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FM AMCONSUL CASABLANCA
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INFO RUEHRB/AMEMBASSY RABAT 8504
RUCNMGH/MAGHREB COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
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RUEHNK/AMEMBASSY NOUAKCHOTT 2368

UNCLAS SECTION 01 OF 07 CASABLANCA 000011 
C O R R E C T E D  C O P Y (ADDED CAPTION) 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA AND NEA/MAG 
STATE PLEASE PASS TO USTR 
USDOC FOR MAC/ANESA 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: EINV ETRD EFIN ELAB OPIC KTDB PGOV MO
SUBJECT: MOROCCO - 2009 INVESTMENT CLIMATE STATEMENT 
 
REF:  08STATE 123907 
 
CASABLANCA 00000011  001.2 OF 007 
 
 
THE FOLLOWING IS THE 2009 INVESTMENT CLIMATE STATEMENT FOR MOROCCO 
 
 
A.1. Openness to Foreign Investment 
 
Morocco actively encourages foreign investment and has sought to 
facilitate it through sound macro-economic policies, trade 
liberalization, and structural reforms. The U.S. Free Trade 
Agreement (FTA) and the Association Agreement with the EU have led 
Morocco to reduce its tariffs on imports from the U.S. and EU. 
Morocco has also signed a quadrilateral FTA with Tunisia, Egypt, and 
Jordan, and a bilateral FTA with Turkey.  Additionally, it is also 
seeking trade and investment accords with other African, Asian, and 
Latin American countries. 
 
The U.S.-Morocco FTA has increased exports and raised inward 
investment.  Nonetheless, challenges remain. According to the World 
Bank's 2008 "Doing Business in Morocco" report, the country's 
excessive bureaucratic red tape is a major constraint on the 
competitiveness of the economy and deters investors.  To make 
foreign investment easier the government has created a number of 
Regional Investment Centers to minimize and accelerate all 
administrative procedures, but their mandate is limited to 
investments of up to 200 million MAD (USD 26 million). Investments 
exceeding that amount are dealt with by a special ministerial 
committee chaired by the Prime Minister.  In 2008, the Committee 
approved 40 projects totaling more than USD 5.75 billion. 
 
Morocco's 1995 Investment Charter applies to both foreign and 
Moroccan investors, with foreign exchange provisions favoring 
foreign investors.  Foreign investment is permitted in nearly every 
sector.  In 2008 Morocco's phosphate producer, the Office Cherifien 
des Phosphates (OCP), announced it would open its phosphate hub to 
foreign investors to set up new fertilizer and chemical plants, a 
move seen by analysts as a step towards the liberalization of the 
phosphate sector.  OCP is the largest producer of phosphates in the 
world.  Additionally, although foreigners are prohibited from owning 
agricultural land, the law does allow for long-term leases of up to 
99 years and permits agricultural land to be purchased for 
non-agricultural purposes.  To attract foreign investment in its 
agricultural sector, Morocco recently set aside about 50,000 HA of 
communal land readily available for leasing to international 
investors.  Agricultural foreign investments are targeted mostly at 
citrus and olives, with some small investments in grapes and 
berries. 
 
A.2. Conversion and Transfer Policies 
 
The Moroccan dirham is convertible for all current-account and 
selected-capital account transactions.  Particularly, 
capital-account repatriation transactions are convertible if the 
original investment is registered with the foreign exchange office. 
Morocco's foreign exchange law enables expatriate employees to 
repatriate their entire salaries. 
 
Foreign exchange is readily available through commercial banks for 
the following activities without prior government approval: 
Remittances by foreign residents; repatriation of dividends and 
capital by foreign investors; and payment for foreign technical 
assistance, royalties and licenses. 
 
The current exchange-rate regime is a tightly managed float against 
a euro-dominated basket of currencies.  The Moroccan dirham thus 
tends to move in line with the Euro.  It strengthened through much 
of 2008 against the dollar, but gave up those gains at the end of 
the year, and entered 2009 at 8.30 MAD to the dollar, down from the 
7.75 MAD level at which it ended 2007. 
 
