World Bank Document
Document of The World Bank
FOR OFFICIAL USE ONLY
Public Disclosure Authorized Report No: 47593-MA
PROJECT APPRAISAL DOCUMENT
ON A
Public Disclosure Authorized PROPOSED LOAN
IN THE AMOUNT OF EUROS 105.2 MILLION AND US$35 MILLION (US$175 MILLION EQUIVALENT)
TO THE
OFFICE NATIONAL DE L’EAU POTABLE (ONEP) (NATIONAL POTABLE WATER AUTHORITY)
WITH THE GUARANTEE OF THE Public Disclosure Authorized KINGDOM OF MOROCCO
FOR A
REGIONAL POTABLE WATER SUPPLY SYSTEMS PROJECT
May 20, 2010
Sustainable Development Department Middle East and North Africa Region
Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS (Exchange Rate Effective {November 3, 2009}) Currency Unit = Moroccan Dirham (MAD) MAD 7.6277 = US$1 US$ 0.1311 = MAD 1
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
CAS Country Assistance Strategy CPS Country Partnership Strategy CR Rural Municipality/Commune Rurale DEP Department for Access to Potable Water (ONEP)/Dir. Généralisation de l’Eau Potable DGCL General Department of Local Communities/Direction Générale des Collectivités Locales DGH General Department of Hydraulics/Direction Générale de l’Hydraulique DPL Development Policy Loan EA Environmental Assessment ESMP Environmental and Social Management Plan ESW Economic and Sector Work FMR Financial Monitoring Report FRR Financial Rate of Return GEP Universal Water Access Programme/Programme de Généralisation de l’Eau Potable GG Managing keeper/Gardien Gérant GOM Government of Morocco HC Household Connection IBRD International Bank for Reconstruction and Development INDH Initiative Nationale de Développement Humain (National Human Development Initiative) LAF Land Acquisition Framework MDG Millenium Development Goals MEMEE Ministry of Energy, Mines, Water and Environment MENA Middle East and North Africa MIC Middle-Income Country NCB National Competitive Bidding O&M Operation and Maintenance ONEP National Potable Water Board/Office National de l’Eau Potable PAGER Rural Water Supply Program/Programme d’Approvisionnement Groupé en Eau Potable des Populations Rurales PDO Project Development Objective PHRD Japan Policy and Human Resources Development Technical Assistance Program RWS Rural Water Supply RWSS Rural Water Supply and Sanitation SEEE Secretariat of Water and Environment – Secrétariat d’Etat a l’Eau et de l’Environnement SIL Specific Investment Loan SMT Social Mobilization Team SP Standpipe (public) WSS Water Supply and Sanitation WUA Water User’s Association
Vice President: Shamshad Akhtar Country Director (Acting): Francoise Clottes Sector Director Laszlo Lovei Sector Manager: Francis Ato Brown Task Team Leader: Pier Francesco Mantovani KINGDOM OF MOROCCO
MA-Regional Potable Water Supply Systems Project
TABLE OF CONTENTS
Page
I. STRATEGIC CONTEXT AND RATIONALE ...... 1 A. Country and sector issues...... 1 B. Rationale for Bank involvement ...... 3 C. Higher level objectives to which the project contributes ...... 4
II. PROJECT DESCRIPTION ...... 5 A. Lending instrument ...... 5 B. Project development objective and key indicators ...... 5 C. Project components ...... 5 D. Lessons learned and reflected in the project design ...... 8 E. Alternatives considered and reasons for rejection ...... 9
III. IMPLEMENTATION ...... 9 A. Institutional and implementation arrangements ...... 9 B. Monitoring and evaluation of outcomes/results ...... 10 C. Sustainability...... 11 D. Critical risks and possible controversial aspects ...... 12 E. Loan/credit conditions and covenants ...... 14
IV. APPRAISAL SUMMARY ...... 17 A. Economic and financial analyses ...... 17 B. Technical ...... 19 C. Fiduciary ...... 19 D. Social...... 21 E. Environment ...... 22 F. Safeguard policies ...... 24 G. Policy Exceptions and Readiness...... 24
Annex 1: Country and Sector or Program Background ...... 25
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 31 Annex 3: Results Framework and Monitoring ...... 32
Annex 4: Detailed Project Description ...... 36
Annex 5: Project Costs ...... 46
Annex 6: Implementation Arrangements ...... 49
Annex 7: Financial Management and Disbursement Arrangements ...... 51
Annex 8: Procurement Arrangements ...... 58
Annex 9: Economic and Financial Analysis ...... 64
Annex 10: Safeguard Policy Issues ...... 78
Annex 11: Project Preparation and Supervision ...... 94
Annex 12: Documents in the Project File ...... 95
Annex 13: Statement of Loans and Credits ...... 97
Annex 14: Country at a Glance ...... 98
KINGDOM OF MOROCCO
MOROCCO REGIONAL POTABLE WATER SUPPLY SYSTEMS
PROJECT APPRAISAL DOCUMENT
MIDDLE EAST AND NORTH AFRICA
MNSSD
Date: May 20, 2010 Team Leader: Pier Francesco Mantovani Acting Country Director: Françoise Clottes Sectors: Water supply (100%) Sector Manager/Director: Francis Ato Brown Themes: Rural services and infrastructure (80%); Access to urban services and housing (20%) Project ID: P100397 Environmental category: Partial Assessment Lending Instrument: Specific Investment Loan Joint IFC: Joint Level:
Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:
For Loans/Credits/Others: Total Bank financing (US$m.): 175.00 Proposed terms: US dollar denominated IBRD commitment linked flexible loan with a variable spread and a maturity of 30 years including a 5 year grace period with level repayments. Financing Plan (US$m) Source Local Foreign Total Borrower 41.00 0.00 41.00 IBRD 0.00 175.00 175.00 Total: 41.00 175.00 216.00 Borrower: Office National de l'Eau Potable (ONEP), Rabat, Morocco With a guarantee by the Government of Morocco Responsible Agency: Office National de l'Eau Potable (ONEP) Station de Traitement Avenue Mohamed Belhassan El Ouazzani Rabat , Morocco Tel: (212-537) 650-695 Fax: (212-537) 759-106
Estimated disbursements (Bank FY/US$m) FY 2010 2011 2012 2013 2014 2015 Annual 0.00 14.00 56.00 54.00 43.00 8.00 Cumulative 0.00 14.00 70.00 124.00 167.00 175.00 Project implementation period: Start August 2, 2010 End: December 31, 2015 Expected effectiveness date: July 15, 2010 Expected closing date: December 31, 2015
Does the project depart from the CAS in content or other significant respects? [ ]Yes [X] No Ref. PAD I.C. Does the project require any exceptions from Bank policies? Ref. PAD IV.G. [ ]Yes [X] No Have these been approved by Bank management? [ ]Yes [ ] No Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No Ref. PAD III.E. Does the project meet the Regional criteria for readiness for implementation? [X]Yes [ ] No Ref. PAD IV.G.
Project development objective Ref. PAD II.C., Technical Annex 3 The project development objective (PDO) is to increase access to potable water supply for selected communities in the project provinces of Nador, Driouch, Safi, Youssoufia, Sidi Bennour, and Errachidia. Project description Ref. PAD II.D., Technical Annex 4
Component 1, estimated at MAD 1,335.8 million before taxes (US$183.8 million), will finance the extension or the renewal of water production systems, regional trunk lines for bulk water transmission, rural conveyance laterals, pump stations and tanks to supply villages, and in- village tanks and public standpipe delivery systems. The component includes three regional subcomponents, relative to projects in the Nador/Driouch, Safi/Youssoufia/Sidi Bennour and Errachidia provinces.
Component 2, estimated at MAD 46 million before taxes (US$6.3 million), will mitigate potential environmental impacts related to increased grey water flows in villages that may opt for HC-service in the Nador, Driouch, Safi, Youssoufia and Sidi Bennour provinces. Additional environmental monitoring and capacity building tasks will be directly funded by ONEP estimated at MAD 19.5 million.
Component 3, estimated at MAD 67.5 million before taxes (US$9.3 million) will provide technical assistance (TA) to ONEP’s project implementation and capacity building (CB) to ONEP’s overall RWS program. Additional capacity building tasks, valued at MAD 17.8 million, will be directly financed by ONEP or by grants mobilized by ONEP.
Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10
Environmental Assessment, OP 4.01 Involuntary Resettlement, OP 4.12
Significant, non-standard conditions, if any, for: Ref. PAD III.F. Board presentation: None
Loan/credit effectiveness: The adoption by the Borrower of a Manual of Operations satisfactory to the Bank will be an Additional Condition of Effectiveness.
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Covenants applicable to project implementation:
1. Institutional arrangements. The Borrower shall implement the Project through its Central Directorate for Universal Access to Potable Water and its provincial and regional directorates in the Project Provinces. Said Central Directorate shall be responsible for the overall management, coordination, monitoring and evaluation of Project activities, and procurement; and said provincial and regional offices shall be responsible, within the areas under their jurisdiction and with the support of the Central Directorate, for the technical, social and environmental studies, community mobilization activities, procurement, construction and supervision of activities contracted out to private sector entities. To this end, the Borrower shall maintain the Central Directorate for Universal Access to Potable Water and its provincial and regional offices in the Project Provinces under the management of qualified managers, staffed with competent personnel, and provided with adequate resources.
2. The Borrower shall take all necessary measures to implement the Project in accordance with the Manual of Operations. The Borrower shall not amend, suspend, abrogate, repeal or waive any provision of the Manual of Operations without the prior approval of the Bank.
3. Agreements with Rural Municipalities. Prior to executing any works contract to supply potable water to a rural community in any of the Project Provinces, the Borrower shall ensure that a written agreement has been executed with the relevant CR which sets forth the level of service required; the financial contribution of the CR to the construction costs of the production, transport and supply works, associated storage tanks and public standpipes, and, for communities requiring individual household connection service, the grey water management systems or collection network, as the case may be; the responsibilities for operation and maintenance of the infrastructure and service delivery; and the commitment from the relevant CR to make the required land available to the Borrower, and the conditions for the acquisition of such land, as necessary.
4. The Borrower shall exercise its rights under the agreements with the Rural Municipalities referred to in paragraph 57 above in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan. The Borrower shall not assign, amend, abrogate or waive any of said agreements or any of its provisions if such assignment, amendment, abrogation or waiver shall affect the implementation of the Project or the achievement of its objectives.
5. Anti-Corruption. The Borrower shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines.
6. Safeguards. The Borrower shall: (i) ensure that the Project is implemented in accordance with the ESMP and the LAF; (ii) not amend, suspend, abrogate, repeal or waive any provision of the ESMP, or of the LAF, without the prior approval of the Bank; and (ii) ensure that adequate information on the implementation of the ESMP and the LAF is suitably included in the Reports referred to in Paragraph 40.
7. Mid-Term Review. The Borrower shall: (a) prepare, under terms of reference agreed with the Bank, and furnish to the Bank,
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about thirty six (36) months after the Effective Date, a report on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (b) review with the Bank, about thirty eight (38) months after the Effective Date, or such later date as the Bank shall request, the report referred to in sub-paragraph (a) of this paragraph 61, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank’s views on the matter.
8. Financial Covenant. For each fiscal year throughout the implementation of the Project, the Borrower undertakes that its estimated Net Revenues shall be at least 1.2 times the estimated Principal Debt Service Requirements of the Borrower in each such fiscal year on the Debt of the Borrower.
9. Whenever for the purposes of this covenant it shall be necessary to value, in terms of the currency of the Guarantor, Debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such Debt; or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank.
10. In the event that the Borrower does not maintain the above 1.2 ratio, the Borrower, after consultation with the Bank, shall take all necessary measures agreed upon with the Guarantor to maintain such ratio.
11. For the purpose of the above covenant: (a) “Debt” means any indebtedness of the Borrower (i) maturing by its terms more than one year after the date on which it is originally incurred, and (ii) being deemed to be incurred under a loan contractor agreement or other instrument providing for such debtor for the modification of its terms of payment on the date of such contract, agreement or instrument. (b) “Net Non-Operating Income” means the difference between: (i) revenues from all sources other than those related to operations such as revenues from financial placements; and (ii) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (i) above and financial investments. (c) “Net Revenues” means the difference between: (i) the sum of revenues from all sources related to operations and Net Non-Operating Income, but excluding operations carried out on behalf of the Guarantor, internal works to be depreciated and bad debts to be written off; and (ii) the sum of all expenses related to operations including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on Debt. (d) “Principal Debt Service Requirements” means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, Debt.
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I. STRATEGIC CONTEXT AND RATIONALE
A. Country and sector issues
1. Social protection, poverty reduction and human development as priorities. Morocco’s social indicators are gradually improving. In 2007, about 9% of Morocco’s population was below the poverty line, compared to 19% in 1999. Poverty continues to disproportionately affect Morocco’s vast rural population1: Indeed more than two-thirds of the poor live in rural areas, although the share in urban areas is rising under the effect of urban migration. Urban and rural poverty and exclusion are among top targets of the government of Morocco (GOM). Launched in 2005, the National Initiative for Human Development (INDH) applies community-based approaches to improve access to services and opportunity in 600 of Morocco’s poorest rural and urban communities.
2. Early efforts at developing rural water supply (1995-2004): Although Morocco features one of the highest rates of rural population in MENA (42%), access to potable water in rural areas has long been neglected. Due to the limited financial and technical capacities of rural local governments - or Communes Rurales (CR)- the average access rate to potable water supply in rural areas was only 14% in 1995. GOM launched a first rural water supply (RWS) program in 1995, known as PAGER2. Its implementation was shared by the General Directorate of Hydraulics – Direction Générale de l’Hydraulique (DGH), and the National Potable Water Board – Office National de l’Eau Potable (ONEP). DGH would build standalone groundwater- fed systems to be managed by Water Users Associations (WUA), whereas ONEP, as the national utility producing potable water for most of Morocco’s urban demands3, would lay lateral pipelines to connect villages located along its regional urban potable water trunk pipelines. Through installation of public standpipes (SP) in thousands of villages, PAGER successfully raised RWS access rates from 14% in 1995 to 61% by the end of 2004, with unquestionable public health, education and gender benefits.
3. Accelerating ONEP’s “piped” approach to RWS (2004 to date): Since January 2004, the program for Universal Access to Potable Water – Programme de Généralisation de l’Eau Potable (GEP) has replaced PAGER, and ONEP is the main rural water supply actor. The rationale has been to accelerate RWS coverage to exceed 90% access by 2007, by scaling-up ONEP’s “piped” RWS approach, limiting dependence on locally unreliable groundwater resources, and essentially forgoing governmental budget support, and increasing instead cross- subsidies and surcharges from ONEP’s urban water sales. Like PAGER, GEP has until today focused on developing RWS access through SP service and includes some measures for hygiene promotion and support to households for grey water disposal.
4. Impressive RWS access achievements, underlain by sustainability concerns. As of December 2008, GEP projects, whether completed or on-going, had accrued an 87% access rate
1 At 42%, Morocco features one of the highest ratios of rural vs. total population in the MENA region. 2 Programme d’Approvisionnement Groupe en Eau Potable des Populations Rurales (PAGER) 3 ONEP holds a de facto monopoly on potable water production in Morocco, selling water in bulk to municipal distribution utilities, and ensuring retail distribution in about 500 medium to small urban centers. ONEP’s mission was substantially broadened in 2004, with, in addition to the exclusive RWS mandate, the responsibility to develop sanitation in the urban centers it supplies water to.
1 nationwide, and GEP was well on its way to reaching its 90% target. Despite such impressive progress, PAGER evaluations have noted some shortcomings, including: (a) SP-service does not correspond to the demand of rural communities which would rather benefit from household connections (HC)4. SP-service seems to only satisfy the needs of the 20% poorest part of the population that has no access to proximity wells or other traditional sources, as corroborated by the low consumptions5; (b) a limited and inconsistent choice of SP management models, including water users associations (WUA) promoted by DGH, and individual stand-pipe supervisors – gardiens-gérants (GG) promoted by ONEP ; (c) inadequate post-construction support to WUAs for borehole pump operation and maintenance (O&M); (d) insufficient attention to greywater management and hygiene promotion and; (e) unequal access coverage between provinces, with those on the Atlantic coast, Rif and “pre-Rif6” Mediterranean mountainous regions lagging behind the national average.
5. Stepping up to the challenge of HC-service. Taking such findings into account, the main challenge faced by GOM in the pursuit of sustainable RWS is the development of viable HC-service. In particular, new HC-service financing and management models are needed that will allow to sustainably meet the growing demand for HC-service and concurrently increase both potable water consumptions and ONEP’s operational revenue. Without HC-service, the uneven ownership and low consumptions achieved by PAGER and GEP investments can be seen as falling short of expected benefits. Furthermore, GEP’s RWS conveyance laterals have been sized in anticipation of HC-service demand flowrates, and very low flows and velocities may create a risk of loss of water quality and of public health impacts. In many provinces furthermore, political pressure for HC-service in CRs chieftowns and surrounding villages is very strong. ONEP needed also to review the financing and management approaches of the HC- service in rural areas which was done in 2009 within the frame of the present project’s preparation.
6. Developing innovative management models. By law, the responsibility for ensuring public services such as water supply and sanitation rests with the Communes Rurales (CR). Taking stock of low CR capacity, ONEP has sought to promote WUAs to take on ad-hoc network financing, development and O&M. Today, based on mixed results of the WUA approach, ONEP plans to roll-out simplified urban water supply solutions for willing Communes Rurales, based on utility-type metered service. The three options include: (i) The development & operation of HC-service by ONEP in the case of douars (villages) bordering existing ONEP urban/small town service perimeters; (ii) the development of small distribution networks by ONEP and outsourcing of multi-village O&M contracts to local private sector, and (iii) the full outsourcing of HC-service development and operations to private operators (upon validation of on-going Jorf El Melha pilot model and clarification of OBA-type subsidy mechanism). Such updating of Morocco’s RWS strategy calls for: (i) effective new partnerships between GOM, CRs, ONEP and local private sector; (ii) affordable and sustainable sharing of capital and operating costs, and (iii) effective rules for prioritization of villages for investment and HC- service provision.
4 National surveys and project evaluation reports estimate that 92% of rural households aspire to a HC. 5 Standpipe uptakes measured on average at 8 liters/hab/day, compared to the targeted 20 liters/hab/day 6 Mountainous areas along the Mediterranean coast
2 7. The need for improved rural sanitation. International experience teaches that the development of HC-service must be conducted in step with drainage and sanitation upgrades. As previously mentioned, under Moroccan law, sanitation service is the responsibility of local governments, which in rural areas feature very low capacity. From lack of any national strategy or support programs, rural sanitation is mostly left to individual household initiatives. As a result, it is estimated that only 40% of rural population has access to an improved form of sanitation, one of the lowest rates in the MENA region. The need for rural sanitation is now being recognized and the DGCL and the Secretariat of Water and Environment – Secrétariat d’Etat chargé de l’Eau et de l’Environnement (SEEE) – engaged, as of 2010, into discussions aiming to develop a first national strategy to that effect. Short of any mandate and resources to tackle rural sanitation needs, ONEP is, as an operator, committed to (i) develop systematic approaches to assess and mitigate potential impacts of RWS HC-service, (ii) assist CR’s initiatives to improve their sanitation and drainage conditions.
B. Rationale for Bank involvement
8. A direct contribution to the CAS/CPS and the MDG objectives. The Bank and GOM elected water as a sectoral entry point for the 2005-2009 Country Assistance Strategy, and developed a CAS “water pillar” aimed at “improving water management and access to water and sanitation services”. Water remains an important focus of the 2010-2013 Country Partnership Strategy (CPS), with renewed commitments to develop equitable, sustainable and affordable WSS service. This water partnership has been underpinned by substantial analytical work and policy dialogue, including investment and development policy lending in support of urban sanitation, RWS, and efficient irrigation programs, as well as of reforms in sector governance, water resources management, irrigation, water supply and sanitation. In supporting a new RWS project in the Safi, Youssoufia, Sidi Bennour, Nador, Driouch and Errachidia provinces, the Bank will contribute to GOM’s RWS objectives in the last most critically underserved Atlantic coast and Rif provinces, as well as in poorer Errachidia province, contributing to water supply MDGs at a national scale, and narrowing the service gap between rural and urban areas.
9. Building on a strong relationship and on-going projects with ONEP. The new operation will help a high-capacity, repeat borrower accelerate and consolidate its RWS mission in support of Morocco’s economic and social development. ONEP has been supported by the Bank since its inception in 1972 and is ranking among the best performing public operators in the region. Approved in 2005 and approaching its midterm review, the on-going Bank-funded Rural Water Supply and Sanitation (RWSS) project is substantially on track to develop RWS access through SP service in the western parts of the Safi and El Jadida provinces. Since 2005 also, ONEP and the Bank have collaborated on the implementation of a GPOBA-funded rural pilot for HC-service development in Jorf el Melha, designing and piloting innovative outsourcing approaches to HC network development and operation by local private entrepreneurs. The new proposed project will build on these on-going projects, and will add value by (i) extending RWS coverage to areas featuring substantial residual access deficits, through the development of dedicated production infrastructure and regional trunk lines7; (ii) pioneering and scaling-up an updated RWS strategy aimed at proactively and systematically addressing HC-service demands,
7 Until now PAGER and GEP have tapped regional trunk lines built for urban water supply needs.
3 based on more structured financing and management options to be offered to villages, and (iii) piloting more effective and integrated approaches to greywater management and rural sanitation as part of HC-service.
10. Helping the overall sustainability of Morocco’s RWS investment and of ONEP. Intrinsically in deficit, the development of RWS projects by ONEP relies on urban-to-rural cross- subsidies. The expansion of ONEP’s mandate to develop capital-intensive and low-return infrastructure in RWS and, as part of the National Sanitation Program, in urban sanitation, is however unfortunately coinciding with a stalling of ONEP’s bulk urban water sales revenue. The overall financial sustainability of ONEP may thus enter a danger zone that won’t be amenable to traditional fixes by bulk tariff or surcharge increases only, due to reduced headroom in urban willingness/capacity to pay. Cross-subsidization of ONEP by urban customers of urban utilities and concessions may also be approaching its limits in terms of equity and distorted incentives8. Bank analytical work and the Water Sector DPL (2008) have identified that solutions should combine more substantial GOM subsidies for “public-good” infrastructure development, enhanced cost-recovery models in RWS, increased operational efficiencies, and adjusted tariff strategies. The new Regional Potable Water Supply Systems (RPWSS) project appraised here offers an opportunity for ONEP, GOM and the Bank to collaborate on updating RWS financing strategies, thus contributing to a more financially sustainable ONEP and RWS subsector.
C. Higher level objectives to which the project contributes
11. The project will contribute to achieving GOM’s objective of increasing access to potable water in lagging urban and rural areas and in so doing improve the living conditions of the beneficiaries. It will also promote social and economic development in rural areas. The project will in particular contribute to the following outcomes:
(a) increase beneficiary participation in educational and economic activities, in particular by reducing the time women and children spend fetching water; (b) reduce prevalence of water-borne diseases, especially in children under five years of age; (c) strengthen social cohesion and foster the emergence of community-based activities; (d) create opportunities for job creation; (e) contribute to improving amenities in rural areas, thereby reducing incentives for rural-urban migration by low income families; and (f) test technical and financial feasibility of rural sanitation systems and help the emergence of grey water and wastewater management policies for rural areas.
8 ONEP’s overall revenue stream currently benefits from i) high urban non-revenue water, and ii) low rural water consumptions.
4 II. PROJECT DESCRIPTION
A. Lending instrument
12. The lending instrument to be used for this project is a Specific Investment Loan (SIL) in Euros and US dollars of USD 175 million equivalent.
B. Project development objective and key indicators
13. The project development objective (PDO) is to increase access to potable water supply for selected local communities in the Nador, Driouch, Safi, Youssoufia, Sidi Bennour and Errachidia provinces.
14. The achievement of the PDO will be monitored through the following indicators: Number of people in villages of project areas with access to potable water through standpipe or HC service, Number (or percentage) of people in villages of project areas served by HC Average volume of water supplied through standpipes Average volume of water supplied through HCs Average volume of water supplied through the Tafilalet trunk line
C. Project components
15. The Project would cover six priority provinces (Nador, Driouch, Safi, Youssoufia, Sidi Bennour and Errachidia and includes three components.
16. Component 1. Water production, conveyance and rural water supply in the Nador, Driouch, Safi, Youssoufia, Sidi Bennour and Errachidia provinces: This infrastructure component is comprised of three independent regional subprojects, or subcomponents, spanning respectively i) the Nador and Driouch provinces, ii) the Safi, Youssoufia and Sidi Bennour provinces, and iii) the Errachidia province. Its cost, with contingencies, is estimated at MAD 1,336.8 million before taxes (US$ 165.4 million).
17. Sub-Component 1.a, for water production, conveyance and rural water supply in the Nador and Driouch provinces, comprises the following works estimated at MAD 483 million before taxes (US$ 59.8 million): Extension of the Nador potable water treatment plant. Doubling of the existing Nador-Midar regional trunk line. Construction of storage tanks, pumping stations and of six rural conveyance laterals connecting the trunk line to approximately 185 villages. Construction of public standpipe delivery systems.
5 18. In addition to providing new access to potable water in the above mentioned 185 villages, this component will allow to meet growing water demands in the Al Aroui urban municipality, in new tourist development areas surrounding the City of Nador, and in CRs already served along the Nador-Midar corridor.
19. It is estimated that thanks to such new RWS facilities, village distribution networks for HC-service will also be installed by ONEP and CRs in about 150 of the newly served 185 villages, outside of the financing scope of the loan.
20. Sub-component 1.b, for water production, conveyance and RWS in the Safi, Youssoufia and Sidi Bennour provinces, comprises the following works estimated at MAD 674 million before taxes (US$83.4 million): Construction of a new potable water treatment plant, drawing raw water from the “Doukkala Haut Service” irrigation canal. Construction of two regional trunk lines, conveying potable water to the southern part of the Sidi Bennour province, and along a central North-South corridor of the Safi and Youssoufia provinces. Construction of storage tanks, pumping stations and rural conveyance laterals connecting the trunk lines to about 800 villages. Construction of public standpipe delivery systems.
21. This component will provide new access to potable water and meet demand in approximately 800 villages. It will also enable the further development by ONEP and the CRs, outside of the financing scope of the loan, of distribution networks for HC-service in an estimated 350 to 400 of these villages.
