Morocco - Rural Development Strategy : Integrating the Two Moroccos (1997-2010) : Synthesis Report (Vol. 1 of 2) : The Executive Summary

CONFIDENTIAL Report No. 16303-MOR 16303-MOR VOL.1 The Kingdom of Morocco Rural Development Strategy Integrating the Two Moroccos (1997-2010) Synthesis Report (In Three Volumes) Volume I Executive Summary 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 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 l'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 Holst 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 Sadd 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 Dervie is the Regional Vice President 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 EADNOTES 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 ofpriorities and main issues xvi CONTENTS FOR VOLUME H - 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 xxix SELECTED BIBLIOGRAPHY xxx-xxxii 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 olagineux) 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 Gendrale des Collectivtgs 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 IACCP 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 (Mnistre de I'Agriculture et de la Mise en Valeur Agricole) 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 D6veloppement des Ports) OECD Organization for Economic Cooperation and Development OED Operations Evaluation Department ONE National Electricity Agency (Office National de l'Electricit) ONEP National Agency for Potable Water (Office National de l'Eau Potable) ONICL National Interprofessional Agency for Cereals and Pulses (Office National Interprofessional des Cgriales et L9gumineuses) ONT National Agency for Transport (Office National de Transport) ONTS National Agency for Tea and Sugar (Office National du Th6 et du Sucre) ORMVA Regional Irrigation Agencies (Offices R6gionaux de Mise en Valeur Agricole) PAC Brazil's State Community Schemes PAGER Rural potable water plan (Programme d'approvisionnement group6 en eau potable des populations rurales) PD Provincial Departments PERG Rural electrification plan (Programme d'9lectrification rural groupg) 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 (Socigtis Coopgratives Agricoles Marocaines) iii SDS Strategy for Social Development (Stratigie de Dveloppement 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 悶 d ，夢 鬥屆寫州 匕d馴悶 閑劉靈鬥 蠱魚諍萬 州k壯州 鬥盒叫h 《留目以 鬥JZ弓 ~O盔 糅凶‘一閂 ！〕亂！!！〕！&！〕！!!!!!: 壩妝一、 INTRODUCTION 1. Grinding poverty is a painful reality for millions in rural Morocco. An estimated four million or 30 percent of the rural population live on less than a dollar a day. The rural poor-the second Morocco-are either the landless, or small farmers, or artisanal fishermen, in rainfed agriculture, unemployed or underemployed for six months in a year. With limited access to basic infrastructure and services, they rely primarily on low productivity subsistence farming Poor rural girls and women have to spend long hours daily in backbreaking chores, like fetching water and fuelwood, chores that make it virtually impossible to invest in their own education and productivity How can the rural poor in Morocco break out of this low level productivity trap? 2 Rapid rural-urban migration is the response of the poor to deprivation. Their answer is to migrate to urban areas in search of a better life, too often to join the ranks of the urban poor Rural-urban migration is a complex phenomenon worldwide with poverty only one of many causes In Morocco however, rural poverty remains a driving force Rural-urban migration has increased, from an average of 67,000 migrants a year in 1960-71 to 193,000 a year in 1982-94, accounting for 50 percent of urban growth Rural deprivation results in rural push, and rural push exacerbates urban unemployment which is already high-around 20 percent of the labor force The majority of rural migrants are young, illiterate women, who go to small- and medium-size towns rather than to big urban centers 3 Successful agricultural development leads to rural transformation. There is a better answer to rural deprivation The answer lies in the transformation from a low productivity, subsistence, smallholder agriculture to a high productivity, competitive, smallholder agriculture Agriculture and related upstream and downstream activities are the driving forces of rural transformation Extensive research on India, Malaysia, Philippines, Sub-Saharan Africa all point to the important multiplier effect of farm- nonfarm linkages. In the initial stages, small industries-mainly in agro-processing, offering non-farm or non-agricultural jobs-play a major role in this transformation Linkages from agricultural growth promote industries in construction and services which in turn expand consumer demand for raw and processed food products With improved access to markets (domestic and foreign) and services, and with increased investment in human capital, rural residents can choose among a richer set of opportunities in agriculture and non-agriculture This is successful rural development 4. Rural development, anchored in a high productivity agriculture promotes industrialization The successful experiences of the high performing economies of East Asia are prime examples of the the virtuous circles between a strong agriculture and rural development and between rural development and industrialization High productivity agriculture promotes industrial growth by providing low-cost, high- quality raw material supplies to industrial enterprises and lucrative domestic markets for ii their outputs The two-fold importance of agriculture to industrialization and to overall dynamic economic growth is particularly true for Morocco where agriculture, including agro-industries and fisheries, accounts for nearly 25 percent of GDP and 40 percent of employment. Agriculture's importance to the performance of the overall economy is dramatically evident in the sharp yearly fluctuations of GDP induced by wide climatic swings. Witness the recent drop of 7.6 percent in GDP caused by the drought-induced fall of 45 percent of agricultural GDP in 1995 followed by the surge of 10 percent of GDP caused by the 45 percent growth in agricultural GDP of 1996. 