A.3. Expropriation and Compensation 
 
The Embassy is not aware of any recent, confirmed instances of 
private property being expropriated for other than public purposes, 
or being expropriated in a manner that is discriminatory or not in 
accordance with established principles of international law. 
 
A.4. Dispute Settlement 
 
In general, investor rights are backed by an impartial procedure for 
dispute settlement that is transparent.  In 2008, however, a few 
U.S. Companies had investment disputes with the Government of 
 
CASABLANCA 00000011  002.2 OF 007 
 
 
Morocco.  In most cases, through U.S. advocacy, these minor disputes 
were resolved with the relevant government agency. 
 
While Morocco's commercial and appeals courts have generally 
improved the dispute settlement climate, Moroccan and foreign 
companies continue to complain about the inefficiency and the lack 
of transparency in the judicial system.  The World Bank notes that 
bankruptcy protection and liquidation procedures are inefficient and 
that the courts are slow and often fail to enforce legal rulings. 
To address this challenge, the U.S. Agency for International 
Development (USAID) has worked with Morocco's judiciary to 
strengthen the legal framework for business and the commercial court 
system. 
 
In an effort to promote foreign investments, the Moroccan 
legislature has adopted laws to protect both foreign investors and 
their Moroccan counterparts.  Morocco is a member of the 
International Center for the Settlement of Investment Disputes 
(ICSID) and a party to the 1958 Convention on the Recognition and 
Enforcement of Foreign Arbitral Awards (with reservations) and the 
1965 Convention on the Settlement of Investment Disputes between 
States and Nationals of Other states.  New legislation extending the 
scope of arbitration and mediation and giving them added legal 
standing took place in July 2007, partly as a result of FTA required 
reforms.  Moreover, USAID in collaboration with IFC are assisting 
the GOM in establishing a national commission on Alternative Dispute 
Resolution (ADR) with the mandate to regulate mediation training 
centers and develop mediator certification system. 
 
A.5. Performance Requirements/Incentives 
 
At present, there are no general foreign investor performance 
requirements.  However, in the event that GOM incentives are 
provided, requirements may be imposed, and if so, would be spelled 
out in the specific investment contract. 
 
Morocco provides a range of investment incentives, particularly in 
the off-shoring sector where it has developed a successful fiscal 
incentive scheme to attract off-shoring clientele to its facilities. 
The incentives include a corporate tax holiday during the first five 
years of business and 17.5 percent thereafter; telecommunications 
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. 
 
American citizens can enter Morocco for a period of three months 
without a visa.  A Moroccan residence permit is required for a 
period of more than three months. 
 
A.6. Right to Private Ownership and Establishment 
 
Private ownership is permitted in all but a few sectors reserved for 
the state, like phosphate mining.  Economic analysts, however, 
speculate that as Morocco's phosphate processing increasingly 
becomes open to foreign investment, so will its mining sector. 
Apart from a few exceptions, private entities may freely establish, 
acquire, and dispose of interests in business enterprises. 
 
In 2008 a number of firms like the national airline carrier (Royal 
Air Maroc) were placed on the short list of companies to be 
privatized in the future. 
 
A.7. Protection of Property Rights 
 
The U.S.-Morocco FTA contains strong intellectual property 
protections, which were incorporated in Moroccan intellectual 
property legislation in 2006.  While the protection of Intellectual 
Property Rights (IPR) is improving as a result of these provisions, 
counterfeit DVDs and CDs remain widely available throughout Morocco. 
 Morocco's Customs Office, Copyright Office (BMDA), and the Office 
of Industrial and Commercial Property (OMPIC) have initiated 
campaigns to target Morocco's largest counterfeit manufacturers and 
importers, with mixed success. 
 
Secured interests in property are recognized and enforced through 
the "Administration de la Conservation Fonciere." 
 
