Morocco - Second Education Project

RESTRICTED Report No. p - 9 7 'F I E C () PY This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE KINGDOM OF MOROCCO FOR A SECOND EDUCATION PROJECT July 8, 1971   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RFCOMMENDATION OF THE PRESIDENT TO TIIE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE KINGDOM OF MOROCCO FOR A SECOND EDUCATION PROJECE 1. I submit the following report and recommendation on a proposed credit for a second education project to the Kingdom of Morocco for the equivalent of US$8.5 million. PART I - HISTORICAL 2. The Association made a first credit of $11 million to Morocco for education in 1965 (79-MOR). In November 1970 the Moroccan Government submitted to IDA a request to finance a second education project which had been prepared with the assistance of UNESCO. 3. The mission which appraised the project in November/l}ecember 1970 found that certain project items required furthler preparatory work before they could be considered for financing. It was therefore decided to defer these items to a possible third education project. 4. The credit for the newly defined seconcl project was negotiated in Washington from June 11 to June 15. The Moroccan delegation was led by Mr. Abdallah Fassi-Fihri from the Prime Minister's office. Mr. Abdelhafid Benjamaa represented thie IMinistry of lHigher, Secondary and Technical Educa- tion and Teacher Training (hereafter the "Ministry of Higher Education"). 5. The proposed credit would be the twelftih operation in Morocco by the Bank and IDA. A summary statenment of Bank loans and IDA credits as of May 31, 1971 is attachedl as Annex I. It shows that the Bank Group has been active mostly in agriculture, in the financing of industry through the Moroccan Banque Nationale pour le D)eveloppement Economique (BNDE) and, to a lesser extent, in the financing of tourism (hotels), roads, and education. 6. Several of the projects financed hiave presented problems. Comple- tiotl of an agricultural development project in the Sidi Slimane area, fi- nanced iinder Loan 3839-MOR was delayed for a year, and thlere remnaiietd unutil- Ized a balance of about $2.2 tnillion wh:ich was cancelled at the revised closing date of Octoher 31, 1970. The main reason for this situation was that the Governmenct reduced tlie programn of farm Lmprovemenit and financed part of it witth other funds.  - 2 - 7. After a slow start most contracts for the Hiighway Project (Loan 167-nKOR and Credit 642-MOR) liave now buen let, or will soon be, and the initial delay sliould be made good. Constrtiction of the dam included in the Klharb-Sebou Irrigation Project (643-MOR) is going well, but delays have occurred in some other parts of the project, particularly in land consolidation, reorganization anid redistributioni of land thlrough the proj-- ect area, tlhe Government beingl; slow in putting into effect the Agricultur- al Investment Code. Recently the GovernmenLt has taken steps which, If followed up), would overcome th(!sc probtlms. 8. Execution of the first education project was very slow, so that only $4.5 million, or 41 percent, of thie total credit hiad been disbursed by the end of 1970. Thte Government has llow taken steps to remedy administrative shortcomings hampering project implementation and the processing of with- drawal requests. Disbursements under the first project were brought up to nearly 60 percent as of the end of June, and a new schedule of anticipated withdrawals provides for 80 percent disbursement of the Credit by the end of the year, witlh full disbursement by mid-1972. On the basis of these actions, the Association agreed to postpone the closing date of the first credit for the time being to December 31, 1971, and to negotiate the second education credit now proposed. 9. IFC holds $1 million, or 25 percent of the share capital of Morocco's development finance company, the Banque Nationale pour le Devel- oppeTient Economique (BINDE). In 1966 IFC miiade an investment and a loan to- taling about $1.4 nmillion in Compagnie Industrielle del Lukus (CIL), a com- pany mainly engaged in thte processing and canning of vegetables. 10. the pattern of past Bank Group lending in Morocco reflects the priorities given in the five-vear plan to agriculture, industry, tourism and education. By channelinig an important part of its lendirng to the BNDE (for industry), the Credit Immobitier et hlotelier (for tourism) and the Caisse Nationale de Credit Agricole (for agriculture), the Bank Group supports the growthl of development credit instituticns in these sectors. P.mtu^e lendling by the Bank Group would include projects similar to previous ones: agricultural credit and the CIII; and projects in new fields such as: water supply, power development, and phosplhoric acid based on phosphates, Morocco's principal mineral resource. In the longer run the Bank is also giving attention to the possibilities of assisting Morocco in its regional development and in its growing unempLoyment problem. PIART II - TIE ECONOtTY 11. A Report entitled "Economic Developnment and Prospects in Morocco" (EMA-27a, dated September 30, 1970) was distributed to the Executive Direc- tors on October 16, 1970. An economic mission visited Morocco in April/May 1971 and is preparing its report. A country data sheet is attached as Annex Il.  - 3 - 12. The Moroccan economy, helped by the excellent hiarvest in 1968 andl above average harvests in 1969 and 1970, has moved further away from the previous stagnation. The buoyant sectors were construction, tourism, manu- facturing and electricity; and commerce and transport followed suit. The stagnant sector was mining, which suffered from stiff competition in the phosphate markets and from poor grades of orc in other mines. In 1970 GDP in real terms rose by about 4.5 percent which was somewhat beLow the growth rates in 1968 and 1969, and about the avelage for the last five years. Th;1 population growth rate has been averaging 3.2 perceun per aniiumii. 