• Abstract and Figures
• Public Full-text

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 74891-MA

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED TRANSITION FUND GRANT

IN THE AMOUNT OF (USD 4 MILLION)

TO THE

KINGDOM OF MOROCCO

FOR THE

NEW GOVERNANCE FRAMEWORK IMPLEMENTATION SUPPORT PROJECT (P143979)

January 22, 2013

This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. KINGDOM OF MOROCCO - GOVERNMENT FISCAL YEAR January 1st - December 31st

CURRENCY EQUIVALENTS US$1 = 8.97 Moroccan Dirham (MAD) (Exchange rate effective as of July 20, 2012)

LIST OF ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities AfDB African Development Bank CMD Modulated expenditure control CPS-PR Country Partnership Strategy- Progress Report CSO Civil Society Organisation DPL Development Policy Loan EU European Union GDP Gross domestic product GFS Government Financial Statistics GID Integrated Financial Management Information System (Gestion Intégrée de la Dépense) IBRD International Bank for Reconstruction and Development ICPC Anti-Corruption Agency (Instance Centrale de Prévention de la Corruption) IGF Inspectorate General of Finance (Inspection Générale des Finances) ISA Implementation Support Agency LIBOR London Inter-Bank Offered Rate LG Local Governments M&E Monitoring and evaluation MAD Moroccan Dirham MAGG Ministry of General Affairs and Governance (Ministère des Affaires Générales et de la Gouvernance) MEF Ministry of Economy and Finance MENA Middle East and North Africa MICNT Ministry of Industry, Trade and New Technologies (Ministère de l'Industrie, du Commerce et des Nouvelles Technologies) MTEF Medium-Term Expenditure Framework OBL Organic Budget Law OECD Organization for Economic Co-operation and Development PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PPD Public Procurement Decree PSIA Project Social Impact Assessment SGG Secretary General of the Government TA Technical assistance TGR General Treasurer of the Kingdom (Trésorerie Générale du Royaume)

Regional Vice President: Andersen Country Director: Neil Simon Gray Sector Director: Manuela V. Ferro Sector Manager: Heidenhof Task Team Leader: Fabian Seiderer 3 PAD DATA SHEET . Kingdom of Morocco New Governance Framework Implementation Support Project (P143979) . PROJECT DOCUMENT .

4 . Basic Information Date: 18-January-2013 Sectors: General Public Administration Sector (50%); Central government administration (30%); Sub-national government administration (20%) Country Director: Neil Simon M. Gray Themes: Administrative and civil service reform (40%), Public Sector Manager/Director: Guenter Heidenhof/Manuela expenditure, financial management and procurement V. Ferro (40%); Decentralization (20%) Project ID: P143979 EA Category: C - Not Required Lending Instrument: Grant from the MENA Transition Fund Team Leader(s): Fabian Seiderer Joint IFC: No . Beneficiary : Government of Morocco Client : Ministry of Governance and General Affairs Beneficiaries: Ministry of Economy and Finance, Ministry in charge of Relations with Parliament and Civil Society, Ministry of Interior Implementing Agency: Ministry of Governance and General Affairs Contact: Mrs Sabah Title: Adviser to the Minister Bencheqr oun Telephon 21253768 Email: [email protected] e No.: 7316 Agencies responsible for Component I : Ministry in charge of d with Relations with Parliament and Civil Society and Ministry of Governance and General Affairs Contact: Mr. Title: Adviser to the Minister Mohamma d Doukali Telephon 21261084 Email: [email protected] e No.: 5306 Agency responsible for component II: Ministry of Economy and Finance Contact: Mr. Fouzi Title: Director of Budget Lekjaa Telephon 21253767 Email: [email protected] e No.: 7267 Agency responsible for component III: Ministry of Interior Contact: Mr. Title: Director of Local Finance Abdelrhan i Guezzar Telephon 21253721 Email: [email protected] e No.: 5865

. Project Start Date: 01-Sep- End Date: 31-Dec-2017 Implement 2013 ation Period: Expected 30-Sep-2013 Effectivene ss Date: Expected 31-Aug-2017 Closing Date:

. Project Financing Data(US$M) [ ] Loan [ X ] Grant [ ] Other [ ] Credit [ ] Guarantee For Loans/Credits/Others Total 4 Project Cost (US$M): Total Bank 4 Financing (MENA Transition 5 Fund) (US$M): . Financin Amount(US$M) g Source Borrower 0 Internation 4 al Bank for Reconstruc tion and Developme nt (MENA Transition Fund) Total 4 . Expected Disbursements (in USD Million) Fiscal Year 2013 2014 2015 2016 2017 Annual 0,2 0,5 1 1 1,3 Cumulative 0,7 1,7 2,7 4 . Project Development Objective(s) The Project Development Objective is to strengthen Government transparency, accountability and public participation by (i) supporting the development and implementation of a public consultation policy and law on petitions; (ii) improving access to fiscal information and enhancing performance orientation in budget management; and, (iii) strengthening fiscal decentralization. . Components Compone Cost (USD Millions) nt Name Component 0.73 1: Strengtheni ng public participatio n Component 1.824 2: Enhancing Efficiency and Accountabil ity in the use of Public Funds Component 0.769 3: Advancing Regionaliza tion Component 0.677 4: Project Manageme nt, communica tion and contingenci es . Compliance Policy Does the Yes [ ] No [ X ] project depart from the CAS in content or in other significant respects? . Does the Yes [ ] No [ X ] 6 project require any waivers of Bank policies? Have these Yes [ ] No [ X ] been approved by Bank manageme nt? Is approval Yes [ ] No [ X ] for any policy waiver sought from the Board? Does the Yes [ X ] No [ ] project meet the Regional criteria for readiness for implement ation? . Safeguar Yes No d Policies Triggere d by the Project Environmen X tal Assessment OP/BP 4.01 Natural X Habitats OP/BP 4.04 Forests X OP/BP 4.36 Pest X Manageme nt OP 4.09 Physical X Cultural Resources OP/BP 4.11 Indigenous X Peoples OP/BP 4.10 Involuntary X Resettleme nt OP/BP 4.12 Safety of X Dams OP/BP 4.37 Projects on X Internation al Waterways OP/BP 7.50 Projects in X Disputed Areas 7 OP/BP 7.60 . Legal Covenants Name Recurren Due Date Frequency t

Description of Covenant

. Conditions Name Type

Description of Condition

Team Composition Bank Staff Name Title Specializa Unit tion Fabian Senior Team MNSPS Seiderer Public Lead Sector Managem ent Specialist Guenter Sector Governan MNSPS Heidenhof Manager ce Jean- Senior Legal LEGEM Charles Counsel De Daruvar Hassine Finance Finance CTRLA Hedda Officer Lida Research Public MNSPS Bteddini Analyst consultati ons Khalid El Senior Fiscal MNSPR Maasnaoui economist decentrali zation David A. Operation Operation MNSPS Bontempo s Analyst s H. Program Program MNSPS Mavoariso Assistant Assistant a Ranaivoar ivelo Salim Lead Procurem MNAPR Benounich Procurem ent e ent Specialist Abdoulaye Senior Procurem MNAPR Keita Procurem ent ent Specialist Lamyae Senior Financial MNAFM Hanafi Financial Managem Managem ent ent Specialist Laila Financial Financial MNAFM Moudden Managem Managem ent ent Specialist Sanaa Program Program MNCMA 8 Bouchikhi Assistant Assistant Non Bank Staff Name Title Office City Phone Rene Consultan France Cipriani t - operation s . Locations Country First Location Planned Actual Comments Administr ative Division Morocco Rabat Rabat X Morocco Morocco

.

The project was prepared by an IBRD team consisting of: Fabian Seiderer (Team Leader, MNSPS), Lida Bteddini (MNSPS), Khalid El Messnaoui (MNSED), Salim Benouniche, Abdoulaye Keita, and Laurence Folliot (MNAPC), Lamyae Hanafi (MNAFM), Ibtissam Alaoui (MNAEX), David Bontempo (MNSPS), Sanaa Bouchikhi (MNCMA) and Mavo Ranaivoarivelo (MNSPR); Tracy Hart (MNSEN) provided key input for the preparation of this operation. Guenter Heidenhof (Sector Manager, MNSPS), and Joelle Businger (Country Program Coordinator, MNCA1) provided feedback and comments on a first draft of the Program Document. The legal adviser for this operation is Jean Charles De Daruvar (LEGAM). Peer reviewers are Ivor Beazley (Lead public sector specialist, ECSP4), and Adrian Fozzard (Lead public sector specialist, PRMPS).

Jean Pierre Chauffour (Lead country economist, MNSED), Yolanda Tayler (Manager, MNAPC) and the Transition Fund Coordination Unit provided key input and guidance at various stages of the project preparation. The team worked under the supervision and guidance of Simon Gray (Maghreb Country Director), Manuela Ferro (Sector Director, MNSPR), and Guenter Heidenhof (Sector Manager, MNSPS). Special thanks are due to the Ministry of General Affairs and Governance, the Ministry of Economy and Finance, The Ministry in charge of relations with Parliament and Civil Society and the Ministry of Interior, for their highly productive cooperation.

9 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROGRAM DOCUMENT FOR A PROPOSED TRANSITION FUND GRANT TO

THE KINGDOM OF MOROCCO

FOR THE NEW GOVERNANCE FRAMEWORK IMPLEMENTATION SUPPORT PROJECT (P143979)

Table of contents

10 I. Strategic Context

A. Country Context

1. Morocco is a middle-income country with a population of 32 million and a per capita income of US$ 3,100 (2011). Over the past decade, Morocco has made progress towards achieving its millennium development goals (MDG) and has sustained a growth rate of 4.9 percent and a stable macroeconomic framework despite adverse external shocks. Extreme poverty has been reduced but the country still faces major socioeconomic challenges. Poverty and vulnerability remain high, with around 17 percent of the population living just above the poverty line. Likewise, inequality and deprivation remain high, as evidenced by the high and steady Gini coefficient (0.41) and the very high rate of adult illiteracy (30 percent for men and 66 percent for women). In 2012, more than 22% of public expenditures (safe debt service) have been allocated to social sectors to finance public services and investments. The important recent investments in social sectors have not delivered the intended results: 8 million people, or one quarter of the population, still live in absolute poverty or are under constant threat of poverty and social indicators also lag behind countries with similar income levels, with women faring particularly badly: 72 percent of rural women cannot read compared to the already high national illiteracy among women of 52.7 percent. In rural areas, only 40 percent to 50 percent of first graders complete the 6 years of primary schooling, with significantly lower graduation rates for girls. These persistent development challenges highlight weaknesses in the effectiveness of public policies and programs and strengthen the motivation to push forward reforms promoting greater citizen’s voice, the performance of public expenditures and government accountability in order to improve access and quality of government services.

2. Development challenges have fueled a sense of inequality and disenfranchisement among large segments of the population, as expressed in recurrent demonstrations. These challenges also raise questions on the effectiveness of past development policies and the issue of equal access to public services, now a new constitutional right. Although the protests in Morocco were more peaceful than in other countries in the region, the demands for reform were very similar, focusing largely on political change, a curbing of corruption, and a more inclusive development process. Limited voice and participation in the design and implementation of public policies are considered important constraints. Corruption and arbitrariness further undermine the delivery of public services, as shown by recent diagnostic studies undertaken by the Anti-corruption Agency (ICPC) in the health and transportation sectors. The majority of users surveyed in both sectors stated that they paid bribes to access public services or obtain privileges. More specifically, limited transparency in the use of public resources, both at central and local level, has been identified as a key impediment to effective

11 governance by making it difficult for citizens to hold government to account. In turn, limited accountability provides room for discretion in the management of public resources, reduces the incentives to improve performance, thus limiting the effectiveness of public policies aimed at reducing inequalities.

3. Popular demands have been acknowledged in the transition process and have translated into the revision of the Constitution, in which governance reforms feature prominently. In March 2011, the King announced the launch of a comprehensive process of political, institutional, and social reform that led to the revision of the constitution and to new elections. On July 1, 2011, the new constitution was adopted which introduced reforms improving Morocco’s governance framework through greater checks and balances between the legislative, executive, and judicial branches. More specifically, the Constitution introduced reforms to: (i) strengthen the role of Parliament through greater legislative powers and increased oversight over the government; (ii) elevate the role of the Prime Minister to that of Head of Government, to be nominated by the political party winning a parliamentary election; (iii) enhance the independence of the Judiciary as a power that is autonomous from both the Executive and the Legislative; (iv) strengthen citizen’s rights, including public participation and the right to access public sector information; (v) strengthen consultative bodies and accountability of institutions, including the Anti-corruption Agency, and (vi) establish far- reaching regionalization as a democratic and decentralized system of governance. A section of the constitution (articles 12 to 15) empowering civil society and strengthening its involvement in the management of public affairs is a direct response to the popular demands for better governance and inclusion. Furthermore, the constitution includes new provisions empowering regions by upgrading them to directly elected local governments (article 135), reinforcing public participation to improve local governance (articles 136 and 139) and strengthening fiscal decentralization (articles 141 and 142). These new provisions further support the new strategy for Advanced Regionalization aiming to improve social and economic development at the local level and reduce geographical and social disparities.

4. These recent constitutional changes represent the road map for Morocco’s transition process and lay out deep and comprehensive medium-term reforms required to accomplish it. For example, in addition to improving the delivery of public services, these important constitutional changes present an opportunity to directly address the longstanding governance challenges affecting the country’s socioeconomic development policies nationwide and at the local level. The important changes introduced in the mandates and functions of Parliament required the renewal of representatives through early elections, which were held on November 25, 2011, in which the Justice and Development Party (PJD) won 107 out of 395 seats in the nationwide vote. The

12 PJD then formed a coalition government in early January 20121, with its leader becoming the Head of Government, as foreseen by the new constitution.

B. Sectoral and Institutional Context

5. In response to the demands of the Arab Spring, the new government prepared a program that aims to establish a more open and inclusive governance framework to help strengthen the development process and improve the delivery of public services. While many areas under this program are not new, the new government program includes a set of progressive measures which are reinforced by renewed political support and an improved enabling environment. The 2012-2016 government program, which was presented to Parliament on January 26, 2012, is structured around five key pillars, including: (i) deepening national identity and social cohesion; (ii) the rule of law and advancement of regionalization and governance; (iii) job creation and economic development; (iv) national sovereignty and social development; and (v) improving access to social services for all Moroccans.

6. The government program is strongly anchored in the new Constitutional provisions, and the 2012-2016 economic and social development plan approved by Parliament, which introduce transparency, accountability, and participation as three essential facets to effective public sector management. The government program focuses on a number of governance reforms relating to the delivery of public services, access to information and public engagement, reform of the fiscal system, budget reform, decentralization, and a profound emphasis on the justice sector. Improving the transparency of economic and financial governance is given particular mention with the strengthening of the competition counsel and improving governance of state-owned enterprises.

7. A key transformational change is derived from the new constitutional right to public consultation, which recognizes inclusive participation in government decision making as a fundamental principle (Articles 12-15). Extending the scope of public consultation through the formalization of a government-wide mechanism aims to directly respond to the rights enshrined in the new constitution and help establish a mechanism for more informed policy-making throughout government. The advancement of this right will also be a symbolic gesture of a changing mode of governance and an opportunity to strengthen dialogue between government and civil society. In addition, it will help to systematize a consultation process that has otherwise been largely ad-hoc and sector-specific. A first attempt of a public consultation policy was made in 2009 in the context of the US-Morocco Free Trade Agreement, which requires online publication of all draft laws and regulations affective trade and

1 The PJF formed a coalition, confirmed by King Mohammed VI on January 3, 2012, with three parties in the outgoing government – the independent Istiqlal, with 60 seats, the liberal National Rally of Independents (Rassemblement National des Indépendents), with 52, and the Socialist Union of Popular Forces (USFP), with 39.

13 investment on the Secretariat General of the Government (SGG) website. In the context of recent constitutional reform, formal consultative bodies have been put in place, such as the formal establishment of the Economic and Social Council (CES) in 2011, already foreseen in the 1996 constitution and which restates the emphasis on public engagement and consultation. Broad public and political consultations took also place over the regionalization strategy and the new constitution (www.réforme.ma). The development of a government wide public consultation policy will build on these achievements and concretize the new constitutional principle of citizen engagement.

8. The government program places emphasis on access to information, a parallel area of reform and prerequisite to effective public consultation, currently supported by the World Bank. The government program places emphasis on this area of reform through a dedicated law on access to information (article 27) currently under preparation and the proactive disclosure of key financial and budgetary information and the central and local level. The World Bank is currently providing technical assistance to the Government for the development and the implementation of the new legal, regulatory and institutional framework for access to information. Weak access to information has been highlighted as a major challenge in previous years, and Morocco’s performance on Global Integrity indicators illustrates this challenge in recent rankings, with measures of the strength of access to information and the media cited as “weak” (64/100), while the sub-component measuring the legal right of citizens to access information was rated as “very weak” (33/100). Furthermore, the 2010 Open Budget index ranks Morocco at 28 out of 100 due to insufficient reporting and disclosure on financial information and budget documentation lacking clarity and transparency, thus hampering Parliamentary oversight.