A.8. Transparency of the Regulatory System 
 
Despite GOM efforts to increase the system's transparency, Morocco's 
administration is opaque and difficult to navigate.  Routine 
permits, especially those required by local government agencies, can 
 
CASABLANCA 00000011  003.2 OF 007 
 
 
be difficult to obtain. Morocco has sought to increase the 
transparency of its public tenders, but moves to decentralize the 
procurement process have had the opposite effect in recent years. 
 
In 2006 a new charter for the Central Bank created an independent 
board of directors and prohibited the Ministry of Finance and 
Economy from borrowing from the Central Bank except in exceptional 
circumstances. 
 
A.9. Efficient Capital Markets and Portfolio Investment 
 
Morocco's banking system is one of the most liberalized in North 
Africa.  Nonetheless, it is highly concentrated, with the six 
largest banks accounting for 85 percent of banking sector assets. 
The IMF/World Bank's updated Financial System Stability Assessment 
concluded that the system was "stable, adequately capitalized, 
profitable, and resilient to shocks."  It noted the progress Morocco 
has made in deepening financial intermediation (37 percent of the 
population has a bank account, up from a quarter) and in reducing 
the overall level of non-performing assets (down from 10.9 percent 
in 2006 to 7.9 percent at the end of 2007). 
 
A new Moroccan banking law was passed in 2006, strengthening the 
supervisory power of the Central Bank and improving risk management 
practices.  Morocco is moving towards adoption of Basel II capital 
adequacy and risk management guidelines in order to improve 
financial stability, while also adopting International Accounting 
Standards (IAS), both intended to enhance transparency. 
 
Credit is allocated on market terms, and foreign investors are able 
to obtain credit on the local market.  There are some 
cross-shareholding arrangements, but they are not tailored to 
exclude foreign investment.  The Embassy has not heard of any 
efforts by the private sector or industry to restrict foreign 
participation in standard setting organizations.  The government has 
actively sought out the participation of foreign investors for 
discussions on improving the business climate in Morocco. 
 
Some foreign banks are critical of what they view as a lack of 
proportionate participation in the Moroccan Bankers' Association. 
Moroccan banks are largely in compliance with the Basel I standards 
and were on-target to become Basel II compliant, as required by the 
Moroccan Central Bank.  Banks are supervised on a consolidated basis 
and must provide statements audited by certified public accountants. 
 
 
The Casablanca Stock Exchange (CSE), founded in 1929 and re-launched 
as a private institution in 1993, is one of the few regional 
exchanges with no restriction on foreign participation.  An average 
of thirty percent of its total capitalization is in foreign hands. 
The Exchange prospered during the early 1990s, but suffered a bear 
market from late 1998 through 2002, with a decline in listings to 
approximately 50 companies and a reduction of market capitalization 
to approximately USD 8.3 billion.  An ensuing bull market lasted 
nearly five years, but the market weakened in 2008.  In addition, in 
late 2008 amid widespread rumors of insider dealing and market 
manipulation at the CSE, the stock market watchdog, the Conseil 
Deontologique des Valeurs Mobilieres (CDVM) moved decisively to 
address what it termed a "blatant failure to monitor the unlawful 
distribution of insider information," recommending that CSE's entire 
leadership be dismissed.  The incident demonstrated the increasingly 
aggressive stance of CDVM in policing the exchange and implementing 
tough sanctions against those it concludes have misused or neglected 
their power. 
 
Analysts note that the market is buoyed by continuing restrictions 
on the ability of Moroccans to invest abroad.  Gradual easing of 
these limits is widening Moroccan investors' options, however, and 
while there has been  discussion of full currency liberalization in 
the medium term, those plans will likely be delayed as a result of 
the international financial crisis. 
 
A.10. Political Violence 
 
Morocco is a constitutional monarchy with a government, parliament, 
and judiciary, in which ultimate power and authority rest with the 
throne.  A democratic reform process is underway and the country is 
broadly regarded as politically stable.  The U.S. Government 
maintains good relations and has designated Morocco a Major Non-NATO 
Ally.  A series of terrorist bombings in Casablanca in March and 
April 2007, the first major incidents since the Casablanca bombings 
of 2003, highlighted the fact that Morocco continues to face a 
 
CASABLANCA 00000011  004.2 OF 007 
 
 
terrorist threat.  U.S. facilities were targeted in the 2007 
incident.  Counterterrorism cooperation is good.  The Moroccan 
government aggressively investigates terrorist suspects and has 
dismantled a number of terrorist cells over the past year. 
 