5. Achieving rural well-being should be center stage in Morocco's development agenda. Achieving rural well-being lays the foundation of an economically strong, a socially-cohesive and a morally responsive Morocco. Rural development is good on economic grounds: it provides the basis of an efficient, dynamic, and durable growth. Rural development is good on socio-political grounds by sharing the fruits of growth, it removes rural poverty as a powerful source of urban discontent Examples abound in the world of the silent rural poor of today becoming the vocal urban discontents of tomorrow. Rural development is good on ethical grounds in Islam as in all religions, the duty to reduce poverty is one of the pillars of moral behavior 6 And it is possible to achieve rural well-being. To the rural poor, achieving well-being in their lifetime and that of their children may seem an impossible dream. It is a dream but it is definitely not impossible Other countries have succeeded Why not Morocco? This study shows that Morocco, despite severe constraints and complexities, can achieve widely-shared rural growth led by agriculture. THE MAIN MESSAGE Is THAT MOROCCO CAN ACHIEVE RURAL WELL-BEING DESPITE SEVERE CONSTRAINTS 7. Morocco can achieve rural well-being provided it adopts a strategy based on efficiency gains. This strategy is far superior to its current strategy based on high protection of import-substituting agriculture The analysis in this study based on simulations of the economy clearly shows that there exists a combination of reforms and feasible productivity improvements on -several fronts that will generate rural development. These results are consistent with institutional analyses of the Moroccan economy and with international experience. ACHIEVING RURAL WELL-BEING REQUIRES A HOLISTIC APPROACH WHICH GOES WELL BEYOND EMPLOYMENT-INTENSIVE AGRICULTURAL GROWTH 8. The next five years are critical for laying the foundations of rural well-being, the defining challenge for Moroccan society. On the eve of the twenty-first century, Morocco faces a challenge that will define its place among nations in the next century: the challenge of achieving rural well-being. What Morocco does in the iii next five years will determine how well it succeeds What does succeis mean? That extensive rural poverty is significantly reduced and that the foundations for an efficient, high productivity, and resilient smallholder sector are in place. 9. A holistic approach to rural development is advocated Extensive international experience shows that a holistic approach is needed to undertake the massive task of reducing rural poverty in Morocco' Coordinated changes are required for incentives, institutions, and investments-to improve the access of the rural poor to markets, jobs, and services This holistic approach is not to be confused with the discredited top-down, integrated rural development (IRD) projects of the 1970s, implemented by centralized departments or parastatal agencies These IRD projects. emphasized the delivery of infrastructure and services and failed to achieve broad-based rural development CAN MOROCCo AFFORD NOT To ACHIEVE RURAL DEVELOPMENT? 10 Maintaining "business as usual" is riskier than macro economic reform. If the Government continues to avoid excessive macro imbalances and to undertake reforms at a gradual pace as in the past, growth would not rise above its historical rate of 3-4 percent per year, unemployment would continue to rise and Morocco would continue to lose competitivess Maintaining "business as usual" is 'therefore risky, riskier than reform. As shown in Table E 1 below, in the "business as usual" scenario, growth will remain low; fiscal deficits will continue;.urban unemployment will rise-by 1 percent (over the current rate of approximately 20 percent) per year over the next decade. On the other hand, if macro reform were undertaken, ie , measures to reduce fiscal deficit, improve the business environment and restore competitiveness, growth would be higher and the fiscal deficit would be eliminated The main risk in the reform scenario is urban unemployment, which would rise over the short term (in rural development, short term is 1-5 years), but would decline steadily over the longer term to fall below 10 perceit. (See Volume II, Tables 4.1 and 4 2 for detailed notes and sources): Table E.1: Short-term impact of alternative scenarios: selected parameters Period of impact: 2000-2003 Variables "Business as usual" scenario Macro reform scenario GDP (% p.a.growth) 3 0 '5.0-6.0 Fiscal deficit (% GDP) -4.5 . 0.0 Urban unemployment level (%) 25-29 less than 10 Source- RMSM, World Bank. iv 11 Macro economic reform while necessary is not sufficient to generate efficient growth to achieve rural development. More than macro reform is required increasing export penetration, raising agricultural and rural non-agriculture productivity, attaining financial sustainability in large-scale irrigation, and improving efficiency of water use in irrigation. This policy package would lead to a win-win scenario Overall growth would be higher and unemployment would be lower than with the macro reforms alone In addition, incomes would rise for both urban and rural households alike and the gap between the two would narrow (See Table E 2 below and Volume 2, Table 3 2, win-win 4 column). Rainfed and irrigated farming households gain relatively more than urban households, and the gap falls from 12-14 to 7-11 index points Table E.2: Short-term impact of alternative reform scenarios on household income: Selected parameters (Year of impact: 2000) Variables (index 1994=100) Macro reform scenario Win-win scenario" Average household income per capita 110 116 -Irrigated 101 111 -Rainfed 99 107 -Rural labor 107 113 -Other rural labor 113 117 -Urban 113 118 Source RSM INTEGRATING RURAL MOROCCO REQUIRES INTEGRATING AGRICULTURE MORE FULLY INTO THE WORLD EcoNOMY 12. Morocco needs integration for high growth. Morocco's openness, at 60 percent, is high by developing country standards, but low in comparison with fast growers, such as Chile at 80 percent and Malaysia at 120 percent Moreover, Morocco's speed of integration has fallen from 4 4 percent between 1986-90 to 3.2 percent in 1991-95 ." Worldwide experience since the 1970s shows that fast integrators are also fast growers and that open economies outperform closed economies in growth, in macro stability, and in the resilience needed in a fast changing world. Morocco requires all three- high growth, macro stability, and resilience to shocks for its rural growth to flourish. 