Morocco - Middle Atlas - Central Area - Agriculture Development Project

Document of The World Bank FLE COPY FOR OFFICIAL USE ONLY Report No. P-3176-M4OR REPORT AND RECOMNENDATION 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 MIDDLE ATLAS - CENTRAL AREA - AGRICULTURE DEVELOPMENT PROJECT December 10, 1981 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its eontents may not otherwise be disclosed without World Bank authorization.  KINGDOM OF MOROCCO CURRENCY EQUIVALENT Currency Unit - Dirham (DH) US$1 = DH4.80 DH1 = US$o.208 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS CNCA National Agricultural Credit Bank (Caisse Nationale de Crgdit Agricole) DPA Provincial Directorate of Agriculture (Direction Provinciale de l'Agriculture) FAO Food and Agriculture Organization INRA National Institute for Agricultural Research (Institut National de la Recherche Agronomique) MARA Ministry of Agriculture (Ministere de l'Agriculture et de la R4forme Agraire)  FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO MIDDLE ATLAS - CENTRAL AREA - AGRICULTURAL DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: The Kingdom of Morocco. Amount: US$29 million. Terms: Amortization over 17 years including four years of grace at 11.6 percent interest per annum. Project Objectives and Description: The project area covers about 600,000 ha in Central Morocco, at altitudes between 800 and 2,500 m, and is about equally divided between forest, rangeland and cropping land. The project consists of interrelated forestry, range and cropping land development to bring about production increases of meat, milk, fodder, cereals and wood, and a rise of income and employment among the rural population. Forestry development would consist of the implementation of forest management plans over 124,000 ha including the preparation of such plans over 36,000 ha; the provision of infrastructure, mostly roads; the planting of trees and forage shrubs; felling and thinning; pest management. Livestock development would consist of increasing forage production and improving forage conservation at the farm level, in the forest and on collective rangeland; the acquisition of selected animals; the introduction of range management based on fixed stocking rates and on deferred and rotational grazing; the provision of infrastructure on the range as well as reseeding and fertilization of forage; the construction of animal health facilities and of breeding stations; and the provision of credit. Cropping development would comprise a reorganization and a reinforcement of existing extension services; problem-specific research linked with extension; the provision of credit; irrigation improvement of some 2,000 ha of small traditional perimeters; and construction of access roads. Project implementation would proceed on the basis of agreements between project management and the social units (tribal units or village councils), to ensure adhesion of the project beneficiaries to project actions. The effects of a drought, an important risk in part of the project area, has been minimized through the selection of drought-resistant agricultural packages and will also be reduced through 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 - the plantation of drought-resistant forage shrubs in the forests as a forage reserve in drought years. The risk that the chosen social units will not be willing to engage in some of the project actions, such as maintaining stocking rates below a maximum and the introduction of rotational grazing on the range, ought to be small, as similar practices were traditionally used in the area, since overall stocking rates will not have to be reduced thanks to a greater availability of forage, and the beneficiaries would participate in defining the action prograsm. Project Cost Estimates: ----------US$ million------------- Local Foreign Total Forestry 5.1 4.1 9.2 Agricultural Development 2.1 1.8 3.9 Livestock 1.5 1.3 2.8 Sylvopastoral Development 1.7 1.4 3.1 Road Construction 4.4 4.4 8.8 Small Scale Irrigation 2.3 1.1 3.4 Infrastructure 2.0 1.5 3.5 On farm Investments 6.3 4.0 10.3 Incremental Short-term credit 4.3 3.3 7.6 Studies, Training and Technical Assistance 1.5 2.3 3.8 Establishment Costs 6.8 3.2 10.0 TOTAL BASE COST 38.0 28.4 66.4 Physical Contingencies 3.3 2.7 6.0 Price Contingencies 12.4 7.4 19.8 GRAND TOTAL 53.7 38.5 92.2 1/ Financing Plan: IBRD - 29.0 29.0 Government 41.9 - 41.9 CNCA (National Agricultural Credit Bank) 5.3 9.5 14.8 Beneficiaries 6.5 6.5 TOTAL 53.7 38.5 92.2 1/ 1/ Including $19.6 million for taxes.  - iii - Estimated Disbursements: ---------------------US$ million--------------------- Fiscal Year 1983 1984 1985 1986 1987 1988 Annual 1.0 4.0 6.0 8.0 7.0 3.0 Cumulative 1.0 5.0 11.0 19.0 26.0 29.0 Rate of Return: 24 percent. Appraisal Report: Staff Appraisal Report of the Middle Atlas - Central Area - Agriculture Development Project No. 3628-MOR dated December 7, 1981.   REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A MIDDLE ATLAS - CENTRAL AREA - AGRICULTURE DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to the Kingdom of Morocco for the equivalent of US$29 million, to help finance a Middle Atlas - Central Area - Agriculture Development Project. The loan would have a term of 17 years, including 4 years of grace, with interest at 11.6 percent per annum. PART I - THE ECONOMY I/ 2. A basic economic mission visited Morocco in November 1978, and updating missions in September and December 1979 and in May 1980. A report entitled "Morocco: Basic Economic Report" (3289-MOR) was distributed to the Executive Directors in December 1980. A mission to review Morocco's Five Year Plan (1981-85) and development prospects is now in the field. Country and Economic Data Sheets are attached as Annex I. Introduction 3. Compared with many developing countries, Morocco is well endowed with natural resources. It has a considerable agricultural potential both in irrigated and rainfed areas. The Atlantic and the Mediterranean coastlines offer considerable fish resources. Morocco also has the world's largest and most easily recoverable phosphate reserves, which makes the phosphate sector a key export sector. Other minerals such as iron ore, manganese, lead and zinc are also exported, but in much smaller amounts. Coal and hydropower plants satisfy only a small part of the country's energy requirements, which are essentially met with imported oil. Morocco has however uranium and oil shale resources which it plans to exploit. In addition, Morocco's proximity to Europe has favored trade, tourism and labor migration with the EEC countries. 4. During the first 15 years after independence (1956), a conservative approach to economic policy predominated in Morocco. GDP increased at an average rate of 4% a year in the 1960s. Growth accelerated somewhat under the 1968-72 development plan as the economy derived substantial momentum from exports. However, a relatively weak savings effort and a small externally financed resource gap resulted in only a slow rise in the share * of resources allocated to investment. Morocco thus entered the 1970s with no major financial imbalances, but a relatively limited growth capacity. Although some industrialization had taken place, over half of the labor 1/ Part I has been updated from Part I of President's Report No. P-3098-MOR of June 22, 1981 on a proposed Ninth Loan to the Banque Nationale pour le Developpement Economique.  - 2 - force was employed in the relatively inefficient traditional agricultural sector, and primary products accounted for close to 90% of merchandise exports, with phosphates representing about a quarter of the total. Economic Performance in the 1970s 5. During the 1970s, economic policy became more ambitious. The 1973-77 Development Plan aimed at an acceleration of economic growth, as well as an improvement in income distribution. To accomplish this, the original plan strategy included two key elements: an intensified savings effort and the development of exports. However, in 1974, with the sudden jump in phosphate prices, phosphate export earnings more than quadrupled. As a result of this windfall, the value of merchandise exports doubled and budgetary receipts rose by 70% between 1973 and 1974. Although the petroleum import bill also quadrupled in 1974, the current account of the balance of payments remained in surplus. The plan's concern for exports and savings lost some of its urgency, and the Government launched a massive public investment program which brought about a sharp acceleration in the rate of growth of the economy and a considerable increase in demand for imported goods and services, whose share in GDP doubled from 19% in 1972 to 39% in 1977. 6. The phosphate boom, however, was shortlived; as early as mid-1975, phosphate exports started falling in both volume and value, and prices continued to decline until 1980. Markets for other exports as well as for tourism and labor migration were also negatively affected by the world recession and restrictions imposed by the EEC. Agricultural production and exports entered a period of prolonged stagnation, and Morocco turned from a net exporter to a net importer of foodstuffs. As a result of all these factors, the growth of exports of goods and nonfactor services, which in constant prices had exceeded 8% a year in 1968-72, was only 1% a year in 1973-77. 7. Stimulated by the high investment level, a high GDP growth rate of 7.3% a year was achieved during the 1973-77 plan period. This growth was led by the expansion of the construction and service sectors. The pattern of investment, however, favored economic and social infrastructure more than the productive sectors. In addition, public investments in industry, agriculture and transport tended to be capital intensive and to emphasize import substitution. 8. Accelerated investment and growing public expenditures created strong pressures on both the balance of payments and the Government budget. While investment jumped from about 15% of GDP in the early 1970s to 32% in 1977, gross domestic savings rose briefly from 13% of GDP in 1972 to 21% of GDP in 1974 thanks to phosphate receipts, but fell back to 10-11% in 1976-77. The large resource gap which emerged as early as 1975 rose to an unsustainable 20% of GDP in 1977 (in current prices). To help finance the gap, Morocco borrowed heavily from the international capital market, which led to rapid increases in external debt and the debt service burden. By the end of 1977, external debt outstanding was close to 40% of GDP. The debt service ratio rose from 5.6% of exports of goods and services in 1975 to 10.7% in 1977, and 18.5% in 1978.  9. The Government's overall budget position also deteriorated considerably during the period 1973-77. While budgetary revenues increased rapidly as a result of the windfall phosphate profits in 1974 and 1975 and of the growth of import duties and taxes in following years (reaching 23% of GDP in 1977), the growth of expenditure far exceeded that of revenues. Total budgetary outlays rose from 20% of GDP in 1972 to nearly 42% in 1977, in response to a number of pressures. These included not only the large scale public investment launched under the plan, but also the rapid increase in defense spending in response to growing tensions in the Western Sahara, and the acceleration of current expenditure for social programs (particularly education). As a result, the Government's overall budget deficit increased sharply, reaching peaks of 17 and 18% of GDP in 1976 and 1977. The expansionary monetary and fiscal policies pursued during the period led to some acceleration of domestic inflation, but excess demand was largely allowed to spill over into the external sector. Recent Developments 10. In order to redress the rapidly deteriorating financial situation, the Moroccan Government in 1978 adopted a three-year stabilization program, characterized by a substantial retrenchment of investment and import levels. In 1978, the first year of the adjustment, public investment was cut back by nearly half in real terms and the growth of current budgetary expenditure held down to about 13% (or less than 3% in real terms). These measures of fiscal restraint were combined with tight credit policies and stringent import controls. As a result, the overall budget deficit declined to about 12% of GDP and the external payments situation improved in 1978. Since then, however, the stabilization program encountered a number of obstacles, including poor harvests, petroleum price increases and the rise in interest on the commercial debt. In addition, internal pressures led to some relaxation of the highly restrictive fiscal policy adopted in 1978. Although the economy continued to make slow progress toward equilibrium, by 1980 both fiscal and external imbalances were still substantial. The resource gap (in current prices) remained at about 10% of GDP and the ratio of the overall budget deficit to GDP at about 117. 