Document of The World Bank
FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 57608-MA
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROGRAM DOCUMENT
Public Disclosure Authorized FOR A PROPOSED LOAN
IN THE AMOUNT OF EURO 100 MILLION (US$138.6 Million Equivalent)
TO
THE KINGDOM OF MOROCCO
FOR A
SECOND MUNICIPAL SOLID WASTE SECTOR DEVELOPMENT POLICY LOAN Public Disclosure Authorized
November 22, 2010
Sustainable Development Department Middle East and North Africa Region
Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
MOROCCO—GOVERNMENT FISCAL YEAR January 1st–December 31st
CURRENCY EQUIVALENTS (Exchange Rate Effective as of November 10, 2010)
Currency Unit Moroccan Dirham US$1.00 MAD8.102
WEIGHTS AND MEASURES Metric System
ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement CAS Country Assistance Strategy CDM Clean Development Mechanism CERs Carbon Emissions Reductions CN-PNDM National Commission for the National Municipal Solid Waste Management Program CPF Carbon Partnership Facility DGCL General Directorate of Local Communities EC European Commission ER Emission Reduction ERPA Emissions Reductions Purchase Agreement EIA Environmental Impact Assessment ESA Environmental and Social Audit ESIA Environmental and Social Impact Assessment FDI Foreign direct investment FEC Fonds d’Equipement Communal FHII Fonds Hassan II GDP Gross Domestic Product GHG Greenhouse Gas GoM Government of Morocco GtZ Gesellschaft für technische Zusammenarbeit IMF International Monetary Fund KfW Kreditanstalt für Wiederaufbau LFG Landfill Gas LG Local Government MAD Moroccan Dirham MAEG Ministry of Economic and General Affairs METAP Mediterranean Environmental Technical Assistance Program MoEF Ministry of Economy and Finance MoI Ministry of Interior MSW Municipal Solid Waste MSWM Municipal Solid Waste Management PNDM National Municipal Solid Waste Management Program PoA Program of Activity PPIAF Public-Private Infrastructure Advisory Facility PSP Private Sector Participation SEEE Secrétariat d’Etat Chargé de l’Eau et de l’Environnement SWE Secretariat of State in charge of Water and Environment SWM Solid waste management tCO2e Tons of CO2 equivalent VAT Value Added Tax
Vice President: Shamshad Akhtar Country Director: Neil Simon Gray Sector Director: Laszlo Lovei Sector Manager: Anna Bjerde Task Team Leader: Jaafar Sadok Friaa
KINGDOM OF MOROCCO
SECOND MUNICIPAL SOLID WASTE SECTOR DEVELOPMENT POLICY LOAN
TABLE OF CONTENTS
LOAN AND PROGRAM SUMMARY ...... iii I. INTRODUCTION ...... 1 II. COUNTRY CONTEXT ...... 2 A. MACROECONOMIC ACHIEVEMENTS OVER THE LAST DECADE ...... 3 B. RECENT ECONOMIC DEVELOPMENTS IN MOROCCO ...... 4 C. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ...... 9 III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES ...... 12 A. SECTOR BACKGROUND ...... 12 B. THE GOVERNMENT’S PROGRAM ...... 12 C. CONSULTATION AND PARTICIPATORY PROCESS ...... 16 IV. BANK SUPPORT FOR THE GOVERNMENT’S PROGRAM ...... 17 A. LINK TO CAS ...... 17 B. COLLABORATION WITH THE IMF AND OTHER DONORS ...... 18 C. RELATIONSHIP TO OTHER BANK OPERATIONS ...... 18 D. LESSONS LEARNED ...... 19 E. ANALYTICAL UNDERPINNINGS ...... 20 V. THE PROPOSED SECOND MUNICIPAL SOLID WASTE SECTOR DEVELOPMENT POLICY LOAN 21 A. OPERATION DESCRIPTION ...... 21 B. PROGRAM ACHIEVEMENTS TO DATE ...... 21 C. STATUS OF DPL 2 TRIGGERS AND PENDING ACTIONS ...... 30 D. FUTURE PROSPECTS FOR BANK ENGAGEMENT ...... 38 VI. OPERATION IMPLEMENTATION ...... 38 A. POVERTY AND SOCIAL IMPACTS ...... 38 B. ENVIRONMENTAL ASPECTS ...... 40 C. IMPLEMENTATION, MONITORING, AND EVALUATION ...... 42 D. FIDUCIARY ASPECTS ...... 43 E. DISBURSEMENT AND AUDITING ...... 45 F. RISK AND RISK MITIGATION ...... 45 ANNEX 1: LETTER OF SECTOR DEVELOPMENT POLICY ...... 47 ANNEX 2: THE GOVERNMENT’S PROGRAM FOR THE REFORM OF THE MUNICIPAL SOLID WASTE SECTOR ...... 66 ANNEX 3: OPERATION POLICY MATRIX ...... 72 ANNEX 4. MOROCCO: PUBLIC DEBT SUSTAINABILITY AND EXTERNAL FINANCING REQUIREMENTS ...... 76 ANNEX 5: MOROCCO AT A GLANCE ...... 77
This Loan is being prepared by a World Bank team consisting of Jaafar Sadok Friaa (Task Team Leader and Lead Urban Specialist), Francois Boulanger (Urban Economist), Hocine Chalal (Lead Environmental Specialist/Regional Safeguards Advisor), Anas Abou El Mikias (Financial Management Specialist), Stefano Paternostro (Lead Country Economist), Khalid El Massnaoui (Senior Economist), Andrea Liverani (Social Development Specialist), Adrien De Bassompierre (Carbon Finance Specialist), Sherif Arif (Environmental Consultant), Abdelmourhit Lahbabi (Consultant); Jyoti Bisbey (Infrastructure Analyst) Sylvie Pittman (Program Assistant), and Laila Moudden (Program Assistant). The team worked under the guidance of Neil Simon Gray (Country Director), Laszlo Lovei (Sector Director), Francoise Clottes (Country Manager), and Anna Bjerde (Sector Manager).
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LOAN AND PROGRAM SUMMARY
KINGDOM OF MOROCCO SECOND MUNICIPAL SOLID WASTE SECTOR DEVELOPMENT POLICY LOAN
Borrower Kingdom of Morocco Implementing Ministry of Economy and Finance, Ministry of Interior, and Secretary Agency of State in charge of Water and Environment. IBRD Loan, Variable-spread loan in Euro, with 28 years maturity and a 5.5-year grace period. Financing Data Amount: Euro 100 million
The proposed loan would be disbursed in one installment upon declaration of Loan effectiveness. The proposed operation is the second DPL in a programmatic series of Operation Type two single-tranche DPLs.
Governance of the municipal solid waste sector Main Policy Areas Sustainability of municipal solid waste services Environmental and social dimensions
The key outcome indicators for the programmatic series of DPLs are detailed in Annex 3 and summarized below:
Governance: (i) Annual costed-workplans and progress reports are systematically reviewed and adopted by the National Commission for the National Municipal Solid Waste Management Program (CN- PNDM); (ii) The percentage of total government financial support under the National Municipal Solid Waste Management Program (PNDM) allocated based on the adopted eligibility criteria; (iii) Solid waste infrastructure supported through the PNDM is consistent with national regulations, based on reviews of projects in 2012; (iv) Increased competition in tenders for MSWM, as measured by the increase in participation to tenders between 2008 and 2011 reported in Key Outcome bid opening records; (v) The Number of thematic conventions signed Indicators between local governments and the State targeting the upgrade of MSWM; and (vi) Change in the perception by the urban population of MSWM as a priority area of intervention, as measured by sample survey.
Sustainability: (i) Increase in the revenues generated from the municipal services tax (TSC); and (ii) The number of municipalities benefitting from capacity-building activities.
Environmental and Social: (i) The number of EIAs related to waste investments reviewed and approved by regional and national EIA committees; (ii) The percentage of collected waste disposed in sanitary landfills by 2012; (iii) The number of open dumpsites closed/ rehabilitated by 2012; and (iv) Number of wastepickers benefiting from
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social inclusion initiatives.
The development objective of the DPL program is to support the GoM in implementing its program of reforms aimed at improving the financial, environmental and social performance of the municipal solid waste sector in Morocco. The first DPL (DPL1) supported the key foundations of the Government’s reform program, which established the enabling environment for an integrated and affordable municipal Program solid waste system. This second DPL (DPL2) supports capitalizing on Development the momentum gained during the first operation while deepening the Objective(s) and reforms at the regional and municipal levels. Contribution to CAS Support to the municipal solid waste reform program is a key component of the new CPS. DPL2 will contribute to the achievement of the CPS’second and third pillars: (i) support to the improvement in access to, and quality of services; and (ii) sustainable development in a changing climate. In addition the operation is fully supportive of the CPS cross cutting theme of enhancing governance.
The risk environment is substantially the same as for the 2009 operation, for which 3 main risks were identified:
1) Commitments to the reform and implementation capacity risks. The quality of the Bank-client dialogue during 2009-10 and progress made towards the prior actions for the second operation indicate that reform commitment remains robust. However, the spotlight is moving onto implementation capacity as a potential risk to the achievement of the national solid waste management program’s objectives. More specifically, implementation progress will depend on the systematization of procedures for the allocation of financial support to municipalities, the capacity of municipalities to manage investments and service outsourcing (and in particular the capacity of medium-sized and smaller municipalities), and the central government’s monitoring Risks and Risk arrangements. This potential risk is mitigated by the Government’s Mitigation strong commitment to (i) scale up and mainstream the solid waste capacity building activities within the Government program to support decentralization at the municipal level, and (ii) mobilize appropriate financial and human resources to support the management of the program at national and local levels.
2) Social acceptance risk, namely the risk that the reforms will be unacceptable to the general public and to waste pickers. So far the public profile of the solid waste reforms has been fairly low. However, there remains a risk of an adverse reaction to the transfer of collection service employees from the public to the private sector. Early signs indicate that pilot projects implemented so far for the re-employment of waste pickers are proving successful. This potential risk is mitigated through the Government’s decision to create a specific line item within the national solid waste program’s 2010 budget to expand these pilots and the mandatory requirement for operators to cover social aspects in iv
future contracts.
3) The possibility of municipalities’ resisting the solid waste reforms was identified as a minor risk for the 2009 operation initially, to be mitigated by the allocation of targeted financial support. However, concerns remain that the incremental cost of the required investments may prove too high for some municipalities. For example, the annualized payments from the Solid Waste Support Program to municipalities may not be enough to finance up-front capital investment in improved waste sites and the financial implications for medium-sized and smaller municipalities may prove particularly daunting. The magnitude of this potential risk is being addressed through the ongoing KFW funded study on institutional and financial aspects, and the government is fully committed to tailor its financial support to small and poor local governments if needed. In the longer term, the progressive shift of financial responsibility from government budgets to municipal taxpayers may weaken municipalities’ commitment to improved solid waste management practices. This potential risk is mitigated by the Government’s strong commitment to proceed with the envisaged municipal finance reforms. Efforts are underway from both cost reduction and revenue generation perspectives ranging from short to medium and long term time frames. Inter-municipal cooperation and regionalization of solid waste disposal facilities will also help especially small municipalities to take advantage of the significant economies of scale in waste management.
Operation ID P119781
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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROGRAM DOCUMENT FOR A SECOND MUNICIPAL SOLID WASTE SECTOR DEVELOPMENT POLICY LOAN TO THE KINGDOM OF MOROCCO
I. INTRODUCTION
1. This Program Document proposes a Second Municipal Solid Waste Sector Reform Loan (DPL 2) to the Kingdom of Morocco in the amount of €100 million (US$ 138.6 million equivalent). The proposed operation is the second of a programmatic series of two single-tranche DPLs. The first operation (€100 million) was approved by the Board in March 2009. In accordance with the initially agreed reform program, this second operation is specifically designed to capitalize on the momentum gained during the first operation while deepening reform through results-oriented actions at the regional and local levels.
2. The program for the municipal solid waste sector was defined at the outset of the new Government in October 2007, and has been implemented since. Reform of the sector is viewed as a core component of improving the urban environment and is central to the decentralization agenda that the Government is carrying out, especially to improve service delivery in urban area. Mainstreaming environment and social concerns is also one of the fundamental principles of the recent Charter of the Environment and Sustainable Development called for by His Majesty the King in his speech of the Throne on July 31 2009, and finalized in April 2010.
3. The Government’s program includes three strategic reform areas: i) enhance the governance of the sector; ii) improve the sustainability of municipal solid waste services; and iii) mainstream environmental and social dimensions. The key outcomes of the reform program include: (a) effective inter-ministerial coordination of the National Solid Waste Program (PNDM) and a strengthened regulatory framework through the enactment of executive regulations for Solid Waste Management (SWM) planning, norms and standards; (b) better financial sustainability through: allocation of financial resources consistent with sector policies and programs, improved cost effectiveness of private sector operators involved in providing SWM services, and additional sources of revenues generated through the Clean Development Mechanism (CDM); and (c) waste disposal practices consistent with international social and environmental good practices.
4. With the support of the first operation (DPL 1), the reform process has made substantial progress with tangible results. Morocco has moved from lagging behind most of its regional peers to pioneering the implementation of an integrated and policy-oriented approach to address sector needs. Actions and policy measures supported through the first operation succeeded in establishing the key foundations of the sector reform, including a sound institutional footing, a strengthened regulatory framework for the solid waste sector and the EIA system, growing and sustained Government financial support to local governments and transparent fund allocation through performance-based criteria. This has translated into the professionalization of collection services through increased private sector participation (now reaching 60% of urban areas), and the launch of the upgrade of waste disposal practices to meet environmental and social standards (targeting waste generated by 50% of the urban population). Climate mitigation is now fully integrated into the national SWM program with a GHG reduction potential of about 9 million tons of CO2 equivalent (tCO2e) over the next 10 years.
5. The implementation to date of the indicative triggers for DPL2 is satisfactory. Out of the nine indicative triggers, 8 of these actions have been met and there is only one action that is delayed and subsequently the number of prior actions for DPL2 is 8. This program document reviews the progress 1
made in implementing the reforms with a focus on the prior actions for the second operation DPL2 and the results achieved until now. It also outlines the lessons learned from the implementation of the first DPL that were incorporated into the design of the proposed operation.
6. Bank support to the municipal solid waste sector in Morocco continues to advance in close collaboration with other partners. Although there are no co-financiers of the proposed operation, the team is working very closely with other donors involved in this sector in Morocco, including UNDP, GtZ and KfW who are providing coordinated technical support.
II. COUNTRY CONTEXT1
7. Morocco carried out sound macroeconomic policies and continued to sustain the momentum of structural reforms. As a result, the growth trend shifted to a higher level averaging 5.1 percent over 2001-09, almost twice the average rate of the 1990s (2.8 percent). The good growth performance allowed GDP per capita to almost double over the last decade to reach US$2,890 in 2009. Furthermore, sound fiscal policies led to the consolidation of public finances, allowing the budget to run surpluses in 2007 and 2008 (averaging 0.3 percent of GDP) and to withstand well in 2009 the impact of the global crisis, with a manageable budget deficit of 2.2 percent of GDP. The Government adopted a prudent debt strategy and central government debt steadily declined to 46.9 percent of GDP in 2009 from 62 percent in 2005. In addition, the monetary authorities pursued appropriate monetary policy geared toward maintaining low and stable inflation (an average of 2.2 percent since 2005) and enhanced financial sector supervision. Furthermore, the country sought to deepen its integration into the world economy through the signing of many FTAs culminating with the recent “Advanced Status” awarded by the UE. Overall, these efforts have led to a stable macroeconomic stance, stronger public finances, and a sound financial sector. On the basis of these achievements Morocco gained ”investment grade” rating in 2007 from Fitch, which was confirmed again in 2009. In March 2010, it received the “Investment grade” again from Standard & Poor (BBB- with stable outlook), which further reinforced the confidence of investors, both domestic and foreign.
8. With the involvement of the private sector Figure 1: Rising investment, in percent of GDP Morocco designed and is implementing 45.0 7.0 40.0 specific sector strategies to increase 6.0 35.0 investment and employment in sectors of 5.0 the economy with high growth potential. 30.0 Thus, investment in these sectors has 25.0 4.0 increased, strengthening the 20.0 3.0 15.0 fundamentals of the economy. While 2.0 10.0 gross investment hovered around 25 percent 1.0 of GDP on average in the 1990s, it increased 5.0 0.0 0.0 rapidly in the 2000s, to reach an outstanding 2004 2005 2006 2007 2008 2009 rate of 36 percent of GDP in 2009 with strong participation of the private sector and Private & SOEs Households Public Administration Changes in stock FDI (right axis) SOEs (a share of 64 percent of the total) (Figure 1). High FDI inflows (an average 4.5 percent of GDP over the last five years) Source: Moroccan Government and Staff estimates. also contributed to reinforce gross investment. These higher investment rates geared to dynamic sectors led to improved diversification and growth potential of the Moroccan economy, and reduced volatility2. Higher investment also improved the employment situation with the number of jobless
1 Unless otherwise indicated, all estimations and projections of economic indicators are those of the World Bank. All historical data are those of the government. 2 The standard deviation of growth rates in the 2000s is three and half times less than in the 1990s. 2
shrinking to 9.1 percent in 2009, down from a high of 14 percent in the late 1990s, although questions remain over the quality of the jobs currently available to large segments of the population.
9. Reforms triggered positive changes in the Moroccan economic structure but manufacturing is losing momentum. The structure of production changed in favor of services with both primary and secondary sectors’ shares in GDP declining over time. The shrinking of the secondary sector’s share is mainly due to falling manufacturing share, which has steadily declined over the last two decades, denoting a weakness of the productive tissue that reduces its productive capacity and hinders its long term growth and development. This weakness stems from the slow structural transformation in the manufacturing sector, which also explains the modest results of Moroccan exports. The latter continue to be concentrated around relatively undiversified, low knowledge, low value-added, traditional products. As a consequence, exports do not fully benefit from trade dynamics of Morocco’s trade partners and thus have been unable to fulfill their potential for contributing to growth and job creation.
A. MACROECONOMIC ACHIEVEMENTS OVER THE LAST DECADE
Figure 2: Growth shifted to higher path and is less Figure 3: Unemployment declined (%) volatile and less dependent on agriculture (%)
14.0 80.0 25% 40% 11.0 60.0 20% 32% 8.0 40.0
5.0 20.0 15% 24%
2.0 0.0 10% 16% ‐1.0 ‐20.0 5% 8% ‐4.0 ‐40.0
‐7.0 ‐60.0 0% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 National (Left axis) Urban (Left axis) GDP Agriculture output (right axis) Poly. (GDP) Urban Youth (right axis) Urban Women (right axis)
Figure 4 : External position is solid with Figure 5 : Public Finances have improved before the vulnerability in trade, (% of GDP) global crisis, (% of GDP)
14% 35% 10 32 12% 30% 8 10% 22 6 8% 25% 6% 4 12 4% 20% 2 2 2% 15% 0% 0 -8 ‐2% 10% -2 ‐4% -18 5% -4 ‐6% ‐8% 0% -6 -28 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Budget deficit Wages & salaries Current account balance Net reserves in months of GNFS Foreign direct investments, Gross Trade Balance (right axis) Consumer subsidies Total revenues (Right Axis)
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Figure 6: Inflation remains subdued (%) Figure 7 : Central Government debt is declining and sustainable, (% of GDP)
8.0 80.0% 7.0 70.0% 6.0 60.0% 5.0 4.0 50.0%
3.0 40.0% 2.0 30.0% 1.0 0.0 20.0%
‐1.0 10.0% ‐2.0 0.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
CPI Food Non‐Food Foreign Domestic Total
Source: Moroccan Government and Staff estimates. Table 1: Selected Macroeconomic Indicators (% of GDP) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Est. I. National Accounts Gross Investment 26.1 25.9 27.4 29.1 28.8 29.4 32.5 38.1 36.0 35.2 Gross National Savings 30.4 29.6 30.5 30.8 30.7 31.6 32.4 32.9 31.0 30.0 Government Investment (Nat. Acc.) 2.6 2.2 2.1 2.1 1.9 2.1 2.3 2.7 3.1 2.6 Private Investment (incl. SOEs) 23.6 23.7 25.3 27.0 26.9 27.4 30.2 35.4 32.8 32.7 Of which SOEs 4.4 4.8 4.9 5.6 6.1 7.1 8.0 9.6 11.5 14.3 II. Central Government Finances Total revenues 22.4 22.1 21.6 22.2 23.8 25.1 27.4 29.7 25.9 23.8 Tax revenue 20.4 20.4 19.8 20.0 21.7 22.2 24.9 27.4 23.4 22.1 Current Expenditure. Of which 21.9 20.6 20.6 20.8 24.1 21.5 21.7 22.8 20.7 21.1 Wages 11.3 10.9 11.2 11.2 11.7 10.9 10.7 10.2 10.2 10.3 Capital Expenditure 5.1 4.5 4.1 4.2 3.9 4.1 4.6 5.5 6.3 5.1 Global Balance -5.7 -4.1 -4.4 -4.0 -5.2 -2.0 0.2 0.4 -2.2 -4.2 III. Balance of Payments Imports GNFS 32.6 32.9 32.0 34.8 38.2 39.8 46.0 52.1 40.7 43.2 Exports GNFS 29.6 30.2 28.6 29.2 31.6 33.1 36.2 37.6 28.8 31.7 Trade Balance -10.3 -9.9 -10.9 -13.9 -17.0 -18.3 -22.3 -24.7 -20.8 -21.0 Tourism receipts 6.8 6.5 6.5 6.9 7.8 9.1 9.5 8.1 7.2 7.5 Workers' remittances 8.6 7.1 7.2 7.4 7.7 8.3 8.9 7.7 6.8 7.1 Current Account Balance 4.3 3.7 3.2 1.7 1.9 2.2 -0.1 -5.2 -5.0 -5.3 Foreign Direct Investment, net 7.6 1.4 4.9 1.9 5.0 4.6 6.2 4.1 2.8 2.0 Reserves, net (months of GNFS imp.) 8.8 9.1 10.0 9.9 9.9 10.0 8.8 6.6 7.6 7.0 IV. Indicators of Credit Capacity of CG Public Debt of CG 67.1 63.7 60.8 58.2 62.1 57.3 53.5 47.3 46.9 48.2 Total interest payments/Tax revenues 21.6 19.1 18.4 17.4 15.2 14.5 12.6 9.7 10.1 10.3 Memo: Country’s external debt stock/GDP 49.8 44.5 36.5 29.6 27.2 27.1 27.3 23.4 24.7 25.0 Consumer price (%, yearly average) 0.6 2.8 1.2 1.5 1.0 3.3 2.0 3.7 1.2 2.0 GDP Growth (%) 7.6 3.3 6.3 4.8 3.0 7.8 2.7 5.6 4.9 3.5 Non Agriculture GDP growth (%) 5.7 3.2 3.6 4.7 5.6 5.4 6.5 4.2 1.4 6.1 Unemployment (%) 12.5 11.6 11.6 11.0 11.2 9.7 9.8 9.6 9.1 9.0 Note: see Table 2 for projections beyond 2010 of the main indicators. Source: Moroccan Government and staff estimates
B. RECENT ECONOMIC DEVELOPMENTS IN MOROCCO
10. In the context of the global economic crisis, growth performance in Morocco has been good. Economic growth in 2009 reached 4.9 percent following a growth rate of 5.6 percent in 2008. This performance is mainly due to an exceptionally good agricultural output, which gained 30.6 percent benefiting from favorable rain conditions. This shows that agricultural variations due to weather conditions still affect GDP growth, albeit with less intensity than in the past. Growth of the non- 4
agricultural GDP slowed down to a much lower rate than projected due to the negative impact of the global crisis. It edged down to 1.4 percent over 2009 compared to 4.2 percent registered the previous year and it is mostly explained by a slow-down or decline of most of the activities, especially manufacturing and tourism.
11. Data for the first half of 2010 show that the economy is recovering from the effects of the global economic slowdown that started in late 2008. Non agricultural GDP gained 5.4 percent in the first quarter of 2010 and stabilized at 4.8 percent in the second quarter. It is expected that growth momentum of the non-agricultural activities would continue through the end of the year. However, total GDP growth is estimated to be around 3.5 percent for the whole year owing to a lower, although good, harvest this year compared to the exceptional one of last year, translating into an estimated negative growth of the agricultural output (down 8 percent). Furthermore, there are no apparent signs that the recent sovereign debt crisis of Greece and the subsequent restrictive policies of some European countries have had any major impact on exports or capital inflows.
