Document of The World Bank FOR OFFICIAL USE ONLY Report No. 67694-MA INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR THE KINGDOM OF MOROCCO FOR THE PERIOD FY1O-13 May 15, 2012 Maghreb Department Middle East and North Africa Region International Finance Corporation 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 AND EQUIVALENTS (Exchange Rate as of April 25, 2012) Currency Unit = Moroccan Dirham US$1 = 8.4 MAD FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activity MDG Millennium Development Goal AFFI Arab Financing Facility for Infrastructure M&E Monitoring and Evaluation ALMP Active Labor Market Policy MFNA Middle Fast and North Africa ANSA Arab Network for Social Accountability MFJ Microfinance Institutions AWl Arab World Initiative MICNT Ministry of Industry, Trade and New Technologies CIP Contrat d Integration Professionnelle MOF Ministry of Finance CCT Conditional Cash Transfer MSMF Micro, Small and Medium Fnterprises CPS Country Partnership Strategy NGO Non Governmental Organization CPS PR Country Partnership Strategy Progress Report NBFRC National Business Fnvironment Reform Commission CSO Civil Society Organization NPL Non-Performing Loan CSP Concentrated Solar Power OBA Output-based aid DPL Development Policy Loan PARL Public Administration Reform Loan EBRD European Bank for Reconstruction and Development PFR Public Fxpenditure Review ESW Economic Sector Work PJD Parti de la Justice et du D&veloppement [Justice and Development Party] EU European Union PPP Public Private Partnerships FDI Foreign Direct Investment P-for-R Program for Results FTA Free Trade Agreement PNDM National Solid Waste Program FY Fiscal Year PSD Private Sector Development GDP Gross Domestic Product QSDS Quantitative Service Delivery Survey HCP Haut Commissariat au Plan [High Commission for Planning] SME Small and Medium Fnterprises HR Human Resources SWN Solid Waste Management IBRD International Bank for Reconstruction and Development TA Technical Assistance ICT Information and Communication Technology TOR Terms of Reference IDF Institutional Development Fund IFC International Finance Corporation INDH Initiative Nationale pour le D&veloppement Humain [National Initiative for Human Development] IBRD IFC Vice President Inger Andersen Dimitris Tsitsiragos Director Simon Gray Mouayed Makhlouf Team Leader Eavan O'Halloran Joumana Cobein The CPS Progress Report was prepared by a team led by Eavan O'Halloran under the guidance of Simon Gray, with significant contribution by Bachir Abdaym. Other team members include Laila Moudden, Micheline Faucompr6, Joelle Businger, Kathleen So Ting Fong, Gloria La Cava, Tara Vishwanath, Luis Alvaro Sanchez, Fabian Seiderer, Jeffrey Waite, Nadine Poupart, Michael Hamaide, Will Stebbins, Dale Lautenbach, Jonathan Walters, Abdelmoua Ghzala, Olivier le Ber, Santolina Savannet, Cedric Mousset, Philippe de Meneval, Guenter Heidenhof Stefano Patemostro, Khalid El Massnaoui, Silvia Pariente-David, Xavier Chauvot de Beauchene, Jaafar Saadok-Fria, Nandini Krishnan, Umar Serajuddin, Gabriella Izzi, Julian Lampietti, Samia Melhem, Dorothee Chen, Patricia Veevers-Carter, 1btissam Alaoui, Anwar Soulami, Andrea Liverani, Mohamed Medouar, Renaud Paubelle. For the IFC, Joumana Cobein and Kaikham Onedamdy were the principal contributors. TABLE OF CONTENTS Pages I. INTRODUCTION.............1................................1 II. COUNTRY CONTEXT.......................................... 1 2.1 Changes in the Social and Political Context.. ......................... 1 2.2 Social Indicators, Gender and Youth................................ 2 2.3 Recent Economic Developments.. ................................ 3 2.4 Macro-Economic Outlook........................................ 5 2.5 Government Program.......................................... 5 III. ASSESSMENT OF THE IMPLEMENTATION OF THE CPS.............. 6 3.1 Progress in Achieving the CPS Objectives.. .......................... 6 3.2 Overview of CPS Implementation.. ............................... 8 3.3 Lessons Learned ............................................. 11 IV. THE CPS PROGRAM GOING FORWARD .......................... 13 4.1 Supporting More Ambitious Reforms................................ 13 4.2 Preparing for Greater Consolidation of the Program... ................ 17 4.3 Lending Pipeline.............................................. 18 V. RISKS............... ................................. ...... 18 5.1 Political and Governance Risks ................................... 18 5.2 Macro-Economic Risk ......................................... 19 5.3 Financing Risk.............................................. 20 5.4 Institutional Capacity Risk...................................... 20 ANNEXES: Annex 1: CPS Results Matrix ........................................... 21 Annex 2: Macro-Economic Issues........................................ 46 Annex 3: CPS Lending Program......................................... 54 Annex 4: AAA Program............................................... 55 Annex 5: Trust Fund Management........................................ 59 Annex 6: Outreach Events - Civil Society Engagement.. ....................... 61 CPS STANDARD ANNEXES: Annex Al: Morocco at a Glance............................................ 65 Annex B2: Selected Indicators of Bank Portfolio Performance and Management............ 68 Annex B5: Social Indicators............................................... 69 Annex B6: Key Economic Indicators....................................... 70 Annex B7: Key Exposure Indicators........................................ 72 Annex B8-1: Operations Portfolio (IBRD and Grants) ............................. 73 Annex B8-2: IFC Committed and Disbursed Outstanding Investment Portfolio..... ....... 74  KINGDOM OF MOROCCO COUNTRY PARTNERSHIP STRATEGY FY1O-FY13: PROGRESS REPORT I. INTRODUCTION 1. This Progress Report assesses implementation of the joint Bank-IFC Morocco Country Partnership Strategy (CPS) for FY10-13 that was presented to Board in January 2010. The CPS focuses on three pillars: (i) growth, competitiveness and employment; (ii) service delivery to citizens; and (iii) sustainable development in a changing climate. It was designed to be flexible and is firmly anchored in the MENA Regional Strategy as well as the Arab World Initiative. 2. With the wave of change sweeping across the MENA region, the socio-political context of Morocco has changed since the CPS was prepared. Morocco has experienced its own unique version of the Arab Spring, characterized as more of an accelerated evolution rather than the revolutions and other dramatic events in other MENA countries. Even before the Arab Spring, Morocco had already engaged on a wide-ranging reform program and had other advantages that made it better placed to respond to the calls from the street. Moroccans point to their long history as a nation, the steadying role of the Monarchy, their own brand of moderate Islam and their business and social ties to Europe that collectively set it apart from many of its neighbors. Nevertheless, many of the economic and social issues that are at the core of the Arab Spring are also at play in Morocco-frustration of the population over poor governance, social and economic exclusion, demand for dignity and voice, inequality and unemployment. These challenges were accounted for in the CPS and are now more sharply at play than ever. 3. This CPS Progress Report (CPS-PR) assesses the implementation of the Bank's program, including the impact of the country changes. It confirms the importance of the flexible program that to date has proven relevant to adapt to country circumstances and client demand, and, more recently, to ensure alignment with the new Government's priorities. This flexible approach allows the CPS program to be adjusted to respond to the new dynamic post-Arab spring context and the MENA regional strategy of doing things differently, as well as to the Government's ambition to accelerate reform implementation. In this framework, the CPS PR proposes areas of increased focus for the Bank's program including growth, employment and competitiveness, governance, inclusion and voice, and subsidy reform. II. COUNTRY CONTEXT 2.1 Changes in the Social and Political Context 4. The wave of protests that has swept the MENA region since the start of the Arab Spring has enveloped Morocco, showing the powerful consequences of exclusion and high levels of youth unemployment. Unemployment is the main social, political and economic issue. Morocco still has a lot to do to improve its social indicators which remain relatively low compared to the MENA average (Box 1) and it particularly needs to make major progress to address inequality and vulnerability. A quarter of the population is considered living in poverty or under constant threat of poverty and Morocco's Gini coefficient measuring inequality has remained high at 0.41 for the last 10 years. Moreover, recent information on youth unemployment and women's lack of participation in the labor force is highlighting how these two groups are excluded from economic opportunities. Less than half of the population aged 15 and over, and between 15-26% of women, participated in the labor market in 2010 (estimates vary depending on the survey mechanism). The official unemployment rate is 8.9% but is three times higher for the 15-24 age group. These conditions, combined with the push for greater voice and dignity as part of the Arab Spring, provided fertile ground for frustration among the population. 