MOROCCO'S MIDDLE CLASS PART III: DISCONTENT WITH

UNCLAS CASABLANCA 000063

SENSITIVE
SIPDIS

FOR NEA/MAG
STATE PLS PASS TO COMMERCE FOR NATHANIEL MASON

E.O. 12958: N/A
TAGS: ECON KISL MO PGOV PREL
SUBJECT: MOROCCO'S MIDDLE CLASS PART III: DISCONTENT WITH
PROSPECTS, MIDDLE CLASS TURNS TO ISLAMISTS

REF: A. CASABLANCA 36

B. CASABLANCA 48

C. 08 CASABLANCA 213

This is the final piece in a three part series on Morocco's
middle class.


1. (SBU) Summary: Private and public sector efforts to
strengthen Morocco's middle class have done little to quell
the increasing discontent among the lower echelons of
Morocco's middle class. Conversations with contacts in
academia and civic society reveal that this segment of
society is increasingly turning to Morocco's
Islamist-oriented Party of Justice and Development (PJD),
perceived as more capable of facilitating middle class
aspirations.

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Public & Private Efforts to Boost the Middle Class
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2. (SBU) Both the private and public sector have tried to
raise the income level of and expand Morocco's middle class,
even before King Mohammed VI raised the profile of the issue
last year. The 2009 Finance Law continued the country,s
incremental reform and lowering of income tax levels, with
the top rate dropping to 40 percent from 42 percent. This
amounts to USD 37 to 75 a month per income earner in the
middle class. Moreover, the percentage of income sheltered
from taxes was increased from 20 to 23. Professor Bekouchi of
Hassan II University told Econoff that Morocco needs exactly
these types of fiscal measures to increase middle class
incomes and enhance the social mobility of the poor.


3. (SBU) Private sector initiatives have also targeted the
middle class. Morocco's leading business journal,
L'Economiste, recently reported on the mechanism through
which Moroccan financial institutions are "Courting the
Middle Class." It noted that the country,s largest banks
have focused recently on increasing their product lines and
services for Small and Medium Enterprises (SMEs),primarily
owned by middle class households. Nevertheless, not all
banks have been proactive. Albert Le Dirachi, the bank
Societe General's CEO, admits his bank does not have a
specific strategy in mind to target Morocco,s middle class.
(Note: Morocco's Central Bank recently asked banks to
facilitate loan approvals to increase opportunities for
financing, in particular for SMEs. End Note.)

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Private & Public Partnerships
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4. (SBU) Some innovative partnerships between the private and
public sector have also taken hold to bolster Morocco,s
middle class. The GOM has recently come to the conclusion
that a collaborative multi-sector plan is the only feasible
approach to strengthen Morocco,s middle class, asserts a
senior official at Morocco,s largest bank Attijariwafa.
This partnership approach is evident in efforts to increase
the accessibility of middle class residential units.
Attijariwafa recently signed a convention with the National
Federation for Real Estate Promotion and the Ministry of
Housing to offer government credit guarantees for first time
home buyers. To make the 25 year loans (capped at USD
94,000) even more attractive, Attijariwafa will waive all
closing costs until September 2009.

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The Islamists' Appeal
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5. (SBU) Despite these private and public sector efforts to
assist Morocco's middle class, which are likely to be
extended as the government focuses on the issue, discontent
continues to increase among the lower echelons of this group.
The private think tank, the Center for Social, Economic, and
Managerial Studies (CESEM) explains that individuals in the
lower echelon operate in Morocco's informal economy and
consequently do not benefit from changes in fiscal policy.
Moreover, only about a quarter of Morocco's middle class will
meet the income qualification criteria required for a
government backed residential loan, notes a senior official
at BMCE, one of Morocco's largest banks. Another senior
official at BMCE said that in effect, Morocco's middle class

is increasingly divided into two distinct entities. The top
one-third does business with Morocco's traditional financial
institutions like BMCE, but the income of the other
two-thirds is too low to permit it to access those
institutions. Morocco's Islamist-oriented Party of Justice
and Development is doing a fantastic job at courting that
lower echelon of the country's middle class via a series of
programs that provide counseling on tax and budget issues and
on rare occasion interest-free loans, he observed.


6. (SBU) Conversations with contacts in academia and civil
society suggest that the lower echelons of Morocco's middle
class are increasingly receptive to the PJD. With a
reputation for rejecting corruption, a populist approach to
both domestic and international affairs (including activism
on the Palestinians and Gaza) and an Islamic conservative but
flexible approach on social issues (Ref C),this Party has
gained wide appeal with the majority of Morocco's middle
class, who believe in the PJD's ability to harness their
aspirations. The PJD has increasingly talked about
coordinating its stance on economic issues in parliament with
the Socialist USFP, a member of the ruling coalition,
although queasiness about such an alliance in both parties
has so far kept this in the rhetorical realm.


7. (SBU) Sociologist Michael Peraldi of CESEM observed that
the PJD's leadership, drawn from Morocco,s middle class (in
contrast to the elites who populate leadership ranks of other
political parties),has been highly successful in its
recruitment and mobilization of the semi-professionals and
skilled craftsmen who make up 2/3 of Morocco's middle class.
Fatiha Rahal, a private school teacher who identifies herself
with Morocco's middle class, said the country's traditional
political institutions are no longer in tune with Morocco's
economic reality. A member of the pro-palace Authenticity and
Modernity Party (PAM),Fatiha said she now planned on voting
for the PJD in the upcoming municipal election not because of
her belief in the PJD's political or religious ideology, but
for their understanding of the economic plight of Morocco,s
middle class.

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Comment
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8. (SBU) The government's inability to reach an accepted
definition of who is Morocco,s middle class (Ref A) will
likely continue to impair the country,s efforts to bolster
this stagnating segment of society (Ref B). In part, the
problem stems from the Government's desire to maintain a
healthy tax revenue for its overall budget situation.
Nevertheless, the lower echelons of Morocco,s middle class
will likely grow more disenchanted with economic and
political institutions if both private and public efforts to
strengthen this segment of society prove to be unsuccessful.
In this atmosphere, the Party of Justice and Development,
generally respected for its probity, will likely continue to
gain adherents, particularly in recruiting the lower echelons
of Morocco's middle class, with possible implications for the
upcoming municipal elections. Public and private partnerships
may help reverse this economic slide and disenchantment, but
real improvements in economic prospects depend on
acceleration of the economic and political reforms that are
at the core of our Mission efforts here in Morocco.
MILLARD