12. The Government has implemented a stimulus package to support the income of the population and help the most affected sectors (Box 1). The income support package is mostly benefiting the low income employees. It includes an increase of 10 percent in the wages of civil servants at the lower end of the salary scale and the Minimum Wage for private sector employees. The wage increase was implemented in two steps, the first increase of 5 percent in July 2008 and the second one in July 2009. In addition, effective January 2009, the marginal income tax rate was cut from 42 percent to 40 percent and further to 38 percent in January 2010. At the same time, the upper end of the exempt income bracket was extended. Direct support measures for affected firms included financial relief (guarantees on loans; rescheduling of debt; help with export insurance) as well as subsidies for training and marketing. Economic stimulus was also provided through some monetary easing. The total budgetary gross cost of the stimulus package has been estimated by the government at MAD 21 billion3 (over the 2008-2010 period) or 2.7 percent of 2010 GDP, and as such does not pose a risk to the medium term sustainability of public finances.
3 Because of their structural nature, the extra subsidies for food and petroleum products (MAD 7 billion) generated by higher world prices of cereals and fuels are not included in the stimulus package. 5
Box 1: Fiscal Stimulus packages and Outcomes The Government has implemented several measures to help affected firms cope with the decline of external demand. Early in 2009, the government set up a high level Council for Strategic Monitoring (CSM), comprising concerned ministers as well as representatives of the business community and banking sector, to follow developments related to the ongoing global crisis. The CSM targeted the export sectors hit by the effects of the global crisis for support through the following measures that would expire at the end of 2010 (and amount to a budgetary cost of 0.2% of 2010 GDP):
Social component: budgetary support to help firms in the payment of their contribution to employees’ social benefits Financial component: public guarantees for financing roll-over funds of firms and for rescheduling of their debt service Commercial component: budgetary support for the prospection and marketing costs abroad, and preferential conditions for export insurance Training component: Budgetary support for training and logistics
Subsequently specific support programs have been designed for tourism and remittances and investment of Moroccan workers residing abroad.
Data as of June 2010 show that 70 percent of the demand for support concerned social benefits relief and was requested by 443 firms, of which 398 firms operating in the textiles sector and the remaining firms in automotive equipment and electronics. At the same time, 129 firms benefited from loan guarantees (of which most are operating in the textiles sector), and 134 firms benefited from training, of which 111 firms from the textiles sector and 20 from automotive equipment.
Measures to help low income households were already started in 2008 and included in the 2009 and 2010 Budget Laws. For the most part, they consisted of tax relief and wage increases for selected groups as well as an increase in social expenditures by relevant government departments. These measures, along with a much higher public investment program in place for 2009 and confirmed for 2010, kept domestic demand high as reflected in the rising credit to consumption, equipment and real estate (see below). Specific measures included the following: The marginal income tax was cut from 42 percent to 38 percent, and the upper limit of the tax-exempt bracket was increased by 25 percent; Salaries of civil servants at the lower end of the pay scale were increased by 10 percent (5 percent in July 2008 and 5 percent in July 2009); For private sector employees, the minimum wage was raised by 10 percent (5 percent in July 2008 and 5 percent in July 2009); Minimum pension payments were increased by 20 percent and family allowances by 33 percent.
Economic stimulus was also provided through monetary easing. Reserve requirements for banks were cut in steps from 15 percent to 8 percent over 2009, and further to 6 percent effective April 1st, 2010. The Central Bank also cut its policy rate by 25 basis-points in March 2009 translating into a policy rate of 3.25 percent.
13. Public finances continue to be well managed despite the impact of the global crisis on the budget. The steady reform efforts of expenditure and tax management and sound active debt management over the last few years have been critical in maintaining public finances on a sustainable path. These reforms translated into better control of the Government’s consumption, enhanced tax collection, and declining public debt. In this context, the budget deficit was limited to 2.2 percent of GDP in 2009 despite decreasing revenues impacted by the reduction of corporate and personal tax rates, the exceptional revenues of 2008, the slowdown of economic activities ensuing the global crisis, and the introduction of the stimulus package. This manageable deficit follows a good performance of public finances that were in slight surplus in 2007 (0.2 percent of GDP) and in 2008
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(0.4 percent of GDP)4, which is remarkable given the impact on the budget of high subsidies5 following the food and fuel crisis.
14. Recent data on budget execution over the first 9 months of 2010 show that the annualized budget deficit was contained to around 3.4 percent of GDP. The budget deficit is mainly explained by soaring food and fuel subsidies (up 143.2 percent) caused by increasing world prices. The deficit however, may have been even larger without efforts to improve revenue collection that helped fiscal revenues to stabilize (down only 0.9 percent) despite the impact of the global crisis and the effects of the stimulus package. It is clear that subsidies still represent a heavy burden on the budget and thus constitute a potential risk factor for its sustainability in case of exogenous shocks such as continued higher world prices of fuels and food items or severe drought. Nevertheless, public finance stance remains sustainable due to the sound macroeconomic policies and accompanying sectoral measures the Government is undertaking to mitigate the effect of such shocks. Indeed, the Government continued to improve tax administration and collection and contain recurrent expenditures, of which the wage bill. It launched a medium term plan to reform the subsidy system along an ambitious program aiming at enhancing the productivity of the agricultural sector and insulating it from the uncertainties of the climate conditions. In addition, the Government is implementing better targeted social programs such as conditional cash transfer program and a scaled up non-contributory health insurance scheme for the poor (RAMED). The stable macroeconomic stance and the continued reform momentum have allowed Morocco to successfully issue Euro 1 billion of bonds in the international market end September 2010, at relatively low interest rate (4.5 percent), of which a low spread of 200 basis points, showing the recognition of international investors of the positive economic prospects for Morocco.
15. Sound fiscal management helped further reduce the central government’s debt. Reflecting the good performance of public finances and sound active debt management, the debt stock of the central government declined to 46.9 percent of GDP in 2009, down by almost a half percentage point compared to the previous year (and by more than 6.5 percentage points relative to 2007). The decline is explained by a decrease in that of domestic debt, which fell by 1.2 percentage points to reach 36.2 percent of GDP, while foreign debt slightly increased by 0.8 percentage point of GDP (representing 10.7 percent of GDP) reflecting the new government’s debt strategy to improve the share of external debt in total public debt while meeting the hard currency needs of the country.
16. The Government and the central bank showed continued commitment to fight inflation. Helped by prudent monetary policies, protected domestic markets from increasing world food and fuel prices, and ample domestic food supply, inflation was low over the first 9 months of 2010 (up 0.7 percent). This inflation rate is less than that of 2009 (1.5 percent) the same period and much less than that of 2008 (3.7 percent). Both food and non-food inflation have been low (0.2 and 0.9 percent respectively).
17. The external position remains solid despite the recent deterioration of the current account. For the first time since the 1980s, the current account ran large deficits in 2008 (5.2 percent of GDP) and 2009 (5 percent of GDP). The latest data show that current account deficit deteriorated to 6.6 percent of GDP over the first half of 2010. Current account deficits followed comfortable surpluses over the period 2001-06 (average surplus of 2.8 percent of GDP) and a quasi-balance in 2007 (a deficit of 0.1 percent of GDP). The worsening of the current account is principally explained by the decrease in workers’ remittances and tourism receipts that had been compensating in the past for the rising trade deficits. However, the on-going recovery of world economy is having a positive impact on these two important sources of foreign exchanges: over the first 9 months of 2010, remittances increased by 8.2 percent and tourism receipts by 6.4 percent. Consequently, after declining by US$ 5.3 billion (or
4 Public finances data don’t include Hassan II Fund expenditures. 5 Consumer subsides are applied to the following items: liquid petroleum products, butane gas, soft wheat, flour and sugar. 7
down 21.4 percent) at end June 2010 (y/y), net foreign reserves started to steadily improve over the last months reducing the loss to US$ 2.6 billion by end September 2010, reaching US$ 22.2 billion, which represent 6.9 months of imports, down from 7.6 months in 2009. Foreign reserves are expected to improve further thanks to the Euro 1 billion raised by the Government end September 2010, the recent selling of 40 percent of Medi-Telecom for Euro 640 million, and increasing share of foreign financing of the budget.
18. The recent economic events revealed once again the weaknesses inherent in the Moroccan trade structure. The trade deficit deteriorated to 24.7 percent of GDP in 2008, up from 22.3 percent of GDP in 2007 (and only 11 percent in 2000). It improved in 2009 as imports declined by more than exports in nominal terms (20.8 percent of GDP). The latest data show the deficit further improved to 19.7 percent of GDP by end September 2010. The high trade deficit is mainly a volume effect rather than a price effect because Morocco actually benefited from positive terms of trade movement; while the price of oil and food imports increased, so did the price of key Moroccan exports such as phosphate products and agri-food. The poor performance of exports reflects their low diversification and lack of competitiveness. This explains largely why Moroccan exports were not able to benefit fully from the many FTAs it signed over the last decade such as those with the EU, the USA, and Turkey.
Figure 8: Despite the Impact of the Global Crisis, Figure 9: The recent deterioration of the Current Public Finances Remain Sustainable Account Mirrors the Deterioration of the Trade (% of GDP) Deficit (% of GDP)
14% 35% 25 10 12% 30% 8 10% 15 8% 25% 6 6% 4 5 20% 4% 2 15% ‐5 2% 0 0% 10% ‐2 ‐2% ‐15 5% ‐4 ‐4% ‐6% 0% ‐6 ‐25 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009
Budget Deficit Wages & salaries Current account balance Net reserves in months of GNFS Consumer subsidies Total revenues (Right Axis) Foreign direct investments, Gross Trade Balance (right axis)
Source: Moroccan Government and Staff estimates.
19. Monetary and exchange rate policies remained appropriate. In 2008, the central bank (BAM) resorted to raising the cost of money (plus 25 basis points in September 2008) to contain soaring credit and moderate inflation, while it relaxed its policy to enhance liquidity in the face of the global crisis. As liquidity tightened and inflationary pressures started to ease over the second half of 2008 through 2009, BAM relaxed gradually the money reserve rate reducing it from 15 to 12 percent January 2009, and then to 10 percent July 2009. BAM decided to further cut the money reserve rate to 8 percent in October 2009 and to 6 percent starting April 2010 to ease the pressure on liquidity and thereby allowing Banks to be able to cope with the new money demands while contributing to keeping interest rates close to the BAM’s policy rate. It has also cut its policy rate by 25 basis points in March 2009 to reach 3.25 percent. Despite these relaxed policies, money supply slowed to 5.5 percent (y/y) by end September 2010, compared to an average 14.5 percent over 2005-2008. Although credit for equipment soared at 24.4 percent, total credit to the private sector slowed down (up 11 percent) driven by reduced growth in credit for consumption (up 9.5 percent), construction (up 9.1 percent), and for working capital (up 0.1 percent). At the same time, the stock of non-performing loans increased by 7.8 percent (y/y), but their share in total credit to the economy has been steadily 8
declining over time (from 4.8 percent in September 2009 to 4.6 percent September 2010). In recent years, the exchange rate remained in line with macroeconomic fundamentals with no signs of misalignment.
C. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY
20. Sound macroeconomic and fiscal policies, as well as efforts to improve sector productivity and competitiveness, put Morocco in a better position to maneuver with less damage through the moderate effects of the global crisis, while being in a position to benefit from the recovery of the world economy (Table 2). The decision of the Government to continue its reform efforts and revamp its sector strategies along the targeted and short term sector fiscal stimulus should allow the Moroccan economy to expect good prospects over the medium term. Meanwhile, economic growth is estimated to be around 3.5 percent in 2010 mostly owing to the recovery of the non-agricultural sector benefiting from contribution of dynamic activities such as construction, finance services, telecommunication, and tourism.
Table 2 : Base-line Medium Term Macroeconomic Indicators Est. Projections 2008 2009 2010 2011 2012 2013 Growth Rates in percent Real GDP 5.6 4.9 3.5 4.4 5.1 5.2 Real private consumption 6.0 4.0 5.2 3.4 4.4 3.6 Real Gross Domestic Investment 12.8 4.4 4.2 4.9 5.3 5.5 Export Volume (GNFS) 7.2 1.9 4.7 6.5 8.2 8.8 Import Volume (GNFS) 12.2 12.2 4.7 4.9 6.5 6.2 GDP deflator 5.9 1.8 2.0 2.0 2.0 1.9 Ratios to GDP Gross Domestic Investment 38.1 36.0 35.7 35.8 35.9 36.0 Fiscal Balance 0.4 -2.2 -4.2 -3.6 -3.4 -3.2 Central Government Debt 47.3 46.9 48.2 47.9 47.2 46.4 of which foreign 9.9 10.7 12.1 13.1 13.2 13.2 Current Account balance -5.2 -5.0 -5.4 -4.5 -3.7 -2.8 FDI, gross 4.1 0.9 2.0 3.1 3.4 4.6 External Debt (public and private) 23.4 24.7 26.3 28.1 27.9 26.7 Source: Moroccan Government and Staff estimates.
21. Growth prospects in the medium term are positive. It is assumed that the Government will sustain the reform momentum of the last few years, achieve the ambitious public investment programs it devised, and continue to implement the main sector strategies it launched, thus consolidating further economic diversification, growth potential, and domestic demand, and it is also assumed that the world economy will slowly recover from the current crisis to allow the on-going export promotion strategies to achieve their targets and contribute to growth. Under these conditions, growth rates will improve from the low 3.5 percent estimated for 20106 to around 5.2 percent in 2013. Should the underlying sources of growth assumed above be slow to materialize, growth prospects would have to be adjusted downward. Moreover, there is a potential risk that even pre-crisis growth levels might not be sustainable over the medium term if internal demand remains the key driver of growth.
22. Sound macroeconomic policies would help contain inflation at low levels. Inflation edged down to 1 percent only in 2009, mainly driven by ample food supply and to a lesser extent by declining prices of imported food items, and should remain subdued at around 2 percent thereafter. As the
6 The low growth in 2010 is mainly explained by normal agricultural output translating into a negative growth rate for agriculture after an outstanding growth in 2009. 9
Moroccan agricultural sector meets domestic demand for most of basic food commodities and even allows it to export many food items, its inflation rate is only slightly impacted by international food price fluctuations. In addition, subsidies for key food and energy prices – while clearly having an impact on the budget – contribute to a stable inflation rate.
23. After a temporary higher estimated deficit in 2010, the fiscal stance should remain sound over the medium term, with fiscal deficits around the targeted threshold of 3 percent of GDP, benefiting from the ongoing fiscal reform and more targeted social programs, as well as a better-controlled wage bill. The budget deficit is expected to edge up to 4.2 percent of GDP in 2010 before gradually dropping to 3.2 percent by 2013. Reaching this outcome implies maintaining momentum of the ongoing tax reform to broaden the tax base, improve the efficiency of the VAT, strengthen tax administration, and remove unproductive tax exemptions in order to reduce the high tax expenditures. These measures would offset the negative impact of the reduced top rates on corporate and personal income taxes. Under these assumptions, revenues are projected to stabilize at around 25 percent of GDP. On the expenditure side, the consolidation of public finances relies on four critical measures: deepening of fiscal reform, achievement of oil and food subsidies reform, continued tight control of the wage bill evolution, and an active debt management. Under these conditions, public debt will slightly increase in 2010 48.2 percent of GDP before following a downward trend to decline to less than 46.5 percent of GDP in 2013.
Table 3: Morocco: Financing Requirements of the Central Government (% of GDP) Est. Projections 2008 2009 2010 2011 2012 2013 Financing required 9.3 10.8 11.8 11.0 10.7 10.5 Budget deficit (+) -0.4 2.2 4.2 3.6 3.4 3.2 Amortization 9.7 8.6 7.6 7.4 7.3 7.2 Domestic 8.3 7.8 6.8 6.5 6.3 6.2 External 1.4 0.8 0.8 0.9 1.1 1.1 Total Financing available 9.3 10.8 11.8 11.0 10.7 10.5 Domestic financing 6.6 7.1 6.8 7.2 8.0 8.1 External disbursement 1.7 2.1 3.7 2.3 1.5 1.3 Others (Privatization, capital grants, CST*) 1.0 1.6 1.2 1.5 1.2 1.1 Source: Moroccan Government and staff estimates. (*) CST: Comptes Spéciaux du Trésor
24. The financing needs stemming from the higher budget deficit in 2010 and declining deficits over the medium term are easily financed through domestic market as well as from increased drawings on external loans (Table 3). In this context, domestic financing would remain the main source, although external financing would improve its contribution. Indeed, since 2006, net external financing reversed its long negative trend to turn positive, reflecting the government’s strategy to slightly change the debt composition in favor of external borrowing. This financing strategy would ease the pressure on domestic financial markets and prevent any crowding out of the private sector’s investment now that the money market is less liquid than over the last years. At the same time it is consistent with the intention to maintain a comfortable level of foreign reserves.
25. The Government’s debt strategy is to diversify financing sources and take on a greater proportion of external financing. Three main factors underpin the decision of the Government to reinforce its external sources, especially multilateral and concessional. The first is linked to Morocco’s public debt maturity structure. The maturity of public debt has fallen in recent years and will fall further given that the central government mostly financed its needs through issuing T-bills of up to 1 year maturity in the domestic market. The main reason behind this choice was to avoid
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affecting long-term floating rates for Banks’ domestic lending to the private sector, especially housing credit, as they are indexed to primary market rates on long-term securities7 (10 and 15 year bonds). The second relates to the higher balance of payments needs although the level of foreign reserves remains relatively comfortable. The third is due to the current higher borrowing requirements of the Budget, in a context of tightening liquidity of the domestic financial markets after a long period of an over-liquid money market. Consequently, additional external lending is consistent with prudent debt management which fosters improved terms of debt, while maintaining a comfortable level of foreign reserves and at the same time avoids pressure on domestic financial markets. In September 2010 Morocco successfully completed a ten year bond issue for one Billion Euros against a total demand of over 2.2 Billions, further attesting international markets confidence in Morocco’s sound macroeconomic stability.
26. A comprehensive public debt sustainability analysis shows that the fiscal framework is robust to downside risk in the medium term (see Annex 4). Public debt under the two main shocks proved sustainable over the medium term8. Under alternative scenarios, six other shocks to the baseline scenario are simulated9, and public debt sustainability is preserved in all of them. Under these shocks, public debt would slightly increase in 2010 and, for a few shocks, in 2011 as well, before steadily declining over the medium term.
27. The external position is expected to remain sustainable over the medium term. The current account is expected to slightly deteriorate in 2010 (5.4 percent of GDP) before following a slight downward trend over the medium term to edge down to 2.8 percent of GDP in 2013, as the impact of reforms and sector strategies take hold. Indeed, the balance of payments is expected to progressively improve, with lower trade and current account deficits, which would benefit from improved export potentials and a recovery of tourism activities and workers’ remittances. This scenario assumes that Morocco would reap the fruits of its continued reform efforts, its sound macroeconomic and fiscal policies, and targeted sector strategies that entail higher public investments, which would translate into higher private investments, including FDI, and progressive gains in competitiveness of its exports, including tourism. In this context, external debt is expected to follow an inverted U path reaching a maximum at 28.1 percent of GDP in 2011 from 24.7 percent of GDP in 2009 before steadily dropping to 26.7 percent by 2013 while net foreign reserves will stay at an average of 6 months of imports.
28. Balance of payments financing requirements do not constitute a serious concern given the sound economic fundamentals, the country’s low external debt stock, and the ample foreign reserves. As the current account deficits are projected to steadily improve in the medium term, there are no constraints on financing them through multilateral and bilateral credit lines along other private capital flows, including FDI. The latter is expected to gradually improve, attracted by an improved business environment and the opportunities offered by important structural projects and the devised privatization program of the country.
29. In sum, Morocco’s macroeconomic framework remains adequate and sustainable in the medium term. The moderate effects of the global crisis on the Moroccan economy have been mitigated by the good economic fundamentals resulting from sound macroeconomic policies carried out over the last years and by the response of the Government through the stimulus package to mitigate these effects on the population and businesses alike. The stimulus package has allowed supporting investors’ confidence and domestic demand while reducing risks. The Government’s
7 However, since early this year, credit with variable interest rates is no longer linked to the rate of long-term treasury bonds. 8 The two main shocks are A1: Key variables are at their historical averages; and A2: No policy change (constant primary balance). 9 See Annex 4 for their description. 11
commitment to maintain momentum of reform effort supports robust prospects of investment, growth, and employment.
III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES
A. SECTOR BACKGROUND
30. Out of a total Moroccan population of 30 million, 18 million live in urban areas. Moroccan cities are characterized by high population densities and rapid growth. They suffer from several forms of environmental degradation, one of which resulting from the poor management of municipal solid waste. The cost of the environmental degradation due to solid waste was estimated at 0.5 % of GDP in 2003 (among the highest in MENA).
31. In 2008, Morocco produced about 5 million tons of municipal solid waste (MSW) per year and this is expected to reach 6.2 million in 2020. Only 70 % of urban MSW was collected and less than 10 % of collected waste was being disposed of in an environmentally and socially acceptable manner. There were 300 uncontrolled dumpsites, and about 3,500 waste-pickers, of which 10 % were children, were living on and around these open dumpsites.
32. MSWM is the primary responsibility of local governments in Morocco. Thus MSW management also suffered from often weak managerial, planning and technical capacity to ensure efficient service delivery. As a result, and despite the key role played by the private sector (70 % of total spending on MSW Services contracted to private operators on a PPP basis), MSWM services were not cost- effective, while they are one of the largest categories of expenditures of cities: total recurrent municipal solid waste expenditures were estimated to MAD 1.3 billion in 2007, or about 10.5 percent of the total municipal budgets in urban areas. Of this amount, MAD 1.1 billion, or 85 percent, was allocated to collection and transfer services. Waste disposal in 2008 was insignificant in terms of allocated financial resources (less than MAD 200 million), as municipalities have not had political, economic, or regulatory incentives to finance disposal facilities.
33. Prior to the program of reforms, Morocco's MSW services were defined only in terms of "cleanliness", with very limited attention and resources allocated to waste disposal/treatment. The resulting impacts on the quality of life, public health, environmental and natural resources, and vital economic activities such as tourism, were huge. Major issues and challenges in the sector prior to formulation of reform program: a) poor sector policy focuses mainly on "cleanliness" with very limited attention to waste disposal/treatment; b) weak legal and institutional framework, which constrains effective strategic planning and governance; c) ad-hoc fiscal transfers to municipalities and uncertain financial sustainability; d) poor cost effectiveness of PPP mainly due to limited competition, lack of transparency, and poor accountability; and e) huge impacts on the quality of life, public health, environment and social and economic development.
B. THE GOVERNMENT’S PROGRAM
34. Morocco initiated the solid waste reform program with the enactment of its first Solid Waste Law 28-00 in December 2006 that, established the fundamental principles and key rules that will govern the management of solid waste in Morocco. This formed the foundation for Moroccan policy for the sector with two key objectives: to establish integrated and affordable solid waste management systems and to mitigate negative impacts of the sector on public health and the environment. More specifically, this law (i) establishes the institutional framework for SWM; (ii) requires the development of solid waste master plans at the national, regional, and municipal level; (iii) establishes cost recovery principles, including the “polluter pays” principle and the possibility of user fees (redevances); (iv) introduces sanitary landfills as the standard for final waste disposal and requiring regulations establishing landfill norms and standards; (v) introduces regulations for hazardous waste management, and (vi) establishes a system to monitor compliance with the law. 12
35. In 2008 Government also launched its first national municipal solid waste management program to help municipalities comply with the new solid waste law. The government recognizes that failing to tackle the sector issues in a timely and integrated manner would further exacerbate the poor environmental, social and economic performance of the sector. In this context, a MAD 4 billion program, called Plan National des Déchets Ménagers (PNDM) was developed and launched in 2008. It sets out objectives for the modernization of SWM, in particular, expanding and professionalizing collection services, modernizing disposal practices and promoting recycling activities. It includes specific long-term (2021 horizon) targets for the municipal waste sector, including: increasing collection coverage from 70 percent to 90 percent; reaching 100 percent use of sanitary landfills in urban areas; closure and/or rehabilitation of 300 open dumps; and sorting of 20 percent of recyclable materials.
