 
  WORLD TRADE  
ORGANIZATION  G/SCM/Q2/MAR/2 
28 April 2004 
 (04-1888) 
Committee on Subsidies 
and Countervailing Measures Original:   French 
 
 
 
SUBSIDIES 
 
Replies to Questions Posed by the EUROPEAN COMMUNITIES1 
Regarding the Updating Notification of MOROCCO2 
 
 
 The following communication, dated 20 Apr il 2004, has been received from the Moroccan 
delegation. 
_______________ 
 
 
I. INVESTMENT INCENTIVES 
Question  
  What are the amounts attributed und er this programme? How many companies 
benefited? What are the conditions and criteria of eligibility?  
Reply
 
  The incentives granted under the "investment incentives" programme and provided for by 
Law No. 18-95 establishing the Investment Charter are fiscal, land and administrative incentives and 
are available to all sectors of economic activity.   The amounts attributed as fiscal incentives unde r the Investment Charter are not included in 
the budget. Morocco does not therefore have any data  on either the amounts of the incentives or the 
number of enterprises which benefit, given that these fiscal incentives are granted not on the basis of 
investment projects submitted by enterprises in ap plication for such incentives, but automatically 
when the enterprise is created.   As far as the criteria and conditions of eligib ility are concerned, the measures provided for in 
the Investment Charter with regard to fiscal incentiv es are horizontal in nature and benefit all areas of 
economic activity.  Fiscal incentives under the Investment  Charter are related to the act of investment 
and are granted automatically upon the crea tion of an enterprise under ordinary law. 
  An investment promotion fund with a budget of DH 100 million has been set up pursuant to the Investment Charter.  It aims to pay, unde r a contractual framework between the State and 
promoters of investment projects eligible for this  funding mechanism, certain expenses relating to 
investment projects by means of a financial c ontribution covering expenditure related to the 
acquisition of the land required for the project (up to 20 per cent of land purchase costs), the 
                                                     
 
1 G/SCM/Q2/MAR/1. 
2 G/SCM/N/95/MAR. G/SCM/Q2/MAR/2 
Page 2  
 
 development of external project infrastructure (up to five per cent of the total amount of the 
investment) and vocational training (up to 20 per cent of training costs), provided that the overall 
State contribution does not exceed five per cent of the total amount of the investment or 10 per cent if the investment is in a rural or suburban area.  
 Investment projects eligible for this funding  mechanism must meet one or more of the 
following criteria:   - Total investment of DH 200 million or more;  - creation of 250 or more permanent jobs; 
 - implementation in a province or prefecture considered to be disadvantaged; 
 - guarantee of technology transfer;  - contribution to environmental protection.   Three investment projects benefited in 200 3 from a financial contribution from the State 
under this programme. The contribution amounted to  DH 5.28 million out of a total investment of 
DH 1.88 billion involving the creation of 1,770 permanent jobs.   
II. HASSAN II FUND 
Question 
 
 
 The amount granted by the Fund is figured  with DH 595 million.  Is this the total 
amount of the fund or the amount distributed each year?  What are the eligibility criteria? 
 
Reply  
 
 The Hassan II Fund is a public institution with legal personality and financ ial autonomy.  It is 
authorized to support the funding of socio-educational infrastructure and projects.    The figure of DH 595 million is the Fund's contri bution to the promotion of investment in the 
industrial sector.  It does not represent the amount distributed each year, but the total amount allocated 
to investment promotion in this sector.  This amount is granted in the form of a contribution to land 
acquisition and construction in the context of inv estment projects which incorporate environmental 
protection, up to a maximum of the overall amount .  The contribution is allocated as follows: 
  - Fund contribution of up to 50 per cent of land purchase costs (on the basis of a  
  maximum price of DH 250 per m
2); and  
  - fund contribution of up to 30 per cent of the cost of building or purchasing business   premises (on the basis of a maximum cost of DH 1,500 per m
2). 
 