13. Fixed investment increased during the last five years at anl aver- age annual rate of nearly 10% in real terms, bringing the level to about 16% of GDP in 1970, puLblic investment riccounting for 60 percent of fixed in- vestment and private investment for /,0 percent. Savings did n10, however, keep up with the expansion of total investments, leaving a resoui X gap of over: 4 percent of GDP. Public savilgs f-itanced two-thirds of public invest- ment in 1970 as compared to 45 percent in 1966. The overall cash deficit of the central government was reduced slightly andi this, together with a small rise in net foreign borrowing, enabled the Government to reduce its net bor- rowing from the domestic market and from the Central Bank. 14. The deficit in the current account of the balance of payments in- creased considerably (from $40 million to $150 million) in 1970, clue almost wholly to a rise in imports. Exports remained stable in value, the rise in the amount of citrus and phosphate exports being offset by a drop in prices. The net services account changed little, and the effect of a larger trade deficit was offset by a larger inflow of public and private capital. 15. Net foreign reserves increased somewlhat, bringing their level to about one and a half months of imports. Public long-term external debt in- creased by 12 percent to $636 million, and the dlebt service represented 8 percent of foreign exchange earnings in 1970. The debt service ratio is expected to rise, possibly to 12 percent by 1976 and 20 percent in the early 1980's, due mainly to the slow growth of exports, the need for a higher rate of investment, and the increased repayment of long term debt. Continuation of concessionary aid in the next few years is needed if the debt burden is to be prevented from rising too fast. 16. A fundamental problem for Morocco is the worsening unemployment, at present estimated at 13 percent of the labor force. The Government is increasingly aware of the serious social and economic implications of unem-- ployment, especially since the migration from the countryside to the cities is continuing at a rapid pace. Large irrigation sclhemes are being developed in an attempt to keep the population in the couLntryside, so far with little success probably in part because the 1969 Agrarian Reform Law is being ap- plied only slowly. However, the present constrtuction boom and the growing emigration provide some relief. In the long run thie problem can be solved only if economic growth quickens and population growth slows down.  - 4 - 17. Ilie Bank chairs a Consultative Group for MAorocco wlhose members are: Belgium, Canada, France, Germany, Italy, Kuwait, United Kingdom, the United States, thie International Monetary Fund and the United Nations Devel- opment Programme. Thle Consultative Group met for thie first time in April 1967, atnd a fourth meeting of the group is planned for October 1971. PART III - TIH' EDUCATION sECTroRt 18. The educational system of Mlorocco is based upon tLle French system and tends to follow chalnges in it. It providles for five years of primary education, followed by seven years of secondary education divided into a first cycle of four years and a second, more diversified, cycle of three years. Iligher education is largely restricted to teacher training and uni- versity studies, with little or no traininig for intermediate positions. Tlhe language of instruction is Arabic in prinary schlools; in all others Frenclh is used. 19. Enrollment in primary schools grew rapidly from 1956-1964, but sinc.e then h:as been relatively static. In 1969/70 1.14 million children were enrolled in primary schools; witlh an enrollnment rate of 53.5 percent. In the first cycle of secondary education, 248,000 pupils were enrolled in 1969/70, thus reaching a relatively high enrollment rate of 17.1 percent. In the secondl cycle enrolLment is markedly lower: 43,000 pupils or 4.7 per- cent of that age group. About 8,000 students a year graduate from second- ary sclhool witl the "baccalaureat" degree. 20. In higlher education, tlhe enrollment is only 12,000 students, and the enrollment rate 0.9 percent. Vocational training is provided by the Min- istry of Labor and Employment, thirouglh vocational training centers giving short courses in industrial and commercial occupations. Enrollment amounts to approximately 1,000 trainees. 21. Ihe financing of education is providedc mainly through the central Government's budget. Total expenditure lhas increased considerably during last six years, and in 1970 reaclhed $157 million or 4.7 percent of the gross domestic product. Recurrent expenditure for public education amounts to 23% of the Government 's recurrent budget. Ccapital expenditure for education accounts for a small part of total public investment, fluctuating between a low of 2.2 percent in 1967 and a high of 6.9 percent in 1968. The proposed project with a total cost of $13.52 million, would account for 24 percent of all education investment included in the Five-Year Plan 1968/1972. 22. EdIucat ion in Morocco still shows many we;iknesses, manifested in a high number of Irop-outs and class repeaters, insufficient preparation of pupils for employment or the next educational level, and the lack of proper- ly trained graduates in most scientific and technical fields.  -5- 23. SoTne of the weaknesses are general. They lnclucle the problen. t:he tise of two l.anguages of instructLion, tihe small i proporti on of girls L tending sc:hoo] and thie neglect of educ.-Lt-ion in rural a.reas. A second g,roup of pr(- blems is to be found in the retention of an iducatLon syst cil which stresse