World Bank Document

Document of The World Bank

FOR OFFICIAL USE ONLY FILECOPY Public Disclosure Authorized

Report No. 2523a-MOR Public Disclosure Authorized

KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT

OF THE

VECETABLE PRODUCTION AND MARKETING PROJECT Public Disclosure Authorized

August 16, 1979

Public Disclosure Authorized Europe, Middle East and North Africa Projects Department Agriculture II Division

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ! CURRENCYEQUIVALENTS

Currency Unit - Dirham (DH) US$1 DH4.0 DH 1 = US$0.25

WEIGHTS AND MEASURES

1 millimeter (mm) - 0.039 inch (in)

1 meter (m) - 39 inches (in)

1 kilometer (km) - 0.62 mile (mi)

1 hectare (ha) - 2.47 acres

1 square meter (m2) - 10.76 square feet (sq ft)

1 cubic meter (m3) - 35.31 cubic feet (cu ft)

1 liter (1) - 0.264 US gallon (gal)

1 hectoliter (hl) - 26.4 US gallons (gal)

1 kilogram (kg) - 2.205 pounds (lb)

1 metric ton (m ton) - 2,205.00 pounds (lb)

1 bar - 14.666 pounds per square inch (psi)

1 kilometer per hour (km/h) - 0.6 mile per hour (mph)

GOVERNMENT OF THE KINGDOM OF MOROCCO

FISCAL YEAR JANUARY 1 - DECEMBER 31 FOR OFFICIAL USE ONLY

ABBREVIATIONS

CLCA Caisses Locales de Crédit Agricole

CNCA Caisse Nationale de Crédit Agricole

CRCA Caisses Régionales de Crédit Agricole

DE Rural EngineeringDirectorate

DMV AgriculturalDevelopment Directorate

DRA AgriculturalResearch Directorate

BEC European Economic Community

FAO/CP Food and Agriculture Organization/CooperativeProgram

ICB InternationalCompetitive Bidding

MARA Ministry of Agriculture

OCE Office de Commercialisationet d'Exportation

SASMA Société Agricole de Services au Maroc

This document ha a restrictod distribution and may be used by rocipientsonly in the performance of thoir officiai dutbu. Its contnte may not otherwise be disclo ed without Worid Bank authorization.

KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCTION AND MARKETING PROJECT

Table of Contents

Page No.

I. INTRODUCTION...... 1

II. THE AGRICULTURAL SECTOR AND THE HORTICULTURAL SUBSECTOR...... 1

A. The Agricultural Sector ...... 1 B. Bank Involvement in the Agricultural Sector ...... 5 C. The Horticultural Subsector...... 6

III. THE PROJECT AREA, ITS DEVELOPMENT POTENTIAL AND CONSTRAINTS ...... 9

A. Location, Water and Land Resources ...... 9 B. Land Use, Land Tenure and Population...... 10 C. Agricultural Supporting Services ...... 11 D. Packing Stations and Export Facilities ...... 13 E.. Roads and Social Infrastructure...... 14

IV. THE PROJECT...... 14

A. Origin and Objectives...... 14 B. Project Description ...... 15 C. Cost Estimates ...... 18 D. Financing...... 20 E. Implementation Schedule...... 21 F. Procurement...... 21 G. Disbursements ...... 22 H. Environmental Effect...... 24

V. PROJECT IMPLEMENTATION...... 24

A. Organization and Management ...... 24 B. Agricultural Supporting Services...... 25 C. Lending Terms and Procedures ...... 27 D. Marketing Organization and Strategy...... 29 E. Construction and Maintenance of Roads ...... 31 F. Accounts and Audits ...... 31 G. Progress Reporting, Monitoring and Evaluation...... 32

The report is based on the findings of an appraisal mission in January 1979, composed of Messrs. C. Polti (Agriculturist), N. Imboden (Economist), L. Bou (Marketing Consultant), and Mrs. E. Garibaldi (Agricultural Consultant). Table of Contents (Continued) Page No.

VI. THE PROJECT BENEFITS AND JUSTIFICIATION ...... 32

A. Production .. 32 B. Marketing .. 34 C. Prices ...... 40 D. Main Benefits and Beneficiaries . . 43 E. Financial Analysis .. 44 F. Economic Analysis ...... 46

VII. RECOMMENDATIONS ...... 48

ANNEXES

1. Table 1: Project Cost and Schedule of Expenditures ...... 50 Table 2: Estimated Schedule of Disbursement ...... 53

2. Table 1: Production Schedule ...... 54 Table 2: Projected Distribution of Moroccan Vegetable ...... 55 Exports Among Western European Countries

3. Selected Documents Available in the Project File ...... 56

Map IBRD 14279 KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE VEGETABLE PRODUCTION AND MARKETING PROJECT

I. INTRODUCTION

1.01 The Government of Morocco has requested a Bank Loan to help finance a development program in the horticultural subsector vith emphasis on production and export of high-value off-season vegetables. The Project, which is on the Government's priority list of development programs in agriculture, would be the Bank's first participation in the horticultural subsector for export in Morocco. The Project was selected because of (i) the importance of fruit and vegetables in foreign trade; (ii) the decline of Moroccan vegetable exports to traditional markets despite increased Western European vegetable imports; and (iii) the need to develop Morocco's existing agricultural potential through modern cropping techniques as well as a new marketing strategy for vegetables.

1.02 The Project was identified in early 1978 when the national export agency (OE) 1/ issued its "Development Plan for Vegetables" (1979-1985), aimed at doubling the value of vegetable exports through (i) the construction of greenhouses, (ii) the modernization of packing and grading infrastructure, and (iii) the development of deep-freezing facilities. The Project is consistent with the Bank's general economic mission's recommendations to support export oriented projects. The Project was prepared by the Government of Morocco with the assistance of FAO/CP from March to December 1978. Project preparation was closely monitored by the Bank. The last Project Brief was issued on November 22, 1978.

II. THE AGRICULTURAL SECTOR AND THE HORTICULTURAL SUBSECTOR

A. The Agricultural Sector

General

2.01 Morocco's population is estimated at 18 million (1977) of which about 60% live in rural areas. Population growth has averaged 2.9% p.a.; 4.8% in the urban sector, 1.8% in the rural sector, the difference being due to rural-urban migration. Agriculture contributed about 14% of GDP in 1977, down from an average of 22% during 1967 to 1970. About 40% of the labor force is employed in agriculture compared to 60% in 1971. Agricultural exports accounted for 35% of total exports in 1977 (falling from about 60% of total

1/ State Board for export and external trade of fruits, vegetables, wine and processed food. -2- exports prior to 1975). The Moroccan economy can be characterizedas pre- dominantly market oriented with state interventionin agriculture occuring through price and credit policy, taxes, import controls,Government investment in infrastructure,Government agriculturalservices, and Government investment in public farming enterprises and agro-industry.

Land Use

2.02 Morocco has a total land area of 50 million hectares of which 7.4 million have soils and moisture suitable for cropping,and 20 million are in semi-arid or mountain regions suitable only for grazing. Permanent irrigation covered 690,000 ha in 1977. About 5.8 million ha of the 7.4 million of agricultural land are cultivated each year; the remainder is left fallow. About 4.5 million ha are planted under cereals, 500,000 ha under pulses, 400,000ha under fruit trees, 140,000ha under vegetables, 60,000 ha under sugar beet, and the remainder under oilseeds, cotton, and forage crops. Livestock is primarily extensive, based on grazing of pasture land. Intensive livestock production based on cultivated forage crops, barley, or industrial crop residues, is rapidly becoming important in irrigated and high rainfall areas. Most of Morocco's rainfed areas are characterizedby traditionalagricultural practices, and limited use of fertilizers,plant protection, certified seeds and farm machinery. As a result, crop yields and livestock productivityare generally low.

AgriculturalPerformance

2.03 Over the last 15 years, agriculturaloutput (in constant prices) grew at an average rate of 2.4% p.a., with wide fluctuationsmainly due to variations in climatic conditions. Domestic agriculturalproduction has not kept up with the increased demand caused by urbanization,and by income and population growth. The result has been a 21% p.a. average increase in food imports from 1970 to 1977 (in current prices), 9.6% p.a. in terms of quantity. The expansion of agriculturalimports, along with a shift of exports to domestic consumption,has maintained a generally adequate food supply and nutritional level. However, poverty pockets exist with significant numbers of people who have nutritionaldeficiencies (para 2.11).

2.04 Performance has varied between agriculturalproducts. In those cases where modern farming techniques and inputs could be introduced rapidly and where prices permitted net income per ha and per day of family labor to be attract-ive,progress has been rapid. Examples are sugar beet and sugar cane production which have been introduced in modern irrigation perimeters. Sugar beet production grew by 13% p.a. from 1967/69 to 1976/78. Similarly, milk production increased from 500,000 t in 1971 to 650,000 t in 1977 (4.3% p.a.) due to Government introductionof imported high yield pure-bred cows from Europe, constructionof milk collection centers, promotion of irrigated forage production,provision of animal health services, and subsidizationof milk prices paid to producers. Government efforts to increase production of crops that do not alter farming practices (cereals and pulses), or when Government price policy does not permit farmers to obtain sufficient income (oilseeds,cotton, maize), have limited or no success. Cereal yields increased 1.2 quintals/hain 18 years (with considerableannual variation). -3-

The Interim Plan, 1978-1980

2.05 Under Morocco's Three Year "Interim Plan" (1978-1980), agriculture would receive 18% of planned investment,"as it did under the Third Plan (1973- 1977). Total Government investment in agriculture for 1978-1980 is tentatively foreseen to equal about US$963 million equivalent, out of total investment of US$5,347 million equivalent.

2.06 The "Interim Plan" foresees the same distribution of Government investment between categories as under the Third Plan. About 57% of Govern- ment agricultural investment would go to irrigation projects, 16% to the extension service and to the agricultural components of rural development projects. About 6% would go to livestock development, 5.6% to forestry and soil conservation, and the remainder to agro-economic studies, the cadastral survey, research, rural water supply, and agricultural education. A major effort is now underway to organize farmers into service cooperatives, improve input supply organization and infrastructure, and create basic infrastructure such as milk collecting centers, grain storage facilities, and animal health stations.

Agricultural Sector Issues

2.07 Public Finance Situation and Emphasis on Irrigation. Eighty-five percent of the rural population is dependent on rainfed agriculture, and Gov- ernment studies indicate that improvements in farming practices alone could increase rainfed agricultural production dramatically. The "Interim Plan" recognizes for the first time the need to'shift more Government resources to rainfed production, but due to the tight public finance situation, and the need to complete ongoing irrigation projects, the investment and operating budgets give priority to irrigation, although no new schemes would begin during the Plan period.

2.08 Exports. An import substitution policy and growing domestic consumption, due to population and income growth, have diverted agricultural exports to local markets. As a result, agricultural exports have somewhat stagnated; their value has increased at 6%, but their quantity has declined at 1.2% p.a. Cereals and meat are no longer exported, while fruit and vegetables now constitute more than 50% of agricultural exports. The development of an export growth strategy, in which fruit and vegetables play an important role, would help alleviate existing balance of payment difficulties. The proposed Vegetable and Marketing Project would be of crucial importance to this strategy.

2.09 Price Regulation and Subsidies. The Government purchases hard wheat and barley at an official support price, while the prices of soft wheat, most industrial crops, and milk are fixed, as are the prices of public utilities. This price intervention is supplemented by controls on imports, foreign exchange transactions, and interest rates. In addition, subsidies are provided to maintain low retail prices for flour, bread, sugar, vegetable oil, and milk, as well as for fertilizer and some high yielding seeds. Agrarian Reform Cooperatives and Farmers' Associations receive special input subsidies. - 4

The Government's price and subsidy policy seems to be administratively cumber- some and inefficient. It has kept some agricultural prices artificially low, discouraging production for the market, encouraged imports of foodstuff by processing enterprises because farmers are unwilling to sell at low official prices, and subsidized milk production unnecessarily. Evidence also exists that the urban poor obtain only a small percentage of consumer food subsidies, and that nearly all agricultural input subsidies go to wealthier farmers. S,ubsidiestherefore have little impact on alleviating the condition of the poor or of stimulating small farmers to use modern inputs. The horticultural subsector is not part of a Government incentive program and does not benefit from special subsidies.

2.10 Taxation Policy. The present tax system is based on the production potential of the farms in terms of rainfed or irrigated area, size of flock and number of fruit trees. However, the assessment of the production potential is made on averages which sometimes underestimate the net values of production especially after investments are made on production units. The MoEoccan authorities are aware of the inadequacies of the present system and are pressing for the completion of a major reform of the agricultural fiscal system. Government has indicated that priority fiscal reform proposals could be included in the 1980 Finance Law.

2.11 Poverty. About 45% of Moroccan farm families live at or below the absolute poverty level of US$200 per capita. Only 60% of the available rural labor (which totals 3,130,000 man-years) is fully employed. Moroccan statistics indicate a reduction in average per capita income and an increase in underemployment in rural areas. Government has undertaken a poverty oriented program requiring a greater commitment of staff and financial resources. The Bank, through its lending program to Morocco, is contributing to Government's efforts to improve the living conditions of farm families below absolute poverty (paras 2.14-2.15).

2.12 Land Tenure. Distribution of private land in Morocco is unequal, with about 75% of the farm families having 5 ha or less, owning 25% of the agricultural land. Farms are excessively fragmented with 1.9 million faras divided into 11.6 million parcels. The average size of a parcel is 0.64 ha, too small for efficient farming. In addition, absentee landlords often hold land for speculative purposes and do not cultivate it. When cultivated, it is often by tenant farmers who have little security of tenure and as a result have no incentive to invest in or improve the land. Morocco's Three- Year '"InterimPlan" proposes several land reform measures which would alleviate these problems and merit Bank support. These measures include limitations on the partition of land below a minimum size, increased induce- ments to cultivate arable land, land consolidation, creation of viable holdings on collectivity owned land, extension of the length of tenure by tenant farmers, and increased recovery of Government investment costs through land betterment levies and user charges (applicable particularly in irrigated areas). In the horticulture subsector, off-season vegetables are grown on small irrigated plots, mostly by owner-cultivators. Because of the labor intensive nature of vegetable production, land fragmentation is not a constraint for the modernization of the vegetable production. - 5-

2.13 Agricultural Extension and Research. Agricultural research in Morocco is carried out by the Ministry of Agriculture (MARA). It is hampered by inadequate organization, financial constraints, lack of qualified staff and bureaucratic behavior. Research is theoretical, and developed in isola- tion from production priorities. The extension service is encumbered with administrative and regulatory tasks; it employs agents with little practical farming experience, and lacks organization, material, and a systematic method for extension. Extension is diffused and discontinous. Moreover, extension agents' salary structure has become increasingly uncompetitive in attracting and keeping qualified staff. The "Interim Plan" institutes a major reform of the extension service, based on the concept to be introduced in the Fes-Karia- Tissa Project financed by the Bank. Extension agents would relinquish all regulatory and most administrative tasks. MARA would concentrate on creating service cooperatives where agents would provide advice on agricultural matters and aid in obtaining credit and inputs. Inadequate practical experience and low salaries will continue to be serious obstacles to an effective extension service, but a gradual improvement is foreseen. The horticultural sector, however, benefits, in addition to MARA's general extension service, from a limited, yet effective organization for agricultural research and extension largely controlled by OCE and financed through levies on exports (para 3.09).

B. Bank Involvement in the Agricultural Sector

2.14 Performance under Previous Projects. Bank Group lending for agriculture in Morocco began in 1965 and to date 12 projects have been undertaken and supported by US$413 million in Bank/IDA funds (US$24 million of which is IDA credits). They include five irrigation projects: Sidi Slimane (FY65, completed), Sebou I (FY70), Souss Groundwater (FY75), Doukkala I (FY76), and Doukkala II (FY77). There have also been four Agricultural Credit Projects (FY66, FY73, FY77 and FY79), an Agro-industries Project (Sebou Il, FY74), and a Rainfed Agricutural Development Project in the Meknes region (FY75). A second Agricultural Development Project (Fes-Karia-Tissa) approved by the Bank in FY78 was declared effective on February 15, 1979. These projects are generally performing well. Implementation delays were caused primarily by lack of coordination between and within participating Ministries. The major issues in the Meknes Project have been the delay in land redistribution, project start-up delays, and a poorly defined division of responsibility between the Project Authority and the Central Government. Measures correcting these problemnsare now being implemented. The Fes-Karia-Tissa Project was designed so as to minimize organization and management problems such as those encountered with Meknes.

