Morocco - Lakhdar Watershed Management Pilot Project

Document of The World Bank Report No: 18370-MOR PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF USD 4.0 MILLION TO THE KINGDOM OF MOROCCO FORA LAKHDAR WATERSHED MANAGEMENT PILOT PROJECT December 3, 1998 Rural Development, Water and Environment Group Middle East & North Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective September 1998) Currency Unit = MAD MAD1 =USD0.107 USD 1 MAD 9.3 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS M]EF Ministry of Water and Forests (within MADRPM) CAS Country Assistance Strategy MAD Dirham, the Moroccan currency unit DPA Provincial Department of Agriculture GOM Government of Morocco MADRPM Ministry of Agriculture, Rural Development and Marine Fisheries PDD Village Development Plans (to be prepared under the project) PIP Project Implementation Plan PMU Planning and Monitoring Unit (in DPA of Azilal Province) Vice President: Kemal Dervi, Country Director: Christian Delvoie Sector Director: Doris Koehn Task Leader: Harald Stier/Douglas W. Lister  MOROCCO LAKHDAR WATERSHED MANAGEMENT PILOT PROJECT CONTENTS PROJECT DATA SHEET A. Project Development Objective ............................................................3 1. Project development objective and key performance indicators ...............................................3 B. Strategic Context ............................................................3 1. Sector-related CAS goal supported by the project ............................................................ 3 2. Main sector issues and Government strategy ........................... ................................3 3. Sector issues to be addressed by the project and strategic choices ...........................................4 C. Project Description Summary ............................................................4 1. Project components ............................................................4 2. Key policy and institutional reforms supported by the project .................................................5 3. Benefits and target population ............................................................5 4. Institutional and implementation arrangements ............................................................5 D. Project Rationale ............................................................5 1. Project alternatives considered and reasons for rejection .........................................................5 2. Major related projects financed by the Bank and/or other development agencies ....................6 3. Lessons learned and reflected in proposed project design .........................................................7 4. Indications of borrower commitment and ownership ............................................................ 8 5. Value added of Bank support in this project ............................................................8 E. Summary Project Analyses ............................................................9 1. Economic ............................................................9 2. Financial ............................................................9 3. Technical ............................................................9 4. Institutional ........................................................... 10 5. Social ..... : 10 6. Environmental assessment ...................... 10 7. Participatory approach ....................... F. Sustainability and Risks ...................... I l 1 . Sustainability ...................... I 1 2. Critical risks ......................1 1 3. Possible controversial aspects ...2................... 12  G. Main Loan Conditions ........................ 12 1. Effectiveness conditions ........................ 12 2. Other ........................ 12 H. Readiness for Implementation ........................ 13 I. Compliance with Bank Policies ........................ 13 Annexes Annex 1. Project Design Summnary Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Anniex 4. Cost-Benefit Analysis Summary Annex 5. Financial Summary Annex 6. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annlex 9. Statement of Loans and Credits and IFC Investments Annex 10. Country at a Glance Malp Morocco - Lakhdar Watershed Management Pilot Project (IBRD 29700)  Morocco Lakhdar Watershed Management Pilot Project Project Appraisal Document Middle East & North Africa Region Rural Development, Water and Environment Group Date: December 3, 1998 Task Leader: Harald Stier/Douglas W. Lister Country Director: Christian Delvoie Sector Director: Doris Koehn Proj ect ID: MA-PE-55 19 Sector: Natural Resources Program Objective Category: Enviromnentally Sustainable Management Development Lending Instrument: Specific Investment Loan Program of Targeted Intervention: [] Yes [X ] No Project Financing Data [x] Loan [ Credit [ Guarantee [ Other [Specify] For Loans/Credits/Others: Amount (US$m/SDRm): USD 4.0 million Proposed terms: [] Multicurrency [x] Single currency, specify Grace period (years): 5 years [ Standard Variable [ Fixed [x] LIBOR-based Years to maturity: 20 years Commitment fee 0.75 % Front-end Fee: 1.0% Service charge: N/A Financing plan (US$m): Source Local Foreign Total Government 1.4 1.4 Cofinanciers IBRD 3.0 1.0 4.0 Other (specify)Beneficiaries 0.4 0.4 Total 4.8 1.0 5.8 Borrower: Kingdom of Morocco Guarantor: n/a Responsible agency(ies): Ministry of Water and Forests (MEF), within the Ministry of Agriculture, Rural Development and Maritime Fisheries (MADRPM) Estimated disbursements (Bank FY/USD M): 99 00 01 02 03 Annual 0.30. 0.35 0.70 1.20 1.45 Cumulative 0.30 0.65 1.35 2.55 4.00 For Guarantees: [ Partial credit [ Partial risk Proposed coverage: Project sponsor: Nature of underlying financing: Terms of financing: OSD PAD Form: July 30, 1997  Page 2 Principal amount (USD) Final maturity Amortization profile Financing available without guarantee?: [ Yes [] No If yes, estimaLted cost or maturity: Estimated firnancing cost or maturity with guarantee: Project implementation period: 4 years Expected effectiveness date: 03/99 Expected closing date: 12/31/03  Page 3 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): * The objective is to test on a pilot basis participatory approaches to improve land use and natural resource management in mountainous areas. To achieve this objective, the project would provide a package which would lead to improved living conditions and incomes for the local population. As such, the project would be the first attempt to test the conclusions of the National Watershed Management Study carried out to take stock of past experiences in watershed management and apply the lessons learned to develop a new, more sustainable approach to land use and natural resource management in mountainous areas. * Indicators of project performance would be the active participation of the local population, higher incomes in the project area from crops and livestock and increased vc -tative cover and anti-erosion structures. Key performance indicators are given in Annex 1. B: Strategic Context 1. Sector-related Countra Assistance Strateg (CAS) goal supported by the project (see Annex 1). CAS document number: 16219 -MOR; Date of latest CAS discussion: January 30, 1997 * The proposed project is explicitly included in the CAS and supports its improved environmental and natural resource management agenda. It also supports the key CAS objective of reducing poverty and the rural-urban gap through improved access to basic infrastructure and job creation with ir.creased community participation. In addition, it promotes the CAS objective of encouraging greater decentralization by providing a vehicle for practical experimentation at the local level. Finally, the project is supportive of, and an outgrowth of, the "Kingdom of Morocco - Rural Development Strategy (1997-2010)," prepared jointly by the Bank and GOM (Report No. 16303- MOR, dated March 28, 1997). 2. Main sector issues and Government strategy: * The mountainous areas of Morocco are home to some 2.4 million people who are among the poorest in the country and who benefit from little social or other governmental services and infrastructure. In order to meet their subsistence needs, these growing populations put increasing pressure on the land with poorly adapted cultural practices, leading to overexploitation, soil erosion, a general degeneration in their natural resource base and to damaging siltation of dams and hydraulic infrastructure downstream. The main sector issue is how best to approach improved management of natural resources under these circumstances. Past efforts in watershed management have only scratched the surface of the problem and it has become evident that a new approach is needed. To help define this new approach, the Bank, with financing from a PHRD grant, assisted the Government to carry out a study of past experiences (successes, failures, reasons, lessons, etc.) and to prepare a National Watershed Management Plan. * The Government strategy, defined through this study, is based on the premise that in order to improve the success rate of watershed management projects, it is necessary to involve the local populations in the planning of the projects, using participatory methods. The central government will provide some strategic planning, but detailed planning and implementation must be smallscale and done locally with the active participation of the concerned populations, taking into account their specific priorities and concerns as well as the specific, on-site, natural resource situation. Decentralization and flexible financial management are indispensable requirements for the participatory approach to succeed. Although this is accepted at certain levels of the central Government, decentralization remains an issue in that entrenched bureaucracies are difficult to  Page 4 change and particularly since there is no agreement in Morocco on what exactly decentralization should mean in practice. The Government strategy of development through participation and decentralization, therefore, will need to be translated into practice and adapted through experience in the field. The proposed pilot project will be an important part of this effort. 