Morocco - Third Highway Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2752-MOR REPORT AND RECONMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 'TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A THIRD HIGHWAY PROJECT March 27, 1980 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.  KINGDOM OF MOROCCO THIRD HIGHWAY PROJECT FISCAL YEAR- January 1 - December 31 CURRENCY EQUIVALENTS Currency Unit Dirham (DH) DH 1 US$0.263 US$1 DH 3.80 WEIGHTS AND MEASURES Metric System British/US System 1 meter (m) 3.28 feet (ft) 1 kilometer (km) 0.62 miles (mi) 1 sq. kilometer (km2) 0.386 sq. miles (mi2) 1 metric ton (m ton) 0.984 long ton (lg ton) ACRONYMS AND ABBREVIATIONS ER - Economic Return LPEE - Soils and Materials Laboratory ("Laboratoire Public dAEssais et d'Etudes") MOT - Ministry of Transportation ("Ministare des Transports") MPW - Ministry of Public Works ("Ministare de 1'Equipement et de la Promotion Nationale") RD - Roads Department ("Direction des Routes"i  FOR OFFICIAL USE ONLY MOROCCO: THIRD HIGHWAY PROJECT Loan and Project Summary Borrower: The Kingdom of Morocco Amount: US$62.0 million equivalent in various currencies Terms: Amortization in 19 years including a 4-year grace period at 8.25 percent per annum. Project Description: The proposed project aims to help the Government protect past investments in the road network by bringing into operation a rational system of road maintenance and by initiating a long-term program of pavement strengthening and resurfacing. To this end the project comprises: (a) a three and a half year time slice of a pavement strengthening and preservation program, on about 1,700 km of primary and secondary roads; (b) a three and a half year program of routine and periodic road maintenance, including the purchase of equipment; and (c) technical assistance to the Ministry of Public Works (MPW), to help in preparing and implementing the above. The project also aims at strengthening the formulation and implementation of transportation policy by the Ministry of Transportation (MOT), by providing technical assistance in transportation planning and economics, as well as by furnishing weighing scales to help in enforcing vehicle loading limits. The main beneficiaries will be road users, who would face quickly rising transporta- tion costs if deterioration of the network were allowed to continue. The project will continue the long-term process of institutional strengthening begun under the two previous Bank- financed highway projects in Morocco. The principal risk it faces is shortage of funds for recurrent maintenance costs, which would cause some activities to be delayed; this would not seriously affect the economic return. In order to ensure the Government's commitment to carrying out the proposed activi- ties, an overall action plan covering maintenance as well as pavement strengthening was agreed during negotiations and annual programs consistent with this action plan will be sent to the Bank for review and comment. 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.  - ii - Estimated Capital Cost: US$ Million _ Foreign Local Foreign Total Exchange Pavement strengthening and preservation 20.9 38.8 59.7 65 Road maintenance and laboratory equipment 4.2 8.8 13.0 68 Technical assistance for - road maintenance (MPW) 0.1 0.4 0.5 77 - transportation policy (MOT) 0.1 0.6 0.7 85 Weighing scales 0.2 0.3 0.5 64 Expected price increases 6.8 13.1 19.9 66 Total 32.3 62.0 94.3 66 Estimated Recurrent Cost: US$ Million % Foreign Local Foreign Total Exchange Periodic maintenance 16.1 37.8 53.9 70 Routine maintenance 16.1 10.5 26.6 40 Expected price increases 9.7 14.5 24.2 60 Total 41.9 62.8 104.7 60 Financing Plan: US$ Million Local Foreign Total IBRD Loan 0 62.0 62.0 Kingdom of Morocco 74.2 62.8 137.0 Total 74.2 124.8 199.0 Estimated Disbursement: US$ Million FY81 FY82 FY83 FY84 Annual 0.8 15.8 31.0 14.4 Cumulative 0.8 16.6 47.6 62.0 Rate of Return: Over 50 percent Staff Appraisal Report: Report No. 2816-MOR, dated March 21, 1980 Highways and Aviation Division Projects Department, EMENA Region  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A THIRD HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Kingdom of Morocco for the equivalent of US$62 million, to help finance a Third Highway Project. The loan would have a term of 19 years, including 4 years of grace, with interest at 8.25 percent per annum. PART I - THE ECONOMY 1/ 2. A report entitled "Country Economic Memorandum on Morocco" (1473- MOR) was distributed to the Executive Directors in June 1977. An economic mission visited Morocco in February/March 1978, followed by a basic economic mission in November 1978, and updating missions in September and December 1979. A draft basic economic report was discussed with the Government at the end of 1979, and is due to be issued in mid-1980. Preliminary findings and conclusions of this report and the missions are reflected in the following paragraphs. Country Data Sheets are attached as Annex I. Recent Developments 3. In 1977, Morocco's political system moved in the direction of a constitutional monarchy. Having marshalled a strong national consensus over the Western Sahara issue, King Hassan II called municipal, provincial and national elections between November 1976 and April 1977. Opposition parties with platforms stressing social reform scored strongly in municipal elections in the larger cities, while at the provincial level, rural constituents supported Government candidates, who eventually obtained a majority of 141 seats out of 264 in the National Assembly. With the Government formed in October 1977, both the Istiqlal party which had been in the opposition since 1963, and the Mouvement Populaire whose main support is in the Berber popula- tion returned to power. The Cabinet was appointed with the mandate to prepare and implement economic austerity measures, the first of which were introduced in the 1978 Budget Law, and to pursue the social development objectives set out in the 1973-77 Development Plan. A new Cabinet formed in March 1979 is pursuing the same policies. 4. Morocco's economic and financial situation became increasingly unbal- anced towards the end of the 1973-77 Plan. The rapid growth of investments and imports which occurred in 1974-75 when phosphate export revenues had reached 1/ This Part updates paragraphs 2 to 17 of the President's Report No. P-2618-MOR on a Loan for a Vegetable Production and Marketing Project, dated August 22, 1979, approved on September 11, 1979.  - 2 - an all-time high, continued in 1976-77, while the world demand for Morocco's main exports, especially phosphate, weakened. At the same time, efforts to increase budgetary savings were insufficient to meet the continued increase in investment and military expenditures. As a result, in 1977 Morocco faced a large resource gap (22 percent of GDP) and overall budget deficit (17 percent of GDP). These imbalances have since been reduced, but continue to be substan- tial (12 and 8 percent of GDP, respectively, in 1979). During this period, Morocco resorted to external borrowing on a large scale. Gross disbursements on public medium and long term loans rose to about $1.3 billion in 1977, as compared to $600-$700 million annually in 1975-76, and less than $300 million a year in the early 1970s. This substantial increase was achieved mainly through increases in borrowing from Arab and commercial sources. Since then, the level of external public borrowing, in particular from commercial banks, has been curtailed to about $1 billion annually in an effort to moderate the growth of debt service payments. On the domestic side, monetary expansion, though it remained rapid, abated somewhat in 1979, reflecting reduced Treasury borrowing in that year. Consumer prices rose 9.7 percent in 1978 and 8.3 percent in 1979. 5. The Government has now succeeded in regaining a measure of control over the excessive increases in investment and external borrowing experienced towards the end of the 1973-77 Plan. This was achieved through budgetary austerity, including severe cuts in public investment, restraint in current spending and some tax increases. Public investment was reduced by nearly 40 percent in 1978 and continued to be severely restrained in 1979. In addition, in 1979, government revenue increased nearly 20 percent with a set of emergency tax measures adopted at midyear. Finally, import restrictions and controls on private credit were applied in 1978 and intensified in 1979. The impact of these policies was a significant deceleration of growth. In 1978, a good agricultural crop helped sustain growth, despite a sharp decline in industry and construction largely resulting from the public investment cuts. In 1979, there was some recovery of activity in the secondary sector, particularly mining. Overall, GDP grew by about 3 percent a year in 1978 and 1979, against 7 percent in 1973-77. 6. The Government will have to pursue austerity policies for a while, considering the continued excessive resource gap and low exports and savings which cannot be increased quickly for reasons largely beyond the Government's control. Instead of the 1978-82 Plan, the Government introduced a three- year interim plan (1978-80) which was approved by Parliament in December 1978, together with the 1979 Budget Law. Its main objectives were to reduce the budget and current balance of payments deficits and to concentrate avail- able resources (after meeting defense requirements) on productive projects, education and health, especially insofar as these benefit the neediest popu- lation groups. Implementation of major public projects not meeting these criteria was to be postponed, while the measures designed to preserve growth in the private sector were to be strengthened. 