Morocco - Sustainable Coastal Tourism Development Project

Document of The World Bank Report No: 20412-MOR PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF EURO 2.4 MILLION TO THE GOVERNMENT OF MOROCCO FORA SUSTAINABLE COASTAL TOURISM DEVELOPMENT PROJECT June 16, 2000 Infrastructure Development Group Middle East and North Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective at appraisal (April 24, 2000)) Currency Unit = Moroccan Dirham I DH - US$ 0.096 US$ I 10.4 DH FISCAL YEAR July 1-December 31 2000 and January 1-December 31 from 2001 on ABBREVIATIONS AND ACRONYMS CICATL: Commission Interministerielle Chargee de lAmenagement Touristique du Littoral CIH: Credit Immobilier et H6telier ( Housing and Real Estate Bank) DAI: Direction des Amenagements et des Investissements (Department of Development and Investment) EIA: Environmental Impact Assessment ( Etude d'Impact sur l'Environnement) GOM: Government of Morocco (Gouvernement du Maroc) LIL: Learning and Innovative Loan (Pret au Developpement des Connaisssances et a l'Innovation) MOT: Ministry of Tourism (Ministere du Tourisme) PIU: Project Implementation Unit (Unite d'execution du projet) RFP: Request for Proposals (Dossier d'Appel d'Offres) SDAU: Schema directeur d'amenagement urbain (Urban Development Plan) SNABT: Societe nationale d'amenagement de la baie de Tanger (National Agency for the Development of the Bay of Tangiers) SONABA: Societe nationale d'amenagement de la baie d'Agadir (National Agency for the Development of the Bay of Agadir) TDU: Tourism Development Unit (Unite d'Aminagement Touristique - UAT) Vice President: Jean-Louis Sarbib Country Director: Christian Delvoie Sector Director: Jean-Claude Villiard Task Team Leader: Jean-Hubert Moulignat  MOROCCO SUSTAINABLE COASTAL TOURISM DEVELOPMENT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 3 3. Learning and development issues to be addressed by the project 8 4. Learning and innovation expectations 9 C. Project Description Summary 1. Project components 9 2. Institutional and implementation arrangements 11 3. Monitoring and evaluation arrangements 14 D. Project Rationale (This section is not to be completed in a LIL PAD) E. Summary Project Analysis 1. Economic 15 2. Financial 16 3. Technical 16 4. Institutional 16 5. Social 17 6. Environment 18 7. Participatory Approach 19 F. Sustainability and Risks 1. Sustainability 20 2. Critical risks 20 3. Possible controversial aspects 21 G. Main Loan Conditions 1. Effectiveness Condition 21 2. Other 21  H. Readiness for Implementation 21 1. Compliance with Bank Policies 22 Annexes Annex 1: Project Design Summary 23 Annex 2: Project Description 27 Annex 3: Estimated Project Costs 31 Annex 4: Standard Terns of Reference for the Indicative Development Plans 32 Annex 5: Financial Summary 45 Annex 6: Procurement and Disbursement Arrangements 46 Annex 7: Project Processing Schedule 53 Annex 8: Documents in the Project File 54 Annex 9: . Statement of Loans and Credits 55 Annex 10: Country at a Glance 57 MAP(S) IBRD No. 30935  MOROCCO Sustainable Coastal Tourism Development Project Project Appraisal Document Middle East and North Africa Region Infrastructure Development Group Date: June 15, 2000 Team Leader: Jean-Hubert Moulignat Country Manager/Director: Christian Delvoie Sector Manager/Director: Jean-Claude Villiard Project ID: P065757 Sector(s): UY - Other Urban Development Lending Instrument: Learning and Innovation Loan (LIL) Theme(s): Urban Poverty Targeted Intervention: N Project Financing Data 1 Loan Li Credit Li Grant O Guarantee O Other (Specify) LIL For LoanslCredits/Others: Amount (US$m): 2.2 equivalent Proposed Terms: Variable Spread & Rate Single Currency Loan (VSCL) Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75 Front end fee on Bank loan: 1.00% Fai__ P '; fla: Soui,: tocsl Poreg7 GOVERNMENT 0.15 0.29 0.44 IBRD 0.73 1.47 2.20 Total: 0.88 1.76 2.64 Borrower: GOVERNMENT OF MOROCCO Responsible agency: MINISTRY OF TOURISM Direction des Amenagements et des Investissements Address: 64, Av. Fal Ould Oumeir - RABAT-Agdal MAROC Contact Person: Mr. Jawad Ziyat Tel: (212-7) 77 07 56 Fax: (212-7) 77 06 26 Email: directeur~dai.gov.ma Estimated disbursements ( Bank FY/US$M): FY,. 