VZCZCXYZ0000
RR RUEHWEB

DE RUEHRB #0073/01 0180744
ZNR UUUUU ZZH
R 180744Z JAN 06
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 2503
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
INFO RUEHCL/AMCONSUL CASABLANCA 1098

UNCLAS RABAT 000073 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA 
STATE PLEASE PASS TO USTR 
USDOC FOR MAC/ANESA 
TREASURY FOR OASIA 
 
E.O. 12958 
TAGS: EINV ETRD EFIN ELAB OPIC KTDB PGOV MO
SUBJECT: MOROCCO 2006 INVESTMENT CLIMATE STATEMENT 
 
REF: 05 STATE 202943 
 
THE FOLLOWING IS THE 2006 INVESTMENT CLIMATE STATEMENT 
 
A.1. Openness to Foreign Investment 
 
The Moroccan government actively encourages foreign 
investment and is taking measurable steps to improve the 
investment climate for foreign and domestic investors. 
Moroccan officials hope that the implementation of the U.S.- 
Morocco Free Trade Agreement (FTA) on January 1, 2006 will 
encourage more U.S. investors in Morocco to take advantage 
of duty-free access to both the U.S. and European markets. 
In addition to tariff elimination, the FTA with Morocco 
includes investment provisions and commitments to increase 
access to the Moroccan services sector for American firms. 
 
King Mohamed VI and the present government have made 
attracting foreign and domestic investment a high priority. 
With the assistance of the U.S. Agency for International 
Development (USAID), the government is streamlining 
paperwork associated with investment and has established a 
series of Regional Investment Centers to decentralize and 
accelerate investment-related bureaucratic procedures. 
 
The October 1995 investment code applies equally to foreign 
and Moroccan investors, with the exception of foreign 
exchange provisions, which favor foreign investors.  Foreign 
investment is now permitted in most sectors, with the 
notable exception of phosphate mining.  Foreign investment 
is permitted in the agricultural sector, although foreigners 
are prohibited from owning agricultural land.  The law does 
allow for long-term leases of up to 99 years; it also allows 
agricultural land to be purchased if it will be used for non- 
agricultural uses, e.g. tourism. 
 
Morocco welcomes foreign participation in its privatization 
program, and does not pre-screen or select foreign 
investment projects. 
 
A.2. Conversion and Transfer Policies 
 
The Moroccan dirham is convertible for all current 
transactions and for some capital transactions, notably 
capital repatriation by foreign investors if the original 
investment is registered with the foreign exchange office. 
Foreign exchange regulations allow expatriate employees to 
repatriate 100 percent of their salaries. 
 
Foreign exchange is readily available through commercial 
banks for the repatriation of dividends and capital by 
foreign investors, for remittances by foreign residents, and 
for payments for foreign technical assistance, royalties and 
licenses.  No prior government approval is required. 
 
The Central Bank sets the exchange rate for the dirham 
against a basket of currencies of its principal trading 
partners.  In April 2001, the exchange rate was effectively 
devalued by five percent as a result of a realignment of the 
basket of currency.  However, the dirham has appreciated in 
relation to the dollar since 2003 due to strong influence of 
the Euro in Morocco's currency basket.  Changes in the rates 
of individual currencies reflect changes in cross rates. 
Many international and domestic observers believe that the 
dirham is overvalued. 
 
A.3. Expropriation and Compensation 
 
There have been no significant expropriations in Morocco 
since the early 1970s.  The Embassy is not aware of any 
recent, confirmed instances of private property being 
expropriated for other than public purposes, or being 
expropriated in a manner that is discriminatory or not in 
accordance with established principles of international law. 
 
A.4. Dispute Settlement 
 
The Embassy is not aware of any U.S. companies currently 
involved in investment disputes with the Moroccan 
government. 
 
Minor disputes are generally resolved with the relevant 
government agency.  There is a consensus among Moroccan 
business leaders that the recent establishment of a network 
of commercial courts has somewhat improved commercial law 
operations, although enforcement of decisions still seems to 
be a problem. Morocco is a member of the International 
Center for the Settlement of Investment Disputes (ICSID) and 
a party to the 1958 Convention on the Recognition and 
Enforcement of Foreign Arbitral Awards (with reservations) 
and the 1965 Convention on the Settlement of Investment 
Disputes between States and Nationals of Other States. 
 