22. Sub-component 1.c, for rehabilitation and expansion of water production and conveyance capacity for urban and rural water supply in the Errachidia province comprises the following works, estimated at MAD 179.8 million before taxes (US$22.2 million): Construction of groundwater wells to increase supply for the Tafilalet Valley regional trunk line. Upgrade and renewal of the Tafilalet regional trunk line, with attached tanks and pumping stations.
23. This component will increase capacity and restore reliability of operations for the Tafilalet trunk line9, while allowing to satisfy growing demands in the towns of Errachidia and Erfoud and in numerous other urban and rural centers and tourist resorts in the Tafilalet valley. The component does not include the development of new RWS conveyance laterals, nor of SP or HC systems, to supply new villages.
24. Component 2. Mitigation of environmental impacts – Grey water management: This component, estimated at MAD 46 million before taxes10 (US$6.03 million) will help mitigate
9 Built in the early 1980s with IBRD financing. 10 MAD 36 million will finance the works and MAD 10 million will be dedicated to finance the individual sanitation pilots
6 potential environmental impacts related to increased grey water flows in villages that may opt for HC-service in the Nador, Driouch, Safi, Youssoufia and Sidi Bennour provinces.
25. In the absence of available alternate funding, it was agreed that the provision included for implementing adequate grey water management solutions (10 + 36 = MAD 46 million) will be included in the IRBD Loan. However, if ONEP were to succeed in mobilizing grants or subsidies for such activities, the Project will remain flexible and will allow for a reallocation of funds, provided it doesn’t affect the implementation of this Component as per the agreed schedule.
26. As part of this component the Project will pilot and promote the development of a market for the installation of improved on-site sanitation facilities. A pilot would first be implemented in the Nador and Driouch provinces for a year and subsequently redeployed in Safi, Youssoufia and Sidi Bennour. The pilot activities will include: The construction by ONEP, in partnership with Office de Formation Professionnelle et de Promotion du Travail (OFPPT - Professional Training and Employment Promotion Board) of showrooms to demonstrate full-scale models of modern and compliant on-site sanitation facilities and technologies. These showrooms will also be used as training facilities to introduce domestic private sector entrepreneurs to the design, materials and installation techniques of improved on-site sanitation techniques. The organization by ONEP of targeted communication and advertising campaigns, promoting by press, airwaves and special events the advantages, availability and affordability of improved on-site sanitation systems. Technical assistance to design, coordinate and supervise implementation of the pilots, as devised in the Environmental and Social Management Plan (ESMP).
27. In villages opting for HC-service where habitat density and soil conditions may not allow safe grey water disposal by traditional drainage nor by on-site sanitation systems, the Project has included a provision of 36 million DH to allow for the construction of small grey water collection networks. This provision is expected to be matched, on a village by village basis, by capital contributions from the CRs, as currently practiced under the National Sanitation Program. It is estimated that such funding arrangements should allow establishing greywater collection and disposal systems in up to 20 villages. The feasibility studies and design for these simplified networks will be provided the consultant in charge of the Technical Assistance to the project. Their simplified operations and maintenance will be entrusted to the water distribution operator.
28. The remaining monitoring and capacity building provisions of the Environmental and Social Monitoring Plan (ESMP) will also pertain to this component, however funded and implemented as part of ONEP current operations. Estimated at MAD 19.5 million, these activities include: i) Development or update of environmental management manuals, ii) environmental audits of new water treatment plant operations, iii) environmental management capacity building workshops, technical assistance to ESMP implementation and reporting, and iv) surface and groundwater quality monitoring program.
7 29. Component 3. Implementation Support and Capacity Building. This component, estimated at MAD 67.5 million before taxes (US$8.4 million), will provide technical assistance (TA) to ONEP’s project implementation and capacity building (CB) to ONEP’s overall RWS program. Additional capacity building tasks pertaining to this component have been identified and valued at MAD 17.8 million. They will be implemented subject to the mobilization by ONEP of the corresponding funds.
30. Bank-funded resident TA for project implementation is to: i) enable efficient project management & monitoring, ii) strengthen participatory approaches to service provision including helping communities opt and organize for either SP-service or HC-service, iii) facilitate effective integration of hygiene and wastewater management into the provision of improved water supply services, iv) screen and specify the need for improved greywater management solutions in case of HC-service selection. This will cover all aspects related to the implementation of technical studies of collection and treatment solutions for the pilot projects, financial, environmental and social monitoring and evaluation, including customer surveys. Separate specialized TA will be funded to increase ONEP’s capacity to design and implement outsourcing contracts for HC- service operations and maintenance by small domestic private sector providers in project areas. Other capacity building needs identified by ONEP include i) the development of feasibility studies and designs for village HC distribution systems and eventual greywater drainage systems, and ii) the implementation of pilots for the promotion of improved on-site sanitation systems in Nador, Driouch, Safi, Youssoufia and Sidi Bennour. Other ONEP-funded ESMP tasks will also be implemented by ONEP under this component.
31. Under this component ONEP will also seek to increase its capacity to effectively manage the overall GEP program and to improve the performance of RWS SP-service and HC- service operations. Specific activities identified by ONEP, estimated at MAD 17.8 million include i) new information systems to track RWS project implementation and operation, ii) staff training programs, iii) technology watch activities and study tours, iv) the upgrade of ONEP’s customer service information systems to accommodate specific rural HC-service needs, and v) the implementation of a RWS cost-recovery study.
D. Lessons learned and reflected in the project design
32. The new project design benefits from critical lessons learned in the on-going RWS project in the Safi and El Jadida provinces as well as from the conclusions of the study of the Water Sector Funding Mechanisms and Flows implemented by the World bank in 2008, including: Recent experience has shown uneven interest of villages for ONEP’s public standpipe service, operated by “Gardiens Gerants” (GG). Also, Water User Associations are losing momentum versus the alternate option where ONEP would pre-finance, construct and manage the entire distribution systems at a more attractive tariff, as this already happens in some provinces. Project design must therefore proactively overcome indeterminations, inconsistencies and weaknesses in the institutional framework which prevent meeting rural demands for HC-service.
8 Project implementation TA should be contracted as early as possible, so as to engage the project on sound and consistent methodological basis. Similarly, preparation of outsourcing solutions for the provision of HC-service in the project areas should start as soon as demand assessments are completed, so as to allow construction and operation of HC-service during the life of the project.
The support of the Government to the development of individual connections in rural areas was increased.
E. Alternatives considered and reasons for rejection
33. The possibility of including this project into the on-going Rural Water Supply and Sanitation Project through an additional financing mechanism was considered and rejected in view of the amount of the loan which far exceeds the limits authorized for such an extension.
34. Development of groundwater-based RWS systems, as a cheaper alternative to piped- RWS was examined but was abandoned in view of the poor capacity and quality of the underground water resources in the project areas.
35. The original project request by ONEP included a fourth regional system, for the production and conveyance of potable water for urban and rural needs in the Khemisset province. This component was not retained in order to limit the physical dispersion of project components.
III. IMPLEMENTATION
A. Institutional and implementation arrangements
36. The project will be implemented by ONEP, with the support of its regional and provincial offices. IBRD will enter into a Loan Agreement with ONEP and the Kingdom of Morocco will guarantee repayment of the loan.
37. ONEP is Morocco’s most important WSS sector actor, an autonomous public enterprise responsible for water supply planning, bulk production of potable water, water distribution in over 500 medium to small urban centers, development of RWS through GEP, and for the development of sanitation in about 200 urban centers. ONEP already has experience with Bank- financed projects. Implementation would leverage existing ONEP structures and available staff will be strengthened by the TA component. Establishment of a special implementation unit is therefore not planned, and project implementation will in fact reinforce ONEP’s effective ongoing decentralization and outsourcing of its services.
38. ONEP’s Development and Coordination Division of the Department for Access to Potable Water (DEP/D) will be responsible for overall project coordination. ONEP’s provincial and regional directions will oversee, each one for the activities they are in charge of, the technical, social and environmental studies, community mobilization, and the construction and
9 supervision of works outsourced to consulting firms and other private sector companies. The regional and provincial offices will also be responsible for issuing the call for bids and issuing contracts, with the support of the central departments. Such implementation arrangements are tested as part of the on-going RWSS Project.
39. Rural communes, - Communes Rurales (CR) - will enter into agreements with ONEP that will define their contribution in the financing of lateral mains construction costs (15 %), the water distribution networks (50 %) and in any wastewater collection network (50 %), the responsibilities for infrastructure O&M and service delivery (i.e., Gardien gérant, WUA, private operator, or ONEP) as well as tariffs charged to water users. The Ministry of Interior’s Directions Générale des Collectivités Locales (DGCL) will see that concerned CR respect their commitments towards ONEP under the project as per the terms of the agreements signed by the said CR with ONEP.
B. Monitoring and evaluation of outcomes/results
40. ONEP will have overall responsibility for collecting data on the project. It will submit a semi-annual report to the Bank covering the status of implementation, outputs, outcomes, financial statements, procurement plans, environmental and social issues, and actions taken to ensure satisfactory project implementation. Financial, technical and procurement data will be collected by the relevant ONEP departments, in collaboration, as needed, with the project coordinator.
41. Semi-annual reports will be shared among ONEP managers to facilitate effective project management, reformulation of project strategy if needed, and lesson-sharing.
42. In addition, ONEP/DEP prepares an annual report on stand-pipe status throughout the country. This report will be communicated to the Bank’s missions during supervision.
43. An annual report will be prepared to document the project activities with regards to the environmental and social safeguards, as per the project Environmental and Social Management Plan (ESMP) and Land Acquisition Framework (LAF).
44. Lastly, additional indicators will be made available to Bank supervision, such as routinely monitored by ONEP’s Provincial Directions (DP), and will allow an assessment of the evolution of operational efficiencies in project areas. Such indicators include:
Linear water loss index Network efficiency ratio Water invoice collection ratio
45. A participatory mid-term review and a final evaluation will be conducted. These evaluations will be preceded by various surveys and audits regarding key aspects of the project, such as :
Customer satisfaction surveys on beneficiary samples (one before the mid-term review and one before the end of the project);
10 An environmental audit of each water treatment plant to be carried out one year after the completion of each WTP construction.
C. Sustainability
46. ONEP has demonstrated a strong commitment to achieving the goals of the project, as this will directly help ONEP reach GOM’s rural water access targets. ONEP fully integrates the imperative of sustainable infrastructure and service development, and has accordingly committed to better satisfy rural demands for HC-service. Project preparation has been put to use to develop more systematic approaches to sustainable HC-service implementation, including participatory and financing approaches, outsourcing of village distribution network installation and operation, and screening of greywater management needs and solutions.
47. In parallel, GOM has committed to support HC-service development, by ensuring that it does not further stress the long-term financial viability of the RWS sub-sector, as already financed by ONEP for SP-service.
48. In October 2009, GOM endorsed adjusted financing rules for HC-service development, consistent with making a nationwide transition from SP-service to HC-service essentially cost- neutral for ONEP. Under such rules, beneficiaries are required to contribute MAD 3,500 for each individual household connection (as opposed to the pre-existing promotional rate of MAD 2,500), and CRs are required to contribute 50% of distribution system capital costs (previously 30%). The new level of contribution was derived from willingness to pay surveys conducted in 2005, which conservatively suggested that at least 60% of households would at the time have paid MAD 3,500 for HC service with credit facilities provided by ONEP.
49. Although these rules may result in different levels of distribution cost-recovery for ONEP depending on the habitat density and the soil conditions of individual villages, the assessment of nationwide HC-service development costs (see Annex 9) extrapolated from actual development costs incurred or calculated for 135 projects across Morocco, suggest that the MAD 3,500 household contribution and the 50% local government contribution allow for overall cost- recovery of distribution capital and operating cost for ONEP on aggregate.
50. Sustainability of the project’s objectives therefore rests on the effective implementation of the following design provisions: (a) Offering of more viable and better differentiated service alternatives (SP-service or HC- service, community-operated or professional operator-operated) to achieve increased ownership and usage of RWS systems by beneficiary villages.
(b) Steady development of HC-service in order to increase rural water demands and ensure that flow velocities in conveyance lines are consistent with maintaining good water quality and to guarantee the cost-effectiveness of the project.
(c) Availability of adequate capacity for sustainable SP-service or HC-service operations and maintenance. While GG-based SP-service is established as a reliable practice across the country, sustainable solutions for systematic development of HC-service need to be better
11 developed, including for project areas. For communities opting for HC-service managed by WUAs, ONEP will have to provide technical support for WUAs to be able to operate and maintain their systems. A vast majority of communities is however expected to sign- up for delegation of HC-service to ONEP, who in turn will recruit domestic private sector operators to outsource the installation and operation of distribution networks in efficiently sized clusters of villages. Specific TA is planned to facilitate systematic outsourcing. The sole-source delegation of service by CRs to ONEP, while potentially inconsistent with Morocco’s service delegation law (Law 05-54) which calls for open tendering of public service delegation, is in practice endorsed by GOM. The perceived legal inconsistency does not affect project sustainability, as further discussed in the “risks” section below and in Annex 1.
(d) Satisfactory mitigation and management of issues related to greywater collection and disposal. The project pilots appropriate improved on-site sanitation solutions, as well as low cost collection networks, which are expected to provide valuable implementation and operation experience for the development of a National Rural Sanitation Strategy.
(e) Securing ONEP’s capacity to fulfill its operational and financial commitments: a. The project will promote sustainability by enforcing per capita cost thresholds for ONEP-borne contribution to the water conveyance and water distribution investments. In parallel, ONEP will continue to increase devolution of operations and maintenance responsibilities to domestic private sector operators, in particular for conveyance laterals and village distribution networks, which has already proven to be an effective way to reduce costs and improve affordability of services. b. The development of metered HC-service, with the application of urban-service derived block tariffs will substantially improve ONEP RWS revenue compared to SP-service, and is thus seen as strategic to enable better overall RWS service cost recovery over time. The tariff structure in place for HC-service, which currently includes a first block social tariff of 2.37 DH/m3 (0.3 USD) for the first 6 m3/month, will however need to be revised to enhance cost recovery. Cross-subsidies between urban and rural areas have reached their limits, and the Strategic Financial Planning model to be developed by ONEP will be key to ensuring ONEP’s long-term financial sustainability while making progress towards reaching GOM’s target for access to potable water. Policy dialog on improving sector financing has been ongoing between GOM and the Bank through ESW and DPL implementation, and through project preparation. It is expected to continue during project implementation, as the resolution by GOM of tariff reform and VAT reform issues clearly exceeds the scope of project preparation. The issues may be assisted through a specific assessment of rural water supply tariff strategies, and facilitated by a second Water DPL.
D. Critical risks and possible controversial aspects
51. The review of available designs, extensive site visits, and knowledge of the borrower, led to assess the technical part of the proposed operation as featuring low levels of risk.
12 52. Overcoming the uncertainties related to innovative development and operation of HC- service, and achieving sustainable operations and maintenance with well managed greywater flows, represent the main risks of the project. If the project does not promote rapid and sustainable progress in implementation of HC-service, the service demand of many villages will remain unsatisfied, and frustration may build-up among users, village leaders and local politicians. More importantly, RWS investments may then remain overdesigned and underutilized, calling for specific mitigation of water quality degradation risks associated with high water residence time in conveyance systems.
53. Risks that may affect achievement of the project’s PDO and each component’s results are summarized below, together with measures identified for minimizing these risks.
Risk Risk Mitigation Measures Risk Rating with Mitigation
Risk to Project Development Objectives
GOM’s commitment to support the long- New financing rules for HC-service were Low term financial viability of the RWS sub- adopted by GOM during project sector, through relevant subsidy, tariff preparation, limiting ONEP exposure. adjustments or other measures does not materialize. Loan Agreement will further include financial covenants for ONEP. Sector policy dialogue and a potential new Water DPL are to address sector financing and tariff reform needs. Conditions for access to HC inadequate vs Capacity/willingness to pay surveys Moderate households willingness to pay conducted in 2005 were used by GOM to establish new HC-service financing rules, and set an affordable price. TA team will conduct village needs/demand, social assessment and willingness to pay surveys at project start. Application of OBA-type subsidies, while tested elsewhere in Morocco, do not seem justified in the project. Delays incurred in collecting household Lessons learned for contribution collection Moderate contributions, and CR contributions to SP by the on-going RWSS project, will be service and HC service applied.
Inadequate tariff policies threatening the A financial covenant is to be included in Moderate sustainability of the operation and the Loan Agreement to ensure ONEP’s maintenance of treatment and conveyance ability to generate sufficient cash to cover infrastructures. its debt service payments to meet its obligations under the project. The Contrat Programme between ONEP and GOM
13 further provides indicative assurance that bulk and tariffs will be adjusted. Risk to component results
Effectiveness of measures to manage For rural/small town sanitation, ONEP Moderate increased greywater flows upon and its consultants will benefit from establishment of HC-service. Ability to specialized TA, and from study tours and design and implement innovative on-site or exchange of information conducted during small network drainage systems. preparation (with Brazilian practitioners).
ONEP’s experience with the outsourcing of Expert TA will be dedicated to tailoring Moderate the development and operation of RWS and management of the “HC-service HC-service to local entrepreneurs is outsourcing” contracts. limited.
Unsustainability of outsourced HC-service ONEP’s experience with OBA-type Moderate due to inadequacy of water pricing (bulk operating subsidy mechanisms may allow tariff applied by ONEP to private operator, to amend dysfunctional contracts. vs. retail tariffs applied by private operator to users) and other reasons.
Potential inconsistency between the sole- Practice is endorsed by GOM. Low sourcing of water supply service delegation Inconsistency is considered benign by all by CRs to ONEP and competitive bidding stakeholders, without prejudice to any provisions of Service Delegation law 05-54 party, and is not expected to jeopardize the establishment of service by ONEP. Overall risk Moderate
E. Loan/credit conditions and covenants
54. The project will include the following conditions and covenants:
55. Effectiveness. The adoption by the Borrower of an Operations Manual satisfactory to the Bank will be an Additional Condition of Effectiveness.
56. Institutional arrangements. The Borrower shall implement the Project through its Central Directorate for Universal Access to Potable Water and its provincial and regional directorates in the Project Provinces. Said Central Directorate shall be responsible for the overall management, coordination, monitoring and evaluation of Project activities, and procurement; and said provincial and regional offices shall be responsible, within the areas under their jurisdiction and with the support of the Central Directorate, for the technical, social and environmental studies, community mobilization activities, procurement, construction and supervision of activities contracted out to private sector entities. To this end, the Borrower shall maintain the Central Directorate for Universal Access to Potable Water and its provincial and regional offices in the Project Provinces under the management of qualified managers, staffed with competent personnel, and provided with adequate resources.
14 57. The Borrower shall take all necessary measures to implement the Project in accordance with the Manual of Operations. The Borrower shall not amend, suspend, abrogate, repeal or waive any provision of the Manual of Operations without the prior approval of the Bank.
58. Agreements with Rural Municipalities. Prior to executing any works contract to supply potable water to a rural community in any of the Project Provinces, the Borrower shall ensure that a written agreement has been executed with the relevant CR which sets forth the level of service required; the financial contribution of the CR to the construction costs of the production, transport and supply works, associated storage tanks and public standpipes, and, for communities requiring individual household connection service, the grey water management systems or collection network, as the case may be; the responsibilities for operation and maintenance of the infrastructure and service delivery; and the commitment from the relevant CR to make the required land available to the Borrower, and the conditions for the acquisition of such land, as necessary.
59. The Borrower shall exercise its rights under the agreements with the Rural Municipalities referred to in paragraph 57 above in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan. The Borrower shall not assign, amend, abrogate or waive any of said agreements or any of its provisions if such assignment, amendment, abrogation or waiver shall affect the implementation of the Project or the achievement of its objectives.
60. Anti-Corruption. The Borrower shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines.
61. Safeguards. The Borrower shall: (i) ensure that the Project is implemented in accordance with the ESMP and the LAF; (ii) not amend, suspend, abrogate, repeal or waive any provision of the ESMP, or of the LAF, without the prior approval of the Bank; and (ii) ensure that adequate information on the implementation of the ESMP and the LAF is suitably included in the Reports referred to in Paragraph 40.
62. Mid-Term Review. The Borrower shall: (a) prepare, under terms of reference agreed with the Bank, and furnish to the Bank, about thirty six (36) months after the Effective Date, a report on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (b) review with the Bank, about thirty eight (38) months after the Effective Date, or such later date as the Bank shall request, the report referred to in sub-paragraph (a) of this paragraph 61, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank’s views on the matter.
63. Financial Covenant. For each fiscal year throughout the implementation of the Project, the Borrower undertakes that its estimated Net Revenues shall be at least 1.2 times the estimated
15 Principal Debt Service Requirements of the Borrower in each such fiscal year on the Debt of the Borrower.
64. Whenever for the purposes of this covenant it shall be necessary to value, in terms of the currency of the Guarantor, Debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such Debt; or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank.
65. In the event that the Borrower does not maintain the above 1.2 ratio, the Borrower, after consultation with the Bank, shall take all necessary measures agreed upon with the Guarantor to maintain such ratio.
66. For the purpose of the above covenant:
(a) “Debt” means any indebtedness of the Borrower (i) maturing by its terms more than one year after the date on which it is originally incurred, and (ii) being deemed to be incurred under a loan contractor agreement or other instrument providing for such debtor for the modification of its terms of payment on the date of such contract, agreement or instrument.
(b) “Net Non-Operating Income” means the difference between: (i) revenues from all sources other than those related to operations such as revenues from financial placements; and (ii) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (i) above and financial investments.
(c) “Net Revenues” means the difference between: (i) the sum of revenues from all sources related to operations and Net Non-Operating Income, but excluding operations carried out on behalf of the Guarantor, internal works to be depreciated and bad debts to be written off; and (ii) the sum of all expenses related to operations including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on Debt.
(d) “Principal Debt Service Requirements” means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, Debt.
16
IV. APPRAISAL SUMMARY11
A. Economic and financial analyses
Economic Analysis
67. An economic analysis has been carried out for the three subprojects in the provinces of Nador/Driouch, Safi/Youssoufia/Sidi Bennour and Errachidia (subcomponents 1.a, 1.b, and 1.c). Projects benefits have been estimated based on the respective estimated economic benefits derived by users of Household Connections (HC) and public Stand Pipes (SP) in rural and urban areas. The Household economic benefits were estimated based on recent data on demand for the different types of services and information on coping strategies in the absence of reliable piped water supply. The costs included in the analysis include (a) costs of construction, equipment, feasibility studies and works supervision of the regional water supply schemes to be financed under the project; (b) costs of local distribution networks and Household Connections, and (c) costs of operation and maintenance based on different scenarios of expansion of Household Connections.
68. The Economic Rates of Return (ERR) of the sub-projects are 13.92% for the Nador/Driouch sub-project, 13.37% for the Safi/Youssoufia/Sidi Bennour sub-project, and 13.47% for the Errachidia sub-project. The total Net Present Value is estimated at US$70,97 million with a discount rate of 10%. The total NPV varies from US$ 138 million with an actualization rate of 8% to US$ 25,42 million with an actualization rate of 12%. The three sub- project’s ERRs and NPVs have been estimated for various scenarios of growth of SP and HC coverage. The results show a significant positive impact of the increase in HC coverage on the economic benefits derived from the project.
Financial Analysis
69. Overall Financial Viability. Since 2004, ONEP has been able to deliver on its new mandates in rural water supply and urban sanitation, which have brought ONEP’s annual CAPEX to levels higher than its annual turnover. The self-financing ratio of investments decreased steadily from 25 percent to the current 16 percent, which is still in line with the target set in the Financing Agreement of Ln. 7351-MA. The commercial performances (billing and collection) are improving, particularly for the water distribution activities. However, it is difficult to assess what has been the recent impact of sanitation and RWS activities. For the time being, the operational deficits generated by rural water and sanitation activities are limited. Their major impact results from the financing of investment expenditures, for which ONEP has to contribute substantially (70 percent).
11 Since appraisal (October 2009) the administrative perimeters of several provinces of Morocco have been modified. Although unchanged in scope, appraised Project activities originally encompassing the four provinces of Nador, Safi, El Jadida and Errachidia, now span six provinces, i.e. Nador, Driouch, Safi, Youssoufia, Sidi Bennour and Errachidia.
17 70. On the other hand, the collection of the contributions of communes to RWS and sanitation investments, which used to be problematic, has substantially improved with the adoption of specific procedures within the National Budget and particularly the establishment of a Designated Account devoted to the implementation of the National Sanitation Program (Programme national d’assainissement, PNA).
71. ONEP’s financial model (see Appendix 1 to Annex 9) shows that the investment program contemplated until 2017 is feasible if ONEP maintains current trends of staff productivity and commercial performance and if the funding of investments includes a greater degree of subsidization from the budget. In addition, it is essential that the current fiscal issues related to Value Added Tax (VAT), which may jeopardize ONEP’s potential of cash generation are rapidly settled.
72. Cost Recovery of Rural Water Services. Cost recovery rules applicable to rural water supply were defined at the start-up of the PAGER, when douars were generally close to the trunk lines that ONEP had already developed to supply urban centers. The rules became less relevant as: (i) ONEP now must serve more remote CRs and douars, which require developing entirely new trunk lines; (ii) the rural population demands HC, not standpipes; and (iii) CRs and people increasingly find that ONEP’s management and development of distribution networks represent the most convenient and economic option, when compared to the efforts and costs associated with the establishment of WUA.
73. ONEP acknowledged these shortcomings and halted all developments of distribution networks and connections in rural areas in January 2009, pending a review of the cost recovery rules for distribution investments, which are set at the discretion of ONEP (water tariffs and surcharges and recovery rules for production and conveyance investments are regulated). The review showed that (i) investing in rural water distribution would generate substantial financial losses for ONEP at the current level of contributions of households and CR; and that (ii) only 80 percent of the rural population could be served by HC at an acceptable cost.
74. In consultation with DGCL, ONEP decided accordingly (i) to raise the household contribution for HC to DH 3,500 and the CR contribution to 50 percent of the distribution costs: and (ii) to set an eligibility threshold of DH 4,000 per capita for the distribution programs. ONEP then resumed the construction of HC and distribution networks. It was agreed further that ONEP would carry out a comprehensive study of the cost recovery of rural water, together with the other actors of the sub-sector, in order to adapt rules and tariffs to the new conditions of development of rural water services.
