Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-177O-MOR REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR THE THIRD EDUCATION PROJECT February 20, 1976 This document has a restrictel distribution and may be used by recipients only In the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS US$ 1.00 = Moroccan Dirham (D.H) 4.00 DH 1.00 = US$ 0.25 INTERNATIONAJ. BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A THIRD EDUCATION PROJECT 1. I submit the followin6 report and recommendation on a proposed loan to the Kingdom of Morocco, for the equivalent of US$25 million, to help fi- nance a Third Education project. The loan would be made on standard Third Window terms of 25 years, including 7 years of grace, with interest at 4-1/2 percent per annum. PART I - THE ECONOMY 2. A report entitled "Current Economic Position and Prospects of Morocco" (1021-MOR, dated January 26, 1976) was distributed to the Executive Directors on February 13, 1976. Country data are attached as Annex I. 3. During the 1968-72 Plan, Morocco succeeded in accelerating the growth of its economy and in improving the situation of its external payments. Aided substantially by good crops following favorable weather in three years out of five, real GDP growth averaged 5.6 percent per annum during the five- year period. Reflecting the sustained rise in exports during the Plan period and a slower growth of :Lmports in 1971 and 1972, the balance of payments showed a surplus from 1969 onward. These results represented a definite im- provement over those of the preceding decade, during which the rate of real GDP growth had barely excceeded that of population growth, and the balance of payments had been a source of constant concern. These achievements were accompanied by an incrense in private consumption averaging about 2 percent per capita in real terras during the five-year period. 4. From 1967 to 1970, the main growth determinants had been exports, tourism and investment, all of which rose substantially; in addition, sizeable stocks were accumulated following the exceptionally good harvest in 1968. By contrast, in 1971-72 exports and tourism together with current government spending were the major factors to sustain economic growth. During these last two years of the Plan, t:he investment of public and semi-public enterprises de- clined, largely because the state-owned phosphate company (OCP) had completed its expansion program. Government investment stagnated after 1968. Private investors adopted a wait-and-see attitude in the face of political develop- ments in 1971 and 1972 End in the expectation of new measures to encourage investment and exports. At the end of the 1968-72 Plan period, there was therefore an urgent need to revive public and private investment. Partic- ularly, in the public sector, absorptive capacity needed to be increased by appropriate changes in staffing and organization. 5. Following a lcng period of very slow growth in private consumption, social problems had to be tackled. Over the 1960-71 period, there had been a slow but perceptible decline in real per capita consumption for about one- third of the rural population. Wealth and income differences between cities and villages, among regions, and between rich and poor tended to widen. Un- employment remained high, in 1971 averaging 9 percent of the country's labor force, and ranging between 12 and 16 percent in large urban centers. 6. Recognizing these difficulties and problems, the Government began in 1971 to revise its development policies, paying increasing attention to social objectives. The changed orientations were reflected in the 1973-77 Plan which aims at (1) GDP growth of 7.5 percent per annum in real terms from 1973 to 1977, mainly through a sharp increase in public and private investment and a strategy geared strongly toward increasing exports; and (2) an improve- ment in the distribution of growth benefits among the different social groups and the various regions, in order to achieve greater equity and at the same time increase domestic demand. This improvement was to be brought about through further land distribution to poor farmers, more emphasis on the deve- lopment of rainfed agriculture, "Moroccanization" of some industrial and commercial enterprises, reforms designed to make the tax system more equit- able and progressive, a price and wage policy designed to enable the poorest segments of the population to satisfy their essential needs, an ambitious pro- gram of low-cost housing, various measures to improve the lot of the rural poor, and increased emphasis on the development of poorest regions. 7. During the first two years of the 1973-77 Plan, the main development policies proposed in the Plan were introduced. Further, in 1974, Morocco bene- fitted from a steep rise in the price of phosphate, its main export product, which provided substantial additional resources compared to the Plan's expec- tation. The Government decided to step up investment spending for the years 1975-77, partly to reflect cost increases for the development program already adopted and partly to embark on additional investment projects. Recent Economic Performance 8. In 1973, exports were the only dynamic element in the economy, and real GDP grew less than 3 percent. Agricultural output declined by 11 percent due to drought. Investment rose 3 percent in real terms, because of the in- sufficient number of fully prepared projects and the late publication of both the 1973-77 Plan and new investment incentives. 9. In 1974, by contrast, the economy registered a strong recovery (GDP grew by 10 percent) supported by all growth determinants. Agricultural output rose by 14 percent, thanks to good weather conditions and expansion of irrigation. Fixed investment increased by 34 percent in real terms due to public sector investment and the implementation of new incentives for semi- public and private investors, and stocks were replenished. Exports (including non-factor services) grew by 14 percent; and Government consumption rose by more than 20 percent at constant prices. 10. The revival of economic activity in 1974 was accompanied by further improvements in the balance of payments. There was a sharp increase in phos- phate export earnings from $192 million in 1973 to $932 million in 1974, due to a 345 percent rise in average export price and a 16 percent growth in quantities exported. rhis and a further large (52 Percent) increase in workers' remittances from Europe were the main factors behind a doubling of the current surplus to $237 million in 1974, in spite of increased import payments for foodstuffs and petroleum. The current surplus enabled Morocco to increase short-term financing of its exports to facilitate sales, and to raise the level of its external reserves. These reached $454 million at the end of 1974. 11. Some weak spots should be noted, however. These were: the increased burden (5.4 percent of GDP in 1974) of price subsidies for imported foodstuffs and petroleum; the volume decline of agricultural exports and the high level of import requirements for wheat, sugar, edible oils and dairy products; the increasingly felt shortage of skilled manpower, particularly at mid-level of technical and managerial qualifications; and the rather low level of reserves in relation to imports (2.4 months at the end of 1974). 