36. The overall reform program supported by the Bank focuses on three areas: governance, sustainability, and environmental and social issues. The full scope of the program was presented in detail in the program document of the first DPL and is included in Annex 2 of the present document. The sections below summarize the key objectives for each reform area of the government’s program as well as their expected benefits.
37. Reform Area 1 – Governance of the Municipal Solid Waste Sector. Box 2: Institutional Framework of Morocco’s Solid Waste Sector Measures and actions in this area are intended to address fragmentation The Solid Waste Law 28-00 clarifies the main functions for the and legacies that affect sector and defines its organizational structure for service delivery policymaking and effective based on policy, planning, management and day-to-day implementation. Policy actions aim operations.
at: (i) policy planning and At the national level, key players in this sector include: (i) coordination in the sector through SEEE in charge of developing sector policies and regulations, the establishment of the National including technical and environmental standards. It is also hosting Commission (Commission Nationale the National Commission of the PNDM and managing the government’s financial support to LGs to upgrade their MSW – CN) as a policy and strategic systems; (ii) Ministry of Interior which is the tutelle of LGs, planning coordination body for the review and approves their budget; provides technical and financial PNDM. It is comprised of support to LG; (iii) Ministry of Economy and Finance in charge of representatives from Ministries of collecting, on behalf of LGs, municipal services tax, and manage Environment, Interior, Finance, annual budget allocation to PNDM; and (iv) FEC is the designated entity to support LGs in developing CDM projects. It is also a Economic & General Affairs and source of funding for preparing and implementing municipal Municipal Infrastructure Fund- all infrastructure including MSW projects. key players in the solid waste sector; (ii) defining the eligibility and At the regional/local level, the key players are: (i) Regional committees within Prefectures are in charge of reviewing and allocation criteria for government approving prefectural MSW master plans and of providing subsidies to support municipal SWM technical assistance to LGs; (ii) LGs are the primary responsible operations and investments in an for municipal solid waste management. They can manage these equitable, transparent, and cost- services directly, or delegate them to professional operators based effective manner; (iii) strengthening on the “Loi sur la gestion deleguée”. Regardless of the operational framework selected, LGs are required to establish the regulatory framework through MSW plans and guidelines that define arrangements for pre- the enactment of executive collection, collection, transportation, discharge commissioning, regulations for SWM planning and disposal, treatment and recovery and, where appropriate, waste for standard and norms for disposal sorting. facilities; (iv) improving competition, transparency, and accountability of SWM Private Sector Participation (PSP) schemes by improving the quality of standard bidding and contracting procedures and strengthening the capacity of respective local governments; and (v) developing appropriate communications and public awareness programs. Responsibility for the implementation
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of these reforms rests primarily with the MoI and the State Secretariat for Water and Environment (SWE), with the CN-PNDM serving as the main coordination entity.
38. Reform Area 2 – Enhancing sustainability of services. The Government recognizes that sustainability of the municipal solid waste sector is critical. There are two main aspects to the Government’s strategy to promote financial sustainability – improving municipal financial capacity to meet the funding requirements of modernizing the MSWM system, both for investment and operation, and improving the cost effectiveness of services. In terms of improving municipal financial capacity, measures include: (i) in the short to medium term, the provision of rules-based targeted subsidies to municipalities to cover the incremental costs associated with complying with the requirements of the PNDM; improve contractual conditions for private sector participation so that private sector funding is available for investment where needed; and implement a reform of the municipal finance framework geared to maximize the fiscal potential of local taxes, thus increasing municipalities’ own revenues, from which most of MSW investment and operation is and will remain funded; (ii) in the long term, supporting municipalities in mobilizing additional funds through the international carbon market, and exploring tools and mechanisms for generating additional revenue such as the creation of solid waste fees (redevances) allowed under Law 28-00 and possible introduction of “eco-taxes” on packaging waste. A KfW-funded study on options for mobilizing additional resources for SWM is underway and should be completed by the end of 2010.
39. In terms of improving the cost effectiveness of services, the Government intends to: (i) introduce incentives and tools to promote inter-municipal cooperation and regionalization of solid waste disposal facilities; this will help municipalities to take advantage of the significant economies of scale in waste management, and (ii) revise contracting documents and procedures for private sector participation in SWM.
40. In addition the Government will scale up its program to strengthen municipal capacity in SWM. In this context, the Ministry of Interior’s training department launched a multi-year program of solid waste management capacity-building for local officials in June 2010. This program is being executed by the training institute of the Office National de l’Eau Potable (ONEP), the national water supply authority. The program’s objectives are to: (i) train staff responsible for solid waste management in private sector participation, monitoring contractors, and the NSWMP approach (ii) raise awareness of the NSWMP’s procedures among Communes and Municipalities, and help them to prepare funding proposals (iii) provide solid waste management officials access to the technical documentation and management tools developed by the METAP project and other MENA countries.
41. Reform Area 3 – Mainstreaming environmental and social dimensions. The GoM is committed to promoting environmentally and socially sound disposal facilities as recently confirmed by the launch of an extensive consultation towards the adoption of a nationwide Environment Charter called for by H.M the King Mohammed VI. To this end, the primary focus of the reform program is to: (i) support the implementation of environmentally and socially sound disposal facilities and (ii) improve the social and working conditions of wastepickers, whose livelihoods will be affected by closure of existing dumpsites. Furthermore, the Government recognizes the need to upgrade the existing EIA system to be applied, in particular, to landfilling projects. It is committed to improving the regulatory, administrative, technical, and managerial frameworks of the prevailing EIA system so that an improved EIA platform can facilitate direct investment and donor support and elevate Morocco’s environmental image in the international arena. These improvements include: (i) establishment of criteria, guidelines and procedures for reviewing EIAs, approving EIA reports, and the inclusion of mitigating and monitoring measures for EIA in services and work contracts; (ii) preparation of standard TORs for preparing EIA reports for solid waste management, and TORs for environmental audits for landfills; (iii) adoption of procedures and modalities for integrating social concerns into the EIA process for projects in general and, for SWM projects in particular, specifically in relation with the issue of wastepickers; (iv) increase in number of specialized technical staff, as well as availability
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of resources and operational manuals to review EIA reports, and; (v) improvement in monitoring and enforcement of EIA mitigating measures at the national and local levels..
42. The reform program also supports cities for contributing to the climate mitigation agenda. Morocco is committed to promoting projects and activities to reduce GHG emissions, particularly thru the solid waste sector. The FEC, a public development bank providing financial support (loans) to municipalities’ infrastructure projects, is now playing a key role in supporting local authorities gaining access to the international carbon market and developing CDM projects in the municipal solid waste area. Capitalizing on the momentum gained to date, the FEC will be focusing on the following: (i) solidifying the pipeline of solid waste-CDM projects in close coordination with the implementation of the PNDM; (ii) providing municipalities with technical and financial support to help them prepare CDM project documentation and generate carbon assets; and (iii) assisting both private landfill operators and municipalities in bringing Emission Reductions (ERs) to market, including through the signature of an Emissions Reductions Purchase Agreement (ERPA) with the Carbon Partnership Facility, managed by the Bank. The FEC program offers a GHG reduction potential of about 9 million tCO2e over the next 10 years.
43. The main out comes targeted by the Government program are summarized in Table 4 below.
Table 4 : Municipal Solid Waste Sector Program Outcomes
Program Outcomes Longer Term Outcomes Improve governance Effective inter-ministerial coordination of policies Legal and institutional framework enables the and programs in the municipal solid waste sector. effective implementation and management of integrated and affordable municipal solid waste Alignment of financial support granted to systems. municipalities with sector policy priorities and national program objectives. Cost-effective private sector participation in municipal solid waste services. Municipal solid waste management systems in place are more consistent with national policies, regulations, and standards. Local decision-makers and service users are is better informed and supportive of improved solid waste management practices.
Enhance sustainability Budget allocation available in a transition period Improved cost recovery of MSW services. to support the additional costs of upgrading municipal solid waste systems. Financial and managerial capacities at the municipal level well established. Additional sources of revenues generated through CDM mechanism and other new instruments. Service users and public benefiting from improved and integrated municipal solid waste services, and Solid waste fees in place to support sector cost willing to contribute. recovery, consistent with provisions of Solid
Waste Law 28-00. Key players at municipal and regional levels are able to plan and efficiently manage solid waste systems.
Mainstream environmental and social 15
considerations An EIA system is in place to reduce social and Near-universal municipal waste collection services environmental impacts in SWM investment and in urban areas. operations. 100 percent disposal of municipal solid waste in Environmentally and socially sound disposal acceptable social and environmental conditions. practices are in place in municipalities supported by the PNDM. Closure and/or rehabilitation of all open dumpsites. Social impacts associated with solid waste services are mitigated. Recycling activities promoted in a manner to incorporate the informal sector. Social considerations fully integrated into solid waste management.
C. CONSULTATION AND PARTICIPATORY PROCESS
44. Since the beginning of the reform process, the reform program has been the topic of numerous consultation events with large participation of civil society. For its part, the Bank has not only participated in this process as appropriate, but has also collected many insights and suggestions on the topics considered for this operation through consultations in the context of the preparation of the recently Morocco Country Partnership Strategy (CPS). The consultation process carried out during the preparation of the CPS highlighted several areas relevant for this operation. The theme of improved governance has emerged as a necessary entry point to improve the efficiency and transparency of public action particularly for enhanced service delivery. The CPS consultations have also reconfirmed the adequacy of the strategic objectives of this operation and the need to continue the support the solid waste agenda.
45. Government has led public consultations under each of the targeted policy areas inviting local participation in many of the engagements. Several workshops were held during the last few months with focus on some important topics of the reform such as private sector participation, social inclusion of the informal sector, and the development of CDM project activities. Participants to these events included representatives of national, regional and local authorities, private operators, NGOs, donors, and informal sector:
a. In June 2008, during the preparation of the DPL program, a large consultation took place in Rabat to discuss improvements to the EIA system as applying in particular to the solid waste sector. This consultation laid the ground for harmonization measures in the framework of the “Use of Country Systems” policy currently piloted by the World Bank across many countries worldwide. b. Public consultations were held in December 2009 to present the strategic action plan to improve the private sector participation in delivery of SWM services and the new bidding documents and model contracts between the private service provider and the municipality. Inputs from these consultations covered important issues including, accountability of the service providers, transparency of bid evaluation process, LG capacity to manage and supervise private contracts, and social aspects. c. Government held consultations in December 2009 on mainstreaming social aspects in the solid waste sector with focus on the wastepickers’ role in upgrading the MSW systems. The participants not only raised awareness on the planned areas of support under the PNDM and alternatives possible for the informal waste workers, they also set a list of recommendations toward the reliability and sustainability of the social inclusion activities.
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d. A stakeholder consultation was held by the Wilaya of Rabat and the Delegated Authority of the Oum Azza landfill in May 2010 to present the first project activity that will be implemented under the CDM program of activities in the MSW sector. In total, more than 50 stakeholders attended the consultation including local authorities, local associations, experts, academics and media. The participants discussed the project’s technical and operational aspects, the role of FEC as the coordinating entity of the CDM program of activities and the progress made in the CDM registration cycle. Stakeholders appreciated the efforts made to integrate the development of CDM activities as part of the PNDM. 46. Furthermore, communication on the reform and consultation efforts to inform the public about the operation and support provided by the Bank took place on September 29, 2010 in Rabat. The main objectives of these consultations were to: a) update the stakeholders on the implementation status of the PNDM; b) present results and achievements of policy measures supported through the first DPL, and; c) key policy measures supported by DPL2 and solicit feedback. More than 140 person representing involved government entities, NGOs, private operators, consulting firm, donors and sub-national governments attended that consultations. The participants raised important issues such as capacity of local government to modernize the sector, monitoring and supervision of project quality and environmental impacts, and valorization of waste. Although, these important issues are being addressed under DPL2, the Government is committed to consolidate the related measures during the next phase of their 15-year reform program. A report on these consultations will be included in the program documentation, as well as disclosed to the public on the SEE’s website (www.minenv.gov.ma).
IV. BANK SUPPORT FOR THE GOVERNMENT’S PROGRAM
A. LINK TO CAS
47. The Bank’s support to the implementation of the Morocco Municipal Solid Waste Management program is detailed in the FY10-13 CPS that was discussed by the Board in January 2010. The CPS is designed to help achieve Government objectives in a flexible and responsive way and is organized around three main pillars: the first concentrates on activities that will help enhance growth, competitiveness and employment. This objective will entail efforts to foster macro-economic stability and promoting private sector development as engine of growth. The second pillar supports the improvement in access to, and quality of, services to citizens. This will involve treating the institutional aspects of public services through appropriate public management measures with a view to reinforcing both the diagnostics (targeting) and accountability elements of service delivery. The third pillar aims at ensuring that Morocco’s development can develop sustainably and address natural resources and climate change challenges. It reflects the Government’s intention to enhance awareness of Morocco’s exposure to climate change impacts while at the same time starting to step up coordination across departments and agencies for adaptation. In addition, the CPS places a strong emphasis on the governance agenda which will be mainstreamed across the envisioned program.
48. The program of two DPL operations, which was launched by DPL 1 in 2009, is fully consistent with the CPS. The lending program envisaged in the CPS includes the proposed DPL2 operation which contributes to the achievement of the CPS second and third pillars: (i) service delivery to citizens and (ii) sustainable development in a changing climate. In addition the operation is fully supported the CPS cross cutting theme of enhancing governance. Specifically, the sub-pillar 3.3 on solid waste management describes the outcomes which the Bank expects to influence: (i) effective inter-ministerial coordination of the PNDM and strengthened regulatory framework through the enactment of executive regulations for SWM planning, norms and standards, (ii) better financial sustainability of SWM sector and improved cost effectiveness of PSP in providing of MSW services, (iii) additional sources of revenues generated through CDM, and (iv) disposal practices comply with international social and environmental standards.
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B. COLLABORATION WITH THE IMF AND OTHER DONORS
49. The World Bank and the IMF maintain close collaboration in Morocco. Regular contacts between the IMF and World Bank country teams are customary, with discussions focused on the respective work programs, country priorities, recent developments and prospects, and reflecting the growing weight of DPLs in the Bank’s Morocco portfolio. Collaboration between the Fund and the Bank has been seamless, with general understanding on the division of labor and a shared assessment of the critical macroeconomic challenges facing the country.
50. The Fund participates in Bank project review meetings where relevant. Similarly, Bank staff contributed to the IMF’s 2009 Article IV consultation mission to Morocco. The ongoing analytical work being carried out by the Fund team, which was welcomed by Bank counterparts, focuses on the medium-term outlook for public finances in Morocco and the macroeconomic implications of the global financial crisis and economic downturn. Morocco’s most recent Article IV consultations were discussed in the IMF’s Board and concluded on January 25, 2010.
51. The proposed DPL operation was prepared in consultation with donors active in Morocco’s solid waste sector. Close collaboration has been developed with KfW, UNDP, PPIAF, and GtZ to ensure full coordination with ongoing donor support activities and to share insights on reform progress and constraints. The proposed operation will expand on KfW and GtZ operations supporting the development of local capacity under the decentralization agenda and assisting the SEEE and MoI in strengthening the solid waste legal, institutional and financial framework and more generally the Environmental Impact Assessment regulation and related institutional arrangements. Bilateral donor- funded studies are supporting the Government’s program. KfW is funding the study on financial and institutional frameworks, including options for small municipalities. This study will assess the cost incidence of various financing options for solid waste management. The Belgian PSIA TF jointly managed by the Bank and UNDP is financing the second phase of the Poverty and Social Impact Analysis (PSIA 2).
C. RELATIONSHIP TO OTHER BANK OPERATIONS
52. Engagement between the Bank and Morocco on SWM has steadily strengthened and deepened since 2002 through dialogue and technical assistance, in large part through the Mediterranean Environmental Technical Assistance Program (METAP). In parallel with the preparation of the proposed DPL operation, the Bank provided the sector with technical support and advisory services, including (i) support to the operationalization of the Morocco national solid waste program including the elaboration of an operational manual; (ii) assessment of the Moroccan experience in term of PSP in the solid waste sector and the development of a strategic action plan; and (iii) capacity building and technical assistance in the areas of carbon finance and the CDM.
53. The operations in support of the urban transport sector, under preparation, draw on and complement the reform agenda supported by the municipal solid waste program of DPLs. The Bank is currently preparing a DPL to support Government reforms in urban transport, scheduled for Board presentation in FY11. This operation benefits from and expands on each of the components supported by the present DPL as it devotes attention to the governance agenda and service delivery at local level covering transport.
54. The Series of DPLs set the ground for the first “Use of Country systems” for safeguards in Morocco: The actions undertaken by the government in term of mainstreaming environmental and social concerns led to a significant improvement of the Moroccan EIA system. The benefit of upgrading the EIA system and its decentralization goes beyond the solid waste sector. For instance, the recent rural sanitation project with ONEP (Office National de l’Eau Potable) approved in June 2010 represents a breakthrough as the first operation financed by the Bank in Morocco that has been submitted to the “Use of Country systems” for safeguards. The assessment carried out by the Bank in 18
Morocco that has been prepared in compliance with the “Use of Country systems” Bank Policy (OP 4.00) for environmental safeguards, has shown only limited discrepancies between the recently enhanced national EIA system and internationally accepted principles and good practices. Consequently, the Carbon finance operation prepared by FEC will also be prepared on the basis of a “Use of Country Systems” assessment.
D. LESSONS LEARNED
55. The proposed operation will build upon the experience of the 2009 Municipal Solid Waste Sector Development Policy Loan, other recent sector DPLs in Morocco as well as Bank lending for solid waste management in general.
56. The experience of the 2009 Municipal Solid Waste Sector DPL has been very positive. Contributing factors included a long history of Bank-client dialogue on sector policies and analysis, largely in the context of the METAP program, the strong coordinating role assumed by the MoI, the existence of a home-grown national strategy for the municipal solid waste sector, owned by the Ministries of Interior, Finance and Environment, the emphasis on the simplicity of the program matrix, the Government’s commitment to social impact mitigation, and the broad support of the general public for improved solid waste management. The 2009 operation also confirmed that a solid waste DPL offers the value-added of bringing the multiple ministries concerned together around a shared policy matrix. All of these positive elements will remain in place for the Second Municipal Solid Waste DPL.
57. Continued coordination among ministries, national entities and municipalities is needed for sustained successful results. One of the major impacts of the first operation is to mainstream coordinated planning to support MSW reform program. This is a major milestone in the way the Government of Morocco will conduct business in the future not only in the solid waste sector but in other reform areas. The second operation has recognized this momentum and is continuing to foster this productive relationship among the agencies by building sustainable systems of incentives and support.
58. Policy reforms adopted under the first DPL may have advanced more quickly than the administrative procedures required to implement them. This was in particular to the allocation of financial support from the center to the municipalities for solid waste investments and the implementation of model contracts for private service-providers. The preparation of the present project will therefore pay attention to the implementation capacity of the relevant agencies for investment appraisals, financing, contracting mechanisms adopted under the 2009 DPL. The Bank is advising the Government on the strengthening of the Program Management Unit as well as supporting the preparation of an operational handbook for the PNDM.
59. Municipalities’ financial and technical capacity to implement the policy reform has also come under the spotlight. Municipalities are benefiting from capacity-building support provided by the Ministry of Interior as well as the AfD, GtZ and KfW. As the focus of the solid waste management reforms shifts from the early reform- stage, focused on large and well-resourced cities to medium- sized and smaller municipalities, the planning and management of capacity-building activities will become increasingly important.
60. Critical “back-loading” but politically sensitive reforms as triggers for second and subsequent operations carry the risk of interrupting the sequence of operations. This was a lesson from the Morocco water and energy sector DPLs of 2007. The Second Municipal Solid Waste Sector DPL is aiming to avoid this risk by ensuring that the triggers for the second operation are logical extensions of prior actions of the first operation.
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61. Commitment of the Government and seeing through the implementation of the reforms are key. More recent operations for education and public administration (2010) in Morocco have shown the Government of Morocco to be a savvy DPL client. It takes advantage of the analysis, planning framework, implementation support and convening power offered by a DPL whilst maintaining full leadership and ownership of the reforms themselves.
62. Reform is a continuous process and the Bank needs to ensure the sustainability of the program. The proposed operation will also benefit from the incorporation of lessons learned from a number of solid waste and municipal development projects undertaken across the Bank’s regions. It is increasingly evident from projects (i.e. Argentina, Brazil, India, and China) that the slow rate of change typically characterizing reforms in the solid waste sector requires sustained support from the Bank. A standalone intervention in this area would not be sufficient to put in place the right framework and institutional ownership for the reforms to be sustainable in the long term.
E. ANALYTICAL UNDERPINNINGS
63. In parallel with the preparation of the proposed DPL operation, the Bank provided technical support and policy advisory services in many areas, including (i) municipal finance, including the development of a set of matrices to guide the allocation of state financial support for the implementation of the PNDM; (ii) a technical note on the main options to improve the financial sustainability of the sector; (iii) a PPIAF-funded study for the development of a strategy for private sector participation in the sector; and (iv) support of the MoI and Department of Environment for elaboration of their draft decrees, generic ToRs, operationalization of the PNDM, and a capacity- building program in the solid waste sector.
64. The SWM program is also supported through analytical work executed under the GtZ Environmental Program in Morocco (Programme de Gestion de Protection de l’Environnement, PGPE). GtZ has assisted in the development of the four laws on solid waste management, EIA, environmental protection, and air pollution. More recently, it has engaged in providing technical assistance and capacity building in the solid waste sector.
65. In summary, the program has an extensive analytical foundation in the form of recent sector work, including:
Morocco – Financing Urban Investment in Morocco, Urban Institute / Cities Alliance / World Bank, August 2010 The Poverty and Social Impacts Analysis (Phase 2), (Ongoing) Morocco – Private Sector Participation in Solid waste sector, PPIAF, December 2009 Morocco “Use of Country System” initial equivalence and acceptability analysis for environmental assessment, June-September 2008 Morocco-Environmental fiscal reform Study, June 2007 Assessment of Environmental Impact Assessment System, GtZ, 2007 National Municipal Solid Waste Management Program, June 2006 Morocco - Solid Waste Management Study, January 2006 The Municipal Solid Waste Financing Note, METAP, 2006 Morocco - Solid Waste Recycling Sector Study, METAP 2005 Country Solid Waste Management Report, METAP, May 2004 Cost Assessment of Environmental Degradation, June 2003
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V. THE PROPOSED SECOND MUNICIPAL SOLID WASTE SECTOR DEVELOPMENT POLICY LOAN
A. OPERATION DESCRIPTION
66. The proposed loan will continue supporting the Government’s program summarized above and detailed in the Letter of Development Policy (Annex 1). The development objective of the DPL program is to support the GoM in implementing its program of reforms aimed at improving the financial, environmental and social performance of the municipal solid waste sector in Morocco. The first DPL (DPL1) supported the key foundations of the Government’s reform program, which established the enabling environment for an integrated and affordable municipal solid waste system. This second DPL (DPL2) supports capitalizing on the momentum gained during the first operation while deepening the reforms at the regional and municipal levels.
67. The specific benefits expected from the implementation of the reform supported by this operation are: (i) improved environmental and social conditions which would result from the progressive elimination of existing uncontrolled dumpsites and construction of sanitary landfills; (ii) enhanced access to waste collection services for the urban poor; (iii) reduced cost of waste landfilling resulting from more cost-effective planning regulations and standards; (iv) more efficient use of resources allocated to the solid waste sector and better targeted public subsidies to the sector; and (v) growth and job creation resulting from the creation of small and medium enterprises, the promotion of recycling and integrating informal actors such as wastepickers in an organized system.
68. Building on DPL1, the proposed second operation is justified by the need to strengthen inter- ministerial dialogue and preserve momentum for consolidating deeper medium-term reforms. The GoM is aware of the need for cross-sectoral policy dialogue between the various government entities and sustained commitment toward effective reform of the sector. This operation will contribute to structuring such commitment and to further accelerating the implementation of an integrated program of solid waste reforms.
69. Bank support to the implementation of sector reforms has gone through successive stages. The first operation has focused on establishing a national framework to implement the national policy and securing continued engagement of all concerned ministerial departments and national agencies. This second DPL focuses more closely on the policy actions needed to reach the local level, where actual implementation of the MSW policy, and resulting outcomes, will materialize.