Demonstrations occur frequently in Morocco and usually center on 
domestic issues.  During periods of heightened regional tension, 
large demonstrations may take place in major cities.  Although these 
demonstrations have been peaceful, well organized, and well 
controlled by the police, some have been anti-American with isolated 
incidents of violence. 
 
The sparsely settled Western Sahara was the site of armed conflict 
between the Moroccan government and the Polisario Front, which 
demands independence.  A cease-fire has been in effect since 1991 in 
the U.N. administered area, but the territory remains disputed 
between Morocco, Algeria, and the Polisario.  Negotiations to reach 
a settlement resumed in 2007 under U.N. auspices, but the dispute 
hampers development in the territory, as well as economic and 
political integration in the North Africa region. 
 
A.11. Corruption 
 
Morocco has a wide body of laws and regulations to combat 
corruption, but it remains a problem, in part due to the low 
salaries in the public sector.  Prime Minister Abbas El Fassi has 
made the fight against corruption one of his key priorities.  A new 
anti-corruption agency was set up in 2008.  Headed by a respected 
senior Moroccan official who has been active in anti-corruption 
efforts since the founding of "Transparency Maroc," the agency was 
created to "moralize" Moroccan public life and to propose specific 
steps the government can take to address the issue. 
 
In spite of legislative improvements and a slight rebound over 2006, 
Morocco's 80th place ranking in Transparency International's 2008 
corruption index is well below its 2002 level, when it was in 52d 
place.  Government officials have criticized the index (which 
reflects public perceptions concerning corruption) for not 
pin-pointing recent anti-corruption efforts.  These include not just 
heightening the transparency of public tenders, but also the 
implementation of a requirement that senior government officials 
declare their assets at the start and end of their government 
service. 
 
Since 2003 Morocco has taken a series of steps to counter terrorist 
finance, strengthen controls against money laundering, and conform 
to international accounting and banking standards.  Comprehensive 
anti-money laundering legislation was passed in 2007, and a 
Financial Intelligence Unit plans to become operational in 2009. 
The robust legislation draws largely from recommendations made by 
the Organization for Economic Cooperation and Development's (OECD) 
Financial Action Task Force (FATF). 
 
¶B. Bilateral Investment Agreements 
 
The U.S.-Morocco FTA was signed in June 2004 and came into effect in 
January 2006, ending tariffs on over 98 percent of the bilateral 
trade in consumer and industrial goods. The GOM also signed an FTA 
with Turkey in January of 2006.  For more details on the 
U.S.-Morocco FTA please see www.moroccousafta.com 
 
¶C. OPIC and other Investment Insurance Programs 
 
Morocco's agreement with the Overseas Private Investment Corporation 
was most recently updated in March 1995. Morocco is also a member of 
the Kuwait-based Arab Investment Guarantee Organization (OAGI) and 
the Multilateral Investment Guarantee Agency (MIGA).  For more 
details please see www.opic.gov 
 
¶D. Labor 
 
Once strong and politically influential, the Moroccan trade union 
movement is now fragmented and no longer possesses the political 
clout it carried 50 years ago when it helped lead the country to 
independence.  Nevertheless, five of the 19 trade union federations 
retain the potential to influence political life.  Although unions 
claim high membership rates, Morocco has about 600,000 unionized 
workers, less than six percent of the 11.26 million workforce. 
 
Moroccan labor law and practice draw from French models.  The labor 
code was reformed in 2004, reducing the maximum workweek from 48 to 
44 hours.  Labor codes concerning unions and the right to strike do 
 
CASABLANCA 00000011  005.2 OF 007 
 
 
not cover agricultural and domestic workers.  Investors continue to 
view labor regulations as a significant constraint.  They complain 
that procedures regarding lay-offs remain complicated and onerous, 
and impose a significant financial burden on companies.  Rules 
regarding foreign personnel are also vague, and can lead to 
conflicting interpretations and arbitrary decisions. 
 
