Document of The World Bank FI COP FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. P-3061-MOR REPORTAND RECOMMENDATION OF THE PRESIDENTOF THE Public Disclosure Authorized INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT TO THE EXECUTIVEDIRECTORS ON A PROPOSEDLOAN TO THE KINGDOM OF MOROCCO Public Disclosure Authorized FOR A THIRD WATER SUPPLY PROJECT May 6, 1981 Public Disclosure Authorized This documenthas a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. KINGDOM OF MOROCCO THIRD WATER SUPPLY PROJECT FISCAL YEAR January 1 - December 31 CURRENCYEQUIVALENTS Currency Unit Dirbam (DH) DH 1 US$0.24 US$1 DH 4.20 WEIGHTS AND MEASURES Metric System British/US System 1 meter (m) 3.28 feet (ft) 1 kilometer 0.62 miles (mi) 1 bectare 2.47 acres GLOSSARY OF ABBREVIATIONS ONEP Office National de l'Eau Potable FEC Fonds d'Ecuipement Communal (Communal Infrastructure Fund) FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO THIRD WATER SUPPLY PROJECT LOAN AND PROJECT SUMMARY Borrower: Kingdom of Morocco Beneficiaries: The Office National de l'Eau Potable (ONEP); the water supply agencies (Regies) in the cities of Casablanca, Fes, Marrakech, Meknes, Tetouan, Safi, Oujda, Tanger, Rabat-Sal6, Taza and Kenitra, as well as other Regies which may be agreed upon during project implementation; the Hydraulics Department of the Ministry of Equipment; and a government agency to be designated sbortly. Amount: The equivalent of US$87 million. Terms: Seventeen years including four years, of grace, at an interest rate of 9.6 percent per annum. On-Lending Arrangements: The Government will onlend the proceeds of the loan allocated to ONEP (about $45.8 million) and the Regies (about $38.1 million) on terms identical to the loan's, as in the financing plan below. The Government would use the remaining $3.1 million for the water resource development component and for the rural water systems study. Project Description: The primary objective of the project is to improve access to safe water supply of the low income population of at least 11 major towns and 80 smaller centers, and to bring water or improved water supply to the population around Karia Ba Mohamed and in'the Ziz valley from Errachidia to Erfoud, as well as on the Tafilalet plain around Rissani. The project consists of: (i) revolving funds to finance credit granted to low income households for house connections in at least 11 major cities and about 80 other population centers; (ii) a line of credit to ONEP, referred to later as the sector loan component, for subprojects consisting of improvements and expansion of water supply facilities in about 32 small centers; (iii) construction of two regional water supply systems, in the areas of Karia Ba Mohamed (about 7,300 | 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. - ii - inhabitants), and Errachidia - Erfoud - Rissani (170,000 inhabitants); (iv) the development of water resources in some 24 centers; (v) the acquisition of laboratory equipment, water meters, leak detection equipment and materials, and eauipment for maintenance and surveys; and (vi) technical assistance, training and studies. The beneficiaries of the project would consist of (i) approximately 1.6 million low income inhabitants of the cities and other centers referred to above, constituting about 275,000 households who would finance their house connections through the revolving funds financed under the loan; and (ii) some 600,000 people living in the small centers served by the two regional systems or in the centers to benefit from the sector loan component. The implementation of the project does not pose any special risks. Estimated Cost: The total project cost is estimated at US$169 _ million apportioned as follows: Local Foreign Total % of Item -------US$ Million--------- Total A. Sector loan component 15.6 10.0 25.6 15 B. Regional Water Supply Systems 16.5 9.5 26.0 15 C. Equipment and Materials 1.6 1.8 3.4 2 D. Water Resources Development 2.9 2.3 5.2 3 E. Consulting Services, Technical Assistance and Studies 4.5 3.4 7.9 5 Base Cost 41.1 27.0 68.1 40 Physical Contingencies 3.5 2.2 5.7 4 Price Contingencies 9.5 6.0 15.5 9 F. Fund for House Connections 27.9 51.8 79.7 47 Total Project Cost 82.0 1/ 87.0 169.0 100 I/ Includes $7.2 million in duties and taxes. - iii - Financing Plan ONEP Govt. FEC Bank Total --------------US$ Million--------------- ---------Local…------- Foreign - House Connections Regies: - Casablanca - - 5.6 10.4 16.0 - Fes - - 2.6 4.9 7.5 - Marrakech - 1.9 3.5 5.4 - Meknes - - 1.0 1.7 2.7 - Tetouan - - 1.2 2.2 3.4 - Safi - - 1.0 1.8 2.8 - Oujda - - 1.0 1.8 2.8 - Tanger - - .9 1.6 2.5 - Rabat-Sa16 - - .6 1.2 1.8 - Taza - - .3 0.5 .8 - Kenitra - - .2 0.4 .6 ONEP 7.4 - - 13.7 21.1 Unallocated - - 4.2 8.1 12.3 Sub-Total 7.4 - 20.5 51.8 79.7 - ONEP Components (excluding house connections) 3.5 46.8 - 32.1 82.4 - Water Resource Development - 3.6 - 2.8 6.4 (Ministry of Equipment) - Rural Water Systems Study - 0.2 - 0.3 0.5 (to be designated) TOTAL 10.9 50.6 20.5 87.0 169.0 % of Total 6 30 12 52 100 Estimated Disbursements: Bank FY 1982 1983 1984 1985 1986 … -------- …USs Million---------…-- Annual 6.4 21.2 26.2 25.5 7.7 Cumulative 6.4 27.6 53.8 79.3 87.0 Rate of Return: Not quantifiable Appraisal Report: Report No.3339a-MOR of April 24, 1981. - 111 - Financing Plan ONEP Govt. FEC Bank Total --------------US$ Million--------------- ---------Local-------- Foreign - House Connections Regies: - Casablanca - - 5.6 10.4 16.0 - Fes - - 2.6 4.9 7.5 - Marrakech - - 1.9 3.5 5.4 - Meknes - - 1.0 1.7 2.7 - Tetouan - - 1.2 2.2 3.4 - Safi - - 1.0 1.8 2.8 - Oujda - - 1.0 1.8 2.8 - Tanger - - .9 1.6 2.5 - Rabat-Sale - - .6 1.2 1.8 - Taza - - .3 0.5 .8 - Kenitra - - .2 0.4 .6 ONEP 7.4 - - 13.7 21.1 Unallocated - - 4.2 8.1 12.3 Sub-Total 7.4 - 20.5 51.8 79.7 - ONEP Components (excluding house connections) 3.5 46.8 - 32.1 82.4 - Water Resource Development - 3.6 - 2.8 6.4 (Ministry of Equipment) - Rural Water Systems Study - 0.2 - 0.3 0.5 (to be designated) TOTAL 10.9 50.6 20.5 87.0 169.0 % of Total 6 30 12 52 100 Estimated Disbursements: Bank FY 1982 1983 1984 1985 1986 ------------US$ Million------------ Annual 6.4 21.2 26.2 25.5 7.7 Cumulative 6.4 27.6 53.8 79.3 87.0 Rate of Return: Not quantifiable Appraisal Report: Report No.3339a-MOR of April 24, 1981. REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A THIRD WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Kingdom of Morocco for the equivalent of US$87 million to help finance a third water supply project. The loan would have a term of 17 years, including 4 years of grace, with interest at 9.6 percent per annum. The Government would onlend on the same terms about US$45.8 million to the Office National de l'Eau Potable (ONEP) and about US$38.1 million to the water distributing Regies of Casablanca, Fez, Marrakech, Meknes, Tetouan, Safi, Oujda, Tanger, Rabat-Sale, Taza and Kenitra, and possibly to other Regies to be agreed upon, to finance mainly water supply systems and house connections for low-income customers. PART I - THE ECONOMY 2. A basic economic mission visited Morocco in November 1978, and updating missions in September and December 1979 and in May 1980. A report entitled "Morocco: Basic Economic Report" (3289-MOR) was distributed to the Executive Directors in December 1980. Country and Economic Data Sheets are attached as Annex I. Introduction 3. Compared with many developing countries, Morocco is well endowed with natural resources. It has a considerable agricultural potential both in irrigated and rainfed areas. The Atlantic and the Mediterranean coastlines offer considerable fish resources. Morocco also has the world's largest and most easily recoverable phosphate reserves, which makes the phosphate sector a key export sector. Other minerals such as iron ore, manganese, lead and zinc are also exported, but in much smaller amounts. Coal and hydropower plants satisfy only a small part of the country's energy requirements, which are essentially met with imported oil. Morocco has however uranium and oil shale resources which it plans to exploit. In addition, Morocco's proximity to Europe has favored trade, tourism and labor migration with the EEC countries. 4. During the first 15 years after independence (1956), a conservative approach to economic policy predominated in Morocco. GDP increased at an average rate of 4% a year in the 1960s. Growth accelerated somewhat under the 1968-72 development plan as the economy derived substantial momentum from exports. However, a relatively weak savings effort and a small externally financed resource gap resulted in only a slow rise in the share of resources allocated to investment.