75. Financial Impact of Project Activities. As expected, the financial rate of return of the project components substantially differs from the results of the economic analysis. The FIRR is negative for Nador/Driouch and Safi/Youssoufia/Sidi Bennour (see Table 3 of Annex 9) and the gap between the FIRR and the EIRR grows with the proportion of rural consumers in the project beneficiaries.
76. Sensitivity Analysis. Alternative financing scenarios have been explored to assess the impact of an additional budget subsidy of 30 percent of total investment costs and of the full compensation of the VAT on investments. These scenarios (see Table 4 of Annex 9) bring the
18 FIRR of the Nador/Driouch and Errachidia components to values close to the weighted average cost of capital (WACC). The FIRR of the Safi/Youssoufia/Sidi Bennour component, remains, however, negative under all scenarios and would reach equilibrium only if the additional budget subsidy were set at 60 percent.
77. Financial Covenant. The above findings show that the financial feasibility of the project is contingent on the overall viability of ONEP, i.e. the company’s capacity to generate enough cash to finance loss-making activities. It was agreed at negotiations that ONEP shall maintain a ratio of net revenues (defined as the annual operating revenues plus the net non operating income (excluding bad debts to be written off) minus cash operating expenditures (excluding interest charges)) to the annual debt service requirements) higher than 1.2.
B. Technical
78. Selection of project area. RWS access rates in the Safi, Youssoufia, Sidi Bennour, Driouch provinces and in the hinterland of the Nador province, are among the lowest in Morocco. Selection of project areas by ONEP in those provinces gives priority to the rural districts yet untouched by previous ONEP projects. The strengthening of saturated and corroded water systems in the Errachidia province responds to an urgent need to restore reliability and expand capacity of water supply for growing urban, rural and touristic demands.
79. Water production and conveyance. The technical solution common to the three components includes the additional potable water production capacity from surface water or groundwater sources, the installation or expansion of regional trunk lines, and the construction of a web of lateral mains from regional lines for RWS. This “large web” RWS approach is justified by the lack of local quality groundwater resources in the project areas, the availability of impounded water in dams or canals, and by the objective of limiting the number of water sources to better ensure the sustainability and quality of the water supply.
80. Water distribution and grey water management. An increasing share of the rural population demands higher service levels, such as provided by HCs. In order to protect public health and comply with environmental safeguards, adequate grey water drainage will be an eligibility criterion for households requesting individual connections. In most cases, traditional on-site household level drainage solutions will be sufficient. Where population density is high and geological conditions do not favor on-site household solutions, small bore or simplified sewerage systems would be put in place to address the increase in wastewater flows. The project does not include the promotion of latrines because this would exceed ONEP’s current mandate.
C. Fiduciary
Procurement
12. ONEP has good experience in implementing Bank financed projects and in carrying out procurement activities. Assessment of ONEP’s procurement capacity made for the on-going Rural Water Supply and Sanitation project concluded that the public procurement system is solid
19 and operates in a structured and reliable control environment, and is thus devoid of major fiduciary risks. ONEP follows procurement rules fundamentally based on the national procurement rules (Décret sur les conditions et forms de passation des marchés de l’Etat, du 5 février 2007)”, which is generally in line with the Bank’s guidelines, with some exceptions as outlined in Annex 8. At the central level of ONEP’s Direction des Approvisionnements et des Marchés (DAM – Direction of Supplies and Contracts) procurement capacity was found to be satisfactory. At the decentralized level, Regional Departments (DR), capacity was found to be fair. Procurement under the Project will be carried out in accordance with Bank Guidelines: Procurement under IBRD Loans and IDA Credits published by the Bank in May 2004 and revised in October 2006.
81. Considering that procurement in the project will be mostly handled at central level and, with DEP’s supervision and support to DRs, at decentralized level, the overall risk is assessed to be low. This risk could lead to some minor non-compliance and delays during the project implementation and will be mitigated by the following set of actions:
(a) Agreed standard bidding documents for Works and Goods under NCB should swiftly be prepared and submitted to the Bank for approval in compliance with the loan agreement, and with the appendices of the Bank letter to Minister Baraka on the Audit Clause and the Fraud and Corruption clauses (AFCC); (b) The initial Procurement Plan, indicating the thresholds for use of non ICB and non QCBS methods, was completed and submitted on the basis of the model procurement plan furnished by MNAPR before negotiations, and signed and annexed to the Minutes of Negotiations, in compliance with the relevant AFCC appendix to the Bank letter to Minister Baraka. Detailed procurement plans updated yearly will be established, submitted to the Bank for no objection, and used during project implementation; and (c) Training in Bank procurement procedures will be provided to DR procurement staff; and (d) Finally, the implementation design includes regular ex-post reviews.
Financial Management
82. ONEP will be responsible for managing the project funds and all related financial transactions. ONEP is a state-owned commercial and industrial enterprise with financial and administrative autonomy (Etablissement public à caractère industriel et commercial). Accordingly, it operates as a private sector entity and the systems in place are based on the principles and procedures of the commercial law of the Kingdom of Morocco. ONEP has a Managing Director, a Permanent technical committee, and a Board composed of various ministries and a Representative of the Prime Minister. ONEP issues year-end financial statements that are audited by external independent auditors with the required qualifications and experience. The accounting is centralized at Headquarters. ONEP’s Financial Department is well structured, and it has an adequate staff complement with proven experience in donor-financed projects. ONEP has already had experience managing several Bank-financed projects.
83. During project preparation, a financial management capacity assessment of ONEP was carried out. This assessment reviewed the financial management capacity, internal control procedures, financial reporting and ex-post reviews. It confirmed the robustness of the entity’s
20 financial management system and concluded that the project risk from a financial management perspective is considered low as ONEP is a very experienced entity which has in place procedures and systems to prevent financial irregularities. However, the capacity assessments identified the following risks:
Payments: To mitigate the risks of delayed payments, ONEP will follow closely all the steps in this process to identify rapidly the bottlenecks and act accordingly. Nature of the project: The project will involve several participants both at central and regional level. In addition to this decentralization, the project must follow specific Bank procedures, directives and guidelines. To mitigate any implementation risk, ONEP will prepare a Manual of Operations (MoP) describing the procedures, the actors, the flow of documents, and the outputs.
D. Social
84. Social impacts. The project will have substantial social benefits and no adverse social impacts. Previous rural water supply studies in Morocco have shown that providing access to potable water supply has positive social impacts, including reducing the drudgery of water collection for women and girls, and improvement of living conditions in the household and within the village. Specific benefits include: (a) time savings leading to increased participation in educational and economic activities, in particular by girls and women; (b) reduced prevalence of water-borne diseases, especially among children under five; (c) strengthening of social cohesion and fostering the emergence of community-based activities; and (d) slowing down the strong trend in rural to urban migration which has been fueled by the increase of poverty in rural areas. Poor people are often the most affected by lack of access to improved, community water systems, as they cannot afford the cost of the coping strategies used by the non poor (water vendors, private wells). The poor are therefore likely to receive significant benefits from this project.
85. Participation. The project strategy is based on a partnership between various sector stakeholders: ONEP, communities, the Communes Rurales, the private sector, etc. Sub-project participation will be at two levels: (a) at the level of local, elected representatives for the provincial and communal RWS planning process and cost sharing of investments in water production and conveyance; and (b) at the community level for the selection of the level of service and the cost sharing of investments in water production and conveyance; for the design, construction and O&M of the water distribution systems; and wastewater management at the village level, including the promotion of proper hygiene and sanitation practices. Community mobilization efforts will include devising any steps needed to facilitate the access of the poor to project benefits; this might include exploring credit mechanisms to facilitate payment for house connections, community-level arrangements for the poor to obtain water from neighbors with house connections, or the placement of stand posts in villages to provide improved water supply for those who do not opt for house connections. The character of rural settlements varies among the different project provinces. In Nador and Driouch, settlements are quite mixed, with small rural settlements adjacent to fast urbanizing district chief towns. In Safi, Youssoufia and Sidi Bennour, rural and urban/small town areas are more distinct, though there is variation among
21 rural areas, with some houses in some villages being very dispersed, while other villages contain houses built quite close together. This variation has an impact on the cost of providing a village house connection network (see annex 4 for more details).
86. Capacity and willingness to pay for water: Project preparation did not include specific demand and capacity/willingness to pay in the Nador, Driouch, Safi, Youssoufia and Sidi Bennour provinces, but benefited from surveys conducted in the Safi, El Jadida, Essaouira, Taounate and Taza provinces by ONEP in preparation of the on-going RWSS project. Although no recent surveys were available for the Nador and Driouch provinces, it is generally acknowledged that Nador and Driouch communities are substantially better off than Safi, Youssoufia and Sidi Bennour, in part due to high levels of remittances and trade revenues. These surveys confirmed the willingness to pay established ONEP rates for SP-service, and helped adjust the level of beneficiary contribution to MAD 3,500 for a HC. As of 2005, over 60% of surveyed households were willing to pay such contribution in installments for a HC.
87. Gender. In addition, the project will promote women’s participation through at least two mechanisms: (a) each Social Mobilization Team (SMT) will include a female member; and (b) the SMTs will promote the inclusion of women along with men in community discussions on project activities and in any community committees related to the project.
88. Monitoring. The project will include satisfaction surveys on customer samples in order to promote accountability of service providers to customers.
E. Environment
89. The environmental screening conducted as per Bank’s Operational Policy 4.01 has classified the project as “Category B”. An environmental assessment (EA) and an Environmental and Social Management Plan (ESMP) were accordingly established by ONEP during preparation. Public consultations were also organized in three of the four provinces concerned by the project (Safi, El Jadida and Nador) in order to inform the population and the different stakeholders concerned by the project’s activities, to associate them to the assessment of the potential impacts of the project on environment and to allow them formulating comments and proposals.
90. Expected positive environmental and socio-economic impacts of the project include:
Increased availability of potable water, a vital resource for human development in rural areas; Reduced pressure on groundwater with a beneficial effect on groundwater levels; Improved quality of water supplied to households resulting in a decrease in waterborne diseases, especially among children; Easier access to potable water resulting in less time spent in fetching water, especially for women and children; Increased availability and involvement of women in community-based associations; Creation of local jobs and mitigation of rural-urban migration through the improvement of rural living conditions;
22 Increased level of environmental awareness in rural communities, especially in relation to wastewater; Promotion of sustainable practices for greywater management and rural sanitation; Development and dissemination of improved on-site rural sanitation (RS) solutions adapted to the local rural environment; and Contribution to the promotion of a RS market, and capacity building with regard to the provision of on-site sanitation services, works and supplies.
91. The EA also allowed to inventory potential negative environmental and socio-economic impacts of project activities and to identify mitigation measures which could reduce or prevent them. The main potential negative impacts that could be created by the project include:
An increased consumption of surface water resources; Increased wastewater generation and discharges, with associated risk of groundwater and surface water resource pollution; Risk of increased pathogen contamination of groundwater ; Risk of development of water borne diseases as a result of untreated wastewater stagnation or reuse; Temporary and localized nuisances due to the construction works; and Increased energy consumption for water supply operations.
92. The ESMP sets up the process for the management and integration of environmental aspects in all phases of the project and includes four parts:
Environmental management and coordination; Mitigation of negative impacts; Monitoring and supervision; and Capacity building activities.
93. The impacts generated by project construction activities, such as laying conveyance and distribution pipes, drilling, and occasional construction works (treatment plants, pumping stations, reservoirs, etc.) are considered of low, local and temporary importance. Bidding documents will specify that contractors will be held to good management practices as per ONEP’s guidelines, and to site specific Environmental and Social Management Plan mitigation and reporting requirements, consistent with specific environmental assessments developed for each of the three main subprojects in component 1. New water treatment plants will also be subject to an environmental audit after the first year of operation.
94. A screening methodology is proposed to identify those villages that require particular attention for greywater management. Villages featuring flat impermeable soils, with concentrated habitats or located within environmental sensitive areas will require the development of greywater drainage networks before the implementation of HC-service water supply networks.
23 F. Safeguard policies
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X ] [ ] Natural Habitats (OP/BP 4.04) [ ] [X ] Pest Management (OP 4.09) [ ] [ X] Physical Cultural Resources (OP/BP 4.11) [ ] [X ] Involuntary Resettlement (OP/BP 4.12) [X ] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [X ] Forests (OP/BP 4.36) [ ] [X ] Safety of Dams (OP/BP 4.37) [ ] [X ] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X ] Projects on International Waterways (OP/BP 7.50) [ ] [X ]
95. The safeguard policies on environmental assessment and involuntary resettlement would apply.
96. OP.P 4.01 has been applied to this project. The project Environmental Assessment indicates that there are reversible environmental impacts that can be mitigated through the implementation of an ESMP.
97. OP.P 4.12 has been applied to this project. There will not be involuntary resettlement, but there is likely to be permanent and temporary limited land acquisition. Pre-feasibility studies indicate that the land acquisition described here generally entails no physical resettlement or impact on residences or economic activities and that only the asset value of undeveloped land is concerned. Therefore, for ease of communication with the client and the public, the resettlement instruments have been entitled Land Acquisition Framework and Land Acquisition Procedures. Irrespective of the title, the instruments respond fully to the Bank'sOP.P4.12 policy requirements in the context of this project.
98. The draft EA, ESMP and the Resettlement Policy Framework were disclosed at the World Bank’s web site and in-country on October 8, 2009, prior to the pre-appraisal mission.
G. Policy Exceptions and Readiness
99. No policy exceptions are required.
* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas
24 Annex 1: Country and Sector or Program Background KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems Project
Rural Poverty and Government Strategy
1. Morocco stands out in the Middle East and North Africa (MENA) region for its political opening. The broad political changes in Morocco are manifest in free and fair elections and in a flourishing civil society. Hundreds of development and advocacy NGOs are active, and a dynamic press corps is at work. A reform of the family law - the Moudawana – has greatly advanced women rights and encourages a more inclusive society.
2. In the last decade, numerous pro-growth structural reforms have been launched in areas of decentralization, trade, customs, transport deregulation, privatization of telecoms, housing sector reform, financial sector reform, public administration modernization, agriculture reform, etc. Along with sustained investment and targeted social development and protection reforms, these initiatives set the stage for economic growth and social development.
Despite undeniable gains, growth remains unsteady, still vulnerable to droughts, and unemployment rates high especially among the youth. The Government has made poverty reduction one of its top priorities. In 2007, about 9% of Morocco’s population was considered to be below the poverty line. More than two-thirds of them are living in rural areas, though the share in urban areas is rising. The Government of Morocco’s (GOM) 2020 Rural Development Strategy is to improve conditions in rural areas by increasing access to basic infrastructure and social services. This includes reducing provincial disparities related to access. In addition, l’Initiative Nationale pour le Développement Humain (INDH), launched by his Majesty the King in May 2005, aims at reducing poverty by targeting poor rural and peri-urban areas and vulnerable people.
The Rural Water Supply and Sanitation Sector
Potable Water
3. Although Morocco features one of the highest rates of rural population in MENA (42%), access to potable water in rural areas has long been neglected and inadequate. Due to the limited financial and technical capacities of the CRs, the average access rate to potable water supply in rural areas was only 14% in 1990.
4. In 1995, the GOM decided to address the needs of rural water supply (RWS) through the Programme d’Approvisionnement Groupé en Eau Potable des Populations Rurales (PAGER). Initially implemented by the General Directorate of Hydraulics (DGH) favoring groundwater-fed water systems, and by ONEP linking villages to its regional potable water trunk pipelines, PAGER raised RWS access rates from 14% in 1994 to 61% by 2004, with positive impacts on public health and education for girls.
25 5. DGH’s and ONEP’s approaches to RWS complemented each other. DGH developed local sources of water (wells, boreholes or spring catchments) serving one or more villages (douars) through public standpipes (SPs) and/or house connections (HCs) managed by WUAs. ONEP focused on linking village SPs to its regional urban potable water supply trunk lines, with SPs and ancillary installations operated by a “gardien gérant” (GG) (operator) designated by the population and trained by ONEP. ONEP covered areas situated near its regional trunk lines as well as villages with large populations; DGH was responsible for the remaining rural areas.
6. PAGER is considered a successful operation with unquestionable public health, education and gender benefits. However, recent evaluations noted some shortcomings, including: (a) low water consumption in some places as users had continued seasonal access to traditional sources and were not always provided the RWS service level they wanted and were willing to pay for; (b) a limited choice of management models; (c) inadequate post-construction support to WUAs; (d) insufficient attention to greywater management and hygiene promotion and; (e) unequal access rates between provinces, with those on the Atlantic coast as well as the Rif and Pré-Rif regions lagging behind the national average. This was often due to the scarcity of good quality groundwater resources, making the development of local water points difficult.
7. In 2004, the need to accelerate PAGER led GOM to put ONEP solely in charge of the Program for Universal Access to Potable Water Supply – Programme de Généralisation de l’Eau Potable (GEP) – in order to reach a 92% coverage by 2009. The GEP enlarged the scope of ONEP’s activities, which had been limited to potable water production (80% of national production), transmission in bulk to large urban distribution utilities, and provision of water supply and sanitation (WSS) services to secondary urban and rural centers. ONEP now represents the central sector planner and operator, combining a core industrial role (water production and distribution) with vast development mandates (RWS and upgrading of secondary center WSS operations).
8. Rehabilitation and upgrade of PAGER groundwater-based RWS systems. Another challenge awaiting ONEP upon completion of GEP is ensuring the sustainability of thousands of DGH-implemented PAGER systems based on community-operated groundwater wells and pumps. A 2004 survey suggests that at any given moment up to 14% of such standalone PAGER systems are out-of-service for reasons of depleted groundwater resources, borehole rehabilitation needs, pump maintenance needs or ineffective WUAs. As of today, DGH and ONEP respond to urgent or complex cases by mobilizing ad-hoc technical assistance for the villages. ONEP is nevertheless assessing options to convert DGH systems to piped RWS.
Sanitation
9. Development of modern sanitation has not been a policy priority in Morocco until the advent of the National Sanitation Program in 2006. However, this program which sets ambitious goals for the sewerage of urban areas (collection rate > 80 %, treatment rate > 60 % in 2020) does not include the rural areas. Experience in rural sanitation is, therefore, very limited. Moreover, there is little public sector assistance in this area and the majority of work is undertaken by the households themselves. 10. Except for a few two-story houses and public buildings with unitary plumbing, wastewater is typically managed separately in villages:
26 Excreta are deposited in dry or pour-flush latrines. Such facilities are not systematically available or used, especially in the poorest rural households, where open defecation is common. Published estimates of improved sanitation coverage range between 35 and 40% for the country as a whole. Loose terminology does not facilitate such assessment, as pour-flush latrines are commonly and improperly called “septic tanks” in Morocco. Greywater (wastewater resulting from domestic, cooking and washing uses) is poured directly onto the ground, or into simplified plumbing with open discharges outside of compounds.
Institutional Framework and Organization of Water and Sanitation Service Provision
11. The overall water policy, water resource management, and protecting quality of the natural resource is under the State Secretariat of Water and Environment. This State Secretariat supervises nine river basin agencies (Agences de Bassin Hydrauliques), which manage allocation of water within their basin and enforce of water legislation. The Ministry of Mines, Energy, Water and Environment (MEMEE) supervises the Office National de l’Eau Potable (ONEP), which is responsible for bulk water supply, and household water supply and sanitation services in secondary towns and in rural areas.
12. The Ministry of Interior through the Direction Generale des Collectivités Locales has the responsibility for regulating the water supply and sanitation services. According to the Communal Charter of 1976, updated in 2000, the CRs are responsible for planning, organizing and managing public services, including RWSS, within their jurisdiction. They can provide such services directly (regie directe), establish an autonomous public utility (regie autonome) or delegate the service to a public or a private operator.
13. In 2008, 52 % of the total rural population was supplied directly by ONEP, followed by the WUAs (28 %) and the CRs and Regies autonomes (20%).
14. Direct management by the CRs (regie directe). Direct management involves autonomous control of public WSS services by the municipality. In most of the cases, the quality of the service is inadequate due to the lack of funding in this field.
15. Regies autonomes. Autonomous municipal authorities provide water to 50 rural centers with a population of about 135,000 persons and 10,300 registered users, more than half of which reside in communal headquarters. The regie autonome is created through communal council deliberations or through a communal syndicate and oversees a governing board, through a management committee and director of daily operations.
16. Management contract with ONEP is now the preferred option for a service delivery by ONEP which is operating 531 rural centers through this arrangement, serving a population of more than 2,000,000. The contract provisions include: (i) the development and O&M of the potable water distribution system by ONEP; (ii) the implementation of a separate accounting system overseen by ONEP and (iii) the application of an agreed and official tariff structure. ONEP has also installed gardiens gérants in villages only equipped by public stand-pipes (15 %).
27 17. Community Management. This was the most common management method in most villages but is losing progressively momentum as ONEP’s RWS program is developing.
18. Service delegation law. Morocco has also passed a law, in February 2006, to define the conditions for municipalities to delegate the management of public services to a public or private operator through an open tender process. This law was reportedly designed for the delegation by urban municipalities of substantial service contracts, and its mandatory tendering requirement is clearly unpractical for low-capacity CRs seeking to outsource minuscule operating contracts in the absence of a local provider market. CRs are however not explicitly exempt from the scope of the Law, a fact recognized by all stakeholders as a benign legislative “bug”, causing no known material prejudice to any party, and calling for an amendment. While no calendar is set for such amendment, the continued common outsourcing practice by GOM and CRs is to sign standardized Management Contracts with ONEP on a negotiated sole-source basis.
19. The pending restructuring of urban and rural utility service: Morocco features a heterogeneous WSS sector, including (i) ONEP as WSS operator in medium-to-small towns and rural areas across the country, (ii) four private multisector concessionaires in large coastal metropolitan areas, and (iii) thirteen urban autonomous municipal utilities. While service is continuous and of good quality, regulation of such diverse operators remains weak, ineffective at promoting efficiency gains (average unaccounted for water: 28% in 2008) and service expansion in marginal rural and peri-urban areas. A long studied reform12 is being considered for enactment toward the multisector consolidation of water, sanitation and electricity distribution operations, along regional lines, spanning urban and rural service areas. As an apparent first step in that direction, the operational merger of ONEP with its electrical sector counterpart – Office National d’Electricité (ONE) is being prepared of August 2009.
The Framework Agreement between GOM and ONEP for 2008-2010
20. ONEP’s infrastructure and service development objectives, and GOM’s commitment to support them financially, are consigned in a Framework Agreement (Contrat Programme) normally updated and signed every four years, organized around the following objectives: The strengthening and expansion of existing production and transmission infrastructure in order to secure the supply of the Kingdom’s cities and urban centers; The completion of the projects related to the Universal Access to potable water for the rural population in order to reach an average access rate of 91% throughout the Kingdom; The implementation of a sewerage investment program in 121 towns and urban centers and the progressive taking over of the sewerage collection service in all towns and centers where ONEP is operating the potable water distribution system; The implementation of the provisions of Law 69-00 related to the financial control of public enterprises by the State.
12 Groupement SGI-ICEA-CID, 2008 : “Restructuration des services de distribution d’électricité, d’eau et d’assainissement dans deux zones pilotes du Maroc”
28 21. The achievement of these objectives requires from ONEP a very important investment program in the range of MDH 13 billion (US$ 1.5 billion) for the three years period, as shown in the table below. For ONEP to implement these investments without damaging its financial equilibrium, the GOM has committed to allow for: An increase of the potable water tariff of 5% per year, beginning in 2009; A subsidy for the development of the rural water supply of MDH 150 million per year; An increase of the tax for wastewater collection of 0.2 DH/m3 in 2009 and 0.1 DH/m3 in 2010.
ONEP’s Investment Program for 2008-2010 (in millions MDH)
Activity 2008 2009 2010 Total
A. Investments in urban water supply Distribution by regies and concessionaires 532.0 440.2 377.4 1,349.6 Distribution by ONEP (present and future) 883.3 1,039.0 953,4 2,875.7 Common measures 672.9 472.0 461.0 1,605.9 Total urban water supply 2,088.2 1,951.2 1,791.8 5,831.2 B. Investments in rural water supply Small rural centers 144.9 144.4 108.5 397.8 Villages (GEP) 1,254.7 1,217.7 1,165.6 3,638.0 Total rural water supply 1,399.6 1,362.1 1,274.1 4,035.8 C. Investments in sewerage 983.0 914.0 1,052.0 2,949.0 D. Acquisition of stocks 36.0 14.0 18.0 69.0 General Total 4,506.8 4,241.3 4,135.9 12,884.0
22. The funding of the above investment plan assumes also a contribution from the municipalities in the range of: 15% for villages supplied through public stand pipes; 30% for centers supplied through individual connections; and 50% for new wastewater schemes.
23. ONEP has been restructured and decentralized to respond to its newly expanded RWS mission. A new Department for Universal Access to Potable Water (Direction de Généralisation de l’Eau Potable - DEP) has been created with regional and provincial offices. To optimize its costs in rural areas and improve sustainability, ONEP relies increasingly on small, local private operators. ONEP is also considering sub-contracting the O&M of water conveyance systems while adopting more demand-driven and participatory approaches. Through the on-going RWSS Project, in particular, ONEP is giving users a choice between different service levels (SPs and/or HCs) and management models (gardien gérant, small private operators, cooperatives or WUAs).
24. Last, ONEP has committed to engage several deep organizational reforms, in particular: The decentralization of its non-corporate functions towards the regions;
29 The reinforcement of its internal control system; The development of a Quality Management System including “Security” and “Environment” related components.
30 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems Project
1. The following on-going or recently completed Bank-financed projects have objectives related to rural development and rural infrastructure:
Sector/Issue Project Ratings
Water Supply & Sanitation Water Sector Development IP : S Financing Policy Loan (DPL) DO : S Rural development and National Initiative for Human IP : MS infrastructure Development Support Project DO : S Rural water supply Rural Water Supply and IP : S Sanitation Project DO : S Rural development and Support for the Social OED : S infrastructure Development Agency Project Rural development and Irrigation based Community IP : S infrastructure Development Project DO : S
2. The following is a sample of on-going projects that are financed by other development agencies and support RWS activities.
