VZCZCXRO5599
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHRB #1860/01 3531208
ZNR UUUUU ZZH
R 191208Z DEC 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 7908
INFO RUEHCL/AMCONSUL CASABLANCA 3764
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3471
RUEHFR/AMEMBASSY PARIS 4870
RUEHNK/AMEMBASSY NOUAKCHOTT 3620
UNCLAS SECTION 01 OF 02 RABAT 001860
SIPDIS
DEPT FOR NEA/MAG
STATE PLEASE PASS TO USTR (BURKHEAD)
SIPDIS
E.O.12958: N/A
TAGS: ECON ETRD EAIR EAGR MO
SUBJECT: ECONOMIC HIGHLIGHTS NOV-DEC 2007
1. Included in this round up: Royal Air Maroc loses control of Air
Senegal. Moroccan trade deficit continues to grow. Timely rains
usher-in the planting season. Casablanca remains plagued by
inefficiencies. Moroccans don't need a visa to visit TGI Friday's.
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SENEGALESE GOVERNMENT RETAKES CONTROL OF AIR SENEGAL
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2. Majority ownership of Air Senegal International (ASI) by Royal
Air Maroc (RAM) appears to have come to an end following a November
5 Senegalese government announcement that it had retaken control of
its national carrier. RAM had held a 51 percent ownership in ASI
since ASI's formation in 2001, but the relationship soured in recent
years due to ASI financial losses. Under the new arrangement, the
Senegalese government will hold a 75 percent share of the Senegalese
carrier, leaving RAM with 25 percent. RAM officials have been
tight-lipped about the reversal, but in a press release the company
said it had made several attempts to restructure the Senegalese
air-carrier, including an infusion of over USD 18 million in 2006
that was part of an overall financial recovery plan intended to
reduce labor and overhead costs while making the carrier compliant
with international safety standards. Senegalese press reports,
however, allege bad faith management on RAM's part, including unfair
competition for the region's most profitable routes. Despite the
setback, RAM insists that its African operations will remain a
cornerstone of its ambitious expansion plans.
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GOOD NEWS ABOUT THE TRADE DEFICIT?
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3. Government officials have sought to dampen concern over
Morocco's widening trade deficit by arguing it results largely from
import of capital goods and equipment that will lead to future
Moroccan economic growth. According to the most recent Moroccan
figures, the country's trade deficit for Jan-Oct 2007 increased 33
percent from 2006, reaching USD 14.0 billion. Imports rose 19.5
percent, to USD 26.4 billion, while exports rose 7.3 percent, to USD
12.4 billion. In an interview with Morocco's leading economic
journal, Finance Minister Mezouar pointed out that imports of
industrial equipment totaled USD 5.8 billion (22 percent of all
imports), while semi-finished products were the largest import
category at USD 6.1 billion (23.1 percent of all imports). The two
segments together comprised 85 percent of the trade deficit.
4. Officials also take comfort from the fact that tourism receipts
and remittances from Moroccans abroad both increased, and continued
to offset the bulk of the trade deficit. Tourism receipts rose 14
percent to USD 6.3 billion, while remittances increased 18 percent
to USD 5.9 billion. Together, the two nearly equaled the value of
all exports (USD 12.2 vs 12.4 billion).
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NOVEMBER RAINS PROMPT CEREAL PLANTING
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5. After a prolonged dry spell, mid-November rains ushered in the
cereal planting season, sparking hope for an end to the 2007 drought
that produced a harvest 66 percent below average. Through the third
week in November, the planted area of cereals totaled 1.1 million
hectares, about on par with last year's pace, but 31 percent below
the five-year average. Although crops have benefited from cooler
temperatures and reduced evaporation, additional rains through the
winter months will be needed for the crops to meet their potential.
6. The drought's effects were apparent in the Jan-Oct 2007 figures
for cereal imports. Compared to 2006, cereal (wheat, corn, and
barley) imports more than doubled to reach USD 1.4 billion. Wheat
imports increased to 2.95 million tons, compared to 1.56 million
tons in 2006.
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CASA PORT REMAINS SNARLED
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7. A year after implementation of a milestone port reform law,
inefficiencies and congestion continue to plague Casablanca port.
The 2006 law sought to increase efficiency and competitiveness by
dividing the Ports Authority (ODEP) into two entities: a National
Ports Agency (ANP), responsible for regulatory control and port
RABAT 00001860 002 OF 002
authority; and a Port Management Company (SODEP), a new entity
responsible for commercial services and port handling. From the
beginning, the Stevedores (longshoremen) opposed the reform over
fears of job security and government pension entitlement.
8. During the summer of 2007, the brewing labor issues were
overshadowed by a congestion crisis that temporarily crippled
Moroccan exports. Government and port officials blamed the
congestion on an unexpected increase of imports (container traffic
is up 20 percent this year), aggravated by the drought, and an
overabundance of containers left in storage within the port.
Critics of the reform law cited other problems, including
corruption, labor unrest, and poor infrastructure. Whatever the
cause, ships were delayed for up to 14 days and the port literally
ran out of space to store additional containers. To solve the
crisis, offloading and transportation of containers from the port
were increased to a 24/7 basis and additional container storage
space was procured.
9. In an acknowledgement that the systemic problems at Casa port
remain, Transport Minister Karim Ghellab recently announced a series
of additional measures aimed at increasing efficiency. Included in
the measures were the installation of a new container tracking
system and increased spending on ground infrastructure to increase
container throughput. To help alleviate the load at Casablanca, the
government is also pushing for a summer 2008 opening of the domestic
container terminal at Tangier Med, with construction already
underway for an additional terminal.
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TGI FRIDAY'S SELLS AMERICA
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10. With a slogan, "You don't need a visa to visit Friday's," the
first TGI Friday's restaurant in Morocco will be launched in Rabat
at the end of the month with a gala opening involving the Ambassador
and the King's brother, Prince Moulay Rachid. Representing a USD 3
million investment, the Rabat restaurant will seat 600 diners, and
will be followed by similar restaurants in Casablanca and Marrakech.
According to the franchise owner, Friday's marketing plan in
Morocco is to sell America while keeping productivity at an American
level and charging American prices. Comparing his experience to the
U.S., the owner notes labor costs in Morocco represent only 12
percent of total expenses, compared to 33 percent in the U.S.
Additionally, he said his team has been thrilled with the number of
qualified employment applicants they have gotten-- six for each
position, even with a requirement that applicants speak English.
The company expects to generate USD 4-5 million annually from the
Rabat franchise, compared to USD 1 million for the typical U.S.
franchise.
JACKSON