3. Sector issues to be addressed by the project and strategic choices: * To help the Government implement its new strategy, the proposed project would test the provision of infrastructure and technical support on improved agricultural and natural resource management practices with the active participation of the concerned populations in the Lakhdar watershed (Hassan ler on Map). In this watershed, priority areas located in four communes were selected for the project. Within these priority areas, it is expected that forty villages with about 13,000 inhabitants and covering an area of about 30,000 ha would participate in the project. Specific programs would be defined in Village Development Plans (PDDs), with the active participation of concerned populations. The PDD would be an all-in-one package with a clear designation of the responsibilities of the various stakeholders. The beneficiaries would bear a part, albeit modest, of the investment cost (mostly in natura) to show their commitment. Since Morocco's centralized administrative system takes time to change, the pilot project cannot hope to achieve a full decentralization, but it should be seen as a first step in the effort to move the administration in that direction progressively. In this respect, the pilot project would establish new precedents in the devolution of decision making and the empowerment of local populations. A successful pilot would provide the basis for replication on a larger scale. C: Project Description Summary I. PrgoLet components (see Annex 2 for a detailed description and Annex 3 and Borrower's Project Ipletnentation Plan for a detailed cost breakdown): Component Categorv Cost Incl. (%) of Bank- % of Contingencies Total financing Bank- (USD M) (USD M) financing * Imp:roved Natural Resource Physical 3.3 (57) 2.55 (77) Management (erosion control, participatory forest management, smallscale irrigation rehabilitation and agricultural development) * Socio-Economic Infrastructure Physical 1.3 (22) 0.90 (69) (access roads and potable water supply facilities) * Institution Building Institution 1.2 (21) 0.55 (46) (strengthening of DPA Azilal building and local branch of the Ministry of Water and Forests) Total 5.8 (100) 4.00 (69)  Page 5 2. Key policy and institutional reforms supported by the project. * Participatory natural resource management (as opposed to the previous top-down approach). * Decentralized project planning and implementation (instead of traditional centralized programs). 3. Benefits and target population: * The target population consists of the approximately 13,000 inhabitants of 40 villages in the Lakhdar watershed. They would benefit from improved employment and incomes, as well as from better rural services, notably access roads and potable water supply facilities, all within an improved natural environment. Successful results would allow a more general replication of this pilot approach to the country's other watersheds which would benefit a majority of Morocco's poor who live in these isolated areas. 4. Institutional and implementation arrangements: * Project Oversight and Coordination: At the central Government level, the Ministry of Water and Forests (MEF), within the Ministry of Agriculture, Rural Development and Maritime Fisheries (MADRPM), would be responsible for oversight and coordination of the project with other ministries (Finance, Interior, etc.) and the Bank. At the provincial level, coordination between the various programs affecting the project would be carried out by a Provincial Coordinating Committee presided over by the Govemor, composed of the local representatives of concerned Government departments . The committee would meet at least once a year or more often as required to coordinate among the various rural development activities in the province to ensure maximum efficiency and impact. - Proiect Execution: The project would be executed in accordance with the detailed Project Implementation Schedule contained in the Borrower's Project Implementation Plan (PIP). Detailed day-to-day project planning and execution would be delegated to the Provincial Department of Agriculture (DPA) in Azilal Province. A Planning and Monitoring Unit (PMU) would be established in the DPA for the project. Procurement of project works, goods and services would be carried out by the DPA in accordance with Bank guidelines. The DPA, through the PMU, would monitor and evaluate the implementation of the project on an ongoing basis in accordance with the indicators given in Annex 1, submit half yearly progress reports to the Bank, prepare and submit to the Bank by March 31, 2000 an implementation review report on progress to date and the measures required to successfully complete the project, review this report with the Bank by June 30, 2000, and subsequently take all necessary measures to ensure the efficient achievement of the project objectives based on the report and the Bank's views. D: Project Rationale 1. Project alternatives considered and reasons for rejection: * There is no blueprint solution for increasing rural well-being. The Bank's most recent sector report entitled "The Kingdom of Morocco - Rural Development Strategy (1997-2010)" recommends a series of pilot projects to try out various approaches. The proposed project focuses on the mountainous areas of Morocco where the people are among the poorest in the country. Previous top-down sectoral development approaches have failed to have much impact on their living standards and have failed to stop the over-exploitation and degeneration of their natural resource base. They were therefore rejected in preparing the proposed project. The study to prepare the National Watershed Management Plan (see Section A. 1 above) specifically examined different project designs and the proposed pilot project reflects the study's final conclusions and recommendations. The Lakhdar  Page 6 watershed was selected as a pilot project area because it was given top priority in the National Watershed Management Plan, was small enough for a pilot project to have some meaningful impact and was requested by the Government. 2. Major related proiects financed by the Bank and/or other developmnent agencies (cotipleted. ongoing and planned): Sector issue Project Latest Supervision (Form 590 ratings) Implementation Progress Development (IP) Objective (DO) Bank-financed (a) Completed Poverty reduction through income Fes-Karia-Tissa S generation, provision of (Loan 1602-MOR), infrastructure and natural resource FY79 conservation. Poverty reduction through better Loukkos (Loan S natural resource management. 1848-MOR), FY80 Poverty reduction through better Middle Atlas (Loan U natural resource management. 2082-MOR), FY82 Income generation through Oulmes Rommani S increase d productivity due to (Loan 2217-MOR), integrated production, better FY83 agricultural and social services and soil conservation Improved natural resource Second Forestry S S management through better Project (Loan 3156- planning and techniques for forest MOR) regeneration, watershed management and forest range management Improving living conditions in Second Rural S S rural areas through electrification. Electrification Project (Loan 3262- MOR), FY91  Page 7 (b) Under Implementation Address core needs of rural poor Secondary, Tertiary U S by improving access to social and Rural Roads services and markets by road Project (Loan 3901- construction. MOR), FY95 Addresses CAS social, rural Rural Water and S S development and poverty Sanitation Project alleviation objectives. (Loan 42540-1 - MOR), FY98 (c) Planned Reduction in the rural-urban gap Rural Infrastructure and increasing rural well-being Project through infrastructure construction. Protected areas management Protected Areas and participatory conservation Management (GEF) of ecosystems European Union Natural Resource Management Planned Rural Poverty and Natural Resource Management Rural Infrastructure Rural Development Kreditanstalt fur Wiederaufbau (Germany) Participatory Natural Resource Management UNDP Integrated and Participatory Rural Development IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the proiect design: The main lessons from the Bank's worldwide rural development and natural resource management experience are as follows:  Page 8 * Prospects for sustainable improvements in natural resource management are reduced where field activities have been carried out by contractors and beneficiary participation is low; full ownership from the outset by all stakeholders is essential; * New approaches require clear objectives and simple project design; * Pilot projects require modest amounts of dependable funding and should be given sufficient time to succeed; * Rural development projects require extra effort and longer gestation of project preparation to improve the chances of effective implementation; and * Sustainability of project infrastructure requires a continual commitment to fund and carry out maintenance. In addition to the above global lessons, the PHRD grant-financed preparatory study (Section B.2) made specific recommendations based on past experience in Morocco. Finding that the top-down approach which did not involve the local populations was one main cause for past failures, the study proposed a new role sharing between the Government and the local populations where both parties participate fully in the decision making process so as to guarantee commnon ownership and, therefore, effective implementation and, subsequently, maintenance of project works. The study emphasized the need for a concentration of efforts, avoiding multiple objectives; more flexible and sustained donor and Government funding commitmrrents (accepting that soil conservation is a long term effort); and effective M&E of project works and results. On the technical side, the study concluded that past failures and high costs were often due to incorrect diagnosis of the erosion process and, therefore, sub-optimal treatments. Another reason for failure was the "standardization of watershed management techniques", which was practically inevitable with detailed, centralized planning, leaving little room for taking local specificity into account. A more flexible approach, combining strategic project level planning with "micro planning" at the field level, together with the local populations concerned, was recommended. The design of the proposed pilot project reflects these lessons. 