B. PROGRAM ACHIEVEMENTS TO DATE
70. The first Bank development policy operation in support of the sector reform agenda has contributed to tangible results in several policy areas. Over the last two years, Morocco made great progress toward the establishment of foundations for integrated and affordable municipal solid waste management systems. Beyond meeting indicative triggers for the second operation (as described in Section C below), progress is measurable both through additional reform actions taken by the GoM and through already observable outcomes. This section presents these actions and direct or indirect outcomes reached so far.
AREA 1: GOVERNANCE OF THE MUNICIPAL SOLID WASTE SECTOR 71. There is now a well-ingrained and effective coordination of sector policies and government actions within the 15-year national municipal solid waste program. This program provides an unprecedented national framework for government support to local authorities with quantitative objectives in terms of service delivery, quality, and environmental and social performance. The National Commission of the PNDM (CN-PNDM), established as a prior action to DPL1 (see Box 3), has been meeting regularly with key players on board. It systematically reviews and approves annual action plans that detail planned funding allocations and implementation progress of the PNDM. 21
72. Financial support to municipalities is better aligned with sector policy priorities and national program objectives. A result-oriented incentive mechanism is in place for the allocation of national financial resources, to support municipalities in establishing modern and integrated systems in line with the objectives of the PNDM. 77 LGs, hosting about 53 % of urban population, are being supported through the PNDM to professionalize their collection services and/or to upgrade disposal facilities. For better transparency in the treatment of funding requests, the PNDM eligibility criteria have been published on the SEEE website (www.minenv.gov.ma).
73. To be fully effective, coordination by the CN-PNDM is supported by a functional program management unit. With the technical assistance of the Bank, since early 2010 the GoM has been gradually reinforcing this unit and formalizing its work. A manual of procedures has been prepared. It details how the unit reviews funding requests from municipalities before their submission to the CN- PNDM, to ensure that they meet the financial, environmental and social support criteria that have been defined in line with national objectives. Procedures also detail how to document the workflow, to ensure full transparency in the treatment of requests, and to ensure a systematic and expeditious follow-up of both requests and on-going projects. The Government has nominated a full-time unit head and it is in the process of contracting out four full-time external experts (one technical and one financial to ensure an adequate and streamlined processing of requests, and two to provide ad-hoc support in the field to local governments). These experts are expected to be on board by November 2010. To date, UGP records shows that about of 50% of MSWM projects supported under PNDM comply with the adopted eligibility criteria. To improve such compliance, the Minister of interior issued, in September 2010, a circular to LGs reminding them with the need to comply with the established criteria prior to claiming any financial support to upgrade their MSWM systems.
74. Beyond ensuring consistency and transparency of government actions, the program management unit should also progressively become a tool to accelerate deployment of the PNDM and trigger targeted technical assistance to municipalities to help them meet PNDM criteria – and hence expand and accelerate the use by Box 3: National Commission of PNDM municipalities of the governmental incentive program. A National Commission (NC) was formed in 2009 to coordinate, supervise and monitor implementation of 75. New projects are more consistent with activities under the PNDM and the sector reform program. better defined national regulations and Its mandate includes the following main tasks: Coordinate the implementation of the PNDM and standards. Morocco has now almost propose strategic measures for the efficient execution completed the required legislation in the of the reform program of the MSW sector; municipal solid waste sector, building on Monitor and assess the achievements, results and the enactment of its first solid waste law. progress under the PNDM and reform program; Review and adopt the eligibility criteria of the financial As a prior action to the first DPL, it had support to the municipalities waste management published the decree related to waste projects under the PNDM; classification. Since then, it has also Review and approve funding allocation to LGs under published the decrees related to PNDM; administrative procedures and technical Review and approve action programs, the partnership agreements, documents, manuals and guidelines for the specifications for sanitary landfills implementation of PNDM’s support activities; (Official Gazette dated January 7, 2010), Approve and monitor the capacity building activities and the decree related to procedures for undertaken under the PNDM ; the elaboration of provincial and Review and approve the progress reports prepared by prefectural MSW master plans (Official the PNDM Program Management Unit (PMU) Gazette dated July 22, 2010). A substantial The NC acts under the presidency of the SWE and is envelope was also allocated under the composed of representatives from the Ministry of Interior, Minister of Finance, Ministry of Economic and General PNDM budget for FY10 for the Affairs, and the Fond d’Équipement Communal (FEC). preparation of seven provincial and prefectural MSW master plans. These three sets of administrative guidelines 22
were key to meet the challenge of bringing down to the local level, in the form of implementable procedures, the national planning requirements of Solid Waste Law 28-00.
76. The regional commissions are in charge of reviewing and validating provincial and prefectural MSW master plans to ensure that solid waste management systems meet national regulation and standards. Such commissions are now established throughout the Kingdom and some of them are operational. This is a key step to initiating a process of decision making and consultative review, and validation of solid waste planning with the participation of regional government entities, professional associations and representatives of civil society.
77. The greatly increased clarity and visibility of the government’s commitment has sent a positive signal to the solid waste market. The role of the private sector has kept increasing. The private sector now provides street cleaning and waste collection services to more than 11 million inhabitants, representing about 34% of the total population of Morocco, 61% of its urban population, and about 70% of total collected tonnage. During 2009 and 2010, 15 new or renewed contracts have been signed with PNDM support. For MSW transfer and disposal, 10 private sector participation contracts cover today 8.5 million inhabitants, or about 30% of the Moroccan population and almost 50% of the urban population. This translates into improved service delivery in terms of quality and coverage.
78. To better align the contribution of the private sector with national objectives, new tender documents and model contracts have been developed to increase transparency and competitiveness. Three sets of model tender documents, including model contracts, were prepared by consultants under the PPIAF-financed study on private sector participation (see paragraph 63). A fourth set is being prepared. These model documents have been submitted for wide-reaching consultations, among municipalities, private operators, central departments, and legal experts. Each set corresponds to a specific contract mode: collection; disposal under a design, build, finance and operate contract (DBFO); disposal under a design, build and operate Box 4: New tools for local public services contract (DBO); and disposal under a introduced by the 2009 amendments to the “Charte Communale” design, build, and operate contract in Law 17-08, promulgated by Dahir on February 18, 2009, amends the case basic infrastructure exists prior Charte Communale (law 78-00) and contains two significant sets of to the start of contract (main site reforms meant to improve the delivery of essential local public earthworks and first cell). The new services. tender documents and model First, it creates the legal template for new legally autonomous inter- contracts comply both with Moroccan municipal structures (groupements d’agglomération) meant to unify law on private sector participation for service delivery in metropolitan areas of 200,000 inhabitants or more. public services (Loi 54-05 sur la This covers, mandatorily, urban planning, urban transport, solid Gestion Déléguée) and with waste, sanitation, water and energy supply; and as an option, any international good practices. They other activity that the member municipalities agree to transfer. In case municipalities within a metropolitan area fail to find a common build on the strength of the existing agreement, the MoI can intervene to mandate the creation of the new private Moroccan MSW market but structure. This will allow synergies to materialize and should both remedy weaknesses identified under lower costs and streamline decision-making processes. In the case of the PPIAF-PSP study. MSW it will in particular facilitate the development and operation of inter-municipal landfills.
79. In particular, main improvements are: Second, the new law grants extensive regulatory power to the MoI (i) the inclusion in the tender which now can, by executive order, take any of a set of measures documents of a complete, non- necessary to ensure adequate delivery of local public services. This negotiable contract, in conformity set includes in particular: the national coordination of local development plans, coordination of tariffs, service norms and with Law 54-05, which makes for a standards, the organization of urban transport, mediation between more transparent and equitable operators in case of conflict, data collection, monitoring, and the selection process; (ii) a technical provision of technical assistance to municipalities. evaluation through “pass or fail” criteria instead of the former opaque grading system; and (iii) introducing 23
of a new DBO option. The new DBO option provides for a significantly better balance of risks than the prevailing DBFO, since switching construction finance from the provider to the municipality ensures that the provider does not bear the financial consequences of erroneous waste flow estimates made at planning stage. It also relieves the private sector financially at a time when equity has become scarce, which levels the playing field between operators and should see prices decrease.
80. As a further positive signal to the solid waste market, amendments to the Charte Communale provide for new public service and PSP regulation mechanisms. With Law 54-05 (Loi sur la gestion déléguée), Morocco had opted for regulation by contract of the private delivery of public services. In the case of weaker municipalities, the absence of a regulator and a possible lack of clarity in the definition of responsibilities could be seen as a risk by the market. In addition to the new mandated model tender documents and model contracts for MSWM (described in the previous paragraph), that provide for clear and equitable risk sharing, the Charte Communale now grants the MoI extensive regulatory powers in the field of locally delivered public services (see Box 4), with the dual objective of ensuring national coherence (in standards, tariffs, and monitoring) and remedying insufficient local capacity with technical assistance, or, in the worst case, by taking over services.
81. Local governments have moved solid waste management up in the list of their priorities. This is in particular apparent in the new thematic conventions that have been developed over the last year between some central governments and the regions: they all place integrated MSWM, and in particular the improvement of disposal, among the top investment priorities. This was already reflected in specific conventions between the center and provinces to support 70 municipal solid waste projects throughout the Kingdom. During 2009-2010, eight (8) thematic partnership agreements (conventions de partenariat) have been signed between the central administrations targeting the upgrade of municipal solid waste systems.
AREA 2: SUSTAINABILITY OF MUNICIPAL SOLID WASTE SERVICES
82. Effective tools have been put in place that should allow municipalities supported by the PNDM to better sustain the increasing financial burden of modernized solid waste collection and disposal. Despite cost efficiency improvements expected from the program, it is estimated that the upgrade of municipal solid waste systems in Morocco, in terms of both service quality and environmental performance, costs around MAD 160 per ton (US$20) for collection and MAD 100 per ton (US$12) for disposal. The program therefore includes several actions to reach the outcome of improved cost efficiency and financial sustainability in municipalities supported by the PNDM.
83. In Morocco, the waste service is funded from the municipalities’ general budgets. There are no direct user charges in place. The “communal services tax” (TSC), traditionally understood to cover municipal services such as street cleaning, waste collection and street lighting, typically represents between 15% and 30% of total current municipal revenues. VAT transfers (30% of the country’s VAT receipts are transferred to local governments according to a set of criteria) constitute another large part of current revenue, up to 35% of total revenue. In 2007, the estimated increased cost from modernizing solid waste systems in medium and large cities represented around 10% of municipal current revenue. The General Treasury has a Division dedicated to the collection of nationally-set local taxes, which has engaged in extensive modernization efforts to increase collection rates: through modern data processing techniques (including mass-mailing, multiple new modes of payment for local taxes including payment on-line, and direct seizures on bank accounts), collection rates have already increased to reach [80%] of billed amounts and [2/3] of billed accounts.
Table 5 : Municipal waste service cost and budget data in select municipalities (Year 2007)
Rabat Fès Essaouira*
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Collection and transfer US$ / ton 53 35 30 Disposal US$ / ton 10 9 14 Total US$ / ton 63 44 44 Population Inhabts. 666,366 603,432 75,000 Waste quantity Tons 235,360 169,725 22,000 Communal Services Tax (TSC) US$ 23,434,560 8,689,017 1,348,906 VAT US$ 4,291,799 16,996,328 2,463,484 Municipality's current revenues US$ 78,051,989 51,575,217 6,679,082
TSC receipts / waste service cost 160% 117% 138% VAT receipts / waste service cost 29% 229% 253% (TSC+VAT) / current revenues 36% 50% 57% Waste service cost / current revenues 19% 14% 15%
Modernization cost as % of TSC 32% 62% 52% Modernization cost as % of VAT 175% 32% 28% Modernization cost as % of total current revenues 10% 10% 10%
Modernization cost : US$32 /ton 1 US$ = MAD 8.17 * 9 months 2007x12/9
84. Growing State support, coupled with increased local tax revenue, ensure that the cost of modernization the MSWM systems can be covered. One of the main components of the PNDM is the financial support mechanism, in the form of Government funding of a dedicated account (corresponding roughly to the savings from reduced environmental externalities) which, as an incentive to modernization and for a limited period, will cover incremental costs to municipalities that upgrade their MSWM systems. The substantial and growing commitment by the Government to support the sector is evident in the financial allocation made to this mechanism: MAD 332 million for 2010, and MAD 200 for 2009, compared to MAD 100 million in 2008. This in addition to MAD 200 million mobilized annually through the MI (programme d’emploi de la TVA) to support mainly the professionalization of the collection service. Financial sustainability of the sector requires however that improved services remain adequately funded beyond the PNDM time span.
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85. Recently introduced improvements to the municipal financial management framework should greatly contribute to medium-term financial sustainability. Since the first DPL, a new local government finance law has been published: Loi 45-08 d'Organisation des Finances Locales du 5 mars 2009 (LOFL). The law is expected to contribute both to increasing revenue and to secure funding and payment for private sector-executed service provision contracts. In particular, the latter are now non-discretionary expenditures (“dépenses obligatoires”) with effective budgeting and payment mechanisms. Provided municipal income is sufficient, these mechanisms give strong assurances to operators that the costs of their contracts will be covered for the whole of their duration (see details in box 5). Combined with the fact that almost all municipalities participating in the PNDM took the decision to implement their MSW modernization plans through PSP (“délégation de gestion”), the municipal financial management improvements ensure an adequate funding of both investment in new MSW infrastructure and operation services until at least the end of the newly signed contracts (ie 10 to 20 years in the case of new landfills), and thus provide a very strong footing to the medium-term financial sustainability of the initially subsidized investments.
86. However in the longer term, despite these improvements, there is still a risk of insufficient municipal capacity to fund the cost Box 5: Improvements brought by the new local government finance law increase, in particular for “Loi 45-08 d'Organisation des Finances Locales du 5 mars 2009” disposal. The Ministry of Interior, with funding from The law constitutes an extensive modernization of the local finance framework in KfW, has therefore Morocco. Some of its new dispositions will contribute to ensuring the provision of initiated the preparation of adequate funding to municipal solid waste services by: (i) ensuring, once a PSP contract is signed, mandatory budgeting and payment of amounts due to the private a study on the financial contractor, and providing for improved recourse mechanisms; (ii) improving year- sustainability of MSW. on-year and multi-year budgeting procedures to avoid the accumulation of arrears; One specific objective is to and (iii) improving revenue collection. In particular: identify tools and actions The MoI verifies that local governments’ non-discretionary expenditures are for mobilizing new included in their annual budgets, and can correspondingly mandate corrections; revenue sources needed for concerned expenditures include financial commitments corresponding to PSP the long term financial and contracts (art. 24). institutional sustainability Payment of sums due by the LG under the above contracts is mandatory, and of SWM services. The the MoI can mandate the State Treasurer to execute such payments from the municipal accounts (in Morocco, Municipalities must keep all their accounts study was launched in May with the State Treasurer) (art. 43). 2010 and is scheduled to Ex-ante controls of municipal payments by the MoF are removed (this was a be completed by early major cause of payment delays in Moroccan municipalities). 2011. The study will assess Appealing to a legal assistant dedicated to local governments (“l’assistant options for introducing judiciaire des collectivités locales”), newly created within the MoI, will be a mandatory first step in case of payment conflict between a third party and a distinct user fees local government. This is expected to facilitate the resolution of disputes (art. established under the solid 38). waste Law 28-00, which Unspent credits for operational expenditures that have been committed but would complement general remained unpaid, as well as unspent credits for investment expenditures, can budget revenues. now be transferred from one year’s budget to the next, instead of being cancelled at the end of the fiscal year (art. 46 to 48); this should facilitate the clearing of arrears. .
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87. An innovative nationwide CDM program of activities will also help municipalities mobilize additional financial resources, while contributing to the climate mitigation agenda. A well staffed and skilled unit within the Fonds d’Equipement Communal (FEC) developed this ambitious clean development mechanism program for the solid waste sector in Morocco. The preparation phase of the Program of Activities (PoA) is now complete: FEC Box 6: Improving municipal revenues through the development of a Clean Development Mechanism (CDM) Program of Activities (PoA) prepared all the CDM- required documentation and The Morocco CDM PoA, which targets 13 municipal landfills in Morocco, will identified a first project to be be implemented as part of the Programme National de Gestion des Déchets developed under the program Ménagers et Assimilés – PNDM. In addition to reducing GHG emissions, the of activities. The publication proposed program will help streamline sound environmental practices in the SWM sector and generate additional revenues for municipalities to promote of the program design investment in such projects. Each of the LFG projects, to be developed on documents on the UNFCC separate landfills throughout the country, will correspond to a CDM Project website, in August 2010, Activity (CPA). All CPAs will be implemented as voluntary activities by the officially launched the municipalities, which will either construct and operate the project themselves or contract it out to private sector entities. validation phase, which consists of a third party audit The program has the potential to reduce approximately 9.6 million tCO2e over the of the program’s compliance period 2012-2021 and to generate revenues estimated to US$96 million over 10 with the rules and years. The CPF has agreed to buy at least 2 million ERs over that period methodologies of the CDM. The PoA will be developed and managed by the FEC, who will act as the A site visit was carried out by Coordinating Entity of the PoA. FEC is a state-owned Moroccan Bank and a UNFCC-accredited specialized in the financing of local investment projects of municipalities and Designated Operational local public institutions. FEC’s mission is to support the implementation of Entity, or DOE, in September national policies for local development with the provision of loans and technical assistance to municipalities. FEC will provide technical assistance for the 2010 as part of the validation development of individual CPAs, manage the PoA and sell the resulting ERs on procedure, which, in turn, behalf of the municipalities. will result in the formal request for registration of the program under the CDM in early 2011. Once the registration milestone is reached, which is expected around the end of 2011, the PoA will be entitled to generate carbon assets, or Emissions Reductions (ERs), through the implementation of specific landfill gas capture and utilization activities. The first of such activities, to be implemented on the inter-municipal landfill of Oum Azza, has been identified and developed, and is expected to start operations in 2010. In addition, by signing a Seller Participation Agreement with FEC in October 2009, the Carbon Partnership Facility (CPF), managed by the Bank for public and private carbon investors, has formally marked its interest in purchasing part of the ERs that will be generated through the activities implemented under the CDM program of activities. Through this agreement, Morocco officially became the first potential seller of CERs to the CPF.
88. The CDM program of activities will provide equal opportunities to municipalities in gaining access to the carbon market. The program coordinated and managed by FEC, will provide a framework under which any interested municipality, or group of municipalities, will be able to develop a CDM project activity in the solid waste management sector, as long as it meets the eligibility criteria established by the CDM (see Box 6). By pooling similar project activities under one commonly-managed CDM program of activities, municipalities will be able to gain access to the carbon market at a relatively low cost, taking full advantage of economies of scale and keeping transaction costs down. Through this mechanism, municipalities will be able not only to mobilize additional revenues but also to gain knowledge and build capacity in the carbon finance domain. FEC has so far identified 13 potential sites that could join the program. The scope of the program, however, is not limited and will depend on the willingness of municipalities to join it. Moreover, this programmatic approach will be a good opportunity to showcase an innovative public-private partnership, which will bring together a public development bank (FEC), local authorities (municipalities) and the private sector (landfill operators). FEC will create the link between the national MSW sector and the international carbon market, by negotiating and signing Emissions
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Reductions Purchase Agreements (ERPAs) with public and private sector carbon buyers. FEC will also be the Focal Point for all communications with the CDM Executive Board.
89. According to estimates from the design documents, the CDM program of activity has the potential to reduce approximately 9.6 million tCO2e over the period 2012-2021 in 13 different landfill sites. In terms of potential revenues for the municipalities, and based on an average ER price of US$10/tCO2e, this could amount to a total of roughly US$96 million over 10 years. The CPF has agreed to buy at least 2 million ERs over that period.
90. The Government has not only continued capacity-building activities in the MSW sector, but has put them on a more secure and long-term footing. Many municipalities lack technical and managerial capacity to manage solid waste services, particularly to plan, contract out, supervise, and evaluate services. Since the first operation, the Government has included SWM capacity-building activities for municipalities in separate ongoing FEC-, JBIC- and GTZ-funded programs, and thus made progress towards the outcome of having key players, at municipal and regional level, able to plan and efficiently manage solid waste systems.
91. However, beyond meeting the DPL2 trigger (Continuation of this multi-year capacity-building program), the Ministry of Interior has recognized the particular challenge that capacity issues and local ownership represent to a sustainable expansion of PNDM implementation (and to achievement of the DPL matrix indicator targets). It has therefore decided to put capacity-building for municipalities in solid waste management on a more integrated, secure, and long-term footing. To do so, it has mandated its training department to develop and carry out an integrated multi-year capacity- building program targeting managerial and technical staff in charge of MSWM at municipal and provincial level. This program was initiated in April 2010 as part of the MoI general multi-year capacity-building program, one of the main components of the Government’s program to support decentralization (Programme d'appui à la décentralisation). It will be implemented by ONEP’s training institute under a framework procurement agreement with MoI. A first training session for trainers took place in June 2010. The program comprises 30 modules covering 4 main themes of SWM and targets, in its first year, 40 trainers, 240 LG staff and 320 elected representatives. So far, 1635 local and regional technical and managerial officials have received training in municipal solid waste management and related environmental aspects i.e. EIA.
AREA 3: ENVIRONMENTAL AND SOCIAL CONSIDERATIONS
92. A fully operational EIA system to reduce social and environmental impacts is now in place and effective. The GoM has successfully addressed the regulatory, administrative, technical and managerial deficiencies of the former EIA system which hindered direct investment and donor support. Under the first operation in this programmatic series, the Government had published two decrees that completed the legal framework for an upgraded EIA system, including regulations related to public consultation, and a decentralized review and validation of EIA through regional EIA commissions. Since the approval of the first operation, the GoM has already established and operationalized regional EIA committees throughout the Kingdom. 9 have held a first meeting in 2009 and a further 2 held their first meeting in 2010. Although not all have yet forwarded activity reports to the SEEE, at least 4 committees have examined over 10 EIAs relative to local projects with investments below the MAD 200 million threshold. This promotes the involvement of local stakeholders in the management of the EIA system and should reduce delays in the review and approval of EIAs.
93. Commitment of the Moroccan government to this agenda is solid as demonstrated by the extensive consultation following the call made by H.M the King for (i) the definition and enactment of an Environmental Charter that will recognize that sustainable development must be a fundamental value of the Moroccan Society; (ii) that all public authorities, elected officials, and private businesses integrate the environmental aspect in the planning and implementation of policies and programs; and 28
(iii) strengthen the role of public consultation and environmental and social due diligence in all areas of infrastructure and human development. Conditions for Public consultation continue to improve. Full implementation of this legal requirement requires an official inter-ministerial circular that will instruct local authorities and project holders on how to carry out the required payment of the fee to cover the cost of the public consultation.
94. Since the first DPL, the implementation of environmentally sound disposal practices has kept increasing. The corresponding DPL2 trigger (launch of the construction of at least three new sanitary landfills and closure or rehabilitation of at least three open dumpsites) focused on government action demonstrating the reality of the reform program, in term of upgrading the poorest segment of the existing MSWM systems and mitigating the related environmental and economic impacts.
