Morocco - Second Forestry Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Rqwet No. 7752-MOR STAFF APPRAISAL REPORT KINGDO4 OF MOROCCO SECOND FORESTRY DEVELWPIEMT PROJECT November 28, 1989 Agriculture Operations Division Country Department II Europe, Middle East and North Africa Regional Office TKs dounet bo a rested JIstdbuton and may be used by recipients only In the performnce of dutls. at kl onotets may not otherwise be discled wiout Word Bank autborlaion.  CURRENCY EOUIVALENTS (February 1289) US$ 1.00 - Dirham (DH) 8.25 DH 1 - USS 0.121 WEIGHTS AND MEASURES The metric system is used throughout this report GLOSSARY OF ABBREVIATIONS ASAL - Agricultural Sector Adjustment Loan B - Billion (thousand millions) CHB - Compte Hors Budget (extra-budgetary fund) CRABVF - Regional Center for Watershed and Forest Management Planning CRIA - Regional Center for Forest Inventory and Management Planning DEFCS - Department of Forestry and Soil Conservation DPA - Provincial Department of Agriculture FAO - Food and Agriculture Organization of the United Nations FAO/CP - FAO/World Bank Cooperative Programme FNF - National Forestry Fund H - million MARA - Ministry of Agriculture and Agrarian Reform MOI - Ministry of the Interior UNDP - 7nited Nations Development Program U.b. - Under bark, i.e. the volume wood excluding the bark GOVERNMENT OF MOROCCO FISCAL YEAR January 1 to December 31  FOR OFFICAL ULSE ONLY STAFF APPRAISAL REPORT KINGDOM OF NOROCCO SECOND FORESTRY DEVELOPMENT PROJECT Loan and Proiect Summary Amr-ower: Kingdom of Morocco Amount: US$ 49 million equivalent ITrms: Repayment in 20 years, including 5 years of grace, with interest at the Bank's standard variable rate. Executing Afency: Department of Forestry and Soil Conservation (DEFCS) Proiect Description: The Project represents priority investmenLs from DEFCS's 5-year investment budget plus forestry investments financed by the communes and executed by DEFCS. The project would strengthen forestry planning and policies and assist Morocco in maintaining and improving its forestry potential and meet the country's wood needs and protect its watersheds in harmony with other demands on the areas such as domestic stock grazing. Main components are (a) forestry planning (including national forest inventory, forest demarcation, forest management planning and a national reforestation plan; (b) field operations, including those paid by the communes, consisting of regeneration of natural forest (36,000 ha), plantation establishment (32,000 ha), watershed management (development of low cost techniques on some 10,000 ha), forest range management (works 57,000 ha, plans 97,000 ha), pest management (25,000 ha), stabilisation of dunes (370 ha), forest road construction (580 km) and rehabilitation (1,450 km); and (c) support activities, including nature conservation, forest research, staff housing rehabilitation, equipment purchases, training and technical assistance. 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) - Project Risks: The two major risks facing the project are a slower than projected growth rate for project plantations and continued government failure to provide adequate and timely funding. The former risk is reduced by the introduction of vegetatively reproduced (clonal) planting material, which has dramatically increased yields in other countries, and the funding risk is lessened by the fact that project investments are in the Government's core investment program. The potential risk of failure of the forest populations to participate and to comply with plans to organise livestock grazing in project areas has been taken into account in the project design by choosing areas where the populations are :-avourable to project operations and by prior negotiated agreements.  Estimated Project Costs S Loual Eoxeign Total ----- -US$ million ------ A. Forestry Planning 4.5 3.1 7.6 B. Forest Operations Regeneration of Natural Forest 8.3 1.3 9.6 Plantation Establishment 13.8 7.5 21.3 Watershed Management 3.9 1.3 5.2 Forest Range Development 6.2 1.9 8.1 Forest Roads 3.2 2.3 5.5 Communal Component 10.8 4.6 15.4 C. Support Activities Nature Conservation 0.5 0.5 1.0 Forest Research 2.1 0.9 3.0 Institution Development 0.1 - 0.1 Housing & Equipment 2.6 1.7 4.3 Training Q.7 0A1 0. Base Costs 56.7 25.2 81.9 Physical Contingencies 3.2 1.4 4.6 Price Contingencies 9.4 4.1 13.5 Total Project Costs 69.3 30.7 100.0 Financing Plan Local oireifn Total - USA million -- Goverment 31.2 1.0 32.2 Rural Communes 18.8 - 18.8 Bank 12.3 29.7 49.0 Total ,69.3 30.7 100.0 Estimated Disbursements FY90 PY91 FY92 F FY94 FY95 FY96 Annual 0.6 5.4 8.0 9.0 10.0 9.0 7.0 Cummulative 0.6 6.0 14.0 23.0 33.0 42.0 49.0 Rate of Return: 39% Mag Number: IBRD 21506 a/ Includes US$19.9 million of taxes and duties.  STAPP APPRAUSAL REPORT KIIoDOM OF MOROCCO SECOND FORESTRY DEVZLOPMENT PROJECT Table of Contents Page no I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. FORESTRY IN MOROCCO . . . . . . . . . . . . . . . . . . . . . . 1 A. Forest Resources . . . . . . . . . . . . . . . . . . . . . 1 B. Contribution to the Economy . . . . . . . . . . . . . . . . 2 C. Forestry Institutions . . . . . . . . . . . . . . . . . . .3 General.. ... Forest Department (DEFCS) . . . . . . . . . . . . . . . . 3 D. Forest Operations . . . . . . . . . . . . . . . . . . . . . 5 E. Marketing of Forest Products . . . . . . . . . . . . . . . 8 F. The Forest Industry . . . . . . . . . . . . . . . . . . . . 9 G. Forestry Legislation and Policies . . . . . . . . . . . . . 11 Forestry Legislation . . . . . . . . . . . . . . . . . . 11 Financing of Forest Operations . . . . . . . . . . . . . 13 Government Plans and Policies . . . . . . . . . . . . . . 14 H. Constraints to Development . . . . . . . . . . . . . . . . 15 I. Bank Involvement in Agriculture in Morocco . . . . . . . . 15 J. Lessons Learned . . . . . . . . . . . . . . . . . . . . . . 17 III. THE PROJECT AREA . . . . . . . . . . . . . . . . . . . . . . . 18 A. General . . . . . . . . . . . . . . . . . . . . . . . . . . 18 B. Climate, Soils and Species Distribution . . . . . . . . . . 18 C. Population and Infrastructure . . . . . . . . . . . . . . . 19 This report is based on the findings of an appraisal mission which visited Morocco in January-February 1989. Mission members were: Harald Stier (Task Manager), Colin Holloway (Forestry Specialist) and Isabelle Schirmer (Economist) Bank, and Gilles Mille (Forest Management Specialist), Consultant. The forest range management and nature conservation components were essentially appraised during an earlier mission, in September-October 1988 by Philippe Ardouin-Dumazet (Livestock Specialist) FAO/Bank Cooperative Programme and Maryla Webb (Nature Conservation Specialist) Consultant, respectively.  i - Table of Contents (continued) - E~~~~~~~~~~aLe_ no IV. THE PROJECT .............. 20 A. Objectives, Rationale and Main Features .20 Objectives . . . . . . . . . . . . . . . . . . . . . . . 20 Rationale for Bank Involvement . . . . . . . . . . . . . 