A.5. Performance Requirements/Incentives 
 
There are no foreign investor performance requirements or 
requirements regarding local value added, substitution of 
imports or employment of Moroccan workers.  Incentives for 
foreign investors have been created under the Free Trade 
Zone laws, as well as under the Investment Code for large- 
scale investments.  Incentives can include reduced land 
acquisition costs and tax breaks.  Also, if the value of a 
foreign investment is more than USD 21.5 million, investors 
can sign a special investment contract with Morocco that 
brings additional negotiated incentives.  In addition, the 
Moroccan government offers specific incentives elating to 
tourism designed to help Morocco achive the goal of 
attracting 10 million tourists by2010. 
 
American citizens may enter Morocco for aperiod of three 
months without a visa.  A residence permit is required to 
remain in Morocco for moe than three months.  Resident 
foreigners who wih to travel outside the country and return 
to Moocco must apply for a return visa that is valid fo 
one year.  However, American citizens are exempt from this 
provision. 
 
A.6. Right to Private Owership and Establishment 
 
Private ownership is prmitte in all but a few sectors that 
are specifcally reserved for the state, such as phosphate 
ining, power generation and foreign ownership of 
griculture land (except when purchased for use in on- 
agricultural enterprises, e.g. tourism).  Th government 
passed a law in February 2003 liberaizing the audiovisual 
sector and lifting the govrnment monopoly over all radio 
and television trasmissions; although it may take some time 
beforenew radio and television stations actually beginoperating.  Apart from these few exceptions, privae 
entities may freely establish, acquire, and dipose of 
interests in business enterprises. 
 
A.7 Protection of Property Rights 
 
The U.S.-Morocco FTA, in force as of January 1, 2006, 
contains some of the strongest Intellectual Property 
protections in any free trade agreement.  In December 2005, 
the  Moroccan parliament passed amendments to its existing 
intellectual property legislation that bring Morocco into 
compliance with the FTA Intellectual Property provisions. 
Morocco has a non-discriminatory legal system that is 
accessible to foreign investors.  The commercial courts, 
established in 1998, have begun to mitigate the weakness in 
commercial proceedings.  A system of commercial arbitration 
was also created in April 1998. 
 
Secured interests in property are recognized and enforced 
through the "Administration de la Conservation Fonciere." 
The GOM has also passed a law permitting the development of 
a secondary mortgage market. 
 
A.8. Transparency of the Regulatory System 
 
Although not perfect, Morocco's regulatory system is 
becoming increasingly transparent.  One of the most 
important reforms in recent years is the requirement that 
significant government projects must be publicly announced 
through a competitive call for tender.  Liberalization of 
the foreign exchange allocation system, the import regime, 
and the financial services sector has also reduced the 
government's role in the economy. 
 
In accordance with the provisions of the FTA, the government 
is working to ensure that its procedures are transparent, 
efficient and quick.  Still, routine permits, especially 
those required by local governments, can be difficult to 
obtain.  In response to these problems, the government has 
launched reforms to streamline bureaucratic procedures. 
 
A.9. Efficient Capital Markets and Portfolio Investment 
 
The Moroccan government has adopted a number of measures to 
liberalize the banking system in recent years.  While these 
reforms have introduced additional competition in the 
banking sector, in practice, banks do not compete 
extensively on deposit and lending rates, except for large 
customers.  In January 2005, the Moroccan parliament passed 
a bill granting the Central Bank greater autonomy.  Morocco 
also passed a comprehensive financial sector bill in 2005 
designed to strengthen banking supervision and improve risk 
management practices in the banking sector. 
 
Credit is allocated on market terms, and foreign investors 
are able to obtain credit on the local market.  There are 
some cross-shareholding arrangements, but they are not 
tailored to exclude foreign investment.  The Embassy has not 
heard of any efforts by the private sector or industry to 
restrict foreign participation in standard setting 
organizations.  The government has actively sought out the 
participation of foreign investors for discussions on 
improving the business climate in Morocco. 
 
Moroccan banks are generally sound, reflecting in part the 
limited competition within the sector, or from other 
financial institutions, e.g. a corporate bond market.  While 
the overall rate of non-performing assets in the banking 
system is 12.0 percent, a 13.5 percent cap on the interest 
banks can charge on all credits restricts local banks from 
lending to higher categories of risk. 
 
Some foreign banks are critical of what they view as a lack 
of proportionate participation in the Moroccan Bankers' 
Association.  Moroccan banks are largely in compliance with 
the Basel I standards and seem poised to be stay up to date 
with Basel II compliance, which the Moroccan Central Bank 
will require by 2008.  Banks are supervised on a 
consolidated basis and must provide statements audited by 
certified public accountants. Morocco is moving to enact a 
comprehensive anti-money laundering law in line with FATF 
and Egmont Group recommendations. 
 
The Casablanca Stock Exchange (CSE) was founded in 1929 and 
re-launched as a private institution in 1993.  The Exchange 
prospered during the early 1990s, but from late 1998 through 
2002 suffered a long, severe bear market, markedly reduced 
trading volumes, a decline in listings to approximately 50 
companies and a reduction of market capitalization to the 
equivalent of USD 8.3 billion at the end of 2002 at same 
year rates. 
 
A marked rebound in 2003 followed by healthy performance in 
2004 and 2005 reflect a return in investor confidence. 
Market capitalization at end 2003 increased to MAD 115.5 
billion or USD 13.2 billion at current rates, a 32.5 percent 
increase in local currency terms and a 60 percent increase 
in dollar terms over 2002. Performance (end 2004) was strong 
with the market up roughly 12 percent over 2003 in local 
currency terms, and roughly 17 percent in dollar terms. 2005 
market capitalization increased MAD 12.4 billion to reach 
MAD 253.3 billion or USD 29 billion. 
 
A.10. Political Violence 
 
A series of terrorist bombings took place in Casablanca on 
May 16, 2003.  U.S. Government facilities were not the 
target of these attacks, and no Americans were killed or 
injured.  Moroccan security services have moved quickly and 
effectively to round up terrorists associated with the May 
16 attack, but the potential for further attacks remains. 
 
Demonstrations occur frequently in Morocco and usually 
center on domestic issues.  During periods of heightened 
regional tension, large demonstrations may take place in 
major cities.  Although these demonstrations have been 
peaceful, well organized, and well controlled by the police, 
some have been anti-American with isolated incidents of 
violence.  The last instance of mass domestic political 
violence was rioting in Fez in December 1990. 
 
The sparsely settled Western Sahara was long the site of 
armed conflict between the Moroccan government and the 
Polisario Front, which demands independence.  A cease-fire 
has been in effect since 1991 in the U.N. administered area, 
but the territory remains disputed between Morocco, Algeria, 
and the Polisario, and lack of resolution to the dispute 
hampers economic and political integration in the region. 
 
A.11. Corruption 
 
Morocco has a broad body of laws and regulations to combat 
corruption.  Corruption nevertheless exists and U.S. 
companies have at times identified it as an obstacle to 
doing business in Morocco. 
 
The previous government of Prime Minister Youssoufi made 
efforts to strengthen transparency and the rule of law.  It 
initiated cooperation with Moroccan civil society and 
business organizations as well as with the World Bank and 
foreign donors on measures to fight corruption more 
effectively and launched a high-profile public education 
campaign.  Since coming to power in 2002, the new government 
of Prime Minister Jettou has continued to support such 
efforts; however it is worth noting Morocco has fallen 
precipitously in ranking by the Transparency International 
corruption index over the past four years, from 52nd in 2002 
to 78th place in 2005. The worsening of corruption is well 
publicized in Morocco and Transparency International 
attributes the dramatic increase to weak enforcement of anti- 
corruption related laws. 
 
Offering and accepting bribes are illegal in Morocco. 
Punishments range from fines to jail sentences. Bribes to a 
foreign official are not tax deductible. 
 
¶B. Bilateral Investment Agreements 
 
The U.S. and Morocco are party to a comprehensive Free Trade 
Agreement (FTA) to provide duty free access to over 95% of 
goods and services.  The agreement also opened up investment 
opportunities in government procurement, e-commerce, 
telecommunications and financial services.  The FTA's 
investment rules, including increased transparency in rules 
and regulations, protections against nationalization, 
ability to repatriate profits and assurances of non- 
discriminatory "national treatment", build upon previous 
agreements.  The U.S. Morocco FTA went into effect on 
January 1, 2006. 
 
Morocco also recently completed a Free Trade Agreement with 
Turkey that also came into effect on January 1, 2006 and is 
expected to complete the Agadir Initiative, a free trade 
agreement with Tunisia, Egypt, and Jordan. 
 
¶C. OPIC and other Investment Insurance Programs 
 
The Overseas Private Investment Corporation (OPIC) is a self- 
sustaining, U.S. government agency that encourages U.S. 
Businesses to invest in developing countries and emerging 
market economies.  OPIC's key products are loan guarantees, 
direct loans and investment insurance against foreign 
political risk, expropriation and convertibility.  Morocco 
has had an OPIC agreement since 1961, which was most 
recently updated in March 1995. Similar agreements are in 
effect with the agencies of France, Sweden, the United 
Kingdom, and Switzerland.  Morocco is also a member of the 
Multilateral Investment Guarantee Agency (MIGA) and the 
Kuwait-based Arab Investment Guarantee Organization (OAGI). 
¶D. Labor 
 
Once strong and politically influential, the Moroccan trade 
union movement is now fragmented and no longer possesses the 
political clout it carried 45 years ago when it helped lead 
the country to independence.  Nevertheless, five of the 19 
trade union federations retain the potential to influence 
political life.  Although unions claim a higher membership, 
Morocco has about 600,000 unionized workers, less than six 
percent of the 10.9 million workforce. 
 
Moroccan labor law and practice draw from French models. 
Labor law makes firing workers for cause cumbersome. 
Tripartite negotiations between government, management, and 
labor resulted in a new Labor Code that went into effect on 
June 7, 2004.  The government continues to rely on a 
tripartite process to reach accords on a reduction in the 
workweek from 48 to 44 hours, and on a 10 percent increase 
in the minimum wage. The new labor code details restrictions 
on the number of overtime hours worked per week and rate of 
pay for holidays, nightshift work, and routine overtime. 
 
Morocco has ratified the International Labor Organization 
(ILO) convention covering the right to organize and bargain 
collectively, and any group of eight workers can organize. 
Article 14 of the Constitution gives workers the right to 
strike, but no detailed law exists to define it.  For a 
union to engage in collective bargaining it must have at 
least 35 percent of the enterprise's workforce as registered 
members.  The Ministry of Interior occasionally intervenes, 
especially if the government believes strategic interests 
are threatened.  There are mandatory procedures governing 
the settlement of disputes, though the government settles 
them on a case-by-case basis. The number of workdays lost to 
strikes has diminished markedly from over 135,000 in 2000 to 
less than 23,500 in 2004. 
 
The official national unemployment figure is 11.0 percent 
with urban unemployment at approximately 18.0 percent.  The 
minimum wage is currently 2,010 dirhams per month, 
approximately 240 USD. 
 
¶E. Foreign Trade Zones/Free Ports 
 
There is a free trade zone in Tangier in northwestern 
Morocco.  The zone is open to both Moroccan and foreign 
companies.  The companies located in the zone may import 
goods duty free and are exempt from other taxes.  Moroccan 
labor laws apply to the zone, but few, if any, firms are 
unionized.  There is also an offshore banking law covering 
Tangier. 
 
 
Foreign Direct Investment Statistics 
 
The Moroccan foreign exchange office maintains balance of 
payments statistics that include annual foreign exchange 
inflows for private foreign investment.  These statistics 
differentiate between foreign direct investment (purchases 
of companies or increases in capital), portfolio investment, 
and short-term financing for current account expenditures 
(e.g. lending to a subsidiary for purchases of equipment). 
There are no statistics on the stock of foreign investment 
in Morocco.  However, foreign direct investment totaled 
approximately 8.4 billion USD from 1967-2001.  The following 
tables are based on the balance of payments statistics. 
 
            Foreign direct investment in Morocco 
                     (millions of USD) 
 
Year           Total FDI         Percent of GDP 
 
1997             800.9              3.3 
1998             384.6              1.1 
1999             945.6              2.7 
2000             245.8              0.8 
2001            2732.2              8.0 
2002             555.6              1.3 
2003            2430.0              5.5 
2004            1070.5              2.2 
2005 (proj)     2133.6              4.1 
 
 
  Private Foreign Investment Inflows* by Country of Origin 
                      (Millions of USD) 
 
Country             2000     2001     2002    2003     2004 
 
United States       35.4     83.2     37.2     53.1    77.8 
France             186.6   2474.3    210.1    316.9   822.9 
Spain               56.7     85.7     34.7   1896.4    59.4 
Germany             18.5     23.8     42.9     15.6    58.5 
United Kingdom      49.3     26.7     29.9     29.2    57.0 
Netherlands        229.3     15.3     20.2      7.7    14.9 
Benelux             25.9      9.7     28.2     29.4    43.2 
Saudi Arabia        13.5      7.4     14.8     17.1    86.2 
Switzerland         23.8     41.6     32.2     37.5    93.6 
Portugal            79.7    127.3     21.0      3.7     2.6 
IFC                408.5       --       --      --      -- 
UAE                 6.0       1.1     10.7      24.7   163.5 
Others              42.1     59.0     82.4      68.4   290.8 
 
Total             1175.3   2955.1    564.3    2499.7  1770.4 
 
* Includes portfolio investment and short-term financing for 
current account expenditures. 
 
N.B.                     2000  2001  2002  2003  2004  2005 
 
 Exchange rate (dh/USD)  10.6  11.2  11.0   9.57  8.86  8.88 
 GDP (billions of USD)   33.0  34.2  37.2  43.7  50.1  50.7 
 
 
 
          Private Foreign Investment Inflows* by Sector 
                     (Millions of USD) 
 
 
Sector                2000    2001    2002   2003    2004 
 
Industry             106.8   222.1   186.2  1994.4   239.0 
Fishing                1.3      --     2.1    15.4     2.6 
Tourism               12.1    29.5    10.1    34.5   190.0 
Services              29.0    87.8    79.8    90.2    65.5 
Transport              1.6     2.5     0.3     1.7     4.9 
Public Works           7.9    13.3     0.6     7.4    11.9 
Banking               67.5    31.8    35.6     8.4   186.1 
Real Estate           55.0    73.0   114.9   176.7   231.1 
Telecommunications   752.6  2354.8    36.3    65.6   677.3 
Other                141.5   140.3    98.4   105.4   162.0 
 
Total               1175.3  2955.1   564.3   2499.7  1770.4 
 
 
* Includes portfolio investment and short-term financing for 
current account expenditures. 
 
 
Major Foreign Investors 
 
U.S. 
 
Goodyear Maroc 
     Parent company: Goodyear 
     Sector: tire production 
     Number of employees: 600 
 
Industries Marocaines Modernes 
     Parent company: Procter and Gamble 
     Sector: soaps and toiletries 
     Number of employees: 500 
 
Jorf Lasfar Energy Company 
     Parent company: CMS Energy 
     Sector: independent power project 
     Number of Employees: 500 
     $1.2 billion joint venture with ABB 
 
Coca-Cola Export Corporation 
     Parent company: The Coca-Cola Export Corporation 
     Number of employees: 3200 
 
J.R.A. Morocco S.A. 
     Parent company: Jordache Enterprises Inc. 
     Sector:  manufacture of jeans 
     Number of employees: 1000 
 
Delphi Automotive (former Division of GM) 
     Sector:  auto part manufacturer 
     Number of employees:  1500 
 
Kraft Foods 
     Sector: food products 
     Number of employees: 60 
 
Other 
 
ST Microelectronics 
     Parent company: S.G.S. Thomson (France) 
     Sector: electronic components and semiconductor 
             manufacturing 
     Number of employees: 1,600 
 
Pechiney - MMA 
     Parent company: Pechiney (France) 
     Sector: aluminum cookware manufacturing 
     Number of employees: 1,280 
 
Bymaro S.A. 
     Parent company: Bouygues S.A. (France) 
     Sector: civil engineering 
     Number of employees: 1,000 
Renault Maroc 
     Parent company: Renault S.A. (France) 
     Sector: motor vehicle assembly 
     Number of employees: 800 
 
C.G.E. Maroc 
     Parent company: C.G.E. (France) 
     Sector: electric cable and transformer manufacturing 
     Number of employees: 675 
 
Polymedic 
     Parent company: Hoechst AG (Germany) 
     Sector pharmaceutical manufacturing 
     Number of employees: 350