Morocco - Agricultural sector memorandum : identification of issues and bank strategy

Report No.2667a-MOR Memorandum on FILE COPY Morocco's Agricultural Sector: Identification of Issues and Bank Strategy May 2, 1980 Regional Projects Department Europe, Middle East and North Africa Agriculture II The World Bank 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 otherwise be disclosed without World Bank authorization.  EXCHANGE RATE US$1.00 5 DH 4.00 DH 1.00 = US$0.25 LIST OF ABBREVIATIONS CLCA - Caisse Locale de Credit Agricole CMA - Cooperative Marocaine Agricole CMV - Centre de Mise en Valeur CNCA - Caisse Nationale de Credit Agricole CRCA - Caisse Regionale de Cre'dit Agricole COMAGRI - Compagnie Marocaine de Gestion de Terres Agricoles CT - Centre des Travaux DAE - Division des Affaires Economiques DER - Direction de l'Equipement Rural DMV - Direction de la Mise en Valeur DRA - Direction de la Recherche Agronomique DRS - Defense et Restauration des Sols FERTIMA - Societ-e Marocaine des Fertilisants FIDA - Fonds International pour le Developpement de l'Agriculture MARA - Ministere de l'Agriculture et de la Reforme Agraire OCE - Office de Commercialisation et d'Exportation ODI - Office de Developpement Industriel ONICL - Office National Interprofessionnel des Ce'reales et Legumineuses ORMVA - Office Regional de Mise en Valeur Agricole PMH - Petite et Moyenne Hydraulique PMI - Petite et Moyenne Industrie SAU - Surface Agricole Utile SCAM - Socie't'e Cooperative Agricole Marocaine SCE - Societe Ch'erifienne d'Engrais SNDE - Societe Nationale pour le Developpement et 1'Elevage SODEA - Societe pour le Developpement Agricole SOGETA - Societ'e pour la Gestion des Terres Agricoles SONACOS - Socie'te Nationale de Commercialisation des Semences  FOR OFFICIAL USE ONLY MEMORANDUM ON MOROCCO'S AGRICULTURAL SECTOR IDENTIFICATION OF ISSUES AND BANK STRATEGY Table of Contents Page No. SELECTED DATA SUMMARY AND CONCLUSIONS ............................... i-iv I. INTRODUCTION .......................................... 1 II. SECTOR PERFORMANCE AND GOVERNMENT OBJECTIVES .... ...... 1 A. Place of Agriculture in the Economy .... .......... 1 B. Land Use ......................................... 2 C. Agricultural Performance and the "Interim" Plan for 1978-1980 ............................ 2 D. Supply and Demand for Agricultural Products ...... 4 III. MAJOR ISSUES AND RECOMMENDATIONS ...................... 5 A. Resource Allocation Within Agriculture and Government's Budgetary Constraint .... ......... 5 B. Savings Mobilization ............................. 8 C. Constraints on Agricultural Exports .... ........... 10 D. Price Regulation and Subsidies ................... 12 E. Poverty .......................................... 17 F. Land Tenure ..................................... 18 G. Livestock Production, Erosion and Desertification ............................ 19 H. Agricultural Research and Extension .... .......... 22 I. Mechanization .................................... 23 J. Issues of Agro-Industrial Development .... ........ 25 K. Monitoring and Evaluation of Agricultural Projects ...................................... 26 IV. BANK PROJECTS UNDERWAY AND A STRATEGY FOR LENDING ..... 27 A. Projects Underway ................................ 27 B. Bank Lending Strategy ............................ 28 C. Sector Work Program .............................. 29 This report was prepared by Mr. Kevin Cleaver. Messrs. C. Polti, E. de Gaiffier and I. Bergeron (Consultant) as well as other staff members of the Bank and of Morocco's Ministry of Agriculture contributed to the report. f This document has a restricted distribution and may be used by recipients only in the performance of their officl duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Continued) TABLES ANNEX 1: Agricultural Prices for Economic Analysis ANNEX 2: Economic and Social Analysis of Mechanization ANNEX 3: Livestock Subsector ANNEX 4: Information and Studies in Sector File  MOROCCO AGRICULTURAL SECTOR MEMORANDUM Selected Data on Agriculture Population Total population (estimate 1977) 17.96 million Rural population 11.00 million Population growth rate per annum 2.9% Population growth rate, urban 4.8% Population growth rate, rural 1.8% Agriculture in the Economy Value added in agriculture to total value added (1977) 14.0% Employment in agriculture to total Moroccan employment (1977) 40.0% Population in agriculture to total population 60.0% Public investment in agriculture to total public investment (1978-1980) 18.0% Food imports to total merchandise imports (1977) 15.0% Agricultural merchandise exports to total exports (1977) 33.0% Direct taxes paid by agriculture to total direct taxes (1978) 1.8% Productivity Value added per worker in agriculture (US$ per employed in 1977) US$940 Value added per worker in other sectors (US$ per employed in 1977) US$6,000 Average Crop Yields (1972/73 to 1977/78) Hard Wheat 1.0 tons/ha Soft Wheat 0.8 " Beans 0.9 " Sunflowers 0.7 " Sugar Beet 34.0 " Land Tenure Percent of farm families holding 0 to 10 ha 91.4% Percent of farm land in holdings 0 to 10 ha 45.3% Percent of farm families holding 10 to 50 ha 8.2% Percent of farm land in holdings 10 to 50 ha 37.9% Percent of farm families holding more than 50 ha 0.4% Percent of farm land in holdings more than 50 ha 16.8%   MOROCCO AGRICULTURAL SECTOR MEMORANDUM SUMMARY AND CONCLUSIONS i. This sector memorandum is based on information obtained by several Bank Project preparation, appraisal, and supervision missions from 1977 to 1979, a November 1978 Bank agricultural mission and various published and unpublished material obtained in Morocco. The November 1978 mission was undertaken in collaboration with a Bank Country Economic Mission to Morocco. Many of the issues discussed in this Sector Memorandum have their counterpart in the Basic Economic Report. The objectives of the Memorandum are to (a) identify the major issues facing Morocco's agricultural sector, (b) identify linkages between these issues and the country economic situation, (c) recom- mend Government actions which might assist in resolving these issues, and (d) identify Bank lending and sector work strategies which would assist Morocco to resolve the major issues facing the sector and contribute to the achievement of Morocco's development objectives. Earlier drafts of this report were discussed with Morocco's Ministry of Agriculture in October and December 1979, and in March 1980. Government comments have been taken into account, and recent Government decisions which address the problems discussed in the Memorandum are cited. The project priorities and sector work program proposed in the Memorandum attempt to provide a coordinated approach to agricultural development in Morocco. ii. Morocco's population is estimated at 18 million (1977) of which about 60% live in rural areas. Agriculture contributed about 17% of GDP during the 1973-77 period, compared to an average of 22% during 1968 to 1972. Agricultural exports accounted for 36% of total exports during 1973-77, falling from about 59% during 1969-73. Over the last 15 years, agricultural output grew at an average rate of 2.4% per annum (in constant prices). Production has not kept up with increased demand, resulting in a 21% p.a. average increase in food imports from 1970 and 1977 (in current prices), 9.6% p.a. in quantity terms. The value of Moroccan agricultural exports expanded at 6% p.a. during the 1970 to 1977 period, with the quantity of agricultural exports declining at 1.2% p.a. iii. The Government's Interim Plan for 1978-1980 indicates that agricul- ture is to receive 18% of public investment as it did under the Third Plan (1973-1977). This amounts to US$963 million equivalent. Public investment, including that in agriculture, is likely to be less than planned due to a serious public finance constraint. About 57% of Government agricultural investment will go to investment in irrigation infrastructure and equipment, 16% to the extension service and to the agricultural components of rural development projects. About 6% would go to livestock development, 5.6% to forestry and soil conservation, and the remainder to agro-economic studies, the cadastral survey, research, rural water supply, and agricultural education. iv. Supply and demand projections for various foodstuffs through the year 2000 indicate an increasing gap for most products which will have to be satisfied by imports. To reduce this gap an acceleration of agricultural growth will be required. Removal of important constraints to growth, such as  - ii - those identified in this memorandum could contribute significantly to such an acceleration, thereby reducing the demand/supply gap. v. Given Morocco's present budgetary constraint, an assessment of the optimal distribution of resources between Project possibilities within agri- culture is extremely important. In particular, an assessment of the current emphasis on large scale irrigation compared to rainfed and poverty oriented projects is now needed. Government studies and rainfed project preparation reports suggest that improvements in farming practices alone could increase rainfed agricultural production dramatically. Projections made of the economic return to several rainfed projects either under execution or nearing execution suggest that these projects may be more viable economically than several of Morocco's large scale irrigation projects, although characterized by higher risks. This would suggest that greater priority should be given to rainfed agriculture projects, although ongoing irrigation projects should not be neglected. If greater investment is to be made in rainfed agriculture, the preparation of such projects must be accelerated, and the staff working on such projects strengthened in both quality and quantity. vi. The Government has neglected export growth, particularly in agricul- ture. Agricultural exports are stagnating. Despite recent EEC restrictions on agricultural exports to Western Europe, analysis suggests that there is a large potential to expand Moroccan exports. The major constraints are inadequate diversification of export markets, obsolescent citrus plantations, inadequate plantation maintenance, low productivity vegetable production due to obsolete production techniques, and an inefficient marketing system. A recent Vegetable Production and Marketing Project, financed by the Bank, will address vegetable production and marketing constraints. vii. Domestic savings mobilization has been poor in Morocco, and partic- ularly inadequate in agriculture. Interest rates on bank deposits are too low to attract significant financial savings. In addition, financial savings are low because larger farmers invest their savings directly in agriculture, or in other non-financial assets. Small and medium size farmers invest their savings in livestock or in agriculture equipment. Low financial savings cause the agricultural credit bank (CNCA) to be excessively dependent on foreign concessional loans and Government contributions to its capital. A more flexi- ble structure of interest rate determination is required, with some linkage to the rate of inflation. Revision of the structure of direct agricultural taxes is also required in order to permit Government to collect more than the present 5% of net monetary income generated by agriculture. Agriculture contributes 17% of GDP, but only 1.9% of direct taxes. The tax structure should be designed to encourage better land use. Finally, some tax raising authority could be delegated to local communities to finance their own small scale projects. viii. Morocco's policy of subsidizing retail food prices for flour, sugar, vegetable oils, and milk, is intended to keep food prices paid by the consumer low, while permitting farm producer prices relative to input costs to be attractive to farmers. In pursuit of these objectives, Government maintains fixed farm producer prices for sugar beet and sugar cane, bread wheat, milk, and oilseeds. For durum wheat, barley, and corn, Government maintains a guaranteed support price. Market prices are generally higher than support  - iii - prices and therefore these have little or no impact on production. For sugar beet and milk, farm prices are high, relative to producer costs, contri- buting to the observed expansion in production and marketing of these commodi- ties. However contrary to Government objectives, retail price subsidies for flour and vegetable oil, combined with low producer prices fixed by Govern- ment for bread wheat and oilseeds relative to input costs, have probably discouraged their production, hence causing imports to increase to cover the food deficit. Farm input subsidies are intended to induce farmers to use more modern inputs, thereby increasing crop and livestock production. All categories of farmers are eligible. However, available evidence indicates that large farmers obtain most of these subsidies. In addition, the subsidies appear to have little impact on encouraging the use of modern inputs. A detailed study of the effect of price policy and of input subsidies would be useful. If the study confirms the observations made in this report, input subsidies should be progressively reduced. Producer prices should be per- mitted to increase, in some cases by imposing tariffs on imported foodstuffs. Tariffs may be particularly useful in encouraging farmers to plant new crops such as oilseeds, and to improve olive production. However, it should be recognized that these tariffs are justified not from the perspective of economic efficiency, but rather from Government's food security and social objectives. ix. About 45% of Moroccan farm families live at or below the rural absolute poverty level estimated at US$200 per capita (1979 prices). There are zones of poverty in the rural sector, largely untouched by Government investment and agricultural credit, in which living conditions are deteriorat- ing. These zones are found predominantly in mountain, forest and arid areas of Morocco. The population of these areas is dependent on livestock. To address the poverty problem, projects are needed which develop pastureland, control erosion and overgrazing in semi-arid and mountainous areas, and develop smallholder agriculture in poor areas. Such projects require the participation of the population in their design, execution, and financing. Several land reform measures including land consolidation; distribution of state land; guarantee of tenure to tenant farmers, and establishment of a ceiling on farm size on irrigated land, would contribute to a reduction in poverty. In addition, the Agricultural Investment Code will have to be revised to make it more applicable to poverty areas. x. Investments in mechanization are undertaken by large farms where labor is scarce because of high rural-urban migration, and in some cases to displace labor which is costly and difficult to manage. The social cost of this displacement, when it occurs, offsets to an unknown extent the economic benefit of mechanization. Government should study the relative importance of the labor replacement versus displacement effects of mechanization, and the relative social cost of labor displacement versus the economic benefit of increased agricultural production caused by mechanization. Additional employ- ment possibilities must be generated in rural non-farm activities to compensate the decline in agricultural employment opportunities which occurs with modern- ization. Promotion of rural non-farm activities will require easier access of small scale enterprise to credit and technical assistance.  - iv - xi. Bank agricultural sector strategy in Morocco recommended in this memorandum aims at supporting Government objectives in agriculture emphasizing particularly (a) agricultural development in non-irrigated areas; (b) projects designed to increase the productivity and well-being of the rural poor; and (c) projects having a high economic rate of return which include export oriented projects, agricultural credit, and irrigation rehabilitation.  MOROCCO AGRICULTURAL SECTOR MEMORANDUM I. INTRODUCTION 1. This sector memorandum summarizes the issues raised by several Bank project preparation, appraisal, and supervision missions during 1977 to 1979, a November 1978 Bank agricultural mission and various published and unpublished material obtained in Morocco. 1/ The memorandum does not provide detailed analysis of issues raised, but rather presents convincing arguments made by the above sources. Where analysis has been insufficient, the memorandum recommends appropriate action or study. A summary of the major issues facing the agricultural sector discussed in this memorandum is included in the Morocco Basic Economic Report. 2/ II. SECTOR PERFORMANCE AND GOVERNMENT OBJECTIVES A. Place of Agriculture in the Economy 2. Morocco's population is estimated at 18 million (1977) of which about 60% live in rural areas. Population growth has averaged 2.9% p.a.; 4.8% in the urban sector, 1.8% in the rural sector, the difference being due to rural-urban migration (Table 2). More rapid growth of the industrial, mining and service sectors than agriculture is reflected in the declining relative contribution by agriculture to Morocco's economy. Agriculture contributed about 17% of GDP during the period 1973-77, compared to 22% during 1968 to 1972 (Table 1). About 40% of the labor force is employed in agricul- ture. Agricultural exports accounted for 36% of total exports during 1973-77, falling from about 59% of total exports during 1969-73. The Moroccan economy can be characterized as predominantly market oriented with state intervention in agriculture occurring through price and credit policy, taxes, import controls, Government investment in infrastructure, Government agricultural services, and Government investment in public farming enterprises and agro- industry. The source of medium- and long-term credit to agriculture is a publicly owned semi-autonomous bank (Caisse Nationale de Credit Agricole, CNCA). 1/ Annex 4 lists Information Sources. 2/ The Basic Economic Report is scheduled for distribution in June, 1980.  -2- B. Land Use 3. Morocco has a total land area of 69 million ha of which 7.7 mil- lion ha have soils and moisture suitable for cropping, and 20 million ha are in semi-arid or mountain regions suitable only for grazing and forests. Permanent irrigation covered 720,000 ha in 1977. About 5.3 million ha of the 7.7 million of agricultural land are cultivated each year; the remainder is under tree crops (0.4 million ha) or left fallow (2.0 million ha). About 4.3 million ha are planted under winter cereals, 500,000 ha under pulses, 140,000 ha under vegetables, 60,000 under sugar beet, and the remainder under oil- seeds, cotton, and forage crops. Livestock raising is primarily extensive, based on grazing of pasture land. Intensive livestock production, based on cultivated forage crops, barley, or industrial crop residues, is rapidly becoming important in irrigated and high rainfall areas. About one-third of agricultural value added is generated by the livestock subsector. Most cultivated land is found in the northern half of Morocco and along the Atlantic Coast where the climate is mediterranean. Aridity increases toward the south becoming desert, east and south of the Atlas mountains. Most indus- trial crops, forage crops, vegetables and citrus fruits are grown under irri- gation which also provides almost all export crops. About 50% of Morocco's cultivable land receives about 350 mm or less of rainfall, and is generally put under a barley/fallow rotation. Most of Morocco's rainfed areas are characterized by traditional agricultural practices. Despite Government efforts, limited use is made of fertilizers, pesticides, herbicides, high yielding seed and farm machinery. As a result, crop yields and livestock productivity are generally low. C. Agricultural Performance and the "Interim" Plan for 1978-1980 4. Agricultural Performance. Over the last 15 years, agricultural output (in constant prices) grew at an average rate of 2.4% per annum. Agricultural output fluctuates annually mainly because of variations in climatic conditions (for example, it increased by 10.5% in 1976 and declined by 13.4% in 1977). Domestic agricultural production has not kept up with the increased demand caused by urbanization, and by income and population growth. The result has been a 21% p.a. average increase in food imports from 1970 to 1977 (in current prices), 9.6% p.a. in quantity terms (Table 4). About 15% of Moroccan merchandise imports consist of foodstuff: primarily sugar, wheat, dairy products and vegetable oil. The value of Moroccan agricultural exports expanded at 6% p.a. during the 1970 to 1977 period, with the quantity of agricultural exports declining at 1.2% p.a. (Table 5). The expansion of agricultural imports, along with some switching of exportables to domestic consumption, has permitted maintenance of a generally adequate food supply and nutritional level. However, there are poverty pockets containing people who have nutritional deficiencies (para 29). 5. Performance has varied between agricultural products and between agricultural zones (irrigation perimeters, high rainfall and low rainfall  -3 - areas). Irrigated and high rainfall areas have progressed most rapidly. In those cases where modern farming techniques and inputs could be introduced rapidly and where prices permitted net income per ha and per day of family labor to be attractive, progress has also been rapid. Examples are sugar beet and sugar cane production which have been introduced in modern irrigation perimeters with the assistance of extension agents, and with the provision of subsidized irrigation water and guaranteed markets defined in contracts between producers and processors. Sugar beet production grew by 13% per annum from 1967/69 to 1976/78 (Table 6). Similarly, milk production increased from 500,000 tons in 1971 to 650,000 tons in 1977 (4.3% p.a.) due to Government introduction of improved high yield cows, construction by Government of milk collection centers around which milk producer cooperatives have been created, promotion of irrigated forage production, provision of animal health services, subsidization of milk prices paid to producers, and investment in milk pasteurization plants. Production of vegetables has grown at 8% per annum largely due to the additional area put under irrigation. Government efforts to increase crop production which were not accompanied by successful efforts to alter farming practices (cereals and pulses in non-irrigated areas), or when Government price policy did not permit farmers to obtain sufficient income (oilseeds, cotton, maize), have had limited or no success. Cereal yields increased by only 0.12 tons/ha in 18 years (with considerable annual variation). Production of pulses, olives and fruit show no long run improve- ment, largely as the result of stagnation of farm technology used in produc- tion, lack of investment during the 1960s, and lack of Government promotion (Table 6). However, significant investments were made in fruit tree planta- tions beginning in 1970/71, which have now begun to cause fruit production to expand. 6. The Interim Plan, 1978-1980. 1/ The Government's Interim Plan was approved by Parliament at the end of 1978. The Plan specifies that Agricul- ture receive 18% of public investment as it did under the Third Plan (1973- 1977). Public investment in agriculture will equal about US$963 million equivalent, out of total Government investment of US$5,347 million equivalent (Table 12). Another US$300 million equivalent in medium-term agricultural credit would be lent by the Agricultural Credit Bank (CNCA) to finance farm investment during the plan period. Government's objectives remain (a) agri- cultural self-sufficiency; (b) maximizing agriculture's contribution to exports and import substitution; (c) improvement of rural living conditions by a better distribution of income and employment generation. 7. The Interim Plan is a status quo plan, having the same distribution of Government investment between categories as under the Third Plan. Public agriculture investment in Morocco complements private farm investment by undertaking projects which the private sector is unable or unwilling to finance. About 57% of Government agricultural investment will go to irrigation projects, 16% to the extension service and to the agricultural components of rural development projects. About 6% would go to livestock development, 5.6% to forestry and soil conservation, and the remainder to agro-economic studies, 1/ "Plan de Developpement Economique et Social", 1978-1980. Secteur Agricole, September 1978.  the cadastral survey, research, rural water supply, and agricultural education (Table 14). Studies undertaken by the Ministry of Agriculture indicate that present agricultural production is considerably lower than its potential if proper farming methods and inputs were used. It is estimated that present production of vegetable oils is about 10% of its potential, while production of pulses, vegetables and cereals is at about 40% of potential. In order to reach this potential the major proposals of the Ministry of Agriculture in the Interim Plan include (a) completion of the irrigation projects already under- way; (b) organization of farmers into service cooperatives which would more efficiently obtain credit and farm inputs; (c) continued input subsidies to encourage use of modern inputs (para 25); (d) improved relative prices for agricultural products (para 21); (e) creation of basic infrastructure such as milk collecting centers, grain storage facilities, vegetable packing centers, animal health stations, workshops for repair of farm machinery, (f) an expanded land reform program (para 32); and (g) improved facilities for supplying farm inputs. D. Supply and Demand for Agricultural Products 8. Demand for agricultural products is projected through the year 2000 in Table 10. Supply projections are based on the assumption that, like the Interim Plan, future Plans will maintain but not accelerate, current growth rates of agricultural production. The result is an increasing gap between supply and demand for foodstuffs, satisfied by imports. To reduce this gap an acceleration of agricultural growth will be required. Removal of the important constraints to growth identified in paragraphs 10 to 43 of this memorandum could contribute significantly to such an acceleration, thereby reducing the demand/supply gap. Some of these constraints are recognized by the Ministry of Agriculture, and would be removed if Ministry recommendations were implemented by Government. 9. For cereals, present trends suggest production of 6.5 million tons by year 2000, compared to demand of 7.5 to 8.5 million tons (Tables 9 and 10). For vegetable oils, production is projected to reach 100,000 tons by the year 2000 compared to projected demand of 390,000-440,000 tons. For sugar, demand in the year 2000 is projected at about 1,150,000 tons which would be satisfied from domestic production if current production trends continue. For dairy products, demand is projected at about 3.5 million tons milk equivalent by the year 2000, compared to the Government's production goal of 3.2 million tons. This production increase is dependent on (a) the cultivation of forage on about 25% of the 400,000 ha of additional land expected to be irrigated by the year 2000, and (b) expanded forage production in non-irrigated areas. If the necessary acceleration in the growth of forage production is not achieved, and forage/milk production expands at its already rapid 5.6% p.a. historical rate, production will be about 1.7 million tons in year 2000. Demand for meat in Morocco is largely met from domestic production. Production is growing at 3.7% p.a., and will reach 540,000 tons in year 2000. Demand is projected to reach 850,000 to 1 million tons. Therefore, imports, which became significant only in 1977, are likely to increase in the future. Morocco is self-sufficient in fruit and vegetable production. Export prospects are discussed in paras 18 and 19.  . 5 - III. MAJOR ISSUES AND RECOMMENDATIONS A. Resource Allocation Within Agriculture and Governme-t's Budgetary Constraint 10. The Budgetary Constraint, and the Allocation of Government Invest- ments Between Irrigation and Rainfed Projects. Issues in the agricultural sector are closely linked to the evolution of the Moroccan economy and overall Government policy. A major factor for the short- and medium-term is the severe limitation of Government budgetary resources. Government's effort to mobilize domestic resources has not matched increases in Government investment and current expenditures. The overall budget deficit and external resource gap have widened sharply. The Three Year Plan for Agriculture (1978-1980) is an austerity plan, with many projects either delayed or cut back in size. This is particularly true for new projects in non-irrigated areas. Therefore, an increase in Government investment in agriculture compared to that budgeted is not possible, despite the evident desirability of such an increase for the sector. The Agricultural Plan emphasizes completion of ongoing projects for which considerable investment has already been made. Since most ongoing public investment in agriculture has been directed to equipping the irrigation command areas, the Plan emphasizes completion of such investments (57% of planned investment in agriculture is foreseen for the irrigation perimeters) (Table 14). Presently, 720,000 ha of land are irrigated in Morocco compared to an irrigation potential of 1,180,000 ha. Morocco expects to reach this potential before the year 2000. Given the constraint on budgetary resources, an assessment of the costs and benefits of various project possibilities is extremely important. In particular, an assessment of the current emphasis on large scale irrigation compared to rainfed and poverty oriented projects is now needed. 11. The Technical Feasibility of Rainfed Projects. Government studies indicate that rainfed agricultural production could be increased dramatically if certain constraints were overcome, including the land tenure problem (para. 32), inefficient farming practices, problems of water retention in cultivated soils, inadequate input distribution, and inadequate infrastructure (roads, water supply). 1/ The two integrated rainfed agriculture projects now being implemented in Morocco attack these constraints, and provide coherent strategies for agricultural development without irrigation. Both of these Projects (the Meknes Agriculture and the Fes-Karia-Tissa Agriculture Projects) emphasize the training of farmers and extension agents who introduce new farming techniques and inputs. 2/ The Fes-Karia-Tissa Project also emphasizes 1/ A summary of Government's analysis is provided in the "Plan de Develop- pement Economique et Social", 1978-1980, Secteur Agricole; September 1978. 