Morocco - Fes-Medina Rehabilitation Project

Document of The World Bank Report No.: 18462-MOR PROJECT APPRAISAL DOCUMENT ON PROPOSED LOANS IN THE AMOUNTS OF FRF 40.9 MILLION TO THE KINGDOM OF MOROCCO AND FRF 40.9 MILLION TO THE MUNICIPALITY OF FES-MEDINA FOR A FES-MEDINA REHABILITATION PROJECT October 7, 1998 Infrastructure Development Group Middle East and North Africa Region  CURRENCY EQUIVALENTS (as of September 1, 1998) Currency Unit = Moroccan Dirham (MAD) US$1.00 = 9.3 MD MAD 1 = US$0.107 FISCAL YEAR July 1 - June 30 GLOSSARY OF ACRONYMS ADER-Fes Agence pour la Dedensification et la Rehabilitation de la Medina de Fes (Agency for the Rehabilitation of Fes Medina) BITS Board for Investment and Technical Support (Conseil a l 'investissement et a I 'appui technique) BOT Build, Operate, Transfer (Construction, exploitation, transfert, CET) CAS Country Assistance Strategy (Strateigie d'assistance aupays) CDG Caisse de dcp6t et gestion (Savings Management Fund) CIH Cre'dit immobilier et h6telier (Real Estate and Hotel Credit Institution) CUF Communaute urbaine de Fes (Urban Community of Fes) FADES Fonds arabe pour le deiveloppement &conomique et social (Arab Fund for Economic and Social Development) FEC Fonds d'equipement communal (Municipal Fund) FES-SAIS Association pour le developpement culturel, social et economique de Fes (Association for Cultural, Social, and Economic Development of Fes) FIAHS Fund for Innovative Approaches in Human and Social Development (Fonds pour la promotion d'approches novatrices en matiere de developpement humain et social) GIS Geographical Information System (Systeme d 'information geographique, SIG) GoM Government of Morocco (Gouvernement du Maroc) MCA Ministry of Cultural Affairs (Ministere des Affaires Culturelles) NGO Nongovernmental Organization (Agence non-gouvernementale) OFPPT Office de laformation professionnelle et de la promotion du travail (Vocational Training and Labor Promotion Office) RADEF Regie autonome de distribution d'eau et d'electricite de Fes (Water Supply and Electricity Public Utility of Fes) UDC Unite de developpement communautaire (Local Development Unit) UNDP United Nations Development Programme (Programme des Nations Unies pour le Developpement, PNUD) UNESCO United Nations Educational, Scientific, and Cultural Organization (Organisation des Nations Unies pour l 'education, les sciences et la culture) VAT Value Added Tax (Taxe a la valeur ajoutee, TVA) Vice President Kemal Dervi, Country Director Christian Delvoie Sector Director Jean-Claude Villiard Team Leader Frangois Amiot  KINGDOM OF MOROCCO Fes-Medina Rehabilitation Project Project Appraisal Document Contents Page No. BLOCK 1: PROJECT DESCRIPTION ....................................................................2 1. Project Development Objectives .....................................................................2 2. Project Components ....................................................................2 3. Benefits and Target Population ....................................................................3 4. Institutional and Implementation Arrangements .................................................................... 3 BLOCK 2: PROJECT RATIONALE ................................................................... 4 5. CAS Objective(s) Supported by the Project .4 6. Main Sector Issues and Government Strategy .4 7. Sector Issues To Be Addressed by the Project and Strategic Choices. 5 8. Project Alternatives Considered and Reasons for Rejection. 6 9. Major Related Projects Financed by the Bank and/or Other Development Agencies 6 10. Lessons Learned and Reflected in the Project Design ........................................................... 6 11. Indications of Borrower Commitment and Ownership .......................................................... 7 12. Value Added of Bank Support ..................................7 BLOCK 3: SUMMARY PROJECT ASSESSMENTS ........................................................... 7 13. Economic Assessment .....................................................................7 14. Financial Assessment .....................................................................8 15. Technical Assessment .....................................................................9 16. Institutional Assessment .....................................................................9 17. Social Assessment .................................................................... 9 18. Environmental Assessment .................................................................... 10 19. Participatory Approach .................................................................... 10 20. Sustainability .................................................................... 11 21. Critical Risks .................................................................... 11 22. Possible Controversial Aspects .................................................................... 12 BLOCK 4: MAIN LOAN CONDITIONS .. ............................. 12 23. Effectiveness Conditions ................................................................... 12 24. Other ................................................................... 12 BLOCK 5: COMPLIANCE WITH BANK POLICIES ........................................................ 13 ANNEXES Annex 1: Project Design Summary .................................................................... 14 Annex 2: Detailed Project Description .................................................................... 17 Annex 3: Project Cost Summary .................................................................... 21 Annex 4: Cost Benefit Analysis Summary .................................................................... 25 Annex 5: Financial Summary for Revenue Earning Project Entities ........................................... 36 Annex 6: Procurement and Disbursement Arrangements ............................................................ 