Report No. 11727-MOR The Kingdom of Morocco Agro-Industrial Development Constraints and Opportunities (in Two Volumes) Volume I Main Report 30 June 1994 Agriculture Division rountry Department I Middle East and North Africa Regional Office FOR OFFICIAL USE ONLY MICROGRAPHICS Report No: 11727 MOR Type: SEC Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization CURRENCY AND EXCHANGE RATE Currercy Unit = Dirham (DH) 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 __________ ~~~~~~~~~~~~~~~~~~1Proj.- DH per US$, 6.27 8.06 9.55 9.62 8.71 7.80 8 21 8.12 8.04 8.15 8.5 End of Period DH per USS, 6.02 7.11 8.81 10.06 9.10 836 8.21 8.49 8.24 8.71 8.5 Period Average . ~~ _. = , - m.- FISCAL YEAR Jamuary 1st - Decemer 31st FOR OFFICIAL USE ONLY AKNOWLEDGEMENTS This two-volume sector report was prepared following a June/July 1992 mission to Morocco. The report was written by Michel L. Debatisse (task manager; Technical Department for Europe, Central Asia, Middle East and North Africa Deparment), and I. abelle Tsakok (Maghreb Department, Agriculture Operations Division). The report is based on Bank and consultants' reports. Michael Koch (Maghreb Department; Industry and Energy Division) produced the chapter on Finance. The consultants are: Bertrand Angleys (dairy); Gerard Deshayes (management oi enterprises and agricultural cooperatives); James Fry (cereals, oilseeds and sweeteners); Paul Guigou (fruit and vegetables); Ena Harvey .,tandards and quality management); Marc Lepinay (spices and aromatic plants); Klaus Pasbjerg Oogistics); Jean-Yves Plamondon (wine); and Jean-Pierre Vaysse (meat). The mission benefitted from secretarial support and logistical coordination by Sylvie Pittman (Agriculture Division, Maghreb Department). Nicole de Blaye (Agriculture Division) and Helene Talon (Country Operations) translated selected chapters. Christine How provided help on tables. Mely Agregado assembled and finalized the two-volume of the Green Cover Report. Syviengxay Creger was responsible for the processing of the final Grey Cover Report. While in Morocco, the mission received support from Messrs. Albert Sasson and Mohammed Anechoum (Ministry of Agriculture and Agrarian Reform, MARA); Mr. Abdelhek Bennani (MARA) was co-ordinator of the Moroccan team. The mission also benefitted from support from Messrs. James Lowenthal and Charles Uphaus of USAID in Rabat. The Moroccan team was composed of Mmes/Messrs Abdelkader Elmazhor, Lahsen Esslimi, Mohammed Rhaoussi (MARA); Abdellouahed Rahmoun (Ministry of Commerce and Industry); Jam,el Kilito, Zahra Maafiri (Ministry of Foreign Trade); Jamil Berdai (Ministry of Plan); Abdelrhni Nejjar (Ministry of Transport); Abdeljebar Lqadey (Ministry of Interior); Fettoume Ameur (Banque Nationale de Developpement Economique); Waft Hamami, Ouafa Cheqrouni (Caisse Nationale de Credit Agricole); and Mohamed Lebbadi (Banque Marocaine du Commerce Exterieur). The peer reviewers were Brendan Horton and Shilpa Patel. This document has a restricted distrbution and may be used by recipients only in the performance of their I officia duties. Its contents may not otherwise be disclosed without World Bank authorization. CONTENTS MAIN REPORT pop ABBREVIATIONS AND ACRONYM EXECUTIVE SUMA RY ............................... i-xx CHAPTER I ... .. . .. . .. . .. . . .. . .. .. .. 1 ROLE, PERFORMANCE AND GROWTH POTENTIAL OF AGRO-INDUSTRY IN THE MOROCCAN ECONOMY ......................... 1 SUMMKARY .......................... A. The Macro-Economic and Trade Framework: hIplications for Private Sector Agro-Industrial Incentives ................., 3 B. Potential for Growth in Agicultural Supply and Agro-Industrial Demand. 9 C. Main Features of the Moroccan Agro-Processing Sector .18 D. Key Macro and Trade Issues and Policy Re-orientations for Efficient Agro- Industrial Development .24 CHAPITER 2.27 THE TECHNICAL ENVIRONMENT FOR AGRO-INDUSTRIAL DEVELOPMENT .27 SUMMARY . .27 A. Marketing Techniques .29 Marketing Techniques .29 B. Preservation and Processing Techniques .38 C. Procurement .42 Supply of Agricultural Raw Materials .42 Supply of Food Additives and other Food Ingredients .43 Procurement of Various Non-Agricultural Supplies ................... 44 D. Support Services to Trade and Industry .. . . . 45 Marketing and Processing Cooperatives .. . . . 45 Information on Markets, Technologies and Trade Regulations .. ... 46 Services to Enterprises ..... 47 CHAPTER3 ..... 50 OVERVIEW OF AGRO-INDUSTRIAL ENTERPRISE MANAGEMENT .. ... 50 SUMMARY .... SO A. Strategic Threats Generated by Changes in the Environment ..... 51 Access to Free Trade Zones ..... 51 Liberalization of External Trade and Deregulation of Agro-Foodstuff Markets . . 51 B. Weaknesses in the Management of Agro-Industr4al Enterprises ..... 52 Procurement of Raw Materials ..... 52 Financing of the Enterprise ..... 54 Staffing of the Enterprise ............. .. .. .. ... .. .. .. .. .. . . 54 Accounting and Monitoring of the Enterprise Management . .............. 55 Marketing of Products of the Enterprise . ......................... 56 Organization of Enterprises, Management Styles, and Implementation of Strategies ........................................ 58 CHAPTER 4 .................................................. 60 LOGISTICS AND INFRASTRUCTURAL ENVIRONMENT. 60 SUMMARY 60 A. The Need for an Enabling Logistics and Infrastructural Environment . .61 B. Selected Aspects of Road Trarsport ..62 C. Selected Aspects of Sea Transport ..70 D. Selected Aspects of Air Transport ..73 E. Selected Aspects of the Use of Cold Storage Facilities ..74 F. Packing Material, Handling and Storage Equipment ..80 G. Norms and Shelf Life ................ 82 CHAPTER 5 .83 QUALITY MANAGEMENT IN THE FOOD CHAIN .83 SUMMARY ..83 A. Quality Management at the Institutional Level ..86 Role of Government Institutions .86 Ministry of Agriculture and Agrarian Reform (MARA) .86 Veterinary Services .86 Direction de la Production Vfg6tale, du Contr6le Technique et de la Repression des Fraude .87 Etablissement Autonome de Contr6le et de Coordination d'Exportations (EACCE) .88 Ministry of Public Health .89 Ministry of Commerce and Industry (MCI) .90 Ministry of Fisheries and Marine Trade .91 Ministry of the Intior .91 The Impectorate ('MOHTASSTBS') .91 Local Authorities ........................................ 91 Role of Supporting Institutions ................ 92 Institut Marocain de l'Emballage et du Conditionnement ([MEC) .92 Official Laboratory for Analytical and Chemical Research (LOARC) .92 King Hassan II Institute of Agronomy and Veterinary Studies (IAV) .92 B. Quality Management at the Enterprise Level .93 Export Markets .93 Domestic Markets .93 C. Major Weaknesses .94 Legislative Level .94 institutional Level .95 CELAPrER6 ........... 99 FINANCIAL NEEDS OF AGRO-PROCESSING ENTREPRISES AND BANKING SERVICES TO THE SECTOR . 99 SUMMARY . 99 A. FinaWcial Needs and Capital Structure ........... ................... 102 Sector-Specific Financial Needs .102 Indebtedness and Capital Structure .104 B. Cost and Adequacy of Banking Services .107 Access to External Financing ..... ............................ 107 Cost and Conditions of Banking Services .108 Adequacy of Banking Services to Agro-Industrial Needs .112 C. Agro-Processing as Banks' Credit Customer .113 Credit to Agro-Processing Enterprises at the National Level .113 Credit to Agro-Processhg Enterprises by Individual Banks .............. 114 Parameters of Credit Allocation ..1....... 18 Promoting Bank Lending ......... 120 AP ER7 ......... 122 OVERVIEW OF AGRO-PROCESSING BY SUBSECTOR .122 SUMARY ..122 A. The Import Substitutes .124 Cereals and Livestock Feeds .124 Oilseeds and Vegetable Oils .127 Sweeteners and their By-Products .128 Dairy Products .129 Meat Products .131 B. The Import Substitutes and Exports .133 Fresh and Processed Fruits and Vegetables .133 Spices and Aromatic Plants. 136 Wine .137 C. Key Sectoral Issues and Policy Re-oriemiations .138 Tables and Figues in Text Table 1.1: Morocco - Trade Regime for Selected Agricultural Commodities, 1993 .... ... 6 Table 1.2: Morocco - Agricultural Performance and Production Structure, 1980-1990 ..... 10 Table 1.3: Morocco - Agricultural Yield Potential Over Actual for Selected Commodities . 13 Table 1.4: Comparisons of Expenditure or Income Elasticities: Morocco & World ... ... 15 Table 1.5: Morocco - Imports and Exports - Relative Importance of Selected Countries or Trading Groups (1980, 1985-91) .17 Table 1.6: Morocco - Overview of Growth Rates of Agricultural/Food Exports, Imports and Food Balance .21 Table 1.7: Overview of the Moroccan Agro-Processing Sector Performance and Structure, 1981- 1990 .22 Figure 1.1: Agricultural Growth Rates (1980-1990) . .......................... 1 1 Figure 1.2: Agro-Processing Growth Rates in Morocco (1982-1990) ................ 19 Table 2.1: Typology of Products and Markets .............................. 32 Table 2.2: Marketing Techniques for Moroccan Food Products ............... .... 34 Figure 2.1: Optimal Curve for Investment Decisions ............... 30 Figure 2.2: Potential for Modification of Marketing for Moroccan Food Products .39 Figure 2.3: Agro-Industries Technological Framework .41 Table 3.1: Return on Assets ard on Equity of a Sample of Moroccan Agro-Industrial Enterprises .55 Table 3.2: Overall Framework of Moroccan Enterprist Management ............... 59 Table 4.1: Cost Structure for a Vehicle Operated for Public Transportation .... ....... 65 Table 4.2: Volume of Traffic (All Goods) In Moroccan Ports (1991) ............... 69 Table 4.4: Exports of Fruits and Vegetables by Sea .......................... 70 Table 4.5: Transit of Sea Containers ................................... 71 Table 4.6: Cold Storage Distribution of Capacity ............................ 74 Table 4.7: Expected Economies of Scale in Operating Cold Stores ................. 77 Table 4.8: Utilization Guidelines for Cold Stores ............................ 78 Figure 4.1: A Comparison of Moroccan and Energy-Saving Standard Layouts for Cold Stores 76 Table 6.1: Investments in Agro-Processing Enterprises (1986-1990) ................ 102 Table 6.2: Nationality of Investors in Agro-Processing Enterprises (1986-1990) .... ..... 103 Table 6.3: Enterprise Activity and Profitability ............................. 105 Table 6.4: Enterprise Indebtedness and Debt Structure ........................ 106 Table 6.5: Enterprise Capital Adequacy and Liquidity ......................... 107 Table 6.6: Financing of Investment Projects (1986-1990) ....................... 109 Table 6.7: Credit to Moroccan Enterprises (1986-1991) ........................ 114 Table 6.8: Credit to Agro-Processing Enterprises by Co- -nercial Banks (1991/92) ... .... 115 Table 6.9: Credit to Agro-Processing Enterprises by BNijE (1988-1991) .... ......... 116 Table 6.10: Credit to Agro-Processing Enterprises by CNCA (1986-1991) .... ......... 117 Map of Morocco: IBRD No. 24657 CONTENTS Volume 1 Technical Annexes Page Abbreviations and Acronyms ANNEX 1 ROLE, PERFORMANCE AND GROWTH POTENTIAL OF AGRO-INDUSTRY IN THE MOROCCAN ECONOMY: TABLES .................................. I ANNEX 2 MARKETING AND PROCESSING COOPERATIVES ......................... 22 SU1MARY . ..................................................... 22 A. The Status of Land Reform Cooperatives ........... .. ............... 24 Overview of Land Reform Cooperatives .......................... 24 Specific Problems of the Land Reform Cooperatives . . ................. 26 Weak Interest on the Part of the Members Resulting in a Precarious Financial Situation ...... 