Document of The WoirR 1Baink

FO1R GD1FICll(AL JUSE ONVLY Public Disclosure Authorized iRepore No.P-1994-MOR

REPORT AND RECOMMENDATION

OF THE

PRESIDENT Public Disclosure Authorized TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

KINGDOM OF MOROCCO

FOR THE Public Disclosure Authorized

DOUKKALA II IRRIGATION PROJECT

April 12, 1977 Public Disclosure Authorized

This dciume¢m bn s mtdic deisbinlsnbmDntd ny be uMsd by reciplemes only Ai the perfornmee of tlelr omlebd luties.am contenb mmay not oagenoe be dIscIoed without WorDd Banu aughorDzzion. Currency Equivalents

US$1.00 = DH 4.4

DH 1.00 = US$0.227

ABBREVIATIONS

CMV Centre de Mise en Valeur (Development Center of MARA)

CNCA Caisse Nationale de Credit Agricole (National Agricultural Credit Bank)

CLCA Caisse Locale de Credit Agricole (local branch of CNCA)

CRCA Caisse Regionale de Credit Agricole (Regional branch of CNCA)

MARA Ministere de l'Agriculture et de la Reforme Agraire (Ministry of Agriculture and Agrarian Reform)

OCE Office de Commercialisation et d'Exportation (Fruit and Vegetable Export Agency)

ONE Office National de l'Electricite (National Power Authority)

ONICL Office National Interprofessionnel des Cereales et Legumineuses (Cereals and Pulses Trade Office)

ORMVA Office Regional de Mise en Valeur Agricole (Regional Irrigated Land Development Agency)

ORMVAD ORMVA des Doukkala

SODEA Societe pour le Developpement Agricole (State Agricultural Company)

SOGETA Societe pour la Gestion des Terres Agricoles (State Agricultural Company) FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR THE DOUKKALA II IRRIGATION PROJECT

1. I submit the following report and recommendation on a proposed loan to the Kingdom of Morocco, for the equivalent of US$41 million to help finance the Doukkala II Irrigation Project. The loan would have a term of 30 years including 6-1/2 years of grace (see para 50) with interest at 8.20 percent per annum.

PART I - THE ECONOMY 1/

2. A report entitled "Current Economic Position and Prospects of Morocco" (1021-MOR, dated January 26, 1976) was distributed to the Executive Directors on February 13, 1976. An updating economic mission visited Morocco in June 1976, and the following is based on this mission's findings.

3. During the 1968-72 Plan, Morocco succeeded in accelerating the growth of its economy and in improving the situation of its external payments. Aided substantially by good crops following favorable weather in three years out of five, real GDP growth averaged 5.6 percent per annum during the five- year period. Reflecting the sustained rise in exports during the Plan period and a slower growth of imports in 1971 and 1972, the balance of payments showed a surplus from 1969 onward. These results represented a definite improvement over those of the preceding decade, during which the rate of real GDP growth had barely exceeded that of population growth, and the balance of payments had been a source of constant concern. These achievements were accompanied by an increase in private consumption averaging about 2 percent per capita in real terms during the five-year period.

4. From 1967 to 1970, the main growth determinants had been exports, tourism and investment, all of which rose substantially; in addition sizeable stocks were accumulated following the exceptionally good harvest in 1968. By contrast, in 1971-72, exports and tourism together with current govern- ment spending were the major factors to sustain economic growth. During the last two years of the Plan, the investment of public and semi-public enterprises declined, largely because the state-owned phosphate company (OCP) had completed its expansion program. Government investment stagnated after 1968. Private investors adopted a wait-and-see attitude in the face of political developments in 1971 and 1972 and in the expectation of new measures to encourage investment and exports. At the end of the 1968-72 Plan period, there was therefore an urgent need to revive public and private investment. Particularly in the public sector, absorptive capacity needed to be increased by appropriate changes in staffing and organization.

1/ This part has been slightly revised from President's Report No. P-1980-MOR on a Loan to Cimenterie de l'Oriental for the CIOR Cement Project, dated March 9, 1977. This document hu a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - 2 -

5. Following a long period of very slow growth in private consumption, social problems had to be tackled. Over the 1969-71 period, there had been a slow but perceptible decline in real per capita consumption for about one- third of the rural population. Wealth and income differences between cities and villages, among regions, and between rich and poor tended to widen. Un- employment remained high, in 1971 averaging 9 percent of the country's labor force, and ranging between 12 and 16 percent in large urban centers.

6. Recognizing these difficulties and problems, the Government began in 1971 to revise its development policies, paying increasing attention to social objectives. The changed orientations were reflected in the 1973-77 Plan which aims at (1) GDP growth of 7.5 percent per annum in real terms from 1973 to 1977, mainly through a sharp increase in public and private investment and a strategy geared strongly toward increasing exports; and (2) an improve- ment in the distribution of growth benefits among the different social groups and the various regions, in order to achieve greater equity and at the same time increase domestic demand. This improvement was to be brought about through a modest program of distributing color lands to poor farmers, more emphasis on the development of rainfed agriculture, "Moroccanization" of some industrial and commercial enterprises, a price and wage policy designed to enable the poorest segments of the population to satisfy their essential needs, an ambitious program of low-cost housing, various measures to improve the lot of the rural poor, and increased emphasis on the development of poorest regions.

7. In 1974 and 1975, Morocco benefitted from a large increase in the average export price of phosphate, its main export product, which provided substantial additional resources compared to the Plan's expectation. The Government decided to step up investment spending for the years 1975-77, and the allocations for investment by the public and semi-public sectors were increased substantially in the 1975 and 1976 Budget Laws. Part of the additional allocations were to cover investment cost increases, and a larger part to launch expanded or new investment programs.

Recent Economic Performance

8. During the first three years of the 1973-77 Plan period, Morocco's overall economic performance improved substantially as compared to the past. Gross fixed investment rose sharply and reached 24 percent of GDP in 1975 or twice the 1972 level; investments in the public and semi-public sectors con- tributed strongly to this increase and there was also a good response on the part of private investors to the new incentives introduced in 1973. Indus- trial growth accelerated to an average annual rate of 11.5 percent for the first three years of the Plan compared to 6 percent in 1968-72, in large part because of the vigorous expansion of construction in response to rising investment demand. At the same time, increased emphasis was put on achieving the social objectives of the 1973-77 Plan with the implementation of an accelerated low-cost housing program, expanded investments in social sectors in small cities, and a program of small-scale investments in disfavored regions. In the face of import price rises, especially for wheat, sugar and - 3 - edible oil, the Government also raised significantly price subsidies for these essential foodstuffs and adjusted upward legal minimum wages in agriculture and industry with a view to protecting the purchasing power of low-income groups.

9. Some weaknesses appeared, however, during this period. After the five-fold increase in phosphate exports receipts between 1973 and 1974, which had led the Government to revise upward the Plan's allocations for 1975-77, expectations of further increases in financial resources did not materialize in 1975. Due to weakening external demand, phosphate exports decreased to 13.1 million tons, from 18.7 million tons in 1974, and prices began to drop sharply in the second half of 1975, restraining correspondingly the country's real capacity to save and to import. Unfavorable weather resulted in poor crops in 1973 and in 1975 and to meet domestic demand, food imports were increased substantially. In constant prices, value added by the mining and agricultural sectors returned in 1975 to levels slightly below those of 1972 despite the fast growth of other industry and services and this held back real GDP growth to about 4 percent per year in 1973-75. As a result largely of the disappointing performance of phosphate exports in 1975, Morocco's internal and external finances came under pressure. The Treasury's accounts showed in 1975 an overall deficit twice the 1974 level due mainly to sharply rising capital spending and insufficient growth in budgetary savings. This contri- buted to inflationary pressure domestically; the cost of living index rose by nearly 8 percent in 1975. The current account of the balance of payments, which had shown a surplus of $105 million in 1973 and $237 million in 1974, registered a deficit of $546 million in 1975.

10. In 1976, GDP growth accelerated to 10 percent, thanks partly to a good cereal harvest (48 percent larger than the previous year's) and a gradual recovery of phosphate sales abroad, and partly to the continued growth momentum in manufacturing, construction and services. The expansionary investment policies of 1973-75 have continued, and the 1976 Budget Law raised further the allocations for investments in the public and semi-public sectors. Several measures were, however, taken to curb the growth of consumption demand, in- cluding some restraint in current budgetary spending, the successful placement last summer of a DH 1 billion ($230 million) bond issue among the Moroccan public, and the introduction of credit restraints. These measures were in- troduced under a financial program which Morocco adopted in February 1976 in support of purchases from the International Monetary Fund with first credit tranche and under the 1975 oil facility. Nevertheless, for the full year, imports are expected to register another sizeable increase, not matched by the recovery of export receipts, and the balance of payments current account registered a deficit estimated at $1.1 billion compared to $0.5 billion in 1975. There was however little change in the country's net foreign assets, as the deficit was covered by large. increases in worker's remittances from abroad, and in net external capital inflows. Regarding the latter, Morocco has drawn on IMF facilities for a total amount of SDR 115 million in early 1976, and it has considerably stepped up borrowings from Arab and commercial sources (see Annex 1, page 4). An important factor in economic and financial developments in 1976 was Morocco's commitments and defense expenditures in the - 4 -

Sahara province and their impact on Government expenditures, imports and external capital inflows. While detailed information is lacking, it appears that substantially higher Government spending on imports for military purposes were nearly offset by increased grant inflows from external sources.

11. For 1977, the Government intends to further curb the trends in con- sumption demand, particularly for imported consumer goods, and restrain sig- nificantly investment in the public and semi-public sectors, in order to keep developments in the internal and external financial situation under firm control. Measures to this effect have been taken. While 1977 would be a year of retrenchment by comparison with policies during the first four years of the 1973-77 Plan, the overall performance of the economy would be satisfactory for the Plan period as a whole. Staff estimates show that a rapid growth (between 16 and 17 percent a year) of investment would have been achieved, exceeding the original Plan targets for 1973-77. They also show relatively good gains in GDP (about 6 percent a year) and consumption (close to 3 percent a year per capita), despite the rather disappointing developments in real terms for the phosphate and agricultural sectors. Finally, national savings would have fi- nanced a larger share of 1973-77 investments than anticipated originally. A detailed performance review of the economy during 1973-77 will be undertaken by the Bank late next fiscal year, in conjunction with an assessment of Morocco's next five-year Plan (1978-82).

Development Prospects

12. The Plan revisions that were introduced on the occasion of the 1975 and 1976 Budget Laws, have maintained or strengthened the investment programs designed to achieve the original economic and social objectives of the 1973-77 Plan. They have, in addition, greatly increased allocations for regional development, for low-cost housing, and especially for the launching of three industrial investment programs to be implemented over the next decade. These programs are a one-million ton steel mill and related infrastructure at Nador, a series of sugar mills and related irrigation development and several chemical and petrochemical export units based partly on phosphate. Thus, the Plan revisions will have an important spill-over effect on the next 1978-82 Plan.

13. The general thrust of the Plan revisions seems justified. Indeed, the achievement of initial (especially social) Plan objectives is eminently desirable. Similarly, Morocco's economy has developed to a stage where the establishment of some basic industries may find a justified place. The coun- try in particular possesses an obvious comparative advantage in the processing of phosphates, which would tend to stabilize export earnings. Similarly, it can produce at competitive cost sugar and steel which would otherwise have to be imported. However, the Plan revisions raise several issues of importance for Morocco's long-term development strategy and prospects.

