Morocco - Forestry Project

Document of The World Bank FOR OFFICIAL USE, ONLY Report No. 3676-MOR KINGDOM OF MOROCCO STAFF APPRAISAL REPORT OF A FORESTRY PROJECT February 12, 1982 EMENA Projects Department Agriculture Division II This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CUkRENCY EQUIVALENTS Currency Unit Dirham (DH) US$1.00 DH 5.30 DH 1.00 US$0.19 WEIGHTS AND MEASUkES 1ihectare (ha) = 2.47 acres 1 kilometer (km) = 0.624 miles 1 kilogram (kg) = 2.205 lbs 1 ton (t) = 2205 lbs m3 o.b. = cubic meter of wood over bark (with bark) m3 u.b. = cubic meter of wood under bark (without bark) m3 s = solid cubic meter of sawn wood ADT = Air Dried Ton ABBREVIATIONS DEFCS Forestry Department (Direction des Eaux et Forets et de la Conservation des Sols) FNF National Forestry Fund (Fonds National Forestier) MARA Ministry of Agriculture (Ministere de l'Agriculture et de la keforme Agraire MOI Ministry of Interior (Ministere de l'Int6rieur) GOVERNMENT OF THE KINGDOM OF MOROCCO Fiscal Year January 1 - December 31  KINGDOM OF MOROCCO FOR OFFICIAL USE ONLY STAFF APPRAISAL REPORT OF A FORESTRY PkOJECT Table of Contents Page No. I. Introduction ............................................. 1 II. The Forestry Subsector ................................... 1 A. The National Economy ................................ 1 B. Place of Forestry in the Economy ................... 2 C. Main Constraints to National Forestry Development ... 6 D. Financing of the Sector .. 8 E. Institutions and Training ........................... 10 F. Objectives and Strategies ........................... 12 G. Bank Involvement in the Agriculture Sector .......... 12 III. The Project Area .......................................... 14 A. Physical Features .............. 4 .................... 14 b. Socio-Economic Features .............................. 15 IV. The Project , , ..... .................... 17 A. Objectives and Summary Description .17 B. Detailed Features ...................... 18 C. Project Start-up Activities .24 D. Project Cost Estimates .24 E. Proposed Financing .25 F. Disbursement .26 G. Procurement .27 H. Accounts, Audits and Report ........................ 28 I. Environmental Impact .29 V. Project Implementation .29 A. Organization and Management .29 B. Staffing .31 C. Monitoring and Evaluation .31 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page No. VI. Production, Marketing and Prices .. 32 A. Production .......................................... 32 b. Market Prospects .................................... 32 C. Prices .............................................. 33 VII. Financial Analysis .35 A. Cost Recovery and Financing of the Sector .35 B. Financial Assessment of Plantation Investments 39 VIII. Benefits and Justification ..40 A. Benefits and Beneficiaries . . .40 h. Economic Analysis . . .41 C. Project Kisks and Sensitivity Tests .42 IX. Agreements to be reached and Recommendations . .43 ANNEXES Annex 1 - Project Costs and Disbursements. Table 1: Project Costs .45 Table 2: Estimated Schedule of Disbursements .46 Annex 2 - Selected Documents and Data available in Project File .47 Annex 3 - Implementation Schedule .49 CHART; Project Organization .50 MAPS: IBRD 15933 - Project Area IBRD 15932 - Forest Resources  KINGDOM OF MOROCCO STAFF APPRAISAL REPORT OF A FORESTRY PROJECT' I. Introduction 1.01 The proposed industrial reforestation project is the first comprehensive Bank investment in the forestry subsector in Morocco and directed towards helping Government to alleviate some of the development constraints in the forestry subsector. By replanting, improved forest management and technical support the project is expected to increase the supply of pulpwood for an existing pulpmill and increase its exports of woodpulp; to reduce imports by meeting part cf the country's increasing demand for fuelwood and industrial roundwood; and strengthen the forestry services in overcoming certain institutional bottlenecks in the sector. The project would be carried out over a five year period. 1.02 The project area selected has relatively favorable climatic and ecological conditions for fast growing tree species and has comparative advantages in the production of wood products relative to other agricultural activities. In addition, proximtity to traditional export markets provides Morocco with a good positior to capture an expanding share of the growing European short and long fiber pulp market. 1.03 The project was identified by a World bank FAO/CP mission in 1979. It was prepared by Government in close collaboration with FAO/CP. Preparation was completed in early 1981. This report is based on the findings of an appraisal mission of Messrs. E. van de Poll, J. P. Chausse and R. Chalk (Bank), and F. Weber and J. Maranda (Consultants) which visited Morocco in June 1981. II. The Forestry Subsector A. The National EcDnomy 2.01 Morocco has a total land area of 67 million ha and a population of 20 million (1980) of which 60% is rural, growing at an estimated rate of 3.2% per annum. Per capita GNP was US$740 in 1978. Average GDP growth was 7.3% per year in the period 1973-77 through high levels of investment. Because of an increasing debt servicing ratio and widening gap of the balance of payments, a stabilization program was introduced in 1977 which reduced investments and imports at the cost of reduced GDP growth and increased unemployment. As a result GDP has only increased at about 3% per annum since 1977. Details of agriculture in the economy are given in an agricultural sector memorandum of May 1980 (Report 2667a-MOR).  -2- b. Place of Forestry in the Economy 2.02 Moroccan natural forests including 2.6 million ha of esparto grass, /I cover around 7.7 million ha, which represents 11.2% of the country's total area. About 2.5 million ha of forests and 1 million ha of esparto grass areas have real production potential. The remaining areas (54% of total), especially in the more arid south, have as prime function the protection of soils and water catchments. All natural forests and esparto grass areas belong to the state (Dahir of October 10, 1917). In addition there are about 367,000 ha of industrial plantations, mostly eucalyptus (49%) and coniferous trees (44%). As of 1979, 74% of these plantations belonged to the state, 17% to collectivities, and 9% to private individuals. The latter two categories have mostly been financed from State funds. Un the basis of recorded wood fiber production in 1978, the contribution of the forestry subsector to Morocco's agricultural GDP was estimated at 1.5% and to total GDP at 0.3%. However, forestry's importance for the country's economy is not adequately represented by recorded fiber production. Moroccan forests supply unrecorded but considerable quantities of fuelwood to rural populations. Furthermore forest rangelands contribute about 1,500 million feed units/2 or 18% of total feed requirements to the fodder supply of the national livestock. In 1977 the value of fodder supplied by forest areas was estimated at DH 530 million, four times the value of recorded wood fiber production. 2.03 Annual recorded wood fiber prodution shows considerable fluctuations. Official annual figures for the period 1975-1979 are summarized below but do not fully reflect the actual production of these products, especially fuelwood (see para 2.10): 1975 1976 1977 1978 1979 (in thousands) Fuelwood (m3 o.b.)/a 2,170 2,240 2,320 2,392 2,392 Sawlogs (m3 u.b.)/b 105 73 85 74 67 Other industrial roundwood including pulpwood (m3 ub) 385 420 406 523 352 Cork (t) 11 12 11 16 19 Esparto grass (t) 40 26 31 53 12 Source: FAO and Ministere du Plan. /a m3 o.b. = 1 m3 of wood over bark (with bark). /b m3 u.b. = 1 m3 of wood under bark (without bark). Annual domestic production of pulpwood, cork and esparto grass more than cover domestic consumption and a large proportion is exported. However, annual domestic production covers only 30% of the country's /1 Esparto grass or alfa is a long fiber grass, used mainly for manufacturing paper, rope and shoes, and for fodder. /2 Nutritional equivalent of 1 kg of barley.  - 3 - requirements for other wood products (15% for sawlogs, 13% for mining timber) and the balance is imported. Although fuelwood production covers national demand, it vastly exceeds the annual allowable cut and this is one of the main factors for decline in the country's forest resources. The area under forest is presently declining at a rate of about 20,000 ha/year (para 2.10). In 1979, wood product imports (70% coniferous) amounted to DH 365 million and represented in value 9.8%. of the country's agricultural imports and 2.5% of its total imports. In -urrert terms. the value -_ we..J imports increased at an average rate of 16% p.a. during the 1970-77 period. In 1978, wood import restrictions vere established and the value of wood imports fell by 25%. However, between 1978 and 1980, value of imports again increased at the same average annual rate of 16%. In 1979, exports of wood products amounted to DH 159 million or 6.1% of Morocco's agricultural exports and 2.2% of its total exports. Pulpwood exports amounted to DH 90 million (56% of total wood product exports) that of cork products to DH 40 million (25%) and that of plywood to DH 14 million (8.8%). The average rate of growth of wood exports' value over the period 1970-79 has been 17.4% p.a. in current terms, higher than that of agricultural exports (7.6% p.a.) or total exports (14.2%). This was due primarily to increases in the current value of exports of woodpulp and plywood. However, Morocco's wood product trade balance has been deteriorating steadily, reaching an estimated deficit of DH 280 million in 1980. 