjoy much of a honeymoon to pursue
them. End Comment.


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Riley