4. Indications of borrower comm)littmlent and ownership. * Borrower commitment to rural development has been demonstrated by MADRPM's preparation of an integrated Rural Development Strategy and, more recently, by GOM's participation with the Bank in the preparation of "The Kingdom of Morocco - Rural Development Strategy (1997-2010)." "Rural Development" has also been added to the name of the Ministry of Agriculture. GOM's policy is to narrow the gap between urban and rural areas. MARDPM has prepared the project (with FAO/CP help) and the Government (Ministry of General Government Affairs) requested the Bank to appraise the project and allocate funds for its financing. MADRP has already recruited key staff for the p:roject and has arranged for their training prior to project start-up, as agreed with the Bank pre- appraisal team. The project has been included in the MEF's 1998-99 budget. 5. Value added of Bank suipport in this proiect: * The Bank's worldwide experience with rural development and knowledge of the enabling policy and institutional environment required for success, together with the recent Morocco rural development strategy study, gives it credibility and much greater influence on policy decisions than any other donor. This permits the Bank to apply more effectively the lessons from pilots and agree with GOM on policy changes, if required, to replicate successes. Bank involvement has already had a catalytic effect in stimulating other donors interest in participatory watershed management projects.  Page 9 E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): Cost-Benefit Analysis: NPV=MAD 18.5 million; US$ 2.0 million; ERR= 17%. * The proposed project has an ERR which is well above the opportunity cost of capital (10%) and a positive net present value (NPV), at 10% discount, which is satisfactory. All project investment and recurrent costs, but only quantifiable benefits have been included in the calculation of the ERR and NPV. The main benefits would arise from increased production of cereals, fodder, olives, fruits, vegetables and fuelwood. Additional benefits would accrue from access roads and reduced siltation of the reservoir of the Hassan I dam. No benefits have been calculated for erosion control measures, since they cannot be quantified (see "Cost Effectiveness Analysis" below). The project would also benefit other projects that are related to it (e.g. through training of trainers). * Cost Effectiveness Analysis: Even though no benefits have been included for erosion control measures (protection of gullies and ravines and biological treatment), these will be more cost effective and produce more benefits than in the past, due to their longer expected life span, which is in tum due to the involvement of the local population in their selection and management. * Sensitivity Analysis: The rate of return is relatively insensitive to reductions in benefits and increases in cost. While still maintaining a 10% ERR, benefits can be reduced by 28%, investment costs increased by 87% or incremental production costs by 97%. Sensitivity tests based on a 10% reduction in benefits, a 10% increase in investment costs or a one-year lag in implementation indicate that the ERR would decline to 14%, 16% and 15% respectively. These risks are considered acceptable, given that unit costs are on the safe side, the phasing is reasonable, and the expected yield increases are conservative. 2. Financial (see Annex 5): D Farm models show that the project's agricultural investments would be attractive to the farmers, particularly intensification of production on irrigated land with IRRs above 50%, but also fruit tree plantations and other productive anti-erosion works which have IRRs ranging from 11-30%. As might be expected from a project with an environmental emphasis and public sector infrastructure investments which do not generate any financial income streams, the financial net present value is negative. However, as indicated above, the cost effectiveness of many of these investments would be increased as a result of greater longevity arising from local participation in their planning and maintenance. * Fiscal impact: After allowing for the contribution of the beneficiary populations, the project budgetary impact would be about MAD 10.0 million per year during implementation. This represents about one-half per cent of MADRPM's budget and five percent of MEF's budget. Since maintenance of project works would essentially be carried out by the beneficiaries, the budgetary impact after project completion would be negligible. It should be kept in mind, however, that this project, if successful, is meant to be a long term effort and continued in the project area, as well as replicated in other watersheds in the country. 3. Technical: * The socio-economic infrastructure and anti-erosion works in the project have been selected from among the types presently being carried out in the project area and which are familiar to the executing agencies and represent no particular technical difficulties. Where possible, improvements have been suggested by the preparation team and the technical packages have been reviewed and vetted by the pre-appraisal team.  Page 10 * Proposed agricultural technologies are a combination of best practices from within the project area and from other areas with similar agro-climatic conditions; and of improvements suggested by the preparation and pre-appraisal teams. With support from the extension service they would represent no particular technical problem to the farmers. 4. Institutional. * Executing agencies: The Ministry of Water and Forests (MEF) within MADRPM is the central government agency responsible for watershed management; as such, it would receive the budget for the project. It would therefore carry out strategic project planning and monitoring, ensure the necessary budget allocations and provide liaison with the Bank. The Provincial Department of Agriculture (DPA) in Azilal is charged with agricultural development in the project area and would bear the main responsibility for project execution, either directly or through contracted parties. The DPA has the main managerial skills and technical capacity, but would be strengthened through training and the addition of some key staff who have already been appointed and given initial training. * Accounting. Financial Reporting and Auditing: Morocco's compliance with audit covenants has impiroved considerably in recent years with compliance rates increasing from 15% in FY96-97, to 24%/o in FY97 and to 53% in FY98. Timeliness also improved with 80% of the reports submitted on time in FY98. The quality of Government audit of project accounts is generally satisfactory. MEF has experience in implementing and accounting for Bank-financed projects, including the recently completed Forestry II Project, where it satisfactorily complied with Bank auditing and reporting requirements. Nevertheless, the adequacy of its financial management system, as well as that of the DPA in Azilal, was reviewed in order to comply with OP/BP 10.02. As a result, an Administrative and Accounting Unit was established in the DPA Azilal especially for the project prior to Board presentation. Separate project accounts would be set up in accordance with Bank requirements and audited annually by an independent auditor acceptable to the Bank. Audit reports, including a separate opinion on the Special Account and SOE, would be submitted to the Bank within 6 months of the end of the FY. 5. Social: The project would test participatory methods for sustainable natural resource management and would in the process strengthen the capacity of the local conmmunities to help themselves. The participatory process, supported by male and female facilitators, would have four phases: a) Selection of the participating villages after a public information campaign and a rapid technical and social feasibility study, including confirnation of community interest and willingness to contribute to project activities; b) Participatory preparation of and agreement on the Village Development Plans (PDD) and Program- Contracts; c) Implementation of the Program-Contracts; and d) Monitoring and evaluation of the results. 