CONFIDENTIAL Report No. 16303-MOR 16303-MOR VOL. 2 The Kingdom of Morocco Rural Development Strategy Integrating the Two Moroccos (1997-2010) Synthesis Report (In Three Volumes) Volume II Main Volume March 28, 1997 Natural Resources and Environment Division Country Department I Middle East and North Africa Regional Office FOR OFFICIAL USE ONLY Document of the World Bank FILE COPY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not other wise be disclosed without World Bank authorization CURRENCY AND EXCHANGE RATE $1 = DH 8.777 (as of January 1997) Fiscal year July 1- June 30 The Kingdom of Morocco Rural Development Strategy Integrating the Two Moroccos (1997-2010) Synthesis Report PREFACE This is a three-volume Report on an integrated rural development strategy for Morocco. Volume One, the Executive Summary, is a synthetic overview of the main messages of the strategy. Volume Two presents a long-term vision of rural well-being and how to achieve this vision Volume Three (Annexes) contains fifteen working papers which detail the analytical basis of the strategy. The purpose of this compendium is to contribute to the information base which policy makers seek when discussing the rural agenda in Morocco. ACKNOWLEDGMENTS This report is based on the findings of a joint Bank-Morocco team The World Bank Maghreb Department team and the inter-ministerial-cum-private sector team worked in close collaboration with colleagues throughout the Bank, and in IFPRI During the mission, substantial coordination and support was provided by the Ministry de 1'Incitation de l'Economie (Mestassi, Amrani, Alanti) and by a cadre of officials at the Ministries of Agriculture (Lhafi, Faraj, Firdawcy, Ben Maklouf, Milourhmane, Mouddene, Serghini), Fisheries (Faik), Commerce and Industry (Benayad), Public Education (Hddigui), Public Health (Laaziri, Sergini), Public Works (Jellali, Benchekroun, Bzioui, Boufous, Yacobi); Energy and Mines (Hmamouchi), Interior (Guessab, Toulali, Es-Skali, Benyoussef), Population (Bijaad, Abzahd, Bencassmi, Ibrahimi), Employment and Social Affairs (Ouassini, Senhaji), Finance (Lazraq, Bougroum, Rais), Promotion Nationale (Amalou) and Office National Eau Potable (Hajji) Mr Sergio Calegari (World Bank) also provided assistance to the mission Administrative support during the mission was provided by James B Lowenthal, Mohamed Oubnichou, Sandy Wark and Khadija El Ouaradia (Morocco Trade Development Services) The report is written by Isabelle Tsakok (Task Manager), assisted by Stephen Mink, on the basis of fifteen working papers The peer reviewers are Hans P. Binswanger, Alberto Valdes, and Jack van Hoist Pellekaan (Bank), and Hassan Benabderrazik and Hassan Serghini (Morocco) The authors of the working papers are Stephen Mink, Soman Kouassi, and Jean-Claude Gouhier (public expenditure), Suzanne Piriou-Sall, Jean-Claude Sallier and Aziz Hasbi (decentralization), Klaus Moelter, Arbi Ben Achour, Ayse Kudat, Enterprise Consulting Italy Srl, and Fatima Nassif of the Institut National de Recherche Agronomique, Settat (survey of small farmers of cereals); Raymond Noronha (agricultural land policy), David W Roland-Holst and Said Belghazi (general equilibrium model of Morocco), Hans Lofgren, Rachid Doukkali, Hassan Serghini and Sherman Robinson (rural sector model of Morocco), Wally Tyner and Channing Arndt (cereals, oilseeds and sugar), Hassan Benabderrazik, Omar Aloui and Rachid el Gharbi (agricultural exports and artisanal fisheries), Jean-Paul Azam (rural migration), Richard lovanna (drought management), and Charles Ameur (agricultural productivity) Meredith Griggs reviewed the report for style and presentation Daniela Gressani provided detailed suggestions on structure and presentation Bruce Ross-Larson edited an earlier version of the report. Research assistance was provided by. Richard lovanna, Sami Ben Daamech, Nava Ashraf, Roya Malekian, Madeleine Varkay, Mona Kanda, and Shobha Shetty Syvie Creger provided exceptional secretarial and administrative support to the entire team The study team was assisted throughout by many MNI colleagues, in particular Van Tuu Nguyen, Luc de Wulf, Rene Vaurs, Benoit Millot, Jaffar Bentchikou and Michel Loir as well as by other Bank colleagues from outside the Department David Tarr, Malcolm Bale, Anna Roumani, Gert van Santen, Cornelius de Haan, Francois le Gall, Shanta Devarajan and Martin Ravallion, and Peter Orram (IFPRI) Nicole Wautiez de Blaye translated the report into French Mark Wilson is the Division Chief, John Underwood was the Lead Economist, Daniel Ritchie is the Department Director, John Page is the Chief Economist and Kemal Dervi§ is the Regional Vice President CONTENTS VOLUME II MAIN VOLUME ABBREVIATIONS AND ACRONYMS PART ONE: PROMOTING THE VISION OF RURAL WELL-BEING 1. CHAPTER ONE: WHY RURAL DEVELOPMENT MATTERS 1 Rural development matters: it is an end in itself and it lays the foundation for widely shared and sustainable growth. Where it has succeeded, poverty reduction has been substantial and strong economic performance has been ensured Where it has failed, either the entire economy has suffered or the gains in growth have not reached the poor and have rarely been sustained Extensive international experience in rural development, acquired at great cost, is rich in lessons that can guide the formulation of Morocco's rural development agenda I Rural development generates a virtuous circle of well-being and sustainable growth International experience has robust lessons for promoting rural development the approach must be holistic, the piecemeal project approach is simply inadequate 2 Moroccan and International experience can help guide the formulation of a rural development agenda for Morocco 7 2. CHAPTER TWO: WHY RURAL DEVELOPMENT MATTERS TO MOROCCO NOW 8 Now is the time for Morocco to reduce extensive rural poverty and large urban-rural disparities, thus strengthening the sociopolitical foundation of an economy capable of adjusting and growing in a rapidly changing global economy. High urban unemployment, exacerbated by extensive rural poverty and continued rural-urban migration add urgency to the need for vigorous growth and successful rural development A more productive and diversified agriculture is essential for promoting a stronger macro economy. Although the erosion of preferential trading with the European Union hurts Morocco, expanding albeit competitive global markets offer a golden opportunity for Morocco to fuel domestic growth, essential for rural well-being 8 Morocco faces difficult challenges at home 8 11 To respond to these challenges, Morocco's needs high growth with agriculture as the engine of growth 10 Expanding world markets provide golden opportunity to fuel rural growth 11 Globalization represents a fundamental challenge and a major opportunity for Morocco to achieve higher agricultural growth and greater resilience to shocks 11 Services constitute the fastest growing component of world trade, and environmental standards are increasingly important for market access 12 Agro-food markets expand but are more competitive 14 Recent trade agreements Morocco is already committed to integration and it faces gains and losses in market access 15 Summing up- a web of challenges and opportunities, abroad and at home 17 3. CHAPTER THREE: WHAT KIND OF RURAL DEVELOPMENT AGENDA SHOULD MOROCCO PURSUE ? 19 Morocco should pursue a rural development agenda based on its own experience and on lessons learned from extensive international experience. These lessons show that a strategy based on the holistic approach anchored in macroeconomic stability, and embracing efficient incentives, equitable access to assets and opportunities, and participatory management, can succeed Consistent with these lessons, the Rural sector model of Morocco, shows that successful rural development requires simultaneous progress on several fronts. Morocco has already initiated the beginnings of a successful approach on several key fronts 19 Morocco needs to consider a holistic strategy to rural development 19 The Strategic checklist based on the holistic approach to rural development is exacting 19 The Strategic checklist-identifies key problem areas in Morocco 20 Rural development is undermined by distortions at the macro, trade and sector levels 22 Rural development is undermined by the inadequate delivery of basic services to the rural poor 23 Rural development is undermined by factors reducing local participation 24 Key elements of win-win scenarios show that simultaneous progress is required on several fronts 25 What furthers rural development also furthers food security 28 The agenda for action: macro stability, trade, markets, agricultural productivity and factor use, public expenditure, and decentralized management 28 Ill PART TWO: ACHIEVING THE VISION OF RURAL WELL-BEING 4. CHAPTER FOUR: GENERATING EFFICIENT, LABOR-INTENSIVE GROWTH THROUGH TRADE POLICY 31 To create an environment in which efficient, labor- intensive growth in agriculture and the rural sector can flourish, Morocco must reduce the high and uneven protection of "strategic" commodities. In the long term, reduced agricultural protection will lead to greater efficiency, and greater export diversification. In the short term, however, it will reduce employment among many of the smallholders that rural development seeks to assist. The Government should offer assistance to smallholders of rainfed cereals and other rural poor who lose in the transition to help them adjust to the new competitive environment. At the same time, it should reform its three main programs to assist the poor 31 Re-establishing macroeconomic stability, and a competitive exchange regime is fundamental 31 The anti-export bias must be reduced to stimulate growth in agriculture 35 Reduced protection hurts small farmers of rainfed cereals in the short run unless alternatives are found 36 The deprotection of sugar and oilseeds will hurt the better off but help the efficiency of use of scarce factors 37 Assistance to losers is critical to successful transition to more efficient agriculture 37 5. CHAPTER FIVE: GENERATING EFFICIENT, LABOR-INTENSIVE GROWTH THROUGH SECTOR POLICY 48 To increase competitiveness of the Moroccan agro-food sector (including fisheries) the State needs to redirect its activities, focusing on creating a legal and regulatory framework conducive to competitive domestic marketing. Policy-induced constraints reduce competitiveness (cost) and effectiveness (quality and timeliness) of the agro-food chain and need to be removed Recent initiatives to deregulate cereals, sugar and oilseeds markets represent important steps toward achieving greater efficiency and should be implemented promptly 48 Promoting the agro-food sector is essential to rural development 48 1v Extensive reforms are required to promote efficiency along the agro-food chain 49 Deregulating domestic marketing in cereals, sugar and oilseeds is needed to increase efficiency 52 Reform and assistance are needed to maximize value-added in the high-potential fisheries sector 54 6. CHAPTER SIX: INCREASING AGRICULTURAL PRODUCTIVITY THROUGH INSTITUTIONAL POLICY 56 An efficient agrofood chain requires efficient factor use in agriculture, thereby generating sustainable productivity increases, along lines of comparative advantage. Such an agriculture--high productivity, diversified and resilient-is the backbone of successful rural development Transforming today's agriculture into such an agriculture is a long-term process requiring fundamental changes in the institutional approaches to the development of rainfed and irrigated agriculture as well as in policies towards food security, drought management, and agricultural land policy, legitimate government concerns. What furthers rural development also furthers food security and sustainable drought management However, Government's current Agricultural Land Policy is not likely to increase agricultural productivity among the majority, the smallholders 56 Increasing agricultural productivity is essential and possible 56 Simulation results highlight the importance for rural development of increasing productivity in agriculture and in the rural non-farm sector 57 It is feasible to close the large yield gap in irrigated and favorable bour zones. 58 Agricultural productivity increases promote the rural nonfarm economy, with positive impact on rural incomes and employment 59 Smallholders face inadequate access to marketing and support services which undermine agricultural productivity 60 A sounder data base for mapping agro-ecological zones and soil types is important for assisting research and extension 61 Productivity increases in irrigation can be achieved through greater efficiency of water use, rehabilitation of the LSI, and renovation of SMSI 61 Increasing agricultural productivity based on comparative advantage will enhance growth and generate employment in the medium and longer terms 63 V Exploiting comparative advantage and trade opportunities strengthens national food security 63 Promoting sustainable productivity increases requires a rethinking of Government's drought management policy 64 Risk reducing approaches to drought management enhance fiscal and environmental sustainability 65 In addition to productivity, vulnerability to drought also has important implications for the Government's approach to food security 66 International experience does not support the focus of Government's current Agricultural Land Policy 67 The Government needs to rethink its Agricultural Land Policy if increasing agricultural productivity and incomes is its goal 69 7. CHAPTER SEVEN: INCREASING ACCESS THROUGH MORE EQUITABLE AND COST-EFFECTIVE EXPENDITURE POLICY 71 To create more efficient goods and factor markets in agriculture, improve the quality of rural (including migrating) labor and promote the vision of rural well- being, the Government must improve rural infrastructure and develop human capital, two key areas of public sector responsibility. The extent of rural deprivation, and continued constraints on the budget suggest that the Government needs to change the way it allocates expenditures and deploys resources. Indeed, the role of the State in a competitive economy shifts towards policy formulation and resource allocation and away from direct execution. Given the heterogeneity of local conditions, accelerating decentralization and promoting demand- driven approaches can improve cost effectiveness, local resource mobilization, and sustainability. Local governments, private sector and civil society are to play a greater role in designing and executing local rural development programs 71 Government support is critical for improving public infrastructure and basic services, essential for rural development and for rural poverty reduction 71 Improving rural infrastructure and the delivery of basic services requires changes in the way public funds are used 72 Restructuring public expenditure allocation is required as service after service, delivery suffers 74 vi Continued high rural-urban migration emphasizes the importance of improving the quality of rural labor, in particular of young women 74 Constrained budgets, huge backlog of rural demands, and problems of delivery emphasize the urgency of improving cost-effectiveness and impact 76 Accelerating decentralization can improve cost-effectiveness and local resource mobilization 76 Morocco can build on the solid base of domestic and international experience through systematic experimentation 81 For public expenditure to become a cost-effective tool of rural development, broad- based reform is required 82 8. CHAPTER EIGHT: INTEGRATING THE TWO MOROCCOS: STRATEGIC PRIORITIES 84 To integrate the two Moroccos, the Government should focus on four strategic priorities: (a) building an efficient agriculture, more competitive in domestic and foreign agro-food markets (b) using public expenditure to facilitate adjustment; (c) redefining Government support to build rural infrastructure, deliver basic services, increase resilience to drought, and improve the productivity of land and water use; and (d) decentralizing to improve the cost-effectiveness of rural development programs. Building on the basis of a stable macro framework and pursuing these priorities will require broad consensus, central coordination, local participation, skillful sequencing and careful balancing. The Government must seize the golden opportunity offered by expanding world markets to fuel overall and rural growth 84 Central coordination and local participation are needed to forge broad consensus on strategic priorities 84 National debate is required to forge broad consensus on resolving controversies 85 Avoiding paralysis managing controversy by adjusting phasing and anticipating difficulties 86 Implementing strategic priorities. how quickly should the Government of Morocco move? 87 Implementing the strategic priorities: little leeway exists 88 The task of reform is daunting but Morocco has the required assets 88 vii A national debate is urgently needed to forge a consensus on how to achieve the vision of rural well-being 88 PART THREE: SUPPORTING TABLES, CHARTS, GRAPHICS AND MAPS Morocco at a glance 90-91 Table 1 1 East and Southeast Asia-Selected economic and social indicators 92-94 Table 2 1 Urban-rural breakdown of social indicators 95-96 Table 2 2 Income elasticities of demand and per capita consumption of horticultural products by country group, 1984 97 Table 2 3 Demand elasticities for selected horticultural exports using two-stage least squares, 1965-85 97 Table 2 4. Projected annual rates of growth of aggregate demand, 1984-2000 98 Table 2 5 International economic integration-Selected features 99 Table 2 6 Summary of European Union's offer on market access to Moroccan agro-food exports 100 Table 2 7. Summary of gains and losses in markets access for selected Moroccan commodities to the United States under GATT and NAFTA 101 Table 2.8: NAFTA agreements on tomato exports to North America 102 Table 2.9: Agreements according preferential access to the United States market 103 Table 2.10: Kingdom of Morocco: Sea products export earnings (1990-1995) 104 Table 3.1: Kingdom of Morocco: Timetable of deregulation of external and internal trade of "strategic" agricultural commodities 105-106 Table 3.2: Rural sector model of Morocco: Selected simulation results (Year 2000) 107 Table 4.1: The revised minimum standard model (RMSM) The Reform scenario and the "Business as Usual" scenario 108 Chart 4.1: Comparison of World price projections to selected 1996 Moroccan target prices 109 Table 4.2: An economywide analysis of selected policy reforms-Selected simulation results(1 996-2000) - 110-111 Table 4.3: Trade protection rates for selected agricultural commodities in Morocco 112 Table 4 4: Reference and target prices for selected agricultural commodities in Morocco _ 113 Table 4.5: A comparison of international prices, tariffs of the 1996 deregulation initiatives, and Uruguay Round tariff bindings 114 Table 4.6- Transfers to agriculture: Selected OECD countries and commodities 115 Table 4.7. Kingdom of Morocco. Costs and benefits of food subsidies-Fiscal importance and incidence (1991-1996) 116 viii Table 4.8: Kingdom of Morocco Absolute incidence of various subsidy programs-International comparisons 117 Table 6.1 Agriculture-Contribution to the economy, production structure, and land use 118-120 Graph 6.1: Agriculture growth rate (1981-1996) 121 Table 6.2. Cereals cultivation. Potential for yield increases by agro-climatic zone and substitutes to cereals 122 Table 6.3 Kingdom of Morocco: Alternative yield growth scenarios for cereals and implications for the cultivated area-irrigated and favorable bour zones 123 Chart 6.1 Kingdom of Morocco: Incidence of rural poverty by region 124 Table 6 4 Kingdom of Morocco. Farm-size distribution of cultivable land 125 Table 7 1 Kingdom of Morocco: Net rural migration (annual average number of people) _ 126 Table 7 2: Kingdom of Morocco: Rural migration by period, by destination, and by size of towns (%) 126 Table 7 3 Kingdom of Morocco: Rural migration by period, by sex and by region of destination (percentage) 126 Table 7 4 Kingdom of Morocco: Sources of rural household income (%) 126 Table 7.5 Kingdom of Morocco: Important dates and events for for decentralization in Morocco 127 Table 7 6. The decentralized and deconcentrated system in rural Morocco (as of 1996) 128 IN-TEXT BOXES Box 1 1: Rural development in Taiwan, China: A brief overview 3-4 Box 1 2: A tale of two approaches to rural development: Brazil and the Republic of Korea5-6 Box 1 3 The vision of rural well-being 7 Box 2 1 Voices of the rural poor in Morocco 9 Box 2 2 Control of quality standards in the United States and the European Union 13-14 Box 2 3. Recent trade agreements between Morocco, the European Union and the United States and major implications 16-17 Box 3.1- Strategic checklist for rural development 20 Box 3.2. Strategic checklist for rural development - What kind of rural development agenda should Morocco pursue (1997-2010) ? 21 Box 3.3: Rural sector model of Morocco: alternative scenarios to the year 2000-Basic structure 26 Box 3.4: Brief guide to the working papers 29-30 Box 4.1- Kingdom of Morocco: The revised minimum standard model (RMSM) 33 Box 4.2: Kingdom of Morocco: Basic structure of the computable general equilibrium model employed in Morocco: an economy-wide analysis of selected policy reforms, (1996-2000) 34 ix Box 4.3: The costs of not effectively assisting the rural poor adjust The case of Mexico38-41 Box 4 4 The returns from bold reform: The case of Chile 42-45 Endnotes: 129-137 CONTENTS FOR VOLUME I EXECUTIVE SUMMARY AND VOLUME II ANNEXEs 138-139 Map 1 Kingdom of Morocco- Agro-climatic zones and the incidence of rural poverty 140 Map 2 Kingdom of Morocco: Small and medium-scale irrigation and the incidence of rural poverty _ 141 Selected bibliography 142-144 ABBREVIATIONS AND ACRONYMS ACP Asian, Caribbean, and Pacific Countries BAJ Barnamaj al-Aoulaouaiyat al-Ijtimaiya (Social Priorities Project) BURAPRO State-owned import monopoly of oilseeds and vegetables oils (Bureau d'approvisionnement des produits oleagmeux) CAS Country Assistance Strategy CD Central Departments CG Central Government CGEM Computable General Equilibrium Model COMAPRA Moroccan state-owned oilseed collecting and storage agency DGCL General Administration of Local Collectivities (Direction Generale des Collectivtis Locales) EGS India's Maharashtra Employment Guarantee Scheme EN National Mutual Assistance Agency (Entraide Nationale) EPA U S. Environmental Protection Agency EU European Union FDA U S Food and Drug Administration FDI Foreign Direct Investment FEC Communal Infrastructure Investment Fund (Fonds d'Equipement Communal) FFDCA Federal Food, Drug, and Cosmetic Act FFWP Food for Work Program FIFRA Federal Insecticide, Fungicide, and Rodenticide Act FOSIS Chile's Solidarity and Social Investment Fund FTA Free-Trade Agreement FUMAC Brazil's Pilot Municipal Community Schemes GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GOM Government of Morocco HACCP Hazard Analysis of Critical Control Points INDAP Chile's Agricultural Development Institute INRA National Institute of Agronomic Research (Institut National de la Recherche Agronomique) IRD Integrated Rural Development JCRR Joint Commission for Rural Reconstruction inTaiwan, China LC Local Collectivities LSI Large-Scale Irrigation MAG Chile's Ministry of Agriculture and Livestock MAMVA Ministry of Agriculture (Ministire de l'Agriculture et de la Mise en Valeur Agricole) 11 MFA Multi-Fiber Arrangement MFN Most Favored Nation MI Ministry of Interior MPH Ministry of Public Health MTP Ministry of Public Works NAFTA North American Free Trade Association NGO Non-Governmental Organization NRDF Chile's National Rural Development Fund NRDP Brazil's Northeast Rural Development Program O&M Operation and Maintenance ODEP National Port Development Authority (Office de Diveloppement des Ports) OECD Organization for Economic Cooperation and Development OED Operations Evaluation Department ONE National Electricity Agency (Office National de l'Electricite) ONEP National Agency for Potable Water (Office National de l'Eau Potable) ONICL National Interprofessional Agency for Cereals and Pulses (Office National Interprofessional des Cerdales et Lgumineuses) ONT National Agency for Transport (Office National de Transport) ONTS National Agency for Tea and Sugar (Office National du The et du Sucre) ORMVA Regional Irrigation Agencies (Offices Rdgionaux de Mise en Valeur Agricole) PAC Brazil's State Community Schemes PAGER Rural potable water plan (Programme d'approvisionnement groupe en eau potable des populations rurales) PD Provincial Departments PERG Rural electrification plan (Programme d'elctrification rural groupe) PN National Welfare Agency (Promotion Nationale) PNI National Irrigation Plan (Plan National d'Irrigation) RAM Royal Air Maroc RBA River Basin Authorities RC Rural Collectivities REER Real Effective Exhange Rate RMSM Revised Minimum Standard Model RSM Rural Sector Model S&P Sanitary and Phytosanitary SCAMS Moroccan Agricultural Cooperatives (Societs Coopdratives Agricoles Marocaines) iii SDS Strategy for Social Development (Strategie de Developpement Social) SMSI Small and Medium-Scale Irrigation STA Special Treasury Accounts UC Urban Collectivities UNDP United Nations Development Program VAT Value-Added Tax WTO World Trade Organization WUA Water User Associations Most Frequently Used Arabic Words Barnamaj Al-Aoulaouiyat Al-Ijtimaiya Social Priorities Programs (BAJ) Douar Village Melk Arable land owned privately Sharia Islamic Law Souk Market PART ONE: PROMOTING THE VISION OF RURAL WELL-BEING 1. CHAPTER ONE: WHY RURAL DEVELOPMENT MATTERS' Rural development matters: it is an end in itself and it lays the foundation for widely shared and sustainable growth. Where it has succeeded, poverty reduction has been substantial and strong economic performance has been ensured Where it has failed, either the entire economy has suffered or the gains in growth have not reached the poor and have rarely been sustained Extensive international experience in rural development, acquired at great cost, is rich in lessons that can guide the formulation of Morocco's rural development agenda Rural development generates a virtuous circle of well-being and sustainable growth 1.1 Rural development is an end in itself Throughout the world, poverty is primarily a rural phenomenon Rural development means reducing poverty for millions of smallholders and other rural residents It is therefore an end in itself As per capita agricultural and rural incomes rise, so do income and food security. The quality of rural life is improved Social indicators reflect this improvement: caloric intake, life expectancy at birth, school enrollment, literacy rates for girls and boys improve dramatically. Sharp urban-rural disparities are narrowed as rural well-being improves 1 2 Successful rural development strengthens the basis of sustainable growth. Massive poverty reduction is achieved by improving agricultural productivity, the foundation of sustainable growth in most developing countries The high performing East Asian economies are prime examples of the virtuous circle between rural well-being and sustainable growth As early as the 1950s, some East Asian economies, notably, Taiwan (China), and the Republic of Korea, launched holistic rural development programs that combined radical land reforms with programs to support and integrate smallholder agriculture into the wider economy The benefits from their successful rural development have been substantial and long lasting. Although the relative share of primary production agriculture in GDP has declined dramatically over the course of 2 development, their strong rural economies have formed the basis of strong economic performance (Table 1 1. Selected economic and social indicators in several countries of East and Southeast Asia) International experience has robust lessons for promoting rural development: the approach must be holistic, the piecemeal project approach is simply inadequate 1 3 The lessons of international experience are robust. The more than 50 years of experience with rural development in widely differing contexts provides important lessons for the development community. These lessons have been aptly referred to as painful lessons because they have been acquired at great cost in terms of missed opportunities and unnecessary human suffering At the broadest level the most robust lesson is that success is possible, although the extent and severity of poverty make the task of rural transformation daunting, and that, factors under the government's control, not the vagaries of nature, determine success or failure Successful cases of rural development show that dynamic agricultural growth is a necessary but not sufficient condition and that government commitment is critical This, commitment must be embodied in the amount, pattern, and efficiency of allocation of public expenditure over time Experience also shows that implementing agencies and intended beneficiaries at local levels need to participate to ensure that rural development programs are cost effective and sustainable 1 4 The holistic approach to rural development has succeeded. The successes of East Asia, the failures in Sub-Saharan Africa, and the intermediate cases of Latin America have led to a rethinking of what works, what does not, and why in rural development The successes in East Asia discredit the view that agriculture is the least attractive of the sources of growth and should therefore be made to generate a surplus for reinvestment in industry, the leading sector Experience shows that transformation from low productivity, subsistence, agriculture to high productivity, commercially viable, agriculture is an essential component of successful industrialization The holistic approach adopted in East Asia succeeded in transforming the enabling environment and the capacity of smallholders to integrate into growing markets (something that occurred early on in Taiwan (China), and Korea, and later, in Indonesia, Malaysia, and Thailand). The holistic approach combined one or more of the following components. (a) radical redistribution of agricultural land; (b) establishment of positive incentives generated by improved market links to growing demand, (c) massive investment in human capital, (d) improved delivery of basic production support and social services, and (e) strengthening of farmer associations and their capacity to shape the design and implementation of rural development programs The governments leveled the playing field in terms of land ownership, access to growing markets and support services, and educational opportunities. (See Box 1 1 on Rural development in Taiwan, China A brief overview) 1.5 Many developing countries fail to achieve rural development. Many developing countries have adopted misguided rural development policies Outside East Asia, most developing countries have not achieved successful rural development. Unsuccessful rural development programs fall into four categories: (a) countries, like India and Kenya, that provided support to their smallholder sectors and achieved some poverty reduction but overtaxed the agriculture sector; (b) countries, like Brazil and Colombia, that heavily subsidized the modern commercial sector but taxed and neglected smallholders, only to find them swelling the ranks of 3 the urban poor, (c) countries, mostly in Eastern Europe and Central Asia, that promoted large- scale, collective farming with disastrous results, contributing to the downfall of the communist regimes; and (d) countries, like Argentina or many African countries, that persisted in severely overtaxing agriculture, with catastrophic results on the rural poor.2 Two contrasting rural development experiences are presented in Box 1 2 A tale of two approaches to rural development Brazil and the Republic of Korea. Box 1.1: Rural development in Taiwan, China: A brief overview Rural development in Taiwan, China during 1949-1970 exemplified the soundness of an equitable, integrated and participatory approach to rural development, within a stable macro framework Macro-trade management was characterized by fiscal discipline, high public savings, and a pro-export regime despite a bnef period of import-substitution protection Right from the start (1949), shared growth was a guiding pnnciple. Over a period of fifteen years, substantial results matenalized a diversified and dynamic agriculture replaced a poverty-ndden, land-insecure peasantry Essential to this success was government investment in the basics of a thriving commercial agriculture infrastructure, productive services, education The substantial investments in irgation and rural infrastructure promoted the adoption of high-yielding varieties, new crops, and new techniques Forty-five percent of the growth in agriculture during the 1960s was due to rising productivity not extensive cultivation In addition, the balance of economic and political power in the countryside was completely altered by giving small farmers greater access to land Land rents were reduced nationwide Substantial public lands were sold to small farmers and landlords were forced to sell tenanted land in excess of a certain limit to the state (the Land-to-the Tiller Act), to be later resold to small farmers Farmers' Associations were strengthened in 1953 and along with other organizations, were entrusted with implementing rural development programs Sustained government support for a strong semi-autonomous institution, the Joint Commission for Rural Reconstruction (JCRR) was crucial to the success of a participatory approach to development. The JCRR was put in charge Well-funded and staffed with highly competent technicians, it drew on external advice and operated in close cooperation with grass-roots Farmers' Associations as well as with government and private organizations Throughout, the Farmers' Associations participated in initiating, funding and implementing programs. The JCRR programs integrated a broad range of investments in hardware (e.g , roads, irrigation systems, marketing infrastructure) and software (basic and higher education, research and extension, technological transfers, conservation techniques, dissemination of market information) and social services (public health and sanitation, disease control, family planning). Local organizations typically contnbuted matching funds, on average 48 percent of total cost Successive installments of funds were conditional on certification of progress, which was monitored Source The Sino-American Joint Commission of Rural Reconstruction-Twenty years of cooperation for agricultural development, by T H Shen. Cornell University Press, Ithaca, London. (1970) Source: The Miracle of East Asia: Economic Growth and Public Policy. The World Bank, 1993 4 Rural development in Taiwan, China -A brief overview Description Units Period Figure Economic Indicators GDP growth rate per capita Average annual % 1951-65 5 1 1965-80 9.8 1980-90 79 1990-94 68 Agncultural growth rate Average annual % 1952-65 5 6 1965-80 1 2 1980-90 1 4 1990-94 26 Agncultural share of GDP % 1952 32 1965 24 1980 8 1994 4 Agricultural labor force % of total labor force 1965 45 1990 13 Social Indicators: Gim coefficient (income inequality) 1960s 0312 1990s 0.305 Infant mortality rate Per 1000 births 1962 31 1991 5 Incidence of poverty % of population 1982 1 1994 1 Access to electricity % of households 1966 89 1993 100 Primary education, total % of school-age pop 1976 101 1991 101 Secondary education, male % of school-age males 1976 78 1991 94 -female % of school-age females 1976 69 1991 97 -public expenditure % of GDP 1965 2.5 1991 4.4 -illiteracy, total % of 15+ population 1966 23 2 1993 60 Sources Social Indicators in Taiwan Area of the Republic of China, Directorate-General of Budget, Accounting, and Statistics, 1994 Taiwan Statistical Data Book, Council for Econonuc Planning and Development, 1995 Statistical Yearbook of the Republic of China, Directorate-General of Budget, Accounting, and Statistics, 1992 Yearbook ofManpower Survey Statistics, Taiwan Area, ROC, Directorate-General of Budget, Accounting, and Statistics, 1994 5 Box 1.2: A tale of two approaches to rural development: Brazil and the Republic of Korea Brazil and the Republic of Korea experienced high growth over the past several decades, but they pursued different macro-stabilization policies, protected/taxed their agncultures differently, and treated their smallholder, rural poor sector differently As a result, they had very different results on the reduction of rural poverty Brazil's aggregate growth performance is a puzzle, being the only country with high land inequality which managed to have high growth However, the quality of development is an issue the high level of personal insecurity to the better-off has largely been fueled by extensive poverty Brazil Beginning in the 1970s and continuing through to about 1988, the Brazilian Government launched a comprehensive agricultural agenda, within an industrialization-led development strategy that taxed agricultural exports, with policies expressly biased toward large landholders and capital-intensive production. Concessional credit, and income tax provisions, combined to encourage the increased concentration of landholdings and a shift from labor to capital factors of production Commercial ventures, unlike modest famly farms, were of a scale to benefit substantially from both purchasing capital equipment at negative interest rates and income tax concessions for farm holdings. Moreover, large farms were also the intended beneficiaries of agncultural extension The unstable macroeconomic climate enhanced the large farm bias the wealthy acquired agricultural land to hedge against inflation Unable to compete, many smallholders either sold out or migrated to big cities or slid into destitution Even opportunities for wage labor or sharecropping dried up because of both capital intensification and tenurial structures for land In the latter case, large-scale farms were often unwilling to utilize local labor because, in Brazil, rights to lands can be asserted by those who improve it Thus, not only were smallholdmgs displaced by large farms, but rural employment as a whole fell relatively Serious efforts to reverse the taxation and inequity are now underway, including targeted extension and small grants programs Moreover, in light of the current macroeconomic and political-economic context, a large number of distressed commercial farms have surfaced, providing the opportunity to experiment with market-based land reform The Republic of Korea. In contrast, Korea promoted equitable growth by heavily investing in infrastructure, services and human capital in the rural areas within a stable macro economic framework. Korean agriculture is land scarce but over 62% of agricultural land is under irngation, whereas it is only 1% in Brazil. Korea undertook a successful land reform whereas land distribution remains highly skewed in Brazil. Though pricing policy was initially biased generally against farmers, a price support system favorable to producers was instituted in Korea in 1969, much earlier than in Brazil. As a result of government's support for smallholders, Korea's small farms are among some of the most productive in the world. Given the tense postwar political situation and extensive rural poverty in the late 1950s, the government did not transfer wealth out of agriculture to other sectors. To continue its progress toward reducing rural-urban income parity, the Korean Government promoted rural industrialization as an effective way of generating income-earning opportunities outside cities In comparing Brazil and Korea, the maintenance of macro stability, moderation in price distortions, and equity of opportunity and access in Korea were of fundamental importance in Korea's success in promoting rural well-being. 6 Brazil Korea Agriculture % of GDP 1965 19 38 1994 13 7 Social Measures Gim coefficient 0.63 (1989) 0.34 (1988) Rural Population (% of total) 1980 34 43 1994 23 20 Fertility Rate, 1994 (births per woman of child-bearing age) 2 8 1.8 Infant Mortality Rate, 1994 (per 1,000 live births) 56 12 Maternal Mortality Rate (per 100,000 live births) 200 30 Rural access to Safe Water 86(1991) 49(1991) Rural access to Sanitation 35(1993) 100 (1991) Sources From Plan to Market World Development Report The World Bank, 1996 Krueger, Anne, et al The Political Economy of Agricultural Pricing Policy. Volume 2, Asia The World Bank, 1991 The East Asian Miracle: Economic Growth and Public Policy The World Bank, 1993 Thiesenhusen, William "Have Agricultural Economists Neglected Poverty Issues? " The Pakistan Development Review 30(4), Winter 1991, pp 551-578 1 6 The piecemeal, top-down, project approach to rural development has failed. The failed approach of the 1970s, usually referred to as Integrated Rural Development (IRD), was fundamentally different from the East Asian approach This piecemeal strategy, applied in Zambia, Tanzania, South Africa, Colombia, Guatemala, Brazil, and elsewhere (categories a, b, and d above) adopted a top-down, 'bnclave" project approach according to which agriculture was believed to be able to flourish even within a distortive and extractive macro, trade, and foreign exchange framework as long as multiple services were delivered (hence the term 'integrated') IRD was a supply-side approach that ignored the importance of final demand for food commodities and relied on trickle-down mechanisms. Commercial agriculture of large landholders was favored, thus perpetuating skewed land distribution and unequal access to input subsidies and services. 1 7 Morocco's experience with IRD is consistent with the experience of the piecemeal project approach Morocco has had substantial experience with IRD projects in rainfed areas 3 As in other project approaches, no particular attention was paid to the overall enabling macro and institutional framework during the late 70s and early 80s. Begun in 1975, costing some DH 3.2 billion, some projects are still in operation Between 1978 and 1982, the World Bank financed IRD projects in Fes-Karia-Tissa, Loukkos, Middle Atlas, and Oulmes-Rommani. These projects included components to boost incomes through improved infrastructure, agricultural extension, soil conservation, and cereals and livestock production Some components fared better than others Soft wheat cultivation was expanded, and roads were constructed, but the technology transfer and institution-building were inadequate Where formal evaluations were undertaken, economic rates of return of about 12 percent were calculated Yet, in terms of permanently 7 transforming the income base and creating job opportunities for the local residents, however, the projects were failures An OED evaluation of these projects identified inadequate funding, unacceptable quality and complexity of interventions in delivery, and overcentralized management as the causes of failure. Inadequate funding was a chronic problem that reflected lack of government commitment.' Moroccan and International experience can help guide the formulation of a rural development agenda for Morocco 1 8 Realizing the vision of rural well-being in Morocco The purpose of this report is to propose a strategy on how Morocco can realize its vision of rural well-being It draws upon Moroccan and international experience to help shape the future of rural Morocco International experience offers powerful lessons since nothing can be more convincing than what has actually happened It is fully recognized that Morocco is unique However, inferences from international experience to Moroccan reality can suggest new paths to old problems, inject hope where there is none or dramatize the risks and returns to bold reforms Lessons of experience can teach if one can learn (See Box 1.3 on the Vision of rural well-being). Box 1.3: The vision of rural well-being * Rural growth is widely-shared, with pnvate and competitive agnculture and agnbusiness as the main engine of growth * Family farms and non-farm enterpnses provide ample remunerative employment opportunities to men and women * Rural people manage the soils, water, forests, grasslands, and fisheries in a sustainable manner * Rural people are linked to well-functioning markets for products, inputs, and finance * Rural people have access to medical care, clean water and sanitation, educational opportunities, and sufficient nutntious foods Essential legal frameworks, public investment, productive and social services are provided and financed in a pluralistic, decentralized and participatory manner Source Rural Development: From Vision to Action. World Bank, Draft, January 17, 1997 2. CHAPTER TWO: WHY RURAL DEVELOPMENT MATTERS TO MOROCCO NOW Now is the time for Morocco to reduce extensive rural poverty and large urban-rural disparities, thus strengthening the sociopolitical foundation of an economy capable of adjusting and growing in a rapidly changing global economy. High urban unemployment, exacerbated by extensive rural poverty and continued rural-urban migration add urgency to the need for vigorous growth and successful rural development A more productive and diversified agriculture is essential for promoting a stronger macro economy. Although the erosion of preferential trading with the European Union hurts Morocco, expanding albeit competitive global markets offer a golden opportunity for Morocco to fuel domestic growth, essential for rural well-being Morocco faces difficult challenges at home 2 1 Rural poverty in Morocco is extensive and severe. Although Morocco's economy grew at an average rate of 3 to 4 percent a year over the last decade, an estimated four millions of Moroccans in rural areas continue to live in grinding poverty. Morocco's poor suffer from chronic malnutrition and 17 percent of children are wasted, stunted, or both ' At the official rural poverty line is DH 2,439/capita, or US$0.77/day [constant 1991 prices] an 18 percent of the rural population subsist, with another 12 percent on slightly more-US$0 94/day.' This poverty is unevenly distributed throughout rural Morocco. In the Center-North, East and Center-South, 25 percent of the population live in poverty whereas only 5 percent of the population along the coastal areas are classified as poor' Acute and chronic malnutrition, however, is most prevalent among children in the South and in the Tensift region Poor women and children are particularly vulnerable Severe lack of rural infrastructure means long hours of work for poor women, who spend two to three hours fetching water and wood and have an average workday of 12 hours/day, (reaching 19 hours/day in some poorer regions) On average rural men work three to four hours less 8 (See Box 2.1 on Voices of the rural poor in Morocco) 2 2 Sharp disparities divide the two Moroccos. Sharp disparities divide urban and rural Morocco. The urban sector, which by 1994 represented 51 percent of the population, is much better off than the rural sector, with higher average incomes, a lower incidence of poverty, and superior social indicators. Economywide, the incidence of poverty fell from 21 percent in 9 1984/85 to 13 percent in 1990/91.' The incidence of poverty has increased in the rural sector, however, and poverty in Morocco is now predominantly a rural phenomenon with 72 percent of the poor living in rural areas in 1990/91 (up from 70 percent in 1984/85) Access to markets is so limited in rural Morocco that small farmers and the poor must rely on a subsistence strategy to survive Social indicators reveal the sharp contrast between the urban and the rural Female literacy is 10 percent in rural areas compared to 80 percent in urban areas, access to potable water is 14 percent in rural areas compared to 100 percent in urban areas, and access to electricification is 13 percent in rural areas compared to 90 percent in urban areas. On average a rural inhabitant is almost 25 kilometer from a health facility, compared to 6 kilometer taken as a norm for the country as a whole (See Table 2 1 on Social indicators: Urban-rural breakdown) Box 2.1: Voices of the rural poor in Morocco "Agnculture is no longer worthwhile. You get some money from the Crgdit Agricole for seeds and other input and you have to give it back at cropping time. You buy expensive and sell cheap" (Ouled Said, Meknes) "We need stable employment in order to have children and a house Now I am obliged to travel here and there, wherever I can find a temporary job" "What can we do here9 Wages are low, conditions are miserable. You work all day, then at night you wait your turn for water Relationships with some masters are awful Migration abroad is the solution Wages are ten times what they are here Working conditions are much better In foreign countries workers are respected" (Laajalma, Beni Mellal) "The only reason to leave the douar is that you cannot survive He who has a little money won't leave three or four hectares to eat white bread in town His land is better for him" (Ait Sibeme) "Women work more than men They work at home and outside" (Safi) "Agncultural work gives an income only to men We work in our parents' fields, men sell the produce and they give nothing to us" (Safi) "Working in agnculture is too hard. We like the town because there you can find, transportation, public baths, markets, meat and desserts" (Ait Hsan, Khemisset) "If we have a public oven, a factory and a public bath we'll stay in the village" (Farjal, Khemisset) Source: Social Assessment on Impact of Market Liberalization on Small Cereal Farmers in Morocco, November 1996, by INRA, Settat, Enterpnse Consulting, and World Bank 2 3 Unemployment is high and rising. Economy-wide unemployment was 16 percent in 1995 with urban unemployment estimated around 20 percent (men at 19 and women at 32) and rural unemployment estimated at 10 8 percent Rural seasonal underemployment is estimated at 23 percent Forty percent of women in the 15-24 age group and 30 to 33 percent of recent graduates are unemployed "0 Unemployment nses gradually with the level of education 16 percent of Moroccans without a degree are unemployed compared with 48 percent of graduates with professional training These high unemployment figures among the educated young suggest a potentially explosive sociopolitical situation The concern is not only that these figures are high but that they may rise dramatically if growth in Morocco remains at its historical growth rates of 3 to 4 percent a year " The one-day general strike staged in late June 1996 and the recent rise in 10 the minimum wage in the context of the dialogue social reflect rising social tensions in Morocco and the Government's attempt to respond to the problem. 