14. The investment level is now very close to the country's absorptive capacity, following the noted increases in 1973-76. Although training efforts have been stepped up, it is likely that shortages of skilled and experienced - 5 -

manpower will continue to be a problem for some years to come. While for large industrial and infrastructure projects, Morocco can use foreign services extensively, this is costly and would not be a suitable solution to meeting the needs of smaller investments in large numbers. Further investments in steel and chemical industries will generate comparatively little employment opportunities for unskilled workers.

15. In addition, financial constraints may in future again restrain Morocco's overall development efforts. While there is scope for increasing the volume of phosphate exports in the medium term, prospects are that the real price of phosphate will remain at best stable. Since phosphate export receipts are a major factor for Morocco's real capacity to save and import, such capacity would be restrained. Taking into account the objective and policies to improve consumption levels of low-income groups, national savings may be expected to be restrained on this account also. In spite of likely efforts to increase budgetary savings and import substitution (particularly food), foreign exchange and national savings are likely to be constraints on investment during the next Plan period.

16. For the 1978-82 Plan period, absorptive capacity and especially resource availability therefore call for caution. Staff projections which are preliminary since the Government has not yet fixed the 1978-82 Plan's objec- tives and strategy indicate that gross fixed investment could only grow slowly in view of these constraints. Given the planned move into heavy industries, investment possibilities in other sectors would by necessity be limited. Assuming a real investment growth rate of about 3 percent per year and export growth of about 8 percent, which seems feasible in view of market prospects and export capacity, a GDP growth rate averaging about 6.1 percent yearly during the 1978-82 period would be likely. Despite implementation of policies to restrain consumer goods imports and likely import substitution, Morocco would experience a sizeable resource gap, and need relatively large inflows of external capital to cover it and to service accumulated debt. External borrowing requirements on a commitment basis are tentatively pro- jected to average $900 million per year in 1978-82, about two-thirds of which would be met by official multilateral and bilateral sources and the rest by commercial sources. Morocco has successfully increased external borrowings in 1974-76; loan commitments have risen to $550 million in 1974, $860 million in 1975 and $1.8 billion in 1976. Morocco should, therefore, be able to mobilize the amounts projected for 1978-82.

17. External debt and debt service would increase as a result of pro- jected borrowings. Debt outstanding and disbursed, which was $1.1 billion at the end of 1974 and an estimated $1.5 billion (19 percent of GDP) at the end of 1975, would rise to a projected $5.0 billion (or 24 percent of GDP) by the end of 1982. Similarly, debt service payments would rise from the low 8.3 percent of exports in 1975 to a maximum of about 18 percent in 1982. Adding workers' remittances to exports, the debt service ratio was less than 7 per- cent in 1975 and would rise to 15 percent in 1982. These projected levels for debt and debt service would be high, but still within Morocco's debt carrying capacity, especially when considering the country's improved eco- nomic and social policies and its long-term export prospects, not only in - 6 - phosphate rock and related products, but also in agricultural and industrial commodities for the European market. Beyond 1982, the relative burden of debt would probably tend to decline gradually as the economy's external resource gap would tend to diminish. Therefore Morocco is considered creditworthy for Bank lending.

PART II - BANK GROUP OPERATIONS IN MOROCCO

18. Bank and IDA lending to Morocco has supported 30 projects, financing a total of $749.5 million (net of cancellations) including a $45 million loan for a cement project approved by the Executive Directors on March 22, 1977 but not yet signed; of this total $534.5 million has been lent since the beginning of FY73. IDA credits, totalling $50.0 million, have been made available for five projects. A Third Window loan for $25 million for the third education project was approved in March 1976. IFC investments have amounted to $4.2 million. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of February 28, 1977, and notes on the execution of ongoing IBRD/IDA projects. In some cases, delays have been caused by management or procurement difficulties, and in 1974 cost overruns increased due to the upsurge in investment activity in Morocco and the acceleration of inflation. However, performance in project execution has considerably improved during the last two years.

19. Past Bank Group lending has been concentrated in the industrial and agricultural sectors, which together have accounted for 63 percent of total net commitments; the balance is accounted for by utilities (17 percent), tourism (9 percent), roads (6 percent) and education (5 percent). Apart from the transfer of resources to Morocco (Bank Group gross disbursements amounted to 5.5 percent of total fixed investment in 1970-74), the main objectives of lending were to foster and strengthen development institutions, provide tech- nical assistance, particularly for project preparation, and increase produc- tive capacity, particularly in order to improve the balance of payments.

20. While these objectives remain, emphasis is also being given to supporting the Government's development effort in income distribution. An increasing share of Bank Group lending will be devoted to projects directly or indirectly developing the productive capacity of the lowest urban and rural income groups.

21. Past lending for agriculture has supported irrigation development, credit and, through a first operation in FY75, the improvement of the produc- tivity of rainfed farming. While continued lending for irrigation is envisaged, greater emphasis will be given to supporting the improvement of rainfed farm- ing, and lending will in general be focussed on support to small farmers. A third agricultural project was recently approved. Projects for livestock/ rural development in the rainfed zones in northern Morocco, for developing production of fruits and vegetables on small holdings and for promoting in- tegrated rural development in selected regions of Morocco are being prepared. 22. Projects in industry and tourism have as key objectives increased foreign exchange earnings or savings and the improvement of sectoral policies. Continued lending for industry and tourism through two DFC's (Banque Nationale pour le Developpement Economique-BNDE and Credit Immobilier et Hotelier-CIH) will be proposed. A project for the construction of a large cement plant in the less developed Northeast was recently approved. Proposals for industrial lending, including one for a steel mill in northeast Morocco, are under con- sideration.

23. An urban development project is being prepared, which should contri- bute to devising means for solving the problem of rapid growth of slum areas. A substantial social services component and an employment generation program are envisaged.

24. Education is a critical bottleneck in Morocco's development. Two IDA credits have been made to develop secondary education and teacher training and to improve technical and vocational training, while a loan for a third project, emphasized on improving facilities in rural areas. A fourth project with emphasis on technical and vocational training is under preparation.

25. Loan commitments from multilateral and bilateral official sources to Morocco rose from $92 million in 1973 to $425 million in 1974 and $538 million in 1975. In addition Morocco received grants totalling $40 million in 1973 and $42 million in 1974. The major sources of aid were France, Saudi Arabia, the UAE, the U.S., Germany and the Bank Group. At the end of 1976, the Bank Group's share in Morocco's outstanding and disbursed external public debt was estimated at 13 percent. The share of the Bank Group in debt service was 20 percent in 1975 and an estimated 13 percent in 1976. By 1982 the Bank Group's shares in debt outstanding and in debt service are expected to be about 17 percent and 11 percent respectively, on the basis of the assumptions made for total external borrowings for the 1976-82 period (paragraph 17).

PART III - THE AGRICULTURAL SECTOR

26. Agriculture is the most important economic activity in Morocco. An average of six million ha are presently cultivated, of which about 750,000 ha are perennially irrigated. Main agricultural products are cereals, pulses, vegetables, citrus, sugarbeets, olives and oilseeds. About half of the labor force is employed in agriculture and two thirds of the population live in rural areas. Until the recent rise in phosphate prices, the sector contri- buted about 25 percent of GDP and accounted for over quarter of total exports. Poor performance of the agricultural sector in the decade after Independence contributed to general economic stagnation, while in the years 1967-72 more rapid growth of agriculture - partly because previous large investments in the modern sector began to bear fruit - was accompanied by overall expansion. Despite past development of irrigation, performance of the sector is very sensitive to the substantial variations in annual rainfall which affect much - 8 -

of the country. In 1972/3 and again in 1974/5, inadequate rainfall seriously affected crop production and substantially reduced the country's overall growth performance, despite rapid expansion in mining and manufacture; in 1975/6, good rainfall boosted agricultural production by 14 percent and con- tributed to an overall GDP growth rate of over 10 percent in real terms.

27. Since Independence, the Government's intervention in the agricultural sector has focussed very heavily on the expansion of irrigated farming to stabilize production and rapidly develop the country's potential. During the Second Five-Year Plan (1968-72), 26 percent of total Government development expenditure was devoted to dams and irrigated farming. Under the Third Five- Year Plan (1973-77), this share is expected to account for about 14 percent. While greater attention is being given to improvement of rainfed agriculture, livestock production, training, improvement of the extension service, credit to small farmers, research and marketing, the Government remains committed to a large irrigation program which is justified by the rapid contribution irrigation projects can make to increasing production, to reducing imports (and subsidies) of basic commodities such as wheat and sugar, and to raising and stabilizing farmers' income given the relative scarcity of cultivable land in Morocco.

28. In many parts of the country, the small size and fragmentation of holdings and complex traditional tenure systems, frequently involving joint ownership, have been major obstacles to improving agricultural productivity. The Government has taken various measures to overcome these problems and to encourage the adoption of modern cultivation methods, particularly on lands with high production potential. First, under legislation introduced in 1962, the Government has successfully started a program of land consolidation: during the Second Five-Year Plan (1968-72) 80,000 farmers have benefited. Secondly, the Government has acquired 610,000 ha of land, previously held by foreigners, for distribution to the rural poor, both small farmers and land- less. Under a law of 1966 (amended in December 1972) the Government is distributing this and other state-owned land to Moroccan farmers meeting competence, poverty, age and character criteria. Recipients are obliged to renounce all other rights to land and to join a Government-sponsored coopera- tive. By 1975 some 270,000 ha had been distributed and measures currently being undertaken indicate that the Plan target to distribute 400,000 ha by end 1977 will be met. Thirdly, the Agricultural Investment Code enacted in 1969 gave powers to the Government to organize agricultural development in irrigated areas. The Code provides for transformation of some tribal land into indi- vidually held freehold plots, prevents excessive fragmentation of holdings, and obliges farmers to follow an approved cropping pattern in exchange for various subsidies.

29. The legislation as a whole has been carefully designed to ensure that changes in the tenure system, particularly the transfer of foreign-owned farms to small Moroccan farmers, do not lead to declines in productivity. Implementation, however, is complex and slow due to the limits of the Govern- ment's administrative capacity. So far the land reform program has been con- centrated in the irrigated areas and has touched only a very small proportion - 9 - of Morocco's farmers (about 2 percent). This proportion would only rise to about 4 percent once the actual land distribution program is completed (see para 28). Further land distribution offers only limited scope for improving rural income distribution as the amount of land that could be redistributed is relatively small: farms of more than 50 ha number 6,500 and represent 10 percent of arable land. On the other hand 960,000 farmers own farms less than 5 ha and a further 650,000 families derive their primary source of livelihood from the cultivation of some 870,000 ha of collectively owned lands, representing 15 percent of all arable land. Despite the paucity of reliable information it can be estimated that a substantial proportion of the rural population is under the poverty level of about $195 per capita or $1,140 per family.

30. Government activity in the agricultural sector in Morocco is the primary responsibility of the Ministry of Agriculture and Agrarian Reform (MIARA). The Ministry's activities are concentrated in the central Director- ates of Agricultural Development and of Equipment, in provincial services which serve rainfed areas (SPs), and in largely autonomous regional devel- opment offices (ORMVAs) for irrigated areas. There are also three public institutions with country-wide responsibilities in the sector: the 1lational Agricultural Credit Bank (CNCA), the Cereals and Pulses Trade Office (ONICL) and the Export and Trade Company (OCE). Two state-owned companies are re- sponsible for managing the land acquired by the Government from foreigners, prior to its eventual distribution under the land reform program; the Farm Development Corporation (SODEA), established in 1972, is primarily responsible for managing plantations while the Agricultural Land Management Corporation (SOGETA), established in 1973, is primarily responsible for managing annual crop land acquired from foreign owners in March 1973.

