MOROCCO: VIRGINIA GOVERNOR'S VISIT SUCCEEDS IN

UNCLAS RABAT 000389 SIPDIS SENSITIVE STATE FOR EEB/CBA, H, NEA/RA AND NEA/MAG E.O. 12958: N/A TAGS: ECON EAGR BEXP BTIO ETRD ENRGMO PREL MO SUBJECT: MOROCCO: VIRGINIA GOVERNOR'S VISIT SUCCEEDS IN GENERATING BUSINESS IDEAS REF: RABAT 0386 ¶1. (SBU) Summary: Virginia Governor Tim Kaine explored opportunities for deepening the economic relationship between Virginia and Morocco with key Moroccan officials, focusing on the already important agricultural trade and port cooperation. On April 23, Prime Minister El Fassi said Morocco was a country "on the move." Minister-Delegate for Economic and General Affairs Baraka and Industry Minister Chami separately described Morocco as eager to attract foreign investment and trade but also ready to learn. On April 24, Foreign Minister Fassi Fihri highlighted the bilateral Free Trade Agreement (FTA) and proposed to use the FTA as a means to expand cooperation in the North Africa region by opening up to other Maghreb states. This message focuses on economic issues; reftel covered political issues. End Summary. -------------- Pitching Virginia for Business -------------- ¶2. (SBU) On April 23, Virginia Governor Tim Kaine, accompanied by Charge and D/PolCouns, had successive meetings with Prime Minister Abbas El Fassi, Minister-Delegate for Economic and General Affairs Nizar Baraka, and Minister of Industry, Commerce, and New Technologies Ahmed Reda Chami to discuss deepening the already strong trading relationship between the Commonwealth and Morocco. Kaine noted that since implementation of the United States-Morocco Free Trade Agreement (FTA) in 2006, Virginian exports to Morocco had doubled, and that Morocco now ranks third as a destination for Virginia's agricultural products. Kaine emphasized that part of the reason Virginia was a good place for investment was because of the diversity of the state's economy and its strengths in port facilities, agriculture and a burgeoning high technology sector. The Port of Virginia is the second most active on the East Coast of the U.S.; Virginia's USD 8 billion agricultural and forestry sector contributes increasingly to Moroccan imports (particularly soy beans); and Virginia's high technology sector is expanding from a traditional base in telecommunications and defense to biotechnology and renewable energy. ¶3. (SBU) The Governor also stressed the importance of good governance to the business climate, noting Virginia had implemented a web-based performance feedback mechanism for citizens to provide continuous evaluation of the State Government. He said that this system helped his administration to focus budget cuts in areas least sensitive to constituent concerns, and that the public response to this program had been overwhelmingly positive. -------------- Prime Minister: "Morocco is on the Move" -------------- ¶4. (SBU) Prime Minister Abbas El Fassi used his time with Governor Kaine to showcase Morocco as America,s friend, a progressive and moderate Arab state, and a country on the move economically. El Fassi praised the long-standing history of positive Moroccan-U.S. relations and a modern manifestation of that relationship: the Millennium Challenge Account. ¶5. (SBU) El Fassi pointed out several positive trends in the country despite the world economic downturn's negative impact on Moroccan exports, particularly textiles and automobiles, and remittance income from Europe. He said the unemployment rate had dropped from 10 to 9 percent last year; numbers of impoverished people were declining; and the Government was rolling out a program of free medical care for the 8 million poorest Moroccans. The numbers of tourists visiting Morocco had risen from 3 to 8 million in the last three years, and added that record rainfall over the last year had produced high crop yields, which would permit Morocco,s GDP to grow despite the world economic crisis. -------------- Business Opportunities in Morocco -------------- ¶6. (SBU) Ministers Baraka and Chami highlighted Morocco,s own effort to improve both the country's infrastructure and its business environment. Baraka described a "golden triangle" in which Arabian Gulf investment finances Moroccan companies that take advantage of Morocco's lower costs and privileged access to export finished goods to Europe. Baraka said that Morocco's economy is diversifying and that the world financial crisis had highlighted the need for even greater diversification. He said that Morocco has already invested in renewable energy technologies, e.g., wind and solar, in the hopes of taking advantage of increased energy reduction/conservation goals in Europe. Baraka underscored that under King Mohammed VI, Morocco had implemented economic reforms much faster than in the past. He conceded, however, that Morocco could still learn a lot from Virginia in "cutting red tape" and in improved governance. Baraka was particularly interested in Virginia's internet-based feedback mechanism. ¶7. (SBU) Chami said that the combination of Moroccan reforms, e.g., national reconciliation, the family code, and improved human rights, and macro-economic discipline (budget surpluses in the last two years, low inflation, and steady GDP growth -- averaging 5.2 percent in recent years) had afforded Morocco the opportunity to build increased capacity in such areas as automobiles, electronics, textiles, fisheries and artisanal handicrafts. It has also led to a burgeoning business in "off-shoring." Chami underscored that Morocco's "off-shoring" model provides businesses with access to the 1.3-billion-person market of the European Union because of Morocco's "advanced status" with the bloc. ¶8. (SBU) Morocco's improved investment climate, Chami said, has created a virtuous cycle in which Morocco is even seeking to move up the value-chain, for example, in phosphates, the country's largest export, to export not just the raw material, but phosphate derivatives like fertilizer as well. The country is also implementing its "Green Morocco" strategy, which he said had been inspired by the U.S.-sponsored Millennium Challenge Account, through which Morocco was investing (7 billion dirham -- approximately USD 850 million last year alone) in irrigation projects and "farm consolidation," i.e., encouraging the replacement of many small farms with larger more efficient ones. Morocco is also investing in niche technology areas in hopes of developing patents that can then be used generate domestic and international revenue streams. Four of these areas include advanced nanotechnology, microelectronics, and biotechnologies in both plants and genetic technology areas. ¶9. (SBU) During a separate discussion on April 24 focused mostly on political issues (reftel),Foreign Minister Fassi Fihri praised the U.S.-Morocco FTA, without any of the familiar complaints about how this has mostly benefited the United States. Fassi Fihri asked Governor Kaine to carry back to Washington the proposal that the FTA could be a useful mechanism to expand cooperation and economic integration in the North Africa/Maghreb region since the FTA already contained a provision allowing for re-export of goods, if there were a certain degree of Moroccan value-added. He sought USG views on promoting this possibility with other members of the Arab Maghreb Union. Such an initiative could provide a possible practical incentive to break the comprehensive political and economic logjam with arch-rival Algeria. -------------- Comment -------------- ¶10. (SBU) Governor Kaine's visit highlighted the depth of the Virginia-Morocco economic relationship, and played a useful role in reinforcing the messages that we convey on investment and economic reform. The Virginia Port Authority is expanding its relationship with its Moroccan counterpart, Tangier-Med, which itself is aggressively moving into Sub-Saharan Africa. This pact is a strong link for agricultural commerce and the visit undoubtedly sowed the seeds for future business opportunities between Virginia and Morocco. End Comment. ***************************************** Visit Embassy Rabat's Classified Website; http://www.intelink.sgov.gov/wiki/Portal:Moro cco ***************************************** Jackson