2 4 Poverty, inequity, and unemployment can be destabilizing. The combination of extensive poverty, sharp inequities, and high unemployment has been destabilizing in many parts of the world. Revolts are always complex phenomena, but these factors exacerbate socio-political tensions In Iran, for example, despite oil wealth and improvements in many social indicators, continued sharp urban-rural disparities, sharp income inequality, and rapid urbanization created conditions conducive to the revolution of 1979 The top quintile owned 42 percent of income while the bottom quintile only 1.4 percent (1973) In Iran, the urban sector grew from 31 percent of the population in 1956 to 48 percent of the population in 1978, and the annual number of rural- urban migrants was estimated at roughly 380,000 after 1971 " This rural influx consisted largely of unskilled landless laborers, (the barzegars), who did not benefit from the Iranian Land Reform undertaken by the Shah in 1962 These, estimated at 1 98 million, constituted 10 percent of the rural population at the time of the land reform This reform excluded them and benefited only the nasaq, tenants with acknowledged rights to land for cultivation." 2 5 Macroeconomic stability remains fragile and the economy remains highly vulnerable to exogenous shocks. Macroeconomic stability, the cornerstone of sustainable growth and development, remains fragile largely because of a succession of droughts More generally, the economy is highly vulnerable to exogenous shocks: not only to drought, but also changes in international interest rates, and a slow down in the growth in the EU. The EU is Morocco's major trading partner, accounting for 64 percent of its exports and 63 percent of its imports It is also an important trading block, accounting for nearly 40 percent of world trade. Following the drought of 1995, agricultural output fell by 45.0 percent, GDP fell by 7 6 percent, the budget deficit rose to 5.8 percent of GDP, and the current account deficit rose to 4 9 percent of GDP Morocco's stock of interest-sensitive debt has been rising sharply and now stands at 41 percent of its foreign debt, leaving the country highly vulnerable to interest rate shocks. Morocco is also highly dependent on the EU not only for its merchandise trade (which represents 64 percent of total merchandise exports), but also for tourism receipts and workers' remittances 14 Only 20 percent of Morocco's exports are destined to countries outside the EU, including many of the faster growing developing countries." To respond to these challenges, Morocco's needs high growth with agriculture as the engine of growth 2.6 The performance of Morocco's economy depends on agriculture Morocco's economy rises and falls with agriculture's performance. This is painfully evident during droughts as in 1995. Agriculture, including agro-industries and fisheries, still accounts for about 23 percent of GDP, 30 percent of export earnings and 40 percent of the labor force The dependence of the macro economy is not only in terms of the level but also the quality of growth. The structural weaknesses of agriculture-namely its low productivity, its vulnerability to drought, its limited diversification, and its extensive poverty-reduce the resilience of the entire economy, constrain domestic demand for industrial and services sectors, undermine the achievement of national and household food security, and contribute to the growth of urban poverty and unemployment through high rural-urban migration 2.7 A higher productivity and more diversified agriculture is a pillar of a rapidly growing and more resilient Morocco Given its importance in the national economy, a higher 11 productivity and more diversified agriculture is essential for Morocco to grow at a 5 to 6 percent a year by 2000 and to adjust to a fast changing global economy In the Reform Scenario of the Bank's Revised Minimum Standard Model for Morocco, agriculture grows at an average annual rate of 2 2 percent during 1997-1999 and 4 4 percent during 2000-2003. (See Box 4 1 on The Kingdom of Morocco The Revised minimum standard model-Reform scenario and the 'Business as usual" or Status quo scenario and accompanying Table 4 1 in Part Three) These rates are not particularly high by historical standards Historical rates are on average higher but they are characterized by sharp fluctuations. 0 7 percent during 1980-83, 10 3 percent during 1984-87, 1.8 percent 1988-92, -36 0 percent in 1992, -6 2 percent in 1993, 63 0 percent in 1994 and -45 0 percent in 1995 6 (This seesaw growth performance is evident in Graphic 6 1 on Agriculture growth rate 1981-1996) These rates give an average growth of well over 4 percent since 1980 However, yearly averages alone are not very meaningful What matters also is the high variability For the economy to be more resilient, its dependence on agriculture must be reduced and agriculture must be more diversified These in turn means that agriculture must be of higher productivity and grow along lines of comparative advantage Such an agriculture can generate efficient, labor-intensive growth Only then will agriculture's relative contribution in the overall economy fall over time and its vulnerability to drought be lessened Expanding world markets provide golden opportunity to fuel rural growth 2.8 Export growth is needed to fuel rural growth. Despite substantial loss of preferential access to the EU as a result of recent trade agreements, Morocco can benefit from the globalization by using world trade to fuel domestic growth. Morocco's small economy needs export growth to break the constraint that low domestic demand imposes on agricultural and rural growth Agriculture's fuller integration into the world economy will also improve the efficiency of the sector and therefore its commercial viability Moroccan agriculture needs structural change to strengthen its long-term viability Morocco cannot continue to rely on subsidizing inefficient agriculture to promote rural well-being Agro-food exports are also labor-intensive Estimates suggest that agro-food exports require 200-1020 compared to 35-145 labor days per ha in Morocco's major import substitute sectors " Growth of exports in general and of agro-food exports in particular can thus fulfill three important functions for promoting rural well-being breaking the domestic demand constraint; promoting efficiency, and generating much needed employment. Morocco's strategic aim should thus be fuller integration, which is good for growth and good for reducing rural poverty Globalization represents a fundamental challenge and a major opportunity for Morocco to achieve higher agricultural growth and greater resilience to shocks 2 9 The globalization of international trade now profoundly shapes domestic economic management Expanding world trade presents the most important opportunity for Morocco as for any country to raise incomes and improve welfare. Morocco must position itself to make use of these expanding opportunities Global economic prospects are brighter now than they have been for many years, and the external environment is more propitious for the developing countries than it has been since 1960s World trade-expected to grow at a robust rate of 6 percent a year over the 1995-2010 period-will be a major engine of growth over the next ten years if liberalization in trade and capital markets continues While globalization expands options for income growth for individuals and firms, it also imposes increased market discipline on policymakers, whose policies will increasingly have to gain and ensure the confidence of markets. 12 Globalization magnifies both the benefits of sound economic management and the costs of policy errors The external trade environment has thus become of fundamental importance in shaping domestic economic prospects and management in Morocco as elsewhere " 2 10 Key achievements of the General Agreement on Trade and Tariff (GATT) are substantial The GATT agreements signed in Marrakech in 1994 have significantly improved market access, further integrating the world's economies through globalization For agriculture the main achievements are improved market access in the longer term, the inclusion of agriculture under GATT rules, and the institution of improved rules for trade and for settlement dispute. Because of 'irty tariffication", bound tariffs are still high in agriculture The main achievements of the GATT include the following An average tariff reduction on manufactures of more than one third, A major scaling back of nontariff barriers with the abolition of the Multi-Fiber Arrangement (MFA) and voluntary export constraints, The inclusion of trade in agriculture and services in the GATT framework; The institution of stronger and clearer rules for settling disputes, and The creation of the World Trade Organization (WTO) to strengthen the world trading system " Services constitute the fastest growing component of world trade, and environmental standards are increasingly important for market access 2 11 Services: an increasingly dynamic component of world trade. Services, which will now account for 25 percent of world trade and 60 percent of foreign direct investment (FDI) are the fastest growing component of world trade 20 Advances in computer and information technologies complemented by the deregulation of service industries and the liberalization of investments regimes are the driving forces in the dynamism of the services component. The revolution in the services sector reflects the rising service intensity of production, making access to efficient services a precondition to rather than a consequence of economic growth. This is of particular relevance to Morocco because it clearly shows that Morocco should no longer neglect the importance of support services in agro-food and other exports. 2 12 Public health standards are increasingly important for market access. Under the new WTO, sanitary and phytosanitary (S&P) standards must be based on available scientific evidence and environmental risk assessment These S&P regulations are increasingly critical for market access Producers of seafood and low-acid canned food entering the United States are required to adopt the Hazard Analysis and Critical Control Point (HACCP) system of preventive measures and corrective actions. For raw fruits and vegetables the Environmental Protection Agency (EPA) sets pesticide tolerance levels The US Department of Agriculture (USDA) imposes restrictive phytosanitary orders with respect to the entry of plants or plant products. The EU applies the ISO 9000 system of minimum food standards, which is similar to the HACCP. (EU will soon use the revised ISO 14,000) For horticulture it requires phytosanitary passports for shipments and official inspections upon entry. (See Box 2.2 on Control of quality standards in the United States and the European Union) 13 Box 2.2: Control of quality standards in the United States and the European Union The United States. Horticultural and seafood imports are subject to sanitary regulation from the Food and Drug Administration (FDA) and are required to meet the same standards as domestic goods. Under the Federal Food, Drug, and Cosmetic Act (FFDCA) imported foods must be pure, wholesome, safe to eat, and produced under sanitary conditions Products are deemed adulterated if they contain unacceptable levels of deletenous substances, such as pesticides, additives, or filth. Of particular relevance to imports of raw horticultural products are pesticide regulations EPA sets tolerances for those substances it grants registration under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Foods are deemed illegal when they contain an amount of pesticide residue in excess of tolerances established for registered pesticides or when they harbor residue of unregistered pesticides for which no tolerances exist Imported goods are also subject to "targeted" monitonng for certain unregistered pesticides that are used outside the U S (e g , Turbuthylazine, Prothiofos, and Thiometon) All producers of seafood and low-acid canned goods are required to operate under the hazard analysis of critical control point system (HACCP) Under HACCP the burden of proof is on producers to show that they have complied with cntical control point procedures If they are unable to do so and are in violation, they are liable for additional penalties Imports are also subject to phytosanitary standards that pertain to pests and diseases with economically important impacts Where there is no available treatment to ensure freedom from pests imports are prohibited. Restrictive orders allow the entry of plants or plant products under either a treatment or inspection requirement Determination of pest risk is made upon application for an import permit When U S Department of Agnculture (USDA) inspection determines that a lot is infested it may be refused entry or destroyed if treatment is not possible Mediterranean fruit fly infestation is the major problem affecting Moroccan exports Cold treatment has been identified as an acceptable treatment to prevent insect activity on citrus exports from Morocco, and shipments are admissible into North Atlantic ports with an import permit Moroccan exports of tomatoes can enter the U S if shipped green Higher-value red tomatoes are currently prohibited, although the USDA Animal and Plant Health Inspection Service is working with Moroccan growers to institute a "systems approach" to production that will prevent infestation and, thus, permit entry. The approach entails improving sanitation, using greenhouses, and instituting modem packing processes For some fruit and vegetables, marketing orders exist to set out mandatory grade standards Imported produce, including citrus and tomatoes, must meet the grade and size standards that apply to the segment of the U S market with which they most directly compete Grades are established according to cnteria such as size and amount of damage Certifying the grade of imported commodities is done at the port of entry by the USDA Agncultural Marketing Service Sources: US Food and Drug Administration. Code of Federal Regulations.21 The European Union. Imtiating directive 76/895/EEC dictates that member states shall take all necessary measures to ensure compliance with maximum pesticide levels by carrying out random checks The Standing Committee for Plant Health recommends that member states monitor a significant proportion of the product groups set out in Annex I to Directive 90/642/EEC, take a minimum number of samples, reflecting production, consumption, and importation into the Community and analyze products for as many pesticides listed in Annex II to Directive 90/642/EEC as feasible A systematic approach to product sampling has not yet been developed To ensure minimum food safety standards are met the E U. is adopting a program similar to the US HACCP system ISO 9000 provides process guidelines to producers and entry certification to importers who comply 14 In terms of phytosamtary restnctions, Council Directive 77/93/EEC states that citrus imports must be inspected in the country of origin or the consignor country to ensure that they are not contaminated by harmful orgamisms and that they comply with relevant special requirements Provisions aim to prevent the introduction into the Community of citrus bactenal canker, citrus spots, and fruit flies (though not the Mediterranean fruit fly) There are no specific tomato requirements. Member states must ensure that relevant importers have a phytosanitary certificate that must accompany food shipments. Before the certificate is granted official bodies must establish that the producer or importer is able and willing to meet specific obligations relating to the assessment or improvement of the plant health situation on the premises These obligations may include special examination, sampling, treatment, destruction or labeling Like the USA, the EU has mandatory grades for citrus and tomatoes The EU may use economic instruments that are consistent with the polluter-pays principle to make those involved in production, import, distribution, and use of products accept responsibility for unecessary packaging and waste Sources: Council Directive. European Commission. International Trade Administration, US Department of Commerce.22 2 13 Environment-friendly packaging and truthful labeling are increasingly important. The United States and the EU are also concerned with two other public aspects of food handling environment-friendly packaging and nutritional information There is increasing emphasis on packaging that is reusable, recoverable and recyclable, and labeling that is informative and truthful. Fruits and vegetables must be correctly graded and that grading must be correctly reported. Agro-food markets expand but are more competitive 2 14 Agro-food markets are increasingly competitive. Agro-food markets are undergoing fundamental changes as a result of (a) improvements in processing technology (the technology of 'tracking'), whereby raw commodities can be decomposed and re-assembled with other subcomponents to form many other commodities, (b) increasing concentration in marketing and distribution, (c) rising concerns by consumers lobbying their governments on environmental and health issues, and (d) changing consumer tastes for more prepared (not more processed) and healthier foods 2 In combination with the deregulation of transport and market expansion through unification of EU markets these changes increase competitive pressures among raw material suppliers for timely, high quality supplies in specific varieties to satisfy specific niches 2 15 Demand prospects are favorable for agro-food exports. World trade in high-value agro-food exports experienced average annual growth rates of 4 to 11 percent during the 1980s well above growth for trade in major agricultural commodity groups. cereals, sugar and tropical beverage (e g, cocoa, coffee) Changing dietary patterns and advances in food-related logistics have contributed to this dynamic expansion 24 Although income elasticities for agro-food exports are usually less than income elasticities for manufactured commodities, they are still high especially in developing countries with elasticities of 1 3-2 5 for oranges and citrus, 0 3-1.0 and above for vegetables, and 0 6-1 5 for fish.25 To give an idea of demand, the range of income elasticities by commodity group and by country category is set out in Tables 2.2, 2.3 on Income 15 elasticities and per capita consumption of horticultural products by country group (1984), Demand elasticities for selected horticultural exports using two-stage least squares (1965-85), and in Table 2 4 on Projected annual rates of growth of aggregate demand, 1984-2000 2 16 World markets expand but the number of competitors rises World markets are projected to expand over the 1995-2004 period but the number of competing countries from different trading blocks will also increase (See Table 2.5 on International economic integration selected features) Under the preferential regime of the past, Morocco's competitors for its horticultural exports to the EU were primarily other Mediterranean countries (Spain, Portugal, Greece, Turkey, Israel, Egypt, and Tunisia) With globalization, competition comes from farther afield. green beans from China, roses from Kenya and Zimbabwe, cut flowers from Colombia and the Africa-Caribbean-and-Pacific (ACP) countries, and strawberries from the United States In addition, to diversify into the North American market, Morocco has to compete against both developing countries (particularly Mexico) and developed countries (the Netherlands for fresh tomatoes). Recent trade agreements: Morocco is already committed to integration and it faces gains and losses in market access 2 17 Morocco's trade environment is shaped largely by the GATT and agreements with the European Union and the United States Improved market access and rules for including agriculture under the GATT, the progressive removal of MFA, and the trade agreements with the EU and the United States all have a major impact on Morocco's external trade prospects.26 Morocco both gains and loses market access in this new trade environment. Whether on balance Morocco gains or loses in net export revenues from the combination of challenges and opportunities that the new trade agreements present will largely depend on Morocco's policy response to this new environment The appropriate policy response is discussed in Part Two Morocco will gain to the extent it succeeds in lowering trade protection on 'htrategic" agricultural commodities, in promoting competitive agromarketing and in assisting losers to readjust to the new policy and market environment Details of the agreements and the major implications for Morocco's market access are presented in Box 2.3: Recent trade agreements between Morocco, the European Union and the United States and major implications 16 Box 2.3: Recent trade agreements between Morocco, the European Union and the United States and major implications Three agreements are critical to Morocco's market access to the EU and the United States (a) the 1995 Free-Trade-Agreement (FTA) ivith respect to industrial production, (b) the EU and US offers in the GATT Agreements with respect to fresh and processed agricultural commodities, signed in April 1994, and the more recent Morocco-EU Accord on agriculture, signed in November 1995, and (c) the Morocco- EU fishenes agreement, signed in February 1996 These agreements affect industrial (mainly textiles, and clothing), agricultural and fisheries exports, which account for roughly 55 percent of Morocco's merchandise export earnings In addition to these pnce-related rules, rules on quality norms (environmental and public health standards) are becoming major factors in determining market access The North American Free Trade Agreement (NAFTA) signed in 1993, has important implications for Morocco's access to North America, a trading block that accounts for roughly 18 percent of world trade Industrial production and exports: FTA shows Morocco's commitment to greater integration. The signing of the FTA with the EU clearly reflects Morocco's commitment to greater integration As a result of that agreement, Morocco's domestic import-substituting industries will have to be more competitive This need to become more competitive coincides with the gradual dismantling of the MFA, which will expand market access of textiles and clothing exporters. The MFA was a maze of quantitative restrictions on exports of textiles and clothing that governed international trade for over 30 years. Under the GATT, voluntary export restraints will be eliminated in four years, and the MFA will be eliminated within ten years 2 Moroccan textile and clothing exports to the EU, which accounted for 25 percent of total export earnings in 1993 will have to compete with lower cost producers, particularly from East, Southeast and South Asia 28 Morocco currently enjoys free access into the EU for its industrial products. Under the FTA, Morocco will grant the EU free access into its markets for industrial goods exports by 2008 Recently, in the context of the transitory budget for January through June 1996, and in the context of the Investment Code wuch went into effect with that budget trade barriers on investment goods have been lowered to a mimmum of 2 5 percent on which no Special Import Tax (Prglevement Fiscal a l'Importation) is levied.29 Earlier, there has been a reduction of tariffs to 5 percent on non-competing industrial imports (no domestic production of these imports) The PFI remained on these. However, selected commodities face reference prices which provide implied effective protection rate of more than 100 percent as in the case of textiles. These barners are scheduled to be elimnated by 2008, with phased elimination of tariffs on industrial inputs for which there is little domestic production taking place between 1997 and 2000 and phased elimination of tariffs on consumer commodities taking place between 2000 and 2008 Agro-food exports to EU: preferential treatment erodes and global competition increases. Morocco's agro-food exports face substantial erosion in access and increased global competition in the enlarged, and unified EU market The GATT agreement in agro-food stipulates a 36 percent reduction in tariffs over six years (1995-2000) as well as a 20 percent reduction in global internal support and a 36 percent reduction in export subsidies These reductions are transitional as more liberal rules of access (still to be negotiated) are envisioned as of January 1, 2001 These transitional reductions improve market access for Morocco's competitors in an expanded unified market, and in so doing reduce Morocco's relative advantage gained through preferential treatment For years, about two-thirds of Morocco's agro- food trade has benefitted from a series of preferential trade agreements (signed in 1969, 1976, 1988) with the EU Under the GATT agreement, an estimated 74 percent of fruit and vegetable exports lose their preferential access with the remaining 26 percent gaining in preferential access The EU has also established high nunimum entry prices that are higher than the reference prices they replace for seventeen "sensitive" exports. Exporters into the EU now have to pay customs duties and equivalent tariffs on these commodities, if their selhng prices fall below 92 percent of the minimum entry prices set 30 Morocco's subsequent Accord (1995) with the EU lowered these minimum entry prices for six important Moroccan exports including winter tomatoes, citrus (winter oranges and clementines) and selected vegetables for which quotas were also set For winter citrus and fresh tomatoes, the quotas are constraining (See Table 2 6 on Summary of impact of European Union's offer on market access to Moroccan agro-food exports). 17 Agro-food exports to United States: gains and losses in access under the GATT Changes in Morocco's market access to the U S are mixed The United States is currently a minor trading partner to Morocco, accounting for only 3 percent of merchandise exports and 7 percent of imports Under the GATT, Morocco benefits from reduction of tanffs on several horticultural commodities such as roses, carnations and dehydrated tomatoes and loses on others such as fresh winter tomatoes (11/15-2/28), cucumbers and pickled olives. With respect to roses, carnations and dehydrated tomatoes, Morocco gains relative to selected Latin American countries such as Colombia, Bolivia, Ecuador and Peru which alread) pay no tariffs With respect to the fresh winter tomatoes, cucumbers and pickled olives, Morocco loses because it already enjoys taniff-free entry into the United States Mexico which supplies 96 percent of the U S imports of these goods, and the Netherlands, vhich supplies 2 percent, are the major gainers 31 (See Table 2 7 on Summary of gains and losses in market access for selected Moroccan commodities to the United States under GATT and NAFTA) Agro-food exports to North America: loss in access relative to Mexico under NAFTA Under NAFTA Mexican exports into Canada and the United States enjoy improved market access via tariff levels that are below those prevailing for Most-Favored-Nation (MFN) countries (and which will gradually be eliminated) and via increasing quotas on goods on which declining tariffs are applicable Tomato exports, for example, are subject to a tariff rate quota that once reached automatically snaps back to the MFN rate That quota will increase by 5 percent every year until 2003 at which time agricultural tariffs are to be completely eliminated (See Table 2.8 on NAFTA agreements on tomato exports into North Amenca) Mexico's market access improved markedly over competitors that had preferential market access pre- NAFTA (See Table 2 9 on Agreements according preferential access to the United States market) In addition, Mexico's horticultural trade with the United States is benefitting from increased backward integration through U.S investments in quality and other handling and marketing improvements Gains and losses in access to North America. Taking into account both the GATT and NAFTA agreements, the impact on Morocco's market access into North America is mixed With respect to the GATT, Morocco both gains and loses, with respect to NAFTA, Morocco clearly loses Fish resources: agreement limits fishing rights, increases their financial value, and expands export access. The Fishenes Agreement of February 1996 with the European Union furthers Morocco's interests in three areas First, it seeks to arrive at a sustainable level of resource exploitation for white fish (demersals) over a period of four years by reducing fishing rights of EU vessels (Unlike horticultural commodities, high-value seafoods, such as white fish, octopus, oysters, shrimps, and lobsters, suffer from a supply rather than a demand constraint). Second, fishing rights to the EU are to yield DH 6 3 billion (roughly US$725 million) by the year 2000 Third, tariff-exempt quotas into the EU for canned fish, (sardines, mackerel, and anchovies) have been agreed upon for 1996-1998; as of 1999, canned fish will become tariff-exempt for unlimited amounts 32 Fish exports: markets expand with no demand constraints but supply constraints are binding. Fish exports account for 56 percent of Moroccan agro-food exports or 13 percent of total merchandise export earnings, and employ a substantial member of Moroccans (exact number unknown).3 (See Table 2 10 on Sea product export earnings 1990-1995) The Fisheries Agreement with the EU signed in February 1996 limits fishing rights of EU vessels Similar fishing agreements were concluded with other countries, including Japan and Russia Worldwide the demand for fish is expected to remain buoyant, with demand from Japan, a major market for cephalopods, such as octopus and squids, and from Europe which is a major market for whitefish, shellfish, and crustacians such as shnmps and lobsters. The demand for these are expected to be particularly strong Summing up: a web of challenges and opportunities, abroad and at home 2 18 Prospects for growth in world trade during the next decade are brighter than they have been since the 1960s for developing countries Expanding trade opportunities offer the best platform from which to launch efficiency-promoting growth These market opportunities come at a particularly fortuitous time as Morocco faces a major erosion in its preferential trade relations with the EU. More than ever, pressures are mounting for Morocco to diversify and 18 penetrate nonpreferential markets Domestic pressures to exploit international trade opportunities are just as strong High and rising unemployment, extensive rural poverty, and the continued fragility of the economy intensify pressures for a fundamental reorientation of policy. It is within this complex web of opportunities and challenges that Morocco must shape a successful rural development strategy 3. CHAPTER THREE: WHAT KIND OF RURAL DEVELOPMENT AGENDA SHOULD MOROCCO PURSUE ? Morocco should pursue a rural development agenda based on its own experience and on lessons learned from extensive international experience. These lessons show that a strategy based on the holistic approach anchored in macroeconomic stability, and embracing efficient incentives, equitable access to assets and opportunities, and participatory management, can succeed Consistent with these lessons, the Rural sector model of Morocco, shows that successful rural development requires simultaneous progress on several fronts. Morocco has already initiated the beginnings of a successful approach on several key fronts Morocco needs to consider a holistic strategy to rural development 3.1 Successful rural development requires holistic approach. Successful rural development transforms the very fabric of economic, social, and cultural life in rural areas To Morocco's poor, it would mean more employment at higher wages, improved access to expanding market opportunities and necessary support services, better access to education and basic services, such as potable water, electrification, schools, and health services, and greater say in their own development More decentralized management of rural development programs is also required so that rural development programs reflect the needs of and mobilize the support of the rural population Only such a holistic approach can improve the fabric of rural life. The Strategic checklist based on the holistic approach to rural development is exacting 3.2 The Strategic checklist for rural development is exacting. Morocco can learn much from the lessons of experience, including its own experience with rural development. What experience shows is that successful rural development is more than delivering multiple services in an integrated fashion-fundamental changes in incentives, institutions and investments are required Based on the lessons of international experience, the World Bank developed a Strategic checklist for rural development Box 3 1 reproduces the Strategic checklist for rural development from the World Bank's Rural Development: From Vision to Action This checklist shows that successful rural development requires a stable, efficient, equitable, cost-effective, and participatory framework. Only such a framework is sustainable 20 Box 3.1: Strategic checklist for rural development * Macroeconomic and sectoral policies are stable The foreign exchange, trade, and taxation regimes do not discnminate against agriculture, but are very similar for the rural and urban sectors * The growth of pnvate agnculture is encouraged by minimizing distortions among input and output markets and by market development for agncultural and agroindustnal products, both at home and abroad. * Public investment and expenditure programs for economic and social infrastructure, health, nutntion and education do not discnminate against rural populations or the rural poor * Large farms and large agroindustnal firms do not receive special pnvileges and are not able to reduce competition m output, input, land or credit markets * The agranan structure is dominated by efficient and technologically sophisticated family operators who rely pnmanly on their own family's labor The nghts and needs of women farmers and wage-laborers are explicitly recognized * Access to and secunty of land and water nghts is actively promoted Restricting land rentals hurts the poor Where land distnbution is highly unequal, land reform is needed Decentralized, participatory, and market-assisted approaches to land reform can achieve this much faster than expropriation by land reform parastatals * Private and public sectors complement each other in generating and disseminating knowledge, and technologies. Public sector financing is particularly important for areas of limited interest to the pnvate sector, such as strategic research, smallholder extension, and diffusion of sustainable production systems and techniques * Rural development programs mobilize the skills, talents and labor of the rural population, through pnvate sector involvement * Rural development programs are designed so that the rural poor and other vulnerable groups are fully involved in the identification, design, implementation of the programs. Otherwise rural elites will appropriate most of the benefits Source: Rural Development: From Vision to Action. World Bank, Draft, January 17, 1997. The Strategic checklist identifies key problem areas in Morocco 3.3 The rural development agenda proposed ranges from macro to sectoral and micro. Box 3 2 What kind of rural development agenda should Morocco pursue (1997-2010)? is an overview of the key areas of focus and a guide to a holistic rural development agenda for Morocco. The agenda ranges from macro stability, to competitive real effective exchange rate, reduced distortions at trade and sector levels, institutional frameworks supportive of competitive markets along the agro-food chain, and public expenditure to improve access, delivery and cost- effectiveness Box 3.2: Strategic checklist for rural development - What kind of rural development agenda should Morocco pursue (1997-2010) ? A strategic checklist Where Morocco stands What rural development agenda a Macro-Economic Stability - Unsustainable budget and current account deficits - Achieve balanced budget by 2000 - Real effective exchange rate appreciated by 15% since - Contain inflation at 2-3% p a and real interest rate levels around 3-4% p a. 1990 - Reverse appreciation of real effective exchange rate of 15% since 1990 b Non-distortive incentive policies between - High & variable effective protection inversely - Reduce trade distortions on "strategic" commodities and high tariffs on fishmeal agriculture and non-agriculture and within proportional to comparative advantage - Develop compensatory programs for the rural poor who lose employment because agriculture - Heavy subsidization of irrigation water of reduction in trade protection oin "strategic" commodities - Reduce substantial subsidization of irrigation water c Efficient market development in agriculture - Liberalization of strategic commodities has recently - Implement market liberalization initiatives in cereals, sugar, olsceds of Spring and agro-food been announced ' 1996 - Structural weaknesses along agro-food chain - Remove legal and regulatory constraints in agro-niarketing infiastructure and i transport d. Supportive public expenditure allocations - Cost-ineffective public expenditures - Improve effectiveness of public expenditure allocations for niral programs in to rural poor infrastructure and in productive and social services c Level playing field between large farms - Sharp dualism in agriculture and agro-industry - Implement liberalization initiatives of Spring 1996 and agro-enterprises on one hand and small - Remove legal and regulatory constraints in agro-marketing infrastnicture and in operators on the other transport - Strengthen government support for public aspects of agromarketing (weights, measures, grades, dissemination of market information, quality management etc f Prevalence of efficient and sophisticated - Prevalence of low productivity small family fanms; - Strengthen delivery of productive services (research and extension) to smallholders family farms, due recogniton of rights of - Rural women severely discriminated against in rainfed and irrigated areas vulnerable groups, namely women and - Develop pilot project(s) to ascertain how best to assist poor runal women and wage wage laborers laborers g Access to and security of land tenure - Pervasive problems of access and security of land - Reconsider focus and instruiments of Agricultural Land Policy tenure - Obtain empirical information on productivity by farm sizes through ongoing - Highly skewed agricultural land distribution agricultural census h A refocused public sector supporting - Generally, underbudgeted, overextended & inefficient - Strengthen delivery of productive services (research and extension) to smnallholders research, extension and technology public sector delivery of services diffusion I Decentralized and participatory - Highly centralized despite long history of - Develop pilot project(s) to ascertain optimum degree and modalities of mechanisms for rural development decentralization and deconcentration decentralization and deconcentration programs I/ Strategic commodities are cereals, sugar, oilseeds, meat, milk and their derivatives 22 Rural development is undermined by distortions at the macro, trade and sector levels 3 4 Macroeconomic stability remains fragile and the real effective exchange rate is appreciated Morocco must establish a stable macroeconomic framework, without which no country has been able to achieve successful rural development and to increase export growth without which domestic demand is inadequate to fuel rural growth As discussed in Chapter Two, Morocco lost ground in budget deficit reduction from 1991/92 to 1995 (from 2 7 percent to 5 8 percent of GDP), and its current account deficit rose significantly (from 1 6 percent to 4 7 percent of GDP) The real effective exchange rate appreciated by about 15 percent since 1990 3 5 Severe trade distortions still prevail During the adjustment period of the late 1980s, Morocco made significant progress towards opening up the economy and reducing distortions. Maximum import tariffs were lowered from 400 percent in 1983 to 35 percent in 1994. Statutory nominal protection remains high, however, at 50 percent However, an anti-export-bias has been generated by an appreciation of the real exchange rate of about 15 percent and a negative effective protection rate of about 35 percent In import-substituting agriculture, protection remains high, and severe distortions between agriculture and nonagriculture and within agriculture remain In addition, effective protection is inversely related to comparative advantage Exports of fruits and vegetables, for example, (with domestic resource costs of 0 33 to 0 95) suffer negative effective protection while uncompetitive import substitutes enjoyed 20-98 percent nominal protection (depending on the commodity) in 1996. 3 6 Public and private monopolies and oligopolies constrain the performance of agromarketing Extensive market controls spawned by the food self-sufficiency approach still constrain domestic competition including public monopolies in agromarketing and transport, private monopolies and oligopolies in the oilseeds subsector, and public ownership of sugar factories. Deregulation in marketing infrastructure and transport services and privatization of sugar factories should complement the substantial progress made in the deregulation of external and internal trade of 'trategic" agricultural commodities since the mid-1980s (See Table 3 1 on Timetable of deregulation for external and internal trade of "strategic" agricultural commodities) 3 7 To improve productivity, skewed agricultural land distribution in Morocco may be problematic Experience and research indicate that skewed land distribution may be a major obstacle to higher productivity and broad-based growth The 1973/74 agricultural census (the latest available, one is now being designed) depicts a highly skewed land distribution 3 At the low end of the scale, an estimated 23.4 percent of the 1.93 million agriculturally-based population was landless The more than half (56 4 percent) of all farmers, who owned less than 5 ha each, occupied only 25 percent of total cultivated land. Small farms were also found to be fragmented into 5 5 parcels each on average. At the high end of the scale, the 3 percent of the agricultural population that owned more than 20 ha. each, occupied 33 percent of total cultivated land. 3 8 The focus of the Government's Agricultural Land Policy is not more equity, access and security of land for the majority of farmers The Government of Morocco chose not to undertake a radical agricultural land redistribution immediately after Independence in 1956 The State confiscated approximately one million hectares from the French colons including some of the best agricultural lands in Morocco. It disposed of these lands in the following way It retained 247,000 hectares for state institutions and state farms and distributed 327,000 hectares to 23 small farmers under the Agrarian Reform program In addition, the State intends to auction off to small farmers 202,000 hectares of land it still owns Another 216,000 hectares of land in unfavorable areas remains under dispute The main focus of Government's Agricultural Land Policy (1993) is not to redistribute land to improve equity but to achieve a minimum viable size in rainfed areas through forced consolidation and to ensure security of tenure through forced land registration and a new land lease law As a result of the skewed pattern inherited since Independence, and despite the land distributed under the Agrarian Reform, it is feared that ownership of agricultural land is even more skewed than indicated in the 1973/74 agricultural census Rural development is undermined by the inadequate delivery of basic services to the rural poor 3 9 Public expenditure allocations inhibit the access of the rural poor to basic services Out of an estimated budget (excluding interest payments) of about 22 percent of GDP in 1995, only 6 9 percent was allocated to rural areas, where 48 6 percent of the population and 72 percent of the poor live The dearth of rural infrastructure, access to potable water, electrification has already been highlighted above (see paras 2 1 and table 2 1) Moreover, spending in key subsectors has been characterized by an anti-poor bias as shown below Expenditures are cost-ineffective and skewed in favor of the urban population and against the poor. In health and education, expenditures are either heavily biased towards the urban centers and the better off or cost- ineffective In health, 75 percent of the spending goes to urban hospitals while only 8 percent goes to rural centers and dispensaries Nearly half of all expenditures benefit the highest quintile while only 7 percent is allocated to the poorest 20 percent. In public education, where the bias against rural areas is less severe (41 percent of primary education spending goes to rural areas, or 19 percent of total) the impact of the spending needs to improve 3 Expenditures are skewed in favor of large-scale irrigated areas: Public expenditures are skewed in terms of distribution of allocations between irrigated and rainfed areas. Although rainfed areas have a higher incidence of poverty than irrigated areas, more than over 50 percent of agricultural spending (61 percent between 1984 and 1987, 52 percent 1988 and 1994) has gone to irrigated areas since 1970s." In contrast to the support for large-scale irrigation infrastructure, research and extension in both irrigated and rainfed have been constrained by chronic budget shortage. Bias in favor of LSI favors the better-off. The Government has viewed expansion of irrigation as the major means to achieving food self-sufficiency. Within the irrigation budget, the greatest share has been allocated to large-scale (LSI) This bias is expected to continue under the National Irrigation Plan (Plan National d'Irrigation, PN)- 80 percent is to be allocated to LSI In addition to this bias in investment, the use of irrigation water is heavily subsidized which favors better-off farmers over poorer farmers in small- and medium-scale irrigation and in rainfed areas 3 24 3 10 The cost-effectiveness of rural programs is undermined by fragmentation among multiple budgets About 30 percent of all allocations are chanelled through some 20 Special Treasury Accounts; 27 percent of allocations are channeled through 6 ministries, 21 percent of allocations are channeled through 5 major and several more minor public sector entities, and 18 percent of allocations are channeled through rural local collectivities 3 Given the complexity of rural development the multiplicity of actors per se may be unavoidable but the lack of coordination and of loss of synergy need to be addressed. Rural development is undermined by factors reducing local participation 3.11 Decentralization has not yet resulted in autonomous local collectivities As early as 1960, Morocco began putting in place essential elements for the decentralized and participatory management of rural development initiatives. Yet local autonomy in designing and implementing cost-effective rural development programs is virtually non-existent, however. Local Collectivities (LC) are still financially and administratively dependent on the central government (CG) The Provincial Departments of sectoral ministries active in rural areas have virtually no autonomy vis- a-vis their Central Departments Local collectivities have little fiscal or administrative autonomy. Despite a long history of deconcentration and decentralization, little actual fiscal or administrative decentralization has taken place. LC have little autonomy and control only 5 percent of their total revenues 40 Forty-five percent of their expenditures are financed by the CG. LC budgets have three components (a) allocated taxes, comprising licenses, urban and property taxes (affectees, la patente, la taxe urbaine et d'dilite), which are controlled by the CG, (b) the bulk of local taxes (rates on which, are set by the CG), and (c) transferred funds, including the 30 percent of VAT (since 1988) collected centrally and distributed according to a formula (since 1995) In 1993 the respective proportions in each component in the budget were 29, 32, and 39 percent Only 15 percent of local taxes amounting to only 5 percent of their total budget, was entirely under the control of LC The tax base of rural collectivities (RC) is even narrower than the urban tax base, with a per capita rural budget of only 18.5 percent of the urban budget (1993) Local Collectivities are almost completely dependent administratively on the Ministry of Interior The Ministry of the Interior (MI) oversees all LC (the oversight function referred to as Ministire de tutelle). This means it exercises a priori approval of and control over virtually all important aspects of their functioning, including budgets, loans, out-of-budget accounts, determination of local tax rates, and even personnel hiring. Given this administrative structure, it is not surprising that these dependent units have played only a very minor role in designing and implementing rural development programs. Provincial Departments respond to central authorities, not to local communities. Although they are located in local communities, the provincial departments (PD) are entirely dependent on the central departments (CD) of the sectoral ministries for their budgets and programs In addition, the PDs are coordinated by technical committees chaired by the Governor, who is a representative of His Majesty, the King, and an agent of the MI The Governor 25 convenes fortnightly technical meetings with the PD, to which elected representatives of LC are invited only once a month Through the Governor and other lower level representatives (Caid, Khahfa, Cheikh and Moqaddem), the priorities of the Central Government predominate in rural Morocco This centrally-controlled structure means that the PD respond to the central authorities rather than to local communities and their priorities. Key elements of win-win scenarios show that simultaneous progress is required on several fronts 3 12 The win-win scenarios of the Bank's Rural sector model of Morocco support a holistic approach to rural development To identify the