6. Environmental Assessment: Environmental Category []A [x] B [] C * The project, which has been rated as a B category project, aims to improve land use and natural resources management in mountainous areas through better practices in soil conservation, water management, erosion control, reforestation and range management. Project works are small and labor intensive. They are not expected to have any major negative environmental impacts. Construction of access roads, water points and irrigation facilities or any construction will follow guidelines acceptable to the Bank and will be monitored closely during supervision. For water points construction, it has been decided that they will be financed and supervised under the Rural Water  Page I 1 Supply and Sanitation Project (PAGER, LOAN 42540-MOR). However, water quality monitoring arrangements will be put in place for periodic testing by ONEP under this project. For rural roads guidelines will be developed and implementation would be monitored closely with special focus on maintenance If pesticides and chemicals are to be procured through the project, procurement will be in accordance with World Bank's Operational Policy 4.09 on Pest management's requirements. A mitigation plan has been developed during project preparation for all the activities to be financed under the project. An environmental management plan has also been prepared (see Annex II of the Project Implementation Report). It will be implemented and monitored under the supervision of the implementing agency. Training of the staff from the agency will be provided on the key environmental issues, on environmental guidelines and on the techniques of environmental analysis. Workshops will also be held to sensitize local communities on environmental issues before the starting of the activities. 7. Participa1o0r approach. * Primary beneficiaries and other affected groups: The local people directly concerned by the project number about 13,000. They will agree on their priorities and together with government representatives will participate in every step of the preparation of their Village Development Plan (PDD). They will choose the infrastructure and agricultural improvements for their village, including natural resource management and erosion control measures, and agree on an investment package with the government representatives, including their own contribution. They will also agree to maintain the investments made. One criteria for inclusion of investments in the project will be the willingness of the villagers to participate. - Other key stakeholders: Local elected representatives to the Communes would be given training in participatory methods and, where appropriate, consulted. F: Sustainability and Risks 1. Sustainabilitv: * Project sustainability will depend on the concerned populations sense of "ownership" of the project investments. The conmmunity based approach taken by the project, involving all those concerned throughout the entire process, i.e. in the selection of the investments, in their implementation and in their operation & maintenance, seeks to ensure this sense of ownership and thus project sustainability. 2. Critical Risks (reflecting assumptions in the fourth column of Annex J): Risk Risk Rating Risk Minimization Measure Annex 1, cell "from Outputs to Objective" 1. Lack of social cohesion among project M Selection of villages ready to participate in village communities project and work of facilitators 2. Lack of interest by villagers in anti-erosion S Packaging with socio-economic infrastructure measures and forest management as an incentive and motivation work by animators 3. Lack of attractive returns to technical variable Selection of packages on basis of returns, agricultural packages M-S extension and adaptive research efforts and preparation of technical reference framework 4. Lack of acceptance of participatory forest S Making it part of the incentives package and management by MEF and users close coaching of MEF staff by Bank .. _^_ _ _ _ __ _ _ _._. supervis.ion missions  Page 12 5. Road and water infrastructure is not built as M Close monitoring and supervision by PMU and scheduled Bank 6. Lack of participation of population and lack M-S Work of facilitators and inclusion of the of funding from the budget project in the annual Finance Law Annex 1, cell "from Components to Outputs" 1. Investment program not meeting M Participatory preparation of PDD populations priorities 2. Non-availability of budget (adequacy, M Adjustment of project to budget, close timing) monitoring of timing 3. Slow budget procedures causing delays M-S Close monitoring to find early remedies Overall Risk Rating M-S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: * None G: Mainm Loan Conditions Action on key conditions has been taken up front, to the extent possible, to ensure smooth project implementation. 1. ffectilveness Conditions: None other than standard. 2. Other: * For the improved natural resource management component and socio-economic infrastructure component, PDDs will include the beneficiaries' contribution to capital costs and responsibility for operation and maintenance in amounts and following procedures acceptable to the Bank (Revenue Generation from Beneficiaries). * DPA to monitor and evaluate implementation of the project on an ongoing basis in accordance with the indicators given in Annex 1, submit half yearly progress reports to the Bank, prepare and submit to the Bank by March 31, 2000 an implementation review report on progress to date and the measures required to successfully complete the project, review this report with the Bank by June 30, 2000., and subsequently take all necessary measures to ensure the efficient achievement of the project objectives based on the report and the Bank's views (Monitoring and Review). * DPA to submit audited annual accounts, including a separate opinion on expenditures financed under SOEs, with six months of the end of the fiscal year (Accounts/Audits).  Page 13 H. Readiness for Implementation Staff recruitment for the project has been done and pre-project training has been completed. A budget, satisfactory to the Bank, has been prepared for the first year's operation, and included in the 1998-99 Finance Law. [ ] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [ x] Not applicable (these can only be prepared after the first PDDs have been established). [ ] The procurement documents for the first year's activities are complete and ready for the start of project implementation. [x] Not applicable (these can only be prepared after the first PDDs have been established). [x] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. I. Compliance with Bank Policies [x] This project complies with all applicable Bank policies. Task LeadeHarald ierDouglas W. Lister Sector Director: Doris Koehn Countryl ctor: Christn Delvoie  Page 14 Annex 1 Project Design Summary Morocco: Lakhdar Watershed Management Pilot Project Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions Sector-related CAS Goal: (Goal to Bank Mission) 1. Sustainable natural 1 . Regulatory frameworks 1. Government regulations 1. Achievements are sus- resource management in place and achieve- and reports on programs tainable and replicable ments in natural resource management. 2. Reduction of poverty 2. Speed of implementa- 2. Reports on programs 2. Gaps reduced by im- and rural-urban gaps tion of social develop- proving rural situation, ment and rural infra- not by worsening structure programs urban incomes 3. Support movements 3. Initiation of public 3. Official documents on 3. Decentralization towards decentralization administration reform reform leading to participation and increased efficiency Project Development 1. Improved land use, 1. surveys (baseline, ex (Objective to Goal) Objective: including increased post) To test in the form of a pilot incomes from crop and project a participatory livestock production approach to improve land 2. Improved natural 2. surveys (baseline, ex Successful project is use and natural resources resource management, post) replicable in order to have management in including increase in wider impact mountainous areas vegetative cover, erosion 3. project progress reports treatment and community participation as reflected in the number of active village committees and extent of participation in investments Outputs: (Outputs to Objective) 1. Population is organized 1. Village committees 1. Social cohesion among for sustainable natural meet and take decisions project village resource management communities 2. Erosion control 2. Establishment of 1,600 2. Villagers give measures are m3 of gabions and 900 sufficient importance implemented ha of fruit tree to anti-erosion plantations measures 3. Improved land use 3. Intensification of 750 ha Project progress reports 3. Technology packages of irrigated crops and give good returns 200 ha of rainfed lands 4. Improvement of forest 4. At least 600 ha of Progress reports, evaluation 4. MEF and users accept management forested areas brought surveys and successful participatory forest under participatory replications of project management management plans elsewhere  Page 15 5. Additional 5. 