5. Morocco's experience with the Arab Spring has been a reasonably peaceful one with well- conducted demonstrations and only sporadic outbursts of violence. The social protests, known as the "February 20 Movement", called for political change, a curbing of corruption and a more inclusive development process. King Mohammed VI responded by proposing, in March 2011, a broad and comprehensive package of political reforms that gathered the support of the population through a constitutional referendum held on July 1, 20111. The new constitution sets the basis for a more open and democratic society, provides mechanisms for the construction of a modem state of law and institutions, and lays the foundation for extended regionalization2. Transparent elections, held on November 25, 2011, were won by the "Parti de la Justice et du Developpement" (PJD), a moderate Islamist party that had traditionally been in active opposition and had seen its support increasing steadily in recent years. The PJD won 27% of the vote, almost twice as much as the second largest political party. The discussions among political parties that followed led to the formation, in early January 2012, of a four-party coalition Government, with the head of the PJD Abdelilah Benkirane becoming the Head of Government. 6. Morocco's Arab Spring underlines its political distinctiveness in the region even though many of the same grievances among the population exist. The changes wrought in the past year have followed on the heels of other reforms already undertaken since the late 1990s. Successive national governments have overseen an impressive political, economic and social transformation, with a marked acceleration of reforms in recent years. Sound macroeconomic management has produced solid foundations, and Morocco is on a recovery path from the stagnation of the 1990s. These gains, however, did not provide total immunity to the rising tide of dissatisfaction and to the pressure from the outstanding development challenges. The constitutional changes have resonated well, although the new governance structure for the country is still to be tested. The country's experience has shown that Moroccans seem more inclined to seek evolution within the system-gradual change that is continuous with the country's history and religious values and that reflects the "social contract" in place. The election of the Islamist party PJD showed that the population was seeking real and sustainable change while working within the system. 7. The new constitutional mandates and the expectations of the population represent real pressure on the Moroccan State for meaningful and quick change. While the people seem to be willing to support the new government and its mandate, they are expecting and indeed demanding that the new government break with the past and usher in more credible and faster reforms, notably in the areas of job creation, governance and improvement in the quality of public services delivered. Morocco is thus on the threshold of potentially profound social, political and economic transformation. If the new Government can manage the expectations voiced by the population and genuinely deliver, then this will go a long way to transforming the social and political landscape of Morocco. 2.2 Social Indicators, Gender and Youth 8. While there has been progress on improving social indicators and decreasing poverty, more effective actions are needed to improve human development outcomes, especially for women. Morocco lags behind regional neighbors and countries with comparable GDP per capita in terms of the Human Development Index. The under-5 mortality rate of 30 per 1,000 live births and the maternal mortality rate of 112 per 100,000 live births are amongst the worst in MENA. The status of women needs to be addressed more comprehensively and with greater commitment in order to ensure real impact on ' The vote in favor of the proposed reforms was 98.5 percent with a participation rate of 73 percent 2 The new Constitution proposes the strengthening of the role of Parliament through greater oversight powers, elevates the Prime Minister status to Head of Government, confirms that the King must appoint the Head of Government from the party winning the largest number of seats in the election, enhances the independence of the judiciary, and establishes institutions for human rights, anti-corruption, integrity, and the Competitiveness Council. It also establishes advanced regionalization as a democratic and highly decentralized system of governance. 2 women's lives. In particular, Morocco needs to bring about significant change in the way social services are delivered and target better those services that have a greater benefit to women (e.g. addressing the high maternal mortality rates, high women's illiteracy, and very low female labor force participation). Box 1: Poverty & Social Indicators * Absolute poverty has decreased sharply from 15.3% to 9% between 2001 and 2007 although economic vulnerability (near-poverty) remains widespread meaning that a quarter of the population - 8 million people - remains either in absolute poverty or under constant threat of poverty. Moreover, the partial closure of the rural-urban gap has not cancelled entrenched disparities: 70% of poverty in Morocco is still rural. In 2007, the urban poverty rate was 4.8% compared to 14.5% in rural areas. (HCP latest data, more recent poverty data is not yet fully validated) * An absolute majority among the poor are working poor: almost 70% of the poor are employed in just two sectors - agriculture and construction - which are characterized by informality. Morocco's labor female force participation rate is one of the lowest in MENA - around 15-26%. (WB sources, figures depend on the survey mechanism) * Inequality has remained high and even increased in both urban and rural areas, and growth for the poor was slower than the average growth and it was still below the levels needed to reduce poverty by half in 20 years. (HCP latest data) * There has been a remarkable increase in access to education, but overall illiteracy rates and gender disparity in access to secondary education remain very high. Around 44% of the total population, 52.7% of women and 72% of rural women are illiterate. In rural areas, only 40 to 50% of first graders complete the 6 years of primary school, with significantly lower rates for girls. Both education quality and learning outcomes lag significantly behind those of other countries with similar income levels. (Ministry of Education data) * Levels of infant and maternal mortality remain high, particularly in rural areas. Lack of adequate local health facilities, combined with poor roads and expensive transport, particularly hurt rural women. Large disparities exist: 92% of births were attended by skilled health personnel in urban areas versus 55% in rural areas (DHS 2010-2011). 