12. Available indicators show that the economic and financial situation was less favorable in 1975 than it was in 1974. Two factors in particular have held back economic: growth. These are: (a) a decline in phosphate exports and downward pressure on phosphate prices, and (b) less favorable weather conditions in 1974/75 than in 1973/74 which caused a decline estimated at 10% in agricultural output. However, the growth of fixed investment and the Government's current expenditures continued at the rapid pace that began in 1974. On balance, real GDP Rrowth was only an estimated 2 percent in 1975. At the same time, the internal and external financial situations have somewhat deteriorated compared to 1974. The Government's budget showed a substantially increased current and overall deficits, due to sharply rising current and capital spending. Despite smaller import price rises and a substantial in- crease in external borrowing, the balance of payments should register for the full year a very small surplus only. Reserves were about 2 months of 1975 imports by the end of 1975. The difficulties should however be temporary A recovery of output and exports is expected in 1976 for the agriculture and phosphate sectors, which should provide the real resources for a further in- crease in investment. This and greater fiscal discipline introduced with the 1976 budget law would enable the country to ease the financial situa- tion by comparison with 1975. Revisions to the 1973-77 Plan 13. The Government revised upward the 1973-77 Plan allocations for the years 1975-77. Government investment appropriations for the five-year period have been raised to DH 25.6 billion (about $6.4 billion) compared to the original DH 11.8 bi:Llion. Of the DH 13.8 billion increase, changes to original projects and cost increases represent DH 4.6 billion and new proj- ects for 1975-77, DH 9.2 billion. Excluding defense, new projects fall in the following main categories: - 4 - DH 2,500 million for regional development; DH 1,600 million for transport and communications; DH 1,300 million for agriculture and water development; DH 400 million for industry; DH 150 million (to be raised to more than DH 300 million depend- ing on implementation capacity) for low-cost housing; and DH 200 million for social services. Since planning is indicative only for the semi-public and private sector, the above allocations do not include investments by this sector. Nevertheless, the Plan revisions contain provisions to prepare for the implementation of two large industrial complexes (chemicals and steel) in the semi-public sec- tor, and expect a vigorous investment growth in the private sector. The State Secretariat for Planning estimates that total investment at current prices could jump from DH 4.2 billion in 1974 to DH 12.0 billion in 1977. This would enable the country to meet the original GDP growth target of 7.5 percent a year for the 1973-77 period. 14. The thrust of the Plan revisions seems justified. Indeed, the achieve- ment of initial (especially social) Plan objectives is eminently desirable. Simi- larly, Morocco's economy has developed to a stage where heavy industry should begin to find a place. The country possesses an obvious comparative advantage in the processing of phosphates, which would tend to stabilize export earnings. However, the Plan revisions raise several issues of importance for Morocco's long-term development strategy and prospects. 15. The steep investment growth foreseen by the plan revisions could exceed the country's absorptive capacity. Following the revival noted in 1974 and 1975, investment in real terms would rise by 39 percent in 1976 and 19 percent in 1977, and continue at very high rates in following years according to the tentative plans for heavy industry. Availability of skilled manpower may restrain the pace of project preparation and implementation. The manpower constraint can only be relieved gradually by training. For large industrial and infrastructure projects, Morocco may be able to use foreign services more extensively than in the past, but at considerable cost. In addition, the Government will have to ensure that the increase in capital intensity implied by the moves into heavy industry would be compatible with the objectives for increasing opportunities for unskilled employment. 16. Financial resources may also restrain investment growth. The analysis of Morocco's financial prospects shows that such resources would grow relatively slowly in the next five years. Export earnings are likely to be restrained by a decline in phosphate prices, and as a result, the phosphate company's savings which are a large share (36 percent in 1974) of national savings would be restrained. Taking into account the objective and - 5 - policies to improve consumation levels of low-income groups, the growth rate of national savings may be expected to be relatively low. In spite of planned efforts to increase budgetary savings and food import substitution, foreign exchange and national savings are likely to become a constraint on investment towards the end of the decade. 17. Despite the uncertainty over the future evolution of phosphate export receipts, it is likely that investment growth will still reach close to 13.5% p.a. on average during the 1973-77 Plan period. It would exceed the original plan targets for 1973-77, but remain below the revised targets. Provided the volume of phosphate exports recovers in 1976 real GDP gains would average about 6.5 percent yearly during the five years. Private per capita consump- tion would rise by about 3.5 percent a year, which should correspond to a net improvement in the situation of low-income groups. Despite heavy external borrowing, the balance of payments would remain strong until 1977. These re- sults would be satisfactory by comparison with the initial objectives of the 1973-77 Plan for output and consumption growth, and for the balance of pay- ments. 18. For the 1978-80 period, however, projected trends call for caution. Taking into account the absorptive capacity and resource availability con- straints, investment growth could slow down to around 10 percent a year in real terms. Such growth and assumed export increases would lead to growth of real GDP of about 7 percent a year, and of private per capita consumption of about 2.5 percent. Import requirements for consumption and especially invest- ment would grow rapidly, and with the likely deterioration in terms of trade, the economy's resource gap would widen substantially during the last three years of the decade. To cover it and service accumulated debt, external borrowing requirements on a commitment basis would need to average more than $700 million annually in 1978-80, compared to an actual $553 million in 1974 and an estimated annual average of $540 million in 1975-77. Morocco's borrow- ing capacity seems sufficient to mobilize these amounts from available sources, provided the necessary effort in project preparation for external financing is made. The bulk of borrowlngs up to 1980 would be from official bilateral and international sources. 19. External debt and debt service would increase as a result of pro- jected borrowings. Debt outstanding and disbursed would rise from $1.0 bil- lion at the end of 1974 to $2.6 billion at the end of 1980. Debt service would go from $121 million in 1974 to some $464 million in 1980. Debt service would remain manageable although it would rise to 11 percent of exports (in- cluding non-factors services) in 1980, from 6 percent in 1974. The prolonga- tion beyond 1980 of macro-economic trends foreseen during 1976-80 indicates that external borrowing requirements would remain larrge, due in particular to the rise in import needs for investment. These would lead to substantial debt service obligations, since an increasing share of external borrowing would come from commercial sources. However, with an additional and feasi- ble export effort, debt service would remain a manageable burden on the bal- ance of payments, provided the recourse to commercial sources is kept within reasonable limits and Morcicco continues to obtain a share of external resources in the form of loans on less than commercial terms. On these assumptions - 6 - Morocco will remain creditworthy for substantial Bank lending, but it will have a continuing need to obtain external capital on as concessionary terms as possible. This need, together with Morocco's relative poverty and impro- ving development performance make Morocco eligible for Third Window loans. PART II - BANK GROUP OPERATIONS IN MOROCCO 20. Bank and IDA lending to Morocco has supported 25 projects with fi- nancing totalling $520 million (net of cancellations). Of which $304.5 mil- lion has been lent since FY73. IDA credits, totalling $50.0 million, have been made available for five projects. IFC investments have amounted to $2.9 million. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of January 31, 1976, and notes on the execu- tion of ongoing IBRD/IDA projects. In some cases, delays have been caused by management or procurement difficulties, and recently the risk of cost overruns has increased due to the upsurge in investment activity in Morocco and the recent acceleration of inflation. However, performance in project execution has considerably improved during the last two years. 