2001 E2- .i03r Annual 0.7 1.0 0.5 Cumulative 0.7 1.7 2.2 Project implementation period: JULY 2000 - DECEMBER 2002 Expected effectiveness date: 10/31/2000 Expected closing date: 06/30/2003 OCS PAD F- RP- ,, 2. O  A. Project Development Objective 1. Project development objective: (see Annex 1) The project's development objective is to propose, test, and evaluate the institutional framework and contractual procedures for managing public-private partnerships that are best suited for integrated and sustainable development of coastal sites in the Moroccan context. A number of recent World Bank documents explicitly call for increased contribution of the Bank to this rapidly growing sector of most development economies, and Morocco in particular: * The importance of tourism for poverty alleviation and catalyzing growth has been underlined in the Sector Note "Tourism and Global Development", prepared by a joint team of World Bank/MIGA/IFC tourism experts. Tourism brings multiple economic benefits and "most visibly: employment, foreign exchange, and tax revenues". To maximize its impact on the poor, Governments must encourage wide distribution of the benefits from the sector through the inclusion of local communities in tourism projects. It states, however, that "the extent of demand for community-based tourism frequently depends on the existence of an already thriving tourism sector to bring visitors to the country." _ The Sector Note recognizes that, while tourism development is predominantly a private sector activity, in order to maximize its overall potential for the country, "effective sector management by government must be combined with strong partnerships with the private sector." = The "Sources of Growth" study, in preparation by the Morocco country team, singles out tourism as one of the major growth sectors of Moroccan economy, whose true potential has not yet been tapped into. * The Tourism Strategy Matrix, being discussed with the Moroccan authorities as part of the broader Comprehensive Development Framework process, stresses lack of institutional capacity, poor public management, land issues, and insufficient private sector involvement, as major reasons for the slow growth of the sector. A Learning and Innovation Loan (LIL) is proposed, since at this stage it can not be known with certainty what regulatory, management, and financial structures are best suited for integrated development of coastal sites in the Moroccan context, and more broadly, whether the institutional capacity exists in the tourism sector as a whole to bring all stakeholders (relevant ministries, local and regional authorities, planning agencies) together in agreeing on priorities for promoting sustainable tourism development and attracting private capital for tourism development projects. Thus, the LIL will finance the learning process of defining and evaluating institutional and organizational mechanisms that are best suited for integrated and sustainable development of coastal sites. The LIL will (a) provide technical assistance in preparing indicative development plans and pre-feasibility studies for a few selected sites; (b) initiate the process of piloting public-private partnerships in coastal development; (c) propose mechanisms for financing off-site infrastructure imperative to attract private developers in greenfield sites; (d) assist in building capacity of the Ministry of Tourism (MoT) for it to become a "local champion" in further negotiations with private master developers and investors. 2. Key performance indicators: (see Annex 1) Key performance indicators will reflect the learning process in-built in the project, and sustainability of its outputs. They will include (a) a new institutional framework endorsed by all stakeholders and fully operational (b) the number of indicative development plans and RFP packages approved by Ad Hoc Steering Committees, and (c) the number of contract agreements with private master developers signed. -2-  B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 16219-MOR Date of latest CAS discussion: 01/30/97 The project is fully in line with the CAS priorities of achieving sustained growth by enhancing competitiveness, fostering a more dynamic private sector and building a more effective and efficient public administration. CAS encourages the use of new instruments and pilot projects that will help bring together Morocco's private sector and foreign entrepreneurs. 