Morocco has ratified the International Labor Organization (ILO) 
convention covering the right to organize and bargain collectively, 
and any group of eight workers can organize. Article 14 of the 
Constitution gives workers the right to strike, but no detailed law 
exists to define it.  For a union to engage in collective bargaining 
it must have at least 35 percent of the enterprise's workforce as 
registered members.  The Ministry of Interior occasionally 
intervenes, especially if the government believes strategic 
interests are threatened.  There are mandatory procedures governing 
the settlement of disputes, though the government settles them on a 
case-by-case basis.  The number of workdays lost to strikes in 2005 
was 72,745. 
 
The official national unemployment figure at the end of the third 
quarter in 2008 was 9.6 percent with the more meaningful urban 
unemployment figure at 15.9 percent.  This represented a slight 
improvement over the same period in 2007.  The minimum wage is 
currently 2,010 dirhams per month, approximately USD 240. 
 
¶E. Foreign Trade Zones/Free Ports 
 
The industrial free trade zone in Tangier has brought foreign 
investment and employment to the northern region of Morocco.  The 
companies located in the zone may import goods duty free and are 
exempt from other taxes.  Moroccan labor laws still apply, but few, 
if any, firms are unionized.  There is also an offshore banking law 
covering Tangier. 
 
Foreign Direct Investment Statistics 
 
The Moroccan foreign exchange office maintains balance of payments 
statistics that include annual foreign exchange inflows for private 
foreign investment.  These statistics differentiate between foreign 
direct investment (purchases of companies or increases in capital), 
portfolio investment, and short-term financing for current account 
expenditures (e.g. lending to a subsidiary for purchases of 
equipment).  There are no statistics on the stock of foreign 
investment in Morocco, but investment was over USD 4 billion in 
2007, and appears to have remained strong in 2008.  The following 
tables are based on balance of payments statistics. 
 
Foreign direct investment in Morocco 
(Millions of USD) 
 
Year            Total FDI               Percent of GDP 
1997                800.9                  3.3 
1998                384.6                  1.1 
1999                945.6                  2.7 
2000                245.8                  0.8 
2001               2732.2                  8.0 
2002                534.2                  1.3 
2003               2430.2                  4.9 
2004               1070.5                  1.9 
2005               3007.6                  5.1 
2006               2962.5                  4.5 
2007               4629.2                  6.2 
 
Foreign direct Investment Inflows by Country of Origin 
(Millions of USD) 
 
Country         2003    2004    2005    2006    2007 
 
United States   49.3    50.5    25.5    98.1   188.2 
France         301.9   535.6  2234.6   982.5  1740.7 
Spain         1890.8    53.8   162.4   817.2   744.9 
Germany         15.1    53.6    96.3   106.8   200.8 
United Kingdom  25.6    51.3    50.9   105.8   314.2 
Netherlands      7.8    14.2    29.3    25.8    61.5 
Benelux         19.9    39.1    48.0   296.0   160.7 
Saudi Arabia    17.1    39.9    40.8    37.5    77.6 
Switzerland     27.2    76.3    85.4   102.9   161.6 
UAE             23.2    37.3    81.9    87.9   464.6 
Kuwait           1.8     2.0    25.1   115.0   192.1 
Italy           11.2    30.0    23.6    38.0   105.4 
Portugal         3.6     2.3     6.8     5.7     6.8 
 
CASABLANCA 00000011  006.2 OF 007 
 
 
Others          35.6    84.6    97.0   143.0   210.0 
Total         2430.2  1070.5  3007.6  2962.5  4629.1 
 
 
N.B       2003     2004     2005     2006      2007 
 
Exchange  9.57     8.86     8.88     8.80       8.20 
   Rate (MAD/USD) 
GDP      49.80    56.40    58.90     65.40     75.10 
   (Billions of USD) 
 