2.04 Forestry employment provides around 16.5 million man-days of labor per year and is the main source of income for about 140,000 rural people, most of whom with annual income below the rural absolute poverty level estimated for Morocco at US$ 270 (in 1980) per capita. Primary productive activities (logging and charcoal) provide an estimated 3 million man-days of work to around 20,000 workers. Forestry administration employs permanently around 2,500 staff members and offers full-time employment on a contractual basis to 1,500 other employees. In addition, government activities in reforestation, infrastructure, soil conservation and forest maintenance provides on average about 3 million man-days of work per year. The wood processing industries, many of them small scale sawmills or joineries, employ an estimated 38,000 full-time workers. A major problem in the forestry employment sector at present is the lack of vocational training facilities, particularly for the forest workers and those employed in the wood processing industries which has resulted in stagnation in the introduction and use of improved forestry equipment and techniques. Forest Industries 2.05 There are 31 sawmills in the country, mainly in the Casablanca region and in the kif and Middle-Atlas forest regions. In 1979, their combined output was around 70,000 m3 (s) L1. In general their equipment is old and the recovery is low (45%). In addition, there are about 600 one-man sawmill operations scattered in rural and urban centers. Five enterprises produced 65,000 m3 of woodbased panels in 1979. Five other enterprises manufacture wooden crates. In 1979, they processed around /1 m3 s = 1 solid m3 of sawnwood.  - 4 - 80,000 m3 u.b. of wood and produced 50 million crates, mostly for fruit and vegetable exports. 2.06 The only pulp mill in Morocco (La Cellulose du Maroc) which is efficiently managed is at Sidi Yahia near Rabat in the Kenitra Province. The company was created in 1952. Presently 51/ of its shares are held by Government-owned banks and the remainder by foreign shareholders. During the last 6 years major technical improvements amounting to about US$80 million have been made to the mill, in order to increase its production capacity from 60,000 to 100,000 ADTIL per annum. With the recent improvements (January 1981) to the mill's evaporators, until then considered to be the major bottleneck, the mill has now expanded its production capacity to 100,000 ADT of pulp per year, corresponding to the processing of 345,000 m3 u.b. of eucalyptus wood (para 3.05). During the period 1976/79 the mill incurred recurrent financial losses, due to low production levels, depressed international pulp prices and high financial charges associated with the mills recent investment. However in 1980 increased production of 83,000 ADT combined with higher international pulp prices helped the mill to break even financially. The mill's financial position and profitability are expected to improve further with the mill starting to produce at full capacity and international wood pulp prices continuing to increase as projected in para. 6.07. The mill exports 80% of its production to European countries. The remaining 20% are purchased by 6 domestic companies which manufacture paper and paperboard from domestically produced eucalyptus (short fiber) pulp, imported long fiberpulp and recycled waste paper. Their combined production in 1980 was around 60,000 tons or 40% of Morocco's paper consumption estimated at 150,000 tons. Wood Product Demand 2.07 As can be seen below, per capita consumption of wood products in Morocco is relatively low compared with countries at a similar stage of development: Apparent consumption per 1,000 capita (1975) Developing Market Product Morocco Tunisia Africa Economies World Sawnwood (m3 (s)) 15.33 25.38 12.33 20.18 109.04 Wood based panels (m3) 2.14 3.93 2.27 2.68 23.0 Paper and Paperboard (t) 6.65 6.49 2.80 6.23 37.0 6ource: FAO The present low current consumption together with an expected increase in real per capita income coupled with a wood products positive income elasticity of demand, indicate that Morocco's domestic demand for most wood products will grow at an annual rate higher than that of the annual population growth. Using however the conservative assumption of constant per capita consumption, projected demand for roundwood, sawnwood and paper and paper board is expected to increase at least as follows: /1 ADT = Air Dried Ton  -5- Estimated Roundwood Wood Product Demand in Morocco Equivalent/a 1979 1985 1990 2000 2000 Roundwood/b ('000 m3 u.b.) 508 626 733 980 1,130 Sawnwood ('000 m3) 409 509 590 797 1,430 Paper and Paper board ('000 t)/c 130 202 270 481 _ Plywood & Other Boards ('000m3) 75 120 145 245 540 3,100 /a In '000 m3 o.b. /b Not including fuelwood. /c Only 30% of roundwood equivalent to be domestically produced; included under roundwood. Source: Mission estimates 2.08 For paper and paper board Morocco's consumption is projected to increase at an average rate of 5.5% p.a., reaching 270,000 tons in 1990 and 481,000 tons in 2000. 2.09 keforestation Requirements. In 1970 a Reforestation Plan was adopted by Government which still forms the basis for Morocco's reforestation program. On the basis of an analysis of the production potentials of the main forest regions and an assessment of future national wood product consumption, the Plan proposed the planting during 1970-2000 of 662,000 ha representing an annual planting program of 22,000 ha. However the actual achievement has fallen far short to this plan (para 2.15). As a result of the slow pace of the actual replanting program, illegal felling and rising demand for forest wood products, Morocco's forest resource is rapidly declining, at an average of about 20,000 ha per year. Comparing Morocco's present annual wood production with its projected wood demand, the country would now require a minimum annual plantation program of 35,000 ha during the period 1980-2000!i. That would be in addition to the need for fuel wood plantations (para 2.10) and the regeneration of exploited forest areas necessary to maintain existing resources. This highlights the need for additional plantations with fast growing species. 2.10 Fuelwood. In volume, fuelwood is by far the most important output of Moroccan forests. However, current fuelwood consumption estimated at about 10 million m3 o.b., is met through considerable overexploitation of existing resources, as production significantly exceeds the estimated maximum annual allowable cut of 3 million m3 o.b., implying an overexploitation of some 7 million m3 o.b. per annum. The rate of exploitation is not expected to increase in the future because increased /1 Of which: production plantations 20,000 ha (soft wood species 11,000 ha and hardwood species 9,000 ha) and protective and recreational plantations 15,000 ha. Average m.a.i. of new productive plantations estimated at 8 m3/year/ha. Of existing plantations (360,000 ha) only 200,000 are productive plantations.  -6- use through population growth is expected to be balanced by an increase use of alternative fuel (mainly butagas) as the population becomes more urbanized. The latest fuelwood demand projections are given below. They are based on expected rural and urban population growth of 1.8% p.a. and 4.8% respectively, FAU estimates of current fuelwood consumption, and an expected substitution coefficient into alternative fuels of 40% over the 1980 - 2000 period. Estimated Fuelwood Consumption in Morocco 1980 1990 2000 Rural population (million) 12.00 14.30 17.10 Per capita rural consumption (m3 o.b.) .80 .64 .48 Total rural consumption (million m3 o.b.) 9.60 9.15 8.21 Urban population (million) 8.00 12.80 20.50 Per capita urban consumption (m3 o.b.) .10 .08 .06 Total urban consumption (million m3 o.b.) .80 1.02 1.23 Morocco's consumption (million m3 o.b.) 10.40 10.17 9.44 Source; FAO 1980 and Mission estimates Assuming that current allowable cut of existing Moroccan forests would be maintained until year 2000 - which is unlikely considering the current overexploitation - the satisfaction of the projected fuelwood demand in 2000 would require the establishment of around 1.0 million ha of additional fuelwood plantations by year 2000, an average annual plantation program of 50,000 ha, based on an estimated general growth rate of 6 m3 o.b. per ha/year under the poorer growing conditions due to lack of rainfall in most of the country. C. Main Constraints to National Forestry Development 2.11 To stop the regression of Morocco's forest resources and promote their development, several constraints will have to be overcome, most of them of an institutional and managerial nature. Four major problems are elaborated below. 