2.15 Bank Agricultural Sector Strategy. Bank agricultural sector strategy in Morocco is (i) to concentrate on target group-oriented agriculture projects, shifting away from the large scale irrigation projects emphasized in the past, and (ii) to emphasize highly productive export-oriented projects in line with the Bank's country economic recommendation to promote exports. Irrigation and small scale agro-industry projects would be developed to complement rainfed farming. Bank emphasis on adequate recovery charges in irrigation projects should continue to be made explicit. Consistent with this -6- strategy, the Bank is preparing a rural development project similar to the recently approved Fes-Karia-Tissa Agriculture Project emphasizing extension, training, erosion control, input supply, credit, and rural infrastructure to aid the rural poor. Additional rural development, agricultural credit, and export oriented projects are foreseen.

C. The Horticultural Subsector

Importance of Horticulture and Past Performance

2.16 Fruit (mainly citrus) and vegetables constitute one of the main components of the Moroccan foreign trade. In value terms, they are second in importance of exports only to phosphates. Citrus orchards cover about 70,000 ha and employ about 300,000 people. Exports have increased from about 350,000 t in 1962/63 to about 600,000 t in 1972/73. Since then exports have stagnated or slightly declined due to a significant percentage of old orchards and obsolete varieties. The Government has initiated a citrus grove improvement program aiming at expanding citrus exports to 720,000 t by 1980/81.

2.17, For vegetables, Morocco is one of the main producers and exporters in the Mediterranean region. Vegetables cover about 140,000 ha, of which 120,000 ha are in-season (May-October) and 20,000 ha are off-season (November- April) vegetables. Total production amounts to about 2,300,000 t, of which 500,000 t are off-season vegetables and about 200,000 t are exported mostly from October to May. Tomatoes and potatoes have been traditionally the main products for export. Contrary to the powerful and well-organized citrus sector mainly established in large farms, vegetables are grown on small and traditional farms. Since the trade agreement with the European Economic Com- munity (EEC) of March 1969 and the associated loss of its trading advantages on the French market, Morocco has found itself confronted .with competition which exposed the relative weakness of the vegetable subsector, mainly the lack of crop diversification, low productivity and obsolete agricultural techniques. However, by opening new outlets, particularly in West Germany, Morocco succeeded in maintaining vegetable exports at about 275,000 tons p.a. until 1975. In 1976, in order to protect its own production under greenhouse, the EEC restricted vegetable imports from May to October, thus reducing significantly the Moroccan calendar of exports. Confronted with a number of technical and institutional difficulties (para 2.21) the vegetable sector has been unable to adapt to the new export calendar and export of vegetables have declined by about 30% in the past three years. The Government's Development Plan for vegetables would be the first step to stop this decline and to recapture the Western European market.

2.18 OCE. Created in 1965, OCE is a national marketing Board with a monopoly for agricultural exports. Fruit and vegetables represent 70% of its foreign trade while the remaining 30% are mostly wine, cotton and processed food. OCE is financially autonomous. Its organization includes 12 directorates and personnel of about 2,000. OCE's role includes supervision of private and cooperative packing and grading stations, quality control of - 7 - exported goods, shipment to and sales in the European markets. OCE's operation costs are recovered through a levy of 3.6% on the products' CIF price. While OCE's efficiency is adequate for citrus, its marketing techniques are inappropriate for vegetables (paras. 2.21-2.22).

2.19 The enforcement of strict quality criteria, required to compete successfully in the European market, have resulted in the rejection of about half of the current vegetable production for export: about 35% is eliminated at the packing level and the remaining at harbor control. To improve the quality of production and to increase exports OCE has become increasingly involved in extension and research primarily through the introduction of selected hybrid seeds and the promotion of greenhouses.

2.20 Vegetable producers have mixed reactions about OCE. Its intervention at the production level and its technical assistance (para. 3.09) are highly appreciated, but its marketing role and its quality control criteria are often not well understood by producers. The limitation of OCE's marketing role to that of a commissioner who does not share the farmers' production and commercial risks is often resented. Farmer Associations desire a greater commitment from OCE, including the guarantee of a minimum price to producers. OCE is strongly opposed to such a guarantee which could threaten its financial position and would encourage th.e current lack of cropping diversification. The proposed improvement in OCE's marketing structure (para 5.22), as well as better planning and control of production, would permit OCE, on a limited scale to pass to the producers the guarantees resulting from its forward contract with European importers (para. 5.19).

Causes of the Decline in Vegetable Exports

2.21 In view of the rapid expansion of the European market for off-season produce (paras 6.07 to 6.30), the decline in Moroccan exports is surprising. Three main causes of this decline have been identified:

(a) the failure of production to adapt to new techniques, coin- ciding with the development in the other producing countries of high-yielding hybrids, new vegetable varieties and greenhouse techniques.

(b) OCE's insufficient control over production and the failure to adapt to the changing demands of consumers. Potatoes and tomatoes have remained the primary products but potato consumption is declining and the present 4% annual growth of off-season tomato imports into the EEC is well below that of other early vegetables (which is running at between 10% and 20% p.a.).

(c) OCE's failure to adopt new marketing practices. In France, (80% of its vegetable exports) OCE uses the same distribution system for marketing fresh vegetables as for citrus: a system of dockside auction sales at the ports. This organization undoubtedly works well for storable products - 8-

like fruit and citrus, but is not adequate for perishable products such as vegetables. The rapid development of sales by telephone, and progress in data processing and telecommuni- cations, have profoundly altered the marketing arrangements for these commodities. Vegetable wholesalers are now specialized and equipped with the necessary facilities (cold storage, packing plants, transportation facilities) to buy and sell directly their commodities. This marketing technique bypasses the dockside auction sale and brokers. Most of the other large exporting Boards have long ago abandoned the dockside sale system for fresh vegetables and have joined up with wholesalers- distributors to form a specialized sales network. The latter system has been used successfully by OCE in Western Germany and it should now be applied in France (para 5.22).

2.22 The major constraints which led to a decline of production and export of off-season vegetables are interrelated and have a cumulative effect. The failure of production to modernize its techniques and to meet the market demand has led OCE to concentrate more heavily on citrus and to organize its marketing structure for citrus trade. This emphasis as well as the inadequate vegetable marketing structure has in turn adversely affected any attempt to modernize vegetable cropping and diversify production. This vicious circle can only be broken by simultaneously addressing the production and marketing issues of the vegetable sector. Encouraging prospects for a rapid improvement of the situation are: the potential of the region, the existing farmers' organization and the OCE's willingness to overcome its present difficulties.

Development Objectives and Strategy

2.23 The Government's "Development Plan for Off-Season Vegetables" aims at recapturing and increasing Morocco's share of off-season vegetables in the European market. Morocco's basic advantages over its competitors are the following: (i) lower production costs than those of European countries, particularly labor cost; (ii) favorable climatic conditions; (iii) the proximity of the EEC market compared with non-European competitors (Israel, Senegal, Kenya, etc.); and (iv) the reputation of Moroccan products, particularly their taste qualities. In addition, Morocco has established durable trade links with EEC, particularly France, which provide its products with a ready access to these markets.

2.24 The present Project would help Morocco in implementing its redressal plan. The Project strategy would be dictated by the causes of the export decline and include the following measures:

(a) Increase in vegetable yields and improvement of their quality through modernization of cropping techniques, such as soil disinfection, introduction of high-yield hybrid -9-

varieties, adequate fertilization and pest control, development of green-houses, and improvement of packing and grading operations.

(b) Planning of production through strengthening OCE's links with the growers and diversification of crops so that supply reflects demand.

(c) Improvement of the marketing structure and establishment of specific commercial channels for vegetables, separate from those of citrus, based on a sale-through distribution system.

III. THE PROJECT AREA, ITS DEVELOPMENTPOTENTIAL AND CONSTRAINTS

A. Location, Water and Land Resources

Location

3.01 The Project area consists of a narrow strip along the Atlantic Coast (map in annex) from Kenitra in the North to Agadir in the South. Five Regions are affected by the Project. Total area encompasses about 100,000 ha of which about 31,000 ha are under vegetable cultivation, and 18,000 ha are devoted to off-season vegetables, with the following distribution:

Vegetables Off-season Region Total Area Total Area Vegetables Area (ha) (ha) ha % of total area

Kenitra/Rabat 3,700 3,600 1,200 32 Casablanca 12,900 8,400 7,300 56 El Jadida 11,600 8,900 5,000 43 Safi 1,400 800 600 43 Agadir 73,000 9,100 3,900 5

Total 102,600 30,800 18,000 18

Climate

3.02 The climate is characterized by mild winters, with average temper- ature from December to March ranging from 12.8 to 16 C in Rabat and Casa- blanca, 13.80 to 170C in El Jadida and Safi, and 14.60 to 19.20C in Agadir. The rainy season extends from October to May; average rainfall drops from 500 mm in the North (Kenitra-Rabat) to 250 mm in the South (Agadir). These climatic conditions are favorable to the production of off-season vegetables in the entire Project area, with some limitations in the North and increasing advantages further South. Strong winds are frequent in all the Project area and make it necessary to protect crops with windbreaks. - 10 -

Water Resources

3.03 Water resources and its quality are unevenly distributedin the Project area. In the Kenitra-Rabatregion groundwater is abundant and soft, while in the Casablanca,El Jadida and Safi Provinces aquifers are already fully exploited (and locally over-exploited),with some salinity problems, particularlyin the El Jadida and Safi areas. In the Agadir region abundant water of good quality is available from two sources: surface water in the Souss Valley and the Massa perimeters, groundwater elsewhere;however, competition for urban and industrialuses is growing around the,city of Agadir. The proposed Project is based on the present water distributionand its usage in the Project area. In order to maximize existing water resources, the following measures would be implemented: (i) whenever water is saline, crops would be restrictedto resistant species; (ii) although the Project is not expected to increase the already cultivatedareas and their respective water requirements,conservation measures through improvement of irrigation systems would be introducedin most of the Project area (para 4.06); and (iii) hydrogeologicalsurveys would be carried out to determine the dynamics of the water resources,to monitor water quality, and to determineguidelines for the rational developmentof water resources in the Project area (para 4.15).

Land Resources

3.04 Soils have a sandy texture in almost all of the Project area; from the standpointof depth, profile and permèability,soils are suitable for a large range of vegetable crops. Characterizedby an alkaline reaction and a low content of nitrogen and phosphorus, they require an extensive and systematic fertilizationprogram. Due to the light soil texture and agricultural mispractices,problems of nematode disseminationhave adverselyaffected most of the project soils and contributedto a decrease in yields. Specific soil disinfectionmeasures would be introducedunder the Project.

B. Land Use, Land Tenure and Population

Land Use

3.05 About one third of the Project area is cultivatedin vegetables and the remainder in cereals and forage with sizeable differences from one province to another as shown in para. 3.01. Crop rotation is not systematic- ally practiced. Livestock and milk productionis relatively important in all the Project area. Potatoes and tomatoes amount to 86% of the off-season vegetable area. Inefficientagricultural techniques and obsolete varieties result in low yields (30 to 35 t/ha for tomato, 15 t for potato) and poor quality. Improvements in agriculturalt`echniques have been introducedon a limited scale: selected hybrid seeds, soil disinfection,adequate pest control, and have proven successful. Over the last three years, about 140 ha of greenhouseswere also introducedthrough special loans and technical assistance extended by OCE. Yields and quality of products under greenhouse cultivationhave been promising. - il -

Land Tenure and Farm Size

3.06 Most of the lands in the Project area are privately owned with the exception of a few state owned lands in the Casablanca area. About 83% of private lands is cultivated by the owners and the remaining 17% by tenants. The following table shows the land tenure breakdown:

0-5 ha 5-10 ha 10-20 ha Over 20 ha Total

Farms (%) 55.2 25.4 13.4 6.0 100 Area (Z) 16.0 22.4 20.0 41.6 100

About 11,100 farms of which 50% are located in the Agadir region, are totally or partly devoted to off-season vegetables. The distribution of land of off-season vegetable farms is considerably less skewed than overall land distribution. Off-season vegetables are mainly grown on small farms as small farmers tend to specialize in labor intensive off-season vegetables. On large farms, the portion of land cropped with vegetables is normally relatively small, because of managerial problems, labor requirements and insufficient water availability.

Population

3.07 The Project area is heavily populated, with about 550,000 inhabit- ants living in rural zones. The 11,000 vegetable growers families, represent about 60,000 persons. With a few exceptions, all the vegetable grower families live above the absolute poverty level.

C. Agricultural Supporting Services

The Ministry of Agriculture (MARA)

3.08 MARA is represented in the Project area by its five Provincial Agricultural Directorates, two Irrigation Offices (Doukkala and Souss/Massa) and seven Development Centers. Nine agriculturalists and 32 extension agents are covering the whole Project area. MARA's extension and research efforts have been hampered by inadequate organization and a lack of specialized staff, as MARA's activities in vegetable producing regions cover all agricultural production and are not specifically directed to the horticulture subsector. However, MARA has succeeded in creating a large number of cooperatives and precooperative associations grouping at least seven members and continues to assist them efficiently.

OCE/SASMA 1/

3.09 At the production level, OCE and its affiliated company SASMA, have become increasingly involved in extension and research. About 40 OCE/SASMA

1/ Societe Agricole de Services au Maroc. - 12 - extension agents are employed in extension services in the Project area. OCE/SASMA staff is specialized in vegetable production. In cooperation vith the AgriculturalResearch Directorate (DRA), OCE/SASMAhas undertaken applied research in Dar Bouazza, a DRA station near Casablanca. Besides SASMA is well equipped in laboratorymaterial and has initiateda specific research program on vegetables. In addition to its extension and research tasks, OCE is the exclusive supplier of imported hybrid seeds and greenhouses. (Other inputs are available through private wholesalers in all the Project area.)

CNCA _/

3.10 CNCA is the main Moroccan banking institutionfor agriculture. It was establishedin 1961 as an autonomousGovernment-owned institution. CNCA's infrastructureincludes its headquartersin Rabat, 29 regional banks (Caisses Regionalesde Credit Agricole, CRCAs) which lend to medium and large farmers with an annual net income above US$1,900 and 91 local banks (Caisses Locales de Credit Agricole, CLCAs) which lend to small farmers whose net income is below US$1,900. CNCA, which has received four Bank loans, has been consis- tently appraisedby the Bank as an effective agriculturalcredit institution having an efficient lending operation and an excellent repayment record. The First AgriculturalCredit Project (Loan 433-MOR, February 1966) has been audited by the OperationsEvaluation Department (OED) 2/ and OED's recommendations have been taken into account in the subsequent loans to CNCA. A complete analysis of CNCA was recently sent to the Board. 3/ CNCA has increased its interest rate in September 1977 and its present interest is 8.5% for medium- and long-term loans to private farmers and 7% for newly created Agrarian Reform Cooperatives. The rate of inflation in'Moroccohas declined from 12.5% in 1977 (9.1% in 1978) to an estimated 9% in 1979. Bank projections indicate a decline in the rate of inflation to 7% in 1980 rising to 8% p.a. for the remainder of the Project period. As the average cost of CNCA resources is estimated at 3.2%, the interest spread permits CNCA to generate a small annual profit.

3.11 CNCA has six regional offices (CRCA) in the Project area. About 1,700 farmers (15% of the total) have borrowed from CNCA. Medium-term credits have been used primarily for purchase of farm machinery, irrigationequipment and pumps. Most of the investmentsunder the proposed Project would be financed through CNCA long- and medium-term conventionalloans. Shortage of capital for short-termlending has led CNCA to establish ceilings which are generally adequate to meet the productioncosts of traditionalproduction under open field conditions. The present ceilings, however, would cover only 10% to 20% of production costs if applied to the proposed techniquesand would

1/ Caisse Nationale de Credit Agricole.

2/ OED Report AgriculturalCredit Programs. BackgroundPaper No. 4. "Evaluationof the CNCA/IBRD AgriculturalCredit Program in Morocco."

3/ "SAR Of the Fourth AgriculturalCredit Project," Report No. 2426-MOR, April 30, 1979. - 13 - hamper modernization of cropping systems for small farmers. The Project would attempt to resolve this issue (para 4.07). Present CNCA and CRCA staffing is sufficient for project needs, as technical factors of the credit component would be appraised by the technical extension agents (para 5.17).

Coordination Among Government Agencies

3.12 In the past, there has been a lack of coordination between MARA, OCE and CNCA. This resulted in a dissipation of actions, inadequate programming and control of production, and failure to efficiently modernize the off-season vegetable sector. Agadir Province, however, has successfully established a Regional Technical Committee composed of representatives of the three orga- nizations, which has contributed to better coordination and stricter control over production than in other provinces. Such committees would be established under the Project both at the regional and central levels (paras 5.01-5.02).

Rural Institutions

3.13 Cooperatives. Cooperatives and pre-cooperative associations are numerous in the horticulture subsector: most of them have been created for packing and grading purposes. In many cases their role has been extended to common purchase of inputs and to investments for farm mechanization and transport equipment which are not profitable or possible for a single farmer. Strengthening the cooperative system and regrouping the smallest cooperatives into more powerful units would be encouraged under the Project (para 4.10).

