VZCZCXYZ0000
PP RUEHWEB

DE RUEHRB #0070/01 0331227
ZNR UUUUU ZZH
P 021227Z FEB 10
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1111
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHCL/AMCONSUL CASABLANCA 0070
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS RABAT 000070 
 
SIPDIS 
SENSITIVE 
 
STATE FOR NEA/MAG, NEA/PI AND EEB 
STATE PLEASE PASS USTR - P BURKHEAD 
AID/W FOR MEA 
COMMERCE FOR NATHANIEL MASON 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV ETRD EFIN PGOV MO
SUBJECT: MOROCCO IMPROVES ITS ECONOMIC RANKINGS, BUT STILL 
HAS FAR TO GO 
 
REF: 09 RABAT 0701 
 
¶1.  (SBU) Summary:  After years of lagging behind in world 
economic rankings such as the World Bank's "Doing Business 
Index" and the Heritage Foundation's "Economic Freedom 
Index," Morocco is starting to show signs of improvement. 
The most recent iterations of these reports show Morocco 
moving up two places in the World Bank,s &Ease of Doing 
Business8 rankings (from 130 in 2009 to 128 in 2010) and 
jumping ten places in the Heritage Foundation,s Index of 
Economic Freedom (101 in 2009 to 91 in 2010).  The Moroccan 
Government, through the local media, has sought to portray 
these gains as the result of King Mohammed VI's economic 
policies and reform.  While the progress is welcome, the 
indices also show that Morocco still has far to go, 
particularly in improving the business climate -- in which 
the indices show it continues to lag behind most of its 
neighbors in the Middle East and North Africa region.  End 
Summary. 
 
------------------------------- 
The Effects of Economic Reforms 
------------------------------- 
 
¶2.  (SBU) In the decade since King Mohammed VI ascended the 
throne, the Government of Morocco has undertaken economic 
policies and reforms aimed at stimulating growth.  In fact, 
Morocco has managed to achieve sustained real GDP growth, 
which despite the world economic crisis, topped 5 percent in 
both 2008 and 2009 and is projected to remain above 4 percent 
in 2010.  Dependence on the volatile agriculture sector has 
diminished as its share of the GDP has fallen from 20 percent 
in 1998 to about 16 percent in 2010.  National strategies for 
industrial production, tourism development, outsourcing, 
green-energy production, agricultural development and 
shipping, among others, have been put in place to position 
the country better in the global economy.  Morocco has also 
sought to strengthen and modernize its public finance system 
and support its private sector (reftel). 
 
¶3.  (SBU) Despite these encouraging signs, the multi-year 
strategies and reforms put in place have not had much effect 
on Morocco's rankings compared to similar and regional 
economies in commonly watched international indices, such as 
the World Bank's "Doing Business Index" and the Heritage 
Foundation's "Economic Freedom Index."  Still, both indices 
have identified significant progress in recent years on 
economic reforms as a decisive factor in maintaining 
Morocco's relatively high growth rates.  The World Bank's 
research shows that the linkage between its index and the 
potential for economic growth is strong.  Higher rankings 
indicate better (and usually simpler) regulations for 
business and stronger protection for property rights, based 
on ten indicators of business regulation that track the time 
and cost to meet government requirements in business 
start-ups, operations, trade, taxation and business closures. 
 (They do not reflect macroeconomic policy, quality of 
infrastructure, currency volatility, investor perception or 
crime rates.)  The Index of Economic Freedom similarly uses a 
series of ten economic measurements (including trade, 
business and investment freedom and property rights) to 
measure the degree of economic freedom in the world's 
institutions.  The higher the ranking in the economic freedom 
index, the freer individuals are to work, produce, consume 
and invest in any way they chose, notes the Heritage 
Foundation in its report.  Both the "Doing Business" and 
"Economic Freedom" Indices compared 183 countries in 2010. 
 
----------------------------- 
Economic Rankings on the Rise 
----------------------------- 
 
¶4.  (U) Local press reporting on the "Doing Business 2010" 
report emphasized the finding that Morocco is among the most 
active countries in instituting economic reforms to 
facilitate commercial transactions and improve the business 
climate.  In 2010, Morocco improved its global ranking by two 
places in the ease of doing business index, while maintaining 
its rank of 13th in the Middle East and North Africa (MENA) 
region.  The improvement is primarily attributable to Morocco 
moving up 44 places in the "getting credit" indicator and 4 
places in "enforcing contracts."  It saw no change in 
"employing workers" or "closing a business."  Morocco 
 
substantially improved the information system related to bank 
credits and was among 27 out of 183 countries to introduce 
reforms to make obtaining bank credits easier. 
 