95. While this target has been met, excellent progress has also been observed towards the outcome indicators initially set for the whole program. Indeed, municipal waste landfilling contracts already cover about 50% of the urban population, which should lead to exceeding the outcome indicator of 30% of collected waste disposed of in sanitary landfills by 2011. The 2010 investment program approved by the CN-PNDM includes twelve further closures/rehabilitations, while the original outcome target was eight. On-the-ground results will provide incentive for additional municipalities to apply for financial support for MSW investments, increasing the momentum of reform implementation while incorporating lessons learned from initial investments. Box 7: Broadening the social integration program: the case of the Oum Azza (Rabat) sanitary landfill 96. The program has promoted the early The Oum Azza is designed to be a sanitary landfill, and started operations in and systematic 2007. Since inception, the site has received an average of 1,400 tonnes of waste consideration of daily, with an annual 3% rate of waste growth. The landfill is equipped with a social concerns at leachate collection system that carries by gravity the leachate to a biological all levels of the treatment basin. A collection system is also used to carry rainwater into a storage decision making basin for multipurpose uses. Currently, the generated biogas is not collected, however, this will be the first project selected for CDM for the biogas collection chain for SWM and recovery to generate electricity. modernization. The GoM has recognized An international firm was awarded the landfill management and the potential implementation contract by the concerned 13 municipalities. One of the requirements of the contract was social inclusion and rehabilitation program for the socioeconomic waste pickers. A Non-Government Organization (NGO), CARE was contracted by impacts of SWM the private operator to implement the social integration program. reforms given that informal systems of The program for social integration has been a great success. More than 150 waste collection and waste pickers have benefited from this initiative for social inclusion. The main principles under which CARE operated were as follows: (i) made waste a resource, recycling play an (ii) brought informal workforce into mainstream formal work, (iii) supported important role in the financially the establishment of a cooperative with elected waste picker-members livelihoods of and voting powers, (iv) provided technical and legal advice, (v) built a joint action marginalized groups. plan with the operator, (vi) exchanged knowledge and practices, (vii) cultivated dialogue and awareness, and (viii) built a relationship of mutual respect in the long As a mandatory term as part of formalizing livelihoods of waste pickers. condition, every convention signed The main lessons learned in this case are that (i) there is a need for support for with a municipality acceptance of informal workers in daily mainstream livelihoods over a period of benefiting from time rather than just finding an alternative source of income; and (ii) integration of such scale takes time and all aspects of technical, economic, social and commercial PNDM financial constraints need to be considered. support now incorporates social aspects into the implementation of the modernization project. An envelope of Dirham 10.5 million is allocated under 29
the PNDM – Action Plan for 2010 to support municipalities in this area. Waste pickers inclusion initiatives are underway in Tangier, Casablanca Rabat and Agadir. Rabat waste pickers inclusion initiative is the most advanced one and it covers 180 pickers.
97. To reinforce the systematic consideration of social aspects in SWM modernization projects (and following the benchmark action in the matrix), the GoM has decided to avail itself of the mandatory use of model tender documents for MSW contracts with the private sector (“gestion déléguée” contracts, in application of Law 54-05). These model documents, which have been finalized and recently adopted by the CN-PNDM, include specific provisions requiring the private sector contractor, possibly with the assistance of NGOs, to make proposals on social aspects, including sorting activities and the integration of informal workers, for inclusion in the final operation contract. These proposals must take into account the recommendations contained in the related environmental and social impact assessment and they must be evaluated as part of the award criteria.
98. Looking forward, the second PSIA, currently under preparation, will evaluate progress and achievements of first round actions, in particular (i) the effects of social inclusion in private sector contracts and partnership agreements; (ii) the extent and impact of CSO involvement; (iii) how the official recognition of waste picker status has influenced living, professional and health conditions; (iv) the social impact on poor customers of increased cost of solid waste services as a result of sector reforms; and (v) the social impact resulting from the transfer of service provision for solid waste from municipal execution (“régie”) to the private sector.
C. STATUS OF DPL 2 TRIGGERS AND PENDING ACTIONS
99. While progress has been excellent in the first operation with the establishment of a national framework to implement the national policy, and with securing continued engagement of all concerned ministries and national agencies, this second DPL is focusing more closely on the policy actions needed to deepen the outreach to the local level, where actual implementation of the MSW policy, and resulting outcomes, materialize.
The program policy matrix (included in Annex 3) consists of key actions based on and aligned with the GoM’s reform program. Under the first operation, nine actions were identified as indicative triggers to be verified to initiate the preparation of DPL2. Their scope and rationale were described in the program document of the first operation, and they are summarized hereafter. Eight (8) of these actions have been met and there is only one indicative trigger which is delayed and thus the number of prior actions for DPL2 is 8 (see below). Some triggers have been reworded to improve clarity and specificity without changing the original spirit of the activity (see table 6).
AREA 1 – GOVERNANCE OF THE MUNICIPAL SOLID WASTE SECTOR:
100. Under this reform area, four indicative triggers of DPL2 have been confirmed with the objective to solidify and put into implementation measures undertaken under the first DPL, including:
101. The National Commission for the National Municipal Solid Waste Management Program has met at least twice a year in the calendar year 2009 and the calendar year 2010 to coordinate, review and evaluate the implementation of the National Municipal Solid Waste Management Program, including review and approval of progress reports and annual action plans. This action was retained to ensure effective and transparent coordination and consultation in preparing and adopting the annual PNDM work program, as well as ensuring appropriate allocation of resources mobilized under each annual fiscal law. A continued and sustained engagement of both line ministries and the ministry of finance is key in such multi-dimensional sector.
102. Two regional commissions for the review and validation of provincial and prefectural municipal solid waste master plans have been established and are operational This action, the first of its kind 30
in Morocco, creates an institutional framework at local level towards effective implementation of the solid waste law in term of sector planning. It will ensure a consultative and decision-making process for the review and validation of solid waste master plans at the regional level involving local governmental entities, professional associations, and civil society representatives.
103. The National Commission for the National Municipal Solid Waste Management Program has reviewed and approved the three sets of model bidding and contracting documents and the Minister of the Interior has issued a circular to dispatch them and require their use. This action provides one of the key means to municipalities to enable them to achieve, on the ground, the program objectives in terms of transparency, competitiveness, and accountability for better private sector participation in MSW management. In addition, the minister of interior has issued, in application of law 54-05, a circular mandating their immediate application. These models are also available on the site of the Official Gazette of Local Governments (www.bocl.gov.ma).
104. The 2010 action plan for the National Municipal Solid Waste Management Program provides for adequate funding of the execution and mainstreaming of a communication and public awareness program. This action is directed toward effective implementation of the communication component of the PNDM, which is a necessary input into behavioral changes among the public as well as into establishing communications between municipal decision makers and the public regarding priorities, concerns, and expectations.
AREA 2 – SUSTAINABLITY OF MUNICIPAL SOLID WASTE SERVICES
105. Originally, the triggers were: (i) signature by the Minister of Interior of a circular on the application of Article 23 of Law 28.00 on user fees (redevances) for municipal solid waste; and (ii) continued implementation of a multi-year capacity building program.
106. One indicative trigger could not be met on time: the signature by the Minister of Interior of a circular on the application of Article 23 of Law 28-00 on user fees for municipal waste. When the first operation was prepared, this new possibility of introducing user fees (“redevance déchets”) was envisaged as the key tool to complement general budget revenues in order to ensure the strengthening of municipal financial capacity to meet the financial requirements for modern, integrated MSW. However the GoM and the Bank agreed that the preparation of such circular needed to be informed by a detailed study on sector financial sustainability (financed by KfW). In particular, the study must determine adequate implementation modalities of such a new revenue source (legal, social, practical, etc.). Although the study is on-going (see par 34), its full results are not expected before early in 2011, after which it will require substantial discussion and consultation before concrete decision can be taken on its implementation.
107. On the other hand, there is a strong positive trend in overall municipal revenue. Following a simplification of local taxation, which reduced the number of taxes by merger of similar ones, and efforts in improving billing and collection, receipts from the communal services tax (TSC) increased from MAD 1.4 billion in 2008, to MAD 2.6 billion in 2009, and a forecast of MAD 3.4 billion in 2010 (actual cumulated receipts as of July 2010 are 44% higher than they were in July 2009). VAT receipts have also shown strong growth. Overall, current revenue for urban municipalities increased by 17% between 2009 and 2008, and data for July 2010 showed a 19% increase over the same period of 2009. This is to be compared with the estimated cost of modernizing MSW systems, which typically represents 10% of current revenue (see Table 5 : Municipal waste service cost and budget data in select municipalities). A further step-up in optimizing the revenue potential of local taxes in Moroccan cities is expected from the implementation of the Law on local finance (45-08) and related Decree 2-09-441, and the modernization of the financial departments inside municipalities, with revised function definitions and a new financial information system.
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108. Moreover, the recent reforms of the local government finance framework introduced new legal and administrative tools (see par. 79 and Box 4) to secure budgeting and payments to operators that, together with these improvements on the revenue side, can ensure medium-term financial sustainability for the modernized, integrated MSWM systems.
109. For the longer term, the Government will continue to work towards the objective of implementing new tools for financial sustainability. While user fees in Law 28-00 were only meant to complement, and not replace, existing revenue sources (and thus have become less critical since these existing sources have shown strong growth), they also serve other purposes not permitted under the current funding of MSW from general budget revenues. Namely, they (i) allow municipalities a degree of freedom to keep matching revenue to cost increases of the waste service (while the rate and basis for the TSC is set nationally); (ii) provide adequate incentives for waste reduction; and (iii) capture additional revenues from large producers (such as restaurants, markets, etc.). The KfW- financed study will determine, beyond the medium term, which new income sources (dedicated waste fees) are necessary or useful to ensure long-term sustainability. These recommendations may include alternative mechanisms to meet the sustainability objective. The Moroccan Government has confirmed its interest in implementing such tools provided they do not merely duplicate existing local taxes (which would go against the recent simplification) but apply to well-defined categories of the population and can be expected to have good collection efficiency.
110. Given the strategic importance of the decisions to be taken on the basis of this study, the GoM will involve all concerned departments early on, and in particular submit all intermediate reports to a broad panel including representatives of the MoI’s Water and Sanitation Directorate (DEA), Local Finance Directorate (DFL), and Legal Directorate, of the State Secretariat for Water and Environment (SEEE), of the Ministry of Finance’s Budget Directorate, and of the Local Finance Directorate of the General Treasury.
111. Overall, the Government of Morocco remains committed to its plan for sector sustainability, and the very significant steps outlined above demonstrate good progress towards this objective. The plan is as follows (see also par. 38 to 40): (i) cities keep the primary responsibility of covering the majority of costs, in particular through their general budgets; (ii) the Government provides financial support (corresponding roughly to the savings from reduced environmental externalities) in the first 3 to 5 years of each eligible SWM modernization project; (iii) over the medium term, measures undertaken cover both the cost and revenue sides: on the cost side, the Government promotes inter-municipal disposal facilities and mandates the use of improved bidding documents and contracts; on the revenue side, the reform of local government finance is expected to contribute to increased resources through the maximization of the fiscal potential and offers new tools to secure funding and payment for service providers (currently 60% are private operators); additional revenues are also expected from the newly developed carbon finance program. (iv) for the long term, the general budget revenues of municipalities need to be complemented through a new instrument (user fees) to be defined in its details.
112. The capacity development program on municipal solid waste management has been continuing in the calendar years 2009 and 2010 and has been mainstreamed into a fully funded government training program. This action targets the managerial dimension of sector sustainability. It will significantly contribute to addressing the lack of managerial, technical and financial management capacity at the municipal level. Given the key roles being played by the private sector in providing services, this action will focus on strengthening municipalities to plan, manage and supervise private operator contracts.
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AREA 3 – ENVIRONMENTAL AND SOCIAL CONSIDERATIONS 113. Three triggers for DPL2 were identified under the environmental and social policy area.
114. Three regional EIA committees have been established and are operational. The intention of this action is to demonstrate the commitment of the government towards reaching a consistent and comprehensive framework for environmental management in general and an effective EIA process for the establishment of sanitary landfills in particular
115. Three partnership agreements (“conventions de partenariat”) have been signed between the central and local governments to improve solid waste practices. This government action will demonstrate the reality of the reform program by the actual establishment of sanitary landfills and rehabilitation and closure of open dumpsites. The related quantitative target indicator reflects a realistic time frame and potential implementation challenges for such disposal infrastructure. On-the- ground results will provide incentive for additional municipalities to apply for financial support for MSW investments, increasing the momentum of reform implementation while incorporating lessons learned from initial investments.
116. The 2010 action plan for the National Municipal Solid Waste Management Program provides for adequate funding for extension of social inclusion programs to disposal investments supported by the National Municipal Solid Waste Program. This action has been selected to demonstrate the commitment of the government to mainstreaming social concerns into projects supported by the PNDM. It will ensure that the Government is concomitantly placing increasing emphasis on making sure that the local authorities take adverse negative impacts of the MSWM investments into account. Also, for the first time, the PNDM Action Plan for 2010 considers ‘the social dimension of the PNDM’ as critical to the success of the reform and includes substantial resources to social issues resolution in selected important investment sites.
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Table 6: Status of Indicative Triggers for DPL 2
Policy area and Indicative triggers Proposed DPL II Status program objectives for DPL II prior action Area 1 - Governance of the Municipal Solid Waste Sector 1A Promote The CN-PNDM The National Met. The CN-PNDM has met five times since January 2009 consistency and meets at least twice a Commission for the on the following issues: (i) approval of the 2009 Action Plan; transparency of year to coordinate, National Municipal (ii) validation of the financial support mechanism and the government actions review and evaluate Solid Waste approach to addressing social considerations of the PNDM; in the solid waste the implementation of Management (iii) review of progress of the 2008 and 2009 action plans sector the PNDM. Program has met at (meeting of June 11, 2009) and (iv) evaluation of policy least twice a year in development through the trigger matrix in preparation of the calendar year DPL2 (meeting of December 3, 2009). 2009 and the calendar year 2010 to coordinate, review and evaluate the implementation of the National Municipal Solid Waste Management Program 1B Ensure Regional Two regional Met. Such commissions are now operational in four regions: implementation of commissions for the commissions for the Chichoua, Mohammedia, Kenitra, Tétouan. The SWM master Solid Waste Law review and validation review and validation plan for Tétouan has been validated. 28-00, and, through of provincial and of provincial and it, implementation of prefectural MSW prefectural municipal the national solid master plans solid waste master waste policy established and plans have been operational in at least established and are two regions operational consistent with the relevant legislation. 1C Improve Adoption by the CN- The National Met. The model bidding documents and contracts were transparency, PNDM of revised Commission for the approved in September 2010 by the CN-PNDM meeting.
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competition, and model bidding and National Municipal accountability in contracting Solid Waste In application of Law 54-05, a Circular was signed by the private sector documents to be used Management Ministry of Interior on October 4, 2010, which mandates the contracting in SWM beginning in 2010. Program has use of these model documents for all MSW contracts with the reviewed and private sector. approved the three sets of model bidding and contracting documents and the Minister of the Interior has issued a circular to dispatch them and require their use Change public Launch in 2009 of a The 2010 action plan Met. The 2010 PNDM action plan includes MAD 3 million behavior and fully funded for the National for a communication and public awareness campaign. The improve municipal communications and Municipal Solid consultancy contract to prepare the campaign has been decision making public awareness Waste Management signed. The consultant has submitted its methodology. with respect to solid program on solid Program provides for waste management waste issues through adequate funding of Although this timeline ensures the program’s contribution to practices the PNDM. the execution and the expected outcomes, the outcome will likely not be mainstreaming of a measurable in the short term given the time it takes to sway communication and public perceptions. It will thus be important for the public awareness government to ensure continued support to public awareness program campaigns, beyond the proposed operation. Area 2 -Sustainability of municipal solid waste services 2A Strengthen Signature of a (None) The Government is committed to continue working towards municipal financial circular by the the objective of long-term financial sustainability. An an- capacity to meet the Minister of Interior going study financed by KfW will identify tools and actions financial on the application of for mobilizing new revenue sources needed to meet this requirements for Article 23 of Law 28- objective, and in particular will assess options for introducing modern, integrated 00 on user fees for distinct user fees established under the solid waste Law 28- MSW municipal waste. 00, which would complement general budget revenues. Given the strategic importance of the decisions to be taken on the basis of this study, the GoM will involve all concerned departments in validating its outputs and recommendations.
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The study was launched in May 2010 and is scheduled to be completed by early 2011. 2B Improve (None) (None) cost effectiveness of MSW services 2C Strengthen Continued The capacity Met. The program is being implemented by ONEP’s training municipal capacity implementation of a development program institute under a framework procurement agreement with the to efficiently multi-year capacity on municipal solid “Direction de la Formation des Cadres” of the MoI. A first manage solid waste building program. waste management training session for trainers took place in June. Another was services has been continuing launched in September. in the calendar years 2009 and 2010 and has been mainstreamed into a fully funded government training program Area 3 - Environmental and social considerations 3A Upgrade and Establishment and Three regional EIA Met. In March 2009, the Minister of Interior and the operationalize the operationalization of committees have Secretary of State for Water and the Environment jointly existing EIA system at least three regional been established and issued a circular for the establishment of regional at both national and EIA committees. are operational. committees, in conformity with Decree No. 2-04-563 of Nov regional levels 4, 2008. Of the 16 committees established, 9 have held a first meeting in 2009 and a further 2 held their first meeting in 2010. Although all not have yet forwarded activity reports to the SEEE, at least 4 committees (Tafilalet-Meknes, Doukkala-Abda, Tadla-Azilal, Tanger-Tetouan) have examined over 10 EIAs relative to local projects with investments below the MAD 200 million threshold. 3B Improve the Launch of the Three partnership Met. Three conventions have been signed: Casablanca, environmental construction of at agreements Laarache and Azilal. performance of the least three new (“conventions de solid waste sector sanitary landfills and partenariat”) have Four integrated MSW management projects have been closure or been signed between launched since the approval of DPL1 (Nador, Beni Mellal, rehabilitation of at the central and local Marrakech, and Casablanca). The construction of sanitary least three open governments to landfills in Nador is ongoing; the one in Marrakech about to
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dumpsites before improve solid waste start. Works towards the closure of existing dumpsites in March 2010. practices. Nador, Casablanca, and Larrache have also started.
3C Improve the Extension of social The 2010 action plan Met. New contract models with private operator include social performance inclusion programs to for the National provision to address waste picking issues. All new PNDM of the solid waste PNDM-supported Municipal Solid support conventions require LG to prepare an action plan for sector disposal investments. Waste Management social aspects. A specific envelope is allocated under PNDM Program provides for budget for FY2010 to support LG in addressing social issues adequate funding for in Casablanca and Agadir. extension of social inclusion programs to disposal investments supported by the National Municipal Solid Waste Program
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D. FUTURE PROSPECTS FOR BANK ENGAGEMENT
117. Through these two operations, the Bank has established itself as a valued interlocutor in the solid waste sector. As expressed in its Letter of Development Policy, the GoM has expressed strong interest for further Bank engagement to support the reform of the sector beyond DPL2. After this operation, the legal and regulatory framework for the national municipal solid waste strategy will largely, but not entirely, be in place. The next challenge will be to ensure that the Ministerial Departments of the Interior and the Environment and the municipalities keep developing the systems and technical, financial and managerial capacity to implement, monitor and regulate modernized systems. For instance: further development of private sector participation and consolidation of the results achieved so far requires mainstreaming contract management practices in municipalities; ensuring lasting environmental performance requires the expansion of independent audit/inspection mechanisms at national or local level; and as noted in paragraph Error! Reference source not found. above, long- term financial sustainability at municipal level, environmental supervision, monitoring and control, and strengthened local project preparation and management capacity will require additional measures to be defined and implemented. Choosing the appropriate instrument to address these challenges will need further discussion with both the Government and other active donors.
118. Given the effectiveness of this policy development operation in providing a clear and conducive national environment for the reform of a major municipal service, as well as the emerging cities and climate change agenda, one option the team is exploring possible broadening of the approach to cover reforms needed in other urban services for Morocco to meet the challenges and investment needs of broader urbanization. This would capitalize on the progress accomplished with all urban-related development policy operations (water, housing, solid waste, and urban transport) and be aligned with the important CPS objectives on territorial development and climate change.
VI. OPERATION IMPLEMENTATION
A. POVERTY AND SOCIAL IMPACTS
119. The DPL program's design takes into account the results of an analysis of potential socio- economic impacts of solid waste management reforms. A Poverty and Social Impact Analysis (PSIA) was conducted between March and June 2008 to: (i) establish baseline data regarding the size of the informal solid waste sector, the characteristics of the groups and individuals involved, and the economic relevance of waste collection activities for their livelihoods; (ii) determine the likely negative and positive effects of the reforms; (iii) identify options to mitigate adverse impacts and maximize potential benefits; and (iv) identify the remaining analytical and data requirements for the proposed second DPL. The analysis benefited from inputs from decision makers at various levels as well as several civil society organizations, and in this sense served as a platform for stakeholder consultation on the objectives and broader dimensions of the reform program. This section highlights the main conclusions of the analysis and how they informed the policy matrix.
120. The informal system of waste collection and recycling plays an important role in the livelihoods of marginalized groups. The number of individuals deriving a substantial part of their incomes from collection on landfills is estimated at 5,500, of which 3,500 are directly involved in informal waste collection and recycling on landfills and 2,000 are herders. These figures are subject to seasonal increases related to the rate of economic growth, with individuals not normally involved in waste-picking attracted to the landfills by the opportunity of additional income during systemic or other shocks. The estimated monthly average income of a waste-picker is MAD 2,300 per month, and the average additional income from herding is around MAD 1,000 per month. 20 percent of active individuals are estimated to be women; 15 percent under 18, and 10 percent over 65. The negative
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social externalities of informal waste picking include impacts on children's education and adverse health impacts for all wastepickers.
121. Without adequate mitigation measures, the reforms risk having significant negative direct impacts on wastepickers and indirect impacts on other social groups and economic sectors. The closure of landfills without accompanying mitigation measures would translate into losses of jobs, income, and homes, with total welfare losses estimated at MAD 88 million per year. Experience from the closing of landfills in Fes, Oujda and El Jadida suggests that 20 to 30 percent of waste pickers normally operating on landfills seek new economic opportunities in waste collection in cities, thereby compounding the problem there. Between 200 and 300 families living inside the perimeter of landfills are estimated to lose their homes. Moreover, the consequent reduction of the volume of recycled material would imply additional welfare losses through extra imports on the part of industries that rely on informal recycling. A 15 percent reduction in the amount of recycled materials (a conservative estimate of those accrued from informal activities) would translate into a 30 percent increase in the cost of inputs, due to higher prices and taxes.
122. Any sustainable solution must begin with the sensitization of decision makers, especially at the local level. The analysis showed an insufficient level of awareness among local and national decision makers on the scope and relevance of the informal waste sector, and of the adverse impacts of existing reforms. Morocco’s demonstrably high level of political attention to the themes of poverty and social exclusion offers an opportunity to remedy this situation. In addition to a range of options for the absorption of informal waste workers into the formal waste management system and the re- conversion of others into different activities, the analysis suggests a range of actions aimed at sensitizing decision makers and the private sector to the key issues. To this effect, the policy matrix includes the introduction of Environmental and Social Impact Assessment tools aimed at placing recognition of the role of the informal waste sector and the adverse impacts of landfill closing at the center of decision-making.
123. The private sector and civil society play a fundamental role in mitigating negative effects of landfill closings and in protecting and strengthening the economic role played by the informal waste sector. The PSIA suggests one mode of integration of informal waste workers into the operations of private solid waste contractors, based on recent successful experience with the reconversion of Rabat/Akreuch/Oum Azza landfill. The matrix thus requires the inclusion in the bidding documents and contracts for solid waste operators of provisions for the absorption of informal waste workers. Based on that same experience, the PSIA further outlines the role of Civil Society Organizations in facilitating the interface of informal waste workers with private sector actors, and suggesting a range of measures related to re-absorption, reconversion and schooling to be implemented in partnership with civil society organizations.
124. The prior action relating to the social sustainability dimension of the second operation has been achieved. This prior action – which consists in ensuring the extension of social inclusion programs to PNDM-supported disposal investments – is met by generalizing the inclusion of provisions on the management of the social aspects of SWM reform and investments in both model bidding documents and private-sector contracts. Contracts for new PNDM investment sites (Marrakesh, Beni Mellal, Benslimane, Khourigba) include clauses concerning the organization and re-absorbtion of informal waste pickers in the new investments. In the framework of a contract modification for the realization and management of the Casablanca landfill, (whose initial contract precedes the PNDM) the authorities have requested Government support in terms of financing and technical assistance for addressing the informal sector problem, which was included in the PNDM Action Plan of FY2010. For Agadir, the local authorities have requested Government assistance to develop a recycling center with a capacity of 130 workers. A feasibility study has been completed and an action plan is under preparation.
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125. The Government is concomitantly placing increasing emphasis on making sure that the local authorities take adverse negative impacts of the MSWM investments into account. For the first time, the joint Ministry of Interior/Environment PNDM Action Plan for 2010 considers ‘the social dimension of the PNDM’ as critical to the success of the reform whilst at the same time earmarking substantial resources (MAD 10.5 Million) to its resolution in two important investment sites (Casablanca and Agadir). Conscious that the sensitization and capacities of local authorities are key to the performance of the institutional architecture developed in the framework of the DPL1 and 2, the PNMD Management Unit within the Ministry of Interior is setting up a technical assistance program aimed at: a) supporting the development of a social action plan specific to Casablanca; b) strengthening the consideration of social aspects within Environmental Impact Assessment and Feasibility Studies; and c) supporting local authorities capacities to submit social action plans in the framework of their PNDM financing request.
