FOR OFFICIAL USE ONLY Public Disclosure Authorized

Document of The World Bank

Report No: 351 18-MA

PROJECT APPRAISAL DOCUMENT Public Disclosure Authorized ON A

PROPOSED LOAN

IN THE AMOUNT OF EURO 50 MILLION (US$60 MILLION EQUIVALENT)

THE CAISSE POUR LE FINANCEMENT ROUTIER WITH THE GUARANTEE OF

Public Disclosure Authorized THE KINGDOM OF MOROCCO

FOR A

SECOND RURAL ROADS PROJECT

April 10,2006

Finance, Private Sector and Infrastructure Maghreb Department

Public Disclosure Authorized Middle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 28, 2006)

Currency Unit = Moroccan Dirham (MAD) MAD9.2 = US$1 MAD 11.0 = Euro 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADM Autoroutes du Maroc ADS Agence de Diveloppement Social (Social Development Agency) AFD Agence FranGaise de Diveloppement (French Development Agency) CAS Country Assistance Strategy CBA Cost-Benefit Analysis CEA Cost-Effectiveness Analysis CFR Caisse pour le Financement Routier CNER Centre National d 'Etude et de Recherches Routidres (National Center for Road Study and Research) DETN Division des Etudes et Travaux Neufs (Division of Studies and New Construction) DPE Direction Provinciale de I 'Equipement (Provincial Office of the MPWT) DRCR Direction des Routes et de la Circulation RoutiBre (Directorate of Roads and Road Traffic) DRE Direction Rkgionale de I 'Equipement (Regional Office of the MPWT) EMP Environmental Management Plan ERR Economic Rate ofReturn FEEP Fiche d 'Evaluation Environnementale Prdiminaire (Preliminary Environmental Assessment Sheet) FMR Financial Monitoring Reports FSR Fonds Spicial Routier (Road Fund) ICR Implementation Completion Report DDH Initiative Nationale de Diveloppement Humain (National Initiative for Human Development) IRI Roughness Index LAP Land Acquisition Plan MDG Millennium Development Goals MPWT Ministry ofPublic Works and Transport NPRR-1 First National Program of Rural Roads NPRR-2 Second National Program ofRural Roads NRAAI National Rural Road Accessibility Indicator NPV Net Present Value OED Operations Evaluation Department PGES Plan de Gestion Environmentale SpLciJique (Specific Environmental Management Plan) PIP Project Implementation Plan PRRP Provincial Rural Roads Program RPF Resettlement Policy Framework RRP-1 First Rural Roads Project RRP-2 Second Rural Roads Project RRPD Rural Roads Program Division STRRP Second, Tertiary, and Rural Roads Project SWAp Sect or-Wide Approach vpd Vehicle per day

Vice President: Christiaan J. Poortman Country Director: Theodore 0.Ahlers Sector Director: Hossein Razavi Sector Manager: Hedi Larbi Task Team Leader: Mohammed D.E Feghoul FOR OFFICIAL USE ONLY

KINGDOM OF MOROCCO

SECOND RURAL ROADS PROJECT

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE...... 1 1. COUNTRY AND SECTOR ISSUES...... 1 2 . GOVERNMENT STRATE ...... 3 . RATIONALE FOR BANK T ...... B. PROJECT DESCRIPTION ...... 5 1. LOANINSTRUMEN ...... 2 . PROGRAM OBJECT ...... 5 3 . PROJECT DEVELOPMENT OBJECTIVE AND KEY INDICATORS ...... 5 4 . PROJECT COMPONENTS ...... 5 . LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN ...... 7 6 . ALTERNATIVESCONSIDERED AND REASONS FO C . IMPLEMENTATION ...... 8 1. OVERALL PROGRAM ARRANGEMENTS ...... 2 . INSTITUTIONAL ARRANGEMENTS AND IMPLEMENT ...... 9 3 . MONITORING AND EVALUATION ...... 4 . SUSTAINABILITY ...... 11 5 . CRITICAL RISKS AND CONTROVERSIAL ASPECT 6 . LOANCONDITIONS AND COVENANTS ...... 12 D . APPRAISAL SUMMARY ...... 14 1. 2 . TECHNICAL ...... 3 . FIDUCIARYASPECTS ...... 16 4 . SOCIAL ...... 5 . ENVIRONMENT ...... 18 6 . 7 . This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. ANNEXES

ANNEX 1: COUNTRY AND SECTOR BACKGROUND ...... 20

ANNEX 2: MAJOR RELATED PROJECTS FINANCED BY THE BANK AND/OR OTHER AGENCIES.30

ANNEX 3: RESULTS FRAMEWORK AND MONITORING...... 31 ANNEX 4: DETAILED PROJECT DESCRIPTION ...... 35 ANNEX4.A: SECOND NATIONALPROGRAM OF RURALROADS (NPRR-2) ...... 39 ANNEX 4.B: PROJECTDESCRIPTION - TECHNICAL ASPECTS ...... 40 ANNEX 4.c: SUB-PROJECTS PROPOSED FOR CFR FINANCING UNDERNPRR-2’S FIRST PHASE (2005-2010) ...... 42 ANNEX 5: NPRR-2 PROGRAM COST AND FINANCING...... 43 ANNEX 6: IMPLEMENTATION ARRANGEMENTS ...... 44 ANNEX 7: FINANCIAL MANAGEMENT AND DISBURSEMENT PROVISIONS ...... 48 ANNEX 8: PROCUREMENT ...... 55 ANNEX 9: ECONOMIC AND FINANCIAL ANALYSES ...... 68 ANNEX 10: SAFEGUARD POLICY ISSUES...... 91 ANNEX 10.A: ENVIRONMENTALASPECTS ...... 93 ANNEX 10-A-1: PRELIMINARY ENVIRONMENTALASSESSMENT SHEET (FEEP) ... ANNEX 10-A-2: SPECIFIC ENVIRONMENTALMANAGEMENT PLAN (PGES) ANNEX 10.B: SOCIAL EVALUATION...... 108

ANNEX 10.B.2: SOCIAL DATASHEET (SCREENING) ...... ANNEX 10.B.3: SOCIAL DATASHEET (MONITORING) ...... 117

ANNEX 1o.c.1 : INFORMATION SHEET ON LANDRIGHTS OF WAY ...... 124

ANNEX 11: PROJECT PREPARATION AND SUPERVISION...... 127 ANNEX 12: DOCUMENTS IN THE PROJECT FILE...... 128 ANNEX 13: STATEMENT OF LOANS AND CREDITS ...... 129 ANNEX 14: COUNTRY AT A GLANCE ...... 130

ANNEX 15: STRATEGIC DIRECTIONS. FRAMEWORK AND IMPLEMENTATION ARRANGEMENTS OF THE SECOND NATIONAL PROGRAM OF RURAL ROADS ...... 132 ANNEX 15.A: LETTEROF STRATEGIC DIRECTIONS. FRAMEWORK AND IMPLEMENTATION ARRANGEMENTS OF THE SECOND NATIONALPROGRAM OF RURALROADS (IN FRENCH)...... 132 ANNEX 15.B: LETTEROF STRATEGIC DIRECTIONS. FRAMEWORK AND IMPLEMENTATION ARRANGEMENTS OF THE SECOND NATIONALPROGRAM OF RURALROADS (IN ENGLISH)...... 141

Map: IBRD 34660 KINGDOM OF MOROCCO SECOND RURAL ROADS PROJECT PROJECT APPRAISAL DOCUMENT MIDDLE EAST AND NORTH AFRICA MNSIF Date: Apnl 10, 2006 Team Leader: Mohammed D. E. Feghoul Country Director: Theodore 0.Ahlers Sectors: Roads and highways (100%) Sector Director: Hossein Razavi Themes: Rural services and inffastructure (P) Sector Manager: Hedi Larbi Project ID: PO94007 Environmental screening category: B Lending Instrument: Specific Investment Loan Safeguard screening category: S2

:or Loans/Credits/Others: rota1 Project Cost: US$654 million Zofinancing: US$227 million rota1 Bank Financing: Euro 50 million (equivalent to US$60 million)

Borrower: Caisse pour le Financement Routier (CFR) (with a sovereign guarantee from the Government ofMorocco) Responsible Agencies: Caisse pour le Financement Routier (CFR) Mr. Ahmed Imzel - Directeur de la Caisse pour le Financement Routier Ministere de 1’Equipement et du Transport - B.P 66465, 10100, Madinat A1 Irfane Rabat - Royaume du Maroc Fax: +212 (0) 37 71 35 26 - Tel: +212 (0) 37 71 32 41 - Email: [email protected] Direction des Routes et de la Circulation RoutiBre (DRCR) Mr. Moha Hamaoui - Directeur des Routes et de la Circulation Routiere Ministhe de 1’Equipement - B.P 6226, Rabat Instituts - Rabat - Royaume du Maroc . Fax.- -. -. +212- - 10)\-, -37 71 32 40 - Tel: +212 (0)\, 37 71 32 41 - Email: hamaoui@,mtmet.eov.maVI ” Estimated disbursements (Bank FY/US$m) I I m.FV 07-. I 08-- I ns-- I 10.- I1.. Annual 6.15 11.85 14.00 14.00 14.00 Cumulative 6.15 18.00 32.00 46.00 60.00

Expected effectiveness date: July 1, 2006 ExDected closing date: June 30, 2012 Does the project depart from the CAS in content or other significant respects? Re$ PAD A.3 [ ]Yes [XINO Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [ IN0 Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? Re$ PAD C.5 [ ]Yes [XINO Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7 [XIYes [ ]No Project development objective Re$ PAD B.2, Technical Annex 3 The project’s development objective is to increase rural populations’ access to all-weather roads by supporting the first Phase ofthe Government’s Second National Program ofRural Roads (NPRR-2). The project will contribute to achieving the main objective of the NPRR-2, namely, to increase the national rural road accessibility indicator - NRRAI (defined as the percentage ofpopulation living within one kilometer from an all-weather road) from 54 percent in 2005 to 67 percent in 2010. Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 The proposed project consists of two components involving the rehabilitatiodupgrading of about 7,800 km of rural roads that constitute the first Phase ofthe NPRR-2 covering the period 2005-20 10:

0 Component A - Rural roads financed by the CFR: This component will support the rehabilitation or upgrading of about 4,600 km of rural roads (including small, complementary road-related infrastructure) financed by the Caisse pour le Financement Routier (CFR) with an estimated cost of about US$385 million equivalent.

0 Component B -Rural roadsJinanced by the DRCR (General Budget and Road Fund): This component will support the rehabilitation or upgrading of about 3,200 km of rural roads (including small, complementary road-related infrastructure) financed by the Direction des Routes et de la Circulation Routi2re (DRCR) through its budget and the Road Fund with an estimated cost ofabout US$269 million equivalent.

~ Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 Environmental Assessment (OP/BP/GP 4.0 1) Involuntary Resettlement (OPDP 4.12) Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation: Not Applicable. Loadcredit effectiveness: Not Applicable. Covenants applicable to project implementation: - The Framework Agreement dated August 22, 2005 between the Ministry ofPublic Works and Transport, the Ministry of Finance, and the CFR, which stipulates the roles and responsibilities of the DRCR and the CFR for the implementation ofthe NPRR-2, shall not be amended without the Bank’s prior consultation. - The Borrower will, no later than March 31 of each Fiscal Year, prepare an annual implementation report. satisfactory to the Bank, covering the technical, financial and accounting aspects of Component A of the Project for the twelve-month period preceding the date of said report. - The Borrower will, not later than ninety days following the twelve-month period commencing at the Effectiveness Date and, thereafter, for every subsequent twelve-month period until completion ofthe Project. submit to the Bank, for its review and approval, progress reports prepared in accordance with environmental indicators set forth in the environmental assessment procedures included in the EMP. - The Borrower will, not later than March 3 1 of each Fiscal Year during the implementation of the Project, ir consultation with the DRCR, submit to the Bank, for its review and assessment, an Annual Report satisfactory to the Bank, in accordance with the format included in the Project Implementation Plan: (1: describing progress achieved in the implementation of the Annual Work Plan approved for said Fiscal Yea] and evidencing compliance by the Borrower with the monitoring and performance indicators agreed betweer

(ii) the Bank and the Borrower; and (2) detailing the budgetary allocations for the following Fiscal Year as shall be necessary to ensure adequate financing and proper implementation of said year’s Annual Work Plan including: (a) confirmation that said Plan (i)is technically and financially viable; (ii)includes the economic rate of return or the cost effectiveness indicator; and (iii)complies with the EMP, including the environmental assessment procedures, and with the Land Acquisition and Resettlement Policy Framework; (b) results on the use of the environmental assessment procedures included in the EMP and the Land Acquisition and Resettlement Policy Framework, including, where appropriate, a copy of the applicable environmental assessment study and the land acquisition plan; and (iii)confirmation that (i)the rural roads retained for rehabilitation and construction have been selected within the Program and in accordance with the participatory process described in the Project Implementation Plan, and (ii)the rehabilitation and construction of the rural roads referred to in the preceding sub-section (i)comply with the Regional Framework Agreements and Specific Provincial Agreements relevant to said roads. The Borrower will, not later than March 3 1 of each Fiscal Year during the implementation of the Project, in consultation with DRCR, submit to the Bank an Annual Work Plan, satisfactory to the Bank, in accordance with the format included in the Project Implementation Plan, setting forth, inter alia, work programs, budgets, the Annual Allocation, the Procurement Plan and the monitoring and performance indicators agreed between the Bank and the Borrower for the following Fiscal Year. The Borrower, jointly with the DRCR, will maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Bank, the carrying out of Component A of the Project and the achievement ofthe objectives thereof. The Borrower, jointly with the DRCR, will provide the Bank with a mid-term progress report by March 31, 2009, review with the Bank this report by September 30, 2009, and 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 ofthe report and the Bank’s views on the matter. No withdrawals shall be made in respect ofpayments made for expenditures under an Annual Work Plan for rural road upgrading, rehabilitation and construction activities unless the Borrower has furnished evidence, satisfactory to the Bank, confirming that no land acquisition is required for purposes of said activities. No withdrawals shall be made in respect of payments made for expenditures under an Annual Work Plan, unless the Bank has determined that evidence of the Borrower’s compliance with the monitoring and performance indicators agreed between the Bank and the Borrower relating to such Plan is satisfactory to the Bank.

(iii)

MOROCCO - SECOND RURAL ROADS PROJECT

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

1.1. Rural poverty and government strategy. For Morocco to realize the Millennium Development Goals, the development ofrural areas will be critical. In Morocco, poverty is mainly rural, since nearly one in four Moroccans living in non-urban areas is poor compared to one out of ten in urban areas. Overall, 66 percent of the poor live in rural areas’. The rural-urban gap is especially big for the extreme and very poor: three million rural people fall in this category, compared to 0.7 million for the urban population. Rural poor tend to live in large households, have few working members and an illiteracy rate of 67 percent, compared to 34 percent in urban areas, and live disproportionally in isolated areas.

1.2. One of the Government’s priorities noted in its 2020 Rural Development Strategy is to improve conditions of the rural population by increasing their access to basic infrastructure and social services. This strategy includes reducing the imbalance between the provinces better off in terms of accessibility, and those worse-off. In the mid-l990s, the Government launched rural infrastructure programs targeted at the rural population in power, water and roads, and these programs are ongoing..

1.3. Rural road accessibility. The Government’s strategy specifically includes improving the rural population’s access to all-weather roads. Access today is low, since only around 54 percent of the country’s rural population live near an all-weather road. There are large differentials among provinces in terms of the rural population’s access to roads, which ranges from about 79 percent for the better served provinces to around 23 percent for the more isolated ones. Population counted as having access to rural roads are those who live in villages (douars) of at least 50 households, and are located not more than one kilometer away from an all-weather road. This definition takes into account that providing rural access to highly dispersed populations is not presently affordable. It also takes into account that a large proportion of the inaccessible rural population lives in mountainous areas, some at high elevations, which makes walking and access to basic services and economic opportunities difficult.

1.4. Morocco’s road network comprises about 57,227 kilometers ofclassified roads (national, regional and provincial), a large percentage ofwhich, 44 percent, is unpaved; and 620 km ofmotonvays managed by a public entity, ADM (Autoroutes du Maroc), under a concession agreement. The density of the road network is low, with less than 90 kilometers of roads per 1,000 square kilometer and 2.2 lulometers per 1,000 inhabitants. The quality of the unpaved road network is further hindered by inadequate reliability, since many of the roads are often cut 30 to 60 days per year due to severe weather conditions. A first National Program of Rural Roads (NPRR-l), launched in 1995 seeks to improve this situation. By completing this Program (in 2006), accessibility will increase to about 54 percent, which is still substantially short ofgovernment objectives.

1.5. Transport services in rural areas are provided by private operators. In the areas with thin demand for passenger services, due to low population densities, and where road conditions are generally poor, transport services are often limited to basic, once or twice daily bus service or all-wheel dnve vehicles on the poorer roads. Where the roads are better, individual operators provide higher quality and more frequent service with smaller vehicles, often share-ride taxis. Regarding road freight, this industry was, until recently, highly regulated, which hampered competition and led to high freight tariffs and inadequate

’ About 19 percent of Morocco’s population, equivalent to 5.3 million people, are estimated to be below the poverty line, and 44 percent, equivalent to 12 million people, are considered economically vulnerable (at or below 50 percent over the poverty line).

1 services. A law that became effective in March 2003 liberalized the sector. This law should significantly improve the provision of road transport services in villages and rural areas because small trucks, that are appropriate for the rural economy due to the small size of shipments and poor road condition, will no longer be constrained to own-account transport. Where roads are improved, better truck services with lower prices will be offered.

1.6. Funding for road maintenance is currently generated from two sources: (a) the Road Fund (Fonds Spkcial Routier, FSR) and (b) the general budget. The FSR, a Treasury Special Account, is funded by a number ofroad user charges, notably fuel taxes, a vehicle registration fee, and an axle-load tax for freight vehicles. Initially, the FSR was established to finance maintenance of the classified road network only. However, in order to secure the financing necessary for the First National Program of Rural Roads (NFXR-1) in 1995, the Government increased FSR’s revenues by raising fuel (gasoline and diesel) taxes.* Consequently, in 2004, funding provided to the FSR amounted to MAD 1.605 billion, of which 1.2 billion came from fuel taxes.

1.7. The Caisse pour le Financement Routier (CFR) was established in 2004 as a public entity with administrative and financial autonomy (Law No. 57-03) to mobilize financing for rural road development through borrowing, with the FSR being used to repay loans. When fully functional, the CFR’s borrowing capacity will significantly increase the funding available for rural roads. The CFR, which is under the tutelage of the Ministry of Public Works and Transport, is also subjected to financial oversight by the Ministry ofFinance.

Road Sector Issues

1.8. In addition to low rural accessibility, which remains the main problem of Morocco’s road sector, other issues include the: (a) inadequate quality and density of the road network; (b) large size ofthe road network under the responsibility of the central government; (c) centralized road management and lack of capacity at the local level; (d) minimum financing for road maintenance; (e) lack of global view of rural roads at provincial levels; and (g) poor road safety.

(a). Rural roads accessibility. Most ofthe classified roads serving rural populations are unpaved, and the large majority is tracks with minimal or no technical standards. About seven percent of the unpaved roads are national roads, 6.5 percent are regional roads, and 86.5 percent are provincial roads. The very low standards of these roads cause frequent road closures or impassability by most motorized vehicles due to weather conditions and traffic-induced deterioration. The result is that only about 54 percent of the rural population have access to roads that can be used reliably at all times.

(b). Quality ofthe road network. Just over one-half (56.5 percent) of Morocco’s classified road network is paved (totaling 32,700 kilometers), including 620 lulometers of motorways and some 18,000 kilometers of two-lane roads that meet international standards. These roads carry the heaviest inter-city traffic. Close to half of the classified paved network consists of narrow roads, less than 4.5 meters wide, or about the width of a conventional single-lane. Since the late 1990’s, traffic has grown at a sustained pace ofthree to seven percent per year, and use of larger trucks for long-distance hauling is also growing. As a result, the road network is becoming increasingly inadequate, causing high costs of land transport and increasing traffic accidents and fatalities.

~~ ~ Fuel taxes are currently set at DH50 per hectoliter of gasoline and DH32.5 per hectoliter of diesel. (see Annex 1 paragraph #27)

2 (c). Size of the road network under the central government. Morocco’s classified road network that is under the jurisdiction the Ministry of Public Works and Transport (MPWT) is large relative to the networks managed by other government levels. The Directorate of Roads and Road Traffic (DRCR) manages national, regional and provincial roads. Ideally, part of the provincial and regional roads should be transferred to the respective local governments (regions, provinces and communes). However, attempts in the early 1990s to make such transfers failed because: (i) of the weak financial and technical resources of local governments and slow progress with the Government’s decentralization process that could have improved the shortfall in resources; and (ii)important investments needed to rehabilitate the roads largely exceeded the resources available locally.

(d). Centralized road management. The DRCR, together with MPWT’s 29 Provincial Offices (DPEs) and 16 Regional Offices (DREs), manages the classified road network. The number ofDREs has gradually increased from four pilot offices in the mid-1990s to 16 offices today. The DRCR has already delegated several technical review functions to the regional and provincial offices. In practice, however, the deconcentration is limited, and the central level still retains many functions that could be passed on to the DREs and DPEs, such as programming the maintenance of provincial roads, since resident engineers are more knowledgeable ofroad condition and needs.

(e). Funding of road maintenance. A recurrent issue with Morocco’s road system is the allocation of funding for road maintenance. In the last decade, funding improved with the creation of a Road Fund (Fonds Spkcial Routier, FSR) in the early 1990s, a special Treasury account, which was established to finance maintenance of the classified road network and improvement of rural roads. Even then, funding for maintenance was not always sufficient. However, more efficient use ofresources by the DRCR permitted a slight improvement in the overall rating condition of the road system. Road Fund resources should be augmented to ensure that required increases in funding that result from the rural roads programs are sufficient.

(f). Provincial view of rural roads. In the provinces, a diversity of sponsors and agencies are involved in financing and executing rural roads projects. This makes it difficult to obtain a global view of all projects, which is essential to facilitate integration ofrural road programs with other sectors and activities planned at the local level. Despite the diversity of sponsors and types of rural roads, the DRCR, with the help of its Provincial Directorates (DPE), carried out an inventory of the country’s rural roads with a view to facilitate preparation of their priority rural roads programs. There is a need to generate information on all rural roads projects, including their implementation status, and to disseminate such information to government officials and service providers in an effort to facilitate the planning of infrastructure, services and investments. The DPEs are well placed to collect and disseminate this information.

(8). Road safety. With the increase in traffic and the low standards of the road network, traffic accidents, fatalities and injuries have grown at an alarming pace. Although some improvements have been made in recent years with the elimination of the most dangerous road sections (black spots), significant work remains to be done. An inter-ministerial commission for road safety, reporting directly to the Prime Minister, was created in 2002 to promote road safety plans and oversee their implementation.

3 2. Government Strategy

2.1. Recognizing the critical importance of access to roads for the rural population, the Government launched a first National Program of Rural Roads (NPRR-l), under which approximately 11,230 km of earth roads were to be rehabilitated and/or upgraded between 1995 and 2005. When the NPRR-1 is completed in 2006, about 54 percent of the rural population will have access to an all-weather road. As recent impact studies have demonstrated, the NPRR-1 has already produced satisfactory results - in some villages that now have access to an all-weather road, school enrollment rates have tripled, while the prices of some staple foods have been cut in half.

2.2. The Government’s road sector strategy for the next ten years should continue to give priority to improving road accessibility for the rural population. The Second National Program of Rural Roads (NPRR-2), launched in 2005, seeks to increase the level of the rural population’s accessability to an all- weather road to 80 percent by 2015. This objective would be achieved by scaling-up the efforts of the NPRR-1 from rehabilitatinghpgrading 1,000 km of rural roads per year to 1,500 km per year. The establishment of the Caissepour le Financement Routier (CFR) in 2004 should enable the Government to mobilize the additional funding needed to expedite implementation of the program and guarantee achievement of accessibility objectives. The CFR will pool all funds provided by donors and local authorities (regions, provinces, and communes) in support of a program-approach for the NPRR-2. Compared to the first program, the NPRR-2 is also different in that it: (a) relies on a stronger participatory process, in which local authorities have been fully involved in the selection ofrural road projects; and (b) includes a comprehensive monitoring and evaluation (M&E) system that will allow adequate and regular evaluation of outcomes (in terms ofaccessibility), as well as physical achievement.

2.3. Finally the NPRR-2 will complement the National Initiative for Human Development (Initiative pour le DPveloppement Humain - INDH), which was launched by the King in 2005 and allocated a budget of MAD 10 billion3 (or about USS1.1 billion) through 2010. Of the four areas covered by the INDH, the alleviation of social exclusion (with funding of MAD 2.5 billion) more specifically targets Morocco’s 360 poorest communes. Most ofthese communes, located in rural areas, have also been given priority under the NPRR-2.

3. Rationale for Bank involvement

3.1. The Bank’s involvement in Morocco’s road sector is long-standing. The Bank started supporting the development of Morocco’s rural road network through its Secondary, Tertiary, and Rural Roads Project, which began in 1995 and was completed in 2002. This project, financed the rehabilitation and/or upgrading of about 950 km of rural roads under the NPRR-1. The First Rural Roads Project (RRP-l), approved in June 2004, addresses the following problems: (a) improving rural road accessibility by financing the rehabilitation or upgrading of approximately 625 km of rural roads as part of the NPRR-2 Program (rural roads component); (b) establishing a comprehensive approach to accessibility, which involves the participation of local authorities in the planning process, as well as the selection of projects to be incorporated into Provincial Rural Roads Programs (PRRPs); and (c) evaluating possible approaches for the management and maintenance of unclassified rural roads by the communes and provinces (institutional support component). Through the development of appropriate tools and procedures, such as the monitoring and evaluation (M&E) system, the Environmental Management Plan (EMP), and the Resettlement Policy Framework (RPF), the RRP-1 was instrumental in the preparation ofthe NPRR-2.

Budget for the INDH will be provided by the Government of Morocco (60 percent), concerned Local Authorities (20 percent), and International Cooperation (20 percent).

4 3.2. Based on its long-standing involvement in the road sector and in rural development in Morocco, the Bank is well placed to support the launch of a fully-functional CFR. The Bank project will serve as a catalyst by helping the CFR attract the funding needed to finance the first phase of the NPRR-2.

3.3. The project is also fully in line with the objectives set out in the Country Assistance Strategy (CAS) for Morocco, adopted on May 19, 2005. This strategy clearly identifies rural infrastructure development as one of the priorities for future Bank operations in Morocco.

3.4. Finally, the project will contribute to achieving the Millennium Development Goals through its intersectoral synergies, given that all-weather roads are essential for attaining the objectives related to maternal mortality and primary education, particularly for girls.

B. PROJECT DESCRIPTION

1. Loan instrument

1.1. A Sector-Wide Approach (SWAP) was adopted for the project with a Specific Investment Loan (SIL) to the Caissepour le Financement Routier (CFR).

1.2. The Borrower selected a Fixed Spread Loan (FSL) with level repayments. The Loan has a 22- year maturity, including a six-year grace period. The currency ofthe Loan will be denominated in Euros.

2. Program objective and Phases

2.1. The Second National Program of Rural Roads (NPRR-2), launched in 2005, aims at increasing the rural population’s level ofaccessibility to an all-weather road to 80 percent by 2015.

2.2. All roads in the NPRR-2 Program have been identified by the DRCR through a thorough inventory of rural roads and selected following a strong participatory process involving local authorities (regions, provinces and rural municipalities - communes). The NPRR-2 consists of 1,058 road subprojects for a total length of 15,560 km. All of the upgradedirehabilitated roads will: (a) contribute to improving rural access in a cost-effective manner or with satisfactory economic rates of return in the case of roads with higher traffic volumes, (b) have acceptable technical standards including for road safety and village crossings, and (c) comply with environmental, resettlement and social safeguards.

2.3. The estimated total cost ofthe NPRR-2 (including physical and financial contingencies) stands at about MAD 11.32 billion (equivalent to US$1.23 billion). The Program will be implemented in two consecutive phases (2005-201 0 and 20 11-201 5), with the first phase accounting for about MAD 6 billion.

3. Project development objective and key indicators

3.1. The project’s development objective is to increase rural populations’ access to all-weather roads, by supporting the first Phase ofthe Government’s Second National Program ofRural Roads (NPRR-2).

3.2. The project will contribute to achieving the main objective of the NPRR-2, namely, to increase the national rural road accessibility indicator - NRRAI (defined as the percentage of population living within one kilometer from an all-weather road) from 54 percent in 2005 to 67 percent in 2010 (and approximately 63 percent by the mid-term project review in mid-2008). By 2015, when the NPRR-2 is completed, the NRRAI should stand at 80%.

5 3.3. In addition to this main indicator, two other performance indicators will also be measured: (a) An Accessibility Differential Indicator (ADI), a measure devised to quantify the accessibility gap between the ten provinces with the lowest accessibility, and the ten provinces with the highest accessibility. The target for this indicator is to improve from 0.41 in 2001 to 0.60 in 2010 (0.65 in 2015 and 0.50 at the mid-term); and (b) A Transport Service Improvement Indicator (TSIT), a measure to assess the impact of improved rural roads on the quality of inter-city transport services for passengers. In order to monitor this indicator, a sample of roads will be selected every year. By the end of the project, at least SO percent of all sample roads that will have been open to traffic for two or more years should show an improvement in the quality of service, reflected in higher service frequency, more comfortable vehicles, or lower rates.

3.4. The project's performance indicators related to institutional development and strengthening objectives would include: (a) The overall performance of the monitoring and evaluation (M&E) system developed and managed by the National Center for Road Study and Research (CNER). This system will generate annual, provincial-level reports on the status of the NF'RR-2 and progress in implementing rural road works, including the number of people that have gained road access, kilometers completed and open to traffic, design standards, exact location, and other related information, as well as the impact on improved delivery, use of social services, and access to markets; (b) The quality ofthe dissemination and outreach program, which will cover those sub-activities aimed at making available to concerned and interested stakeholders and the public, information on rural roads projects, and identifying local economic opportunities made possible by improved roads. The total number of recipients of the provincial accessibility reports produced by the CNER will more specifically be assessed; and (c) Overall development of local consulting firms and the strengthening of their technical capacity, following the development and dissemination of the Manual for Rural Roads Design and Appraisal.

3.5. In order to ensure that maintenance of the overall road network is being done correctly there would also be: (a) An indicator measuring the level of funding provided for road maintenance, equal to the minimum annual value determined by the DRCR in its national road maintenance strategy study. This study which is currently being updated should be completed by December 31, 2006; and (b) An indicator on overall road network condition, specifying the percentage of roads in bad condition (the target would be 30 percent in 2010, down from 35 percent in 2004).

4. Project components

4.1. The project consists oftwo components involving the rehabilitatiodupgrading of about 7,800 km of rural roads that constitute the first phase ofthe NPRR-2 covering the period 2005-2010: (a). Component A- Rural Roads Financed by the CFR: This component will support the rehabilitation or upgrading ofabout 4,600 km ofrural roads (including small, complementary road-related infrastructure) financed by the CFR with an estimated cost of about US$385 million equivalent.

6 (b). Component B- Rural Roads Financed by the DRCR (General Budget and Road Fund): This component will support the rehabilitation or upgrading of about 3,200 km ofrural roads (including small, complementary road-related infrastructure) financed by the DRCR through its budget and the Road Fund (FSR) with an estimated cost of about US$269 million equivalent.

4.2. The project’s financing plan, shown in the table below, consists of (a) a joint contribution from the Road Fund (FSR) and the general budget of up to MAD 2.48 billion (41 percent of investment); (b) loans contracted by the CFR in the amount of approximately MAD 2.64 billion (44 percent); and (c) contributions from local authorities (regions, provinces, and communes) amounting to MAD 90 1 million (15 percent). Contributions from local authorities will be made directly to the CFR. Funds from the general budget and Road Fund allocated to the NPRR-2 will be managed by the DRCR.

Project Cost Estimate and Financing Plan

Component A - Rural Roads Financed by the CFR 3,541 385 59% 0 Contributions from Local Governments and Local Communities 90 1 98 15%

0 Hassan I1 Fund 100 10 2% 0 International Bank for Reconstruction and Development (IBRD) 550 60 9% 0 Agence Franqaise de Developpement (AFD) 550 60 9%

0 European Investment Bank (EIB) 660 72 11% 0 To be financed (loans to be contracted by the CFR) 780 85 13% Component B - Rural Roads Financed by DRCR’s Budget and the Road Fund 2,476 269 41% Total 6,017 654 100%

4.3. As part of the Sector-Wide Approach (SWAP) adopted for the NPRR-2, all funds secured by the Caisse pour le Financement Routier (CFR), regardless of their origin (loans or contributions from local authorities), will be pooled. Consequently, financing obtained from different sources will not be earmarked for specific rural roads. Instead, funds will be allocated to the overall funding of the program of rural roads for which the CFR is responsible. Donor financing will be disbursed in tranches, in accordance with a multi-year programming strategy prepared by the Directorate of Roads and Road Traffic (DRCR) and the CFR. This programming will be reviewed annually based on implementation progress and impact of roads on the national rural road accessibility index.

4.4. Project funds will be transferred to the CFR annually. The first disbursement will take place when the loan agreement takes effect, at CFR’s request. Subsequent disbursements will be contingent upon the: (a) preparation of a road implementation program and budget by the CFR for the following year (annual work plan); (b) balance of funds available from the previous disbursement; and (c) conclusions and recommendations of ex-post technical, accounting, and financial audits carried out to assess the overall performance and achievement of the Program, and to monitor the proper use and management offunds by the CFR (cf. Annex 7) and progress in implementation (annual report).

5. Lessons learned and reflected in the project design

5.1. Three lessons learned from previous Moroccan road projects were taken into account in the design ofthe proposed project.

5.2. Thefirst lesson is the need for rural road projects to define objectives based on accessibility. The Second, Tertiary and Rural Roads Project (STRRP), while providing some crude indicators on

7 accessibility and road trafficability, still retained as key performance indicators the physical outputs, namely, the km ofroads rehabilitated. The proposed project has rural accessibility as its main focus.

5.3. The second lesson pertains to the difficulties in monitoring and evaluating rual roads programs. In the context of the NPRR-2, a monitoring and evaluation (M&E) system was established within the National Center for Road Study and Research (CNER) in order to ensure close, ongoing, and regular monitoring of the progress of the NPRR-2 in general, and of Provincial Rural Roads Programs (PRRPs) in particular, both in terms ofphysical works and accessibility outcomes. Information on the progress and impact of the PRRPs will be disseminated by the CNER, and more specifically, to local authorities involved in the financing of the Program. This information will also be regularly distributed to the provincial and central authorities of the various sectors that are likely to benefit either directly or indirectly from rural road subprojects. These include the health and education departments, as well as public service sectors and concessionaires of other services (water, rural electrification). This large dissemination process will enable these various actors to define or modify their own rural action programs, including implementation schedules, based on the subprojects outlined in the NPRR-2, and will pave the way for synergies to be created among the different programs, and for economies of scale. Effectiveness of the M&E system and overall quality of information produced and disseminated will be assessed throughout the Program.

5.4. The third lesson relates to the problem ofoverdesign ofrural roads and the shortcomings noted in several rural road detailed designs, a factor that explains the early deterioration of some ofthese roads. In order to address these problems and ensure optimal use ofthe funds allocated to the NPRR-2, the DRCR has agreed to prepare a Manual for Rural Roads Design and Appraisal, taking into account the specificities of rural road subprojects (particularly their low level of traffic), and the possibility of using local or reprocessed materials. This manual will include all NPRR-2-related procedures and tools (covering such areas as environmental and social management). By proposing a selection of road pavement structures and construction techniques more suited to the NPRR-2, this manual will contribute to the efficiency and sustainability of the program’s investments. It will also enhance the technical capacity of local consulting firms, by providing them with a comprehensive set of tools for designing and appraising rural roads.

6. Alternatives considered and reasons for rejection

6.1. A spatially focused approach for the design of the project was considered, but rejected. This alternative approach, which would have involved planning and implementing rural road projects by the provinces, was rejected because the provinces have little autonomy, scant resources, and are not equipped to plan networked infrastructure, such as roads. Decentralization-focused operations would be better suited for this purpose.

6.2. Pilots could have been tried in the more advanced provinces, however, they would have been risky as this would have required complex implementation arrangements.

C. IMPLEMENTATION

1. Overall Program arrangements

1.1. As a result of the program-approach, the World Bank will support the first Phase ofthe NPRR-2 (from 2005 to 2010) through its financing to the Caissepour le Financement Routier (CFR). Other donors are also supporting the NPRR-2 and the program approach adopted for its implementation. This is particularly true for the: (a) Agence Franqaise de Dkveloppement (AFD), which has provided a loan to the CFR in the amount of Euro 50 million (financing agreement signed on September 27, 2005); and (b) European Investment Bank (EIB), which has provided a loan ofEuro 60 million to the CFR.

8 1.2. The World Bank, AFD, and EII3 are working closely together in the context of the NPRR-2. They have been able to jointly address critical issues and develop a joint plan for effective implementation. The AFD has assisted with the preparation of an administrative, financial, and accounting management system for the CFR, as well a comprehensive manual of tools and procedures. The EIB is supporting the Rural Roads Program Division (RRPD) within the DRCR to assist with project implementation. This division will consolidate all information on program implementation. The Bank, through the First Rural Roads Project (RRP-l), initiated the preparation of a comprehensive Manual for Rural Roads Design and Appraisal, and assisted in the establishment of the program’s M&E system, and the development of the Program’s social and environmental tools and procedures.

2. Institutional arrangements and implementation

2.1. The Caisse pour le Financement Routier (CFR) and the Directorate of Roads and Road Traffic (DRCR) will be the implementing agencies for the project, with each agency being responsible for those rural roads it finances (see Figure 1 below). Under a Framework Agreement4, the DRCR (and its deconcentrated offices) has however been designated as the oversight entity and construction manager for all NPRR-2 rural road subprojects, including those financed by the CFR. With the assistance of its network of Regional Offices (DREs) and Provincial Offices (DPEs), the DRCR has the capacity required to prepare and monitor execution of all NPRR-2’s rural road subprojects. The DRCR has satisfactorily completed World Bank-financed projects in the past and is currently implementing the First Rural Roads Project.

2.2. The CFR will assume administrative and financial responsibility for the sub-program of rural roads it was assigned (Component A under the Project). It will seek, secure, and manage funds obtained from various sources (loans from donors and contributions from local authorities) necessary to finance this sub-program. A multi-year programming strategy as well as works and financing plans will be developed by the CFR in conjunction with the DRCR. Annual implementation, budget, and related plans will also be prepared in close collaboration with the DRCR, based on the overall progress ofthe NPRR-2 and its actual impact on the national rural road accessibility index. These annual plans will allow the CFR to determine the precise amount of withdrawals for each one of its mobilized loans. The CFR will approve and sign all contracts related to its rural road subprojects (Component A), verify disbursement amounts, and make all appropriate payments.

2.3. As the construction manager, the DRCR will coordinate and monitor the execution of all NPRR-2’s roads. The DPEs and DREs will be responsible for project supervision, and will prepare contracts for rural road subprojects, supervise works, determine payment amounts to contractors, and ensure provisional and final handover ofroads. The DPEs and DREs will also liaise with local authorities benefiting from NPRR-2’s roads with which they have concluded agreements.’