31. The execution of past agricultural projects has been satisfactory on the whole. Land distribution and project management problems encountered initially in the Sidi Slimane and Sebou I projects have been solved, while progress is being made in addressing management problems with the Meknes and Sebou II projects. Performance under the Doukkala I project is satisfactory, now that adequate measures have been taken to catch up on delays in the laying and testing of the large diameter pipe network (para 41). The OED report dealing with the First Agricultural Credit Project in Morocco found a low eco- nomic return to farm mechanization financed through the Project attributable to the severe drought conditions prevailing during the disbursement period. This issue was addressed in the "Appraisal of a Third Agricultural Credit Project" (Report No. 1308-MOR) which cited acceptable returns to farm mecha- nization and considerable strengthening of the management and operations of the National Agricultural Credit Bank under the Second Agricultural Credit Project. - 10 -

PART IV - THE PROJECT

Background

32. The Oum-er-Rbia is the largest river in Morocco and flows from the Middle Atlas mountains near Khenifra in a westward arc to reach the sea eighty kilometers south of Casablanca. The river and its tributaries have long served as the source of irrigation waters for two separate and relatively densely populated areas characterized by limited rainfall: the Tadla plain near Beni Mellal, and the Doukkala region, south of El Jadida. Diversion works constructed before Independence--at Bin-el-Ouidane on the El Abid and at Kasba Tadla and Im Fout on the Oum-er-Rbia--permitted the development of modern irrigation in both these areas (see Map 12791).

33. In 1969, acting on a suggestion of the Bank, the Government commis- sioned a Water Master Plan for the Oum-Er-Rbia basin, a preliminary version of which was completed in 1971. By that time, however, the bases for the prepara- tion of the Master Plan had been altered by Government decisions to reallocate the waters of the main tributaries of the Oum-Er-Rbia for upstream use thereby affecting water availability and to build a phosphate based chemical complex near Safi, thereby greatly increasing downstream demands. The Water Master Plan was revised to reflect these changes and discussed with an FAO/Bank Cooperative Program mission which visited Morocco in 1974. The Water Master Plan, which was completed in 1975, set out a three-phase program for the development and use of water resources. The first phase called for the full utilization of existing diversion structures which would permit completing irrigation development in the Lower Doukkala and Tadla perimeters. The second phase was based on the construction of a dam at Sidi Cheho to meet downstream industrial and potable water demands and allow for future irrigation in the Upper Doukkala. The third phase stage envisaged the building of a multipurpose dam further upstream on the Oum-Er-Rbia at Dechra-El-Oued. Implementation of the first phase commenced in 1976 with the decision to construct a first extension of the Doukkala perimeter with financing by the Bank (Loan 1201-MOR) and USAID and to rehabilitate the Beni Amir perimeters in the Tadla (with fi- nancing by the Arab Fund for Economic and Social Development); completion of the first phase would be achieved through the proposed project (see para 34 below). The decision to construct the Sidi-Cheho-Al-Massira dam, which is partly financed by a Bank loan (No. 1299-MOR), sets the stage for the second phase development. A feasibility study for the dam at Dechra-El-Oued is being financed under the Bank Loan for Doukkala I.

34. The proposed project consists of a second extension of irrigation in the lower part of the Doukkala perimeter located in the Province of El- Jadida (see Map 12561R). It would complete the development of these perimeters and also the first phase of Water Master Plan by fully utilizing waters from existing diversion structures. In addition, optimal design of the proposed project requires water from the Sidi-Cheho-Al-Massira dam to meet peak irriga- tion demands during the summer months, which is the reason why development of this extension was withheld until the construction of the dam was assured. - 11 -

The proposed project was appraised by a Bank mission in October 1976. Nego- tiations for the proposed loan were held in Washington in Mlarch 1977. The Moroccan delegation was led by Mr. Oulad Chrif, Director of Construction, MARA. The Appraisal Report No. 1431a of April 12, 1977 is being distributed separately. A loan and project summary is attached as Annex III.

Project Description

35. The purpose of the project is to provide for the most economical development of irrigation in the main Oum-er-Rbia basin in order to increase agricultural production a substantial share of which would benefit the poorest members of the population. The project covers an area of 16,600 ha of land presently cultivated under rainfed conditions. The project consists of:

- enlargement of the main supply canal over 22 km, construction of about 10 km of feeder canals and installation of automatic flow regulators;

- construction of six pumping stations with a total installed capacity of 11,300 kW, each with an elevated equalizing reservoir;

- construction of 31 km of 60 kV and 62 km of 22 kV power transmission lines and a substation for pumping stations;

- land preparation and consolidation including farm roads, windbreaks and drainage;

- installation of 450 km of buried pipe distribution system including hydrants, each serving about 16 ha, and associated mobile sprinkler equipment;

- construction of main drainage channels entailing about 300,000 m3 excavation;

- construction of 108 km of roads and reinforcement of 64 km of existing roads;

- construction of buildings, provision of equipment for exten- sion, operation, maintenance, artificial insemination, and telecommunications between ORIVAD's El Jadida headquarters and the project area;

- construction of four milk collection centers;

- provision of village infrastructure for five villages;

- provision of farm inputs, credit and extension services; - 12 -

strengthening of applied agricultural research activities; and

- provision of consulting engineering services for project implementation.

36. Full development of the project would be reached in 1989, seven years after completion of physical construction. By that time, on an indicative basis, incremental annual production under the project would be approximately: 212,000 tons of sugar beet, 17,000 tons of maize, 9,500 tons of vegetables, 2,500 tons of cotton and 1,500 tons of milk. Cotton would be exported after local processing in existing facilities. The remaining production would be consumed within Morocco, thereby reducing the country's need to import. Existing marketing and processing facilities for these products exist except for milk, for which additional collecting centers will be constructed under the project, and sugar, for which an additional plant, not financed by the Bank, is under construction and would be in operation by the end of 1979.

37. All land in the project area is privately owned and is characterized by a high degree of fragmentation. Most farmers are small-holders with present per capita incomes averaging $165 which is below the poverty level of $195 and well below the national average income of $470; 78 percent of farmers have holdings of less than 5 ha.

38. Within the area administered by ORMVAD, there are at present about 27,100 ha of irrigated land, most of it by gravity. The proposed project, as the first one, would provide for sprinkler irrigation of rainfed lands, the choice of irrigation system being determined by the soil characteristics and undulating topography of the project area which does not lend itself to gravity irrigation. In addition, experience with the sprinkler system within the ORMVAD perimeters demonstrates that the adoption of this system permits more rapid development, earlier returns and greater water economies.

39. Relocation of part of the population will allow for more efficient irrigation. To this end, the project would provide for the creation of five village centers, each with public water supply, paved roads, public lighting and a primary school. No difficulties are anticipated in inducing farmers who already live in villages, to move into these new centers for which the communal services would serve as an incentive. Housing at these centers would be con- structed by farmers with their own means.

Project Execution

40. Execution of the proposed project would be carried out under essen- tially the same conditions as those agreed under the first project. The pri- mary responsibility would fall to the Regional Agricultural Development Office for the Doukkala (ORMVAD), which is responsible for the agricultural develop- ment of 389,000 ha of land in the Province of El Jadida. ORMVAD is well managed and adequately staffed. Telecommunications difficulties experienced between ORMVAD's headquarters in El Jadida and the project area and telecom- munication needs between field offices would be addressed by the project - 13 -

(Section 4.04(b), draft Loan Agreement). A subdivisional office of ORMVAD was created at Zemamra to coordinate construction of the first project. It would exercise the same responsibility for the proposed project. The Design and Construction Service of ORMVAD would be responsible for land consolidation and for design and supervision of construction of the physical works (except schools). The engineering consultants retained under the first project would continue to assist the Design and Construction Service in carrying out its tasks.

41. Delays in the laying and testing of prestressed concrete pipes have been experienced under the first project. The Government has taken a series of measures to correct this situation, including requiring the pipe laying contractor to triple the number of laying and testing crews. An interminis- terial committee created to verify compliance with these measures has reported that physical progress of works is sufficient to permit completion of this project component within the contracted time frame. To avoid potential delays in implementing the proposed project, the Government agreed to take measures to ensure a sufficient supply of pipes for the proposed project.

42. Maintenance and major repairs of the irrigation network would be the responsibility of the Maintenance Service of ORMVAD which would continue to receive funds for repairs and purchase of spare parts through Government budgetary allocations.

43. Extension services would be provided by ORMVAD which would create four Development Centers (CMV's) under the authority of its extension sub- division to form the basic channel for providing extension advice to farmers. The CMV's would also be responsible for organizing water allocation to hy- drants, and for recording consumption of water for billing purposes. Addi- tional extension and other staff would be hired to meet the needs of the project (Section 4.07, draft Loan Agreement). Each CMV would be headed by an agriculturalist, and would be staffed by agricultural agents, who together with subject matter specialists from the Agricultural and Livestock services would provide day-to-day extension advice. In accordance with the 1969 Agricultural Investment Code, farmers would follow approved cropping patterns in exchange for input subsidies. The CMVs would also act as stores for agri- cultural inputs and would be responsible for minor repairs to the irrigation network. Agricultural research activities would be intensified and an applied research program to serve the project area would be jointly established by ORMVAD and the regional office of the Agricultural Research Directorate of MARA and carried out on an existing farm located in the Doukkala I project area. The annual applied research programs would be submitted to the Bank.

44. As required under Morocco's legislation, farmers would be required to join service cooperatives which would receive assistance from the extension services. Water users associations would be created to organize water alloca- tion from hydrants. In addition, farmers would form groups to own, operate, maintain and replace the mobile sprinkler units. Service cooperatives would be established to permit the bulk purchase of inputs and bulk marketing, for - 14 - joint ownership of agricultural equipment, and to facilitate the provision of extension advice and credit.

45. Organizations other than ORMVAD would be involved in the project. The Ministry of Education would supervise construction and maintenance of primary schools. The National Power Authority (ONE) would construct and maintain the power connection lines, and the Roads Directorate of the Ministry of Public Works and Communications would supervise construction, reinforce- ment and maintenance of classified roads. The Directorate of Animal Production of the Ministry of Agriculture would advise ORMVAD in the implementation of the crossbreeding program. Farmers' credit needs under the project would be met by regional (CRCA) and local (CLCA) branches of the National Agricultural Credit Bank (CNCA).

46. Coordination between the agencies involved in project implementation would be ensured by the Coordination Committee established under the first project. This Committee, which is chaired by the Governor of the Province of El Jadida and comprised of the regional representatives of all ministries and agencies concerned in project implementation, meets a least once every three months to approve quarterly progress reports, review past achievements and determine future work programs for each of the agencies concerned. It has been effective in coordinating the activities of the different agencies for implementation of the first project. Quarterly progress reports monitoring project implementation would similarly be prepared for the proposed project. In addition ORMVAD would continuously monitor agricultural production in areas benefitting from the project and would carry out in 1983 and 1988 sample farm surveys to evaluate project benefits (Section 4.04(a), draft Loan Agreement).