26 A Serious Dispersion and a Weak Grouping of the Unions ..... ........ 27 Legal Difficulties ................................... 27 Potential Risks from the Withdrawal of the State ................ 28 B. The Status of Cereal Cooperatives ................................ 29 Organization of the Cereal Market .............................. 29 The Role of the ONICL and of Other Market Agents .... ......... 29 Storage and Marketing Schemes .......................... 29 Cereal Cooperatives ....................................... 31 Cooperative Movement as an Instrument of Grain Policy of the State ... 31 Competition with Grain Retailers, Operating along Different Commercial Methods ................................. 32 A Weakened Financial Situation .......................... 33 The Perspectives of Liberalization and Its Difficulties .................. 34 Liberalization Measures ............................... 34 Structural Difficulties ................................. 35 Institutional Difficulties ............................... 35 Organizational Difficulties .............................. 36 Financial Difficulties ................................. 36 C. The Situation of the Cooperatives in Areas Outside of Land Reform .... ....... 36 The Overall Situation ...................................... 37 The Situation of the Dairy Cooperatives .......................... 37 Analysis of the Specific Situation of Dairy Cooperatives .... ....... 37 Future Perspectives .................................. 38 D. General Problems of Cooperatives as Seen from the Perspective of the State's Withdrawal . .............................................. 39 Inappropriate Statutes ...................................... 39 Some Shortcomings on an Inapplicable Law Governing Cooperatives ... 39 An Imperfect Understanding of the Cooperative Logic ................. 40 Concept of Administrative Assistance Focused on Production .... ......... 41 APPENDIX 2.1 .............................................. 46 Remarks on the Cooperative Law and the Resulting Statute ..... ......... 46 ANNEX 3 CEREALS, OILSEEDS AND SWEETENERS ................................ 48 SUMMARY . .................................................... 48 A. Review of the Main Issues ..................................... 52 Distortions in the Price System ................................ 53 Ojiseeds ......................................... 53 Cereals .......................................... 54 Sweeteners ....................................... 55 Deficiencies in the Supply and Quality of Storage .................... 55 Sugar ........................................... 55 Cereals .......................................... 56 Oilseeds .......... ............................... 56 Inadequate Quality Standards .................. 56 Cereals .................. 56 Oilseeds ...................... S^. Sugar .................. 57 The Suitability of Local Packaging Materials .................. 57 Controls Over Levels of Output and Entry to a Sector ................. 58 Sugar ........................................... 58 Cereals .......................................... 59 Oilseeds ............ ............................. 59 Weaknesses in Financial Services and Infrastructure ................... 59 Laws Affecfing Foreign Trade .......... ...................... 61 Import Barriers . .................................... 61 Proposed Foreign Trade Law 13-89 ........................ 61 The Administration of Exports of Processed Products .... ......... 62 Export Certificates ............ ...................... 62 Admission Temporaire .......... ...................... 62 Drawbacks ........................................ 63 Administrative Procedures ......... ..................... 63 Maghreb Free Trade Area ......... ..................... 63 The Application of Agricultural Reference Pricing .................... 64 Proposed 'taux d'adEquion'for oilseeds, oils and meals .... ...... 64 The 'taux d'adqadon' . ............................... 66 Differences in Product Quality ........................... 67 The Storage of Domestic Supplies ......................... 68 Forward Purchasing of Imported Supplies .................... 68 Risk Management .................. 69 The Scope for a Price Band System ....................... 69 Conclusions Regarding the System of Reference Prices ................. 71 A. The Cereals Subsector . ........................................ 71 Marketing and Food Processing of Cereat ......................... 71 B. Marketing and Food Processing of Wheat and Other Cereals ................. 72 The Buying of Cereals and Cereal Quality ......... .. .............. 72 Importation .................. ..................... 75 Storage ................... ...................... 76 Estimates of Storage Capacity .......... .. ............... 77 Cereals Pricing ........................ 78 Flour Milling ...................................... 79 Bread Production ................ ................... 82 Pasta Manufacture ................ ................... 82 Animal Feed ........................................... 83 C. Oilseeds and VegetablesOis ................................... 85 Vegetable Oils and Oilseeds (excluding olives and olive oil) ................... 86 The Puichasing of Oilseeds and the Determination of Quality Norms ... 86 The Storage of Oilseeds .............. ................. 87 The Pricing and Distribution of Oilseeds and Vegetable Oils ... ...... 87 End-Markets and New Uses ............. ................ 88 Olives and Olive Oil .................. ................... 90 Olive Oil Quality ................ ................... 90 Domestic Demand for Olive Oil ...... .................... 91 The Pricing of Olive Oil .............. ................. 91 Tinned and Preserved Olives .......... .. ................ 92 D. Sweeteners and Their By-Products ............... ................. 92 Overview of the Sugar Subsector, and Policy Environment ..... ......... 92 Main Constraints at the Agricultural Level .................... 96 Main Constraints at the Industrial Level .. ..... 97 The Sugar Sector Optimization Plan .. . .... 98 Sugar and Sugar By-Products .. ..... 99 Sugar Quality and Methods of Delivery .. ..... 99 Sugar Reference Pricing .. ..... 99 The Environmental Impact of Sugar Processing . . 99 Beet Pulp .. 99 Molasses ....1. l00 Alcohol Distillation ..100 Yeast . .100 Starch and Starch Sweeteners .. 101 APPENDIX 3.1 . . .102 Oilseeds Crushing Margins .. 102 ANNEX 4 DAIRY PRODUCTS .102 SUMMARY .102 A. Supply of Raw Materials ..103 Size of Farms ..103 Animal Production ..105 Dairy Production Delivered to the Market . .106 imports .. 107 Colecton ..108 Livestock Extension Services ..110 Persistent Constraints at the Production and Collection Stages ..110 Door to Door Sales 1................................. II B. Processing and Packaging of Milk ............................... 112 Dairy Processing Enterprises ........................... 112 Manufactured Products ............................... 114 Packaging ....................................... 115 Constraints at the Processing Stage ....... ................ 116 Price Structure .................................... 119 Technologies ..................................... 119 C. Distribution ...... .......... 121 The Cold Chain ...................................... 121 Importation by Contraband ........... ................. 122 ANNEX 5 MEAT PRODUCTS ..................................... 123 SUMMARY .................. ................... 123 A. Animal Production ...................................... 125 Red Meat Production ...................................... 125 Quality of Beef Production ......... ................... 125 Quality of Sheep Production .......... ................. 126 Meat Prices ..................................... 126 White Meat Production ...... . ....................... 128 Price Trends ........................ 128 Supply from the Feed Industry ........................ 129 Hatcheries ........................ 1Zo Poultry Farms ....................... 131 B. Slaughterhouses ........................ 132 Large Animals ....................... 132 Public Slaughterhouse ...... ................. 132 Quality of the Work in Regulated Slaughterhouses .132 Public Slaughterhouse Management .134 Meat Pricing Systems .135 Private Poultry Processing Plants .137 Pricing .137 C. The Marketing of Meat .138 Red Meat .138 White Meat .138 D. Potential hnprovements in the Meat Subsector .139 Red Meat .139 Deregulation of Wholesale Prices .139 Deregulation of Trade in Meat .139 Deregulation of the Wholesale Butcher and Merchant Trade Classifications .140 Modernizing, Equipping, and Maintaining Industrial Slaughterhouses .140 Gradually Free the Slaughterhouses from Control by the Municipalities .140 Encouraging the Stock-Raisers .141 Revision of the Government's Role in Livestock .141 White Meat ........................................... 141 General Conclusion ...................................... 142 APPENDIX 5. I. ................1.. ..................... 143 List of Operations receiving State Financiai Aid under the Agricultural Investment Code ........................... 143 ANNEX 6 FRESH AND PROCESSED FRUITS AND VEGETABLES ...................... 144 SUMMARY . .................................................... 144 A. Fresh Fruits and Vegetables ................................... 148 The Professional Economic Organization of the Fresh Fruit and Vegetable Sector .......................... 148 Citrus .............................................. 151 Citrus Production .................... 151 Citrus Trade ...... ......... .. .................... 154 Packing and Storing of Citrus ........... .. .............. 156 Other Vegetables and Fresh Fruits ............ .. ............... 160 Vegetable Production ............. .. ................. 160 Early Produce Cultivation ........... .. ................ 160 Tomatoes ....... ......... .. ..................... 161 Potatoes ................... ..................... 161 Seasonal Vegetable Growing .......... .. ............... 162 Vegetable Cultivation Destined for Agro-Industry .... .. ........ 162 The Cultivation of Other Fruit .......... .. .............. 163 Export of Tomatoes, Potatoes, and Vegetables ..... .. ......... 163 Tomatoes ....... ......... .. ..................... 163 Potatoes ....... .......... .. ..................... 165 The Other Vegetables and Fruit for Export ....... .. .......... 165 Customs Regulations for Access to the EC Markets ..... ........ 166 Tomatoes ....... ......... .. ..................... 166 Potatoes ................... ..................... 167 Packing and Storing .... ...e. ....... 167 The National Market for Fruit and Fres Vegetables . .169 Wholesale Markets in the Urban Communes ........ ............ 169 Souks and Rural Communes ................ 171 The Case of the Agricultural Region of Souss-Massa ..... .. .......... 171 Regional Organization of the Marketing of Fruits and Vegetables ..... 171 Principal Weaknesses Observed ......................... 174 Development of the Fresh Fruit and Vegetable Subsector ............... 176 Citrus Production for Export ........................... 176 Vegetables for Export ............................... 178 B. Processed Fruits and Vegetables . .................. ............ 180 Versatility of Canneries .............................. 180 Citrus Juices .......................................... 180 Citrus Supply to FRUMAT ............................ 181 The International Market of Orange Juices and Concentraes .... ... 