The Framework Agreement dated August 22, 2005 and concluded between the Ministry of Public Works and Transport, the Ministry of Finance, and the CFR, stipulates the roles and responsibilities of the Directorate of Roads and Road Traffic and the CFR for the implementation ofthe NPRR-2. Two types ofagreements were concluded: - Regional Framework Agreements between the DREs and each ofthe regions; - Specific Provincial Agreements between the DPEs and the respective provinces and municipalities (communes). These agreements commit all Program’s stakeholders on the exact length and estimated cost of Rural Roads Programs in each Province, the share of financing by source, as well as the timetable for mobilization of financial resources. For NPRR-2’s unclassified roads, the Specific Provincial Agreements will also ensure that local authorities acquire all rights of way needed for the road prior to construction and that they adequately maintain those roads when handed over.

9 2.4. Overall monitoring and coordination of NPRR-2 implementation, as well as relations with donors, will be handled by the Rural Roads Program Division (RRPD), recently established within the DRCR. This division will centralize all the technical and financial data related to the overall NPRR-2, monitor programming and adherence to deadlines, and prepare consolidated progress reports in accordance with plans and deadlines agreed with donors.

2.5. In order to prepare, implement, and monitor subprojects, the DREsiDPEs will refer to the Project Implementation Plan (PIP) developed in the framework of the First Rural Roads Project (RRP-1). This PIP has been revised to reflect the lessons of experience from the RRP-1. It provides all the environmental, social, and technical procedures and tools to be followed and used for project execution purposes. The CFR will follow the manual of procedures and tools that is currently being developed in order to facilitate and harmonize the administrative and financial management of the NPRR-2 Program (see Annex 7).

Figure 1 : Project implementation arrangements

Component A Rural Roads Financed by the Component B: Rural Roads Financed by the CFR DRCR

I Framework I I I I I

I /

2.6. The Project, which would be implemented between June 1, 2006 to December 31, 2010, would have a Loan closing date of June 30, 2012. A mid-term review in September 2009 will assess progress made, using performance indicators selected for the project.

3. Monitoring and evaluation

3.1. A monitoring and evaluation system has been developed for the NPRR-2 to monitor progress of works, as well as impacts on rural accessibility and improvement in road transport services. This system, which is a key feature of the NPRR-2, has been developed and is currently being managed by the National Center for Road Study and Research (CNER), an autonomous agency reporting to the DRCR.

10 3.2. Under a contract agreed between the DRCR and the CNER, the DRCR (through its DREs/DPEs) will be responsible for collecting data related to the program’s outcomes and activities, as well as progress made with road works. These data will cover not only the NPRR-2, but also any other rural roads programs financed or executed by other local authorities or public service sectors. On the basis of the information collected by the DREslDPEs, the CNER will produce annual provincial reports on the impact of roads on rural accessibility and transport services, and disseminate this information to all concerned stakeholders.

3.3. As part of the SWAP approach adopted for the project, external audits will be carried out annually by independent consultants (see Annex 3) to: (i)include ex-post reviews of the overall performance and progress of the NPRR-2; (ii)ensure strict compliance by the DRCR (and its deconcentrated Offices) with the technical, social, and environmental tools and procedures developed for the NPRR-2 with respect to project implementation, particularly procurement and financial management procedures; and (iii)ascertain CFR’s capacity to manage the funds secured for the program, as well as the appropriate use of these funds, and assess compliance with international accounting standards and the maintenance ofproper accounts and documents for each rural road subproject.

4. Sustainability

4.1. The participation of local authorities in the selection and financing of rural road subprojects will contribute to their sustainability by assigning more responsibility to local authorities in the management and maintenance oftheir local rural roads. By signing specific agreements (see footnote 5) with the DPEs, local authorities have committed to take all steps necessary to ensure effective maintenance ofthose roads under their responsibility. A study on the management of local roads is currently being carried out (as part of the First Rural Roads Project). This study will identify a whole set of practical and regulatory procedures that could be applied (as well as the appropriate funds to be secured) for the proper management and maintenance of all local roads included in the NPRR-2.

4.2. The quality of the technical, economic, environmental, and social studies and procedures implemented for the design and implementation of rural road subprojects will ensure their technical soundness. The planned Manual for Rural Roads Design and Appraisal will help specify adequate technical standards and construction methods.

4.3. The rehabilitation or upgrading of the 15,560 km of rural roads identified in the NPRR-2 will have a signifiant impact on road maintenance needs. Without sufficient road maintenance budgets, the long term sustainability of the network will be at risk. To mitigate this risk, a study of maintenance strategies has determined the amount of funding to be secured in the future to ensure proper maintenance of the classified network. CFR’s borrowing capacity, which relies on the Road Fund revenues, would be determined after deducting the required funds for proper road maintenance (see analysis in Annex 9).

11 5. Critical risks and controversial aspects 5.1. The table below summarizes potential risks that may hinder achieving the project’s development objective. Critical Risks Matrix - Risk Mitigation Measures 1. Duplication ofacti\.ities and M -Framework agreement concluded between the Government of conflict of responsibilities Morocco and the CFR to specify the roles and responsibilities ofthe ibetween the DRCR and CFR. DRCR and CFR in NPRR-2 implementation; and -The framework agreement shall not be amended without the Bank’s prior consultation. 2. Use ofNCB Procurement M -Adequate capacity by the DRCR and its deconcentrated offices in Procedures. tern ofprocurement; and - CFR procedures and bidding documents reviewed and amended to bring them in line with standard Bank documents and procurement guidelines. 3. Application ofdifferent M - Standardization ofoperational procedures and tools, based on the procedures for the Project Implementation Plan for the RRP-1; implementation ofprojects - Setting-up of a dedicated Rural Roads Program Division to coordinate depending on their source of and monitor all NPRR-2 activities; financing. -The same technical, environmental, and social standards and criteria will be followed for all NPRR-2 projects; and -Monitoring and coordination ofall NPRR-2 activities will be entrusted to a dedicated entitv, the Rural Roads Program Division. 4. Overdesign ofproject roads M -Preparation ofa Manual for Rural Roads Design and Appraisal; and application ofstandards -Technical audits carried out by the DRCR and DPEs to ensure the that are higher than necessary. conformity ofdetailed studies with the standards set forth in the Manual; and -The annual NPRR-2 ex-post audit will check compliance with the technical criteria spelled out in the Manual, based on a random - sampling ofroads (25 percent). 5. Sustainability ofthe road M -Borrowing capacity ofthe CFR determined on the basis ofavailable network and inadequate FSR funds, after evaluation and funding ofroad maintenance budgets. financing ofroad maintenance 6. Inadequate management and S - Study on the management oflocal roads, spelling out the practical anc maintenance oflocal rural regulatory provisions to be implemented, as well as the funding to be - secured in order to DroDerlv manage and maintain local rural roads.

_.M

6. Loan conditions and covenants 6.1. The following conditions and covenants were agreed: - The Framework Agreement dated August 22, 2005 between the Ministry of Public Works and Transport, the Ministry of Finance, and the CFR, which stipulates the roles and responsibilities of the DRCR and the CFR for the implementation of the NF’RR-2, shall not be amended without the Bank’s prior consultation. - The Borrower will, no later than March 31 of each Fiscal Year, prepare an annual implementation report, satisfactory to the Bank, covering the technical, financial and accounting aspects ofComponent A ofthe Project for the twelve-month period preceding the date ofsaid report.

12 The Borrower will, not later than ninety days following the twelve-month period commencing at the Effectiveness Date and, thereafter, for every subsequent twelve-month period until completion of the Project, submit to the Bank, for its review and approval, progress reports prepared in accordance with environmental indicators set forth in the environmental assessment procedures included in the EMP. The Borrower will, not later than March 3 1 ofeach Fiscal Year during the implementation of the Project, in consultation with the DRCR, submit to the Bank, for its review and assessment, an Annual Report, satisfactory to the Bank, in accordance with the format included in the Project Implementation Plan: (1) describing progress achieved in the implementation of the Annual Work Plan approved for said Fiscal Year and evidencing compliance by the Borrower with the monitoring and performance indicators agreed between the Bank and the Borrower; and (2) detailing the budgetary allocations for the following Fiscal Year as shall be necessary to ensure adequate financing and proper implementation of said year’s Annual Work Plan including: (a) confirmation that said Plan (i)is technically and financially viable; (ii)includes the economic rate of return or the cost effectiveness indicator; and (iii)complies with the EMP, including the environmental assessment procedures, and with the Land Acquisition and Resettlement Policy Framework; (b) results on the use of the environmental assessment procedures included in the EMP and the Land Acquisition and Resettlement Policy Framework, including, where appropriate, a copy of the applicable environmental assessment study and the land acquisition plan; and (c) confirmation that (i) the rural roads retained for rehabilitation and construction have been selected within the Program and in accordance with the participatory process described in the Project Implementation Plan, and (ii)the rehabilitation and construction ofthe rural roads referred to in the preceding sub-section (i)comply with the Regional Framework Agreements and Specific Provincial Agreements relevant to said roads. The Borrower will, not later than March 3 1 of each Fiscal Year during the implementation of the Project, in consultation with DRCR, submit to the Bank an Annual Work Plan, satisfactory to the Bank, in accordance with the format included in the Project Implementation Plan, setting forth, inter alia, work programs, budgets, the Annual Allocation, the Procurement Plan and the monitoring and performance indicators agreed between the Bank and the Borrower for the following Fiscal Year. The Borrower, jointly with the DRCR, will maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Bank, the carrying out of Component A ofthe Project and the achievement of the objectives thereof. - The Borrower, jointly with the DRCR, will provide the Bank with a mid-term progress report by March 31, 2009, review with the Bank this report by September 30, 2009, and 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 report and the Bank’s views on the matter. - No withdrawals shall be made in respect ofpayments made for expenditures under an Annual Work Plan for rural road upgrading, rehabilitation and construction activities unless the Borrower has furnished evidence, satisfactory to the Bank, confirming that no land acquisition is required for purposes ofsaid activities. - No withdrawals shall be made in respect of payments made for expenditures under an Annual Work Plan, unless the Bank has determined that evidence ofthe Borrower’s compliance with the monitoring and performance indicators agreed between the Bank and the Borrower relating to such Plan is satisfactory to the Bank.

13 6.2. In addition to the above-mentioned covenants, the Ministry of Public Works and Transport agreed to the following conditions, as indicated in the Government’s letter of strategic directions, framework and implementation ofthe Second National Program of Rural Roads (see Annex 15): - The Ministry ofPublic Works and Transport undertakes to maintain an adequate level ofFSR funding to cover both NPRR-2 expenditures, including servicing the debt contracted by the CFR, and expenditures related to the management and maintenance of Morocco’s classified road network. - For each road improved under the NPRR-2, DRCR’s Division for “Studies and New Construction” will ensure that all environmental and social issues have been assessed and mitigated in line with the safeguards policies defined in Annex 10 of the PAD. - At the beginning of every year, the DRCR will submit provincial accessibility reports to the Bank indicating, by province, the progress achieved in implementing NPRR-2 road subprojects, as well as all other rural road works that may have been carried out by other institutions or sectors, and the overall impact ofthese roads on rural accessibility. - The DRCR will submit to the Bank, by June 30, 2007, a manual for rural roads design and appraisal, prepared in accordance with the terms ofreference agreed upon. - The DRCR will submit to the Bank by December 31, 2006, its updated road maintenance strategy and associated budget requirements.

D. APPRAISAL SUMMARY

1. Economic and Financial Analyses

Economic Analysis

1.1. An economic analysis was carried out to cover both the entire Second National Program of Rural Roads (NPRR-2) and its first phase (the project). A separate economic analysis was also carried out to evaluate the economic feasibility ofthose road subprojects included in CFR’s first-year workplan.

1.2. Most roads under the NPRR-2 are very low-volume roads, and the remaining are low-volume roads. Accordingly, two different approaches were used to evaluate the economic feasibility ofrural road subprojects: (i) A Cost-Benefit Analysis (CBA), using the RED6model (Roads Economic Decision Model) for low-volume roads (with traffic above 30-50 vehicles per day) with a minimum Economic Rate ofReturn (ERR) of 12 percent. (ii) A Cost-Effectiveness Analysis (CEA) for very low-volume roads (with traffic below 30-50 vehicles per day) with a threshold of US$490 per beneficiary. By nature, these roads will serve the country’s most isolated populations and therefore have low populatiodm ratios.

1.3. The economic evaluation of the overall NPRR-2 using the RED model (see Annex 9.A) showed that the Program had an ERR of 19 percent, with a global Net Present Value (NPV) ofUS$373 million. For the ERR to drop below 12 percent, costs would need to increase by 43 percent or benefits to drop by 30 percent.

The RED model was developed by the Bank for the economic analysis of low-volume traffic (see SSATP Working Paper No. 78, July 2004 - Rodrigo Archondo-Callao).

14 1.4. The economic analysis of the first phase of the NPRR-2 covered 487 rural roads totaling about 7,800 km for an estimated cost of MAD 6,017 million. Roads with an ERR exceeding 12 percent represent a total length of 4,774 km and a cost ofUS$381 million. The ERR for these roads is 28 percent, and the Net Present Value US$326 million. A Cost-Effectiveness Analysis was carried out for about 2,958 km ofvery low volume rural roads representing a cost of US$249 million, and serving a population ofabout 520,000 people, 63 percent ofthese roads meet the cost-effectiveness selected criterion.

1.5. There are 1,095 remaining km of roads that do not pass the cost-effectiveness criterion. These roads, which are located in rough, mountainous terrain or on poor soils, present important implementation challenges, and in the absence of surface treatment would rapidly deteriorate. They are generally located in the most isolated areas, e.g., in mountainous regions such as Azilal and Chefchaouen, and therefore , have a significant impact in terms of rural accessibility. Experience has shown that important gains could also be realized through optimization of pavement structures. Pending the finalization of the Manual for Rural Roads Design and Appraisal in early 2007, the DRCR will systematically review technical standards applied for each road subproject with a view to reducing costs. Most of these roads are also located in the 360 communes chosen for the high priority National Initiative for Human Development (Initiative Nationale de Ddveloppement Humain, INDH) launched in 2005.

1.6. In its first-year workplan, the CFR retained 88 sub-projects 1,186 km for a total cost of about US$lOO million. The overall ERR of these roads is 22.2 percent. The Cost-Benefit Analysis showed that 66 sub-projects (for a total length of about 883 km and a cost of US$66.5 million) had a satisfactory ERR (above 12 percent). Sensitivity analyses confirm that, even when investment costs increase and/or road user benefits decline, these sub-proj ects would still have adequate rates of return. The 22 remaining subprojects totaling a length of 239 km and a cost of US$27.6 million were evaluated with the Cost- Effectiveness Analysis and 15 did not meet the CEA criterion. The economic viability of these 15 subprojects will be improved by revising technical standards (using intermediate technical solutions) to reduce costs and better assessing benefits.

Financial Analysis

1.7. The financial analysis covers the NPRR-2 overall implementation period (2005-2015), as well as CFR’s debt repayment period (until 2030).

1.8. To finance the investments required to improve 15,560 kilometers of roads included in the Second National Program ofRural Roads (NPRR-2), the Government has mobilized resources from four different sources: the General Budget, the Road Fund (FSR), contributions from local authorities, and loans contracted by the Caisse pour le Financement Routier (CFR). The legal provisions establishing the CFR call for all of its loans to be backed by the FSR in the future. The main objective of the financial analysis is to validate NPRR-2’s financing arrangements and to ensure that the future resources of the FSR will be sufficient for both maintaining the country’s classified network and repaying CFR’s debt. The results of this analysis (see Annex 9.B) indicate that the financing plan adopted for NPRR-2 is financially viable. This plan, while permitting the financing ofa considerable number ofrural roads, does not affect the general equilibrium of the road sector during the period under review (2005-2030). Sensitivity tests also showed that in the absence ofresources available from the poorest local authorities and/or steady growth in FSR resources, the Program’s financing plan can still be adjusted (through a larger reliance on borrowing) without jeopardizing CFR’s capacity to repay its debt.

15 2. Technical

2.1. The lessons learned from the previous road project and the NPRR-1 have led to considerable improvements in the design of rural roads. Relying on the Manual for Rural Roads Design and Appraisal which is currently being prepared, DRCR’s technical departments and Moroccan consulting firms working on the Program should be able to apply the most appropriate technical standards for NPRR-2 road subprojects (and in particular optimize the design of road pavement structures), and to carry out a systematic assessment of the possible use of local materials andor inert reprocessed materials. Labor- intensive techniques will also be promoted in road construction, whenever appropriate. Until the Manual for Rural Roads Design and Appraisal is available in early 2007, the Technical Division of the DRCR will systematically check the detailed studies prepared by consulting firms for each road, in particular the proposed pavement structures, and optimize them, whenever possible.

3. Fiduciary aspects

Procurement

3.1. A recent Bank assessment of the legislative and institutional framework for procurement showed that Morocco had efficient auditing and control systems, as well as adequate appeal procedures.

3.2. During project preparation, a procurement capacity assessment was carried out for the CFR and the DRCR (including its deconcentrated Offices, the DREs and DPEs) (see Annex 8). The assessment concluded that capacity was adequate. CFR’s procurement regulations are based on national public procurement regulations, which generally conform to Bank procurement guidelines. However, some procedures have been modified to be in total agreement with Bank Guidelines.

3.3. Overall procurement risks are deemed to be moderate. The procurement and contract management capacity of the DRCR and DREsiDPEs is well known to the Bank and is satisfactory, since these agencies have considerable experience with projects financed by the World Bank and other donors. The CFR, although recently created, has staff competent to handle procurement. It will use standard bidding documents developed for the NPRR-2, which reduce procurement risks and facilitate controls.

3.4. CFR’s Procurement procedures are detailed in Annex 8. CFR’s and DRCR’s Procurement Plans for 2006 were reviewed during appraisal and are attached in Annex 8.

Financial Management

3.5. A financial management capacity assessment was carried out for the two implementing agencies (DRCR and CFR) and the Rural Roads Program Division (RRPD), a new entity within the DRCR responsible for centralizing technical and financial information for monitoring and auditing purposes of the entire NPRR-2. The assesment concluded that the financial management risk is deemed moderate.

3.6. The assesment’s main conclusions are: (a). DRCR’s capacity to handle the Program’s financial management is deemed satisfactory and presents a moderately low risk. The DRCR and its deconcentrated offices have acquired sufficient experience in the implementation oflarge-scale road programs. Audit reports ofthe preceding Bank-financed project indicated no significant anomalies likely to compromise the use ofthe funds received. (b). A Rural Roads Program Division (RRPD) dedicated to consolidation of the entire Program is in place. The necessary information tools needed for the management of the whole program

16 are in development. Arrangements have been made in order to ensure the preparation of consolidated progress reports for the NPRR-2. (c). The CFR, a new entity that is just being organized from a Jinancing and accounting standpoint, presents a moderate risk for the Program’s jnancial management. The framework of the financial and accounts management system set out in CFR’s establishing documents as well as the implementation of its structure accompanied by international consultants meets Bank requirements. External accounting assistance will be hired by the CFR for its first-year. In addition, staff from the RRPD will be trained in the new management procedures.

3.7. The financial management procedures for the project are based on national procedures in place in executing agencies, as described in detail in Annex 7 of this document. However, the Sector-Wide Approach (SWAP) adopted requires specific reporting and audit procedures arising from the need to consolidate information. Twice-yearly consolidated financial monitoring reports will be submitted to donors during the execution of the Program. These reports will be used for preparation of the ex-post audit. The NPRR-2 will be subject to an annual accounting and financial audit funded by the CFR through AFD’s loan to the Program. This audit, which will be conducted by an external auditor in accordance with terms of reference acceptable to the Bank, will cover all NPRR-2 road subprojects, regardless oftheir source of funding.

Disbursement

3.8. Project disbursement procedures are tailored to the SWAP approach and rely on a report-based disbursement mechanism of funds in annual tranches, according to the financing needs of the Program, rather than on individual road subprojects. Funding provided by the Bank will be transferred annually in the form ofan advance into a CFR credit line opened within Morocco’s general treasury as follows: (a) a first tranche of Euro 5 million will be disbursed at loan effectivness; and (ii)every year thereafter, funding will be provided in tranches based on, among others, progress made with execution of the NPRR-2 Program.

3.9. Retroactive financing of eligible project expenditures from January 1, 2006 until the expected date of signing of the Loan Agreement will be allowed up to an aggregate amount of Euro five million (EUR5 ,000,000).

4. Social

4.1. Recent statistics confirm that poverty in Morocco remains largely a rural phenomenon. Close to two-thirds of Morocco’s poor live in rural enclaves, with no access to roads and essentiel social and administrative services (schools, health centers, offices in communes). Opportunities for economic development are hampered by the inability of populations to sell their merchandise, particularly their agricultural products on local markets, and by very high transport costs. By reducing the isolation ofthose populations, rural roads should have a significant impact on poverty. Year-long access to essential social services and markets should indeed rapidly be reflected in improved living conditions, particularly for women, and in the revival and development of local economies. Rural-urban migration, exacerbated by rising poverty in rural areas and decreasing economic opportunities, should be stemmed overtime. This in turn will preserve the social cohesion ofthe country. The Second Rural Roads Project is therefore part of a broader effort to achieve sustainable and equitable development ofMorocco.

4.2. Participation in the planning process. The social impact of NPRR-2’s rural road subprojects should be further strengthened by the participatory approach adopted in their selection. During the NPRR- 2 preparatory phase, all provinces in Morocco, as well as elected officials and representatives of local

17 authorities, were consulted by the DRCR (through its DPEs) on those roads to be included in their Provincial Rural Roads Programs (PRRPs). In a number of provinces, provincial councils organized preconsultation meetings on their own, at the commune level, in order to present projects in greater detail and gather comments prior to the consultations organized by the DPEs. The consultations led to approval of the majority ofroads selected by the DRCR (and therefore of the selection methods applied), as well as a few changes aimed at meeting specific local demands. The objective of consultations was also to strengthen the impact of roads on concerned populations, by enabling local authorities to match, as much as possible, their own investment programs with the NPRR-2. Annual dissemination of provincial accessibility reports by the CNER relies on the same approach, with priority being given to integration and coordination ofthe NPRR-2 with other sectors working in the area ofrural development.

4.3. Institutional framework for integrating social development into project execution. As part ofthe RRP-1, a social monitoring program was implemented in order to measure, monitor, and document the socio-economic impact of rural roads. This program is based on general and specific forms containing social information gathered for each subproject by the DPEs, and then centralized and processed by the CNER. These completed forms will provide a succinct overview of the social benefits derived from subprojects and will allow for better identification of economic activities that could be developed as a result of these subprojects. On-site social surveys will be carried out prior to the implementation of subprojects and then two years after the opening of roads. The “environmental and social” specialist specially appointed by the DRCR for the NPRR-2 will ascertain the quality of the social data submitted by the DPEs. In the context of the SWAP approach, it was agreed that the social monitoring program developed for the RRP-1 would be applied to all roads included in the NPRR-2.

4.4. Standard framework for resettlement and release of rights of way. Most rehabilitation or upgrading works launched under the NPRR-2 will take place on reserved rights of way or on existing tracks or roads. In most cases, there will be no significant changes in technical characteristics (width or alignment) or any displacement ofpopulation. Minor land expropriation could, however, be required for a limited number of roads. In this regard, a Resettlement Policy Framework (RPF), which outlines the procedures to be followed and appropriate compensation, was prepared by the DRCR and approved by the Bank under the RRP-1. This RPF, which is now applied to the entire NPRR-2, favors a policy of reducing private land appropriation. The DRCR is indeed required to assess all possible alternatives before taking definitive action related to land acquisition. All individuals whose land has been expropriated will be compensated in accordance with the procedures outlined in Moroccan law. Land acquisition could, in some circumstances, be resolved informally or through some kind of settlement. In the case of rural roads outside the classified network, it is expected that land will be acquired directly by the concerned communes (following standard procedures). Specific agreements have been concluded between the DPEs and local authorities for approval ofthe release and regularization ofrights ofway for roads. Details regarding expropriations that take place under the Program should be included in the Land Acquisition Plan (LAP) and regularly transmitted to the Bank as part of the Program’s semi-annual progress reports prepared by the Rural Roads Program Division.

5. Environment

5.1. Environmental considerations will be systematically included in the design, implementation, operation, and maintenance ofrural roads. An Environmental Management Plan (EMP), which includes a manual ofenvironmental procedures and tools, was prepared for the First Rural Roads Project (RRP-1). This EMP has since been slightly amended to facilitate its use and adoption by the DREsDPEs. It is now applied to the entire NPRR-2.

5.2. This manual establishes the institutional procedures and practices required for the environmental management of subprojects during all execution phases, and provides the DREsDPEs with all necessary evaluation and approval tools. Adequate use ofthis manual should guarantee that all NPRR-2 rural roads

18 are subject to an appropriate environmental study, that they do not have serious adverse impacts on the local environment, and that appropriate mitigation measures are included in project design.

5.3. Although the vast majority of roads financed by the program pose only minor environmental risks, the DREs/DPEs will provide close and systematic environmental monitoring, as part of their supervision activities, in order to ensure that all mitigation measures required are properly implemented by contractors. The DPEsDREs and communes, under the supervision of the DRCR, will monitor the environmental impact of roads during their operation. As with the social management program, supervision will be provided by the “environmental and social” specialist appointed at the Division of “Studies and New Construction” of the DRCR. The Program’s semi-annual progress reports distributed by the Rural Roads Program Division to donors will indicate progress made with implementation of the EMP specific to each road subproject.

6. Safeguards Policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBPIGP 4.0 1) [XI [I Forestry (OP/BP 4.36) [I [XI Natural Habitats (OPIBP 4.04) [I [XI Safety of Dams (OPIBP 4.37) [I [XI Pest Management (OP 4.09) [I [XI Involuntary Resettlement (OPIBP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [I [XI Projects in Disputed Areas (OPIBPIGP 7.60)* [I [XI Projects on International Waterways (OPIBPIGP 7.50) 11 [XI

6.1. An environmental and social screening of the NPRR-2’ was conducted. The program has been classified as “Category B” regarding environment, and “Category S2” regarding the social aspects, as per the Bank’s Operational Policy 4.01, Annex C. The screening indicated that there are reversible environmental issues that can be mitigated. The safeguard policies on environmental assessment and involuntary resettlement would apply to all road rehabilitation and/or upgrading works carried out under the NPRR-2. Ex-post reviews, along with spot visits on-site, will be carried out in order to ensure strict compliance with the safeguard policies by all Program stakeholders.

7. Policy Exceptions and Readiness

7.1. Nopolicy exemptions are required. The project meets regional criteria for project readiness. All roads financed by the Bank through the CFR comply with necessary technical, economic, environmental and social requirements.

* By supporting theproposedproject, the Bank does not intend to prejudice thejinnl determination of theparties‘clnims on the disputed areas

19 Annex 1: Country and Sector Background MOROCCO - SECOND RURAL ROADS PROJECT

Economy and Poverty

1. Morocco’s population is about 30 million, of which close to 50 percent live in rural areas. Per capita income, which is slightly over US$1,300, grew at a modest 1.3 percent per year between 1992 and 2002, although growth in the last few years was substantially higher.’

2. According to the most recent counts (1998/1999), about 19 percent, equivalent to 5.7 million people, of Morocco’s population are estimated to be below the poverty line, and 44 percent, equivalent to 13 million, are considered “economically vulnerable” (at or below 50 percent of the poverty line).

3. Poverty is mainly rural: almost one Moroccan out of four is poor in rural areas compared to one out of ten in urban areas. Overall, 66 percent of the poor live in rural areas. The rural-urban gap is especially big for the extreme and very poor: 3.0 million rural people fall in this category, compared to 0.7 million for the urban population.

4. The rural poor: live mostly in Center and Northwest regions; live in large households, with few working members; have an illiteracy rate of 67 percent, compared to 34 percent in urban areas; and live disproportionally in isolated areas, and more than half the villages do not have access to all weather roads. Maternal mortality rate is high, with 228 maternal deaths for 100,000 live births.

5. There are enormous differences among provinces in the level ofper capita income. To ensure an even development ofthe country, the government aims at helping the poorest regions by improving rural populations’ access to basic infrastructure and social services.

Decentralization and the Role of Local Governments*

6. For administrative purposes, Morocco is divided into four sub-national territorial levels: Regions (16), Provinces (45), Prefectures (26), and Communes (249 urban and 1,298 rural). The Regions, Provinces and Prefectures are under the authority of a Governor, while the Communes are under a Commune President.

7. While delegation of responsibilities to local governments through decentralization is a government objective, the transfer process has been hampered by the scarcity of local resources. Locally generated revenues are few, and government transfers to local governments have been limited. As shown in Table 1 below, expenses by the local governments account for only about 13 percent of central government expenditures. This share has been constantly declining over the last five years.

Table 1 - Central Government budget and local entities’ expenditures

I Central Government budget (MAD billion) 1 80,12 I 77,70 I 8554 1 91,49 I Local governments expenditures (MAD billion) 1 13,77 I 14,51 12,95 1 13,83 Local governments expenditure/ Central government budget I 14,67% 1 15,74% 13,15% I 13,14%

~ ’ Source: World Bank. Morocco, Country at a Glance. September 15,2004 Sources : Morocco-Decentralization Study, Nov 03

20 8. The rural communes, that would have a direct interest and responsibility in the management of their local rural roads, with a few exceptions, have limited budgets and only get a small share of local entities’ resources. Fund transfers would be necessary for those communes to play a more important role in road maintenance.

Table 2 - Rural Communes’ expenditures (in MAD million)

Ordinary Expenses 1,304 2,458 2,507 2,238 2,469 2,840 Investments 829 81 7 672 751 837 81 5 (of which Infrastructure) (497) (509) (505) (572) (557) Total 2,133 3,275 3,179 1 2,990 1 3,306 1 3,655

Transport Sector

9. Morocco’s transport system comprise: 57,227 km of classified roads and about 620 km of conceded highways; a railway network of about 1,900 km, of which about 1,003 km are electrified and 295 km double track; 27 ports, including 12 commercial and fishing ports, 9 fishing ports and 6 recreational ports; about 30 airport facilities, of which 15 are open to commercial traffic and 12 can accommodate international flights.

10. Transportation activities in Morocco make up 6 % of the country’s Gross Domestic Product (GDP) and provide 10 % ofjobs for the urban working population. They account for 15 % of the State’s budgetary revenues and represent some 35 % ofnational energy consumption.

11. Road transport is the dominant mode and accounts for at least 90 percent of inter-city passenger traffic and more than three quarters of freight traffic (excluding the transport of phosphates, carried by rail). The country’s vehicle fleet is estimated at about 1.95 million, of which 1.42 million passenger cars and 5 10,000 commercial vehicles. While operated by private companies, road transport until recently was strongly regulated, and many constraints to competition existed. A transport law that became effective in March 2003 (the law was approved in March 2000 but included a three-year period until effective), liberalized the transport market. The law granted an extra three years beyond effectiveness to current operators to meet professional qualification standards. One consequence of the law is that small trucks that were traditionally limited to own-account transport can now provide for-hire services without restrictions. This change should bring about important improvement in the provision of road transport services for villages and rural areas, where the size of shipment and road condition favor the use of small trucks. Another consequence is that large trucking companies are now allowed to do transport without requiring prior approval by the government’s National Transport Office (NTO); only post-notification is now required.

12. Despite a dip in accident figures in 1996 (essentially due to stepped-up controls and greater mobilization ofthe various departments involved), road safety in Morocco remains a major problem that has steadily worsened in recent years. Thus, traffic accidents reached a record level of 3,878 fatalities and 15,000 serious injuries in 2003, compared to 3,761 fatalities and fewer than 15,000 serious injuries during the preceding year (Le., an increase of 3 %.) Recent studies have estimated that fatalities on Moroccan roads could jump by 32 % by 2012, to reach nearly 5,000 deaths. To address this dramatic problem, the Government has launched a strategic road safety plan aimed in the medium term (i.e., over the next three years) at halting the continuous increase in road fatalities and serious injuries, and in the long term at reducing these numbers significantly. On the basis of recent statistics (which showed that (i)50 % of accident victims are pedestrians and users of two-wheeled conveyances; (ii)dangerous driver behaviors are an important road hazard; (iii)the lack ofequipment and signage in urban areas greatly increases road

21 perils; and (iv) nearly 50 % of fatal accidents involve defective vehicles), the road safety plan focuses on spot road checks and prevention, applies more severe sanctions and, finally, promotes an updating of driver education. This plan has already produced significant results since, in 2004, the accident rate for 100 million vehicle-kilometer on the classified road or highway network has been evaluated at 67.51, compared to 82.57 in 2003 (or an 18 percent decrease in one year).

Road Sector

Organization

13. The Directorate of Roads and Road Traffic (DRCR) of the Ministry of Public Works and Transport (MPWT) is responsible for the management of Morocco’s road network, comprising national, regional and provincial roads. The DRCR is a well established agency, endowed with capable personnel, and well experienced in Bank-financed projects. It is organized into the following divisions: Planning, Studies and New Construction, Bridges, Maintenance, Management and Road Safety, Programming and Finance, Human Resources, and the National Center for Road Studies and Research (CNER). Recently a Rural Roads Program Division (RRPD) was created to monitor and coordinate implementation of the NPRR-2.

14. DRCR operations are partially deconcentrated through the 16 regional and 29 provincial offices of the MPWT. The number of regional offices has gradually increased over the last decade, from four pilot offices in the mid-1990s to 16 offices today. The DRCR has delegated several technical review functions to the regional offices, including maintenance programming, review of studies, and technical support for works supervision. The nine most important regional offices (DREs) are equipped with a Regional Center of Technical Studies (CERET), and all provincial offices (DPEs) with a Planning and Economic Studies Service (SPEE), in addition to administrative support. The DREs and DPEs are key parts of the delegation process. This process is ongoing and the DRCR expects to continue transferring technical and economic functions to the regional offices.

15. Responsibilities at the various levels are the following: - DRCR headquarters focus on planning and standards at the national level. - DRCR’s provincial offices (DPEs) are in charge of planning and participation at the local level, as well as the execution of construction and maintenance of national, provincial and regional roads. - DRCR’s regional offices (DREs) support the DPEs through the provision of technical and economic expertise, and quality control.

The Road Network 16. Morocco’s classified road network comprises 57,227 kilometers, of which 56 percent are paved. Since independence, the size ofthe paved road network has tripled, from about 10,000 km to 32,086 km to date. Despite this, the density of the road network is low, with less than 90 kilometers of roads for 1,000 square kilometers and only 2.2 kilometers for 1,000 inhabitants. In addition, many ofthe roads are often cut 30 or 60 days per year due to severe weather conditions.

Table 3 - Morocco’s Classified Road Network, March 2005

(*) motonvays excluded

22 17. The high percentage of unpaved roads (44 percent) is an indicator of the relative low quality of the classified road network. At the same time, paved roads are generally quite narrow, with 45 percent of the classified paved network being less than 4.5 meters wide, which is barely more than the equivalent of a standard lane width (3.5 meters).

Table 4 - Paved Network Lengthg by Road Width

c 3,5 3,454 3,5-= 4,5 10,210 4,5<< 5,5 1,808 6 5,5 15,159 49 Total 30,631 100

18. Road System Ownership. The classified road network is owned by the central government. In the past, there were attempts to transfer a substantial part ofthe provincial roads to the Communes. However, the attempts were not successful because: (a) the roads to be transferred were in poor condition, and communes would have needed to rehabilitate many of them, for which they had no resources, and (b) the general weak condition of the provincial and communal finances. Upgrading of the rural roads, initiated under the First National Program of Rural Roads (NPRR-1) and to be continued under the Second Program (to be financed by the project), should facilitate transfer to local governments by the time the project is completed by the end of 2010.

19. Road Condition. The condition of the road network has gradually improved over the last years. As indicated in Table 5 below, the proportion ofroads in fair to good condition has increased from 53.3 percent ofthe classified network in 1990 to 64.5% in 2004, an increase of 11.2 percent in 15 years.

Table 5 - Percent of Classified Roads in Fair to Good Condition (per category)

Utilization of the Road System

20. Utilization of the classified road system almost doubled in the past 13 years, growing from 27.7 million vehicle-kilometer per day in 1991 to a corresponding 52.14 million in 2004 (46.1 million in 2001 and 48.87 million in 2003). Between 2001 and 2003, average traffic growth was estimated at about 3 percent per year. In the past two years, annual traffic growth increased significantly, with an average of 7 percent per year. About two thirds of this traffic uses the national roads and the motorways, while the remaining third uses the regonal and the provincial roads.

Paved road network inspected by the CNER, or about 95% (30,631 km) of the country’s classified paved road network.

23 The Moroccan highway system and Mediterranean Road

2 1. Since 1975, Morocco has been engaged in an ambitious highway construction program that it has granted, under a concession arrangement, to ADM (Autoroutes du Maroc), a public entity in charge of Morocco’s highway system. The 620 km of highways now in service include the Rabat-Larache (150 km), Rabat-Fez (1 82 km), Larache-Asilah (42 km), Rabat-Casablanca (59 km), Casablanca-Settat (57 km), Casablanca-Had Soualem (16 km), Asilah-Tanger (30 km), and Had Soualem-Tnine Chtouka (35 km) sections, as well as the rings of Casablanca (32.5 km) and Settat (17 km). Construction of the highway network has significantly accelerated over the past few years: nearly 260 km of additional highways are currently under construction (see table below), and construction of the highway linking Marrakech and Agadir (233 km), which was assigned to ADM, started in early January 2006. By 2010, the Moroccan highway system should exceed 1,100 km, compared to only 490 km in 2002.

Table 6 - Progress Status* of Highway Projects

Tchine Chtouka - El Jadida Tetouan - Mdi 23% 12% Settat - Marrakech 145 from 18 to 20% 233 Total 490 (*) As of December 2005

22. The Mediterranean Rocade Project will ensure greater accessibility and economic development of Morocco’s 6 northern provinces and of 40 communes (i.e., over 3 million inhabitants, half of whom are scattered in rural areas), by linking Tangiers to Sai’dia, on the Mediterranean coast, via a 510-km long trunk road. This project, with an estimated cost of about MAD 6.2 billion (of which 1.2 billion is for the TCtouan-Fnideq section alone, to be entirely financed by ADM) entails the improvement of 280 km of existing roads and the construction of230 km ofnew roads.

Table 7 - Progress Status* of the “Mediterranean Rocade”

r)as of December 2005 (**) several tranches

Road Maintenance: Management and Funding

Management

23. At present, 100 percent of road rehabilitation and periodic maintenance is camed out by contractors, as is about 50 percent of routine maintenance. Some routine maintenance activities, especially in remote areas, are difficult to outsource since the small size ofthe routine maintenance works and the high cost of access makes them little attractive for contractors. At the same time, recurrent floods

24 and other emergencies require quick road repairs for which, especially in the case of unpaved roads, it is difficult to find contractors that are interested or can respond rapidly.

24. Over the last 3-4 years, the DRCR launched three pilots to test multiyear contracts for routine road maintenance. These contracts are more attractive for private enterprises, while at the same time should lead to better quality and lower cost of maintenance operations. The first pilot was a two-year contract covering two provinces (Meknes and Tetouan). The contract was input-based (quantity ofwork done). This pilot was considered unsatisfactory because of lack of performance targets and because unit prices were substantially higher .than by force account. The second pilot was a three-year contract covering a national road. Contract penalties were based on several performance parameters. Prices were slightly higher than force account. This pilot was considered a qualified success. The third pilot, also a three-year contract, also focused on a national road. This contract, also performance-based, used several indicators integrated into one single indicator of performance, on which penalties were based. This pilot was considered successful: the quality of work was good, and unit prices were comparable to those by force account.

