Morocco - Irrigated Areas Agricultural Services Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11947-MOR STAFF APPRAISAL REPORT KINGDOM OF MOROCCO iRRIGATED AREAS AGRICULTURAL SERVICES PROJECT NOVEMBER 23, 1993 Middle East and North Africa Region Maghreb and Iran Department Agriculture Operations Division 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.  CURRENCY EQJIVALENT Currency Unit = Moroccan Dirham (DH) USS1.00 = DH 9.0 DH1.00 = USSO.111 WEIGHTS AND MEASURES The metric system is used throughout this report GLOSSARY OF ADEVIATIONS ASIL Agricultural Sector Investment Loan Prit aux investissements dans le secteur agricole CMV Development Center Centre de mise en valeur CRA Land Reform Cooperative Cooperative de la r6forme agraire CREPA Regional Center of Upgrading of Agricultural Skills Centre regional de perfectionnement agricole DDA Department of Agricultural Development D6partement du developpement agricole DE Livestock Department Direction de l'6levage DERD Department Education, Research and Development Direction de l'Enseignement, de la Recherche et du Developpement DER Department of Rural Engineering Direction du Genie Rural DPAE Department of PLanning and Economic Affairs Direction de La Planification et des Affaires Economiques DPV Department of Crop Production Direction de ta Production V6g6tale ENA National School of Agricultural EcoLe Nationale de l'Agriculture FDA Agricultural Development Fund Fond de devetoppement agricole IAV Agricultural and Veterinarian Institute Institut Agronomique et Veterinaire Hassan 11 INRA National Institute of Agricultural Research Institut National de La Recherche Agronomique LSI Large Scale Irrigation Grande irrigation LSII-2 Second Large Scale Irrigation Improvement Project Deuxieme projet d'amelioration de ta grande irrigation MAMVA Ministry of Agriculture and Agricultural Development Minist6re de L'agriculture et de La mise en valeur agricole OP Farmers' organizations Organisations Professionnelles ORMVA Regional Authority for Agricultural Development Office Regional de Mise en Valeur Agricole SPA Livestock Service Service de La Production Animale SPV Crop Production Service Service de La Production V6g6tale SVOP Extension and Farmers' Organizations Service Service de ta Vulgarisation et des Organisations Professionnelles SEMVA Experimental and Agricultural Development Station Station Exp6rimentale et de Mise en Valeur Agricole SMSI Small and Medium Scale Irrigation Petite et moyenne hydraulique WUA Water User's Association Association des usagers des eaux agricoles FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO IRRIGATED AREAS AGRICULTURAL SERVICES PROJECT Loan and Project Summary Borrower: Kingdom of Morocco Amount: US$25 million equivalent Terms: 20 years, including 5 years grace, at the Bank's standard variable interest rate. Executing Agencies: Directorate of Education, Research and Development and the nine Regional Agricultural Development Authorities (ORMVA), under the Ministry of Agriculture and Agricultural Development. Project Obiectives: The project objectives would be: to raise agricultural production and farmers' incomes in the irrigated areas with special efforts to reach women who are mainly responsible for livestock management; to improve the operating efficiency of the ORMVAs' agricultural services; to promote commodity and service orientated farmer organizations to take on development responsibilities; and to involve the university teaching/research staff in field extension and research. Proiect Description: The project would include: (a) the transfer of technology including the strengthening of adaptive research, agricultural extension and womens' programs with provision for staff training, infrastructure, vehicles and equipment, the contracting out of some extension and research activities, technical assistance and incremental operating costs; (b) provision of supporting services to farmers including soils and plant analysis, pest and disease warning system, and testing/demonstration of small equipment; (c) the promotion of farmers' organizations with provision for technical assistance, training and initial investments; (d) monitoring and evaluation of agricultural development in the irrigated areas; and (e) studies. The project would complement, and be implemented in parallel with the Second Large Scale Irrigation Project (Ln. 3587-MOR) which finances rehabilitation of the network and the improvement of the ORMVAs' public utility function for water distribution. Benefits: The project would be expected to have a substantial impact on agricultural production in the irrigated and adjacent rainfed areas complementing efforts to be made under LS112 to better manage water resources. Some 125,000 farm families with land in the areas under modern, large scale irrigation would benefit directly as would at least a further 75,000 families with rainfed land. Beneficiaries would include the many small farmers on the irrigation schemes (over 60% have less than 2 ha) and the women who are responsible for livestock management. Risks: The main risks stem from the difficulty of changing an existing organization, farmers' slow adoption of some new technology and the Government's capacity to assure continuity of funding. To counter these risks the project first provides for the reorganization of ORMVAs' services to be implemented prior to investments, for the up- dating of the skills gap analysis prior to redeploying staff, as well as for considerable staff training; second, the project provides for diagnostic studies to better identify 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.  farmers' real constraints and the points at which research should be focussed - also there are a number of on-going initiatives to tackle land tenure constraints which will be supported by the planned ASIL2; and finally the efforts to improve the efficiency of ORMVAs' services as well as to gradually transfer certain responsibilities to farmer organizations, should help resolve the budget constraint over time. Estimated Proiect Costs Local Foreign Total ------------- (US$ million) ---------------- Constructions & civil works 0.7 0.4 1.1 Vehicles & equipment 3.1 4.4 7.5 Training, technical assistance 5.4 4.4 9.8 & studies Incremental operating costs 9.0 2.3 11.3 Total Base Costs 18.2 11.5 29.7 Physical Contingencies 0.4 0.6 1.0 Price Contingencies 3.0 1.0 4.0 Total Project Costs a/21.6 13.1 34.7 a/ Including US$4.4 million of taxes and duties Financing Plan Local Foreign Total -------------- ZUS$ million ---- World Bank 11.9 13.1 25.0 Government 5.3 5.3 Net Project Costs 17.2 13.1 30.3 Taxes and Duties 4.4 4.4 Total Project Costs 21.6 13.1 34.7 Estimated Disbursement (US$ million) IBRD Fiscal Year 1994 1995 1996 1997 1998 1999 2000 2001 Annual 1.5 1.8 4.6 6.0 5.8 3.2 1.5 0.6 Cumulative 3.3 7.9 13.9 19.7 22.9 24.4 25.0 Economic Rate of Return: N/A Poverty Category: N.A. (indirect impact) MaR No.: IBRD 24899  - iii - STAFF APPRAISAL REPORT KINGDOM OF MOROCCO IRRIGATED AREAS AGRICULTURAL SERVICES PROJECT Table of Contents Page No. I. PROJECT AND SECTOR BACKGROUND .......................... I A. Project Background ........................................... 1 B. The Agricultural Sector . ...................................... 2 C. Bank Support for Moroccan Agriculture ............................. 4 H. AGRICULTURAL PRODUCTION AND SERVICES IN THE IRRIGATED AREAS 6 A. The Irrigated Areas .......................................... 6 B. Agricultural Production . ...................................... 7 C. Agricultural Services ......................................... 8 D. Increasing Role for the Private Sector ......... ..................... 10 E. Strategy for Intervention . ...................................... 12 I. THE PROJECT .............................................. 12 A. Project Origin and Rationale .......... .......................... 12 B. Project Objectives and Summary Description .......................... 13 C. Detailed Features ............................................ 14 D. Cost Estimates ............................................. 21 E. Financing ................................................ 22 F. Procurement .............................................. 23 G. Disbursements ............................................. 25 IV. PROJECT IMPLEMENTATION .................................. 26 A. Project Organization . ........................................ 26 B. Organization of Agricultural Services ............................... 27 C. Supervision and Mid-Term Review ................................ 29 D. Accounts and Audit ........................................... 29 V. PROJECT IMPACT ........................................... 30 A. Project Benefits ............................................. 30 B. Impact on Recurrent Costs .......... ........................... 30 C. Cost Recovery . ............................................ 31 D. Environmental Impact . ........................................ 31 E. Risks ................................................. 31 VI. AGREEMENTS REACHED AND RECOMMENDATIONS ................. 32 This report is based on the findings of an appraisal mission which visited Morocco in February 1993, comprising Messrs. J. Cole, (Task Manager), W. Zijp (Extension Specialist) and F-D Migeon (Financial Analyst), A. Bouchitte (Consultant - Agricultural Economist) and J. Grolleau (Consultant - Horticulturist). Ms. H. Lackner (Consultant - Sociologist) also participated in the preappraisal mission in October 1992. The peer reviewer is Mr. Hosnich (EC4NR). The Division Chief is Mr. Odin Knudsen (MN 1AG) and the Acting Country Department Director is Mr. Mahmood Ayub (MN1DR).  - iv - Page No. In-text Tables Table 3.1 Project Cost Summary ................................... 22 Table 3.2 Price Contingencies ..................................... 22 Table 3.3 Project Financing Plan ................................... 23 Table 3.4 Summary of Proposed Procurement Arrangements .................. 24 Table 3.5 Disbursement Schedule ................................... 25 Table 3.6 Disbursement Categories .................................. 26 Annexes Annex I Agricultural Production and Potential in the Irrigated Areas ........... .................... 34 Annex 2 Adaptive Research and Supporting Services ...................... 45 Annex 3 Extension Services ..................................... 52 Annex 4 Womens' Program ..................................... 62 Annex 5 Farmers' Organizations .................................. 67 Annex 6 Staff and Farmer Training Program ........................... 79 Annex 7 Project Costs ......................................... 83 Annex 8 Disbursement Schedule ................................... 87 Annex 9 Monitoring and Evaluation Indices ........................... 88 Annex i0 Implementation Schedule ................................. 90 Annex 11 Supervision Plan ....................................... 91 Annex 12 Selected Documents in Project File ........................... 92 Charts Chart 1 Organization of the Agricultural Sector Chart 2 Organization of ORMVA Agricultural Services Map No: IBRD 24899 Implementation Volume Working Paper no. 1 Production Agricole, Recherche Adaptative et Actions d'Appui Working Paper no. 2 Vulgarisation Agricole Working Paper no. 3 Animation Feminine Working Paper no. 4 Organisations Professionnelles Working Paper no. 5 Cost Tables MA:cde\idsps\sr\I1  STAFF APPRAISAL REPORT KINGDOM OF MOROCCO IRRIGATED AREAS AGRICULTURAL SERVICES PROJECT I. PROJECT AND SECTOR BACKGROUND A. Project Background 1.01 This project forms one element of a coordinated lending program which the Bank is pursuing in support of large scale irrigation (LSI) in Morocco. The project would raise the productivity of LSI farming operations through increased transfer of technology and support to service cooperatives and farmer organizations. In parallel, the second Large Scale Irrigation Improvement Project (LSII2), which was approved by the Board March 30, 1993, covers network rehabilitation, efficiency and sustainability of the public utility function of the Regional Agricultural Development Authorities (ORMVA), on-farm water management techniques and environmental protection. An on-going Agricultural Sector Investment Loan supports rainfed agricultural investments and the improvement of public resource management. 1.02 As detailed in the recent Country Assistance Strategy (see Report No. P-61 14-MOR), Bank strategy in Morocco stresses the need to improve public sector management, foster private sector development, enhance environmental and water resource management, alleviate poverty and increase the outward orientation of the economy, in addition to consolidating macroeconomic adjustment and reform. The proposed project in improving the organization and efficiency of the ORMVAs' agricultural services would contribute to the sustained improvements in public management while benefitting both productivity and soil and water management. Private sector development would be directly served by the development of farmers' organizations. The project would also reduce poverty by raising the income of small farms and benefit women directly because of the important role they play on farms (particularly on the smaller farms and in livestock management). The reduction of poverty and the direct involvement of women in development actions are important planks in Government's strategy for intervention in the sector. Although the irrigated areas are relatively well- endowed compared with those areas which rely entirely on rainfall, there are many families who can not subsist on their farm income. To the extent that the project can transfer improved technology to these families, it would make a significant contribution to poverty reduction. Moreover, because of the importance of women on farms in the irrigated areas, they would benefit directly from the project. 1.03 The success of Government's national program' for LSI expansion and rehabilitation is dependent upon progress toward the OMRVAs' financial self-sufficiency through cost-effective O&M, improved water-use efficiency and, above all, increased cost recovery. If farmers are to use water more efficiently and obtain the increase in yields and cropping intensity required for them to be able, over time, to pay the full cost of water, higher productivity through adoption of improved technology 1/ The eight-year program 1993-2000, includes 250,000 ha of new areas and 200,000 ha of rehabilitation.  -2- will be required. The ORMVAs' agricultural services would play an important role in the development and transfer of the necessary technology. But, if these services are to be sustainable within existing budget limitations, not only must the existing private sector network be exploited, but its expansion actively promoted. 1.04 The Large Scale Irrigation Improvement Project (LSII1), approved in 1986, shifted the emphasis from straight support for new investments to improving the performance of the existing irrigation network by emphasizing rehabilitation and the reform of the institutions supporting the system. It also began improving the transfer of technology by strengthening the agricultural services. The proposed Irrigated Areas Agricultural Services (IAASP) project would build on the results of this first project on support services while the second project, the LSII2, will continue with the program of rehabilitation. The separation of services from the LSII2 project recognizes the importance of focusing more emphasis on technology adaptation and extension. 1.05 A joint Bank and FAO/CP mission, in October 1991, identified the project which was subsequently prepared by the Ministry of Agriculture and Agricultural Development with the help of a FAO/CP mission in March 1992. The project was preappraised in October 1992 and appraised in February 1993. B. The Agricultural Sector Physical and Economic Setting. 