3.14 Farmers' Association. The horticulture subsector is characterized by a widely based farmers' association system. Most of the citrus growers are grouped in a single association, ASPAM. Vegetable growers are grouped into two associations, ASPRIM in the North and APPAS in the South. The farmers' associations participate in the Board of Directors of SASMA and contribute to its financing. The farmers' associations also participate in the OCE's Board of Directors and contribute to decision-making on the amount and tariff of a small "stabilizing" fund which is financed through a levy on exports. The 'stabilizing" fund is used to partly compensate farmers whose export products have suffered a loss because of special circumstances such as strikes, transport difficulties, etc.

D. Packing Stations and Export Facilities

Packing and Grading Stations

3.15 About 300 packing and grading stations are scattered in the Project area. Most of them belong to cooperatives and work exclusively for their members; others are owned by private enterprises. Private stations are generally bigger than cooperative ones and well managed. The cooperatives' main problems are their excessive number (which results in an excess of brands), low capacity (below 1,000 t for 80% of them), poor management and lack of equipment. As a result, their operation costs are high, and the - 14 - standardization and quality of products are insufficient. OCE initiated a cooperative regrouping operation, which would be a component of the project aiming at reducing the number of stations and strengthening their efficiency.

OCE Quality Control Facilities

3.16 In the past, quality control for export was located exclusively in Casablanca and Agadir harbors causing excessive handling, high transportation costs back to the station for rejected goods, and lack of communication between controllers and station operators. Therefore, OCE has recently established, in leased quarters, five temporary quality control centers located near the production and packing areas. Similar quality control centers located as close as possible to the production and packing areas should be further developed under the Project.

Harbor and Shipment Facilities

3.17 Exports are channeled through two harbors: Casablanca and Agadir. Casablanca has a special dock for horticultural products and a modern infrastructure including roll-on roll-off equipment and refrigerated containers. Agadir harbor is not adequately equipped to cope with increasing shipments, and part of the on-going improvements would be financed under the project. All fruit and vegetable carrying ships currently used by OCE for exports to Europe are equipped for the loading and unloading of pallets and containers. It will be necessary to ensure that domestic means of transportation keep pace with the development of export tonnages under the Project.

E. Roads and Social Infrastructure

3.18 The Project area is connected to major cities and harbors by an extensive network of primary and secondary roads. However, rural roads are insufficient to cope with future Project needs in the El Jadida and Agadir regions. The existing potable water facilities, as well as health and education infrastructure, are among the best of the country. The main deficiency in the Project area is the insufficient telephone network which hinders communication between OCE, packing stations and quality control facilities.

IV. THE PROJECT

A. Origin and Objectives

4.01 The Government has requested-Bank assistance for its Development Plan for Vegetables (1979-1985), aiming at doubling vegetable exports through a comprehensive modernization of the vegetable sector. The Project would help Government in implementing the first phase of its Development Plan. Its primary objective would be to increase the value of foreign exchange earnings - 15 - from agriculture by about 26% (US$85 million) by expanding production and export of off-season vegetables. This objective is in line with Government efforts to reduce its accumulated balance of payment deficits which are affecting the overall performance of Moroccan economy. A further major objective would be employment creation at a low investment cost.

4.02 The Project objectives would be achieved mainly through changes in agricultural techniques and the adoption of a new marketing system for off- season vegetables. The Project would be limited to a four-year period and to about 9,000 ha out of 18,000 ha now under off-season cultivation, because of (i) the need to concentrate upon the high-value crops which have good export prospects, thus excluding potato and vegetables produced for the local market; and (ii) the need to match production to the potential demand of the external market.

B. Project Description

4.03 The Project would include the following components: (i) on-farm development and working capital for vegetable production under both greenhouse and open-field conditions; (ii) provision of equipment, facilities and personnel to improve existing agricultural services; (iii) construction and equipment of packing and marketing facilities; (iv) improvement of feeder roads; and (v) training, technical assistance and hydrogeological surveys.

On-Farm Investments

4.04 Greenhouses. The greenhouse program would permit (i) earliness and timing of production; (ii) high yields (more than two-fold that of openfield); (iii) high rate of exportable quality; and (iv) reduction of climatic risks. Production under greenhouse would be an essential element for OCE's export strategy; it would permit OCE to enter market agreements with importers (para 5.22) and to adjust the supply to the demand for vegetables. Based on projections of farmers' requests for greenhouses and the potential demand of the external market, the greenhouse component would cover about 1,000 ha in four years. About 525 ha would be located in the Agadir region, which enjoys the most favorable climatic conditions for a large range of vegetables; the remaining area would be spread over El Jadida/Safi (325 ha), Casablanca (100 ha) and Kenitra/Rabat (50 ha). The cropping program under greenhouse, which would aim at a large diversification of crops and could be adapted to the market situation is expected to be the following:

Tomatoes 450 ha Peppers 350 ha Eggplants 75 ha Melons 75 ha Green beans 50 ha

At full development (year 7) production under greenhouses would represent about 40% of the incremental vegetable production and about 15% of the total production for export. _ 16 -

4.05 The greenhouseswould be designed for easy assembling,proper ventilation,and high wind resistance. Because of mild winter temperatures ln all of the Project area, no heating would be needed. A typical greenhouse vould be 7 to 9 m wide and 50 to 70 m long; it would have a galvanizedsteel tube framevork and would be covered with polyethylenefoil. It would be equipped with a hand-operatedridge ventilation system. Drip irrigation squipment is recommendedfor high cropping density, efficientuse of scarce water resources and reduction of soil-borndiseases. Approximatelyhalf of the greenhouseswould be equipped with drip irrigationduring the four-year Project. The Project would also finance soil disinfectionand windbreaks as well as specially adapted greenhouses for nurseries (10 ha) equipped with an automatic ventilation,a shading system and a mist watering. These nursery greenhouseswould produce seedlings for about 250 ha.

4.06 Open-field. In open-field the Project would cover about 8,000 ha and would involve most of the farmers exporting off-seasonvegetables. It would help expand new agriculturaltechniques such as high-yield hybrid varieties soil disinfection, adequate fertilization and pest control. Investments would include the following components: (i) agriculturalequipment, mainly eprayers and motocultivators;and (ii) improvementof the water distribution system through the installationof plastic pipes on about 4,000 ha.

4.07 Short-TermCredit. CNCA lending norms for short-termcredit are based on present production costs for the production of in-seasonvegetables for the local market, but are not adapted to the intensiveproduction of off-season export vegetables (para 3.11). The proposed cropping techniques under the Project would increase annual production costs fourfold for tomatoes and sevenfold for peppers under greenhousesand would triple these costs in opanfield operation. CNCA with its limited resources, spread over the whole agriculture sector, would not be able to sustain alone a significantpart of 2,he short-termproduction costs required by the Project. For this reason the Dank would assist by providing about 50% of the yearly incrementalshort-term credit requirementsunder the Project. This would leave the bulk of the fînancing to CNCA and the farmers (more than 60%). Most of this increase in $hort-termcredit requirementswould take place during the implementation perîod of the Project and would stabilize thereafter.

A rîcultural Services and Farmers Cooperatives

4o08 Extension vould be carried out both by MARA and OCE/SASMA (paras. 505-5.07) through twelve Development Centers of which seven already exist and five would be constructed under the Project. Their location has been oelected to cover the whole Project area (map). The Project would provide necessary office space for the five new Development Centers as well as housing, vehicles and vehicle operating expenses for 32 MARA extension agents. Zouaing and vehicles would not be financed for OCE/SASMA agents since they are part of employmentconditions with OCE. Assuranceswere obtained during aegotiations that OCE/SASMA would provide adequate transportationfacilities and operating expenses to its agents. -17 -

4.09 Research, Training, Demonstration. Three research, training and demonstrationcenters would be establishedin Casablanca,El Jadida and Agadir regions. The Project would provide office, laboratoryand storage space, housing, agriculturalequipment, vehicles, a research and training budget and salaries for six agriculturalists,nine agents and 90 workers. Programs to be developed would include applied research both in greenhouses and in openfield (paras 5.08 -5.13). About a 0.8 ha greenhousewould be provided at each center for applied research,training and demonstration purposes.

4.10 Cooperatives. Regrouping small service cooperativesinto bigger intercooperativeunits in order to strengthen and enlarge their activities would be carried on under the Project. Investmentsfor ten intercooperatives would include office space, storage for agriculturalequipment, workshop and transportationfacilities. One milk collecting center would also be constructed in each of the new intercooperativeunits. Many of the vegetable farmers are also milk producers as they have livestock and produce irrigated fodder. Intercooperatives,as well as about 100 existing cooperativesare expected to purchase agriculturalequipment through credit availableunder the Bank CNCA IV Project. Some cooperativesare also expected to purchase nursery greenhousesto produce their seedlings.

Marketing Services

4.11 Packing and Grading Stations. Regrouping small cooperativepacking stations into larger and more efficientunits would be developed under the Project: ten new stations with a 2,500 capacity each would be constructed. They would include two packing lines each and loading and transport equipment. They would be suitable for multi-produceuse. As a result, about 25 outdated and inefficientstations would be closed and transformedinto storage space. About 30 other existing stations would be enlarged and equipped to process a minimum of 2,500 t each; investments for these stations would include replacementof packing lines and loading equipment. Two stations with a 5,000-ton capacity would also be constructedby OCE. These two stations would serve small farmers who, because of their large number and small production are not able to join in a cooperativeand who now often are forced to sell their produce ungraded and at very low prices to middlemen.

4.12 Quality Control Facilities. Twelve new quality control stations would be installed close to the production and packing areas. Five of these would replace the existing temporary stations which have been establishedin leased buildings (para 3.16). The Project would provide buildings,housing for 24 OCE agents, forklifts and other loading equipment,vehicles, and telephone connections.

4.13 Port Storage Facilities. Storage facilities covering about 6,000 m2 would be constructedin the port of Agadir to cope with increasingvegetable production of the Souss-MassaRegion. - 18 -

4.14 Roads. In order to improve communication and to facilitate the movement of inputs and crops, the Project would provide for the rehabilitation of existing and the construction of new access roads as follows:

Rehabilitation Construction Total ______------(km)------

Oualidia (El Jadida Province) 25 25 50 Souss (Agadir Province) 100 100 200

Total 125 125 250

Funds to equip the maintenance teams would also be provided under the Project. It is estimated that about three dump trucks, two graders, two compactors and two bulldozers would be needed.

4.15 Hydrogeological Surveys. A study on water resources in the Project area would be carried out through drilling of wells, pumping tests, stream gauging of rivers and water salinity monitoring.

4.16 Technical Assistance. The innovative character of production of seedlings under greenhouse as well as the need for training extension agents and farmers in new cropping techniques would require consulting services. About 74 man-months of high level vegetable specialists to be attached to the Research, Demonstration and Training Centers would be provided under the Project. A provision of 12 man-months would also be made for specific agricultural problems, as well as for marketing, monitoring and evaluation aspects.

C. Cost Estimates

4.17 Total Project costs for the four-year implementation period, including establishment costs, taxes, duties and contingencies are estimated at DH 518.4 million (US$129.6 million), of which 52% or US$67.4 million is foreign exchange. Construction costs are based on quantity and unit price estimates from the Ministry of Agriculture, OCE and the Ministry of Equip- ment. Unit prices are in line with January 1979 bid prices for similar work. Prices for farm equipment and inputs are the ones currently practiced in the Project area. The cost of greenhouses and of the packing stations is based on bids received from suppliers in January 1979. Costs include duties and taxes equal to 18% for civil works, 20% for equipment and 15% for farm inputs. No taxes have been taken into account for greenhouses as they are exempt of all taxes by Government decree. Total taxes and duties are estimated at DH 63.0 million (US$15.8 million). Physical contingencies are included in the costs: 10% for all equipment, civil works and for on-farm investments, 5% for greenhouses. The cost of consultant services, including support services, has been estimated at US$6,600 per month for long-term - 19 - consultantsand US$8,000 for short-term consultants. Projected average price inflation at 9% per annum in 1979, and 8% per annum thereafter,has been included in project cost estimates. Overall contingencieswould amount to 29% of the base costs. Cost estimates includingestablishment costs are summarized in the following table and shown in detail in Annex 1, Table 1.

Local Foreign Total Local Foreign Total F.E. Component -----(DH Million)------(US$ Million)--- % Onfarm investments Greenhouse production 52.3 108.5 160.8 13.0 27.3 40.3 68 Openfield production 17.1 23.6 40.7 4.3 5.8 10.1 57 Total 69.4 132.1 201.5 17.3 33.1 50.4 66

Cooperative storage & packing stations 10.9 5.3 16.2 2.6 1.3 3.9 33 Incrementalproduction costs Greenhouse 10.0 8.2 18.2 2.5 2.1 4.6 45 Openfield 49.9 40.8 90.7 12.5 10.2 22.7 45 Total 59.9 49.0 108.9 15.0 12.3 27.3 45

Other marketing facilities OCE small producer packing stations 2.3 1.3 3.6 0.6 0.3 0.9 35 OCE quality control stations 12.8 3.2 16.0 3.2 0.8 4.0 20 Storage facilities at port 2.7 0.9 3.6 0.7 0.2 0.9 25 Total 17.8 5.4 23.2 4.5 1.3 5.8 22

Agriculturalsupport services Extension services 16.4 5.6 22.0 4.1 1.4 5.5 25 Research, training, demonstration 5.6 1.0 6.7 1.4 0.9 1.6 23 Seedling production and cooperativeinfrastructure 2.4 1.4 3.8 0.6 0.4 1.0 40 Total 24.4 8.0 32.5 6.1 2.0 8.1 25

Feeder roads 9.0 4.0 13.0 2.3 1.0 3.3 30

Technical assistance and studies 2.0 3.2 5.2 0.5 0.8 1.3 65

TOTAL BASE COST 193.4 207.1 400.5 48.3 51.8 100.1 52

Physical contingencies 8.3 8.9 17.2 2.0 2.3 4.3 52

Price contingencies 47.5 53.2 100.7 11.9 13.3 25.2 52

GRAND TOTAL /a 249.2 269.2 518.4 62.2 67.4 129.6 52

/a Discrepanciesdue to rounding. - 20 -

D. Financing

4.18 The proposed Bank loan bf US$58 million would be to the Government of the Kingdom of Morocco. The detailed financing plan for the different project components would be as follows:

Bene- Govern- Item IBRD OCE CNCA ficiaries ment Total ------(US$ Miî`lion)------

On farm investments 34.6 - 11.4 12.3 7.7 66.0

Storage and packing station 2.8 - 1.8 1.8 - 6.4

Incremental short-term production costs 12.6 - 12.6 8.4 - 33.6

OCE nursery greenhouses, packing and control stations 2.8 3.8 - - - 6.6

Storage facilities at port 0.4 - - - 0.6 1.0

Agriculture supporting services 2.0 2.3 - - 5.7 10.0

Feeder roads 2.0 - - - 2.4 4.4

Technical assistance and hydrogeological survey 0.8 _ - - 0.8 1.6

TOTAL 58.0 6.1 25.8 22.5 17.2 129.6

4.19 The Bank loan would finance about 51% of the total Project cost net of taxes (86% of the foreign exchange component). Based on the life of the Project, the Bank loan would be for 15 years including 4 years of grace at the interest rate prevailing when the loan is presented to the Board. US$4.4 million of the loan would be used by the Ministry of Agriculture for the research training and extension, the roads and the technical assistance components; US$0.8 million would be used by the Ministry of Equipment for the construction of storage facilities in the port of Agadir and hydrogeological surveys. Governnent would on-lend US$50.0 million to CNCA for long- and medium-term and incremental short-term credit requirements. US$2.8 million would be on-lent to OCE for the control stations, the two small producer stations and a part of the nursery greenhouses. Greenhouses would be prefinanced and procured by OCE on behalf of the farmers (para 4.21). Assurances were obtained at negotiations to this effect. The Government loan to CNCA would be for 14 years including 2 years of grace at the same interest rate as that of the Bank to Government. The Government loan to OCE would be for 14 years including 2 years of grace at 9% interest rate. The remaining Project costs (US$71.6 million) would be financed by CNCA (US$25.8 million), OCE (US$6.1 million),

r - 21 -

the Government (US$17.2 million) and the beneficiaries (US$22.5 million). The Government would carry the foreign exchange risks on the loan and would guarantee debt service. Assurances were obtained at negotiations that the Government would enter into a subsidiary loan agreement with OCE and CNCA on terms and conditions satisfactory to the Bank by December 31, 1979.

E. Implementation Schedule

4.20 Project works would be implemented over four years from September 1979 to August 1983. Construction of greenhouses would be completed on about 12% of the total area in 1979, 20% in 1980, 30% in 1981 and 38% in 1982. In open-field, new technical packages would be introduced at a rate of about 2,000 ha p.a. Estimated schedule of expenditures is summarized below and detailed in Annex 1, Table 1.