25. The successful third pilot should provide a good basis for an extension ofthis approach to a larger number ofroads. The performance-based multiyear contracts may be a way to further expand outsourcing of routine maintenance in the future, since it is likely that more highway maintenance enterprises would be interested in bidding for these bigger contracts.

Funding

26. Financing for road maintenance comes from two sources: (i)the Road Fund (Fonds Spkcial Routier, FSR) and (ii)the general budget. The FSR, created in 1989, is financed through road usage charges such as: fuel taxes, a registration tax on motor vehicles, and an axle-load charge on commercial vehicles. Since its creation, the FSR has been revised several times, mainly to expand its resources. In 2004, the Caisse pour le Financement Routier (CFR) was created under Law N"57-03. The CFR is a financially autonomous public entity with corporate liability placed under the administrative authority of the MPWT. The primary mission ofthe CFR is to seek and mobilize additional financial resources (than those of the FSR and general budget) for the construction, improvement, maintenance and operation of the country's road network. The creation of the CFR would allow to significantly increase the implementation pace of rural roads (under the Second National Program of Rural Roads) and thereby make it possible to achieve the accessibility objectives set by the Government for 2015. The CFR is expected to make a direct contribution of over MAD 5 10 million per year to the financing ofthe NPRR-2, through borrowings from various donors. Borrowings contracted by the CFR will be backed by the FSR.

27. The FSR was initially intended to finance only the management, maintenance and operation of the classified road network. In 1995, when the First National Program of Rural Roads (NPRR-1) was launched, FSR's funds were however expanded to partly finance implementation of this Program. This expansion was achieved through an increase in fuel taxes, which went from MAD 18hectoliter for gasoline and MAD 10hectoliter for diesel to MAD 41 and MAD 23.5, respectively. The resources of the FSR, which totaled MAD 600 million in 1994 prior to this increase, rose to nearly MAD 1.1 billion the following year. In 2004, another increase in petroleum product surcharges (MAD 50/hectoliter for gasoline and MAD 32.5hectoliter for diesel) boosted FSR revenues to about MAD 1.6 billion. These revenues were, however, substantially below government forecasts, which had counted on MAD 2.1 billion in revenues in 2004. FSR funds are now derived essentially from the fuel tax (about MAD 1,200 million for 2004), followed by axle-load and vehicle registration taxes. These funds serve mainly to finance road maintenance and the construction ofrural roads.

25 28. From 1995 to 2005, the distribution of funding by source and type of expenditure has been as follows, between the General Budget and the Road Fund:

Table 8 - Road Expenditures* by Source and Type of Expenditure, 1995-2005

I Maintenance of Bridges 1 58 I 57 1 83 I 61 1 43 I 62 I 64 I 162 1145,8 1 130 I

(3 Source: Programming and Finance Division (DRCR)

MPWT Contribution 82 96 104 123 Partner Contribution 21 32 142 91 Total Cost 103 129 246 214

30. Road maintenance expenditures (see Table 8) have constantly increased since 1995, in line with the continuous extension of the classified road network. The overall level of funding for road maintenance is considered adequate. A large proportion of the funding went to road rehabilitation because important roads in poor condition needed to be put in workmg conditions. In the future, the needs for rehabilitation should decrease, with a higher proportion going to finance periodic maintenance, that is, resurfacing of paved roads.

26 Rural Roads

31. Morocco’s rural roads perform two key roles: (a) to be an integral part of the national road system, ensuring connectivity of the network; and (b) to provide rural population with all-weather access to markets and basic services (such as education and health), and to create new business opportunities.

Rural Road Accessibilitj 32. Accessibility to rural roads in Morocco is low. About 54 percent of the country’s rural population have access to an all weather rural road (see Table lo). Population counted as having rural access are those who live in villages (douars) of at least 50 households, and are located not more than 1 kilometer away from an all weather road. This definition was set up following sensitivity analyses, which showed that providing rural access to highly dispersed populations was unaffordable.

33. Similarly as with per capita income, there are also large differentials among provinces in the population’s rural road accessibility, ranging from about 79 percent for the better-served provinces to about 23 percent for the more isolated provinces. More details are in table 10 below.

34. Rural road accessibility in Morocco is made especially difficult by two factors: frequent floods, which cut roads to traffic for hours or days at a time, and severe mountainous topography.

35. The road accessibility problem can take different forms. Isolated rural households normally do not have a decent road connection to even the closest village, impeding their access to markets, jobs and services. Conversely, a rural household may be well linked to the closest village, but the village may itself be isolated and poorly linked to main roads connecting to cities or other urban centers. A rural road may be passable some days, but not others, depending on weather conditions, type ofroad surface, and quality of maintenance. Distance from a household to the closest road may be difficult to interpret, since topography, water crossings, climate and other factors may significantly distort the meaning of such distance. Or, a road may be passable by one type of vehicle, for example, a four-wheel drive vehicle and a motorcycle, but not by a passenger car or a truck.

Rural Roads Programs

The First National Program for Rural Roads (NPRR-1)

36. In 1995, the DRCR launched a ten-year priority program for the expansion of Morocco’s rural roads. Prior to this program, fewer than 300 km of rural roads were being built each year in Morocco, corresponding to annual investments of less than MAD 200 million. Most resources for the road sector were at that time targeted towards national and regional roads. The first National Program ofRural Roads (NPRR-1) initially covered some 11,230 kilometers, of which about 5,130 to be surfaced with bitumen, and 6,100 kilometers to be left with improved gravel surface. The criteria for defining priorities included economic efficiency (return on the investments), degree of accessibility of the areas served by the road, the importance of the road in serving social and administrative centers, and the agricultural potential of the road’s area ofinfluence.

21 Table 10 -Accessibility of Rural Population to All-Weather Roads, Year 2005*

SID KACEM

TAROUDANT

TlZNlT TOTAL 8,383,216 I 4,476,637 I 3,906,579 1 53.4%

(*) Source: DRCR and CNER Estimates. y) Only population who live in villages (douars) of at least 50 households are counted.

28 37. The status of the NPRR-1 as of November 2005, which stood at 90% completed (compared to 72% in March 2004), is summarized in Table 11 below. To date, 85 % of the roads included in the NPRR-1 have been put into service. Program implementation has thus experienced a slight delay of about a year. The distribution ofprojects between rehabilitation andor upgrading has also been modified, with a share ofpaved roads greater than initially planned.

Table 11 - Status of the NPRR-1 as of November 2005

Construction 1 5,794 5,508 5,213 5,149 lmorovement I 4.775 4.312 4.312 6.087

The Second National Rural Roads Program (NPRR-2)

38. The NPRR-2, which is supported by this project, is described in further detail in Annex 4. The main objective ofthis Program is to increase the national rural roads accessibility index (NRRAI) to 80% by 2015, when the Program is completed. In order to achieve this objective, the pace of rehabilitatiodupgrading of rural roads is to be increased to about 1,500 km per year, compared to 1,000 km per year under the NPRR- 1.

Impact of rural roads

39. Several surveys and studies have dealt with the socio-economic impact of rural roads in Morocco and have shown their significant positive impacts on the affected populations, particularly in terms of living standards (transportation services, agriculture, health, education, women’s living conditions, etc.). The results ofthese studies, presented in greater detail in Annex 10 (‘Social Evaluation’), are summarized below. - A study by the World Bank’s Operations Evaluation Department in 19961° found that improved roads generated substantial positive impacts on: transport (such as reduced transportation costs and lower and better access to markets and services), agriculture (increased yields, production shift to higher value commodities); health (increased visits to clinics, better quality of services); education (increased enrollment, easier recruitment and retention of teachers); and, gender (girls increasing school enrollment more than boys, women benefiting from economic transformation could seek on and off-farm employment). - A survey 11 carried out in 2002 among key stakeholders (villagers, providers of social services and providers of transport services) of a sample of rural roads improved or built in several provinces under a recently completed Bank roads project found responses consistent with the impact study described above. The survey interviewed 391 persons (including 190 villagers, 73 percent of which were illiterate) in the sample of rural roads construction; and 655 persons (including 379 villagers, 61 percent of which were illiterate) in the sample of rural roads improvement. - Studies carried out by the DRCR in the late 1990s on two roads improved under the NPRR-1 confirmed the above findings.

loWorld Bank (1996): Socioeconomic Influence ofRural Roads. Operations Evaluation Department. World Bank (2002): Implementation Completion Report for Morocco: Secondary, Tertiary and Rural Roads Project.

29 Annex 2: Major Related Projects Financed by the bank and/or other Agencies MOROCCO - SECOND RURAL ROADS PROJECT

1. There are currently twelve on-going Bank-financed projects in Morocco (see Annex 13 for further detail), five of which have objectives related to rural development and rural infrastructure: (a) the (First) Rural Roads Project; (b) the Rainfed Agriculture Development Project; (c) the Irrigation-Based Community Development Project; (d) the Social Development Agency Project; and (e) the Rural Water Supply and Sanitation Project. Those five projects amount to about 20 percent ofthe Bank portfolio in the country, with total loans of around US$160 million (out ofUS$826 million, including grants).

2. Several other development agencies are or have recently been involved in rural development or rural infrastructure projects in Morocco. These agencies include more particularly the Agence Franqaise de Developpement (AFD), the European Union (EU), and the European Investment Bank (EIB) which are very active in those specific fields.

Access to all-weather Rural Roads Project in the Northem Provinces €24 million Agence Franqaise de roads (NPRR-1) (US$29 m) Developpement (AFD) Access to all-weather Rural Roads Project (NPRR-2) €50 million Agence Franqaise de roads (US$61 m) Developpement (AFD) Access to all-weather Rural Roads Project in the Northern Provinces €53 million European Investment Bank roads (NPRR-1) (US$64 m) (EIB) Access to all-weather Rural Roads Project (NPRR-2) €60 million European Investment Bank roads (US$73 m) (EIB) Access to all-weather Rural Roads Project in the Northern Provinces €30 million European Union (MEDA") roads (NPRR- 1) (US$36 m)

Rural Development Support to Integrated Rural Development €28,4 million European Union (MEDA*) (US$34 m) Rural Development Hydro-agricultural Installations of Sahla (in €28,7 million European Union (MEDA) /Agriculture the Northern Province of Taounate) (US$34,5 m) Rural Development Participatory Rural Development in Central €9 million European Union (MEDA) Atlas (US$11 m) Rural Development Participatory Forestry Development in the €24 million European Union (MEDA) Province of Chefchaouen (US$29 m) Rural Development Project to Improve the Employment Situation €6 million European Union (MEDA) of Rural Women and Sustainable Management (US$7 m) ofArganeraie in South West Morocco

Rural Water Water Project in Rural Areas (PAGER €11,5 million Agence Franqaise de Program) (US$14 m) Developpement (AFD) Rural Water Water and Sanitation Project in Rural Areas €40 million European Union (MEDA*) (PAGER Program) (US$48 m) Rural Water Rural Water Supply Project in the Provinces of €5 million Kreditanstalt fur Taroudant and Tiznit (PAGER Program) (US$6 m) Wiederaufbau (KfW) (Germany) (*) MEDA: Mesures d'accompagnement financieres et techniques

30 Annex 3: Results Framework and Monitoring MOROCCO - SECOND RURAL ROADS PROJECT

Monitoring procedures

1. In order to support the setting-up of a SWAP approach for the Second National Program of Rural Roads (NPRR-2) and to simplify as much as possible the administrative procedures, it was agreed that the Program would have a single, integrated monitoring system intended for, and geared to, all partners ofthe Program. This system will be based both on semi-annual progress reports on the Program produced by the DRCR, and on annual external audits (execution reports).

2. Semi-Annual Progress reports. The Rural Roads Program Division (RRPD) recently created within the DRCR will be responsible for producing semi-annual progress reports on the NPRR-2, which it will convey to all partners and donors involved in the Program. These reports, which will be produced by consolidating all data provided by the Program’s two implementing agencies (DRCR and CFR) will contain: (i)a Program Implementation Plan (PIP) indicating the status of overall physical progress ofthe NPRR-2 and implementation forecasts; (ii)a detailed procurement table on works and services showing the financial status of each contract (total costs of contracts financed, extent of physical and financial execution, amounts committed and disbursed), as well as the projected and actual timetables for procurement and contract execution; (iii)a table summarizing technical and financial data on each contract, including in particular the name of the relevant province, the contract reference, the total length of the road, the characteristics of works and services, and the contracting enterprises; and (iv) a financial table summarizing the Program’s resources and utilization, average time discrepancies observed between the issuance of invoices and actual disbursements, and a summary of the use of funds in terms of expenditures committed and payments by funding source and expenditure category. The reports will be augmented with maps produced by the CNER showing operations in progress and their physical implementation status.

3. External Audit (Execution Reports). In addition to the semi-annual progress reports produced by the DRCR, the CFR will submit each year to the Bank an external audit (or execution report) of the NPRR-2 prepared by an external auditor. This audit will make it possible to monitor expost the operation and progress of the NPRR-2, to verify the proper use of funds allocated by donors, and to suggest, as necessary, possible areas of improvement. Like the aforementioned semi-annual reports, the audit will cover the Program as a whole, making no particular distinction among the various sources of funding deployed for its implementation and the various donor contributions. It will deal, on the one hand, with technical and organizational aspects ofthe Program, and, on the other hand, with accounting and financial aspects. The main objective of the technical and organizational audit will be to assess the Program’s overall efficiency and efficacy, its impact in terms of accessibility, as well as the sustainability of Program investments. This audit will compare the quality and coherence of the inputs deployed with outcome achieved, and more specifically the efficacy ofprocurement procedures at the central (i.e., CFR) and decentralized (i.e., DPE) levels. In that purpose, the organizational audit will address: (i) procurement and contract management systems; (ii)the system for financial and technical scheduling of contracts; and, finally (iii)the Program’s monitoring and evaluation (M&E) system. In the area of procurement, a random sampling of25% oftransactions under NPRR-2 will be selected for verification of compliance with, and proper application of, procurement procedures, time elapsed for bidding invitations, contract award and contract signing. The technical audit will, on its side, verify the extent to which project execution has incorporated and followed environmental and social safeguards procedures, the quality ofdetailed studies, and construction standards used for each road project.

31 4. The accounting and financial audit (cf. Annex 7 for more details) will verify: (i)proper use of credits and counterpart funds deployed for Program implementation, and more specifically the compliance with rules in the use of funds obtained from externals lenders; (ii)the conformity (and legitimacy) of contracts for goods and services awarded under the Program; (iii)proper maintenance of accounts and entries pertaining to each sub-project of the NPRR-2; and, finally(iv) adherence to international accounting standards in the preparation of the Program’s accounts. The audit report will thus make it possible to certify the Program’s financial statements by comparing its summary financial statements with expenditures committed for its implementation.

5. In addition, due to its status as a public entity, the CFR will be audited annually by the Moroccan government. This audit report will also be submitted to the Bank for information.

Indicators

6. Owing to the SWAP approach adopted, monitoring and evaluation of the NPRR-2 will be thorough and regular. They will be based on both results indicators and performance indicators. These indicators will be evaluated on the basis of progress reports prepared by the Rural Roads Program Division (RRPD) and external audit (execution report) of the Program, and will be carefully checked during supervision missions.

7. Results indicators. Results indicators will enable to monitor the Program’s impact upon the targeted population by measuring the increase in rural accessibility (the main indicator of the NPRR-2), the accessibility differential among provinces, and the degree of improvement of transport services. Precise objectives were defined for each of these indicators during preparation of the first Rural Roads Project. They are set out in the following monitoring grid.

8. Performance indicators. Performance indicators assess the quantity and quality of the means deployed in order to achieve Program objectives. The indicators are key elements for evaluating the Program’s overall functioning and in ensuring proper utilization, on the part of the relevant administrations (e.g., CFR, DRCR and deconcentrated Offices), of the tools and procedures provided to them for implementation of the NPRR-2. The Bank shall determine the amount of its disbursements on the basis ofthese indicators.

32 Results Framework PDO Outcome Indicators Use of Outcome information

a) Increase accessibility ofrural National Rural Road Accessibility Index - The government will track population to all-weather roads (NRRAI) increase from 54 percent in progress with meeting rural 2005 to 67 percent in 2010 (63 percent infrastructure accessibility by the Mid-TernReview and 80 percent targets, both the NRRAI and in 2015 when the NPRR-2 is completed) the ADI.

b) Reduce access differentials between Accessibility differential Indicator provinces (ADI) improved from 0.43 in 2002 to 0.60 in 2010 (0.65 in 2015 and 0.50 at Mid-Term)

c) Improve quality of service ofinter- By project completion, at least 80 - Verify impact ofroad city transport for passengers percent ofroads in the sample will show program on improving quality improvement two years after transport service for the rural open to traffic. populations. intermediate Results Results indicators for Each Component Use of Results Monitoring One per Component Imponent: Zomponent: Zomponent: Component A - Rural Roads financed Noof kilometers ofroads launched Assess physical progress of by the CFR under CFR’s road program, DRCR’s CFR’s road program and road program, and the whole NPRR-2 NPRR-2 in general Component B - Rural Roads financed by the DRCR Rural population given road Assess progress with accessibility under CFR’s program and providing road access to the the whole NPRR-2 rural population

Performance of NPRR-2’s monitoring Sectoral agencies and other and evaluation system stakeholders use it

Quality ofthe dissemination and Assess success of activity, outreach program. Relevance of steer if necessary. information circulated and No. oftarget institutions Strengthening oflocal consulting firms’ Assess quality ofthe capacities and improvement in the Manual for rural roads quality ofdetailed studies design and appraisal Funding for road maintenance Check compliance with project covenant Overall road network condition Ensure good use ofroad maintenance fimds

33 Arrangements for results monitoring - - -Ti Data ( lection and I porting Data esponsibility laseline YR3 ‘requency Outcome Indicators YRI YR2 YR4 YR5 Collection for Data MTR nd Reports - - istruments Collection - National Rural Road 54% 63% 67% Annual [&E System IRCWCNER Accessibility Index (NRRAI)

- Accessibility Differential Index 0,43 0.50 0,60 Annual I&E System IRCWCNER (ADO - Improvement in Quality Intercity 80% Annual l&E System IRCWCNER Passenger Transport Services mprov. Results Indicators for Each Component lomponents A and B Kilometers of roads launched 711 ,692 !,623 5,452 4,546 kmi-annua WD DRCR under CFR’s road program Progress Reports

Kilometers of roads launched 356 ,115 1,845 !,572 3,186 kmi-annua WD DRCR under DRCR’s road program Progress Reports

Kilometers of roads launched 1,133 !,807 1,468 5,024 7,732 kmi-annua RRPD DRCR under the overall NPRR-2 Progress Reports

Monitoring and Evaluation X X X X X Annual External DRCR System working efficiently Audits (Execution Reports)

Dissemination and outreach X X X X X Annual Provincial CNEWDPEsi program in place Reports DREs

Strengthening of local consulting X X X X Annual External DRCR firms’ capacities and Audits improvement in the quality of (Execution detailed studies Reports)

Funding for road maintenance X X X X X Annual DRCR DRCR Budgets

Overall road network condition X X X X X Annual DRCR DRCR Budgets -

34 Annex 4: Detailed Project Description MOROCCO - SECOND RURAL ROADS PROJECT

1. The project will support implementation of the first phase of the Second National Program of Rural Roads (NPRR-2) by contributing to its financing through the Caisse pour le Financement Routier (CFR).

The Second National Program of Rural Roads (NPRR-2)

2. This program, which the project supports, follows the NPRR-1, launched in 1995 with a target of some 11,230 km ofroads to be rehabilitated or upgraded. The NPRR-2’s main aim is to increase the level ofaccessibility ofthe rural population to all-weather roads to 80 percent by 20 15. This program, launched in 2005, differs from the preceding program in four main ways: (a) it will focus on outcome, that is, the population that will be provided with rural access, rather than on kilometers ofroads improved; (b) it will proceed at a faster pace (about 1,500 km ofroads will be improved per year, compared to 1,000 km under the NPRR-1, representing a total of almost 15,600 km over 10 years); (c) it is based on a participatory approach in which local authorities (i.e., regions, provinces and communes) were fully involved in the selection and financing ofrural roads; and (d) it will enhance the integration of other rural infrastructure projects with rural roads, through greater involvement of the Program’s local partners and wider dissemination of information. The outcome approach, which matches the Bank’s interest in results, is possible thanks to field and methodological work done by Morocco’s Directorate ofRoads (DRCR) ofthe Ministry ofPublic Works and Transport (MPWT). The approach also benefited from the results of studies carried out under the STRRP Project (Loan 3901, closed June 30, 2001) that helped to develop appropriate accessibility indicators.

3. Program IdentiJication Process. To prepare the NPRR-2 program, the DRCR carried out, in 2002, an inventory ofrural roads throughout the country. The inventory was aimed at assessing the level ofaccessibility ofthe rural population and covered 48,200 km ofroads and tracks, ofwhich 24,685 km in the classified road network (national, regional and provincial roads). In total 39,650 km of roads were inspected and entered in a database, which includes technical as well as socioeconomic data for each road, while 8,559 km of roads were not accessible during the inventory. The vehicle passability of the roads inspected was as follows: 19% impassable by any kind of vehicle because of their poor condition; 28% passable by four-wheel drive cars or trucks; 53% can be used by any type ofvehicle. Some 19 percent of these are closed at least for 30 days a year during the rainy season.

4. The rural road inventory was the basis for the preparation of a draft Provincial Rural Roads Program (PRRP) in each province. The roads in this program were selected on the basis of two analyses: (a) the first, at the national and provincial level, was the contribution to improving accessibility, with priority given to the roads serving the most people and to those that reduced the difference in accessibility between the most and the least accessible provinces, and (b) the second considered the connectivity ofthe classified road network. The preliminary Provincial Rural Roads Programs (PRRPs), together with the selection criteria, were presented, during provincial assemblies, to local authorities (elected and officials of the provinces and communes) to involve them in the planning process, confirm their initial priorities, and make the final selection of the roads to be included in the PRRPs. The setting-up of provincial assemblies was also necessary to validate the Program implementation process, the terms of financial participation, and local collectivities’ commitment to maintenance. Following consultations (organized by DRCR’s regional and provincial offices), small changes to the preliminary Provincial Rural Roads Programs (PRRPs) were made to include suggestions from local authorities. Consolidation of the PRRPs at the national level constituted the Second National Program ofRural Roads (NPRR-2).

35 5. The NPRR-2, as it now stands, consists of 1,058 road subprojects for a total length of 15,560 km, of which 573 km ofnational roads, 487 km of regional roads, 7,692 km ofprovincial roads, and 6,808 km of unclassified roads. 657 projects (or 9,742 km of roads) will be proposed for upgradingiconstruction works, compared to 401 projects (or 5,818 hof roads) for rehabilitation works. The total length of the road network under the responsibility of the DRCR should not change by the end of the NPRR-1 and NFXR-2, although some sections will be transferred to local authorities upon completion, while others will be added to the country’s classified network (national, regional and provincial roads.)

6. The participation of local authorities in the NPRR-2 will extend, in addition to the selection of roads, to their financing. The contributions of local authorities have been set at 15% of the total Program’s financing plan. These contributions have been officially set out in specific and framework agreements respectively signed between DRCR’s regional offices (DREs) and regional councils, and DRCR’s provincial offices (DPEs), provincial councils and rural communes. These agreements formalize partnerships between the various Program stakeholders by committing them to the exact length and estimated cost ofthe roads program to be carried out in their respective region, the share of financing by source, as well as the timetable for mobilization of financial resources. For NPRR-2’s unclassified roads, these agreements will also ensure that local authorities acquire all rights ofway needed for the road prior to construction and that they adequately maintain those roads when handed over. After their ratification at the local (i.e., provincial and regional) levels, these agreements are being submitted to the Ministry of Public Works and Transport and the Ministry of Interior for final approval. Rural road subprojects may only be launched once the relevant framework and specific agreements have been signed and local collectivities have actually planned to make their financial contributions to the CFR.

7. Provincial Rural Roads Programs (PRRPs) are expected to pay a central role in the sectoral integration of other infrastructure projects in the same areas. To that end, the implementation status ofthe PRRPs will be regularly updated, with all relevant information conveyed to other sectors and rural development actors (rural water supply, health, education, etc.) so that they can better schedule their projects.

8. Cost ofthe Program. The total cost ofthe NPRR-2 is estimated at about MAD 11.32 billion (US$ 1.23 billion equivalent) (see Annex 5.) A five-year sub-program of rural roads for the period 2005-2010 (lstPhase) has been proposed to the financing of the CFR and DRCR. This first Phase consists of 487 subprojects, for a total length of 7,732 km and an estimated cost of about MAD 6,017 million, or 53% of the total estimated cost of the NPRR-2. 361 road subprojects (for a length of 5,734 km and total investments ofMAD 5,196 million) will receive upgrading/construction works, compared to 126 projects (for a length of 1,999 km and total investments ofMAD 82 1 million) for rehabilitation works.

9. Economic tests. The selection of roads to be part of the NPRR-2 program and the definition of priorities were done considering : (i)the economic rate of return (ERR) for roads with a traffic generally higher than 30-50 vehicles per day; and (ii)a cost-effectiveness analysis (CEA) for roads with traffic generally lower than this threshold (30-50 vehicles per day). The objective of the CEA indicator being to select roads with high population served per investment. For a few projects that did not meet both ERR and CEA criteria, an analysis on the roads’ impact on poverty alleviation and road network griding was

l2 As of 2005, the network of classified roads consisted of 57,227 km of national, regional and provincial roads (32,086 km paved and 25,141 km unpaved), of which about sixty-five percent are all-weather roads. The total length of the classified network is not expected to change by 2015, when the PNRR-2 is completed, but the percentage of all-weather roads will have increased to provide an overall rural accessibility of 80 percent.

36 carried out. It is expected that some 2.8 million peopleI3 will gain improved accessibility at completion of the NPRR-2.

10. Construction standards. A Manual for rural roads design and appraisal is currently being prepared in order to develop optimal technical standards and integrate environmental and social aspects into project preparation and execution. Depending on the function of a given road within the national road network, different technical specifications will be applied: (i)for local roads, a six-meter platform, and a four-meter width for the traffic surface (graveling with asphalt or selected material without bituminous product, depending on the local conditions of traffic, soil, topography, material available for construction, cost, ERR, etc); and a reference traffic speed of 40 km per hour; and (ii)for national, regional or provincial roads, 6 m ofpavement and two shoulders of 1 m each. Appropriate local materials and labor intensive methods of works will be used when appropriate. Environmental mitigation activities will be implemented as recommended by the environmental impact study. Works will be executed by contractors under the supervision of consulting firms, MPWT’s regional and provincial directorates (DREs/DPEs), and public works laboratories.

The Project

11. The project consists of two components involving the rehabilitation andor upgrading of about 7,800 km ofrural roads that constitute the first phase ofthe NPRR-2 covering the period 2005-2010: Component A - Rural roads financed by the CFR: This component involves the rehabilitatiodupgrading of about 4,600 km of rural roads (including small, complementary road-related infrastructure) financed by the CFR (US$385 million, of which US$60 million provided by the Bank), including technical studies and monitoring. . Component B -Rural roads financed by the DRCR (General Budget and Road Fund): This component involves the rehabilitatiodupgrading of about 3,200 km of rural roads (including small, complementary road-related infrastructure) financed by the DRCR through its budget or the Road Fund (US$269 million), including technical studies and monitoring.

Component A -Rural roads financed by the CFR

12. The sub-program ofrural roads financed by the CFR during NPRR-2’s first phase consists of 308 road subprojects for a total length of about 4,600 km (including small, complementary road-related infrastructure) and an estimated cost of MAD 3,541 million (equivalent to US$385 million). All funds allocated to the NPRR-2 through the CFR (i.e., donors’ loans and contributions from local governments and authorities) are pooled and allocated, regardless oftheir source, to the overall financing ofCFR’s sub- program.

Component B - Rural roads rehabilitation andor upgrading component financed by the DRCR

13. The sub-program of rural roads financed by the DRCR during NPRR-2’s first phase consists of 179 road subprojects representing a total length ofabout 3,200 km (including small, complementary road- related infrastructure) and an estimated cost ofMAD 2,476 million (equivalent to US$269 million). This sub-program will be entirely financed through Budget allocation and transfers from the Road Fund (Fond Spkcial Routier - FSR).

l3If douars ofless than 50 households were also taken into account (which is not the case at present), the number of people benefiting from the NPRR-2 would in reality be about 3 million.

37 14. All roads to be improved under the NF'RR-2 program, whether financed by the CFR or the DRCR, will comply with the same basic criteria: They will contribute to improving access in an economically efficient manner (see Annex 9), have acceptable design standards, and meet environmental, resettlement and social assessment, fiduciary and procurement requirements.

15. In line with what was done under the RRP-1, the project will also finance, as part of the roads themselves, small complementary infrastructure in villages that would be identified through a participatory process. Complementary infrastructure can be built with limited additional cost during road construction that will add value to the road investments. Many ofthe areas where the roads are built lack proper market facilities, accessibility features for disabled persons and the old, recreational facilities for youth (e.g. football fields), sidewalks, well designed public areas such as water fountains (adding a stand for placing buckets, stone benches and shade for those waiting). For each road sub-project, these investments will be identified during the initial process of social data collection, and be done in partnership with local communities or the Social Development Agency (ADS).

38 Annex 4.A: Second National Program of Rural Roads (NPRR-2)

Cost Estimate (including contingencies) (in thousands MAD)

Rehabilitation of rural roads (‘000 MAD)

UpgradinglConstruction of rural roads (paved) (000 MAD)

Total (Rehabilitation and UpgradinglConstruction) (OOO’DH)

Rehabilitation = unpaved, all-weather platform Upgrading/construction= paved (single surface treatment), 4-meter wide, 1 meter shoulder each side, all- weather

Average cost in NPRR-2: UpgradinglConstruction (paving): MAD 911,000Km (US$99,000KM) Rehabilitation: MAD 419,000Km (US$45,550/KM)

Estimates based on the final NPRR-2 Program, 2005 base costs.

39 Annex 4.B: Project Description - Technical Aspects

1. Visit of several roads improved under the NPRR-1, carried out during preparation of the project, showed that the design and implementation of works were generally satisfactory. However, use of more appropriate standards would reduce the cost of road pavement structure and of road width. Equally, drainage and safety could be improved.

2. Traffic on those roads improved under the NPRR-1 is very low (less than 50 cars a day and most of the roads have less than 10 cars a day, with only few trucks, generally not heavy). Recent studies carried out by the CNER show that the traffic class T4 (less than 250 vehicles per day) comprises 94 percent of light vehicles, four percent of small trucks (less than 3.5 tons), and two percent of buses. Design of the pavement structure was based on DRCR guidelines and standards on the basis of T4 with 22,000 passages of 13-ton equivalent axle, during the life of the pavement. Materials are mostly crushed stones as base layer, bituminous graveling and mechanized mean of work execution. The cost of the pavement structure is high and represents an important part (50 to 80 percent) of the subproject costs. However, drainage, which is important for all-weather use of road and for protecting the road from erosion, was sometimes not sufficient. This led to an early deterioration of a few roads.

3. Road design. DRCR technical standards were designed for national, regional or provincial roads with a reference truck of more than 8 tons and an axle charge of 13 tons. Since traffic on the roads to be upgraded or rehabilitated under the NPRR-2 is very low (very often under traffic class T4) and only small trucks use the rural roads, these standards are excessive in the case of rural roads subprojects and inevitably result in oversized pavement structures. The launch of the first Rural Roads Project (PRR-1) gave the opportunity to review these standards by initiating the preparation of a Manual for rural roads design and appraisal. This Manual, which is under preparation, is intended to set up road standards and construction techniques adapted to rural roads. The main idea is that the objective of all-weather accessibility, at reasonable construction costs, should be given priority over comfort.

4. Cost control will be achieved through improved evaluation of subprojects’ entry parameters (especially traffic) and adequate geotechnical, geometric and topographic analyses, as well as through in- depth examination of the choice (and origin) of materials and construction techniques, since pavement structures represent a significant share ofroad costs (nearly 65% oftotal costs, on average).

5. The use of local natural or inert processed materials and the adoption of appropriate structures should prove less costly than the use of crushed gravel. Such use should also have a positive impact on local employment by favoring labor-intensive techniques. Bituminous graveling should be limited to roads with high traffic, or to national and regional key roads.

6. The Manual for rural roads design and appraisal should also set up construction techniques to be followed by contractors in terms ofearth works, drainage and pavement cross-sections. These aspects will be particularly important in the case of roads in mountainous regions, where erosion may quickly deteriorate roads and make them impracticable. Only well-designed drainage and earth works can ensure the sustainability ofroads and an all-weather access for the population.

7. The Environmental Management Plan (EMP) and the Resettlement Policy Framework (RPF) developed for the PRR-1 and henceforth applied to all roads under the NPRR-2 will be incorporated in the Manual. This will ensure that all environmental and social aspects are taken into account throughout the project cycle and that the tools developed for the EMP and RPF are conscientiously and rigorously used by contractors and consulting firms in charge ofthe detailed design.

8. Traffic signs and road safety equipment will also be part of the roads design and implemented with special attention to local customs (in order to mitigate the risks of deterioration). Training on road

40 safety and information to users should be carried out by the DREsiDPEs and the communes upon completion ofthe road works.

9. Pending the issuance ofthe Manual for rural roads design and appraisal (which is not expected to be available until early 2007), the DREs/DPEs and DRCR's Division for "Studies and New Construction" will conduct a systematic review of the detailed design, and particularly of pavement structures, in order to control and optimize, if necessary, the proposed standards and technical solutions. This review will take into account all current parameters related to the road: traffic (in terms of volume and type), population, topography, climate, soils and availability ofmaterials near the project site. Recent experience under the W-1has shown very positive results from the structure review work done so far by the DRCR on a few NPRR-2 projects. Significant savings have been identified, leading to an important increase in the projects' Economic Rate ofReturns (ERRS)or cost-effectiveness.

10. Works options. On the basis of proposals made by the DREsDPEs, two categories of works options were considered for roads under the NPRR-2: (a) Rehabilitation of earth/gravel roads to make them all-weather, with addition sometimes of a thin layer in special situations (clay soils). The average cost for this solution is MAD 419,OOOOikm (cost varying between MAD 196,000 and 1,154,000 per km, depending on the topography, geology, rainfall, traffic, etc) ; (b) Upgrading/Construction, with a pavement ofbituminous graveling (mainly to protect against erosion), utilizing different, optimal pavement structures, with layers of natural materials, or exceptionally crushed stones. Average cost is MAD 9 11 ,OOO/km (cost varying between MAD 300,000 and 3,000,000 per km, depending on topography, geology, rainfall, traffic, etc).

11. Other construction solutions may also be proposed and implemented in the future, depending on the conclusions reached during the preparation of the Manual for rural roads design and appraisal. All of these solutions will be aimed at an only objective, which is the reduction ofconstruction costs and a better sustainability ofrural roads.

12. The preparation of the Manual for rural roads design and appraisal, which will be NPRR-2's future reference manual, will also provide an opportunity to enhance dialogue and cooperation between local consulting firms, laboratories and contractors. A draft Manual will be presented to the road construction industry at a workshop. The Manual will be modified and finalized on the basis of comments received during the workshop.

13. Finally, the study for the management oflocal rural roads, which is now underway under the first Rural Roads Project, will give local authorities the tools they need to: (i)evaluate future road financing needs and options (especially for maintenance); (ii)organize the management of maintenance and develop partnerships for this purpose with deconcentrated Offices (mainly the DPEs); and (iii)select the best suited option to contract road maintenance to the private sector (through multi-year maintenance contracts, rehabilitation and maintenance contracts, etc.) Using these institutional, organizational, financial and technical tools, local authorities are expected to be able to maintain NPRR-2's local roads, thereby ensuring the sustainability ofthose investments to which they will have partly contributed.

41 Annex 4.C: Sub-projects proposed for CFR financing under NPRR-2’s first Phase (2005-2010)

1. The table below shows the distribution, by province, of road subprojects financed by the CFR under NPRR-2’s first phase (2005-2010). These subprojects, as well as their schedule of implementation, were defined on the basis of the progress reached in the preparation of detailed design, the current and upcoming workload of DRCR’s provincial offices (DPEs), and the projected schedule for payment by local authorities of their financial contributions to the Program. The environmental studies and social management programs for each road project will be systematically reviewed by the DRCR, in order to ensure that no further studies are required. Pending completion of the Manual for rural roads design and appraisal, pavement structures will likewise be optimized for each road on the basis of recommendations made in Annex 4.B, in an attempt to reduce construction costs and thereby improve the subprojects’ economic rates ofreturn.

42 Annex 5: NPRR-2 Program Cost and Financing MOROCCO - SECOND RURAL ROADS PROJECT

NPRR-2 Financing Plan

Total Cost NPRR-2 (MAD million)

Financing Plan of NPRR-2's First Phase (2005-2010)

Total Cost 1'' Phase (MAD million) 6,017 2,076 400 901 2,640

Total Cost 1'' Phase (US$ million) 654.0 225.6 43.5 97.9 287.0

1 Total Cost 1'' Phase (E million) I 547.0 1 188.7 1 36.4 1 81.9 1 240.0 I I I 100% I 34% I 7% 1 15% 1 44% I

1 DRCR Road Fund (FSR) 3,717* 248 685 549 359 196 400 400 400 400 400

General Budget 800 80 80 80 80 80 80 80 80 80 80

CFR

Loans to be contracted 5,110 450 622 523 545 500 500 495 495 490 490

TOTAL NPRR-2 I 11,319 I 925 I 1,577 [ 1,357 1 1,143 I 976 1 1,140 I 1,135 I 1,135 1 1,127 I 1,124

(*)Total FSR resources allocated to rural roads are estimated at MAD 4,037 million over the period 2006-2015. However MAD 320 million of these funds will serve to cover the final payments under the NPRR-1.

43 Annex 6: ImplementationArrangements MOROCCO - SECOND RURAL ROADS PROJECT

1. Institutional context. The Ministry of Public Works and Transport (MPWT) is responsible for developing and implementing the government policy regarding roads, ports, public facilities and transportation. On behalf of other ministries, local authorities or public entities, the MPWT may also implement, supervise or control technical works and studies of a technical nature. The MPWT consists, at the central level, offour functional Directorates (Programs and Studies, Technical Affairs, Administrative and Legal Affairs, Human Resources and Training) and four operational Directorates (Roads and Road Traffic, Public Facilities, Ports and Maritime Public Domain, and Ports of Casablanca and Mohammedia). The MPWT also has 29 Provincial Offices (DPEs) and 16 Regional Offices (DREs) responsible for the implementation of the Ministry's policies in their respective jurisdictions. Finally, the Ministry is overseeing a number ofpublic entities involved in its areas of expertise and action, including the recently- created Caissepour le Financement Routier (CFR).

Figure 1: Organizational chart of the Ministry of Public Works and Transport (Public Works Sector)

General Council for Public

i Central j i Level j ...... c

Programs and Studies Public Facilities Technical Affairs Ports and Maritime Public Domain Administrative and Legal Affairs Ports of Casablanca & Mohamrnedia Personnel and Training Affairs Roads and Road Traffic (DRCR) <->El 4 7- I Programming/ Financing I I Regional Regional Offices Coordination/ (Donors & I Financing Local j Level j ...... (Budget and FSR) Authorities) lmplementation I I NPRR-2 Organization j Provincial Provincial Offices j Level ......

