Morocco - Second Forestry Development Project

Document of The World Bank FOR OMCIAL USE ONLY iRe No. P-5G68-MOR MEMORANDUM AND RECOMMENDAK1ION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$ 49 MILLION TO THE KINGDOM OF MOROCCO FOR A SECOND FORESTRY DEVELOPMENT PROJECT November 28, 1989 . This domend ba a rualted ditbution and may be ud by reipients ody ithe pefonmnee of thei oUkd duies. its Mteut may not oherwie be dslo_d withut Wodd lank uthorIaion.  CURRENCY EOUIVALENTS (February 1989) US$ 1.00 - Dirham (DH) 8.25 DH 1 - US$ 0.121 WEIGHTS AND MEASURES The metric system is used throughout this report GLOSSARY OF ABBREVIATIONS ASAL - Agricultural Sector Adjustment Loan DEFCS - Department of Forestry and Soil Conservation FAO/CP - FAO/World Bank Cooperative Programme SAL - Structural Adjustment Loan GOVERNMENT OF MOROCCO FISCAL DEAR January I to December 31  FOR OMCIAL USE ONLY KINGDOM OF MOROCCO SECOND FORESTRY DEVELOPMENT PROJECT Loan and Project Summary Borrower Kingdom of Morocco Beneficiary Ministry of Agriculture Amount US$ 49 million equivalent Terms : 20 years including a 5-year grace period with interest at the Bank's standard variable interest rate. Onlending Terms Not applicable Financing Plans Government US$32.2 million Rural Communes US$18.8 million IBRD USS49.0 million Total US$100.0 million Staff Appraisal Report: No. 7752-MOR Date: November 28, 1989 Map No. : IBRD 21506 This document has a restricted distribution and may be used by recipients only in ;i'e performance of their official duties. Its contents may not otherwise be disclosed without Workd iank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TC THE KINGDOM OF MOROCCO FORA SECOND FORESTRY DEVELOPMENT PROJECT 1. The following memorandum and recommendation on a proposed loan to Morocco for US$49 million is submitted for approval. The proposed loan would be for 20 years including a 5 year grace period with interest at the standard variable rate and would help finance a Second Forestry Development Project. 2. Background. Agriculture in Morocco accounts for some 17% of GDP and employs some 40% of the labor force. Primary agricultural exports account for some 17% of total exports; total agricultural exports, including processed products, account for some 28% of total exports. Forests occupy 8% (5.8 M ha) of Morocco's area and contribute an estimated 12% of agricultural value added if one takes into account its unrecorded contribution to the kingdom's energy and forage supply. About 85% of Morocco's domestic energy needs are met from fuelwood, equivalent to about 10 M m3 of wood which clearly exceeds the national forest's current sustainable yield. Forest rangelands supply more than one-sixth of the national forage production. While directly quantifiable economic benefits are very significant, the forest's most important contribution to the economy is probably ecological: the protection of watersheds and the safeguarding of water supplies, agricultural production and wildlife, and the arresting of the erosion and desertification of Morocco's sensitive soils. The current over-exploitation of the country's forest resources is resulting in a steady depletion of this wealth and there is a need for sound management programs aimed at reversing this trend. 3. With active Bank encouragement, Morocco has been giving increasing priority to natural resource management and forestry over the last decade or so. During this period, the Bank has supported forestry through four rural development projects (Fes-Karia Tissa FY78, Loukkos FY80, Middle Atlas FY82 and Oulmes Rommani FY83). The experience from the earlier of these projects was included in the Forestry I project (Gharb-Mamora, FY82, to be closed June 30, 1990). All these projects included experimental or innovative improved practices for forest plantations, exploitation, soil conservation, pest management, etc., and institution building. Technically the implementation of these forestry activities has been successful. However, they have (like other projects) been suffering from Morocco's financial problems which have caused delays in project implementation. Other major constraints on forestry development are (a) population pressure and lack of their participation, (b) lack of sector plans and p'.anning data, (c) inadequate funding, and (d) difficult climatic and ecological conditions, restricting forest productivity. 4. Rationale for Bank Involvement. The project is part of the Bank's agricultural strategy and is included among the investment priorities under the Medium-Term Agricult ral Sector Adjustment Program defined under ASAL I and II and in GOM's tatl at investment program (PIC) identified under the SAL.  