Sector/Issue Project Agency
Development of Rural Water Rural Water supply and sewerage Local commercial Banks Supply and Sanitation small urban centers (3 phases - DH 2,7 billions) Rural water supply in Chefchaouen, JBIC Taounate and Khenifra provinces (¥ 13,6 billion) ONEP9 – Water supply and African Development Bank sewerage in urban and rural centers (€ 54 millions) ONEP7 – Developement of water Agence Francaise de supply in rural areas (loan: €30 Developpement (AFD) million) Water supply of Taza and Berrechid Islamic Development Bank ($20 millions) Rural water supply (PIC program – Belgium grant: €16,5 million) Water supply for villages in Al Saudi Fund for Development Hoceima province ($12 millions) Generalization of access to potable KfW water 3 (€ 9,5 million)
31 Annex 3: Results Framework and Monitoring KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems Project
Results Framework PDO Project Outcome Indicators Use of Project Outcome Information Increase access to potable water Number of people in project areas Track progress towards meeting supply for selected local with access to potable water through national targets on rural access to communities in project areas standpipe or HC service potable water supply.
Number of people in villages of project areas served by HC
Average volume of water supplied through standpipes
Average volume of water supplied through HCs
Average volume of water supplied through the Tafilalet trunk line Intermediate Outcomes Intermediate Outcome Use of Intermediate Indicators Outcome Monitoring The rural communities demanding % of villages visited Adjust the design of the Project to standpipe (SP) or household the actual demand. connection (HC) service have been % of communities that signed SP identified through a demand-driven and/or HC co-financing agreements and participatory approach. % of rural communities that paid the initial up-front fee Arrangements for proper operation % of villages for which O&M Assess and adjust the participatory and maintenance of the village SP or arrangements are in place approach and outsourcing effort HC systems are in place. ONEP is effectively outsourcing the % of villages with HC-service with Assess ONEP outsourcing effort operation of HC-service. O&M outsourced to local operators Solutions for the development of % of households served by Assess progress of the grey water improved individual sanitation individual HC that have adequate management component facilities have been developed. grey water collection facilities
Arrangements for results monitoring
ONEP will submit a semi-annual report to the Bank covering the status of implementation, outputs, outcomes, financial statements, yearly procurement plans, environmental and social issues, and actions taken to ensure satisfactory project implementation. Financial, technical and procurement data will be collected by the relevant ONEP departments, in collaboration as needed with the project coordinator. Semi-annual reports will be shared among ONEP managers and policy makers to facilitate effective project management, reformulation of project strategy if needed, and lesson-sharing.
In addition, ONEP/DEP prepares an annual report on stand-pipes status throughout the country. This report will be communicated to the Bank’s missions during supervision.
32
Last, ONEP’s DP are also following a set of operational indicators such as:
Water loss linear index Network efficiency Water paid/water billed
Those indicators will be also made available to the supervision missions in order to follow-up the evolution of the level of service in the project’s area.
A participatory mid-term review and final evaluation will be conducted. Those two evaluations will be preceded by various surveys and audits regarding key aspects of the project. Those surveys and audit include:
Satisfaction surveys on a sample of customers (one before the mid-term review and one before the end of the project); An environmental audit of each water treatment plant to be carried out one year after each WTP works completion.
33
Arrangements for results monitoring
Target Values Data Collection and Reporting Component 1.a: Nador/Driouch Project Outcome Baseline 2011 2012 2013 2014 2015 Frequency and Data Collection Responsibility Indicators 2010 Reports Instruments for Data Collection People with access to 0 0 0 35,000 75,000 76,000 Every 6 months Project M&E ONEP (DEP) water through SP or HC database
People in project areas 0 0 0 30% 50% 70% Every 6 months Project M&E ONEP (DP- served by HC database DEP) Average volume of water supplied through SP 0 0 0 10 10 10 Every 6 months Project M&E ONEP (DP) (lpcd) database
Average volume of water 0 0- 0 30 35 40 Every 6 months Project M&E ONEP (DP- supplied through HC database DEP) (lpcd)
Intermediate Outcome Indicators % of villages visited 0% 50% 100% 100% 100% 100% Every 6 months Project M&E ONEP (DEP) + TA database % of rural communities 0 % 25% 75% 100% 100% 100% Every 6 months Project M&E ONEP (DEP) + TA that signed the co- database financing agreement
% of rural communities 0% 10% 30% 60% 80% 100% Every 6 months Project M&E ONEP (DP-DEP) + (and population) that paid database TA the initial up-front fee
% of villages for which 0% 0% 25% 60% 90% 100% Every 6 months Project M&E ONEP (DP-DEP) + O&M arrangements are in database TA place
% of households served 0% 0% 0% 30% 50% 70% Every 6 months Progress Reports TA by individual HC that have adequate grey water collection facilities
34 Component 1.b: SafiYoussoufia/Sidi Bennour Project Outcome Baseline 2011 2012 2013 2014 2015 Frequency and Data Collection Responsibility for Indicators (2010) Reports Instruments Data Collection
People with access to 0 0 0 0 180,000 260,000 Every 6 months Project M&E ONEP (DEP) water through SP or HC database
People in project areas 0 0 0 0 25% 50% Every 6 months Project M&E ONEP (DP-DEP) served by HC database
Average volume of water 0 0 0- 0 10 10 Every 6 months Project M&E ONEP (DP) supplied through SP database (lpcd)
Average volume of water 0 0 0 0 30 35 Every 6 months Project M&E ONEP (DP-DEP) supplied through HC database (lpcd) Intermediate Outcome Indicators % of villages visited 0% 30% 100% 100% 100% 100% Every 6 months Project M&E ONEP (DEP) + TA database % of rural communities 0 % 40% 100% 100% 100% 100% Every 6 months Project M&E ONEP (DEP) + TA that signed the co- database financing agreement
% of rural communities 0% 0% 15% 50% 80% 100% Every 6 months Project M&E ONEP (DP-DEP) + (and population) that paid database TA the initial up-front fee
% of municipalities for 0% 0% 0% 50% 100% 100% Every 6 months Project M&E ONEP (DP-DEP) + which O&M database TA arrangements are in place
% of households served 0 0 0 0 20% 50% Every 6 months Progress Reports TA by individual HC that have adequate grey water collection facilities
Component 1.c: Errachidia Project Outcome Baseline 2011 2012 2013 2014 2015 Frequency and Data Collection Responsibility for Indicators (2010) Reports Instruments Data Collection Additional average 0 0 0 +5% +15% +20% Every 6 months Project M&E ONEP (DEP) volume of water supplied database through the Tafilalet trunk line
35 Annex 4: Detailed Project Description KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems Project
1. The proposed Project would increase sustainable access to potable water supply in selected urban and rural municipalities of Safi, Youssoufia, Sidi Bennour, Errachidia, Driouch and Nador provinces. This program is based on provincial master plans carried out after exhaustive village surveys. They identified technical solutions to supply each city and village with sustainable potable water supply, along with investment and development costs.
2. Its final objective is to provide sustainable access to potable water supply to about 340,000 people in 1,000 villages and 300,000 people in medium and small cities. It will finance the delivery of water supply to medium size cities and villages through the construction of new water production facilities (water treatment plants or deep wells), regional trunk lines, storage tanks, pumping stations and a web of lateral mains.
3. This “large web” approach is justified in the project area by the lack of local quality groundwater resources, the availability of surface water from existing irrigation schemes and dams within respective water basins, and by the objective of limiting the number of water sources to better ensure the quality of the water supplied.
Subcomponent 1.a: Development of access to potable water supply in urban and rural areas of Nador and Driouch Provinces
4. Introduction and background. Located North-East of Morocco Kingdom between the Rif mountains region and the Mediterranean Sea, Nador and Driouch provinces had a population of 728 60013 inhabitants in 2004 (last census), 49% of which live in rural areas.
5. The project area is characterized by a lack of good quality underground water resources which are brackish with a salinity varying between 4 and 16 g/l. The water supply of the Nador and Driouch provinces is therefore ensured by surface water mobilized through the Mohammed V and Mechraa Hammadi dams, with the exception of (i) 9 municipalities in the northwest part of the province supplied from Al Hoceima, and (i) the Ras El Ma municipality fed from Saidia resources.
6. The Zaio center benefits from its own treatment plant (50 l/s). The rest of the province’s potable water is produced in a regional treatment plant (Nador Water Treatment Plant) with a present capacity is 840 l/s. This treatment plant feeds two regional systems: The Northern system supplies the municipality of Nador, the urban centers of Al Aroui, Selouane, Taoumia, Zeghanghane, Ihaddaden, Jaadar, Beni Ansar, Had Bni Chiker, Farkhana, Kariat Arkmane;
The Western system towards Midar supplies the urban centers of Al Aroui, Tiztoutine, Driouch, Midar, Tafersit, Ben Taieb, Dar Kebdani and 40 villages along the trunk line.
13 Figures for Nador province as per the old boundaries
36 7. The province is facing huge touristic developments along the Mediterranean coast. New industrial areas are also being developed in the cities of Al Aaroui and Selouane, accompanied by the development of new cities built as per the Ministry of Housing’s policy.
8. The rural water supply in the Southern part of Driouch province is lagging behind the national average, and ONEP has engaged in an important RWS scheme which calls for the doubling of the western regional trunk pipeline along the Nador-Midar route and the construction of lateral conveyance mains (piquages), storage tanks, and pumping stations.
9. Water demand. The peak day water demand is summarized in the following table (in l/s):
Year 2010 2015 2020 2025 Northern System 612 906 1,089 1,326 Including - Nador city 274 308 344 372 - Touristic area 0 150 200 300 Western System 193 213 246 275 Zaio System 83 91 103 110 TOTAL 888 1,210 1,438 1,711
10. In view of the above table and in order to satisfy the potable water demand until 2020, an increase of the production capacity by 560 l/s is required. 11. Description of the Project. The Nador/Driouch urban and rural integrated project will enable to secure and reinforce the existing water supply system and to construct new facilities benefitting to 12 rural districts representing an additional population of 146,000 people, including 50,000 rural dwellers.
12. The project include the following facilities: Extension of the raw water pumping station by 620 l/s; Laying of a new 800 mm pre-stressed concrete raw water pipe on 4.5 km. Extension of Nador’s treatment plant capacity from 840 l/s to 1,400 l/s. Doubling of the existing trunk regional pipeline to increase the conveyance capacity by 250 l/s including lateral mains to Dar El Kebdani, Ben Taieb, Tafersit and Tssaft- Azlaf ; 6 independent distribution systems, controlled by one or several semi-buried storage and regulation tanks for the following small centers and villages: o Neighbouring villages located in Tiztoutine, Driouch and Ait Mait CR. o Ouardana and Ait Mait. o Iferni and Tafersit. o Amejjaou located along Nador’s system northern line
37 o Ouled Settout and Oulad Daoud Zkhanine located south of Nador treatment plant. o Afsou, Ouled Boubker and Hassi Berkane.
Component 1.b: Development of access to potable water in rural areas of Safi, Youssoufia and Sidi Bennour provinces
13. The proposed Component would cover two priority provinces on the Atlantic coast. These two provinces are lagging behind the national average due to: (a) a significantly lower access rate to potable water supply and (b) a large rural population.
14. In Safi and Youssoufia provinces, the RWS is particularly critical due to the decrease of underground table. According to socio-economic surveys realized during the Master Plan for Safi province rural water supply, the major part of the rural dwellers is supplied through individual or collective rainwater harvesting ponds (“metfias”). Also, some small urban municipalities are supplied by RADEES through a treatment plant located in Sidi Aissa (40 l/s) that will soon be saturated.
15. To develop access to a reliable drinking water source in the Northern part of Safi and Youssoufia provinces and the Southern part of Sidi Bennour province, ONEP has designed a regional urban and rural water scheme supplied by a treatment plant to be built on Doukkala High Service Canal.
16. This component will finance the first phase of this scheme and will permit access to potable water supply for 260,000 inhabitants in 800 villages and will improve and secure the supply of the three municipalities supplied by RADEES (Jamat Shaim and Sebt Ghzoula) representing a population of 33,000 in 2007.
17. It includes the construction of the following facilities: A potable water treatment plant on Doukkala High Service Canal at PK 75 for a capacity of 500 l/s (2 units of 250 l/s). A trunk regional pipeline for Safi/Youssoufia system (75 km, 500 to 700 mm) A trunk regional pipeline for 215 villages in Sidi Bennour province (34 km, 400 mm to 75 mm) Eleven (11) lateral mains from the regional trunk lines (piquages), storage tanks, and SP for the supply of 525 villages in Safi and Youssoufia provinces (Lots S1, S2 and S3) Four (4) lateral mains for the supply of Sidi Bennour villages.
18. The second phase of works will permit the supply of 390 additional villages from DHSC treatment plant in Sidi Bennour and El Jadida provinces and will reinforce the production capacity of ONEP’s centers in Youssoufia, Chemaia and Tnine Ghiat (100,000 inhabitants) and RADEEJ centers in Sidi Bennour, Sidi Smail, Zmamra and Oualidia (65,000 inhabitants).
38 19. ONEP has planned to mobilize the funding of the second phase of works before the end of 2010 for a commissioning of the works by the end of 2013.
Subcomponent 1.c: Reinforcement and rehabilitation of Errachidia water production capacity and Tafilalet trunk regional pipeline
20. Background. The project area is located South-East of Morocco Kingdom and South of Atlas mountains and includes the cities of Errachidia, Erfoud, Moulay Ali Cherif (Errissani) and Jorf, small rural centers (Aoufous and Alnif) and ksours (villages) from Ziz valley and Tafilalet plain coming under 11 rural municipalities. Its population is estimated to 275,000 inhabitants and is slightly growing with an annual growth rate of 0.4%.
21. About 146,000 people in the urban centers and 92,000 in the villages currently have access to potable water either through house connections (81 %) or public stand pipes (19 %). The present potable water production and distribution is ensured by ONEP through four (4) bore wells located down Hassan Addakhil dam which have a total capacity of 340 l/s. The water quality is compliant with Moroccan standards.
22. The regional trunk pipe has a length of 100 km. Its route is characterized by an uneven profile with very limited space for laying a new line between BC1 and Aoufous. This trunk pipe is becoming flimsy in some parts of its route due to the corrosion and the repetitive mechanical constraints on its sections located besides a heavy traffic road. Actually, since its commissioning in 1986, the pipeline was broken 163 times including 34 breaks between 1986 and 1989.
23. Errachidia is equipped with a wastewater collection network (pseudo-separate system) supplying 50% of the population. The remaining part of the city uses infiltration wells. Waste water is treated before being discharged in Oued Ziz.
24. Proposed subproject. The production and transmission system of Tafilalet valley is now nearly saturated and needs to be reinforced and partially rehabilitated. The project will finance the construction of the following facilities: The equipment of three new bore wells located upstream Errachidia to increase the production capacity by 105 l/s; The tanks and connection pipelines between those bore wells and the main pipeline; The reinforcement of the adduction capacity between PK 16,1 and PK 47,4 (Aoufous), including two boosting stations (310 and 290 l/s) and a 1000 m3 tank; The replacement of the corroded pre-stressed concrete pipe section between Aoufous and Arfoud. The doubling of the pipeline between Arfoud and Errissani . 25. In view of the soil aggressiveness in some sections, 24 km of the pipe line will be protected by cathodic protection (pre-stressed concrete) or passive protection with polyethilene sleeves (ductile iron).
39 26. The total estimated cost of the project is DH 200 Millions. Construction is scheduled to start in December 2009 and to be completed in August 2011.
Component 2: Mitigation of Environmental Impacts – Greywater management
27. This component aims to mitigate and monitor the environmental impacts related to increased grey water flows resulting from the rural population demand for individual House Connections.
28. Consistent with the Environmental Assessment and its Environmental Management Plan, potential negative impacts of added household water supply will be mitigated based on a methodology for multi-criteria sorting of villages in 2 categories:
Category I villages (expected to be the vast majority) feature habitat, soil and environmental characteristics such that potential water stagnation/discharge impacts may be mitigated by household level grey water drainage and/or on-site sanitation solutions.
Category II villages (expected to be a small minority) feature dense habitat, impermeable soils and otherwise sensitive environments calling for more structured solutions than household-level drainage and on-site sanitation, including small networked sewerage.
29. Studies realized by ONEP within the frame of the Project’s preparation in Nador and Driouch provinces showed that future beneficiaries of individual HC in rural areas are aware that their present infiltration wells are not necessarily designed to evacuate an increased grey water discharge. It is therefore anticipated that households will ask for upgraded grey water collection facilities in parallel with the individual HC.
30. In this frame, the Project will help structuring, in each one of the Project’s provinces, a private sector market for improved on-site sanitation. The pilot activities will include:
The construction, in partnership with OFPPT (Professional Training and Work Promotion Board), of show-rooms to present compliant individual sanitation facilities. These show- rooms will be used as tools for training on these techniques. The organization of targeted communication and advertising campaigns.
31. This approach would be piloted in Nador and Driouch for the first year and then developed in Safi, Youssoufia and Sidi Bennour. The overall cost estimate of the pilot program is estimated at MAD 10.5 million, including MAD 3 million for each provincial pilot14 and MAD 1.5 million in specialized technical assistance. 32. Where no acceptable on-site sanitation solutions can be applied, the project has included a provision of 36 million DH to allow for the construction of small grey water collection networks.
14 The three pilots will be developed for: Nador/Driouch, Safi/Youssoufia and Sidi Bennour.
40 33. ONEP-funded activities. The monitoring and capacity building provisions of the Environmental and Social Monitoring Plan (ESMP) will also be conducted as part of this component. The main activities include: i) Development or update of environmental management manuals, ii) environmental audits of new water treatment plant operations, iii) environmental management capacity building workshops, technical assistance to ESMP implementation and reporting, and iv) surface and groundwater quality monitoring program. These activities, to be funded by ONEP as part of current operations, are estimated at MAD 19.5 million.
Component 3. Implementation Support and Capacity Building
34. This component will provide technical assistance (TA) to ONEP’s project implementation, as well as capacity building (CB) to ONEP’s overall RWS program. Under this component, the two most critical tasks for project implementation will be financed by IBRD, for a total of MAD 67.5 million. The remaining tasks, valued at MAD 17.8 million, will be implemented subject to the mobilization by ONEP of the corresponding funds.
35. Bank-funded resident TA for project implementation is to: i) enable efficient project management & monitoring, ii) strengthen participatory approaches to service provision including helping communities opt and organize for either SP-service or HC-service, iii) facilitate effective integration of hygiene and wastewater management into the provision of improved water supply services, iv) screen and specify the need for improved greywater management solutions in case of HC-service selection. This will cover all aspects related to the technical studies of collection and treatment solutions for the pilot projects, financial, environmental and social monitoring and evaluation, including customer surveys. Separate specialized TA will be funded to increase ONEP’s capacity to design and implement outsourcing contracts for HC-service operations and maintenance by small domestic private sector providers in project areas. Other capacity building needs identified by ONEP will include i) the development of feasibility studies and designs for village HC distribution systems and eventual greywater drainage systems, and ii) the implementation of pilots for the promotion of improved on-site sanitation systems in Nador, Driouch, Safi, Youssoufia and Sidi Bennour.
36. ONEP funded activities. Under this component ONEP will also seek to increase its capacity to effectively manage the overall GEP program and to improve the performance of RWS SP-service and HC-service operations. Specific CB tasks identified by ONEP, estimated at MAD 17.8 million, will include i) new information systems to track RWS project implementation and operation, ii) staff training programs, iii) technology watch activities and study tours, iv) the upgrade of ONEP’s customer service information systems to accommodate specific rural HC-service needs, and v) the implementation of a RWS cost-recovery study.
41 Appendix 1 to Annex 4
Methodology for the Participatory Approach
Phase 1. Information and Commitment of Local Authorities
During this phase, ONEP works along two parallel fronts: the first being information and commitment of local authorities (provinces and rural communes-CRs), and the second technical studies.
Step 1. Consultation with Local Authorities and Elected Representatives. ONEP informs provincial authorities and CRs of the priority program. More specifically, the following points are explained: (a) the proposed selection of the sub-projects; (b) the methodology for community participation; (c) the financial and management implications of the choice of delivery system (SPS or HCs); and (d) the financial contribution from each party to construction costs.
Step 2. Information and Commitment of the Rural Communes. The rural commune through conventions and agreements with the ONEP commits itself to the mobilization of funds. Ideally, the rural commune will designate a technician to support the Social Mobilization Team (SMT) in the initial contacts and mobilization of the population. At this stage the project can also begin to explain to the rural commune representatives the overall characteristics of the participatory approach.
The detailed studies presented to the communes and local authorities should also indicate whether there will be any environmental impacts, temporary occupation of lands, or land acquisition and if so, the mitigation measures to be taken.
Phase 2. Social Mobilization and Community Participation
During this phase, the SMTs fully launch their work in the villages. This is a critical phase to gain the trust and cooperation of the communities. Before beginning their work, the SMTs must have the information necessary to understand the technical aspects of the proposed sub-projects. This will also help them in focusing the participatory diagnostic. During this phase SMTs carry out three critical steps: informing and consulting with the community and verifying their demand; conducting the participatory social community diagnostic, and forming the community structures needed for the project.
Step 1: Community Information. The SMTs begin the process of education and mobilization with the communities. This work will require one or several visits to the communities, depending on their degree of prior information and other factors. During this phase the SMTs inform the population about the requirements for accessing the project; technical and management options, including choice of SPS or HCs; the rationale behind community participation and the necessary contributions required to bring the water to the douar; and the financial contributions required by the users if HCs are chosen.
42 Step 2. Community Participatory Diagnostic and Choice of Service Level
The objective of the diagnostic is to establish an accurate socio-economic baseline for the implementation of the project and to begin to explore the best methods for the management of the water systems. The participatory diagnostic will include: (a) a socio-economic baseline study, which will be used for project M&E. Data/information collected could include: (i) the number of households with and without access to water and sanitation; (ii) an inventory of households and household characteristics (led by men, by women, widows); (iii) the type of house: permanent construction, earth, other; (iv) a typology of the village settlement pattern: concentrated, dispersed; (v) alternative water sources, mapping of existing water sources; (vi) existing roles within the household, work distribution, time spent collecting water; (vii) cost of water provisioning; (viii) hygiene and sanitation practices and infrastructure; and (ix) statistics on water-related diseases; (b) a diagnostic of existing forms of community organization and of the existence and types of social cohesion. This will permit the SMT to explore the potential for different models of organization and management of the water distribution system as well as wastewater management. This also helps to identify existing organizations and the role they could play in the social mobilization and management of water distribution systems; and (c) assessment of the community level of relative wealth and poverty and capacity to pay for the different technical choices offered to them.
The outcome of the diagnostic permits the SMT to:
(a) verify community demand for the project
(b) know local capacities (of men and women, youth and aged) that can be used for the implementation of the project;
(c) evaluate potential capacity for different management models;
(d) recommend possibilities for different types of distribution (SPS or HCs) depending on local conditions/preferences as well as technical considerations; and
(e) assist the community in decision-making concerning the choice of service level (water management and wastewater management).
After the community has made the choice of water distribution systems (SPS or HCs), the SMT must inform the communes of the results of the diagnostic as well as the community’s choice. At this time, ONEP signs an agreement with the commune rural concerning the commune’s 15% financial contribution. In addition, the communities start collecting their capital cost contribution.
43 Step 3: Choice and formation of community management structures. The project cycle follows two different paths, depending on the choice of the community for either SPS or HC. However, they both have the following steps in common :
(a) community decision on the management model to be chosen; (b) formation of the management unit at the community level as appropriate; (c) community committee written agreement confirming commitment to project; and (d) consolidation and evaluation of impacts, and M&E.
The steps in this phase of community organization can be summarized as follows. Standpipes HCs15 1. Selection of location for placement of 1. Discussion with the community on the standpipes according to set criteria.16 conditions of access to HCs.17 2. Community agreement and technical feasibility 2. Technical studies and choice of option for of the placement of standpipes. the treatment of waste-water, jointly with the study of the distribution network. 3. Identification of possible models for 3. Identification and decision on the management of the water system and provision of management model, with the SMT explaining management training. Completion of collection of the different alternatives, requirements and first tranche of community contribution to capital responsibilities. The SMT subsequently costs. provides any needed management training. 4. Signing of the contracts with the managers in 4. Financing period launched by the association the community and the ONEP. and, if necessary, measures to acquire land required for any works 5. Hygiene education related to water supply and 5. Signing of management contracts with any wastewater management. associations as appropriate. 6. Turning over the standpipes to the managers 6. TA for the creation of the waste-water and the community, after final contributions to treatment and sanitation system/network. capital costs have been received by the project. 7. Regular monitoring of the management system 7. Follow up in cases of management and consolidation of the management structures; associations and assist in their functions, monitoring of health and hygiene and sanitation. consolidation of the associations, M&E of the management, and environmental and social impacts.
15 The SMT work with communities will be more intense in the case of house connections. 16 Criteria for the location of SPs: one standpipe for an area covering 500 meters in a grouped population; One standpipe per 300 inhabitants average; one standpipe for 100 to 150 inhabitants minimum in an area of 1 km in a dispersed settlement; placement has to be accessible to all the users.
17 Criteria for individual connections: community consensus for HCs (at least 70% of households demand this level of service); 100% financing by the users; need to have created an association or other management structure to manage and deal with ONEP; adequate measures for waste water management or commitment to have one in place during the project; create the distribution system for the connections according to the technical plan proposed by ONEP.
44
The role of the SMT is of particular importance in the assistance to the community, guiding them to decide on the appropriate management structure. This is relatively straightforward in the case of the standpipes, but requires more assistance as well as community consensus in the case of HCs and the maintenance of the distribution system. Among their functions the SMTs will:
(a) explain to the community the legal aspects of each management model (standpipe operator, water users association, cooperatives, private contractors, etc.); (b) explain the role of the other partners: rural communes and ONEP; (c) demonstrate the role and advantages of each management model depending on the community’s characteristics and needs; (d) explain the roles and duties of the members of a management model; (e) help communities that are forming management associations and provide them with training; (f) assist the communities in integrating women into the processes of preparation and creation of the management association; and (g) make available to the members of a management association the documents required to formalize the organization: statutes, models of assemblies, legal texts governing micro-enterprises, rights and duties of associations, copies of the conventions drawn between the community, the rural commune and ONEP, etc.