183 By-products and Co-products of Citrus Processing in Juices and Concentrates ..................................... 189 Customs Regulations ................................ 190 The Processing Plants ............. 190 Financial Problems of the Company ....................... 191 The Risk Position of the Company on its Markets .192 Contractual Relations with Producers ...................... 192 Contractual Relations in Export ......................... 193 The Risk-Position of FRUMAT ......................... 193 The Canned Olives ...................................... 194 Procurement of Canneries ............................. 194 Products of the Jndustry .............................. 195 Production Units ................................... 195 The Markets ..................................... 197 Development of the Sector ............................. 198 Canned Gherkins .................................. 198 Procurement of Processing Plants ........................ 198 Processed Products ................................. 198 Production Units ................................... 199 The Markets ..................................... 200 Development of the Sector ............................. 200 Canned Capers ......................................... 200 Procurement of Canneries ............................. 200 Processed Products ................................. 200 Units of Production ................................. 200 Capacities Production ................................ 201 The Markets ..................................... 202 Development of the Sector ............................. 202 Canned and Frozen Vegetables ............................... 202 Procurement of Canneries ............................. 202 Processed Products ................................. 203 Units of Production ................................. 204 The Market ...................................... 205 The Development of the Sector .205 Getting Out of the Mono-products and Mono-market Commercial Mode of Operation .206 Canned Apricots .208 Production of Raw Materials .208 Procurement of Canneries .208 Processed Products .208 Processing Units .208 The Markets .209 Development of the Sector .210 Canned Tomato and Paprika .211 Procurement of Canneries .211 Processed Products .211 The Markets .212 Development of the Sector .212 C. Logistics in the Fresh Fruit and Vegetables Subsector .212 The Role of Atlas Fruit Board .213 AFB's Operations .214 Packing Stations .216 Equipment .216 Suggested Improvements .218 Packing Material, Handling and Storage Equipment .................. 218 Packing Material for Export Markets ...................... 218 Packaging Material for Domestic Market .................... 221 Pallets ......................................... 221 Handling and Storage Equipment ......................... 223 Quality .............................................. 223 Shelf Life Calculations ............................... 224 Subjective Quality .................................. 227 Suggested Improvements .............................. 228 ANNEX 7 SPICES AND AROMATIC PLANTS .................................... 229 SUMMARY .................................................... 229 A. Modem Uses of Spices and Aromatic Plants: Main Features .............. 230 Products and Trade ................................. 230 Market Characteristics ................... 233 B. Production and Marketing of Spices and Aromatic Plants.234 Production ...................................... 234 Marketing Channels ................................. 236 Processing ....................................... 237 Domestic Trade ................................... 239 Exports ........................................ 239 C. Opportunities for the Subsector ................................. 240 Agricultural Production of Spices and Aromatic Plants .... ....... 240 Processing for Local Markets ........................... 240 Processing for Export Markets .......................... 241 Potentials for Paprika ('niora') .......................... 242 Potentials for Saffron ................................ 242 Potentials for Coriander and Cumin ....................... 243 ANNEX 8 WINE ........................................................ 245 SUMMARY .................................................... 245 A. The Wine Marketing Chain .............. ..................... 246 The Supply of Wine-Making Grape ............................ 246 The Vineyards .................................... 246 The Processing Industry ................................... 247 Winemaking Technologies ............................. 247 Quality of Wines .................................. 249 Technical Services and Suppliers ......................... 249 Trade and Distribution ............................... 251 Govermment Agencies ............................... 251 Production and Market Outlook ......................... 252 Price/Cost Structure in the Marketing Chain .................. 254 B. Main Issues in the Wine Marketing Chain .......................... 255 Management of the "Public" Vineyard ..................... 255 Absence of Quality Wines from Noble Varietals ............... 256 Maintenance of Crushing-Storage Facilities; Aging Technologies ..... 256 Inadequate Knowledge of Foreign Markets ................... 256 Narrowly-Focussed, Bureaucratic Business Approach .... ........ 256 Lack of Research and Professional Support ..... ............. 257 Insufficient Diversification ............................. 257 Tables and Figures in Tecniical Annexes Table la: Morocco - Trade Reform Under Successive Adjustment Loans - Major Changes (1983-1993) .......... ............................. 2 Table lb: Morocco - Structure of Official Prices for Selected Agro-Industrial Commodity Groups: Cereals, Sugar and Sweeteners and Vegetable Oils, 1992 ................................................. 3 Table Ic: Morocco - Structure and Levels of Official Prices of Selected Agro-Industrial Commodities: Meat, Milk and their Derivatives .... ........ 4 Table Id: Morocco - Trade Regime, Domestic Taxes for Major Agro-Industrial Commodity Imports, 1992 ......................... 5 Table le: Morocco - Trade Regime, Domestic Taxes and Other Changes on Major Agro-Industrial Commodity Groups Sold on Both Domestic and Foreign Markets, 1992 ............................. 6 Table 2: Morocco - Consumer Subsidies for Basic Food (1985-1992) ............... 7 Table 3: Morocco - Agricultural Performance and Production Structure (1980-1990). 8 Table 4: Morocco - Indicators of Agricultural Potential: Area, Cropping Intensity, and Yield (1985-1990). 9 Table 5: Morocco - Agriculture and Food Self-Sufficiency Ratios ..... ........... 10 Table 6: Morocco - Levels of Official Prices for Selected Agro-Industrial Commodition - Cereals, Sugar and Vegetable Oils (DH/T) .... .......... 11 Table 7a: Morocco - Relative Protection at Producer Levels in Agriculture .... ....... 12 Table 7b: Selected Estimates of Effective Protection and of Comparative Advantage, 1991 ............ ............................ 13 Table 8: Morocco - Demand for Basic Consumer Foods, Current and Projected (1980, 1985, 1990-1996) . . 14 Table 9: Consumption Levels for Basic Foods: Morocco and World in 1980's . ............................................ 15 Table 10a: Morocco - Agro-Processing (Food) Exports 1980-91, Volume ('000T), Value Current and Constant 1980=100, Growth Rates and Selected Ratios (%) ................................ 16 Table l0b: Morocco - Major Agro-Processing (Food) Imports 1980-1991, Volume ('0001), Value Current and Constant 1980= 100, Growth Rates and Selected Ratios (%) ................................ 17 Table 10c: Morocco - Agro-Processing (Food) Trade Balance (1980 - 1991), Annual Growth Rates and Selected Ratios ......................... 18 Table 1 Ia: Morocco - Overview of the Performance of the Agro-Processing Sector 1981 - 1990 .......... 19 Table 1 lb: Morocco - Overview of the Performance of the Agro-Processing Sector, in Percentages 1982-1990 ........ ............. 20 Table 1 Ic: Morocco - Overview of the Performance of the Agro-Processing Sector (in Constant 1908 Prices, in Percentages) 1981-1990 .21 Table 2.1: Area Cultivated by the Grantee Members of the Land Reform Cooperatives .... 25 Table 2.2: Development of Equipment Used by the Land Reforn Cooperatives ........................................... 25 Table 2.3: Equipment of Economic and Social Character of Land Reform Cooperatives .26 Table 2.4: Economic Results and Turnover for Land Reform Cooperatives .27 Table 2.5: Share of Cooperatives in Marketing of Cereals .30 Table 2.6: Storage Capacities of Cereal Cooperatives .32 Table 2.7: The Four Types of Cooperatives .43 Table 2.8: Number and Categories of Cooperatives Outside of Land Reform .44 Table 3.1: Per Capita Consumption ..................................... 50 Table 3.2: Percentage Share of Food Spending by Household .51 Table 3.3: Exports of Cereals, Sweeteners & Oil-Based Products in 1991 .52 Table 3.4: Trends in Areas and Yields for Different Cereals .71 Table 3.5: Trends in Fertilizer Use on Cereals. Figure 3.1: Cereal Marketing Chain Milling Industry .73 Figure 3.2: Oilseeds marketing Chain .83 Figure 3.3: Changes introduced by the Reference Pricing System in the Crushing Margin (1989 Average Prices) .87 Figure 3.4: Sugar Marketing Chain .91 Figure 3.5: Administrative Intervention in the Sugar Sectoro. Table 3.6: Nominal Capacity of Sugar Mills .96 App. 3.1: Oilseeds Crushing Margin .101 Table 4.1: Development of the Output of Milk Cows in Production (animals of more than 3 years old) .106 Table 4.2: Development of Dairy Production and of Processed Milk .107 Table 4.3: Imports of Dairy Products .108 Table 4.4: Development of the Number of Milk Collection Centers ..... ........... 109 Table 4.5: Dairy Processing Enterprises and their Processing Capacities .113 Table 4.6: Moroccan Dairy Products .' 114 Table 4.7: Development of Processed Dairy Products .117 Table 5.1: Red Meat Consumption .125 Table 5.2: Agricultural Wholesale Price Index (1970=100) .'126 Table 5.3: Price Comparisons Between Morocco and Other Countries for Meat Products (1990) .127 Table 5.4: Consumer Prices for Meats .127 Table 5.5: White Meat Production .131 App. 5.1: List of Operations Receiving State Financial Aid Under the Agricultural Investment Code .143 Table 6.1: Marketed Production of Fruits (1990/91).148 Table 6.2: Commercialized Production of Vegetables (1990/91) .149 Figure 6.1: Evolution of Main Citrus Varieties .151 Table 6.3: Moroccan Citrus Production (1987/88 to 1990/91) .152 Table 6.4: Regions of Citrus Production .153 Figure 6.2: Marketing Channels for Citrus .155 Table 6.5: Age of the Citrus Orchard by Varieties .......... ................. 153 Table 6.6: Commercial Destinations of Citrus .......... ................... 156 Table 6.7: Utilizatioi. o-f Citrus Production (1990/91) ........ ................. 157 Table 6.8: Citrus Exporting Groups and Capacities of Packing Stations .158 Table 6.9: Refrigerated Storage Capacity of Packing Plants ..................... 159 Table 6.10: Development of Early Crop Cultivation (1980/83, 1988/91) .............. 160 Table 6.11: Exports of Tomatoes by Seasonal Origin (Crop Years 1989/90, 1990/91) ..... 160 Table 6.12: Development of Vegetable Production Destined for Agro-Industry (1982/84, 1989/91) ....................................... 161 Table 6.13: Area and Production of Fruit other than Citrus (1989/90 - 1990/91) .............. ....................... 162 Table 6.14: Evolution of Tomato Exports (1965/70 - 1991/92) .................... 