2. The Directorate ofRoads and Road Traffic (DRCR) is more specifically responsible for defining MPWT's policy regarding roads, management of public road assets, planning and programming of construction and maintenance works, oversight,of quarries, and the development of technical rules and standards. The DRCR has 6 divisions, as well as the National Center for Road Study and Research (CNER) and the Rural Roads Program Division (specially created to supervise and coordinate the NPRR- 2), which are both considered as divisions. The DRCR is currently the implementing agency for the first Rural Roads Project (Loan No47470-MO). With support from the Provincial and Regional offices of the MPWT, the DRCR has adequate means to implement Bank projects, as was demonstrated by the fully satisfactory completion ofthe Secondary, Tertiary and Rural Roads Project (Loan No3901-MO). In order to accelerate implementation ofthe Second National Program ofRural Roads (NPRR-2), the Caisse pour le Financement Routier (CFR), a public establishment specifically dedicated to the financing of the Program, was recently created (Law No. 57-03).

44 3. The CFR will be both the Borrower (with the sovereign guarantee of the government) for the Second Rural Roads Project (RRP-2) and the implementing agency for those rural roads subprojects it finances. The DRCR will be the implementing agency for the sub-program of rural roads it finances through the General Budget and the Road Fund (FSR). The main purpose of the CFR, a financially autonomous public entity with corporate liability, is to seek, mobilize and manage the additional funding needed to carry out the NPRR-2: namely, loans contracted from donors and contributions of local authorities. Under the framework agreement signed between the Caisse and the Government (represented by the Ministry of Public Works and Transport, and the Ministry of Finance), the implementation of NPRR-2 road subprojects financed by the CFR will however be delegated to the DRCR and its deconcentrated Offices (cf. Figure 3). The DRCR will therefore be the oversight entity and construction manager for all NPRR-2 road subprojects.

4. To ensure a high degree of flexibility and efficiency in CFR’s operations, its staff has been kept to a minimum, with 14 staff including 5 engineers. The CFR is managed by a Director and has a TreasureriPaymaster and a Financial Comptroller, both of which are appointed by the Ministry of Finance. In accordance with Law No. 57-03, CFR staff consists of seconded civil servants and contractual staff, all of whom are financed out of CFR’s budget. The CFR has a Board of Directors chaired by the Prime Minister (or the person appointed by him) and composed of representatives of those main administrations concerned by the NPRR-2, namely the Ministries of Public Works and Transport, Interior, Finance, Agriculture and Rural Development. This Board is the only entity empowered to enter into loan and grant agreements with partners of the Program.

5. The CFR will bear administrative and financial responsibility for the sub-program ofrural roads it was assigned. Thus, it will: (i)manage loan agreements signed with donors; (ii)approve all contracts; and (iii)allow mandatements and payment of enterprises for works completed. For each new loan contracted (for which a specific credit line will be opened), the CFR will ensure that the payment and commitment timetable is in line with the Program’s physical implementation timetable and that it corresponds to the disbursement schedule set out in the loan agreement. The CFR will service the debt on borrowings contracted from donors out of the special account opened at the Treasury and replenished by the Road Fund (Fonds Spicial Routier - FSR).

6. The CFR’s multi-year programming strategy will be developed jointly with the DRCR for a period of 5 years. These programs will tentatively define CFR’s action plans, its results and expense accounts, as well as its investment and financing plans. Annual implementation programs and their associated budgets will also be prepared in close collaboration with the DRCR based on the status ofthe Program and the actual impact of operations on road accessibility rates. These annual programs, which will be validated by the Board of Directors, will enable the CFR to define with precision the withdrawal requests to make in each of the opened credit lines. Finally, the CFR will approve and sign all contracts pertaining to rural roads subprojects, validate invoices and make the corresponding payments. In order to simplify the payment system (and thereby accelerate implementation ofthe NPRR-2), the decentralisation

of payments through the appointment of ‘yondis de pouvoir ” at the level ofthe provincial treasuries may be envisaged in the future.

45 Board of Directors Chairman, Prime Minister

Programs Department Administrative Office Accounting & Finance Department (1 Head of Department) (1 Head of Department)

Contracts Section: (2 staff) Accountina Section: (3 staff) 9 Contract Approval Payment of invoices Establishment of invoices = Periodic reporting on budget -. Control of invoices and general accounting 1. Cash management Budget of the CFR Monitoring of disbursements

-1 Preparation of Board meetings and payments . Monitoring of program execution . Preparation of financial . Preparation of periodic progress statements reports

7. As the Program’s construction manager, the DRCR will coordinate and monitor execution of rural roads subprojects, on the basis of the multi-year programming strategy and annual action plans developed with the CFR. Contracting authority for subprojects will be entrusted to the DPEs and DREs, which will (i)draw up specifications and launch bidding procedures in accordance with CFR’s procurement rules; (ii)oversee the technical monitoring of works; (iii)manage worksites; (iv) prepare works progress reports; (v) prepare and submit orders to proceed, commitments and invoices for payment; (vi) handle provisional and definitive reception of road works; and (vii) take disciplinary measures, as needed, with enterprises that fail to meet their obligations. The DPEs and DREs will coordinate their respective activities with all stakeholders involved in the road subprojects. They will in particular implement the framework agreements and specific agreements concluded with local authorities benefiting from rural roads included under the NPRR-2. These agreements clearly define the responsibilities and financial contributions of each partner of the NPRR-2 and, in the case of unclassified local roads, will ensure necessary rights of way are acquired and road assets adequately maintained overtime. NPRR-2’s rural road subprojects will not be launched until their associated framework and specific agreements have been signed and local collectivities have actually planned to make their contributions to the CFR.

8. For purposes ofproject preparation, implementation and monitoring, the DREs/DPEs will use the Project Implementation Plan (PIP) developed under the first Rural Roads Project (PRR-l), which contains all the environmental, social and technical procedures and tools to be followed in project execution. Given the SWAP approach adopted by the CFR, it was agreed with the DRCR (and accepted by the Program’s other financial partners) that the technical elements and procedures of the PIP would henceforth be used for all roads under the NPRR-2. Due to the faster pace ofrural road improvement, the DRCR will soon appoint an Environmental and Social Expert within its Division for “Studies and New

46 Construction” who will be specifically responsible for the coordination, monitoring and oversight of the environmental and social procedures followed for each rural road subproject. Within each DPEIDRE, a liaison officer specialized in environmental and social issues will also be designated. (See Annex 10 for further details on environmental and social safeguard policies).

9. The CFR will, on its side, rely on the comprehensive manual of procedures and tools that is being developed in order to facilitate and standardize the Program’s administrative and financial management. This manual, which is being financed by the AFD, will define, among other things: (i)procedures and tools for procurement and contract management; (ii)standard documents for project presentation, bidding and specifications; (iii)CFR’s administrative and accounting procedures; (iv) procedures for financing the NPRR-2 through the CFR; (v) debt management tools; and (vi) the Program’s monitoring and evaluation system.

10. Finally, the monitoring and overall evaluation of the Second National Program of Rural Roads (NPRR-2) will be carried out by the Rural Roads Program Division (RRPD) created within the DRCR. This division will centralize all technical and financial data related to the NPRR-2; monitor planning schedules and compliance with given deadlines; and will prepare consolidated monitoring reports on Program implementation. It will also serve as a single window and intermediary for all donors involved in the NPRR-2, and will facilitate liaison and communication between the DRCR and the CFR.

11. In order to carry out its mission, the RRPD will work closely with the National Center for Road Study and Research (CNER), which recently set up a monitoring and evaluation (M&E) system for the Program. Throughout the NPRR-2, the CNER will collect data from the DPEsiDREs on the various results and achievements, as well as on the status ofroad works. This data-gathering, which will be done via the Center’s dedicated Program website, will cover the NPRR-2 as well as any other rural roads program financed or implemented by other entities. This will ensure that actual rural accessibility rates are accurately defined for each province. In order to maximize the impact of rural road subprojects and give the NPRR-2 optimal visibility, the CNER will disseminate annual provincial accessibility reports. These reports, which will be submitted to the main stakeholders involved, will foster the integration and coordination ofthe NPRR-2 with other sectors involved in rural development.

Figure 3: Operating Mechanism of the CFR (for Component A of the Project)

and implementation -

47 Annex 7: Financial management and disbursement provisions MOROCCO - SECOND RURAL ROADS PROJECT

1. The Bank assessed the financial management capacities of the Program ’s implementing agencies (DRCR and CFR) in order to ensure that the procedures used and the capacities in place will cause the funds received to be used for their intended purpose. This assessment also covered the Rural Roads Program Division (RRPD), a new entity within the DRCR charged with consolidating technical and financial data for purposes ofmonitoring and auditing ofthe Program as a whole.

2. The Project’s financial management and disbursement modalities are in keeping with the SWAP approach adopted by the Bank for this operation. In the interest of simplification and reduced transaction costs, this approach emphasizes the use ofnational procedures instead ofthe parallel systems traditionally set up for financed projects. This approach involves in particular: (i)the pooling of funds mobilized from donors and local authorities, without distinguishing road projects by their funding source; and (ii)a disbursement mechanism based on the release of donor funds in tranches, as a function of overall execution ofthe NPRR-2, rather than on the basis ofindividual operations.

A. Summary of risks identified at appraisal

3. The capacity to handle the Program j. financial management is deemed quite satisfactory and presents a moderately low risk within DRCR and its deconcentrated offices. Its resources follow the execution circuit of Moroccan public expenditures, deemed by the Bank to be solid and reliable. The habitual delays observed under the regionalized Moroccan system are fairly well managed within the DRCR, although information feedback from local departments to the central authorities could still be improved. Moreover, the DRCR and its deconcentrated offices have acquired some experience in the implementation of large-scale road programs. Audit reports of the preceding Bank-financed project indicated no significant anomalies likely to compromise the use ofthe funds received.

4. As a new entity still working out its financial and accounting organization, the CFR presents a moderate risk for the Program ’s financial management. The framework of the financial and accounts management system set out in CFR’s establishing documents as well as the implementation of its structure accompanied by international pool of consultants meets Bank requirements. The delay in the purchase of accounting software is mitigated by the external accounting assistance provided to the CFR. In addition, training in the new management procedures will also involve the DRCR and its deconcentrated Offices, to the extent that the latter are delegated contracting and implementing authorities for CFR’s sub-program ofrural roads.

5. A Rural Roads Program Division (RRPD) devoted to consolidation of the Program as a whole is still partially in place. The necessary information tools needed for the management ofthe whole program are currently under development. Arrangements have however been made in order to ensure the preparation ofconsolidated progress reports for the Nl’RR-2.

6. Based on the preceding remarks, the overall risk associated with the Program’s financial management is deemed moderate. A summary of these risks and of steps to be taken to mitigate them is set out below. An action plan is also described at the end ofthis annex.

48 Table 1: Summary of risks

11. Human resources I I CFR: Capacity of financial / accounting staff need to be External accounting assistance for CFR in place for improved M 2006 and training in ISCAE (accounting, taxes and Risk: Financial management quality treasury ) RRPD: structure partially equipped S Technical assistance is planned (financed by BEI) Risk: inadequate Program coordination 12. Flow of funds I I I CFR: delay/failure by communes to make contributions Development of procedures, by the consultant, and I--Risk: delav in imDlementation of interventions of monitoring tables CFR + DRCR: lack of feedback on actual payment of suppliers Establishment of procedures and monitoring within the RRPD Risk: Door control over time reauired for Davment CFR: debt repayment Programming that incorporates institutional Risk: delay in first debt payments due (cf. experience with timeframes required for payment of funds APDN) 13. Accounting and financial management I I I CFR: accounting software not operational and delay in Ongoing external accounting assistance for 2006 2005 accounting M accounts and production of 2005 financial Risk: unsatisfactory project’s financial management statements and accounts 4. Internal controls CFR: lack of local representation of govt. comptroller Representation by the “fondes de pouvoir” in place Risk: delay/blockage of expenditure commitments at the local level if needed 5. Program information system Large number of actors and implementation procedures, Solidification of the circuit through establishment of especially at the local level (DREslDPEs) M common Program management procedures and Risk: poorly unified program management training 6. Program reporting Manual information system from the DREs/DPEs to the CFR M See point No. 5 above Risk: impact of thoroughness/reliability RRPD: structure partially equipped M Information tool for NPRR-2 management is Risk: impact on time required for report production currently in development (based on the existing system in place within the DRCR) S: substantial, M: moderate, L: low, N: negligible

B. Appraisal of the financial management in place

B. 1 Financing design and flow of funds for the Program

7. The NPRR-2 Program, which has four funding sources, will be carried out by two implementing agencies, namely, the DRCR and CFR (see Figure 1). The assessment of the financial management capacities of these two entities covers the areas of budgeting, accounting systems, internal and external control systems, and the information system. The RRPD, in charge of overall Program coordination and monitoring, must have the capacity to consolidate technical and financial information for purposes of monitoring and auditing the Program as a whole.

49 Figure 1: Flow of funds under the NPRR-2

A Financing of NPRR-2 --_--- Repayment of debt and oper. expend. of CFR

B.2 DRCR

Financial management system in place

8. The DRCR (and its deconcentrated offices) executes the portion of the NPRR-2 assigned to it (Component B of the Project), using budgetary credits allocated to the FSR and general budget in accordance with traditional public expenditure execution circuits. These execution circuits are well known; they have been subject to appraisal by the Bank in connection with earlier roads subprojects as well as in the context of a general assessment of Morocco’s public finance system.

9. Accounting system. The accounting system in place is based upon public accounting rules applicable to the Government’s financial and accounting operations, which are governed by Royal Decree No. 330-66 dated April 21, 1967. The payment authorizers (ordonnateurs) and accountants maintain separate books, which are referred to respectively as administrative accounts and Treasury accounts.

5. Internal and external controls. The system ofinternal controls over public expenditures ensures a separation of functions by means of several layers of control. A first level of ex ante control involves three independent actors; the sous-ordonnateur, the controller ofexpenditure commitments and the public accountant. A second level of expost control occurs either internally, through MPWT’s central audit unit and/or through the General Finance Inspectorate (Inspection Gbnbrale des Finances, IGF), at their initiative, or externally, through the Court of Accounts, in accordance with INTOSAI standards.

10. Information system. The accounting information system is based upon public accounts, which are maintained for purposes of budget execution. In addition, a separate information system has been developed by the DRCR to monitor its 2002-2007 action plan (HP9000). This information system can serve as a tool for tracking the Program’s financial data (e.g., budgeting, commitments, authorizations), from the local level up to the DRCR, for purposes ofreporting and Program audits.

Risk assessment and analysis

11. Country risk. Program funds, which are allocated globally through the General Budget and the Road Fund, follow the execution circuit of Moroccan public expenditures as described above. This system was evaluated by the World Bank14 in October 2003 and was assessed as presenting a low fiduciary risk (budgetary and accounting).

l4Country Financial Accountability Assessment (CFAA).

50 12. Program risk. The habitual delays observed, in the regionalized Moroccan system, between central units and deconcentrated departments are under fairly good control within the DRCR due to a high degree of standardization of road operations at the local level and a clear division of authority. In addition, the DRCR and its deconcentrated offices have acquired substantial experience in the implementation of large-scale road programs and projects financed by international donors. Given these factors, the risks identified are deemed to be moderately low. The main risk, associated in particular with the regionalization of program execution and timely feedback from the local level back up to the DRCR for purposes ofprogram consolidation, will be mitigated by the Rural Roads Program Division’s (RRPD, see above) assigned role in supporting existing structures.

B-3. CFR

Accounting and financial organization arrangements

13. As a public entity in the form of a financially autonomous public entity with corporate identity under Law No57-03 and Decree No2-03-702 dated May 4, 2004, the CFR is subject to current provisions concerning the administrative, technical and financial organization of State public establishments. The main provisions are described below.

14. Administration and management. The CFR is administered by a Board of Directors chaired by the Prime Minister who delegates to the Minister of Public Works and Transport, and it is managed by a Director appointed by dahir.

15. Organizational chart and operating structure. The CFR is divided between two departments: the programs department, and the accounting and finance department. The accounting and finance department which consists of two services (accounting and financing) is fully staffed, except for the finance function which is currently kept by the head of the (accounting and finance) department (see Action Plan).

16. Budgetary system. CFR’s budget is submitted by its Director to the Board for examination by October 15 of the year preceding a given fiscal year. If approval is delayed, execution of the operating budget may occur within a limit of one twelfth (1/12) of the funds available under the preceding fiscal year, whereas investment expenditures are limited solely to those expenditures committed under previous fiscal years.

17. Information system and management procedures. The CFR is obliged to have an information system and accounts management based on (a) reliable and exhaustive item entry rules, and that must include (b) an accounting procedures manual covering the areas of organization, the rules of evaluation and accounting, as well as (c) procedures for inventory and archiving.

18. Maintenance of accounts. The CFR is required to maintain two accounting systems; a budgetary accounting and a general accounting conforming to the CGNC as appended to Decree No. 2-89-61 dated November 10, 1989. Although analytical accounting is not required by regulation, the CFR plans to implement it fairly quickly (as provided for in the terms of reference of the technical assistance contract with a consulting group.)

19. Internal controls. CFR’s system of internal controls ensures a separation of functions similar to the structure applicable to the execution of public expenditures, by means of three levels of controls involving (a) the Director ofthe CFR as ordonnateur; (b) the government comptroller for ex ante controls at the commitment stage; and (c) the treasurer/paymaster at the payment stage. However, unlike the traditional procedure for the execution of budgetary expenditures, the CFR’s ex ante control and payment phases are streamlined.

51 20. Internal audits. No arrangements have been made for CFR’s own internal audits.

2 1. External audits. Although the legislation concerning public establishments does not impose any general requirement of annual external audit of the accounts of public establishments and of the CFR in particular, a circular from the Prime Minister stipulates such an obligation for all public establishments. The CFR must therefore comply.

22. As a public entity, the CFR is subject to external controls by the Court of Accounts (every five years on average), as well as to controls carried out by the Inspection Ginirale des Finances - IGF (a multi-purpose general inspectorate for the entire public sector).

Evaluation of CFR s management system

23. The implementation of CFR’s management system, supported by an international external assistance, is nearing completion. All the measures related to CFR’s accounting and finance organization have now been achieved (staffing, manual of procedures, accounting assistance, training), except for the implementation of the accounting software which has been delayed. This weakness which should be addressed soon (see action plan), is mitigated by the ongoing CFR external accounting assistance. In conclusion, the financial management system in place is satisfactory to the Bank. In addition, other operational management tools such as the operations manual, the procurement software and the debt management tool should be implemented during the first semester 2006 (see Action Plan).

Rulesfor Program Execution (NPRR-2)

24. Implementation.For the implementation of road subprojects, the CFR, which is the expenditure authorizer (ordonnateur des depenses) for its part of the NPRR-2 Program (or Component A under the project), relies to a great extent on the technical support and existing departments of the DRCR and its deconcentrated offices (i.e., the DREs/DPEs). For this purpose, the CFR and the Government have signed a framework agreement defining the operational distribution of functions and responsibilities for each of them. The large number of actors involved in a single chain of operations requires the definition of procedures that will be documented in the operations manual.

25. Specific case of communes ’ contributions. The Program’s financing arrangements stipulate that local authorities (LAs) will contribute up to 15% of the overall investment cost, which will occur in accordance with traditional procedures applicable to the communes. Uncertainties concerning (a) those commitments made by the poorest communes and (b) the insufficient control that they have over their budgets, require a rigorous financial monitoring with specific procedures included in the operational manual to be developed by the consultant.

26. Loan repayment. CFR’s establishing texts state that it must contract borrowings directly from donors with a government guarantee, and that it must therefore make the corresponding repayments. Loan repayment procedures must provide for all institutional time involved in mobilizing funds, in order to adhere to deadlines.

27. Debt management. This activity consists of the management and monitoring, by the Budget Directorate, of debt outstanding (in hard currency and dirhams) and the timely payment of capital and interest installments in close coordination with the DRCR, which is the focal point for the Budget Directorate. This function requires special skills and appropriate training that are not readily available within the administration. The consultant will have to assess the opportunity of purchasing a debt management software package (see Action Plan).

52 B-4. Monitoring and audit of the Program as a whole: Rural Roads Program Division (RRPD)

28. Function ofthe RRPD. Although donors (World Bank, AFD) are only financing the portion of the NPRR-2 Program implemented by the CFR, the Sector-Wide Approach (SWAP) chosen for this operation entails an overall and consolidated monitoring of the Program, in terms of programming of operations, monitoring of performance indicators, and release of funds by tranches. The MPWT has created a Rural Roads Program Division within the DRCR in order to ensure this consolidated reporting for the Program. This division, which does not supplant the existing structures, is partially equipped. It will have to be quickly provided with all human and material resources required to gather and consolidate technical and financial data provided by the DRCR and the CFR (see Action Plan).

29. Financial monitoring reports (FMR). Consolidated financial monitoring reports will be produced each semester by the RRPD based on those reports produced by the implementing agencies (CFR and DRCR) for their related part of the Program (respectively Components A and B of the project). These reports will serve as a basis for the World Bank to release its tranches. They will include (a) a financial status of resources, for all sources of funds, and use by commitment and payment, for the semester and cumulatively, including the forecast for the next semester; (b) a status of procurement based on the procurement plan; and (c) the physical progress of activities by contract based on progress indicators. The format of the financial monitoring reports has been discussed with the Moroccan counterparts and the other donors during the appraisal mission. A draft format in support of the disbursement mechanism will be defined during negotiation and attached to the minutes. The FMR will be attached to the PIP.

Audit

30. Audit of the Program. The Program will be subject to annual accounting and financial audits, by an independent external auditor and according to terms of references acceptable to the Bank. This audit will be conducted according to acceptable audit standards. The auditor will give an opinion on the Program’s financial statement. He will also give an opinion on the Program’s internal control. These audits also include a procurement component and a technical component, and will be financed by the CFR out of the AFD loan proceeds. An initial (launching) audit will be conducted during the first semester 2006.

3 1. The Program’s financial statements, including all operations regardless their source of funding, will be produced based on the budget execution statements of the CFR and the DRCR and will include at least (a) a consolidated statement of funds and their utilization (by activity and funding source); (b) a statement reconciling the balances ofthe various bank accounts - if applicable- with information provided in the consolidated statement offunds and use; and (c) annexes to these statements.

32. Audit of the CFR. As per its status ofpublic entity, the CFR will be audited each year by an external auditor. The CFR will submit to the Bank the annual audit report of its financial statements after approval by the Board ofDirectors.

C. Disbursements

33. Disbursement procedures under this project are specific to the SWAP approach. Funds will be disbursed in annual tranches depending on the Program’s financing needs. They will be transferred annually in the form of an advance to a deposit account opened for the CFR in the General Treasury, (i)in the first year in the form ofan initial advance in an amount set at negotiations; (ii)every year thereafter in a tranche as a function ofthe Program’s implementation progress.

34. The initial advance from the Bank loan will be determined at negotiations depending on expenditures planned for the first year ofthe Program, and be transferred upon loan effectiveness and at

53 the request of the borrower. The amount of the subsequent annual tranches will be determined as a function of: (i)projected financing needs of the NPRR-2 based on contributions from all donors; (ii)the remainder of annual advances from the preceding year; (iii)financial monitoring reports and monitoring indicators; and (iv) technical and financial audits prepared by the Program’s external auditor.

35. The annual release of funds by the Bank will be subject to the CFR’s prior presentation of (i)an approved program of projected activities; and (ii)a financial monitoring report indicating, among other things, expenditures carried out during the elapsed period. The release of the initial advance will be subject to the provision of projected costs ofthe relevant year.

36. In line with the request for simplification conveyed in the SWAP approach, project activities will be covered by a single disbursement category under the Loan Agreement for goods, works, and program services.

Figure 2 - Flow of funds

D. Action Plan

E. Supervision schedule

37. Due to the moderate risk associated with this project and the approach chosen, close Bank supervision will be needed during the first year, in particular to monitor the setting up of CFR’s and RRPD’s structures. In subsequent years, supervision will occur twice yearly.

54 Annex 8: Procurement MOROCCO - SECOND RURAL ROADS PROJECT

A. Assessment of Agencies’ capacity to implement Procurement

1. The Caisse pour le Financement Routier (CFR) is the borrower under the Project. It is the contracting authority of the portion of the Second National Program of Rural Roads (NPRR-2) that it is financing through contributions of local collectivities and loans from donors, including the World Bank under the present Project (Component A). As such, the CFR approves procurement, commitment of contracts, and handles payments to entrepreneurs and providers of goods and services. The DRCR, through its Rural Roads Program Division (RRF’D, which plays an important role in program monitoring and coordination) and its deconcentrated Offices (DPEsDREs, which are the executing agencies), implement the sub-program of rural roads entrusted to the CFR (hereinafter designated as the sub- program). The DRCR acts as CFR’s delegated contracting authority, as per a framework agreement signed between the Caisse and the Government (Ministry of Finance and Ministry of Public Works and Transport). The entire process of procurement and contract management (except for contract approval, commitment and payments) is thus handled by the DRCR. Procurement occurs in accordance with the legal text pertaining to procurement carried out by the CFR (Reglement de la passation des marchis de la CFR), especially its Article 2, which allows waivers to this Reglement for externally financed contracts and the use ofother procedures agreed upon in the loan agreements.

2. During project appraisal, a two-step evaluation of the system and ofthe agencies that will handle procurement and manage contracts under the sub-program was conducted. First, a review of CFR’s procurement process was carried out. Then, the Bank examined the procurement system, organization of circuits and procedures, monitoring and controls, documentation, staff and the general environment in which sub-program procurement and contract management occur.

3. Regulation of CFR procurement. This regulation is identical to national regulatory texts governing public procurement (Decree No. 2-98-482). Overall, the public procurement system is solid. It operates in an environment of structured and reliable controls and does not present any major fiduciary risk. National procurement regulations generally conform to Bank guidelines in this area. However, some procedures need to be modified in order to be in total agreement with these Guidelines. These modifications had been agreed upon during the Loan negotiations; they are as follows: - For works and goods contracts : (i)simultaneous opening of envelopes constituting the bid at a single public session, with bid amounts read aloud and recorded in the minutes; (ii)using quantifiable evaluation criteria into bidding documents, in addition to the Moroccan certificate of classification by category and sector ; (iii)not using the points system for the evaluation of bids on goods contracts; (iv) awarding the contract to the lowest qualified bidder whose bid essentially meets specifications; (v) refraining from requiring non-resident bidders to have a representative established in Morocco; (vi) allowing bidders a period of at least one month to submit bids for works contracts; and (vii) opening national bidding to non- resident firms from eligible countries. - For consultancy contracts firms and individuals), open bidding invitations should be discarded in favor of a short-list consultation of firms or individuals having the required qualifications and experience, in a two-step (i.e., technical and then financial) evaluation procedure, with financial bids of qualified bidders opened publicly after the technical evaluation.

4. The procurement and contract management capacity ofthe DRCR and DREs/DPEs is well known to the Bank and is satisfactory, since these agencies have considerable experience with projects financed

55 by the World Bank and other financing institutions. The CFR, although recently created, has staff competent to handle procurement. It has prepared standard bidding documents to be used by all agencies for the entire portion of the sub-program that it is implementing (whatever the funding source). This should reduce procurement risks and facilitate controls.

5. The overall risk is thus deemed to be moderate. In order to improve the existing system, the following measures are being, or will be, carried out according to the following schedule: Production of a clear procedures manual defining procedures, circuits and documents to be used, as well as the various responsibilities; (end March 2006); Standard bidding documents compatible with World Bank Guidelines on the subject and agreed upon with the World Bank and other donors for (i)works; (ii)construction supervision; (agreed upon during negotiations); Standard bidding documents for (i)consultants’ services; and (ii)goods; (to be agreed upon by end of April 2006); Dissemination to the DRCR and the DREsiDPEs of the documents and manuals, and organization ofcapacity-buildingitraining sessions; (by end of April 2006); Organization of information sessions for consultants, laboratories and contractors; (by end of April 2006); and Procurement Plan for the year 2006; (reviewed during negotiations).

B. Guidelines and standard documents

6. World Bank Guidelines on Procurement, dated May 2004, and standard World Bank documents for international competitive bidding will be used for contracts for provision of goods valued at over two hundred thousand US dollars equivalent (US$ 200,000) and for works contracts valued at over five million US dollars equivalent (US$ 5,000,000); these contracts will be awarded through International Competitive Bidding (ICB).

7. Contracts for consultants ’ services for technical studies, capacity-building and audits will be awarded in accordance with World Bank procedures defined in “Guidelines for the Selection and Employment of Consultants by World Bank Borrowers” dated May 2004. Standard World Bank quote request and contract documents will be used for all contracts valued individually at over two hundred thousand US dollars equivalent (US$ 200,000). The October 1999 evaluation report template for consultant selection will also be used.

8. CFRs revised procurement procedures (as indicated in Section A above) will be used for contracts for goods valued at or under two hundred thousand US dollars (US$ 200,000), and contracts for works valued at or under five million US dollars (US$ 5,000,000). Standard documents approved by the World Bank and other donors will be used.

9. Laboratory contracts for works oversight will be granted according to the procedures for works and will use standard documents agreed upon with the World Bank.

C. Advertising and Procurement Plan

10. In addition to advertising pertaining to each contract, a General Procurement Notice (GPN) will be published in DG-Market, in United Nations Business Development, and in at least two national newspapers, at least one of which must be in French. The GPN will provide a description of the sub- program and information on related procurement. It will be updated annually.

56 11. A sub-program Procurement Plan (in a Bank-approved format) will be prepared and updated twice a year. The PPP for 2006 has been reviewed during negotiations. The Procurement Plan shall set forth those contracts which shall be subject to the Bank’s Prior Review. All other contracts shall be subject to Post Review by the Bank.

D. Procurement arrangements

12. Contracts for works. Procurement of works under the sub-program will essentially concern the rehabilitation or upgrading of rural roads scattered throughout the country. Given the low volume of works per road and the existence of competent local contractors, works are not expected to attract non- resident firms. Standard Bank-approved bidding documents for local competitive bidding will be used for contracts valued individually at or under five million US dollars equivalent (US$ 5,000,000). For contracts valued individually over five million US dollars equivalent (US$ 5,000,000), Bank procedures and standard documents will be used.

13. Contracts for goods. Purchases will essentially consist of equipment for the CFR and the project (office furnishings, computer equipment, vehicles, consumables, etc.). For contracts valued individually at or under two hundred thousand US dollars (US$ 200,000), standard Bank-approved documents will be used for NCB. For contracts valued over two hundred thousand US dollars equivalent (US$ 200,000), Bank procedures and standard documents will be used for international competitive bidding. Short lists may be used for standard goods and for contracts valued individually at or under twenty five thousand US dollars (US$25,000) equivalent.

14. Laboratory contracts. Laboratory contracts for works oversight will be for small amounts. They will be awarded as works contracts, through NCB, using standard Bank-approved documents.

15. Direct Contracting. Goods and works which the Bank agrees meet the requirements for Direct Contracting may be procured in accordance with the provisions of said procurement method.

16. Consultant services. These services pertain to technical studies, capacity-building activities at the CFR and other implementing agencies as needed, as well as audits, engineering studies and construction supervision services. The following Bank procedures will be used: - Selection based on quality and cost (SBQC, for capacity-building and audits, as well as for high-value contracts for studies (above US$200,000 equivalent per contract). Standard Bank procedures and documents will be used. Short lists may be composed entirely of national consultants for contracts less than US$ 200,000 equivalent per contract, subject to the remarks set out in the following paragraph.

- Quality-based Selection. Services for assignments which the Bank agrees meet the requirements set forth in paragraph 3.2 of the Consultant Guidelines may be procured under contracts awarded on the basis of Quality-based Selection in accordance with the provisions ofparagraphs 3.1 through 3.4 ofthe Consultant Guidelines. - Selection Under a Fixed Budget. Services for assignments which the Bank agrees meet the requirements ofparagraph 3.5 ofthe Consultant Guidelines may be procured under contracts awarded on the basis of a Fixed Budget in accordance with the provisions of paragraphs 3.1 and 3.5 ofthe Consultant Guidelines. - Least-cost Selection. Services for assignments which the Bank agrees meet the requirements of paragraph 3.6 of the Consultant Guidelines may be procured under contracts awarded on the basis of Least-cost Selection in accordance with the provisions ofparagraphs 3.1 and 3.6 of the Consultant Guidelines.

57 - Selection Based on Consultants ' Qualzjkations. Services estimated to cost less than $200,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1, 3.7 and 3.8 of the Consultant Guidelines.

- Single Source Selection. Services for tasks in circumstances which meet the requirements of paragraph 3.10 of the Consultant Guidelines for Single Source Selection, may, with the Bank's prior agreement, be procured in accordance with the provisions of paragraphs 3.9 through 3.13 ofthe Consultant Guidelines.

- Individual Consultants. Services for assignments that meet the requirements set forth in the first sentence of paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.2 through 5.3 ofthe 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.

17. Standard World Bank models for evaluation reports shall be used.

E. Frequency of procurement supervision

18. Supervision of procurement by donors and the World Bank is part of Project supervision and implementation monitoring. Based on the moderate risk assessed during evaluation ofthe existing system, and since a Sector-Wide Approach (SWAP) is being adopted, a procurement review will be conducted ex post and will cover about fifteen (15) to twenty five percent (25%) of contracts, all funding sources combined. This percentage will be adjusted during Project implementation as a function of the performance ofthe implementing agencies and the results ofreviews.

19. External audits. Annual external audits, including technical audits, will be carried out by auditors in accordance with terms of reference acceptable to the World Bank and other donors. The audits will include, for a random sample of 25% of operations under the NPRR-2, opinions on the quality of studies and works and on whether works, goods and services have been procured in accordance with the agreed- upon procedures and arrangements (see Annex 3).

F. Thresholds for Procurement Methods

20. The following contracts will be subject to Bank prior review: - All civil works contracts above US$ 5.000.000; - All goods contracts above US$200.000.

1. Works (Rural roads) > 5,000,000 ICB All contracts < 5,000,000 NCB 2. Goods > 200,000 ICB All contracts < 200,000 NCB 3. Services (Firms) > 200,000 SBQC/others < 200,000 SBLC Others

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zr If I-1m: Zk Annex 9: Economic and Financial Analyses MOROCCO - SECOND RURAL ROADS PROJECT

A. Economic Analysis

1. The objective of the Second National Program of Rural Roads (NPRR-2) is to boost the annual pace of rural road rehabilitationiupgrading from the current 1,000 km to 1,500 km, thereby achieving the government’s objective of an 80% rural accessibility index by 2015. For the selection of roads to be included in the NPRR-2, the Government followed a strong participatory approach involving all local authorities. Following this process, a final program of rural roads, describing the nature of works to be undertaken under each operation and a projected implementation calendar, were adopted. The final NPRR-2 includes 1,058 road subprojects for a total length of 15,560 km. In order to facilitate its implementation, the NPRR-2 has been broken down into two successive phases ofabout five years each. Through the proposed project the Bank will finance the first phase covering the period 2005-2010. The following economic analysis concerns not only the entire Second National Program of Rural Roads (NPRR-2) as identified by the Government and local authorities, but also the Program’s first phase. A more detailed economic analysis was also carried out to evaluate the economic feasibility of those road subprojects included in CFR’s first year action plan.

The Second National Program of Rural Roads (NPRR-2)

2. The first National Program ofRural Roads (NPRR-l), which was launched by the government in 1995 and is about to be completed, aims at increasing rural road accessibility to 54 percent. While this represents a major leap compared with the start of this program, it is still substantially short of government goal to provide the vast majority of the rural population with reliable road access.

3. The Second National Program ofRural Roads (NPRR-2), which this project will support, reflects the Government’s will to give priority to improved rural accessibility in its transportation policy. The NPRR-2 is thus intended to expand on efforts undertaken under the NPRR-1 in terms of objectives, process, and outcomes: (a) The program objectives will be defined in terms of population served, rather than kilometers ofroads built. The program will aim at increasing the percentage of rural population given access to an all-weather road from 54 percent at the start of the program, to 80 percent when the program is completed in 2015 .I5 (b) The level of participation of local governments has been substantially increased and formalized. The global NPRR-2 resulted from the consolidation of Provincial Rural Roads Programs (PRRPs). The final PRRPs were decided by the provinces and communes upon their review of a list of pre-identified project roads prepared by the Directorate of Roads on the basis of a detailed road inventory. Further, specific and framework agreements have been signed or will be signed between all NPRR-2 Program’s stakeholders, with a view to making certain that the concerned communes and provinces provide the right-of-way whenever necessary, contribute to the road’s financing, and guarantee their future maintenance. Works on local rural roads projects included in the NPRR-2 will not be started until the respective participation oflocal authorities becomes effective.

Rural population counted as inaccessible are those living in douars of 50 or more households, living at a distance over one kilometer from an all-weather road. This excludes the much dispersed population for whom providing all-weather, motorized access is unaffordable.

68 (c) The pace of rehabilitation and upgrading will be accelerated. The second Program is expected to be executed over a ten-year period, the same as the NPRR-1. However, during this period the second Program will improve 15,560 kilometers of roads, compared to about 1 1,240 kilometers that will be completed under the first Program.

4. BeneJiciaries. The main beneficiaries of the NPRR-2 and the project will be populations living near the roads to be improved. These populations, which are now isolated, will enjoy easier all-weather access to essential social and economic services (health, education, and markets). These roads will have a significant impact more specifically in the agricultural sector, by facilitating the distribution and marketing of agricultural products, thereby increasing the sector’s productivity. Services should also benefit from the NF’RR-2 since improved roads will facilitate the recruitment of teachers and medical personnel, and the acquisition of goods. Experience under the First National Program of Rural Roads (NPRR-1) has also demonstrated that the rehabilitationhpgrading of rural roads led to significant improvement in both transport services’ quality and competitiveness, and to a large drop in transport fares. Finally, the use of labor-intensive techniques, which will be encouraged in the Manual for rural roads design and appraisal currently under preparation, will provide local population with opportunities for temporary work, as well as training in construction techniques. This newly-acquired expertise can subsequently be exploited in other infrastructure projects, thereby fostering overall economic and social development in the country’s rural areas. These benefits are unfortunately difficult to quantify and could not be integrated into the economic analysis of the project. They do however exist and are worth being mentioned.

Examination of alternatives 5. Alternative solutions were considered during preparation of the First Rural Roads Project (PRR- 1). These solutions, which included community-driven development (CDD) and a decentralization approach, were discarded for the following reasons: (a) Community-Driven Development (CDD); This solution had to be discarded because of the Sector-Wide Approach (SWAP) used for the NPRR-2 at the national level, with framework and specific agreements signed between the Program’s partners (at the central and local levels) defining the precise roles and responsibilities of each stakeholder under the NPRR-2; and also due to the weak technical capacities of local communities in terms of road design, implementation and maintenance. A CDD approach would have been limited defacto to the construction of short segments of local roads connected to roads that are not all-weather. This approach is incompatible with the government’s objective ofbuilding an average of 1,500 km of rural roads each year under the NPRR-2. (b) Decentralization; Decentralization of the project to the provincial level would also have been impossible because local institutions have limited autonomy, scant resources and are insufficiently equipped to manage complex network utilities such as roads. Pilot projects could have been carried out in provinces having the best technical resources, but this would have increased project risks, required significant supervision and, once again, reduced the chances for achieving the ultimate objective ofrural accessibility.

