The Private Public Partnership a Strategic Choice for Efficient and Sustainable Irrigation Management in Morocco

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

THE PRIVATE PUBLIC PARTNERSHIP A STRATEGIC CHOICE FOR EFFICIENT AND SUSTAINABLE IRRIGATION MANAGEMENT IN MOROCCO

A. El Bouari1, M. Ouhssain2, S. Oudrhiri3, R. tanji4

ABSTRACT

Irrigated agriculture is at the heart of Morocco's economic and social development. It plays a crucial role in meeting Morocco's food needs. It also generates more than 75% of the country's agricultural exports and providing jobs for half the rural labour force. However, irrigation monopolizes the country's scarce water resources, accounting for 85% of water usage. With water resources becoming increasingly scarce, Morocco urgently needs to find a better way to manage water for irrigation.

Indeed, the sector of irrigation in Morocco is confronted with several constraints, in particular because of the limits of the institutional framework which continues to govern the sector. These limits, which mainly concern the Regional Offices for Agricultural Development (ORMVAs), can be summarized as follows: their statutory framework as public institutions of an administrative nature; their current budgetary framework which does not clearly establish the principle of separation of public service missions and commercial missions; their dependence on the State's budgetary resources; and the relational framework that establishes a state-to-user relationship in which the farmer positions himself in the state's favor rather than as a customer of the water service.

These limits have not allowed the irrigation sector to generate sufficient internal financial resources to guarantee the sustainability of the equipment and to ensure an efficient water service. The expenses, even recurrent of this service, continue to be partly covered by budgetary transfers.

In this context and since the end of the 1990s, the Department of Agriculture after a thorough examination of the feasibility of the various possible options: (i) the autonomy of the water service within the ORMVA, (ii) the transfer of management to farmers and (iii) the delegated management in a private setting, concluded that the option of delegated management in a public-private partnership framework is appropriate. The interest of this option has been demonstrated through the realization of the Public Private Partnership project for the safeguarding of the citrus area of El Guerdane in Souss (10,000 ha). In fact, a delegated management agreement was signed in 2005 between the Ministry of Agriculture and a private operator (Amensouss company) to co-finance, implement and manage the irrigation infrastructure. Indeed, the construction was completed in July 2009 and management by the delegate started in October 2009 after inauguration by HM King Mohammed VI, may God glorify him, on October 2nd, 2010. Building on the success of this unprecedented international experience, the Ministry of Agriculture adopted the public-private partnership in irrigation as an important institutional reform for the upgrading and modernization of irrigation.

1 Agricultural Engineer, Director of Irrigation and management of agricultural land, Ministry of Agriculture, Fisheries, Rural Development, Water and Forests. [email protected] 2 Agricultural Engineer, Head of PPP Division at Directorate of Irrigation and management of agricultural land, [email protected] 3 Agricultural Engineer, Head of Service of Monitoring and regulation of PPP in Irrigation 4 Agricultural Engineer, Head of Service of promotion and implementation of PPP in Irrigation

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

Today, the program of public-private partnership in irrigation is concerning many perimeters, we name as some important ones: The seawater desalination irrigation project in the Chtouka Ait Baha area in Souss-Massa to irrigate 15,000 hectares; Azemmour - Bir Jdid coastal zone irrigation project (3,200 hectares) and extension of irrigation project in the Dakhla zone using desalinated water and wind energy on 5,000 hectares.

Keywords: Morroco, Irrigation, Irrigated agriculture, Public-Private Partnership

1. INTRODUCTION

Irrigated agriculture in Morocco, although it concerns only 15% of cultivated areas, contributes about 45% on average of agricultural value added and accounts for 75% of agricultural exports. This contribution is even more pronounced during the dry years when production in the Bour5 zones is severely affected. During the 1994-1995 dry year, this contribution amounted to 70% of this added value. It has also contributed substantially to improving the living conditions of farmers through a multiplier effect on their income, opening up and access to other community public services such as drinking water, electrification, etc.

The continuous efforts of the public authorities for the development of the sector have made it possible to develop a total area of more than 1,016,000 ha, of which nearly 683,000 ha are in the large perimeters, which are managed by the Regional Offices for Agricultural Development (ORMVA), public institutions with representative from civil and with financial autonomy.

2. IRRIGATION POLICY IN MOROCCO

It was in its battle against underdevelopment that the government decided to reserve a place of choice for these irrigated perimeters. The Agricultural Investment Code has come to reflect the action of the Government in favor of the agricultural sector and its desire to intervene more directly in the process of agricultural production. For this reason, the Government has engaged in irrigated perimeters, in an important process, not only of external equipment but also of internal equipment of the farms for a better valorization of water and soil. This strong commitment of the government, left little space for the initiative of the farmers or any other operator of the private sector wishing to contribute to the development of the sector by its expertise, its flexibility, its capacity to diversify the risks, etc.