9. The budget reform has gained a new momentum and is considered a key lever to improve the performance of public service delivery and the accountability of government over the use of public resources. Growing fiscal constraints in Morocco (with a budget deficit of 6.8 percent in 2011) and the international public debt crisis further highlight the importance of fiscal transparency and increased allocative and operational efficiency in public expenditures. The budget reform is considered instrumental to achieving these multiple and complementary objectives and to addressing the above-mentioned weaknesses. The programmatic budget classification and the introduction of multi-annual budget perspectives are seen as ways to enhance the strategic nature of the government’s budget policy and to improve allocative efficiency. By strengthening the link between public policies, performance objectives, and budget appropriations, it would improve transparency and facilitate parliamentary oversight. The introduction of a performance management approach through which the government, ministries, and program managers commit to performance objectives and report on their achievements aims at strengthening the administration’s external and internal accountability. The

14 new managerial responsibility combined with increased flexibility in the management of public expenditures is meant to improve the budget’s operational efficiency. This will also require the integration of the budget with the performance management cycles as well as establishing robust performance monitoring and evaluation systems. Against this background, the performance approach is seen as a way to address both the fiscal constraints as well as shortcomings in the administration’s accountability over the effectiveness of public policies and programs.

10.Advancing regionalization is a key pillar of Morocco’s governance transition, as confirmed by the constitutional revisions and the new strategy adopted in March 2011. The emphasis on advancing regionalization is warranted by numerous weaknesses in the accountability and transparency of local governments, as well as the limited scope for citizen engagement in local affairs, which detrimentally impact the effectiveness of local government services. These shortcomings are notably reflected in the low score (c) in the last Public Expenditure and Financial Accountability (PEFA) assessment of the transparency of inter-governmental fiscal relations. Currently, fiscal transfers and resources allocations from the central government lack clarity and predictability. The different rules on revenue sharing, transfers, and allocation criteria are scattered across different regulations and are not always public. For instance, the report on local finances accompanying the budget law does not disclose transfers to individual local governments. Likewise, local government budgets are rarely made public. Different sets of rules exist depending on the fiscal sources—VAT, business tax, and income tax—of transfers to local governments, each passing through special Treasury accounts.

11.In order to address challenges on the local government level and to implement the new constitutional principles of self-determination, the government has initiated a major reform to the current fiscal transfer and equalization system, in addition to reforms strengthening the managerial responsibility and accountability of local governments. Local governments will benefit from increased competences and corresponding resources according to the principle of subsidiarity (Article 140-141). These important changes will be implemented through the revision of the organic law on local governments, the law on local finances and the revision of the regulatory framework on inter-governmental fiscal transfers. Such revisions are also warranted by the new organic budget law, as central and local governments share the same budget classification and public accounting rules. Likewise, the new transparency and public consultation policies are also applicable to local governments. Regional councils will be entrusted with greater responsibility for public service delivery and will require the corresponding financial visibility, autonomy, and tools. This will involve central planning and coordination with the government and its local representatives, line ministries and their devolved regional bodies, and local governments. The empowerment of regions and the new programmatic and performance-focused budget management approach

15 constitutes an opportunity to strengthen planning and among the numerous stakeholders intervening in a given region. The government sees this reform also as an opportunity to modernize local budget and financial management and improve intergovernmental fiscal relations, which are marked by many shortcomings that reduce transparency and efficiency in public expenditures and service delivery. Finally, the constitution calls for the setup of a two new funds (article 142) to strengthen vertical and horizontal equalization and reduce development disparities. All in all, this combination of reforms will ensure consistent implementation across the public sector of the new constitutional principles of transparency accountability, and participation.

C. Higher Level Objectives to which the Project Contributes

12.The project is fully in line with Transition Fund objectives by supporting the government in the implementation of transformational reforms that will strengthen economic governance. The reforms supported by this project will help to strengthen the country’s overall governance framework and make tangible the new Constitutional principles derived from popular demands of the Arab Spring. The Bank is supporting this governance reform agenda through a comprehensive support program, including (i) policy advice for the design of these new policies and laws, (ii) a multi-donor Accountability and Transparency Development Policy Operation (DPO) to support the adoption of this new legal and institutional framework and (iii) through the proposed technical assistance project to support the implementation of this new governance framework. The proposed project is fully integrated with the development policy operation and builds on the current policy dialogue by supporting the implementation of its three strategic reforms strengthening, respectively: (i) open governance through greater public consultation, (ii) accountability in public financial management through the budget reform and; (iii) fiscal decentralization through the revision of the fiscal transfer and equalization system to local governments.

13.The project directly contributes to the achievement of the common objectives of the Morocco Country Partnership Strategy (CPS) and its progress report, namely to strengthen governance and territoriality. These development objectives have been confirmed and even strengthened in the new constitution and government program. The CPS progress report, presented to the Board in May 2012, confirms the relevance of these objectives while recognizing the need to adapt the strategy to the new socio-political priorities by strengthening governance and accountability, ensuring greater social and economic inclusion, and increasing the scope for voice and public engagement. The proposed project is designed to support the achievement of the two cross- cutting objectives of the CPS by supporting the implementation of horizontal reforms including: (i) public consultation; (ii) performance based budgeting and fiscal transparency; and (ii) decentralization.

16 14.In focusing on reforms that improve the Executive while strengthening Parliamentary oversight, this project complements a parallel World Bank Justice Sector reform project. The Bank’s current engagement is thus designed as a holistic approach which helps to strengthen the three pillars of Morocco’s governance framework.

Donor coordination and complementarity

15.The technical assistance proposed under this project complements the current support to governance reforms provided by the World Bank together with other development partners. Support to these reforms benefit from close coordination with other donors, notably through the joint Morocco Accountability and Transparency Development Policy Operation (AT DPO), prepared with the European Union (EU) and the African Development Bank (AfDB). The components included in this project aim to support strategic reforms on civic engagement, performance budgeting and fiscal decentralization, which are central to the joint DPO and for which the authorities requested implementation support from the World Bank. This project will thus complement and strengthen the current engagement. It will also build on a large pool of analytical underpinnings as well as on up-stream technical assistance provided by the Bank, the EU, the AfDB and the MENA multi-donor trust fund, through the “Morocco and Tunisia economic governance support project”. Finally, the governance and decentralization reforms, supported by this project could eventually be complemented by dedicated capacity building projects, such as a local government support program discussed with the Bank and a public administration reform project discussed with the OECD and the Bank.

16.The synergies between this project and current interventions from the Bank and other donors are presented below:

Table 1: scoping of current donor support to governance reforms.

Reform areas/ World Bank (own European Union African OECD Donors resources and MENA Development multi-donor TF project) Bank Open AT DPO and policy AT DPO (joint budget AT DPO (joint Open government advice on the access to support) budget support) Government information law, the Partnership public consultation policy assessment and and the fiscal transparency application. policy. Public financial AT DPO and policy AT DPO and past TA to AT DPO. OECD senior management advice on the budget the budget reform (law, budget officer reform and on public training plan and action network and procurement. plan). Twinning on meetings financial controls: one with the CoA and one with the General inspectorate of Finance. TA on the tax reform.

17 Decentralization AT DPO and diagnostic of AT DPO. AT DPO the transfer and equalization system. Sector specific support to local government service delivery. Public Support to administrative Study on Advice on HRM administration simplification (CNEA) deconcentration, advice reform on human resource management (HRM) and on the quality of public services. Justice sector Justice sector Past MEDA justice reform enhancement technical support project (closed). assistance project + Justice sector public expenditure review.

II. Project Development Objectives

PDO

17.Objective of the Project. The Project Development Objective is to contribute to strengthen government transparency, accountability and public participation by (i) supporting the development and implementation of a public consultation policy and right a law to on petitions; (ii) improving access to fiscal information and enhancing performance orientation in budget management; and, (iii) strengthening fiscal decentralization.

i. Project Beneficiaries. 18.The project will support the implementation of a range of new constitutional rights and structural reforms that are expected to benefit the Moroccan population as a whole. More specifically the project’s primary beneficiaries will be citizens, civil society organizations, businesses, parliament, taxpayers, users of public services and local governments. Reforms supported under this project will benefit the project beneficiaries through the following expected outcomes:

(i) The development of a government wide public consultation policy and a law on the right to petitions in line with international standards, will strengthen citizens’ voice in public affairs;

(ii) Civil society organizations will be associated in the development of new public engagement policies through an inclusive and structured National Dialogue and will benefit from capacity building and training to effectively exercise these new rights;

(iii) Businesses and investors will benefit from increased transparency and consultation, which reduce information asymmetry and create a more

18 predictable regulatory environment and level playing field conducive to growth and employment;

(iv) Parliament and taxpayers will benefit from the new organic budget law introducing performance budgeting and increasing government accountability in the allocation and management of public resources and results achieved. The implementation of performance budgeting is expected to enhance parliamentary oversight, and strengthen the allocative and operational efficiency of public expenditures.

(v) Users of public services will benefit from the increased responsibility and accountability of managers and public service providers, through the introduction of performance budgeting;

(vi) Local governments will benefit from capacity building and from the revision of the fiscal transfer and equalization system, which will increase transparency of intergovernmental fiscal relations and contribute to more effective equalization policies. This reform would also create incentives for local revenue collection and greater self-determination, sought by the constitution.

19.The secondary beneficiaries of the project are the public administrations and notably: (i) the Ministry in charge of relations with parliament and civil society who will benefit from capacity building and support for its role as permanent secretariat for the National Dialogue, (ii) the Ministry of Economy and Finance who is in charge of the budget reform, (iii) the Ministry of Interior, who is tasked to implement the new constitutional provisions for advanced regionalization.

ii. PDO level results indicators. 20.At the level of the project development objective:

 Citizen’s new constitutional rights for greater participation in public affairs have been consecrated through the adoption of a public consultation policy and a draft law on petitions.

 The Government’s accountability towards parliament and tax payers over the use of public resources has been strengthened, through its commitment to annual performance objectives and the reporting on their achievement for a first wave of 3 key ministries.

 The transparency of intergovernmental fiscal relations and local finances has increased through the adoption of consolidated and transparent rules on fiscal transfers and equalization.

19 III. Project Description

A. Project components

21.The project supports the implementation of the governance framework foreseen in Morocco’s new Constitution through technical assistance and capacity building for three strategic intertwined governance reforms aiming to increase civic engagement in government affairs, enhance the government’s accountability towards parliament and tax payers, as well as to strengthen fiscal decentralization and local governance. The project follows an integrated and holistic approach by supporting three horizontal and mutually reinforcing governance reforms in order to improve the inclusiveness and effectiveness of Morocco’s public policies across the whole of government.

22.The project’s first component supports the development and implementation of government wide policies for public consultation and petitions. This reform not only concretizes new constitutional rights but will also create an enabling environment for greater citizen engagement in government affairs and will help build trust between the public administration and citizens. These policies will be developed in a participatory manner through a national dialogue to be headed by an independent personality.

23.The second project component supports the implementation of performance budgeting, another key horizontal governance reform that will enhance Government transparency and accountability. This reform represents a strategic lever to strengthen the government’s internal and external accountability in the implementation of public policies and the use of corresponding resources. The new organic budget law will require the Government and its different ministries to commit to performance objectives along with the budget proposal. At the end of each budget year the government will have to report to Parliament and to the public on the achievement of its performance targets. Likewise, this new budget management approach will also increase accountability and managerial flexibility within the public administration. Finally, the new programmatic budget presentation will increase fiscal transparency and the link between policy priorities and budget allocations.

24.The third project component will support the holistic implementation of these new governance principles across the public sector by strengthening fiscal decentralization, local governance and intergovernmental fiscal relations. The empowerment of directly elected local governments and strengthening transparency and public engagement in the management of local affairs, represent a key pillar of the Country’s new governance framework and Constitution. Reforms supported under the two first project components represent an opportunity to bring about more inclusive local governance and

20 strengthen their financial management. Furthermore, the advanced regionalization strategy and the planned empowerment of regions will necessitate in the transfer of new competences and financial resources. This will in turn require the revision of the current system of fiscal transfers and equalization, taking into account the new distribution of competences in a constrained fiscal environment.

25.The duration of this project is envisaged for a period of 4 years, in line with the time frame of the government’s development program (2012-2016) as well as with the transition period foreseen for the full implementation of the new constitution. Supporting the implementation of reforms covered under the Morocco Accountability and Transparency DPL, this project will also support an information and communication strategy that will help provide the necessary visibility to improve awareness within the administration and the public on the benefits of the government’s reform strategy and ongoing initiatives. This strategy will be particularly important for cross-cutting reforms such as public consultations, performance budgeting and fiscal decentralization. The strategy should also contribute to building momentum for their effective and successful implementation. For the public consultation reform work under Component I, a specific information and communication strategy will be developed around the launch and implementation of the National Dialogue in order to support the reform process and duration of activities under this new and innovative reform area.

Component I – Strengthening public participation (USD 0.73 million):

26.Rationale: Fostering greater public engagement is one of the core commitments enshrined in the new Constitution. Improving public consultation and participation in the design and implementation of public policies contributes to improving their quality as well as their implementation by helping build consensus and, in turn, compliance. Consultation practices are widely accepted as effective tools for building public trust around key reforms, generating efficiency savings and accelerating public service reform. Better informed and engaged users benefit decision-makers by leading to better quality participation and greater efforts to support and improve reform implementation. Such reforms can also impact the quality of services themselves through measureable improvements such as: (i) lower running costs; (ii) less time spent on administration; (iii) more efficient targeting of resources and; (iv) increased consumer satisfaction.

27.In efforts to concretize these principles, the Ministry charged with relations with Parliament and Civil Society (MCRP) is organizing an inclusive national dialogue around the development of rules, policies and a legal framework defining public engagement mechanisms. The National Dialogue adopts a participatory approach, with a wide representation of relevant ministries and representatives of universities and research centers, specialized experts, civil

21 society representatives, and representatives from the media industry. Selection methodology for participation will take into account the representation of civil society organizations from a wide geographical distribution and various sectoral areas, and will take place in coordination with concerned ministries. The overall dialogue process will adhere to generally accepted international standards.

28.An independent Steering Committee will be established to guide the development of the process and will be comprised of representatives from government, civil society, and the private sector. Four thematic committees will be established in the areas of: (i) motions; (ii) the governance of NGOs; (iii) guidelines on public engagement; and, (iv) petitions. These thematic committees will be comprised of representatives from government and civil society who have technical expertise in each thematic area and who will work on further developing the legal and policy framework relevant to each area. On issues of monitoring and evaluation, the Ministry will issue reports on the progress of the national dialogue on a regular basis. These reports will be made public and will be disseminated to the media. This process will lead into the preparation of the final document on the outcomes and recommendations of the national dialogue. A ministerial decision has been adopted in November 2012 to formalize the participative approach around the development of the legal and policy framework defining public engagement, which outlines the objectives of the initiative, the structure and composition of the Steering Committee and thematic committees, the duration of the process, and the expected outcomes of laws and policies related to public engagement.

29.The objective of Component I is to support the launch and implementation of a national dialogue tasked with designing a government wide policy on public consultations and a law on petitions. The main outcome of national dialogue will be a special law or policy, derived from discussions with civil society organizations and stakeholders, which sets the main guidelines and principles for public engagement. This law or policy will be presented to Parliament in 2013. This project component is subdivided into three sub- components focusing on (i) support to the national dialogue on the new constitutional principles of citizen participation and the participatory development of related policies; (ii) capacity building and piloting of the new consultation policy, and; (iii) monitoring and evaluation. Activities under Component I will provide international expertise, logistical support to the setup of the national dialogue, in addition to technical assistance for the design and the implementation of these new policies and the operational tools and guidelines required. To ensure more effective civil engagement, capacity building activities to public administration staff and civil society representatives will take place in close coordination with the ANSA-Arab World Initiative, in addition to World Bank Institute knowledge-exchange activities. International expertise will include hands-on assistance from good practice examples in the area of public engagement, such as that of the UK.

22 Component II: Enhancing Efficiency and Accountability in the use of Public Funds (USD 1.824 million)

30.The budget reform is a building block of Morocco’s governance and public sector reform agenda as it enhances transparency and accountability throughout the budget process, strengthens parliamentary oversight, and represents a strong lever for the modernization of the management of public expenditures and services. Public financial management, budget transparency, and budget oversight are integral to improving government efficiency and adapting the public sector towards performance orientation and results. This project component is subdivided in four subcomponents focusing respectively on (i) the implementation of the budget reform, (i) the new public procurement rules, (iii) a diagnostic on public investment management, and (iv) an external public financial management assessment (PEFA).

31.Sub-component II-1: this sub-component will support the implementation of the performance budgeting reform, through the provision of public sector expertise and technical assistance for the modernization of budget classification, the preparation of bylaws and new budget management procedures. It will empower program managers in addition to making them more accountable for their performance. Activities under this component will also support the development of a government wide performance monitoring and evaluation framework and will build on the Bank’s past support to the conceptualization and pilot testing of this reform. The Bank had supported the initial development of guidelines for medium term budget frameworks and for the design of performance objectives and indicators. These guidelines now need to be revised in accordance with the new organic budget law and the results of previous pilot testing. The project will also support the three first ministries for the restructuring of their budgets in a programmatic and multiannual format as well as the development of their performance commitments to be sent to Parliament along with their draft budget in 2014.