Methodology used for economic analysis

6. Two different approaches are commonly used to evaluate the economic feasibility of rural road projects: (i)for low-volume roads [which generally have traffic above 30-50 vehicles per day (vpd)], a Cost-Benefit Analysis (CBA) was chosen, with a calculation of the investment’s Economic Rate of Return (ERR) and Net Present Value (NPV). This approach is justified by the fact that these roads serve not only to improve rural accessibility, but also to complete the trunk road grid in the country; (ii)for very low-volume roads (which handle less than 30-50 vpd), a Cost-Effectiveness Analysis (CEA) was applied.

69 Most of those roads aim at reducing the isolation of rural populations and linking them to basic infrastructures and social and economic services (e.g., schools, health centers, village markets, etc.).

7. Cost-BeneJit Analysis (CBA). The Cost-Benefit Analysis will be done according to the Roads Economic Decision (RED)16 model developed by the World Bank for the economic evaluation of investments and maintenance alternatives for low-volume roads. The RED model adopts the consumer surplus approach to estimate project benefits that are comprised of road user costs (vehicle operating costs, travel time costs and accident costs) savings, which are estimated using road user costs relationships from the Highway Development and Management Model (HDM-4). The RED model is customized to the characteristics and needs of low-volume roads, such as the high uncertainty of the assessment of the model inputs, the importance of speeds for model validation, and the need for a comprehensive analysis of generated and induced traffic. DRCR staff is familiar with the RED model and has been adequately trained to use it. It is generally agreed that the investments on each road subproject should yield an Economic Rate ofReturn (ERR) higher than 12 percent to be considered acceptable.

8. Cost-Effectiveness Analysis (CEA). A Cost-Effectiveness Analysis (CEA) of very low-volume roads will be done by calculating the total investment cost per beneficiary person. By nature, these roads will serve the country’s most isolated populations and therefore have low populatiodkm ratios. CEAs incorporate beneficiaries, i.e., populations living along roads included under the program (in douars of at least 50 families located within one kilometer of the road), as well as indirect beneficiaries, i.e., populations living along other roads connected to the project road and who will use the project road to gain access to social centers and economic services. A global analysis of roads to be improved under the NPRR-2 has demonstrated that 2.2 million people would benefit directly and about 590,000 people indirectly from roads under the program, representing a total population of nearly 2.8 million people”. For very low-volume roads, it was agreed with the DRCR that a minimum threshold of US$ 490 per beneficiary would be required for roads to be included in the NPRR-2.

Basic data used in the RED model (for low-volume roads)

9. Maintenance costs. In the context of the study of maintenance strategies for the Moroccan road network, the CNER has recently reevaluated maintenance costs for paved and earth roads, by traffic

range. These costs are summarized in Table 1 below. ’

Table 1 - Unit Maintenance Costs, per Traffic and Road Category (in US$/krn/yr)

<30 30< 40 1,177 50< 400 1,319 1,425 100< <250 1,766 1,425 >250 2,290 1,425 Road Roughness (IRI) 1 i4.: 1 9: 1 10. Road user costs. Road user costs were evaluated for five different vehicle types (passenger cars, pick-up trucks or utility vehicles, four-wheel drive vehicles, medium trucks and heavy trucks), based on typical operating costs recently updated by the CNER. For data that had not been updated since 1998

j6 The RED model was developed by the Bank for the economic analysis of low-volume traffic. (see SSATP Working Paper No. 78, July 2004 - Rodrigo Archondo-Callao) ” If douars ofless than 50 households were also taken into account (which is not the case at present), the number of people benefiting from the NPRR-2 would in reality be about 3 million.

70 (when the last complete site survey was conducted by the CNER), a 10% increase rate was applied to evaluate current vehicle operating costs. These costs are set out in detail in Table 2.

Table 2 -Vehicle Fleet Characteristics and Economic Unit Costs (year 2005)

Economic Unit Costs New Vehicle Cost (DHivehicle) 66,956 88,030 110,996 178,373 609,852 765,811 1,698,221 Fuel Cost (DHiliter) 4.25 4.25 3.5 3.5 3.5 3.5 3.5 Lubricant Cost (DH/liter) 11 11 11 11 11 11 11 New Tire Cost (DHitire) 443 584 869 1,286 4,523 4,523 2,927 Maintenance Labor Cost (DHihour) 72 72 72 72 72 72 72 Crew Cost (DH/hour) 158 160 81 45 36 30 68 -Operating Cost (DHiyear) 20,977 21,934 4,465 18,209 77,631 105,233 197,613 Interest Rate (en YO) 12 12 12 12 12 12 12 Use Time (DH/passenger) 10 10 0 0 0 10 4 Utilization and Loading Kilometers driven per year (km) 15,000 15,000 35,000 70,000 70,000 80,000 100,000 Hours driven per year (hr) 171 169 394 884 877 1,091 1,294 Service Life (years) 10 10 10 12 10 12 10 Yo of Time for Private Use (%) 90 90 0 0 0 0 0 Gross Vehicle Weight (tons) 1.o 1.2 1.5 3.0 15.0 28.0 15.0 Number of Passengers 3 3 0 0 0 0 60

11. Vehicle operating costs were then evaluated for different vehicle types and roughness levels. The value of time was estimated at US$ 0.93 per hour for passenger cars and at US$ 0.35 per hour for bus passengers. These values have been determined by the DRCR and are used in the analysis of all their investments. As can be seen in Table 3, current vehicle operating costs are high (particularly compared to costs used for the economic evaluation of the PRR-1). This is essentially due to the fact that fuel prices have significantly increased over the past few years. These vehicle operating costs are however quite comparable to those seen in other North African countnes.

Table 3 - Vehicle Operating Costs, Roughness Sensitivity (in US$/vehicle-km)

Paved 3 0.19 0.25 0.27 0.76 0.77 5 0.20 0.26 0.29 0.88 0.88 Unpaved 8 0.24 0.32 0.37 1.14 1.13 10 0.25 0.35 0.41 1.27 1.26 12 0.28 0.39 0.46 1.41 1.41 15 0.31 0.45 0.54 1.64 1.65 18 0.35 0.53 0.60 1.87 1.89

12. Trafic composition. Table 4 below indicates the typical traffic composition by type and traffic range. The annual traffic growth was estimated to be five percent for all vehicles, based on past trends, and the generated traffic was estimated assuming a price elasticity of demand equal to one. This is a conservative assumption ofthe generated traffic based on empirical evidence in developing countries.

Table 4 - Traffic Composition (Average Annual Daily Traffic - AADT)

<30 4 3 2 4 2 15 30< e50 10 7 6 11 6 40 50< 250 153 87 18 33 9 300 Economic analysis of the NPRR-2

13. An overall economic evaluation of the NF’RR-2 was done using the RED model on the basis of the final list of rural roads to be improved under the Program. This list has now been validated by the provincial councils, as well as by local presidents of the relevant communes and technical departments. Although the final NPRR-2 represents a total length of 15,560 km ofroads (cf. Annex 4 for more detail), the Program’s economic analysis was carried out on a total length of 14,722 km. The remaining 838 km of roads that were not analyzed are located in the southern areas ofMorocco and therefore serve nomadic populations that could not be surveyed by DRCR’s deconcentrated Offices (DREs/DPEs). These roads were nevertheless included in the NPRR-2 in the interest of full country-wide road coverage and social cohesion.

14. The economic analysis considered a matrix of representative road classes by traffic range, annual maintenance costs, and road user costs. The evaluation was done for a period of 15 years and adopting a discount rate of 12%. It should be noted that most of the NPRR-2 (Le., 8,226 km ofroads or 53% of the Program) consists of roads with traffic volumes ranging from 30 to 50 vehicles per day,. Of these roads, a significant number of kilometers (5,135 km) is proposed for upgradinglconstruction works. In terms of investments, 80% of the resources devoted to the NPRR-2, i.e., US$ 925 million, concern paving works, compared to US$ 236 million for rehabilitation works. On average, the cost of works under the NPRR-2 currently stands at about US$ 42,865/km for rehabilitation and at US$ 97,17O/km for paving. These costs could drop significantly in the future, particularly once the Manual for rural roads design and appraisal is completed. On the basis of this Manual, local consulting firms should be able to define, for each road subproject, the most appropriate technical standards (i.e., those offering the best quality/price/sustainability ratio). A significant improvement in the economic rate ofreturn of the NPRR- 2 can therefore be anticipated in the future.

15. Results. The evaluation done on the basis of data currently available for the NPRR-2 (i.e. excluding any possible pavement optimization) showed that the program had an economic rate of return of 19%, with a global Net Present Value (NPV) of US$ 373 million (see Table 5). Sensitivity analyses were run to assess the impact ofincreased investment costs andor lower benefits for road users. As Table 6 below indicates, the ERR drops to 15% when costs increase by 20%; and falls to 14% if benefits are 20% lower than estimated. A combination of the two scenarios results in an economic rate of return of only 11%. The switching value analysis shows that for the ERR to be exactly 12%, costs would need to increase by 43% or benefits to drop by 30%. Finally, the Program should benefit about 2.8 million people in Morocco. These results indicate a satisfactory economic justification for the NPRR-2.

Table 5 - NPRR-2 Program: ERR and Net Present Value

Global NPRR-2 Program 15,560 1,229.9 Rural Roads Program Analyzed 14,722 1.161.7 373 19%

Table 6 - NPRR-2 Program: Sensitivity Analysis and Switching Values

(a) Cost +20% 15% (b) Benefits - 20% 14% (c) Cost +20% and Benefits -20% 11 % Cost increase for ERR to fall to 12% 43% Benefit decrease for ERR to fall to 12% -30%

72 Economic analysis of the first phase of the NPRR-2

16. Based on the final NPRR-2, the DRCR and CFR have jointly prepared an initial five-year rural roads program for the period 2005-2010. This first phase of the NPRR-2, which the present project is intended to support through the CFR, consists of 487 operations totaling 7,732 km of roads for an estimated cost ofMAD 6,017 million (i.e., 53% of the total cost of the NPRR-2). Economic analysis of this first phase was initially done using the RED model. The assumptions are identical to those used for the economic analysis of the whole NPRR-2, namely a period of 15 years and a discount rate of 12%. Like the overall NPRR-2, the first phase of the program has a very large number ofroads (3,049 km) that handle traffic ranging from 30 to 50 vehicles per day. As shown in Table 7 below, these roads represent a total investment of US$ 230 million, of which 16 % for pavement works and 84 % for rehabilitation works.

Table 7 - Road Traffic Classes evaluated with the RED Model (1st Phase) (km and US$ million)

30C <50 91 1 36 2,138 194 3,049 230 50C 400 541 27 1,704 180 2,245 207 10Oc c250 179 7 1,177 118 1,356 125 >250 9 0 254 25 263 26 Total 1,999 aa 5,716 563 7,716 651

17. Preliminary results. The RED model shows that the first phase of the NPRR-2 has an overall ERR of 22% and a Net Present Value of US$ 305 million. Sensitivity tests identical to those done for the NPRR-2 were also conducted (cf. Table 9). They demonstrate the feasibility ofthe first phase, regardless of the scenarios adopted (a 20% in cost increase, benefits 20% lower than estimated, or a combination of the two scenarios.

Table 8 - 1st Phase of the NPRR-2: ERR and NPV

First Phase (including roads with ERR<12%) 7,716 651 305 22% Roads with ERR 5 12% 4,774 393 337 28%

Table 9 - Sensitivity Analysis and Switching Values (1st Phase of the NPRR-2)

(a) Cost +20% 18% (b) Benefits - 20% 17% (c) Cost +20% and Benefits -20% 13% Cost increase for ERR to fall to 12% 61 % Benefit decrease for ERR to fall to 12% -38%

18. Cost-BeneJit Analysis. Roads under the first phase with an ERR exceeding 12% represent a total length of 4,774 km and a cost of US$ 393 million, or 60% of the first phase’s total cost. The ERR for these roads is 28%, and the Net Present Value US$ 337 million. As expected, the roads with a high ERR are those that handle a traffic volume higher than 50 vpd, or those on which current road conditions are very poor, thus resulting in the highest benefits for users in connection with the planned rehabilitation or pavement works.

73 Table 10 - 1st Phase of the NPRR-2: Economic Rate of Return (by traffic and road work)

e30 0.2% -2.9% 30C <50 17.9% 11.8% 50C 400 22.1% 17.0% 100C e250 54.1Yo 37.2% 2250 105.9% 71.8% Total 22%

19. Cost-Effectiveness Analysis. For very low-volume roads under the first phase of the NPRR-2 which, as shown in Table 10 above, do not meet the economic return criteria (i.e., ERR >12%), a cost- effectiveness analysis was carried out. This analysis covered 2,958 km of roads representing a cost of US$ 257 million. These roads serve a population of 518,789 people. It should be noted that this figure does not reflect reality, since scattered populations living in douars of less than 50 families are not taken into account in the calculation of beneficiaries. This analysis shows that 63% of these roads meet the selected criteria in terms of cost-effectiveness (ie., a per-beneficiary cost below US$490).

20. On the other hand, there are 1,095 remaining km of roads that do not meet cost-effectiveness criteria. These roads are located in rough, mountainous terrain or on poor soils, and therefore present important execution problems that increase costs. In the absence ofpaving or protective surface treatment, these roads would have little prospect of lasting very long. They are generally located in the most isolated areas, e.g., in mountainous regions such as Azilal and Chefchaouen, and therefore have real impact in terms of rural accessibility and social cohesion within the country. Experience gained under PRR-1 has shown that important gains could also be realized on the investment costs of rural roads through DRCR's efforts to optimize pavement structures. Pending the finalization of the Manual for rural roads design and appraisal in late 2006, which will allow for the implementation of technical standards and construction methods perfectly suited to rural roads, the DRCR will systematically review technical standards initially envisaged for each road project, with a view to reducing costs. In the end, only the most economical solutions will be retained, or at least those with the best costhustainability ratio in regions with the most difficult climate and soils. In particular, the use of single-layer surfacing, as an alternative to the two-layer surfacing currently envisaged for paved roads, will need to be seriously considered by the DRCR for those roads under the NPRR-2 with very low traffic.

21. Population benefiting from projects. The population benefiting fi-om roads built under the first phase of the NPRR-2 is about 1.44 million people (see Table 11 below). As indicated previously, this figure does not take into account dispersed populations living in villages of less than 50 households. All of these people will however have greater access to basic socio-economic services and significantly improved living conditions after completion of the road projects.

Table 11 - 1st Phase of the NPRR-2: Beneficiary Population (by Type of Economic Analysis)

Roads with ERR>12% 4,774 62% 393 60% 707,678 209,559 917,237 Roads with ERR<12%, but pass CEA 1,847 24% 288,260 I10,187 398,447 257 40% Balance 1,095 14% 103,280 17,062 120,342 Total 1st Phase of the NPRR-2 7,716 100% 651 100% 1,099,218 336,808 1,436,026

74 Economic evaluation of those road projects pre-selected for CFR’s first-year action plan

22. Preparation of the first Phase of the NPRR-2 has also enabled the CFR and DRCR to define tentative annual implementation programs for the period 2005-2010. For its first year of activity (2006), the CFR has been assigned 88 operations’* (see Summary Table at the end of the Annex). This list of roads is subject to change, however, depending on the payments made by local authorities. Under the Second National Program of Rural Roads indeed, road projects will only be launched once contributions from the relevant local authorities have been programmed. Some road projects with complete financing available could thus be included later in the first-year program, as long as their detailed studies have been prepared and carefully reviewed by DRCR’s technical department. For Morocco’s poorest local authorities, which could have trouble paying their 15%-contribution to the general financing ofroads, the CFR is already planning to appeal to the General Directorate of Local Authorities (Direction Gdnerale des Collectivitds Locales - DGCL), to cover the financial contributions of the poorest communes. The financial analysis of the Program, presented in Part B of the Annex, shows that the failure of the poorest local authorities to pay their contributions would have a relatively modest impact on NF’RR-2’s financing plan, which could be compensated by a larger use ofFSR resources.

23. Preliminary reports. The 88 road subprojects selected for CFR’s first-year program represent a total length of 1,185.8 km, for a cost ofabout MAD 927 million (or US$ 100 million). It should be noted that a large number of these operations (30) will be completed in 2007 (even 2008), and thus CFR’s financing requirements for 2006 amount to only a little less than MAD 600 million (US$ 65.2 million). The overall ERR of these 88 road subprojects is 22.2%, for a Net Present Value of US$ 49.92 million. Table 12 below shows the distribution of CFR’s first-year roads by traffic range and type of works planned. Once again, there is a very large proportion of roads with traffic volumes between 30 and 50 vehicles per day. As Table 13 indicates, most very low-volume roads (Le., with less than 50 vpd) do not meet ERR benchmark (or higher than 12%).

Table 12 - Road Traffic Classes evaluated with the RED Model (CFR’s 1st Year Program) (km and US$ million)

<30 61 2.1 89 7.8 150 9.9 30< e50 99 3.6 387 32.7 486 36.3 50< 250 6 0.2 60 4.5 65 4.7 Total 184 6.8 1,001 93.34 1,186 100.14

Tableau 13 - CFR’s First Year Program : Economic Rates of Return (by traffic and road work)

5.5% -1.1% 30< e50 22.8% 13.1% 50< 400 22.4% 18.0% 100< e250 44.6% 35.8% 102.9% 92.2% Total 22.2%

l8CFR’s first year program of rural roads in practice consists of 86 subprojects, two of which were divided into two lots, which makes a total of 88 operations.

75 24. Detailed Cost-BeneJit Analysis. The CBA was camed out for 66 operations, representing a total length of 883.4 km and a cost of US$ 66.52 million. Table 15 indicates that these projects generally have a satisfactory ERR. Sensitivity analyses confirm that, even when investment costs increase and/or road user benefits decline, these projects, with very few exceptions, still have adequate rates ofreturn. These roads should also serve about 162,000 people, thereby contributing to a 1.5 % increase in the national rural road accessibility index during the first year ofthe program.

25. Detailed Cost-Effectiveness Analysis. A CEA analysis of first-year projects that do not meet ERR criteria indicated that 302.4 km of roads, representing a total investment of about US$ 33.7 million (or 34% of CFR's first year investment plan), will need to be selected on the basis of Cost-Effectiveness criteria. As can be seen in Table 16 below, a total of 15 operations (out of 22) do not meet the CEA criteria (under US$ 490heneficia1-y). These subprojects, however, which represent 239 km ofrural roads and investments of US$ 27.64 million, serve a large number of population (17,369 direct and 3,293 indirect beneficiaries, for a total of 20,662 people). It should also be noted that these operations, as well as the type of works planned (in most cases paving works), have been approved by the DRCR and the provincial councils, and (framework and specific) agreements have been signed or will be with the relevant local authorities to include these projects in the NPRR-2. The solutions needed to make these projects economically viable can only be found in their construction costs and those technical standards applied, as well as in the general assessment of benefits associated with these projects (beyond the benefits accruing to road users). Some suggestions for reflection are presented in the following chapter.

Options to consider for the economic evaluation and improvement of road subprojects that do not meet both cost-benefit and cost-effectiveness benchmarks.

26. Benefits associated with the projects. First-year subprojects that do not meet costhenefit or cost- effectiveness criteria are, with a few exceptions, located in Morocco's poorest communes (with poverty rates ranging from 20% to 40%, and sometimes even more). Table 14 below gives for each ofthose roads the respective poverty rate ofthe relevant served communes.

Table 14 - Poverty Rates of the relevant served Communes

Sefrou NC 4.0 0.28 R503-R714 Bahlil 240% Agadir-1.0 PI004 17.5 2.28 Aghroud -Aqsri Tamri 5-1 0% Khemisset P4325 11.0 1.56 Ait lchou - Boukachmir Ait lchou 30-40% Benslirnane NC27 9.0 0.55 Bir Nasr- Selaa Bir Nasr 20-30% Nador 542 8.0 1.30 Dar Kebdani - Chaabi Dar Kebdani 20-30% Errachidia R113 17.2 1.85 Alnif-Tinghir Alnif 20-30% AI Hoceirna NC 17.0 2.40 Bni Ammart - Tarnchacht Bni Ammarl 20-30% Meknes P7020 12.0 1.66 Mouinat Rmel-Ain Gharbaoui Ain Karma 20-30% Chefchaouen NC 11.0 2.40 B.Berred - Aounane Aounane >40% Nador 280 23.0 2.61 Kassita - lferni Kassita 20-30% AI Hoceima 3238 20.0 3.05 Tifarouene - Tamallahte (2 lots) Tifaourene 30-40% Tanger CT8300 19.2 2.09 Hjar Nhal-Rgaia par Sguedla Azzinat >40% Sidi Kacem P4553 20.0 2.83 R413-N 13 Sidi Kacern 15-2O?'o Source : Haut Commissariat au Plan - Carte de la Pauvrete Communale (June 2004)

27. As indicated previously, these subprojects aim at reducing the isolation of very poor populations who have traditionally been remote from basic social and economic services. These roads therefore have the greatest impact in terms ofpoverty reduction in Morocco. The great majority ofthem are also located in the 360 communes chosen for the National Initiative for Human Development (Initiative Nationale de Ddveloppement Humain, INDH) launched by the King in 2005. Their complementarity with actions undertaken under the INDH is obvious. An important multiplier effect in terms of economic and social

76 development can be anticipated from this complementarity. For roads located in mountainous areas, labor-intensive techniques will be envisaged for the construction of the much-required large-scale masonry and drainage works. In that case, benefits for local populations will be large both in terms ofjobs and training. The expertise newly acquired by those populations may actually be used under other construction projects, as well as to ensure future road maintenance.

28. Reduction of construction costs. The harsh construction conditions encountered with certain road subprojects inevitably have implications on overall investment costs. Because works on these roads are due to start soon, these roads will not be able to benefit from the conclusions and recommendations gathered in the Manual for rural roads design and appraisal. In order to reduce construction costs, DRCR’s technical division will need to carry out a comprehensive analysis of detailed design, project by project. Significant savings will need to be realized, in particular, on pavement structures, which size will have to be in line with the overall traffic handled by the roads. Technical experiments will have to be carried out, particularly on those roads with very low volume but which, due to their location or local conditions (e.g., climate) require more extensive works than a mere rehabilitation. These intermediate technical solutions, if they prove sustainable, may then be extended to all very low-volume roads under the NPRR-2 and integrated into the Manual for rural roads design and appraisal (if they have not already been envisaged by the consultant in charge ofpreparing the Manual).

0 00 CFR’s First Year Program - Economic Analysis (Summary) B. Financial Analysis

1. To finance the investments required for the improvement of the 15,560 kilometers of roads included in the Second National Program of Rural Roads (NPRR-2), the Government has developed a complex financial arrangement involving four different sources: the General Budget, the Road Fund (FSR), contributions from local authorities, and donor loans contracted by the Caisse pour le Financement Routier (CFR). The legal provisions establishing the CFR call for all of its loans to be backed by the FSR in the future. The main objective of the financial analysis set forth below is to validate the financial arrangement proposed for the NPRR-2 and to ensure that the future resources ofthe FSR will be sufficient to enable it both to carry out its principal mission (which is to finance maintenance activities on the country’s classified network), and to back the future debt of the CFR. The results ofthis analysis, which are presented in greater detail in this Annex, indicate that the financing plan adopted for NPRR-2 is viable in its present form. This plan, while permitting the financing of a considerable number of rural roads, does not affect the general equilibrium ofthe road sector during the period under review” (2005-2030). Sensitivity tests also show that in the absence of resources available from the poorest local authorities and/or steady growth in FSR resources, the Program’s financing plan can still be remodeled (through notably a larger reliance on borrowing) without jeopardizing CFR’s capacity to repay its debt.

Second National Program of Rural Roads (NPRR-2)

2. NPRR-2 Financing Plan. The financing plan for the NPRR-2 depends upon two different channels: a first part of the Program is financed through the General Budget and FSR resources, and implemented by the DRCR; a second part of the Program is financed by contributions from the local authorities and loans from donors, and is implemented by a newly created entity, the CFR. The first part of the Program thus depends on a conventional approach, the same as the one adopted for the first Rural Roads Project (RRP-1). The second part of the Program implemented by the CFR, in contrast, uses a Sector-Wide Approach (SWAP) under which loans from donors and contributions from local authorities are pooled in order to support the overall financing ofthis part, without breaking down projects by source offunding. In addition, this approach relies on a system of disbursement by tranches. To secure the overall financing plan adopted for NPRR-2, the Government decided that a fixed share of FSR resources (namely, 45 percent of the fuel tax - TIC) would be devoted exclusively to the financing ofrural roads. FSR’s contribution to the NPRR-2 should thus enable not only to cover the investment expenditure committed by the DRCR to carry out its rural road subprojects, to finance CFR’s operating costs, but also to service the debt contracted by the Caisse to finance its sub-program of rural roads.

3. NPRR-2’s Financial Model. To prepare financial projections on the NPRR-2, the DRCR and the CFR have developed a relatively simple financial model (using an Excel spreadsheet) presenting the future flows (sources and applications) ofthe Program. This model is based on separate sheets which indicate, for each donor involved in the Program, the loan amounts and terms, as well as projected drawings. The information on external financing is recapitulated in a sheet devoted specifically to the CFR, which also shows the transfers from the FSR and the contributions from local authorities (that is, the “Sources” of the CFR). The same sheet shows the “Applications” of the CFR in three distinct categories: investments in rural roads, the Caisse’s operating expenses, and loan repayments. An overview table summarizes all the resources (FSR, General Budget, loans, and funding from local authorities) available for the NPRR-2, their disbursement timetable, as well as the assumptions made as to physical completion of the Program (see Table 4). On this basis, the DRCWCFR financial model makes it possible to evaluate the share of FSR resources devoted to debt repayment (under both NPRR-1 and NPRR-2) and the portion available to

l9 Although NPRR-2’s implementation period runs fIom 2005 to 2015, the CFR will not start financing rural road subprojects before the year 2006. Within that context, the financial analysis will cover CFR’s financing period of the program (2006-2015), as well as the period (until 2030) when the CFR will reimburse its debt.

82 finance DRCR road subprojects (under the NPRR-2). This model, which is focused solely on the NPRR-2, unfortunately does not show, at the same time, the overall financing requirements of the road sector, alongside the resources devoted to the Program.

4. Program impact on FSR equilibrium. A comprehensive financial analysis ofthe NPRR-2 requires to evaluate the real impact of the NPRR-2 on the future equilibrium of the FSR. More particularly, it is necessary to control that, during program execution and the repayment period for the related loans, FSR resources will be sufficient both to securitize CFR debt and to cover the road maintenance requirements of the country’s classified network. NPRR-2’s impact on FSR equilibrium was evaluated on the basis ofthose assumptions used by the CFR for the Program, and a number of sensitivity tests were carried out.

Assumptions used for the financial analysis

5. Assumptions used. The financial simulations performed by the DRCR and the CFR are based on the following assumptions: - Transfers from the General Budget to the DRCR for financing the NPRR-2 have been set at MAD 80 million per year, or MAD 800 million for the program as a whole. The program has been divided into two successive phases. The first phase, covering the period 2005/6-2010, represents investments on the order of MAD 6.02 billion, as compared to MAD 5.30 billion for the second phase. The share of external financing requirements is slightly higher during the second phase owing to the smaller amount of resources available from the FSR for financing DRCR operations. The average construction cost under the NPRR-2 comes to MAD 730,000 per kilometer, as compared to about MAD 584,000 per kilometer for the NPRR-1 (corresponding to a 25-percent increase). The average costs for pavement works are MAD 912,000 per kilometer, and MAD 41 8,000 per kilometer for rehabilitation works. - The contributions from local authorities have been set at 15 percent of the overall amount of the NPRR-2, or nearly MAD 1.7 billion for the whole NPRR-2 Program and MAD 901 million for its first phase. These contributions are transferred directly to the CFR. - The payment of guarantee charges, corresponding to 3 percent of the overall amount of the loans contracted, will be spread equitably over the life of the program. This figure comes to MAD 16 million (on the basis of an external financing requirement of about MAD 5.1 1 billion). - In view of the reduced structure of the CFR, its operating costs will remain low throughout Program implementation, standing at MAD 6 million per year. - The model calls for FSR repayment of those loans contracted from the AFD and Ell3 to finance the First National Program of Rural Roads (NPRR-1). In 2006, MAD 320 million should also be forthcoming from the FSR to cover the final works carried out under the NPRR-1.

6. Estimated requirements for road maintenance. The National Center for Road Study and Research (CNER) recently conducted a study to evaluate the road maintenance requirements for the country’s classified network, as well as to define optimum maintenance strategies. The initial conclusions of this study show that an annual average allowance of MAD 1,147 million would be necessary in order to bring about significant improvement in the quality ofthe road network over the period 2005-2009. As part of the financial analysis, it was decided to use an amount equivalent to this average until 2009, and then to consider an annual increase of 3 percent in road maintenance needs until 2030. This assumption is based on the fact that the size of the classified paved network is not expected to increase significantly after the

83 completion of NPRR-2, as the vast majority of the roads paved under the program will actually be turned back over to the local authorities and classified as commune-level property.

Table 1 - Maintenance requirements for the country’s paved network (2005-2009)*

Total Km 2,264 6,334 5,924 482 2,218 17,222 Cost (MAD ‘000) 1,002 1,977 1,810 228 719 5,736 Source: CNER, September 2005. (*) The annual budget requirements for maintenance evaluated by the CNER will be spread overtime.

7. Risk associated with maintenance of local roads by local authorities. The present financial analysis only includes the evaluation of the maintenance requirements for the classified paved network. Alongside this main maintenance risk, is the question of those roads turned back over to local authorities. In the absence of adequate maintenance, these roads could deteriorate rapidly and not be sustainable over time. To mitigate this risk, a study on the management oflocal roads will be launched shortly with a view to defining the practical, organizational, and regulatory provisions needed for dealing effectively with these roads, as well as the maintenance funding that will need to be mobilized. During project supervision, the Bank will organize a mid-term review (toward mid-2009) of the expenditure devoted by the local authorities to maintaining the first local roads built under the NPRR-2. In the event a significant risk would be identified, the Bank could interrupt its disbursements to the CFR.

Road sector equilibrium between 2006 and 2030

8. To evaluate the equilibrium of the road sector during the NPRR-2 period, three additional assumptions were made: - FSR resources devoted to the NPRR-2 (that is, 45 percent ofthe fuel tax) have been estimated at MAD 624 million for 2006. These resources should increase at a growth rate of 4 percent per year, thus rising to MAD 888 million in 2015 and MAD 1,600 million in 2030 (which corresponds to the final date of repayment for loan maturities). This growth rate is relatively conservative when compared to the real growth ofthe fuel tax in recent years (average increase of 15 percent over the past 16 years and 8 percent between 2000 and 2004); - The operating costs of the DRCR were considered to be constant throughout the period, at MAD 270 million a year; and - The contribution from the General Budget to the DRCR is expected to decline gradually (by 2 percent a year) and to be offset by transfers from the FSR. This continuous decrease is not, however, expected to be as pronounced as the projections used for analytical purposes.

9. As indicated in Table 2 below, the general equilibrium of the road sector is expected to be maintained over the next 25 years despite the implementation of the NPRR-2 and the continual decline in General Budget funding to the DRCR. The residual amounts available to the DRCR to finance road construction or maintenance work are thus expected to grow during the period under review from MAD 321 million to MAD 648 million.

84 Table 2 - Road sector equilibrium between 2006 and 2030 (in MAD million)

DRCR resources Of which. FSR transfer 1263 1303 1345 1388 1433 1480 1528 1578 1630 1683 1738 1796 Funding from General Budget 1 475 1 466 1 456 1 447 I 438 1 429 1 421 1 412 1 404 1 396 I 388 1 380 I DRCR uses 1417 1417 1417 1417 1451 1487 1523 1561 1600 1640 1681 1723 Of which. Operating costs 270 270 270 270 270 270 270 270 270 270 270 270 Maintenance costs 1147 1147 1147 1147 1181 1217 1253 1291 1330 1370 1411 1453

I I I I I 1 I I I I I I Available residual (MAD million) 1 321 1 352 1 384 I 419 1 420 1 422 [ 426 I 429 1 434 I 440 I 446 1 453

Funding from General Budget 373 365 358 351 344 337 330 324 317 311 305 298 292

DRCR uses 1767 1811 1858 1905 1954 2005 2057 2111 2166 2223 2281 2342 2404 Of which. Operating costs 270 270 270 270 270 270 270 270 270 270 ' 270 270 270 Maintenance costs 1497 1541 1588 1635 1684 1735 1787 1841 1896 1953 2011 2072 2134

Available residual (MAD million) 461 471 481 492 504 518 532 548 565 ' 584 604 625 648

10. At CFR's level, the Debt-Service Coverage Ratio (DSCR) should also remain satisfactory, declining to a minimum of 1.6 1 in 20 16, as compared to a ratio of 6.25 percent at the start of the program in 2006 and 11.60 at the end of the repayment period in 2030. The evolution of the ratio during the period of the Program is set forth in Figure 1 below.

Figure 1 - Debt-Service Coverage Ratio (DSCR) of the CFR 13.00 12.00 11.oo 10.00 9.00 8.00 $ 7.00 0 6.00 5.00 4.00 3.00 2.00 1.oo 0.00

85 Sensitivity Tests

11. To verify the feasibility ofthe financial arrangements made for the NPRR-2, three sensitivity tests were carried out on the basis ofthe following scenarios: . Scenario 1 (low growth of FSR resources): This scenario assumes a low growth in revenue from the fuel tax (TIC), at an average of 2 percent per year, resulting de facto in lower than expected FSR resources allocated to the Program; . Scenario 2 (limited contributions from local authorities): On the basis of what had been experienced under the Secondary, Tertiary, and Rural Roads Project (STRRP), this scenario evaluates the impact on program financing of limited financial contributions from local authorities to the Program (50% lower than expected), owing to limited budget capacities (notably in the case of the poorest authorities); Scenario 3 (combination of previous scenarios): This scenario makes both of the assumptions used for Scenarios 1 and 2, namely a low growth of FSR resources and limited contributions from local authorities.

12. Impact on the NPRR-2 Financing Plan. As shown in Table 3 below, no additional funding would be required under Scenario 1, with FSR resources being sufficient during the whole program implementation. The financing requirements to close the gap in the program financing would reach MAD 846 million in Scenarios 2 and 3. In such cases, the requirements would however only represent 7.5 percent ofthe total amount ofthe NPRR-2.

Table 3 - NPRR-2 Financing Plan (in millions of MAD)

. General Budqet . Road Fund (FSR) 3,717 3,717 3,717 3,717 1 1 Additional financing requirements 0 0 846 846 As % of total amount 0 0 7.5% 7.5%

13. Impact on equilibrium of the CFR. Recourse to external borrowing to complete NPRR-2’s Financing Plan should not jeopardize CFR’s repayment capacities. As the following figures indicate, the equilibrium of the CFR is ensured under all three Scenarios, with a debt-service coverage ratio (DSCR) remaining higher than 1 over the period 2006-2030. In the case of Scenario 3 (the least favorable), the DSCR reaches a minimum of 1.16 in 2016, compared to 1.32 and 1.41 respectively under Scenarios 1 and 2. This analysis shows that the main constraint affecting the CFR is the potential growth ofFSR’s resources. In the case whereby some local authorities would not be able to provide their financial contributions, the CFR would indeed still get sufficient resources from the FSR to offset those defaults ofpayment.

86 Figure 2 - Debt-Service Coverage Ratio of the CFR (Scenario 1) 8.00

7 00

6.00

5.00

4.00

3.00

2.00

1 .oo

0.00

Year

Figure 3 - Debt-Service Coverage Ratio of the CFR (Scenario 2)

11.oo 10.00 9.00 8.00 7.00

[li 6.00 $0 5.00 4.00 3.00 2.00 1.oo 0.00

Figure 4 - Debt-Service Coverage Ratio of the CFR (Scenario 3)

7.00

6.00

5.00

[li 4.00 $ 0 3.00

2.00

1 .oo

0.00

87 14. Impact on the equilibrium of the road sector. One conceivable solution for offsetting the deficits observed under the scenarios examined above would be to increase the proportion of the TIC devoted to financing the NPRR-2. This solution would rebalance the financing ofNPRR-2 to the benefit of the DRCR by providing it with more resources. The simulations carried out show that: (a) In the case of Scenario 1, no additional borrowing would be required to complement the Program’s financing plan over the period 2005-2015. The share of the TIC devoted to the Program could therefore be maintained at 45 percent. However, the impact of such measure on the equilibrium of the road sector would be evident beginning in 2028, when FSR resources would become insufficient to cover simultaneously the requirements for road maintenance and the financing of the Program. Over the entire period under review (2006-2030), the budget surplus would still come to MAD 4,644 million, corresponding to a surplus for the DRCR of about MAD 186 million a year. (b) Under Scenario 2, the share of the TIC devoted to NPRR-2 should be increased to 47 percent. In that case, FSR’s transfers to the DRCR to finance rural roads project would amount to MAD 4,563 million, or 40% ofthe program’s total investment cost. The impact on the equilibrium of the road sector would be limited, with FSR resources being largely sufficient over time to cover road maintenance requirements and the financing shortfall of NPRR-2. Over the full program period (2006-2030), the budget surplus would be MAD 10,536 million, or an annual average of about MAD 42 1 million. (c) Scenario 3 would entail boosting the share of the TIC devoted to the program to 52 percent. In these conditions, the equilibrium of the sector would be in jeopardy beginning in 2022. In 2030, the DRCR would be able to cover a bit less than 90 percent of Morocco’s road maintenance requirements. Despite this, the surplus of the road sector between 2006 and 2030 would amount to MAD 1,498 million, or about MAD 60 million a year.

Figure 5. Coverage of road maintenance requirements

--e Scenario 0 fur Scenario 1 1 Scenario 2 1 +scenario 3 i -Equilibrium

15. Impact on rural accessibility. In the absence of additional external funds to complete NPRR-2’s Financing Plan and an increase in the proportion of the fuel tax devoted to the Program, the objective of achieving a national rural road accessibility index (NRRAI) of 80 percent can obviously not be met. However, the impact of the three scenarios on this rate is relatively low. Even in the most extreme case (Scenario 3), a NRRAI of over 78 percent would still be achieved by 2015; meaning a difference in terms of number ofpeople served ofnearly 210,000 inhabitants by comparison with the baseline scenario.

88 Fiscal impact of NPRR-2

16. As indicated in the financial analysis, the financial arrangements made for the NPRR-2 are viable in their present form, and future FSR resources are sufficient to cover both maintenance requirements for the country’s classified road network and to meet CFR’s debt service requirements. In the event the poorest local authorities would not be able to pay their contributions to the financing of the Program, the Directorate General of Local Authorities (DGCL) could be in a position to stand in for them. The impact on the DGCL budget would be significant, as local authorities’ contributions to NPRR-2’s financing plan represent an annual amount of almost MAD 80 million (or about US$9 million). To cover those contributions, the DGCL would have to increase by about 10% annual resources of the FEC (Communal Equipment Fund) which provided loans in the amount of MAD 835 million in 2002. In practice, however, the DGCL should only support the poorest rural communities in the country. Greater recourse to borrowing would de facto be the primary response to a delay in payment or nonpayment of the local shares. The analysis carried out above (scenario 2) proved that such response would remain feasible and would sustain the general equilibrium both ofthe program and the road sector.