80 km of village access 5. Road infrastructure is infrastructure roads built as scheduled 6. MADRPM has acquired 6. Above indicators show 6. Participation of replicable skills in successful populations and budget participatory natural implementation and funding resource management maintenance Project Components/Sub- Inputs: (budgetfor each (Components to Outputs) components: (see Annex 2 component) for project dlescription) 1. Natural resource 1. USD 3.3 million GOM annual budget 1. Investment program management document. corresponds to populations priorities 2. Socio-economic 2. USD 1.3 million Project progress reports 2. Budget funds timely infrastructure and available 3. Institution building 3. USD 1.2 million Project audit 3. Existing budget procedures not causing undue delays in implementation of agreed actions  Page 16 Annex 2 Lakhdar Watershed Management Pilot Project Detailed Project Description The project would be a pilot phase in a longer term program to improve land use and natural resources management through a participatory approach. It would finance Village Development Plans (PDD) prepared jointly by local communities and the project technicians. The design of the project, which gives a proactive role to resource users in the decision making process, does not allow a detailed advance definition of project components. However, participatory rural surveys carTied out in a sample of villages during preparation have identified priorities as perceived by local population. These priorities are reflected in the following components that the project will finance in the four selected communes of the Azilal province. Project Component 1 - Natural Resources Management (USD 3.3 milion) This component will contribute to the achievement of the project objective through sustainable soil and water conservation and erosion control measures carried out with the active participation of the populations concerned on public, collective and private lands. The measures proposed under the project include: * erosion control through (i) protection of gullies and ravines on all lands, both mechanically and vegetatively to stabilize the soils, (ii) range lands improvement in degraded sylvopastoral lands through destoning, harrowing, seeding, fertilization, plantation of forage shrubs and deferred grazing and (iii) progressive re-vegetalization with suitable local species of badlands; it is estimated that treatment of 35 km of ravines, 500 ha of improvements to sylvopastoral lands, 100 ha of vegetalization, I 100 in3 of gabions and 500 in3 of rock fill will be necessary; * participative management of forests and forest ranges through preparation, with the participation of the users, of simplified sylvopastoral management plans and after their adoption, progressive implementation of these plans which could include demarcation of forest estates, pilot operations to regularize illicit settlements, reforestation, rangelands improvement and socio-economic infrastructure. * rehabilitation of 500 ha of small-scale irrigation systems through renovation and improvement of diversion weirs and intake structures, systematic lining of earth canals to the on-farm distribution systems, gated distribution installations on the canals, construction of main canal siphons, suspensions, chutes and culverts, bank and flood protection structures, etc.; feasibility studies including reconnaissance investigations, detailed designs and bid documents and maintenance programs, would be carried out by consulting engineers wherever possible and with the direct involvement of the beneficiaries. * agricultural development through: (i) intensification of irrigated crop production in line with the availability of additional and reliable supplies of water; (ii) intensification of rainfed crops on gentle slopes (less than 10 %) and on steeper slopes (between 10 and 30 %); and (iii) plantation of fruit trees accompanied by water collectors and small walls and rehabilitation of old plantations; it is expected that the farmers themselves, with the help of the technicians, would draw up the list of technical priorities; these can be of three kinds: (i) questions concerning practices that have been tested under simnilar farming conditions and can be introduced immediately through field demonstrations and farmer's days; (ii) those that have answers which  Page 17 have not yet been tested and are therefore subject to adaptive research under the project; and (iii) questions for which no technical solution appears to be readily available and which will have to be referred to the research institutions (not supported by the project) and take several years to find an answer; in support of this agricultural development program, the project would provide equipment, tools, materials and farm inputs for demonstrations and adaptive research; it would also finance 3.5 and 5 months respectively of international and national technical assistance to prepare technical reference norms, the training of the staff (5 months of study tours and 900 days of training per year) and the participatory monitoring of the impact of anti-erosion measures (1.5 and 7 months of international and national technical assistance respectively and 260 days of training). Project Component 2 - Socio-economic Infrastructure (USD 1.3 million) Among the top priorities of the rural communities are the construction of access roads and potable water supply schemes. This infrastructure, which can be expected to be amply represented in the Village Development Plans, acts as a motivating factor for the communities to participate in more efficient natural resource management and anti-erosion measures which they might not otherwise accept initially. Investments would be co-ordinated with those of other infrastructure projects in order to take maximum advantage of the synergism of such investments and also to ensure consistency in the participatory approach. Based on estimates, the project would include: . the financing of 80 km of access roads; these roads are of the forest road type already being executed by the MEF under the Forestry II Project (Loan 3156-MOR); feasibility studies including reconnaissance investigations, detailed designs and maintenance programs would be carried out by technicians of the Provincial Forestry Department or of the Provincial Department of Agriculture; before starting the works, local communities would commit themselves to maintain the road; * the implementation of 40 water supply schemes; once the Village Development Plan is approved by the local community and the technicians, the request made for the water supply scheme, if any, would be transmitted to the Provincial Department of Public Works which is in charge of implementing the Rural Water Supply and Sanitation Project in the Province of Azilal (PAGER, Loan 42540-1-MOR). The technical studies as well as the financing of the works would be done under that project. Project Component 3 - Institution Building (USD 1.2 million) The project would be implemented by the Provincial Department of Agriculture (DPA) of Azilal. The DPA Director would be the Project Manager. He would be seconded by a Planning and Monitoring Unit (PMU) headed by a technical staff, an Administrative and Accounting Unit in charge of keeping separate accounts for the project, a team of technical staff (forestry and soil conservation, agronomy, rural engineering and sociology/ communication), a team of 4 male and 2 female animators, one male for each commune and one female covering two communes, plus 2 drivers. At the central level, the project would be located in the Ministry of Water and Forests (MEF) of the Ministry of Agriculture, Rural Development and Maritime Fisheries (MARDPM) which would be in charge of piloting it; a technical staff attached to MEF would serve as liaison officer between the project and the Ministry. In order to allow for a smooth implementation, the project would finance: . four 4wd vehicles, one per animator that he would share with the female animator and the technical staff supporting him; * three PCs with printer and soft-ware, photocopier, other office equipment and set of office furniture;  Page 1 8 * a sizeable training program for project staff; in addition to tteir basic training in participatory techniques which would be organized before the project start, the animators and the technical staff would receive 20 and 5 days of training per year, respectively; the program would benefit from 6 months of foreign training consultants; in addition, 650 days would be allocated for visits to other projects, and 8 months to study tours; * the training of elected representatives and local administration officials; 160 days are included in order to allow 4 days of training for 10 elected members and administrative staff per commune; in addition 625 days would be allocated for visits to other projects. * the training of two representatives per village and per year during 4 days; * the incremental recurrent costs: salaries of the staff that the MADRP would not be able to place at the project disposal (head of the PMU, sociologist, female animators and drivers), travel allowances, operation and maintenance for vehicles and office operating costs which would cease at the end of the project. The project would be executed in accordance with the detailed Project Implementation Schedule contained in the Borrower's Project Implementation Plan (PIP).  Page 19 Annex 3 Lakhdar Watershed Management Pilot Project Estimated Project Costs (USD '000) 1999 2000 2001 2002 2003 Total Project Component Improved Natural Resource 103.4 175.6 463.4 782.0 1,186.1 2,710.56 Management Socio-economic Infrastructure 4.3 96.8 197.9 307.6 404.4 1011.0 Institution Building 350.2 174.4 187.1 183.1 152.8 1047.6 Sub-total 457.9 446.8 848.4 1272.7 1,743.3 4,769.16 Physical Contingencies 45.8 44.7 84.8 127.3 174.3 476.9 Price Contingencies 12.7 25.0 71.5 144.5 252.2 505.9 Total _roject Cost 516.4 516.5 1,004.8 1,544.5 2,169.9 5,752.0 N.B. For further details, see COSTAB tables in the Borrower's Project bIplementation Plan (PIP)  Page 20 Annex 4 Lakhdar Watershed Management Pilot Project Cost Benefit Analysis Summary (Base Year 1997-98) Present Value of Flows' Fiscal Impact (000 MAD), Economic Financial Analysis Analysis Taxes Subsidies Benefits 66,583 77,921 From 80 to 100% of Costs 48,097 69,731 6,800 works' costs. Almost nil for O&M. Net Benefits: 18,486 8,190 IRR: 17.0 12.0 Summary of Benefits and Costs: The main benefits would arise from increased production of cereals, fodder, olives, fruits, vegetables and fuelwood. Additional benefits would accrue from access roads and reduced siltation of the Hassan I dam. No benefits have been calculated for participatory forest management and environmental protection. Furthermore, the "Without Project" benefits have been estimated conservatively. Indeed, they have been maintained constant at their present level during the entire project life, because it would have been too hazardous to estimate the progressive decline of the present yields due to land degradation. All project costs have been included in the costs when calculating the rates of return. Investment Costs cover components for which benefits have been estimated as well as participatory forest management and access roads. Recurrent costs comprise works (gabion and wire mesh) and road maintenance during the project life and limited institutional support after the investment period. Production costs include the incremental costs of inputs, labor and works maintenance (vegetative protection of ravines, rangelands improvement, water collectors, rehabilitated small-scale irrigation systems, etc.) which result from the introduction of new technical packages. Main Assumptions: * Exchange rate: USD 1.0 = MAD 9.3; * Project life: 30 years, Investment period: 4 years; * A $tandard Conversion Factor of 0.9 reflects the premium on Foreign Exchange; * Border prices have been used for traded goods and services and local prices adjusted by the SCF for the other ones; * The labor market rate has been adjusted by a factor of 0.8 to reflect the prevailing unemployment and underemployment in Morocco; * A comprehensive economic analysis is presented in Annex 10 of the Project Implementation Report. 