13 The key decision is to integrate agriculture more fully into the global economy. Morocco's success will depend primarily on how fully it integrates its agriculture into the world economy, and how thoroughly it restructures incentives, institutions, and investments in the agro-food sector to support that integration Morocco has already made the decision to integrate its non-agricultural sector, through the Free Trade Agreement with the EU. Now, the key decision is on agriculture. Integrating the two Moroccos-the urban and the rural, that is the first and the second Morocco- depends on integrating the agriculture sector into the global economy. V 14 Now is the time to speed up integration. For a small economy with limited markets, expanding world trade would break the constraint that domestic demand imposes on rural growth. Trade is the classic vehicle for promoting dynamic growth, deriving benefits from the efficiency of specialization and the exposure to new processes and products Moreover, the world-wide expansion in agro-food exports has been higher than overall world trade, and Morocco faces high income elasticities for its agro-food exports in the context of expanding markets World trade is expected to expand at about 6 percent p a. in volume terms over the next decade, faster than at any time since the 1960s Morocco thus has a golden opportunity to tap expanding world trade in ways that fuel rural growth SUCCESSFUL INTEGRATION IN THE WORLD EcoNOMY HAS To BE ANCHORED IN COMPETITIVE STRENGTH 15. Pressures intensify for Morocco to diversify in more competitive global markets. Expanding world trade comes at a difficult time for Morocco It faces substantial reductions in its preferential trade with the European Union with an estimated 74 percent of agro-food exports losing preferential access, a major terms-of-trade shock for 66 percent of Morocco's agro-food exports Pressures are thus great for Morocco to diversify its products and markets As a supplier of undifferentiated agro-food exports, Morocco is a price taker. But, differentiation would enable Morocco to succeed in niche marketing For new markets, Morocco is strategically placed to expand access beyond the EU, into North America, the Middle East, and Sub-Saharan Africa. But its capacity to capitalize on its strategic position, to be more competitive and to diversify, is hampered by policy-induced constraints-constraints only the Government can remove 16 To be more competitive, Morocco must remove its substantial anti- export bias. Morocco's substantial anti-export bias inhibits its international competitiveness Morocco's export growth has been sluggish since the early 1990s 4 5 percent a year during 1991-95 down from 8 9 percent a year during 1986-90 Part of the reason is the 15 percent appreciation of the real effective exchange rate since 1990 Another part is the high import protection of agriculture import substitutes. under the system of target prices, rates of trade protection range from 20 to 98 percent in the spring of 1996 Exports suffer from a negative effective protection of around 35 percent These policies undermine the competitiveness and efficiency of the entire agro-industrial chain and they waste land and irrigation water 17 Morocco should focus on integration in agricultural trade. Morocco has already signaled its commitment to integration by signing the Free Trade Agreement with the European Union but fuller integration is needed in agriculture The Government's objective of food self-sufficiency now has been officially replaced by food security according to comparative advantage But the many interventions in domestic markets previously spawned by the food self-sufficiency approach are only beginning to be dismantled. In particular, the protection of "strategic" commodities remains high and variable for cereals, sugar, oilseeds, meat and milk and their derivatives and for fishmeal. Fuller integration of these strategic commodities in the world economy will be critical to the integration of the two Moroccos: urban and rural. INTEGRATION IS NECESSARY BUT IT INFLICTS SHoRT-TERM COSTS ON SOME VULNERABLE GROUPS 18. Import liberalization will increase growth, but risks short-term unemployment. The trade-off between higher growth and short-term increase in unemployment is a fundamental dilemma in promoting integration of agriculture in the world economy. Complete import liberalization, including both agricultural and industrial goods and leading to zero protection after the fifth year, would generate additional GDP and export growth, above not only the 'business as usual" projection but also the macro reform scenario discussed above. However, liberalization would increase short-term unemployment where uncompetitive domestic activities lose ground to cheaper imports. Unskilled workers, and among them subsistence cereals farmers in rainfed areas in particular, lose in terms of employment and real wages. These subsistence farmers, who earn 35 percent of their incomes as wage laborers in large cereal farms, are particularly hard hit. However, those who manage to keep their jobs benefit from an additional 7 per cent per year growth in real income. This growth is fuelled by overall growth, by the increase in foreign remittances and foreign direct investment, the real exchange rate depreciation and the sharp decline in consumer prices, all resulting from the package of macro reform and import liberalization. (See Table E. 3 below and Volume II, Table 4.2 for detailed notes). Table E.3: Short-term impact of alternative import liberalization scenarios: selected parameters (Year of impact: 2000) Variables (% p. a. changes wrt Partial import Complete import liberalization reform scenario in Tab.E. 1) liberalization GDP +1.0 +1.0 Exports +3.0 +6.0 