11. The reduction in the Government deficit during the 1978-80 period was achieved chiefly through cutbacks in the level of budgetary investments, which dropped from 22% of GDP in 1977 to 12% in 1980. The growth of current expenditure proved difficult to restrain because of the continuing need to maintain defense and social expenditures, the growing interest payments on the public debt and the rising cost of consumption subsidies. The latter tripled in 1979-80 reaching 2% of GDP, as price increases for subsidized staple food and petroleum products could not catch up with the rise in import costs for these products. Reflecting these pressures, the growth of current expenditure accelerated to 16% in 1979 and 22% in 1980.  - 4 - 12. In the external sector, non-oil imports were reduced substantially and remained below the 1977 level in nominal terms due to a sharp reduction in capital goods imports (by about two-thirds in real terms between 1977 and 1980). Oil imports on the other hand increased 2.5 times in value due to price increases. Export earnings improved in 1979 and received a significant boost from the recovery of phosphate prices in 1980. Thus, despite a large increase in the petroleum import bill (from less than $400 million in 1977 to $1 billion in 1980) and a rise in external debt interest payments by about $350 million between 1977 and 1980, the current account deficit was reduced from $1.8 billion, or 18% of GDP, in 1977 to about $1.4 billion, or 8% of GDP, in 1980. The growth of external borrowing slowed considerably during the period. However, the absolute level of gross external capital requirements rose because of growing amortization payments on medium-term commercial credits contracted earlier and the rise in the interest rate on these credits in 1980 (paragraph 21). 13. The budgetary and balance-of-payments constraints had a serious impact on the levels of investment and economic activity in 1978-80. Annual GDP growth dropped to 4% in 1978-80. The adverse impact of the stabilization program on employment has probably been substantial in contrast with the rapid rate of employment creation during 1973-77. On the whole, the demand management policies followed since 1978 have had a high cost in terms of growth and employment and appear to have been only partly successful in their short-term stabilization objectives. These results brought out the urgent need to address adequately the long-term structural weaknesses which are at the root of the continuing financial imbalances in the Moroccan economy, and which must be corrected if an acceptable rate of economic growth is to be achieved over the medium term without unsustainable external deficits. Medium Term Prospects 14. Projections!/ of the likely outcome of the continuation of past policies without concerted effort to implement major structural reforms suggest that Morocco would be faced with a prolonged period of slow growth, rising unemployment and continued large external imbalances which would keep the country in considerable dependence on external borrowing and could jeopardize its creditworthiness. To forestall such a deterioration, the Government adopted a strategy in the development plan for 1981-85 which aims at narrowing the external resource gap while accelerating growth and spreading 1/ For details on these Bank projections, see Morocco - Basic Economic Report, December 30, 1980 (No. 3289-MOR), Chapter III.  the benefits of growth more widely. The main objectives are to achieve a significant increase in domestic savings and exports, a reduction in the elasticity of imports with respect to GDP, and a rise in productivity and the employment rate. The Plan's projections show that, if achieved, such changes would permit a gradual acceleration of annual GDP growth to 6.5% p.a., somewhat higher than Bank projections, in 1981-85, accompanied by a reduction of the resource gap to about 7% in 1985. 15. The containment of imports would result in part from the substitution of imports of food products (cereals, sugar, vegetable oil, meat and dairy products) to be brought about by an acceleration of the rate of growth of agricultural production. This will require a wide range of institutional reforms in addition to a review of prices of certain inputs and outputs, and a greater allocation of resources to rainfed areas and to projects with high rates of return. The Government also intends to follow a determined policy in 1981-85 in the area of energy conservation, including in particular maintaining domestic energy prices at high levels, and making the necessary investment allocations to increase energy production from local sources. 16. An essential role in the achievement of the Plan's objectives will have to be played by export promotion aimed at exploiting Morocco's comparative advantage as regards phosphates and phosphate derivatives as well as the current favorable export prospects for manufactured goods, agricultural products and tourism. Exports of goods and nonfactor services are expected to rise at 8.5% p.a. in real terms over 1981-85. While feasible, such a growth rate would require implementation of the supporting investments and incentives policies. 17. Narrowing the resource gap while maintaining at the same time high investment levels would require an increase in domestic savings as well as rationalization of the pattern and content of investment. A vigorous recovery in domestic savings, which would rise from 11.5% of GDP in 1980 to 16% by 1985, would make it possible to narrow gradually the resource gap from about 10% in 1980 to 5% of GDP by 1985. Such a rise in the domestic savings rate would exceed the performance in 1973-77 when savings averaged 14% of GDP. It would demand intensive efforts to increase public savings (through an increase in budgetary savings and an improvement in the performance of public enterprises) and to stimulate private savings (through a revision of interest rates and improvements in financial intermediation). 18. Given the feasible level of investment, the future rate of growth of the economy will depend to a large extent on the sectoral allocation and the efficiency of investment as well as institutional reforms. Under the Plan, the Government will start fewer large capital-intensive projects and pay particular attention to the allocation of investments to priority subsectors. Priority is given to projects that are export oriented, less capital intensive and which use a greater proportion of domestic resources. In addition, particular attention will be paid by the Government to manpower planning and to the employment effect of investments in order to ensure that unemployment does not rise.  -6- Social Development 19. Comparatively slow economic growth and employment creation up to the early 1970s were accompanied by widening income disparities. The limited data available indicate that in the 1970s, while disparities continued to grow, household incomes increased in both urban and rural areas, and the lower income groups shared in the real increase in incomes. In addition, infant mortality has declined and life expectancy has increased, both significantly. More recently, partly in response to the demands of locally elected assemblies, the Government has shown more awareness of social problems and greater interest in the issue of basic needs. Social expenditures have been at a high level in recent years, accounting for more than half current outlays. However, social indicators still appear to be at low levels in Morocco. The limited effectiveness of past social policies in reaching the lower income groups, especially in rural areas, is increasingly recognized as a major issue, and the new strategy of the 1981-85 Development Plan emphasizes rural development in rainfed areas, where most of the poorest households in Morocco currently live, and improved mechanisms to deliver services to meet basic needs at an affordable cost, especially in rural areas. An effort is also being made to increase the involvement of local communities in providing basic needs, particularly for sites and services for low cost housing, water supply, sewerage and electrification. Although rapid results cannot be expected in any of these areas, implementation of these policies would help meet the needs of low-income groups, while holding down the budgetary cost of social programs. External Debt and Debt Service 20. Morocco sharply increased external borrowings after 1974. Nearly all of the increase came from Arab and commercial sources. Morocco also drew on the IMF automatic credit facilities in early 1976, and obtained about $70 million in IMF compensatory financing in August 1978. Agreement was reached with the IMF in 1980 for Morocco to draw on the Extended Fund Facility (EFF); the agreement provided for the use of IMF resources in the amount of SDR 810 million over the 1980-83 period, an amount subsequently increased to SDR 956 million ($1.2 billion). However, as Morocco did not satisfy performance criteria at the end of July 1981, its purchases under the EFF have been suspended pending an understanding with the IMF. The Government and IMF staff have been in close contact and plan to discuss a program for 1982 in January. 21. From the low levels of 1974-75, Morocco's external debt rose rapidly to $7.1 billion (disbursed only) by December 1980. Gross inflow of medium and long term capital reached $1.57 billion in 1980. Debt service amounted to $800 million in 1979 and $1.2 billion in 1980 (22% and about 28%, respectively, of total exports of goods and services). The debt service rose considerably in 1980 due mainly to the steep rise in interest on commercial credits. As a result of recent and projected borrowings, debt service may be expected to average $1.8 billion annually in the early 1980s. Because of the growing burden of debt service, external borrowing has become more restrictive and selective since 1978. If debt service is to stay manageable, the Government  - 7 - will have to continue this policy over the next few years. Limits on commercial borrowing have been agreed within the framework of the Extended Facility arrangement with the IMF, and efforts should be continued to seek loans on softer terms. 22. Loan commitments from multilateral and bilateral official sources to Morocco rose from $205 million in 1975 to $1376 million in 1978. Since then, they have averaged $700-800 million a year (excluding grants). Major sources of aid were France, Saudi Arabia, the UAE, the U.S., Germany and the Bank Group. At the end of 1980, the Bank Group's share in Morocco's outstanding and disbursed external public debt was 7 percent. The share of the Bank Group in debt service was 21 percent in 1976 and declined to 15 percent in 1977, and 6 percent in 1980. By 1985 the Bank Group's shares in debt outstanding and in debt service are projected at about 10 percent and 11 percent respectively. PART II - BANK GROUP OPERATIONS IN MOROCCO 23. Bank and IDA lending to Morocco has supported 50 projects, financing a total of $1,833.1 million (net of cancellations), of which $1,379 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 $31.2 million ($17.1 million after cancellations, terminations, repayments and sales). Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of September 30, 1981, and notes on the execution of ongoing IBRD/IDA projects. In some cases delays in project implementation have been caused by management problems and budgetary constraints; however, overall performance in project execution has been improving and is satisfactory. 24. Past Bank Group lending has been concentrated in the agricultural and industrial sectors, which have accounted for 27 percent each of total commitments; the balance is represented by utilities (16 percent), tourism (9 percent), education (9 percent), roads (6 percent), energy (3 percent) and urban development (3 percent). While limited as regards the transfer of resources to Morocco (Bank Group gross disbursements amounted to 2.2 percent of total fixed investment during the 1973-77 Plan period), the main objectives of Bank lending in previous years 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. 