'At an estimated opportunity cost of capital of 10%.  Page 21 Cost Effectiveness Analysis: Even though no benefits have been included in the economic analysis for erosion control measures (protection of gullies and ravines and biological treatment), these will be more cost effective than in the past, due to their longer expected life span. This, in turn, is due to the involvement of the local population in their initial selection and subsequent management. Sensitivity analysis / Switching values of critical items: The main benefits of the project would be the improvement of the land use and natural resources management in mountainous areas through a participatory process which would allow the rural comamunities to address their priorities. The overall rate of return of the project is 17%, well above the opportunity cost of capital of 10%. At that rate, the Net Present Value of the net benefit flow is almost MAD 18.5 million. This, however, does not include benefits which are substantial from participatory forest management and improved environment. Also, it does not take into account the long-term benefits thal: would accrue from investments under the project for institution building; local communities are organized for sustainable natural resources management and the staff of MADRP has acquired skills to implement participatory natural resources management projects. Switching values show that the rate of return is not very sensitive to reductions in benefits and to increases in costs. To maintain a 10% rate of return, benefits can be reduced by 28 %, investment costs increased by 87% or incremental production costs by 97%. Also, sensitivity tests based on a 10% reduction in benefits, 10% increase in investments costs or a one year lag in implementation indicate that the economic rate of return would decline to 14%, 16% and 15%, respectively. In spite of the fact that the rate of Ieturn is not very sensitive to reductions in benefits and increases in costs, investments and recurrent costs will have to be monitored closely during implementation in order to avoid cost overruns. Likewise, the planning process and technical assistance to farmers will have to be looked at carefully in order to avoid delays in implementation and to reach the targeted yields. On the other hand, under a close supervision, the risk to have reduced benefits or costs overruns is still acceptable because unit costs are on the safe side, the phasing is reasonably gradual and the expected yields are conservative. Furthermore, if other non-quantified benefits such as improved living conditions in the project area and reduced rural-urban migration, the overall positive environmental impact, better local conmmunity organizations and MARDPM staff acquiring skills in participatory planning would have been tak- into account, no doubt that the risk of the ERR being below the opportunity cost of capital would be very low. The implementation of the project works, which would be mainly executed by the beneficiaries, would give rise to 180,000 work-days of employment for a total value of DH 12.2 million. This would give each family an incremental income of DH 6,800. In addition to that, the increased crop production from the project's agricultural program, would require, at full development, an additional 27,000 work- days of employment per year. That increase will help reducing the present unemployment and underemployment. The economic profitability of the 14 production models which fall into five categories (rangeland management, irrigated land intensification, fruit tree planting, hillside agriculture and rainfed land intensification) is also quite satisfactory. Their rates of return vary from 10% to more than 50% and their Net Present Values from DH 300 to 148,000 per ha. Irrigated crops bear the better returns (from 23% to more than 50%) but rainfed farming, although less profitable, also increases greatly the present net benefits (from DH 800 for barley to 17 000 for pulses, per ha). The viability of rangelands improvement and contour farming is also acceptable, their rate of return varying from 10 to 24%. The calculation has  Page 22 not been done for the last two models: protection of gullies and ravines and biological treatment, the principal objective of which is to control erosion. Indeed, their main benefits have not been estimated; reduced siltation of the Hassan I dam has been estimated at the project level and not component by component, and the progressive decline of present yields due to land degradation, as already explained, would have been too hazardous to estimate. Furthermore, costs of these activities amount to only 5% of total project costs, Nevertheless, it is expected that their implementation will be done more efficiently than it used to be by the previous projects and that their benefits will be increased due to their extended lifetime resulting from their appropriation by the concerned rural population. Their number, category and location will indeed be decided jointly be the local population and the project technicians, and the beneficiaries will be responsible for maintaining them. Their life has therefore been estimated to be about 30 years, i.e. at least double that of past similar investments. A case study presented in Annex 10 of the Implementation Report estimates the increase in the NPV for project anti-erosion works compared to non-project works to be about 25%.  Page 23 Annex 5 Lakhdar Watershed Management Pilot Project Financial Summary Years Ending (Indicate currency, units and base year) Implementation Period (1998-99/2002-03) Operational Period (2003-04/2027-28) Total Total' Project Costs (in USD 000) Investment Costs 5,070 45 Recurrent Costs 682' 1575 Total 5,752 1,620 Financing Sources (% of total project costd. IBRD/IDA 70 Government 23 20 Central Local User Fees/Beneficiaries 7 80 Total 100 100 Main assumptions: * Cost sharing estimates between the public sector and the beneficiaries will vary according to the type of investment. It has been assumed that local communities will contribute the following percentages: * rehabilitation of small-scale irrigation systems: 20%; * water collectors for fruit trees: 10%; * biological treatment on private land: 5%; * access roads: 10%. The cost of the agricultural packages will be bom 100% by the beneficiaries except for extension and demonstrations. During the implementation period, the beneficiaries are expected to contribute about 7% to the project total costs. In addition, the beneficiaries will be responsible of maintaining the access roads, small-scale irrigation systems and soil and water conservation works with the exception of gabion and wire mesh which would be maintained by the public sector. * Incremental recurrent expenditures resulting from the project activities after completion of implementation would average USD 145,000 per annum. This includes the maintenance of: * gabion and wire mesh; * access roads; and o development works (vegetative protection of ravines, rangelands improvement, water collectors, rehabilitated small-scale irrigation systems, etc.); * In addition to that, the project will recommend to the Govemment to pursue a light institutional support until the expected production objectives are attained (assumed to be ten years in the above estimate): * provision to replace vehicles and office equipment; * recurrent costs: salaries, travel allowances, 0 & M for vehicles and office operating costs. Net present values of recurrent costs discounted at 10% to the first year of operation. 2 Project costs do not include maintenance costs of small-scale irrigation systems and main soil and water conservation works, the mnaintenance of which is included in the production costs.  