VZCZCXRO2098
RR RUEHTRO
DE RUEHRB #1801/01 2701534
ZNR UUUUU ZZH
R 271534Z SEP 06
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 4764
INFO RUEHAS/AMEMBASSY ALGIERS 4160
RUEHMD/AMEMBASSY MADRID 5581
RUEHNK/AMEMBASSY NOUAKCHOTT 3319
RUEHFR/AMEMBASSY PARIS 4391
RUEHTRO/AMEMBASSY TRIPOLI 0102
RUEHTU/AMEMBASSY TUNIS 9061
RUEHCL/AMCONSUL CASABLANCA 2179

UNCLAS SECTION 01 OF 02 RABAT 001801 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG, STATE PASS USTR (BELL), USPTO (ADLIN AND 
ADAMS), USDOC FOR ITA/MAC/ONE (ROTH), ADVOCACY CTR (JAMES) 
AND CLDP (TEJTEL) 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ELAB EAIR EINT ECPS KTEX TS
SUBJECT: MOROCCO MACROECONOMIC UPDATE AND ECONOMIC 
HIGHLIGHTS; SEPTEMBER 2006 
 
 
 ¶1. (U) This message provides an update on Morocco's 
macroeconomic situation, together with other highlights of 
recent economic developments, including: 
 
¶A. Altadis's purchase of the remaining 20 percent of the 
National Tobacco Monopoly. 
¶B. The creation of a new fund (Oleo Capital) to support the 
development of the olive industry. 
¶C. Increased Moroccan textile exports to the U.S. 
¶D. Morocco seeks Turkish tourists 
¶E. Port reform sparks protests 
 
¶2. (SBU) A Bumper Crop: Official forecasts for economic 
growth for the remainder of 2006 remain extremely positive. 
Building on a successful harvest, the Ministry of Finance now 
predicts that annual growth for the year will come in at 
least 7.3 percent, well above the baseline included in the 
2006 budget, and a dramatic turnaround from last year's 1.7 
percent.  For its part, the IMF forecasts 5.4 percent growth. 
 The strong showing results largely from the agricultural 
sector, which contributes 3 points to the total, versus its 
contraction by 2.7 points last year.  Non-agricultural 
activities continue to grow at a more modest rate of 5 
percent, the same rate as last year, aided by recovery in the 
textile sector and a strong showing by Morocco's 
metallurgical sector. 
 
¶3. (U) The Casablanca Stock Exchange, as reflected in the 
Moroccan All Shares Index (MASI), has enjoyed a bullish year, 
up over 45 percent in 2006.  Fueled by an influx of foreign 
investment and a series of asset sales by the government, the 
Casablanca Stock Exchange has outpaced all other markets 
worldwide. 
 
¶4. (SBU) Dropping Unemployment: Morocco's strong growth is 
also reflected in a sharp drop in unemployment.  The national 
unemployment rate dropped from 9.8 percent in the first 
quarter to 7.7 percent at mid-year, well below last year's 
rate of 11.1 percent, and the first time in 13 years that the 
number of unemployed dropped below 1 million.  Strikingly, 
while the agricultural sector provided more than half the new 
jobs created by the economy (350,000 of 628,000 positions), 
the steepest decline was recorded in urban unemployment, 
which fell from 18.4 to 13 percent, and in that of 
unemployment among young graduates, which fell from 26.5 to 
17.7 percent. 
 
Comment: While encouraging, the improvement has sparked 
considerable skepticism, with one leading industrialist 
questioning how Morocco can be within such close striking 
distance (2 percent) of "full employment."  Skeptics predict 
that once the seasonal impact of the excellent harvest 
passes, unemployment will return to more typical levels. 
 
