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DE RUEHRB #0431/01 1491530
ZNR UUUUU ZZH
R 291530Z MAY 09
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 0147
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHCL/AMCONSUL CASABLANCA 4615
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS RABAT 000431 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/MAG - KAAILAU 
 
E.O. 12958: N/A 
TAGS: ECON EINV EAGR SOCI MO
SUBJECT: RE-ORIENTING THE ORIENT: ECONOMIC TRANSFORMATION 
IN MOROCCO'S NORTHEAST 
 
REF: RABAT 392 
 
¶1.  (SBU) Summary: The Oriental region in northeastern 
Morocco is undergoing a rapid transformation from one of 
Morocco's poorest and least-developed regions to one of its 
most richly-endowed with development projects and 
infrastructure.  The flood of new construction, investment, 
and social programs demonstrates the Government of Morocco's 
determination to spur economic growth as a tool to alleviate 
both poverty and the risks that it perceives from economic 
discontent )- social instability, susceptibility to 
extremist ideology, and potential unrest in a border region 
adjoining an adversarial neighbor.  This cable, outlining 
Rabat's growth strategy for this remote region, is the first 
of two reports on economic development in the Oriental and 
its impact on Morocco's growth and international relations. 
Septel will discuss the region's role in Morocco's 
international economic relations.  End Summary. 
 
----------------------------- 
Lifting the Burden of History 
----------------------------- 
 
¶2.  (U) The Oriental, one of Morocco's 16 regions, occupies 
the northeast corner of the Kingdom, including most of 
Morocco's Mediterranean coast and the majority of its 
non-desert land border with Algeria.  The region comprises 
about 18 percent of Morocco's (non-Saharan) land area, but is 
home to only 2 million people, or 6.25 percent of the 
population.  Under French rule, political, commercial and 
family ties had been oriented across the border toward 
Algeria, and poor transportation links westward with the rest 
of Morocco left the region isolated following independence in 
¶1956.  Uprisings in the nearby Rif Mountains in 1958 and 
rioting across northern Morocco in 1984 engendered central 
government antagonism toward the region.  This history, along 
with decades of low rainfall, gave the region Morocco's 
highest poverty rate (26 percent) by 2002 ) a "truly 
damaged" region, in the words of the director of the Regional 
Investment Center (CRI). 
 
¶3.  (U) Nearly every local contact during Econoff's May 11 ) 
15 travel in the region spontaneously cited King Mohammed 
VI's March 18, 2003 speech in Oujda as the inflection point 
in the Oriental's prospects.  The King proposed a regional 
development strategy focused on constructing infrastructure, 
attracting private investment, creating opportunities for 
entrepreneurship (particularly among young people), and 
enhancing the quality and relevance of education and job 
training.  Since that speech, contacts emphasized, the King 
has returned 17 times to the region to assess the progress of 
development projects ) in contrast to the two visits of his 
father during the latter's 38-year reign.  The royal 
attention has given people in the region "unprecedented" 
optimism, said Abdelkhalek Bendriss, the regional director 
for the Banque Populaire, expressing a sentiment repeated by 
many contacts. 
 
¶4.  (U) In addition to the CRI-managed plans for industrial 
parks, offshoring business centers, airports, and tourism 
developments, the effect of this royal attention can be seen 
most strongly in the quick pace of construction of new 
transportation links and the ubiquitous upgrades and 
beautification of streets, public places, and public 
buildings in the cities of the region.  A new rail line, set 
to open in June 2009, will finally link the port of Nador to 
Morocco's rail network, allowing the port to compete for the 
business of major cities like Fez, and highways under 
construction will connect Oujda to Fez and Nador, and link 
the region's cities along the Mediterranean coast. 
 