21. Past Bank Group lending has been concentrated in the industrial and agricultural sectors, which together have accounted for 70 percent of total net commitments; the balance is accounted for by utilities (14 percent), roads (8 percent), tourism (5 percent) and education (3 percent). Apart from the transfer of resources to Morocco (Bank Group gross disbursements amounted to 5.5 percent of total fixed investment in 1970-74), the main objectives of lending were to foster and strengthen development institutions, provide technical assistance, particularly for project preparation, and increase productive capacity, particularly in order to improve the balance of payments. 22. While these objectives remain, emphasis is now also being given to supporting the new orientation of the Government's development effort in the field of income distribution. Future Bank lending will reflect this orienta- tion. An increasing share of Bank Group lending will be devoted to projects developing directly or indirectly the productive capacity of the lowest urban and rural income groups. 23. Past lending for agriculture has supported irrigation development and credit. The Doukkala Irrigation Project has been recently approved by the Executive Directors. While continued lending for irrigation is envis- aged, greater emphasis will be given to supporting the improvement of rainfed farming, and lending will in general be focussed on support to small farmers. A first project for the development of rainfed agriculture in the Meknes re- gion has been approved recently. Projects for livestock/rural development in a rainfed zone in northern Morocco and for agricultural credit are being prepared. 24. Continued lending for industry and tourism through two DFC's (Banque Nationale pour le Developpement Economique and Credit Immobilier et Hotelier) will be proposed. The Bay of Agadir Tourism Project has been re- cently approved by the Executive Directors. A third line of credit for CIH - 7 - is now being appraised. A project for the construction of a large cement plant in the less developed northeast part of the country is envisaged. Projects in these sectors3 help to raise foreign exchange earnings and to improve sectoral policieti. 25. A sites and services project in Casablanca is being prepared. It should contribute to solving the problem of rapid growth of slum areas. A substantial social services component is envisaged. The Bank is executing agency for project preparation being financed by UNDP; UNDM is also providing technical assistance for overall planning of the sector. A second Water Sup- ply project is expected 1:o meet the needs of several urban and rural centers. A multipurpose development project on the Oum-er-R'bia river, mainly for power but with substantial irrLgation and industrial and potable water supply bene- fits is being appraised 26. Education is a critical bottleneck in Morocco's development. The proposed project is the ]3ank's third project to assist the Government in re- moving this bottleneck. 27. A consultative group for Morocco was formed in April 1967 under the chairmanship of the Bank. It includes Belgium, Canada, France, Germany, Italy, Japan, Kuwait, Spain, the U.K., the U.S., UNDP, OECD/DAC, the African Develop- ment Bank and the European Investment Bank. The last meeting of the Group, on March 28 and 29, 1974, expressed satisfaction with the improvement in Morocco's economic performance in recent years, and the emphasis in the Third Five-Year Plan (1973-77) on improving the distribution of growth benefits. The gross inflow of official loans and grants to Morocco rose from $129 mil- lion in 1966 to $159 million (of which $18 million in grants) in 1971, but fell to $128 million in 1972 and $121 million in 1973; in 1974 the gross in- flow rose again to $190 million. The major sources of aid were France, the U.S., Germany and the Bank Group. 28. At the end of 1975, the Bank Group's share in Morocco's external public debt was estimatedl at 17 percent on a disbursement basis. The share of the Bank Group in debi: service was 12 percent in 1974 and an estimated 14 percent in 1975. By 1980 the Bank Group's shares in debt outstanding and in debt service are expected to rise to about 24 percent and 15 percent respectively. PAiRT III - THE EDUCATION SECTOR 29. Before independence in 1956, Morocco's education system had developed along the lines of the system then prevailing in France. Basically, education was public and free, academically oriented and highly selective. The current system still retains these features despite a substantial expansion and efforts to generalize education iLn Arabic at all levels. Much remains to be done to generalize basic education, train middle and higher level technicians and to adapt the system to the needs of the economy. 30. The school system consists of five years of primary school, a four- year lower and three-year upper secondary cycle and up to six years of higher education. Specialization begins at the upper secondary cycle, where students choose between arts, science, technical subjects and primary teacher training. In addition, they can enroll in specialized training institutions managed by the various technical ministries and public agencies. Higher education is conducted in two universities and thirteen specialized institutions. Private schools are restricted to primary and secondary levels and account for only 3.5 percent and 6 percent of respective total enrollments. 31. The fast expansion of schooling over the last decade favored higher and secondary education to provide for much needed higher and middle level man- power. Between 1970 and 1975, enrollments increased by 75 percent in higher, 40 percent in secondary and 24 percent in primary education. Despite these increases, coverage still remains inadequate. In 1974-75, primary, secondary and higher education enrollments (including over-aged students) represented 54%, 13% and 2% of the respective age groups. Illiteracy remains widespread. In 1974, 74% of the population over 5 years was illiterate. 32. Although less than half of the children aged 7-11 are in school, budgetary allocations still favor the development of education at higher levels. At the primary level, the more easily serviced urban areas have received the greatest attention. In 1974-75 about 68 percent of urban children, as compared to 38 percent of rural children, were enrolled in primary schools. A partial explanation for this is to be found in unfavor- able parental attitudes toward the schooling of girls in rural areas (while in the larger cities, girls represent about 45 percent of total enrollment, in the poorest rural provinces their enrollment is only about 10 percent). However, the major reason for low rural enrollment ratios remains the gov- ernment's past lack of attention to providing adequate and relevant school- ing opportunities. Rural primary school facilities are far from satisfac- tory; many do not offer a complete cycle and often cater for different grade pupils in the same classroom, and in comparison with those in urban areas, a higher proportion of underqualified staff teach in rural schools. 33. Despite considerable efforts at increasing enrollments in secondary higher and technical education, the system remains inadequate to meet the needs of a rapidly developing economy for trained manpower. One major limit- ing factor has been the lack of Moroccan teachers. Despite the creation in 1971 of 13 new regional lower secondary teacher training colleges and the introduction of upgrading courses for the best qualified lower secondary teachers, about 36 percent of secondary teachers were still expatriates in 1974-75. During the same year, about 40 percent of full-time university staff were foreign. 34. While projections of manpower requirements and training needs are difficult due to lack of adequate data, shortfalls can be anticipated at all manpower levels in key sectors by 1985. Morocco has so far relied heavily on informal training to service its industrial and commercial expansion, but the need now to increase the supply and quality - particularly at middle and high staffing levels - is critical to achieve economic growth objectives and to ensure that the execution of the Goverment's new social and rural oriented plans and programs are not jeopardized by shortage of specialized and trained personnel. 