Morocco - Fourth Highway Project

Document of FILE Y The World Bank FOR OFFICIAL USE ONLY Report No. P-3475-MOR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$85 MILLION TO THE KINGDOM OF MOROCCO FOR A FOURTH HIGHWAY PROJECT March 4, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  KINGDOM OF MOROCCO CURRENCY EQUIVALENT Currency Unit - Dirham (DH) US$l = DH 6.1 DH 1 = US$o.164 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 Kilometer (Km) = 0.62 miles GLOSSARY OF ABBREVIATIONS CIF Cost, Insurance and Freight MPW Ministry of Public Works ("Ministere de l'Equipement") MOT Ministry of Transport ("Ministere des Transports") ONT "Office National des Transports" RTD Roads and Traffic Department  FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO FOURTH HIGHWAY PROJECT Loan and Project Summary Borrower: The Kingdom of Morocco Amount: US$85 million equivalent, including the capitalized front-end fee. Terms: Amortization in 17 years including 4 years of grace, at variable interest rates. Project Description: The proposed project aims at lowering transport costs, helping to reduce regional income disparities, strengthening the planning capability of key institutions in the transport sector, and raising the productivity of road transport services. The project consists of: a) road works, comprising continuation of the Roads and Traffic Department's program of pavement strengthening and improvement, reconstruction of bridges, a pilot program of improvement of provincial roads, and completion of the Casablanca-Rabat expressway; b) continuation of the Roads and Traffic Department's program of routine and periodic maintenance of the classified road network, renewal and acquisition of maintenance equipment, and construction and equipping of workshops for such equipment; c) a study of provincial roads; d) a study of the freight transport market and regulatory system; e) technical assistance to strengthen institutional planning capability. The main project benefits will be lower transport costs. Other benefits comprise reduced future road rehabilitation requirements, avoidance of road accidents, passenger time savings, and increased farm incomes. The principal project risk is the possibility of shortfalls in allocations by the Government of funds required to fully implement the project. Such shortfalls would postpone This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  (ii) benefits expected from particular components, but would not seriously affect the economic justification for other project items. The Government has confirmed that it will provide needed funds. A second type of project risk is posed by the possibility of delays in the start-up and execution of the freight market study. This risk has been minimized by requiring progress in hiring consultants for the study as a condition of loan effectiveness. US$ Million Estimated % Foreign Capital Cost: Local Foreign Total Exchange Ministry of Public Works Pavement strengthening and improvement 16.6 20.3 36.9 55 Bridge Reconstruction 4.1 5.0 9.1 55 Pilot Program of Improvement of Provincial Roads 11.9 11.9 23.8 50 Completion of Casablanca- Rabat Expressway 11.5 14.0 25.5 55 Construction of Workshops 0.6 0.4 1.0 40 Road Maintenance and Workshop Equipment 3.7 6.7 10.4 64 Provincial Roads Study 0.2 0.6 0,8 70 TA to MPW Planning Unit 0.2 0.3 0.5 70 TA to Roads and Traffic Department 0.2 0.5 0.7 70 Ministry of Transportation Freight Market Study 0.2 0.4 0.6 70 Total Base Cost 49.2 60.1 109.3 55 Physical Contingencies 1.7 2.1 3.8 56 Price Contingencies 8.8 9.5 18.3 52 Total Capital Cost 59.7 71e7 131.4 55 USt Million Estimated % Foreign Maintenance Cost: Local Foreign Total Exchange Periodic Maintenance 39.1 47.8 86.9 55 Routine Maintenance 26.3 14.1 40.4 35 Expected Price increases 15.2 12.8 28.0 46 Total 80.6 74.7 155.3 48 Total Project Costs 140.3 146.4 286.7 Front-end fee 0.6 0.6  ( iii) Financing_Plan: US$ Million Government Bank Loan Total Local Foreign Total Foreign Capital Items 59.7 - 59.7 71.7 131.4 Periodic Maintenance 48.0 45.0 93.0 12.71/ 105.7 Routine Maintenance 32.5 17.1 49.6 - 49.6 Total 140.2 62.1 202.3 84.4 286.72/ Capitalized front-end fee on Bank loan 0.6 Total Bank Loan 85.0 US $ Million Estimated Disbursement: Bank FY: 1984 1985 1986 1987 1988 1989 Annual 2.7 22.9 25.2 19.8 12.6 1.8 Cumulative 2.7 25.6 50.8 70.6 83.2 85.0 Rate of Return: Over 40 percent overall on the following items of civil works, comprising, in all, 87 percent of the cost of the capital items in the project: pavement strengthening and improvement, bridge reconstruction, pilot program of improvement of provincial roads, and completion of the Casablanca-Rabat expressway. Staff Appraisal Report: Report No.4266 MOR, dated March 2, 1983, Transportation II Division Projects Department, EMENA Region. 1/ The Bank will finance 22 percent of the foreign cost of periodic maintenance indirectly, by disbursing a uniform 64 percent of expenditures on capital items. 2/ Includes taxes and duties of approximately 22 percent.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A FOURTH HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Government of Morocco for the equivalent of US$85 million, including the capitalized front-end fee, to help finance a Fourth Highway Project. The loan would have a term of 17 years, including 4 years of grace, at variable interest rates. PART I - THE ECONOMY I/ 2. A basic economic mission visited Morocco in November 1978, and updating missions in September and December 1979 and in May 1980. A report entitled "Morocco: Basic Economic Report" (3289-MOR) was distributed to the Executive Directors in December 1980. A report on Morocco's Public Sector Investment Program for 1981-85 is expected to be distributed to the Board shortly. An economic mission on industrial incentives and export promotion was in Morocco in September 1982. Country and Economic Data Sheets are attached as Annex I. Introduction 3. Compared with many developing countries, Morocco is well endowed with natural resources. Morocco has the world's largest and most easily recoverable phosphate reserves, which makes the phosphate sector a key export sector. Other minerals such as iron ore, manganese, lead and zinc are also exported, but in much smaller amounts. Coal and hydropower plants satisfy only a small part of the country's energy requirements, but Morocco has some uranium and oil shale resources which could become significant energy sources in the long term. There are moreover preliminary indications of natural gas reserves. Morocco has also a relatively good agricultural potential. In addition, Morocco's proximity to Europe has favored trade, tourism and labor migration with the EEC countries. 1/ Parts I and II are essentially the same as in the Oulmes-Rommani Agricultural Development Project (Report No. P-3413-MOR of November 22, 1982).  4. During the first 15 years after independence (1956), a conservative approach to economic policy predominated in Morocco, and GDP increased at an average rate of 4% a year in the 1960s. A relatively weak savings effort and conservative external borrowing policies permitted only a slow rise in the share of resources allocated to investment. Morocco thus entered the 1970s with no major financial imbalances, but a relatively limited growth capacity. Although some industrialization had taken place, over half of the labor force was employed in the relatively inefficient traditional agricultural sector, and primary products accounted for close to 90% of merchandise exports, with phosphates representing about a quarter of the total. Economic Expansion in the Mid-1970s 5. During the 1970s, economic policy became more ambitious, and the original 1973-77 Development Plan strategy stressed an intensified savings effort and development of exports. In 1974, with the sudden jump in phosphate prices, phosphate export earnings more than quadrupled, and although the petroleum import bill also quadrupled in 1974, the current account of the balance of payments remained in surplus. The Plan's concern for exports and savings lost some of its urgency. The Government launched a massive public investment program which brought about a sharp acceleration in the rate of growth of the economy, and GDP grew at the rate of 6.7% per year between 1973-1977. The expansion of the investment program also led to a considerable increase in demand for imported goods and services, whose share in GDP doubled from 19% in 1972 to 37% in 1977. 6. The phosphate boom, however, was shortlived and phosphate exports started falling in both volume and value as early as mid-1975. Phosphate prices continued to decline until 1980. Markets for other exports as well as for tourism and labor migration were also negatively affected by the world recession. Agricultural production and exports entered a period of prolonged stagnation and Morocco turned from a net exporter to a net importer of foodstuffs. As a result of all these factors, the growth of exports of goods and nonfactor services, which in constant prices had exceeded 8% a year in 1968-72, averaged only 1% a year in 1973-77. 7. Accelerated investment, growing public expenditures, and particularly increased defense spending in response to growing tensions in the Western Sahara, created strong pressures on both the balance of payments and the Government budget. While investment jumped from about 15% of GDP in the early 1970s to 32% in 1977, gross domestic savings rose briefly from 15% of GDP in 1972 to 20% of GDP in 1974 thanks to phosphate receipts, but fell back to 10-12% in 1976-77. The large resource gap which emerged as early as 1975 rose to an unsustainable 20% of GDP in 1977 (in current prices). To help finance the gap, Morocco borrowed heavily from the international capital market, which led to rapid increases in external debt and the debt service burden. The debt service ratio rose from 5.6% of exports of goods and services in 1975 to 10.7% in 1977.  - 3 - 8. The Government's overall budget position also deteriorated considerably during the period 1973-77. While budgetary revenues increased rapidly as a result of the windfall phosphate profits in 1974 and 1975 and of the growth of import duties and taxes in following years (reaching 22% of GDP in 1977), the growth of expenditure far exceeded that of revenues. Budgetary outlays rose from 19% of GDP in 1972 to 39% in 1977. As a result, the Government's overall budget deficit increased sharply, reaching peaks of 18% of GDP in 1976 and 1977. Stabilization Program 1978-1980 9. In order to redress the rapidly deteriorating financial situation, the Moroccan Government in 1978 adopted a three-year stabilization program, characterized by a substantial retrenchment of investment and import levels. In 1978, the first year of the adjustment, public investment was cut back by nearly half in real terms and the growth of current budgetary expenditure held down to 3% (in real terms). These measures of fiscal restraint were combined with tight credit policies and stringent import controls. As a result, the overall budget deficit declined to about 10% of GDP and the external payments situation improved in 1978. Later, however, the stabilization program encountered a number of obstacles, including poor harvests, petroleum price increases and the rise in interest on the commercial debt. In addition, internal pressures led to some relaxation of the highly restrictive fiscal policy adopted in 1978. By 1980 both fiscal and external imbalances were still substantial: the resource gap (in current prices) remained at about 11% of GDP, and the ratio of the overall budget deficit to GDP at about 12%. 10. The reduction in the Government deficit during the 1978-80 period was achieved chiefly through cutbacks in the level of budgetary investments, which dropped from 27% of GDP in 1977 to 12% in 1980. The growth of current expenditure proved difficult to restrain because of the continuing need to maintain defense and social expenditures, the growing interest payments on the public debt and the rising cost of consumption subsidies. The latter tripled in 1979-80 reaching 2% of GDP, as price increases for subsidized staple food and petroleum products could not catch up with the rise in import costs for these products. Reflecting these pressures, the growth of current expenditure reached 27% in 1980 and their share of GDP represented 22%. 11. In the external sector, non-oil imports were reduced substantially and remained below the 1977 level in nominal terms due to a sharp reduction in capital goods imports (by about two-thirds in real terms between 1977 and 1980). Oil imports on the other hand increased 2.5 times in value due to price and volume increases. Export earnings improved in 1979 and received a significant boost from the recovery of phosphate prices in 1980. Thus, despite a large increase in the petroleum import bill and a rise in external debt interest payments, the current account deficit before grants was reduced from $l.8 billion, or 17% of GDP, in 1977 to about $1.4 billion, or 8% of GDP, in 1980.  -4- 12. The adverse impact of the stabilization program on employment has probably been substantial in contrast with the rapid rate of employment creation during 1973-77. On the whole, the policies followed since 1978 have had a high cost in terms of growth and employment and appear to have been only partly successful in their short-term stabilization objectives. Recent Developments 13. In 1981, the economy was subjected to strong external shocks: a substantial increase of imports of cereals, following a drought which reduced agricultural value added by about 23% in real terms; a large appreciation of the US dollar; and a rise in foreign interest rates, which further increased the cost of debt service. As a result of these factors, economic and financial performance worsened. Gross domestic product fell by 1.3% in real terms, the Treasury deficit reached 14% of GDP in 1981, and the current account deficit reached $l.9 billion in 1981 (12.6% of GDP). Economic activity improved in 1982 as agricultural production recovered thanks to a good harvest, but phosphate prices weakened. adversely affecting export earnings. GDP is estimated to have increased by 5 to 6% in real terms but the external payments situation has not improved significantly. The budgetary situation improved somewhat as a result of a combination of tax increases and expenditure restraining the measures adopted in the framework of a stand-by agreement reached with the IMF in April 1982, but the Treasury deficit remains high. Medium Term Prospects 14. The initial development strategy in the 1981-85 Plan period was to reach a high rate of GDP growth (6.5%), needed to obtain an acceleration of employment creation and a strengthening of Government programs for social and regional development. The Plan projection was, however, too ambitious and although the financial constraint lessened somewhat in 1982 as the economy recovers from the 1981 drought, Morocco's external financial situation will remain difficult in 1982-85 and will continue to constrain GDP growth. 