The World Bank Group in Morocco

THE World Bank Group IN MOROCCO INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION INTERNATIONAL DEVELOPMENT ASSOCIATION January 1967  BASIC STATISTICS AREA: 172,000 square miles POPULATION: 13 million (mid-1965) Population growth: 3 per cent per annum ( 1960-64 average) GROSS NATIONAL PRODUCT 1964: $2,422 Per Capita: $188 CONTRIBUTION TO GROSS NATIONAL PRODUCT Sector Percentage Agriculture . . . . . . . . . . . . . . . . . . . . . . 28 Industry and handicraft . . . . . . . . . . . 13 Mining . . . . . . . . . . . . . . . . . . . . . . . . . 6 Transport, trade and services . . . . . . . 37 All other . . . . . . . . . . . . . . . . . . . . . . . . 26 THE WORLD BANK GROUP IN MOROCCO ] anuary 1967  A NUMBER of important respects, Morocco is well en- I Ndowed to achieve economic development. The climate is in general favorable to agriculture. The country has numerous mineral deposits, including virtually inexhaustible amounts of rich phosphate rock, and it is relatively well equipped with modern transport, power and other facilities. Its various natural resources accord considerable opportunity for indus- tries processing and transforming raw materials. Since World War II a number of modern industries have been established by Moroccan and foreign, mainly French, investors. The potentialities for rapid economic advance, however, must be weighed against the problems posed by the pressure of population, scarce investment funds available domestically, and the urgent necessity of modernizing agriculture. Agricul- tural production for domestic consumption has been static since 1960. While other activities have better records, any gains achieved by the economy as a whole have been largely offset by the persistent rise in population, which is estimated to be proceeding at the rate of at least 3.2 per cent a year. Relatively speaking, exports are a dynamic factor in the economy, with phosphates, citrus fruits and tourism leading the way. The government is fully aware of the importance of exports and provides assistance of various kinds to promote them. The government has also shown awareness of the value of private investment by introducing a number of financial and institutional incentives, including tariff protection for new industries. Nonetheless, in the last few years, growth in private investment has been slower than that on public account. The Government's development plan envisages a substan- tial increase in private industrial investment. Important in- vestments are expected in pulp and paper products, in cement and in other construction materials, such as ceramic tiles and plate-glass. In the food industry, considerable expansion is en- visaged in fruit juices and processing of other agricultural products and fish. Expansion is also expected in cotton textiles and synthetic fibers. 1  Another development is the construction of hotels to accom- modate the rapidly growing tourist industry. Morocco's 1,200 mile coastline and other national attractions are drawing more tourists to Morocco yearly. With increased accommodation for tourists, the number could triple by 1970 to 1 million a year, greatly increasing Morocco's foreign exchange earnings. Up to the end of 1966 the World Bank Group had made loans, credits and investments to the country amounting to the equivalent of about $74 million. These funds have helped to assist agricultural development, industrial expansion and the streamlining of Morocco's secondary education system. AGRICULTURAL DEVELOPMENT About 70 per cent of Morocco's population of 13 million is engaged in agricultural pursuits and agriculture is responsible for almost a third of the country's gross national product and half of its exports. In recent years, especially during the 1960- 65 period, agricultural output has risen little. This has been due largely to outdated cultivation techniques. Morocco has good soils, adequate resources of water, a well developed infrastructure and a small, but growing, number of progres- sive farmers. The high yield from the 10 per cent of arable land on which scientific methods and machinery are used is indicative of the potentialities of the country's agricultural sector. In August 1964, the World Bank made a loan equivalent to $17.5 million to Morocco to assist in financing the Sidi Slimane agricultural development and irrigation program. This program is a pilot undertaking to accelerate the growth of modern intensive agriculture in Morocco. Its successful ex- ecution will point the way to similar developments in other parts of the country. The main project area encompasses some 24 7 ,000 acres in the Rharb Plain, an alluvial region in the Sebou River Basin, about 65 miles northeast of Rabat, the capital. The cultivable area consists of 217 ,000 acres, part of which is already irrigated by the River Beth system. 