Morocco - Rural Water Supply and Sanitation Project (First Phase of PAGER)

Document of The World Bank Report No: 17005 MOR PROJECT APPRAISAL DOCUMENT ON A PROPOSED SINGLE CURRENCY LOAN WITH AN US DOLLAR TRANCHE IN AN AMOUNT EQUAL TO US$ 5 MILLION AND A FRENCH FRANC TRANCHE IN AN AMOUNT EQUAL TO FF 29.5 MILLION TO KINGDOM OF MOROCCO FOR A RURAL WATER SUPPLY AND SANITATION PROJECT October 31, 1997 Rural Development, Water and Environment Department Middle East and North Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 1997) Currency Unit = Moroccan Dirham US$ 1.00 =DH9.5 FISCAL YEAR July I to June 30 ABBREVIATIONS AND ACRONYMS CAS - Country Assistance Strategy CFD - Caisse Franvaise de Developpement CR - Rural Commune CRS - Catholic Relief Service DGCL General Directorate of Local Communities DGH - Direction Generale de Il'Hydraulique DPTP - Provincial Department of Public Works DRH - Direction Regionale de I'Hydraulique (Regional Hydraulic Directorate) ERR - Economic Rate of Return EU - European Union FAO - Food and Agricultural Organization FAO/CP- World Bank-FAO Cooperative Program GNP - Gross National Product ICB - International Competitive Bidding JICA - 3apan Intemational Cooperation Agency KFW - Germnan Bank for Reconstruction and Development LCD - Liter per Capita per Day MOF - Ministry of Finance MOH - Ministry of Public Health MPT - Mobile Participation Teams MTR - Mid-Term Review NCB - National Competitive Bidding NGO - Non-Government Organization NPV - Net Present Value OECF - Overseas Economic Cooperation Fund ONEP - Office Nationale de l'Eau Potable O&M - Operation and Maintenance PAGER - Water Supply Program for Rural Populations PF - Public Fountains PRA - Participatory Rural Appraisal SOE - Statements of Expenditures TA - Technical Assistance UNICEF - United Nations Children Fund WID - Women in Development WSS - Water Supply and Sanitation WTP - Willingness to Pay WUA - Water Users Associations WW - Wastewater Vice President K. Dervi,s Country Director C. Dr'voie Sector Leaders S. Dw, ghouth, M. Wilson Task Teamn T. Sinha, P. Koenig  Morocco Rural Water Supply and Sanitation Table of Contents Project Financing Data ..............................................................I Block 1: Project Description ..............................................................2 1 Project Development Objectives ...............................................................2 2. Project Components ..............................................................2 3. Benefits and Target Population ...............................................................2 4. Institutional and Implementation Arrangements ..............................................................2 Block 2: Project Rationale ...............................................................3 5. CAS Objectives Supported by the Project ..............................................................3 6. Main Sector Issues and Government Strategy ..............................................................3 Government Policy ..............................................................3 7. Sector Issues to be Addressed by the Project and Strategic Choices ...............................................................5 8. Project Alternatives Considered and Reasons for Rejection ..............................................................5 9. Major Related Projects Financed by the Bank and/or Other Development Agencies ...........................................................5 10. Lessons Learned and Incorporated in the Project Design ..............................................................6 11. Indications of Borrower Commitment and Ownership ...............................................................6 12. Value Added of Bank Support .............................................................................................................................................6 13. Economic Assessment .........................................7 Block 3: Summary Project Assessments .........................................7 14. Financial Assessment ........................................7 15. Technical Assessment .........................................8 16. Institutional Assessment .........................................9 17. Social Assessment ...........................................10 1 8. Environmental Assessment ........................................ 10 1 9. Participatory Approach ........................................ 10 20. Sustainability ....................................... 11 21. Critical Risks ....................................... 11 22. Possible Controversial Aspects ....................................... 11 Block 4: Main Loan Conditions ........................................................................................................................ 12 23. Conditions ............................. 12 24. Agreements and Assurances ............................. 12 Block 5: Compliance with Bank Policies ............................. 12 List of Annexes Annex 1: Project Design Summary ............................. 13 Annex 2: Detailed Project Description ............................. 14 Annex 3: Estimated Project Costs ............................. 22 Annex 4: Cost Benefit Analysis Summary ............................. 23 Annex 5: Financial Summary ........................................31.............................................................................................. 31 Annex 6: Procurement and Disbursement Arrangements ........................................ 32 Annex 7: Project Processing Budget and Schedule ....................................... 36 Annex 8: Documents in the Project File ....................................... 37 Annex 9: Statement of Loans and Credits ............................. 38 Annex 10: Country at a Glance ............................. 40 Morocco MAP - Project Provinces  I  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Middle East and North Africa Regional Office Project Appraisal Document Morocco Rural Water Supply and Sanitation Date: October 31, 1997 [] Draft [x] Final Task Team: Messrs. T. Sinha and P. Koenig Country Manager: Mr. Christian Delvoie Project ID: 40566 Sector: Water Supply & Sanitation (WSS) Lending Instrument: Sector Investment and Maintenance Loan PTI: [X] Yes [ ] No Project Financing Data [x] Loan [] Credit [ Guarantee [] Other [Specifyj For Loans/Credits/Others: Amount: US$ 10.0 million - Retroactive Financing: US$ 0.5 million Proposed Terms: .] IMulticurrency j[x Single currency Grace period (years): 5 [] Standard Variable [] Fixed [x] LIBOR/PIBOR- based Years to maturity: 20 Commitment fee: 0.75% Service charge: N/A. Financing plan (32 % foreign exchange) * (Costs in US$ million) Project Program Source: (as appraised by Phase I (years I to 3 yrs) Phase II (years 4 to 6) Bank) Local Foreign Total Toal IQoal Local Govt. and Beneficiaries 12.0 - 12.0 14.0 26.0 :IBRD 6.0 4.0 10.0 20.0 30.0 Other Proposed Financiers: KfW (Germnan) 6.0 4.0 10.0 6.0 16.0 CFD (France) 9.0 6.0 15.0 3.0 18.0 OECF (Japan) 6I0 40 10. 20. 3 Total 39.0 18.0 57.0 63.0 120.0 * This financing plan, especially for Phase II, is only indicativ. Actual amounts will depend on Govemmnet's negotiations with the different financiers. Note: Phase 11 financing by the World Bank to be committed after satisfactory evaluation of Phase I Bor ower: Kingdo m oforo M orocco.--..---------.