Morocco - Legal and Judicial Development Project

Document of The World Bank Report No: 20457-MOR PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF EURO 5.6 MILLION (US$ 5.3 MILLION EQUIVALENT) TO THE KINGDOM OF MOROCCO FORA LEGAL AND JUDICIAL DEVELOPMENT PROJECT MAY 18, 2000 Social and Economic Development Group Middle East and North Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 23, 2000) Currency Unit = MAD MAD 1 = US$ 0.097 US$ 1 = MAD 10.299 FISCAL YEAR Juliy 1 June 30 ABBREVIATIONS AND ACRONYMS ADR Alternative Dispute Resolution CAS Country Assistance Strategy CCAC Commercial Arbitration Center CDF Country Development Framework CGEM Moroccan Federation of Business Owners EA Environmental Assessment EU European Union FMPM Financial Management Procedures Manual FMS Financial Management System FTA Free Trade Agreement GLIN Global Legal Information Network GOM Government of Morocco GPBM Professional Bankers' Association of Morocco ICR Implementation Completion Report IBRD/Bank International Bank for Reconstruction and Development IDF Institutional Development Fund INEJ Institut National d'Etudes Judiciaries LACI Loan Administration Change Initiative LIL Learning and Inovation Loan MIS Management Information System MOJ Ministry of Justice NGO Non-Governmental Organization PFS Project Financial Statement PHRD Policy and Human Resource Development Fund PIP Project Implementation Plan PMR Project Management Report PMU Project Management Unit PRSL Policy Reform Support Loan PSA Private Sector Assessment SA Special Account SEGMA Self-Managed Public Economic Service (Service Economique Gere de Maniere Autonome) SOE Statement of Expenditures UNDP United Nations Development Program USAID United States Agency for International Development Vice President: Kemal Dervis/Jean-Louis Sarbib Country Manager/Director: Christian Delvoie Sector Manager/Director: Mustapha Kamel Nabli Task Team Leader: Ferid Belhaj Co-Task Team Leader: Amine Khene  MOROCCO LEGAL AND JUDICIAL DEVELOPMENT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 8 C. Project Description Summary 1. Project components 12 2. Key policy and institutional reforms supported by the project 13 3. Benefits and target population 14 4. Institutional and implementation arrangements 15 D. Project Rationale 1. Project alternatives considered and reasons for rejection 17 2. Major related projects financed by the Bank and other development agencies 18 3. Lessons learned and reflected in proposed project design 19 4. Indications of borrower commitment and ownership 20 5. Value added of.Bank support in this project 20 E. Summary Project Analysis 1. Economic 21 2. Financial 21 3. Technical 21 4. Institutional 21 5. Social 22 6. Environment 22 7. Participatory Approach 22 F. Sustainability and Risks 1. Sustainability 23 2. Critical risks 24 3. Possible controversial aspects 25  G. Main Conditions 1. Effectiveness Condition 25 2. Other 25 H. Readiness for Implementation 25 I. Compliance with Bank Policies 26 Annexes Annex 1: Project Design Summary 27 Annex 2: Project Description 31 Annex 3: Estimated Project Costs 35 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 36 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 37 Annex 6: Procurement and Disbursement Arrangements 38 Annex 7: Project Processing Schedule 49 Annex 8: Documents in the Project File 50 Annex 9: Statement of Loans and Credits 51 Annex 10: Country at a Glance 53 Annex 1 1: Project Performance Indicators 55 MAP(S) IBRD No. 25545  MOROCCO LEGAL AND JUDICIAL DEVELOPMENT Project Appraisal Document Middle East and North Africa Region LEGMN/MNSED Date: May 18, 2000 Team Leader: Ferid Belhaj Country Manager/Director: Christian Delvoie Sector Manager/Director: Mustapha Kamel Nabli Project ID: P063918 Sector(s): BI - Institutional Development Lending Instrument: Specific Investment Loan (SIL) Theme(s): Public Sector Poverty Targeted Intervention: N Project Financing Data Z Loan O Credit C Grant O Guarantee O Other (Specify) For Loans/Credits/Others: Amount (US$m): 5.3 Proposed Terms: Variable Spread & Rate Single Currency Loan (VSCL) Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75 Service charge: % Front end fee on Bank loan: 1.00% Financing Plan: Source Local Foreign Total GOVERNMENT 1.42 0.00 1.42 IBRD 2.97 2.33 5.30 Total: 4.39 2.33 6.72 Borrower: KINGDOM OF MOROCCO Responsible agency: MINISTRY OF JUSTICE A Project Management Unit (PMU) has been established informally within the Ministry of Justice Address: Ministry of Justice, Rabat, Kingdom of Morocco Contact Person: Khalid Laraichi, PIU Director Tel: 001-212-7-72 76 76 Fax: 212-7 72 33 93 Email: Laraichi(justice.gov.ma Other Agency(ies): Ministry of Justice Address: Palais de la Mamounia, Rabat, Kingdom of Morocco Contact Person: Mr. Ahmed Ghazali, Secretaire General; Mr. Khalid Laraichi, Directeur du Budget et de l'Equipement Tel: (212-7) 73 22 74 (Mr. Ghazali) Fax: (212-7) 72 33 93 (Mr. Ghazali) Email: Ghazali(justice .gov.ma Estimated disbur ements ( Bank FYIUS$M): . FY 2001 2002 2003 2604 . _ _ Annual O0.9 1.8 2.2 0.4 Cumulative 0.9 2.7 4.9 5.3 Project implementation period: 2000-2003 Expected effectiveness date: 09/30/2000 Expected closing date: 01/31/2004 CS PAD Fcm- P. Md, 20Y0  A. Project Development Objective 1. Project development objective: (see Annex 1) Recognizing the critical importance of a modem justice system for the development of the Moroccan economy, the Government of Morocco has embarked on a comprehensive, five-year, justice system reform Program (the Program) which aims, essentially, to improve the enforceability of laws, regulations and contractual obligations. This ambitious Program, estimated to cost in the order of US$250 million equivalent over the next five years, is an essential part of Morocco's five-year economic development plan to be adopted by the end of 2000. The Program focuses on five major dimensions: (a) the re-organization of the judicial system, including the improvement and enlargement of the network of courts (carte judiciaire); (b) improvements in human resource capacities, including the training of judges, auxiliaries of justice and management personnel; (c) the application of a general framework for performance assessments of the judiciary and all others within the judicial system; (d) improvements in information and communication; and (e) the promotion of appropriate ethical standards throughout the entire judicial system. In these ways the Government seeks to develop a more independent, competent and professional judicial system, with all those within it committed to high standards of ethics and contributing to more efficient and effective dispute resolution. As a small, but important, part of the Program, the Project has more modest aims. These are to improve the Moroccan capacity to resolve commercial disputes and to facilitate commercial transactions within the country. Responding to the Ministry of Justice's strategic priority of upgrading and modernizing the judiciary and certain commercial registry offices in matters related to business activities, the Project's objectives are to develop the justice system as a factor of growth promotion and to use the lessons learned in improving the operations of the new commercial courts and their commercial registry offices as pilots for further and more ambitious modernization of the justice system in general. These Project goals will be achieved by: (a) updating and modernizing the relevant legislative framework, including amendments to the Codes of Civil and Commercial Procedure and the formulation of a new Code of Commercial Arbitration, the latter as an aid to relieving the current backlog of commercial court cases; (b) capacity-building within the commercial courts, including the introduction of modern case management tools and systems and of the appropriate corresponding training; (c) modernizing management tools and systems in the registries of commerce; -2 -  (d) improving the quality of training for magistrates and auxiliaries of justice, particularly in matters relating to commercial and business law; (e) strengthening the Ministry of Justice's capacity to collect and disseminate relevant legal information (including laws, regulations and important judicial decisions) and upgrading its communication policies; and (f) ensuring adequate capacity to manage and implement the Project. 2. Key performance indicators: (see Annex 1) The Project will include a number of performance indicators which will measure the following goals: * a more accessible, transparent and effective commercial judicial system; * a more efficient and consumer-friendly commercial registry system; * a more appropriate legislative framework for commercial cases and commercial registrations; * a strengthened system of education for judges in commercial cases and commercial court administration staff (greffier) resulting in a better trained and more competent judicial system professionals; * improved access by government officials, judges, institutes of learning, parliamentarians, legal professionals, the business community and the public-at-large to more reliable, comprehensive and up-to-date legal information; and * the use of arbitration as an alternative means to resolve commercial disputes outside the formal justice system. See also Annex 11 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 16219 Date of latest CAS discussion: 01/30/97 By helping to increase the efficiency of Morocco's civil service administration, the Project supports the fourth CAS priority of public sector reform, a matter widely recognized as central to the country's development agenda. At the same time, the Project fits within the overall Bank strategy for private sector development, notably the need to introduce "a broad program to improve the business environment for private investment" (as stated in paragraph 4.1.2 of the CAS). By strengthening the Moroccan judicial, registry and arbitration systems in respect of commercial matters, the Project aims to enhance private investments and operations. In addition, the development of the judiciary as a more independent and effective branch of government constitutes the foundation of the Government's program to improve ethical standards. The Project is also based on the priorities set by the Moroccan Government in the context of the Bank Policy Reform Support Loan (PRSL) program. This is a multi-sector adjustment operation which supports the Government's economic and social priorities, including important aspects of its legal and judicial reform agenda. Assistance in identifyring the priorities was provided by the 1998 Bank-led updating of the Private Sector Assessment (PSA). Five main areas were then identified in the PSA exercise as needing attention in the reform of the Moroccan justice sector and as being matters of potential Morocco-Bank collaboration in these respects. These were: -3-  (a) the strengthening of the judicial system through new court and case management tools, notably in the newly created commercial courts; (b) the introduction of new administrative systems in the Ministry of Justice; (c) the reorganization of legal training, with emphasis on business law; (d) the increase in the dissemination of legal and regulatory information and the strengthening of the communication capabilities of the Ministry of Justice; and (e) the creation of a system of alternative dispute resolution for commercial cases. 2. Main sector issues and Government strategy: The main sector issues the Moroccan justice sector faces are highlighted below. They are of a structural nature and have been identified by the Moroccan Government as requiring particular attention in the overall approach to the reform Program. Some of these issues, such as, but not limited to, upgrading the level of the judges through more focused training, dissemination of legal information, case management and the promotion of alternative dispute resolution mechanisms, will be tackled by the Project. Others will be dealt with either by the Moroccan Government on its own or with the future assistance of other international partners, as well as possibly that of the Bank. The Project's Economic and Political Background& Appropriately functioning legal and judicial systems which ensure the rule of law by providing transparent law-making procedures and cogently-reasoned, just, timely and predictable resolution of disputes are essential requirements for sustainable economic growth. Although in the early 1990's Morocco experienced mounting internal and external criticisms in these respects, important efforts have been made over the past six years to improve the country's legal and regulatory framework and to reform its justice system. Concluded by Morocco with the European Union in 1995, the Free Trade Agreement (FTA) has played an important role in encouraging these efforts, particularly in respect of business-related activities. The sense of urgency was stressed by the late King Hassan whose personal call to action and support for significant reform helped shape the adoption of modern legislation, replacing laws inherited largely from the colonial era. Also, the appointment of a reform-minded Minister of Justice and his confirmation after the 1997 elections gave a clear signal of the Government's commitment to reform the justice system through a new, comprehensive, and forward-looking approach. The role of Moroccan civil society, as well as the interaction between the Government, through the Ministry of Justice, and all major stakeholders, including the private sector, constitutes a major feature of the reform. The Legislative Framework: A more business-friendly legal and regulatory framework has, thus, been established by the relatively recent enactment of a new banking law, a modern securities law, a joint stock company law (which provides for minority shareholder protection and lays the basis for sounder corporate governance), a modem commercial code and new legislation providing for modern accounting standards. These efforts have been motivated in large measure by the FTA necessity for Morocco to harmonize its legal framework with that of the European Union. It is widely acknowledged, however, that critical legislative reform remains, notably in matters of civil and commercial procedure and that greater consensus-building is required in the preparation of Morocco's new laws to ensure that its legislation fully reflects on-the-ground needs and realities.  The Justice System: Recently as well, attention has turned to another key determinant of the efficiency and effectiveness of the legal and regulatory framework, namely, the functioning of the justice system. The Moroccan justice system in general and its judiciary in particular have long been criticized by all stakeholders, particularly, but not exclusively, regarding business-related litigation. For many years the mal-functioning of the justice system has been identified as a key constraint to Moroccan private business development (see the 1994 Morocco PSA and the 1998 PSA update). Still needed are: (i) case management procedures, with efficiencies helping to reduce the huge backlog of cases, even at the Supreme Court level; (ii) transparency in judicial decision-making and predictability in judgments; (iii) the capacity to enforce judgments; (iv) appropriate legal and judicial education and thus of judicial competence in general and in matters of commercial law, in particular; (v) trained court personnel; (vi) adequate salaries for public employees in the justice system; (vii) access to complete, up-to-date, legal information, including jurisprudence; (viii) adequate physical infrastructure; and (ix) an ethical working environment. Ensuring the Rule of Law: Ensuring the rule of law in Morocco requires a properly functioning legal and judicial system. This calls for enforcement of the country's laws and regulations by a competent, transparent and independent judiciary. To achieve this goal, medium and long-term institutional reforms are needed, not just within the judiciary, but throughout the legal and judicial system, including: - the streamlining of judicial procedures, with particular emphasis on the codes of civil and commercial procedures; - the raising of the level of professionalism of judges and other legal professionals through training and higher academic standards; - the rehabilitation and equipping of courts, as well as the improved design of the network of courts throughout the country (carte judiciaire); - the implementation of more effective and efficient court administration and case management systems; - the improved enforcement of judicial decisions; - the application of measures to strengthen ethical standards at all stages of legal procedures; - the provision of access to up-to-date legal information (including legislation, regulations, court decisions, and treaties) to all possible end-users; - the reforrn of the registries of commerce so as to ensure proper and clear registration of companies and the security of business transactions; and - the improvement of the legislative framework for commercial arbitration. Independence of the Judiciarv: The Moroccan constitutional system is formally based on the principle of separation of powers and article 82 of the Constitution provides clearly for the independence of the judiciary. Magistrates are appointed by the King upon recommendation of the Judicial Council (Conseil Superieur de la Magistrature) (art. 84) and are not removable (art. 85). The Judicial Council is presided over by the King, as the guarantor of the Constitution. In order to achieve independence in practice, however, judges need adequate education, reasonable working conditions and salaries, all requisite legal information, effective court and case management procedures, and an ethical working environment. In each respect, however, Morocco still has a way to go: legal and judicial education leaves much to be desired; most courthouses are in deplorable physical condition; judges lack access to basic legal information, including statutes and the jurisprudence of the Supreme Court; case management procedures are inadequate; and initial and continuing training for court administrators is virtually non-existent. Recent efforts have, however, been made to improve the situation, and most notably, the salaries of judges have been brought to a level equivalent to those paid to the highest ranks of the civil service. Also, matters of ethics are now factors for the recruitment of candidates for judicial training as - 5 -  well as subjects of training in themselves. Legal Education. Legal education helps build a foundation for the rule of law. It prepares future generations of legal professionals (judges, lawyers, scholars, government