¶5. (SBU) Sectoral Developments: 
 
¶A. Altadis/Regie de Tabacs: The Franco-Spanish group Altadis 
moved earlier this month to purchase the remaining 20 percent 
of shares of the national tobacco monopoly (Regie de Tabacs) 
that remained in the state's hands after the company's June 
2003 privatization.  The purchase, for 4.02 billion dirhams, 
was followed by conclusion of two agreements: one 
guaranteeing the state a continued role on the company's 
board of directors, and the second by which the company will 
provide technical assistance to tobacco growers, to help them 
develop blond tobacco and also diversify into olive 
cultivation.  The sale follows adoption in July of a decree 
prolonging the state's monopoly on the importation and 
distribution of tobacco products until the end of 2010, to 
help "reinforce the sector and enable it to overcome the 
continued decline in demand for tobacco products." 
 
Comment: The monopoly extension appears to violate provisions 
of the U.S.-Morocco Free Trade Agreement, and will be the 
subject of further bilateral discussions. 
 
¶B. Oleo Capital: The Ministry of Agriculture, Credit 
Agricole, and Societe Generale of France launched a new fund 
on September 18 in Marrakech to encourage the development of 
olive farming in Morocco.  The fund, Oleo Capital, will 
 
RABAT 00001801  002 OF 002 
 
 
invest approximately 180 million dirhams apiece in 10 olive 
farms.  The project aims to produce an additional 30,000 tons 
of olive oil each year, meeting international standards in 
terms of cost and quality.  With planting of the farms 
planned between 2007 and 2012, the first harvest is expected 
in 2010.  Fund managers predict investors will earn a 25 
percent return over 12 years. 
 
Comment: The olive sector is also a central element in 
Morocco's proposal to the Millennium Challenge Corporation, 
and MCC staffers will meet with Oleo Capital next month to 
compare notes on the project.  Earlier, analysts at both 
McKinsey and BMCE Capital in Morocco had identified the 
sector as one that offered high potential for Morocco. 
Credit Agricole executives note that they plan four other 
funds in areas ranging from animal husbandry to "high-tech" 
agriculture, with a view to helping the agricultural sector 
as a whole modernize. 
 
¶C. Textiles: With public relations and other assistance from 
USAID's New Business Opportunities Project (NBO), 10 Moroccan 
firms participated in the 2006 "Magic Show" in Las Vegas in 
August, earning orders estimated at 90 million dirhams (10 
million USD).  Participants said the experience helped them 
better understand the U.S. market, and vowed to redouble 
their efforts in coming years.  Separately, in a press 
conference following a meeting with visiting USDOC Deputy 
Assistant Secretary Holly Vinyard, Minister of Industry and 
Commerce Mezaour said Moroccan textile exports to the U.S. 
have doubled in the first six months of 2006, thanks to the 
U.S.-Morocco Free Trade Agreement. 
 
¶D. Seeking Turkish Tourists: A delegation of 15 Moroccan 
travel operators met with their Turkish counterparts in 
Istanbul last week to encourage Turkish tourism to Morocco. 
Royal Air Maroc launched direct flights from Casablanca to 
Istanbul last year, with service 6 times weekly (including a 
corresponding Turkish Airlines codeshare).  Passenger load 
has been relatively healthy at 65 percent, but the airline 
has targeted 85 percent for the coming year.  Industry 
experts note that only 10,000 Turkish tourists came to 
Morocco in 2005, but argue that the total can be dramatically 
expanded if Morocco effectively promotes its cultural 
attractions. 
 
¶E. Port Conflicts:  Casablanca port union workers 
(stevedores) continue to resist the government's plan to 
privatize port operations.  Dock workers staged an all-day 
strike on Wednesday, September 10, over fears of job 
security.  At issue is the privatization of port operations 
(loading and unloading of ships) and the resulting loss in 
jobs for stevedores employed under the current system.  Union 
leaders met with both the Minister of Transportation, Karim 
Ghellab, and the Prime Minister, Driss Jettou, for over four 
hours on September 20 without reaching a settlement.  The 
union is firm in its opposition to the plan, which they say 
will mean the loss of over 700 jobs at Casablanca.  In 
contrast, the government is offering a buy-out plan, 
emphasizes the efficiency and merits of their privatization 
plan, and claims the jobs will merely be transferred, rather 
than eliminated. 
****************************************** 
Visit Embassy Rabat's Classified Website; 
http://www.state.sgov.gov/p/nea/rabat 
****************************************** 
 
BUSH