20 Main Components . . . . . . . . . . . . . . . . . . . . . 20 B. Detailed Description .21 Forestry Planning .21 Forestry Operations .22 Support Activities .26 C. Project Costs .30 D. Financing .32 E. Procurement .33 F. Disbursements .35 G. Accounts and Audit .36 V. ORGANIZATION AND MANAGEMENT .37 A. Project Irplementation and Operation . . . . . . . . . . . 37 B. Participation of Local Populations and Social Issues . . . 38 C. Consultancy Services . . . . . . . . . . . . . . . . . . 39 D. Monitoring and Evaluation ..40 E. Status of Project Preparation . . . . . . . . . . . . . . . 40 VI. PRODUCTION MARKETS, PRICES AND FINANCIAL RESULTS . . . . . . . 41 A. Yields and Management .41 Plantation Establishment .41 Regeneration .41 Silvo-pastoral Development . . . . . . . . . . . . . . . 42 B. Production .42 C. Markets .44 D. Prices . . . . . ... . . . . . . . . . . . . . . . . . . . 44 E. Impact on Government Budget and Cost Recovery . . . . . . . 45 VII. BENEFITS AND JUSTIFICATION .46 A. Benefits and Beneficiaries .46 Production and Foreign Exchange Savings . . . . . . . . . 46 Employment Creation .46 Environmental and Other Benefits . . . . . . . . . . . . 47 B. Economic Analysis .48 C. Sensitivity Analysis .49 D. Project Risks .50 VIII. AGREEMENTS AND RECOMMENDATION ................ . 50  iii - STAFF APPRAISAL REPORT KINGDOM OF MOROCCO SECOND FORESTRY DEVELOPMENT PROJECT LIST OF ANNEXES ANNE 1 - BACKGROUND DATA Table 1: Action Taken on WJater Catchments ANNEX 2 - COST ESTIMATES Table 1: Project Cost Summary Table 2: Project Components by Year Table 3: Summary Accounts by 'Year Table 4: Disbursement Schedule ANNEKX 3 - PROJECT PROGgaMS Table 1: Regeneration of Natural Forest Table 2: Annual Program of New Boundary Marking Table 3: Annual Reforestation Program by Forest Serviee and Model Table 4: Annual Watershed Management Program Table 5: Research Components: Annual Physical Targets and Unit Costs ANNEX 4 F- FINANIAL ANTD ECONOMIC RESULTS Table 1: Internal Rates of Return and Net Present Valu4 of Project Components Table 2: Cost Recovery for Regeneration and Plantation Components Table 3: Cost Recovery for Bouhasoussen Forest Silvopastoral Development Table 4: Distribution of the Pro* iction neremental Wood Production from the Project Table 5: Selected Project Streams Table 6: Economic and Financial Prices for Selected Outputs and Inputs ANNEX 5 - LIST OF DOCUMENTS IN PROJECT FILE CHART Organisation of Forest Services (WB 44431) Project Sites-IBRD 21506  SAP APPRAISAL RO KINGDOM OF MOROCCQ SECOND FORESTRY DEVELOPMENT PROJECT I. INTRODUCTION 1.01 With active Bank encouragement, Morocco has been giving increasing priority to natural resource management and forestry over the last decade or so. During this period, the Bank has supported forestry through important (.omponents in four rural development projects (Fes-Karia-Tissa FY 79, Loukkos rF 80, Middle Atlas FY 82 and Oulmes-Rommani FY 83). The experience from the earlier of these project components was included in a first forestry project (Gharb-Mamora, FY 82) for a loan of US$27.5 million which is expected to close on June 30, 1990. All of these projects included experimental or innovative improved practices for forestry plantations, exploitation, soil conservation, pest management, eX.c., and institution building. Technically, implementation of these forestry activities was successful and, in the anticipation of their completion, a Bank mission visited Morocco in October 1985 to discuss further Bank assistance to the forestry sector in the country. After having defined a forest development strategy, the Government requested the assistance of FAO/CP, which fielded a mission in March-April, 1988 to prepare the project. Appraisal of the project took place in February 1989. II. FORQETRY IN MOROCCO A. Forest Resources 2.01 Morocco's substantial forest and woodland occupy 5.8 M ha (8%) of the comntry's total land area of just over 71 M ha. These are mainly concentrated to the north-western part of the cnuntry where the climate is rooler and more humid and where the forest covers about 20-30X of the land area. Forest plantations represent some 0.5 M ha of the above total. In addition there are about 3.2 M ha of esparto grass in the east and 0.5 M ha of mainly acacia based pre-Saharan shrubs in the south. Vir.ually all of the natural forest and esparto grass area is owned by the state although, based on tradition, local and nomed populations usually exercise grazing rights and their domestic stock largely prevents natural regeneration and contributes to the degeneration of the vegetative cover in Morocco. Of the plantation area, about 77X belongs to the state, 16X to collectives and 7X to private owners. 2 02 The availability of data on the forest resources in Morocco is incomplete and out of date, still being largely based on the work by P. Baudy in the 1940s which has been partially revised and updated. Only 40X of the forest area has been inventoried since then (around 1980) and the full effects  ._f the increasing population and grazing pressures on the forests, about 20X of which are not even demarcated, has not been taken fully into account. Available estimates suggest that about 45X of the natural forests and 402 of the esparto grass areas are suitable for commercial exploitation; most of the remaining arets having mainly a protective, soil conservation function. The main indigenous forest tree species are, holm oak (1.4 H ha), thuya (0.6 H ha), cork oak (0.3 M ha), cedar (0.1 M ha), pines (0.1 M ha), junipers (0.3 H ha) and, in the south, argan (0.8 M ha). the areas not necessarily reflecting the economic importance of the species. Somewhat more than half of the plantation species are eucalypt (0.2 M ha) and other hardwoods (0.2 M ha) and the remainder coniferous (0.1 M ha). mainly pines and some cypress. A. Contribution to the economv. 2.03 While directly quantifiable benefits are important, the forest's most important contribution to the economy is probably ecological: the protection of watersheds and safeguarding of water supplies, agricultural production and wildlife and the arresting of the erosion of Morocco's sensitive soils. The share of value added by forestry i-. Morocco's gross domestic product is estimated to be about 21, which is 12X of the agricultural value added and equivalent to about DH 2.7 B, if one includes its unrecorded contribution to the Kingdom's energy and forage supply, which particularly benefits the poorer strata of the population. It has been estimated that 85Z of Morocco's domestic energy needs are met from firewood and agricultural wastes, equivalent to some 10 N m? of wood, worth DH 0.7 B (US$ 85 M), which clearly exceeds the national forest's sustainable yield of some 3 M m3 of wood for all purposes and is the major contributing cause of the ongoing deforestation. Forest rangelands contribute more than one-sixth (DH 1 B) of the national forage production. Forest operations also provide an estimated 7 M man-days of work and income for the rural poor and the wood processing industries require another 9 M man-days of work per year. 2.04 Morocco's wood production meets domestic needs of firewood, and for cork (4Z of world production) the country is an important supplier of the world markets, exporting DH 90 M (US$ 10 M) worth in 1987. Some DH 330 M (US$ 40 M) of pulp is also exported. Until recently pulp procuction was wholly based on domestic wood but now some 602 of the raw material requirements are imported. In fact, domestic forest production only meets one-third of demand for sawnwood, pulpwood and other wood products, with net imports amounting to DH 625 N (US$ 75 M) in 1987. Such imports represent 72 of raw materials and semi-finished goods, or 2.52 total Moroccan imports. Table 2.1 below shows imports and exports of raw materials and semi-finished forestry products.  - 3 - Table 2-1: FOREST PRODUCTS TRADE (DH Million, current prices) Exports 215 363 483 Imports 527 m Deficit (312) (532) (625) C. Forestry Ilistitutions General 2.05 The Hinistrv of Agriculture and Agrarian Reform (MARA) has the overall responsibility for the development of the forestry sector. Ihk Ministry of the Interior (MOI also plays an important role through its jurisdiction over the provincial administration, the communes and the tribal collectives. Coordination among the ministries in forestry matters is provided by a National Forest Council (para 2.08). Morocco is administratively divided into more than 40 provinces headed by a governor who reports to the MOI and who has the responsibility for the development of his province. The governor approves the decisions of local authorities, including communal budgets which also include forestry investments. MOI also has the trusteeship of lands owned collectively by tribes and plays a key role in the implementation of any forest plantation and pasture development thereon. MARA operates in the provinces through its Provincial Departments of Agriculture (DPA), which are headed by a director and who, for the budget and for technical purposes, depend on MARA in the central administration. Forest Degartment (DEFCS) 2.06 The Ministry of Agriculture exercisas its responsibilities in the forestry sector primarily through its Forest Department (DEFCS), which is headed by a Director and who reports to the Minister via the Secretary General (Organizational Chart 1B 44431). The Forest Department at headquarters in Rabat, in addition to its administrative services, is divided into 5 technical divisions responsible for: (a) forest management, exploitation and the marketing of wood products; (b) inventory, management of forest infrastructure, legal and other questions concerning the forest estate; (c) soil conservation and reforestation;  (d) hunting, fishing and nature conservation and; (e) research. DEFCS is represented in the provinces through its forest service which is one of the divisions in the DPA. The provincial forest services are generally, at their headquarters, organised into 4 sections which research apart, correspond to the DEFCS divisions in Rabat. In the field, the 35 forest services in Morocco operate at three levels, the sub-division (65) headed by a forest engineer, the district (187) headed by a district forest officer "lid the beat (651) operated by a beat forest officer. The size of a beat may vary from 2,500 to 15,000 ha, depending on the nature of the forest. Ta total, the Forest Department and the provincial forest services have 4,360 permanent staff of which 315 are forestry graduates, 1,220 are forestry technicians and 735 are mounted guards1. The present staffing levels appear sufficient to carry out the program included in the 1988-92 Indicative Development Plan, the main constraint on Morocco's forestry operations being the shortage of funds. 2.07 The Forest Department's main responsibilities include the manage.dent and protection of Morocco's forest estate, the protection of the country's watersheds and the prevention of the gradual desertification of its sensitive soils. To do this properly requires information and data on existing resources and constraints and plans for their development. The lack of forest inventory and data has already been referred to (para 2.02). Only 10 of the forest area is covered by management plans, some of which already need revision. Watershed management and silvo-pastoral development are also constrained by the absence of plans. Forest planning and the development of necessary marketing knowledge has been neglected in the past. The present forest management is aware of this and aims to correct the situation as part of the project. Already, the existing regional centers for Forest and Inventory and Management Planning (CRIA) at Meknes and T6touan are being complemented with four additional Regional Centers for Watershed and Forest Management Planning (CRABVF) which are being established with UNDP/FAO assistance. DEFCS has also submitted a proposal for the restructuring of its organisation to meet the needs of the Department's program. However, this proposal has never been approved by the Government and is now out of date. This would be addressed in the project (para 4.22). 2.08 To coordinate and reinforce the efforts by the Government and the local populations to develop and conserve forest resources in Morocco, a National Forest Council and Provincial Forest Councils were created under a 1976 law (para 2.26). Concerned ministries, government agencies and three representatives each for the Governors, the Provincial Forest Councils and for the Communal ;ouncils, are members of the National Forest Council, which is chaired by the Minister of Agriculture and with the Director DEFCS being its Secretary. According to the law, it should meet at least once a year, and Only 100 of whom have mounts at present.  after a gap of a few years without sessions2, it has now met in 1988 and 1989. Each concerned province has its Provincial Forest Council which is chaired by the Governor and where the members are representatives for concerned authorities at the provincial level and for the communal councils within its jurisdiction. The provincial councils meet at least twice a year as required by law. At the communal level, the law of 1976 prescribes the responsibility of the Communal Council in forestry matters. 