The role of the SMTs will be to continue to work within the communities until the chosen management model is operating, and then to provide follow-up support over the next two years through occasional visits. These management structures can encompass more than a single douar; however, all the households must be in agreement with the model that is chosen so as to avoid conflict. The modalities of the management model chosen should include measures to ensure that the women’s interests are well represented.
The SMT will keep a dossier with the relevant information to inform ONEP and subsequently sign the contracts.
Monitoring will be participatory as much as possible, with the assistance of the SMTs. This will consist, in addition to the result indicators, of indicators of social impact produced by the community. It is suggested that from the beginning of the social diagnostic, a small sample group be chosen by the SMT for the measurement of impacts. This group would be heterogeneous reflecting the wider community in order to follow through the changes in well being and quality of life of the communities (schooling rates, women’s literacy, rising levels of income, new economic activities, reduction in water borne diseases and infant mortality, etc.)
45 Annex 5: Project Costs KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
Million Moroccan Dirhams
IBRD financing need Project Cost By without Component, Base Cost incl. taxes subcomponent contingency Total Cost Financing (IBRD) and/or Activity Main works MAD 106 Taxes MAD 106 Ratio MAD 106 a B c = a+b d e = a x d 1. Production, Conveyance and RWS systems 1,335.80 267.16 1,602.96 1,221.40 1.a Nador/Driouch production, conveyance & RWS 482 96.4 578.4 436.4 Extension of Treatment Plant 108 21.6 129.6 100% 108 Regional pipeline 146 29.2 175.2 100% 146 RWS laterals and standpipe systems 228 45.6 273.6 80% 182.4 1.b Safi, Youssoufia &Sidi Bennour production, conveyance & RWS 674 134.8 808.8 605.2 Treatment plant + regional pipeline 330 66 396 100% 330 Laterals & standpipes (J1, 215 villages) 101 20.2 121.2 80% 80.8 Laterals & standpipes (S1, 163 villages) 90 18 108 80% 72 Laterals & standpipes (S2, 84 villages) 70 14 84 80% 56 Laterals & standpipes (S3, 99 villages) 83 16.6 99.6 80% 66.4 1.c Errachidia production & Tafilalet wells and conveyance systems regional pipeline 179.8 35.96 215.76 100% 179.8 2. Environmental mitigation, greywater mgt. 46 9.2 55.2 100% 46 3. Implementation support and capacity building 67.5 13.5 81 100% 67.5
TOTAL MAD 106 1,449.30 289.86 1,739.16 1,334.90
Identifiable taxes and duties are 290.9 million DH, and the total project cost, net of taxes, is 1,450.3 million DH. Therefore, the share of project cost net of taxes is 83.3 %.
46 In million US dollars (MAD 1 = USD 0.1311)
IBRD financing need Project Cost By without Component, Base Cost incl. taxes subcomponent contingency Taxes Total Cost Financing (IBRD) and/or Activity Main works USD 106 USD 106 USD 106 Ratio USD 106 A B c = a+b D e = a x d 1. Production, Conveyance and RWS systems 175.12 35.02 210.15 160.13 1.a Nador/Driouch production, conveyance and RWS systems 63.19 12.64 75.83 57.21 Extension of Treatment Plant 14.16 2.83 16.99 100% 14.16 Regional pipeline 19.14 3.83 22.97 100% 19.14 RWS laterals and standpipe systems 29.89 5.98 35.87 80% 23.91 1.b Safi, Youssoufia & Sidi Bennour production, conveyance & RWS systems 88.36 17.67 106.03 79.34 Treatment plant + regional pipeline 43.26 8.65 51.92 100% 43.26 Laterals & standpipes (J1, 215 villages) 13.24 2.65 15.89 80% 10.59 Laterals & standpipes System (S1,163 villages) 11.80 2.36 14.16 80% 9.44 Laterals & standpipes (S2, 84 villages) 9.18 1.84 11.01 80% 7.34 Laterals & standpipes (S3, 99 villages) 10.88 2.18 13.06 80% 8.71 1.c Errachidia production & Strengthening of conveyance Tafilalet wells and systems regional pipeline 23.57 4.71 28.29 100% 23.57 2. Environmental mitigation, greywater mgt. 6.03 1.21 7.24 100% 6.03 3. Implementation support and capacity building 8.85 1.77 10.62 100% 8.85 TOTAL 190.00 38.00 228.00 175.01
47 Other project-related costs funded by ONEP
(in million Moroccan Dirhams)
Cost incl. contingency Taxes Total Cost Financing ratio MAD 106 MAD 106 MAD 106 Environmental monitoring and capacity building 19.50 3.90 23.40 0% Rural water supply program capacity building 17.80 3.56 21.36 0%
Total ONEP 37.30 7.46 44.76
(In million US dollars) (MAD 1 = USD 0.1311)
Cost incl. contingency Taxes Total Cost Financing ratio USD 106 USD 106 USD 106 Environmental monitoring and capacity building 2.56 0.51 3.07 0% Rural water supply program capacity building 2.33 0.47 2.80 0%
Total ONEP 4.89 0.98 5.87
Cost-sharing arrangements.
Construction costs for RWS lateral mains and standpipe supply systems benefit from a financial contribution from users (MAD 500 per household, originally estimated as 5% of costs) and local governments (15%). The local government contribution of 15% would also apply to a prorated share of production and conveyance capital costs. The balance would be financed by the IBRD loan. Supervision of works, estimated at 2% of construction cost, would be financed entirely by ONEP. The cost of village distribution networks and household connections is not covered by the IBRD loan, nor included in the above table. Such cost is to be shared by local governments (50%) and by beneficiaries and ONEP (50%). Project costs do not benefit from any direct Government subsidy, although local government contributions may be aided by Government on an ad-hoc basis.
48 Annex 6: Implementation Arrangements KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems Project
1. Project Institutional Framework. The project will be implemented by the Office National de l’Eau Potable (ONEP). The project is consistent with ONEP’s mandate to plan and develop potable water supplies in Morocco, and is identified for implementation in the current Framework Agreement (Contrat Programme), signed between ONEP and the State of Morocco represented by the Ministry of Economy and Finance (MEF) and the Ministry of Energy, Mines, Water and Environment (MEMEE). The Project will also involve beneficiary local governments, who will enter into agreements with ONEP for the delivery of potable water service. Such agreements will define, in particular, the conditions to be fulfilled by the municipality before the actual service delivery (complementary funding…).
2. Project Contractual Arrangements. The International Bank for Reconstruction and Development (IBRD) and ONEP would enter into a Loan Agreement. The Kingdom of Morocco would guarantee repayment of the IBRD loan. The Loan Agreement includes a financial covenant to ensure that ONEP’s debt service capacity will be preserved. The General Directorate for Local Governments (DGCL) will be responsible to follow-up on the fulfillment of the municipalities’ contribution to the project.
3. Project Management. ONEP has a long experience of Bank-financed projects. Implementation would leverage existing ONEP structures and available staff and there is no plan to establish a special implementation unit. Projects are prepared and managed through relevant operating departments, led in this instance by the Department of Universal Access to Potable Water (DEP) with the support of its regional and provincial Departments, seconded and coordinated by ONEP’s Financial Department for reporting to donors.
4. In addition to DEP overarching project implementation responsibility, the Direction Technique et Ingéniérie will be responsible of the construction and supervision of regional production and transmission lines while DAE will be responsible for the sanitation component, environmental screening, environmental assessment and environmental monitoring. ONEP’s Legal Services will be responsible for procedures related to temporary and permanent land acquisition.
5. ONEP’s provincial and regional offices, with the support of the central departments, will oversee the technical, social and environmental studies, community mobilization, communication campaigns and the construction and supervision of distribution works. The regional and provincial offices will also be responsible for issuing the call for bids and issuing contracts, with the support of the central departments. This arrangement is appropriate due to: (i) the geographically dispersed nature of the works in rural areas and the local availability of qualified contractors; (ii) the small value of contracts; and (iii) the nature of labor intensive works. It is expected that most contracts will not attract foreign competition and will be processed under NCB procedures. Most of the tasks overseen by the provincial and regional offices would be out-sourced to the greatest extent possible to consulting firms. This would include the TA activities described under sub-component 3 “Institutional Strengthening and Project Implementation Support”.
49 6. The project will be implemented through a demand-driven, participatory approach adapted to the sector and the Moroccan context, meaning that it will seek to stimulate and organize active and responsible community participation in the selection of the level of service and O&M arrangements. The TA specialists will conduct the demand-driven and participatory approach to service provision, and monitor the design and implementation of the environment and social action plans, including those related to land acquisition issues. The social scientist and the hygiene/sanitation specialist will work during the first years of the project, to fully elaborate their sub-components, and to provide training and initial supervision. Later on in the project, their supervision roles will be taken over by the social mobilization coordinators. The SMTs will be responsible for village-level implementation of the strengthened demand-driven, participatory approach to service provision introduced by the project. They are expected to spend most of their time in the field with rural communities. Each SMT will comprise a social scientist and a hygiene specialist (one male, one female).
7. The project will provide ONEP with specific TA to assist the systematic development and implementation of outsourcing contracts for the development and operation and maintenance of village distribution systems for HC-service.
8. ONEP will be responsible for collecting data on outcomes and progress. It will submit to the Bank semi-annual reports indicating the status of project implementation, outputs, outcomes, financial statements, updated procurement plan, environmental and social issues, and actions taken to ensure satisfactory project implementation. A mid-term review and final evaluation will be conducted to assess progress and impacts.
9. Financial management of the Project will be the responsibility of ONEP’s Financial Department.
10. The Communes Rurales (CR) under the Ministry of Interior are responsible for water supply and sanitation in villages under their jurisdiction. They will participate along with water users in financing approximately 15% of water production and conveyance construction costs and, in some cases, in financing water distribution and collective wastewater management infrastructure.
50 Annex 7: Financial Management and Disbursement Arrangements KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems Project
Summary of the Financial Management Assessment and Arrangements
1. During project preparation, a financial management capacity assessment of ONEP was carried out. This assessment included (a) a field visit to El Jadida, (b) a series of meetings held with representatives from several directorates, and (c) processing a self-evaluation questionnaire facilitated by ONEP.
2. The project design and the ONEP status, allows the implementation of the project using main elements of the country’s system. The ONEP financial staff will be entrusted with the project accounts and generation of the project financial statements.
3. The project risk from a financial management perspective is considered low as ONEP is an experienced entity with Bank financed projects and has in place reliable procedures and systems to prevent and detect financial irregularities. However, some mains risks identified during the capacity assessments are:
Payments: To mitigate delayed payment risks, ONEP will follow closely all the steps in this process to identify rapidly the bottlenecks and act accordingly. Nature of the project: The project will involve several participants both at central and regional level. In plus of to this decentralization the project need to follow specific procedures, directives and guidelines of the Bank. To mitigate any risk related to the implementation, ONEP will prepare a manual of operations describing the procedures, actors, flow of documents, outputs...
4. Major findings and conclusion. ONEP will be responsible for managing the project funds and all related financial transactions. ONEP is a state-owned commercial and industrial enterprise with financial and administrative autonomy (Etablissement public à caractère industriel et commercial). Accordingly, it operates as a private sector entity and the systems in place are based on the principles and procedures of the commercial law of the Kingdom of Morocco. ONEP has a Managing Director, a Permanent technical committee, and a Board composed of various ministries and a Representative of the Prime Minister.
5. ONEP issues year-end financial statements that are audited by external independent auditors with the required qualifications and experience. The accounting is centralized at Headquarters. ONEP’s Financial Department is well structured, and it has an adequate staff complement with proven experience in donor-financed projects. ONEP has already had experience managing several Bank-financed projects. Furthermore, the financial management capacity assessment conducted confirmed the robustness of the entity’s financial management system and that the financial risk is low for this Bank-financed project to be implemented by ONEP. The only relevant activity required is for ONEP to prepare a Manual of Operations, encompassing disbursements and financial management procedures.
51 6. Based on the assessment’s findings and on the actions presented to mitigate the identified risks, the residual financial management risk is expected to be low.
Detailed Financial Management Assessment and Arrangements
Financial Management Assessment
National system
7. The Bank’s experience in Morocco and the main conclusions of the 2007 CFAA indicate that the Moroccan public finance system is governed by an elaborate legal and regulatory framework. It also contains strong reliability and transparency safeguards. The system is based on the principle of strict separation between authorizing officers and accounting officers. Moreover, the system includes (a) prior authorization of expenditures and supervision and (b) internal and external audits.
8. The reform of the public sector financial control was initiated under Law 69-00 of 11 November 2003 modifying Dahir of 14 April 1960, modified in 1962. The reform intended to enhance the management of public institutions.
9. The financial management risk of the Moroccan public finance system is considered low. Moreover, the particular PFM risks raised by the CFAA do not affect the project since ONEP operates as an autonomous entity from the Government public finance system.
Experience in the sector
10. The ongoing rural water supply and sanitation project provided the Bank with previous experience working with ONEP. The current project is largely inspired by the present one and will benefit from the same arrangements. ONEP benefited also from several projects funded by the Bank and other donors, gaining significant experience in donor-funded project management.
Financial Management Arrangements
Financial management system
11. General framework. The ONEPs financial management system is based on principles and procedures defined by the legal framework applicable to the public sector enterprises, more precisely, to the principles applicable to government institutions and public agencies.
12. The State financial oversight now deeply modernized and called “Performance Control” (controle d’accompagnement) to which ONEP is subject according to provisions of law 69-00 of November 11, 2003, guarantees the separation of the functions through several levels of independent controls. In addition, the internal audit function is performed by the audit and organization department, directly attached to the general manager’s office.
52 13. ONEP is also subject to controls by Ministry of Finance General Inspection (IGF) as well as to the external audit by the Court of Auditors. ONEPS’s accounts are also subject to an annual external financial and accounting audit.
Staffing
14. The existing human resource capacity is adequate to carry out the financial management tasks of the project. At this stage therefore, there is no need for change in quantity and quality of the existing staff to meet Bank and ONEP financial reporting requirements. It is however expected that the staffing will be monitored closely so as to anticipate any capacity gap which could occur and agree with ONEP on a capacity-building program in a timely manner. For this project, ONEP has appointed an internal dedicated staff to take charge of the project financial management aspects.
Accounting System, Accounting Policy and Procedures
15. ONEP’s accounting system is governed by rules applicable to autonomous public state owned agencies (Decree of 10 November 1989). Moreover, ONEP maintains an accounting system in line with corporate and commercial law. Project statements will be issued based on ONEP’s accounting system.
16. ONEP already has a comprehensive accounting system with an adequate chart of accounts which is in compliance with the existing laws and regulations of Morocco. Donor- financed projects are integrated into ONEP systems. The current accounting system is being upgraded, and will be supplemented and consolidated with the necessary features to tailored to suit individual information needs of each funded project. A cursory review of ONEP’s internal control system indicated satisfactory levels of segregation of duties. Reporting is adequate and timely.
17. The project’s general accounting principles are as follows:
Project accounting will cover all the project sources and uses of funds, including payments made and expenditures incurred. The project transactions and activities will be clearly identified from the rest of ONEPs’ other activities. Financial statements summing up project commitments, receipts and expenditures will be prepared semi-annually, using appropriate procedures. The project chart of accounts will cover the expenditure classification and sources of funds indicated in project documents and the general budget breakdown. The chart of accounts should facilitate the financial monitoring of project expenditures by component and sub-component, expenditures allocation and category of disbursement.
53 Books of Registry
18. In addition to any information system installed, and the books needed to maintain an accurate and complete record of transactions, ONEP will maintain a set of additional books of registry, either within their systems or outside them, for control purposes. These books will include and not be limited to:
Fixed assets register at Headquarters and in the Regions Contracts register
Budgeting
19. ONEP has a reliable information system integrated called SAP. This system is installed both at the central level and at the regional level. It makes possible to follow expenditure from its budgeting to the payment to supplier, and it blocks any not budgeted expenditure.
20. The project annual budget process will follow the ONEP budget cycle which is mainly as follows:
May-June: Letter of Orientation issued by the Finance Director to all Departments September: Budget and Controller consolidate data and prepare financing plan September – December: Internal negotiations and validation December: After Board approval, budget sent to Minister of Finance January: Minister of Finance approves and budget is implemented.
Project Reporting System
21. The Division of the Financings (division des financements) mapped with the Financial Direction will be responsible for the preparation of the interim unaudited Financial reports.
22. ONEP will produce semi-annual interim unaudited Financial Reports for the project and submit them to the Bank as part of the project progress report, or separately. These reports will consist of: (i) statement on sources and uses of funds for the reporting period and with cumulative figures; (ii) a statement of use of funds by component and expenditure type; and (iii) a variance analysis indicating budgeted amounts versus actual and explanation of variances for the period covered by the semi-annual Financial Report.
23. These reports should be remitted to the Bank within 45 days from the end of the period. The format and content of the FMRs were discussed during the appraisal mission.
Project Financial Statements
24. In addition to the semi-annual financial reports related to project activities, ONEP will produce its customary annual financial statements. These project annual financial statements will be composed of:
54 . A Statement of Sources and Applications of Funds reflecting the year expenditures plus cumulative amounts disbursed to date; . A use of funds by project categories/activities reflecting the year expenditures plus cumulative amounts disbursed to date; . An SOE withdrawal schedule, listing individual withdrawal applications relating to disbursement through the SOE, by reference number, date and amount; . Notes on significant accounting policies and accounting standards adopted for the preparation of the accounts; and any supplementary information or explanation that may be deemed appropriate by Management to enhance understanding of the financial situation of the project.
Internal controls
25. The internal control system set within ONEP is in line with existing country internal control framework. It is considered satisfactory by the Bank. Actually, an adequate system of internal control is in place. It makes it possible to guarantee the segregation of duties through three levels of control: (a) the control ex ante of the expenditure at the stage of their engagement; (b) the centralization of the payments on the level of the Financial Direction; and (c) the second ex ante control at the stage of their effective payment by the agency of control (ACO) according to the system of the double signature.
26. Thus, pursuant to 2003 Law Nr. 69-00 related to Government financial control of public agencies and other institutions, ONEP expenditure control is ensured with the presence of a State controller (commitments), seconded by the Directorate of Public Enterprises and Privatization (DEPP). Regarding its capacity and performance, ONEP is benefiting from a control system which is performance control (controle d’accompagement).
27. ONEP has a manual of procedures describing all management rules applicable to all major processes.
Audit Arrangements
28. Internal Audit. There is a full-fledged Department of Audit and Organization at ONEP, headed by a senior staff reporting directly to the Managing Director. The Audit Department is composed of four (4) divisions, namely, Organization, Audit, Total Quality, and Post-evaluation. The Department has a well established statement of mission objectives which includes, inter-alia, assurance that procedures set forth in the Financial Management Manual of Procedures are enforced, conducting internal audit missions, and reinforcement of coordination among the various operating aspects of ONEP.
29. External Audit. ONEPs' financial statements have been audited for several fiscal years by independent external auditors. The last financial statements (2008) were certified, with a qualification due to uncertainty to recover the credit of VAT witch amounts on December 31, 2008 to MAD 875 million.
30. During project’s implementation, ONEP will submit its financial statements annual audit, conducted by an external independent auditor, to the Bank after its approval by ONEP’s Board of
55 Directors (Conseil d’Administration). Each submission shall include financial audits as well as management letter.
31. The records and financial statements of the project will also be separately audited annually, in accordance with international audit standards, by the same independent auditor. The audit would include a comprehensive review of all statements of expenses (SOEs). In addition to the audit report, the auditor will issue a management letter including recommendations on project controls and recommending enhancements if any weaknesses are identified.. The audit report shall be submitted to the Bank no later than 6 months after the closing of each fiscal year.
Flow of funds
32. The expenditure related to the project is dealt with on the system by the various technical directions at the decentralized level. The technical directions establish calculations (décomptes) on the basis of the progress of work. The calculations are sent to the Financial Direction where those are controlled, checked compared to their eligibility and in comparison with the procedures. Before payment the agency of control (ACO) carries out the last control before validation of the payment (also see diagram below).
33. Disbursement Arrangements.The proceeds of the loan will be disbursed in accordance with the Bank’s disbursement guidelines and as outlined in the disbursement letter. Transaction- based disbursements will be used under this project. Withdrawal applications will be submitted for the reimbursements of expenditures prefinanced by ONEP, direct payments or the issuance of Special Commitments. All requests for payment from the loan account will include appropriate supporting documentation including detailed Statement of Expenditures (SOEs). ONEP may request to the Bank the opening of a Designated Account and the disbursement letter will then be amended accordingly.
34. Use of Statements of Expenditures (SOEs). All applications to withdraw proceeds from the Loan will be fully documented, except for: (a) expenditures of contracts with an estimated value of US$10,000,000 or less for works; (b) US$5,000,000 or less for goods; (c) US$200,000 or less for consulting firms; and (d) US$50,000 or less for individual consultants which may be claimed on the basis of SOEs. Documentation supporting expenditures will be available for review by Bank supervision missions and project auditors. All disbursements will be subject to the conditions of the Loan Agreement and the procedures defined in the Disbursement Letter.
Supervision Planning
35. Supervision activities will include, inter-alia, review of Semi-annual interim financial reports, review of annual audited financial statements and management letters as well as timely follow up on issues which have arisen, and participation in Bank project supervision missions, as appropriate. There will be about two financial management supervision missions each year. Bank supervision missions will consist of visits to ONEP and its decentralized offices to review financial management practices, procurement methods, payment procedures, and documentation.
56
Diagram: Summary of flow of funds
Stage Action
control of attachnmts 1 ONEP/Concerned Department
Approval
ONEP/DAM
Control of attachnments or and issuance of decomptes DR if project at regional level (in this case there is no stage 1)
2
Approval
Booking and preparation of payment order ONEP/DFI
Payment of Direct Payement World Bank supplier by ONEP request
3
Application to withdraw proceeds from loan
57
Annex 8: Procurement Arrangements KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
A. Guidelines and Standard Bidding Documents
1. Procurement under the Morocco Regional Potable Water Supply Systems Project would be carried out in accordance with the World Bank’s Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’ known as the ‘2006 Anti-Corruption Guidelines’, the ‘Guidelines: Procurement under IBRD Loans and IDA Credits’ published by the Bank in May 2004 and revised in October 2006 and the ‘Guidelines: Selection and Employment of Consultants by World Bank Borrowers,’ dated May 2004 and revised October 2006, and the accompanying standard bidding documents for any new procurement and the provisions stipulated in the Loan Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the loan, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The procurement procedures and Standard Bidding Documents (SBD) that will be used by the borrower will be well defined in the Operational Manual, which will include specific and detailed sections regarding Procurement.
2. National Competitive Bidding (NCB) procedures adapted as indicated below will be used for Goods contracts estimated to cost less than the equivalent of five millions US dollars (USD 5,000,000) and for works, Supply and installation contracts estimated to cost less than the equivalent of ten millions US dollars (USD 10,000,000) equivalents.
Necessary adaptations to the National Competitive Bidding procedures:
3. To ensure broad consistency with the Procurement Guidelines, the following provisions will apply when using NCB under this project. Said procedures shall ensure that, inter alia:
a) The bidding documents include explicitly the bid evaluation method, award criteria and bidder qualification criteria; b) Technical, administrative and financial envelopes are opened immediately after the bid opening session has started and prices are read aloud; c) The bids are evaluated on the basis of the price and any other criteria expressed either in pass/fail terms or in monetary terms; d) Contracts are awarded to the qualified bidder who has submitted the least-cost evaluated and substantially responsive bid as stipulated in the bidding document; and e) Standard bidding documents and bid evaluation reports found acceptable by the Bank are used.
4. Moreover, it has been agreed with the borrower that each contract financed from the proceeds of this loan shall provide that suppliers, contractors and subcontractors shall permit the Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract and to have said accounts and records audited by auditors appointed
58 by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to “obstructive practice”.
5. Prior to issuing the first call for bids, a draft standard bidding document to be used under National Competitive Bidding procurement must be submitted to the Bank and found acceptable by the latter;
Advertisement, Publication of Results and Debriefing 6. In addition to advertising pertaining to each contract, a General Procurement Notice (GPN) will be published in DG-Market, in United Nations Development Business, and in at least two national newspapers. The GPN will be published after project is approved by the Bank and prior to Effectiveness. The GPN will provide a description of the project and information on related procurement.
7. Online (DG Market, UN Development Business, and /or Client Connection) publication of contract awards would be required for all ICB, Direct Contracting, and the Selection of Consultants for contracts exceeding a value of US$200,000. In addition, where prequalification has taken place, the list of prequalified bidders will be published. With regard to ICB and large- value consulting contracts, the Borrower would be required to assure publication of contract awards as soon as the bank has issued its “no objection” notice to the recommended award in UN Development Business (UNDB) online and dgMarket. All consultants competing for an assignment involving the submission of separate technical and financial proposals, irrespective of its estimated contract value, should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of the financial proposals. The borrower would be required to offer debriefings to unsuccessful bidders and consultants should the individual firms request such a debriefing.
8. Procurement of Works and Supply and Installation: Works or Supply and Installation procured under this project would include mainly the construction and installation of RWS infrastructure facilities, as well as wastewater management facilities in rural areas. These contracts are expected to add up to an aggregate of about US$.190 million equivalent. The procurement will be done using the Bank’s Standard Bidding Documents (SBD) for all ICB and National SBD agreed with and satisfactory to the Bank.
International Competitive Bidding (ICB): Contracts for civil works estimated to cost the equivalent of US$10,000,000 or more per contract shall be procured on the basis of the International Competitive Bidding (ICB) procurement method, using the applicable World Bank Standard Bidding Documents. National Competitive Bidding -. Each package of civil works estimated to cost less than the equivalent of US$10,000,000 may be procured on the basis of National Competitive Bidding procedures. Standard Bidding Documents acceptable to the World Bank will be used.
59 9. Procurement of Goods: Goods procured under this project would include: hydraulic equipment, pumps, transformers,… The procurement will be done using the Bank’s SBD for all ICB and National SBD agreed with and satisfactory to the Bank.
International Competitive Bidding (ICB): Goods contracts estimated to cost the equivalent of US$5,000,000 or more per contract shall be procured on the basis of International Competitive Bidding (ICB). Applicable Bank Standard Bidding Documents shall be used. National Competitive Bidding (NCB): Each package estimated to cost less than the equivalent of US$5,000,000 may be procured on the basis of NCB procedures as found acceptable by the Bank. Bidding documents acceptable to the Bank will be used.
