Morocco - Second Highway Project

FILE CDPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 143a-MOR APPRAISAL OF A SECOND HIGHWAY PROJECT KINGDOM OF MOROCCO November 6, 1973 Regional Projects Department Europe, Middle East and North Africa Regional Office This report was prepared for official use only by the Bank Group. It may not be pubUshed, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCr EQUIVAL!NTS Currency Unit a Dirham (Dh) Dh 3.90 a US$1.00 Dh 1 - us$o.2564 Dh 1,000,000 - US$256,.412 Dh 3,9oo,000 - US$ 1,000,000 SrSTEK OF WEIGHTS AND MEASURESt METRIC Metric System British Imperial/U,S. Syatep 1 kilometer (km) 5 0.62 nile (mi) 1 metric ton (m ton) - 2,204.60 pounds (lb) 1 liter (1) 5 0.88 British Imperial quart (qt) ACRONIMS AND ABBREVIATIONS 1 MPWC - Ministry of Public Works and Communications BCEOM - Bureau Central d'Etudes d'Outre-Mer PWS -- Public Works South PWN - Public Works North REI - Public Corporation for Industrial Management STP - Public Works Service ONT - National Office for Transport ONCF - National Railways ONEP - National Office for Drinking Water TNDP - United Nations Development Programme ADI - Average Daily Traffic HP - Horse Power ki/h - kilometer per hour KINGDaM OF MOROCCO FISCAL YEAR January 1 to December 31 1/ Adjusted as of July 1973. 2/ Acronyms of organization names relates French titles of organizations in Morocco.  APPRAISAL OF A SECOND HIGHWAY PROJECT MOROCCO CONTENTS Page No. SUMMARY AND CONCLUSIONS ... ........... .. ...... .. .... . i - ii I. INTRODUCTION ........................................ 1 II. THE TRANSPORT SECTOR ...... .................o......... 2 A. Description . ............ ............... ........ . 2 B. Planning, Financing, and Coordination .......... 4 III. HIGHWAYS ....................... .............. 6 A. The Network * ... ............. . ... * * * .*******....*..*..*. 6 B. Road Traffic . .................................. 6 C. Administration . . ............... ........... 7 D. Planning and Financing ............ 0....... ..*.. 8 E. Construction .............. . ........ . .. . . .. . . 8 F. Maintenance .......................... ....... ....... 9 r ~~~~G. Training .......... 0... ... ** ....................... 10 IV. THE PROJECT ...................................... 10 A. Description ............. .... 0............................... 10 B. Cost Estimate and Foreign Exchange Component ... 13 Cl. Execution . ................................ ........... 15 D. Financing , .. ........ .. 16 E. Disbursement .* ....... ..... ... ........... 16 V. ECONO1C EVALUATION ... o ......................... o- 16 A. General ............ 16 Bo Roadworks ......................... 17 C. Other Project Elements ............ 18 VI. RECOMMENDATIONS o ................. . 19 This report was prepared by Messrs. G. Ludwig (Engineer), A.J. Stone (Economist), G. El-Rifai (Young Professional).  CONTENTS (Continued) TABLES 1. Railway Traffic, 1959-69 2. Port Traffic at Casablanca and Tangier, 1965-69 3. Highway Network, by Classification, 1972 4. Motor Vehicle Fleet, 1965-70 5. Motor Vehicle Fuel Consumption, 1965-70 6. Highway Investment Plans, 1965-72 7. Highway Maintenance Expenditures, 1967-71 8. Cost Estimate of Highway Improvement Works 9. Maintenance Equipment to be Purchased 10. Highway Design Standards 11. Economic Evaluation of Casablanca-Rabat Expressway 12. Economic Evaluation of Highway Improvement Program ANNEXES A. Estimated Schedule of Disbursements B. Main Assumptions Used in Economic Evaluation CHART Organization of the Ministry of Public Works and Communications MAP Transportation Infrastructure  APPRAISAL OF A SECOND HIGHWAY PROJECT MOROCCO SUMMARY AND CONCLUSIONS i. Morocco's transport system, largely concentrated in the coastal plain between the Atlas mountain ranges and the Atlantic, serves all produc- tive areas of the country reasonably well. The system comprises: 51,500 km of primary, secondary and tertiary roads, of which about 21,500 km are paved; a 1,200 km railway system, including a section of the international line Casablanca to Tunis (Tunisia); six major ports of varving importance; six minor ports; and eight airports, including three which can handle transoceanic flights. ii. The railways, roads, ports and airports are owned and administered by the Government. In accordance with Government policy to restrict private services which may compete with the public sector, the licencing and operation of privately owned trucks and buses is highly regulated. Government control is most strict in the rail/road freight industry and includes: control of all licences (public and private) for trucks over 5.5 tons capacity; direct assignment of cargoes to common carriers; and regulation of rates (and fares) for rail and road transport. The Bank has opened discussions with the Gov- ernment on deregulating the industry. The Government has begun a study on deregulation and has agreed to discuss the study results with the Bank. iii. Transport infrastructure investments have been modest in previous years, especially in roads, so that a backlog of highway investments have accumulated. Many roads have poor alignments and other design characteristics and are below standard for present traffic. A start was made with the re- habilitation and modernization of the most important roads in greatest need under the First Highway Project. This process will be continued under the proposed project by completing the first phase construction of an expressway between Casablanca and Rabat and improving sections of 17 high priority roads with a total length of 679 km. These works constitute a major part of the highway investments planned for 1973-75. The project also includes purchases of road maintenance equipment for replacing equipment over 10 years old; technical assistance for improving transport planning, and two urban transport studies. The project supports the emphasis in Bank group lending on institu- tion building in that it provides for significant organizational reforms in the Ministry of Public Works and Communications (MPWC), improvements in main- tenance administration, and for better overall transport and project planning.  - ii - iv. The Ministry of Public Works and Communications, assisted by consultants, will be responsible for carrying out the entire project. The Ministry will appoint qualified counterparts to work full-time with the con- sultants on the urban transport studies and the technical assistance pro- gram. Bidding and contract award procedures for the construction and im- provement works are in accordahce with Bank guidelines. The works have been arranged to make contracts of a size which are attractive to both local and foreign bidders, who will be allowed to bid for one or more contracts, sepa- rately or in combination. v. The total project cost, including contingency allowances, is es- timnated at USS43.3 million. The loan will finance the foreign exchange cost of the project (US$29.0 million); the Government the local cost. The Govern- ment has asked for retroactive financing of US$1.3 million, representing the foreign exchange costs for the detailed engineering studies for the Casablanca-Rabat expressway and the Kenitra-Larache road which were under- taken in 1972 with the Bank's agreement. This amount, covering the consult- ing work as from January 1, 1972, is included in the project. vi. The project is economically well justified. With respect to road- works only benefits from lower accidents, maintenance, and transport costs have been quantified in the economic analysis; benefits from reduced travel time for passengers in cars and buses have been excluded. Quantified benefits are estimated to yield an Economic Return (ER) of 16% on the first stage of the Casablanca-Rabat expressway. Sensitivity tests show that the ER would be 12% if construction costs were 20% higher than the best estimate, or if benefits were 25% lower. The road improvements have a combined ER of 62%, with individual rates per section ranging from a minimum of 17% to over 100%. The purchases of road maintenance equipment are justified by savings in the cost of maintenance, repair, and operating the existing equipment over ten years old which is to be replaced. Benefits from the other project elements have not been quantified, but technical assistance is essential for improving the operations of the MPWC and the detailed engineering and urban transport studies for sound project preparation. vii. Based on the expected economic lives of the road sections to be built or improved, the project is suitable for a Bank loan of US$29 million with a term of 20 years, including 4 years of grace.  APPRAISAL OF A SECOND HIGHWAY PROJECT MOROCCO I. INTRODUCTION 1.01 The Government of the Kingdom of Morocco, in agreement with the Bank, contracted consultants in 1971 to carry out detailed engineering for the Casablanca-Rabat expressway for which a feasibility study financed under the first highway project had shown a satisfactory Economic Return. A Bank identification mission in September 1972 recommended the construction of the first phase of the expressway, the improvement of various road sections, purchases of highway maintenance equipment, traffic studies and technical assistance. A US$43.3 million project has since been prepared for financing by the Bank Group and the Government. 1.02 This will be the second project financed by the Bank Group in Morocco's transportation sector. The first project consisted of the construc- tion and improvement of roads, purchases of highway maintenance equipment and a transport survey to be carried out by consultants. Its total cost was estimated at US$21.2 million, whica the Bank Group helped finance with a Loan/Credit (Loan 642-Mor/Credit 167-M1r) of US$14.6 million equivalent, corresponding to the foreign exchange component of the project. The Loan/ Credit was signed on November 13, 1969, and became effective on May 20, 1970. Overall execution of the project is satisfactory, although disbursements are lagging behind the appraisal estimate; they currently amount to about 60% of the appraisal estimate, mainly due to the slow and cumbersome processing of contractors' bills by the Administration. 1.03 This report is based on information provided by the Ministry of Public Works and Communications (MPWC), a feasibility study and detailed engineering for the Casablanca-Rabat expressway, and a study on highway organ- ization and administration carried out by the consulting firm BCEOM (France), and the findings of a November/December 1972 appraisal mission composed of Messrs. G. Ludwig (Engineer), A.J. Stone (Economist) and G. El Rifai (Young Professional). Mr. R. Venkateswaran (Special Projects Department) participated in the appraisal mission for a brief period to define the proposed urban studies.  -2- II. THE TRANSPORT SECTOR A. Description 2.01 The transport system is reasonably well developed. The system is fairly extensive for a country with an area four-fifths the size of France; a population of 15.6 million growing at an annual rate of 2.9% overall, and 5% in urban areas; and with a per capita income in the US$200-250 bracket. It connects all major production and consumption centers as well as the local communities to main routes. The existence of a fairly sizeable network of local roads is important considering that 70% of the population live in rural areas and 30% in cities. The infrastructure is mainly concentrated in the coastal plain, known as the Atlantic corridor, and the valleys between the three parallel mountain ranges running southwest to northeast, called the Atlas mountains. Traffic is particularly dense between Casablanca and Rabat. The former is the country's commercial center, main port and largest city with a population of over one million. Rabat, the capital, is the second largest city with approximately 300,000 inhabitants. The Atlantic corridor generates also a significant volume of export/import traffic, especially with Europe since Morocco is only 15 km from the southern tip of Europe across the Strait of Gibraltar. 