7. The financial stringency required to rebalance the economy has limited the scope for stepping up social programs in the past two years and the Government is anxious to resume the more dynamic social policy stance  - 3 - which characterized Moroccan development during the 1973-77 Plan. Preparation of the 1981-85 Plan has begun and attention is being given to long-term reforms which are needed if a resumption of more rapid economic and social progress is to be achieved. Economic Development Issues and Prospects 8. Bank projections summarized in Annex I assume sharp structural adjustments to keep the economy on a financially viable growth path over the long run, and also reflect the desire to maintain adequate GDP and employment growth during the stabilization period, and to achieve further progress to- wards the country's social objectives. The projections suggest that invest- ment would have to be restrained and GDP growth would remain modest for the next several years. During this period, Morocco will need substantial capital transfers from abroad on terms as favorable as possible to sustain project investment and GDP growth at 3 to 4 percent per year. After the required adjustment has been made, export prospects should enable Morocco to resume growth of investments, output and employment while progressively reducing the relative burden of debt and debt service. 9. Following the large windfalls in foreign exchange and domestic savings caused by high phosphate prices in 1974-75, the investment target was raised to meet cost increases, to permit some real expansion of original investment programs, and to undertake large capital-intensive projects geared to import substitution (in particular for sugar, chemicals, shipping and steel). Thus the GDP growth target for 1973-77 was nearly met, and investment rose to nearly 32 percent of GDP in 1977 from less than 14 percent in 1972. In the process, Morocco built up its capacity to prepare and implement projects not only in traditional sectors such as irrigation, import-substitution industries and physical infrastructure, but also in new and more difficult sectors such as rainfed and small-scale agriculture, export industries, and socially-oriented programs. There is little doubt that Morocco can achieve the investment levels assumed in the Bank projections, the main constraints being domestic savings and foreign exchange availability. 10. Domestic savings have been falling in relation to GDP after the brief increase during the phosphate windfall years, mainly due to low public savings. Successful efforts to raise public revenues were offset by increases in current government spending, particularly for education and health, as well as for price subsidies and defense. Tax reform measures and unpopular price policy decisions, such as reduction of subsidies to urban consumers, farmers and industrial investors, will be required to increase public savings. Interest rate adjustments to reflect changes in the rate of domestic price inflation would also be called for. 11. During the 1973-77 Plan period, exports rose by less than 4 percent p.a. in real terms (the Plan target was 10 percent). This lackluster per- formance was largely due to weak external demand for Morocco's main export products since 1974, especially phosphate, other minerals and agricultural products. Moreover, with some exceptions such as textiles, export production and marketing efforts were not sufficient, and new markets were not aggres- sively sought. Morocco continued to depend on demand from the EEC, especially  - 4 - France. Morocco would have considerable export potential if only products and markets were diversified. Programs designed to boost foreign exchange earn- ings are now under preparation particularly for phosphate and its derivatives, fresh and processed foodstuffs, and tourism. 12. While the emphasis on completion of high-return projects will have to continue, Morocco should delay or shift away from highly capital-intensive, import substitution investments, as well as from some ambitious programs for physical infrastructure. A changed investment pattern should reduce the external resource gap, and also contribute to higher growth and employment at lower investment and import costs than in recent years. This would call for improvements in policy planning and investment programming. The 1978-80 Plan started implementing a new industrial investment strategy, which should facilitate better investment selection. Social Development Strategy 13. Comparatively slow economic growth and employment creation up to the early 1970s were accompanied by widening income disparities and a decline in real consumption by the weaker sections of Morocco's population. As a major objective, the 1973-77 Plan set out to reverse these trends. The Government's strategy since 1973 has emphasized: (i) acceleration of employment creation; (ii) measures aimed at reducing income disparities; and (iii) specific invest- ment programs to benefit the least favored population groups. 14. Some progress has been made towards these objectives, as witnessed by increased expenditures for social sectors (from 5 percent of GDP in 1972 to 8 percent in 1977). However, the institutions created to meet social sector objectives are in many cases still fragile. Understaffing, weak policy analysis and inadequate program formulation are common. As a result, public programs to improve productivity, collective amenities and social services are reaching relatively small proportions of the population, especially in rural areas. In addition, during the period of financial stringency ahead, Morocco may not be able to sustain the current level of expenditures in socially-oriented sectors; some cuts were made in 1978 as part of the measures to re-balance the economy. External Debt and Debt Service 15. Morocco sharply increased external borrowings after 1974 (para. 4). Nearly all of the increase came from Arab and commercial sources. With a hardening of terms on new commitments, average maturity dropped from 18 to 11 years and average interest rose from 5.2 to 7.7 percent between 1974 and 1978. Morocco also drew on the IMF automatic credit facilities in early 1976, and obtained about $70 million in IMF compensatory financing in August 1978. From the low levels of 1974-75, Morocco's external debt rose rapidly to an esti- mated $5.2 billion (disbursed only) by December 1979. 1/ In 1979 debt service 1/ A recent debt mission has revised this estimate to about $6 billion. The new estimate for debt service in 1979 has been increased to about $800 million.  amounted to $750 million (nearly 22 percent of tDtal exports of goods and services, includireg workers' remittances). As a rf sul , eent and plo- jected borrowings, debt and deb5 serv-e may be ct t -i-res fu-rth-2 in the years immediately ahead, with the debt serv_ ce ratio reaching 24 to 25 percent in 1980-85. but declining progressively therea'terr The country's net foreign assets would remain at a relatively low le-el. Because of the grow-ng burden of debt service, external debt management has become more restrictive and selective since 1978. If debt service is to stay manageable, Morocco will have to continue this policy over the next few years. Additional comnercial borrowing should be limited, and efforts should be continued to seek loans on softer terms. Overall, external borrowing needs would remain sizeable in 1980-85, ranging between $1 and 1.5 billion. However, in view of the deter- mined effort being made by the Government to regain control of domestic demand and with good long term prospects for exports and, in particular, assured sales of phosphate rock and derivatives, Morocco continues to be creditworthy for further Bank lending. 16. Loan commitments from multilateral and bilateraL official sources to Morocco rose from $286 million in 1975 to $296 million in 1976, and to $862 million in 1977, dropping to $434 million in 1978. Major sources of aid were France, Saudi Arabia, the UAE, the U.S., Germany and the Bank Group. At the end of 1978, the Bank Group's share in Morocco's outstanding and disbursed external public debt was 8.4 percent. The share of the Bank Group in debt service was 24 percent in 1976 and declined to 18 percent in 1977, and 10 percent in 1978. By 1985 the Bank Group's shares in debt outstanding and in debt service are expected to be about 17 percent and 14 percent respectively. PART II - BANK GROUP OPERATIONS IN MOROCCO 17. Bank and IDA lending to Morocco has supported 44 projects, financing a total of $1,325.9 million (net of cancellations), of which $840 million has been lent since the beginning of FY1975. IDA credits, totalling $50 million, have been made available for five projects. A Third Window loan for $25 miLlion for the third education project was approved in March 1976. IFC investments have amounted to $42.9 million ($40.8 million after cancellations, terminations, repayments and sales). Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of January 31, 1980, and notes on the execution of ongoing IBRD/IDA projects. In some cases, delays in project implementation have been caused by management difficulties; how- ever, overall performance in project execution has been improving and remains satisfactory. Total disbursements as of December 31, 1979, amounted to 70 percent of original appraisal forecasts, and 73 percent of revised forecasts. 18. Past Bank Group lending has been concentrated in the agricultural and industrial sectors, which have accounted for 38 and 27 percent respec- tively of total commitments; the balance is represented by utilities (13 percent), education (12 percent), tourism (5 percent), roads (3 percent),  -6- and urban development (1 percent). While limited as regards the transfer of resources to Morocco (Bank Group gross disbursements amounted to 3.2 percent of total fixed investment during the 1973-77 Plan period), the main objectives of Bank lending in the early years of Bank operations in Morocco were to foster and strengthen development institutions, provide technical assistance especially for project preparation, and increase productive capacity, in order to improve the balance of payments. 19. While these objectives remain, over the last few years, greater emphasis has been given to preparing projects that support the Government's policy of fostering social development and improving income distribution. An increasing share of Bank Group lending is being devoted to projects directly or indirectly developing the productive capacity of the lowest urban and rural income groups and meeting their basic needs. 20. Past lending for agriculture has supported irrigation development, credit, agroindustries and, starting in FY1975, improvement in the produc- tivity of rainfed farming. Continued selective lending for irrigation is envisaged but emphasis will be increasingly given to supporting small farmers and shepherds and the development of rainfed areas. The Fes-Karia-Tissa Agriculture Project, approved in June 1978, directly addresses these objec- tives in the favorable cereal producing zone. An agricultural development and erosion control project, including forestry and livestock, in the Loukkos area will be submitted to the Executive Directors shortly. It would address major issues in developing Morocco's relatively densely populated but poorly endowed mountainous regions, and is expected to have a significant poverty impact. An extensive livestock project in central Morocco and an integrated rural devel- opment project in the Khemisset province are also under preparation. A fourth line of credit to the National Agricultural Credit Bank (CNCA) and a loan providing investment and credit for vegetable production and marketing, particularly for export, were approved in FY1979 and FY1980, respectively. 21. Projects in industry and tourism have had as key objectives increased foreign exchange earnings or savings and the improvement of sectoral policies, which have taken on increased importance in view of the country's short-term resource constraints. The eighth loan to Banque Nationale pour le Developpe- ment Economique (BNDE) which was approved in 1977, included a pilot small- scale industry component to promote labor intensive investments. This pilot effort led to the recently approved Integrated Project for Small Scale Industry Development. The loan to Maroc Phosphore made in 1978 will help increase Morocco's foreign exchange earnings. Continued lending for industry through the BNDE is contemplated as well as lending for industrial estates, and further lending to the Credit Immobilier et Hotelier (CIH) for tourism development. 22. Previous lending for utilities has consisted of two loans for water supply, two loans for power generation, a loan for village electrification and an engineering loan for the preparation of a sewerage project for Casa- blanca. A third water supply project, designed to provide access to safe water for small towns and semi-rural areas as well as for low-income popula- tion in the larger cities, is under preparation.  23. In order to reduce the impact of the oil import burden on the Moroccan economy, a project is being submitted for consideration by the Executive Directors which would contribute to the Government's efforts to accelerate the exploration and development of its petroleum potential. 24. Education continues to need attention to ensure Morocco's manpower development. Two credits and a loan have been made to develop secondary education and teacher training, to improve technical and vocational training, and to expand facilities in rural areas. A fourth project with emphasis on technical education was approved in FY1979 and preparation has begun on a fifth project focusing on technical training and research, teacher training and rural primary school facilities. 25. The Rabat Urban Project (FY1978) was the first Bank-financed project in the urban sector. Preparation of a follow-up project is nearing completion and would support the Government's program for slum upgrading and urban devel- opment through the provision of basic infrastructure, housing and social services and the creation of employment opportunities in Meknes and Kenitra. 26. A family health project is under preparation with the Ministry of Public Health as a first phase of the Government's program to extend basic health services, particularly in rural areas, including improvements in nutrition, environmental sanitation and family planning programs, as well as providing support to the Ministry of Public Health in planning and administering its programs. PART III - THE TRANSPORTATION SECTOR Sector Structure 27. All the basic transportation modes are present in tho Moroccan system: a network of 25,000 km of paved roads, serving a fleet of some 320,000 vehicles; a railway system of 1,760 km connecting the major popu- lation centers; six major ports handling 13 million tons of general cargo imports and exports per year; and eight major airports and a national air- line with an extensive international network. 28. Roads are the dominant mode. A relatively large vehicle fleet and a fairly dense network of low-standard paved roads were developed before independence in 1956 to connect the main agricultural areas with the cities and ports, and have been gradually upgraded since then. The ports in turn have linked Morocco with the markets for its fruits and vegetables and minerals in Europe. The railway and certain ports have a special-purpose role in exporting phosphate, while the airports and national airline are particularly geared to promoting tourism. In the late 1970s, roads accounted for about 95 percent of total passenger-km and over 80 percent of freight ton- km excluding phosphate (or 60 percent including phosphate). Total expenditure on road transportation by users is estimated for 1978 at $2 billion per year.  - 8 - 29. The road network is generally adequate as regards its density, but its quality is deteriorating for want of sufficient maintenance and renewal. The classified network consists of 55,200 km of roads, of which 45 percent are paved. Most of the network is situated in the plain between the Atlantic Ocean and the Atlas mountain ranges. Historically, the network has evolved through gradual upgrading of existing roads rather than by the construction of new ones. Between 1972 and 1977, the total network increased by 7 percent, and the length of paved roads by 14 percent. 30. Traffic volumes on the Moroccan road network are relatively high, averaging about 2,000 vehicles per day on primary roads, 800 on secondary and 300 on tertiary roads. Traffic in the main corridors is expected to grow over the next few years at 5-9 percent per year, faster in and around the secondary cities and slower in the Rabat-Casablanca corridor and in rural areas. 31. Road-side surveys in 1977 and 1978 under the Second Highway Project showed a generally efficient utilization of the fleet with regard to annual distance driven and loading. Buses carried over half of all intercity passenger traffic. Trucks under 5.5 tons gross vehicle weight, which are unregulated, performed nearly two-fifths of all intercity ton-km, despite their cost disadvantage, in theory at least, compared to large trucks, which are regulated as to their number, rates and operating area. The Ministry of Transportation (MOT) recognizes that small trucks play an important role in meeting transportation demand effectively, particularly in rural areas, as well as in generating small-scale employment, but believes that they have been holding down their costs per ton by neglect of vehicle maintenance and severe overloading, making their trucks a safety hazard on the road. The MOT there- fore intends to improve the enforcement of proper vehicle loading (see para- graph 56, below). Sector Organization 32. Transportation services are operated variously by wholly private, wholly government-owned or mixed-capital enterprises on broadly commercial lines, in a framework of government regulation intended to assure uniform and equitable levels of service to different users. In recognition of the growing demand for coordination of transportation policy and planning amongst this variety of enterprises, the MOT was established in 1977 separate from the Ministry of Public Works (MPW), to combine supervision of the railway, civil aviation, shipping, general cargo port operations and state-owned bus and freight-forwarding companies, as well as to regulate private road transporta- tion. The MOT's Transportation Studies, Planning and Coordination Department, set up initially as a sector-wide planning unit within the MPW under the Second Highway Project, is responsible for intermodal coordination and in particular the collection of data on costs and pricing. The MPW (now called the "Ministere de l'Equipement et de la Promotion Nationale") retains control over road and port infrastructure, and the infrastructure plans of the two ministries are coordinated by the Secretary of State for Planning. 