At the time, this approach was justified by the objective socio-economic conditions of the rural world and by the options decided by the government with regard to the economic and social development of the country.

The evolution of the national and international economic contexts, the disengagement of the Government, the abandonment of compulsory rotation plans, the daily practices of the users and the “dirigiste” policy in agricultural production in the irrigated perimeters force the adaptation of the legal framework to the reality of the ground. The organic link established in time between water management and the other activities of the ORMVAs is no longer justified.

Indeed, the sector is confronted with several constraints, in particular because of the limits of the institutional framework which continues to govern the sector. These limits, which mainly concern the ORMVAs, can be summarized as follows:

5 Rain zone

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

• their statutory framework as public institutions of an administrative nature; • their current budgetary framework which does not clearly establish the principle of separation of public service missions and commercial missions; • their dependence on the government’s budgetary resources; • and the relational framework that establishes a government -to-user relationship (ORMVA) in which the farmer positions himself in the Government’s favor rather than as a customer of the water service.

3. THE EMERGENCE OF A MODEL FOR CARRYING OUT IRRIGATION PROJECTS

For decades attempts have been made to avoid jeopardizing the whole effort of the national community in the field of irrigation. The salvation by which the sector must be sustainably improved is the reform of the institutional framework governing this service. The content of this reform is summarized in:

a) The adaptation of the texts by repealing the statutory and regulatory provisions of a prescriptive nature. b) The continuation and consolidation of the policy of encouraging users to invest in the modernization of irrigation techniques on the plot (localized irrigation, pivot, improved spraying, etc.). c) The separation of the management of the irrigation service from the other activities of the ORMVAs. d) The financing of the extension of irrigation, particularly through the opening of the irrigation sector to private developers in the framework of public-private partnership, which was the most appropriate choice of management of the water irrigation service to ensure its durability and quality.

3.1 A Project to Test a Reform:

The interest of this option has been demonstrated through the realization of the PPP project for the safeguarding of the citrus area of El Guerdane in Souss (10,000 ha). In fact, a delegated management agreement was signed in 2005 between the Ministry of Agriculture and a private operator (Amensouss company) to co-finance, implement and manage the irrigation infrastructure. Indeed, the construction was completed in July 2009 and management by the delegate started in October 2009 after inauguration by HM King Mohammed VI, may God glorify him, October 02, 2010.

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

Building on the success of this unprecedented international experience, the Ministry of Agriculture adopted the public-private partnership in irrigation as an important institutional reform for the upgrading and modernization of irrigation.

3.2 The Objectives of the Public-Private Partnership:

The public-private partnership in irrigation consisted in interesting private operators in investing and managing irrigation infrastructure in irrigated perimeters under delegated management / concession contracts. The irrigation water service in these perimeters is a public service that can be delegated under the law.

The objective is to improve the technical, economic and financial conditions of the management of the irrigation water service in these perimeters, in this case:

• Better water and energy efficiency; • Optimization of the use of water resources and the costs of operation and maintenance; • The sustainability of the developments achieved. • Improvement of the water service; • And The reduction of Government budget transfers for the management of irrigation schemes.

In this context, the intervention of the private sector covers the following main tasks:

• co-finance irrigation schemes; • Design and build irrigation infrastructure; • Manage, operate and maintain these infrastructures to ensure a distribution of water to the farmer, who is the user, in optimal conditions. Of course, the irrigation infrastructure remains public property; • Bring expertise and innovation for the modernization of irrigation; • Support the risks related to the irrigation project (construction risks, operation and maintenance risks, financial risks, commercial risks, etc.), • collect remuneration from the users on the basis of a tariff of the water service validated by the government, etc.

4. PPP PROJECTS IN IRRIGATION:

The PPP Irrigation Program was launched in September 2008. In order to maximize the chances of success of delegated irrigation management, the Department of Agriculture is proceeding with the structuring of each of the PPP projects through in- depth studies. Each project has two important phases: (i) a feasibility study and definition of strategic partnership options, at all legal, institutional, technical, economic and financial levels; and (ii) the execution of the call for tenders for the designation of the private delegate and the establishment and signing of the contractual documents (delegated management agreement, specifications, user contracts, public financing agreement, water supply agreement, etc.). The program concerned the following perimeters:

o The existing irrigation schemes for modernization and improvement of their management: Loukkos (26,500 ha), Tadla (98,000 ha), Doukkala (95,000 ha), Gharb (117,000 ha), Moulouya (65,400 ha), Haouz (143,000 ha).These projects have been the subject of feasibility studies;

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

o New hydro-agricultural development projects (in the feasibility study phase): extension of irrigation in Gharb (113,900 ha) and in the Loukkos perimeter (9,700 ha); Dar Khrofa project in Loukkos (21,000 ha); development of new irrigated areas downstream of the Kaddoussa Dam (5,442 ha); extension of irrigation in the Dakhla zone irrigated from desalinated water (5,000 ha) which is in the phase of negotiation; o Irrigation safeguard projects in areas with high agricultural production potential: the seawater desalination irrigation project in the Chtouka area in Souss-Massa (15,000 ha); Azemmour - BirJdid coastal zone irrigation project (3,200 ha) wich are in the phase of construction and subscription.