9. Morocco is far from achieving the MDG relative to full and productive employment and decent work for women and young people. Youth (aged 15 to 29) make up 30% of the population and 44% of the working age population (aged 15 to 64), but have been largely excluded from the sustained economic growth the country has experienced in the last decade. Though the youth unemployment rate is high, averaging about 22% among males and 38% among females3, it only provides a partial picture of young people's exclusion from economic life. Gender disparities in employment are glaring in all age groups. In 2009-2010, a World Bank Household and Youth Survey4 estimated that close to 90% of young women and about 40% of young men who were not in school were either unemployed or out of the labor force, suggesting that progress in educational attainment has not translated into effective transitions to the labor market. In addition, the bulk of unemployed youth have little or no education: almost 80% have less than secondary education (or no education at all). Young men and women who do work widely report holding poor-quality jobs, often working without job security or benefits (about 88% of employed youth work informally without a contract), being underemployed (especially in the informal sector, where many jobs are temporary or part-time), and having poor working conditions. 2.3 Recent Economic Developments5 10. Despite the regional upheaval and global economic slowdown, Morocco's economy has performed relatively well during the CPS period, and remained resilient in 2011. It grew at an estimated 4.8 percent in 2011, recovering from 3.7 percent in 2010. The main drivers of growth have been domestic private consumption (up 6.5%) and total investment (up 4.5%). Unemployment slightly decreased to 8.9% due to dynamism of the services and construction sectors. Debt declined steadily from 62% in 2005 to 50.3% of GDP in 2010, before increasing to 52.9% of GDP in 2011. The Government and the central bank showed continued commitment to control inflation through prudent monetary policy, but also through the key policy of subsidizing basic food and fuels. Inflation was low in 2011 (0.9%), the same as 2010, but much less than the average of the last 5 years (1.9%). 3 Note that the unemployment rate refers to the ratio of unemployed young people and young people who are in the labor force. 4 Kingdom ofMorocco: Promoting Youth Opportunities and Participation, World Bank, 2012. See Annex 2 for full details on economic developments 3 11. However, data on budget execution for 2011 show that the budget deficit has reached around 6.8% of GDP, much higher than the targeted 3.5 percent set by the Budget Law 2011 and achieved in 2010 (Table 1). Public expenditure faced significant pressure to address the grievances being voiced on the street by the population and to respond to the impact of the international economic crisis. In addition to the implementation of a public wage rise in early 2011, the high deficit is mainly explained by increasing subsidy expenditures due to high world prices of food and fuels (they were 80% higher in 2011 than in 2010). Subsidies, at 6% of GDP, now represent the most serious contingent liability on public finances. The deficit would have been much higher without the measures undertaken by the government to improve tax revenues and reduce non-priority recurrent expenditures. A major priority of the new Government's program is to bring down the cost of the subsidy system. Table 1- Subsidies in percent of GDP In % of GDP 2007 2008 2009 2010 2011 Food 1.0 1.1 0.7 0.7 0.9 Fuels 1.7 3.5 1.1 2.9 5.1 Total Subsidies 2.7 4.6 1.7 3.6 6.0 12. The trade deficit deteriorated over 2011, from 19.5% in 2010 to 23.1% in 2011, due mainly to the increasing world prices of food and fuels. The performance of exports continued to be lackluster with volumes stagnating in 2011, reflecting their low diversification and the overall lack of competitiveness of the Moroccan economy. The current account deficit also deteriorated, from 4.5% of GDP in 2010 to 8% in 2011; foreign exchange reserves also decreased but remain at acceptable levels. The current account deficit would have been even higher without the good evolution of worker remittances (up 7.6%) and of tourism receipts (up 4.8%). Net international reserves remain at a comfortable level of 5.1 months of imports of goods and services. 13. FDI inflows were good and averaged 4.5% of GDP over the last five years. While gross investment had increased rapidly in the 2000s, to reach a rate of 38% of GDP in 2008, it receded to around 35% of GDP in 2010. Investment has been characterized by confidence with a strong participation of the private sector and State-Owned Enterprises with a share of 63% of the total. Morocco's "investment grade" rating, gained in 2007 from Fitch, was confirmed in 2009. In March 2010, it received the "Investment grade" again from Standard & Poor (BBB- with stable outlook). In September 2010, Morocco successfully completed a ten year bond issue for one billion Euros against a total demand of over Euro 2.2 billion, further attesting to international markets confidence in Morocco's macroeconomic stability. 14. However, overall growth outcomes in Morocco have not been commensurate with the investment effort, suggesting that the continued lack of competitiveness in the economy, poor productivity improvements and existence of monopolies, cartels and special interests create deep- rooted inefficiencies that hamper actual growth performance. As noted above, Morocco's reforms and sector strategies of the past few years have resulted in high investment rates but outcomes have not yet fully materialized in line with what could be expected from such a high rate and there were limited productivity improvements. According to international experience, reaching and sustaining annual GDP growth above 6% requires not only growing investment but also sizable productivity gains. Growth by mid-2012 is decelerating and the room for Morocco to respond to legitimate social aspirations, including those that emerged from the Arab spring, may be narrowing in the near term. In this environment, Morocco will need to rely more extensively on fundamental reforms of its economy than on additional spending to bring about higher growth that will create more jobs and achieve its development aspirations. 4 2.4 Macro-Economic Outlook 15. Morocco has shown good capacity to manage external shocks and its prudent macro- management and sustained reform measures have positioned it better than other countries in the region. The Government's approach is to build consensus on macro-economic management which has proved effective and reassuring, and its track record on implementation has been strong. These factors have allowed Morocco's economy to remain resilient despite the regional upheaval and global economic slowdown. Nevertheless, Morocco is facing a difficult macro-economic context, with some factors beyond its control. Stagnation in Europe in 2012 and slow recovery thereafter is expected to negatively impact Morocco's exports and thus growth. Current 2012 forecasts indicate that growth may also be adversely affected by the agricultural sector (suffering from drought) which accounts on average for about 15% of GDP. The growth rate is expected to reach around 3% in 2012 before improving to about 5% in 20146. This is predicated on the Government sustaining and accelerating the reform momentum, thus consolidating economic diversification, growth potential, and domestic demand. 16. Morocco has recognized that the subsidy system is the main threat to the overall macro- economic framework, especially in the face of sustained high international prices of food and fuel. The Government's plan is to decrease the budget deficit in 2012 to 5.1% of GDP, by incorporating specific measures to contain public spending, further advancing the fiscal reform agenda and increasing revenues, and starting reform of the subsidy system. The expected fiscal deficit in 2012 of 5.1% is considered prudent, in the sense that it recognizes that subsidy expenditures will likely remain high in the short-term because reform of the subsidy system will be complex and take a long time. However, in parallel, the Government's efforts on fiscal control should assist in decreasing the overall deficit. The Government's goal is for the budget deficit to converge gradually to the stated objective of 3% of GDP by 2015-16 as reforms are implemented. Even in the face of external difficulties, the fiscal stance is expected to remain sustainable over the medium term. 17. The external position is expected to remain sustainable over the medium term. The current account deficit is likely to stabilize in 2012 at 6.9 % of GDP and progressively edge down to around 4.5% of GDP in 2016, as the impact of reforms and sector strategies take hold. Balance of payments financing requirements are manageable given the good economic fundamentals, the country's relatively low external debt stock, and still adequate foreign reserves. Additional external lending is consistent with prudent debt management and a recent comprehensive public debt sustainability analysis by the World Bank indicates that the framework remains sustainable. Sound monetary and budget policies will help maintain inflation at around 2%. In sum, Morocco's macro-economic framework remains adequate and sustainable in the medium term. The economic effects of the global uncertainty and the Arab Spring have been muted by good fundamentals and by the Government's current response which is supporting investors' confidence and domestic demand. If compared to the 2008 crisis, the Government has today less margin to maneuver. Nevertheless, its commitment to increase and expand reform efforts supports the current positive view on macroeconomic prospects. 