35. The school system is also qualitatively ill-adapted to meet the country's needs. Some efforts have been made at reforming curricula, but the content of education still remains foreign to the requirements of the job mar- ket and poorly relevant to the learning needs of the students. At both prim- ary and secondary levels, teaching methods are conventional; curricula favor arts at the expense of science, technology and practical subjects. The inade- quacy of curricula and the high selectivity of the education system result in high repeater and drop-ouit rates. It currently takes for instance, 11.4 pupil/ years to produce a typical 7-year course completer in secondary education. In addition, many students ,Irop out of school before completing a cycle. 36. The education system is centrally run by two ministries, the Ministry for Primary and Secondarr Education and the Ministry for Higher Education which share common management and planning departments. Recently, measures have been taken to decentralize these functions. It is expected that a much needed im- provement will result. Further improvement in the management of the general education system would be brought about by the introduction of modern admin- istrative techniques. Investment planning for the sector is split between the Ministries of Education, the State Secretariat for Planning and the various technical ministries which operate their own training systems. This situation is not conducive to proper coordination between the general education system and the specialized training systems nor to the preparation of consistent and economical training programs that would adequately meet the most urgent needs of the country. The Government is aware of the need for coordination and has requested the Bank's assistance for the preparation of a comprehensive program for technical education amd vocational training. 37. Between 1971 and 1975, government expenditure on education and training increased at an annual average rate of 29 percent in current terms. It amounted to about 6 percent of GDP in 1973. Capital expenditure for edu- cation and training grew faster than recurrent expenditure; as a result, its share in total governmenl: expenditure for education which was less than 10 percent in 1970, increased to mDre than 30 percent in 1975. Fast development of teacher training facilities was the main cause of this large increase. 38. The National Development Plan 1973-1977 recognized the shortcomings of the educational systemi and proposed objectives for both the long and the medium term. A major research and development program is to be started for preparing a comprehensive! educational reform aimed at making the system more - 10 - relevant to the country's needs and which would be implemented during the next plan period. Complete enrollment of the 7 year old group is to be achieved by 1995. During the present plan period, the specific targets included: (i) non-formal basic education: preparation of a national program for literacy and basic education and implementation of a first phase of this program; (ii) primary education: rationalization and expansion of the rural school network to reduce regional disparities; measures to im- prove the efficiency of the system and therefore to reduce repeater rates; and curricula reform to provide for more train- ing in mathematics and practical subjects; (iii) secondary education: reorientation towards science and tech- nology training by putting more emphasis on these subjects in the lower cycle and enrolling two-thirds of new upper cycle students in science subjects by 1977; "moroccanization" of teachers which should be completed by 1980 for the lower cycle and; arabization of the language of instruction; (iv) technical and vocational training: large expansion of training facilities including technical teacher training facilities and coordination of vocational and technical education programs. 39. Quantitative achievements during the first two years of the Third Plan implementation are generally in line with the Plan's objectives. Cur- ricula reform in primary and secondary education is being gradually intro- duced. However, coordination and planning of vocational and technical edu- cation programs should still be improved while planning and preparation of a national literacy and basic education program remains to be organized. 40. Bank Group assistance for education started in 1965 with a first education credit (Cr 79-MOR of US$11 million) which was designed to help ex- pand general and specialized secondary schooling. The credit assisted the financing of 18 secondary schools. Poor project management, due to a lack of qualified and full time appointed staff and cumbersome contracting proced- ures during the early years, caused the project to be five years behind the original implementation schedule. Since 1973, these difficulties have been overcome, after the Government had taken vigorous measures. The project was completed in June 1975. The second education credit (Cr 266-MOR of US$8.5 million), provided in 1971, was designed to help expand secondary teacher training, develop science and technology education in upper secondary level and increase vocational education. The credit helped finance construction and equipment of a higher teacher training college, a national education re- search institute and six regional teacher training colleges; extensions and science equipment in six secondary schools; extension to a middle level for- estry school; and equipment for 10 industrial and 13 commercial schools. This project was also affected by delays similar to those experienced under the first project. However, it has been progressing well since 1973 and is expected to be completed by the end of 1976, nearly two years behind the original schedule. - 11 - PART IV - THE PROJECT 41. The project was identified by a UNESCO mission to Morocco in September 1973 and by a Bank mission which discussed the UNESCO findings with the Govern- ment in September 1974. Subsequently, the Government proposed to include ad- ditional components which were reviewed by a Bank/UNhSCO mission in January 1975. In February/March 1975 a UNESCO preparation mission assisted in preparing the project which was appraised in April 1975. Negotiations were held in Washington in January 1976. The Moroccan delegation was headed by Mr. H. Belkoura of the Prime 1"inister's Office. Project Objectives 42. The proposed project would assist the Government in implementing its program for (i) reorienting primary education to meet more effectively the needs of rural children and to reduce the present disparities in the distribution of primary schools between rural and urban areas; (ii) reform- ing general secondary education through introducing prevocational subject in the lower cycle and reorienting the upper cycle toward science and tech- nology, (iii) further expanding secondary teacher training to help remove costly reliance on expatriates; (iv) expanding and improving specialized training to meet urgent manpower needs in agriculture, health and tourism; (v) preparing the launching of a major effort in technical education and vocational training for industry and commerce; and (vi) improving the man- agement of the education system by introducing computerized techniques. Project Description 43. The proposed project includes (i) construction, furnishing and equip- ping of 47 experimental rural primary schools, rIve secondary schoois in rural areas, one secondary te(acher training college, one-hotel training school, four hotel training centers, one National Rural Development and Extension Training Center, one College of Public Health, one medical technicians' training unit and three health training centers; (ii) engineering design for five technical colleges, one technical teacher training college and one applied engineering training institute; and (iii) related technical assistance. The components are amplified in succeeding paragraphs and the main features are summarized in the Project and Loan Summary provided in Annex III. A report entitled "Appraisal of a Third Education Project in the Kingdom of Morocco" (No. 1059-MOR, dated February 25, 1976) IS Deing distrIDurea separately. 