 
Foreign direct Investment Inflows by Sector 
(Millions of USD) 
 
Sector        2003     2004     2005     2006     2007 
Industry    1963.6    202.7    308.0   1019.6    404.2 
Tourism       19.5    161.5    346.9    889.6   1515.0 
Real Estate  176.1    230.2    272.8    467.8    925.7 
Banking        5.9    172.1      5.0    166.3    222.4 
Insurance     16.9     18.7    128.9    166.2      2.6 
Commerce      50.5     69.1     49.7    118.9     41.9 
Holding        0.0      3.5     23.6     16.8    103.4 
Energy and Mining 
              11.1     37.9     42.5     11.4    343.7 
Transport      1.5      4.9     36.2      6.4    333.8 
Public Works   6.9     11.9     18.0      3.9     64.9 
Telecommunications 
              64.7     81.0   1725.2      3.1    376.5 
Agriculture    2.5      3.3      0.1      2.8      4.0 
Fishing       13.0      1.5      0.1      0.0      0.5 
Studies        0.0      7.9      0.1      0.0      0.0 
Other Services 85.8    53.9     46.9     76.8    275.1 
Other         12.2     10.4      3.5     12.8     15.6 
Total       2430.2   1070.5   3007.6   2962.5   4629.1 
 
 
Major Foreign Investors 
 
U.S. 
 
Industries Marocaines Modernes 
     Parent company: Procter and Gamble 
     Sector: soaps and toiletries 
     Number of employees: 500 
 
Coca-Cola Export Corporation 
     Parent company: The Coca-Cola Export Corporation 
     Number of employees: 3200 
 
J.R.A. Morocco S.A. 
     Parent company: Jordache Enterprises Inc. 
     Sector:  manufacture of jeans 
     Number of employees: 1000 
 
Delphi Automotive (former Division of GM) 
     Sector:  auto part manufacturer 
     Number of employees:  1500 
 
Kraft Foods 
     Sector: Food Products 
     Number of employees: 60 
 
Minco Aviation Electronics 
     Sector: Aviation/Hi Tech 
     Number of employees: 250 direct and indirect jobs 
     USD 17 million temperature sensor production unit 
 
Colony Capital 
     Sector: Tourism 
     Number of employees: will generate 9,000 direct 
     and USD 45,000 indirect jobs 
     USD 1.2 billion in over ten years 
 
Emerging Capital Partners and Truffle Capital 
     Sector: Mining 
 
International Paper 
     Sector: Packing 
     Number of employees: 1,500 
 
Fruit of the Loom 
 
CASABLANCA 00000011  007.2 OF 007 
 
 
     Sector: Textile 
     Number of employees: 1,150 
     USD 162 Million in new and expanded production units 
 
Dell Computers 
     Sector: Computers/Hi Tech 
     Number of employees: 1,700 
 
Other 
 
Jorf Lasfar Energy Company 
     Parent company: TACA Energy (operated by CMS Energy) 
     Sector: independent power project 
     Number of Employees: 500 
     $1.2 billion project 
 
ST Microelectronics 
     Parent company: S.G.S. Thomson (France) 
     Sector: electronic components and semiconductor 
             manufacturing 
     Number of employees: 1,600 
 
 
Pechiney - MMA 
     Parent company: Pechiney (France) 
     Sector: aluminum cookware manufacturing 
     Number of employees: 1,280 
 
Bymaro S.A. 
     Parent company: Bouygues S.A. (France) 
     Sector: civil engineering 
     Number of employees: 1,000 
 
Renault Maroc 
     Parent company: Renault S.A. (France) 
     Sector: motor vehicle assembly 
     Number of employees: 800 
 
C.G.E. Maroc 
     Parent company: C.G.E. (France) 
     Sector: electric cable and transformer 
     manufacturing 
     Number of employees: 675 
 
Polymedic 
     Parent company: Hoechst AG (Germany) 
     Sector pharmaceutical manufacturing 
     Number of employees: 350 
 
 
MILLARD