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RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHCL #0102/01 1580915
ZNR UUUUU ZZH
R 070915Z JUN 07
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 7723
INFO RUEHRB/AMEMBASSY RABAT 7984
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 0280
RUEHFR/AMEMBASSY PARIS 0560
RUEHNK/AMEMBASSY NOUAKCHOTT 2261

UNCLAS SECTION 01 OF 02 CASABLANCA 000102 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN KDEM MO
SUBJECT: PROS AND CONS OF INVESTING IN MOROCCO 
 
¶1. (SBU) Summary.  Morocco is an increasingly attractive investment 
destination, as evidenced by the on-going series of events in 
Casablanca and other cities to discuss opportunities for potential 
investors.  Many factors make Morocco a good place for Americans to 
invest, including the FTA, flexibility in setting business terms, 
and a qualified, low-cost workforce.  At the same time, challenges 
remain.  They include: a questionable supply of skilled workers; 
lack of capacity to serve the U.S. market; bureaucratic and 
regulatory obstacles; and a weak judicial system.  End Summary. 
 
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THE PROS OF INVESTING IN MOROCCO 
-------------------------------- 
 
¶2. (U) The newly-released 2007 Morocco Trade and Investment Guide, 
published by the American Chamber of Commerce, lists the reasons 
that Morocco offers a "welcoming business environment."  At the top 
of the list are low labor costs, proximity to Europe and the U.S., 
political and economic stability, and prime tourist attractions. 
Also mentioned are reforms such as stricter enforcement of 
intellectual property laws and an improved labor code. 
 
¶3. (U) The Free Trade Agreement (FTA) between Morocco and the U.S., 
and its "investor-friendly rules," is also a key incentive. 
Companies such as Paris Texas - Chapstar have found that they can 
deliver Moroccan-made specialized fabrics to the U.S. market at a 
lower cost than similar goods manufactured in Egypt or China, thanks 
to the tariff relief provided by the FTA.  More and more companies, 
including Italian shoe manufacturers and others, are seeking ways to 
take advantage of FTA benefits. 
 
¶4. (SBU) Another incentive is the flexibility offered by a country 
that actively promotes and is eager for investment.  Anwar Dahab, 
Managing Director of Dell Computer Morocco, says that his company 
particularly appreciated the ability to negotiate its terms when it 
set up shop in 2003.  Dahab noted that he has worked directly with 
Prime Minister Driss Jettou to design an incentive package for the 
company's upcoming move to Casablanca's new Casashore.  Dahab 
conceded that Morocco did not immediately deliver on all its 
promised incentives for its initial investment, but that it has been 
able to resolve the problem, and appreciates the responsiveness and 
flexibility that Morocco offers investors. 
 
¶5. (U) Morocco also seems able to provide a qualified and relatively 
low-cost workforce in many areas.  Dell, for example, went from 700 
employees at the end of 2004 to 1400 just a year later.  The ability 
to expand so rapidly testifies to a pool of qualified workers in 
some key sectors.  In addition, unemployment is a significant 
problem in Morocco, further inducing the government to provide 
incentives to businesses that bring jobs to the country. 
 
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THE CONS OF INVESTING IN MOROCCO 
-------------------------------- 
 
¶6. (U) Despite the advantages of investing in Morocco, there are 
challenges as well.  Language and cultural barriers can make doing 
business difficult, and companies often have trouble finding 
information about Moroccan businesses in English.  Sometimes the 
information they do find is written so poorly that it puts off 
potential partners or investors.  As in any country, potential 
investors can also be victimized by unscrupulous local economic 
operators.  The problem is compounded by the slow pace and 
complexity of the Moroccan judicial system, which is widely 
perceived to be a key impediment to foreign investment. 
 
¶7. (U) The labor market story is also not uniformly positive, 
notwithstanding Dell's experience.  Morocco's aggressive tourism 
promotion policy aims to create 80,000 additional rooms by 2010, 
generating 72,000 new jobs.  Already, however, some new 
establishments in Marrakech and other popular destinations report 
difficulty in recruiting qualified staff.  Similarly, Morocco's goal 
of training 10,000 engineers by 2010 is also falling behind 
schedule.  In addition, investors are sometimes surprised to find 
that when it comes to labor costs, Morocco may be inexpensive 
compared to Europe or the U.S., but it is not a low-cost country 
compared to many other emerging markets. 
 
¶8. (U) Another potential concern for investors is the ability of 
Moroccan businesses to satisfy the demands of the U.S. market. 
Speakers at the recent Moroccan-American Bridges conference pointed 
out that Moroccan exporters are sometimes so busy filling orders for 
other markets, usually Europe, that they have little excess capacity 
for the U.S. and little ability to increase production quickly. 
Another speaker noted that this problem also exists in the 
agribusiness sector, as does that of reliability and standards. 
 
CASABLANCA 00000102  002 OF 002 
 
 
 
¶9. (SBU) While Morocco has put a great deal of effort into 
instituting reforms that improve the investment climate, there is 
still work to be done.  Regulations in many areas remain opaque and 
time-consuming, a problem compounded by the judicial shortcomings 
cited above.  To cite one key example, implementation of Morocco's 
new 2004 labor code remains extremely problematic.  Even companies 
that fully comply with its provisions can find themselves dragged 
into court by disgruntled employees, where they can face judgments 
that have little relation to the underlying facts of the case.  On 
the whole, Morocco is reform-minded and moving forward, but 
investors still need to be cautious about perceived versus actual 
benefits from newly instituted changes. 
 
¶10. (SBU) Unfortunately, the rise of terrorism in Morocco is an 
issue that potential U.S. investors have to consider, particularly 
for those interested in the tourism sector.  Following recent 
suicide bombings in Casablanca, however, Moroccans have been quick 
to note that their experiences with terrorism are similar to those 
in many Western countries.  According to Anwar Dahab of Dell 
Computer, "Morocco is a stable country and terrorism in Morocco is 
like what happened in Madrid or London."  In other words, it happens 
everywhere now and does not indicate fundamental instability.  At 
the same time, the GOM has stepped up efforts to track and capture 
terrorists in Morocco, and is keenly aware of the negative impact 
terrorist acts could have on the country's ability to encourage 
Foreign Direct Investment as an integral part of its growth 
strategy. 
 
¶11. (SBU) Comment.  Morocco offers many compelling reasons for 
American businesses to invest in the country.  Several U.S. 
companies, including Dell Computer, Colony Capital, International 
Paper, Fruit of the Loom and Century 21, have had positive 
experiences.  The GOM's eagerness to court international investors, 
however, sometimes masks the challenges of investing in Morocco. 
Not only is Morocco anxious to downplay any downsides to investing 
here, but many of the country's reforms and initiatives are very 
new, requiring time and tweaking before investors can benefit fully 
from them.  End Comment. 
 
GREENE