10. Shopping: Goods and works estimated to cost US$50,000 or less may be procured using Shopping procedures.
11. Direct Contracting: Under circumstances which meet the requirements of paragraph 3.6 of the Procurement Guidelines, goods and works may be procured in accordance with the paragraph 3.7 of the Procurement Guidelines using the Direct Contracting procurement method.
12. Selection of Consultants: Consultants services comprise mostly technical studies, capacity building activities, as well as audits, engineering studies and construction supervision services. .
13. The following Bank methods and corresponding standard documents will be used:
Quality & Cost Based Selection (QCBS) for technical assistance, capacity building and audits as well as contracts for consultants services above US$200,000 equivalent per contract. Standard Bank procedures and documents will be used. Quality-based Selection (QBS). Services for assignments which meet the requirements set forth in section 3.2 of the Consultant Guidelines may be procured using the Quality-based Selection method in accordance with the provisions of paragraphs 3.1 through 3.4 of the Consultant Guidelines. Selection under a Fixed Budget (FBS) Services for assignments which meet the requirements set forth in section 3.5 of the Consultant Guidelines may be procured using the Quality-based Selection method in accordance with the provisions of paragraphs 3.1 and 3.5 of the Consultant Guidelines. Least-cost Selection. Services for assignments which meet the requirements of paragraph 3.6 of the Consultant Guidelines may be procured using the Least-cost Selection method in accordance with the provision of paragraphs 3.1 and 3.6 of the Consultant Guidelines. Selection Based on Consultant’s Qualifications (CQS). Services estimated to cost less than US$100,000 equivalent per contract may be procured in accordance with the provisions of paragraphs 3.1, 3.7 and 3.8 of the Consultant Guidelines.
60 Single Source Selection. Under circumstances which meet the requirements of paragraph 3.10 of the Consultant Guidelines for Single Source Selection, consultant services may be procured in accordance with the provisions of paragraph 3.9 through 3.13 of the Consultant Guidelines, with the Bank’s prior agreement. Individual Consultants (IC). Services for assignments that meet the requirements set forth in the paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provision of paragraph 5.2 and 5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.4 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis.
14. Short lists may be composed entirely of national consultants for contracts of less than US$200,000 equivalent per contract in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines, complying with the remarks mentioned above,
Fraud, Coercion, and Corruption
15. All procuring entities, as well as bidders, suppliers, and contractors shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.14 & 1.15 of the Procurement Guidelines and paragraphs 1.22 & 1.23 of the Consultants Guidelines.
B. Assessment of the agency’s capacity to implement procurement
16. ONEP has good experience in implementing Bank financed projects and then in carrying out procurement activities. Basically procurement activities will be carried out by the Central Department of Supply and Contracts (DAM) at the central level and, at the regional level, by regional and provincial departments of ONEP. A good number of staff will be involved in different steps of procurement. Assessment of ONEP’s capacities made for the Rural Water Supply and Sanitation project which is currently ongoing concluded that the public procurement system is solid and operates in a structured and reliable control environment and does not present major fiduciary risk. ONEP follows its own procurement rules which are fundamentally based on the national procurement rules (Décret sur les conditions et forms de passation des marchés de l’Etat, du 5 février 2007)”, which is generally in line with the Bank’s guidelines, with some exceptions as outlined above. At the central level of DAM, procurement capacity was found to be satisfactory. At the decentralized level, Regional Departments (DR), capacity was found to be fair.
17. Considering that procurement in the project will be mostly handled at central level and with DEP’s supervision and support to DRs at decentralized level, the overall risk is assessed to be low. This risk could lead to some minor non-compliance and delays during the project implementation and will be mitigated by the following set of actions:
(a) Agreed standard bidding documents for Works and Goods under NCB should swiftly be prepared and submitted to the Bank for approval in compliance with
61 the loan agreement, and with the appendices of the Bank letter to Minister Baraka on the Audit Clause, and the Fraud and Corruption clauses (AFCC);
(b) The initial Procurement Plan, indicating the thresholds for use of non ICB or non QCBS methods, should be completed and submitted on the basis of the model procurement plan furnished by MNAPR before negotiations, to be signed and annexed to the minutes of negotiations. Updated detailed procurement plans will be established, submitted to the Bank for no objection, and used during project implementation.
(c) Training in Bank procurement procedures will be provided after the negotiations to DR procurement staff; and
(d) Finally, the implementation design includes regular ex-post reviews.
C. Procurement Plan
18. A Project Procurement Plan in a format acceptable to the Bank has been prepared and will be updated at least once a year. The procurement plan for the first eighteen (18) month period was prepared and submitted to the Bank before the negotiations, for its approval. The procurement plan indicates which contracts are subject to the Bank’s prior review. All other contracts shall be subject to Post Review by the Bank. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The procurement plan will be available in the project’s database and in the Bank’s external website.
D. Frequency of Procurement Supervision
19. Supervision of Procurement by the World Bank is an integral part of Project supervision and implementation monitoring. The evaluation of existing procurement systems considers the overall risk assessment of procurement implementation for this project to be low. On that basis, and considering that the project is following as a part of a wider program an ongoing one, most of the procurement review will be carried out ex-post and will concern about five percent (5%) of contracts,. This percentage will be adjusted during Project implementation as a function of the performance of the implementing agencies and the results of reviews.
62 Thresholds for Procurement Methods
1. The following contracts will be subject to Bank prior-review:
Contract Value Expenditure Threshold Procurement Method Contracts Subject to Prior Review Category (US$) 1. Works and S&I >= 10,000,000 ICB All contracts <10,000,000 NCB None, except first three contracts under NCB Direct contracting All
2. Goods >= 5,000,000 ICB All contracts <5,000,000 NCB None, except first three contracts under NCB Direct contracting All
3. Services Firms >= 200,000 QCBS All contracts < 200,000 Autres Terms of Reference and Shortlists of all contracts Single Source
All contracts 4. Individuals >50,000 Single source All
2. Consultancy services estimated to cost above 200,000 US$ per contract for firm, 50,000 US$ per contract for individual and single source selection of consultants (firms and individual) will be subject to prior review by the Bank.
3. Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than 200,000 US$ equivalent per contract, may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
63 Annex 9: Economic and Financial Analysis KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
A. Demand and Affordability Analysis
1. The demand and affordability for individual house connections. There is now a very high demand for individual house connection in Morocco rural areas18. This level of service, reserved for a privileged elite at the beginning of the PAGER eleven years ago, has become more common in rural communities (over 470,000 HC were estimated to have been established in 2004) and more than 92 % declare desiring a HC. Moreover, for a cost of 2500 DH, about 80 % of the households would be ready to pay upfront for the connection while all households would be connected if they had the possibility to reimburse this cost every term over 7 years. Surveys conducted in 2005 in project areas suggest that , with similar credit conditions, over 60% of households were ready to pay 3,500 DH. Aggregated results of surveys on willingness to pay for HC-service are illustrated in the graph below19.
Cash
2. Consumption forecasts. All studies and surveys performed to date converge to assess the average consumption of individual customers between 8 and 9 m3 per month. Such a figure corresponds to 41 l per capita per day for a HC serving 7 people. This general average covers, however, noticeable regional variations (mainly linked to the availability of alternate resources and standards of living).
18 Hydroconseil – SCET Maroc : OBA pour l’AEPA en milieu rural au Maroc – Tome 4: Analyse de la demande – Juin 2007 19 The surveys covered the Taza, Taounate, Essaouira , Safi and El Jadida provinces. Taza and Taounate are located in the Rif hinterland of Nador, with substantially higher levels of poverty than Nador. Essaouira borders Safi to the south, and registers as poorer than Safi and El Jadida. The consolidated findings are deemed as conservative estimate for the willingness to pay in Safi, El Jadida and Nador.
64 3. The demand for sanitation. Nearly two-thirds of rural households are equipped with latrines. Half of them include a manual flush and a siphon. However, the households demand for sanitation is low: only 11.5 % of them declare willing their sanitation facility to be improved. The hygiene and communication campaign will therefore be critical towards reinforcing the rural households support to the National Sanitation Strategy. Not surprisingly, the demand for improved sanitation is higher among those households supplied with individual HC.
4. The demand for stand-pipes. For a long time, public stand-pipes were the only water supply option in rural areas and ten years ago, there was still large support among rural dwellers who were ready to contribute financially to their development. It is now clear that this level of service does not fit with the demand any more.20 However, SP can still benefit to households that cannot afford individual HC and may be developed in accordance with the community wishes.
B. Economic Analysis
Summary of benefits and costs
5. The project is expected to have very positive impacts on the quality of life of the population in the targeted areas by providing sustainable access to potable water to 340,000 rural inhabitants in some 1,000 villages while answering to the needs of the growing urban population in the neighboring cities.
6. The primary benefits of the project include:
(a) Time savings arising from reduced time spent collecting water, especially among women and girls. (b) Increased household water consumption, together with improved drinking water quality and improved hygiene practices, resulting in a decrease of the occurrence and severity of water borne diseases. (c) Reduced household spending on water supply;
7. The main costs of increasing access to potable water supply in rural areas are:
(a) Costs of studies, works and supervision of works linked to the construction of water production, conveyance and distribution infrastructure. (b) Costs of O&M and replacement of the infrastructure mentioned above.
20 “A significant number of SP is not used or abandoned: more than 15% of SP is dysfunctional. Only 40% of households supplied through SP actually use SP for drinking water purposes. The daily average consumption is around 8 lpcd what is much less than the 20 lpcd standard”. Abstract from the ONEP survey carried out in March 2005.
65 (c) Costs of project management including social mobilization, hygiene education, formation and training of management structures for village water distribution systems and wastewater management systems.
8. Potential costs of investments in additional grey-water management infrastructure have not been taken into account. The surveys have shown that the majority of households already have wastewater disposal solutions that can accommodate an increase in water consumption without the need for additional investment. As a safeguard, a budget has been provisioned under component 4 of the Project for potential interventions to allow for the construction of small grey water collection networks in situations where habitat density and soil conditions may not allow safe grey water disposal by traditional drainage nor by on-site sanitation systems. However, specific such situations have so far not been identified in the Project area and the evaluation of the additional costs and benefits of such interventions could not be included in this economic evaluation.
Methodology and main assumptions
9. An economic analysis was carried out for each infrastructure component of the project and for the project as a whole.
10. Main assumptions are described below:
(a) Benefits and costs have been projected over a 40-year horizon; (b) The opportunity cost of capital is assumed to be 10%, and alternative Net Present Values (NPVs) have also been estimated for discount rates of 8 and 12 %; (c) All transfers including taxes and subsidies are excluded from the analysis; (d) Conservative assumptions have been made on future water consumptions. Average population growth in the rural areas is assumed to be 0.5%. Consumption levels are estimated at 40 lpcd for Household Connections (HC) in rural areas, 60 lpcd for Household Connections in urban areas, and 10 lpcd for Stand Posts (SP); (e) An average yearly economic benefit was estimated for HC and SP water users both in urban and rural areas, based on the result of recent studies on the demand for both types of services and the costs avoided thanks to the provision of improved water supply21. The Average Yearly Economic Benefits used for the analysis were : 1. 1000 DH/month for a rural household supplied through SP 2. 3500 DH/month for a rural household supplied through HC 3. 2500 DH/month for an urban household supplied through HC
21 Hydroconseil - SCET Maroc : OBA pour l'AEPA en milieu rural au Maroc - Tome 4 : Analyse de la demande - juin 2007
66 (f) The Average Yearly Economic Benefit for rural household supplied through SP is a conservative estimate. It is consistent with the valuation of time savings based on the assumption of a reduction of the time spent collecting water of 30 minutes per day and per household. It is also consistent with estimations of avoided cost in the situation where no source is available locally and households have to buy their water to vendors at a price that can vary from 50 DH/m3 to 350 DH/m3); (g) The Average Yearly Economic Benefit for rural and urban households have been estimated by calculating the area under the demand curve for both types of household. Conservative average estimates of the price of the first cubic meter have been derived from the available data on the price of water sold by local private water vendors. The price of the first cubic meter is estimated to be 75 DH/m3 in rural areas and 40 DH/m3 in urban areas. The demand curves are assumed to decrease linearly from the price of the first cubic meter above mentioned to reach the average tariff of 5 DH/m3 for the quantity assumed to be the average consumption in each settlement categories (40 lpcd in rural areas and 60 lpcd in urban areas); and (h) Given the assumed difference in economic benefits derived from the different levels of services (HC or SP) provided in rural areas, alternative scenarios of HC generalization have been used to simulate the impact of a lower or faster generalization of HCs on the ERR of the different subprojects.
Summary of results
11. The main results of the economic analysis of the infrastructure components are presented in Table 1. The Economic Rates of Return (ERR) of the sub-projects are 13.92% for the Nador/Driouch sub-project, 13.37% for the Safi/Youssoufia/Sidi Bennour sub-project, and 13.47% for the Errachidia sub-project.
12. The total Net Present Value is estimated at US$ 67 million with a discount rate of 10%. The total NPV varies from US$ 131 million with a discount rate of 8% to US$ 24 million with a discount rate of 12%.
Sub-project ERR NPV (r = 8%) NPV (r = 10%) NPV (r = 12%) US$ US$ US$ Nador/Driouch 13.92% 49,023,611 25,825,901 10,317,646 Safi/Youssoufia/Sidi 13.37% 61,915,884 31,054,691 10,340,188 Bennour Errachidia 13.47% 20,371,310 10,170,631 3,482,881 Total 131,310,805 67,051,223 24,140,715
67 Sensitivity analysis
13. The three sub-project’s ERRs and NPVs avec been estimated for various scenarios of increase in the rate of SP and HC coverage. The results are summarized in the table below and show a significant positive impact of the increase in HC coverage on the economic benefits derived from the project.
Scenarios ERR NPV @ 8% NPV @ 10% NPV @ 12% US$ (US$) (US$) Nador/Driouch Nador/Driouch – S0 13.26% 43,548,759 21,486,835 6,792,856 HC connection rate 50% in 2015 Nador/Driouch – S1* 13.92% 49,023,611 25,825,901 10,317,646 HC connection rate 60% in 2015 Nador/Driouch – S2 14.33% 53,056,669 28,873,154 12,681,653 HC connection rate 80% in 2015 Safi/Youssoufia/Sidi Bennour Safi/Youssoufia/Sidi Bennour– S0 11.66% 40,055,052 14,557,950 -2,459,178 HC connection rate 30% in 2015 Safi/Youssoufia/Sidi Bennour – S1* 13.37% 61,915,884 31,054,691 10,340,188 HC connection rate 50% in 2015 Safi/Youssoufia/Sidi Bennour – S2 14.43% 73,238,274 40,479,805 18,251,716 HC connection rate 60% in 2015
Errachidia Errachidia – S0 7.68% -997,867 -5,712,031 -8,672,936 No new SP and HCs Errachidia – S1 7.74% -965,075 -6,567,820 -10,048,306 SP coverage increase to 100% No new HC Errachidia – S2* 13.47% 20,371,310 10,170,631 3,482,881 No new SP, increase of HC connection rate to 70% Errachidia – S3 15.33% 33,613,015 19,125,441 9,598,653 SP coverage increase to 100%, increase of HC connection rate to 70% * Scenario used as reference scenario for the project’s economic evaluation.
C. Financial Analysis
14. The Financial Analysis aims to assess, (i) the financial viability of ONEP as a whole, on the basis of its recent financial performance and the results of the financial model, and (ii) the impact of the project’s activities on ONEP’s financial position.
68 Background
15. The overarching objective assigned to ONEP is to develop urban and rural WSS services through cost recovery policies based on (i) full cost recovery of bulk water supplies to régies and concessionaires; (ii) cross-subsidization of water supply services in secondary urban centers and rural areas by bulk sales; (iii) contributions of communes to sewerage and rural water supply investments; (iv) contributions of consumers to connection costs and network expansion; and (v) limited budget contributions to sewerage and RWS investments. ONEP is expected to maintain its financial equilibrium and autonomy to preserve its credibility with donors and commercial lenders.
16. Policy Assessments. The development strategy of the Moroccan water and sanitation sector at large (including water resources mobilization, irrigation and urban and rural water supply and urban sanitation), as well as the underpinning financing and cost recovery policies, has been extensively reviewed by the Bank22. This comprehensive body of sector work, which largely inspired the First Water DPL (Ln. 7444-MA), recommended critical reforms that would guide, inter alia, the increased involvement of ONEP in urban sanitation and rural water supply, beyond its historical mandate in bulk water provision and water supply in medium and small urban centers. These recommendations are summarized below: To promote efficiency gains and operators’ performances through an increased contractualization; To improve the transparency of the costs of combined activities of the actors (electricity/water/sewerage for régies and concessionaires, bulk water/urban water /rural water/sanitation for ONEP); To redeploy budget support to sector investments by using a results-based expenditures framework and to explore the possibilities of fiscal exemptions and the allocation of parafiscal revenues.
17. Against this background, some progress has been registered at ONEP’s level with the signing of the 2008-2010 Framework Agreement (see paragraphs 22-24 of Annex 1) and the adoption of budgetary procedures that allowed to secure the contributions of communes to sewerage and RWS investments, particularly through the establishment of a Designated Account devoted to the implementation of the national Sanitation Program (Programme National d’Assainissement, PNA). However, instead of increasing as expected, net budget transfers became substantially negative since 2007, as a result of the termination of the VAT exemption for ONEP’s investment expenditures23.
22 The relevant sector work includes: the 2004 Water and Sanitation Sector Policy Note (Report no. 29994- MOR), the 2008 Assessment of Financial Flows of the Water Sector (Report no. 34675-MOR) and the Strategic Review of the National Sanitation Program (Report no. 40298-MOR) 23 The VAT rate applicable to water sales is 7 percent, while the rate applicable to most of ONEP’s CAPEX is 20 percent. This generates an annual tax credit of about DH 500 million, which, under the current VAT rules, ONEP may not recover and reduces accordingly ONEP’s operational cash flow.
69 Past Performance
18. ONEP’s past financial performance is summarized in Table 1 below, which provides the evolution of the key financial data and ratios since ONEP was given the overall responsibility for developing RWS services in 2004. The mandates of ONEP generate a very high level of capital expenditures, which are higher than the annual revenues. The investment efforts remained sustainable over the review period (2004- 2008) as operations generated a steady level of cash flow, even though the more profitable activity (bulk water) was relatively stagnant, as well as rates (with the exception of one tariff revision in 2006). The increase of the global working ratio (cash expenditures/sales) in 2007-2008 is mainly attributable to energy costs.
Table 1: ONEP Financial Data (DH Million) and Indicators 2004-2008
Year 2004 2005 2006 2007 2008 Operating revenues 2,755 2,922 3,107 3,510 3,845 o/w Sales 2,612 2,751 2,958 3,118 3,325 Cash operating expenditures 1,540 1,607 1,753 1,937 2,024 Depreciation and allowances 920 955 973 1,100 1,206 Operating income 455 360 382 473 614 Net income 130 130 134 137 92 Cash generated by operations (before interest) 1,110 1,153 1,335 1,494 1,825 Debt service 500 484 628 646 987 Working Capital Requirements 480 -644 -45 15 -350 Capital expenditures 1,868 3,012 3,109 2,352 3,876 Borrowings 990 899 1,535 1,804 1,780 Grants and contributions 713 881 513 93 1,174 Variation of cash -36 82 -309 378 13 Working ratio (%) 58.9% 58.4% 59.3% 62.1% 60.9% Debt service coverage (times) 1.3 3.7 2.2 2.3 2.2 Source: Audited financial statements (2004-2008)
19. Although audited accounts do not provide detailed information on the financial viability of the three main activities of ONEP, they include a specific assessment of the operating results of gérances, which regroup the urban and rural centers where ONEP distributes water under management contracts with municipalities. Table 2 below shows that the water surcharges on bulk water may no longer compensate the operating losses.
70 Table 2: Operating Results of the Gérances (DH Million)
Year 2006 2007 2008 Operating income -551 -617 -733 Surcharges 646 664 688 Income after surcharges 95 47 -45 Source: Audited financial statements (2006-2008)
20. Commercial Performance and Productivity. The commercial performance is improving in water distribution activities, with arrears amounting to around two months of sales. Bulk water customers (water distribution companies) owe on average about five to six months of billing, which could be improved and the Framework Agreement’s target is to reduce the receivables to three months. ONEP made a specific effort in 2008 to better monitor and collect the contributions of the municipalities to RWS and sanitation investments.
21. A 2007 study carried out by KPMG also showed that the collection of the contributions of the municipalities to RWS and sanitation investments (on average 20 percent to 30 percent of the total costs) was quite ineffective and that the arrears of the municipalities were not adequately monitored. ONEP and the Government have since taken corrective actions (see paragraph 17 above).
22. Productivity. The standard ratio of staff productivity (number of staff per 1,000 connections) is meaningless at corporate level, as the majority of ONEP staff is engaged in bulk water production, planning and execution of investments and activities other than urban water supply. Taking into account employees working exclusively for the gérances (35 percent of the total staff), the ratio is close to 3 staff per 1,000 connections, which is satisfactory.
Cost Recovery
23. As mentioned above (para. 15), the operating costs of sanitation and rural activities are subsidized by bulk sales, whereas budget contributions to investment costs are quite modest, contrary to what is generally observed elsewhere. In the case of RWS, the cost recovery rules that were set at the beginning of the PAGER were as follows:
Additional investments in water production and conveyance are shared between ONEP which finances (80 percent) and local governments (communes rurales, CR) (20 percent, including a DH 500 contribution from households). Investments in distribution, including networks and service connections are expected to be financed by water user associations; in case of a direct involvement of ONEP in distribution, each household has to pay DH 2,500 and the CR contributes 30 percent. ONEP sells water (i) to gardiens gérants at DH 2.37/m3 (ONEP’s rate for standpipes) who sell to final customers at about DH 6-7/m3; (ii) to network operators at DH 3.62/m3, who distribute water at about DH 9/m3.
71 The main administrative center (chef-lieu) of the CR may be equipped by ONEP with a distribution network; households then get connections at a preferential prices (half of the normal ONEP bordering fee) and pay for water consumption at the usual (urban) ONEP rates, which are much lower than the rates charged by other network operators. A surcharge of 5 percent of the bulk water tariff (the PAGER surcharge) is levied on urban water consumption to subsidize ONEP activities in rural water supply, together with an annual budget subsidy of DH 150 million.
24. The above rules reflected situations where douars were generally close to the trunk lines that ONEP had already developed to supply urban centers. The rules became irrelevant as (i) ONEP now must serve more remote CRs and douars, which requires to develop entirely new trunk lines; (ii) the rural population demands HC, not standpipes; and (iii) CRs and people increasingly find that ONEP’s management and development of distribution networks represent the most convenient and economic option, when compared to the efforts and costs associated with the establishment of WUAs.
25. ONEP acknowledged these shortcomings, particularly those related to the growing demand for HCs and halted all developments of distribution networks and connections in rural areas in January 2009, pending a review of the recovery rules for distribution investments, which are set at the discretion of ONEP (water tariffs and surcharges and recovery rules for production and conveyance investments are regulated). This review was carried out by using a specific financial model. The model showed that (i) investing in rural water distribution would generate substantial financial losses for ONEP as the current level of contributions of households and CR is insufficient to cover costs; and (ii) although 80 percent of the rural population may be provided with water connections at an acceptable cost, the remaining 20 percent would require investments with a cost of about DH 4,000 per capita. In consultation with DGCL, ONEP decided accordingly (i) to raise the household contribution for HC to DH 3,500 and the CR contribution to 50 percent of the distribution costs: and (ii) to set an eligibility threshold of DH 4000 per capita for the distribution programs.
26. It was agreed further that ONEP would carry out a comprehensive study of the cost recovery of rural water, together with the other actors of the sub-sector, in order to adapt rules and tariffs to the new conditions of development of rural water services.
Financial Forecasts
27. Financial Modeling. ONEP prepared a comprehensive financial model that covers the period 2010-2017 and provides financial forecasts for the three main activities (urban water, rural water and sanitation). Key financial information and indicators are summarized in Table 1 of Appendix 1 to this annex. The model assesses the viability of an investment program of DH 28.4 billion over the review period, of which 45 percent are devoted to urban water supply, 31 percent to rural water supply and 24 percent to sanitation. The main assumptions and financing options underpinning the model are as follows:
72 productivity would increase with a constant number of staff over the period and the working ratio would decrease from 61 percent in 2009 to 51 percent in 2017; water tariffs would increase annually at a rate of 5 percent in 2010-2012 and 3 percent thereafter (vs. a 2 percent inflation rate) and the sanitation surcharge applied to water consumption would increase by 0.10 DH/m3 every year; the VAT issues (para. 17) would be addressed by a progressive increase of VAT rates applied to water sales; the budget subsidy for rural water, which was set at DH 150 million per year in the Framework Agreement would be maintained after 2010 in the form of an operating subsidy in the same amount.
The contributions of communes to sewerage investments would be paid through the Designated Account of the PNA and would increase to DH 320 million per year.
28. The model shows that under the above assumptions ONEP may maintain its financial equilibrium until 2017 and keep a ratio of debt service coverage higher than 1.2 over the duration of project implementation.
29. Financing Options. The above financing options were discussed with the Ministry of Finance. In addition, it was agreed with the latter that special projects (e. g. for supplying water to new cities) would benefit from specific financing conditions that would neutralize their impact on ONEP’s financial position. Therefore, the financing options are substantially in line with the recommendations of the policy assessments (para. 16), as (i) the budget support to RWS and sewerage is secured and increased; and (ii) that the principle of annual tariff increases is confirmed, without increasing cross- subsidization that had already reached its limits. The solution of the VAT issue would also allow reversing the unfavorable trend of net budget transfers to ONEP that have taken place since 2007. The effective implementation of the financing options remains to be checked, particularly the planned tariff revisions.
30. The financial model does not include the rural water investments in distribution, which are expected to be fully covered by the contributions of households and CRs. The proposed project would account for about 23 percent of the entire rural water program of ONEP over the period 2010-2013 and would allow serving about 342,000 people. Assuming an investment cost per capita for the entire program equal to the one of the proposed project, ONEP’s rural water program would allow serving 350,000 people per year, which in turn would require annual contributions from the CRs of about DH 210 million.