44. General Education. The 47 rural primary schools scattered through the poorest areas of the country would help improve the rural population's access to schooling and form a test base to develop new curricula and teach- ing methods to be generalized during the next (1978-1982) Plan period. The new curricula based on manual skills, in particular, basic farming and artizan skills, are aimed at children who will not continue into secondary schooling. A comprehensive evaluation of the experiment will be carried out by the Min- istry of Primary and Secondary Education, and its results would be discussed with the Bank (Section 4.05 of the Loan Agreement). - 12 - 45. The five secondary schools financed under the project would open opportunities for secondary education in rural areas so far not served by such facilities. Parting with the academic bias of existing secondary schools their curricula would emphasize technical and science teaching. A sufficient number of teachers will be available as the number of graduates from Morocco's existing higher teacher training college increases; however, in the initial phase some expatriate teachers may have to be employed. 46. The proposed teacher training college at Meknes, through one year resident courses, would upgrade selected qualified teachers to upper secondary teaching requirements. Candidates for this program would have at least five years of teaching experience at the lower secondary level. For upper second- ary teaching staff Morocco still relies most heavily on expatriate teachers, and the proposed college, together with the existing higher teacher training college, should eliminate the need for employing foreigners in upper secondary teaching by 1985. 47. Data Processing Unit. The management of personnel and students files in the Ministry of Primary and Secondary Education is presently done manually with limited efficiency. The Government, with UNESCO's assistance has developed procedures to rationalize handling and utilization of data. The proposed project would provide technical expertise and some equipment to initiate the first phase of computerized data processing. 48. Industrial Training. The project includes the preparation of a comprehensive program to be part of the next National Development Plan (1978- 1982) for technical education and vocational training to meet the skilled manpower requirements for industry and the need to provide skill training for primary and secondary school leavers. In addition it includes the engineering design and the development of curricula as well as instructional methodology for several institutions. These institutions include five technical colleges to meet middle level needs of the labor market, a technical teacher training college and a new applied engineering training institute. The engineering design of these institutions includes the preparation of master plans, prelim- inary drawings, equipment lists and detailed cost estimates, which would pro- vide the basis for a possible follow-up education project. 49. Tourism Training. Existing facilities remain largely inadequate to meet the demand for middle and lower level hotel staff of the rapidly growing tourism industry. A Hotel Training School at El Jadida would supple- ment the five existing schools for middle-level technicians. Four hotel training centers, to be located in tourist areas of growing importance, would turn out semi-skilled hotel and restaurant staff. 50. Agricultural Education. Lack of adequately trained extension agents is the critical factor limiting the development and implementation of agricul- tural projects, mostly in rainfed areas. On average, one extension agent, seldom trained to cope with existing working conditions, has to deal with one thousand farm families. The proposed Center, to be part of the National School of Agriculture, Meknes, would help alleviate the shortage of well- trained extension agents and assist in developing modern extension methods - 13 - based on an array of coimmunication techniques ranging from personal contact to mass media. The Center would provide in-service training for some 2,400 agricultural staff annually, experiment with new extension techniques, and help prepare and backstop new comprehensive regional schemes of non-formal education, interrelating3 agricultural extension with health education, coop- erative activities, and other development inputs. To ensure proper dissemina- tion of methods to be dieveloped in the Center and adequate relationships be- tween staff training and extension needs, a Board with representatives from the Ministry of Agriculture and from ministries and agencies concerned with rural development would be established to decide and follow up on work pro- grams for the Center (Seaction 3.04 of the Loan Agreement). 51. Health Educat:Lon. The Government is embarking on a large-scale policy aiming at expandLng and rationalizing the health distribution system with emphasis on preventive and community medicine, for which the training of medical and paramedical personnel is indispensable. The proposed project would assist the Government in this task by constructing and equipping a new institution associated with the Rabat hospital to permit the expansion and amalgamation of training for various types of middle-level health staff and medical technicians which would improve efficiency and facilitate a team approach to health servLce delivery; by constructing and equipping a unit of a teaching hospital at Casablanca; and by constructing and equipping three regional health staff t:raining centers to provide manpower to help implement the government's policy of expanding and improving rural health services. Technical Assistance 52. A large program of technical assistance is recommended under the proposed project to help the Government in developing curricula and teaching methods, training teachers needed for the proposed institutions, initially staffing these institut:Lons, physically implementing the project and prepar- ing the program mentioned in paragraph 48. The project would provide for 5.5 man years of fellowshiv and about 49 man years of exDerts' assistance, most of which would be bor technical training instrlurions. Prolect Co&_ 53. The total cosl: of the project, including contingencies, is estimated at about $59.5 million, with an estimated foreign exchange cost of approxi- mately $25 million proposed for Bank financing. The balance of $34.5 million will be financed by the Government. In estimating the foreign exchange cost, it has been assumed that 50% of the contracts for furniture would be won by local manufacturers (whiose production has an estimated 50% foreign exchange component) following international competitive bidding. The cost estimates for civil works are based on recently awarded contracts for the second educa- tion project (Cr. 266-M)R). Equipment and furniture cost estimates are based on reasonable C.I.F. unit prices for each category of goods. The detailed cost estimates are provlded in Annex III. - 14 - Project Implementation 54. The Project Unit, established for the carrying out of the first and second education projects would be responsible for implementation of all proj- ect items pertaining to the Ministries of Education (representing about two thirds of the total project cost less technical assistance). In addition, it would support - to the extent necessary - the technical services of the other ministries directly responsible for the implementation of the health, tourism and agriculture components. The staff of the Project Unit will be expanded to ensure adequate and timely implementation of works. Additional staff is being hired, including a programming officer and an architect, whose appointment would be a special condition of effectiveness (Section 5.01 of the Loan Agree- ment) and a civil works supervisor. In addition, technical assistance total- ling 6 man-years would be provided to the Project Unit under the proposed proj- ect for review of the detailed plans, preparation of bidding documents and furniture lists and design and for the development of building and maintenance procedures. The Ministries of Tourism, Agriculture and Health have each ap- pointed a full time architect or civil engineer, with qualifications satisfac- tory to the Bank, who will be responsible for the technical aspects of con- struction (Section 3.01 (c) of the Loan Agreement). To ensure timely imple- mentation of the project, according to detailed timetables agreed during nego- tiations, the Government, through the Prime Minister's Office would convene coordinating meetings of all agencies concerned at least once every three months. 