126. A follow up PSIA financed by UNDP/Belgian Cooperation and fully owned by the Government is currently being finalized. The PSIA2 focuses on street picking in urban areas on households. Preliminary findings estimate the total population of informal street pickers in urban areas at 5300 nationwide. Regarding the socio-economic profile of urban waste pickers, and compared to the situation on landfills, the study notes the near-absence of women and a relative high presence of youth (13-18) but a relative absence of children on the collection segment of the chain. Roughly 30% of street pickers are illiterate. Revenues from street picking average around MAD 100 a day, with highs nearing MAD 200, placing informal wastepicking as a more profitable occupation than a range of formal jobs.
127. The study highlights the win-win of addressing waste picking in urban areas organically, as done with landfill wastepicking. First, it stresses the economic potential of the informal sector in terms of valorization and recycling (306000 Tons/year equal to 8,8% of total waste produced) and its increasing organization by formal ‘intermediaries’ (wholesalers and small recycling industries). Second, the switch to private sector operators (gestion deleguée) away from public operators (gestion directe) foreseen by the reform program is unlikely to have substantial negative impacts on informal street pickers: this group normally continues to operate as before, and a conflictual relationship between urban street pickers and private sector operators tends to develop due to the ‘interference’ of the former in collection activities. The study concludes by recommending two possible options to be piloted aiming at the incorporation of street pickers in formal collection activity: these options include: a) the organization of street pickers in cooperatives operating side by side private operators; and b) the organization of street pickers by a recycling firm in selective recycling at industrial level.
B. ENVIRONMENTAL ASPECTS
128. Expected to be available by board date, the final PSIA report will be presented to the steering committee composed of Ministry of Interior and Environment, as well as UNDP, GTZ and the World Bank. The PSIA component relating to the impact of the introduction of cost recovery fees has been dropped, due to delays in the KfW-financed study on local financing, and the elimination of related measures from the policy matrix.
129. An assessment of the potential impacts of supported policies on the environment and natural resources was carried out, and concluded that the measures supported by the proposed program are likely to have significant positive effects on the environmental. The implementation of the first stages of the reform program has allowed significant improvements in the country’s environmental regulatory and institutional framework. The State Secretariat (Water and Environment) within the Ministry of Energy, Water and Environment oversees a fully fledged environmental administration at the central level and recently at the regional level. The system is now essentially coherent and complete. The EIA process is being strengthened at the regional levels. To this effect, regional EIA committees have been established throughout the Kingdom and are operational. According to the EIA law, they review and approve impact on the environment in their regions, for projects which cost 40
less than MAD 200 million. The operationalization of these regional committees is likely to promote local participation in the EIA management system and reduce delays in the review and approval of impact assessments. As additional confirmation of the commitment of the country to promote environmental sustainability, it is noteworthy that on July 31, 2009, H.M. the King of Morocco requested the preparation of the Environment and Sustainable Development Charter which was formally finalized in April 2010, which establish clearly the principles of sustainability that should accompany the country development agenda. As a follow up to this initiative, the preparation of an environmental and sustainable development framework law will be launched in the short term, in order to translate into the law the principles adopted in the Charter.
130. Following the enacting of its first solid waste management law (Law 28-00) in December 2006, the environment protection law and the EIA law, Morocco has now almost completed the required legislation in the municipal solid waste sector namely by issuing, the decrees related to waste classification, technical specifications and standards for sanitary landfills and the circulars related to the establishment of regional commissions for the review and validation of provincial and prefectural MSW master plans.
131. In parallel to the DPL preparation, the World Bank has completed a safeguard diagnostic review (SDR) for the use of national country systems (UCS) for EIA in the water sector. Although the DPL should comply with OP 8.60 while not being subjected to safeguards requirements per the World Bank Safeguards Policies, it was found useful and appropriate to initiate early in 2008 an analysis of the environmental and social implication of the policy reforms being supported by the DPL under the format of a SDR, which is the tool used for assessing the equivalence and acceptability of the country systems compared, in the case of environmental assessment, to a set of principles defined in the Operational Policy 4.00.
132. An SDR process has been initiated for the waste sector in 2008 and will be completed as part of the CDM program to be implemented by the FEC. The initial findings of the SDR determined that the Moroccan EIA laws and regulations are generally equivalent to the Objectives and Operational Principles of OP 4.00 and that the application of these laws and regulations are also in conformity with this policy in the waste sector. Some initial gaps related in particular to public consultation have since then been bridged which allowed the successful completion of the SDR in the water sector mentioned above. The issue of capacity within the new institutional set-up has also been raised as a potential gap but the Government has taken credible steps to fill that gap by reiterating its commitment through the recently adopted Environment Charter. A detailed and comprehensive manual on EIA review and approval was issued to the Regional Committees for use and a comprehensive training program is being implemented with GTZ support.
133. In particular, further areas for improvement would be the following: (i) increase the availability of technical staff and resources for the regional EIA committees to review EIA reports, (ii) systematize public consultation in accordance with the EIA law # 12-03 and disclose information on EIA reports, (iii) ensure the systematic monitoring and enforcement of EIA mitigating measures at the national and local levels
134. Potential positive effects: Main positive effects include (i) improvements in public health through proper collection, transport and disposal of municipal solid waste; (ii) decreased potential contamination of groundwater (aquifer) and surface contamination from waste leachate; (iii) pollution reduction from on site burning of waste; (iv) improved waste management with a special focus on waste treatment and disposal in sanitary landfills; (v) protection of the global environment though methane capture and (vi) empowerment of municipalities as implementers of integrated municipal solid waste management.
135. Furthermore, the positive contribution of the proposed operation is the mainstreaming of environment and social dimension into the solid waste management sector as well as mainstreaming 41
the global environment into the local environment through the operationalization of the Clean Development Mechanism in the waste sector. More specifically, the third pillar under the DPL is exclusively an environment and social related policy area. It has established standard TORs for EIAs that will be used by all operators, and requires that the environment and social mitigating plans are included into the solid waste management contracts and will also ensure that the social programs for waste pickers are being implemented in accordance with the PSIA.
136. The program is also supporting the development of the first program of CDM activities in solid waste sector in Morocco. In addition to significantly reducing GHG emissions compared to the emissions that would occur in the absence of the proposed activities and contributing to Morocco’s climate change mitigation efforts, the program will generate local environmental and socio-economic benefits through the promotion of an integrated MSW management approach. In terms of environmental benefits, the destruction of landfill gas will contribute to (i) the reduction of local air pollution in and around landfill sites, (ii) the control of safety hazards and public health risks associated with municipal waste disposal in open and uncontrolled dumps, (iii) the minimization of LFG migration and associated risks of fires and explosions in landfill sites’ neighboring areas, and (iv) the displacement of fossil-fuel based electricity generation by a renewable source, i.e., biogas from municipal waste. The socio-economic benefits of the program are associated with (i) an improvement of the quality of life of the communities living close to the landfill sites, (ii) capacity building for the development of clean technology projects in Morocco, (iii) greater awareness in sustainable development practices, and (iv) creation of short and long term employment opportunities to install, operate and maintain LFG systems.
137. Potential negative effects: The above-mentioned environmental and social benefits of these DPL- supported reforms are expected to overwhelmingly exceed potential negative effects. These effects are not expected to be substantial, but would be related to the risks of inappropriate operation of waste facilities supported under the PNDM. For example, the GoM is aware of potential negative effects and is working on measures and actions to mitigate them. The GoM has established specific criteria for providing financial incentives to the municipalities. These incentives are based on the principles of equity and transparency for environment and social protection. In order to benefit from the financial incentives, each municipality will: a) prepare an EIA in accordance with the standard TORs; b) agree to close the illegal dumps upon the beginning of operation of the landfill, and; c) implement the social measures for waste pickers. Furthermore, the DPL supports the financing by the Government of training for EIA, review and approval, monitoring and follow up of environment and social mitigating measures. On the basis of these measures, the assessment concluded that GoM demonstrates that potential negative effects will be addressed in a satisfactory manner.
C. IMPLEMENTATION, MONITORING, AND EVALUATION
138. Implementation and coordination responsibilities: The same arrangements that have been put in place for the first operation will apply for the proposed operation, including the following implementation and coordination mechanisms:
The Steering Committee for the Municipal Solid Waste Sector DPL will continue to oversee loan coordination at the ministerial level. The National Commission for the PNDM, will be responsible for the coordination, review, and evaluation of the solid waste sector reform program and the PNDM. The National Commission is led by the Secretary of State in charge of Water and Environment and includes representatives of the MoF, MoI, SWE, the MAEG, and the FEC. The National Commission will in particular ensure progress reporting and schedule management, action documentation, inter ministerial coordination, and proactive corrective action on non-progress actions. The National Commission will also be responsible for communication with the Bank supervision team.
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The Program Management Unit established within the DGCL will be in charge of day-to-day management of the PNDM.
139. Supervision by the Bank: Supervision missions will allow the Bank to continue providing policy advice and technical assistance to the institutions involved in the implementation of the sector’s program of reform. An ICR will be prepared six months after the closing date of the proposed operation. The closing date of the proposed date is June 30, 2011.
D. FIDUCIARY ASPECTS
140. Financial Management Diagnostics and Risk Rating: The Morocco’s public finance system is governed by a well-developed legal and regulatory framework that provides assurance in terms of reliability and transparency. The Morocco system is based on the principle of segregation of responsibilities and separation of the roles between the payment authorizer (ordonnateur) and public accountant, and on the principles governing ex ante expenditure control and internal and external audits. Under the DPL instrument, used to execute the Second Municipal Solid Waste Sector Program, the Government financial management system including treasury and controls will be relied upon to channel the loan proceeds to the budget system and thereafter to the final beneficiaries. The overall fiduciary risk under this operation is rated as “Low” based on the review conducted during the preparation of the proposed DPL.10 The rating is due in large part to the steady and continued Government efforts and major reforms implemented to modernize and improve the efficiency and transparency of the public sector, including the public financial management (PFM) system.
141. In response to a Government request, the Bank prepared and issued a 2007 Country Financial Accountability Assessment (CFAA), following the 2003 CFAA. The experience gained by the Bank in Morocco and the key findings of the 2007 CFAA report reflected that Moroccan public finance system is governed by a well-developed legal and regulatory framework, and generally provides assurance in terms of reliability and transparency. Despite the low fiduciary risk identified by the CFAA, the report did recommend improvements in a number of areas; including: (i) reducing the delays to produce the year-end government financial statements and accounts, as well as reducing the time frame needed by the Court of Accounts, being the government external auditor, to audit the government financial statements; (ii) further simplification of the priori internal controls while continue the strengthening of the ex-post controls and of the internal audit already in place; and (iii) continuing the automation of the public financial system through further deployment of the management information system.
142. Looking forward, after the 2007 CFAA, the Government aimed at sustaining implementation progress in the PFM reforms agenda especially in areas with importance in the fiduciary context towards increased budget transparency. Progress in implementing the Public Administration Reform Program has been broadly on track, surpassing plans in certain areas while being slow in other areas. Hence, in the area of budget management, the Government has: (i) introduced budget flexibility norms that have facilitated transfers among resources among 30 ministries that represent above 90 percent of non-wage expenditures; (ii) completed aggregate and sector Medium-Term Expenditure Frameworks (MTEFs) in 12 ministries, with generalization of the MTEF to the other ministries being in progress; (iii) introduced performance budgeting (with explicit performance indicators) in 22 ministries, with extension to other ministries under way; and (iv) completed a study to reform control of public expenditure, which has led to the elimination of priori control duplications and the merger of the two directorates involved, thereby contributing to reducing paperwork and time by
10 Among the background documents reviewed were the 2009 PEFA; The World Bank 2007 CFAA and the Audit reports of the Central Bank of Morocco. 43
about half and making public expenditure processing more efficient. The Government is already engaged in all of the above areas and intends to enhance budget transparency and anti-corruption policies, while improving accountability in delivering services, through the introduction of e- government and further simplification of procedures.
143. Another important achievement under the PFM reforms relates to the timely preparation and submission to the Parliament of the Annual Budget Execution Reports (ABER). Preparation delays have been significantly reduced during the last few years and all the overdue ABERs (those of 2003- 2006) have been remitted to Parliament by the end of 2008. While the 2007 and 2008 ABERs were finalized and submitted to parliament by end of the FY 2009 rendering the accounts up to date.
144. Moreover, the recent diagnostic completed in 2009 under the Public Expenditure and Financial Accountability Framework (PEFA) allowed for a detailed assessment of the progress and achievements in the performance of the Moroccan public financial management system. The purpose of using the PEFA tool was to measure Morocco’s PFM performance during the 2005-2007 period against international standards in five Public Financial Management (PFM) areas: budget credibility, budget comprehensiveness and transparency, predictability and control in budget execution, accounting recording and reporting, external scrutiny and audit, and also, donor practices regarding the predictability of international aid funds and use of national procurement procedures to manage them. The PEFA findings provide an overall positive assessment of the PFM system in Morocco. The result of the analysis contributed to the Government’s reform process by providing information on the extent to which reforms are yielding improved performance. The results based on the PEFA ratings indicate that Morocco has an overall credible, comprehensive, and transparent budget.
145. The findings reflected that Substantial progress has been made in the regulation, administration, and management of taxes and customs duties. Fiscal obligations have been clearly codified and explained. However there is still a need to strengthen computer capability in the tax offices and at customs, and to upgrade the hardware in order to facilitate monitoring and control. Significant improvements were realized during the period reviewed in the implementation, frequency, and methods for internal audit. Complete, good quality budget execution reports are regularly produced; however while reduced in 2008, delays remain in the preparation of annual financial statements and accounting data categories for recording State assets and liabilities. The General Auditor’s Office (Cour des Comptes) is fully engaged in its role as external auditor of the management and use of public funds. The frequency and scope of its audits are steadily increasing, follow-up of its recommendations still needs improvement.
146. There are nevertheless areas which require dedicated attention. These include: (i) improvement of the budget classification, since despite the level of detail, accuracy, and reliability, it does not yet allow for reliable direct tracking of program-related spending being financed under priority programs; (ii) progress in systematic recording of procurement complaints and the following on such complaints; (iii) strengthen internal audits as current practice leads to scattered information and limited transparency as the reports of the Inspector General (IGF) and the ministerial inspectors general (IGM) are not made public; and (iv) improvement of the external audit as the Court of Accounts’ external audit reports are submitted for review with noticeable delays. Furthermore as of 2007 none of the Court’s observations in its activity or audit reports seems to have led to any investigative hearings (auditions approfondies) before Parliament who has the authority to question the ministers or administrators concerned.
147. Funds Flow. The proposed loan will follow the Bank’s disbursement procedures for development policy support. Once the loan is approved by the World Bank’s board and becomes effective, the proceeds of the loan will be disbursed in compliance with the stipulated release conditions as defined in the Development Policy Loan Agreement and in a single installment.
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148. Morocco has had no safeguard assessment, related to the foreign exchange control environment at the Central bank, by the IMF. The Government budget is comprehensive, unified and subject to centralized treasury account. Cash flow and debt are well managed by the Treasury Department of the Ministry of Finance under generally satisfactory conditions. Moreover, the Central Bank is audited on yearly basis with the audit report being disclosed publicly. These audits and the auditor opinions did not reflect any weaknesses in the control environment and the auditor’s opinions were issued with no qualifications.
149. To address the fiduciary risks in the foreign exchange control environment, Loan proceeds will be deposited in a government dedicated account at the Central Bank and the equivalent of the funds in local currency will be transferred to the Treasury current account being the government budget account. The Ministry of Finance will then furnish to the Bank a confirmation of this transfer and advising that the total sum of the loan has been received.
E. DISBURSEMENT AND AUDITING
150. The loan proceeds will be deposited by the International Bank of Reconstruction and Development (IBRD) in a dedicated account opened by the Borrower and acceptable to the Bank at the Central Bank of Morocco (Bank Al Maghrib), upon submission of a signed withdrawal application. The Borrower should ensure that upon the deposit of loan proceeds into said account, an equivalent amount, in the local currency, is credited to the treasury current account at the Central Bank.
151. The Borrower will report, within a week, to the Bank on the amounts deposited in the foreign currency account and credited to the budget management system. If the proceeds of the loan are used for ineligible purposes as defined in the Development Loan Agreement, IBRD will require the Borrower to promptly upon notice refund an amount equal to the amount of said payment to IBRD. Amounts refunded to the Bank upon such request shall be cancelled. The loan proceeds will be administered by the Ministry of Economy and Finance (MoEF).
CBM MOEF Budget World Bank USD MD Morocco PFM Dedicated Budget Account System Bank Account at - CBM
152. Auditing. Although an audit of the use of the funds may not be required, IBRD reserves the right to ask for a transaction audit. This audit, when asked for, will cover the accuracy of the transactions of the dedicated account, including accuracy of exchange rate conversions; confirming that the dedicated account was used only for the purposes of the operation where no other amounts have been deposited into the account. Also the auditor will have to obtain confirmation from corresponding bank(s) involved in the funds flow regarding the transaction. The time period for submission of the audit report to the Bank is 6 months from the date a request for such audit is issued.
F. RISK AND RISK MITIGATION
153. The risk environment is substantially the same as for the 2009 operation, for which 3 main risks were identified:
154. Commitments to the reform and implementation capacity risks. The quality of the Bank-client dialogue during 2009-10 and progress made towards the prior actions for the second operation 45
indicate that reform commitment remains robust. However, the spotlight is moving onto implementation capacity as a potential risk to the achievement of the national solid waste management program’s objectives. More specifically, implementation progress will depend on the systematization of procedures for the allocation of financial support to municipalities, the capacity of municipalities to manage investments and service outsourcing (and in particular the capacity of medium-sized and smaller municipalities), and the central government’s monitoring arrangements. This potential risk is mitigated by Government’s strong commitment to (i) scale up and mainstream the solid waste capacity building activities within the Government program to support decentralization at municipal level, and (ii) mobilize appropriate financial and human resources to support the management of the program at national and local levels.
155. Social acceptance risk, namely the risk that the reforms will be unacceptable to the general public and to wastepickers. So far the public profile of the solid waste reforms has been fairly low. However, there remains a risk of an adverse reaction to the transfer of collection service employees from the public to the private sector and to the future introduction of new sources of municipal revenue. Early signs indicate that pilot projects implemented so far for the re-employment of waste pickers are proving successful. This potential risk is mitigated through the Government’s decision to create a specific line item within the national solid waste program’s 2010 budget to expand these pilots and the mandatory requirement for operators to cover social aspects in future contracts.
156. The possibility of municipalities’ resisting the solid waste reforms was identified as a minor risk for the 2009 operation initially, to be mitigated by the allocation of targeted financial support. However, concerns remain that the incremental cost of the required investments may prove too high for some municipalities. For example, the annualized payments from the Solid Waste Support Program to municipalities may not be enough to finance up-front capital investment in improved waste sites and the financial implications for medium-sized and smaller municipalities may prove particularly daunting. The magnitude of this potential risk is being addressed through the ongoing KFW funded study on institutional and financial aspects, and the government is fully committed to tailor its financial support to small and poor local governments if needed. In the longer term, the progressive shift of financial responsibility from government budgets to municipal taxpayers may weaken municipalities’ commitment to improved solid waste management practices. This potential risk is mitigated by the Government’s strong commitment to proceed with the envisaged municipal finance reforms. Efforts are underway from both cost reduction and revenue generation perspectives ranging from short to medium and long term time frames. Inter-municipal cooperation and regionalization of solid waste disposal facilities will also help especially small municipalities to take advantage of the significant economies of scale in waste management.
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ANNEX 1: LETTER OF SECTOR DEVELOPMENT POLICY
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TRANSLATED VERSION
Kingdom of Morocco Office of the Prime Minister
November 15, 2010
Mr. Robert B. Zoellick President of the World Bank 1818 H Street, N.W. Washington, DC U.S.A.
Subject: Letter of Development Policy related to the Municipal Solid Waste Sector in Morocco
Mr. President:
I am pleased to reiterate herein the terms of the letter dated February 12, 2009, informing you of the municipal solid waste sector reform program, one of the priorities of the Government of Morocco, as well as the measures adopted to ensure its implementation with technical and financial assistance from the World Bank and other donors.
Indeed, the Government of Morocco has taken the initiative to outline and implement a program based on clear and ambitious goals, with the aim of eliminating the lag noted in this sector relative to the average in countries with a comparable level of economic and social development. This initiative is based on the objective expressed on many occasions by His Majesty King Mohammed VI to ensure that Morocco’s environment is healthy and sustainable. This program, the preparatory phase of which was launched in 2006, is aimed at improving governance in the waste sector, enhancing the financial sustainability of municipal solid waste management, and incorporating the social and environmental considerations into the planning and implementation of projects intended to upgrade the sector. The specific objective is to improve the financial, environmental, and social performance of Morocco’s municipal solid waste sector.
This program is designed and intended to meet the following needs, among others:
Achieving the professionalization of the sector, one of the strategic thrusts, with the aim of enhancing the quality and efficiency of the service;
Clarifying rules and making actors accountable in order to promote the partnership between the central government and local governments and establish a clear technical and managerial frame of reference;
Establishing the framework for the reform program and setting forth targeted and rigorous incentives to enable the State to provide effective support to the sector;
Reducing market risks and guaranteeing the quality, efficiency, and sustainability of the service by improving, inter alia, public-private partnerships (PPPs) in this area, including procurement procedures and documents and building the capacity of local governments to better manage the private sector participation (PSP) process; and
Improving the environmental and social performance of the sector.
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The Ministries of the Environment and Interior are jointly supervising, coordinating, and monitoring the implementation of this program.
I. OVERVIEW OF THE SITUATION IN THE MUNICIPAL SOLID WASTE SECTOR AND MAIN THRUSTS OF THE PROGRAM
In 2008, Morocco produced approximately 5 million metric tons of municipal solid waste per year in urban areas and will produce up to 6.2 million metric tons by 2020. In 2008, only close to 70 percent of waste produced in urban centers was collected and less than 10 percent of the waste collected was disposed of in sanitary landfills. A large percentage of this waste ended up in open dumpsites.
The situation created by the existence of more than 3,500 waste pickers at open dumpsites, some of whom are children, also made intervention by the public authorities urgent.
Moreover, deficiencies in the management of this sector were largely attributable to institutional, legal, managerial, and financial constraints, in particular: A deficient legal and institutional framework that impedes effective governance of the sector; Services that are not very cost effective and uncertainty surrounding the long-term financial viability of the sector; and An urgent need for integrated and modernized solid waste management systems in order to mitigate the economic, environmental, and social effects of the current systems.
To address these deficiencies, the Government has, since the launching of the sector reform program, undertaken a series of actions aimed at developing and upgrading the municipal solid waste sector, including:
The publication in December 2006 of Law 28-00 on waste management. This law reflects the clear political will to improve waste management in general and solid waste management in particular, by: Affirming the primary responsibility of municipalities for municipal solid waste management; Introducing integrated solid waste management planning tools at the national, regional, and local levels; Imposing on municipalities the obligation to obtain the resources and infrastructure for waste disposal, treatment, recovery, and recycling; and Introducing a new cost recovery instrument for waste services, including the possibility of establishing a solid waste management (SWM) fee.
The drafting in 2007 of a National Municipal Solid Waste Program [PNDM]. This program is aimed at upgrading municipal solid waste management by 2021. The total cost of the program is estimated at DH 37 billion (approximately US$4 billion) over a 15-year period and covers all segments of the chain— from collection to treatment. More specifically, the program is aimed at assisting urban municipalities with: Professionalizing solid waste services; Improving access to collection services by increasing the percentage of waste collected in urban areas to 90 percent by 2015 and 100 percent by 2020; Eliminating the lag noted in the treatment of solid waste by disposing of all municipal solid waste in sanitary landfills by 2020 (one landfill at most per province) and increasing the recycling rate to 20 percent by 2015; 59
Closing/rehabilitating 300 existing open dumpsites in parallel with the construction of new sanitary landfills; and Building awareness and providing training to the actors affected by the municipal solid waste problem.
