Morocco - Fourth Agricultural Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY L Cg PY Report No. P-2535-MOR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO CAISSE NATIONALE DE CREDIT AGRICOLE (CNCA) WITH THE GUARANTEE OF THE KINGDOM OF MOROCCO FOR A FOURTH AGRICULTURAL CREDIT PROJECT May 10, 1979 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 lank authorization.  Currency Equivalents US$1.00 DR 4.0 DH 1.00 = US$0.25 Fiscal Year: Calendar Year ABBREVIATIONS BNDE Banque Nationale pour le D4veloppement Economique (Moroccan Industrial Development Bank) CLCA Caisse Locale de Credit Agricole (Local Agricultural Credit Bank) CNCA Caisse Nationale de Credit Agricole (National Agricultural Credit Bank) CRCA Caisse Regionale de Credit Agricole (Regional Agricultural Credit Bank) IFAD International Fund for Agricultural Development KfW Kreditanstalt fUr Wiederaufbau  FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO FOURTH AGRICULTURAL CREDIT PROJECT LOAN AND PROJECT SUMMARY Borrower: Caisse Nationale de Credit Agricole (CNCA). Guarantor: The Kingdom of Morocco. Amount: US$70 million. Terms: Amortization 14 years including four years grace at 7.9 percent interest.l/ Project Description: The project aims to (i) improve the standard of living of about 475,000 of Morocco's 1,928,000 farm families, (ii) contribute to growth of agricultural production and to a decline in Moroccan dependence on imported food, (iii) create about 115,000 manyears of rural employment, (iv) generate value added from agro-industrial production, and (v) expand CNCA's capacity as an agricultural credit institution. The Project would do this by financing farm investments through CNCA during the period September 1979 to August 1982, including (A) investments by small farmers with incomes below 1.6 times the absolute rural poverty level, (B) investments by Agrarian Reform Coopera- tive and Farmers' Associations, (C) investments by medium and large farmer clients, and (D) agro-industry invest- ments. CNCA's monitoring and evaluation system would also be strengthened. About 40 percent of beneficiaries are expected to be small farmers whose present income falls beneath the absolute rural poverty level. The major Project risk is that of abnormally adverse weather condi- tions which would reduce crop yields and the Project's rate of return. 1/ These terms are justified on Project grounds. This document has a restricted distribution and may be used by recipients only in the performance l of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Project Cost US$ Million Estimates: Local Foreign Total Agricultural Machinery 33.0 49.5 82.5 Wells, Pumps, Irrigation Equipment 43.1 18.5 61.6 Transport and Other Equipment 29.3 29.3 58.6 Cattle and Sheep 165.4 45.0 210.4 Stables, Sheep Folds, Storage 79.5 53.0 132.5 Plantations 20.5 13.8 34.3 Land Improvement 15.2 6.5 21.7 Draft Animals 64.6 0.0 64.6 Agro-Industry 34.3 34.4 68.7 Other Farm Investment 1.3 0.0 1.3 Monitoring and Evaluation .5 0.5 1.0 Total 486.7 250.5 737.2 Of which Price Contingencies 45.8 23.6 69.4 Of which Taxes 52.0 - 52.0 Financing Plan: CNCA Lending Sub- CNCA Total Borro- Govern- Own Total Project Category wers ment Funds IBRD IFAD KFW CNCA Cost -----------------------US$ Million-------------------- PART A. Small Farmers 104.0 2.0 163.0 29.9 25.0 24.5 242.4 348.4 B. Cooperatives and Associations 16.3 12.0 32.5 8.7 0.0 7.1 48.3 76.6 C. Medium and Large Farmers 72.8 0.0 128.7 22.6 0.0 18.4 169.7 242.5 D. Agro-Industry 34.3 0.0 26.0 8.3 0.0 0.0 34.3 68.7 E. Monitoring and Evaluation 0.0 0.0 0.5 0.5 0.0 0.0 1.0 1.0 Total 227.4 14.0 350.7 70.0 25.0 50.0 495.7 737.2 Estimated Disbursements: FY80 FY81 FY82 FY83 ----------- US$ Million -------- Annual 14.4 21.3 27.4 6.9 Cumulative 14.4 35.7 63.1 70.0 Rate of Return: Economic Rate of Return: 20 percent. Social Rate of Return: 14 percent (see para. 59). Appraisal Report: "Appraisal of a Fourth Agricultural Credit Project, Morocco," No. 2426-MOR, dated April 30, 1979.  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE CAISSE NATIONALE DE CREDIT AGRICOLE WITH THE GUARANTEE OF THE KINGDOM OF MOROCCO FOR A FOURTH AGRICULTURAL CREDIT PROJECT 1. I submit the following report and recommendation on a proposed loan to the Caisse Nationale de Credit Agricole (CNCA) with the guarantee of the Kingdom of Morocco for the equivalent of $70 million to help finance CNCA's medium- and long-term credit program. The loan would have a term of 14 years, including 4 years of grace, with interest at 7.9 percent per annum. The pro- ceeds of the loan would be onlent to project beneficiaries for up to 12 years, including 3 years of grace, with interest on the agricultural credit subloans at the prevailing rates for agriculture in Morocco and on the agroindustry subloans at prevailing rates for small scale industry. Joint financing is expected for the program by the International Fund for Agricultural Develop- ment (IFAD) through a $25 million loan to CNCA, and by the Kreditanstalt fur Wiederaufbau (KfW) through a German Deutschmark 94 million loan (equivalent to about $50 million) to CNCA. PART I - THE ECONOMY 1/ 2. A report entitled "Country Economic Memorandum on Morocco" (1473-MOR) was distributed to the Executive Directors in June 1977. An economic mission which visited Morocco in February/March 1978 was followed by a basic economic mission in November 1978. A basic economic report is under preparation; preliminary findings and conclusions of these missions are reflected in the following paragraphs. Country Data Sheets are attached as Annex I. Recent Developments 3. In 1977, Morocco completed the return towards a constitutional mon- archy. Having marshalled a strong national consensus over the Western Sahara issue, King Hassan II called municipal, provincial and national elections between November 1976 and April 1977. Opposition parties with platforms stressing social reform scored strongly in municipal elections in the larger cities, while at the provincial level, rural constituents supported Government candidates, who eventually obtained a majority of 141 seats out of 264 in the National Assembly. With the new Government formed in October 1977, both the Istiqlal party which had been in the opposition since 1963, and the Mouvement Populaire whose main support is in the Berber population returned to political responsibility. The Cabinet was appointed with the mandate to prepare and implement economic austerity measures, the first of which were introduced in the 1978 Budget Law, and to pursue the social development objectives set out in the 1973-77 Development Plan. A new Cabinet formed in March 1979 is expected to pursue the same policies. 1/ This part is substantially the same as paragraphs 2 to 16 of the President's Report No. P-2519-MOR on a Loan for a Village Electrifica- tion Project, dated April 26, 1979.  - 2 - 4. Morocco's economic and financial situation became increasingly unbalanced towards the end of the 1973-77 Plan. Rapid growth of investments and imports, carried over from 1974-75 when phosphate export revenues reached an all-time high, and despite some Government restrictions, did not slow down, while the world demand for Morocco's main exports, especially phosphate, recovered only moderately. At the same time, efforts to increase budgetary savings were insufficient to meet the continued increase in investment and military expenditures. As a result, in 1977 Morocco faced again a large resource gap (21 percent of GDP) and overall budget deficit (19 percent of GDP). To cover these, it sharply increased external borrowing to $1.9 billion (commitments), from $909 million in 1976 and $780 million in 1975; most were from commercial sources. Despite these borrowings, the country's net foreign assets stayed at a low level (1.2 months of 1977 imports by year's end). On the domestic side, external borrowings fueled monetary expansion which remained rapid in 1977; consumer prices rose 12.5 percent over 1976 compared to about 8 percent in the previous 2 years. 5. By and large, the Government has succeeded in regaining control over the excessive increases in investment and external borrowing experienced towards the end of the 1973-77 Plan. Investment has since been reduced by an estimated 25 percent in real terms, and so has external borrowing which at $1.3 billion of new commitments was, however, still large and mostly on commercial terms. The Government has achieved these improvements through budgetary austerity, including severe cuts in public investment, restraint in current spending and some tax increases; it applied selective import restrictions and controls on private credit preserving as much as possible the growth momentum of private sector output and exports. A good agricultural crop in 1978 helped sustain growth, despite a sharp decline in construction activity largely resulting from cuts in public investment plans; overall, GDP grew by an estimated 4 percent in real terms in 1978. 6. The Government will have to pursue austerity policies for a while, considering the continued excessive resource gaps and low exports and savings which cannot be increased quickly for reasons largely beyond the Government's control. Instead of the 1978-82 Plan, the Government has introduced a three- year interim plan (1978-80) which was approved by Parliament in December 1978, together with the 1979 Budget Law. Its main objectives are to further reduce the budget and current balance of payments deficits, and to concentrate avail- able resources (after meeting defense requirements) on productive projects, education and health, especially insofar as these benefit the neediest popula- tion groups. Implementation of major public projects not meeting these criteria has been postponed, while the measures designed to preserve growth in the private sector have been strengthened. Recently, the Government agreed with the IMF on a short-term financial rehabilitation program for 1979. This program calls for continued limitation of budgetary expenditures, domestic credit expansion and new external borrowing, while maintaining selective import restrictions and credit controls favoring productive private activi- ties. It is aimed at reducing the overall budget deficit by 15 percent, and narrowing the current balance of payments deficit by more than 30 percent. Assuming harvests are equal to those of 1978 and phosphate exports increase by  - 3 - 6 percent in quantity and 7 percent in value, real GDP growth in 1979 again may still not exceed 4 percent. Gross official reserves would stay around 1.5 months of imports. 7. While the interim measures may be effective in re-balancing the economy, because of the short-term constraints on exports and savings, they might cause a rise in social pressures. The Government is therefore anxious to resume the more dynamic social policy stance which characterized Moroccan development during the 1973-77 Plan. Preparation of the 1981-85 Plan has begun and attention is being given to long-term reforms which are needed if an early resumption of more rapid economic and social progress is to be achieved. Economic Development Issues and Prospects 8. Bank projections summarized in Annex I reflect the Government's keen concern to avoid a liquidity crisis in the next two to three years. They assume sharp policy adjustments to keep the economy on a financially viable growth path over the long run, but also reflect the desire to maintain adequate GDP and employment growth during the interim period, and to achieve further progress towards the country's social objectives. The projections show that investment and GDP growth will have to be curtailed for the next two to three years, given the constraints on savings and exports. In this period, Morocco will need substantial capital transfers from abroad on terms as favorable as possible to sustain the project investment and GDP growth. Beyond 1982, export prospects should enable Morocco to resume more rapid growth of investments, output and employment while progressively reducing the relative burden of debt and debt service. 9. Following the large windfalls in foreign exchange and domestic sav- ings caused by high phosphate prices in 1974-75, the investment target was raised to meet cost increases, permit some real expansion of original invest- ment programs, and undertake large capital-intensive projects geared to import substitution (in particular sugar, chemicals, shipping and steel). Thus the GDP growth target for 1973-77 was nearly met, and investment rose to nearly 32 percent of GDP in 1977 from less than 14 percent in 1972. In the process, Morocco built up its capacity to prepare and implement projects not only in traditional sectors such as irrigation, import-substitution industries and physical infrastructure, but also in new and more difficult sectors such as rainfed and small-scale agriculture, export industries, and socially-oriented programs. There is little doubt that Morocco can achieve the investment levels assumed in the Bank projections, the main constraints being domestic savings and foreign exchange availability. 10. Domestic savings have been falling in relation to GDP after the brief increase during the phosphate windfall years, mainly due to low public savings of only 4.7 percent of GDP in 1977. Successful efforts to raise public revenues to 28 percent of GDP in 1977 were offset by increases in current spending, partly for education and health, but particularly for price subsidies and military expenses. Tax reform measures (which are being prepared with IMF assistance) and unpopular price policy decisions, such as reduction  -4- of subsidies to urban consumers, farmers and industrial investors, will be required to increase public savings. Interest rate adjustments to reflect changes in the rate of domestic price inflation would also be called for. 11. During the 1973-77 Plan period, exports rose by less than 2 percent p.a. in real terms (the Plan target was 10 percent). This lackluster per- formance was largely due to weak external demand for Morocco's main export products since 1974, especially phosphate, other minerals and agricultural products. Moreover, with some exceptions, such as textiles, export produc- tion and marketing efforts were not sufficient, and new markets were not aggressively sought; Morocco continued to depend on demand from the EEC, especially France. Yet, it has considerable export potential if only products and markets were diversified. Export programs are now under preparation particularly for phosphate and its derivatives, fresh and processed food- stuffs, and tourism. With regard to phosphate, for example, Morocco and the USSR signed agreements in March 1978 under which Morocco will export phosphate rock and phosphoric acid for the next 30 years for possibly up to 10 million tons per year by 1985-86; in return, the USSR will lend Morocco up to $2 billion on favorable terms to develop its phosphate export capacity and will export various commodities and goods to Morocco, including crude oil. These agreements substantially improve Morocco's long-term prospects for phosphate exports. 12. While the emphasis on completion of high-return projects will have to continue, Morocco should shift away from highly capital-intensive, import substitution investments, as well as from some ambitious programs for phys- ical infrastructure. This would call for improvements in policy planning and investment programming. Consultants are currently completing a major study on industrial investment strategy, which should facilitate better investment selection. A changed investment pattern should reduce the external resource gap, and also contribute to higher growth and employment at lower investment and import costs than in recent years. Social Development Strategy 13. Comparatively slow economic growth and employment creation up to the early 1970's were accompanied by widening income disparities and a decline in real consumption for the weaker sections of Morocco's population. As a major objective, the 1973-77 Plan set out to reverse these trends. The Government's strategy since 1973 has emphasized: (i) acceleration of employment creation; (ii) measures aimed at reducing income disparities; and (iii) specific invest- ment programs to benefit the least favored population groups. 14. Progress has been made towards these objectives, as witnessed by the increased expenditures for social sectors (from DH 1.3 billion in 1972 to DH 3.7 billion in 1977). However, the institutions created to meet social sector objectives are in many cases still fragile. Understaffing, weak policy analysis and inadequate program formulation are common. As a result, public programs to improve productivity, collective amenities and social services are reaching relatively small proportions of the population, especially in rural areas. In addition, during the period of financial stringency ahead,  Morocco will not be able to sustain the current level of expenditures in socially-oriented sectors, and cuts have been made as part of the measures to re-balance the economy. 15. With the population growth rate now at about 3 percent, pressure to provide adequate social services will rise. Despite short-term financial constraints, efforts will be needed to limit such growth. Consequently, strengthening health and family planning services is now an integral part of the Government's social objectives. External Debt and Debt Service 16. Morocco sharply increased external borrowings after 1973 (para. 4). Nearly all of the increase came from Arab and commercial sources. With a hardening of terms on new commitments, average maturity dropped from 19 to 10 years and average interest rose from 5 to 7.5 percent between 1974 and 1977. Morocco also drew on the IMF automatic credit facilities in early 1976, and obtained about US$70 million in IMF compensatory financing in August 1978. From the low levels in 1974-75, Morocco's external debt has risen rapidly to an estimated $4.0 billion (disbursed only) at the end of 1978, and in that year debt service amounted to $481 million (18 percent of exports and workers' remittances). As a result of recent and projected borrowings, debt and debt service may be expected to increase further, and debt service may exceed 25 percent of exports and workers' remittances by 1980-82, and decline progres- sively thereafter. The country's net foreign assets would remain at a rela- tively low level. Because of the expected upswing in debt service, external debt management has become more restrictive and selective since 1978. If debt service is to stay manageable, Morocco will have to continue this policy over the next few years. Additional commercial borrowing should be limited, and efforts should be increased to seek loans on softer terms. Yet, external borrowing needs would be sizeable. Beyond 1980-82, however, the situation should progressively improve with the Government firmly controlling domestic demand and with good long-term prospects for exports and, in particular, with assured sales of phosphate rock and derivatives. Morocco should therefore be considered creditworthy for further Bank lending. PART II - BANK GROUP OPERATIONS IN MOROCCO 17. Bank and IDA lending to Morocco has supported 40 projects, financ- ing a total of $1,106.9 million, 1/ net of cancellations of which $886 million has been lent since the beginning of FY73. IDA credits, totalling $50.0 million, have been made available for five projects. A Third Window loan for $25 million for the third education project was approved in March 1976. IFC 1/ Including two loans approved in April 1979, the first of $113 million for the Fourth Education Project and the second of $25 million for an Integrated Project for Small Industry Development.  -6- investments have amounted to $12.6 million ($10.5 million after cancellations, terminations, repayments and sales). Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1979, and notes on the execution of ongoing IBRD/IDA projects. In some cases, delays in project implementation have been caused by management or procurement dif- ficulties, and in 1974 cost overruns increased due to the upsurge in invest- ment activity in Morocco and the acceleration of inflation. Overall perfor- mance in project execution, however, has considerably improved in recent years. Total disbursements as of December 31, 1978, amounted to 72 percent of original appraisal forecasts and to 75 percent of revised forecasts. 18. Past Bank Group lending has been concentrated in the agricultural and industrial sectors, which have accounted for 27 and 32 percent respec- tively of total net commitments; the balance is represented by utilities (14 percent), education (14 percent), tourism (7 percent), roads (4 percent) and urban development (2 percent). Apart from the transfer of resources to Morocco (Bank Group gross disbursements amounted to 5.5 percent of total fixed investment in 1970-74), the main objectives of lending were to foster and strengthen development institutions, provide technical assistance especially for project preparation, and increase productive capacity, in order to improve the balance of payments. 19. While these objectives remain, greater emphasis is being given to prepare projects that support the Government's policy of fostering social development and improving income distribution. An increasing share of Bank Group lending will be devoted to projects directly or indirectly developing the productive capacity of the lowest urban and rural income groups and meeting their basic needs, including, possibly, Bank participation in the Government's program for promoting integrated regional development, which is under discussion. 20. Past lending for agriculture has supported irrigation development, credit and, through a first operation in FY75, improvement in the produc- tivity of rainfed farming. Continued selective lending for irrigation is envisaged but emphasis will be increasingly given to support small farmers and the development of rainfed areas. The Fes-Karia-Tissa Agriculture Proj- ect, approved in June 1978 was the second, after the Meknes Project to directly address these objectives. In addition to the proposed project, an integrated rural development project including livestock and forestry development is under preparation in a rainfed zone in northern Morocco. A project aimed at developing production and marketing of off season vegetables for export markets has recently been appraised. 21. Projects in industry and tourism have had as key objectives increased foreign exchange earnings or savings and the improvement of sectoral policies, which have taken on increased importance in view of the country's short-term resource constraints. The eighth loan to Banque Nationale pour le Developpe- ment Economique (BNDE) which was approved in 1977, included a pilot small- scale industry component to promote labor intensive investments. This pilot effort led to the recently approved Integrated Project for Small Scale Indus- try Development. The loan to Maroc Phosphore made in 1978 will help increase  - 7 - Morocco's foreign exchange earnings. Continued lending for industry through the BNDE is contemplated as well as further lending to Credit Immobilier et Hotelier (CIH) for tourism development. 22. Previous lending for utilities has consisted of one loan for water supply, two loans for power generation and a recently approved loan for village electrification and one engineering loan for the preparation of a sewerage project for Casablanca. A follow up project for water supply and distribution in urban centers, including distribution to low income urban consumers, was recently negotiated. A sewerage project in Agadir is under preparation. 23. Education continues to need attention to ensure Morocco's manpower development. Two credits and a loan have been made to develop secondary education and teacher training, to improve technical and vocational training, and to expand facilities in rural areas. A fourth project with emphasis on technical education has been recently approved. 24. The Rabat Urban Project (FY78) was the first Bank-financed project in the urban sector. Follow up projects are under preparation to support the Government's program for slum upgrading and urban development through the provision of basic infrastructure, housing and social services and the crea- tion of employment opportunities. 25. Loan commitments from multilateral and bilateral official sources to Morocco rose from $221 million in 1975 to $296 million in 1976, and dropped from $831 million in 1977 to $370 million in 1978. Major sources of aid were France, Saudi Arabia, the UAE, the U.S., Germany and the Bank Group. At the end of 1978, the Bank Group's share in Morocco's outstanding and disbursed external public debt was 11.2 percent. The share of the Bank Group in debt service was 24 percent in 1976 and declined to 18 percent in 1977, and 9.5 percent in 1978. By 1983 the Bank Group's shares in debt outstanding and in debt service are expected to be about 25 percent and 12 percent respectively. PART III - THE AGRICULTURAL SECTOR Agricultural Performance 26. Morocco's population in 1977 is estimated at 18 million of which about 60 percent live in rural areas. During recent years annual population growth has averaged 2.9 percent overall, with the urban sector growing at 4.8 percent per annum and the rural sector at 1.8 percent per annum. Rural- urban migration accounts for the difference. In 1977 agriculture contributed about 14 percent of GDP, employed about 40 percent of the labor force and accounted for about 35 percent of total exports, compared to an average of about 21, 60 and 42 percent respectively in the early 1970's. The decline in agricultural exports is due in large part to the increase in phosphate produc- tion, most of which is exported.  -8- 27. Morocco has a total land area of 50 million hectares of which 7.4 million have soils and moisture suitable for cropping, and 20 million are in semi-arid or mountain regions suitable for grazing and forestry. Of the 7.4 million hectares of agricultural land about 5.8 million hectares are cul- tivated each year while the remainder is left fallow. Of the cultivated land about 4.5 million hectares are planted under cereals, 500,000 hectares under pulses, 400,000 hectares under fruit trees, 100,000 hectares under vegetables, 60,000 hectares under sugar beet, and the remainder under oilseeds, cotton and forage crops. Permanent irrigation covered 690,000 hectares in 1977. 28. Over the last 15 years agricultural output, which remains subject to wide annual fluctuations due to variations in climatic conditions, grew at an average rate of 2.4 percent per annum, below the growth in demand for foodstuffs caused by a rapid rate of urbanization and by income and population growth. The value of food imports increased at an average of 21 percent per annum (9.6 percent in volume) while agricultural exports grew at 6 percent per annum in value but declined 1.2 percent in volume. The expansion of agricul- tural imports, along with some switching of exportables to domestic consump- tion, has permitted maintenance of a generally adequate food supply and nutritional level for Morocco as a whole, although recent data indicate that some rural population groups may have experienced a slow decline in consump- tion on a per capita basis accompanied by some nutritional deficiencies mainly because of increasing population pressures on cultivable land. 29. Growth of output has varied between agricultural products. Progress has been rapid where modern farming techniques and inputs could be introduced rapidly and where prices permitted net income per hectare and per day of family labor to be attractive: sugar beet, sugar cane, milk, and vegetables. For other crops such as cereals and pulses where the Government has not yet been successful in modernizing farming practices and for crops such as oilseeds, cotton and maize where prices have been pegged at insufficiently remunerative levels, the Government has met with limited or no success. 30. Under Morocco's Three Year Interim Plan 1978-80, agriculture would receive $963 million, 18 percent of planned investment, the same proportion as under the 1973-77 Plan. A further $300 million equivalent in agricultural credit to finance farm investment would be lent to farmers by the Caisse Nationale de Credit Agricole (CNCA), the borrower under the proposed project. In view of the priority given to completing ongoing projects in the current period of austerity, the intersectoral allocation of Government investments remains virtually unchanged with about 57 percent for irrigation projects; 16 percent for the extension service and rural development projects; 6 percent for livestock; 5 percent for forestry and soil conservation. For the future, the Interim Plan 1978-80 suggests a policy shift away from irrigation towards rainfed projects that are increasingly recognized as being central to achiev- ing agricultural self-sufficiency and reducing income disparities. To achieve these new objectives would require a major preparation effort during the Interim Plan period.  -9- Agriculture Sector Issues 31. As part of its social policies, the Government purchases hard wheat and barley at an official support price and fixes the price for soft wheat, milk, most industrial crops, bread, sugar and vegetable oils. It also inter- venes in the agricultural sector through controls on imports, foreign exchange transactions, interest rates and the price of inputs including fertilizer and high yielding seeds. Agrarian Reform Cooperatives and Farmers' Associations receive special subsidies. These price controls and subsidies are adminis- tratively cumbersome and inefficient: some agricultural prices have been kept artificially low discouraging production and encouraging imports. The urban poor only receive a small percentage of consumer food subsidies while the wealthier farmers benefit most from agricultural input subsidies. Although these price distortions may lead to suboptimal investment decisions by farmers, they are not such as to compromise the economic viability of farm investments in general and the components retained by the proposed project in particular. The Government is committed to study this complex issue and an understanding has been reached that the Bank would be consulted in the context of its ongoing economic and sector dialogue on the follow up measures to be proposed. 32. About 40 percent of the rural labor force does not have permanent employment and about 45 percent of farm families are estimated to be living at or below the absolute rural poverty level ($200 per capita). Despite a rise in real per capita income, there is evidence that population pressures have increased in mountain, forest and arid areas where agricultural production could not yet be increased commensurably. With employment opportunities unchanged, the population groups living in these areas have tended to expe- rience declines in per capita income whenever migration elsewhere in Morocco or abroad was not possible. The Government is aware of the need to redress this situation and reduce income disparities, both through agricultural projects, such as the proposed project, under which 40 percent of the bene- ficiaries are expected to be in rural poverty target group, the Fes-Karia- Tissa project and the Doukkala Irrigation projects, and through a regional development program focussing on less developed zones which is under prepara- tion with Bank assistance. 33. Distribution of land in Morocco is relatively skewed with about 75 percent of the farm families owning 5 hectares or less and accounting for 25 percent of the agricultural land. Farms are excessively fragmented with 1.9 million farms divided into 11.6 million parcels averaging about .64 hectare. Absentee landlords and tenancy arrangements that afford tenant farmers little security of tenure and consequently no incentive to invest in or improve the land, have constrained use of agricultural credit and distorted the distribu- tion of agricultural credit in favor of large farms. Several land reform measures are under study including a limitation on the division of land below a minimum size, obligatory land consolidation, revision of tenancy arrange- ments and increased recovery of investment costs incurred by the State through land betterment levies and user charges.  - 10 - 34. During 1973-77 meat production grew at 3.7 percent per annum and milk production 5.6 percent. For cattle this growth was associated with increased milk and meat yields while for sheep and goats it led to overgrazing of pastureland and a decline in yields, along with destruction of vegetative cover, erosion, and desertification. To meet anticipated demand for meat and dairy products, the Government intends to intensify cattle and sheep produc- tion, concentrating herd development on farms able to grow forage, by the introduction of high yielding imported breeds, the provision of improved technical and health services, and the creation of livestock cooperatives and infrastructure. Medium-term credit for livestock development based on farm cultivation of forage and industrial crops which provide residues used for animal feed would be provided under the proposed project. 35. Agricultural research is theoretical and is not oriented toward farm profitability. Research priorities are developed in isolation from production priorities. The extension service is encumbered with admin- istrative tasks, employs agents with little practical farming experience, and lacks organization, materials, and a systematic method for extension. The Interim Plan 1978-80 calls for measures to reduce the administrative and regulatory responsibilities of extension agents and to increase the time they devote to technical advice along the lines set out in the Bank financed Fes-Karia-Tissa Agriculture Project. A gradual improvement in the extension service may therefore be expected, leading to a more productive use of credit. 36. Experience in Morocco has shown that tractors can prepare the land and permit fertilizer and high yielding seeds to be applied rapidly before the first rainfall so as to gain the maximum advantage from Morocco's short period of rainfall. They have led to more timely and better quality land preparation than animal drawn implements and allowed farmers to replace draft animals with livestock. Research indicates an average 0.3 ton/ha increase in cereal yields can be achieved by mechanization. Analysis of CNCA mechanization loans shows good economic and financial returns, although there is some labor displace- ment. Morocco does not subsidize mechanization and the modest expansion to be financed by the proposed project, which would be limited to farming units of a size for which animal or human cultivation and harvest would be uneconomic, is appropriate. 37. During 1973-77 value added in agroindustry accounted for 7 percent of GDP and 42 percent of the manufacturing total. Employment in both the traditional and modern sectors is estimated at 45,000 or about a quarter of employment in the manufacturing sector. Annual investments have averaged DH 200 million or 10 percent of large and medium scale investments in indus- try. The industrial investment code which provides incentives to larger scale modern units has had a tendency to encourage excess capacity, although in some branches this has occurred because anticipated agricultural growth has not been achieved. Future growth of agroindustry is expected to exceed population growth due to a rapid rate of urbanization and rising per capita incomes, both associated with higher consumption levels for processed foods. Furthermore, capacity is becoming constrained in certain branches and in others full capacity utilization, at least locally, is expected to be reached by the early 1980's: olive oil and oilseed trituration, sugar beet processing, sugar refining, milk pasteurization, animal feed, cold storage, and vegetable  - 11 - canning. Finance for large scale projects is generally available from foreign and local sources including the Moroccan Industrial Development Bank (BNDE) and the Moroccan Government. Small and medium scale agroindustries have not received adequate attention. Their expansion has been constrained by lack of finance, technical competence and skilled labor and experience in dealing with financial institutions and the Government. These issues are addressed by the small scale agroindustry component of the proposed project which would be directed to industries where capacity is not sufficient and would help over- come the above constraints. CNCA's experience in the rural sector and its extensive branch network make it a suitable institution for carrying out this function. 38. Over recent years, the Bank's strategy in the agricultural sector has supported the Government's objectives of increasing economic agricultural production to meet basic food needs and to work towards agricultural self- sufficiency, while placing increased emphasis on social aspects, particularly the inclusion of the rural poor target group and a shift in investments from large scale irrigation towards rainfed agriculture. Within this framework, support of agricultural credit which finances a large percentage of directly productive farm investments has figured importantly: Bank funds under the Third Agricultural Credit Project served to refinance subloans to small farmers and cooperatives, including large numbers living at the poverty level. In this respect CNCA's performance has been one of the best in the region. The Bank strategy also recognizes the need to support highly productive export oriented projects as part of an overall national policy to promote exports. Irrigation and small scale agroindustry projects would be developed in a manner which would develop their complementarity with rainfed farming. Performance Under Previous Bank Financed Agricultural Projects 39. Bank Group lending for agriculture in Morocco began in 1965 and to date 11 projects have been undertaken and supported by $343 million in Bank/IDA funds ($24 million of which in IDA credits). They include five irrigation projects: Sidi Slimane (FY75, completed), Sebou I (FY70), Souss Groundwater (FY75), Doukkala I (FY76), and Doukkala II (FY77). There have also been three Agricultural Credit Projects (FY66, FY73, FY77), an Agro- industries and Flood Control Project (Sebou II, FY74), and two Agricultural Development Projects focussing on rainfed agriculture in the Meknes (FY75) and Fes-Karia-Tissa (FY78) areas. Project performance to date is generally satisfactory although irrigation projects suffered initially from problems of land distribution, insufficient cost recovery, organization and delays in the construction and in acquisition of irrigation equipment. Poor coordination between and within participating Ministries was a primary cause of these problems. For the Meknes Project, the major issues have been the difficulties in establishing, and delays in executing, the land redistribution program, as well as a poor coordination betwen the Project Authority and the Central Government. These issues are now largely resolved. 40. There have been three Bank financed Agricultural Credit Projects in Morocco for which CNCA was the borrower. The First Agricultural Credit Project (FY66) for $10 million covered the period 1966-69, and financed investments  - 12 - undertaken by about 6,000 medium and large farmers and the farm equipment and machinery purchased by a State company managing land taken over from foreign settlers. The Project was audited by the Operations Evaluation Department (OED) 1/ which attributed the Project's mixed results principally to CNCA's shortage of qualified staff and to Government's interference in CNCA operation by directing CNCA resources to small farmer lending not approved by the Bank, and by dissolving the State company receiving Bank financing without prior notification to the Bank. Nonetheless, investments financed by CNCA credit generated an increase in the income of beneficiaries. 41. The Bank provided a loan/credit of US$34 million to CNCA (FY73) for the Second Agricultural Credit Project covering the 1973-1976 period to finance medium and large farmer investments in grain farm equipment, citrus plantation development, winter vegetable production, marketing facilities, dairy, cattle, and sheep operations. Excluded from the Project were loans to small farmers on the grounds that CNCA would be taking an unjustified finan- cial risk by financing small farmers without a prior appraisal of their investments. About 17,000 mostly large farmers benefitted from this Project. 42. With the Third Agricultural Credit Project (FY77) the scope of CNCA activities subject to refinancing was enlarged to include agrarian reform cooperatives, farmers' associations and small farmers, the latter in view of the good results obtained by CNCA in financing small farmers outside the Bank's Second Project. The Bank loan of $35 million should be fully disbursed as foreseen by August 31, 1979, and will finance about 13 percent of CNCA Project lending. A parallel loan of KD 7 million (about $31 million equivalent) by the Arab Fund for Economic and Social Development is likewise being disbursed on schedule. By 1977, CNCA reached about 17 percent of Morocco's 1,928,000 farms; about 40 percent of its clients lived at or below the absolute poverty level when the loans were made. A net gain of about 52,000 manyears of employment is expected under the Third Credit Project. Analysis of a sample of CNCA loan recipients indicates a project economic rate of return of about 20 percent. Project issues, which are dealt with under the proposed project, include negative real interest rates, CNCA's need for: (i) more agricultural staff in order to serve clients and supervise loans; (ii) more efficient lending norms for small farmers; and for (iii) improved monitoring, evaluation and information flow. IV. THE PROJECT 43. The Government of Morocco and CNCA the National Agricultural Credit Bank have requested a Bank loan to help finance a Fourth Agricultural Credit Project. Project objectives are to finance farm investment and small scale 1/ "Operations Evaluation Report--Agricultural Credit Programs", Report No. 1357 of November 18, 1976.  - 13 - agroindustry in order to stimulate agricultural and agroindustrial growth, increase rural incomes and provide rural employment. The project would also assist CNCA resolve the issues raised under the implementation of the Third Agricultural Credit Project (para. 42). The project was identified by CNCA with the assistance of Bank missions during November 1977 and July 1978 supervising the Third Agricultural Credit Project. Project preparation was carried out by CNCA according to terms of reference agreed to during the July 1978 Bank preparation mission. A Bank appraisal mission visited Morocco in November 1978. Negotiations for the proposed loan were held in Washington on April 16-20, 1979. CNCA was represented by M. Kadiri, General Manager of CNCA and the Guarantor by M. Belkoura, Prime Minister's Office. Negotiations between the International Fund for Agricultural Development (IFAD), CNCA and the Government were held in Rome on April 26 and 27. An appraisal report of the Fourth Agricultural Credit Project (No. 2426-MOR) dated April 30, 1979, is being distributed separately. The main features of the loan and project are summarized in the Loan and Project Summary and in Annex III. Project Description 44. The Project is based on a projection of demand for CNCA medium and long term loans. Project costs include the entire cost of eligible investments projected to be financed by CNCA during the Project period, September 1, 1979 to August 31, 1982, for a total of $737.2 million. Project start up would immediately follow completion of the Third Agricultural Credit Project. The Project consists of the following five parts: (A) farm investments by small farmers with estimated annual farm income of $20 to $325 per capita borrowing from CNCA's local branches for livestock, draft animals, wells, pumps, land improvement and small equipment. All categories of small farms would be eligible; (B) farm investments by agrarian reform cooperatives and farmers' associations, most of whose members are small farmers with per capita incomes ranging from slightly below to about three times the absolute rural poverty level, for the same objects as financed for small farmers, plus farm mechaniza- tion. Subloans for investments for farm mechanization and transport equipment would be made to the cooperative or association while other subloans would be made directly to their members; (C) farm investments by medium and large farmers with an estimated annual farm income above $325 per capita borrowing from CNCA's regional branches and headquarters; the same objects would be financed as for cooperatives and farmers' associations; (D) small scale agroindustrial investments contributing to rural employment and showing a large share of project benefits  - 14 - accruing to the rural sector, including: flour mills, milk pasteurization, cold storage, animal feed, canning, and olive trituration; and (E) extension of CNCA's monitoring and evaluation system through provision of necessary equipment (vehicles, calculators, com- puter programs), consulting services and training. Project Implementation, Organization and Staff 45. CNCA, the only institutional source of medium and long term agricul- tural credit in Morocco, would be the borrower and executing agency for project lending. CNCA lends in response to loan applications by farmers or entrepreneurs who would execute the investments. CNCA is an autonomous Government owned Bank. Its Board of Directors is chaired by the Minister of Agriculture and it is administered by a Managing Committee presided by a General Director and including representatives of the Ministries of Agri- culture, Finance, Interior, and the Central Bank. Loans to companies, coop- eratives, and very large farmers are handled at CNCA's headquarters. Loans to medium and large farmers, farmers' associations and some cooperatives are processed and supervised by CNCA's 29 regional branches, the Caisses Regionales de Credit Agricole (CRCA). Loans to small farmers are processed by 91 local branches, the Caisses Locales de Credit Agricole (CLCA). These branches have been grouped into five regions each administered by a Regional Director. Headquarters has the responsibility for major policy decisions involving lending norms and criteria and personnel policy. 46. CNCA staff number 1,519 having doubled since 1971. The level of education is high, staff are qualified and staff training is of good quality. However, staff recruitment and retention have been constrained by a national shortage of agricultural technicians and a gradual erosion of CNCA's salary structure compared to the conditions offered to staff by private banks and industry. In order to avoid a deterioration of CNCA's appraisal and super- vision activity, Government and CNCA provided assurances that CNCA would maintain a compensation and incentive system competitive with the systems applied in comparable institutions (Section 5.04, draft Loan Agreement and Section 3.02, draft Guarantee Agreement). Lending Procedures and Interest Rate 47. Overall, CNCA's appraisal criteria and lending procedures are ade- quate and loan approval is usually fast. For loans made through the Ilead- quarters and the CRCAs, a relatively good balance has been struck between the thoroughness of appraisal and the objective of reaching a large number of farmers with limited staff. CNCA financing for these loans is normally limited to 70 percent of investment costs for which a loan application is made. Loans to small farmers with an annual net farm income below $1,900, are provided through the CLCAs on the basis of annually updated lending norms specifying the maximum loan amounts for each investment item. The total indebtedness of CLCA small farmer clients is also subject to a loan ceiling  - 15 - based on an estimate of fiscal revenue which relates to the number of hec- tares, livestock, and fruit trees declared by the farmer. The purpose of these lending limits is to minimize CLCA lending risk and client indebtedness since appraisal of CLCA loans is based on a desk review. A systematic field appraisal and supervision of small farmer loans would not be administratively feasible, given the number of CLCA loans processed each year, over 100,000 in 1977-78. 48. The major changes in CNCA policy since the Third Agricultural Credit Project have been a regionalization of CRCA lending norms, decentralization of lending responsibilities, and simplification of lending procedures. The institutional objectives underlying these changes have been to maximize the number of farm clients, accelerate loan appraisal and disbursement, and tailor credit norms to farming conditions specific to each region. Under the pro- posed project these changes would be pursued further, with particular efforts to gradually introduce an alternative system to the fiscal revenue ceiling used in approving loans to small farmers, in order to bring about a direct relationship between the loan amount, the investment cost and the repayment capacity of the farmer. Two different approaches are currently being tried out on an experimental basis. First, beginning in 1978/79, CNCA has extended the CRCA lending criteria, which tailor the size of the loan to actual invest- ment costs and repayment capacity, to the largest of the CLCA clients. This change would mostly affect farmers with annual net farm incomes in the $1,200 to $1,900 range. Second, under the Fes-Karia-Tissa Project, a system is being developed based on (i) the creation of pre-cooperative associations of small farmers agreeing to follow technical packages established by the local exten- sion service and specifying, among others, the cropping pattern, input use, and agricultural practices to be followed and (ii) the granting of credit on a collective basis to these associations to carry out their investment and harvest programs. Therefore in addition to participating in the annual review of the CLCA lending norms (see para. 47), it was agreed that CNCA would review with the Bank before July 31, 1980, the experience gained under the two experi- mental systems with a view to extending their benefits to farmers below the absolute rural poverty line. (Section 5.01, draft Loan Agreement). An understanding was also reached that CLCA lending norms would gradually be regionalized, starting with the 1980/81 season. It was further agreed that a random 5 percent sample of CLCA loans would be supervised during the project implementation period to control use of credit and provide feedback on the adequacy of norms adopted (Schedule 4, Section II, Part I (iii), draft Loan Agreement). 49. The present interest rate of 8.5 percent for medium- and long-term agricultural loans to private farmers, companies and to Agrarian Reform Cooperatives from the sixth year of their existence onwards is in line with interest rates charged in other sectors of the economy. Farmers' associations and newly created Agrarian Reform Cooperatives pay an interest rate of 7 percent. For the agroindustry component, it was agreed that CNCA would apply an interest rate at least equal to the interest rate applied by other institu- tions lending to small scale agroindustries in Morocco (currently 8 percent on medium term loans and 9 percent on long term loans) or to 8-1/2 percent for  - 16 - loans with a maturity of less than 7 years and 9 percent for loans with a maturity of 7 years and more, whichever is higher (Schedule 4, Section I C(ii), draft Loan Agreement). The rate of price inflation is estimated at 9 percent per annum in 1979, down from 12.5 percent in 1977 and 9.4 percent in 1978. Bank projections indicate a decline in the rate of inflation to 7 percent in 1980 when the proposed project starts up, rising to 8 percent per annum for the remainder of the project period. CNCA's average lending rate would therefore be positive in real terms during the project period, and the interest rate spread would be sufficient to generate a profit since the average cost of CNCA resources is projected at 3.2 percent. However, with respect to CLCA operations for which the Government provides a small subsidy to cover part of the cost of handling the small credit applications, assurances were obtained that financial charges on CLCA operations would be adjusted upwards whenever the Government subsidy of CLCA expenses is forecast to exceed 30 percent of those expenses (Section 6.07(a) (ii)), draft Loan Agreement). In order to protect CNCA's financial viability in the event of more rapid than expected price inflation, it was agreed to adjust interest rates on Head Office/CRCA Loans to ensure profitable operation of CNCA and to provide adequate provisions for bad or doubtful debt (Section 6.07(a) (i), draft Loan Agreement). Agroindustry Component 50. Project lending to agroindustry would be oriented to labor intensive small scale agroindustries which process Moroccan agricultural products. The component is intended to create employment in rural areas, provide outlets for agriculture, and contribute to economic growth by financing subprojects with high economic returns to investment. A secondary objective is to assist agroindustries owned by cooperative groups of Moroccan farmers so as to encourage the cooperative movement and to ensure that the farm sector receives a larger share of benefits. Specific subproject evaluation criteria have been agreed with CNCA stipulating that the subprojects should not exceed an invest- ment cost of DH 10 million ($2.5 million); transform Moroccan agricultural products; have adequate plans for input supply, marketing, design, and financing; and include an economic justification (Schedule 4, Section III, draft Loan Agreement). The first agroindustrial subloan application in each of five different agroindustry branches would be submitted to the Bank for prior approval as would subsequent subloan applications for investments exceeding DH 2.5 million (Section 3.02, draft Loan Agreement). 51. An agroindustry evaluation unit would be established at CNCA head- quarters. It would be fully staffed with suitably qualified personnel by December 31, 1980. Technical assistance and project promotion would be provided by the Technical Assistance Unit being established in the Office de Developpement Industriel under the Integrated Project for Small Scale Industry Development recently approved (Section 4.06, draft Loan Agreement). Additional technical assistance and promotional services for agroindustry would be provided by the Office de Commercialisation et d'Exportation, the Irrigation Offices for agroindustry within the irrigation perimeters, and the Ministry of Industry and Commerce.  - 17 - Monitoring, Evaluation and Audit 52. The monitoring and evaluation system established by CNCA under the Third Agricultural Credit Project would be strengthened to increase the usefulness of information presently being collected from a sample of farms. This data has served CNCA in improving lending norms, appraisal criteria and credit delivery and in assessing the impact of its lending on agricultural production and income. The monitoring and evaluation component under the proposed project would assist CNCA by providing necessary equipment, consulting services and training. CNCA would prepare a Project Completion Report evalu- ating project execution and the performance by subborrowers, the Bank, the Government and CNCA itself. During negotiations an understanding was reached with Government that it would study with the Bank the possibility of estab- lishing a sector-wide monitoring and evaluation system for agricultural projects to complement project specific systems. 53. CNCA's accounting organization and audit system are satisfactory and would remain unchanged. The audit report would include an opinion certifying that CNCA disbursements under the project were consistent with the statements of expenses submitted to the Bank. Project Costs and Financing 54. Detailed project costs and financing are given in the Loan and Project Summary. The total project cost is estimated at $737.2 million equivalent (including $52.0 million in taxes) of which 34 percent ($250.0 million) would be in foreign exchange. These estimates include price con- tingencies based on projected price inflation at 7 percent in 1979/80, and 8 percent thereafter. CNCA would finance 47 percent of project costs from its own resources. Subborrowers would finance 31 percent of project costs as their equity contribution to farm and agro-industrial investment. The Govern- ment would provide small investments grants primarily to agrarian reform cooperatives and farmers' associations, amounting to 2 percent of project costs. The remaining financing gap of $145 million equivalent (20 percent of project cost) would be financed by the proposed Bank loan for $70 million, a loan from the International Fund for Agricultural Development (IFAD) for $25 million, and a loan from the German Kreditanstalt fur Wiederaufbau (KfW) for DM 94 million (about $50 million equivalent). CNCA would be the borrower in each case. The Bank loan would be for a period of 14 years including a 4-year grace period and would finance 12 percent of subloans to small farmers, 18 percent of subloans to cooperatives and farmers' associations, 13 percent of subloans to medium and large farmers, 25 percent of subloans for agroindus- try, and 50 percent of the cost of the monitoring and evaluation system. The IFAD loan, with a maturity of 20 years, including 5 years grace, at an interest rate of 4 percent would finance 10 percent of loan disbursements to small farmers. The KfW loan would have a maturity of 30 years including 10 years grace at a nominal interest of 3.5 percent. In accordance with country terms for Morocco, KfW would actually be paid interest at the rate of 2 percent; the 1.5 percent difference would be applied to an interest differential fund which CNCA could use to: (i) cover the cost of additional personnel recruited to intensify appraisal and supervision of CLCA activities; (ii) finance overseas training for staff; and (iii) set up provisions against losses and bad debts on CLCA operations. The KfW loan would finance 10 percent of subloans to  - 18 - small farmers, 15 percent of sub-loans to cooperatives and farmers' associa- tions and 11 percent of sub-loans to medium and large farmers. In order to maintain the proposed schedule of disbursements under the Bank and IFAD loans, given the time required to process the KfW loan agreement, the signature of the KfW loan agreement would be a condition of effectiveness, and the failure to declare the KfW loan effective by March 1, 1980 would constitute a special condition of suspension of the Bank loan. The effectiveness of the IFAD loan would also be a condition of effectiveness of the Bank loan (Sections 7.01(b) and 8.01, draft Loan Agreement). Government would carry the foreign exchange risk on all foreign loans, would guarantee the debt service on each loan, and would provide or cause CNCA to be provided with any additional resources required for CNCA's operations under the project (Section 3.03, draft Guarantee Agreement). Financial Position 55. CNCA's resources grew at 21 percent per annum from 1974/75 to 1977/78, to a total of $302 million equivalent. Long term loans have been obtained from the IBRD/IDA ($79 million total), the German KfW (10 million Deutschmark), the Euro-dollar market ($30 million equivalent), the Arab Fund ($31 million), and domestic bond issues (DH 60 million). Most CNCA resources go to lending operations, with only 2.1 percent going to fixed assets and to investments in State debentures and equity participations. CNCA's financial position is good, reflecting its efficient management and excellent rates of loan recovery (82 percent annually and 94-97 percent cumulatively). Its liquid and current assets cover twice its short term liabilities, which together with an excellent rate of loan recovery, indicates a good liquidity position. CNCA's equity resources and long term debt more than cover medium and long term loans outstanding. The balance, along with deposits and Central Bank advances, covers outstanding short term loans. Profits increased 4-1/2 times from 1974/75 to 1977/78, reaching DH 5.3 million ($1.3 million) in 1977/78. As in the past, assurances would be sought that CNCA medium and long term debt will not exceed 4 times equity (Section 6.05, draft Loan Agreement), and current assets will equal at least 120 percent of current liabilities (Section 6.09, draft Loan Agreement). Procurement 56. With the exception of the agroindustry component, the range of goods to be financed under the Project is varied and would not be suitable for bulk procurement. Contracts would be too small to warrant competitive bidding advertised internationally. Foreign suppliers of machinery are well repre- sented in Morocco, necessary service facilities are available, competition is keen and prices are competitive. Agricultural subborrowers would therefore purchase agricultural equipment of their choice through existing local channels. Dairy farm development would require procurement of in-calf heifers, most of which would come from Government or private farms. However, should more than 75 heifers be imported under any subloan, quotations from at least three suppliers would be sought. For the agroindustrial subprojects having an investment cost exceeding DH5 million ($1.25 million), contracts for civil works and installation of machinery, exceeding the equivalent of $200,000 and  - 19 - equipment exceeding the equivalent of $100,000 would be tendered under competi- tive bidding advertised locally as set out in the Bank guidelines. For all other contracts, procurement would be undertaken according to commercial practices in Morocco which are acceptable to the Bank and generally involve international and local shopping. CNCA would verify compliance with the procurement procedures (Section 3.08(c) and Schedule 5, Part D, draft Loan Agreement). Bidding documents for contracts of $300,000 or more which are part of an investment exceeding DH5 million and the final award of such contracts would be submitted to the Bank for prior approval. In view of the widespread representation of foreign equipment suppliers in Morocco, suppliers from the Bank's member countries would have an equal opportunity to compete for contracts. Contracts of greatest interest to foreign suppliers would include installation of machinery and equipment for milk pasteurization plants, semi-industrial flour mills, cold storage, animal feed production, and cannning factories. The value of these contracts, including contingencies, would probably not exceed $40 million. Disbursement 57 The Project commitment period is for three years (September 1, 1979 to August 31, 1982) and CNCA's disbursements to subborrowers would be in accordance with the phasing of individual subproject development. The Bank loan would be disbursed in about 3-1/2 years. The Bank would reimburse CNCA against certified statements of expenditures for 12 percent of agricultural subloans disbursed under Part A, 18 percent of subloans under Part B, 13 percent of subloans under Part C, and 25 percent of subloans under Part D of the project. It would also finance 50 percent of the costs of the monitoring and evaluation system. Documentation for the statements of expenditures to agricultural subborrowers would not be sent to the Bank but would be retained by CNCA for review by supervision missions. Project Justification 58. The project would increase crop production in Morocco through changed cropping patterns and increased crop yields resulting from project financed wells, pumps, mechanized farming, draft animals, land levelling, destoning, other land improvements and plantations. Development of milk and meat production would result from project investment in pure and cross breed cows and sheep, development of forage crops and crop residues used for animal feed, improved animal shelters, complementary Government services, and expanded marketing and processing facilities. Incremental annual production with the project is estimated as follows:  - 20 - As a % of Increase in Incremental Annual Moroccan Consumption Production from project Between 1977 and 1985 (tons) (%) Wheat 107,000 6.5 Barley (animal feed) -100,000 - Forage ('000 feed units) 163,000 16.0 Vegetables 215,000 9.5 Industrial Crops 1,283,000 13.0 Pulses 1,000 .7 Fruit 500,000 70.0 Milk 300,000 42.0 Meat 55,000 18.0 This incremental production would help Morocco's balance of payments by reduc- ing imports and increasing exports of fruit. About 475,000 farmers or 25 percent of the total are expected to receive CNCA loans, an increase over the present figure of 323,800 clients. Based on data collected by CNCA in process- ing credit applications, about 40 percent of CNCA clients are estimated to presently live at or below the rural absolute poverty level. The overall economic rate of return to the project is estimated at 20 percent, varying between 10 and 80 percent on the various project components. Financial rates of return for illustrative farm models range from 9 to 50 percent. The project would directly create about 115,000 manyears of employment compared to a total rural labor supply of 3.1 million manyears in 1979, of which about 60 percent are permanently employed. The agroindustrial component would generate value added to the Moroccan economy by processing Moroccan products, and create rural non-farm employment. 59. An exercise to calculate the social rate of return for the kinds of investment undertaken under the project is underway in the context of Bank sector work in Morocco. For the purposes of the project, preliminary weights derived from this exercise and reflecting the Government's primary objectives of fostering economic growth and reducing income disparities, were applied to farm budgets. A weighted average of the rates obtained yielded a tentative social rate of return to the project of 14 percent compared to an average social rate of return on marginal Government expenditures in Morocco of 6 percent. Application of this methodology to the investments financed under the project indicated that on average these are justified, with the possible exception of investments in combine harvestors in areas where unem- ployed labor is abundant at harvest periods. These latter investments, however, yield an acceptable economic rate of return of 10 percent. The social analysis would be completed within the context of Bank economic sector work and its implications discussed with Government. Project Risks 60. The major risk is that of adverse weather conditions which on average occur once in every five years, and which reduce crop yields. Low crop yields would reduce incremental income and the economic and social  - 21 - returns from the project. These returns were estimated on the basis of average crop yields likely to be obtained in the normal pattern of good and bad years. Other risks include adverse changes in Government price policy and support services which would limit production increases and hence rates of return under the Project. Such changes would constitute a reversal of present policy trends and are not considered likely. PART V - LEGAL INSTRUMENTS AND AUTHORITY 61. The draft Loan Agreement between the Caisse Nationale de Credit Agricole and the Bank, the draft Guarantee 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 are being distributed to the Executive Directors separately. 62. Special conditions of the project are listed in Section III of Annex III. 63. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 64. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President By I.P.M. Cargill Attachments May 10, 1979 Washington, D.C.  ANNEX I -22 - Page 1 of 6 TAJ4I 3A MOROCCO - SOC7AL INDICAOR& DAtA SHEZS ZYErENCI GROUPS (ADfSSZU AVZJffE MOROCCO LAND AREA (THOUSAND SO. KH.) - MOST RECENT ZSTIMATZ) TOTAL 659.9 i SAMH SAME NZXT HIGHER ANRICULTUAL 157.8 MDST RECENT GEOGRAPHIC INCOME INCOME 1960 .1 1970 Lb ESTI0ATE lb REGION /c GROUP ld GROUP la GNP PER CAPITA (USS) 190.0 290.0 570.0 1438.5 432.3 867.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OP COAL EQUIVALENT) 148.0 180.0 274.0 816.7 251.7 578.3 POPULATION AND VITAL STAISTICS TOTAL POPULATIN, MID-YEAR (MILLIONS) 11.6 14.8 17.7 LlBAN POPULATION (PERCENT OP TOTAL) 29.3 32.2 39.5 45.8 24.2 46.2 POPULATION DENSITT PER SQ. PH. 26.0 33.0 39.0 LI 23.2 42.1 50.8 PER SQ. XM. AGRICULTURAL LAND 61.0 74.0 112.0 112.4 95.0 93.3 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 44.3 46.4 45.8 46.0 44.9 42.9 15-64 YRS. 51.7 51.1 51.6 50.6 52.8 53.5 65 YRS. AND ABOVE 4.0 2.5 2.6 3.3 3.0 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 2.6 2.4 2.4 2.9 2.7 2.5 URBAN 6.4 4.0 4.8 5.0 8.8 4.7 CRUDE BIRTH RATE (PER THOUSAND) 50.4 49.2 44.5 45.0 42.2 37.8 CRUDE DEATH RATE (PER THOUSAND) 24.2 18.5 13.4 13.7 12.4 10.8 GROSS REPRODUCTION RATE 3.4 /h 3.4 3.3 3.4 3.2 2.5 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) .. 25.1 68.0 USERS (PERCENT OF MARRIED WOMEN) .. 3.0 5.4 14.7 14.2 20.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970100) 118.7 100.0 86.0 107.1 104.3 107.3 PER CAPITA SUPPLY OF CALORIES <PERCENT OF REQUIREMENT5) 90.0 102.0 108.0 99.2 99.5 105.3 PROTEINS (GRAMHS PER DAY) 43.0 64.0 70.5 63.4 56.8 63.0 OF WHICH ANIMAL AND PULSE .. 14.0 /i 15.6 16.4 17.5 21.7 CHILD (AGES 1-4) MORTALITY RAT! .. .. .. .. 7.5 8.0 HEALTH LIFE EXPECTANCY AT BIRTR (YEARS) 45.4 50.4 53.0 53.7 53.3 57.2 INFANT MORTALITY RATE (PER THOUSAND) 149.0 /h .. 130.0 77.7 82.5 53.9 ACCESS TO SAF_ WATER (PERCENT OF POPULATION) TOTAL .. 51.0 .. 59.1 31.1 56.8 1URBAN .. 92.0 .. 85.9 68.5 79.0 RURAL .. 28.0 .. 38.0 18.2 31.8 ACCESS -O EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 29.0 *- 64.3 37.5 30.9 URBAN .. 73.0 .. 94.5 69.5 45.4 RURAL *- 4.0 *- 27.7 25.4 16.1 POPUILTION PER PHYSICIAN 9700.0 /h 12650.0 12400.0 4271.6 9359.2 2706.8 POPULATION PER NURSING PERSON .. 2820.0 1500.0 2077.4 2762.5 1462.0 FOPU7ATION PER HOSPITAL IED TOTAL 680.0 660.0 710.0 530.2 786.5 493.9 JRBAN .. 460.0 .. 310.0 278.4 229.6 RURAL .. 2980.0 .. .. 1358.4 2947.9 ADMISSIONS PER 00SPITAL BED .. 15.5 16.5 22.0 19.2 22.1 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 4.8 5.5 .. 5.4 . 5.2 URBAN 4.3 4.9 .. .. .. 5.0 RURAL 5.1 5.8 .. .. .. 5.4 AVERAGE NUXMER OF PERSONS PER ROOM T0TAL 2.2 2.4 .. .. .. 2. 0 URSAN 2.1 2.: .. 1.8 2.3 1.5 RURAL 2.3 2.6 .. .. .. 2.7 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 76.0 .. .. 40.3 28.3 64.1 URBAN 55.4 j 68.4 55.0 .. . 67.8 RURAL 31.0 .. .. 12.2 10.3 34.1  -23 - AN. EX I TABLE 3A Tage 2 of 6 MCROCCO - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES 40RORCCO !a - MOST PECENT ESTIM6AT!) SAME SADIE NEXT 'iGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 lb 1970 Lb ESTIMATE lb REGION /c GROUP /d GROUP e EDUCATION ADJUSTED EHROLLMENT RATIOS PRIMAPY: TOTAL 47.0 52.0 65.0 80.8 75.8 99.8 FEMALE 27.0 37.0 47.0 61.8 67.9 93.3 SECONDARY: TOTAL 5.0 13.0 17.0 23.6 17.7 33.8 FEMALE 2.0 7.0 12.0 18.2 12.9 29.8 VOCATIONAL (PERCENT OF SECOhDARY) .. 2.0 3 6.7 7.4 12.8 PUPIL-TEACHEP. RATIO PRL'LARY 43.0 34.0 40.0 31.5 34.3 34.9 SECONDARY .. 20.0 22.0 22.3 23.5 22.2 ADULT LITERACY RATE (PERCENT) 17.0 21.0 28.0 50.1 63.7 71.8 CONSUMPTION PASSENGFR CARS PER THOUSAND POPULATION 11.0 15.0 18.0 14.5 7.2 12.4 RADIO RECEIVERS PER THOUSAND POPULATIO 46.0 60.0 77.0 125.8 71.1 104.5 TV RECEIVERS PER THOUSAND POPULATION 0.4 11.0 23.0 34.5 14.1 28.1 NEWSPAPER ('DA.LY GENERAL INTEREST") CIRCULATION PER THOUSAND POP':LATION 22.0 16.0 14.0 17.4 16.3 45.2 CINEMA ANNUAL ATTENDANCE PER CAPITA 2.0 .. 1.6 1.6 1.6 4.6 EKPLuYiSENT TOTAL LABR FAaCE (THOUSANDS) 3250.0 3980.0 4930.0 FEHALE (PERCENT) 10.6 15.2 19.0 9.3 28.0 25.7 AGRICULTLRE (PERCENT) 56.4 49.9 42.5 42.0 54.1 46.2 INDUSTRY (PERCENT) 11.3 14.9 18.1 PARTICIPATION RATE (PERCENT) TOTAL 28.0 26.3 27.0 26.9 37.8 33.8 HALE 50.1 44.5 44.4 46.6 50.3 48.1 FEMALE 5.9 8.0 10.3 5.3 20.9 17.3 ECONOMIC DEPENDENCY RATIO 2.0 1.9 1.8 1.9 1.3 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 1B.0 /k 20.0 /k .. *- 19.5 23.6 HIGHEST 20 PERCENT OF HOUSEHOLDS 43.3 /k 49.0 /k .. .. 48.9 52.3 LOWEST 20 PERCENT OF HOUSEHGLDS 7.0 /k 4.0 ok .. .. 5.9 4.3 LOWEST 40 PERCENT OF HOUSEHOLDS 18.0 1k 12.0 tk .. .. 15.7 13.1 PO'VERTY T'AlGET GROUTPS ESTIMATE) ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) *URBAN 107.0 157.0 288.0 .. 155.9 191.9 RISRAL 66.0 101.0 174.0 142.0 97.9 193.1 EST1MATED RELATIVE POVERT-Y INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 189.0 236.1 143.7 319.8 RURAL .. .. .. 144.7 87.3 197.7 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) 11RBAN 59.0 39.0 34.0 21.5 22.9 19.8 RURAL 49.0 45.0 45.0 37.4 36.7 35.1 Not available Not applicable. NOTES /a The Adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. 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 Fstimate, between 1973 and 1977. tc North' Africa 6 Middle East; /d Lower Middle Income (S281-550 per capita. 1976); Le lntermediate Kiddle lcome (0551-1135 per rapica. 1976); L Including Moroccan provinces in Westen; Sahara; /R Excludes Moroccan provinces in W. Sahara; /h 1962; L/ Av. 1964-66; LI Brick building only; lk Consumption exptnditures of households. September, 1978  - 24 - ANNEX I DEFNITONS Of SragLMIAT 3 of 6 QU~: The adjusted group averalge for each indicator are Populacion-weighted geometric means, excluding the extreme values of the indicator and toe moor populated country in each group. Coverage of countries among the indicators depends on availability of data end is not uniform. Due to lack of data, group averages for Capital Surplus Oil. Exporters and indicators of atccess to water and excrete disposal, housing, income distribution and pvoarty are simle popwlation-weighted geometric mesas without the exclusion of extreme values. LAND AREA (thousand sq. km) PoPulation Per hospital bed - total, urban, and rural - Population (total. Total - Total surface area comprising loand area sand inlanid waters, urban, and rural) divided by their respective number of hospital beds haniuitual -most recent estimate of agricultural area used respora rily aviable in public and private general sod specialized hospital arc no orpermanently Ion crops, pastures, us,rist and kitchecgric or to oa,bilitaciuo centers. Hospitals are establishentoa . ai,.. lefollo., at least one physician. israblishments providlr.g prinCipaily cusradiul cars are not included. Rural hospitals, however. include heLith and .edi- GNP tPER CAPITA (US$ - GNP par cepita estimates at current market prices. cal centers not permanently staffed by a phys.ician (but by a medicalas calculated by same conve.rsion method as World Bank Atlas (1975-77 basis): sistant, nurse, midwife. etc.) which offer in-petisnt acom f- ad 1960, 1970. sod 1977 data. provide a limited rungs of medical facilities. Admissionspoar hosital bed - Total ueber,of adeissiosn to or discharges ENERGlY CONlSiOSTION PtR CAPITA - Annual Consumption of comercial energy frmhsptl ivided by the nuebar of beds. (coal and lignite, petroleum, macoral gas and hydro-, nuclear and geo- thermal electricity) in kilograms of coal equivalent par capita. HOUSING Average Si:e o f household (persons net hou-shold) - total, urba..' and rural- POPUL.ATION AND VITAL STATISTICS A bossehold consists of a group of individuals who share living quarters To tal oooulstin s%in-year (millions) - As of July 1; if not available, and their main meals. A boarder or lodger may or may not be included in average of two end-year estimates; 1960. 