2.5 Government Program 18. The PJD election platform emphasized anti-corruption and set out policy proposals to deliver on good governance, justice, revamping the delivery and quality of social services and improving people's economic inclusion. As part of its mandate, the new Government is charged with implementing the changes in the new Constitution as regards putting in place a new more decentralized system based on separated, balanced and complementary powers. In particular, the new Constitution reinforces the principles of good governance, human rights, protection of individual freedoms, as well as 6 Projections are based on the World Bank Global Economic Prospects 2011 key forecasts. 5 more responsibility and accountability for institutions. These issues are all central to the Government's 2012-2016 program, as declared by the Head of Government Abdelilah Benkirane in January 2012, although many specifics of reform programs have not yet been fully articulated. It is expected that the program will be further articulated going forward, relying on the continued implementation of programs already underway, and launching accelerated programs in priority areas such as subsidy reform. 19. The governance reform focus will be on reform in the delivery of public services, access to information, reform of fiscal system, budget reform, advanced regionalization (i.e. decentralization), and a profound reform of the justice sector. Social solidarity, participation and inclusion are all emphasized with a special focus on youth and families. Improving the transparency of economic and financial governance is given particular mention with a strengthening of the competition counsel and improving governance of state-owned enterprises. Human development is prioritized in the program. The importance of fulfilling the goals of the Education Emergency Plan - adopted in 2009 - is highlighted, especially as regards promoting good governance and the quality of teaching. For the health sector, reducing infant and maternal mortality in order to achieve the MDGs is the main priority, as well as improving the quality of services across the health sector. Supporting the National Initiative for Human Development (known by its French acronym INDH) is also a key element of the plan, as is the need for addressing other social issues such as focusing on women, youth and disadvantaged people. 20. Key areas of priority on the economic front include strengthening the competitiveness of the economy, improving the investment climate, support to SMEs, and encouraging exports. To reach the goal of reducing the unemployment rate to 8% by 2016, the Government program will continue support to employment creation programs undertaken to date and introduction of new programs to insert the unemployed into businesses and associations. Social assistance is also being pursued as part of a broader and more comprehensive overhaul of the social protection and subsidy system. Perhaps the most ambitious aspect of the Government's program is its objective to bring down the cost of the subsidy system which is not only costly, but also inefficient as it benefits mainly the non-poor population. The new Government's plan sets as a priority a full reform of the overall system and the design of a new social protection model that is more cost effective and better targeted. III. ASSESSMENT OF THE IMPLEMENTATION OF THE CPS 3.1 Progress in Achieving the CPS Objectives 21. The CPS has been implemented broadly as expected and the program is on track to deliver on the majority of the foreseen outcomes. The CPS flexible design has proven adequate to remain aligned with the Government's program and allow for adaptation to events. The CPS has 19 program areas which were, at the time of CPS preparation, recognized as being at different stages of development. The evaluation of the Bank's program towards achievement of the CPS objectives is assessed as broadly on track as supported by the full stock-taking of results achieved and progress towards indicators in the results matrix (Annex 1), and on the mobilization of the IBRD program. The results matrix already shows either full achievement of, or at least good progress towards, milestones and outcomes for many sectors. This is summarized in Table 2 where "Substantially Achieved" refers to those areas where targets and milestones have been almost fully achieved already, "On Track" refers to those areas where progress is on track to meet targets and milestones by the end of the CPS period, and "Off Track" refers to those areas where the Bank's program has not evolved as expected and hence the results area is being dropped. The Bank's engagement remains strong in those areas already defined at the time of the CPS and has been firmed up or is growing - sometimes significantly - in the areas under development at that time. The Bank's program has engaged in all of the results areas, albeit at different levels depending on the maturity of reforms and sectoral programs. 6 Table 2: Progress in Achieving the CPS Objectives and Main Activities Program Areas Targeted Progress Main Activities Undertaken towards Objectives Pillar 1: Growth, Competitiveness, Employment Business Environment AAA, new DPL in Competitiveness, IDF grant, IFC Financial Sector Reform AAA, DPL Financial Sector, TFC Skills & Employment AAA, new DPL in Skills/Employment Justice Sector Reform* AAA, new Judicial Performance Enhancement Project Trade & Competitiveness* AAA, new DPL in Competitiveness, IFC ICT* AAA, DPL Public Administration Pillar 2: Service Delivery to Citizens Public Sector Management AAA, DPL Public Administration Quality & Access in Education AAA, DPL Education, Tayssir CCT pilot Health Sector Reform AAA Vulnerability & Social Exclusion AAA, 1NDH 1 Transport AAA, Rural Roads Projects, DPL Urban Transport Agricultural Sector Reform AAA, DPL Plan Maroc Veit, Rainfed Agriculture Project Social Protection Reform AAA, Tayssir CCT pilot Leveraging PPPs* AA uarzazate Project, DPL-2 Solid Waste, FC Pillar 3: Sustainable Development in a Changing Climate Water Management - I~ AAA, Investment Projects in Water & Sanitation, DPL Plan Maroc VeAA , OBA urban water supply/sanitation Low Carbon Energy AAA, IBRD and CTF Ouarzazate Solar Power Project, FC Solid Waste Management AAA, DPL 2 Solid Waste Sector, Carbon Finance Program Climate Change Adaptation* AAA, GEF Project Integrating Climate Change Plan Maroc Vert Cross-Cutting Beams - Governance and Territoriality Public Expenditure AAA, DPL Public Administration, Institutional Development AAA, DPL Public Administration, DPL-2 Solid Waste, DPL Urban Transport, DPL Plan Maroc Vert, new DPL Competitiveness, IFC corporate governance program Governance in Service Delivery AAA, DPL Education, DPL Solid Waste, DPL Urban Transport, DPL Plan Maroc Vert, new DPL Skills & Employment Use of Country Systems AAA, IDF Procurement, Preparation of Program For Results INDH 2, Carbon Finance Program for Solid Waste Strengthen Local Government AAA, INDH 1, DPL-2 Solid Waste, DPL Urban Transport, DPL Education, DPL Public Administration Spatially Inclusive Development 4 AAA, Rural Roads Projects, Projects in Water & Sanitation *Program Areas that were under development at the time of the CPS and for which no specific results matrix was prepared (with the exception of Climate Change Adaptation) Substantially On track to be Of-rc achieved achieved 22. The changes in the results matrix going forward reflect both the pace of implementation progress as well as the emphasis of the new Government and the Bank's program. In some areas, the program did not follow the expected evolution as regards instruments and timing of lending. For example, the health sector engagement didn't evolve as planned due to the Ministry of Health's choice not to engage the Bank in support of the health agenda, and this area is thus dropped from the results matrix. The engagement in Competitiveness has proven to be a key element of the Bank's support so a 7 new results area was added to capture this. The Skills and Employment and the Social Protection results areas were fine-tuned to align better with the actual delivery of the Bank's program. The text of the matrix indicates clearly where each program result area has been revised to reflect the current status of engagement, where priority areas and results were added or fine-tuned, and where additional indicators (vulnerability, exclusion and gender aspects) were introduced. 