¶5.  (U) Projects by the National Electricity Office (ONE) and 
National Potable Water Office (ONEP) have brought in-home 
access to electricity and water to nearly 100 percent in the 
region (from around 25 percent in the early 1990s). 
Government-sponsored projects, such as the electrical and 
water expansions, that do not fall under the CRI mandate owe 
much of their momentum to the Agence de l'Oriental, a GOM 
agency that has little budgetary authority of its own, but 
coordinates among other Ministries and state-owned offices to 
prioritize projects for the Oriental. 
 
---------------- 
Regional Economy 
---------------- 
 
¶6.  (U) The Oriental is the home of the highest number of 
 
Moroccans Residing Abroad (MREs), whose remittances fund the 
region's unusually high savings rate.  With porous borders 
flanking the region (the Spanish enclave of Melilla on the 
coast and the Algerian border to the east), the region is 
also known for trade in contraband goods (Septel). 
Historically, the region hosted coal and mineral mining, but 
those operations have closed or dwindled to almost a 
standstill.  Major products include agriculture (olives, 
cereals, spices, and citrus fruits), light industry, and 
raising sheep, although both agriculture and sheepherding 
were adversely impacted by twenty years of below-normal 
rainfall since the 1980s. 
 
¶7.  (U) MREs dominate the region's economy, particularly in 
the port city of Nador.  Around 30 percent of Morocco's 
immigrants to Europe hail from the Oriental region, estimated 
Hachmi Bentahar, the vice dean of Oujda's School of Law.  M. 
Houbaine of the Nador directorate of the Banque Populaire 
noted that while the average personal bank deposit in Morocco 
holds approximately USD 850, in the Nador area the average 
value is ten times higher, thanks to remittances from 
overseas relatives.  As a result, Nador was until recently 
Morocco's second most important city for financing behind 
Casablanca (but has since dropped to third behind Rabat). 
Tarik Yahya, President of the Chamber of Commerce of Nador, 
told Econoff that Nador uses only 11 percent of banking 
deposits for local lending; the balance is absorbed into the 
Moroccan financial sector through Casablanca.  This high 
savings rate also means that essentially all project 
financing in the Oriental is locally financed, protecting 
developers from international changes in conditions. 
 
------------------- 
Planning for Growth 
------------------- 
 
¶8.  (U) The targeted industries for Oriental's growth are 
tourism, agriculture, industry, and offshoring.  The first 
two hotels of the planned 12 hotels in the 1600 acre "tourism 
station" of Saidia (on the coast next to the Algerian border) 
will open in June with 4,000 beds (out of an eventual 40,000 
planned).  Another four sites along the Oriental's 
Mediterranean coast have been identified for tourist 
development, including the ecologically sensitive Mar Chica 
lagoon of Nador.  Construction of the first resort of the Mar 
Chica development has started, but the plan for Mar Chica 
reserves most of the area as a wildlife preserve, and the 
resorts will aim at high-value eco-tourists (in low numbers), 
according to Jilali Hachemi, regional director of the 
Moroccan Bank of External Commerce in Nador.  A new airport 
in Oujda, the highway connections to Fez, and the "rocade" 
highway along the Mediterranean coast are all an essential 
part of "de-isolating" the region and opening it to tourist 
traffic, Chourak explained. 
 
¶9.  (U) Diversification of outside investors in the tourism 
developments is an integral part of the GOM's strategy, for 
example, selecting a Spanish hotel developer, a British real 
estate promoter, and an American golf course developer for 
the Saidia project.  The varied international links should 
ensure that no one nationality dominates the tourism market, 
avoiding an unhealthy dependency on the financial health of a 
single market, Chourak argued.  The CRI expects the Saidia 
resort development to create 8,000 jobs at the tourism 
complex, with an additional 42,000 jobs created indirectly to 
support the growing tourism industry (Reftel). 
 
