VIII. Trade and Project Financing Morocco has a healthy and comparatively well-developed banking system, originally modeled after the French system, and currently working its way through modernization similar to those that took place in France over the past decade. There are 12 major banks in the country plus five government owned specialized financial institutions, about 15 credit agencies and about 10 leasing companies. Other elements of the financial infrastructure include insurance companies, pension funds, and a stock market. Until 1991, credit and money supply was controlled directly by the old french-style encadrement system allocating sectoral lending among banks based on historical patterns. Since financial liberalization, credit is supposed to be allocated freely, with the central bank using indirect methods to control the interest rate and volume of credit. The banking system is still used by the government, however, as a way to channel domestic savings to finance government debt, and the banks are required to hold an important part of their assets in bonds paying below market interest rates. Following liberalization, credit continued to expand at a rate that appeared to threaten price stability with interest rates rising to record levels, and the central bank moved part way back to administrative controls by raising the discount rate and by setting an administrative ceiling on interest rates, calculated as a markup over the banks average cost of funds. A new bank reform law, promulgated in 1993 clearly laid out the parameters of banking activities, clarified oversight and control responsibilities, specified legal penalties for violations of banking regulations, and established a depositors guarantee fund. The two largest banks are owned by the state, but are operated according to normal banking and commercial principles. They are both slated to be privatized. Foreign Exchange Controls Affecting Trading: Morocco maintains a system of foreign exchange controls, managed by a government agency, the Office de Changes, but the rules on transfers have been progressively liberalized to the point where the Morocco claims that the dirham is freely convertible according to the IMF definition for current account transactions. The value of the dirham is tied to a basket of hard currencies weighted according to Morocco's foreign trade. Since this is dominated by Europe, variations in the dollar/franc or dollar/deutschemark rates are generally reflected in the dollar value of the dirham. Authority to buy and sell foreign exchange has been delegated to the banking system, which will carry out transactions on presentation of appropriate documentation justifying the transaction such as an invoice to pay for imports. In practice, there are no reports of difficulties in obtaining foreign exchange in this way. Capital transactions do require authorization from the Office de Changes, which is granted routinely for business-related transactions. Under its investment code, the government offers a guarantee of repatriation of both invested capital and profits, provided that the initial investment was declared on the way into Morocco. What is General Financing Availability: Local financing is available for Moroccan investors and importers, but real interest rates are high by American standards, and Moroccan Banks generally require a high degree of security (e.g. collateral and personal signature) before committing themselves. How to finance exports/Methods of Payment: Most Moroccan imports are paid for by irrevocable confirmed letters of credit issued by major local banks with U.S. banking correspondance. Within the country, end-users are normally given up to 90 day credit by importers. Types of Available Export Financing and Insurance: Financing for U.S. exports in the form of loans or guarantees is available through EXIM bank, however a Moroccan guarantee, either from the government or from a private bank may also be required. EXIM is establishing a small bundling facility (a line of guaranteed credits) with Credit du Maroc (CDM). Although other Moroccan banks have expressed some interest in this program, they have not overcome the reluctance of Moroccan importers to take on the foreign exchange risk of borrowing in dollars. The principal multilateral financial institutions such as the World Bank, the IFC, the African Development bank, and the European Investment Bank all lend to Morocco for infrastructure development. Project financing available including lending from Multilateral Institutions and type of projects. Morocco's major lenders are the World Bank, the African Development Bank, The European Investment Bank, The Kuwaiti Fund (FADES), The Saudi Fund, and The Abu Dhabi Fund. 1. The International Bank for Reconstruction and Development (IBRD), a member of the World Bank group makes long-term loans at market- related rates primarily to developing nations. The International Development Agency (IDA), the soft loan window of the World Bank, lends to the poorest of the development countries. Both the IBRD and IDA work to promote broadly based economic growth and frequently focuses on structural adjustment, sectoral reform and individual project lending and operate under the same set of procurement guidelines. Typically the World Bank does not finance the entire cost of a project. Rather, it finances the components of a project purchased with foreign exchange, which on average is about 40 per cent of the total project cost. Each project may cover a wide variety of sectors and can involve anywhere from one to hundreds of separate contracts providing export business opportunities for suppliers worldwide. CONTACTS: U.S. Department of Commerce Liaison to the U.S. Executive Directors Office International Bank for Reconstruction and Development 1818 H. St., NW Washington D.C. 20433 Tele: (202) 458-0118 Fax: (202) 477-2967 Office of Multilateral Development Banks U.S. Foreign Commercial Service U.S. Department of Commerce Room H-1107 Washington D.C. 20230 Tele: (202) 482-3399 Fax: (202) 273-0927 *Loans from the World Bank in 1994 USD 40 million to the Ministry of Health to rehabilitate health infrastructure and hospital management reforms. USD 75 million to the Ministry of Agriculture to improve land use and natural resources management in mountain areas and reduce siltation in reservoirs and associated hydraulic infrastructure. USD 25 million for irrigation and USD 140 million to support investment program in Agriculture. USD 100 million to the Ministry of Public Works, "Direction des routes" to improve communication within regions and access to rural areas, improve road safety, improve road transport efficiency and strengthen institutions in charge of road maintenance, road funding and network management. USD 30 million to the Ministry of Interior to reduce rural poverty and protect the environment. USD 6 million to the Ministry of Environment to support environment management policy. USD 120 million to support private sector development USD 150 million to support social action programs. USD 160 million to ONEP to implement the fifth drinking water filtration program. The African Development Bank as well as Japan are financing part of this program. The objectives of the program are: The development of a long term management strategy, the improvement of water management and filtration, the installation of 5 water supply facilities, and the acquisition of equipment. 2. The African Development Bank (AFDB), headquartered in Abidjan, Cote d'Ivoire, is an international financial institution created by Africans in 1963 to promote the economic and social development of its member African countries. Founded with initial capital resources of USD 250 million, it has authorized capital today of over USD 22.3 billion. The bank belongs to the African Development Bank Group (ADBG) which also includes the African Development Fund (ADF) and the Nigerian Trust Fund (NTF). The AFDB makes loans to development projects in 51 countries in Africa. The ADB provides development financing on concessionary terms to the poorer African member countries. The NTF was established by the Government of Nigeria in 1976 to assist in the development efforts of the poorer ADB members. The ADFB has 21 non-regional members. The United States joined in 1982. CONTACTS: U.S. Department of Commerce Liaison Office to the U.S. Executive Directors Office African Development Bank Ave. Joseph Anoma 01 B.P. 1387 Abidjan 01, Cote D'Ivoire Tele: (225) 21-46-16 Fax: (225) 22-24-37 Office of Multilateral Development Banks U.S. & Foreign Commercial Service U.S. Department of Commerce Room H-1107 Washington, D.C. 20230 Tele: (202) 482-3399 Fax: (202) 273-0927 *Loans from the African Development Bank in 1994 USD 60 million to the ONPT to develop its telecommunication network. Total cost of the project: USD 700 million USD 68 million to the Ministry of Education to assist them improve the secondary education and the efficiency of the education system. USD 63 million to "La Direction des routes et de la circulation routiere" to improve the road network USD 29 million to assist the Ministry of Public Works in constructing medium-sized dams. 3. Loans from other International Lending Institutions in 1993-1994. USD 60 million from The Kuwaiti Fund for Economic Development to irrigate the Haouz and Tassaoute regions. USD 16 million to ONPT from the Islamic Development Bank to finance purchase of KM 3350 of telephone cables (Jan 94) Spain in the framework of it bilateral cooperation with Morocco has lent USD 225 million to promote foreign investment in Morocco. European Investment Bank (EBI), will finance 15 percent of the Moroccan-Spanish power connection project for USD 395 million. Japanese Fund for Overseas Economic Cooperation (FOEC), has agreed to finance some ONEP projects. The USD 60 million untied loan will be signed in August, 1995. The European Development Bank (EDB), granted two loans of USD 70 million. USD 46 million will finance water projects in Agadir and Casablanca while USD 24 million will finance Euro-Moroccan joint ventures. EU lent USD 25 million for the hydro-agricultural projects in the Haouz and Tassaoute projects. The Arab Fund for Social and Economic Development (FADES), lent USD 63 million to assist Morocco in the construction of the Sidi Chahed dam. The FADES has already contributed in 1993 to the financing of the Rabat-Tangier highway, USD 60 million and the Aoulouz and Al Wahda dams construction, USD 55 million. List of Banks with Correspondent U.S. Banking Arrangements: Among the top 16 commercial banks in Morocco, the following deal with major U.S. corresponding banks: BANQUE MAROCAINE DU COMMERCE EXTERIEUR Citibank Bankers Trust Chase Manhattan Chemical Bank Bank of America Bank of New York CREDIT DU MAROC Bank of New York Chemical Bank American Express Bank Credit Lyonais of New York CITIBANK-MAGHREB Citibank BANQUE COMMERCIALE DU MAROC Citibank Bank of New York Chase Manhattan Bank Chemical Bank American Express National Bank for Cooperatives First National Bank of Chicago Firts Bank of Americas Arab-American Bank of New York State Street Bank & Trust Company BANQUE MAROCAINE POUR LE COMMERCE ET L'INDUSTRIE Bank of New York Citibank First American Bank Inc. American Express WAFABANK Citibank Arab Banking Corporation (ABC) Ubaf Bankers Trust Co. Chase Manhattan Manufacturers Hanover Trust Co. Bank of New York Continental Bank Bank of America SOCIETE GENERALE MAROCAINE DES BANQUES Societe Generale Citibank Chase Manhattan BANQUE CENTRALE POPULAIRE Chemical Bank Bank of New York Citibank Swiss Bank Corporation Arab Banking Corporation Arab American Bank Arab Bank PLC Bank of America