Cost Estimates and Financing Plan

47. Cost estimates are shown in Annex III and are summarized below:

Million of US$ Local Foreign Total

Irrigation network 35.7 25.0 60.7 Agricultural infrastructure 1.4 1.0 2.4 Roads 2.2 2.2 4.4 Village Infrastructure 1.1 0.3 1.4 Agricultural credit 3.2 0.0 3.2 Administration and consultants 3.8 1.3 5.1 Contingencies 27.1 16.7 43.8

Total 74.5 46.5 121.0

48. Physical contingencies representing 10 percent of the base cost were calculated on the basis of recent experience for similar works. Price contin- gencies for civil works were estimated on the basis of an annual rate of price increase of 12 percent during the first two years and 10 percent thereafter. Although on the high side, these are justified by recent and forecast price - 15 - increases in Morocco. Corresponding rates for equipment were estimated at 8 percent and 7 percent respectively. Overall contingencies would amount to 57 percent of the base cost; this high percentage results from the relatively long construction period.

49. The proposed Bank loan of US$41 million would be made to the Govern- ment and would finance 88 percent of the foreign exchange cost of the project and would cover the estimated foreign exchange requirements of project items suitable for procurement through international competitive bidding. The cost of farm development, consisting of purchase of livestock, construction of stables and agricultural inputs, would be financed by contributions from farmers (not included in the table above) and by agricultural credit made available by the CRCA and CLCA. The remaining project costs including US$5.5 million in foreign exchange would be borne by the Government through appro- priate budgetary allocations.

50. The proposed pattern of amortization on this loan, with a period of grace of six and a half years and a final maturity of 30 years, while fully justifiable on project grounds, is exceptionally generous in terms of the Bank's present standards. However, this is accounted for by the fact that other loans made to Morocco during the present fiscal year, the Agricultural Credit Project (Ref.: LN 1361-MOR approved by the Executive Directors on January 11, 1977) and the CIOR Cement Project (approved by the Executive Directors on March 22, 1977) carried relatively short terms. Including the proposed loan, the weighted average terms of lending to Morocco in FY77 would be 19.1 years final maturity, including 4.2 years of grace, well within the norm applicable to countries with Morocco's per capita GNP, namely 20 years final maturity including 4.5 years of grace.

Recovery of Irrigation Networks Costs

51. The Agricultural Investment Code of 1969 provides for the recovery from each farmer of his share of operating and maintenance costs and up to a maximum of 40 percent of the capital costs of the irrigation network. Costs are recovered through (a) a betterment levy of DH 1,500 per hectare, (b) a basic water charge which has so far been fixed at a maximum base rate of DH 27 per thousand cubic meters in existing irrigation areas in the Doukkala, and (c) a supplementary water charge to cover the cost of energy used for pumping. For holdings up to 20 ha, the first 5 ha are exempt from the betterment levy, and farmers can choose to pay the levy though annual installments over 20 years, with three years grace and at four percent interest. Over the first five years of irrigated cultivation, the amount of the basic water charge is increased linearly up to the full base rate.

52. The issues of the level of water charges actually levied and the extent of recovery of the investment costs of irrigation networks have been the subjects of an on-going dialogue with the Moroccan authorities and have been addressed in all loans for irrigation since the Sebou I Loan (No. 643-MOR FY70) and in particular by the first Doukkala project. Under this project - 16 - it was agreed that (1) ORMVAD would levy and collect from the start of irriga- tion and would review at its own initiative or at the Bank's request, water charges to recover actual operation and maintenance costs and a reasonable share of capital costs subject to beneficiaries' incentives and their ability to pay and (2) the Government would carry out a study of irrigation cost re- covery charges throughout Morocco and would inform the Bank of the measures resulting from the study. Identical provisions have been retained for the proposed project (Section 4.03, draft Loan Agreement). The system envisaged under the first Doukkala project consisted in recovering 100 percent of opera- tion and maintenance costs and up to 40 percent of capital costs through an adjustment of the basic water charge and of the supplementary pumping charge and the application of the existing betterment levy. At the suggestion of the Bank, a detailed study of the economic implications of this system has been carried out by the Moroccan authorities and Bank staff. This study revealed that the project rent over and above reasonable incentives accruing to farmers increased more than proportionately with the size of holdings and that the application of a system of high and uniform water charges levied on a volumetric basis and of a betterment levy that was small in comparison to water charges would threaten the small farmers' incentive to irrigate and generate a regressive structure of cost recovery. Therefore during the negotiations of the proposed loan, a new system was proposed by the Bank for review by the Moroccan authorities. According to this proposal, on which further discussions are scheduled to take place, the basic water charge and supplementary pumping charge would be set at levels permitting full recovery of operation, maintenance and replacement costs of the irrigation network and the betterment levy at a level which would fully recover project rent above reasonable incentives from holdings over 20 hectares. The proposed adjust- ments would require water charges to be indexed and increased 2.7 times over present prices which is only about 70 percent of the increase envisaged under the first Doukkala project; conversely, the betterment levy would be indexed and increased 2.5 times and collected over the life of the project. Under these conditions, and taking into account incremental income taxes payable by farmers, about 22 percent of capital costs would be recovered, with the largest farmers paying proportionately more. Unless agricultural prices increase more rapidly than forecast, a higher cost recovery ratio would not leave farmers with sufficient financial incentives to invest and improve their cultivation methods.

53. The Government is presently reviewing irrigation cost recovery charges throughout Morocco. A study of the existing situation and preliminary recommendations have been completed and are under review by the concerned authorities. The Government intends to implement before the end of 1977 a system for automatically indexing the basic water charge. It also has under review the Bank study mentioned above. The Government agreed to inform the Bank of the results of such review and to provide the Bank with an opportunity to comment on the recommendations made and on the proposed timetable for implementing them. - 17 -

Procurement

54. Procurement for the civil works contracts to be financed under the project amounting to $69.7 million and for most equipment items amounting to $13.4 million would be through international competitive bidding in accordance with Bank Guidelines for Procurement. To the extent practicable, these items would be grouped into twenty one lots for tendering purposes. A preference margin of 15 percent or the prevailing customs duty, whichever is less, would be extended to local manufacturers in the evaluation of bids for equipment. Individual purchases of equipment in amounts not exceeding $125,000 per con- tract and $250,000 in the aggregate would be procured in accordance with applicable local procedures. These items involve amounts that are too small to attract foreign bids or are not suitable for procurement through competi- tive bidding (vehicles). Bank staff have reviewed the local procedures and found them acceptable and there is adequate competition in the local market. Consultant services to assist ORMVAD in implementing its irrigation program which covers the Doukkala I and Doukkala II project areas were procured in accordance with Bank guidelines under the first Doukkala project. The pro- posed project would provide for continuation of similar services until project completion.

Disbursements

55. The proposed Bank loan would be disbursed by end 1983 and would finance:

(a) 40 percent of selected civil works eligible for ICB consisting of canals, pumping stations, reservoirs, buried pipe distribution systems, drainage networks and roads;

(b) 100 percent of the foreign expenditures or 60 percent of local expenditures (for goods already imported) included in the fol- lowing categories: electromechanical equipment and filters for pumping stations, hydrants, telecommunication equipment and mobile sprinkler equipment;

(c) 100 percent of the foreign cost of consultants.

The disbursement schedule is given in Annex III. Retroactive financing to December 1, 1976 for about $500,000 would be allowed for the enlargement of the main canal to ensure a timely start on this project component.

Prolect Justification

56. Together with the first Doukkala project and the Beni Amir Project (para. 33), the project is part of a long-term program for irrigation develop- ment in the Oum-er-Rbia river basin. The main benefit would be a substantial increase in agricultural production. The project would contribute to meeting - 18 -

the domestic demand for sugar, milk, meat, cereals and vegetables and generate export of cotton and possibly vegetables. At full development net incremental production would be equivalent to about $15 million per year. The project would directly benefit 3,400 farm families, 77 percent of whom are presently living below the absolute poverty level. Aside from agricultural development based on irrigation, no alternative means to develop the region or provide employment opportunities for this population have been identified. Under the proposed project, average per capita income would be increased by 140 percent to $390 at full development. In spite of this increase, 42 percent of the farmers who presently own 2 ha or less, would still earn farm incomes below the poverty level. These however, would be able to obtain additional income through employment opportunities on larger farms. About 5,500 man-years of family labor would be created annually by the project. Through its land consolidation component, the project would eliminate fragmentation, thereby improving agricultural efficiency. Financial rates of return would be higher for smaller than for larger farmers (estimated at 100 percent for the smallest and 35 percent for the largest ones). The rural infrastructure component of the project would improve living conditions for the project beneficiaries. The economic rate of return of the project is estimated at 11.6 percent; it would decline to 10.3 percent if investment costs increased by 15 percent and to 9.5 percent if agricultural prices decreased by 10 percent; it would in- crease to 13.4 percent if tomatoes for industrial processing replaced cotton.

Project Risks

57. Since irrigation will be by sprinkler the proposed project would not induce the development of bilharzia. Moreover, it was agreed under the first Doukkala project that the incidence of bilharzia would be monitored on a regular basis in the entire El Jadida province; the Ministry of Health has started implementation of the control program.

58. The highest yielding cropping pattern is proposed taking into account present and forecast market conditions. Farmgate prices of agricultural prod- ucts with the exception of cotton are expected to provide sufficient incentives for farmers to adopt improved agricultural techniques. Forecast cotton prices may not be remunerative enough in the future to reach expected production levels. ORMVAD recognizes this problem and is investigating substitute crops. Provided markets are available for these crops, their cultivation could result in a higher economic rate of return of the project.

PART V - LEGAL INSTRUI4ENTS AND AUTHORITY

59. The draft Loan Agreement between the Kingdom of Morocco and the Bank, the Report of the Committee provided for the Article III, Section 4 (iii) of the Articles of Agreement, and the text of a resolution approving the proposed loan are being distributed to the Executive Directors separately. - 19 -

60. Features of the Agreement of special interest are summarized in Annex IV.

61. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.

PART VI - RECOMMENDATION

52. I recommend that the Executive Directors approve the proposed loan.

Robert S. McNamara President

LuI age 1 ofr 4 pagCB TABLE IA MOROCCO - SOCIAL IWu*TIS DATA SHEET &AI,AMaRlI ITAMDq %Al. MOROCCO REFERENCF LOUNIRIES (1')F,I UV X4OST H RECENT TURKEY 0cia.m* vr j l & Z49)42 1Q60 19*0 ESTIATAE PHILtPPINES

GNP P14 C.lI". fuss)) IgO. v 3o0.0 470.0 230.0 480.0 !390.0

PJPUAATION ANJ V.'AL STATISTICS

POPULATION IttlD-YR. IILLIONS 11.6 14.6 16.7 36.9 35.T 8.8

POPULATICN DENSITY PER SQUARE Nit. 26.0 33.0 37.0 123.0 46.0 67.0 PER SO. KM. AGRICULTURAL LAND .. .. 78.0k 2".0 67.0 99.0

VITAL STATISTICS AVERAGE BIRTH RATE IlHOtI) 50.4 44.2 44.2 44.2 40.6 18.1 AVERAGE DEATH RATE ITNHOttI 24.2 16.5 15., 13.2 14.4 8.0 INFANT MORTALITY RATS 1ITHOU1 149.0& .. 117.0 00.0 145.0 29.6 LIFE EXPECTANCY AT BIRTH IVRS) 45.4 50.4 52.4 55.6 54.4 70.9 GROSS REPROOUCTION RATE 3.4& 3.4 3.4 3.3 . 1.0

POPULATION GROWTHRATE tXI TOTAL 2.6 2.4 2.4 3.0 2.5 0.5 URBAN 6.4 4.0 5.6 3.1 4.2 1.5

URBAN POPULATION (S OF TOTAL) 29.3 32.3 37.9 27.6 31.2 62.6

AGE STRUCTURE tPERCENTI 0 TO 14 YEARS 44.3 46.4 44.6 45.6 41.8 24.9 15 TO 64 YEARS 51.7 51.1 30.9 51.6 53.9 64.0 65 YEARS AND OVER 4.0 2.5 2.5 2.8 4.3 11.1

AGE DEPENDENCY RATIO 0.9 1.0 1.0I 0.9 0.9 0.8 ECONOMIC DEPENENCY RATIO 2.0 .. 2.2u 1.5 1.1.