¶10.  (U) The second focal area of growth for the Oriental is 
agriculture.  The region includes areas noted for sheep 
raising, citrus fruits, olives, and cereal cultures, but 
availability of irrigation water limits productivity.  The 
GOM has subsidized investment in drip irrigation systems in 
25 thousand acres in the region.  The president of Berkane's 
Chamber of Agriculture, Mohammed El Haddadi, explained that 
the GOM pays 60 percent of the cost of farmers' drip 
irrigation systems, but argued the state would still come out 
ahead if it paid all the cost, by reaping a 40 percent 
savings in water used for agriculture.  The GOM is also 
divesting itself of state-owned farms in the region to allow 
entrepreneurs to experiment with new crops and growing 
methods. 
 
¶11.  (U) Haddadi assessed that the GOM's "Green Morocco Plan" 
for improving agricultural productivity is "exactly what we 
need" in the Oriental, offering technical and financial 
support to small farmers in the region, and, "opening their 
horizons" to develop strategic plans and goals.  The plan 
 
aims to organize small operators into cooperatives to build a 
"critical mass" for achieving economies of scale in seeking 
out market opportunities and moving up the value chain in 
conditioning and processing agricultural products.  Other 
agricultural plans include shifting citrus production from 
clementines to other citrus varieties that can be transformed 
into higher margin products (such as juices), promoting local 
brands for olive products and mutton to increase the value of 
the production, and reaching out to new export markets. 
 
¶12.  (U) Nador-area agriculture has shifted to new crops and 
techniques in recent years as Spanish producers have shifted 
farming to the Nador region for lower production costs, 
either by leasing land and operating the farms themselves, or 
by contracting with local farmers to supply European markets. 
 In both cases, the Spanish producers have introduced 
higher-yield techniques to local producers, explained Nador 
Chamber of Commerce President Yahya. 
 
¶13.  (U) A third focus for the Oriental region is offshoring 
operations and industrial parks.  Oujda now has Morocco's 
highest density of fiber optic internet connections, Chourak 
said, in the hope of capturing European offshoring business. 
As part of Morocco's industrial "Emergence" plan, Oujda has 
been selected to host a "Kyoto Park" industrial center, meant 
to host all future renewable energy and energy efficiency 
manufacturing. 
 
¶14.  (U) While the Government of Morocco has planned the 
offshoring site and industrial zones in Oujda, an industrial 
park in Nador is rising under the aegis of Nador's Chamber of 
Commerce ) the only park in Morocco to be developed by a 
Chamber of Commerce ) and has already leased nearly all of 
its space.  The key to the Nador park's success, stated 
Chamber of Commerce president Yahya, is its response to local 
demand from small and medium enterprises.  Yahya and Chourak 
both argued that the multiplying transportation links in the 
Oriental ) its four airports, new highways, and in 
particular the rail link connecting the Nador port to the 
rest of Morocco's rail lines, will accelerate economic 
activity, linking the Oriental both to Morocco and to Europe. 
 
¶15.  (U) While Oujda already boasts several university 
campuses, the education system is now trying to "orient the 
curriculum" to the job opportunities expected in tourism, 
offshoring and industry, Chourak told Econoff.  The Chamber 
of Commerce of Oujda has partnered with a French business 
school to open a business school in Oujda starting in 2009, 
and has worked with the Ministry of Education and Ministry of 
Industry to develop training curricula for technical trade 
schools.  However, law school Vice-Dean Bentahar, who is also 
the president of the Network of Associations for Development 
in the Oriental, regretted that Morocco's university system 
was likely not flexible enough to respond with appropriate 
courses fast enough to meet private sector need for trained 
workers.  The law permits secondary education systems to 
customize up to 30 percent of the curriculum with local 
content, he said, but thus far the local school systems had 
not incorporated any training aimed at the new jobs likely to 
be created. 
 