policy makers, and others) to develop and implement an evolving legal system. Morocco's basic legal education, however, leaves much to be desired. Not only are important subjects poorly taught, if at all, most are too theoretical and unconnected with Moroccan realities and global developments. In addition, classes at the various Faculties of Law have far too many students. Courses in modem business-related law, foreign languages and human rights are frequently unavailable. The inevitable result is that Law Faculty graduates are not adequately prepared for any subsequent activity, including enrollment at the National Institute for Judicial Studies (INEJ), graduation from which is the principal means of becoming a judge. Quality and Professionalism of Judges: Improving the level of basic legal education is imperative. But there is an urgent need, as well, to ensure that judges have the requisite specific judicial education and qualifications. In this respect, however, the present curriculum, staffing and course materials (including library resources and equipment) at INEJ are inadequate to provide requisite training for judges, particularly in matters relating to commercial and business law. Reinforcing INEJ, in terms of its human and material resources, is thus a top Government priority. In addition, until such time as a separate institute is established to train court clerks (greffiers), there is a need to extend the coverage of INEJs initial training and continuing education programs to clerks. There is also a need to revamp commercial law education in all of Morocco's Faculties of Law and to cultivate closer contacts with the private sector in organizing training seminars for public servants within the justice system. As a first step, the Ministry of Justice has developed an agenda, agreed with the Bank, for a broad-ranging overhaul of the management, staffing and curriculum of INEJ. Joint financing and organization of targeted seminars for judges and others in the legal profession has been initiated with the banking community (GPBM). The Casablanca Stock Exchange as well as the Moroccan Federation of Business Owners (CGEM) have also expressed interest in joining such efforts. In the coming months, MOJ will: (i) help to ensure the early enactment of legislation granting INEJ administrative and budgetary autonomy; (ii) overhaul INEJ's curriculum through the introduction of new courses focusing on business law and foreign languages; (iii) make INEJ more accessible to auxiliary staff of the judiciary for initial and continuing education and refresher programs; (iv) introduce continuing education programs for judges, including in matters of business law; (v) intensify efforts to organize training events for judges and auxiliary staff with private sector participation; and (vi) improve the capacity of the INEJ library and research facilities, electronically and otherwise. Enforcement of Judicial Decisions: The Moroccan judicial system has a poor record of enforcing judicial decisions in civil and commercial cases. Enforcement officials are technically under the authority of the Ministry of Justice, but, in practice, they respond to their respective courts. In addition, enforcement officials experience low salaries, lack of adequate training, and lack of necessary support from the courts. The Government is aware that timely and just enforcement of judicial decisions, particularly in commercial matters, is critical to imparting greater security to transactions, thereby reducing the cost of doing business. In penal cases, there exists a judicial function for the enforcement of judicial decisions which focuses responsibility and accountability for, and thus speeds, enforcement. The Government is assessing the feasibility of establishing an analogous position for the enforcement of administrative, as well as business-related, judicial decisions. Physical Infrastructure. The existing physical infrastructure of the courts and related facilities are, as a general rule, in deplorable condition. With the exception of the newly created commercial courts, and in - 6 -  particular the Casablanca commercial court of appeal, courthouses generally have no appropriate rooms for the orderly conduct of trials or which permit public attendance. They also lack meeting rooms for litigants, their attorneys, and witnesses, and the most basic facilities, such as court registry offices, libraries, archives and administrative offices. Most frequently, judges work with difficulty in small, cramped, offices and lack even the most basic research tools and resources. There is also a near total lack of modem equipment for photocopying, word-processing, and court reporting as well as of qualified and experienced staff. And although under its five-year reform Program, a significant effort is to be made by the Ministry of Justice to build new courthouses and provide basic equipment, until the Government's five-year economic plan is adopted, as anticipated later this year, significant budgetary constraints will continue to hamper these efforts. Justice System Ethics: In addition to raising salaries to more reasonable levels, developing high ethical standards in the judicial system will require the adequate resolution of all the other issues discussed above. Measures needed include reforming legal, judicial and court administration education, upgrading the professionalism and quality of judges and auxiliaries of justice, improving the physical infrastructure of courts, and publishing and disseminating legal information, including judicial decisions and, in particular, especially those improperly reasoned. Building appropriate ethical standards in the judiciary requires significant public awareness. In this regard, it is crucial to develop ways for concrete public involvement and positive pressure from the press, NGOs, and civil society at large. Alternative Dispute Resolution Mechanism: Building the capacity of the judicial system will be a long-term and complex undertaking over many years. It is recognized, however, that the resolution of commercial disputes does not always need to rely on formal judicial deliberations. Indeed, the congestion of court cases may be efficiently relieved through recourse to arbitration. And this is perhaps most notably so in matters of commercial disputes, at least in those situations where, notwithstanding their dispute, the parties have an economic interest in ensuring a healthy, long-standing, business relationship. Morocco has adhered to, and ratified all relevant international instruments in the matter. Most significantly, a Casablanca Commercial Arbitration Center (CCAC) was inaugurated in 1998 as a pilot vehicle for the promotion of alternative modes of commercial dispute settlement This Center, linked directly to the Arbitration Center of the International Chamber of Commerce in Paris, deals essentially with international commercial disputes. The legislative framework for the domestic arbitration of commercial disputes, however, is unconsolidated and badly out of date. Thus, the early overhaul and modernization of the statutory basis for commercial arbitration ranks as a certain MOJ priority. Legzal Information: There are major deficiencies in the publication and dissemination of legal information in Morocco which seriously constrain the proper functioning of its legal and judicial systems. The increased volume of legislation, regulation and jurisprudence in the 1990's has not been accompanied by adequate levels of corresponding publication, nor especially of dissemination of what has been published. Currently, the majority of Moroccan laws, decrees, selected decrees of the Council of Ministers and international treaties or conventions of multilateral or bilateral character are published in the Official Gazette. Although the Constitution requires the publication of all laws, decrees, and all other normative acts before they can take effect, publication is not timely. Also, although publication of the jurisprudence of the Supreme Court is mandatory, such is, likewise, less than timely. It is critical that suitable information technology and adequate training in its use be applied as soon as possible to ensure that all legal information, including judicial decisions, laws and regulations, is published and disseminated routinely, promptly, and electronically in an easily indexed and searchable fashion. Among others, this is essential for the legal and judicial professions and for the business community. Through its legal advisor's office (the "Secretariat General du Gouvernement"), GOM has conducted a -7 -  detailed assessment of an electronic legal information system (financed by a Bank IDF Grant) and expects to initiate the implementation of an electronic legal database and information network focusing on the Official Gazette (Journal Officiel) over the next few months. Systematic dissemination of up-to-date legal information will be the next priority. Currently, the Official Gazette is distributed by the postal service. For the proper functioning of Government and Morocco's legal and judicial system, it is crucial that all ministries, agencies, courts, institutions of legal and judicial education, the business community, and the public-at-large have easy access to all statutes of Morocco, Morocco's subsidiary legislation as well as its most important jurisprudence. This will require the establishment of an electronic database, with reliable access to all potential users in conjunction with other, more traditional, methods of dissemination. Reorganization of the Ministry of Justice: Initiatives have been launched to reorganize the Ministry of Justice in order to provide improved delivery of its many services. A new organizational chart for the MOJ has recently been approved as an effort to establish clearer lines of responsibility and accountability. The Ministry's goals include: more streamlined procedures and decision-making processes; better interaction between judicial administration services and users; greater capacity for monitoring and evaluating judges' performance and for inspecting courts; and the establishment of performance incentives for the Ministry's civil servants. As the MOJ continues to adapt its personnel to its new organizational chart, it will conduct formal impact assessments, the results of which will be used to devise additional re-organization measures that may be needed. 3. Sector issues to be addressed by the project and strategic choices: Among the Government's main priorities in its five-year justice system reform Program are changes in the attitudes and practices of judges and court administrators, the opening up of the system to more potential users, the increased transparency, accountability and streamlining of procedures, the dissemination of legal information and the enhancement of training of justice system professionals. Issues of human rights, notably improving Morocco's prison conditions, including the rights of detainees, are also being tackled by the MOJ as an important component of the overall reform Program. In line with the Government's five year economic development plan, certain of the sector issues identified above will be addressed by the Project through the following strategic choices. Modernization of Commercial Courts and Selected Local Registries of Commerce: The appropriate up-dating and simplification of all relevant processes and procedural requirements will occur first. Only then will modern automated systems be introduced as a result. Case Management: Improving the way cases are managed and tracked from start to finish is essential to efficient, speedy and transparent judicial procedures. Effective case management also frees judges from administrative duties so they can focus on being judges. The Loan will finance the computerization of the information system within each commercial court so as to provide these courts with real time information regarding their workload, the nature of their cases and the duration of their proceedings. Modern case management will also allow commercial court litigants to trace the status of their cases in real time, thereby allowing for more transparency and public trust in the commercial justice system. Although by means of the introduction of its own "in-house" computer system, Casablanca's Commercial Court of Appeal has managed to control delays and be reasonably up-to-date in the management and processing of its cases in its first eighteen months of operations, it is already obvious that more will soon be necessary, even in this best example of court automation in the country. Improvements will, thus, include the introduction of more - 8 -  adequate software in this and all other commercial courts. Registries of Commerce: The Registries of Commerce are regulated by the Commercial Code (Law No. 15-95). The Registry, as such, is made up of the central registry, located in Casablanca, and local registries. The central registry operates under the auspices of the Ministry of Commerce. Local registries are under the authority of the Minister of Justice and are located within the Commercial Courts. In cities and towns where there are no Commercial Courts, local commercial registries are housed at the trial courts of first instance. Local Registries: All persons performing a business activity and all businesses, including subsidiaries of Moroccan or foreign companies carrying on business in Morocco, must be registered with the registry of commerce within the closest proximity to where the business takes place. Registration has a personal character, which means that no one person or business can be registered twice with the same registry or with different local registries. Various modalities regarding the different forms of companies to be registered are provided for by law. The Central Registry: The main mission of the central registry of commerce is to ensure that all businesses operating in Morocco are properly registered, including all businesses registered with local registries of commerce. Its jurisdiction is limited to the registration of companies through the delivery to business owners of certificates of company name approval. Despite recent efforts at modernization through the introduction of a basic computerized information management system, central registry operations continue to be inefficient. With the exception of the central registry, registries of commerce lack modem tools of information management and all operations are manual and paper-based. Archiving is chaotic and staff are overworked. The Project aims at modernizing the local registries housed within the commercial courts through computerization and installation of a linked electronic network. As a result, speedier, more reliable, and fully up-to-date information will be available. The Project will also aim at enlarging the services rendered by the registries, including the storage and dissemination of up-to-date information regarding the status of registered companies in terms of their financial and other liabilities. The updating of the relevant legislative and regulatory framework for civil and commercial procedures will, however, be a crucial pre-condition for success of these efforts. Streamlining of Civil and Commercial Procedures: The Casablanca civil trial court has recently adopted certain ad-hoc measures to simplify and streamline its judicial procedures, in particular with regard to the registration of cases. Although these initiatives have benefited litigants by shortening delays and reducing paperwork, such one-off, independent, measures will now help to inform the initial Project component which is aimed, in part, at the streamlining of civil and commercial procedures in all commercial courts. This component will be an essential pre-condition to all activities related to automation of all commercial courts and the local registries of commerce housed within them. Management Systems' Training: Training will need to be provided to the personnel (at all levels, including judges) in charge of operating computerized management systems, both for those merely having access to the data, as well as for those who, in addition, must input and remove data. Court administrators, entrusted with such tasks as managing court registries and court files and the acceptance of papers for filing, must be adequately trained for these tasks. Thus, a training program for court administrators will be developed and implemented as part of the Project. -9-  Information and Communication For the proper functioning of the Moroccan Government and its legal and judicial systems, ministries, agencies, courts, institutions of legal and judicial education, as well as the Moroccan business community and the public-at-large must have ready access to Morocco's laws, subsidiary legislation and at least the most important Moroccan jurisprudence. This will require the establishment of an electronic database, with reliable access by all potential users in conjunction with other methods of dissemination. Suitable information technology and adequate training in its use will ensure the automatic electronic publication and dissemination of all legal informnation (including judicial decisions, laws, and regulations) useful to those referred to above. Also, more generally, there is interest on the part of MOJ in ensuring that the justice system reform Program (including its Project components) gets properly communicated to users and the public-at-large, with an opportunity provided to them to react. As a result, a communication strategy is being devised to create an outflow and inflow of information from MOJ to the public and vice versa, through awareness campaigns and surveys. While the Project does not boast a poverty reduction goal per se, there is also a need for all potential users, including the poorest segments of the population, to gain access to basic legal information. Thus under the Project, MOJ will establish information offices for the public (Info-shops) within the Ministry's premises and, as a pilot, in all commercial courts for the purpose of disseminating this basic information. Under arrangements to be agreed with the MOJ, the Moroccan Bar Association will provide free basic legal advice at commercial courts for all those seeking it, and in particular, for those considering the establishment of micro-enterprises. The recently re-organized MOJ provides for the Ministry's Information Unit to be the center for the reception, management, stocking and dissemination of all GOM-generated legal and regulatory information. The same Unit is also to be in charge of the communication Component referred to above. The Project will strengthen this Unit through the introduction of