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Kingdom of Morocco Recent Economic Developments in Infrastructure (REDI) Water Supply and Sanitation Sector

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Kingdom of Morocco Recent Economic Developments in Infrastructure (REDI) Water Supply and Sanitation Sector Report No. 29634-M OR Kingdom of Morocco Public Disclosure Authorized Recent Economic Developments in Infrastructure (REDI) W ater Supply and Sanitation Sector June 2004 M iddle East and North Africa Region Finance, Private Sector and Infrastructure Group Public Disclosure Authorized Public Disclosure Authorized W orld Bank Document Public Disclosure Authorized Morocco REDI Water Supply and Sanitation 1 Kingdom of Morocco Recent Economic Developments in Infrastructure (REDI) Water Supply and Sanitation Sector Table of Content LIST OF FIGURES IV LIST OF TABLES IV EXECUTIVE SUMMARY 1 PART A : WATER AND SANITATION SECTOR IN MOROCCO: A SNAPSHOT 5 1. WATER AND THE SOCIAL AGENDA 5 2. SECTOR FRAMEWORK 5 3. SUPPLY AND DEMAND TRENDS 6 4. TARIFF STRUCTURES AND THE SUSTAINABILITY OF PROVIDERS 7 5. BARRIERS TO ACCESS BY THE POOR 7 6. INVESTMENT REQUIREMENTS AND FINANCING MECHANISMS 8 PART B : DIAGNOSTIC OF WATER SUPPLY AND SANITATION SECTOR PERFORMANCE 9 I GENERAL ECONOMIC CONTEXT RELEVANT TO THE SECTOR 9 I.1 SOCIOPOLITICAL AND MACROECONOMIC CONTEXT 9 I.2 THE STATUS OF WATER RESOURCES IN MOROCCO 12 I.3 GOVERNMENT SECTOR GOALS AND RELEVANT WATER POLICIES 14 II ACCESS TO WATER SUPPLY AND SANITATION 16 II.1 GENERAL DIAGNOSTIC OF ACCESS 16 II.1.1. GOOD ACCESS TO WATER, EXCEPT IN SLUMS AND RURAL AREAS 16 II.1.2. INADEQUATE SANITATION AND LACK OF WASTEWATER TREATMENT 17 II.2 DIFFICULTIES IN REACHING THE POOR 17 II.2.1. ACCESS ISSUES FOR THE URBAN POOR 18 II.2.2. ACCESS ISSUES FOR THE RURAL POOR 20 III INDUSTRY STRUCTURE 21 III.1 SUPPLY SIDE 21 III.1.1. MODES OF SUPPLY 21 Morocco REDI Water Supply and Sanitation i III.1.2. INDUSTRY STRUCTURE AND ITS CHAIN OF VALUE ADDED IN THE WATER SECTOR 22 III.2 DEMAND SIDE 25 III.2.1. CONNECTED URBAN DEMAND 25 III.2.2. UNCONNECTED URBAN DEMAND 26 III.2.3. RURAL DEMAND 27 III.3 WILLINGNESS AND ABILITY TO PAY 28 IV WATER SECTOR ORGANIZATION AND INSTITUTIONS 30 IV.1 MAJOR SECTOR PLAYERS 30 IV.1.1. MATEE 31 IV.1.2. DGH 31 IV.1.3. ONEP 31 IV.1.4. RIVER BASIN AGENCIES 32 IV.1.5. LOCAL GOVERNMENTS 32 IV.1.6. MINISTRIES 32 IV.1.7. INTER-MINISTERIAL COORDINATING BODIES 33 IV.2 MAJOR WATER AND SEWERAGE SERVICE PROVIDERS 34 IV.2.1. ONEP 34 IV.2.2. RÉGIES DIRECTES 35 IV.2.3. RÉGIES AUTONOMES 35 IV.2.4. PRIVATE CONCESSIONAIRES 36 IV.2.5. INFORMAL URBAN SUPPLIERS 37 IV.2.6. RURAL WATER SUPPLY PROVIDERS 38 V SECTOR RESTRUCTURING AND COMPETITION 39 VI THE REGULATORY ENVIRONMENT 42 VI.1 LEGAL FRAMEWORK 42 VI.2 REGULATORY PRACTICES 43 VI.2.1. REGULATORY REGIME FOR PUBLIC OPERATORS 43 VI.2.2. REGULATION OF CONCESSIONS 44 VII FINANCING AND TAXATION OF THE SECTOR 47 VII.1 FINANCING STRATEGIES OF THE MAIN PROVIDERS 49 VII.2 TAXATION OF THE SECTOR 52 VIII TARIFFS AND PRICING 53 VIII.1 TARIFF LEVELS AND STRUCTURES 53 VIII.1.1. RAW WATER WITHDRAWAL FEES 53 VIII.1.2. POTABLE WATER TARIFFS 54 VIII.1.3. RURAL WATER SUPPLY TARIFFS 56 VIII.1.4. SEWERAGE TARIFFS 56 Morocco REDI Water Supply and Sanitation ii VIII.1.5. DISCHARGE FEE 57 VIII.2 AVERAGE UNIT WATER SUPPLY AND SANITATION PRICES 57 VIII.3 SUBSIDIES 58 VIII.4 CURRENT RULES FOR TARIFF ADJUSTMENT 61 VIII.5 ASSESSMENT OF CURRENT RULES AND OUTCOMES 63 IX INVESTMENT REQUIREMENTS IN WATER AND SANITATION 66 IX.1 GOVERNMENT SECTOR OBJECTIVES 66 IX.2 FINANCING NEEDS 66 IX.3 INVESTMENT OPPORTUNITIES FOR THE WORLD BANK GROUP 68 APPENDIX 1. TECHNICAL PERFORMANCE OF THE WATER AND SANITATION SECTOR 70 APPENDIX 2: PERFORMANCE INDICATORS FOR WATER AND SANITATION 77 APPENDIX 3. SELECTED MOROCCO MACROECONOMIC INDICATORS 79 APPENDIX4. SELECTED SOCIAL INDICATORS IN MOROCCO 80 APPENDIX 5. MILLENNIUM DEVELOPMENT GOALS AND WATER SUPPLY AND SANITATION: DEFINITIONS, COMMENTS AND LIMITATIONS ON DATA SOURCES 81 APPENDIX 6. ENQUETE NATIONALE SUR LES NIVEAUX DE VIE DES MENAGES 1998/99 83 LIST OF REFERENCES 87 Morocco REDI Water Supply and Sanitation iii LIST OF FIGURES Figure 1: Investment needs for 2004-2007, by subsector and type of operator (MAD billion)................................................................................................................................. 9 Figure 2: Demographic and urbanization trends of the 1993-2002 decade...................... 10 Figure 3: Government budget deficit................................................................................ 11 Figure 4: Territorial levels of State representation and elected Local Governments ....... 12 Figure 5: Allocation of mobilized water resources (million m3) ...................................... 14 Figure 6: Percentage of the population with access to improved water in Morocco and other countries................................................................................................................... 