33. The MPW's Roads Department (RD) is responsible for the classified network. The central divisions have an overall planning and coordination function, while programming, contract awards and supervision of works are  - 9 - substantially delegated to 18 regional offices. Unclassified roads are administered by the local authorities using provincial budget funds and, if necessary, technical assistance from the RD. 34. Although the engineering staff of the RD is generally well- qualified, it is not yet sufficient in number and is lacking in practical experience, as recently graduated engineers and technicians are immediately posted in the higher echelons. This situation is expected to be transitional, as the demand for additional qualified staff in highway engineering is being adequately addressed by training facilities at the university level (Ecole Hassania) and by the technician training courses and refresher seminars and workshops offered within the MPW itself. However, the RD wishes to review its present training of staff in charge of heavy equipment, and has requested the services of an outside expert for this purpose under the project. The RD has also identified a need for specific short-term expertise in cost accounting and procedures for equipment maintenance, which will be provided under the proposed project (see paragraph 53, below). 35. Construction and reconstruction of roads is done through private contractors, often operating as joint ventures between local and foreign firms. Patching of asphalt pavements is done by RD's own forces as part of routine maintenance, while the strengthening of asphalt pavements through overlays and preservation through surface treatments are done by contractors. There are a number of domestic firms qualified to carry out major pavement overlay and surface dressing, and competition between them is strong. Con- tracts for road works are awarded after competitive bidding, and the quality of work is generally good. The supervision of construction is normally done by RD's regional staff, assisted by the autonomous soils and materials laboratory ("Laboratoire Public d'Essais et d'Etudes"-LPEE) in Casablanca. 36. Routine road maintenance such as minor pavement repairs, grading of shoulders, and cleaning of drainage ditches and culverts, is done by RD's own crews under the supervision of the district offices. The policy of the RD to handle only strict routine operations by its own forces applies also to maintenance of mechanical equipment. Major repairs or overhaul are therefore done by outside specialized workshops. Principal Sector Issues 37. The major problems facing the transportation sector in Morocco are: a large railway deficit which constitutes a significant drain on resources; costly investments in ports, whose productivity is less than optimum due to managerial and institutional problems; deterioration of the road network; and lack of intermodal coordination. The proposed project will address the latter two issues, which are discussed further in the following paragraphs. 38. Deterioration of Road Network. Under the 1973-77 Plan, with the injection of higher phosphate revenues, an ambitious program of port, railway and shipping expansion was started, and these ongoing projects proved difficult to cut back when the drop in phosphate revenues severely restricted government  - 10 - investment under the current Plan (1978-80). The investment cutback has been most heavily felt in the area of road construction and maintenance; under the 1978-80 Plan, the construction of new roads has virtually come to a standstill, although master plans for upgrading national and regional roads have identified a large program of economically feasible projects. Annual investments in road construction and preservation in 1978 and 1979 amounted to less than $30 million per year, compared to an average of $70 million during the 1973-77 Plan. While the funds allocated to maintenance have dropped only slighly in current terms since 1975 ($18-19 million per year), in real terms expendi- tures per km in 1979 were only 55 percent of the 1975 level. In 1979 prices, this constitutes a decline from over $1,100 per km of the network (excluding tracks) to about $600 per km, whereas, at a minimum, maintenance expenditures should have increased in real terms to keep pace with traffic growth. As a result of the decline in real terms, the 1979 expenditure level allowed for resurfacing of the paved road network only once every 15 years, about twice as long as the recommended frequency. Furthermore, the RD has not been able to secure sufficient funds to regularly replace obsolete mechanical equipment, and, the cost of repairing the aging equipment has become disproportionately high, leaving less and less funds available for other operational expenditures. 39. While the geometric design standards of the classified roads are generally satisfactory, the pavement structures of many roads have become inadequate to carry present traffic. Because of the severe cut in the roads investment budget, the RD has had to apply temporary preservation measures like patching and surface dressing on road sections, where pavement strength- ening through overlays or base reconstruction would have been more economical in the long run. The RD is now seeking funds on a sufficient scale to allow it to select the most economic method of pavement preservation from a range of alternatives that include those with a larger initial investment. 40. The result has been that routine road maintenance has gradually diminished to maintenance of the major roads only. Insufficient maintenance of the secondary and tertiary roads is leading to near isolation of some rural areas and to uneconomically high transportation costs for most of the tertiary and some of the secondary roads. If the downward trend in road investment and maintenance is not reversed to halt further damage to already distressed pavement, it will lead to extensive deterioration of the entire road network, with consequent rising vehicle operating costs, including increased imports of spare parts and replacement vehicles. Moreover, continued delay in road maintenance will necessitate investments in more costly road reconstruction at a later date. In the short run, more resources must be allocated to both routine maintenance and road strengthening and preservation, and the proposed project will assist the Government in these two areas. In the medium term, once the ongoing projects in ports, shipping and rail expansion have been completed, greater balance must be restored to the distribution of investments among the subsectors to give greater weight to the needs of the road transpor- tation system. 41. Need for Improved Planning and Coordination. In the climate of fiscal austerity prevailing since 1978, the principal emphasis in transporta- tion planning in Morocco has been on organizational and managerial changes  - 11 - that can improve the productivity of existing facilities and the financial performance of the transport agencies, so that growth in demand can be met with a minimum of new infrastructure. Establishment of the MOT as a separate organization was a first step in improving the overall planning process. However, the MOT is a relatively new agency, still in the process of building up its own staff, and thus has identified a need for additional expertise in planning, studies and coordination for the sector as a whole. Though the Planning Department conducts studies on a cooperative basis with the modal agencies, effective policy formulation and intermodal coordination are at an early stage. The main issues and priorities have been identified in general terms, but detailed analysis and remedial actions are still needed. An active debate is taking place in Morocco on the economics of existing transport regulations. The MOT is engaged in disseminating relevant operating cost and traffic data and in coordinating this policy debate. The technical assistance in transport policy and economics to be financed under the project will provide an avenue for a continuing dialogue between the Government and the Bank on ways to lower overall transport costs, including regulatory changes, and will contribute to studies in the railway, port and road sectors necessary to develop and implement the appropriate policies (see paragraph 55 below). 