31. Rural Water Financial Forecasts. Table 2 of Appendix 1 provides key financial data and indicators for the rural water activities of ONEP. Under the above-mentioned assumptions, the financial model shows that:
73 the development of rural water services would require an average cash contribution of DH 547 million per year from urban water activities; rural water sales cover cash operating expenditures and, with the operating subsidy, may cover about 30 percent of the debt service requirements that are related to RWS projects; the accumulated debt service over the review period is equivalent to the accumulated borrowings; rural water tariffs would need to be increased by 240 percent to achieve financial equilibrium without additional budget subsidies; the only realistic degree of freedom of the key factors of financial viability is the rate of subsidization of investments.
Financial Impact of Project Activities
32. Methodology. The financial impact is measured in terms of incremental (with/without project) cash-flows generated by project activities, from ONEP’s standpoint. The analysis covers all water supply investments, i.e. 92 percent of the total project costs. Data from the economic analysis are adjusted to take into account: (i) taxes (VAT); (ii) inflation at a 2 percent annual rate for operating expenditures and renewal investments; and (iii) annual tariff increases estimated in line with the assumptions of the financial model. Investment costs are assumed to be funded by: (i) contributions of communes and population for 20 percent of the cost of conveyance (regional trunk lines, lateral mains and storage); (ii) the Bank loan and ONEP funds for 80 percent and 20 percent of the remaining costs, respectively. Renewal costs are assumed to be fully funded by ONEP.
33. Main Assumptions. The annual financial cash flows consist of (i) incremental sales of water delivered to douars using the current rates (DH 2.37/m3 for water supplied to standpipes and DH 3.62/m3 for water delivered to operators); (ii) incremental sales of water delivered to ONEP direct customers in urban centers using ONEP’s water rates; (iii) incremental sales of water delivered to régies (RADEES and RADEEJ) using ONEP’s bulk water rates; (iv) incremental operating expenditures adjusted for inflation; (v) ONEP’s share of investment and renewal costs; and (vi) debt service of the Bank loan.
34. FIRR and NPV. Based on the above, the financial internal rate of return (FIRR) and the net present value (NPV) of the investments subject to the analysis are as follows:
Table 3: FIRR and NPV Nador/Driouch Safi/Youssoufia/Sidi Project Area Errachidia Overall Bennour FIRR (%) -2.7% -6.2% 2.3% -2.7% NPV@ 8% (US$ - 37.54 - 59.91 -13.16 - 110.62 million) Long-term 18 DH/m3 24 DH/m3 13 DH/m3 marginal cost
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35. As expected, the financial outcome substantially differs from the results of the economic analysis. The gap between the FIRR and the EIRR grows with the proportion of rural consumers in the project beneficiaries. This is confirmed by the values of the long-term marginal costs of the various components, which are provided in the above table, and which point to the wide gap between costs and tariffs in the absence of subsidies suitable for rural water investments. The LTMC value for Safi/Youssoufia/Sidi Bennour evidences the high cost of water when specific conveyance systems have to be developed to serve exclusively rural areas.
36. Sensitivity Analysis. Three alternative financing scenarios have been explored as follows:
Scenario 1 : additional budget subsidy of 30 percent of total investment costs Scenario 2 : full compensation of the VAT on investments Scenario 3 : budget subsidy and VAT compensation
37. The above scenarios largely improve the FIRR of the Nador/Driouch and Errachidia subcomponents, the latter reaching values close to the weighted average cost of capital (WACC). The FIRR of the Safi/Youssoufia/Sidi Bennour component, remains, however, negative under all scenarios; this component would reach equilibrium only if the budget subsidy rate were increased to 60 percent of the investment cost (with VAT compensation). A 30 percent subsidy for the three components would amount to DH 360 million, which is consistent with the estimates of the financial model (DH 250 million per year).
Table 4: FIRR in various financing scenarios Scenario Nador/Driouch Safi/Youssoufia/Sidi Errachidia Overall Bennour Budget subsidy : 30% -1.3% -4.6% 3.2% -1.2% VAT compensation 1.5% -5.4% 3.8% -1.6% Subsidy and VAT 0.4% -3.1% 5.1% 0.5% compensation Subsidy amount (M 115 206 39 360 DH)
Overall Assessment.
38. The above findings show that, on the whole, ONEP’s RWS activities cannot by themselves reach financial equilibrium; the specific activities of the project are no exception. The project’s financial viability is thus contingent on ONEP’s capacity to compensate their negative financial impact through the cash flow generated by bulk sales. It was therefore agreed at negotiations that ONEP shall maintain a ratio of net revenues (defined as the annual operating revenues plus the net non operating income (excluding bad debts to be written off) minus cash operating expenditures (excluding interest charges)) to the annual debt service requirements) higher than 1.2.
75 Appendix 1 to Annex 9 Financial Data
Table 1: Selected Financial Data (DH Million) and Indicators 2010-2017 – ONEP
Year 2010 2011 2012 2013 2014 2015 2016 2017 Operating revenues 4,088 4,624 5,087 5,395 5,680 5,987 6,283 6,595 o/w Sales 3,751 4,248 4,660 4,936 5,203 5,486 5,768 6,063 Cash operating expenditures 2,229 2,365 2,510 2,636 2,756 2,875 2,992 3,111 Depreciation and allowances 1,329 1,471 1,638 1,797 1,930 2,012 2,084 2,169 Operating income 510 789 940 962 994 1,100 1,207 1,315 Net income 93 100 125 127 188 312 449 592 Cash generated by operations 1,801 2,216 2,491 2,665 2,802 2,937 3,058 3,205 (before interest) Debt service 1,034 1,264 1,447 1,598 1,759 1,858 1,889 1,838 Working Capital Requirements 14 647 332 410 596 682 516 544 Capital expenditures 4,112 3,784 3,759 3,015 2,637 2,569 2,537 2,473 Borrowings 2,278 1,940 1,940 1,621 1,447 1,506 1,488 1,409 Grants and contributions 1,347 690 668 664 643 663 666 693 Variation of cash 266 -849 -440 -73 -99 -3 270 452 Net cash on hand 1,527 678 238 165 66 63 333 785 Cash generation by activity: Urban Water 875 26 380 744 880 927 1,157 1,348 Rural Water -492 -557 -499 -513 -648 -558 -560 -550 Sanitation -117 -318 -321 -305 -331 -371 -327 -346 Working ratio (%) 59.4% 55.7% 53.9% 53.4% 53.0% 52.4% 51.9% 51.3% Debt service coverage 1.73 1.24 1.49 1.41 1.25 1.21 1.35 1.45 (times) Source: ONEP Financial Model
76 Table 2: Selected Financial Data (DH Million) and Indicators 2010-2017 – Rural Water Activities of ONEP
Year 2010 2011 2012 2013 2014 2015 2016 2017 Sales 166 196 220 230 240 249 258 268 Operating subsidy 0 150 150 150 150 150 150 150 Operating revenues 166 346 370 380 390 399 408 418 Cash operating expenditures 132 160 184 200 217 233 250 266 Depreciation and allowances 155 189 223 254 284 312 338 363 Operating expenditures 287 349 407 454 501 546 588 629 Operating income -122 -3 -37 -74 -111 -146 -180 -212 Net income -276 -185 -238 -283 -312 -362 -408 -451 Cash generated by operations (before interest) 34 186 186 180 173 166 159 151 Debt service 336 374 465 521 586 573 586 600 Working Capital Requirements -113 139 -10 -44 52 35 32 0 Rural investments 1,121 875 875 875 750 750 667 667 Financial investments 215 161 162 148 123 123 107 107 Borrowings and grants 614 597 597 597 511 578 513 513 Contributions of customers 67 53 53 53 45 45 40 40 Contributions of communes 202 158 158 158 135 135 120 120 Budget subsidy 150 0 0 0 0 0 0 0 Variation of cash -492 -557 -499 -513 -648 -558 -560 -550 Working ratio (%) before 79.6% 81.6% 83.6% 86.9% 90.3% 93.6% 96.6% 99.4% operating subsidy† Debt service coverage 0.10 0.50 0.40 0.35 0.29 0.29 0.27 0.25 (times) †Calculated as the ratio of rural water sales to cash operating expenditures
Source: ONEP Financial Model
77 Annex 10: Safeguard Policy Issues KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
1. The project triggers two safeguard policies: Environmental Assessment (OP/BP 4.01) and Involuntary Resettlement (OP/BP 4.12). In order to address these safeguard policy issues and to ensure that implementation of project activities will be carried out in an environmentally and socially sustainable manner, ONEP has prepared (i) an Environmental and Social Management Plan (ESMP) and (ii) a Land Acquisition Framework (LAF). The following sections of the Annex present the rationale for the ESMP and LAF.
2. In additional to semi-annual project status reports, ONEP will prepare an annual report to document compliance of project activities with regards to environmental and social safeguards, as per the ESMP and LAF.
Environmental Assessment
3. According to the Bank’s Safeguard and Operational Policies, the Regional Potable Water Supply Systems Project was rated “B” and its implementation is subject to a partial Environmental Assessment and an Environment Management Plan.
4. An Environmental Assessment (EA) of the project was finalized in October 2009, which included :
An analysis of the natural environment in the project areas, in particular to assess their environmental sensitivity and vulnerability An assessment of the project activities on the basis of the project documents, technical studies and Environmental Impact Assessments of the three sub-projects (Nador/Driouch, Safi/Youssoufia/Sidi Bennour and Errachidia) including the public consultations results and visits of some villages; and An analysis of planned activities and an assessment of their potential environmental impacts as well as of their socio-economical consequences on the project’s beneficiaries.
5. Public consultations were organized in three project areas (Nador/Driouch, Safi/Youssoufia/Sidi Bennour) in order to inform the population and concerned stakeholders on the project activities, to associate them to the assessment of the project’s potential environmental impacts, and to allow them formulating their comments and proposals. With regard to Errachidia, public consultations were not organized given that the works consist of a renewal / enhancement of the existing regional pipeline, essentially along sections of existing pipelines, without the development of new rural water supply standpipes of networks.
6. The main positive environmental and socio-economic impacts expected from the project include:
Increased availability of potable water, a vital resource for human development in rural areas; Reduced pressure on groundwater with a beneficial effect on groundwater levels; Improved quality of water supplied to households resulting in a decrease in waterborne diseases, especially among children;
78 Easier access to potable water resulting in less time spent in fetching water, especially for women and children; Increased availability and involvement of women in community-based associations; Creation of local jobs and mitigation of rural-urban migration through the improvement of rural living conditions; Increased level of environmental awareness in rural communities, especially in relation to wastewater; Promotion of sustainable practices for greywater management and rural sanitation; Development and dissemination of improved on-site rural sanitation (RS) solutions adapted to the local rural environment; Contribution to the promotion of a RS market, and capacity building with regard to the provision of on-site sanitation services, works and supplies.
7. The EA also allowed to inventory potential negative environmental and socio- economic impacts of project activities and to identify mitigation measures which could reduce or prevent them. The main potential negative impacts that could be created by the project include: An increased consumption of surface water resources; Increased wastewater generation and discharges, with associated risk of groundwater and surface water resource pollution; Risk of increased pathogen contamination of groundwater ; Risk of development of water borne diseases as a result of untreated wastewater stagnation or reuse; Temporary and localized nuisances due to the construction works ; Increased energy consumption for water supply operations.
8. Environmental and Social Management Plan. An Environmental and Social Management Plan was proposed as part of the project preparation studies. It aims at integrating environmental protection concerns into the design, planning, management and implementation processes of project activities. This Environment and Social Management Plan (ESMP) includes the four following components:
Environmental management and coordination; Mitigation measures for project’s negative impacts; Project’s environmental performance monitoring and evaluation plan, and Environmental management capacity building program.
9. Except for the greywater management component (Component 2), the EA confirmed that the negative environmental impacts of the project were minor to moderate. No major or irreversible negative impact was identified.
10. The impacts generated by project construction activities, such as laying conveyance and distribution pipes, drilling, and occasional construction works (treatment plants, pumping stations, reservoirs, etc.) are considered of low, local and temporary importance. Bidding documents will specify that contractors will be held to good management practices as per ONEP’s guidelines, and to site specific Environmental and Social Management Plan mitigation and reporting requirements, consistent with specific environmental assessments developed for each of the three main subprojects in component 1. New water treatment plants will also be subject to an environmental audit after the first year of operation.
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11. Particular attention was paid in the report to the greywater management and rural sanitation component of the project. The analysis of the environmental impact of wastewater generated by rural water supply led to a sorting of villages along two categories:
Category 1: Villages supplied by SP or HC for which the environmental impact will be managed through the development of individual greywater management solutions with Technical Assistance provided by the project ; Category 2: Villages with concentrated habitat with a risk of soil saturation and uncontrolled greywater discharges in case of household connection service, and that are located in sensitive areas (close to protected areas, vulnerable water resources…).
12. For the first category of villages, the project plans for an integrated support program for the creation of provincial markets of individual sanitation, awareness and capacity building of relevant stakeholders (rural municipalities, households, suppliers of goods, local construction enterprises, service providers, etc…), and the capitalization and dissemination of success stories in the field of rural sanitation. The program also includes the implementation of pilot projects of improved or standardized high standing individual sanitation and ad-hoc collective or semi-collective systems.
13. Despite their relatively small number, villages in the second category without adequate wastewater collection service, could have major negative impacts on the environment and constitute, therefore, the project’s black points.
14. The impacts mitigation measures proposed for this category of villages consist in screening them at the preliminary stage of the project, in order to identify them. Once identified, those villages should be subject to a specific wastewater study in order to identify the adequate greywater collection system. HC-service water supply to the villages would be conditioned to the implementation of the recommended sewerage system.
15. The screening tool and justification of criteria chosen to classify the villages according to the environmental impact of greywater are presented in the Environmental Management Plan.
16. The proposed approach enables therefore to overcome the constraint linked to the villages and housing diversity and to propose differentiated mitigation measures. With the implementation of the support program for the project’s rural sanitation component, the use of the sieving tool for the identification and management of villages that may have major environmental impacts and the reinforcement of environmental monitoring of the project’s rural sanitation component, the environmental impacts of grey waters generated will be low and localized.
17. The proposed support program will allow starting implementing rural sanitation solutions that are adapted to local conditions and conform to ONEP’s present mandate. It is expected that on-going initiatives of other concerned public stakeholders will enable to adopt quickly a national strategy for the development of rural sanitation with a broader mandate for ONEP for an optimized an integrated management of rural water supply and sanitation projects.
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18. Besides, the compliance of project activities with Bank’s environmental and social safeguards was checked. The diagnosis realized confirms the “B” rating of the project and its compliance with Bank’s operational policies.
19. To summarize the environmental impact assessment, the project has obvious positive impacts on the targeted rural population: social, sanitary and economical. With the implementation of the proposed Environmental Management Plan and, in particular, of the recommended solutions for an adequate management of discharged grey waters, those impacts will be durable and will permit to improve in a sustainable way the living conditions of the population targeted by the project. The following table summarizes the positive and negative impacts and presents how they will be mitigated, monitored and evaluated.
20. Environmental capacity building. An assessment of environmental capacity should be conducted for every ONEP Regional Directorate involved in the Project, before Project launch. Awareness and capacity building workshops should be offered to relevant ONEP staff, contractors and projects stakeholders, assisted by environmental specialists, with the support of available ONEP guidelines and documentation. A summary of the proposed capacity building workshop program is presented below:
Workshop topic Target Audience Support materials Environmental Relevant ONEP staff ONEP’s EA Guide assessment for water Relevant water supply
supply projects sector professionals Environmental Relevant ONEP staff Environmental & Social Management during management rules for construction Relevant contractor staff construction phase (ONEP) Environmental Relevant ONEP staff Planned ONEP Guides to Monitoring Relevant contractor staff environmental monitoring Relevant ONEP staff Greywater management Suppliers, providers and rural sanitation FAO/ONEP Guides Interested communities & practice households
21. The costs for implementing the training and monitoring plan in the ESMP were estimated to MAD 30 million. The environmental management costs associated with the project are therefore less than 2.5% of the project budget. These costs will be incurred by ONEP as part of current operations, and are not financed under the IBRD loan.
22. In additional to annual environmental monitoring reports to be generated for the Project, ONEP will include information on safeguards policies application and monitoring in its periodic progress reports to the Bank, including as related to the implementation of site- specific ESMP in construction bidding documents.
81 SUMMARY OF IMPACTS, AND ENVIRONMENTAL AND SOCIAL MITIGATION AND MONITORING MEASURES
Positive impacts Source of the Environment/ Negative impacts affected element impact Nature of the impact Intensity Nature of the impact Intensity
Easy access to Drinking Water, including increased quantity and better quality: socio- Increased pressure on a depleting resource economic, health and economic impacts are Major Mobilizing and very positive with a clear improvement in usage of water Water Average the quality of life of the rural people served resources Mitigation: Awareness-raising of the public on water
conservation
Preservation of groundwater resources Average
Risk of soil and water resources pollution through mud. Average Mitigation: Sludge treatment and disposal of treated sludge in controlled landfills
Water treatment Water and soil Water purification Major Risk of accidental pollution by waste water or uncontrolled chemical products. Mitigation: Developing a plan to prevent risks of Moderate accidental pollution. Monitoring: WTPs Environmental audits after the first year of operation. Supply works, and special construction Dust, noise, hydrocarbon emissions and waste oil Weak works discharge, solid waste, and road traffic disruption. impact, Jobs creation (local workers are solicited Water, soil and air Mitigation: best management practices regarding localized for the works ) - tertiary sector Weak constructional works. ONEP requirements for and development managing environmental and social projects. transient
82
Environment/ Negative impacts Positive impacts Source of the affected element impact Nature of the impact Intensity Nature of the impact Intensity Risk of saturation and illegal discharge of wastewater - Risk of increased concentrations of pathogens in water and soil - Risks of waterborne diseases.
Mitigation: Identification through screening process - specific rural sanitation/greywater management (RS) Increased greywater studies, and HC conditionality: implementation of discharges in appropriate treatment system recommended by the Water and soil Major category 1 villages studies. Contribution to the implementation of the national RS strategy (in Monitoring: preparation). Adoption of a performance indicator for Development and implementation of specific RS project activities; RS solutions adapted to rural areas. Monitoring water quality in pilot douars; Creation of a RS market RS component evaluation study after second RS stakeholders awareness-raising year of program activity. and capacity building (Rural Major municipalities, households, suppliers, construction and transport enterprises, Risk of soil and water contamination. Risk of etc.). waterborne diseases. Creation of stable jobs for skilled workers. Mitigation: Identification through screening and Contribution to the reduction of support for the implementation of improved or high- waterborne diseases due to lack of AR standing on-site sanitation solutions Increased greywater discharges in Water and soil Monitoring: Moderate category 2 villages Adoption of a specific performance indicator for RS project activities. Monitoring of water quality in the pilot douars. Evaluation study of the RS program component after the second year of program activity.
83
Involuntary Resettlement / Land Acquisition24
23. Principles. In order to achieve its infrastructure investment program in water supply and sanitation, ONEP will need to acquire land under various land tenure arrangements for the related works and equipment. Consequently, public domain and temporary occupancy regulations will apply, as specified by Law No 7-81, dated June 5, 1982 and its implementing decree No. 2-82-382 dated April 16, 1983. The Land Acquisition Framework was prepared in accordance with the provisions of this law and according to the requirements of World Bank OP 4.12. Specifically, the proposed policy framework for land acquisition includes measures which ensure that the affected population is:
Informed of the options available to them and the rights attached to handing over of land or land transfer; Consulted, provided with several choices and informed of realistic alternatives to the technical and economic plans; and Immediately provided with compensation, equivalent to total replacement costs for the loss of assets directly attributable to the project.
24. Securing full compliance with OP 4.12 should remain a forefront concern during project implementation and supervision.
25. Preparation and approval process of the LAF. ONEP has a long experience in land acquisition as it relates to water supply and sanitation projects. The LAF is based on the file prepared by ONEP on land acquisition practices and the results of consultations between experts, consultants, Bank lawyers, and ONEP which were organized for the preparation of the LAF and according to OP 4.12 provisions. The draft LAF was prepared by ONEP with the help of a consultant familiar with the Bank’s safeguard policies and was subsequently submitted to the Bank for comments. The approval of the final draft LAF takes into accounts these comments. . 26. Estimates of land to be acquired. At this stage of project preparation, the trunk line routes and specific locations of some project collective works are yet to be determined. The area of lots to be acquired or made available by the communes for ONEP is estimated at 515.5 ha or 59% of total land area without any possible distinction at this stage between public and private land. Areas of land to be directly acquired by ONEP include some 270 ha of public land, representing 31% of the total land, and 84.5 ha of private land, or 10% of the total land area. Land in the public domain is handed over to ONEP for its works through a temporary occupation agreement entered into with the public administration managing said land. This agreement is automatically renewed as long as the works justifying the temporary occupation are ongoing.
24 Pre-feasability studies indicate that the land acquisition described here generally entails no physical resettlement or impact on residences or economic activities and that only the asset value of undeveloped land is concerned. Therefore, for ease of communication with the client and the public, the resettlement instruments have been entitled Land Acquisition Framework and Land Acquisition Procedures. Irrespective of the title, the instruments respond fully to the Bank's op.p.4.12 policy requirements in the context of this project.
84 27. Relevance of the legal framework. Land acquisition under the Project will follow Law N°7-81. The review of Law N°7-81 shows that the main arrangements proposed by OP 4.12 to protect the rights of the expropriated party are complied with. The basic differences are in its application, the waiting period for the compensation, and the following three aspects:
The law does not provide compensation for the loss incurred by non owner farmers, who are adversely affected by the expropriation or the loss of their livelihood. The law does not make any explicit reference to the «replacement cost». The law provides that works on expropriated land can start as soon as the decision to expropriate is made through an administrative process involving an order of the Government (Minister of Interior or Prime Minister depending on the scale of the land to be expropriated) or a judge’s ruling to transfer the property. Such decision entails that a provisional budget for compensation is made by the beneficiary of the land to be expropriated.
28. Regarding the first of these three aspects, the law only recognizes as expropriation stakeholder those eligible persons holding the property title or equivalent. Only actual and proven damage is taken into consideration, including the value-added and the loss in value resulting from «works announcement or the proposed transaction». The loss of the main source of livelihood incurred by the farmers is not included in the compensation amount assessment. However, the farmer can be recognized as a stakeholder during the public inquiry by recording it in its compensation request registry. It is then up to the judge to determine the validity of the request and if the farmer is eligible for compensation. In all cases, the compensation will cover losses incurred on current crops or damages incurred, but not the losses in income. In this regard, it is worth noting that the land area to be acquired by ONEP for the Project does not exceed 870 ha, of which 5 ha will be used for collective works. The remaining hectares are devoted to the linear ribbons for underground pipes replacement. The impact of Project land acquisition and works on potential crops will then be limited.
29. Regarding the second aspect, or the potential difference regarding the evaluation process of compensation, Law N07-81 provides that the expropriation compensation be set according to amount set by the Administrative Evaluation Commission (AEC) established for this purpose by representatives of the involved administrations. The practice of expropriation shows that the amount set by the Commission is usually equal to the market value of the land, especially in rural areas. In any case, the expropriated party can challenge the compensation amount following the deposit of the compensation amount at the CDG, before a judge who applies the proven expertise. ONEP experience shows that in 60% of disputed cases, the amount of the compensation set by the AEC is ordered by the judge.
30. With respect to the third aspect related to the launch of works on the expropriated land, OP 4.12 requires that works on the expropriated land will not start unless the actual amount of the compensation is paid to eligible parties. Law 7-81 dictates that the land can be taken following the issuance of the Government order granting the authorization to expropriate. Such order is made on the basis of a proposal from a beneficiary agency which requires a land for the construction or implementation of a public purpose investment. Such proposal entails that the beneficiary agency will provide the necessary budget for the land acquisition. If ONEP is the
85 direct beneficiary of the land to be expropriated, the compensation amount is deposited at the Caisse de Dépôt et de Gestion (CDG) and can be paid to the expropriated land owner as soon as an agreement is reached. In case land is to be acquired by local government agencies, ONEP shall conduct a due diligence to ensure land is acquired in accordance with the Land Acquisition Framework and that adequate provisional budget is allocated to compensate land owners as soon as agreement is reached on the transfer of land or a court decision is made to fix the amount of compensation to be paid.
31. Assessment of affected assets. The assessment of compensation and affected assets is carried out according to the provisions of Law N°7-81 on expropriation by the Administrative Evaluation Committee (AEC) established for that purpose. The compensation amount is equal to the market value of the expropriated property or the value of loss caused to the occupied property. In order to determine the value of the land and the amount of compensation to be paid to affected property owners, an Administrative Commission of Experts (ACE) is established. The ACE uses evaluation criteria established by Article 20 of the law which calls for assessing actual value and losses, including the value-added and the loss in value resulting from «works announcement or the proposed transaction». This amount is determined on the basis of current land market prices in the region. The amount finally determined by the ACE and proposed to be paid to the expropriated land owner can be challenged through a court process and the judge as demonstrated by a consistent jurisprudence may confirm the amount determined by the ACE or ask independent experts to provide for a review of the ACE proposed compensation amount. The ruling of a judge on the compensation amount can be appealed to a superior court. The decision of the superior court is final.
32. To avoid any dispute, the compensation determined by the Administrative Evaluation Committee is deposited at the Caisse de Dépot Gestion (CDG) in a timely manner in case the ONEP is the beneficiary. In case a local government agency is the direct beneficiary of the land to be expropriated, the amount is earmarked in its budget and made available to expropriated land owners. It is made available to the expropriated owner as soon as he/she reaches agreement or following a court ruling to transfer the property and determine the compensation amount. The amount of the compensation deposited on her/his name at CDG is made available to the owner as soon as she/he complies with the regulatory requirements: provision of property title or in case of unregistered parcels or litigation issues or pre-rating, supporting documentation proving that they actually own the land. Deposited amounts at the CDG earn interest at the legal rates.
33. With regard to ONEP’s empowerment as a state-owned industrial and commercial enterprise to initiate expropriation procedures for public purpose. According to Article 3 under above-mentioned Law No 7-81: "the right of expropriation is open to state and local governments, and to other legal public or private entities and persons authorized by public delegation to carry out works and operations.” Consequently, ONEP is entitled to expropriate land belonging to others, but strictly for the purposes required in the scope of its mandate and expertise. ONEP’s power is, then, recognized to be exercised by delegation, conferred to it by the delegating authority.