55. The proposed project would be implemented over a period of about five years. Selection and acquisition of sites are underway and should be completed in March 1977. The final design of the first group of project items would be completed by May 1977. Procedures for awarding civil works contracts will begin in June 1977 and continue through June 1978. Construction of the first schools is expected to begin by the end of 1977. Construction and equipment installation are expected to be completed by the end of 1980. Procurement 56. Civil works contracts would be awarded on the basis of international competitive bidding in accordance with Bank guidelines. Detailed lists of furniture and equipment would be presented for the Bank's review and approval prior to procurement. These lists would identify all items or categories of items costing more than US$10,000, the residual items being included in one miscellaneous category not exceeding US$100,000 for each institution. Items would be grouped to the extent possible to form sizeable packages to permit bulk procurement. Furniture and equipment contracts, except for the items included in the miscellaneous category, would be awarded on the basis of international competitive bidding in accordance with Bank guidelines. Local manufacturers of furniture and equipment would be allowed a margin of prefer- ence equal to the existing rate of customs duty applicable to competing im- ports or 15 percent of C.I.F. price, whichever is lower. Contracts for the - 15 - items in the miscellaneous category would be awarded under normal government procurement procedures which are satisfactory to the Bank and which would in- clude price quotations from at least 3 suppliers. Nearly all equipment is expected to be obtained from foreign manufacturers, although about 50 percent of the furniture contructs might be won by local firms following international competitive bidding. Disbursements 57. Disbursements would be on the basis of: (i) 100 percent of the C.I.F. cost of imported furniture and equipment or 100 percent of the ex- factory price for loca]Lly manufactured furniture and equipment for contracts awarded under ICB; (iii 70 percent of the purchase price of furniture and equipment of foreign origin but procured locally; (iii) 50 percent of ex- factory price of localLy produced furniture and equipment not tendered under ICB: (iv) 85 percent of the total expenditure for technical assistance; (v) 50 percent of the totaL expenditure of the consultant fees for the engineer- ing preparation studies; (vi) 26 percent of total expenditure for civil works; and (vii) 16 percent of consultant architect fees. These percentages would be adjusted as necessary in order to distribute disbursements over the im- plementation period. PART V - LEGAL INSTRUMENTS AND AUTHORITY 58. The draft loan agreement between the Bank and the Government of Morocco, the Report of the Committee provided for in Article II, Section 4 (iii) of the Articles of Agreement and the text of a resolution approving the proposed loan are being distributed to the Executive Directors separately. The draft loan agreemenit conforms to the normal pattern for loans for education projects. 59. The appointm,ant of a programming officer and of an architect to the Project Unit (paragrapli 54) would be additional Condition of Effectiveness (Section 5.01, draft Loan Agreement). 60. I am satisfiead that the proposed loan would comply with the Articles of Agreement of the Bank and with the established criteria for Third Window loans. PART VI - RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President go a) tic Cid 0. cn 44 0 1-4 r-4 Oa CL4 li99 i 1: iii i9ii bi 9 j411 9 9' 9,7 1 1 9 1 1 9 9' 1 9999 91-!9 ;j.A Z ::11- 91 .1;:1 .1 I 2 .1 2 r 2.1 ! 43 ..... ... .... .. ... .... 'w'A .3i iij % is 9 9 9i :91 i I r 9 ij Ififfi Z] 7; HS 9 ZU -1 -- a .1 V, ,  '. 4 Z,:! L 2 1- zt- Z' H 6i I'll I -;;n SO i, a 5 . .......... 3!t. 4- -as g.2-- .4. Z! I 315:- Ai- fli2w v: 1IM-P! 2-112. Annex I Page 2 of 3 Pages ECONOMIC DEWELOFREIT MU& (Amounts in millions of U.S. dollarsa) Act,.l Eat1mtes Projected Aummsa Growh -Rates _ Percent Of 196 1972 197 197 1975 1976 1977 198o 968-72 *-*fl GDP 1974 NAT_iONAL ACCOUNTS (1974 Prices) Gross DomesTtic Product. 4549 5961 6121 6726 7114 7567 8061 9870 5.6 6.3 6.6 100.0 Gais fom erm ofTrde (+) -133-317 0 j69 -20 -554 --- Gross Domestic Income 441 5593 5 67TM28 9-316 3. 7. .6 100.0 Imports (intl. NFS) 1404 1587 1978 2163 2833 2503 2690 341.6 2.5 11.1 7.9 32.1 Exports (import capacity) 1251 -15'14 1863 2115 1978 2424 261 2688 4.2 11.3 4.1 31.4 Resource Gap 153 53 115 48 855 79 73 728 - - - 0.T consumption Expenditures 3991 4972 5299 578 p419 6361 6697 8019 32 53 568. Gross fixed investment 569 697 715 959 1f602 1216 1387 1960 4.1 14.8 12.6 14.3 Domestic Savings 426 621 508 945 856 1275 1364 1296 7.9 17.1 5.4 14.1 National Savings 422 736 729 1230 1252 1535 1631 1565 11.8 17.3 4.1 17.6 EXTERNAL TRADE Petre-t of (Current prices) total 1974 Imports Foodstuffs 143 136 262 420 658 401 398 473 -1.0 24.0 2.0 19.4 Petroleum 25 56 74 258 268 360 434 735 17.5 41.7 19.1 11.9 Intermediates 166 307 437 711 732 988 1182 2029 13.1 31.0 19.1 32.9 Cap.ital goods 105 154 20? 326 639 553 634 984 8.0 32.7 20.5 15.1 Consumer goods 79 124 168 192 263 252 283 423 9.4 17.9 14.1 8.9 Non-factor services 102 199 ..,8 a.56 .239 . 408 628 14.3 1. 16.2 11.8 Total 620 977 1 02163 2799 2907 3338 5273 9.5 27.9 16.0 100.0 Exports Phosphate 108 146 192 932 854 1371 15999 1673 6.2 61.2 10.2 44.1 Agricultural products 238 357 517 463 439 488 529 739 8.4 8.2 8.1 21.9 Other minerals 41 44 62 100 61 118 142 200 1.4 26.4 12.3 4. Manufactures 37 93 140 197 22 288 341 562 20.2 29.7 19.1 9.3 Non-factor services 129 302 39 422 3 549 6 7 18.6 i6.0 15.1 20.0 Total 553 943 1301 2115 1952 2815 3246 4150 11.3 _2r 11.9 TOO. 0 Trade indices (1974.1.000) Export price index 0.463 0.522 0.s61 1.000 1.077 1.195 1.231 1.280 2.4 18.7 4.2 Import price index 0.512 0.647 0.656 1.000 0.987 i.161 1.240 1.544 4.8 13.9 7.5 Terms of trade 0.904 0.807 0.855 1.000 1.091 1.029 0.922 0.828 .2.1 4.2 -3.2 VALUE ADDED BY SECTOR (Share of GDP at C?tu5mt pricfes) (Constant 1974 prices) Agriculture 27.4 27.8 24.4 22.7 2. 171 16.2 15.1 5.9 1.7 3.0 Mining 5.2 5.2 5.8 14.3 12.2 18.3 14.9 12.5 5.6 8.1 8.6 other industry 20.3 20.4 21.6 19.0 21.7 21.4 21.9 23.4 5.7 8.7 8.6 Services 47.1 46.6 48i2 44.0 45.9 46.2 47.0 49.0 5.3 7.0 6.8 puILIC FINANCE (Annual data at current prices and exchange rates) pae ...nt of (Central Government) GOP 1974 Current receipts 453 773 1013 1628 2096 . . ... 24.2 Current expenditures 415 729 882 1479 1984 . . ... 22.0 Budgetary savings 37 44 131 149 112 i .2 Investment expenditures 212 259 294 512 854 . . ... 7.6 CURRENT EIXPENDITURE DETAILS Ata Es.DETAIL ON CENTRAL (As j Total Current Expend.) 196 1972 L974 9195 GOVERNMEN Education 261 2.2 31.1 17.1 15.1 INVESTMEN 192;17 Other Social Services i1.6 -4.T 9.2 5.6 4.5 Agriculture23 29.2 Agriculture 8.0 7.2 7.1 4.3 3.6 industry and mining 130 16.1 Other Economic Services 6.3 5.3 4.8 2.8 2.6 Economic infrastructure 105 13.0 Administration and Defense 31.3 30.9 31.2 18.5 15.6 Education and training 69 8.5 Other 16.7 18.7 16.6 51.7 58. Other social sectors 76 9.4 Total Current Expentditures 100.0 100.0 100.0 100.0 100.0 Admiuistration and security 102 12.6 ____________ ___________ ___________ ___________ ___________ ___________ Regional development 52 6.4 UnLclassified 4.8 SELECTED INDICATORS 1968- 1973- 1975- Total 8 100.0 1972 111 1980 Average ICOR 2.4 2.3 2. FINACING import Elasticity 0.5 1.8 1.2 Public sector savings 280 34.7 Average National Savings Rate 12.8 18.2 17.1 Externkal borrowing 42 5.2 Marginal National Savings Rate 0.3 0.4 0.1 Domestic borrowism 486 60.1 Total financing 100.0 LABOR FORCE AND Total Employment Value Added Per Worker 1960 Prices -i Ext. Rates) OUTPUT PER WORKER In Thousands - 1o Tota60-71 U;...L Dllarsi1n Percent of Average 1960-71 1960 1971 1960 1971 Grouh Rat. 1960 1971 1960 317I Growth Rate Agriculture 1.F4 1988 ~ .i 54.7 0.7 -w4- S1.8 'a 66F 3.0 Industry 369 593 12.5 16.3 4.4 1328 1354 192.2 154.6 0.1 Services 641 895 21.7 ~4-7 3.1 1393 1538 201.6 177.2 1.0 Unclassified 1fnr 155 3. 