42. In order to lower overall transportation costs and reduce the safety hazard presented by overloaded, unregulated small trucks, the MOT is preparing various measures aimed at shifting freight, where economical, from smaller to larger trucks. It is currently seeking to develop and propagate a better understanding of the economic arguments involved in trucking regulation, as well as the economic trade-offs involved in the proposed shift to larger vehicles: lower operating costs per ton carried against an increase in road pavement deterioration. In the same context, the MOT is endeavoring to improve its enforcement of proper vehicle loading. Previous Bank Involvements in the Highway Sub-sector 43. Two previous highway projects have helped build up the expertise of the agencies responsible for road construction and maintenance and set up an initial organizational structure for rational transportation planning and coordination. The First Highway Project (Loan 642-MOR/Credit 167-MOR) for $14.6 million, signed in November 1969, included construction of one new primary road, a program of localized improvements on selected primary roads, and the purchase of maintenance equipment and spare parts. The project was completed in a timely way with only minor cost overruns. Institu- tional benefits included the good performance of local contractors, and efficient construction supervision undertaken by Moroccan engineers of the MPW (see Project Performance Audit Report No. 1565 of April 1977). 44. A transportation survey also carried out under the First Highway Project laid the groundwork for the Second Highway Project five years later, for which a $29 million loan (955-MOR) was signed in January 1974. This included (a) construction of part of the Casablanca-Rabat expressway; (b) a further program of road improvements throughout the country; (c) renewal and some expansion of maintenance equipment; (d) traffic studies for Casablanca  - 12 - and Rabat; and (e) technical assistance for setting up a transportation plan- ning office. This project was physically completed in late 1979. Implementa- tion performance was again good. Local contractors carried out all the civil works competently. Cost accounting methods for road maintenance recommended under the First Project were introduced. The technical assistance team, through a program of traffic and financial surveys, laid valuable ground- work for the MOT in its planning and policy-making function; however, such institution-building is a long-term process and thus will be further rein- forced under the present project. 45. A further 1,650 km of roads have been or will be constructed or improved under six agricultural projects since 1974, for a combined loan amount of $44.9 million. These works range from widening and resurfacing of sections of classified roads to construction of unpaved farm access roads, in support of irrigation and other agricultural development investments. PART IV - THE PROJECT Origin of the Project 46. The idea of a Bank-assisted highway project concentrating on road maintenance and rehabilitation was first suggested by a supervision mission for the Second Highway Project in April 1978 and confirmed by the Government in November 1978. The project was prepared by the RD in consultation with subsequent Bank missions, and was appraised in September 1979. Negotiations were held in Washington in February 1980; Mr. Hassan Belkoura of the Prime Minister's Office headed the Moroccan delegation. The Staff Appraisal Report (No. 2816-MOR, dated March 21, 1980) is being distributed separately. Special conditions in the Loan Agreement are summarized in Annex III. Project Objectives and Description 47. The objective of the proposed project is to help the Government to continue the institution building process started under the First and Second Highway Projects. It conforms to the Government's policy, reinforced under the current austerity program, of protecting its past investments in the highway sector, rather than constructing new roads. To this end, the project will help to: (i) bring into operation a rational system of road maintenance, including the maintenance of secondary and tertiary roads; (ii) establish and partly execute a long-term program for pavement strengthen- ing; (iii) improve the capability of the RD to manage its road maintenance operations; and (iv) strengthen the formulation of transportation policy recommendations by the MOT and help in their implementation. 48. The proposed project consists of: (i) a three and a half-year time slice of RD's pavement strengthening and preservation program; (ii) a three and a half-year time slice of RD's routine and periodic road maintenance program including the renewal of mechanical equipment; (iii) assistance to the RD by providing: (a) 23 man-months of consultant services to improve its maintenance  - 13 - operations; and (b) laboratory equipment for a pavement evaluation center; and (c) advisory services by the soils and materials laboratory (LPEE) in preparing the pavement strengthening and preservation program; and (iv) assis- tance to the MOT by providing: (a) consultant services in transportation planning and economics (totalling 64 man-months); and (b) weighing scales to check vehicle ioading. 49. Pavement Strengthening and Preservation. In 1976, the RD commis- sioned and financed a study by consultants on pavement strengthening and preservation which recommended a five-year program, involving about 3,400 km of roads and costing $117 million at 1976 prices. Because of budget restrictions since 1978, only a modest beginning has been made with the execution of this program. About 700 km of pavement strengthening and about 1000 km of preservation works are included in the proposed project. The works will generally consist of applying asphaltic concrete overlays to strengthen existing asphalt pavements and of preserving the existing road surfaces through surface dressing. In some cases, existing roads will also be widened. 50. The road sections to be treated will be selected from the program recommended by the consultants. The initial selection for the first year of execution of the pavement strengthening work was made after visual inspections, taking into account deflection measurements made by the LPEE, and finalized during negotiations on the basis of detailed engineering and economic evalua- tion. For the remaining years of the project, road sections for strengthening and preservation would be selected on the basis of (a) an economic evaluation submitted to the Bank and prepared by the RD in accordance with a methodology and criteria agreed with the Bank, and (b) a technical evaluation acceptable to the Bank (Loan Agreement, Section 2.03(b)). During negotiations, under- standings were reached on the methodology for the economic evaluation of road sections and that the criteria for their approval would be: (i) the ER of the investment exceeds the opportunity cost of capital in Morocco; and (ii) the first year benefit-cost ratio at least equals the opportunity cost of capital in Morocco. The experience RD will gain in working with this methodology will strengthen its capacity to evaluate and prepare future main- tenance programs. The program for the remaining years, including the sections to be resurfaced, will be finalized from mid-1980 to end 1981. Depending on the outcome of engineering and economic studies and on the ultimate cost of the works, the total length to be treated under the project may differ from the presently estimated 1,700 km. 51. Routine and Periodic Maintenance. The proposed road maintenance program will extend adequate routine maintenance to the entire paved network and on a selective basis to the unpaved network. Recurrent expenditures for periodic maintenance will be increased to a level which would permit resur- facing the paved primary and secondary roads approximately once every eight years and the paved tertiary roads once every twelve years, which are reason able frequencies from an engineering and economic point of view. The Govern- ment has requested Bank financing for the renewal of priority items of road maintenance equipment required as part of this program. The equipment is to be procured in two lots, with delivery of the first lot to be completed by late 1981 and the second lot by late 1982. This delivery schedule will facilitate the transition to unfamiliar equipment for equipment operators and maintenance mechanics.  - 14 - 52. During negotiations, agreement was reached with the Government on an overall action plan, defined in physical and budgetary terms, for routine and periodic maintenance as well as pavement strengthening and preservation, to ensure the Government's commitment to providing not only the capital costs not covered by the proposed loan, but also all of the recurrent costs needed for the execution of a balanced maintenance program. Annual programs consis- tent with this action plan and showing the works to be carried out in the following year, will be sent to the Bank by September 30 each year, starting in 1980, for review and comment before being finalized, in order to permit an ongoing dialogue between the Government and the Bank on appropriate levels of maintenance needed to reverse the deterioration of the road network (Loan Agreement, Section 3.02). 