VZCZCXRO5458
RR RUEHLMC
DE RUEHRB #1677/01 2511709
ZNR UUUUU ZZH
R 081709Z SEP 06
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 4625
INFO RUEHTU/AMEMBASSY TUNIS 9045
RUEHCL/AMCONSUL CASABLANCA 2110
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC

UNCLAS SECTION 01 OF 05 RABAT 001677 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/PI AND NEA/MAG 
STATE PASS TO USAID CJUDGE 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN KMCA MO
SUBJECT: DONOR COMMUNITY PROGRAMS IN MOROCCO 
 
REF: A. RABAT 176 
 
     ¶B. RABAT 661 
 
 This cable is sensitive but unclassified - protect 
accordingly. 
 
¶1.  (U) This is the third part of a three part series on 
international donor activities in Morocco.  Part 1 (ref A) 
covered the World Bank while part 2 (ref B) discussed the 
European Union's Barcelona Process. 
 
¶2.  (U) Summary.  A wide variety of international donor 
organizations are present in Morocco and many have 
increased their activities in recent years as the GOM has 
demonstrated a new openness to political reform, social 
inclusiveness and economic liberalization.  Donors are 
generally favorable towards Morocco as a recipient country, 
but see implementation as slow and feel that the GOM could 
do more to coordinate donor assistance.  Many believe King 
Mohammed VI's year-old National Initiative for Human 
Development (INDH), offers a potential vehicle for such 
coordination, but are skeptical of its current managerial 
capacity.  The Government of France (GOF) is the largest 
bilateral donor in Morocco and recently announced a new 
five-year $1.15 billion program in addition to its existing 
programs.  Leading areas of interest for the donor 
community include infrastructure, education, water and 
waste water, agriculture, environmental protection, health 
care, finance,  housing and social issues.  Assistance 
projects are predominately financed by loans but also 
include grants.  End summary. 
 
------------------------- 
FRENCH PROGRAMS 
------------------------- 
 
¶3.  (SBU) The new GOF project redefines France's position 
as Morocco's largest bilateral donor.  The bulk of the 
funding is allocated to 4 sections:  basic education and 
training (25%); job creation, business modernization, 
loans, microcredit loans, loan guarantees, and risk capital 
(30%); social and economic infrastructure projects such as 
social housing, rural electrification, rural roads, and 
rural potable water projects (24%); and water treatment and 
sewage projects (7%).  More modest sums are allocated to 
rural health; cross cutting programs (in the fields of 
governance, judicial reform, security, and drug 
interdiction); culture (music, dance and libraries); and 
French language programs (in science and business).  The 
French Embassy tells us that funding will also be used to 
promote south-south cooperation with Sub-Saharan countries, 
and the 900,000 Moroccans living in France.  The GOF plans 
to encourage the Moroccan migrs to increasingly 
repatriate money to develop the economy, enlist them to 
help provide training for Moroccan businesses, and assist 
the development of the Moroccan tourism industry by 
building low priced accommodations. 
 
¶4.  (SBU) The GOF usually contributes approximately $280 
million per year to assistance programs in Morocco, 
including its contributions to those under the umbrella of 
the European Union (EU), of which more than $100 million is 
from the French Development Agency (AFD).  The AFD has been 
active in Morocco for 15 years offering loans with 
concessional interest rates and grants.  Originally, it 
concentrated on infrastructure projects such as power 
plants, rural roads and dams, but for the past three years 
has focused on social programs such as education, health 
care and microcredit lending.  The AFD promotes the idea 
that the people implementing assistance should be Moroccan 
and 38 percent of its total commitments in Morocco go to 
private sector organizations.  The AFD is one of the more 
successful international donors as far as coordinating its 
efforts with others.  It currently has joint financing 
projects with the  World Bank, the African Development Bank 
(AFDB), the Japanese International Cooperation Agency 
(JICA), and the Moroccan National Water Company (ONEP). 
The AFD has worked on water issues for most or its 
existence in Morocco and the sector still accounts for the 
largest part of its portfolio here.     The AFD feels water 
is an excellent issue for the INDH to manage and use to 
coordinate the efforts of the international donor 
community. 
 