Expenditures 1979/80 1980/81 1981/82 1982/83

Annual 19.4 28.3 36.9 45.0 Cumulative 19.4 47.7 84.6 129.6

F. Procurement

4.21 Contracts for farm input (improved seed, fertilizer and pesticide) and farm equipment and machinery totalling about US$14.0 million would not be suitable for bulk procurement as agricultural subborrowers would purchase them individually throughout the project period from well established local or foreign commercial channels. Suppliers of these goods are numerous in Morocco, competition is keen and prices are competitive. For greenhouses (about US$46 million) well established commercial channels do not exist in Morocco. To ensure standardization of equipment, lower prices and timely supplies, OCE which prefinances this equipment (para 4.19) would procure them through international competition in accordance with procedures acceptable to the Bank. OCE will submit to the Bank, for its prior review, tender documents, detailed description of the advertising procedures and detailed report on the evaluation and comparison of the bids received.

4.22 Housing, buildings, vehicles and equipment for supporting services, as well as construction and rehabilitation of dirt roads, would be procured by the Ministry of Agriculture. These contracts, totalling about US$9.0 million would involve a large number of amall contracts that would be handled through local procedures already determined to be satisfactory to the Bank. These items would not be suitable for ICB because of the phasing that they require and their dispersion in the Project area. For contracts procured under local procedures, the Project agency concerned will furnish the Bank, promptly after execution, two conformed copies of its contracts together with the analysis of the respective bids received and the recommendations for award. - 22 -

4.23 Contracts for construction and equipment of two packing stations for small farmers, of quality control centers, storage facilities and hydrogeological investigations totalling about US$8.6 million equivalent would be procured by OCE or the Ministry of Equipment as the case may be. These contracts when related to civil works exceeding the equivalent of US$300,000 or when related to equipment and exceeding US$150,000 would be procured following international competitive bidding (ICB) procedures in accordance with Bank guidelines. Each individual contract for civil works estimated to cost less than US$300,000 equivalent and each individual contract for equipment estimated to cost less than US$150,000 equivalent may be awarded through local competitive bidding already determined to be acceptable to the Bank provided that the aggregate amount of all contracts for equipment so awarded would not exceed the equivalent of US$1,200,000.

4.24 Contracts for civil works and equipment of cooperative packing stations totaling US$6.4 million to be financed by CNCA would be procured by cooperativesthrough establishedcommercial channels provided that (i) the cost of each individual contract for civil works and equipment does not exceed US$300,000 and US$150,000 respectivelyor (ii) the investment cost does not exceed the equivalentof US$1,250,000. Goods and works in excess of the amounts specified above would be procured following ICB procedures according ta Bank guidelines.

4.25 The contracts for civil works and equipment would be of size to enable manufacturers and contractors to bid for individual contracts or for a group of similar contracts, at their ôption. Assuranceswere ôbtained at negotiations that the above procurement`procedures would be followed.

G. Disbursements

4.26 The Project implementation period would be four years (September 1979-August1983) and the Bank loan would be disbursed in about 4-1/2 years as follows: - 23 -

Category Amount Disbursement Percentage (US$ million)

(a) Civil works and equipment 4.0 45% of total expenditure for research and supporting services provided by MARA and for the construction and maintenance of roads

(b) Civil works and equipment for 2.8 45% of total expenditure quality control stations, packing stations and nursery greenhouses

(d) Hydrogeological surveys 0,4 5Q% of total expenditure

(e) Technical assistance 0.4 45% of total expenditure

(f) Greenhouses and drip irrigation 37.4 75% of subloan actually Open-field investments disbursed by CNCA Medium-term investments Cooperative packing stations

(g) Farm inputs 12.6 50% of annual increments of subloan actually disbursed by CNCA.

TOTAL 58.0

For the credit component the Bank would reimburse CNCA against certified statements of expenditures. CNCA employs suitable accounting procedures and is audited annually (para 5.26). Disbursements for civil works and equipment for research and extension, quality control and small producer packing stations, roads and port storage, as well as for studies and consultants, would be made after receipt of full documentation. An estimated schedule of disbursements is summarized below and is detailed in Annex 1, Table 2.

Disbursements 1979 1980 1981 1982 1983 1984 ------(US$ million)…------…---

Annual 2 7 13 19 15 2 Cumulative 2 9 22 41 56 58 - 24 -

H. EnvironmentalEffect

4.27 Intensiveproduction of vegetableswould necessitate considerably greater use of agro-chemicals. The plastic covers on the greenhouses,which last for about two years, would be burned completelyat the end of their useful lives under strict Governmentguidance. The extension agents would assure that plant protection chemicalsbe handled properly and that the required protectiondevices (masks,etc.) be available and used. The Pro- vincial Technical Committees would monitor the use of chemicals so as to detect and remedy any harmful effects to beneficial insects, build-up of resistancein pest populationand possible contaminationof water supplies and vegetables. The project area is free of malaria and the existing irrigation vorks would not promote mosquito breeding or spread malaria.

V. PROJECT IMPLEMENTATION

A. Organizationand Management

5.01 At the national level the Ministry of Agriculturewould have primary responsibilityfor the project. Its AgriculturalDevelopment Directorate (DMV) would be responsiblefor organizingand supporting farmers' cooperatives, its Research Directorate (DRA) agriculturalresearch and its Rural Engineer- ing Directorate (DE) for roads improvementand construction. CNCA would be responsiblefor the credit program. OCE would have primary responsibility for marketingactivities, control of packing stations,purchase and establishment of greenhouses,technical support to farmers, and for the production of seedlings. The Ministry of Equipmentwould be in charge of constructionat the port and hydrogeologicalinvestigations. Overall coordinationof the Project would be assured by a National CoordinatingCommittee includingthe Ministry of Agriculture,the Ministry of Equipment,OCE and CNCA. It would be responsiblefor the definition of project strategy and for the coordination and monitoringof project activitiesat the national level. The National CoordinatingCommittee would determineproduction targets for each region according to market prospects. The committeewould meet as necessarybut at least once every six months to review Project activities. Agreementwas reached that the National CoordinationCommittee with terms of reference, povers and membership satisfactoryto the Bank would be establishedby December 31, 1979.

5.02 In each Region, Regional technical committeeswould be created similar to the committee already existing in Agadir. Each committeewould meet monthly, and be composed of the ProvincialDirector of the Ministry of Agricul- ture, (and the Director of the IrrigationOffice in El Jadida Province) as well as ProvincialRepresentatives of OCE, SASMA and CNCA. The committeechairman would be either the OCE's or the Ministry of Agriculture'srepresentative. The Regional committeeswould be responsiblefor the execution of the program at the provincial level. At the beginning of each season they would establish - 25 - production targets, quality requirements, and schedule delivery for each crop according to production targets determined at the Central level. They would organize the extension work, determine seed and other input requirements, organize their supply, and monitor credit needs. Within the general guidelines of the National Committee, the Regional committee would also establish and organize the research and training program for the region. During the production campaign the Regional committee would monitor Project execution and, at its monthly meeting revise production targets and determine the extension and marketing program for the coming months. Assurances were obtained at negotiations that Regional technical committees composed of representatives of MARA, OCE and CNCA would be established in each Region by December 31, 1979.

B. Agricultural Supporting Services

Extension

5.03 Extension services would have two interrelated objectives: (a) to group small farmers into cooperatives and to assist them in their operations, and (b) to provide farmers with technical advice. Extension works would be coordinated through the 12 Development Centers to be established under the Project.

5.04 The Organization of Farmers. The Ministry of Agriculture would be responsible for organizing farmers into extension units in the form of cooperatives or pre-cooperatives. It is expected that about 5,000 small farmers would be grouped into about 625 extension groups of about 8 farmers each and would be supported by 32 extension agents with one extension agent for 20 cooperatives. The extension agents would help the members of cooperatives establish their cropping pattern, organize their supply of inputs and equipment and fill out credit applications and marketing contracts with OCE. MARA would also continue to help cooperatives manage their grading and packing stations and maintain a proper accounting system (para 3.08). It would be responsible for regrouping them and for providing them with the necessary infrastructure and milk collection centers (para. 4.10).

5.05 Technical Extension. Because of the relationship between marketing and production and the highly specialized technical advice required, OCE/ SASMA would be responsible for technical extension to farmers in general, and for the implementation of greenhouses in particular. The main technical packages to be introduced in the project area include: soil disinfection, improved seeds, seedbed preparation, pest control, appropriate irrigation and fertilization. OCE/SASMA's technical extension service would be staffed with 85 technical advisors and ten supervisors. The 1,000 ha greenhouse program would require 53 technical advisors serving about 500 cooperatives and 400 individuals totalling about 4,400 farmers. Each technical advisor would serve 15 small farmer cooperatives or 20 individuals. This relatively dense cover- age (about one advisor per 20 ha greenhouse) is considered necessary as production under greenhouse is a new technique requiring specialized technical knowledge. In openfield, one advisor would serve about 250 ha, comprising 20 individuals and 20 cooperatives or about 180 farmers. - 26 -

5.06 The technical advisors would devote ail their time exclusively to professional agricultural extension work as MARA would handle the organization of farmers, the supply of inputs, etc. (para 5.04). Each technical advisor would visit the same group of growers twice a-month on a fixed day known to both farmers and supervisors. During each visit the technical advisor would demonstrate his recommendations, check progress and observe any technical problems the farmers may be having. In case of virulent pest attack he would notify his superior for immediate action. He would also inform his supervisor about climatic or other conditions which could affect the timing, quality or quantity of production. The technical advisors would attend one-day training sessions every fortnight at the Research and Demonstration Centers where they would review the three or four most important issues for the forthcoming one or two weeks of the crop season. The 45 additional technical advisors required under the Project would be graduates of the four existing horticultural schools. Before starting their job, they would be adequately trained both in the field and at a Research, Demonstration and Training Center.

5.07 Supervisors would provide technical support to 9-10 technical advisors. The supervisors would spend eight days each fortnight in the field assisting technical advisors. Their visits would be prescheduled and timed so that over a period of one month each supervisor could see each of his technical advisors. The supervisors would assure the close link required between marketing and production: they would advise the farmers about marketing prospects and requirements, and inform OCE, through the Regional Commit- tees about the likely quantity, quality and timing of the production in their area. The supervisors, like the technica'l advisors, would attend periodic training sessions at the Research and Demonstration Center.

Research, Demonstration and Training.

5.08 Research, demonstration and training would be carried out in close cooperation between the research and extension services of MARA, OCE and SASMA on three existing research stations and three demonstration and training centers to be established in their vicinity.

5.09 The Applied Research Program would be adapted to a specific region. It would include greenhouse and open-field works and would be defined by the Regional technical committees, thus ensuring that it reflects the concerns of the farmers and responds to marketing requirements. A research and extension committee, composed of the researcher, technical supervisors and OCE representatives would evaluate the research results, translate them into recommendations for t:heextension service and develop a demonstration program. The field trials, executed by the technical advisors in close collaboration with the researchers from the three stations, would be established in the farmers' fields and used to demonstrate new techniques and varieties.

5.10 Seedling Production. OCE and its technical advisors would be responsible for initiating a seedling production program under nursery - 27 -

greenhouses (about 3 ha). The greenhouses would be used (i) to prepare the seedlings to be sold to small farmers' cooperatives which are not equipped with adequate seedbed installation, and (ii) to test the economics of producing seedlings in central nurseries and to train members of cooperatives that produce se-odlings(para 4.10).

5.11 Demonstration and Training. In each station an open-field plot and 1/2 ha of greenhouse would'be installed for demonstration purposes. Each farmer, or lead farmer in the case of a cooperative, who requested a greenhouse would attend a five day training session on the basic principles of greenhouse production. For open-field techniques, a lead farmer, selected by the cooperative members, would be trained on the demonstration plots. The lead farmer should be willing to try out recommended practices in his fields and be prepared to pass his knowledge on to the other members of the cooperative. The Research, Demonstration and Training Centers would also train the technical extension advisors in bi-monthly training sessons. Training would be practical and goal oriented. Supervisors would participate in those sessions. In addition, they would attend a one-week course, four times a year (one before each crop season, two during the production period and one evaluation session at the end of this period).

5.12 The three Research, Demonstration and Training Centers would be staffed by six agriculturalists, nine assistants and ninety workers to be provided by MARA's Research Directorate and by OCE. Assurances were obtained at negotiations that the management staffing, operation, budget and program of the Research, Demonstration and Training Centers would be acceptable to the Bank. These programs and staffing for 1980 would be prepared by MARA in agreement with OCE not later than December 31, 1979. For the following years the National Coordination Committee would prepare operation budgets and programs.

5.13 Technical Assistance. Each station would be entitled to the services of a horticulturalist, specialized in research and training. Each of the three horticulturalists would be assigned a qualified counterpart to assist in planning and implementing the research and training program. Within three months of assuming their duties, the horticulturalists would develop an adaptive research program on the basis of the recommendations of the Regional technical committees. Within six months they would have initiated a training program for farmers, technical extension agents and supervisors. Assurances were obtained at negotiations that the horticulturalists would be employed no later than December 31, 1980 with qualifications and terms and conditions acceptable to the Bank.

C. Lending Terms and Procedures

5.14 CNCA's existing lending procedures, interest rates and loan conditions are generally adequate (para. 3.10) and would be maintained with the changes outlined below. 5.15 The Financing of Greenhouses. Under present conditions CNCA finances 70% of the investment costs of greenhouses. Past experience has shotn that only large farmers are able and willing to finance 30% of the initial greenhouse investment. Those farmers would continue to be financed according to existing CNCA credit procedures. Because of the risks, high technicity and capital required, small and medium farmers are neither willing nor able to invest in greenhouses at the required implementation rate on existing financial terms. Therefore, the Moroccan Government has enacted that, for the period of the Project, farmers would have the benefit of a prcnotional financing of 90% of the greenhouse investment as follows: (a) a loan of 70% of the investment by CNCA at 8.5% interest for a duration of 7 years with a grace period of 2 years; and (b) an additional loan from the Treasury, administered by CNCA, of 20% of the investment at 6% interest and to be recovered by CNCA during the first two years of the loan. Assurances were obtained at negotiations that Government would make available to CNCA Treasury funds under an agreement to be entered into not later than January 31, 1980. En order to spread Project benefits to as many farmers as possible, agreement UaS reached at negotiations that (i) the additional Treasury loan would be limited to 2 ha greenhouse per family, and (ii) about 60% of the Treasury fuEds would be set aside for the financing of greenhouses to farmers or cooperative members who would not own more than 1/2 hectare of greenhouses. Zhese credit conditions would be reviewed annually and could be modified with the Bank's agreement according to Project experience.

5016 Short-term Credit. Under the Project, farmers' production costs would increase substantially and their credit requirements would exceed CNCA's current lending ceilings (para. 3.11). CNCA agreed to raise its lending ceilings up to 75% of the real production co0ts provided the below mentioned loan procedures are respected. Short-term credit financing would be at CNCA's regular loan conditions at an interest rate of 8.5%.

5.17 Credit Procedures. To benefit from these special financial arrangements for greenhouse investments and/or short-term credit, the farmers would have to meet the following requirements: (i) CNCA's normal credit- worthiness criteria; and (ii) technical criteria set by OCE, including commitment from the farmer to follow cropping techniques as instructed by the Project's extension service. For loans to cooperatives, collective commitment from the cooperative members would be required. The farmer, before submitting his credit application to CNCA for a regular assessment by the credit institution would obtain a certification from OCE stating (i) that the prospective subborrower is a farmer in the Project area; (ii) that he is considered capable of executing the proposed investment in conformity with the tentative export program for off-season vegetables; (iii) that he accepts to follow the technical advice provided under the Project; and (iv) the status of his commitments vis-a-vis OCE. If the farmer's credit application is accepted by CNCA and if the farmer is eligible for the additional Treasury loan (para 5.15), CNCA would complement its own loan with the 20% Treasury loan and finance up to 90% of the total greenhouse investment. OCE would send all - 29 - the farmer's receipts to his account at CNCA and CNCA would then withhold interest and repayment of debts on a pro rata basis previously agreed upon with the farmer. All other on-farm investments (irrigation, plastic, soil disinfection) and investments for packing stations and nursery greenhouses would be financed at existing interest rates and according to the general lending procedures of CNCA. Assurances were obtained at negotiations that lending terms and conditions for sub-borrowers would be as above.

D. Marketing Organization and Strategy

General

5.18 OCE's marketing problems (para. 2.21) are due to its inability to influence either production or demand of off-season vegetables. The project would permit OCE to manage demand and supply rather than to be submitted to their consequences. This would be achieved through (i) OCE's increased involvement in extension; (ii) a better information flow of marketing information to producers; (iii) closer collaboration between farmers and OCE for packing and quality control; and (iv) closer contact with EEC import demand by a reorganization of the marketing structure.