25. While these objectives remain, in recent years Bank lending has increasingly focussed on supporting a number of policy objectives: to promote exports and other foreign-exchange earning activities; to reduce imports, particularly of food and energy; to lower unit costs for the delivery of basic services, widen their distribution among regions and increase access by lower-income groups; to increase employment and improve income distribution; and to bring about structural adjustment.  - 8 - 26. Since FY1975, lending in agriculture has emphasized improvement in the productivity of rainfed agriculture and livestock, which employ over 80 percent of the rural population, primarily small farmers. The Fes-Karia-Tissa Agriculture Project, approved in June 1978, directly addresses these objectives in the favorable cereal producing zone. The Loukkos project, approved in May 1980, extends support of these objectives to a less favorably endowed region and finances investments for agricultural development, erosion control, forestry and livestock. It should have a significant poverty impact and address major issues in developing Morocco's relatively densely populated but poorly endowed mountainous regions. The proposed project would address similar issues with a particular emphasis on integrated agro-sylvo-pastoral development. Continued Bank support of rainfed agriculture is expected to be provided through an integrated rural development project in the Khemisset province, which is under preparation. A fourth line of credit to Caisse Nationale de Credit Agricole (CNCA) has helped provide credit to small and medium farmers, and a fifth project is under preparation. Increased export earnings are expected to result from a Bank-supported project for vegetable marketing and production, as well as from a project currently under preparation to improve the efficiency of the coastal fishing industry. Projects are also under preparation for research and extension, for irrigation rehabilitation, and for development of small- and medium-scale irrigation. 27. Increased foreign exchange earnings or savings and, more recently, job creation, have been the key objectives of Bank projects in industry and tourism. A ninth line of credit to the Banque Nationale pour le Developpement Economique (BNDE), incorporating a pilot component for export-oriented industries, as well as a second line of credit for small scale industries with an emphasis on job creation have recently been approved by the Board. A project focussing on the development of electro-mechanical industries is being prepared. A fourth line of credit to Credit Immobilier et Hotelier (CIH) for tourism projects was also recently approved by the Executive Directors, in a sector which has contributed a substantial share of Morocco's foreign exchange earnings and provided significant employment. A project to increase the incomes of artisanal and small-scale miners in southeastern Morocco, a region largely bypassed by previous development efforts, is scheduled to be presented to the Board later this fiscal year. 28. Projects to improve basic infrastructure and services have concentrated on improving the efficiency of existing investments and extending services to rural and low-income urban groups. A second urban development project was approved by the Board in FY1981, which would continue to support the Government's efforts to provide shelter, basic services and employment to low-income urban families. A third highway project approved in FY1980 supported the Government's road maintenance efforts and a fourth project now being prepared would continue support for maintenance and improve rural access roads. A loan for village electrification approved in FY1979 is helping bring power to over a hundred small towns and villages. A third water supply project, recently approved,  - 9 - will provide access to safe water in small towns and semi-rural areas, as well as expand a pilot component initiated under the second project to provide credit for house connections to low income urban families. In addition, a project to strengthen the capacity of local communities to prepare and implement their own development programs and provide financing for such programs through the Communal Infrastructure Fund (FEC) is being prepared. It will not only help to widen the distribution of infrastructure and services but will also support the Government's policy of encouraging administrative decentralization and local participation. 29. Education continues to need attention to ensure Morocco's manpower development. While recent projects have focussed on secondary level technical education and teacher training, attention has also been given to expanding basic education in the rural areas and ensuring a greater orientation in primary schooling towards practical training. This would be complemented by future projects in non-formal education and vocational training. The Government's recent policy supporting primary health care would be tested through a project currently being prepared as a first phase in a nationwide program to reorganize medical and paramedical training, health education, nutrition, environmental sanitation and family planning services, especially in rural areas. 30. In order to aim at reducing the impact of the oil import burden on the Moroccan economy, a project was approved in April 1980 to contribute to the Government's efforts to accelerate the exploration and development of its petroleum resources. An oil shale engineering project, the main objective of which is to help Morocco identify the best course for development of its oil resources, is expected to be presented to the Board shortly. Additional projects for development of coal and hydropower resources are under consideration. 31. The sectoral objectives implied in these projects as well as other objectives relating to price policy, efficiency and composition of the public sector investment program, and measures to mobilize domestic savings, would be reinforced by the policy changes envisaged under a possible Structural Adjustment Loan which has been appraised. Negotiations for the loan began in mid-1980, but were not completed by the time the release of the second tranche of the IMF's EFF was postponed (see paragraph 20). The government has requested resumption of negotiations; further progress would depend on the IMF and the Bank reaching agreement with the Government and may require reappraisal of the structural adjustment program.. PART III - THE AGRICULTURE SECTOR 32. Agricultural Sector Background. About 60 percent of Morocco's population of 20 million lives in rural areas. Since 1970, population growth in the rural sector has averaged 1.8 percent per annum compared with 2.8 percent growth overall, reflecting rural-urban migration. In 1979, agriculture contributed about 13 percent of GDP, employed about 40 percent of the labor force, and accounted for about 33 percent of total exports -- a  - 10 - decline from figures for the early 1970s largely as a result of increased phosphate production and exports. Out of a total land area of about 50 million hectares, 7.4 million have soils and moisture suitable for cropping and 20 million are in semi-arid or mountain regions suitable for grazing and forestry. About 5.8 million hectares are cultivated each year, with 4.5 million in cereals, 500,000 in pulses, 400,000 in fruit trees, 140,000 in vegetables, 60,000 in sugar beet, and the remainder in oilseeds, cotton and forage crops. Most of Morocco's rainfed areas are characterized by traditional agricultural practices which result in low crop yields and low livestock productivity. In 1979 permanent irrigation covered 760,000 hectares. 33. Since 1965 agricultural output has grown on average by 2.4 percent per annum, with wide annual fluctuations due to climatic conditions. This growth was below the increase in demand for foodstuffs caused by income and population growth. The value of food imports increased on an average of 21 percent annually, while the value of food exports grew at 6 percent per annum. A generally adequate food supply was maintained by expanding agricultural imports and some switching of exportables to domestic consumption. However, increasing population pressures on cultivable land have led in some rural areas to a decline in per capita consumption levels and some nutritional deficiencies. Growth of output has been greatest for products for which the introduction of modern farming techniques has been made possible by adaptive research and appropriate extension efforts, and prices set at attractive levels: sugar beet, sugar cane, milk and vegetables. For other crops such as cereals and pulses where the Government has not yet been successful in modernizing farming practices, and for crops for which prices have been pegged at insufficiently remunerative levels -- oilseeds, cotton, maize -- the Government has met with limited success. Regarding forestry products, although cork and pulp are exported, industrial timber production only accounts for 25 percent of the domestic market. 34. The Government's objectives in agriculture are: (i) to restore a high degreee of agricultural self-sufficiency and maximize agriculture's contribution to the balance of payments by fostering export and import substituting production; and (ii) to reduce regional income disparities and improve living conditions of the poorer segments of the rural population by increasing their productivity and generating employment opportunities. In order to achieve these objectives, the Government recognizes the need to allocate a larger share of Government resources to support the rainfed agriculture and extensive livestock activities practiced by the majority of Morocco's rural poor, as well as for forestry development. The investment program in agriculture under the Five-year Plan 1981-85 reflects this strategy as well as the importance accorded by the Government to the sector. Agriculture is allocated 22.5 percent of total investments, against 18 percent during 1978-1980 and 17 percent during 1973-1977. Within the sector, the share of large irrigation schemes falls from 61 to 40 percent, while that of rainfed agricultural development increases from 2 to 18 percent, of small-scale irrigation from 3 to 8 percent, of livestock development from 4 to 11 percent and of forestry from 4 to 8 percent. The shift in priorities is even more radical when account is taken of expenditures committed to completion of ongoing large irrigation projects.  - 11 - 35. Agricultural Sector Issues. About 40 percent of the rural labor force is partly or fully unemployed, and about 45 percent of farm families are close to or below the estimated absolute rural poverty threshold ($270 per capita in 1980). Despite a rise in the real average rural per capita income, there is evidence that population pressures have led to a decline in per capita income in mountain, forest, and arid areas where neither employment opportunities nor emigration to other parts of Morocco or abroad increased. Over the last five years, and mostly through investments in hitherto neglected areas, the Government has increasingly sought to reach the rural poor through its agricultural projects. Among the recent agricultural projects supported by the Bank, the Souss Groundwater and the two Doukkala Irrigation, the Fes-Karia-Tissa Agricultural Development and the Fourth Agricultural Credit (CNCA IV) projects were designed to have a significant impact on the productivity and incomes of small farmers, and the Vegetable Production and Marketing project is expected to lead to a significant amount of rural on-farm and off-farm employment generation at a low cost per job created. The Loukkos project marked the Bank's first involvement in developing Morocco's agricultural and livestock potential in the poorer and less favorably endowed regions. The proposed project is a further step in this direction: its location is representative of a large ecologically similar underdeveloped area in mountainous central Morocco, devoted mostly to extensive pastoralism in forests and on rangeland collectively owned by long established tribes. 