34. Selection of the land to be expropriated. The selection of land is the responsibility, par excellence, of the operator whose preliminary study based on clear scientific, optimization and
86 feasibility criteria focuses on identifying suitable sites for facilities and works (treatment stations, storage tanks, etc.) as well as appropriate pipeline routes by giving preference to pipelines within the roads right-of-ways (road or highway systems), forests (temporary occupation with compensation payments, State public domain, or Communal public domain). As a result, there is a tendency to avoid as much as possible privately owned land, first to optimize the cost of the project and more specifically to minimize the social impact resulting from land expropriation. This choice is not always simple given the technical constraints and the specific requirements underlying the areas of intervention: land in urban areas, semi-urban, rural, and agricultural land, or arid areas, developed areas or affected by infrastructure works and others.
35. Preparation of technical documentation for land plot.In light of this preliminary study, the engineer, acting also as surveyor and topographer, will design and provide ONEP with the technical plot documentation which will formally represent the first phase of the expropriation process, prior to launching a public inquiry. Once completed, this file will include the following supporting documents: - An introductory note describing the proposed project, the concerned commune responsible for the public inquiry, the administrative tribunal and land conservation which govern the parcels to be acquired by expropriation and related budget allocation. - The general layout that reflects the areas affected by expropriation and the riverside land. - A parcel map which accurately determines the parcels to be expropriated. - The list of parcels which provides their number and size, the identity of the owner (or alleged owners), address, etc .... - ONEP will delegate the preparation of many technical land details to professionals in order to avoid any discrepancies or errors related to the land reserve lying inside the expropriation perimeter, supported by property titles for registered land which will serve as a basis for both the establishment of the temporary occupation order for the draft expropriation Decree. Note: There is a tendency to think that the two above-mentioned procedures require two different technical records.
36. The Authority is thus responsible for the review and confirmation of the above- mentioned deliverables, i.e., review of the technical and regulatory components of the technical plot file.
37. Preparation phase and publication of the temporary land occupation order. This is the temporary acquisition phase of land subject to expropriation, in order to facilitate the execution of public works and grant access to these lands. It includes the following: - The carrying-out of studies and preparatory works; - The temporary installation of tools and material, or establishment of the construction site and the necessary steps for execution of works (Art. 50 of the above-mentioned Law no 7-81).
87 Houses, yards, orchards, surrounding gardens and religious buildings cannot be subject to temporary occupancy (Art. 53 under Law no 7-81). To this end, an order is established by the competent entity based on ONEP’s suggestion. Once signed by the appropriate authority, the temporary occupancy order is sent to the president of the Council by notifying all owners whose names appear thereon for their information. Subsequently, the local authority shall call upon the Observation Evaluation Committee (OEC) whose objective is to evaluate the material damages caused by the temporary occupation, in the presence of owners and operators and ONEP’s representatives. Following this action, a damage report is prepared to ascertain the nature and the extent of the damage. Following this report, a commission is called upon by the local authority to evaluate the damage and to produce its evaluation report based on expert opinions. Finally, a compensation meeting is organized by the local authority following the OEC meeting to pay the owners and operators the amounts of compensation.
Note: The duration of the temporary occupancy order is 5 years, during which time owners cannot oppose ONEP’s claim or recourse in case of renunciation of the expropriation of land by the Agency (Art. 57 under Law no 7-81).
38. For the sake of optimization, ONEP’s practice suggests that temporary occupation of land and expropriation operations are initiated simultaneously.
39. The Administrative phase of the expropriation. The administrative phase of the expropriation usually leads to signing of the Statement of Mutual Agreement (SMA) by the expropriated party. Although this phase is no longer required under Law no 7-81, the SMAs therein concluded are, nevertheless, considered as part of expropriation process (Art. 42 under Law no 7-81). Thus, these acts have a unique character and differ from ordinary sale contracts.
(a) Publication and dissemination of the expropriation acts Draft Decree Preparation of the draft eminent domain decree required for the execution of the project. This action must be consistent with the parcel record prepared during the previously mentioned technical study: lists plots and land owners. Draft Decree published in the newspapers authorized to receive legal notices. Draft decree published in the Official Gazette (section for legal notices posting). Land titles of registered plot draft decrees recorded at the land registry. For parcels that are being registered: Draft Decree recorded at the claim registry (Art. 84 of Dahir dated 08/12/1913 on registration). For parcels that are not registered or in the process of being registered, the draft decree is deposited with a clerk at the court of first instance to be recorded in the special register set for in section 455 of the Code of Civil Procedure.
88 All these formalities are sanctioned by established and dully signed certificates by the competent administrative authorities. Clarification on the legal value of the Draft Expropriation Decree (DED) The DED is seen as an essential administrative act of undisputable obligation for the following reasons: 1. It is published in the Official Gazette; 2. It lists the properties to be expropriated; ONEP’s practice makes the DEP an act not limited to identifying the zone to be expropriated but also to identify the owners and the claimants. It then has the value of transferability act as specified in Article 9 under Law 7-81; 3. It is published and posted; 4. It is recorded in the land registry or, as required, in a specific court registry; 5. It specifies the date of the public inquiry: two-month requirement; 6. It specifies the delegation of authority by the public powers to ONEP to start expropriation; 7. Allows opening of the comments registry: legal effect on third parties; 8. Represents an administrative act subject to annulment, etc. All these requirements have been reinforced by a recent Supreme Court Jurisprudence. (b) Conduct of the public inquiry Recording with the local authorities of public inquiry file which list the parcels, the site plan, plot map to allow this authority to open a comments registry during the two months following publication of the draft decree in the Official Gazette to collect the opinions and comments of the public: owners, beneficial owners, and tenants etc. The display and the deposit of the public inquiry file are confirmed by the issuance of certificates of deposit and display by the local authority under which jurisdiction the land is subject to expropriation, as specified under the expropriation as well as the submission of the comments registry to ONEP duly endorsed by such authority. If the registry includes comments, a meeting is organized jointly with the local authority and the interested parties to review all comments and prepare a report reflecting the actions they are taking (or intend to take) for each comment made in the said registry: errors in the land area, and in the identity of the expropriated party. In case of errors, remedial actions are undertaken through an amendment act to the draft decree and response letters are addressed to those parties who provided comments. (c) Administrative Evaluation Committee Immediately after meeting as per requirements previously described, a request is sent to local authorities to call upon the administrative evaluation and compensation committee.
89 The Administrative Evaluation Committee is chaired by the local authority or its representative. Its full members include representatives of relevant competent ministerial departments and ONEP acts as an observer. Overall, compensation is set according to the prevailing price of land in the region: comparison of cases, required expertise within the member committee to conduct assessments, including thorough knowledge of specific management plan requirements. The commission’s report is then drafted in the presence of ONEP. Drafting of the SMAs: ONEP calls upon the local authority for a conciliation meeting during which the expropriated party is required to provide the title deeds and sign the Statement of Mutual Agreement (SMA). The SMAs are jointly signed by ONEP and the local authority. (d) Payment of the compensation to the claimants After completing the transfer formalities for the property to ONEP (registration or requisition of registry in the land conservation) on the basis of established and registered SMAs, payment of the compensation to the eligible party will be made (provision of checks). Note: The expropriated party is entitled to temporary compensation (set by the EAC) and to defend his/her right to a potential increase of the compensation amount through court decision (legal stage). (e) Deposit of the compensation amounts at the Caisse des Dépôts et de Gestion (CDG) In which case the compensation amounts are deposited? Absence of unquestionable title deeds, despite the easy provision of administrative property acts provided by the local authorities or acts of notoriety; Absence of owners; Obvious absence of consent of the owners to set compensation; Dispute between co-owners in joint ownership; Unsure owners voluntarily willing to seek the recourse of law. For this purpose, and for the sake of ensuring the reliability of this process and protecting the sanctity of private property, the amounts of compensation are deposited at the CDG. The deposit is subject to an obligation of public authority, not subject to any decrease, waiver, or declared void following any violation of this principle (Articles 24 and 31 under Law No. 7- 81). Because of its binding and compulsory character, the deposit act is considered a “voluntary requisition of funds” from the CDG. It should not be considered as imposing a claim upon a deposit. The keen interest of the deposit lies in the following: It is an actual release of funds from the treasury office into the account opened at the CDG for the expropriated party;
90 It is a nominative deposit whose holder can only be changed by providing supporting documentation requested by the CDG; The deposited amounts are not released to the Office in the following strictly prescribed cases: cancellation of the expropriation process duly supported by documents, garnishing court order against ONEP’s account or deposit of the compensation amount in an account opened in a court of competent jurisdiction; It is a secure method to protect both public money and eligible persons against any delaying tactic in case of embezzlement or other fraudulent act ; The deposited amounts shall earn interest at the legal rate; The release may be obtained from the Office within 24 hours following provision of supporting documents and are centralized with delegation of signature authority to the regional office; In case of release, the amounts are collected by the eligible party (collection). Ultimately, it is a flexible and secure process, hence in accordance with both the safeguard requirements and the interests of the expropriated party. Any exception to the principle of the deposit of expropriation compensation is considered a serious violation of the law recognizing the defaulting party as violating the principle of respect for private property as well as that of protection of public funds against any possible squandering of resources. 40. The legal phase of the expropriation. It takes place after the publication of the draft expropriation decree in the Official Gazette, and after completing the steps involved in the administrative phase: total or partial failure of land acquisition by mutual agreement. Documents to be included in the file and to be presented through the Government General Secretariat for the adoption of the decree (which falls under the prime minister’s jurisdiction) are: a note describing the project; the plot map and the list of parcels; the Draft expropriation Decree; Certificates proving the deposit at the relevant commune; Certificates proving the publication and posting of the draft decree; comments registry duly signed; Copy of the newspaper in which the draft was published; The evaluation administrative committee report; Registry certificate at the special registry. At this stage, both the judge in chambers and the trial judge systematically control the regularity of formalities completed during the administrative phase. Indeed, the acquisition depends on strict compliance with these formalities, otherwise the procedure is declared void (Art. 24 under Law no 7-81).
91 The steps to follow for this phase are: (a) Advertisement of the final expropriation Decree in the national newspapers; (b) Display of the final decree at the commune headquarters; (c) Deposit of expropriation and transfer requests in a court of competent jurisdiction through the Office counsel; (d) Follow-up before the competent jurisdiction (Administrative Court of Appeals and Supreme Court) for obtaining an expropriation order or a court ruling to transfer the property coupled with final amount of compensation: the judge has recourse to legal expertise by inviting the expropriating and the expropriated parties; (e) Systematic Notification of the expropriation order and the court ruling of transfer of property to both the expropriating and the expropriated parties; (f) Publishing of the court ruling in the newspapers, display at the municipalities and land conservation; (g) Recording of the ruling in the special registry kept at the competent jurisdiction. Note: It is worth mentioning that 50% of cases are judged as last resort cases while retaining the amount of compensation set by the Evaluation Administrative Commission. (h) If the judge increases the compensation amount: deposit of various compensation amounts at the CDG and appeal or, if applicable, appeal to the Court of Cassation to defend the Office interests. (i) release by the Office of the deposited compensation in the event of final judgments rendered by the competent court: with regard to the supporting documents, the display of the court ruling for 6 months for non-registered land parcels or after the judge’s summons to reinforce it. Thus, the legal phase of the expropriation is enforced by the transfer of property order to the Office, the registration of land on its behalf and the release of the compensation deposited at the CDG. 41. Remedy Mechanisms Eligible parties can exercise their right to remedy as follows:
Legal recourse to dispute the use of eminent domain to justify the Project. Possibility of dispute during the public inquiry period starting six months after the publication of the draft expropriation Decree. Legal recourse for assault in case of delay or rejection of the applied procedure.
42. Advertisement and Public Consultation Mechanisms. Two acts submitted during the administrative phase are legally publicized and submitted: the Public Property Act and the Transferability Act.
43. ONEP’s Monitoring Arrangements. ONEP’s is responsible for developing and monitoring the implementation of the LAF. As such, each regional directorate will ensure that all identified persons affected by the project will be consulted, taken into account and compensated under the framework. A registry will be opened in ONEP’s legal unit to ensure the proper implementation and monitoring of expropriation procedures, since this process is planned at the local level (decentralization), including payments to claimants for land acquired for Project activities. The registry will document compensation for damages caused during the temporary
92 occupation (trees and crops) and compensation payments for expropriated land. This registry must be comprehensive and kept updated, as the expropriation process progresses. A document highlighting the status of land acquisition and compensation for eligible persons, including updated monitoring tables, are required to be submitted to the World Bank on a regular basis during Project supervision.
93 Annex 11: Project Preparation and Supervision KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
Planned Actual PCN review 01/14/2009 01/14/2009 Initial PID to PIC Initial ISDS to PIC Appraisal 09/10/2009 10/26/2009 Negotiations 09/28/2009 05/03/2010 Board/RVP approval 11/24/2009 06/15/2010 Planned date of effectiveness 07/15/2010 Planned date of mid-term review Planned closing date 12/31/2015
Key institutions responsible for preparation of the project: ONEP
Bank staff and consultants who worked on the project included:
Name Title Unit Pier Francesco Mantovani Task Team Leader MNSWA Philippe Huc Sr. Water and Sanitation Specialist MNSWA Wendy Wakeman Lead Social Development Specialist MNSSO Xavier Chauvot de Beauchene Sr. Water and Sanitation Specialist MNSWA Augustin Maria Economist MNSWA Anas Abou El Mikias Sr. Financial Management Specialist MNAFM Abdoulaye Keita Procurement Specialist MNAPR Jean-Charles de Daruvar Sr. Counsel LEGEM Mohammed Bekhechi Lead Counsel LEGEN Abdeljalil Derj Socio-Economist Consultant Richard Verspyck Financial Analyst Consultant Abdelmourhit Lahbabi Environmental Specialist Consultant Khalid Anouar Social Safeguards Specialist Consultant Zakia B. Chummun Language Program Assistant MNSWA
Bank funds expended to date on project preparation: 1. Bank resources: USD 236,485 2. Trust funds: 3. Total: USD 236,485
Estimated Approval and Supervision costs:
25. Remaining costs to approval: USD 35,000
26. Estimated annual supervision cost: USD 85,000
94 Annex 12: Documents in the Project File KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
1. Bank staff assessments
Project Aide Memoires and Back to Office Reports Financial Management Assessment Procurement Capacity Assessment Mécanismes et Flux de Financement du Secteur de l’Eau (Banque mondiale, Avril 2008)
2. Project preparation and implementation documents
Environmental Assessment Land Acquisition Framework
3. Other documents/studies carried out
Guide technologique pour l’assainissement liquide des douars marocains (D. Kopitopulos, septembre 2005) Contrat Programme Etat-ONEP pour 2008-2010 Rapport d’Audit des comptes de l’ONEP au 31 décembre 20008 Indicateurs d’exploitation des bornes fontaines en milieu rural (ONEP, Aout 2006) Etude de diagnostic de l’AEP en monde rural au Maroc (FAO/ONEP, Juillet 2005)
Sub-Component 1.a – Nador/Driouch
Etude de factibilité du renforcement de l’AEP de Nador (ONEP, Mai 2009) 3e tranche de l’AEP des douars limitrophes de l’adduction Midar-Nador, Dossier d’Appel d’Offres (ONEP, 2008) Etude du Schéma Directeur d’AEP des populations urbaines et rurales des provinces de Berkane et Nador (Scet Maroc, Juin 2008) Etude de renforcement de l’adduction régionale de Midar, Avant-Projet Sommaire (Nord Dirassat, non daté) Etude d’AEP des douars des CR d’Amejjaou, Ben Tayeb, Dar El Kebdani, M’Hajjer, Tallilit et Tazaghine (Nord Dirassat, non daté) Etude d’AEP des douars des CR d’Ain Zohra, Oulad Boubker et Afsou, Avant-Projet Detaillé (Nord Dirassat, 2008) Etude d’AEP des douars des CR de Ras El Ma, Kariat Arekmane, Berkaniene, Oulad Daoud Zkhanine et Oulad Settout (Nord Dirassat, non daté) Alimentation en eau potable des douars et CLCR de Ouardana et Ait Mait, Avant-Projet Sommaire (IDEVAC/C3E, Aout 2007)
95 Sub-Component 1.b – Safi/Youssoufia/Sidi Bennour
Etude d’AEP des douars avoisinants la future adduction régionale Labkhati-Tnine Ghiat : - Lot 2, Avant-Projet Sommaire (Team Maroc, Aout 2007) - Lot 3, Avant-Projet Sommaire (Amane Ingénierie/Inovar, non daté) Etude de Production d’Eau Potable pour les populations rurales de la province de Safi (CID) : - Avant-Projet Détaillé (Avril 2007) - Avant-Projet Sommaire (Novembre 2006) Etudes d’AEP des douars relevant des cercles de Zemamra et Sidi Bennour, Avant-Projet Sommaire (Maghreb Dirassat/SESAER, Septembre 2006) Etude du Schéma Directeur d’Alimentation en Eau Potable des populations rurales de la province de Safi (Scet Maroc-ADI) : - Sous-Mission II.1 : Etudes et comparaison des variantes (Février 2004) - Sous-Mission II.3 : Rapport Global définitif (Juillet 2006)
Sub-Component 1.c – Errachidia
Etude d’Alimentation en Eau Potable de la ville d’Errachidia et Centres avoisinants : - Avant-Projet Détaillé (Mora Etudes, Octobre 2008) - Etude d’agressivité des sols (Laboratoire Public d’Essais et d’Etudes, Octobre 2008) - Etude géotechnique (Labosol, Juin 2008)
Component 2 – Greywater management
Elaboration de la composante assainissement rural du projet des Adductions Régionales d’AEP urbaine et rurale (ECOPSIS, Octobre 2009) Guide Technique pour la promotion de l’assainissement autonome adapté au milieu rural (SOGREAH/Team Maroc)
96 Annex 13: Statement of Loans and Credits KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems
Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P104265 2008 MA-ONE Support Project 150.00 0.00 0.00 0.00 0.00 147.89 9.99 0.00 P100026 2007 MA-National Initiative for Human Dev. 100.00 0.00 0.00 0.00 0.00 67.49 21.82 0.00 P086877 2006 MA-Rural Water Supply and Sanitation 60.00 0.00 0.00 0.00 0.00 45.57 18.11 0.00 P094007 2006 MA-Rural Roads II 60.00 0.00 0.00 0.00 0.00 22.65 -12.79 0.00 P043412 2005 MA-Basic Education Reform Sup Program 80.00 0.00 0.00 0.00 0.00 25.64 26.34 0.00 P082754 2004 MA-Rural Roads 36.86 0.00 0.00 0.00 0.00 13.29 -1.43 -2.00 P069124 2003 MA-Rainfed Agriculture Development 26.80 0.00 0.00 0.00 0.00 24.85 14.06 5.19 Total: 513.66 0.00 0.00 0.00 0.00 347.38 76.10 3.19
MOROCCO STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars
Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2006 FONDEP 3.45 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Maghreb Inv. Mgt 0.00 0.02 0.00 0.00 0.00 0.02 0.00 0.00 2000 Maghreb Invest P 0.00 2.30 0.00 0.00 0.00 2.30 0.00 0.00 Total portfolio: 3.45 2.32 0.00 0.00 0.00 2.32 0.00 0.00
Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2005 BMCE 0.00 0.03 0.00 0.00 2002 SGRI 0.00 0.00 0.00 0.00 2004 Meditel Restruct 0.00 0.00 0.00 0.00 Total pending commitment: 0.00 0.03 0.00 0.00
97 Annex 14: Country at a Glance KINGDOM OF MOROCCO: MA-Regional Potable Water Supply Systems M . East Lower- POVERTY and SOCIAL & North middle- Development diamond* Morocco Africa income 2007 Population, mid-year (millions) 30.9 313 3,437 Life expectancy GNI per capita (Atlas method, US$) 2,250 2,794 1,887 GNI (Atlas method, US$ billions) 69.4 876 6,485
Average annual growth, 2001-07 Population (%) 1. 1 1. 8 1. 1 GNI Gross Labor force (%) 2.4 3.6 1.5 per primary M ost recent estimate (latest year available, 2001-07) capita enrollment Poverty (% of population below national poverty line) ...... Urban population (% of total population) 56 57 42 Life expectancy at birth (years) 71 70 69 Infant mortality (per 1,000 live births) 34 34 41 Child malnutrition (% of children under 5) 10 . . 2 5 Access to improved water source Access to an improved water source (% of population) 83 89 88 Literacy (% of population age 15+) 52 73 89 Gross primary enrollment (% of school-age population) 10 6 10 5 111 Morocco M ale 112 108 112 Lower-middle-income group Female 100 103 109
KEY ECONOM IC RATIOS and LONG-TERM TRENDS 1987 1997 2006 2007 Economic ratios* GDP (US$ billions) 18.7 33.4 65.4 73.3 Gross capital formation/GDP 21.1 20.7 31.6 31.8 Trade Exports of goods and services/GDP 23.6 28.5 33.0 33.1 Gross domestic savings/GDP 17.7 16.9 26.2 25.9 Gross national savings/GDP 22.6 20.0 34.5 33.5 Current account balance/GDP 0.9 -0.3 2.8 2.0 Domestic Capital Interest payments/GDP 3.6 3.1 0.8 .. savings formation Total debt/GDP 112.2 70.4 28.3 .. Total debt service/exports 29.5 27.1 12.2 .. Present value of debt/GDP .. .. 27.0 .. Present value of debt/exports .. .. 63.2 .. Indebtedness 1987-97 1997-07 2006 2007 2007-11 (average annual growth) GDP 2.6 4.5 8.0 2.3 4.7 Morocco GDP per capita 0.8 3.2 6.7 1.1 3.0 Lower-middle-income group Exports of goods and services 6.6 6.4 10.5 5.5 5.7
STRUCTURE of the ECONOMY
1987 1997 2006 2007 Growth of capital and GDP (%) (% of GDP) Agriculture 15.8 15.8 15.7 12.4 20 Industry 33.7 33.8 27.8 29.0 15 M anufacturing 18.7 18.1 16.5 19.4 10 Services 50.5 50.4 56.5 58.5 5 0 Household final consumption expenditure 66.6 65.3 55.5 58.0 02 03 04 05 06 07 General gov't final consumption expenditure 15.7 17.8 18.3 16.1 GCF GDP Imports of goods and services 27.0 32.2 38.4 39.0
1987-97 1997-07 2006 2007 Growth of exports and imports (%) (average annual growth) Agriculture -0.3 4.2 23.0 -20.0 15
Industry 3.1 3.9 4.6 4.8 10 M anufacturing 3.3 3.4 3.9 4.0 Services 3.4 4.9 4.1 7.4 5 Household final consumption expenditure 2.6 3.4 3.9 1.6 0 02 03 04 05 06 07 General gov't final consumption expenditure 3.8 3.1 3.8 1.7 -5 Gross capital formation 1.9 8.0 14.0 4.6 Exports Imports Imports of goods and services 6.2 6.5 6.7 5.9
Note: 2007 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.
98 Morocco
PRICES and GOVERNM ENT FINANCE 1987 1997 2006 2007 Inflation (%) Domestic prices (% change) 4 Consumer prices 2.8 1.0 3.3 1.9 3 Implicit GDP deflator 3.9 2.0 1.9 2.0 2 Government finance 1 (% of GDP, includes current grants) 0 Current revenue 16.0 26.4 25.1 24.1 -1 02 03 04 05 06 07 Current budget balance -4.6 0.9 2.0 1.2 GDP deflator CPI Overall surplus/deficit -9.9 .. -2.3 -1.9
TRADE 1987 1997 2006 2007 Export and import levels (US$ mill.) (US$ millions)
Total exports (fob) 3,051 7,039 11,913 13,637 30,000 Agriculture 761 1,387 2,445 3,063 Phosphorus rock 368 435 540 624 20,000 M anufactures 1,142 3,802 7,213 7,256 Total imports (cif) 4,411 9,522 23,534 25,741 Food 476 1,072 1,718 1,910 10 , 0 0 0 Fuel and energy 738 1,296 5,104 5,352 Capital goods 881 1,939 5,136 5,867 0 01 02 03 04 05 06 07 Export price index (2000=100) 69 98 145 152 Import price index (2000=100) 90 111 136 140 Export s Imports Terms of trade (2000=100) 77 89 106 108
BALANCE of PAYMENTS 1987 1997 2006 2007 Current account balance to GDP (%) (US$ millions) Exports of goods and services 4,426 9,510 21,738 23,830 5 Imports of goods and services 5,254 10,627 25,776 28,102 4 Resource balance -828 -1,117 -4,038 -4,272 Net income -767 -1,175 -421 -1,066 3 Net current transfers 1,759 2,205 6,315 6,781 2
Current account balance 164 -87 1,856 1,442 1 Financing items (net) 16 640 881 3,123 0 Changes in net reserves -180 -553 -2,737 -4,565 01 02 03 04 05 06 07 Memo: Reserves including gold (US$ millions) 422 4,185 18,613 25,623 Conversion rate (DEC, local/US$) 8.4 9.5 8.8 8.2
EXTERNAL DEBT and RESOURCE FLOWS 1987 1997 2006 2007 Composition of 2006 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 21,030 23,527 18,493 .. IBRD 2,558 3,271 2,267 2,578 A: 2,267 G: 1,797 IDA 41 31 18 17 B: 18 Total debt service 1,779 3,140 3,405 .. IBRD 345 544 418 399 IDA 1 2 1 1 Composition of net resource flows F: 4,947 D: 4,357 Official grants 77 281 421 .. Official creditors 468 -583 462 .. Private creditors 294 92 -825 .. Foreign direct investment (net inflows) 60 4 2,699 .. Portfolio equity (net inflows) 0 38 -309 .. E: 5,107 World Bank program Commitments 802 339 340 200 A - IBRD E - Bilateral Disbursements 404 141 176 418 B - IDA D - Ot her mult ilat eral F - Private Principal repayments 164 308 331 296 C - IM F G - Short-term Net flows 240 -166 -155 123 Interest payments 182 238 88 104 Net transfers 58 -405 -243 18
Note: This table was produced from the Development Economics LDB database. 9/24/08
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