Morocco - Industrial Infrastructure Project

Report No. PIC2697 Project Name Morocco-Industrial Infrastructure Project Region Middle East and North Africa Sector Industry Project ID MAPA40893 Borrower Kingdom of Morocco Implementing Agency Ministry of Commerce and Industry Avenue Mohammed V Rabat, Morocco Contact: M. A. El Mossadeq, Secretary-General Tel: 011.212.7.76.89.33 Fax: 011.212.7.76.01.92 Date PID Prepared September 1995 Projected Appraisal Date March 1996 Projected Board Date December 1996 Background 1. Morocco has made significant progress toward becoming an open and efficient economy. A policy environment conducive to private sector development has largely been put in place. Since the mid-1980s, Morocco's impressive economic growth, fueled by strong private sector export growth in the textiles and agro-industries, has been commendable. Despite this, the industrial sector is now facing the challenge of an increasingly integrated world economy and strong competition from a number of rivals. While the private sector has responded vigorously to new incentives, especially for exports, recent export gains are highly vulnerable to international competition and there remains much potential for diversification and growth. The Government of Morocco (GOM) is fully aware that in order to address this issue, two critical constraints to private investment in industry and product competitiveness, identified by the 1994 Private Sector Assessment, need to be resolved: (i) shortage of well-equipped industrial land and the associated trade facilitation, marketing, technical, and business services in order to improve productive private investment; and (ii) weak technology infrastructure which undermines quality and international competitiveness of private industry. Project Objectives 2. The main objective of the proposed project would be to alleviate two major bottlenecks to private investment in industry and enterprise competitiveness outlined in para 1. It would also support government initiatives to encourage private participation in infrastructure development, and contribute to increasing foreign direct investment. Project Description  3. The proposed operation would finance investments in off-site infrastructure development and technology infrastructure and provide technical assistance for setting up the legal and regulatory framework for increasing the supply of industrial land and for the development of Private Industrial Parks (PIPs), as well as for bid and concession document preparation and drafting model lease, sub-lease, and the cahier des charges for industrial park development and management companies (DMCs). In addition, a parallel partial risk guarantees operation might be envisaged. Specifically, the proposed project would have two major components: industrial parks component and technology infrastructure component. 4. Private Industrial Parks Component. Private industrial parks would be developed and managed by experienced DMCs. The DMCs will lease the land from the GOM and sub-lease to private enterprises. Land purchase, particularly by tenant enterprises, at market prices would also be possible. The DMCs will also: (i) mobilize private financing to develop the necessary infrastructure and services for the park; (ii) develop common facilities (e.g., maintenance, marketing, trade facilitation offices) and provide management and other services for the tenant enterprises; and (iii) act as liaison between enterprises and the central and local governments in such areas as trade facilitation. 5. The Bank assistance under this component would consist of (a) technical assistance to strengthen the legal and regulatory framework for private development of industrial parks under the project and in the future, as well as institutional capacity of the Ministry of Commerce and Industry and local authorities to draw up concession contracts and negotiate these contracts with DMCs; (b) providing financial assistance for off-site infrastructure development;(see 1/) (c) and, a possible partial risk guarantee, to facilitate private sector financing of PIPs. 6. Technology Infrastructure Component. At this stage, the exact scope of this component remains to be determined. The component would provide financial support for the necessary investment costs for the public sector (to be determined by the on-going consultant studies) and for the public sector institutions (to be identified by the on-going consultant studies). However, the probable sub-components would include:a) an industrial quality sub-component which would consist of the development of an efficient metrology, standards, certification, testing, and quality management infrastructure, to support the effort of private enterprises to respond to the needs of the importing markets, specifically in Europe and North America; and b) a quality management sub-component, which would introduce a number of pilot Moroccan enterprises, management methods to improve product quality. Project Benefits 7. The proposed project would contribute to enhancing the competitiveness of private industrial enterprises through reducing costs of doing business (such as industrial land costs, transactions costs, and trade facilitation) and environmental and safety hazards associated with existing industrial zones, as well as upgrading the quality and acceptability of Moroccan industrial products. Indirect benefits include: (a) attracting foreign investment; (b) encouraging private - 2-  financing and provision of industrial infrastructure; and (c) creating substantial local employment opportunities. Project Implementation 8. The proposed project will be implemented by the Ministry of Commerce and Industry, as well as private developers. The Ministry will use the services of reputable legal and architectural firms to assist in the feasibility study, bid document preparation, bid award, construction supervision, and commissioning of the project. The project contracts will be awarded according to the Bank's ICB procurement guidelines. Project Cost and Financing 9. Total project costs are tentatively estimated at $160 million, with a Bank loan currently estimated at $40 million. The possibility of cofinancing for the project will be investigated from different sources (EU, EIB, bilateral donors) in the form of grants and/or loans. Lessons Learned from Past Operations in the Country/Sector 10. The design of this project will draw on the lessons learned from the development of privately built and managed industrial parks, mainly in East Asia, as well as the Bank's experience in technology development projects and the results of an OED study of Bank lending for technology development. Poverty Category 11. Not applicable. Environmental Aspects 12. Consistent with the internal Bank requirements, the project is proposed to be classified in environmental screening category "A". Program Objective Categories 13. The proposed project, by enhancing the overall competitiveness of private industrial enterprises, directly addresses a wide array of private industry development issues. 1/ This would not exclude private sector investment in off-site infrastructure. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. -3 -