2.12 Paucity of Data and Lack of Resource Planning. Presently, only very limited information is available on the location, quality and exploitable volumes of Moroccan forests. The National Forest Inventory, launched in 1976, aimed at providing recurrent stocktaking of the country's forests over 10 year periods. As of 1980, only 1,100,000 ha (approximately 20% of total forest areas) has been subjected to detailed inventory and mapping. Without this knowledge, forest resource planning cannot be carried out. Only 700,000 ha (13%) of Morocco's forest have management plans. This leads to suboptimal use of existing resources and investment decisions. Completion of a first comprehensive coverage of Morocco's forests is therefore a high priority. In the meantime, less detailed but useful information could be obtained rapidly through a forest resource study based on satellite imagery, which will be introduced under the proposed project (para 4.15).  2.13 Unsatisfactory exploitation/market:ing system. Under current practices, tree stands are auctioned by the Forestry Department of the Ministry of Agriculture to private loggers. The latter, who number around 500 for Morocco as a whole, fell and cut the trees and market the wood. They are mostly middlemen with no professional skills in logging and they recruit daily unskilled workers paid on a piece work basis. This often results in low valorization of trees. For instance, most holm and cork oak wood production (around 400,000 m3 u.b. year) is transformed into charcoal, whereas a sizeable part could provide higher value sleepers or pit-props, which are currently imported. The current plantation management practices are also inadequate (i.e. lack of thinnings) and trees are often harvested without regard to the best economic utilization of the wood. This has resulted in suboptimum utilization of resources as trees are not always harvested according to their best marketable end-product. There is, therefore, a need to train forest workers, to promote professional logging operations, and to improve forest exploitat:ion management, a start of which will be made under the project (paras 4.17/18). 2.14 Integration of Foresty and Livestock Development. Because of increased population pressure on agricultural land, the period spent yearly by the cattle in forests has been steadily increasing with examples of sedentarization on forest rangelands. Presently, it is estimated that about 1.0 million cows, 3.5 million sheep and 4.0 million goats spend more than 6 months every year in forests. At the same time and also because of population pressure, there has been a dilution of traditional authorities over collective rangeland management and a gradual abandonment of range rotation. The growing anarchy presiding in the exploitation of forest rangelands, particularly in natural forest;, has three main consequences (i) a decrease in their productivity; (ii) the prevention of natural forest regeneration; and (iii) the destruction of trees by browsing and lopping. Because of the importance of forest for livestock production (it is estimated that it produces about 35,000 toiis of meat per year or 15% of total Moroccan production) and to protect Eorest resources, measures are urgently needed to introduce a rational accion program for dealing with the dual but sometimes conflicting interests between the Forestry Department and the local population in the promotion of integrated forestry and pastoral development. Specific measures to reduce the risk of cattle encroachment in the newly established project plantations will be carried out under the project (para 4.11). 2.15 Insufficient Investment. Morocco's forestry policy aims at reconciliating various interests: increased wood production, harmonious integration of livestock and forest development, soil conservation and larger participation of rural populations in the development of national forests with better sharing into the economic benefits from their exploitation. However Morocco's actual field programs have mainly centered on the management and conservation of the natural forests, entrusted to the state. Little resources have been devoted to inventory programs, resource planning, plantation programs or soil conservation. During the 1978-80 Development Plan, public planned investmenls for the forestry subsector amounted to DH 205 million or 5.6% of planned investment in agriculture.  - 8 - Although the Government's 1970 National Reforestation Plan called for the reforestation of 22,000 ha a year (para 2.09), the 1978-80 Development Plan provided only for plantation of 5,000 ha/year of which 4,000 ha were realized because of delays in the availability of funds and cost escalation. During the same Plan period, none of the planned Inventory Program was carried out (para 2.12), whereas the preparation of management plans was reduced from 51,000 ha to 20,000 ha, and soil conservation works reduced from 17,600 ha to 4,900 ha. However, steps have been taken in the 1981-85 Development Plan to redress this situation by more than doubling (increment terms) the annual public forest investments compared with the 1978-80 Plan (para. 2.26). D. Financing of the Sector 2.16 Sources of Funds. Reforestation activities are financed from several sources. Of the presently reforested area, totalling 367,000 ha, about 225,000 ha (62% of total) were financed by appropriations from the Government general budget, 55,000 ha (15%) by the resources of the National Forestry Fund (FNF) (para 2.18), 64,000 ha (17%) by Soil Conservation Programs and 23,000 ha (6%) by various other sources. Standing trees from natural forests and from plantations established by Government on state, private and collective land, are auctioned by the Forestry Department of MARA (plantations established by private individuals or collectivities with their own resources are nearly non-existent). In the case of the sale of trees standing on private or collective land, the Forestry Department recovers the historical establishment and maintenance costs of the plantation (without interest). The balance goes to the owner of the land or individuals making up the collectivities. In case of the sale of trees grown on state land, the entire auction price is transferred to the commune within whose administrative boundaries the land is located. In both cases, however, the buyer has to pay in addition to the basic auction price; (a) an ad valorem 10% tax whose proceeds are transferred to the FNF; and (ii) various fees and taxes amounting to about 8 to 12% of the basic auction price, covering administrative selling and recording costs and accruing to the general budget of the Government. These financing arrangements present major drawbacks discussed in the following paragraphs (paras 2.17/19). 2.17 Forest Revenues and Stumpage Rates. Stumpage rates (value of standing tree) for different species have never been systematically assessed, but there are indications that current auction prices paid by contract loggers for some plantation woodlots although set in competitive markets are insufficient to pay for the replacement costs of plantations. In 1981 for example, estimated establishment costs of one hectare of eucalyptus plantations was about DH 3,000, whereas the revenues obtained from clearfelling this hectare was only DH 2,700 /1. This difference is mainly due to the relatively low yields of existing eucalyptus plantations (5 - 6 m3 o.b./ha). Total forest revenues collected from existing /1 Average standing volume of 60 m3 o.b./ha and clearfelling auction price of DH 45/m3 o.b. However in the case of acacia for example, where current unit auction price was DH 180 /m3 o.b., revenues of DH 14,000/ha were exceeding the plantation establishment costs of about DH 3,000 per ha.  -9- plantations will remain below plantation replacement costs, unless average plantation yields and wood product prices increase considerably in the future or forest management standards are upgraded (including valorization of trees) substantially, to improve the value of the standing trees. As a first step to increase forest revenues, considerable efforts have to be made to improve the yield and quality of wood fiber per ha by (i) planting improved fast-growing species; (ii) using better exploitation techniques; and (iii) improve stand management of the natural forest and plantations. In addition it would be essential to assess and monitor the actual stumpage rates for the various tree species, sothat real stumpage values could be used in monitoring the base price for wocdlot auctioning. 2.18 The National Forestry Fund (FNF) was created by law dated 6eptember 12, 1949. FNF resources come from recovery of plantation establishment and maintenance costs and from the 10% tax on auction prices (para 2.16). Twenty percent of the Fund's resources are devoted to finance forestry research and experimentation, and 80% to promote reforestation on State, collective and private lands. This is done through two main types of measures: (i) subsidies in kind to ccllectivities or private individuals. An average of 2 million seedlings are distributed free of charge annually; (ii) loans in kind and services. Collectivities or private individuals enter into a contract with the Forestry Department, by which the latter takes control over the use and management of the land for a given period to establish and maintain tree plantations and sell the trees in due course. Proceeds from the sale are then distributed as mentioned in para 2.16. As only actual historical costs are recovered, the landowner benefits from a long-term, interest free loan. For example, for a plantation felled after 20 years and assuming a 10% discount rate, FNF recovers only 15% of the costs incurred. This represents a substantial drain of the Fund's resources. The FNF tax proceeds have increased regularly from DH 4.0 million in 1974 to Di 7.0 million in 1980 but are grossly inadequate to allow the Fund to play a major role in Morocco's reforestation efforts with current establishment costs (DH 3,000/ha) for productive plantations. 