36. Livestock is a major activity, contributing about 36 percent to agricultural GDP. It has a very important place for small farmers both as a source of protein and as an instrument for wealth accumulation or temporary savings: about 63 percent of cattle and 46 percent of sheep are owned by the landless and farmers with less than 5 hectares of land. Morocco has a long tradition of extensive livestock raising on range and forest lands totalling some 20 million hectares, mostly collectively owned and grazed. It is estimated that these lands produce about one half of the feed units consumed. However, livestock yields are low and declining due to overgrazing, the absence of range management and poor animal husbandry. These difficulties are accentuated by population pressures on land that have led to an erosion of transhumance patterns and increased use of grazing lands for cropping purposes. The Goverment has recognized the need to reverse these trends and to attach a higher priority to develop the potential of grazing lands. The proposed project would be the first attempt to do so on a significant scale, through a series of integrated actions. Fodder production on the range and in the forest would be increased through proven techniques and traditional range management practices, which had fallen into disuse, would be reinvigorated through agreements with the traditional tribal units. 37. Morocco's natural forests are extensive, covering some 7.7 million hectares. In addition to the lumber and firewood they provide, these forests provide forage material that plays a major complementary role to the range in sustaining livestock. However, natural forests are being rapidly degraded as population pressures drive the local population to seek additional cultivable and grazing lands. On the other hand, productive  - 12 - forests are not being exploited to their potential, mainly for lack of investments, so Morocco has to import a substantial share of its domestic consumption of wood and wood products. The greater emphasis given to forestry investments under the Plan, and the sylvo-pastoral strategy tested under the proposed project, should help address these issues. A forestry project under preparation would constitute a large share of forestry investments under the Plan and would help boost wood production in Morocco's most favorably endowed area. 38. Agricultural research is excessively theoretical and has developed in isolation from farm profitability considerations or production priorities. Budget allocations have been low and research carried out in the various centers has been poorly coordinated. To overcome these constraints the Government recently created a National Institute for Agricultural Research, and in the last Plan increased allocations for research. The extension service is encumbered with administrative tasks and employs agents with little practical farming experience. It also lacks organization, materials, and a systematic method for extension, particularly in rainfed areas. These issues are addressed through the Bank supported Fes-Karia-Tissa Project which seeks to divest the extension agents of all regulatory and most administrative tasks and to concentrate their efforts on forming service cooperatives through which extension advice and inputs can be channelled. That project provides for practical training of agents and, in addition, seeks to develop the extension agents' role in establishing farmers' needs and revenue potential as a basis for establishing credit eligibility criteria. The proposed project would seek to adapt the relevant experience gained to a different ecological zone and production sytems, and introduce a multidisciplinary and farmer oriented approach to extension. Finally, a project is in the early preparatory stages to support research nationally, to help train trainers of extension workers and develop an effective extension system nationwide. 39. Land distribution is relatively skewed: about 75 percent of farm families own 5 hectares or less, accounting for 25 percent of agricultural land. These farms are for the most part below an economically viable size and suffer from excessive fragmentation: Morocco's 1.9 million farms are divided into 11.6 million parcels. Absentee landlords and tenancy arrangements afford tenants little security and consequently no incentive to improve the land. With few exceptions, tenants are also ineligible to receive agricultural credit. A number of land reform measures are currently under study or being carried out on an experimental basis. Among the Bank supported operations, the Meknes project includes a trial program for land consolidation on private land and for the creation of viable holdings on collective lands. In order to obtain a better understanding of these patterns, the Government now attaches a high priority to the execution of a national cadastral survey of all agricultural lands as a basis for a land register. A first tranche of Morocco's program in rainfed areas is being financed under the Loukkos project, which will also cover this project area. In the longer run, land tenure patterns will have to be rationalized to a greater degree if further gains in productivity are to be achieved. By  - 13 - reaffirming the rights and obligations of tribal collective land ownership and by providing the tribes with the means necessary to control stocking rates, the project would reinstate conditions allowing the tribal units to effectively manage collective range lands. 40. Other issues not specifically addressed by the proposed project include the need for: a reinforcement of the Ministry of Agriculture's sectoral planning and programming capacity; a revision of Morocco's Agricultural Investment Code introduced in 1969; development of Morocco's agricultural exports; a review of its agricultural pricing policies and * subsidies, agricultural taxation, and savings mobilization in the rural sector. The first two issues are addressed in the Loukkos project, the third is partially addressed through the Vegetable Production and Marketing Project which sets out a program for developing Morocco's exports of off-season vegetables. The latter issues are all major topics of the Bank's on-going economic and sector dialogue with the Government. They are analyzed in greater depth in the Report: Morocco - Agricultural Sector Memorandum that was circulated on May 2, 1980 to the Executive Directors (Report no. 2667a-MOR). 41. Bank Agricultural Sector Strategy. Over recent years, the Bank's strategy in the agricultural sector has supported the Government's objectives of increasing agricultural production wherever economically justified to meet basic food needs and to work towards agricultural self-sufficiency, while placing, for economic and social reasons, an increased emphasis on developing rainfed areas, where the largest untapped potential exists. In particular, actions to benefit the rural poor target group have been pursued. The Bank strategy also recognizes the need to continue supporting highly productive export oriented projects and agricultural credit which finances a large percentage of directly productive farm and agroindustrial investments. Support for irrigation, particularly for rehabilitation and development of small and medium scale irrigation infrastructure, is also envisaged. 42. Performance Under Previous Bank Financed Agricultural Projects. Bank Group lending for agriculture in Morocco began in 1965 and to date 14 projects have been undertaken and supported by $435 million in Bank/IDA funds ($24 million in IDA credits). They include five irrigation projects; Sidi Slimane (FY65), Sebou I (FY70), Souss Groundwater (FY75), all completed; Doukkala I (FY76) and Doukkala II (FY77); four Agricultural Credit Projects (FY66, FY73, FY77 and FY79) three of which are completed; an Agroindustries and Flood Control Project (Sebou II, FY74); a Vegetable Production and Marketing Project (FY80); and three Agricultural Development Projects focussing on rainfed agriculture in the Meknes (FY75), Fes-Karia-Tissa (FY78) and Loukkos (FY80) areas. Project performance to date is generally satisfactory although irrigation projects suffered initially from poor coordination between and within participating Ministries which resulted in delays in construction and in acquisition of irrigation equipment. Among rainfed agriculture projects, which are mostly still at an early stage of execution, implementation has also been satisfactory so far with the exception of the Meknes Project which has encountered very  - 14 - substantial delays. the major issue has been the difficulties in establishing and delays in executing the land redistribution program. Measures to improve project performance in these areas are underway. 43. The First, Second and Third Agricultural Credit Projects have been audited by the Operations Evaluation Department (OED). The report on the first project attributed the project's mixed results principally to the Caisse Nationale de Credit Agricole's (CNCA) shortage of qualified staff and Government's interference in CNCA's operations by directing it to lend to small farmers and by dissolving a State company receiving Bank financing without prior consultation with the Bank. It also reported that the most important achievement was the institutional development that took place. In its report on the Second Agricultural Credit Project, OED calculated an economic rate of return to the project of about 20 percent as compared to an appraisal estimate of 18 percent. However, it noted that the return might have been higher had Morocco enjoyed a more effective national agricultural extension service. OED's report on the Third Agricultural Credit Project mainly noted CNCA's institutional progress and achievements. PART IV - THE PROJECT 44. Project Background. It is only natural that under its strategy in the sector (paragraph 34), the Government would consider investing in the Middle Atlas region. A relatively poor mountainous area in central Morocco covering about 5 million ha, the Middle Atlas has so far been mostly bypassed by investments and despite having significant potential, has seen its resource base progressively eroded by increasing pressures on its precarious ecology. Vast forests, among which the largest cedar forest in the world, and extensive prairies cover much of the area. The forest belongs to the state, which grants grazing rights to the herds of long established tribes. The same tribes each own collectively an expanse of rangeland, on which settlement and crop cultivation are forbidden, although in some cases they have been tolerated. The lowlands are mostly cultivated and privately owned. Pastoralism, the main economic activity, is undergoing a transformation whereby the increasing cultivation of the lowlands has gradually restricted the yearly transhumance cycles between low and highlands, and crowded the herds in the highlands. As a result, the overstocked prairies and the forest are suffering constant degradation and the productivity of the herds is low and diminishing, mirrored by a deterioration of the social cohesion of the tribes. However, research results elsewhere in Morocco and several successful experiments carried out locally in the seventies have demonstrated the feasibility of an integrated set of development actions, articulated on the existing social structure and aimed at improving the productivity of the range, the forests and livestock and cropping activities in the area. In May-June 1979, a mission of the World Bank/FAO Cooperative Program was able to identify the proposed project in a zone representative of the Middle Atlas Region. The project was prepared by a Moroccan team with the assistance of the Cooperative Program and a Bank mission appraised the project in April 1981. Negotiations for the proposed loan took place in early December. The Moroccan delegation was led by Mr. Belkoura of the Prime Minister's Office. An appraisal report  - 15 - entitled "Middle Atlas - Central Area - Agricultural Development Project" (3628-MOR) is being distributed separately. The main features of the loan are summarized in the Loan and Project Summary, and in Annex III. Maps No. 15865R and 15898R are attached. 45. The project covers about 600,000 ha in the central area of the Middle Atlas region, straddling the two provinces of Ifrane and Khenifra. Altitude ranges from 800 m to 2,500 m and precipitations increase with altitude and northern exposure from 300 to 1,000 mm. Holm oak and cedar forests account for somewhat more than a third of the area and cover much of the higher altitude zone. Rangeland collectively owned by tribal units spreads over most of the adjacent intermediate zone below, and land at lower levels consists mainly of cropping land privately owned, of which about 54 percent is under cereals, 40 percent is left fallow, and the rest is under vegetables or forage. A rigorous climate, and generally shallow and sometimes stony soils limit the vegetative period and the use of modern cultivation techniques. The project area forms part of the watershed basins of the Oueds Beht, Oum-er-Rbia and Guigou in the Ifrane province, and Moulouya in the Khenifra province, where the lack of availability of water resources is a serious constraint for agricultural development. 