¶5.  (U) The GOF's largest non-AFD program is to pay for 
30,000 Moroccan university students to study in France at a 
cost of over $100 million per year.  This is a 
 
RABAT 00001677  002 OF 005 
 
 
long-established program in which many high ranking GOM 
officials have participated.  France also pays $38 million 
per year to maintain 30 French  elementary schools in 
Morocco.  Still other GOF assistance programs include job 
training, microcredit lending, and a $38 million project to 
help restructure small-to-medium size enterprises' (SME) 
short-term debt.  In addition, infrastructure projects 
include helping Morocco connect its electrical grid to 
those of Spain and Algeria, and improve its railroad 
system.  There is a $19 million program for drought 
alleviation.  Finally, the French are also working to 
improve Morocco's system of land titling, where reportedly, 
rural law enforcement is inconsistent and hampers 
privatization of small farms. 
 
----------------------------------- 
OTHER EUROPEAN DONORS 
----------------------------------- 
 
¶6.  (SBU) Most European countries channel the bulk of their 
assistance efforts in Morocco through programs of the EU 
(see ref. B).  However, many EU members maintain bilateral 
programs as well that allow them to concentrate on areas of 
particular interest to them.  The office of the European 
Commission in Rabat has organized the EU Cooperation 
Council to help coordinate the efforts of the international 
donor community.  It welcomes non-EU members and meets on a 
regular basis.  Besides EU countries, the Council also 
includes representatives from the U.S., Canadian, Swiss and 
Japanese Missions in Morocco, the United Nations 
Development Program, and the European Investment Bank and 
the World Bank.  Unfortunately, efforts to increase 
cooperation between donors remains elusive.  Three years 
ago, discussions showed that donors manage their work 
differently and much aid is tied to purchases of goods and 
services from the donor country.  In addition, collecting 
information on donor programs is difficult because some 
countries do not want to share information and donors do 
not always have accurate statistics.  However, 
(predominately European) donors have been successful in 
establishing a number of thematic groups to coordinate 
planning in areas such as the INDH, water, rural 
development, education, housing, women's issues and 
protection of oases.  Council members note that the INDH 
program has great potential to promote greater cooperation 
between donors and that the GOM has asked "almost everyone" 
for funding to support the INDH.  Privately, however, most 
Council members have expressed concern over how the INDH 
would be managed and whether the GOM was up to the 
task. 
 
¶7.  (SBU) The Government of Germany (GOG) has historically 
been the largest bilateral donor in Morocco after France 
and has been active in the country since the 1960s.  For 
the two-year-period of 2004-05 it committed $137 million 
for assistance programs in Morocco (actual disbursements 
will vary depending on progress in individual projects). 
Of this amount, $13 million will come in the form of grants 
for technical assistance while loans will account for the 
rest.  Currently, the GOG concentrates its assistance 
efforts in three fields: water and sanitation, 
environmental protection and economic growth.  Kordula 
Melhart, Cooperation Counselor of the German Embassy, told 
econoff that the GOG's greatest successes have come in the 
field of water and sanitation where Germany is one of the 
leaders in Morocco.  She added that the GOG would like to 
cooperate with other donors on water projects, but it was 
waiting for the GOM to develop a coherent plan for its 
water resources. 
 
¶8.  (SBU) In the field of environmental protection, the GOG 
concentrates on renewable energy and is coordinating its 
efforts with the GOF and hoped to also work with the 
Belgium Embassy in the future.  The GOG concentrates its 
efforts in the field of economic growth on job creation and 
training.  It recently established a microcredit program 
and is working with the GOF, the International Finance 
Corporation and the European Investment Bank.  Melhart said 
that the GOG does not advance funds directly to the GOM for 
assistance work.  Instead, the GOM submits bills for 
expenses incurred and the GOG reimburses it.  In principle, 
the information is reported to the Ministry of Finance 
(MOF), but she was not certain that this actually 
happened.  Melhart added that one of the largest challenges 
to German assistance efforts in Morocco is getting the GOM 
to implement programs on a timely basis. 
 
 
RABAT 00001677  003 OF 005 
 
 
¶9.  (SBU) The Government of Spain (GOS) is another major 
donor to Morocco, with most assistance targeting northern 
Morocco and are linked to Spanish exports or foreign 
investment.  The GOS currently has a $25 million program to 
finance Moroccan SMEs that buy Spanish goods.  Spain was 
one of the earliest countries to pledge funds to the INDH 
and has offered $38 million over the 2006-09 time frame for 
health care, housing and education.  In addition, the GOS 
has a $50 million debt conversion program for private 
investment and donated $12 million for reconstruction 
efforts after the 2004 Al Huceima earthquake in northern 
Morocco.  Although not an assistance program, the GOS has 
additional ties to Morocco because it buys CO2 credits from 
the GOM as part of the Kyoto Accord.  Spanish officials 
reported that the GOS always works directly with the MOF 
for its assistance programs. 
 
---------------------- 
OTHER DONORS 
---------------------- 
 
¶10.  (SBU) The Government of Saudi Arabia (GOSA) is a major 
contributor to assistance programs in Morocco, but it does 
not coordinate either with other donors or among its 
various programs, which are often financed by different 
individuals within the Saudi royal family. For example, 
following the aforementioned earthquake, the GOSA donated 
$50 million for relief efforts.  Another time, a Saudi emir 
donated $30 million to finance two hospitals, one 
specializing in the treatment of cancer in Agadir and 
another focusing on children's ailments in Erricchedia. 
Also, several years ago, following the sinking of a Saudi 
oil tanker off the coast of Morocco, the GOSA gave $50 
million to the GOM to cover the cost of cleaning up the 
ensuing oil spill.  However, when the wind changed 
direction and blew the oil spill out to sea, the GOSA 
allowed the GOM to keep the money to build Alakhaywayn 
University instead. 
 
¶11.  (SBU) When one time donations are made by the GOSA or 
its citizens, the funds are sent to the Saudi Embassy in 
Rabat and transferred to the Ministry of Interior in 
tranches to assure that the work is being done properly. 
In addition, there is a joint committee of the GOM and the 
GOSA to decide how the money is to be spent.  The GOSA only 
gives assistance funds to the GOM, or an NGO recognized by 
GOM.   In either case, the funds are controlled by GOM. 
The GOSA also works through the Saudi Fund for Development 
to establish more traditional assistance programs. 
Historically, this fund has concentrated on children's 
issues, building roads, assisting the handicapped and 
locust alleviation.  The GOSA has cooperated with the World 
Health Organization in Morocco, but it generally does not 
coordinate with other donors in the country. 
 
¶12.  (SBU) The Government of Kuwait  (GOK) has participated 
in development projects in Morocco since the 1970s through 
the Kuwait Fund, and in the past 10 years has contributed 
over one billion dollars in aid.  Most of its assistance 
comes in the form of low interest loans.  Since 1996, the 
Kuwait Fund has financed projects in the following sectors: 
agriculture irrigation and dams ($391 million), highways 
($339 million), water and sewage ($140 million), energy 
($107 million), development bank activities ($40 million) 
and industrial projects ($11 million).  Since 2000, the 
level of assistance has diminished as the GOM seeks to 
re-focus Kuwaiti funding towards foreign investment and 
away from assistance projects.  All Kuwaiti funding goes 
directly to the GOM and bypasses NGOs altogether.  To 
access the money, the GOM undertakes a technical study and 
then presents its findings to the Kuwait Fund. 
 
¶13.  (U) The Government of Japan (GOJ) has been active in 
the field of assistance in Morocco since the late 1970s and 
has provided approximately $1.3 billion in loans and $240 
million in grants to the GOM.  Japanese programs have 
predominately focused on the fields of fisheries, 
agriculture, water, health care and culture.  Currently, 
Japan concentrates its efforts in three fields.  First, the 
GOJ offers long-term credit with concessional interest 
rates to finance infrastructure projects such as rural 
roads and electrification.  Second, it offers grants for a 
fisheries research center.  Finally, the Japanese 
International Cooperation Agency provides experts to help 
upgrade Moroccan institutions to meet the challenges of 
economic globalization. 
 
 
RABAT 00001677  004 OF 005 
 
 
---------------------------------- 
MULTILATERAL PROGRAMS 
---------------------------------- 
 
¶14.  (SBU) The World Bank plays a leading role in 
assistance activities in Morocco and its programs were 
discussed in ref. A.  The European Development Bank (EDB) 
works in four major fields in Morocco.  It makes long-term 
concessional loans for infrastructure, energy, water and 
waste water projects.  It also supports the private sector 
by assisting SMEs, operating an investment fund, offering 
risk capital, and participating in microcredit projects. 
The EDB also has environmental projects, most of which 
focus on waste water programs for major cities.  Finally, 
the bank has a number of social programs related to 
education, health care, rural roads ($75 million over the 
last 10 years), social housing, and modernizing 17 Moroccan 
hospitals ($50 million over the next five years). 
Representatives of the EDB express concern that Moroccan 
SMEs lack transparency, a claim widely shared throughout 
the country, but are encouraged that the World Bank is 
taking action to improve the situation.  They also said 
that Morocco's economy was evolving well, but felt that 
social areas such as health care and education lag behind 
international standards and that they need more investment 
than infrastructure projects. 
 
¶15.  (U) The Islamic Development Bank (IDB) conducts three 
types of projects in Morocco, project finance, trade 
finance and insurance, and technical assistance.  Its two 
main technical assistance programs involve working with 
NGOs to reduce poverty and advance women's issues, and 
promote cooperation between North African and West African 
countries to support the training of mid-wives and to 
assist SMEs.  Technical assistance from the IDB helps 
transfer knowledge between its 56 member states.  The 
bank's major projects in Morocco include financing for 
highways, electric utilities, potable water, railroads, a 
refinery and dams.  IDB representatives admitted the bank 
does not coordinate much with other donors. 
 
¶16.  (SBU) The United Nations Development Program (UNDP) 
has a smaller assistance budget in Morocco than its 
counterparts (approximately $7 million in 2005), but it is 
an active player in promoting cooperation among donors. 
Its major programs include governance, environmental 
protection, poverty reduction and human rights. 
 
------------ 
THE GOM 
------------ 
 
¶17.  (U) The MOF coordinates the GOM's foreign assistance 
funding including those going to public enterprises.  The 
MOF reported that in 2005 foreign assistance funding 
increased 20.5 percent from 2004 to approximately $2.4 
billion and this in turn followed a 31 percent increase 
from 2003.  Of this amount, 54 percent went directly to the 
Moroccan Treasury for redistribution and 46 percent went to 
public enterprises such as the Highway Department, the 
National Electric Agency and the National Water Company. 
The MOF reported that 76 percent of assistance funds came 
from multilateral sources and 24 percent from bilateral 
donors.  Grants, mostly from the EU, accounted for five 
percent of assistance funds and loans accounted for the 
other 95 percent.  Approximately one-third of these loans 
carried concessional interest rates while the rest were 
close to market rates. 
 
¶18.  (SBU) Several officials from the donor community 
expressed frustration with the GOM for its lack of 
promoting cooperation among donors.  One even said the GOM 
often plays donors off against one another thereby 
promoting competition for bigger programs rather than 
cooperation.  The same person noted the 2005 Paris 
Declaration meeting in which Morocco was selected as one of 
14 countries to participate in a pilot program to promote 
coordination among donors.  Unfortunately, GOM 
representatives reportedly never attended any of the 
subsequent meetings for the program, claiming that they 
were too busy.  Donors also said that the MOF's official 
assistance statistics were understated because they omit 
many bilateral assistance programs and do not include 
assistance from Arab countries although they felt the MOF 
could get the information.  Many donors commented on the 
slow pace of implementation of assistance projects in 
Morocco and one said that of the numerous developing world 
 
RABAT 00001677  005 OF 005 
 
 
countries in which she had worked Morocco was the poorest 
in terms of timely implementation of projects. 
 
-------------- 
COMMENT 
-------------- 
 
¶19.  (SBU) Following the 2003 Casablanca bombings and the 
GOM's ensuing pursuit of political reform, social 
inclusiveness and economic liberalization, Morocco has 
become somewhat of a darling of the international donor 
community.  Contributions of assistance have grown in 
recent years and the types of programs the GOM has pursued 
have expanded widely beyond infrastructure project and into 
fields related to social conditions.  Still, many donors 
complain that project implementation is too slow (see refs 
A and B) and there is insufficient coordination among 
donors.  Fortunately, donors have made advances in 
cooperating through thematic groups that address various 
issues.  While the donors hope the INDH program can be a 
catalyst for the GOM to improve coordination efforts among 
them, they remain skeptical that the GOM has the expertise 
and the desire to do this.  Members of the donor community 
have shown great interest in the Millennium Challenge 
Account and the organization's representatives have 
consulted regularly with other donors during their visits 
to Morocco.  In addition, the rise in social programs 
compliments similar programs contained in the USG's Middle 
East Partnership Initiative.  The USAID program in Morocco 
is well-established with the donor community and will be of 
great assistance as the Mission attempts to coordinate with 
other donors where feasible. 
 
 
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RILEY