Morocco's Recent "Doing Business" Rankings: 
 
Year        Rank        MENA Rank 
2007        115/175       10/17 
2008        129/178       13/19 
2009        130/181       13/19 
2010        128/183       13/19 
 
¶5.  (U) Morocco's economic performance has been steady in 
recent years, stressed local news reports on the Heritage 
Foundation's "2010 Economic Freedom" index, sustained by 
reform measures focused on competitiveness and 
diversification of the production base.  Major structural 
reforms have aimed at ensuring macroeconomic and financial 
stability and improving the overall entrepreneurship 
environment, according to the Heritage Foundation.  Morocco's 
economic freedom score is now 59.2 out of 100, making it the 
91st freest in the 2010 index, moving up 10 places from 2009. 
 It ranked 10th in the MENA region, moving up two places from 
the last two years.  The positive change in score reflects an 
improvement in five out of the ten economic freedoms. 
Morocco's economy benefits from relatively high levels of 
business freedom, monetary freedom and investment freedom, 
indicates the 2010 "Economic Freedom" report.  Foreign and 
domestic investments receive equal treatment, the report 
continues, while the small but growing financial sector is 
well-developed for the region.  Simplifying the tax regime 
and improving the transparency of fiscal management have been 
major parts of the government's reform agenda, the report 
concludes. 
 
Morocco's Recent "Economic Freedom" Rankings: 
 
Year        Rank        MENA Rank 
2007        96/157        11/17 
2008        98/157        12/17 
2009        101/183       12/17 
2010        91/183        10/17 
 
------------------------------- 
Evidence of Succeeding Reforms? 
------------------------------- 
 
¶6.  (U) While the overall rise in these rankings reflects the 
positive effects of reforms and will help spur economic 
growth, much remains to be done, both reports stress. 
Morocco continues to score low in some major indicators in 
both indices, which has held back Morocco's advance in the 
rankings over last the four years.  For example, in the ease 
of doing business rankings, Morocco received more bad news 
than good, improving in only two of the ten indicators from 
the previous year.  Furthermore, in 2010 Morocco dropped 17 
places in "starting a business," 7 in "construction permits," 
6 in "paying taxes," 5 in "registering property," 4 in 
"trading across borders" and 1 in "protecting investors." 
Morocco also received low ratings from the Heritage 
Foundation for certain important economic freedoms, 
particularly in "labor freedom," "property rights" and 
"freedom from corruption."  The judiciary is inefficient and 
vulnerable to political interference, states the "Economic 
Freedom" report, and labor market rigidity continues to 
discourage dynamic employment growth. 
 
¶7.  (SBU) Comment:  The reform camp within the Government 
kept the local economic press well-supplied with recent 
good-news stories about Morocco's improvement in the widely 
watched indices, which had previously been the source of many 
critical media pieces.  This can only help as the modernizers 
continue to push for economic liberalization to spur 
continued growth.  In the past, the Government has often 
reacted by criticizing the methodology of the indices and 
questioning the validity of the results.  In private talks 
with government interlocutors, we have emphasized that 
whatever merit the government's arguments may have concerning 
the fairness of the ratings system, the fact remains that the 
problems these indices have captured are real ones that 
Morocco needs to work on.  No doubt the rise in economic 
rankings for 2010 is a step in the right direction, and a 
sign that the government's economic reform program has begun 
 
to take effect.  It is also a sign that the Free Trade 
Agreement, USAID, the Millennium Challenge Corporation and 
other mission efforts to improve the business climate are 
having an impact.  However, much remains to be done, 
particularly in terms of improving the business climate -- as 
exemplified by the low rankings in indicators related to 
labor, commercial property rights and investor protection. 
There is still significant space for improving and 
simplifying business regulation, which would help consolidate 
the dynamism of the economy.  The Mission will advocate a 
redoubling of efforts to address Morocco's weaknesses, 
especially in the investment climate, and will seek 
discreetly to strengthen the hand of economic reformers 
within the Government, who continue to face foot-dragging and 
second-guessing by some entrenched interests.  End Comment. 
 
 
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