2. Main sector,issues and Government strategy: Main Sector Issues * Potential Contribution of the sector is not being fully tapped: Tourism is an important sector of the Moroccan economy though its contribution to the overall economic growth of the country could be much more significant, given the natural beauty and diversity of Morocco, and its rich cultural heritage. Presently, tourism generates more that 15 percent of the country's foreign exchange earnings, and in 1999 it came first, outpacing the remittances of Moroccans residing abroad. Its value added to GDP amounts to 7.7 percent (4.7 direct and 3 indirect), that is about half of what tourism contributes in major comparator countries, like Greece, Turkey, and Tunisia. It generates 7.5 percent of total employment (3 percent indirect, mostly in retail and construction). However, the sector had been stagnating for more than ten years. The Investment Code of the 70s and 80s was sector specific and granted liberal subsidies to local investors, that incited excess hotel capacity. At the same time, many of these hotels were poorly planned and managed, and did not meet the actual demand for tourism products and services. As a result, three main hotel chains found themselves severely in the red, and less than 70 percent of available hotel beds in 1998 met intemational quality standards. The new Investment Code of 1995 removed the subsidies, contributing to a drop in investments. In the last couple of years the sector experienced an upswing and its revenue has been growing (by 19 percent in 1998 and 15 percent in 1999). In 1999 it was 19.2 billion DH, and a total of 2.4 million tourists visited Morocco. International and local investors are also increasingly more interested in the country. Since the beginning of 1999, eleven conventions have been signed for a total of 7.6 billion DH, or 17,116 hotel beds. * Institutional and structural constraints: The scarcity of land available for tourism projects and inadequate planning and protection of tourism development sites have been constraining factors for the growth of the sector. Additionally, pollution and sprawling urbanization have detracted from the quality of existing sites and reduced the opportunities for new development. Reliance on public developers has also turned out to be inefficient in the Moroccan context: two regional, development agencies, SONABA in Agadir and SNABT in Tangiers, have not proved successful at attracting investors for over two decades, despite their access to considerable land reserves. The capacity and the decision-making power of the MoT to manage the expanding land development program for coastal tourism is currently quite limited. There is no national agency that can assume the responsibility for the whole process. In order to get approval, investment proposals have to be submitted to two interministerial commissions, MoT being part of them: -3 -  * CICATL, a consultative interministerial commission in charge of coastal tourism development, which examines all investment proposals for tourist sites to be located outside of the urban areas and less than 5 km from the coast; * The Interministerial Investment Commission, chaired by the Prime Minister, which has a final say in; settling investment appeals and granting contractual fiscal and financial benefits for investment packages over 500 million DH. Before projects can be launched, the Ministry of Urban and Regional Planning, Housing and Environment, and its regional agencies (Agences Urbaines) have to issue subdivision and building permits, according to the prescriptions of urban (SDAU, coastal SDAU) and rural planning documents, that in principle (and which is not always the case) should exist for all urbanized and rural areas. Though these documents often (e.g. Agadir, Larache, Essaouira) envision tourism zone development, and are discussed for 3 months with the local communities, no professional input is required' from the tourism industry specialists for'delimiting land, planning for infrastructure needs and maintenance, setting appropriate land use coefficients, etc. Government Strategy In 1994-95 the GOM undertook a study to help formulate a new tourism sector strategy in order to resolve some of the most pressing issues, and accelerate annual sector growth to more than 10 percent. Some of the measures that have been implemented since 1998 are: * Decentralization of tourism promotion through creation of associations at the regional level; * Introduction of management contracts with the private sector instead of direct hotel management by the State, and proactively attracting leading international companies in hotels and resorts;