The October 2007 government declaration placed the problem of solid waste management, and in particular municipal solid waste treatment, among the priorities requiring government action both in terms of assistance to local governments and environmental protection and sustainable development. This political will was reflected in the establishment in the 2007 budget law of an earmarked account called the National Environment Fund [Fonds National pour la Protection et la mise en valeur de l’Environnement]. Its “use of funds program” [programme d’emploi] includes a line item pertaining to the “Contribution to the National Municipal Solid Waste Program.” An envelope of DH 300 million was allocated for this purpose in 2008, with DH 100 million coming from the general budget and DH 200 million, from the VAT program.
At the same time, at the local government level, a commendable effort was made to improve the professionalization of municipal solid waste collection services. Most large and mid-sized towns, in particular Rabat, Casablanca, and Tangiers, have carried out projects to professionalize collection services. In 2008, as a result of work already done, approximately two-thirds of collection services were provided by private operators hired by municipalities through delegated management contracts [contrats de gestion déléguée]. Annual expenditure, at the national level, for collection and clean-up services by private operators in urban municipalities stood at approximately DH 1.2 billion in 2008.
II. PROGRESS MADE WITH ACTIONS TAKEN IN THE CONTEXT OF THE DPL Since the start of the PNDM in 2008, significant progress has been registered, with the support of the World Bank through the 2009 First Municipal Solid Waste Sector Development Policy Loan (DPL1) and the second DPL, discussed in this Letter. This progress, the focus of which is governance issues in the municipal solid waste sector, the sustainability of municipal solid waste management services, and environmental and social issues, is described in the sections below.
A. Governance of the Municipal Solid Waste Sector
1. Promoting Consistency and Transparency in Government Actions in the Municipal Solid Waste Management Sector In order to ensure the sectoral planning and coordination of reforms, the monitoring and evaluation of the status of PNDM execution, and the status of the reform program as a whole, a National Commission for the National Municipal Solid Waste Program (CN-PNDM) was established in January 2009. This Commission outlined and adopted eligibility and allocation criteria for government subsidies, with the aim of supporting solid waste management operations and investments in this sector, in the context of State support for local governments to upgrade their municipal solid waste management systems and to facilitate achievement of the objectives of Law 28-00. 2. Progress Made with the Application of Law 28-00
In order to adhere to the principle of the deconcentration of waste management enshrined in Law 28-00 and establish a consistent technical frame of reference, two decrees adopted in January and July 2010,
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respectively, set forth the procedures for elaborating a MSW provincial or prefectural master plan, along with the administrative procedures and technical standards for MSW landfilling.
Based on the same approach, provincial or prefectural commissions responsible for the review and validation of master plans were created in 17 prefectures and provinces (Tétouan, Mohammedia, Kénitra, Chichaoua, Khouribga, Al Hoceima, Berkane, Essaouira, Tiznit, Taroudant, Taourirt and Jerada, Sidi Ifni, Safi, Taounate, Oujda, and Larache).
3. Improving the Transparency and Competitiveness of Private Sector Participation
In the context of application of Law 54-05 regarding delegated management, standard bidding documents including model contracts for the delegated management of collection/street cleaning services and disposal of waste were prepared. These bidding documents reflect international good practices in the areas of procurement, balanced contractual relations, and consideration of social issues. These model documents, which can be obtained on the website of the Official Gazette of Local Governments [Bulletin officiel des Collectivités Locales] (www.bocl.gov.ma) and are permanently available on the website of the State Secretariat for Water and Environment (www.minenv.gov.ma), were transmitted to local governments for immediate application by means of a circular issued by the Ministry of Interior.
4. Encouraging Public Involvement and Improving Local Decision Making
In recognition of the importance of communication in ensuring ownership and changes in the behavior of the actors concerned, a national communication and public awareness program was developed, with a budget allocation of DH 3 million being made in 2010 for implementation of this program.
B. Sustainability of Solid Waste Management Services
1. Providing Assistance to Local Governments to Improve the Financial Equilibrium of the Service
The problem of the financial sustainability of the waste management service is central to the reform program. To this end, the Government has started to implement a plan targeting solid waste management sustainability in the short, medium, and long term. This plan revolves around the following measures:
(a) The Government has pledged to implement a targeted financial incentive mechanism intended to help municipalities cope, in the short term, with the additional expenses associated with the immediate requirements to be met under the PNDM. Consequently, adequate funding was allocated to PNDM financing, in the amount of DH 300 million in 2008, DH 400 million in 2009, DH 532 million in 2010. The direct contribution of the Ministry of Interior through the VAT fund should be added to this envelope.
(b) Increasing the tax revenue of municipalities and thus their capacity to meet the cost of improved waste management
As part of the reform of the local tax system (Law 47-06), the Government organized the municipal tax administration into three units (tax base, oversight, and collection), which should more likely ensure that municipalities gain a better understanding of the local tax potential, and thus improve productivity of the tax system in municipalities and their financial capacity.
Moreover, it is especially important to note that the Local Tax Directorate of the General Treasury, which is tasked with collecting local taxes determined by the State (the municipal services tax, the housing tax, and business taxes), introduced modernization measures aimed at increasing the collection rate of these taxes. An effort to ensure the general application and use of modern data processing techniques (mass mailing, an increase in the number of available
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payment methods, and the possibility of direct deductions from bank accounts) has already helped increase collection rates, which currently stand at 80 percent of billed amounts and pertain to 66 percent of taxpayers, thus contributing to the sharp increase in own resources for local governments, as illustrated by the increase in revenue generated from the municipal services tax, which jumped from DH 1.4 billion in 2008 to DH 3.4 billion in 2010 (projection).
(c) A study on the financial sustainability of municipal waste management is under way. This study is expected to develop tools for the application of Article 23 of Law 28-00 on solid waste fees. More generally, this study seeks to identify ways to strengthen the capacity of municipalities to meet the costs associated with the modernization of waste management services. In light of the importance of this study, owing in particular to its financial and institutional implications, the various relevant departments will be involved in the validation of its findings and recommendations at all stages of the study, with a view to prompt application.
(d) In order to help local governments mobilize additional funds from the international carbon market, the Fonds d’Equipement Communal [FEC] was selected as the coordination entity for the CDM program of activities in the solid waste sector. In this context, the FEC prepared an innovative program of activities for carbon finance. This program will help reduce greenhouse gas emissions through biogas capture in public landfills, and through flaring or recycling of this biogas to produce electric energy, while generating carbon credits that can be sold on the international market, under the Clean Development Mechanism (CDM). The descriptive documents relating to the program of activities, the first CDM project for the Oum Azza landfill, and the CDM project for the Oujda landfill were:
Developed in accordance with the procedures and modalities established by the CDM Executive Board; Approved by the Designated National Authority (DNA); and Published by the validator on the website of the United Nations Framework Convention on Climate Change.
The validation process for the program of activities and projects for the CDM was launched in September 2010.
2. Strengthening of the Technical Capacities of Local Governments to Improve Solid Waste Management
The Government mobilized national and international actors to implement a capacity-building program for local governments. In this context, training sessions on landfill management were organized with German Cooperation in Tangiers and Tétouan.
A training program related to the environmental considerations was also launched in October 2010 with German Cooperation (GTZ) by the department responsible for the environment. The first phase of this three-year program (2011–2013) entails capacity building of local governments, enhancing the skills of actors responsible for waste management, as well as the development of a national strategy for basic and continuing training in environmental occupations in general, and integrated waste management in particular. An international expert was hired by the GTZ to develop this program and draft a specific action plan in consultation with all the relevant actors, particularly the local governments.
In addition, the PNDM Project Management Unit (PMU), which was established within the Ministry of Interior (DEA), is responsible for identifying and programming projects, and for the monitoring, post evaluation, and classification of these projects, taking into account eligibility criteria selected by the
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Moroccan party and the World Bank, as well as financial sustainability mechanisms for local governments and their associated groups.
The PMU assists local governments with the steps to prepare bidding documents for professionalizing the management of their services, in particular the development of preliminary studies, consultation regulations, and standard technical specifications. In 2010, the PMU provided technical support to the authorities in Mehdia, Ouled Frej, and Bouznika, the Albay’A group in Nouacer, and the neighboring municipalities of Imntanout, Taourirt, Chichaoua, Benslimane, Chefchaouen, Marrakech, Mohammedia, Nador, Loualidia, Khemisset, Tiflet, Sidi Allal El Bahraoui, and Rommani.
With a view to providing assistance to the PMU and local governments, a bid for the recruitment of two experts for the PMU and four experts for the local governments was launched in September 2010. These programs supplement the multiyear training for trainers program launched by the Ministry of Interior for local governments, to improve waste management services training in municipalities.
C. Environmental and Social Considerations
1. Upgrading and Operationalizing the EIA System at the National and Regional Levels The Government has introduced a raft of preventive and corrective measures to mitigate the negative effects on the environment and on socioeconomic development caused by current waste disposal practices, namely:
The publication of two decrees pertaining to (i) the responsibilities and functioning of the Environmental Impact Assessment National Committee and Regional Committees, and (ii) the methods for organizing and conducting the public survey related to projects requiring an EIA and its implementing order; and A joint circular issued in March 2009 by the Minister of Interior and the Secretary of State for Water and Environment to establish EIA regional committees, with signing authority delegated to the Wali. A total of 16 regional committees were established and are in operation. They are carrying out their responsibilities, particularly with respect to the review and approval of EIAs in their regions, for projects costing under DH 200 million.
2. Improving the Environmental Performance in the Solid Waste Sector
The quantitative objectives of the PNDM for 2012—at least 30 percent of collected waste disposed of in sanitary landfills and the closing of at least eight open dumpsites—are well on the way to being achieved in 2010 and, in particular, open dumpsites have already been rehabilitated in the municipalities of Fez, Tétouan, Oujda, Essaouira, Témara, El Jadida, Mohammedia, Benslimane, and Bouznika.
The improvement of the EIA system also facilitated the acceptance of several sanitary landfill projects. It bears noting at this juncture that the improvement of this system provided benefits that went well beyond the solid waste sector and contributed in particular to the preparation of the first World Bank-financed project in Morocco based on the Use of Country System (Oum-Rbiaa sanitation project).
3. Improving the Social Performance of the Solid Waste Sector
With a view to improving the social performance of the solid waste sector, the CN-PNDM defined and adopted principles for the inclusion of social considerations, which extends to planning and decision- making mechanisms, accountability of municipalities or groups of municipalities, accountability of operators, a participatory approach, and awareness building and training related to the social aspects of the PNDM.
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The social integration of waste pickers is currently stipulated in agreements relating to the implementation of the PNDM. In addition, clauses on the social aspects have been incorporated into contracts for landfill projects in Agadir and Casablanca. Beneficiary waste pickers could number between 100 and 150 by 2010.
Drawing on the pilot experience of the Oum Azza landfill, whose waste pickers are benefiting from the social inclusion initiative, similar initiatives are being developed in the municipalities of Tangiers, Agadir, and Casablanca.
III. PROGRESS MADE TO DATE UNDER THE DPL1 AND THE DPL2 AND PROSPECTS
The program has been successfully implemented and, in a number of cases, targets have even been exceeded, judging by the level attained by the most important indicators, namely:
Strong ownership by local governments of the PNDM objectives as 70 professionalization projects have been launched since 2008; Implementation of an incentive mechanism to support the process to modernize the municipal solid waste management system—DH 532 million in 2010. Some 77 local governments have received support since the launch of the PNDM; At the same time, the reform of the tax system led to a sharp increase in municipal tax revenues, from DH 1.4 billion in 2008 to DH 2.6 billion in 2010 for urban municipalities; An extremely positive impact on the market; service is currently being provided by private firms (collection/clean-up) to 60 percent of the urban population, with a marked improvement in service quality; Contracts signed for the construction of sanitary landfills cover over 50 percent of the urban population; A decentralized and operational EIA system, with 20 EIAs reviewed in Wilayas.
The Government is nevertheless cognizant of the fact that achievement of the final objectives of this program is a long-haul endeavor, and remains fully committed to the attainment of these long-term objectives. In order to meet the 2020 targets (see Section 1 above), the remaining areas in need of strengthening are as follows:
Consolidation of the achievements of the reform process at the national level through greater ownership, at the local level, in the areas of governance of the solid waste sector, the sustainability of this sector, and the inclusion of social and environmental considerations in MSWM projects; The sustainability of the achievements of the reform of the solid waste sector through communication and training in particular; The evaluation and improvement of the outcomes of the reform of the solid waste sector during the course of its implementation, while harmonizing it with the other works projects related to environmental protection; The introduction of new instruments to ensure the long-term sustainability of the sector and improve financial management by local governments; The strengthening of the integrated municipal solid waste management approach through the development of waste sorting and valorization activities. This point was raised in particular during the consultation workshop on the Program, which was held in Morocco in September 2010; and The strengthening of supervision, and oversight of quality and compliance with environmental and social standards.
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In light of the foregoing and of the role played by the World Bank in the preparation and implementation of the PNDM, the Government attaches the utmost importance to continued technical and financial support from the World Bank for this Program, and to its role as a facilitator of support from other donors. This assistance is also being requested beyond DPL2, the subject of this Development Policy Letter for this Program.
I wish to express my gratitude to you for your support with the implementation of this important program and for the interest shown by the World Bank in the development of this sector.
Very truly yours,
Minister Delegate to the Prime Minister In Charge of Economic and General Affairs /s/ Nizar Baraka
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ANNEX 2: THE GOVERNMENT’S PROGRAM FOR THE REFORM OF THE MUNICIPAL SOLID WASTE SECTOR
1. Recognizing the urgent need for leadership and partnership in addressing the very serious issues in municipal solid waste management, the Government has begun to take vigorous actions toward the development and reform of the sector. Extensive consultations, conducted by a steering committee led by the Ministry of General Economic Affairs (Ministère des Affaires Economiques et Génerales – MAEG) involving key stakeholders, i.e., Ministry of Economy and Finance - MoEF, MoI, and Secretariat of State in charge of Water and Environment -SWE, and supported by the Bank and other donors, have enabled the Government of Morocco (GoM) to initiate the development of a comprehensive municipal solid waste sector reform program. This consultation and dialogue over the last two years, with strong commitment and ownership of Moroccan stakeholders, has led to the elaboration of the program detailed in the sector development policy letter, and substantially outlined and discussed in the following paragraphs.
2. The Government initiated the solid waste reform program in 2006 with the enactment of the first Solid Waste Law 28-00 that established the fundamental principles and key rules that will govern the management of solid waste in Morocco. This formed the foundation for Moroccan policy for the sector with two key objectives: to establish integrated and affordable solid waste management systems and to mitigate negative impacts of the sector on public health and the environment. More specifically, this law (i) establishes the institutional framework for SWM; (ii) requires the development of solid waste master plans at the national, regional, and municipal level; (iii) establishes cost recovery principles, including the “polluter pays” principle and user fees (redevances); (iv) introduces sanitary landfills as the standard for final waste disposal and requiring regulations establishing landfill norms and standards; (v) introduces regulations for hazardous waste management; and (vi) establishes a system to monitor compliance with the law.
3. The Government also prepared and approved a national municipal solid waste management program (Programme National de Déchets Ménagers et Assimilés – PNDM). The PNDM is the result of strong inter-sectoral collaboration and dialogue between the key ministries concerned. A 15- year, 3-phase program launched in 2008, it sets out objectives for the modernization of SWM, in particular, expanding and professionalizing collection services, modernizing disposal practices and promoting recycling activities. It includes specific targets for the municipal waste sector, including: collection coverage increasing from 70 percent to 90 percent by 2021; 100 percent use of sanitary landfills in urban areas by 2021; the closure and/or rehabilitation of 300 open dumps; and sorting of 20 percent of recyclable materials.
4. The overall reform program builds on the momentum gained through the introduction of the above two government actions. It focuses over the next four years on three areas of reform:
(i) Improving governance of the sector through additional legal, regulatory, and institutional measures designed to establish a clear framework for the sector, and eliminating overlap and/or gaps in the policy-making, regulatory, and operational structure;
(ii) Improving the sustainability of the sector through the introduction of financial mechanisms and incentives for municipalities to improve their SWM systems; and
(iii) Mainstreaming social and environmental considerations into the planning, implementation, and operations of solid waste services and investments.
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REFORM AREA 1 – GOVERNANCE OF THE MUNICIPAL SOLID WASTE SECTOR
5. Reform measures in this area are intended to address fragmentation and legacies that affect policymaking and effective implementation. Policy actions aim at (i) policy planning and coordination in the sector through the establishment of the National Commission (Commission Nationale – CN) as a policy and strategic planning coordination body for the PNDM; (ii) defining the eligibility and allocation criteria for government subsidies to support municipal SWM operations and investments in an equitable, transparent, and cost-effective manner; (iii) strengthening the regulatory framework through the enactment of executive regulations for SWM planning and for standard and norms for disposal facilities; (iv) improving competition, transparency, and accountability of SWM Private Sector Participation (PSP) schemes by improving the quality of standard bidding and contracting procedures and strengthening the capacity of respective local governments; and (v) developing appropriate communications and public awareness programs. Responsibility for the implementation of these reforms rests primarily with the MoI and the SWE, with the CN serving as the main coordination entity. Specific actions are presented below:
GoM actions program for reform area 1
Establish a national coordination commission (CN-PNDM). The CN will be responsible for sector planning and reform coordination, as well as for monitoring, evaluating, and reporting on implementation and results of the PNDM and the overall reform program. The CN will be chaired by the Secretary of State in charge of Water and Environment and will include stakeholders representing the MoI, MoEF, MAEG, and the Fonds d’Equipement Communal (FEC). The establishment of the CN-PNDM was announced by a circular letter issued by the Secretary of State in charge of Water and Environment and will meet at least twice a year.
Defining the eligibility and Box 1: Government target financial support to municipalities in allocation criteria for upgrading their municipal solid waste systems government financial support for The Government has decided to support municipalities to upgrade their municipal SWM operations and management of solid waste, in part to facilitate the objectives of Law 28- investments. The MoEF and the 00. The support is intended to be limited, in order to encourage SWE have prepared a draft policy municipalities to develop their own resources, and temporary, to provide note defining the principles, financing while measures to improve local revenues take effect. The criteria, and application of Government support has four objectives: (i) transparency in the allocation of funds; (ii) the placement of municipalities on a level playing field; (iii) financial support to municipalities support for capital investments; and (iv) the integration of environmental for MSWM. Financial support and social considerations. Municipalities must first meet several eligibility will in principle support criteria in their application for funds. Once those have been met, investment costs of sanitary allocations will be determined based on the costs of the investment (a cost landfills and the closure of open ceiling applies), the quality of the proposal; and the financial capacity of each municipality. In total, the government’s commitment is expected to dumps and the incremental costs be approximately 1.5 billion MAD, over five years, for the support of of professionalized collection investments in sanitary landfills, in improvements to collection services, services. The system would be and in the closure and/or rehabilitation of uncontrolled dumpsites. designed to incentivize inter- municipal cooperation, to improve municipal revenues, and to better integrate social and environmental considerations. The incorporation of these criteria into the allocation system would support the equitable, transparent, and cost-effective transfer of Government funds to support upgrading municipal solid waste management systems.
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Monitoring of the Box 2: Main funding sources of the Municipalities implementation of supported projects would be facilitated by Municipalities’ revenues come from three sources. The largest, which the signing of contrats de make up 40 percent of the total, are taxes levied by the central government: partenariat between housing taxes, municipal services taxes, and professional taxes. Despite municipalities and the being the largest, the recovery rates of these taxes are weak, as the central fiscal authorities do not consider them – because they are allocated to the government. When adopted by municipalities – to be a priority. A recent tax reform law intends to revise the CN, a ministerial circular will the tax base and the application of these taxes. The second source of funds, be issued stating how this system making up 27 percent, consists of “own resources” – leases, various user will be used in the allocation of fees, and indirect fees – that are collected by the municipalities themselves. Last, the central government transfers a part – not less than 30 percent – of financial resources for the revenues received from the Value-Added Tax (VAT). These revenues are upgrade of municipal solid waste transferred in a manner intended to equalize municipal finances. The VAT systems. transfers comprise approximately one third of municipal revenues. It is important to note that the above revenues, for the most part, only cover Strengthen the SWM regulatory municipalities’ recurrent, operational costs; funds for capital investment are made available through loans, through grants from the government, or framework by enacting missing through municipal savings/surpluses from revenues. regulations. The GoM intends to enact, by end of 2010, the following regulations: (i) the elaboration of regional and local planning tools for solid waste management; (ii) administrative procedures and technical standards for waste treatment and landfilling; (iii) guidelines for the determination of solid waste fees (redevances des déchets); and (iv) modalities for monitoring and supervision of waste services at national, regional and municipal levels.
Establish regulatory mechanisms governing local public services. GoM has initiated the amendment of the Charte Communale in order to introduce, among other changes, the concept of regulation of local public services, including solid waste management. The amended Charte will be enacted during 2009 and will provide greater legitimacy to regulatory actions in the sector.
Improving competition, transparency, and accountability of PSP schemes in SWM by improving standard bidding and contracting procedures. With the support of the Public-Private Infrastructure Advisory Facility (PPIAF), the Government is currently undertaking a study on PSP in MSWM that aims to recommend areas where improvements or adjustments need to be made in order to improve efficiency in the sector. The study will review existing PSP contracts and will benchmark the Moroccan PSP experience to other relevant experiences before suggesting areas of improvements in contract design, tender preparation and implementation, and contract management. The study will also propose options to improve transparency and accountability in PSP contract management by suggesting modalities to ensure greater participation from users/beneficiaries. GoM will validate proposed changes by end 2009 and incorporate them in preparing new standard contracting documents and procurement procedures starting in 2010.
Public communications and awareness program: The Journée de Communications, held on July 9, 2008, launched the Government’s communication strategy with respect to the reform program. The strategy will continue to be developed and implemented over the course of the PNDM. Annual budget allocations will take place beginning in 2009 for the implementation of a national communication and public awareness program. In parallel, the GoM will implement a national benchmarking system that will constitute an additional incentive for municipalities to improve their performance in this sector.
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REFORM AREA 2 – ENHANCING SUSTAINABILITY
6. The Government recognizes that sustainability of the municipal solid waste sector is critical. Sustainability factors include (i) short-, medium- and long-term financial sustainability, and (ii) improved municipal capacity to plan and manage SWM services; including regular monitoring and evaluation of sector performance.
7. Financial Sustainability: There are two main aspects to the Government’s strategy to promote financial sustainability – improving municipal financial capacity to meet the financial requirements of modernizing the MSWM system and improving the cost effectiveness of services. In terms of improving municipal financial capacity, measures include: (i) in the short term, the provision of targeted subsidies to municipalities to cover the incremental costs due to the requirements of the PNDM; (ii) supporting municipalities in mobilizing additional funds through the international carbon market; and (iii) exploring new revenue sources and mechanisms for generating additional revenues such as the earmarking of local revenues and the creation of solid waste fees (redevances) in application of Law 28-00 and possible introduction of “eco-taxes” on packaging waste. In terms of improving the cost effectiveness of services, the Government intends to: (i) introduce incentives and tools to promote inter-municipal cooperation and regionalization of solid waste disposal facilities; this will help municipalities to take advantage of the significant economies of scale in waste management; and (ii) revise contracting documents and procedures for private sector participation in SWM.
8. In the case of smaller municipalities, contracting out for improved solid waste disposal may pose particular challenges as these have: (i) lower revenues from local taxes as a proportion of their volume of waste produced; (ii) are less able to realise technical economies of scale in waste handling; and (iii) have limited financial capacity to smooth out the gap between their up-front investment costs and the annualized, tonnage-based subsidy from the GoM. The regulations on the technical arrangements for waste disposal will therefore be indicative rather than obligatory during the first phase of the PNDM, allowing smaller towns to opt out. The Phase 1 (2008-2012) focuses on the larger towns and cities, which represent around 70 percent of national solid waste production in Morocco. A study on SWM arrangements in smaller towns is planned for 2009 with possible KFW funding. It is envisaged that DPL2 will pursue and deepen reforms among smaller towns to allow them to participate in the program. It is hoped that multi-town groupings will permit many smaller municipalities to realise technical and managerial economies of scale and equally benefit from the PNDM.