key components for a rural development agenda for Morocco, a joint Bank-Morocco team developed a Rural sector model of Morocco (RSM) (See Box 3 3 on A rural sector model of Morocco alternative scenarios to the year 2000-Basic structure and related Table 3.2 on Selected simulation results) The RSM is calibrated to replicate the solutions for 1994 and 2000 of the Reform scenario of the Revised minimum standard model (RMSM) The alternative win-win scenarios of the RSM require the Reform scenario (throughout Reform scenario is the same as Base case) of the RMSM (See Box 4 1 on RMSM and related Table 4 1), water tariff covering O&M, increasing export prices, accelerated productivity growth in agriculture and rural non-agriculture and water sales by farmers of 5 percent of irrigation water at three times the price of the water rent Each of these factors alone when added to the Reform scenario is not sufficient to generate growth that benefits rural Morocco, but together, they do. The synergism among them is a key feature of the approach advocated. Together, rural Morocco benefits and relatively more than urban Morocco which also benefits. In the Reform scenario alone, rainfed farm households actually lose and irrigated farm households gain only marginally Hence the need for a rural development strategy, to complement the reforms of the Reform scenario The common sense interpretation of a win-win scenario is that everybody is better off in 2000 after the reforms than in 1994, the base year, (where it is not so is in win-winl as indicated in Table 3 2) The win-win scenario 4 was formulated by successively adding different scenarios Adding water tariff covering O&M benefits only government savings (tar-om scenario). Adding yearly export price increases (this is a proxy for increasing export earnings, possibly due to an increased penetration of world markets, partially assisted by a depreciation of the real exchange rate) benefit some farm households but not everybody (win-win 1) Adding accelerated productivity increase of 0 5 percent a year for agriculture and 1 0 percent per year for rural non-agriculture significantly reduce overall unemployment and improves the income per capita for different categories of rural households relatively more than urban households (win-win 2) 26 Doubling the acceleration of productivity growth in agriculture and rural non- agriculture dramatically reduces overall unemployment and improves income per capita for all categories of rural households (win-win 3). Finally, adding the ability of farmers to sell 5 percent of irrigation water further improves incomes of rural households, particularly irrigated farm households (win- win 4) Box 3.3: Rural sector model of Morocco: alternative scenarios to the year 2000 - Basic structure The analysis of this paper uses an economywide agriculture-focused model of Morocco which has been designed for analysis of rural development issues The model emphasizes agriculture, rural non-agricultural production, and sectors with strong links to agriculture (supplying inputs or processing outputs) The model is closed by an aggregate representation of urban activities, capturing economy-wide issues. The model has a detailed treatment of agriculture, including 33 activities in crop and livestock production. Activities, which may yield multiple outputs, are disaggregated into irrigated and rainfed, differing in their techniques (yields and mixture of factors and other inputs). The model captures the structure of input-output links in the economy, inside agriculture, this includes links between crop and livestock production (for example the use of manure as input in crop production) The factors of production are divided into capital, labor (urban and rural), and agricultural resources (rainfed land, irrigated land, water, and pasture land). Producers maximize profits subject to production functions with neoclassical substitutability for factors and fixed coefficients for most intermediate inputs Households (a total of five groups, including three in agriculture -irrigated and rainfed farmers, and rural workers) receive the bulk of their incomes from the factors they control, including worker remittances from abroad, and use their income to save and consume (according to demand functions derived from utility maximization) Flexible prices clear most markets, the main exception is labor for which unemployment at a fixed real wage is possible. Given the 5-year time frame of the analysis, both capital and labor can migrate between sectors and rural-urban areas Outputs that are sold domestically and traded internationally are imperfect substitutes The same assumption is made for agricultural outputs from irrigated and rainfed zones The macro rules of the model are simple government savings is a residual, a flexible real exchange rate equilibrates the fixed current account deficit, and adjustments in the urban household savings rate assure that aggregate investment, a fixed share of GDP, is fully financed The model, which is solved in a comparative static mode, provides a simulation laboratory for doing controlled experiments, changing policies and other exogenous conditions, and measuring the impact of these changes Each solution provides a full set of economic indicators, including household incomes, prices, supplies and demands for factors and commodities (including foreign trade for the latter); and macroeconomic data 27 3 13 Components of the win-win scenarios. The win-win scenarios have the following components (a) A reformed and stable macro framework. This macro reform scenario reflects the Bank's diagnosis of the macro economy and the steps needed to put the economy back on a sustainable growth path (These requirements are set out in the Revised minimum standard model for Morocco, a standard accounting framework). See Box 4 1 Throughout the report, these requirements are referred to as macro fundamentals. The report focuses on how to build on these macro fundamentals to promote rural development This macro reform scenario is also referred to as the base case. (b) Water tariffs fully covering estimated Operations and Maintenance (O&M) costs, (c) Increasing export prices-successful market penetration, (d) Accelerated productivity increases for agriculture, (e) Accelerated productivity increases in rural non-agriculture, and (f) Sales of 5 percent of irrigation water by farmers, at water prices well above current levels 3 14 The win-win scenarios highlight the necessity of, and the synergism between increased efficiency and equity. The necessity of simultaneous progress on different fronts and the synergism among them in the win-win scenarios is based on the following logic Accelerated productivity in agriculture and rural non-agriculture represents the core of rural development as it generates improvement in rural household incomes relative to urban incomes and contributes to a drop of about 6 percent drop in overall unemployment relative to the base case (win-win 3) Note the inclusion of promoting productivity increases in the nonagriculture rural sector, a sector with close forward, backward, and consumer demand linkages to agriculture Unless supply increases are complemented by demand increases, the benefits of these increases will accrue primarily to consumers rather than producers, and agriculture and the rural sector will lose while urban areas and consumers gain Without increases in demand, productivity increases in the rural sector will not be translated into rural development. The need for increases in demand means that the overall economy must grow to generate increases in domestic demand It also means that agro-food exports must be increasingly competitive to capture expanding preferential and nonpreferential markets abroad. However, increasing export penetration without productivity increases in the rural sector does not benefit the majority of rural residents This productivity and supply growth must materialize even as irrigated agriculture gives up 5 percent of its water endowment to urban areas This relative reduction in water allocation to irrigation is inevitable as competing non- agriculture demands rise over the next decade 3 15 Results from scenario analyses seriously understate returns from reform. In interpreting results of these scenarios from this and other two models, it is important to bear in mind that they seriously understate the returns from reform for two main reasons. First, they are short run models. Typically, reform entails short-term costs but long-term benefits These models focus on the short term adjustment period because that is the period which requires immediate policy attention By not including the longer term, they have an inbuilt bias toward understating the returns from reform Second, since they compare two equilibria (comparative 28 static models) instead of tracing the disequilibrium path itself as reform unfolds (dynamic models), they understate the efficiency gains which are dynamic and long-term What furthers rural development also furthers food security 3 16 Rural development would further Government's goal of food security. Rural development would further food security because it raises productivity and incomes in agriculture and the rural sector within the framework of an efficient, outward-oriented economy It is different from past policy that focused on supply increases for food self-sufficiency irrespective of cost in an inward-oriented economy Recently, food security has officially replaced food self- sufficiency as a major goal of the Government's agricultural policy However, it is still to be fully translated into a different operational approach Food self-sufficiency has spawned a plethora of costly market controls and protective mechanisms to promote 'htrategic" commodities, some of which are beginning to be dismantled Despite these controls and mechanisms, Morocco's 'Strategic" food supplies are still highly vulnerable to drought, agricultural productivity is still low, much of agro-food marketing is still inefficient, and rural poverty is still extensive. These do not form a solid basis for food security Morocco has progressed along several key fronts 3 17 Progress along several key fronts is ground for optimism. The task of rural development is daunting but doable Morocco has already taken the first key steps to undertake this long journey First, Morocco has signed the Free Trade Agreement with the European Union, a major step towards fuller integration in the world economy Second, Morocco has made significant progress in reducing the budget deficit from 5.8 percent of GDP in 1995 to an estimated 4 percent of GDP for 1996. The Government has re-iterated its commitment to a balanced budget by 2000 in its preamble to the budget speech during the Fall of 1996 Third, in the spring of 1996, it has annnounced important domestic market deregulation measures in the cereals, sugar and oilseeds subsectors. Moreover, though high, actual nominal protection for cereals are lower than the GATT bindings (the GATT binding for soft wheat, for example, is 190 percent much higher than the actual average rate of protection of 40 percent in 1996) " Fourth, there are recent improvements in favor of the rural poor in the relative public expenditure allocations in education and health. In the investment budget allocated to the Ministry of Education, out of the DH 1.01 billion allocated yearly during 1991-95 period, relative rural allocations have increased from 22 to 43 percent. In health, the investment budget allocated to the Ministry of Public Health averaging DH 547 million a year, relative rural allocations have also increased from 14 to 35 percent over the 1991-95 period 42 Long-term plans for expanding rural potable water delivery and electrification have recently been developed. Last, but not least, the Government has consistently moved in favor of greater decentralization and deconcentration. The agenda for action: macro stability, trade, markets, agricultural productivity and factor use, public expenditure, and decentralized management 3 18 The Synthesis Report is a response to Government and World Bank priorities: product and process. This report addresses one of the top priorities of the Government of Morocco and the World Bank It complements work undertaken by MAMVA and the Ministry de I'Incitation de l'Economie. It synthesizes extensive analytical work undertaken by a World Bank-Moroccan team in the spring and summer of 1996. Volume III Technical Annex contains the working papers prepared as complements to thd existing analytical work. Box 3.4 is a brief 29 guide to their content The work (a) determines what a strategy for rural development in Morocco should include and why, (b) identifies the reforms necessary to achieve rural development, and (c) assesses the likely impact of the proposed strategy A dialogue between technical staff in Morocco and at the World Bank on the approach and findings has been ongoing since the exercise began 3 19 Simultaneous actions on several fronts are needed. The main messages of the report are that. (a) rural development, anchored in macro stability, is an economic and sociopolitical imperative for Morocco and is achievable, (b) fuller integration of its agriculture into the expanding world economy is needed to fuel Morocco's rural growth and to integrate rural Morocco into the broader Morocco-integrate the two Moroccos, (c) integration in the world economy will most likely entail transitional costs in terms of loss of employment among small farmers and the rural poor, (d) displaced segments of the population should be assisted through compensatory programs to better adjust to and thrive in the restructured and competitive agricultural sector; (e) higher productivity along lines of comparative advantage is essential for rural development and for food security, (f) public expenditure has a pivotal role to play in increasing rural productivity, improving access to basic services and in developing human capital of the rural poor, and (g) small farmers and the rural poor should be given more power in determimng how specific development programs should be designed, financed, and implemented Part Two Achieving the Vision of Rural Well-Being discusses the agenda and actions that are needed to achieve successful rural development Box 3.4: Brief guide to the working papers Morocco: An economywide analysis of selected policy reforms and A rural sector model of Morocco: alternative scenarios to the year 2000. Two analyses of the economywide and rural sectorwide consequences of alternative reform scenarios Of particular interest in the economywide model is the nature and magnitude of the tradeoff between short-term employment of farmers in rainfed cereals and longer-term efficient growth of much of agriculture if agricultural trade protection is to be substantially reduced Of particular interest in the sectorwide model are the likely rural impact of various improvements in the agricultural and rural sector and the combination of instruments that can generate win-win scenarios for rural development Social Assessment on impact of market liberalization on small cereals farmers in Morocco. An empirical socioeconomic survey assessing the current impact of high trade protection of cereals on small farmers of rainfed cereals and the likely impact of sharp deprotection on this vulnerable group Land policy and issues. A review of the Government's Agricultural Land Policy, an assessment of its adequacy in resolving long-standing land issues that undermine agricultural productivity and a diagnosis of agricultural land issues in the light of international experience. Moroccan policy reform in cereals, sugar and oilseeds. A political economy analysis of recent proposals for reform in three '§trategic" subsectors, namely cereals, sugar, and oilseeds, and the likely impact of the resulting incentive framework on efficient operations of these key subsectors 30 Dveloppement des exportations des produits agricoles, POche Artisanale marocaine aux "petits mitiers," and Quelle stratigie pour le diveloppement du commerce extirieur des produits halieutiques au Maroc? An institutional analysis of the recent trade framework that sheds light on the prospects for agro-food exports (including fishenes) and their implications for promoting efficient development for diversified and nonpreferential markets L'erode rural au Maroc, 1960-1994. A review of rural-urban migration trends and characteristics and an assessment of the implications for incentive and public expenditure policy in support of rural development. The structure and role of public expenditure in Morocco's rural development, using Stratigie de dveloppement rural-Ressources humaines: iducation et santd, and Stratigie de ddveloppement rural int6grd 1997-2010: secteurs de Promotion Nationale, lectriciti, routes et pistes, eau, et agriculture. A review of the role and structure of public expenditure in rural areas and an assessment of the consistency of these expenditures with likely available budget resources and the efficiency of their use The review is based on two background papers on public expenditures dealing with relevant subsectors Ddcentralisation et diveloppement rural au Maroc. A review of historical and recent developments in terms of the process of deconcentration and decentralization in Morocco The study compares the Moroccan expenence with selected expenences in Latin America to assess the scope for strengthening the process in the service of more cost-effective and participatory modes of development management. Toward sustainable drought management in Morocco A review of the incidence of drought in Morocco and an assessment of the sustamability of its response in the light of international experience Potentiels d'accroissement de la production et de la productivitd A review of the gap between actual average yield and potential levels for cereals in different agro-climatic zones, (best practices and research stations), an identification of key constraints, and pnonties for action for improving agricultural productivity PART TWO: ACHIEVING THE VISION OF RURAL WELL-BEING 4. CHAPTER FOUR: GENERATING EFFICIENT, LABOR- INTENSIVE GROWTH THROUGH TRADE POLICY To create an environment in which efficient, labor- intensive growth in agriculture and the rural sector can flourish, Morocco must reduce the high and uneven protection of "strategic" commodities. In the long term, reduced agricultural protection will lead to greater efficiency, and greater export diversification. In the short term, however, it will reduce employment among many of the smallholders that rural development seeks to assist The Government should offer assistance to smallholders of rainfed cereals and other rural poor who lose in the transition to help them adjust to the new competitive environment At the same time, it should reform its three main programs to assist the poor Re-establishing macroeconomic stability, and a competitive exchange regime is fundamental 4 1 Macroeconomic stability and a competitive exchange/trade regime are central to efficient growth A stable macroeconomic framework and a competitive exchange/trade regime condition the incentive environment within which private sector operates These have been referred to as 'fiacroeconomic fundamentals" Together, they provide the basis of a market- friendly approach conducive to private savings, efficient investment and capital accumulation This incentive environment, which is characterized by the following factors (a) manageable budget deficits, (b) low to moderate inflation, (c) stable real interest and exchange rates, (d) manageable external debt levels, and (e) openness to foreign trade, facilitate long-term planning by the private sector, promote high savings and investment and impose competitive discipline The Bank research findings on the East Asian miracle point to the consistent differences between the high-performers of East Asia and poorly performing developing countries with respect to these factors In the debate over the role of public policy in the making of the East Asian miracle, there is common ground between the two views. the Neoclassical view-markets take center stage and government is passive and the so-called Revisionist view-governments actively intervened in guiding resource allocation and led the markets They agree that these factors constitute the basics They are necessary if not sufficient 3 The extensive review of world development experience undertaken by the World Development Report 1991, stressed the critical importance of 32 these macro fundamentals and the consensus among development practitioners on this point Morocco's recent growth experience-4 5 percent per year GDP growth during 1986-1990 as opposed to 1 2 percent of the 1991-1995 period-under the stabilization impact of its 1983/84- 1991/92 stabilization-cum-adjustment program, also supports this consensus view without underestimating the negative impact of successive droughts 4 4 2 Macroeconomic stability and the foreign exchange/trade regime define the framework for rural development Given the centrality of the macro framework and the foreign exchange/trade regime, the search for a rural development strategy draws upon the results of the Revised minimum standard model (RMSM), a standard macro accounting framework, and an Economywide computable general equilibrium model (CGEM) to quantify gains and losses from comprehensive macro reforms " (See Box 4 1 on the RMSM and related table 4 1 and Box 4 2 on Basic structure of the computable general equilibrium model and related Table 4 2) The RMSM shows that without a package of comprehensive macro reforms that contains the fiscal deficit, controls inflation, liberalizes interest rates, reduces urban labor market rigidities, and removes the anti-export bias, growth in Morocco will at best remain at its historical rate of 3-4 percent a year, a rate that is insufficient to significantly reduce the high rate of urban unemployment. To significantly reduce its high (and socially destabilizing) level of unemployment, Morocco must achieve a 5-6 percent growth rate a year by 2000-2003, a rate of growth that the CGEM shows to be attainable with comprehensive reforms. Implementation of these reforms would add an average of 2-3 percent growth per year over the status quo. 4 3 Policy dilemma between long-term efficient benefits and short-term social costs of macro fundamentals. One may agree on the growth benefits of macro fundamentals in theory but how to achieve them in practice is likely to be controversial in Morocco. Similarly, one may agree on the efficiency costs of macroeconomic instability and inward-orientation, but how to remove these given that they generate short-term distributional benefits is likely to be controversial in Morocco The trade-off between long-term efficient growth benefits and short- term social costs is a fundamental policy dilemma for rural development in Morocco The trade- off consists of lost employment among small farmers in the cultivation of cereals as the production pattern is restructured along lines of comparative advantage How to regain and maintain macroeconomic stability is a major concern of policy makers in Morocco How to address the fundamental policy dilemma is also central concern of the holistic rural development strategy proposed here The gains and losses of the current system of trade protection, and the nature of this dilemma are discussed next. 33 Box 4.1: Kingdom of Morocco-The revised minimum standard model (RMSM) Reform Scenario and the "business as usual" or status quo scenario (1997-2003) Projections are difficult to make in Morocco, due to the large fluctuations in agriculture output caused b, climatic fluctuations changes Notwithstanding the economy's vulnerability to these shocks, two sets of projections were built to review the likely outcome (on a trend basis) of different policy scenarios (i) the impact of a reform scenario, in which the Government launches a broad reform agenda along the lines of the CAS, and (u) a "business as usual" or status quo scenario, where reforms would be undertaken at their past gradual pace, while avoiding excessive macroeconomic imbalances, consistent with the Government's track record over the last ten years of prudent macroeconomic management, even during the years with severe droughts The Reform Scenario * The Reform Scenario is predicated on decisiveness by the Government in resuming and implementing its reform program on a broad front, with particular focus on (1) clear direction, backed up by a clear sense in the country that the reform agenda is moving forward, (i) steady progress in reducing the budget deficit, (iii) success in rapidly improving external competitiveness, and (iv) improvements in the broad business environment to improve investor confidence in the economy * Under such a scenario, the economic situation would not turn around immediately but would pick up steadily while laying the ground for higher sustained growth in the early part of the next century * during 1986-90, per capita GDP grew by 2.5 percent per year, stimulated by strong growth in manufacturing exports This was made possible by steady progress on the adjustment and stabilization fronts, a large reduction m trade protection (average tariffs were reduced, quotas were eliminated, and reliance on reference prices was drastically reduced), and unproved external competitiveness through gradual depreciation of the exchange rate, accompamed by the initiation of fundamental financial sector reforms As a result, investment and national savings rates increased, averagmg 22 7 percent and 22 4 percent of GDP respectively * the proposed scenario up to the year 2000 aims at repeating this performance Key policies for achieving this are (i) steady reduction in the budget deficit (before privatization) to about 1 percent of GDP, or a steady reduction of one percentage point of GDP per year from the 1995 level of 5 7 percent of GDP This should be achieved through a reduction in the wage bill (from 11 4 percent in 1995 to 9 5 percent of GDP), continued reduction in transfers and subsidies, and steady budget reallocations towards rural and social investments with public investments remaining at about 5 percent of GDP Budget revenues would be maintained at their current levels, however, this will require the substitution of the import tax revenues lost through the EU FTA by broadening the tax base This policy would increase the pnmary surplusi to 4 percent of GDP from 8 percent in 1995, while reducing the external debt-to-GDP ratio to 59 percent from 70 percent in 1995, and the domestic debt to 39 percent of GDP from 45 percent in 1995 (u) improvement in the business environment and in restonng external competitiveness Three policy measures will be restoration and maintenance of a competitive exchange rate, improvements in the business environment, and improvement in infrastructure services through concessions and deregulation "Business as usual" or status quo scenario The "business as usual" or status quo scenario does not foresee a financial cnsis, as the Government has always demonstrated strong commitment to macroeconomic stabilization in the past and would thus take the necessary measures to prevent any impending crisis However, such a scenario would result in a continued steady erosion of performance, in line with recent trends In particular, while growth could amount to about 3 percent per year, Morocco would continue to lose market share for exports in a more competitive environment, and would thus not benefit from the expanding world trade as its engine of growth Investment and savings rates would not pick up dramatically, and budget pressures would develop, thereby further delaying the Government's social and rural development agenda More importantly, the basis for future higher growth in the next decade would then be missing Deficit on cash basis minus interest on public debt 34 Box 4.2: Kingdom of Morocco-Basic structure of the computable general equilibrium model employed in Morocco: an economy-wide analysis of selected policy reforms, (1996-2000) The model is a small open economy model in the tradition of those of Dervi, de Melo and Robinson (1982) Virtually all behavioral equations are derived from first principles, e g, demand functions for commodities are denved from the maximization of utility by consumers The key assumptions are as follows L Households and utility maximization There are 6 types of households, distinguished by source of income In each time period, each household maximizes utility from consumption subject to its budget constraint in that period There are 24 aggregate goods in the model Each good is differentiated between imports and domestic goods (the "Armington" assumption) In addition, imports from the EU and the Rest of the World are differentiated Consumer optimization produces demand functions for each of the goods, distinguished geographically by domestic, EU. and Rest of the World II. Firm behavior Firms operate under constant returns to scale and use four differentiated types of labor, capital and intermediate inputs from other sectors. Land is included in capital and is not dealt with separately Firms are pnce takers for all inputs and mimmize the costs of production given factor pnces Output which is exported is differentiated between exports and domestic production (the "CET" assumption) Analogously, exports to the EU are differentiated from exports to the Rest of the World Firms are pnce takers in all markets domestic, EU and the Rest of the World. Given output prices, and the relative costs of producing for each market, firms choose their allocation of sales across markets to maximize profits This is the "small country" assumption that assumes that Morocco cannot influence the price on world markets of its exports or exert monopsony power on its imports. The small country assumption should be appropriate in most sectors for Morocco, but non-tanff barners that are quantity dependent against Moroccan exports in a few products are not taken into account III. Factor markets There are four types of labor in the model Unskilled, skilled, salaried and proprietor Labor within a given skill type is perfectly mobile across all sectors of the economy, but firms are not able to substitute labor of one skill type for labor of another. The demand function for a factor is derived from firm cost minimization Labor supply is assumed to be upward sloping since households are assumed to value leisure time at zero in this model, (a restrictive assumption), any increase (or decrease) in employment, results in an increase (or decrease) m goods produced in the economy without any offsetting loss (or gain) to households in the value of their leisure time Each factor market is in equilibrium, i e., the price of any factor adjusts until the quantity demanded for it equals the quantity supplied. Thus, any reduction in the aggregate demand for any category of labor (without a change in its aggregate supply) will reduce employment and the real wages in that category The data of the model imply that the agricultural sectors are labor intensive relative to the rest of the economy Thus, anything that induces a move of resources out of agriculture, will reduce the wage-rental ratio, but total employment will fall only if wages fall faster than consumers goods prices. IV. Recursive dynamic model: All agents optimize within each time period For example, consumers maximize utility in a given year subject to the budget constraint of that year, rather that the present value of utility over time subject to a lifetime budget constraint The model is repeatedly shocked to produce a dynamic time path of the variables The key shocks are: increases in total factor productivity (the scalar in front of the value-added function), increases in capital flows from macroeconomic reform; reduction in the government deficit; and reduction of the protection of imports. Using total factor productivity growth as the key calibration factor, the aggregate variables in the reform scenario of this model are constrained to be equal to the projections from the Revised Minimum Standard Model (RMSM) Base or Reform scenario for Morocco. V Interpreting simulation results The gains estimated in the macro-reform scenario are relative to a status-quo scenario where reforms would be undertaken but at a very gradual pace, while avoiding excessive macroeconomic imbalances The gains estimated in the trade liberalization scenario are relative to the macro-reform scenario. 35 The anti-export bias must be reduced to stimulate growth in agriculture 4 4 The anti-export bias reduces the competitiveness of agriculture. The anti-export bias is generated by an overvalued real effective exchange rate (REER) which has appreciated by about 15 percent since 1990, and high protection on '§trategic" commodities and other imports These ' trategic" commodities are cereals, sugar, oilseeds, meat and milk and their derivatives In spring 1996, during a period of high international commodity prices, trade protection rates ranged from 20 to 98 percent, depending on the commodity (See Tables 4 3-4 6 and Chart 4 1 on Comparisons of world price projections to selected target prices). By increasing the prices of agricultural commodities used into agro-processing, protection represents a direct tax on these activities. It also raises the price of other imported inputs in transport, packaging and refrigeration. By contributing to the high cost of irrigated and high-rainfall land in areas where import substitutes compete with exports, protection represents an indirect tax on farmers " In the Gharb area, for example, the price of coastal land is high: DH 200,000 per hectare, a contributing cause being the protection afforded to banana cultivation " (It is well known that the high price of land tends to reflect values beyond financial returns). In the fish sector, the high protection on domestic fishmeal undermines value-added and the small pelagics canning subsector (See section on fisheries in Chapter 5). 4.5 Efficiency costs of high protection constraint to economic growth and reduction of consumer purchasing power The GCEM simulates the incidence of three variants of import liberalization (a) liberalization on all imports, (b) liberalization on all imports except food and agriculture, and (c) liberalization on all imports except livestock The CGEM simulations show that high import protection is costly in terms of foregone growth, and foregone consumer purchasing power Relative to the Reform scenario, complete import liberalization generates an additional real GDP growth of 1 percent per year, an additional real income of 7 percent per year, and an additional drop in consumer price indices of 6 percent, five years after the enactment of the reforms These gains are substantial The highly protected commodities constitute much of agriculture. cereals, sugar, and oilseeds together occupy 84 percent of rainfed land and 43 percent of irrigated land (crop agriculture only, not livestock) 48 The concern is that the substantial efficiency gains would not materialize if the GATT timetable of reduction in protection is followed Morocco is committed to a gradual lowering of trade protection on strategic commodities: a decrease of 24 percent over ten years, 1995-2005, from the high tariff bindings it negotiated under the GATT Indeed, the tariff bindings do not require Morocco to reduce protection, since Morocco's current rates of nominal protection being well below GATT bindings, it could actually raise protection levels and still be within these bindings 4.6 Distributional benefits of high protection on cereals- a subsidy to large farmers, processors and intermediaries. The main beneficiaries of high protection on cereals are large farmers, processors, and intermediaries who have marketable surpluses and who collect rent under the administered system. Small farmers of rainfed cereals do not benefit as producers as they are predominantly subsistence farmers with little marketable surplus They benefit only in so far as they are laborers on the farms of large farmers (see para.4.9) Given that protection primarily benefits the better-off and only marginally the poor, trade protection is a cost-ineffective method of helping the poor 36 Reduced protection hurts small farmers of rainfed cereals in the short run unless alternatives are found 4 7 Reducing protection involves a tradeoff between short-term unemployment and longer-term efficient growth Reduced agricultural protection is an essential complement to macro reforms for sustained, efficient growth In the short run, however, such gains come at the expense of agricultural jobs, in cereals, sugar, forage feed and meat/dairy The rural poor are employed mainly in cereals, and rangeland livestock In the rainfed areas, cereals-livestock activities of small farmers are closely inter-dependent Under complete import liberalization, the growth in overall employment falls by 2 percent on average per year (fall relative to the macro reform scenario). The bulk of this fall is from agriculture (crop and livestock) In the two variants of the simulation that exclude food and agriculture and livestock, there is virtually no lowering in the growth of employment. When complete trade liberalization is combined with macro reforms, the increase in jobs in the short term is smaller than if macro reforms alone are implemented (See Table 4 2 An economywide analysis of selected policy reforms-selected simulation results, 2000) This reduced gain in employment would occur even though agro-food export commodities are more labor intensive than the import substitutes from which labor is being released because (a) the rate of expansion of jobs in exports will not suffice to absorb the large numbers of displaced labor, (b) displaced labor who migrate to urban areas face high transaction costs, and (c) there are downward wage rigidities in the urban labor market " 4 8 Survey results of small farmers of rainfed cereals show that they are primarily subsistence farmers Survey results reveal the quantitative importance of subsistence farming among small farmers: small farmers in rainfed cereals (who represent about 80 percent of all farmers) are only marginally involved in the marketing of cereals Small farmers produce primarily for their own consumption, only 30 percent of their land is devoted to marketable commodities. In a good (nondrought) agricultural year, roughly 40 percent of soft wheat production is sold, with the remaining 60 percent of production consumed on-farm About 70 percent of flour consumed by small farmers comes from their own production with the remaining 30 percent purchased Small farmers are thus both producers and consumers of wheat and flour. These farmers have too little output to sell through official channels and are limited to selling in souk (market) or through unofficial traders who will purchase small amounts and extend credit. Small farmers also typically need cash and must sell soon after the harvest when prices are low In contrast, large farmers sell their output to licensed traders and the cereals cooperatives, the Socits Coopdratives Agricoles Marocaines, (SCAMs) and often are the traders themselves. 4.9 Trade protection affects small farmer income through several mechanisms. If small farmers tend not to trade in the official market, how do official prices affect them? The primary mechanism is through the labor market. Off-farm income, including income from agricultural work on large farms, petty trading, and work in factories in agro-processing accounts for roughly 35 percent of small farmers' total household income. To the extent that large farms reduce cereals cultivation demand for labor will decrease and small farmers will lose A second mechanism is through the drop in prices offered to small farmers by unofficial traders, many of whom use official prices as reference prices. A third mechanism is the increase in price variability that would occur if official target prices were not enforced at point of import. Increased price variability would mean that small farmers would face more uncertainty regarding the price they would receive for cereals. Given the vulnerability of farm income to climatic conditions and their 37 poverty, small farmers place a high value on price stability, which they consider important for income security 5o 4 10 Farmers' capacity to adjust depends on remunerative alternatives. The ability of these farmers to switch into other activities if cereals prices decline will depend on (a) availability of other viable alternatives, (b) their agro-climatic zone and soil type, (c) the availability and affordability of alternative technical packages, and (d) the costs and riskiness of alternative operations Given the precariousness of rainfed farming, household incomes of small farmers are already diversified between crops and livestock, between agriculture and non-agriculture, between own-farm and wage labor (See Table 7 4 Sources of rural household income) What they need is not just more diversification, but diversification into more remunerative activities To the extent that the Government can help these farmers develop remunerative alternatives through investments in infrastructure, dissemination of market information, the transfer of technology through research and extension, improvements in access to input and output markets, and the provision of basic public goods and services the ability of these small farmers to adjust will be strengthened In addition, priority should be given to promoting efficient and dynamic rural non- farm alternatives to improve incomes and employment Extensive research into farm-nonfarm linkages in East and South Asia, and in Sub-Saharan Africa clearly show the critical importance of these linkages." The need to help them adjust and succeed in a more competitive environment has important implications for public expenditure measures (see Chapter Seven) The deprotection of sugar and oilseeds will hurt the better off but help the efficiency of use of scarce factors 4 11 Deprotection of sugar and oilseeds primarily hurt the better off Sugar eet and sugar cane (irrigated crops) and oilseeds (a rainfed crop) are grown along the Atlantic coast, where the incidence of poverty is 5 percent-far lower than the 25 percent in the Center-North, East, and Center-South Sugar is processed by thirteen state-owned factories. The oilseeds complex is dominated by the state-owned collecting and storage agency, la COMAPRA, and two crushing facilities owned by the Lesieur Cristal group, which also controls 75 percent of oilseed refining In 1995/96, a period of high international commodity prices; the rates of nominal protection ranged from 20 to 98 percent. (See Table 4.3 on trade protection rates for selected agricultural commodities).52 4 12 Deprotection is likely to increase the efficiency of scarce factors. Some of the scarcest production factors are used in the production of sugar beet, sugarcane and oilseeds Irrigation water is probably the scarcest factor in Moroccan agriculture; high rainfall (600 mm/year and above) land is also scarce (more than half of rainfed land receives less than 400 mm/year). These scarce factors, currently used in sugar and oilseeds production, could be better applied to higher- value crops such as fruits, vegetables, forage crops and legumes. Assistance to losers is critical to successful transition to more efficient agriculture 4.13 Assistance is needed to facilitate transition. Fuller agricultural trade integration through reduced protection on '§trategic" commodities is likely to hurt both the poor and the better-off in the process of transition to a more competitive agriculture. The main groups affected are small farmers in rainfed cereals, better-off farmers of irrigated sugar beet, sugarcane and 38 oilseeds, and better-off industrial processors and other intermediaries in sugar and oilseeds The poor require short-term assistance on equity and efficiency grounds, the better-off require assistance on political economy grounds Lack of attention to either set of needs can undermine the entire process of transition For the rural poor consideration should be given to expanding existing public employment schemes and providing short-term safety net programs to protect their consumption Other programs should seek to increase their skills and raise their productivity. For the better off, skillful negotiations will be needed to deterne how they can be assisted without undermining progress toward increased efficiency of the more integrated system In the longer term, expanded market opportunities for both the poor and the better off will be essential if the deprotection is to be sustained. 4.14 Helping the rural poor adjust to reap returns from trade liberalization: key for rural development strategy in Morocco. Helping the poor adjust during the transition is essential. The social costs of transition should require policy attention, as is clear from the unfolding story of Mexico, a cautionary tale Box 4.3 presents the salient features of Mexico's ongoing reform experience Box 4.3: The costs of not effectively assisting the rural poor adjust: The case of Mexico The message of Chiapas is that bolder socio-political reforms must complement economic reforms to assist the rural poor adjust The Government has made a start on the latter, but has barely touched the former. It is costlier not to effectively assist the poor dunng the transition than to assist them. Brief overview. The Mexican economy has become increasingly open over the last decade Until recently, however, the agricultural sector was a prominent exception to economic liberalization The past two administrations (de la Madrid 1982-1988 and Salinas de Gortan 1988-1994) developed a market-oriented agricultural strategy Apart from the macroeconomic reforms and fiscal stabilization measures undertaken since 1988, the principal reforms affecting rural areas have been trade liberalization, accession to NAFTA and GATT, the devaluation of the nuevo peso in early 1995, pnvatization of agncultural parastatals, the reduction or elimination of agricultural input and pnce subsidies, and constitutional changes to allow the privatization of ejido land (ejidos are farmers'groups). The privatization gave individual titles to land. The reforms have generated moderate economuc and agricultural growth and a reduction in urban poverty, but the incidence of rural poverty remained the same between 1989 and 1992. And, urban-rural dispanties continue to be high. Most of Mexico's poor are in rural areas where the poverty rate is 47 percent versus 25 percent for urban areas Reflecting this sharp difference between urban and rural income levels, the aggregate Gim coefficient of income inequality is always higher than either the rural or urban coefficients separately Poverty in rural Mexico is also concentrated in the South and, to a lesser extent the Center, and is particularly high in predominantly indigenous mumicipalities 39 Profile of Mexican poverty: extent of poverty and urban-rural disparity Indicators Units Year Urban Rural Population % of population 1994 75 25 Poverty Incidence, % of population 1984 23 3 43 6 Headcount 1989 27 8 473 .1992 24 6 469 Extreme Poor 1984 2 4 12 2 1989 . 33 14 7 1992 . 22 15 9 Moderate Poor 1984 209 31 5 1989 244 326 -1992 224 310 Access to health services 85-95 80 60 Access to safe water :90-95 91 . 62 Access to sanitation 90-95 70 . 17 Access to electncity 90-95 91 65 Less than prunary education 1992 30 62 Gini coefficients (Income) 1984 0 443 0 449 (Overall Ginis are in 1989 0518 (0.473) parentheses) 1992 0.493 0444 (0534) 0.451 (0 533) Population 89 million (1992) Rural Population 23.3 Urban population 66.7 Extreme poor 3 7 . Extrem.poor 1 37 Moderate oor 71 Moderate poor 13 9 ... ... .. . .... .... .P. .. ...... .. ... .... ............... .. . ... .. .. ... ......... ... .... .... .... .... . . .... . . .. ...... .......... .. .... ......... . ..... .. .. .. ... .... Total poor 108 Total poor 1527 Extreme overty . <$1.3/day Extreme poyve <$17/day Moderate poverty <$1.6/day Moderate poverty <$2.2/day Regional incidence of poverty (% of population) Year National North Central South 35% 28% 40% 52% 1989 34% 24% 35% 65% 1992 :II Sources Human Development Report 1996. UNDP,1996 Mexico: Rural Poverty. Report No 15058-ME, The World Bank, September 1996 Mexico: Poverty Reduction. Report No. 15692-ME, The World Bank, December 1996 40 Pre- and post reform in agriculture. Before 1990, the main goal of Mexico's agncultural policy was to keep prices low for consumers yet ensure high prices for producers Prices were guaranteed for 12 major crops (including the "sensitive" crops of maize and beans) Between 1977-92, maize prices were 36 to 72 percent above equivalent world market prices Also dunng this period, agricultural inputs were subsidized In contrast, export crops, especially coffee were taxed directly and indirectly The principal beneficiaries of the Governnent's pnce subsidies were the large surplus producers of basic food crops who were also the major consumers of purchased inputs, including credit The main losers were rural consumers, including deficit producers, who had little or no access to the largely urban consumer subsidies The fiscal crisis of the 1980s, NAFTA, and the recent devaluation gradually led to the removal of pnce supports for most outputs and subsidies for most inputs Compensatory measures. The authorities feared that a reduction in protection and structural adjustment measures might significantly increase the incidence and severity of rural poverty Politically powerful large-scale farmers benefitted from protection and opposed liberalization To compensate for the elmination of producer pnce supports, the reduced protection implied by NAFTA and GATT, the Government introduced an income transfer program (PROCAMPO) where payments are proportional to histoncal areas planted and regional average yields Another recent initiative was the Government's high-profile anti-poverty program Programa Nacional de Sohdaridad ' (Solidarity) set up in 1988, which finances poverty-targeted investments and transfers through more than 32 separate programs The hard core of the rural poor still require more effective assistance. Nonetheless, PROCAMPO, Solidanty and other Federal Government expenditures have still not significantly benefitted the hard core of the rural poor in Chiapas Liberalization alone has done little to end chronic rural poverty. Public expenditure is still heavily biased towards larger commercial farmers. These rural poor still have little access to safety net programs, e g., food subsidies (torta sin costo, DICONSA rural stores, LICONSA milk), and tortilla subsidies are still biased towards urban areas Almost a quarter of the population works in agnculture, but receives only 8 percent of the national income In sum, the safety net remains biased in favor of urban areas and larger farmers The Chiapas Rebellion, January 1, 1994 The roots of the upnsmg in the Southern state of Chiapas, which has a high proportion of indigenous peoples, lie in severe poverty, racial discrimination, and the failure of regional and social policy. The rebellion was the worst political violence in Mexico for two decades, a symptom of deep-rooted gnevances going beyond NAFTA. The rebellion was timed to coincide with the entry into effect of NAFTA, which according to the leader was "a death sentence" for Mexico's Indians. The rebels also called for free democratic elections, more effective representation of the indigenous peoples. the redistnbution of large private estates, and the repeal of the ejido reforms In 1996, as part of the overall decentralization policy, the Government agreed to give indigenous communities more autonomy in the management of public resources and basic social services Renamed Programa de Bienstar Social recently. 