4. - Total 2,950 3,632 100.0 100.0 1.9 6r91 100.0 100.0 2.2 Unemployment 305 349 - - 1.2 not applicable not available - nil or negligible AANC OP PAYICA KIXTRBAL AS5ISTANCE AID MEBT Atsma r (ounts in Millions of U.S. dollar at curr ant prices) Page 3 of 3 pate 'Actual t. Projected SUMaMI o0 BALANC OF PAYMNT 1980 Rport., tool. NP5 553 943 1301 2115 1042 2815 3246 4150 lmorts, *ocl. m -620 -977 -1380 -2163 -L99 2907 -3338 -5273 Resource balance -67 -34 -79 -48 -847 -92 -92 -1124 Net factor ervices -37 38 138 266 421 291 323 401 Itterest receipts 3 9 11 24 34 49 60 65 Interest paymets -27 -38 -40 -44 -41 -72 -85 -143 Net investnt incoee -22 -28 -38 -31 -46 -38 40 -50 Workers resittonces 41 139 249 356 481 399 440 592 Other (net) -42 -44 -44 -39 -7 -48 -51 -63 Currest transfers (net) 35 43 46 19 -25 24 25 31 Current account balance -69 47 105 237 -451 221 256 -691 Private direct invest. (net) 10 24 11 5 6 6 7 10 Public MILT loans Disbursements 88 111 82 148 481 243 357 774 Repayents -29 -79 -79 -82 -121 -121 -160 -321 Net dieburseents 59 32 3 66 360 122 197 453 Short-term capital (net) -15 -35 -75 -158 155 -96 -114 -22 Capital n.e.. -4 7 -13 -27 - - - Change in reserves 19 -75 -35 -123 -50 -254 -345 250 Levl of reaervea - aunt 90 256 331 454 504 758 1103 957 - soothe' i1ports 1.7 3.1 2.9 2.5 2.0 3. 1 4.0 2.2 CRANT AND LOAN CO0IDEENT5 Official grant 23 17 40 42 47 10 SO Total public M+LT loans 177 168 553 111 523 977 IBRD/IDA . 97 49 141 120 120 140 Other isternl institutions - 4 38. 27 29 36 GCovrMeonta - 'IO 248 281 302 374 Suppliers' credits 61 4 31 63 72 248 PFinncial institutifons . 19 11 97 - - 179 EXTERNAL DSBT Actua.l Debt Outstandisa on Dec. 31. 1974 Actual tot Df bi1Qed On Percent 1967 1972 1975 1974 1975 World B-Rk 148 14.2 DEBT AND DEBT SERVICE IDA 26 2.5 Public Debt Out. + Disbursed 490 896 977 1043 1336 Other Multilateral 7 0.7 Goverments 691 66.2 Intocost on Public Debt 17 38 40 44 41 Suppliacs 79 7.6 Repa-yents o Public Debt 29 79 79 77 97 PFinancial Ioetitutions 64 6.o Total Public Debt Service 46 117 119 121 13P Bonds - - Oth r Debt Sorico (net) Public Debt.s.e.i 29 2.8 Total Debt Service (net) 46 117 119 121 138 Total Public M+LT Debt !043 100.0 Burden on report tarnings (%) Other M+LT Debte Short-term Debt (dib. only) Public Debt SIoic. 8.3 12.4 9.1 6.0 5.7 Total Debt Sorvice 8.3 12.4 12 1 6.0 5.7 TDS + Direct Inne.t Inc. 12.3 15.4 12.1 T.4 7.2 Average Terms of Public Debt Ilt. as % Prior Year DOD 2.4 4.4 4.5 3.8 3.0 Amert. ae % Prior Year DOD 6.5 9.1 8.8 7.8 7.4 IBRD Debt Out.ndDisbursed IBRD as % Public Debt OD 6.0 9.5 10.8 14.2 14.4 IBRD as % Public Debt Service 5.7 10.7 14.4 12.1 13.7 IDA Debt OutoodDiAbursed IDA as % Public Debt 0 0.0 1.7 2.4 2.5 2.1 ISA as % Public Debt Service 0.0 0.1 0.2 0.1 0.1 not available -nil or negligible ANNEX II Page 1 of 5 pages THE STATUS OF BANK GROUP OPERATIONS IN MOROCCO A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of January 31, 1976) Loan or US $1 Million Credit Amount (less cancellations) Number Borrower Purpose Bank IDA Undisbursed Seven Loans fully disbursed 111.9 79 1965 Kingdom of Morocco Education 10.2 --- 167 1969 Kingdom of Morocco Highways 7.3 --- 642 1969 Kingdom of Morocco Highways 7.3 0.2 643 1969 Kingdom of Morocco Irrigation 46.0 15.4 704 1970 CIH DFC (Tourism) 8.8 0.1 266 1971 Kingdom of Morocco Education 8.5 7.8 848 1972 CIH DFC (Tourism)15.0 7.4 850 1972 ONEP Water Supply 48.0 16.3 338 1972 Kingdom of Morocco Agriculture 10.0 --- 861 1972 CNCA Agriculture 24.0 6.0 890 1973 BNDE DFC 24.0 1.2 936 1973 ONE Power 25.0 6.3 955 1974 Kingdom of Morocco Highways 29.0 23.4 1017 1974 Maroc-Phosphore Industry 50.0 12.8 1018 1974 Kingdom of Morocco Agriculture 32.0 20.2 1061 1974 BNDE DFC 30.0 22.2 555 1975 Kingdom of Morocco Agriculture 14.0 14.0 1123 1975 Kingdom of Morocco Agriculture 18.5 18.5 Total 469.5 50.0 171.8 of which has been repaid 66.9 Total now outstanding 402.6 50.0 Amount sold 1.3 of which has been repaid 1.3 Total now held by Bank and the IDA* 402.6 50.0 Total undisbursed 150.0 21.8 171.8 Prior to exchange adjustment B. STATEMENT OF IFC INVESTMENTS (as of January 31, 1976) Amount in US $ Million Year Obligor Type of Business Loan Equity Total 1962 BNDE Development Bank -- 1.5 1.5 1966 CIL Canning Factory 0.9 0.5 1.4 Total gross commitments 0.9 2.0 2.9 less cancellations, terminations, repayments and sales 0.8 0.7 1.5 Total commitments now held by IFC 0.1 1.3 1.4 Total undisbursed ANNEX II Page 2 of 5 pages C. PROJECTS IN EXECUT]ON - Ln. No. 642 and Cr. No. 167 First Highway Project: US$14.6 million of November 13, 1969; Date of Effectiveness: May 22, 1970; Closing Date: December 31, 1975. The project suffered from initial delays; however. construction was completed in late 1973 amd within the estimated cost. By September 1975, $0.2 million was still tndisbursed out of the combined credit/loan, mainly because of cumbersome Government disbursement procedures. The original closing date has been extended three times, from the original date of February 28, 1974. Ln. No. 643 Rharb-Sebou Irrigation Project: US$46 million Loan of November 13, 1969; late of Effectiveness: June 8, 1970; Closing Date: November 3C, 1978. Progress in inmplementing the project is now satisfactory although considerable problems were first experienced with management and procurement, and some procurement difficulties continue. The major project structure, Idriss ier Dam, is completed and equipment of 13,200 ha out of a total of 35,000 ha is completed. Additional infrastructure for the project area, in- cluding a sugar cane processing factory and flood protection works, are being provided by Loan No. 1018-MDR. Ln. No. 704 First Hotel. Development Project; US$10.0 million of August 12, 1970; Date of Effectiveness: January 28, 1971; Closing Date: December 31, 1975. Disbursements and commitments were initially lower than originally expected, as construction of some hotels ran into difficulties in 1971-73. As a result, the original closing date of December 31, 1973 was extended, and $1.2 million was cancelled from the loan. With returning confidence and re- newed investment activity, project execution substantially improved in 1974. The loan is now fully committed, but a further postponement in the closing date has been necessary to complete disbursements. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 of 5 pages Cr. No. 266 Second Education Project: US$8.5 million Credit of August 18, 1971; Date of Effectiveness: December 10, 1971; Closing Date: April 30, 1976. The project included the expansion and improvement of specific sec- tions of the secondary, vocational and higher educational systems of the Borrower, and technical assistance for project administration and school main- tenance. Subsequently the Association agreed not to finance two Vocational Training Centers and the Department of Veterinary Medicine. Accordingly, an amount of about US$0.9 million has been transferred to the unallocated cate- gory for future reallocation and/or cancellation. Initial delays occurred in the appointment of consultant architects, in the recruitment of local personnel and technical assistance experts for the Project Unit, and in pro- curement. However, execution is now proceeding satisfactorily, and all civil works contracts under the project have been awarded. Physical execution of the project is forecast for completion by the end of 1976, about one year and a half later than originally planned, and an extension of the closing date will be necessary. Ln. No. 848 Second Hotel Development Project; US$15 million of June 30, 1972; Date of Effectiveness: November 1, 1972; Closing Date: December 31, 1976. Commitments initially lagged behind expectations, as in the case of Loan No. 704, due to sluggish investment activity, but the loan should be fully committed by December 1975, as against the appraisal estimate of year-end 1973. A third loan is now being appraised. Ln. No. 850 Water Supply Project; US$48 million Loan of July 19, 1972; Date of Effectiveness: May 2, 1973; Closing Date: December 31, 1977. The dam which was the major component of the project was inaugurated in August 1974. All project elements are being completed on schedule except for the treatment