9. Improved municipal capacity to plan and manage SWM services: The Government program includes a multi-year capacity building program targeting local authorities and aiming at improving (i) managerial and technical capacity in SWM at the municipal level, (ii) elaboration, review and approval of environmental impact assessment of solid waste investment; (iii) contracting out solid waste services; and (iv) municipal financial management.
GoM actions program for reform area 2
Government subsidies to support the implementation of the PNDM: GoM is committed to allocating financial resources to support municipalities in improving their municipal solid waste management systems, and to annually transfer all targeted subsidies committed to as part of the Budget Laws. As a prior action, the Moroccan Government has already credited MAD 100 million to the National Environment Fund (Fonds National de l’Environnement – FNE) under the 2008 budget as well as MAD 200 million as part of the Programme d’emploi de la TVA to provide financial support for municipalities through the PNDM. Additional transfers will be included for the upcoming four fiscal years (2009-2012) on a yearly basis.
Supporting the municipalities to mobilize additional financial resources under the Clean Development Mechanism (CDM): The GoM is committed to supporting municipalities in the 69
identification, preparation and negotiations of a CDM programmatic project in the solid waste sector. The FEC has been appointed by the Government as the coordinating agency responsible for developing a programmatic CDM project in parallel with the implementation of the PNDM. Additional resources provided by carbon finance could help cover part of the cost of municipal solid waste landfilling. Concurrently the CDM program will also contribute to international efforts to reduce carbon emissions and therefore contribute to the international community effort to mitigate climate change.
Completion of a feasibility study on long-term financial sustainability: Based on Terms of Reference prepared and finalized in 2008, the GoM will conduct in 2009 a feasibility study for the implementation of identified tools/actions for mobilizing new revenue sources, such as the earmarking of local revenues; the creation of “eco-taxes” on packaging materials, and the establishment of users fee (redevances) in application of the Solid Waste Law 28-00. Validation and implementation of the recommendations and findings of the study will take place in 2009-2010.
Strengthening the legal framework to promote inter-municipal cooperation GoM initiated in 2008 the revision of the Charte Communale in order to provide formal legal status (personalité juridique) to groupings of municipalities and enabling them to act as special purpose vehicles. The adoption of the amended Charte communale by the Parliament took place in December 2008. This will help municipalities take advantage of the significant economies of scale in waste management.
Implementation of a national capacity-building program in SWM: As a prior action, the Government will implement a multi-year training plan for local municipalities within the framework of the PNDM in order to address the lack of managerial, technical and financial management capacity at the municipal level. The program will be co-managed by the Ministry of Interior and the Secretariat of State in charge of Water and Environment. The Government has already mobilized national and international actors for the implementation of this program including the FEC, GTZ, JICA, AFD and PPIAF. A first series of capacity building and technical assistance has been launched in 2009 and should cover the first phase of PNDM covering the period 2009-2011
REFORM AREA 3: MAINSTREAMING ENVIRONMENTAL AND SOCIAL DIMENSIONS
10. The GoM is committed to promoting environmentally and socially sound disposal facilities. Given the current situation in terms of final disposal and the huge potential social and environmental impacts, the primary focus of this aspect of the reform program is to (i) support the implementation of environmentally and socially sound disposal facilities; and (ii) improve the social and working conditions of wastepickers, whose livelihoods will be affected by closure of existing dumpsites.
11. The Government recognizes the need to upgrade the existing EIA system. The GoM is committed to removing the regulatory, administrative, technical, and managerial shortcomings of the current EIA system so that a harmonized EIA platform can facilitate direct investment and donor support and elevate Morocco’s environmental image in the international arena. These shortcomings include: (i) absence of established criteria, guidelines and rules for reviewing EIAs, approving EIA reports, and including the EIA mitigating and monitoring measures in services and work contracts; (ii) incomplete standard TORs for preparing EIA reports for solid waste management, and lack of TORs for environmental audits for landfills; (iii) absence of procedures and modalities for integrating social concerns into the EIA process for projects in general and, for SWM projects in particular, those related to wastepickers; (iv) lack of technical staff, resources and operational manuals for local staff to review EIA reports, and (v) lack of monitoring and enforcement of EIA mitigating measures at the national and local levels.
12. The reform program also supports the international agenda on climate change. Morocco is committed to promoting projects and activities to reduce GHG emissions, with particular focus on the 70
solid waste sector. The FEC, a government agency specialized in the funding of municipalities, has already been appointed to support the municipalities in promoting the CDM agenda in municipal solid waste, including: (i) to assist in developing, preparing and sustaining CDM projects in parallel with the implementation of the PNDM; and (ii) to assist in selling Certified Emission Reductions (CERs) under a programmatic approach under which the FEC will act as the coordinating entity of a nationwide CDM Programme of Activities. Because of the potential reduction in GHGs and the resulting stream of revenues that can be generated, CDM related activities contribute to mitigating short- and medium-term financial shortfalls in the sector.
GoM action program for reform area 3
13. The measures to be implemented under this reform area are presented below.
Enactment of EIA-related decrees toward effective implementation of the EIA Law: As part of the reform program and as an indication of the Government’s commitment to improving transparency in the EIA process, the Government is committed to enacting the decrees required in the EIA law, namely, (i) the responsibilities and operations of the national EIA committee and regional EIA committees, and (ii) procedures for EIA-related public consultations.
Operationalize the EIA system as whole through: (i) the preparation of a comprehensive EIA operational manual detailing steps and procedures for EIA preparation, review and approval; and (ii) the provision of training and capacity building on EIA preparation and review. The Government will also (i) prepare model TORs for Environment and Social Impact Assessments (ESIAs) for sanitary landfills; (ii) prepare model TORs for environment and social audits (ESA) for the closure/rehabilitation of open dumpsites; and (iii) establish best-practice guidelines for including mitigation and monitoring measures in work and services contracts.
Preparation and implementation of a multi-year plan (Phase 1 of the PNDM) focusing on municipal waste disposal: For the first phase of the PNDM (2008-2012), a detailed action plan has been prepared and adopted by the three concerned ministries (MoI, MoF and SWE) in order to help local authorities improve SWM, including the modernization of collection services; the construction of transfer stations and new sanitary landfills in eligible municipalities; the closure of 63 open dumpsites; and the preparation of seven regional master plans benefiting 52 municipalities and provinces.
Preparation and implementation of a program to improve social performance of solid waste management: Implementation of this plan has been agreed based on the findings of Phase 1 of a poverty and Social Impact Assessment (PSIA) conducted during preparation of the present operation. The plan will include: (i) providing wastepickers access to health care; (ii) in-depth consultations by the municipalities with wastepickers and discussion of options for their reemployment, possibly by private SWM operators ; and (iii) involving local NGOs, through a call for proposals, which will work closely with wastepickers, ensuring that they receive appropriate health and hygiene services, assisting in their finding alternative employment, and monitoring the implementation and follow-up of the PSIA recommendations. As first steps in this regard, the CN-PNDM has adopted the key principles under which social aspects will be incorporated into the implementation of the PNDM, and two pilot social inclusion initiatives were launched in 2009.
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ANNEX 3: OPERATION POLICY MATRIX
Policy Area and Prior Actions Prior Actions for DPL 2 Program Outcomes and Program Objectives for DPL 1 Monitoring Indicators Governance of the Municipal Solid Waste Sector To promote consistency and 1. Issuance of a circular by the 1. The National Commission for the Effective inter-ministerial coordination of transparency of government actions in Secretary of State in charge of Water National Municipal Solid Waste policies and programs in the solid waste the solid waste sector and Environment establishing the Management Program has met at sector. National Commission of the National least twice a year in the calendar year Indicator: Annual costed -workplans and Municipal Solid Waste Management 2009 and the calendar year 2010 to progress reports are systematically Program (CN-PNDM). coordinate, review and evaluate the reviewed and adopted by the CN-PNDM. implementation of the National Baseline : 0 Municipal Solid Waste Management Target : by 2012, 6 progress reports and 3 Program annual programs
2. Adoption by the CN-PNDM of Alignment of financial support to eligibility criteria for the allocation of municipalities with sector policy financial support to municipalities priorities and national program under the PNDM. objectives. Indicator: Percentage of total government financial support under the PNDM allocated based on the adopted eligibility criteria. Baseline : 0 Target : 100%
To ensure implementation of Solid 3. Publication in the Bulletin officiel 2. Two regional commissions for Solid waste management systems in place Waste Law 28-00, and, through it, of the decree related to classification the review and validation of are more consistent with national implementation of the national solid of waste and submission to and provincial and prefectural municipal regulations and standards. waste policy. approval by the Ministry of Interior solid waste master plans have been Indicator: Solid waste infrastructure and the Secretariat of State in charge established and are operational. supported through the PNDM is of Water and Environment of the two consistent with national regulations, draft decrees related to (i) procedures based on reviews of projects (to be for the elaboration of a provincial or verified by project sampling in Q3 FY12). prefectural master plan for municipal Baseline : N /A solid waste (MSW); and (ii) Target : 100% administrative procedures and technical standards for MSW land filling. To improve transparency, 3. The National Commission for the Indicator: competitiveness, and accountability in National Municipal Solid Waste 72
private sector contracting in SWM. Management Program has reviewed Increased competition in tenders for and approved the three sets of model MSWM, as measured by the increase in bidding and contracting documents number of received bids between 2008 and the Minister of the Interior has and 2011, reported at bid opening issued a circular to dispatch them and records. require their use Baseline: 4 to 5 bids per tender in 2008 Target: Significant improvement in term of bidder participation
To change public behavior and 4. The 2010 action plan for the Local decision-makers and service users improve municipal decision making National Municipal Solid Waste are better informed and supportive of with respect to solid waste Management Program provides for improved solid waste management management practices. adequate funding of the execution practices. and mainstreaming of a communication and public awareness Indicators: program . Number of thematic conventions signed between local governments and the State targeting the upgrade of MSWM Baseline: 0 in 2008, Target: 10 in 2012
Change in the perception by the urban population of MSWM as a priority area of intervention, as measured by sample survey.
Sustainability of municipal solid waste services To strengthen municipal financial 4. Appropriate funding has been Improved coverage of the costs of SWM capacity to meet the financial made available to the PNDM for services in municipalities supported by requirements for modern, integrated 2008, and the Loi de Finances of the PNDM. MSW. fiscal year 2009 includes appropriate budget allocations in support of the Indicator: PNDM. Increase in the revenues generated from the municipal services tax (TSC) Baseline: 1.4 MDH in 2008, Target: 3.0 MDH in 2011 5. Appointment by the Minister of Interior of a coordinating entity in charge of the development of a national Clean Development Mechanism Program to facilitate municipalities’ access to the carbon market.
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To improve cost effectiveness of MSW services. To strengthen municipal capacity to 6. Launch of a fully funded capacity 5. The capacity development Key players at municipal and regional efficiently manage solid waste development program in the program on municipal solid waste levels are able to plan and efficiently services. municipal solid waste sector targeting management has been continuing in manage solid waste systems. municipalities. the calendar years 2009 and 2010 and has been mainstreamed into a fully Indicator: Number of local governments funded government training program benefitting from capacity-building activities Baseline: 0 in 2008. Target : 230 by 2012
Environmental and social considerations To upgrade and operationalize the 7. Publication in the Bulletin officiel 6. Three regional EIA committees An EIA system is in place to reduce existing EIA system at both national of the decrees related to (i) the have been established and are social and environmental impacts in and regional levels. responsibilities and operations of the operational . SWM investment and operations. national EIA committee and regional EIA committees, and (ii) procedures Indicator: for EIA-related public consultations. Number of EIAs related to solid waste investments reviewed and approved by regional or national EIA committees. Base: 17 up to 2010 (only by the national committee) Target : 25 by 2012
To improve the environmental 7. Three partnership agreements Environmentally and socially sound performance of the solid waste sector. (“conventions de partenariat”) have disposal practices are in place in been signed between the central and municipalities supported by the PNDM. local governments to improve solid waste practices Indicators: Percentage of collected waste disposed in sanitary landfills by 2012 Baseline 10% in 2008 Target: 30%
Number of open dumpsites closed/ rehabilitated by 2012 Baseline 4 in 2008; Target: 12 by 2012
To improve the social performance of 8. Adoption by the CN-PNDM of 8. The 2010 action plan for the Social impacts associated with solid the solid waste sector. principles for the inclusion of social National Municipal Solid Waste waste services are mitigated. 74
considerations in the framework of Management Program provides for the PNDM. adequate funding for extension of Indicators social inclusion programs to disposal Number of wastepickers benefiting from investments supported by the social inclusion initiatives National Municipal Solid Waste Baseline : 0 in 2008) Program. Target : 100 -150 by 2012
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ANNEX 4. MOROCCO: PUBLIC DEBT SUSTAINABILITY AND EXTERNAL FINANCING REQUIREMENTS
(% OF GDP)
Fiscal Sustainability Analysis Fiscal Sustainability Analysis Main Scenarios (1) Alternative Scenarios (2) 50.0 54.0
48.0 52.0 46.0 50.0 44.0
42.0 48.0
40.0 46.0
38.0 44.0 36.0 42.0 34.0 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Base Line Key Variables at their Historical Averages No Policy Change B1 B2 B3 B4 B5 B6
Morocco: External Financing needs 2008 2009 2010 2011 2012 2013 Financing Requirements 8.2 6.8 5.1 5.3 4.2 4.1 Current account deficit 5.2 5.0 5.3 4.4 3.9 2.6 Long term amortizations 3.9 2.0 1.9 1.9 2.0 2.0 Reserves Changes of Monetary Auth. -0.9 -0.2 -2.1 -1.1 -1.7 -0.5 Financing sources 8.2 6.8 5.1 5.3 4.2 4.1 Official capital grants 1.3 0.4 0.5 0.4 0.4 0.4 Private investment, (FDI+Portfolio) (net) 2.1 1.0 0.1 0.8 1.0 1.4 Long term Disbursements 5.1 3.9 4.4 4.0 2.9 2.4 Other capital flows (incl. errors and omissions in 08-09) -0.3 1.6 0.0 0.0 -0.1 -0.1 Source: Moroccan Government and staff estimates
(1) The two main shocks are A1. Key variables are at their historical averages; and A2. No policy change (constant primary balance).
(2) The other shocks are: B1. Real interest rate is at baseline plus one standard deviations; B2. Real GDP growth is at baseline minus one-half standard deviation; B3. Primary balance is at baseline minus one-half standard deviation; B4. Combination of B1-B3 using one-quarter standard deviation shocks; B5. One-off 30 percent real depreciation in 2010; B6. Increase in “other debt-creating flows” in 2010 of 10 percent of GDP. Standard deviations for B1-B6 are calculated over the last ten years.
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ANNEX 5: MOROCCO AT A GLANCE
Morocco at a glance 9/16/10
M. East Lower Key Development Indicators & North middle Morocco Africa income Age distribution, 2008 (2009) Male Female
Population, mid-year (millions) 31.6 325 3,703 75-79 Surface area (thousand sq. km) 447 8,778 32,309 60-64 Population growth (%) 1.2 1.8 1.1 Urban population (% of total population) 57 57 41 45-49 30-34 GNI (Atlas method, US$ billions) 86.4 1,053 7,675 15-19 GNI per capita (Atlas method, US$) 2,730 3,237 2,073 GNI per capita (PPP, international $) 4,190 7,350 4,593 0-4
6420246 GDP gro wth (%) 4.9 5.5 7.4 percent of total population GDP per capita growth (%) 3.7 3.7 6.1
(most recent estimate, 2003–2009)
Poverty headcount ratio at $1.25 a day (PPP, %) 3 4 .. Under-5 mortality rate (per 1,000) Poverty headcount ratio at $2.00 a day (PPP, %) 14 17 .. Life expectancy at birth (years) 73 71 68 Infant mortality (per 1,000 live births) 32 29 45 90 80 Child malnutrition (% of children under 5) 10 12 25 70 60 Adult literacy, male (% of ages 15 and older) 69 82 87 50 Adult literacy, female (% of ages 15 and older) 44 65 73 40 Gross primary enrollment, male (% of age group) .. 107 110 30 Gross primary enrollment, female (% of age group) .. 104 106 20 10 Access to an improved water source (% of population) 96 88 86 0 Access to improved sanitation facilities (% of population) 79 74 52 1990 1995 2000 2007
Morocco Middle East & North Africa
Net Aid Flows 1980 1990 2000 2009 a
(US$ millions) Net ODA and official aid 899 1,048 419 1,217 Growth of GDP and GDP per capita (%) Top 3 donors (in 2008): European Commission 12 29 117 484 15 France 135 217 155 163 Spain 0 33 -1 117 10 5 A id (% o f GNI) 4.9 3.7 1.2 1.5 0 Aid per capita (US$) 46 43 15 39 -5
Long-Term Economic Trends -10 95 05 Consumer prices (annual % change) 9.4 7.0 1.9 1.0
GDP implicit deflator (annual % change) 15.2 -57.0 -0.6 1.8 GDP GDP per capita
Exchange rate (annual average, local per US$) 3.9 8.2 10.6 8.0 Terms of trade index (2000 = 100) 80 75 100 118 1980–90 1990–2000 2000–09 (average annual growth %) Population, mid-year (millions) 19.4 24.2 28.5 31.6 2.2 1.6 1.2 GDP (US$ millions)* 18,821 28,839 37,022 92,086 3.9 2.9 5.0 (% of GDP) Agriculture & Fishing* 20.0 19.3 14.9 16.4 3.8 0.3 5.8 Industry* 33.6 30.4 29.1 28.5 3.2 3.0 4.1 M anufacturing* 18.3 18.9 17.5 15.9 4.3 2.6 3.1 Services* 46.4 50.3 56.0 55.1 4.3 2.9 5.1
Household final consumption expenditure 68.7 60.0 61.4 57.0 3.6 2.8 4.7 General gov't final consumption expenditure 18.3 16.8 18.4 18.0 1.9 2.3 3.8 Gross capital formation 22.2 28.7 25.5 36.0 4.4 3.4 8.9
Exports of goods and services 17.4 25.7 28.0 28.6 12.1 5.5 6.4 Imports of goods and services 26.7 31.2 33.4 39.5 8.8 4.4 8.3 Gross savings 18.6 28.3 24.3 31.0
Note: Figures in italics are for years other than those specified. 2009 data are preliminary. Group data are through 2008. .. indicates data are not available. a. Aid data are for 2008. (*) The new series of GDP started in 1998 Development Economics, Development Data Group (DECDG). 77
Morocco
Balance of Payments and Trade 2000 2009 Governance indicators, 2000 and 2008 (US$ millions) Total merchandise exports (fob) 7,419 13,843 Total merchandise imports (cif) 11,531 32,786 Voice and accountability Net trade in goods and services -2,085 -10,868 Political stability Current account balance -475 -4,551 as a % of GDP -1.3 -4.9 Regulatory quality
Rule of law Workers' remittances and compensation of employees (receipts) 2,161 6,895 Control of corruption
Reserves, including gold 5,138 24,094 0255075100
2008 Central Government Finance Country's percentile rank (0-100) 2000 higher values imply better ratings (% of GDP) Current revenue (including grants) 23.6 25.9 Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue 21.7 23.4 Current expenditure 23.4 23.0 Technology and Infrastructure 2000 2008 Overall surplus/deficit -4.8 -2.2 Paved roads (% of total) 56.4 62.0 Highest marginal tax rate (%) Fixed line and mobile phone Individual 45 38 subscribers (per 100 people) 13 82 Corporate 35 30 High technology exports (% of manufactured exports) 11.3 8.8 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 20,674 21,842 Agricultural land (% of land area) 69 67 Total debt service 2,610 2,594 Forest area (% of land area) 12.7 .. Debt relief (HIPC, M DRI) – – Terrestrial protected areas (% of surface area) .. 1.2
Total debt (% of GDP) 55.8 23.7 Freshwater resources per capita (cu. meters) 983 918 Total debt service (% of exports) 20.3 7.8 Freshwater withdrawal (billion cubic meters) 12.6 ..
Foreign direct investment (net inflows) 260 2,514 CO2 emissions per capita (mt) 1.2 1. 5 Portfolio equity (net inflows) 30 520 GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) 8.3 8.3 Composition of total external debt, 2009 Energy use per capita (kg of oil equivalent) 355 460 Short-term, 1,631 IBRD, 2,378 IDA,IMF, 14 0 World Bank Group portfolio 2000 2008 Private, 4,626 (US$ millions) Other multi- lateral, 6,492 IB RD Total debt outstanding and disbursed 2,837 2,540 Disbursements 138 242 Principal repayments 307 262 Bilateral, 6,701 Interest payments 190 125
US$ millions IDA Total debt outstanding and disbursed 27 16 Disbursements 0 0 Private Sector Development 2000 2009 Total debt service 2 1
Time required to start a business (days) – 12 IFC (fiscal year) Cost to start a business (% of GNI per capita) – 16.1 Total disbursed and outstanding portfolio 29 153 Time required to register property (days) – 47 of which IFC own account 29 153 Disbursements for IFC own account 1 145 Ranked as a major constraint to business 2000 2008 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 7 0 Access to/cost of financing .. 84.4 Tax rates .. 62.6 MIGA Gross exposure – – Stock market capitalization (% of GDP) 29.4 79.9 New guarantees – – Bank capital to asset ratio (%) 9.8 7.3
Note: Figures in italics are for years other than those specified. 2008 data are preliminary. 9/16/10 .. indicates data are not available. – indicates observation is not applicable.
Development Economics, Development Data Group (DECDG).
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Millennium Development Goals Morocco
With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years) Morocco
Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2008 Poverty headcount ratio at $1.25 a day (PPP, % of population) 2.5 .. 6.3 2.5 Poverty headcount ratio at national poverty line (% of population) 13 . 1 .. 15 . 3 8.8 Share of income or consumption to the poorest qunitile (%) 6.6 .. 6.3 6.5 P revalence o f malnutritio n (% o f children under 5) 9.0 .. .. 10 . 2
Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) 58 72 79 87 Primary completion rate (% of relevant age group) 51 48 57 81 Seco ndary scho o l enro llment (gro ss, %) 38 38 38 56 Youth literacy rate (% of people ages 15-24) 55 62 67 76
Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 67 72 80 86 Women employed in the nonagricultural sector (% of nonagricultural employment) .. .. 20 19 P ro po rtio n o f seats held by wo men in natio nal parliament (%) .. 1 1 11
Goal 4: reduce under-5 mortality by two-thirds Under-5 mo rtality rate (per 1,000) 85 .. 47 38 Infant mortality rate (per 1,000 live births) 66 57 40 32 M easles immunization (proportion of one-year olds immunized, %) 80 88 93 94
Goal 5: reduce maternal mortality by three-fourths M aternal mortality ratio (modeled estimate, per 100,000 live births) 332 228 228 227 Births attended by skilled health staff (% of total) 31 34 48 59 Contraceptive prevalence (% of women ages 15-49) 39 42 45 63
Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases P revalence o f HIV (% o f po pulatio n ages 15-49) .. 0.1 0.1 0.1 Incidence o f tuberculo sis (per 100,000 peo ple) 110 113 9 5 88 Tuberculo sis case detectio n rate (%, all fo rms) 75 74 75 73
Goal 7: halve the proportion of people without sustainable access to basic needs A ccess to an impro ved water so urce (% o f po pulatio n) 75 .. 80 93 Access to improved sanitation facilities (% of population) 58 .. 68 79 Forest area (% of total land area) 6.8 12.7 12.7 .. Terrestrial protected areas (% of surface area) ...... 1.2 CO2 emissions (metric tons per capita) 0.9 1.1 1.2 1. 5 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 9.7 8.2 8.3 8.3
Goal 8: develop a global partnership for development Telepho ne mainlines (per 100 peo ple) 1.6 4.2 4.9 9.5 M o bile pho ne subscribers (per 100 peo ple) 0.0 0.1 8.1 72.2 Internet users (per 100 people) 0.0 0.0 0.7 33.0 P erso nal co mputers (per 100 peo ple) .. 0.3 1.2 5.7
Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds)
100 100 90 80 75 75 70 60 50 50 50 40 25 30 25 20 0 10 2000 2002 2004 2006 2008 0 0
1990 1995 2000 2007 2000 2002 2004 2006 2008 Primary net enrollment ratio
Morocco Middle East & North Africa Fixed + mobile subscribers Internet users Ratio of girls to boys in primary & secondary education
Note: Figures in italics are for years other than those specified. .. indicates data are not available. 9/16/10
Development Economics, Development Data Group (DECDG).
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