FAMILY PLANNItNG ACCEPTORS ICUWULATIVE, THOJI .. 68.1 216.4 354.0 USERS IS OF MARRIED WOMEN) .. 3.0 6.7 2.0 8.2

EMPLOYMENT

TOTAL LABOR FORCE ITHOUSAND) 3300.0 .. 3960.0 a 12300.0 14500.o0 d LABOR FORCE IN AGRICULTURE (t) 54.0k .. S5 j 55.0 67.0 .. UNEMPLOYED 13 OF LABOR FORCE) 1.0 .. 9.0 7.0 4.0 ..

INCOME OISTRIBUTION

I OF PRIVATE INCOME REC D BY- HIGHEST 53 OF HOUSEHOLDS ...... 32.8/ . HIGHEST 203 OF HOUSEHOLDS ...... 60.6 LOWEST 203 OF HOUSEHOLDS ...... 2.9 7. LOWEST 403 OF HCUSEHOLDS ...... 9.4 DISTRIBUTION OF LANO OWNERSHIP

5 OWNED BY TOP 103 OF OWNERS ...... 53.0 * OWNEO BY SIALLEST 10Z OWNERS ...... 0.9

HEALTH AND NUTRITION

POPULATION PER PHYSICIAN 9100.0 13270.0 13830.0& *- 2220.0 620.0 POPULATION PER NURSING PERSON s350- *- *- *- 1860.04 1140.0 POPULATION PER HOSPITAL BED 62.0 690.0/b 690.04 850.0 490.0 160.0

PER CAPITA SUPPLY OF - CALORIES 15 OF REQUIREMENTS) 70.0 99.0 92.0/d 100.0 110.0 116.0 PROTEIN tGRAMS PER DAY) 43.0 64.0 62.0j 45.0 78.0 99.0 -OF WHICH ANIMAL AND PULSE .. 14.0/ .. 22.0 22.0, 52.04

DEATH RATE I/THOU) AGES 1-4 ...... 9.0 15.0/b

EDUCATION

ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 49.0 55.0 SS.0 / . 108.0a 111.0& 106.0 SECONDARY SCHOOL 9.0 12.0 13.0 Z { .0 8.0 66.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 12.0 IZ.0 10.0 11.0 12.0 VOCAT IONAL ENROLLMENT (I OF SECONtDARY) 30.0 2.0 1.0 6.0 & 14.0 20.0 ADULT LITERACY RATE (t7 17.0/4 21.0 .. .. 55.0& 82.0

HOUSING

PERSONS PER ROOM IAVERAGEI 2.1 .. 2.1o .. 1.9 OCCUPIED DWELLINGS WITHOUT PIPED WATER (3) .. .. 35.0/ h6.0/. 64.0 TO ELECTRICITY ACCESS 2 (1 OF ALL DWELLINGS) 76.0 .. 8 .02 23.0/d 41.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY it5 31.0 .. .. 6.04d 18.0

CONSUNPTI ON

RADIO RECEIVERS (PER THOU POP) )6.O 60.0 74.0 45.0 89.0 111.0 PASSENGER CARS (PER THOU POP) 11.0 15.0 17.0 a 8.0 4.0 26.0 ELECTRICITY tKWH/YR PER CAPP 87.0 128.0 164.0 235.0 247.0 1072.0 NEWSPRINT (KG/YR PER CAP) 0.2 0.2 0.3 1.2/4 0.7 1.6

SEE NOTES AND DEFINITIONS ON REVERSE binsatheas-oenio, data sp 1960 refer to any Y-ar between 1959 and 1961, fur 19(0 between 1968 and 1970, and for Moat beceat EStimate Latween jfjan 1975. ecAlthough Greece'a GNP per eapita is mach higher than that of Morocco, Greece has been selected as an, objective country since both countries are on the Mediterrensani, their econosdes rely on the sarket mecheniam, sandthey are, similar in productive activity, especially in agriculture. MOROCCO196 a 1962; & Exclude unrported female family helpers In agriculture; acIncluding midwives and assistant oarses; L4 Government hospital eatabllhnota; /a, 6-10 sad 11-17 years of age respectively; If Persons over 5 years of age who can read and write. 1970 /a Due to smigration, population grwth rats is lower than the rate of naturel incrseas;j abGovernment hospital establtshaeots aly; /j~91-66 a 7-11 and 12-18 years of age respectively. HOBTSECENT ESTIMATE: ~a 1972; & Excludes unreported female family helpers in agriculture; /c 1971; d 1 969-71 avenge 7-11 and 1218 years of age; If Urban only; aL Due tc emigration, growth rae a lower then rate d natural increase. nnnIpnKSs 197 /a As percentage of employment; ab7-12 and 13-16 years of age respectively; 4c Not including private vocational schools or vocational short-ten courses; /d 1967 househoids; a. Inside onob'; If, lmports only. TURKEY1970 a Excludes 17 Iaetems provinces; a 1965-67; /c RAtio of population under 15 end 65 and over to labor force age 15 years and over; /d 15 years and over, eelodes unemployed; a Registered only; If DIsposble inomas; Including assistant oses and midwives; /h 196L-66; /i 7-11 years of age; ZI Persns six1 year and over who tell the ensus takere that they can read and write. GMGE ~1970/a Doe to emigration, growth rate is lower than rats of naturel increase ; /a 1967.

R9, September 17, 1976

DEFINITIONSOP SOCIAl INDICATOHS

teed A-s (thou kJ) bepnlationc ar o-ievro - Ppulatto.. divided by ounber f practicing ljocal1 Total sc-of aps ccpriaieg land ares sod inland ser.Lsal a nd. feal raduate oase, "tr,ained' or "1eertifiedl nurses, andf hAk.- ot recet entimate of agicolt-rl ares need tenpe....fly or aoxiliary personnel with training or experie-ec. pe-ncs toly far -rps, p-s u-o, e-ket &kiirhce pardons or 1o- Popolatio- per hospital hod - Poplotitee dIvided by nunber of hospital cede (nUns, ~~~~~~~~~~~~~~~avalablein public and pri vate general and specialized hospital and rehabilitation ceeters; exeludes easing homes and eotablishnente for 1cNP Per -Ptel (PSS) - GNP Pa s ots tcret -t-a carket prieco, eustodial and prevetive...... eale-lated by nse. .. a.s--Ioa method as World Rank Atlao (1973-75 taste); ts aiasppyo ao iso off rieou -oeto)- Coeputed free c-egy itO, 1270 and 5975 data. eqiaeto ntfo ople vial in vnotry per capita per day; available supplies conprise doemtie produetion, imiports less aperto, fopolat-ne nod vitol statiataca and changes in stank; net supplico exelude aninl feed, needs, quani,tties fpoPladoi (oid-Yr. cMic) - Aas of July first: if eel..acolable. coed in food processing and lessonw in distribution; reqoiroenets were t-roencsod-yoors L-occ 1960, 1970 ccd 1975 Into estimated by PAD booe d or.physiological seeds fi- sora aet-vity a aed health considering -cv.roe,ntal temperature, bdiy neights, age acid Popalntios dnaa ttp one sanar koe Mid-year - popolatioc per aqonro bib0 - sex distributicon of population, and a1l.inig 10% for Waste at icuneheld rooer(W bee caes of total,aea level. fopoiation donut0 - pe nor heof cgrte load - C-npocted a above for Par capite sopply of protein_(Xroon per day) - Protein, cont-et of per ngri-l-crnl I.od only. capita net sopply of feed per day; oat supply of food io defined as shoves; reqsireneets for all ocustries etstahicbd by USDA F--o,n Vital ctstiec- Research lercocee Provide for a ciimumvealeoc ci tO U-ol of aLt. frodo birth p.ac p.r tho...c.d - anna l..Ivetbirtho per thoc -ed of old- protein per day, and 20 grass of animal and pulse protein, of Which 10 o..or pepnlarie tee-ysdrs ritboecic noerages eedieg ie19.60 ood 1970, grams siould be animal protein; these st.naiads are lower thac those of ncdfley.rceaocdg, 1n9bll fr cot-reo ta ture. 75 groo of total protein aed 23 groan of an-Ima protene an an ovrge d _iodrceper!, ebo..s.ed - IeAa- deatba per thon--d a,.ild-pea F- tie e- 3d, P-.sp.od i, PAC) in tho Thn-d W.rld Food Ssroey. popalatiec to-year -plihmetin s-roges edieg be bOl a-d t970, ced Per caiapoennp rom nIalrad ppulne - Protoln eupply sf fend (inc-year -oo-go codig be 197brcarcnt enti-sro. derie fr_oiasad usei rc pr day. ath rateou Ag ŽL-Annual deathe per thousand in age group I-h I.,f.,go~i~ajfhu ea atb fifnsodr05ya er,to childrecinwthie age greup; suggested aan inoedlatnr of sal- ir .yFioi lites biu,rthsn. dootrofinans ndro..y tufe sopecaneY a-t birth (ore) - Average number of yearn of life rebate log at birth; neoally five -year aver. ags ending in 1961),1970 and dastioc 1975 for de-elepiogf igcoontries. rati,of- ice school - Ecro11-nt of all agoe on Gpo..rep,odu5ione rate - Average onumber of lips daughtere. a woac will__ i6Iid iz6W isb6li~~ltou oldsa ,ae bear7in her ooreIl r-pr-d-ruv ported if she -epsrl-ere pressent ago- 6-11 years hot adjusted for different lecgths of pr,imary ed.i .,ion; specific fertility rates; osoaIly f is--Year avrages e-dtg inf 1960, for ocuetries with uiesledu..ati.n, -1slinet any son 001% IAU n du,Al/b-n J-oelpi.ig eouotries. since s.ee pupilsn are below or above the offi-ta1 nehool age. Poeslatron upowh rate 'I, - tcra C-fpoond ..ac.nI growth -ac- of mid- Ajooted enrol1ment ratio - necoadaZrynohoul - Computed no above; secod- year popobatio (o OO-b 1960-70 an 9071 r dcetioc reqoires at least forern of approvd primary inotrou- Population growth rate (9)f- aba - Coopoted like groah rate of total tion; providen generl, voational or teacher training instruetiorn for popolution; ilffZeret defiitoco f -arbo areas ey affect -oIparn- pupils of 12 to 17 yonrs of age; encrenpondence coar..s a,re gneeroly b,lity ofdata aeg countra-s. en1.dsd. Urban population (9 of total) - Ratin of urban to total population; d,f- Years ofdsgotgpoie frtadseodlvl)-Ttlyano ferent definitioss of urban areas may affect comparability of data schooln;a eeeaylve,nctoal instruction may be partially anongeovtnirte. or copletely excluded. U.e stru ture(ercea:t.) - Children (0-lb yearn), working-age (15-6L years), Pocatieoa1 enrollment (9oof seoday -Vocational ins titutions include Wndrtired W annd eve r) as peroectagen of cid-year pepulation. technical, industrial or oile porswhioh operate indeperndecily or Age d.pend-.rti - Ratio of populationunder 15 aed i5 and over to as deparZteetof specodary institutions. =IC}uf.g h.odgn 6i. Adult literc rte (9) - idterate adults (able to rand nod -lto) an per- Een.edpeneyrtio - ltatnoof populotionunder iS and 65 and over ceetege of itotl adult populatioc aged 15 years and aver. to the ao. oc nae ru of i5-61 ye.ar. family eluoclep-occepeers (cu ,ultive. thou) - C-csnt-uo cnnmer of H.s in acoptror of birth-rontrol devices neder euspices of nutionel fanllY kPu~ per room (vrage) - Averge number of perso ns par boo. in oecopned pluoinig program sine ienepton. eonveetione1 dwellings to urben areas; duellnego nmlode cor-poronni i,anjlni, cg-sr (8 of married -nos) - Pereertags of married strueturss cud uaioeepied parts. wne of child-bear/op age 1-hiers) h. use birlb~-torul de- a ihuFoiddelig piped twae(9 - Occupied ~cnvoational d-11- nines to dl married w.... in sam age greoup. Gings intuban andru aleams without isc rotid ie ae faeilitiee as p-reetage of nl occupied dweIllngu. dmlR,nt Acc.es to nleotrienty (9 of al doe1hngo) - Conv tnoonel dwelings nith Total labo.r aine thounand)- f-u-onvaly -etive persOons -liridcig eletriciy nliving quarters as percent of totul delic-gs ino urban ores fres nd 1nepyedi bot .eeldnog heus-ai-v, bl,ilects, t-.; and rural a-a. IIcnstionsa curno ncntrivaes o-ot eoewarable. Rural hwellings connected to electricity ()-Computed as above for rua,l yen.1 force in ogr'lp74t7-e2 Agricultural labor fare (to farot..g, a.1~s-y Tor-t3y/7hnihtln, and fishing) an percen.tage of total labor f- oe Ueenoloyed (%of labor forc) -Unemplayed are o-only defined as persaso Cae-uept-ae 00 re ohoA an owillgintke a jb,ct of a 1 ob u g-en day, Radio recei-er (Dcr thou PaP) - All types of reni..ra fr. radio broad- triedoutf a jb, cd sebsg _er furoosetfs 5tton ..antn to general public per thousand of pnpu.acnos rooldes ,oaieenS.d perid net enceding ope week; synot be cosparnbl trte....O sen niet coontrtas and is y-ari-te r-g-:ano.- i. -di~ sento ass trls- duneto different definitions of u-emplnyed anod uc of data, in ef:ect; data for recet year' may n-c be nocco-bcl stne cwstro- s.g., employmatos ffie- statltics, sample survys. vo-pul-iav 0 trios bo2helnid lioi ployment n-srane. Pasege .erCper thou pop) - Pis-n-wv cur -sp.J-orl- -- lens ta eight p-rnons; axolodee hnuiacs.ie..n no oll- bone. distribution - Perentage of' private ineeme (tonh iii --n -id vehicles kind) receivedby riebeni it, rinhen 20%, peorest, 2(. and p.OO-Ot Elt-i Jlhl- ino-al -no-crpnirt- bsrn, oir LOT1of ho,iseholds. eial,paliaiid+ivteleetr,ei!y so kilo-,I/um ptr~ia erally han-d acpr-d-tion data, sibat llow Sr t- lo.-- ir grubi Distviiatsoo of land -a-n-rhbsp - Pervertage et land o--I iY weutnis hut. allwuo fer uTrort a-d soperis of ee:m 1/9 anod poorest I/iT of land es-r-. Newsprint (bg/yr per caP) - Per copsis alulal O. i kosoflograr Heolti and Ratrhtuon en~~~~~~~~tioctedfroo donesT se preductioc plus rat ponprt of eanprint. Pooul.tisn eca phvician - Pepalatioc dvuded by ronla ,f p-ettri-. Page I of. 4 pages ECOR0KUC DEVMLOPMENT DATA (Asneots in ojillions of U.S. dollars)