16 Figure 7: Potable Water and Sanitation Access in Morocco, 1990 and 2000................... 17 .Figure 8: Water sector service segments and main suppliers .......................................... 22 Figure 9: Sources de production d’eau potable urbaine (par volume).............................. 23 Figure 10: Urban potable water customers by provider.................................................... 23 Figure 11: Reasons for non-connection to water distribution network............................. 27 Figure 12: Water supply time for unconnected households.............................................. 29 Figure 13: Functional organization of Morocco’s water sector institutions..................... 30 Figure 14: Rural Water Supply Investment 1995-2002.................................................... 38 Figure 15: 1993-2002 Investments in Water and Sanitation sub-sectors ......................... 47 Figure 16: Investment by subsector over the 1993-2002 decade...................................... 49 Figure 17: ONEP’s sources and uses of funds – 1999-2001 ............................................ 50 Figure 18: Committed investment per capita in water and sanitation projects with private participation in lower-middle income countries ............................................................... 50 Figure 19: Sources and uses of Régies’ funds (potable water), 1993-2002..................... 51 Figure 20: Sources and uses of regies’ funds (sewerage), 1993-2002 ............................ 51 Figure 21: Beneficiaries contribution/Investment Ratio by provider category (1993-2002) ........................................................................................................................................... 52 Figure 22: RADEEF’s domestic customers’ distribution in October 2002 and October 2003................................................................................................................................... 60 Figure 23: Gini curve for RADEEF’s domestic consumption in 1994............................. 60 Figure 24: Change in average unit price before value added tax for selected operators .. 65 Figure 25: Main water service cost components for Moroccan operators in 2002.......... 73 Figure 26: Main sanitation cost components for Moroccan operators in 2002 ............... 73 Figure 27: Unit Revenues vs. Unit Costs (MAD/m3)....................................................... 74 Figure 28: Unit Operating Revenues vs. Unit Operating Costs (MAD/m3)..................... 75 Figure 29: Net Operating Results (Water), FY2002 (MAD million) ............................... 75 Figure 30: Overdue receivables at RADEEF, 2002.......................................................... 76 LIST OF TABLES Table 1: Rationale for non-connection to water distribution network (1998-99)............. 18 Table 2: Habitat and service impediments for the urban poor.......................................... 19 Table 3: Capital cost sharing assumptions........................................................................ 20 Table 4: Sources of water supply in Moroccan households (1998).................................. 21 Table 5: Sources of sanitation in Moroccan households (1998)....................................... 22 Table 6: Water supply providers by urban area................................................................ 25 Morocco REDI Water Supply and Sanitation iv Table 7: Average residential consumptions by operator category (2000) ........................ 26 Table 8: Rural Water Demand .......................................................................................... 28 Table 9: Annual per capita water supply expenses, per expenditure category (MAD/person)................................................................................................................... 29 Table 10: Comparative scope of Morocco’s concession contracts................................... 37 Table 11: Summary of water sector restructuring trends................................................. 40 Table 14: Summary of regulatory provisions applicable to private sector providers....... 44 Table 15: Principal obligations of concessionaires........................................................... 45 Table 14: Infrastructure funding sources for the 1993-2002 decade (MAD billion)........ 48 Table 15: Investment by operator and sub-sector, 1993-2002 (MAD billion) ................. 48 Table 16: Pricing stages in water supply .......................................................................... 53 Table 17: Evolution of ONEP’s bulk water tariffs 1995-2000 (MAD/m³ before VAT) .. 55 Table 18: Representative water distribution tariff structures (2003, before VAT)........... 56 Table 19: Representative sewerage tariffs (2003, no VAT is applied)............................. 57 Table 20: Comparison of calculated
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