2.02 The transport system comprises: about 1,200 km of railways, 51,500 km of roads, six major ports and eight airports served by international and national airlines. 2.03 Although the density of transport infrastructure is basically ade- quate, investments need to be made in rolling stock for rail, some port improve- ments, and especially in roads, many of which have deteriorated and are below standard for current traffic. Road improvements need to be made for the gen- eral movement of passengers and freight, but also to support the development of agriculture, which generates 30% of GNP and about 60% of total exports. Morocco is an important producer of citrus fruit and tomatoes for the European market. Good roads are required for inland transport of these products to keep transport costs to a minimum as well as to ensure speedy deliveries of fresh quality products and to avoid spoilage. Good roads are also needed for Morocco's budding tourism industry, which in 1971 contributed 11% of total foreign exchange earnings. 2.04 The total passenger and freight market cannot be estimated with a reasonable degree of accuracy because no reliable data exist on private passenger transport by car and the operations of unlicenced public truckers. Broadly, available data indicate that the total market has steadily expanded in recent years, in line with economic growth, and that most of the increase in traffic has been attracted by road transport. However, during the past three years (1970-72) rail freight has increased 10% annually, mainly due to expanding phosphate traffic.  - 3 - 2.05 The modal split of passenger and freight traffic between rail and road is highly regulated by Government. The backbone of railway business is the movement of bulk commodities, in particular phosphates. A fairly even split exists between rail and common carrier road transport on other long distance freight. The railways carry more long distance passengers than buses. However, if transport by private passenger car and private trucks are taken into account the market is almost equally divided between rail and road trans- port. 2.06 In terms of areas served, the highway system is the principal means of transportation in the country. Full details of the highway system are given in Chapter III. 2.07 The railways are Government-owned and run by the Office National des Chemins de Fer (ONCF). The ONOCF is a public corporation with legal status and financial autonomy, under the jurisdiction of the Minister of Public Works and Communications. The system is made up of 1,178 km of standard gauge track, of which 730 km are electrified, including 161 km of double track carrying phosphate from Khouribga to Casablanca. The track in general is in reasonable condition; however, rolling stock and locomotives, except on the phosphate line, are inadequate for present traffic. The railways in 1969 carried 2,401 million ton-km of frelght and 506 million passenger-kilo- meters. Of the freight carried, 1,525 million ton-km (63%) were phosphates (Table 1). The volume of freight was relatively constant in the five years prior to 1967 but since then has grown, at about 2.5% per annum through 1968, thereafter at 10% per annum, due to increased phosphate traffic. Passenger traffic has been relatively constartt in the last ten years. 2.08 The Goverrnment is contemplating a program of investments in the 1973-77 Plan, totalling DP, 123.4 million in rolling stock, locomotives and some track renewal, excluding the phosphate Lines. The phosphate line is financially prcfitable and is to receive investments of DP 27.7 million in the new Five Year Plan. These profits subsidize other services which run at a loss, notably passenger services. Overall, the railways make a small financial profit, although this is based on inadecuate provision for depre- ciatlon of fixed vissets. 2.09 Morocco has six ports which handled in 1970 a total of 18.5 million tons of cargo. The Port of Casablanca handled about 70% of this traffic (Table 2). Mobammedia, just 25 km north of Casablanca, handled a further 10% of the tonnage, mainly in petroleumn. Tangier in the north is mainly a passenger port for the Europe tourist traffic. The other three ports are on the Atlantic Coast at Kenitra, Safi and Agadir, the last two serving the southern section of the country. The ports of Casablanca and Mohammedia are administered by a separate Director of Ports, while the others are administered by Divisions of the Ministry of Public Works and Coumunications (MPWC) (para. 3.07). The Government is considering establishing an autono- mous port authority for all ports.  -4- 2.10 Present port capacity is adequate and operations are efficient. Some renewal and reconstruction at: Casablanca, new passenger loading facilities at Tangier and expanded facilities for the fishing fleet at Agadir are re- quired in the near future, but no major port improvements are needed for about five years when the port basin at Casablanca may require extension. The Five Year Plan proposes Dh 250 million in investments to meet these requirements, which is reasonable. 