Conclusion

17. The financial analysis shows that despite the launch ofNPRR-2, the equilibrium of the road sector is ensured throughout the program implementation period (including the loan repayment period). However, this equilibrium is heavily dependent upon future developments with respect to FSR revenue, in particular the proceeds from the fuel tax (TIC). Limited growth of the TIC, alongside low contributions from local authorities, would require a comprehensive review of the Program Financing Plan, requiring a significant increase in CFR’s borrowing capacities. This should however not jeopardize the program’s global equilibrium, with FSR resources being sufficient to cover CFR’s debt service over the entire NPRR-2 period (2006-2030).

Annex 10: Safeguard Policy Issues MOROCCO - SECOND RURAL ROADS PROJECT

1. Project Description. The aim of the project is to support the implementation ofthe first Phase of the Second National Program ofRural Roads (NPRR-2) through a loan to the Caisse pour le Financement Routier (CFR). The objective of the NPRR-2 is to improve accessibility for Morocco’s rural population, and permit an all-weather access to basic social and economic services such as schools, health centers, and markets. The NPRR-2 is expected to significantly improve the quality of life of the targeted population groups and provide them with new economic opportunities.

2. Implementation. The Directorate of Roads and Road Traffic (DRCR) of the Ministry of Public Works and Transport (MPWT) has responsibility for execution, management and monitoring of all road works under the NPRR-2, whatever their implementing agency (DRCR or CFR). In that context, the DRCR is expected shortly to appoint an “Environmental and Social” specialist within its Division of Studies and New Construction (DETN) to ensure that all roads improved under the NPRR-2 comply with the standards set for social and environmental safeguards. Furthermore, the Rural Roads Program Division (RRPD) recently established at the DRCR will report to donors in regular Program status reports on the environmental and social progress made under each rural road project.

3. At the local level, the Regional Offices (DREs) and Provincial Offices (DPEs) ofthe MPWT will carry out the road subprojects and assume responsibility for their operation and maintenance. The DREs and DPEs will ensure that safeguard procedures are thoroughly applied throughout the project. For each road subproject, they will also gather baseline social information that will be forwarded to the National Center for Road Study and Research (CNER). The CNER will process the information in its program Monitoring and Evaluation (M&E) system. In the near future, communications between the DREs/DPEs and the CNER will be done through the website dedicated to the NPRR-2 that the CNER is currently developing.

4. NPRR-2 Program Environmental Category: The NPRR-2 Program will support environmental improvements through upgrading and rehabilitation of rural roads in small poor communities and villages. Potential adverse environmental impacts during both construction and operation are restricted in magnitude and severity. Roads to be funded by the NPRR-2 Program do not have major irreversible environmental impacts; on the contrary, all roads would contribute to positive environmental and social impacts especially by providing access to agricultural areas, and to social infrastructures and services. The roads to be executed under the NPRR-2 are on existing right-of-ways and there will be no significant changes in road characteristics such as width or alignment. Therefore, the NPRR-2 will not entail major resettlement of population, minor land expropriation will be required and excavation works will be limited. Furthermore, it is agreed that the proposed project will not fund any road that would require resettlement, deforestation, or would adversely affect natural habitats, biodiversity, and cultural heritage sites. Negative impacts are mainly related to construction activities and are limited to the civil works sites. Accordingly, the proposed project has been placed in “Category B” in accordance with World Bank Operational Policy (OP 4.01) on Environmental Assessment (January 1999).

5. Environmental and Social Safeguards Review Process. Evaluation of issues concerning the environment, society, involuntary resettlement, and land acquisition is an integral part of the NPRR-2. Under the first Rural Roads Project (W-l),an Environmental Management Plan (EMP) and a Resettlement Policy Framework (RPF) were developed with a view to limiting the negative impacts of road projects on the environment, and to evaluate and address the socioeconomic impacts of projects on the population. During the appraisal mission, these plans and frameworks, as well as the tools and instruments mahng them up, were reviewed and slightly modified in order to facilitate their use by the various NPRR-2 stakeholders, and especially the DREsDPEs. It was agreed that the Environmental

91 Management Plan and the Resettlement Framework Policy thus revised would henceforth be applied to all rural road subprojects under the NPRR-2.

6. During project preparation, the Bank team re-evaluated the capacities of the various institutions involved in the Nl’RR-2 for adequately implementing the Environmental Management Plan and Resettlement Policy Framework. This assessment broadly took into account lessons of experience from the on-going RRP-1. It focused in particular on the Directorate of Roads and Road Traffic (DRCR) and its deconcentrated Offices (DREsDPEs).

7. In the context of the Second Rural Roads Project (RRP-2), it is expected that only those rural road subprojects meeting all environmental and social conditions set for the Program will be financed. Strict and rigorous monitoring will be performed throughout the Project.

8. The public will be consulted extensively during the screening phase and preparation of the Environmental Management Plan for each road subproject. Arrangements allowing for consultation with the public at each worksite have also been included in the environmental procedures. Finally, close upstream coordination with agencies involved in rural development, such as the Social Development Agency (ADS), should make it possible to support and launch socioeconomic activities in addition to NPRR-2’s road subprojects.

92 Annex 10.A: Environmental Aspects

Context and National Legislation

1. Legal and Regulatory Framework. Moroccan legislation includes more than 300 legal and regulatory instruments concerning environmental protection. In January 2003, three major laws aimed at limiting atmospheric emissions ofpollutants in Morocco were adopted by Parliament. These are: - Law No. 11-03 on environmental protection and improvement; - Law No. 12-03 on Environmental Impact Assessments (EIAs); and - Law No. 13-03 on the protection ofair quality.

Under Law No. 12-03 (promulgated and published in the Bulletin OfJiciel after adoption in May 12,2003 of Dahir No. 1-03-59), seven directives were issued in order to define the projects subject to environmental impact assessments. One of these directives focuses in particular on “large infrastructure projects” which include roads and highways. The law stipulates that obtaining authorization for any project is subject to a decision as to environmental acceptability. Environmental impact assessments are thus now regarded as a priority under the national environmental policy and are the key preventive instrument in respect of environmental action. A new legislation on quarries was also passed in 2002, which requires that an assessment of the environmental impact of quarry operations be conducted every three years. However, this law has not yet taken effect owing to the absence ofan implementing decree.

2. Institutions Involved. Many institutions are involved in environmental management and protection in Morocco. The Department of Environment (DE) ofthe Ministry ofTerritorial Development, Water, and the Environment (MTDWE) is the primary institution tasked with coordination, monitoring, and control, as well as establishing a legal and institutional framework for environmental protection. While it has been a centralized organization until recently, the DE has decided to establish external offices in the major regions of Morocco (largely through the Regional Inspectors of Territorial Development). In the Ministry of Public Works and Transport (MPWT), the Directorate of Technical Affairs has responsibility for monitoring environmental issues associated with the projects coming under the purview of the MPWT and, in cooperation with the MTDWE, implements government policy within the limits ofits authority. Lastly, the Directorate ofRoads and Road Traffic (DRCR), through its Division of Studies and New Construction (DETN), deals with all environmental issues relating to road projects. Under Law No. 12-03, only major road infrastructures, namely highways and national roads, are subject to a comprehensive environmental impact assessment procedure, corresponding to that required for World Bank Category “A” projects. These assessments must be analyzed and validated by a National Interministerial Committee. However, the law includes no provisions concerning the preparation of EIAs for roads in rural areas, provincial and regional roads, which can also have potentially negative impacts on the environment.

3. Alongside the environmental laws prepared by the DE, it is important to note that the Morocco has ratified a number of international conventions on environmental protection, such as the Convention on Biological Diversity, the Convention to Combat Desertification, the United Nations Framework Convention on Climate Change, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Vienna Convention for the Protection ofthe Ozone Layer, and the Montreal Protocol on Substances that Deplete the Ozone Layer.

Environmental Assessment of NPRR-2

4. Overall Environmental Review of Roads to be funded under NPRR-2. The rural roads to be built under the Second National Program of Rural Roads (NPRR-2) by the DRCR and its deconcentrated Offices (DREdDPEs) should not have any significant irreversible impacts on the environment. To the

93 contrary, the rehabilitation or upgrading of these roads should help address drainage problems more appropriately, by channeling runoff water and thereby reducing the risk of dispersion of automotive pollutants. The impact on the environment of the rural areas concerned by NPRR-2 projects will also be broadly positive, by improving safety conditions and enhancing accessibility to rural infrastructure and services. Negative externalities could ultimately arise if the roads funded by the NPRR-2 are not suitably designed, built, and maintained. To mitigate this risk a Manual for rural roads design and appraisal is now being prepared, and environmental aspects are a key element of it. For the foregoing reasons, the Second Project of Rural Roads is classified in “Category B” in accordance with the World Bank OP 4.01 on EA (January 1999).

5. In general, environmental issues that will need to be addressed during the implementation of the NPRR-2 rural road subprojects are mainly construction-related and are limited to the roads sites. These issues include borrow area operation and redevelopment, environmental degradation due to the opening of quarries, controlling erosion and slope stabilization, as well as disposal of wastes and other construction material. Some future roads could also be located near forests or other ecologically sensitive areas. In hilly terrain of some provinces, road works may accentuate erosion and affect drainage. As a result, during operation, concerned local or national institutions will have to provide adequate road maintenance to avoid the generation ofnegative impacts, mainly with respect to clogging ofdrainage and erosion.

6. Environmental Classification of Roads. Most of the roads covered by the NPRR-2 have not yet been the subject of detailed studies. At this stage, it is difficult to provide a precise assessment of their potential impact on the environment. In the future, road projects will be classified into three categories depending on their environmental impact. The following eligibility criteria for Bank financing under the RRP-2 and environmental requirements will be observed during project implementation: (a) Roads that can have considerable irreversible negative impacts, such as those requiring deforestation as well as roads adversely affecting natural habitats, biodiversity and cultural heritage sites, will not be financed by the proposed project. (b) Roads identlJied as having only minimal or short term impacts on the environment or moderate environmental impacts limited to construction sites, with no significant adverse impact on communities or important resources, would be addressed through the implementation of a preliminary Environment Impact Analysis (EM) including the preparation of a site specific Environmental Management Plan (EMP). The preliminary EIA and EMP will be reviewed and approved by the DRCR as part of its prerogatives. Adequate mitigation measures will be incorporated in the contract documents according to the typical examples provided in the environmental procedures (see Table 1). (c) Roads with potentially significant adverse environmental impacts that are sensitive, or diverse or that could affect an area beyond the road site will be subject to a full Environment Impact Analysis (EM) including the development of a comprehensive EMP to be implemented and monitored according to the terms of reference provided in the environmental procedures manual. These roads will be carefully monitored by the DREsDPEs and the DRCR.

7. Cultural Property. Rural roads to be executed under the NPRR-2 Program should not impact designated cultural property. In the unlikely event of any such impacts occurring, they will be examined as part of the limited or full Environment Impact Analysis (EM), as applicable, and a detailed conservation plan for the cultural property will be prepared. In addition, procedures for conservation and protection of the “archeological chance finds” will be included in the contract documents.

94 Project execution arrangements and assessment of existing capacities

8. Project Execution Arrangements. The DRCR and its deconcentrated offices (DREDPE) will be executing all rural road subprojects under the NPRR-2. The project execution arrangements as regards environmental management, as well as the tools used, are therefore quite similar to those adopted in the context of the First Project of Rural Roads (RRP-1). The arrangements have however been slightly improved in order to take into account lessons of experience and those few problems associated with the initial implementation of the first RRP-1 road projects. For each of NPRR-2’s road subprojects, the DREsiDPEs will prepare a standard financing report consisting of an introductory report (see Annex 10.B) and an environmental report. These reports will provide the key information on NPRR-2’s road subprojects. In particular, they will make it possible to define the environmental category of each road. Once prepared, these reports will be submitted to the DRCR (Rural Roads Program Division) for review and approval.

9. Assessment of Environmental Capacities. Until quite recently, and the promulgation of Law No. 12-03, the DRCR conducted Environmental Impact Assessments (EIAs) only for roads financed by international donors. Under the RRP-1 however, DRCR’s technical staff, whether working at the central office or in the field (DREsiDPEs), were able to build their capacities for assessing and controlling the environmental risks associated with rural road subprojects. DRCR staff now have good awareness of environmental issues and the tools available to them. This said, some improvements can still be made at the DREiDPE level prior to the effective implementation of the RRP-2. Accordingly, an “Environmental and Social’? liaison officer is expected shortly to be appointed in each DREiDPE to perform quality assurance (which is not currently in place) and to control the substance of the environmental reports before they are submitted to the DRCR. An “Environmental and Social” specialist will also shortly be appointed in the Division of Studies and New Construction (DETN) ofthe DRCR to replace the previous specialist, who recently left his position under the voluntary retirement program. Currently, the DETN does not have enough staff to review all detailed project studies as well as the corresponding environmental reports. This situation could however be addressed with the hiring of outside road engineers on a temporary basis.

10. Within the Department ofEnvironment (DE), a special division has been created for pilot projects and environmental impact assessments. Under the Mediterranean Environmental Technical Assistance Program, the World Bank provided several capacity building activities, including training workshops for this division as well as other line ministries. This division for pilot projects and EIAs has been charged with preparing terms of reference for the conduct of environmental impact assessments and reviewing EIAs carried out for highway and national roads projects. Its members also participate in the meetings of the National Interministerial Committee. However, because of its workload, its relatively small staff, and its broad scope of activity, the DE will not be in a position to provide major technical assistance to the DRCR in the context ofNPRR-2 implementation.

11. The number of consultancy firms able to perform detailed environmental impact assessments is currently limited in Morocco, as shown by experience under the RRP-1, for which few consultants responded to calls for competitive bids on conducting such studies. This is largely due to the fact that, until quite recently (and the promulgation of Law No. 12-03), only donor-supported projects required specific environmental impact assessments. Most of these EIAs were then undertaken by consultancy firms with the assistance of international consultants or by individual consultants based in universities or other institutions. To address this shortfall in expertise and address future needs arising under Law No. 12-03, some universities have decided to establish departments specialized in environment and notably in environmental impact assessments. Ultimately, it is expected that the promulgation of Law No. 12-03 will lead to the emergence of genuine national expertise in the environmental field. Because of the large number ofroads to be improved under the NPRR-2 (and hence the potential volume of EIAs to be carried out), the capacities oflocal consultancy firms could improve rapidly in the period ahead.

95 NPRR-2’s Environmental Procedures

12. The environmental procedures define the institutional organization, the instructions to be followed, and the tools to be used in the context of the NPRR-2 to assess and monitor the environmental impacts of rural road subprojects, as well as to address the potential adverse risks that may occur in each consecutive project phase: design, construction, operation, and maintenance. In addition, the environmental procedures set forth the arrangements for public consultations for each project, as well as the implementation of the Specific Environmental Management Plan (Plan de Gestion Environnement SpkciJique - PGES).

13. Environmental procedures based on a practical manual of environmental instructions were prepared as part of the first Project of Rural Roads (RRP-1). This manual describes, for each road project, the steps to be followed in the environmental area, the respective responsibilities of those stakeholders involved in the project, and the assessment and validation tools available to the DREsiDPEs to ensure that environmental requirements are adequately incorporated into road subprojects.

14. The manual includes the following components and tools: . A Preliminary Environmental Assessment Sheet (Fiche d ’Evaluation Environnementale Priliminaire - FEEP) and a Specific Environmental Management Plan (PGES) to be filled out for each rural road subproject; . Terms of Reference for the selection through competitive bidding of specialized technical consultancy firms for the conduct of detailed environmental impact assessments (if necessary); and . Check-lists enabling the DRCR and the DREsDPEs to evaluate the detailed EIAs and to ensure that all environmental aspects and mitigation measures have been properly integrated into design studies.

15. Owing to the adoption of a Sector-Wide Approach (SWAP) for the Second Project of Rural Roads (RRP-2), it has been agreed with the DRCR and the CFR that the environmental procedures developed for the RRP-1 would henceforth be applied to all NPRR-2 subprojects. These procedures have already demonstrated their full relevance. Under the first Rural Roads Project indeed, a significant number ofdetailed EIAs have been initiated or will shortly be, which gives clear evidence that the system in place is efficient and working as required. On the basis of RRP-1’s experience however, some components of the manual have been slightly modified to facilitate their use by the DREsDPEs.

16. All of the components and tools contained in the practical manual on environmental instructions are described in greater detail in the sections below, following the chronological sequence of project execution. Chart 1 also illustrates the logical sequencing of the environmental procedures adopted for the NPRR-2.

P Study Phase

17. During the study phase, a preliminary assessment (screening) will be made to define the potential environmental risks of each rural road subproject. This evaluation is summarized in a Preliminary Environmental Assessment Sheet (FEEP) (see Annex 10-A-1). Depending on the results of this initial assessment, either a summary Specific Environmental Management Plan (PGES) will be prepared, or a detailed environmental impact assessment will be initiated leading up to the preparation of a comprehensive PGES.

96 18. The primary aim of the Specific Environmental Management Plan (PGES), a copy of which is provided in Annex 10-A-2, is to define for each potential environmental impact identified the generic mitigation measures to be taken, their implementation period, and the share of responsibilities in respect of implementation and monitoring. The PGES will state the type and frequency of monitoring and reporting to be used, as well as the monitoring indicators applied. The budget line for this task will be mentioned as well.

19. In the event of a major or potential environmental risk, a specialized consultancy firm will be selected through competitive bidding to carry out a detailed Environmental Impact Assessment (EM) and produce the related Specific Environmental Management Plan. The recommendations and measures supported in the detailed EMwill be incorporated into the detailed design.

20. At the outset, it is projected that the DPEs and DREs will be charged with conducting the preliminary environmental studies and producing the summary PGESs. Once the Manual for rural roads design and appraisal is completed, the FEEPs and summary PGESs will become an integral part ofdesign studies and will actually be filled out directly by local technical consultancy firms. The validation of FEEPs and PGESs, currently carried out by the DETN for national and regional roads and by the Regional Centers of Technical Studies (CERETs) for provincial and unclassified roads, will then be performed entirely by the DETN. Oversight over the incorporation of environmental constraints at the design study level will be provided using a standard checklist. The technical consultancy firms will include in the specific service agreements (SSAs) for civil works, the specific environmental measures defined in the detailed environmental assessments and related PGESs.

P Construction Phase

2 1. During the construction phase, the DREs/DPEs, in their capacity as project supervisors, will be responsible for the environmental oversight of rural road subprojects. They will ensure the proper implementation by contractors of those mitigations measures developed in the PGESs and incorporated into the environment clauses of the SSAs for civil works. Regular monitoring of the works should also ensure that no new and unforeseen environmental adverse impacts occur during works execution. The DREsDPEs will produce, for each subproject, an oversight report that will be incorporated into the monthly site monitoring report. Oversight reports will also be produced at the end of the construction phase and on final delivery. These reports will make it possible to carry out an ex-ante assessment of the mitigation measures applied and to bring about ongoing improvements in the way environmental aspects are taken into account in NPRR-2 road subprojects.

22. To facilitate the execution of oversight functions, they may, where appropriate, be delegated to external consultancy firms. The oversight reports coinciding with final and provisional acceptance of deliverables must be however prepared solely by the designated “Environmental and Social” liaison officer within the DREsDPEs.

P Operational Phase

23. During the operational phase, the DREsDPEs will carry out the environmental monitoring measures developed in the PGESs. Environmental monitoring reports will be prepared periodically by the “Environmental and Social” liaison officer in the context ofthe road maintenance monitoring programs, and will constitute an integral part thereof.

97 Mitigation Measures

24. Typical environmental impacts and possible mitigation measures for the NPRR-2 are shortly presented below and further detailed in Table 1. They include, but are not be limited, to the following:

- Design phase: Issues to be addressed include: encroachment on private properties, erosion and slope stabilization, provision of adequate drainage facilities, proper disposal of waste material, and road safety. Those issues will be addressed through the preparation of environmentally-sound technical designs.

- Construction phase: construction mitigation measures will be required to minimize inconveniences to the public. Adverse construction activities will be mitigated through the implementation of Good Practice Environmental Procedures, which are presented in the environmental manual. Contract documents will incorporate all requirements to minimize disturbance from construction activities, including proper management of construction waste; control measures for waste fuel, oil and lubricants; provisions for protection of vegetation, actions to reduce noise and dust levels; control of soil erosion and protection ofwater quality; as well as reinstatement of areas used for construction camp and for temporarily storage of construction materials. Mitigation measures will be monitored by the DPE Supervision Engineer to ensure compliance with the contract. - Operational phase: operational impacts will be addressed as part of the operation and maintenance of each road in order to avoid deterioration of the road and associated safety problems. Among the major issues to be addressed during operation are: proper functioning of drainage facilities, and erosion control.

Environmental Monitoring

25. As mentioned previously, the regional and provincial offices of the MPWT (DREDPE) will be responsible for the environmental monitoring of rural roads subprojects during construction and operation. This monitoring will be carried out in close collaboration with relevant local authorities, on the basis ofthose indicators defined in the Environmental Management Plans (EMPs).

26. The Division of Studies and New Construction (DETN) of the DRCR will also conduct periodic monitoring of NPFZR-2 subprojects in order to assess compliance with PGESs of those various stakeholders participating in project execution, and in order to gather necessary field data to control that the environmental (and social) procedures have been observed for each subproject. The information gathered by the DETN and the DREsDPEs will be summarized in the Program progress reports regularly submitted by the Rural Roads Program Division (RRPD) to the Program’s various donors.

27. Finally, an in-depth environmental review will be carried out each year as part ofthe preparation of the technical and financial audit (execution report) ofthe NPRR-2 (see Annex 3) carried out by a local or international auditing firm. The technical audit, which will cover a random sample of 25 percent of NPRR-2 road subprojects, will assess the quality of the detailed design studies, the technical standards applied, as well as the inclusion and compliance with environmental (and social) procedures during project execution.

Institutional Strengthening

28. As part of the first Rural Roads Project (RRP-l), several training activities were planned for the DRCR and its deconcentrated Offices as well as for the conimunities and contractors involved in the project. Such trainings were intended to enhance project stakeholders’ awareness of environmental issues and present them, using a case-study approach, the special environmental situations that are involved with

98 rural road projects. Some of these training activities have already been carried out. An introductory workshop was organized by the consulting firm in charge of the preparation of environmental procedures for the RRP-1, to acquaint DRCR and CERET staff with the tools included in the practical manual on environmental instructions. These staff are now properly trained in the review of those environmental reports prepared by the DREs/DPEs for each rural road subproject. Other training programs and workshops on environmental matters will be regularly conducted throughout the RRP-1.

29. The RRP-1’s experience has demonstrated that the capacities of the institutions responsible for executing the NPRR-2 at the local level should be further strengthened in the near future. An information campaign targeted at the DREs/DPEs will thus be conducted to enable them to fill out the Preliminary Environmental Assessment Sheets (FEEPs) more accurately. For some RRP-1 road projects, these sheets were often incomplete or mentioned possible environmental adverse impacts without necessarily clarifying the risks being run. This triggered an important exchange of communications between the DREs/DPEs and the DRCR (which was willing to better understand and evaluate the potential environmental impacts of the projects), and defacto delayed the project execution process in those cases. To address this problem, the introductory workshop will be repeated in the near future for the “Environmental and Social” liaison officers selected within each DRE/DPE. This workshop will constitute an integral part of the normal internal training process for the DRCR, and will thus be entirely covered by the Roads Directorate.

30. Additional Actions to be Undertaken: To ensure the environmental and social sustainability of the Project, the following measures will have to be implemented in the very short term:

9 Within the Division of Studies and New Construction (DETN) ofthe DRCR, appointment of an “Environmental and Social” specialist responsible for checking EIAs and specific environmental management plans, and replacing the prior incumbent; . Appointment, within the DREs/DPEs, of “Environmental and Social” liaison officers to carry out quality control of the road subprojects’ environmental reports, before they are submitted to the DRCR.

99 Chart 1: Environmental Procedures

Selection of a consultancy firm for the (*) Pending completion of the technical, economic, environmental, and Manual for rural roads design social studies and appraisal, these tasks will be carried out by the DREslDPEs.

Completion of the Preliminary Environmental Assessment Sheet (FEEP) I 1 Potential or major risk

Definition Low risk studies Preparation of TORS for performing a detailed Environmental Impact Assessment (EIA) .1 Selection of a specialized consultancy firm through bidding 1

Preparation of a simplified Specific Detailed Environmental Environmental Management Plan (PGES) (EIA) and comprehensive Specific r- Environmental Management Plan (PGES) I I'I Checklist for the evaluation of a detailed EIA report

Incorporation of environmental aspects in

Design ...... , , ...... I Checklist for ensuring the studies inclusion of mitioation I measures in design studies Preparation of Standard Bidding Documents for works

Establishment of a regular program for environmental monitoring I II, 1 Preparation of an environmental monitoring report I

Environmental oversight reports (during works, at provisional acceptance, and at final acceptance)

100 a

a a.. a a I1

L Annex 10-A-1: Preliminary EnvironmentalAssessment Sheet (FEEP)

Kingdom of Morocco Ministry of Public Works and Transport Directorate of Roads and Road Traffic Second National Program of Rural Roads

The purpose of this sheet is to set forth, during the preliminary phase (screening) of the project, the likely major impacts of the project, and to evaluate the scope of the environmental assessment required

Type of sheet I I Identification ofproject II Project No. : National Program of Rural Roads Original 0 Project Name: (Road) Length of Project: Revised Estimated Project cost:

PROJECT JUSTIFICATION Indicate the aim and objectives of the project, as well as the outcomes and bene$ts anticipated

DESCRIPTION OF PROJECT AND ITS \LAIN CO\IPONESTS (Length, tlpe of works: Sen road, rehabilitation of track, road construction, etc.)

102 [ LOCATION OF PROJECT

11 Province Connection Road No./Listed Track No. Project start date (location or km post) End of project (location or km post)

Brief description of the project area alongside the road cut (geography, human activities, agnculture, industry, etc.)

Presence of water resources in the project area (irrigation, safe drinking water, energy, etc.) Use of water resources (energy, imgation) Types of access to safe drinking water (water distribution network, bore holes, wells, matfias) Number of inhabitants or douars concerned in the project area Type ofhousing (dense, dispersed) Other characteristics ofproject area - Protected spaces -Wooded areas 11 - Presence of oueds

PRINCIPAL TECHNICAL CH.AR.4CTERISTICSOF PROJECT Total IenFh of project n

Length in flat terrain

Length in hilly terrain

Length in mountainous terrain

Width of projected platform (pavement and shoulder)

POSSIBLE ALTERNATIVES TO PROJECT Description (using attached map) of main possible alternatives (if any). indicating the reasons for selecting the project route.

103 iEVIEW OF VARIOUS PROJECT ASPECTS 4. Main problems associated with the project Does the project involve land expropriation or the demolition of Yes 0 No 0 To be determined

existingI infrastructure (housing, community or socioeconomic infrastructure, etc.)? If yes, surface area or name and type of infrastructure affected

Does the project require the relocation or compensation of people? 0 Yes c] No 0 To be determined Ifyes, number of people affected.

Does the project involve encroachment on lots, residences, or OYes 0 No 0 To be determined public use land (parking lots, access platforms for springs, wells, or bore holes)? If yes, explain:

Are residences alongside or contiguous to the new road platform? 0 Yes 0 No To be determined If yes, explain:

Does the project encroach upon areas suitable for improvement, 0 Yes 0 No 0 To be determined planting (bours, irrigated areas), or industrial use? If yes, explain:

Will the project entail intensive disruption of the sites (earth works, 0 Yes 0 No To be determined tree removal, deforestation, etc.)?

Will the project result in the destruction of vegetation or soil on the Yes No 0 To be determined route, on the sites from which materials are taken, quarries, storage areas, worksite facilities, etc.?

Does the project involve the use of explosives? 0 Yes 0 No 0 To be determined

3. Isthe project likely to result in soil or water pollution (at the 0 Yes 0 No Tobedetermined surface or underground)?

10. Will the project result in an increase in materials in suspension, a 0 Yes 0 No 0 To be determined decrease in water quality, or sedimentation in oueds associated with erosion from project areas?

11. Does the project result in any permanent and dangerous increase in 0 Yes 0 No 0 To be determined atmospheric emissions?

12. Does the project bring about an increase in the prevailing noise 0 Yes No 0 To be determined level?

13. Does the project cause disruptions or changes (temporary cutoff, Yes 0 No [I] To be determined deviation) of the drainage network or surface water drainage (oueds, dayas, etc.) during the construction phase?

15 Does the project cause disruptions (springs running dry) or changes 0 Yes 0 No 0 To be determined in the level of underground water (wells, springs, etc.)?

16. Will the project be equally profitable for all beneficiaries in the 0 Yes 0 No 0 To be determined region?

17. Will the beneficiaries in the region have equal access to the 0 Yes 0 No 0 To be determined project?

104 B. Problems associated with the new road cut for the project

18. Isthe project situated in a zone where there are protected areas? 0 Yes No 0 To be determined

19. Is the project being introduced in an area where there are species Yes 0 No To be determined (fauna or flora) or ecosystems of ecological value?

20. Is the project situated in an area where species (fauna or flora) are in 0 Yes No To be determined danger of extinction?

21. Is the projected situated in proximity to wells, springs, bodies of 0 Yes 0 No 0 To be determined water, oueds, wet areas, or dayas? (improved spring) 22. Isthe project being introduced in areas of archeological, historical, 0 Yes [7 No 0 To be determined cultural, or religious interest? If so, of what type?

23. Is the project located in areas affected by soil pollution? Yes 0 No 0 To be determined

24. Does the project cross an area in which the landscape is of significant Yes No 0 To be determined interest?

25. Isthe project being introduced in an area subject to landslides? Yes 0 No To be determined If so: Is this risk high, moderate, or low?

26. Isthe project being introduced in an area subject to erosion 0 Yes 0 No 0 To be determined (gullying)? If so: Is this risk high, moderate, or low?

27. Isthe project being introduced in an area subject to seismic risk? Yes 0 No 0 To be determined If so: Is this risk high, moderate, or low?

28. Does the project cross an area subject to flooding? 0 Yes 0 No 0 To be determined

29. Does the project cross an area sensitive to the risk of fires? [7 Yes 0 No 0 To be determined

30. Does the project cross any densely populated areas? 0 Yes No 0 To be determined

31. Does the project cross an area valuable for agricultural purposes? Yes No 0 To be determined If so, is this value level high, medium, or low? 32. Does the project cross an area of interest for tourism? 0 Yes 0 No n To be determined 'repared by Reviewed and verified by: The DPEiDRE of

PROJECT CLASSIFICATION Based on the preliminary assessment, the project is classified in the following category:

I The project may trigger significant negative environmental impacts. It calls for an Environmental Assessment (EA) including a Specific Environment Management Plan (PGES).

The foreseeable negative impacts ofthe project are of short duration and easily mitigated both during the construction phase and during the maintenance/operational phase. II The project calls for an environmental study limited to the preparation of a Specific Environment Management Plan (PGES).

Approved by the DRCR:

105 Annex 10-A-2 : Specific Environmental Management Plan (PGES)

Project to Reduce Rural Isolation in Morocco Specific Environmental Management Plan Provincial Directorate of Public Works (Name of DPE)

RP (Project No.): Locality (km post ) to Locality (km post )

1. Project Descriution

2. Project Objectives

3. Project ComDonents

4. proiects

5. Presentations of the Sueciflc En VironmentaJ Management PJan

106 E .e* a 0 Ea 3! .e SQQk

. . e . e Annex 10.B: Social Evaluation Social Monitoring of Roads under the NPRR-2

Social impact of roads

1. Poverty in Morocco: Morocco is a rapidly urbanizing country, although poverty remains a largely rural phenomenon where nearly two thirds of the poor live. The heavy trend in rural to urban migration is fueled by the increase and deepening of poverty in rural areas. Provinces with the highest incidences of poverty are Meknes Tafilalet (29%), Fes Boulmane, Taza-A1 and Hoceima-Taounate, Doukala-Abda, Marrackech-Tensfit-Alouaz which account for nearly 40% of the total share of the poor. Without road access, the poor are trapped in their geographic enclaves, unable to access social services (schools, health centers), realize their economic potential (unable to market their goods or choose what goods to buy) or realize their rights as citizens (e.g. travel easily to obtain national identification cards). The isolation of the rural poor from the rest of the nation is accentuated by the topography of the country where high mountains, deep rocky gorges and desert dunes serve as insurmountable physical barriers.

2. BeneJiciaries of the NPRR-2 Program: The second National Program of Rural Roads (NPRR-2) aims at linking poor and isolated inhabitants in rural areas to social and administrative services and markets. Criteria for selecting the Program’s road projects included population size and access. The poorest and most remote regions were given priority under the NPRR-2, given the important social impact ofrural roads on poverty alleviation and improvement of local populations’ living conditions. The selection of roads also relied on other criteria such as potential economic opportunities in the targeted areas (agriculture and tourism), remoteness of social and administrative services, and road network griding. The preliminary consultations held to validate the NPRR-2 have demonstrated that the socioeconomic criteria chosen for the selection ofrural roads were satisfactory and viable. Indeed, only a very limited number ofmodifications were made in the preliminary Provincial Rural Roads Programs (PRRPs) proposed by the DRCR.

3. A beneficiary survey was completed as part ofthe preparation ofthe Implementation Completion Report (ICR) for the Second, Tertiary and Rural Roads Project (Loan 3901, closed June 30, 2001); it demonstrated that the construction of rural roads had a number of positive social impacts. More specifically rural roads:

- improved access to schools, and therefore provided girls with better educational opportunities;

- improved the quality and availability oftransport services;

- contributed to lower prices for goods and raw materials by reducing vehicle operating costs; and - improved agricultural productivity and opened new opportunities to people in rural areas, where agnculture continues to be the primary economic activity. These conclusions since have been broadly validated by new field surveys conducted by the DRCR in regions concerned by the NPRR-1. They are presented in greater detail in the paragraphs below.

4. Poor access to social services. Poor road access not only severely constrains the ability ofrural inhabitants to reach social services but also has a negative impact on the quality of services delivered. For example, few teachers are willing to accept jobs where road access is difficult; this is especially true of women, which in turn has a negative impact on girls’ school enrolment rates. Once personnel are recruited, rural services often suffer from a high rate of absenteeism. Teachers who go to their home towns on weekends or go to the market to buy their provisions have difficulty finding transportation to

10s return to the village. The improved traffic conditions on rural roads should have a major impact on maternal mortality by enabling women to have much more rapid access to medical centers and thereby reducing the potential risks of complications in childbirth. Once the country has a quality road network serving a large population, significant economies of scale could be realized in health services. Indeed, it will be much more advantageous to replace the current system of scattered rural health centers with limited resources by a smaller number of well equipped health centers that are staffed by competent personnel, to which patients can be brought rapidly by ambulance. To this end, it is planned to disseminate the NPRR-2 progress reports widely to the national institutions working in the health area, so as to enable them to program their own investments in light of the progress made with the NPRR-2 and thus make the most ofthose investments.

5. Gender and Roads. The gender gaps in health, education and employment are one of Morocco's most significant developmental challenges. Improved road access provides girls with better educational opportunities. The impact of the NF'RR-1 on enrollment ratios largely corroborates this assertion. As shown in Table 1 below, from 1985 to 1995 the enrollment ratios of girls increased country-wide by a factor of three. The living conditions of women should also benefit broadly from the NPRR-2. By facilitating their travel and reducing the time customarily devoted to gathering fuel wood and obtaining drinking water, roads provide rural women with greater opportunities to participate in socioeconomic activities in their region. The existence of a reliable road network also enables them to engage in far more extensive social exchanges with their families and surrounding individuals.

Table 1 - NPRR-1 Impact on Enrollment Rates in Morocco

Source : DRCR - March 2005

6. Impact of the NPRR-I on agriculture. The lack ofroads and the inefficiency oftransport services constitute major obstacles to rural development and contribute to rural depopulation. Product availability, the prices of agricultural inputs, and production levels all depend on the efficiency and availability of transportation means. Poor households are compelled to limit themselves to subsistence agriculture when they lack market access to sell their products. The impact of the NPRR-1 on agriculture has been remarkable. Agropastoral investment to improve herds increased by 150 percent between 1985 and 1995. Productivity of the land, and the use of crops and techniques with high added value, have increased significantly (see Chart 1 below). In the areas affected by the NPRR-1, the use of fertilizers increased by 60 percent. Owing to the improvement in traffic conditions, rural inhabitants have been able to obtain food for livestock much more easily, leading to a 20-percent increase in livestock farming productivity. Thanks to livestock transport by truck and the new communications methods available (cellular phones), livestock farmers are able to sell their animals rapidly when market prices are the most favorable. Their sale prices have thus risen by 50 percent since the NPRR-1.

109 Chart 1 - NPRR-1 Impact on Agriculture Productivity

a5Project 95 a5Control 95 a5Project 95 a5Control 95

Source : DRCR - March 2005

7. Impact of rural roads on the prices of basic supplies and transport costs. The impact of rural roads improved under the NPRR-1 Program was also 1felt in the dramatic drop ofprices ofbasic supplies. In the commune of N’hilt in the province of Taroudant, located on the eastern mountainous region for instance, the price of liquefied petroleum gas (LPG) dropped from MAD 100 to MAD 45, the cost of public transportation from the village to the provincial capital declined from MAD 500 to MAD 40, and time travels went from two hours to 40 minutes.

8. Isolation, Urban migration and road. Lack of roads also translates into a sense of deep isolation and real marginalization of the rural poor. Not only are they unable to leave their localities, but outsiders cannot come. In particular, government officials, be it at a national or even provincial level, rarely visit isolated populations and therefore have limited knowledge oftheir needs. These populations feel put aside by the institutions. With the trend in urban migration, the lack of roads also contributes to the fragmentation of families and communities. Children sent to live with relatives in nearby towns can only periodically return to visit their families. In many provinces, such as Taroudant, the expansion ofthe rural road network has also been accompanied by investments in construction and other economic activities, revitalizing these rural areas. Information generates knowledge that people can adopt for learning new ways ofdoing things.

Participatory Process

9. The social impact of NPRR-2’s rural road subprojects should be further amplified by the participatory process used to select them. In the preparatory phase of the NPRR-2, elected officials and representatives of local governments were indeed consulted, during regional and provincial councils, on those proposed roads to be included in the Provincial Rural Roads Programs (PRRPs). In some provinces, the provincial councils themselves organized preconsultation meetings at the commune level to present the projects in greater detail and gather comments prior to the consultations organized by the DPEs. These consultations made it possible to validate most ofthe road choices made by the DRCR, but also to make a number of changes to meet certain specific local requests. A further objective of these consultations was to increase the impacts of road subprojects on the targeted populations, by enabling local authorities to match their own investment programs with the NPRR-2.

110 Monitoring of Social Development in the NPRR-2

10. A framework for monitoring and operationalizing social development was put in place under the first Rural Roads Project (RRP-1). The aim of this framework was to promote development efforts associated with road subprojects: (a) Community participation in planning and implementing infrastructure works for communities along rural roads. (b) Better measure, monitor and document socioeconomic impacts of roads through systematic data collection. (c) In-depth thematic studies on the sociological impacts ofroads. (d) Promote activities for local economic development linked to roads.

11. Due to the implementation of a Sector-Wide Approach (SWAP) for the NPRR-2, it was decided to extend this framework to all roads in the Program. In this context, the components ofthe framework have been reviewed by the Bank during the appraisal mission and slightly modified or simplified on the basis of experience from the RRP-1 and proposals made by the DREsDPEs. The framework adopted for the NPRR-2 is presented below.