electronic networks linking MOJ to all electronic sources of legal and regulatory information in Morocco and abroad, including, possibly, the Global Legal Information Network (GLIN). The Loan will also finance the training of staff in the use of information management systems and their development, building on on-the-job acquired techniques with a view to customizing these systems to respond to Moroccan-specific needs. It will also finance efforts at communication and interaction with the public, including by means of radio programs and surveys, and will provide requisite training in these respects. Updating of the Judicial Training System Improving INEJ's Curriculum: The National Institute for Judicial Education (INEJ) is Morocco's sole training center for judges. The curriculum offered at INEJ reproduces for the most part that of the Faculties of Law across the Kingdom and lacks emphasis on business law, foreign languages and an openness to civil society issues and international experience. The Project will strengthen the curriculum through the introduction of more focused courses in business law, foreign languages, practical training with private sector involvement and exchange programs. Diversijfying Access to INEJ: At present, INEJ provides courses for judges in training and, in a few cases, to other officials for targeted training. Although in the medium-term, GOM will pursue the possibility of creating one or more specialized institutes for the training of court administrators and other support staff, additional INEJ training, at least in the short to medium-term, will be tailored for auxiliaries of justice, notably court clerks ("greffiers"), in commercial courts on a rotating basis. Strengthening INEJ~' Autonomy: Once the Institute is transformed into an entity enjoying administrative and budgetary autonomy, the Loan will finance the establishment of appropriate management techniques - 10-  within INEJ. These techniques will ensure that, among other things, INEJ has direct access to non-government financing, operates its own system of cost-recovery and recruits its staff and trainees independently. Installation and Operation of a Modern Information System: There is no electronic access to informnation to or from INEJ. The Project will, therefore, establish an information network which links INEJ to MOJ's Information Center and to all Faculties of Law where compatible information systems exist. Also, a complete overhaul of INEJ's library will be undertaken, including the introduction of a new electronic database, with modem archiving and management tools, thereby improving access to legal information and ensuring continuous updating. These strategic choices were part of the ongoing dialogue between the Moroccan Government and the Bank. Indeed, part of the Government's Program in the justice system reform area is an integral component of the Bank's Policy Reform Support Loan, a multi-sector adjustment operation which supports the Government's broadly-based economic and social reform agenda. At the same time, studies financed by a PHRD Grant have prepared the Project in four main areas: (a) Management of Commercial Court Cases: A study has taken stock of the present management of commercial court cases and has proposed an alternative system with a view to improving timeliness, efficiency and responsiveness. The resulting action plan has been agreed between MOJ and the Bank. (b) Local Registries of Commerce: In the Moroccan legal system, corporations must, by law, be registered with the local Registry of Commerce, so as, among other things, to insure publicity of trade name and security of ownership. Registries of Commerce are, however, badly mismanaged, with outmoded, and less than secure, paper-based entries in cumbersome log books. These Registries no longer adequately serve the needs of modem commerce. The study has taken stock of current deficiencies and has proposed remedies by way of an action plan agreed between MOJ and the Bank. (c) Judicial System Education: A study has also been completed in respect of: (i) the reform of the current training and curricula for judges and auxiliaries of justice; (ii) technical assistance for the elaboration of regulations reforming INEJ's management; and (iii) modernizing the INEJ information system. And a corresponding action plan has again been agreed between MOJ and the Bank. (d) Dissemination of legal information: Presently, there is no systematic, organized gathering and dissemination of essential legal and regulatory information in Morocco. A fourth study has recently assessed the needs of the Moroccan judiciary and all other stakeholders, including lawyers, the business community and the public-at-large, for comprehensive and timely access to such information and has made recommendations by way of an action plan which, once again, has been agreed between MOJ and the Bank. The Project will enhance the effectiveness of the existing Information Unit within MOJ, including its capacities to manage information, to play a meaningful role in promoting public awareness of the Ministry's reform Program and to serve as a valuable resource for all stakeholders, all as part of a well designed communication policy. Also financed by the PHRD Grant, work is progressing in respect of a revised legislative framework for commercial arbitration. This is intended to result eventually in a unified Commercial Arbitration Code. As stated above, MOJ's aim is to encourage development of the private arbitration of commercial disputes, - 1 1 -  thereby lessening the anticipated ever-growing burden of litigation in commercial courts. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The Project consists of six components: 1. Imyrovin2 the legislative and regulatory framework for commercial transactions and the resolution of commercial disvutes by supporting efforts to draft: (a) relevant amendments to existing legislation and regulations which will streamline processes and procedures and otherwise pernit the successful implementation of components 2 and 3 below; and (b) a modern Commercial Arbitration Code. 2. Strengthening the judicial system's capacity to adiudicate business-related cases efficiently, fairly, transparently and reliably through the introduction in all commercial courts of modem techniques and automated tools for the management of all cases from the beginning to the end of the litigation process. 3. Strengthening the capacity of the local Registries of Commerce housed in the Commercial Courts to register and record essential company information and provide ready access to the public to this information by the introduction of appropriate automated systems. 4. Providing better training to iudges and court administrative staff by: (a) improving the training of INEJ trainers, including the up-grading of teaching methods; (b) upgrading and enlarging the INEJ curriculum; (c) introducing up-to-date and more relevant course materials, as well as access to modem information and research tools for INEJ teachers and students; and (d) reorganizing INEJ and introducing modem management systems. 5. Strenatheninm the capacity of the-Ministry of Justice to collect, manage and disseminate legal, judicial and regulatory information and promote a wide-ranging communication policy, including a public awareness program. 6. Ensurine adequate sustainable capacity within the MOJ to implement the Proiect - 12 -  Kidicative Bank-- % of Component Sector Costs % of financing _US$M) Total 1. Improving the Legal and BI - Institutional 0.11 1.6 0.10 1.9 Regulatory Framework Development 2. Strengthening Commercial Courts BI - Institutional 1.15 17.1 1.03 19.4 Development 3. Strengthening Registries of Institutional 2.01 29.9 1.56 29.4 Commerce in Commercial Courts Development 4. Strengthening INEJ Institutional 1.94 28.8 1.81 34.1 Development 5. Strengthening the Ministry of Justice Institutional 0.75 11.1 0.54 10.2 Development 6. Supporting the Project Institutional 0.77 11.4 0.27 5.1 Implementation Unit Development Total Project Costs 6.73 100.0 5.31 100.0 Front-end fee 0.00 0.0 0.00 0.0 Total Financing Required 6.73 100.0 5.31 100.0 2. Key policy and institutional reforms supported by the project: Under the existing Policy Reform Support Loan, a number of relevant institutional reforms have been undertaken, notably: the creation of the commercial courts; the initiation of work on a legal guide for judges officiating in commercial courts; the harmonization of statutes relating to the organization of the judiciary and magistrates with the law creating the commercial courts; and the adoption of a new organizational chart for the Ministry of Justice. These reforms have been strengthened by a set of measures indicative of a participatory approach, including: a cooperative agreement between the Ministry of Justice and the Moroccan Bar Association; the involvement of the private sector in supporting INEJ, through the financing of seminars and other activities for the promotion of judicial awareness of issues in commercial litigation; and the establishment of the Casablanca Center for Commercial Arbitration. Also, as the senior legal advisor to the Government the Secretaire General du Gouvemement, has begun implementation of a program for the electronic dissemination of the Official Gazette (Journal Officiel). Based on a feasibility study financed by an IDF Grant, this program will complement the Project component aimed at strengthening the MOJ by building the capacity of its Information Unit: (i) to collect and disseminate legal and regulatory information electronically and in hard-copy; and (ii) to design and implement an MOJ policy for communications with the public-at-large. Under the Project, the following institutions will undergo reform: (a) the six commercial courts of first instance and the three commercial courts of appeal will streamline their case management procedures so as to ensure that their operations generally, and - 13 -  regarding each of their cases, become more efficient; (b) the local Registries of Commerce at the commercial courts will each adopt modem systems which will permit the electronic registration and storage of critically important company information as well as its dissemination to the public by electronic means; (c) INEJ will be re-organized and re-vitalized so as to provide relevant training to judges and administrators in all commercial courts; and (d) MOJ will be strengthened by the building of capacity within: (i) its law drafting department to analyze the need for legislative and regulatory improvements and to draft relevant legislative amendments as well as a Code of Commercial Arbitration; (ii) its Information Unit; and (iii) the PMU. 3. Benefits and target population: It is anticipated that the Project will have a positive impact, directly and indirectly, on Moroccan society as a whole and on its business community in particular. As the private sector operates within an ever more reliable and transparent public sector regime, the risks, and therefore the costs, of doing business will decrease. And, by increasing the business community's satisfaction with, and confidence in, the capacity of public sector institutions - the roles of which are to support private sector transactions and the resolution of commercial disputes - in time, private investment and levels of employment should increase. These results then may well ultimately prove important in reducing existing levels of poverty. In addition, the poorer segments of Moroccan society will derive direct benefits from the Project to the extent they are ready, willing and able to take advantage of the possibilities for increased access to legal information. Though improving gender equality in the public service is not a specific Project goal, improving the access of women to training as judges and court administrators will be an important aspect of Project implementation. The following table summarizes key anticipated benefits. BENEFIT DIRECT BENEFICIARIES INDIRECT BENEFICLARIES Better qualified and trained commercial court Judges and others who receive Citizenry, Private sector judges and related staff. training More reliable, less costly and less time-consuming Citizens requiring legal assistance Citizenry, Private sector enforcement of legal rights and judicial decisions in commercial matters. Easier access to laws, regulations, treaties and other Judges and auxiliaries of justice, Public at large, legal scholars, relevant Moroccan legal information and better citizens, including the poor, with students, Private sector communication between the Ministry of Justice and legal questions, private sector the public-at-large. More secure and viable system of arbitration of Parties to commercial disputes Public at large, private sector commercial disputes. Reduction of corruption through the establishment Private sector, Public at large Citizenry of a more transparent judiciary. Equal access of women to the legal profession, Women Citizenry including the judiciary Increased credibility of MOJ and the justice system MOJ employees and Government Citizenry in general. more generally - 14 -  4. Institutional and implementation arrangements: Implementation Period: The Project is expected to be implemented over a three-year period from the second half of 2000 to the second half of 2003. Project Implementation: Steering Committee The Government has created a Steering Committee to be in charge of supervising the implementation of the Project. This Committee will meet twice a year, as convened by its Chairman. This Committee comprises the Minister of Justice, as Chairman and, in addition to the Secretaire General of the Ministry of Justice and the Director of INEJ, has as members, a representative of: (i) the judiciary, including the Supreme Court, the Commercial Courts of Appeals and the Commercial Courts; (ii) the Secretariat General du Gouvemement; (iii) the Minister of Finance; (iv) the local Registries of Conmmerce; (v) the Bar Association; (vi) the Deans of the major Faculties of Law of Morocco; (vii) the Moroccan Professional Bankers Association (GPBM); (viii) the Casablanca Stock Exchange; (ix) the Moroccan Association of Business Owners (CGEM); (x) the Moroccan Federation of Judicial Experts, (xi) the bailiffs officiating in the Commercial Courts, and (xii) the Commissaires Judiciaires. This Committee will ensure a wide-ranging participatory approach to the Project, involving all major stakeholders, and will be responsible for the cohesiveness of the different agencies involved in Project implementation. Project Management Unit (PMU). Project management and implementation will be carried out by a Project Management Unit (PMU) located within the Ministry of Justice. The PMU will be comprised of a Project Director, a Deputy Project Director, a judicial system reform specialist, a procurement/disbursement specialist, a financial management specialist, an information technology specialist, a training specialist, a communication specialist and two assistants. Firm GOM commitment to a strong PMU has been forthcoming, as evidenced by its readiness to finance the salaries of all of the above staff. In performing its functions, the PMU will: (a) ensure the co-ordination of all actions required for Project implementation; (b) provide assistance and support to all agencies involved in Project execution; (c) be responsible for procurement; (d) maintain Project accounts and Project financial management systems; (e) dissemninate Project-related infornation; (f) conduct the Project's mid-term reviews and completion reviews; (g) be the Bank 's counterpart during Project implementation and evaluation; (h) report directly to the Steering Committee on a semi-annual basis; and (i) act as this Committee's secretariat. The PMU will be provided with the resources necessary to hire short- and long-term specialized consultants to facilitate Project implementation and ensure appropriate Project monitoring. It will also have the responsibility, and be provided resources, to plan, budget and manage all facets of Project implementation. As stated, GOM will finance the salaries of all of the PMU staff referred to above. The Bank will finance all goods for the PMU and all short- and long-term consulting services, as needed. The selection procedures for consultants, if any, including advertisement, will be in accordance with the Bank's guidelines and the Bank's normal review process will be followed. - 1 5 -  The PMU has produced a procurement plan for the Project's first year activities. Monitoring and Evaluation Design: The PMU will have a monitoring and evaluation system for which an appropriate computerized Management Information System (MIS) will be set up under the Project. It will track three main variables: * financial indicators (e.g. amounts contracted and disbursed); * performance indicators (as listed in Annexes 1 and 11); and * physical indicators (e.g. procurement of computers, the setting up of all electronic and other information systems, etc.). The PMU will provide the Bank with semi-annual reports on Project progress, by June 30 and December 31 of each year, beginning in December 2000. Furthermore, on the basis of baseline surveys which will be undertaken not later than June 30, 2001, further surveys will be taken to obtain stakeholders' evaluations of the impact of reforms implemented under the Project. In particular, surveys will be taken at mid-term and at Project completion as outlined in Annex 11. Accounting, Financial Reporting and Auditing. The Financial Management System (FMS) in place in the MOJ, is based on principles and procedures defined by the legal framework applicable to the pubic sector and more specifically to governmental institutions. MOJ is maintaining an accounting system based on the cash basis and the outline of budget components according to the provisions of the Public Accounting Law. Development of the management information system stars recently and will allow after its implementation an acceptable monitoring of the operational activity. Although globally satisfactory, the existing financial management system should be improved in order to guaranty a satisfactory monitoring of the project according to the Bank requirements and to achieve the required efficiency. The improvements are reflected on an agreed time bound action plan which will be implemented by no later than September 30, 2001. Financial management arrangements for the project are detailed in Annex 6 and are summarized below. Accounting and Reporting. The Ministry of Justice (MOJ) will be the overall executing agency for implementation of the Project. A Project Management Unit (PMU) will be established under the authority of the Steering Committee. The