December/January 1991/92, Page 27
Morocco Converting Tangiers into Offshore Banking Center
By Jamal Amiar
To attract more foreign investment and to stimulate the entire Moroccan economy, the Moroccan government has passed laws to turn the former international zone of Tangiers into an offshore banking center.
Located at the northern tip of this northwestern African kingdom, Tangiers lies on the Strait of Gibraltar, facing the coast of Europe, only 10 miles away. The move is seen as part of a priority government program to increase foreign investment, which in 1990 totaled only $200 million.
The Concept of Economic Freedom
Remarkably, when the government proposal was submitted for parliamentary approval last June, not a negative vote was cast. Rightist and center-right pro-government MPs predictably voted "yes," and nationalist and leftist party MPs only abstained. This event signaled unmistakably that the concept of economic freedom has arrived in Morocco.
Basically, the new law authorizes any company or financial institution with experience in the field to conduct offshore banking activities. All financial transactions are permitted at very low tax rates, so long as the transactions are conducted in convertible currencies. The law also authorizes holding companies to open offices in Tangiers. The hope is that these businesses, which manage international investment portfolios, will discover interesting investment opportunities in Morocco, producing new jobs and economic growth.
Since Morocco gained its independence 35 years ago, the northern part of the country, including Tangiers, has benefited less from public expenditures than "central" areas such as Rabat, Casablanca, Marrakesh, and the Western Sahara towns. Unemployment is high throughout the country, totaling some 1 million of a total working force of 9 million. Since half of the unemployed are age 16 to 30, the government hopes that by applying innovative economic measures it can alleviate major societal problems.
There are historical factors behind the choice of Tangiers as the Moroccan city to host offshore banking activities resembling those of Gibraltar, Hong Kong, Bahrain, Luxembourg or the Cayman Islands. Tangiers is a city with a rich international past. It is the site of America's oldest overseas diplomatic establishment. Today, the restored American legation building is a beautiful art museum and conference center. During the 1940s and 1950s, Tangiers was host to many European financial institutions fleeing successive Nazi and Communist takeovers in Europe.
It is not just due to historic reflexes, however, that Tangiers still hosts a number of consular offices and foreign schools teaching in English, Spanish and French. Located at the contact point of two continents, and of two seas, the city enjoys a mild year-round Mediterranean climate.
Since the offshore banking activities bill was passed, more than 20 international banks from Europe, the Philippines, and the Gulf states have inquired about investment conditions in the Tangiers area. During his visits to Washington, DC and New York last September, Morocco's King Hassan met with the US business community at gatherings arranged by banks and by trustees of the American-Moroccan Foundation.
Prior to his US trip, the Moroccan king had created a new government office, a ministry of foreign investments. The first holder of the new portfolio is Mohamed Alaoui Medaghri, a respected civil servant and expert in tax questions.
To increase Moroccan attractiveness to, foreign investors at a time when many Middle Eastern and African countries are competing for the same investment, Tangiers still needs an improved communications system and better flight connections with world business centers. Local authorities have estimated they will need $250 million to bring the city telephone system up to current world standards. Plans are under way to build an airport extension and to improve water and electrical energy distribution in Tangiers.
It is a fact that only eight years away from the year 2000, many Tangiers neighborhoods still don't have running water 24 hours a day. On the environmental side, the town remains dirty, a fact that officials attribute to low literacy rates, making it hard to convince people to change past attitudes.
Until the government completes the task of refurbishing or installing the basic infrastructure, it has postponed to late 1992 the launching of an international information campaign on offshore banking activities in Tangiers. With a foreign debt estimated at more than $20 billion, the Moroccan government for now prefers to move more deliberately in putting both the new law and the new infrastructure in place. Privatization of public sector facilities also should begin over the next months. No less than 700 businesses, hotels, factories, and other production and distribution monopolies are scheduled for sale to the private sector. Meanwhile plans also are being drawn up to cut taxes across the board.
Jamal Amiar is a US-educated radio journalist based in Tangier, Morocco.