-- Guarantor: N/A Responsible agency(ies): Direction Gendrale de Hydraulique (DGH) - Ministere des Travaux Publics, ONEP Estimated disbursements of World Bank funds 1998 1999 2000 2001 (Bank FY/US$m): Annual 2.0 4.0 3.0 1.0 Cumulative 2.0 6.0 9.0 10.0 For Guarantees: N/A [] Partial Credit [I Partial risk Final maturity Amortization profile Financing available without guarantee?: N/A Yes No Expected effectiveness date: March 1998 Closing date: December 31,2001  ProjectAppraisal Document 2 Country: MOROCCO Project Title: Rural Water Supply and Sanitation Block 1: Project Description 1. Project development objectives (see Annex 1 for key performance indicators) The project seeks to improve the access of rural populations to safe potable water and to support the implementation of Government of Morocco's master plan program for the supply of water to rural populations (PAGER). About 75% of the poor in Morocco live in rural areas and it is estimated that only 20% to 30 % of the rural population currently have good access to safe water. By improving rural water supply, the project aims to improve the health and productivity of rural populations, and to reduce the burden of rural girls who are traditionally involved in fetching water over long distances which lowers their attendance in primary schools. The proposed project will complement investments in primary education being made through Morocco Basic Education Project (Loan 4024). and for this purpose it will include most of the provinces that are also included in the Basic Education Project. The strategies for achieving these objectives are: (a) Participation: The project will use a participative rural appraisal process involving beneficiaries, including women, to assure that the project is demand oriented and is properly dimensioned and located. Training for this purpose has already been provided using a grant from FAO. (b) Cost-effectiveness: To assure that the largest possible number of population are reached, the project will give preference to reconstruction, expansion and rehabilitation of existing sources of water where feasible. Also, to give incentives for cost-effectiveness the project will place an initial grant ceiling of DH 1,200 per beneficiary. (c) Local Institutions: To assure sustainability full operation and maintenance cost will be recovered through water charges, which will be collected by water users associations, or other acceptable management mechanisms, and local individuals selected by them. This has already been tried in pilot projects and found to be successful. The project will provide training for strengthening the capacity of local institutions. 2. Project components * (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Project Proerag Component Phase I Phase II Cost Incl. Contingencies % of Total (US$ m) (US$m) Rural Water Supply 46.7 51.7 98.4 82 Rural Sanitation 5.1 5.9 11.0 9 Local Institutional Strengthening 4.6 4.8 9.4 8 Central and Provincial Support (DGH/ DPTP) 0.6 0.6 1.2 1 Total .57.0 63.0 120.0 100 * The allocation of funds, especially for Phase 11, is only indicative. Final amounts depend on actual negotiations between the Governmnent and the different financing agencies. 3. Benefits and target population: Target yovulation: The project will focus on the country's poorest provinces with the highest concentration of rural population. Within the provinces covered by the proposed project, the project assistance will be targeted to rural areas with greatest need. The original Goverunent proposed project, based on an FAOQCP Preparation Report was for about USS 248 million. Due to limited implementation capacity, it was reduced to and appraised by the Bank and CFD, KfW, OECF as a US$ 120 million Program. It will target 27 Priority Provinces of a total of 58 rural provinces country wide. (Annex 2 (a) - List of Priority Provinces). The Program will be part of PAGER. During negotiations, the Moroccan delegation expressed the Government's commitment to the proposed Program for rural water supply and sanitation, but requested that it be divided into two Phases. Phase I - the proposed Project - could be completed in two to three years, at the end of which a second Phase (about 3 years implementation) can be started, incorpoating the lessons learned from Phase 1. As a con..equence, the proposed Loan is reduced from US$ 30 million to US$ 10 million.  Project Appraisal Document 3 Country: MOROCCO Project Title: Rural Water Supply and Sanitation Blnefits :The project is expected to benefit about 1.3 million rural inhabitants (Phase I - 600,000 people), who generally have poor quality water often far from their homes. A recent Bank study ( Morocco - Enhancing the Participation of Women in Development, Report No. 14153, 1995) found based on Participatory Rural Appraisal (PRA) that the lack of adequate potable water figured as women's highest ranking problem in many of the villages covered in the study. Fetching water is a women's task and young girls often as young as five years old are expected to help out. This keeps them out of schools. While investments in basic education is being made under Loan 4024 MOR, it needs to be complimented with supportive investment in rural water to free girls to attend school. The proposed project would ensure that safe potable water is provided from public taps which would be less than one kilometer from the homes of the beneficiary population, thereby considerably reducing the work load for children, who can then attend school. The quality of water will also be improved and beneficiaries, especially small children, will receive significant health benefits particularly in terms of reduced diarrhea incidence and morbidity. Based on experience elsewhere in the world, diarrheal diseases in children up to 5 years of age can be reduced by about 50% in the villages covered by the project, one year after project completion. These results will gradually improve over time, as health education messages and changes in behavior take hold. 4. Institutional and implementation arrangements: - Implementation period: Project (Phase 1): 3 years; Phase II: 3 years - Executing agencies: (i) Directorate General of Hydraulics (DGH) in the Ministry of Public Works (MPW); and (ii) Office Nationale de I' Eau Potable (ONEP) - Project coordination: - National level: Ministries of Public Works and of Interior - Provincial level: Provincial Commissions, presided by Governor or Wali and comprising representatives from MPW, Ministry of Agriculture, Ministry of Public Health Financial Intermediary: Ministry of Finance - Accounting, financial reporting and auditing arrangements: DGH and ONEP will maintain project accounts and will submit to the Bank annually, within six months of the end of Government's financial year, audit reports prepared by independent financial auditors on project accounts, statements of expenditures and special accounts. - Monitoring and evaluation arrangements: DGH and ONEP monitoring and evaluation units will submit quarterly reports on physical and financial progress of the project. These units will submit a mid-term evaluation report by December 31, 1999, and a final evaluation report prior to loan closing. Block 2: Project Rationale 5. CAS objective(s) supported by the project The project objective is consistent with the Country Assistance Strategy (Report # 16219-MOR, January 8, 1997) which was discussed by the Board on January 13, 1997. The project supports one of the three key objectives of CAS, which is to strengthen rural and social development including poverty alleviation focusing on basic education, health care, water supply and rural infrastructure. Because of its importance for the country's development strategy, satisfactory performance on rural water supply is included as a key CAS objective and is one of the triggers for high case lending assistance to Morocco. 6. Main sector issues and Government strategy: i) Urban vs. Rural - Access to Safe Water Supply: While Morocco has been remarkably successful in providing virtually all urban inhabitants with potable water, only about 20% to 30 % of the rural population were estimated in 1996 to have access to potable water. However, estimates vary from one region to another and could be as low as 10 % in some southern provinces. This urban bias is due to several reasons. First, urban areas are economically more advanced (75% of the poor live in rural areas) and therefore cost recovery has been easier. Accordingly organizations such as ONEP, which have to maintain financial viability, have given a preference to investments in urban areas. Second, urban areas have been politically better organized, and therefore their needs have been recognized earlier. Third, with local budgetary constraints of 1980s and early 1990s, the Government tended to postpone investments in rural potable water, which was not seen as a productive investment. This situation is changing and a master plan program for improving access to safe drinking water in rural areas (PAGER) has been prepared by the Government.  Project Appraisal Docutment 4 Country: MOROCCO Project Title: Rural WaterSzupplyandSanitation ii) Sanitatiown Statistics on rural access to sanitary disposal of excreta and wastewater vary, and adequate rural sanitation coverage nation wide is estimated at about 35 %. This figure masks, however, a much grimmer reality in the poorer southern and mid-Atlas provinces, wherc; less than 10 % of the rural people have latrines or any other form of safe human waste disposal. This contributes to health problems, specially in denser rural communities. Provision of sanitation is therefore necessary, but both DGH and ONEP do not have much experience in rural sanitation and therefore have not been keen to invest in sanitation. H4owever, a start needs to be made to get full benefit of safe drinking water supply and build local capacity. Therefore, a pilot component would be included in the project. iii) halth Aspects: The dismal rural water and sanitation situation is the primary cause for the poor health of the rural population. In 1995, the Ministry of Public Health (MPH) registered nationwide 1,064,000 cases of diarrhea in children of less than 5 years of age. Unofficial estimates are much higher, perhaps double. These water and hygiene-related diseases are more prevalent in poor provinces which are also suffering from water shortages. Consequently, registered diarrheal diseases in 1995 affected 37,300 children in Ouarzazate (plus about 40% who received private care or no care ), 10,000 children in Tata (plus about 15 % to 20 %), 30,000 children in Errachidia (plus about 20 %), and 37,500 children (plus about 20 %) in Taroudant. In 1989, the MPH reported about I ,000 deaths linked to diarrheal diseases among children, representing close to 30 % of all deaths in this age group. In reality and due to large number of unreported cases, this figure is much higher. According to MPH, about 40 % of all diseases are water / hygiene related. Although no precise data exists for more recent years, the MPH estimated that the overall situation has improved during the past two years, largely as a result of the special program "Lutte contre les maladies Diarrh6iques" (Fight Against Diarrheal Diseases), the nationwide draught recovery efforts and other programs that have started to focus on improving quality of life in rural Morocco (Annex 4 - Attachment). In addition, the MPH registered in 1994 nationwide 4,138 cases of Typhoid and 362 cases of cholera. It is recognized that the only long-term sustainable impact on water-related diarrheal diseases can be achieved through preventive measures, such as safe drinking water and sanitary facilities and health education. iv) Gender Issuest Rural water supply is essentially a women's issue. The Bank's Enhancing the Participation of Women in Development (WID) Sector Study ( Report No. 14153 of 1995) has shown that because of a lack of availability, drinking water has to be hauled over long distances (often up to 5 kin) in rural areas and that it is mainly the role of women and girls. This adversely affects women's education. Because it is mainly men that consult and are consulted in the provision of rural infrastructure, often rural roads and electricity are given higher priority than rural water. A reflection of this bias is that while the Bank has a free standing rural electricity and a secondary (rural) roads project, rural water has been neglected. Following the recommendations of the WID Study, which showed that in most rural areas, the highest priority infrastructure investment need was to improve access to drinking water, it has been agreed that a rural potable water supply project deserves a very high priority in Bank's assistance strategy. GOVERNMENT POLICY: i) Rural Water Supply Master Plan: The government has increasingly become aware of the growing rural - urban gap and the consequential rural exodus. This has been specially emphasized during the droughts of early 1 990s, when the lack of reliable drinking water supply in rural areas has been one of the factors leading to an exodus of rural populations to urban areas. In 1994 the Government submitted to the National High Council for Water and Climate a Master Plan for the Development of Rural Water Supply. The Council approved the plan, which provides for near universal coverage (80 %) of rural populations in ten years. To implement the Master Plan, the Government designed in October 1995 a country-wide rural water supply program (PAGER). ii) Implementation and Management Responsibilities: According to a government decree ("La Charte Communale") of 1976, the local communities and communes (urban and rural centers) are responsible for building and managing rural water supply under the auspices of the Ministry of Interior and the assistance of the technical departments of the Ministry of Public Works. ONEP assists in this function in larger villages through a management agreement with the communes, and where there is an existing regional water conveyance pipeline (meant primarily for urban areas but traversing rural areas and managed by ONEP) from which branches for rural population can be constructed. iii) Financine and Cost Recovery: The Govemment's policy for water supply from public stand pipes has been to recover full cost of operation and maintenance from beneficiary, but to cover investment costs from the budget. Because of budget difriculties, and the need to provide benefits to a larger number of beneficiaries, the Government is now expecting local Govemments and beneficiaries to participate in the financing of up to 20% of investment costs.  Project Appraisal Document 5 Country: MOROCCO Project Tiitle: Rural Water Supply and Sanitation (Reference documents: World Bank: Kingdom of Morocco Water Sector Review, June 1995 (Report No. 14750 - MOR); Morocco Enhancing the Participation of Women in Development Study, June 1995 (i;.port No. 14153 MOR); Morocco Country Assistance Strategy, January 8, 1997 (Report No. 16219 MOR); The Contribution of People's Participation - Evidence from 121 Rural Water .Supply Projects (ESD Occasional Paper Series No. 1). 7. Sector issues to be addressed by the project and strategic choices: The project will address both rural water supply and sanitation issues in line with local implementation capacities. The participation of local populations in the project is essential. The project provides assistance to build local capacity for this. Sanitation and health education aspects are crucial to get full benefits of the new investments. The project will emphasize these aspects. Gender sensitivity is another important factor, given the role of women in transportation and use of rural drinking water. Therefore, the project will assure that the Mobile Participation Teams - MPT (discussed in Section 15 below, and in Annex 2 (b)), have, to the extent possible, at least one female agent for consulting women and for providing training in sanitation aspects 8. Project alternatives considered and reasons for rejection: Technical asects: i) Rehabilitation versus new systems: Rehabilitation of existing system allows lower cost expansion of quality service. Therefore, rehabilitation will be -iven preference. Only in areas, where rehabilitation possibilities are limited, will the project consider construction of new system. ii) Water supply pumped with renewable power (solar or wind energy) vs. thernal: Cost benefits of solar, wind, and thermal powered water pumps were examined. Generally thermal powered pumps had the highest Net Present Value - NPV - (about 60 % of investment costs) and these would be favored in most cases. However, there are a few cases where winds are specially favorable and in these locations wind powered pumps would be provided, if considered the preferred option by local communities. Solar energy would be used in locations where supply of fuel is particularly difficult. In both cases, the communities would have the option to use the power source also for simple electrification, if this proves to be cost-effective. iii) Hand pNmps: Another option under consideration was to concentrate the project on building mostly water supply installations based on manual pumping methods. Surveys and past experience in Morocco indicate that the people in general prefer motorized pumping, because motor pumps produce more water. However the project is demand-driven and, therefore, will be open to all technically and financially viable options, including hand pumps. There may be some small villages, where local populations may prefer such options because of lower operating costs. In those cases this option will be offered. Financial aspects: iv) Beneficiarv contribution: In view of budgetary constraints, and also to establish a firmer basis to asses demand, contributions by beneficiaries is essential. However, considering that about 75 % of Morocco's poor reside in rural areas, their ability to pay full cost is a problem. Therefore, cost sharing between the Govemment and the rural poor is needed. Experience shows that Govermnent budget cannot be relied upon to cover O&M costs, therefore full coverage of O&M costs by beneficiaries would be expected. This amounts on average to 60% of initial investment costs in discounted present value terms. The investment costs would be fnanced mainly by Government and donors. Several levels of beneficiary participation in initial investment costs was examined. Full financing of investment costs by the Govemment was rejected because it does not allow a firm detemination of demand and reduces felt ownership of the project by the beneficiaries. Local contributions from beneficiaries and communes combined would be expected at a rate of 20% of project costs, with beneficiaries contributing at least 5%. 9. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Bank: Emergency Drought Recovery Project (Loan 3935-MOR) Fifth Water Supply Project (Loan 3664/3665-MOR) Social Priorities Program - BAJ - Basic Health Project (Loan 4025-MOR) Secondary Roads Project (Loan 3901 -MOR) Second Rural Electrification Project (Loan 3262-MOR) Rural Infrastructure Project (under preparation) A number of other projects in the water sector address mainly urban water supply and sewerage management.  Project Appraisal Document 6 Country: MOROCCO ProjectTittle: RuralWaterSupplyandSanitation LU: Grants to ONEP during the last 4 years for water supply and sanitation in small urban centers of about ECU 50 million; A new grant of ECU 40 million will have a rural water component of about ECU 24 million. KfW: Several grants and soft loans to ONEP in support of water supply and sanitation in small urban centers of about DM 400 million over last 20 years; ! CMD Several soft loans to ONEP and DGH in support of water supply in small urban centers and rural communities of about .200 million FF. JlCA/0ECF: Grants and credits to ONEP and DGH for TA and the supply of equipment (e.g. water pumps, trucks) equivalent of about USS 50 milion. UNDP: Grants to DGH for TA and equipment for about USS I million. 10. Lessons learned and incorporated in the project design. The Lessons Learned through the above operations are four-fold: (i) Past sector support has predominantly focused on improving urban systems. The results have been positive, to the point where Moroccan cities have almost universal public water supply coverage, and about 70 % of urban dwellers are connected to wastewater collection systems, most of which are, however, not linked to wastewater treatment. At the same time, rural areas have nWLreceived the necessary investments to keep up with a basic infrastructure which is the prerequisite for economic development. In the past years, the priorities have clearly shifted from urban to rural areas. the proposed project would help cement that shift in development emphasis. (ii) Due to the absence of community participation, rural water and sanitation projects, or components of projects, were supply-driven. Per capita investments have been too high and in some cases investments were too sophisticated (and expensive) for the rural communities to maintain and operate. Likewise, a recent Bank publication - "Contribution of People's Participation" (July '95) - reviews 121 water projects with rural water components. It concludes that especially in rural areas, the failure rate in terms of sustainability is large. The main reason is attributed to a lack of popular participation in choosing the supply system that matches peoples' demand and willingness to pay. The proposed project uses state-of-the-art participatory approaches (Section 15 and Annex 2, Attachment (b), below). (iii) The first Bank project for rural water supply in Morocco, executed through ONEP in the Ziz-Tafilalet region demonstrated that community participation (social surveys, including a willingness-to-pay [WTP] assessments) are necessary to come up with the project design that responds to demand. The project designed water supply systems from public fountains (PF) to provide 30 liters per capita per day (lcd). Actual consumption was between 10 lcd and 14 lcd, depending on the season, which is the result of supply-driven project implementation. In addition, the project did not foresee any measures for the disposal of (increased) wastewater. This is a particular problem in the walled-in villages. The proposed project would determine demand through participative design, and where needed will provide for disposal of waste water. iv) In recent years, several international agencies, notably UNICEF and NGOs, have carried out small-scale, pilot-type, rural water and sanitation projects with full use of participatory methods. The NGO CRS has worked particularly in southem provinces, including in Tata which is a priority project of the proposed project. CRS has shared their experience with the Bank and, as they are planning to expand their activities, they may enter into an agreement with the government to closely cooperate with the partners of the proposed project. I1. Indications of borrower commitment and ownership: Government commitment is currently mixed. A Government budget allocation of at least DH 100 million (USS10.5 million) for disbursements during the 1997/98 FY, plus another DH 100 million in commitments, also to be made in FY 1997/98, has been approved by the Governmnent. The following indicators are favorable: (i) H.M. The King's declaration of priority for developing rural areas, notably sectors that contribute to social and economic well- being, i.e. rural infrastructure (water, sanitation, health, education,roads); (ii) Government's agreement with the new CAS which gives explicit priority to rural water supply; and (iii) Government's adoption of the master plan for rural water supply.  Project Appraisal Document 7 Country: MOROCCO Project Title: Rural Water Supply and Sanitation 12. Value added of Bank support: (i) Introduction of participatory approach and PRA methodology, which are needed to assure that investments are cost-effective and are well maintained; (ii) Introducing concepts of cost-effectiveness to reduce program costs (iii) Acting as a catalyst for mobilizing external financing; and (iv) Partnership Agreement between the Ministries of Interior and TP (Joint Memorandum of the two Ministers signed Nov. 7, 1995). 13. Economic Assessment [x] [] Cost Effectiveness Analysis: I ] (see Annex 4): Cost-Benefit Analysis: Project (Phase 1): NPV=US$ 15.5 million Phase I: NPV=US$ 12.5 million Total Program: NPV=US$ 28.0 million NP of US$ 15.5 million and ERR of 15% are based on a 30 years average life expectancy of the systems and on the project targeting the 25 % of the 'worst-off populations in each province. This excludes most health benefits, which could substantially increase the return. Sensitivity Analysis: If the project were to be expanded to address an additional 15% of the populations, the ERR would decline to 10%, without including health benefits. The SCF is 0.9; the opportunity cost of capital is 10%. Block 3: Summary Project Assessments (Detailed assessments are in the project file. See Annex 8) 14. Financial Assessment: (i) Budget: Given the severe budget constraints and the limited absorptive capacity of the sector, the appraisal mission found that the originally proposed project size of DH 2.2 billion (about US$ 245 million) was over-ambitious. Accordingly, the Govemment agreed to reduce the original proposal to about DH 1.1 billion (about US$ 120 million), the Program which was jointly appraised by the Bank, CFD, KfW and OECF. During negotiations, the Government requested that the Program be broken up into two Phases. Phase I (the proposed Project) would cover the first three years of the Program. If the evaluation of the first Phase was satisfactory, a second three- year Phase would be launched, incorporating the lessons from the first Phase. The Government assured the Bank that it would implement the Program as fast as possible, so as to increase access to potable water by the rural population from a currently estimated country-wide average of 30 % to 80 % in the next ten years. (ii) Cost Effectiveness: Analysis of sub-projects during appraisal showed that some past investments had high per capita investment costs, of up to US$ 800. Under the project, typical costs per beneficiary will be reduced drastically. Accordingly, it is proposed that for the first phase, per capita investments would have a ceiling of DH 1,200 (about US$ 126) for new systems, including the building of a well or borehole, and DH 900 (US$ 95) for systems, where water in acceptable quantity and quality is already available. Investments with higher unit costs may be allowed in some cases, if justified by higher benefits. But these would be approved only if the beneficiaries agreed to finance 100 % of the excess cost. (iii) Beneficiary Assessment: Discussions in the field with beneficiaries, volunteer groups and local officials, revealed that the convenience factor of investments in potable water and sanitation was more prized than the health benefits. The willingness to pay (WTP) for water for house connections is almost twice that from public fountains. The project would give emphasis to actual demand through beneficiary assessments. Incremental costs would be met by beneficiaries. (iv) Cost for Water Supply: The least cost water supply system built by DGH is the hand pump (about US$ 28/capita); the most  Project Appraisal Doctument 8 Country: MOROCCO Project Title: Rural Water Supply and Sanitation expensive ones are systems based on solar or wind energy (US$ 150 and higher, depending on water head, length and elevation of the pipeline, the size of the reservoir and the number of people to be served). However, solar pumps require expensive replacement parts, i.e. the pump after 5 - 7 years and the panels after about 12-15 years. In some cases, existing wells can be equipped or upgraded to minimize new investments. The project would limit per capita investment costs. (see Section 14 (ii), above). For more details on unit costs, see Annex 4, Section G. (v) Cost for Sanitation: In the original project proposal (FAO/CP Project Preparation Report, June II, 1996), the sanitation component was limited to health education. However, the sanitation component needs to be strengthened by physical work, so as to maximize health benefits, one of the project's key objectives. The cost of a simple ventilated latrine is estimated at DH 1,000 (US$ 105), or about USS 13 per capita. This low cost option is included to keep the financial burden low. It will cover 75% of the cost of the sanitation component (Annex 2 - Project Description and Annex 4, Section G - Cost Effectiveness). The cost for household latrines would be borne by individual families. The existence of a latrine or other sanitary wastewater disposal system will be a pre-condition for the installation of water supply house connections, regardless of who pays for the house connection. The cost for public sanitation installations, such as latrine blocks for schools, small sewer collection systems, communal septic tanks and perhaps simple wastewater treatment stations, would be borne by the Government. (vi) Willingness to P_y (WTP): - Water: Socio-economic studies and surveys carried out by ONEP and DGH define the main parameters to be considered for the development of water supply services. Limited incomes in rural households are the major limiting factor to effective cost recovery. Nevertheless, studies show that in the case of water supplied through ONEP, a majority of rural dwellers is willing to pay between DH 1 0 and DH 15/m3 (US$ 1.05 - US$ 1.58) for water in small quantities from a public fountain (PF). Based on experience and actual cases (purchases from tank trucks, water vendors), the mission estimates that the 25 % "worst-case" populations (distance to water point more than I km, poor water quality and water security) are willing to pay on average DH 40 to DH 50/m3; for the 50 % "worst-case" populations, WTP is estimated at DH 30 to DH 40/m3. Of course, quantities consumed from Pfs, tank trucks and far-away sources are small, in most cases not exceeding 15 U/c/d. Such water is generally used only for cooking and drinking purposes. Even in rural areas, people generally prefer house connection to PFs, and they are willing to pay up to double the price of water from a PF. The figures for house connections indicates that where the convenience factor is a given (i.e. house connections were preceded by PFs), WTP declines, as compared to the worst-cases. According to the ONEP studies, average rural incomes are about DH 25,000 per household per year (US$ 2,600). However, this indicator masks rural disparities and mnay not be applicable for the target populations of this project. If the worst- case population (project's target group) has a family income of about DH 13,000 per year (US$ 1,370), the annual water bill for this family may be as high as 12 % of the family income. - Sanitation: WTP for sanitation services is less evident. This is mostly due to (a) the lack of hygiene awareness (especially among men) and knowledge of the relation between hygiene, health and water; and (b) the traditional household budget control by men, who perceive less of a need to have a private latrine than do women and children. But WTP for sanitation has not yet been systematically tested. It is likely that with intensive health education, the need for individual hygiene and excreta disposal facilities will increase, -and with it, the willingness to financially contribute to the cost. (vii) Accounting and Audits: DGH and ONEP will maintain separate project accounts, which will be audited annually, along with the special account and statements of expenditures (SOEs). - A special account equivalent to four months of disbursements (up to $ 1.2 million) will be maintained 15. Technical Assessment: The Government has agreed to implement PAGER through participatory methodologies, with least cost technologies, adapted to the demands and WTP of the communities. This requires extensive, decentralized preparation, in terms of training, selecting and sensitizing the communities, and mobilizing the physical and financial resources to implement the project. Under this project, DGH will work in 20 southern, mid-Atlas and northern provinces. They were preliminarily allocated to the co-financiers as follows: El Jadida, Ouarzazate, Safi, Sidi Kacem, Tata (World Bank); Taroudant (KfW); Al Hoceima, Jerada, Oujda-Angad, Taourirt, Berkane, Boulemane, Ifrane, Sefrou, El Hajeb, Khemiset (CFD); Azilal, Khenifra, Beni Mellal, Khourigba (OECF). Twelve of these provinces are also included in the BAJ or the Social Priorities Projects (Lns. 4024/25/26). ONEP will work in 15 provinces, eight of which are overlapping with those of DGH (Annex 2 - Attachment (a) - List of Priority Provinces).  Project Appraisal Document 9 Country: MOROCCO Project Tiitle: Rural Water Szpply and Sanitation The participatory process includes a demand assessment, mobilization and commitment of communities. In the case of DGH, these tasks tasks will be the responsibility of Mobile Participation Teams (MPT), under the direct supervision of the Provincial Departments of Public Works (DPTP). Each province would initially have one MPT which would consist of 3 members. It is foreseen to introduce a second team per province, starting with the third project year. At least one member per MPT should be a water and sanitation technician. The other members would be a health technician and a public communicator ('animateur' or 'animatrice'). Of the latter two positions, to the extent possible, at least one member should be a woman, for whom the role of 'animatrice' would be ideal, as this expert will have to communicate especially with women. Appropriate assurances to that effect were obtained at negotiations. Women are in charge of water as part of their household chores. Ideally, the MPTs should be chosen from the respective province. Utilizing local expertise, languages and being familiar with particular cultural backgrounds is essential for the success of the project. The first group of 14 MPT members, constituting five MPTs, was selected from the staff of the Ministry of TP and has been trained in September / October 1996. However, no woman was among the first group of trainees. A second group, constituting 10 MPTs, was trained from mid-April to end May 1997. However, only 5 women participated. A third group of another 7 teams will be trained in September 1997. A significant portion of the training consists of field work, 'applied learning' in a rural environment. Trainees will also be taught basic knowledge in financial matters and health education. The first year work program is being prepared in close consultation with the beneficiaries. As a Condition for Negotiations, a work program for the first six months was presented to the Bank. Assuranc were also obtained that a tentative annual operational plan will be presented to the Bank by March 31 of each year which will be finalized by September 30 of the same year. In collaboration with the beneficiaries, this program will be up-dated every 6 months. It will be reviewed by the Bank in the course of field visits (supervision missions) to assure technical, social, financial and economic soundness (Annex 2 (b) - Participation Approach). ONEP has recently started - in the context of KfW-funded projects - implementing rural water projects with participatory methods. Similarly, as envisaged under the DGH component, the first phase of this approach consists of a sensibilization campaign. It is initiated by specialized teams of ONEP's regional offices (including a woman sociologist) and addresses local authorities, politicians and potential beneficiaries. Once the latter have declared water as a priority, chosen the location for their water point and are willing to participate in the investment cost with a financial contribution of at least 5 percent, construction of the PF will begin. Before the PF becomes, however, operational, the village has to select and nominate a local manager of the water point ("gardien gerant"), who, if accepted by ONEP, will be responsible vis-a-vis ONEP for the payment of the water bill and for the sanitary maintenance of the PF and its immediate vicinity. Technologies: Principal Water Supply Systems: Supply modes will largely depend on water availability, beneficiary demand and WTP, investment and maintenance costs. DGH has preliminarily classified the possible supply systems according to the number of people to be served: - less than 300 pop. - simple well or rainwater collection systems equipped with hand pumps; - 300 to 900 pop. - well or borehole with electric / diesel / solar pump, storage tank and pipeline to one or more PFs; - 900 to 3,500 pop. - same as above, but including small distribution system, allowing for several PFs. Water supply systems implemented by ONEP will include: - 'piquages' (connections from public long-distance main carriers) for nearby villages, with one or more PFs per village; - local water supply systems (boreholes supplying public water stand-pipes), notably for groups of villages with an aggregate population of more than 2,000. Operation andMaintenance: Sustainability and year-round service delivery are key objectives of the Project. This will be assured by beneficiaries organized in water users associations (WUA), or similar viable management structures (MS) at the village level. The availability of technical know-how, especially for pumps, as well as spare parts is, therefore, essential. Appropriate training will be provided by DGH and ONEP. Assurance were obtained that a WUA or MS is in place in a village prior to the start of works, and that agreement on O&M has been reached with the WUA/ MS. The implementing agency will involve the WUA/MS during construction phase and will provide appropriate training to designated WUA/MS representatives prior to hand-over of the investment. Sanitation: The following types of sanitary installations will be included in the Project - 250 to 500 pop. - simple ventilated pit latrines for individual households; - block latrines for schools (with water supply facilities 'br hygienic purposes); - larger villages with more concentrated populations may qualify for a small-diameter wastewater collection systems with a communal septic tank;  Project Appraisal Document 10 Country: MOROCCO Project Title: Rural Water Supply and Sanitation NGOs are already successfully working in several provinces, and it would be useful to involve them in implementation of the proposed Project. In case of an NGO participation in the project implementation, DGH and ONEP will inform the Bank of the contracts signed with the respective NGO(s). 16. Institutional Assessment a. Executing agencies: DGH and ONEP are the main Project implementing agencies. DCH and ONEP will utilize their decentralized regional offices in close co- operation with the Ministry of Interior to facilitate closer consultations with the affected populations. While ONEP staff is adequate to implement the project, DPTP technical staff will need training in beneficiary assessment and participation. The training has already begun and the initial results are good. This will be continued under the project (see Section 15, above). b. Project management: Overall project coordination is the responsibility of DGH. Specific management designations are as follows: i) DPTP and rural commune: For a village or small community to be considered in PAGER, the establishment of a community-based WUA/MS is a prerequisite. The WUA/MS would be in charge of managing the water system on a day-to-day basis, including cost recovery, operation, maintenance and repair. The WUA/MS would also be responsible for coordinating health education activities with the Ministry of Health or the designated local health center. Once implementation is completed, fully in line with participatory methodologies (Section 15 - Technical Assessment and Annex 2, Attachment (b)), the new or rehabilitated water systems will be turned over to the WUA/MS. DGH already has good experience with WUAs and some have been operating successfully for more than five years near Ouarzazate. ii) ONEP (a) Water Supply: For house connection services, ONEP would retain management responsibility; for PFs, ONEP will contract a 'gardien gerant' (a local manager), who will be billed by ONEP for the water used at the metered fountain (about DH 5.6/m3) and, in turn, he will charge his clients about DH 10/m3. The difference would be his remuneration for operating and maintaining the water point. This is the traditional approach followed by ONEP for all their public fountain programs; (b) Sanitation: while latrine construction would be the responsibility of individual households, ONEP would manage the construction of block latrines and small-bore sewer systems, ifjustified by the quantity of water used. 17. Social Assessment: The project will focus on poor rural areas, notably those identified according to poverty criteria established for BAJ Provinces (i.e. covered by the Social Priority Projects, Ln. 4024/25/26- MOR), where living conditions are severely constraint due to a lack of social and physical infrastructure. The absence of a safe water supply and sanitary environment is a key factor for poor public health. It affects schooling, labor productivity and overall economic output of Morocco's rural areas. The field work done in the context of Morocco - WID Study (Report #14153 ) highlighted the high priority attached by women to the provision of potable water close to their houses, and its significant impact on attendance of girls in elementary schools. The project would expand PRA methodologies already introduced in the course of WID Study and during project preparation in 1996. This would help ensure sustainability. Accordingly, project design and implementation would assure flexibility, to adjust to demand expressed by beneficiaries. 18. Environmental Assessment: Environmental [ ] A [x ] B [] C Category The project's major environmental impact would be to improve rural hygiene through an organized supply of safe drinking water and the construction of basic sanitary facilities. The supply of water in most cases will replace existing sources of polluted water and therefore would not increase overall waste water generation. In most cases the daily consumption is small (less than 20 liters per capita per day) and human settlements are small (less than 1000 person per village) and therefore waste water disposal is not a major issue. Still, in some cases villagers may choose to pay full incremental costs for house connections, which could increase water consumption and pose-a wastewater disposal problem. To avoid this problem a sanitation component is included in the project and construction of latrines would be a pre-condition for house connection. To avoid contamination, wells for water supply will be constructed sufficiently away from latrines to avoid contamination. Where water is provided through pipes,the project would n=t allow the use of asbestos-cement pipes.  Project Appraisal Dociument 11 Country: MOROCCO Project itle: Rural Water Supply and Sanitation 19. Participatory Approach: Identification/Preparation Implementation Opertion Beneficiaries/community groups Consultation by DGH Participation lead role and NGOs Participation where agreed in provide training when Intermediary NGOs consultation consultation with local requested by communities and DGH community groups. Academic institutions N/A N/A N/A Local government consultation Consultation and participation. through WUA Other donors KfW (Germany) consultation financing N/A CFD (France) consultation financing N/A OECF (Japan) consultation financing N/A EU consultation financing -parallel project N/A See Section 15, Technical Assessment, and Annex 2, Attachment (b) - Participation Approach, for detailed description on participation. 20. Sustainability: The traditional, supply-driven approach to rural water supply and sanitation has not been very successful in terms of both, sustainability of the systems and their utilization by beneficiaries. As a result of many post-implementation evaluations and social assessments, the need for a more demand-based approach has become apparent. Beneficiaries' involvement in the decision-making process for design, construction and operation and maintenance, including their WTP, has become a major element of rural projects' design in the 1990's. The process as well as methodologies of participation have evolved over the last five to seven years, but there is no 'blue print'. Each situation has to be examined on its own merits. However, as far as performance and sustainability assessments are possible after this relatively short period of time, the improvements in duration and viability of the systems built with participation from the beneficiaries, have been remarkable. This project uses state-of-the-art participatory, demand-driven methods which are expected to enhance the likelihood of sustainable investments (Section 15, Technical Assessment, as well as Annex 2, Attachment (b), provide details on participatory methods). 21. Critical Risks (see fourth column of Annex 1): jz Risk Ratine Risk Mnimization Measure lo......................................... ................................................................................................................................................................................... Government budget allocations . medium Budget allocation for the project is DH 100 million plus an additional 100 million of are not forthcoming commitment authority in the first year of the project. In addition, HM The King, in his letter to President Wolfensohn, has highlighted that implementation of PAGER is a high priority action for the Govemment. Budget for subsequent years will be reviewed during supervision along with the annual program which will be submitted by March 31 preceding each fiscal year (para 24). The project size was reduced in line with this. Interest of communities to medium Initial evaluation done during Morocco WID Study and the project preparation have participate in the project and confirmed interest. In addition, the expanded participatory process will reconfirm willingness to pay (WTP). interest and WTP. Sensitivity analysis shows its importance in ensuring acceptable ERR. Adequate implementation of the . medium Initial TA in participatory process, including gender sensitivity training, was provided participatory approach by the during the preparation phase; a grant for continuation of the training has been arranged Government, including through FAO and it is already under implementation. In addition, assurances were given consultation of women so that by the Government that, to the extent possible, at least one women will be included in new water points are located in each MPT. Adequate consultation and village level organizations (see below) are line with the wishes and essential for ensuring adequate O&M, and sensitivity analysis confirms its importance convenience of the populations for ensuring adequate ERR. ........................................................................ .......................................................................................... .......... The village level organizations medium A WUA or MS will be set up in each village prior to the start of works in the village are able to collect sufficient and agreement reached with the WUA/MS on O&M responsibility; and training for funds to assure operation and. O&M will be provided to a representative of each WUA/MS prior to hand-over of the maintenance and continued . investment to the WUA/MS. water supply  Project Appraisal Document 12 County: MOROCCO Project Title: Rural Water Supply and Sanitation Sanitation: insufficient high Interest of beneficiaries has been confirmed during appraisal and performance will be participation from the population evaluated during a mid term review (MTR) to be completed by December 31, 1999. The component is relatively small (10% of project cost) and TA and sensibilization campaigns will further raise the need for sanitation. ~~~~~~~~~~~~~~~~~~~........................................................................... .. .. .........,.... ..................... ............., .............. Insufficient availability of water medium Water availability is assured before begining of works. Proposed annual work programs * . are based on confinned water availability. Overall risk rating: moderate he overall risks that the project would fail to achieve its objectives and/or development targets are moderate, since there is a significant popular demand for water supply (and sanitation), especially by women in rural areas, where coverage of safe water availability is currently as low as 30%. The priority for this service has been confurmed through the Morocco - WID Study and participatory planning. Project size has already been reduced in line with budget constraints. 22. Possible Controversial Aspects: None Block 4: Main Loan Conditions 23. The following Conditions were met prior to Negotiations: The Government will allow signing of about DR 200 million in contracts during the first year of the Project, with disbursements of about DH 100 million, b) The Government has prepared a tentative operational plan for the first year of project implementation and presented the Bank with a detailed program for the first six months, c) A project co-ordination committee was appointed with the participation of Ministries of Public Works, Interior, Health, Agriculture, and ONEP. 24. Loan Effectiveness: Assurances were received that a Project Implementation Manual with a participatory focus, satisfactory to the Bank is prepared, prior to Loan Effectiveness. 25. The following Assurances were received during loan negotiations: (i) Project Monitoring and Evaluation Cells (with the participation of Direction Generale de Communautees Locales (DGCL) will be set up in DGH and ONEP. The cells will submit to the Bank a mid-term evaluation report by June 30, 1999, and a final evaluation report before loan closing (which is six months after Project completion); (ii) a tentative annual program will be prepared in consultation with beneficiaries and presented to the Bank by March 31 of each year, to be finalized by September 30 of each year.; (iii) a satisfactory plan for allocation of budgetary and non-budgetary local resources by March 31 of each year; (iv) a WUA or MS will be set up in each village prior to the start of works in the village and agreement will be reached with the WUA/MS on O&M responsibility; (v) appropriate training for O&M will be provided to a representative of each WUA/MS prior to hand-over of the investment to the WUA/MS; (vi) a mobile participation team (MPT) with adequate qualifications will be set up in each project province according to schedule agreed at appraisal, and, to the extent possible, at least one member of the team will be a woman. Block 5: Compliance with Bank Policies [x ] This project complies with all applicable Bank policies. Task Manager: T. P. N Sinha Country Manager: Christian Delvoie By: Marjr ealios  Project Appraisal Document 13 Country: MOROCCO Project Title: Rural Water Supply and Sanitation Annex 1 Project Design Summary Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks The CAS Objective is to (a) Implementation of key rural Performance on this key CAS Continued economic and renew support for economic and social development objective will be monitored political stability, and reform; and (b) strengthen programs such as the national during annual country increased priority for social social and rural development. rural water program (PAGER) assistance review and and rural development in Accordingly, at least one-third will be accelerated. At least discussion and satisfactory Government's investment of investment program will be 250,000 additional rural progress towards this is a program. for social and rural population will be served with trigger for high case lending to development including poverty safe water in 1997/98; 500,000 Morocco. alleviation focusing on basic in 1998/99; and 750,000 education, health care, water thereafter. and rural infrastructure. Project Development i) Reduce by 50% the diarrheal Impact will be evaluated Complementary investments in Objectives: disease rates in young children during mid-term and social and rural development i) Improve the health and (less than 5 yrs. old) within one implementation completion through Bank-assisted projects productivity of rural year of project completion, and reviews through independent for basic education (Loan population, particularly sample surveys. Project 4024), health (Loan 4025), and children, who currently have ii) Provide complimentary monitoring and evaluation unit rural roads (Loan 3901, and poor access to safe water ,and assistance to Morocco Basic will make annual estimates of 3951) are implemented as ii) Reduce the burden of girls Education Project (Loan 4024 progress towards meeting this planned. The provision of who currently carry water over MOR) to achieve enrollment goal. Bank financing which is long distances in rural areas target of 46%, and retention already approved and close and which prevents them from rate of 65% by FY2001 in 10 supervision will help assure attending primary schools. rural provinces (a follow-up that these investments are project will cover the made. remaining three provinces). Program/Project Outputs: Project Targets are achieved: Project monitoring and a) New water points are The Program/Project will i) after 3 years evaluation unit will monitor located in line with the wishes provide rural populations with - 600,000 additional people improved access on a quarterly and convenience of the safe water and sanitation will have access to safe water basis through field reports and populations; through : (a) construction and and adequate sanitation; and visits. This will be reviewed b) The village level rehabilitation of about 2,000 by Bank supervision missions. organizations are able to (650) public water points with ii) after six years: collect sufficient funds to a capacity to deliver about - 1.3 million additional people assure operation and 20,000 (7,000) cu. m. of safe will have access to safe water maintenance and continued potable water per day, (b) and adequate sanitation; water supply; and construction of about 85,000 c) Interest of the population in (40,000) household latrines improving sanitation. and 20 (20) block latrines for schools, and