3.2 Overview of CPS Implementation 23. IBRD lending commitments slightly exceeded the anticipated envelope. The CPS proposed an annual IBRD lending envelope of US$600 million. Since then, IBRD commitments to Morocco will have averaged about $642 million per year across the FY10-12 period: they reached record levels in FY10 at $729.5 million, $480.3 million in FY11 and are expected to be $716 million in FY12. Including the FY12 deliveries to be approved, the Bank will have delivered 7 DPLs, 7 investment projects and 1 Program For Results (P-for-R) in the FY1O-12 period (Annex 3). In addition, the Bank's Analytical and Advisory Activities (AAA) program is broadening and deepening the knowledge base in critical areas (Annex 4), thus informing sector reforms and the preparation of new DPLs and investment programs in many areas. The approach of the Bank has been to carry out AAA and dialogue/advocacy in many sectors before building up the engagement to IBRD financing once the reform program is in place, and sectoral programs are well designed with relevant objectives and indicators. Pursuing several DPLs at once has also allowed the Bank to provide much deeper support to a broader range of reforms than would have been the case had several sectors been bundled into multi-sectoral DPLs. 24. At the same time, the level of disbursements has reached record levels. The increased availability of financial resources during a period of tight financial markets has been a major achievement of the World Bank Group. The Bank's IBRD disbursements have reached record levels - in the 2011 calendar year (the budget year for Morocco) over $710 million was disbursed by IBRD, of which $600 million was in budget support. This was a sizeable increase over calendar year 2010 disbursements that were $270 million (2008 and 2009 disbursements were each about $240 million). Given the expected concentration of DPLs in the IBRD pipeline for calendar year 2012, and assuming satisfactory program performance, the Bank can expect to deliver at least the same level of disbursements in the Government's 2012 budget year as were achieved in 2011. These high disbursements are due mainly to the delivery of DPLs as the investment lending portfolio continues to disburse slowly (see paragraph 26). Box 2: Ouarzazate Solar Power Project - using energy resources to improve competitiveness and create jobs The Ouarzazate I Concentrated Solar Power Plant (CSP) Project supports the development of the 500MW solar power plant through a PPP. This is the first project of the Morocco Solar Plan and is supported by $200 million from IBRD and a CTF allocation of $197 million ($100 million of this CTF channeled through the African Development Bank and $97 million through the World Bank). The MENA CSP initiative, a $5.6 billion program that finances CSP deployment across the region, is one of the programs under the New Partnership for Inclusive Growth in the MENA Regionl| launched at the G8 summit in Deauville in May 2011. The overall objective is to help bring down the global costs of CSP technology, through economies of scale and learning effects from replication. The MENA CSP initiative also aims at generating much- needed employment through technology transfer and local manufacturing. Morocco has decided at the highest level to play a leadership role in the development of CSP thereby initiating a clean energy transformation that shows the world what real financial commitment to solar power can create. It is ideally positioned given its high solar resource base, reasonable investment climate, and proximity to European markets. However, the Ouarzazate project's success depends on solar energy exports to Europe. The World Bank is supporting Morocco in its dialogue with European countries to establish a framework for exports and will provide financial support for the next phases of Ouarzazate (2nd IBRD project in FY14). 25. IBRD lending instruments - range of instruments being used. The use of DPLs has become a defining aspect of the Bank's program as the Government has sought to effectively use this instrument to advance the significant reform agenda in response to unfolding demands. In parallel, the Bank continues to implement sectoral investments encompassing water and sanitation, rural roads, irrigation 8 modernization, and agriculture projects, and delivered $200 million in IBRD funds and $97 million in CTF in support of the Ouarzazate Solar Power project (Box 2). The Bank, through grant funding from the Global Program for Output Based Aid (GPOBA), has also promoted the piloting of innovative output- based aid approaches to extend water services to the poor in peri-urban and rural areas (Box 3). A new and innovative feature of the Bank's program is the proposed use of the Program-For-Results (P-for-R) instrument as the Bank's FY12 support to the INDH 2 program. The P-for-R allows the Bank to respond to the Government's request for greater use of country systems and also supports important aspects of the Bank's program as regards strengthening institutions and developing capacity at all levels, focusing on results, and improving coordination among partners. Box 3: Ouput-Based Aid Pilot to extend Water and Sanitation Service in low-income peri-urban areas. Between 2007 and 2011, the Government and water utility operators in Casablanca, Mekn s and Tangiers implemented a grant from the Global Partnership on Output-Based Aid (GPOBA) to pilot an innovative output-based aid (OBA) approach, the first in the MENA region, to encourage service expansion to low-income peri-urban settlements, where connection fees (priced at marginal cost) were unaffordable. The project paid subsidies to the operators for delivering concrete outputs of network connections to water supply and sewerage services for households. The subsidy was paid only after the outputs were realized and independently verified. The pilot resulted in subsidized access to more than 52,500 people. All parties agree that the OBA approach has proven an efficient tool to extend services in a cost-efficient and sustainable manner. It particularly contributed to improve women and children's living conditions as they were/are the major water provider/manager in the family. A documentary movie was made to capture this good practice example, which the Government is now considering scaling-up nationwide. 26. Portfolio management. Morocco's investment lending portfolio is growing. Only 3 projects under implementation today were part of the portfolio at the time the CPS was discussed. In June 2010, the Bank approved $285 million for 3 new projects in the water, irrigation and sanitation sectors, and in November 2011, approved the Ouarzazate Solar Energy project for $200 million. The IBRD investment portfolio now consists of 7 operations for a total of $839.5 million with an undisbursed balance of $617.6 million (the high undisbursed balance reflects the relative newness of the operations). Performance of the portfolio has been broadly satisfactory with all projects rated Satisfactory or Moderately Satisfactory. There have been notable delays in getting new projects up-and-running due to the lengthy procurement processes and the concentration on capacity building at the start of projects' implementation, particularly for decentralized entities that are responsible for project implementation. Hence, Morocco suffers from a relatively weak disbursement ratio of its investment projects of 21.7% in FY10 and 14.l1% in FY11. 