32.This reform will be supported by the transfer of knowledge from OECD countries having implemented performance budgeting reforms. This sub- component will support the government in the implementation of the new organic budget law by introducing programmatic and performance budgeting. A draft organic budget law has been prepared and is currently discussed with Parliament and with the Court of Audit. The adoption of the law is foreseen in 2013 with an early implementation in key line ministries with the 2014 budget. The Ministry of Economy and Finance, the Ministry of Health and the Ministry of Education would constitute the first implementation wave and start preparing the new programmatic budget in 2013, with the corresponding performance objectives and indicators. The reform will be rolled out in sequence with full implementation in 2016. In each ministry, program heads and managers will be designated and tasked with setting the performance objectives, managing the corresponding resources and reporting on their achievements. The corollary of

23 this increased accountability is more managerial flexibility for the reallocation and management of budget resources. For that purpose, the Ministry of Economy and Finance has started to differentiate and alleviate ex-ante financial controls based on managers’ capacity and risks.

33.The public sector expertise needed for the implementation of this reform will be provided by a one or more Ministries of Finance from OECD countries having a unique expertise and practical experience in the implementation of such a budget reform, such as France, Canada, the UK and Chile. The partnership would be led by a country having also the necessary regional experience and language skills to be able to transfer effectively this knowledge and experience to the Moroccan counterparts. This partnership will take the form of a direct administrative services contract with the lead partner public administration, as the required expertise is mostly available in the public sector. This contract will enable public officials from Morocco to benefit from the experience of their counterparts in the design and implementation of the various dimensions of the budget reform. As this reform necessitates an overhaul of the current budget preparation and management procedures with wide ranging implications, both the Ministry of Economy and Finance and the line ministries will need support for the implementation of this structural reform. This support would include advice on the steering and change management for this reform, expertise for the design of the new budget preparation and management rules and regulation, technical assistance and capacity building for the introduction of the new performance management approach and support for the setup of a government wide performance monitoring and evaluation system, integrated with the government’s current information systems. The proposed cooperation will leverage this expertise and would be structured along the following three sub-components: (A) support to the design and piloting of the budget reform, (B) support to the implementation of the performance-based approach in line ministries, and (C) development of a government wide performance monitoring and evaluating system.

34. Sub-component II-2 : supports the implementation of the new procurement rules and regulations across the public sector, through the development of training modules and the training of public sector trainers. The implementation of the new procurement rules and regulations, which will enter into force in 2013, will be primarily supported through training and capacity building. The new rules and regulations aim to enhance transparency, efficiency and value for money of public procurement, including through e-procurement. The new decree extends the scope of public procurement rules to agencies and local governments, thus requiring large training efforts. This subcomponent will focus on the design of training modules and the training of trainers for the central administration, using the existing sectoral training structures/facilities in the country. This includes the MEF training institute for the central level, and the MoI directorate and facilities for local governments (Collectivités

24 territoriales/locales). This subcomponent could also tap into the pool/network of procurement training experts developed by the TGR (Trésorerie Générale du Royaume) to teach within those existing sectoral institutions, and for the development of the e-procurement aspects. Support to local governments will be provided under component 3, along with the other new local public financial management rules.

35.Sub-component II-3: will finance a public investment management diagnostic and technical assistance to improve the efficiency of public investments in Morocco. Authorities and international organizations have expressed concerns regarding the uneven effectiveness and impact of public investments. As mentioned in the introduction, the scaling up of public investments in social sectors and for basic services have not always yielded the expected development outcomes. Development challenges and social and regional disparities remain high and addressing them is the Government’s utmost priority. However given the financial constraints, this effort requires also enhancing the effectiveness of programmed public investments and thus the strengthening the public investment management (PIM) process. The Ministry of Economy and Finance has thus expressed interest in the new and comprehensive PIM assessment toolkit developed by the World Bank and covering the entire project cycle, from project identification, selection, management through to evaluation. The current component would support an initial diagnostic with this tool kit for the Ministry of Economy and Finance itself as well as for one or two pilot ministries. This will enable customizing further the toolkit, training public officials who could then carry out the assessment on a larger scale, while already providing some recommendations on how to strengthen public investment management in the ministries covered.

36.Sub-component II-4: supports an external public financial management (PFM) diagnostic (PEFA) to assess the progress made in the recent reforms, including the performance budgeting reform. A joint external diagnostic of Morocco’s public financial management system, using the Public Expenditure and Financial Accountability (PEFA) methodology has been conducted in 2009 with the European Union and the African Development Bank and has made recommendations to improve. Since then, the Government has initiated important reforms across the budget cycle, from preparation, execution, with a new integrated financial management system GID, but also on procurement, public accounting and on financial controls. Regarding the latter, the commitment control body and the accountant’s financial controls have been merged in a single entity and the process has been simplified and modernized introducing a risk based approach (contrôle modulé de la dépense). Likewise, the budget reform, supported by the DPL and subcomponent II-1 will move to actual implementation, thus addressing some of the weaknesses highlighted in the 2009 PEFA regarding notably the link between public policies and budget allocations. The PEFA update will enable to capture these changes and to incorporate its findings and recommendations in the ongoing reform process.

25 Like the initial PEFA, the update will be conducted jointly with the European Union and with the African Development Bank.

Component III: Advancing Regionalization (USD 0.769 million)

37.Rationale: Regionalization is a key component of Morocco’s governance transition, as confirmed by the constitutional revisions and the new Advanced Regionalization strategy adopted in March 2011. Major changes were introduced in order to strengthen the regions and their socio-economic development, increase accountability and transparency of local governments as well as of intergovernmental fiscal relations. Local governments are at the frontline of public service provision to citizens and the newly elected and empowered regions will have a key role in planning and coordination for public services and infrastructure. Expectations are particularly high at the local level, considering their direct interface with citizens for numerous basic public services. This project will thus provide training and capacity building to local governments for improved public financial management, procurement and service provision. Likewise, this component will support local government’s efforts to strengthen fiscal transparency and comply with the forthcoming law on access to information, supported by the Bank. Activities supported under this project can be complemented by a subsequent project proposal focusing on strengthening municipalities’ capacity to deliver public services, including through cooperative arrangements (groupements inter-communaux) and mutualized technical service centers (centres d’appui à maîtrise d’ouvrage).

38.Component III supports fiscal decentralization reforms in an effort to strengthen the performance of local governments and improve relations across levels of government, in line with the new constitutional provisions empowering regional and local governments. The project supports the regionalization of government functions as an opportunity to stimulate economic growth across the country and reduce spatial inequalities, which fueled protests. It contributes to re-assessing functions of the central government based on the principle of subsidiarity, and following an inclusive sectoral approach, in view of improving public service delivery through decentralization. It would provide regional stakeholders with instruments to set development strategies and coordinate with the central government. The Constitution also foresees the setup of new funds to foster vertical (state- local governments) and horizontal (between regions) equalization in order to reduce regional disparities. These changes require the overhaul of the current fiscal transfer and equalization system, currently assessed by the Bank. Activities supported under Component III are divided into three sub-components, including: (i) support to adaptation of the fiscal transfer and equalization system for local governments; (ii) capacity building support; and, (iii) support to the system of planning and performance contracting.

39.Sub-component III-1: will provide advice and technical assistance to the reform of the fiscal transfers and equalization system, in line with the new

26 constitution and strategy for advanced regionalization. This technical assistance builds on the diagnostic of the current transfer and equalization system supported by the Bank and the MENA multi-donor trust fund. It will including: (i) international and local expertise from practitioners to support the development and costing of different reform scenarios to adapt the fiscal transfer system to the new constitutional provision while strengthening its transparency, equalization effect and incentives for the mobilization of local revenues. This expertise will further support authorities in the revision of the system once the reform scenario has been validated; (ii) benchmarking of similar reforms notably in Latin America and in Europe to inform the design and different scenarios as well as the implementation of this reform; (iii) information seminars and change management events to build consensus on the proposed reform and support its implementation.

40.Sub-component III-2: will support training and capacity building for local governments (LG) on public financial management. This activity includes support for the development of implementing regulations and user manuals for the new law on local finance; and including LG training and capacity building on: (i) budget preparation; (ii) strategic budgeting based on the Communal and regional development plans; (iii) public procurement, based on the new procurement decree and regulation; and, (iv) training on the new IFMIS system GID.

41.Sub-component III-3: will provide technical assistance for the revision of the current planning and performance contracting guidelines and tools, in line with the new competences of the regions and the budget reform. It will further provide training and capacity building on these tools for local governments, notably on: (i) the costing of multi-annual investment projects; (ii) on economic and financial (ecofin) analysis of projects; (iii) on how to strengthen the link between the plan, the projects and the annual budget; (iv) on the new performance contracting tools and their implementation at the regional level, in line with the new performance budgeting approach.

B. Project Financing

B.i. Financing Instrument

The technical assistance project will be financed through a grant from the MENA Transition Fund in the amount of 4,000,000 USD. The grant will be recipient executed in line with the Bank and the Transition Fund’s policies and procedures.

B.ii. Project Cost and Financing

Indicative project budget for 4 years (in USD)

27 Transitio Country Bank Total Cost by Component n Fund Financing Financing (USD) I. Strengthening public participation I-1: Support to the National Dialogue on the new 322,000 50,000 constitutional principles of citizen participation and to the participatory development of related consultation and petitions policies. I-2: Piloting of the new consultation policy in one 266,000 ministry and one local government and capacity building of officials and CSOs 142,000 I-3: Development of a monitoring and evaluation system, including on-line consultations and user surveys.

Total component I 730,000 50,000 II. Enhancing Efficiency and Accountability in the Use of Public Funds 1,500,00 70,000 II-1 Support to the implementation of the performance 0 budgeting reform through public sector expertise from OECD countries having implemented the same reform. It comprises support to (i) the design and steering of the budget reform and for the development of the new procedures and tools, (ii) the implementation of the performance-based approach in line ministries, and (iii) the development of a government wide performance monitoring and evaluating system and the revision of the financial management information systems. II-2 training and capacity building for the implementation of the new public procurement rules. 124,000 II-3 Public investment management diagnostic and 100,000 technical assistance II-4 public financial management assessment through an 100,000 update of the 2009 PEFA. 1,824,00 70,000 Total component II 0 III. Advancing Regionalization III-1 Adapting the fiscal transfer and equalization system 277,800 50,000 for local governments (LG), in accordance with the new constitution and the advanced regionalization strategy. III-2 Capacity building for Local Government (LG) 296,000 financial management, including on the new public procurement rules. 195,000 III-3 Strengthening the planning and performance contracting process in line with the enhanced role of regions.

Total component III 768,800 50,000 Information and communication 50,000 Reserve (Misc expenditures) 137,200 Project Implementation Unit 490,000 200,000 2

28 Total project cost 4,000,00 0

Nature of expenditures

Expenditures Amount estimated in % Millions of USD Works 0 0% Goods 0.02 0.5% Consultants’ services and 3.98 99.5% training Total Financing Required 4,000,000 100%

42.The project will finance primarily services (99.5%) and limited goods (0.5%), mainly for the operation of the project implementation unit. The project will not finance works. Services financed by the project notably include local and international consultancy services, public sector administrative services, transportation services, information and communication services as well as events, training seminars and visits abroad.

43.The financing of this project is complemented by financing from the Government and from the Bank. The Government is providing a counterpart contribution, both in kind (staff) and budget allocations. The Bank is supporting these reforms and project activities through technical assistance in the amount of 170,000 USD as well as through a proposed development policy loan series under preparation, estimated at USD 200 million.

44.Component II of the project, supporting the performance budgeting reform will benefit from the provision of public sector expertise and knowledge transfer from partner countries. This will be done through an administrative services agreement, on a cost recovery basis for the advice, expertise and assistance provided, including deliverables. This will enable to mobilize high level expertise from public agencies or state institutions (of selected/identified OECD countries) at very reasonable -nonprofit- costs, leveraging existing bilateral cooperation.

45.The project is recipient executed and will be managed by the Ministry for General Affairs and Governance. In order to maximize the financing for operational activities and the project will finance only the necessary assistance to the project management through the hiring of a local project coordinator and expertise on procurement and financial management and leverage existing human and financial resources from the implementing agency.

2 In kind contribution related to project management (staff, offices, utilities)

29 46.In order to support the implementation of these new and complex reforms, the project will finance internal and external information and communication activities. Public sector reforms supported in the past have suffered from uneven appropriation and resistance within the public administration. Long and complex reforms such as the budget reform suffered from lake of information and decreasing commitment over time from public officials. Change management is thus seen as a major success factor for these reforms and for the project. This is why the project includes a dedicated budget for information and communication to increase the visibility of these reforms and sustain their momentum across the administration.

IV. Implementation

A. Institutional and Implementation Arrangements

47.The project is recipient executed and will be implemented by the ministry of General Affairs and Governance (MAGG). The project will be managed by a project management unit (PMU) headed by a public official from MAGG and supported by a project coordinator as well as procurement and financial expertise. The responsibility of specific activity implementation under each component will be left at the responsibility of each respective lead ministry. The development of a government wide consultation policy foreseen under component I is entrusted to the Ministry in charge of relations with Parliament and Civil Society, the budget reform, covered by component II, is led by the Ministry of Economy and Finance and the implementation of the decentralization strategy, supported by component III, is led by the Ministry of Interior. A project Steering Committee will oversee the project implementation and coordinate its activities. To facilitate project implementation and supervision, procurement plans will be prepared to identify a limited number of key experts to be recruited and to package most activities into single contracts to be awarded to international and/or local firms that have proven capacity to deliver results under “turn-key” contracts or similar results-based approaches.

48.The project steering committee (SC) will oversee the project implementation and the project management unit and coordinate the different activities and project stakeholders. The SC, will be headed by MAGG and include all project stakeholders, notably the project director and coordinator, representatives from the Ministries in charge of relations with Parliament and Civil Society, of Economy and Finance and of Interior as well as other relevant project stakeholders. It will meet at the request of the president as many times as necessary and at least four times per year. The task of the Steering Committee is to provide overall guidance, facilitation, coordination and supervision of project activities throughout the project cycle. The SC membership, mandate and internal regulation will be specified in terms of references.

30 49.A project management unit (PMU) will be established and supervised by MAGG, which will be responsible for the implementation of project activities, procurement of services and financial management. The Unit will also be tasked with monitoring the activities and coordination between the different actors associated in the respective reforms covered under this project. The Project Director presides over the PMU and will be assisted by a Project Coordinator, as well as an expert in procurement and financial management. The Project Director is appointed by the Minister and the three other positions are financed by the project. Detailed descriptions of each position as follows:

. The Project Director (PD) is a public official from MAGG. He will be assisted by a coordinator, and will oversee the implementation of the project; sign contracts, and validates report implementation reports and financial reports.

. The Project Coordinator (PC) is a local expert with project management experience, hired by the project. He will manage the daily activities of the project, under the responsibility of the Project Director, manage procurement, accounting and reporting and oversees financial management. The PC sets up a system for monitoring and evaluation of activities and results of the project in close coordination with the Ministries, relevant Departments and beneficiaries involved in respective reforms. The PC also controls the activities relating to information and communication relating to on-going reforms covered under the project.

. The Procurement Expert (PE) is a local consultant, hired by the project. He prepares a procurement plan for the project and updates this plan as needed. The PE prepares the bidding documents and assists in recruitment processes with the coordinator, under the supervision of the PD, and in consultation with the World Bank on the basis of terms and references provided by the service recipient. The PE works closely with its counterpart office of the Bank. His/ her terms of reference are annexed to the project implementation manual.

. The Financial Expert (FE), is a local consultant hired by the project, manages the project accounts and produces quarterly financial reports, in close coordination with the Finance Office of the Bank. His/her terms of reference are annexed to the project implementation manual.

Specific implementation mechanisms:

50.Subcomponent II-1, supporting the implementation of the performance budgeting reform will be implemented through an administrative services contract with one or more OECD countries having a unique public sector expertise and experience in the implementation of such a budget reform as well as the necessary regional experience and language skills. This

31 administrative services contract will enable to pair high public officials from Morocco with their counterparts in these countries to foster knowledge exchange in the design, steering and implementation of the various dimensions of the budget reform. Under the administrative services contract, the contracting public institution from the OECD partner country will second a competent official from its Ministry of Finance to the Ministry of Economy and Finance in Morocco for the duration of the contract. This seconded official will act as adviser and as coordinator for the implementation of the activities foreseen under the contract. He will work in close cooperation with his appointed Moroccan counterpart and under the guidance and supervision of a project head, to be appointed by the contracting public institution. The adviser will have an office in the premises of the Ministry. He will report quarterly to his counterpart at the Ministry of Economy and Finance as well as to the project director from MAGG on the implementation of the administrative services contract. Under each specific component of this contract, a lead expert, who is a high public official with proven expertise and experience in the subject matter, will take responsibility for the delivery of the advice and administrative services agreed upon. He will be supported by a pool of experienced public officials who will provide specific short term expertise as required for the deliverables of the contract. Three to four lead experts are foreseen in addition to the adviser. Public sector expertise can be mobilized from other OECD countries as needed for the project delivery, under the supervision and responsibility of the contracting public institution. Such cooperation can take the form of sub-contracting or co-contracting for the purpose of this administrative services contract. This component and contract includes also two visits of Moroccan public officials to two OECD countries having implemented such budget reform to learn from their experience. A dedicated steering committee will be established to oversee the smooth implementation of this administrative services contract. It shall be co-chaired by the two project heads, who are two high official appointed respectively by the contracting parties. The dedicated steering committee signatories will meet at least twice a year in Morocco. A launching and closing seminar are foreseen and included in the budget. Financial management of the administrative services contract will be ensured by the contracting public institution, which will send the payment requests in line with the contract schedule to the project director at MAGG.