164 Table 6.15: Evolution of Potato Exports (1965/70 - 1991/92) ..................... 163 Table 6.16: Exports of Other Fruits and Vegetables (Strawberries, Courgettes, Eggplants, etc.) (1965/70 - 1991/92) ............................ 166 Figure 6.3: Vegetable Export Marketing Chain ............................. 165 Table 6.17: Other Exported Fresh Fruits and Vegetables ....................... 167 Table 6.18: Number, Location and Legal Status of the Other Vegetable and Fruit Packing Plants. Figure 6.4: Marketing Channels of Fresh Fruits and Vegetables on the Domestic Market (1990/91) ........................................ 170 Table 6.19: Marketed Volumes and Regional Distribution of the Transactions on Wholesale Markets for Fresh Fruits and Vegetables (1991) .... .......... 172 Table 6.20: Production Seasons and Areas for Canned Fruits and Vegetables .... ....... 182 Table 6.21: Regional Location of Selected Fruits and Vegetables (except Citrus) Processing Units ......................................... 184 Figure 6.5: Processing and Marketing Channel for Citrus Juices and Concentrates .... ... 183 Table 6.22: Supply of Citrus to FRUMAT and Price Paid to Suppliers ............... 185 Table 6.23: Comparative Prices of Citrus Paid to Producers of Competitive Countries (1989/90 - 1990/91) ................................ 186 Table 6.24: Production of the Major Producers of Juices and Concentrates (1979/80 - 1990/91) ...................................... 187 Table 6.25: Imports of Frozen Orange Juice Concentrates by EC Countries and Origin of Deliveries (1985-1998) .............................. 188 Table 6.26: Sales of FRUMAT by Product ad Destination (1985/86 - 1990/91) .... ..... 189 Figure 6.6: Utilization Rate of FRUMAT Plants (1985/86 - 1989/90) ............... 191 Figure 6.7: Fruits and Vegetables Processing Channels ........................ 196 Table 6.27: Exports of Olives (1970/75 - 1990/91) ........................... 197 Table 6.28: Distr.bution of Olive Exports by Countries (1990/91) .................. 198 Table 6.29: Gherkin Exports (1975/80 - 1990/91) ............................ 199 Table 6.30: Distribution by Colntry of Gherkin Exports ........................ 201 Table 6.31: Caper Exports (1975/80 - 1990/91) ............................. 201 Table 6.32: Destinations of Canned Caper Exports ........................... 202 Table 6.33: Exports of Canned Green Beans (1975/80 - 1990/91) .................. 205 Table 6.34: Exports of Frozen Vegetables (1987/88 - 1990/91) ................... 206 Table 6.35: Destination of Canned Green Bean Exports (1990/91) .................. 206 Table 6.36: Destination of Frozen Vegetable Exports (1990/91) ................... 207 Table 6.37: Exports of Canned Apricots (1970/75 - 1990/91) ..................... 210 Table 6.38: Destination of Canned Apricots Exports .......................... 210 Table 6.39: Exports of Processed Tomatoes ............................... 212 Table 6.40: Destination of Tomato Exports (1990/91) ......................... 213 Figure 6.8: Optimal Logistical Process from Farm to Foreign Customer (Transportation by Sea) .226 Figure 6.9: Actual Logistical Process from Farm to Foreign Customer (Transportation by Sea) ..................................... 226 Table 7.1: Imports of Spices by Major Importing Countries (1987) ..... ........... 231 Table 7.2: Destination of Spices in Developed Countries ....... ................ 233 Table 7.3: Destinations of Some Moroccan Exports of Spices (1987) ..... .......... 235 Table 7.4: Spice Crops (Reported) for 1986, 1987 and 1988 ...... .............. 237 Figure 7.1: Marketing Channels for Moroccan Spices ........ ................. 236 Table 7.5: Production of Paprika by Regions .238 Table 8.1: Production of Wine (970-1991) .245 Figure 8.1: The Wine Marketing Chain .246 Table 8.2: Age of SODEA Vineyards .247 Table 8.3: Wine Production (Campaign 1991) .252 Table 8.4: Wine Production and Market by Producer (1991) .253 Table 8.5: Price/Cost Structure in Wine Marketing Chain (1991) .254 Table 8.6: Estimated Retail Prices for Domestic and Imported Wines (1991/92) .255 Map of Morocco: IBRD No. 24657 ABBREVIATIONS AND ACRONYMS AFB Atlas Fruit Board AFNOR Association Franqaise de Normalisation (French Institute for Standardization) ANAF Association Nationale du Froid (National Refrigeration Association) ANEB Association Nationale des Eleveurs de Bovins (National Association of Cattle Growers) AOG Appellation d'Origine Garantie ASAL/PASA Pr8t d'Ajustement Sectoriel Agricole (Agriculture Sector Adjustment Loan) ASPAM Association des Producteurs d'Agrumes du Maroc ASPEM Association des Prodtcteurs Exportateurs de Maraichage et Primeurs du Maroc ASTA American Spice Trade Association ASTM American Society for Testing and Materials BCM Banque Commerciale du Maroc (Commercial Bank of Morocco) BMCE Banque Marocaine pour le Commerce Exterieur (Moroccan Bank for External Trade) BMCI Banque Marocaine pour le Commerce et l'lndustrie (Moroccan Bank for Commerce and Industry) BNDE Banque Nationale pour le Ddveloppement Economique (National Bank for Economic Development) BSI British Standards Institute CCP Critical Control Points CDM Credit du Maroc (Moroccan Credit) CA Commercants Agrees (licensed merchants) CE Conformite Europeenne CERLAB Centre Inter-Laboratoires d'Etudes et de Realisations CFC Chloro-fluoro-carbon CAF/CIF CoAtt Assurance Fret (Cost Insurance Freight) CMA Coop6ratives Marocaines Agricoles (Moroccan Agricultural Cooperatives) CNCA Caisse Nationale de Cr6dit Agricole (National Agricultural Credit Bank) CODEX Codex Alimentarius: compilation of 17 volumes of standards, 8 recommended codes of practice, guidelines and recommendations of the Codex Alimentarius Commission, and updated tables of government replies COMANAV Compagnie Marocaine de Navigation (Moroccan Shipping Company) COMAPRA : Compagnie Marocain d'Approvisionnement Agricole (collecteur exclusif des graines oleagineuses et du coton) COSUMAR : Compagnie Sucribre du Maroc (raffinerie privee du Groupe ONA) CPI Consumer Price Index (Indice des Prix a la Consommation) CPM Cr6dit Populaire du Maroc DE Direction de l'Elevage (Directorate for Animal Productions) DH : Dirham DPVCTRF : Direction de la Production Vegetale, du Controle Technique et de la Rdpression des Fraudes (Directorate for Crop Productions, Technical Control and Fraud Repression) EACCE : Etablissement Autonome de Contr6le et de Coordination d'Exportations (Autonomous Agency for Export Control and Coordination) EC/CE European Communities (Communautes Europeennes) EFTA European Free Trade Association EMENA Europe, Middle East & North Africa (Europe, Moyen-Orient et Afrique du Nord) ENA Ecole Nationale d'Agriculture (National Agriculture Institute) FAO Food and Agriculture Organization FGIS U.S. Federal Grain Inspection Service FL Farine de Luxe (not-subsidized flour) FN Farine Nationale (subsidized wheat flour) FICOPAM Feddration Interprofessionnelledes Conserveries de Produits Agricoles Marocains (Interprofessional Federation of Agricultural Canning Industries) FOB Free on Board GATT General Agreement on Tariffs and Trade GDP/PIB Gross Domestic Product (Produit Interieur Brut) GDPPC Gross Domestic Product Per Capita (Produit Interieur Brut par Habitant) GMP Good Manufacturing Practice GNPPC Gross National Product Per Capita (Produit National Brut par Habitant) HACCP Harzard Analysis Critical Control Point HFCS High Fructose Cereal Syrup (also called isoglucose) HT Hors Taxes (taxes not included) IAV Instituit Agronomique et Veterinaire Hassan 11 (King Hassan 11 Agronomic and Veterinary Institute) IGR Imp6t General sur les Revenus (Tax on Personal Income) IMEC Institut Marocain de l'Emballage et du Conditionnement (Moroccan Institute for Packaging and Conditioning) IS Impot sur les Societes (Tax on Corporate Income) ISERF Institut Sucrier d'Etudes, de Recherche et de Formation (Institute for Studies, Research and Training on Sugar) LABOMETAL: Laboratoire M&tallurgique d'Etudes et de Contr6le (Laboratory for Studies and Control of the Metallurgical Industry) LOARC Laboratoire Officiel d'Analyse et de Recherche Chimique (Official Laboratory for Analytical and Chemical Research MAEP : Ministere des Affaires Economiques et de la Privatisation (Ministry of Economic Affairs and Privatization) MARA Ministare de l'Agriculture et de la Reforme Agraire (Ministry of Agriculture et Agrarian Reform) MCI : Ministere du Commerce et de l'Industrie (Ministry of Commerce & Industry) MIN Marche d'Inter& National NAFTA : North American Free Trade Association (Association Nord-Americaine de Libre Echange) OCE Office de Commercialisation et d'Exportation (Trade and Export Board) ODC Office des Changes (Exchange Office) ODECO Office de Developpement des Cooperatives (Cooperative Development Board) ODEP : Office d'Exploitation des Ports (Port Management Board) OECD/OCDE Organization for Economic Cooperation and Development (Organisation de Cooperation et de Developpement Economiques) ONA Omnium Nord Africain ONICL Office National Interprofessionnel des Cereales et Legumineuses (National Interprofessional Board for Cereals and Pulses) ONT Office National des Transports (National Transport Company) ONTS Office National du The et du Sucre (National Board for Tea and Sugar) ORMVA Office Regional de Mise en Valeur Agricole PFI Prelevement Fiscal a l'Importation (Special Import Levy) PIB/GDP Produit Interieur Brut/Gross Domestic Product PRCC Projet de R6forme de la Commercialisation des C&rUales (finance par U SAID) RAFC Regie Autonome des Frigorifiques de Casablanca (Refrigerated Storage Company of Casablanca) RAM Royal Air Maroc (Moroccan National Airline) R&D Research & Development (Recherche-Developpement) Ro-Ro Roll on-Roll off SA Societes Anonymes (Joint Stock Companies) SAL/PAS Structural Adjustment Loan (Pret a l'Ajustement Structurel) SARL Societe a Responsabilite Limitee (Partnership with limited liability) SASMA Socidte Agricole de Services du Maroc SCAM Societes Cooperatives Agricoles Marocaines (Agricultural Moroccan Co. -eratives) SEPO Societe d'Extraction de Produits Oleagineux (Societe privee du groupe ONA) SICA Societ d'Interet Collectif Agricole (droit franqais): societ6 combinant des participations de cooperatives et des entreprises ou individus priv6s SMAEX Societe Marocaine d'Assurance 4 I'Exportation (Moroccan Export Insurance Company) SMEs/PMEs Small- & Medium-Scale Enterprises (Petites et Moyennes Entreprises) SNI Socite Nationale d'Investissement (National Investment Company) SNIMA Service des Normes Industrielles Marocaines (Moroccan Industrial Standard Service) SOCAP Societes de Crddit Agricole et de Prevoyance (Company for Agricultural Credit and Insurance) SODIAAL Societd franeaise detenant les produits de marque Yoplait TARIC Tarif Douanier commun de la CE (EC Unified Tariff) TIR Transport International Routier (Road International Transport) TRA Taux de Reference Annuel (Annual Reference Rate) ITC Toutes Taxes Comprises (All taxes included) UHT Ultra High Temperature UNCAL Union Nationale des Cooperatives Agricoles Laiti6res (National Union of Dairy Cooperatives) USAID United States Agency for International Development USCAM JJnion des SCAM USDA United States Department of Agriculture USFDA United States Food and Drug Administration VAT/TVA Value Added Tax (Taxe sur la Valeur Ajout6e) WB World Bank (Banque Mondiale) WHO/OMS World Health Organization (Organisation Mondiale de la Sante) EXECUTIVE SUMMARY THE DEVELOPMENT OF MOROCCAN AGRO0INDUSTRY: Constraints and Opportunities INTRODUCTION (i) Purpose and Focus of Report. This two-volume sector report is addressed to decision-makers in the Kingdom of Morocco and at the World Bank to assist them in formulating a strategy to promote the efficient and dynamic development of Moroccan agro-industry. The purpose of this sector work is to help decision makers formulate measures to maximize value added (at economic prices) to agricultural output. Its starting position is what undermines add.ng value to agricultural output, undermines agricultural growth itself; hence the key importance of agro-industry. The report focuses on the key constraints which inhibit the efficient and dynamic development of Moroccan agro-industry; assesses the performance of selected subsectors against the promise of their potential; and suggests how to better exploit the opportunities they face and to better manage the inevitable risks of market operations. (ii) Scope and Approach of Report. The report covers both domestic import substitutes and exports, and emphasizes the linkages and synergies between the two. It rejects the enclave approach to export development as a long-term strategy: stccessful exports often depend on prior or parallel strong domestic industry and markets. As the experience of successful developing countries suggests, there is strong complementarity between export and domestic market development. The report analyzes the constraints on major import substitutes, namely cereals and livestock feeds; oilseeds and vegetable oils; sugar and sweeteners; meat and dairy products; spices and aromatic plants; wine; and on commodities which are both import substitutes and exports, namely fruits and vegetables which are major exports; olive oil, spices and wine which are minor exports. (iii) Definition of Agro-Industry. In this report, agro-industry is broadly defined to include agro-processing and its network of marketing and support services from farm to consumer. The support network, analyzed at the sectoral level, comprises finance and banking services, logistics and infrastructure, quality management, professional services including interprofessional organizations, and cooperatives. (iv) Output Performance (1985-1990). Agro-processing as defined by the Ministry of Commerce and Industry contributes 5 percent of GDP, 15 percent of industrial GDP. 25-30 percent of industrial employment, and 16-20 percent to industrial exports. Value added and exports have grown at 8 and 14 percent per annum respectively (in 1980 constant prices). These estimates are likely to understate the contribution of agro-processing, as there is a large informal sector not captured by these ii statistics. Thus, agro-processing has done well and constitutes an important segment of the economy. Its fiuther development has a solid base to build on. (v) Organization of the Report. The Main Report gives an overview of the environment, identifying incentives, institutions, and infrastructure at macro, trade, and sectoral levels, which shape the performance and prospects of the agro-industrial sector. It sets the framework and discusses the key issues. It is supported by a Technical Annex which presents in detail the strengths and weaknesses of each subsector, highlights constraints to overcome, opportunities to tap and risks to manage. Two matrices are attached. The first set of matrices summarizes the main constraints, opportunities/objectives and proposed actions. To help clarify the level of intervention needed, these are presented at three levels: (a) economy-wide: trade and financial; (b) sectoral but not specific to agro- industry; and (c) sectoral but specific to agro-industry. The second set of matrices summarizes the issues and recommendations for each strategic objective. Main Empirical Findings (vi) Overview of the Macro-Trade Environment. The achievements of the successive structural adjustment programs, namely macro-economic stability, a more outward-oriented trade and foreign exchange regime, and reduced direct government intervention in prices and marketing provide the cornerstone of an enabling macro and trade environment. For agro-industry however, these solid gains are threatened by the focus of agricultural trade policy on agricultural production only (as opposed to downstream activities). Specifically, the high protection provided to agricultural producers by the previous regime of quantitative controls, licenses, price and margin controls, and barriers to entry, had serious drawbacks. The new system of moving average reference prices and future domestic market liberalization, is an improvement but still creates serious distortions. Over time, they undermine the ability of enterprises to be cost-competitive and to better manage price and quantity risks. For price takers, these drawbacks threaten their long-term business prospects. (vii) Overview of the Sectoral Environment. The sectoral or technical environment refers to the network of institutions and infrastructure which impinges on the functioning of the three interdependent stages of procurement, processing technology and output marketing of the agro-industrial chain. The network is weak at key points in the chain. The key weaknesses which render the technical environment disabling rather than enabling are in four areas, namely: (a) finance and banking services; (b) logistics and related infrastructure; (c) management of product quality at sectoral and enterprise levels; and (d) professional services and interprofessional organizations. (viii) Key Weaknesses in the Technical Environment. The weaknesses identified undermine the cost-competitiveness of agro-processors in different ways. Either the financial costs and resulting vulnerability are too high, or the reliability and quality of the commodities too low, or the supply of professional services to enterprises too thin. (ix) Finance. Short term loans are available. However, scarce long-term finance is rationed among enterprises via high collateral requirements and loan guarantees. This policy militates against newer and less established enterprises. Even for those with access to formal credit, they have to finance long-term investments with short-term loans, which increases their financial vulnerability. iii (x) Loglstics. Gaps in the logistics chain damage the quality and shorten the shelf life of perishable products. These gaps arise from a complex of causes: policy restrictions and fiace difficulties, among others. From field to fmnal sales, improper handling is far too common. In particular, there is a shortage of cold storage, palettized packaging materials and equipment, and truck services equipped with temperature control and communications devices. The quality of sea transport is marred by delays, inadequate pre-cooling facilities and limited flexibility. International rod transport with more flexible schedules and higher quality services is still not an affordable option for many. Air transport is still too costly as the load factor (utilization rate on return cargo) is too low. (Xi) Management of Product Quality. Despite significant efforts by several government agencies to ensure quality, these efforts are uncoordinated and, at times, incoherent. In addition, they are punitive and insufficiently backed by laboratory analyses and trained personnel. Moreover, products destined for domestic markets largely escape quality control by the agencies and face no pressure from consumers. Export-oriented enterprises are markedly different. However, here too, quality problems are significant. In these cases, the problems are mainly due to insufficient consumer- oriented marketing strategy, inadequate equipment and insufficiently trained personnel. (xii) Professional Services. Two major categories of specialized services are sorely lacking. The deficiencies combine to undermine the effectiveness of management, a scarce resource. The first category refers to the day-to-day functioning of enterprises, such as equipment maintenance, laboratory analyses, and technical advice on mechanical and business operations. Lacking such support, managers spend too much of their time in day-to-day concerns and not enough time in strategic and consumer-oriented planning. The second category refers to interprofessional organizations which can focus on the bottlenecks common to a given subsector, provide the platform and means to overcome these bottlenecks, and thus further the interests of the entire subsector. Lacking such support, each manager must again find his own solution, thus detracting from developing a strategic focus. Cooperatives, in principle the only organizations integrated with producers, but chiefly promoted by the State, remain financially and managerially weak. (xiii) An Overview of the Agro-Processing Sector. The agro-processing sector is dualistic and primarily private sector, except in sugar, wine and processed citrus. In subsector after subsector, many small-scale enterprises (with a range of technologies from traditional to modern) co-exist with a few large-scale and modern enterprises; e.g., in wheat processing; olive oil pressing; spice growing and processing; fruit and vegetable growing; handling, processing and marketing. Sugar and oilseeds are both large scale and modern, although sugar is state-owned and oilseeds private. This dualism is both a source of strength and of weakness for the agro-processing sector. It is a source of strength because it represents a substantial potential that can and should be tapped. It provides a solid basis to build upon. It is a source of weakness because it represents significant wastage. Despite Morocco's varied agricultural endowment, diversification in terms of products and markets is limited. This limited diversification increases vulnerability at both enterprise and national levels. (xiv) Main Features of Selected Subsectors. An important feature of all the subsectors .,elected for analysis, is the significant economic and agronomic potential that exists. Estimated economic return on intensification in existing cultivated lands with suitable soils, in irrigated and in higher rainfall areas (above 400 mm) exceeds the opportunity cost of capital. At the farm level (field or stable), the ratio of agronomic potential over actual yield, ranges from 1.5 to 3.0 for all major crops and livestock. For example, yield of irrigated common wheat could increase by half as much. Milk yield for which there is scarcity at both processing and consumer levels, could more than double. iv Red meat output has been stagnant for the last two decades and carcass yield (depending on the breed) could be almost doubled. However, for both milk and meat, the economic cost of forage remains a critical variable determining economic return. Beyond the farm, there are many possibilities for improving efficiency in storage, processing and handling. For example, storage of common wheat is inadequate both in terms of quantity ani quality. Poor quality standards and inadequate premia for rewarding quality encourage wasteful processing as in wheat and oilseeds. Materials for local packaging are of poor quality leading to wastage as in the case of the 50 kg. cotton bags for Farine Nationale (subsidized flour), and the boxes of variable shapes and sizes for fruits and vegetables destined for domestic markets. All subsectoral analyses demonstrate that, while marketing strategies and technologies result in poorly differentiated agro-processing outputs - therefore making the industry more dependent on cost competitiveness - weaknesses along the agro-industrial chain combine to undermine cost- minimization through: (a) underutilization of capacity; (b) poor extraction rates and product wastage; (c) wastage of by-products; (d) increased vulnerability of enterprises having to resort to short-term financing for long-term investments; and (e) relatively high cost of transport and packaging (sometimes not even suitable). Most of the few exceptions (e.g., in the fruit and vegetables, spices and dairy subsectors) to the above remarks come from enterprises with cooperative agreements with foreign enteprises, in which marketing strategies have shaped investments in and management of procurement, processing, and logistics. (xv) Technological Choices Shaped by Inadequate Marketing Strategies and by Administratively-Induced Incentives. Agro-industrial development depends on the functioning of the three interdependent stages of procurement, processing and output marketing. The techniques used in each stage are underdeveloped and, as a result, the transmission of consumer preferences down the industrial chain through to agricultural production and the adaptation of this chain to changing demand are inefficient. Marketing techniques are, apart from a few striking exceptions, poorly adapted to the nature of the commodity and the exigencies of consumer demand. Technological choices are shaped by inadequate marketing strategies and by administratively-induced incentives. Most Moroccan products sold domestically and abroad are undifferentiated. The dominance of undifferentiated products rinds Its parallel in the dominance of unsophisticated and unadapted technologies. A range of modern technologies is virtually non-existent and within the existing technology, the typical problems are: (a) excess capacity in relation to procurement (with difficult access to alternative sources of raw materials) and to optimum scale economies, (b) ecoi,omically unjustified technologies, and (c) gaps in the technical chain as in the case of cold storage. Moroccan products are differentiated only to a very limited degree at best. For these products, with a few striking exceptions, Moroccan enterprises do not aggressively promote the image of quality nor develop a diversified portfolio of more highly differeatiated products. Send-processed products (food ingredients providing nutritive value, texture, color, aroma, longer shelf life, to be used in the final processing of consumer products) for which Moroccan entrepreneurs could build a strong comparative advantage, are barely developed. With products that are only slightly differentiated, Moroccan entrepreneurs are price takers. For price takers, management of price risks has a determining impact on enterprise performance. For both imports and exports, enterprises have no access to commodity futures markets and modern risk management instruments. This is particularly evident in the case of the processor of fresh and frozen concentrated orange juice. For basic consumer goods, enterprises are faced with the risks generated by the uncertainties and arbitrariness of administrative intervention. Intervention-generated risks have replaced price risks, but unlike price risks, they are usually impossible to manage, except perhaps by non-market means. (xvi) Demand-Driven Agro-Industrial Development Should Be Accorded Priority. The potential contribution of agro-industry is vast. A stylized fact is that over the course of development, v the relative contribution of agriculture diminishes while that of agro-industry increases. In the Republic of Korea for example, the ratio of value added from food to value added from agriculture, rises from 0.21 in 1970 to 0.37 in 1987. In the United States, to use another example, agriculture contributes roughly 1-2 percent of GDP while agribusiness (which includes agricultural inputs) contributes 17 percent of GDP. If Morocco 's development follows the historical path, the relative contribution of agriculture and agro-industry should be reversed. Of course, Morocco could be an exception but there is no reason, a-priori, to believe it is so. Efficient agro-industrial development in Morocco will indeed entail a fundamental re-shaping of the mix of outputs in both agriculture and agro-industry. Giving priority to demand-driven and dynamic agro-industrial growth is giving priority to demand-driven and dynamic commercial agricultural growth. There is no difference: sustained commercial agricultural growth is demand-driven. The reverse is also true: weak agro-industrial growth acts as a brake to commercial agricultural growth. There is a strong and an increasing interdependence in the growth performance of both sectors. Indeed, for policy purposes, they should be viewed as one integrated sector. If a historically-founded and long-term approach to development is taken, promoting demand-driven agriculture-cum-agro-industrial development and increasing its contribution to GDP should be a major concern of Moroccan policy makers. Not resolving the conflict between agricultural producer incentives on one hand and agro-processors and other downstream users is anti-developmental. Main Policy Issues (*vii) Food Self-Suffidency Policy has been a Major Constraint. For a long time, food self-sufficiency has been a driving concern of agricultural trade and price policy. This concern has spawned a complex administrative system of controls which distort incentives and thus resource allocation. In particular, this has meant minimizing trade dependence for basic foods, namely cereals, vegetable oils, sugar, meat and dairy products. Levels of food self-sufficiency have risen significantly but at a high cost. Prior to the structural adjustment programs which started in 1985 (ASAL-I), food self- sufficiency was to be achieved by favoring import substitutes at the expense of exports. With progressive liberalization, this inward-oriented, anti-export bias has been significantly reversed. However, trade protection still remains high for cereals, oilseeds, sugar, meat and milk products. Under the pre-SAL-II trade regime, the system was characterized by numerous quantitative restrictions (QRs). Domestic marketing was also heavily controlled. With SAL-Il, these QRs have been replaced by reference prices based on moving averages of world prices and equivalent tariffs. In addition, the restrictions on domestic marketing for oilseeds, sugar and meat, and on foreign marketing of cereals (except common wheat) are scheduled for elimination in 1993. These additional liberalization measures constitute an important phase in the on-going reform process. However, for these five basic commmodities, the form of border protection but not its level has changed. Therefore, some of the distortions and the disincentives of the former system persist. (xviii) The System of Agricultural Reference Prices and Equivalent Tariffs. This system continues the existing high levels of protection of agricultural producers. For common wheat, the safeguard clause gives discretion to policy makers to freeze the current price in real terms, irrespective of movements of border prices. For sugar and oilseeds, there are: (a) the 'taux d'addquation" (an administratively-determined percentage mark-up) which differs among products; and (b) the safeguard clauses which relate variations in weighted average border prices (21 years for sugar and 10 for oilseeds) to variations in domestic inflation (on a yearly basis). The long period of averaging and the safeguard clauses further the objective of price stability. The latter is intended to limit the extent of variations not to exceed plus or minus 5 percent in real terms in any one year. For meat and milk vi products, the rate of protection afforded by the high equivalent tariffs would change as tariff levels allowed under GAIT change. Although this system makes more transparent the high protection afforded to agricultural producers, it is at the expense of both agro-processors (some agro-processors are protected) and consumers downstream. Agricultural raw and processed commodities are a major cost component in agro-processing. The main drawbacks of current protection levels and distorted incentives are: (a) cost-price squeeze for agro-processors (other than a subset of agro-processors protected by reference prices) over time as raw material reference prices remain far above border prices; (b) insufficient incentives for proper storage and for quality improvements; (c) distortions in incentives (among producers and among banks) away from higher-value but riskier commodities (commodities without price support) in irrigated perimeters; and (d) limitations in diversification in products (including the use of by-products) and markets. In addition, the reference prices for oilseeds, oil and meal, make it impossible for crushers to hedge successfully their crushing margin. (xix) Trade and Other Price Controls. In addition to these reference prices, agro- processors are hampered by restrictions on the import of agricultural inputs and other controls. Unlike other products, the exports of agricultural products which are subsidized still require licences and the Temporary Admission Scheme for agricultural inputs is granted only on a case by case basis. These cumbersome procedures discourage the processing of semi-processed products for exports or the import of cheaper complementary agricultural inputs needed. However, under the SAL-11, domestic marketing controls in oilseeds, sugar and meat, are to be eliminated in 1993. (xx) Dualism in Approach Toward Domestic and Export Markets. The Government of Morocco has always pursued a dualistic approach to the development of domestic industry and exports. However, this dualism has inhibited efficient development, agro-industrial and otherwise, instead of promoting it. The negative consequences of this dualism are evident in agriculture and agro- industry. Up to the mid-eighties, it favored strong inward-orientation at the expense of exports. Other than the trade measures discussed above, nowhere is this dualism starker than in the area of quality management. Growing domestic markets with value-adding potential are viewed as dumping grounds for export rejects. This neglect not only contributes to wastage, but also limits the diversification options for agricultural producers, agro-processors and consumers. Improvements in wholesale marketing infrastructure at the regional level and in quality/standards regulations would instead give new opportunities to add value to the current export rejects. In this new context. agro-industrial enterprises would be better able to build comprehensive procurement, processing and marketing - based on or targeting both domestic and foreign markets - to reach their optimal scale of production, to reduce their risks (both for agricultural inputs and food outputs) and to develop new opportunities to add value to their products and by-products. (xxi) Regulation Has Induced Institutional Weaknesses. The negative consequences of pervasive regulation go beyond incentive and resource distortions. A major case in point is the weakened state of agricultural cooperatives. Cooperatives have been used as conduits of official intervention instead of mechanisms for pooling risks and resources, for exploiting economies of scale, and for helping the multitude of small farmers obtain better market options and prices. Cooperatives have never been autonomous. In an economy where the majority of farmers are small and illiterate, and dispersed over wide areas, a major developmental opportunity has been iost. With progressive liberalization and the elimination of their input subsidies, there is a real danger that numerous cooperatives, already financially weak, will not rise to the development challenge they face. vii Main Recommendations (xxii) Overview. Morocco's agro-industries have significant potential. However, much needs to be done to tap that potential. Our recommendations range from: (a) trade and marketing policy; to (b) the restructuring of agro-enterprise portfolios with respect to their current and long-term liabilities, and design of new agricultural and food products; and (c) improvements in the support network of public inastructure and institutions. Given the wide-ranging nature of the recommendations, the institutional location in the Government of Morocco for devising a stratey and implementing an action program needs to be determined. Our hope is that our diagnosis and recommendations will form the basis of a fruitful dialogue between the Government of Morocco and the World Bank, both pursuing the common objective of efficient ato-industrial development. Two sets of matrices are atached: the first emphasizes the levels at which constraints occur and actions are proposed; the second organizes the recommendations by strategic objective. Detailed comments and technical recommendations at the subsector level are developed in each chapter and each annex. (xxiii) The Challengeof Expanding Opportunities, Increasingly CompetitiveMarkets and Remaining Major Uncertainties. Morocco is strategically located. Its export prospects will be heavily affected by developments in surrounding markets and its trade relations with these surrounding markets. On-going GA1T talks and the negotiations between Morocco-EC on a Free-Trade Zone will certainly have a major impact on its trade prospects. To date, there is no concrete information on these talks. These uncertainties notwithstanding, the major fact that Morocco has key advantages and faces increasingly competitive global markets, remains. Morocco is next to Europe and the European Community (EC), one of the most important and lucrative world markets. It is a member of the Maghreb Union and market. Morocco is also easily accessille from North America, the Middle-East and Sub- Saharan Africa. These various continents present a diversified array of markets at different income levels and with different consumer preferences. Morocco's main trading partner has been the EC, in particular France and to a lesser extent the United Kingdom and Gamany. On the positive side, the unification of the EC market presents tremendous opportunities for expansion and diversification for Morocco's exports. On the negative side, with the full integration of Spain and Portugal scheduled for 1996, Morocco's preferential treatment for its fruits and vegetables exrorts may cease. More generally, with the increase of Mediterranean countries in the EC, self-sufficiency in Mediterranean products will rise and so may protectionism against other Mediterranean exporters. It is also reported that the full enty of Spain could result in new special trade agreements with Latin America and the Caribbean. If so, this increased competition will reduce the seasonal niche advantages of Mediterranean products. Therefore, while Moroccan products will still have to maintain their market share in the EC, future marketing strategies will have to be directed toward non-EC outlets. (xxiv) Expanding and More Competitive Markets in Morocco. Moroccan agro- industries face expanding and more competitive markets at home as well. Demographic and income growth, urbanization and the increasing participation of women in the labor market, and the positive income elasticities for these consumer goods ensure expanding demand. Despite substantial and sustained improvements &a consumption, nutritional levels are still low and can be vastly improved. Per capita GNP is still low: US $ 1030 (1991). The GOMs commitment to continue the process of liberalization will ensure increasing competitiveness in these expanding domestic markets. (xxv) Response Capability to Alternative Trade Scenarios. How should Morocco respond to the new opportunities and challenges abroad? There is still much uncertainty with respect to viii its trading relationships with the EC. The possibilities range from being part of the EC Free-Trade Zone to having no preferential access beyond 1996. The uncertainty is true of not only relationships with the EC. The uncertainty is broader since GATT talks are still inconclusive and global trade relationships are still in flux. This highly uncertain global trade environment emphasizes the importance for the Government not to preserve the status quo through special incentives or support granted to specific subsectors and thus prevent private enterpreneurs from adjusting to this rather volatile market environment. The Government of Morocco should not try to pick the winners; instead let the private sector pick the winners. The role of government policy should be to relieve basic constraints and build an enabling environment so as to improve cost-competitiveness and enable the economy to respond no matter what the trade opportunities turn out to be. This is precisely the approach of this report. (Xxvi) Purpose, Focus and Scope of Agro-Industrial Policy. The purpose of agro- industrial policy is to maximize value added at economic prices by strengthening the key links in the agro-industrial chain from procurement to output marketing. Its focus should be on: (a) facilitating the flow of goods, services and information in competitive and flexible marketing structures; (b) promoting the diversification of products (including developing a portfolio of semi-processed products), marketing techniques and markets; (c) adding value to by-products of processing and reducing processing and marketing costs for undifferentiated products; and (d) improving the access of decision makers to risk management mechanisms. Its scope ranges from macro and trade to sectoral and enterprise levels. Specifically, it covers four main areas: (a) agricultural trade and marketing; (b) finance and foreign exchange risk; (c) infrastructure and (d) institutions. (xxvii) Agricultural Trade and Marketing. In the short run, the GOM should remove the most distortionary aspects of the system of agricultural reference prices (and accompanying variable levies) and equivalent tariffs, reduce the dualism in its approach to domestic and foreign markets, privatize the sugar and the wine sectors and reduce restrictions to entry in the processing of oilseeds. In the longer run, it should rethink its strategy to achieve food security now that it offically no longer espouses food self-sufficiency. It should also rethink its strategy for promoting incomes and employment of the rural poor, to which increased basic agricultural production was seen as contributing. In the short run, it should consider the following: (a) reference price system-removing the safeguard clause on common wheat; reducing the differences in the "taux d'ad6quation" and equivalent tariffs among commodities so that private sector has incentives to seek out the best price-quality combinations, to store and to hedge their purchases; over time, reducing the protection rates implied by these tariffs; and rendering more uniform intersectoral protection rates; (b) dualism between exports and domestic markets-lifting the administrative restrictions on exports of subsidized agricultural commodities; including agricultural imports in the automatic Temporary Admission Scheme irrespective of their quantitative importance in the structure of the processed output; (c) privatization-restructring the sugar sector on the basis of the Sugar Optimization Plan (December 1990) and (d) domestic market liberalization-removing restrictions on domestic market operations. The rationalization of the sugar sector is not only efficiency-inducing but will also reduce the financial burden on the Compensation Fund without leading to major increases in consumer prices. Some important issues to consider are access to mechanisms for managing price variability and attendant risks, the role of the Cereals and Pulses Marketing Board (ONICL) consistent with a liberalized market structure, and the rationale for public sector "security stocks". (Xxviii) Flnuance and Foreign Exchange Risk. Agro-processing enterprises, specially the small and medium size, need assistance to restructure their investment portfolios, to strengthen their equity base and to increase the ratio of long to short term debt. Banks can provide both the finance and ix the technical assistance needed. The financial restructuring linked with new investments can help enterprises diversify their operations. In addition to strengthening their product portfolio and financial structure, enterprises should also be given the means to better manage their foreign exchange risks in pardcular and the inevitable risks of rapidly changing markets in general. Restrictions on the retention of foreign exchange earnings also need to be relaxed. Domestic and foreign banks can also play a key role in the area of risk management (for interest and foreign exchange rates, and agricultural or energy prices) by providing a better understanding of how forward and futures markets work; by marketing risk management instrumerts; and when necessary, by financing deposits and margin calls. (xxix) Infrastructure. This is obviously a very broad area but the focus suggested here is on the development of a few major wholesale markets along the Agadir - Tangi_rs axis - the main production regions of fresh produce, linked to foreign markets through airports, ports and major highways, to be equipped not only with buildings and improved access to shipping points, but also with modern communications necessary for both regular and electronic marketing. These markets can then serve as reference markets for fruits and vegetables and other major agricultural commodities. This infrastructural development must be complemented by: (a) selectively modernizing port facilities, including cold storage in say Agadir, Casablanca, and Tangiers; and (b) improving the ferry and export services at Tangiers (including an extension of the parking areas for trucks on international routes). These infrastructural improvements in turn require changing the Office National de Transport's licensing system so as to improve private sector incentives for supplying well-equipped commercial trucking services both for domestic and international road transport. (xxx) Institutions. The key weaknesses identified relate to. (a) inadequate interprofessional organizations; (b) weak agricultural cooperatives; (c) uncoordinated quality management; and (d) for fresh citrus, non-existence of risk management techniques (including fuhtures contracts). In these four areas, legislation must be reviewed and technical assistance provided. Profesional organizations exist but they do not fully play their role in providing a forum for articulating common problems, for disseminating market and technology information, for finding common solutions and for dialoguing with the GOM and other business groups. Cooperatives need to evolve into autonomous and financially viable institutions. At a minimum, the Cooperative Law of 1984 should be reviewed to ensure that cooperatives will be allowed to be fully autonomous and then enacted. To support the privatization and the restructuring of the cooperative sector, the Office de Developpement des Cooperatives should be strengthened in terms of trained personnel. The extent to which other cooperatives would require special assistance (financial and technical restructuring as they are already financially weak), should be assessed. Quality management is the concern of too many agencies whose roles have to be rationalized, so that quality management becomes a coordinated national effort as opposed to being an uncoordinated agency effort. Quality management has to become the responsibility of food processing enterprises themselves, with the support of state agencies. Government will then concentrate on formulating and implementing regulation on public health and sanitary standards; product information (labelling) and consumer safety; and on supporting quality enhancement at the enterprise level. In addition, this national effort should apply a uniform not a dualistic approach to products destined for domestic and foreign markets. It should do so by closing the gaps in the above regulations and their enforcement for certain products and for small and medium scale enterprises operating in the domestic market. The capacity of laboratories to undertake and deliver needed analyses needs strengthening. Risk management tools. The fresh citrus sector faces high variability in production and prices and is therefore highly risky. Yet, there are no possbilities for hedging, for reducing and transferring riscs. An initiative should be undertaken to examine the possibility of creating a regional (Mediterranean) futures market for fresh citrus. x (xxxi) Suggested Role of the Govermnent of Morocco and Donors at Different Levels in the Economy. The above set of measures are summarized here to demarcate the different levels at which intervention is suggested; and to help identify the respective roles of GOM and interested donors. As discussed above, promoting demand-driven agro-industrial growth, requires a fundamental shift in the role of the GOM from control to support: from controlling markets to providing an enabling environment including a stable macro-economic and a suitable legal, regulatory and institutional framework; and to strengthening the competitive and efficient operations of markets. This shift is on-going in the current liberalization process. Specifically, the proposed actions are at three levels: (a) economy-wide: trade and financial; (b) sectoral but not specific to agro-industry and (c) sectoral but agro-industry specific. (xxxii) Trade, Macro-Economic and Financdal. These measures are priority since they create an enabling overal framework. The trade measures have a two-fold objective: one, to increase trade opportunities and domestic competition in general; and two, facilitate diversification, value added and risk management in procurement, processing and sale, including the import and export of agriculture- related goods in particular. Rules on the retention of foreign exchange earnings should be further relaxed and hedging of foreign currency denominated assets and liabilities facilitated. The macro-economic measures continue the pursuit of stability essential to any sustained growth. The financial measures should firther broaden the mobilizable base of loanable funds, reduce the crowding out by government borrowing and remove disincentives to equity participation and long-term financing. (xxxiii) Institutional Measures at the Sectoral Level. To support these economy-wide measures, specific institutions must be strengthened or created. These institutions are essential to strengthen supply response from the private sector. They should be initiated as early as possible because they will send strong signals (and thus re-inforce macro signals) to the private sector of the market- orientation of policy and because they take time to develop and function. Essentially, they enable the private sector to: (a) operate within a competitive system (including transport services) of clear rules systematically enforced; (b) develop common solutions that exploit economies of scale, facilitate access to market and technology information and to risk management techniques; and (c) increase quality consciousness and develop consumer-oriented, and environmentally benign products. The key measures include rules and regulations to increase competition; to standardize weights and measures; to develop and enforce quality norms (for exports and import-substitutes) and quality consciousness (imcluding among consumers) and to develop interprofessional organizations and autonomous cooperatives. (xxxiv) Infrastructural (Public and Private) Measures at the Sectoral Level. Efficient and flexible market operations require substantial hardware. With respect to public infrastructure, the key investments needed are the modernization of port facilities, in particular refrigerated storage; adequate parking facilities in Tangiers; and improvements in the delivery of basic utilities such as electricity and telecommunications. With respect to private infrastructure, the key problem is the accreditation and the strengthening of laboratories to analyze product samples. Gaps in these infrastructure result in high cost through delays, wastage, and a lack of flexibility and responsiveness to changes in market demand. Therefore, they should be undertaken in parallel to the above set of institutional measures. (xxxv) Sectoral and Agro-lIdustry Specific. These are targeted to agro-industries to promote diversification of products and markets; to reduce and pool risks; and to add economic value to products, semi- and by-products. The key measures include: (a) the development of wholesale markets in major reference markets; (b) the enforcement of contracts; (c) improved access to land on long leases to enable vertical integration; (d) improved competitiveness in packaging; (e) technical assistance to enterprises (specially small and medium) in re-structuring portfolios, in developing consumer-oriented xi marketing strategies, quality products, accounting and other business practices, and in developing training programs to produce technical, financial and managerial personnel in agro-industry; and (e) the privatization of enterprises in sugar, oilseeds and wine. (xxxvi) Minimizing the Social Costs of Adjustment and InvestIng in the Moroccan Labor Force. The above measures represent fundamental and long-term changes in market prospects and job opportunities. Inevitably, human resources must move away from non-viable to viable enterprises. However, given the typical lag between the decline of some opportunities and the establishment of others, the Government should facilitate labor mobility, through better job information and re-training. Measures such as job placement through private employment bureaus, severance pay, literacy and re-training programs need to be available. Financing of labor mobility and re-raining is a major long-term investment in human capital, an essential component of any sustainable development. (xxxvii) To Sum Up. Moroccan development is at a turning point. The inward-oriented and regulated approach of the seventies and much of the eighties is being gradually replaced by outward- orientation and reliance on market mechanisms. The external trade environment is also evolving rapidly. Equally fundamental are changes in processing technology, in marketing structures and strategies of agribusiness, and in consumer preferences for the health and convenience aspects of food. Morocco's agriculture and agro-industry have a vast potential. Morocco has a strategic location, valuable market and trade connections and a pool of experienced producers, businessmen, industrialists, and trained technicians. However, many areas of agro-processing are still in their infancy. Developing the vast potential will require a fundamental re-structuring of agriculture and agro-industriat sectors. These sectors in particular and the economy in general will gain from a demand-driven, efficient development. Inevitably however, there will be losers and winners in the process. The losers of today should be assisted in the adjustment so as to become the winners of tomorrow. The task is to re-orient the sectors and strengthen their links. Strengthening the links between these two closely interdependent sectors is essential for the dynamism of each. What these links are and how best to strengthen them is the focus of this report. xii TE DEVELOPMENTOF MOROCCAN AGROWN(DUSTY SUMMARY OF MAIN CONSRAMITS, OPPORTUNTES AND PIROPOSED ACInONS A. ECONOMY-WIDE LEVEL CONSTRAIN OPPORTUN[TIEWOBJECTIVES PROPOSED ACnIONS TRADE High protection of Strateglco goods; Expand tude oppoukies within EC and non-EC Redue exte and variability of protetio Cost-Pric sgueeze on agro-processors Diffuties in mport & exporting agricultur Expand sources of inputs, agricultural and Remove restritions to the import of agriculwal inps lnpUtS & ago-processed outputs using subsidied no-gicur & ago-processed expots usig subdized commodities _ _ _ _ _ _ _ _ _ _ _ _ _ __ commoditie Controls on foreign exchange earnings and diffulties Access fututes contacts to hledge dsks on cerals, Facile access to isk manag_m techniques of hedging risks oilseeds, sugar, frozen concentad orange juice Relax controls on foSeign exchange amrings & develop mnuket-basod foreign excange insuanc _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ s c be m e FINANCE Crowding out by public sector borrowing Reduce crowding out of priate sector boring Underdevelopment of rnneuial capital makdts De fncia libaliztion nterest rate ceilin Remove or sigificantly raie inte re celings Limited access to foreign banks Improve access to forcip banks xiii B. SECTOR LEVEL- GENERAL ____________ .CONSTRASI OPPORTUBTIES/OBJECYVES P!ROPOSED AClIONS INSTITTONAL Barir to enty and naios/ocal marking Expand and unify domestic markds Promote anti4rust or co_petin laws and rdue aketing controls, including road transpot controls Chang ONT's lcsing toove supply of wtJJ.quiped _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ privat etucking fe oacl i s Lack of sandardiation and qualiy Exploit synergism bewn domestic and foeign makets RaonalIe agency reSponaibdit controllconsetouusn a in doomsesi market _ _ _ _ _ __ _ _ _ _ _ _ __ _ _ _ _ _ _ Promote suppotitw rater than punive quaity ontrol A _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ assis enterprises _______________________ ______________________ Defin envionental policy and safeguards _______________________ __ _ _Prornote enabling laws Absence of iteaprofessiondl organizations Tap economies of sc"a, exploit value-adding nodern Prepar ageda for uaunchbidg of inter-professional technologies, internaize externdities organi7stions Provide teclulical assistancc_ Low & uneven quality & wastg in some Restructure mubsecors to optiuniz economic value added Privatize ceterprises in sugar, oleeds. wine publicly-owned and rmnaged enterprises INFRASTRUCTURAL PUBLIC Undco tenn inv e Inadequate port 5acilities. e.g.. cold storage, parking Improve consumer-oriented logistics and penetate space for trucks ftrtber niche markets SEMI-PUBUC Absence of adequate wholesal mUakCt facilities in Imptowv effiency of product handlig and create new Modernizc or creat key wholesae markes from Agadir to production regios market oporuniie for domestic outlets Tangirs _ Expand physical & clectonic marketing (wholsale level) __ PRIVATE Inadequate laboratory facities Deeop ratory sppott witin and outsie Labortory accreditation enterprise _ __ Technical assistance to aboratris and eUtd traing IPr
Группа Всемирного банка · Pre-2003 Economic or Sector Report
Morocco - Agro-industrial development : constraints and opportunities (Vol. 1 of 2) : Main report
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