46. The population of the project area numbers about 100,000, of which some 80,000 depend on agriculture. It is relatively poor and young with a high dependency ratio due to a high net outmigration which results from the difficult conditions of agriculture and its low productivity, and the lack of local employment opportunities. The social structure rests predominantly on tribes. Each tribal unit normally possesses a territory consisting of privately owned land and collective grazing land, and holds rights to graze on adjacent forest land. Collective land is managed by the jemaa, a traditional tribal council. Next to their own, rightholders often keep sheep in association with absentee urban owners, as there is no limitation on the number of sheep they are allowed to let graze. Average farm size is 14 ha, and land and livestock ownership is skewed; smaller farmers depend proportionately more on livestock, and 70 percent of herds account for only about 30 percent of animals. 47. The project area's productive resources are being degraded fairly rapidly. For lack of funds, large forest areas are not tended or managed and are inaccessible for exploitation; they are being progressively degraded by livestock whose fodder resources outside the forest are decreasing, by the population for fuelwood, and by defoliating insects. Collective and forest rangelands are overstocked and poorly managed, and the overall forage deficit in the area causes meat and milk yields to be low. The practice of association described in the preceeding paragraph contributes to overstocking while bringing few benefits to the collectivity. This phenomenon and the disruption of transhumance are progressively eroding the ability of the jemaa to manage the collective range. Finally, crop yields are low mostly because of inappropriate farming practices. Earlier development efforts were unsuccessful because they failed to address the interactions between the forest, the forest range, the rangeland and the cropping land; because they ignored the existing social structure, or because application was sought of insufficiently adapted research results.  - 16 - 48. Project Objectives and Description. The project consists of a set of interrelated actions in the forest, on the range and on cropping land to bring about production increases of meat, milk, fodder, cereals and wood, and a rise of income and employment among the rural population. It is based on a participatory approach geared to the area's tribal mode of social organization, to its dominant pattern of collective land ownership and to its main economic activity, pastoralism. Actions based on proven techniques would be implemented on the basis of agreements reached with the social units. The project would reverse the persistent ecological deterioration affecting its area and help restore the role of the tribal units which had successfully managed collective pastoralism up to a recent past, by adapting traditional pastoral management to prevailing conditions. 49. The proposed project would consist of the following: (a) Forestry development: implementation of forest management plans over 124,000 ha, including the preparation of such plans over 36,000 ha, the provision of infrastructure, planting of trees and forest shrubs, felling and thinning; pest management; and the strengthening of forest services. (b) Livestock development: development of fodder resources at the farm level, in the forest and on collective rangeland; introduction of range management systems based on fixed stocking rates and on deferred and rotational grazing including reseeding, fertilization and fencing; provision of infrastructure on the range; construction of animal health facilities, and breeding stations; improvement of herd management, animal health and genetics; and short-, medium- and long-term credit. (c) Cropping development: reorganization and reinforcement of extension services; problem-specific research programs linked with extension; short-, medium- and long-term credit; construction of a water supply system in Timahdite Commune; irrigation rehabilitation of some 2,000 ha of small traditional perimeters; construction of access roads; and introduction of forage conservation methods. (d) Consultants and Studies: technical assistance for extension, range management, research, training of loggers, pest management, project monitoring; studies for irrigation rehabilitation, and for the establishment of a cheese factory. 50. The forestry component would give the administration the means to effectively manage 124,000 ha of forests covering all major cedar concentrations in the project area. Management plans would be drawn up for 36,000 ha to complete the coverage of existing plans. Construction of 185 km of forest roads would open up large tracts previously of difficult access, and two forest road maintenance units would be created, one for Khenifra and one for Ifrane. Two new nurseries would be established and two existing nurseries expanded to produce forest and forage shrubs for all forestry and sylvo-pastoral operations under the project (see next paragraph). To improve forest production 3,200 ha of assisted regeneration in cedar forests would be  - 17 - undertaken; 2,500 ha of young cedar stands and 15,300 ha of holm oak coppice would be thinned to promote growth and increase forage production; and 250 ha would be planted with fast growing conifers. Infrastructure would be built for fire control and for demarcation, and 46,000 ha sprayed against the processionary caterpillar, which has already caused serious defoliation. An integrated pest management plan would be developed to avoid recurrence of such damage. Finally, the increased availability of forage and the control of forest grazing should help protect regeneration areas and decrease the damage caused by livestock. 51. Deficiencies in nutrition and in animal husbandry are the main impediments to a greater productivity of livestock. The project would develop fodder resources on the farm, on the range and in the forest. At the farm level, besides the production of fodder on land now left fallow (see next paragraph), the project would introduce silage conservation methods and, on a trial basis, the treatment of straw with caustic soda to improve its nutritional value. On the range, under agreements to be reached with the concerned social units, the project would invest in fencing over at least 50,000 ha to control stocking rates; fertilize about 13,000 ha; reseed about 2,000 ha, build about 16 km of access roads, a water supply system and water points. On the forest range, growth of forage would be stimulated through improved management such as controlled stocking rates, deferred grazing and rotational grazing over 20,800 ha; planting of forage shrubs on about 3,000 ha; the fertilization of about 6,000 ha and the thinning of about 15,300 ha of holm oak to promote the growth of undercover. Measures for animal health and genetic improvement include the construction and staffing of 9 animal health centers and 18 additional dips for external parasite control; the construction and staffing of 6 horse and 5 cattle breeding stations, the rehabilitation of an existing sheep selection station, and the acquisition of about 400 Murcia and 1,700 Timahdite goats. Credit would be provided through Caisse Nationale de Credit Agricole (CNCA) for stables and folds, and improved livestock. Finally, two milk collection centers would be built, and a feasibility study carried out for a goat cheese factory. 52. Cultivation actions would play a role complementary to actions in the forest and on the range. By reducing the dependency of the herds on forest and range forage resources, they would help introduce the limits on stocking rates and grazing rotations promoted by the project. Credit would be made available to the farms through CNCA: short-term credit for farm inputs, machinery services and feed supplies; medium- and long-term credit for mechanization, small farm equipment, destoning (2,000 ha), and fruit tree plantation (1,000 ha). Extension services would be reformed and reinforced and strongly linked with research, with the help of technical assistance. The extension services would encourage farmers to adopt more intensive cultivation practices, notably to substantially reduce the acreage left fallow. The project would also provide demonstration farm equipment for haymaking, silage, tillage and weed control, and build 17 warehouses for farm inputs in remote locations, to be managed by cooperatives. Traditional irrigation perimeters producing mostly fruits and vegetables would be rehabilitated over 2,000 ha, studies carried out for the rehabilitation of 9,000 ha more, and 71 km of related access roads wouid be constructed.  - 18 - 53. Project Execution. The project implementation strategy is geared to ensure maximum participation and adherence to project actions of beneficiaries, whether represented by elected Commune councils or the jemaas, the tribal councils. For each social unit, a resource study would cover the resources within the purview of the unit (forest, livestock, collective range, forest grazing rights, private rainfed and irrigated land); an integrated action program would be defined to develop these resources rationally through an implementation strategy adapted to the social organization of the unit; and following discussions with the representatives of the unit, an agreement would be reached between the concerned Provincial Directorate of Agriculture (DPA) and the social unit specifying respective obligations regarding investments, implementation modalities and population participation (Loan Agreement, Schedule 5). Project execution would extend over five years. The basic implementation modalities have been successfully tested within the project area. 54. At the Commune level, five Local Project Coordinators have been appointed to deal with the social units in the Commune on behalf of all services, in order to establish a fully integrated dialogue. The work of the provincial technical services will be planned and coordinated at the provincial level by two Project Management Units (one for Ifrane and one for Khenifra) which have already been established within the DPAs and are headed by the Provincial Director of Agriculture and are to receive technical assistance from a team comprising an agronomist/extension specialist, a pastoralist, and a zootechnician (72 man-months). Matters of inter-provincial coordination (use of consultant services, research and studies, application of uniform grazing regulations) would be dealt with by an Inter-Provincial Committee, also already established, presided by the two Governors, and in which CNCA and the Institut National de Recherche Agronomique (INRA) are represented. At the central level, a National Committee, established as well and chaired by the Ministry of Agriculture's (MARA) Director of Livestock, will approve yearly action programs and prepare budget requests, generally follow project progress through the project monitoring system and identify issues requiring decisions at the central level. The Project Management Units would be fully staffed and the technical assistance team to assist the two Project Management Units would be hired by December 31, 1982 (Loan Agreement, Schedule 5, Part A, paragraph 2 (c)). 55. Forestry investments and forest range improvement activities would be undertaken by the Provincial forestry services of the DPAs. The two road maintenance units would be fully staffed, including the managers of the units, by December 31, 1982 (Loan Agreement, Section 3.02). A mechanized exploitation unit would be established in each of the two provincial forest services, to replace on a trial basis wasteful and inefficient traditional felling and cross-cutting methods. A logging consultant would provide practical training in the use of equipment (4 man-months). On the basis of the trials conducted during project execution, the Government would exchange views with the Bank by December 31, 1985, on a proposal for the reorganization of forest exploitation, and would implement an agreed plan for reorganization by December 31, 1986 (Loan Agreement, Section 3.03 (b)).  - 19 - 56. As provided by Moroccan law, local commissions would be created to administer grazing on forest range by the herds of tribes with grazing rights. The commissions, composed of representatives of the technical services, the local authorities and the tribes concerned, identify rightholders, fix stocking rates, modalities for cost recovery and adopt sylvo-pastral improvement plans. Grazing regulations would be enforced by the forestry services, which would be provided with transportation and other necessary means. These commissions would be established according to a schedule agreed with the Bank and would cover all the forest rangeland in the project area by the end of 1985 (Loan Agreement, Section 4.04). 