Actual - ___ct_d___L___ ftof =E 197 1972 LM L4197 1IM 96 I~ 1I98eI 1966-12 19f-7 1978-82 17 (1975Prices) ~ ~ ~ ~ 197 a 97

CrossDoestic prduct 5380 7049 7157 7854 7953 865 9417 12670 5.6 4.1 6.0 6.1 100.o Go.1. frmTre fTae1)~-660 -6 .:f 0 z- ~-.0 Gross Dosestic Inco,se 504 6337552 7 ~ ~ Ul 1i60 4.8 7. .263 o.0 Emport.(itci. NFS) 1501 1698 2111 2337 2996 375 3126 3860 2.5 20.8 12.9 4.3 37.7 E.ports (imapirtcalbacity) -t67 -g3o -?_1 -255 -13 2883 -4239 6.6 -4.3 4.6 8.0 n34 Resource Gap 16 8 120 52 WE 154 1 13L9 - -- 12.3 Coossoption Zxpeedit.rq. 4480 554 5917 6450 7027 7818 7610 9945 4. 1 8.0 6.4 1.5 88.4 Gross fixed inwetteot 726 868 84 1143 1930 2344 1974 2281 4.1 29.5 17.3 2.9 24.3 Domestic S:avioge 574 809 616 1132 906 452 1021 1748 7.9 4.6 4.8 11.3 11.6 Not ionaI Savings 569 947 893 1485 1312 937 1477 2251 11.8 11.5 9.3 8.8 16.5

EXTERNALTRADE percent (Current prtces) of total l.p.rt. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1975 Foodstffs 143 136 262 420 640 455 602 897 -1.0 68.0 34.7 10.3 21.4 Petroleum 25 56 74 258 277 303 354 69 17.5 70.0 44.8 14.4 9.2 Intornediates 166 307 4~37 711 757 750 93~5 1699 13.1 35.0 24.8 12.7 25.3 Capita1gcods 105 154 207 326 615 796 713 1172 8.0 59.0 35. 9 10.4 -20 6 Consumer goods 79 124 168 183 27 293 313 49 9.4 30.9 20.1 9.6 9:2 No-f.ot.r services 102 199 231 256 4u 90 3 589 14.3 p8.4 9.1 ..13.9. 14.2 Total 6~~ ~~~~~~2-0977 1380 M81 3847 PF 5546 9.5 45.2 27.0 11.4 10.

Phouphste 108 146 192 932 847 488 566 1269 6.2 80.0 31.2 17.5 41.7 Agriculturl products 238 357 517 463 419 429 482 541 8.4 5.5 6.2 11.8 20.6 Other sinerals 41 44 62 100 63 64 76 564 1.4 9.4 i1.6 i6.631 lasufeotures 37 93 140 207 211 187 219 536 20.2 31.4 13.7 19.6 10.4 on-fecto1r services 129 502 39 422 490 .A64 566 1130 j 7. 13.4 14.8 I Toa 553 943 1301 2125 2-03T 163 w 394 11.3 29.1 18.1 12.7 To. Trade indi..s(1979-1.000) Enportprice index 0.412 0.465 0.504 0.892 1.000 O.84 0.835 1.229 2,4 - 29.1 - 12.3 8.0 I.port price index 0.519 0.6*? 0.662 0.998 1.ooo 1.031 1.148 1.597 4.7 15.4 12.1 6.9 Te- of tr.de '3.795 0.713 0.761 0.894 1.0 0.823 0.727 0.707 -22 11.9 0.7 1.1

VALUEADDED RY SECTOR - (Shaeo GDPatIrUYcs Agriculture 27.4 27~~ ~~~~.824.4 22.7 19.7 18.6 16.2 5.9 -3.7 -0.7 3.2 19.7 Mining 5.2 5.2 8.8 14.3 11.2 12.2 14.9 16.8 5.6 -1.3 5.0 8.7 11.2 Othe r industry 20.3 20.4 21.6 19.0 25.6 22.8 22.2 22.5 5.7 11.5 12.2 7.1 22.6 Services 47.1 46.6 4882 44.0 46.5 45.3 44.3 44.5 5.3 6.7 6.4 6.2 46.5

PUBLIC FINANCE (Percent of GDP at current prices) (Central Gover-net) 1967 1972 197t4 1 976 Current receipts 17.1 17.8 19.8 24.2 2.3 24.1 Currentexpenditores 15.6 16.8 17.3 22.0 22.8 22.6 Hudgetary savings 1.9 1.0 1.5 2.2 3.5 1.5 1nvestmet expenditures 8.0 6.0 5.8 7.6 13.8 17.5

CU~RRENTTEXPENDrITURE DETAILS DETAIL ON CENTRAL (As Toa.I Crrent Expend.) 967 197 1972 1974 1975 GOVKRNNENT Education 26. 28.2 31.1 17.1 21'? INVSTHEN 19 -14j 1975 Other Socie1 ler-lces 11.6 - 9'T 9.2 5.6 s.4. Agricult.re 3,g94 29.2 Agriculture 8o0 7.2 7.1 4.3 4.3 T.du.etrand .inig 130 16.1 Other Econsei S-riceas 6.3 0.3 4.8 2.8 3.0 Economicingr-tr,stur. 101 13.0 Admlioistrtion and Defense 31.3 30.9 31.2 18.1 22.2 Educationsnd training 69 8.5 Other 16.7 18.7 16.6 51.7 'A . Other ncial sectors 76 9.4 Totul CurrentExpenditures 100.0 100.0 100.0 100.0 lot 0 Administration and security 102 12.6 ______Re gional develop.ammt 52 6.4 UmclAaaifLed 3 4.8 - SELECTED INDICATORS t968- 1973- 1973- 1978- Total 808 100.0 445

Average ICOR 2.4 2.7 3.0 3.1 PINANICI, Import Elaaticity 0.5 1.1 2.2 0.7 Publicseactor savings 280 34.7 1117 25.1 Average National Sevings Rate 12.8 16.1 14.9 16. 9 External borrvmrin 42 5.2 1865 41.9 Margi.ul N.tio...l Savings Rate 32.1 19.0 22 3 23.8 mei ar.i 486 60.1 1472 U_ - Total fieamcing 100,0 4454 100.0

LABORFORCE AND Total E..eioymont L~*- Value Added Per Werker (1960 Prices *Ec.. Ratses) OUTPUT PER WORKER InTeosds. Total 10 1 & .. N1 ecn fA rg 9 7 0 1960 I -1Ab f 1971 GrothRb ate- 1960 119 T60 j_F Gro,th Rate Agricult-r 1,834 190 ZF 54.7 0.7 i W 518Q . Industry ~~~~ ~~~369593 12.5 16.3 4.4 1328 1364 192.2 154.6 0.1 S-rvcee 641 898 21.7 R4.7 3.1 1393 1558 201.6 177.2 1.0 Uncl.asnifled 106 155 6 4.3 ... - - Totol 2~~~~~~~,9503 ~ 10.0 100.0 1.9 1100. .-T~ Une.pl.voent 305 349 - -1.2 not applicable cot availahle nil or negligible 3klc or PA T. TEIEML ASTSDU AIM MBT An"'e T (_oont iJ eilion of U.S. dollars at corret price.) Page 4 of 4 page.

