Close France-Morocco ties must be earned - Sarkozy

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MARRAKESH, Morocco, Oct 24 (Reuters) Nicolas Sarkozy rounded off his first visit to Morocco as French president today with a warning that France's dominant trade relations with its former colony were no longer guaranteed.

France has seen Morocco as its natural preserve since the north African country of 33 million gained independence in 1956 and remains its dominant investment and trade partner by far.

But Morocco has sealed free trade agreements with the United States, Turkey and others in recent years and its decision to shun France's Rafale fighter plane in favour of US F-16s suggests France must now work harder to stay on top.

Former French leader Jacques Chirac nurtured close personal and business relations with a select group of African leaders but his successor has vowed a more pragmatic approach.

''We're going in with the others as equals and we'll win because we are the best and we want to be the best,'' Sarkozy told French business leaders gathered in Marrakesh. ''We ask for no privileges.

There's no market share reserved for us.'' French firms captured deals worth an estimated 3 billion euros (4.27 billion dollar) during Sarkozy's three-day trip in which he met King Mohammed and his government and made a landmark speech on his plans for a Mediterranean Union.

The visit appeared to restore normal ties with Morocco after it took offence at Sarkozy's decision to make Algeria his first foreign destination outside Europe after taking office in May.

But a shadow fell over the lavish reception, smiles and handshakes as it emerged that Morocco had cancelled interest in French Rafale combat jets and had chosen the US planes instead.

It was the first time the Rafale has faced such a challenge in France's own diplomatic back yard, losing business that Paris had been widely expected to win.

A source close to Sarkozy said on Wednesday that the management of French defence sales contracts would now be reformed ''from top to bottom''.

The aircraft has been a ''technological success but a commercial failure,'' the source said.

STILL TOP DOG France would have to fall far to cede its predominant position in Morocco, which includes Vivendi's controlling stake in Maroc Telecom and Danone's venture with dairy firm Centrale Laitiere.

Last month, French car maker Renault unveiled plans to build its biggest African plant near Tangier worth 600 million euros.

However, signs of strain have appeared in the relationship.

Royal family controlled conglomerate ONA, which dominates some of Morocco's most lucrative industries, split this year with French insurance partner Axa.

Then it parted ways with France's Auchan after a disagreement over strategy for their supermarkets venture.

Veolia and Suez, which run utilities in Rabat, Tangier and Casablanca, have had a bad press after street protests from consumers angry over water and power bills.

To win back the initiative, France agreed this week to help quench Morocco's thirst for energy through a nuclear energy partnership to provide the electricity the kingdom needs for faster economic growth and higher living standards.

Officials close to the French president said meetings would be arranged shortly to get the new partnership under way and that Morocco's new Energy Minister Amina Benkhadra would visit France soon.

Reuters AE DB2351

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