Imports +2.0 + 25.0 Unemployment 0.0 +2.0 Real wages-Unskilled 0.0 - 6.0 Real disposable household + 1.0 + 8 0 income-Ag. worker head Source: CGEM.. wrt: with respect to Vii THE RURAL POOR WHO DEPEND ON CEREALS CULTIVATION FOR THEIR LIVELIHOOD CAN ADJUST IFALTERNA TIVES ARE DEVELOPED 19. If alternatives are developed, agricultural integration need not hurt the rural poor in the short run. The fundamental dilemma between preserving the, employment of small farmers in rainfed cereals in the short term and promoting the efficiency of agriculture in the longer term can and should be addressed. At lower levels of protection, cereals producers would find it more profitable to switch to higher-value crops in irrigated and high rainfall zones, and to more 'drought-resistant alternatives in semi-arid and arid zones. These alternatives will generate higher incomes and employment but the process of switching can be disruptive. Cereals are the major crops of Moroccan agriculture, occupying 50-60 percent of cultivated land, 70-75 percent in rainfed and 35- 40 percent in irrigated. Cereals constitute roughly 80 percent of the, value of crop production (the value of fruits and vegetables excluded). Small farmers in raiifed cereals form the majority of the agricultural population making cereals the 'ttaff' of life. Cereals and cereal products absorb 25 percent of household food expenditure. 20. Small farmers and the rural poor should be assisted to adjust successfully. Small farmers in rainfed cereals and the rural poor are many of the very people rural development is intended to assist and helping them to become economically viable in the long term is the heart of the rural development strategy proposed. Because fuller trade integration is likely to have a negative impact on the short-term employment possibilities of these small farmers, they need assistance during the transition. This is good on humanitarian, equity and efficiency grounds. If the main source of their livelihood stands in the way of a more efficient and more viable agriculture, then that source is the cause of their poverty and that source has to be replaced over time. To help them adjust, the assistance should be in terms of (a) compensatory programs to sustain short-term consumption and employment; (b) of education and training to facilitate mobility to more viable and remunerative employment; and (c) of economically viable alternative cropping patterns to absorb labor. SUCCESSFUL INTEGRATION OF THE SECOND MOROCCO REQUIRES CHANGING INCENTIVES, INSTITUTIONS, AND INVESTMENTS To PROMOTE EFFICIENT OPERATIONS FROM PRODUCTION THROUGH TO MARKETING 21. Improving efficiency along the entire agro-industrial chain is essential for being more competitive abroad. For years, Morocco hai, pursued' a dualistic approach to agro-market development. Domestic markets have been considered a dumping ground for export rejects. But research in high performing agro-food exporters shows that the prior or parallel development of domestic markets strengthens rather than weakens export competitiveness: that is, there is strong synergy between the efficiency of domestic markets and the competitiveness of exports. Several areas need improvement: viii * The legacy of Morocco's interventionist approach to food self-sufficiency is a plethora of controls on domestic marketing. In the spring of 1996, the authorities started dismantling some of these controls in cereals, sugar, and oilseeds markets, but much more is needed. * Transport is of strategic importance in modern markets, but is hampered by public monopolies. In Morocco, transport and handling costs represent 38 percent of total cost of fresh agro-food exports. The margins in agro-business are so small that competitive transport and handling costs can make the difference between success and failure as they are usually the largest single cost item. * Urban communes use their monopoly in marketplaces mainly to extract revenues. Their markets are dilapidated In addition, the Government's system of quality management is fragmented and punitive. What is needed instead is to assist the private sector in understanding and adapting to rigorous standards for public health, for environmental safeguards, and consumer information. * Wholesale marketing would give small- and medium-size operators access to equipment that preserves the quality, reliability, and timeliness of their delivery, but such marketing is non-existent. Both the public and the private sectors can contribute in setting up wholesale marketing. Because of externalities and high initial entry costs involved in the marketing chain, the public sector has a major role to play. Because of substantial private benefits from more efficient marketing, the private sector also has a major role to play, but needs the legal and regulatory framework to do so. The Government needs to define the rules for mutually beneficial public-private partnership. The public sector could also do much to help small- and medium-size operators become more competitive and more profitable: promoting standard systems of weights, measures, and grades; disseminating fast changing market information, enforcing standards to ensure public aspects of quality (health and sanitation and the environment). Instead, the Government maintains controls that undermine quality management, and resilience of response to changing market conditions. 