41 Salient features of poverty and inequity in Chiapas. According to most indicators, Chiapas is the poorest state in Mexico. Over 50 percent of the population suffers from malnutrition Illiteracy rate in Chiapas at 30 percent is three times higher than the national average The percentages of houses without electricity, drinking water, and drainage are 33, 42 and 59 respectively compared to the national averages of 13, 21 and 36 respectively Many of the Chiapas Indians are landless in a region of large estates and cattle barons Chiapas is Mexico's pnncipal coffee-growing and the largest maize-growing state with a highly skewed land distribution--over 90 percent of coffee producers have less than 5 ha and 116 farmers possess 12 percent of the total land ' Between 1984 and 1992, coffee prices declined by 65 percent, leading to a 15 percent decline of incomes of subsistence farmers. For maize, the withdrawal of state pnce supports hurt the producers. Although Chiapas received more money than any other state in the country, the impact of the transfer has been negligible The injection of assistance through Solidarity was insufficient to offset the negative impact of low pnces Political control dictating disbursements (corruption), insufficient grassroots participation, and inadequate emphasis on the production and marketing needs of the smallholder sector contribute to this failure Sources. The Prevalence of Rural Poverty in Mexico, T McKinley and D Alarcon, World Development , v.23, no 9, 1995 Rebellion in Chiapas: Rural Reforms and Popular Struggle, Third World Quarterly, v 16, no 1, 1995 Mexico: Rural Financial Markets, Report No. 14599-ME (GC), The World Bank, August 1995 Mexico: Rural Poverty, Report No 15058-ME (GC), The World Bank, September 1996 Adjustment and Poverty in Mexican Agriculture, R.Lopez, J Nash and J Stanton, Policy Research WP No 1494, The World Bank, August 1995 4.15 Transitional costs of reform should not however deter from undertaking reform itself. However, not to engage in reform because of the fear of transitional costs would also be a costly mistake in terms of substantial foregone returns The case of Chile, presented in Box 4 4, in which Government decisively re-oriented macro, trade and sectoral policies, is instructive 2 Coffee producers tend to be among the poorest producers in Mexico. Most coffee is grown in the poor Pacific South and the Gulf Center regions Moreover, 65 percent of all coffee producers are indigenous who have the highest rural poverty rate. In 1989 when the International Coffee Organization failed to agree on production quotas, coffee prices fell by 50 percent which hurt coffee producers badly in Chiapas (and Mexico) Unlike other Latin Amencan countnes, Mexico did not take ameliorative measures in the ensuing period Coffee producers were also hurt by the overvalued peso 42 Box 4.4: The returns from bold reform: The case of Chile Chile's experience in building a strong macroeconomic basis, undertaking bold reform, and pursuing social goals at the same time, is remarkable These goals are rooted in a well-targeted and fiscally responsible use of resources The key to the Chilean success was that they 'stayed the course-consistently pursuing reform despite a painful transition Brief overview. The recent economic history of Chile is, arguably, one of the most dramatic cases of radical change in development and politics in the world In the early 1970s, the military deposed the democratically-elected Marxist president, Salvador Allende and established an authoritarian regime. This new regime sought to reshape the economic landscape of Chile along free market lines Hyperinflation and large macroeconomic imbalances were addressed first, as a precondition for economic liberalization Over the past decade, Chile achieved high output growth led by investment and exports, each of which rose on an average of 13 percent a year Inflation fell to just below 9 percent in 1994, and key social indicators were vastly improved with a notable fall in the incidence of poverty Main economic indicators: 1971-93 Period GDP Inflation . Public Sector UnempL Ave.Real Growth Deficit Rate Wage (%) (%) (% of GDP) (%) 1970-100 Allende Govt 0.7 2857 161 4.8 900 1971-73 Pmochet Regime 3.4 799 05 17.1 814 1974-89 Aylwin Govt. 5.9 196 03 6.5 947 1990-92 1993 6.4: 12.2 n.a 45 na Real Exchange Ratea 1978-81 1 01 1982-85 1.12 1986-88 1 61 a/The real exchange rate index is the ratio (expressed in common currency units) of a weighted sum of trading partners' wholesale price indices over the domestic consumer price index (1980=100). An increase in the value of the index indicates a depreciation (increased competitiveness) Average annual rates of growth: selected sub-periods Sub-period GDP (%) Agricultural GDP (%) 1975-80 7.5 2 2 1980-83 -34 -1.0 1983-89 6.2 5 8 1989-90 6.1 3.0 1990-94 7.5 4.0 43 Composition of exports (1980-93) 1980 1985 1989 1990 1991 1992 1993 Export fob 100 100 100 100 100 100 100 Copper 452 470 498 457 405 38.9 35 3 Agriculture . 72 135 9.7 118 13 7 12.3 127 of which Fresh Fruits 0 94 67 85 106 94 92 Industrial 36.2 . 28 3 * 30.6 33.0 . 37 1 40.4 44 1 Nominal protection rates for selected commodities: 1985-933 1985 1986 1987- 1988 1989 1990. 1991 1992 1993 Beef 647 60 1 272 374 28.0: -11.2 -98 24.8 302 Beets 985 94.3 787. 38 3 230 62 424 56.5 377 Wheat 132. 54 1 194 -102 -66 -13 432 33 1: 13 5 Fruits 00. 0.0 00. 00 00 00 00 00 00 (grapes) Social Indicators Indicator Life Expectancy at Birth 1960 57 1 1993 73 9 Infant Mortality (per 1000 live births) 114 . 15 Underweight Children (< 5 yrs) % 1975 2 1985-95 1 Adult literacy rate (%) 89 95 Population with access to safe water (%) 1975-80 70 1990-95 . 95 Poverty Incidence (Headcount) 1987 45 1994 29 Sources UNDP Human Development Report, 1996 Chile Economic Update:1990-93, Report No 12903-CH, The World Bank, December 1994. Indicator . 1987 1990 . 1992 Gini Coefficient 0 511 0.507 0 504 Extreme Poor (% of total) 16 8 13.8 9 0 Total Poor (Headcount) (%)' : 44 6 40 1 32 7 Rural Poverty Incidence (%) 52 5 42.8 34 3 A positive number means producers are protected, a negative number, taxed and zero, neither protected nor taxed, all with respect to prevailing border pnces Also called indigent. Per capita income less than the cost of one basic food basket. They cannot meet basic nutritional needs. Poor but not indigent. Per capita income less than two times the cost of basic food basket can meet nutritional needs but little else. 44 Urban-rural disparities Indicator Year % ofpopulation Urban Rural Population 1993 84 16 Population with access to Safe Water 1991 95 73 Population with Access to Sanitation 1990-95 84 5 Illiteracy Rate 1992 3.3 15 Poverty Incidence 1992 30 34.3 A package of far-ranging reforms. To achieve these results, the Chilean authonties implemented far-ranging and complementary policies in a prudent and persistent way over fifteen years The liberalization program of the military regime included trade liberalization, rationalization of the financial sector, and the public sector (includmg the pnvatization of many state-owned enterpnses), and reforms of the social secunty system. On the macroeconomic front, the main objectives were to reduce hyper-mflation, correct a large fiscal deficit and regain sustainable balance of payments Chilean emphasis on export orientation. Chile's export-onented policy has fostered an increasingly efficient private sector and a more diversified, more open economy Chile has not only succeeded in increasing its market shares in traditional markets, especially in Latin Amenca, but also in opening new export markets in the United States and in Asia Agricultural exports, specifically fruits, have played a major role in exports, which witnessed explosive growth following the wide ranging trade and macro reforms implemented early on. Import tanffs were gradually dismantled with the last reduction taking place in 1991 (from 15 percent to 11 percent) In addition, the Government concluded free trade agreements that gradually eliminated tanffs with Mexico in 1992, with Venezuela in 1993, and (more limited agreements) with Argentina (1991), Bolivia (1993) and Colombia (1994) Chile joined the Asia-Pacific Economic Cooperation (APEC) in 1994 and is expected to jom NAFTA shortly Significant reduction in import protection. Chile pursued a transparent policy with no pnce interventions for exports (e.g, fruits). However, for certain import-substitutes like wheat, and sugar beets, Chile implemented a price band system to reduce pnce instability for domestic producers The simple annual average of the rates of nominal protection (NPRs) for selected commodities show that the general trend is towards no subsidies and no taxes on exportables, and declining protection from 1985-90 for importables After 1990, the rise in protection can be attnbuted to the decline in world pnces, and to adjustments in pnce bands, themselves due to a recent exchange rate appreciation. Institutional reforms to improve targeting. In the late 1970s important institutional reforms were initated in the social sectors: decentralization, targeted spending in and increased private sector provision of social services. During the recession of 1982-83, an effort was made to extend social spending through a well-targeted program of assistance through unemployment subsidies, emergency employment programs, and money transfers targeted to low-income groups However, social expenditures dunng the 1980s were largely restrained. Despite effective targeting, the financial pressure on social programs threatened their success. The civilian government that took office under President Aylwii in 1990 preserved the reforms of the previous regime while simultaneously pursuing active social policies mtended to alleviate poverty Poverty has fallen to its lowest level (29% in 1994) although the Gini coefficient of income inequality (0 5) and rural poverty incidence continues to be high 45 Increased focus on human capital formation. Since 1990, the government has sought to reverse the sharp declines in the ratios of social service expenditures to GDP To do this, Chile increased pensions and social subsidies and undertook major programs in basic education, job training, health, and project funding for the poor Between 1990 and 1994, social expenditure grew about 40 percent in real terms Social expenditure as a share of the GDP increased to 15 3 percent in 1993 from 12 5 percent m 1990, the increase being financed entirely by the tax reform in 1990 in order not to undermine macroeconomic stability 6 Also, in 1995, the Government raised excise taxes to finance an increase in pensions and educational spending. Effective targeting mechanisms. Social expenditures have been fairly successful in targeting the most vulnerable groups including youth, poor women, children, the elderly, and the handicapped Targeting mechanisms include proxy means testing (for family subsidies, pension assistance, housing programs), by geographic area (through schools and health-care centers for school feeding and food supplement programs), and by self-selection for employment programs (by keeping wages below market rates) The continuing task of poverty reduction. Although the rural-urban gap has decreased over time, social indicators for rural areas are still below those of urban areas In absolute terms, most of the poor (3 2 nullion or 80 percent) are in the urban areas, but the severity of rural poverty is higher Lack of economic diversification and low educational attainment are seen as the primary reasons With unemployment rates at a histonc low, Government efforts are currently focussed on building up human capital especially in rural areas Sources: Poverty and Income Distribution During Adjustment, Bourgugnon,F et al 1991 WPS 810, The World Bank Developmentalism,Socialism, and Free Market Reform, 1993 Marcel, M and Solinano, A WPS 1188, The World Bank. Chile:Strategy for Rural Areas - Enhancing Agricultural Competitiveness and Alleviating Rural Poverty, 1994 Report No 12776-CH, The World Bank Surveillance of Agricultural Price and Trade Policy: A Synthesis for Selected Latin American Countries, 1995 Valdes,A with Meyer,M and Schaeffer,B Report No 14609-LAC, The World Bank. Chile Economic Update: 1990-93, Report No 12903-CH, The World Bank, December 1994 Protecting the Poor During Adjustment and Transitions, Subbarao, K et al 1995 HCO WP58, The World Bank. Administering Targeted Social Programs in Latin America, Grosh, M. 1994 The World Bank Regional and Sectoral Studies 4.16 Properly designed and managed public works programs can reach the poor effectively Studies of two major rural works schemes, India's Maharashtra Employment Guarantee Scheme (EGS), which followed the severe drought of 1970-1973, and Bangladesh's Food for Work Program (FFWP), set up shortly after the 1974 famine, suggest that rural public works can reach the poor cost-effectively if properly designed and managed Both EGS and FFWP assisted the poor through (a) targeting (roughly 90 percent of participants were below the poverty level), (b) increasing wage income (wage income transferred was well above 50 percent 6 The tax reform widened the tax base. increased the tax rates, and restructured tax brackets to increase the progressiveness of the personal income tax 46 of foregone income), and (c) stabilizing incomes of the poor, particularly during periods of drought These programs were also cost-effective, with the wage bill representing 60-70 percent of total outlays Appropriate setting of wage rates and schedules, geographical targeting, and management are critical to the success of a program 1 Before expanding public works schemes, the Government of Morocco should revilatize existing schemes of the Promotion Nationale, as it implements its new rural focus Adequacy of skills to run the programs is of particular concern Developing pilot programs may also prove useful 4 17 Can food subsidies be abolished to fund adjustment support? Food subsidies represent a major drain on the budget in Morocco; abolishing these subsidies would free up scarce funds that could be used for adjustment support Whether it is politically feasible or not to remove food subsidies (and if so, when) must be determined by the Government of Morocco.54 4 18 Food subsidies in Morocco are costly. Food subsidies are a significant portion of government expenditures and of GDP, yet they do not primarily benefit poor consumers Gross subsidies on flour, sugar, and cooking oils totalled DH 4 4 billion in 1995 and DH 4.6 billion in 1996 Net (of trade revenues) subsidies totalled about DH 1.4 billion in 1995 and DH 3 0 billion in 1996, accounting for approximately 5 0 percent of total government expenditures, or about -1.5 percent of GDP a year between 1991-1996 Between 1988 and 1994, subsidies which averaged 4 5 percent of the government budget (1 2-1 5 percent of GDP), exceeded the total agricultural budget 1 These subsidies constitute the largest single transfer in the government budget and represent roughly 75 percent of total social transfers 4 19 Food subsidies are untargeted to poor consumers. A substantial portion of total subsidies accrue to producers rather than consumers and as such they benefit better-off producers rather than the poor. In cereals, for example, small farmers of rainfed cereals do not participate in the official system of administered prices; nearly all the benefits accrue to large farmers Moreover, most of these subsidies are not true economic subsidies, but financial transfers to compensate consumers for high domestic producer prices 5 As consumer subsidies, they benefit primarily better-off consumers. Even for flour (FNBT: farine nationale de ble tendre) subsidies which have a self-targeting mechanism, the poorest quintile of the population received only 15 percent of total subsidy For sugar, wealthy consumers received 25 percent of the subsidy while the poorest quintile received only 15 percent. For vegetable oils the wealthiest quintile received 32 percent of the subsidy while the lowest quintile received only 11 percent " (See Table 4 7 Costs and benefits of food subsidies in Morocco: fiscal importance and incidence). Given this distribution of benefits, the food subsidies program cannot be justified as an effective instrument for income redistribution; and if retained, the programs require reform The incidence of Moroccan food subsidies however is comparable to the incidence of generalized food subsidy programs in other countries. International experience with food subsidies show that targeting is significantly improved when self-selecting mechanisms replace generalized systems, e g, Tunisia (1993), Jamaica, and Chile (See Table 4.8: Absolute incidence of various subsidy programs: international comparisons) 4 20 Reform of food subsidies is expected to increase growth and income but could hurt the poor in the short run. Results from general and partial equilibrium scenario analyses of the impact of reforming these food subsidies reveal both the scope for increasing growth and income and the potential for aggravating the circumstances of the poor in the short run 47 Simulation results from the CGEM show that introducing complete trade liberalization and abolishing food subsidies increases growth and real income Five years after the reforms, GDP would have grown by an additional I percent a year above the reform scenario, and real income by an additional 7 percent a year. Relative to the reform scenario, the increase in employment will be significantly smaller however with import-substituting agriculture bearing the brunt of the lost employment Changing the form of the subsidies to a targeted food voucher scheme would generate an even higher increase in real income of 8 percent per year instead of 7 percent Scenario analyses in a partial equilibrium framework undertaken to explore the likely impact of different reforms show negative short-term impact on the poor. In all the exercises, trade protection was not reduced One exercise was to eliminate all food subsidies In this case the incidence of poverty would increase by 2 7 to 4 1 percent over 1995 baseline levels (depending on assumptions on the resulting market price increases) A second exercise was to eliminate subsidies on sugar and oils and to improve the self-targeting feature of the flour subsidy Under this scenario, the incidence of poverty would increase 1 8 percent over the 1995 baseline level Finally, replacing generalized subsidies with food stamps were examined Under all the exercises, the fiscal gain (exclusive of administrative costs) would be substantial but the incidence of poverty would rise by 2 0-3 0 percent Both general and partial equilibrium analysis, show that food subsidies should not be eliminated without reducing trade protection Although the major beneficiaries of this subsidy-cum- protection apparatus are the better off, eliminating food subsidies would also hurt the urban and rural poor Indeed, eliminating food subsidies should be viewed as an integral component of the protection apparatus If protection is abolished, then the poor will need assistance as producers The poor who are benefiting from public employment schemes will continue to need consumption support as well. The issue is then not whether the poor need assistance but how to establish the most cost-effective and politically sustainable mechanisms of assisting them 4.21 Other social safety net mechanisms also need reform. Morocco's two other safety-net mechanisms--the Promotion Nationale (PN), with a budget of DH 665 million, and the Entraide Nationale (EN), with a budget of DH 300 million-have also failed to primarily benefit the poor Established in 1961 as a program of labor-intensive public works in rural areas, the PN has devoted the bulk of its resources to administration and to works of low labor intensities The EN, established in 1957 as a welfare program for feeding widows, orphans and people with disabilities has diverted most of its funding to training and was forced to drastically cut back its compensatory food program when USAID cancelled its support in 1992 " In both programs, only 30 percent of all spending has benefitted the poor" 5. CHAPTER FIVE: GENERATING EFFICIENT, LABOR- INTENSIVE GROWTH THROUGH SECTOR POLICY To increase competitiveness of the Moroccan agro-food sector (including fisheries) the State needs to redirect its activities, focusing on creating a legal and regulatory framework conducive to competitive domestic marketing. Policy-induced constraints reduce competitiveness (cost) and effectiveness (quality and timeliness) of the agro-food chain and need to be removed Recent initiatives to deregulate cereals, sugar and oilseeds markets represent important steps toward achieving greater efficiency and should be implemented promptly Promoting the agro-food sector is essential to rural development 5 1 The agro-food sector provides the critical demand link for agricultural growth To generate efficient, labor-intensive growth in agriculture the role of the Government is to promote the agro-food sector, because agricultural growth is demand-driven. Direct (production) and indirect (services) employment generated by a dynamic agro-food exports would provide a much needed outlet for labor displaced by the deprotection of uncompetitive import substitutes Given external challenges and opportunities, Morocco must seize the opportunity to penetrate expanding world markets to fuel domestic growth The CGEM and the RSM, developed to explore the likely impact of different reform scenarios on the rural sector, clearly show that supply increases that face inelastic demand hurt suppliers and benefit consumers only. Demand growth and income elasticities of demand have a major impact in determining whether agricultural supply increases are translated into income gains for the originating sector. In the CGEM, growth of the domestic economy following macro reforms requires an accommodating foreign demand. In the win-win scenarios of the RSM translating increased agricultural and rural productivity and supply into rural development requires increased horticultural exports Improved access to foreign markets is thus essential for high growth in rural Morocco ' 5.2 Export success depends on Morocco's response to the new external environment. Since relative market access issues have already been determined, Morocco should focus on improving competitiveness in terms of price, quality, and on time delivery, issues of critical importance in today's markets. The successful experience of exporters of high-value horticulture shows that domestic policy has a determining impact on competitiveness and market penetration, not trade barriers in export markets (although these of course do matter) "Careful management of all aspects of the production/marketing chain and economies of scale are the keys to 49 success" 61 Within the next five years, Morocco must make the transition from supplying primarily undifferentiated commodities to supplying differentiated commodities for niche markets thereby achieving greater bargaining power Achieving this transition is the major challenge of agro-food exports Extensive reforms are required to promote efficiency along the agro-food chain 5.3 Reducing dualism in the agro-food sector would unleash potential strength. Morocco's agro-food sector is dualistic a small number of large enterprises which are highly integrated and export-oriented, produce differentiated products of high quality, and a large number of small- and medium-size firms, produce low quality, undifferentiated output, and are domestic-oriented Typically, the latter use outdated technologies that are inefficient and poorly adapted to demand 62 This dualism represents both a major weakness and a reservoir of strength It shows the significant potential for growth of the sector increase growth by increasing the number of firms that successfully produce export-quality products Any export promotion strategy should involve this majority on both efficiency and distributional grounds The agro-food sector already makes a significant contribution to export earnings, but most of it comes from a minority of large enterprises. Between 1990 and 1996 agro-food exports accounted for 20-25 percent of merchandise exports Exports of fish accounted for half of these exports with the other half being made up of fruits and vegetables (fresh and processed) and flowers Other subsectors of potential remain untapped Spices, essential oils and aromatic plants have potential but are poorly developed, and the significant potential of export earnings and employment creation in the fish subsector remains unexploited. 5 4 Increasing exports requires the development of the domestic market. "Successful export diversification often depends upon prior and parallel development of domestic markets" 64 Domestic markets provide a valuable springboard for exports and an outlet for diversifying risks and revenues Morocco's dualistic agro-food sector, in which domestic markets are considered dumping grounds for export rejects, keeps small- and medium-size firms uncompetitive The role of domestic markets to diversify risks and returns is particularly important given the high riskiness of horticultural exports. The State thus has an important role to play in helping these firms overcome sector-wide weaknesses to improving competitiveness so that they can also produce export-quality output 5 5 Sectoral policies undermine the competitiveness of the agro-food sector Sectoral policies undermine the competitiveness of agro-food exports. In irrigated areas water is rationed to "strategic" crops (cereals and sugar, they have priority) rather than to export-oriented commodities Imported agricultural inputs that are used for exports still do not benefit from an automatic temporary admission scheme under which they are exempt from the high tariffs on inputs in exports Special requests have to be made, which makes the process cumbersome and increases costs. In addition, export of food using subsidized food commodities (flour, sugar and vegetable oil) requires an export license. 6 Packaging (carton, metallic and glass containers) is monopolistic. For major exporters of fresh horticultural produce, packaging constitutes as much as 50 percent of cost of agro-processing ' 5 6 Policy-induced constraints undermine competitiveness of agro-food marketing. Policy-induced, sector-level constraints, in terms of hardware (infrastructure) and software (legal and regulatory), undermine the competitiveness of agro-food markets in Morocco Souks 50 (markets) which remain the main centers for wholesale and retail trade are run by urban communes they are dilapidated and poorly maintained Slaughterhouses are generally also in poor condition Disposal of offals and wastewater constitute an environmental hazard The private sector can provide much of infrastructure needed to reduce spoilage and maintain high quality, but the incentives are not there To increase the competitiveness of the agro-food sector, the State must change the legal and regulatory framework to promote private-sector incentives It should also focus on the software aspects of efficient marketing Specifically, it should focus on the public services aspects by (a) providing standardized weights and measures, and grades, (b) disseminating timely market information on prices and market trends, (c) helping small- and medium-size enterprises understand and apply the public aspects of quality management, in the areas of public health standards, environmental norms (with respect to production and packaging), and consumer demand for truthful labeling. In addition, the private sector is also weakened by the lack of autonomous professional and interprofessional associations, capable of assisting its members to better solve similar requirements of quality management, technology transfer and adoption, and acquisition of timely market information The legal and regulatory framework has to be revised to promote such associations 5 7 Structural weaknesses result from the monopoly of urban communes in marketing infrastructure. Agro-food markets in Morocco, continue to bear the heavy burden of the State's interventionist approach The poor quality of these marketing infrastructures stems largely from the regulatory framework, created in 1962, according to which urban communes have a monopoly in establishing and managing souks, on which they can levy a 7 percent tax. The communes (which are generally strapped for funds) are interested mainly in extracting tax revenue rather than in investing in these market centers This monopoly is costly to private sector operations in terms of high wastage and low quality Because of the high cost of using the souks and slaughterhouses and the dilapidated nature of their facilities, many market transactions occur outside the souk, thus avoiding public health scrutiny and weakening the potential cost-reducing impact of competitive transactions 5.8 Transport monopolies undermine the development of competitive commercial transport services in Morocco. The competitiveness and the slim business margins of undifferentiated fresh agro-exports demands competitively priced, high quality transport and handling services on sea, air and road. "Export potential can only be realised if fast, reliable and cost-effective transport is available It is normally the largest single cost item" 6 The excess costs due to a host of restrictive practices were quantified in a field study of transport chains originating or ending in Maghreb countries. For Morocco, the estimated ad valorem excess costs (excess costs are direct costs that would disappear following removal of specific barriers along the transport chain) are particularly high for fruit and vegetables exports: from 6 to 12 percent.6' In Morocco, monopolies (and their regulations) constrain transport which together with handling represents 38 percent of total cost of agro-food exports.6' This high share is largely caused by the regulations on commercial transport services and by the de facto monopolies of the Office National des Transports (ONT, created in 1936) and the Royal Air Maroc, (RAM, created in 1978) and the Office de Dveloppement des Ports (ODEP, created in 1984). In a business in which margins are very slim, these additional costs can make the difference between success and failure The ONT holds the monopoly of freight 51 forwarding, that is every commercial supplier and demander of freight services must in principle go through the ONT For this mandatory service, they must pay 4-5 percent of the freight rates, plus 1 percent on average to compensate truckers for empty back-hauls for the road transport.'o The Ministry of Transport grants licenses to individuals, and these individuals are usually not the truckers themselves These licenses also are not granted on the basis of professional standards of competence and road safety. The rents generated by these licenses and regulation on commercial trucking undermine the development of professional, high quality and competitively priced (in particular refrigerated) trucking services and compromises road safety The fiscal burden on international truck transport is also heavy with a combination of fixed and variable taxes, the latter a function of the tonnage carried and distance travelled " The users of port handling services have not financially derived full benefits from the increased efficiency of ODEP's port management over the last decade Instead, they have had to pay some 25-30 percent more than what they would have paid had ODEP priced its services competitively 72 The RAM maintains its grip on the air cargo market, particularly through its de facto monopoly on ground handling services and shippers complain about lost opportunities to use foreign carriers at more advantageous prices. 5 9 Regulations undermine the competitiveness of Morocan international truck transport (ITT or TIR in French). Regulations on international truck transport are cumbersome and undermine competitiveness of transport services and hence of agro-food exports Major obstacles include (a) Moroccan ITT are forbidden to pick up cargo along the Moroccan leg of their return trip to the point where they have to load their next cargo for export to Europe, an operation referred to as cabotage. They are thus forced to travel long distances, 500-1000 km, without cargo. These empty hauls inevitably raise their costs significantly This restriction, intended to protect domestic trucking in Morocco, leaves Moroccan ITT at a disadvantage since competing European ITT do not face such restrictions on "cabotage" in Europe, (b) Moroccan ITT is subject to a total gross weight (poids total autorise en charge, or PTAC) of 38 tons per truck as opposed to 40 tons per truck in Europe. This lower limit raises costs for Moroccan ITT relative to their European competitors In so doing, it reduces the availability of competitively priced transport services to agro- food enterprises. This difference in total gross weight, only one of several differences in technical norms between Morocco and its European ITT competitors, exemplifies the lag that persists between Moroccan and international regulation in this critical area, to the detriment of Morocco 7 The lag may be explained by the fact that the maintenance of the 38 tons norm acts as mechanism to protect local industry assembling these equipment, and 52 (c) the lack of operational flexibility in ODEP's operations and the complexity of its customs clearance procedures. International agro-food business for undifferentiated products is extremely competitive margins are slim and success depends on selling large quantifies at competitive prices, ensuring high quality and delivering on time. These problems have been documented, analyzed, and discussed, but there has been no major coordinated reform effort Only such an effort can break through this quagmire of regulations and improve the institutional environment in the agro-food sector, so that the sector attracts domestic and foreign direct investment and joint ventures 74 Such ventures can provide the financial resources, technical expertise, and market connections essential for revitalizing the agro-food sector 5 10 Small- and medium-size enterprises require assistance in order to thrive in more competitive agro-food markets Reducing the high protection and increasing domestic competition would give the majority of small and medium entreprises the incentives to improve product and process Typically, these enterprises suffer from unreliable procurement, poorly adapted technologies and absence of a demand-orientation in their marketing strategy The task is to improve reliability in procurement, adaptation of processing technology and customer- orientation in marketing so that the majority can begin to produce differentiated goods for niche markets Because of the close interdependence among different links in the agro-food chain, the State must remove sector-wide constraints which weaken these linkages In particular, it must remove the legal and regulatory constraints, costly legacies of an interventionist approach. Deregulating domestic marketing in cereals, sugar and oilseeds is needed to increase efficiency 5 11 Pros and cons of maintaining high protection. For fiscal 1996-97 the Government has decided not to remove the price and resource allocation distortions caused by trade protection but to improve efficiencies in processing and marketing within this high protective barrier Though not a first-best solution, the decision nevertheless represents an important step in the right direction. The advantage of this approach is that it may dampen political pressures to delay the liberalization measures The disadvantage of this approach is that it will maintain the inefficiencies of this system, which reduces growth dynamism, and consumer purchasing power, both hurting rural development 5 12 Removing controls on domestic marketing of cereals, sugar, and oilseeds represents an important step Most controls on domestic marketing and imports are scheduled for removal during 1996-97 Import monopolies of ONICL (cereals), ONTS (tea and sugar), and BURAPRO (oilseeds complex) are also scheduled for elimination. Flour millers will be free to procure wheat from any source and to sell products to any buyer, and fixed margins in cereals marketing, quotas in vegetables refining, and fixed margin per factory will be abolished Elimination of these constraints should reduce rents, corruption, and fraud, and improve efficiency (See Table 3 1 on Timetable of deregulation for "strategic" commodities) 5 13 The Government is however maintaining high trade protection. Fulfilling its commitments under the GATT, the Government created a two-part tariff system in the spring of 1996 for cereals, sugar and oilseeds/vegetable oils It adjusted the tariffs to maintain current price 53 levels (for cereals, these are now referred to as target prices) It changed the system of protection but not the levels Despite high commodity world prices protection rates remain high and variable (Morocco's high protection rates are not high compared to the measures of assistance to farmers in the EU and Japan) In mid-1996, before tariffication, nominal protection rates were about 17 to 40 percent on cereals, 63 percent on raw sugar; 53 percent on oilseed, and 98 percent on raw oil The two-part tariff includes a 25 to 148 percent base rate (depending on the commodity) and a 16 percent additive rate 7 (See Tables 4 3-4 6 on protection for selected agricultural commodities) If these target prices are maintained, and projected international commodity prices fall, the divergences between domestic and international prices will increase or persist (See Chart 4 1 on Comparison of world price projections to selected 1996 Moroccan target prices) 5 14 Private sector pressures on the GOM to maintain controls may dilute efficiency gains For years the private sector has divided the rents of an administered system Now, for the first time, they are required to actually compete Because the new measures threaten the interests of processors and intermediaries, the beneficiaries of these market controls, the Government will be under intense pressure to delay or limit market decontrol These pressures clearly show which groups are benefitting from these various controls Through their association, the Association Professionnelle des Minotiers, millers have asked the Government to maintain transport subsidies, claiming that since many mills were opened under government's directives the millers should not bear the full brunt of adjustment In response, the Government has agreed to maintain transport subsidies for the next four years The millers had also requested a restriction to outsiders on the right to mill for the next four years. The Government has rejected the millers' request to restrict the right to mill for this period The farmers'associations have asked for price support The Government has granted a request by these associations to maintain a temporary (three months only) support price of DH 2,300/ton for soft wheat given that the harvest has been exceptionally good and prices typically fall at harvest time Processors and intermediaries in cereals, sugar and oilseeds also point out that they should not be asked to adjust unless the GOM pays off its substantial arrears on subsidy payments estimated at DH 3.0 billion The Government has decided to clear arrears over the next twelve month period Given these pressures it is still too early to predict whether the recent deregulation measures will be promptly implemented 5.15 The losers from this high protection, final consumers and intermediary users of feed ingredients, are silent It is noteworthy that the losers from this high protection, final consumers and mixed feed providers (users of maize and mealcakes mainly for poultry) have not organized support for these liberalization measures After tariffication in the spring of 1996, protection remained high on livestock feed ingredients: maize received a 41 percent protection, soybean meal, 27 percent and rapeseed meal 29 percent 6 The different political reactions of the gainers and losers of high protection to the Government's recent liberalization initiatives is very instructive on the political economy of price reform in agriculture. 5.16 Using efficiency gains to protect inefficient production systems a misguided strategy. Should the domestic decontrol measures be implemented traders will compete to offer farmers better prices Market signals would then generate the correct signals on resource allocation unless incentives are artificially raised through continued high protection Under such an incentive structure, greater efficiency in processing and intermediation could benefit small producers through even higher farm prices. Allocating efficiency gains this way would be a mistake, however, since it would give farmers the wrong signals to expand cereals production, a substantial 54 portion of which should be replaced by either higher-value alternatives or more environmentally suitable cropping systems Expansion of inefficient cereals cultivation cannot lead to efficient agricultural growth, long-term income enhancement or employment prospects of rural Morocco 5 17 Additional action is needed to strengthen efficiency. The Government should reconsider its protection policy and try to maximize the potential efficiency gains of the deregulation measures it has already taken by (a) ensuring their prompt implementation, (b) monitoring their impact on rents and efficiency, (c) viewing the current cumbersome two-part tariff system as temporary and losing no time in devising a simpler, more transparent system, (d) seizing any opportunities afforded by border price changes and domestic market availability to reduce target prices significantly; and (e) promoting competitiveness of domestic agricultural markets and of exports, in order to expand viable alternatives to inefficient commodity systems The window of opportunity afforded by expanding world markets on one hand and high commodity prices on the other should be seized to facilitate the transition to more efficient domestic market operations Reform and assistance are needed to maximize value-added in the high- potentialfisheries sector. 5 18 Sector-level constraints undermine value added in the artisanal, deep-sea fishing and canning segments of fisheries. The three segments face both unique and common constraints These undermine the efficient development of the fisheries sector with significant potential for export earnings (currently 16 percent of merchandise export earnings or 56 percent of agro-food exports), employment creation (currently 98,000 of direct employment) and poverty alleviation (artisanal fishermen, part rural or full-time are some of the poorest)." All three subsectors contribute to these objectives but in different degrees. The artisanal segment employs roughly 21,000 including some of the poorest of the rural poor They make a significant contribution to both domestic supply but particularly to exports of white fish (demersals) and shellfish, although reliable numbers on their contribution are virtually impossible to obtain. Their main constraints are inadequate landing and marketing facilities in fishing ports, lack of inputs such as gasoil and ice, limited marketing alternatives and virtual lack of quality management. There is a conflict between coastal trawlers and artisanal fishermen for demersal stock, which only the Government can resolve The deep-sea fishing fleet, major supplier of high-value exports is capital- intensive and closely integrated with export markets Its capital intensity makes it largely independent of port facilities and other infrastructure It competes with coastal trawlers for fast-dwindling stocks of white fish. The processing industry of small pelagics is a major supplier of both Moroccan and EU markets for canned sardines and mackerel The fishmeal industry produces fishmeal (an important input in poultry feed) and fishoil only for the local market on account of high tariffs on imported meal. Unlike the demersal stocks, the pelagic stocks along the southern coastline of Morocco are underfished, while they are overfished in the central and northern zones. The main constraints to its 55 efficient development are the high import protection of domestic fishmeal, price fixing of fresh sardines with no premium for quality, poor infrastructure in fishing ports, poor development of boat technology, a complex system of taxation in fishing ports (some 20 taxes/fees in all), multiplicity of government interventions in ports (some seven separate agencies), and fragmented and punitive quality management." 5 19 Trade-offs need to be resolved in maximizing value-added in fish sector. In promoting efficient and sustainable development, while maximizing rural development impact, the Government has to balance conflicting objectives. These are (a) short term versus the long term- increasing fishing activities of demersals (white fish) and cephalopods (e g, octopus, squid) today for more revenues versus sustainable resource management over time, (b) large- versus small- scale-favoring capital-intensive and bigger catches (deep sea fishing fleet and coastal trawlers) versus small-scale and artisanal fishermen with smaller catches With current information, it is unclear whether there is a trade-off between more efficient growth of the fish sector and more short-term employment; (c) higher domestic production of fishmeal versus increased fish export earnings," and (d) higher domestic production of fishmeal versus higher production of poultry for which fishmeal is an important feed ingredient In the canning of small pelagics, the critical decision is at the trade level the high protection of domestic fishmeal Currently, the 50 percent tariff protection on fishmeal undermines the development of the entire fish canning industry, which has greater potential for value added, export earnings and employment creation than fishmeal so It also penalizes the modern poultry industry, and therefore poor consumers for whom poultry could be a cheaper source of protein. The similarities between the two major agro-food subsectors, the fruits-vegetables-flowers subsector and the fish subsector, are striking 5 20 Policy-induced constraints undermine agro-fish marketing. Weak links in the harbor- to-sale chain undermine the value added by and competitiveness of fisheries. Problems include (a) poor management of fishing ports and improper spacing of landings, which contribute to crowding, deficient handling, and quality deterioration; (b) inadequate fishing port facilities, (c) excessive bureaucracy (seven separate agencies handle fisheries issues), (d) a complex system of taxation that include twenty different taxes, (e) a non-transparent system of auction management, and (f) a fragmented and punitive system of quality management These policy-induced infrastructural and institutional weaknesses are particularly damaging to the artisanal sector which needs to be integrated into a higher value-added fish sector, through increased marketing alternatives, and better access to equipment and infrastructure. 6. CHAPTER SIX: INCREASING AGRICULTURAL PRODUCTIVITY THROUGH INSTITUTIONAL POLICY An efficient agrofood chain requires efficient factor use in agriculture, thereby generating sustainable productivity increases, along lines of comparative advantage. Such an agriculture-high productivity, diversified and resilient-is the backbone of successful rural development Transforming today's agriculture into such an agriculture is a long-term process requiring fundamental changes in the institutional approaches to the development of rainfed and irrigated agriculture as well as in policies towards food security, drought management, and agricultural land policy, legitimate government concerns. What furthers rural development also furthers food security and sustainable drought management However, Government's current Agricultural Land Policy is not likely to increase agricultural productivity among the majority, the smallholders Increasing agricultural productivity is essential and possible 6 1 Increasing agricultural productivity is essential to improving the competitiveness of the agro-food sector. High-productivity agriculture is essential for successful rural development as it is the backbone of a thriving rural sector. Indeed, as stated above, agriculture is a major sector and fluctuations in its performance have a pervasive impact on Morocco (See Table 6.1 on agriculture's contribution to the economy and accompanying Graphic 6.1 on its widely fluctuating performance) Productivity can be increased by reducing the significant yield gaps that exist between actual and best practice in Morocco. While maximizing yield levels is not the objective (increasing yields at any cost is not the objective), closing yield gaps that also reduce the economic cost per unit of output is critical if Morocco is to become competitive in agro-food markets A high productivity agriculture in turns increases the agriculturally-induced rural income multipler and translated into increased household income, promotes household food security. (See paras. 