2.19 State Forests. Prior to 1976, proceeds from the sale of trees from state forests accrued to the Government's general budget. The law of September 20, 1976 organized rural population's participation to forest development through the creation of National, Provincial and Communal Forestry Councils (para 2.20). The law also redirected the revenues from state forests to the communes within whose boundaries the forests are located. In turn, the communes should devote at least 20% of the proceeds to investments inter alia into the forestry subsector. Possible investments are in reforestation or development of forest infrastructure such as roads, shelters, waterholes and forest rangeland improvement at the commune's discretion. These arrangements have resulted in a major diversion of funds from reforestation and it is clear that this 20% formula plus the current FNF taxation (para 2.18) is inadequate to finance the renewal of the present forest resources. Communes well-endowed in forest resources have generally reinvested very little of their forest revenues into reforestation programs, relying on Government budget to finance these  - 10 - activities. They have implemented a mining-type of exploitation of forest resources, reaping as quickly as possible high revenues without participating in the renewal of the resources. Various options which could be introduced to improve the level of a more automatic self-financing of the sector are described in Chapter VII. E. Institutions and Training 2.20 The Ministry of Agriculture and Agrarian Reform (MARA) is respon- sible for the overall development of the subsector. It exercises its responsibilities mainly through the Forestry Department (Direction des Eaux et Forats et de la Conservation des Sols) (DEFCS) (chart 1). DEFCS is responsible for the sector planning, including protection and management of the forests, plantation programs and supervision of all forestry exploita- tion. The participation and decision making of the local population in both the formulation and implementation of forest policy has been improved by the creation in 1976 of Forestry Councils at national, provincial and local level. The highest authority, the National Forestry Council has been set up in MARA. It is chaired by the Minister of Agriculture and consists of the ministers or representatives of the Ministries of Interior, Finance, Public Works, Commerce, and Justice, the Governors of the forest provinces and representatives of provincial and local authorities (para. 5.02). This Council is mainly responsible for coordinating all forest programs including their financing and defining Government's policy and legislation to facilitate the development of the national forestry resources including livestock grazing in the forest areas. The Provincial Forestry Council has basically the same function as the National Council but is only involved in matters dealing with the implementation of provincial forestry programs including forest exploitation and sylvo-pastoral development. At local level, the Communal Council plays an advisory role, and participates in the organization of forest related programs within their communal boundaries such as the auctioning of forest woodlots, the organization of forest grazing (para. 5.06) and the collection of dead wood. Although it is still too early to measure the effectiveness of these councils, the existing Provincial and Communal Forestry Councils could certainly play a key role in helping design practical and adequate legislative and administrative instruments for the development of the forestry subsector including pastoral development (paras 5.04/07). 2.21 DEFCS has five technical divisions at headquarters in Rabat concerned with: (i) exploitation and marketing of wood products including wood technology; (ii) reforestation and soil protection; (iii) forest inventory and planning including sylvo pastoral development; (iv) inland fishing and wildlife; and (v) research. At regional level DEFCS is represented in all 28 provinces and is attached to the Provincial Agricultural Services of MARA. The two provincial forestry services of DEFCS (Kenitra and Khemisset) affected by the project are relatively well staffed and will require only a limited number of additional staff to meet the expanded work program under the project. DEFCS has a staff of 2500 of which 270 managers and enginers, and 1200 junior level technicians.  - 11 - Although staffing appears satisfactory, normal operation of DEFCS is generally constrained by a shortage of funds. DEFCS is weak in forest inventory and planning while management praci:ices of many field operations, particularly stand management, needs to be improved to increase forest productivity. In both fields the project wiLl undertake specific measures to improve this situation (para 4.15) 2.22 Morocco has been engaged in forest :research since 1945. The senior research staff are all based in Rabat and are running experimental plots on a rather limited scale in forest areas throughout the country. IResearch topics presently being covered are silviculture, forest ecology, tree genetics, seed testing, entomology and ]?athology and wood and cork utilization technology. Greater emphasis is however desirable in genetic improvement, provenance trials, silviculturaL practices through different methods of thinnings, rotations, tree spacing, fertilizer use etc, wood technology, and utilization, and these will be addressed in this project (para 4.12). 2.23 All formal forestry training and education requirements are met by the Royal Forestry Training School in Sale for junior (20 graduates per year) and medium level technicians (20 per year) (respectively 1 and 2 year courses) and by the National School of Forest Engineers in Sa16 for Forest officers (4 year course and about 5 graduates per year). Senior Forest officers undertake further degree courses at the Hassan II Agricultural and Veterinary Institute. Problems are not foreseen in meeting training of f'uture technical staffing requirements. Whal: is totally lacking at present however is DEFCS's capability to direct and carry out in-service training and refresher courses for its forestry services personnel in fields such as modern plantation management techniques, improved silvicultural practices, forest inventory work, equipment maintenance etc. In addition there are no specialized vocational training centers or courses to train forest workers in improved logging operations and charcoal mLaking. The Project would initiate measures to overcome both of these shortcomings (paras 4.17/18). 2.24 The Ministry of Interior. The Ministry of Interior (MOI) has an important role in the development of the forestry subsector: (i) the Provincial Governors who represent MOI have overall responsibility for development activities in their Provinces, and are responsible for coordinating the operations of the technical services including DEFCS; (ii) the Governors review and approve the decisions of local authorities, including the communal budget; and (iii) the MOI, through the directorate of collectivities (Direction des Collectivit6s Locales), has the trusteeship of collective lands. For a successful implementation of plantation and pasture development as well as an improvement in legislative and administrative instruments for the subsector, MOI has to play a key role.  - 12 - F. Objectives and Strategies 2.25 Government objectives in the forestry subsector, as defined in the five-year Development Plan (1981-1985), include: (i) increasing wood fiber production through establishment of plantations with fast growing species at a rate of 50,000 ha per annum (until year 2000) and by applying a more rational and productive management and exploitation system of Morocco's forest resources, which would reduce imports of forest related products and increase exports of wood pulp, cork and alfa; (ii) maintaining, through improved forest management, the environmental impact of forests in relation to soil stability, erosion and water catchment; and (iii) control and supply of fodder for livestock by providing improved sylvo-pastoral management. 