The record of the PPP program has exceeded all expectations. In fact, the structuring studies carried out or in progress until now have involved a total area of 545,000 in the existing perimeters, 185,000 ha of new irrigation schemes and 18,000 ha of conservation irrigation’s projects.

It should also be noted that the EL Guerdane perimeter (10,000 ha), the only perimeter currently in delegated operation, has continued since its inception in 2009 to record the best expected performance in terms of satisfaction of contractual water allocations, efficiency of distribution, recovery rate, satisfaction of user complaints and their information in real time, intervention diligence, quality of maintenance and maintenance, etc.

5. Study Case : EL Guerdane Project

The perimeter of El Guerdane is located in the plain of Souss, between the city of Taroudant in the East and the center Oulad Taîma in the West. 80% of the area of this perimeter (14,000 ha) is developed by citrus orchards (10,000 ha), the rest is mainly occupied by food crops. This plain has undergone major agricultural development, oriented mainly towards export crops (citrus, market gardening, ...), thanks to the favorable climatic conditions of the area, the dynamism of the private sector, hydro-agricultural investments and basic infrastructures. (port, airport, ...) granted by the Government.

Geographic location

Citrus fruit growing in Souss is a modern sector supported by a structured professional organization. This sector produces 50 to 60% of the national citrus production and accounts for 50% of Morocco's citrus exports. The agricultural development of the Souss Massa region is linked to the extension of modern irrigation areas by individual pumping. In fact, 70% of the irrigated areas of the region are fed by groundwater.

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

For twenty years now, the abstraction of irrigation water far exceeds the possibilities of renewal of the water table of Souss. This situation has resulted in an annual reduction of the groundwater of the order of 1.5 to 2 m.

These conditions have led farmers to adapt to changes in the groundwater either by frequent overcrowding of the wells or by the drilling of deep wells or by the conversion of pumping equipment or the use of localized irrigation equipment.

These alternatives are expensive and are not within the reach of all citrus growers.

Faced with this critical situation, the public authorities have made safeguarding this area a priority.

6. THE CONSISTENCY OF THE PROJECT

The project to save the citrus area of El Guerdane consists of a transfer of 45 million m3 of water from the Aoulouz-Chakoukane Complex to the benefit of the 10,000 ha of plantations in the project area. The Chakoukane dam is intended exclusively for feeding the perimeter of El Guerdane. The main components of the project are as follows:

• The realization of a work of head on the dam of Aoulouz. • The completion of a 90 km long adduction pipeline • The construction of an irrigation water distribution network in pressurized pipes about 300 km long. • Installation of irrigation bollards.

7. FINANCIAL AND INSTITUTIONAL FRAMEWORK:

• PPP (public service delegation) putting together Government, users and the private operator • Project cost estimated at DH 987 million • Government’s share : DH 475 million (Hassan II Economic and Social Development Fund)

– A 237.5 million DH subsidy – A concessionary loan of 237.5 million DH (1% interest rate, 20 years differed payment)

• Farmers’ contribution of 8,000 DH/ha, i.e. up to 80 million DH depending on the number of contracting farms

Operator’s share estimated at 432 million DH, i.e. 43% of the project cost

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

Project partners

8. PROJECT RISK ALLOCATION:

▪ Transaction document prepared to minimize risks for the private sector/contractor;

▪ Shortage of water risk : o Income deficit due to the lack of water for one specific year will be limited for the contractor to a maximum 15 % of average annual income o Users will take part of the risk (if deficit exceed 15% of the volume allocated to the project) through a surcharge o Government will pay the contractor for any deficit higher than 22,75%

▪ Demand risk : o Government will give a 475 MDH investment subvention o This amount will allow a tariff that is included in the average cost of water while maintaining the financial profitability of the project.

o Such a tariff would be affordable to the vast majority of farmers willing to receive surface water.

▪ A optimal network conception:

o Allowing the contractor to identify the users, o organization of an annual subscription mechanism for land owners willing to be connected o Subscription will be a lump sum payment per ha.