Actoal Projected i! z 1974X iS .gi IS77 1970 fo 1902 n!25 SSII(AT OF RAAC OPA*40? T5 Ecl. t Im t5~~%1301 2515 2019 16J 2166 2565 5494 4685 7430 Report. ldn I .977' -1380 2146c 2996 3040 3t2295 35523 43956 55466 86079 Imports, i-cl. Nf 44 97-M -1 063 916 -901 -86i -649 Resou.rcebalance T7g - 9 03 -8

Not factor services 38 138 266 423 464 464 487 581 729 937 Tbst inte rnt pay.ete -29 -29 -20 -30 -38 -102 -150 -209 -243 -386 Net invest_.t inoe_ -28 -38 -31 -36 -40 .43 -46 -53 -60 -74 Workers' recoittancec 139 249 356 533 582 633 726 886 '°76 1441 Other (ee) -44 -44 -39 -43 -43 -43 -43 -43 -43 -43

Correct transfers (eat) 43 46 19 8 9 9 10 12 13 16 Curreot occocnt bhles.. 47 105 237 -546 -1381 -589 -461 -309 -118 304 84 Private direct tre-st. (eet) 24 15 5 - 24 28 32 43 56 Pub1lc.+LT logos Di.bur.seaest 111 82 148 538 1136 876 808 865 918 1200 Repasy.te -79 -79 -82 -136 -1.39 -192 -380 -so6 -552 -596 Net df bursen-or 32 3 66 404 997 683 428 353 366 604 -40 -17 -20 -24 Short-tern capital (oct) -35 -75 -158 125 -25 -48 Copital c.e.t. 7 -13 -27 13 SOO 200 - _ _ _ Ch..e Ic reserve. -7 -35 -123 17 -184 -239 76 -75 -283 -969 of reserve. Level 5608 - ount 286 354 475 454 593 832 756 734 1243 2.7 5.4 - soothe' isporte 3.5 3.1 2.5 1.8 2.0 3.1 2.6 2.0

GRANT AND LOAN COaITHSNTS

Official gronto 17 40 42 - 500 200 - - - - 1413 Total public H+LT lo... 177 96 553 863 1803 701 626 863 1105 IBRD/IDA 97 49 141 63 125 140 158 143 158 194 Other i.tercI i-etitati... - - 38 25 27 29 32 35 37 41 Goverceent. - 43 246 450 850 450 486 559 640 784 394 Suppliers credito 61 4 31 125 91 82 90 107 270 Pic..clcl ittitutlo. 19 - 97 200 710 19

Actual EXTERNALDEBT Actual Debt Out.t.edico Dec. 51. 1974 DiabsdD1 r.rc.Elt 1967 c IIU 1974 1975 World Beck 156.7 15.8 DEbT AND DEBT S_RVICE Disbursed 490 912 986 1124 1413 ID'A 29.6 2.6 public Debt Out. + Other ?Wltil.ter-l 2.7 0.2 G-vero_ecat 737.4 65.6 Ilte.e.t oc Public Debt 17 33 41 42 52 Suppliers 86.5 7.7 Rapy-.tocon Public Debt 29 67 88 94 116 Fi.a.ctl1 Icotitoti.oc 85.1 7.6 Total Public Debt Service 46 100 129 136 16° Others 29.8 2.7 Other Debt Service (.et) .. 168 Total 1123.8 100.0 Total Debt Service (net) 46 100 129 136

Bordec oc Report Ercineg (%) Other -+LTDebts 9.1 6.0 Shcrt-terc Debt (disb. only) Public Debt Service 8.3 12.4 8.3 Total Debt Service 8.3 12.4 12.1 6.0 8.3 TDS + Direct 1ovest. I.C. 12.3 15.4 12.1 7.4 10.1

Average Ter- of Public Debt

Ilt. .o %Prior Year DOD 2.4 4.4 4.5 3.8 4.7 Aacrt. as %Prior Ye-r DDD 6.s 9.1 8.8 7.8 10.4

IBRD Debt Out.aedDoibursed IBRSDa %Public Debt OD 6.o 9.5 10.8 14.2 16.1 IBRD as %Public Debt Service 5.7 10.7 14.4 12.1 19.4

IDA Debt Out. ndDiobursed IDA as %Public Debt O 0.0 1.7 2.4 2.5 2.0 ILDo %Public Debt Service 0.0 0.1 0.2 0.1 0.1

cot available nil cr n Rlgihle ANNEX II Page 1 of 6 pages

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of February 28, 1977)

Loan or US$1 Million Credit Amount (less cancellations) Number Borrower Purpose Bank IDA1/ Undisbursed

Ten Loans Fully disbursed 152.0 Three Credits " " 27.5

643 1965 Kingdom of Morocco Irrigation 46.0 8.5 266 1971 Kingdom of Morocco Education 8.5 3.3 848 1972 CIH DFC (Tourism) 15.0 3.1 850 1972 ONEP Water Supply 48.0 10.1 890 1973 BNDE DFC 24.0 1.1 936 1973 ONE Power 25.0 5.3 955 1974 Kingdom of Morocco Highways 29.0 15.2 1017 1974 Maroc-Phosphore Industry 50.0 4.4 1018 1974 Kingdom of Morocco Agriculture 32.0 16.8 1061 1974 BNDE DFC 30.0 12.4 555 1975 Kingdom of Morocco Agriculture 14.0 14.0 1123 1975 Kingdom of Morocco Agriculture 18.5 16.5 1201 1976 Kingdom of Morocco Agriculture 30.0 30.0 1202 1976 Kingdom of Morocco Tourism 21.0 21.0 1220T 1976 Kingdom of Morocco Education 25.0 25.0 1279 1976 CIH DFC (Tourism) 25.0 24.8 1299 1976 Kingdom of Morocco Power 49.0 49.0 1361 1977 Kingdom of Morocco Agriculture 35.0 35.0

Total 654.5* 50.0 295.5 of which has been repaid 86.3 Total now outstanding 568.2 50.0

Amount sold 6.2 of which has been repaid 1.3 4.9

Total now held by Bank and the IDA!/ 563.3 50.0

Total undisbursed 278.2 17.3 295.5

* Excludes a $45.0 million loan for a 4/ Prior to exchange adjustment cement project, approved on 3/12/77 but not yet signed. B. STATEMENT OF IFC INVESTMENTS (as of Fe'ruary 28,1977)

Year Obligor Type of Business Amount in US$ Million Loan Equity Total

1962 BNDE Development Bank -- 1.5 1.5 1966 CIL Canning Factory 0.9 0.5 1.4 1976 SCM Cement Factory -- 1.3 1.3

Total gross commitments 0.9 3.3 4.2

less cancellations, terminations, repayments and sales 0.9 0.7 1.6 Total commitments now held by IFC -- 2.6 2.6

Total undisbursed -- 0.2 0.2 ANNEX II Page 2 of 6 pages

C. PROJECTS IN EXECUTION 1/

Ln. No. 643 Rharb-Sebou Irrigation Project: US$46 million Loan of November 13, 1969; Date of Effectiveness: June 8, 1970; Closing Date: November 30, 1978.

Progress in implementing the project is now satisfactory although considerable problems were first experienced with management and procurement of canalettes, and some procurement difficulties continue. The major project structure, Idriss ler Dam, is completed and equipment of 19,940 ha out of a total of 35,000 ha is completed. Construction of remaining perimeters is expected to be completed by June 1978. Additional infrastructure for the project area, including a sugar cane processing factory and flood protection works, are being provided by Loan No. 1018-MOR.

Cr. No. 266 Second Education Project: US$8.5 million Credit of August 18, 1971; Date of Effectiveness: December 10, 1971; Closing Date: April 30, 1978.

The project included the expansion and improvement of specific sections of the secondary, vocational and higher educational systems, and technical assistance for project administration and school maintenance. Subsequently, the Association agreed not to finance two Vocational Training Centers and the Department of Veterinary Medicine. Accordingly, an amount of about US$0.9 million has been transferred to the unallocated category for future reallocation and/or cancellation. Initial delays occurred in the appointment of consultant architects, in the recruitment of local personnel and technical assistance experts for the Project Unit and in procurement. However, execution is now proceeding satisfactorily and construction is on schedule. Procurement of furniture and equipment should be substantially completed by mid 1977.

1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 of 6 pages

Ln. No. 848 Second Hotel Development Project; US$15 million of June 30, 1972; Date of Effectiveness: November 1, 1972; Closing Date: December 31, 1977.

Commitments and disbursements initially lagged behind expectations, due to sluggish investment activity in 1973. The loan is now fully committed, as against the appraisal estimate of March 1974 and is now expected to be fully disbursed by mid 1977.

Ln. No. 850 Water Supply Project; US$48 million Loan of July 19, 1972; Date of Effectiveness: May 2, 1973;GClosing Date: December 31, 1977.

The dam which was the major component of the project was inaugurated in August 1974. All project elements are being completed on schedule except for the treatment plant and the training school, which are both about six months behind schedule. The financial position of the Borrower, Office National de l'Eau Potable (ONEP), is satisfactory. In early 1976 consultants have completed a tariff study which will assist in improving ONEP's long-term financial performance. Consultants have recently been engaged to undertake a management study for ONEP.

Ln. No. 890 Sixth BNDE Project; US$24 million of May 14, 1973; Date of effectiveness: September 10, 1973; Closing Date: Mfarch 4, 1977.

The loan was fully committed by May 1974, about six months earlier than expected. Disbursements have been completed and the Loan was closed March 4th, 1977.

Ln. No. 936 Power Project; US$25 million of October 5, 1973; Date of Effectiveness: January 23, 1974; Closing Date: December 31, 1977.

Physical implementation of the project is practically complete. Savings amounting to about US$4.0 million are being applied to consultant services for feasibility studies, preliminary design and preparation of bid documents for 5 hydro stations required to alleviate Morocco's dependency on imported oil. Although electricity rates were sharply increased on January 1, 1976, ONE's rate of return has not yet reached the covenanted level because of even sharper increases in the price of imported inputs.

Ln. No. 955 Second Highway Project; US$29 million of January il, 1974; Date of Effectiveness: Mlay 21, 1974; Closing Date: June 30, 1977.

Construction of the Rabat-Casablanca expressway began in early 1975, 8 months behind schedule and is expected-to be completed during the first half of 1977. Purchase of maintenance equipment and work on the highway improvement program are proceeding satisfactorily, close to the appraisal cost estimates. The consultants for the urban traffic and transport study in the towns of Casablanca and Rabat have submitted the draft final reports. The Government has recently awarded a contract for technical assistance for the establishment of a Transport Planning Office in the Ministry of Public WJorks and consultants have commenced work in August 1976. ANNEX II Page 4 of 6 pages

Ln. No. 1017 Phosphoric Acid Project; US$50.0 million of June 27, 1974; Date of Effectiveness: February 27, 1975; Closing Date: June 39, 1977.

Progress in project execution is good; the units are now undergoing commercial test runs. Full commercial production is expected by mid 1977. Personnel recruitment and training is expected to be successfully completed in early 1977. Cost overrun is expected to be less than 8 percent, mostly in local currency and will be financed locally.

Ln. No. 1018 Sebou II Development Project; US$32.0 million of June 27, 1974; Date of Effectiveness: February 28, 1975; Closing Date: June 30, 1979.

The sugar cane processing factory was essentially completed on schedule in 1975. Construction of the project area roads is on schedule but work on the flood protection dykes is about 12 months behind schedule, mainly on account of delays in land acquisition. The studies of pollution control and the incidence of bilharzia on the Rharb plain have not yet been started.

Ln. No. 1061 Seventh BNDE Project; US$30 million of December 30, 1974; Date of Effectiveness: January 15, 1975; Closing Date: December 31, 1978.

This loan is almost fully committed. Disbursements are roughly in line with appraisal estimates.