It is also an important element in the Government's and the Bank's energy strategy and in Morocco's 5-year plan strategy for the conservation and more efficient utilisation of the country's natural resources. Under the forestry components in earlier Bank projects and the Forestry I project, the Forest Department (DEFCS) has initiated with Bank assistance a long term program for the introduction and pilot application of new techniques and practices with the objective of a wider application, lf successful. The proposed project is a logical sequence to continue and expand the improvements already made, particularly in forest regeneration and plantations, and to continue the development of techniques and a national program for watershed management for which support by the Bank is planned In a subsequent operation. The institution-building process and the strengthening of DEFCS is a relatively long-term endeavor not yet completed. For all this, Morocco needs continued help and the Bank is uniquely placed to inject experience from neighbouring countries and from elsewhere in the world into Morocco's forestry operations. 5. project 0biectiven. The objectives of the project are (a) to support environmentally sound management and development of Morocco's forest and other natural resources and (b) to prepare and test components for a national watershed management program aimed at addressing soil erosion in the country's water-catchments. The project would (a) strengthen forestry planning and policies and (b) assist Morocco in maintaining and improving its forestry potential to meet the country's wood and energy needs and protect its soils and water.heds in harmony with other demands on the resources such as domestic stock g'azing and (c) support an investment program towards these goals. 6. Project Deserlgtion. To achieve the project's objectives, priority investments have been defined from the DEFCS 5-year investment program for inclusion in the project. The project accounts for just over half (US$81 M) of DEFCS' capital budget for the period, and also includes investments (US$19 M) financed by the local communities and executed by DEFCS. The main project activities are: (a) Forestry Planning, including the organization of a national forest inventory; the demarcation of 370,000 ha of productive forest with unmarked boundaries; the preparation of action-oriented forest management plans for 390,000 ha of natural forest and 300,000 ha of forest plantations; and the preparation of a national reforestation plan. (b) Forest ORerations consisting of regeneration of some 33,000 ha of indigenous cork oak and cedar forest; afforestation of 31,000 ha; experimentation with low-cost watershed management techniques involving the local populations on 10,000 ha in two water-catchments and the development of components for a national program; the development of a total of 27,000 ha of forest ranges in two areas where plans are available and the strengthening of a forage seed farm; stabilisation of some 370 ha of dunes; and the construction of some 250 km of new forest roads and the rehabilitation of some 1500 km of existing roads. (c) Supnort Activities, including the planning and equipment of two nature conservation areas, inventories of Morocco's fauna and flora and the  -3. establishment of a nature research and management unit; undertaking seven silvo-pastoral development studies covering a total of nearly 100,000 ha, and one pilot study on the argan forest area in a selected commune supporting an ongoing Bank "women in development" sector study: measures to promote private sector plantations; forest research, extension, training, institutional development and technical assistance; the rehabilitation of 600 staff houses; the purchase of 88 four-wheel drive and 10 light vehicles, 25 personal computers and other equipment and materials. DEFCS would execute the communal works to the same standard as those financed over their own budget. 7. The project would disburse funds for civil works; forest operations; equipment, tools, materials, farm 'k-uts and books; and consultancy services, studies and training. Toial cost of the project is estimated at US$ 100 million with a foreign exchange component of US$ 30.7 million. A breakdown of costs and the financing plan are shown in Schedule A. The loan amount of US$ 49M has been specifically reduced from US$ 50M by US$ 1.0 because procurement procedures inconsistent with Bank Guidelines would be used by the Government for vehicle procurement. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in schedule B. A timetable of key project processing events and the status of Bank Group operations in Morocco are given in schedules C and D, respectively. A map is also attached. The Staff Appraisal Report, no 7752-MOR and dated November 28, 1989, is distributed separately. 