6.22-6 30) 6 2 Increased productivity in irrigation is important for strengthening competitiveness of the agro-food exports. Low productivity prevails even in large-scale irrigation (LSI), a highly favored sector. Extensive wastage of irrigation water in LSI undermines the productivity of 57 irrigation and therefore the economic viability and competitiveness of agro-food exports To compete in global agro-food export markets, Morocco must reduce its water cost per unit of foreign currency earned irrigation is estimated to contribute to 50 percent of agro-food exports Irrigation, mainly LSI, has received the lion's share of agriculture investment-over half of investment by M4AMVA or 12-15 percent of total public investment for the past two decades-yet its productivity is undermined by, inter alia, poor cultural practices, and a complex set of institutional weaknesses and engineering ngidities Currently, the irrigation sector uses an estimated 85 percent of mobilized water Water efficiency is below 50 percent (in an efficient system, the rate is above 60 percent) In an economy where water is scarce, wastage of irrigation water has a high financial, economic and environmental cost Increased efficiency would not only increase competitiveness but also generate water savings, of key importance in keeping the cost of responding to expected demand increases affordable It has been estimated that a 20 percent savings could reduce the cost of mobilizing water from 5 DH/m3 to about 1 5 DH/m' or lower by 2020.1 6 3 Demand constraints must be released if higher productivity is to benefit rural producer households. A recurrent message of the productivity-increasing scenarios of the RSM is that expanding agricultural and rural productivity and supply must be accompanied by expanding demand if agriculture and the rural sector are to benefit The extent to which agriculture and the rural sector benefit depends on income elasticities of demand for the final output, that is on the responsiveness of quantity demanded to changes in income levels In the accelerated productivity scenarios of agriculture, rural non-agriculture, and other sectors, the producing household category that gains the most is always the one facing higher income elasticities. The importance of tapping expanding world markets to break the demand constraint is discussed in para. 2.8. Simulation results highlight the importance for rural development of increasing productivity in agriculture and in the rural non-farm sector 6 4 Simulation results show that raising productivity in agriculture and rural non- agriculture should be a priority. Simulation results of the RSM developed to explore the quantitative impact of alternative reform packages show the importance for rural development of improving productivity in agriculture. Accelerated productivity increases raises growth of GDP and reduces overall unemployment over and above what macro reforms alone would generate Thus a 1.0 percent per year increase in productivity in both irrigated and rainfed agriculture, would increase overall GDP growth by 0.2 to 0.5 percentage points (above the reform scenario) and reduce unemployment by 1 3 to 3 5 percentage points respectively 82 Combining productivity increases in agriculture and in rural non-agriculture would have even more positive effects In win-win 3 scenario, GDP growth would rise by another 0 8 percentage point per year and overall unemployment would fall by an additional 4.4 percentage points, both results relative to the levels in the reform scenario (See Table 3 2 on Rural sector model of Morocco selected simulation results) How to equip rural areas to increase rural productivity is discussed below and in Chapter Seven 6 5 Accelerated productivity from rainfed agriculture has greater rural development impact than from irrigated. Given its relative size in agriculture and the rural economy, the impact of accelerated productivity in the rainfed subsector is significantly greater than in irrigated 58 agriculture A one percent per year growth in productivity in the rainfed subsector would benefit the following household categories rainfed farm, rural labor and other rural households, more than a one percent per year growth in productivity of the irrigated subsector In addition, it would contribute to a higher increase in GDP growth and larger fall in overall unemployment rate, both relative to levels in the reform scenario (See Table 3.2 on Rural sector model of Morocco) 6.6 Improving productivity in rainfed agriculture should no longer be neglected. Under current policy, enhanced productivity is not a primary goal Instead, the priority in public investment has been for expanding irrigation infrastructure and the focus in incentive policy has been for extending cultivation of cereals even in agro-ecologically unsuitable areas. This neglect of the productivity potential of rainfed agriculture has been costly in terms of widespread rural poverty and foregone efficient growth and must be reversed. The increases in productivity could come largely through closing the yield gap in the favorable and to a lesser extent, the intermediary bour areas and/or switching to higher-value or agro-ecologically more suitable cropping systems The practical challenge is how to bring about these productivity increases. It is feasible to close the large yield gap in irrigated and favorable bour zones. 6.7 The potential for agricultural productivity gains is significant but varies across agro-ecological zones. Increases in productivity in Moroccan crop agriculture can be achieved by increasing yields and cropping intensity, by reducing fallow and spreading best practices to the majority of smallholders. The Ministry of Agriculture (MA4MVA) divides Moroccan crop agriculture into four agro-climatic zones. (a) irrigated, (b) favorable bour with rainfall above 400 mm/yr, (c) intermediary bour with rainfall of 250 to 400 mm/, and (d) unfavorable bour with rainfall below 250 mm/yr In the unfavorable zone, 4IAAfVA distinguishes among the unfavorable Eastern region (Oriental), the unfavorable South, the mountainous zones, and the Sahara (including oases). Half of Morocco's cultivated land receives under 400 mm a year of rainfall. The potential for agronomic increases is highest in the irrigated, in the high and (to a lesser extent) intermediary rainfall zones. Many of the rural poor live in the intermediary and unfavorable bour zones In the intermediary bour (semi-arid zone), drought-tolerant cropping systems, for example triticale and olive orchards should be prominent In the unfavorable bour (arid zone), barley-livestock system, and fodder trees for example would be well suited. Within the unfavorable zone, at less than 150 mm/yr, rangeland livestock systems prevail. 6 8 The gap between actual and potential cereal yields is significant. The productivity gap in cereal yields illustrates the significant potential that exists for increased productivity. If this potential were tapped, significant areas could be released from cereals cultivation In the irrigated and favorable bour, yields can double and even triple. In the intermediary and unfavorable bour, yields can increase by 60 to 100 percent About 4 to 5 million ha or 50 to 60 percent of total cultivated land in Morocco is devoted to cereals cultivation Under best practices, average yields in each major agro-ecological zone could rise significantly over current levels which are estimated at (a) 2.8 tons per ha in irrigated areas; (b) 1 5 tons per ha in favorable bour, (c) 1.2 tons per ha in intermediary bour, and (c) 0 5 tons per ha in unfavorable bour areas (See Tables 6 2-6 3 on Cereals cultivation- potential for yield increases by agro-climatic zone and substitutes to cereals, alternative yield growth scenarios for cereals). 6.9 Closing the yield gap in cereals is technically feasible. In irrigated areas, where 350,000-400,000 ha are under cereals cultivation, the yield gap could be narrowed if (a) the 59 delivery of water was more reliable, (b) water applications were better adapted to plant needs, (c) the problem of salinization, which threatens large areas of both irrigated and rainfed areas, was resolved, (d) the irrigation system was better maintained, (e) new varieties of certified seeds was available, (f) fertilizer applications were adjusted to soil types, (g) control of fungus and pest attacks was carried out, and (h) herbicides were applied and/or proper practices adopted In the favorable bour zone, where 1 6 million ha are under cereals, the yield gap could be narrowed if the technical packages recommended for irrigated areas were applied. In the intermediary bour zone with 1 3 million ha under cereals, the yield gap could be narrowed if drought-tolerant and disease-resistant seed varieties were used, the proper amount of nitrogen per ha were applied, and weed control were improved In the unfavorable bour zone, which is marginal for cereals cultivation, the focus should be on switching to drought-resistant systems not on increasing cereals yields per se. Barley-livestock systems and fodder trees are more suitable. Within the unfavorable bour zone, at less than 150 mm/yr, only rangeland livestock systems are suitable The feasibility of closing the yield gap is shown graphically by assuming alternative percent increases in yields over the next decade (See Table 6 3 on Alternative yield growth scenarios for cereals at alternative assumed yearly rates). 6 10 The yield gap can be closed in other commodities as well. Aggregate data for other commodities, including fodder (bersim and alfalfa (also called lucerne), both irrigated), sugar beet and sugarcane, sunflower, meat, and milk suggest that the ratio of potential to actual yields ranges from 1.3 (irrigated sugar cane) to 3 2 (for dairy livestock production)." 6.11 Closing the yield gap in cereals and switching to substitutes can have a major impact on reducing the incidence of rural poverty The incidence of rural poverty rises from favorable to unfavorable bour it is under 10 percent in the favorable bour zone of the Center, between 10-20 in the intermediate bour and above 20 percent in the unfavorable, which is most of rural Morocco. (See Map 1 on Agro-climatic zones and the incidence of rural poverty and Table 6 2 on potential substitutes to cereals). Given the importance of cereals and incidence of rural poverty across agro-climatic zones, a productivity strategy that can increase cereals yields and promote more economically viable substitutes can have a major bearing on reducing the incidence rural poverty Agricultural productivity increases promote the rural nonfarm economy, with positive impact on rural incomes and employment 6 12 Agriculture productivity growth has a positive impact on the rural non-farm economy. The rural non-farm (also called rural non-agriculture) economy is closely linked to agriculture through backward-supplying agricultural inputs and repair services to production, forward-adding value through processing and marketing agricultural outputs, and consumption linkages-supplying non-agricultural consumption goods purchased by agriculturally-generated incomes. Thus raising the productivity of farm labor promotes the rural non-farm economy by releasing labor for non-agricultural activities and by boosting per capita incomes to enable consumer diversification from foods to non-foods Thus growth in agriculture and its productivity is essential for "launching successive rounds of growth in rural areas" 84 There are different estimates of the quantitative importance of the agriculture multiplier For example, for the Muda River Region in Malaysia, an agriculturally induced rural income multiplier is estimated at 0 8, that is a dollar increase in agricultural value-added leads to US$0.80 increase in value- 60 added in the regional non-farm economy Employment multipliers from the Philipines place agriculture-to-nonfarm employment elasticities between 1.0 and 1 3, that is a 1 percent increase in agricultural output leads to a 1-1.3 percent increase in non-farm employment In Africa, a dollar increase in agriculture value-added produces a US$0 50 increase in rural income 8 For India, every Rupee of value-added in agriculture leads to Rupee 0 37 of direct (in agriculture) additional value-added and Rupee 0.54 of indirect (in rural non-agriculture) income increment." 6 13 The size of these agricultural multipliers can be increased by policy. The size of these multipliers vary with many factors, key among which are the level of development of agriculture and the nature of technology used, the relative importance of small farmers (small farmers tend to buy more tradeables and non-tradeables as producers and consumers from local markets), the adequacy of physical, (eg , roads, electricity) productive, (e g applied research and extension services) and social (eg , services in education, and health) infrastructure; and the incentive framework for small, labor-intensive businesses The magnitude of these multipliers, their positive impact on rural poverty reduction, and their dependence on policy, all highlight the importance of promoting agnculture and its linkages with the local rural economy and the important role of policy to do so Smallholders face inadequate access to marketing and support services which undermine agricultural productivity 6 14 Limited access to markets undermines the productivity of small farmers. The majority of small farmers in rainfed areas are subsistence farmers These farmers face poor soils, and low and erratic rainfall. Their focus on subsistence provides them with neither the means nor the incentive to improve productivity Cereals are considered the "staff' of life for smallholders in rainfed areas. To supplement their subsistence production, they work as wage labor on large farms These farmers are only marginally involved in the market economy because of insufficient farm-to-market roads, poor access to market information, banking services, and other farm inputs, monopolistic marketing arrangements, and because of the high riskiness of rainfed agriculture. To weather droughts they rely primarily on their own private stocks, when these run out, they sell their livestock Their urgent need for cash forces these farmers to sell cheaply at harvest time and buy seeds at high prices before the next planting season because they have run out of stocks To quote from the working paper on the social assessment of small farmers producing rainfed cereals: "Our habit is to buy expensive and to sell cheap When we want to buy in the seeding period, prices are high, when we are forced to sell in the cropping season, prices are low "" For many smallholders, the market thus does not represent a reliable channel for expanding operations and returns. They resort to the market only when they are forced to do so 6 15 Limited access to research and extension undermines productivity Smallholders surveyed complained about their limited access to research and extension services " Less than 20 percent of small farmers surveyed who produce rainfed cereals, have regular contacts with government extension agents. Of these, only 17 percent are assisted in terms of improved cultural practices. Therefore, only 3.4 percent of the sample surveyed were assisted by extension agents. Most of these 3 4 percent were larger farmers While a low percentage is not a problem per se (since there is no benchmark percentage access for a well-performing extension system), the low percentage is indicative of the poor use of extension resources and the distance that exists between agent and small farmer " Several interrelated problems weaken the relevance and reach of these services Extension services are chronically short of funds and extension staff lack status, 61 incentives, and means to develop a relevant and cost-effective service The chronic lack of resources undermines the ability of extension to develop technically relevant messages In any case, farmers are looking for guidance not only on improving their farming practices under existing constraints but also for assistance on how best to respond to opportunities offered by changing market conditions They want guidance not merely on technical packages After all, research and extension constitute only one link in the chain of productive services from producer to consumer, albeit a key link. However, both a strategy for developing such an extension service that responds to farmers'concerns and the financing necessary for such a service have been lacking. The multiple problems of the Bank's research and extension efforts in rainfed (Loan 3036-MOR, 1989) and irrigated agriculture (Loan 3688-MOR, 1994) testify to these crippling day-to-day problems of budget shortages exacerbated by a lack of strategy. A sounder data base for mapping agro-ecological zones and soil types is important for assisting research and extension 6 16 Effective research and extension requires a national mapping of agro-ecological zones and soil types A large but fragmented data base now exists on Morocco's agro- ecological zones and agronomic potentials In its current state, basic data needed by research and extension to develop relevant technical messages and by sectoral planners to develop long-term strategies, are not available. This data base would be an invaluable input into the agro-ecological mapping of Morocco's agriculture if the existing large but fragmented data were synthesized, updated, and complemented by data on soil types and on farmer categories (small, medium, large, etc ) The Government should consider how this effort can be undertaken, drawing upon and complementing the agricultural census which is now being designed by MAMVA Productivity increases in irrigation can be achieved through greater efficiency of water use, rehabilitation of the LSI, and renovation of SMSI 6.17 The benefits of increased productivity in irrigation are substantial. In comparing the two scenarios of the RSM, the irrigation productivity increase scenario--a 1 percent increase in total factor productivity in irrigated agriculture--versus the irrigation expansion scenario--a 8 6 percent change in irrigated land, a -1 48 percent change in rainfed land and 5 9 percent change in irrigated water supply--the first is superior in terms of addition to growth, and reduction in unemployment but not in the pattern of income distribution benefits for all rural households (all relative to the reform scenario). (See Table 3.2 on Rural sector model of Morocco: Selected simulation results) The addition to growth is three times higher in productivity increase scenario rather than in the expansion scenario; the reduction in unemployment is also three times higher The major gainers in terms of household income per capita in the irrigation expansion scenario are in the group of rainfed households which now enjoy irrigation Other rural households (except the irrigated household category) also gain relative to the urban household, but only marginally In the productivity increase scenario, all rural households (except the rainfed household category) gain in absolute terms more than in the expansion scenario This comparison highlights the importance of productivity growth in irrigation for rural development, even without irrigation expansion 6 18 Emphasize rehabilitation of LSI and renovation of SMSI to maximize rural development pay-off. The important role that irrigation can play in promoting rural development 62 can be enhanced by emphasizing rehabilitation rather than expansion and by concentrating on renovating and developing SMSI as a priority over LSI This oft-repeated Bank position is anchored in the following reasoning (a) rehabilitation is essential for improving water use efficiency and generating water savings, (b) rates of return are higher for rehabilitation than for expansion, (c) rehabilitation costs are less, (d) rates of return are higher for SMSI than for LSI, and (e) the potential beneficiaries in SMSI areas are generally poorer Thus, SMSI development can be an important catalyst to develop poor rural areas in Morocco. (See Map 2 on the location of SMSI and the incidence of rural poverty) Rehabilitation makes economic and financial sense. Most of Morocco's modern irrigation infrastructure, built between 1970-85, is aging and needs rehabilitation In order to improve the efficiency of irrigation water use, rehabilitation is essential Rehabilitation would include installing new pumping equipment, upgrading main canals, improving sub-surface drainage, and rehabilitating feeder roads. Rates of return to rehabilitation range from 15 to 50 percent, much higher than the 7 to 15 percent rates for new LSI irrigation. Rehabilitation is also much less expensive than expansion for both LSI and SMSI. (USS3,000 to US$6,000/ha for rehabilitation of LSI versus US$8,000 to US$15,000/ha for expansion Note this cost is a minimum and excludes the cost of dams US$1,200 to US$3,800/ha for rehabilitation of SMSI versus US$5,000 to US$6,250/ha for investment cost in modern new schemes For traditional SMSI schemes, the cost of investment is much less, at US$625 to US$1,250/ha) ' SMSI makes even more sense. SMSI development should be emphasized on budgetary, efficiency, as well as equity grounds As a result of past policy, about 700,000 ha are under LSI versus 400,000 ha under SMSI LSI is heavily subsidized by the State and managed by regional public irrigation authorities, called Offices R6gionaux de Mise en Valeur Agricole (ORMVAs), whereas SMSI is not subsidized and is managed by local communities. Unlike LSI, SMSI consists of small traditional structures, dependent on underground springs and small rivers not on Government-built dams and created largely by farmers themselves Investments in SMSI makes more sense than expanding LSI by 235,000 ha by year 2000 as planned under the PNI " As shown above, investment and renovation in SMSI costs about 40 to 63 percent of the investment and rehabilitation cost in LSI. The 20 percent estimated rate of return for the Bank's Second SMSI project (1988) is comparable to the rate of return on rehabilitation of LSI at 23 percent.9" 6.19 Recent institutional measures represent significant progress toward more efficient water use. The Government is well aware of the urgent need to manage water as an increasingly scarce resource. It has accepted the principle of integrated water resource management (integrating considerations of supply and demand, ground and surface water, quantity and quality, and short and long term outcomes) and is in the process of formulating a National Water Strategy It recently promulgated a new Water Law (August 1995), which establishes a comprehensive framework for integrated water resource management, provides for the establishment of the River Basin Authorities (RBA) in individual or group catchments, and clarifies the mandates and responsibilities of various institutions in water management." In addition, it is envisaged that the irrigation water tariff will be restructured, the first such initiative since the Agricultural Investment Code of 1969 Under the proposed new tariff, the base water 63 price would be increased from 0 18 DH/m3 on average to about 0 27 DH/M3 9 Although the envisaged rise in water tariff is a step in the right direction, a much larger increase (of almost 200 percent) is needed to ensure the financial viability of the system The increase is therefore still far too low to cover O&M charges and investment amortization. 6.20 Results on the ground require concerted action. These initiatives must be followed by sustained implementation on several fronts. One, the Water Law must be implemented through the promulgation of a complex set of decrees and regulations Two, action must be taken to implement the law on Water Users' Associations (WUA). Although the law was promulgated in 1990, the private sector has yet to take over responsibility for O&M activities from the ORIVAs Implementing the law would allow the Government to reduce extensive subsidies and excessive water wastage, as WUA have the incentives and the detailed knowledge needed to maintain and operate irrigation schemes more cost-effectively Three, the role of the ORMAVAs themselves must be fundamentally re-defined, so that they retain greater financial and administrative autonomy This re-definition in turn raises the larger issue of allocation of water rights Increasing agricultural productivity based on comparative advantage will enhance growth and generate employment in the medium and longer terms 6.21 Strengthening comparative advantage is the best way to tap productivity potential and thus promote rural development. Rather than devote scarce resources to commodities in which Morocco has poor long-term competitive prospects (sugar, oilseeds, cereals in some agro- ecological zones) the Government should strengthen incentives, institutions and investments (including infrastructure) in areas in which Morocco has comparative advantage (inter alia, horticulture, spices and aromatic plants, fish) and develop new areas of comparative advantage (inter alia, differentiated and semi-processed food products)." As discussed above, Morocco's agriculture has significant productivity potential in irrigated and higher rainfall zones There is a large margin for increasing yields and water use efficiency Therefore, in these high potential zones, the approach should be growth and diversification through increasing productivity and expanding access to markets The approach to the development of its semi-arid and arid zones should be different For these zones, the emphasis should not be on increasing cereals yields per se but on adopting sustainable drought-tolerant and drought-resistant systems These systems are agronomically superior to extensive cultivation of soft and durum wheat In arid zones below 150mm/yr of rainfall, rangeland livestock systems are most suitable Exploiting comparative advantage and trade opportunities strengthens national food security 6 22 Morocco's strategic location makes comparative advantage and trade a sounder basis for food security at the national level. Strategically placed at a gateway to Europe, one of the most lucrative markets in the world, Morocco also has good access to the growing markets of the North and South America With air transport it can possibly even diversify into the more distant but dynamic markets of East and Southeast Asia. Developing comparative advantage by increasing agricultural productivity and by emphasizing trade, is a sounder approach to rural development and to achieving food security than high protection of "strategic" commodities with poor long-term prospects and extensive cultivation of cereals in marginal areas In fact, the current approach actually increases Morocco's vulnerability to frequent droughts 64 Promoting sustainable productivity increases requires a rethinking of Government's drought management policy 6.23 Sustainable productivity increases must come to grips with chronic drought. Morocco's vulnerability to droughts must be addressed by any strategy aimed at promoting a more productive agriculture Thus, any effort to improve yields in rainfed areas that requires high-input production systems must take into account the frequency and severity of drought in Morocco. Rainfed agriculture in Morocco is risky (See Graphic 6 1 on sharp fluctuations in agricultural performance) Rainfall over the past 15 years has been below average, the lowest since 1920, when records began to be kept Since 1911, there have been 29 years of drought, roughly one in every three years Since 1980, seven droughts have occurred, and since 1990 alone, there have been three, including the drought of 1994/95, which was considered the worst of the century. It caused agricultural GDP to fall by 45 percent and overall GDP to fall by 7 6 percent The current account deficit rose to about 4 7 percent of GDP, and the budget deficit rose to 5.8 percent (1995) A third of the Government's investment budget (DH 4 86 billion) had to be diverted to drought relief and recovery. The direct impact was most severe in rainfed areas, where many of the rural poor live An estimated 100 million workdays were lost, equivalent to an income loss of about DH 5 0 billion (about US$600 million) 6.24 Morocco's response to chronic drought needs to be rethought on fiscal and environmental grounds. Morocco's response to the 1994/95 drought was fiscally and environmentally costly. It cost the budget DH 4.86 billion. To provide immediate relief to farmers, the Government distributed subsidized livestock feed, which contributed to overgrazing of already seriously degraded rangelands, by enabling herders maintain an excessive number of animals It undertook wholesale debt rescheduling for farmers, further undermining the financial viability of the Caisse Nationale de Cr&dit Agricole (CNCA), increasing the indebtedness of farmers and compromising their future access to credit. 6.25 Current policy focuses on risk compensation. Morocco's approach to drought management is primarily to compensate farmers for losses rather than to help them reduce or cope with risk. In so doing, it undermines farmers' resilience to drought. In the Emergency Drought Recovery project (1995), a first step has been made to better prepare farmers for drought by the Livestock Department of the MAMVA. It is developing a drought preparedness program that includes the setting up of early warning systems and ecological monitoring, temporary feedlots, and livestock herder organizations. In addition, under the National Rural Finance project a Calamity Risk Management and Insurance Scheme is being developed on a pilot basis. If successful the pilot project would replace the periodic rescheduling of debt that undermines the financial viability of the CNCA 6.26 The Government's approach to drought management has undermined sustainable productivity increases The Government's approach does not support sustainable productivity increases in cereals and livestock. Experience from other countries in reducing the vulnerability of agriculture to drought suggests that the Government's approach has actually increased the sector's vulnerability through (a) incentives that extend the cultivation of soft wheat at the expense of barley in marginal areas, (b) inadequate support of the research and extension system, which does not encourage farmers to adopt drought-tolerant techniques, (c) a livestock feed subsidy that distorts farmers' response in terms of destocking thereby contributing to further rangeland degradation, and (d) privatization (ownership by private individuals) of communal lands 65 and the centralization of decision making in rangeland management which undermine sustainable rangeland use 16 Risk reducing approaches to drought management enhance fiscal and environmental sustainability 6 27 Drought can be managed in ways that are environmentally and financially sustainable. Experience from other countries shows that an array of measures are available to farmers and governments to assist in (a) reducing the impact of drought by taking measures ahead of time, (b) coping with the impact of drought once it has occurred, and (c) compensating farmers in kind and in cash for drought-induced losses Support from the public sector for sustainable drought management should emphasize reducing risk and helping farmers cope with the effects of drought The third approach (c) should be adopted only when absolutely necessary Private insurance schemes could also play an important role in risk compensation 6 28 Alternative ways of strengthening resilience to drought should be explored. Over the centuries and in recent times farmers and scientists have developed many ways of strengthening resilience to drought by reducing and coping with risk However, risk coping mechanisms are much more experimental than risk reducing mechanisms. Risk-reducing options Long-term forecasting Recent technological advances have made long-term forecasting more reliable and affordable Months before sowing time the overall temperature and rainfall for the next growing season can be predicted regionally The applicability and cost of this technology should be explored by the Government Cultural practices. Cultural practices include planting barley instead of soft wheat, using drought-resistant seed varieties, diversifying crops and plots, intercropping, and conserving water and soil through conservation tillage, contour farming, and terracing. Rangeland management Flexibility in destocking and restocking, following the state of pasture, and improvements in rangeland productivity are central to improving response to drought Techniques such as overseeding which can restore degraded pasture when complemented by improvements in access rights by traditional users or communities can improve the productivity of rangelands. Holistic resource management involves the entire community in setting environmental goals and using management tools such as rotational grazing animals to rest degraded rangeland Diversification Farmers everywhere diversify their sources of income across crops, between farm and nonfarm activities, between agricultural nonfarm and nonagriculture rural activities, and between rural and urban activities (migration) Diversification is not unique to areas vulnerable to droughts, but chronic drought makes diversification of the sources of income a matter of survival 66 Greater access to markets Improved market access is particularly important so that farmers and pastoralists can sell their stock or to buy feed and other inputs during times of stress Risk-coping options Insurance Insuring farmers against the risk of drought remains controversial. Some advocates of insurance have proposed target yields, others have proposed administering a lottery Private crop insurance is available for high-value crops, such as strawberries, but not for low-value crops such as cereals The poverty of the farmers and the high covariance of risks over wide areas, make these crops uninsurable by private agents Moral hazard (that is, the phenomenon in which the existence of the insurance itself undermines clients' behavior, encouraging them to take risks they otherwise might not have) also discourages private firms from offering calamity insurance Setting up an insurance scheme can be time consuming 6 29 Drought management can be made environmentally and fiscally sustainable. Morocco's crisis response to drought undermines productivity in cereals and livestock, hurting the poor in the short and long run A more sustainable response will depend on: (a) adoption of a scientifically-based, objective, nonpolitical measure for declaring and monitoring droughts, (b) assistance to farmers enabling them adopt drought-resistant practices; (c) reduction of high trade protection of cereals and removal of the subsidy on livestock feed during droughts, (d) flexibility in management of rangelands by herders for arresting and reversing already extensive rangeland degradation, and (e) compensation for rangeland herders in an environmentally-sustainable manner A program that successfully incorporates these five components is environmentally and financially sustainable, promotes agricultural productivity, and reduces human and livestock suffering during drought In addition to productivity, vulnerability to drought also has important implications for the Government's approach to food security 6 30 Government should reconsider its food self-sufficiency policy in a drought- vulnerable agriculture Government policy has always recognized the vulnerability of agriculture (and the entire economy) to drought and its response to this structural problem has been to promote irrigation as the hard core (MAMVA's noyau dur) of agriculture Irrigation is seen as the major instrument to achieve food self-sufficiency. The driving force of Moroccan agricultural policy has been to achieve food self-sufficiency in "strategic" commodities Although the policy is now called food security, there has been no substantive change in approach. Giving irrigation a central role in food security is sound, but government's irrigation policies have not promoted an efficient subsector Therefore, LSI has not played the important role that it could play in Moroccan agriculture In addition, ensuring food security in a drought- vulnerable agriculture is not best achieved by domestic production. Promoting domestic production at great efficiency cost has actually increased Morocco's vulnerability to drought, thus decreasing rather than increasing food security Food security is best achieved through efficient market development, not inefficient domestic production. The high protection of cereals that encourages 67 cultivation in areas that are agronomically unsuitable and vulnerable to drought increases the riskiness of a commodity that the Government considers "strategic" A major portion, an estimated 45 percent, of total cereals production comes from the intermediary and unfavorable bour (from irrigation, 20-25 percent and from favorable bour, another 30 percent) " Given that half of Morocco's total cultivated land receives rainfall less than 400 mm/yr, drought-tolerant options should be vigorously promoted through research and extension. As discussed above, Morocco's strategic location suggests that trade, efficient market development, increased purchasing power of private households, and adequate financial reserves of the Government are more likely to ensure food security than dependence on low productivity, fragile farming systems Food security would be strengthened by market-led diversification. Food security in a risky environment would be better served by diversifying incomes and risks. Indeed, diversification in terms of products and markets is the classic response to reducing risk However, Morocco's agricultural incentive policy does not promote market-led diversification Instead, the Government distorts incentives, controls markets and fixes prices rather than promote the resilience of markets through neutral incentives and higher efficiency International experience does not support the focus of Government's current Agricultural Land Policy 6.31 Distribution of agricultural land can be an important factor in promoting growth and reducing poverty. Recent research based on evidence from over 100 countries argues that "initial inequality of assets, as proxied by the distribution of land, has a significant effect on subsequent growth both in the overall sample and for developing countries separately"." Only two (Brazil and Puerto Rico) of the 15 developing countries analyzed with high inequality in land distribution managed to grow at more than 2.5 percent over 1960-92 period Low initial inequality appears to be a necessary rather than a sufficient condition for high growth Access to banking services (credit and savings) usually requires land as a collateral More equal land distribution thus broadens access to these services and facilitates indivisible productive, growth- promoting investments Countries in East Asia that have comparatively equal land distributions- they have undertaken successful land reforms-and have aggressively pursued economic growth, have achieved high growth and massive reductions in poverty. Countries in Latin America that have comparatively less equal land distributions-their land reform has been largely ineffective- have achieved slower and less consistent growth, with less reductions in poverty Given these research results, agricultural land policy that affects agricultural land distribution can have a major potential impact on agricultural productivity, incomes and poverty reduction 6 32 International experience does not support the premises underlying the Government's Agricultural Land Policy (1993). The Government's Agricultural Land Policy is anchored in the belief that (a) there is a minimum size for efficient farming and that this size can be determined centrally, and (b) registration is the cornerstone of security of tenure, which in turn is essential for increase in investments and productivity in land. Accordingly, it sets out to enforce consolidation and registration International experience does not substantiate these basic premises 68 6 33 The majority of farmers in Morocco are landless and small farmers on fragmented farms The 1973/74 Agricultural Census revealed that the distribution of cultivable land was skewed According to that census, 80 percent of farmers (if you consider the landless as farmers) own 25 percent of the cultivated land and the remaining 20 percent of farmers own 75 percent of cultivated land In addition, farms of less than 5 ha farms were fragmented into about five separate parcels (See Table 6 4 on the distribution of cultivable land according to the 1973/74 agricultural census) 6.34 Poor productivity is attributed to small fragmented farms This pattern of land distribution led the Government to conclude that small fragmented farms are a root cause of low agricultural productivity One of the basic tenets of government's Agricultural Land Policy is that consolidation into a minimum viable size is necessary to improve productivity and that legislation to prevent fragmentation and to enforce consolidation in rainfed areas is needed (The problem of fragmentation in irrigated areas is already dealt with under the 1969 Code des Investissements Agricoles) The recently passed Loz de mise en Valeur des Zones en Bour, Law Number 33-94 enables the Government to undertake such land consolidation in rainfed areas. It defines a minimum viable size as "that area fixed by regulation, which suffices to produce an annual revenue sufficient to cover the wage or minimum guaranteed salary of two agricultural laborers" For irrigated areas, the minimum viable size is set at five hectares 6.35 International experience suggests that small family-operated farms are the most productive and consolidation does not promote productivity International experience shows that small family-owned farms are some of the most productive The tiny (less than 2 ha) plots in Taiwan, China and in the Republic of Korea (0.35 ha/family) are cases in point While it is true that for any level of technology and management capacity there is a minimum viable size, this size cannot be fixed rigidly nor be set by a central authority. Moreover, as the experience in India shows, without access to markets, extension, seeds, and other inputs, infrastructure and credit (i e. all the main ingredients of a functioning market economy), forced consolidation will not necessarily lead to increased productivity. Size alone cannot predict economic performance, and neither is consolidation a panacea since it can always be reversed. In Morocco, consolidation in irrigated perimeters under the 1969 Code des Investssements Agricoles has not halted fragmentation nor increased productivity. In Kenya, despite forced consolidation under the Swynnerton Plan, illegal subdivision proceeded apace a few years later. Indeed, a wealth of studies show clearly that family-owned and managed farms (these do not have to correspond to any physical unit per se) are more efficient and productive than large farms, because of diseconomies of scale and of management 9 6 36 Government has erroneously attributed poor productivity to lack of registration. The other central tenet of the Agricultural Land Policy is that insecurity of land tenure can be addressed by compulsory registration The Government argues that boundaries are unclear, rights are unstable and there is little incentive to invest in lands titled under customary rules-the Islamic law-(the Sharia) that govern landholding 10 As a result, small farmers are unable to provide land as the collateral needed to establish creditworthiness. Lack of registration in turn undermines investment incentives in privately owned lands, (the so-called melk lands) which represents 81 percent of arable land."o' 6 37 International experience suggests that lack of registration is not a cause of low productivity Security of title is important for long-term investment, but compulsory registration 69 is neither necessary nor sufficient to ensure security Lack of registration has not stopped farmers from adopting high-yielding varieties of wheat and rice in South and Southeast Asia, cocoa in Ghana and Nigeria, or maize in much of Africa Moreover, possession of title has not invariably made farmers creditworthy In Kenya farmers have had titles for more than 30 years and yet the banks will not lend to them because they cannot foreclose and seize their land The mere possession of land titles by the Buganda chiefs (Kenya), bestowed by the British in 1901, did not induce them to innovate Instead, they sold their lands to others, who introduced coffee and cocoa 6 38 The draft law on rural land leases adversely affects lessees. The draft law provides security to lessors, not lessees. The proposed changes in rural land leases would establish a minimum lease term of six years, limits the lease to a single tenant, and would give the lessor the power to fix the cropping pattern which cannot be changed without prior consent of the lessor In addition, if the lessee makes any improvements of a permanent nature, these improvements become the property of the lessor upon termination of the lease The cost of any major works undertaken by the lessee without the lessor's consent must be borne solely by the lessee The draft law also contains penal clauses to be enforced by the Government on behalf of the lessor It leaves open the division of the product between lessor and lessee Clearly, in a labor surplus economy, the bargaining power is on the side of the landowner not the tenant The Government needs to rethink its Agricultural Land Policy if increasing agricultural productivity and incomes is its goal 02 6.39 Skewed land ownership retards efficient growth. Development performance since World War II shows that there is no tradeoff between equity and growth In fact, inequity may retard growth 103 Recent research has shown that initial land inequality is a significant determinant of income growth for all population groups except for the top quintile 104 In addition, "low initial inequality is doubly beneficial-it is associated with higher aggregate growth and such higher growth would be biased in favor of the poor" "o International experience also shows that large farms are less efficient in terms of increased productivity and poverty reduction than small family- managed farms The 1973/74 census showed that land ownership in Morocco is highly skewed Whether the skewed pattern of land distribution has worsened since 1973 and whether it undermines productivity in Moroccan agriculture need to be established empirically by the agricultural census now being prepared. Only on the basis of this empirical link can one assess (reconfirm) whether skewness hurts agricultural productivity in Morocco (as it does elsewhere) 6 40 The focus on compulsory consolidation and registration is not cost-effective. Consolidation and registration are costly and neither appears to be tied to increased productivity Government's policy paper estimates that it will cost around DH 1.34 billion over five years to implement its propopals The experience in the irrigated areas, where fragmentation has proceeded despite the 1969 Code des Investissements, suggests that compulsory consolidation may not be effective Indeed, even if minimum farm size made sense, the compulsory approach would not. Voluntary registration is advisable where strong competition exists for the same pieces of land, for example, in irrigated and periurban areas, not in low rainfed areas that are far from major commercial centers If undertaken, area-wide titling is recommended over selective titling since the latter is open to abuse 70 6 41 The terms of land leases do not promote productivity, equity, or security. The proposed Land Lease Law should be reviewed on productivity, equity, and security grounds The insistence on fixed cropping patterns, the need for prior approval from the lessor of any action contemplated by the lessee, and the capture without compensation by the lessor of any permanent improvements made by the lessee, reduce flexibility of response to changing market signals and incentives for introducing innovations The requirement that the term of the lease be fixed for a minimum of six years provides security to the lessor, who has a captive labor supply. For the lessee the draft lease law represents bondage rather than security 6.42 Sustainable productivity of rangelands requires decentralized management by local communities. To enhance and maintain the productivity of the 20 million ha of fragile rangelands, the Government should turn over their management to the local communities, who have both the knowledge required and the incentive to manage these lands in a sustainable fashion Flexible management, based on an intimate understanding of local conditions, is essential if damage from overgrazing is to be prevented, halted and/or reversed 106 Reducing the role of the central government in local day-to-day decision-making needs to be considered. The program for protecting these areas, which includes delimiting ethnic boundaries, restricting encroachment, and limiting cultivation in ecologically fragile areas should be accelerated 7. CHAPTER SEVEN: INCREASING ACCESS THROUGH MORE EQUITABLE AND COST-EFFECTIVE EXPENDITURE POLICY To create more efficient goods and factor markets in agriculture, improve the quality of rural (including migrating) labor and promote the vision of rural well- being, the Government must improve rural infrastructure and develop human capital, two key areas of public sector responsibility. The extent of rural deprivation, and continued constraints on the budget suggest that the Government needs to change the way it allocates expenditures and deploys resources. Indeed, the role of the State in a competitive economy shifts towards policy formulation and resource allocation and away from direct execution. Given the heterogeneity of local conditions, accelerating decentralization and promoting demand-driven approaches can improve cost effectiveness, local resource mobilization, and sustainability. Local governments, private sector and civil society are to play a greater role in designing and executing local rural development programs Government support is critical for improving public infrastructure and basic services, essential for rural development and for rural poverty reduction 7 1 Public infrastructure and basic services are essential for rural development Small farmers of cereals surveyed highlight the deprivation of rural Morocco in terms of access to infrastructure and services and their importance in improving their lives (See Box 2 1 on Voices of the rural poor in Morocco) The critical importance of these goods and services