2.09 Formal fores t- training is carried out by the Royal Forestry School (ERF) for technicians and by the National School of Forest Engineers (ENFI' for officers; both schools are at Sal6. ERF graduates about 20 each of junior and medium level tWchnicians annually, who have followed one- and two-year courses, respectively. After agronomical studies at the Hassan II National Agricultural and Veterinary Institute (INAV), ENFI provides three-year courses (other combinations exist) and graduates about five engineers yearly. Senior forest officers undertake further degree courses at the Hassan II National Agricultural and Veterinary Institute. The capacity for formal forestry training is suf'icient and the quality is good and does not constitute a constraint on the sector. However, refresher courses for all levels of forestry staff are completely lacking and this void would be addressed by the project (para 4.27). D. Forest Operations 2.10 Wood Extraction. In Morocco wood extraction is carried out by private loggers under DEFCS supervision (paras 2.19, 2.23). Holm oak stands and eucalypt plantations are clear cut periodically, usually every 40-50 years and every ten years respectively and allowed to coppice, i.e. regenerate from the stump. In other, high forest, wood extraction is performed through two basic cuts. First through thinnings and cleanings which help produce a good quality product at the final harvesting and secondly through regeneration felling which includes both harvesting of final product and regeneration operations. 2.11 Plantation Program. Forest plantation establishment started in Morocco in the early 1940's to provide mining timber (pine) for the phosphate company and pulpwood (eucalypt) for the proposed pulpmill in the Gharb region. Annual programs rose from around 5,000 ha in the early 1950's to over 20,000 ha in the early 1970's. From 1960-70, pine plantations (notably Pinus pinaster, P. haleRansis and P. g#rsXXiasis) increased and gradually overtook eucalypts (Eucalyptus camaldulensis and EucalX2tus gomphocephala), as the most widely planted species. Other broadleaved species comprise Acacia spp and poplars. By mid-1988, there were some 95 forest nurseries in Morocco with an annual capacity of around 100 million plants and a total planted area of 507,000 ha, comprising about 212,000 ha (421) of eucalypts, 56,000 ha (1lX) of other broadleaved species and 239,000 ha (471) of pines. 2 Mainly because the position of Director DEFCS was vacant.  - 6 - 2.12 Planting Teniaues. Until 1982, all forest plantations in Morocco were established manually. Land is prepared by cutting and, sometimes, stumping the indigenous vegetation. Holes (usually 0.5 x 0.5 x 0.5 in in size) are dug at a density of around 1,000/ha into which tree seedlings (normally five to eleven months old) are planted at the start of the rains. The trees are weeded ir. the first two years and, if survival is below 80X, failed trees are replaced. Following a further three to five years of guarding, primarily against stock grazing, the plantation is regarded as established. The need to increase water retention, aid growth and reduce the soil erosion hezard, has encouraged the preparation of primitive terraces in association with planting holes on steep slopes. Since 1982, mechanized land preparation (normally stumping old eucalypt plantations) prior to manual tree planting has been practised in Gharb/Mamora. There are several variations but essentially three operations are involved: (a) root undercutting by a stump plough dragged by a 200-300 hp tracked tractor; (b) stumping and windrowing of stumps with a front-end rake on a 170 hp tracked tractor; and (c) soil levelling with a harrow drawn by a four-wheel drive or tracked 110 hp tractor. 2.13 Watershbd Management. Morocco suffers from serious soil erosion, by wind in the arid areas in the south and by water in the water-catchments in the mountains in the north where the majority of dams are located. It is estimated that some 50 M m3 of soil is deposited in Moroccan dam impoundments every year, which is equivalent to 0.51 of the country's total dam capacity and corresponds to an annual loss of 5,000 ha of irrigation potential and 10-15,000 ha of cultivable land up-stream. At the same time the heavy erosion reduces the groundwater retention and threatens the fresh water supply to the population and wild-life in the area. With regard to the dams, three dams have already been raised in height to reestablish their capacities lost by sedimentation. Treatment of the catchments of the 34 existing dams to reduce capacity losses, therefore, has high priority. In the same vein, the Government has recently decided that financing for all new dams --14 are programmed to be built by the year 2000-- must include funds for the management of their water catchments. Availability of studies and appropriate cheap techniques combined with a lack of funding are serious constraints to actual soil conservation works. To date, only four watersheds have been fully studied and have a master plan for their development (for dams on the rivers of Loukkos, Mhadar, Nekkor and I1sa) and five watersheds have had summary studies made ( Lakhdar, N'fiss, L'Abid and Tassaout). For details on the dams see Annex 1, Table 1. 2.14 A major effort to come to grips with the erosion problem in the Rif was made with the DERRO project launched in the early 1960's with UNDP/FAO and bilateral assistance. The project was an integrated rural development project which set out, over a 25-year period to treat some 2 M ha against erosion while providing populations with means to improve their standard of living. Although the project had some successes, it fell short of reaching its targets and in the early 1970's, FAO and the bilateral assistance gradually came to an end. Since then Government interest in the project seem to have lessened and now only sporadic activities continue under DERRO under the Ministry of the Interior. Soil conservation works by DEFCS on catchments  - 7 - of dams date only from 1976 and have mainly concerned Loukkos (with a total catchment area of 1,800 kmn), Nekkor (780 kn') and Tetla (180 lmn), and to a degree also Issen (1,300 kmn) and N'Fiss (1,700 kmn). The type of soil conservation treatments given and the approximate achievements are: pasture improvement (2,500 ha), forage plantation (5,700 ha), fruit tree plantations (15,400 ha), reforestation (7,800 ha), silt traps- large (52,000 in),- small (54,000 units), primitive terraces (88,500 m ) and dirt roads (280 km). Anti-erosion treatments of water catchments now run at an average of an annual level of some 10,000 ha and, in total, only some 320,000 ha have been covered, which appears negligible against the estimated total watershed area of 20 M ha, of which the extent of the area needing treatment is not known for lack of studies but the order of magnitude would be at least 10-15 M ha. This aim will never be achieved with Government funds alone and it becomes essentLal to develop new, cheaper approaches enlisting the full participation of the interested local populations. This need would be addressed under the project (paras 4.12 and 4.19). 2.15 Forest Rane. Management. Morocco's forest area represents 40X of the livestock range area in the country which has about 0.7 H cattle and 3.5 M each of sheep and goats. Because of increased population pressure on agricultural land, the period spent yearly by livestock in the forests has been steadily increasing. Increased population pressure has also contributed to a dilution of traditional authorities over collective rangeland management and a gradual abandonment of range rotation. All this has led to a decrease in the productivity of forest range lands, helped prevent natural regeneration of the forests and through browsing and lopping contributed to the destruction of trees. On the positive side, the continuous livestock ranging in the undergrowth of the forests contributes considerably to limiting fires and Morocco loses only on average 2-3,000 ha of forest per year to this hazard. 