2.11 Morocco is served by eight airports with regularly scheduled flights; six airports have international flights but only three (Casablanca, Rabat and Agadir), can serve transoceanic flights (Boeing 707's). Besides these main airports there are a number of smaller airports and airfields. The Government plans to raise the standard of the airports at Tangier and Fes to accommodate transoceanic flights in support of the expansion of the tourist industry. The country is served by its own international airline, Royal Air Maroc (RAM) with 4 Caravelle and 2 Boeing 727-200 aircraft providing service to Europe. The importance of air transport in Morocco is closely linked with the growth of the tourist industry which accounts for about 90% of total passengers in recent years. Total air passenger traffic increased by 11.5% annually during 1962-1970 to over one million. RAM carried about one-third of all passenger traffic in 1970. Domestic routes are served by Royal Air Inter (RAI) which is owned by RAM, ONCF (the railways) and the Office National des Transports (ONT government trucking agents and controllers). The country has air reciprocity agreements with 22 other countries. Airport administration and regulation of the airways are carried out by a separate agency, the Direction de l'Air of the Ministry of Public Works and Communications. B. Planning, Financing and Coordination 2.12 Transport policy aims to almost totally control public services and to restrict private services which may compete with the public sector. The principal agency charged with the implementation of this policy is the Ministry of Public Works and Communications. This Ministry is responsible for civil aviation, ports and hydraulic works, the road network and control of six public enterprises 1/ (Chart 'World Bank 7380). 2.13 Government control over transport is most strict in the rail/road freight market; the MPWC through the Office National des Transports (ONT) controls the licenses for common carrier trucks, determines freight rates and fares for rail ana road transport, assigns cargoes directly to road common carriers, and issues and collects the bilis for services rendered by these carriers. Furthermore, trucks which can be freely purchased cannot exceed 5.5 tons capacity and can be used only for own-account trucking. As a result of the regulations restricting supply and rates calculated on a I/ National Office of Transport (ONT), National Office of Electricity (ONE), National Office of Railways (ONCF), Royal Air Maroc (RAM), Cargo Administration of the Port of Casablanca (RAPC), National Office for Drinking Water (ONEP).  ton-km basis, the road common carriers concentrate on lcng distance bulk hauls, while private operators without a licence concentrate on short heul freight. The consultants of the Transport Survey (para. 2.14) have recommend- ed complete deregulation of the industry. The existing system is costly to the Moroccan economy. It causes high freight rates than under a competitive situation. In addition it results in low utilization of equipment and facili- ties which are foreign exchange intensive investments; loss of development impact of entrepreneurial training provided for small firms in the trucking industry; use of scarce Government expertise to administer the regulations when it could be employed elsewhere; and restriction of innovations in res- ponse to changing shipper needs. The Bank has opened discussions with the Government on deregulation. The MPWC recognizes the problem and is taking an active interest in the matter. The MPWC is seeking information from other countries, notably France and has started its own study of this issue. Three experts, to be financed under the proposed project, will assist the MPWC with this study. All interested parties in Morocco, including users and private unlicenced carriers, are to meet at a Government-sponsored colloquium in March 1974 to decide on a strategy to improve the service provided by the industry. During negotiations the Government agreed to continue the dialogue with the Bank on the deregulation issue. 2.14 The MPWC is responsible for preparing the initial Five Year Plarn proposals for the transport sector as a whole as well as for individual modes. These are then discussed with the Secretariat General of the Plan, attached to the Prime Minister's office, and adjusted as necessary to the overall Plan. Collaboration between the Secretariat and the MPWC is arranged formally by way of commissions. The Plan for 1973-77 has been approved at a total of DH 1,221 million which represents a 60% increase over the previous plan. It was formulated partly on the results of the Transport Survey and provides a reasonable plan of investment. The survey was carried out by Bureau Central d'Etudes pour les Equipements d'Outre-Mer (BCEOM) (France) in 1970-71 under the First Highway Project; it covered the roads, railways and ports, including traffic forecasts, investment requirements and organization of the administra- tion. It included feasibility studies for the Casablanca-Rabat expressway, to be financed in this project and the feasibility study of the Kenitra-Larache road. The recommendations in each mode have been discussed with the Government who is considering their implementation. 2.15 The planning mechanism is by and large satisfactory, and the evaluation of projects is based increasingly on economic considerations. However, the Second and the Fifth Offices in the Technical Division of the MPWC (World Bank Chart 7380), which are responsible for preparing the trans- port plan proposals and follow-up, lack sufficient supporting staff to dis- charge their responsibilities satisfactorily, especially for the economic evaluation of projects. To improve the situation, the project provides for the establishment of a small transportation planning unit, to be attached to the Fifth Office, with technical assistance consisting of a highway traffic engineer, a railway engineer and a transporz economist. This unit will also be responsible for liaison with the Secretariat General of the Plan (para 4.12).  -6- 2.16 All transport infrastructure investments are financed from general public funds; Morocco applies the concept of "domaine public" to its trans- port infrastructure so that only operating costs are considered to be assess- able to users. However, annual revenue from highway user charges is about four times total highway expenditures. Railways and ports generate revenues which approximately equal their operating costs. III. HIGHWAYS A. The Network 3.01 The highway network is classified in: primary (Routes Principales), secondary (Routes Secondaires) and tertiary (Chemins Tertiaires) roads (Table 3). The network is well developed, consisting of some 51,500 km of roadways of which about 21,500 km are paved and further 4,000 km are con- structed earthroads of good serviceability, the remainder are tracks. Most of the network is concentrated in the plain between the Atlas mountain ranges and the Atlantic Ocean. 3.02 The total length of the network has remained stationary at 51,500 km over the last 13 years; however, the asphalted portion has increased from 15,600 km in 1959 (30%) to 21,500 km in 1972 (40%), mostly by asphalting the most important tertiary roads. Asphaltic pavements vary from bituminous surface treatment on secondary and tertiary roads to asphaltic concrete for most primary roads and a large part of the secondary roads. Legal restrictions on vehicle weights (maximum axle-load is 13 ton) and dimensions are adequate and are being enforced. 3.03 While the present network is generally adequate in coverage and length, its design characteristics are becoming insufficient to handle the growing traffic: alignments are often tortuous with many curves and low visibility, many roads are narrow because they were designed many years ago for light traffic volumes, and pavement thickness is insufficient for present traffic and pavements are breaking up. Under the First Highway Project certain heavily travelled trunk roads were modernized and light and aging pavements were strengthened. The proposed project will continue to assist the Government in improving and modernizing the network so as to avoid rising congestion and accident rates, and to reduce maintenance expenses and transportation costs. B, Road Traffic 3.04 The vehicle fleet, fuel consumption and traffic on the road net- work as a whole have grown since 1965 at an average annual rate of about 6%; the traffic growth on main roads was somewhat higher than the national average and varied between 7% and 10% annually (Tables 4-5). The exact number of vehicles in circulation is not known, because discarded vehicles are not re- corded systematically. In 1970, the total number of vehicles was estimated at about 250,000 to 300,000 including 28% of heavy vehicles. This corresponds  - 7 - to about 12 to 15 vehicles per 1,000 inhabitants, which is on the high side for a country with a GNP per capita of US$200 to US$250. The number of small passenger cars and trucks under 5.5 tons capacity has grown more rapidly than that of the heavier vehicles. The growth in small cars, relative to large cars, has been primarily supported by the domestic small car assembly industry, which is protected by high duties on imported vehicles. The growth in trucks under 5.5 tons capacity results from the capacity limit on trucks that can be freely purchased for private use (pata. 2.13). In the light of past trends in road traffic and continued growth of about 5% annually in GDP the volume of road traffic in terms of ton-km is expected to increase about 6% annually for the country as a whole, and about 7% to 10% annually on main roads. 3.05 The distribution of traffic on the network continues to produce the heaviest traffic concentration on the trunk roads of the northern half of the Atlantic coastal plain, with the roads in the Casablanca-Rabat corridor carrying in 1972 Average Daily Traffic (ADT) of 8,000 vehicles. A majority of the other main roads in the Atlantic coastal plain have ADTs above 2,000 vehicles. All other rural roads carry lower traffic volumes. Traffic statistics have improved but for certain roads are still distorted by the location of permanent counting stations too close to urban areas. These counting stations are being moved to more appropriate locations and continued overall improvement in data collection is expected. Urban traffic, especially in Casablanca and Rabat, is becoming congested; the problems this causes, es- pecially with respect to through traffic, are to be studied under this project (para. 4.09). C. Administration 3.06 The MPWC has large responsibilities for the transportation system as a whole (para 2.12), including the maintenance and development of the primary and secondary road network, To discharge its responsibilities for the highway network, the MPWC relied until recently primarily on two regional offices, each headed by a Chief Engineer: Public Works North (PWN) in Rabat and Public Works South (PWS) in Casablanca. For highway planning, project preparation and supervision the MPWC relies on one of its technical offices at headquarters (para 2.15). The 2 regional offices supervised between them 9 field divisions, with 35 subdivisions. The divisions and subdivisions are headed by engineers supported by technicians. The engineers in charge are competent, most have been trained abroad, and they are also assisted by sev- eral expatriate engineers. 3.07 The organization of the MPWC placed a heavy burden on the Secretary General, who besides his responsibilities for other departments, was charged with the day-to-day supervision and coordination of PWN and PWS. During 1972, BCEOM carried out a study of the highway organization within the MPWC. It found that the present organization is generally sound, but recommended establishing a Directorate for Roads to relieve the Secretary General in day-to-day administration, and abolish PWS and PWN. This recommendation. has been accepted by the Government and a Director has recently been appointed and the regional offices have been abolished.  -8- 3.08 1ajor contracts for construction are awarded by the MPWC, minor contracts of up to DH 200,000 (about US$50,000 equivalent) by the Director of Roads. The nine divisions administer and supervise project execution, with the assistance in the field of the subdivisions. The latter also render tech- nical assistance to local authorities who are responsible for the construction and maintenance of local roads. These arrangements are satisfactory. D. Planning and Financing 3,09 The planning mechanism is explained in Chapter Il. Preliminary estimates indicate that total highway expenditures during the last Plan Period 1968-72, including construction of Agadir-Marrakech road financed under the First Highway Project, amounted to DH 215 million (US$51 million); of this total, about DH 50 million was for agricultural feeder roads, DH 50 million for tertiary roads, DH 42 million for the Agadir-Marrakech road, DH 40 mi'lion for the rehabilitation and improvement of existing roads, and the remainder for tourist roads and new roads construction (Table 6). This distribution of investment is reasonable and reflects the needs for the different types of road. It indicates that the Government, using economic priorities, is devoting a major share of highway investments to feeder and other local roads and that modernization of existing roads is not being ne- glected for the benefit of new construction. Due to overall budgetary and monetary constraints, however, total expenditures were on the low side and a backlog of investments for road improvements has accumulated. 3.10 The Five Year Plan for 1973-77 has been approved; investments planned in the highway sector amount to DH 412 million (US$105 million equivalent) which is about a 50% increase over the actual investments of the previous Five Year Plan. The objectives of the new Plan reflect the results of the recommendations of the recent transport survey conducted by BCEOM. The planned investments are adequate. E. Construction 3.11 The MPWC does not as a matter of policy undertake departmental construction of roads. All construction, reconstruction and improvement works are carried out by contractors. Contracts for such works are awarded after competitive bidding of prequalified bidders. For smaller contracts bidding is open to all contractors, who are qualified on the presentation of their bids. Morocco has about 20 local contractors, but only six have the equipment and technical personnel to carry out major construction con- tracts. Most of the contractors are affiliated or cooperate closely with foreign enterprises; joint ventures are common practice. No restrictions prevent or impede foreign contractors from working in Morocco. 3,12 The Moroccan road construction industry includes a number of small conitractors who use labor almost exclusively and work mostly on periodic maintenance or as subcontractors for larger contractors on construction. An additional feature of the industry is the Government-sponsored "Promotion Nationale" which provides the equivalent of about 26,000 full time jobs annually on technically simple road projects with high inputs of unskilled labor, such as the reconstruction of tertiary roads.  -9- F. Maintenance 3.13 Periodic maintenance such as resealing of pavements is normally carried out by contractors under so-called "marches generaux". This con- tract type usually covers all repair works and material supplies within a certain area; it is based on unit prices and approximate quantities but does not fix in advance the exact site of the works. It is awarded after compet- itive bidding. Unit prices and quantities are estimated by MPWC and the contractors are asked to bid in the form of a percentage of the priced estimate. The maintenance bid can be below or above the MPWC estimate, but bids 10% above or 30% below the estimate are discarded. 3.14 Routine maintenance on primary and secondary roads is carried out by the subdivisions with their own forces. While routine maintenance techniques are satisfactory, the fleet of maintenance equipment is inade- quate. Under the First Highway Project, a start was made to improve the fleet with purchases of the most urgently needed equipment. The proposed project will continue this process by providing for additional purchases to replace equipment over ten years old or obsolete as recommended by BCEOM in their study on highway organizations. 3.15 Under the First Highway Project, an equipment depreciation account- ing system was introduced and is now functioning satisfactorily. This accounting system will be an important input for determining future renewals of each piece of equipment. To improve the system further, Government will introduce full cost accounting of all types of maintenance operations, includ- ing the cost of equipment in each operation. 3.16 Until 1971, all heavy equipment was purchased and administered by a public enterprise, Regie des Exploitations Industrielles (REI), which was attached to the MPWC. It operated on a pool basis for all the equipment of the entire Ministry; highway divisions and subdivision could rent civil engineering equipment when needed. This arrangement did not satisfy the needs of the various departments and, in 1972, the agency was split into the water supply agency, Office National pour les Eaux Potables (ONEP), and the civil engineering equipment pool, Service Travaux Publics (STP). BCEOM in their study on highway organization (para 3.07) recommended that STP should be transferred from REI, with equipment and personnel, to the highway directorate established in the MPWC (para 3.07) and become the_Central Highway k Equipment Division. However, the Government has not yet taken a decision and the Director for Roads therefore has decided as an interim solution to create his own Central Equipment Division. This division will administer and super- vise all equipment in the divisions and subdivisions, carry out periodic inspections of equipment in the field as well as major repairs and overhauls at its central workshops. During negotiations assurances were obtained from the Government that a Central Equipment Division will be established within the Directorate for Roads by December 31, 1974.  - 10 - 3.17 Maintenance expenditures have increased over recent years from about DH 41.5 million in 1968, when the Bank discussed the First Highway Project, to DH 48.9 million in 1971 (Table 7). Thus the average expendi- tures per km on the primary and secondary network increased from about US$670 in 1968 to US$770 in 1971, which is adequate. G. Training 3.18 The Fourth Office of the Technical Division in MPWC supervises and initiates training of technical assistants, construction supervisors and equipment operators. Technical assistants and construction supervisors are trained through courses at the engineering college at Mohammedia, while equipment operators take refresher courses at STP and at the Central Equip- ment Division as soon as the latter has been established. The level of training is satisfactory. IV. THE PROJECT A. Description 4.01 The principal objectives of the proposed project are: to improve traffic conditions on main roads as well as some secondary roads, mostly in the Atlantic corridor, and in the urban areas of Casablanca and Rabat, to improve highway maintenance, and to assist the MPWC in strengthening trans- port planning. Specifically, the project consists of: (i) construction of two lanes of the uncompleted part (33 km) of Primary Road 36 (RP 36); (ii) improvement of sections, totalling 679 km, of 17 primary and secondary roads; (iii) purchases of highway maintenance equipment; (iv) traffic studies by consultants in the towns of Casablanca and Rabat; (v) technical assistance by consultants to MPWC for the establishment of a transportation planning office; and (vi) retroactive financing of detailed engineering by consultants. (a) Construction of RP 36 4.02 All traffic between Casablanca, the commercial center of the country, and Rabat, the capital, must use the plain bordered by the Atlantic in the northwest and by the rugged terrain of the hills in the southeast. In a broader sense, all traffic between the south and north of Morocco has to use this corridor of maximum 5 km in width.  - 11 - 4.03 At present, this corridor is served by a railway and two roads, one near the coast and one inland. Both roads pass through a number of small towns, villages and urban settlements and have poor design characteristics. In 1972, the ADT between Casablanca and Mohammedia was 11,000 vehicles and between Mohanmedia and Rabat 8,000 vehicles. This traffic has been increasing by about 11% annually. The coastal road serves the recreational resorts along the coastline, which is being urbanized rapidly. Its alignment is poor, limiting travel speeds. Therefore, the more inland road carries most of the through traffic between the two centers, although its design standards are also poor and four narrow bridges over major rivers impede the traffic, two old suspension bridges have a maximum load capacity of 2.5 tons. In view of the poor traffic conditions on these two roads, the Government in the late 1950's decided to link both cities through a modern expressway. 4.04 Since then, a 28 km section of a two-lane highway (RP 36), bypassing or paralleling the two suspension bridges on the inland road at the Rabat end, has been completed as part of the expressway. At the Casablanca end, a section of 6.8 km has been constructed with four lanes, and an adjoining 5 km long section with two lanes. 4.05 Completion of the expressway will be carried out in three phases: Phase "A" consists of the completion of the missing link of about 33 km of the two-lane highway RP 36, including two interchanges, three overpasses and one underpass for the future expressway. The proposed project covers Phase "A" only. Phase "B" covers the completion of the two lanes about 38 km long, parallel to Phase "A", including construction of two interchanges and one overpass; and Phase "C" the construction of two lanes, about 28 km long, parallel to the existing RP 36 at the Rabat end, including two interchanges and three overpasses. Phases "B" and "C" will be undertaken in a few years, probably by 1980, depending on traffic growth. The expressway will run 2 to 3 km inland from the coast and therefore will not affect the environment along the coast. (b) Road Improvement Works 4.06 Table 8 indicates the sections, totalling 679 km on 12 primary and 5 secondary roads (with a total length of about 4,300 km) which, based on economic priority, have been selected by the Government for improvement under the project (Map IBRD 10341). These sections represent a major part of the road improvements to be undertaken during the first three years of the Five Year Plan. As a result of increasing traffic and insufficient pave- ment thickness, a large number of sections, ranging from 1 to 15 km, are beginning to deteriorate and require urgent rehabilitation. Realignments are needed on sections totalling 213 km and widening on 220 km. Engineering has been completed by the Divisions in the field and is satisfactory. (c) Purchases of Highway Maintenance Equipment 4.07 Under the First Highway Project, maintenance equipment at a cost of about US$3.0 million was purchased to renew part of the most urgently needed equipment. A further list of equipment for urgent renewal, together with spare parts costing US$2.4 million, is included in the project (Table 9) (para. 3.14).  - 12 - (d) Urban Traffic and Transport Studies in the Towns of Casablanca and Rabat 4.08 In view of the proposed expressway's implications on the urban traffic patterns in Casablanca and Rabat, the project includes two urban traffic and transport studies. At the Casablanca end of the expressway, the complex traffic dispersal problems would be the main focus of the studies. In the absence of a comprehensive urban traffic framework for the urban area of Casablanca, it is not felt desirable to establish a full scale urban trans- port plan at this stage. The studies would therefore examine broad lines of traffic dispersal and major conflicts to be resolved over the short run, i.e. within five years, in order to ensure that expressway traffic does not impose additional burdens on the urban street network. These studies would also focus on any short term improvements that would need to be brought about in the traffic patterns in Casablanca, as well as on any needed infrastructure investments. 