22. Public expenditure-pivotal for facilitating integration, increasing productivity and reducing rural poverty. The efficiency, equity and sociopolitical benefits of integrating the second Morocco depend on how skillfully the Government directs and rearranges its spending. And while poverty reduction is a public good, and a public responsibility, private individuals need to pull their weight as well. Through its public expenditure, the Government must provide the means to assist the rural poor break out of their low level productivity trap. In a budget-constrained situation, how Government uses funds will make the critical difference. Currently, budgetary resources allocated to rural areas are not insignificant-DH 19.5 billion in 1995 or 6.9 percent of GDP-but greater impact on the ground is sorely needed. lx 23. To get greater impact, Morocco must consider a radical departure from the "business as usual" approach. This means that the Government should reform the institutional fragmentation of public investment in planning and allocation, re- allocate expenditure in favor of the delivery of rural infrastructure and services, and improve the autonomy and participation of local collectivities in development programs The urgency to improve cost-effectiveness is underlined by the resource requirement of the rural development plans developed by the central Government. The demand for incremental resources envisaged by these sectoral plans is expected to require a real increase of 40 percent in rural expenditures relative to 1995 levels. An increase of this magnitude in rural programs would only be achievable by a reduction of 15 percent in real expenditures on non-rural expenditures. This level of re-allocation does not seem feasible. 24. Hence, an urgent need for reform. Specific suggestions where significant resources and returns are expected are (a) a re-allocation from physical expansion to service delivery and productivity enhancement in the Programme National d'Irrigation (PNI) to improve the efficiency of water use; (b) a re-design of the PAGER program to accommodate more modest but still sturdy and sound engineering designs of water delivery systems; and (c) an increased allocation to primary education and basic health care in rural areas. Sector-wide, the Government has to re-focus its public expenditure in five areas: First, is to improve the quantity and quality of rural infrastructure and related services. The priorities for the rural poor are roads, electrification, potable water, primary schools, and health centers. The management of irrigation infrastructure and the incentives for efficient water use are also concerns. Irrigation has received the lion's share of public investment because of its important role in agro-food exports, but it is not contributing as much to value-added or incomes as it could. Second, is to expand employment schemes that can sustain the employment and consumption of the rural poor. With the rural areas so devoid of public infrastructure, the employment schemes should create valuable assets in rural areas, boosting employment while improving infrastructure These employment schemes can be particularly useful during droughts. Third, is to strengthen productive supportive services in agriculture, e.g., research and extension, to assist the myriad of small farmers, specially those in rainfed agriculture. Agricultural research and extension for rainfed areas have been starved of budgetary support for years. Lacking motivation and poorly equipped, staff have either left or are ineffective. Fourth, is to build human capital in rural areas, making the poor more literate, healthier, and more productive workers. Public expenditure has a strong pro- urban bias and the inequities and inefficiencies of public expenditure are major stumbling blocks that have to be addressed. X Fifth, is to decentralize the management of rural development programs which remains highly centralized despite a long history of decentralization and deconcentration in Morocco. With little autonomy and meager budgets, communities barely participate in the financing, design, and implementation of programs that affect them. Experience elsewhere shows that local participation can release resources and managerial talent. THE REALITY OF DROUGHT MUST BE INTEGRATED IN THE STRATEGY FOR RURAL DEVELOPMENTAND FOR FOOD SECURITY 25. Rural development strategy must grapple with drought The frequency and severity of drought further complicate the task of rural development. Since 1911, there have been 29 years of drought, roughly one every three years. The 1995 drought dramatized the economy's vulnerability to drought. Agricultural GDP fell by 45 percent and GDP by 7.6 percent. The current account deficit deteriorated to about 4.7 percent of GDP, and the budget deficit to 5.8 percent. By increasing the riskiness of rainfed agriculture, drought causes severe hardship for the rural poor, because they have so little margin to absorb the blow. 26. Promoting agricultural integration strengthens resilience to drought and furthers food security. Resilience to drought and improved food security are best served by promoting agricultural integration according to comparative advantage. Due to high trade protection, low yield systems in cereals, sugar and oilseeds, meat and milk can be financially viable. Extension of cereal cultivation, the most important commodity of Moroccan agriculture, into marginal areas actually increases Morocco's vulnerability to drought, contributes to rangelands degradation, and undermines food security. Sugar and oilseeds use some of the scarcest factors in Moroccan agriculture: irrigated and high rainfall'land. These could be generating much higher value-added By lowering protection on these commodities, integration will promote a more competitive and diversified commercial agriculture. In areas of high agronomic potential, producers will find it more profitable to diversify their activities in terms of commodities and markets. In areas of low agronomic potential, producers will seek drought-tolerant varieties and drought-resistant production systems. Given Morocco's strategic location in global markets, food security will be strengthened through greater reliance on trade and on intensive and high productivity cultivation rather than on extensive, and low productivity cultivation in unsuitable areas. 