plant and the training school, which are both about six months behind schedule. The financial position of the Borrower, Office National de l'Eau Potable (ONEP), is satisfactory. In early 1976 consultants are due to complete a tariff study which will assist in improving ONEP's long-term finan- cial performance. Consultants should be engaged shortly to undertake a manage- ment study for ONEP. Ln. No. 861, Cr. No. 338 Second Agricultural Credit Project; US$34.0 million of October 10, 1972; Date of Effectiveness: February 2, 1973; Closing Date: August 31, 1976. The project has been progressing satisfactorily and disbursements had reached US$23.3 million by the end of September 1975. The Caisse Nationale de Credit Agricole (CNCA) increased its lending rates in September 1975; as a result, the total of sub-loans which qualify for reimbursement under the Bank loan has increased, and disbursements are likely to be completed by March 1976 in line with the appraisal forecast. ANNEX II Page 4 of 5 pages Ln. No. 890 Sixth BNDE Project; US$24 million of May 14, 1973; Date of Effectiveness: September 10, 1973; Closing Date: December 31, 1976. The loan was fully committed by May 1974, about six months earlier than expected, due to rapid improvement of the investment climate since mid- 1973. Disbursements are also running slightly ahead of the appraisal estimate and should be completed by the end of 1975. Ln. No. 936 Power Project; US$25 million of October 5, 1973; Date of Effect- iveness: January 23, 1974; Closing Date: December 31, 1976. Execution of the project was completed in mid-1975, and disbursements are likely to be completed 6 months behind the appraisal estimate. The Gov- ernment has undertaken to increase tariffs by the end of 1975 in order to comply with the rate of return covenant of the Loan Agreement. Ln. No. 955 Second Highway Project; US$29 million of January 11, 1974; Date of Effectiveness: May 21, 1974; Closing Date: June 30, 1977. Construction of the Rabat-Casablanca expressway began in early 1975, 8 months behind schedule; the contract was awarded for the equivalent of about $21 million, 20 percent above the appraisal estimate. Purchase of maintenance equipment and work on the highway improvement programme are proceeding satis- factorily, close to the appraisal cost estimates. The urban traffic and trans- port study in the towns of Casablanca and Rabat is now under way. The Govern- ment has recently invited consultants' proposals for technical assistance for the establishment of a Transport Planning Office in the Ministry of Public Works. Ln. No. 1017 Phosphoric Acid Project: US$50.0 million of June 27, 1974; Date of Effectiveness: February 27, 1975; Closing Date: June 30. 1977. Progress in project execution is good, although there is likely to be a delay in completion of one to three months, due to a delay in the civil works component of the turnkey contract. Commercial operations of the first production unit are presently scheduled to start in early 1976, and construc- tion of all units should be completed by October 1976. Ln. No. 1018 Sebou II Development ProJect: US$32.0 million of June 27. 1974; Date of Effectiveness: February 28. 1975; Closing Date: June 30, 1979. The sugar cane processing factory was commissioned in June, 1975, one month later than originally scheduled, but in time to process the 1975 harvest. Construction of the flood protection dykes and project area roads is on schedule. The studies of pollution control and the incidence of bilharzia on the Rharb plain have not yet been started. ANNEX II Page 5 of 5 pages Ln. No. 1061 Seventh BNDE Project; US$30 million of December 20, 1974; Date of Effectiveness: January 15, 1975; Closing Date: December 31, 1978. About half the loan amount has been committed. Disbursements amounted to $4.7 million at end-September, 1975, ahead of the appraisal fore- cast. Ln. No. 1123 Souss Groundwater Project; US$18.5 million of June 11, 1975; Date of Effectiveness: September 26, 1975; Closing Date: June 30, 1980. Project execution has begun on schedule. The project unit has been created, its staff appointed, and the project co-ordinating committee has been established. Cr. No. 555 Meknes Agricultural Development Project; US$14.0 million of June 11, 1975; Date of Effectiveness: November 14, 1975; Closing Date: March 31, 1981. Project execution is somewhat behind schedule due to staff con- straints and organizational problems which are presently being reviewed with the Government. ANNEX III Page 1 MOROCCO THIRD EDUCATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Kingdom of Morocco. Amount: US$25 million equivalent in various currencies. Terms: 25 years including seven years of grace with in- terest at 4-1/2 percent per annum. Project Description: The proposed project which supports Morocco's program of reforms in the education sector comprises the following: 1. Design, construction and equipping of 47 primary schools (9,400 student places), 5 secondary schools (6,000 student places), 1 secondary teacher training college (275 student places), 1 hotel training school (180 student places), 4 hotel training centers (540 student places), 1 rural development and extension training center (120 student places), 1 college of public health (replacing 780 student places), 1 medical technicians school (80 student places) and 3 health training centers (240 student places). 2. Detailed preparation and design for 5 technical colleges (4,000 student places), 1 applied engineer- ing institute (240 student places) and 1 technical teacher training college (470 student places) and demonstration school (390 student places). 3. Equipment for a computerization unit. 4. Technical assistance (49 man/years) to operate the computer unit, prepare a national program for technical education and vocational training, develop curricula, train trainers, bridge the gap in training needs and help in physically implementing the project; and fellowships (5.5 man/years) for computer techniques and mass media development training. ANNEX III Page 2 Estimated Cost Millions of US$ Local Foreign Total - General Education 14.54 7.83 22.37 of which: 47 Primary Schools (6.12) (2.66) (8.78) 5 Secondary Schools (7.40) (4.63) (12.03) Teacher Training College (1.02) (0.54) (1.56) - Hotel Training 3.59 3.43 7.02 of which: Hotel School (0.74) (0.71) (1.45) 4 Hotel Training Centers (2.85) (2.72) (5.57) - Rural Development and Extension 0.97 0.71 1.68 Training Center - Health Training 2.25 1.26 3.51 of which: College of Public Health (1.79) (0.91) (2.70) Medical Technicians School (0.10) (0.10) (0.20) 3 Health Training Centers (0.36) (0.25) (0.61) - Detailed Preparation and Design 0.59 0.60 1.19 of which: 5 Technical Colleges (0.43) (0.43) (0.86) Applied Engineering Training Institute (0.06) (0.07) (0.13) Technical Teacher Training College and Demonstration School (0.10) (0.10) (0.20) - Computerizing Data Processing Unit 0.07 0.52 0.59 - Consultant Services and Fellowships 0.31 1.77 2.08 of which: Project Implementation (0.04) (0.26) (0.30) Curricula Development and Trainers (0.27) (1.51) (1.78) - Contingencies 12.84 8.26 21.10 of which: Physical (2.19) (1.88) (4.07) Price (10.65) (6.38) (17.03) GRAND TOTAL 35.16 24.38 59.54 Financing Plan Millions of US$ Bank 25.00 Government 34.54 Estimated Disbursements: Millions of US$ FY77 FY78 FY79 FY80 FY81 Annual 0.60 0.98 8.98 12.05 2.39 Cumulative 0.60 1.58 10.56 22.61 25.00 ANNEX III Page 3 Procurement Arrangements: International competitive bidding for civil works equipment and furniture in accordance with Bank's Guidelines for Procurement 15 percent preference for local suppliers of furniture and equipment. Detailed lists of equipment and furniture identi- fying all items or categories of items costing more than US$10,000 would be presented for Bank's review and approval prior to procurement. Resi- dual items included in miscellaneous category not exceeding US$100,000 for each institution. Nearly all equipment and 50 percent of furniture expected to be obtained from foreign manufacturers. Consultants: Services of local architectural firms employing both local and foreign architects. Appraisal Report: 1059-MOR of February 25, 1976. / <{L"G&Eretr,NYcZ E cHY_ SOVIEt MA_AGA_ 4 U, FEBRUARY 1976 At /o, tic FR I, '..U-YROMANIAO e. 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