53. Technical Assistance to RD. The technical assistance requested by the RD will consist of: (i) a cost accountant to advise on improving present cost accounting methods (5 man-months); (ii) an expert to help develop proce- dures for the maintenance of equipment (9 man-months); and (iii) an expert to advise on staff recruitment and training needs for the operation and main- tenance of heavy equipment (9 man-months). To prepare the engineering for the pavement strengthening and preservation program, the RD needs the services of the LPEE. Agreement was reached that the LPEE will provide such services, including the advisory services of two experienced pavement design and main- tenance specialists. They will assist the RD in the evaluation of the laboratory results and in the selection of road sections to be included in the strengthening and preservation program. The cost of the LPEE's services for the first year of the program are entirely financed by the RD. The foreign cost of the services for the remainder of the program are to be financed from the proposed loan, under a negotiated contract with the RD acceptable to the Bank (Loan Agreement, Section 3.03(b)). 54. The Belgian Government has agreed to assist the RD in setting up a pavement evaluation center. The Belgian National Road Research Center will help establish a highway data bank and it will assist in training Moroccan staff to man the new center. Since the Belgian assistance will not provide for the financing of non-Belgian equipment, the RD has requested the Bank to include this equipment in the proposed project. 55. Transportation Planning. To assist the MOT's Planning Department in developing policy recommendations for land, air, maritime, and urban transportation, the proposed project would finance the services of a team of consultants, comprising a team leader (24 man-months) and an expert for each of the land, air, maritime, and urban transportation subsectors (4 X 10 man- months). These consultants would assist in the preparation and execution of studies needed in order to examine policy tradeoffs within the transportation subsectors and to recommend concrete measures, including regulatory changes, which would promote greater productivity and intermodal coordination. Agree- ment was reached that the government would recruit the consultants whose qualifications, experience and terms of employment would be satisfactory to the Bank, no later than July 1, 1981 (Loan Agreement, Section 3.03(a)).  - 13 - operations; and (b) laboratory equipment for a pavement evaluation center; and (c) advisory services by the soils and materials laboratory (LPEE) in preparing the pavement strengthening and preservation program; and (iv) assis- tance to the MOT by providing: (a) consultant services in transportation planning and economics (totalling 64 man-months); and (b) weighing scales to check vehicle ioading. 49. Pavement Strengthening and Preservation. In 1976, the RD commis- sioned and financed a study by consultants on pavement strengthening and preservation which recommended a five-year program, involving about 3,400 km of roads and costing $117 million at 1976 prices. Because of budget restrictions since 1978, only a modest beginning has been made with the execution of this program. About 700 km of pavement strengthening and about 1000 km of preservation works are included in the proposed project. The works will generally consist of applying asphaltic concrete overlays to strengthen existing asphalt pavements and of preserving the existing road surfaces through surface dressing. In some cases, existing roads will also be widened. 50. The road sections to be treated will be selected from the program recommended by the consultants. The initial selection for the first year of execution of the pavement strengthening work was made after visual inspections, taking into account deflection measurements made by the LPEE, and finalized during negotiations on the basis of detailed engineering and economic evalua- tion. For the remaining years of the project, road sections for strengthening and preservation would be selected on the basis of (a) an economic evaluation submitted to the Bank and prepared by the RD in accordance with a methodology and criteria agreed with the Bank, and (b) a technical evaluation acceptable to the Bank (Loan Agreement, Section 2.03(b)). During negotiations, under- standings were reached on the methodology for the economic evaluation of road sections and that the criteria for their approval would be: (i) the ER of the investment exceeds the opportunity cost of capital in Morocco; and (ii) the first year benefit-cost ratio at least equals the opportunity cost of capital in Morocco. The experience RD will gain in working with this methodology will strengthen its capacity to evaluate and prepare future main- tenance programs. The program for the remaining years, including the sections to be resurfaced, will be finalized from mid-1980 to end 1981. Depending on the outcome of engineering and economic studies and on the ultimate cost of the works, the total length to be treated under the project may differ from the presently estimated 1,700 km. 51. Routine and Periodic Maintenance. The proposed road maintenance program will extend adequate routine maintenance to the entire paved network and on a selective basis to the unpaved network. Recurrent expenditures for periodic maintenance will be increased to a level which would permit resur- facing the paved primary and secondary roads approximately once every eight years and the paved tertiary roads once every twelve years, which are reason able frequencies from an engineering and economic point of view. The Govern- ment has requested Bank financing for the renewal of priority items of road maintenance equipment required as part of this program. The equipment is to be procured in two lots, with delivery of the first lot to be completed by late 1981 and the second lot by late 1982. This delivery schedule will facilitate the transition to unfamiliar equipment for equipment operators and maintenance mechanics.  - 14 - 52. During negotiations, agreement was reached with the Government on an overall action plan, defined in physical and budgetary terms, for routine and periodic maintenance as well as pavement strengthening and preservation, to ensure the Government's commitment to providing not only the capital costs not covered by the proposed loan, but also all of the recurrent costs needed for the execution of a balanced maintenance program. Annual programs consis- tent with this action plan and showing the works to be carried out in the following year, will be sent to the Bank by September 30 each year, starting in 1980, for review and comment before being finalized, in order to permit an ongoing dialogue between the Government and the Bank on appropriate levels of maintenance needed to reverse the deterioration of the road network (Loan Agreement, Section 3.02). 53. Technical Assistance to RD. The technical assistance requested by the RD will consist of: (i) a cost accountant to advise on improving present cost accounting methods (5 man-months); (ii) an expert to help develop proce- dures for the maintenance of equipment (9 man-months); and (iii) an expert to advise on staff recruitment and training needs for the operation and main- tenance of heavy equipment (9 man-months). To prepare the engineering for the pavement strengthening and preservation program, the RD needs the services of the LPEE. Agreement was reached that the LPEE will provide such services, including the advisory services of two experienced pavement design and main- tenance specialists. They will assist the RD in the evaluation of the laboratory results and in the selection of road sections to be included in the strengthening and preservation program. The cost of the LPEE's services for the first year of the program are entirely financed by the RD. The foreign cost of the services for the remainder of the program are to be financed from the proposed loan, under a negotiated contract with the RD acceptable to the Bank (Loan Agreement, Section 3.03(b)). 54. The Belgian Government has agreed to assist the RD in setting up a pavement evaluation center. The Belgian National Road Research Center will help establish a highway data bank and it will assist in training Moroccan staff to man the new center. Since the Belgian assistance will not provide for the financing of non-Belgian equipment, the RD has requested the Bank to include this equipment in the proposed project. 55. Transportation Planning. To assist the MOT's Planning Department in developing policy recommendations for land, air, maritime, and urban transportation, the proposed project would finance the services of a team of consultants, comprising a team leader (24 man-months) and an expert for each of the land, air, maritime, and urban transportation subsectors (4 X 10 man- months). These consultants would assist in the preparation and execution of studies needed in order to examine policy tradeoffs within the transportation subsectors and to recommend concrete measures, including regulatory changes, which would promote greater productivity and intermodal coordination. Agree- ment was reached that the government would recruit the consultants whose qualifications, experience and terms of employment would be satisfactory to the Bank, no later than July 1, 1981 (Loan Agreement, Section 3.03(a)).  - 15 - 56. Weighing Scales. The Moroccan authorities intend to intensify the enforcement of the legal maximum axle loads. Because of the damage to the pavements by overloaded vehicles, more intense checks on overloading by roving enforcement units is also strongly supported by the RD. To this end, ten mobile weighing scales and four fixed weighing stations have been included in the proposed project. The MOT will be responsible for organizing and operat- ing the control system, for which the necessary legislation and administrative systems already exist. The fixed stations will be centered around Casablanca, which is the origin or destination of about one-third of total freight traffic by road in the country. Cost Estimates and Financing 57. The total capital cost 1/ of the project is estimated at $94.3 million, including a foreign exchange cost of $62.0 million (see page (ii), Loan and Project Summary). These costs do not include taxes or customs duties and do include price contingencies (22 percent), but not physical contingen- cies, since the physical program may be adjusted on the basis of the ultimate cost. The Bank loan contributes to a national road rehabilitation and main- tenance program, which includes not only capital costs relating to civil works, equipment and technical assistance, but also recurrent costs for routine and periodic maintenance. The total recurrent cost for the three and a half-year time slice of the periodic and routine maintenance program (mid- 1980 to end-1983) is estimated at $104.7 million. The proposed loan amount of $62 million would finance 100 percent of the foreign capital expenditures. The Government would finance the local capital cost amounting to $32.3 mil- lion equivalent and the entire recurrent cost of $104.7 million equivalent. 58. The estimated cost of the overall pavement strengthening and preser- vation program is derived from the preliminary design for the first year's program. The estimates for road maintenance equipment and miscellaneous equipment are based on past offers by manufacturers, while those for technical assistance, including the services of the LPEE, reflect costs in the past for similar activities, updated to mid-1979. All cost estimates were confirmed during negotiations. The average base foreign cost of technical assistance per man-month, including international transportation and per diem in Morocco, is about $7,400 for the Roads Department and about $8,900 for the Ministry of Transportation. These amounts reflect the costs of recruitment on a world- wide basis. Project Implementation 59. The RD and MOT will be responsible for implementing their respective project items. RD's regional offices will invite bids from contractors for the pavement works, and will supervise their execution. The Road Maintenance 1/ The definition of capital costs under the project includes some items (pavement preservation and some of the equipment for routine maintenance), which in Morocco are financed from the recurrent budget.  - 16 - Division in RD's Head Office will procure the routine road maintenance equip- ment and supervise the technical assistance in the area of road maintenance. RD's Technical Division will be responsible for procuring the laboratory equipment for the pavement evaluation center and will coordinate and supervise the advisory services by the LPEE. The MOT will directly supervise the work of the technical assistance team for transportation planning and procure and operate the weighing scales. Procurement 60. Contracts for the pavement works, the road maintenance equipment and the weighing scales will be awarded after international competitive bidding according to the Bank's "Guidelines for Procurement." Bids for the equipment for the pavement evaluation center will be invited on the basis of limited international tendering because there is only a limited number of suppliers for this very specialized type of equipment. Bitumen (a petroleum by-product) will be procured by the semi-public agency SEBLIMA, which purchases it in bulk under a contract with the RD, following its standard procedures, and provides it directly to private contractors. This is considered to be an economic and efficient arrangement. 61. To make bidding for civil works more attractive for foreign and local bidders, the pavement contracts will, wherever practical, be combined into larger lots. Contractors will be allowed to bid for one or more lots, separately or in combination. Because of the presence of six or seven locally established pavement contractors, including joint-ventures, it is unlikely that a foreign contractor not now operating in Morocco will win a bid. Disbursement 62. Disbursement for the various project items will be as follows: (a) 65 percent of total expenditures for pavement strengthening and preservation; (b) 100 percent of the foreign expenditures and 73 percent of local expendi- tures for equipment; (c) 85 percent of the total expenditures for consultants' services; and (d) 70 percent of the total expenditures for the services of the LPEE. 63. Disbursements are expected to begin by July 1980 and be completed by June 30, 1984. Environmental Impact 64. The pavement strengthening will not detrimentally affect the environment. The improved maintenance of secondary and tertiary roads will increase the reliability of access to markets, schools and medical facilities and thus improve the rural environment. Main Benefits and Beneficiaries 65. Unless the present downward trend in road maintenance expenditure is reversed, the condition of the road network will continue to deteriorate. This would raise transportation costs, reduce the accessibility of remoter  - 17 - parts of the country, and burden the Government with costly reconstruction works at a later date. The proposed programs of pavement strengthening and preservation as well as improved routine and periodic maintenance will pay for themselves many times over through the avoidance of accelerated wear and tear on road vehicles, which would necessitate increased imports of spare parts and replacement vehicles, as well as expensive road reconstruction. The overall economic return is estimated at over 50 percent, consisting of slightly less than 50 percent on the pavement works and well over 50 percent on the routine maintenance improvements. The benefit-cost ratio is over 4 to 1. 66. The benefits will be widely distributed geographically. About 55 percent of the operating cost savings will accrue to truckers, 40 percent to passenger car owners, and 5 percent to bus operators. Given the existence of keen competition in the trucking industry as well as the regular revisions to public carrier rates and fares in response to cost changes, it is reasonable to expect that the operating benefits will be passed on to the general public within one to two years through slower increases in rates than would otherwise occur. Project Risk 67. There is a risk that the Government's financial situation might prevent it from providing financing for the local capital cost and the recur- rent cost of the project, particularly in view of the high foreign exchange component of the recurrent cost. In such a case, the planned improvements in pavement strengthening and preservation and the road maintenance and rehabili- tation would be delayed and the country would forego substantial benefits. As a safeguard against such a contingency, the annual review by the Bank of the Government's proposed maintenance program for the following year (paragraph 52) will focus on keeping a technically and economically sound balance in the program. The planned pavement works are easily divisible, so that any cutback would not harm the economic justification of the remaining works; but if any cuts were proposed, the Government would be reminded during the annual reviews of the benefits which would accrue from the overall maintenance program that had been agreed during negotiations. PART V - LEGAL INSTRUMENTS AND AUTHORITY 68. The draft Loan Agreement between the Bank and the Kingdom of Morocco and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed.to the Executive Directors separately. 69. Special conditions of the project are listed in Section III of Annex III. 70. 1 am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.  - 18 - PART VI - RECOMMENDATION 71. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments March 27, 1980 Washington, D.C.  19 ANNEX I TABLE 3A Page 1 of 6 MOROCCO - SOCIAL InDICATORS DATA SHEET M)ROCCO ERSFERENCE GROUPS (ADJUSTED AYRACES LAND AREA (THOUSAND SQ. ZM.) - MOST RECENT ESTIMATE) - TOTAL 647.0Jf SAME SAME NEXT HIGHER AGRICULTURAL 203.371 MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e GNP PER CAPITA (USS) 190.0 300.0 670.0 1532.5 467.5 1097.7 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 148.0 180.0 273.0 838.1 262.1 730.7 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 11.6 15.1 18.3 URBAN POPULATION (PERCENT OF TOTAL) 29.3 34.6 37.4 49.0- 24.6 49.0 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 34.0 STATIONARY POPULATION (MILLIONS) 71.0 YZAR STATIONARY POPULATION IS REACHED 2090 POPULATION DENSITY PER SQ. IX. 26.0 34.0 41.0 19.9 45.3 44.6 PER SQ. IM. AGRICULTURAL LAND 59.0 76.0 90.0 99.0 149.0 140.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 44.0 47.5 46.0 45.6 45.2 41.3 15-64 YRS. 53.0 48.3 52.0 51.4 51.9 53.5 65 YRS. AND ABOVE 3.0 4.2 2.0 2.8 2.8 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 2.6 2.7 2.8 3.0 2.7 2.4 URBAN 6.4 4.3 4.1 5.2 4.3 4.5 CRUDE BIRTH RATE (PER THOUSAND) 50.0 48.0 45.0 43.7 39.4 31.1 CRUDE DEATH RATE (PER THOUSAND) 21.0 17.0 13.0 13.5 11.7 9.2 GROSS REPRODUCTION RATE 3.4/1 3.4 3.2 3.2 2.7 2.