2/ Both projects are financed by the Bank.  the organization of farmers into service cooperatives for the acquisition of farm inputs and credit; the improvement of credit and input supply distribu- tion channels; and livestock development through introduction of new forage crops, seeding of pastureland, animal health services, and installation of milk collection centers. The Fes-Karia-Tissa Project includes soil improve- ment and soil conservation works, agricultural research, and infrastructure development (roads, market places, rural water supply). The Meknes Project will improve cultivation practices in the Meknes area. A legal framework is being applied under the Meknes Project for the distribution of state land to small farmers, and for land consolidation. Technical assistance is being provided to farmers through service cooperatives organized by extension agents. In addition to these "integrated" agricultural development projects, agricultural credit has been found to be highly productive in Moroccan rain- fed agriculture. Agricultural credit, supplemented by farmers' own funds, finances small scale investment in wells, pumps, livestock, agricultural implements, equipment, draft animals, vegetable and fruit production. The cost to Government of distributing credit is low, since most credit is reim- bursed with interest. Other agricultural projects require substantial non- reimbursable Government expenditure. An additional advantage of credit projects is that they distribute investments widely over the entire country, compared to regionally specific rural development or irrigation projects. Other interesting project possibilities for the rainfed sector include (a) integrated soil conservation, forestry and pastureland development linked to livestock production in heavily populated mountain areas (modeled after the Loukkos Rural Development and Middle Atlas Livestock Development Projects now being prepared); (b) pasture improvement (14 project possibilities covering 249,700 ha have been studied as well as Projects based on seeding of range- land and introduction of new livestock varieties such as Ranch Adarouch); and (c) farm improvement in semi-arid regions (being prepared under an existing research project entitled the "Aridoculture" project). Only DH 50 million of investment foreseen in the Three Year Plan is allocated to these three types of rainfed projects (1.7% of Government investment in agriculture). The Ministry of Agriculture recently identified several additional project possibilities which are listed in Table 17. 12. The Economic and Social Viability of Rainfed Projects Compared to Large Scale Irrigation. Since an alternative agricultural development strategy giving greater emphasis to rainfed agricultural development is technically feasible, the issue is the economic desirability of increasing the allocation of scarce public resources to such Projects, causing a relative decline in resources going to large scale irrigation. Bank experience with both irriga- tion and rainfed agriculture projects in Morocco, though not sufficient to permit definitive conclusions, tends to indicate that compared to large scale irrigation projects, rainfed and credit projects are less costly per hectare, per family, and per Dirham of output (i.e., have a higher economic rate of return). Recent large scale irrigation projects studied by the Bank in Morocco have projected economic rates of return varying between 7 to 12%. Projected rates of return to rainfed and agricultural credit projects studied by the Bank generally are close to 20%. Rates of return to the poverty oriented mountain, forestry, and pastureland improvement projects are probably in the 10 to 15% range (see chart on next page). In terms of Morocco's food security objective, the deficit in cereals, vegetable oils and meat cannot be covered except by an intensification of agricultural production in rainfed areas.  - 7 - This intensification must be directed at increasing cereal yields, and develop- ment of forage crops and oilseeds. In addition to the economic argument for increasing somewhat the relative emphasis on rainfed projects, there is a social argument since the rural poor tend to live in areas with limited irriga- tion potential (para 29). Eighty percent of Morocco's rural population is dependent on rainfed agriculture. Benefits of rainfed projects tend to be lower per family, but are distributed over a much larger number of families than are benefits of irrigation projects, as is seen in the following table. Projected Investment Investment Economic Cost per Rate of per ha Farm Return ----------(DH)---------- ( (1978 prices) Bank Financed Irrigation Projects /a (Large Scale) Souss 21,400 111,400 10.0 Doukkala 1 23,800 114,500 11.4 Doukkala II 32,000 152,500 11.6 Haouz (under preparation) 44,000 190,000 7.0-9.0 Small Scale Irrigation /b n.a. 1,950 n.a. Vegetable Production and Marketing (for export) 41,000 51,000 46.0 Bank Financed Rainfed and Credit Projects Agriculture Credit IV /d 700 5,600 20.0 Meknes Agriculture 790 10,500 24.0 Fes-Karia-Tissa 2,610 20,000 21.0 Poverty-Oriented Agriculture and Forestry Mamora, Gharb Reforestation 3,250 n.a. n.a. Rif 2,500 n.a. n.a. Bouhsoussen 460 n.a. n.a. Loukkos 3,360 32,300 15.0 Pastureland Improvement Middle Atlas Livestock /c 3,750 n.a. 10.0-15.0 Ranch Adarouch 800 n.a. 10.0 /a Excludes cost of dams. 7F Program undertaken during the 1973-77 Plan. 7W Presently the Plaine d'Aarid Project. 7T Ex-post analysis of the results of the Second and Third Agricultural Credit Projects suggests an economic rate of return equal to 20%. n.a. = not available  - 8 - 13. The Argument for Large Scale Irrigation. Despite the desirability of rainfed projects, Government has a case that its limited resources be used during the next several years to complete the irrigation projects into which considerable costs have been sunk. The rates of return to the incremental investments required for completion of these irrigation projects are likely to be relatively high in most cases. In addition, due to past relatively limited Government actions in the rainfed sector, only a few Projects are ready for implementation, and there is only limited scope for accelerating the execution of rainfed projects already prepared. Morocco's capacity for constructing and managing large scale irrigation projects has increased. Capacity to plan and manage rainfed projects is still not well developed. Furthermore, although rainfed projects appear to have higher economic rates of return than do irrigation projects, the latter have the potential for genera- ting considerable output of deficit commodities including milk, sugar and oilseeds. Rainfed projects will face important constraints to producing these commodities. This is important given Government's objective of agricultural self-sufficiency. A final disadvantage of rainfed projects compared to irrigation projects is the greater risk of the former due to Morocco's highly variable annual rainfall. Crop yields will be low in years of low rainfall, even when modern cultivation techniques are used. The risk is that the income obtained from low crop yields in poor years will not cover the additional costs of modern inputs promoted under such projects. In these years, farmers will suffer losses. Irrigation reduces the variability of crop yields due to the controlled supply of water. The calculations of the economic rates of return above include an adjustment for probable low rainfall years. However, the calculations do not reflect the value to the farmer and to the nation of increased stability of income which is best assured by irrigation. 14. Recommendations. Analysis of the arguments presented above suggests that Government should study the incremental costs and benefits of alternative rates of development of irrigation projects during the Interim Plan period, and for the five year period following the Interim Plan. These should be compared to the likely returns on the rainfed projects which have been deferred until after the Plan or for which the implementation schedule has been delayed. It is probable that the conclusion will be to accelerate the development of rainfed projects, without neglecting completion of irrigation projects which are under construction or are already in operation. In order to implement this reallocation of investments, preparation of rainfed projects must be accelerated. The staff which prepares rainfed projects needs considerable strengthening both in quantity and quality. Other issues which affect rainfed projects should also be resolved (paras 30, 31 and 36). The newly established sector-wide monitoring and evaluation system discussed in para 43 below, will permit an ongoing assessment of the merits of various project types, and contri- bute to efficient resource allocation. Bank lending (paras 47 and 48) should be oriented to rainfed agricultural development during the next several years. B. Savings Mobilization 15. Savings Mobilization by the Banking System. Domestic savings mobilization has been poor (about 15% of the GDP in 1975, 8% in 1976). In agriculture, this is reflected by the difficulty faced by the Agricultural  - 9 - Credit Bank (Caisse National de Credit Agricole, CNCA) in mobilizing domestic financial resources. 1/ As of June 30, 1978, only 43% of CNCA's financial resources were raised7from domestic borrowing, accumulated profits, and deposits; while 26% came from foreign borrowing. The remainder (31%) came from capital provided by Government. 2/ Savings are not adequately tapped by CNCA despite CNCA publicity campaigns and establishment of banking service facilities in many of its branches. There is some savings mobilization for agriculture undertaken by traditional money-lenders who provide short-term loans to farmers. Most of these money-lenders are tradesmen, and the savings mobilized are their own. There is no evidence that savings mobilization in this form is significant. Commercial banks provide about 50% of the short- term credit used by the farm sector, but no medium- or long-term credit. CNCA provides the remaining credit to agriculture. Commercial banks are also having difficulty mobilizing domestic savings, and have not seriously attempted to mobilize rural savings. One of the reasons for poor domestic savings mobilization by CNCA is that until recently CNCA attempted to mobilize savings exclusively from the agricultural sector. Farmers put their savings primarily into real assets such as livestock, equipment, land or housing, not into savings deposits. CNCA is therefore considering mobilizing savings from the urban population and from other sectors which complement agriculture, such as agro-industry and services. A difficulty which CNCA will confront, already confronted by Morocco's banking industry, is the low level of interest rates. CNCA offers rates varying from 3% on savings deposits to 8% on 18 to 24 month deposits and bonds. With inflation above 11% in 1979, interest rates on savings instruments are negative in real terms, thus discouraging financial savings. Unless significantly greater domestic savings are mobilized, CNCA will continue to be dependent on foreign concessionary finance. The Fourth Agricultural Credit Project provides CNCA with US$145 million of foreign financing which, added to about US$350 million of CNCA's own resources, will cover CNCA medium-term loans to farmers for the 1979-1982 period. 3/ However, the foreign loans are provided by concessionary sources includTng the Bank, the Kreditanstalt fur Wiederaufbau, and the International Fund for Agricultural Development. All of'these sources lend to CNCA at interest rates below CNCA's own medium-term lending rate of 8.5%. If domestic savings mobilization does not improve, and if CNCA is unable to mobilize the necessary concessionary foreign financing in the future, less is likely to be lent to the agricultural sector whose investments will then decline. 1/ Staff Appraisal Report of the Morocco Fourth Agricultural Credit Project, No. 2426-MOR, April 30, 1979, Chapter III. 2/ See Table 15 for sources of CNCA funds compared to sources of funds for other Specialized Financial Institutions in Morocco. 3/ CNCA's own resources, useable for agricultural lending, are derived from loan repayments by its borrowers, checking and savings deposits, profits, borrowing from the Central Bank, minus CNCA Loan repayments and investments. CNCA recovers about 90% of its loans due, each year.  - 10 - 16. The Bank's position on CNCA's interest rate structure has consist- ently reflected the above reasoning, though recognizing that significant increases in CNCA interest rates could not be expected in the absence of comparable increases in interest rates facing other sectors. In the Fourth Agricultural Credit Project, an interest rate adjustment mechanism was intro- duced whereby lending rates would be increased as needed to ensure adequate accumulation of reserves by CNCA and to provide adequate provisions for bad or doubtful debt. More rapid than expected inflation, causing a rapid increase in CNCA expenses and financial losses, would require an automatic increase in lending rates. It is recommended that Government investigate a more flexible structure of interest rate determination, with some linkage to the rate of inflation. 17. Savings Mobilization by Government and Agricultural Taxation. Taxes collected from the rural sector are low, equaling about 50 to 60 million Dirhams per year. A recent study by the Ministry of Agriculture estimated net monetary income of the farm sector before taxes to be 1.3 to 2 billion Dirhams in 1977. 1/ Taxes collected from the farm sector thus equal less than 5% of the net annual monetary surplus generated by the sector. Agriculture contri- butes 17% of GNP, but only 1.9% of direct taxes. Reform of the tax code and tax collection system is required to permit Government to mobilize a larger fraction of rural savings, particularly from large farmers. This would require upward revision of the norms used to estimate net income per farm, on which the tax liability is determined. The present system estimates net income per farm on the basis of a net income norm per hectare, per fruit tree, and per head of livestock declared by the farmer. The norms vary by region, depending on the region's average agricultural potential. The norms were established in 1961 and have not been changed since. Inflation has caused the norms to increasingly underestimate real income. Taxes paid by the agricultural sector as a percent of real income are therefore declining. The system requires an increase in norms, an increase in tax rates for large landowners, and procedures linking norms to agricultural prices. Government is now considering tax reform in which farmers would be liable to the same income tax imposed on other Moroccan citizens. The tax would be based on declared income. For agriculture, the present system, properly adjusted by increasing norms, is desirable because agricultural income taxes are based on potential income, thus providing farmers with an incentive to fully exploit their land. Absentee landlords whose land is not cultivated but rather held for speculative purposes, are penalized by such a tax system. A system which taxes actual rather than potential agricultural income would not provide this incentive to exploit the land fully. If Morocco introduces a tax based on actual income, another inducement to use land optimally will be required. This inducement could be provided by the introduction of a land tax. Finally, it would be desirable that a portion of tax revenue be collected and used by the representatives of the communities taxed, and reinvested in local projects. Decentralization of the fiscal system is discussed in the Bank's Economic Report. 1/ MARA; Division des affaires economiques, "Evaluation de la capacite de financement du development par l'agriculteur", November 1977.  - 11 - C. Constraints on Agricultural Exports 18. Promotion of agricultural exports constitutes an objective of the Interim Plan (1978-1980), and a major recommendation of the Bank's Basic Economic Report is for Morocco to emphasize an export led growth strategy. Although Morocco's agricultural exports are stagnating (Table 5), the country has potential for increased exports of high quality fruit and vegetables. The high quality of Moroccan citrus production is appreciated in external markets. The major constraint to increased exports is the shortage of suitable supplies. A second constraint is the heavy competition by other suppliers and trade barriers created by many industrial countries to protect local producers. 1/ 19. Production of citrus fruits increased from 500,000 tons in 1962-63 to about one million tons in 1978. Exports of citrus increased from 350,000 tons in 1962/63 to 600,000 tons in 1972/73. Since then, exports have stagnated due primarily to the increasing age of the orchards and the obsolescence of varieties. Government has initiated a citrus improvement program of replanting and overgrafting with the objective of expanding citrus exports to 720,000 tons by 1980/81. Total vegetable production amounts to about 2,300,000 tons of which about 200,000 tons are exported, mostly from October to May. Tomatoes and potatoes have been the main export products. In contrast to citrus production which is undertaken mostly by large farms, vegetable production is concentrated on small and medium size farms. As a result of the trade agree- ment with the European Economic Community (EEC) of March 1969 and the as- sociated loss of its trading advantages in the French market, Morocco has been confronted with increased competition, reducing demand for Moroccan vegetables. The supply of quality vegetables has also been constrained by the lack of crop diversification, low productivity, and obsolete agricultural techniques. In 1976, in order to protect its own greenhouse vegetable production, the EEC further restricted vegetable imports during May to October of each year. Partly as a result, Moroccan production and export of vegetables have declined by about 30% in the past three years. The Bank financed Vegetable Production and Marketing Project constitutes part of Government's strategy to stop this decline and to maintain a share of the West European market. The strategy is based on an exploitation of Morocco's several advantages over its competitors: (i) lower production costs than those of European countries, particularly labor cost; (ii) favorable climatic conditions; (iii) the proximity of the EEC market compared with non-European competitors (Israel, Senegal, Kenya, etc.); and (iv) the reputation of Moroccan products, particularly their taste quali- ties. The strategy presumes that the EEC will continue to import Moroccan vegetables during November to end April. The Vegetable Project would increase vegetable production during this period through modernization of cropping techniques, such as soil disinfection, introduction of high-yield hybrid varieties, adequate fertilization, pest control, development of greenhouses, 1/ This assessment was made in the Bank's Appraisal of a Vegetable Produc- tion and Marketing Project, Morocco; (Report No. 2523-MOR).  - 12 - and improvement of packing and grading operations. The Project would also facilitate diversification of crop production, improve marketing structures and establish commercial channels for vegetables. 1/ The Project would provide technical assistance to vegetable producers, improve credit norms to permit farmers to obtain sufficient credit, and would undertake applied research. Better Government services should induce farmers to more closely coordinate production plans to market demand projections and therefore to satisfaction of European importers. Project risks involve the uncertainty of foreign markets for vegetables, and the management problems of the institu- tion responsible for exporting fruits and vegetables (the Office de Commer- cialisation et d'Exportation; OCE). Despite these risks, the Project is the most viable strategy for increasing vegetable exports. D. Price Regulation and Subsidies (Annex 1) 20. Public marketing enterprises purchase durum wheat, barley, and maize at official support prices. The prices of bread wheat, most industrial crops, and milk are fixed by Government, as are the prices of electricity, petroleum products, water, transport and communication. This price intervention is supplemented by controls on imports, foreign exchange transactions, and interest rates. Such controls have an impact on Moroccan prices. In addition, subsidies are provided to wholesalers and processing industries to maintain low fixed retail prices for flour, bread, sugar, vegetable oil, and milk, as well as for fertilizer and high yielding seed varieties. 2/ Additional subsidies are provided directly to farmers to encourage the use of fertilizer and high yielding seed varieties. Agrarian Reform Cooperatives and Farmers' Associations receive special input subsidies. No attempt has been made in Morocco to measure the impact of price intervention by Government on the agricultural sector although the evidence available suggests that agriculture and export industries are penalized by overall price policy while import substituting manufacturing industries are subsidized. 3/ 1/ Bank Appraisal of the Vegetable Production and Marketing Project, Morocco (Report No. 2523-MOR). 2/ The Moroccan system of price controls is discussed in Annexes to the Morocco Basic Economic Report, including: "Prices, Subsidies, and Resource Management in Morocco", and "Shadow Prices for Project Appraisal in Morocco". More detailed analysis of price subsidies and taxes is given in Annex 1 of this Memorandum. 3/ This is the result of the analysis in "Shadow Prices for Project Appraisal in Morocco", Morocco Basic Economic Report 1980. The Annex finds that effective protection for most agricultural and exported products is low or negative, while that for import substitutes is high. Analysis under- taken for the Morocco Fourth Agriculture Credit Project obtained similar results.  - 13 - 21. The Impact of Fixed Producer Prices on Production. The two objec- tives of Government agricultural price policy are to guarantee a sufficiently high producer price to induce production, and to maintain low retail prices facing consumers. In pursuit of these objectives, Government fixes producer prices for soft wheat, oilseeds, sugar beet, and milk, as well as retail prices for flour, vegetable oils, processed sugar and processed milk. Attrac- tive producer prices compared to production costs for sugar beet and milk have been partly responsible for stimulating increased production and marketing of these commodities. In contrast, declining quantities of bread wheat and oilseeds marketed through enterprises paying official prices is one indication of the inadequacy of the prices for these two commodities compared to free market prices and to farm production costs. 1/ For wheat and olives there is an uncontrolled market on which prices are free to fluctuate as a function of supply and demand. Even on this free market, however, Government policy puts downward pressure on prices by causing demand to decline. This occurs because artificially low retail prices for flour and vegetable oils stimulates consumer demand from industrial processors which receive subsidies to sell at these low official prices. Wheat and oilseeds used as raw materials by these enter- prises are largely imported because low fixed prices paid to farmers are not sufficiently attractive. Much domestic demand for flour and vegetable oils, particularly in the cities, is met by these enterprises. This reduces the demand for and hence price of free market flour and vegetable oil. This in turn reduces the free market prices of wheat and oilseeds, particularly olives. The result is a reduction in the incentive for farmers to produce these commodites. This has contributed to rapid growth of cereal and vege- table oil imports. 22. Late Announcement of Floor Price Adjustment. Public announcement of floor prices for certain agricultural commodities often occurs just before the harvest. Farmer decisions about how much land to plant under each crop and the quantity of inputs to use, are made considerably before these prices are set. The prices therefore lose most of their potential incentive effect. 23. Fixed Producer Prices and Income Distribution. The justification for maintaining low producer prices is to subsidize food consumption by the urban poor. However, the 25% wealthiest households obtained about 3.5 times the subsidy for foodstuff (cereals, sugar, milk, and vegetable oil) received by the poorest 25%. 2/ Most food subsidies do not go to the urban poor, but rather to the middle income urban population which has greater purchasing power. About 45% of the food subsidies provided in 1977 are estimated to have benefitted the 28% highest income group. 1/ MARA, Division des Affaires Economiques: "Le Marche de Produits Agri- coles", 1977. Sixteen percent of domestic production was sold through the official enterprises in 1976, compared to 22% in 1971. 2/ "Prices, Subsidies, and Resource Management in Morocco, Annex in the Morocco Basic Economic Report, 1980.  - 14 - 24. Subsidies and Processing Efficiency. The mechanism for subsidizing retail food prices may cause food processing enterprises to be inefficient. Retail food subsidies are provided by setting a low fixed retail food price, and by both directly subsidizing processors for any loss incurred, and indi- rectly subsidizing them by maintaining low raw material prices. This system presumes that processors are efficient and that any loss is due to the artifi- cially low retail price. Such a system does not discipline inefficiency by processors. 25. The Distribution of Farm Input Subsidies and Their Impact on Input Use. In order to stimulate the use of modern inputs, and to offset the penalty on agriculture caused by the unfavorable structure of effective protection and low producer prices, Government subsidizes many farm inputs (Annex 1). The price of high yielding wheat seed is fixed by the Government at about 18% less than the world price. Additional subsidies are available for cooperatives and for farmers participating in Government's cereal programme (eperation Cereales). About 25% of the domestic price of tractors purchased by Agrarian Reform Cooperatives and Farmers Associations is subsidized. A 20% subsidy is provided to such groups for combine harvestors. This offsets the price increase caused by the 33% effective import duty on imported farm machinery. Private farmers obtain no farm machinery subsidy. In order to stabilize fertilizer prices on the domestic market and thereby keep prices from rising at the world market rate, Government has established fixed whole- sale and retail prices. Suppliers of fertiliers are compensated by Government for losses incurred as a result of sale prices lower than production or marketing costs. This subsidy is provided through Morocco's Caisse de Compensation. In 1978, the Caisse de compensation paid out DH 58 million in such subsidies. However, part of the cost of raw materials to domestic fertilizer suppliers includes import duties paid on raw materials, equal to about 30% of c.i.f. cost. The subsidy thus compensates for the import duty. A second subsidy is paid directly to some farmers, totalling DH 5 million in 1978. This direct subsidy is available only to farmers owning more than 20 ha of land and willing to enter into an agreement with Government in which the farmer agrees to follow a bi-annual rotation. Farmers' groups can obtain subsidies for fertilizer use equal to 30% of the price they pay to the major supplier (FERTIMA). Small and medium farmers receive no fertilizer subsidy. Farmers receive a 20% subsidy on the purchase price of pure-bred livestock and on the construction of modern stables. Finally, irrigation water charges have been excessively low, not even covering the operation and maintenance costs of the irrigation perimeters (60 to 80% on average). This last subsidy will be reduced when the decree recently signed by the Minister of Agriculture increasing water charges is implemented (para. 44). 26. It is Government's intention that input subsidies benefit all farmers. No analysis has been undertaken in Morocco to determine the allocation of subsidies between different farm categories and sizes. However, a study was undertaken of the allocation of subsidies within a large irrigation perimeter (the Gharb), which gave the results shown in the following table. The table shows that most subsidies benefit a small number of the larger farmers and cooperatives.  - 15 - Distribution of Subsidies by Farm Size in the Gharb Region, 1972-1976 Percent of Subsidies Allocated by Farm Category Percent Percent of High Farm of I'arms Land Held For Cropping Yield Seed Category in Category by Category Material /a Contracts /b Subsidies Livestock (ha) 0- 10 91.4 45.3 0.0 0.0 0.0 30.7 10- 20 4.9 18.1 0.2 0.0 0.0 11.6 20- 50 2.3 16.8 3.7 2.7 0.6 17.3 50-100 0.3 7.1 15.4 10.0 1.0 10.6 > 100 0.1 9.7 26.8 75.2 27.7 29.8 Agrarian 1.0 3.0 Reform Coops 42.1 12.1 70.0 0.0 Pre-Coop Groups /c /c 11.8 0.0 0.0 0.0 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 /a "Subventions au materiel agricole", Law 2.09.313. lb "Subventions au Titre Contrats Assolements", Law 2.69.316. /c Included above, primarily in the 10-20 ha farm size category. Sources: (1) "Les Subventions dans le Cadre du C.I.A."; Daden Mohamed These 3eme Cycle, Inst. Hassan II, July 1978 (2) MARA: "Etudes de la Capacite' de Financement du De'veloppe- ment par l'Agriculteur", November 1977. (3) MARA: "Recensement Agricole, 1973-74". The major purpose of input subsidies is to induce the use of modern inputs, and hence to stimulate production. Fertilizer use has increased by more than 10% per year, and demand for high yielding seed has increased rapidly, the constraint being lack of supply. It is unlikely that input subsidies which accrue primarily to large farmers and cooperatives are responsible for the increases in demand. Farms above 20 ha, owned by 2.7% of Moroccan farmers, need no subsidy to introduce them to the benefits of modern farming, which they already practice. The above table indicates that such farms receive nearly all subsidies for material, fertilizers, and high yield seed. Subsidies for livestock development (acquisition of pure or cross bred cows and stables) are more evenly distributed, but are probably unnecessary to induce small farms to introduce better quality livestock. Moroccan farmers are aware of the qualities of improved livestock. Subsidies merely induce small and medium farmers to invest in purebred livestock when such investments would not be viable without the subsidy. In most cases, these artificially induced investments will not be economically desirable. Water charges which presently do not cover operation and maintenance costs distribute income to relatively wealthy farmers, and do not encourage efficient use of water. Bank appraisal of Moroccan irrigation projects has indicated that the incomes of beneficiaries of these projects increase dramatically, and therefore they do not need subsidies to induce their use of water.  - 16 - 27. Recommendations. The following policy changes appear to command high priority: (a) progressively reduce agricultural input subsidies. Those input subsidies which are maintained should be directed to small farmers grouped into cooperatives who, without input subsidies would not use modern inputs. In addition, priority should be given to farmers in non-irrigated areas when distributing input subsidies. Input subsidies should not be provided to a farmer for more than the time necessary to introduce him to a modern input; (b) accompany the reduction in input subsidies with an increase in agricultural prices in order to avoid penalizing farmers. Otherwise, a decline in agricultural production may occur. An increase in agricultural prices might be obtained by taxing imported food products and by progressively reducing price subsidies for flour and vegetable oils. Each agricul- tural price fixed by Government should be examined before the planting of the crop on the basis of farm budgets so that sufficiently attractive prices may be established. There is sound justification for subsidizing food for the urban poor, but this will require a subsidy distribution system which permits the poor to obtain most of the benefits; 1/ (c) increase irrigation charges and the land betterment levy to at least cover operation and maintenance costs, and preferably part of investment cost; water charges should be indexed to agricultural prices. (These measures would be applied under a ministerial decree recently signed by the Minister of Agriculture); (d) since the problem of introducing high yielding seed is more a supply problem than a demand problem, increase the price paid to seed producers in order to stimulate greater production; (e) introduce contracts between producers and processing enter- prises or distribution cooperatives specifying floor prices and guarantee of purchase, as well as number of hectares to be cultivated by farmers (for vegetables, oilseeds, fruits, and industrial crops). 1/ See the relevant discussion in the Basic Economic Report for Morocco.  - 17 - 28. In general, the above measures would tend to increase production and reduce food imports, hence increasing agricultural self-sufficiency and reducing the drain of public resources caused by subsidies. The recommendation to impose tariffs on certain food imports is not justified from the perspective of economic efficiency, but rather from Government's food security and social objectives. There is considerable support for these reforms within the Ministry of Agriculture, and the Development Plan recommends that Government permit producer prices to increase. An understanding was reached with Gov- ernment during negotiations of the Fourth Agricultural Credit Project that Government discuss this issue with the Bank and that Government communicate the actions it proposed to take to the Bank. The issue of irrigation water charges is being discussed on a continual basis with Government. E. Poverty 29. The Problem. It is estimated that about 45% of Moroccan farm families live at or below the rural absolute poverty level estimated at US$200 per capita. 1/ Only 60% of the available rural labor (which totals 3,130,000 man years) is fully employed. 2/ An analysis of Moroccan statistics indicates a reduction in average real per capita income of the poorest 50% of Moroccan farm families and an increase in underemployment in rural areas. 3/ At the same time, there is evidence that agricultural income in the irrigation command areas and in the high rainfall areas has increased, as has that of the farm population served by CNCA agricultural credit. Ther2 is therefore an increasingly unequal distribution of income in the rural sector. 4/ There are zones of poverty in the rural sector, largely untouched by Government investment and agricultural credit, in which living conditions are deteriorating. These zones are found predominantly in mountain, forest and arid areas of Morocco. The population of these areas is dependent on livestock. Sixty-three percent of cattle, and 46% of sheep are held by landless farmers and farmers having less than 5 hectares of land. 1/ In urban areas, basic needs are satisfied at an income of US$375 per capita or above. 2/ Estimates provided by the Ministry of Agriculture. 3/ Household budget surveys for 1961 and 1971. 4/ The 40% poorest rural households had 21% of total rural consumption in 1959/60, falling to 14% in 1970/71. The level of living of these households declined by about 10% in real terms during this period. The level of living of the 40% wealthiest households increased by about 40% during the period.  - 18 - 30. Possible Solutions. To more efficiently address the poverty problem, the economy and social structure of regions in which poverty is important should be analyzed, and programs developed to improve the well-being of the population. Such actions would probably include development of pasture land combined with livestock production; projects integrating reforestation, erosion control and agricultural improvements in mountain and forest areas; small-scale agro-industry; and social infrastructure. Agro-industry will be necessary in order to absorb labor which will inevitably be displaced by the modernization of agriculture. Coordination of actions by the institutions responsible for the various components of poverty oriented projects is difficult as evidenced by experience in the preparation of the Fes-Karia-Tissa and Loukkos Projects. The actions envisaged by the forestry service require close collaboration with the extension service, the credit bank, the Public Works Ministry (road construction) and input suppliers. Government might consider the creation of an institution responsible for preparing integrated poverty oriented rainfed projects. Implementation could be carried out by Project authorities able to manage development in numerous sectors (agricul- ture, housing, roads, water supply, etc.). Operating and investment budgets should be prepared in a coordinated manner in order to avoid the situation where investments cannot be fully utilized due to an inadequate operating budget. It is likely, based on experience in preparing poverty oriented projects in Morocco to date, that such projects will often be less viable economically than agriculture projects such as Fes-Karia-Tissa and Meknes which are oriented more to an increase in production. The Government's trade-off between social and economic objectives may therefore have to be defined more explicitly in order to permit planning of a strategy to attack poverty. Finally, a poverty oriented development strategy should include new legislation with respect to land use, land consolidation, user charges to be imposed on beneficiaries of Government investments, and the contribution of farmers to Government Projects. The existing Agricultural Investment Code foresees that the costs of Government financed investments be recovered in part from beneficiaries, including small farmers. Recovery charges cannot be effectively imposed on farmers who live below the poverty level and who have little or no monetary income. On the other hand, pilot projects undertaken by Government to demonstrate new agricultural techniques to small farmers, and which involve no farmer participation, are often met with farmers' indifference. A new methodology is required which is based on small farmers' participation, particularly through a contribution of labor. Bank strategy has already begun to emphasize poverty oriented projects, beginning with Loukkos. In addition, the future Middle Atlas Livestock Project and a possible project in the semi-arid zone ("arido-culture" project) will be poverty oriented. Projects which create employment, even if located in the wealthier agricultural areas will also help reduce the poverty problem by stimulating migration from poor areas by people in search of work. F. Land Tenure 31. The Land Tenure Problem. Distribution of private land in Morocco is unequal, with about 75% of the farm families having 5 ha or less, owning 25% of the agricultural land. Farms are excessively fragmented with 1.9 million  - 19 - farms divided into 11.6 million parcels. The average size of a parcel is 0.64 ha, generally too small for efficient farming. In addition, absentee landlords often hold land for speculative purposes, and do not cultivate it. If culti- vated, it is often by tenant farmers who have no security of tenure and as a result have no incentive to invest in or improve the land. Collectively owned land, generally held by tribal members, is overgrazed, and collective members lack an inducement to undertake soil conservation and improvement. There are too many collective land rights-holders to permit distribution of the land, since each would obtain an inadequate parcel. These land tenure problems have constrained expansion of agricultural credit use, and have caused the distribu- tion of agricultural credit to be unequal. Farmers without productive poten- tial do not apply for credit, and large farms obtain proportionally more credit than small farms. The Agricultural Credit Bank does not provide credit for the exploitation of collective land since repayment guarantees cannot be obtained. 32. Possible Solutions. Morocco's Three Year Interim Plan proposes several land reform measures which would alleviate the above problems and, therefore, merit Bank support. These measures include limitations on the partition of land below a minimum size, increased inducements to cultivate arable land, consolidation of fragmented parcels into single units by the exchange of parcels between owners, creation of viable privately owned land holdings on land which is presently collectively owned and on state land, extension of the length of tenure by tenant farmers, and increased recovery of Government investment costs through land betterment levies and user charges (applicable particularly in irrigated areas). An assessment of these proposals indicates them to be constructive, and technically feasible. Land consolida- tion on 300,000 ha has already been undertaken in the modern irrigation perimeters, and could be undertaken in rainfed farming areas where Government has development programs. With respect to land redistribution, Morocco's Agrarian Reform program has had a positive impact on farm families receiving land. About 21,000 beneficiary families (1% of total Moroccan families) have been given 324,000 ha of land (3% of cultivable land) under this program. These farmers have been organized into 670 cooperatives. More land could be distributed, as recommended by the Ministry of Agriculture, including 7.5% of cultivated land belonging to the State, to religious groups (Habous), and other groups which received land from the State (Guich). An additional reform which should be considered is the imposition of a ceiling on farm size in irrigated areas. The implementation of many of these reforms requires the completion of the cadastral survey which is progressing slowly. The Bank should consider financing parts of the cadastral survey within several of its Projects (estimated cost about US$20 million). A part of the cadastral survey would be financed under the Loukkos Rural Development Project now being appraised. G. Livestock Production, Erosion and Desertification (Annex 3) 33. The Present Situation. Meat production grew at 3.7% p.a. during the 1973-77 Plan period, while milk production grew at 5.6% p.a. Meat and milk yields from cattle raising have increased due to farm cultivation of forage and of crops such as sugar beet with residues which can be fed to livestock.  - 20 - For goats and sheep, milk and meat yields have declined due to increasingly inadequate animal nutrition, poor health care and poor handling of animals. Most animal feed comes from pasture land and forest areas (about 9,400 million feed units of the 14,000 million feed units presently consumed by animals in Morocco). 1/ An increase in the number of sheep and goats has caused over- grazing of pasture-land and forest areas, resulting in destruction of vegeta- tive cover and erosion. 2/ As food supply from pasture-land and forest areas declines, herdsmen must choose between reducing herdsize or accepting reduced milk and meat yields per animal. Moroccan sheep and goat herders have main- tained herd size, accepting a decline in yields. 34. Government Strategy. The Government's strategy is to concentrate on intensive livestock production. Intensification will be done through (a) herd development on farms able to grow adequate forage (which will be primarily farms in high rainfall areas and irrigated areas; 50,000 additional ha of land will be irrigated in 1978-80); (b) continued introduction of higher yielding breeds (the local breed cow has a yield of about 450 liters of milk per year, compared to 3,000 liters for an imported pure-bred, and 900 liters for a cross-bred cow); 3/ (c) improved technical and health services provided by Government; (d) provision of technical assistance in constructing proper animal shelters; (e) increased incentives to market milk and meat by creating livestock cooperatives, milk collection centers, milk processing plants, slaughterhouses, animal feed factories; and (f) emphasis on cropping complemen- tarities (such as use of sugar beet pulp for livestock development). In addition, Government is successfully promoting the production of poultry by providing credit and extension assistance. This program is supported by the Bank's Agricultural Credit Projects and Irrigation Projects. 35. Likely Effectiveness of Government Strategy. Despite the progress which the above strategy represents, it will not resolve the problem in entirety since the poorest farmers and transhumant herdsman are essentially ignored. The average farm, having about 3 ha, is used for subsistence farming. Forage crops for livestock are not grown. Transhumant herdsman usually own no cultivable land and therefore do not qualify for the agricul- tural credit needed to purchase high yielding animal breeds. The Government's agricultural services do not reach herdsman in the mountain and in the arid areas, and have little impact on the small farmer (para 29). Required are projects directed at extensive livestock production. Such projects could 1/ Ministry of Agriculture: "Productions Animales", August 1978. 2/ Same source as above, as well as "Analyse des Structures du Cheptel", July 1976 by the Ministry of Agriculture; and FAO/IBRD CP: "Report of the Livestock Reconnaissance Mission to Morocco" March 1974. 3/ Data provided by Morocco's Direction de l'Elevage for 1979. A Govern- ment study undertaken in 1975 stated that imported pure-bred cows had an average yield of about 2000 liters of milk per year, compared to 600 liters for a cross-bred cow and 450 liters for a local-bred cow.  - 21 - restrict the use of pasture land so that vegetative cover can regenerate, and increase forage production on pastureland through seeding, fertilization, and introduction of subterranean clover and annual medicago. These projects should also include complementary investment in storage and di^ribution facilities for forage which would be used to compensate reduction in use of pasture land. Forage from irrigated areas could be sold to herdsman in the dry season. In addition, the Government might promote the creation of pri- vately owned industrial slaughterhouses which could contract with herdsman for a specific number and quality of animals to be provided at a negotiated price, and which could provide inputs (animal feed, medicine) to herdsman. Herdsman would be required to nourish animals according to norms given by the enterprise, and to deliver at the date specified in the contract. Herdsman could partici- pate in the equity of the enterprise. Slaughterhouses would invest in refrige- ration and transport equipment and provide technical assistance. This formula is presently used effectively for sugar beet, industrial tomatoes and milk. The above measures have been shown to be technically and financially feasible in Morocco, now requiring a financial and managerial input. They would also go far in assisting the rural poor, since the rural poor are found primarily among the population living in mountain and arid areas. 