12. Framework for monitoring and operationalizing social development. For each rural road subproject under the NPRR-2, the DREs/DPEs will prepare a financing report consisting ofa presentation report and an environmental report (see Annex 10.A). The presentation report contains the following 6 sheets: - Project Summary Sheet; - General Information Sheet; - Social Information Note; - Social Data Sheet; - Information Sheet on land Rights ofWay; and - Sheet on the Occupation ofland Rights ofWay.

13. The purpose of the first two sheets is to provide a project overview containing summary and general information (road number, traffic data, works anticipated, cost, etc.). The social information note and the social data sheet should make it possible to evaluate the socioeconomic development opportunities associated with each road subproject and to document and measure project impacts on the affected population groups. The last two sheets deal with land acquisition, an issue discussed in detail in Section C ofthis annex. Like the environmental reports, the introductory reports will be submitted to the DRCR (through the Rural Roads Program Division - RRPD) for review and approval and then forwarded to the CFR. In order to ensure efficient quality control, an “Environmental and Social” liaison officer will soon be designated within each DREDPE. This officer will control that the financing reports are complete and properly filled out before being submitted to the DRCR. In the future, once the monitoring and evaluation (M&E) system for the NPRR-2 currently being developed by the CNER is fully operational, the DREsIDPEs will be able to submit the socioeconomic data on rural roads directly through a website devoted to the Program

14. The main activities called for under the monitoring and social development framework are as follows: (i) Community participation in planning and implementing complementary infrastructure works intended to improve the quality of life: In addition to road works, small scale civil works could be carried out under the NPRR-2 Program to enhance the quality of rural life. Those works would only require limited additional funds due to economies of scale. Many of the areas where the roads will be constructed lack markets, pedestrian crossing points,

111 speed bumps, access for the old or disabled, sidewalks, public transportation stops, parking etc. These works will be identified as part of the social data collection process carried out by the DPEsiDREs in each of the areas concerned by rural road subprojects. A large participatory process will be followed to gather as many proposals as possible from local population.

(ii) Better measure, monitor and document socioeconomic impacts of roads through systematic data collection. n Baseline data collection: For each NPRR-2 road subproject, the DPEsDREs will collect and document, using the social information notes and social data sheets (see Annexes 10.B.l and 10.B.2 for the standard models adopted), a number of baseline indicators focused largely on the quality of life of the population, road conditions, and means of transport available in the region. These data will be processed by the CNER with the help of the M&E system developed for the NPRR-2 and then presented in the province-level reports on the Program.

0 Collection of monitoring and evaluation indicators: Two years after the roads are in service, the DREs/DPEs will carry out a socioeconomic monitoring survey. The information gathered will be used to fill out the social monitoring and evaluation sheet, a copy of which is provided in Annex 10.B.3. This information will be conveyed to the CNER directly through a dedicated website (currently under preparation). The impact of the rural roads on the quality of life of the affected population groups will be a key component ofthe province-level progress reports on the Program.

(iii) In-depth thematic studies on the sociological impacts of roads. On an as-needed basis, and to complement the progress produced by the CNER, the DRCR will carry out detailed sociological studies to demonstrate the impact ofrural roads in improving living conditions for the rural population. These studies will be conducted using rigorous data collection and analysis methods in order to establish causal relationships. Examples of such studies are “rural roads and their impact on social services,” “rural roads and community isolation,” “road accidents and the disabled,” “rural women and the road network,” “the participatory process and its impact on the quality of the road network.” Qualitative and quantitative methods will be used in these studies. The studies will be conducted by sociologists (consultants) who will be hired through the CNER.

(iv) Promote activities for local economic development linked to roads: Rural roads will bring several opportunities for local economic development in rural areas. To facilitate and support such development, a number of activities could be supported once the projects are launched. In this context, the DREsiDPEs will identify upstream all the local economic development opportunities that could stem from the improvement of roads and traffic conditions. These activities could include the following: (a) creation of agricultural cooperatives for local products; (b) rural tourism; (c) car repair .and maintenance; (d) processing of local products; (e) malung and marketing of local handicraft; (0 public (mass) transportation; and (g) private system for local school transportation. Given the magnitude ofthe NPRR-2 (over MAD 11 billion), the CFR and the DRCR will not be able to use their own funds to support such activities. Other agencies specialized in local development, such as the Social Development Agency (ADS), on the other hand, could do so. Consequently, for each road subproject, the “Environmental and Social” liaison officers in the DREsDPEs will collaborate upstream with their counterparts in the existing regional agencies.

112 Capacity building for integrating social development

15. As part of the RRP-1, a training program was developed to strengthen the social development capacities ofDRCR and DRE/DPE staff. These training activities were aimed primarily at enabling these staff to develop adequate methods for gathering data for the presentations reports; to properly identify all economic activities likely to benefit from rural road subprojects; and lastly to interact as widely as possible with the targeted local populations to better identify their needs and expectations.

16. These training efforts are expected to be sufficient to build capacities in social development within the DRCR and the DREsDPEs. Accordingly, no additional training is planned in the context of the NPRR-2.

113 Annex 10.B.l: Social Information Note

Second National Program of Rural Roads -NPRR-2

Name of Province Road No. From km post to km post

I.Localities served

2. Socio-administrative centers served

- Schools: - Health centers: - Markets: - Administrative centers:

3. Economic activities of the served area

- Agriculture: - Livestock farming: - Tourismlcrafts: - Forested areas exploited:

4. Benefits linked to road improvement

- Incentive to improve social infrastructure: - Development of public transport: - Increased marketing of various local products: - Tapping of natural resources and modernization of agriculture:

114 Annex 10.B.2: Social Data Sheet (Screening)

Second National Program of Rural Roads-NPRR-2

Name of Province Road No. Name of douar (Select the most isolated douar on the road) Form completed by Date 1. Total beneficiary population of the road: Direct Indirect

2. Transport services available for access to the douar from the closest functional track a. Buses - Number of times daily b. Shared taxis Estimated number daily C. AWD vehicles Estimated number daily d. Carts e. Donkey trips

3. Number of girls registered in school

4. Number of boys registered in school

5. Average time required for primary school teacher to reach the school in the douar, during the dry season (a) Number of hours (b) Teacher lives in the school

6. Average time required for primary school teacher to reach the school in the douar, during the rainy season (a) Number of hours (b) Teacher lives in the school

7. Average time required for patients to reach the health service closest to the center of the douar

8. Transport services used to reach health service (a) Shared taxi (b) bus (c) AWD vehicle (d) donkey (e) on foot

9. Average time required (number of hours) for people to reach administrative offices in the rainy season

10. Average time required (number of hours) to reach the main market

11. What kinds of transport-related public space improvements would the population like to see? (Examples: sidewalks, bus stops, etc.)

12. Was a participatory approach used to identify these improvements? (a)Yes- (b) No-

13. Economic activities of the men in the area (a) cereal crops (b) fruit (c) vegetables (d) livestock (e) trade (f) other

14. Economic activities of the women in the area (a) crafts (b) processing of agricultural products (fruits, vegetables, etc.) (c) egg/poultry production (d) production of honey

115 15. Indicate if there are potential economic development zones that could be financed by the Social Development Agency

16. Other observations

Approved by the DREDPE

116 Annex 10.B.3: Social Data Sheet (Monitoring)

Second National Program of Rural Roads -NPRR-2

Name of Province Road No. Name of douar (Select the most isolated douar on the road) Form completed by Date 1. Total beneficiary population of the road: Direct Indirect

2. Transport services available for access to the douar from the closest functional track a. Buses- Number of times daily b. Shared taxis Estimated number daily c. AWD vehicles Estimated number daily d. Carts e. Donkey trips

3. Number of girls registered in school

4. Number of boys registered in school

5. Average time required for primary school teacher to reach the school in the douar, during the dry season (a) Number of hours (b) Teacher lives in the school

6. Average time required for primary school teacher to reach the school in the douar, during the rainy season (a) Number of hours (b) Teacher lives in the school

7. Average time required for patients to reach the health service closest to the center of the douar

8. Transport services used to reach health service (a) Shared taxi (b) bus (c) AWD vehicle (d) donkey (e) on foot

9. Average time required (number of hours) for people to reach administrative offices in the rainy season

IO. Average time required (number of hours) to reach the main market

11. What kinds of transport-related public space improvements were built for the population? (Examples: sidewalks, bus stops, etc.)

12. Was a participatory approach used to identify these improvements? (a) Yes (b) No -

13. Economic activities of the men in the area (a) cereal crops (b) fruit (c) vegetables (d) livestock (e) trade (f) other

14. Economic activities of the women in the area (a) crafts (b) processing of agricultural products (fruits, vegetables, etc.) (c) egg/poultry production (d) production of honey

117 15. Indicate if potential economic development zones have been financed by the Social Development Agency

16. Other observations

Approved by the DREDPE

118 Annex 10.C: Social Aspects - Land Acquisition and Resettlement Policy Framework

Responsibilities and general framework for land acquisition for NPRR-2

1. Physical execution of all NPRR-2 rural roads will be under responsibility of the DRCR. The DRCR currently has a department (Service de Domaine Public) responsible for handling all land expropriation that may be required to carry out the Government’s road projects. This department is staffed by competent personnel with in-depth knowledge of Moroccan legislation on expropriation. At the DRE/DPE level, “Environmental and Social” liaison officers will soon be appointed to monitor the procedures used for land acquisition under the NPRR-2 and to ensure that the rules in force in this regard are observed.

2. Under the first Rural Roads Project (RRP-l), a Resettlement Policy Framework and Land Acquisition Plan were adopted for all the roads financed by the Project. This framework laid down the procedures required for land acquisition as well as the corresponding compensation resulting from the construction ofroads financed by the Project. The principles established in this framework are in line with Moroccan law and the Bank’s Operational Policy 4.12 regarding expropriations, whether or not resettlement is involved. This framework, henceforth to be applied for all roads under the NPRR-2, favors a policy ofminimizing private land appropriation. The DRCR is asked to explore all possible alternatives before taking definitive action to acquire land. This framework, and the principles governing it, are presented in greater detail in the sections below.

Principles and objectives governing resettlement and land acquisition

P Rationalefor land expropriation

3. The requirements for land to be acquired are determined by the engineering designs in each particular case, and result from a) the type of traffic the road will accommodate; and b) the topography of the land, where varying widths and/or alignments ofroad may be required.

4. In any road design under the NPRR-2 Program, there are three scenarios: o Road constructed within existing rights of way, with no expropriation required. This is the case for the vast majority of roads under the project since the works are mainly to improve the conditions ofexisting roads in the officially classified road network. o Expropriation of small tracts of land for expansion or realignment. Some roads within the classified network may require expansion or realignment and thus necessitate land acquisition. The required land must be acquired by the DRCR (through its Expropriations Department - Service de Domaine Public). This acquisition could be done through expropriation, amicable arrangement or land donation. Amicable arrangement and land donation are governed by the Dahir which covers the code ofobligations and contracts. o Community donation of land for rural roads that are not part of the DRCR network under state control. A large share of roads under the NPRR-2 is not part of the classiked road network. These roads will be managed by local authorities which will be responsible for acquiring land needed for their upgrading or rehabilitation. These arrangements were spelled out in the specific and framework agreements. In practice, local authorities or other property holders are eager to donate small tracts of land for roads because of the dramatic opportunities rural roads bring. Land acquired for road works will be given to the central government through a voluntary donation.

119 > Minimization of expropriation of land

5. Typically, land requirements for roads improvements are moderate, not more than 5 meters wide. The expropriation of private land is minimized in accordance with Moroccan law, which requires public infrastructure projects of any nature to make maximum use of public land, and only to resort to expropriation when there is no alternative. Minimal expropriation of private land also serves the interest of the provincial offices of the DRCR and the communes which are obliged to pay compensation awarded by independent assessment as explained below. The DRCR takes great care to avoid disturbing existing structures, especially residences, farms, areas of religious or cultural heritage, or other areas of public value.

> Legal process is obligatory

6. All expropriations under the NPRR-2 must be carried out according to the provisions of Moroccan law. The law of expropriation defines the procedures to be followed and protects the rights of all parties involved. Wrongs committed during expropriation may be redressed by the courts with provision for payment ofdamages and punishment of offenders.

P Compensation and eligibility principles

7. Whenever expropriation ofprivate land is unavoidable, Moroccan law clearly indicates that land should be expropriated through full compensation at market value, independently determined, with advance public notice, negotiation and right of appeal. Rights to compensation extend to owners, tenants, workers, or any person who can demonstrate any interest lost as a result of expropriation as long as they are acknowledged by the land lord during the period ofpublic inquiry.

> Legal and Institutional Framework

8. Moroccan law Number 7-81 permits the expropriation of land for public use. The law allows temporary occupation of land in the event that no agreement with property owners has been reached on the proposed compensation in order to permit the expropriating agency to conduct preparatory works, remove materials or to set up the work site. The law protects those who either do not have formal land title or do not have sufficient documentation to prove ownership.

9. Law number 12-90 on urban development (loi sur l’urbanisme) also states that roadside landowners (riverains) must contribute a portion of their land equivalent to a rectangle about 10 meters wide and the length of the faqade of the parcel. This contribution, however, should not be more than a quarter ofthe parcel.

Description of Procedure for Preparing and Approving Land Acquisition Plans (per Moroccan Law and OP 4.12)

10. Before launching each road subproject under the NPRR-2, the DREsDPEs will prepare a presentation report which contains two sheets relating to expropriations: (1) the information sheet on land rights of way; and (2) the sheet on occupancy of road rights of way. These two documents, using the standard models presented in Annexes 1O.C.1 and 10.C.2, make it possible to classify roads in accordance with the three scenarios discussed earlier.

11. For roads requiring land acquisition, the DREsDPEs must follow the following steps in preparing a Land Acquisition Plan (LAP).

120 (a) During preparation of the project execution study, the consultancy firms will, under DRE/DPE supervision, prepare a Land Acquisition Plan (parcel description and map) after determination of the right of way requirements for the road. One of the criteria to be observed will be to minimize the impact of expropriations of private land to the greatest possible extent. Detailed expropriation requirements will be defined at this stage. (b) Once the specific right of way has been defined, a valuation commission is established. This commission consists of: (i)a representative of the expropriating entity (DRE/DPE), (ii)a representative of the local administrative authority, (iii)the users or owners of land concerned, and (iv) the surveyor responsible for preparing the Land Acquisition Plans.

(c) The commission prepares minutes ofmeetings for each parcel which includes: - The boundaries of the parcel affected by the subproject, its surface area, legal status, registratiordtitle status, communal land, state land privately owned, etc. - Names of the owners/users ofthe land and any other relevant information about them (first and last names, address, land owner, user, national ID card numbers etc). - Description of land use (housing, business, stable, factory). - List of equipment on the land (well, irrigation system, electricity etc). - A qualitative and quantitative description ofthe agncultural uses. (d) This information is documented and signed by the property ownershsers and each member ofthe commission.

(e) Based on this investigation, the surveyor prepares the Land Acquisition Plan and the inventory ofeach ofthe parcels.

(f) On review of the evidence, and on finding the application justified, the DRCR (Service des Domaines Publics) gives permission to the DRE/DPE to begin the process ofexpropriation.

> Information and Consultation with Persons affected by the NPRR-2

12. Moroccan expropriation procedures include publicly informing concerned parties. The procedure requires the public announcement of an intent to expropriate at least twice in a national newspaper and in the Official Bulletin (Bulletin OfJiciel). The draft “order of cessation of ownership” (1 ’acte de cessibilitd, an administrative order which authorizes the agency to launch the expropriation process of specific property) is submitted to the Consewationfonci2re which registers the land identified for expropriation in the land title and requisitions. If the land is not registered, this information is recorded in a public register dedicated to this purpose and placed at the relevant administrative tribunal.

13. The expropriation proposals and plans are posted in the offices of the relevant communes (plans parcellaires). The publication of the expropriation acts is followed by an administrative review which is completed within two months of publication in the Bulletin OfJiciel in the offices of the relevant communes. The public during this time may review the plans and provide comments, questions/concerns or objections, which is documented in an official register that is reserved for this purpose.

14. Locally elected representatives are well informed of the DRE/DPE’s action plans in their respective regions. Thus, they play an active role in informing their constituents of the expropriation plans.

15. The findings are then submitted to the Secretary General of the Government which verifies the correct application of the procedure and publishes the “cessation of land title” in the Bulletin OfJiciel. The Prime Minister provides the clearance of expropriation decrees before publication in the Bulletin OfJiciel. An announcement ofthe decree is then published in a local newspaper and the complete text ofthe decree is posted in the offices of the communes for public information and response.

121 Estimated Population Displacement

17. To date it is not possible to know exactly the number of persons, residences, or economic enterprises that will have to be physically displaced under the NPRR-2. Any such instances will systematically be fully detailed in the LAP.

Eligibility Criteria for Defining Categories of Displaced Persons

18. In land with defined use, the law explicitly recognizes for the purposes of entitlement to compensation all holders of any rights. The following main categories of right holders are entitled for compensation where loss can be established: (a) owners; (b) tenants or occupant;(c) usufructuaries; (d) Owners of trees or other permanent improvements or equipment; and (e) people who use the land for commercial purposes.

Methods of Evaluating Assets

19. Valuation Commission. The expropriation law specifies that valuation of losses or damages is determined by a commission. The commission, headed by the representative of the local administrative authority, consists of the following permanent members: head of the circonscription domaniale or a person designated by himher, the receveur de 1 ’enregistrement or person delegated by himiher and representative of the expropriating entity. Non permanent members of the commission are the following. (a) in rural areas: the representative of the provincial representative of the Ministry of Agriculture and the inspector of rural taxation; and (b) in urban areas: the inspector of urban taxation or hisher designate and the inspector ofurban affairs or hidher designate.

20. Methods of Compensation. Direct damages due to expropriation are compensated, but uncertain, indirect or speculative damages are not compensated. The valuation method takes into account the value of assets and land at market value rate at the time the expropriation decree is issued. Improvements made to the value of the land after the decree cannot be compensated, unless prior agreement with the expropriating agency has been made. The compensation rates will not include any price changes that might have occurred by speculators as a result ofthe expropriation decree.

2 1. Institutional responsibility for compensation. The DREsDPEs are in charge of expropriation for those roads in the classified network. Affected individuals must properly establish ownership rights. If affected individuals do not have sufficient proof of ownership, the compensation amount is placed in the “Caisse de Dkpot et de Gestion” until sufficient documentation has been established. An official announcement is made that the compensation amount has been deposited and the expropriation decree is posted in the relevant commune office. After six months, if there are no objections, the claimant receives the compensation along with the interest accumulated in the Caisse de Dkpot et de Gestion.

22. Grievance mechanisms. Landowners have legal recourse for contesting expropriation decrees. However, a judge may accord the expropriating agency rights to take the land while the case is in court as long as the Compensation is paid to the landowner. The judge may propose a new amount during the appeal. The additional amount will then be awarded to the property owners (if they have land title) or placed in the Caisse de Dipot et de Gestion (if the title is insufficient) following the procedures above.

23. All other cases. Any affected person may appeal to the court for redress. The court has the power to hear submissions, review the process, and make such provisions as it deems fit. These include ordering compensation to be paid or halting works.

’ 122 24. Land Donation. Rural communities are acutely aware of the costs of poor road access and their isolation and are prepared to donate small tracts of land that will bring with it considerable economic, social and welfare benefits. According to ownership, land may be provided for roads by the following: (a) communities (b) individual owners on behalf ofthe community or (c) the commune in case of communal property. It is however critical to ensure that these donations are made formally and in a genuinely voluntary manner, avoiding injustice and hardships for donors. As a result, the DRCR, through the DREslDPEs, is responsible for ensuring that this process is properly documented and formalized. The DREs/DPEs will have in their records documentation related to land donation, including copies of signed contracts.

Procedures for Informing the Bank

25. . The details ofplanned expropriation, together with details ofany expropriations for the NPRR-2 that have already been undertaken, are consolidated in a Land Acquisition Plan (LAP) that will be submitted to all donors (among which the Bank), as part ofthe semi-annual progress reports prepared by the RRPD. The LAP monitoring plan (see attached form at the end ofthis annex) will have to be prepared with great care. The Bank will ensure that the LAP conforms to the requirements of Bank policy. Consecutive disbursements of the loan tranches will depend on the Program’s overall compliance with those requirements.

Monitoring of Implementation

26. The DRCR is responsible for monitoring the correct implementation of the Resettlement Policy Framework and the Land Acquisition Plan for all types of land to ensure that people affected by the NPRR-2 Program are protected in the terms outlined in this framework. In each case, when any type of land acquisition and compensation is involved, the LAP monitoring plan is completed. This table informs the donors and also serves as a monitoring device showing all actions involved, the responsible agency, expected completion date, the reason(s) for any delay and new expected completion date.

123 Annex 10.C.l: Information Sheet on Land Rights of Way

Second National Program of Rural Roads -NPRR-2

DREDPE :

Length of road :

Current right of way (Decree ofrelease, public track, etc.) :

Right of way required for construction

Need for expropriation WIN)

Estimate of surface area to be expropriated :

Estimated cost of expropriation

Cost of topographic studies (thousands of MAD) : Cost ofland (thousands of MAD) Surface area indemnification (thousands ofMAD) : Total (thousands of MAD)

Availability of survey plans (Y/N) :

Projected date for preparation of survey plans (YnU):

Approval by the DREDPE

124 Annex 10.C.2: State of Occupancy of Road Rights of Way

KINGDOM OF MOROCCO Ministry of Public Works and Transport Directorate of Roads and Road Traffic

Second National Program of Rural Roads-NPRR-2

DRE/DPE:......

Road No.: ...... iection (M POST...... to KM 'OST ......

(1) fence, residence, trei well, etc

125 +

G 4 d e zm PI)

.IE L 0 .-U dE 0 .IY .I .Iv1 3 4s V E 3.. "! ? s B 3

-a, E m

zx n Annex 11: Project Preparation and Supervision MOROCCO - SECOND RURAL ROADS PROJECT

Planned Actual PCN Review June 22,2005 June 21,2005 Initial PID to PIC July 22,2005 July 2 1, 2005 Initial ISDS to PIC July 22,2005 August 1,2005 Appraisal February 20,2006 February 20,2006 Negotiations February 26,2006 February 21,2006 Board/RVP Approval May 2,2006 Planned Date ofEffectiveness July 1, 2006 Planned Date ofMid-Term Review September 30,2009 Planned Closing Date June 30,2012

Key institutions responsible for preparation of the project:

Caisse pour le Financement Routier (CFR) Ministry ofPublic Works and Transport - Directorate of Roads and Road Traffic (DRCR)

Bank staff and consultants who worked on the project included:

Name Title Unit Mohammed D.E. Feghoul Lead Municipal EngineedTTL MNSIF Jtr8me Leyvigne Transport Specialist MNSIF Abdelghani Inal Highway Engineer Consultant Hernan Levy Transport Economist Consultant Rodrigo Archondo-Calla0 Highway Engineer TUDTR Hocine Chalal Senior Environmental Specialist MNSRE Meskerem Brhane Social Development Specialist MNSRE Andreas Wildt Lead Procurement Specialist MNAPR Alaleh Motamedi Procurement Specialist MNAPR Pierre Messali Sr. Financial Management Specialist MNAFM Meryem Benchemsi Financial Management Specialist Consultant Dominique Bichara Sr. Counsel LEGMS Hassine Hedda Finance Analyst LOAG2 JosCphine Ngou Program Assistant MNSIF

Bank funds expended to date on project preparation: 1. Bank resources: $61,000 2. Trust funds : N/A 3. Total: $61,000

Estimated Approval and Supervision costs: 1. Remaining costs to approval: $ 9.000 2. Estimated annual supervision cost: $ 85.000

127 Annex 12: Documents in the Project File MOROCCO - SECOND RURAL ROADS PROJECT

A. Project Implementation Plan

- Project Implementation Plan (PIP)

B. Bank Documents and Staff Assessments

- Aide-MCmoires et Back-to-Office Reports 2002 - 2005 - Financial Management Assessment

- Procurement Capacity Assessment - Morocco: Rural Roads and Poverty Alleviation, Prepared for Scaling Up Poverty Reduction, A Global Learning Process and Conference, May 25-27,2004 - Draft Note on Accessibility to Roads in Morocco (2003)

C. Documents from the Government of Morocco

- Documents on the Second National Program ofRural Roads:

0 Note on the Second National Program ofRural Roads (NPRR-2), Feb, 2005; 0 Framework Agreement for the Implementation ofthe NPRR-2; 0 Specific Agreement for the Implementation ofthe NPRR-2; 0 Land Acquisition and Resettlement Policy Framework, October 2004; 0 Environnemental Management Plan, October 2004; 0 Guideline for Visual Surveys ofTracks; 0 Bidding Documents for the Preparation ofa Support Study for the Setting-up ofOperational Procedures for the NPRR-2 Program. -. Caisse pour le Financement Routier (CFR):

0 Law No 57-03 creating the CFR and implementing decree No 2.03.702 (May 4,2004); 0 Minutes of the May-2005 Board Meeting; 0 Framework Agreement between the CFR and the MET; 0 Draft Decree concerning CFR’ s Financial and Accounting Organization, and Draft Regulation of CFR Procurement, October 2004; 0 Five-Year Programmatic Strategy for Implementation ofthe NPRR-2, Dec. 2005.

- Road Fund - Ten Years ofPresence, DRCR, July 1999

- National Program ofRural Roads - Annual Report, 2002 - Local Authorities at a Glance - Ministry ofInterior, DGCL, 2004

D. Others

- Finorg & KPMG (2005). (( RCalisations de Prestations d’Appui pour la Conception et la Mise en Place de ProcCdures et d’Outils SpCcifiques au Financement des MarchCs par la CFR dans le cadre du PNRR-2 : Rapport Final de la Phase 1 (Diagnostic - Etat des Lieux et des Besoins), November 2005. ))

128 Annex 13: Statement of Loans and Credits MOROCCO - SECOND RURAL, ROADS PROJECT

Active Projects Difference Between Expected and Actual Original Amount in US$ Millions Disbursements a’

Project ID FY Project Name IBRD GRANT Cancel. Undisb. Orig. Frm Rev’d

~~ PO43412 2005 Basic Education Reform Support Program 80.0 58.96 0.9 PO05516 2003 Asset Management Reform 45.0 28.1 23.7 PO75808 2003 Adult Literacy (Alpha Maroc) 4.1 1.8 2.7 3.0 PO88243 2006 Financial Sector DPL 200.0 68.5 1.4 PO05525 1999 Health Management 66.0 26.4 22.0 43.1 -0.8 PO83746 2005 Housing Sector DPL 150.0 55.9 4.4 PO89677 2006 PARL I1 120.0 PO56978 2001 Irrigation Based Community Dev. 32.6 26.6 20.0 PO48314 2000 GEF: Protected Areas Management 10.5 6.6 6.6 PO82754 2004 Rural Roads 36.9 35.9 3.3 2.7 PO69124 2003 Rainfed Agriculture Development 26.8 28.1 3.3 PO86877 2006 Rural Water Supply and Sanitation 60.0 59.9 PO73531 2002 Social Development Agency 5.0 4.7 1.7 0.9

Overall Result 826.3 10.5 28.2 398.0 111.4 2.9

MOROCCO STATEMENT OF IFC’s Held and Disbursed Portfolio As of 11/30/2005 In Millions ofUS Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 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 3.40 0.00 0.00 0.00 3.15 0.00 0.00 2001 Medi Telecom 54.43 0.00 22.13 293.59 54.43 0.00 22.13 293.59

Total Portfolio: 54.43 3.42 22.13 293.59 54.43 3.17 22.13 293.59

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2005 BMCE 0.00 30.00 0.00 0.00 2002 SGRI 0.00 0.90 0.00 0.00 2004 Meditel Restruct 0.00 0.00 0.00 0.00

Total pending cornmittrnent: 0.00 30.90 0.00 0.00

129 Annex 14: Country at a Glance MOROCCO - SECOND RURAL ROADS PROJECT

M. East Lower- POVERTY and SOCIAL & North middle- Morocco Africa income 3evelopment diamond, 2002 Popuiation, mid-year (millions) 29.6 306 2,411 Life expectancy GNi per capita (Atlas method, US$) 1190 2,070 1,390 GNI (Atlas method, US$ billions) 35.3 670 3,352 Average annual growth, 1996-02 T Population (%) 16 19 l.0 GNI Gross Labor force (%) 2.5 2.9 1.2 per t-i H primary Most recent estimate (latest year available, 1996-02) capita enrollment Poverty (%of population belo wnatio nal PO vertyline) 8 Urban population (%oftotalpopulation) 57 58 49 Life expectancyat birth (years) 68 69 69 I Infant mortality (per ZOOOlive birihs) 39 37 30 Child malnutrition (%of children under5) 11 Access to improved water source Access to an improvedwatersource (%ofpopulation) 80 88 81 Illiteracy (%ofpopulation age 759 49 35 13 Gross primary enrollment (%of scho 01-age population) 94 95 111 Morocco Male Dl 98 I11 Lo wer-middle-income group Female 88 90 ID

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 2002 Economic ratios' GDP (US$ billions) 25.4 28.5 33.9 37.3 Gross domestic investmentlGOP 28.2 23.2 24.8 25.2 Trade Exports of goods and ServicesIGDP 8.2 25.1 30.7 29.9 Gross domestic savingsiGDP 13.8 8.5 19.5 8.3 Gross national savingsiGDP 18.2 217 25.0 24.0 Current account balancelGDP 4.1 -15 4.8 interest paymentsiGDP 4.3 8.1 2.7 2.9 Total debffGDP 80.4 79.7 58.9 49.9 Total debt servicelexports 44.8 40.6 18.2 32.9 Present value of debtiGDP 43.4 D4.6 Present value of debtlexports Indebtedness 1982-92 1992-02 2001 2002 2002-06 (average annualgrowih) Morocco GDP 4.2 3.0 6.5 4.5 3.4 GDP oercaDita 2.0 13 4.8 2.9 1.7 Lo wr-middle-income group I.

STRUCTURE of the ECONOMY 1982 1992 2001 2002 Growth of investment and GDP (Oh) (%of GDP) Agriculture 25.3 s.4 15.8 8.1 40 T Industry 31.9 32.3 3 14 311 Manufacturing 17.3 18.1 17.3 7.3 Services 52.8 52.3 52.8 52.8 Private consumption 67.9 66.7 62.4 64.8 General government Consumption 18.3 8.8 18.1 8.0 Imports of goods and services 33.7 318 36.1 35.9

1982-92 1992-02 2001 2002 1 Growth of exports and imports (Oh) (average annualgrowih) Agriculture 5.3 17 23.0 7.0 /boT Industry 3.2 3.5 3.0 3.5 Manufacturing 4.2 3.0 4.0 4.5 Services 4.3 3.2 5.1 4.5 Private consumption 4.3 34 3.9 D.O General government consumption 3.8 3.9 14.5 -6.0 Gross domestic investment 2.9 5.1 8.1 5.6 imports of goods and Services 5.9 6.5 2.3 6.7

130 Technial notes

Morocco at a glance 8120103

M. East Lower- POVERTY and SOCIAL & North middle- Morocco Africa income )evelopment diamond* 2002 Population, mid-year (millions) 29.6 306 2,411 Life expectancy GNI per capita (Atlas method, US$) 1,190 2,070 1,390 GNI (Atlas method, US$ billions) 35.3 670 3,352 - Average annual growth, 1996.02 Population (%I 1.6 1.9 1.o ;NI ..tap,, Gross Labor force (%) 2.5 2.9 1.2 Er I' f--l pnmary Most recent estimate (latest year available, 199642) apita .* I #" enrollment 'I &" Poverty (% of population below national poverty line) 19 Urban population (% of total population) 57 58 49 Life expectancy at birth (years) 68 69 69 I Infant mortality (per 1,000 live births) 39 37 30 Child malnutrition (% of children under 5) 11 Access to imDroved water source Access to an improved water source I% ofpopulation) 80 88 81 Illiteracy (% ofpopulation age 15+) 49 35 13 Morocco Gross primary enrollment (% of school-age population) 94 95 111 Male 101 98 111 - Lower-middle-incomegroup Female 88 90 110

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 2002 Economic ratios* GDP (US$ biilions) 15.4 28.5 33.9 37.3 Gross domestic investmenffGDP 28.2 23.2 24.8 25.2 Trade Exports of goods and sewices/GDP 19.2 25.1 30.7 29.9 i I Gross domestic savingsiGDP 13.8 16.5 19.5 19.3 I Gross national savingdGDP 18.2 21.7 25.0 24.0 Current account balance/GDP -12.1 -1.5 4.8 Interest payments/GDP 4.3 8.1 2.7 2.9 Total debtiGDP 80.4 79.7 58.9 49.9 Total debt sewice/exportS 44.8 40.6 18.2 32.9 Present value of debffGDP 43.4 Present value of debffexports 104.6 Indebtedness

1982-92 1992-02 2001 2002 200296 I I (average annual growth) - Morocco GDP 4.2 3.0 6.5 4.5 3.4 Lower-middle-income orow GDP Der caDita 2.0 1.3 4.8 2.9 1.7 I I

STRUCTURE of the ECONOMY 1982 1992 2001 2002 Growth of investment and GDP (%) (% of GDP) Agriculture 15.3 15.4 15.8 16.1 40 T I Industry 31.9 32.3 31.4 31.1 Manufacturing 17.3 18.1 17.3 17.3 Services 52.8 52.3 52.8 52.8 Private consumption 67.9 66.7 62.4 64.8 General government consumption 18.3 16.8 18.1 16.0 Imports of goods and services 33.7 31.8 36.1 35.9

1982-92 1992-02 2001 (average annual growth) Agnculture 53 17 230 Industry 32 35 Manufacturing 42 30 Sewices 43 32 Pnvate consumption 43 34 General government conSUmPtlOn 38 39 Gross domestic investment 29 51 Imports of goods and services 59 65

131 Annex 15: Strategic directions, framework and implementation arrangements of the Second National Program of Rural Roads

MOROCCO - SECOND RURAL ROADS PROJECT

Annex 15.A: Letter of strategic directions, framework and implementation arrangements of the Second National Program of Rural Roads (in French)

Objet : Financement du second pm.]et de mutes rutales P.3 : 1

Monsieur, Ce ddvelappcrnent rural figure panni 1es priorice5s de la politique de proXimitcS pourmivie par It gouvcmcment marocain. L’aclikvcrnent du premier programme nRtional des routes mrales et la rcl-alisation du secor~dprogramme permettront d‘aupenta le niveau d’acc& des populations mlasilu mutts M porter ICtaux d’acccssibiliti & 80% a i’horkon 2015, favorisant ainsi I”acc6s aux services sociaux des populations mt@set la ahtion d’vppom;mit& de d&eIoppment Qoonoinigue local. La creation d’uxie Caissc pour le FStancemcnf Routier m 2004 doir pernettre au gouvemernent de mobiliser les ressourcw financitrrs additiomeIles nicessaires pour accUCrer la r6alIsatioa dudit programme et garantir t’meintc des objectifs d’accesuibilitb a I’horizon retenu. Dam cetee perspective, ’le AlliOistRre de I’Equlpemant et du Transport a &labor6 unc lettre de choix sWat&ques, cadrage at moddltbs d’exikution dit second prograarne oarional de routes males visptnt assurer une amClioration tr& impartanto en mati& dc quafite dc rhlisation dts mutes mrzlles. far Ea prksenta, je vom confirme ces choix strat&giquccs, les principaux dltSrncnts de cadrage et les modditts d’exkution du pagrammet, pr&is& dms Je document ci-joint, ayant servi de base: B I”&vabtion et aux n6gociations du second projet de routes rrmra1.e~que la Banquc appuie favoratdement Par aillews, eomme vous Ic sava, menouvclle rnfthodologie a && d&veIo@e pour I’identificdon des #p&atims dc routes rwalcs rt 1e suivi de la pcrhance de ce rhseau, bask sur un indicatew d’awssibilit& et we appr~cheparticipatiw irepiiqugnt ICSautrcs partemires du d;irveiopprment nual.

132 133 CHOIX STRATEGIQUES, CADRAGE ET MODALITES D’EXECUTION DU DEUXIEMEPROGRAMME NATIONALDE ROUTESRURALES

A :CHOIX STRATEGIQUES ET CADRAGE DU DEUXIEMEPROGFL4MME NATIOXAL DE ROUTESRURALES

1. Le developpement rural figure parmi les objectifs prioritaires de la politique de proximite preconisee par le Gouvernement. La realisation des programmes de developpement rural, en particulier ceux qui facilitent l’acces aux infrastructures de base et aux services essentiels, doit permettre d’atteindre ces objectifs. La population rurale souffre depuis longtemps au Maroc d’un deficit significatif d’infrastructures. Le manque de routes praticables par tout temps continue d’&tre une preoccupation nationale importante. Le Ministere de 1’Equipement et du Transport (MET), au vu des resultats notables et des impacts socio-economiques tangibles du premier Programme National de Routes Rurales (PNRR- 1) - qui avait etk lance en 1995 et qui est maintenant en voie d’achevement - a elabork un nouveau programme, le deuxieme Programme National de Routes Rurales (PNRR-2), avec pour objectif de donner un acces aux routes A la majorit6 de la population rurale a l’horizon 2015.

2. Le PNRR-2, tout en poursuivant le developpement du reseau de routes rurales engage au titre du PNRR-1, se distingue par plusieurs ameliorations fondees sur les enseignements tires de la mise en ceuvre du premier programme. Les principales caractkristiques du PNRR-2 sont ainsi : (a) un accent mis sur l’accessibilite ; (b) une planification s’appuyant sur une demarche participative dans laquelle les collectivites locales (regions, provinces et communes) ont pris entierement part a la selection des projets de routes rurales ; (c) l’adoption de standards techniques, economiques, sociaux et environnementaux pertinents et adaptes au contexte de routes rurales a faible trafic ; (d) des financements diversifies, comprenant notamment les contributions des collectivites locales et les emprunts contractks par la Caisse pour le Financement Routier (CFR), etablissement public rkcemment cr& pour mobiliser les ressources additionnelles necessaires a l’accelhation de la realisation du programme ; (e) une attention particuliere accordee a la preservation et a l’entretien du patrimoine de routes rurales et plus specialement a celui des routes rurales locales par les communes et les provinces ; (0 la promotion d’opportunites de developpement Cconomique local pour renforcer les benefices apportts par la route ; et (g) des modalites de suivi et d’evaluation approprikes, accompagnkes d’une diffusion large des progres de la realisation et des resultats du programme.

L’accessibilitC : objectif principal du PNRR-2

3. Les routes rurales jouent un r81e essentiel dans la reduction de l’isolement et de la pauvretk des populations rurales. L’acces par tout temps des populations aux services sociaux et administratifs essentiels (ecoles, centres de sante ...) ainsi qu’aux marches se traduit en effet par de meilleures conditions de vie, notamment pour les femmes, et par la renovation et le dkveloppement du tissu economique et social local. Les phknomenes d’exode rural, favorises par l’aggravation de la pauvrete en milieu rural, devraient ainsi &tre contenus dans le temps. A l’achevement du PNRR-1, debut 2006, environ 54 % de la population rurale a acces A une route praticable par tout temps. L’objectif du PNRR-2, qui comprend 15.560 km de routes rurales A amknager ou a construire, est de porter ce taux d’accessibilite 21 80 % Q l’horizon 2015, ce qui correspond a environ 3 millions de personnes supplementaires desservies en milieu rural. En plus de l’accroissement du taux national d’accessibilitk rurale, le PNRR-2 aura Cgalement pour objectif la reduction des kcarts d’accessibilitk qui existent aujourd’hui entre les provinces, et ce afin d’assurer un dhveloppement hannonieux et tquilibrk du pays.