15. Bank projections for the 1981-85 Plan period are based on the assumption that exports of goods and non-factor services could grow by 5.8% in real terms, while imports of goods and non-factor services would be allowed to rise by no more than 0.5% p.a. in real terms, as the need for food imports is expected to diminish, the increase in capital goods and oil imports to slow down, and payments for military equipment to be lower. Moreover, the growth in investment expenditures would not exceed 3.1% p.a. in real terms. Given these assumptions, domestic savings could recover from the abnormally low 1981 level (7.8% of GDP) to reach 12.5 % of GDP in 1985, the resource gap would gradually decline from 13.3% of GDP in 1981 to 7.5% in 1985, while GDP could still grow at about 4.5% p.a. in real terms or just over 1% per capita. 16. The projected export growth would result from an increase (in real terms) of 6.6% in phosphate and phosphate based products and 9.5% p.a. in manufactured products between 1981-85. Such a performance would depend upon  identification of new markets and could be accomplished only if high priority is given to export promotion. In the case of finished and intermediate products, the extent to which the projected increase in exports would materialize depends on the revision of incentives granted to exporters, the diversification of Moroccan exports towards non-traditional exports and new markets, and the appropriate level of the exchange rate. 17. A sustained reduction of the trade gap will be difficult to achieve unless growth of merchandise imports is drastically curtailed. This would require not only a higher increase in agricultural output so that the level of food imports would decline in real terms, but also an effective domestic pricing policy so as to limit the growth of petroleum imports (assumed at 1.3% p.a.) from 1981 to 1985. It would require moreover a reduction of the capital goods imports growth to 1.8% p.a. in 1981-85 through cuts in Treasury civilian investment with respect to the level planned in the 1981-85 Plan, and a revision of the various investment codes so as to reduce financial incentives to imported capital goods. 18. In view of the projected stagnation in per capita household incomes, any significant increase in domestic savings would mainly come from substantial improvements in Government savings performance. As part of the 1982 stand-by arrangement between Morocco and the IMF, several measures and reductions in real Government expenditures were implemented in 1982. The Bank's projections assume that progress will continue in this area. 19. Given the strong constraints on investment levels, the future rate of growth of the economy will depend to a large extent on the sectoral allocation and the efficiency of investment. In conformity with the Plan objectives, the Government should start fewer large capital-intensive projects and restrict the allocation of investments to priority subsectors. Priority is to be given to projects that are export oriented, less capital intensive and which use a greater proportion of domestic resources. In addition, particular attention will have to be paid by the Government to manpower planning and to the employment effect of investments in order to prevent unemployment from rising. Social Development 20. Social expenditures have been at a high level in recent years, accounting for more than half of current outlays. However, social indicators still appear to be at a relatively low level in Morocco. The limited effectiveness of past social policies in reaching the lower income groups, especially in rural areas, is increasingly recognized as a major issue, and the strategy of the 1981-85 Development Plan emphasizes rural development in rainfed areas, where most of the poorest households in Morocco currently live, and the need to improve mechanisms for delivering services to meet basic needs at an affordable cost, especially in rural areas. An effort is also being made to increase the involvement of local communities in meeting basic needs, particularly for low cost housing, water supply, sewerage and electrification. Although rapid results cannot be expected in any of these  - 6 - areas, implementation of these policies would help meet the needs of low-income groups, while holding down the budgetary cost of social programs. External Debt and Debt Service 21. Morocco sharply increased external borrowings after 1974. Nearly all of the increase came from Arab and commercial sources. Morocco also drew on the IMF automatic credit facilities in early 1976, and obtained about $70 million in IMF compensatory financing in August 1978. In October 1980, the IMF approved an extended arrangement for a three-year period in the amount of SDR 810 million in support of a medium term program of financial adjustment. This arrangement was interrupted in 1981 when it appeared that the assumptions and targets of the EFF program were no longer possible. It was replaced in 1982 by a stand-by arrangement in the amount of SDR 281 million and purchase of SDR 236 million under the Compensatory Financing Facility. The 1982 financial program, which was supported by the standby arrangement now drawing to a close, sought to reduce the deficit in the current account of the balance of payments (excluding grants) to 10% of GDP and to decrease the overall Treasury deficit by one-third to 8% of GDP. Other major elements of the program included an upward revision of the interest rate structure, restraint in overall credit and monetary expansion, further trade liberalization, and progress with respect to both tax reform and reform of the state enterprises. Preliminary data indicates that the targets under the standby for end-1982 were met. The performance criteria of the program were observed and Morocco was able to make the last drawing under the standby arrangement in February 1983. Discussions are underway of a possible further standby arrangement for 1983/84. 22. From the low levels of 1974-75, Morocco's external debt rose rapidly to *8.4 billion (disbursed only) by December 1981. Gross inflow of medium and long term capital reached $1.8 billion in 1981. Debt service amounted to $1.2 billion in 1980, $1.3 billion in 1981 and $1.5 billion in 1982 (27%, 31% and 35% respectively, of total exports of goods and services). As a result of recent and projected borrowings, debt service may be expected to average $1.8 billion annually during 1982-85. Because of the growing burden of debt service, external borrowing has become more restrictive and selective since 1978. If debt service is to stay manageable, the Government will have to continue this policy over the next few years while taking special measures to expand exports. 23. Loan commitments from multilateral and bilateral official sources to Morocco rose from $205 million in 1975 to $1368 million in 1978. In 1979-80 they have averaged $700-800 million a year (excluding grants). In 1981 they are estimated at *1759 million. Major sources of aid were France, Saudi Arabia, the UAE, the U.S., Germany and the Bank Group. At the end of 1981, the Bank Group's share in Morocco's outstanding and disbursed external public debt was 7.5%. The share of the Bank Group in debt service was 21% in 1976 and declined to 15% in 1977, and 7% in 1981. By 1985 the Bank Group's shares in debt outstanding and in debt service are projected at about 10 and 11% respectively.  -7 PART II - BANK GROUP OPERATIONS IN MOROCCO 24. Bank and IDA lending to Morocco has supported 58 projects, financing a total of $1,988.5 million (net of cancellations), of which $1,164.5 million has been lent since the beginning of FY1978. IDA credits, totalling $50 million, have been made available for five projects and a Third Window loan for $25 million has been made for an education project. IFC investments have amounted to $61.6 million ($42.7 million after cancellations, terminations, repayments and sales). Annex II contains a summary statement of Bank loans, IDA credits and IFC investments and notes on the execution of ongoing IBRD/IDA projects as of September 30, 1982. Overall performance in project execution is satisfactory, although in some cases, delays in project implementation have been caused by management problems and budgetary constraints. 25. Past Bank Group lending has been concentrated in the agricultural and industrial sectors, which have accounted for 28 percent and 26 percent, respectively of total commitments; the balance is represented by utilities (16 percent), tourism (9 percent), education (8 percent), roads (6 percent), energy (4 percent) and urban development (3 percent). The main objectives of Bank lending in previous years were to foster and strengthen development institutions and to increase productive capacity, in order to improve the balance of payments. While these objectives remain, Bank lending now also focuses on supporting a number of other policy objectives: to contribute to the reduction of the Treasury deficits; to lower unit costs for the delivery of basic services, widen their distribution among regions and increase access by lower-income groups; and to increase employment and improve income distribution. 26. Since FY75, lending in agriculture has emphasized improvement in the productivity of rainfed agriculture and livestock, which employ over 80 percent of the rural population, primarily small farmers. The Meknes and Fes-Karia-Tissa Agriculture Projects address this objective in the favorable cereal producing zone. The Loukkos, Middle Atlas, Forestry and Oulmes-Rommani projects extend support to less favorably endowed regions. Four lines of credit to Caisse Nationale de Credit Agricole (CNCA) have helped provide credit to farmers, and a fifth project is under preparation. Increased export earnings are expected to result from the Bank-supported project for Vegetable Marketing and Production, as well as from a project currently under preparation to improve the efficiency of the coastal fishing industry. The scope of future lending is likely to be expanded to include projects aimed at improving input supply and marketing nationwide. 27. Increased foreign exchange earnings or savings have also been the key objectives of Bank projects in industry, mining and tourism and led to nine lines of credit to the Banque Nationale pour le Developpement Economique (BNDE) for industrial projects and four lines of credit to Cr4dit Immobilier et Hotelier (CIH) for tourism projects. A project to increase mineral export earnings and raise the incomes of small-scale miners in southeastern Morocco was approved by the Board in FY82.  28. Projects in basic infrastructure and services have concentrated on improving the efficiency of existing investments and extending services to rural and low-income urban groups. A second urban development project aims at supporting the Government's efforts to provide shelter, basic services and employment to low-income urban families. A third highway project supports the Government's road maintenance efforts. A loan for village electrification is helping bring power to over a hundred small towns and villages, and a third water supply project is providing access to safe water in small towns and semi-rural areas. A project aimed at strengthening the Communal Infrastructure Fund's (FEC) capacity to support local communities is being prepared. 29. Five education projects have focused on secondary level technical education and teacher training, on expanding basic education in the rural areas and on ensuring a greater orientation in primary schooling towards practical training. Further lending will be focussed on vocational training and on primary education. 30. In order to reduce Morocco's dependence on oil imports, the Government has made considerable efforts to develop national resources, notably of gas and oil shale. These efforts are being supported by the Bank through a gas exploration project and an engineering project aimed at studying the viability of developing the country's oil shale resources. Additional projects for further gas exploration, as well as coal and hydropower development, are being studied. 31. Morocco's disbursement performance improved in FY82. Disbursement shortfalls are, however, still being experienced, particularly for a few projects in new sectors, due mainly to institutional or project management problems. These cases are being closely monitored and implementation schedules have been established specifying critical actions, in agreement with the Government. In some projects, implementing agencies have been slow in submitting disbursement requests to the Ministry of Finance for transmittal to the Bank, but the Government has recently taken effective measures to resolve this problem. The rate of disbursement has also been affected by the appreciation of the dollar against other currencies. PART III - SECTORAL BACKGROUND Structure of the Transport Sector 32, Morocco's transport system comprises a network of 26,300 km of paved roads serving some 400,000 vehicles, a railway of 1760 km connecting most of the larger cities, sixteen ports, of which six serve international trade, fourteen airports handling scheduled flights, a national airline with extensive international connections, and a merchant marine which has expanded significantly in recent years. Roads are the dominant transport mode, accounting for about 95 percent of total passenger-km and 60 percent of  - 9 - freight ton-km. The railway and certain ports have a special role in exporting phosphate, while the airports and national airline are particularly geared to promoting tourism. 33. Over the past ten years investments in transport have accounted for around 20 percent of total fixed capital formation in the public sector, and in the economy as a whole. The 1981-85 Plan envisages a budgetary allocation of about DH 16 billion for the sector over five years, of which DH 3.5 billion is for roads. Continuing budgetary constraints may, however, result in actual commitments of only about 65 percent of allocations, as in 1981. First priority is assigned in the Plan to road rehabilitation and maintenance; next in importance is improvement of the regional and local network. These priorities are appropriate and leave limited room for new main road construction other than what is directly required to support projects in the productive sectors. 34. There are about 57,800 km of classified primary, secondary, and tertiary roads, of which 45 percent are paved. Over the last five years additions to the network have averaged about 1 percent annually of the existing paved length and about 0.6 percent of unpaved roads. The density of the network is generally adequate, as are also the geometric design standards of the classified roads, but their pavements are increasingly inadequate to carry present traffic because of high traffic volumes, a relatively high level of vehicle ownership, and vigorous growth of traffic. The number of road accidents is high in relation to traffic volume. The Ministry of Public Works (MPW) is making efforts to improve the reporting of accidents, as a first step to identifying appropriate preventive measures. Sector Organization and Institutional Framework 35. Transport services are operated variously by wholly private, wholly Government-owned, or mixed-capital enterprises on broadly commercial lines in a framework of government regulation intended to ensure that individual clients face uniform, fair rates, fares, and conditions of carriage, and that traffic should use the lowest cost mode. Responsibility for the transport system is divided primarily between the Ministry of Public Works ("Ministere de l'Equipement", MPW), which is in charge of road infrastructure and ports, and the Ministry of Transport ("Ministere des Transports", MOT). The latter was established in 1977 and supervises the railway, civil aviation, and state-owned bus and freigbt forwarding companies; it also regulates private road transport. The Ministry of the Interior is responsible, through the local communities, for local roads and urban bus companies. Shipping is under the Ministry oL Fisheries and the Merchant Marine. The capital investment plans for these ministries are coordinated by the Planning Ministry. 36. The MPW's Roads and Traffic Department (RTD) is responsible for the design, construction and maintenance of the classified road network. Unclassified roads are administered by the local authorities using provincial budget funds and, if necessary, technical assistance from the RTD. The RTD's organization is, in general, appropriate, though there is a need to strengthen staff in certain functions. The RTD's central divisions have an overall  - 10 - planning and coordination function, while programming, contract awards and administration, and supervision of works are substantially delegated to the field organization, which (after a recent expansion) consists of 35 provincial offices, grouped in seven regional directorates. There is close contact between the central divisions and the provincial offices. 37. Highway Design and Engineering. Although the engineering and technical staff of the RTD is generally well-qualified, it is not yet sufficient numerically. As a result, in the medium-term, design work will continue to be contracted out to consultants. This situation is expected to be transitional, as the demand for additional qualified staff in highway engineering is being addressed by training facilities at the Hassania School of Public Works and Communications in Casablanca, and by the technician courses, refresher seminars, and workshops offered within the MPW and engineering schools. Several domestic consulting firms are now available for design of medium-sized projects. Designs and feasibility studies for major roads and bridges are generally prepared by foreign consulting firms, some of which now have local branches. Highway design standards were prepared in 1978 and are satisfactory. In exceptional cases, such as the Casablanca-Rabat expressway, special standards are adopted. 38. Construction. Construction, improvement, and strengthening of roads are done through private contractors. Contracts are awarded after competitive bidding, and the quality of work is generally good. There are a number of domestic firms qualified to carry out relatively large contracts, and competition between them is strong; however, given domestic contractor capacity, some foreign participation would be required in the construction of new primary and secondary roads under the current Development Plan. The supervision of construction is carried out by the RTD's regional staff, assisted by the autonomous soils and materials laboratory (Laboratoire Public d'Essais et d'Etudes, LPEE), while for major road construction special supervision offices are established by the RTD. The capacity of the RTD's provincial offices to carry out contract management needs to be augmented by reinforcing technical staff. Road Maintenance 39. The RTD's provincial offices plan maintenance works on the basis of instructions and a general maintenance program prepared by headquarters, following reviews of road maintenance needs annually or every second year. Road maintenance is generally limited to paved roads; tracks receive attention only when urgent repairs are needed. Routine maintenance is done by the RTD's own crews and periodic maintenance through contracts. The provincial offices undertake minor repairs of the road equipment fleet. Large-scale repairs are carried out by private workshops, and major overhauls by specialized workshops in the principal cities. The inability to carry out more repairs at the field level because of the lack of sufficient facilities results in the sub-optimal use of equipment. The RTD is addressing this issue with a plan to build and equip a central workshop, two major regional workshops, and minor workshops in  - 11 - districts with no facilities (paragraph 59). In its effort to improve road maintenance, the RTD also plans to set up a permanent training center for road maintenance technicians. The RTD is undertaking a study (financed by the Bank under the Third Highway Project) of the organization of road maintenance, which includes the evaluation of training needs and other preparatory steps to establish such a center. 40. Because of the emphasis on new construction in earlier years, and budgetary constraints, until 1979 funds for road maintenance were sufficient only for a limited level of maintenance. A large backlog of rehabilitation and improvement works was created, and insufficient maintenance of secondary and tertiary roads, in particular, led to near isolation of some rural areas and uneconomically high transport costs. Since 1980, the Government's budgetary allocations for maintenance have increased substantially, following the agreement reached at negotiations of the Third Highway Project on an overall action plan for routine and periodic maintenance. Budgetary allocations for maintenance have even exceeded the agreed amounts. Despite this, the executed maintenance programs could not always reflect the agreed quantities because of inflation. In general, the RTD has been able to carry out an acceptable program of maintenance of the network of primary and secondary roads. As for the tertiary roads, in 1982 they received an allocation of funds double the figure for 1981. With the continuation of the program of maintenance, the quality of the rural network will gradually begin to improve. Organization of Road Transport Services 41. Most inter-urban bus and truck services are operated by small private companies or co-operatives. Buses are licensed as to routes and service frequencies, and their fares are set by the MOT. Trucks are classified in three categories: a) trucks below 5.5 tons gross vehicle weight or GVW, b) own-account vehicles over 5.5 tons GVW, and c) common-carriers over 5.5 tons GVW. The purchase and operation of small trucks is unregulated, while large trucks are regulated as to their number, rates, and operating area. Small trucks are important in meeting transport demand, particularly in rural areas, and in generating small-scale employment. On the other hand, small trucks frequently practise overloading, and in their effort to reduce cost per ton, they often neglect vehicle maintenance, posing a safety hazard. (Enforcement of vehicle weights and axle-load limits has been constrained by the absence of weighing equipment, but is being strengthened with financing under the Third Highway Project of the purchase of portable scales and fixed weigh-bridges.) In any case, the share of small trucks in the freight market appears to be disproportionately high (nearly 40 percent of all inter-city ton-km) as a result of the regulatory system which restricts licenses to large common carriers. In principle, large common carrier trucks have a significant cost advantage because of their higher ratio of payload to deadload. The high market share of small freight transporters therefore implies a significant cost to the economy. At a rough estimate, a market shift to large common carriers could save $40-80 million annually.  - 12 - 42. A second major feature of the system of regulation of freight transport is that the Office National des Transports (ONT), a parastatal agency, exercises a monopoly of freight fowarding services. The ONT offers its customers the advantages of advertised rates, standardized billing procedures, and guaranteed insurance coverage, as well as common overhead services to truckers. All operators of large common-carrier trucks are obliged to be affiliated with the ONT, which charges a commission for its services. The disadvantages of the system are that it suppresses competition, provides no incentives to improved performance, and through regulation of rates keeps profits too low to provide adequately for fleet renewal. Since many unpaved roads are accessible only to small trucks which are not allowed access to the ONT terminals, any long-distance haul whose origin is off the paved network has to be performed entirely by the small trucks, even though a large-capacity truck may be half as costly for the line haul. 43. The Government is eager to improve the distribution of traffic, but opinions are divided as to whether the solution lies in tightening restrictions on the small trucks or easing restrictions on the large ones. To assist the Government in resolving this issue, the proposed project includes a survey of the freight market, and a review of trucking organization, licensing and regulation (paragraph 62). Major Policy Issues 44. The principal transport policy issues are: i) the need for organizational and managerial changes to improve the productivity of existing facilities and the financial performance of the public transport agencies, and ii) the need to ensure greater role for cost-related prices to optimize traffic and investment allocation. The overall objective in addressing these issues is to meet growth in demand with a minimum of new infrastructure. Related issues are the need to improve coordination, cost accounting, planning within and between transport modes, and the consistent application of quantified criteria to the arbitrage process across modes and sectors. In the context of the need for each sector ministry to develop its internal planning capability, the recent initiative of the MPW to set up a studies and planning department is particularly welcome. The MOT, which has jurisdiction over both road and rail transport services, needs to expand its capacity for studying transport corridors where different modes of transport compete, refine its analysis of the least-cost means of transport for different transport categories, and propose measures to encourage traffic to take the least-cost mode wherever it is not at present doing so. 45. In the roads sub-sector, the major issues are the need to improve productivity through better traffic allocation in the trucking market (paragraphs 41 and 42) and to continue the recent increased emphasis on maintenance (paragraph 40). The principal problem of the railway is its large operating deficit, due to low tariffs. It is expected that a study of railway operating costs carried out for the MOT under the Third Highway Project would provide a basis for aligning tariffs more closely with costs. A further issue is posed by the size and details of the current railway investment plan. The  - 13 - Bank's recent review indicates that this plan could be substantially reduced, and several projects of doubtful economic viability scaled down or postponed. The Government is taking measures to address this issue, following the dialogue with the Bank. As regards the ports subsector, Moroccan ports remain inefficient despite massive capital investments. There are problems of congestion and limited storage capacity at Casablanca, the country's principal port, and poor overall cargo handling performance. The Government recognizes the need to address these issues, and is now preparing a port project for possible Bank financing. In shipping, the Government's generous incentives have helped increase the tonnage of the Moroccan merchant marine, but at the cost of apparent overcapacity and low returns. The Government is currently reviewing these incentives, which are expected to be more selective in future. Previous Bank Involvement in the Sector 46. Through three previous highway projects, the Bank has financed the construction or improvement of main roads, encouraged the allocation of resources to high-return projects, contributed to heightened emphasis on road maintenance and rehabilitation, and helped strengthen the agencies responsible for road construction, maintenance, and transport coordination. The First Highway Project (Ln. 642-MOR/Cr. 167-MOR) for t14.6 million, signed in November 1969, included construction of one new primary road, a program of localized improvements on selected primary roads, and the purchase of maintenance equipment and spare parts. The project was completed on time with only minor cost overruns, and was marked by the good performance of local contractors and the efficient construction supervision undertaken by the MPW (see Project Performance Audit Report No. 1565 of April 1977). 47. The Second Highway Project (Ln. 955-MOR, signed in January 1974) for $29 million followed from a transport survey carried out under the First Highway Project, and included: a) construction of part of the Casablanca-Rabat expressway; b) a further program of localized road improvements throughout Morocco; c) renewal and expansion of maintenance equipment; d) traffic studies for Casablanca and Rabat; and, e) technical assistance for setting up a transportation planning office. The loan was closed in June 1980, three years later than planned at appraisal. The delay was due principally to a problem with the contractor for the expressway. However, the quality of work was good, local contractors were competent, cost accounting methods for road maintenance were introduced, and the traffic and financial surveys carried out by the technical assistance team were valuable in laying the groundwork for MOT's planning and policy-making function. 48. The Third Highway Project (Ln. 1830-MOR, signed in May 1980) emphasizes road maintenance and rehabilitation. The loan for $62 million finances a portion of the RTD's program of resurfacing and pavement strengthening over 3-1/2 years, purchase of road maintenance and pavement evaluation equipment, and a study of the organization of road maintenance. These components are the responsibility of the MPW. The project also includes, as the responsibility of the MOT, a set of studies into the pricing and organization of transport services, and the purchase of vehicle weighing scales to aid in the enforcement of weight limits. After a slow start, civil  - 14 works are now progressing satisfactorily. Disbursements have lagged behind appraisal estimates as a result of slow implementation, administrative bottlenecks and appreciation of the dollar, but have improved following recent Government measures to streamline procedures, intensify follow-up, and reallocate loan proceeds to finance further pavement strengthening, some additional road maintenance equipment, vehicles for transporting maintenance crews, and studies that have helped prepare the Fourth Highway Project. The MOT components are about 18 months behind schedule as a result of delays in recruiting consultants for the study, and in procurement of the weighing scales. The project as a whole is expected to be completed by the Closing Date (June 30, 1984). 49. The Bank's three highways projects have focused on primary and secondary roads in view of the greater traffic carried by them. In addition, a further 3,060 km of roads have been or will be constructed or improved under eleven agricultural projects since 1974, for a combined loan amount of $67 million. These road components range from widening and resurfacing sections of classified roads to construction of unpaved farm access roads in support of irrigation and other agricultural development investments. The Bank's involvement has promoted a closer and more consistent cooperation between the Ministry of Agriculture and the MPW in determining design standards and arrangements for maintenance of these roads. Bank Role in Transport 50. The Bank's project and economic work focuses on supporting and promoting policies that would help address the critical sector issues (paragraphs 44 and 45). Future Bank lending in the transport sector will support priority agricultural and industrial production, maximize opportunities for earning or saving foreign exchange (as by improving the efficiency of handling imports and exports through the proposed Casablanca Port Project), and help expand access to previously neglected groups and regions, especially in rural areas, thereby contributing to increased job opportunities and higher incomes for the poorer sections of society. PART IV - THE PROJECT Background 51. The proposed project arises from previous Bank-financed highway projects. It was prepared by the RTD in consultation with Bank missions and appraised in two stages, in June and October 1982. Negotiations were held in Washington in February 1983. Mr. H. Belkoura of the Prime Minister's Office led the Moroccan delegation. The Staff Appraisal Report (No. 4266 MOR, dated March 2, 1983) is being distributed separately, special conditions of the loan are summarized in Annex III, and map No. 16783R (attached) displays the location of project activities.  - 15 - Project Objectives and Description 52. The objectives of the project are to lower transport costs throughout the country, help reduce regional income disparities, strengthen institutions responsible for road maintenance and improvement, and contribute to raising the productivity of road transport services. These objectives are in conformity with the Government's priorities for roads as defined in the 1981-85 Development Plan. The Project consists of; a) road works, comprising i) continuation of the RTD's program of pavement strengthening and improvement on about 470 km of primary and secondary roads, ii) reconstruction of fourteen bridges with reduced load-carrying capacity, iii) a pilot program of improvement of about 300 km of provincial roads, iv) completion of the remaining 29 km of the Casablanca-Rabat expressway; b) continuation of the RTD's program of routine and periodic maintenance of the network of paved roads, and ad hoc maintenance of unpaved roads and tracks, construction and equipping of a central workshop and two regional workshops for road maintenance equipment, and acquisition of additional maintenance equipment and renewal of the existing equipment fleet; c) a detailed engineering and economic study of provincial roads, to prepare a program which could be financed under a possible Fifth Highway Project; d) a study of the freight transportation market and regulatory system; e) technical assistance to i) the MPW's Planning and Studies Department, and ii) the RTD's Studies, Management Systems, and Maintenance Divisions. 53. Pavement Strengthening and Improvement. This component represents continuation of a program started under the Third Highway Project (paragraph 48). The major component of the works would be the application of different types of overlays (the choice depending on the level of traffic), to strengthen existing asphalt pavements. In addition, most road sections require ancillary works such as widening, restoring shoulders, repairing and improving drainage facilities. The specific road sections have been selected from a list of 800 km included in the 1981-85 Development Plan, on the basis of a technical and economic study financed under the Third Highway Project. The lowest economic rate of return for the road sections chosen is 35 percent. 54. Reconstruction of Bridges. Following a survey in 1980 by the LPEE (paragraph 38) consultants studied twenty-one bridges in detail, selected on the basis of traffic volumes and the importance of the road they served, and concluded that works on fifteen would be justified, fourteen of which are included in the project. These bridges present a diversity of spans, are generally old, not designed for modern, heavy traffic, and their load-carrying capacity has been reduced by the settling of foundations and, in some cases, inadequate maintenance. Often, the bridge reconstruction is associated with a road realignment to select a more suitable crossing and permit a reduction in road-length. The Government will send the Bank, for review and comment, on or before October 31 of each year, the bidding documents for the bridges to be reconstructed during the following project year (Loan Agreement, Section 3.05(c)). Of the 14 bridges, 13 have an economic rate of return over 40 percent, and one of 23 percent.  - 16 - 55. Pilot Program of Provincial Road Improvements. A study in 1976 identified about 8,000 km of provincial roads whose construction or upgrading would promote the economic and social development of the various regions. Of these roads, 29, for a length of about 900 km, were subsequently studied in detail, with traffic counts and the collection of data from the provincial offices of the Ministry of Agriculture on the present cultivated area in the zone of influence of each road, cropping patterns, and yields. Shortage of reliable data and methodological difficulties leave uncertainty as to the amount of traffic that would be generated by road improvement, and the farmers' response to increased mobility. However, even if the benefits to non-agricultural generated traffic are excluded, and with pessimistic assumptions as to farmers' responses, 11 of these roads have economic rates of return above 12 percent. 56. Four roads totaling 172 km have been fully appraised and will be upgraded or constructed in a first tranche. Additional road segments may subsequently be included, up to a total cost of DH 175 million (including contingencies), provided such roads meet the criterion of a minimum economic rate of return of 12 percent, justified by savings to existing traffic alone, or, where the inclusion of agricultural benefits is essential to show a satisfactory rate of return, on the basis of evidence of agricultural development potential in the road's zone of influence. The Government will send the Bank for review and comment the economic evaluation according to the agreed guidelines, as well as the detailed engineering and bidding documents for the provincial roads included in the project, by October 31 each year preceding the year of proposed construction (Loan Agreement, Section 3.05(c)). 57. Completion of the Casablanca-Rabat Expressway. This component will finance the completion of the remaining 29 km of the four-lane expressway, from Oued Cherrat to Rabat. This stretch is at present covered by a two-lane highway (RP 36) and a lower standard road, RP 1, which together cannot serve the heavy traffic in the corridor. The Government began construction of the expressway from the Casablanca end in the early 1970s, and the Second Highway Project financed the construction of a 33 km two-lane section (paragraph 47). The proposed work will comprise two sections: the first of 15.5 km consisting of two new two-lane carriageways from Oued Cherrat, including a major bridge over the Oued Yqem and the Skhirat interchange, the second of 13.5 km consisting of strengthening the existing RP 36 for traffic in one direction, and adding another two-lane carriageway including an interchange at Temara. The feasibility study for the expressway was prepared in 1971 under the First Highway Project and has since been updated by consultants. The detailed engineering was financed under the Second Highway Project. The design standards are satisfactory. 58. The completion of the expressway will save travelers' time by relieving the present heavy congestion which is a daily feature of the RP 36. It will also reduce the unusually high accident rate on this road, which is double that on the adjoining expressway. Traffic on the road is expected to continue growing at 5 to 7 percent annually, aggravating the congestion and  - 17 - raising the accident toll. By 1986, the earliest year the expressway could be completed all the way to Rabat, traffic on RP 36 is expected to reach 15,400 vehicles per day. The expansion of rail services as a result of the on-going doubling of the track between Casablanca and Rabat will not significantly alleviate the congestion, as the number of road vehicles will decline by less than a normal year's growth in traffic. The economic rate of return of the expressway section (taking into account the estimated growth in rail traffic) will be 32 percent; its economic justification is not sensitive to reasonable margins of error in the estimates of construction cost or traffic volumes, or to sharply lower valuations of time saved. 59. Road Maintenance. The project will continue the RTD's program (being implemented under the Third Highway Project) of routine maintenance through force account and periodic maintenance by contract of the paved network, as well as ad hoc maintenance of unpaved roads and tracks and renewal of the maintenance equipment. Periodic maintenance of paved roads includes surface dressings, and where warranted by traffic, asphaltic concrete overlays. The RTD's established frequencies of periodic maintenance are satisfactory. To optimize use of road maintenance equipment and reduce down-time for major repairs, the RTD plans to set up a central equipment workshop in Casablanca where major overhauls will be done on a carefully planned rotation basis, two regional workshops in Fes and Marrakech to handle intermediate repairs, and minor workshops at the district level. The proposed loan will finance the foreign exchange cost of construction and equipment of the central and regional workshops. It will also finance the purchase of an additional minimal amount of equipment needed to meet maintenance needs during the project years. It will be procured in two lots, in 1983 and 1984. 60. As under the Third Highway Project, the Government will send to the Bank, for review and comments before finalization, its annual programs of civil works and road maintenance under the project consistent with the action plan agreed with the Bank, by September 30 of each preceding year (Loan Agreement, Section 3.05(b)). 61. Provincial Roads Study, Second Phase. The feasibility study on provincial roads carried out in preparation of the proposed project broke new ground in the attention paid to agricultural production as the main justification for low-standard roads in rural areas (paragraph 55). However, there is, as yet, little reliable data on key aspects such as the size of the zone of influence, the extent of yield increases, and the interaction of road and agricultural investments. The proposed loan will therefore finance a further study (60 man-months) to design data collection procedures and refine the methods for forecasting changes in farming practices. This study will also prepare a program of provincial road improvements for possible financing by the Bank under a Fifth Highway Project.  - l8 - 62. Freight Market Survey and Review of Regulatory System. To address the issue of allocation in freight transport (paragraphs 41 and 42) the MOT's Planning Department in collaboration with the RTD intends to hire consultants to carry out a users' survey. The survey will identify the requirements and preferences of different market segments with regard to cost, speed, reliability and flexibility, assess the strengths and weaknesses of the regulated and unregulated trucking sectors and the railway in meeting user needs, review the system of licensing and operating regulations and recommend possible changes in this system. The study will require about 45 man-months of consultant time. The MOT will provide survey personnel. Terms of reference for the study have been finalized. In order to ensure prompt implementation of the study, the issue of the request for proposals to consultants is a condition of effectiveness of the proposed loan (Loan Agreement, Section 5.01). This step is expected to be completed by June 30, 1983. The Government will immplement those of the study's recommendations upon which it reaches agreement with the Bank (Loan Agreement, Section 3.03 (d)). The consultants will commence the study by January 31, 1984 (Loan Agreement, Section 3.03 (a)). 63. Technical Assistance to MPW's Planning and Studies Department. The MPW's technical competence is high. However, in view of the importance of widening the application of consistent and objective economic criteria to investment decision-making (paragraph 44),the Minister decided early in 1982 to strengthen his central advisory staff responsible for providing guidance on economic methodology and exercising quality control over the planning studies prepared by the RTD, and the departments which oversee dams and ports. This central staff will also carry out economic studies that cannot conveniently be delegated to one or other of the technical departments, on such subjects as port/road interface, or certain energy issues. The proposed loan will finance the services of a transport economist and a water resources economist, each for two years, to provide the personnel of the MPW's Planning and Studies Department (who are mostly engineers) with on-the-job training in economic planning. 64. Technical Assistance to RTD's Studies, Management Systems, and Maintenance Divisions. The project will provide the services of three experts for two years to strengthen the RTD's Planning and Economic Studies Section of the Studies Division, the recently created Management Systems Division, and the Maintenance Division. These experts would help reduce the RTD's dependence on external consultants for the economic analysis of roads, help modernize management techniques, improve the collection of statistical information on roads, streamline the flow of technical and financial data from the field offices to headquarters, and follow up on the implementation of the on-going maintenance study (paragraph 39 above). Cost Estimates and Financing 65. The costs for the various items of civil works have been estimated by consultants, except for the reconstruction of bridges, where they are the estimates of the RTD's district offices. The cost of the road maintenance equipment is based on the cost of similar equipment in the Third Highway Project. The RTD estimated the cost of the workshop equipment. Technical  - 19 - assistance under the project totals 225 man-months, of which 105 will be provided by consulting firms at an average cost of $11,000 per man-month, and another 120 by individual foreign engineering consultants at an average cost of $7,500 per man-month. These costs for consultants include international travel and subsistence. The technical assistance proposed (totally $2.6 million, excluding contingencies) includes about $545,000 of reimbursable items such as local travel, cost and operation of vehicles, other equipment, and consumable materials. Physical contingencies have been estimated as follows: i) 5 percent for the equipment, to allow for slight variations in technical specifications, ii) 15 percent for the reconstruction of bridges, and iii) 7 1/2 percent for the Casablanca-Rabat expressway. (The pavement strengthening and provincial roads programs are defined more broadly as programs, and therefore do not require any separate physical contingency allowance). Price contingencies have been estimated on the basis of local inflation rates of 11, 9, and 7.5 percent, in 1983, 84, and subsequent years respectively, and foreign inflation rates of 8 percent in 1983, 7.5 percent in 1984, 7 percent in 1985, and 6 percent in subsequent years. 66. The total capital cost of the project is estimated at $131.4 million, of which the foreign exchange cost is $71.7 million. The total cost of periodic maintenance under the project is estimated at $105.7 million, of which the foreign cost is $57.7 million. The total cost of the routine maintenance in the project period is estimated at $49.6 million, of which the foreign cost is $17.1 million. The proposed Bank loan of $85 million would finance 100 percent of the foreign cost of the capital items, $12.7 million (or 22 percent) of the foreign cost of the periodic maintenance, and includes the capitalized front-end fee of $0.6 million. The Government would finance the local costs of the capital items ($59.7 million) and the balance of the maintenance costs ($142.6 million). Project Implementation 67. Except for the freight market study, which is the responsibility of the MOT in collaboration with the RTD, and the technical assistance to the MPW's Planning and Studies Department, the RTD will be the executing agency for all project components. The RTD will therefore supervise all civil works under the project. The project is expected to be physically completed in about 3-1/2 years, by December 31, 1986, but a margin of a further 12 months is considered useful to allow for possible implementation capacity constraints of domestic contractors, who will carry out most of the civil works. In view of the importance of monitoring the pace of deterioration of newly strengthened roads in relation to traffic and technical parameters, as well as the impact of construction of provincial roads on traffic and agricultural development, the Government will carry out: i) a program of automatic traffic counts and measurements of pavement roughness on road sections strengthened under the project, ii) two traffic counts annually of a week each, at six-monthly intervals, on the provincial roads constructed or improved under the project, iii) a program of monitoring, in consultation with provincial agricultural authorities, of the agricultural development after road construction, including the type, amount, and timing of complementary agricultural investments. The Government will send semi-annual reports to the Bank showing the information indicated above.  - 20 - Procurement 68. Contracts whose expected cost exceeds the equivalent of $2 million in the case of road works, $100,000 for road maintenance equipment, and $50,000 for workshop equipment will be awarded after international competitive bidding according to the Bank's guidelines for procurement. All other contracts for civil works and equipment will be awarded under local competitive bidding procedures acceptable to the Bank and open to foreign firms. Such procedures are justified by the availability of local representatives of the major equipment manufacturers, and the established competence and competitiveness of domestic contractors. Bidders for the reconstruction of bridges and the Casablanca-Rabat expressway will have to be prequalified. Bitumen will be procured from the public agency SEBLIMA, which, following its standard procedures, purchases in bulk and provides the bitumen direct to contractors under a contract with the RTD. This is an economic and efficient system of procurement, approved by the Bank for the Third Highway Project. However, to streamline disbursements, the Government will sign discrete contracts for bitumen in quantities required by civil works contracts to be financed by the Bank. Prior review of contracts will be required where the contract cost exceeds the equivalent of $0.5 million for bridge reconstruction, $2.0 million for all other civil works, and $0.25 million for equipment. Consultants for the studies and technical assistance proposed under the project will be recruited according to procedures in conformity with the Bank's guidelines. Accounting and Auditing 69. In June 1982 the Government and the Bank agreed that for easy reference and monitoring of counterpart funds each Bank-financed project component would be identified by a line in the investment budget. The Government has confirmed the application of this procedure to the proposed project. The accounting systems of the MPW and the MOT, and the related internal and external control procedures are satisfactory for the purposes of the proposed project. Quarterly progress reports will be prepared on standardized forms and submitted to the Bank. Audits will be carried out by the Ministry of Finance, which has both competent staff and appropriate independence. The auditors' certification and report will be received in the Bank within six months after the end of each fiscal year; the first certification and report will cover 1983. Disbursements 70. The program of periodic maintenance under the project will comprise numerous small road surfacing contracts, and disbursements against such contracts are likely to pose problems of administrative complexity and delay. In order to streamline and expedite disbursements, the Bank has therefore agreed with the Government to disburse from the loan only against the capital items in the project, at a uniform rate of 64 percent of total expenditures. Since the average foreign cost of the capital items is about 55 percent, this procedure will permit financing by the Bank of $12.7 million of the foreign cost of periodic maintenance. Disbursements are expected to begin by  - 21 - October 1983, and to be completed by December 31, 1988. Environmental Impact 71. The civil works under the proposed project will not adversely affect the environment. Improvements on provincial roads and better maintenance will increase the reliability of access to markets, schools, and medical facilities, and thus improve the rural environment. Project Benefits and Risks 72. The main benefit of the project will be the reduction of transport costs (vehicle operating costs) for those using the roads and bridges constructed, improved, or maintained under the project. The overall economic rate of return on those of the capital items on which a rate of return can be calculated (87 percent of the total) is over 40 percent. While a rate of return calculation is not feasible for the maintenance items, the frequency of operations represents the minimum consistent with preserving the road network. The economic impact of the survey of the freight market and review of trucking regulations will flow from the study's success in contributing to improvements in transport policies. It is estimated that appropriate changes in the regulatory system and an improvement in the level of service of large common-carrier trucks could lead to a shift in freight traffic, generating transport cost savings of as much as $40-80 million annually. The technical assistance proposed to the MPW and the RTD continues the long-term process of institutional strengthening already begun by the Bank. 73. There is a risk that budgetary constraints might prevent the Government from providing financing on time for its share of the project's costs. In such an event, expected benefits would be postponed, but cutbacks for certain components would not harm the economic justification of the remaining works. This risk has been reduced by the Government's commitment to make all required funding available for the project, thus respecting its stated priority for projects with foreign financing. A second type of risk is posed by the possibility of delays in the start-up and implementation of the freight market study. This risk has been minimized by arranging for early finalization of the terms of reference for the study and by requiring issue of the request for proposals from consultants before loan effectiveness. PART V - LEGAL INSTRUMENTS AND AUTHORITY 74. The draft Loan Agreement between the Kingdom of Morocco and the Bank, and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank are being distributed separately to the Executive Directors.  - 22 - 75. Special conditions of the proposed loan are listed in Section III of Annex III. 76. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 77. I recommend that the Executive Directors approve the proposed loan. A.W. Clausen President Attachments March 4, 1983 Washington DC  -23- ANNEX I Page 1 of 6 TABLE 3A HOROCCO - SOCIAL INDICATQRS DATA SHEET MOROCCO REFERENCE GROUPS (WEIGHTEID AVEGZS AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIIIATE) TOTAL 446.6/c MIDDLE INCOME AGRICULTURAL 202.2 /c MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN GNP PER CAPITA (US$) 220.0 340.0 900.0 1253.6 1902.0 ENERGY CONISUMPTION PER CAPITA (RILOGRAMS OF COAL EQUIVALENT) 163.2 214.0 302.3 713.5 1259.9 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (TROUSANDS) 11626.0 14993.0 20182.0 URBAN POPU1LATION (PERCENT OF TOTAL) 29.3 34.6 40.6 47.3 65.7 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 35.5 STATIONARY POPULATION (MILLIONS) 81.2 YEAR STATIONARY POPULATION IS REACHED 2090 POPULATION DENSITY PER SQ. EM. 26.0 33.6 43.8 35.8 35.2 PER SQ. EM. AGRICULTURAL LAND 61.1 75.0 96.6 420.9 92.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 44.8 47.6 46.1 44.3 39.7 15-64 YRS. 52.6 48.3 50.7 52.4 56.1 65 YRS. AND ABOVE 2.6 4.2 3.2 3.3 4.2 POPULATION GROWTH RATE (PERCENT) TOTAL 2.6 2.5 3.0 2.8 2.4 URBAN 3.7 4.2 4.6 4.6 3.8 CRUDE BIRTH RATE (PER THOUSAND) 51.8 47.3 44.9 41.2 31.4 CRUDE DEATH RATE (PER THOUSAND) 23.4 17.2 12.7 12.2 8.4 GROSS REPRODUCTION RATE 3.5 3.5 3.2 2.9 2.1 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 25.1 78.0/d USERS (PERCENT OF MARRIRD WOMEN) .. 1.0 5.4/d FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71=100) 99.0 98.0 88.0 100.4 110.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 100.8 103.0 106.5/e 108.5 108.4 PROTEINS (GRAMS PER DAY) 64.6 66.5 68.3/e 71.9 66.0 OF WRICH AN1LMAL AND PULSE 13.8 12.6 13.5/c 18.0 34.0 CHILD (AGES 1-4) MORTALITY RATE 36.8 26.6 15.5 15.1 5.6 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 46.7 51.7 56.5 56.9 64.2 INFANT MORTALITY RATE (PER THOUSAND) 160.5 136.3 107.2 104.3 64.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 30.6 51.0 55.0/d 59.1 65.6 URBAN 58.7 92.0 100.0/d 83.1 78.9 RURAL 19.0 28.0 25.0/d 39.8 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 29.0 .. .. 59.3 URBAN .. 75.0 .. .. 75.3 RURAL .. 4.0 .. .. 30.0 POPULATION PER PHYSICIAN 9406.1 12814.5 11037.4/d 4015.5 1617.3 POPULATION PER NURSING PERSON .. 2742.2 1826.3/c 1802.2 1063.5 POPULATION PER HOSPITAL BED TOTAL 625.6 664.3 773.6/e 641.7 477.4 URBAN .. 454.7 623.4/c 538.3 679.8 RURAL .. 5821.4 3089.6/e 2403.3 1903.4 ADMISSIONS PER HOSPITAL BED .. 15.5 17.9/e 25.5 27.3 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 4.8 5.5 URBAN 4.3 4.9 RURAL 5.1 5.8 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.2 2.4 URBAN 2.1 2.1 RURAL 2.3 2.6 .. .. . ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. 68.4 65.0/e RURAL .. ..  - 24 - ANNEX I Page 2 of 6 TABLE 3A MOROCCO - SOCIAL INDICATORS DATA SHEET MOROCCO REFERENCE GROUPS (WEIGHTED AVEI4GES - MOST RECENT ESTIMATE) MIDDLE INCOME MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 47.0 52.0 75.0 88.7 104.3 MALE 67.0 67.0 93.0 104.5 106.4 FEMALE 27.0 36.0 56.0 72.0 103.3 SECONDARY: TOTAL 5.0 13.0 22.0 39.7 41.3 MALE 7.0 18.0 27.0 49.3 40.4 FEMALE 2.0 7.0 17.0 29.0 41.8 VOCATIONAL ENROL. (1 OF SECONDARY) 30.2 2.3 2.8 10.1 33.7 PUPIL-TEACHFR RATIO PRIMARY 42.4 34.3 40.3 34.1 29.9 SECONDARY 6.3 20.4 21.0/f 23.7 16.7 ADULT LITERACY RATE (PERCENT) 13.8 21.4 28.0 43.3 79.1 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 10.7 14.8 19.6/d 17.8 42.8 RADIO RECEIVERS PER THOUSAND POPULATION 45.8 62.4 107.5 131.3 270.5 TV RECEIVERS PER THOUSAND POPULATION 0.4 11.6 38.4 44.1 107.7 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 22.1 16.2 11.8 31.5 63.7 CINEMA ANNUAL ATTENDANCE PER CAPITA 2.0 .. 2.0le 1.7 2.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 3388.7 3945.2 5294.8 FEMALE (PERCENT) 10.0 14.2 15.8 10.6 24.4 AGRICULTURE (PERCENT) 62.0 57.0 52.0 42.4 31.3 INDUSTRY (PERCENT) 14.0 17.0 21.0 27.8 23.9 PARTICIPATION RATE (PERCENT) TOTAL 29.1 26.3 26.2 26.0 33.6 MALE 52.1 45.2 44.2 46.2 50.4 FEMALE 5.9 7.5 8.3 5.6 16.8 ECONOMIC DEPENDENCY RATIO 1.6 2.0 1.9 1.9 1.3 INCOME DISTRIBUTION RURAL .. .. 219.0/i PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 18.0/g 20.0/g HIGHEST 20 PERCENT OF HOUSEHOLDS 43.3_/ 49.0_/ - LOWEST 20 PERCENT OF HOUSEHOLDS 7.0_/ 4.0/o_ LOWEST 40 PERCENT OF HOUSEHOLDS 18.0/g 12.0_/g POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN 107.0 157.0 389.0 279,2 RURAL 66.0 101.0 238.0 178.6 184.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 242.0 403.6 518.0 RURAL .. .. 257.0 285.6 371.1 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN 51.0 38.0 28.0 22.1 RURAL 49.0 45.0 45.0 30.9 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1978 and 1980. /c Excludes the ex-Spanish Sahara; /d 1976; /e 1977; /f 1975; /g Consumption expenditures of households. May, 1982  - 25 - ANNEX I ~~ 90 ~~ ~~ Page 3 of 6 Htoet Althee0 Ottu t dvo. too. a.tt o-aiiy jottd the %0eg I.11tttO. ttr lto .. Lt ab.oid100 II o b.ota.0 th., ty tap -t he Lnot- ato it owaah.ba haoto . o lb. lent at *tdmdtaot tot itltto ted -ooate -" by ttgftt...t -oetrfntos ti. ti hs dat.. Th. totc.s thi...atI t Id ea.tftM raoo MtOd.A. totinote tt.a". sOA thnnoi..tef l. .0200 tiftfeao be 000 -11-? ao Th. gae...mcator i ti. ceo Od atq fod at the a.*J-c ceeafy art (27 a -oatr s-ow rth ennao thl3r -.afa. taI.- oh- the ontry S-oo Of th "J.tloo atfy (otoaplofy t2 to iltpfoe ft nbld~ alfp ro`fop Mba. '0114db Oas. ot"m .Of,it. Ad Ktddic tOrn" L. otOaa hodoea of -rroopor seloity f o. oonnrco t a sro h" d..a far that t'aditot. Stat th. Iotas f cr-rfta ae.. th fitt dtcaodo I0 oh. tra bial.lty of I-t Mn L. to -ifof-. naco tt is do-af.et it eaf a,.r.. of o- indicator lr Thr.-o-.a..e -rrocoo..oy cot1 II tocrota,t. lho -oi of T-1a - boat1 eaf-an o-. awtt ta ace oat ii1ad ra-.; 1979 IItt. ofe. 'at remIt thid"t hy cor epoto n o of lioatfl hate A ttkitoat Utestt of aroleo r..oa tepaert o.. fl _ofeniya lobi in polit tot pf t-ot oooe odoecOt hanpitot .00f or oe ,ponoon. rrho roa titatt Aorta- or to 1to fattoo; t979 data. tablit-toocatr. faiti f -atbltnh-nt ya-e-niry 0...0t0 by at Iao .. re.. phyttto. foei- htnnP-ooliag Proit paiiyc to GW%P it107CA112 (12S - G0P Por ..Pte. foo-tfte as tra-ee eaftr ptto... cI. - diet core no fla ttIoddit k. tota hd.icytai, hofrr. toL-Ita hoeltk bgoo y tan -ononlo rt hod a, Woritlad L. ientl (197S-O bait); 1940, and roicat ta.storn- .0..rttrcyoeiff hy a phyattoto (bet hi 19iS. oat 19dd data. ttUti aootttaot roo. tidefo, otol rhich ote t-. ttt on dOti. Ott pl-lott . tIthed .an. of todioi taciltttira. foI. atto 0001901 teOOtfOoTIOO OttCOuld -OoooOt ono.~ttorof oortalatrroy(ooai tttl paroo.e orbi horritoo toclatP.,"-.yinotpail-raral hoftitie cot Ioalfa psrrln.. ttorot ga cod hydra-, .olor d 0a-thof.1'b- ttfath-opit.lo. lc 1- 0 tot-l haptiUlo oat Otict .od trty tricityl i. otiotano If ..ai n.ooarpat ..pit.; iOta 1970 . ot 1979 OtItI. Spoooto opoi et o.ddd ny te rti ff0- ..optitit. di-ottd by th. Icto f hbOt- POPOUOATIOO tMO VITA.L STATZTIfCS ot, Prlt.on. Kit-Yan Ith-d.)to - It f Joly it 19ht. 1972, and 1940 tOili UlOhoPooaOo lOrcto oti et f othoa -0 totct poPoItOidd,t I :hooohai int te of PI00 ntdot ttottoelvo ttr di uaat t tintto of trtt Orate .07 effoo onef-titLty of tote IIt thet rossa. A lortor or tottr -Y or07 not bn t-itodtd it aentaonunrita 194, 1975. ott 1900 duo.. i ttoobttd fo n .tctotoc popoe p Orof~~~~~ectien b S.anr -tar tooaa rts, -vraa- odf ti... brety aae,- dtocoot., piart-a.. Its lifeoocoof at himt in-ftoae with co-tryt. P.r cerit Ldom Aroo., to tEctttIt, (ner-antf dt LOt -toal oa. ao toI - lore. an (ase if rooontno or e At 0 77.2pYf.- Ito Po.- CMo.ttto to-Liat.%rt tloot-ioIlp to L,irto Oo- -f 0. Plrlot.tOI .,.rLfr ertit rot t.1 toa thrinL0. ttl oL. oflo d.tiit in of o Illotha . ad tofal fo-iitrfo n-p-tloly. fertil"yaOOtt on trt.-oI Oat ren fIRtly piatont Oeffoc5t.. tehI aee-, Ot aciaot of Ifie Ie oaisattot of a-tltoy tOLICATICS ttttoar roalatn -Ita tatonE.pryolotto tier. i. on gO-ho niece Prist ahnal - tot.l. aio II4 mL.-I - Grt.. co-al -le and fatal. rIta bfrot ro- fa nool to chi doa- r_a1olate00ataaaaMorleo of aft oco. 00 Oh. titorY 000 aI at Iooa f -opaorffa etr ooo T. mO ia .?hLee oLy ottr etilltyr teteln - to prieny scal-hIr plotna orol incloee otitldret stat h-i terpi- LnI 0.1o ai to reodroarton rate e,o .cch aS-raiot y.sre hbt odjotd for diffor.t. Lr-atht of pritay toto;for to . ti Y_o 2Ut00 st th rota If doola of f-rtiltryratItoctytote- S-.A.ota erhoo - otl t cot fatalo - Coapotto ao abort -ecooY OU tatoo rouolOi. mac-Od - Th. Y-o h- a .:.atinnory ropolattot. prorta.taere. toOloal.occoi- -h atot-tirtetnnfroti .ia etIl he reta.tcalyof1to7 Al.r of oc.; orr .......nrotfacelrt tar So. 0. - ~It-y-a Pooloo Ia aoar toiloate 1120 h- -tra o f Voattoalt .t.ltor II_, toooooo a __ttt_na iiatttot... tota Ict0 1L01, 1072 oct 1979 to to. irol.ta tatati..lototla. r hec Proora- htto opetoto todePanI- Per ..0k. Z; tocltri 9 .d rtt Ie char for ooiotort at .wtly rt dtOfO-t- cf etca -r t -ttoL_o oniy; 1940. ltffi TI t Onta. Pcfltaoartt -Olsot t oor o T Iot1 -td-ot onrolot i Porlanot sa trottre pofonL- - Childre i-li-1 ie..ret. -kntit-ote 115- Pri-rY an or-ottar It-1 t~iotta y -7 Ittra ofL.aoet tie icton1945, 1(70, sod lO .tet. Adot litt-ra rota- 1:I ar.atl - Li..ltn.t otolta (.labIa to ead -A -t.) P:plota Gro ae .rtflOt OAlla Lrooth cott of -oto sIt- AIf eno g or -a1o d01I olrttcat IS pece and .-tI. 7000rortlatao fr lSt-l .1 00-i.dOt 1970-to. Porlain Coth ttarooott- obs -.ttal ar-rth rt.te of ort.. PoP- C2050UITCOO ropolattoo; lOOt. 1070. tnt 1905 Oat.. etIdoer Le.toL... . ' Cd.0th ktot (oar otho-d) - Atooa i Onbsh M p.r tth--d t If Kin-year ttoirceoer lJtt:oot ool o . i -ype of hotae orrot C,pai,t.o.; 1900. 1970. .od 1990 taeUrsoeaottrl ulcprtOdt itooOiO nltein tity rated toucy fios-ytor. orart ondino It 100., 170,at 19M. oa o ortalthtiloetto. Staic lootc Rd coert.., .Ad-tI(haoet - -tao o.o f accertcre CVI-tottor. 100 Ihaaet .... ittd TV rta 0-r. foo b-OOr-t to ohit-ctrldevilt.. ...e noplon, of tattoc foolly Pte.ete Protai. genora pri.ri par lhotosi ttclOlo; tttOt Idltort Crotee PItnilo FOam; -1.0cc lOoft,tO f earned enan P. Ior ento of -ried it -onrit d to yatte dit. rttotof aT Veroattertt oi trried eao In eoo on, 9r-. Ooltio ofLol toe otatnopaa.tttn .0PrOiO 7LOW O rAoiMiIIMt o dOy if it Atar at ..e foo toeI 0 lede of ood ro ionla -a Canto (1190971-120) - latdt of Per toyOt aen-I Cinano Oao l crcd-t Znt UPtIta Por ioo- a..t ottoce. f P, I..Oo of alt land oo. tioa FradbIrtie -Ilo.".at o f- 0.0 Oa itat 04 no the Jroo. nlta itdotot drio-loatc iso ataa yearIhate Coetci. oe ProI..y Soeta (e... ecaosWn soblo -atte -1araoto4i) Ottnooot. pr-dotton nO t.-h .-try L.te . daa 00 0.0101 7000 notona avree pdoarPrice s.i,ht; 1961-45. 1970,. a 1900 dato..Total Lbhr Iorce lthaoadelB - Uca.-Id-tly attic OOr.o.1000410 atoptotrirt o I ontfodd aPvlisa -1oiisl.o to oteoty pot oapLta Ino7in Saootaofalao. D.fitn t oOt aot e r eoot,othoboge in etnot. wtt tyPLitt .ecIot eol-lI fed. tot.Ftislstel - 1a Lehor forte .o P.--.*.co If toa ... o I oron t . .oetca od 10 1d oct proaio end I-n in dtetribotiat. Reqtre Otiotoo preo - labor forra to iao.tri. foroatrY. h- oto5 a soot rro ntnoe hifa boeed o -hntoairlnat ftolorlOt-itl~a Itr fot at otL. tlor fort; .90 9 I0ad190 oa itfy end haoith conitfIr L_ trrtneta tta".raoaro bciesta. a t_~~>ro -I- Ott.".r 10 lot IIdatttio eo.otaOrt aoit so dotrttr de of P popo oto. ant otionlot tO potn tnr rai 0edaec_rici.u at oO t oproo f 00001 lano forte; ht.t. tald Iarn; 091-7,OS a itL9? tote. 0960. 1970 .0d19 tO0 d.ra.` Per r -pitt I007o rti taatrdyfI- PratOsooae o ar 00020 Lanio.otn dae o rt - .001. -I., eo4 feata - p-tictrota o tet aoppiy offo a o.Ot.pf f font is ftotos at tha. to- tttyrostr OPtd00ocloi.otioleiehr 0ffr. Io Ootaefor oI -ooaie ..et..bliaho hy USA1505pr d.t for r.toioa pocnao f rttal sola ott feral. optto of al n r.tnie a.,o__..o If .60 ro of .oa.I Prcatai o. tap an 12 oo- of 0.`0`1 ted 1940, 1970. e.at 190 Oc... T`-oc dt 00 oa 1140. Po-lopaOnra polat Prci1o.. of attb 12 ore.- ahald he atO-t prottoo. mat, Itod- rolttaeote ootr foa oo ia a I-gt otared.A I_tcetoe thao thet of 75 Sats of toot p-oOoa oa 23 ore.. fi.Otne o rnotoo iott .tslpiit Io to -Prt 'ot it rortd. p,opoasd by FAO it the Third t.o7~or49~Oo at fppoebnotr1 a0 a i. Wtyl 1 ot areS 1961-O5. 1970 .od 1977 Sot. I Itaaoal.hIM IlloIc..,.- f ~~~~~~~~Choll ,one 1-hf Dao daelie h hoool- -oa aar Poc thoea4 to, Fercrtoo of Pri-Otf ao (Sorti It coo no mldl - 0000012d by ttinot 00ear 10er., 00 Itoid-o 10 OtO. 00 troop, for S.0dttitpo nt- 7pett. ri.h.., 20 pe-ei. p,,Ioee 22. porcato. oc1 p-or-I 4 Of II re trot.. toto ertoe (r ifl. t Io;105 1070 and 1900 dat, of noo..ooItt.. IEfTH ifPOVETY TARGET G011172 hf. trto oitoat trti,brace - lerar coaordo Y.-r of lOfe -esettg flt. iolbattt0.. .etae art . tto - arprtte t refPocrny eo-l.. at hOn; 191 o tt19 oA. 004 h.0001 to loopeOo00 ocOohlaoo Ltfdto ofrt-lty at- Elir htcoaod) - Aonti itaacha of Iinfant ottr orYf- Eta _tleto Oh Plt -Oitet 1L000 10-1 '052 -ar crona- ator -00 focl of oot par thogoat It. SOrolo,; 1994 270of 1900 "Ia.. A.taaoot p-rnY L.c l. a 0ta . cr Io l Ol. afIot * eo1toa 0000. tohat hanr Iercon ofitootatott- toal. rba aftcarl - 0.- otrtiontlyOdtOato ttOpnoteoonlel000-000oPqcrtate Ihro P.rtoae f thi apccopplin . t at orbO ortaopoil P.,_,ta Lccon of oh, ooootry. Oct00 L.-Icl L rrtot iro tie colrol iooo-it ortsaot IIIso not sort than 200 firo.f to ahtoa cay b. 10. thajtsitfor 1,4toar --a 01 01000 to oct0b co otasnoha cicoo roll bts 010tOo oatu. or .asar o .f htt hd-ahIld oct coral - yr-o to f -Poiroltcn lot itdt rtal aho oc bijt lOao fpor.10.,coo,rtrrl -arcet f sctcot 00000-01.00 pertat Ie f oih. at1 tto OpLanio L orrat ttPIe ro tolcd. Otto oailoaOaa .04dtoois,rc owtot rOse.o io or ZOMiypI ?hy.itlAo - Poocotilot diotted by cbto roittoyo .oiooatlc. oaJooo .00. and fi feetlo rodo -t oootr. ddton rn.", Id. -otool t-uttee aod. torsoat~ ~ ~~P id by Iiit-ario-Y.  - 26 - Population 20.8 million (mid-1981) ANNEX I GNP Per Capita: US$ 870 (1981) o f 6 MOROCCO - ECONOMIC INDICATORS Amount f/ (million US$ at Annual Growth Rates (2)- current prices) Actual Projected Indicator 1980 1977 1978 1979 1980 1981e/ 1982 1983 1984 1985 NATIONAL ACCOUNTS Gross domestic product a/ 17820 6.0 2.2 4.8 3.6 -1.3 4.0 5.1 4.5 4.3 Agriculture 3229 -12.3 18.0 -1.7 6.2 -23.0 7.0 9.6 3.1 2.5 Industry 5752 8.0 -0.9 7.7 -2.5 -0.5 3.7 4.6 5.4 5.1 Services 7762 8.5 4.0 5.1 6.4 3.4 3.7 4.3 4.3 4.3 Consumption 15770 5.3 4.2 5.8 2.5 2.2 1.3 4.2 3.5 3.6 Gross investment 4025 15.6 -25.9 1.3 -7.3 -3.6 6.5 -1.1 3.7 3.2 Exports of GNFS 3273 10.3 3.3 0.9 3.7 3.5 4.5 7.0 6.3 5.3 Imports of GNFS 5247 14.5 -17.4 3.3 -9.8 10.7 -1.9 -0.6 2.2 2.3 Gross national savings 2606 1.5 -15.4 3.2 6.0 -20.6 9.5 15.6 13.2 1.7 PRICES GDP deflator (1969 = 100) . 172.0 186.5 200.2 218.4 241.2 Exchange rate (US$ per DH) . .222 .240 .256 .254 .193 Share of GDP at Market Prices (Z) Average Annual Increase (Z) (at current prices)d/ (at constant 1969 prices) (at constant 1980 prices) 1960 1970 1975 1980 1985 1990 1960-70 1970-75 1975-80 1980-85 1985-90 Gross domestic product 4.0 4.6 5.1 3.7 5.1 Agriculture D/ 29.1 19.2 17.9 18.1 17.1 15.1 3.5 -2.1 3.8 2.5 2.5 Industry b/ 23.5 27.2 35.2 32.3 34.9 35.8 4.7 7.1 4.2 3.9 5.5 Services b/ 47.4 53.6 46.9 49.6 47.9 49.1 4.1 5.5 5.9 4.0 5.5 Consumption 89.2 85.5 85.5 88.5 87.7 84.0 4.1 4.8 5.8 3.0 4.2 Gross investment 10.3 18.5 25.4 22.6 20.0 20.0 8.0 9.3 -2.8 2.0 5.1 Exports GNFS 27.4 17.6 22.5 18.4 20.5 22.7 1.3 2.1 4.9 5.5 7.1 Imports GNFS 26.9 21.6 33.4 29.4 28.7 26.7 3.5 8.1 0.5 1.7 4.0 Gross national savings 11.0 14.8 19.3 14.6 14.5 17.9 3.5 15.3 -4.4 3.0 10.0 As Z of GDP 1960 1970 1975 1980 1981 PUBLIC FINANCE Current revenues 16.5 16.1 23.3 21.6 23.3 Current expenditures 15.6 14.5 20.2 21.8 24.7 Surplus (+) or deficit (-) 0.9 1.6 3.1 -0.2 -1.4 Capital expenditure 3.8 5.7 12.2 12.4 12.6 Foreign financing .. 1.3 3.7 5.6 9.3 1960-70 1970-75 1975-80 1980-85 1985-90 OTHER INDICATORS GNP growth rate (Z) 4.0 6.0 5.2 3.4 5.1 GNP per capita growth rate (Z) 1.6 3.1 1.8 -0.1 2.0 Energy consumption growth rate (Z) 3.8 6.7 5.6 4.3 5.0 ICOR 3.09 3.0 4.1 6.2 3.9 Marginal savings rate 0.10 0.38 -0.15 0.27 0.28 Import elasticityE/ 0.95 1.84 0.13 0.95 0.78 a/ At market prices. b/ Share of GDP at factor cost beginning in 1985 and sectoral growth rates at factor cost beginning in 1980-85. c/ Goods only. d/ Projected years at constant 1980 prices. e/ Estimates. f/ 1977-1980 at 1969 prices, 1981-85 at 1980 prices. January 27, 1983 EMENA CP II-B ID 0180B P.1  - 27 - Population 20.8 million (mid-1981) ANNEX I GNP Per Capita: USS 870 (1981) Page 5 of 6 MOROCCO - EXTERNAL TRADE Amount Indicator (million US$ at Annual Growth Rates (Z)I/ current prices) Actual Projected 1980 1975 1977 1978 1979 1980 1981 1982 1983 1984 1985 EXTERNAL TRADE Merchandise exports (FOB) 2414 -21.9 10.7 5.3 1.8 5.1 1.0 4.0 7.8 6.7 5.1 Primary products 1823 -25.2 7.7 5.4 0.0 5.8 -8.1 1.2 3.4 3.8 3.5 Phosphate rock 765 -29.9 9.6 9-.6 3.2 7.4 -5.4 0.0 3.0 5.0 4.0 Others 939 -22.3 6.5 2.8 -1.7 14.7 -10.0 2.1 3.7 2.9 3.1 Intermediate & manufactures 591 -1.4 23.8 5.0 7.1 2.8 27.4 9.8 16.3 11.8 7.6 Merchandise imports (CIF) 4283 21.2 14.4 -19.9 6.6 -7.1 9.3 -1.9 0.5 3.9 4.0 Food 720 37.8 0.4 8.6 2.2 3.4 32.5 -16.8 -0.9 2.1 4.5 Petroleum 1006 12.8 8.7 11.0 12.1 -11.9 10.8 0.0 -1.1 3.3 3.2 Machinery and equipment 805 51.7 26.7 -44.3 -3.2 -19.8 7.5 3.0 -2.5 4.0 2.9 Others 1752 4.0 13.0 -15.1 12.5 -5;22 -0.3 2.6 3.7 5.0 4.8 PRICES (1980 = 100) Export price index . 89.9 68.4 69.7 83.5 100.0 123.3 125.1 137.1 153.5 171.8 import price index . 64.1 67.9 73.0 79.2 100.0 122.3 130.9 140.2 154.3 169.8 Terms of trade index . 140.3 100.7 95.5 105.4 100.0 100.8 95.6 97.8 99.5 101.2 Composition of Merchandise Trade (Z) Average Annual Increase (Z) (at current prices) (Constant 1969 prices) (Constant 1980 prices) 1960 1970 1975 1980 1985 1990 1960-70 1970-75 1975-80 1980-85 1985-90 Exports 2.0 -1.2 6.6 5.2 7.6 Primary products 89.5 89.4 86.9 74.4 60.5 49.1 .. -2.7 5.3 1.3 3.3 Intermediates & manu- 10.5 10.6 12.9 25.6 39.5 50.9 .. 8.1 12.1 14.0 13.0 factures Imports 4.0 9.1 0.7 2.4 4.0 Food 27.3 16.9 25.0 16.9 16.9 15.5 .. 14.0 3.0 0.7 2.4 Petroleum 7.4 5.5 10.8 23.6 23.6 22.4 .. 9.6 5.3 2.4 2.8 Machinery and equipment 6.7 24.1 24.0 18.9 18.7 19.2 .. 12.8 -7.0 2.4 4.5 Others 58.6 53.5 40.2 40.6 40.7 42.9 .. 5.5 2.9 3.3 5.1 Share of Trade with Share of Trade with Share of Trade with Industrial Countries (Z) Developing Countries (Z) Capital Surplus Oil Exporters (x) 1960 1970 1980 1960 1970 1980 1960 1970 1980 DIRECTION OF TRADE Exports 72.3 73.7 76.5 27.7 25.4 21.6 .. 