2.16 Only some 0.2 H ha of the 5 H ha forest range area has been subject to silvo-pastoral management studies. Actual works on improving forest ranges are even more limited and results are mixed. For example, in the west Mamora area (30,000 ha studied) some 1,100 ha have been given different treatments including the removal of non palatable brush, fertilisation, seeding of grasses, plantation of forage shrubs and the establishment of rotational and deferred grazing. After four years of work, the program finally failed for social reasons, the populations refusing a reduction in the grazing intensity. Under the Middle Atlas project (loan 2082-MOR) in Bouhasoussen, 14,000 ha of forest range were to be improved through better management of forage resources (rotational and deferred grazing and control of stocking rates), 2,000 ha through the planting of forage shrubs, 6,000 ha through fertilisation and 15,000 ha through the thinning of holm oak. Some other minor areas were also treated under the project. After a slow start due to the reticence of the populations the program may now be considered a definitive success in organising the herdsmen, both technically and socially. Forage production has increased significantly, convinced and satisfied herdsmen pay their user fees, which have been doubled, and maintain installed fences. They now want to extend this experience to larger areas. At Sahel des Doukkala, under the government's soil conservation program, 18,000 ha of rangeland have been treated through the planting of  -8- forage shrubs, protected by lines of wind breaks, and rotatiinal grazing. The beneficiaries have a contractual agreement with the government under which it recovers the investment costs without interest, through user fees and from the sale of wood. Also this experience has been successful and to date, all costs incurred by DEFCS between 1965 and 1971 for this purpose have been recovered. The experien:e gained has been used in the development of project actions (para 4.13). 2.17 Hunting. fishing and nature conservation fall within the jurisdiction of the DEFCS technical division of this name. Hunting is by far the best staffed of the three subjects. The Provincial Forest Services have some 50 game wardens, -ormally attached to sub-divisions. There are some 11.0 million ha of hunting reserve (136 permanent and 113 open to hunting every three years) and approximately 500,000 ha of State land leased for hunting by private hunting societies. There are about 50,000 Moroccan and 1,000 visiting hunters each year. The division controls both sport and commercial fishing in Moroccan rivers and dam impoundments primarily through the game wardens. Several thousand fishing licences are issued each year. There are 15 protected areas (national parks or nature reserves) ranging in size from three to 220,000 ha. Negligible numbers of staff are specifically assigned to them and to nature conservation in general. This would be addressed by the proposed project (para 4.18). 2.18 Forest Research The Forestry Research Division of DEFCS (para 2.06) has a complex of offices and laboratories on the outskirts of Rabat, a wood technology center at M'Keinza-Rabat, poplar field stAtions at Kenitra and Beni Mellal and its first regional research center at Marrakech. It has two services in the Division at Rabat (Silviculture & Soil Service and Genetics & Plant Improvement) and 11 specialized offices on wood technology, wood chemistry, entomology, mycology, biometry, silviculture, soils, climatology, physiology, poplars and arboreta. Over 80X of its present work is on eucalypt and its management but in the past it has studied a variety of topics that include indigenous, productive forest (primarily cork oak and cedar), exotic plantation species (primarily eucalypt and pines), ecology of sites (especially in Gharb/Mamora, the Rif and Middle Atlas) and the biology and control of various forest insect pests a-id pathogens. Results of these studies have been published in the Division's scientific journal Annales de la Recherche Forestiere au Maroc. Over the past decade, the Research Division has suffered from an increasing number of organisational problems. This has been addressed through the recent appointment of a new division chief. E. MARKETING OF FOREST PRODUCTS 2.19 Sale of wood products from state-managed forests is administered by the Forest Department (DEFCS) through annual descending auctions. To the basic auction price are added (a) an ad valorem 1OX tax which is transferred to the National Forestry Fund (FNF) (para 2.28) and (b) various administrative fees and taxes amounting to around 5X of the basic sale price. Primary wood products are sold at stump while raw cork is sold stacked in  -9 DEFCS warehouses. Auctions f.or primary wood products are usually held at the provincial level where loggers purchase and later resell lumber to other operators for processing (sawing, slicing, and peeling) or wholesale marketing in the case of building poles. What remains is used for fuelwood, most of which is transformed to charcoal on-site and sold in the country's urban centers. However, less than 10 of the estimated fuelwood consumption is marketed this way, most fuelwood being collected directly by the rural populations for thei: own needs. The markets are free except for eucalypt (see para 2.20). Auctions for cork are held once a year at the national level. Cork harvest, which used to be performed under force account, is now contracted out to private operators who are responsible for harvesting, transportation and stacking in the warehouses. 2.20 Pulpwood, is used by the single pulpmill in Morocco, la Cellulose du Maroc, which requires 350,000 ml a year. The mill has a contract with the Ministry of Agriculture until September 1993, whereby (a) the DEFCS is responsible for the supply of the required quantities of pulpwood and (b) the price of wood paid by the mill is fixed by a formula linking the local price to the international pulp price and adjusted on a yearly basis. In practice the DEFCS sells the eucalypt stand to loggers who are required by contract to deliver 55X of the standing wood volume in debarked logs of specified dimensions to the mill, at the fixed price, allowing for transportation costs. This fixed stumpage price is about half the price commanded by the same eucalypt as utility wood or standing poles on the free market. 