4.09 At the Rabat end of the expressway, the studies would focus on the likely methods of traffic dispersal from the expressway, the technical and economic feasibility of any bypass routes needed to divert through traffic, and on the establishment of a longer term transport plan for the urban area of Rabat, in the context of ongoing Master Plan work. The study approach in Rabat would examine both short and medium term needs and make recommenda- tions on the desirable phasing of future transport infrastructure investments in the Rabat area. It would review deficiencies in the public transport system and propose remedial measures in the context of future planned growth in Rabat. The studies would also form a potential link with proposed urban extension projects in the Rabat area for which the Government is likely to request Bank Group financing. 4.10 Both studies will be carried out with the assistance of consultants as a joint effort of the Ministry of Public Works and Communications, the Ministry of Urbanism, Housing and Environment, and the Municipalities of Casablanca and Rabat. Draft terms of reference for the studies are now being prepared and reviewed by all parties concerned. During negotiations, assur- ances were obtained from Government that it will designate, by the end of 1973, the agency/agencies responsible for hiring consultants and executing the studies and that it will ensure proper coordination of the study's data base. 4.11 No major congestion problems exist as yet at both ends of the project expressway, but they are likely to arise by or even before 1980 depending on traffic growth. Therefore, during negotiations, assurances were obtained that Government will review the findings of the urban traffic and transport studies with the Bank and undertake arrangements and improve- ments needed to ensure reasonable dispersal of traffic from the project expressway.  - 13 - (e) Technical Assistance 4.12 To improve its own planning on transport investments, the MPWC has requested technical assistance, consisting of a highway traffic engineer, a railway engineer and a transport economist to be recruited from a consult- ing firm (para 2.15). These experts will assist the MPWC for a total of 5 man-years in establishing a small transport planning office, initiate opera- tions and train Moroccan counterparts. (f) Retroactive Financing 4.13 The Transport Survey under the First Highway Project included feasibility studies for the construction of an expressway between Casablanca and Rabat, and the Kenitra-Larache road along the Atlantic coast. These studies indicated that construction of both highways would yield satisfactory Economic Returns and the Government decided, and the Bank agreed, to go ahead with detailed engineering. BCEOM started in January 1972, with the engineer- ing on the Casablanca-Rabat expressway and the Italian consulting firm, SAUTI, with the Kenitra-Larache road in May 1972. These detailed engineering studies were intended to be financed from surplus funds under the First Highway Project; however, through quantity increases in the construction and improvement works under that project and particularly by the first devaluation of the US dollar in December 1971, the expected surplus funds were depleted. The project, therefore, includes the retroactive financing as of January 1, 1972, of the foreign exchange component of the studies amounting to about US$1.3 million. 4.14 Construction of the Casablanca-Rabat and Kenitra-Larache roads was expected to be included in the proposed project. Due to budgetary limitations, however, construction of the latter has been postponed and deleted from the project. B. Cost Estimate and Foreign Exchange Component 4.15 The project cost, including contingency allowances, is estimated at US$43.3 million, including a foreign exchange component of US$29 million, or 67% of the total, and is summarized in the table on page 14. Details of the cost of highway improvement works and maintenance equipment are shown in Tables 8 and 9, respectively. 4.16 The cost of construction of RP 36 is derived from detailed engineer- ing and estimates by BCEOM. The cost of the highway improvement works is based on detailed quantity estimates by the MPWC and unit prices for similar works recently carried out and financed under the First Highway Project. The costs of consulting services for the urban traffic and transport studies and for technical assistance are based on previous or present consulting engineering contracts in Morocco; the costs for detailed engineering studies for retroactive financing on actual contracts with consulting firms; the cost of the highway maintenance project equipment on recent prices for similar equipment delivered in Morocco. The cost estimates are satisfactory and have been confirmed during negotiations.  Foreign Exchange, Project Element Local Foreign Total Local FPea4ggn Total Ocmponent - DH million ---- ----- us$ .mi,l,ion --- 1. Completion of con- struction of RP30 19.8 36.7 56.5 5.1 9.4 14.5 65 B. Highway improvement works 19.5 36.3 55.8 5.o 9.3 2.1403 65 1. Urban traffic and transport studies in Casablanca and Rabat 1.4 4.6 6.o 0.3 1.1 1.4 80 D. Retroactive financing for Casablanca-Rabat expressway and Kenitra- Larache road 1.3 5.1 6.4 0.3 1.3 1.6 80 Purchase of mainte- nance equipment 3.2 9.3 12.5 0.9 24 3.3 73 F. Technical assistance 0.5 2.4 2,9 0;2 086 $ w. Contingency allowance 9.7 19.3 2,80 2.-5 4.9 7.4 Total Project Cost 55.4 113.5 368R. 14.3- 67 a/ 10% for physical overrdih on items A throitgh C and F, 13% fo