27. Strengthening resilience to drought, furthering food security and achieving rural development are mutually reinforcing. The disaggregated approach to agricultural development advocated here simultaneously furthers three related objectives, drought resilience, food security and rural development. Trade integration will generate incentives to produce according to comparative advantage. To be successful, changes in trade incentives must be complemented by domestic measures which can turn xi Morocco's comparative advantage into competitive advantage. The resulting package of policies will generate labor-intensive growth essential to sustainable rural development. THE GoVERNMENT'S AGRICULTURAL LAND POLICY Is NOT LIKELY To ASSIST SMALLHOLDERS To BE MORE PRODUCTIVE 28. Skewed land distribution undermines poverty reduction. The skewed distribution of agricultural land further weakens the ability of the poor tp rise out of poverty. According to the latest 1973-74 agricultural census, 80 percent of farmers, owning farms of less than five hectares, occupied only 25 percent of total cultivated land, while the remaining 20 percent of medium and large farmers occupied 75 percent of total. Since then, the situation may have worsened considerably, The successful East Asian experience in rural development shows that' equalizing land ownership and broadening access to public goods and services is important for rapid and sustained growth with equity. Recent Bank research on inequality and growth also shows that the more unequal the asset distribution, the slower the growth. 29. International experience does not support the premises of the Government's Agricultural Land Policy. The Government's Agricultural Land Policy focuses on consolidation and registration to improve smallliolder -investment and productivity and not on the skewness of land distribution. This f6bus is anchored in the belief that (a) there is a minimum size for efficient farming and that size can be determined centrally, and (b) registration is the cornerstone of security of tenure, which in turn is essential for increased investments and productivity in land. International -experience however does not substantiate these premises. ACHIEVING RURAL WELL-BEING REQUIRES, CONSENSUS ON FOUR STRATEGIC PRIORITIES AND STRONG POLICY COORDINATION BY THE CENTRAL Go VERNMENT 30. Integration will be served by pursuing four strategic priorities. Once' agricultural integration is adopted as a major goal in Morocco, strategic priorities are largely determined. These are 1. Build an efficient and a high productivity agricultural and rural sector, more competitive in domestic and foreign agro-food markets. 2. Use public expenditure and targeted programs to facilitate the adjustment of vulnerable groups in rural areas. 3. Refocus government support to improve rurai inirastructure, services, drought resilience, and more productive land and water use. 4. Decentralize, implementation futher-to improve cost-effectiveness and ownership of rural development programs. xii If there is a consensus on adopting these priorities-essential for integrating the two Moroccos-then detailed work can proceed on an action plan. This approach requires that the central government shifts its focus towards formulating policy and promoting efficient resource allocation and away from direct execution, leaving the latter to local governments, the private sector and civil society. 31. 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 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 for vulnerable groups in rural areas. 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 32. Morocco has the required assets to draw upon. To shape its future, Morocco can rely on its past First, when faced with past financial crises, Morocco undertook structural adjustments and was successful in regaining internal and external equilibrium, in achieving sustained growth and in reducing poverty. Second, Morocco has a long history of consensus building, and now, more than ever, Morocco should draw upon this asset. Third, Morocco can draw on the lessons of international experience and donor support to guide and finance its rural development efforts. 33. The cost of inaction is far heavier than the short-term cost of reform. Faced with the narrowness of the path, inaction may be a strong temptation But, the problem would not disappear-indeed, it would likely grow worse, greatly raising the cost to Moroccan society. Rural poverty feeds urban poverty and unemployment, undermining the socio-political stability of Morocco. Reform is thus the better course, even if it involves short-term costs, for reform typically involves short-term costs before reaping long-term benefits. Commitment at the highest levels and consensus on the broadest basis are essential. 34. The Government's commitment to rural well-being is the key. To achieve the vision of rural well-being described here requires an unwavering commitment by the central government, that the vision is worth pursuing, that it will build the needed consensus, and that it will mobilize the needed financial and other support. Coordination is essential The proposed strategy places a high burden of policy coordination in the central government to ensure that policy actions and institutional reforms are properly timed and executed, that the required financial resources are mobilized and that they are properly allocated to executing agencies xlil most suitable for the task In this way, the substantial existing capacities that lie dormant can be mobilized for the task, while the central government concentrates on the key policy, allocation, coordination, and monitoring functions. Broad participation is necessary. The execution of the resulting programs will rest with actors as diverse as local governments, private sector, civil society groups and the various departments of the central government ranging inter alia from finance, commerce and external trade, population, and interior to agriculture, public works, health, education, and social affairs This report assumes that unwavering commitment to rural well-being exists, for without it, this report has little relevance. Addressed to all who want to contribute to the realization of this vision in Morocco, this report is intended as a first step in better understanding what it takes for Morocco to succeed in rural development, and to mobilize support both at home and abroad. Endnotes 'Note Holistic refers to an approach whereby the whole is greater than the sum of its parts The approach hinges upon the synergism among the constituant parts The impact of coordinated changes is greater than the separate impact of each change " Note Several win-win scenarios were explored This, the fourth win-win scenario, is presented here because it achieves the most rural development, i.e , the income disparity between urban and rural households shrnks ' Note. The degree of an economy's openness is defined as the share in GDP of exports and imports of goods and non-factor services Non-factor services includes shipment, passenger and other transport services The speed of integration is measured as the sum of the growth of exports and imports less GDP growth Kingdom of Morocco Table E-4: Rural development strategy: An overview of the diagnosis Key propositions Key data 1. Rural Poverty is extensive * 30% of the rural population or 4 million live on less than a dollar a day 2 There are sharp disparities in social indicators between urban and rural * Examples are access to potable water is 100% in urban and 14% in rural, illiteracy is 37% mn urban and 75% in rural, female illiteracy being 49% urban and 89% in rural. 