in rural development is widely recognized. As stated in the vision statement, rural development requires adequate access to these basic goods and services (See Box 1.3 on The vision of rural well-being) Their importance is re-iterated in the Strategic Checklist (See Box 3.1) By strengthening supply response to an efficient incentive framework, they are essential in the development of competitive markets and in the formation of human capital, both key components of rural transformation Indeed, the consensus among development practitioners on this point stands in sharp contrast to the continuing debate over the value of directed credit in rural areas or the effectiveness of other budgetary transfers (e g , subsidies on food, fertilizer, and water) in promoting rural development 72 7 2 Experience in Morocco and elsewhere emphasize pivotal role of public expenditure in improving access to public infrastructure and services A recent OED study on the socioeconomic impact of rural roads constructed under the Bank-funded Fourth Highway Project (approved FY 1983) showed that the project had a catalytic effect in transforming and diversifying the agriculturally-based rural economies in different regions with economic returns of 16 to 30 percent The surrounding populations benefitted in terms of improved access to markets and to social centers The cost of spoilage of agricultural commodities decreased, the shift into higher-value fruit orchards and vegetables was facilitated, off-farm employment increased, dietary habits changed, and school enrollment soared, particularly for girls in primary schools.o' More generally, massive reductions in poverty in the high growth economies of East and Southeast Asia are ample evidence of the pivotal role of public expenditure in improving the access of the poor to basic rural infrastructure, and services--productive and social These infrastructure and services exhibit one or several of the classic attributes of mixed (private individuals also capture benefits) public goods: externalities, non-rival in consumption or non-excludability 7.3 Public expenditure is urgently required to improve the quality of rural labor including migrant labor The Government has a key role to play in improving the quality of rural labor Improving the literacy and health status of rural labor in Morocco is urgent, because of prevailing low literacy levels and poor health status, specially among poor women and because of continuing high rural-urban migration, increasingly female (See Table 2.1 on Urban-rural breakdown of social indicators and Table 7 1 on net rural migration) Rural migration is an enduring phenomenon over the course of development and Morocco's experience is typical The experience of successful East Asian economies shows that migration remains high even when rural conditions improve dramatically Thus even though the Government may not be able to slow down the flow (should not try if free labor mobility is valued), it can and should improve the quality of this flow Improved delivery of infrastructure and services is critical to preparing today's labor force with basic skills to succeed in urban areas tomorrow (or anywhere else it chooses to be) This is particularly true of poor women who are even more disadvantaged than poor men their lack of basic education can constitute a life-long obstacle to achieving well-being Improving rural infrastructure and the delivery of basic services requires changes in the way public funds are used 7 4 Public expenditures which are needed to improve rural infrastructure and services are expected to exceed resource availability. Central Ministries have prepared medium-term plans that increase expenditures for rural areas by about 40 percent. These exceed expected funds by almost DH 5 0 billion (in constant 1995) in FY 1997-98 '" Or, to put it differently, financing these investments will require a 15 percent decline in real terms in other investment categories Planned investments include (a) rehabilitation and construction of 11,400 km of paved and unpaved roads, (b) extension of potable water to serve 11 million people in 31,000 douars (small villages) over 10 years (PAGER), (c) construction of electrification to connect 600 villages, raising rural coverage to 40 percent (PERG); (d) expansion of irrigation on about 114,000 ha and rehabilitation on about 56,000 ha; (e) consolidation of land and development of infrastructure (following Loi no. 33-94 relative aux primetres de mise en valeur en bour), (f) delivery of primary and secondary education to increase enrollment among girls from its current level of 36 to 55 percent by 2000 and (f) construction of 1,580 etablissements de santi de base to improve the 73 delivery of primary health care (some 53 percent of the rural population live more than 6 km from a health care center) 109 7.5 Institutional fragmentation of management may be undermining cost-effectiveness of scarce public funds. Fragmentation across institutions is a striking feature of the way public investment funds are being used Investments in 1995 were fragmented across four main expenditure mechanisms Special Treasury Accounts (33 percent of total), Central Ministry budgets (27 percent of total), public entity budgets (22 percent of total) and local collectivity budgets (18 percent of total) Some 21 STA exist, some of the most important for rural areas are the Road Fund, the Agricultural Development Fund, the Drought Fund, the Livestock Emergency Fund (Fonds special de sauvegarde et protection du cheptel), the National Forest Fund, and the Fund for Food Subsidies There are seven main Central Ministries Agriculture, Public Works, Education, Public Health, Energy and Mines, Employment and Social Affairs, and Interior, six public sector entities ONE (Electricity), ONEP (Potable Water), ORA4VA (Irrigation), PN (Public Works Employment Program), Caisse de Compensation (Food Subsidies), and ONICL (Cereals), and 1,237 rural local collectivities for 31,000 douars Not surprisingly, rural development in Morocco is necessarily complex with so many institutions involved Since fragmentation is so pervasive, and results on the ground meager despite substantial sums spent (DH 19 7 billion or 6 9 percent of GDP in 1995), fragmentation may be a contributing cause The institutional challenge will be to ensure coordination and synergism despite the inherent complexity of the task 110 7.6 The high cost of providing rural infrastructure in a budget-constrained situation makes cost effectiveness essential. The costs for Morocco of providing rural infrastructure are high in absolute and relative terms. In a budget-constrained situation, cost-effectiveness becomes essential if the substantial rural investment needed is to be undertaken over the next decade or so The high absolute cost is partly due to the geographical dispersion of Morocco's rural population Rural Morocco is spread out over 31,000 douars, of which 77 percent have less than 500 inhabitants and the remaining 23 percent between 500-3000 inhabitants Serving this thinly dispersed population is inherently costly It is also partly due to the application of standard engineering technical norms The rural road program based on these norms has to be scaled down or stretched out in time because local communities were not willing or able to contribute the DH 100 million of the DH 730 million needed for 11,400 km of roads The cost of maintaining one kilometer (kn) of non-paved road is also high- it ranges from DH 1,800-2,700, and of maintaining one km of paved road from DH 9,800-7000 "' These costs are high relative to the rural poverty level of DH 2,439/head/year (1990/91) around which about 30 percent of the rural population live 7.7 Cost recovery must be explored in the context of specific projects. Even for public goods and services such as rural roads, potable water, electrification, research and extension, basic education programs and health centers, the principle of cost recovery is widely accepted in Morocco given that private benefits are also derived from these What is at issue is how much to recover and through what mechanisms Various mechanisms of cost recovery are being tested in Morocco with varying degrees of success. Since cost recovery is best discussed in specific project contexts, it is not discussed here. 74 Restructuring public expenditure allocation is required as service after service, delivery suffers 7 8 Budget and other problems weaken the delivery of research and extension services. Research and extension services which should provide a key link between the producer and the physical and market environment are inadequate 112 In Morocco, the operational budget per researcher declined by 30 percent in real terms between 1989-1995 This decline is in sharp contrast to the continuing substantial share allocated to LSI In addition to inadequate budget, training and logistical support, extension delivery suffers from a lack of strategic focus, blurring of the roles of public and private sectors As a result, staff are demoralized at all levels, and many small farmers (e g.,in rainfed cereals areas) receive no extension advice 113 7 9 Inequity, inefficiency and inattention to non-school factors undermine delivery in education. Skewed and inefficient spending, and inattention to non-school factors have contributed to the low rural literacy, especially of girls. Despite the 7 3 percent of GDP (1992) spent on education and training, skewed support for higher education has meant that too much educational spending has benefited the better off. Primary education received only 35 percent of total educational spending, a significantly lower proportion than among the reference group of middle-income countries, among which primary education received 43 percent of total educational spending The Social Priorities Project Basic Education (BAJ in Arabic), is helping the Government implement its Social Development Strategy (Strategie de Developpement Social pour la D&ennie 1990, SDS) by focusing on rural areas with special emphasis on girls and by improving and targetting the quality of education in thirteen of the poorest provinces 114 The BAJ approach focuses on both school and non-school factors. 7 10 Insufficient funding, inequitable coverage, and poor quality of service delivery contribute to inadequate delivery of health care services The budget of the Ministry of Public Health (MPH) has declined from 7.8 percent of total central government expenditures in 1960 to 4 6 percent in 1994 From 1960-1994, MPH's budget hardly grew in real terms at only 1 3 percent a year. In comparison with other countries at similar levels of developmnent, such as Tunisia and Algeria, total health expenditures at 3.8 percent of GDP is low In addition to low aggregate expenditure, distribution of public expenditure is highly skewed The inequities between urban and rural areas and among regions are striking Some 75 percent of the budget of the MPH is allocated to two urban university hospitals. The poor receive less than 20 percent of the total spending, while 40 percent goes to the better off 1". 116 Despite significant achievements over the past several decades, the health status of poor women and children remains low About 35 percent of children between the ages of 6 months and 5 years and 45.5 percent of pregnant women suffer from iron and iodine deficiency Morocco has one of the highest maternal mortality rates in the North Africa and the Middle East Region, averaging 332 per 100,000 (compared to 50 in Tunisia and 140 in Algeria) Continued high rural-urban migration emphasizes the importance of improving the quality of rural labor, in particular ofyoung women 7 11 High rural migration is largely a response to rural deprivation. Motivations for migration are complex but the push of poverty seems to be a driving factor in Morocco. The net average annual flow of rural-urban migration rose from 67,000 a year between 1960 and 1971 to 75 193,000 a year between 1982 and 1994 According to the most recent data on migration, about 31 percent of migrants leave to join a family member (this may or may not be related to poverty) Another 40 percent of migrants leave in search of better jobs, and 11 percent migrate in search of schools for their children (See Table 7.1 on Net rural migration 1960-1994) 7.12 Rural migration is primarily an intra-regional movement and migrants are increasingly moving to small- and medium-sized towns. Unlike migration flows before 1980, migration over the past decade has increasingly been toward small- and medium-size towns rather than to the major centers of the El Jadida-Casablanca-Rabat-Kenitra axis ' According to one source, these major centers along the Atlantic coast attracted only 50.2 percent of migrants during the last ten years, down from 62 2 percent before 1980 '" (See Table 7 2 on Migration by period, by destination and size of towns) How this new pattern affects the location of infrastructural developments (l'amenagement du territoire) will require more detailed data, inter alia, on trends and patterns from losing and receiving villages and towns (See Table 7 3 on Migration by period, by sex and by region of destination) 7 13 Migration reflects a fundamental transformation of the rural economy. Migration is changing the face of the rural landscape the sparsely peopled, wide open landscape of today is slowly but surely being replaced by small and medium towns "' These usually begin as centers for agro-processing activities, which attract other economic activities As the process of "urbanization" of the rural world proceeds, the demand for processed foods and other goods and services increases, thus contributing to the diversification of the local economy Rural incomes are already diversified, with agriculture directly accounting for only 38 percent of total household income (See Table 7 4 on Sources of rural household income). According to the migration census of 1994, only 48 5 percent of the approximately 895,000 salaried workers in the rural economy work on agriculture 120 The development of these small- and medium-sized towns is doubly beneficial to Morocco's development because they relieve pressure on the already overcrowded major urban centers and serve as the nuclei for diversifiying and strengthening the rural economy These towns are thus part of the vision of rural well-being 7.14 Characteristics of 1982-94 rural migration highlight the urgency of improving female literacy. A striking and unexpected feature of the most recent census on rural migration is that 62 percent of all migrants were young women, up from 50 percent before 1980 (See Table 7 3 on migration by sex, among other things). This high female to male migrant ratio of 60- 40 has major implications for human capital investment. Rural girls born today will increasingly become inhabitants of Morocco's small- and medium-sized towns and big cities tomorrow. The overwhelming majority of these women (92.6 percent at the time of migration and 85 4 percent at the time of the census) are illiterate Most of these women are young (70 percent are in the 15-24 age category) and work in industry (49 7 percent) and trade (7.3 percent) or as domestic servants (22 percent). Given the labor market rigidities of urban employment, these young women form part of the temporary labor force, specially in export-oriented sectors.12' Their low levels of literacy and lack of formal skills training constrain them to low paid, low productivity, and temporary jobs. Not educating these women represents a missed opportunity not only for the rural women themselves but also for society as a whole 76 Constrained budgets, huge backlog of rural demands, and problems of delivery emphasize the urgency of improving cost-effectiveness and impact 7.15 Greater cost-effectiveness and impact require radical departure from "business as usual" approach to expenditure policy Morocco's expenditure policy is at a crossroads Public expenditure has a pivotal role to play in improving the access of the rural poor to (a) markets, (b) job opportunities in economically promising systems, and (c) productive and social services, the fundamentals of integrating the poor in the mainstream of a more efficient and prosperous Morocco The magnitude of the task in a budget-constrained situation makes the search for more cost-effective approaches a practical imperative. Under the "business as usual" approach, "meeting sector development targets that are likely to foster higher growth will probably require real increases in expenditures of at least 7-8 percent per year over the medium term" ' The need to contain the budget deficit (to reach a balanced budget by 2000-03 according to the Reform scenario in the Country Assistance Strategy) precludes such increases.123 In any case, Morocco's budget expenditures at roughly 25 percent of GDP is a full 4-5 percentage points above the unweighted average of a majority in a sample of ten other middle-income countries. While there is no rigorous norm on what level is "appropriate", it does weaken the case for even higher expenditures.124 The only realistic alternative is then to improve cost- effectiveness Morocco should consider "load shedding" (that is a better demarcation between public and private responsibility), cost sharing especially with the higher income beneficiaries, larger scale privatization, and greater decentralization Since experience so far with greater decentralization and participation in rural development programs is promising, this alternative is discussed next Accelerating decentralization can improve cost-effectiveness and local resource mobilization. 7 16 The English and French meanings of decentralization need to be distinguished to avoid confusion The English term decentralization refers to processes in which selected powers and resources are transferred from the central government to subnational levels of government and community organizations 125 It includes deconcentration (that is establishing local offices of the central government), democratic decentralization, fiscal decentralization, devolution, privatization, community participation, and empowerment The French term decentralization refers only to the devolution of selected powers from central to subnational levels, not to deconcentration Since the Moroccans use the French meaning and to avoid confusion, the term decentralization is used in the French sense here. 7 17 The Kingdom of Morocco has a long history of decentralization but central tutelage remains strong Prior to the Protectorate in 1912, the Jema'a, a local unit, managed local affairs Soon after Independence in 1956, 20 provinces and prefectures were created. These divisions were subdivided into 72 circles in 1959 and 311 caidats in 1973 By 1995, there are 65 provinces and prefectures (urban units), 133 circles and 460 caidats126. At the same time, Morocco developed a system of decentralized units, known as local collectivities (LC), which include communes, provinces and prefectures, and regions. Communes were created by the Charte Communale in 1960. Further legal definition and multiplication of local collectivities (LC), provinces, and prefectures occurred in 1960, 1962, 1976, and 1984 In 1992 the region was established as a decentralized administrative unit above the province The legal documents 77 necessary to operationalize this decision are still being developed Today Morocco has 1,546 communes, 248 urban and 1,298 rural whose representatives are elected every 6 years (See Table 7 5 on Important dates and events for decentralization and Table 7 6 on the Decentralized and deconcentrated system in rural Morocco) 7 18 The tutelage of the Ministry of Interior remains heavy Despite the evolution toward increased autonomy the decentralized (as well as the deconcentrated) system remains under heavy central control The deconcentrated units (administrative) are headed by appointees nominated by the Ministry of the Interior (MI) or by His Majesty the King Every aspect of the day-to-day functioning of the communes is affected by the Ministry of Interior which (a) approves or rejects the deliberations of the communes, (b) controls budgetary procedures and determines their budgets (including which loans the commune can take, what tax rates it can levy, and which gifts it can accept), (c) voids any decisions of the communes that are judged to violate existing regulations, (d) imposes certain expenses of the recurrent budget of the Ministry of Interior on the communes, (e) intervenes in a wide range of local matters through the Card who determines whether communes can assemble publicly, form associations, fix prices in souks, and regulate imports; and (f), can substitute itself for any elected member of the communes 127 Every aspect of the functioning of these elected communes is thus subject to the approval of the Ministry of Interior as represented by the Governor and his subordinates The decision to define the legal attributes of the Region and to establish another layer of administration between the center and the LCs undermine what little autonomy the LCs possess. 7 19 Local collectivities have little financial autonomy The 1995 decision to transfer 30 percent of the VAT to the LCs according to an allocation formula improved their financial status markedly (the decision to transfer the VAT was made much earlier in 1988) However, the rural communes still remain heavily dependent on the center The budgets of the Rcs (Rural Collectivities) must be approved by the Governor and the budgets of UCs (Urban Collectivities) by the MI. The MI, as the Ministere de tutelle, closely oversees the functioning of these LCs through the Direction Generale des Collectivites Locales (DGCL). The communes draw their revenues from four main sources allocated taxes (recettes affectees), made up of licenses (patente), the urban tax, and the property tax (d'edilite), local taxes, transferred taxes (VAT) and loans from the Fonds d'Equipement Communal (FEC). These communes collect only 5 percent of their total revenues locally. It is the central government (CG) that determines the scope and rates of these taxes Forty-five percent of the communes' expenditures are financed by transfers from the CG. 7.20 Resources of rural communes are meager. Average revenues (including all resources) per head are less than US$20 in rural communes, half of which goes towards recurrent expenditures.128 Revenues for RC are lower than in UC because rural communes cannot raise allocated taxes RC receive only 28.6 percent of the VAT transfer, or DH 71 3 per head, far less than the DH 98 6 per head allocated to urban communes.'29 Urban commune revenues per head are on average three times as high as rural commune revenues (1993) Because of the weakness of rural commune budgets the attempted transfer of responsibilities for health and school infrastructures to the communes was unsuccessful. 7 21 The degree of fiscal decentralization is low in Morocco Only 8 percent of total government expenditures is spent by the LCs, slightly less than the developing country average of 10 percent, (some developing countries such as Colombia at 21% (1994) and Brazil at 14% 78 (1990) are far above) and much less than industrial country average of 22 percent The 5 percent of total revenues raised by local governments in Morocco compares unfavorably with the 8 percent average for developing countries and the 16 percent average for industrial countries 'so 7 22 Deconcentrated departments respond to central directorates, not to local communities The problems in the functioning of sectoral ministries in IRD projects are exemplified by the IRD project in Ouarzazate, in the Haut Atlas Central, begun in 1993 Jointly funded by the UNDP (20 percent) and eight sectoral ministries (80 percent), the project is coordinated by a unit that also manages the UNDP funds. Each ministry's technical staff follow the administrative and budgetary procedures of the appropriate central ministry and each ministry has its own budget, is responsible for its own intervention, and works according to its own technical specifications Each ministry follows its own timetable of implementation and coordination is complex, slowing down project implementation The synergistic interaction among different interventions, the hallmark of a successful IRD, has unfortunately not materialized .31 7 23 Demand-driven rural development projects have shown promising results. The heavy tutelage by the center is detrimental to cost-effective delivery of IRD projects By contrast, experience shows that decentralization along with the empowerment of local communities can work well in Morocco Demand-driven approaches can work more efficiently, as shown by the case of Tiznit, a rural semi-arid province in south Morocco Eighty percent of the population in Tiznit is rural and poor, but the community has a strong tradition of association and self-help. Between 1983 and 1995, the residents of Tiznit organized to build 331 km of road, of which 281 km are paved Working through local associations, the community raised roughly 50 percent of the costs of the project which were matched by the Ministry of Public Works (MTP). Technicians of the MTP prepare the technical specifications as a basis for discussion with the local community which decides on the design, determines the division of labor between the administration and the community and executes the works according to agreements reached with the assistance of the MTP As a result of local involvement these roads were built at a cost of DH 54 million, a savings of DH 26 million over what they would have cost had the community not been involved. Such participatory approaches have worked in widely different contexts elsewhere in the world; e g, in Latin America, and in Taiwan, China, and should be seriously considered on a large scale in Morocco 132 Adaptation is however non-trivial For example, complex issues of public goods which "spill over" into other communities may require arbitration from some higher level of administration. Checks and balances and transparency in the management of funds at the local level, are also important to ensure that local elites do not capture all the benefits 7 24 Selected experiences from Latin America illustrate the benefits of decentralization. Systematic evidence on the functioning of decentralized systems has been gathered and is being analyzed by the Bank's ongoing research project Decentralization, Fiscal Systems and Rural Development The analysis has been based on a sample of 17 developing and 22 industrial countries.'3 Some relevant experiences from Brazil, Mexico, Chile and Colombia are briefly presented below Brazil Following disappointing results, in 1993, Brazil reformulated its Bank- financed (US$826 million), centralized Northeast Rural Development Program (NRDP) for small farmer agricultural development in the drought-prone, poverty- stricken northeastern states. The reformulation scaled up a successful, innovative, 79 community-based investment component of the NRDP, adding elements of the Mexican Solidaridad and other successful experiences Three different delivery mechanisms are involved One, under the State Community Schemes (PAC) poor rural communities submit investment proposals to a state technical unit, which screens, approves, and releases funds for subprojects, interacting directly with beneficiaries Two, under the Pilot Municipal Community Schemes (FUMAC) subprojects identified and prepared by rural communities (with technical assistance) are presented to project municipal development committees, which include community members and representatives of the civil society and municipal authorities, for review prior to submission to the state technical unit for approval FUMAC has proved superior to PAC by providing for direct municipal involvement in mobilizing and organizing communities, setting priorities, fostering participation, and ensuring transparency The program covers a broad spectrum of the rural poor including the landless, living in communities of less than 7,500 persons, and provides matching grants (with a community contribution of 10-20 percent depending on the type of subproject) to legally organized community associations for infrastructure and productive and social subprojects that do not exceed US$50,000 Technical assistance (roughly 8 percent of total subproject cost) is broadly sourced and includes NGOs Through binding agreements, beneficiaries accept full responsibility for operation and maintenance The program has reached its intended beneficiaries through rigorous targeting and is generating sustainable economic growth, and employment Demand is strong and beneficiaries enthusiastic. Three, further decentralization of budget resource allocation and control (FUMAC-P) is being piloted under the new Rural Poverty Alleviation Program, the successor to NRDP Mexico. The Municipal Solidarity Fund (MSF) is one of 32 programs included within the National Solidarity Program (Sohdaridad) established in 1988 with US$2.0 billion in central government funding The objectives of the MSF are to strengthen local institutional capacity and to promote decentralized decisionmaking Financed by matching grants from national and state budgets, the MSF provides annual block grants to municipalities for small investments in social and productive infrastructure that will increase employment.134 A Municipal Solidarity Council is established in each municipality (with representation of poor communities organized into Solidarity Committees), to prioritize and select investment subprojects with a ceiling of US$50,000 (the average subproject costs about US$12,000) and community cost-sharing of at least 20 percent of the total investment, in labor, materials or cash Now functioning in most of Mexico's 31 states, the MSF has financed about 75,000 demand-driven subprojects, at unit costs that are 30-60 percent lower than traditional contracting costs and at satisfactory quality. The MSF is not managed by autonomous agencies but is integrated into the government system A World Bank loan supports the Municipal Solidarity Funds in four poor states under the Decentralization and Regional Development Project (1991). 80 Chile. In 1990 a new democratic government in Chile launched a national strategy for poverty reduction The Solidarity and Social Investment Fund (FOSIS), an "independent" agency of the Ministry of Planning, provides the rural poor, youth, indigenous peoples, and residents of marginal areas with programs for micro- enterprise development, credit access, training and technical assistance The program is decentralized, participatory, and innovative, and is executed through agreements and contracts with public and private entities, including businesses, NGOs, the beneficiaries themselves, universities, and municipalities In four years FOSIS has benefited some 200,000 persons The Agricultural Development Institute (INDAP), a subsidiary of the Ministry of Agnculture and Livestock (MAG), delivers credit and agricultural extension to poor, small farmers. These programs stress decentralized implementation and quality control, and the private sector delivery of technology transfer They have a strong gender and productive/income generation focus and are constantly evolving and seeking linkages with other rural programs, including FOSIS Other instruments include the Interministerial Social Committee, an advisory committee comprising all social ministries whose purpose is to design and coordinate a poverty-alleviation strategy, especially for the poorest municipalities, the majority of which are rural, the National Regional Development Fund, (NRDF) which re- distributes funding for investments in less well-endowed regions, and municipal funds, similar to the NRDF, to which each municipality contributes a percentage of its annual income for redistribution to less advantaged municipalities Colombia. The experience of the Colombia Integrated Rural Development Fund (Fondo DRI), underscores the effectiveness of schemes combining political, fiscal and institutional decentralization. These schemes increase the availability of resources for rural development, increase beneficiary participation, influence the decision-making process and improve outcomes Fondo DRI provides matching grants to municipalities for small investment subprojects covering a wide range of rural development components including rural roads and electrification, potable water supply, watershed management, minor irrigation, agricultural extension, community organization and projects targeted to women Fondo DRI contracts with municipalities to channel funding, and municipalities in turn enter into agreements with communities and private contractors to execute the works or services, appraising subprojects and meeting required technical and environmental standards Communities of low-income rural households are fully involved in identifying priority needs, selecting subprojects, implementing, operating and maintaining projects chosen, and sharing cost through labor and materials. Key to the Fondo DRI strategy are (a) reaching poor municipalities with some agricultural potential, (b) building capacity in weaker municipalities, and (c) working through a cofinancing mechanism for targeting resources at poorer municipalities and at privately profitable projects with large spillover effects such as resource conservation, and agricultural extension 81 These four experiences are fundamentally different from the traditional top-down approach taken in Morocco (except for some isolated cases as in the case of Tiznit) In all these cases, local communities take the initiative, contribute their time and other resources, and are supported rather than controlled by technicians. The tutelage of the center is replaced by the initiative of the local residents The process, which is often one of trial and error, unleashes the managerial and other talents of local residents and can thus break the vicious circle whereby tutelage from the center remains strong because the locals are weak and the locals remain weak because the tutelage is strong 7.25 Successful participatory approaches contrast with the failed centralized approach. Under a participatory approach intended beneficiaries are in charge while the center is confined to providing assistance (through funds and technical assistance) The results of this approach stand in stark contrast to those of the failed centralized IRD projects of the 1970s Local involvement does not guarantee success-local rural elites can capture project benefits to the exclusion of the poor for example or sociocultural minorities can be excluded-but performance to date is promising and warrants further experimentation 7 26 Only a participatory approach can be effective and sustainable in Morocco. The great diversity of rural conditions, the geographical dispersion of douars (villages), and the evolving nature of constraints, opportunities and priorities mean that only a participatory and decentralized approach is sensible and sustainable in Morocco. The classic criticism that the local communities are incapable of management is unfounded, experience elsewhere in the world shows that the local communities learn by doing They can also acquire skills in management and accounting through formal technical assistance programs Participation and decentralization, however, do not mean that rural -development programs becomes cheaper for the central government. It does however mean that, if the right incentive structure in local collectivities is in place, more can be gotten out of less Morocco can build on the solid base of domestic and international experience through systematic experimentation 7 27 Formulas for decentralization and deconcentration must be country-specific Experiences from other countries offer no guidance on the optimum degree of decentralization and deconcentration which depends on country-specific characteristics. Each country must balance a complex set of historical, cultural and other factors in what A Parker has aptly referred to as "the souffld theory of decentralization".135 7.28 Morocco should experiment with pilot projects to find the optimum degree and form of decentralization and deconcentration. Decentralized pilot projects should be set up to test the efficacy of the participatory approach in different physical, agro-climatic, economic, cultural and socio-political environments within Morocco The solid base of domestic and international experience should be drawn upon in designing pilot projects Public expenditure policy can be critical in promoting rural transformation 7 29 Social expenditure policy plays a crucial role in rural transformation. Over time, social expenditure policy can level the playing field in terms of access and opportunities, key ingredients of successful development To integrate rural Morocco policy must complement and 82 support the fundamental changes in incentives generated by macro stability, trade liberalization, and domestic market deregulation It must increase the productivity of agriculture and the rural labor force so that factor markets in the sector can respond efficiently to the opportunities created by the change in signals This supply response at the factor level is essential if rural Morocco is to benefit from a more efficient policy framework For public expenditure to become a cost-effective tool of rural development, broad-based reform is required 7.30 Reform will require redefining the very role of the State and its priorities in a market economy. The Government needs to determine how egalitarian the public expenditure allocation system should be and establish its priorities accordingly; redefine the role of the public sector in promoting productivity growth and human capital formation within a more open and competitive economy, restructure budget allocation and undertake subsectoral reform to support that role, and devolve power away from the center Specifically, to make expenditure policy a cost-effective tool of socio-economic development, the Government needs to make the following changes: (a) Determine how egalitarian the system should be. Inequities in the access to land assets which were perpetuated by inequities in public expenditure policy, have been costly in terms of foregone growth and development and concerted effort to reverse these inequities is essential to increase the rural poor's access to basic infrastructure and services (b) Redefine the role of the public sector within a more open and competitive economy. Government has a major role to play in generating the social and private pay-offs associated with basic infrastructure and services Sound rural development requires that the Government invests in human capital in order to facilitate the structural transformation of the rural economy. The Government should increase spending on rural infrastructure and services, and on productive services, e.g., agricultural research and extension; strengthen cost-recovery mechanisms (taking into account the poverty of affected populations) and accelerate its withdrawal from market controls. (c) Restructure budget allocation and undertake subsectoral reform to support its redefined role more cost-effectively. Current budget allocations and the way the way public funds are used blunt the effectiveness of public expenditure as a tool of socio-economic development. Public expenditure policy must be restructured; both in terms of inter- and intra-sectoral allocations and of administrative systems With respect to the latter, the Government has a large menu to choose from. This report builds on the recommendations made in previous Bank work on how to render public expenditure a more cost-effective tool in the delivery of various public goods and services such as irrigation, agricultural research and extension, rural roads, electrification, delivery of potable water, basic health and education, public employment schemes, and social safety net mechanisms. 83 (d) Devolve power away from the center toward local collectivities. The Government has already espoused the principle of decentralization It needs to follow through to achieve results on the ground Experimentation with pilot projects can assist in determining the optimum balance of power and responsibility between central authorities and local collectivities, and in identifying the kinds of technical and other assistance local collectivities need to operate effectively 8. CHAPTER EIGHT: INTEGRATING THE TWO MOROCCOS: STRATEGIC PRIORITIES To integrate the two Moroccos, the Government should focus on four strategic priorities: (a) building an efficient agriculture, more competitive in domestic and foreign agro-food markets (b) using public expenditure to facilitate adjustment; (c) redefining Government support to build rural infrastructure, deliver basic services, increase resilience to drought, and improve the productivity of land and water use; and (d) decentralizing to improve the cost-effectiveness of rural development programs. Building on the basis of a stable macro framework and pursuing these priorities will require broad consensus, central coordination, local participation, skillful sequencing and careful balancing. The Government must seize the golden opportunity offered by expanding world markets to fuel overall and rural growth Central coordination and local participation are needed to forge broad consensus on strategic priorities 8 1 Coordination and consensus are needed on four strategic priorities. The basis for action would need to be broad consensus on four strategic priorities Progress in these areas requires coordination by the central government drawing upon consensus throughout the nation to ensure that policy actions and institutional reforms are properly timed and executed and the required financial resources are mobilized and properly allocated to priority programs. The four strategic priorities are the following Build an efficient and high productivity agricultural and rural sector more competitive in domestic and foreign agro-food markets; Use public expenditure and targeted programs to facilitate adjustment of vulnerable groups in rural areas; Refocus Government support to improve rural infrastructure, services, drought resilience and more productive land and water use; and 85 Decentralize implementation further to improve cost-effectiveness and ownership of rural development programs. 8 2 The strategic priorities are anchored in building an efficient, diversified and resilient agriculture Since the cornerstone of rural development is a more efficient, diversified and resilient agriculture, the first set of measures should focus on dismantling inhibiting incentives and institutions reducing anti-export bias, agricultural trade 'and other import distortions, removing domestic market monopolies and other controls along the agro-industrial chain, and raising water tariffs The second set of measures should focus on restructuring and implementing compensatory programs The third set of measures should focus on restructuring public expenditures building rural infrastructure, facilitating access of rural poor to basic services, strengthening productive services in research and extension, and in quality management The fourth set should focus on accelerating decentralization increasing the participation of local collectivities at every stage in the development of rural projects 8.3 The logic of sequencing: change signals first, then put in place systems to facilitate desired response to these signals. The inherent logic to any reform is signals first, supportive measures next Changing signals can be accomplished "overnight" or by "the stroke of a pen", but putting in place the new institutional framework takes time. Changing signals in a clear and sustained manner is necessary but not sufficient to changing the behavior and performance of public and private sector. In Morocco, changing the key signals is fourfold First, it pertains to the size of the fiscal deficit-it signals the Government's commitment to playing a different role relative to the private sector. Second, it pertains to the depreciation of the real effective exchange rate and the lowering of target prices on "strategic" agricultural commodities-it signals the Government's commitment to a more competitive and integrated Morocco, capable of responding to the challenges and opportunities of a rapidly changing global economy Third, it pertains to the centrality of reducing rural poverty for a more stable and more dynamic Morocco-it signals Government's commitment to a more equitable Morocco Fourth and final, it pertains to the principles governing refocused and revitalized central and local administrations-these signal the Government's commitment to a new partnership between public and private sector National debate is required to forge broad consensus on resolving controversies 8 4 Controversy is likely on the extent and pace of agricultural trade liberalization. Reducing trade protection on "strategic" commodities and on fishmeal is likely to be highly controversial because of the negative short-term impact on (a) small farmers of rainfed cereals and the rural poor who benefit indirectly by selling their labor on large cereals farms; (b) relatively better off farmers of sugarbeet and sugarcane and oilseeds, state-owned sugar factories, and monopolies and oligopolies in oilseeds and vegetable oil; (c) returns in domestic fishmeal industry The gainers are consumers and exporters However, because trade liberalization is likely to hurt both the poor and the better off producers in the short run, (short run is 1-5 years in rural development which is a long-term process) sharp and swift reduction of trade protection is likely to be very controversial. 8 5 Controversy is likely on how best to coordinate deprotection with the agro-food export promotion As protection on "strategic" commodities and fishmeal is reduced, promotion of agro-food exports must expand opportunities in competitive agro-food exports to re-absorb displaced labor in profitable outlets in competitive activities Greater efficiencies 86 expected from recent deregulation measures in cereals, sugar and oilseeds marketing, the depreciation of the real effective exchange rate to reverse the 15 percent appreciation, and the current high world commodity prices, all can combine to facilitate this transition from uncompetitive to competitive In theory, deprotection can be achieved by a "stroke of a pen" whereas successful market development and export promotion/diversification take time The controversy would revolve around varying judgements as to the capacity of compensatory programs to buffer the blow, and the speed and success of export promotion, judgements on both being necessarily somewhat speculative 8 6 Controversy is likely on the priorities of public expenditure and how best to decentralize further. In formulating a policy framework that will promote an efficient and diversified rural sector the Government must make several fundamental decisions Should priority be given to large-scale irrigation or should policy focus on raising productivity in rainfed agriculture? Should priority be given to expansion of large-scale irrigation in the near future or to rehabilitation? Should priority be given to large-scale irrigation or to renovation of small- and medium-scale scale irrigation, the economic returns from which are greater? Given the lack of basic public infrastructure and services in rural areas and the strong urban bias of public expenditure, how major a re-allocation of resources is called for? How best should the fragmented system of expenditure allocation to rural areas be replaced by more cost-effective and decentralized approaches? Public expenditure policy is at a crossroads on how best to support an efficiency-and equity-promoting framework 8 7 Controversy is likely on redefining the role of the Government Decisions on medium-term public expenditure allocations will depend on redefining the role of the Government in a more outward-oriented and competitive agriculture Should the Government operate and maintain the irrigation canals of the LSI through the ORMVAs or should it embrace participatory irrigation management with Water Users' Associations responsible for O&M? How should Government demarcate its role relative to private sector in research and extension to assist the myriads of small farmers? How should the Government work with private sector in building efficient marketing infrastructure and competitive transport along the agro-industrial chain; in disseminating market information, and in assisting private enterprises to better comply with the public health and environmental requirements of their products? Here too, government role is at a crossroads on how best to change the rules for public and private operation. Avoiding paralysis: managing controversy by adjusting phasing and anticipating difficulties 8 8 Some technical options can assist Government manage the controversies. The proposal is to generate efficiency gains and to put in place safety nets and compensatory schemes early in the process In the short run (1-5 years), the major potential gainers to the changes proposed are exporters and consumers; the major losers are producers, processors, and intermediaries in non-competitive "strategic" agricultural commodities. The technical option is to benefit the potential gainers as early as feasible Fiscal discipline would contribute to reducing inflation and real interest rates These would benefit private business and exporters in particular A sharp reversal of the 15 percent appreciation of the real effective exchange rate would boost export competitiveness and enable Government reduce target prices of cereals, sugar and oilseeds at the border, while benefiting consumers and moderating the negative impact on the production chain Signalling a fundamental deregulation along the agro-food chain would set in motion 87 competitive behavior. The resulting efficiency gains would benefit both small producers and poor consumers The above agro-food deregulation should increase the inflow of foreign direct investment thus generating further broad-based income and employment gains Implementing strategic priorities: how quickly should the Government of Morocco move? 8 9 There are pros and cons to moving quickly. International experience is inconclusive on whether to engage in rapid or gradual reform The main advantages to reforming quickly are that credibility is established and efficiency gains are realized sooner, two important considerations that can determine the success or failure of the transition Rapid lowering of trade protection on "strategic" commodities would also allow immeditate dismantling of the costly food subsidy system, thus generating fiscal savings and enabling the strengthening of compensatory programs, including an income support program for small farmers in high poverty areas In addition, in agro-food exports, there is a high premium in being ahead in developing niche markets Since world market prospects are expected to remain favorable for the near future, it would be advantageous to reduce the anti-export bias and to tap expanding markets sooner rather than later. The main disadvantage of moving quickly is the likely short-term increase in unemployment among both the rural poor and better off As in many reform programs, the costs precede the benefits. Productivity increases and institutional reforms take time. Rural employment works, and other social safety net programs are needed to assist the Government manage the negative short-term consequences of deregulation and assist the longer-term adjustment of those negatively affected. They should be in place whether the rapid or gradual approach is adopted However, the more rapid the pace, the greater their urgency Given Morocco's gradualist approach to structural adjustment, many observers are skeptical that Morocco will want to move quickly A gradual approach may enable it to better manage the social costs of adjustment among both the poor and the better off However, Morocco would need to operate simultaneously two social welfare programs, namely consumer food subsidy and producer income support. 