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Cablegate: Fta Benefits a Mirage Says Moroccan Ceo

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DE RUEHCL #0169/01 2270949
ZNR UUUUU ZZH
P 150949Z AUG 07
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC PRIORITY 7811
RUEHAS/AMEMBASSY ALGIERS 2919
RUEHBP/AMEMBASSY BAMAKO 0244
RUEHBJ/AMEMBASSY BEIJING 0047
RUEHEG/AMEMBASSY CAIRO 0808
RUEHRY/AMEMBASSY CONAKRY 0019
RUEHDK/AMEMBASSY DAKAR 0264
RUEHLC/AMEMBASSY LIBREVILLE 0037
RUEHLO/AMEMBASSY LONDON 0295
RUEHMD/AMEMBASSY MADRID 3741
RUEHNK/AMEMBASSY NOUAKCHOTT 2278
RUEHRB/AMEMBASSY RABAT 8059
RUEHTU/AMEMBASSY TUNIS 2044
RUEHFR/AMEMBASSY PARIS 0578
RUEHYD/AMEMBASSY YAOUNDE 0077

UNCLAS CASABLANCA 000169

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SENSITIVE
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STATE PLEASE PASS TO USTR FOR PAUL BURKHEAD

E.O. 12958: N/A
TAGS: ECON EFTA EFIN ETRD ECIN BEXP MO
SUBJECT: FTA BENEFITS A MIRAGE SAYS MOROCCAN CEO

REF: RABAT 00627

Sensitive but unclassified. Please protect accordingly.

1. (SBU) Summary: According to Saad Bendidi, Chairman and CEO of
palace-controlled conglomerate ONA, the Morocco-U.S. FTA is not
significant. This is in part because Morocco produces little to
allow it to take advantage of such bilateral agreements. In
addition, the U.S. market's complexity makes it hard to access, and
potential businessmen consider factors such as the overall business
climate before an FTA when considering a market. Bendidi believes
that solid business opportunities for Morocco abound regionally and
with China. Despite severe drought this year, he feels Morocco's
economic outlook is strong, with growth fueled by investment and
consumption. Bendidi's comments concerning the FTA suggest the need
for further programs to promote it. End Summary.

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CEO SAYS FTA NOT SIGNIFICANT
----------------------------

2. (SBU) On August 8, 2007, CG and Econoff met with Saad Bendidi,
Chairman and Chief Executive Officer (CEO) of Omnium Nord Africain
(ONA), a palace-controlled conglomerate headquartered in Casablanca.
The meeting focused on the Morocco-U.S. Free Trade Agreement (FTA),
which Bendidi feels is not significant to Morocco. He cordially
expressed this sentiment in numerous ways, saying that the FTA is not
"transformational" or "fundamental," that it is not an economic
driver, and that its benefits are a mirage. He went so far as to say
that it may have a negative effect on Morocco's economy, and that the
FTA with the U.S. is not part of the way Moroccans think.

3. (SBU) Bendidi thinks the FTA is not significant for several
reasons. First, he believes Morocco negotiates "asymmetric"
bilateral agreements from which the country cannot benefit. In his
eyes, Morocco produces little and has a narrow market that prevents
it from engaging in the type of reciprocal trade that such agreements
are designed to encourage. It was this perception that led him to
remark that the FTA "has a negative effect in a way," as well as the
fact that only certain sectors, such as agriculture, are affected.

4. (SBU) According to Bendidi, the complexity of accessing the U.S.
market also diminishes the FTA's importance. Given the U.S.'s
immense size, he wondered how Moroccan businesses could target
partners. He also lamented the lack of step-by-step guidance on how
to put the agreement's provisions into practice. With the exception
of those who have prior exposure to the U.S., for example as
students, he contends that few Moroccan businessmen access the U.S.
market, and those who want to are afraid.

5. (SBU) Part of Bendidi's skepticism regarding the FTA lies in his
approach to examining markets. He said that a businessman does not
start with questions such as, 'What is the tax rate?,' which the FTA
might impact, but rather with more general questions - is there an
opportunity, can I make a profit, are business conditions good? Only
after addressing these issues would someone consider the FTA, making
it less potent than it may seem.

--------------------------------------------- --------
PLENTY OF OPPORTUNITIES CLOSER TO HOME - AND IN CHINA
--------------------------------------------- --------

6. (SBU) The appeal and plenty of regional opportunities may best
explain Bendidi's assessment of the FTA. Just because you have a
text, he said, does not mean you have opportunities. One needs
relationships, such as those Morocco already has with neighboring
Algeria, Egypt, Jordan, Tunisia, and Turkey. Given that "the
potential in the region has been proven more than that with the
U.S.," Morocco has decided to collaborate with such countries first,
followed by Europe, which is much closer than the U.S. Bendidi finds
regional integration more "interesting" than transatlantic
cooperation and wants to see more FTAs with Morocco's regional
counterparts.

7. (SBU) Outside the region, Bendidi says Morocco is more occupied
with China than the U.S. Last May, 25 ONA associates spent ten days
in China to conduct a review and visit suppliers. Bendidi plainly
stated that he has more interest in what China has to offer - cobalt
and zinc, for example - than the U.S. (One of ONA's many
subsidiaries is a mining company). Even if China is untested as a
business partner, it is viewed as competitive in the region, while
the U.S. is not.

----------------------------------------
POSITIVE ECONOMIC OUTLOOK, DROUGHT ASIDE
----------------------------------------

8. (SBU) Bendidi presented a positive outlook on the economy, saying
that growth in Morocco is good if you extract the effect of drought.
In fact, he said, the sugar crop was better this year than last in
irrigated areas. ONA's supermarkets have seen double-digit growth in
2007, and cement and iron consumption surpassed 15 percent at the end
of May. Despite these examples, Bendidi's perspective seems at odds
with reports of the drought's negative impact. With the cereal
harvest radically reduced, unemployment has increased from 7.8
percent in the second quarter of 2006 to 9.4 percent this year, and
the GOM reports a loss of 93,000 jobs in the farming sector.

9. (SBU) Overall, two factors explain Morocco's strong economic
position in Bendidi's eyes - investment and consumption. While he
conceded that the public and private sectors, as well as non-profits,
must support impoverished communities, he maintained that in cities
and some rural areas, consumption is increasing, fueling growth. He
noted that Morocco has people with the knowledge, capital and
motivation to help the country move forward on its own steam.

10. (SBU) Comment: Bendidi echoes some of the sentiments of
Casablanca businesspeople who feel it is difficult to take advantage
of the FTA. His comments underscore the need for further programs to
demystify the FTA and assist Moroccans in finding practical ways to
benefit from it. End Comment.

GREENE

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