2  A program for the comprehensive development of this area was begun in 1962 and the first phase is scheduled for comple- tion in 1968. The main elements of this 6-year program being assisted by the Bank loan consist of the improvement of the existing irrigation system on roughly 69,000 acres and the construction of irrigation works on an additional 10,000 acres. Drainage facilities are also being improved and extended for both irrigated and rain-fed lands; the existing farm to market fruit system is being strengthened; and farm holdings con- solidated. Other aspects of the program include the provision of equipment to enable farmers to adopt modern methods of crop rotation, dairy and livestock farming, and the completion of 11 agricultural service centers to provide farmers with equipment and advice. In 1965 the World Bank made a loan of $10 million to the Caisse Nationale de Credit Agricole (CNCA), an agricultural credit institution in Morocco. The CNCA was established in 1962 and is now the main source of agricultural credit in Morocco. This institution plans to lend the equivalent of $20 million during the three years which commenced on June 30, 1965 to individual farmers and cooperatives. The purpose of the Ba~k's loan is to assist CNCA's effort to encourage the use of modern agricultural methods in Morocco. The bulk of the credits granted by CNCA will be used to finance the purchase of farm machinery, fertilizers, pesticides and improved seed. A prominent feature of CNCA' s lending program is the help it proposes to render to CGEA, a government agency which administers land formerly owned by foreigners. The farms operated by CGEA are among the most fertile in Morocco and the new machinery and equipment will contribute to increase their productivity. EDUCATION In 1965, the International Development Association (IDA), another affiliate of the World Bank, granted a credit of $11 million to the Government of Morocco to help finance the cost 3 ~.:::­ ~-::.:....~- i:-.... - M Toroudont *  \ PROJECTS FINANCED BY THE WORLD BANK GROUP ~ Development Finance Company \. • Food Processing ~ Agriculture & Irrigation 9' Education of the establishment of 21 schools offering general and special- ized education at secondary level. These schools are expected to absorb a third of the additional secondary school enrollment planned for Morocco's 1965-67 Three-Year Plan period. Morocco's primary education system has been expanded con- siderably since the country gained independence in 1956, but the number of secondary schools is still inadequate. In 1964 only some 7 per cent of the children of secondary school age were attending school. It is essential to enlarge this crucial sector of Morocco's educational system, as the demand for skilled manpower is heavy and likely to increase substantially as the number of expatriates employed in the fields of educa- tion, industry and administration diminishes. The project which the IDA credit is helping to finance will be completed by 1968 when it is expected to enable about 30,000 students to pursue secondary school studies. The total cost of constructing and equipping the schools is estimated at the equivalent of about $16.2 million. The IDA credit will cover all the foreign exchange costs and part of the local currency requirements. ASSISTANCE TO DEVELOPMENT FINANCE COMPANY One of the Moroccan Government's measures to encourage economic growth was the establishment of the Banque Na- tionale pour le Developpement Economique ( BNDE) in mid- 1959, with power to employ a variety of investment techniques. BNDE grants long and medium-term loans; discounts medium- term credits made by commercial banks; establishes enter- prises on its own initiative; takes equity participations; and offers guarantees. It was owned by both Moroccan and foreign investors and its original share capital was Dirhams 20 million (US$ 4 million equivalent). By 1962 BNDE was in need of additional funds to enable it to promote private investment in Morocco more vigorously. These new resources were provided in December 1962 by the World Bank through a loan equiv- alent to $15 million in foreign exchange and by the Inter- national Finance Corporation ( IFC), an affiliate of the World 6 