36. Project Possibilities. The development of Projects such as those described above deserves more attention from the Bank. One such Project was identified by the recent FAO Cooperative Programme identification mission. The Project is located in the Middle Atlas Mountains (Khenifra) and is based on the experience of an existing pasture improvement Project (perimetre Aarid). Seven thousand hectares have been seeded in "Agropyron" causing forage production to increase significantly on a per hectare basis. This has permitted meat yields from sheep to increase from 9 to 45 kg per hectare. 1/ The Project proposed for Bank financing would extend this seeding to 35,000 hectares. At the same time the region's forest areas would be protected, and reforestation undertaken. An agricultural component would distribute modern inputs in the Project area and improve small scale irrigation works. Major constraints will be the need to obtain the cooperation and participation of the population to restrict exploitation of forest and pasture areas to a rate which will not cause soil and vegetative degradation. This would be done through increased forage production from pastureland, permitting herdsman to maintain larger herds, while at the same time making it unnecessary for the herdsman to use the mountainous areas for grazing. This protection of the mountain areas will be required for several years to permit regeneration through seeding, planting, erosion control works, etc. The important variables will be the expansion of forage production from pastureland to substitute for the mountain pastures which would no longer be available for grazing, and an extension program to obtain the cooperation of herdsman. In addition, the present trend toward acquisition of collectively owned pastureland by private farmers who cultivate annual crops must be stopped. On collective land receiving low rainfall (about 300 mm falls in the Middle Atlas Project area), this cultivation is causing rapid soil erosion. 1/ FAO Cooperative Programme, "Maroc, Identification de Projets Agricoles June 6, 1979.  - 22 - H. Agricultural Research and Extension 37. Agricultural development will be based in part on agricultural research. In Morocco, agricultural research is undertaken on 68 research stations and in 20 laboratories. Research themes have been generally defined on the basis of agricultural production objectives. Major themes are plant breeding and improvement, production of high yield seed varieties, protection of plants against pests and diseases, genetic improvement of livestock, pastoral development, and processed food technology. Interesting results include: (a) development of new cereal varieties which have been successfully disseminated to farmers; (b) production of improved varieties of seeds for cereals, forage crops, oilseeds and cotton; (c) adaptation of biological and chemical treatment against certain plant diseases and pests; (d) selection and adaptation of several locally bred varieties of livestock for wider dissemination in Morocco. Although these results are positive they are insufficient. The major gap is in research directed to adapting discoveries made elsewhere to the socio- agro-economic situation of Morocco. Moroccan research is too theoretical, and has been given too little priority and inadequate resources. More research should be undertaken on farmers' fields in order to experiment within the context of real farm level constraints and to verify recommended practices. There has been recent progress, in particular a project of applied agricul- tural research in semi-arid areas undertaken with USAID. It is recommended that the Bank incorporate agricultural research components into its agricul- tural projects. 38. The principal function of Morocco's extension service is now to diffuse research results to farmers. In the past, most of the effort of extension agents was directed to distributing inputs to farmers, collecting agricultural statistics, and enforcing regulations. In order to reduce the activities not related to the diffusion of information, the seed and fertili- zer suppliers (SONACOS and FERTIMA respectively) increasingly acquired the function of distributors to the farmer. Despite increased time devoted to extension work, agents have not been very successful at diffusing new tech- nology due to: (a) their frequent lack of practical farming experience; (b) weak research-extension linkages; (c) inadequate training of agents; (d) lack of sytematic scheduling of activities; and (e) the vicious circle of poor staff efficiency, low status, low pay, and low morale.  - 23 - The extension services operating in the modern irrigation perimeters (ORMVA) are generally more effective due to larger budgets, and more and better staff. The introduction of water and new cropping patterns also facilitate the extension azents' task since farmers more easily accept advice when their environment changes dramatically. The Interim Plan includes a major reform of the extension service, based in large part on the system introduced in the Fes-Karia-Tissa Project financed by the Bank. Extension agents have completely given up all regulatory and most administrative tasks, and concentrate on creating service cooperatives to which the agents provide advice on agricul- tural matters and aid in obtaining credit and inputs. Agricultural input "packages" have been identified for farms grouped by technical level. Exten- sion agents introduce these packages. Improved training of extension agents will be undertaken through a three year training program, including one year of farming under the guidance of instructors. A similar program has been developed for the Meknes Ariculture Project also financed by the Bank. Although the Fes-Karia-Tissa extension program is an important improvement, deficiencies throughout the remainder of the non-irrigated areas will remain important. The Ministry of Agriculture should develop a production oriented research and extension program. I. Mechanization (Annex 2) 39. Economic Analysis. Morocco's use of tractors and combine harvestors is limited; totalling 23,000 tractors at the end of 1978 (330 cultivated ha per tractor), and 2,100 combines (3,685 cultivated ha per combine). About 3,000 tractors and 325 combines were purchased in 1978 while about 1,500 tractors and 200 combines were estimated to have completely depreciated. Under the Bank financed Fourth Agricultural Credit Project, tractors and combines would be acquired by large farmers, Agrarian Reform Cooperatives, and small farmers grouped into Associations for the purpose of sharing farm machinery. The loan criteria applied by the Agricultural Credit Bank (CNCA) require a minimum of 60 ha of land to obtain credit for a tractor, 120 ha for a combine, thus limiting mechanization credit to farming units of a size for which animal or human cultivation and harvest would generally be uneconomic. In most non-irrigated farming areas of Morocco, weather and soil conditions are such that rainfall is necessary before the land can be prepared for planting by animal powered implements. On larger farms (60 ha and above), preparation by animal power requires considerable time. Since the period of rainfall is short, much of the benefit is lost by the time animal powered land preparation on such farms is completed. Tractors can prepare the land before the rain, thus permitting increased use of scarce rain water by the plant. Tractors also permit better quality land preparation, can work for a longer period of time without stopping than can animal drawn implements, and since the land can be prepared at the proper moment, tractors permit fertilizer and high yielding seed to have a more beneficial impact on yields. Research in Morocco indicates an average 0.3 ton/ha increase in cereal yields as a result of early sowing permitted by tractors, compared to yields obtained when sowing is undertaken by animal powered implements. Use of tractors rather than draft animals reduces the amount of land which must be used to produce feed for  - 24 - draft animals, and reduces the drudgery of agricultural labor (one ha of land preparation by animal power requires the farmer to walk 60 kilometers). Ex-post analysis of past CNCA tractor loans shows good economic and financial returns (Annex 2). Analysis of investments in combine harvestors also shows acceptable financial and economic rates of return (Annex 2). Financial and economic benefits of combines result from labor savings and from a reduction in crop losses at harvest compared to those incurred when harvest is manual. CNCA's relatively strict evaluation criteria, in combination with a 30% tariff levied on imported combines which increases their price, also serve to insure that combines are acquired only by farms able to use them economically. Farmers will purchase combines only when the expected value of incremental crop harvested permits a profit after amortization of the cost of the combine. 40. Social Analysis. The above analysis is expanded in Annex 2 to account for the impact of tractors and combines on income distribution. This was done by estimating income distribution weights for each income group in Morocco, which represent the relative social value of an additional Dirham in consumption going to the group. The weights were inferred from Government policy. They may not, however, represent actual Government preferences. Farmers benefitting from combine harvestors are relatively wealthy, and have low distribution weights attached to their incremental consumption (their average distribution weight equals 0.2, Annex 2, page 5). Farm employees whose jobs are displaced by combines have a relatively high distribution weight attached to their consumption loss (distribution weight equal to about 2.5). 1/ The social analysis, with the above distribution weights, gives the result that the net economic benefit to the average tractor investment is sufficiently greater than the social cost of labor displacement to provide an acceptable social rate of return. 2/ However, for combine harvestors, despite an acceptable economic rate of return, the social rate of return approaches zero in situations where labor is displaced by combines, and when alternative employment obtained by displaced labor permits only a significantly reduced level of consumption. If combines are purchased because adequate labor is not available at harvest, then the social rate of return approaches the economic rate of return, and is acceptable. In addition, if labor is displaced, but is able to find alternative employment providing comparable consumption possibili- ties, and if owners of combines save or reinvest most of the incremental income generated by use of the combine, the social rate of return becomes acceptable. These results suggest that careful Government consideration of the social-economic trade-off with respect to combines is required. The employment impact of combines should be studied in detail. 1/ Actually the analysis is more complicated, but the above is adequate to illustrate the problem. See Annex 2 for more details. 2/ To the extent that prices of oil and gasoline rise relative to prices of agricultural products and labor, the economic rate of return to mechanization will tend to decline. More labor intensive forms of agriculture will become economically attractive.  - 25 - J. Issues of Agro-Industrial Development 1/ 41. Morocco presently has excess capacity in some agro-industrial sub-sectors, in most cases because anticipated agricultural growth has not been achieved, or because of a tendency to invest in large scale industry having greater capacity than required (Table 13). Excess capacity exists in the processing of oilseeds and olives, several sugar beet and cane processing factories, milk pasteurization, animal feed production, canning, and cotton ginning. Refineries of vegetable oil and sugar work close to full capacity as do artisanal flour mills, slaughterhouses, and most small scale agro-industrial enterprises. Cold storage is used to full capacity. Growth of agro-industry has been and will continue to be more rapid than population growth due to rapid urbanization (the urban population consumes a greater amount of processed food per capita), and income growth (higher income people consume more processed food than do low income people). Rapid growth of production for sugar, milk, meat, olives, and vegetables should quickly reduce excess processing capacity, and additional capacity will be required in the early 1980s. Finance for large scale agroindustry is available from foreign investors, wealthy Moroccan citizens, foreign suppliers, the Moroccan Economic Development Bank (BNDE), and the Moroccan Government. Small and medium scale agro-industry do not receive adequate attention. Of the 3 billion Dirham of public investment in industry foreseen under the Interim Plan, 13% is allocated to sugar processing, 79% to phosphates, and 8% to industrial projects promoted by the "Office de Developpement Industriel" (ODI). These latter include primarily medium and large scale investments in chemical, textile, mechanical and agro-industrial plant and machinery. Four agro-industrial projects are now being executed with ODI's assistance, six are being promoted, and 17 are under study. The average investment cost of these agro-industry projects is US$4 million equivalent. None are small scale. Expansion of small scale agro-industry is constrained by (a) lack of finance, (b) lack of information, technical compe- tence, and experience in dealing with financial institutions and Government; and (c) lack of skilled labor. The small scale agro-industry component of the Fourth Agricultural Credit Project and the Bank's Small Scale Industry Project are directed to industries where capacity is not sufficient and would attack 1/ Sources of information are: a/ "Etude d'Identification et d'Evaluation des Possibilites d'Investissements Industriels", Dar Al-Handasah Consultants, August 1978. b/ "Apercu sur Quelques Secteurs de l'Activite Agro-Industrielle au Maroc", October 1978, CNCA. c/ Office Pour le Developpement Industriel: - "Rapport d'Activite", Departement Agro-Industriel, November 1978; - "Fiches Projets", October 1979. d/ Ministry of Agriculture, "Apercu sur les Principales Activites Agro-Industrielles", May 1976.  - 26 - the first two of the above constraints. Although Government will continue to develop large scale agro-industry, the Development Plan does give greater priority to small and medium size agro-industry, both for financial and human resources. This is a desirable shift in direction. 42. Storage capacity for cereals and pulses is presently inadequate to handle both the large quantity of cereal imports, and to service local pro- ducers. Traditional storage techniques for cereals and pulses lead to high crop loses. Government has requested Bank assistance to construct cereal storage facilities located at the Port of Tanger with a preliminary proposed capacity of 100,000 tons. 1/ Storage capacity for the Northern part of Morocco is already inadequate, with cereals destined for the North presently being stored in Casablanca. The existing capacity at Casablanca is fully utilized. Growth of imports required for the Northern part of Morocco would be best served by expanding capacity at Tanger, which is situated in the North. During preparation of this Project, these preliminary conclusions would be analyzed as would optimal silo capacity and construction timing. Other possible silo sites are at Agadir and Nador. The silo and complementary port facilities are estimated to cost US$60 million (1979 prices). It is recommended that Bank and FAO/IBRD Cooperative Programme missions participate in Project preparation during 1980. It is also recommended that these missions organize a study of storage needs at farm level and at transit points to serve Moroccan producers. Such a study would require a quantitative analysis of flows of cereals and pulses; an identification of the location and capacity of intermediaries, and the nature, location, and timing of storage requirements. K. Monitoring and Evaluation of Agricultural Projects 43. Because of an inadequate system for monitoring and evaluating agricultural projects in Morocco, there is little information on the physical, economic, and social impact of past projects. It would be desirable to establish a sector wide monitoring and evaluation system at the Ministry of Agriculture which would serve all Government agriculture projects. The Bank is now introducing monitoring and evaluation systems into all of its agricul- tural projects. Costs of such systems are relatively high and therefore difficult to replicate for all projects undertaken in agriculture. A well equipped and properly trained team operating out of Rabat with standardized questionnaires could efficiently monitor and evaluate activities of numerous projects. Considerable cross fertilization between projects might occur as a result. Bottlenecks caused by sector problems (marketing rigidities, price policies, land tenure) could be brought more quickly to the attention of appropriate Government authorities. Project specific monitoring and evalua- tion units have much less weight with Government. Evaluation would be more impartial, since project specific evaluation units may be induced by project 1/ FAO Cooperative Programme, "Maroc, Identification De Projets Agricoles", June 6, 1979.  - 27 - management to communicate overly optimistic results rather than undertake serious analysis. Replicable project results can be more rapidly disseminated from the center. In March 1980 the Minister of Agriculture created a monitor- ing and evaluation unit in its Department of Planning and Economic Analysis. The Bank will assist in the development of this system both financially (as a component of the Loukkos Rural Development Project) and through Bank staff assistance. This assistance would include the provision of documentation, comment during Bank project preparation and appraisal missions, and study of results. IV. BANK PROJECTS UNDERWAY AND A STRATEGY FOR LENDING A. Projects Underway 44. Bank Group lending for agriculture in Morocco began in 1965 and to date 12 projects have been supported by US$413 million in Bank/IDA funds (US$24 million of which in IDA credits). They include five irrigation proj- ects: Sidi Slimane (FY65, completed), Sebou I (FY70), Souss Groundwater (FY75), Doukkala I (FY76), and Doukkala II (FY77). There have also been four Agricultural Credit Projects (FY66, FY73, FY77, and FY80), an Agro-industries and Flood Control Project (Sebou II, FY74) and two Rainfed Agricultural Devel- opment Projects (Meknes in FY75, and Fes-Karia-Tissa in FY79). In addition, a Vegetable Production and Marketing Project receiving a Bank loan of US$58 million became effective in April 1980. Existing projects are perform- ing generally well, although certain important issues are outstanding. The major issue with respect to the irrigation projects has been inadequate cost recovery. Government agreed under loan agreements with the Bank to impose recovery charges which cover at least operation and maintenance costs "as well as a reasonable portion of the capital cost, subject to beneficiaries' capacity to pay". Cost recovery charges presently do not cover operation and maintenance costs. In addition, government agreed under the Doukkala I Irrigation Project to undertake a plan for the reform of its cost recovery system by December 1977. A nationwide study was undertaken, and proposals developed by the Ministry of Agriculture. Based on the results of this study, the Minister of Agriculture signed an Inter-ministerial decree in early 1980 which, (a) doubles water charges, (b) triples the land betterment levy used to recover part of irrigation investment costs, and (c) indexes water charges to a price index. These new charges would permit recovery of O&M costs and 15 to 30% of investment costs for Bank financed irrigation projects. Government is studying the possibility of recovering a greater percentage of investment costs through the acquisition of land held by large landowners in irrigation command areas. It is of note that the Doukkala II Irrigation Project appraisal report showed that it would be unlikely that farmers could pay more than operation and maintenance plus 30% of investment costs. Implementation of these increases will satisfy Government agreements with the Bank. 45. Other project issues in Morocco have been less serious. Most of the irrigation projects suffered from delays in land consolidation, construc- tion and in the acquisiton of irrigation equipment. Implementation delays  - 28 - have been caused by coordination problems between Ministries, and with con- tractors and suppliers. A tight public financial situation in Morocco has also affected the ability of Government to implement Bank financed projects at the speed foreseen, causing delays. However, Government gives Bank projects priority in funding, and therefore delays in Bank financed projects are generally less than for other projects. The major issues of the Meknes Rainfed Agriculture Development Project have been the delay in land redistri- bution, and start-up delays for several project components. Measures to correct these problems are now being undertaken. The Fes-Karia-Tissa Agri- culture Project was designed so as to minimize organization and management problems such as those encountered with Meknes. 46. Despite the problems cited above, preliminary evidence on the impact of the irrigation and agricultural credit projects suggests that the economic impact foreseen at appraisal will be achieved (8-12% economic rates of return for the irrigation projects, and about 20% for agricultural credit). Results are not yet available for the two rainfed agriculture development projects. B. Bank Lending Strategy 47. Bank agricultural sector strategy in Morocco is to support Govern- ment objectives in agriculture including (a) agricultural development in non-irrigated areas having unutilized potential, (b) projects designed to increase the productivity and well being of the rural poor, (c) projects having a high economic rate of return, particularly export oriented projects. The Projects listed in the following table are consistent with this strategy. The Loukkos rural development, Middle Atlas Livestock, and two unidentified rural development projects would be consistent with the objective of pursuing productive projects in proverty areas. The Khemisset Agriculture Project, Small Scale Irrigation Program, and the Irrigation Rehabilitation Project are highly productive, making use of unexploited potential. Continued support should be given to agricultural credit projects which in Morocco finance a large percentage of directly productive farm investment. The proposed refores- tation Project confronts the constraints to expanding production of wood while conserving the forests pasture potential. Due to the constraints to agricul- tural development imposed by the lack of progress on the cadastral survey, inadequate availability of high yield seed, and insufficient cereal storage capacity, the Bank should cooperate with Government to prepare projects in these areas, and consider financing them. The Fisheries Project shown in the following table is being prepared by the FAO/IBRD Cooperative Programme. It would be directed to increasing Morocco's supply of high protein food and is expected to have a high economic rate of return. During discussion of this report, the Ministry of Agriculture agreed to devote more resources to the preparation of the Projects emphasized in this strategy. A unit in the Ministry of Agriculture was created in March 1980 to coordinate Project preparation by the various Ministry services involved. A list of new projects under preparation appears in Table 17. In response to Government's request, Bank staff would assist this preparation unit.  - 29 - 48. Preparation of the above projects is expected to be completed during 1980-1986, and have the following investment costs. Total Investment in Projects that May be considered for PFnk Assistance (US$ Investment Cost, 1979 Dollars Approximate)Tj1 US$ million Loukkos Rural Development 75 Middle Atlas Livestock 75 Cadastral Survey 20 Khemisset Rural Development 150 Reforestation 16 High Yield Seed 15 Grain Storage 55 Fisheries 100 Fifth Agricultural Credit 700 Second Vegetable Production and Marketing 100 Rural Development Projects /2 Irrigation Rehabilitation Projects 7 Small Scale Irrigation Program 7 /1 These projects are consistent with the strategy the Bank would support in Morocco but listing them confers no commitment to their being financed by the Bank. /2 Investment amounts not yet estimated; specific projects not yet identified. The Government recently identified several new projects for consideration by the Bank, of which several are consistent with the strategy outlined above (Table 17). Bank identification missions have been programmed to study these projects. C. Sector Work Program 49. Due to the many demands on its limited staff, only the highest priority sector issues can be studied by the Bank. The emphasis should be on undertaking joint studies with the Moroccan Ministry of Agriculture, and in studying issues which affect Bank financed projects. First, a periodic update of this memorandum would be undertaken, including discussion with Government. A more detailed analysis would be undertaken at the completion of the Develop- ment Plan, with recommendations made for the following Plan. Secondly, the Bank would assist the Ministry of Agriculture to develop the recently created project preparation unit and sector wide monitoring and evaluation system (para. 43). Thirdly, analysis would be undertaken of the characteristics of rural poverty and possible action programs. This work would be included in the preparation of the poverty oriented projects proposed above. It may also  - 30 - include assistance in the preparation of a food strategy in Morocco. The Ministry of Agriculture has expressed interest in obtaining Bank assistance in designing a food strategy. The Ministry's Direction of Planning and Economic Studies has begun study of the agricultural components of such a strategy. The Bank has been requested to provide (a) terms of reference for the study, (b) extensive comment at each step in the study's development, and (c) general assistance during short missions to Morocco. The Bank has agreed to submit terms of reference and documentation to the Ministry as a first step. Finally, the Bank has begun to provide assistance in the revision of the legal framework (investment code) for rainfed agricultural development. This legal framework would specify rights and obligations of landowners and of Government in rainfed project areas, with respect to land use, user charges, expropriation, water rights, etc. (paras. 27 and 30). A consultant to assist this study could be financed under the Loukkos Project now being appraised. Other areas of study, which are recommended for the Government's consideration, are in order of priority: (a) land tenure and land consolidation in rainfed agriculture; (b) price and subsidy policy in agriculture; (c) an improved system of agricultural research; (d) the economic return to various agricultural projects (para. 12); (e) savings mobilization in agriculture; (f) livestock production and desertification; and (g) mechanization. May 1980  - 31 - Table 1.0 MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANDUM/RAPPORT SUR LE SECTEUR AGRICOLE Total and Agricultural Gross Domestic Product/ Produit Interieur Brut Total et Agricole (Millions of 1960 Dirhams - Old System)/ (En millions de dirhams de 1960 - Ancien Syst6me) Agricultural G.D.P. PIB Agricole Annual Variations (7.)/ Year/ Total G.D.P./ Value/ % of Total/ Variations Annee PIB Total Valeur En % du Total Annuelles (7) 1960 8,200 2,650 32.3 1961 7,930 2,260 28.5 - 15 1962 8,900 2,870 32.2 27 1963 9,410 3,060 32.5 7 1964 9,470 2,990 31.5 - 2 1965 9,690 3,150 32.5 5 1966 9,470 2,780 29.3 - 12 1967 10,100 3,070 30.4 10 1968 11,380 3,980 34.9 30 1969 11,430 3,650 31.9 - 8 1970 12,010 3,720 30.9 2 1971 12,620 3,950 31.3 6 1972 13,200 4,090 31.0 4 1973 13,380 3,640 27.2 - 12 1974 14,640 4,150 28.3 14 1975 14,960 3,660 24.4 - 12 1976 16,430 4,120 25.0 13 1977 15,560 3,380 21.7 - 18 Average/Moyenne 60-62 8,300 2,593 Average/Moyenne 69-70 11,720 3,685 Average/Moyenne 75-77 15,650 3,720 Average Growth per Annum 60-62/75-77/ Croissance Annuelle 4.3% 2.43% Moyenne 60-62175-77 December 1978/Decembre 1978 Source: Annuaires Statistiques  - 32 - Table 1.1 MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANDUM/RAPPORT SUR LE SECTEUR AGRICOLE Total and Agricultural Gross Domestic Product/ Produit Interieur Brut Total et Agricole (Millions of 1969 Dirhams - New System) (En millions de dirhams de 1969 - Nouveau Syst'me) Agricultural G.D.P. /PIB Agricole Annual Variations () Year/ Total G.D.P./ Value % of Total/ Variations Annee Total PIB Valeur 7. du Total Annuelles (7.) 1969 16,118 3,545 22.0 - 1970 16,969 3,740 22.0 5.5 1971 17,984 4,089 22.7 9.3 1972 18,341 3,999 21.8 - 2.2 1973 19,054 3,673 19.3 - 8.1 1974 20,249 4,041 20.0 10.0 1975 21,852 3,694 16.9 - 8.5 1976 24,203 4,084 16.9 10.5 1977 25,406 3,538 13.9 -13.4 Average/Moyenne 69-70 16,543 3,642 Average/Moyenne 76-77 24,804 3,811 Average Growth per Annum/Croissance Annuelle Moyenne 1969-70/76-77 5e- 5- 0.65% December 1978/D4cembre 1978 Source: Annuaires Statistiques  - 33 - ~R~C0/KA.RDC Table 2 AGRICULTURAL SECTOR MEMDRANDUMlRAPPORT SUR LE SECTEUR AGRICOLE Population and Employment in the Rural Area/ ltonetl oienMilieuRural Total Rural Rural Rural Rural Year/ Population/a/ Populatiori Labor Force/ Employment/e/ Agricultural Unemployment/ Annee population Population Population Emploi Employment/e/ l Totqlea pwR.ale Active Rural/e Emploi Agricole Chomae Rtirale en milieu rural/e 1960 1.60 1104'/ 2170 t ;150 1,793 1961 -112 v v ' 1962 %2,Z33 ' b 1963 12,548 1,873 1964 12,871 - - - - - 1965 13,203 - - - - - 1966 13,543 - - - - - 1967 13,891 - - - - - 1968 14,249 - - 1969 16,616 - - - - - 1970 14,933 - d - - 1971 15,379 9,797/Ic 2,577/- 2,444 1,928 133 1972 15,782 - - - - 1973 16,196 - - - - - 1974 16,620 _ _ 2,043/b - 1975 17,056 - _ _ 1976 17,503 - - - - - 1977 17,962/b 10,867/b 3,130"d 2,880 2,027 f 250 1978 18,543/b - - - - - 1979 19,143/b - _ _ - - 1980 19,763/b - - - - 1981 20,403/b - - - 1982 21,063 11,858/b 3,750/d _ 2,167/e 487/e 2000 36,363 18,262/c 6,458/d - 2,381 822/e /a Preliminary, except for 1960 and 1971 Census, and as la Chiffres preliminaires, sauf indication noted. contraire ou donnees provenant de* recense- ments de 1960 et 1971. /b IBRD estimate /b Estimations de la BIRD /c MARA, DAE, L'emploi dans le Milieu Rural, October 1977, /c MARA, DAE, L'emploi dans le Milieu Rural, Annex Table 2. oct bre 1977, Tableau annexe 2. /d Idem, Annex Table 3. /d Idem, Tableau Annexe 3. /e Idem, Annex Table 4. Ie Idem, Tableau Annexe 4. /f The real needs of agriculture, based on units standard If Les besoins reels de l'agriculture, exprimeis (J.T./ha ou J.T./UGB), would not exceed 1.8 to 1.4 mil- sur la base d'unit6s normalisees (J.T./ha ou lion jobs in 1976/1977. See MARA, op. cit. Annex, J.T./UGB) ne depasseraient pas de 1,8 a 1,4 Table 8. million d'emplois pour 1976/1977. December 1978/Decembre 1978  34 Table 3 MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANDUM/RAPPORT SUR LE SECTEUR ACRICOLE Value Added Per Worker Agricultural Sector/ Valeur Ajout6e par Travailleur Secteur Agricole ('000) (DH) Agricultural Number of Value Added Year/ Value Added /a/ Workers/ per Worked Annee Valeur Ajoutee Nombre de Valeur ajoutee Dans l'Agriculture/a Travailleurs par Travailleur 1960 2,650 1,793 /b 1,477 1963 3,060 1,873 /c 1,634 1971 3,950 1,928 /b 2,048 1974 4,150 2,043 /d 2,031 1977 3,380 2,027 /c 1,667 /a Millions 1960 Dirhams /a En millions de dirhams de 1960 /b 1971 Popula-ion Census /b Recensement demographique de 1971 7T BIRD Estimates /c Estimations de la BIRD T7 MARA Estimates /d Estimations du MARA December 197WDe&cembre 1978  1t ROCCO/MAROC AGRICULTUR8AL SEICTOR MOlRAt0DL'M/RAPPORIT sua LE SECTEURI AGRICOLE Agricultural Importa - Morocco 1969-1977/ T,mportationa Agrrioles - Maroc 1969-1977 Quantity (Tons '000) and Value (DH '000/ Quantites (en muilers de lonnes) et Valeur (en silliers de dirhams) D1969 1970 1971 1972 1973 1974 1975 1976 1977 D-sription qty. VaI.e QtY. value *4ty. Value Qty. loe Qty. Val.e Qty. Val.. Qty. Value QLY. Val.. Qty. Value lescription Quant. Valeur Quant. Valeur Quant. Valeur Quant. Valeur Quant. Valeur Quant. Valeur . Va lu. ant. Valeur Qot. Valer 1. Food Products: 569 391,994 828 558,441 1,138 711,249 829 599,921 1_501 1,075.343 1,367 2,041,789 2,033 2,629,114 1,526 2,081,364 2,049 2,106,178 1. Produits Ali..entaiirs Of which: Breed Wheat 98 39,818 358 129,957 672 243,031 382 136,917 905 483.386 778 708,300 1,303 959,849 1,012 725,830 1,202 587.078 Doot: Ble Tendre Rough Sug-r 253 108,106 273 137,347 246 148,738 222 169,296 272 239,419 295 641,419 267 971,363 261 644, 786 242 273.578 Sucre Brut Rough Veg. Oils 40 44,051 54 81,358 81 131,507 84 102,865 106 165,593 123 417,363 161 405,863 113 215,776 137 337,496 Huiles Brutes Vegetal.. Milk & Milk Products 41 66,171 41 70,966 27 73,337 23 69,659 26 72,589 35 119,036 31 124,159 35 140,536 36 148,583 Lait & Produics L.itiers Tea 17 103,325 14 89,709 13 83,513 12 86,108 10 66,968 16 105,254 14 104,477 11 87,965 12 102,757 The L,vestock - - - - - - - 3 26 Ovis & B-ovina Sauf Reprod. Meat & By-Products - - - 2 1,896 1 5,737 4 18,597 Vitde6e & Abats 2. liher Agric. Products 166,152 168,966 177,474 174,263 241,2S5 447799 461,367 475,813 628,401 2. Autses Produits Agri-oles Of which: Fertiliers 134 29,838 106 23,668 151 27,344 168 35,163 217 50,959 278 167,334 229 166,115 272 116,249 254 114,571 Doot: Eograis Wood 245 88,820 280 108,826 272 110,551 241 102,402 284 245,039 265 195,353 251 183,048 326 256,508 399 348,337 Boi0 Agr. Machinery 8 47,494 5 36,472 5 39,579 5 36,698 6 45,257 10 85,112 12 112,204 10 103,056 12 165,493 Materiel Agricole Total I + 2 558_146 727,407 888,723 774,184 1,316,598 2,489,588 3,090,481 2,557,177 2,734,579 TutalI + 2 Geneoal Tool of Total G-eeral des Agtric. lmportt 1,030 751,495 1,304 953_ 198 1,643 1 122 694 1,324 1 022,983 2,102 1.622,505 2,021 2,923,300 2,614 3,664,958 2,239 2.952,962 2,845 3,249,447 I n .portations Agricolea Total Imports 283_7000 3,463,000 3,565,000 4,683,600 8,291,300 10,393,800 11,554,600 14,401,500 Total des t.po-tations Source: Stotistiq.es du Commerce Etberieur December 1978/Decembre 1978  MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANQU'd/RAPPORT SUR LE SECTEUR AGRICOLE Agricultural Exports-Morocco (1969-19770 Conportnliona Sonloolen - 21aroc (1969-1977) QMantily (Ton. 000) and YTaln ("', 0'0/ Qoantite. (en Ailli.r- de to..nn) et Valnor (en millers dn dirhooma) 1969 1970 1971 1972 1973 1974 1975 1976 1977 D-scripli-o Qty. Vlon- QLy. V.lon Qty. Valu QLy. V1- QtyC V. OVio Qcy. Co1o Qy. 1l QY Voy. alon Q5y. Colou D e.or ipnion _ VI5 er.S.Cn1Sor Qu -nt, le ur Qn attoO Qonot Valor Q.an.t. V-l r Qon-l Valeur Quant. VSe-r Qu-t. V-leur 1. Food Product 1,096.930 1,020,79i )1_416 1,116,324 *,714,172 1,538,532 1,384,053 18920l6 1,783,905 IProdlts Aleoairn Of ohlch: CiSroR Fr-iL 551 388,529 602 357,334 527 389,130 586 228,519 700 494,070 543 388,387 446 406,423 548 610,710 522 593,604 Dont: Agro-n. F-hnl CImo1oe3 653 145,614 140 180,228 131 152,705 120 179,146 173 229,484 146 182,664 144 172 ,625 112 127.102 112 114,733 Tomnon- Fr-ichn. Ro_gh Oliv- Oil 32 88,201 5 16 049 7 20,612 34 109,203 22 101,361 21 146,990 13 93,726 15 65,773 14 63,949 Hoilen d'Olivn B-ronn C.onnd Veg-tbl-n 49 62,660 40 54,036 57 85,100 77 105,784 85 125,360 77 162,252 56 145,010 73 157,424 93 232,782 C.onorn.. dn Legan-. polses 102 104,793 745 145,770 130 88,291 250 134,902 187 180,958 137 152,361 118 10 118,289 141 1b44675 54 88,191 Lgomine-e- Potatoes 49 25,076 66 40,251 69 37,701 83 46,002 90 55,547 71 81,528 78 81,515 75 78,220 50 38,346 Poo-en de terre Cocono Finsi 47 123,13: 44 127 254 53 147,665 46 134,339 66 189,500 59 243,520 40 162,382 53 235,886 43 229,279 Conarren On Poinn.on i:iD- 90 38,965 88 44,426 35 19,634 65 31,640 133 88,014 64 47,510 45 36,213 42 40,609 34 38,219 Vi1 2. Othr AgricoIOorol Prodo-, 136.054 103,355 120 ,191 157,b61 180,064 228,31; 152,219 151,246 137,411 2-r- Produits AO oles 0f Chich Cor & Cork Prod.c-s 45 27,539 44 27,326 30 21,231 32 24,844 44 37,146 26 49,757 14 34,055 12 28,061 14 38,617 Don: Liegns - Dei- Pho-pi-ocr Fnroili-er 182 52,447 105 27,142 197 49,218 258 65,842 260 82,080 131 138,655 86 105,602 156 69,290 173 83,828 Eognala Pho-phat-. Total 1 + 2 1,232,9b4 1 184 150 1,2753607 1 273 985 1,894,236 1,766,847 1,536,272 2.020,452 1,921,316 Tot-l I + 2 Total OgricIloo ral TotI Eloporrattoot ECports 1,974 14954L 1,971 1.463,973 1,691 1450389 1 984 1 654 ,97 2 2,264 2,241,646 1,639 2167870 31 1,799,649 1,629 2,133_940 1_574 2,055,397 ..I Total Exports 245,0 2,470,000 2,526,000 2,953,000 3 746 9000 75439,900 _ _ __5__79,300 5896 Total de- Enportetion- Source S-aistiSques d0 CoFloerce rorrijor D-cenhr- 1978/DecrAbre 1978  MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANDUM/RAPPORT SUR LE SECTEUR AGRICOLE Volume of Agricultural Froductionl Volume de is Production Agicole Main Crops/Cultures Principales (Quintals -000) (En milliers d. oist.n.) 1970-1971 1971-1972 1972.-197- 1973-1974 1974-1975 1975-1976 1976-1977 1977-1978 Crops Cultures Hard Wheat 16,415 16,310 11,821 13,800 12,040 16,518 10,358 14,409 le Dur Soft Wheat 5,466 5,298 3,920 4,730 3,708 5,371 2,519 4,356 Ble Tendre Barley 25,719 24,659 12,546 23,870 15,853 28,604 13,450 23,2o2 orge Oats 153 236 122 198 286 362 78 113 A-oino Others 559 654 938 519 568 879 279 141 Autres Total Winter Grai0 Crops 48.312 47.157 29,347 43.117 32.455 51.734 26.684 42,281 Total Cereales d'Hiver Maize 3,899 3,676 Z,173 3,900 3,708 4,925 1,843 3,904 Mais SOrgh-5s 1,205 590 520 877 746 193 47 361 Sorgho Rice 27 139 104 123 292 179 n.a. ..a. Ri'. 7 5 93 15 - - na. A.tr-a Total SpriRg G-ain Crops 5.138 4_410 2_890 4_915 4,746 5.297 1,890 4,265 Total Cereales do Printemps Beans 2,426 2,672 1,887 3,455 2,126 2,302 936 1,614 Feves Chick Peas 19 340 789 1,63d 608 511 110 367 Po-s Chiches Green Peas 500 619 371 1,243 986 1,122 333 457 Petits Pois Lentils 156 201 114 274 343 413 79 211 Lentilles Others 266 311 376 438 445 615 123 100 Autres Total Pulses 3_367 4.143 3,537 7.048 4.508 4963 1.583 2.749 Total Legumineuses Flaxseed 24 88 14 29 8 14 - - Lin Sunflower Seed 118 255 11.4 142 156 155 191 159 Tournesol Peanuts 33 59 71 128 188 128 84 28 Arachides Sugar Beets 15,839 16,770 12,927 19,436 17,919 23,616 14,737 23,954 Betteraves Sugar Cane 628 776 1,774 3,375 Canoe a Sutre Cotton 191 266 267 178 173 152 221 169 Coton othors 4 117 119 84 351 100 n.a. Autres Totrl Industrial Oil-Crops 16,205 17,447 13,580 20,032 19,156 25,192 17,107 2 - Total tre Instriell- & 1agineus vegotabl,s /a 7,140 6,760 8,580 8,100 10,600 /d 10,500 /d 10,700 /d na. Maraichage /a Citron Fruits 8,317 8,520 9,429 8,400 6,410 /c 7,050 |c 8,500 /c 0.a. Agrumes Olives 1,600 5,060 1,950 2,547 2,009 3,122 n.a. n.a. Olives Grapes 2,75t 2,640 2,824 2,400 n.a. n.a. n.a. n.a. Ratsins Wine ('000 hecto.) 1,050 1,146 1,200 1,212 Lb 1,233 Lb 705 Lb 790 Lb ..a. Vin ('000 hocto.) Ia Early Crops, -onatoes, potatoes, frosh vegetables (Source I'Agriculture Marocauie en chiffres 69-74) /a Prineurs, toosates, por-es do terra, 1lgumes fraou (Source I'Agricalture Maroca-ue en chitfres 69-74) 7b OC.E. C.C.4E |c Estimates /c Estimatio-s |d To-at-es and potatoes only /d Tonates et ,oouuu de terre -e-lomoc,t So-rce: MARA, StaListiques Agricoles D-eber 1978  MOROCCO/MAROC AGRICULTURAL SECTOR MEMORAND1U RAPPORT SUR LE SECTEUR AGRICOLE Size of Flock and Volume of Animal Productions/ Cheptel et Volume de la Production Animale Category Units 1971 1972 1973 1974 1975 1976 1977 Catdgorie Unites Cattle '000 Heads 3,670 3,500 3,600 3,400 3,620 3,400/c 3,600/c Bovins '000 tetes Sheep '000 Heads 18,260 16,500 16,000 16,000 14,270 13,500/c 14,300/c Ovins '000 tetes Goats '000 Heads 8,150 8,000 7,500 7,000 5,740 5,600/ 5,750/c Caprins '000 tetes Swine '000 Heads 11 11 11 11 10 10/c 4/c Porcins '000 tetee Horses '000 Heads 371 311 320 320 n.a. n.a. n.a. Equides '000 tetes Camels '000 Heads 193 200 200 110 80 90/c n.a. Camelides '000 tetes Meat & By-Products '000 tons 231 240 238 236 238 233 200 Viande rouge & abate '000 tonnes Poultry '000 tons n.a. n.a. n.a. n.a. 46 49 75 Viande blanche '000 tonnes Eggs /a '000 units 3,490 6,300 23,180 n.a. n.a. n.a. n.a. Oeufs /a '000 unites Milk /b '000 tons 505 524 523 521 570 600 650 Lait trait /b '000 tonnes /a Excluding the traditional sector fa Excluant le secteur traditionsel /b Cow, Sheep, and goats f Vaches, brebis, et chevres /c Estimates /c Estimations Source: MARA, Statistiques Agricoles December 1978/Decembre 1978  MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANDUM RAPPORT SUR LE SECTEUR AGRICOLE Volume of Agricultural Production/ Forest Products Volume de la Production Agricole Produits Forestiers Production Units/ 1971 1972 1973 1974 1975 1976 1977 Unites Pulpwood '000 m 50. 55. 96. 121. 33. 122. 197. Bois a pate Lumber '000 m3 295. 357. 562. 692. 181. 363. 512. Bois d'oeuvre de service, & d'industrie Firewood '000 m3 1124. 1212. 1009. 1129. 657. 727. 1090. Bois de feu Source: Information given to the Mission by the Direction des Eaux et Forets/ Source: Donnees transmises a la mission par la Direction des Eaux et Forets December 1978/ Decembre 1978 F CD .~  MOROCCO/MARHC AGRICULTURAL SECTOR MEMORANDUM / RAPPORT SUR LE SECTEUR AGRTCOLE Cultivated Areas - Main Crops/ Superficies Cultivees - Cultures Principales (1000 ha) 1970-1971 1971-1972 1972-1973 1973-1974 1974-1975 1975-1976 1976-1977 1977-1978 Cultures Hard Wheat 1.517 1,503 1,478 1,388 1,238 1,454 1,392 1,297 Ble Dur Soft Wheat 489 495 562 528 453 467 531 456 B1 Tendre Barley 1,998 1,993 2,016 1,973 1,819 2,117 2,316 2,389 Orge Oats 19 24 20 20 32 31 27 26 Avoine Others 109 94 111 129 102 __162 115 137 Autres Total Winter Grain Crops 4,1 4,109 4,187 4,038 3,644 4 931 4,387 4_305 Total C6r6ales d'Hiver Maize 453 481 446 447 492 433 424 394 Mais Sorghum 83 66 53 70 58 49 41 32 Sorgho Rice 1 3 3 4 6 5 6 n.a. Riz Others 2 2 11 4 - - - n.a. Autres Total Spring Grain Crops 539 552 513 525 556 487 471 426 Total Cdreales de Printemps Beans 190 259 278 227 220 191 190 221 Feves Chick Peas 108 53 84 158 98 100 42 68 Pois Chiches Green Peas 70 91 102 109 137 133 117 95 Petits Pois Lentils 28 39 31 41 46 62 36 37 Lentilles Others 31 39 57 51 60 130 74 79 Autres Total Pulses 427 481 552 586 561 616 459 500 Total Legumineuses Flaxseed 3 8 2 2 2 1 - - Lin Sunflower Seed 14 37 20 18 23 23 49 16 Tournesol Peanuts 4 10 13 17 16 11 19 28 Arachides Sugar Beet 43 60 45 58 62 67 48 59 Betteraves Sugar Cane - - - - 4 2 1 4 Canne a Sucre Cotton 17 17 15 16 17 12 18 18 Coton atb5es 12 13 12 _13 14 _12 8 n,". Autres Total Industrial & Oil-Crops 93 14&5 107 124 13S 128 143 125 Total Oldagineux et Cultures Industrielles Vegetable 121 114 111 111 94 112 108 125 Legumes Forage 61 60 62 81 84 85 91 89 Fourrages Fallow 1,829 1,778 1,593 1,641 2,097 1,800 1,836 1,974 jachere Source: Mara - Statistiques Agricoles December 1978/Decembre 1978  - 41 - Table 8 MOROCCO/MAROC AGRICULTURAL SECTOR MEMORANDUM/ RAPPORT SUR LE SECTEUR AGRICOLE Net Income Per Proprietor and Per Person According to Size of Farm (1974)/ Revenu Net par Exploitant et Par Personne Selon La Superficie de l'Exploitation (1974) (In 1960 Dirhams) (En dirhams de 1960) Average Average No. of Net Income Net Income Size of Farms Proprietors % per Farmer per Person /a (ha) (DH) (DHi) Superficie de Nombre Revenu Muwen Revenu Moyen 1'Exploitation d'Exploitants Net par net Exploitant par Personne/a (DH) (DH) 0 345,600 23.4 781.8 206 0 - 5 834,500 56.6 1,251.3 226 5 - 10 168,400 11.4 3,872.9 506 10 - 20 87,100 5.9 6,967.8 849 20 - 50 34,000 2.3 12,579.4 1,393- 50 - 100 5,900 0.3 28,525.4 2,512 100 1.500 0.1 115.733.3 21,700 Total 1,477,000 100.0 - - Average/Moyenne 2,263.3 402 /a On the basis of 5.6 persons per farm - /a BasJ sur une moyenne de 5.6 personnes Average obtained from 1973/74 Agricultural par exploitation. Moyenne obtenue Census. du recensement agricole 1973/74. Source: MARA - Division des Affaires Economiques Etudes de la Capacite de Financement du Developpement par l'Agriculteur, Novembre 1977. December 1978/Decembre 1978  MOROCCO/MAROC AGRICULTURAL SECTOR NEMORANDUM/RAPPORT SUR LE SECTEUR ACRICOLE Domestic Use and Utilization-Soft Wheat, Hard Wheat, Barley Consomnation Int6rieure Totale et Par Habitant-B14 Tendre, Ble Dur, Orge Cereal 1949/50 1959/60 1969/70 1974 1975 1976 1977 1978 Cereale Bread Wheat Ble Tendre Surface ('000 ha) 294.00 436.00 446.00 528.00 453.00 467.00 537.00 456.00 Surface ('000 ha) Yield (q/ha), 6.70 6.40 8.10 8.90 8.20 11.50 4.70 9.50 Rendement (Qx/ha) Production ('000 Q) 1,970.00 2,790.00 3,760.00 4,730.00 3,708.00 5,371.00 2,519.00 4,356.00 Production ('000 Qx) Importation ('000 Q) 980.00 450.00 404.00 7,780.00 13,030.00 10,120.00 12,020.00 n.a. Importation ('000 Qx) Domestic Use ('000 Q) 2,950.00 3,240.00 4,164.00 12,510.00 16,738.00 15,491.00 14,539.00 n.a. Demande Apparente ('000 Qx) Utilization Kg/Cap. 30.90 28.00 52.00 75.00 98.00 88.00 81.00 n.a. Utilisation Kg/Cap. Hard Wheat B1E Dur Surface ('000 ha) 859.00 1,248.00 1,452.00 1,388.00 1,238.00 1,454.00 1,392.00 1,297.00 Surface ('000 ha) Yield (Q/ha) 5.80 5.90 9.10 9.90 9.70 11.40 7.40 11.10 Rendement (Q/ha) Production ('000 Q) 5,000.00 7,320.00 13,210.00 13,800.00 12,040.00 16,518.00 10,358.00 14,409.00 Production ('000 Q) " Importation ('000 Q) - - - - - - - Importation ('000 Q) Domestic UIse ('000 Q) 4,840.00 6,300.00 13,200.00 13,800.00 12,040.00 16,518.00 10,358.00 14,409.00 Demande Apparente ('000 Q) Utilization Kg/Cap. 54.00 55.00 88.00 83.00 70.00 94.00 58.00 78.00 Utilisation Kg/Cap. Barley/a Orge /a Surface ('000 ha) 1,897.00 1,775.00 1,963.00 1,973.00 1,819.00 2,117.00 2,316.00 2,389.00 Surface ('000 ha) Yield (Q/ha) 6.40 6.40 10.00 12.10 8.70 13.50 5.80 9.70 Rendement (Q/ha) Production ('000 Q) 12,190.00 11,380.00 20,780.00 23,870.00 15,853.00 28,604.00 13,450.00 23,262.00 Production ('000 Q) Importation ('000 Q) - - - - - - - - Importation ('000 Q) Domestic Use ('