2.26 These goals are considered reasonable given the present state of the country's forestry resources, wood processing industries and legislative and administrative instruments. However, development of Morocco's forestry resources has been slow and are mainly due to insufficient investment in the sector and other problems, most of which emanate from lack of planning and management plans (paras 2.11/16). Concerning the lack of investment in the subsector, Government has taken a major step to improve this situation as the allocation of funds to forestry in the new Plan have been raised to over 8.5% of public investments in Agriculture compared with 7.3% during the 1973-1977 Plan and 3.9% during the 1978-80 period. During the 1981-1985 Development Plan, public investments in forestry will amount to DH 893 million (DH 179 million per year) against DH 213 million during the 1973-1977 Plan (DH 43 million per year) and DH 205 million during the 1978-1980 Plan (DH 68 million per year). In respect to the other weaknesses of the subsector, Government is aware of these problems and is willing to remedy this situation, both the proposed Forestry Project and the Bank financed Middle Atlas Agriculture Development Project _- (para. 2.27) are likely to assist in resolving some of these problems. G. Bank Involvement in the Agriculture Sector 2.27 Bank group lending for agriculture in Morocco began in 1965 and to date 14 projects have been undertaken and supported by US$505 million Bank/IDA funds (US$24.0 million in IDA credits). They include five irrigation projects; Sidi Slimane (FY65 completed), Sebou I (FY70 completed), Souss Ground Water (FY75 completed), Doukkala I (FY76 completed) and Doukkala II (FY77). There also have been four agricultural credit projects (FY66 completed, FY73 completed, FY77 completed, and FY79) /1 une major objective of the proposed Bank loan for the Middle Atlas Agricultural Development Project is the integration of wood and fodder production.  - 13 - an agro-industries and flood control projezt (Sebou II, FY74), four rainfed agricultural development projects (Meknes FY75, Fes-Karia-Tissa FY78, Loukkos FY80 and Middle Atlas FY82); and oie export oriented project (Vegetable Production and Marketing project, FY79). The proposed project would be the Bank's first major involvement in Morocco's forestry subsector, although three rural development projects - Fes-Karia-Tissa (Loan 1602-MOR), Loukkos (Loan 1848-MOR), and the Middle Atlas Project have important forestry components with the objectives of reforestation for erosion control, water catchment protection and sylvo-pastoral development. 2.28 Performance of bank-financed projects has generally been satisfactory. Performance in irrigation projects has been good once initial problems of land distribution, organization delays in construction and in procurement of irrigation equipment had been overcome. Inadequate cost recovery is the major issue. The impLementation of a recently decreed increase of irrigation water charges by about 100% will contribute to the solution of the cost recovery issue. The completion report for the Sebou I project, an irrigation project situated in the same region as the proposed Forestry Project, was submitted on April 29), 1981. The report stresses the project's success in institution building and in providing infrastructure to achieve increases in the production of irrigated crops. It also stresses the importance of extension, the :imely allocation of funds for O&M, as well as the collection of water charges due and the completion of land reform as a remaining challenge to en3ure achievement of the investments's economic and financial potential. Performance of the four agricultural credit projects has been good. OED reports for three of them are available (Report 2543, June 15, 1979, Report 3248, December 23, 1980)11. These reports stress the contribution made by these loans to agricultural development, their success in establishing an efficient credit institution and the successful expansion ol credit to small farmers. They also underline the importance of agricultural price policy, extension and input distribution for improved economic and financial performance of the credit loans. These issues are being addressed through Bank sector work. The Fourth Agricultural Credit Project has recently run into liquidity problems because of the 1980/81 drought which resulted in rescheduling of farmers' debts. Adequate measures to deal with these temporary problems have been taken. In the rainfed subsector, the first project (Meknes FY75), experienced considerable implementation delays due to land redistribution problems, poor preparation of project components, over-optimistic assessment of implementation targets, and inexperience in the organization and management of rural development projects. The Fes-Karia-Tissa Agriculture Project was designed to minimize organization and management problems encountered with Meknes and is performing well. The Loukkos project, which has recently become effective has made a good start. /1 The First Agricultural Credit Project was reviewed in OED's Report on Agricultural Credit Programs, Background Paper No. 4.  - 14 - 2.29 Lessons learned from those projects, both technical and institutional, have been taken into account in designing the proposed project. Start-up delays which have been experienced by most projects in Morocco would be minimized since key project staff have already been appointed (para 5.01) and since a small pilot mechanized destumping program (para 4.20) is reaching a successful conclusion. Detailed designs, including quantities and specifications for roads and buildings to be constructed during the first year are available. The proposed project is in line with the Bank's 1978 Forestry Sector Policy Paper in emphasizing the importance of industrial wood plantations and the crucial role of management and institutional building for improved management in the development of the forestry subsector. III. The Project Area A. Physical Features 3.01 Location. The project area (Map IBID 15933) covers some 212,000 ha of natural (cork oak) and plantation (eucalyptus, pines and acacia) forests in two provinces (Kenitra and Khemisset). The Mamora forms a large single block (134,000 ha) of natural cork oak forest mixed with forest plantations whereas the kharb consisting of about 78,000 ha of forest plantations is dispersed in two separate areas north and south of the alluvial plain of the Sebou River. 3.02 Topography and Soils. The elevation in the project area ranges between 25 and 300 m above sea level. The soils in Mamora are homogeneous and consist of sandy pervious soils ranging in depth between 1-5 m overlying rather impermeable clay formations. The area is fairly flat with slopes rarely exceeding 5%. Agricultural potential of these soils for food production is limited, because of lack of soil nutrients. The forest areas in the kharb are located on the fringes of the alluvial plain and are more undulating than the Mamora forest. In the South, the Rharb consist of sandy Mamora type soils; in the West the sandy soils are part of recent and consolidated dune formations, whereas the North and East have large proportions of gravel mixed with sandy and clay soils. Only a small percentage of these soils have good water retention capacity or have fair potential for agricultural production other than forestry. 3.03 Climate. The moderating influence from the ocean has created a sub-humid climate in a band 20 km wide along the coast, while the rest of the area inland has a drier sub-arid climate. Annual rainfall decreases inland, varying between 600 mm along the coast to about 450 mm in the east of the project area. Maximum mean monthly temperatures range between 200C and 370C, while in winter temperatures may drop to minus 50C, with incidents of frost. The climatic conditions in combination with the particular properties of the soils make the growing conditions in the project area relatively favorable for relatively fast growing tree species, but less attractive for crop production.  - 15 - 3.04 Infrastructure. A road network of about 400 km of all weather plantation access roads exists in the Mamora forest and Rharb area, linking these forests with the public road system. The existing forest roads have been constructed and maintained by road contractors under the supervision of DEFCS. This system has been operating efficiently for 10 years. Density of forest roads is low, averaging .40 km/100 ha in the natural forest of Mamora. However, existing plantations are generally laid-out in blocks of 300 x 300 m, each separated by fire lanes 12 to 30 m wide. Due to the gentle topography of the area, fire lanes are often used as tracks by four wheel drive vehicles and provide adequate access for plantation management and fire protection. Maintenance of these tracks is carried out by DEFCb on force account, using its own mnotorgrader. In the project area, there are 6 nurseries with a total combined output of about 7 million seedlings per year. Existing administrative offices and housing are adequate for current level of operations, but will need to be increased to support the expanded scale of operations proposed under the project (para 4.19). 