27. AAA. The importance of the knowledge role of the Bank to inform reforms and the accompaniment of reform implementation through TA, capacity building and policy dialogue is a key aspect of the partnership with the country. The approach of the Bank has been to carry out strong AAA that underpins dialogue and advocacy in many sectors, and then builds up the Bank's engagement to DPL or investment financing once the sectoral reform programs are well designed, fully costed and with relevant objectives and indicators in place. In several cases, the Bank's AAA program has encompassed cutting-edge work (see Annex 4) and provided an excellent vehicle for advocacy of critical issues - addressing youth exclusion, social protection reform, poverty analysis, governance issues, scaling up innovative service delivery approaches such as Conditional Cash Transfers (CCT), competitiveness, labor market issues - so the Bank is well placed to partner with the Government in these areas. 28. IFC has scaled up its engagement in Morocco during the CPS period. Since FY10, IFC has committed around $203 million in seven projects (including mobilization and south-south investments) in the financial markets, infrastructure, and mining sectors. IFC has also had a strong and complementary advisory services program for investment climate, microfinance and PPPs in infrastructure. IFC supported two flagship PPP projects showcasing Morocco's regional leadership on climate change and water: (i) a PPP advisory project to help assess the feasibility of, and structure the Ouarzazate concentrated solar power project; and (ii) support to the Ministry of Agriculture to structure and 9 implement Morocco's first PPP for desalination and integrated irrigation in the Chtouka region, one of Morocco's largest agricultural areas. IFC also provided capacity building to the Ministry of Finance to help with the design and implementation of PPP projects in health and education. IFC's investment program has grown from a committed portfolio of only around $6 million in two companies in FY06 to almost $220 million in nine companies at end-April 2012. This has also allowed IFC to have significant development impact including supporting the creation of around 12,000 jobs and helping generate $1.3 billion of volume in MSME loans. 29. Given recent events in the region and a changing domestic environment, IFC's immediate response has been to restore investor's confidence by increasing its engagement in Morocco. Since January 2011, IFC has invested close to $162 million (of which $50 million in mobilization and south- south) in three projects in priority areas such as microfinance, trade finance, and insurance. The Board also recently approved a US$209 million equity investment (including mobilization) in a Moroccan banking group to support the bank's transformation into a regional SME champion. IFC's investment will: (a) help attract other investors into Morocco's banking sector; (b) increase access to finance for SMEs and (c) encourage regional integration and expansion into Sub-Saharan Africa. IFC has increasingly focused on improving good corporate governance standards and debt resolution mechanisms for SMEs. 30. As part of the flexible CPS, IFC's program adapted to market conditions in a difficult investment environment for the private sector. IFC's investment pipeline, namely in infrastructure and the real sector, was affected by the global crisis, and some projects were delayed or resorted to public financing. IFC has also not been able to invest directly in the agribusiness sector due to lack of suitable opportunities. However, we have invested in private equity funds which target high growth SMEs in the agribusiness sector. The lack of an appropriate regulatory framework for private education and health services has also hampered IFC from investing in these sectors. 31. Donor Harmonization, Partnerships and Trust Funds. Alignment of donor programs with Government priorities continues to be strong, especially around budget support operations. Donors have continued their good partnerships around programs such as Education, Public Administration Reform, Financial Sector, National Initiative for Human Development and rural roads . Morocco participated in the 2011 Survey on Monitoring the Paris Declaration on Aid Effectiveness which concluded that $2bn of aid was received in 2010 (not including IFC or European Investment Bank financing), accounting for about 2% of GDP and 7% of the Government's budget. For the World Bank, 98.5% of financing was delivered directly to the Government's budget (either through direct budget support or through projects financed through the budget) and 80% used country systems (this was the DPL proportion with the other 20% using country financial systems but World Bank procurement systems). As shown in Annex 5, the Bank continues to mobilize significant trust funds for Morocco to complement its engagement. A particular success of the CPS period to date has been the budgeting of these trust funds in the 2012 country budget to contribute to their smooth implementation going forward. 32. Consultations. The dissemination of knowledge, outreach to beneficiaries, and consultations with stakeholders evolved into central themes of the CPS over the course of its implementation8. This is in line with Bank efforts to adapt to the profound changes in the political economy of the MENA region with a more inclusive approach to development. Within Morocco it has been a process of expanding on current practices to increase transparency and broaden the range of relationships, to ensure that beneficiaries are fully informed about Bank programs, have an opportunity to provide input on their design, as well as give feedback on the results of their implementation. As concrete recent examples, the The new arrival of the European Bank for Reconstruction and Development (EBRD) in Morocco is also a promising new partnership for the World Bank given good experience between the two banks in the ECA region and also because the EBRD is drawing from the World Bank's knowledge of the MENA region for their own engagement. A full list of the Bank's consultations, out-reach and partnerships with CSOs and other audiences is detailed in Annex 6. 10 Bank engaged in broad consultations on the Judicial Enhancement project as regards citizens' views on how best to improve service in Moroccan tribunals, as well as technical/legal views from people working within the judicial system on the priority reform areas. This allowed for a more informed vision on the justice sector and for sharing of concrete experiences on the difficulties citizens experience with service delivery. These consultations have not only helped to refine the operational framework of the project but also to identify the need to adopt a participatory approach in the project's implementation. Similarly, the Bank engaged in five different multi-stakeholders consultations on the INDH project with the objective of better grounding the INDH second phase on the needs of beneficiaries, on the role of non government actors, and on the critical issues of project design for local participation and ownership. Views and recommendations greatly helped inform the design of the operation and its expected results. The communications and out-reach strategy of the Bank in Morocco aims to continue these local, regional and global initiatives to make the Bank more accessible, to take advantage of new communication technologies to create more channels for dialogue, to continue building ties with civil society through the development of a more systemic approach to public consultations, and to promote social accountability. 