Morocco - Highway Sector Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-5103-MOR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOENT EQUIVALENT TO US$79 MILLION TO THE KINGDOM OF MOROCCO FOR A HIGHWAY SECTOR PROJECT JANUARY 8, 1990 This document bas a *estricted distribution and may be used by recipients only in the performance of their oftieial duties. Its contents may not otherwise be disclosed without Worie Bank authorization.  CURRENCY AND EOUIVA1ENT UNITS as of mid-1989 Currency unit - Dirham (DH) DH 1 - US$0.12 US$1 - DH 8.3 VEIGRTS AND MEASURES Metric System ABBREVIATIONS AfDB African Development Bank CSNEHA National Center for Vehicle Inspection and Testing (Centre National d'Essai et d'Homologation Automobile) MOT Ministry of Transport 1FW Hinistry sf Public Works PERL Public Enterprise Restructuring Loan SAL Structural Adjustment Loan  FOR OFFICIAL USE ONLY * KINGDON OF MOROCCO IGHWAY SECTOR PROJECT LOAN AND PROJECT SUMMARY Borrower: Kingdom of Morocco Beneficiaries: Ministry of Public Works and Ministry of Trarnsport Amoun"t: US$79 million Terms: Repayment in 20 years, including five years of grace, at the standard variable interest rate. Financing Plan: Government US$337.9 million AfDB (ongoing) US$ 77.1 million IBRD (ongoing) US$ 6.6 million AfDB (proposed) US$ 33.0 million IBRD (proposed) USS 79.0 million Total US$533.6 million Economic Rate Bank-financed Road Rehabilitation and Periodic of Return: Maintenance Programs: Range from 30% to 50%. Staff AnDraisal Report:No. 7983-MOR, dated January 8, 1990 IBRD 21695 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 Batik authorizr fion.j  MEMORANDUM AND RECOMNENDATION OF TUE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$79 MILLION TO THE KINGDOX OF XOROCCO FOR A HIGHUAY SECTOR PROJECT 1. The following report on a proposed loan to the Kingdom of Morocco in the amount of US$79.O million equivalent is submitted for approval. The proposed loan would be repayable over 20 years with five years of grace at the Bank's standard variable interest rate and would assist in (a) implementing a three-year priority program (1990-92) of rehabilitation and periodic maintenance; (b) strengthening the overall institutional framework by integrating road maintenance planning within a comprehensive pavement management system; (c) improving the organization of the road freight transport market through progressive deregulation and associated changes in road user taxation policy and in vehicle safety, and (d) enhancing the operations of the construction industry. 2. Backaround. Road haulage dominates the Moroccan inland transport market, handling over 90% of interurban passenger traffic and about 70% of freight traffic. However, because of restrictions on funding in recent years, road infrastructure now requires substantial rehabilitation or upgrading to meet the demand for improved levels of service. This includes (i) rehabilitation and maintenance of the classified road network, (ii) betterment of the rural roads network, (iii) modernization of parts of the classified network, and (iv)/bridge reconstruction and repair. Given the continuing need for macro-economic stabilization, Morocco cannot afford investments requiring large contributions from the Government budget, and has had to ado:.t in the 1988-92 Development Plan a strict strategy of public expenditir is rationalization. For the road sector this means postponing the road betterment and modernization programs [items ii) and iii) abovel, and giving utmost priority to the maintenance of the existing infrastructure and to improving the efficiency of transport operations. The proposed project would provtide essential support in this respect, thereby substantially reducing expenditures on deferred maintenance and ultimately on reconstruction in the future, and increasing the sector's contribution to the economic recovery. 3. Proiect Objectives. The proposed project would be the first Bank operation for the highway sector in the past five years and would introduce a broader, sectoral approach to the development of the highway sector and to road transport in general. The main objectives are to assist the Government in bringing sector investments in line with economic priorities, primarily by (i) concentrating resources on the preservation of existing roads, (ii) strengthening the overall institutional framework by optimizing the use of funds for road resurfacing and maintenance within a compreh-~ensive pavement management program, (iii) pursuing efficiency improvements iii the road transport market through progressive deregulation of the trucking industry and related adjustments in road user taxation, and (iv) pursuing efficiency improvements in the construction industry in lire with the Bank's efforts in the Maghreb region. As part of project preparation, the Bank assisted with an analysis of road user charges, which resulted in the establishment of a Road Maintenance Fund thereby ensuring  more stable resources for road maintenance operations. In addition, the priority road investment and maintenance program included under the proposed project is being monitored in terma of overall resource allocations, as part of the target investment program under the SAL. Finally, a National Transport Sector Master Plan Study, prepared as part of the PERL, has proposed a far-reaching program of reforma for the road transport industry which is currantly being reviewed by the Government. The initial steps in th