0.9 1.9 Imports 76.7 74.9 72.9 23.3 25.1 8.3 .. .. 18.8 1/ 1975-1980 at 1969 prices, 1981-1985 at 1980 prices September 22, 1982 EMENA CP 1I-B ID 0180B p.2  - 28 - Population : 20.8 million (mid-1981) ANNEX I GNP Per Capita: US$ 870 (1981) Page 6 of 6 MOROCCO - BALANCE OF PAYMENTS, EXTERNAL CAPITAL AND DEBT (million USM at current prices) Indicator Actual Projected 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1990 BALANCE OF PAYMENTS Exports of goods and services 2288 2486 2955 3694 4364 4132 4087 4669 5401 6193 11297 Of which: Merchandise f.o.b. 1245 1283 1488 1938 2414 2283 2180 2575 3077 3618 7163 Imports of goods and services 3691 4364 4353 5268 5912 6095 5780 6276 6930 7734 12812 Of which: Merchandise f.o.b.a/ 2305 2820 2628 3245 3770 3840 4054 4365 4994 5714 9856 Net current tranfers 47 52 50 44 128 102 - - - - Current account balance -1355 -1826 -1348 -1530 -1420 -1861 -1692 -1607 -1529 -1541 -1515 Special grants 435 360 260 420 314 313 84 197 320 150 232 Current account balance after grants -920 -1466 -1088 -1110 -1106 -1548 -1609 -1410 -1209 -1391 -1283 Private capital 38 53 45 37 88 68 76 85 96 106 171 MLT loans (net) 838 1338 1109 946 971 1205 1071 1425 1371 1666 1359 Official .. .. .. . .. 1315 994 736 878 982 1092 Private .. .. .. .. .. -110 77 689 493 684 267 Other capital 28 68 ^73 73 -200 17 .. . Monetary movements'. 16 6 8 53 247 258 462 -100 -258 -381 -263 International reserves 548 609 772 917 814 508 470 543 653 787 1635 Of which: Gold 82 104 154 360 415 278 278 278 278 278 278 Reserves as months imports 1.8 1.7 2.1 2.1 1.7 1.0 1.0 1.0 1.1 1.2 1.5 EXTERNAL CAPITAL AND DEBT c/ Gross disbursements 725 1787 1182 1405 1567 1807 Concessional loans 111 636 325 293 750 1089 DAC 63 109 91 76 96 138 OPEC 41 507 189 168 584 837 IDA 4 3 - - 1 2 Other 3 16 45 49 69 112 Non-concessional loans 614 1151 859 1113 818 718 Official export credits 22 27 2 2 12 128 IBRD 59 68 72 137 64 129 Other multilateral 2 6 53 7 13 86 Private 531 1050 732 967 729 375 Suppliers credits 10 171 10 8 16 6 Financial credits and bonds 521 879 722 957 713 368 External Debt Debt outstanding and disbursed 2330 4069 5123 6182 7097 8381 Official 1250 1975 2456 2833 3482 4865 Private 1080 2094 2667 3349 3615 3515 Undisbursed debt 801 1024 2280 2337 2058 2901 Debt service Total service payments 162 264 547 798 1191 1340 Interest 66 148 252 410 618 738 Payments as % exports of G+S d/ 7.2 10.7 18.7 21.8 27.0 31.3 Average interest rate on new loans (X) 7.7 6.8 7.0 8.2 8.1 8.5 Average maturity of new loans (years) 11.7 13.1 13.2 15.9 13.7 8.0 As % of Debt Outstanding at End of Most Recent Year (1980) Maturity structure of debt outstanding Maturities due within 5 years 47.9 Maturities due within 10 years 88.0 Interest structure of debt outstanding Interest due within first year 7.3 a/ c.i.f. for projected years. b/ Projected values include IMF credits. c/ Years 1976-80 from IBRD External Debt Reporting System, 1981 from the BOP statistics. There are sizeable discrepancies in some years between the external capital and debt service flows reported under the IBRD Debt System and those recorded in the official balance of payments statistics shown in the upper part of this table. d/ Excluding debt service on IMF loans. January 27, 1983 EMENA CP II-B ID 0180B p.3  - 29- ANNEX II Page 1 of 10 A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1982) a! Loan or US$ Million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed Twenty-four Loans Fully disbursed 617.4 Four Credits Fully disbursed 36.0 1018 1974 Kingdom of Morocco Agriculture 32.0 8.4 555 1975 Kingdom of Morocco Agriculture 14.0 11.1 1202 1976 Kingdom of Morocco Tourism 21.0 11.6 1220-T 1976 Kingdom of Morocco Education 25.0 14.6 141b 1977 Kingdom of Morocco Agriculture 41.0 30.5 1428 1977 BNDE DFC 35.6 2.5 8-7 1977 Kingdom of Morocco Engineering 1.5 0.5 - 1528 1978 Kingdom of Morocco Urban Development 18.0 15.2 1602 1978 Kingdom of Morocco Agriculture 65.0 59.1 _1625 1978 Maroc-Phosphore Industry 50.0 5.9 1681 1979 Kingdom of Morocco Education 113.0 108.9 * 1687 1979 Kingdom of Morocco DFC (SSI) 25.0 12.8 1695 1979 Kingdom of Morocco Power 42.0 41.9 1704 1979 CNCA Agriculture .0 30.8 1724 1979 Kingdom of Morocco Water Supply 44.0 30.4 1757 1980 Kingdom of Morocco Agriculture 58.0 49.6 S-18 1980 BRPM Oil Exploration 50.0 20.7 1830 1980 Kingdom of Morocco Highway 62.0 53.8 1848 1980 Kingdom of Morocco Agriculture 34.0 32.2 1943 1981 CIU Tourism 100.0 70.9 1944 1981 Kingdom of Morocco Urban Development 36.0 36.0 2006 1982 Kingdom of Morocco Water Supply 87.0 87.0 20371/ 1982 BNDE DFC 70.0 70.0 20381/ 1982 Kingdom of Morocco DFC (SSI) 70.0 70.0 20821/ 1982 Kingdom of Morocco Agriculture 29.0 29.0 21091/ 1982 Kingdom of Morocco Mining 9.5 9.5 2ilo / 1982 Kingdom of Morcco Forestry 27.5 27.5 2ii41/ 1982 ONAREP Oil Shale 20.0 20.0 21491/ 1982 Kingdom of Morocco Education V 50.0 50.0 Total 1908.5 50.0 1010.4 of which has been repaid 239.4 1.2 Total now outstanding 1669.1 48.8 Amount Sold 20.1 of which has been repaid 17.7 2.4 Total now held by Bank and IDA 1666.7 48.8 Total undisbursed 999.3 11.1 1010.4 NOTE a! Does not include the Oulmas Rommani Agriculture Development Project, loan of $30 iillion, approved December 14, 1982. 1/ Not effective as of 9/30/82. However, since then the following loans have been declared effective: BNDE IX, Forestry, Small-Scale Mining, Middle Atlas Agricultural Development, Small Scale Industry II, and Oil Shale Engineering. B. STATEMENT OF IFC INVESTMENTS (As of September 30, 1982) ______US$ Million Loan Equity Total 1962/1978 BNDE Development Bank - 2.7 2.7 19b6 CIL Canning Factory 0.9 0.5 1.4 1976 Marrakech Cement Cement Factory - 1.3 1.3 1977/1980 Temara Cement Cement Factory 4.7 3.6 8.3 1979 Agadir Cement * Cement Factory 12.5 2.2 14.7 1980 SOMIFER Copper Mining 13.0 2.3 15.3 1981/1983 Casablanca Cement Cement Factory 15.8 -2.1 17.9 Total Gross Commitments 46.9 14.7 61.6 Less cancellation, terminations, repayments and sales 15.4 3.5 18.9 Total commitments now held by IFC 31.5 11.2 42.7 Total Undisbursed 15.8 2.4 18.2 * Agadir Cement has been cancelled.  - 30 - ANNEX II Page 2 of 10 C. PROJECTS IN EXECUTION AS OF SEPTEMBER 30, 1982 1/ Ln. No. 1018 Sebou II Development Project; USt32.0 million of June 27, 1974; Date of Effectiveness: February 28, 1975; Closing Date: December 31, 1982. The project as originally appraised was completed in November 1980. Funds have been fully committed for the additional infrastructure works and equipment provided for under an amendment to the Loan Agreement approved in July 1980. Final disbursements are expected by end-March, 1983 and unused funds will be cancelled. Cr. No. 555 Meknes Agricultural Development Project; US$14.0 million of June 11, 1975; Date of Effectiveness: November 14, 1975; Closing Date: June 30, 1984. After a 2-year initial delay, project implementation has picked up momentum. Major activities concerned with the land consolidation and redistribution program have been completed in one district and civil works (roads, destoning and irrigation rehabilitation) bave been started in the remaining three districts. Progress is slower than expected, mainly because project implementation has proven more complex than anticipated, wbich has been aggravated by project management problems. However, the first results of the completed components are promising. Because of the initial delay and the complexity in implementation, the original closing date was extended by three years. Ln. No. 1202 Bay of Agadir Tourism Project; US$21.0 million of February 27, 1976; Date of Effectiveness: October 29, 1976; Closing Date; December 31, 1981. The project consists of infrastructure works and common facilities for a hotel/residential tourism development complex. Most infrastructure works were completed in December 1980, except for the construction of common facilities (representing some 20% of the total project costs). This delay is mainly due to institutional and project management problems. Project 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems wbich are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 31 - ANNEX II Page 3 of 10 completion is expected to be delayed by at least 18 months, and an extension of the closing date has been under consideration for a long time since it has been made contingent on the Government's agreement to an action program. The Government has now been advised that the Bank will cancel the balance of the loan on December 31, 1982 unless an action program has been agreed upon by that date. Ln. No. 1220-T Third Education Project; US$25.0 million of March 18, 1976; Date of Effectiveness: October 1, 1976; Closing 4 Date: September 1, 1983. The project is designed to expand and improve primary and secondary education in rural areas and specialized training to meet manpower needs in education, agricultural extension, health and tourism. After an initial two-year delay, construction under the education and agriculture components is largely completed and funds are committed for the equipment and technical assistance components, but lengthy delays have been experienced in the implementation of the health and tourism components. Ln. No. 1416 Doukkala II Irrigation Project. US$41.0 million of June 16, 1977; Date of Effectiveness: December 1, 1977; Closing Date; June 30, 1984. The project aims at extending irrigation and related agricultural development in the Doukkala perimeter by 16,600 hectares; it also calls for provision of extension and credit services, and village infrastructure. The land consolidation program and the enlargement of the main canal are proceeding according to schedule. Implementation was slowed down due to budgetary constraints facing Morocco in 1980-81 which caused a delay of about two years. Project implementation has resumed vigorously under excellent project management. Ln. No. 1428 Eighth BNDE Project; US$45.0 million of June 16, 1977; Date of Effectiveness: December 21, 1977; Closing Date: September 30, 1982. The project is designed to meet part of the Banque Nationale de Developpement Economique's (BNDE) requirements for financing of the import component of industrial sub-projects, and of a small-scale industry pilot credit program ($5 million). The loan is fully committed, and the loan is expected to fully be disbursed before end 1982. BNDE's financial performance deteriorated sharply in 1981, but the trend should be reversed since a package of measures to rehabilitate BNDE financially and to strengthen the institution has recently been agreed upon.  - 32 - ANNEX II Page 4 of 10 Ln. No. S-7 Sewerage Engineering Project; US$1.5 million of August 30, 1977; Date of Effectiveness: August 18, 1978; Closing Date: October 31, 1982. The project includes the preparation of a sewerage Master Plan for the Casablanca-Mohammedia region and of a first phase project. It would assist Morocco in developing the design and planning criteria for urban sewer systems and strengthening the institutional and financial bases for the development of this sector. Project implementation was delayed by about 15 months, due to administrative and budgetary difficulties, but studies were launched in May 1980, and are now proceeding satisfactorily and an extension of the closing date is under consideration. The technical components of a possible project have been identified, but institutional problems have not yet been resolved. Ln. No. 1528 Rabat Urban Development Project; US$18.0 million of March 31, 1978; Date of Effectiveness: November 21, 1978; Closing Date: March 31, 1983. The project is designed to improve living conditions of the urban poor in Rabat. It includes upgrading of slum infrastructure and social services in three squatter areas with a total population of about 60,000; an experimental sites and services housing scheme; an employment generation program; and related technical assistance. After initial delays, project implementation has recently improved significantly. Infrastructure works are under way and bousing improvement loans are being made. Relocation to sites and services areas is under progress and some enterprises have started operation in the industrial zone. Disbursements, however, remain low and the matter is under review with the Government. Ln. No. 1602 Fes-Karia-Tissa Agriculture Project; US$65.0 million of September 6, 1978; Date of Effectiveness: February 18, 1979; Closing Date: June 30, 1986. The project aims at (i) improving the standard of living of about 33,900 farm families in the Fes-Karia-Tissa region, and (ii) contributing to the growth of agricultural production and to a reduction in Moroccan dependence on imported food commodities. These aims would be achieved through a reorganization and strengthening of agricultural extension and soil conservation services, training, the provision of credit and infrastructure. Although somewhat delayed, implementation is proceeding satisfactorily, due to excellent project management and good interagency coordination. However, disbursements have lagged due to delays by the implementing agencies in submitting reimbursement requests to the Ministry of Finance.  - 33 - ANNEX II Page 5 of 10 Ln. No. 1625 Maroc Phosphore Expansion Project; US$50.0 million of October 27, 1978; Date of Effectiveness: March 23, 1979; Closing Date: June 30, 1982 The project consists of expansion of existing production facilities at Safi through (a) the erection, on the site of the existing Maroc Phosphore plant, of an additional unit and ancillary facilities to produce for export 165,000 tpy of phosphoric acid, and (b) the construction of sulphur melting and storing facilities as well as of new phosphoric acid concentration and storage facilities. Commercial operations have begun and the project will probably be completed on schedule. Maroc Phosphore's technical management appears satisfactory. The project account is being closed and an amount of about $5 million is expected to be cancelled. Ln. No. 1681 Fourth Education Project; US$113.0 million on April 25, 1979; Date of Effectiveness: October 16, 1979; Closing Date: December 31, 1984. The project consists of the construction, furnishing and equipping of 11 technical high schools, a technical teacher training college, two higher institutes of technology, an institute of applied engineering and an extension of Mohammedia Engineering College and associated technical assistance. Implementation was initially delayed; however, all major contracts have now been signed and disbursements are expected to accelerate. Ln. No. 1687 Small Scale Industry Integrated Development Project; US025.0 million of April 25, 1979; Date of Effectiveness: December 17, 1979; Closing Date: December 31, 1983. The project consists of support for a Government program to assist small and labor intensive industries through technical, managerial and financial assistance. The loan is fully committed, and earlier disbursement delays are being remedied subsequent to the recent introduction of simplified administrative procedures. Ln. No. 1695 Village Electrification Project; US$42.0 million of May 22, 1979; Date of Effectiveness: April 30, 1980; Closing Date: June 30, 1984. This project, which is the first stage of a 15-year village electrification program, would provide electricity to about 60,000 dwellings in more than 200 villages throughout the country. Problems of interministerial coordination and budgetary allocations delayed project start-up for about one year. Orders have now been placed for most of the equipment but no payments have yet been made. However, implementation is well under way and the project is expected to be completed according to schedule.  - 34 - ANNEX II Page 6 of 10 Ln. No. 1704 Fourth Agricultural Credit Project; US$70.0 million of May 23, 1979; Date of Effectiveness: December 5, 1979; Closing Date: June 30, 1983. The project aims at increasing Morocco's agricultural production thereby improving the standard of living of about 475,000 of Morocco's farm families. The project covers most of the Caisse Nationale de Credit Agricole's (CNCA) medium- and long-term lending program and farm investment program through mid-1983. Cofinancing of $75 million is provided by IFAD and KfW. CNCA's on-lending as well as repayments were severely affected by the 1980-1981 drought, slowing disbursement of the Bank loan. To alleviate CNCA's short-term liquidity problems (due mainly to the drought), its lenders, including the Bank, have increased their disbursement percentages under their respective loans. Ln. No. 1724 Second Water Supply Project; US$49.0 million of July 2, 1979; Date of Effectiveness: February 4, 1980; Closing Date: June 30, 1984. The project is designed to improve access to safe water supplies for the population of the Mid-Atlantic Coast and the Greater Agadir area. It consists of: (i) the expansion of bulk water production and transmission facilities along the Mid-Atlantic Coast; (ii) the expansion of bulk water production and transmission facilities in Agadir; (iii) the establishment of a revolving fund to facilitate house connections for low income families; and (iv) studies on accounting and management systems. Administrative problems created some initial delays, but there is strong demand for the credit facilities for low-income house connections. The project is now proceeding satisfactorily and disbursements are expected to increase accordingly. Ln. No. 1757 Vegetable Production and Marketing Project; US$58.0 million of November 15, 1979; Date of Effectiveness: April 17, 1980; Closing Date: June 30, 1984. The project is the first phase of a long-term program for development of off-season vegetables for export. $50.0 million of the loan is to be on-lent for long and medium-term farm investments and incremental short-term production costs of vegetable quality control centers, for two small producer packing stations, and for seedling greenhouses benefitting about 8,000 farm families and creating seasonal employment. The balance of the loan would help finance infrastructure in the project area, and technical assistance. Implementation is proceeding satisfactorily. Overall production did not progress as scheduled due to two cold winters, but greenhouses, which have resisted frost fairly well, are gaining acceptance with the farmers and the prospects of rising production are promising.  - 35 - ANNEX II Page 7 of 10 Ln. No, S-18 Petroleum Exploration Project; US$50 million of May 19, 1980; Date of Effectiveness: October 24, 1980; Closing Date: December 31, 1983. The project aims essentially at accelerating the Government's petroleum exploration and development program. It has recently been transferred from BRPM, the original Borrower, to the new petroleum development agency, the Office National de Recherches et d'Exploitations Petrolieres (ONAREP). The project also provides technical assistance in prospect evaluation, analysis of results of exploration, and exploration management. Drilling so far has shown encouraging results, particularly as regards natural gas prospects. Procurement problems have hampered project implementation and recruitment of consultants has proceeded very slowly. Administrative problems have also delayed disbursements. Ln. No. 1830 Third Highway Project; US$62.0 million of May 19, 1980; Date of Effectiveness: September 29, 1980; Closing Date: June 30, 1984. The project comprises (i) a three-and-a-half year time slice of the Government's pavement strengthening and preservation program; (ii) strengthening and management of the road maintenance program and (iii) technical assistance for the Ministry of Transport to improve transport planning and to study road maintenance. The pavement strengthening and maintenance activities are progressing satisfactorily. The hiring of consultants for technical assistance is behind schedule due to the slow preparation of the terms of reference. Disbursements have lagged due to delays in payment of contractors as well as transmittal of reimbursement requests to the Ministry of Finance. Ln. No. 1848 Loukkos Rural Development Project; US$34.0 million of December 22, 1980; Date of Effectiveness; September 30, 1981; Closing Date: June 30, 1987. The project should increase incomes and productivity of very poor subsistence farmers in the Loukkos Basin by reversing the declining trends caused by soil erosion and inappropriate farming practices. It consists of: (i) development and erosion control works on 15,000 steeply sloping hectares in Upper Loukkos; (ii) development of field crops and small irrigation improvements in Middle Loukkos; (iii) establishment and maintenance of pine plantations in the Izarene Forest; (iv) construction of roads and social service facilities in the Project area; and (v) execution of a cadastral survey on about 500,000 hectares of land. Once proven, the project implementation methodology could be widely replicated throughout Morocco's mountain and steppe land. Project implementation is progressing satisfactorily.  - 36 - ANNEX II Page 8 of 10 Ln. No. 1943 Fourth Hotel Development Project; US$100.0 million of February 5, 1981; Date of Effectiveness: April 9, 1981; Closing Date: December 31, 1985. The project provides funds over a three year period to the Credit Immobilier et Hotelier (CIH), a Moroccan development bank specializing in the tourism and housing sectors, for the development of tourism hotels. It. also includes studies for developing policies in the tourism sector and training of CIH staff in appraisal methodologies for tourism projects. Commitments and disbursements have been extremely rapid. Ln. No. 1944 Second Urban Development Project; US$36.0 million of April 16, 1981; Date of Effectiveness: August 4, 1981; Closing Date: July 31, 1986. The project consists of the provision of shelter, basic services and employment to low-income urban families through a program for slum upgrading, sites and services and provision of serviced land for small-scale industries, to be implemented in the cities of Meknes and Kenitra. Assistance is also provided to strengthen the municipal services of the project cities. Implementation is on schedule, due to the efficient coordination through the provincial Governors' offices, but some delays in approval of contracts by the Ministry of Finance have occurred. Ln. No. 2006 Third Water Supply Project; US$87.0 million of September 28, 1981; Date of Effectiveness: March 15, 1982; Closing Date: December 31, 1986. The project includes the construction of two regional water supply systems and the expansion and upgrading of the water supply facilities in about 32 small towns scattered throughout Morocco. It would also provide revolving funds to facilitate house connections for low income households, equipment, technical assistance, training and studies. Ln. No. 2037 Ninth BNDE Project; US$70.0 million of November 3, 1981. Date of effectiveness: November 2, 1982. Closing Date: December 31, 1986. The project would include a pilot component in the line of credit to BNDE, to finance export-oriented industrial sub-projects. The project also focusses on strengthening organizational aspects of BNDE in the field of project appraisal, portfolio monitoring and export promotion.  -37 - ANNEX II Page 9 of 10 Ln. No. 2038 Small Scale Industry II Project; US$70.0 million of November 3, 1981; Date of Effectiveness: February 24, 1983. Closing Date: June 30, 1986. The project comprises (i) a line of credit to the Government to be relent to BNDE and commercial banks for relending to small scale industries (SSIs); (ii) financing of the foreign exchange costs of technical assistance provided by the Government to SSIs; and (iii) financing of studies relating to the structure of incentives for SSIs. Ln. No. 2082 Middle Atlas - Central Area - Agriculture Development Project: US$29.0 million of March 5, 1982. Date of Effectiveness: November 30, 1982. Closing Date: June 30, 1988. The project consists of interrelated forestry, range and cropping land development to bring about production increases of meat, milk, fodder, cereals and wood, on about 600 ha. in central Morocco, as well as to raise income and employment among the target population. Loan No. 2109 Small-Scale Mining Project: US$9.5 million of April 14, 1982. Date of Effectiveness: November 19, 1982. Closing Date: December 31, 1988. This pilot project would increase the productivity of small-scale lead and zinc mining operations through provision of equipment and facilities, as well as credit to miners, in a remote region of Morocco thus increasing exports and raising rural incomes. The project would also strengthen the financial, technical and administrative base of CADETAF, the implementing agency, and finance studies as a basis for future expansion of mining activities. Implementation is proceedirng satisfactorily. Loan No. 2110 Forestry Project: US$27.5 million of April 14, 1982. Date of Effectiveness: October 28, 1982. Closing date: June 30, 1988. The project consists of destumping about 30,000 ha of eucalyptus plantations and degraded oak and cork forests and replanting with eucalyptus, pine and acacia; upgrading and construction of forest and access roads; pasture improvement over 2,000 ha; and technical and institutional support. Project implementation has commenced satisfactorily. Loan No. 2114 Oil Shale Engineering Project: US$20.0 million of April 14, 1982. Date of Effectiveness: February 25, 1983. Closing date: September 30, 1986. The engineering project would finance studies and the construction of a shale retorting test station to generate information and analysis on the characteristics of Moroccan oil shale resources and on the technical and economic viability of alternative options for their development.  - 38 - ANNEX II Page 10 of 10 Loan No. 2149 Fifth Education Project: US$50.0 million of November 5, 1982. Not yet effective. Closing date: March 31, 1988. The project is designed to improve the effectiveness of primary education and support expanded science and mathematics teaching at the senior secondary level, through construction of four senior secondary teachers training colleges, 40 rural primary schools and the provision of teaching aids to about 700 primary schools.  - 39 - ANNEX III Page I of 2 KINGDOM OF MOROCCO FOURTH HIGHWAY PROJECT SUPPLEMENTARY PROJECT DATA SHEET 4 Section I: Timetable of Key Events (a) Project identification: October 1980 (b) Time taken by the Borrower to prepare project: 18 months (c) Agencies responsible for project preparation: Roads and Traffic Department (RTD) of the Ministry of Public Works (MPW) with assistance from the Bank and consultants; the Studies, Planning and Coordination Department of the Ministry of Transport (MOT). (d) First Bank Mission to review project: February 1982 (e) Departure of Appraisal Mission: June 1982 (f) Date of completion of negotiations February 25, 1983 (g) Planned date of effectiveness June 30, 1983 Section II: Special Bank Implementation Action None Section III: Special Conditions Condition of Effectiveness 1. Issue of request for proposals from consultants to carry out the freight market study (paragraph 62).  - 40 - ANNEXE III page 2 of 2 Other Special Conditions 2e The Government will send to the Bank for review and comment: a) the bidding documents for the bridges to be reconstructed each project year, on or before October 31 of the preceding year (paragraph 54); b) the economic evaluation according to agreed guidelines, as well as the detailed engineering and bidding documents for the provincial roads included in the project, by October 31 of the year preceding the year of proposed construction (paragraph 56); c) annual programs of civil works and road maintenance under the project consistent with the action plan agreed with the Bank, by September 30 of each preceding year (paragraph 60); d) quarterly reports on the progress of the project (paragraph 69). 3. The Government will also send to the Bank semi-annual reports on the following information in an agreed format (paragraph 67); a) continuous automatic traffic counts and measurements of pavement roughness at intervals and on road sections strengthened under the project agreed with the Bank; b) two one-week traffic counts at semi-annual intervals on the provincial roads constructed under the project; and c) monitoring, in consultation with the concerned provincial departments of the Ministry of Agriculture and Agrarian Reform, of the agricultural development occurring after the construction of provincial roads, including the type, amount, and timing of complementary agricultural investments. 4. The Government will implement those of the freight market study's recommendations upon which it reaches agreement with the Bank (paragraph 62).  -~ IBD67 T-~~~~~~~ 1l:9n;S tioN i Ear? 72 Cl S M o]l W A TW m b :R 6 CEC C 0 ;t i::\ kk: ik ; : " ;i'; af b 0 g & ; . FOURTH HIGHWAY PROJECT Sii i " 5 NEW CONSTUCIL0ON i \ - -<tg~~~~roesisrrol ooa irst tranch,) S f, i0z E z4 t \tX +<' 73 4~~~~ PREVIOUS PROJECTS, Major roads conarroored Main roads ; ~~~~~A,,qq Jy:P ;( tt ; ;Af AVrm: << - - - TArac/ 4 Arroorri ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ELADM a-r-- 300 Mhlllseter loohyyt Irdiooans the sesritory of thre o 50 5 0 50 50 50 0 50 i_ I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Il CANARY~~~~~~~~~~~~~~~~~~~~~~~~~~~~ A r A N 7- C] C' CA Al~ ~ ~~~~~~~~~~~ rots ctOrrrdl i 0A2D i;i;|4Af< D osatOXg~~uQs eovr *r so o r_. sO o tf _/ I ___ _) D;2 2; y a a ot , D f D wed , / enSorsqwerf nracc#n8eslCeof 1 g MA L E Tr IARI _ ,27 , 2 lo C8ANARY