B. Results Monitoring and Evaluation

51.M&E organizational arrangements. The M&E system will be based on the agreed results framework and monitoring arrangements (See Annex 1). The PMU will be responsible for supervising the M&E activities at component and PDO level. For each component the lead ministry will be in charge of the M&E of its own project activities and report on a quarterly basis to the PMU at the MAGG. The PMU will assemble and review this information and complement it with available external information sources referenced in the project result

32 framework and include it in its quarterly reports to the Bank. The project result indicators will be, to the extent possible, aligned with and fed by the administration’s own information systems.

52.M&E actions. The project M&E system will be complemented by specific M&E actions funded under the project or by respected independent external surveys publicly available. The former include on-line user surveys and an evaluation to be conducted under component I on the implementation of the public consultation policy as well as an external Public Expenditure and Financial Accountability (PEFA) assessment funded under component II. The results from external independent assessments, such as World value survey, on citizen’s engagement as well as from the Open Budget Index on fiscal transparency will further feed the project’s M&E system. Further, the project will also support the development of reform specific M&E systems. For instance the national dialogue on public consultation will have its own M&E system, including a feedback mechanism for participants, a monitoring system for the implementation of the new public consultation policy and external evaluations. Likewise, component II will support the development of a government wide performance M&E system in the context of the budget reform, comprising performance monitoring integrated in the budget cycle, ex-post performance audits and evaluations, associating external experts. These different M&E systems, once operational, will further strengthen the project M&E system and facilitate its alignment with the government’s priorities and information systems. This will also improve the sustainability of results beyond the project duration.

C. Sustainability

53.The main objective of the project is to support the sustainable implementation of the new constitutional rights and governance principles and the transformational reforms derived from these changes. The project is thus supporting sustainable reform efforts and is designed in a way to maximize the sustainability of the results achieved. It is therefore designed in an integrated manner to supporting the macro, meso and micro levels. At the macro level the project support the revision of the policy framework and more specifically the development of a new policy on public consultations, a new law on the right to petition, the organic finance law and a new regulatory framework on fiscal transfers to local governments. At the meso level the project is supporting the necessary institutional development for the implementation of these new policies and laws, including by supporting the institutionalization of the national dialogue and its M&E system, by supporting the institutional setup necessary for the steering and management of the budget reform at the ministry of Economy and Finance as well as in line ministries. At the micro level the project is providing training and capacity building to the public officials and Non State Actors involved in the actual implementation of these reforms and new policies.

33 54.To increase the sustainability of the capacity building activities, the project support will focus on institutional strengthening and on the development of training modules in close cooperation with established public training institutions. It will train trainers, both from the public sector and from the civil society and work very closely with parallel support initiatives to civil society or other donors to roll out the training and capacity building activities. On component I the project will notably work with the Bank funded ANSA-Arab World initiative supporting demand for good governance activities in Morocco, including on public consultation. On component II, the project will work very closely with the European Union who has developed a training plan for the budget reform and could support its implementation.

55.Component II provides innovative support to the budget reform by building in the transfer of knowledge from public sector practitioners to Moroccan counterparts. The design of this component will capitalize on the benefits of peer-to-peer knowledge exchange, by building sustainable working relations across countries, thus contributing to the sustainability of this reform. Experience has shown that such administrative cooperation between peers has often led to knowledge-exchange well beyond the project duration.

56.Close integration with the multi-donor development policy operation (Hakama) provides this project with a strong anchor and additional long- term reinforcement. Over the past decade, the Bank has supported Morocco’s public sector reform agenda through similar development operations that have helped build strong analytical underpinnings as well as in-depth policy dialogue with key counterparts on which this project will build.

1. V. Key Risks and Mitigation Measures 2. A. Risk Ratings Summary

Stakeholder Risk High (H) Implementing Agency Risk - Capacity High (H) - Governance Moderate (M) Project Risk - Design Moderate (M) - Social and Environmental Low (L) - Program and Donor Low (L) - Delivery Monitoring and Sustainability Moderate (M) Overall implementation risk Moderate (M)

34 B. Description

57.Stakeholder Risks are considered high considering the high expectations from the public and the new and transformational reforms supported by the project. While there is a generally strong interest by civil society to be engaged in government decision-making, there remains some uncertainty regarding public confidence and uptake towards government efforts to consult. Popular opinion in regards to past experiences with consultation has been largely negative, as many citizens claim past efforts to consult by the government have been largely ineffective or not genuine. In order to mitigate this risk, an information and communication campaign will accompany the progress of the activities under Component I to build momentum and ownership among both government officials and the public. In addition the National Dialogue will adopt a ‘platform approach’ which is a means to phase and sequence reform stages to ensure that adequate capacity and consensus is built along the way that will not affect the overall success of the larger reform program.

58.Expectations are high among the public on visible and concrete results relating to transparency, accountability and citizen participation, which will be dependent on government capacity to adequately sequence and phase reforms, prioritizing ‘quick-wins’ while maintaining a long-term reform perspective. While the current sociopolitical context is more conducive to change, it also bears important risks of frustration and tension in the absence of visible results in the short term. Managing people’s expectations and the sequencing of reforms and changes across the public sector are thus critical factors for the success of the government’s program particularly given the transformational and transversal nature of reforms relating to public consultation, performance-based budgeting and decentralization. The authorities and the project aim to mitigate the risk of frustration by building-in intermediate visible results throughout the reform process, such as the setup of the national dialogue on citizen engagement as well as visible fiscal transparency measures. In order to increase the potential impact on public service delivery, the implementation of the budget reform will be initially focused on the ministries of health, education and finance (including the tax authority). 59.The risk of insufficient ownership by Government, project stakeholders and the donor community is low. The proposed project responds to the high level directions outlined by Morocco’s 2011 Constitution that calls for the “inclusive participation in government decision making (Articles 12-15); balanced public finances (Article 77); and advancement of the regionalization agenda through principles of good governance, greater accountability, and improved representation.” The project components and accompanying reforms are strongly anchored in these new Constitutional provisions as well as the new government program which has set the stage for transformational initiatives particularly in the area of governance. Therefore, the team does not envisage

35 significant resistance for reform in the proposed thematic areas, largely due to strong popular backing for greater accountability and transparency in government affairs, and the propensity of such reforms to produce concrete and visible change in the short-term. 60.The implementation of the Government’s large governance reform program is faced with major coordination challenges, considering the numerous reforms and their cross-cutting nature. The project design aims at mitigating this coordination risk by focusing on three strategic and intertwined reforms and by entrusting the project management to the Ministry of General Affairs and Governance, which has this coordination mandate. The responsibility of specific activity implementation under each component will be left at the responsibility of each respective lead ministry. The development of a government wide consultation policy is thus entrusted to the Ministry in charge of relations with Parliament and Civil Society, the budget reform is led by the Ministry of Economy and Finance and the implementation of the decentralization strategy is led by the Ministry of Interior. 61.Risks to the successful execution of the overall project stem largely from limited implementation capacity of the implementing agency and counterparts. The Ministry of General Affairs and Governance, deals primarily with public policies and has limited experience in managing projects. The mandate to coordinate governance reforms is new for the ministry and it is still strengthening its own capacities to fulfil it. Likewise, Ministry charged with relations with Parliament and Civil Society, has also a new and extended mandate (Civil Society) and limited experience in managing projects. The project seeks to mitigate this high risk by supporting the project management unit, providing implementation support from the Bank and hand holding advice on the different reforms. 62.In addition to these horizontal risks, each component/ reform may face its own specific challenges, which the project design aims to address as follows:

 In regards to public consultation, there is a risk of insufficient engagement from the public administration in the absence of a formalized and established policy. Although authorities have scaled up public consultation on strategic and high level reforms, such as the Constitution, the decentralization strategy and the justice reform, other consultation processes remained generally ad-hoc, primarily focused on strategies rather than on actual policies and often seen as a mere validation process. The authorities aim to address this potential risk by launching a high level and inclusive national dialogue for the design of the country’s new civic engagement policies. This dialogue will be launched by the Head of Government and piloted by an inclusive steering committee, in addition to thematic sub-committees which will associate all relevant ministries as well as civil society organizations. The design of Component I aim to further mitigate this risk by incorporating a strong information and communication

36 strategy linked to the launch and implementation of the National Dialogue, in order to raise awareness of on-going initiatives and build consensus for reform. In addition, the e-consultation platform will be a useful tool to help expand the scope of consultation to a wider user base as well as act as a medium for government to disseminate information and updates on overall progress.

 Regarding the budget reform, there is a risk of slippage and of the lack of engagement from line ministries in the absence of new formal rules and regulations for budget preparation and management. The reform has suffered delays in the absence of a clear time table. Past pilot testing of the performance approach yielded limited results as the legal and regulatory framework remained unchanged and created frustration among ministries which were confronted with parallel procedures. The authorities recognized this limitation and thus focused their efforts on the revision of the organic budget law, which is in its final stage. A sequenced implementation plan is also being developed. The project will help mitigate this risk by assisting the Ministry of Economy and Finance in developing the necessary guidelines for line ministries and by supporting them in their implementation.

 The regionalization reform is complex and highly political, and thus may be faced with a risk of implementation delay. The constitutional revisions and the new Advanced Regionalization strategy, adopted in March 2011, introduced major changes empowering regions, reducing their numbers and redistributing competences and resources. These changes will be implemented through the revision of the organic law on local governments and will also require the revision and consolidation of the regulatory framework on inter-governmental fiscal transfers as well as the amendment of the law on local finances. These important and sensitive changes present a risk of delays and resistance. This risk is partly mitigated by the high level political support this reform has as well as by the participatory approach followed by the high commission for regionalization for the development of the strategy. Furthermore, other national reforms imply the revision of the legal framework for local governments. For instance, the new organic budget law warrants the alignment of local governments’ budget classification and public accounting rules. Likewise, the public consultation policy supported under Component I is also applicable to local governments and thus require the revision of the transparency and consultation provisions in their legal and regulatory framework. These entry points represent further opportunities to strengthen local governance and to advance regionalization.

37 VI. Appraisal Summary

A. Economic and Financial Analysis

63.Strengthening the country’s governance framework will have significant benefits for the society at large. Although it is difficult to quantify the economic and financial impact of such transformational and cross cutting reforms, and the causal link with the project’s support, economic research (Gelos & Wei 2005 et Glennerster & Shin 2008) suggests a positive correlation between fiscal transparency, foreign investments and government borrowing costs and interest spreads. Anecdotal evidence confirms that a more open mode of governance with genuine public participation contributes to improve the design, acceptance and implementation of public policies and regulations. Enabling citizens to voice their priorities enables to better target public programs and expenditures and improves the uptake of public services offered. The same is true for business and investors, which benefit from reduced information asymmetry and greater regulatory predictability, thus creating a more level playing field conducive to growth and employment.

64.Regarding public financial management, increased accountability over the budget allocations and performance creates incentives for greater allocative efficiency. Likewise, increased managerial responsibility and accountability within the public administration of budget management fosters greater operational efficiency of public expenditures. The same is true for increased transparency of intergovernmental fiscal relations, which will contribute to more effective equalization policies to reduce regional disparities while creating incentives for local revenue collection and greater self-determination of local governments, sought by the constitution.

B. Technical

65. The project design follows a comprehensive and collaborative approach to support the implementation of the new Governance framework. It uses an integrated approach, using different reform levers to improve government accountability and transparency, by supporting mutually reinforcing reforms that foster open governance, improve public financial management and strengthen intergovernmental fiscal relations. It follows also a holistic approach by supporting horizontal structural reforms across the public sector (central and local governance) to enhance impact. The project is integrated in the Bank’s comprehensive support to Morocco’s governance reforms, comprising policy advice for the design of the new laws and policies, a development policy operation (DPO) supporting their adoption and this technical assistance to support their implementation. The project follows a collaborative approach with bilateral and multilateral donors, both through involving OECD member countries in the provision of expertise (component II) and through the joint DPO and related policy dialogue.

38 66.The proposed project components are technically sound and viable. The advice and technical assistance provided is in line with international standards and good practices. The policy advice on the public consultation and transparency policies are based on prior policy notes and international benchmarking. It has associated the expertise from the Bank’s anchor as well as from internationally recognized experts and practitioners. The advice on the budget reform builds on the Bank’s global expertise and experiences, including from Europe, North America and Latin America and associates high level practitioners from OECD countries having experienced similar budget reforms. Finally, the support to the revision of the fiscal transfer and equalization system will build on a comprehensive diagnostic of the current system and its evolutions and integrate an international benchmarking.

67.The project builds on extensive analytical work from the Bank and other development partners accumulated during the last decade of support to Morocco’s public sector reform as well as on the Bank’s global knowledge and tools. The public finance management diagnostic foreseen will use the tested multi-donor Public Expenditure and Financial Accountability methodology. Likewise, the Public Investment Management (PIM) diagnostic foreseen will use the comprehensive tool kit developed by the Bank and applied in several countries.

C. Financial Management

68.The financial management system within the Ministry of General Affairs was appraised to determine if it complies with the requirements of the Bank in respect to OP/BP10.02. The financial management assessment of the Ministry of General Affairs and Governance covered the areas of accounting and financial management, as well as the reporting and auditing processes of the project. The financial management system, including necessary arrangements to respond to the needs of the financial monitoring of the project, satisfies the minimum requirements of the Bank.

69.The assessment concluded that the Ministry of General Affairs and Governance, strengthened by the suggested arrangement of the PMU, will have sufficient capacity to manage project financial matters and administer grant funds. The main responsibilities will include Project budgeting, treasury, general accounting and reporting. The FM inherent risk for the country, the entity, and the project is considered moderate.

70.Disbursement will be handled through the PMU at the Ministry of General Affairs and Governance following established procedures.

71.Interim unaudited financial report, which will cover all the activities and sources of funds of the project, will be prepared biannually by the PMU and transmitted to the World Bank 45 days after the end of each period.

39 72.The PMU within the Ministry of General Affairs and Governance ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank not later than forty five (45) days after the end of each calendar semester, covering the semester, in form and substance satisfactory to the World Bank.

73.The Ministry of General Affairs and Governance shall have its Financial Statements for the Project audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six months after the end of such period.

74.Financial flow of funds will come from the grant funds of the Bank. Flow of funds between the World Bank the Ministry of General Affairs and Governance will be organized according to the Disbursement procedures of the Bank.

D. Procurement

75.Procurement under the Project is mostly for the selection of international and local consultants for technical assistance, training and capacity building, the design, development and implementation of policies, operational tools and various guidelines for the 3 different components. To support the implementation of the performance budgeting reform under the component 2, an administrative services contract will be concluded between the Moroccan Ministry of Finance and one or a consortium/association of Ministries or public administration agencies of Finance from OECD countries selected for their best expertise will be formalized on single source basis as an administrative services (non -commercial) agreement on cost recovery basis. Procurement would include also some goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events for the 3 components. Procurement will concern also goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events for the 3 components.

76.The Ministry of General Affairs and Governance (MAGG) will have the overall responsibility to manage the project. It will act as the project implementing agency and its Division in charge of Administration and finance (DAF) which is in charge of procurement for the ministry will be handling all procurement under the project.The units directly in charge of procurement within the DAF (“service des marchés” and “service Bon de commande”), will have the responsibility in relation with the other concerned departments, for planning and carrying out procurement activities. A capacity assessment of the MAGG (“Division administration et finances”) was conducted on January 7 and 10, 2013. Overall, it shows that the MAGG has very limited experience in implementing Bank funded project. The

40 example of the IDF grant for “Institutionalizing a Reform Process for the Business Environment in Morocco” which is currently under implementation illustrates the weaknesses of its capacities with Bank procedures. Furthermore, despite the existence of a training budget and the various training activities organized for staff every year, the procurement topic has not yet been covered (only one staff benefited training on Bank procurement procedures). The assessment shows also that the DAF is well staffed, and has overall satisfactory records in carrying out procurement using Moroccan national procurement rules. However, audit conducted by IGF in 2012 (report in draft) outlined the need to set up internal control mechanism in order to improve the quality and efficiency of procurement.