Ln. No. 1123 Souss Groundwater Project; US$18.5 million of June 11, 1975; Date of Effectiveness: September 26, 1975; Closing Date: June 30, 1980.

The project unit has been created, its staff appointed, and the project co-ordinating committee has been established. The 59 wells required for new irrigated area (6,300 ha) are now completed and tested, one year ahead of appraisal schedule. Land clearing is almost complete. Land registration of private farms is only about 50 percent completed, delaying land consolida- tion. A consultant has been retained to speed up the design of the village centers.

Cr. No. 555 Meknes Agricultural Development Project; US$14.0 million of June 11, 1975; Date of Effectiveness: Noveaber 14, 1975; Closing Date: March 31, 1981.

Following initial delay, the project is now getting underway. How- ever, project management and the coordination of project activities between the project authority and the central offices of the Ministry of Agriculture require close monitoring for satisfactory enforcement of land distribution criteria. ANNEX II Page 5 of 6 pages

Ln. No. 1201 Doukkala Irrigation Project; US$30.0 million of February 27, 1976; Date of Effectiveness: July 20, 1976; Closing Date: June 30, 1981.

The project includes sprinkler irrigation for 15,400 ha and infra- structure and equipment. Progress of construction is satisfactory with the exception of laying and testing of large diameter concrete pipes for which satisfactory remedial measures are being taken.

Ln. No. 1202 Bay of Agadir Tourism Project; US$21.0 million of February 27, 1976; Date of Effectiveness: October 29, 1976; Closing Date: December 31, 1981.

The project intended to develop Agadir into a major tourism area consists of infrastructure works and public facilities for the development of a new tourism section on 260 ha on which 7,000 hotel beds and 2,600 housing units are expected to be constructed. The project includes also regional infrastructure and facilities for the development of Agadir's tourism assets. Project implementation is progressing satisfactorily.

Ln. No. 1220 Third Education Project; US$25.0 million of March 18, 1976; Date of Effectiveness: October 1, 1976; Closing Date: May 1, 1981.

The project is designed to expand and improve primary and secondary education in rural areas and specialized training to meet urgent manpower needs in education, agriculture, health and tourism. Project implementation is progressing satisfactorily. The ministries concerned have appointed the officials responsible for project implementation. Consultant architects have been selected. Selection and acquisition of site are well underway.

Ln. No. 1279 Third Hotel Development Project; US$25.0 million of July 2, 1976; Date of Effectiveness: November 18, 1976; Closing Date: December 31, 1980.

Implementation of the project is proceeding well. The Loan is expected to be disbursed somewhat ahead of schedule. Commitments at end 1976 amounted to $4.2 million. CIH has been successful in mobilizing for- eign exchange resources other than the Bank's and in reducing outstanding arrears in accordance with understandings reached during negotiations. ANNEX II Page 6 of 6 pages

Ln. No. 1299 Sidi Cheho - Al Massira Hydro Project; US$49.0 million of July 2, 1976; Date of Effectiveness: November 16, 1976; Closing Date: December 31, 1981.

The Project, comprises the construction of the Al-Massira concrete dam on the Oum er Rbia river, a 120-MW power station including a 225-KV sub- station, construction of about 200 Km of 225 Kv transmission lines, and prepa- ration of preliminary designs and bid documents for the Merija compensating dam and power station. Procurement of the main project items is underway and physical progress of the Project is satisfactory.

Ln. No. 1361 Third Agricultural Credit Project; US$35.0 million Loan to Caisse Nationale de Credit Agricole (CNCA) of February 7, 1977; Date of Effectiveness: May 10, 1977; Closing Date: June 30, 1980.

The project aims at increasing Morocco's agricultural production and at expanding the capability of CNCA as a sound agricultural institution. The project will cover most of CNCA's program for medium- and long-term lending through August 1979 and will include related technical assistance.

Ln. No. CIOR Cement Project; US$45.0 million of March 9, 1977; The Loan Agreement for this project has not yet been signed; however, the signing is expected shortly.

The project comprises construction of a 1.2 million tons per year cement plant near Oujda in the Eastern Region of Morocco, and related distri- bution facilities. ANNEX III Page 1 of 3 pages

DOUKKALA II IRRIGATION PROJECT

Borrower: Kingdom of Morocco

Loan Amount: $41 million equivalent in various currencies

Terms: 30 years including 6 1/2 years of grace with interest at 8.20 percent per year.

Project - enlargement of the main supply canal over 22 km, construc- Description: tion of about 10 km of feeder canals and installation of automatic flow regulators;

- construction of six pumping stations with a total installed capacity of 11,300 kw, each with an elevated equalizing reser- voir;

- construction of 31 km of 60 kv and 62 km of 22 kv power transmission lines and a substation for pumping stations;

- land preparation and consolidation including farm roads, windbreaks and drainage;

- installation of 450 km of buried pipe distribution system including hydrants, each serving about 16 ha, and asso- ciated mobile sprinkler equipment;

- construction of main drainage channels entailing about 300,000 m3 excavation;

- construction of 108 km of roads, reinforcement of 64 km of existing roads;

- construction of buildings, provision of equipment for extension, operation, maintenance, artificial insemination, and telecommunications between ORMVAD's El Jadida head- quarters and the project area;

- construction of four milk collection centers;

- provision of village infrastructure for five villages;

- provision of farm inputs, credit and extension services;

- strengthening of applied agricultural research activities; and

- provision of consulting engineering services for project implementation. ANNEX III Page 2

Cost Estimates: Million of US$ Local Foreign Total

Irrigation network 35.7 25.0 60.7 Agricultural infrastructure 1.4 1.0 2.4 Roads 2.2 2.2 4.4 Village infrastructure 1.1 0.3 1.4 Agricultural credit 3.2 0.0 3.2 Administration and consultants 3.8 1.3 5.1 Contingencies 27.1 16.7 43.8

Total 74.5 46.5 121.0

Financing Plan:

Amount Sources of Finance: Items to be Financed $ Million

Bank Loan Foreign exchange cost of: canals, pump- ing stations, reservoirs, buried pipe distribution systems, drainage networks, roads, electro-mechanical equipment and filter for pumping stations, hydrants, telecommunication equipment and mobile sprinkler equipment 41.0

National Agricultural Farm Development through Agricultural Credit Bank (CNCA) Credit 3.2

Government Remaining foreign exchange and local costs 76.8

TOTAL

Estimated Disbursements: Millions of US$ CY78 CY79 CY80 CY81 CY82 CY83

Annual 2.0 4.0 8.0 10.0 12.0 5.0 Cumulative 2.0 6.0 14.0 24.0 36.0 41.0

Procurement All goods to be financed by the Bank loan with the exception Arrangements: of selected equipment items not exceeding $250,000 in the aggregate, would be procured through international com- petitive bidding in accordance with Bank Guidelines for Procurement, and would be grouped as far as practicable into twenty-one lots for tendering purposes. A preference margin of 15 percent or the prevailing customs duty, which- ever is less, would be extended to local manufacturers in the evaluation of bids for equipment. Consultant services would be procured in accordance with Bank guidelines. ANNEX III Page 3 of 3 pages

Consultants: Engineering consultants to the Regional Office for agri- cultural Development in the Doukkala would amount to 186 man-months at an average cost of $6,800 per man- month.

Rate of Return: 11.6 percent.

Appraisal Report: No. 1431a-MOR dated April 12, 1977 ANNEX IV

SUPPLEMENTARY PROJECT DATA SHEET

Section I - Timetable of Key Events

(a) Time taken to prepare the project: two years

(b) Agency which prepared the project: Consultants/FAO-IBRD/CP

(c) Project preparation report submitted to Bank: November 1974

(d) Appraisal mission for the entire project including the first and second extension of irrigation: April 1975

(e) Departure of appraisal mission for the proposed extension: October 1976

(f) Completion of negotiations: March 1977

(g) Planned date of effectiveness: August 15, 1977

Section II - Special Bank Implementation Actions

None.

Section III - Special Conditions

(a) ORMVAD to levy and collect in the project area, water charges and a land betterment levy on the basis agreed upon under the Doukkala I project. The Borrower to inform the Bank of results and recommendations of ongoing review of water charges throughout Morocco (paras. 51 and 52).

(b) ORMVAD to continuously monitor agricultural production in project area and to evaluate in 1983 and 1988 actual project benefits (para. 46).

(c) ORMVAD to employ additional extension and other staff to meet needs of project (para. 43).

(d) ORMVAD to improve system of communications within Project area (para. 40).

(e) Retroactive financing of about $500,000 for enlargement of main canal to permit timely start of this project component (para. 54). IBRD 10682RI -- MOLAGA - AIr~~~~~~~~~~~~~er,o~~~MARtCH i977

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A T L A N T I C DOUKKALA 11IRRIGATION PROJECT DEVELOPMENT OF THE OUM ER R' BIA BASIN

EAzemmour Existing irrigation creas El Jod.da 0 B.,ehd MAACHOU rre~dDoukkalo Iand II areas 0 N Oe,*MAACHOU BrehdDu olonEes C E A 0 C E A N ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Futureextensions

-33' 1 T~~~~ - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'.4Existing dams 0 /Ap, \_XODAOURAT 1 Settos hero Potential dam sites 33

1/ SIDI FAREGH SMA/I Khouribga OOuedZem IMIZOIFANE, 0 Q66 C Hydro power plants 51D SMAI AEG- Kho-rbga 0 ---- Tunnel

IM-OUFOUTN So - Main irrigation canals 0 L A ~-Rivers BENI AMIR DECH)RAELOUED

AL MASSIRA

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~~To 5odiav,-~~~~~~~~~~ ~ T.ElIJuda. MARCH,1977 <~~~~~~ ~~~~~i ~~~~KINGDOM OF MOROCCO -- -D- _s N ,-E DOUKKALA E IRRIGATION PROJECT

0/ad Saleni ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ LDoukksala o I ~ 2irrigaition Project SvS.1-Coukkala 2 sector boundaries /~~ I _____ >-~~~~~~~ ~ ~ 7Ijn= oukkala 1 Irrigation Project D.-nt - _-- Doukkalai 1 sector boundaries 0 I ~~~~~ ~~ . ~~~~ flOU55r&-~ ~ ~~ ~~SbtS.~ Existing gravity irrigated areas Existing sprinkler irrigated areas Subd' Airline Fu~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Fture high service ivision areas 25 S-l ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~)K~Subdivision headqsarters

/ L"I -M~~~~~~'\ouAboM~xi9~=ain canal a ...... ~~~~~~~~~~~~~~Tunnels Soak ~~~~~Feedercanals \ ----- Main ~~~drains

/ ---- ~-Proposed high service canal e Project pumping stations k ~~~~~~~~~~~~~~~DoukkalaI pumping stations * Existing pumping staitions

______* ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ProjectCMV's oNew C ' S.fi s ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*Existing CMV's I I ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~32 one*Existing sugar factory de,~ ~~ ~ ~~~I 3Future suaar tactory ~--iOcontours in meters T c N ~~~~~~~~~~~~~~i9i- ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~BossUiDaya (Karst depression) > FWRF U/GA'~~~~~~~~~~~~~~~~~SERVICE CANVAlI -- eretr. Primary roads Secondary roads

i AI D D A ~~~~~~~~~~~~~- MS2Tertiary roads I ~~~~~~~~~~-Projectroads (new) ~~'''~~ / 0 -- -- Proect roads (to be improved) ~I N~ ~ ~ ~~~~~~~~.i$,\ -- Provincial boundaries

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