2.21 Over the recent years, as the pulpmill expanded its capacity much faster than pulpwood production could increase, it proved impossible to meet the mill demand with domestic production and the mill now imports about 60% of its raw material. The supply contract induces substantial distorsion in the domestic eucalypt market. The negative implications are two-fold (i) the use of substantial DEFCS financial and human resources for the establishment and management of pulpwood plantations to accommodate the needs of a private pulpmill and (ii) the market distorsion which results in higher free market prices for other end-users. In consequence, this contract should not be renewed after it expires. Government and Cellulose du Maroc are studying means (i) to enable la Cellulose du Maroc in the long term to grow most of its own wood requirements using state land and (ii) in a transition period to provide la Cellulose with a guarantee of a certain portion of its needs from the domestic market, at a price determined by a study and taking into account prices paid by other local users of eucatypt wood and by foreign pulp industries (para. 4.11). F. THE FOREST INDUSTRY 2.22 Morocco's forest products industries can be divided into (a) mechanical wood processing industries, sawmilling and panel manufacturing, which provide semi-processed products for packaging, carpentry, furniture and construction, (b) wood pulp and paper making, and (c) cork processing industries. There is a sharp contrast between (i) industries which import  - 10 - most of their raw material or export most of their output (wood panels, pulp, and cork), which are medium-scale modern and rather efficient industries and (li) industries processing domestic wood for the home market which are small-scale and usually inefficient industries. 2.23 The weakest segment of the forest products chain is the logging and sawm_lling of domestic-forest. Loggers run small operations, have usually neither technical expertise nor adequate equipment and employ unqualified casual labor on a piece work basis, using only hand tools. Generally inefficient exploitation and logging methods have led to irregular mill supplies. In turn, sawmills relying on domestic supplies are old and inefficient and work only part of the year. To make better use of the locally produced logs it is essential to improve the quality of domestic wood supply by better silvicultural techniques and to reorganize and modernize the logging and sawmilling industry. 2.24 In Morocco the primary processing industries for forest products include about 30 sawmills, five wood-based panel products enterprises, one pulpmill, and eight cork p:ocessing industries. Except for the few sawmills converting imported logs, the mills saw local cedar and pine with recovery rates as low as 40 to 50X whereas at least some 701 ought to be obtained with better organisation. They produce about 40,000 m3 of sawnwood per year. Average annual production of veneers and plywood is about 50,000 mJ of which about 851 is used locally and the remaining 15X is exported. Annual production of particle board is about 25,000 m3 of which only 5 is exported. The pulpmill produces about 100,000 tons of bleached chemical hardwood pulp which at present commands high prices in world markets. Of the production, 801 is exported to European and Mediterranean countries, and the remaining 20X is sold on the local market. Morocco imports most of the pulp it consumes. Raw cork is processed in Morocco and exported as cork panels and cork. The main problems encountered are (a) keen competition from other producers, particularly Portugal and Spain, and mostly (b) irregularity and variable quality of raw material supply. Table 2.2 below indicates the composition of Moroccan trade in forest products in 1987.  . 11 - Table 2.2 TRADE IN FOREST PRODUCTS 1987 Value Share of Total (DH M) (X) 1. IMPORTS (CIF) Roundwood 304 (27) Sawnwood 611 (55) Veneers & Plywood 44 (4) Others 45 (5) Subtotal 1004 Pulp 104 (9) TOTAL Imports 1108 (100) 2. EXPORTS (FOB) Processed Wood Products 63 (13) Cork Products 87 (18) Pulp 333 (69) TOTAL Exports 483 (100) G. Forestry Letislation and Policies Forestry Legislation 2.25 The basic law governing forests in Morocco is the Law (Dahir) of October 10, 1917, as amended, and related implementing decrees and orders, on the conservation and use of forests. This law provides that all forests are in the public domain and vests MARA with the responsibility for their oversight. It codifies the traditional usufruct of the forests, which includes grazing and gathering of forestry products for personal use within the limits of available resources, as determined by MARA. HARA is required to establish, in consultation with the concerned communities, plans for each forest, outlining those areas in which grazing and gathering is permitted, the extent to which such activities in those areas are allowed, those areas to be closed off for regeneration activities and measures to improve forest pastures. To lessen the impact of forest regeneration activities on forest users, HARA customarily ensures that no more than 20X of the forest is closed at any given time to such users. The law also allows the government to restrict the clearing and logging of privately- or collectively-owned woods, as well as grazing in such woods, if necessary for soil conservation, erosion control or other environmental protection purposes, and to undertake  - 12 - reforestation activities i:. tLese areas. The law provides penalties for the unauthorized use of the Forest and forest products and vests the responsibility for enfotcing the law with MARA's forestry service. Finally, the law provides rules for the sale of forest products. 2.26 The basic law is supplemented by the Laws of March 4, 1925 and March 28, 1951 on the protection and demarcation of the argan forests (which cover and protect the pre-Saharan dunes in the south), the Laws of August 15, 1928 and June 20, 1930 on the conservation and use of esparto grass areas (in the east), the Law of September 8, 1928 concerning the protection and use of walnut trees, the Law of September 1934 providing for the creation of national parks, the Law of September 12, 1949 establishing a National Forestry Fund (FNF) for reforestation activities funded by taxes imposed on revenues derived from investments in the forestry sector, Law No. 1-69-170 of July 15, 1969 on soil conservation and erosion control, and Law No. 1-76-350 of September 20, 1976 providing an organizational and financial framework for the participation of local communities in the management of forests. The Law of July 15, 1969 on soil conservation and erosion control authorizes the government to designate as a protected area any area of land threatened with erosion and to I undertake works in this area to prevent erosion. It also authorizes the government to carry out conservation works on non-governmental land, at the expense of the requesting party, pursuant to agreements entered into with the land owners. Subsidies may be provided to such land owners. The Law of September 20, 1976 on local participation in forestry management provides for the establishment of Provincial Forest Councils, each comprised of the governor of the concerned province and representatives of local legislative and administrative bodies, as well as of the central government, and of a National Forestry Council comprised of the Ministers of Agriculture, Interior and Finance, and representatives of the provincial governors, the provincial forestry councils, and local governments (para 2.08). The national council proposes policies and measures for the development of forests and mediates conflicts between government and forest users. The law vests the local communal councils with responsibility for organizing the use of the forests within the parameters established by ARA. The law finally provides that all revenues derived from a forest (eg., from the sale of wood products, etc.) are allocated to the budget of the commune in the territorial jurisdiction of which the forest is located. The commune in turn is required to apply at least 20X of these revenues to investments in the forestry sector (para. 2.30). Although well intended, the law has rather reduced than increased public resources available for the management of the country's forest resources; whereas previously the treasury received all forest revenues, now they go to the communes without any deduction for the cost of maintenance and regeneration of forest resources which still is paid from the government budget. More generally in forest legislation, the gap that has developed between the law and the actual practice is a source of potential contentions which contribute to preventing an effective development of the country's forest resources. The National Forest Council, therefore, has recommended that forest legislation be reviewed and brought in line with present needs (see also para. 2.32). Draft amendments to the forestry laws have been prepared in the DEFCS and are now being discussed in the Government.  - 13 - Financing of Forest Ogerations 2.27 Reforestation activities are mainly financed from the government budget under various headings but other sources also exist. Of the presently reforested area of 0.5 M ha, about 60X has been financed over DEFCS's general budget for reforestation, about 20% from the National Forestry Fund (FNF), some 101 under soil conservation programs and most of the remainder under various projects or by the communes and only about 1 by private sources. A distribution of some 5 M seedlings to private individuals by the DEFCS should be added to this number. The Indicative Plan 1988-92 provides about DH 240 K per year for the DEFCS investment budget, of which about DH 90 N for reforestation. 2.28 Several funds have been established to finance DEFCS's activities. The most important of these is the National Forestry Fund (FNF) which is established in a special, extra budgetary, account (CHB no.35-16), which was created to promote reforestation on public, collective and private lands. The fund's resources are statutorily divided into two sub-accounts such that 102 of the resources are for forest research (35-16/1) and 901 of the resources are for reforestation (35-16/2). The fund was originally financed through a 102 tax on the auction price of forest products (para 2.19 viz. wood, cork and esparto grass). More recently, a matching duty of 101 on wood imports was considered to boost the funds available for reforestation that fell far short of needs but so far only 6X has been levied as part of the measures taken under ASAL-I. The proceeds from the sales tax and import duty are presently of the order of DH 20 M and DH 40 M, respectively. The FNF may also be replenished from the budget. 2.29 Since FNF advatnes funds for reforestation against projected revenues for the year, the annual allocations must receive prior approval by the Ministry of Finance. Approved funds are disbursed into a special operational account (CHB no. 36-00), from which they are spent. CHB 36-00 is also replenished from reimbursements for DEFCS plantations on collective or private lands (para 2.16). There are a number of other CHB accounts of less importance. CHB 35-15, the forest road maintenance fund, has annual revenues (and expenditures) of about DR 1.5 K from a user fee paid by the loggers. For the purpose of this project this fee was recently doubled. CHB 35-50, the hunting fund. has annual revenues of some DH 5 N from hunting taxes, licenses, leases, fees and fines. CHB 36-01, the soil conservation fund, is replenished through budgetary allocations and reimbursements for works on collective and private lands. Annual expenditures are of the order of DH 8 M. The accounts with numbers starting with 35- need annual budget approvals by the Ministry of Finance whereas the 36- accounts may be used as long as there are funds. An advantage with all these funds for DEFCS is that remaining funds at the end of the year can be carried over into the following year. 2.30 Another source of funds are the communes, which receive all the revenues from sales of forestry products originating from within their territorial limits (para. 2.26). In return they should invest at least 201 of these proceeds into reforestation, forest rangeland improvement, forest infrastructure sgch as roads, shelters and water-holes, fruit tree plantation  - 14 - and green spaces, at the commune's discretion. This formula has resulted in a major dlversion of funds from reforestation and in fact, between 1977 and 1984 it is estimated that only 2X (DH 10 M) of forest revenues (DH 570 H) has been invested in reforestation. However the communes' attitude has changed and presently it is estimated that some lOX of revenues, which are now at the level of about DH 130 N per year, are being invested in reforestation. Government Plans and Policies 2.31 Morocco is faced with a rapid deforestation, decreasing productivity of forest rangeland and growing erosion damage and in consequence, the government has been giving increasing priority to the forestry sector. This is reflected in the rising share of public investments in agriculture being devoted to forestry, which has increased from 7.3X to 8.5Z and 121 over the three public investment plan periods of 1973-77, 1981-85 and 1988-92, respectively. According to Morocco's indicative investment plan 1988-92, which allocates DH 1.3 B of public funds to forestry, the main long- term objectives of the sector include: (i) Protection and conservation of natural resources through measures against deforestation, soil erosion and desertification; (ii) Ensuring the maintenance of forest cover by demarcation of the forest estate, by rationalisation of wood exploitation and forest range management and by an increase in the regeneration of the natural forest and in plantation establishment; and (iii) For this purpose, improving the forest infrastructure and strengthening forest management based on forest inventory studies and the preparation of forest management plans. 