134 Une planification participative

4. Les investissements routiers retenus dans le cadre du PNRR-2 l’ont &e en suivant un processus participatif inedit au Maroc, tant par son ampleur que par la qualit6 de sa mise en ceuvre. Dans la phase de preparation du Programme, une concertation elargie et approfondie a ete menCe avec les Collectivitks Locales afin de definir les projets de routes a inscnre dans les Programmes Provinciaux de Routes Rurales (PPRR) qui, reunis, constituent le PNRR-2.

5. Des inventaires et programmes prk-identifies ont ttt, dans un premier temps, prepares par la Direction des Routes et de la Circulation Routiere (DRCR), en Ctroite coordination avec ses services deconcentres. Les Programmes Provinciaux de Routes Rurales preliminaires ainsi identifies reposaient sur deux analyses distinctes: (a) la premihe, aux niveaux national et I provincial, fondee essentiellement sur des criteres de contribution a l’amelioration de l’accessibilitk, avec priorit6 accordee aux routes qui desservent le plus grand nombre de personnes, ainsi qu’a celles qui reduisent 1’Ccart entre les provinces ayant les taux d’accessibilite les plus bas et celles oh ces taux sont les plus ClevCs; et (b) la deuxieme, prenant en compte des criteres de connectivitk des reseaux routiers classees.

6. Les inventaires et programmes preliminaires provinciaux accompagnks des criteres de selection etablis pour toutes les provinces ont Cte presentes, lors de conseils regionaux et provinciaux, aux autorites locales et elus pour leur permettre de participer pleinement au processus de planification, de confirmer leurs priorites en matiere d’amknagement local, et d’arreter la liste des routes a inscrire aux programmes provinciaux de routes rurales definitifs. La consolidation des programmes provinciaux a 1’Cchelle nationale a permis de constituer le deuxieme Programme National des Routes Rurales (PNRR-2). Les conseils (regionaux et provinciaux) ont egalement permis de valider les dispositions d’execution du PNRR-2, les conditions de participation au financement et l’engagement de prise en charge de l’entretien des routes locales par les collectivites concernees. Le processus de consultation aujourd’hui acheve peut etre consider6 comme une reussite, tant en terme d’organisation que de resultats.

7. L’aboutissement de ce processus a tte la signature de conventions cadres et specifiques avec les Collectivites Locales. L’ensemble des conventions cadres (16 au total) et des conventions specifiques (59 au total) ont ainsi Cte signees respectivement au niveau regional et au niveau provincial.

Financement et mise en oeuvre du Programme

8. Dans le cadre du PNRR-2, le rythme annuel de rehabilitation et de construction de routes rurales sera porte a 1SO0 km, contre 1.OOO km sous le PNRR-1. La crkation de la Caisse pour le Financement Routier en 2004 (Loi no 57-03) doit permettre au Gouvernement de mobiliser les ressources financihes additionnelles (A celles du FSR et du budget general) nkcessaires pour accelerer la realisation du Programme et garantir l’achevement des objectifs d’accessibilite a l’horizon retenu (2015). Le plan de financement du PNRR-2 sera complete par les contributions des collectivites locales (regions, provinces et communes) qui s’eleveront A 15% du montant total du PNRR-2. Ces contributions ainsi que d’autres dispositions relatives a l’entretien des routes rurales locales du PNRR-2 sont entkrinees dans les conventions cadres et specifiques passkes entre les services territoriaux du MET (Directions Regionales et Provinciales de 1’Equipement) et les collectivites locales.

9. La mise en place de la CFR doit Cgalement faciliter la mise en ceuvre d’une veritable approche- programme pour le PNRR-2, en mutualisant l’ensemble des ressources financihes alloukes par les bailleurs de fonds et les collectivites locales au Programme au sein d’une meme entite. Cette approche se traduit notamment (i)par une globalisation des ressources a l’avantage de toutes les operations du programme, et (ii)par un mecanisme de decaissement base sur des versements des fonds des bailleurs par tranches (determinkes en fonction de l’execution du PNRR-2).

135 10. La mise en place effective de l’approche programme sera possible grke a l’adoption d’un Plan d’Execution du Programme (PEP). Ce Plan integrera notamment le manuel de prockdures et d’outils actuellement en cours de realisation pour faciliter et uniformiser la gestion administrative et financiere du Programme. La crkation rCcente de 1’UnitC de Gestion de Projet (UGP) au sein de la DRCR devrait egalement faciliter cette approche en permettant un suivi et une coordination globale de la mise en Ceuvre du PNRR-2.

11. Le deuxikme Programme National de Routes Rurales (PNRR-2) sera mis en Ceuvre par deux entitks d’exhtion, la DRCR et la CFR. En vertu d’une convention passee avec 1’Etat (represent6 par le Ministere de 1’Equipement et du Transport et par le Ministere des Finances et de la Privatisation), la CFR a dClCgue a la DRCR (et a ses services deconcentrks) la maitrise d’ouvrage et la maitrise d’ceuvre des projets de routes rurales. La CFR pourra ainsi se consacrer a sa tache premiere, qui est de rechercher, mobiliser et gerer les diffkrentes ressources nkcessaires au financement desdits projets. De son c8tt la DRCR coordonnera et assurera le suivi de l’exkcution des projets de routes rurales. Les programmes pluriannuels d’intervention de la CFR, ainsi que ses plans d’actions, d’investissement et de financement, seront developpes conjointement avec la DRCR, afin d’assurer une repartition equilibree de la charge de travail des DREiDPE tout au long du PNRR-2.

Des standards techniques, kconomiques, sociaux et environnementaux pertinents

12. Sur la base des enseignements tires du premier Programme National de Routes Rurales (PNRR- l),les specifications techniques pour la conception des routes rurales seront affinees pour mieux prendre en compte : (a) dans le cas des construction de routes revetues, les volumes, et plus particulikrement les types de trafics qu’elles seront amendes a supporter afin d’adopter des structures de chaussees optimales ; et (b) l’objectif de praticabilite effective par tout temps pour les amknagements de routes non revetues.

13. Guide de conception des routes rurales. La realisation imminente d’un guide complet d’evaluation et de conception des routes rurales devrait permettre la mise au point de standards techniques et de mkthodes de construction spkcifiquement adapt& au contexte du PNRR-2. Ce guide encouragera notamment la mise en euvre de techniques a forte intensitt de main d’ceuvre, ainsi que le recours a des materiaux locaux ou inertes valorises. Les economies substantielles ainsi obtenues dans la realisation des projets devraient se traduire non seulement par une rentabilitt Cconomique plus ClevCe du Programme, mais aussi par une meilleure tenue des routes dans le temps.

14. Solutions intermkdiaires de construction. Panni le large eventail de solutions techniques qui seront proposees par le Guide, les solutions intermediaires de construction occuperont une place privilkgiee. Elles offriront en effet la pkrennite attendue propre aux travaux de construction, tout en rCduisant sensiblement les coGts d’investissement. Ces solutions seront ainsi parfaitement adapttes a certaines routes peu fkequentees du PNRR-2 qui, de par leur localisation (en region montagneuse) ou les conditions locales rencontrkes (climat), nkcessitent des travaux plus importants que de simples amknagements.

15. Dkveloppement des capacites techniques. La realisation du Guide de conception des routes rurales aura Cgalement un effet positif sur les bureaux d’etudes routiers marocains, en leur offrant les moyens et outils pour se developper et renforcer leur expertise dans le secteur. Ce Guide devrait aussi favoriser, au niveau provincial et local, l’emergence de nouveaux bureaux d’ etudes techniques et ainsi permettre aux CollectivitCs Locales de disposer a terme d’une expertise de proximite pour developper leurs programmes communaux.

16. Faisabilite economique du PNRR-2. Toutes les routes du PNRR-2 devront rkpondre a des crithes precis de rentabilite economique. Ces routes devront soit presenter un taux de rentabilite Cconomique satisfaisant (dans le cas des routes rurales a faible trafic) soit avoir un rapport coQtlefficacitC

136 acceptable (pour les routes rurales a tres faible trafic). Dans les cas exceptionnels oh ces crithes ne seraient pas remplis, un travail approfondi d’optimisation de la conception de ces projets serait alors entrepris par la DRCR afin d’en rCduire les coiits de construction.

17. Intkgration des aspects sociaux et environnementaux. Les questions sociales et environnementales seront systkmatiquement examinees et intCgrCes dans les etudes, la realisation et l’entretien des routes. La DRCR a prepare, dans ce contexte, un manuel opkrationnel decrivant les procedures permettant de guider la gestion environnementale et sociale du Programme, y compris un cadre d’acquisition de terrains et de reinstallation pour les liberations d’emprises qui s’avereraient necessaires. La DRCR renforcera sa capacitk dans les domaines sociaux et environnementaux tant au niveau central que territorial, en nommant un specialiste (( Environnement et Social )) au sein de la Division Etudes et Travaux Neufs (DETN) de la DRCR et des correspondants ((Environnement et Social )) dans chacune des DRE et DPE. Des formations et ateliers cibles dans le domaine environnemental et social seront regulierement mis en place tout au long du PNRR-2.

Gestion du Programme

18. La gestion du PNNR-2 est confiCe 21 la Direction des Routes et de la Circulation Routiere (DRCR). Le suivi et la coordination globale de la mise en oeuvre du PNRR-2 se feront au travers de 1’Unitt de Gestion de Project (UGP) crCee au sein de la DRCR. Cette Unit6 centralisera toutes les donnkes techniques et financieres concernant le Programme et Ctablira des rapports consolides a destination des bailleurs de fonds et autres partenaires du PNRR-2. Elle sera dotee des ressources humaines necessaires pour mener bien sa mission tout au long de 1’exCcution du PNRR-2. En raison des enjeux socio-Cconomiques lies au Programme, cette UGP, promue au rang de Division, disposera notamment d’un Chef d’Unite et d’experts techniques disposant des compktences requises en matihe de gestion et de dkveloppement de projets.

Suivi, evaluation et disskmination de l’information

19. Le systeme de Suivi et Evaluation (S&E) est l’un des ClCments clCs du PNRR-2. Developpe et gerC par le Centre National d’Etudes et de Recherches routieres (CNER), ce systeme doit permettre d’assurer un suivi rigoureux, permanent et rkgulier des progres du PNRR-2, en general mais aussi au niveau des provinces, tant en matikre de rtalisations physiques que d’impact sur 1’accessibilitC des population rurales. Les informations relatives a l’avancement et a l’impact du PNRR-2 seront largement diffuskes aupres des partenaires concernCs, et plus particulierement aupres des collectivitks locales impliqukes financierement dans le Programme.

20. Ces informations seront Cgalement rkgulierement communiqukes aux responsables provinciaux et centraux des diffkrents secteurs pouvant bheficier directement ou indirectement des projets de routes rurales. Ceci concerne notamment, aux echelons nationaux et provinciaux, les services de sante et d’education, et les administrations et concessionnaires en charge d’autres infrastructures (eau, electricite rurale). Cette dissemination permettra a ces diffkrents acteurs de dCfinir ou de modifier leurs propres programmes ruraux d’actions en fonction des projets inscrits au PNRR-2 (et de leur CchCancier de realisation), et facilitera ainsi les synergies entre les diffkrents programmes et les economies d’echelle.

Preservation du patrimoine routier

2 1. L’effort particulier que nkcessitera l’execution du PNRR-2 au cours des prochaines annCes ne sera pas fait au detriment de l’entretien et de la prkservation de l’ensemble du reseau routier. Le MET accorde une priontk particulikre a la preservation du reseau des routes classtes, dont la condition devra continuer A s’amkliorer grke a l’accroissement rCgulier des ressources alloukes a l’entretien routier au travers du Fonds Special Routier (FSR).

137 22. Le MET est Cgalement soucieux &assurer la perennite des investissements du PNRR-2 et des bdnkfices qui en decouleront, en veillant en particulier a ce que les routes rurales locales (communales et non-classees) qui auront et6 amenagees ou construites au titre du programme soient convenablement gkrtes et entretenues. C’est dans cette perspective que le MET : (a) sensibilisera les collectivitks locales (rkgions, provinces et communes) pour qu’elles prennent les dispositions necessaires pour contribuer au financement des routes rurales locales du programme et a la prise en charge de leur entretien; et (b) veillera au respect par les collectivitks locales des engagements qu’elles ont pris en signant les conventions cadres et spkcifiques. Ces engagements portent principalement sur la contribution des collectivitks locales au financement du Programme, sur la liberation et la regularisation des emprises des routes (le cas kcheant), et sur l’entretien futur des routes locales. Les travaux des projets de routes rurales locales inscrits au PNRR-2 ne seront dCmarrCs qu’une fois les conditions stipulkes dans les conventions cadres et specifiques concernkes respectees.

23. Ces dispositions seront complCtCes par le lancement prochain d’une etude sur la gestion des routes locales. Cette etude a pour objectif de definir les modalites pratiques et reglementaires a mettre en oeuvre, ainsi que les credits a mobiliser pour assurer une gestion et un entretien futurs adequats des routes locales du PNRR-2. Cette etude fournira aux collectivitts locales les outils pratiques necessaires pour (i) &valuer les besoins fbturs et options de financement des routes ; (ii)organiser la gestion de l’entretien et developper des partenariats dans ce sens avec les services dkconcentres de 1’Etat (principalement les DPE) ; et (iii)contractualiser l’entretien au secteur privk en fonction de la fonnule la mieux adaptke au contexte local (marches pluriannuels d’entretien, marches de rkhabilitation et d’entretien). Ces outils institutionnels, organisationnels, financiers et techniques devraient ainsi offiir aux collectivitks locales les bases necessaires pour assurer l’entretien des routes locales du PNRR-2 et ainsi pkrenniser les investissements auxquels elles auront en partie participks.

OpportunitCs Cconomiques locales

24. L’amelioration de l’accessibilitk aux routes rurales qui resultera des travaux de rehabilitation et de construction engages par le PNRR-2 devrait favoriser le dkveloppement economique local. Pour faciliter et accompagner ce developpement, quelques activitks pourraient &tre soutenues dks le lancement des projets. Dans ce contexte, les DREIDPE, lors de la prtparation des projets, contribueront a l’identification en collaboration avec les collectivites locales impliqukes l’ensemble des opportunitks de developpement Cconomique local pouvant rCsulter de l’amelioration des routes et des meilleures conditions de circulation. Ces opportunites pourront ensuite &tre presentees aux agences specialisees dans le dkveloppement local afin de beneficier de leur soutien.

138 B : MODALITESD’EXECUTIOS DU DEUXIEME PROGRAMME NATIOKALDE ROUTES RCRALES

Plan d’ExCcution du Programme

1. Afin d’assurer une mise en ceuvre effective de l’approche-programme retenue pour la realisation du PNRR-2, un Plan d’Execution du Programme (PEP) a kt6 dkveloppe par la Direction des Routes et la Circulation Routiere. Ce Plan, qui dkfinit de maniere precise les procedures de preparation, d’evaluation, d’execution et de suivi, s’appliquera a la totalit6 des operations du PNRR-2, quelle que soit leur ma7trise d’ ouvrage.

2. Le PEP etablit, entre autres : (i)les r6les et responsabilitts de chacun des partenaires du Programme (notamment la DRCR, les DRE/DPE et la CFR) pour la mise en Ceuvre du Programme ; (ii) les modalites de comptabilite, de rapports financiers et d’audit ; (iii)le Plan de passation de marches de l’ensemble du Programme ; (iv) les procedures de suivi et d’evaluation du PNRR-2 ; (v) les procedures d’kvaluation et de gestion environnementale ; (vi) le cadre de politique d’acquisition de terrains et de reinstallation ; et (vii) le manuel de procedures et outils relatifs a la gestion administrative et financiere du Programme.

Unit6 de Gestion de PNRR-2

3. Pour renforcer et maintenir l’integritk du PNRR-2, et en accord avec l’appproche-programme adoptee, la DRCR a Cree une Unite de Gestion (UGP) dont la mission est d’assurer le suivi et la coordination globale de mise en ceuvre du Programme. Cette UGP, composee d’un chef d’UnitC, d’un responsable des marches et d’un responsable du suivi et de l’evaluation, sera dotee, tout au long de la periode d’execution du PNRR-2, d’un personnel qualifie et en nombre suffisant pour remplir de maniere satisfaisante sa mission.

4. Les activitks principales qui seront menees par 1’UGP incluent : (i)le contr6le de la conformite et de la qualit6 des documents produits par les differents partenaires du Programme pour son execution ; (ii) le respect des delais de preparation, de soumission ou de traitement des documents dans un souci d’efficacitk ; et (iii)la production de rapports consolidks d’avancement du Programme qui seront transmis a l’ensemble des partenaires et bailleurs de fonds impliquks dans le PNRR-2. Ces rapports seront prepares sur la base des informations transmises par les deux makes d’ouvrage du Programme (DRCR et CFR).

Guide de conception des routes rurales

5. La DRCR a pris aujourd’hui l’ensemble des dispositions nkcessaires pour la preparation effective du guide de conception des routes rurales. Ce guide qui couvrira les modalites et la consistance de la preparation et de l’evaluation des operations de routes rurales, permettra entre autres l’optimisation des standards routiers et techniques pour les routes du PNRR-2 ; il sera acheve au 30 juin 2007.

IntCgration des aspects environnementaux et sociaux

6. Les aspects environnementaux et sociaux font partie intkgrante des projets de routes rurales. A cet effet, la DRCR assignera du personnel en nombre suffisant et qualification requise a ses structures responsables des etudes pour s’assurer de la mise en ceuvre de Plan de Gestion Environnementale (PGE) et du Cadre d’Acquisition de Terrains et de Reinstallation (CATR) qu’elle a prepare pour le PNRR-2.

139 StratCgie d’entretien routier

7. La DRCR completera une Ctude de strategies d’entretien et de maintenance du reseau des routes classees au 3 1 dkcembre 2006. Les budgets optimaux permettant de garantir une maintenance appropriee du reseau des routes classkes pour la periode 2006-20 15 seront determines par cette Ctude.

Convention Etat/CFR

8. Sur la base de la convention passee entre 1’Etat (represent6 par le Ministere de 1’Equipement et du Transport et par le Ministhe des Finances et de la Privatisation) et la CFR, les r6les et responsabilitks de chacun des partenaires du deuxieme Programme National de Routes Rurales (PNRR-2) ont pu &tre arrgtes.

9. La CFR delegue a la DRCR la maitrise d’ouvrage des projets qu’elle finance. La CFR pourra ainsi se consacrer pleinement a sa mission principale qui est de rechercher, de mobiliser et de gCrer les diffkrentes ressources (pr&tsdes bailleurs de fonds et contributions des collectivitts locales) nkcessaires au financement de ses operations.

10. La CFR dkfinira, conjointement avec la DRCR, la stratkgie pluriannuelle ainsi que les plans d’extcution, d’investissement et de financement pour toutes les activitts de routes rurales proposCes a son financement, en tenant compte des progres globaux du Programme et de son impact sur l’indice national d’accessibilite routiere.

11. Aux niveaux regional et provincial, les DRE et DPE seront responsables de l’exkcution, de la coordination et du suivi des projets de routes rurales conformement aux processus et prockdures contenus dans le Plan d’ExCcution du Projet, et seront en liaison avec les autorites locales beneficiant du Programme, conformement aux conventions cadres et spkcifiques conclues avec lesdites autoritks.

Passation des MarchCs

12. Pour une mise en ceuvre effective de l’approche-programme retenue pour l’exkcution du PNRR- 2, les procedures de passation de marches ont Cte uniformiskes, dans le respect des textes rkglementaires nationaux. C’est ainsi que des Dossiers d’ Appels d’Offres (DAO) particuliers, y compris les reglements des consultations, ont ete prepares et seront utilists pour tous les marches de travaux et services de contr6le des operations du PNRR-2. Ces dossiers d’appel d’offres respectent les regles suivantes :

le dossier d’appel d’offres explique clairement le processus d’evaluation de l’offre, les criteres d’octroi du march6 et les qualifications du soumissionnaire ; les offres sont evaluies sur la base du prix et de tout autre critkre stipule dans les dossiers d’appels d’offre et quantifii en termes monktaires ; Les marches sont octroyes au soumissionnaire qualifik au regard des crithes mentionnks au point (i)ci-dessus et ayant soumis l’offre CvaluCe la moins-disante ; la condition pour le soumissionnaire d’avoir un representant local, Ctabli sur le territoire du Garant, ne sera pas appliquke ; La mCthode d’evaluation pour la passation des marches de biens se fera par lot et non par article ; et les soumissionnaires auront un minimum de trente (30) jours calendaires a compter de la date de l’appel d’offres pour soumettre leur offre et le document d’appel d’offres le precisera.

140 Annex 15.B: Letter of strategic directions, framework and implementation arrangements of the Second National Program of Rural Roads (in English)

A: STRATEGIC DIRECTIONS AXD FRAMEWORKOF THE SECOND NATIONALPROGFUM OF RURAL ROADS

1. Rural development is one of the key objectives of the geographic-proximity policy advocated by the Government. Rural Development Programs, notably those aimed at facilitating access to rural infrastructure and services, help meet those objectives. Rural population has suffered, for many years, fiom deficient infrastructure. Lack of roads providing all-weather accessibility remains a major national concern. The Ministry of Public Works and Transport (MPWT), considering the important results and socioeconomic impact of the First National Program of Rural Roads that was launched in 1995 (currently being completed), has prepared a follow-up program. This is the Second National Program of Rural Roads (NPRR-2), that aims at providing road access to most ofthe rural population by 20 15.

2. The NPRR-2, while continuing the development of the rural road network initiated under the NPRR-1, will introduce a number of improvements based on the lessons learned from the first program. The main features of the Second Program are: (a) a focus on accessibility; (b) strong participatory planning under which local authorities (regions, provinces, and communes) have been involved in the selection and funding of rural roads; (c) setting-up of sound technical, economic, social and environmental standards that are specific to rural roads; (d) diversified financing, including contributions from local authorities and borrowing contracted by the Caisse pour le Financement Routier (CFR), a newly-established public entity whose purpose is to mobilize resources to accelerate the program implementation; (e) attention to the preservation ofrural road assets, especially of local rural roads by the communes and provinces; (0 promotion of local economic development opportunities to enhance the roads’ benefits; and (8) appropriate monitoring and evaluation arrangements including a broad dissemination ofthe program’s implementation status and results.

Accessibility as the Program Objective.

3. Rural roads are key to reducing the isolation and poverty ofrural population. All-weather access to social and administrative centers, as well as markets, can indeed result in better living conditions, especially for women, and in a renewal and development of the socio-economic environment. Rural- urban migrations, which are bolstered by an increase in rural poverty, should be tempered overtime. When the NPRR-1 is completed early 2006, about 54 percent of the rural population will have access to an all-weather road. The 15,560 kilometers of roads planned to be improved under the NPRR-2 are expected to bring the accessibility level to 80 percent by 2015, which means that about 2.8 million people in rural areas will be given access. The NPRR-2, in addition to raising overall rural road accessibility, will also reduce the differentials existing today between the more accessible provinces and the less accessible ones, which will ensure a balanced and fair development ofthe country.

Participatory Planning

4. Road investments to be financed under the NPRR-2 were selected through a bottom-up, participatory planning process. This process was rather innovative in Morocco, both in terms of coverage and quality. During the Program’s preparatory phase, a broad and thorough consultation was organized with local authorities to identify those road projects to be included in the Provincial Rural Roads Programs (PRRPs). The consolidation of all PRRPs constituted the Second National Program of Rural Roads (NPRR-2).

5. The inventory and pre-identification of roads were prepared by the Directorate of Roads and Road Traffic (DRCR) in close coordination with its deconcentrated offices. The roads pre-identified in

141 the provincial programs were selected based on two analyses: (a) the first, at the national and provincial level, focused on the contribution to increasing accessibility, with priority given to the roads serving the largest amount of people and to those contributing to reduce the differential in accessibility between the provinces less accessible and those most accessible, (b) the second took into account the contribution to connectivity with the classified road network.

6. The inventory together with the pre-identified provincial programs, and the selection criteria that were used, were presented, during regional and provincial councils, to elected officials and local authorities. This allowed them to fully participate in the planning process, to confirm their priorities regarding local development, and to make a final selection of those roads to be included in the Provincial Rural Roads Programs (PRRF’s). The regional and provincial councils also enabled to validate the Program’s implementation arrangements, the terms of financial participation, and local authorities’ commitment to maintenance. The participatory planning process, which has now been achieved, can be considered as a success, both in terms ofplanning and outcome.

7, The outcome of this process was the signing of framework and specific agreements with the concerned local authorities. To date, all sixteen framework agreements and fifty-nine specific agreements have been signed respectively at the regional and provincial levels.

Program Financing and ImplementationArrangements

8. Under the NPRR-2, the pace of road upgradinghehabilitation will be scaled up to 1,500 km per year, compared to 1,000 under the first Program. The establishment of the Caisse pour le Financement Routier (Law No 57-03) should enable the Government to mobilize the additional funding (alongside the General Budget and resources from the Road Fund) needed to expedite implementation of the Program, and guarantee achievement of accessibility objectives by 2015. The NPRR-2’s financing plan will be complemented by contributions from local authorities (regions, provinces and communes) which will amount to 15% ofthe Program’s total investment cost. These contributions, as well as other arrangements related to maintenance of the Program’s local roads, are formalized in the framework and specific agreements signed between MPWT’s deconcentrated offices (DREDPE) and concerned local authorities.

9. The setting-up of the CFR will also facilitate application of a true Sector Wide Approach (SWAP) for the NPRR-2, by pooling all funds provided by donors and local authorities in a single entity. This approach involves in particular: (i)the pooling ofresources to the benefit of all the Program’s road subprojects; and (ii)a disbursement mechanism based on the release of donor funds in tranches, as a function ofoverall execution ofthe NPRR-2.

10. Implementation of the SWAP approach will be made possible with the adoption of a Program Implementation Plan (PIP). This Plan will notably include the manual of procedures and tools that is currently being developed to facilitate and harmonize the administrative and financial management ofthe NPRR-2 Program. The recent setting-up of a Rural Roads Program Division (RRPD) within the DRCR will also support the SWAP approach by allowing for a global monitoring and coordination of the Program.

11. The Second National Program of Rural Roads (NPRR-2) will be implemented by two agencies, the Caissepour le Financement Routier (CFR) and the Directorate of Roads and Road Traffic (DRCR). Under an agreement signed with the Government of Morocco (represented by the Ministry of Public Works and Transport and the Ministry of Finance), the CFR has however designated the DRCR (and its deconcentrated offices) as the oversight entity and construction manager for its rural road projects. The CFR will consequently be able to focus on its primary mission, which is to seek, secure, and manage the funds needed to finance those projects. On its side, the DRCR will coordinate and monitor the execution of all rural road projects. CFR’s multi-year programming strategy as well as its action, investment, and

142 financing plans will be developed in conjunction with the DRCR, in order to ensure a balanced workload for the DREiDPE throughout Program implementation.

Sound Technical, Economic, Social, and Environmental Standards

12. Based on the lessons of the First National Program of Rural Roads (NPRR-l), design criteria have been improved to better take into account: (a) in the case ofpaved roads, the level and composition of the traffic to ensure that optimal pavement structures are adopted, and (b) in the case ofunpaved roads, the objective to allow their operation year round.

13. Manual for rural road design and appraisal. The impending preparation of a Manual for rural roads design and appraisal should help develop appropriate technical standard and construction methods perfectly suited to the context of the NPRR-2 Program. This Manual will more specifically promote labor-intensive techniques, as well as the use of local materials and/or inert reprocessed materials. The important savings realized on the investment costs of rural roads should lead not only to a significantly improvement in the economic rate ofreturn ofthe NPRR-2, but also to better road preservation overtime.

14. Intermediate technical solutions. Among the wide range of technical solutions proposed in the Manual, intermediate technical solutions will be highlighted. These solutions will indeed offer the expected sustainability requirements, while at the same time significantly construction costs. They will be perfectly suited to those PNRR-2 roads with very low volume which, due to their location or local conditions (e.g., climate), require more extensive works than a mere rehabilitation.

15. Local capacity Development. The preparation of the Manual for rural roads design and appraisal will also have a positive impact on Morocco’s consulting firms, by providing them with all the means and tools required to develop and strengthen their expertise. This Manual should also promote the development ofnew consultancies at the provincial and local levels, and thus enable, in the long run, local authorities to contract with local consultancies for the preparation of their own community-driven programs.

16. NPRR-2 economic feasibility. All NPRR-2 roads will have to comply with well defined economic criteria. These roads will either have satisfactory economic rates ofreturn (in the case of low- volume roads) or be cost-effective (in the case of very low-volume roads). In the event where those criteria would not be met, the DRCR would systematically try to optimize the detailed design with a view to reducing construction costs.

17. Social and environmental safeguards. Environmental and social considerations will systematically be included in the design, implementation, and maintenance of roads. In that respect, the DRCR has developed an operational manual describing all procedures to be followed for the Program’s environmental and social management, including a land acquisition and resettlement policy framework in the case rights of way would need to be acquired. The DRCR will strengthen its capacity in environmental and social matters, both at the central and local levels, by appointing an (( Environmental and Social H specialist within DRCR’s Division of Studies and New Construction, as well as (( Environmental and Social N liaison officers in each DRE/DPE. Targeted training activities and workshops in the environmental and social fields will also be organized on a regular basis throughout the Program.

NPRR-2 Program management

18. The Directorate of Roads and Road Traffic (DRCR) is responsible for managing the NPRR-2. Overall monitoring and coordination of the Program will be camed out by the Rural Roads Program Division (WD) created within the DRCR. This division will collect all technical and financial data

143 related to the NPRR-2, and will prepare consolidated reports for donors and other stakeholders involved in the Program. It will be provided with the human resources needed to handle its mission throughout the NPRR-2. Owing to the social and economic issues related to the Program, the RRPD, which was given the status of a division, will in particular have a head of division and technical experts with adequate qualifications in project management and development.

Monitoring, evaluation and information dissemination

19. The Monitoring and Evaluation (M&E) system is a key feature of the NPRR-2. This system, which was developed and is currently being managed by the National Center for Road Study and Research (CNER), will ensure close, ongoing, and regular monitoring of the Program in general, and of Provincial Rural Roads Programs in particular, both in terms of physical works and accessibility outcomes. Information on the progress and impact of the NPRR-2 will be widely disseminated to all concerned partners, and more specifically to local authorities involved in the financing ofthe Program.

20. This information will also be distributed on a regular basis to the provincial and central authorities of the various sectors that are likely to benefit either directly or indirectly from rural road projects. These include the health and education departments, as well as public service sectors and concessionaires of other services (water, rural electrification). This large dissemination process will enable these various actors to define or modify their own rural action programs based on the projects outlined in the NPRR-2 (and their implementation schedule), and will pave the way for synergies to be created among the different programs, and for economies ofscale.

Preservation of Road Assets

2 1. The effort over the next years required to implement the NPRR-2 will not lessen attention to road maintenance and the need to preserve the whole road network. The MPWT gives a high priority to the maintenance of the classified road network, whose condition should continue to improve thanks to the resources allocated by the Road Fund (FSR) to road maintenance.

22. The MPWT is equally concerned with the sustainability of the investments financed under the NPRR-2 program, and the socioeconomic benefits they generate. In this context, the MPWT will put special attention to ensure that local rural roads (communal and non-classified) are properly managed and maintained. In this context, the MPWT will:

(a) raise local authorities’ (regions, provinces, and communes) awareness so that they undertake the necessary actions to contribute to the financing of NPRR-2’s local rural roads, and take responsibility for the maintenance ofthese roads; and (b) ensure that local authorities comply with the commitments they made when signing the framework and specific agreements. These commitments mainly concern local authorities’ financial contributions to the Program, acquisition ofrights ofway (whenever necessary), and future maintenance of local roads. Works on local rural roads projects included in the NPRR-2 will not be started until the conditions set forth in the respective framework and specific agreements are observed. 23. These arrangements will be soon complemented by the launch of a study on the management of local roads. This study aims at defining the practical and regulatory provisions needed, as well as the maintenance funding to be mobilized, to adequately manage and maintain NPRR-2’s local roads in the future. This study will provide local authorities with all the practical tools they need to (i)assess future road financing needs and options; (ii)organize the management of maintenance and implement partnerships for this purpose with relevant Government’s deconcentrated services (mainly the DPEs); and (iii)select the best suited option to contract road maintenance to the private sector (through multiyear

144 maintenance contracts, rehabilitation and maintenance contracts). These institutional, organizational, financial and technical tools should thus give local authorities with those key elements needed to ensure the maintenance ofNPRR-2’s local roads and to ensure the sustainability of those investments to which they would have partly contributed.

Local Economic Opportunities

24. The improved rural road accessibility resulting from the upgrading and rehabilitation works launched under the NPRR-2 should promote economic development at the local level. To facilitate and support such development, a number of activities could be supported once the projects are launched. In this context and in cooperation with concerned local authorities, the DREs/DPEs will contribute, during project preparation, to the identification of local economic development opportunities that could stem from the improvement of roads and traffic conditions. These opportunities could afterward be presented to agencies specialized in local development, in order to get their support.

145 B: EXECUTIONARRANGEMENTS FOR THE SECOND NATIOKALPROGRAM OF RURAL ROADS

Program Implementation Plan

1. To ensure effective implementation of the programmatic approach adopted for the NPRR-2, a Program Implementation Plan (PIE’) was prepared by the Directorate of Roads and Road Traffic. This Plan, which defines all preparation, assessment, execution and monitoring procedures, will be applied to all NPRR-2 road subprojects, whatever their implementing agency.

2. The PIP defines, among others: (i)the roles and duties of each of the Program’s partners (in particular the DRCR, DREs/DPEs, and the CFR) in NPRR-2’s implementation ; (ii)the arrangements made regarding accounting, financial reporting, and auditing ; (iii)the overall Program’s procurement plan ; (iv) NPRR-2’s monitoring and evaluation procedures ; (v) environmental assessment and management procedures; (vi) the land acquisition and resettlement policy framework; and (vii) the manual ofprocedures and tools for the Program’s administrative and financial management.

NPRR-2’s Rural Roads Program Division

3. To strengthen and maintain NPRR-2’s unity, and in line with the Sector-Wide approach adopted, the DRCR has created a Rural Roads Program Division (RRPD), whose mission is to monitor and coordinate implementation of the whole Program. This WD, which consists of a head of division, a procurement specialist, and a monitoring and evaluation specialist, will be provided, throughout NPRR- 2’s implementation period, with qualified staff in sufficient numbers to properly carry out its mission.

4. The main activities handled by the RRPD include: (i)quality control of documents prepared by the various Program’s partners during implementation ; (ii)compliance with the deadlines set for preparation, transmission or processing of documents, for efficiency purposes; and (iii)preparation of consolidated monitoring reports on Program implementation, that will be distributed to all donors and partners involved in the Program. These reports will be based on the information provided by the Program’s two implementing agencies (DRCR and CFR).

Manual for rural roads design and appraisal

5. The DRCR has now taken all actions needed to effectively develop the manual for rural roads design and appraisal. This manual which will cover the arrangements and consistency regarding the preparation and assessment of rural road subprojects, will allow, among others, for the optimization of those technical standards applied to NPRR-2 roads ; it will be ready by June 30,2007.

Integrating environmental and social aspects

6. Environmental and social aspects will be a key part ofrural road subprojects. In that respect, the DRCR will assign to those entities in charge of detailed studies, qualified staff in sufficient numbers to ensure that the Environmental Management Plan (EMP) and the framework for land acquisition and resettlement prepared for the NPRR-2 Program are applied.

Road maintenance strategy

7. The DRCR will prepare, by December 3 1, 2006, a study on strategies for the maintenance of the classified road network. Optimal budgets allowing for an adequate maintenance of classified roads over the period 2006-2015 will be defined on the basis ofthis study.

146 Agreement between the Government and the CFR

8. Under the agreement signed between the Government (represented by the Ministry of Public Works and Transport and the Ministry of Finance) and the CFR, the roles and duties of each of the Program’s partners have been defined.

9. The CFR has designated the DRCR as the delegated implementing agency for the road subprojects it finances. The CFR will consequently be able to focus on its primary mission, which is to seek, secure, and manage the funds (loans from donors and financial contnbutions from local authorities) needed to finance those projects.

10. The CFR will, in conjunction with the DRCR, define the multi-year strategy as well as implementation, investment and financing plans for all rural road activities proposed to its financing, taking into account the overall progress of the Program and its impact on the national rural road accessibility index.

11. At the regional and provincial levels, the DREs and DPEs will be responsible for executing, coordinating and monitoring rural road subprojects in accordance with the processes and procedures contained in the Project Implementation Plan, and will liaise with local authorities benefiting from the Program, in accordance with the framework and specific agreements signed with such authorities.

Procurement procedures

12. To ensure effective implementation of the Sector-Wide approach adopted for the NPRR-2, procurement arrangements have been standardized, in full compliance with national legal texts. Standard bidding documents, including consultation procedures, have been prepared and will be used for all contracts for works and laboratory contracts under the Program. These bidding documents will follow the following rules:

(i) The bidding document will clearly specify the procedure followed for the evaluation of bids, the criteria for contract award, and the qualifications required to bid; (ii)Bids will be evaluated on the basis of cost and any other criterion specified in the bidding documents that would have been quantified in monetary terms; (iii)Contracts are awarded to the lowest bidder whose qualifications comply with the criteria mentioned in rule 1 above; (iv)The condition set for bidders to have a representative established in Morocco will not be applied; (v) The evaluation of bids on goods contracts will be done for each lot, and not for each item; and (vi) Bidders will be given a period ofat least thirty (30) days, after publication ofthe invitation to bid, to submit their bids. This will be specified in the bidding document.

147

MAP SECTION IBRD 34660

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BENIBENI MELLALMELLAL SAFISAFI 32° YoussoufiaYoussoufia BoudenibBoudenib FIGUIGFIGUIG To Bechar ChemaiaChemaia ELEL KELAAKELAA ERRACHIDIAERRACHIDIA DESDES AZILALAZILAL 32° SRARHNASRARHNA Oued Tennsift GoulmimaGoulmima DemnateDemnate TinerhirTinerhir CHICHAOUACHICHAOUA MARRAKECHMARRAKECH ErfoudErfoud ESSAOUIRAESSAOUIRA

TAHANNAOUTTAHANNAOUT BoumalneBoumalne IminImin TanoutTanout AmizmizAmizmiz OUARZAZATEOUARZAZATE TamanarTamanar

ArganaArgana O AgdzAgdz u TazenakhtTazenakht ed Dr uss aa

ATLANTIC OCEAN . So O ZagoraZagora AGADIRAGADIR TAROUDANNTTAROUDANNT 30° Y R IrhemIrhem A D N 30° U TATATATA O B TIZNITTIZNIT E TafraouteTafraoute A T O X I M APP R ALGERIA IfniIfni Ifni BouBou IzakranIzakran

GOULIMINEGOULIMINE

CANARY

Draa ISLANDS 0 25 50 75 100 Miles (Spain) Oued 28° TAN-TANTAN-TAN This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information 0 25 50 75 100 Kilometers shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 28°

14° TarfayaTarfaya 12° 10° 8° 6° 4° 2°

MARCH 2006