5.19 Planning Production for Exports. Based on its marketing experience, its marketing contracts and information provided by the panels of importers yet to be organized, (para. 5.22) OCE would establish national and regional production targets. Through the National and Regional Coordination Committees the national targets would be translated into production plans for each farmer or farmers' cooperative. OCE's direct involvement in technical extension would provide it with advance information of the evolution of production, so that it can plan the marketing of the product. Adaptation of production to market requirements and regularity of supply would be assured through the following means:

(a) The OCE visa required to obtain credit (para 5.17) would be provided only if the farmers' cropping pattern is in line with the production planning for each region.

(b) The greenilouseprogram and its effect on the regularity of supplies in terms of quantity, quality and timing would allow OCE to carefully plan its marketing strategy and to enter into export agreements with European importers who wish to have regular and assured supplies; and

(c) OCE would enter into production contracts with farmers for those products for which it has an assured market in Europe. The production contracts would guarantee a minimum price to the grower. The grower would commit himself to respect the agreed upon cropping pattern, timetable and OCE's technical advice. - 30 -

5.20 Improvement of Packing and Quality Control. Because of an inadequate packing infrastructure (para. 3.15) OCE is revising the conditions under which it delivers an operation permit. The new regulations would require packing stations to possess an adequate infrastructure and to process a minimum of produce. Based on an inventory of existing facilities OCE has established a development program consisting of (i) improving existing viable packing stations; and (ii) regrouping small and inefficient stations into larger units. Part of these investments would be financed under this project (para 4.11) through CNCA's long-term conventional loans. In addition, OCE's policy is to develop packing stations for small producers (para 4.11). Two of these new stations would be constructed under the Project. After an initial two-year period, these stations are expected to be transferred to newly created cooperatives. In order to apply its new policy, OCE has created a Division responsible for packing stations. A financial and technical feasibility study for the two small producer's stations has been presented by OCE and approved by the Bank. Assurances were obtained that the Bank would receive for approval the two first CNCA loan proposals for regrouping packing stations.

5.21 The decentralization of OCE's quality control (para. 4.12) would permit a closer contact between producers, packing stations and controllers, a better inspection of packing and grading practices and reduced handling and transportion costs. Since the controller of each exported lot is clearly identified, fraud can be traced and the risk of collusion between the packing station and the controller is minimized.

5.22 Reorganization of the Marketing Structure. As the prese'nt marketing channels are not adapted to off-season vegetables (para. 2.21), the marketing structure for off-season vegetables would be separated from those of citrus fruit. The system of dockside auction sales would gradually be abandoned in favor of a'specialized panel of importers-distributors operating as close as possible to the final buyer. The distribution network would include a panel of about ten importers-distributors in the major French markets. The panel members would receive reasonable renumeration (about 8%) and enjoy exclusive sales within their quotas determined at the beginning of each season and revised each year according to the results and prices obtained by OCE during the preceeding season. The new marketing structure would require a vigorous programming of exports and constant reciprocal information between the panel and OCE about the status of production and the development of demand.

5.23 To avoid disruption of the existing commercial network the reform would be introduced gradually as follows:

(a) a Panel of importers would be created by October 31, 1979. By that time OCE would submit to the Panel a program of exports and a schedule of deliveries for the season 1979/80. The program would be limited to the most fragile and profitable produce, in particular, strawberries, greenbeans, peppers, eggplants, melons and parts of the tomato production. - 31 -

(b) by November of each following year, OCE would have submitted a program of exports and a schedule of deliveries for the upcoming season. According to the experience obtained during the preceding season, ecport arrangements would be modified and the program of exports expanded.

The Bank and 0CE have agreed on the marketing principles (described in para. 5.22 above) and assurances were obtained that 0CE would establish annually, in concurrence with the Bank, an implementation program for the new marketing organization.

5.24 In addition to this new marketing system 0CE would explore and test markets both in other countries and for other products. Funds for short-term consultancy for a marketing expert are included in the Project.

E. Construction and Maintenance of Roads

5.25 The Rural Engineering Department of the Ministry of Agriculture would be responsible for the construction and maintenance of the proposed dirt roads. In El Jadida, the Provincial Agricultural Directorate would execute the required works, while in Agadir the roads would be under the jurisdiction of the Office of Souss-Massa.

F. Accounts and Audits

5.26 CNCA, which receives 86% of the Bank loan has a satisfactory accounting organization, and audit arrangements under previous Bank loans have been satisfactory. Assurances were obtained that CNCA continue to have its accounts audited by independent auditors acceptable to the Bank. In addition the statement of expenditures submitted to the Bank in application for loan disbursement would be audited by the same auditors to ensure that actual CNCA expenditures under the Project are consistent with the statements of expenditures to the Bank. The auditors annual report and the audit of the statement of expenditures would be sent to the Bank within five months of the end of each fiscal year. The Government agencies responsible for Project implementation and 0CE maintain budgets and accounts which are audited by the Ministry of Finance. The Ministry of Finance would be considered an acceptable independent auditor under the present Project. Assurances were obtained that (i) each government department participating in the Project would maintain separate accounts for the Project work for which it is responsible; and (ii) 0CE would furnish to the Bank certified copies of the financial statements for such year as so audited and the annual report of its Board of Directors approving such statements. - 32 -

G. Progess Reporting, Monitoring and Evaluation

5.27 The Project's financial and export results would be monitored by OCE. OCE possesses a computerized information system that provides up-to- date information on export results and on financial accounts for the packing atations. The Project would provide short-term consultancy services to help OCE to fully utilize the analytical possibilities of the present information system. On-farm project implementation would be monitored through CNCA's credit disbursements (number of credits for greenhouses, soil disinfection, purchase of seeds, irrigation improvement, cooperatives, packing stations, etc.). The creation of farmers' cooperatives, the evolution of cropping patterns, agricultural practices and yield estimates would be monitored by the extension service. The Regional technical committees would analyze and evaluate this information and the reports of CNCA, and use the field experience to adapt the regional program. Consultancy services would be provided under the Project for setting up a proper management information system. The Regional technical committees would send semestrial progress reports to the National Committee. CNCA and OCE would submit separate quarterly reports summarizing progress in lending under the Project, in the construction of physical facilities, in the procurement of equipment and in the reorganization of the marketing structure. The detailed information would be retained by the National Committee and would be made available for inspection by Bank missions. Summaries and analysis of the information, prepared in accordance with mutually agreed upon guidelines, would be submitted to the Bank annually. The Ministry of Agriculture would submit to the Bank a Project completion report no later than six months after completion of the Project. Assurances were obtained to this effect.

VI. PROJECT BENEFITS AND JUSTIFICATION

A. Production

6.01 Land use and cropping pattern: The Project, without significantly changing the total area under off-season vegetables, would diversify off-season vegetable exports. The cropping pattern would depend on develop- ments in export markets. In addition to the more traditional export crops analyzed in the Project, Morocco would attempt to produce crops such as off- season lettuce, onions, cucumbers, celery, etc. which enjoy good marketing prospects but have not yet been produced for export.

6.02 Of the 9,000 ha of off-season vegetables under the Project, 7,600 ha are estimated to be under tomatoes. Tomatoes would remain the traditional Moroccan export crop, although the Project would reduce the surface under tomatoes by about 1,200 ha. The area under peppers in openfield is estimated at 500 ha and would be supplemented by about 350 ha of peppers under greenhouse. The area under green beans is expected to increase from about 300 ha to 750 ha since Morocco has a favorable marketing position for that crop. The - 33 - area under squash is expected to remain stable or slightly decrease. The Project would also introduce an additional 300 ha of strawberries in openfield and about 150 ha of eggplants and melons under greenhouses.

6.03 Productivity Increases: For open-field production, total yields would rise relatively moderately (about 56% on average) but yields of export quality production would increase substantially (about 160Z on average), due to improved varieties, better cultivating techniques and improved marketing structure. The projected yields are well below full potential. They take into account climatic riska and are considered conservative. Progressive farmers using modern production inputs have already surpassed them.

6.04 Full development yields are projected to be reached after four years because (i) farmers have a long tradition of producing off-season vegetables in open-field; (ii) the dense extension service foreseen for greenhouses would assure that production techniques are understood and implemented; and (iii) Morocco has been experimenting with greenhouses and improved vegetable production and new techniques are already known and available for larger diffusion.

6.05 Production Increases. Without the Project, the decline of Moroccan exports is expected to continue, though less rapidly, because of OCE's recent involvement at the production level. Except for skilled and generally large farmers, vegetable growers would have little incentive to improve their production techniques. Low yields for export, low return and limited access to credit would hamper small farmers' on-farm investments such as development of greenhouses and improved agricultural techniques. Some of the existing constraints (soil infection, etc.) would worsen production conditions. Exports of tomatoes would probably continue to decline. Pepper production is expected to remain stable, since the soils of Agadir Province have not yet been infected, but would be absorbed by an attractive local market. Green bean production would follow the same trend. Squash would remain stable. Strawberries and melons would not be developed except on a few large farms.

6.06 With the Project, the estimated evolution of the cropping pattern and of production at full development is summarized in the table below: - 34 -

Production Cropped Area Export Local Market Total (ha) ------tons------

Tomatoes Without project 7,600 76,000 152,000 228,000 With project 6,450 243,700 94,500 338,200 Incremental -1,150 167,700 -57,500 110,200

Peppers Without project 500 - 10,000 10,000 With project 850 17,000 17,000 34,000 Incremental 350 17,000 7,000 24,000

Greenbeans Without project 300 - 1,500 1,500 With project 750 6,470 3,180 9,650 Incremental 450 6,470 1,680 8,150

Squash Without project 600 3,000 4,200 7,200 With project 500 6,000 4,000 10,000 Incremental -100 3,000 -200 2,800

Strawberri es With project 300 2,400 5,100 7,500 Incremental 300 2___400 5,100 7,500

Eggplants With project 75 4,500 750 5,250 Incremental 75 4,500 750 5,250

Melons With project 75 1,125 375 1,500 Incremental 75 1,125 375 1,500

B. Marketing

General

6.07 The Project's export projectionsare based on the market potential for the various vegetables and on Morocco's demonstratedability to produce and market them. The analysis has been limited to seven crops and to the traditionalMoroccan markets (Germany,France) which account for 95% of Moroccan outlets. The Project would seek to achieve greater diversification of export crops and export markets. However, because of the short implementation period, the importanceof tomatoes as a crop, and of France as a market, diversificationwould remain limited during the Project. The Project, by providing the technicalmeans and the organizationalstructure to control - 35 - the timing, type and quality of production,would permit Morocco to take full advantage of the rapidly evolving European off-season vegetablemarket, particularly between December and March, when the expansion of import requirements is greatest and when few suppliersare able to produce at competitive costs.

6.08 The market analysis indicates that European import requirementsfor off-seasonvegetables could absorb the increasedMoroccan exports without unduly affecting the market share of other export countries. The distribution of Moroccan exports among importing countries and Morocco's share of their potential import markets is given in Annex 2, Table 2. The marketing prospects are good for all crops with the possible exception of tomatoes. The projected levels of tomato exports are possible to achieve, but more difficult than those of other produce because (i) the growth rate of tomato imports in EEC countries is lower than for other vegetables;and (ii) Morocco's share of the tomato market is and would remain much larger than for other vegetables. If Morocco failed to export all its projected tomato production, it could switch to other produce or reduce its areas under tomatoes without significantly affecting the overall economic rate of return (para. 6.52).

Tomatoes

6.09 Despite a reduction in acreage, Morocco would increase its exports from an average of 135,000 t in 1972-77 to 245,000 t in 1986/87. The large majority of these exports would have to find a market in the EEC countries.

6.10 The EEC Markets. Despite a stagnation of total tomato imports into the EEC, off-season tomato import demand continues to increase. From June to October, the EEC has become self-sufficient. However, during the off- season period (October-May),EEC consumptionhas increasedby about 5% p.a. and EEC imports increasedby 4% p.a. from 346,500 t in 1969/70 to 455,000 t in 1976/77. Based on a continuationof this growth, EEC import requirements would amount to 532,000 t in 1980/81 and 674,000 t in 1986/87.

6.11 EEC Regulations. Through its Common AgriculturalPolicy (CAP) the EEC is protecting its producers from extra EEC competitionthrough a combination of ad valorem tariffs, variable levies and support prices. Tomatoes are among the eleven products subject to reference prices. The reference price, designed to protect European growers, is a floor below which a foreign product is not allowed to enter the Community. If the entry price of imported tomatoes is below the referenceprice for more than two consecutivedays, the EEC intervenesby imposing a compensatorytax and can go as far as complete prohibition on importation. In 1977 reference prices have been in applicationfrom April 1 to December 20, but there existed no reference prices during the main off-season period. Morocco will have to adjust to any changes in the EEC agriculturalpolicy in order to avoid their tomatoes being surtaxed or even forbiddenentry at EEC frontiers. OCE's new marketing system will provide Morocco with the necessary informationand means to plan its production in view of EEC regulations. 36 -

6.12 Supply of EEC Imports. Intra-EECtrade of off-season tomatoes increased from 50,000 t in 1969/70 to 100,000 t in 1976/77,mainly due to the development of greenhouse production in Europe. However, this production is limited to March/April/Mayand has been hampered by rising energy costs. The expansion of off-season European exports is expected to decline substantially, as already witnessed by the stagnation of Italian exports and only a moderate increase in Dutch production (1%) between 1972 and 1977. It is therefore estimated that intra-Europeantrade will only increase by 2% p.a. to 108,000 t in 1980/81 and 120,000 t in 1985/86.

6.13 Spain is the largest non-EEC exporter to EEC market. Spanish exports to EEC increased by 1.7% p.a. from 160,000 t in 1969/70 to 180,000 t in 1976/77. The substantial increase in mainland production has been partly offset by the decline in the exports of the Canary Islands (from 150,000 t in 1966 to 110,000 t in 1975), and almost fully absorbed by a high yearly increase in domestic consumption (5%). Assuming a 2% yearly increase in Spanish exports to EEC countries, Spanish exports would amount to 191,000 t in 1980/81 and 215,000 t in 1985/86.

6.14 EEC imports from other countries have increased from 54,000 t in 1969/70 to 60,000 t in 1976/77 or at an annual rate of 1.5%. Eastern European countries are supplying about 15,000 t of tomatoes and this is not expected to increase. The rest of the EEC demand is supplied by a large number of countries, whose share of the market, with the possible exception of Israel, depends on supply conditions. If supply is scarce and prices high, tomatoes are imported from Africa, Latin America and even the USA. These countries' share of the EEC market is estimated to increase by 2% per year, although some countries, like Greece and Israel,might substantiallyincrease their exports to the EEC.

6.15 EEC Market Potential for Morocco. Import supply and demand fore- casts for off-season tomatoes indicate that the production gap would amount to about 165,000 t in 1980/81 and to 240,000 t in 1985/86. Morocco is well placed to capture this potentialmarket because of (i) its proximity to EEC market as compared with African countries and Israel; and (ii) its ability to produce at low cost at any time in the year. (EEC countries, Greece and Spain require heated greenhousesto produce in the earliest season).

6.16 The major potential competitor of Morocco is Spain. However, Morocco has some distinct advantages over Spain which outweigh the threat of Spain's entry into the European Common Market: (a) the quality of Moroccan tomatoes is superior; (b) Moroccan production costs are only half those of Spain; and (c) Spain has not resolved the technical problems of greenhouse production and its hybrid varieties are not appreciatedby the consumer.

6.17 Spain's admission into the Common Market may alter trade relation- ships significantly. However, drastic changes are not expected in the near future as Morocco is tied to France by several trade and economic agreements. It is with respect to the applicationof the safeguardingclauses within the framework of the Common AgriculturalPolicy that interventionby Spain - 37 - could take place, in the form of an extension of the application of reference prices (para 6.11). This threat could not materialize until after a fairly long trial period. It justifies speedy implementation of the Moroccan vegetable Program so as to put Morocco in a position to adapt quickly to any tightening of the import calendar.

6.18 The French and German Markets. France and Germany account for about 95% of all Moroccan tomato exports. France is by far Morocco's most important export market (75% of all Moroccan exports in 1976/77). Total French off-season imports (October-May) have increased from 130,347 t in 1970 to 144,559 t in 1977. Imports decreased in April and May (-3% p.a.), increased moderately in October, November (+2%) and substantially from December to March (5.2% to 8.6% p.a.). Projections based on past monthly trends show that French off-season tomato imports would increase from 148,000 t in 1978 to 207,000 t in 1987 or at an annual rate of about 4%. As the biggest increase of import demand is projected for January to March when Morocco's share of the market is about 80% and when it has a clear advantage over its competitors, it is estimated that Morocco will be able te capture 90% of the projected increase in import demand during October to March. During April-May, Morocco would maintain its share of the shrinking market. Thus Moroccan exports to France would amount to about 145,000 t in 1987 or about 70% of the total French off-season market. This compares relatively modestly with the traditional Moroccan share of 80% of the French market (1969-1974).