3 Morocco is facing a major erosion of preferential trade with the European * 74% of value of agrofood exports to EU lose preferential trade Union. treatment. * Growth of 6% a year is forecast over next decade, higher that it ever 4 World markets are expected to expand at high rate over the next decade if has been since the 1960s. liberalization continues 5 lToibercompativ, ors mt* Appreciation of the real effecive exchange rate of 15% since 1990. 5 To be competitive, Morocco must reduce anti-expot bias * High import protection generates a negative 35% effective protection rate for exports. 6 Agricultural protection on "strategic" commodities is high and variable. * Nominal rates of protection (after Spring 1996 reforms) range from 20% on maize to 94% on rapeseed oil 7. Morocco's degree of openness is low in comparison to fast growers and its speed * Morocco's degree of openness is 60%, Chile is 80% and Malaysia of integration has fallen 120% * Morocco's speed of integration has fallen from 4 4% (1986-90) to 3 2% (1991-95). 8 Typically rainfed cereals is large portion of agriculture Reducing protection on * Cereals occupy 70-75% of rainfed land. cereals will hurt small farmers of rainfed cereals in the short run but promote * Many small farmers of rainfed cereals earn 35% of household income long-term efficiency Close cereal-livestock interactions in rainfed areas can as wage laborers on cereals farms of large farmers soften the negative impact on household income from cereals alone * Close cereals-livestock interactions prevail among small farming systems 9. Compensatory programs and employment alternatives are needed to help the * 80% of farmers are small farmers (1973/74 Agricultural census) poorest among the losers adjust to decreased protection. * Rural poor are mainly the landless and small farmers in ramnfed areas * Urban commune monopoly exists in marketing infrastructure Table E. 4 continued 10 Being competitive in agro-food exports requires inter aba removing regulatory * Public sector monopolies in transport Office de ddveloppement des obstacles to competitive agro-markets, and improving system of quality ports (ODEP), Office National de Transport (ONT), Royal Air Maroc management. (RAM) undermine competitiveness of transport/handling services. * System of quality management is fragmented and punitive * For example, in irrigated and high rainfall (above 400 mm/year of II High productivity agnculture, on a sustainable basis, and along lines of rain) zones, cereals yields can double or even triple comparative advantage is the core of rural development * Ratio of potential to actual yields for other commodities ranges from 13 to 3 2 * In semi-arid and arid zones, too much land allocated to cereals * Agro-ecological data on Moroccan agriculture abundant but fragmented and of little use to decision-making * Research and extension weak due to lack of strategy and chronic 12. Agro-ecological mapping of agriculture and cropping systems must be budget shortages. strengthened to assist research and extension promote productivity * International experience shows there are many options for reducing 13. Sustainable drought management requires emphasis on risk reducing and risk risk. coping strategies rather than nsk compensation, currently sole focus of government approach * International experience shows that small family farms are the most 14. Government's agricultural land policy focuses on issues of little significance to productive and that registration is no guarantee for higher investment improving smallholder productivity. and productivity in land. * International experience shows that highly skewed land distribution may be a major obstacle to high and sustained growth * Without fundamental changes, rural public expenditures would 15 Compensatory programs, investment in rural infrastructure, in productive require a real increase of over 40 percent over 1995 levels. services, and in human capital will have to be financed within constrained budget envelope This will necessitate fundamental changes in public expenditure allocations and the way they are used. * International experience with decentralized management in East Asia 16. Decentralization of rural development programs is a promising solution to (e.g , Taiwan, China) and Latin America (e g , Brazil, Mexico, Chile, Morocco's public expenditure problems. Colombia) is promising xvi Kingdom of Morocco Table E-5: Rural development strategy: An overview of priorities and main issues STRATEGIC MAIN ISSUES PRIORITIES 1. Build an efficient and a * Cereals, sugar, oilseeds. high productivity a) short-term negative impact of reducing agricultural and rural protection on cereals on small farmers in rainfed sector areas, and other poor, subsistence farmers b) opposition to the deregulation of marketing in cereals, sugar and oilseed/vegetable oils from processors and intermediaries * Agro-marketing chain: a) removal of anti-export bias and public monopolies in agro-marketing infrastructure and transport b) reorganization of public aspects of quality management * Fisheries sector a) reduction of high trade protection on fishmeal 2. Use public expenditure * Labor-intensive public employment schemes and targeted programs to a) revitalization of operations of Promotion facilitate the adjustment