PMU will be headed by a Project Director and will be responsible for maintaining Project financial data. The Project Director will assure the issuance of annual Project accounts and the quarterly Project Management Reports (PMR) as well as the submission of these documents on a timely basis to the Steering Committee, the Bank and the Project auditors. Procedures for accounts, financial management and reporting will be developed by a highly-qualified specialist and will be reflected in a Financial Management Procedure Manual (FMPM) which conforms to Bank requirements. Auditing. An auditor acceptable to the Bank will be appointed to carry on an annual audit according to International Standards on Auditing and the Bank's Guidelines reflected in its Financial, Accounting, Reporting and Auditing Handbook (FARAH). The auditor will express a professional opinion on the annual Project financial statements and will submit to the Bank an annual audit report within 6 months after the end of each fiscal year. Disbursements from the Bank loan will be made initially on the basis of reimbursements with full documentation and against Statements of Expenditures and direct payments. Disbursements on the basis of Project Management Reports will be made after assessment of the financial management system and the -16 -  issuance of a certification, that this system is operating satisfactorily. This option will only be considered after implementation of the agreed action plan by June 30, 2001. Development Partners Coordination Committee: Recognizing the need to ensure on-going coordination of the roles of, and financing from, all external development partners interested in assisting the Government with any aspect of the Program, the Director of the PMU will chair a standing committee made up of representatives, to start, of the European Union, USAID and the World Bank. Representatives of any additional development partner organizations so interested will be included in this Committee. D. Project Rationale 1. Project alternatives considered and reasons for rejection: The comprehensive judicial reform Program the Kingdom of Morocco is now embarking upon is complex and will be difficult to manage. It is the first of its kind in Morocco and it is politically sensitive. With its many weaknesses and shortcomings, there is widespread lack of trust and confidence in the existing judicial system in Morocco. It is still cumbersome, procedure-heavy, opaque and, at times, ethically questionable. In order to help correct its many imperfections, the Project could have been more ambitious, embracing the whole spectrum of the justice system, including civil, penal, administrative and commercial courts. Precisely because of the sensitivity of the issues, and in order not to start on this new path with too ambitious an agenda, the Moroccan Government has focused this Project within the more narrowly defined boundaries of support for the economic development of the country and particularly a more favorable environment for private sector development. The successful implementation of this Project will increase the opportunity for more ambitious subsequent projects. And while focusing specifically on commercial issues, the Project will have a beneficial impact on the judicial system as a whole. This Project will only serve as one of the many stages of reform with a select number of courts that will test new processes which can later be revised and expanded. Although there are many aspects of judicial system reform, this Project addresses commercial courts' case management aspects, coupled with training and improved flow of information, as priorities. This will benefit users as well as court staff, including judges. In this way, the Project is designed to include activities that allow integrated reform to achieve improved delivery of services. In many cases, courts are located in dilapidated buildings, inspiring no respect for Justice and impeding the proper conduct of cases by judges. The Project could also have tackled this issue by including an infrastructure component. This alternative was rejected, however, given the vast extent of the needs. With a relatively modest Project sum, any infrastructure component would have inevitably become the center piece of the operation, thus minimizing the possibility of reform efforts in commercial courts and local registries of commerce which, from the outset of Project design, have formed the basis and rationale of Bank involvement. Also, infrastructure projects which focus on Morocco's needs for modern court houses generally, and for commercial courts in particular, form an important part of MOJ's reform Program. One of the main constraints to an adequate and well functioning justice system is the lack of appropriate education. The Project could have embraced legal training at Morocco's Faculties of Law. This would have given more depth to the reform of legal education and would, in time, have likely provided INEJ with better quality applicants. This option was rejected, however, as being too ambitious within the Project's financial constraints and as potentially unbalancing to the comprehensive program of education reform Morocco is now engaged in. - 17 -  The Project could also have dealt with a larger segment of the justice system and not confined itself to commercial courts and their related commercial registry offices. This would have muted potential criticism of the Project establishing a "dual-speed" judiciary and commercial registry system. The option of focusing on commercial courts and their registries was, however, specifically chosen given their relatively modest number and in response to the sequencing of reform activity as envisaged by MOJ in its five-year Program. The Ministry of Justice's strategy is to develop the newly established commercial court system and its adjoining commercial registry offices as engines, examples and pilots for court and registry modernization, setting templates that, if successful, will be reproduced throughout the country. A Leaming and nnovation Loan (LIL) was also initially envisaged as a possibility. Although a LIL might have led to speedier Project preparation, this option was rejected due to MOJ's desire to have initial detailed assessments of potential Project components carried out under PHRD funding. In the light of these studies, the Project will now proceed with greater clarity and certainty. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). 'Latest SupervIso Sector Itssue Project0 (PR) Ratings Implementation Development Bank-financed Progress (IP) Objective (DO) Multi-sector PRSL Support of the broad-based economic and social reform agenda. Judicial Information IDF Grant HS Study for the dissemination of legal and regulatory information Preparation of the Legal and Judicial PHRD Grant Reform Project Other development agencies BAD PRSL IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) - 18 -  3. Lessons learned and reflected in the project design: The Project will be the first of its kind in Morocco and is a pilot. It does, however, benefit from the early experience acquired by the Moroccan Government in implementing the initial steps of the reform of the Justice sector as well as Bank experience of legal and judicial reform projects in other countries such as Georgia, Venezuela and Albania. The lessons learned underscore the crucial importance of ownership and commitment at the highest level of government, as well as of the need for stability of relevant government policies and of leadership. Experience also shows that national stakeholders have to be involved from the outset, and all along, in studying problems, proposing solutions, and implementing those that are agreed upon. Also, strong and sustained support for legal and judicial reform by the country's highest political authorities is crucial. Indeed, in the absence of such support, little of lasting value in justice system reform is likely to be achieved. Furthermore, it would clearly have been unwise and inappropriate to have attempted to apply a possible "turn-key" or ready-made non-Moroccan reform Project, given the inevitable lack of relevance to the reality of Morocco's legal and judicial traditions and culture, as well as its particular political, economic and social situations. Rather, as it should be, the Project is directly responsive to GOM's own reform priorities. In focusing on commercial courts and business related activities in general, the Project aims at achievable goals in a three-year time frame that, in turn, will lay the basis for further reforms. Other lessons reflected in Project design Ultimately aiming at giving a high level of credibility to State institutions, judicial reform should itself be credible and therefore avoid setting (and publicizing) over-ambitious and unattainable goals. The focus needs, rather, to be on what is realistically achievable. Establishing clear priorities and the sequencing of the reform process is crucial in this regard. In order to be sustainable, judicial reform needs to increase, in the long run, political and social consensus in its favor. Hence particular attention must be paid to maintaining and enhancing the participatory approach governing the process in the first place. A participatory approach to project development, implementation, and where possible, supervision, is also required in building ownership. The Project's components benefit many different stakeholders which allows for greater participation. And participation includes those at the grassroots as well. The reform effort does not overlook the needs of the people within the marginalized segments of society who lack the resources to enforce basic rights. These segments of society will be included through surveys as well as in the public outreach programs, such as the communication component of the Project. There is also a clear advantage in looking at experiences of other institutions in the field and their work in Morocco. In this respect, those involved in preparing the Project have reached out to other international donors interested in financing any aspect of Morocco's justice reform Program so as to understand their areas of interest and expertise and their experiences with their Moroccan counterparts. As of now, the major institutions involved in this area of activity are the European Union and USAID. UNDP is also interested, but has still to develop a clear and operational intervention strategy. An understanding was reached with the European Union (EU) for a division of labor, with the Bank focusing its financial and other assistance on business-related activities and the EU financing reforms within the administrative court system. The EU is, however, still negotiating with the Moroccan Ministry of Finance the specifics of its Mediterranean Development Program, which makes a European financed project still many months away. Also, within the framework of the much publicized "Eizenstadt Initiative", USAID is interested in promoting trade and commerce and is thus looking at ways to complement the Bank's Project in Morocco. - 19-  And in this context, there is an on-going Bank and MOJ dialogue with USAID so as to ensure that there will be no duplication of efforts. 4. Indications of borrower commitment and ownership: The Government has shown strong commitment to the development of a comprehensive and far reaching reform of its legal and judicial system. Work in these respects started in 1996 under Morocco's previous so-called "technocratic" Government. The appointment by the late King of a dynamic, reform minded Minister of Justice, a former President of the Moroccan Human Rights League and a former Minister of Human Rights, has sent a strong signal throughout Moroccan society of the intent and political will to reform the justice sector. After the November 1997 elections and the coming to power of the first so-called "altemance" Government in Morocco's history, the Minister of Justice was confirmed in his post. Also, in his first address to Parliament in April 1998, the new Prime Minister put the reform of the Moroccan judicial system at the top of his Government's priorities. Among recent actions taken by the Ministry of Justice, have been: (i) the creation of new Commercial Courts; (ii) the launching of a campaign to "sanitize and moralize" the justice system, including sanctions against judges convicted of misconduct; (iii) the reorganization of the Ministry with a view to its more open communication to and from Moroccan citizens as well as to the streamlining of its internal procedures; and (iv) the participation of stakeholders in the reform of the judicial system as demonstrated by agreements between the Ministry and the Moroccan Bar Association. In the Government's view, the justice system in Morocco should, in time, become an attractive feature to business, both local and foreign, and should act as a catalyst to the growth of the country's economy by contributing to a more conducive environment for private sector development. 5. Value added of Bank support in this project: The dialogue between the Bank and the Government on the issue of legal and judicial reform started with the Private Sector Assessment (PSA) update conducted in late 1997 and has continued through the preparation, appraisal and negotiation of the judicial component of the Policy Support Reform Loan. The negotiation and implementation of Project-related studies financed by a PHRD Grant have marked other substantive and concrete steps in this dialogue. Morocco has already begun its program of judicial system reform with little, if any, assistance from external donors. The efforts undertaken as part of the reform have now, however, reached a stage where international assistance and technical expertise can bring benefits, in particular in the fields of training, commercial court case management, information dissemination, upgrading and modernizing of local registries of commerce and the creation of a modern Code of Commercial Arbitration. These activities have each been covered in the dialogue the Bank has conducted with the Ministry of Justice in the preparation and appraisal of the Project. They have also been accepted by Moroccan stakeholders as the key priority issues to be dealt with in the process of reforming the justice system so as to make it more supportive of private sector activity. Furthermore, due to its experiences in numerous other countries instituting similar reforms, the Bank has facilitated, and will continue to ensure, the application of important lessons from elsewhere. - 20 -  E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): O Cost benefit NPV-US$ million; ERR = % (see Annex 4) 0 Cost effectiveness * Other (specify) Economic analysis is not applicable. 2. Financial (see Annex 5): NPV=US$ million; FRR = % (see Annex 4) Financial analysis is not applicable Fiscal Inpact: Not applicable 3. Technical: Technologies for management and data gathering have been evaluated to be viable and appropriate for commercial courts and their registries of commerce. A Local Area Network will be implemented at each commercial court and its registry of commerce. These networks will communicate with each other, exchanging data to all participating entities and end users. In the commercial courts, modem case management software will keep track of each individual case. 4. Institutional: a. Executing agencies: The Ministry of Justice will be the executing agency for the Project and will coordinate, as necessary, with INEJ, the Supreme Court and the Secretariat General du Gouvemement (the Office of the Government's legal adviser). b. Project management: Established within MOJ, the PMU is responsible for management and implementation of the Project. The PMU will be headed by a Director with extensive knowledge of the Project's goals, thorough understanding of computer technology and familiarity with the Moroccan legal and judicial system. Nine additional individuals will be employed by the PMU, as indicated under Part C 4. above. The PMU will provide assistance and support to all agencies, including the commercial courts, the local registries of commerce INEJ, and the MOJ's Information Unit, involved in Project execution. And, among other things, the PMU will: (i) be responsible for procurement, (ii) maintain Project accounts and financial management systems, (iii) disseminate Project related informnation, and (iv) conduct the Project's mid-term and completion reviews. In order to enhance the quality of project governance, local assistance and training are envisaged for the project implementation unit to reinforce its financial and procurement capacity. The improvements proposed in the agreed time bound action plan which, if successfully implemented, during the 15 month period, will enable mitigate the risk linked to the insufficiencies identified in the MOJ's existing financial management system. - 21 -  5. Social: There is a strong awareness on the need for the reform of the justice system in general. The public at large will be further sensitized to the reform Program through the new MOJ communication policy to be developed as part of the Project. This, in turn, will open the way to a positive exchange of information between MOJ and the end-users of the justice system 6. Environmental assessment: Environment Category: C (Not Required) Not applicable 7. Participatory Approach (key stakeholders, how involved, and what they have influenced or may influence; if participatory approach not used, describe why not applicable): a. Primary beneficiaries and other affected groups: As part of GOM's economic development plan for the next five years, it's comprehensive justice system reform Program has been developed with strong stakeholder participation. Bar associations, Chambers of Commerce, and business associations have been part of the process to date. The Project which constitutes a small, but important, portion of the overall Program has also benefited from this participation. Moreover, the Project will create new venues for public and private sector participation in judicial reform through the establishment of a number of public outreach offices and activities. One of the main successes of Project preparation has been the wide and continuous commitment and participation by stakeholders. This participatory process will continue throughout Project implementation by means of the Steering Committee and stakeholder meetings. The participatory process will also focus on determining whether there is any resistance to a particular reform and, if so, on developing strategies to mitigate such resistance, including by means of public awareness campaigns and seminars. b. Other key stakeholders: In addition, there has