1.06 The agricultural sector is a critical component of the Government's economic and social strategy. Although agriculture contributes only 16% of Morocco's GDP, it provides employment to 40% of the labor force and generates 30% of export earnings. Food crops are the largest subsector, contributing about 60% of the gross value of agricultural production. Cereals account for nearly 80% of the harvested area and 33 % of the gross value of production. 1.07 Morocco has 28 million ha of agricultural land, of which only 9.2 million ha are cultivable; half of this area receives sufficient but inconsistent rainfall. Irrigation is practiced throughout the country and the 1.3 million ha (500,000 ha LSI and 800,000 SMSI) now irrigated cover about 80% of the potentially irrigable area. Moroccan agriculture is dualistic. Its relatively prosperous areas use modem technology to produce food, industrial and export crops while poorer areas practice traditional agriculture in which cereals and pulses dominate. 1.08 While agricultural growth was slow in the 1970s, averaging 2.4% p.a. in real terms, it rose to an average 8.2% annual real rate between 1981 and 1991 despite several drought years. This reflects the growing impact of irrigation, good rainfall in the non-drought years, the uptake of improved technology and improved producer prices for cereals. This growth in output has been accompanied by increases in agricultural exports (3.2% p.a. in real terms between 1981 and 1991) and reductions in food imports which fell steadily from 17% of total imports in 1984 to 8.6% in 1991. Public investment in agriculture is channeled through the Ministry of Agriculture and Agricultural Development (MAMVA), accounting for 16% of total public investment. About 55% of public agricultural investment was allocated to irrigation, mainly LSI (excluding dams). Although public investment fell in real terms by 3.2% p.a. between 1981 and 1991, total investment in the sector (public and private) grew by an average of 4.4% indicating the extraordinary performance of private sector investments.  -3 - Government Objectives and Strategy 1.09 The Government's objectives in the early 1980s were shaped by the urgent economic circumstances in which it found itself. Faced with increasing economic disequilibria in the internal and external accounts, the Government sought to: (i) reduce fiscal and balance of payments deficits; and (ii) increase productivity by reforming the underlying structure of key economic and social sectors. In 1984, as part of its adjustment strategy, the Government launched the Medium-Term Agricultural Sector Adjustment Program (MTASAP) to liberalize agriculture and food prices, reduce subsidies and restructure public expenditure in the sector. MTASAP has been largely implemented in the area of global sectoral policies. However, further deepening and strengthening of reforms are needed. The Government has also initiated a long-term program to restructure public enterprises across the economy, including in the agricultural sector, that is being followed by a comprehensive privatization program. 1.10 Despite the achievements of the MTASAP, challenges remain. The ability of farmers to respond to changing circumstances is weak due to limited information about technical options, lack of capital and poor access to support services. An ability to adapt to new conditions will be necessary as Morocco faces integration into the EC. Furthermore, the quality of the natural resource base is deteriorating and water resources are becoming scarce; development efforts need to focus on making better use of natural resources, particularly water since shortages by the early 2000s threaten to hamper further development. 1.11 In order to address these challenges, the Government's strategy for the agricultural sector includes: (i) increasing sector efficiency, flexibility and growth by raising productivity, expanding the ability of farmers to respond to changing markets and reducing risk; (ii) assuring environmental protection by maintaining, protecting and developing the natural resource base; (iii) reducing poverty by expanding income generating opportunities in rural areas; and (iv) redefining the role of Government by increased reliance on the private sector and strengthened public administration through greater accountability, decentralization and increased efficiency. In support of these objectives, Government would: (a) continue the program of deregulation and liberalization of domestic markets; (b) reduce and diversify risks in the sector through promoting more effective use of irrigation, improved crop varieties etc.; (c) enhance farmer responsiveness to changing conditions through loosening restrictions on cropping patterns and greater access to services; (d) increase private investment through further trade and market liberalization; (e) encourage more rational use of water and other natural resources; and (f) select public investments against more demanding economic and environmental criteria. 1.12 The proposed project is in conformity with this strategy as it would: (i) assist farmers to raise productivity and diversify their cropping, (ii) support a more efficient use of water, fertilizer and crop protection chemicals, (iii) raise the earning potential of small farms, and (iv) rationalize ORMVAs' agricultural services while promoting farmers' organizations to take on development responsibilities.  C. Bank Support for Moroccan Agriculture Lending Program 1.13 Bank Group lending to Morocco began in 1965. To date, 103 loans and credits have been made totalling US$6,025 million. In agriculture, 29 loans and credits have been made totalling US$1,770 million, or 29% of total lending. Twenty-two of these projects have been completed and seven are being implemented. These include eight irrigation projects, Sidi Slimane (FY65), Sebou (FY70), Souss Groundwater (FY75), Doukkala I (FY76), and II (FY77), Small & Medium Scale Irrigation I (FY83), all completed, Small & Medium Scale Irrigation II (FY88), Large Scale Irrigation Improvement Project I (FY86) and II (FY93); eight agricultural credit projects (FY66, FY73, FY77, FY79, FY84, FY86 all completed, FY89 and FY94), five rainfed agricultural development projects in Meknes (FY75), Loukkos (FY80), Fes-Karia-Tissa (FY79), Middle Atlas (FY82) and Oulmes Rommani (FY83) all completed; an agro-industrial and flood control project, Sebou II (FY74 completed); a vegetable and marketing project (FY80 completed); two forestry projects (FY82 completed and FY90); an agricultural research and extension project (FY 89); two agricultural sector adjustment loans (FY86 & FY88, both completed); and an agricultural sector investment loan (FY 91). Project Performance 1.14 Bank-financed projects in agriculture have largely been successful. Performance of irrigation projects has been satisfactory although problems of land distribution and organizational delays in construction and in procurement of irrigation equipment need to be overcome. The Project Performance Audit Report (PPAR) for the Sebou I Project (Loan 643-MOR) stresses the project's success in institution building and in contributing to increasing crop production. The PPAR of Sebou 11 (Loan 1018-MOR) notes that the project was successful in introducing commercial sugarcane production and processing but stresses the vulnerability of investments in commodities like sugar which are subject to wide price fluctuations. An OED Impact Evaluation Report for Doukkala I and 11 projects (Loans 1211- and 1416-MOR) concluded that the projects complemented well Government's objectives of investing in large scale irrigation to enhance domestic food self- sufficiency, boost export earnings and expand rural employment opportunities. The PPAR of the Souss Groundwater Project (Loan 1123-MOR) stresses the successful private land consolidation and public land distribution and cooperatives' establishment but highlights the neglect of maintenance due to inadequate funding and staff. This problem has been addressed by the Large Scale Irrigation Improvement Project (Loan 2656-MOR), which began a process of making the LSI subsector more efficient, cost-effective and sustainable. The project has been successful in rehabilitating infrastructure, increasing water charge collection rates and beginning the disengagement of commercial activities to the private sector. While the project demonstrated the strong technical capacity of the ORMVAs as executing agencies, it also showed that institutional weaknesses were deeper and more widespread than anticipated. Improvements in management and institutional arrangements have been slower than expected but are being continued under the second irrigation project.  1.15 Performance of the five agricultural credit projects has been good and the PPARs stress the contribution made to the country's agricultural development by the successful expansion of credit to small farmers. In the rainfed sector, the rural development projects results have been mixed. The first project (Meknes, Credit 555-MOR) experienced considerable delays due to land redistribution problems, insufficient project preparation, optimistic implementation targets and management inexperience. The following four projects, Fes-Karia-Tissa, Loukkos, Middle Atlas and Oulmes Rommani (Loans 1602, 1848, 2082 and 2217-MOR) were designed to minimize such organizational and management problems and were concluded satisfactorily except that the completion dates were considerably extended due to delays arising from the general financial crisis which Morocco experienced in the 1980s. Technically the implementation of first forestry project, Gharb-Mamora (Loan 21 10-MOR), was successful but it also suffered delays due to budgetary shortfalls arising from the financial crisis. 1.16 Implementation of the agricultural research and extension project (Loan 3036-MOR) is proceeding satisfactorily although disbursements have been delayed by budget shortfalls and the time taken to effect certain institutional changes. The project, which covers primarily the rainfed areas, also includes financing for testing extension approaches in the irrigated areas (19 pilot Extension Centers in six ORMVA are covered). This followed the creation of an agricultural extension service in the ORMVAs as part of the institutional changes implemented under the first Large Scale Irrigation Improvement Project. Lessons Learned 1.17 The main lessons learned in support of irrigation development over 28 years as well as from more recent experience in the support for agricultural research and extension services are the need for a better organization of services, for a more participatory approach in formulating programs, for raising farm incomes, for recognizing budgetary restrictions in implementation and for project simplification. The proposed project has taken into account these lessons. First, the reorganization of agricultural services in the ORMVA (so as to make best use of the scarce human resources available in the field) would be carried out prior to further investments. Thus, key steps in the reorganization of four ORMVAs to be implemented during the start-up of LSII2 were completed prior to negotiations of the proposed project (para. 4.05), while activities in the five other ORMVAs would be limited to studies and training until they are also reorganized. Second, extension would not be operated as a top-down purveyor of messages to a recipient farming population; rather it would focus on identifying the real needs. A thorough diagnosis of farmers' needs would be conducted prior to planning research and extension programs (para. 3.13). Third, to enable farmers to meet the rising cost of water and for the state to obtain a satisfactory return on the investments in LSI, field efficiencies would be increased and crops diversified in intensifying agriculture (para. 3.09). Fourth, given budget restrictions, the continued divestiture of services towards the private sector should be pursued. This is also in the interests of developing responsive services, which is one of the objectives of the component for the promotion of farmers' organizations (para. 3.35). Finally, as experience with LSII1 showed the need for simplification, support for agricultural services would be provided under a separate project from LSII2, as is being done under the proposed project (para. 3.02).  -6- II. AGRICULTURAL PRODUCTION AND SERVICES IN THE IRRIGATED AREAS A. The Irrigated Areas 2.01 Background. Morocco's farmers have traditionally used irrigation to compensate for low and inconsistent rainfall, bringing 800,000 ha under small scale systems. Since the 1960s, Morocco has made modern, large scale irrigation (LSI) the centerpiece of its agricultural development and has rapidly built or modernized nearly 500,000 ha. In addition to boosting food production, this strategy has also increased rural employment, promoted agroindustry and helped stabilize domestic production. It has also raised productivity significantly by bringing modern agriculture to more than 100,000 poor, small farm families, and, in several areas, has slowed the flow of people from rural to urban areas while protecting semi-arid land from overgrazing. In the large scale irrigated areas, about 158,000 farms benefit from irrigation; another 330,000 farms with more traditional irrigation systems or rainfed farming are in the ORMVA's territory of responsibilities. 2.02 Institutional Framework. The LSI subsector involves a combination of Government bodies and public enterprises at central and regional levels, private farmers, input suppliers and processors. The institutional and legal framework for LSI was established in the late 1960s on a strongly centralized and government-dominated basis, but, since the mid-1980s, has moved toward decentralization and state divestiture. 2.03 MAMVA plays a pivotal role in the LSI subsector. It has full responsibility for managing and overseeing construction, for operating irrigation facilities and for supervising agricultural research and development. MAMVA has delegated operational responsibility for the LSI systems and the provision of farmers with agricultural support services to the nine ORMVAs2. The legal status of the ORMVAs is that of administrative public enterprises, placed under MAMVA's technical supervision and the Ministry of Finance's financial control. The National Bank for Agricultural Credit (CNCA) has a principal role in delivering rural finance. 2.04 Infrastructure. Morocco's LSI schemes (see map) are comprised of capital-intensive public investments for hydraulic infrastructure almost entirely based on surface water stored behind dams. Modern irrigation systems cover 84% of the LSI area, of which 294,000 ha are under surface irrigation while 114,300 ha benefit from sprinkler irrigation. The remaining 77,500 ha are improved traditional schemes in the southern oases. In addition to LSI, the territory of the nine ORMVAs includes a further 311,000 ha in private and traditional irrigation and 1.4 million ha of rainfed land adjacent to the LSI areas (see annex 1, table 1). 2.05 Divestiture Program. Until the mid-1980s, LSI development was a top-down Government undertaking: most decisions were taken centrally by MAMVA while the ORMVAs were extensively involved in commercial activities such as mechanized cultivation services, input supply and veterinary services. In addition, state-owned firms held processing monopolies. The private sector was confined to production on farms and output marketing, although parastatals were heavily involved in purchasing of basic commodities. Under the MTASAP, the ORMVAs have withdrawn from commercial activities and the private sector's role is rapidly expanding in input supply, in organizing 2/ Doukkala, Gharb, Haouz, Loukkos, Moulouya, Ouarzazate, Souss-Massa, Tadla, Tafilalet.  - 7 - produce marketing as well as through grower associations (paras. 2.23-2.29). Domestic marketing and trade has also been liberalized; price stabilization schemes using variable tariffs are now being introduced for several major communities. B. Agricultural Production 2.06 Overview. The LSI schemes are producing well below potential with average crop yields and cropping intensity still relatively low and efficiency of water-use poor. Several reasons account for this poor performance: water shortages due to drought and distribution problems arising from the poor state of the irrigation network, the lack of attention to improved technology and the failure to develop new markets. Poor water efficiency is the result of inadequate technology, low water charges and lack of technical knowledge on water management. Land tenure constraints (such as collectively owned land or land reform cooperatives where farmers did not have individual titles) have also contributed to limiting increased productivity. 2.07 Land Tenure. Typically, farms in LSI areas are small and privately owned. Some 84% of farms in the LSI area are 5 ha or smaller, while average farm size is 3.1 ha (annex 1). If the oasis perimeters (where irrigated farms average 0.9 to 1.5 ha) are excluded, 75% of the farms are 5 ha or less and 55% smaller than 2 ha. Although numerous, these farms cover only 36% of the cropped area; 48% of the land is held by farms of 5-20 ha and 24% is in holdings above 20 ha many of which are state-owned, operated by parastatals, or by farmer cooperatives under ORMVA supervision. Although the small size of the farm can be seen as an incentive to agricultural intensification, the continuous fragmentation of the holdings due to the increased pressure of rural population growth is becoming an obstacle to modernization, exacerbated by traditional forms of collective ownership ("indivision" and "terres collectives"). Private individual farms hold over 70 percent of the land in the Doukkala, Moulouya and Tadla while in the Gharb, Loukkos and Haouz more than half the land is held by land reform cooperatives (CRA) and/or traditional collectives. A number of on-going programs are giving titles to farmers on CRA land and are distributing collective lands. 2.08 Cropped Area. In the LSI area (500,000 ha), Government has promoted a cropping pattern based on industrial cash crops and intensive animal production in combination with traditional food crops. However, following the divestiture of ORMVAs' responsibility for managing sugar and cotton crops, regulations on crop rotations have been modified, revised cropping recommendations have been issued for each LSI scheme and farmers now have the option to propose an alternative rotation within the limits of water availability. About one third (420,000 ha) of the solely rainfed land lies in the Gharb and Loukkos ORMVAs where annual rainfall exceeds 450 mm (the minimum required for wheat production); the remainder is in the arid zone where cropping opportunities are limited. 2.09 In 1990/91, cereals (mainly bread wheat) were planted on 36% of the area of the seven modern schemes; industrial crops (sugar beet, sugarcane, cotton, oilseeds) on 20%; food legumes on 6%; forage crops for cattle (milk and meat) on 12%; and vegetables on 12%. Tree crops, mainly citrus and olive trees, cover 14% of the cultivated area. On the rainfed land in the Gharb and Loukkos, cereals occupy 60% of the land and in the other areas 80 to 100% of the cropped area. 2.10 Overall cropping intensity averaged 103% in 1986-1991, with the best performance achieved in Doukkala and Tadla with 125% and above (annex 1). These cropping intensities compare with potentials of over 100% throughout the LSI area and ranging up to 140% in Doukkala.  - 8 - 2.11 Yields. Crop yields vary widely both within and between ORMVAs due to differences in soil conditions, farmers' competence and the incentives to invest and produce. Sugar beet yields range from 62 ton/ha in the Doukkala to 43 ton/ha in the Tadla and only 35 ton/ha in the Gharb and Moulouya; these yields compare to 80 ton/ha achieved under best practice. Sugarcane yields vary from 68 ton/ha in the Gharb where soils are good to around 50 ton/ha in the Loukkos and Moulouya where soils are too light for achieving higher yields. This compares with 70 ton/ha achieved by the better producers and 100 ton/ha on the research station. Cereal (mainly bread wheat) yields at 3 to 4 ton/ha are 50 percent of potential; however, some farmers in the Doukkala reach over 6 ton/ha. Average cotton yields range from a low 1.2 ton/ha in Gharb to a more acceptable 2.1 ton/ha in Tadla and some producers in the Haouz have obtained as much as 4 ton/ha. Citrus production has fluctuated between 14 and 20 ton/ha over the last five years, with the ceiling reflecting the aging of the plantations. 2.12 Numbers of livestock have remained more or less stable. The quality of stock has generally improved through crossing with improved breeds. Total milk production has reached 300 million liters per year but yields per cow are still relatively low due to poor feeding and hygiene. 2.13 Market Outlets. The ORMVA territory contributes 96% of the country's exports of citrus and 35% of vegetables. However, quality of fruit and vegetables for export is a problem although in some areas quality standards are excellent and internationally competitive. Sugar beet and sugarcane are processed by private and public mills. Cotton is handled by a parastatal purchasing organization COMAPRA. New crops are being introduced partially driven by increasing contacts and trade with farmers and importers in the EC and other countries. 2.14 Potential for raising productivity. Realizing the potential for increased farm incomes and productivity in the LSI areas will require action on three fronts. First, better and more economic use will need to be made of the available water supply. Good potential to improve on the present performance exists through rehabilitating and modernizing the infrastructure and through introducing improved field irrigation practices (actions are supported by LSII2). Second, the land tenure constraints, for which legislation will be supported by the planned ASIL2, will need to be resolved over time. In the short run, limited potential exists for raising productivity on the area occupied by many of the very small farms, many of which are run on a part-time basis (these farmers obtain work on other farms, or in the towns, to supplement their income). Because many of the larger farms already largely use the latest technology, improvements in productivity would necessarily be moderate on these farms. Nonetheless, between these two extremes, the full-time farmers on small to medium sized farms (occupying nearly 50 percent of the surface area) could considerably raise productivity and better link themselves to modem agro-industry. Third, much remains to be done on all farms to adapt and diffuse improved technology for better use of water, better management of soil and pests and develop new market outlets. C. Agricultural Services Agricultural Research 2.15 Institutions. Agricultural research is carried out by several public, para-public and private institutions. The public agencies are the National Institute for Agricultural Research (INRA), (the most important and the only one devoted solely to research) and the universities. Of the universities,  - 9 - the Agricultural and Veterinary Institute (IAV) in Rabat and the National Agricultural School in Meknes (ENA) have a high research capacity used primarily in support of their teaching. IAV has a good potential for livestock research and for socio-economic aspects, while ENA has a strong unit for training extension staff. 2.16 A number of state-owned companies, such as SODEA (citrus, vines and fruit trees), SNDE Oivestock), COMPARA (oilseeds) and the Sugar companies, do some adaptive research. The private sector has been responsible for the advances in vegetable production together with the Moroccan Company for Agricultural Services (SASMA), which has been funded by a retention on exports. For citrus, the Royal Farms and SODEA are doing adaptive work and INRA is responsible for maintaining planting material nurseries. Private sector research is also expanding in the irrigated areas. In addition, some sugar grower associations have started adaptive work on varieties and fertilizer practices. 2.17 The ORMVAs have a responsibility for adaptive research that complements the research of the public and para-public institutions and demonstrates the potential of improved technology to farmers. Unfortunately, little progress has been achieved in this adaptive research. Under LSII1, efforts were made to develop a program coordinated by the Education, Research and Development Department (DERD) of MAMVA and by a national level committee, the "Conseil National de l'Orientation de la Recherche Agricole" (CNORA). Regional working groups, "Comite Local de Coordination de la Recherche" (CLCR), on which the profession and a number of research institutes are represented, were set up and prepared research proposals but financing was not forthcoming to start field trials. Agricultural Extension 2.18 National extension services are overseen by the DERD. Its extension division is responsible for coordinating and planning all extension activities, defining suitable techniques, means and methodology for extension and organizing staff training. It also has responsibility for overseeing the land reform cooperatives (CRA). A separate Department for Public Agricultural Enterprises is responsible for ensuring liaison between MAMVA, the Chambers of Agriculture, professional associations and farmers' unions. 2.19 The extension field services in the rainfed areas are managed by the 46 Provincial Departments of Agriculture and 122 Extension Centers (CT). In the irrigated areas, the ORMVAs are responsible for services operated through 156 Development Centers, "Centre de Mise en Valeur" (CMV). Overall, these services tend not to be responsive to farmers' needs; operating efficiency is also low. Agricultural Support Services of the ORMVA 2.20 ORMVAs' support to farmers is provided through three services: crop production (SPV), livestock (SPA) and extension (SVOP). The crop production service which, prior to divestiture, was primarily responsible for contracting and monitoring industrial crops, handles adaptive research and is the main source of technical expertise on crops. The livestock service handles technical advice, the establishment of new milk collection centers and the development of services such as artificial insemination in collaboration with the livestock breeders associations. The extension service, which was established under LSIII, works through extension agents located in the CMV. Under LSII1,  - 10- pilot activities providing a more intensive form of extension through working with farmer groups have been successfully launched in one or two CMV per ORMVA. The provision of professional farm management advice has been started in the Loukkos ORMVA under a KFW funded project. 2.21 The ORMVAs' agricultural extension has suffered from lack of coordination between services and a serious overstaffing in lower grades. Staff numbers in the three services of the nine ORMVAs total 4170, of which 2,170, many of whom are redundant, are in low non-technical grades. These problems have been addressed in a LSII1 management study on three ORMVAs (Doukkala, Gharb and Tadla) which would (a) bring together the three services under a director of agriculture and (b) decentralize services to the sub-division level. This study reviewed staffing and made a 'skills gap' analysis prior to preparing an estimate of training needs. Under LSI12, four ORMVAs are undergoing reorganization (ORMVAs of Doukkala, Gharb, Tadla and Loukkos), followed by the other five ORMVAs once management studies have been completed. This reorganization and introduction of greater accountability should provide a suitable environment for the transformation of staff attitudes needed to upgrade the services. However, overstaffing and inadequate remuneration need also to be tackled. The proposed project includes provision (para 3.26) for updating the 1990 "skills gap' analysis and a staffing plan (which would be expected to include a reduction in total numbers but an increase in graduate posts). The need for changes to the remuneration system to match the new approach to management applies to all ORMVA services; the Management Improvement Plans under LS112 being negotiated between two ORMVAs and the Government contain provision for dealing with these institutional issues. Similar plans will be negotiated with the other seven ORMVAs by the end of 1995. Bank Support for Agricultural Services 2.22 Bank support for agricultural research and extension services commenced in the late 1970s with adaptive research and improved extension management supported through a number of area development projects. Subsequently, a national Agricultural Research and Extension Project (Ln. 3036-MOR) was launched in 1989 to strengthen INRA and test extension approaches in the rainfed areas as well as in 19 pilot CMVs in six ORMVA. Lessons learned from the pilot actions in this project have been taken into account in preparing the proposed project. D. Increasing Role for the Private Sector 2.23 Overview. A relatively well-organized private sector has grown up around the packing and export of citrus and vegetable crops. On the other hand, many of the farmer cooperatives set up with government assistance in the 1970s' remain dependent on the assistance of the ORMVAs. However, more recently, Government's divestiture of responsibility for sugar and cotton crops has led to some encouraging development of grower associations. The Government's policy is to encourage the development of farmer organizations embracing all farmers, as a vehicle for increasingly involving them in improving agricultural productivity and water use. a/ A separate study for the reorganization of the Loukkos ORMVA was carried out with KFW funding.  - 11 - 2.24 Farmer Cooperatives. The majority of the existing cooperatives were created at the initiative of the Government to facilitate the distribution of certain lands "Cooperatives de la Reforme Agraire" (CRA), to simplify milk collection "Centre de Collecte du Lait" (CCL) or to organize joint ownership of machinery "Cooperatives d'Utilisation de Materiel en Commun" (CUMA). These cooperatives have received assistance from the ORMVA in personnel (most of the Directors of the CRA are paid by the ORMVA) and/or equipment (the initial milk collection tank is generally provided by the ORMVA). This assistance is beginning to pay off in the case of the milk collection centers where the operating costs are covered by a retention on the price paid for milk delivered. However, for both the milk collection centers and the CRA, the ORMVAs continue to fund some staff and milk collection tanks. Agreement on phasing out support for milk collection over three years is included under the planned ASIL2. 2.25 Producer Associations. The producer associations, which were originally developed to defend farmers' interests at the time of independence, are beginning to take on a role in technology transfer. The best developed associations operating in the irrigated areas are the cattle breeders and producer associations for citrus, vegetable and sugar crops. For example, the cattle breeders are taking over milk recording and artificial insemination (Gharb and Doukkala), while the sugar producers association in the Tadla has become involved in conducting seed and fertilizer trials. Operations are financed by a retention on either production (in the case of milk and sugar) or on exports (citrus and vegetables). 2.26 Another particularly successful example of producer associations is SASMA (para. 2.16) to undertake technology development and transfer on fruits and vegetables. Financed by a tax on exports, the associations played a key role in promoting the greenhouse production of early vegetables (which was also supported by a Bank financed project in the early 1980s). With the liberalization of exports, it lost a major part of its funding and many staff moved into private production and advisory services. MAMVA has contracted one such service to continue advisory work and adaptive research. 2.27 Chambers of Agriculture. The Government has recently launched a pilot program to develop the role the Chambers of Agriculture (CA) in the management of agricultural services and transfer of technology. A number of the ORMVAs have transferred some staff and vehicles to the Chambers of Agriculture for carrying out specified extension programs. Also, under a cooperation agreement with France, Chambers of Agriculture in three of the ORMVAs have entered into twinning arrangements with French Chambers of Agriculture. While the CAs could play an important role in aiding the development of the profession as well as directly taking on responsibility for certain services, the present statute and lack of resources limit their options. The statute needs modification to open up membership to farmer associations so as to obtain a better representation of the profession, while funding options, which MAMVA is discussing with the Ministry of Finance, need to be reviewed and actions taken. 2.28 Water Users Associations. Formalized under legislation issued in 1990/91 and supported by LSII2, water user associations are being created to take on more responsibility for the operation and maintenance of the network at the field level. The proposed project would develop the role of these associations in technology transfer. 2.29 The Processing Industry. The sugar factories and cotton ginneries are also beginning to get more involved in adaptive research and advisory work. This involvement is expected to increase and would be encouraged by the project. The fruit and vegetable packing stations also are  - 12 - providing a point around which to organize and better inform farmers. The milk collection centers are already used by the livestock services and cattle breeders association as a point for working with farmers. The cattle breeders association is expected to play a major role in provision of services in the future. E. Strategy for Intervention 2.30 The Government's strategy already initiated in the divestiture program (para. 2.05) and the pilot program with the Chambers of Agriculture (para. 2.27) is to encourage the take-over of commercial services by the private sector and increase the efficiency of the agricultural services that would remain in the public domain. During the next ten to fifteen years, there will be a shift of responsibilities to, and increased cost-sharing with farmers and associations. Already, farmers are organizing around the industrial crops and livestock (para. 2.25) and this trend can be expected to continue (see annex 5 and working paper 4 for an analysis of each organization's role). The policy measures to support this shift would include the necessary legal framework for private sector organizations, cost-sharing for certain individual advisory services and continued encouragement to cooperative development. The proposed project, by promoting a participatory approach to the planning and distribution of tasks, would support these developments and would set goals for privatization of services. III. THIE PROJECT A. Project Origin and Rationale 3.01 The project is part of the Government's strategy (which the Bank fully supports) to develop a more productive and flexible agricultural sector that can respond to the opening of the Moroccan economy and trade opportunities with the EC and other potential markets. The project would complement the reforms and investment programs under the second Large Scale Irrigation Project and raise returns to investments in irrigation infrastructure. The proposed project, which incorporates important lessons learned from previous Bank-financed projects in the sector, would provide responsive extension and research services in the ORMVAs' irrigated and adjacent rainfed areas. It would aim to improve the efficiency of LSI farming operations through the transfer of technology and support to service cooperatives and professional organizations. In parallel, LSII2 covers network rehabilitation, efficiency and sustainability of the public utility function of the ORMVAs, on-farm water management techniques and environmental protection. An on-going Agricultural Sector Investment Loan supports other agricultural investments and the improvement of public resource management. A planned (FY94) Second Sector Investment Loan would continue this support, 3.02 In the early stages of preparation, the LS112 project included components for agricultural services; subsequently, following experience under LSIII, it was decided to separate project assistance for agricultural services from that for irrigation hardware and management for a number of reasons. First, the two projects will be working with different parts of the ORMVA organization, each requiring specialized assistance. LSII2 will assist the ORMVAs' construction and irrigation management divisions covering their operations as utilities managing the supply of water and recovering costs. The proposed project would assist the ORMVAs' agricultural department dispensing specific agriculture and water management advice while applying research results. Second, seven different MAMVA departments are involved in the proposed Services Project and their  - 13 - coordination is beyond the capacity of the LSII unit in the Department for Rural Equipment (DER). Third, experience under LSIII has convinced both the Bank and Government that each ORMVA has to be supervised separately and that coordination of the nine ORMVA and various MAMVA departments is outside the control of DER. Finally, the importance of the project, which will provide the catalytic investment required to raise the return on the heavy sunk costs in irrigation, justifies the additional resources and focus of a separate project. 3.03 The proposed project was prepared by the ORMVA and central MAMVA departments with the help of the FAO/Bank Cooperative Program. The project was appraised in February 1993. Negotiations took place in Washington in November 1993. B. Project Objectives and Summary Description Project Objectives 3.04 The project's major objectives would be to: (a) raise agricultural production and farmers' incomes in the irrigated and adjacent rainfed areas - with special efforts to reach women who are mainly responsible for livestock management; (b) improve the organization and operating efficiency of the ORMVAs' agricultural services; (c) promote commodity and service orientated farmer organizations to take an increasing share of development responsibilities; and (d) involve the university teaching/research staff in field extension and research. Summary Project Description 3.05 To achieve the above objectives, the project would implement the following five components: (a) the transfer of technology to and from farmers in the LSI area including the strengthening of adaptive research, agricultural extension, womens' programs, with provision for staff training, infrastructure, vehicles and equipment, contracting out extension and research, technical assistance, and incremental operating costs; (b) supporting services, including soils and plant analysis, pest and disease warning system and testing/demonstration of small equipment, with provision for infrastructure, vehicles and equipment and incremental operating costs; (c) promotion of farmer organizations, with provision for technical assistance, training and some initial investments;  - 14 - (d) monitoring and evaluation of agricultural development in the irrigated and adjacent rainfed areas with provision for vehicles and equipment and incremental operating costs; and (e) studies for specific components and a review of the development strategy for the irrigation sector. 3.06 The project would be implemented by the ORMVAs and coordinated through a project steering committee comprising ORMVAs' representatives and the seven concerned MAMVA departments: training, research and development, crop production, livestock production, crop protection, farmer organizations, rural engineering and planning. C. Detailed Features 1. Transfer of Technology 3.07 The objective of this technology component is to increase the productivity and incomes of some quarter million farmers with land in the LSI schemes (about 63% of the farmers) and adjacent purely rainfed land (about 37%) in the better rainfall areas. The component, which would cost US$24.9 million (72% of total costs), comprises support to four activities: (i) adaptive research; (ii) agricultural extension; (iii) womens' program; and (iv) staff and farmer training. 3.08 Adaptive Research (Annex 2, Working Paper 1) [US$9.0 million, 26% of total costs]. This sub-component would provide the means for testing and demonstrating improved crop and livestock technology for the benefit of farmers in the irrigation perimeters. The project would support strengthening the ORMVAs' capacity to execute adaptive research and the contracting out of some research with the universities, other institutes and private sector agencies. 3.09 The adaptive research program would be confined to testing the adaptability of technology developed elsewhere (e.g. new varieties and fertilizer recommendations from INRA, chemical companies' recommendations etc.) to the farming conditions of each region. The program would include work on improving on-farm water management in collaboration with the irrigation and drainage technical unit of the Water Management Department in each ORMVA. An initial program (annex 2 and working paper 1) has been prepared from proposals put together by regional committees (CLCR) (para. 2.17) and then screened at the center to eliminate duplication between ORMVAs. This program would be subsequently fine tuned as necessary, once the results of the diagnostic studies (to be carried out prior to launching the extension program - para. 3.13) are available. The program would be implemented by the ORMVA, either by their own staff on their research stations and farmers fields, or by sub-contracting with other agencies: universities, INRA and private sector. The CLCR which is chaired by the ORMVA and on which farmers are represented, would advise on the allocation of responsibilities and monitor progress. Assurances were obtained during negotiations that a three-year research program would be finalized by effectiveness and be updated annually by 30 September each year.  - 15 - 3.10 The project would encourage certain regions to take the lead in selected crops. For example, the Sugarcane Research Center, "Centre Technique de Canne I Sucre" (CTCAS) in the Gharb, which has recently added work on sugarbeet to its program, would take the lead for the program on sugar crops, but in close collaboration with the Doukkala for sugarbeet. Work on citrus would be done in the Souss-Massa, Moulouya and Gharb, olives in the Haouz etc.. 3.11 The project would improve the infrastructure of existing research stations "Station d'Experimentation et de Mise en Valeur" (SEMVA), provide additional field equipment and vehicles, and finance incremental operating costs (see annex 2, table 1 for stations covered). Equipment would include that required for measuring soil moisture levels to be used in a program for improving use of water at the field level and upgrading irrigation agronomy. One new station would be constructed in the Gharb. The existing research staff of the Crop Production Service (SPV) and Animal Production Service (SPA) would be strengthened and training provided. The project would provide for 162 man- months of adaptive research to be contracted out to other agencies. 3.12 Agricultural Extension. (Annex 3, Working Paper 2) [US$14.4 million, 41% of total costs]. In support of the project's objective to increase the income of farm families, this sub-component would provide farmers in the irrigation perimeters with relevant and timely advice through: (i) improved participatory diagnosis, planning and implementation with, by and for farmers; (ii) distribution of extension tasks among the private and public sectors; (iii) improved management of extension services; (iv) improved research-extension-farmer linkages; (v) the wider dissemination of information through local and regional radio; (vi) more effective public relations; and (vii) timely monitoring of activities and impact. 3.13 The project would support diagnostic studies in each ORMVA to determine more clearly the different farming systems and farmers' problems, to identify possible solutions and to set out the priorities for different categories of farmers. The studies would be done in two phases: first an aM inventory would be prepared by the extension agents, and second a diagnostic survey would be carried out by a multidisciplinary team of public and private extension and research specialists and the profession. The project would provide the vehicles and equipment necessary to carry out these studies, and finance contracts for the participation of university and other non-ORMVA staff, field expenses and technical assistance for the design and execution of studies. Linkages with research and farmers would be strengthened considerably through this multidisciplinary approach in the field. Assurances were obtained during negotiations that these studies would be completed before the end of the second year (December 31. 1995) of the project and regularly updated thereafter. 3.14 The project would provide for the improved planning and implementation of extension services. Following the clearer definition of needs and priorities, objectives would be better formulated and quantified, the various public and private sector sources of advice would be identified, responsibilities defined and tasks distributed accordingly. Implementation of ORMVAs' services would be improved by: clear definition of tasks and staff training, performance-linked incentives, provision of infrastructure and transport in support of decentralization and more effective use of group and mass communication (for more details see annex 3). Assurances were obtained during negotiations that annual extension programs would be prepared by 30 September. 3.15 The project would support the ORMVAs to meet the needs of three different tpes of farmer client: the mass media approach destined to reach the many small part-time farmers; group extension working with homogeneous groups of small and medium scale farmers - in developing the group  - 16 - approach, ORMVA would try to work through, inter alia, the Water User Associations (para.2.28); and farm management advice destined for the more developed medium and large scale farmers, who would be selected also for their willingness to share cost and returns data. The latter service (building on work already underway in the Loukkos) would be extended to a further six ORMVA; the project would provide the necessary staff training and technical assistance. 3.16 In providing these services, the ORMVA would initially use existing field extension staff and the technical specialist staff of the SPV and SPA who, under the ORMVA reorganization, are to be relocated at the sub-division level (para.4.04). These specialists would provide multidisciplinary support to the field extension agents working with farmer groups as well as the links with research and would assist farmers seeking advice at the sub-division. In each ORMVA, five to ten staff would be selected for training as farm management advisors to work with selected farmers. 3.17 The project would also support on-going pilot activities with Chambers of Agriculture (para. 2.27). Assurances were obtained during negotiations that consultants would be recruited by September 30. 1994 to evaluate the results of this support and draw up proposals for future cooperation with the ORMVAs. 3.18 The project would also provide for more use of regional radio. The project would provide three ORMVAs (Haouz, Moulouya and Souss-Massa) with training and equipment to produce two fifteen minute farming programs a week for diffusion by RTM. 3.19 The project would establish improved monitoring of the execution and impact of the extension services. This would include the formal, quantitative aspects of project inputs, outputs and effects as well as the more qualitative monthly checking of factors such as: the presence of higher level staff in the field, farmers' reactions to demonstrations, radio program audience and coherence of program with extension workplan. 3.20 Total extension staff would be increased from 106 graduates and 224 technicians to 151 graduates and 435 technicians through redeployment and transformation of posts. To enable the ORMVAs to carry out the above program, the project would provide for the construction of offices (25) and meeting rooms (19) at sub-division and CMV level. The project would provide for additional vehicles (83 light cars, 22 vans and 9 minibuses), as well as for demonstration and audio- visual equipment and small computers. In those ORMVAs where motorcycles are the preferred means of transport, they would be acquired in place of these vehicles. Some 61 man months of technical assistance to support the diagnostic and planning process, 14 man months for training in audio-visual support, and 40 man months to develop a farm management service would be provided. 3.21 Womens' Program. (Annex 4, Working Paper 3) [US$1.5 million, 4 percent of total costs]. The aim of this sub-component would be to provide women, who play an important role in livestock production and provide much of the family labor on small farms, with timely and relevant advice. The project would support the necessary studies and diagnosis necessary to deepen the understanding of womens' role in agriculture. It would also strengthen the ORMVAs' extension services to provide advice as well as support for small projects that would increase their revenue-earning potential. 3.22 The project would provide for the recruitment of an additional 3 graduates and 30 technicians bringing the total womens' program staff to 56, or about 6 per ORMVA in total. In three ORMVA (Ouarzazate, Souss-Massa and Tafilalet), the project would test the possibility of working through  - 17 - women extension assistants who would be recruited to work in their own villages. A total of 40 assistants would be recruited to be trained in livestock husbandry and some other agricultural skills and supplied with equipment kits. Following training and a period of supervision, they would be expected to work as independent operators in their own villages. This follows a successful experience of a project financed by German aid. 3.23 The project would also provide for small investment projects that have a clear demonstrative objective. Specifically, the project would cover: (a) in Tafilalet, the expansion of the D'mane sheep project; (b) in Ouarzazate, the deployment of Draa goats in the southern oases and the setting up of a cheese-making unit; and (c) feasibility studies in the other seven ORMVAs. 3.24 The initial diagnostic studies would be made as an integral part of the determination of farm types and needs for the extension services (para. 3.13). Subsequently, the project would provide for studies necessary to deepen the understanding of womens' issues (para. 3.21), for additional offices, vehicles, equipment, incremental operating costs and technical assistance for the womens' services. 3.25 Training. (Annex 6, Working Papers 1,2 & 3) [US$2.9 million included within the other components, 8 % of total costsl. The project would provide initial training to upgrade basic skills, regular in-service training and selected training abroad. An important objective of the initial program would be to support staff in making the shift from purveyors of inputs to providers of solid advice on agriculture. The program would also develop their practical experience - in order to improve their demonstration of improved technology in the field. Each ORMVA would draw up a training masterplan on the basis of a skills gap analysis. Training would be carried out in ORMVA facilities, regional training centers (CREPA) and would also be sub-contracted to the universities and other training institutes in Morocco. 3.26 The project would provide first for the updating of the skills gap analysis made during the management studies under LSIll; the initial analysis was done for all nine ORMVA and is the basis for the on-going staff redeployment program. The implementation schedule for the training program would be reviewed at negotiations. Assurances were obtained during negotiations that the skills gap analysis would be updated and a revised training program prepared by June 30. 1994. 3.27 As part of this program, extension agents would receive training in farm management and group work; specialists in the practical aspects of farming and didactics, and supervisors in staff- management, including motivation, conflict resolution and performance appraisal. About 1500 staffweeks have been foreseen for initial training of all staff in the project objectives, extension principles, participatory appraisal, working with groups, demonstrations, planning, accounting and personnel management. Regular in-servi training would be provided for extension staff (biweekly for field agents and monthly workshops for specialists). In-service training would be conducted partly on the ORMVA research stations. Overseas training, including study tours and seminars, would be provided at the rate of about 20 staffweeks per year. Training for male and female farmers would be provided for a total of about 600 weeks a year. Farmer groups would also travel within the country and overseas to visit farmer organizations and see other extension systems. 3.28 The project would also provide for training of crop and livestock production services staff responsible for the adaptive research program and their role as technical specialists. Training programs for crop staff would put special emphasis on irrigation agronomy and provision is made for each ORMVA to send one agronomist for 6 - 12 months training overseas. In addition to the above,  - 18 - under the Farmers' Organizations (OP) component, the project would provide for the training of farmer members and OP staff in management, accounting and stock management and other subjects of organization management. 2. Supporting Services (Annex 2, Working Paper 1) [US$1.9 million, 5% of total costs] 3.29 This component would have two objectives: (i) rationalize the use of fertilizers and pesticides and reduce the present waste and deleterious effects on the environment and (ii) raise farm productivity. The project would assist the ORMVAs to provide: (a) soils and plant analysis; (b) agro- meteorological information; (c) better pest management; and (d) introduction and demonstration of small scale machinery. As farmer awareness and demand for these services builds up, the private sector (farmer organizations and/or commercial laboratories) would be expected to take over. 3.30 (a) Soils and plant analysis. At present, apart from a few farmers using the Gharb ORMVA's Kenitra laboratory, a private laboratory in Casablanca or able to send samples to France, soils analyses to check nutrient levels and optimize fertilizer applications, are not used. Trials work has shown that there is a potential to economize on the standard fertilizer recommendations reducing costs and damage to the environment; but this will require the availability of soils testing facilities and field extension staff trained in field sampling and interpretation of the results. To date, the soils analysis work done by the ORMVAs in their own laboratories or contracted out, has been confined to planning the construction of new irrigated areas. 3.31 The project would provide the additional equipment and staff training required to complete the equipment of the ORMVAs' existing laboratories and to adapt and equip an existing building (in Tadla) to provide a soils analysis service for farmers where the services of private laboratories are not available. Assurances were obtained during negotiations that analyses would be charged at commercial rates and that separate accounts would be kent. Farmers using these services would receive the 50 % rebate on charges which is provided by MAMVA's Agricultural Development Fund' to encourage the use of soils' analysis. 3.32 (b) Agro-meteorology. The availability of good and timely agro-meteorological data is required for effective irrigation scheduling (as part of the program for raising the efficiency of water use) as well as an input into prediction of pest and disease attacks and greenhouse management. The project would provide for the equipping or improvement of equipment on selected ORMVA research stations, for the training of staff and for the regular diffusion of the information. 3.33 (c) Pest Management. Each ORMVA would establish a convention with DPVCTRF (the MAMVA department responsible for crop protection) to reenforce the warning network for pest infection and to assist with introducing integrated pest management (1PM) practices. The IPM practices to be applied would follow three basic principles : the management wherever possible of pest populations at below economically damaging levels (rather than complete eradication), the use to the extent possible of non-chemical measures and the selective application of pesticides when they have to used. DPVCTRF (which is already propagating some important elements of IPM including pest scouting and the judicious use of modern, high concentration, low application rate pesticides with A/ The Agricultural Development Fund provides grants of 20% - 50 % of cost to encourage farmers to take-up new, more efficient technologies.  - 19 - quick biodegradability) would provide the technical assistance to work with and train ORMVA personnel in the identification of pest outbreaks and application of IPM practices. This work would be supported by the adaptive research program (para. 3.08), which would include work on pest control, and by collaborative work with INRA on pest ecology. Training programs for extension staff (para. 3.25) would include the application of IPM practices. The project would provide additional vehicles (one for each of the 13 inspection zones concerned) for DPVCTRF to facilitate collaboration with the ORMVAs. Assurances were obtained during negotiations that each ORMVA would establish a convention with DPVCTRF by December 31. 1994. 3.34 (d) Small farm equipment. Under the project, the ORMVAs would work with local machinery suppliers to test and demonstrate the introduction of small scale farm machinery required to improve productivity. The project would include first a study to make an inventory of existing use and determine the main needs; subsequently, it would work with the universities, research institutes and the machinery suppliers to encourage the introduction and demonstration of appropriate tools. 3. Promotion of Farmer Organizations (Annex 5, Working Paper 4) [US$5.6 million, 16% of total costs] 3.35 In the context of the liberalization of the economy and divestiture by the ORMVA, the project would promote the emergence of efficient, viable and autonomous farmer organizations "Organisations Professionnelles" (OP)5 at the key points in the production-processing-marketing chain of major food products, through: (i) changes to the legal and regulatory framework; and (ii) a pilot technical assistance/investment component. 3.36 In respect of the legal and regulatory framework, there are three areas in which progress is a prerequisite for the development of viable farmer-owned organizations: (a) the application of the 1984 Cooperative Charter to encourage the development of competitive and viable cooperatives; (b) the preparation of a specific statute for farmer associations to enable them to develop a financial base; and (c) for the Chambers of Agriculture to (i) give the farmer organizations the possibility to be represented and (ii) provide financial resources (para.2.27). First, the review and application of the Cooperative Charter is expected to be a subject in the dialogue between the Bank and Government on the Private Sector Development operations and the Agro-Industry sector review and the preparation of a subsequent project, which is likely to proceed in parallel with the implementation of the proposed project. Second, in respect of the statute for the farmer associations, the project would provide funds for studies required to prepare a revised statute. Finally, for the Chambers of Agriculture, which, if properly managed and funded, could take responsibility for certain extension services, the project would press for action on representation and funding. Assurances were obtained during negotiations that proposals for appropriate funding of the Chambers of Agriculture be reviewed with the Bank by December 31. 1994. and a revised statute for the farmer associations prepared by June 30. 1995. 3.37 The project would aim to promote a small number of OP, particularly to concentrate the supply of selected primary livestock (milk), and crop (fruit and vegetables and sugar crops) produce. The objective would be to encourage medium and small economically viable farmers capable of s/ For the purposes of this project Farmer Organizations are defined as any group of agricultural producers, whatever its legal structure (Association, Chamber of agriculture, Cooperative, commercial company, or de facto grouping).  - 20 - integrating in the food chain. Success would be measured by the extent to which they were sufficiently active, financially viable and autonomous within five years. The project would: (i) support planning (regional diagnosis and preparation of an action plan) providing assistance from specialized consultants, study visits to other countries and workshops. A regional task force would be set up composed of representatives of the profession, the ORMVAs and private sector agro-industries, who, assisted by consultants, would prepare an annual plan for the ORMVAs' support to the development of farmer organizations. The plan would determine the priority sub-sectors, set objectives and fix the technical and financial support to be provided. Assurances were obtained during negotiations that the task force would be set up by December 31. 1994. with a composition acceptable to the Government and the Bank; (ii) strengthen selected OPs with assistance to be provided in the establishment process, in the evaluation of investment proposals, in developing management procedures, in providing training for OP members and staff and in lightening state intervention. Work with farmer organizations would be on the basis of contracts to be drawn up between the ORMVA and the organization; (iii) provide investment assistance to OPs for projects designed to test innovative technology or organizations. Investment assistance would comply with agreements expected to be reached under the planned ASIL2 on the gradual elimination of government assistance to milk collection cooperatives and artificial insemination operations; (iv) support staff training and incremental operating costs for the ORMVA units working with the farmer organizations; and (v) provide some 90 months of consultants to work with the regional task forces and farmers' organizations and 15 months per ORMVA for feasibility studies of potential projects requested by the OPs. 3.38 The project would also provide for the disengagement of the ORMVAs from the management of the Land Reform Cooperatives to reduce ORMVAs' costs (paras. 2.07 & 2.24). Assurances were obtained during negotiations that the ORMVAs would draw up a program by December 31. 1995. for the take-over by the cooperatives of ORMVA funded directors by the end of the project. 4. Monitoring & Evaluation of Agricultural Development in the Irrigated Areas (Annex 9) [US$1.4 million, 4% total costs] 3.39 The project would support the establishment of a system for the monitoring and evaluation of agricultural development in the irrigated areas. Each of the ORMVAs would select a sample of farms on which progress would be monitored during the course of the project. The data to be collected would provide the basis for a better understanding of the farming systems as well as for the ultimate evaluation of project impact. The project would provide the necessary vehicles, equipment and incremental operating costs.  - 21 - 5. Studies [US$0.7 million, 2% of total costs] 3.40 The project would include funds for studies tied to the execution of components (farm mechanization and farmer associations) and for product marketing. 6. Project Unit [US$0.2 million] 3.41 The project would also provide vehicles, equipment and operating costs for a small project unit to be set up in MAMVA's Department for Education, Research and Development (para.4.03). Project Implementation 3.42 The project would be implemented over five years from January 1994. Implementation of the investment program would be phased to take account of the timing of the reorganization of agricultural services in each ORMVA. In the cost estimates summarized below, four ORMVA (Doukkala, Gharb, Loukkos and Tadla) would have completed their reorganization by end 1993 and thus be ready to invest from 1994, while the other five (Haouz, Moulouya, Ouarzazate, Souss-Massa and Tafilalet) would require up to two years to complete the study and implementation of a new organization. In the case of these five, expenditures in the first two years would be limited to studies and staff training preparatory to a three-year investment period starting in 1996. Model designs and cost estimates for housing would follow government norms. D. Cost Estimates 3.43 Total project costs, including taxes, duties and contingencies, are estimated at DH 312.7 million (US$34.7 million), of which 38%, or US$13.1 million would be foreign exchange. Duties and taxes are assessed at DH 39.6 million (US$4.4 million) which is equivalent to 13% of total project costs. Cost estimates are summarized in Table 3.1 and shown in more detail in annex 7 and in working paper no.5. 3.44 Physical contingencies have been included at 10% on civil works, vehicles and equipment. Price contingencies have been calculated on the basis of the annual projected inflation rates applied to local and foreign costs, including physical contingencies as shown in Table 3.2. Price contingencies equal 14% of base costs.  - 22 - Table 3.1: Project Cost Summary DR uss Millip Miloo LOCl Foi TarOl Loc FoMgP Tahw % for. %baw echg. oaf A. ORMVA Research & Support Services 49.1 34.6 83.7 5.5 3.9 9.4 41 31 Extension 82.1 30.1 112.2 9.1 3.3 12.4 27 42 Womens' Services 9.9 1.8 11.7 1.0 0.2 1.2 17 4 Fanner 13.4 30.0 43.4 1.5 3.3 4.8 69 16 Organizations Sub-total 154.5 96.5 251.0 17.1 10.7 27.8 38 94 B. Monitoring and 6.9 3.4 10.3 0.8 0.4 1.2 33 4 Evaluation C. Studies 2.3 3.4 5.7 0.2 0.4 0.6 67 2 D. Project Unit 0.3 0.4 0.7 0.1 0.1 0.2 50 0 Total Base Costs 164.0 103.7 267.7 18.2 11.6 29.8 39 100 Physical Contingencies 3.7 5.0 8.7 0.4 0.5 0.9 56 3 Price Contingencies 27.0 9.3 36.3 3.0 1.0 4.0 25 14 TotalPROJECTCOSTS 194.7 118.0 312.7 21.6 13.1 34.7 38 117 Table 3.2: Price Contingencies (percent) 1993 1994 1995 1996 1997 1998a/ Local Costs 3.3 4.4 5.4 5.7 5.2 5.3 Foreign Costs 2.8 2.8 2.8 2.8 2.8 2.8 Source: World Bank (Operational Directive 6.50 for foreign contingencies, Country Operations for local) a/ and thereafter. E. Financing 3.45 A Bank loan of US$25 million to the Kingdom of Morocco is proposed to finance about 83 % of total costs net of taxes. This would cover 100% of foreign exchange costs and 70% of local costs net of taxes. The Government would finance the balance of the local costs. Loan proceeds would be made available to ORMVAs on a grant basis. Project costs would be shared in the amounts and proportions shown in Table 3.3.  - 23 - Table 3.3: Project Financing Plan Local Foreign Total % of net project cots US$ M Equivalent World Bank 11.9 13.1 25.0 83 Governenrt 5.3 5.3 17 Net Project 17.2 13.1 30.3 100 Costs Taxes & Duties 4.4 4.4 15 Total Project 21.6 13.1 34.7 115 Cos 3.46 While no specific cofinancing has been agreed upon at this stage, in three ORMVA other donors are likely to finance some parts of the agricultural services in parallel to the proposed project. First, KFW has been financing the development of a farm management advisory service in the Loukkos and are expected to continue to so do. Second, the EC has been supporting developments in the Haouz and may include support for agricultural services under its fourth protocol. Finally, USAID has recently signed an agreement to finance a development program in the Tadla which is designed to test and promote water-saving techniques and tackle drainage and salinity problems. The design of the proposed project takes into account these interventions. The Government has also been advised to seek additional cofinancing for the training and technical assistance program. F. Procurement 3.47 Implementing Agencies. Procurement would be carried out by the nine ORMVAs, primarily, and by the DERD to a minor extent. The nine ORMVAs have demonstrated their capacity to handle procurement matters efficiently during LSII1, while the DERD (extension division) has also had experience of Bank procurement in the course of the Agricultural Research and Extension Project. Procurement arrangements are summarized in Table 3.4.  - 24 - Table 3.4: Summary of Proposed Procurement Arrangements (US$ million equivalent) Project Procurement Method Element ICB LCB Other Total Cost 1. Works 1.4 1.4 1.1 Buildings (1.2) (1.2) 2. Goods 2.1 Vehicles 2.7 2.7 (2.2) (2.2) 2.2 Agric.Equip. 1.3 2.1 3.4 (1. 0) (I. 7) a/ (2.7) 2.3 Other Equip. 1.7 0.7 0.7 3.1 (1.4) (0.5) (0.6) (2.5) 3. Consultants 3.1 Training 2.9 2.9 (2.6) (2.6) 3.2 Tech. Assistance 5.2 5.2 (5.0) (5.0) 3.3 Studies 2.6 2.6 (2.5) (2.5) 4. Other b/ 4.1 Incre.Oper.Costs 13.4 13.4 (6.3) (6.3) TOTAL 5.7 4.2 24.8 34.7 (4.6) (3.4) (170) (25.0) Note: Figures in parentheses are the respective amounts financed by the Bank loan. Works and Goods should be procured in accordance with World Bank Guidelines: Procurement under JERD and IDA Credits (Washington May 1992) and Services should be procured in accordance with World Bank Guidelines: Use of Consultants by World Bank Borrowers and by world Bank as Executing Agency (Washington, D.C., August 1981) a/ local shopping; b/materials, vehicle fuel and repairs, field trial inputs, services for demonstrations and travel allowances for which procurement is carried out efficiently under Loan No. 3036-MOR. 3.48 Civil Works. Contracts for the construction of houses and offices would be awarded through Local Competitive Bidding (LCB) procedures that are acceptable to the Bank. This would reflect the generally small size of contracts with an average value of about US$200,000, the scattered nature of the project civil works, and the experience of Bank-financed projects in Morocco, in particular LSII1. 3.49 Goods. Contracts for the purchase of vehicles and laboratory, computer and audio-visual equipment would be awarded by the ORMVAs through International Competitive Bidding (ICB) procedures, in accordance with Bank guidelines and using the Bank's sample bidding documents. Qualifying domestic manufacturers would receive preference in bid evaluation of 15% or the prevailing  - 25 - import duty, whichever is less. Contracts for other equipment (mainly agricultural machinery) estimated to cost less than US$300,000 but more than US$30,000, could be awarded by the ORMVAs under LCB procedures acceptable to the Bank, as local suppliers represent a wide range of foreign manufacturers and previous experience shows bidding to be competitive. Procurement of miscellaneous supplies costing less than US$30,000 equivalent would be made by the ORMVAs and DERD on the basis of local shopping with quotations from at least three suppliers. 3.50 Consultant Services. Contracts for consultant services estimated to total US$14.4 million would cover technical assistance and studies (US$11.5 million) and training (US$2.9 million). They would be procured internationally in accordance with Bank guidelines. Joint ventures between foreign and local firms would be encouraged under arrangements acceptable to the Bank. It is expected that local consultants will provide about 50% of the person-month inputs required. 3.51 Contract Review. All bidding documents and awards of contracts estimated to cost the equivalent of US$500,000 or more for civil works, and US$300,000 or more for goods would require the Bank's prior approval. Consultant contracts estimated to cost the equivalent of US$50,000 or more would require the Bank's prior approval as would all terms of reference, irrespective of contract amount. These arrangements would represent prior review by the Bank of about 80% of the total estimated value of contracts. The other contracts would be subject to random post-review by the Bank after contract award, in the course of supervision missions. G. Disbursements 3.52 Disbursement Schedule. It is anticipated that the proposed Bank loan would be disbursed over eight fiscal years; see Table 3.5 below and annex 8 for the detailed disbursement schedule. The disbursement profile for agricultural development projects in Morocco is nine years with 78% being disbursed over seven years, while for irrigation projects implemented by the ORMVA the period is nearer seven years. In view of LSIIl's confirmation of the ORMVAs' satisfactory implementation capacity for physical infrastructure and the fact that the project is not expected to suffer the budgetary problems faced by the earlier agricultural projects, the proposed period is considered realistic. The proposed closing date of the loan would be June 30, 2000. Table 3.5: Disbursement schedule (US$ million) IBRD Fiscal Year 1994 1995 1996 1997 1998 1999 2000 2001 Disbursements Annual 1.5 1.8 4.6 6.0 5.8 3.2 I.5 0.6 Cumulative .3 7.9 13.9 19.7 22.9 24.4 25.0 3.53 Disbursement Procedures. Disbursement would be made after receipt of full documentation except for goods and works provided under contracts valued below US$100,000 equivalent and for eligible incremental operating costs, for which disbursements would be made against certified Statements of Expenditures (SOE). The SOE would be certified by the executing agency involved. Supporting  - 26 - documentation for SOEs would be retained by the implementing agency and would be made available for inspection during Bank supervision missions and by external auditors. Disbursement categories, amounts allocated and share of expenditures financed would be as indicated in Table 3.6. Table 3.6: Disbursement Categories Category Amount of Percentage of Expenditure to be Loan Financed Allocated (US$ nullion) Civil Works 1.10 86% Equipment/Vehicles (a) Part A 6.40 )100% of foreign expenditures and (b) Part B 0.14 )65% of local expenditures for items )procured localy Training, Technical Assistance & Studies (a) Part A 8.40 )100% (b) Part B 0.90 Incremental Operating 5.60 80% 1994 & 1995, 50% 1996 & 1997, Cost6 and 25% thereafter UnaHocated 2.46 TOTAL 25.00 3.54 Special Account. To facilitate implementation, a Special Account would be opened in the Treasury for the purpose of the project. The Bank would deposit an initial sum of up to US$1.5 million corresponding to the Bank's share of 3-4 months project needs. Assurances were obtained during negotiations that disbursement operations from the Special Account would be made in accordance with Bank guidelines and existing arrangements agreed upon by the Bank and MOF. 3.55 Retroactive Financing of up to 10% of the loan amount against payments made for eligible expenditures before the date of the Loan Agreement but after March 1, 1993, is included to cover actions already started. IV. PROJECT IMPLEMENTATION A. Project Organization 4.01 Project Coordination. The project would be implemented by the Ministry of Agriculture (MAMVA) through the ORMVAs. The Education, Research and Development Department (DERD) has been designated by MAMVA to coordinate implementation and the intervention of the other concerned central departments covering Crop Production (DPV), Livestock (DE), Public Agricultural Enterprises 6/ Materials, vehicle fuel and spare parts, field trial inputs, services for demonstrations and travel allowances.  - 27 - and Farmer Organizations (DAP), Planning and Economic Affairs (DPAE), Crop Protection (DPVCTRF) and Rural Engineering (DER) (see organigram, chart 1). A project steering committee would be formed by representatives of these directorates and the nine ORMVA which would meet twice a year to: (i) coordinate the LSII2 and IAASP activities; (ii) review the programs every six months; and (iii) monitor the results. The existing National Project Coordination Committee (CNCP) set up under LSII 1 would provide for interministerial coordination. CNCP, which meets once a year, is chaired by MAMVA's secretary general and includes the heads of MAMVA and Ministry of Finance departments involved in both LSII2 and the proposed project. 4.02 ORMVA Organization. The project would be implemented by the nine ORMVAs following the new ORMVA organization to be implemented under LSII2. The new organization structure in the Doukkala, Gharb, Loukkos and Tadla was approved prior to negotiations of LSII2. The principal innovations compared with the previous organization are the bringing together of the three agricultural services under one department and the creation of a separate department to handle human resources. Plans for the reorganization of the other five ORMVA will be prepared and implemented in the course of LSII2 (para.3.42). The necessary studies are expected to be committed by end 1993 and the proposals should be available by mid-1995. 4.03 Project Unit. A project unit would be established in DERD to provide a point of coordination for the services links with MAMVA, to handle the central procurement of consultant services where there would be technical and economic advantages from grouping demands (e.g. for the diagnostic studies, para.3. 13) and to act as a point of liaison with the Bank. This unit would be attached to the Director, DERD. The establishment of the unit and appointment of staff with qualifications and experience acceptable to the Bank would be a condition of loan effectiveness. B. Organization of Agricultural Services 4.04 Agricultural Development Department. Under the reorganization agreed upon for the four ORMVAs studied to date (Doukkala, Gharb, Loukkos and Tadla), the work of the three existing agricultural services (SPV, SPA and SVOP) together with a fourth service for development studies (SEDA) will be coordinated by a Director for Agricultural Development who will report to the Director of the ORMVA (see chart 2 for proposed organization). In respect of agricultural support services, the main features of this reorganization are: (a) the coordination of the three existing services (crop production, livestock and extension) under one director; (b) the merging of the development centers (CMV) and livestock posts into one agricultural development center (CDA) with increased focus on agricultural extension; (c) the transfer of staff from headquarters to the sub-division level - target ratio 20% HQ : 80% field sub-division or arrondissement and CDA; (d) the placing of technical specialists in the sub-divisions; and (e) a reduction in the administrative tasks of extension staff. Also, a human resources department will be created to handle staff redeployment and training plans. MAMVA's commitment to the essential features of the reorganization (the appointment of a Director of Agriculture. the decentralization of services with 80% of staff to be located at the sub-division and extension agents to be relieved of administrative duties) was obtained during negotiations.  - 28 - 4.05 The setting up of the new organization, the designation of the Directors of Agriculture in each of the four ORMVA and the finalization of staffing plans for the agricultural services of the four ORMVA together with provisional staffing plans for the other five ORMVA7 were completed prior to negotiations. The signature of contracts for carrying out studies on the five ORMVA would be a condition for effectiveness of the loan. Assurances were obtained during negotiations that the conclusions of these studies (which are scheduled to be completed by mid-1995) would be discussed with the Bank. 4.06 The effectiveness of the new organization would be monitored by each ORMVA who would be expected to adjust it to their own particular circumstances as necessary. Within two years of the project start-up and during the mid-term review (para.4. 14) experiences would be shared and the necessary fine tuning effected. Assurances to this effect were obtained during negotiations. 4.07 Research. The adaptive research component would be implemented by the Crop and Animal Production Services (SPV and SPA) in each ORMVA. Proposals for the adaptive research program would come from the users through the existing regional committees (para.2. 17) on which the profession and the major research institutes are represented. These proposals would be screened at the center by an existing committee (CNORA) for which MAMVA's Education, Research and Development Department provides the secretariat. In each ORMVA, the research program would be coordinated by the adaptive research unit to be set up in the SEDA (chart 2). One field station (SEMVA) in each ORMVA would be selected to take the lead in the management of the field research program. 4.08 Agricultural Extension. The agricultural extension component would be implemented by the ORMVAs' Extension Service (SVOP) with the close support of the SPV and SPA which would provide much of the specialist technical expertise. The field extension agents would be attached to the CDAs which are in turn administratively attached to the sub-divisions under the Director of Agriculture. Technically the extension staff are responsible to their supervisors who depend on the extension unit within the SVOP. Specialist support would be provided by the technical specialists who will be located in the technical support units in each sub-division, the type and number of which vary according to agricultural characteristics of the ORMVA. 4.09 Womens' Services. The women's extension program would be implemented by an existing unit within the SVOP. The retention of young qualified female staff to work in the more remote areas has proved difficult in the past and the turnover has been high. The recruitment of village women to act as a type of "para-extensionist" has been tried in a pilot project funded by GTZ with some success and a similar approach would be tested in the project. 4.10 Farmers' Organizations. This component would be managed by the DDA in each ORMVA which would set up a Task Force, made up of ORMVA managers and representatives of the profession, to handle the strategic aspects of regional analysis and planning. Implementation would be handled by the Farmers' Organizations (OP) unit (within the extension service) in collaboration with the crop and animal production services. The task force would be drawn from among the elected representatives of OP in the region (Cooperatives, Farmers' Associations and other professional organizations), ORMVAs' managers, product groups, elected members of the Chambers of Agriculture and private banks and agro- industry. The composition, the nominating process and the chairmanship would be decided locally. This 7/ Haouz, Moulouya, Ouarzazate, Souss-Massa and Tafilalet.  - 29 - task force would undertake the conceptualization, planning and monitoring of actions to promote the development of Farmers' Organizations. Specifically it would: (i) elaborate a regional analysis of the status of OP; (ii) select the priority product lines; (iii) approve the annual technical and financial intervention program; (iv) propose the transfer of responsibilities from the ORMVA to the OP; (v) examine individual demands; and (vi) approve contracts between the OP and ORMVA. 4.11 The DDA would implement the technical and financial plan through its three field services: the OP unit within the extension service would coordinate the interventions and provide training and management advice, while the crop and livestock production service would provide technical advice. 4.12 Monitoring and Evaluation. Under the new organization, responsibility for monitoring and evaluation of the services would rest with the SEDA, the fourth service under the Director of Agriculture. This unit would handle the monitoring of project execution by the three services, the monitoring and evaluation of results at the farm level and ad hoc studies. The methodology would be developed by four of the central departments (DPV, DE, DERD and DPAE) concerned on the basis of the consultants' report which will be available before negotiations. C. Supervision and Mid-Term Review 4.13 Bank supervision input into key activities is indicated in Annex 11. This is in addition to regular supervision needs for the review of progress reports, procurement, correspondence estimated at 2-3 staff- weeks per year. For the total Project implementation period, supervision needs are estimated at 107 staff- weeks. The main lines of this supervision were discussed with the Borrower. The project unit would be responsible for the preparation of semi-annual reports on physical and financial progress in a format acceptable to the Bank. This unit would also coordinate arrangements for Bank supervision missions and for providing information required. Mission briefings on arrival and wrap-up meetings will normally be held with representatives of the Ministries of Agriculture and of Finance. Before departure, the Bank mission will leave in the field an Aide-Memoire with its conclusions and recommendations. 4.14 The Government and the Bank would carry out a Mid-Term Review of the project at the end of the second harvest year. The objectives of this review would be to : (i) measure progress with each component against qualitative and quantitative targets (see annex 9 for indicative list of indices); (ii) assess the impact of the new organization on the effectiveness of the agricultural services and effect the necessary fine tuning; (iii) ascertain whether the ORMVAs are carrying out their undertakings and, if not, what remedies should be exercised; and (iv) determine necessary adjustments to project activities. The Review would also assess the opportunities for introducing user fees for certain services such as the farm management advisory service and prepare a schedule for their introduction. Assurances to this effect were obtained during negotiations. D. Accounts and Audit 4.15 The ORMVAs will establish and maintain separate project-related accounts. Such accounts shall be maintained in accordance with sound and internationally recognized accounting principles and practices satisfactory to the Bank. An auditor's opinion and report satisfactory to the Bank on such statements will be provided within six months of the close of the project year. The auditor's report will include a statement on the reliability of statement of expenditures as a basis for loan disbursements, on the Special Account, and on compliance with financial covenants. The foregoing Project accounting and financial  - 30 - reporting, and auditing arrangements should provide adequate and timely information to the Bank for supervision of the Project. Assurances to this effect were obtained duriny negotiations. V. PROJECT IMPACT A. Project Benefits 5.01 The project would be expected to have a substantial impact on agricultural production in the irrigated and adjacent rainfed areas complementing the efforts to be made under LSII2 to better manage the use of water resources. Some 125,000 farm families with land in the areas under modern, large scale irrigation would benefit directly as would at least a further 75,000 farm families with land in adjacent rainfed areas. Beneficiaries would include the many small farmers (over 60 percent of farms have less than 2 ha) on the irrigation schemes and the women who are responsible for much of the livestock management on irrigated farms. The results of the adaptive research work would also be expected to provide some spin off to farmers on the 800,000 ha in traditional, small and medium scale irrigation schemes throughout the country; the majority of these are also small farmers. 5.02 An economic rate or return has not been calculated due to the service and institutional development nature of the project components. However, where ex-post studies have been attempted in Latin America, America, Asia and Africa, the returns showed highly positive results in nearly all cases with economic rates of return ranging from 14% to more than 500%.5 Furthermore, the increase in growth of total value added in the area under the ORMVA jurisdiction needed to offset the cost increase arising from the incremental investment and operating costs is only 0.1 % (total value added is estimated at about 8 billion Dirhams, or US$0.9 billion9). In practice, the impact of the project on growth in added value would be expected to significantly exceed this level. 5.03 The project would also promote a significant institutional reform of the ORMVA with an eventual impact on ORMVAs' operating costs through more cost-effective operation and the eventual transfer of some activities to the farmer organizations and agro-industry. An essential step in the planning of ORMVAs' extension activities would be an analysis of the capacity of the various public and private organizations to take on certain tasks with the ORMVA becoming the supplier of last resort. The training program would also have a wider impact by creating a source of trained staff better able to transfer to the private sector over time. B. Impact on Recurrent Costs 5.04 The project would lead to increased activity which would raise the annual operating costs (including building, vehicle and equipment replacement calculated at 4%, 14% and 12.5%, respectively) for the agricultural services by about 20% overall, in the short term. In the medium term, this increase a/ See Birkhauser,D.,R.E.Evenson,and G.Feder. 1988. 7he Economic Impact of Agricultural Extension: A Review. World Bank Working Paper. U1 Calculated at 8000 Dh/ha on 800,000 ha of irrigated land under the ORMVAs and 2000 DH/ha on 750,000 ha of rainfed land in the Doukkala, Gharb and Loukkos; the remainder of the rainfed land receives only low and very variable rainfall.  - 31 - in costs will be partly offset by the introduction of user fees and the transfer of certain services to the private sector. Since agriculture has been exonerated from direct taxation to the year 2050, the Treasury would benefit only from taxes on goods purchased by the project."0 C. Cost Recovery 5.05 Initially, user fees would be applied for specific services such as soils and plant analysis, but it would be premature to consider charging for extension services in the short term, that is, until the quality of advice warranted it. While, in the medium term, it would be possible to recover costs on the farm management advisory service (now being tested in the Loukkos and to be extended to other ORMVA under the project), extension staff will need considerable training to get them to the level at which farmers will be prepared to pay for their services. The opportunities for direct cost recovery would be reconsidered at the time of the Mid-Term Review (para. 4.13). Although the opportunities for direct cost recovery are limited in the short term, the approach proposed in the extension component (para. 3.14) to identify those tasks that should be provided by ORMVA and those that are being provided increasingly by the private sector should keep public service costs to a minimum. D. Environmental Impact 5.06 The project would assist farmers to make better use of fertilizer and crop protection chemicals and to use scarce water resources more efficiently. Fertilizer nitrate has been identified as a pollutant in groundwater in several LSI areas and the introduction of systematic soil testing as proposed by the project is an essential first step to reducing the present wasteful use of fertilizer. Crop protection chemicals are also used in a wasteful manner in the country and the project would encourage the adoption of integrated pest management to make better use of these chemicals. ORMVA extension staff would be trained with the aid of MAMVA's crop protection department. Monitoring of the impact of these measures is provided for under LSII2. The project would also provide the essential complement to LSII2 in the more efficient use of water resources. Improved techniques (land levelling and introduction of water saving techniques in field distribution systems) will be tested by ORMVAs' irrigation field services in conjunction with the extension services, who will subsequently be responsible for demonstrating and advising farmers on their uptake. E. Risks 5.07 The main risks relate to the difficulty in changing the operating practices of nine diversely located semi-autonomous organizations, to the possibility of farmers' slow adoption of some new technology and to the Government's capacity to assure continuity of funding. First, the agricultural services of the ORMVA have, until recently, been responsible primarily for implementing government policy in respect of sugar and cotton crops and many of them are unaccustomed and poorly trained to take on their new, advisory role. To minimize this risk, the project provides for the services' reorganization to be implemented prior to investments, for the skills gap analysis to be up-dated prior to redeploying staff, and for the considerable training required to lift the technical level (practical as well as theory) of staff, while technical assistance is included to help develop the new approaches to working with, rather than 10/ A study of taxation indicates that indirect taxation amounted to as much as 19 % of value added, a sum comparable to other sectors.  - 32 - in parallel to the private sector. Second, structural problems in land tenure or lack of markets may limit the uptake of new technology and improvement in farm incomes. The project provides for diagnostic studies prior to better identify farmers' real constraints and the points at which research should be focussed. Furthermore, the project will be complemented by actions (such as work on the collective land problem in the Gharb, the strengthening of security of tenure, etc.) to be supported by forthcoming projects, namely: the planned ASIL2 on land measures and the Agro-Industry project expected to follow the recent sector work. Finally, the ORMVA are dependent upon the government budget for maintaining their agricultural services. Irregular annual provisions and delays in their release each year could lead to difficulties in maintaining services. However, the funding of agricultural services in the irrigated areas now forms part of the funding package for the National Irrigation Plan (para. 1.03) to which the Government gives high priority. VI. AGREEMENTS REACHIED AND RECOMMENDATIONS 6.01 It would be a condition of loan effectiveness that: (a) the ORMVAs of Haouz, Moulouya, Ouarzazate, Souss-Massa and Tafilalet sign contracts for carrying out organizational studies (para. 4.05); (b) the ORMVAs finalize the three-year research program (para. 3.09); and (c) the Government establish the project unit in DERD and appoint staff with qualifications and experience acceptable to the Bank (para. 4.03). 