------------------------------------- 
Social Programs Progressing in Tandem 
------------------------------------- 
 
¶16.  (U) In tandem with plans to spur investment, the GOM has 
made a concerted effort, under the King's "National 
Initiative for Human Development" (INDH), to reduce the 
sentiment of isolation or exclusion of the poorest residents 
of the region.  As city populations swelled in the past two 
decades following mine shutdowns and drought in agricultural 
areas, Oujda in particular witnessed undirected and 
ill-managed growth of slums in its outskirts, harboring 25 
percent of the city's population.  Since 2005, massive 
building programs have replaced most of the slums Qth 
government-constructed apartment buildingsQith electricity 
and water service, and INDH is now constructing community 
centers in 10 of the poorest neighborhoods among the 
outskirts of Oujda. 
 
¶17.  (U) When Econoff made an unannounced visit to the 
one-year-old El Amal community center, the health clinic was 
bustling, the training rooms were occupied by NGOs running 
four different one- or two-year training programs for 
neighborhood women (embroidery, hairdressing, cooking, and 
textile painting), and fifty neighborhood children were 
attending preschool classes taught by volunteers.  Rachid Ben 
 
Kaddour, Head of Evaluation for INDH's Social Action Division 
in Oujda, explained that while the central government pays 
for the construction of the facilities, and government 
employees staff the co-located health clinic and public 
administration offices, all of the other activities at the 
center are run and funded by volunteer associations. 
Residents Econoff spoke with were universally positive about 
the utility of the community centers and the change it had 
made in their lives. 
 
-------------------------------------- 
Development in the Service of Security 
-------------------------------------- 
 
¶18.  (SBU) CRI director Chourak commented that the King's 
2002 assessment of the region's needs, and subsequent 
attention to its development, stem as much from security 
concerns as from development ideals.  Fifty-five percent of 
the growing population is under 25 years old, and in 2002 
there were few prospects for their employment, he stated. 
The King recognized that a disaffected mass of young 
Moroccans, living along the border with a "bad neighbor," was 
a security risk due to the potential for recruitment to 
radical or violent ideologies. 
 
¶19.  (SBU) Oujda Chamber of Commerce President Driss Houat 
concurred with the security rational for economic 
development, pointing out that the "isolation" of the region 
had made Moroccan citizens dependent on Algeria for food and 
fuel, creating a strategic vulnerability.  The development 
plan both aims to "re-orient" the region toward Rabat and the 
rest of Morocco, and, with its focus on employment creation 
for young workers, to "prevent the creation of a favorable 
terrain for extremists," Chourak asserted.  Another element 
of the anti-extremist strategy is to encourage the local 
associations working with INDH-sponsored projects to run 
contribution drives among potential donors in both well-off 
and poorer neighborhoods for campaigns to build schools, 
provide services to impoverished families, and so forth. 
Soliciting these contributions for social programs dries up 
the funds for extremists to tap, Chourak explained. 
 
-------------- 
Forget Algeria 
-------------- 
 
¶20.  (SBU) Comment: After years of stewing in isolation and 
pining for a reopening of the land border with Algeria to 
kick-start commerce in the region, business leaders in the 
Oriental have turned inward to the rest of Morocco to 
reestablish economic growth.  The new impetus to invest, 
build, and upgrade is immediately apparent to visitors, and 
optimism about the Oriental's future is nearly universal. 
The willingness of the GOM to direct so much spending toward 
new construction, investment, and social programs 
demonstrates its determination to spur economic growth as a 
tool to alleviate poverty and the risks that it perceives 
from economic discontent )- social instability, 
susceptibility to extremist ideology, and potential unrest in 
a border region adjoining an adversarial neighbor.  The 
potential success of the investment decisions in tourism, 
agriculture and industry will depend on both Moroccan and 
international market preferences and the severity of the 
current economic downturn, but the decision to no longer wait 
for commerce with Algeria seems to have opened the door to 
the possibility of a more prosperous future. 
 
 
***************************************** 
Visit Embassy Rabat's Classified Website; 
http://www.intelink.sgov.gov/wiki/Portal:Moro cco 
***************************************** 
 
Jackson