57. Other local commissions have already been created by decree for the rangeland to be improved under the project, and as a condition of effectiveness, decrees would be issued declaring it a "zone of range improvement" (Loan Agreement, Section 6.01 (a)). Fencing of the areas controlled by the commissions would be carried out if agreed with the jemaa and provided installation is carried out by the social units, to ensure their acceptance. The adhesion of the beneficiaries would be sought by a major extension effort and facilitated by a generally greater availability of forage. Only range activities agreed with the population would be carried out. Overall stocking rates would be controlled by the range police, and the allocation of individual grazing rights as well as the rotation patterns would be managed by the jemaa. A fair distribution of individual grazing rights and the imposition of collective sanctions for overgrazing, as well as the demonstration of the benefits of range improvement activities, should ensure collective self-discipline. 58. Extension services would be considerably reinforced and the number of extension agents would be brought from 15 to 42, or one agent for 250 to 325 farms. Extension activities would be reorganized along the following lines: (i) extension services would be integrated for all activities (a farmer would deal with one single agent for all his activities); (ii) a close link would be established with research, with a research assistant positioned at the Commune level, and (iii) extension agents would work on a regular schedule providing for visits to contact farmers on a fortnightly basis and for systematic training. Research would be carried out mostly by INRA, who would be represented at the Commune level. As a condition of effectiveness, a contract would have to be signed with INRA for research, including the program of research activities to be carried out during the first year (Loan Agreement, Sections 3.06 and 6.01 (b)). Future activities would be agreed on an annual basis (Loan Agreement, Section 3.06 (b)). Animal health and genetic improvement facilities would be located at extension centers and operated by the livestock services. The rural construction services of the DPAs would execute project construction activities outside the forest. Irrigation works would be operated and maintained by the farmers, as is the tradition in small perimeters. Feeder roads would be maintained by the Communes. The 17 input stores would be managed by cooperatives. Credit would be channelled through  - 20 - CNCA, which has adequate facilities. The social units would set up multipurpose cooperatives to facilitate access to credit of small farmers who otherwise may not qualify. Finally, technical assistance would be used to help set up a project monitoring system, to reinforce cost accounting, and for the training of the DPAs' accountants (24 man-months). 59. Project Cost and Financing. Total Project costs are detailed in the Loan and Project Summary and are estimated at DH 442.5 million ($92.2 million), of which 42 percent or $38.5 million in foreign exchange. Costs include duties and taxes estimated at DH 94.0 million ($19.6 million) or 21 percent of base costs. Estimates are based on October 1981 prices. Construction cost estimates are based on unit costs obtained in contracts in the project region, adjusted for inflation. Equipment prices are based on the latest invoices available (March 1981). Physical contingencies are estimated at 15 percent for civil works and 10 percent for equipment. Price escalation has been estimated at 11 percent for 1981, 10 percent for 1982, and 9 percent per year thereafter for local costs and at 9 percent, 8.5 percent, 7.5 percent and 6 percent respectively for foreign costs. Overall contingencies amount to DH 123.2 million ($25.7 million) or 39 percent of the base cost. The cost of consultant services has been estimated at $10,000 per month for short-term consultants (about 2.5 man-years) and $8,300 for long-term technical assistance (about 6 man-years), both including travel and subsistence. 60. The proposed Bank loan of $29.0 million to the Government of Morocco would cover the foreign exchange cost of the project, except for the credit component, whose foreign exchange cost will be financed by CNCA out of its foreign loans, which include loan 1704-MOR from the Bank. The loan would be for 17 years including four years of grace, at an interest rate of 11.6 percent per year. Remaining project costs ($63.2 million) would be financed by the Government ($41.9 million), CNCA ($14.8 million), and the beneficiaries ($6.5 million). CNCA will finance as and when needed credit requirements of project beneficiaries according to its prevailing policies and procedures, which are acceptable to the Bank (Loan Agreement, Section 3.01 (c)).. 61. Cost recovery dispositions are several. The proceeds of public auctions of wood production will cover 180 percent of forestry maintenance and investment costs over the long run, as the benefits of opening up virgin forests for exploitation would be substantial. For investments on forest rangeland, an annual grazing tax would be levied, exempting a small flock per family for subsistence, but enabling recovery of operation and maintenance expenditures, and as high a proportion of investment costs as compatible with the beneficiaries' ability to pay (Loan Agreement, Section 4.04 (a)). For investments on collective rangeland, it would be difficult to introduce cost recovery measures without jeopardizing the introduction of new herd management regulations, which may be resisted by the beneficiaries and will necessitate a vigorous extension effort. Therefore, guidelines for cost recovery for investments on collective rangeland would be defined by December 31, 1985, when the benefits of range management will have been established in the eyes of beneficiaries, and, after an exchange of views with the Bank, such guidelines would be implemented by December 31, 1986 (Loan Agreement, Section 4.07). Regarding water supply investments on collective rangeland in Timahdite, a watering fee would be levied sufficient to recover related  - 21 - operating, maintenance and investment costs (Loan Agreement, Section 4.05). The Commune of Timahdite would provide for appropriate maintenance and operation of its own water supply system (Loan Agreement, Section 4.06). Finally, irrigation investments are maintained and operated by the traditional irrigation associations. The Government is currently studying on a nationwide basis issues of recovery of investment costs for small scale irrigation schemes; guidelines for recovery of investment costs, taking into account the farmers' ability to pay, would be defined by December 31, 1982, and implemented by December 31, 1983 after consultation with the Bank (Loan Agreement, Section 4.08). 62. Procurement and Disbursements. Procurement will be spread over five years and involve a large number of contracts. Contracts for road construction exceeding $2 million, for the water supply system in Timahdite, for spraying against caterpillars, as well as contracts for the purchase of equipment and vehicles exceeding $150,000, will be awarded after international competitive bidding following Bank guidelines, for a total estimated at about $14.3 million. Equipment and vehicle contracts would be bulked to the extent practicable. Contracts for vehicles and equipment for less than $150,000 each, estimated at less than $1.5 million in the aggregate, would be procured after local competitive bidding. Small project works estimated at less than $100,000 each and for not more than $4 million in the aggregate would be carried out by force account; selected animals and equipment for milk colLection centers and forest road maintenance workshops ($0.4 million in the aggregate) would be acquired after limited international tendering. All other contracts for works, estimated at $29 million in total, would be procured after local competitive bidding according to procedures acceptable to the Bank. Because of their small size and the presence in Morocco of competitive local and international contractors, these contracts would not be expected to attract bids from foreign firms not established in Morocco. 63. The loan would be disbursed against a) 50 percent of the total cost of the spraying program, of roads construction, of construction of the water supply system; b) 40 percent of the total cost of other works; c) 100 percent of foreign expenditures and 60 percent of local expenditures for the purchase of equipment, vehicles and selected animals; d) 100 percent of foreign expenditures and 75 percent of local expenditures for consultants' and specialists' services and training abroad; Retroactive financing, in an amount not exceeding $250,000, would be provided for preparatory studies.  - 22 - 64. Environmental affects. The project would help stall the degradation caused to the forest and the range by uncontrolled grazing, and therefore have a beneficial effect on the environment. Aerial spraying conducted against the processionary caterpillar, which has been causing important damage to the cedar forest, would mostly use bactospein, a substance proven effective and environmentally acceptable, and dimilin, which is safe when properly used but which has not been as widely tested as bactospein. During negotiations assurances were obtained that bactospein will be used to the extent possible, that dimilin will be used for ten percent at most of the area being sprayed, and that evidence shall be furnished to the Bank, prior to the use of dimilin, adequate arrangements have been made to warn herders and effectively prohibit entrance to the areas being sprayed until rains have washed the substance away. Furthermore, an integrated pest management system will be developed by December 31, 1984, to minimize spraying in the future (Loan Agreement, Section 3.04). 65. Benefits, Justifications and Risks. The project's impact on production would be substantial. Forestry production during project implementation would yield 300,000 m3 of cedar sawlogs, 50,000 steres (m3) of cedar fuelwood and 850,000 steres of oak fuelwood. Over the project implementation period, the incremental annual cedar log production would amount to 17 percent of sawlog imports. Forage production in the forest would increase by 26 to 62 percent depending on the area; on the rangeland, by 31 to 87 percent. The increase in production of sheep, goat and beef meat resulting from project actions is respectively estimated at 198, 80 and 33 percent; of cattle milk, at 133 percent. These performances would partly be obtained through a considerably increased production of forage on farmland from very low levels. Other crops would display lower but substantial gains: 30 percent for hard wheat, 34 percent for soft wheat, 15 percent for barley, and between two- to fourfold (also from low levels) for fruits and vegetables. Based on detailed studies of the farms in the area, eight farm models were chosen displaying varied characteristics in terms of arable and grazing areas, irrigated and rainfed land, cropping patterns and animal numbers. The financial rates of return range from 26 to 61 percent for small farms, and 13 to 46 percent for large farms; the financial rate of return of the medium size farm was 36 percent, and a of dairy farm, 41 percent. The higher benefits obtained by smaller farms reflect their greater reliance on livestock. The financial incentives to participate in the project actions are therefore substantial and the farmers should be able to pay the required recovery charges. There should be no problem in marketing the project's incremental production. The project would provide 1.6 million man days of employment in agricultural and livestock activities, the equivalent of 6,700 full-time jobs. In addition, the forestry component would require about 960,000 man days over the project period. 66. The economic analysis was carried out not only to determine the project's economic viability and its sensitivity to changed assumptions, but also to ensure the replicability of some of its main actions. The Economic Rate of Return (ERR) of the whole project is estimated at 24 percent. When taking out the forestry component, the ERR of which is estimated at  - 23 - 81 percent, the ERR falls to 19 percent. The main range component has an ERR of 21 percent, and irrigation, of 11.5 percent. Sensitivity testing yields ERRs no lower than 12 percent for the whole project, the latter being obtained by lagging benefits by 3 years without lagging costs, which would correspond to the effect of a prolonged drought. 67. The production estimated is based on known technology. Increased wood production would be obtained by opening up large tracts of previously inaccessible forest, by introducing standard modern technology in exploitation metlhods, and by managing forest resources. Increased forage production in the forest and on the range is based on the introduction of technical packages tested successfully over several years under local conditions in various projects sponsored by FAO, USAID, King Ranch Texas, the Hassan II Institute and the forestry services. The main production increases on cropping land would be obtained by substituting the currently applied cereals-fallow rotation with a triennal cereals-forage-fallow rotation, and applying simple technical improvements. Assumptions on the proportion of farmers willing to participate in project activities are prudent: the rate is expected to build up slowly over 7 years to a maximum of 60 percent. 68. The project would incur acceptable risks. The success of the project depends on the successful implementation of several interdependent actions, which the project organization has been designed to facilitate, and for which appropriate assurances have been sought. Drought is a major risk for about 30 percent of the project area. The package of agricultural techniques to be introduced under the project is designed to reduce the effects of a drought, however, and drought resistant forest shrubs to be planted under the project would provide a forage reserve in drought periods. Another risk or uncertainty resides in the willingness of the tribal units to introduce limits on stocking rates and rotation patterns on the range, and a fair allocation of grazing rights among members, thereby inevitably affecting some currently large holdings. However, the increased availability of forage will make it possible to set stocking rate limits higher than current rates, which ought to make easier the allocation of grazing rights, and the rangeland areas involved have been chosen for their suitability to introducing such a system, therefore minLimizing risks. At any rate investments on the range would only be carried out after a contractual agreement is reached with the tribal units. Similar arrangements are being successfully implemented at present over about 10 percent of the forest range in Moulay Bouazza, a Commune in the project area. Finally, project actions have been extensively discussed with the population concerned, which has responded positively. PART V - LEGAL INSTRUMENTS AND AUTHORITY 69. The draft Loan Agreement between the Kingdom of Morocco and the Bank, and the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately.  - 24 - 70. Special conditions of the loan are listed in Annex III. Special conditions of effectiveness include i) promulgation of decrees declaring rangeland to be improved under the project "zones of range improvement" and ii) agreement on INRA's first year research program (Loan Agreement, Section 6.01). 71. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 72. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachments December 10, 1981 Washington, D.C.  - 25 - ANNEX I Page 1 of 3 TABLE 3A hOROCCO - SOCIAL INDICATORS. DATA SHEET MOROCCO REFERENCE GROUPS (WEIGHTED AVERAGES LAND AREA (THOUSAND SQ. KX.) - HOST RECENT ESTIMATE) TOTAL 447.0/c MIDDLE INCOME AGRlCULTURAL 203.77c MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE Jb MIDDLE EAST LATIN AMERICA & CARIBBEAN GNP PLE CAPITA (U0$) 200.0 310.0 740.0 865.5 1616.2 ENERGY CONSUMPTION PER lAPITA (KILOGRAMS OF COAL EQUIVALENT) 169.3 222.2 315.2 758.3 1324.1 POPULATION AND VITAL STATISTICS POPULATiON, MID-YEAR (THOUSANDS) 11626.0 14993.0 19538.0 URBAN POPULATION (PERCENT OF TOTAL) 29.3 34.6 39.9 45.2 64.2 POPULATION PROJECTIONS PUPULATION IN YEAR 2000 (MILLIONS) 35.6 STATIUNARY POPULATION (MILLIONS) 81.0 YEAR STATlONARY POPULATION IS REACHED 2090 POPU LATION DENSITY PER SQ. kh. 26.0 33.5 43.7 36.3 34.3 PER SQ. KM. AGRICULTURAL LANU 59.U 76.0 92.9 442.7 94.5 FOPULATION AGE STRUCTURE (PERCENT) U-14 YRS. 44.8 47.6 46.3 44.2 40.7 15-64 YRS. 52.6 48.3 50.4 52.4 55.3 b5 YRS. AND ABOVE 2.6 4.1 3.3 3.4 4.0 PUIULATION GROWTH KATE (PERGENT) TOTAL 2.6 2.5 2.9 2.7 2.4 URBAN 3.7 4.2 4.5 4.6 3.7 CRUDE BIRTh RATE (PER THOUSAND) 50.2 47.4 44.2 41.5 31.4 CRUDE DEATH KATE (PER THOUSAND) 20.8 16.4 12.8 12.8 8.4 GROSS REPRODUCT1ON RATE 3.6 3.5 3.2 2.9 2.3 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 25.1 78.0 USERS (PERCENT Of' tiARRIED WOMEN) .. 1.0 5.4 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PEb CAPITA (1969-71-100) 99.0 98.0 85.0 96.3 108.3 PlR CAPITA SUPPLY OF' LALORIES (PERCENT OF REqUIREMlNTS) 96.0 102.0 105.0 110.4 107.6 PROTEINS (GRAMS PER DAY) 62.0 66.0 67.0 73.4 65.8 OF WHICH ANIMAL AND PULSE 13.0 13.0 13.0 17.1 34.0 ChlLU (AGES 1-4) MORTALITY RATE 30.3 21.9 15.7 14.9 7.6 htALTh LiF'E EXPECIANLY AT FIRIk (YEARS) 46.9 51.9 56.4 55.9 64.1 INFANT MORTALITY RATE (PEk THOUSAND) .. .. .. .. 70.9 ACCESS TO SAFE WATER (PERCENT OP FOP UbATION) TOTAL 30.6 51.0 55.0 59.4 65.7 URBAN 58.7 92.0 100.0 83.9 79.7 kUkAL 19.0 28.0 25.0 40.8 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 29.0 .. .. 59.9 URFAN .. 75.0 .. .. 75.7 RURAL 4.0 30.4 POPULATION PEK PHYSICIAN 9406.1/d 12814.5 11037.4 4174.5 1728.2 POPULATION PER NURSING PERSON .. 2742.2 1693.5 1780.5 1288.2 POPULATION PER hOSPITAL bED TOTAL 626.0 664.3 773.6 647.4 471.2 URbAN .. 454.7 623.4 547.2 558.0 KRUAL .. 5821.4 3089.5 3361.1 ADhUSSIONS PER HOSPITAL BED .. 15.5 16.5 25.3 hOUSUING AVLRAGE SIZE OF HOUSEHOLD TOTAL 4.8 5.5 URBAN 4.3 4.9 kURAL 5.1 5.8 AVERAGE NUMbER OF PERSONS PER ROOM TOTAL 2.2 2.4 URBAN 2.1 2.1 RURAL 2.3 2.6 ACCESS TO ELECTRICITY (PERCENT OF UWELLINGS) TOTAL 76.1/a URbAN 85.47T 68.4 65.0 RUItA-L 30.8rh . .  - 26 - ANNEX I Page 2 of 3 TABLE 3A MOROCCO - SOCIAL INDICATORS DATA SHEET MOROCCO REFERENCE GROUPS (WEIGHTED AVE AGES - MOST RECENT ESTIMATE) MIDDLE INCOME MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 47.0 52.0 72.0 85.1 101.7 MALE 67.0 67.0 90.0 101.5 103.0 FEMALE 27.0 36.0 54.0 67.5 101.5 SECONDARY: TOTAL 5.0 13.0 20.0 38.0 35.3 MALE 7.0 18.0 25.0 48.1 34.9 FEMALE 2.0 7.0 15.0 28.3 35.6 VOCATIONAL ENROL. (1 OF SECONDARY) .. 2.0 3.0 11.3 30.1 PUPIL-TEACHER RATIO PRIMARY 43.0 34.0 39.0 34.9 29.6 SECONDARY .. 20.0 21.0 23.8 15.7 ADULT LITERACY RATE (PERCENT) 14.0 21.4 28.0 43.0 80.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 11.0 14.8 19.6 18.3 42.6 RADIO RECEIVERS PER THOUSAND POPULATION 45.8 62.4 87.4 121.0 215.0 TV RECEIVERS PER THOUSAND POPULATION 0.4 11.6 32.6 37.4 89.0 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 22.0 16.2 10.7 35.9 62.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 2.0 .. 2.0 3.0 3.2 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 3369.7 3951.7 5117.3 FEMALE (PERCENT) 10.1 14.1 15.6 10.5 22.6 AGRICULTURE (PERCENT) 62.5 56.9 52.7 43.5 35.0 INDUSTRY (PERCENT) 13.8 17.4 20.7 27.3 23.2 PARTICIPATI)N RATE (PERCENT) TOTAL 29.0 26.4 26.2 26.4 31.8 MALE 52.1 45.2 44.2 47.0 49.0 FEMALE 5.9 7.5 8.2 5.7 14.6 ECONOMIC DEPENDENCY RATIO 1.6 2.0 1.9 1.8 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 18.0/f 20.0/f HIGHESI 20 PERCENT OF HOUSEHOLDS 43.37f 49.077 LOWEST 20 PERCENT OF HOUSEHOLDS 7.0jf 4.07T LOWEST 50 PERCENT OF HOUSEHOLDS 18.0/f 12.0/f POVERTY TAR.ET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN 107.0 157.0 389.0 271.4 RURAL 66.0 101.0 238.0 144.6 187.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US PER CAPITA) URBAN .. .. 242.0 400.8 513.9 RURAL *- *- 157.0 290.9 362.2 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY I GCOME LEVEL (PERCENT) URRAN 51.0 38.0 28.0 22.1 RURAL 49.0 45.0 45.0 29.2 Not available Not appLicable. NOTES /a The gr' p averages for each indicator are population-weighted arithmetic means. Coverage of countries among he indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Host Recent Estimate, between 1976 and 1979. /c Exclud s the ex-Spanish Sahara; /d 1962; /e Brick bui ldings only; /f Consumption expenditures of ho seholds. Revised June, 1981  - 27 - ANNEX I Page 3 of 3 DEFINITIONS UP SOCIAL INDICATORS Notte.: Although the data aeda f oucsgnrlyjdged the oa autborirtte sod reiable, ii shoul alo he note that theymanoheitr naioaly omarbl eoas o te oc f tedadieddetinion an too n seed by d5ff tart counttrieslc ectg h dt. h date r,os thels...e,. usful no descr ibe o-de- ofngitd,indioatr toenda, ted ohs..tscnrl erai major diftorsa.se het-soonone The..... ..f..oe roPs are 'II the -s -os-try group of the auhlsct coun.try tdf2) a coutr grupsih sonohnhthghr- averge imor.. that the cnotnry group sfthe uhj-sctcountry (cpt fo-Cpital hurplus Oli tEpo-tta" group'shere "Kiddi incom Noth At otad riddle tsar isoho...o. ua of stoger gao lo~~~~~~~~~~~~~~~~~~~~~~~~~~~-olnua a..Itfinities). In the eeet grop don bt aerg. r popoenin e l gted ihmnoit. ....n fP orrah Indicatorsdso uyae majority of nh.oan ine ingrop boa date fat chat ladni-t.t Noc the on ag_f ontia n the iod i-aor depensr he eoeiailny of dens sad is mn unfor,ono mutbtsrctdi iting average of one tadiosnor no an-thsr. Th.se average are only useful in ounp-ri the u-lus of oned indicator ta t1ime amon tthe... cutry an.dl reenogrus LAM)1 ARtEA (thousan d sq.i.) PouatrprHeio a oa, orho, and totl. I Population(onl tt -Tonal sort acesom comprising LArd arsonnd inland -ssr.ura, cud rura) divided by this- -rp-te ounb-t of huapita1 bode _ktti-lt.t.l - isrimee t. o gf u o are need temporaily or permansoly a.eilabte to poblic eod private gorraI atd sp..cialied hospital ando- fto coPs, P-so-e, natkat sod kitchsn gardens or as Ito felice; 1976 dnu. habiltition cetr.-sitltt aali rt emnetysa e "'It'dk ~ ~~~~~~~~~~~~~~~~bY a bet one phyeiciao. fEnsliohm -nna Pro-ditf prio-ipslly cuso- tOP PI.d0ITA(I.)- Ppe caiasnmnsAtlcr-o marke;tbPrice,; ca,l- dial coe m- o i-tludrd. URslI bosPitu1s, ho--o, to-luds h.tith nalto byeos cnvreis ethd s Sci lat tla (9)779bass) lOI,andsatcL cncr sot .prmanetly s1fted by a phyii.ot (but bya iNPuT CONSiUMPTION PERL CAPITA - Annual codmto ftnmntlsery(olitoa purdr urban. hoeinceIcudilitpicpl?ors hsde an igaine,perooo, ntualgaed hyd,o-, nularad geoheba alo n ua opnl oa or! naai optlsedmdoidn aent dtriiy)i. tlgrmIi ol qt tln Pso caPins; 1960, 1970, and 1979 cene. pcairdhsItasaeiou nyudritl dens. ~~~~~~~~~~~~~~Adaissios pR.loPitol had - Tota nushe of adIasondtn or inahng_ POPULATION AND VITAL STATISTICS ~~~~~~~from honPitols dividod by tbr -ubro of beds.id.ht. - ~~~~~~~~~1Toal Popoletion, Hid-Tsa (thousands) - As of JaIp 1; i960, 19701..ad 19)9 HOUSING irben Prpuletioo (p-erc.tof atcotal) _ Ratio of unbar to c,taI populatin A-- hosehol fHo-hnofla g Iou of ndiidoldh shrelIin qan difiersot d-fioiticos of orbon ars- myafe coprbiltyof danah and theIr mainmul. Af boarde or lodger may orny o b uuedt among cutries; i9g0, 1970, end 1979 t.il doo.th ouehl fo btito-a - puyoo.d._ hoh ogIt Porlanasprootinsboeeaoumnt f arsnsocrcoo-ttel udan an rral- Aorge un Purulcton to en-2 by Curen pultionprjetion atbaedo-98e of peron per- o it all urban, and rural ocopiod ooeto toJ.talpplainb aead e n theitmoraliy edotutyrts doellings, r-peotiv-y. Uolreecuernpraatsrcoe a Projonia petmotne fo motality reron -nprien of obese 1-oolsasaun- uno-oopiad pants. log life -nP-ctenY en birrh tacr-asingwith .outr'. pe t apysP Snores Access . nofPtiA y(ooreo oitg)-tta.uht n oo laa,ad i,snlifo eaeroc tbilting at 77.5 y-ar. Th et oyocoa aitog oil bIlorco nlvo qerr spo tg macaryforfortti
irasas ae hn eessaoigdci no oa, ra,adrua wlig rometivoly fe tilityaccoding no income loya nod past family plann ing pefoesstt1ace. .d-1 -li, ..-t- tth oso is tha istgod one of ohee in combinoosfmrtly PUCTN end fertitlity mends for pr -toion puroses.EDjUCAINdUolrtRin tho alce -tIre of aIo de rpodete ae,oo eahgnrtoP.rabtejoe o dfeetlo ao pnsryaucnon;fo inte hsr ol,nd h rate fdcieoffh,iyon rpoe Picnday sho tootl, mal sod -1maY i-lComputed las above sood11 mann lend. sdunsaionreqairna or~~~~~~h- .h .tdJ.t. leastiff-our years of, approved prmc nrcn lean anorionary Uoruleif ... rechd. The yea wheny sca ioer -ouoirpaidsgnri Y..os.o ecerneon nnuoto a toabre;16, 197 hnd 197 dan. nood itchooi--, dodsola,ior the prgr Y whic opernsndeand ionhly;Y960 1971 and 1970 data.p dPuitl-tefectht Patia - bpo nr.1 end thcndovf-iTotl athdnnntoedi Popula ~ ytootion iros at ct rea -nched - Th.nual growt ratesi-of tonalmid- gsaperenneg of natal autf-", population aged- 15 i yeera and tost Poultin rot RotoIIpercent)-turbant- Annul frostPh rsta of urban.p.p- CON... -TSO letoefo d15-y6, P96-Pl,tisd 1970 - il-79. h.... 1 Pasna asm hosn oonin - .Ps .satior copiseti Crat it Rat ire thosod) - annual. liv birth pa husn t o-eadat etn loa dha sigIa pesn;tah ds- maen ,ber. a pouato; I%,1960, d 171,ed1979t dana.i-lt l .. milay vehcle..t-~ Crd ethRt pr huad)-Aao dnh e thondaofei-yaeRaio Usnairen It per .....n oultyo) jAll totipsah of teoirr pfa rdl populaion; 960, 971. nd 199 dat.rboouanetogsarYdivicpe thosan of :t ppltton isdn n Cross . .. rti. Ser6uctn an-veag onoto doeghirsP wma.. wil bea infliososed neosivPr in" naunns ed to yoar wheT - rgi tree -ls of reIo 1tility 190 tao;1970, ieperaaoe odn n160 9f e 1979.mst.coo arias aboishedYlicensing ofbit-cothRol devices une-upcso national familyh pt.on otn1 pidr- genera lipublcpe r htadv opLation;. narludt unlicensed TVd r-its.s Peally Plennirolarns (cercoon f married woman P ecnaeofmridi o ...is an i ysr whe reistei LINo TV eoswa safs alimrr tdwon in sae ag gnoo. 7u9ttn o-'oil gnarlbnnees nwsppe",fefnedasperadoe ,_d Si-h P--(p- th .... ~~~~~~~~d) - IIultcltvo deoisdhrimarly tora..d.ng dnorf nedsyIt.i.consdere FI1900 197,NUTRITION' nop b dlp if itCappears at .. ppleoctout timesawash naioa ovenag prdcrprc egh 91-5 90 end91979 date. Tonal LaoIoc oosns onmiel ciepeoe mldn enegyoqa.- en aP.d ti Prd no ioofapi h vaghl in llnbunbry ptrapca avaia paaa to ofal age.hafitiofns in 1 veou tanEie ate pot day. Avalable supplies c1mpoas do70ttcprodution,itpare let not c,c_is;b160, 170 an 1979dana ecy-rt_, an chngsin enact. Neth .....plis-A aild anIma toed-, seds PIa ereo)- haml labr oceasprcntg.o ttl abrtoe ousatinlesusod Ic food poco Ping aefasst itrbto,Uql Agrcutue cecet) ao ot t amn,frsty onn houseold ll;1961-5, 191. ia d 197dt.. 197 sodb-1979.date. Percait sorel of r9%in(arsesy- p dy)- Pritalo-orron o per capta PIdoleio lt Y.r.rr - tonal, male sad i femal - PaTVcipenlooe _a upl f rd r aydeampipo-fo sieiedo sos i-aciiy aesaeocpnd stoa,mae adteInlao orea pus poai,ofwio 0 rntsoadbeaimlpott. bet sad rfecig g-saanomoPo the poplation,T end. lon time nosd, Child (eos 1-0) Ifrcaicy R in rrthot. d 1997-10 ACsidenapntouadi Prrc of 1 P ivate Incom t (both - noonsh ao id - Ocivdbynoh age rcu 1- yeas, o cilde nchneoSto;frd atd foaigcos onec icet2 pecnt. poorest 20 B.. pecet sotporb 4 prc tro dn dnvd frmleosi;190 197 ed 97 dte of ..an Ie ttd d- 11107,TS POPE R-i . ~ P~-ygod.tikt TAlE 0IIPPdS. h y.,i..i di...t A LieUctaoai ic yas rcssnso tpaso iermiig h olwn siao r eyaprnmt enrao oet ees atbit; 96,190 n 119dta edshud heIntrpetda-h csierbo on- InetIo ralvRte(a bosn)-AnuldabIo ios ne n 3tt Uniae bolt oetyIcm evl(t pnc ie)-ubntehua at ae e rhuud) lv birhs Abalc-poery tom lonIschtinnmflvefblw.hit mnia benofpepl mml urban, nodd - roral) LAhBaonbeansst aeOf tFORdCE wator suc as that rom proes iedbrho96s,6spring, en 1anise wells T- Lara trlann poety .. om..d l s w-thirdo cgeprcpn fami'awter needs.t poor' let itknN-stplalle..tloblus96.170.. 17 May t1911At P -oua -io poc -d A Num..Peson Pouato divided by number -. opRuonicing- . . _.. ft,. na adt eml gnnddh ontn... ourise rcia nu,- rs and assistant curses.j.f.i., -ty bto  - 28 - Population 19.5 (mid-1979) ANNEX I GNP Per Capita: USt 740 (1979) Page 4 of 6 MOROCCO - ECONOMIC INDICATORS Amount (million US4 at Annual Growth Rates (%) current prices) Actual Projected Indicator 1980 1976 1977 1978 1979 1980 p/ 1981 1982 1983 1984 1985 NATIONAL ACCOUNTS Gross domestic product a/ 17640 10.2 6.5 3.4 4.5 4.0 3.9 5.7 6.2 6.6 6.7 Agriculture 3253 4.3 -13.2 23.6 -1.7 6.2 3.5 3.5 3.5 3.5 3.5 Industry 5599 8.8 10.0 -2.0 8.3 0.5 4.0 6.0 7.4 7.4 7.4 Services 8788 13.3 8.3 4.3 4.2 13.0 4.0 5.7 6.2 6.9 7.0 Consumption 15767 11.7 2.0 7.4 3.3 5.1 4.0 2.3 4.1 4.8 6.0 Gross investment 3849 20.1 11.0 -23.1 -1.2 -5.8 -5.2 15.7 12.8 10.2 8.0 Exports of GNFS 3273 6.3 9.8 3.8 5.5 4.8 7.6 6.5 8.8 9.6 6.8 Imports of GNFS 5247 23.8 13.s -16.1 -1.1 -9.2 -0.3 -1.0 4.8 4.5 5.0 Gross national savings 2429 13.9 20.6 -16.6 11.5 -2.2 20.9 10.6 14.1 7.7 PRICES GDP deflator (1969 = 100) . 152.0 163.7 177.1 189.8 208.8 Exchange rate (US$ per DH) . .226 .227 .240 .256 .254 Share of GDP at Market Prices (7) Average Annual Tncrease (%) (at constant 1969 prices) (at constant 1969 prices) 1960 1970 1975 1980 1985 1990 1960-70 1970-75 1975-80 1980-85 1985-90 Gross domestic product 4.0 4.9 5.7 5.9 6.8 Agriculture bl 29.1 19.9 15.1 13.6 12.5 10.7 3.5 -0.5 3.2 3.5 3.5 Industry b/ 23.5 27.6 30.6 29.5 31.6 32.4 4.7 8.6 5.0 6.6 7.3 Services b/ 47.4 52.5 54.3 56.9 55.8 56.9 4.1 5.5 7.3 5.9 7.2 Consumption 89.2 88.8 87.3 88.7 82.3 79.7 4.1 4.7 5.8 4.1 6.1 Gross investmient 10.3 16.0 24.6 16.7 18.5 18.9 8.0 15.9 -2.4 9.4 7.3 Exports GNFS 27.4 18.9 14.8 15.4 16.9 17.3 1.3 2.6 6.3 8.0 7.2 Imports GNFS 26.9 22.5 24.4 20.8 17.8 15.9 3 .5 7.2 2.1 2.7 4.3 Gross national savings 11.0 11.1 19.1 16.1 19.5 21.3 3.5 13.1 3.1 10.0 8.7 As 1 of GDP 1960 1970 1975 1980 e/ PUBLIC FINANCE Current revenues 16.5 16.6 23.3 22.3 Current expenditures 15.6 14.9 20.2 21.7 Surplus (+) or deficit (-) 0.9 1.7 3.1 0.6 Capital expenditure 3.8 5.9 12.2 12.1 Foreign financing .. 1.4 3.7 5.5 1960-70 1970-75 1975-80 1980-85 1985-90 OThIER INDICATORS GNP growth rate (%) 4.0 6.0 5.9 5.6 6.7 GNP per capita growth rate (%) 1.6 3.1 3.0 2.5 3.8 Energy consumption growth rate (%) 3.8 6.7 4.3 5.9 6.8 ICOR 3.09 2.77 3.87 2.88 2.74 Marginal savings rate 0.10 n.4n -0.002 0.33 0.24 Iniport elasticity_/ 0.95 1.44 0.28 0.76 0.80 a/ At market prices. b/ Share of GDP at factor cost beginning in 1985 and sectoral growth rates at factor cost beginning in 1980-85. c/ Coods only. e/ Estimate. p/ Preliminary. December 7, 1981 FMFYIA CD TT-B  - 29 - Population 19.5 (mid-1979) ANNEX f GNP Per Capita: USS 740 (1979) Page 5 of 6 MOROCCO - EXTERNAL TRADE Amount Ann Growth Rates (x) Indicator (million US$ at (at constant 1969 prices) current prices) Actual Projected 1980 1975 1976 1977 1978 1979 1980 e/ 1981 1982 1983 1984 1985 EXTERNAL TEtADE Merchandise exports (FOB) 2414 -22.8 12.8 8.0 3.5 4.0 6.9 7.6 6.0 9.3 10.4 6.5 Primary products 1823 -25.3 13.1 2.1 3.8 3.5 7.3 3.8 3.9 4.1 4.3 4.3 Phosphate rock 765 -29.9 12.0 7.5 10.4 3.2 -7.5 5.0 5.0 5.0 5.0 5.0 Others 1058 -22.5 13.8 -0.9 0.0 3.6 17.1 3.0 3.2 3.4 3.7 3.9 Intermediate & manufactures 591 -8.5 11.0 36.0 2.3 7.0 5.5 17.5 10.7 20.7 21.7 9.9 Merchandise imports (CIF) 4283 21.4 7.8 31.4 -26.4 9.7 -11.5 0.7 4.7 5.5 5.0 5.7 Food 720 35.5 -24.0 32.9 8.6 1.2 10.7 -5.1 -5.3 -5.1 -5.2 4.9 Petroleum 1006 12.8 2.9 14.5 10.7 12.2 -12.5 3.8 -4.4 3.8 4.1 3.0 Machinery and equipment 805 51.7 20.4 76.3 -57.9 -3.2 -19.9 1.0 17.2 13.3 10.2 10.6 Others 1752 5.2 14.8 4.9 -10.7 19.1 -13.8 2.4 4.5 5.4 5.4 3.2 PRICES (1969 = 100) Export price index . 256.5 207.8 201.9 211.4 231.7 264.2 291.5 319.8 348.7 380.6 411.3 Import price index . 205.0 211.7 223.4 236.1 252.4 293.4 326.0 351.4 379.2 408.7 437.9 Terms of trade index . 125.1 98.2 90.4 89.5 91.8 90.0 89.4 91.0 91.9 93.1 93.9 Composition of Merchandise Trade (%) Average Annual Increase (Z) (at current prices) (at constant 1969 prices) 1960 1970 1975 1980 1985 1990 1960-70 1970-75 1975-80 1980-85 1985-90 Exports 2.0 -0.7 7.5 8.1 6.9 PrLmary products 89.5 89.7 86.9 75.5 61.3 59.8 .. -2.2 4.7 4.1 6.0 Intermediates & manu- LO.5 10.4 13.1 24.5 38.7 40.2 .. 9.0 17.8 16.0 8.1 factures Imports 4.0 8.1 0.0 4.5 5.4 Food 27.3 16.8 24.9 16.8 9.6 6.6 .. 14.0 0.8 -3.8 -1.8 Petroleum 7.4 5.5 10.7 23.5 24.2 23.4 . 9.5 10.2 1.8 2.0 Machinery and equipment 6.7 24.0 23.9 18.8 28.2 32.3 . 12.8 -3.0 11.3 8.7 Others 58.6 53.7 40.5 40.9 38.0 37.7 .. 3.8 -5.4 4.5 5.6 Share of Trade with Share ot Trade with Share of Trade with Industrial Countries (X) Developing Countries (%) Capital Surplus Oil Exp,rters (%) 1960 1970 1975 1960 1970 1975 1960 1970 1975 DIRECTION OF TRADE Exports 72.3 73.7 60.8 27.7 25.4 38.8 . . 0.9 0.4 Imports 76.7 74.9 65.7 23.3 25.1 33.9 .. .. 0.4 e/ Estimiate. December 7, 1981 EMENA CP II-B  _ 30 - Population : 19.5 (mid-1979) ANNEX I CNP Per Capita: USO 740 (1979) Page A of 6 MOROCCO - BALANCE OF PAYMENTS EXTERNAL CAPITAL AND DEBT (million US$ at current prices) Indicator Actual Projected 1970 1975 1976 1917 1978 1979 19 e0 e/ 1981 1982 1993 1984 1995 1990 BALANCE OF PAYMENTS Exports of goods sod services 775 2580 2288 2486 2955 3694 4364 5136 5852 6758 7872 8q26 16088 Of which: Merchandine f.o.b. 488 1530 1245 1283 1488 1938 2413 2851 3314 3951 4759 5477 10336 Importn of goods sod services 946 3134 3691 4364 4353 5268 5911 6369 6899 7911 8791 9865 16604 Of which: Merchandise f.o.b. 625 2267 2305 2820 2628 3245 3770 4158 4693 5344 6046 6846 12178 Net correct tranfers 27 8 47 52 50 44 127 - - - - - - Current account balance -144 -546 -1355 -1826 -1348 -1530 -1420 -1233 -1047 -1153 -919 -93Q -516 Special grants .. 100 435 360 260 420 97 300 250 200 150 100 - Current account balance after grants -144 -446 -920 -1466 -1088 -1110 -1323 -933 -797 -953 -769 -839 -516 Pri-ate capital 21 21 38 53 45 37 88 25 28 31 35 39 79 MLT loans (net) 90 304 336 1338 1109 946 1188 1083 901 1121 882 979 727 Official .. .. .. .. .. .. .. 716 643 683 954 612 618 Private .. .. .. .. .. .. .. 367 159 437 179 368 109 Other capital 56 104 30 68 -73 73 -111 -70 -42 -30 - - - Monetary movements -23 17 16 6 8 53 158 -105 -89 .-169 -147 -170 -789 Ioternationl reserves 161 437 548 609 772 917 814 972 1061 1229 1376 1556 7681 Of which: Gold 21 85 82 104 154 360 415 360 360 360 360 360 360 Reserves as months imports 2.0 1.7 1.8 1.7 2.1 2.1 1.7 1.8 1.8 1.9 1.9 1.9 1.9 EXTERNAL CAPITAL AND DEBT _/ Gross dibuurnexents 175 664 725 1787 1182 1405 1567 Concessional loans . 164 121 634 334 321 750 DAC . . 109 73 107 100 76 97 OPEC .. 42 41 50' 189 179 598 IDA I1 4 - - I Other . . 13 3 1, 45 66 69 Non-concessional loans .. 500 614 1151 857 1113 817 Official export credits .. 3 22 27 2 2 11 IBRD 16 110 59 68 72 137 64 Other -ultilat-ral .. 7 2 7 51 7 13 Private 25 380 531 104" 732 967 729 Suppliers credits .. 127 10 171 10 8 16 Financial credits and bonds .. 253 521 878 722 957 713 External Debt Debt outstanding and disbursed 703 1753 2330 4066) 5123 6182 7097 Official .. 1121 250 1975 2456 2833 3482 Private ., 632 1080 2094 2667 3349 3615 Uodisbursed debt 239 652 801 1024 2280 2337 2018 Debt service Total service payments 58 145 162 264 547 798 1191 Interest 23 50 66 148 252 411 618 Payments as % exports of GCS 7.5 5.6 7.1 10.7 18.5 21.6 27.3 Average interest rote In se loans (X) 4.4 7.3 7.7 6.8 7.0 8.2 8.1 Av-rage natcrity of ne- loans (years) 18.5 14.7 11.7 13.1 13.2 15.9 13.7 As X of Debt Outstanding at Eod of Most Recent Year (1979) Maturity structure of -bt outstanding Maturities dun within 5 years 38.5 Maturities due within 10 years 73.2 Interest structure of . ebt outstanding Interest due within first year 6.9 Oecernber 7, 1981 EMENA CP TI-B a/ From IBRD External tebt Reporting System. There are nizeable discrepant ies in some years between the external capital and debt service flows reported under the lBRD Debt System and those recorded in the official balance of payments statistics shown in the upper part of this teble. e/ E.tixated.  - 31 - ANNEX II Page 1 of 8 A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1981) Loan or US$ Million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed Eighteen Loans Fully disbursed 411.4 Four Credits Fully disbursed 36.0 1017 1974 Maroc-Phosphore Industry 50.0 0.3 1018 1974 Kingdom of Morocco Agriculture 32.0 11.0 555 1975 Kingdom of Morocco Agriculture 14.0 11.8 1201 1976 Kingdom of Morocco Agriculture 30.0 6.4 1202 1976 Kingdom of Morocco Tourism 21.0 12.3 1220-T 1976 Kingdom of Morocco Education 25.0 19.7 1299 1976 Kingdom of Morocco Power 49.0 1.9 1361 1977 CNCA Agriculture 35.0 0.0* 1383 1977 CIOR Industry 45.0 0.4 1416 1977 Kingdom of Morocco Agriculture 41.0 37.4 1428 1977 BNDE DFC 43.2 14.9 S-7 1977 Kingdom of Morocco Engineering 1.5 1.0 1528 1978 Kingdom of Morocco Urban Development 18.0 15.7 1602 1978 Kingdom of Morocco Agriculture 65.0 62.2 1625 1978 Maroc-Phosphore Industry 50.0 10.7 1681 1979 Kingdom of Morocco Education 113.0 112.9 1687 1979 Kingdom of Morocco DFC (SSI) 25.0 15.3 1695 1979 Kingdom of Morocco Power 42.0 41.9 1704 1979 CNCA Agriculture 70.0 51.6 1724 1979 Kingdom of Morocco Water Supply 49.0 40.4 1757 1980 Kingdom of Morocco Agriculture 58.0 52.5 S-18 1980 BRPM Oil Exploration 50.0 37.7 1830 1980 Kingdom of Morocco Highway 62.0 62.0 1848 1980 Kingdom of Morocco Agriculture 34.0 34.0 1943 1981 CIH Tourism 100.0 100.0 1944 1981 Kingdom of Morocco Urban Development 36.0 36.0 20061/ 1982 Kingdom of Morocco Water Supply 87.0 87.0 20371/ 1982 BNDE DFC 70.0 70.0 20381