Page 24 Annex 6 Lakhdar Watershed Management Pilot Project Procurement and Disbursement Arrangements Procurement Procurement methods (Table A) As a pilot project in decentralized watershed management, the emphasis is on motivating the local populations through participation in the decision making. Procurement methods, therefore, need to be kept flexible to permit local involvement, quick implementation and maximum benefits (such as employment) to those concerned. Since the detailed selection of project investments will be done under the project together with the concemed populations, the amounts in the various categories can only be indicative. They have been estimated on the basis of investment priorities expressed by the populations in the socio-economic survey done during project preparation. The change from the traditional top-down to a bottoms-up approach helps explain the relatively large share of consultants services and training in the total works, goods and services to be procured for the project. Under the Ministry of Water and Forests (MEF), the Provincial Department of Agriculture (DPA) in Azilal, through the Project Planning and Monitoring Unit (PMU) to be established for the project, would be responsible for procurement of project works, goods and services in accordance with Bank guidelines. The DPA in Azilal has most of the capacity required to handle this responsibility, but would be strengthened by the addition of key staff, including one for the rural infrastructure component and a Head of the PMU, as well as training. Works: The type of works under the project (USD 3.31 million) are described in Annex 2, Components I and 2 (e.g. local erosion control, rehabilitation of around 500 ha of small scale irrigation systems and around 80 km of village access roads). These works are small and in remote locations, and would be carried out in accordance with NCB procedures. Works not exceeding USD 20,000 and estimated to amount to USD 1.7 million may be procured through community participation to permit the employment of local labor. The Govemment's provincial technical department have the required experience to see that such small works are carried out efficiently, in a manner which is satisfactory to the Bank. The technical departments will purchase the required materials and hire the local labor needed. Goods: Goods comprise essentially four vehicles and office equipment (personal computers, printers, photocopiers, etc.) and fumiture for a total estimated amount of USD 300,000. Goods may be procured through national shopping. For certain items (seeds), for which there is only one supplier in Morocco, direct contracting may be used. Consultant Services and Training: The type of consultant services and training (USD 1.42 million) are described in Annex 2 and would be procured in accordance with the Bank's Guidelines for the Selection and Employment of Consultants by World Bank Borrowers, dated January 1997 and revised in September 1997. Prior review thresholds (Table B) There would be no large Works or Goods contracts. NCB contracts for Works valued at more than USD 200,000 would be subject to prior review. There would be no prior review for Goods  Page 25 contracts. For Consultant Services and Training, in the case of consulting firms, for contracts valued at more than USD 100,000, terms of reference, shortlists, letters of invitation and contracts would be subject to prior review, while for contracts valued at less than USD 1 00,000, only the terms of reference would be subject to prior review. In the case of irlividual consultants, for contracts valued at more than USD 50,000, terms of reference, shortlists, letters of invitation and contracts would be subject to prior review, while for contracts valued at less than USD 50,000, only terms of reftrence would be subject to prior review. Disbursement AIllocation of loan proceeds (Table C). Allocation of the proceeds by disbursement categories and percentages financed by the loan are presented in Table C. Ulse of statements of expenditures (SOEs): Full documentation for expenditures under contracts requiring the Bank's prior review will be submitted with the corresponding application. Disbursements for contracts valued at less than USD 200,000 for works, USD 100,000 for the services of consulting firms and USD 50,000 for the services of individual consultants, and training, as well as disbursements for all goods contracts, will be made on the basis of Statements of Expenditures (SOE). Documentation to support these expenditures would be maintained by the DPA in Azilal and made available for review by visiting Bank missions and for project auditing. Special account (SA): To facilitate disbursements against eligible expenditures, the Borrower will establish a Special Account (SA) in MAD with the Treasury. The Bank would, upon request, make an Authorized Allocation of USD 300,000 equivalent. Initially, the allocation would be limited to USD 150,000 equivalent until disbursements reached USD 1,500,000 at which time the full Authorized Allocation could be claimed. Applications for the replenishment of the SA would be submitted monthly or when one-third of the initial deposit has been utilized, whichever occurs earlier. The replenishment application would be supported by the necessary documentation, including the bank and reconciliation statement of the SA. The SA would be audited annually by independent auditors acceptable to the Bank. Retroactive Financing: Retroactive financing in the amount of USD 400,000 would be provided to help cover project expenditures between July 1, 1998 and the anticipated date of loan signing in January 1999.  Page 26 Annex 6, Table A: Project Costs by Procurement Arrangements' (in USD million equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NCB Other N.B.F 1. Works - 1.61 1.7A/ - 3.31 (1.21) (1.27) (2.48) 2. Goods - - 0.30 B/ - 0.30 (0.21) (0.21) 3. Consultants Services and - - 1.42 C/ - 1.42 Training (1.31) (1.31) 4. Recurrent Costs - - - 0.72 0.72 (0.00) (0.00) Total - 1.61 3.42 0.72 5.75 (1.21) (2.79) (0.00) (4.00) Note NBF = Not Bank Financed Figures in parenthesis are the amounts to be financed by the Bank loan A/ Works contracts of less than the equivalent of USD 20,000 and estimated to amount to USD 1.7 million may be procured through community participation to permit the employment of local labor. The Government's provincial technical departments have the required experience to see that such small works are carried out efficiently, in a manner which is satisfactory to the Bank. The technical departments will purchase the required materials and hire the local labor needed. B/ USD 200,000 National Shopping; USD 100,000 Direct Contracting for small quantities of seeds estimated to cost less than the equivalent of USD 50,000 per contract. C/ USD 900,000 Quality and Cost Based Selection; USD 200,000 Single Source Selection; USD 200,000 Individual Consultants. For details on presentation of Procurement Methods refer to ODI 1.02, "Procurement Arrangements for Investment Operations." Details on Consultant Services can be shown more easily in the Table Al format (additional to Table A, where applicable).  Page 27 Annex 6 Table B: Thresholds for Procurement Methods and Prior Review' Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review USD USD 1. Works 200,000 and above NCB =>200,000 2. Goods None National Shopping None 3. Consultants Services and Training Firms => 100,000 Consultants Guidelines TORs, shortlist, LOI & contracts <100,000 Consultants Guidelines TORs only Individuals =>50,000 Consultants Guidelines TORs, shortlist, LOI & contracts <50,000 Consultants Guidelines TORs only 'Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance.  Page 28 Annex 6 Table C: Allocation of Loan Proceeds Expenditure Category Amount in USD Financing Percentage 1. Civil Works 2,200,000 80% 2. Goods 200,000 100% of foreign expenditures, 100% local expenditures (ex-factory cost), and 80% of local expenditures for other items procured locally 3. Training and Consultants Services 1,300,000 100% 4. Front-end Fee 39,604 100% 5. Unallocated 260,396 Total 4,000,000  Page 29 Annex 7 Lakhdar Watershed Management Pilot Project Project Processing Budget and Schedule A. Project Budget (USD '000) Planned Actual FY97 157.1 129.9 FY98 72.0 133.6 FY99 36.1 44.1 TOTAL: 265.2 307.6 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 10 12 First Blank mission (identification) 4/97 4/97 Appraisal mission departure 1 st qt 1998 04/98 Negotiations 08/98 09/98 Planned Date of Effectiveness 02/99 03/99 Prepared by: Ministry of Water and Forests (MEF), within the Ministry of Agriculture, Rural Development and Maritime Fisheries (MADRPM) Preparation assistance: FAO/CP (Bank funded) Bank staff who worked on the project included: Name Specialtv Harald Stier Economist, Task Leader Arbi Ben-Achour Sociologist Aline Cabal Environment Fran9ois Wencelius Forester Ousa Sananikone Micro Credit Douglas W. Lister Economist, Task Leader  Page 30 Annex 8 Lakhdar Watershed Management Pilot Project Documents in the Project File* A. Project Implementation Plan In Project Implementation Report, Volume I B. Bank Staff Assessments In Project Implementation Report, Volumes I and II C. Other Etude de Factibilite d'un programme de Micro-Credit dans la zone du projet d'amenagement du Bassin versant de l'Oued Lakhdar, by CIDR, Nov 1997 Rapport de pre-identification du programme MEDA 1996/98 par AHT International MEDA - Cadre Institutionnel des projets MAMVA, proposition Marocaine sur l'Agence d'Execution, perimetres de mise en valeur- 10/09/96 Rapport sur les R6sultats de l'Atelier de Planification ZOPP, GTZ. 02/28/97 Identification d'un Appui aux Micro-Entreprises, Rapport Final, CEPT, 08/97 Programme MicroStart au Maroc, UNDP, 06/13/97 Programme Experimental de Mesure de 1'Erosion dans le Bassin Versant de l'Oued Lakhdar Evaluation des Actions Financees par la CE en Faveur de l'Emploi au Maroc, Rapport Final, FGU, 12/21/95 Fiche de projet sur la Protection et Gestion Participative des Ecosystemes Forestiers du Rif, Projet B7/5040/1/94/02 Participation des Populations et Developpement Rural au Maroc, Iraki, 06/93 Projet MOR92/010 de Developpement Communautaire dans le Haut Atlas Central Reunion Tripartite du Projet, Ministere de l'Interieur 1995 Rapport d'Activite Annuel pour 1995, 02/96 Document de Projet Protection des Infrastructures agricoles contre l'Envasement par Amenagement des bassins Versants, UNDP, 02/98 Note de Service Primetres de Mise en Valeur en bour Cadre Institutionnel d'Ex&ution des Projets 10/09/96 Methodologie d'Analyse Economique et Financiere des Projets 02/96 Systeme de Suivi-Evaluation 03/96 Decrets sur le MARA,CGDA, MAMVA Projets de Mise en Valeur en Bour, Cahier de Prescriptions Speciales, MoA Instruction #6 Relative aux Attrib"';ons et a l'Organisation des Directions Provinciales de l'Agriculture, MoA,01/95 Instruction #7 Relative aux Attributions et a l'Organisation des Directions Regionales des Eaux et Forets, MoA, 01/95 ODESYPANO - Approche Participative, 05/96, GTZ *Including electronic files.  