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Viewing cable 07RABAT641, EMBASSY'S INVESTMENT CONFERENCE HIGHLIGHTS

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Reference ID Created Released Classification Origin
07RABAT641 2007-04-13 10:12 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Rabat
VZCZCXYZ0001
RR RUEHWEB

DE RUEHRB #0641/01 1031012
ZNR UUUUU ZZH
R 131012Z APR 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 6309
INFO RUEHAS/AMEMBASSY ALGIERS 4382
RUEHTU/AMEMBASSY TUNIS 9254
RUEHCL/AMCONSUL CASABLANCA 2907
UNCLAS RABAT 000641 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/PI 
 
E.O. 12958: N/A 
TAGS: BEXP BTIO ECIN EIND ETRD EINV MO
SUBJECT: EMBASSY'S INVESTMENT CONFERENCE HIGHLIGHTS 
MOROCCAN POTENTIAL 
 
Sensitive but unclassified -- protect accordingly 
 
1. (U) Summary.  In support of implementation of our 
bilateral free trade agreement with Morocco, Mission Morocco 
recently hosted an investment conference for potential 
foreign investors in the automotive parts sector, a key 
priority of Moroccan industrial policy.  The event 
highlighted success stories of existing American, European 
and Asian investors, and included visits to several 
manufacturing facilities.  The GOM participated in the event, 
and used the occasion to launch its new targeted program for 
the auto parts sector under its overall "Plan Emergence." 
Approximately 50 people attended the event and already two 
companies have expressed strong interest in investing in 
Morocco in the near future.  End summary. 
 
2. (U) On March 26-27, an Embassy/USAID conference (financed 
with MEPI funding) hosted potential foreign investors from 
the auto parts sector in Casablanca and Tangier. 
Representatives from American and European companies were 
briefed by experts in both the public and private sector. 
Since 1996, Morocco's automotive sector has experienced 
average growth rates of 26.4 percent in investment, 22 
percent in export growth and 9.3 percent in overall growth. 
The 120 companies in the sector account for $1.1 billion in 
exports, representing 17 percent of total Moroccan exports. 
Auto parts manufacturers in Morocco predominately supply 
automotive assembly operations in southern Europe.  Proximity 
and low labor costs are the two main features that make 
Moroccan produced automotive parts attractive to European 
automotive assemblers.  Delivery times for Moroccan products 
are one to three days to Southern Europe and five days for 
other parts of the continent, while wage rates in Morocco are 
a fraction of those in the European Union. 
 
-------------------------- 
PUBLIC-PRIVATE PARTNERSHIP 
-------------------------- 
 
3. (U) On the first day of the conference, Ambassador Riley 
welcomed the participants and provided an overview of the 
benefits that the FTA brings to Morocco-based manufacturers. 
The Ministry of Industry's (MOI) Secretary General Bouselham 
Hilia discussed the GOM's Emergence Plan, which seeks to 
promote investment in seven key sectors identified through a 
McKinsey Associates study: automotive, electronics, aviation, 
tourism, textiles, agriculture and cinematography.  The MOI's 
Deputy Director of Industrial Production Ouatiqua Elkalfi 
outlined the GOM's new plan to focus on the automotive 
sector, rated by the GOM as the second most important sector 
after textiles.  Measures include financial incentives such 
as paying up 20 percent of land acquisition and training 
costs (up to five percent of total costs).  In addition, the 
GOM has established free trade zones that offer first rate 
facilities and infrastructure, simplified customs 
regulations, efficient management and tax incentives 
(corporate income is tax free for the first five years and 
only 8.75 percent for the next 20 years).  In addition, the 
GOM is constructing the world class Tangier Med Port to 
facilitate vastly increased sea freight from Morocco as well 
as to act as a major transshipment facility for the 
Mediterranean region (the Straight of Gibraltar is one of the 
busiest freight areas in the world). 
 
4. (U) The rest of the conference had a predominately private 
sector focus with current investors in the Moroccan 
automotive sector sharing their business experiences with the 
visiting potential investors  Representatives from six 
companies discussed teir investment stories, including one 
who gave atour of his company's manufacturing facilities in 
Casablanca.  The second day of the conference shifted to 
Tangier where participants visited the Tanier Free Zone 
(TFZ) and toured four manufacturin plants.  Finally, 
representatives from the TFZ nd Tangier Med Port discussed 
the plans for thei facilities and how they would help 
manufacturersin Morocco to produce and export their products 
fficiently.  The investment conference was widely overed by 
Moroccan TV and press, and interviews ith Ambassador Riley 
featured prominently in thenews. 
 
------------------------------ 
CURRENT IVESTORS' EXPERIENCES 
----------------------------- 
 
5. (U) Larbi Belarbi, the president of Moroco's only 
automotive assembly company, Somaca, (ad the president of 
the Moroccan Association of Automotive Industry and Trade) 
 
shared the story of his company's evolution and recent 
growth.  The formerly state-owned company had produced cars 
for Renault, Peugeot and Fiat before nearly being put out of 
business by an influx of imported second-hand cars into 
Morocco.  In 2003, Renault bought Somaca and proceeded to cut 
operating costs by 40 percent.  In 2005, Somaca launched a 
project to assemble the economy car "Logan" in Morocco. 
After producing 20,000 Logans in 2005 for the domestic 
market, Somaca built 30,000 cars in 2006 and made its first 
foray into exporting cars to Spain and France.  In 2007, the 
company will raise production to 40,000 cars and seek to 
expand exports further.  Belarbi led the conference 
participants on a tour of Somaca's production facilities that 
helped demonstrate the quality of Moroccan workmanship. 
 
6. (U) Representatives from seven foreign auto parts 
manufacturers with operations in Morocco also spoke at the 
conference or gave tours of their facilities in the TFZ.  All 
seven stressed Morocco's advantages, including low wage 
rates, a large available pool of labor and close proximity to 
Europe.  One company reported that total monthly costs for a 
typical machine operator, including benefits, cost only $400 
in Morocco compared to $567 in Romania and $1,067 in 
Lithuania.  Clearly, Morocco's minimum wage rate of $1.15 per 
hour helped make it an advantageous destination for 
investment.  In addition, several current investors noted 
that they were pleased with the quality of the Moroccan labor 
force, its strong work ethic -- absenteeism is very low, and 
its ability to successfully operate with a minimum of expat 
managers.  Most of the companies participating in the 
investment conference had experienced rapid growth in their 
Moroccan operations, with their staffs doubling or tripling 
in the first two to three years of operations. 
 
----------------------- 
FREE ZONES AND NEW PORT 
----------------------- 
 
7. (U) Both business participants and Free Zone officials 
themselves stressed that the TFZ offers a well managed, 
modern facility with good infrastructure and excellent port 
connections  Several also praised the GOM for its timely 
assistance in securing investment incentives that helped them 
get off to a quick start.  Hicham El Aloui, an executive with 
the Tangier Med Port, which owns the TFZ, added that other 
free zones were being built in Tangier and there was abundant 
space for more investors.  Also, because the TFZ had proven 
to be so popular with auto parts manufacturers, a "Tangier 
Auto City" dedicated solely to the sector may be opened in 
the future.  El Aloui also presented plans for the new 
Tangier Med Port, which will be much larger than the existing 
port and will act as a major transshipment facility.  The new 
port will have increased storage facilities and modern 
infrastructure.  El Aloui suggested that the new port should 
cut logistics costs by 30 to 40 percent for companies working 
in the TFZ. 
 
------- 
COMMENT 
------- 
 
8. (SBU) The GOM has identified the auto sector as an area 
with high potential for the country, and the conference (part 
of our effort to advance the bilateral economic relationship 
under the FTA) contributed to its own promotion activities. 
We share, and sought to convey to investors, the view that 
good opportunities exist for investors who do their homework 
and select appropriate niches.  At the same time, some 
constraints remain to full realization of the "Emergence" 
vision.  These include notably a shortage of professionals in 
engineering, design, and research and development. 
Nonetheless, recent success stories and the interest of at 
least two companies who attended the conference show that 
this remains a sector with promise for Morocco.  End Comment. 
****************************************** 
Visit Embassy Rabat's Classified Website; 
http://www.state.sgov.gov/p/nea/rabat 
****************************************** 
 
RILEY