2.32 The Plan expresses the need for an updating and complementing of forest legislation (see also para. 2.26) to address, in particular, the problems of desertification and of the development and financing of the sector. As one measure to protect the forest from over-exploitation, the Plan considers the buying back from beneficiaries, the usufruct of productive forests covering more than one million ha. The registration of the forest range users is also proposed. Other p.anned measures include increased participation of the rural communes in the financing of fencing where needed to protect zhe forest and to rationalise forest range management. Generally, the Plan expresses the need for encouraging private initiatives to invest in the forestry sector, notably in the areas of industrial reforestation and wood processing. To ensure import needs of sawnwood it expresses the need to encourage domestic wood indwx ries to exploit concessions which Morocco has obtained in some African countries. Subsidies are also being considered for  - 15 - industries switching -v non-wood energy sources. Many of these objectives and measures lack concrete proposals for implementation and this is being addressed with Bank support under ASAL II and in the proposed project. H. Constraints to Develoge nt 2.33 The main ;onstraints to a forestry development program commonsurate with Morocco's needs may be summarised as follows: (a) Increasing human and livestock pressure and non-participation of populations; (b) lack of sector plans and lack of data for planning; (c) inadequate funding; (d) obsolete and incomplete forest legislation; and (e) difficult ciimatic and ecological conditions restricting forest productivity. 2.34 The climatic and ecological conditions cannot be changed but more research is needed to develop suitable technologies that are more productive and better adapted to this environment. The active participation of the local populations is a sine gua n for a successful forest development program. Not only are they a potential source of investment funds but also their sometimes outright hostility to reforestation which involves the closing of forest rangeland for extended periods of time needs to be changed through infcrmation programs. In some areas these attitudes have already been successfully changed (para. 2.16). The severe government budget constraints make it necessary to seek other sources of finance, particularly the involvement of the wood processing industry and other private initiatives (eg. social and farm forestry) need to be promoted. However, in order to arrest the rapid deforestation and soil erosion in Morocco and to maintain existing assets and establish new forest resources in target-oriented programs, a comprehensive planning framework is required within which such activities can take place. The necessary data for such a planning framework are lacking and need to be generated. Also, the existing legislative framework is not always conducive to an effective resource management or is not properly applied. The Government is already reviewing forest legislation (para. 2.26) and the project would address the other constraints. I. Bank Involvement in Agriculture in Morocco 2.35 Bank Group lending to Morocco began in 1965. To date, 94 loans and credits have been made, supported by US$4.4 B Bank and IDA funds (US$45.2 H of IDA credits), net of cancellations. In agriculture, 15 projects have  . 16 - been completed, 10 are being implemented, and one has just been signed, totalling US$1.3 B of Bank Group lending. These include: eight irrigation grojects, Sidi Slimane (FY65), Sebou (FY70), Souss Groundwater (FY75), Doukkala I (FY76) and II (FY77), all completed, Two Small- and Medium-Scale Irrigation (FY83 and FY88) and a Large Scale Irrigation Improvement Project (FY86); seven agricultural credit projects (FY66, FY73, FY77, FY79, FY84, all completed, and FY86 and FY89), five rainfed aaricultural deve1ooment projects in the Meknes (FY75), and Loukkos (FY80) completed, Fes-Karia-Tissa (FY79), Middle- Atlas (FY82) and Oulmes RouruAni (FY83) areas; an agro-industrial and flood control project, Sebou 1I (FYt.. completed);a vejetable and marketing groiect (FY80 completed); a forestry groiect (FY82); and two agricultural sector adjusta4nt loans (FY86 and FY88) one of which has been satisfactorily completed. An agricultural research and extension 2roiect was signed in September 1989 but is not yet effective. 2.36 Performance of Bank-financed projects in agriculture has generally been satisfactory. Performance in irrigation projects has been good once initial problems of land distribution and organisational delays in construction and in procurement of irrigation equipment were overcome. The Project Performance Audit Report (PPAR) for the Sebou I Project (Loan 643-MOR) stresses the project's success in institution building and in contributing to increasing crop production. The PPAR of the Sebou II Project (Loan 1018-MOR) notes that the project was successful in introducing commercial sugarcane production and processing but stresses the vulnerability of investments in commodities like sugar which are subject to wide price fluctuations. An OED Impact Evaluation Report for Doukkala I and II projects (Loans 1201- and 1416- MOR) concluded that the projects complemented well Government's objectives of investing in large-scale irrigation to enhance domestic food self-sufficiency, boost export earnings and expand rural employment opportunities. The PPAR of the Souss Groundwater Project (Loan 1123-MOR) stresses the successful private land consolidation and public land distribution and cooperative establishment but highlights the neglect of maintenance due to inadequate funding and staff. This problem was subsequently addressed country-wide through the Large Scale Irrigation Improvement Project 'Loan 2656 MOR). Performance of the five completed agxicultural gredit projects has been good and the PPARs stress the contribution made to the country's agricultural development by the successful expansion of credit to small farmers. 2.37 Rural Develonment Projects. In the rainfed sector,the fitst project (Meknes, Credit 555-MOR) experienced considerable delays due to land redistribution problems, insuffic:.ent project preparation, optimistic implementation targets and managerment inexperience in Morocco. The following four projects, Fes-Karia-Tissa, Loukkos, Middle Atlas and Oulmes Rommani (Loans 1602, 1848, 2082 and 2217-MOR), which all have important forestry and soil conservation components, were designed to minimise such organisational and management problems and are progressing satisfactorily (Loukkos is completed) except that the completion dates have been considerably extended due to delays caused by the general financial crisis from which Morocco is now  - 17 - emerging. In the Fes-Karia-Tissa project, although the agricultural components have been successfully executed, the project has suffered particuiar delays to permit the implementation of the component for water supply to difflcult access areas. 2.38 Fo