Morocco - Private Sector (Agro-industries) Project

Report No. PIC875 Project Name Morocco-Private Sector II (Agro-industries) Project Region Middle East and North Africa Sector Agroindustry Project ID MAPA5520 Borrower Kingdom of Morocco Implementing Agency Ministry of Agriculture 51, avenue de France Agdal/Rabat, Morocco Tel: 212.7.76.94.31 Fax: 212.7.76.94.19 Date PID Prepared April 1994 Projected Appraisal Date October 1995 Projected Board Date May 1996 Background. 1. Morocco is entering a critical phase in the adjustment program where structural reforms need to be deepened and the basis for sustained growth established. Although the adjustment program has achieved macroeconomic balances and policy reforms that have improved sectoral efficiencies, growth must be accelerated if these reforms are to persist in the face of extensive poverty and unemployment. The basis of this growth must rest with the private sector. However, to create a favorable environment for private investment, certain economy-wide reforms are needed and sectors with particular promise must be promoted. The Government and the Bank are developing a Private Sector Development Program (PSDP) to assist in developing the private sector and establishing the basis for sustained growth. The first loan in this PSDP is currently under preparation, and will address many of the economy-wide impediments for private sector development. 2. The proposed second loan PSD 2 would address the agro-industrial sector's high potential for private sector expansion. Substantial analytic work has identified the agro-industrial sector as having high potential for growth, export earnings and employment creation. However, this work has also discerned and catalogued several key areas in policy, institution, and public infrastructure which will need to be addressed if this sector is to expand. Furthermore, because an efficient agro-industrial sector is required to provide the market for agricultural products and to enhance value added, the development of agro-industries is critical in alleviating rural poverty and realizing gains from the massive resources invested in irrigation (16 percent of annual public investment for the last two decades). The favorable Moroccan climate, and its proximity to important external markets portend an important future for agro-industries once catalytic reforms and infrastructure investments have been made. The purpose of the PSD 2 is to assist in realizing the potential in this important sector. Project objectives. 3. The objective of the project is to promote private sector development and investment in agro-industries by providing the necessary infrastructure and an enabling regulatory and institutional environment. Also, through support for privatizing or closing remaining public commercial enterprises in oilseeds, sugar and wine, the sector will achieve full private sector character and Government resources can be refocused towards public goods activities in the agro-industrial sector. Project description 4. The project has four components: (i) construction of critical public infrastructures; (ii) regulatory and institutional strengthening including technical assistance; (iii) support for the privatization of commercial public enterprises through technical assistance and possible financial support to ease the adjustment; and (iv) support for private investment in new agro-industries (new products or new markets) through either directed credit, ECO arrangements, or collaboration with IFC equity or credit support. 5. Four main areas are proposed: (i) wholesale markets for fruits and vegetables along the Agadir-Tangiers axis; (ii) refrigeration facilities for Agadir and Casablanca ports; (iii) parking facilities for trucks in Tangiers; and (iv) the Casablanca Grain Exchange. Since these large investments are divisible into individual services, the project would seek concessional arrangements for their operation and management by private parties or through professional/ interprofessional associations. During project preparation, the possibility of ECO arrangements for these investments will also be explored. 6. The project would: (i) develop the regulatory and institutional framework for ensuring the public health, product information, environmental and consumer safety aspects of quality control; (ii) invest in quality control laboratories and their staff training; (iii) develop the exchange of technical and market information between domestic enterprises and food technologists and foreign counterparts, e.g. conferences, international food fairs; (iv) develop norms and standardized contracts for many major agricultural commodities; (v) develop training programs on risk management -- in particular, hedging techniques using forward contracts, and futures and options markets; and (vi) strengthen professional and interprofessional associations and cooperatives. 7. The Government has accepted the principle of privatization. The project would develop plans of action and possibly finance required - 2 - adjustments for commercial public enterprises in sugar, oilseeds, and wine (and possibly abattoirs). 8. One possible component would be long-term directed credit and/or financing through ECO arrangements to improve access by small and medium enterprises, by investors in new products diversifying into new markets, and by investors in projects with long-gestation periods; e.g. fruit trees. Project cost and financing 9. The total project cost is estimated at US $200 million with an implementation period of five years. The Bank loan is expected to be US $120 million and the balance financed by the Government of Morocco (US $20 million), private sector (US $10 million) and other donors (US $50 million). Project implementation 10. Implementation would be assured by an Inter-ministerial Committee chaired by the Secretary-General of the Ministry of Agriculture. Project sustainability 11. Project sustainability would be ensured by maximizing private participation in financing and managing infrastructure. Environmental aspects 12. The project is rated a B. The preparation team will assess the environmental implications of any infrastructure investment financed. The technical assistance studies to privatize public commercial enterprises (oilseeds, and wine) will also assess the environmental implications of the activities of these enterprises. If the project finances any line of credit which in turn finances agro-processing enterprises, the participating bank is responsible for the environmental assessment needed. Contact Point: Public Information Center The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202)458-5454 Fax No.: (202)522-1500 Note: This is information based on an evolving project. Certain components may not necessarily be included in the final project. - 3 -