been widespread coverage by the press, speeches by Government Officials on the overall justice reform program. A public awareness campaign with training for those in charge of implementing the communication policies of the Ministry of Justice will be included under project implementation. Communication activity has also been developed in order to facilitate the reforms and maintain consensus and commitment among the stakeholders, inform the general public on the importance of the reforms and get reactions through periodic polls. - 22 -  F. Sustainability and Risks 1. Sustainability: The Government's reform strategy supported by the Project includes features that, when successfully implemented on the basis of the orderly sequencing of Components, should give a firm foundation for sustainability. The most important assurance of sustainability is the large participation in the preparation, implementation and supervision of the reform program by major stakeholders, with particular emphasis on the private sector and the members of the judiciary. Careful consideration will need to be given to the Government's budgetary support during and beyond the implementation stage of the Project. Adequate funding for the judicial reform program in general should be ensured so as to effectively take advantage of the reforms put in place by the Project and enlarge their scope to embrace the entire judicial system. During preparation of the Project, GOM addressed the issue of sufficient allocation of operational funding to make the Project sustainable after the implementation phase is completed. Building the capacity of the Ministry of Justice, through the PMU, to conduct and implement the Program is also crucial for the sustainability of the Project. The Project's Components all converge towards the goal, sustainable over time, of improving access to a more transparent and efficient justice system for commercial transactions and the resolution of commercial disputes. As indicated under Part A 1 and Part C above and as detailed in Annex 2, these Components are as follows: The updating of the codes of civil and commercial procedure and the texts regulating the functioning and procedures of the registries of commerce that will streamline court procedures and provide speedier resolution of disputes. The enactment of a commercial arbitration code. This will provide the private sector, including foreign investors, with a better legal foundation for the out-of-court settlement of commercial disputes. The establishment and operation of automated case management in the commercial courts, allowing for direct access to files and real time checking on the status of cases. This will ensure considerably greater transparency and should ultimately raise the level of trust on the part of users and potential users in the commercial courts. The establishment and operation of automated registration and retrieval systems for local registries of commerce. These will give more security in commercial transactions and provide the business community, the financial sector and the public-at-large with a transparent, reliable and efficient means to register required company information, including in respect of secured interests on real (immoveable) and personal (moveable) property, and to readily obtain all such information. The successful reform of the National Institute for Judicial Studies (INEJ). The long-term sustainability of the reform Program depends to the largest extent on the basic education and subsequent training of all those employed in the judicial system. In this respect, a high level of capacity within INEJ to adequately educate and train judges and auxiliaries of justice is essential. The Project will thus: (i) enhance INEJ's curriculum and the exposure of INEJ administrative and teaching staff to the outside world, including the local business community, (ii) provide INEJ with modem research and teaching methods, and (iii) institutionalize continuing education at least for judges and court clerks ("greffier"). - 23 -  The strengthening of the legal information system and the implementation of a MOJ communication policv. An automated information system will allow for real time interaction between the Ministry of Justice, all jurisdictions, Faculties of Law, INEJ, the private sector, all those in the legal profession and the public-at-large. A new communication policy will allow for direct contact between the public-at-large and the justice system, through Info-shops, surveys and public awareness campaigns, which in tum will provide MOJ with crucial feedback on the impact of its reform Program, including the Project. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk Risk Rating!: Risk Minimizaton Measure From Outputs to Objective New legislative and regulatory framework M Wide stakeholders participation in preparing for commercial transactions and the such laws and regulations. resolution of commercial disputes is not adequate. Adoption of new laws and regulations for S Commitment of Government to speed-up the commercial courts and registries of approval process. commerce is delayed. Entrenched interests in the judicial system S Enhanced training for judges and court do not show capacity or willingness to administrative staff and sensitization measures acquire skills needed to implement within the judicial system. reforms. Inspection Unit within MOJ lacks M Transparency of the inspection process so as to appropriate mandate and manpower. bring broad acceptance of the Inspection Unit's mandate by judicial system employees. Access to legal informnation restricted for M Agreement on a time-bound implementation plan technical or other reasons and MOYs for making legal information available to the communication policy not adapted to public, through publication and electronic users expectations. means, and using systematic feedback from civil society to assess progress of the reforms. From Components to Outputs Institutional capacity is lacking to M Training and sensitization efforts supported by speed-up the process of adoption and the Project instill greater Government and implementation of legal and regulatory Judiciary understanding of the need for seizing changes as well as to restructure 1NEJ up the reform momentum. successfully. PMU's ability to coordinate and facilitate M PMU will be strengthened through hiring of implementation of the Project proves technical and specialized staff; provision of inadequate. Project related training and the hiring of Project staff on a competitive basis, based on market principles. Overall Risk Rating M - 24 -  Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: None have been identified. G. Main Loan Conditions 1. Effectiveness Condition The PMU has been formally established within MOJ and: (i) has employed specialized staff having legal and judicial reform, procurement, financial management/disbursement, information technology and communication skills under terms of reference acceptable to the Bank; and (ii) has been provided with adequate office space and equipment. 2. Other [classify according to covenant types used in the Legal Agreements.] Dated covenants. (a) Amendments to the legislation and regulations provided for in component 1 of the Project (see Annex 2) shall be adopted by the Borrower's Council of Government no later than December 31, 2001. (b) All measures to ensure the administrative and budgetary autonomy of INEJ shall be taken not later than March 31, 2001. (c) For purposes of measuring Project performance at mid-term and Project completion, baseline surveys of users and potential users of commercial courts, commercial registries and commercial arbitration services will be completed not later than June 30, 2001 under terms of reference satisfactory to the Bank. On the basis of the results of these surveys, further similar surveys will be undertaken at mid-term under terms of reference satisfactory to the Bank. As a result of mid-term assessments and the lessons then learned in respect of successes and difficulties in Project implementation, adjustments, as appropriate, will be made in respect of subsequent implementation arrangements. Finally, similar surveys will be undertaken at Project completion, again under terms of reference satisfactory to the Bank. (d) An agreement between MOJ and the Moroccan Bar Association regarding the provision of free legal advice in all commercial courts will be entered into not later than December 31, 2001. H. Readiness for Implementation [] 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. Z 1. b) Not applicable. 1 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. Z 4. The following items are lacking and are discussed under loan conditions (Section G): - 25 -  PMU fully staffed and operational 1. Compliance with Bank Policies 1 1. This project complies with all applicable Bank policies. D 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Ferid Belhaj ChrisTDelvoie Team Leader t Sector ManagerlDirector Country Manager/D(rector - 26 -  Annex 1: Project Design Summary MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT Key Performance Hierarchy of Objectives Indicators Monitoring & Evaluation .Critical Assumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Promotion of economic Gradually improving the Country assessments Government will remain development and private private sector's and public's reports; country integrative committed to sustained sector led growth by opinion of, and trust in, the tools and CDF. private sector growth strengthening the justice justice system. system and improving the justiceosystem. legal framework for business sern related activities. surveys Project Development Outcome I Impact Project reports: (from Objective to Goal) Objective: Indicators: The objectives of the Project Continued GOM commitment are to assist in improving to reform the performance of the commercial courts and the local registries of commerce housed in these courts, as well as the legal framework for the arbitration of commercial disputes, as a result of: 1. commercial courts Compared to baseline, Progress reports/Bank Acceptance and use of the making good use of modem increased user satisfaction supervision reports new system by the business case management techniques with: Midterm review report community and processes, as well as of (a) commercial court ICR all relevant core legal processes and timeliness of Baseline data and periodic information; commercial court decisions; surveys and (b) the accessibility of legal information. Training of commercial court administrators in modem case management - 30% each year as of September 30, 2001 Modem case management tools introduced by September 30, 2001 Reduction of backlog of commercial cases by 25% per year with effect as of October 1, 2002 - 27 -  2. improved security, Ready electronic access by As above accuracy and transparency the public to registry of business transactions as information as of December recorded in local registries 31, 2002. of commerce; 3. INEJ graduates trained INEJ graduates given the As above Greater acceptance of the under new curriculum for necessary tools to provide overall reform process careers as judges and court more efficient, reliable and through continuing administrators in the transparent services education for career commercial courts; development At least 10 new courses introduced in subjects relevant for commercial courts At least 10 INEJ trainers trained in modem methods of teaching At least 50 commercial court judges and 50 commercial court administrators trained 4. the MOJ managing and At least 10 communications As above dissemninating legal, judicial campaigns conducted, and regulatory information, including publications and and promoting a radio and TV broadcasts wide-ranging communication policy; and At least 10 Info-shops established. 5. a modem commercial Compared to baseline, Compared to baseline, arbitration code enacted for increased user and potential increased user and potential purposes of resolving user satisfaction with the user satisfaction with the business related disputes regime for the arbitration of regime for the arbitration of commercial disputes commercial disputes - 28 -  Key Performance Hierarchy of Objectives Indicators Monitoring & Evaluation Critical Assumptions Output from each Output Indicators: Project reports: (from Outputs to Objective) component: Improvement of the All necessary adjustments to Project progress and Laws and regulations legislative and regulatory the legal and regulatory supervision reports, introduced during the reform framework for commercial framework are enacted. mid-term review and process are adequate for transactions and the Completion Report their purposes resolution of commercial disputes Strengthening the capacity Automated case As above Laws and regulations of commercial courts to management systems introduced during the reform adjudicate business-related installed and fully process are adequate for cases by applying operational their purposes automated case management. Strengthening thle capacity of Automated case As above New laws and regulations the local Registries of management systems are in place and there is Commerce in each installed and fully continued commitment of Commercial Court operational the judiciary to the reform program Strengthening of INEJ by Autonomy from MOJ for As above Judges and court clerks will (a) reorganizing and INEJ in place acquire skills needed to modernizing INEYs implement reforms management structure; and New mediatheque (b) providing a revised and established and fully enhanced training program operational for commercial court judges and commercial court administrators Strengthening capacity of MOJ's Publication Unit As above MOJ provides clear the Ministry of Justice operational by July 2001 mandate for reform and for the modemization of its Publication and Information Units Support for the PMU Timeliness of Project As above PMU adequately staffed procurement; Timeliness of Project implementation reports; Timeliness of preparation of necessary Project documentation. - 29 -  Project Components / Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) 1. Improving the Legislative US$ 0.11 million Supervision reports Legislative and regulatory and Regulatory Framework changes are accepted and implemented 2. Strengthening the US$1.15 million Supervision reports Continued support from the Commercial Courts judiciary for refonn efforts 3. Modernizing Local US$2.01 million Supervision reports Adequate manpower Registries of Commerce at resources available Commercial Courts 4. Strengthening INEJ US$1.94 million Supervision reports Successful restructuring of INEJ management. 5. Strengthening of the US$0.75 million Supervision reports MOJ supports baseline Ministry of Justice Permanent monitoring of assessments and follow-up media coverage and periodic studies. analysis of public opinion. 6. Supporting the Project US$0.77 million Supervision and PMU receives support from Management Unit disbursement reports MOJ during start-up and implementation. - 30 -  Annex 2: Project Description MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT The Project aims: (i) to streamline court and registry processes and procedures; (ii) to improve access to the commercial courts and the local registries of commerce housed within them, (iii) to improve the judiciary's efficiency in handling business related cases, (iv) to provide the means, in terms of training and automation, for more efficient service from commercial court and registry staff to the public-at-large, and (v) to provide all users and potential users with more complete and up-to-date basic legal information. The result should be a significant increase in transparency and effectiveness in the handling commercial litigation and greater security in commercial transactions. The Loan will fund goods, services, including software development, training for commercial court and registries' staff and technical assistance for updating relevant legislation and regulations. By Component: Project Component i - US$0.11 million Jmproving the le2islative and reeulatory framework for commercial transactions and the resolution of commercial disputes This Component consists of the drafting and enactment of: (i) important amendments to existing legislation and regulations so as to streamline processes and procedures and otherwise permit the successful implementation of Components 2 and 3 described below; and (ii) a modem Commercial Arbitration Code. Modernizing the commercial courts and their registries of commerce and the training of their staff in the use of modem technologies cannot efficiently correct the existing deficiencies of these courts and registries without an appropriate legal and regulatory framework that allows for a considerably more streamlined, standardized and enforceable set of processes. There is, thus, an initial need to review the relevant existing legislation and regulations pertaining to commercial activities, including, but not limited to, the Code of Commerce, Company Law, and the Codes of Civil and Commercial Procedure, so as to simplify procedures, to allow for automation, and to do away with unnecessary, and sometimes contradictory, processes. The Government also recognizes that Morocco's commercial arbitration legislation is not up to date and that potential business litigants are in need of a more secure framework for private commercial arbitration should they choose to avail themselves of this mechanism for the settlement of their commercial disputes. Not only can arbitration be potentially quicker, less costly and more reliable than recourse to the formal judicial system, to the extent private arbitration of commercial disputes takes place there is a welcome reduction in the caseload of the commercial courts. The preparation and enactment of a modem Code of Commercial Arbitration with the wide participation of all major stakeholders, including the Bar Associations, the judiciary, and the business community-at-large is thus a priority. The Project will finance technical assistance: (i) for the review of all legislation and regulations relevant to the operation of commercial courts and local registries of commerce, as well as for the drafting of amendments to such legislation and regulations, and (ii) for the review of all legislation relevant to commercial arbitration and the drafting of a modem Commercial Arbitration Code. Project Component 2 - US$1.15 million - 31 -  Strengthenina the judicial system's capacity to adiudicate business-related cases throu2h the modernization of the commercial courts in terms of case manaaement This Component first aims to improve the way the commercial courts manage each of their cases from the start to the completion of the litigation process. The case management systems which are now in place in the commercial tribunals and commercial courts of appeal will be overhauled with automated tools introduced for the management of all specific cases, thereby significantly promoting the efficiency, fairness, transparency and reliability of commercial litigation in Morocco. This will be done through the development (possibly locally) of targeted software and the provision of technical equipment and will include training for all conmmercial court judges and other court staff in the use of the equipment and software. Secondly, this Component will assist in upgrading the working conditions of commercial court judges by providing them with direct, automated, access to legal and judicial infornation. As a result, these judges will be able to draft their formal judicial decisions and other related documents in a secure, efficient, electronic manner. Texts and other materials for commercial court law libraries, including essential legal manuals, will also be funded under this Component. Project Component 3 - US$ 2.01 million Stren _thenin2 the capacity of the local RegLstries of Commerce in each Commercial Court It is widely recognized that Morocco's Registries of Commerce provide poor services to registrants, operate with outdated registration and management tools and suffer significant backlogs in the handling of requests. This Component will thus introduce, and ensure the application of, appropriate automated systems for the registration and storage of essential company information which will also permit ready, reliable, access to this information by the public-at-large. Funding for all necessary hardware and software and for training in its use will be provided. Although this Component will focus exclusively on those Registries of Commercial in the Commercial Courts, it is anticipated that the lessons learned as a result will be made applicable throughout the Commercial Registry system. An essential objective of this Component is to make the local Registry of Commerce in each Commercial Court a more efficient and increasingly self-sustaining service provider. Over time, it is anticipated that each such Registry will obtain greater autonomy through the transformation of its legal status from a service under the direct administrative and budgetary authority of the Ministry of Justice, into a so-called SEGMA (Service Economique G&re de Maniere Autonome). Once accomplished, such transformation will improve the sustainability of each of these Registries of Commerce in terms of budget and administrative organization and will define more clearly the responsibilities against which perforrnance can, and will ultimately, be measured. The broad reform program envisioned for this Component includes: (i) organizational restructuring through improvement of the business processes for each of the Registries of Commerce in question; (ii) the provision of training in the use of modem management tools for new and current staff of these Registries; and (iii) the modemization and automation of the operation of these Registries. The Component will finance: (i) the automation of the local Registries housed in the commercial courts, so as to provide more timely and efficient service to users, improve the security of business transactions and free staff from the manual handling of files and requests; and (ii) the training of Registry staff in the use of the new technologies. Automation will allow for: the eventual inclusion of all existing files in the new management system; the updating of the status of all companies registered in terms of incorporation (including company name approval); the filing post-incorporation activities, such as company information updates (including company name changes); the registration of information - 32 -  concerning company directors and officers; the registration of mortgages, pledges, liens and other charges on the property of registered companies; the provision of access to public records and production of certified copies; document verification and authentication; and fee collection and reconciliation. The ready availability and accuracy of this information is of critical importance for potential equity investors in, and creditors of, Moroccan businesses. Project Component 4 - US$1.94 million Providing better training to oudges and court administrative staff through the strengthening of INEJ This Component will focus attention on a range of improvements in the Institut National d'Etudes Judiciaires (INEJ), the sole institution responsible for training Moroccan judges. Under this Component, goods, technical assistance and training will be financed pursuant to a time-bound action plan agreed between the Government and the Bank to permit: (a) the reorganization of INEJ so as to provide it with greater financial and admninistrative autonomy, and with this the introduction of: (i) modern management systems to assist INEJ in building increased managerial, administrative and budgeting capacity; (ii) an improved program for the training of trainers, judges and court administrators; (iii) a program of internal Moroccan and international cooperation on the part of INEJ; and (iv) a so-called "mediatheque" program; (b) the upgrading and enlarging of the INEJ curriculum, with a significant increase in the number, range and quality of courses in subjects of particular relevance to commercial activity: including such subjects as economics, accounting, finance, business management, commercial law, company law, consumer law, intellectual property law, competition law, intemational commercial law, law of the European Community, maritime law, and the law of civil and commercial procedure with, in each case, the introduction of up-to-date and more relevant course materials; and (c) the creation of a "mediatheque" with all appropriate hardware and software and corresponding improvements to the existing physical premises of the INEJ library. Project Component 5 - US$0.75 million Strengthening the communication capacity within the iustice system This Component will permit the MOJ to better manage and disseminate legal, judicial and regulatory information and to promote a wide-ranging communications policy, including a public awareness campaign in respect of the Government's comprehensive justice system reform Program of which the Project is a part. It will finance efforts to obtain large public adhesion to, a clear media understanding of, and a broad Moroccan consensus supporting the Program and the Project. The dissemination of information to the public through a MOJ web page and hard-copy publications, the so-called "info-shops" and the building of capacity within the MOJ's Information Unit will be financed. An intemet site for MOJ will be created and will include the development of a legal information page that will benefit users, especially those in the business community. Also, an office will be created within the Ministry for the publication of brochures and other basic material, targeting the public-at-large. Some of these materials will be drafted in terms easily understood by all segments of the population. - 33 -  Secondly, "info-shops" will be created in the Ministry of Justice and, on a pilot basis, in all commercial courts, for the purpose of disseminating legal information to the public by means of brochures and guides. These "info-shops" will also serve to direct information-seekers to appropriate sources of more detailed information. And thirdly, the MOJ's Information Unit will establish and maintain adequate capacity to act as the focal point for Ministry communications with the public and the media regarding the reform Program and the Project. This Unit will also be in charge of conducting polls and surveys and assessing the impact of the Program generally, and the Project in particular, on users and the public-at-large. This Component will also provide poorer segments of the population with at least some free legal services so as to increase their understanding of their rights and to enhance their trust in the justice system. To that end, by December 31, 2001, MOJ will have entered into an agreement with the Moroccan Bar Association by the terms of which Association lawyers will be assigned to each commercial court and commercial court of appeal in order to provide free basic legal advice. MOJ will finance the hiring of the necessary staff, the provision of the its internal information and communication systems, as well as the costs involved in providing the requisite space and equipment to ensure the carrying out of the aforementioned agreement with the Bar Association. Project Component 6 - US$0.77 million Supporting the Project Management Unit Project management and implementation will be carried out by a Project Management Unit (PMU) located within the Ministry of Justice. The PMU will be comprised of a Project Director, a Deputy Project Director, a judicial system reform specialist, a procurement/disbursement specialist, a financial management specialist, an information technology specialist, a communications specialist and two assistants. In performing its functions, the PMU will: (a) ensure the co-ordination of all actions required for Project management and implementation; (b) provide assistance and support to all agencies involved in Project execution; (c) be responsible for procurement; (d) maintain Project accounts and Project financial management systems; (e) disseminate Project-related information; (f) conduct the Project's mid-term review and completion reviews; (g) be the Bank Project team's counterpart during Project implementation and evaluation; (h) report directly to the Steering Committee on a semi-annual basis; and (i) act as the Steering Committee secretariat. The PMU will be provided with the resources necessary to hire short- and long-term specialized consultants to facilitate Project implementation and ensure appropriate Project monitoring. It will also have the responsibility, and be provided resources to plan, budget and manage all facets of Project management and implementation. - 34 -  Annex 3: Estimated Project Costs MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT local Foreign Total Project Cost By Component US $miliion US $million US $million 1. Improving the Legal and Regulatory Framework 0.09 0.01 0.10 2. Strengthening Commercial Couts 0.69 0.37 1.06 3. Strengthening Registries of Commerce at Commercial Courts 0.91 0.94 1.85 4. Strengthening INEJ 1.30 0.49 1.79 5. Strengthening the Ministry of Justice 0.51 0.18 0.69 6. Supporting the Project Implementation Unit 0.54 0.17 0.71 Total Baseline Cost 4.04 2.16 6.20 Physical Contingencies 0.20 0.11 0.31 Price Contingencies 0.15 0.07 0.22 Total Project Costs 4.39 2.34 6.73 Total Financing Required 4.39 2.34 6.73 Local Foreign Total Project Cost By Category US $mirlion US $mittion US $million Goods 2.23 1.90 4.13 Works 0.08 0.00 0.08 Services* 1.79 0.44 2.23 Miscellaneous 0.29 0.00 0.29 Total Project Costs 4.39 2.34 6.73 Total Financing Required 4.39 2.34 6.73 * Includes training of judges and other court staff. - 35 -  Annex 4 MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT N/A - 36 -  Annex 5: Financial Summary MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT Years Ending Y Year I Year 2 | Year 3 Year 4 | Year 5 Year 6 | Year 7 Total Financing Required Project Costs Investment Costs 1.1 2.2 2.6 0.4 0.0 0.0 0.0 Recurrent Costs 0.1 0.1 0.1 0.1 0.0 0.0 0.0 Total Project Costs 1.2 2.3 2.7 0.5 0.0 0.0 0.0 Total Financing 1.2 2.3 2.7 0.5 0.0 0.0 0.0 Financing IBRD/IDA 0.9 1.8 2.2 0.4 0.0 0.0 0.0 Government 0.3 0.5 0.5 0.1 0.0 0.0 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 1.2 2.3 2.7 0.5 0.0 0.0 0.0 Main assumptions: - 37 -  Annex 6: Procurement and Disbursement Arrangements MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT Procurement 1. The Project will be managed by a Project Management Unit (PMU) located within the Ministry of Justice. For procurement related activities, the PMU will be staffed with a procurement specialist and a procurement assistant. This procurement staff will work closely with INEJ and MOJ's technical units responsible for Components 1 through 5 of the Project. Responsibility for the preparation of TORs and technical specifications will lie with INEJ and MOJ, as the case may be. The procurement staff in the PMU will be responsible, however, for all activities related to the procurement cycle. 2. For all contracts for goods or works fnanced in whole or in part from the Loan, the Bank's Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995 (revised January and August 1996, September 1997 and January 1999) will apply. Consultants services financed in whole or in part from the Loan will be procured in accordance with the Bank's Guidelines: Selection and Employment of Consultants by World Bank Borrowers, January 1997 (revised September 1997 and January 1999). 3. Table A shows the Project items to be financed by the Loan and the proposed procurement methods. Amounts in parenthesis show the amounts financed by the Loan. The procurement plan reflects the fact that Component 2 of the Project covers a total of 9 Commercial Courts and Component 3 of the Project covers a total of 9 local Registries of Commerce. 4. Civil Works (US$0.07 million). There is one contract for civil works, namely for minor rehabilitation of the INEJ library. Estimated to have a value of US $70,000, this contract will be procured through simplified NCB procedures for small contracts. 5. Goods (US$4.2 million). (a) Goods to be purchased include office equipment and office furniture, supplementary reading materials and vehicles. Commercial courts will be upgraded with modem, computerized, court and case management systems and registries of commerce will be upgraded with modem, computerized, business and secured transaction registration systems. To the extent possible, the purchase of this equipment, including all relevant software, will be phased over time and will be grouped into suitable packages. Therefore, all these items will be purchased throughout the life of the Project. For individual contracts of less than US$30,000, up to an aggregate not exceeding US$500,000, goods will be procured through national shopping, with solicitation of price quotations from at least three qualified companies eligible under the Bank's Guidelines. Procurement of goods estimated to cost more than US$30,000 but less than US$300,000 per contract, up to an aggregate not exceeding US$0.98 million, will be carried out through NCB procedures. Procurement of goods estimated to cost more than US$300,000 per contract will be carried out through ICB procedures using the Bank's standard bid documents. 6. Services (US$2.47 million). (a) A Training Program and preparation of training material is outlined in the Project Implementation Plan and has an aggregate amount of US$1.5 million. Implementation will be subject to prior review by the Bank. Training expenditures will be based on agreed annual rates or unit costs covering expenditures for course operation, trainee stipends, travel and lodging and for monitoring activities. Training activities may also cover inter-institutional seminars and visits. A list of seminars, workshops and expected costs will be reviewed annually. (b) Consultant Services has an aggregate amount of US$1.2 million. The Quality and Cost-Based Selection Process (QCBS) will be used, with prior review for all contracts costing the equivalent of US$100,000 or more for firms and US$50,000 or more for - 38 -  individuals. For contracts costing less than the prior review thresholds, the Bank will only review the relevant Terms of Reference. Below these thresholds, with the exception of the employment of consultants through sole source contracting for reasons critical to the Project, the selection method may be on the basis of Consultant's Qualifications (CQ). 7. Miscellaneous. Recurrent costs attributed to operation and maintenance directly related to the Project will be financed directly by the GOM. Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method Expenditure Category iCB NCB Oter N.B,F. Total Cost 1. Works 0.00 0.08 0.00 0.00 0.08 (0.00) (0.07) (0.00) (0.00) (0.07) 2. Goods 2.03 0.58 0.17 0.00 2.78 (1.53) (0.55) (0.13) (0.00) (2.21) 3. Services 0.00 0.00 3.11 0.36 3.47 (0.00) (0.00) (3.03) (0.00) (3.03) 4. Operating Cost 0.00 0.00 0.00 0.40 0.40 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Front-end fee 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 2.03 0.66 3.28 0.76 6.73 (1.53) (0.62) (3.16) (0.00) (5.31) "Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies 2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the PIU, training, technical assistance services, and incremental operating costs related to managing the Project. - 39 -  Table Al: Consultant Selection Arrangements (optional) (US$ million equivalent) Consultant See77n eto ExpenditureI QCB QB SF80 LS " cte oLB.F. t Categry ____ A. Firms 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) B. Individuals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 . I (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) 1\ Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank Loan. - 40 -  Prior review thresholds (Table B) Table B: Thresholds for Procurement Methods and Prior Review1 Contract Value Contracts Subject to Threshold Procurement Prior Review Expenditure Category (US$ thousands) Method (US$ millions) 1. Works >50,000 NCB 1 contract 2. Goods x<30,000 NS first two contracts 30,000<x<=300,000 NCB first two contracts x>300,000 ICB all contracts 3. Services Firms: x>100,000 QCBS all contracts for firms Individuals: x<=100,000 QCBS,CQ TORs only for firms x>50,000 see section V of Guidelines all TORs, contracts, CVs x<= 50,000 see section V of Guidelines TORs Total value of contracts subject to prior review: Overall Procurement Risk Assessment Average Frequency of procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review/audits) Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance. - 41 -  Disbursement Allocation of loan proceeds (Table C) 8. Table C above shows the allocation of Loan proceeds and the financing for the various categories of expenditures. Preparation and submission of disbursement applications will be the responsibility of the PMU. 9. The Loan is expected to be disbursed over a period of three years. The expected closing date of the Project will be January 31, 2004. The estimates of Loan disbursements over the three-year period are presented on page 2 of this Project Appraisal Document. Withdrawals, in an aggregate amount not exceeding EUR260,000, may be made in respect of Categories 1, 2, and 3 set forth in the table in paragraph 1 of this Schedule on account of payments made for expenditures before that date but after July 1, 2000. Bank Reporting and Disbursement Arrangements 10. PMR-based Reporting System. The Project will develop a management and reporting system that will generate quarterly Project Management Reports (PMRs). A draft model PMR, based on the Loan Administrative Change Initiative (LACI) Implementation Hand-book and on the Project's design, has been developed and is documented in the PIP. The PMU will define Project information needs, formats, and frequency of input from various PMU members in order to enable production of the PMRs in a timely manner. 