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 25.1 78.0 USERS (PERCENT OF MARRIED WOMEN) .. 1.0 5.4 .. 13.2 34.7 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 116.3 98.0 67.0 90.8 99.6 104.4 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 90.0 102.0 108.0 99.0 94.7 105.0 PROTEINS (GRAMS PER DAY) 43.0 64.0 70.5 63.6 54.3 64.4 OF WHICS ANIMAL AND PULSE .. 14.0/h 15.6 16.0 17.4 23.5 CHILD (AGES 1-4) MORTALITY RATE 30.0 22.0 17.0 15.9 11.4 8.6 HEIALTH LIFE EXPECTANCY AT BIRTH (TEARS) 47.0 52.0 55.0 53.8 54.7 60.2 INFANT MORTALITY RATE (PER THOUSAND) .. .. .. .. 68.1 46.7 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 51.0 55.0 56.4 34.4 60.8 URBAN *- 92.0 100.0 83.4 57.9 75.7 RURAL .. 28.0 25.0 34.3 21.2 40.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 29.0 59.1 40.8 46.0 URBAN .. 75.0 78.2 71.3 46.0 RURAL *- 4.0 *- 26.4 27.7 22.5 POPULATION PER PHYSICIAN 9400.O0 12650.0 11100.0 3677.0 6799.. 2262.4 POPULATION PER NURSING PERSON .. 2820.0 1700.0 1730.6 1522.1 1195.4 POPULATION PER HOSPITAL BED TOTAL 680.0 660.0 710.0 577.0 726.5 453.4 URBAN .. 460.0 272.7 253.1 RURAL *- 2980.0 1404.4 2732.4 ADKISSIONS PER HOSPITAL BED .. 15.5 16.5 21.8 27.5 22.1 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 4.8 5.5 .. 5.3 5.4 5.3 URBAN 4.3 4.9 .. 5.5 5.2 5.2 RURAL 5.1 5.8 *- 6.0 5.5 5.4 AVERACE NMBER OF PERSONS PER ROOM TOTAL 2.2 2.4 .. .. .. 1.9 URBAN 2.1 2.1 .. .. .. 1.6 RURAL 2.3 2.6 .. .. .. 2.5 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 76.0/i .. .. 45.1 28.1 50.0 URBAN 85.471 68.4 55.0 67.9 45.1 71.7 RURAL 31.07- 9.9 17.3  20 A I TAsLr! A ..page 2 6f 6 MOROCCC - SOCIAL INDICATORS rAT, SHEET REFERENCE CROUPS (A.mSTED A!jERAGES MOROCCO~~~~~ Y OST RECENT EST MATE1 ' SAME SA.4 NEXT HIGHER 40ST RECENT GEOGRAPH1C tYCOME LYC0,'E 1960 lb 1970 /b ESTIMATE /b REGION Ic CROUP 7d CROUP /e EDUCATION ADJ1USTED ENROLLMSN! RATIOS PRLY.UY: O-AL 47.0 52.0 65.0 85.0 82.7 102.5 MALE 67.0 67.0 82.0 103.7 87.3 108.6 EMALE 27.0 36.0 47.0 66.0 75.8 97.1 SECONDARY: TOTAL 5.0 13.0 17.0 27.6 21.4 33.5 MALE 7.0 18.0 22.0 39.2 33.0 38.4 FEMALE 2.0 7.0 12.0 20.8 15.5 30.7 VOCATIONAL ENROL. (t OF SECONDARY) .. 2.0 3.0 4.3 9.8 11.5 PlPIL-TEAC1 RATIO PR I .AR 43.0 34.0 40.0 32.6 34.1 35.8 SECONDARY .. 20.0 21.0 23.4 23.4 22.9 ADUXLT LITERACY RATE (PERCENT) 14.0 21.0 28.0 41.4 54.0 64.0 CONSU 'PTION PASSENCER CARS PER THOUSAND POPVLATIOS 11.0 15.0 20.2 16.7 9.3 13.5 RAD'O RECEIVERS PER THOUSAND POPULAutON 46.0 60.0 92.0 147.9 76.9 122.7 TV RECEIVERS PER THOUSAND POPnLATION 0.4 11.0 27.0 36.0 13.5 38.3 NrEWSPA.PER ("DAILY CENERAL -NTERZST') CIRCULATION PER THOUSAND POPULATION 22.0 16.0 21.0 17.9 18.3 40.0 CINEMA ANIdUAL AITENDANCE PER CAPITA 2.0 .. 1.6 2.9 2.5 3.7 LABOR FORCE TOTAL LABCR FORCE (THOUSANDS) 3254.0 3981.0 4670.0 FEMALE (PERCE.NT) 10.6 15.2 19.0 8.6 29.2 25.0 ACRICI'LTURE (PERCENT) 62.5 56.9 53.0 43.0 62.7 43.5 INDUSTRY (PERCENT) 13.8 17.4 19.0 23.7 11.9 21.5 PARTICIPATION RATE (PERCENT) TOTAL 29.0 26.1 26.1 26.7 37.1 33.5 MALE 52.1 45.2 44.4 46.4 48.8 48.0 FEMALE 5.9 7.5 7.9 5.1 20.4 16.S ECONOMIC DEPENDENCY RATIO 2.0 1.9 1.8 1.8 1.4 1.4 INCOME DISTERISU-10N PERCENT OF rRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS I8.Oz 2O.O/ .. 21.4 15.2 20.8 RICHEST 20 PERCENT OF HOUSEHOLDS 43.3j 4i9.Oz *- 48.6 48.2 52.1 LOWEST 20 PERC-NT OF ROUSEhOLDS 7.OLI 4.0/ .. 5.3 6.3 3.9 LOWEST 40 PERCENT OF ROUSEHOLDS 18.02 12.j .. 15.0 16.3 12.6 POVERTY TARGET GROUPS ESTIMATED ABSOLS-E POVERTY INCOME LEVEL (USS PER CAPITA) URBAN 107.0 157.0 319.0 201.3 241.3 270.0 RURAL 66.0 101.0 167.0 134.2 136.6 183.3 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 242.0 288.6 179.7 282.5 RURAL .. .. 157.0 170.0 103.7 248.9 ESTIMATED POPF'tLATON BELOWV ABSOLUTE POVERTY. INCOtME LEVEL (PERCEN`T) URSAN .. .. 34.0 22.9 24.8 20.5 RURAL .. .. 45.0 31.2 37.5 35.3 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are populatiov-welghted geometric seans, excludIng the extreme values of the indicator and the mosc aoaulated country in each gro.p. Coverage of countries .-og the indicators depends on availability of a:a and is not uniform. /b 'ilss eTherh-eee noted. dat. for :960 refer to an7 year betweeo 1959 and 1961; for 1970, bet.cen 1969 ag,d 1971; and for 'lost Recent Fst:nace, bectaen 1974 and 1977. /c North :f' 7i. S Mlddle East; id Lo.et Y1dAle Income ($81-550 per capita, 1976); Ie Intermediate Middle Incone 1$55i-1135 pe! capIa, 1976); If lxcludes Moroccan pioviuces in W. Sabra, / 19f2; /h Av. 1'9i-h6 /1 Brick huilding only; /1 Consuspcinn expcnditures of householda. Most Recent Estimate of GNP per capita is for 1978. August, 1979  21 ANNEX I txgymvto-s o, rMUMICTage 3 o 53Js: the adjusted group #ererags for esAh liWicAtec wet popnlacioe-veighcat seometric earsm, excluding the extrem vals..e of the Indicator and C.e marc popu;ated Country int each scooP. CorSrsga Of ceWaries mums the inietiaors aepend.. on availahillt7 of dats and is not unif or. Dze to lack of deca. group areragee for Capica.. S.urplus. 011 LEportars and indiAteore of acces to ester and screta disposal. bousiog. income disctrb.tion And Poverty arm limple populetinovigbted geioeatric. eass ithou the seaclusion of estremd values.. LOD5 A RA (thousand sq. km) ?opOOtlstion p5y hospital bed - total, urba. and rural, - Population ca. Total - 'ocal, s.rfaco armea oarislne land ar"ea nd iciet waters, urba., a rural.; di,,dee by tne.Lr raspecci.. ru-ber of oospital Ien. Aarlccl.tural - Most r.csat *stineta of aoticu.ltural area used teeporartly avail,able In public an privaet amoral, -dlopeclAIic.o hcuyiz; -oa r.- or pereecently fnr crops, Pastures. SoMck and hitches gardans or to hbobilitation centers. Hospitals are eszahlloismntso p.rnmanec.: utrf!au I Iie fallo". Cr lase se physician. Etatbii.ananta Providing ;rincipa.lly c-tIcitlla carer accn included. Rural hospital... Muscvs. incld. hoalth ann .odi- GP? PEI CAPITA (UM0 - M? per capita estimats at current earkec primes, ca W cecrs no emnnl cofdh bscen(u y*nd l as- cal.culated by msa con-ersio. schet aso flord lena Atlas (1975-fl heeis); ijctaCt curse. midwife. eCC.) so,ch offer 1.n-ptcient szowwmda:ios end 1960. 1970, And 1977 data. provid a Ilaited ramS. of mLedial faci,tis.. Adeisaelos ,er hospital. bed - Iscel Maher of adalissose to or discharges IMEROT CClrO-TMTtO ?'-I CAPITA - Annual CeOUspciom of CemeNrCial neargy froe sospicala divided by the amber of bade. (cnal end 1ignite, pecrelom. acural. We end bydra-. nucl.ear and gao- thermal. electricity) in kilograma of coal equivalent pier capica. VSfl40 A-eras. isiz of household (P.rsons a,e Mouaehold) - total. i4rban. aO rural - PCPMLATICS AM? VITAL SCATIFTICS k nouaennld coneists of a Srour of individuals who sa-re .1,,.04 quarters total ,oeu.Ato. old-Ioar tatillio-S) - As of July 1; if not available. ant their main seals. A bOarter or iodgec may or nay not 'a inciuded in avweg nr v. .o-ysa ectiacas 1960. 1970. ant 1977 daca, the household for satistaical p.r"oea. StatIstical dafiaitione, of house- urban oaoul.ato (perce o oAll - AdsC Of whean tC total papule- hold arcy. tdon; diffarent definitions of rban Seraem nAy affect roaprmhility Aenrazt amberc of person. Per rose - total, urban, a"t rural - A"veage son- of dta Soong couscriLes. her of rae pers onseo in 1 all. ocean, and -ura Occupied eonventlosa.1 Psoolaion density domllings. reepectively. DeelU.inga eacj.ode non-pormament sc,ic:urcs and U0 o n Mi-year population per square hilanecex (100 hactmes) unacrupiedt pats. of total, area. ~~~~~~~~~~Acctess to electricity (poercn of decllinac) - .totl, urbn, and -rural - ?erfo.A.osiutc land - Computed en 1share for agricultural lead Con.oet-nal deelliAlo with alectricity in. living qua.rters AS percentage only. of total, urhen. and rural dunlings respectirair. Poplactioa ac structure (percenc) - Chi.drse (0-lb ycars), enching-ege (1-5yso.and retired ,b5 years and Over) as parmaencgoe of nit- tbOCATfOl( -ea popuLlti. Adluet.d scroilnast retina Population orouth r-ae (;6rranti - total. and urban - Compound anua.l Prizarv school, - total. and !eale - Tocal and fomale .srollesnt izf all ages growh rare. Of total and urban n3od-yaw POPUlAto fOr 1950-60. at the primacy lerel aSo prercccagee of rospeotilrc prianay ecbnl-.age, 1960-70. set 19 70- '5. pnpulscone; nornally forludee Children aged 6-Ll years hut adjusted for Crude birth rate (per thousand) - Annul Lire birthos per theseat of different langthe of primary educaciAc; for countries etch unirerel adw- aid-year population. ten-year arirnutct aretages ceding in 1960 end "Clano enoilnent may eamced 100 nernet cLan. so"e Puasl are below n 1)70 a"d fira-year averatte endingi in 1975 f or most recent aetloat. above the offlitial School ago. Crd. dsach rtac (vor thousand) - Annual meanh per Choussad of mid- Seconedr, school - total. and female - Computed at above; secondary etuca- year pnpuelcioft tan-yerarwithn CIdi &avrages ending in 1960 and 1970 ctan rquires at least four yerar of approred prisary lOstructiac; pro- and five-year a"Crl. ending in 1975 for seat recent estlmetr. rides general rocational *Or ceacher training sinscructones tor pupils Gces. raoroiuctl.on rats - Average atabar of dsushrners a anes will boar saucily of 12 to 1 years of age; torreepeadasco curses are smnsrall, in -a rorm.l :.rorouctir- period If oh. earperoenc present Vu- enclude. specllic fertIlIty rates; usually f irc-ymer averages ending in 1960. 7ocationaL sarollmat (pareent of setocdiarv) -Vocational lca: