Morocco - Railway Restructuring Project

Report No. PIC3178 Project Name Morocco-Railway Restructuring Project Region Middle East and North Africa Sector Public Enterprise Reform Project ID MAPA43725 Borrower Office National des chemins de fer (ONCF) Implementing Agency ONCF Date This PID January 1996 Project Appraisal Date September 1997 Project Board Date October 1998 Background 1. A policy environment conducive to private sector development has largely been put in place in Morocco. Since the mid-1980s, growth of private sector exports, particularly in the textile and agro-industries, has been significant. The Moroccan transport sector plays a key role in encouraging exports, reducing the cost of imports, and enhancing prospects for growth in tourism. Ongoing projects financed by the Bank focus, therefore, on improving port and road transport policies. 2. The Moroccan railways (ONCF) transport phosphate (about 50- of revenue), general freight (grain, cement, petroleum products, fertilizers, sugar; W of revenue), and intercity passengers (t of revenue). Phosphate transport is important since phosphate is Morocco's main foreign exchange earner. A significant proportion of rail infrastructure and equipment, although well maintained, needs to be rehabilitated. Pensions are paid directly by ONCF (similar to an operating expense) under specific railway staff rules. Project Objectives 3. The main objective of the project is to support the preparation and the implementation of a restructuring program. The principal items in the restructuring program are: (a) separation of commercial activities to be operated in a fully-deregulated environment from public service obligations; (b) reduction of Government financial support to the railway sector, to be eventually restricted to compensation for public service obligations; (c) closing of uneconomic services; (d) divestiture of non-railway activities (mainly hotels); and (e) contracting out of railway support activities to the private sector (ballast and sleeper production, track maintenance, building maintenance, etc.). Project Description 4. The proposed operation would finance: (a) consulting services for the formulation and implementation of the restructuring process; and (b) rail infrastructure rehabilitation. The investment program concentrates on necessary track rehabilitation and upgrading and the  renewal/reinforcement of electric traction and telecommunication systems. Project Benefits 5. The proposed project would result in a reduction of Government subsidies and contribute to improved competitiveness of rail transport. The economic justification of the proposed investments will be primarily based on a comparison of costs of road and rail transport and on improved market responsiveness and efficiency of the railway. Project Cost and Financing 6. The cost of the investment program is estimated at US$490 million. Other costs will be estimated during project preparation. The proposed Bank loan amounts to US$100 million, while the African Development Bank would provide US$100 million cofinancing. Environmental Aspects 7. The project is proposed for category B. Rehabilitation works to be done under the project will only have positive effects on the environment. A review of environmental aspects of rail workshop operations will be conducted as part of the project, and methods of industrial waste disposal will be introduced if required. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. - 2 -