11. The PMR will comprise three sections as follows: (a) Financial statements, which provide the following: (i) information on sources and uses of funds by Loan category and Project activity; (ii) forecast of expenditures; (iii) amount of disbursement requested; and (iv) reconciliation of the Special Account (SA) (see paragraph 14 below); (b) Project Progress Reports which provide information on Project implementation progress, in physical and financial terms, using monitoring indicators. Such information will include the identification of deviations from original plans and explanations for such deviations; and (c) Procurement Management Reports on the status of procurement and contracts which are subject to the Bank's prior review as well as of those contracts subject to the Bank's post-review. 12. The PMU will follow traditional disbursement procedures until the Project is converted to PMR-based disbursement. The Bank will require full documentation for its prior review of contracts: (i) for goods which exceed US$300,000 equivalent; (ii) for consulting firms which exceed US$100,000 equivalent; and (iii) for individual consultants which exceed US$50,000 equivalent. There is no joint or co-financing with bilateral or multilateral development partners and the Bank will not be administering any funds on behalf of others. -42 -  Table C: Allocation of Loan Proceeds Expendfture Category Amount in US$million Financing Percentage Civil works 0.07 80% of all expenditures Goods 3.20 100% of foreign expenditures 85% of local expenditures Services 1.45 100% of all expenditures Unallocated 0.53 Total Project Costs 5.25 Front-end fee 0.05 Amount due under Section 2.04 of this Agreement Total 5.30 Use of statements of expenditures (SOEs): 13. The PMU will claim reimbursement on SOE for US$30,000 for civil works, US$300,000 for goods, US$100,000 for consulting firms, US$50,000 for individual consultants.. Special account: 14. To facilitate Project implementation and make timely payments of the Bank's share of eligible expenditures to contractors, suppliers, consultants and others, the Borrower may open and maintain a Special Account (SA) in a commercial bank, on terms and conditions acceptable to the Bank. The PMU will have access to, and manage, the SA. Disbursement will be made by the PMU directly from the SA. The authorized allocation of the SA will be equal to four months estimated expenditures, equivalent to US$0.50 million. At the start of the Project, the initial deposit to the SA will be limited to US$0.25 million. The remaining amount of the authorized allocation may be requested only after cumulative disbursements reach the equivalent of US$1.2 million. Project Financial Management 15. The Financial Management System (FMS) in place in the MOJ, implementing agency for the Project, is based on principals and procedures defined by the legal framework applicable to the public sector and more specifically to governmental institutions. The main characteristics of this system are the following. 16. Accounting sYStem. A cash based accounting system with the outline of budget components is operational according to the regulation described in the public accounting law. The transactions in terms of commitments and disbursements are reflected in legal books maintained manually. 17. Budgeting system. An annual approved budget for commitment and disbursement is issued by MOJ based on the needs and actions to be undertaken. The annual budget is submitted to the Ministry of Finance which is in charge of budget system control through its specialized units. The general budget includes the Government's contribution as well as funds from a special account. The source of funds of this special account are judicial taxes and legal stamps. 18. Disbursements. Two entities are involved in the disbursement procedures. The first is within the -43 -  Construction and Equipment Division, and the second is the unit within the Budget and Accounting Division. Payments are authorized by the Public Accountant (PA) and processed by the Tresorerie Generale du Royaume (TGR). Regarding transactions financed totally or partially by the Bank the existing procedures for the use of special accounts, spelled out in a circular of June 1990, do not allow the use of special accounts for payments that are not pre-approved by the Budget Directorate within the MOF, through a certificate ascertaining the eligibility of the expense for financing under a given Bank loan. The current procedure prevents the use of special accounts for disbursements for which only SOEs are required by the Bank, and burdens the Budget Directorate with responsibility for reviewing a very large and increasing number of small project expenses, which in turn, translates in disbursement delays. 19. Control of the budget execution. Fiduciary responsibility for control of budget execution and monitoring is assigned to the General Inspectorate of Finance (IGF) and to the Audit Court. The Budget Directorate within the Ministry of Finance plays an important role in controlling transactions financed by external donors. Even though the levels of controls aim to reinforce transparency, the general system remains inefficient and involves delays. 20. Management Information System. Each Directorate/division monitors operational activities according to specific procedures. Some applications which aim to improve working procedures have been developed with the assistance of consultants or through the MOYs own information technology team. However, the general information system is still incomplete and incoherent. A program for modernization was launched in 1999 and will allow implementation of a comprehensive management information system. The target date for completion is set for December 2004 and will include all structures at the central and regional levels. The Computerization and Statistics Division is highly involved in this process and a team of 20 IT specialists has been appointed and posting of another group of 10 specialists is in process and will be effective by no later than June 2000. It should be noted that in addition to the Project the Budget and Equipment Directorate is about to launch two other projects financed by grants from USAID and the EU. This situation will consequently increase the workload and thus the need for staffing and implementation of an adequate organization able to monitor all projects adequately. General Assessment and scope for improvement 21. General Assessment. Insufficiencies in MOJ's financial management were identified during the review, including non-computerization of the accounting and budgeting system, non-official definition in writing of financial management procedures, lack of adequate skills in some key units, insufficient training program for upgrade and update of competencies, and an incomplete Management Information System. Though MOJ is in the process of addressing several of these issues, mainly through an ambitious modernization program, implementation of this program will require several years of concerted efforts and the mobilization of important funds. 22. Scope for improvement. Even though the modernization program launched in 1999 aimed to implement a comprehensive Management Information System, the review of this program shows that many actions still need to be undertaken in parallel by MOJ in order to finalize the whole process. These actions are mainly related to: (i) issuing a detailed plan for the whole process, indicating the source of financing for each action, (ii) the setting up of a steering committee responsible for strategic decision making and the close monitoring of the Project, and (iii) hiring of a highly qualified specialist to assist in implementation the Management Information System and in training. 23. Financial Management System for the Project. Since the program of modernization will not be -44 -  effective before the year 2004, there is a need during the transition period to set up special arrangements for the management and monitoring of the Project. The recommendations take into account the ongoing modemization program and could be considered as complementary. The main actions to be implemented during a period of 12 months and no later than June 2001, are the following: > the formal establishment of a Project Management Unit (PMU) headed by the Project Director who will have responsibility to identify qualified PMU staff. Job descriptions and responsibilities will be issued by writing and included in the Financial Management Procedures Manual (FMPM). > Hiring of a specialized consultant in accounting, finance, and information system in order to issue the FMPM for the Project according to TORs acceptable to the Bank. The FMPM will define the flow of funds, the internal control rules, finance and disbursement procedures, relationship between all the intemal and extemal entities involved in Project implementation, the chart of accounts, and reporting procedures and rules. > Acquisition of needed hardware for the PMU. This will start at an early stage in order to allow the launching of the training program and improvement of the computer skills of the PMU staff. > Hiring of a short-term consultant to assist the PMU during a first 24 months. This consultant who will be a highly-qualified accounting and finance specialist who will take responsibility for the PMU's accounting, finance and reporting duties. This consultant will also train PMU staff involved in Project implementation. Specific TORs will to be issued, and submitted to the Bank. > Development of a specific application (e.g. Access data base) in order to maintain computerized Project accounts and financial reporting. > Development of the training program. Specific training sessions for procurement, disbursement, accounting, project management, and financial management will be undertaken. The training program will include all staff involved in Project implementation, as well as their backups. Each staff member's capacity, background and experience will be taken into consideration in designing his or her training program. Project Financial Management Characteristics 24. Organization of the PMU. The head of this structure will be designated officially as the Project Director, and he will act as coordinator and take overall responsibility for the Project. This person will be responsible for monitoring and evaluation as well as procurement, finance, budgeting, and accounting functions. The Project Director will also hire adequate staff to assist in Project management taking into account the activity level and the mandatory segregation of duties according to acceptable internal control concepts. To establish a sound financial management system, the Project Director will be assisted during a period of 24 months, by a qualified financial and accountant specialist. This short-term consultant will be expected to demonstrate a reasonable knowledge and understanding of World Bank procurement, disbursement, project accounting, financial reporting and auditing guidelines and procedures. 25. The Project management team will include among others: * A Project Director as head of the PMU * A technology specialist which could be the head of the Computerization and Statistics Division * A financial management specialist as short term consultant -45 -  * Three focal points from contract unit, budget and accounting division and computerization and statistics division 26. To establish an acceptable system for the monitoring and managing of the Project, INEJ and the Supreme Court may designate, when need arises, to the steering committee a coordinator responsible of the technical monitoring of the components to be implemented at their level. 27. Financial and Accounting Policies for the Project have to be developed. These policies are crucial for ensuring transparency, providing clarity regarding financial aspects to the various stakeholders and finance staff, ensuring uniformity, and enforcing accountability. These policies inter alia cover the following aspects: (i) transactions which will be treated as Project expenditures including their classification; (ii) expenditures which will be eligible for reimbursement from the Bank loan; and (iii) Project accounting policies. These policies will be gradually expanded and refined to include aspects such as efficient management and deployment of funds, internal control policies, etc. 28. Project Accounting System. The PMU will maintain books of accounts, prepare and issue annual Project financial statements and quarterly Project Management Reports (PMR), as well as the submission of these documents on a timely basis to the Steering Committee, the Bank and the auditors. 29. The overall principles for Project accounting are outlined below: (a) Books of accounts for the Project will be maintained on cash basis principles. Project accounts will be maintained using the application to be implemented by no later than January 31, 2001. Maintaining the reporting financial system to reflect all the transaction flows and issuing of the quarterly PMRs will complete this system. (b) Project accounting will cover all sources and utilization of Project funds. This will include payments made and expenditures incurred. All project-related transactions (whether involving cash or not) will be taken into account in the reporting system. Disbursements made by the Bank and the Special Account maintained by TGR will also be included in the Project accounting system. Funds received from different sources will be identified separately and reflected in the Project accounts. (c) Project-related transactions and activities will be distinguished from other activities. This distinction will be reflected at the data-capture stage. An identifiable Trial Balance for the Project capturing all Projects receipts, expenditures, and other payments under the Project will be prepared. A Chart of Accounts for the Project will be developed. The Chart of Accounts will conform to the classification of expenditures and sources of funds as indicated in the project documents (Project Implementation Plan, Project Appraisal Document, COSTAB). The Chart of Accounts will allow data to be captured in a manner to facilitate financial reporting of Project expenditures by: (i) Project component; (ii) expenditure categories; and (iii) disbursement categories. (d) A system of reconciliation between the Project Financial Statements /financial reports and the legal books of accounts will be defined. (e) Physical information on key performance indicators that can be readily linked to financial costs will be maintained as part of the Project financial management system. Initially this will be maintained for some high cost items that represent a significant portion of Project cost, and for items for which data on physical activities can be easily captured. These items have to be identified -46 -  and indicated in the FMPM. This list will be gradually expanded during implementation. 30. Issuing of the accounting procedures manual for the Project will outline at a minimum: (i) job responsibilities within the PMU; (ii) monthly and annual accounting ledger closing and reconciliation procedures, including centralization and consolidation of data; (iii) accounting policies; and (iv) disbursement procedures. It is important that this manual be in writing so it can be distributed to all PMU staff. 31. Information Flow for Accounting Purposes. The information flow will be as follows: (a) The PMU will generate and maintain vouchers and supporting documentation for all Project expenditures; (b) Sub-Project accounts (one for each component ) will be issued on a monthly basis and transmitted to the technical department and steering committee for review, reconciliation with technical data and approval; (c) Consolidated Project financial statements and PMRs will be issued and submitted to the Steering Committee before their official transmission to the Bank and their submission to the IGF for purposes of annual audit; and (d) This system will be reviewed in the light of implementation experience and modified as necessary. 32. Internal Controls. The Project financial managernent system should include the following internal control mechanisms: (a) Operation of a budgeting system and regular monitoring of actual financial performance with budgets and targets; (b) Adoption and operation of simple, clear and transparent financial and accounting policies which will govern financial management of, and accounting for, the Project. These policies and procedures will be included in the Financial Management Procedures Manual; (c) Establishment at the transaction level of policies, procedures and systems for ensuring an acceptable internal controls mechanism such as checking of expenditures, appropriate documentation, levels of authorization, segregation of duties, periodic reconciliation, physical verification, easy access to supporting documents, etc. These policies and procedures will be reviewed and updated periodically; and (d) Implementation of a comprehensive system aiming to: (i) aggregate data at the level of the PMU; and (ii) the issuance of the Project financial statements and the PMRs. Financial Management Reports 33. Quarterly Project Management Reports (PMR) for the Project will be generated from the computerized financial management system. These reports will be management-oriented (i.e., sunmmaries rather than transactional details) and will be used for Project monitoring and implementation by each executing agency. The PMR will include the three following parts: -47 -  (a) Financial Statements that include: * Summary of sources and uses of funds * Uses of funds by Project activity * Project balance statement of affairs * Cash withdrawal * Cash forecast * Special account statement (b) Project progress statements that include: * Output monitoring report using contract management information, or * Output monitoring report using unit variance as monitoring indicator (c) Procurement management report that includes: * Contract expenditure report - Goods and works * Contract expenditure report - consultant * Procurement management report - Goods and works * Procurement management report - Consultant Formats of the reports will be part of the Financial Management Procedures Manual. 34. Annually: Audited Project Financial Statements (PFS) will be submitted to the Bank. PFS will include: (i) a statement of sources and utilization of funds or Balance Sheet, indicating funds received from various sources, Project expenditures, and assets and liabilities of the Project; (ii) schedules classifying project expenditures by components, expenditure categories, and sector; (iii) a Special Account Reconciliation Statement; and (iv) a Statement of Withdrawals made on the basis of Statements of Expenditure (SOEs). Audited PFS will be submitted to the Bank not later than 6 months after the end of each Fiscal Year. Audit Arrangements 35. Annual Project financial statements audited by auditors acceptable to the Bank will be submitted to the Bank within 6 months after the end of each Fiscal Year. 36. The audit will be comprehensive and cover all aspects of the Project (i.e., all sources and utilization of funds, and expenditures incurred). The audit will be carried out in accordance with International Standards on Auditing and the Bank's guidelines reflected in the Financial, Accounting, Reporting and Auditing Handbook (FARAH). Each executing agency as well as PMU's team will provide the auditor with access to project-related documents and records, and information required for the purposes of the audit. The Auditor will carry out a concurrent audit during the fiscal year, to bring to management's attention any issues, which need to be addressed. This will strengthen internal controls and will also facilitate early completion of the annual audit. Readiness for Implementation 37. Project implementation shall be preceded by the following: (a) Project organization including official designation of the Project Director and the staffing of the PMU, including the appointment of the financial management specialist; (b) Development of the database to be used to maintain Project accounts and PMRs; and (c) Development of an appropriate training program to improve computer literacy, Project management, procurement, disbursement, and accounting skills. - 48 -  Annex 7: Project Processing Schedule MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT Pl-ftmi - Actted Time taken to prepare the project (months) 12 12 First Bank mission (identification) 06/01/99 06/01/99 Appraisal mission departure 04/10/2000 04/10/2000 Negotiations 04/24/2000 04/24/2000 Planned Date of Effectiveness 08/01/2000 08/01/2000 Prepared by: Ferid Belhaj and Amine Khene Preparation assistance: Merlin Ponraj and Josephine Salang Bank staff who worked on the project included: | Naime Speciality Eric Haythome Senior Counsel Hans Korb Implementation Specialist Samia Msadek Financial Management Specialist Maurice Gress Senior Procurement Specialist Ezzeddine Moudoud Consultant Fawzia Majid Aziz Administrative Officer Eileen Brainne Sullivan Operations Analyst Jan-Marie Hopkins Office Manager - 49 -  Annex 8: Documents in the Project File* MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT A. Project Implementation Plan A Project Implementation Plan (PIP) has been prepared. B. Bank Staff Assessments 1. Identification Aide-Memoire, June 1999 2. Preappraisal Aide-Memoire, February 2000 3. PSA Update, 1998 4. PRSL, 1999 5. CDF, Justice Matrix, 1999 C. Other Studies financed through IDF Grant: Modernization of the Legal Information System, 1997 Studies financed through PHRD Grant funding, 2000. *Including electronic files - 50 -  Annex 9: Statement of Loans and Credits MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT Difference between expected and actual Original Amount in US$ Millions disbursements' Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Org Frm Revd P042414 1996 Morocco COORtMON SOCIAL PRO 28.00 0.00 0.00 18.10 5.32 0.00 P005525 1999 Morocco HEALTH MANAGEMENT 66.00 0.00 0.00 59.30 14.72 0.00 P005499 1994 Morocco IRR. AREAS AGR. SERV 25.00 0.00 9.90 6.42 16.52 6.64 P005519 1999 Morocco LAKHDAR WATERSHED MG 4.00 0.00 0.00 3.96 0.63 0.00 P005514 1993 Morocco LAND DEVELOPMENT 130.00 0.00 34.00 16.31 62.31 6.67 P005524 1999 Morocco MA-FES/MEDINA REHAB. 14.00 0.00 0.00 12.23 3.64 0.00 P058128 1999 Morocco MA-TELECOM, POST AND IT 101.00 0.00 0.00 49.99 -0.51 0.00 P005523 1998 Morocco MUNICIPAL FINANCE 11 70.00 0.00 0.00 30.86 26.89 0.00 P052247 1999 Morocco PILOT FISHERIES DEV. 5.00 0.00 0.00 4.46 0.62 0.00 P038978 1997 Morocco PSD III-VOC TRG. 23.00 0.00 0.00 16.63 13.04 5.54 P043725 1997 Morocco RAILWAY RESTR & PRIV 85.00 0.00 0.00 63.28 24.88 0.00 P040566 1998 Morocco RURAL W.S.& SANITATN 10.00 0.00 0.00 7.59 5,85 -0.47 P005462 1993 Morocco SECOND LSI IMPROVEME 215.00 0.00 70.56 35.03 77.18 23.38 P005489 1995 Morocco SECONDARY ROADS 57.80 0.00 0.00 32.52 36.51 2.41 P005503 1996 Morocco SEW.& WATER REUSE II 40.00 0.00 0.00 33.13 11.67 0.00 P005501 1996 Morocco SPI - EDUCATION 54.00 0.00 0.00 34.10 6.94 0.00 P042415 1996 Morocco SPI - HEALTH 68.00 0.00 0.00 31.30 -4.25 0.00 P005521 1998 Morocco WATER RESOURCE MGMT. 20.00 0.00 0.00 17.38 3.73 0.00 P005435 1994 Morocco WATER SUPPLY V 160.00 0.00 70.98 26.70 81.37 -1.49 Total: 1175.80 0.00 185A4 499.29 387.06 42.68 - 51 -  MOROCCO STATEMENT OF IFC's Held and Disbursed Portfolio In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1995 Attijari 0.00 0.48 0.00 0.00 0.00 0.48 0.00 0.00 1987190 CIH 13.89 0.00 0.00 0.00 13.89 0.00 0.00 0.00 1990 ENNASR 0.94 0.00 0.00 0.00 0.94 0.00 0.00 0.00 1994/96 Mediafinance 0.00 0.66 0.00 0.00 0.00 0.66 0.00 0.00 1991 SEAVI MVB II 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.00 1999 Settavex 4.62 9.00 0.00 0.00 4.62 9.00 0.00 0.00 1991 VIM MVB II 0.00 0.02 0.00 0.00 0.00 0.02 0.00 0.00 Total Portfolio: 19.45 10.56 0.00 0.00 19.45 10.56 0.00 0.00 Approvals Pending Conmmitment FY Approval Company Loan Equity Quasi Partic Total Pending Commitment: 0.00 0.00 0.00 0.00 - 52 -  Annex 10: Country at a Glance MOROCCO: LEGAL AND JUDICIAL DEVELOPMENT M. East Lower. POVERTY and SOCIAL & North middio- Morocco Africa income Development dlamond' 1998 Ponmdation mid-vear (millions) 27.8 28S 9 Life expectancy GNP car nanita (Atlas method. USS) 1-250 27050 1 710 GNP IA tas method. USS billions) 34.8 585 1 557 Averaas annual arowth. 1992-98 Ponijlation I%l 1a 2.2 1 1 Labor forcef%) 2.2 3.0 1.5 GNP _. Gross per ~~~~~~~primary Most recent estimate (latest vear available. 1992-981 per capita '. nnIen Povertv f% of Doculation below national Dovertv line) 13 t/rhan nnnulation f% of fotal oooulationl 54 58 58 I ife axnoetancv at birth (vearsl 67 67 68 Infant mortalitv (oer 1.000 live births) 51 49 38 Child malnitritinn f% of children under 5) 10 14 Access to safe water Access to safe water (% of ooDulation) 57 81 75 Illitpracv f% of nooulation aoe 15+) 54 38 14 Gross orimarv enrollment f% of school-aae oooulation) 86 96 103 Morocco Male 97 103 105 Lower-middle-income group Female 74 89 100 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1977 1987 1997 199S Economic ratios' GDP (USS billions) 11.0 18.7 33.4 35.1 Gross domestir invAstment'r)lfP 34 2 21 1 20 7 22 6 Exoorts of ooods and services/GDP 16.9 23.6 27.6 27.3 Trade Gross domestic savinnslGnfP 13.8 15.8 13R 14 7 t3ross national savinns/Gl)P 17 1 22.1 20 4 72 3 rCirrent acounnt halance/GrP -165. 1 0 -0.3 -0 1 Interest navmnnts/GDP I a 3 6 3 R Domestic A Investment Total debl/GDP 48,3 110.2 57.8 65.8 Savings s Total debt serviceRlynorts t4.5 29 5 26 6 23.4 Present value of debt/GDP 51.3 Present valiue of deht/pxnnrts 148 6 Indebtedness 1977-87 1988-98 1997 1998 1999-03 faveraae annual arowth) G))P 41 2 4 -2 3 6 5 Morocco GNP nor canita 1 5 0 6 -3 9 4.5 Lower-middle-income group Exoorts of ooods and services 4.5 6.5 6.3 3.6 7.7 STRUCTURE of the ECONOMY 1977 1987 1997 1998 Growth rates of output and investment (%) (% of GDP) 20 Anricullttire 16 4 15 4 15 4 16 8 Indiustrv 32 6 32 9 33.a 32 n Manufanturino 16 6 18 2 17 7 17 1 Services 51 1 51 R 51 6 61 4 o Private cnonsinmotion 65 6 87.5 68 7 67 2 -10 General novemment ronsulmntion 20 6 15 7 17 R 18 2 -GDI -O GDP Imnorts of ooods and services 37.3 27.8 34.7 35.2 (averaoe annual arowth) 1977.87 1988-98 1997 1998 Growth rates of exports and imports (%) Aanriculture 4.1 -0.7 -26.5 23.6 is lndi,strv 2 3 0 8 1 1 8 10 A Manufacturina 4.1 3.1 3.3 2.4 Services 5 2 3 0 08 4 9 s - Private consumDtion 2.9 2.5 -3.9 3.6 o General onvemment nonsurmntion 53 1.3 -13.2 9 5 94 95 97 go Grnss domestic investment 1 5 10 5 19.1 s Imonrts nf noods and services -0 4 5 2 11 6 2 Exports -Imports G.rnss national nrndijci 3 8 2 5 -2 2 6 4 Note: 1998 data are preliminary estimates. ' The diamonds show four kev indicators in the countrv fin bold) comoared with its income-orouo averaoe. If data are missinoa the diamond will hb incmnnlate - 53 -  Morocco PRICES and GOVERNMENT FINANCE Domest(pricess 1977 1987 1997 1998 Inflatbn (h) (% change) 10 Consumer prices 12.6 2.8 1.0 2.7 81 Implicit GDP deflator 15.7 3.9 2.0 0.7 r, Government finance 2 (% of GDP, includes current grants) o Current revenue 21.7 16.0 24.7 25.1 93 94 95 9s 97 99 Current budget balance 3.1 0.3 2.6 3.1 GDP deflator t CPI Overall surplus/deficit 2.7 -5.7 -3.6 -3.1 TRADE (USS millions) 1977 1987 1997 1998 Export and Import levels (USS millions) Total exports (fob) 1,314 3,068 7,039 7,185 12,000 Other agriculture 429 858 1,374 1,362 Phosphorus 469 368 435 453 9.*00 Manufactures 218 876 1,467 1,490 000 Total inmports (cif) 3,237 4,388 9,522 10,120 Food 432 476 1,065 1,167 3,000 Fuel and energy 371 738 1,296 905 Capital goods 1,104 881 1,661 2,213 o Exoort orce index (1995=1001 .. 71 84 87 Imoort orice index 11995=100 .. 76 89 97 *Exports *Imports Terms of trade (1995=1001 ,, 94 95 9a BALANCE of PAYMENTS fUSS millionsl 1977 1987 1997 1998 Current account balance to GDP ratio (%b) Exports of goods and services 1,839 4,420 9,510 9,964 o ' liportsofgoodsandservices 4,041 5,218 10,627 11,210 97 og Resource balance -2,202 -799 -1,117 -1,247 . Net incomne -192 -767 -1,175 -1,090 -2 Net current transfers 560 1,759 2,205 2,304 -3 Current account balance -1,834 194 -87 -32 Financing iters (net) 1,832 94 640 268 Changes in net reserves 2 -288 -553 -236 a Memo: Reserves inciudino oadd (USS millions) 531 427 4.620 4.951 Conversion rate (DEC. local/USSI 4.5 8.4 9.5 9.7 EXTERNAL DEBT and RESOURCE FLOWS 1977 1987 1997 1998 (USS miIi,onsl Composition of total debt, 1998 (USS millions) Total debt outstanding and disbursed 5,335 20,651 19,321 19,609 IBRD 340 2,558 3,271 3,388 G 336 IDA 38 41 31 29 A: 3,388 Total debt service 357 1,779 3,081 2,841 F: 5,21 B:29 lBRD 41 345 532 505 IDA 0 1 2 0 Composition of net resurce flows D ,5 Official grants 60 77 269 225 D. 3,058 Official creditors 648 481 -753 -284 Privatecreditors 1,144 294 -141 -181 Foreign direct investment 57 60 1,200 800 Portfolio equity 0 0 243 174 E: 7,582 World Bank program Commitments 168 802 155 130 A - IBRD E - Bilateral Disbursements 71 405 141 291 B- IDA 0-Other multilateral F- Private Prindpal repayments 17 164 295 299 C - IMF G - Short-tern| Net flows 54 240 -154 -8 Interest payments 24 182 238 207 Net transfers 31 58 -392 -214 Development Economics 9/9/99 - 54 -  Additional Annex No.: 11 Project Implementation Performance Indicators The following indicators will be used to monitor and evaluate the achievement of Project objectives and implementation progress at mid-term and at the completion of the Project. 1. To assess whether the improvement of the legislative and regulatoty framework for commercial transactions and the resolution of commercial disputes component has achieved its goals and objectives, namely a more transparent and streamlined set of procedures that would strengthen the judicial system's capacity to adjudicate business related cases and the capacity of the local registries of commerce to provide for more security in commercial transactions and greater public access to business related data, as well as the provision of alternative dispute resolution mechanisms, measure will be made of the extent to, and way in, which: A. for the mid-term review: - streamlined rules, legal and otherwise, regulating procedures before the commercial courts and streamlined processes of the local registries of commerce have been adopted and are operational; - the commercial arbitration code has been prepared on the basis of a wide participation of all identified stakeholders, and is ready for enactment by Parliament; and - staff of the commercial courts and of the local registries of commnerce housed at these courts are trained in the use of new tools and equipment. B. at Project comnpletion: - users of commercial courts and local registries of commerce receive improved service as measured through polls and surveys; - the Commercial Arbitration Code, as drafted, is finally enacted by Parliament and the business community has taken advantage of commercial arbitration as a means of dispute resolution; - the commercial courts and the local registries of commerce have been provided with the necessary tools and equipment to enable them to strengthen their capacity; and - the commercial courts and the local registries of commerce are providing improved service to the users. 2. To assess whether the Judicial System Training Component has achieved its objective, namely to strengthen judicial and related court administration education, resulting in better trained professionals within the judicial system generally and the commercial courts in particular, measure will be made of the extent to, and way in, which: - 55 -  A. for the mid-term review: - the agreed Action Program for INEJ is being implemented on time; - the full-time teaching staff of INEJ has been trained under new arrangements; - INEJ has been reorganized and is autonomous in terms of its legal framework as well as in respect of its financial and human resources; - new teaching materials have been prepared and are available for classes at INEJ; and - INEJ's investment program is on schedule. B. at Project completion: - all Project sub-components in respect of INEJ have been implemented according to agreed schedules; - full-time teaching positions at NEJ have been filled; - the quality of INEJ graduates, teaching staff and administration has improved (target is significant improvement in each instance). The students will evaluate the quality of teaching staff and administrators; the teaching staff will evaluate the quality of students and administrative staff; and the administrative staff will evaluate the quality of teachers and students; and - INEJ's mediatheque is adequate to meet the appropriate needs of its students, faculty and administration. 3. To assess whether the Ministry of Justice Strengthening Component has achieved its objectives, namely: (i) to build MOJ capacity to manage and disseminate legal, judicial and regulatory information; and (ii) to promote a wide ranging communications policy, including a public awareness program, measure will be made of the extent to, and way in, which: A. for the mid-term review: - the publication unit within the Ministry of Justice is operational; - info-shops within the Ministry of Justice and all commercial courts are in place and operational; - the MOJ's Information Unit is adequately staffed and its staff have received required training for media and public exposure; - agreement has been reached with the Moroccan Bar Association to ensure that free legal advice is being provided on a weekly basis to those who seek it at each commercial court, and such advice is being rendered as a result; and -56 -  - key private stakeholders in various cities and regions of Morocco believe the communication policy developed and implemented by the Project, and in particular its participatory approach (including the establishment of an MOJ Information Unit and public outreach offices or info-shops), is effective. B. at Project completion: - public awareness campaigns are being conducted by the MOJ's Information Unit, including through the media (radio programs and press articles); - surveys have been conducted to assess the impact on users of the availability of information through the info-shops and the Information Unit; and - the agreement with the Moroccan Bar Association is in effect and lawyers are providing free legal counsel to disadvantaged segments of the population, including the poor. 4. To assess whether the PMU Strengthening Component has achieved its objectives, namely to ensure that the PMU is able to manage important aspects of Project implementation and to provide the Ministry of Justice with a sustainable platform for the continuation of the MOYs comprehensive reform Program, measure will be made of the extent to, and way in, which: A. for the mid-term review: - the PMU is providing appropriate assistance to all agencies involved in Project implementation; - the PMU is adequately dealing with all procurement aspects of Project implementation; - the PMU is maintaining all Project accounts in a manner satisfactory to the Bank; - the PMU is performing satisfactorily as the Secretariat of the Steering Committee; and - the PMU has conducted agreed surveys regarding success in Project implementation. B. at Project completion: - the PMU has developed satisfactory capacity to act as the main MOJ Unit for the further development and implementation of additional aspects of the Government's comprehensive justice system reform Program; and - the PMU has conducted agreed surveys regarding success in Project implementation. In each instance, assessments at mid-term will allow the Borrower and the Bank to take stock of the views of end-users and others regarding Project impact and the achievement of Project goals. And as a result of these mid-term assessments and the lessons then leamed in respect of successes and difficulties in Project implementation, adjustments, as appropriate, will be made in respect of subsequent implementation arrangements. - 57 -   MOROCCO: : . A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T 0-*N*. tP g<>>u / < - - -<32~~~~~~~~~~~~~~T-t 32'+ . 3 rT. -,,- RAILWAYS /~~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~ r .vX OT CE A . ' PRVIC CAITL / - / C KIIOMETERS I~~~~~~~~~~~~~~~~~~~~~~ -i F INATEONATCAIONALBUDRE m/This mop wsprodd fy the Mop Design U nit o f The Wor/d hook. r_ To Torfoyo = The hrooodoriee, oolore,deoo,noto ^naod onyf other toforosotakGouany _10 - NTERNATIONAL BOUNDARIES.- 32'| acceptance of suc boundories. 28t judgment on the logo)sftoto of any territory or ooy endorsement or r2 a _ _ _ _ _ _ _ _ _I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ( occeptonce of sooh houndories.~~~~~~~~~~~~~~~~~~~~. 3.h.