8. Agreed Actions. At negotiations, assurances were obtained from the Government that it would (a) prepare modern, simple forest management plans with terms of reference acceptable to the Bank and carry out silvicultural treatments prescribed in these plans; prepare a national reforestation plan by June 30, 1995; (b) before December 31, 1992, implement measures satisfactory to the Bank, designed to promote the carrying out of reforestation activities by La Cellulose and other private sector enterprises; (c) [i] not later than December 31, 1992, carry out a study under terms of reference satisfactory to the Bank, to develop a suitable structure of prices to be charged for wood supplied by DEFCS to La Cellulose and [ii] ensure that upon expiration of the Protocol for Pulpwood Supply in 1993, any transitional arrangements to supply the company with pulpwood, be at prices based on the study and agreed upon between the Government and the Bank; (d) propose an organizational structure for DEFCS, including job descriptions for key staff, for discussion with the Bank and implement the agreed recommendations by June 30, 1992; (e) make arrangements satisfactory to the Bank with individuals who use forests in which regeneration under the project is to take place for grazing purposes to ensure that the grazing activities are carried out in a manner consistent with the regeneration activities; (f) for project activities on non-governmental land, make suitable arrangements with the owners to ensure proper implementation of such action; (g) employ key project staff (sociologist, economist, technical staff) by agreed dates.  9. Bngfts Direct benefits of the project include Increased wood production and foreign exchange savings, employment creation in rural areas, where the project would be implemented, and thus increased incomes for the rural poor, 45 of whom are still bel2w the absolute poverty level. The project would be instrumental in promoting the participation of the local populations in the management of their natural resources and private sector participation. It would also contribute towards protec ig dams and watersheds an would help meet Morocco's energy requirements, while making more effective use of the country's natural resources and protecting its soils. The project would have beneficial effects on the environment and contribute towards the conservation of nature and Morocco's unique flora and fauna. The internal economic rate of return of the project is 39X. 10. Risks. The two major risks facing the project are a slower than projected growth rate for project plantations and continued government failure to provide adequate and timely funding. The former risk is reduced by the introduction to Morocco in recent years of vegetatively reproduced (clonal) planting material, which has dramatically increased yields in other countries, and the funding risk is lessened by the fact that the budget situatio. has now improved and by ensuring that project investments are in the Government's target investment program. The potential risk of failure of the forest populations to participate and comply with plans to organise livestock grazing in project areas is reduced through the choice of project sites where there have been successful experiences with similar works or where the populations have asked for the project. Arrangements would also be made with concerned populations to minimise this risk. 11. Recommendatig . I am satisfied that the proposed project would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Barber B. Conable President Attachments Washingtor., D. C. November 23, 1989  -5- Schedule A KINGDOM OF MOROCCO SECOND FORESTRY DEVELOPMENT PROJECT Estimated Costs and Fiancing Plan Estimated Project Costs-' Local Foreitl Total - - US$ million A. Forestry Planning 4., 3.1 7.6 B. Forest Operations Regeneration of Natural Forest 8.3 1.3 9.6 Plantation Establishment 13.8 7.5 21.3 Watershed Management 3.9 1.3 5.2 Forest Range Development 6.2 1.9 8.1 Forest Roads 3.2 2.3 5.5 Communal Covponent 10.8 4.6 15.4 C. Support Activities Nature Conservation 0.5 0.5 1.0 Forest Research 2.1 0.9 3.0 Institution Development 0.1 - 0.1 Housing & Equipment 2.6 1.7 4.3 Training 0.7 0.1 0.8 Base Costs 56.7 25.2 81.9 Physical Contingencies 3.2 1.4 4.6 Price Contingencies 9.4 4.1 13.5 Total Project Costs Financing Plan Local Foreign Total US$ million Government 31.2 1.0 32.2 Communes 18.8 - 18.8 Bank 19.3 29.7 49.0 Total 69.3 1/ Includes US$19.9 million of taxes and duties.  Ichodule, Page I of 2 KINGDOM OF MOROCCO SECOND FORESTRY DEVELOPMENT PROJECT Pmr ment Methods and DIsbUrsments Proourement Methods /a (US million) Procurement Method Project element ICB LIB LCB Other 1/ N.A. Total Cost Civil works (Roads, - 8.9 4.6 - 13.5 buildings and wells) (7.1) ( - ) (7.1) Forest operations 42.1 6.7 - 48.8 (31.1) ( - ) (31.1) Vehicles - 1.9 - 1.9 g(_) (- ) Equipment, tools, materials, farm inputs and books 0.2 1.8 0.9 - 2.9 (0.1) (1.1) (0.5) (1.7) Technical Assistance and Studies - 7.6 - 7.6 (7.6) (7.6) Training - 1.5 - 1.5 (1.5) (1.5) Incremental staff salaries and operatit. costs - - 5.0 5.0 (-) ( -) Communal component 18.8 18.8 (-.) (-) 0.2 52.8 42.0 5.0 100.0 (0.1) (39.3) (9.6) (-) (49.0) a/ Figures in parenthesis are amounts disbursed by the Bank and include a prorated share of unallocated funds in the disbursement schedule. 1/ Force account for Civil Works and Forest Operations, reserved procurement for vehicles and local shopping or direct purchase (US$0.2M) for equipment, tools, etc.  - 7 - Schedule B Page 2 of 2 KINGDOM OF MOROCCO SECOND FORESTRY DEVELOPMENT PROJECT Procurement Methods and Disbursements Disbursements (US$ million) Category Amount (US$ million) Civil Works under contract 6.0 802 Forest operations under contract 30.0 80X Equipment, tools, materials, farm inputs, books 1.8 1002 (of foreign expenditures) 1002 (of ex factory) 802 (of local expenditures) Consultancy ser-rdces, studies and training 8.7 1002 Unallocated 2.5 TOTAL 49.0 Disbursements (US$ miLlion) Estimated Bank Disbursements: IBRD Fiscal Years FY90 FY91 FY92 FY93 fi14 FY95 FY96 Annual 0.6 5.4 8.0 9.0 10.0 9.0 7.0 Cummulative 0.6 6.0 14.0 23.0 33.0 42.0 49.0  -8- Schedule C KINGDOM OF MOROCCO SECOND FORESTRY DEVELOPMENT PROJECT Timetable of Key Proleet Procesing Events (a) Time Taken to Prepare One year (b) Prepared by Government and FAO/CP (c) First Bank Mission : October 1987 (d) Appraisal Mission Departure February 1989 (e) Negotiations October 16-20, 1989 (f) Planned Date of Effectiveness : March 1990 (g) List of Relevant PCRs and PPARs :  -9- Annex D Page 1 of 2 DStat of Ui' OM oarattu. in 1 * S~~~~~~~~gltoit of 3in Lou ad I" Cr"Ada (mS of SeqomCr 30. I"" U$1 million Amot (LOS cal ltiam) Lamt or~____________ crLt ba IRE UE* IM ne UAt Fifty-two loan wd five credits fully diskirsed 2,060.88 45.16 1602 1978 Kigr of torocco Agrcultute 40.00 7.46 2006 1982 Kingd of Morocco Water Slpty 78.00 16.42 2082 1982 Kingdom of Norocco Agriculture 16.00 8.39 2110 1982 Kingdom of Norocco Forestry 12.S 4.52 2149 1982 Kingdom of Morocco Edocation 38.00 4.50 2217 1983 Kirgdom of Noroco Agriculture 22.00 1S.99 2245 1963 CI MAing Oevelopmnt 60.00 2.70 2253 1983 Kingdm of Morocco Agriculture 34.00 21.04 22S4 1983 Kingdom of Morocco NHigys 76.60 13.48 2272 1983 KifD of Morocco Villep Infrastructure 16.00 .69 2479 1985 Kir. io of Mororco Vocational Training 27.10 13.82 2487 1965 Kin.Zem of Morocco Elec. *nd Mch. Indiatry 25.10 8.44 2508 19%5 Kingdom of Morocco Jerado coal Mining 21.00 9.90 257n 1985 Kingdom of Norocco Heltth 28.40 23.24 2656 1986 Kingdom of Morocco Agriculture 46.00 36.85 2657 1986 Port Authority Port of Cesablanc 22.00 14.48 2664 1986 Kingdom of Morocco Ewat ihn 150.00 27.23 2731 1986 CCA Agriculturat Credit 120.00 4.00 279 19M? Kingdom of Moroaco Vocetiountl Training 22.30 15.5? 2798 1987 OMPY TeleeciAnUM cAt10 116.00 113.1? 2806 198? National Sank for Econ. Owa. Industrial Export Finance 70.00 27.34 2820 1987 Kingdom of Norocco Public Ert. Rationalization 240.00 4.41 2825 1967 Kingdom of Mrocco National Water Supply 60.00 58.49 2826 1987 Kingdom of forocco Greter Cablene Sewraege 60.00 59.3? 285 1988 Kinom of Morocco Send Agric. Sec. AdJust. 225.00 150.00 2910 19868 Kirvwa of Mtrocco Power Distribution S/ 90.QO 90.00 2954 1968 Kin, otf Morcco tlwt S Md. Seale Irrig. 11 23.00 23.00 3001 1989 Kingdm of Morocco Structural Adjustent Loan 200.00 100.00 3026 1989 Kingdom of Mwocco Rursl Primry tdoation jl 83.00 83.00 3036 1989 Kingdm of Moroco Agric. tea. end Extion St 28.00 28.00 3048 1989 Kingdom of Morco Ptblic Adin. Loon El 23.00 23.00 3088 1969 CNCA Natioal Agric. Credit 100 190.00 3121 1990 CIA Mousing financea 11 ILSfl TOTAL 4404.38 45.16 1279.00 Of whick has be repaid (only ortization) 932.13 4.a6 Total bhld by Sank and IA 3,472.25 40.30 A=ma sold 20.11 of sAich has ben rpid 20.11 Ttotl undisbursad 1279.00 D/lNot yet effective. W not yet signed. RGO1/benkopa Sep. 26, 1989  - 10 - AMn: D pYea Z of 2 1961 lu Ae Nt. W i* 0Dv. gmn. (WlDot) Oe pwnt frafwtie 56.1 1.54 s9.6 1978 19t * * " 196 US$486 Irdstrttlle do Liiu (loan fully rep.dg eqfty otd) Afrumtn rry 0.6 0.50 1.3" 1976 Rarrkech Cint C_nut Prodwsttmn * 1.28 1.6 197 Tmr_ Cnt Cmnt Pru1tf n 4.75 3.57 6.38 1979 Cftms d$Agadtr Cement Pruuisftm 15.16 * 15.16 1980 sotFnR Eine 11." 9 .3 15.34 1901 Caablawawmt CanenO Proouktion 15.60 L.2 168.05 1982 1983 Frurt Agrotfn*try 6.30 8.30 1967 Cr6dlt Iumbtl1ier at IOteltfr (CIN) Fftunslal irntftutlon 25.00 * .00* 18 9srf II Il Tattlt FtorY 3.7 1.33 4.6O 1987 Ci$stb-