VZCZCXRO3922
RR RUEHLMC
DE RUEHRB #0880/01 1241104
ZNR UUUUU ZZH
R 041104Z MAY 06
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 3657
INFO RUEHCL/AMCONSUL CASABLANCA 1644
RUEHAS/AMEMBASSY ALGIERS 3968
RUEHTU/AMEMBASSY TUNIS 8856
RUEHNK/AMEMBASSY NOUAKCHOTT 3161
RUEHFR/AMEMBASSY PARIS 4184
RUEHRO/AMEMBASSY ROME 1461
RUEHMD/AMEMBASSY MADRID 5488
RUEHLO/AMEMBASSY LONDON 2929
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHRC/USDA FAS WASHDC 0896
RUEAORC/USCBP WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEAEPA/HQ EPA WASHINGTON DC

UNCLAS SECTION 01 OF 02 RABAT 000880 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR NEA/MAG, NEA/ OFI, AND INL/AAE 
DEPT ALSO FOR EB/TPP AND EB/IFD 
STATE PASS USTR FOR D. BELL 
STATE PASS USAID FOR J. RAGLAND 
USDOV FOR ITA/MAC/ANESA 
USDOL FOR ILAB 
PARIS FOR ZEYA 
LONDON FOR TSOU 
ROME FOR ROSE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ENRG EFIN EAGR KIPR KTEX MO
SUBJECT: MOROCCO ECONOMIC HIGHLIGHTS 
 
-Hu Emphasizes Economic/Commercial Ties on Three-Day Visit 
-Royal Conglomerate interest in Jorf Lasfar 
-Privatization Resumes:  State Tea and Sugar Company 
-FTA:  ISP-Liability Laws Adopted "in Haste" 
-Casablanca Exchange - Running with the Bulls 
-Contraband Wheat Seized 
 
Hu Emphasizes Economic/Commercial Ties on Three-Day Visit 
--------------------------------------------- ------------ 
 
¶1.  Economic and commercial issues dominated Chinese 
President Hu Jiantao's April 23-25 visit to Morocco - his 
first stop on a three country Africa tour following his 
trips to Washington and Riyadh.  Responding to Moroccan 
fears of China's domination of manufactured exports, 
particularly the textile and garment sector (evidenced by a 
surge of Chinese imports into Morocco), Chinese officials 
agreed to establish joint ventures in Morocco to produce 
Chinese manufactures with Moroccan labor (including 
textiles) for export to Europe and Africa (but notably, not 
to the United States under the newly implemented FTA). 
Seven cooperative agreements were signed, including accords 
on tourism promotion, public health, cultural exchange, 
infrastructure, and scientific and technological research. 
The Chinese also agreed to provide up to $500 million for 
investment in infrastructure projects.  An agreement for the 
purchase of 800 thousand tons phosphate-based fertilizer (a 
major Moroccan export) in 2007 through 2011 was also 
concluded.  China and Morocco also agreed to establish a 
joint venture to produce phosphoric acid.  Bilateral Sino- 
Moroccan trade is about $1.48 billion or 50 percent more 
than U.S.-Moroccan trade.  However, in contrast, the balance 
heavily favors China ($1.2 billion in exports, accounting 
for five percent of Moroccan imports).  China- Morocco trade 
grew 28.2 percent in 2005, slightly more than the 25 percent 
average annual rate of increase over e last several years. 
 
Royal Conglomerate interest in Jorf Lasfar 
------------------------------------------ 
 
¶2.  Emboffs have learned that the royally-controlled 
conglomerate ONA is in negotiations with Swedish-Swiss 
engineering firm ABB to assume its stake in the coal-fired 
Jorf Lasfar electricity generation facility joint venture 
with Michigan-based CMS Energy.  Jorf Lasfar - which 
provides about 60 percent of Morocco's electricity (a demand 
that is growing eight percent annually) - has a long term 
concession to provide electricity at fixed rates through 
¶2027.  ABB has been seeking to exit the project for many 
years, but CMS remains committed to its largest overseas 
investment (and one of the largest U.S. investments on the 
African continent).  On April 23, ONA announced publicly its 
intention to invest in electricity generation, an 
unsurprising development in light of the GOM's plans to 
liberalize the generation and distribution of electricity, 
perhaps as early as 2007. 
 
Privatization Resumes:  State Tea and Sugar Company 
--------------------------------------------- ------ 
 
¶3. After a pause of several months, the GOM has resumed 
privatizing state companies.  The state privatized the state 
sugar and tea trading company (Somathes), issuing over 3.75 
million shares, each nominally valued at DH 100 (about $11). 
The trading company was created with the commercialization 
 
RABAT 00000880  002 OF 002 
 
 
in 2004 of the National Office of Tea and Sugar that had 
held a 35 year monopoly on the importation and distribution 
of green tea and sugar - staples of Moroccan consumption. 
(In fact, Morocco reportedly boasts the world's highest per 
capita sugar consumption.)  The Somathes privatization 
brings total privatization receipts from the sale of 70 
state companies over the last several years to more than 77 
billion Dirham (about $8.5 billion).  Informal indications 
are that the state ferry company Comanav will be one of the 
next put on the block.  Government officials say that 81.2 
percent of investors in privatized firms are foreign (75.2 
percent French, 9.4 percent Spanish, and 5.5 percent Saudi 
Arabian) and about 18 percent are Moroccan. 
 
FTA:  ISP-Liability Laws Adopted "in Haste" 
------------------------------------------- 
 
¶4.  In an early backlash to FTA implementation, Moroccan 
information technology experts have publicly criticized the 
GOM's "hasty" adoption of internet-related IPR laws in 
December 2005.  The laws were adopted to bring Morocco into 
compliance with FTA provisions, enabling the agreement to 
come into force in January 2006.  Attacking government 
officials for rushing the laws through parliamentary process 
at the behest of U.S. negotiators without sufficient 
consultation with industry, Moroccan ISP providers and other 
IT executives note their concern that Morocco has adopted 
and will impose new and untested penalties for internet- 
based piracy on the industry. 
 
Casablanca Exchange - Running with the Bulls 
--------------------------------------------- 
 
¶5.  On April 28, following a bullish April, the Masi 
(Casablanca Stock Exchange Index) passed the psychologically 
important 8000 point mark for the first time since the Masi 
was created in January 2002.  The Casablanca exchange rose 
10 percent in April alone.  Added to moderate growth in 
February and March and a 20 percent rise in January, the 
Casablanca exchange has enjoyed 46 percent annual growth. 
Capitalization of the Casablanca exchange has reached 370 
billion Dirham (about $40 billion or 80 percent of Moroccan 
GDP). 
 
 
Contraband Wheat Seized 
----------------------- 
 
¶6.  Moroccan Customs "mobile enforcement teams" seized 80 
tons of contraband wheat smuggled by truck from Algeria. 
The seizure of six vehicles and their cargo occurred 50 
kilometers south of the northeastern Mediterranean port of 
Nador.  While it is surprising to smuggle such a low value 
commodity in such small amounts, some of Morocco's 
persistent and recurrent sanitary and phytosanitary problems 
are attributed to widespread illicit cross border animal and 
commodity trade. 
 
 
 
RILEY