▪ A limited risk of non-payment from users

o Tariff includes a fix cost (20 % prepayment of the volume subscribe by each farmer) and a consumption fee based on the volume used. o Such a tariff structure will limit non-payment risk; contractor will be allowed not to deliver the water to farmers who do not pay their subscription at the beginning of the season or their fees

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

▪ A weak demand in surface water o Public contribution will maintain the tariff at a similar water cost already paid by farmers, thus accessible to a large number of farmers

o To reduce the contractor risk from insufficient water demand, the contractor will not start building the infrastructure until uptake is at least 80 % of the volume allocated to the project

▪ Contractor will be technically responsible for designing the project: o Contract will only determine a limited number of indispensable technical criteria needed to guaranty a good quality of the service and reduce environmental impact o Choice of material, distribution network design and some services modalities will be the responsibility of the contractor.

9. PUBLIC CONTRIBUTION FINANCING AGREEMENT AND DELEGATED MANAGEMENT AGREEMENT

The signing of the financing agreement for the public contribution to this project was signed on February 4, 2005 in Zagora under the effective presidency of His Majesty King Mohammed VI, between the Ministry of Agriculture, Rural Development and Maritime Fisheries. (delegating authority), the Hassan II Fund for Economic and Social Development and the AMENSOUSS SA Company (delegate). In addition, on March 29, 2005, the delegated management agreement was signed between the Amensouss Society and the Ministry of Agriculture, Rural Development and Maritime Fisheries. The entry into force of this agreement was made on December 23, 2005. Since then, project implementation studies have been launched as well as farmers' subscriptions. The launch of the works was planned in 2007 for a duration of 2 years.

Some Performance indicators

Tariff :

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

In the space of 10 years, the tariff is known for a cumulative increase of 9%.

Billing:

The recovery is remarkable. It is over 97% since the start of the project.

Volumes taken and distributed:

The transport efficiency is also remarkable, of the order of 97%.

Service provision:

Service outages have a cumulative duration less than that provided for maintenance under the concession agreement.

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11

Complaints

In the same way, disputed meters and requests for information have been reduced with the duration of the project

10. CONCLUSION:

The analysis of the Moroccan experience of development of irrigation projects through public-private partnership brings out several benefits.

The main advantage is to improve the quality of service by allowing both sectors to do what they do best; Indeed, Government acts as the regulator and focuses on planning services and monitoring performance, and the private sector focuses on managing the day-to-day delivery of the service.

Another interest is to improve cost-effectiveness by taking advantage of private sector innovation, experience and flexibility. Indeed, PPPs can often deliver more cost- effective services than traditional approaches. And the private sector can often earn extra revenues from third parties, thereby reducing the cost to the public sector.

We also notice the ability to carry out complex projects with several institutional stakeholders. The typical example is Chtouka's project. This includes a desalinated drinking water production project, carried out by delegated public service management by the National Office of Electricity and Drinking Water (ONEE), a concession project for the production of desalinated water for irrigation by the Ministry of Agriculture, a project to build and operate an irrigation network distributing the other desalinated produced by the concession as part of a delegated public service management of the regional agricultural development office and a project management of the aquifer under a contract linking farmers, the basin agency, the Regional Office for Agricultural Development, local and regional elected officials and local authorities.

This ability to federate the action of several public and private parties is a characteristic of private public partnership projects because they are based on a contractualization of relations between the different actors, contracting based on a detailed analysis of the risks and problems to be overcome and a good overview of the project.

Without forgetting one of the fundamental principles of PPPs witch consist on a better management of risk, and it allocation to the party best able to manage it at lowest cost. In fact, the importance of the risk analysis phase lies in the definition of the project itself and its improvement. The identification of the risks makes it possible to

3rd World Irrigation Forum (WIF3) ST-3.3 1-7 September 2019, Bali, Indonesia W.3.3.11 better establish the technical options, the commercial options and the choices of implementation.

11. BIBLIOGRAPHY

El Bouari, A. (2019) PPPs in irrigation in Morocco: Experiences and lessons. Chati, M.T., Moussadek, R., OUDRHIRI, S., Boughlala, M., & Hallam, J. (2015). Appendices of the final technical report "Study of the contribution of the public-private partnership in the sustainable management and valorization of irrigation water in the perimeter of El Guerdane". Maatala, N., &Lebailly, P. (2017). Irrigation water service management mode: A determinant of the technical efficiency of citrus farms in the Souss-Massa perimeter in Morocco. EL Gueddari, A. (2006, March). El Guerdane project: from the classical approach to the implementation of the public-private partnership. In World Water Forum, 4 (pp 1-16). WWC. Irrigation: ONA picks up Guerdane's project, The Economist of 23/07/2004 McKinsey, Green Morocco Plan, State Redeployment, February 2008 Ouhssain M., Public-Private Partnership in Irrigation, Articulation of Groundwater Contracts with PPP Projects, March 2014.