6.19 Germany is an increasingly important market for Moroccan tomatoes: Morocco exported 2,700 t to Germany in 1.970/71(2% of its total exports) and 25,000 t in 1976/77 (20% of its total exports). German off-season tomato imports have increased by about 6% annually over the last seven years. High tomato prices during the winter months indicate that demand is far from being saturated and that past trends in imports should continue. Like France, the growth of off-season imports is unevenly distributed over the off-season period. From December to March, imports have increased at an annual rate of 11%, while imports during November, April and May have been rather stable. For the projection of future import requirements, it was assumed that overall off- season demand would continue to increase at 6% until 1983 and then decline to 4%. Based on these projections, German imports of off-season tomatoes would increase from 132,000 t in 1977 to 210,000 t in 1987.

6.20 The Netherlands is Germany's main supplier of off-season vegetables, covering about 40% of Germany's off-season needs. Ninety six percent of Dutch exports to Germany is concentrated in November, April and May. During that period Dutch exports are expected to grow at about the rate of the expansion of the German market, i.e. at 2.6% per year. Dutch exports from December to March are insignificant (2,000 t) and have increased only moderately; they are expected to almost double over the period considered from 2,300 t in 1978 to 4,000 t in 1987.

6.21 Morocco's share of the slow growing market period (November, April and May) is only 8% and it is expected that it will maintain this share. Morocco, however, supplied 36% of the December to March market and is expected to expand its market share to 40%. Thus, Moroccan exports to Germany - 38 -

are expected to increase from 26,000 t in 1977/78 to 53,000 t in 1987 and its market share would increase from 19% to 25%.

6.22 Spain, with the Canary Islands, would be the major Moroccan competitor for the German growth market. Spain, which provides 56% of the fast growing market period (December to March), would increase its exports from about 33,000 t in 1977/78 to 69,000 t in 1987 or at an annual rate of 7%. Its market share would increase from 26% in 1977/78 to 33% in 1987. It is unlikely that Spain could expand its exports to Germany at a faster rate. Other suppliers (includingFrance, Italy and Israel) are currently providing about 11% of the German import market. Their supply is highly fluctuatingand it has been estimated that their exports to Germany would remain stable at about 11,000 t/year.

6.23 Other European markets are less attractive for Morocco. Great Britain imports about 96,000 t of tomatoes from November to April. The Canary Islands and Spain provide 87,000 t, i.e. about 92% of the import market. British import requirementsduring the period of November to April are estimated to increase by about 4% p.a. Thus, Great Britain's needs for imports would increase to 137,000 t in 1987. Assuming a 2% increase in Spanish exports and other exports expanding at 4%, Morocco could supply about 10,000 t in 1987. The Scandinaviancountries (Sweden, Norway, Denmark) imported about 28,000 t in 1976/77 and their imports are expected to reach about 33,000 t in 1981 and 41,000 t in 1987. Spanish and Dutch exports account for about 93% of the present Scandinavianimport demand. Assuming a 2% increase in Dutch and Spanish exports and a stable supply from other sources, Morocco could export about 8,000 t of tomatoes in 1987. Switzerlandimported 30,000 t of tomatoes in 1977 and is expected to import 44,000 t in 1987. Morocco has increased its share of the market from 2% in 1972 to 8% in 1975 and 13% in 1977. It is expected that Morocco would easily be able to supply 20% of the future market and thus export 9,000 t in 1987.

Other Vegetables

6.24 The market prospects for other off-season vegetables from Morocco are excellent because European import requirementsare increasing rapidly and Morocco is and would remain a relatively small supplier. Through its marketing panel (see para 5.22) OCE would make a major effort to expand exports of other vegetables and, if its marketing experience warrants it, Morocco would attempt to accelerate the shift of its production potential from tomatoes to other vegetables.

6.25 Peppers. Under the Project, Morocco wiuld increase its pepper exports from about 3,000 t in 1976/77 to 6,500 t in 1981 and to 17,000 t in 1986. Off-season pepper imports into the major European countries (Germany, France and Great Britain) have risen from 13,700 t in 1971/72 to 36,000 t in 1977/78. Projectionsbased on an 18% annual growth until 1981/82 and 10% thereafter indicate an off-season import demand for pepper in those three countries of 103,000 t in 1985/86. Morocco would export the bulk of its peppers to France and Germany. Morocco's main competitorswould be Spain, - 39 -

Italy, Israel and African countries. Spain has substantially increased its exports of peppers and currently supplies 34% of the French and 15% of the German market. Italy's exports have not increased substantially. Italy presently supplies 15% of the French and 19% of the German market. Israel no long^ -:p;- -s th- Frenc1 m2rk-2-k >- ---- about 18% of the Gern"r imports. African countries supply 20% of the French and 10% of the German import market. Morocco would be able to supply the French market with 5,000 t in 1985/86, as well as the German market with 12,000 t without cutting into the market share of Israel and Spain, and assuming that Italian and African exports double. These projections would still leave a sizable market for third countries.

6.26 Green beans. Morocco's exports of green beans would increace to 3,600 t in 1981/82 and 7,400 t in 1985/86. European production satisfies European consumption from May to mid-November. However, off-season imports are expanding at an annual rate of 26%. France is the biggest importer of green beans, with 21,603 t during the period October-May 1977/78. Morocco's main competitors are Spain and Africa. Since Morocco would shift its production to the December-May season, the African countries would be its major competitors. Given the rapidly expanding market and the relatively limited Moroccan supply, no difficulties are foreseen in the marketing of green beans. Assuming a 15% increase in import demand and assuming that Morocco would export all its green beans to France, Moroccan supplies would constitute 12% of French import requirements in 1981/82 and 19% in 1985/86 which is below its market share in 1972/73 (22%).

6.27 Strawberries. Under the Project, Morocco's strawberry exports would increase to 1,700 t in 1981/82 and to 2,400 t in 1985/86. All European countries are producing strawberries from April (Italy) to September (Nether- lands. Imports from non-EEC countries are limited to the off-season period, and have increased by about 16% p.a. Germany and France are by far the biggest markets. Their main suppliers are Israel, Mexico and the United States. Morocco's ability to produce from December through May, its low labor costs and its proximity to the market would permit to export its projected production which would amount to 9% of the potential German and French market (assuming a conservative 10% annual growth rate of import requirements).

6.28 Melons. Under the Project, Morocco would start exporting melons. However, because of the existing local demand for off-season melons and production being restricted to the Souss-Massa region, Morocco would export only about 300 t in 1981/82 and 1,110 t in 1985/86. No marketing difficulties are foreseen. Should Morocco prove able to produce melons at the required quality level, production and exports could be greatly increased.

6.29 Squash and Eggplant. The Project would increase squash exports from the present low levels to a modest 7,000 t which corresponds to about the export level of squash in 1974/75. Eggplant exports are expected to increase to 900 t in 1981/82 and 4,700 t in 1985/86. Although much of the trade in eggplants and squash is between European countries in summer, the off-season trade is increasing rapidly. Most countries do not separate eggplant and squash imports in their trade records. In 1977 EEC imports of eggplants are --4u - estimated to have been at about 33,000 t and squash at about 42,000 t. France is the largest market for both eggplants and squash, and accounts for over 60% of the combined imports. Germany is the second largest market, followed by Switzerland for squash and Great Britian for eggplants. Morocco, Kenya, the Canary Islands, Martiniqueand Guadaloupe are the main off-season suppliers to Europe. Israel also supplies eggplants, though it appears to have placed less ewphasis on this vegetable than on some others. African countries are also minor suppliers of eggplants to Europe.

6.30 Off-season imports of squash and eggplant into France have increased from about 12,000 t in 1970/71 to about 31,000 t in 1976/77 or at an annual rate of about 17%. Spain's exports have increased annually and reached 54% of the French market in 1976/77. Spain's exports peak in April and May, while Morocco's supplies are concentrated from January to April. Assuming a conservative 15% growth rate of French imports and a continuous 15% share of the market, Morocco would be able to supply about 8,000 t in 1981/82 and 9,500 t in 1985/86. German off-season imports have increased from 1,647 t in 1971/72 to 4,162 t in 1976/77 or at an annual rate of about 20%. Most of the expansion has been in eggplants. Italy is Germany's main supplier of off-season eggplants (47% of the market in 1976/77). Morocco's share is minor (5%). The market is divided among a great number of countries, nostly African. Morocco is expected to export about 2,200 t to Germany in 1985/86. This would amount to about 16% of the German market in 1985/86. As Morocco's exports would be mostly in eggplant, where market prospects are particularly favorable, no marketing problems are foreseen.

C. Prices

Prices for Agricultural Outputs

6.31 Average import prices of off-season vegetables on Rungis market in France and on the wholesale markets in Germany have remained relatively stable in real terms. Because of increased competition in the future, the prices used in the economic analysis foresee a small decline in prices in real terms. Moroccan producers receive about one-third of the wholesale price, which is considered a reasonable margin. The difference between the wholesale price and the producer price is made up by a 5-8% commission fee to the wholesaler, a 5% los', transit costs, the OCE's commission of 3.6%, a charge of 1% for quality control, packing, port handling and a small contribution to the stabilizing fund and to the farmers' associations (para 3.14). Tle fee for packing is determined by Government decree. Packing and marketing costs are comparable to similar costs in other vegetable exporting countries.

6.32 Tomatoes. Tomato prices in France and Germany reach their peak in April when they are double their August and September level. Prices vary each month and according to each category. Prices in Germany are slightly higher than in France and partly reflect a quality differential. Average base prices used for the financial and economic analysis are farmgate prices of DH 1.50/kg - 41 - for greenhouse production and DH 1.20/kg for open-field production, which corresponds to c.i.f. prices of DH 3.35/kg and DH 3.15/kg respectively. These prices are substantially lower than the expected price average for the current campaign estimated at about F 4.00/kg. These conservative price estimates have been chosen to take into account the increasingly competitive market, and the possible decline of tomato prices in real terms.

6.33 Peppers. Because of the short-fall in Ethiopian exports, peppers have been in short supply on European markets and prices have increased substantially. However, many countries have started producing peppers and prices will probably stabilize, if not decline in real terms. Pepper prices are highest in March and April and fall considerably in May. The prices chosen for the economic and financial analysis are DH 1.90/kg for greenhouse production and DH 1.50/kg for open field production which corresponds to a c.i.f. price of DH 4.15/kg and DH 3.80/kg respectively. These prices are considerably lower than the average prices obtained by Morocco in 1977/78 (DH 4.54/kg).

6.34 Green beans. Green bean prices are relatively stable during the off-season period. Variations in prices, howeyer, are important according to quality. Prices at Rungis vary between F 10.00 to F 12.00/kg for extra- fine green beans and from F 8.00 to F 10.00/kg for fine green beans. It is estimated that Morocco should be able to receive DH 7/kg c.i.f. for greenhouse production and DH 5/kg for open-field production, which corresponds to a farmgate price of DH 3.50/kg or DH 2.30/kg, respectively. Farmers have received an average price of DH 3.18/kg in 1976/77 and DH 2.81/kg in 1977/78 for their open-field production.

6.35 Eggplant. Prices for off-season eggplant at Rungis are relatively stable and vary between F 4.00 to F 6.00/kg. The average price obtained by Morocco was DH 3.40/kg in 1976/77 and DH 3.05/kg in 1977/78. It is expected that Morocco would sell its eggplants at DH 3.40/kg which corresponds to DH 1.30/kg to the producer. This price is lower than the average prices obtained by the farmers during the years 1974/77.

6.36 Melons. Off-season melons are sold at Rungis at about F 6.00 to F 9.00/kg. It has been estimated that Morocco would sell its melons, produced under greenhouses, at DH 6.80/kg (c.i.f. price) equivalent to DH 2.30/kg for the farmer. Should prices at the farm level fall below DH 2.30/kg, the greater part of the exportable production would probably be diverted to local consumption, as local prices are very attractive.

6.37 Strawberries. Strawberries are currently sold at about F 13.00/kg at Rungis. Morocco has sold its production at fluctuating prices varying from DH 7 to DH 9/kg c.i.f. during 1973/74-1977/78. The low prices obtained are due to inadequate marketing rather than a reflection of European price trends. The Project estimates the future price of strawberries at DH 8.50/kg c.i.f. (France) or at 4 DH/kg at the farmgate. - 42 -

6.38 Squash. For squash, Spanish prices are always lower than Moroccan ones since Moroccan supplies arrive throughout the higher priced off-season period. Morocco has sold its squash production at an average price of DH 3.37/kg (c.i.f. France) in 1977/78 which corresponds to a farmgate price of DH 1.48/kg. Prices in real terms are expected to remain stable throughout the Project and are estimated at DH 3.30 c.i.f. France or DH 1.40 net production.

6.39 Local market prices for all products have been estimated at observed average prices in 1977/78. As local off-season vegetable demand is increasing and as the Project does not significantly affect the national market supply, local prices are considered to be conservative estimates.

Prices for Agricultural Inputs

6.40 Financial prices are based on observation of farmgate prices in the Project area. Economic prices have been calculated on the basis of accounting ratios recently established for the Moroccan agricultural sector.

(a) Seeds: Most of the vegetable seeds are imported; they are obtained by the farmer through local dealers with the exception of some hybrid seeds which are imported exclusively by OCE and distributed at direct cost to the farmer. It is estimated that farmgate prices of hybrid seeds are about 7% lower than the economic price of seeds.

(b) Fertilizers: Fertilizers, except for phosphate, are imported and processed by Fertima, a public enterprise. Phosphate based fertilizers are processed and distributed by a Moroccan firm (Societe Cherifienne des Engrais SCE). An import tax of 30% is partly offset by a 10% subsidy price to Fertima and SCE. Some farmers and farmers' associations can obtain a subsidy equal to 20 and 30% respectively of domestic prices. Most small and medium farmers, however, receive no subsidy.

(c) Pesticides: Chemicals and pesticides are imported into Morocco in bulk and packed locally into small units for retail sale. Import and indirect taxes result in a farmgate price of about 38% higher than border prices adjusted for transport and handling.

(d) Farm machinery services: Because of high import duties and indirect taxes on imported agricultural machinery, the border price of machine services is about 20% Iower than the farmgate prices. Agrarian Reform Cooperatives and Farmers' Associations can obtain a 30% subsidy of the domestic price of tractors. Individual farmers do not receive these subsidies.

(e) Water: Well water is composed of the following costs: fuel (50%) oil and lubrication (10%), repairs and maintenance (40%). Because of high import duties and indirect taxes on these items, - 43 -

the economic price of water is about 37% lower than the financial cost of water.

(f) Manure and Transport: 50% of the price of manure is transport costs. Because of high taxes on gasoil, lubricants and imported lorries, the economic cost of transport is 50% lower than the financialcost. The economic price of manure is estimated at 72% of its financialcost.

(g) Plastic: Plastic is produced locally with imported raw materials. Border prices, adjusted for handling and transport, are estimated at about 63% of the farmgate price of plastic.

(h) Agriculturalequipment and IrrigationMaterials are mostly produced or assembled locally. Because of import duties on the raw material and indirect taxes, the border prices, adjusted for handling and transport, are estimated at about 65% of the farmgate price.

(i) Labor: In Morocco, the opportunitycost of unskilled labor is estimated at between 30 and 50% of the average wage rate. In the Project area, family labor is already fully employed and labor is not very abundant (the region is importing labor from the surroundingareas). It is considered that for the Project, the opportunitycost of labor is approachingthe daily wage rate.

D. Main Benefits and Beneficiaries

6.41 The Project is consistentwith Morocco's national objectives of (i) improving its balance of trade; (ii) acceleratingeconomic growth; and (iii) increasing productive employment.

6.42 The economic analysis,by using border price equivalentsexpresses the direct and indirect impact of the Project on foreign exchange earnings. The Project would accelerate economic growth given its high net present value (para 6.54) and its many forward and backward linkages. Through its labor intensivecultivation of high value crops under greenhousesand in openfield the project would raise labor productivity. Employment in off-seasonvege- table production is estimated to increase from 3.8 million man/days to about 6.0 million man/days or by the equivalent of about 10,000 full-timejobs. The production of 193,000 t generated by the Project would require an additional work force of about 1.3 million man/days for processing and packing of the vegetables. The Project would thereforeemploy the equivalent of about 16,000 full-timeworkers at an investment cost of about US$6,000 per job, which compares favorably to small scale industry. No difficultiesare expected in labor supply as the Project area is heavily populated and, if required, labor can be obtained from the surroundingareas. - 44 -

6.43 Beneficiaries. Out of the 11,000 vegetable farm families living in the Project area, about 8,000 would directly benefit from the Project. It is estimated that about 3,000 families would be potato producers or producers of off-season vegetables for the rapidly growing local market and they would only benefit indirectly from the Project.

6.44 Aside from its important employment impact, the Project is not expected to benefit members of the rural target group, as the off-seasonvege- table sector is a relatively privileged part of the Moroccan economy. The present per capita income of a small farmer owning 2 ha of land and having 0.75 ha under off-season vegetables is substantiallyabove Morocco's absolute poverty level. The Project beneficiaries are limited to farmers who already produce vegetables since, because of water limitations,the irrigated area cannot be increased. However, the Project would assure that, within the off- season vegetable sector, the small farmers who constitute the large majority of the Project participantswould have access to modern technology,inputs and credit, and thus fully participate in Project benefits. Based on typical farm models the income effect of the Project would be:

Farm Model Income without project Income with project DH DH

2 ha farm openfield (vegetables: 0.75 ha) 14,500 23,400 7 ha farm openfield (vegetables: 3.0 ha) 36,600 73,300 2 ha farm openfield (greenhouses: 0.25 ha) 13,300 46,400 7 ha farm openfield (greenhouses: 0.5 ha) 75,600 139,300

E. Financial Analysis

6.45 Open-field Production: The financial and economic rates of return on typical investmentsmodels for the open-field are summarized below:

Crop Financial Economic

Tomatoes 27 50 Peppers 35 67 Squash 53 129 Green Beans 80 124 Strawberries 71 119 - 45 -

The computationshave been based on January 1979 input prices and estimated or observed output prices. The higher economic rates of return show that Moroccan price distortionsput the export-orientedhorticultural subsector at a disadvantage. The returns on farmers'equity, assuming regular financing by CNCA, are at or above 50% for all the crops. The returns are considered to be sufficientlyattractive to assure farmers'acceptance of the proposed technical packages. Sensitivitytests show that the investmentsremain attractive with a 20% cost overrun or 20% cut in benefits. As investmentsare short term, farmerscan easily adapt productionand productioncosts to market requirements. The two crops with the highest returns (strawberriesand green beans) are also the riskiest ones. Off-seasonstrawberries can only be grown in the Souss-Massaregion and their high manpower requirementsinvolve special managerial skills. The return on green beans implies the productionof high quality, extra-finebeans, for which an interestingyet limitedmarket exists in France.

6.46 GreenhouseProduction: The financialand economic rates of return on greenhouseproduction are:

Crop Financial Economic

Tomatoes 21 31 Peppers 37 44 Green Beans 21 24 Melons 15 21 Eggplants 16 19

As for open-fieldproduction, the financialrate of return has been based on revenues lagged by one year. Incrementalcosts and benefits have been calculated compared to the open-fieldsituation with the Project, as the farmers' choice is between improved open-fieldproduction and greenhouse production. Compared to the without project situationthe financialreturns would be substantiallyhigher. A relativelyhigh rate of return is required to induce farmers to invest in greenhouseproduction, a techniquewhich requires high financialobligations and with which they have no experience. The returns on a 30% equity investment,though attractive,are not sufficientlyhigh for small and medium sized farmers to invest in greenhousesat the rate required by the Project. Since the implementationof the greenhousecomponent is an essentialpart for the success of the proposedmarketing structure,the return on the farmer's contributionshould not be lower than 50% to assure the implementation of the program. The 90% promotionalfinancing of greenhouseswould assure these returns. Returns to farmers'contributions at standard financing (70%) indicate that greenhouseinvestments would be sufficientlyattractive for big farmers and that promotionalfinancing for small and medium size farmers could be abandonedas soon as the profitabilityof the investmenthas been demonstrated. The spread between the economic and financialreturn is lower for greenhousesthan for open-fieldproduction, since greenhousesare exempt from duties. - 46 -

6.47 Farm Models. The financialand economic rate of return of typical farm models are:

Financial Economic

2 ha farm: openfield vegetables 26 49 7 ha farm: openfield vegetables 20 35 2 ha farm: openfield and greenhouses 55 67 7 ha farm: openfield and greenhouses 104 123

The sensitivityanalysis shows that the two openfield vegetable farms without the greenhouses are relatively sensitive to decreases in benefits. The financial rate of return of the two farms remains acceptable at an increase of costs by 20%, but a decrease of benefits by 20% yields rates of return of 5 and 7%. This confirms the relatively speculativecharacter of off-season vegetable exports. Returns on farmers' equity are high (above 50%), but the risks are commensurate. The farmers protect themselves against this risk by planting only part of their farm in off-season vegetables. Farm budgets with greenhouse production are not so sensitive to increases in costs or decreases in benefits.

6.48 Packing and Control Stations: The benefits of packing stations have been based on tariffs of processing tomatoes and peppers at 1979 prices and the benefits on control stations on the tax perceived by OCE for quality control. The financial and economic rates of return are:

Financial Economic

Small producer packing stations 34 80 Regrouped packing stations 32 77 Quality control centers 42 50

F. Economic Analysis

6.49 The economic rate of return is estimated at about 46%. It is based on the value of net incrementalproduction of the Project. All investments, incrementalproduction costs, replacementof greenhouses,operating costs of the extension service, the research stations and packing and control stations have been deducted from the net benefits. The benefit stream has been lagged by one year. All input and output prices have been converted into economic prices based on conversion factors recently established for Morocco or by deducting subsidies and taxes and adjusting for the common foreign exchange denominator (para 6.40). Project costs and benefits have been calculated over 20 years. Each farmer would achieve the projected yields within four years and the Project's full development productionwould be achieved within seven years. Only the benefits of incrementalproduction - 47 - have been taken into account for the control and packing stations. As the reorganization of the packing stations would also improve the productivity of other existing stations, the benefits of the packing component are conservative.

6.50 The Project design has been chosen after analysis of several alter- natives as the optimal strategy for taking full advantage of the potential of the off-season vegetable market and local production capabilities. An economic analysis of each Project component would be misleading as all the components are interdependent and necessary for the success of the Project. The greenhouse component is considered to be the required minimum to permit OCE to enter into marketing agreements with importers. In the same way, the restructured marketing system is required to assure attractive returns to the farmers. The agricultural component alone, assuming a restructuring of the marketing organization without the investments in the physical infrastructure of packing and control stations, would yield a rate of return of about 40%. The rate of return on the physical marketing infrastructure is 75% and therefore justified, even if it were considered a separable component.

Risk and Sensitivity Analysis

6.51 The risks of the Project are relatively low for the following rea- sons: (i) almost all Project costs are divisible; any reduction in benefits would be accompanied by a reduction in costs; (ii) vegetable production can easily be adapted to the market situation; if demand for any one commodity should fall short of projections, other crops could be substituted; (iii) the technology involved in the project is well known; and (iv) yields and price assumptions are conservative. The major risk of the Project is the marketing uncertainties. The effects of the marketing risk are, however, reduced by the possibility of substitution of crops and the relative insensitivity of the Project towards marketing projections. If the total demand for Moroccan vegetables should fall short of projection, the total area under off-season vegetable production could be reduced substantially and the Project would remain economically viable. Sensitivity tests show that the area under openfield tomatoes could be reduced from 6,000 ha to 3,000 ha and the economic rate of return would still be at an acceptable level (17%). The remaining risk is the price level. Prices used in the economic analysis already take into account a substantial decrease in relative prices. The sensitivity analysis shows, however, that a reduction of prices by 20% would still yield a return of about 30%.

6.52 The agricultural component is relatively insensitive to cost over- runs or decreases in benefits: a decrease in benefits of 20% would still yield a rate of return of about 25%. Costs would have to increase by 50% to bring the rate of return down to about 15%.

6.53 The rate of return for the packing stations is relatively insensitive to increases in cost. Benefits are fixed in terms of prices and the risk is limited to the quantity of vegetables processed. Sensitivity analysis shows that even if benefits were reduced by 50% and volumes processed by 20%, the packing stations are still economically viable. For the quality control centers, sensitivity analysis shows that the rate of return is not sensitive - 48 - to either decreases in benefits or increases in costs: a 50% increase in costs would still yield a return of 31% and a similar decrease in benefits, 20%.

6.54 At the opportunitycost of capital, estimatedat about 10%, the net present value and the switching values are the following:

Benefits Costs Net Present Value % - (Million DH)

Total Project -41 68 930.6 Agriculturalcomponent -42 64 662.9 Marketing component -54 117 267.7

VII. RECOMMENDATIONS

7.01 The main agreements reached at negotiationsincluded:

(a) Government would:

(i) onlend of the Bank loan US$50.0 million to CNCA and US$2.8 million to OCE and enter into a subsidiary loan agreement with CNCA and OCE on terms and conditions acceptable to the Bank by December 31, 1979 (para. 4.19);

(ii) carry the foreign exchange risk on the loan and guarantee the debt service (para. 4.19);

(iii) establishby December 31, 1979 a National Coordination Committee and Regional Technical Committeeswith terms of reference powers and membership satisfactoryto the Bank (paras. 5.01-5.02);

(iv) ensure that the management, staffing, operation, budget and program for the Research, Demonstrationand Training Centers would be acceptable to the Bank and be established in agreementwith OCE no later than December 31, 1979 for the year 1980 and by the National Coordination Committee for the following years (para. 5.12);

(v) employ no later than December 31, 1980 horticulturalists specializedin research and training with qualifications and terms and conditions of employment satisfactoryto the Bank (para. 5.13);

(vi) make available to CNCA Treasury funds for promotional financing of greenhouses under an agreement to be entered into not later than January 31, 1980 (para. 5.15). - 49 -

(b) OCE would:

(i) ensure that adequate transportationfacilities and operating budget would be provided to OCE/SASMA agents (para. 4.08);

(ii) prefinanceand procure greenhouseson behalf of the farmers (para. 4.19);

(iii) initiate not later than October 31, 1979 a reorganizationof its marketing structure in France for off-seasonvegetables and establish in concurrencewith the Bank an annual implementation program for this marketing reorganization(para. 5.23).

(i) present to the Bank for its approval the two first CNCA loan proposals for regrouping packing stations (para. 5.20);

(ii) ensure that lending rates, terms and procedures for subborrowers would be as outlined in paras. 5.14 to 5.17;

(iii) ensure that (a) the additionalTreasury loan would be limited to a maximum of 2 ha greenhouseper individualfarmer or a Cooperativemember and (b) about 60% of the Treasury loan would be set aside for farmers who would not own more than 1/2 hectare of greenhouse (para. 5.15);

(iv) have its accounts audited by independentauditors acceptable to the Bank and ensure that the auditors annual report and the audit of the statement of expenditureswould be sent to the Bank within five months of the end of each fiscal year (para. 5.26).

(d) Government,OCE and CNCA would:

(i) carry out procurement as outlined in paras. 4.21 to 4.25;

(ii) furnish to the Bank necessary data and informationthrough periodic reports to measure Project implementation(para. 5.27).

7.02 Agreementshaving been reached on the assurancessought, the Project is suitable for a Bank loan of US$58 million to the Government of the Kingdom of Morocco for a term of 15 years with 4 years of grace at an annual interest rate of 7.9%.

August 1979 KINGDON OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCTIONAND MARKETING PROJECr

Pro1ect Costa and Schedule of Expenditures Total des Couts du Projet et Calendrier des Depenses

Component Year Foreign Exchange (Annee) Total (Monnaie Etransere) Element 1 2 DHIOOO3 4 DH'OOO US$o000 US$000 %

Onfarm Investments Investissements au Niveau de la Ferme Greenhouse production Production sous serres Greenhouses 16,800 28,000 42,000 53,200 140,000 35,000 24,500 70 Serres Drip Irrigation 1.250 2 500 3.750 5.000 12.500 3,125 1.500 48 Irrigation localisee Subtotal without contingencies 18,050 30,500 45,750 58,200 152,500 38,125 26,000 68 Sous total sans imprevus Physical contingencies 5% 903 1,525 2,288 2,910 7,626 1,906 1,296 68 Imprevus physiques 5% Price contingencies 1.705 5,326 12.470 22.022 41.523 10,381 7 059 68 Imprevus financiers Total Greenhouse production 20,658 37,351 60,508 83,132 201,649 50,412 34,355 68 Total Production sous,serres Openfield Production Production Irrigation improvements plein champ 1,500 3,000 3,750 3,750 12,000 3,000 1,800 6Q Sprayers Amelioration irrigation 400 750 850 1,000 3,000 750 358 48 Pulverisateurs Other equipment 543 1.072 1.108 1.137 3860 965 579 60 Autres materiels Subtotal without contingencies 2,443 4,822 5,708 5,887 18,860 4,715 2,737 58 Sous total sans imprevus Physical contingencies 10% 244 482 571 589 1,886 471 273 58 Imprevus physiques 10% Price contingencies 242 913 1.630 2.334 5.119 1.280 742 58 Imprevus financiers Total Openfield production 2,929 6,217 7,909 8,810 25,865 6,466 3,752 58 Total Production plein champ Base cost on-farm investments 20,493 35,322 51,458 64,087 171,360 42,840 28,737 67 Cout de base investissements a la ferme Physical contingencies 1,147 2,007 2,859 3,499 9,512 2,377 1,569 66 Imprevus physiques Price contingencies 1.947 6.239 14.100 24.356 46,64 11.661 7.801 67 Imprevus financiers Total on-fara investments 23.587 43,568 68.417 91f942 227.514 56.878 38.107 67 Total investissements au niveau de la ferme Incremerntal Production Costs Couts Additionnels d'Exnloitation Medium-term investments Investissements a moyen-terme Greenhouse production 230 946 1,500 2,093 4,769 1,192 477 40 Production sous serres Openfield production 4 838 5.725 5.556 5.651 21.770 5,443 3,157 58 Production plein champ Base cost medium-term investment 5,068 6,671 7,056 -7,744 26,539 6,635 3,634 55 Cout de base investissements a moyen terme Price contingencies 456 1.109 1.832 2.791 6.188 1.547 851 55 Imprevus physiques Total mediun-term investment 5,524 7,780 8,888 10,535 32,727 8,182 4,485 55 Total investissementsamoyen terme Short-term investments Investissements a cout-terme Greenhouse production 2,148 3,994 5,242 6,849 18,233 4,558 2,051 45 Production sous serres Openfield production 18,531 23.355 23.672 25.149 90.707 22.677 10 205 45 Production plein champ Base cost short-term investment 20,679 27,349 28,914 31,998 108,940 27,235 12,256 45 Cout de base investissements a court terme Price contingencies 1,861 4 548 7.506 11.531 25 446 6,362 2.863 45 Imprevus physiques Total Incremental Production Costs 22,540 31J897 36,420 43,529 134,386 33,597 15,119 45 Total couts additionnels d'exploitation Base Cost Incremental Production 25,747 34,020 35,970 39,742 135,479 33,870 15,890 47 Cout de basecouts additionnels d'exploitation Price contingencies 2.317 5.657 9.338 14.322 31.634 7,909 3 714 47 Imprevus physiques Total Incremental Production Costs 28,064 39 677 45.308 54.064 167.113 41.779 19.604 47 -rotal Couts additionnels d'exploitation

May 1979 Mai 1979

bse KINGDOMOF MDROCOC

STAPF APPRAISAL REPORT oF THE

VEGOTABLE PRODUCTION A1NDMARSETING PROJECT

PFleot Costsa sd Schedule of ExPenditurea Total des Couts du Projet et Calendrier des Depenses

Co,poonent Year Foreign Exchange Element (Annee\ Total (Monnaie Etrangerel I 2 3 4 IE'OOO US$'00B US$'000 % DR'OOO

Agricultural Supoort Services Services de Production Agricole

Extension Services Service de vulgarieatisn Ivestoents aov55ti55ent5 Offices and housing 1,640 1,640 1,060 - 4,340 1,085 163 15 Bureaux et logests Vehicles sud equipment 396 486 600 - 1-482 371 215 53 Vehiculs et ateriel Subtotal 2,036 2,126 1,660 - 5,822 1,456 378 26 Sous total

t Establishment costs Coute d'e blisessnt Salaries 780 1,755 3,003 3,003 8,541 2,135 - - Salsire et traitents Operation costs f8l 405 693 693 1W971 493 296 60 Couts d'e ploitation Subtotat 960 2,160 3,696 3,696 10,512 2,628 296 il Sou».total.