40 Annex 7: Project Processing Budget and Schedule .................................................................... 43 Annex 8: Documents in the Project File .................................................................... 44 Annex 9: Status of Bank Group Operations in Morocco ............................................................. 46 Annex 10: Morocco at a Glance .................................................................... 48 Map: IBRD No. 29303  INTERNATIONAL BANK FoR RECONSTRUCTION AND DEVELOPMENT INTERNATiONAL DEVELOPMENT ASSOCIATION Middle East and North Africa Regional Office Infrastructure Development Group Project Appraisal Document Kingdom of Morocco Fes-Medina Rehabilitation Project Date: October 7, 1998 Team Leader: Francois Amiot Country Director: Christian Delvoie Sector Director: Jean-Claude Villiard Project ID: MA-PE-5524 Sector: Urban Lending Instrument: Specific Investment Loan PTI: [X] Yes [ I No Project Financing Data [X] Loan [] Credit [I [I Other [Specify] Amount FRF 81.8 million in two loans of 40.9 million each (US$14.0 million equivalent in two loans) Proposed Terms: [ Multicurrency [x ] Single currency (French Francs) Grace period: 5 years [ Standard variable [ Fixed [XI PIBOR-based Years to maturity: 20 Commitment fee: 0.75% Service charge: n/a Financing plan (US$m): 27.59 million Source Local Foreign Total Govermment 3.08 0 3.08 Municipality of Fbs-Mddina 3.37 0 3.37 IBRD 5.80 8.20 14.00 Grants to municipality of Fs-Jdid 0.59 0.54 1.13 Municipality of Fes-Jdid 0.22 0 0.22 Private beneficiaries 3.76 2.03 5.79 Total 16.82 10.77 27.59 Borrower: Government of Morocco for FRF 40.9 million and Municipality of Rs-Medina for FRF 40.9 million Responsible agency: ADER-Fes Estimated disbursements (Bank FY/US$): 1999 2000 2001 2002 2003 Annual 1.5 3.2 4.2 2.6 2.5 Cumulative 1.5 4.7 8.9 11.5 14.0 Expected effectiveness date: 01/31/1999 Closing date: 12/31/2003  Project Appraisal Dorument Page 2 Fes-Medina Rehabilitation Project Kingdom of Morocco Block 1: Project Description 1. Project development objectives (see Annex I for key performance indicators): Fes-Medina, a UNESCO World Heritage site since 1976 and center of Moroccan commerce and culture, also has a high concentration of poverty and substandard living conditions. Under a comprehensive defnition of cultural heritage as the historically built environment and the social structures which support it, the primary objective of the proposed project is to assist in the conservation and rehabilitation of the Fes-Medina, especially the historic housing stock and urban environment. To reach this objective, the project will: (a) expand and accelerate ongoing conservation efforts; (b) consolidate partnerships among the public and private sectors, World Bank, and other donors; and (c) use the rehabilitation process to alleviate poverty. 2. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The proposed project will support the above development objectives by: (a) conserving cultural heritage through a variety of priority rehabilitation activities aimed at upgrading the historic housing stock and expanding the tourism offering; (b) providing priority access for emergency public services extending to the center of the medina, and facilitating logistical activiffes for residents and businesses, thereby creating favorable conditions for efficient urban development and private sector investment; (c) improving the urban environment by instituting programs for solid waste collection and pollution reduction for small-scale industries; (d) reducing poverty by creating employment through a labor-intensive public works program linked with the rehabilitation process and a specific training program; and (e) strengthening the capacity of the municipality and responsible local agencies to plan and carry out proposed improvements. Component (including private sector) Category (main) US$ million incl. % of Contingencies Total Rehabilitation of built heritage Civil Works & Goods 3.7 14 Infrastructure rehabilitation - Historic and emergency network Civil Works 2.7 10 - Medina gates and logistic facilities Civil Works 11.9 42 Improvement of medina environment Civil Works & Goods 3.5 13 Poverty alleviation Civil Works 3.5 13 Institutional strengthening Consultants Services & Goods 2.3 8 Total 27.6 100 The loans will be shared between the State and the municipality of Fes-Medina as follows: A. STATE US$M Share by component (%) Rehabilitation of built heritage 2.7 100 Infrastructure rehabilitation 1.8 33 Improvement of medina environment 1.2 50 Institutional strengthening 1.3 77 Total 7.0 50 B. MUNICIPALITY Infrastructure rehabilitation 3.6 67 Improvement of medina environment 1.2 50 Poverty alleviation 1.8 100 Institutional strengthening 0.4 23 Total 7.0 50  Project Appraisal Document Page 3 Fes-Medina Rehabilitation Project Kingdom of Morocco 3. Benefits and target population: Extensive information on the composition, status, and income of the Fes-Medina's population and the actual physical condition of the built environment, integrated into a Geographic Information System (GIS), provides the basic data for the proposed project. Development and analysis of this social and urban data undertaken during project preparation have dispelled earlier assumptions and allowed a targeted approach to problem solving. A 1995 project survey indicates that 36 percent of the medina's population is below the poverty threshold, a proportion far exceeding the national average for both urban (10.4 percent) and rural (28.7 percent). Moreover, half of the housing stock is seriously decayed and housing occupancy levels surpass acceptable levels. This cycle of decline also affects the architectural heritage of Fes, despite recent efforts by Moroccan authorities to preserve selected monuments. However, data collected on the demand for building permits to rehabilitate the housing stock, as well as on land transactions, indicate a potential for reversing the cycle of decline among all segments of the medina's