Bank, through an investment in BNDE's shares of DH 7.5 million (US$ 1.5 million) as part of a reorganization of BNDE. A second loan of $17.5 million was made to BNDE by the Bank in May 1966. This loan increased BNDE's total resources, excluding re-discounting facilities at the Central Bank, to about DH 265 million ( $52.5 million). The share capital now amounts to DH 30 million ( $6 million). The Moroccan Gov- ernment and IFC have substantial minority interests and the remainder of the capital is owned by shareholders in Morocco, Belgium, France, Germany, Italy and the United States. From 1959 to 1965 BNDE made 131 direct loans and equity invest- ments totaling DH 1 72 million ( $34 million), equivalent to an annual rate of about DH 27 million ( $5.3 million). Recently BNDE has stepped up its activities considerably; between late November 1965 and February 1966 loans and investments amounting to DH 29 million ( $5. 7 million) were approved. The industries which have received assistance in- clude electric power and mining, food and beverages, petro- leum and its derivatives, textiles, transportation, and mechani- cal and chemical manufactures. In 1965, BNDE distributed its first dividend of 3 per cent for the year 1964. ASSISTANCE TO PRIVATE INDUSTRY A Moroccan food processing and canning company active in the export field received financing of approximately $1.4 million from the International Finance Corporation in 1966. The company, Compania Industrial del Lukus, S.A. ( CIL), is expanding its facilities at Larache in northern Morocco, principally to increase its exports of tomato and paprika products to the European and North American markets. IFC extended a loan of $890,000 and invested DH 2 mil- lion (equivalent to $400,000) in shares of the company, as well as making a standby commitment of $100,000. The BNDE and two leading Spanish banks joined with IFC in the financing. The Spanish banks made equity subscriptions, while BNDE provided loan and share capital in the same amount as IFC. CIL is a new company created earlier in 1966 to take over 7 and expand the industrial facilities of an. established Moroc- can enterprise producing and manufacturing a wide range of food products. The expansion program is expected to double CIL's present level of sales and lower the company's process- ing costs. This will enable the company to strengthen its posi- tion in export markets where between 60 per cent to 70 per cent of its sales are now made. The company expects to gen- erate foreign exchange earnings of more than $5 million a year when the expansion and modernization program is completed. WORLD BANK SURVEY MISSION During the course of Morocco's Five-Year Plan for 1960-64, the Moroccan authorities realized that the Plan was not achiev- ing its basic objectives; the economy was not growing as ex- pected. In the circumstances, the Government decided to seek advice on creating a new pattern of economic priorities which would lead to sustained development, and invited the World Bank to organize a general survey mission that would make independent recommendations to this end. An 11-man mission, lead by Dr. Johan W. Beyen, the former Foreign Minister of the Netherlands, conducted the survey in the spring of 1964. The mission formulated a scheme of development expendi- ture covering the 6-year period, 1965-70. The mission's report was published by The Johns Hopkins Press, in July 1966. ECONOMIC DEVELOPMENT INSTITUTE The Economic Development Institute (EDI) of the World Bank is a staff college for senior officials of less developed countries who are concerned with the formulation and ad- ministration of policies, programs, and projects related to economic development. The courses organized at the EDI are an attempt to broaden the competence and perspective of senior officials from the developing countries in the light of the experience gained by the World Bank Group in the course of its operations. Three Moroccan officials have attended EDI. 8  BANK LOANS, IDA CREDITS AND IFC ·INVESTMENTS As of December 31, 1966 Amounts expressed in thousands of U.S. Dollars BANK IDA IFC PURPOSE LOANS CREDITS INVESTMENTS DEVELOPMENT FINANCE COMPANY 32,500 1,500 EDUCATION 11,000 AGRICULTURE 27,500 FOOD PROCESSING 1,390 TOTAL WORLD BANK GROUP: $73,890 9  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H Street, N.W., Washington, D. C. 20433 U.S.A. Telephone number: EXecutive 3-6360 Cable address: INTBAFRAD Office for Europe: 4, A venue d'Iena, Paris 16e, France Telephone number: KLEber 25-10 Cable address: INTBAFRAD PARIS