Base cost extension service 2,996 4,286 5,356 3,696 16,334 4,084 674 17 Cout de base service de vulgarisation Physical contiogencies 222 253 235 69 779 195 67 34 Imprewsu physiques Price contiogencies 290 -- 5 1.451 1I_U 3.853 963 163 17 Imprevus finaciers Total extension service 3,508 5,294 7,042 5,122 20,966 5,242 904 17 Total service de vulgarimation

Cooperatives Cooperatives iotercooperetive Centers - 290 435 725 1,450 363 54 15 Centrea d'intsrcoopsrativ Milk Cotlection Cestera 500 750 1,250 2,500 625 313 50 Centre de collecte de lait Cooporative Storage Facilities 1200 1.200 1 200 1 200 4,800 1.200 180 15 Centr de stockages du cooperative Total Base Cost 1,200 1,990 2,385 3,175 8,750 2,188 547 25 Cout de Base Physical Contiogencies 120 199 239 318 875 219 55 25 Sprevus Physiques Prire Cootingencies 119 363 682 1260 2h425 606 152 25 Iprevu FinaoOiSrs Total Cooperatives 1,439 2,552 3,306 4,753 12,050 3,013 754 25 Total des Cooperatives

Seedling Froducti.a Pepinieres Cooperative Seedling Production - 510 1,530 1,530 3,570 893 714 80 Cooperative Pepinieras OCE Seedling Production 1,529 - - 105 1,634 408 327 80 Pptiniere de I'OCE Total Basa Cost 1,529 510 T30 1,633 5, 1,301 1,041 80 Cout de Base Physical Contiogeonise 153 51 153 164 521 130 104 80 tmprevus Physiques Prics Cooting..cieo 151 93 437 647 1.328 332 265 80 Iprevua Financiers Total Ssedlirg Production 1,833 654 2,120 2,446 7,053 1,763 1,410 80 Total Pepinieras

Rsosarch, Training, Devouetretion Recherch, Foratios, tratioa

Construction 990 1,410 840 - 3,240 810 122 15 Construction Eqaipm.nt 956 541 - - 1,497 374 225 60 Materiel D-rno.stratiou 210 - - - 210 53 37 70 Deuonstration Total Base Cost 2,156 1,951 840 - 4,947 1,237 384 31 Cout de base investiss_t Physical Contingencies 216 195 84 - 495 124 38 31 loIprevus Physiques PFics Coatingercies 213 357 240 - 810 203 63 31 lmprevus Financiers Total Investment CaSts 2,585 2,503 1,164 - 6,252 1,564 485 31 Total Couts d'InvOstisa tssnt

E.tabliahoînt Cbots Couts d'Etablisemeot Personnel 459 828 1,002 1,002 3,291 823 - - Personnel operetios C..ts 293 Le 547 647 727 2,214 554 233 42 Couts d'Esploitation Base Cost Establiahment Coots 752 1,375 1,649 1,729 5,505 1,377 233 17 Couts de Base couts d'Esttblisseent Physiral Contingencien 29 55 65 73 222 55 21 39 Imprevu Physiques Prics Contingeaciso 71 237 445 649 1.402 351 118 34 tIprevus Financiers Total Establishment Costs 852 1,667 2,159 2,451 7,129 1,783 372 20 Total Couts d'Estsblissnt

Base Cotrs Rsea.rch, Truiaing, Couts de base Recherche, Fostino, et OieGonatration 2,908 ' 3,326 2,489 1,729 10,452 2,613 617 24 Denonstratiot Physicul Coctiigencies 245 250 149 73 717 179 59 33 Imprevus Physiques Prics Contiigencies 284 594 685 649 2,212 553 181 33 Itprevus Financiers Total Research, Training, Deronstra- Total Recherche, Forestion. D_aonsîrattun tion boots 3,437 4,170 3,323 2,451 13,381 3,345 857 26 Busc Cost Agricultural Support Cout de Base de Services de Poduction Services 9,062 10,112 11,760 10,235 41,169 10,292 2,879 28 Agricole Physicol Contiagencie 740 753 776 624 2,893 723 285 39 Itprevus Physiques Prire Couticesociso 844 1,005 3,255 3,913 9_817 2,454 761 31 IoMprevus Financierd Total Agrirultural Support Services 10,646 12 670 15_791 14,772 53 879 13.469 3 925 29 Total Cout de Services de Froduetios Agricole

/A First yeur = operating ruais La Fientera 50se - 52 des cours de production KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCa1ON ANI) MARKETING PROJECT

Proiect Costs and Schedule of Expenditures Total des Couts du Projet et Calendrier des Depenses

Component Year Foreign Exchange Element (Annee) Total (Monnaie Etraneere) 1 2 3 4 DH'000 US$o000 US$000 7. DR'000

Marketing Services Marketing

Invest=ents Investissements Packing stations 2,200 4,000 3,500 5,300 15,000 3,750 1,463 39 Stations de conditionnement Quality control stations 3,600 3,600 3,600 3,600 14,400 3,600 756 21 Centres de controle Storage facilities at port 3.600 - - - 3.600 900 225 25 Entrepots quai Subtotal vithout contingencies 9,400 7,600 7,100 8,900 33,000 8,250 2,444 30 Sous total sans imprevus Physical contingencies 940 760 710 890 3,300 825 248 30 Imprevus physiques Price contingencies 931 1.390 2.027 3.527 7.875 1.969 591 30 Imprevus financiers Total Investment costs 11,271 9,750 9,837 13,317 44,175 11,044 3,283 30 Total Couts d'Investissement

Establishment Costs /a 150 300 450 690 1,590 398 56 14 Couts d'Etablissement /a Price contingencies 14 50 117 249 430 107 15 14 Imprevus financiers Total Establishment costs 164 350 567 939 2,020 505 71 14 Total Couts d'Etablissement

Base Cost Marketing Services 9,550 7,900 7,550 9,590 34,590 8,648 2,500 29 Cout de base Marketing Physical Contingencies 940 760 710 890 3,300 825 248 30 Imprevus physiques Price Continagencies 945 1.440 2.144 3 777 8.306 2.077 602 29 Imprevus financiers Total Marketing Services 11.435 10,100 10.404 14.257 46.196 11.550 3,350 29 Total Marketing s

Feeder Roads Routes Secondaires

Investments 2,400 3,600 3,150 2,100 11,250 2,813 703 25 Investissements Maintenance equipment 10% yr. - 240 600 915 1.755 439 307 70 Materiel d'entretien Subtotal wsithout contingencies 2,400 3,840 3,750 3,015 13,005 3,252 1,010 31 Sous total sans imprevus Physical contingencies 240 384 375 302 1,301 325 101 31 Imprevus physiques Price contingencies 238 703 i.d7l 1.196 3.208 802 249 31 Imprevus financiers Total Cost Feeder Roads 2.878 4A927 5,196 4.513 17.514 4.379 1.360 31 Total Couts Routes Secondaires

Technical Assistasce & Studies Assistance Technique et Etudes

Long-term technical assistance 480 960 640 180 2,260 565 396 70 Assistance technique Short-term consultants 96 96 96 96 384 96 67 70 Consultants Total Base Cost 576 I,056 736 276 2,644 661 463 70 Total Couts de BSse Price contingencies 52 177 191 100 520 130 91 70 Ieprevus financiers Total Cost Technical Assistance 628 1,233 927 376 3,164 791 554 70 Total Cout Assistance Technique

Hydraulic studies base cost 200 800 1,000 300 2,300 575 345 60 Etudes hydraugeologies Physical contingencies 20 80 100 30 230 58 35 60 Imprevus physiques Price contingencies 20 146 286 119 571 142 85 60 Inprevus financiers Total Cost Hydraulic Studies 240 1,026 1,386 449 3,101 775 465 60 Total Couts Etudes Hydraugeologies

Total Base Cost Technical Assistance & 776 1,856 1,736 576 4,944 1,236 808 65 Total couts de base assistance technique et etudes Studies physical contingencies 20 80 100 30 230 58 35 65 lIprevus physiques Price contingencies 72 323 477 219 1,091 272 176 65 Imprevus financiers Total Cost Studies & Technical 868 2.259 2U 825 6,265 1,019 65 Total Couts Etudes et Assistance Technique Ass istance

PROJECT GRAND TOTAL GRAND TOTAL DU PROJET

Base cost 68,028 93,050 112,224 127,245 400,547 100,138 51,824 52 Cout de base Physical contingencies 3,087 3,984 4,820 5,345 17,236 4,308 2,238 52 Imprevus physiques Price contingencies 6,363 16,167 30,385 47,783 100,698 25,175 1330 53 Imprevus finaciers

1 Total 77,47S 113,20 147,42 1,2373 518,481 129,621 67,365 52 Total , -

/2 For Quality Control Stations on-y. /aSeulenent pour les Centres de Controle.

May 1979 Mai 1979 - 53 - ANNEX 1 Table 2

KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCTION AND MARKETING PROJECT

Estimated Schedule of Disbursement (US$ Million)

IBRD Fiscal Year Disbursement Cumulative Disburse- Quarter Ending During Quarter ment at End of Quarter

Fiscal Year 80 December 31, 1979 2.0 2.0 March 31, 1980 0.5 2.5 June 30, 1980 0.5 3.0

Fiscal Year 81 September 30, 1980 2.0 5.0 December 31, 1980 4.0 9.0 March 31, 1981 2.0 11.0 June 30, 1981 2.0 13,0

Fiscal Year 82 September 30, 1981 4.0 17.0 December 31, 1981 5.0 22.0 March 31, 1982 3.0 25.0 June 30, 1982 3.0 28.0

Fiscal Year 83 September 30.,1982 5.0 33.0 December 31, 1982 8.0 41.0 March 31, 1983 4.0 45.0 June 30, 1983 4.0 49.0

Fiscal Year 84 September 30, 1983 3.0 52.0 December 31, 1983 4.0 56.0 March 31, 1984 2.0 58.0

August 1979 KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCTION AND MARXETING PROJECT

Production Schedule Calendrier de production

Vegetable -_ Prov4nce eNov. Dec. Jan. Feb, Mar. Provînce Apr. MaY ,~~~~~~~~~~~~~~~~~Fb c M

Tomatoes Tomates Casablanca

El Jadida/Safi I ___-_-

Agadir

Peppers Poivrons Agadir

Green Beane flaricots Rabat Verts

Cazablanca

Agadir

Eggplants Aubergines Agadir

Me Sens Melons El JadidalSafi

Agadir stra'berries Fra*ses

Squash Casablanca _ Courgettes

El Jadida/Safi - - - - - _ Agadir

Greenhouse (Serre) Open Field (Plein Chamep)

February 1979

(5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~II ANNEX II - 55 Table 2

KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCTION AND MARKETING PROJECT

Projected Distribution of Moroccan Vegetable Exports Among Western European Countries

Items 1981 1986 Quantity % of Market Quantity % of Market ('000 t) ('000 t)

Total tomato exports 150.0 - 244.0 -

Exports to total EEC Market 147.0 28 224.0 34 Exports to non-EEC Countries 3.0 - 20.0 - Specific countries France 105.0 65 145.0 73 Germany 36.0 23 53.0 26 United Kingdom 6.0 6 10.0 7 Scandinavia - - 8.0 20 Switzerland 3.0 9 9.0 20 Other countries - - 18.0 -

Total pepper- exporta 6.5 - 17.0 - of which to: France 3.0 17 5.0 19 Germany 3.5 8 12.0 19

Total greenbean exports 2.4 - 7.4 - France 2.4 12 7.4 19

Total squash & eggplant exports 5.0 - 11.7 - of which: France 5.0 10 9.5 15 Germany - - 2.2 16

Total strawberry exports 1.0 - 2.4 - France & Germany 1.0 9 2.4 9 Total melon exports 0.3 - 1.1 - France 0.3 1.1

May 1979 - 56 - ANNEX III Page 1

KINGDOM OF MOROCCO

STAFF APPRAISAL REPORT OF THE

VEGETABLE PRODUCTION AND MARKETING PROJECT

Selected Documents Available in the Project File

A. Material on Morocco's Agricultural Sector

Ai - Special Report on Morocco's Agricultural Sector, January 1975

A2 - World Bank - Morocco, Survey of the Agricultural Sector and Prospects for the Development of Rainfed Areas; Report No. 1395a-MOR

A3 - Morocco, Ministry of Agriculture: "Le Developpement du Secteur Agricole," September 1978 (The "Transition Plan")

B. Other Reports and Studies Related to the Project

Bi - Kingdom of Morocco, Ministry of Agriculture: "Project de Developpement du Maraichage de Primeurs," December 1979, Project Preparation Report including annexes on the Project, area, the development program, farm models and the marketing organization.

B2 - Kingdom of Morocco, OCE: "Plan d'Action Primeurs," September 1977.

B3 - Kingdom of Morcco, OCE: "Le Deroulement de la Campagne," Council d'Administration 1976/77.

B4 - Kingdom of Morocco, OCE: Tableau de bord: Recapitulation 1977/78.

B5 - Kingdom of Morocco, OCE: "Plan d' Action Primeurs - Campagne 1978/79: Production," April 1978.

B6 - Kingdom of Morocco, OCE: "Plan d'Action Conditionnement - Campagne 1978/79."

B7 - Kingdom of Morocco, OCE: "Cahier des Charges pour l'Agrement des Stations de Conditionnement des Primeurs," draft. ANNEX III 57 - Page 2

B8 - Kingdom of Morocco, OCE: "Liste des Stations Primeurs Agrees par 1'OCE," Campagne 1977/78.

B9 - Kingdom of Morocco, OCE: Detailed statistics on production and marketing of tomatoes by region and by month, 1976/77.

B10 - Kingdom of Morocco, OCE: Detailed statistics on production and marketing of vegetables by region and by month, 1976/77.

Bll - Kingdom of Morocco, OCE: Direction des Primeurs et Coton, Division Planification, "Evolution des Resultats: 1970-1978" prix et tonnages.

B12 - Monthly off-season vegetables import statistics for selected European countries by origin of imports 1975/76 - 1978/79.

B13 - Selected French Import statistics of vegetables, 1970-78.

B14 - Tropical Products Institute: "The .Market for aubergines and courgettes in selected Western European countries," January 1979 ODM, London.

B15 - COLEACP: "Mission to the ACP producer countries; liaison committee for African, Carribean and Pacific countries producers of tropical fruit and off-season vegetables," Paris, March 1978.

B16 - French price statistics for vegetable prices: CIF, wholesale, retail prices.

C. Selected Working Papers

Annex IV - Agricultural Development

Appendix 1: Technical Specifications for Production Greenhouses Appendix 2: Record of Climatic Conditions Appendix 3: Greenhouses: Schedule of Implementation Appendix 4: Cumulative Cropped Area under Greenhouses Appendix 5: Cumulative Cropped Area in Openfield Appendix 6: Terms of Reference for the Vegetable Specialists Appendix 7: Hydrogeological Studies

Annex V - Agricultural Production

Appendix 1: Evolution of Croppinig Pattern Appendix 2: Yield Assumption Appendix 3: Yearly Agriculturai Produçtion Appendix 4: Total Agricultural Production with and without Project; - 58 - ANNEX III Page 3

Annex VI - Marketing

Appendix 1: Draft Recommendations Concerning Reform of the Marketing System Appendix 2: Projected Moroccan Off-Season Vegetable Exports Appendix 3: EEC Imports of Off-Season Vegetables Appendix 4: Past and Projected EEC Import Requirements for Off-Season Tomatoes Appendix 5: EEC Imports of Off-Season Peppers Appendix 6: Imports of Tomatoes - France Appendix 7: Imports of Tomatoes - Germany Appendix 8: Main Exporters of Off-Season Vegetables to EEC Member Countries Appendix 9: French Imports of Off-Season Vegetables

Annex VII - Cost Estimates

Appendix 1: Packing Plants for Small Producers, and Regrouped Packing Stations Appendix 2: Quality Control Centers Appendix 3: On Farm Investments Appendix 4: *Investment and Operating Costs: Extension Service and Cooperatives Appendix 5: Demonstration and Training Centers Appendix 6: Research Centers Appendix 7: Credit Requirements Appendix 8: Crop Production Costs Appendix 9: Hydrogeological Surveys

Annex VIII - Projected Income and Cash Flow Statements

Appendix 1: Greenhouse Production Appendix 2: Openfield Production Appendix 3: Small Producer Stations Appendix 4: Regrouped Packing Stations Appendix 5: Quality Control Centers

Annex IX - Farm Models

Annex X Economic Analysis

Appendix 1: Financial Prices for Vegetables Appendix 2: France: Monthly Wholesale Price Variations Appendix 3: Output Prices Appendix 4: Agricultural Input Prices Appendix 5: Accounting Ratios Used for Project Expenditures Appendix 6: Annual'Foreign Exchange Earnings and Expenditures Appendix 7: Employment Creation Appendix 8: Cost and Benefit Stream for The Economic Analysis Appendix 9: Switching Values IBRD14279 100 8° KENlTR iç APRIL 1979

KINGDOM MOROCCO RABAT VEGETABLEPRODUCTION AND MARKETINGPROJEOT MOHAMMEDIA uznika = - ~~~~~~~~~CASABLANCK-

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A`AI .TELRO4DAN /

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