77.The overall risk for procurement is considered substantial. This is because of: (i) the weak experience in Bank procedures of the MAGG and its staff working directly on project implementation and (ii) the absence of training in Bank procurement procedures for those staff. To help better mitigate the risk and facilitate project implementation the following measures are recommended: (i) hiring of an external consultant to help carry out procurement and build capacities within the MAGG, (ii) organization of training in procurement for all staff involved in the project implementation (MAGG, MoF, MCRP and all other concerned public entities), before project effectiveness, (iii) preparation of Standard bidding documents (SBD) for National Competitive Bidding (NCB) complying with procedures for NCB acceptable to the Bank; and (iv) preparation of an implementation manual for the project. More details are provided in Annex 3.

E. Social (including safeguards)

78.This technical assistance project has no direct distributional impact as it focuses on horizontal structural governance reforms. The project has a positive social impact by contributing to the government’s effort to strengthen citizen engagement and voice, through the support to the development and implementation of a government wide public consultation policy and law on petitions. These policies will be developed in a participatory an inclusive manner associating civil society organizations to the National Dialogue and through an online consultation platform.

79.The project supports both supply and demand side governance, in order to strengthen the impact of these new rights and policies. The project will provide technical assistance to the design and implementation of the new consultation policy and train public officials (supply side) as well as capacity building for Civil Society Organizations to strengthen the demand side and facilitate effective participation. Support to the demand side will leverage and complement existing programs supporting Non state Actors, such as the ANSA Arab World program financed by the World Bank and Implemented by Care Egypt, including in Morocco.

80.No involuntary resettlement and/ or involuntary land acquisition can be envisaged in relation to project activities and therefore OP 4.12 does not

41 apply." A social safeguards specialist will advise the team to ensure that implementation of project activities would not warrant triggering of the policy.

F. Environment (including safeguards)

The proposed Project is rated Category C for environmental safeguards purposes. This small technical assistance project is not expected to have any direct environmental safeguards implications. The technical assistance provided and the policies supported by the proposed project are oriented toward improving transparency and effectiveness of public governance and do not include a lending sub- component or physical investments. The project provides technical assistance to the government. The project activities do not support direct investments, involve civil works, or imply policy actions that would have any direct environmental or social safeguards impacts. In particular, it should be noted that the proposed actions to enhance citizen engagement, improve the performance orientation of the budget or the transparency of intergovernmental fiscal relations do not target environmental procedures and thus will neither directly improve nor degrade existing standards for public health and safety or the environment. Indirectly, however, as these institutional capacities for ministries are strengthened, so will public expectations for all other ministries, including those relating to the management of natural resources and the environment.

42 3. Annex 1: Results Framework and Monitoring Project Development Objective (PDO): The Project Development Objective is to strengthen government transparency, accountability and public participation by (i) supporting the development and implementation of a public consultation policy and a law on petitions; (ii) improving access to fiscal information and enhancing performance orientation in budget management; and, (iii) strengthening fiscal decentralization. PDO Level Frequency Responsibility Description Data Source/ Results Unit of Measure Baseline for Data (indicator Methodology Indicators* YR 2 YR3 YR 4 Collection definition etc.) Indicator Number of dedicated policies of 1 policy related 2 laws 2 laws 2 laws Every Official MCRP Stocktaking One: formalized practices for public to US-Morocco 2 policies 3 3 legislative government assessment of newly Strengthened engagement established Free Trade policies policies cycle, as bulletin; MCRP established laws or legal Agreement relevant policies in the framework domain of public and engagement formalized practices for participation in public affairs Indicator Ranking on PEFA3 performance 2009 nº6 scored B+, nº nº6 nº6 Once, by Morocco PEFA World Bank Data on PEFA Two: indicators related to budget assessment: 12 : B, nº26: C, scored scored end of the assessments and client framework Increased transparency (nº6), policy based Indicator nº6 and nº27: B+ B+, nº B+, nº project generated by World accountability budgeting (nº12) and external scored B, nº 12 : B, 12 : B, cycle Bank PEFA of scrutiny (nº 26 and 27) 12 : C, nº26: D, nº26: nº26: C, assessments government and nº27: B C, and and over the use nº27: nº27: B+ of public B+ resources

Indicator Ranking on PEFA indicator PI-19 (2009): B B B B+ Once, by Morocco PEFA World Bank Data on PEFA Three: measuring competition and value end of the assessments and client framework Increased for money in procurement (PI- project generated by World transparency 19) cycle Bank PEFA of assessments intergovernm ental fiscal relations and local finances

3 Public Expenditure and Financial Accountability (PEFA) is a multi-donor diagnostic instrument, with 28 high level performance indicators measuring a country’s public financial management. Morocco was assessed in 2009 and the current budget reform should translate into better scores on budget transparency, link between policies and budget and external budget oversight (respectively indicators nº6, 12, 26 and 27. Indicators are ranked from A to D, D being the lowest score.

43 INTERMEDIAT E RESULTS Intermediate Result (Component One): Strengthening public participation Intermediate Number of CSOs participating in To be TBC TBC TBC Annual Diagnostic MCRP Participation data Result consultation activities determined at survey compiled through indicator the launch of conducted by MCRP diagnostic One: the National MCRP surveys Increased Dialogue participation Rate of participation by males To be TBC TBC TBC Annual Participation MCRP/MCINT Data compiled rate of CSOs and females using e-consultation determined at measure through MCRP e- in public processes in X sectors the launch of compiled consultation consultation the National through online platform activities Dialogue survey Intermediate Percentage of CSOs that feel NONE 50% 60 70 Annual Satisfaction MCRP Result public consultation processes survey indicator met their expectations conducted by Two: Strong MCRP satisfaction rate among CSOs participating in public consultation Intermediate Result (Component Two): Enhancing Efficiency and Accountability in the use of Public Funds

44 Intermediate Ranking on PEFA performance Indicator nº6 nº6 scored B+, nº nº6 nº6 Once, by Morocco’s World Bank Data on PEFA Result indicators related to budget scored B, nº 12 : B, nº26: C, scored scored end of the PEFA and client framework indicator transparency (nº6), policy based 12 : C, nº26: D, and nº27: B+ B+, nº B+, nº project assessments generated by World One: budgeting (nº12) and external and nº27: B 12 : B, 12 : B, cycle Bank PEFA Strengthened scrutiny (nº 26 and 27) nº26: nº26: C, assessments budget C, and and transparency, nº27: nº27: B+ policy based B+ budgeting and external scrutiny Intermediate Budget execution within budget 2010: 67.3% 72% 73% 75% Annual MoF - budget MoF budget Data on budget Result programs has improved and the % directorate directorate execution rates as indicator of the budget spent the last database reported by the Two: month has decreased by y% MOF budget Improved directorate budget execution rate

Intermediate Ranking of budget transparency 2010 ranking: 28 28 30+ Bi-annually Open Budget World Bank A sub-set of Result on OBI index 28 Index (OBI) and client indicators indicator measuring budget Three: transparency from Strengthened the Open Budget budget Index, conducted transparency by the and access to International information Budget Partnership, which covers 95 countries in total Ranking of access to information 2010 baseline : 4 4 4 Annual Right to World Bank RTI assessment on framework on RTI measure from 1 Information and client existence of ATI OGP Index (RTI) as law (4 points), a presented by constitutional the Open provision Government guaranteeing ATI Partnership (3), or a draft ATI (OGP) law under consideration (1)

Intermediate Result

45 (Component Three): Advancing Regionalizatio n Intermediate Number of formal rules and Transfer rules Full Full full Annual MoI local MoI local Annual assessment Result regulations for fiscal transfers are scattered budget budget conducted on indicator and equalization made available and allocation directorate directorate number of formal One: online criteria are only database rules and Increased partly public regulations for public fiscal transfers and accessibility equalization made of formal accessible online rules and via government regulations websites for fiscal transparency and equalization

Intermediate Ranking in PEFA index on PI-19: B B B A Once, by Morocco PEFA World bank Public procurement Result competition and value for money end of assessments and client of local indicator in procurement (PI-19) project governments has Three: cycle improved as Strengthened evidenced by a competition higher PEFA and value for ranking money in procurement

Intermediate Number of local government 4 (TBC) 8 10 10+ Annual MoI local MoI local A greater number Result budgets available online budget budget of local indicator directorate directorate governments are Four: assessment publishing their Increased local budgets public online for ease of accessibility public access of local government budgets

46 4. Annex 2: Detailed Project Description

Component I: Strengthening public participation (USD 0.73 million):

1. Fostering greater public engagement is one of the core commitments enshrined in the new Constitution. Improving public consultation and participation in the design and implementation of public policies contributes to improving their quality as well as their implementation by helping build consensus and, in turn, compliance. Consultation practices are widely accepted as effective tools for building public trust around key reforms, generating efficiency savings and accelerating public service reform. Better informed and engaged users benefit decision-makers by leading to better quality participation and greater efforts to support and improve reform implementation. Such reforms can also impact the quality of services themselves through measureable improvements such as: (i) lower running costs; (ii) less time spent on administration; (iii) more efficient targeting of resources and; (iv) increased consumer satisfaction.

2. In efforts to concretize these principles, the Ministry charged with relations with Parliament and Civil Society (MCRP) is organizing an inclusive national dialogue around the development of rules, policies and a legal framework defining public engagement mechanisms. The National Dialogue adopts a participative approach, with a wide representation of relevant ministries and representatives of universities and research centers, specialized experts, civil society representatives, and representatives from the media industry. Selection methodology for participation will take into account the representation of civil society organizations from a wide geographical distribution and various sectoral areas, and will take place in coordination with concerned ministries. The overall dialogue process will adhere to generally accepted international standards. The Ministry’s role will be limited to facilitation as well as logistical and organizational support. An independent Steering Committee will be established to guide the development of the process and will be comprised of representatives from government, civil society, and the private sector. Four thematic committees will be established in the areas of: (i) motions; (ii) the governance of NGOs; (iii) guidelines on public engagement; and, (iv) petitions. These thematic committees will be comprised of representatives from government and civil society who have technical expertise in each thematic area and who will work on further developing the legal and policy framework relevant to each area. On issues of monitoring and evaluation, the Ministry will issue reports on the progress of the national dialogue on a regular basis. These reports will be made public and will be disseminated to the media. This process will lead into the preparation of the final document on the outcomes and recommendations of the national dialogue. A ministerial decision has been adopted in November 2012 to formalize the participative approach around the development of the legal and policy framework defining public engagement, which outlines the objectives of the initiative, the structure and composition of

47 the Steering Committee and thematic committees, the duration of the process, and the expected outcomes of laws and policies related to public engagement.

3. The objective of Component I is to support the launch and implementation of a national dialogue tasked with designing a government wide policy on public consultations and a law on petitions. The main outcome of national dialogue will be a special law or policy, derived from discussions with civil society organizations and stakeholders, which sets the main guidelines and principles for public engagement. This law or policy will be presented to Parliament in 2013. This project component is subdivided into three sub- components focusing on (i) support to the national dialogue on the new constitutional principles of citizen participation and the participatory development of related policies; (ii) capacity building and piloting of the new consultation policy, and; (iii) monitoring and evaluation.

4. Sub-component I-1 - Support to the National Dialogue on the New Constitutional Principles of Citizen Participation and the participatory development of related policies: This sub-component will support the government in the design, launch, and implementation of the National Dialogue process, foreseen to be launched in March 2013. Specific activities under this component include:

4.1Advice and technical assistance: This sub-component will provide advice and technical assistance to the Steering Committee established to oversee and guide the National Dialogue process in the framework of public engagement. This activity will also provide the relevant advice and technical assistance required for the Secretariat of the National Dialogue as well as the thematic committees in charge of the public consultation policy and the development of the law on petitions. International and local hand-holding technical expertise will help to strengthen capacity building in this new and innovative reform area. The technical assistance will be provided in the form of a standard consultancy contract with the identified international and local expert in the relevant technical field. The consultancy contract will be established in line with standard World Bank guidelines for short-term consultancies.

4.2Exchange of international experience: Support provided through this sub- component will make available good practice international experience from countries such as the UK, a leading pioneer in the area of public engagement. The expertise will be in the form of one-on-one exchanges in Morocco and abroad, in the form of working sessions dedicated to developing draft documents related to the National Dialogue process and laws and policies developed throughout. This activity envisages a total of four (4) persons throughout this exchange and access to two international country examples. In addition, international experience and knowledge-exchange will be provided in complement to this activity (and which are outside the scope of activities covered under this subcomponent) include videoconference exchanges provided

48 by the World Bank Institute (WBI) through a series of virtual working sessions designed to facilitate knowledge-exchange from practitioners working in this field. These VC exchanges will also provide a platform for peer-to-peer learning and feedback throughout the reform process. The ANSA-Arab World Initiative will also provide an important network of regional expertise in the area of social accountability and public engagement. This activity has been designed in close collaboration with WBI and the ANSA-Arab World to help ensure the maximum complementarity across these parallel initiatives.

4.3Information and Communication: Linked to Component 1 of this project is a dedicated information and community strategy aimed to strengthen awareness on the reform initiative and the value of public consultation. This activity will provide support to activities designed to raise awareness on the national dialogue and accompanying public consultation initiatives. In addition, this activity will provide support to the development of a dedicated website linked to the National Dialogue. This activity will also support ICT services provided by the Ministry of ICT to develop an e-consultation platform to help expand the scope of users and geographical coverage of consultation activities. The e- consultation platform will build on existing initiatives such as the website Fikra, developed by the e-government department of the Ministry of ICT aimed to provide citizens with a means to voice their suggestions on how to improve government administration and its functioning (primarily in terms of e-gov functions). The e-consultation platform will aim to act as a ‘one-stop-shop’ for public consultation initiatives across government on both a central and sectoral level, thus building on parallel and past sectoral initiatives in the area of consultation.

5. Sub-component I-2 – Support to capacity building and piloting of the new consultation policy: This sub-component aims to build capacity for successful implementation of this new reform area by providing support for the development of training modules and the training-of-trainers for government officials and civil society organizations. While this sub-component does not provide direct support to the training of CSOs, the training-of-trainers activity will help to build capacity for officials who will be responsible in the transfer and knowledge exchange for CSO capacity building. Training sessions will be provided on (i) the different modalities of public consultation; (ii) change management; (iii) advocacy and awareness raising; (iv) public policies and development projects; (v) civic engagement; and, (vi) CSO governance, including administrative and financial management. This sub-component will also provide support to the piloting of the new consultation policy in two government agencies on the central and local level respectively. The two pilot agencies will be selected through a vetting process administered by the Steering Committee of the National Dialogue. Support under this sub- component will cover international and local expertise, in addition to the establishment of training seminars and material related to these activities.

49 6. Sub-component I-3 – Support to monitoring and evaluation: This sub- component will provide the necessary technical assistance for the development of a monitoring and evaluation system on public consultations. This sub- component includes support for the provision of international and local expertise in designing an M&E system in line with public consultation mechanisms, in addition to the development and roll-out of a user survey aimed to address user satisfaction ratings and feedback on the overall consultation process. The user survey will be directly embedded in the online public consultation platform to be established under sub-component I-1 and will developed in close coordination with the Ministry of ICT. In addition, the Ministry will develop and issue progress reports on the National Dialogue which are to be published on the dedicated ministerial website and accessible to citizens and the media. These progress reports will lead into the preparation of a final document on the results of the national dialogue, which will be presented to Parliament in 2013.

Component II: Enhancing Efficiency and Accountability in the use of Public Funds (USD 1.824 million)

7. The budget reform is a building block of Morocco’s governance and public sector reform agenda as it enhances transparency and accountability throughout the budget process, strengthens parliamentary oversight, and represents a strong lever for the modernization of the management of public expenditures and services. Public financial management, budget transparency, and budget oversight are integral to improving government efficiency and adapting the public sector towards performance orientation and results. This project component is subdivided in four subcomponents focusing respectively on (i) the implementation of the budget reform, (i) the new public procurement rules, (iii) a diagnostic on public investment management, and (iv) an external public financial management assessment (PEFA).

8. Sub-component II-1: this sub-component will support the implementation of the performance budgeting reform, through the provision of public sector expertise and technical assistance for the modernization of budget classification, the preparation of bylaws and new budget management procedures. It will empower program managers in addition to making them more accountable for their performance. Activities under this component will also support the development of a government wide performance monitoring and evaluation framework and will build on the Bank’s past support to the conceptualization and pilot testing of this reform. The Bank had supported the initial development of guidelines for medium term budget frameworks and for the design of performance objectives and indicators. These guidelines now need to be revised in accordance with the new organic budget law and the results of previous pilot testing. The project will also support the three first ministries for the restructuring of their budgets in a programmatic and

50 multiannual format as well as the development of their performance commitments to be sent to Parliament along with their draft budget in 2014.

9. This reform will be supported by the transfer of knowledge from OECD countries having implemented performance budgeting reforms. This sub- component will support the government in the implementation of the new organic budget law by introducing programmatic and performance budgeting. A draft organic budget law has been prepared and is currently discussed with Parliament and with the Court of Audit. The adoption of the law is foreseen in 2013 with an early implementation in key line ministries with the 2014 budget. The Ministry of Economy and Finance, the Ministry of Health and the Ministry of Education would constitute the first implementation wave and start preparing the new programmatic budget in 2013, with the corresponding performance objectives and indicators. The reform will be rolled out in sequence with full implementation in 2016. In each ministry, program heads and managers will be designated and tasked with setting the performance objectives, managing the corresponding resources and reporting on their achievements. The corollary of this increased accountability is more managerial flexibility for the reallocation and management of budget resources. For that purpose, the Ministry of Economy and Finance has started to differentiate and alleviate ex-ante financial controls based on managers’ capacity and risks.

10. The public sector expertise needed for the implementation of this reform will be provided by a one or more Ministries of Finance from OECD countries having a unique expertise and practical experience in the implementation of such a budget reform, such as France, Canada, the UK and Chile. The partnership would be led by a country having also the necessary regional experience and language skills to be able to transfer effectively this knowledge and experience to the Moroccan counterparts. This partnership will take the form of a direct administrative services contract with the lead partner public administration, as the required expertise is mostly available in the public sector. This contract will enable public officials from Morocco to benefit from the experience of their counterparts in the design and implementation of the various dimensions of the budget reform. As this reform necessitates an overhaul of the current budget preparation and management procedures with wide ranging implications, both the Ministry of Economy and Finance and the line ministries will need support for the implementation of this structural reform. This support would include advice on the steering and change management for this reform, expertise for the design of the new budget preparation and management rules and regulation, technical assistance and capacity building for the introduction of the new performance management approach and support for the setup of a government wide performance monitoring and evaluation system, integrated with the government’s current information systems. The proposed cooperation will leverage this expertise and would be structured along the following three sub-components: (A) support to the design and piloting of the budget reform, (B) support to the

51 implementation of the performance-based approach in line ministries, and (C) development of a government wide performance monitoring and evaluating system.

11. The administrative services contract to support the performance budgeting reform would comprise the following components and indicative activities:

(i) Support to the design of new rules and regulations and pilot-testing:

 Advice, training and exchange of international experiences for the budget reform steering committee and involved administrative structures;  Technical assistance for the drafting of the new organic budget law’s bylaws;  Technical assistance for the development of standards and operational guidelines for the line ministries;  Advice for the revision of the new budget classification and the development of budget programs.  Advice and technical assistance for the development of multiyear budget programming tools and budget rules  Technical assistance to adapt the financial information systems to the new budget classification and management.  Development of a website and Intranet for reform in order to communicate and create a community of practice within the administration.  Development of e-learning modules for the new budget management procedures (ii) Support to the implementation of the performance-based approach in line ministries.  Technical assistance for the development of ministerial budget programs and the corresponding performance commitment and reports  Advice and technical assistance for the development of performance management tools in line ministries, including: (i) an operational breakdown of ministerial performance objectives and indicators, (ii) the development of performance management dashboards, and (iii ) performance management controls,  Technical assistance for the horizontal and vertical performance contracting for the implementation of ministerial programs. (iii) Development of a government wide performance monitoring and evaluating system  Technical assistance to develop a government wide system performance monitoring and evaluation system, integrated with existing information

52 systems.  Advice for the Development of an inter-ministerial mechanism for quality control and validation of the ministerial budget programs, performance commitments and reports.  Support to the conduct of two ex-post program evaluations, involving external experts.  Advice for the development of a methodology to review and amend budget programs based on their performance

12. Sub-component II-2 : supports the implementation of the new procurement rules and regulations across the public sector, through the development of training modules and the training of public sector trainers. The implementation of the new procurement rules and regulations, which will enter into force in 2013, will be primarily supported through training and capacity building. The new rules and regulations aim to enhance transparency, efficiency and value for money of public procurement, including through e-procurement. The new decree extends the scope of public procurement rules to agencies and local governments, thus requiring large training efforts. This subcomponent will focus on the design of training modules and the training of trainers for the central administration, using the existing sectoral training structures/facilities in the country. This includes the MEF training institute for the central level, and the MoI directorate and facilities for local governments (Collectivités territoriales/locales). This subcomponent could also tap into the pool/network of procurement training experts developed by the TGR (Trésorerie Générale du Royaume) to teach within those existing sectoral institutions, and for the development of the e-procurement aspects. Support to local governments will be provided under component 3, along with the other new local public financial management rules.

13. Sub-component II-3: will finance a public investment management diagnostic and technical assistance to improve the efficiency of public investments in Morocco. Authorities and international organizations have expressed concerns regarding the uneven effectiveness and impact of public investments. As mentioned in the introduction, the scaling up of public investments in social sectors and for basic services have not always yielded the expected development outcomes. Development challenges and social and regional disparities remain high and addressing them is the Government’s utmost priority. However given the financial constraints, this effort requires also enhancing the effectiveness of programmed public investments and thus the strengthening the public investment management (PIM) process. The Ministry of Economy and Finance has thus expressed interest in the new and comprehensive PIM assessment toolkit developed by the World Bank and covering the entire project cycle, from project identification, selection, management through to evaluation. The current component would support an

53 initial diagnostic with this tool kit for the Ministry of Economy and Finance itself as well as for one or two pilot ministries. This will enable customizing further the toolkit, training public officials who could then carry out the assessment on a larger scale, while already providing some recommendations on how to strengthen public investment management in the ministries covered.

14. Sub-component II-4: supports an external public financial management (PFM) diagnostic (PEFA) to assess the progress made in the recent reforms, including the performance budgeting reform. A joint external diagnostic of Morocco’s public financial management system, using the Public Expenditure and Financial Accountability (PEFA) methodology has been conducted in 2009 with the European Union and the African Development Bank and has made recommendations to improve. Since then, the Government has initiated important reforms across the budget cycle, from preparation, execution, with a new integrated financial management system GID, but also on procurement, public accounting and on financial controls. Regarding the latter, the commitment control body and the accountant’s financial controls have been merged in a single entity and the process has been simplified and modernized introducing a risk based approach (contrôle modulé de la dépense). Likewise, the budget reform, supported by the DPL and subcomponent II-1 will move to actual implementation, thus addressing some of the weaknesses highlighted in the 2009 PEFA regarding notably the link between public policies and budget allocations. The PEFA update will enable to capture these changes and to incorporate its findings and recommendations in the ongoing reform process. Like the initial PEFA, the update will be conducted jointly with the European Union and with the African Development Bank.

Component III: Advancing Regionalization (USD 0.769 million)

15. Regionalization is a key component of Morocco’s governance transition, as confirmed by the constitutional revisions and the new Advanced Regionalization strategy adopted in March 2011. Major changes were introduced in order to strengthen the regions and their socio-economic development, increase accountability and transparency of local governments as well as of intergovernmental fiscal relations. Local governments are at the frontline of public service provision to citizens and the newly elected and empowered regions will have a key role in planning and coordination for public services and infrastructure. Reforms under Component III have important linkages to other dimensions in this project, particularly to the budget and public financial management reforms that will impact local financial management, as well as to the open governance reforms fostering public participation across the public sector. Expectations are particularly high at the local level, considering their direct interface with citizens for numerous basic public services.

54 16. Component III supports fiscal decentralization reforms in an effort to strengthen the performance of local governments and improve relations across levels of government, in line with the new constitutional provisions empowering regional and local governments. The project supports the regionalization of government functions as an opportunity to stimulate economic growth across the country and reduce spatial inequalities, which fueled protests. It contributes to re-assessing functions of the central government based on the principle of subsidiarity, and following an inclusive sectoral approach, in view of improving public service delivery through decentralization. It would provide regional stakeholders with instruments to set development strategies and coordinate with the central government. The Constitution also foresees the setup of new funds to foster vertical (state- local governments) and horizontal (between regions) equalization in order to reduce regional disparities. These changes require the overhaul of the current fiscal transfer and equalization system, currently assessed by the Bank. Activities supported under Component III are divided into three sub-components, including: (i) support to adaptation of the fiscal transfer and equalization system for local governments; (ii) capacity building support; and, (iii) support to the system of planning and performance contracting.

17. Sub-component III-1 – Adapting the fiscal transfer and equalization system for local governments: This activity aims to support the adaptation of the fiscal transfer and equalization system for local governments, in accordance with the new Constitution and the advanced regionalization strategy. Support will be provided through technical assistance and advice to the revision of the fiscal transfer and equalization system, including both international and local expertise. This activity also envisages support through international benchmarking and knowledge-exchange among two partner countries (TBD) for a total of four persons. This exchange will be primarily through the form of two south-south study tours. Information and change management seminars on the new transfer and equalization system will be designed and supported through this sub-component.

18. Sub-component III-2 – Capacity building for local government financial management, including on the new public procurement rules: Activities supported under this sub-component aim to strengthen the necessary technical assistance and training required to build capacity for local government financial management. Support will be provided for technical assistance, including modules and training-of-trainers for local government officials on: (i) preparation of the budget based on an multi-annual budget framework and on the priorities of communal and regional development plans (ii) procurement rules, based on the new decree, (iii) implementation of the new integrated financial management and revenue information systems called GID CL and GIR; and, (iv) internal audit.

55 19. Sub-component III-3 – Strengthening the system of planning and performance contracting in line with the new organic law on local governments and the enhanced role of regions: This sub-component will support technical assistance in line with the development of planning guidelines and tools to enhance local government development planning processes, comprised of international and local expertise. Support will also be dedicated to the development of training and capacity building activities including dedicated seminars and training modules for regions and other local authorities, with the aim of improving multi-annual budget-programming in addition to linkages with the budget. Similar activities will be developed to support economic and financial analyses of projects.

56 5. Annex 3: Implementation Arrangements

1. The project is recipient executed and the implementation agency will be the ministry of General Affairs and Governance (MAGG). The project will be managed by a project management unit (PMU) headed by a public official from MAGG and supported by a project coordinator as well as procurement and financial expertise. The responsibility of specific activity implementation under each component will be left at the responsibility of each respective lead ministry. The development of a government wide consultation policy foreseen under component I is entrusted to the Ministry in charge of relations with Parliament and Civil Society, the budget reform, covered by component II, is led by the Ministry of Economy and Finance and the implementation of the decentralization strategy, supported by component III, is led by the Ministry of Interior. A project Steering Committee will oversee the project implementation and coordinate its activities. To facilitate project implementation and supervision, procurement plans will be prepared to identify a limited number of key experts to be recruited and to package most activities into single contracts to be awarded to international and/or local firms that have proven capacity to deliver results under “turn-key” contracts or similar results- based approaches.

Project institutional and implementation arrangements

2. The project steering committee (SC) will oversee the project implementation and the project management unit and coordinate the different activities and project stakeholders. The SC, will be headed by MAGG and include all project stakeholders, notably the project director and coordinator, representatives from the Ministries in charge of relations with Parliament and Civil Society, of Economy and Finance and of Interior as well as other relevant project stakeholders. It will meet at the request of the president as many times as necessary and at least four times per year. The task of the Steering Committee is to provide overall guidance, facilitation, coordination and supervision of project activities throughout the project cycle. The SC membership, mandate and internal regulation will be specified in terms of references.

3. A project management unit (PMU) will be established and supervised by MAGG, which will be responsible for the implementation of project activities, procurement of services and financial management. The Unit will also be tasked with monitoring the activities and coordination between the different actors associated in the respective reforms covered under this project. The Project Director presides over the PMU and will be assisted by a Project Coordinator, as

57 well as an expert in procurement and financial management. The Project Director is appointed by the Minister and the three other positions are financed by the project. Detailed descriptions of each position as follows:

 The Project Director (PD) is a public official from MAGG. He will be assisted by a coordinator, and will oversee the implementation of the project; sign contracts, and validates report implementation reports and financial reports.

 The Project Coordinator (PC) is a local expert with project management experience, hired by the project. He will manage the daily activities of the project, under the responsibility of the Project Director, manage procurement, accounting and reporting and oversees financial management. The PC sets up a system for monitoring and evaluation of activities and results of the project in close coordination with the Ministries, relevant Departments and beneficiaries involved in respective reforms. The PC also controls the activities relating to information and communication relating to on-going reforms covered under the project.

 The Procurement Expert (PE) is a local consultant, hired by the project. He prepares a procurement plan for the project and updates this plan as needed. The PE prepares the bidding documents and assists in recruitment processes with the coordinator, under the supervision of the PD, and in consultation with the World Bank on the basis of terms and references provided by the service recipient. The PE works closely with its counterpart office of the Bank. His/ her terms of reference are annexed to the project implementation manual.

 The Financial Expert (FE), is a local consultant hired by the project, manages the project accounts and produces quarterly financial reports, in close coordination with the Finance Office of the Bank. His/her terms of reference are annexed to the project implementation manual.

Specific implementation mechanisms:

4. Subcomponent II-1, supporting the implementation of the performance budgeting reform will be implemented through an administrative services contract with one or more OECD countries having a unique public sector expertise and experience in the implementation of such a budget reform as well as the necessary regional experience and language skills. This administrative services contract will enable to pair high public officials from Morocco with their counterparts in these countries to foster knowledge exchange in the design, steering and implementation of the various dimensions of the budget reform. Under the administrative services contract, the contracting public institution from the OECD partner country will second a competent official from its Ministry of Finance to the Ministry of Economy and Finance in Morocco for the duration of the

58 contract. This seconded official will act as adviser and as coordinator for the implementation of the activities foreseen under the contract. He will work in close cooperation with his appointed Moroccan counterpart and under the guidance and supervision of a project head, to be appointed by the contracting public institution. The adviser will have an office in the premises of the Ministry. He will report quarterly to his counterpart at the Ministry of Economy and Finance as well as to the project director from MAGG on the implementation of the administrative services contract. Under each specific component of this contract, a lead expert, who is a high public official with proven expertise and experience in the subject matter, will take responsibility for the delivery of the advice and administrative services agreed upon. He will be supported by a pool of experienced public officials who will provide specific short term expertise as required for the deliverables of the contract. Three to four lead experts are foreseen in addition to the adviser. Public sector expertise can be mobilized from other OECD countries as needed for the project delivery, under the supervision and responsibility of the contracting public institution. Such cooperation can take the form of sub- contracting or co-contracting for the purpose of this administrative services contract. This component and contract includes also two visits of Moroccan public officials to two OECD countries having implemented such budget reform to learn from their experience. A dedicated steering committee will be established to oversee the smooth implementation of this administrative services contract. It shall be co-chaired by the two project heads, who are two high official appointed respectively by the contracting parties. The dedicated steering committee signatories will meet at least twice a year in Morocco. A launching and closing seminar are foreseen and included in the budget. Financial management of the administrative services contract will be ensured by the contracting public institution, which will send the payment requests in line with the contract schedule to the project director at MAGG.

Financial Management, Disbursements and Procurement

5. Public Financial Management: The Bank’s experience in Morocco and the main conclusions of the 2009 PEFA indicate that the Moroccan public finance system is governed by an elaborate legal and regulatory framework. The financial management risk of the Moroccan public finance system is considered low.

6. Assessment of the Financial Management System: An assessment of the financial management system in place at Ministry of General Affairs and Governance was carried out to determine if it complies with the Bank minimum requirements for the project management in respect to the OP/BP10.02.

59 7. The Financial Management System (FMS) in place in the executing agency is based on principals and procedures defined by the legal framework applicable to the public sector and more specifically to governmental institutions.

Risk Analysis: Inherent risk

Risk Rating Mitigation of risk Risk rating after mitigation Country level Low The Moroccan public finance system is governed by a complex legal and regulatory framework that offers guarantees of high reliability and transparency. Morocco’s compliance with rules and regulations and existing accountability arrangements provide an adequate framework for the use of public funds and public financial management (PFM) is considered broadly transparent.

Project level Substantial  A Project Moderate Though the Ministry of Management Unit will General Affairs has a have a dedicated previous experience on consultant for FM Bank’s financed IDF (financial grant for the management), that reinforcement of the will work closely with reform process of the the Director of the National Commission of PMU. Business Environment  The PMU will be (CNEA), important overseen by a delays in the Steering Committee implementation of the representing the grant’s activities and central departments low disbursement of and the grant proceeds were decentralized units mainly due to lack of involved. capacity and monitoring.  Capacity building of financial management staff of the project.  Close monitoring by the World Bank financial management team  A Project implementation manual acceptable to the World Bank to ensure that project

60 activities are covered in their entirety and that the risk level is mitigated.

Inherent risk before mitigation Substantia Inherent risk after Moderate l mitigation

Control Risks Rating after Risks Rating Mitigation of risk mitigation of risk Budget Low The administrative and financial management unit is responsible at the Ministry of General Affairs and Governance for the preparation of and implementation of the annual budget for operating and investment programs of the Ministry. The budget is submitted to the Secretary General/the Minister and afterwards to the Directorate of Budget at the Ministry of Finance for primary approval. The draft budget is submitted for adoption by first and second chamber of Parliament. Accounting Low The accounting system is based on accounting regulations applicable to public institutions (Royal Decree n° 330-66, April 21, 1967) BO. n° 2840, April 26, 1967, p. 452) ; relating to the maintenance of public accounting in accordance with General Code of accounting Standards. Financial Reporting Moderate The FM consultant Low The Implementing agency is using GID to will extract the administer its accounting. report from GID and The financial reporting for the project can be will ensure that extracted from GID. complementary While presenting the funds to the MoF to be budgeted, the split of the grant into components information will be clearly presented to allow the bank funds requested in the to be reported in GID by components. financial report, if The Financial report will require the presentation not able to extract it of the funds by category as well. Hence, an from GID, are execel spreadsheet will be prepared where it will completed in an excel provide the formation needed. spreadsheet and Reconciliation with the system will be performed reviewed and submit to ensure accuracy. it to the Director for approval and submission to the Bank

61 Rating after Risks Rating Mitigation of risk mitigation of risk Funds Flow Low Financial flows come from the World Bank and in kind contribution from the counterpart The flow of funds from the World Bank are organized according to the Bank's disbursement procedures Internal control Substantial An implementation No formalization of the internal control functions Manuel will detail the Moderate within the Ministry. control environment to be applied for this project. The external auditor of the project will submit a report on internal control Auditing Moderate The Bank team will Low Delay in the submission of the audit report of the ensure the auditor, its project to the Bank term of reference are acceptable to the Bank and that the audit work is started timely to deliver the required report within the deadlines. Inherent risk before mitigation Substantial Inherent risk after Moderate mitigation

Given all the measures to be taken to reduce the level of exposure, to manage and to reduce the risks and weaknesses identified, the risk of residual financial management at this stage is considered moderate.

8. Implementing Agency: A Project Management Unit will be established within the ministry of General Affairs and Governance. The PMU will ensure the coordination and execution of Bank project. The PMU will be overseen by a Steering Committee. The Steering Committee will meet at the request of the president at least four times per year and upon request. The task of the Steering Committee is to provide overall facilitation and supervision of project activities throughout the project cycle. The chair of the Steering Committee will be the Secretary General, or the Project Director. The Project Director, a public official from the MAGG, presides over the PMU and will be assisted by a Project Coordinator, a specialist in procurement and financial management. The Project Director is appointed by the Minister and the two other positions are financed by the project.

9. The Administrative and Financial Management unit (Direction Administrative et Financière- DA) within the Ministry of General Affairs and Governance will ensure support to projects. The FM consultant will strengthen the DA capacity,

62 and will assist in ensuring good management of funds, and timely production of the required financial reporting.

10.Procedures and policies: The Ministry of General Affairs and Governance has a manual of procedures for the Administrative and Financial unit but doesn’t have a manual of accounting and organizational procedures. Hence, to allow a good implementation of the project, a Manuel of execution will be required to explain the procedures to be applied for the funds and the level of controls to be applied.

11.Budgeting: In Morocco, each Ministry prepares its own budget and submits it to the Ministry of Economy and Finance for approval through the “loi de finance”. In the case of grants, they can use “le fond de concours” when it needs to be budgeted during the year. In this case, the Ministry of General affairs and Governance will include the amount of the grant in its budget and submit it to the MEF through “les fonds de concours” for budgeting. The MAGG will ensure that the Budget is well presented and that the separation of the funds in the different budget lines will allow to identify the grant component. This will allow the funds budget presentation for this grant to be presented in GID accordingly, and hence, extract the financial reporting directly from the system.

12.Accounting: An acceptable cash based accounting system with the outline of budget components is operational according to the regulations described in the public accounting law. The transactions in terms of commitments and disbursements are reflected in the well-functioning Integrated Financial Management Information System (IFMIS) named GID (Gestion Intégrée des dépenses). The overall principles for project accounting are outlined below: (a) Books of accounts for the project will be maintained on cash basis principles. Maintaining the reporting financial to reflect all the transaction flow of funds and issuing of the interim unaudited financial report (IUFR) each semester; and (b) Project accounting will cover all sources and utilization of project funds. This will include payments made and expenditures incurred.

13.Financial Management Reporting of the Project: Interim Unaudited financial report (IUFR) will be extracted from GID and complementary information requested will be maintained on an excel spreadsheet. From GID we will be able to extract the commitments and disbursements. However, we will not be able to present the commitment by categories. GIS will allow the extraction of the commitment and disbursements by component only. Hence, this complementary information will be prepared by the FM consultant who will compare the information prepared with the total of the component extracted from GID to

63 ensure accuracy. The head of the Administrative and Financial Management Unit will review and approve and submit it to the PMU director for approval and submission to the Bank. The PMU will produce the IUFRs every semester and send them to the World Bank within 45 days from the end of each semester.

The FMR’s include, in addition to a summary of project progress the following:

- Summary of funding sources and uses of funds

- Uses of funds by project component and by project category

- Cash withdrawal

- Cash forecast

Bank guidelines on financial monitoring will be communicated to the project. A sample of FMR to use for the project will be agreed on and will be annexed to the manual of implementation of the project.

14.Controls: In Morocco, the rules governing funds commitment and payment authorization are clear, well known, and enforced. The control framework is based on the segregation of duties between the Commitment (ordonnateur) and payment (comptable). The ministry of General Affairs and Governance does not have the internal control procedures formalized. Hence, a Project Operations Manual will be prepared and submitted to the Bank before effectiveness in order to document the control environment. The Project Operations Manual will describe, among others: controls mechanisms, transfer and accountability mechanisms for beneficiaries.

Fiduciary responsibility for control of budget execution and monitoring is assigned to the General Inspectorate of Finance (IGF). The Budget Directorate within the MEF plays an important role in controlling transactions financed by external donors.

15.External Audit: Audit Arrangements. Annual Project financial statements audited by auditors acceptable to the Bank will be submitted to the Bank within 6 months after the end of each Fiscal Year. The audit will be comprehensive and cover all aspects of the Project (i.e., all sources and utilization of funds, and expenditures incurred). The audit will be carried out in accordance with International Standards on Auditing. The Project team will provide the auditor with access to project related documents and records, and information required for the purposes of the

64 audit. The implementing agency will retain an auditor acceptable to the bank to perform an annual audit in accordance with International Standards on Auditing (ISA), as issued by the international Federation of Accountants and with terms of reference acceptable to the Bank.

The audit terms of reference should be acceptable to the Bank.

Annually: Audited Project Financial Statements (PFS) will be submitted to the Bank. PFS will include: (i) a statement of sources and utilization of funds or Balance sheet, indicating funds received from various sources, project expenditures, and assets and liabilities of the project; (ii) schedules classifying project expenditures by components, expenditure categories; and (iii) a statement of reimbursement made on the basis of statements of Expenditure (SOEs). Such audits can be performed by the IGF.

16.Internal audit: The Ministry doesn’t have an internal audit unit. Following The 2007-2008 IGF audit report’s recommendations, three main actions are undertaken: 1) an internal audit mission will be launched on January 20, 2013 to review the Ministry financial procedures. This mission will issue a report with an action plan, 2) the recruitment of a public official ensuring the function of internal auditor and control management is programmed for early 2013, and 3) the Organization readjustment of the Ministry is undergoing and will be communicated in early 2013.

17.Staffing: The PMU will manage a day to day implementation of the project. The PMU will be housed at the Ministry of General affairs and Governance and composed of a Project Director, assisted by a Project Coordinator, a Procurement consultant, an FM consultant who will reinforce the DA unit and who will be under the supervision of the head of the Administrative and financial management unit.

Accounting staff in the Administrative and Financial unit is composed of six public officials with administrative, engineering and technician profiles holding positions in the commitment, procurement, mandating payments and logistics units.

The head of the administrative and financial unit is qualified. However, he handles many responsibilities and will not be able to fully dedicate his time to this project. Hence, the recruitment of an FM consultant is important to strengthen the team and to provide support to the project. The head of the administrative

65 and financial unit will have to control and supervise the work of the consultant to ensure ownership of the project by the Ministry.

Funds flow and disbursement

18.The funds after their budgeting in the “Loi de Finance” will be transferred to Ministry of General affairs and Governance according to Bank disbursement guidelines and according to the method agreed on the disbursement letter. The payment justifications supporting documents will be sent to the Directorate of Budget (MEF) for verification, approval and then electronically submission to the Bank.

The MAGG have the below options: 1- Pre-finance the expenses, and grant disbursement will be made based on documentary evidence or on presentation of statement of expenditures (SOEs) prepared in compliance with the World Bank disbursement procedures. The MAGG will provide documentary evidence and SOE, which will be submitted to the MoF, Budget Directorate, External financing department, which will review eligibility and electronically submit them to the World Bank for reimbursement. 2- Direct payment: The MAGG will prepare documentary evidence and statement of expenditures (SOEs) in compliance with the World Bank disbursement procedures and will submit them to the MoF. The MoF, Budget Directorate, External financing department, which will review eligibility and electronically submit the Direct payment request to the World Bank for processing. 3- Advance: The MAGG should open a designated account and can request an advance on the project. Once documentary evidence and statement of expenditures (SOEs) in compliance with the World Bank disbursement procedures are submitted them to the MoF to justify the advance usage, it will be reviewed by the MoF for accuracy and will submit the justification to the World Bank. A replenishment request of the designated account will be then submitted electronically. The counterpart in kind contribution will be well detailed and will be honored by the MAGG. The disbursement procedures will be well detailed in the execution manual.

66 19.In summary, the proceeds of the grant would be disbursed in accordance with the traditional disbursement procedures of the Bank and will be used to finance project activities through the disbursement procedures currently used, that is Direct Payment, Reimbursement accompanied by appropriate supporting documentation (Summary Sheets with records and/or SOEs) in accordance with the procedures described in the Disbursement Letter and the Bank's “Disbursement Guidelines”. The minimum application size for direct payment and reimbursement will be the equivalent of US$ 10,000.

20.In order to allow a continuation of related activities, retroactive financing is allowed to finance eligible expenditures made prior to the Grant signing date but on or after January 15, 2013. The aggregated amount should not exceed US$ 500,000 equivalent. The Bank will honor eligible expenditures for services rendered and goods delivered by the Project closing date. A four months' grace period will be granted to allow for the payment of any eligible expenditure incurred before the grant closing dates.

Necessary supporting documents will be sent to the Bank in connection with contract that are above the prior review threshold, except for expenditures under contracts with an estimated value of (a) US$ 200,000 or less for works; (b) US$ 100,000 or less for goods; (c) US$ 100,000 or less for consulting firms; (d) US$ 50,000, or less for individual consultants, as well as training which will be claimed on the basis of SOEs. The documentation supporting expenditures will be retained at the MAGG and will be readily accessible for review by the external auditors and periods.

All disbursements will be subject to the conditions of the Grant Agreements and disbursement procedures as defined in the Disbursement Letter.

21.e-Disbursement. The Bank has introduced e-Disbursement for all projects in Morocco. Under e-Disbursement, all transactions will be conducted and associated supporting documents and SOEs scanned and transmitted online through the World Bank’s Client connection system. The use of e-Disbursement functionality will streamline online payment processing to (i) avoid common mistakes in filling out WAs; (ii) reduce the time and cost of sending WAs to the Bank; and (iii) expedite the Bank processing of disbursement requests.

22.Planning of Supervision : A supervision mission will be conducted every six months based on the risk assessment of the project. The mission’s objectives will include: (i) ensuring that strong financial management systems are maintained for the

67 project throughout its life; and (ii) semi-annual review of IUFRs, review of annual audited financial statements and management letters.

23.Action Plan:

Actions to be undertaken When

Manual of implementation for the project Effectiveness

Selection of a consultant in Financial management Negotiations

Procurement Arrangements

General

24.Procurement for the proposed project would be carried out in accordance with (i) the World Bank’s Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, known as the ‘Anti- Corruption Guidelines’ dated on October 15, 2006 and revised in January, 2011; (ii) the ‘Guidelines: Procurement of Goods, Works, and non-consulting services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ (known as Procurement Guidelines) published by the Bank in January 2011; (iii) the ‘Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,’ (known as Consultant Guidelines) dated January 2011; and (iv) all the accompanying standard bidding documents for any new procurement and the provisions stipulated in the Grant Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the grant, the different procurement methods or consultant selection methods, the estimated costs, prior review requirements, and agreed time frame are set out in the Procurement Plan. The procurement procedures and Standard Bidding Documents (SBD) that will be used by the recipient will also be well defined in the Operational Manual, which will include specific and detailed sections regarding Procurement.

25.Procurement under the Project is mostly for the selection of international and local consultants for technical assistance, training and capacity building, the design, development and implementation of policies, operational tools and various guidelines for the 3 different components. To support the implementation of the performance budgeting reform under the component 2, it is envisaged a direct administrative services contract between the Moroccan Ministry of Finance and a

68 one or a consortium of Ministries of Finance from the OECD countries. Procurement will concern also goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events for the 3 components.

26.National Competitive Bidding (NCB) procedures adjusted as indicated below will be used for all Goods and Non-Consulting Services contracts estimated to cost less than the equivalent of three million US dollars (USD 3,000,000). To ensure broad consistency with the Procurement Guidelines, the following provisions will apply when using NCB under this project. Said procedures shall ensure that, inter alia:

a) The bidding documents include explicitly the bid evaluation method, award criteria and bidder qualification criteria;

b) Technical, administrative and financial envelopes are opened immediately after the bid opening session has started and prices are read aloud;

c) The bids are evaluated on the basis of the price and any other criteria expressed either in pass/fail terms or in monetary terms;

d) Contracts are awarded to the qualified bidder who has submitted the least-cost evaluated and substantially responsive bid as stipulated in the bidding document; and

e) Standard bidding documents and bid evaluation reports found acceptable by the Bank are used.

27.Moreover, it has been agreed with the borrower that each contract financed from the proceeds of this grant shall provide that suppliers, contractors and subcontractors shall permit the Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract and to have said accounts and records audited by auditors appointed by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to “obstructive practice”.

28.The procedures and standard bidding documents (SBD) of the borrower adjusted to be acceptable by the Bank will be used under National Competitive Bidding (NCB). Thus prior to issuing the first call for bids, a draft SBD to be used under NCB procurement must be submitted to the Bank for approval;

69 29.Procurement Plan: A Project Procurement Plan in a format acceptable to the Bank will be prepared and updated at least once a year. The procurement plan for the first eighteen (18) month period will be agreed during the negotiations. The procurement plan shall indicate which contracts shall be subject to the Bank’s prior review. All other contracts shall be subject to Post Review.

Specific Procurement Arrangements

No Works contracts are contemplated under the project.

30.Procurement of Goods and non-consulting Services: Procurement of goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events among others, will be carried out using the following methods:

a) National Competitive Bidding (NCB): Each package estimated to cost less than the equivalent of US$ 3,000,000 may be procured on the basis of NCB procedures as found acceptable by the Bank. Bidding documents acceptable to the Bank will be used.

b) Shopping: Goods and non-consulting services estimated to cost US$ 500,000 or less may be procured using Shopping procedures.

c) Direct Contracting: Under circumstances which meet the requirements of paragraph 3.7 of the Procurement Guidelines, goods, non-consulting Services and works may be procured in accordance with the paragraph 3.7 of the Procurement Guidelines using the Direct Contracting procurement method.

31.Selection of Consultants: International and local consultants services required for the project are mostly for technical assistance, training and capacity building, the design, development and implementation of policies, operational tools and various guidelines for the 3 different components. NOTA BENE : the single source selection method will be used also for the administrative services contract between the Moroccan Ministry of Finance and a one or a consortium/association of Ministries or public administration agencies from OECD countries, selected on basis of best expertise to provide an administrative services (non-commercial) agreement on cost recovery basis to provide assistance, expertise and support to the implementation of the performance budgeting reform under the component 2, (despite the fact that this is not a commercial consultancy services contract).

70 32. The following Bank methods and corresponding standard documents will be used:

a) Quality & Cost Based Selection (QCBS) for all types of consultant services.

b) Least-cost Selection. Services for assignments which meet the requirements of paragraph 3.6 of the Consultant Guidelines may be procured using the Least- cost Selection method in accordance with the provision of paragraphs 3.1 and 3.6 of the Consultant Guidelines.

c) Selection Based on Consultant’s Qualifications (CQS). Services estimated to cost less than US$100,000 equivalent per contract may be procured in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines.

d) Single Source Selection. Under circumstances which meet the requirements of paragraph 3.8 of the Consultant Guidelines for Single Source Selection, consultant services may be procured in accordance with the provisions of paragraph 3.8 through 3.11 of the Consultant Guidelines, with the Bank’s prior agreement.

e) Individual Consultants (IC). Services for assignments that meet the requirements set forth in the paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provision of paragraph 5.2 and 5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.6 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis.

Short lists may be composed entirely of national consultants for contracts of less than US$ 200,000 equivalent per contract, complying with the remarks mentioned above.

Publication of Results and Debriefing

33.Online (UN Development Business, and /or Client Connection) publication of contract awards would be required for all Direct Contracting, and the Selection of Consultants for contracts exceeding a value of US$200,000. All consultants competing for an assignment involving the submission of separate technical and financial proposals, irrespective of its estimated contract value, should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of the financial proposals. The borrower would be

71 required to offer debriefings to unsuccessful bidders and consultants should the individual firms request such a debriefing.

Fraud, Coercion, and Corruption

34.All procuring entities, as well as bidders, suppliers, and contractors shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.16 & 1.17 of the Procurement Guidelines and paragraphs 1.23 & 1.24 of the Consultants Guidelines.

Frequency of Procurement Supervision

35.Supervision of Procurement by the World Bank is an integral part of Project supervision and implementation monitoring. In addition to the prior review supervision to be carried out from Bank offices, it is recommended that two (2) supervision missions take place during a year to visit the project and to carry out post review of procurement actions.

36.Based on the risk associated with procurement (substantial), as mitigation measures, the following actions need to be implemented:

a. Hiring of an external consultant to help carry out procurement and build capacities within the Ministry of General Affairs and Governance (MAGG)

b. Organization of training in procurement for all staff involved in the project implementation (MAGG, MoF, MCRP and all other concerned public entities), before project effectiveness

c. Preparation of Standard Bidding Documents for NCB in accordance with the Procurement Guidelines and found acceptable by the World Bank for Goods and Non-consulting Services; these documents, taking into consideration required adjustment in order to be acceptable to the Bank, will be submitted for review and approval to the World Bank by project effectiveness

d. Adoption of an Operational Manual. This manual will clearly describe procurement procedures, responsibility sharing and document flow among the parties involved in Project implementation. The manual should comprise in annex, all standard bidding documents that will be used under

72 the project. This action need to be completed before the effectiveness of the project

e. Preparation of the procurement plan for the first eighteen (18) month before negotiations

Monitoring & Evaluation (M&E)

37.M&E organizational arrangements. The M&E system will be based on the agreed results framework and monitoring arrangements (See Annex 1). The PMU will be responsible for supervising the M&E activities at component and PDO level. For each component the lead ministry will be in charge of the M&E of its own project activities and report on a quarterly basis to the PMU at the MAGG. The PMU will assemble and review this information and complement it with available external information sources referenced in the project result framework and include it in its quarterly reports to the Bank. The project result indicators will be, to the extent possible, aligned with and fed by the administration’s own information systems. 38.M&E actions. The project M&E system will be complemented by specific M&E actions funded under the project or by respected independent external surveys publicly available. The former include on-line user surveys and an evaluation to be conducted under component I on the implementation of the public consultation policy as well as an external Public Expenditure and Financial Accountability (PEFA) assessment funded under component II. The results from external independent assessments, such as World value survey, on citizen’s engagement as well as from the Open Budget Index on fiscal transparency will further feed the project’s M&E system. Further, the project will also support the development of reform specific M&E systems. For instance the national dialogue on public consultation will have its own M&E system, including a feedback mechanism for participants, a monitoring system for the implementation of the new public consultation policy and external evaluations. Likewise, component II will support the development of a government wide performance M&E system in the context of the budget reform, comprising performance monitoring integrated in the budget cycle, ex-post performance audits and evaluations, associating external experts. These different M&E systems, once operational, will further strengthen the project M&E system and facilitate its alignment with the government’s priorities and information systems. This will also improve the sustainability of results beyond the project duration.

73 6. Annex 4: Operational Risk Assessment Framework (ORAF) Morocco: New Governance Framework implementation support project Stage: Appraisal 7. Project Stakeholder Risks Rating: H Description: Risk Management: Stakeholder Risks are A. Strong capacity building, institutional strengthening are the primary mitigation measures foreseen. considered high considering B. A comprehensive information and communication campaign aims to help build awareness throughout the reform process and build the high expectations from consensus for reform the public and the new and transformational reforms C. Beneficiary perceptions will be assessed throughout the project, through reform specific M&E systems and external surveys. The supported by the project. project and the Bank will carry out /continuous monitoring and supervision. While there is a generally D. The project will dedicate resources to systems and capacity development at various levels. strong interest by civil society to be engaged in government decision-making, there remains some uncertainty regarding public confidence and uptake towards government efforts to consult. Popular opinion in regards to past experiences with consultation has been largely negative, as many citizens claim past efforts to consult by the government have been largely ineffective or not genuine. In order to mitigate this risk, an information and communication campaign will accompany the progress Due Date : During of the activities under Resp: Client and Bank Stage: Through implementation Status: in progress Component I to build implementation momentum and ownership among both government officials and the public. In addition the National Dialogue will adopt a ‘platform approach’ which is a means to phase and sequence reform stages to ensure that adequate capacity and consensus is built along the way that will not affect the overall success of the larger reform program. The risk of insufficient ownership by Government, project stakeholders and the donor community is low. The

74 proposed project responds to the high level directions outlined by Morocco’s 2011 Constitution that calls for the “inclusive participation in government decision making (Articles 12-15); balanced public finances (Article 77); and advancement of the regionalization agenda through principles of good governance, greater accountability, and improved representation.” The project components and accompanying reforms are strongly anchored in these new Constitutional provisions as well as the new government program which has set the stage for transformational initiatives particularly in the area of governance. Therefore, the team does not envisage significant resistance for reform in the proposed thematic areas, largely due to strong popular backing for greater accountability and transparency in government affairs, and the propensity of such reforms to produce concrete and visible change in the short-term. The implementation of the Government’s large governance reform program is faced with major coordination challenges, considering the numerous reforms and their cross- cutting nature. The project design aims at mitigating this coordination risk by focusing on three strategic and intertwined reforms and by entrusting the project management to the Ministry of General Affairs and Governance, which has this coordination mandate. The responsibility of specific activity implementation under each component will be left at the responsibility of each respective lead ministry. The development of a government wide consultation policy is thus

75 entrusted to the Ministry in charge of relations with Parliament and Civil Society, the budget reform is led by the Ministry of Economy and Finance and the implementation of the decentralization strategy is led by the Ministry of Interior. Risks to the successful execution of the overall project stem largely from limited implementation capacity of the implementing agency and counterparts. The Ministry of General Affairs and Governance, deals primarily with public policies and has limited experience in managing projects. The mandate to coordinate governance reforms is new for the ministry and it is still strengthening its own capacities to fulfil it. Likewise, Ministry charged with relations with Parliament and Civil Society, has also a new and extended mandate (Civil Society) and limited experience in managing projects. The project seeks to mitigate this high risk by supporting the project management unit, providing implementation support from the Bank and hand holding advice on the different reforms.

Implementing Agency Risks (including fiduciary) Capacity Rating: H Description: Component I: The Risk Management: Risk will be mitigated through hand-holding technical assistance as well as the conduct of training seminars for public new Constitution has expanded administration staff in regards to public consultation, petitions and motions, e-participation methods, and monitoring and evaluation. The the scope and mandate of the seminars will be designed with a flexibility component to allow trainings to adjust according to specific capacity needs. In regards to the former Ministry charged with regionalization agenda, there is strong ownership on the part of the Ministry of Interior to push forward these new reforms and strong relations with Parliament to expectations at the local level for results, thus stimulating momentum for rapid progress. The program as designed will aim to strengthen include affairs relating to local government capacity as well as capacity of the MoI through international and local expertise, training seminars, and a strong government-civil society information and communication campaign to raise understanding and awareness of these reforms both within government and externally. engagement. This new mandate will pose challenges in regards to capacity and competences, thus potentially affecting oversight, preparation, management and Due Date: continuous Status: To be put in implementation of planned Resp: Client and Bank Stage: Implementation during place once the project implementation is approved Component II: The Bank has a long-standing relationship with

76 the main counterpart, the Ministry of Economy and Finance which helps to minimize uncertainties in regards to capacity constraints and reform ownership. Component III: The regionalization agenda has been a priority in the country’s development plan for the past decade. Nonetheless, little progress has been made in actualizing these objectives. Risks may potentially arise in regards to political ownership, as well as capacity constraints on the level of the regional or local governments to successfully implement these new reforms. Expectations are particularly high at the local level, considering their direct interface with citizens for numerous basic public

Governance Rating: M Description: Given the strong Risk Management: Proper sequencing and phasing of reforms aim to address potential difficulties in maintain reform momentum across the emphasis on governance reforms different reform components under this project. The government aims to address this by combining visible short-term measures with more in the constitution and the new medium-term structural reforms in order to build momentum and consensus around visible and successful reform initiatives in each area. government’s development program, there seems to be broad consensus about the importance of strengthening government accountability, transparency, and participation in order to improve the acceptance and effectiveness of its development policies. It is also recognized that past public sector Resp: Client and Bank Stage: through implementation Due Date : ongoing Status: in progress and governance reforms failed to yield visible and tangible results for the population, as evidenced by the government’s agreement with the findings and recommendations of the PARL series’ implementation completion and results report (World Bank: June 30, 2011). Project Risks Design Rating: M Description: Given the innovative Risk Management: The project design incorporates the principles of flexibility to accommodate for the long-term nature of these reforms and cross-cutting nature of the as well as potential factors that might affect overall progress. Based on progress on the ground, respective reform components will be reforms covered under this reviewed and revised, as needed, during mid-term. The project design aims at minimizing the risks by focusing on an integrated and project as well as involvement of holistic approach, supporting three strategic and intertwined reforms both at central and local government level. various counterparts each with varying capacity constraints, there might be a risk regarding varying implementation success Status: in progress across the different components. Resp: Client and Bank Stage: Through implementation Due Date : ongoing Due to the medium term nature of the reforms, there is a risk for

77 limited short term results.

Social & Environmental Rating: L Description: The grant funds only Risk Management: No specific mitigation measures are foreseen. TA activities and there are no direct social or environmental safeguards risks envisaged with respect to this operation which is Resp: Stage: Due Date : Status: rated as a Category C.

Program & Donor Rating: L Description: No risk is envisaged Risk Management: No specific mitigation measures are foreseen. with respect to the Transition Fund which will be providing the Resp: Stage: Due Date : Status: grant financing for this project. Rating: Delivery Monitoring & M Sustainability Description: Overall Risk Management: responsibility for oversight and monitoring of the project rests with Ministry of General Affairs and Governance (MAGG). Building on the positive experience accumulated over the course of several World Bank budget support operations, MAGG will continue to take the lead in monitoring progress in implementation of this program. Bank staff both in HQ and in the field will continue to maintain Resp: Client and Bank Stage: through implementation Due Date :ongoing Status: in progress dialogue with the key counterparts and the relevant sector ministries and will conduct periodic reviews of the government’s reform program and activities supported under this project. Specific attention will be devoted to monitoring the indicators and goals of the

Project Team Proposed Rating Before Review Preparation Risk Rating: M 5.2 Implementation Risk Rating: M Comments: The preparation risk Comments: Government and stakeholder commitment confirm that risks are likely to be manageable. The risk level will be subject to for this operation is Moderate in continuous monitoring and if needed re-assessment during implementation. Needed improvements at the margin and risk management view of the Country, Stakeholder measures are built into the project and will be adjusted, as needed and Project risks and taking into consideration the level of Fiduciary Risk at this stage. Risk Team Preparation Risk Rating 6.2 Implementation Risk Rating : M Comments: The appraisal mission Comments: The same team will be involved in project implementation and thus in risk monitoring and mitigation. included a core team from the country office, led by the country economist and included the FM specialist, the procurement specialist as well with a

78 governance specialist and a consultant with long experience in project formulation and management. This team enabled a good assessment of the risks and identified appropriate risk mitigating measures as outlined in the PAD and in the project implementation manual.

Overall Risk Following Review Preparation Risk Rating: 7.2 Implementation Risk Rating: M

Comments: The preparation risk Comments: The Government and stakeholder strong appropriation as evidenced by the stakeholder meeting at the end of the appraisal for this operation is Moderate in mission and the inter-ministerial coordination mechanism foreseen confirm that the risk is moderate and should be manageable. The risk view of the Country, Stakeholder level will be subject to continuous monitoring and if needed re-assessment during implementation. Needed improvements at the margin and Project risks and taking into and risk management measures are built into the project and will be adjusted, as needed consideration the level of Fiduciary Risk at this stage. The MAGG strong coordination mandate and role throughout the project preparation has mitigated this risk. The fact that the project activities are fully aligned and integrated with a parallel governance DPL under preparation further mitigates the

79 8. Annex 5: Implementation Support Plan

Strategy and Approach for Implementation Support

1. The executing agency for the project will be the Ministry of General Affairs and Government (MAGG). To facilitate and accelerate the implementation of the project, MAGG will establish a Project Management Unit (PMU) which will be staffed by experts recruited on a competitive basis according to their skills. Activities funded by this project have several departments whose main ones are: the Ministry of Economy and Finance (MEF), the Ministry of Relations with Parliament and Civil Society (MCRP), the Ministry of the Interior (MI). Other departments will also be beneficiaries of activities implemented by the MAGG. This includes, among others: sectoral ministries such as the Ministry of Education and Health, in addition to local governments which will benefit from some project activities.

2. The institutional arrangements of the project include the establishment of a Steering Committee (SC) which will be constituted by the various ministries involved, and the beneficiaries linked to the main components of this project. The SC will meet quarterly to ensure the strategic guidance of the project and to ensure coordination between the different ministries. In its role, it will be responsible for:

 Defining the objectives, priorities and expectations of the project;

 Reviewing the activities and related budgets that are presented by the Project Management Unit (PMU);

 Reviewing the progress of planned activities for the current year and at its year-end meeting decide on the activities and budget of year n +1;

 Managing differences that may arise in the course of activities and decide on corrective measures as necessary to ensure implementation;

 Facilitating the management of implementation hurdles that may arise;

 Ensuring the participation of all stakeholders and that project objectives are met;

 Approving any changes in the Project Manual.

3. The Presidency of the SC will be held by the Secretary General of MAGG or the Project Director who will be appointed by the MAGG. The President shall convene the SC for regular (and supplementary) meetings.

80 4. The secretariat is provided by the SC of the PMU. The project management unit (PMU) will be in charge of coordinating the project on a daily basis. It ensures that decisions are implemented and activities, procurement, and financial arrangements meet the grant agreement signed with the World Bank. It will be composed of external experts recruited according to merit for the positions of Project Coordinator (PC), Procurement Specialist (PS) and Financial Specialist (FS). They are recruited on the project and work within the MAGG, under the guidance of the Project Director, in collaboration with the various departments and services of the Ministry.

81 5. A visualization of this implementation arrangement is presented in the below illustration :

6. The MAGG, acting as the executing agency, will prepare agreements with respective beneficiary ministries to coordinate the activities and budget allocations under their respective component. The beneficiary Ministry of the respective task will, in conjunction with the PMU: (i) define the needs (preparation of terms of reference, technical specifications, training, etc.), (ii) provide information on monitoring activities and (iii) validate the services provided by the resources at their disposal. The MAGG, based on expressed needs, will provide: (i) procurement, (ii) the provision of resources, (iii) financial monitoring of suppliers and their payments result in "good pay" issued by the beneficiary. Each year, meetings between beneficiaries and the PMU will establish the activities and annual budgets to be submitted to the SC. To facilitate interaction between departments and PMU, each beneficiary ministry will appoint a focal point that will be in permanent contact with the PMU and provide an interface between his Ministry and the MAGG.

82 7. Cross-cutting activities, such as training, will be implemented by the MAGG for beneficiaries. They will establish the number of trainees, the themes, and venue. The MAGG will monitor and evaluate the training provided to beneficiaries.

8. Activities will be described, estimated and planned in year n-1. On the basis of this plan, a procurement and disbursement plan will be established or updated. These documents will form the basis for the financial monitoring system. Tracking tables will be presented to the SC during quarterly meetings. An annual monitoring will be established at the year end. The quarterly assessment will be sent to all participants by the PMU 15 days before the date of the meeting. On the basis of the monitoring tables, the SC will take appropriate decisions to achieve the objectives of the project. These tables will also be forwarded to the World Bank in accordance with the grant agreement.

9. Each component will be implemented under the responsibility of the departments listed below:

Component Budget (USD) Responsibilit y 1 Strengthening public participation 730 000 MCRP 2 Improving the efficiency and accountability 1 824 000 MOF in the use of public funds 3 Advanced regionalization 768 800 MI Information et communication 50 000 MAGG Project management 490 000 MAGG Miscellaneous 137 200 Project total 4 000 000

10.The table below lists the required steps to be achieved and respective responsible unit:

N Stage Responsible entity ° 1 Nomination of focal point Beneficiaries 2 Preparation of annual work program (AWP) n+1 Beneficiares + MAGG 3 Development of the annual project budget n+1 MAGG 4 Presentation of AWPs and annual budgets to SC MAGG 5 Validation of AWPs and annual budgets SC 6 Development and signature of the contract de l’année Beneficiaries / MAGG n+1 7 Procurement MAGG 8 Contract signatures MAGG

83 9 Resources are made available MAGG 10 Activity implementation Beneficiaires + Service providers 11 Follow up of activities (monitoring and evaluation) Beneficiaries / MAGG 12 Validation of services or supplies provided Beneficiaries 13 Payment of service providers MAGG 14 Development of monitoring tables and annual Beneficiaries + MAGG summary table 15 Presentation of results to SC MAGG 16 Corrective measures for year n+1 SC Resume iterative process in phase 2

84

Load more

  84

Copy Link