3.05 In 1980, the pulpmill (para 2.06) produced 83,000 ADT of bleached hardwood sulfate pulp from eucalyptus and has recently increased its capacity to 100,000 ADT. To reach full capacity production, the mill's annual pulp wood consumption would have to be increased from about 286,000 m3 u.b. to 345,000 m3 u.b. This increase could be obtained by replanting about 20,000 ha of present low yielding eucalyptus (5 m3 o.b./ha) with high yielding planting stock (12 m3 o.b./ha, para 4.08). At present the mill purchases its pulp wood requirements from contract loggers who cut eucalyptus wood lots scattered throughout the project area and beyond, at distances ranging from 5 to 180 km from the mill. There would however be sufficient existing eucalyptus plantations in the project area within a 50 km radius of the pulpmill, which if properly upgraded would provide the total wood requirements of the mill at significantly reduced wood costs. B. Socio-Economic Features 3.06 Population and Land Tenure. The M4amora area is populated only at the fringes of the forest. The population of the Rharb has however doubled during the last 20 years to about 1.2 million people part of which may have been caused by the success of the Sebou project (para. 2.28). The forest in the project area is divided into state, collective and private (melk) land. The Mamora forest consists entirely of state land, whereas the Rharb area comprises 43% state land, 38% collective land and 19% private land. * Forest areas in the project area are well delimited. While the Government is undisputed owner of the state land, people living near forest state land have grazing rights in these areas together with the right to collect dead wood for domestic purposes. The forest plantations on collective and private land are established and managed like forests on state land by DEFCS (para 2.18).  - 16 - Land Use and Forest Management 3.07 The project area consists of about 210,000 ha of forests of which 82,000 ha in natural cork oak vegetation and about 130,000 ha in plantations, mainly eucalyptus (105,000 ha) and pines (18,000 ha). Their wood production is generally low, particularly the eucalyptus plantations, which on average have annual yields between 5-8 m3 o.b./ha, about half the potential production levels of improved species in this type of soil and climate (para 4.08). In order to make possible efficient exploitation and management, the replacing of degraded natural forests and plantations of low productivity by high yielding fast growing species is therefore one of the main priorities in the project area. In 1973, a detailed management plan for the Mamora forest prepared by DEFCS assisted by foreign consultants, was introduced, outlining the areas and species to be planted. DEFCS has already started with the implementation of this Plan which will be enforced under the project. The existing forest management in the project area is mainly based on the supply of pulpwood to the pulpmill but a higher value of production would be obtained by allocating a larger share to utility timber, poles and fuelwood from the same forests. This will be possible with improved stand management techniques (i.e. rotation, thinnings, more intensive plant spacing) to be strengthened under the project. 3.08 Apart from the production of wood products the forest areas are also used for grazing, particularly those areas which have a degraded forest cover (cork oak) or young tree plantations (eucalyptus, pines, acacia) which still have an open canopy allowing enough sunlight for the production of fodder. The Mamora forest has been divided in 10 specific grazing areas corresponding to each of the 10 tribes who have grazing rights.The productivity of the forest rangeland is however very low due to overgrazing and mismanagement. Forage output varies with the rainfall from about 120 to 300 feed units per ha. Fodder production under eucalyptus or acacia plantations is nearly nill, estimated at about 10 to 20 feed units per ha. 3.09 Each family is allowed by right a maximum herd for subsistence of 8 cattle or 40 sheep. Grazing right holders have to pay a small fee for each animal above this limit. Although grazing right holders have to register their herd each year with the local authorities, the actual number of livestock grazing in the Mamora forest is much too high in relation to available fodder resources. In the Rharb area grazing is not regulated. Most young plantations are protected by law against grazing during the first 3 to 4 years but, since there is very little natural forest left which can be used for rangeland, temporary grazing restrictions to protect young plantations are seldom fully respected. Due to the generally severe grazing pressures on forest lands DEFCS is only allowed by law to close off 20% of tribal rangeland/forest during plantation establishment and tree regeneration, to livestock at the same time. 3.10 Agricultural crop production in part of the Rharb plain is intensive since large areas are under irrigated crop production (about 70,000 ha). The rural life style is becoming increasingly sedentary. This  - 17 - has resulted in a far more aggressive use of grazing areas available in the forests of the project area. Particularly the rangeland in the Mamora forest is not used any longer for winter grazing only b-t is now used throughout the year, resulting in overgrazing and rapidly degrading pastures. Although the deficit in fodder resources in the project area is being reduced by increased fodder crop production in the Rharb plain, the success of the proposed reforestation program would also be strengthened if the productivity and management of the forest grazing areas were improved. 3.11 Major Constraint to Plantation Development in Project Area. The main forest development constraint in the project area is related to the reiatively high human and livestock population increase in the area which has resulted in overcutting the forest for fuelwood, conversion of rangeland into agricultural land and increased grazing pressure in the remaining forest areas. The proposed development actions under the project have taken these constraints in consideration since the project would replant mainly old plantations (20,000 ha) having a very low annual incremental yield of 5 m3 per ha and which presently do not produce any fodder for livestock. In respect to the rewly established plantations (10,000 ha) in degraded cork oak forest, w,rhich are presently used for grazing, pastoral improvements on other existing forest rangeland would be made to compensate livestock holders for the loss in grazing resulting of this reforestation program (para 4.11). The project will also help to alleviate the fuelwood constraints in the project area, by using the stumps and the balance portion of the production from the proposed plantations for fuelwood. 3.12 A UNDP/FAO project (MOR 73/106), which has successfully studied two tribal rangeland areas in the Mamora forest from 1973-1980, has made specific proposals for the required improvement of project grazing areas including its organization and management. These results would be used in the implementation of the project pastoral component. IV. The Project A. Objectives and Summary Description 4.01 The principle objectives of the project are: (i) to increase roundwood production through new plantations to provide short fiber pulpwood to the existing pulpmill at Sidi Yahia in the Rharb and provide part of Morocco's increasing demand for construction and industrial timber and fuelwood. This increased production would result in increased exports of pulp and reduced imports of timber; and (ii) introduce better planning and management techniques for the forestry subsector, which would result in increased productivity of forests as well as supply of forage for livestock.  - 18 - 4.02 The project is part of a long term plantation program in the country (para 2.25). Plantations would be of two types: the first would involve replanting of old eucalyptus plantations which are either of unsuitable genetic stock (around 20%) or are already in their third or fourth coppice rotation period with rapidly declining yields (80%), mainly for the supply of pulpwood, fuelwood and poles (para 4.04); the second would be reforestation with pines, acacia and eucalyptus in degraded natural cork oak areas for the supply of utility timber, fuelwood, poles, tanning bark and some pulpwood (para 4.06). 4.03 The proposed project would consist of: (i) destumping and replanting of about 20,000 ha of existing low-yielding eucalyptus plantations in the Mamora and Gharb areas; (ii) reforestation in the Mamora forest area of about 10,000 ha degraded cork oak forest with 3,000 ha eucalyptus, 3,500 ha Acacia mollissima and 3,500 ha of pines; (iii) upgrading and constructing of respectively about 140 and 40 km of forest roads and tracks, and maintaining about 500 km of selected plantation roads over the project construction period; (iv) pasture improvements on about 2,600 ha; (v) improving the research, forest inventory/planning and training capabilities of DEFCS; (vi) carrying out specialized studies including forest inventory, management, exploitation (charcoal) and financing; and (vii) establishment of a project management unit together with technical, administrative and logistical support. B. Detailed Features Reforestation and related works 4.04 About 20,000 ha of existing low yielding eucalyptus plantations on State or collective land would be logged, mechanically destumped and replanted with improved eucalyptus planting stock. Since 50% of this program would be carried out on collective land, assurances were obtained at negotiations that MUI had received written approval from all collectivities involved in the destumping program in the project area for replanting their land with eucalyptus. Destumping will be done mechanically. There are neither technical nor financial advantages to manual destumping. It costs about DH 3,500/ha (DH 3.5 per stump) and requires further mechanical soil preparation (deep ploughing) at an average additional cost of DH 500/ha. Mechanical destumping costs are estimated at DH 5,500/ha from which must be deducted revenues from sales of stumps of about DH 1,000/ha. Moreover, since it takes nearly 400 mandays to manually  - 19 - destump one ha, proposed annual destumping programs can only be carried out mechanically as there would be insufficient labor available in the area to carry out the work within the available period (about 2 million mandays to destump 5,000 ha in 6 to 8 months). The destumping program would be carried out by private contractors financed by the project. The wood from the stumps which amounts to about 40 tons per ha would be sold at auctions to the loggers as part of the wood lots, together with standing trees and imarketed as fuelwood or charcoal. Experiments would be carried out under the project to establish the most efficient way of splitting these stumps to facilitate transport and to introduce more efficient charcoal kilns (para 4.18). 