Page 31 MOP Schedule D Generated: 11/30/98 Annex 9 Lakhdar Watershed Management Pilot Project Status of Bank Group Operations in Morocco Operations Portfolio As of 23-Nov-98 Difference Between expected Original Amount in USS Millions and actual Fiscal disbursements a/ Project ID Year Borrower Purpose IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Number of Closed Projects: 102 Active Projcts MA-PE-5524 1999 GOVERNMENT FES-MEDINA REHAB. 14.00 0.00 0.00 14.78 0.00 0.00 MA-PE-40566 1998 GOVT OF MOROCCO RURAL W.S.& SANITATN 10.00 0.00 0.00 10.33 2.34 .17 MA-PE-5521 1998 GOVT OF MOROCCO WATER RESOURCE MGMT. 20.00 0.00 0.00 20.66 1.34 0.00 MA-PE-5523 1998 FEC MUNICIPAL FINANCE II 70.00 0.00 0.00 62.52 18.83 0.00 MA-PE-38978 1997 GOVERNMENT OF MOROCCO PSD III-VOC TRG. 23.00 0.00 0.00 20.97 8.79 .96 MA--PE-43725 1997 ONCF RAILWAY RESTR & PRIV 85.00 0.00 0.00 70.01 1.95 0.00 MA-PE-42414 19 9 GOVT OF MOROCCO COOR/MON SOCIAL PRO 28.00 0.00 0.00 28.38 2.92 0.00 MA-PE-42415 1996 GOVT OF MOROCCO SPI - HEALTH 68.00 0.00 0.00 60.33 -.09 0.00 MA-PE-5501 1996 GOV. OF MOROCCO SPI - EDUCATION 54.000 0.00 0.00 36.20 3.60 0.00 MA-PE-5503 1996 KINGDOM OF MOROCCO SEW.& WATER REUSE II 40.00 0.00 0.00 39.21 5.33 0.00 MA-PE-5489 1995 KINGDOM OF MOROCCO SECONDARY ROADS 57.60 0.00 0.00 58.79 40.40 0.00 MA-PE-5435 1994 KINGDOM OF MOROCCO/ONEP WATER SUPPLY V 160.00 0.00 40.00 82.33 66.40 6.57 MA-PE-5499 1994 GOV. OF MOROCCO IRR. AREAS AGR. SERV 25.00 0.00 7.99 13.25 16.45 6.87 MA-PE-5504 1994 KINGDOM OF MOROCCO ENVIRONMENT MANAGEME 6.00 0.00 1.02 3.29 3.50 0.00 MA-PE-5462 1993 GOVERNMENT SECOND LSI IMPROVEME 215.00 0.00 71.12 67.71 46.15 8.36 MA-PE-5514 1993 GOV. OF MOROCCO LAND DEVELOPMENT 130.00 0.00 24.00 42.76 61.12 37.72 MA-PE-5517 1993 GOV.OF MOROCCO/FEC MUNICIPAL FINANCE I 104.00 0.00 4.00 3.96 7.97 1.47 MA-PE-5495 1991 MOROCCAN BANKS FINANCIAL SECTOR DEV 235.00 0.00 16.80 16.49 33.30 16.47 MA-PE-5440 1990 KINGDOM OF MOROCCO HEALTH SECTOR INVEST 104.00 0.00 5.00 8.36 13.35 0.00 Total 1,448.60 0.00 169.93 660.33 333.65 78.59 Active Projects Closed Projects Total Total Disbursed (IBRD and IDA): 635.76 5,716.48 6,352.24 of which has been repaid: 40.60 2,972.30 3,012.90 Total now held by IBRD and IDA: 1,238.07 2,775.21 4,013.30 Amount sold 0.00 20.11 20.11 Of which repaid : 0.00 20.11 20.11 Total Undisbursed : 660.33 18.91 679.24 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. Note: Disbursement data is updated at the end of the first week of the month and is currently as of 31-Oct-98. Generated by the Operations Information System (OIS)  Page 32 MOP Schedule D Annex 9 Lakhdar Watershed Management Pilot Project Morocco STATEMENT OF IFC's Committed and Disbursed Portfolio A, if 31 -Oct-98 (In US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1987/90 CIH 22.24 0.00 0.00 1.15 22.24 0.00 0.00 1.15 1987/93 SETAFIL 3.21 1.20 0.00 0.00 3.21 1.20 0.00 0.00 1990 ENNASR .94 0.00 0.00 0.00 .94 0.00 0.00 0.00 1994/96 Mediafinance 0.00 1.16 0.00 0.00 0.00 1.16 0.00 0.00 1995 Attijari 0.00 .50 0.00 0.00 0.00 .26 0.00 0.00 1999 Settavex 5.42 9.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Portfolio: 31.81 11.86 0.00 1.15 26.39 2.62 0.00 1.15 Approvals Pending Conmmitment Loan Equity Ouasi Partic Total Pending Conmmitment: 0.00 0.00 0.00 0.00 Generated by the Operations Information System (OIS) on 11/30/98  Morocco at a glance 10/1/98 M. East Lower- POVERTY and SOCIAL & North middle- Morocco Africa income Development diamond 1997 Population, mid-year (millions) 27.5 283 2,285 Life expectancy GNP per capita (Atlas method, US$) 1,250 2,060 1,230 GNP (AfIas method, US$ billions) 34.4 583 2,818 Average annual growth, 1991-97 Population I%) 1.9 2.3 1.2 G Labor force (%) 2.5 3.2 1.3 GNP Gross per primary Most recent estimate (latest year available, 1991-97) capita enrollment Poverty (% of population below national poverty line) 13 Urban population (% of total population) 53 57 42 Life expectancy at birth (years) 67 67 69 Infant mortality (per 1,000 live births) 51 48 36 Chrid malnutrition (% of children under 5) 10 . Access to safe water Access to safe water (% of population) 52 71 84 Illiteracy (% of population age 15+) 56 39 19 Gross primary enrollment (% ofschool-age population) 83 97 111 Morocco Male 94 102 116 Lower-middle-income group Female 71 91 113 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic ratios' GDP (US$ billions) 9.3 17.0 36.7 33.5 Gross dcmestic investment/GDP 28.1 22.8 19.8 20.6 Trade Exports of goods and services/GDP 18.5 22.1 25.7 30.4 Gross domestic savings/GDP 8.7 16.7 15.9 16.8 Gross naitional savings/GDP 14.6 17.4 19.0 20.0 Current account balance/GDP -14.9 -1.0 -1.1 -0.4 Domestic Interest payments/GDP 1.2 3.8 3.6 3.8 Savings Investment Total debt/GDP 33.2 103.6 59.2 57.0 , Total debt service/exports .. .. 27.7 24.4 Present value of debtlGDP .. .. 53.8 Present value of debt/exports .. .. 169.7 Indebtedness 1976-86 1987-97 1996 1997 199842 (average annual growth) GDP 4.3 2.6 12.6 -2.0 4.6 Morocco GNP per capita 1.6 0.7 10.9 -4.4 2.9 Lower-middle-income group Exports of goods and services 4.3 6.9 8.4 6.3 7.3 1 STRUCTIURE of the ECONOMY 1976 1986 1996 1997 Growth rates of output and investment (Y.) (% of GDP) 2 Agriculture 19.2 19.1 19.3 15.3 20 Industry 32.5 32.3 30.3 33.2 ,0 Manufacturing 16.5 17.2 17.0 17.6 Services 48.3 48.6 50.4 51.5 0 Prvate consumption 68.9 68.0 68.0 65.3 -lo - General govemment consumption 22.5 15.4 16.7 17.9 _ GDI e-GDP Imports of goods and services 37.9 28.2 30.0 33.9 1976-86 1987-97 1996 1997 Growth rates of exports and imports (%h) (average annual growth) Agriculture 3.6 -0.2 78.0 -25.6 - Industry 2.5 3.0 3.4 8.4 1C Manufacturing 4.3 3.3 3.0 3.1 Services 5.6 3.2 4.9 0.0 5 Private consumption 3.1 3.3 19.3 -10.1 0 General govemment consumption 5.0 1.1 -15.2 5.2 92 74 95 07 Gross domestic investment 0.6 2.1 12.1 2.2 -s Imports of goods and services -1.1 5.9 -4.0 1.6 Exports e Imports Gross national product 3.9 2.7 13.2 -2.0 Note: 1997 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incornplete.  Morocco PRICES and GOVERNMENT FINANCE 1976 1986 1996 1997 Infation (%) Domestic prices (% change) 10 T Consumer prices 3.0 10 8 01 Implicit GOP deflator 1.5 10.3 0 8 2 4 4~~~~ Government rinance 2 _ (% of GDP, includes current grants) . o , Current revenue 20.3 18.8 24.3 26.2 92 93 94 95 96 97 Current budget balance 0.8 -1.7 0.9 1 6 GOPdefator 'CPl Overall surplus/deficit -18.1 -8.6 -3.4 -3.7 TRADE (UJSS millions) 1976 1986 1996 1997 Export and import levels (USS millions) Total exports (fob) 2,608 6,893 7,039 12.500 Other agriculture 792 1,646 1,374 Phosphorus 412 348 435 I1o.wW T Manufactures 654 1,531 1,469 7s500 TFeal imports (ci) 3.925 9,728 9,521 |5 Food 476 1,287 1.065 Fuel and energy . 596 1,294 1:296 2.50 Capital goods 906 1,781 1,660 o Export price index (1995=100) 67 80 84 1 91 92 93 94 95 96 97 Import price index (1995=100) 76 95 89 0 Exports *Irrmpons Terms of trade (1995=100) . 89 85 95 _ BALANCE of PAYMENTS (UJS$ millions) 1976 1986 1996 1997 Current account balance to GDP ratio (%) Exports of goods and services 1,696 3,757 9,433 9,483 I 0 Imports of goods ancl services 3,450 4.796 10 991 10 632 Resource balance -1.754 -1,039 -1.559 -1,148 Net income -127 -688 -1,211 -1,179 T Net current transfers 499 1,549 2,352 2,205 .3 Current account balance -1,382 -178 -418 -123 T4 Financing items (net) 1,365 545 465 679 Changes in net reserves 18 -367 -47 -556 -6 Memo: Reserves including gold (US$ millions) 3,968 4,154 Conversion rate (DEC, locai/US$) 4 4 9.1 8.7 9.5 EXTERNAL DEBT and RESOURCE FLOWS 1976 1986 1996 1997 (USS millions) Total debt outstanding and disbursed 3.084 17.601 21.710 19.096 IBRD 289 1.859 3,732 3,271 IDA 35 42 32 31 G: 2,053 A: 3,271 Total debt service 3,219 2,817 Compositia _r9jlions) IBRD 34 233 599 532 IDA 0 1 2 2 Composition of net resource flows F: 5,074 Official grants 47 57 356 100 Official creditors - 124 -490 Private creditors -190 -140 Foreign direct investment 38 89 397 1.210 Portfolio equity 0 134 0 :8,667 World Bank program Commitments 150 366 213 155 A- IBRD E - Bilateral Disbursements 64 363 380 141 B-IDA 0- Other multitateral F - Prvate Principal repayments 15 109 342 295 C- IMF G - Short-term Net flows 49 254 38 -154 Interest payments 20 125 258 238 Net transfers 29 128 -221 -392 Development Economics 10/1198  \VAP~ SFCT ION I~ ~ ~ ~ ~ ~ ~ ~~~~~~~~i\):E(ll) l  LAKHDAR5,.Hasa WAESE MAAEMN Al. He Abelkimo Khtu 9 akhl vf 4. MoPILOTaROJECT sefCh 19. S.alTkero 0 bdelmuen 07 ~ t < 0 500 OuedEIMakh0zine 13. S.Med.B.Abdellah 21. elH ache mILOME1~RS Theboundaries cao < frone I,A, A T L A N T I C EIJ~~dida * rrechido 0 C E A N Jerfim ~~~0 eSttat 320~~~~~~~~~~~2e3- ~~ssaouirg * Ckicliaoua r.d L 0 12 r, o~~~~~~~~~~~~~~~~~ew~wmao WATERSHED BOUNDARIES 11 = LAKHDAR RIVER BASIN 0 SELECTED CITIES 0D PROVINCE CAPITALS A~~~~~~gdir ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~NATIONAL CAPITAL MOUNTAINOUS AREAS (DTata ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ - - INTERNATIONAL BOUNDARIES WAERSHEDS (in order of priority in National Watershed Management Plan): I.Mokammed V 9. Bin el Ouidane 17. Hassan EdclakHll uelmi 2. El Wahda ~~~~~~~~~~~10. Mansour Eddha6i 18. Ibn Battouta 4. Moulay Youssef 12. S. Lalla Takarkoust 20. Abdelmoumen n 6. ldriss ler ~~~~~~~~~~~~~~~~~~14. Youssef Ben Tachfine 22. Mellak h ~ Te hun&ris, o!u-s deoronaign, on id oa Th. Wfrmtd, Ban 7. Allai El Fassi s.Auoz skoon s tis napdo olisnp6-- eprdyt o her Wrmtorl BakS. El Kansera 16. Al Massira :Z Gr-u, o j.dgmeo on the legal statu of any ioy, or any 8 00 '0 edorsmentor aceptnceof -uh oun'darse niI~ 01C: