Morocco - Fourth Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 12081 PROJECT COMPLETION REPORT KINGDOM OF MDROCCO FOURTH HIGHAY PROJECT (LOAN 2254-MNR) JUNE 30, 1993 MICROGRAPHICS Report No: 12081 Type: PCR Infrastructure Operations Division Country Department II Middle East ana North Africa Region This document has a resridted distibutIon ad may be sed by recipients only in the perforunce of their official duties its contents may not oherwise be disclosed without Wodd Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Moroccan Dirham EXCHANGE RATES Appraisal Year Average US$1 - DH 6.1 Intervening Year Average US$1 = DH 8.7 Completion Year Average US$1 = DH 8.0 GLOSSARY ER = Economic Retum HDM = Highway Design Model ICB International Competitive Bidding LA = Loan Agreement LPEE = Laboratoire Public D'Essais et d'Etudes MOT = Ministry of Transport MPW = Ministry of Public Works PERL = Public Enterprise Reform Loan RTI) = Roads and Traffic Department SAR = Staff Appraisal Report SAP - Special Action Program VOC Vehicle Operating Costs FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation June 30, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECTs Project Completion Report on Morocco Fourth Highway Project (Loan 2254-NOR) Attached is the "Project Completion Report on Ilorocco - Fourth Highway Project (Loan 2254-MOR)" prepared by the Middle East and North Africa Regional Office. Part II is based on Borro%4er comments. The Loan (US$85.0 million) was approved in March 1983. Initiation of a policy study financed under the Project postponed the Loan Effectiveness Date from January to August 1984. After two extensions, the Loan was closed on December 31, 1990, and US$8.4 million were canceled. Project composition was complex. It encompassed road repairs and maintenance, construction of one segment of a major expressway, rural roads construction, and policy studies. Project implementation was hampered by local fund shortages, complications in works procurement, and problems with the design and execution of the policy studies. The PCR suggests that contracting procedures used during project implementation raise broad issues concerning works moonitoring and cost control, and that supervision could have been tighter. Lower than expected (and negative) traffic growth on many road segments and cost overruns will have severely reduced the project economic rate of return in spite of what the PCR states. The Bank has been providing finance to Morocco for highway transport since 1969 and this, the Fourth in a series of projects, was aimed at maintenance. Nevertheless, at the entd of the project, proper evaluation of road maintenance "is difficult given a lack of detailed documentation, no explicit financial target for annual maintenance work, uncertainty regarding the Government's funding obligation for maintenance activities, and failure to show the relationships between the physical content of the program and its costs" (paras 3.02 and 5.05). On the basis of available information, the overall project outcome cannot be rated; we assess its sustainability as unlikely and its institutional impact as negligible. The planned audit will reassess these ratings and will also look at the broader perspective of the road subsector in the context of the current lending program. The PCR is of adequate quality, except for the absence of documentation on the economic analysis. This document has a restricted distribution - *: -'v be used by recipients only in the performance of their officiat duties. its contents may not orlherw.te be disclosed without World Bank authorization.  FOR OMCIAL US ONLY TABLE OF CONTENTS PREFACE EVALUATION SUIMARY .. ................................... i Project Objectives and Implementation Experience ......... ...... i Results ............................................. ii Sustainability ....... . ... . .......... iii Findings and Lessons . . ............................... iii PARTI: PROJECTREVIEWFROM THEBANK'SPERSPECTIVE ...... ..... 1 I.PROJECr IDENTfrY .................................. 1 11. 3ACKGROUND: THE TRANSPORT SECTOR AND THE HIGHWAY SUBSECTOR ...... ............................... 1 M.PROJECTOBJECTVES AND DESCRIPnON .................. 3 IV.PROJECTDESIGN AND ORGANIZATION ................... 4 V. PROJECrT PLEMENTAJ1ON ................ 6 Delays in Implementation and Shortage of Budgetary Funds. . 6 Partial Cancellation of Loan ..9 Civil Works in GeneAl 9............. 9 Pavement Strengthening Works and Provincial Road Improvements..... 10 Bridge Reconstruction and Construction of Workshops .. .10 Completion of Caablnca-Rabat Expressway . .....11 Equipment Procurement .1......... .# .... 11 Consulting Services-Provincial Roads Study Phase .........11 Consulting Services-Freight Market Study.......... 12 Consulting Services-Study of Measures to Strengthen Transportaton Sector ....................... . ...... ...... 12 Consulng Services-Study on Railways Operational Information System . . 13 Technical Assistance for MPW Planning Unit . .. . 13 Technical Assistance to RTID ................... . 13 Fellowships ................................ . 13 VI. MJOR PROJECT RESULIS .......... 14 Achievement of Project Objectives ..... 14 Achievement of Physical Tagets ............1.. .15 PIrject Costs .15 Disbursements . .... .................. 15 Economic Reevaluation..... 16 Environmental Impact ......... . . . ... .. . ... . .18 VII. PROJECr SUSTAINABUI. . .. ..Y 19.......19 vm. BAN'S PERFORM.ANCE .l..................... . 19 IX. BORROWERS PERFORMLUNCE ......... ..... 20 X. RELATIONS BETWEEN THE BANK AND THE BORRCWER.22 Xa. CONSULTANT SERVICES ............................ . . 22 XI.PROJECTDOCUMENTATION AND DATA .22 PART H: PROJECT REVIEW FROM BORROWER'S PERSPECTE...... 24 This document has a restricted distribution and may be used by recipients only in the performance of their offlcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  PART M.- STATISTICAL INFORMATION Table 1: Related IDA Credits and Bank Loans Table 2: Strengthening and Improvement Works Table 3: Bridge Reconstruction Works Table 4: Provincial Road Improvement Works Table 5: Equipment Procured under the Project Table 6: Project Timetable Table 7: Cumulative Loan Disbursements Table 8: Project Costs Table 9: Project Financing Table 10: Status c. Coveants Table 11: Progress of Disbursements by Categories Table 12: Missions Table 13: Staff Inputs Diagram I: Planned and Actual Implementation MAP IBRD24176: Morocco: Fourth Highway Project  KINGDOM OF MOROCCO FOURTH HIGHWAY PROJECT (LOAN 2254-MOR) PROJEC'T COMPLETION REPORT Preface This Project Completion Report describes the preparation, appraisal, and implementation of a Fourth Highway Project in Morocco, for which Loan 2254-MOR in the amount of US$85 million was signed on October 23, 1983. The loan was scheduled to become effective on January 23, 1984, but actually became effective eight months later on August 24, 1984, due to delayed submission of documentation regarding initiation of d policy study and teuired as a condition of effectiveness. The loan was closed on December 31, 1990, after two extensions. Ultimately US$76.6 million were disbursed and US$8.4 million were cancelled. The Preface, Evaluation Summary, and Parts I and III of the PCR were prepared by the Infastructure Opetions Division of Country Department I, Middle East and North Africa Region. As the Government of Morocco did not formally provide a summary statement about the Project from the Borrower's pespective, Part II coasists instead of comments by the Road and Traffic Department, Ministry of Public Works, and Staff and Professional Training on the draft PCR (similar in structure and content to the current version). The Bank's contnbution to the report was prepared on the basis of, inter alia, the Staff Appraisal Report, the Loan Agreement, supervision reports, correspondence between the Bank and the Moroccan authorities, intemal Bank records, and information gathered through consultation with Bank staff and officials of the Government of Morocco.  EVALUATION SUMMARY Project Objectives and hnplementation Experience (i) The Fourth Highway Project continued the focus on the priority areas established in the first three highway projects in Morocco, with major emphasis on repair and maintenance of the existing road equipment. The Project emphasized road strengthening and pavement repair (about one-third of Project costs) and included a limited amount of construction on a new major expressway (about one quarter of Project costs). However, a new pilot component (about 22% of Project costs) in support of rural roads was added and included financing for a study of the pacts on agriculture of improved rural roads. The Project also sought to generate a process to reform Morocco's restrctions on road transport and, to this end, financing was provided for a study of the regulatory scheme for road transport. (ii) Loan proceeds for a program of road maintenance financed workshops, road maintenance equipment and technical assistance. Although maintenance was a major area of emphasis in this project, proper evaluation of the success of this componer is difficult given a lack of detailed documerntation, no explicit financial target for annual maintenance work, uncertainty regarding the Government's funding obligation for maintenance activities and failure to show the relationships between the physical content of the program and its costs (para. 5.05). (iii) Implementation of the Project was severely hampered by insufficient government contributions which were limited as a result of annual fiscal constraints. Budgetary shortages affected both capital and cunrent expenditures and earned the Project a rating of 2 or 3 for financial problems in every supervision report Such shortages affected execution of procurement under the Project, e.g. delaying the award of contracts and slowing payments to contrators once they had been engaged (para. 5.05). The slowdown of public expenditures also affected the rate of disbursements under the loan. As a result, the Bank agreed to place the loan under the Bank's Special Action Program for Morocco by temporarily raising the reimbursable perontage of civil works expenditures (para 5.03). This resulted in a moderate acceleration of disbursements. Even though local funds were in short supply, foreign exchange was more than adequate, especially after the value of the US dollar rose in relation to the dirham. The Porrower accordingly cancelled US$8.4 million of the loan in 1986 (para. 5.08). (iv) Loan utilizntion for works was also hampered by a multiplicity of relatively small contracts involving a large number of small payments. The orginal intention was that the Government should pay the contractors and then be reimbursed. Instead, a Special Account was set up to handle the many small payments, which the Bank replemshed periodically. The use of many small, scattered contra also raises broader issues concerning monitorng of works and cost control (pam. 5.04). (v) The exact shortfall in maintenance expenditure and physical activities targets is unknown not only due to conflicting reports on what these expenditures amounted to and what physical activities actually occurred, but also to uncertainties concerning the precise level of expenditures which had been agreed for the Project (para. 5.05). However, the available evidence points to significantly smaller expenditures than initially contemplated (para. 5.06).  (vi) The lack of adequate counterpart funds had a different impact on each Project component. Available data m the Bank's and Borrower's files do not permit speculation on whether the differences in impact were due to a deliberate policy of assigning investment priorities, or were purely circumstantial. There is also no evidence regarding the impact on project costs that postponement or interruption of works might have had. A more rational response by the Government and the Bank to addressing the consequencez of recurrent budgetary constraints on the project scope and its timely execution would have helped improve project results. (vii) The Project included major studies on road transport policy; one was part of the original Project and another was added in 1986 as a follow-up to the PERL (para. 5.22). The first exoerienced considerable problems in execution and its results were satisfactory to neither the Bank nor the Borrower; the second ultimately was found unacceptable to the Government (paras. 5.185.22). Tnese studies originated in an atempt to mediate sharp differences between the purdes in their views on road transport policy. The Bank advocated greater liberalization while the Government was reluctant to change the existing system, which limited entry and othterwise regulated the conditions under which road transport enterprises operated. The Bank has contiued to press for road transport liberalization in subsequent transport projects for Morocco and progress continues to be slow. This exoerience shows that relying on studies to resolve road transport policy differences is inefficient. (viii) The Project also included a study of provincial roads which was to provide, inter alla, an empirical basis to judge the impact of improved rural roads on agriculture. The study was conducted over a long period and resulted in a large number of reports (parm. 5.17), but no analysis appears to have been made of the link between road improvement and agricultural development (para. 6.04). Results (ix) The construction components of the Project (except for a 15% shortfall in the km of roads strengthened) were substantially completed as planned, though behind schedule, and maintenance equipment corresponding in value, though not in specification, was procured under the loan, but again, much behind schedule (paras. 6.01 and 6.03). The studies components only partly achieved their objectives (paras. 6.02 and 6.04). The Government's maintenance program was not implemented as intended even though the Project's financial contribution thereto was significant. As a result, the condition of tertiary roads appears to have deteriorated (para. 6.03). (x) Economic performance of most civil works, according to the Government's reevaluation, is satisfactory with rates of return in excess 35% in nearly all cases. However, no rates of return were calculated for the provincial roads as these had been completed too recently to have had a significant impact on agriculture (paras. 6.11-6.20).  - iii - Sustainability (xi) The continuation of benefits from the road works carried out under tne Project will depend on adequate road maintenance. Maintenance was the focus of a sustained improvement effort by the MOP under the Project and there is an expectation that Project works will, in fact, be adequately maintained. More generally, the Project is one in a line of Bank operations whichi have addressed the problems of Morocco's road sector on a long-term basis. Most components of the Project thus have antecedents in prior Bank operations and will be continuing in the Highway Sector Project and the proposed Roads Improvement Project. This includes support for road rehabilitation, rural roads improvements, procurement of maintenance equipment, assistance to improve the operations of the highway authority and reforn of transport policy. This linkage of activities over time ensures that the initiative: of the Project will be carried forward and their beneficial effects will be sustained. Flndings and Lessons (xii) The lack of local counterpart funds due to major distortions in the Borrower's economy (likely to continue for a long period) and the fact that such funds are subject to international lending agencies' stringent conditionalities, need to be addressed explicitly in the design and implementation of investment projects. Adjustments in the project giving recognition to budgetary constraints to ensure that the project is in line with the Government's macroeconomic policies and is executed smoothly, should be anticipated. More generally, the preparation of annual budgets steeds to reflect the relative priorities of investment and maintenance, especially when capital expenditures must be cut. The Moroccan authorities did not define these priorities clearly in the early years of the Project and, while progress has been made in more recent years, the issue has not yet been satisfactorily resolvt. Discussions of the annual budgets between the Bank and the Government may help improve this process. (xiii) The creation in 1989 of a special fund earmarked for routine road maintenance has had a beneficial effect so far on maintenance funding. Its success has now led to a proposal to extend the fund's revenue base in order to provide the same safeguard against fluctuations in the budget for periodic maintenance as well. (xiv) The construction period forecasted in the Project was unduly short not only in view of Morocco's budgetary problems, but also with respect to the Bank's prior experience with lending to Morocco. It should have been explicitly based on the Bank's experience. (xv) Once the budgetary problems and the undue complexities of the Project had become apparent, the Project should have been subject to a mid-term review to articulate the difficulties, redefine Project objectives and restructure the Project appropriately. Such a review should have concentrated on the sectoral policy and the budgetary problems which emerged from Project implementation. (xvi) Although there wvas no formal mid-term review, the Bank and the Borrower agreed in due course to the use of a special account in the Treasury to facilitate loan disbursements which had been hampered by documentation for a large number of small expenditures. According to the Bank's accounting department, the special account has worked well.  KENGDOM OF MOROCCO FOURTH HIGHWAY PROJECT (LOAN 2254-MOR) PROJECT COMPLETION REPORT PART I: PROJECT REVIEW FROM THE BANK'S PERSPECT I. PROJECT IDENTITY Name: Fourth Highway Project Loan Number: 2254MOR Loan Amount: US$85 million RVP Unit: MENA Country: Kingdom of Morocco Sector: Transportation Subsector: Highway I. BACKGROUND: THE TRANSPORT SECTOR AND THE HIGHWAY SUBSECTOR 2.01 The current situation concerning Morocco's transport sector is summarized in the Transport Sector Strategy Paper (Report No. 9712-MOR, September 10, 1991). Road, rail, coastal shipping, and air constitute the primary modes of transport in the country. In 1988, road accounted for nearly 90% of passenger-km and over 40% of ton-km. Two-thirds of export tonnage and nearly oae-half of aU international trffic is represented by one commodity, phosphates and its derivatives. This traffic also provicies over 70% of all ton-km on the railway. The share of road transport in all non-phosphate traffic is nearly 70%. Road was also the dominant transport mode when the Fourth Highway Project was approved in 1983. 2.02 At the time of the approval of the Fourth Highway Project, Morocco was reported to have a "well developed transportation system " but there remained, "considerable potentialfor reducing transport costs and improving service levels in particular locaions or for partcular segments of the transportation market". Moreover, as much of the basic transportation infrastructure had been completed twenty or thirty years ago, there was "need of renewal or upgrading to meet the evolving needs of the 1980's". More recently, with the steady increase in traffic throughout the 1980's at 4 to 5% per year, capacity problems are emerging, particularly in certain busy corridors. 2.03 After a short-lived boom in the 1970's based on phosphate exports, austerity has been a continuing theme in the management of Morocco's government finances. Nevertheless,  - 2 - transport sector public investments have increased in real terms in the 1980's and represented about 22% of total investments. At the same time, the share of road investments has gradually gone up and that of railways declined. When the Fourth Highway Project was appraised, road investments were about 33% of total public investments for transport. In the current plan period (1988-1992) they are planned to reach nearly 47%. 2.04 Morocco's road system currently consists of about 28,000 km of paved and 30,000 kn of unpaved roads. At appraisal of the Fourth Highway Project the total was nearly the same but the length of paved roads was Lbout 2,000 km less. The approximately 20,000 km of primary and secondary roads are mostly paved, while over two-thirds of the tertiary network is unpaved. 2.05 At appraisal, Morocco's highway investments were planned at about US$100 million equivalent a year. Actual expenditures were less in the appraisal year, but the average over the period 1981 to 1987 was approximately at the planned level. About two-thirds of road investments were allocated to primary and secondary roads. 2.06 Road maintenance expenditures we.e estimated in 1990 (Staff Appraisal Report, Highway Sector Project, Report No. 7983-MOR) to have averaged about US$50 million equivalent annually for the period 1981-1987, though varying widely from this mean in individual years. A large part of maintenance expenditures (especially periodic maintenance) was financed from the capital budget. The bulk of maintenance outlays was for primary and secondary roads. 2.07 The Bank (including IDA) has been providing finance for transport in Morocco since 1969. Except for a loan of US$22 million equivalent in 1985 for the port of Casablanca, and loans of $12 million and $63 million in PY91 for a Port Sector Project, the rest of this lending has been for roads. Prior to the Fourth Highway Project the equivalent of US$105 million was lent in three roads projects (Table 1: Related IDA Credits and Bank Loans); in addition, US$67 million equivalent was made available under the roads components in 11 agricultural sector projects. A Highway Sector Project (Loan 3168-MOR of US$79 million equivalent) was authorized in 1990 and is currently being implemented (Table 1). A Second Highway Sector Project for about US$80 million equivalent is currently in the pipeline. 2.08 The three operations for roads in Morocco before the Fourth Highway embodied common emphases: major construction and improvement (or studies for such work) on a few longer road sections; pavement strengthening and reconstruction on a large number of short sections of the paved network; road maintenance equipment; and studies or technical assistance for transport planning and coordination. In addition, one or another of the projects provided support for bridge construction, highway administration or control of overvwight vehicles. While major road construction was executed by international competitive bidding (ICB) with normal engineering designs and controls, pavement strengthening and reconstruction was executed, for the most part, by smaller local contractors. Most of these works were awarded under rules which exempted the Borrower from the Bank's full ICB requirements and limited the need for prior review of procurement contracts by the Bank. The ICB/LCB thresholds went up gradually as Bank lending for roads evolved in Morocco.  - 3 - 2.09 Beginning with the Transport Survey of the Atlantic Coastal Region under the First Highway Project, transport planning and coordinadon activities under the Bank's projects addressed concerns over pricing and undue restrictions on entry in the transport sector. Such concerns had been raised as early as 1964 when the Bank in its (published) economic survey on Morocco criticized these restrictions as a major problem for the country's transport system because they were both wasteful and ineffective. However, these rules had powerful political support and remained a major problem twenty years later when the Bank was considering the Fourth Highway Project. 2.10 In the late 1970's Morocco implemented a program to decentralize governmental functions to provincial and communal level organizations; transferring responsibility for roads used primarily by short distance traffic was a part of this program. Special funds were set aside to improve such roads and local level commissions selected which roads would be improved. However, the central public works authorities continued to play an important role in the management of local roads. These developments offered an opportunity for Bank as-sistance to be channelled to rural roads through a conventional roads project. IH. PROJECT OBJECTIVES AND DESCRIPION 3.01 The Fourth Highway Project continued the focus on thc pnonty areas established in the first three highway projects in Morocco, with major emphasis on repair and maintenance of the existing road equipment. The Project emphasized road strengthening and pavement repair (about one-third of Project costs) and included a limited amount of construction on a new major expressway (about one quarter of Project costs). However, a new pilot component (about 22% of Project costs) in support of rural roads was added and included financing for a study of the impacts on agnculture of improved rural roads. The Project also sought to generat a process to reform Morocco's restrictions on road transport and, to this end, financing was provided for a study of the regulatory scheme for road transport. 3.02 Loan proceeds for a program of road maintenance financed worlkshops, road maintenance equipment and technical assistance. Although maintenance was a major area of emphasis in this project, proper evaluation of the success of this component is difficult given a lack of detailed documentation, no explicit financial target for annual maintenance work, uncertainty regarding the Government's funding obligation for maintenance activities and failure to show the relationships between the physical content of the program and its costs (para. 5.05). 3.03 As approved by the Bank's Board, the Project included: (a) strengthening and improving of about 470 km of primary and secondary roads (Table 2: Strengthening and Improvement Works); (b) reconstruction of 14 bridges on the primary and secondary networks (Table 3: Bridge Reconstruction Works);  (c) pilot program to improve about 300 km of provincial roads (Table 4: Provincial Road Improvement Works); (d) construction on about 29 km of the Casablanca-Rabat Expressway; (e) construction of three road maintenance workshops; (f) acquisition of road maintenance equipm.ent (Table 5: Equipment Procured under the Project); (~,, execution of Provincial Roads Study, Phase I; (h) execution of Freight Market Survey and review of trucking regulatory system; (i) provision of technical assistance to the Ministry of Public Works' Planning and Studies Department; and (j) provision of technical assistance to the Road and Traffic Department (RTD). Most Project components were carried out by RTD, a constituent agency of the Ministry of Public Works (MPW), but item (h) was the responsibility of the Ministry of Transport (MOT) and item (i) came under the MPW. The Project penod was to extend from mid-1983 to end 1987, abort the same length as foreseen for the Third Project. However, some concern had been expressed within the Bank that the proposed disbursement period was significantly shorter than the general Morocco and the EMENA road project disbursement profiles, but the briefer period was accepted on the basis that plans were in hand to execute the works quickly, as had occurred in the Third Project. IV. PROJECT DESIGN AND ORGANIZATION 4.01 The Project was identified during a Bank mission to Morocco in October 1980 and was prepared by the Roads Departnent (subsequently Roads and Traffic Department or RTD) with assistance from French consultants financed from the Third Project. The consultants made economic evaluations of the proposed works to strengthen and improve main roads, reconstruct bridges and construct or improve provincial roads. Appraisal occurred two years later (October 1982) and negotiations took place in Washington in February 1983. The Project was approved by the Board in March 1983 and the LA was signed in October of that year. Effectiveness of the loan was conditional upon the usual requirements (legal opinion etc.) and on the issuance by MOT of requests for proposals from consultants to carry out the Freight Market Study. Effectiveness was scheduled for January 23, 1984. However, there were delays in submission of necessary documentation, especially that relating to the Freight Market Study. In addition, a loan covenant required that the Freight Market Study was to have begun by June 1984 and when that date passed without this requirement having been met loan effectiveness was further delayed. Effectiveness was finally attained on August 24, 1984. The planned Ptoject Timetable and the planned cumulative disbursements under the loan are shown in Tables 6 (Project TImetable) and 7 (Cumulative Loan Disbursements) respectively.  4.02 Project costs consisting of capital costs were originally estimated at US$131.4 million (Table 8: Project Costs). The description of the Project also included a program of road maintenance to be carried out by Morocco over the period miuu-1983 to the end of 1987. The loan did not include any financing directly linked to this maintenance program, but it did increase the disbursement percentage for civil works in recognition of these maintenance activities and provided financing for road maintenance workshops and equipment. The total cost of the capital items and the maintenance program were as showr "from SAR, in millions equivalent): Capital Items 131.4 Periodic Maintenance 105.7 Routine Maintenance 49.6 Total 286.7 It is not clear whether these sums represented all the amounts which RTD was intending to spend over the period, that is, whether the basis of the Bank's Project was, in fact, RTD's overall program. In any event, Bank financing under the loan was based on 64% of the capital items in the Project cost table, which represented 100% of the foreign exchange content of these items plus a contribution toward the costs of maintenance. The planned pattern of Project financing is shown in Table 9 (Project Financing). 4.03 The usual Bank requirements for ICB were considerably modified. The Government was authorized to use local competitive bidding to procure civil works where the value of the contracts was US$2.0 million equivalent or less, and to procure equipment where contracts were less than US$0.1 or 0.05 million, depending on the type of equipment. Prior Bank review of civil works contracts was requred for those valued over US$2.0 million except for bridge contracts where the threshold was US$0.5 million and for equipment contracts over US$0.5 or 0.1 million, in accordance with the kind of equipment. These thresholds were substantially higher than under the third project for roads in Morocco. 4.04 The location of civil works to be included under the Project was spelled out in a side letter, giving full details for road strengthening and improvement, bridge reconstruction, work on the Casablanca-Rabat Expressway and, in part, for the improvement of secondary and tertiary roads. For those roads in the latter category which were not specifically approved for financing in the side letter, the Borrower was to submit an economic evaluation showing a rate of return of over 12% before they would be eligible to b; included in the Project. 4.05 Loan covenants covered the usual requirements related to orderly Project execution, as well as the requirements to submit to the Bank annual audit reports six months after the close of each fiscal year (Table 10: Status of Covenants). Borrower performance varied among covenants; generally there was compliance, though often with delays.  - 6- 4.06 Project design and organization were amended on several occasions: (a) In early 1986, US$8.4 million of the loan was cancelled as foreign exchange requirements had gone down, due to the revaluation of the US dollar in terms of the dirham. (b) In 1986, as part of the Bank's general Special Action Program (SAP) which was intended to accelerate disbursements to certain countries in financial distress, the disbursement percentage of eligible expcnditures under the loan was increased from 64 to 77%. (c) In late 1986, the Project Description was expanded to include Part B (3), studies to develop measures for strengthening Morocco's transportation sector, develop an operational information system for Morocco's national railway and provide fellowships for RTD personnel, and the disbursement procedures were amended to provide for the establishment of a Special Account in the Treasury of US$3.0 million to facilitate disbursements under the loan. (d) Ln mid-1988, the Special Account was increased to US$5.0 million. V. PROJECT IMPLEMENTATION Delays in Implementation and Shortage of Budgetary Funds 5.01 The Project was to have been completed on December 31, 1987 and the loan was to have been closed one year thereafter. The actual course of implementation is summarized in Tables 6, 7, 8, 9 (Project Financing), and 11 (Progress of Disbursements by Categories) and in Diagram I (Planned and Actual Implementation). Throughout its implementation the Project suffered from lack of counterpart funds, earning it a supervision rating of 2 or 3 for financial problems in every supervision report. As a consequence, completion and closing were delayed for two years. Completion was also delayed due to slow tendering procedures. In the early stages of Project implementation, while there were delays in making the loan effective (para. 4.01); due to problems with the Freight Market Study (see para. 5.02 below) in the end, their impact on implementation progress was insignificant compared with that of the Government's budgetary difficulties.  - 7 - 5.02 The Government's main problem was that, under its arrangements with the International Monetary Fund (IMF), it had to limit public expenditures. Data on capital expenditures as a whole and for public works and by RTD for the years 1981 through 1986 were as follows: Dirhams billions 1981 1982 1983 1984 1985 1986 Total capital expenditures 9.6 12.5 8.0 7.0 9.3 13.3 Public works capital expenditures 1.9 2.8 2.5 1.5 1.6 2.5 Public works as % of total 20.0 22.4 31.2 21.4 17.2 18.8 Capital expenditures as RTD 0.37 0.76 0.66 0.23 0.21 0.55 Capital expenditures by RTD as % of public work.s 19.5 27.1 26.4 15.3 13.1 22.0 It appears that both total and public works capital expenditures went down in the early years of Project implementation and only began to recover in 1986 to levels they had reached at the time of appraisal. The Government resorted to various means to limit public expenditures, which had the main consequence of slowing down the rate of expenditure under the Project. Not only did it dela) the making of contracts but it also postponed payments to contractors. 5.03 The slow down of public expenditures also affected disbursements under the loan. As a result the Bank agreed to male the loan subject to the Bank's SAP for Morocco and the original disbursement percentage of 64% of expenditures was raised in February 1986 to 77% (para. 4.06(b)). It remained at that level by successive extensions of the SAP for much of the remainder of the disbursement period though it was finally lowered to 60% in 1989. Application of the SAP resulted in a modest acceleration of disbursements (under US$5 million) from limits that would otherwise have prevailed. 5.04 The Government also had difficulties in utilizing the loan due to a multiplicity of relatively small contracts and payments which it financed. The original intention had been that contractors would be paid from the Government budget and the Bank would then reimburse the Government for a portion of the expenditures. This system became cumbersome not only because Governmant appropriations were slow and insufficient, but because the number of payments was large. Therefore, the Loan Agreement was amended in November 1986 to provide for a Special Account of US$3 million (later raised to US$5 million) from which the Government would make payments for the Project and which the Bank would periodically replenish against documentation in support of these payments. The Special Account is reported to have worked well in achieving its objectives. However, the use of many, scattered contracts, usually two or three for one section of road, raises broader issues than ease of loan disbursement. Such scattered procedures require effective monitoring for integration and control (see para. 12.02 below). In addition, this method of execution makes it difficult to organize the work, in such a way as to achieve efficiency and to allow comparison of costs. A subsequent  -8 - loan for roads in Morocco (Loan 3168-MOR) provides for grouping of contracts in lots and for awarding of these contracts at the regional level. This new procedure may alleviate some of the difficulties described above. 5.05 As indicated above, the definition of the Project encompassed both capital and maintenance activities and the budgetary restrictions impacted on both of them. However, the Government's failure to provide the necessary capital budget affected disbursement of the loan, while the insufficient provision of maintenance funds interfered only with the Government's ability to carry out the maintenance part of the Project. The precise obligation of the Government regarding the funding of maintenance activities is somewhat uncertain under the loan documentation. A side letter to the LA spells out the annual physical volumes of various categories of maintenance work to be done under the Project, but the documents do not contain a detailed presentation to show the relationship between the physical content of the maintenance program and its aggregate or annual cost. The documents do not, therefore, contain an explicit financial target for annual maintenance work but an estimate in the SAR suggests a value of 173 million in 1983 dirham (about US$28.4 million). This was the figure mentioned on various occasions when the Bank raised with the Moroccans the adequacy of their maintenance effort under the Project. 5.06 The reports on actual expenditures for maintenance are conflicting. According to para. 2.20 of the SAR for the Highway Sector Project (Report No. 7983-MOR of January 8, 1990) the amounts (in millions of current dirham) were as follows: 1981 1982 1983 | 1984 1985 1986 1987 Average 294 618 432 127 155 256 553 348 In constant 1983 millions of dirhams, the amounts would be: 1981 1982 1983 1984 1985 1986 1987 Average | 345 657 432 113 128 194 409 325 Various supervision reports indicate different amounts; for example, the April 1985 report indicates that 1984 expenditures were 57% of the budgeted amount of DH 202 million, that is, DH 115 million which is less than DH 127 million shown above. Regardless of which source is used, the expenditures fell short in 1984 and 1985. The Bank spent considerable effort in seeking to persuade the Government to keep up its expenditures for maintenance and to increase them much beyond the level of DH 127 million. It agreed with the Government on action plans and targets which covered not only capital items under the Project but maintenance expenditures as well. While budgetary allocations often were adequate, actual spending tended to fall below agreed targets. RTD considers that it had a strong commitment to maintenance as evidenced by  - 9 - the relatively large share of the roads budget devoted to maintenance and by the establishment in 1989 of a special fund earmnarked for maintenance. 5.07 The impact of the shortage of funds on execution of the Project was not uniform for all ts components. Table 11 shows the course of disbursement by principal categories. Three years after loan signature more than half of scheduled disbursements for the Casablanca- Rabat Expressway had been completed, whereas only about one-fifth of the loan as a whole was disbursed. The record does not show whethef giving preference to this part of the Project was discussed with the Bank or whether the Government was following any deliberate priorities in making its budget cuts. However, the budget crisis was publicly and widely recognized and certain deliberate actions resulted, such as restructuring of the Project after partial cancellation of the loan. Maldng adjustments was complicated because the length of the crisis was difficult to foresee. RTD points out that the earlier completion of disbursements for the expressway was mainly due to the fact that work on it had been startd before the financial crisis and that efforts were concentrated on keeping contractors current once the crisis started. The non-payment of contractors had significant impacts on several of the consultancy assignmerts financed under the loan when firms either slowed down or temporarily abandoned their work. No information is available on the cost impacts of the budgetary crisis, whether any claims were made for late payment of dues or whether prices rose to adjust for the additional working capital needs experienced by contractors. A more deliberate response by the parties to the budgetary crisis, including giving preference to maintenance, and a recognition by the Bank that the crisis had significant implications on the size and implementation of the Project would have been helpful. Partial Cancellation of Loan 5.08 Shortly after the loan was made, the dirham/US$ exchange rate began to rise from the 6.1 level at appraisal. It went up to nearly 10 before falling to around 8 in early 1991. As the value of the works in dirham did not go up correspondingly, the loan (expressed in US dollars) covered a larger proportion of the cost of the works. The disbursement percentage, however, remained unchanged in the early years of the shift in exchange rates and as a result some of the loan became unneeded and the Borrower cancelled US$8.4 million of the loan in early 1986. Civil Works in General 5.09 The detailed design for the civil works was, for the most part, available at appraisal. However, the design of pavement strengthening works was to be reviewed using the Highway Design Model (HDM) and the Bank made extensive comments in the early years of Project implementation on pavement design for such works. With regard to provincial road works, designs were available at appraisal for only about 100 km of such roads. Another roughly 200 km of these works were to be designed and submitted for Bank review in three annual lots of about 70 km each. These submissions were covered by Section 3.03(c) of the LA, to the extent they exceeded certain monetary thresholds. As hardly any works were above these thresholds, the section was eliminated by letter agreement of February 20, 1985. The record  - 10- does not indicate what review, if any, was made of the designs of the 200 additional km of provincial road improvements. 5.10 A number of different procurement procedures applied to the civil works financed under the Project. In the early years of Project implementation considerable correspondence arose over the interpretation of the requirements. The Moroccan authorities sometimes failed to apply correctly the rules set out in the LA. At other times they asked for Bank concurrence when that was not needed. 5.11 On-site supervision of civil works was provided by RTD, supported by the Material Tests and Studies Laboratory, Laboratoire Public d'Essais et d'Etudes (LPEE). RTD submitted invoices covering completed works for financing under the loan, but detailed reports on work execution and the quality of works were not provided the Bank. Bank staff made site visits to the Casablanca-Rabat Expressway; the record does not show what other works were inspected by Bank staff. Pavement Strengthening Works and Provincial Road Improvements 5.12 A list of about 464 km of pavement strengthening works was agreed at appraisal. In mid-1988 another 40 km of roads was added to the list. A final compendium of the pavement works covered under the Project is shown in Table 2, together with the original list. A comparison shows that 443 km of roads were completed and that most of the works proposed at appraisal were carried out, but some 82 kn were built outside the original list although the record does not indicate when this substitution was agreed between the parties. These substitutions were made because some road sections selected for improvement when the project was prepared deteriorated before the loan became effective and had to be repaired without awaiting the availability of loan funds. At appraisal, it was agreed that four provincial roads aggregating 172 km in length would be financed under the provincial road improvement program and another about 128 km would be selected later (from a list of about 313 kn of provincial roads). A final group of roads to be financed was agreed in January 1986. Most of these roads corresponded to the tentative list, although the length varied on some of them and one new road was added. Table 4 shows the list of provincial road improvements proposed at appraisal, the list agreed in January 1986, and the list of roads aggregating 301 km which were finally financed under the Project. Bridge Reconstruction and Construction of Workshops 5.13 Both these categories, except for one bridge, were executed as proposed at appraisal, but with much delay. By October 1988, 5 of the 14 bridge works were yet to be started and construction of the three workshops had just begun. The list of reconstructed bridges is shown in Table 3 (Bridge Reconstruction Works).  - 11 - Completion of Casablanca-Rabat Expressway 5.14 This 29 km section of road (including a major bridge) was subject to ICB but Moroccan firms were the low bidders and were awarded the work. This part of the Project was substantially completed in mid-1987, more than a year behind schedule, though disbursements continued for these works into 1990. Equipment Procurement 5.15 The original and final list of equipment is shown in Table 5. Implementation of equipment procurement was very slow and by October 1988 less than 20% of this program had been implemented. However, in the end the original allocation of ioan proceeds for equipment was more than used up. Some of the items on the original list were not procured under the Project and others were substituted. No formal record was found for the justification or approval of the revised list of equipment purchases. However, RTD indicated that reduction of procurement under Lot 1 was agreed by a Bank mission in 1986 after many of the items were otherwise acquired by RTD. According to RTD, the type and quantity of additional equipment was approved by a Bank mission which visited Morocco in May 1988 when it reviewed the bidding documents for the second tranche of equipment purchases. A side letter under the Project also required the Borrower to replace outside of the Project, other items of road maintenance equipment listed in the side letter. RTD) indicated that the maintenance equipment which it held in 1982 was not replaced because it had not been written off. Consulting Services-Provincial Roads Study Phase H 5.16 The provincial roads component of the Project was based on a study financed by the Bank under the Third Highway Project. While that study had broken new ground by including increased agricultural production as a main benefit of improving rural roads, data was still lacking on the exact interaction between road investment and agriculturl production. A second phase rural roads study, thus, was included under the Project to determine reliable methods to measure the impact of better rural roads on crop yields, and, in particular, to measure the impact on agriculture of the road improvements under the pilot rual roads program of the Project. This second phase study also was to provide a basis for a fifth Bank road project for Morocco by an analysis of 2,500 km of roads to be built and 2,500 km of roads to be renewed. 5.17 A French firm associated with Moroccan consultants was engaged for this work. While the study was to have been completed by early 1985, it was not actually started until after the middle of 1984. The first report was issued in August 1985 and work continued for over six years (instead of the originally scheduled 20 months), in hee phases, with numerous reports and techno-economic and computer manuals not all of which are available in the Bank's files. The work was interrupted in 1985 when the foreign members of the consulting team were withdravn to France and again in 1988 because of delays in payment. Another cause of delays was that RTD made changes in the priorities of roads to be studied. There were severe strains in the relaonship between RTD and the consultants, with complaints on the part of the former  - 12 - regarding timely and adequate completion of the work and on the part of the latter regarding appropriate directions from the clients and payment for services as due. Consulting Services-Freight Market Study 5.18 This study was carried out by an American/Lebanese consulting consortium. It was to provide data and recommendations to improve productivity in road transport. The Project design considered this objective to have great urgency and the loan's effectiveness was made conditional upon issuance of the request for proposals for the study. Recommendations of the study were to be implemented as agreed between the Borrower and the Bank. 5.19 The study was started about 9 months later than planned and took 2 1/2, instead of 1 1/2, years to complete. One reason for the longer time to finish the work was that the study involved getting information from other ministries of the Government and this required clearance from the authorities. 5.20 Neither the Government nor the Bank were very satisfied with the results of the study. Their comments were critical of the study's undue descriptiveness, lack of analysis and for continued advocacy of some severe restrictions on road haulage. They also expressed the concern that the study failed to examine such questions as the system of taxation on transport and the supply of vehicles to Morocco, and failed to make use of available data on road usage. 5.21 The study was not amended after the comments. Instead, it became one of the bases for the Study of Measures to Strengthen the Transportation Sector (see para. 5.22). Consulting Services-Study of Measures to Strengthen Transportation Sector 5.22 This study (more aptly described by its French title Schema Directeur National des Transports) was added to the Description of the Project in 1986 and was one of the studies identified as part of the Public Enterprise Reform Loan (PERL) for Morocco. The study was to provide a basis for reorganization of the transport sector and a transport sector investment program. A British/Moroccan consortium was selected to do this work which was to extend over 1 1/2 years beginning in March 1988. The assignment was divided into five major tasks (missions). The Bank provided considerable oversight for this work and made substantive comments particularly on the Mission 3 report (in mid-1988) which concerned the fiscal regime and general public policy to be applied to transport. The draft report for Mission 5 (SynthWse et Plan Directeur des Transports) was issued in January 1990, about 9 months later than scheduled. The final version of the study (scheduled for June 1990) was to provide a basis for a program of policy adjustments in the organization of road freight tansport under the Highway Sector Project (Loan 3168-MOR of February 1990) and for an agreed detailed plan of action for implementng this program. However, the detailed plan of action was never prepared. An important cause for this was that the Govemment was dissatisfied with the results of the study and with what the consultants had done. The Govemment found that the consultants' recommendations to deregulate the trucking industry were not justified. Partly, this may have been due to the fact that the amount of effort spent on this study was much below what the terms  - 13 - of reference had estimated was required. This study, as well as the Freight Market Study, originated in an attempt to mediate sharp differences in views between the Bank and the Borrower on road transport policy and other studies had been made in the past under similar circumstonces. This experience casts doubt on the efficacy of studies to resolve policy differences of this type. Consulting Services-Study on Railways Operational Information System 5.23 This study also was added in 1986. However, it was never implemented under this Project. No clear decision was made to drop this Project element but it appears that a similar study may have been made by the Moroccan railways themselves. Technical Assistance for MPW PLanning Unit 5.24 This part of the Project involved the services of two experts (a tansportation and a water resources economist) for two years each. Because the Ministry did not follow Bank guidelines in the appointment of the consulting firm which was to furnish the two experts, the loan could not be used to finance their costs. However, their services remained a part of the Project but no information is available as to what they accomplished. Technical Assistance to RTD 5.25 Three experts were to be recruited, each for two years, to transfer skills in economic analysis, help improve administrative procedures and assist in maintenance management. The economic expert started in February 1985 and the maintenance expert in November 1985. The management expert only started in February 1987 and was given a broader assignment beyond the confines of RTD and was therefore attached to the cabinet. The assignments of the economist and the maintenance experts extended beyond their original two year terms and when these persons finally became unavailable in 1988, the Bank agreed to a series of short term assignments to replace their services. RTD expressed general satisfaction with the work of these experts. The work of the maintenance management expert was considered particularly useful because it led to establishment of regional equipment repair facilities. FeDlowships 5.26 The description of the project was amended in 1986 to include fellowships to improve the technical sldlls of RTD staff. An amount of US$50,000 was set aside from the loan for this purpose, but very modest use was made of this feature, primarily to pay for attendance at professional meetings overseas. The final disbursement on its account was US$60,000.  - 14 - VI. MAJOR PROJECT RESULTS Achievement of Project Objectives 6.01 Project objectives were based on the strategy for the road subsector set forth in Morocco's 1981-1985 development plan, and included maintenance and rehabilitation of the primary and secondary networks, improvement and expansion of the provincial network, and support to major industrial and agricultural development projects. Several components of the Project supported the first two objectives while construction on both the Casablanca-Rabat Expressway and several of the provincial roads supported the last objective. All Project components (with the exception of a 7% shortfall in the km of road strengthening) were largely carried out as planned, though behind schedule, and the corresponding Project objectives can, therefore, be considered fulfilled. 6.02 In addition, the Project sought to improve productivity in road transport (by sponsoring a study of road transport regulation (the recommendations which would form a basis for regulatory improvement and increased efficiency) and to strengthen the management and maintenance of roads. The study of the freight transport market was carried out but did not lead directly to any reforms in road transport regulation. However, it provided data for the Schema Directeur National des Transports upon which discussions were based on transport policy (including deregulation of road transport) under the follow-on loan for roads. 6.03 The Project contributed to increased in road management; road project analysis and maintenance operations skills. It also helped to implement some of the recommendations of the 1984 Road Maintenance Study financed under the Third Highway Project through establishment and equipping of workshops and acquisition of road maintenance equipment. These activities were part of a program under which about 26,000 km of paved roads would receive routine and periodic maintenance over the years 1983 to 1987. This program was not fully implemented for lack of funds with the result that the 1988 condition of the primary and secondary paved roads (about 55% of all paved roads) had improved marginally but the terdiary roads had deterorated significantly (60% in bad condition in 1988 as against 40% in 1983). In 1989, Parliament established a Road Fund, whose proceeds are allocated primarily to routine maintenance. This has helped put the road maintenance budget on a firmer footing, and its success has now led to a proposal to extend its revenue base and provide the same protection against fluctuations in the budget periodic maintenance as well. 6.04 Finally, the Project was to provide reliable methods to measure the economic impact of improved rural roads as a result of the Rural Roads Study Phase II. The study turned out a large volume of work to identify, plan and design improvements on specific rural roads which could form the basis of a follow-on Bank project. In addition, an econometric analysis (multiple correlation) was made which linked rural road improvements with touristic activity and with increased mining output. However, on the basis of the documentation available in the Bank, no analysis appears to have been made of the link between road improvement and agricultural development.  - 15 - Achievement of Physical Targets 6.05 The physical targets in terms of km of road works were met for the Pilot Program of Provincial Road Improvements and for the completion of the Casablanca-Rabat Expressway. The km of road strengthening completed fell about 15% short of the target of 469 km. The reconstruc-tion of 13 out of 14 bridges was accomplished as was the construction of three workshops. The acquisition of equipment under the Project corresponded only partly with projections at the time the loan was made. Significant substitutions were made and the budgeted amount was exceeded. Project Costs 6.06 The final cost of the Project in terms of constant 1983 DH (DIH 650 million) is slightly below the original estimate, exclusive of contingencies, (DH 667 million). In terms of US$ the difference is similar, US$109.3 million base price as against final cost US$106.5 million (applying a 6.lDH per US$ exchange rate to 650 million of 1983 DH). If the contingencies of the original estimate are included, the final US$ cost is about 20% below the estimate (rable 8). 6.07 Most components of the Project were below estimated costs, but the expressway and equipment procurement were slightly above estimates. Moreover, the savings in costs of civil works are lower than appears because the onginal estimate for these works made no separate provision for related consultancies, such as geotechnical studies and supevision. Their costs (representing nearly two thirds of all consultancy expenditures) should be added to the final cost of civil works. Savings are also less than appears because some of the civil works items (pavement strengthening and bridges reconstruction) were slightly reduced in scope. A further apparent reduction in terms of US$ is due to the fact that at times the DHIUS$ exchange rate did not move in parallel with domestic inflation in Morocco. 6.08 Consultancy services appear to have cost much more than estimated at appraisal. However, they now include, as already mentioned, civil works supervision and the rest of the final consultancy costs are close to what was estimated at the start. 6.09 While overall fina! costs generally follow estimates, a few individual works were significantly above or below projections (see, for example, bridge reconstruction in Table 3). Also, the unit cost of pavement strengthening and provincial road improvement for individual roads varied considerably from overall averages. For example, pavement strengthening could cost as little as DH 200,000 per Ian or as much as DH 800,000 per kIn, while it averaged about DH 500,000. Disbursements 6.10 Table 7 compares actual with projected disbursements. The main delay in disbursement is attributable to very slow start up during the first three years. By the sixth year (1988/1989) the amount disbursed was very close to the revised profile which was prepared after cancelation of US$8.4 million of the loan in early 1986.  - 16 - Economic Reevaluation 6.11 Economic evaluation of the Project at appraisal was made for pavement strengthening, bridge reconstruction, provincial road improvement and completion of the Casablanca-Rabat Expressway. For pavement strengthening, the Staff Appraisal Report did not provide precise economic return (ER) calculations for individual road sections, but all ER's were reported to have been 35% or above. The analysis was based on the Highway Design Model (HDM) and principally reflected reduced vehicle operating costs (VOC) attributed to reduced pavement roughness incident to repaving. The analysis used traffic growth rates of between 4 and 9% per year. Considerable effort was expended in selecting a paving option and sequence for each road which would yield the best ER. 6.12 RTD's reevaluation of the economic merits of pavement strengthening was confined to 315 km of road sections, roughly three-fourths of all such works under the Project and is considered a reasonable indication for the road strengthening program as a whole (shown in last column of Table 2). The reevaluation was based on a simplified version of HDM called EVAL which replicated the roughness parameters of HDM. The 70 road sections analyzed ranged in length from 0.1 to 17.0 km and reestimated ER's were provided for all but 3 of the 70 sections. Of the 67 sections with ER's, 59 sections had ER's of 35% or more, 6 sections had ER's of 24 to 34% and only 2 sections had ER's under 10%. The latter accounted for a total of 5.1 km. RTD also recalculated ER's on the basis of the original cost parameters and thus provided a comparison of ER's before the works began and after their completion. This comparison showed that about half of the sections had higher ER's at completion and about half had lower ER's. RTD's analysis was based on an assumed improvement in surface roughness after repaving, immediately after the works were completed or at the time of the reevaluation (early 1992) not on measures of actual roughness improvements achieved. 6.13 RTD also analyzed the evolution of some of the principal parameters used in the economic evaluation: For 293 km of road sections analyzed regarding pavement strength, the CBR equivalent of the final strengthening works was within 20% of the CBR value of the planned works on 193 km (or 66%) of the road sections. - For 315 km of road sections analyzed regarding costs of construction, actual costs were within 20% of estimated costs on 120 km (or 38%) of road sections. Traffic counts were provided for 319 km of road sections built and for 258 kmn of road sections reevaluated. In a number of cases traffic in 1989 exceeded projections for that year (for 69 km or 22% of the roads built). For 111 km (or 35%) of the roads built actual traffic was below projections though still positive (with growth rates ranging up to about 6% per year) and for 139 km (or 43%) of roads 1989 traffic levels were below actual 1980 traffic counts. Another presentation by RTD related to traffic in 1983 (though not showing actual counts) and indicates that iffic growth from that base year was positive for 139 km (or 44%) of road sections for which evaluations were made and negative for 178 km (or 56%). Traffic growth thus appears  - 17 - to have been quite uneven and for about one-half of the roads, in terms of km, no growth occurred at all. These shortfalls in traffic seem, however, to have had limited impact on the ER's, a result which may be explained by the inherently high level of benefits in relation to the cost of the works. 6.14 For bridge reconstruction, the Staff Appraisal Report showed that 13 of the 14 bridges included in the Project had an ER of "over 40%" while the other bridge had an ER of 23%. These ER's were based on the impacts on VOC of bridge weight restrictions, narrow bridge carriage ways and poor alignments in bridge approaches. Removal of weight restrictions was found to be responsible for the bulk of the benefits. 6.15 RTD used a similar methodology in its reevaluation, with primary emphasis on the additional costs due to detours of vehicles which would be precluded from using a bridge if it were not reconstructed. The results of RTD's reevaluation which was made for 12 of the 13 bridge reconstructions that were implemented (the bridge at km 148 on RP2 which had an ER of 23% at appraisal was not rebuilt under the Project) showed an ER of "over 40%" for 11 of these reconstructions and 30.8% for the other (the bridge at knm 47.2 on RP38 which had an ER of "over 40%" at appraisal). As in the case of the road strengthening works, 1990 traffic on the bridges fell below 1984 levels in a substantial number of cases (8 of the bridges) but the ER's remained high. ER's also were substanially unaffected by the fact that the final cost of the reconstuction wors exceeded estimates (in current DE) in 8 case. These results are sumnmanzed in Table 3. 6.16 The Pilot Program of Provincial Road Improvement was definitely identified at apprisal to the extent only of 172 kIn; an additional selection of 128 km was to have been made subsequently from 313 km of roads listed in the appraisal documents. The ER's for these 485 kn of roads ranged at appraisal from 21% to 40% (best estimate) and from 5% to 40% (alternative estimate based on alternative forecasts of agricultural impact). While many of the orginal group of roads were dropped from the Project, three other roads aggregating 92 km were eventually included in the Project but no documentation was available in the files to show the ex-ante estimates of the ER's for these roads. The appraisal methodology to calculate the ER's for this program was based primarily on the estimated impact on agricultural production from the road improvements. The full impact was not expected to be reached for ten years. In cases where this impact needed to be included to raise the ER for a particular road over 12%, RTD was to submit evidence regarding the agricultural development potential in the road's zone of influence. The record does not show that any such evidence was submitted for any of the roads. The second phase of the Provincial Roads Study was to provide empirical evidence as to the impacts on agriculture from improved roads, but as mentioned above (para. 6.04), the Study did not generate this kind of data. 6.17 RTD did not attempt a reevaluation of the ER's for the provincial road improvements included under the Project. RTD thought that such an exercise would not be meaningful at his time because full agriculture benefits would not have accrued by now. As over 80% of the expenditures for these roads occurred only five or fewer years ago, significant levels of agricultural benefits are unlikely to have been generated by now.  - 18 - 6.18 The Staff Appraisal Report estimated the economic merits of completion of the Casablanca-Rabat Expressway on the basis of VOC savings, travel time savings and avoided accident costs. The analysis projected congested conditions on the alternative existing routes. With opening of the new expressway, this would be relieved to the benefit of both the diverted and remaining traffic. Consideration of the impact on the parallel railway also was included. The ER was estimated at 32%. The importance of VOC savings would be minimal in the early years of the analysis period but would rise to nearly one quarter of all benefits in the tenth year. Time savings would be the predominant benefit (over 80% at the start and 72% in the tenth year). 6.19 RTD reevaluated the economic performance for completing the Expressway on the same basis as at appraisal (except for reference to the railway) and came to an ER of 40%. In the reevaluation the contnbution of VOC savings became relatively more important representing nearly 47% in the opening year and still 44% in the eighteenth year. The costs of construction rose only slightly over estimates and traffic in 1986 (the originally projected opening year) was very close to projections on representative sections of the existing network: ! On RP1 Ferme Rossi-TUmara 4,200 projected v. 3,845 actual On RP36 Skhirat-Oued Chamt 13,160 projected v. 12,204 actual Actual traffic on these two sections had grown rapidly by 1990 to 5,402 and 17,147 respectively, as against projections for 1996 of 8,750 and 20,220. The reestimated ER thus appears reasonable. 6.20 In summary, the economic reevaluations, where they were made, show that reestimated ER's are generally at levels equivalent to the ER's projected at appraisal despite low traffic increases. However, no information is available on the economic performance of the Pilot Program of Provincial Road Improvement. While the impact on agriculture may take some additional time to materialize, an indication of taffic development on these roads would be useflt as a preliminary measure of economic performance. Environmental lIpact 6.21 There was no known adverse environmental impact resulting from the civil works under the Project in terms of land use, expropriation, resettlement or any other ecological or sociological aspect. The pavement strengthening and improvement works were largely on the existing alignment and, therefore, would have had minimal effects on the environment. The remaining road works also were improvements on existing facilities which frequently included providing a permanent seal for previously unpaved surfaces. The environmental impact of such works would typically be neutral or positive although only a detailed examination could confirm this.  - 19 - VII. PROJECr SUSTAINABILITY 7.01 The continuation of benefits from the road works carried out under the Project will depend on adequate road maintenance. Maintenance has been the subject of a sustained improvement effort before, during and after the Project, and there is an expectation that the Project works will, in fact, be adequately maintained. More generally, the Project stands in a line of Bank operations which have addressed the problems of Morocco's road sector on a long- term basis. Most components of the Project thus have antecedents in prior Bank operations and will be continued in the Highway Sector Project or the proposed Roads Improvement Project. This includes support for road rehabilitation, rural roads improvements, procurement of maintenance equipment, assistance to improve the operations of the highway authority and reform of transport policy. This linkage of activities over time ensures that the initiatives of the Project will be carried forward and their beneficial effects will be sustained. V3II. BANK'S PERFORMANCE 8.01 The Bank's contribution to the Project was substantial. Missions and staff inputs are summarized in Tables 12 OMissions) and 13 (Staff Inputs). Not only did the Bank provide a new emphasis in Project design on resolving long standing regulatory problems in Morocco's road sector but, in Project implementation, the Bank sought to find creative solutions (such as the Special Action Program and the Special Account) for the problems which Morocco's budget crisis caused in the Project. When the budget crisis prevented implementation of the agreed maintenance program, the Bank gave serious consideration to providing additional funds for the loan to enable the Bank to finance some of the periodic maintenance. The Bank also provided significant assistance in technical analysis of pavement design and in procurement matters. Nevertheless, in certain respects the Bank's performance could have been improved: - At appraisal, the Bank strongly supported a rapid disbursement projection but apparently did not examine whether Morocco's budget situation would be able to sustain this level of activity. - The Project was in practice a sector loan but the linkage between the works under the Bank's Project and the overall road program was never made clear. This made it difficult to establish the role of the Bank in supporting Morocco's road program as a whole. - Although this was the Bank's fourth road operation in Morocco, the Borrower ewperienced difficulty at times establishing and meeting the procurement requirements of the loan even though the Borrower made strong efforts to ensure that compliance was adequate. An explicit initiative to familiarize the Borrower with Bank's requirements in the context of this Project would have been helpful.  - 20 - After the budgetary problems related to the Project became explicit, the Bank treated them somewhat in isolation and did not attempt to place them in the context of Morocco's general fiscal crisis, at least not until the time of the PERL in 1986. Nor did the Bank raise with the Moroccan authorities how most effectively to deal with the crisis. For example, the Bank did not argue in favor of funding maintenance before other activities, nor did the Bank raise the issue of how the Government could reduce its obligations to its contractors with the least effect on costs. In the early years of Project implementation the Bank did not focus concentrated attention on the execution of two of the major studies under the Project (the Freight Market Study and Rural Roads Study Phase II). As these studies were closely linked to major Project objectives, closer follow-up would have been helpful. As it was, neither study fully provided expected results. IThe Project involved a large volume of contracts and payments aU of which had to be processed by the Bank without appropriate project monitoring tools. The efficacy of this, in terms of Morocco's road operations and in terms of the call on Bank staff resources, was not examined. Other arrangements for contcting and works supervision may have been more cost effective and perhaps some of the responsibilities of Bank staff could have been assumed by coordinating consultants. The development of a project monitoring system or greater application of Bank supervision resources would have been other alternatives. IX. BORROWER'S PERFORMANCE 9.01 The bulk of ProJect activities were the responsibility of RTD. RTD's parent ministry, the MPW, was responxible for implementing technical assistance to the Ministry's Planning and Studies Department and the MOT was responsible for the Freight Market Study and the Study of Measures to Strengthen the Transportation Sector. 9.02 RTD faced the challenging task of managing a large volume of construction work carried out under numerous contracts in a period of acute budgetary stringency. RTD was working mostly with local contractors with whom it had extensive previous relations and knew how to deal with. As a result, its record was notable for the few difficulties or disputes it had with these contractors, although there were some occasions when financing under the loan was refused because RTD had failed to comply with the procurement requirements of the loan. RTD's system of supervision relied primarily on its own staff worlkng with LPEE. While the record does not indicate how well the supervision was done, the supervisory system appears to have been adequate. Nevertheless, the question is raised whether the existing system for execution of works is the most efficient and effective for Morocco, especally if the volume of works is expanded and construction of local roads increasingly becomes the responsibility of local authorities. In RTD's view, the 42 provincial offices of public works are equipped to  - 21 - discharge these administrative, financial and technical tasks, especially in collaboration with the provincial representatives of the Government services. According to RTD, special arrangements are made for supervision of large works. The execution of smaller works will also be improved by the newly instituted practice of grouping contracts. 9.03 Despite the budgetary problems, RTD maintained Project momentum as best it could. Nothing in the record indicates, however, that RTD had an explicit plan for dealing with the budget crisis, although in late 1985 it made a proposal to the Bank for reprogramming the whole loan. A more deliberate response by RTD would have been helpful in raising and forcing decisions on such issues as short term priorities in expenditures and cost, and the economic implications of interrupting various types of work. 9.04 The MPW had the limited role of procuring and managing two expatriate economists to work on port and water resources problems, one of the responsibilities of MPW, though not otherwise an objective of the Project. MPW failed to follow Bank procurement guidelines and this part of the Project was therefore excluded from financing although the services, to be executed by the Borrower, continued to be part of the Project. No information is available in the record concerning MPW's experiences with this activity. 9.05 MOT was responsible for two major studies which cut across jurisdictional lines of the Government and covered broader policy issues in the transport sector. MOT experienced some difficulties in gaining the cooperation of other parts of the Government and this led to delays. In similar cases in the future, prior discussion with other ministries where a study requires inter-ministerial collaboration would be desirable in order to expedite a study once work begins. Also, it appears that the execution of the second study went somewhat more smoothly an the first and it seems reasonable to conclude that MOT had gained experience in managing complex sectoral analyses. 9.06 AlU three agencies had some responsibilities for the selection and appointment of consultants under the Project. Several of the consulting assignments were delayed due to problems in this process. Lengthy clearances were required not only within the agency immediately in charge, but from such supervisory bodies as the Ministry of Finance. For example, the Bank gave its approval for one particular firm to do the work on the Rural Roads Study in January 1984 but the work was not actually started until September of the following year do to delays in completing contractual formalities. The Government may wish to examine how the process for contracting of consultants could be rationalized to avoid delays in the future. 9.07 The Borrower's Performance with respect to LA is summarized in Table 10. Over 200 contracts were financed under the loan and it was not possible to ascertain compliance with loan covenant specifications for each contract. However, examination of a sample of contracts confirms that covenants were complied with.  - 22 - X. RELATIONS BETWEEN THE BANK AND THE BORROWER 10.01 Relations between the Bank and the Moroccan authorities were friendly and without undue difficulties. RTD made determined efforts to observe Bank procurement requirements and to seek the Bank's advice on technical issues such as the design of pavements. The Bank for its part sought to respond to RTD's requests promptly and thoroughly. XL. CONSULTANT SERVICES 11.01 The Project made extensive use of consultant services. Not only were its major components designed by consultants (under prior Bank projects), but consultants were employed under the Project to provide technical assistance to improve Government operations, help in the resolution of major transport policy issues and prepare the bases for follow-on Bank projects in Morocco's road sector. The use of consultants to help train Government staff and otherwise improve administration raises the question of fitting the Project's contribution into the Government's more general program to improve management and into similar efforts by other aid givers. The record does not indicate that these matters were considered in detail and more attention to these points would perhaps have made these sorts of consulting services more effective. 11.02 Bank attention to the work of the consultants varied considerably. It was most intensive in regard to the Study of Measures to Strengthen the Transport Sector, but in other cases the consultants did not have the benefit of detailed review of their work by Bank staff. Bank staff resources obviously are limited and must be applied with an eye to cost effectiveness and in accordance with consciously set priorities. This undoubtedly explains the care given to the Study of Measures... which was seen as an essential prerequisite to achieving an improved transport policy. Nevertheless, some review mechanism could be developed to ensure that major consulting initiatives are caried out properly and will deliver the results which were promised. However, even with limited Bank supervision some consulting assignments achieved good results; a notable example was the assistance to the economic studies group at RTD. XII. PROJECr DOCUMENTATION AND DATA 12.01 Original documentation for the procurement elements of the Project were contained pardy in the SAR and LA and partly in side letters to the LA. This arrangement allowed a degree of flexibility in the process of execution, but also dispersed the focus of the Project from the specific works which were to be included in it. The Project also included as one of its objectives the execution by the Moroccan authorities of a multiyear road maintenance program. This program was not defined clearly in either financial or physical terms, with consequent difficulties in monitoring of performance (para. 5.0S).  - 23 - 12.02 Data for preparation of the PCR were lacking in significant respects. In pardcular, information was not readily available on which works were finally included for financing under the Project, which contracts related to these works, what was the course of disbursement under individual contracts and how physical eiecution progressed under various elements of procurement. 12.03 A more systematic presentation of objectives and more thorough monitoring of their accomplishment would be desirable, particularly through more detailed and pointed progress reporting.  - 24 - PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 1.01 The Borrower did not formally provide a summary statement about the Project from the Borrower's perspective. However, the Borrower did comment on a draft of the PCR (substantially similar in structure and content to the current version of the PCR). The comments, which are attached in French, are reflected in the current version of the PCR and are summarized below. They are wide ranging and serve as an excellent indication of the Borrower's point of view. 1.02 The Borrower generally confirms the Bank's analysis on how the budgetary crisis affected the performance of the Project. The Borrower considers its response to the crisis appropriate. It continued the rapid execution of existing major works (such as the Casablanca- Rabat Expressway) to avoid having to pay penalties to contractors and it affirms its strong commitment to adequate road maintenance. It views its actions under the Project as consistent with that commitment. 1.03 The Borrower acknowledges that the Project made some useful contributions to improving the Borrower's tendering procedures. It also notes that the multiplicity of contracts under the Project has been avoided under the current Highway Sector Project for roads by the requirement that contracts be tendered in groups. However, in general the Borrower is satisfied with the efficacy of its construction and supervision procedures. 1.04 The Borrower views the changes which were made in the content of the Project as appropriate to the intervening change in circumstances. Roads which had been identified as in greatest need of improvement in 1980 were supplanted by other roads, either because the original roads had been improved in the meantime or because other roads had deteriorated to a worse state. Similarly, equipment purchase programs were adjusted as deteriorated equipment turned out to last longer than anticipated. 1.05 The Borrower agreed that the link between road improvement and agricultural development had not yet been established and, it thought that agricultural development resulting from better roads could not be documented for a long time. Consequently, the study of this link which was foreseen in the Project, was premature. 1.06 The Borrower expressed satisfaction with certain individual technical assistance advisors provided under the loan, though it was distinctly negative about some of the consulting services rendered by firms.  QUATROE&9E PROJET R1TOER (Prgt ?254 - N OR) PT'DioJ do rapira d'SchV,omrng 02mmonntsIr0 de A'*mprOntour Section Observations Commentaires 5.01 Retard dans l'execution et penurie de fond Le projet a accus6 un retard de deux (2) ans dG essentiellement au budg6taires manque de moyens budg6taires. Le pr8t West entr6 en vlgueur que le 24108184, ators que ta date originate de mise en vigueur etait prevue pour le 2310111984, soit un retard de 7 mois qui nincombe pas a la DRCR. Les restrictions budg6taires ont falt diff6rer dannee en ann6e I'inscription dans les lots de finances de certaines operations programm6es dans le cadre du 4eme Projet Routier. De ce fait, on pourrait dire quo le d6marrage effectif de ce projet n'a eu lieu quoen 1988 pulsque 1985 etait la demlrre annee du Plan Quinquennal 1981-1985 et que les cr6dits inscrits en 1I et 1987 etaient tr6s faibles et permettaient a peine de consolider les marches engag6s entre 1983 et 1985. 11 faut signaler 6galement que les reports 1985/86 ; 1986187 et 1987/88 ont 6t1 annules. Par ailleurs, les d6marrages de proJot sont lents compte tenu des d6lais que n6cessite la proc6dure de lancement des marches. 5.02 Les d6penses d;investissement La Direction des Routes et de la Circulation Routiere atant l'organe totales et celles des Travaux d'6x4cution du 4eIne Projet Routier, it seralt souhaitable de Pubtlcs ont balsse durant (es premieres compl6ter le tableau donne dans cette section par son budget annees de 1'ex6cution du projet. d'investissement. voir tableau NO 1 6.04 Le gouvemement a 6prouv6 des Le Maroc a choisi la vole de la reglonallsation et de la difficultes & utiliser les fonds decentraUisation. Dans cette optique, le MTPFPC s'est dote d'une du pret en raison d'une multiplicit6 repr6sentation au niveau provincial gui traite de toutes les  Tableau I Dpenses par secteur 1981 1982 1983 1984 1985 1986 en Milliards de dirhams D6penses totales d'investissement 9 12,5 8 7 9,3 13,3 Depenses d'investissOment des T.P. 1,9 2,8 2,5 1,5 1,6 2,5 % (invest. T.PfTotal Invest) 20 22 31 21 17 19 Depenses dlinvestissement DRCR Oa ,76 ',66 o, 23 0 21 o,55 % (INVEST. DRCR/INVEST.T.P) 19 27 28 15 13 22  GUAThOE&AE PPROJET ROUTEiR (prt 24 - NOR) Prolot de rappoot d'schvwm'ent Commoentl"r de i'emprontOur (SRft) Section Observations Commentaires de march6s relativement petits activites conti6es au d6partement. Les responsables routiers ont procede, dans le cadre du Projet Sectoriel Routier (Pret n