Back on the Road to Morocco?

By John T. Haldane

King Hassan II's surprise July summit meeting with Shimon Peres provided some badly needed positive "PR" in the United States for the Moroccan ruler. As an article in the July 31 Christian Science Monitor put it: "Underlying King Hassan's invitation to Israeli Prime Minister Shimon Peres was the Moroccan monarch's wish to revive a more privileged relationship with the Reagan Administration."

American-Moroccan relations have undergone a period of "benign neglect" ever since King Hassan entered into a political union with Libya's Colonel Muammar Qaddafi two years ago. While American Middle East experts understood that Hassan wanted Qaddafi to stop providing weapons to the separatist Polisario Front movement in the Western Sahara, the action certainly did not please President Reagan, who long has considered Qaddafi to be a major supporter of international terrorism. Hassan now appears to be back in the Administration's good graces. White House spokesman Larry Speakes said the Peres-Hassan meeting "symbolizes the change that has occurred in the Middle East and creates a context which can enhance the peace process."

In his brief talk with Peres, Hassan stuck to the guidelines of the Fez plan, originated by Saudi Arabia's King Fahd when he was Crown Prince and Foreign Minister and approved unanimously by Arab leaders at a 1982 summit meeting in Morocco. These call for a full Israeli withdrawal from all territories occupied in the 1967 Arab-Israeli war, the establishment of an independent Palestinian state on the West Bank and a UN Security Council guarantee of peace in the region. King Hassan has stated that he asked Peres two questions: Was Peres willing to discuss Israeli withdrawal from all Arab lands occupied in 1967 and would the Israeli government talk to the PLO? Peres, according to Hassan, replied no to both questions. Thus the accomplishments of the meeting were more psychological than political. The Moroccan monarch demonstrated to the world his willingness, as Arab League Leader, to discuss specifics of a settlement. The Israeli Prime Minister demonstrated to his own people that when they are ready to give back the land, he is the leader who can get them a lasting peace.

The current warm-up in U.S.-Moroccan relations actually had been preceded by a slight thaw last March, when King Hassan celebrated his quarter-century on the Moroccan throne. The U.S. sent a high-level delegation to the ceremony, led by CIA chief William Casey and U.S. Ambassador to the U.N. Vernon Walters. Clearly State and Defense Department experts were already persuading the Administration that the loose Libyan-Moroccan union was less of a boost to Qaddafi than he had hoped and they had feared.

Looking Toward the U.S. To Help Bolster Economy

King Hassan must be admired for his timing, since closer relations with the United States are coming at a time when international bankers are talking about a program announced by U.S. Secretary of the Treasury James Baker at the 1985 World Bank/IMF Conference. Under this "Baker plan," new commercial and World Bank loans of at least $20 billion would be provided over the next three years in exchange for meaningful economic policy reforms by 15 countries, including Morocco.

As a born-again ally of the United States, Morocco, with one foot in Africa and the other in the Middle East, can hope that U.S. influence in the World Bank, IMF, and world financial circles will help it to get the funds it needs for its faltering economy.

Until the late 1970s, Morocco, the world's largest exporter and third largest producer of phosphates, after the United States and the Soviet Union, benefited from a five-fold rise in phosphate prices that followed the first oil price shock. But then world overproduction caused phosphate prices to drop from $56 a ton in 1975 to about $35 today. Morocco was forced to borrow heavily to sustain an ambitious investment program.

Since mid-1983, Morocco has pursued an austerity program involving higher taxes and lower government spending. It has abolished an inefficient state monopoly of agricultural exports and has lifted import restrictions on many goods. The government's goal is to make the Moroccan economy more competitive, promote faster economic growth, and generate the foreign exchange needed to pay off an estimated $13 billion in external debt.

Morocco's vigorous economic revitalization dropped its payments deficit from $19 billion in 1982 to $950 million in 1985, and it is expected to dip further to between 500 and 600 million dollars in 1986. Economic growth is increasing from some 2.4 percent to an estimated 4 percent this year.

As economic performance improved through 1985, tourism grew by a staggering 47 percent. Similar huge growth is expected in 1986. Remittances from Moroccan workers in the Gulf area and in Africa have also held up and are actually expected to increase.

Morocco has enjoyed a bit of economic luck, also. The sharp drop in oil prices, along with lower interest rates, provided the nation an estimated $400 million windfall in savings this year. And plentiful rains recently have put an end to a four-year drought, enabling Morocco to meet its domestic grain needs. Agricultural exports, mainly citrus, tomatoes and wine, have been guaranteed restricted access to the European Economic Community (EEC) during 1986-89 in order to offset expected negative effects on Morocco of the EEC admission of Spain and Portugal.

Experts expect the Moroccan balance of payments to improve in the long term as imports fall for the rest of the 1980s. Exports should steady, and could even pick up if there is a revival in the demand for phosphate rock and derivatives. As the 1985 World Bank Annual Report put it: "The impact of the Moroccan policies adopted since 1983 has been encouraging. Export performance has improved significantly, and earnings from tourism and flows of workers' remittances have increased."

Good News From the IMF and World Bank

This positive statement by the World Bank must have greatly cheered Moroccan Ministry of Finance officials, who are depending on the World Bank to help carry them through the next few years. Since 1983, the World Bank has almost doubled lending, from about $250 million to more than $400 million annually, helping finance important development projects. These include agricultural programs to assist Morocco in becoming self-sufficient, new water plants and the modernization of the all-important phosphate industry, so that phosphate rock can be converted into the more valuable phosphoric acid.

The IMF and Morocco announced in August that they will renegotiate a major loan agreement. An agreement last September allowed Morocco 18 months' access to a standby credit facility worth $230 million. Also awarded was an additional $132 million compensatory financing facility for cereal purchases. Both were seen by the international banking community as gestures of approval from the IMF for Morocco's stringent economic policies.

According to the U.S. Agency for International Development, Morocco received $150 million in economic and military assistance in fiscal year 1985. At the same time Israel was awarded $3.4 billion and Egypt received $2.5 billion. King Hassan knows these figures very well, so one can assume he will be seeking a larger aid package this year, despite Gramm-Rudman budget cuts. While admittedly not a key player in the Arab-Israeli dispute, he can play a valuable role as intermediary, allowing both sides to "save face" while talking about subjects critical to the future of Israel and the Arab world. Clearly, King Hassan's clever politicking has put the United States back on the road to Morocco.

John Haldane is a specialist in Middle East affairs who has served as a foreign service officer in Baghdad, Beirut and Cairo, and as an international economist in the Departments of Commerce and Treasury.