population. A good indicator of the long-term benefits expected from the project is the leveraging ratio computed under the project's economic analysis. It shows that for every dollar of public funds invested under the project, more than US$3.0 will be invested by the medina's population over the long term. The target population is the residents of the medina (150,500 inhabitants), with special attention to those living below the poverty threshold (52,700 inhabitants). About one third of the residents would benefit directly from improved infrastructure network, including an emergency network of some 14 km which would improve access to the medina for medical emergencies, fire brigades, security services, solid waste collection, etc. Another direct benefit would be the creation of some 10,000 jobs over the next fifteen years, in part targeted to the poor under a specific poverty alleviation component. Benefits of the project would also accrue to various professional and artisan groups working in the medina; those individuals receiving training and technical assistance; local institutions, universities, NGOs, and neighborhood associations involved in rehabilitation of the medina; and the tourism industry. A related institutional benefit would be the sharing of the Geographic Information System (GIS), which has been expanded during the preparation of the project among local institutions, including the agency in charge of the water and sewerage projects, and the medina municipality. The ultimate beneficiary, of course, would be the World Heritage city of FRs, which would benefit from the new rhythm of maintenance and rehabilitation and resulting inward investment. There would also be benefits at the national level, since the Fes experience would serve as a demonstration project that could be replicated in other medinas of Morocco. 4. Institutional and implementation arrangements: An agreement has been signed among State representatives (Ministers of Interior, Finance, and Cultural Affairs), the two municipalities (Fes-Medina and Fes Jdid), and ADER-FES which includes the following: role of ADER as executive agency; project coordination; project cost sharing between the State and the municipalities; procurement; and disbursement procedures. Under this agreement, ADER will execute the State's components on its behalf and will assist the municipality of Fes Medina on all technical aiatters (including control over technical studies and civil works) to implement its related components. To facilitate the flow of funds, the State will open a specific Treasury account located in Fes and in the name of ADER's managing director, while the Municipality of Fes-Medina will open a revolving fund (Compte d'affectation special), funded by the budget under a specific line, and identifying all sources and application of counter-part funds. To facilitate control over implementation, ADER's management information and accounting system will be reinforced, allowing the detail monitoring of each operation. Policy and overall project supervision will be performed by two separate steering committees (see below). Any operation directly related to the cultural and historic heritage will have to receive clearance from the Ministry of Cultural Affairs. Implementation period: Four years (FY 1999-FY 2003). Executing agency: ADER-Fes was the main agency in charge of preparing the project, and will act as executing agency for the project. For the State and the Fes Jdid components, it will be in charge- of preparing the bidding documents; and controlling and monitoring all rehabilitation projects, studies and training activities. For the Fes-Medina municipality, ADER will act as technical and monitoring agency (Assistance a la maitrise d'ouvrage), and will manage the poverty alleviation component under a specific unit (Unite de developpement communautaire, or UDC), with a separate accounting system. ADER's institutional, financial, and technical assessments are presented in block 3 below. Project coordination: A Technical Committee, chaired by the Governor of Fes-Medina, and comprising the two municipalities' chairmen and the regional representative of the Ministry of Culture, will have overall responsibility for project coordination and supervision in the following areas: project implementation, bidding procedures, selection of beneficiaries under the grant rehabilitation scheme (Annex 2).  Project Appraisal Document Page 4 Fes-Medina Rehabilitaion Project Kingdom of Morocco Project oversight (policy guidance, etc.): A consultative steering committee (Comite de suivi), under the chairmanship of the Wali of Fes, and composed of representatives of local governments, central government main agencies (Agence urbaine, Ministere de la culture, Minist&re des habous, Ministrre des finances, RADEF etc.), University of Fes, UNESCO, and the World Bank has been formed to solve policy issues, particularly in conservation heritage. ADER-Fes will act as permanent secretariat for the two above committees. Accounting, financial reporting and auditing arrangements: All of ADER's accounting documents will be made available to Bank missions. Its financial statements will be audited annually by an independent auditor and certain specific and detailed information on all project operations. The municipality of Fes-Medina will make available to Bank missions its annual expenditure and investment budget, cleared by the Ministry of Interior (Direction des finances locales). Monitoring and evaluation arrangements: Quarterly reports done by ADER-Fes, on the basis of agreed key performance indicators, cleared by the municipalities and by the Governor of Fes-Medina; annual indicators on the indebtedness of the Fes-Medina municipality (debt to receipts ratio); and final evaluation report to be submitted by ADER-Fes within six months of the loan closing date. Block 2: Project Rationale 5. CAS objective(s) supported by the Project: Yes Document number and date of latest CAS discussion: N