33. Regional Integration, Arab World Initiative (AWI), Deauville Process and Alignment with MENA Region Framework. Morocco's CPS detailed the regional activities underway that aimed to capitalize on the opportunities of better regional and cross-border cooperation and that fell under the overall umbrella of the AWL. Morocco's participation in several regional AAA and capacity building activities has continued - through the MENA Concentrated Solar Power initiative (IBRD's financing of the Ouarzazate solar energy project), trade and investment AAA, climate change impacts, water resource management, and Morocco's founding membership in the Marseille Center for Mediterranean Integration. Two highlights of the Bank's AWI work are the MSME Project (FY12) and the 2012 study on regional cross border trade facilitation and infrastructure for the Maghreb countries (Algeria, Libya, Mauritania, Morocco, Tunisia)9. Morocco hosted the ANSA regional workshop in March 2012 and the second regional forum on the Arab Financing Facility for Infrastructure (AFFI) in April 2012. Morocco has participated in the Deauville Process and the Bank Group has confirmed that its program is fully aligned with that framework for engagement built around creating jobs, accelerating growth, strengthening governance and ensuring economic and social inclusion. This is also the framework for engagement of the MENA region thus ensuring CPS alignment with MENA regional priorities. 34. IFC's work supported regional integration and south-south investments by regional players from Morocco into Sub-Saharan Africa. IFC supported a Moroccan insurance group (FY12, $125 million) to expand into underserved insurance markets in 12 Sub-Saharan Africa countries and also provided $22 million in equity to a regional fund to support high growth SMEs in the Maghreb. From FY1O-12 (year to date), IFC provided $55 million to a leading Moroccan bank to increase access to finance to SMEs in Sub Saharan Africa. IFC also invested in a Senegalese subsidiary of Morocco's power utility to supply power to rural areas in Senegal, and committed a $12 million investment in a regional private equity fund targeting infrastructure investments in North and Sub-Saharan Africa. 3.3 Lessons Learned Relevant to the Strategy Going Forward 35. Morocco's response to the challenges emerging from the Arab Spring provides lessons in political economy for the strategy going forward. As noted, Morocco faced challenges similar to other countries in MENA: high unemployment and poor job quality, inequality, exclusionary practices that benefited the elites, and a public service delivery system that has partially failed to deliver quality results. The Moroccan response thus far has been effective because of a new willingness to work in a more participatory and inclusive mannerlo. There is broad understanding in Morocco that to achieve real social 9 The action plan and recommendations of this study are expected to be approved at a ministerial workshop to be held in May 2012 in Morocco, and to lead to the preparation of a regional trade and integration project for Maghreb countries to be implemented with the support of the Bank and other development partners. Note: the closed border between Morocco and Algeria represents a significant obstacle to greater integration. 1o The new Constitution specifically states that the Government is obliged to work in a more participatory and inclusive way. 11 transformation requires two comprehensive sets of reforms - one set that covers equitable growth and jobs, and the other around service delivery and governance. This new context and drawing from lessons of the past are incorporated in the implementation of the program for the rest of the CPS period. 36. The CPS emphasis on sector reforms has proven effective in addressing weaknesses in cross-Ministerial coordination. The CPS implementation to date confirms a lesson learned from the CAS Completion Report (for the 2005-2009 period) that highlighted the importance of understanding the dynamics of the reform environment in Morocco and concluded that there had been a notable difference in the impact and effectiveness of reform programs that were targeted to specific sectors, compared to reform programs that were multi-sectoral and demanded complex cross-ministerial coordination that proved challenging. Now, several sector-specific DPL programs are being pursued (e.g. Plan Maroc Vert, Solid Waste, Urban Transport, and Education) where the likelihood of impact is deemed greater through a sectoral approach, enabling the pursuit of many reforms. 37. Effective delivery, however, requires attention to transversal issues such as employment generation, governance issues in service delivery, social accountability and inclusion. Several critical national priorities call for efforts across the board to realize them. Recently, the response of the Bank program has been to design operations that support the Government on mobilizing multiple institutions and actors and ensuring better coordination and communication of reforms that impact several sectors at once. Two such operations are the Competitiveness DPL (FY13) and the Skills & Employment DPL (FY12). The Governance and Accountability DPL (FY13) will be complementary to the mandate of the Head of Government in Morocco that shifts the focus away from public sector reform and towards better impact of service delivery, while ensuring greater coordination in Government for implementing main priorities of the national agenda. The new Constitution mandates a greater emphasis on a more systemic approach to public consultations and citizen participation, including the active participation in decision- making by CSOs and young citizens through new institutions such as the Socio-Economic Council and the Consultative Council for Youth and Civic Engagement. This mandate will be supported by the Bank through instruments for greater out-reach, inclusion and accountability. Box 4: Solid Waste Sector - Good Example of Building Up Bank Engagement The Solid Waste Management (SWM) sector has a long history of Bank-client dialogue on sector policies and strong analytical foundations that allowed the Bank to accompany the Government in a well-designed and phased program. The Bank carried out an ESW on "The costs of environmental degradation in MENA" which helped in understanding the negative impact of the SWM in terms of environmental, social and economic aspects, estimating that the cost of sub- standard SWM practices in Morocco was 0.5% of GDP. This, in turn, helped rank the sector as a top priority by the Government which put through legislation on the sector that was informed by several pieces of Bank AAA, and then designed the national solid waste program (PNDM in French) that outlined the sectoral reform program over the medium-term. The Bank accompanied the Government on the implementation of the 1st phase of the PNDM through a programmatic series of 2 DPLs. The Government took advantage of the analysis, planning framework, implementation support and convening power offered by a sectoral DPL whilst maintaining full leadership and ownership of the reforms. The continued relevance of the Bank support is testified by the Government's request to accompany the second phase of the PNDM with a second series of two programmatic DPLs. In sum, the experience of the approach in this sector has been positive and confirms the usefulness of the DPL instrument under the right set of circumstances. 38. Importance of Knowledge and TA to Accompany Reforms. The strong AAA approach taken to date provides a lesson on how to develop a solid country engagement (Box 4), and will be continued for the future more ambitious reforms to be undertaken, through ensuring that the Bank has the required knowledge and expertise to accompany the Government and can add real value to the process. In parallel, the implementation of the program to date has highlighted the need to step up TA and implementation support for reforms, with regular demand from interlocutors in this regard. This will be even more important for multi-sectoral reform programs, especially DPLs where TA can help develop policy options and implement the policies once adopted to improve the chances of sustainability. Going forward, the Bank's program needs to step up implementation support, including exploring the possibility of a TA lending operation that could cluster efforts and more systematically address implementation challenges. 