6.02 Assurances were obtained during negotiations that Government and/or ORMVAs would: (a) up-date three-year rolling programs for adaptive research annually by 30 September (para. 3.09); (b) undertake diagnostic studies by the second year of project (para. 3.13); (c) prepare annual extension program for year ahead by 30 September (para. 3.14); (d) recruit consultants by September 30, 1994, to evaluate program with the Chambers of Agriculture and prepare proposals for future cooperation (para 3.17); (e) update the skills gap analysis, staff redeployment program and prepare revised training program by September 30, 1994 (para. 3.26); (f) make commercial charges for soils analysis and follow separate accounting (para 3.31); (g) establish conventions with DPVCTRF for assistance with pest warning and introduce IPM practices by December 31, 1994 (para. 3.33);  - 33 - (h) review funding proposals for Chambers of Agriculture with the Bank by December 31, 1994, and prepare revisions to farmer associations' statute by June 30, 1995 (para. 3.36); (i) set up task forces by December 31, 1994, with composition acceptable to Government and Bank (3.37); (j) prepare program for take-over by the CRA of ORMVA funded directors and book- keepers by June 30, 1995 and complete by the end of the Project (para 3.38); (k) prepare conclusions of organization studies on the five ORMVAs and discuss with the Bank by June 30, 1995 (para. 4.05); (1) carry out a study on the introduction of user fees for certain services by December 31, 1995 (para. 4.14); and (m) carry out a Mid-Term Review by December 31, 1996 (para. 4.14). 6.03 Based on the above agreements, the proposed project would be suitable for a Bank loan of US$25 million to the Kingdom of Morocco for a term of 20 years including a five year grace period. The project would be expected to be completed by June 30, 1999.  - 34 - ANNZX I Page 1 of 6 STAFF APPRAISAL RBPORT KINGDOM OF MOROCCO IRRIGATED AREAS AGRICULTURAL SZRVICES PROJECT Aaricultural Production and Potential in the Irriaated Areas A. The Irriaated Areas Natural Resources 1. Morocco's nine LSI perimeters (see map) involve capital-intensive public investments for hydraulic infrastructure. They are almost entirely based on surface water stored behind large dams and are located in several different agro-climatic zones. The perimeters grouped according to the rainfall zone in which they are located, are as follows: Rainfall LSI perimeters Rainfed Cropping Potential >450 mm Gharb, Loukkos Important 250-350 mm Doukkala, Tadla Limited 150-300 mm Haouz, Moulouya, Limited to Souss-Massa Negligible <150 mm Ouarzazate, Tafilalet Oasis agriculture 2. The Gharb and the Loukkos are located in areas of relatively good (although highly variable) rainfall where irrigation is required primarily for summer crops and can be used to advantage for supplementary irrigation at the start and end of the winter cropping season. Even so, a range of arable crops can still be grown without irrigation. In the Doukkala and Tadla areas, rainfed cropping is limited to cereals with widely fluctuating yields. The remaining five perimeters are located in the arid zone where rainfall is generally sufficient for barley but which may be grazed off if there is insufficient moisture for grain production. The Ouarzazate and Tafilalet perimeters, which lie south of the Atlas mountains, are oases where the irrigation system is essentially based on improved flood management. 3. The soils, which have been well studied in the course of designing and equipping the irrigated areas, vary widely between and within each irrigation perimeter. These soils offer a variety of cropping possibilities with limitations in some well-defined areas. In the Loukkos plateau area, the soils are light, sandy loams and adaptive research is needed to diversify the cropping away from sugarcane which is currently grown. In the Gharb, soils are much heavier with over 50& of the soils requiring careful management; some  - 35 - ANNEX 1 Page 2 of 6 8 are frequently flooded and only suitable for rice. In the Tadla, soils are good except for about 12' of relatively shallow soils. In the Doukkala, there are no significant soils constraints. Poor drainage and salinization are hazards in some areas (particularly the Tadla, Moulouya and Souss)1. These problem areas will be monitored by environment studies under LSII2 while corrective measures are planned by LSII2 and, for the Tadla, by a USAID assisted project. 4. Available water resources from the reservoirs has fluctuated widely with the drought years (e.g. in the Tadla, Beni Moussa where the water available at the field turn-out fell from 8900 m3/ha to 5200 m3/ha in 1985/86). In some perimeters farmers have sunk private wells to provide supplementary water but supplies are not always sufficient to meet the demand for summer cropping. Also, in some previously irrigable areas (e.g. parts of the Triffa scheme, Moulouya, and the PTI and Beht schemes in the Gharb) the irrigation network is so degraded that either they can no longer receive water from the dam, or the delivery capacity has been reduced. Again, farmers have, where possible, sunk private wells to provide supplementary irrigation. Water shortages have also led to a modification of cropping patterns as in the Massa, where the area in high demanding lucerne has had to be reduced. 5. The above situation highlights the importance of raising field efficiencies (currently estimated at 40 - 501) which is a major objective of LSII2 and the proposed project. Aaricultural Area 6. The available agricultural area in the nine ORMVA comprises 408,300 ha of land irrigable by modern gravity (294,000 ha) or sprinkler (114,300 ha) systems, 77,500 of improved traditional irrigation schemes, 311,000 of other non-improved traditional irrigation and 1,432,000 ha of solely rainfed land (see table 1). Of the rainfed land, about one third, or 416,000 ha in the Gharb and Loukkos, receives more than 450 mm rainfall per annum. A further third receives 250-350 mm, and the remainder less than 250 mm. Land Tenure 7. The land tenure situation is dominated by many small farms (summary below and table 2): -------Total Area a/ -------- ----------LSI Area---------- Area Farmers Avg. Size Area Farmers Avg. Size X X ha X X ha 0- 5 ha 36 75 2.4 38 84 1.4 5-20 ha 38 23 8.5 35 14 7.5 >20 ha 26 2 53.3 27 2 49.3 Total 100 100 5.0 100 100 3.1 a/ IncLuding irrigated and rainfed land under ORMVA responsibility. 1/ See "Etude sectorielle d'impact de l'irrigation sur l'environnement", SECA-BCEOM, mai 1992.  - 36 - ANNEX 1 Page 3 of 6 8. In the irrigated area including the two LSI perimeters in the southern oasis, 84% of the farms have less than 5 ha and the average size of all irrigated farms is 3.1 ha. If the oasis perimeters (where farms are particularly small averaging less than 0.9 ha) are excluded, in the remaining seven perimeters, 75% of the farmers have less than 5 ha and 55% less than 2 ha. However, these small farms cover only 36t of the land area, while farms with more than 20 ha (2% of farmers) farm 26% of the land. The latter includes the state-owned land farmed by parastatals. The total number of farms with irrigated land (LSI only) is estimated at 158,000 and another 328,000 have traditionally irrigated and rainfed land in ORMVA territory (table 3). 9. Over 70% of the land in the Doukkala, Moulouya, Massa and Tadla irrigated areas is held by private individuals while in the Haouz, Souss and Loukkos more than 50* is held by land reform cooperatives and/or collectives. In all privately held areas, except parts of the Haouz and in Ouarzazate and Tafilalet, private land has been subject to consolidation. On privately held land, traditional inheritance laws lead to ownership being sub-divided between co-heirs but without change of title ("indivision"). This ownership pattern which affects development and production expectations, applies to at least 50* of the area. In some cases, the land is farmed by one member on behalf of the others; more usually it is sub-divided between heirs who work their piece separately, while the ORMVAs, which do not recognize this de facto break-up of the farm, continue to bill one family for the water. 10. On the collective lands which make up 28* of the area in the Gharb and 15% in the Haouz, the traditional system of usufruct rights discourages investment. In the Gharb, a pilot program (which will be supported by the Second Agricultural Sector Investment Loan) is underway to give land titles to the right holders. B. Agricultural Production CroDoinQ Pattern 11. In the LSI area, Government has, in the past, promoted a cropping pattern based on industrial cash crops and intensive animal production in combination with traditional food crops. This policy was backed up by legislation on the cropping pattern and cultural practices to be used in each perimeter. In effect, this legislation imposed the growing of sugar crops and cotton without which farmers did not get ready access to water. Under MTASAP and LSII1 this policy has been relaxed. Although new notices with recommended rotations have been issued, these are more advisory in nature and farmers are given the option of proposing an alternative cropping program, within the limits of available water supplies. 12. The cropping in the ORMVAs' territory in 1989/90 is summarized in table 4(a) and in the LSI area (Ouarzazate and Tafilalet excepted) for 1990/91 and the five-year average in table 4(b). In the LSI area of the seven modern  - 37 - ANNEX 1 Page 4 of 6 schemes, cereals (mainly bread wheat) are planted on 36% of the area; industrial crops (sugar beet, sugarcane, cotton, oilseeds) on 20W; food legumes on 6%; forage crops for cattle (milk and meat) on 12*; vegetables on 12%, and miscellaneous crops on 3%. Tree crops, mainly citrus and olive trees, cover 14% of the cultivated area. On the rainfed land in the Gharb and Loukkos, cereals occupy 60% of the land and in the other areas 80 to 100% of the cropped area. 13. In the LSI area, the overall croDping intensity averaged 103% in the five years 1986-19912, with the best performance achieved in Doukkala and Tadla where it was 125* and above. These cropping intensities compare with a potential of about 117* overall2 in the LSI area and up to 135% in the Doukkala. Studies by IAV-Hassan II show the relationship between cropping intensity and size of farm; farms of less than 5 ha in the Doukkala had intensities exceeding 140% while on the larger farms they were closer to 100W. CroD Yields 14. Yields vary widely both within and between ORMVA due to varying soil conditions, farmers' competence and the incentives to invest and produce. Sugar beet yields range from an average of about 60 ton/ha in the Doukkala to 46 ton/ha in the Tadla and only 35 ton/ha in the Gharb and Moulouya; against the 80 ton/ha achieved by best practice. Sugarcane yields range from 68 ton/ha in the Gharb (good soils) to around 50 ton/ha in the Loukkos and Moulouya where soils are less suitable. These results compare with over 70 ton/ha obtained by the better producers and up to 100 ton/ha on the research station in the Gharb. Yields of bread wheat at 2 ton/ha (Haouz) to 4 ton/ha (Tadla) are well below the potential of 6 ton/ha achieved by some farmers in the Doukkala and Tadla. Average cotton yields at 1.2 to 2.1 ton/ha are also low, yet some producers in the Haouz have obtained as much as 4 ton/ha. Average citrus production (mainly clementines and navel and Maroc-late oranges) has fluctuated between 14 and 20 ton/ha over the last five years, the ceiling of about 20/ton/ha reflecting the aging of the plantations. Crop and Livestock Production 15. CroD production in the LSI area is dominated by cereals, sugar, vegetables, citrus and milk production from forage. Overall, production in the Doukkala is closest to the planned objectives while at the other end of the scale, in the Gharb production is well below the objectives due to the farmers' preference for solely rainfed cereals and legumes. The Tadla is also a relatively good performer. Performance is low but improving in the Haouz (Tessaout Amont). In the Loukkos, production is relatively intensive due to 2/ See Etude sur la synthese de la r6vision des assolements, Expert Systeme, Rabat, Maroc, janvier 1993.  - 38 - ANNEX 1 Page 5 of 6 the long tradition of growing vegetables for market and groundnuts which occupy 45% of the area. But sugarcane production is well below potential since part of it is on very light soils. In the Moulouya, production is below expectations, particularly for vegetables. The Souss is the nearest to potential. Overall, the return on the irrigation network is below expectations due to a relatively large area under cereals (36% against about 25% which might be expected to meet rotational needs), the low cropping intensity and crop yields 30-50% below potential. 16. Numbers of livestock have remained more or less stable but there has been a general improvement in the quality of stock through crossing with improved breeds. Total milk production has reached 300 million liters per year but yields per cow are still relatively low. On extensive systems, yields in the order of 470 liters/lactation for the local breeds, 1100 liters for the cross-breeds and 1850 liters for pure improved breeds, have been recorded. Under intensive systems, the pure breeds have averaged about 4000 liters per lactation. The reasons for low performance in milk production are attributed to poor feeding and lack of basic hygiene. There is considerable potential to raise the productivity of the forage break in the rotation through use of new species and better conservation in the form of silage. C. Production Potential and Constraints 17. An analysis of the potential by groups of crops is in working paper 1. 18. The principal reasons for lower than expected production and the constraints to increasing agricultural production include the following: (a) Water shortages restricting the area in summer crops but also poor irrigation techniques resulting in wastage of water (field efficiencies in gravity schemes are estimated at about 45%) and low yields. These problems are compounded by the design of the irrigation system (trame B) which is geared to a collective rather than individual use of water. (b) The land tenure situation including the impact of "indivision" and the lack of titles on land reform cooperatives and collective lands also reduces farmers' interest in investing or intensifying their holdings. (c) Limited crop options in the summer; there is a need for field trials and experimentation to test new crops as well as the need for the development of new markets. (d) Poor cultural practices, particularly in land preparation, seeding and weed control and wasteful use of fertilizer and crop protection chemicals.  - 39 - ANNEX 1 Page 6 of 6 (e) In the Gharb, the risk of flooding on 20,000 ha in late winter makes farmers reticent to grow intensive crops. Instead, cereals are grown and resown in spring with sunflower if the cereals are lost. The Ouargha dam presently under construction should eliminate this risk. 19. The proposed project will be the vehicle for tackling (c) and (d) while it would play major role in diffusing results of LSII2 work on (a). The land tenure constraints (b), and specifically the collective lands in the Gharb, will be tackled under the planned Second Agricultural Sector Investment Loan. N:Cole\iaadsp\annexl  - 40 - ANNEX 1 Table 1 STAFF APPRAISAL REPORT IRRIGATED AREAS AGRICULTURAL SERVICES PROJECT Agricultural Area '000 ha ANNUAL IRRIGABLE LSI ORMVA RAINFALL ------ ------------------- OTHER BOUR/ TOTAL (MM) MODERN IMPROVED TOTAL IRRIGABLE RAINFED AREA TRADITIONNAL a/ Gharb 550 86 _ 86 _ 306 392 Loukkos 700 19 _ 19 _ 110 129 Sub-total 105 _ 105 - 416 521 Doukkala 350 61 _ 61 6 339 406 Tadla 250 97 _ 97 17 98 212 Sub-total 158 _ 158 23 437 618 Haouz 300 47 30 77 134 257 468 Moulouya 350 65 - 65 6 60 131 Souss Massa 250 31 2 33 72 212 317 Sub-total 143 32 175 212 529 916 Ouarzazate 100 1 26 27 44 12 83 Tafilalet 150 1 19 20 32 38 90 Sub-total 2 45 47 76 50 173 TOTAL 408 78 485 311 1,432 2,228 a/ SMSI/PMH Private/Privf, etc. Source: LSII2 SAR and PSDA preparation Report. M:\COLE\SARIAASP\TABlWK1  - 41 - ANNEX I Table 2 STAFF APPRAISAL REPORT IRRIGATED AREAS AGRICULTURAL SERVICES PROJECT Land Tenure/Structure fonciere 1----------------------I I- --- I -----I I---- I- --- I----------I------I ----I*- I---- IDOtUKKALAIGHARB HAOUZILW%KKOSIMOuLOUtYAIOUJARZAZATEI SOUSS ITADLAITAFILALETI ORMVA I I I a/ I b/ I I I IMASSA c/1 d/ I e* I| / I 1 1-----