VZCZCXRO3745
RR RUEHTRO
DE RUEHCL #0209/01 3101326
ZNR UUUUU ZZH
R 051326Z NOV 08
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 8188
INFO RUEHAS/AMEMBASSY ALGIERS 3003
RUEHBM/AMEMBASSY BUCHAREST 0051
RUEHMD/AMEMBASSY MADRID 3827
RUEHFR/AMEMBASSY PARIS 0666
RUEHRB/AMEMBASSY RABAT 8440
RUEHTRO/AMEMBASSY TRIPOLI 0025
RUEHTU/AMEMBASSY TUNIS 2125

UNCLAS SECTION 01 OF 02 CASABLANCA 000209 
 
SIPDIS 
 
FOR STATE NEA/MAG 
STATE PLS PASS TO COMMERCE FOR NATHANIEL MASON 
STATE PASS TO USTR FOR BURKHEAD 
 
E.O. 12958: N/A 
TAGS: ECON EIND PGOV PREL AMCHAMS MO
SUBJECT: OFFSHORING - MOROCCO,S COMPARATIVE ADVANTAGE 
 
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SUMMARY 
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¶1.  (SBU) Building on its natural advantage of both 
geographic and linguistic proximity to Europe, the 
"offshoring plank" of Morocco,s "Emergence" strategy has 
succeeded in making the country a premier destination for 
European firms seeking to shift their operations offshore. 
Beyond language, geography, and culture, Morocco has 
benefited from its state-of-the-art infrastructure, and a 
liberalized telecom sector, to become one of the top five 
destinations in the world for the relocation of a company,s 
business processes.  Nevertheless, to maintain its 
comparative advantage, Morocco must address two major 
challenges:  the lack of skilled labor and increasing 
competition from Eastern Europe.  End Summary. 
 
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Job and Wealth Creation Strategy 
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¶2.  (SBU) Offshoring, defined as the relocation of a 
company,s business processes, is playing an increasingly 
important role in Morocco,s economy.  A central part of the 
government,s "Emergence" strategy (an effort to diversify 
the economy and raise productivity) focuses on creating 
offshoring hubs in major urban centers including Casablanca 
and Rabat.  A number of these are being financed by the 
Caisse de Depot et de Gestion (CDG), which manages Morocco,s 
pension fund.  It plans to invest 2 billion USD in building 
four high tech offshoring facilities in Casablanca, Rabat, 
Fes, and Marrakesh, as part of its long-term strategy to 
create jobs and generate return on its capital. 
 
¶3.  (SBU) On October 22, NEA Maghreb Office Director Williams 
and EconOff visited Casablanca,s 550 USD million offshoring 
facility, Casablanca Nearshore Park (CNP).  The Director 
General of CNP, Mohamed Lasry, explained Morocco,s long-term 
plans in this area and discussed existing and potential areas 
of cooperation between Morocco and the U.S., notably in the 
field of information technology.  As an example of this 
collaboration, he said Dell has established helpdesks in 
Morocco to assist its French and Spanish clientele with 
technical problems, creating some 1,500 jobs. 
 
¶4.  (SBU) Although offshoring has clear benefits for the 
Moroccan economy, leaders in the field disagree about its 
long-term financial impact.  On the one hand, Lasry told us 
that CNP would produce 26,000 jobs and generate over USD one 
billion in revenues by 2012.  On the other hand, the Finance 
Ministry estimates that offshoring will create 9,100 jobs and 
contribute about USD 1.7 billion by 2015.  Nevertheless, one 
thing is clear; offshoring is an important component of 
Morocco,s long-term economic development. 
 
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Morocco,s Comparative Advantage 
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¶5.  (SBU) Morocco,s comparative advantage in the offshoring 
sector is four-fold.  The first advantage is its geographic 
proximity to the European market.  Second, Morocco,s labor 
force is multilingual, namely in French, Arabic and Spanish. 
The third asset is its state-of-the-art offshoring 
infrastructure.  Finally, Morocco,s growing telecom sector 
is liberalized and modern. 
 
¶6.  (SBU) A clear example of Morocco,s unique position in 
offshoring is found in the latter sector.  Morocco has 
already attracted close to half of Europe,s Francophone call 
centers and is highly competitive in the Spanish market. 
Moreover, the number of call centers in Morocco increased 
from 50 in 2004 to an estimated 200 in 2008, employing 18,000 
people. 
 
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Fiscal Incentives 
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¶7.  (SBU) Morocco has developed a successful fiscal incentive 
scheme to attract offshoring clientele to its facilities. The 
 
CASABLANCA 00000209  002 OF 002 
 
 
incentives at CNP include a corporate tax holiday during the 
first five years of business and 17.5 percent thereafter; 
telecommunication costs that are set at 35 percent below the 
market price; and training grants of up to USD 7,000 for each 
Moroccan employee during the first three years of employment. 
 With 100 percent of the office space rented to 
multi-national companies, the incentives have proven to be 
effective in attracting corporations like Tata, Nestle and 
Accenture. 
 
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Obstacles in Maintaining Competitiveness 
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¶8.  (SBU) Challenges remain, however.  Chief among them is a 
lack of skilled labor.  Morocco,s education strategy "Vision 
2010" seeks to train 10,000 engineers by 2010, but will 
likely fall well short of its objective.  A leading business 
paper recently estimated that only 4,200 engineers would 
enter the workforce by that date.  Other skills are in 
similarly short supply:  a McKinsey consultant who tracks 
offshoring recently told us that the future of the sector 
depends on whether Morocco can increase the supply of skilled 
labor.  Some steps have already been undertaken:  the 
offshoring facility in Rabat, for instance, will include a 
technical university to train individuals with the necessary 
skills to be competitive in labor force. 
 
¶9.  (SBU) The second challenge is increasing competition from 
Eastern Europe, which offers cheaper white-collar labor. 
Salaries for engineers in Romania, for instance, can be as 
low as one-third the Moroccan level.  Already, some 
Moroccan-based companies are recruiting in Eastern Europe to 
fill positions.  Many middle managers at companies in the 
Tangier-Med zone, for instance, have come from Romania and 
elsewhere in Eastern Europe. 
 
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Comment 
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¶10.  (SBU) As one of the key pillars of the "Emergence" 
strategy, offshoring figures prominently in Morocco,s 
efforts to create a modern and outward-looking services 
sector.  Hard-won success is at risk, however, until the 
government is able to implement the education reforms that 
will enable Moroccan schools to assure the supply of 
highly-skilled labor the sector requires.  End Comment. 
MILLARD