8.10 International experience is inconclusive on the desirable pace of reform. In the debate of whether to engage in rapid or gradual reform, the contrasting experiences of other successful reformers is instructive. Chile, which chose to move quickly during its 1973-79 reform program, achieved dramatic success but at a substantial social cost: unemployment rose from 5 percent in 1973 to around 20 percent by 1982 Israel adopted an employment-sensitive approach to reform between 1952 to 1986. In both cases, despite ups and downs, there were no major reversals in policy, a major achievement "' Morocco will need to decide this issue of pacing on its own evaluation of national strengths and sensitivities, but decide it must since the current course is not sustainable. 88 Implementing the strategic priorities: little leeway exists 8 11 Fragile macro stability, severe distortions and sharp budget constraints narrow Morocco's choices The commitment to achieving the vision of rural well-being means that Morocco has no choice but to reform and to do so while ensuring macro stability, without which no country has been able to implement reform successfully. To achieve high growth Morocco will have to reduce severe distortions and integrate its economy more fully in the world economy To provide needed services given the tight budget constraints, it will have to redefine the role of the Government The agenda-stabilizing the economy, liberalizing trade and markets, reshaping delivery of public goods and services and decentralizing development programs- is demanding. The task of reform is daunting but Morocco has the required assets 8.12 Morocco has assets upon which to draw. To shape the future Morocco can rely on its past. When faced with past financial crises Morocco has successfully regained internal and external equilibrium, achieved sustained growth, and reduced poverty by undertaking wide- ranging structural adjustments Morocco should draw on its long history of consensus-building, on the lessons of international experience, and on donor support to guide and help finance its rural development agenda A national debate is urgently needed to forge a consensus on how to achieve the vision of rural well-being 8.13 The World Bank can contribute to Morocco's debate on how far and how fast to proceed with reform. The role of the Bank is to contribute to a national debate on how best to achieve the vision of rural well-being in Morocco The purpose of this report would be amply served if it contributes to such a debate and helps shape the consensus and agenda for rural development. Only a national consensus can provide the foundation for an action plan that can mobilize the moral and financial support of all Moroccans and the development community PART THREE: SUPPORTING TABLES, CHARTS, GRAPHICS AND MAPS 90 Morocco at a glance M. East Lower- POVERTY and SOCIAL & North middle- Morocco Africa income Development diamond* Population mid-1994 tmillions) 26 4 267 1,097 Life expectancy GNP per capita 1994 (US$j 1,150 .. 1,680 Average annual growth, 1990-94 Population (%) 2.0 28 1,4 Labor force t%) 3.0 3.2 16 GNP Gross Most recent estimate (jatest yearavailable since 1989) per primary capita enrollment Pove. headcounl index (% ofpopulation) 13 cn Jrban population (% of total population) 48 54 54 Life expectancy at birth years) 65 65 67 Infant mortality (per 1,000 live births) 56 49 35 Child mainutrtion (% ofchfiten under 5) 9 A Access to safe water (% otpopulation . 7 Access to safe water iliteracy (% ofpopulation age 15+) .5S 45 Gross primary enrollment (% ofschool-age population) 73 97 104 -Morocco Meale 65 10 10 - Lower-middle-income group KEY ECONOMIC RATIOS and LONG*TERM TRENDS 1 1975 1985 1994 1995 Economic ratios* Gross domestic investmentfGDP 25.2 27,1 .21.3 210 Openness of economy Exports of goods and non-factor services/GDP 22 5 24.7 25.3 27.3 Grossdomesticsavimgs/GDP 143 18.1 15.7 13.4 Gross national savingsGP 187 17,9 18.9 16 1 Current account balance/GODP -61 -9.3 -24 -4.9 Interest payments/GDP 06 3,8 3,5 Savings Investment Total debt/GDP 210 128.4' 74.2 70.1 Total debt servicelexports 63 35.3 33.& 30.5 Present value of debilGDP . . 62.6 Present value of debtlexports . . 212 0 I e Indebtedness 1975-84 198545 1994 1995 1996-04 (average annual growth) Morocco GDP 4.4 29 11.5 -76 5.6 GNP per capita 1.7 08 9.4 -9.6 3.8 - Lower-middle-income group Exports of goods arid nifs , 4.2 47 . 2.0 2,1 7.5 STRUCTURE of the ECONOMY (% of GDP) 1975 1985 1994 1995 Growth rates of output and investment (%) Agriculture 17.3 166 184 143 1s Industry 34.7 334 31 5 33.2 to Manufacturing 166 186 176 192 s Services 480 500 501 525 o . Private consumption 69.4 660 674 689 19 90 94 General government consumption 16.3 158 169 177 Imports of goods and non-factor services 33.4 337 30.9 349 -Gi *GDP (average annual growth) 1975-84 1985-95 1994 1995 Growth rates of exports and imports (%) Agriculture 1.4 04 630 -459 20 Industry 3.0 24 43 31 1s Manufacturing 31 42 29 10 Services 6.5 40 32 12 s Private consumption 3.8 42 151 -7 1 .5 B 9 92 93 94 95 General government consumption 5.7 3 1 1 7 -45 -10 Gross domestic investment -0.1 1 5 11 5 -85 .1s Imports of goods and non-factor services -0.6 64 36 40 Gross national product 41 29 124 -74 -Exports Imports Note 1995 data are preliminary estimates - The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete 91 Morocco PRICES and GOVERNMENT FINANCE 1975 1985 1994 1996 Inflation I%) Domestic pnces (% change) 120 Consumer prices 79 77 51 61 I00 Implicit GDP deflator 15 85 04 71 so 60 - Government finance 40 (% of GDP) 20 Current revenue 207 24 2 239 0 Current budget balance -24 28 1 4 90 91 92 93 94 95 Overall surplus/deficit -96 -39 -57 -GDP def -CPI TRADE (millions US$) 1975 1985 1994 1995 Export and import levels (mill. USS) Total exports (fob) 2,283 5,538 6,676 10000 Agricultural products 603 1.280 1,457 9000 90 Phosphate rock 479 273 291 8oon00 Manufactures 478 1.474 1,600 ,oo I Total imports (cif) 3,921 8,265 9.936 soo Food . 507 799 1,332 4ii Fuel and energy 1,074 1,113 1,184 3.000 Capital goods 649 1,845 1,854 2.0 Export price index (1987=100) 87 95 99 0 Import price index (1987=100) 87 89 92 89 so 91 92 93 94 9s Terms of trade (1987=100) .. 100 107 108 0 Exports M Imports BALANCE of PAYMENTS (millions USS) 1975 1985 1994 1995 Current account balance to GDP ratio (%) Exports of goods and non-factor services 1,997 3,278 7,688 8,840 0 Imports of goods and non-factor services 2,939 4,402 9,368 11.315 89 90 91 94 95 Resource balance -942 -1,124 -1,680 -2,474 -1 Net factor income -88 -766 -1,171 -1,209 -2 Net current transfers 482 1,064 2,124 2,096 Current account balance, .58 -2 76 _ 8 3 before official transfers -548 -826 -726 -1,587 Financing items (net) 519 845 1,240 886 Changes in net reserves 28 -19 -513 702 Memo: Reserves including gold (mill USS) 438 345 4,548 3,613 Conversion rate (local/US$) 4 1 10.1 92 8 5 EXTERNAL DEBT and RESOURCE FLOWS 1975 1985 1993 1994 (mons USS) Composition of total debt, 1994 (mill. US$) Total debt outstanding and disbursed 1,889 16,526 21,261 22,512 G IBRD 244 1,288 3,559 3,746 547 A IDA 31 43 36 35 6 B Total debt service 163 1,372 2,612 2,920 5174 35 c IBRD 33 167 552 572 148 IDA 0 1 2 2 Composition of net resource flows 0 Official grants 26 416 55 105 2396 Official creditors 232 428 -166 -496 Private creditors 283 153 502 230 Foreign direct investment 0 20 522 776 Portfolio equity 0 0 0 63 E World Bank program 1D466 Commitments 33 379 809 535 A - IBRD E - Bilateral Disbursements 111 307 377 294 B - IDA D - Other multilateral F - Private Principal repayments 18 87 294 351 C - IMF G - Short-term Net flows 93 220 83 -58 Interest payments 15 81 260 276 Net transfers 78 139 -177 -333 International Economics Department 11/4/96 Table 1.1: East and Southeast Asia -- Selected economic and social indicators Table 1.1 Indicator' Units Period Taiwan, Republic Malaysia Thailand Indonesia China China2 of Korea Economic Indicators: US$ 1965 223 106 329 143 55 94 Real GDP per capita3 1980 2,348 1,670 1,779 693 526 206 1994 11,462 8,470 3,597 2,465 922 438 GDP growth rate per capita Average annual % 1965-80 9.8 7.6 4.8 4.3 5.6 4.2 1980-90 7.9 8.2 2.6 5.8 4.3 8 7 1990-94 6.8 5.7 6 7.2 6 11 7 Total factor productivity Average annual % 1960-90 3.76 3.10 1.08 2.50 1.25 na growth rate4 Agricultural sector: -growth rate Average annual % 1965-80 1.2 3.0 na 4.6 4.3 2.8 1980-90 1.4 2.8 3.8 4.0 3.4 5.9 1990-94 2.6 1.8 2.8 3.1 3.0 4.1 -share of GDP % 1965 24 38 28 32 56 44 1980 8 15 22 23 24 30 1994 4 7 14 10 17 21 -labor force % of total labor force 1965 45 55 58 82 70 81 1980 20 37 41 71 58 74 1990 13 18 27 64 55 72 -yield for cereals5 Tons per hectare 1961 1.98 3.20 2.10 1.68 1.54 1.21 1996 4.58 5.80 3.08 2.45 4.00 4.75 1 Unless otherwise noted, data are from World Development Report, World Bank, 1990, 1995 2 All Taiwan data are from the following soutces: Social Indicators in Taiwan Area of the Republic of China, Directorate-General of Budget, Accounting, and Statistics, 1994 Taiwan Statistical Data Book, Council foi Economic Planning and Development, 1995. Statistical Yearbook of the Republic of China, Directorate-General of Budget, Accounting, and Statistics, 1992. Yearbook of Manpower Survey Statistics, Tanwan Area, ROC, Directorate-General of Budget, Accounting, and Statistics, 1994 Data aie from the World Bank Economic and Social Database (BESD). 1967, 1980, and 1994 data for Indonesia. 4 Data are from The East Asian Miracle. Economic Growth and Public Policy, World Bank, 1993. Note that results aie highly sensitive to model specification; othei studies have yielded different estimates. s Data are from FAOSTAT database. 1952 and 1994 data for Taiwan. 3/28/972 52 PMNICS DOC Table 1. I cont. Indicator Units Period Taiwan, Republic Malaysia Thailand Indonesia China China of Korea Social Indicators: Gini coefficient6 1960s .312 .315 .515 .420 .366 .315 1990s .305 .356 .480 .502 .331 .362 Population growth rate, total Average annual % 1965-80 2.3 2.0 2.5 2.9 2.4 2.2 1980-90 1.4 1.2 2.6 1.8 1.8 1.5 1990-94 0.9 0.9 2.4 1.0 1.6 1.2 -urban Average annual % 1965-80 na 5.8 1.9 5.1 4.8 2.3 1980-90 na 3.8 4.4 2.8 5.3 4.8 1990-94 na 2.9 4.0 2.4 3.8 4.1 Rural population7 % of total population 1965 45 68 74 87 84 82 1980 30 43 58 83 78 81 1994 19 20 47 80 66 71 Infant mortality ratei Per 1000 births 1965 24 62 55 88 128 90 1980 11 32 30 49 90 42 1994 5 12 12 36 53 30 Total fertility rate9 Births per woman 1965 4.8 4.9 6.3 6.3 5.5 6.4 1980 2.5 2.6 4.2 3 5 4.3 2.5 1994 1.7 1.8 3.4 2.0 2.7 1.9 Incidence of rural poverty'0 % of rural population 1970 1 28 21 30 58 39 1990 1 4 .4 20 14 11 Data are decadal averages from Equity and Growth it Developing Countries: Old and New Perspectives on the Policy Issues, M Bruno, M Ravallion, and L. Squire, World Bank Policy Research Working Paper 1563, January 1996. The Gini coefficients illustiate income inequality for Taiwan, Korea, Malaysia, and China, and expenditure inequality foi Thailand and Indonesia. 1960s and 1980s data for Korea. 1970s and 1980s data for Malaysia. 1970s and 1990s data foi Indonesia. 1980s and 1990s data toi China. 1966, 1980, and 1994 data represent agricultural population for Taiwan. 8 1965, 1980, and 1991 data for Taiwan. 91965, 1980, and 1991 data for Taiwan. o Data aie from Poverty Reduction in East Asia: The Stlent Revolution, World Bank, 1993. The poverty line allows for a diet of 2,150 calories/day, 90% of which dei ived horn grains Taiwanese data represent total poverty in 1988 and 1994 and may rely on poverty lines not consistent to those of the other nations. 3/281972 52 PMNICS DOC Table 1. 1 cont. Indicator Units Period Taiwan, Republic Malaysia Thailand Indonesia China China of Korea Access to safe water, total" % of total population 1985 78 83 78 66 33 72 1993 86 89 90 81 65 71 -urban % of urban population 1975 na 95 100 69 41 87 1991 na 91 96 57 65 87 -rural % of rural population 1975 na 38 6 16 4 66 1991 na 49 66 85 32 68 Access to sanitation, total % of total population 1985 93 100 78 47 30 na 1993 98 100 94 87 55 na -urban % of urban population 1985 na 100 100 50 30 na 1993 na 100 100 81 81 na -rural % of rural population 1985 na 100 67 44 30 na 1993 na 100 89 57 45 na Education:13 -primary, male'4 % of school-age males 1980 101 109 93 100 115 121 1993 101 100 93 98 116 120 -female % of school-age females 1980 101 111 92 97 100 103 1993 101 102 93 97 112 116 -secondary, male % of school-age males 1980 81 82 50 30 35 54 1993 94 93 56 38 48 60 -female % of school-age females 1980 80 74 46 28 23 37 1993 97 92 61 37 39 51 -public expenditures % of GDP 1960 2.5 2.0 2.9 2.3 2.5 1.1 1989 4.4 3.6 5.6 3.2 0.9 1.5 -illiteracy, total % of 15+ population 1985 8.5 5.3 26.0 9.3 28.2 31.8 1995 6.0 2.0 16.5 6.2 16.2 18.5 -female % of 15+ population 1985 na 8.9 34 12 35 45 1995 na 3.3 22 8 22 27 1 Data represent % of population with reasonable access to safe drinking water, including sutface souices are from BESD. 1985 and 1991 data for Korean total access 1988 and 1991 data for Chinese total, urban, and iural access. Taiwan data represent % of population having tap water. 12 Data represent % of population with adequate excreta-disposal facilities aie from BESD. 1985 and 1991 data for Koican total access. 1988 and 1993 data foi Malaysian utban and rural access. 1985 and 1988 data for Thai urban and rural access. Taiwan data represent % of population served by refuse collection and disposal services. ' 1980 and 1992 data for Thailand and Indonesia. 1980 and 1991 data for Taiwan 14 Piiiaiy education data foi Taiwan is not broken down by gender. 15 Data are from BESD and Hunian Development Report, UNDP, 1991. 1965 and 1991 data for Taiwan. 1990 and 1994 data for China. 16 Data are from BESD. 1985 and 1993 for Taiwan. 3/28/72 52 PMNICS DOC 95 Kingdom of Morocco Table 2.1: Urban-rural breakdown of social indicators Table 2. 1 Indicators Units Latest single year Latest Single Year (1982- 1987) (1988 - 1995) Urban Rural Urban Rural Population % of population 43 57 51 49 Population growth rate % 4.1 1.1 3.7 0.8 Fertility rate Births per woman 4.28 6.59 2.56 4.25 Household size Persons 5.48 6.35 5.32 6.58 Working people per household na na 1.74 2.70 Labor force participation % of population 15- 44 56 54 46 64 years of age Unemployment rate' % 12.3 9.5 22.9 10.8 Male 11.7 10.0 17.1 10.9 Female 14.2 6.5 29.6 10.5 Illiteracy rates % of population na na 37 75 Male na na 25 61 Female na na 49 89 Education subsidy Dh per capita na na 267 67 Schooling % of population 78 37 84 43 Male 8-13 years of age 82 49 88 57 Female 74 23 80 27 School enrollment % of school- Coranic & preschool attending population na na 12 11 Primary na na 72 81 Secondary na na 10 5 Higher na na 6 3 Figures do not include underemployment, which is estimated at 20% of the rural labor force. 3/28/973:00 PMURMOR DOC 96 Table 2.1 cont. Indicators Units Latest single year Latest single year (1982- 1987) (1988 - 1995) Urban Rural Urban Rural Poverty incidence, head-count index % of population Very poor 9.0 22.2 2.8 10.7 Poor 17.3 32.6 7.6 18.0 Infant mortality Per 1000 live births na na 52 69 Households living in shacks % of population na na 9.3 72.1 Access to potable water % of population na na 100 14 Population with garbage pickup % of population na na 85 2 Health indicators Access to health clinic % of population na na na 6.5 Women who had a prenatal visit % of pregnant na na 65 24 women Access to electricity % of households na na 90 13 Sources: Annuaire Statstique du Maroc 1995, Minstere charge de la Population, Direction de la Statistique. Recensement 1994, Les Caracterstiques Socio-Economiques et Demographiques de la Population, Nveau National, Ministere charge de la Population, Direction de la Statistique. Social Indicators of Development, The World Bank, 1996. Morocco: Vision for the year 2010, The World Bank, unpublished, February 1996. Increasing Growth and Employment, World Bank Report 14155-MOR, September 15, 1995. Enhancing the Participation of Women in Development, World Bank Report 14153, June 29, 1995. Poverty, Adjustment, and Growth, World Bank Report 11918-MOR, January 1994. Overall incidence was 16.5 for the lower and 26.0 for the upper poverty lines in 1984-85, and 7.0 for the lower and 13.1 for the upper poverty lines in 1990-91. The Poverty Line is measured in DH/Person/Year and US$/Person/Year at an exchange rate of 9.5 DH/US$ in 1984-85 and 8.7 DHIUS$ m 1990-91. 1984-85 1990-91 Urban Rural Urban Rural DH US$ DH US$ DH US$ DH US$ Very Poor 1519 160 1473 155 2106 242 2042 235 Poor 1966 207 1760 185 2725 313 2439 280 Rural habitations are usually constructed from stones, clay, twigs, and wood. 3/28/973-00 PMURMOR.DOC 97 Tables 2.2: Income elasticities of demand and per capita consumption of horticultural products by country group, 1984 Country group Income elasticity of demand Per capita consumption Vegetables' Fruits Vegetables Fruits Developing countries 0.61 0.68 43.43 38.63 (0.30-0.90) (0.28-1.17) Developed market economy countries 0.25 0.38 101.00 92.95 (0.10-0.40) (0.25-0.60) Eastern Europe and U.S.S.R. 0.43 0.64 104.85 54.75 (0.30-0.60) (0.34-0.82) 1 Source: Food and Agriculture Organization of the United Nations, "Agriculture: Toward 2000 DataTape," Rome 1988. Note: The numbers in parentheses indicate the range of varation in income elasticities of demand. Excludes potatoes. Table 2.3: Demand elasticities for selected horticultural exports using two-stage least squares, 1965-85 Demand Commodity group Price Income Fruits Fresh -0.71* 0.74* 0.96 Oranges -0.60** 0.96* 0.96 Nontropical -0.85 1.32* 0.93 Processed -0.98 1.78* 0.98 Nontropical juices -5.35* 6.97* 0.96 Vegetables Fresh -0.57* 0.84* 0.91 Miscellaneous vegetables -0.52* 0.89* 0.92 Processed -1.41* 2.04* 0.93 Miscellaneous vegetables -1.29 3.34* 0.98 Source: 1. Horticultural exports of developing countries: Past performances, future prospects and policy issues, IFPRI Research report 80, by Nurul Islam, April 1990, Table 20. * = sigmficant at the 95 percent level. ** = Significant at the 90 percent level. 98 Table 2.4: Projected annual rates of growth of aggregate demand, 1984-2000 Commodity Developed Developed Developing market centrally countries economies planned economies (percent) Growth of aggregate demand All cereals 0.95 1.07 2.64 Coarse grains 1.06 1.22 3.40 Meat 1.00 1.32 3.85 Fruits 1.31 2.82 3.54 Vegetables 0.66 0.81 2.91 Vegetables, excluding potatoes 1.08 1.80 2.98 Population growth 0.60 0.70 1.90 GDP 3.30 3.70 4.90 Sources Food and Agriculture Organization of the United Nations "Agriculture: Toward 2000 Data Tape. Data on horticultural products compiled by the author from various FAO Sources. m:\..\tab2-234.doc Table 2.5: International Economic Integration -- Selected Features Agreement Region % of Global PTA FIA CET MU First Signed Latest Major Signatories Exports Revision European Union (EU) Europe 38.27 yes yes yes no 1957 1992 16 Gulf Cooperation Council Middle East 2.14 yes yes no no 1981 1981 6 North American Free Trade North America 17.45 yes yes no no 1992 1992 3 Agreement (NAFTA) West African Economic Community West Africa 0.13 yes yes yes yes 1974 1974 6 Association of South-east Asian South-east Asia 6.1 yes by 2000 no no 1967 1995 7 Nations (ASEAN) Caribbean Community (CARICOM) Caribbean 0.17 yes yes yes no 1973 1991 13 Central American Central America 0.18 yes yes yes no 1960 1990 6 Andean Pact Andean South 0.5 yes yes yes no 1988 1988 5 America Southern Common Market Southern Cone South 1.5 yes yes yes no 1991 1995 4 (MERCOSUR) America Arab Magreb Union Magreb 0.66 yes no no no 1989 1993 5 Lome Convention ACP (Africa, 38.7 yes no no no 1975 1996 85 Caribbean, Pacific) & EU General Agreement on Tariffs and World 98.5 yes no no no 1947 1995 122 Trade (GATT)/ World Trade Organization (WTO) Source: Directions of Trade Statistics, International Monetary Fund, 1995. PTA: Preferential Trade Agreement FTA: Free Trade Area CET: Common External Tariff MU: Monetary Umon 3/28/973 02 PMTRADEAG DOC Table 2.6: Summary of European Union's offer on market access to Moroccan agro-food exports Uruguay Round Euro-Mediterranean Agreement' Commodity Period UR Bound Rate Period Quota Agreed min. Duty reduction Duty red. beyond (tons) entry price quota Fresh cut flowers 11/1-5/313 8.5% 10/15 to 5/14 3,600 none 100% 0% Tomatoes 11/1 to 5/14 8.8%+298 ECU/t 10/1 to 3/3 150,700 500 ECU 100% 60% New potatoes 1/1 to 5/15 9.6% 12/1 to 4/31 120,000 none 100% 40% Courgettes 11/1 to 5/15 12.8% +152 ECU/t 11/1 to 5/30 5,000 451 ECU 100% 60% Cucumbers 12.8% +378 ECU/t I1/1 to 5/31 5,000 500 ECU 100% 0% Oranges 12/1 to 5/31 16% +71 ECU/t 12/1 to 5/31 340,0004 275 ECU 100% 80% Clementines 11/i to 2/end 16% + 106 ECU/t 150,0005 500 ECU 100% 80% Sardines 12.5% 19,500 none 100% see footnote 6 Shrimp 12% none none 100% na 0 Squid 6% none none 100% na Sources: Legal Instruments Embodying the Results of the Uruguay Round of Multilateral Trade. GATT Secretariat, 1994. Euro-Mediterranean Agreement establishing an Association between the European Communities and Morocco, December, 1 995 Although the Euro-Mediterranean Agreement has been signed by both parties, it has not been implemented Figures are at 1996 levels 2 Figures represent year 2000 rates and full concessions 10/15 to 5/31 for carnations 300,000 tons with respect to agreed minimum entry price 1 10,000 tons with respect to agreed minimum entry price. 6 6% duty for imports beyond quota during 1996. 3/28/973 02 PAfMOREU DOC Table 2.7: Summary of gains and losses in market access for selected Moroccan commodities to the United States under GATT and NAFTA Commodity Morocco & GSP Mexico CBERA & ATPA Israel Canada MFN 1993 1996 1993 1996 1993 1996 1993 1996 1993 1996 1993 1996 Canned sardines(%): 4.0 2.4 4.0 2.4 Morocco gains relative to 0.0 0.0 0.0 0.0 Morocco loses relative to 4.0 0.0 2.0 0.8 Roses (%): 8.0 7.6 8.0 7.6 Morocco gains relative to 0.0 0.0 Morocco loses relative to 8.0 3.2 8.0 0.0 4.0 1.6 Regular carnations (%): 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Morocco gains relative to Morocco loses relative to 4.0 1.6 8.0 7.5 Oranges, winter (C/kg): 2.2 2.1 2.2 2.1 Morocco gains relative to 0.0 0.0 0.0 0.0 0.0 0.0 Morocco loses relative to 2.2 0.8 Easy peelers, winter (C/kg): 2.2 2.1 2.2 2.1 Morocco gains relative to 0.0 0.0 0.0 0.0 0.0 0.0 C Morocco loses relative to 2.2 1.5 Frozen orange juice (C/kg): 9.25 8.78 9.25 8.78 Morocco gains relative to 0.0 0.0 Morocco loses relative to 9.25 4.63 9.25 0.0 4.6 1.8 Tomatoes, winter (C/kg): 0.0 0.0 0.0 0.0 0.0 0.0 Morocco gains relative to Morocco loses relative to 3.3 2.3 1.5 0.6 3.3 3.1 Tomato paste (C/kg): 13.6 12.9 13.6 12.9 Morocco gains relative to 0.0 0.0 Morocco loses relative to 13.6 8.0 13.6 0.0 6.8 2.7 GSP: Generalized System of Preferences beneficiaries. ATPA: Andean Trade Preference Act beneficiaries. CBERA: Caribbean Basin Economic Recovery Act beneficiaries. MFN: Nations with only Most Favored Nation status. Interpretation of table: 1993 and 1996 duties on Moroccan exports (and those of other GSP nations) are found on the first line for each commodity. Other entries on first lines indicate nations facing the same duties as Morocco for both years (Thus, they had no impact on Morocco's relative trade access). Duties illustrating that a nation lost access relative to Morocco as a result of trade concessions over the 1993-96 period are found on the second line. On the third line are found duties of nations who gained access relative to Morocco. Source. Harnnuzed Tariff Schedule of the United States, International Trade Commission, US Department of Commerce, 1993, 1996. 3/28/973 03 PMUSGA7TDOC 102 Table 2.8: NAFI'A Agreements on tomato exports into North America Exports to the US' 1996 Season Tariff (C/kg)2 Quota (tons) Phase-ou? All tomatoes 11/15-2/end 182,793,000 2003 3/1-7/14 175,579,000 2003 Cherry tomatoes 12/1-2/end none na 5/1-7/14 1.30 1998 9/1-11/30 1.30 1998 Other tomatoes 11/15-2/end 2.30 2003 3/1-7/14 3.20 2003 9/1-11/14 1.80 1998 Note: As a result of allegations by Florida producers of Mexican dumping, effective October 25, 1996, there is a minimum price restriction on all tomatoes imported from Mexico. They are required to be sold for at least $0.21/lb. Sources: Harmonized Tariff Schedule of the United States, International Trade Commission, 1996. "US, Mexico Reach Tomato Accord," The Washington Post, October 12, 1996. In Canada, 1995, Mexico paid a seasonal duty of either 0.6c/kg or 1.6c/kg with a minimum ad valorem tariff of 4.5 percent on a maximum of 4,002,000 kgs of fresh tomatoes used for processing. Up to 5,250,000 kgs of fresh tomatoes for consumption are allowed to enter the Canadian market on a duty-free basis during a given calendar year. Under the terms of the special agricultural safeguard, this is to be a seasonal tariff-rate quota. A specified quantity of US imports from Mexico will enter the US at the NAFTA preferential rate, while the amount in excess will be assessed at the MFN rate. NAFTA stipulates that tariffs on fresh-market tomato trade between Mexico and the US will be completely phased out within 10 years (5 years for the less sensitive 7/15-11/14 season). US Department of Agriculture estimates that the long tariff phase-out period and safeguard quotas during the winter and spring seasons will likely have a gradual impact on fresh tomato trade. 3128/973:03 PMTOM.DOC 103 Table 2.9: Agreements according preferential access to the United States market Preferential agreements Effective date Effects/beneficiaries Generalized System of 1/1/76; GSP was Most developing nations are beneficiaries of The Preferences suspended during the Generalized System of Preferences (GSP), including 7/96-9/96 period Morocco, Brazil, and Chile. Since ratification of NAFTA, Mexico is no longer a GSP country. Caribbean Basin Economic 1/1/84 Antigua and Barbuda, Aruba, Bahamas, Barbados, Recovery Act Belize, British Virgin Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Honduras, Jamaica, Montserrat, Netherlands Antilles, St. Christopher-Nevis, St. Lucia, St. Vincent and the Grenadines, Tobago, Trinidad. US-Israel Free Trade Area 9/1/85 Israel. Note that on 1/1/95, all currently eligible Implementation Act reduced-rate imports from Israel were accorded duty- free treatment. US-Canada FTA: 1/1/89 Canada. It has now been subsumed under NAFTA. Andean Trade Preference 7/22/92 ATPA initially included Bolivia and Columbia. In Act 1993, Peru and Ecuador joined the agreement. North American Free 1/1/94 Canada and Mexico. Trade Agreement Source: United States International Trade Commission. 3/28/973 03 PMUSTRAG.DOC Table 2.10: Kingdom of Morocco: Sea product export earnings (1990-1995) 1990 1991 1992 1993 1994 1995 Weight Value Weight Value Weight Value Weight Value Weight Value Weight Value (Ton) (DH M.) (Ton) (DH M.) (Ton) (DH M.) (Ton) (DH M.) (Ton) (DH M.) (Ton) (DH M) Agar Agar 581 101,385 974 109,915 653 100,683 833 112,801 961 143,636 1,007 152,296 Seaweed 695 9,514 559 7,950 413 4,857 332 4,898 926 11,990 792 11,918 Canned fish 54,388 1,168,898 57,342 1,347,083 55,101 1,360,384 56,294 1,354,122 59,381 1,439,843 68,050 1,541,873 Coral 6 7,877 7 8,683 10 10,522 6 5,752 5 5,709 4 4,772 Fish meal 1,100 2,232 7,253 22,367 3,890 16,906 - - 2,969 8,810 18,990 80,177 Fish fat and oil 4,776 9,289 3,684 9,334 1,934 6,013 515 1,629 705 1,897 9,871 34,776 Shellfish, mollusc & sea shells 61,519 1,756,924 97,247 2,729,447 94,264 2,500,689 108,673 2,923,882 112,052 3,520,621 109,252 4,239,980 Fresh, frozen fish Deep-frozen Salted, dried or smoked 64,995 1,389,031 51,893 1,205,106 32,841 870,645 32,199 738,223 32,031 741,942 28,744 758,270 TOTAL 188,060 4,445,150 218,959 5,439,885 189,106 4,870,699 198,852 5,141,307 209,030 5,874,448 236,710 6,824,062 Source: Office des Changes Reprinted in Quelle Strargie pour le Dveloppenient du Commerce Extirreur des Produits Halieutiques au Maroc, by Rachid El Gharbi, July 1996, Annex IV Table 3.1: Kingdom of Moroccoo: Timetable of the deregulation of external and internal trade of "strategic" agricultural commodities "Strategic" Pre-deregulation Achievements under adjustment programs Deregulation initiatives agricultural (until 1984) (1985-1995) Spring 1996-... ccmmodities External Internal External Internal External Internal Bread or - Quantitative - Administered - Adoption of reference - Adnumstered - Elimination of licenses on - Removal of controls on Common Restrictions (QR) Producer Prices price system based on a producer prices Julyl, 1996 margins & marketing & Wheat and Marketing 5-year moving average of and marketing storage that remain on the - Import Monopoly Margins world prices plus a 25% margins for only - Adoption of two-part tariff 10 million quintals of Farine (ONICL) tariff; variable levy 10 million quintals system Nationale - Consumer covers difference between of low quality subsidy actual import prices and heat (Farine - Remaining: reduce tariffs - Deregulation of domestic the reference price Nationale) marketing system upstream - Subsidy to users (ASAL 2) (ASAL 2) - ONICL's monopoly in import of the mills including of bran of cereals abolished elirnnation of licenses, and - Adoption of safeguard - Other amounts fixed margins for storage, clause to maintain non-controlled transport & resale; freedom reference prices in real (ASAL 2) for the nulls to purchase term (ASAL 2) from any operator - Subsidy on bran - Target price set at 2588 abolished DH/Ton (ASAL 2) - Maintenance of subsidy at Oilseeds - QR - Administered - Adoption of a reference - Subsidy on retail - Elimination of licenses July 1, - Target prices for sunflower producer prices price system based on a packaging 1996 seed set at 4400DH/Ton, - BURAPRO 10-year moving average abolished Sunflower cake at Monopoly - Consumer of world prices for (ASAL 2) - Adoption of two-part tariff 1400-1600DH/Ton subsidy on oilseeds, a 5-year for system vegetable oils mealcakes, a - Maintenance of subsidy at 10-year for crude - Remaining: reduce tariffs 5DH/Litre of vegetable oil - Subsidy on retail vegetable oils (SAL 2) packaging - BURAPRO monopoly - Safeguard clause to abolished ensure price vanability does not exceed + /- 5 % in real terms (SAL2) Meat - QR - Controls on meat - Adoption of tariff - Remaining: reduce tariffs - Ad hoc local controls on pricing and equivalents (SAL 2) meat pricing & marketing marketing remain Table 3.1 cont. "Strategic" Pre-deregulation Achievements under adjustment programs Deregulation Initiatives agricultural (until 1984) (1985-1995) Spring 1996-... commodities External Internal External Internal External Internal Milk - QR - Price controls on - Adoption of tariff - Eliminination of - Remaining: reduce tariffs - Ad hoc local controls on milk and equivalents (SAL 2) official support milk price remains processing prices (ASAL 2) controls on milk - Use of milk powder powder controlled Sugar - QR - Ex-factory prices - Adoption of a reference - Formulation of the - Elimination of licenses, - Target prices for raw sugar fixed per factory price system based on a Sugar July 1, 1996 fixed at 4700DH/ton and for - ONTS Monopoly 21-year moving average Optimization Plan refined sugar at - Consumer of world prices (SAL 2) (ASAL 2) - Adoption of two-part tariff 5700DHITon subsidy system - Safeguard clause - Maintenance of subsidy at - Government (ASAL 2) - Remaining: reduce tariffs 2DH/Kg of refined sugar owned and controlled sugar - to ensure that price - ONTS monopoly abolished a mills variation does not exceed +/- 5% in real terms (SAL 2) All - Remaining: no automatic "Strategic" Temporary Adussion Scheme Agricultural for agricultural imports as Commodities inputs into processing for exports and no licensing requirements for Agricultural Exports using subsidized agricultural commodities timetable ivp5 Table 3.2: Rural sector model of Morocco: Selected simulation results (Year 2000) ___ _Scenarios Variables BASE' TAR-OM 2 IRR-LW ' PRD-IRR " PRD-RNs PRD-AGR' PRD-RNAG' WIN-WINI 8 WIN-WIN2' WIN-WIN3 "o WIN-WIN4" %p.a. Growth GDP 3.07 -0.01 0.05 0.15 0.45 0.62 0.11 0.00 0.43 0.81 0.80 Agriculture GDP -0.28 -0.01 0.15 0.39 0.87 1.27 0.06 0.21 0.92 1.62 1.55 Irrigated -0.25 -0.01 0.94 1.43 0.10 1.54 0.05 0.47 1.32 2.15 1.86 Rainfed -0.44 -0.01 -0.17 -0.03 1.18 1.16 0.06 0.13 0.78 1.42 1.44 Rural non-agriculture 1.19 -0.08 0.05 0.23 0.68 0.94 0.30 0.15 0.94 1.70 1.76 Urban 2.95 0.00 0.03 0.11 0.37 0.48 0.11 -0.07 0.28 0.58 0.58 Factor Income Irrigated -0.10 -0.01 0.73 0.89 -0.12 0.81 0.23 0.70 1.38 2.05 1.89 Rainfed 0.16 -0.01 -0.15 -0.03 0.41 0.45 0.29 0.28 0.81 1.32 1.36 Rural labor 1.64 -0.04 0.08 0.26 0.65 0.93 0.08 0.40 0.82 1.20 1.20 Urbanlabor 4.80 0.00 0.05 0.19 0.63 0.84 0.18 -0.09 0.51 1.05 1.03 Unemployment rate % of total laborforce 11.17 0.11 -0.37 -1.26 -3.53 -4.94 -0.23 -0.92 -3.73 -6.17 -6.17 Index 1994 = 100 Exchange rate 12 111.76 0.00 0.00 0.09 0.58 0.67 0.25 -0.47 0.11 0.67 0.6 Averagd HH income per cap. 110.20 -0.19 0.29 0.98 2.92 4.03 0.77 -0.10 2.75 5.37 5.46 Irrigated 101.22 -3.86 -1.87 3.22 2.45 4.52 1.65 -1.76 2.31 6.27 9.65 Rainfed 98.88 -0.04 0.75 0.29 1.10 2.97 1.97 0.67 4.21 7.62 7.72 Rural labor 106.80 -0.05 0.30 1.04 3.25 4.42 1.29 -0.28 3.27 6.57 6.50 Other rural 112.46 -0.03 0.26 0.79 2.44 3.33 0.96 -0.54 2.11 4.61 4.52 Urban 112.87 -0.03 0.27 0.96 3.08 4.16 0.46 -0.08 2.51 4:85 4.78 Source: Rural sector model of Morocco: Alternative scenarios to the year 2000 by Hans Lofgren, Rachid Doukkali, Hassan Serghini and Sherman Robinson 1. BASE refers to the Base Case or Reform Scenario of the World Bank's Revised Minimum Standard Model This is year 2000 if reforms of this scenario are undertaken. % in all other scenarios indicate change from this base. Positive signs means addition to; negative means subtraction from. 2. Assumes farmers pay water tariff covering, O&M costs. Irngated HH refers to only LSI. 3. Assumes a 8.9% change in irnigated land, a -1.48% change in rainfed and 5.9% change in irrigated water supply. 4. Assumes a I % increase in annual total factor productivity growth in irrigated agriculture. 5. Assumes a 1 % increase in annual total factor productivity growth in rainfed agriculture 6. Assumes a 1 % increase in annual total factor productivity growth in agriculture, irrigated and rainfed. 7. Assumes a I % increase in annual total factor productivity growth in rural non-agriculture. 8. Assumes water tariff covering O&M costs, and a 1 % p.a. increase in export prices. 9. Same as win-win1, with the added assumption of accelerated productivity growth of 0.5% p.a. in agriculture and 1.0% p.a. in rural non-agriculture 10. Same as win-win2, with a doubhng of productivity growth in agriculture and rural non-agriculture. 11. Same as win-win3, with farmer water sales at DH 1.59/m3, of 5% of irrigation water supply. 12 A positive sign means more DH per unit of foreign currency; that is a depreciation of the dirham. RSMresul3/28/97 file:agroclim.xls 108 Table 4.1: Kingdom of Morocco: Revised minimum standard model: The reform scenario and the "Business as Usual" Scenario "Business as Usual" or Averages Prelim Reform Scenario Status Quo Scenario 1986-90 1991-95 1996 1997-1999 2000-2003 1997-1999 2000-2003 Rates of Change (% p.a.): Gross Domestic Product 45 1.2 10 3 4 0 5 6 3 0 3 0 Agriculture' 8 8 -0.3 648 2 2 44 3 2 35 Industry 3 7 1.8 3 2 52 81 3 0 3 0 (0/w manufacturing) 4 2 2 4 4.0 58 8 4 3 8 3 5 Services 4 2 3 0 3 3 39 4 5 2 9 2.8 Exports of GNFS 2 9 4 5.0 19 6 3 7 3 3 4 4 3 Imports of GNFS 96 4.3 -1 5 48 7 2 4 4 3 4 Ratios to GDP (%): Gross Investment 227 21 7 20 4 23 6 27 0 20 7 203 Of which. FDI 0 7 19 17 20 3 1 1 5 1.4 Domestic Savings 18.4 156 145 179 21 3 13 7 141 National Savings 22.4 191 181 220 25 7 16 5 16 0 Current Account Balance -1 5 -2 6 -2.3 -1 6 -1 3 -42 -4 2 Government Revenue 21 8 24.7 23 3 23 3 23.4 221 21 4 Government Expenditure 27 5 28 4 27.5 25 8 23.4 26 6 25 7 Fiscal Deficit, commit basis 3 -5 7 -3 6 -4.2 -2.5 00 -4 5 -4.3 ICOR (1 year) 5 8 5 8 4 5 8 4 49 4.0 6 0 6 3 External Debt Burden (%): Debt Outstand /GDP5 994 753 66.6 650 52.3 56 1 522 Debt Service/XGS) 6 532 345 26.2 240 219 25 4 30 1 Domestic Inflation 5.8 4 5 3.0 2 8 2 5 6.2 65 Source Country Operations Division, and Maghreb & Iran Department World Bank Sharp fluctuations in agriculture caused by severe weather fluctuations; projections based on average trends 2 GNFS denotes goods and nonfactor services Excludes privatization receipts 4 Average ICOR for the 1980-90 penod External debt outstanding and disbursed includes MLT, IMF, and Short-term debt 6 XGS denotes exports of goods & services, includes workers' remittances tab4 13/28/97 maccompl xis 109 Chart 4.1 Comparison of World price projections to selected 1996 Moroccan target prices Figures in constant 1990 US dollars' Hard red winter wheat Raw Sugar 350 900 - 300 800 - 700 - 250 .-.. .. .. .-... . .-. --.. . . . . . . . . 600- 200 500 150 - 400 - 300 100 Soybean Raw Oil 12002 1000 800 600 400-- 200- 0 0 o- 00 L 0 MN C) (M 0) CY) t-) 0 0 0f Notes: Target prices of the 1996/Sprng deregulation initiatives for comparison are softwheat, raw sugar and raw sunflower oil. Hard red winter wheat is not durum wheat. It is used as a comparator to what is referred to m Morocco as soft or common or bread wheat. Sources: 1) Commodity Markets and the Developing Countries, A World Bank Quarterly, Nov. 1996. 2) Moroccan Policy Reform in Cereals, Sugar, and Oilseeds, W. Tyner and C. Arndt, Association for International Resources and Development, Working Paper, July 1996. 3128M974.26 PMPROT.XLSpnce_proj Kingdom of Morocco Table 4.2: An economywide analysis of selected policy reforms: simulation results' (All values in real terms. Average % p.a. changes. Year of impact: 2000) I II III IV V VI Variables Scenario: Partial Import Partial import Complete import Macro reform Macro reform; Base case or Liberalization liberalization liberalization3 with abolition direct transfers to Reform2 (excL. food & agric.) (excl. livestock) offood consumers subsidies through food stamps %wrt status % wrt reform % wrt reform % wrt reform % wrt reform % vrt reform a. GOP4 ~~quo __________ a. GD +3 +1 +1 +1 +7 +2 +5 +7 +7 +8 c. Employment +4 0 0 -2 -2 -2 d. Exports +7 +3 +5 +6 +6 +5 e. Imports +5 +2 +15 +25 +23 +25 +40 0* 010. f. Exchange rate +4 0 +1 +1 g. Wages -unskilled" +10 0 -2 -6 -5 5 -Employment-weighted +12 +1 0 -2 -2 h. Disposable household 12 income -farm +10 +1 +4 +7 +6 -1 -Ag worker head +8 +1 +5 +8 +7 +8 -income-weighted +8 +1 +5 +8 +7 +9 i. Consumer price indices -Income-weighted 0 1 5 -10 -9 -10 average Source. Morocco: An economywide analysis of selected policy reforms by David W. Roland-Holst and SAad Belghazi (February 1997) Scenarios I through VI are revenue-neutral The fish sector is not included. Wrt: with respect to. Numbers refer to changes relative to either the status quo (column I) or reform case (columns II-VI) ' In comparing the import liberalization scenarios (scenarios II-IV) and the removal of food subsidy scenarios (scenarios V-VI) with the macro reform or base scenario (scenario I), it is important to remember that the macro scenario captures the efficiency gains of scenarios II-VI Hence the small percentage differences between II-VI and I on GDP Scenarios II-VI are structured to isolate distributive impact The distributive impact is captured through employment, wages, disposable household income and consumer price indices In the real world, a reform package will have both efficiency and distributive impact To improve the real world interpretation of results, the impact of scenario I should be combined with the impact of the other scenario being considered. 2 Base case or Reform scenario as set out in the World Bank's Revised Minimum Standard Model for Morocco. Country Operations Division, Department of Maghreb and Iran Complete import liberalization scenario assumes a 20% reduction in trade protection over 5 years. The removal of all import barriers removal of nominal tariffs, variable levy instruments and ad-valoren effects of non-tariff barriers-with respect to all trading partners The latter refers to ad valorem equivalent of quantitative restrictions 4Gross Domestic Product at base year factor prices Base year = 1995 5hicoie GDP plus foreign savings at base year market prices. 6Employment at economy-wide level. Assumes a 75 of a percent p a growth rate of the labor force participation rate, and an estimated elasticity of labor absorption of 0.7 Source Kingdom of Morocco CEM - Towards Higher Growth and Employment Report no 14155-MOR, vol IT Annexes, Sept 1995, Ann. I para 20, 21. 7Exports Earnings from Goods and Non-factor services and financial inflows (foreign capital and remittances) 81mports Expenditures on Goods and Non-factor services and financial outflows (interest payments on foreign capital) 9Real exchange rate- purchasing power of tradeables, deflated (Base-year weighted average for tradeables)/deflated (Base-year weighted average for non-tradeables) A positive number denotes the dirliam depreciates, a negative number, the dirham appreciates, and zero, no change on balance 01n this case, the annual average (0%) masks a trend of depreciation in the exchange rate By the terminal year (2000), the real exchange rate has dropped 3% as intuition would suggest. "Unskilled agricultural and rural labor including cereals farmers in ramnfed areas, also includes urban labor 12Disposable household income income minus personal taxes 1Consumer price indices based on "typical" consumer basket 112 Table 4.3: Trade protection rates for selected agricultural commodities in Morocco' 1984 1987 1988 1989 1992 1995 19962 19963 Cereals Common wheat 1.124 1.23 1.41 Rainfed 0.88 1.05 1.06 1.05 Irrigated 0.84 0.99 0.98 1.09 Durum wheat 1.31 1.43 Rainfed 0.89 0.99 0.99 1.05 Irrigated 0.89 0.95 Barley 0.81 0.99 0.99 1.01 1.60 1.17 1.22 Maize 1.05 1.01 1.01 1.24 2.08 1.40 1.20 Rice 2.26 Blended feeds 1.42 Sugar Sugarbeet, rainfed 4.04 2.31 Sugarbeet, irrigated 3.71 1.50 Sugarcane 60.75 -1.05 Raw 1.63 1.83 Sunflower Seed 0.80 1.48 1.46 1.68 Raw oil 2.40 1.70 Meal 1.22 1.26 Rape (Colza) Seed 1.80 Raw oil 1.94 Meal 1.30 Soybean Seed 1.42 Raw oil 1.98 Meal 1.28 Notes: For 1998-1995, figures are nominal rates of protection. For 1996, figures are ratios of import prices to CIF Casablanca prices. For the deregulation initiatives column, prices do not include port charges. 2 Prices used are those paid for most recent imports as of July 1996. TIs column exhibits nominal rates of protection arising from the spring 1996 deregulation initiatives. August 1996 prices were used in calculations and do not account for transportation costs from border to wholesale locations. 1991-1993 average. Sources: 1) The Kingdom of Morocco: Agro-Industrial Development: Constraints and Opportunities, World Bank Report 11727-MOR, June 30, 1994. 2) Moroccan Policy Reform in Cereals, Sugar, and Oilseeds, W. Tyner and C. Arndt, Association for International Resources and Development, Working Paper, July 1996. 3) Grams Market Report, International Grains Council, September 1996. 4) Oil World, ISTA, September 20, 1996. 5) Commodity Price Data (Pink Sheet), World Bank, October 4, 1996. 3128/973.19 PMPROTXLSprot_rate Table 4.4: Reference and target prices for selected agricultural commodities in Morocco Reference Prices (Dh/t) Target Prices (Dh/t)' 1985 1987 1988 1989 1990 1991 1992 1996 1996 Cereals Common Wheat 1800 2000 2000 2200 2250 2400 2400 2500 2588 Durum Wheat2 1800 2530 3000 3000 Barley 1500 1290 1500 Maize 1600 1820 1880 1880 Sugar Sugarbeet 1900 2150 2150 2400 2520 2770 2910 4700 Sugarcane 1400 1600 1600 1750 1820 1950 1950 5700 Raw 4260 4750 4700 Refined 4736 5700 Sunflower3 Seed 3700 4100 4100 4100 4300 4300 4300 4400 4400 Raw Oil 12418 Meal 1500 Rape (ColZa) 4 Seed 4746 Raw Oil 12418 Meal 1752 Soybean Seed 2916 Raw Oil 12418 Meal (raw) 2547 Meal (refined) Notes: The spring 1996 deregulation initiatives for strategic agricultural commodities utilize target prices. Strictly speaking, target pnces are set only for cereals. For other commodities, prices are set for each shipment. 2 Domestic markets were liberalized for durum wheat, barley, and corn. Reference prices for the entire period are available for the controlled common market. With target prices for sunflower seed and meal, it is possible to calculate the target price for raw sunflower oil. 4 Target prices for rape and soybean meal are based on their historical prices relative to sunflower meal and the target price for sunflower meal. Target prices for rape and soybean oil are set equal to sunflower. Using with target prices for meal and raw oil, the target price for seeds are derived. Sources: 1) The Kingdon of Morocco Agro-Industrial Development: Constraints and Opportunties, World Bank Report 11727-MOR, June 30, 1994. 2) Moroccan Policy Reform in Cereals, Sugar, and Oilseeds, Association for International Resources and Development, July 1996. 3/289 73 20 PMPRO T XLSref pnce 114 Table 4.5: A comparison of international prices, Tariffs of the 1996 deregulation initiatives, and Uruguay Round Tariff Bindings cif Pricel Target Price Base Rate" Band Limit Additive Rate" Ad Valorem Rate4 TariffBindings Dh/t Dh/t % Dh/t % % % Cereals Common Wheat5 1766 2588 50 1300 16 41% 190.0 Durum Wheat 2034 3000 58 1300 16 43% 224.0 Barley 1530 1500 30 700 16 22% 148.5 Maize 1797 1880 25 800 16 20% 160.5 Long Rice7 3159 126 4020 16 126% 256.0 Medium Rices 90 3000 16 233.5 Other Cereals 30 Sugar Raw 2466 4700 148 1250 16 83% 221.0 Refined 5700 Granules 139 1700 16 221.0 Cubes 148 1800 16 221.0 Sunflower Seed 2725 4400 81 2200 16 68% 183.5 Raw Oil 5145 12418 70 5400 16 70% 283.5 Refined Oil, Wholesale 72.5 6200 16 311.0 Refined Oil, Retail 76.5 7000 16 311.0 Meal 1437 1500 37.5 700 16 26% 82.0 Rape (Colza) Seed 2751 4746 104.5 2000 16 80% 192.5 Raw Oil 5050 12418 99.5 4700 16 94% 283.3 Refined Oil, Wholesale 99.5 5500 16 311.0 Refined Oil, Retail 100.5 6300 16 311.0 Meal 1679 1752 37.5 1100 16 30% 95.0 Soybean Seed 2846 2916 52.5 2000 16 42% 146.5 Raw Oil 4990 12418 99.5 4900 16 98% 283.5 Refined Oil, Wholesale 96.5 5600 16 311.0 Refined Oil, Retail 98.5 6400 16 311.0 Meal 2440 2547 37.5 1400 16 28% 113.0 Notes: Prices and the exchange rate (8.644 DH/US$) are August '96 averages. Prices are cif Casablanca estimates. 2 The base rate applies to portion of world price up to and including the band hrut The additive rate is the duty on the amount in excess of band limit. The ad valorem rate equivalent to the two-part tariff. US hard red winter. 6 US hard amber durum. 7 Tariff binding refers specifically to white rice. Tariff binding refers specifically to paddy rice. Sources: MAMVA/DPAE. Moroccan Policy Reform in Cereals, Sugar, and Oilseeds, by W Tyner and C. Arndt, Association for International Resources and Development, Working Paper, July 1996 Oil World, ISTA, September 20, 1996. Commodsty Price Data (Pink Sheet), World Bank, October 4, 1996 3182973 20PMPROT.XLSTer duty 115 Table 4.6: Transfers to agriculture: Selected OECD countries and commodities Nominal Assistance Coefficients Australia EU Japan New Zealand US Wheat 1986-88 1.12 2.15 9.38 1.18 2.07 1990-92 1.08 1.96 7.30 1.02 1.77 19952 1.06 1.81 8.27 1.01 1.26 Oilseeds 1986-88 1.10 3.05 4.24 nd 1.10 1990-92 1.05 2.83 1.80 nd 1.08 1995 1.04 2.04 1.44 nd 1.09 Sugar 1986-88 1.17 3.21 3.17 nd 2.47 1990-92 1.11 2.54 2.80 nd 1.93 1995 1.10 2.16 2.76 nd 1.50 All Crops 1986-88 1.11 2.39 6.73 1.10 1.56 1990-92 1.07 2.13 5.32 1.02 1.30 1995 1.06 2.02 6.72 1.01 1.16 Total Transfers (PSE) in 1995 (US$Milions) 1153 96892 49329 154 18990 Percentage of 1995 Labor Force in Agriculture 6 7 7 10 3 Transfer per Farmer in 1995 (US$) 2096 8597 10677 906 4759 Notes: The nomnal assistance coefficients (NAC) is the ratio of the border price plus the unit producer subsidy equivalent (PSE) to the border price. While the PSE measures the annual value of monetary transfers to agricultural producers from domestic consumers and taxpayers, the NAC provides an indication of domestic price relative to world price. 2 1995 data are provisional. Source: Agricultural Policies, Markets, and Trade in OECD Countries, OECD, 1996. 3/28/973 21 PMPROTXLSoecd trans 116 Table 4.7: Kingdom Of Morocco - Costs and benefits of food subsidies - Fiscal importance and incidence (1991-1996) Varr 1991 1992 1993 1994 1995 1996' Variables Fiscal importance (DH million) Total subsidies 3138 3034 3338 . 4386 4430 4614 - sugar 1021 999 1149 - 1589 . 1671 1753 - cooking oils 436 313 430. 804 907 954 - total bread wheat 1680 1722 1759 1994 1852 1907 of which: FNBT 1476 1463 1474 1655 1616 1688 other 204 259 . 285. 339 236 218 Total subsidies as %of - GDP 1 3 1 3 1.3 1.5 1 7 1.6 -total govt expend. 5.0 44 4.5 5.7 5.5 5.4 Total trade revenues 2422 3336 3326 . 2021 3059 1397 Net subsidies 716 -302 12 2365 1369 3217 Incidence Transfer to producers 36 . s 25 - cooking oils 21 - FNBT 54 Transfer to consumers by quintile (out of every DH s ent) 4 Sugar - wealthiest 25 - poorest 15 Cooking oils - wealthiest 32 . -.poorest 11 FNBT- wealthiest 13 . poorest - 23: Total food subsidies - wealthiest 25 - poorest 15 Sources Prnmary source of data. Caisse de compensation, Government of Morocco Fourth note on social protection January 30, 1996 World Bank, Maghreb Department and Iran Report on consumer subsidies January 3, 1996 K. Lindert, World Bank I Projected estunates from the Minstry of Fmance 117 Table 4.8: Kingdom of Morocco: Absolute incidence of various food subsidy programs - International comparisons % of Benefits accruing to quintile Country Program Poorest Richest 1 3 5** Morocco (1995) Food Subsidies (Sugar, oil, FNBT) 15 20 25 ... .. .. ...... ............. .... ........ ........ ....... . ... .. ... ...... ..... .... thy gg! eralized ood subsid progra ms... .......... Tunisia (1990) Food 17 21 20 Algeria (1988) Food 13 20 27 Sri Lanka (1978/79) Wheat, bread, 14 21 25 sugar 16 19 27 Jamaica (1988) Powdered milk, wheat and cornmeal 14 20 26 Targeted od-bsed program Tunisia (1993) Self-selection Self-targeted food subs. 21 21 18 Jamaica Self-selection Food stamps at health clinic 44 18 2 Jamaica Means-test: Means-tested food stamps 47 15 3 Chile Self-selection food I supplement at health clinic 41 18 3 Sources: Report on food subsidies, by K Lindert, World Bank, 1996 Kingdom of Morocco Table 6.1: Agriculture: Contribution to the economy, production structure, and land use Units 1984 (or latest available figures 1989 (or latest available figures 1994 (or latest available figures bietween 1979-84) between 1985-89) between 1990-94) Part 1: Contribution of Agricuiture GDP in Agriculture (current prices)' Millions DH 16,851 33,370 55,727 Contribution to Total GDP2 Percent 14.9 17 2 21 Employment in Agriculture (% of " 50 45 40 Labor force)3 Female Employment in Agriculture " na na 342 (% of Total)' Exports of Agricultural Commodities5 Percent of Total 14 16 14 Value of Exports Exports of Food Commodities Percent of Total 22.4 25 7 28 (including Fish)6 Value of Merchandise Exports_ _ Exports of Fish7 " 9 13 15 Imports of Agricultural CommoditiesO Percent of Total 22 15 19 Value of Imports Imports of Food Commodities' _18 10 13 Imports of Sugar" " 15 15 15 Imports of wheat" 1 _ _ 10 4 6 1 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 2 Data from the "World Development Report (1990 and 1996)" corresponding to the years 1984, 1988, and 1994. 3 The 1984 and 1989 data is from the "Social Indicators of Development 1996" document , page 235 and the 1994 data is from the "Recensement 1994 - les caracteristiques socio- economiques et demographiques de la population" a document published by the "Direction de la Statistique" of the Prime Ministry page 75. 4 Data from the "Recensement 1994 - les caracteristiques socio-economiques et demographiques de la population" a document published by the "Direction de la Statistique" of the Prime Ministry, page 91 5 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD). 6 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD) 7 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD). 8 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD) 9 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD). 10 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD). 11 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD). inguom ot iviorocco Table 6.1: Agriculture: Contribution to the economy, production structure, and land use Imports of Oilseeds12 0.2 0 2 03 Part II: Production Structure Valuo Added Contribution"* Percent Crop production - 72 66 Livestock production 23 27 Fisheries 2 6 Forestry 2 2 Total Agriculture 100 100 Oleaginous Agricultural Production" 1000 Ql 544 1.197 909 Bovine Population6 Thousands 2,363 3,324 2,238 Ovine Population" " 11,493 13,761 13,902 Caprine Population' " 4,222 5,281 4,060 Fisheries Production'9 1000 Tons 463 620 742 Land Area20 1000 ha 44,650 44,650 44,650 Cultivable Land21 " 8661 9291 Cultivated Land22 7225 7731 Rainfed Area23 Percent of 85 87 Cultivated Land Percent of 80 Rainfed Leguminous " 6 6 12 The data is from the FAO trade data and is retrieved from the Bank's Economic and Social database (BESD) 13 The World Bank's Project "Rangelands Development in Arid and Senu-Arid Areas Strategies and Policies - North Africa and Iran - Report No 14927 MNA" - IEPS statistics 14 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 i Q is the symbol for Quintal and 100 Q = 1 Ton 16 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 17 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 18 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 19 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry,, page 4 20 The FAO - Water Report 1995, page 195 21 Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 22Data from the "Annuaire Statistique du Maroc 1995" published by the "Direction de la Statistique" of the Prime Ministry, page 4 23 Cultivated Area minus Irrigated Land and Hans Lofgren's Preliminary Report. A Model of Rural Morocco Structure and Simulations Kingdom of Morocco Table 6.1: Agriculture: Contribution to the economy, production structure, and land use Fodder " _1.1 Industrially Processed 2 "3.2 Vegetables 18 Fruit Trees 73 Irrigated Area25 Percent of 15 14 13 Cultivated Land Cereals Percent of 39.6 Irrigated Leguminous 22 Fodder 9.8 Industrially Processed "_10.8 Vegetables "_9.2 Fruit Trees "_28 5 Forest & Woodland26 Percent of Land 17 19 20 area Rangeland27 Percent of Land 47 47 47 area 0 24 Industrially Processed Products include mainly. Sugar, Cotton, Sunflower, and Peanut. 25 The FAO Water Report 1995, page 196 26 The FAO Yearbook of Production 1994, page 4. 27 The FAO Yearbook of Production 1994, page 4. Graph 6.1: Kingdom of Morocco AGRICULTURE GROWTH RATE (1981 - 1996) 80 63 60 - 45 35 367 -20 K-31.4 18 5 ,21 7 -236 6 -40 -2835I.5 -45 -60 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Annual Avera e Growth 6 7% Standard Deviation 31 Coefficient of Variation 4 6 28 The data for the above Graph is taken from data base of the Country Operations Division of the Middle-East and North Africa Region 1 (MN ICO) Table 6.2: Cereals cultivation: potential for yield increases by agro-climatic zone and substitutes to cereals Agro-climatic zone' Area planted to _ _ _ _ Yield (T/ha) _ - _ Constraints Remedies Potential Substitutes cereals 2 Experimental to cereals7 Best Station Average practice (Potential) (Feasible) Irrigated 28 60 8 5-9 0 Fungal 3diseases Improved cultural husbandry Vegetables Soft Wheat and durum Insufficient Inputs Improved seeds Flowers 400,000 ha Inappropriate water Ensure the application of proper amount of Fruit trees citrus, management techniques nitrogen apples, etc Soil Salinity Weed control High-value forage crops/ Irrigation management techniques legumes Disease control Guar Harvest and storage improvement Favorable rainfed area Soft wheat* 556,000 ha 1 5 45 5 5 Fungal Resistant new varieties Groundnuts >400 mm Durum 590,000 ha diseases and insects Soil preparation almonds or Favorable Bour Barley 415,000 ha Soil Salinity Fertilization reflecting soil analysis pistachio Total 1,561,000 ha Weed control pomegranate Harvest and storage Improvement guar jojoba Semi-arid rainfed area Soft wheat 475,000 ha 1 2 2 5 3.0 Diseases and Insects Drought-tolerant cereal varieties and Sorghum 250 mm to 400 mm or Durum 410,000 ha Poor use of inputs cecidomye-tolerant varieties Jojoba 6 Intermediary Bour Barley 400,000 ha Weed and disease control Fodder trees, ie , Total 1,285,000 ha Fertilization reflecting soil analysis Cassia Sturti Harvest and storage improvement Acacia Technology development & transfer Unfavorable arid area Barley: 1,000,000 ha 0 5 0 8 1 1 Insects and diseases Need to seek alternatives to cereals Barley-Livestock <250 mm Wheat. 300,000 ha Too little research on drought- fodder trees, e g , Atriplex var , Unfavorable Bour Total 1,300,000 ha resistant sytems 5 (fodder crops, atriplex mumularia or water mobilization, tree production) salt bushes, acacia var Drought-resistant fodder trees (Acacia Atriplex) Source Ministry of Agriculture/DPAE/OPV/INRA World Bank staff estimates 1 mm refers to millimeter of rain per year 2 Areas are approximate especially in the lower rainfall zones 3 Fungal or cryptogamic disease 4 Cecidomye is a wheat pest 5 Drought tolerant cereals, (e g , sorghum) for intermediary bour, drought-resistant (barley, livestock and fodder trees) for unfavorable bour. 6 Guar. leguminous crop, high In protein Gum used in Industry as thIckener in cosmetics etc Rotates well with cereals and vegetables Cereals3/28/97 Jojoba drought-tolerant bush, used in cosmetics, high-value oil, used as a substitute for sperm whale oil. Requires effective processing and marketing file:agroclim.xls 7 Indicative only Examples of options assuming proper rotations, available labor, technology, access to inputs, transportation and markets Table 6.3: Kingdom of Morocco: Alternative yield growth scenarios for cereals and implications for the cultivated area Irrigated and favorable bour zones Annual Yield Growth Scenarios Low Medium Higil Best Practice' Estimates of actual yield levelsL Irrigated area (tons/ha) 2.80 2.80 2.80 2.80 Favorable bour (tons/ha) 1.50 1.50 1.50 1.50 Output, irrigated and favorable hour (tons)3 3,461,500 3,461,500 3,461,500 3,461,500 Annual yield growth rates Irrigated area 1.5% 2.0% 2.5% 5.6% Favorable bour 1.5% 2.0% 2.5% 8.2% Year 2000 projections: Irrigated area yields (tons/ha) 2.97 3.03 3.09 3.48 Favorable bour yields (tons/ha) 1.59 1.62 1.66 2.05 Output, irrigated and favorable bour (tons) 3,673,910 3,746,839 3,820,848 4,597,376 Cultivated area savings Irrigated 6% 8% 9% 20% Favorable Bour 6% 8% 9% 27% Year 2010 projections: Irrigated area yields (tons/ha) 3.45 3.69 3.96 6.00 Favorable bour yields (tons,ha) 1.85 1.98 2.12 4.50 Output, irrigated and favorable bour (tons) 4,263,722 4,567,376 4,891,009 9,424,500 Cultivated area savings Irrigated 19% 24% 29% 53% Favorable Bour 19% 24% 29% 67% Notes: I In this scenario, "best practice" yields (World Bank staff estimates) are reached by the year 2010. 2 World Bank staff estimates refer to current levels. 3 Output is the product of World Bank staff estimates of average yield and area planted. 4 With yield increases, less cultivated land is required to produce current levels of output. Percentages refer to the area saved relative to the current cultivated area. Source World Bank staffestunates 3/2&973 44 PMRURISS XLSproj Chart 6.1: Kingdom of Morocco: Incidence of rural poverty by region 35% - 30% - 0 Lower poverty line, Dh2,042 U Upper poverty line, Dh2,439 25% 0 Near-poverty line, Dh3,000 20% 15% 10% 5% 0% Total South Tensift Center North- Center- East Center- West North (Oriental) South Source: World Bank Report 11918-MOR, January 1994. Regions 3/28/973:52 PMRURISS.XLSpov_chart 125 Table 6.4: Kingdom of Morocco: Farm-size distribution of cultivable land Farm Size (ha) Farms (%) Land Area (%) 0 23.3 0.0 0-5 56.5 24.5 5- 10 11.4 20.8 10-20 5.9 21.1 20-50 2.3 16.8 50- 100 0.4 7.1 100 + 0.1 9.7 Source: Government of Morocco Agricultural Census 1973-74. 126 Table 7.1: Kingdom of Morocco: Net rural migration (annual average number of people) 1960-1971 67000 1971-1982 113000 1982-1994 193 000 Source- CERED 1995 b. Croissance demographique et ddveloppement du monde rural, direction de la statistique Rabat. Table 7.2: Rural migration by period, by destination, and by size of towns (%) Region of More than 10 years Less than 10 years destination Iarge Medium Small Large Medium Small South 22.69 60.27 17.04 11.65 66.23 22.13 Tensift 64.59 24.15 11.26 63.06 19.00 17.94 Center 78.57 13.85 7.58 69.86 15.68 14.46 North-West 52.21 25.10 22.69 48.68 29.79 21.54 Center-North 75.72 14.84 9.44 70.88 15.97 13.15 Eastern 45.47 26.70 27.84 35.66 28.41 35.93 Central-South 38.55 25.70 35.75 26.94 17.22 55.84 Total 62.20 22.67 15.13 50.19 27.45 22.36 Source: CERED 1995.a: L'exode rural. Traits d'ivoluton, profils et rapport avec les milieux d'origne, Direction de la stanstique: Rabat. Table 7.3: Kingdom of Morocco: Rural migration by period, by sex and by region of destination (%) Region of destination More than 10 years Less than 10 years Male Female Male Female South 55.99 44.01 35.87 64.13 Tensift 44.57 55.43 36.17 63.83 Center 50.58 49.42 37.73 62.27 North-West 52.48 47.52 39.48 60.52 Center-North 49.46 50.54 39.10 60.90 Eastern 47.43 52.57 43.66 56.34 Center-South 51.22 48.78 39.20 60.80 Total 50.55 49.45 38.47 61.53 Source: CERED 1995.a: L'exode rural. Traits d'ivolution, profils et rapport avec les milieux d'ongine, Direction de la statistique: Rabat. Table 7.4: Sources of rural household income (%) Wages 15.54 Non-agricultural profits 16.69 Farm income 37.90 Income from communal assets 10.00 Home-consumed production 6.40 Miscellaneous transfers 5.69 Ad-hoc incomes 7.78 Sources Rhallab, S (1995) Essaz d'estimation du revenu des menages marocains, mdmoire de 3eme cycle, non pubh6, INSEA Rabat 127 Table 7.5: Kingdom of Morocco: Important dates and events for decentralization in Morocco Important Dates Important Events 1956 Independence 1960 First municipal charter - First municipal election 1962 First constitution: constitutionnal status of local organizations (provinces, administrations, and municipalities). 1963 Provinces et administrations are endowed with legislative status 1965-1973 Period of political crisis (unsuccessful coups d'dtat; strikes, demonstration...). Diminution of numbers of provinces and restrictions of local autonomy. 1971 The region becomes a deconcentrated level and a framework for economic development 1975 Green March 1976 Second municipal charter The 1980s Structural adjustment - Liberalization 1984 The King announced his intention to make the region a decentralized entity 1992 New constitution - The region becomes a decentralized local collectivity The number of municipalities increases by 80%. Source: Dicentrahsazon et Diveloppement Rural au Maroc, Novembre 1996, by Suzanne Pinou-Sall and Jean-Claude Salber Table 7.6: The Decentralized and deconcentrated system in rural Morocco I (as of 1996) Authority Level Number Ministry of Interor Sectoral Ministres Decentralized Deconcentrated Deconcentrated Departments Sstemsstem. Administrative Administrative Region 7 Province 43 Governor Local Services of sectoral Ministries Circle 133 Chief of Circle Caidat 460 Caid Commune rural 1,298 (total 1546) Elected body Khalifa Village (douar) 31,000 Cheikh, 00 Moqaddem Source: Dcentralisation et Dgveloppement Rural au Maroc, S. Piriou-Sall and Jean-Claude Sallier, November 1996. The Local Collectivities (LC) are communes, provinces, prefectures, and regions The Ministries are Agnculture, Public Works, Health, and Education 129 Endnotes This report complements work carried out by MAMVA and the Ministry of l'Incitation de l'Economie 2 Source. Agriculture and rural development painful lessons, by Hans P Binswanger, Simon Brandt Address, delivered September 21, 1994, pp 11 3 Note The major IRD projects in rainfed areas since the 1970s are listed in the note 4 below 4 Source Performance Audit Report Morocco - Fes-Tissa-Karia Agriculture Project (Loan 1602-MOR), Loukkos Rural Development Project (Loan 1848-MOR), Middle Atlas Agriculture Development Project (Loan 2082-MOR, Oulmes-Rommani Agricultural Development project (Loan 2217-MOR), report no SECM94-304, March 29, 1994, Operations Evaluation Department, Evaluation Summary ' Source: Kingdom of Morocco Social Priorities Program, Basic Health Project, (BAJ), Staff Appraisal Report, report no 15073-MOR, May 6, 1996, para 1.11 6 Source Kingdom of Morocco Poverty, adjustment and growth, report no. 11918-MOR, 2 vol, January 1994, World Bank, vol. 1, tab. 1 1, ch IV, pp 48 Source Kingdom of Morocco BAJ, op cit ,para 1.05 Source. Kingdom of Morocco: Enhancing the participation of women in development, GC, by Sunita Ghandi, MNINE, report no. 14153, June 29, 1995, 3 3-3 4 9 Source Kingdom of Morocco Poverty, Adjustment, and Growth, World Bank, report no 11918-MOR, January 1994, vol 1, Tab. 1.1 There are two poverty lines the very poor line is US$235/person/year (rural) and US$242/person/year (urban), the poor line is US$280/person/year in rural and US$313/person/year urban In Dirham, the levels are DH 2042 and DH 2106 respectively (very poor) and DH 2439 and DH 2725 respectively (poor) 'o Source: Enqutte Nationale sur la Population et I'Emploi, juillet 1996, Direction de la Statistique, Royaume du Maroc " Source Kingdom of Morocco Country economic memorandum Towards higher growth and employment, World Bank, report no 14155-MOR, September 1955, vol I and 2, Executive summary, para 1 12 Sources World Bank Database, Annual reports of the Central Bank of Iran, 1977 & 1978 1 Source. Land policy and issues, working paper, by Raymond Noronha, op cit, pp 8 14 Source: Morocco in the Global Economy 1995-2010, a Background Note, by E Mick Riordan, International Economics Department, January 1996, Table 8 i5 Source. Morocco in the Global Economy, 1995-2010, op.cit.,sectionsl.1, 1 4 16 Source. Kingdom of Morocco: Country economic memorandum-Towards higher growth and employment, World Bank, report no 14155-MOR, September 1995, vol 2, tab 1 130 1 Source Developpement des exportations des produits agricoles, a working paper by Agroconcept 1 Source Global economic prospects and the developing countnes, a World Bank Book, 1995. Summary 19 Source Global Economic Prospects and the Developing Countries, 1995, World Bank, Summary, pg 2 20 Source Global Economic Prospects and the Developing Countnes, op cit ,chapter 3, pg 43, Box 3-1 on pg.45-46 21 Sources: US Food and Drug Administration HACCP A state-of-the art approach to food safety, FDA, Consumer Reprint, Dec 5, 1995. Imports and the FDA, FDA Backgrounder, May 1992 Import procedures, CFAAN/IAS Flyer, 1996. The FDA importer's guide to low-acid canned and acidified foods, FDA/IAS Brochure, 1985 Pesticide Residues FDA's criteria for enforcement actions, FDA, Washington DC, Feb 02, 1994 Code of Federal Regulations, Title 7, section 319 56 (plant quarantine regulations), Title 21, Part 110 (inspection of canned goods), Title 21, Part 123 (inspection of seafood), Title 40, Part 180 (pesticide tolerances) Animal and Plant Inspection Service, List of admissible fruits and vegetables from Morocco, USDA, Feb 1996. Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) 22 Sources Council Directive 77/93/EEC, 90/642/EEC, 93/58/EEC, 94/30/EC, 95/38/EC, 95/61/EC, 96/14/EC. European Commisssion Internal market. Current status 1 July 1994 Veterinary and plant health controls, vol 5, Luxembourg, Office for Official Publications of the European Commumties, 1995. International Trade Admimstration, US Department of Commerce, The European Community's Policy and Regulations on Food and Beverages, August 1, 1993 23 Source Kingdom of Morocco Agro-industnal development opportunities and constraints, report no 11727-MOR, World Bank, June 1994, para 1.25-1.26 24 Source: Exporting high-value food commodities-Success stones from developing countries, by Steven Jaffe with the assistance of Peter Gordon, World Bank Discussion Paper, no 198, 1992, para 0.2 25 Source Morocco in the global economy 1995-2010 A background note by E Mick Riordan, World Bank, January 1996, pp. 20 26 Source Morocco in the Global Economy 1995-2010, a Background Note, by E. Mick Riordan, International Economics Department, January 1996, Table 8 27 Source Global Economic Prospects and the Developing Countnes, op cit. pp 31, Box 2-1 28 Source Kingdom of Morocco. Country economic memorandum-Towards higher growth and employment, report no 14155-MOR, September 1995, vol 1, para 34. 29 Source- La Loi Cadre Formant Charte de l'Investissement au M1aroc, par 1 Association des Economistes Adarocains, 2 &me. Edition, mars 1996, pubhi avec le concours de la Fondation SIDI M'CHICHE EL ALAkf, PP 150-151, Article 3, Droits de Douane 30 Source. Kingdom of Morocco Towards Higher Economic Growth and Employment, op cit, September 1995, vol. 1, para 36-37 Morocco faces tariffs of 11-18 percent for tomatoes and clementines and 4-20 percent on oranges. 31 Source Market Access Study of Moroccan Fresh Produce and Processed Tomatoes to the United States and Canadian Markets, by Madeleine Varkay, July 1996, Section 6 3 131 32 Source Quelle Strat6gie pour le Diveloppement du Commerce Exterieur des Produits Halieuthiques au Maroc? by Rachid El Gharbi, July 1996, Section I B, & II 3 Note a guestimate of 98,000 of direct employment according to the Ministry of Fishenes 34 Source Kingdom of Morocco Poverty, adjustment and growth, op cit, vol 1, Box 4 2, Land Policy and Issues, working paper by Raymond Noronha, July 1996, para 10. 's Source Annuaire Statistique du Maroc 1995, pg 4 Total hectarage of cultivable land is estimated at 9.2 million hectares and cultivated at 7 7 m.ha However, estimates of cultivated land vary among sources, from 7 to 9 m ha An intermediate figure of 8 m.ha is used here 36 Source Kingdom of Morocco Social Priorities Program, Basic Education Project, Staff Appraisal Report, report no 15074-MOR, May 9, 1996, para 1 20 3 Source: Actions de developpement dans le monde rural, Ministere de I Agriculture et de la Mise en ValeurAgricole, Nov 1995 3 Source Kingdom of Morocco: Water Sector Review, World Bank, report no 14750-MOR, June 1995, para 19, 12 In fact the system of financial accounting is not able to generate reliable figures on what the actual O&M costs are and how much of that is paid for by water charges Putting in place a reliable system is one of the important activities in the Bank's Second Large Scale Irrigation Improvement (LSII II) project 39 Source Kingdom of Morocco. Rural Development Strategy, an Orientation Bnef, by Stephen Mink, MNINE, September 1996, section G on Reforming Public Expenditure, also Rural Development Strategy The structure and role of public expenditure, a working paper, by S Mink This paper is based on 2 background papers, by S Kouassi and Jean-Claude Gouhier 40 Source: D6centralbsation et d9veloppement rural au Maroc, working paper, draft, July 1996, par Suzanne Pinou-Sall and Jean-Claude Sallier, section 3 3, tab 7-9 4 Note: Like many other industrial and developing countries, Morocco engaged in "dirty tariffication" Source Global economic prospects and the developing countries, op.cit, pg 33, tab 2-1 42 Source- Strategie de ddveloppement rural ntegr6: Ressources humaines-Education et Sant&, document de travail par Kouassi Soman, Banque mondiale, juin 1996, para 11 & 41. 43 Sources The East Asian Miracle- Economic growth and public policy, a World Bank policy research report, Oxford University press, 1993, Overview pp 9-13, chapter 2, pp 81-86, chapter 3, pp 105, 107- 115, 121-125 Some lessons from the East Asian miracle, by Joseph Stiglitz in The World Bank Research Observer, vol II, number 2, August 1996, pp 151-175; pp 153-156 44 Source Kingdom of Morocco. Country Assistance Strategy, World Bank, report no. 16219-MOR, January 1997, pp 1 45 Sources Kingdom of Morocco. The Revised Minimum Standard Model, August 1996, World Bank, by the Country Operations Division, Maghreb Department, Kingdom of Morocco. Country Economic Memorandum-Towards higher growth and employment, World Bank, report no 14155-MOR, September 1995, vol I & II, Vol II, Annex 1, Kingdom of Morocco- An economy-wide analysis of selected policy 132 reforms, working paper by David W Roland-Holst in collaboration with Saad Belghazi, August 25, 1996, tab 2 1-2 4. 46 Note It is recognized that the cost of land is high for reasons other than expected financial returns Land is considered a store of value for reasons of tradition and other long-standing attachments High protection is one of the several reasons for the high cost of land 41 Source Dveloppement des produits des exportations agricoles, working paper, op cit., octobre 1996, pp 25 4 Source A Rural Sector Model of Morocco alternative scenarios to the year 2000, November 1996, op.cit, tab A. 3 4 Note The high transaction costs of rural-urban migration and the wage rigidities in urban labor markets violate the Stopler-Samuelson theorem so Source Social assessment on impact of market liberalization on small cereal farmers in Morocco, working paper, August 1996, by Enterpnse Consulting Italy Srl et al, and Institut National de Recherche Agronomique aNRA), Settat si Source Farm-Nonfarm Linkages in Rural Sub-Saharan Africa, by Steven Haggblade, Peter Hazell, and James Brown, World Development, Vol 17, no. 8, pp 1173-1201, 1989 Also reprinted in World Bank Reprint Senes Number 450, Section 8 Conclusions 52 Indirect evidence is provided by area grown under sugarcane at 15,000 ha, oilseeds at 98,000 ha (1993- 1994), compared with cereals at 5 0 million ha. Source Annuaire statistique du Maroc 1995. s3 Source Reaching the rural poor through public employment Arguments, evidence, and lessons from South Asia, by Martin Ravallion, in The World Bank Research Observer, vol 6, no 2 (July 1991), pp 153-175 54 For FY 1997, the respective budgeted amounts are in DH m Flour 1,434; sugar- 1,700, and vegetable oil 1,500 Source MAMVA/DPAE. These are gross subsidies as opposed to the net subsidies derived by substracting the tariff/tax income these commodities generate. 5 Source- Royaume du Maroc. Depenses pubhques-problematiques et perspectives, Banque mondiale, numro du rapport 13413-MOR, septembre 1994, tab. 2 2, 7.1. 56 Source K Lindert's Mision back-to-office report on food subsidies, December 22, 1995, para 11, annex 1 para 6, annex 2, para 1 57 Source: K Lindert's Mission back-to-report report on food subsidies, December 22, 1995; para 14, 18. 58 The Entraide Nationale was established on the 27 April 1957 (26 ramadan 1376) by the Dahir no 1- 57-099 5 Source: Kingdom of Morocco. the Fourth note on social protection, World Bank, January 1996, pp 2-6. 60 Sources. Morocco: An economywide analysis of selected policy reforms, working paper, by David Roland-Holst and Saad Belghazi, November 1996, Tab 2.5.1., A Rural sector model of Morocco 133 alternative scenarios till the year 2000, a working paper, by Hans Lofgren, Rachid Doukkali, Hassan Serghim, and Sherman Robinson, October 1996, Tab 3 5 2 61 Source The Global Trade in Fresh Produce with Particular Reference to Less Developed Countries, by High-Value Horticulture PLC, November 1995, Executive Summary 62 Some of the well-known enterprises are LUKUS in tomatoes, spices, and dehydrated products, SOMIA in table olives, VCR in gherkins and capers Source Developpement des exportations des produits agricoles, op cit , footnote 18 63 Source The Kingdom of Morocco agro-industrial development-constraints and opportunities, op cit, vol 1 64 Source Exporting high-value food commodities-Success stories from developing countries, by Steven Jaffe with the assistance of Peter Gordon, World Bank Discusssion Paper no 198, 1992, 0 29. 65 Source Dveloppement desproduits des exportations agricoles, par Agroconcept, juillet 1996, pg 24, section A. 66 Source Kingdom of Morocco- Agro-industrial development-Constraints and opportunities, World Bank, report no. 11727-MOR, June 1994. This 2-volume report issues of the sector in detail 67 Source The Global trade in fresh produce with particular reference in less developed countries, op cit , Executuve summary 68 Source- Maghreb transport and trade facilitation study, World Bank, report no 13908-MNA, March 13, 1995, para 2.13-2 17, graphic. Morocco. Ad valorem excess cost profile 69 Source Developpement des exportations des produits agricoles, op. cit., document de travail, Octobre 1996 '0 Source Kingdom of Morocco. Secondary, tertiary and rural roads project, May 1995, SAR, no 12761- MOR, para 3 51, 5 5 A draft law to eliminate these restrictions on road transport is still to be ratified into law since January 1996 7 Source: L'impact du changement de reglementation du transport international routier (TIR) sur la competitivite des produits agricoles marocains a I'export, par M Mram Alaoui Mehdi, Projet de Promotion d'Agribusiness au Maroc, Groupe ESC Bordeaux, E B P France, juillet 1996, pp 15, no 2. 72 Sources Kingdom of Morocco Pnvate sector participation in infrastructure, World Bank, report no. 15059-MOR, December 1995, para 5 13 Les reformes du transport au Maroc, par Agro-concept, section 6, pp 23 3 Source L'mpact du changement des reglementation du transport international routier (7IR) sur la competitivite des produits agricoles marocains a 'export, op. cit., pp. 18, 19 74 Sources Agribusiness Marketing Investissement, a USAID-funded project to assist Moroccan agribusiness to be more competitive and diversify, L 'Impact du changement des reglementations du transport international routier (TR) sur la comptitivit6 des produits agricoles marocains a 'export, par M Mrani Alaoui, Les reformes du transport au Maroc, par Agroconcept, 1996, the preparation of the Agromarketing and supply services project, a World Bank supported project following the seminar in 134 Rabat on agro-industnal development in May 1995 and sector work resulting in Kingdom of Morocco Agro-industrial development--constraints and opportunities, World Bank, report no 14750-MOR, June 1994, 2 volumes. ' Source Moroccan policy reform in cereals, sugar and oilseeds, working paper, by Wallace E Tyner and Channing Arndt, July 1996, Associates for International Resources and Development; tab 2.3, pg 15, tab 2-15 76 Source Moroccan policy reform in cereals, sugar and oilseeds, op.cit , table 5-1 " Source Strat6gie de developpement du secteur des paches maritimes Horizon 2000, Royaume du Maroc, Ministere des P&hes Maritimes et de la Marine Marchande, pp 1 -chiffres cl6s 78 Source Royaume du Maroc- Le secteur de p6che aux petits pelagiques-Note d'orientation strategique, by Laurent Msellati, Natural resources division, Maghreb Department, World Bank, October 1996 7 Note There are two other conflicts between domestic production and promoting more efficient development between protecting domestic fishmeal and penalizing industrial poultry prduction through high-pnced uxed feed, between protecting oligopolistic producers of empty bottles and cans and users of these lugh-pnced bottles and cans in fish canning These show the incoherence of protection policy 80 Source Le secteur de la p&che aux petits pilagtques- Note d'orientation stratigque, op.cit, Box 4. 8' Source Kingdom of Morocco. Water sector review, op cit, pg para 11 82 Source A Rural sector model of Morocco Alternative scenarios till the year 2000, November 1996, by Hans Lofgren et al, Tab 3.4 2 83 Source Kingdom of Morocco: Agricultural sector strategy, World Bank, November 1994, Annex 1. 84 Source Farm-Nonfarm Linkages in Rural Sub-Saharan Africa, by Steven Haggblade, Peter Hazell and James Brown, World Bank Repnnt Senes Number 450, pp 1191 " Source: Farm-Nonfarm Linkages in Rural Sub-Saharan Africa, op cit, pp 1173-1174, 1190 86 Source. Rural-Urban Growth Linkages in India, by Peter Hazell and Steven Haggblade, Indian Journal of Agricultural Economics, vol 46, no 4, Oct -Dec. 1991, pp 515, 526-527 87 Source: Social assessment, op.cit para 5.3.5 9. 88 Source: Social assessment, op.cit section 5.4.2 89 Source: Social assessment, op.cit, para 5 4 2 4.-5.4.2 7. 9 Source: Kingdom of Morocco- Second small and medium scale irngation project, Staff Appraisal Report, World Bank, report no 6902-MOR, May 1988, para 3 01 9' Source Kingdom of Morocco: Water resources management project, Staff Appraisal Report, draft Green Cover, World Bank, report no 15760-MOR, September 1996, para 1 6-1.7 In the Kingdom of 135 Morocco Public expenditure-Issues and outlook, report no 13413-Mor, August 1994, para 7 9. footnote 28, 251,000 ha are scheduled for expansion, of which 235,000 are in LSI and 16.000 ha in SMSI 92 Note The poverty level was then set at DH 1,830, the current official level is DH 2.439/capita/year 9 Source: Kingdom of Morocco Water resources management project, op cit, para 1 22-1 31. 9 Note The decree 2-96-297 was promulgated on June 30, 1996 to increase water tanffs substantiall) To date (17 February 1997), there has been no arr&te d'application Without this arrte, the June decree is non-operational MAMVA has pronused to promulgate this arrete by 28 February, 1997 The above tariffs are averages Average fees for pumping increased from 0.19 DH/m3 in 1992 to 0 21 DH/m3 in December 1995. In April 1996, MAMVA raised tariffs by 0 01 DH/m3 in some areas not stncken by drought In areas with pumping, the average tariffs are 0 16+0 19=0 35 DH/m3 9 Source Kingdom of Morocco Agro-industnal development-constraints and opportunities, op ct, vol 1, para 2 05, tab 2 1-2.2, para 2 16 96 Source North Africa and Iran: Rangelands development in arid and semi-and areas-strategies and policies, Main report, report no 14927-MOR, Yellow Cover, November 9, 1995, 7.12-7 17 9 Note World Bank estimates based on data from MAMVA and INRA. 9 Source New Ways of Looking at Old Issues Inequality and Growth, by Klaus Deminger and Lyn Squire, World Bank, July 1996, pp 3, 14 9 Source. Land policy and issues, op cit, for fuller details '00 Source: Land policy and issues, by Raymond Noronha, op cit, para 11 '01 Source- Land policy and issues, by Raymond Noronha, op. cit, para 65 102 Note detailed recommendations are set out in Land policy and issues, working paper, by Raymond Noronha 103 Source Equity and growth in developing countnes old and new perspectives on the policy issues, by Michael Bruno, Martin Ravallion, and Lyn Squire; Policy Research Working Paper No. 1563, World Bank, January 1996; pp 23- 25 104 Source Design issues in new land reform projects, by John Heath, October 1996, pp 1 'os Source New ways of looking at old issues. Inequality and growth, by Klaus Deimnger and Lyn Squire, World Bank, July 1996, pp 4. 106 Source North Africa and Iran rangelands development in and and seni-and areas strategies and policies, Main report, Report no. 14927-MNA, Yellow Cover, November 9, 1995, pp 49-52 107 Source Kingdom of Morocco Impact evaluation study-Socioeconomic influence of rural roads, Fourth Highway Project (Loan 2254-MOR), OED report no 15808-MOR, June 1996, and OED Precis From foodline to lifeline Rural roads in Morocco, number 119, June 1996 136 108 Source Morocco Rural development strategy-draft onentation bnef, by Stephen Mink, September 1996, para 80 109 Source: Royaume du Maroc Ressources humanes--ducation et sante, by K Soman, op cit , juillet 1996, pg.3 110 Sources Morocco The structure and role of public expenditure, a working paper, by Stephen Mink; Royaume du Maroc Strategie de developpement rural mntegre-Ressources humaines, 9ducation et santa, background paper by Kouassi Soman, Royaume du Maroc strat6gie de d6veloppement rural--revue des secteurs, a background paper by Jean-Claude Goulner. "' Source. Maroc Strategie de developpement rural, revue des secteurs, by Jean-Claude Gouhier, op cit , Routes et Pistes, para 9. 112 Source. Agricultural extension A step beyond the next step, World Bank, Technical paper no. 247, 1994, by Charles Ameur, pp 27 113 Note this was clear from the Social Assessment on impact of market liberalization on small cereal farmers, op cit , section 5 4 2 For high-value crops, farmers pay for their extension advice, but for low- value cereals, the majonty of small farmers cannot afford to pay "1 Source: Kingdom of Morocco: Social pnorities program Basic education project, SAR, report no 15074-MOR, May 1996, para 2 04 115 Source: Kingdom of Morocco Social prionties project, Basic health project, report no 15073-MOR, May 1996, para 1.15-1.24 116 Source Kingdom of Morocco- Public expenditure-Issues and outlook, report no 13413-MOR, August 1994, ch 5, pp 55, para 5.5-5 6 "' Source L 'Exode rural au Maroc 1960-1994, a working paper, by Jean-Paul Azam, August 1996, Tab 14 118 L 'exode rural au Maroc, 1960-1994, working paper by Jean-Paul Azam, tab. 15 "9 Note: a large town is defined as "24 agglomerations de plus de 100,000 ha"(JPA pp 18) and small and medium with inhabitants below 50,000 120 Source L'Exode rural au Maroc 1960-1994, by Jean Paul Azam, op. cit, pp 2. 121 Source Kingdom of Morocco Towards higher growth and employment, CEM, op cit , vol. 1, para 65. 122 Source Kingdom of Morocco-Public expenditure: Issues and Outlook, World Bank, report no. 13413-MOR, August 1994, chapter 1, para 13 123 Source Kingdom of Morocco Country Asssistance Strategy, World Bank, report no 16219-MOR, January 8, 1997, Table 5 124 Source Kingdom of Morocco-Public expenditure: Issues and Outlook, op. cit., para 2 4 and table 2.2. 137 "25 Note The Webster's definition is- The dispersion or distnbution of functions and powers from the central authonty to regional and local authorities The explanation of deconcentrate is referred to the explanation of decentralize 126 Source Decentralisation et developpement rural au Maroc, working paper, by Suzanne Pinou-Sall and Jean-Claude Sallier, October 96, Tab I 121 Source Decentrahsation et developpement rural au Maroc, op.clt , pg 16 128 Source Decentrahsation et developpement rural au Maroc, op cit , pg 37 129 Source, Dcentrahsathon et developpement rural au Adaroc, op cit ,Tab 13 130 Source Dcentrahsation et developpement rural au Maroc, op cit, Tab 21 131 Source Decentrahsation et developpement rural au Maroc, op cit, Box 1 msaventures banales d'un projet tnt6gr6 132 Source The Sino-Amencan Joint Commission on Rural Reconstruction Twenty years of cooperation for agncultural development, by T.H Shen, Cornell University Press, Ithaca and London, 1970, pg 70-76 133 This research project is being conducted by a team led by Hans Binswanger, World Bank Completion is scheduled for mid-1997 Some of the results of the comparative analyses are presented and discussed in the Decentralisation et dveloppement rural au Maroc, working paper by Suzanne Pinou-Sall et Jean- Claude Sallier 134 These infrastructures include school buildings, health centers, rural roads, water supply and electnfication 135 Source Decentralization. The way forward for rural development9 by Andrew Parker, Policy research working paper, #1475, World Bank 136 Source. Opening up Liberalization with stabilization, by Michael Bruno, pg 223-248 in The Open Economy Tools for policymakers in developing countries, edited by Rudiger Dornbusch and F. Leslie C H.Helmers, EDI Senes in Economic Development, published for the World Bank, by Oxford University Press, 1988, pg. 230-234 138 CONTENTS VOLUME I EXECUTIVE SUMMARY Abbreviations and Acronyms Introduction i The main message is that Morocco can achieve rural well-being despite severe constraints ii Achieving rural well-being requires a holistic approach which goes well beyond employment-intensive agricultural growth ii Can Morocco afford not to achieve rural development? iii Integrating rural Morocco requires integrating agriculture more fully into the world economy iv Successful integration in the world economy has to be anchored in competitive strength v Integration is necessary but it inflicts short-term costs on some vulnerable groups _ vi The rural poor who depend on cereals cultivation for their livelihood can adjust if alternatives are developed vii Successful integration of the second Morocco requires changing incentives, institutions, and investments to promote efficient operations from production through to marketing vii The reality of drought must be integrated in the strategy for rural development and for food security x The Government's agricultural land policy is not likely to assist smallholders to be more productive xi Achieving rural well-being requires consensus on four strategic priorities and strong coordination by the central government xi ENDNOTES xiii Table E. 1: Short-term impact of alternative scenarios: Selected parameters iii Table E. 2: Short-term impact of alternative reform scenarios on household income iv Table E.3: Short-term impact of alternative import liberalization scenarios vi Table E. 4: Rural Development Strategy: An overview of the diagnosis xiv-xy Table E 5: Rural Development Strategy: An overview of priorities and main issues xvi CONTENTS FOR VOLUME II - MAIN VOLUME AND VOLUME HI - ANNEXES xvii-xxvii MAP 1: Morocco: Agro-climatic zones and incidence of rural poverty xxviii MAP 2: Morocco: Small and medium scale irrigation and incidence of rural poverty x-ix SELECTED BIBLIOGRAPHY xxx-xxxii 139 CONTENTS VOLUME Ill ANNEXES List of Working Papers 1 The Structure and Role of Public Expenditure in Morocco's Rural Development, by Stephen Mink, MNI NE, (WP) 2 L 'Exode Rural au Maroc, 1960-1994, by Jean-Paul Azam, Cerdi, Université d'Auvergne, Clermont-Ferrand, France, (WP) 3 Décentralisation et Développement Rural au Maroc, by Suzanne Piriou-Sall, Jean-Claude Sallier, (WP) 4 Quelle Stratégie pour le Développement du Commerce Extérieur des Produits Haleutiques au Maroc, by Rachid El Gharbi, (WP) 5 Pêche Artisanale marocaine aux "petits métiers" : Analyse des contraintes et des options pour un développement rural intégré, by Rachid El Gharbi, (WP) 6 Développement des Exportations des Produits Agricoles, by Agro Concept, (WP) 7 Moroccan Policy Reform in Cereals, Sugar and Oilseeds, by Wallace E. Tyner, Channing Arndt, AIRD, (WP) 8 Social Assessment on Impact of Market Liberalization on Small Cereal Farmers in Morocco, by Enterprise Consulting Italy Srl, and Institut National de Recherche Agricole, Settat, (WP) 9 A Model of Rural Morocco: Structure and Simulations, by Hans Lofgren, Rachid Doukkali, Hassan Serghini and Sherman Robinson, (WP) 10. Morocco: An Economywide Analysis of Selected Policy Reforms, by David Roland-Holst, Saâd Belghazi, (WP) 11 Land Policy and Issues, Raymond Noronha, (WP) 12. Towards a sustainable Drought Management, by Richard Iovanna, (WP) 13. Potentiels d'Accroissement de la Production et de la Productivité: Cas de Céréales par Charles Ameur, MNINE, (WP) 14. Stratégie de Développement Rural Intégré - Ressources Humaines: Education et Santé, by Kouassi Soman, MNICO, (WP) 15 Stratégie de Développement Rural Intégré 1997-2010: Secteurs du Promotion Nationale, Electricité, Routes et Pistes, Eau, Agriculture, by Jean-Claude Gouhier, (WP) B8kø 28429 MAP 1 MOROCCO e Mediterranean Sea AGRO-CIMATIC ZONES AND INCIDENCE OF RURAL POVERTY Lo1 J 711 7 0 5 TOO ISO /e Q O- duIdo Souk(A~o 4's~ KILOMETERS LSoko0 Th, m-p wns p,odced by ih. M.p 0.,,gn Umr o Th# World ionk ur/ Th'. b ndon, color, d.jn.n.in and onyolher ,nomnon shown E -:, i h,, p do hof ,ply, o h.pan Th. ~r a.on G-up -n y K Kn fr occepl.nce of such bo-ndor. Rabat E4N E . ( Casablonea ~E A ST ) ATLANTIC -0n ~ N ( OCEANJoLop y' Doy qaTKonøi~oo z~-9,~~~ C E oi TE \t enno" K.,b T. T ENSIFT SErod Essaouir~ "..~Co)i Tohnonpa r n,.loneoi- E,,ci,hidn INCIDENCE OF RURAL POVERTY DEFINED AS 990/91 EXPENDIEURES )0 - 'Zý N- 2,439 WIRHAMS PER CAPITA, PER YEARI il0 ... t' ~ , REGIONS WITH OVER 20% OF RURAL Agadr Toude 'Toonoch 1 . \PULATION DENED AS P00R ATormPOPULATION DEFINED AS P0RA Milssa S OU T u - REGIONS WITH UNDER 0% OF RURAL sou.._. POPULATION DEFINED AS POOR AGRO CLIMATIC ZONES- - ECONOMIC REGION BOUNDARIES -- / --250 ISOHYETS (in mm lyr) FAVORABLE BOUR (>400mm annua] ranfall) RIVERS Goelm * '1111] INTERMEDIATE BOUR (250 400mm -nnual rainfll) 0 SELECTED CITIES AND TOWNS UNFAVORABLE BOUR (<250mm onn.al r-nll) (0 PROVINCE CAPITALS LARGE SCALE IRRIGATION ® NATIONAL CAPITAL MOUNT-NOU AREAINTERNATIONAL BOUNDARIES MOUNTAINOUS AREAS --- INTERNATIONAL BOUNDARIES --SAHARA (APPROXIMATE) 281 DECEMBER 1996 MAP 2 Tanger MOROCCO T&Ojon MeclHiierranean Sea SMALL AND MEDIUM SCALE T IRRIGATION AND INCIDENCE OF RURAL POVERTY KX Å-w Soul * AbIr \ r ' 1 O 5,0 100 150\ KILOMETERS ont rd Thns op was prod-cd by th. Map D-pogo Um of The World Book 0 on Il.u map do no, .rpty, on lh por of rh. WorId Bonk Grop, ny 1od0"nrothe Sko oplsrtatuof any rr.rryor any endorsementor Ra bat eSOIa ~ ~ <~r occepmonce of such borndor,es 0 Corbia I | ran\ E A S T/ A T L A N T l C O C E A N"° \ Khour69 0.nd Zen 3 sr CENTER\ 8 n ) K-bo Todtbo. 323 32 TENSIFT SrTnI E s.oouiro( \"Eho0/> To ~o INCIDENCE OF RURAL POVERTY - --Z - 2,439 DRHAMS PER CAPITA, PER YEAR)i r rREGIONS WITH OVER 20% OF RURAL 0d r aro , ou POPULATION DEFINED AS POOR 0 REGIONS WITH 10 20% OF RURAL An 0 Tomo \ POPULATION DEFINED AS POOR REGIONS WITH UNDER 10% OF RURAL S > U T H -POPULATION DEFINED AS POOR '-( a - -- ECONOMIC REGION BOUNDARIES - * ~ MOUNTAINOUS AREAS Y - 250 ISOHYETS (in mm /yr) S3 -- RIVERS - FOOTHILL ZONES WITH PERENNIAL WATER 0 SELECTED CITIES AND TOWNS 510 OsnSOFROM SPRINGS OR SURFACE Gue FOOTHILL ZONES WITH INTERMITTENT WATER 0 PROVINCE CAPITALS FROM SPRINGS OR SURFACE @ NATIONAL CAPITAL o la" -'. AQUIFERS -- - INTERNATIONAL BOUNDARIES INTERMITTENT FLOOD PLAINS -- INTERNATIONAL BOUNDARIES -3 OASES IAPPROXIMATI) 29, DECEMBER 1996 142 SELECTED BIBLIOGRAPHY Abdel-Rahman, A M, Jean-Nizoux, and Anne-Mane Enterpnse Consulting Italy Srl, INRA, Settat and Geourjon Maroc: Vers la Mobilisation des World Bank. August 1996. Social Assessment on Recettes: Possibilit6s et Contraintes March 1996 Impact of Market Liberalization On Small International Monetary Fund, Washington, D C. Cereal Farmers in Morocco, working paper Agribusiness Marketing Investissement, a USAID- Gandlu, Sumuta. June 29, 1995 Kingdom of Morocco: funded project to assist Moroccan agnbusiness to be Enhancing the Participation of Women in more competitive and diversify Development, Green Cover, report no 14153, Agroconcept. 1996. Les reformes du transport au World Bank, Washington, D.C Maroc, the preparation of the Agromarketing And Gardner, Bruce L 1996 Policy Reform in Supply Services Project, a World Bank supported Agriculture: An Assessment of Results in Eight project following the seminar in Rabat on agro- Countries, unpublished paper, Uruversity of industrial development in May 1994 and sector Maryland. work resulting in Kingdom of Morocco: Agro- Gouhier, Jean-Claude. 1996 Maroc: Stratigie de Industrial Development-Constraints And dveloppement rural, revue des secteurs, Routes et Opportunities, World Bank, report no 14750- Pistes, working paper; Royaume du Maroc: MOR, June 1994, 2 volumes. stratigie de diveloppement rural-revue des Agroconcept Juillet 1996 Developpement des secteurs, a background paper. produits des exportations agricoles Haggblade, Steven, Peter Hazell, and James Brown Alaoui, M. Mram L'Impact du changement des Farm-Non-farm linkages Rural Sub-Saharan riglementations du transport international routier African, World Bank repnnt senes No 450. (TIR) sur la compditivitd des produits agricoles Hazell, Peter B.R and Behjat Hoati (IFPRI) marocains 4 l'export.. Farm/Non-farm growth linkages in Zambia, Annuaire Statistique du Maroc 1995, Royaume du Journal of Afncan Economies, vol. 4, No 3, pp Maroc 406-35 Azam, Jean-Paul August 1996. L'Exode rural au Hazell , Peter B.R. and Steven Haggblade Rural- Maroc (1960-1994), working paper. urban growth linkages in India. Indian Journal of Banque Mondiale, Departement du Maghreb. Voyages Agncultural Economics, vol 46, No. 4, Oct -Dec. d'Etudes en Amirique Latine, 24 f6vrier-9 mars 1991. 1996, rapport de base, pp9-11. Mission mende par High Value Horticulture PLC. November 1995. The Mark D. Wilson, World Bank, Washington, D.C. Global Trade in Fresh Produce with Particular Bmswanger, Hans P, (Simon Brandt Address). Reference to Less Developed Countries. Prepared September 21, 1994 Agricultural and Rural for International Finance Corporation, Uxbridge, Development: Painful Lessons. U.K. Bruno, M., Opening up: Liberalization with lovanna, Richard. November 1996 Toward stabilization. 1988. Pg. 223-248 in the Open Sustainable Drought Management in Morocco, Economy Tools for policymakers in developing working paper countnes, edited by Rudiger Dornbusch and F. Jaffe, Steven, and Peter Gordon, 1992. Exporting Leslie C.H. Helmers, EDI Series in Economic High-Value Food Commodities-Success Stories Development, published for the World Bank, by from Developing Countries, World Bank Oxford University Press, 1988, pg. 230-234. Discussion Paper, no.198, World Bank, Bruno, M, M Ravallion, and L. Squire. January 1996 Washington, D.C Equity and Growth in Developing Countries: Old Johansen, Frida, 1993. Poverty Reduction in East and New Perspectives on the Policy Issues, World Asia: The Silent Revolution, World Bank Bank Policy Research Working Paper 1563, World Discussion Paper 259, World Bank, Washington, Bank, Washington, D.C. D.C. Deininger, Hans, and Lyn Squire. July 1996. New Krueger, Ann, Maunce Schiff, and Alberto Valds Ways of Looking at Old Issues: Inequality and 1991 The Political Economy of Agricultural Growth, World Bank, Washington, D.C. Pricing Policy. World Bank, Washington, D.C Economic Research Service. April 1996 Nafta: Year Lofgren, Hans (IFPRI), Rachid Doukkalh, Hassan Two and Beyond. U.S Department of Agriculture, Serghim, and Sherman Robinson September 1996 Washington, D.C. A Model of Rural Morocco: Alternative El Gharbi, Rachid July 1996. Quelle Strat4gie pour le Scenarios till the Year 2000. Diveloppement du Commerce Extirieur des Produits Halieutiques au Maroc?, working paper 143 SELECTED BIBLIOGRAPHY Mrnistire de l'Agriculture et de la Mise en Valeur Tomatoes to the United States and Canadian Agricole. Nov 1995 Actions de diveloppement Markets, working paper. dans le monde rural, Rabat, Morocco World Bank. 1995. Kingdom of Morocco: Mink, Stephen D. 1) September 1996 Morocco: Secondary, Tertiary and Rural Roads project, Rural Development Strategy-Draft Orientation May 1995, Staff Appraisal Report, World Bank Brief 2) October 15, 1996. The Structure and report No 12761-MOR Role of Public Expenditure, working paper This World Bank 1997 Rural Development: From Vision paper is based on 2 background papers, Stratigie de to Action, prepared by the Rural Development and developpement rural-Ressource humaines Agnculture Staff, Department for Environmentally 6ducation et sante. by Kouassi Soman and Strategie Sustainable Development. World Bank, de developpement rural int6gr6 1997-2010- Washington, D.C. Secteurs de Promotion Nationale, diectricit6, routes World Bank. . Brazil: North East Rural etpistes et agriculture, by Jean-Claude Gouhier. Development Program-Performance and Noronha, Raymond. July 1996. Land Policy and Evaluation, March 1996, Introduction, Issues, working paper. Conclusions and Recommendations Parker, Andrew N. June 1995 Decentralization: The World Bank 1993. Irrigated Areas Agricultural Way forward for Rural Development?, Policy Support Services Project, Staff Appraisal Report, Research Working Paper #1475, World Bank, report no. 11947-MOR, World Bank, Washington, Washington, D.C. D C. Pinou-Sall, Suzanne, and Jean-Claude Sallier World Bank. 1993. The East Asian Miracle: November, 1996. Dicentralisation et Economic Growth and Public Policy, World d&veloppement rural au Maroc, working paper Bank, Washington, D.C. Ravallion, Martin September 1996 Poverty and World Bank. 1995 & 1996. 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Groupe de la Banque mondiale · Pre-2003 Economic or Sector Report
Morocco - Rural Development Strategy : Integrating the Two Moroccos (1997-2010) : Synthesis Report (Vol. 2 of 2) : The Main Report
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