1970, and 1977 dare, the household for statistical purposes. Statistical definitions of house- Urhan Popoulation (percent of total) - Ratio of urban to total popula- hold vary. nion; different definitions of urban areas may affect Comparability Average oumber of porsons oar room - total, urban, and rural - A*verge nan- of dare among countriss. her of persons per tone in all, urban. end rural occupied conventIonal- Poo..letiom density dwellingsn, respectively. Dwellings sexclude non-permanent strcture.sand per asq. km. - Mid-year population per square kilometer (100 hectares) unoccupied parts. of total ores. Access to electricity foercat of dwellings) - total. urban, and rural - Per sq. ko. agriculture land - Computed as above for agricultura1leiad Conventional dwellings with electricity in living quarters as percentage only. of total, urban, and rural dwellings reapective17. Population Age structura (percent) - Children (0-l4 pears), working-age (15-64 years), and retirad (65 years sand over) as Percentages of mId- EDUCATIOON year population. Adjusted enrolnment rati.s Population gtrowth rate (percent) - total. and urban - Compound annual Primary schooi - local. end female - Total and fesale enrollment of all ages growth rtots of total sand urban mid-year populations for 1950-60, at the primary level as perrentagee of respectively primary sho-q 1960-70 sand 1970-75. populations:; normally includes children aged 6-il pears but adjusted ocr Crude birth rate (per thousand) - Aannul live births per thousand of different lengths of primary education; for countr ies with universal odu- mid-year population; ten-year arithmetic averages ending in 1960 and cation enrollment may exceed 100 nercest since some pupils are below o 1970 sand fiv-year average ending in 1975 for mast recent satiaste, above the official School age. Crude death rate (oar thousand) - Annual deaths per thousand of old- Secondary school - total, and female - Computed aso above; secondary educa- year population; tan-year arithmetic aveCragesnding is 1960 end 1970 tdon requires at Iesaa four peers of approved primary instruction; pro- and five-pear average ending in 11975 for most recent estimate. vides general vocational, or rancher training instructIons for puplos irons reproduction rats - Average number of daughters a woman will bear usualyp of 12 to I7 years of age; correapoedance cours es are genrally ic uec -orn! o-productive period if she eaperience s prese.nt age-seldd specific fertilI'ty rates; ususlly five-pear uvarages coding in 1960, Vocational enroliment (Percent cf Secondarv) - VPoci.atinl lol'n 0 1970, and 1975. .dud technical, industrial, or other p,rograms which operate infcporcocti,' Poily olannina - accepcors. annual ftbousands) - Annual number of or a. departments of secondary institutions. occoptror of birth-control dev,ices under auepCcs of nstioeall fanily Pupil-taeaher ratio - prisry. end serso.darn - Total Students o.rrlod i plann.ing program. primary end secondary levels divided by n,uohers of teachers ti th. come.- Family clanicog . users (peccan.t of married women) - Percentage of Spoending leveis. -arniec wosen of chlld-heaCnig age (Il-hi pears) who use birth-coocrol Adult Lteracy rate (percent; - Literate adults (ahie to read end wrIt:,. a devices to all married woman in sane &gS group, a percentage of total adult population eqed 11 pears end over. FOOl AND gISTITIONI C0KSU)ITCON Inds. of food production per canite (1970-i00) - Index eumbar of per Paseemser cars (net thousandi pseulation) - Passenger cats comprise mo tor car. capita nanual production of lI, food commodities. searing lees than eight persons; secludes ambulances, hearses sod military Per capita supply of calories (percent of remuirommets) - Computed from vehicles. energy equivalent of net food supplies available in country per capita Raio receivers (ner thousand population) - All types of receivers for tai. per day. Available Suppiies comprise dome stic Production, imports less broadcasts to general public per thousand of novulati.o; eacludesunlon onporte, and Changes in stock. Net supplIes emclud animal feed, seeds, receivers is countrie.soad in yearn when regietrutlon of radio sets wsi quantities used fe food process..ing, and Io...as in distribution. Re- effect: dots for recent years may not be coproososmst countries qciceence were estimated by PAO based on phyeioiogical needs for nor- abnlisehd licens.ing. mal activity and health considering environmental temperature, body TV, receivers (per thousand population) - TV :cnivere for broadcast to genera osights, age and seax distributionts of population, sand allowing 10 per- public per thousand population; secludes noliceesed TV receivers in coon- cent for waste or house hold level, tries and in years when cegintretian of TV nets was in effect. Par capita supply of orocein (stuns per day) - Protein Content of per NeusPpenr circulation (per thousand ponulatlon) - Shows the averge ci-r.ca- capita oar sopplp of food per day. let supply of food is defioed as tion of "daily genearl interest news;papr`, defined as a paCcidic-l pcl-- above. isqoirements for oil cou ntries ostabl_lshad by ifSlA provide for cation devoted primarily to recording gene.ral news. Itc is considered to a minimum allowan ce of hi grams of total protein per day snd 20 grams he 'daily' if it appears at leas.t four tines o week. of animal and pulse protein, of which 10 grams should he animal protein. Cinema. annual attendance per canits per year - 3ased cm the ousher oftcet These tcaodards are lowe.r than those of 75 gras. of total protein and sold during the year. includiog admissiosn to drive-in, cinemas ace obhile Z3 gra.s of animal protein as an vsgefor the world, proposed by units. FAG io che Toird World Food Survey. Per -pnite protein suVply from animal sand pulse - Protein Supply of food EMPPLOYMENlT derived fnon animals and pulses in grams par day. Totai labor force (thousands) - icronomically active persons. Lnciudiog a-rmed Child (ages 1-4) mortality rats (per thousand) - Annual deaths per thous- forces sand unemployed hut secluding housawives. students, etc. Osfici- and in age group 1-4 years., to Children in this age group. cions In vsrious countrisa are not comparahle. renals (perrent) - Famale labor force as percentage of total labor force. HEALTH! Agriculture (percent) - Labor forts In farming. forsurry, hunting and fishing Life emPect.acy at birth (year) - Average number of years of life as percentage of total labor forces. remaining at birth; usually five-year averages ending in 1960, 1970, Industry foercent) - Labor force in mining, construction, manufaccuring end and 1971. electricity, water and gas as percentage of total labor force. Infest mortality rate (oar thousand) - Annual deaths of infants under ParticipatIon rece (nercent) - total, male, and female - Total, male, and one year of .ag per thousand live birhts. seals. labor force as percentgags of their respective popiuc.icns. ACcSes to oafs water (percent of population) - total, urban, and rural - these are -LiOn adjusted participation races reflecting ace-set bunker of peopie (total, urban, and rural) with reasonabie access ton structure of the .poplation, and looc time trend. oafs water supply (inducdes treated surface w.ater or untreated but fionomic dependency ratio - Ratio of population ardor 15 asec 61 and ace- - uncontaminated water such as that froe protected borsholas, springs, the lsbor force in age grocy of Il-hi pears. and san itary wella) an p.rerostage of their respactive populations. to an urban area u pubiic fountain or standpost located iot nere INC0xi DISTRIBITTON that 200 macens from s house. may he Considered as being within raa- Percenruge of privute intone (both in Cash and kind) received ho richot.t ounablo access of that house. In rural areas reasnanale access .unud percent, richest 210 percent, pooroec 20 percet, and pooes-i~ p--0c imply icact the hou..wif. or canners of rho house.hold do cot have t of housholds.. upend a disproportinoatac part of the day to fetching the family's water oeeds. POVERTY -ARGET GROUPS Actcess to. acrera disno...l (nercent of osnoI.icio) - total, urban, and Estioacad babelute poverty i.c0m5 level (150$ per Capita) - urban and coral- rual - Nlumber of People (total. urhan. sand rurl) servd by xacrtat Absolute poverty -COcem level IS that Incme level below whichq a cra disposal an percentages of their respective populations. EocretA nutritionally adequate diet plus estilnon-food requiremento su -t disposal asp Include the collection and disposal, with on without affordable. tre-tmont, aEomuoceaad at-ae.ywte-ontytm aiMaLed relative poverty income level (iS$ oar Capita) - urban and cor-l or the -o of pit privies sod similar intlRtos elative povrtry income level io that income level lass than ore-rhino Population par physician - Population divided by nuohec of prac.ticing per capita pereonsi income of the counutry. physician qualIfied (non a medical School at university level. tatimated population below poverty incone level (percent)-onnadcrs- Po-olti-o -r oursina person - Population divided by number ofPretf pplto ubnadrrl h r iher "absout p:'oor" or -rcticing male and fenais graduate ouross. practical nurs, an. .d 'relative poor" whicheve is greeter. toono..i,c and Social Dtat ivso Ecooni. c Analysis Sand P Dopactrert  * 4*0.fI~~*4.0A0C*4. 9. .40 4*Sw4. U 00 0 . ... ............00 4.In.4 ~ ~ ~ ~ ~ ~ ~ ~ ~~ . .. .. .. .. .. .......4 .. - . 044 sos 4. 0000 o -.ar~~~~~~~~~~~~~~. . . .. .. f. o.. - * ., a... c a * o or 2 00 00 4. 4. *022~~~. . .. . . ..0 . . . . 9 44..94..-~~~~~~~ o.cr- .404900