 The Fund contribution may, however, amount to 100 per cent if it is restricted solely to the 
purchase of real estate on the basis of a maximum price of DH 250 per m2. 
  Since the launch of this programme in 2001, 78 projects, representing a total investment of over DH 2.2 billion and involving the creation of 19, 600 permanent jobs, have so far been able to 
benefit from overall Fund contributions totalling DH 159 million, that is to say, 7.2 per cent of the 
total investment. 
  With regard to eligibility criteria, new investme nt projects and extensions investing more than 
DH 1 million in capital equipment qualify for assistance from the Fund.  G/SCM/Q2/MAR/2 
 Page 3 
 
 
 III. EXPORT FREE ZONES 
Question  
  In the context of the last TPRM (document WT/TPR/S/116), it was stated in item 112 that, in order to  benefit from ZFE status, companies must  export all their production. Is this 
export requirement still valid and, if so, how is it compatible with Morocco's obligations under 
the ASCM?   WT/TPR/S/116, item 122, also mentions  a "free industrial warehouse regime" which 
seems to contain an export requirement.  Co uld Morocco please explain why this programme 
was not mentioned in the present notification and describe it in more detail and how it is 
compatible with Morocco's obligations under the ASCM? 
 
Reply
 
 
1. Free export zones  
 Morocco currently has only one free export z one, in Tangiers, which was created under Law 
No. 19-94 of 26 January 1995.  Its purpose is the promotion of foreign direct investment, technology transfer and development through the encouragem ent of research and development, promotion of 
development in northern Morocco, a region considered  to be disadvantaged, and the creation of job 
opportunities. 
 
 Tax benefits in the context of free zones are not  expressly granted to particular enterprises or 
a group of enterprises, rather they apply to all enterprises operating within the free zone, irrespective 
of their sector of activity.  
 The restrictions on granting authorization for in vestment in the free zone relate to the time 
limits for carrying out the projects forming the subj ect of the application and specific requirements 
concerning environmental protection, such as the use of hazardous waste and all substances which 
could adversely affect health, flora, fauna a nd water resources, as well as the surrounding area and 
quality of life.  
 It should be noted that the measures provided for in favour of free zones are not restricted to 
certain enterprises or industries.  They are not intended to stimulate exports, rather to promote 
exportation in general.  First and foremost, they ta rget regional development, mainly the promotion of 
foreign direct investment and job creation.  
 Furthermore, although enterprises set up in the free zone are export-oriented, no provision of 
the law on free export zones prohibits enterprises whic h have set up in the free zone from selling their 
output on the local market.  Sales on the local mark et are merely considered as importation and, as 
such, subject to Customs duties pursuant to  the existing Customs tariff legislation. 
 2. Free industrial warehouse regime
 
 The free industrial warehouse regime is a Customs regime enabling the enterprises operating 
under it to import or acquire, with suspension of  import duties and taxes, equipment and the 
components and parts thereof, goods to be processe d using this equipment a nd consumables used in 
the production of export products.  
 Enterprises which intend to invest a minimum of DH 50 million in either a new project or an 
extension are eligible for the free industrial ware house regime.  This is the only legal eligibility G/SCM/Q2/MAR/2 
Page 4  
 
 requirement for this regime.  There is no such e xport requirement as that referred to in the question 
and the authors of the Trade Policy Review of Mo rocco (WT/TPR/S/116) did not base their work on 
official documents when drafting paragraph 122 of the Report of the Secretariat in relation to the 
Trade Policy Review of Morocco.  
 The amount of import duties and taxes not collect ed under this regime does not exceed that of 
the duties and taxes normally collected on the impor tation of equipment and the components and parts 
thereof, goods to be processed using this equipm ent and consumables used in the production of goods 
for domestic consumption.   
 Therefore and pursuant to Article 3 of the Agreement on Subsidies and Countervailing 
Measures (SCM Agreement) and paragraphs (h) a nd (i) of Annex I thereto, the free industrial 
warehouse regime does not constitute an export subsidy insofar as th e suspension of import duties and 
taxes only affects goods used in the production of export products.  Enterprises operating under this 
regime settle their tax obligations by way of dir ect taxes in accordance with current legislation. 
 
 Furthermore, the free industrial warehouse regime  is not considered a specific subsidy within 
the meaning of Article 2 of the SCM Agreement, gi ven that the benefits thereunder are granted in 
accordance with objective criteria set out in the Cu stoms and Indirect Taxation Code.  Consequently, 
this regime does not constitute a subsidy under Article 1 of the SC M Agreement and is not therefore 
subject to the notification requirement in Article 25.2 of that Agreement.  
 
 
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