MOROCCO'S CUMBERSOME INVESTMENT CLIMATE

UNCLAS SECTION 01 OF 02 CASABLANCA 000108

SIPDIS
SENSITIVE

STATE FOR NEA/MAG
COMMERCE FOR NATHANIEL MASON
DEPT FOR EB/IFD/OIA
STATE PASS TO USTR
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: EINV ETRD EFIN ELAB PGOV MO
SUBJECT: MOROCCO'S CUMBERSOME INVESTMENT CLIMATE

REF: A. Casablanca 11


1. (SBU) Summary: Despite the rising inward investment trend in the
last three years, discussions with government and diplomatic
interlocutors, civic society, and more than 20 U.S. businesses
operating in Morocco reveal that the country's bureaucratic red
tape, compounded with shortcomings in the country's national and
regional investment centers, frustrates and at times deters small
and medium size investors in Morocco. USAID's efforts to improve
the country's regional investment centers will help to reverse this
disenchantment, but real improvement in Morocco's investment climate
will depend on the government's willingness to rethink and
restructure its modus operandi. End Summary.

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Morocco's Investment Institutions
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2. (SBU) To minimize and accelerate all administrative procedures
related to investment in Morocco, the government established
Morocco's Centre Regional d'Investissement (CRIs) and the country's
national Agence Marocaine de Developpement des Investissements
(AMDI),formerly the Direction des Investissements Exterieurs (DIE).
Morocco's 16 CRIs, created in 2002, aim to make foreign and
domestic investment easier through the centralization of all
concerned administrations. Once fully operational in late 2009,
AMDI will also be responsible for encouraging foreign investment by
actively seeking investors abroad, including the U.S., and
developing investment poles within Morocco.

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A Fragile Investment Climate
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3. (SBU) Despite the rising inward investment trend in the last
three years, discussions with government and diplomatic
interlocutors, civic society, and more than 20 U.S. businesses
operating in Morocco reveal that the country's bureaucratic red
tape, compounded with shortcomings in the country's national and
regional investment centers, frustrates and at times deters
investors. According to Bruno Fernandez, Spain's Economic Counselor
in Casablanca, Morocco's investment climate has deteriorated. His
department's most recent report details widespread losses in Spanish
investment in the last eight months. (Note: Some of the lost
investment is likely linked to a downturn in the Spanish economy,
particularly the real estate sector. End Note.)


4. (SBU) Discussions with more than 20 U.S. businesses at a recent
business roundtable held in Casablanca revealed similar concerns.
Some companies described the investment climate as cumbersome and
opaque, citing difficulties navigating Morocco's CRIs. The former
director general of the country's national investment center, Hassan
Bernoussi, went further by noting that, "Morocco's investment
climate is in disorder and in need of structural reform". Senior
government officials are having a difficult time piecing together a
modus operandi, added Bernoussi, who believes that Morocco's CRIs
should be phased into AMDI to rationalize this system. This
development, he argued, will enable Morocco to begin consolidating
and simplifying the investment structure in the country.


5. (SBU) Citing another obstacle in Morocco's investment climate,
Kjartan Sorenson of USAID's "Improving the Business Climate"
program, argued that the investment climate varies in each region
depending on the CRI director and more importantly on his/her
relationship with the Wali, who is appointed by the King and has
oversight responsibility over the CRI. A change in leadership can
mean a change in a region's investment strategy, added Sorenson.
Another limiting factor is that investments exceeding USD 23 million
are dealt with by a special ministerial committee chaired by the
Prime Minister, which meets once a year, and are outside the purview
of CRI.

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Formal and Informal Solutions
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6. (SBU) In an effort to improve the country's investment climate,
the government has unveiled several recent institutional and legal
measures. In 2008, Casablanca's CRI in conjunction with USAID
launched a USD 270,000 project to improve harmonization of

CASABLANCA 00000108 002 OF 002


investment-related procedures within the city's CRI. Furthermore, a
recently-signed interministerial pact, proposes legislative reforms,
which eliminate the previously existing minimum capital requirement
for investment, create a harmonized business registration form for
investors, and eliminates requirements for certified copies of
selected documents. Moreover, the Ministry of Interior has recently
acquired software called E-Facilitation, which will enable several
government entities involved in the investment process to easily
share information. E-facilitations, which will be fully operational
in five years, will also make basic information available to foreign
investors abroad, including the point of contact's phone numbers,
email, and picture.


7. (SBU) In addition to governmental reforms, small and medium size
investors are using informal conduits with great success to overcome
some of the shortcomings in the country's national and regional
investment centers. Rather than recommending Morocco's CRIs and
AMDI, the Spanish Consulate connects prospective investors with
companies who have had success in penetrating the market. The
success rate is outstanding, according to Fernandez. Similarly, the
American business community at the business roundtable held in
Casablanca unanimously agreed to create an E-forum that will connect
U.S. prospective investors with U.S. companies already operating in
Morocco who have developed best practices.

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Comment
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8. (SBU) The progress made in developing institutions and laws that
encourage foreign investment has been hampered by the inability of
the government to address the shortcomings of CRI and AMDI. In
order to capitalize on the Free Trade Agreement with the United
States, Morocco must work on improving its investment climate - this
means simplifying business procedures and creating a clear
investment structure. Without these improvements, international
investors who don't know their way around will find it difficult to
succeed in their local ventures, remain in country, and create
sustainable employment. Even more importantly to the country's
long-term development, if these improvements are made, small local
businesses stand to benefit the most. End Comment.