Nationale of vulnerable groups in * Revitalization of operations of Entraide Nationale rural areas 3. Refocus government * Relative public expenditure allocations: support to improve a) mobilization of additional budget and/or better infrastructure, services, utilization of available budgets for priority drought resilience and programs for rural development more productive land b) redefinition of the role of the public sector to and water use support a competitive private sector in a more open economy 4. Decentralize further to * Participation of local collectivities, NGOs and civil improve cost- society in rural development programs: effectiveness and a) experimentation with different modalities of ownership of rural central government - local partnership development programs \ov-vzew doc xvii CONTENTS Volume Il Main Volume xviii 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 1 Rural development generates a virtuous circle of well-being and sustainable growth_1 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 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 I Services constitute the fastest growing component of world trade, and environmental standards are increasingly important for market access 12 xix 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 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 xx 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 fundamental31 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 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 xxi 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 Exploiting comparative advantage and trade opportunities strengthens national food security63 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 xi 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 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 XXIii 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 difficulties86 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 A national debate is urgently needed to forge a consensus on how to achieve the vision of rural well-being 88 xxiv 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(1996-2000) 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 xxv 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 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 xxvi 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) 9 - 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 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 HI ANNEXES 138 Map 1: Kingdom of Morocco: Agro-climatic zones and the incidence of rural poverty 139 Map 2: Kingdom of Morocco: Small and medium-scale irrigation and the incidence of rural poverty 140 Selected bibliography 141-143 xxvii CONTENTS VOLUME III ANNEXES List of Working Papers 1. The Structure and Role of Public Expenditure in Morocco's Rural Development, by Stephen Mink, MNI1NE, (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 Haheutiques 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 Lôfgren, Rachid Doukkali, Hassan Serghini and Sherman Robinson, (WP) 10. Morocco. An Economywide Analysis of Selected Policy Reforms, by David Roland-Holst, Saâd Belghazi, (WP) I. Land Policy and Issues, Raymond Noronha, (WP) 12. Towards a sustainable Drought Management, by Richard lovanna, (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) IBRD 28429 MAP 1 Ton r MOROCCO Mediterranean Sea AGRO-CLIMATIC ZONES AND INCIDENCE OF RURAL POVERTY K-, 0 5,0 100 150 o ILOMETERS - - 5 Th. p ~ by ptdod . map 0.3,9. Un rh IS.M o..ok T. bo~don~., oorx d~nceinonon, od mnyoff.r inonon show- ohuR. , do th,,pyoo1. pon of 1. WorM Book G-,o. emy god,maono ifh. le,als.osu of ony torroaye anoy .odro,.n. or 3 oeprnc of such bonr. Robot. ATLANTIC ' El-J didy --j OCEAN . -c N- 32 32 r- -EK FNCIDENCE OF RURAL POVERTY Ouar za t(DEFINED AS 1990/91 EXPENDITURES - - <-~ 2,439 DIRHIAMS PER CAPITA, PER YEAR) - -- N~p V [Y REGIONS WITH OVER 20% OF RURAL , Aga~I Taro o '~~- ~ I POPULATION DEFINED AS POOR d - - 1REGIONS WITH 10-20% OF RURAL > Souss ~1o ~ - .POPULATION DEFINED AS POOR c Mss O T - REGIONS WITH UNDER 10% OP RURAL - -EOPULATION DEPINED AS POOR AG_CoAThfNS,---ECONOMIC REGION BOUNDARIES --250 ISOHYETS (In mm /yr>) 5 ...' ~ FAVORABLE BOUR (>.400mm annulOO rafll) -_\-- RIVERS ~ Go.imm INTERMEDIATE BOUR (250-400mm anua ra,ioIIll 0 SELECTED CITIES AND TOWNS ____ UNFAVORABLE BOUR (<250mm onnual romfaoll) ® PROVINCE CAPITALS 'LARGE SCALE IRRIGATION D NATIONAL CAPITAL Tan-Qo -R---INTERNATIONAL BOUNDARIES -PO-UL---OMOUNTANNDUSSAREAS - -UNTA-N- ---.- INTERNATIONAL BOUNDARIES SAHARA (APPROXIMATE) DECEMBER 1996 IBRD 28A31 MAP 2 Tanger . MOROCCO ' .on Mediterranean Sea SMALL AND MEDIUM SCALE IRRIGATION AND tho A a Nador INCIDENCE OF RURAL POVERTY K-. T it Odulda SO E 10 iso o e ,,.... 400 KILOmIETERS ouaeS The nm produced by dw Map Dag Umi of The Wadd Bank iTo The bondo-, colars,n o d namio and anywher mfornanon shon r an dw.s map da not aNply, i, dw part a Tha World Sank Grop, any ao( dgn.w o hd egans of onaa or any -d-rsmnt ar Rabasse GENTE Casablanca EAS T/ ATLANTIC c A"k ATLANTICEI-Jadid 1 .rr4ck/do OCEAN ~ 5sya b , ~ ,1 d..* CENTER\ ' .. @. Ifrrosh -' Banguaro Kela a gS32 TENSIFT s e a El-jadidL~ ' ..hdI ? IEssaouire n - -. )INCIDENCE OF RURAL POVERTY (DF0E AS 1909 EXPENDITURE L.-)--Ouarzate. <2,439 DIRHAMS PER CAPITA, PER YEAR) REGIONS WITH OVER 20% OF RURAL godir f/,oPOPULATION DEFINED AS POOR Agadr ara - "~1REGIONS WITH 10O-20% OF RURAL Inad g..r POPULATION DEFINED AS POOR T Trma REGIONS WITH UNDER 10% OF RURAL SOUTH POPULATION DEFINED AS POOR TTwoa ---- ECONOMIC REGION BOUNDARIES / . *MOUNTAINOUS AREAS / * a --250 ISOHYETS (in mm /yr) 7 ' -' RIVERS FOOTHILL ZONES WITH PERENNIAL WATER o SELECTED CITIES AND TOWNS g *FROM SPRINGS OR SURFACE Gu.m.m. 'FOOTHILL ZONES WITH INTERMITTENT WATER 0 PROVINCE CAPITALS a FROM SPRINGS OR SURFACE * NATIONAL CAPITAL AUIFERS--- INTERNATIONAL BOUNDARIES ; INTERMITTENT FLOOD PLAINS -- INTERNATIONAL BOUNDARIES ... '... OASES IAPPROXIMATE) 21 M 4. I I DECEMBER 1996 xxx SELECTED BIBLIOGRAPHY Abdel-Rahman, A. M., Jean-Nizoux, and Anne-Marie El Gharbi, Rachid. July 1996. Quelle Stratdgie pour le Geourjon. 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