4.05 The nursery, field preparation, planting and maintenance program would be carried out by DEFCS. To meet the increased demand for seedlings in the project area an additional nursery would be established, which would lbring the total number of nurseries in the project area to 7 with a total annual capacity to 10 million seedlings. 4.06 A further 10,000 ha plantation program would be carried in the Mlamora forest on state land to replace the much degraded cork oak vegetation cover, by planting eucalyptus, pines, and Acacia molissima. In contrast with the mechanical destumping program, with about 900 trees per ha this area with only 30 to 40 trees per ha would be suitable for clearing and destumping by hand. 4.07 The combined logging, destumping, land clearing and preparation and plantation program over the 5 year period would be as follows: PYO PYl PY2 PY3 PY4 PY5 Total ------------------------ha--------____________ Destumping and field preparation (old planting) 1,000 2,000 3,500 4,000 4,500 5,000 20,000 Clearing and prepa- ration (degraded cork oak) - 1,000 1,500 2,500 2,500 2,500 10,000 Planting 1,000 3,000 5,0)0 6,500 7,000 7,500 30,000 4.08 The eucalyptus selected for planting would be Eucalyptus camaldulensis, (provenance Lake Albacutya). It regenerates from its own stump following cutting (coppices) and has shown under research conditions a mean annual increment (m.a.i) in the project area between 17 and 21 m3 o.b./ha. Due to the variations in soils and rainfall in the project area, the eucalyptus to be planted under the project is expected to yield an average m.a.i. of 12 m3. o.b. It would be harvested every 10 years and would be allowed to coppice at least twice. The pines selected for planting would be Pinus pinaster (syn maritimna) from Leiria (Portugal), with an expected m.a.i of 6 mJ o.b./ha. It Would be cut after 30 years with thinnings after 15 and 25 years. Acacia mollissima would also be  - 20 - planted, cut and destumped after 10 years giving a m.a.i of 8 m3 o.b./ha and about 400 kg of dry bark for tanning. 4.09 The plantation establishment, maintenance and management techniques proposed are all well proven in both Morocco and other similar ecological areas including Southern Europe. Proposed mechanical destumping techniques have been tested in Morocco with track type tractors and have been found feasible. Nutrient loss caused by these operations appears to be small, since debris and bark left behind from the wood exploitation is properly mixed with the soil in the course of the land preparation operations. 4.10 Roads and Firebreaks. On the basis of the Management Plan (para 3.07) 140 km of selected roads will be upgraded to allow year round access for standard road vehicles in order to provide better forest management and exploitation. In addition a small new road construction program of 40 km will be undertaken in the new plantation areas. Both upgraded and new roads would have minimum design standards compatible with satisfactory serviceability and would be based on standard 4 m gravel roads with drainage ditches and culverts as required. Maintenance would be carried out on about 500 km of selected roads in the project areas aiming at keeping the roads open for light vehicular requirements. Road construction costs (new roads US$19,000/km; upgraded US$14,500/km and maintenance US$1,500/km) was based on recent bid documents and contracts for roads in the project area. The road program would be carried out under the same system described in para 3.04. Basic fire protection arrangements already exist in the project area, but will be improved during the project. New firebreaks would be constructed according to design standards of existing plantations (para 3.04) which are satisfactory. Because of the flat topography, firebreaks can also serve as access during the dry season which compensates for the relatively low density of existing road network (para 3.04). Selected firebreaks would be upgraded as access tracks by DEFCS as part of plantation maintenance operations using departmental labor and equipment. These would bring the overall road track density to about 20 m/ha. Special patrols would be put into operation during the high risk season. 4.11 Pasture Improvement. Blocks of about 100 ha totalling some 2,600 ha of degraded cork oak forest would be selected in Mamora for pasture improvement to compensate for the loss in grazing resulting from the establishment of 10,000 ha of new plantations on forest range land in Mamora (para. 4.06). The program would be carried out at an annual rate of about 650 ha starting in PY2. Apart from the intrinsic social and economic merits of this program, it would also provide an incentive to the collectivities to cooperate with project staff in the protection of young plantation stands. Pasture improvements would be based on the findings of a project (para. 3.12) carried out in Mamora since 1973 by UNDP/FAO and DEFCS and would follow its specific proposals in respect to the organization, management and technical parameters for improved grazing areas established under this project. Only the forest range of legitimate herds affected by the plantation development program in Mamora would be  - 21 - improved. The forest range would be improved by reseeding of the natural vegetation, seeding of grasses and annual and perennial legumes, fertilization, planting of forest shrubs and the establishment of rotational and deferred grazing. Investments for fencing has also been included in project costs. It is expected that the present low level productivity of these ranges would be increased 3 to 4 fold. Most important would also be the control of stocking rates and the organization of the legitimate pastoralists into grazing associations, who would be responsible for the maintenance of the improved pastures (para 5.06). Due to lack of technical local expertise, two man-years of technical assistance are included in the project (para 5.07) to help with the implementation of this component. 4.12 Research and Technical Management. A number of applied research development efforts will be undertaken by the research division of DEFCS to provide practical guidelines for the improvement of some forest management operations. The program would concentrate on; (i) studies on production and yields cf existing plantations; (ii) increasing tree volume and growth through genetic improvement, vegetative propagation, use of feitilizer and improvement of sylvicultural practices (thinnings, tree spacing, rotations etc.); and (iii) technical and economic assessment of improved wood utilization and its economics, including charcoal making; 4.13 Resource Management. The research program would closely monitor project results and assist in reviewing anc formulating forest management plans for the project area in Rharb and Manmora with the objective of better rationalizing forest exploitation by earmarking specific forest areas for specialized management of plantations for pulpwood for the pulpmill and other areas for the production of utility timber and other wood demands (paras 3.05 and 3.07). Although the realization of this goal is a long term proposition, assurances were obtained at negotiations that a forest management plan for the project area would be established. The plan would rationalize land use and fiber production and would introduce specialized sylvicultural practices adapted to different end uses. The plan would be available for review by the Bank by December 31, 1983 and would be put into effect, taking into account the Bank's comments, if any, not later than June 30, 1984. Disease and insect control have not caused any major problems in the project area. Although the cork oak has been affected by the gypsy moth, no serious defoliating problems have been. reported in the existing eucalyptus plantations. Future pest activity will however be monitored by the project, and short courses in pest identification and management control will be introduced by D].FCS in the proposed in-service training programs.  - 22 - 4.14 Technical Research. The genetic improvement of eucalyptus can be considerably increased if propagated by rooted cuttings selected from exceptionally fast growing parent trees (cloning). However this technique has one inherent risk in that it has not the genetic diversity which is important in resisting diseases, drought, frost etc. Vegetative propagation must therefore be based on a wide range of parent material stock which is not yet available. The project would continue with the present technique of propagation from seed, but would at the same time develop and select a wide range of parent stock so that rooted cuttings on a large scale can be produced during the latter part of the project period. Present fertilizer trials in Morocco have indicated a positive response in the rate of wood fiber production. However the specific rate and time for optimum fertilizer application together with the resulting m.a.i. have not yet been determined. The project will therefore continue these fertilizer trials and carry out economic and biological analysis to evaluate the precise benefits. The application of fertilizers is not included in the project, but funds would be allocated to the project area by Government if the evaluation proves positive and warrants systematic application of fertilizer. A possible technical alternative to the proposed mechanical destumping is chemically killing the tree stumps and planting between the stumps. Although sprouting (coppicing) of the stumps could thus be eliminated, this technique is as yet untested. Major questions are insufficiently resolved to warrant recommending this method such as (i) the number and costs of chemical sprayings and techniques required to kill the stumps; and (ii) extent of stumps and roots limiting annual mechanical maintenance operations, and percentage of loss in annual tree growth in the new planting caused by impediments during root establish- ment. Since with further research this technique could become a viable alternative to mechanical destumping in the future, it will be further studied under the project's applied research program, and possible harmful ecological side effects monitored. 4.15 Forest Inventory and Planning. The project would include a forest resource study based on recent satellite imagery which is considered necessary for the management and planning of Morocco's forests. It would be carried out during the first project year and would complement the National Forest Inventory (para 2.12). In addition, DEFCS's capacity in photo interpretation and physical planning in the "Division du domaine forestier" would also be strengthened by providing and training 4 additional staff. 4.16 Technical Assistance. The project would provide a total of 68 man-months of short-term technical assistance. In addition, two man-years for long-term consultants would be required to assist in the initial implementation of the grazing component (para 5.06). Short-term technical assistance would be made for up to 29 man-months of specialist consultancies in various areas relating to applied research, nursery techniques, silvicultural practices and forest management including preparation and evaluation of bidding documents for the destumping program (para 4.20), on a needs basis agreed between the Government and the Bank.  - 23 - In addition the project would provide 39 man-months of consulting services to assist the project and DEFCS to carry out studies in relation to forest management plan of the project area (8 man-months) (para 4.13), forest inventory and planning (8 man-months) (para 4.15), financing and cost recovery of the sector (6 man-months) (para 7.05), technical manpower and training requirements of the sector (17 man-nonths) (paras 4.17/18). Draft terms of references for technical assistance consultants and activities are given in the project file. During negotiations assurances were obtained that DEFCS would be responsible for preparing detailed terms of reference and that all consultants would be employed on terms and conditions and with experience and qualifications acceptable to the Bank. 4.17 Training. There is an important need for improving the training capability of the sector, but a detailed study of training requirements is needed to devise an effective in-service training program for DEFCS and for the training of forestry workers and people engaged in small scale wood iprocessing industries. This study should lead to the formulation of a subproject which would establish vocational training centers for forest workers and other related wood production activities for which interest has already been shown by some donor countries. Assurances were obtained at negotiations that a study on technical manpower and training requirements covering the scope and detail acceptable to the Bank would be completed no later than June 30, 1983 and that, after consultation with the Bank, the findings and recommendations of the study--including particularly the organization and responsibilities of in-service training for DEFCS-- would be implemented no later than December 31, 1983. Provision has been made under the project for 28 man months training fellowships for forestry officers to be utilized in line with the present priorities and the recommendations to be made by the proposed study. 4.18 The forest economy and research divisions of DEFCS would carry out a study which would investigate various ways to improve the efficiency of current harvesting practices and charcoal-making. The study would mainly rely on the results obtained from monitoring the operations of 2 or 3 groups of forest workers who would be employed by DEFCS under force account to cut and log some wood lots using improved techniques, undertake the mechanical splitting of eucalyptus stumps and test the output and efficiency of some modern charcoal kilns to be introduced by the project. Although a few forest exploitation and loggiig cooperatives exist in Morocco they are not yet very efficient and there are none in the project area. The study would therefore also determine appropriate steps to establish a forest exploitation and logging cooperative among forest workers in the region which would include its organization, activities and financing. If findings of this study are positive one or two pilot logging cooperatives would be established with the assistance of DEFCS (Division economique), which has already developed several cooperatives in other parts of Morocco. This would allow the forestry workers, members of a cooperative to secure value added through wood product marketing currently only accruing to their usual employers who a:re predominantly merchants and money lenders. The establishment of these cooperatives could however only  - 24 - be promoted realistically once DEFCb has established its capability to train forest workers in technical and organizational matters. Assurances were obtained at negotiations that the study would be completed by December 31, 1983 and sent for review to the bank. After taking into account the Bank's comments the recommendations of the study will be implemented. 4.19 Administrative and Logistical Support. The Project would provide offices at TIFLET and 13 houses for project personnel. In addition 23 light vehicles, seven 5-ton trucks and one grader for forest tracks' maintenance would be purchased. C. Project Start-up Activities 4.20 Several project activities would be carried out by the DEFCS prior to project effectiveness: destumping, raising of seedlings and planting of the destumped area. Provision has been made for up to US$1.5 million of retroactive financing for the destumping activities which would take place between October 1981 and June 1982. Since experience in large scale mechanized destumping contract operations is lacking, about 1,850 ha of a total of 20,000 ha will be mechanically destumped in 1981/82 in relatively small bid packages of 200 ha each so that contractors can demonstrate mechanized destumping techniques. The written approval for destumping and plantation reestablishment has been secured for concerned collectivities. It would also provide the project with more accurate cost estimates of the different operational approaches and would help to develop more appropriate technical specifications and contract standards for future international tenders. The monitoring of these operations will be carried out by the project manager who is already in place (para 2.29). D. Project Cost Estimates 4.21 Total estimated project costs during the five-year development period are estimated at DH 345.0 million (US$65.1 million) of which DR 145.5 million (U6$27.5 million), or 42% would be foreign exchange. Cost estimates include an estimated DH 123.6 million of taxes and duties. Base cost estimates are based on prices obtained during appraisal, updated to end 1981 prices. Physical contingencies included in the project cost estimates are 15% for civil works and 10% for equipment and operating costs. The allowance for expected price increases has been calculated on both local and foreign base costs plus physical contingencies. Estimated price increases for local cost are 11% for 1981, 10% for 1982, 9% for 1983 and thereafter and for foreign costs of 9% in 1981, 8.5% in 1982, 7.5% for 1983/85 and 6% for 1986. Total contingencies calculated on the foregoing basis are estimated at 30% of total costs, or 44% of baseline costs. The average costs of consultant services are estimated at US$10,000 per man-month (including travel and subsistence). Details of projects costs are presented in Annex 1, Table 1 and summarized below:  - 25 - Project Cost Estimates Foreign Components Local Foreign Total Local Foreign Total Exchange ------DH Million----- -----