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Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No. 58010-MA INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized PROGRAM DOCUMENT ON A PROPOSED DEVELOPMENT POLICY LOAN IN THE AMOUNT OF EURO 100 MILLION (US$136.7 million equivalent) TO THE KINGDOM OF MOROCCO IN SUPPORT OF Public Disclosure Authorized THE URBAN TRANSPORT SECTOR February 14, 2011 Sustainable Development Department Middle East and North Africa Region 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. Public Disclosure Authorized MOROCCO GOVERNMENT FISCAL YEAR January 1 – December 31 CURRENCY EQUIVALENTS (Exchange Rate Effective as of January 31, 2010) Currency Unit Moroccan Dirham US$1.00 = MAD 8.2 WEIGHTS AND MEASURES Metric System ABBREVIATION AND ACRONYMS AFD Agence Française de Développement ANAPEC Agence Nationale de Promotion de l’Emploi et des Compétences EIB European Investment Bank CDG Caisse de Dépôts et Gestion CNDU Commission Nationale des Déplacements Urbains CPS Country Partnership Strategy CFAA Country Financial Accountability Assessment DGCL Direction Générale des Collectivités Locales DPL Development Policy Loan FEC Fonds d’Equipement Communal GDP Gross Domestic Product GHG Green House Gas IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report IFC International Finance Corporation IMF International Monetary Fund JSAN Joint Staff Advisory Note LDP Letter of Development Policy MOF Ministry of Finance MOI Ministry of Interior OFPPT Office de la Formation Professionnelle et de la Promotion du Travail PEFA Public Expenditure and Financial Accountability PER Public Expenditure Review PFM Public Finance Management PPP Public Private Partnerships Vice President: Shamshad Akhtar Country Director: Simon Gray Sector Director: Laszlo Lovei Sector Manager: Patricia Veevers-Carter Task Team Leader: Jean-Charles Crochet KINGDOM OF MOROCCO URBAN TRANSPORT SECTOR DEVELOPMENT POLICY LOAN TABLE OF CONTENTS Page No. LOAN AND PROGRAM SUMMARY .................................................................................................................. i I. INTRODUCTION ................................................................................................................................... 1 II. COUNTRY CONTEXT .......................................................................................................................... 2 A. MACROECONOMIC ACHIEVEMENTS OVER THE LAST DECADE ...................................... 2 B. RECENT ECONOMIC DEVELOPMENTS IN MOROCCO .......................................................... 5 C. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ............................................ 8 III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES .................................. 11 A. URBAN TRANSPORT SECTOR ISSUES .................................................................................... 11 B. THE GOVERNMENT’S PROGRAM ........................................................................................... 15 C. CONSULTATION AND PARTICIPATORY PROCESSES ......................................................... 19 IV. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM .............................................................. 20 A. LINK TO CPS ............................................................................................................................. 20 B. COLLABORATION WITH IMF AND OTHER DONORS ...................................................... 20 C. RELATIONSHIP TO OTHER BANK OPERATIONS .............................................................. 21 D. LESSONS LEARNED ................................................................................................................ 21 E. ANALYTICAL UNDERPINNINGS .......................................................................................... 22 V. THE PROPOSED MOROCCO URBAN TRANSPORT SECTOR DPL ............................................. 23 A. OPERATION DESCRIPTION ................................................................................................... 23 B. POLICY AREAS ........................................................................................................................ 24 VI. OPERATION IMPLEMENTATION .................................................................................................... 27 A. POVERTY AND SOCIAL IMPACTS .............................................................................. 27 B. ENVIRONMENTAL ASPECTS ....................................................................................... 28 C. IMPLEMENTATION, MONITORING, AND EVALUATION ....................................... 29 D. FIDUCIARY ASPECTS AND DISBURSEMENTS ........................................................ 29 ANNEX 1: LETTER OF SECTOR DEVELOPMENT POLICY ...................................................................... 33 ANNEX 2: OPERATION POLICY MATRIX .................................................................................................. 55 ANNEX 3: MOROCCO - PUBLIC DEBT SUSTAINABILITY AND EXTERNAL FINANCING REQUIREMENTS ............................................................................................................................................. 59 ANNEX 4: MOROCCO AT A GLANCE ......................................................................................................... 60 MAP: IBRD 33450R2 This Loan was prepared by a World Bank team consisting of Jean-Charles Crochet (Task Team Leader and Senior Transport Economist), Ziad Nakat (Transport Specialist), Paul Noumba Um (Lead Economist), Anas Abou El Mikias (Senior Financial Management Specialist), Stefano Paternostro (Lead Economist), Khalid El Massnaoui (Senior Economist), Gaël Grégoire (Environmental Specialist), Andrea Liverani (Social Development Specialist), Eavan O’Halloran (Senior Country Officer), Jean-Charles de Daruvar (Senior Counsel), Hassine Hedda (Finance Officer), O.P. Agarwal (Senior Transport Specialist and Peer Reviewer), Aurelio Menendez (Sector Manager and Peer Reviewer), Sally Burningham (Operations Adviser and Peer Reviewer), Fatiha Amar (Program Assistant), and Khadija Sebbata (Program Assistant). The team worked under the guidance of Simon Gray (Country Director), Laszlo Lovei (Sector Director), and Jonathan Walters (Regional Strategy and Programs Director). LOAN AND PROGRAM SUMMARY KINGDOM OF MOROCCO URBAN TRANSPORT SECTOR DEVELOPMENT POLICY LOAN Borrower Kingdom of Morocco Implementing Agency Ministry of Interior Financing Data The loan amount is Euro 100 million. The main loan terms are as follows: variable spread over LIBOR, 28 years maturity including 5.5 years grace period, Euro denominated, and tailored repayment schedule. Operation Type The proposed operation is a single-tranche DPL Main Policy Areas Governance of the urban transport sector Efficiency and supply of urban transport services and infrastructure Environmental and social sustainability Key Outcome Indicators Governance: (i) Efficient planning and management of the urban transport sector in the Casablanca agglomeration. (ii) Effective coordination of policies and programs among the main Government departments involved in the urban transport sector. (iii) Effective Central Government support provided to local authorities on urban transport issues. (iv) Sufficient urban transport expertise available in the cities that have carried out or launched the preparation of municipal urban strategies and priority investment plans. Efficiency and supply of urban transport services and infrastructure: (i) Improved quality and quantity of bus services in the agglomerations of Rabat-Sale-Temara and Casablanca. (ii) The procurement process for outsourcing public transport services is in line with international best practice. (iii) Government financial support allocated to those urban transport investment projects with superior economic and social returns. Environmental and social sustainability: (i) Effective vehicle inspection and monitoring systems in place. (ii) Accessibility for persons with limited mobility mainstreamed in urban transport projects and awareness of accessibility issues increased. Program Development The development objective of the proposed DPL is to improve the Objective and efficiency of urban transport in Morocco’s large cities through: (i) Contribution to CPS better governance of the sector; (ii) increased performance and supply of urban transport services and infrastructure; and (iii) higher environmental and social sector sustainability. The proposed single- tranche DPL would support the Government’s urban transport i reform program and accelerate its implementation. It would focus on key institutional and regulatory measures as well as the implementation of the Government’s reform program in main cities, primarily Casablanca and Rabat. The CPS is designed to help Government achieve its medium term priority objectives in a flexible and responsive way. It is organized around three main pillars. The first concentrates on activities that encourage growth, competitiveness and employment, including fostering macro-economic stability and promoting private sector development as engine of growth. The second pillar supports the improvement in access to, and quality of, public services, including the development of institutions and management systems.