12 IV. THE CPS PROGRAM GOING FORWARD 39. The Bank Group's discussions with the new Government counterparts have confirmed the relevance of the flexible CPS, which allows for responsiveness to client demand, adjusts and facilitates scaling up of the program in relevant areas. The program going forward allows for continuity while proposing some shifts in emphasis to align further with the priorities of the new Government's Plan for 2012-2016 and to adhere to the MENA region strategy of "doing things differently" in the post-Arab Spring context. The program is being adapted to respond better on strengthening governance and accountability, ensuring greater social and economic inclusion, and increasing voice and participation. As already noted earlier, the CPS results matrix (Annex 1) is confirmed as being largely relevant for the rest of the CPS period, although some revisions have been made to add a new area of focus (Competitiveness), introduce gender-specific indicators in Education, Vulnerability and Social Inclusion, align better expected results with the Bank's program in key areas (Social Protection, Skills and Employment), and ensure flexibility needed to capture results that will be achieved in the next CPS period (each revision is explained in the results matrix). 40. This CPS Progress Report proposes two fundamental directions for the Bank's program; * Supporting more ambitious reforms through targeting effective delivery and tighter coordination around concrete results. This involves two main tracks: (i) continued support to the program areas undertaken to date which remain relevant with an enhanced focus on sectoral governance issues, communication and participation; and (ii) stepped-up Bank engagement in support of more ambitious priority reforms that are addressing cross-sectoral issues. These areas are economic competitiveness in support of growth and job creation (CPS Pillar 1), governance (the cross-cutting beam of the CPS), social protection and subsidy reform (CPS Pillar 2), and strengthening inclusion and voice, particularly of youth and women (covered under CPS Pillar 2)11. * Introducing multi-sector approaches to lay the basis for consolidation in the next CPS. The Bank's engagement for the rest of this CPS period will build the foundations for further consolidation of the program in the next CPS, bringing synergies where possible and pursuing more multi-sectoral approaches. This will allow for stronger alignment with the Government's priorities of addressing complex cross-sectoral issues, while setting the framework for future consolidation of the Bank's program in Morocco. 4.1 Supporting More Ambitious Reforms Growth, Competitiveness & Employment 41. The Bank Group's program has already stepped-up its engagement here as there was broad consensus that the positive growth experience of the last decade was not sufficient for Morocco to meet its development challenges, especially as regards job creation. The on-going program in support of greater competitiveness is being strengthened, building on the good progress that has been made thus far. The Competitiveness DPL (FY13), Financial Sector DPL-2 (FY13) and the MSME investment project (FY12) will provide a package of support to target better economic governance and improvements to the investment climate and the financial sector that support greater private sector development, innovation, trade and the related job creation that is expected to come about. Support is being provided to implement the new Competition Law and strengthen the Competition Council in line with the Constitutional mandate. The work will continue to create a fair playing field and facilitate the entry of new firms. Besides work on regulation, support from the Bank and IFC will continue for individuals and MSMEs to gain access to finance which also supports the goal of job creation. The international trade These areas of focus are all aligned with the MENA Regional Update presented to the Board in February 2012. 13 agenda is being prioritized supporting Morocco to take advantage of recent openings to boost trade and integration with its regional neighbors, the EU and USA, as well as deepen its global integration with other regions. The competitiveness agenda through the Second DPL for the Plan Maroc Vert (FY13) maintains support for the development of the private sector in agriculture and targets improvements in the efficiency of domestic markets by reducing marketing costs and improving marketing services. 42. The Bank Group will step up its support for Government's efforts to deliver better employment opportunities. The focus will be multiple. First, at the policy level, the Skills and Employment DPL (FY12) and the Employment TA target labor market programs and vocational training to create a more conducive environment for the creation of good jobs. Their agenda aims to broaden the focus of labor market programs, currently targeted largely to university graduates, who constitute only 20% of unemployed, and to include less educated youth and more young women in its coverage. In addition, the work will introduce rigorous evaluation systems to improve the mixed performance of existing labor market programs. At the project-specific level, the INDH-2 project (FY12) has a core focus on revenue generating activities that target job creation, especially in poor areas and for young people and women, thus supporting short-term responses to creating jobs. Together with the Islamic Development Bank, IFC is leading the regional Education for Employment Initiative in the Arab World (e4e) to engage the private sector to create new opportunities for employment-based education and enhance labor market skills for Arab youth and women seeking productive employment. Design and fundraising for country-specific e4e roadmaps is ongoing. The Ouarzazate project (FY12) has a specific goal of supporting the creation of the solar industry locally in Morocco that could lead to the creation of green jobs. The Bank will also launch further AAA in areas exploring the linkages between urban productivity, informal sectors, economic opportunity and job creation. 43. Going forward, IFC's strategy in Morocco will continue to focus on increasing private sector led inclusive growth and job creation by: (i) providing counter-cyclical support to existing clients and new firms, especially with a view to increasing employment through increased access to finance for MSMEs; (ii) facilitating the expansion of regional champions in underserved markets; (iii) supporting innovative and high value added industries; (iv) improving infrastructure and social services; and (v) strengthening corporate governance and the investment climate. The IFC will also increasingly focus on inclusion (youth and women) and underserved areas. IFC's investment pipeline for FY12-13 includes four to five projects in trade finance, SME regional funds, SME banking, social housing and renewable energy. IFC's newly created MENA Fund will be critical in mobilizing additional investments to support financial intermediaries. It will also leverage the regional SME Facility to increase access to finance for SMEs and complement the MSME technical assistance facilityl2. PPP work will be integrated into the broader Arab Financing Facility for Infrastructure (AFFI) initiative13 and will focus on financing and advisory assistance to innovative infrastructure projects. Governance 44. The Bank will realign its governance agenda to support the development and implementation of the new constitution and the revision of the country's overall governance structure that follows. These changes now provide the Government with a new framework to address past shortcomings and push forward on a broad range of governance reforms that will strengthen transparency, accountability, citizen voice and participation in public affairs. Governance will remain mainstreamed in the CPS as a cross-cutting beam, and in the Bank's operations (all DPLs pursue specific 12 MENA SME Facility and MSME Technical Assistance Facility: a comprehensive regional initiative in collaboration with the JBRD, EIB and KfW, to enhance SME access to finance and support job creation and broad-based economic growth. Advisory work has begun and financing of investment facility underway. 13 AFFI and a complementary Technical Assistance Facility (TAF) are a joint initiative between the World Bank, IsDB and JFC to foster infrastructure investments in Arab countries. 14 governance reforms in their respective sectors). For FY13, the Bank has two mutually-reinforcing DPLs which pursue economic governance and business environment reforms. The Competitiveness DPL focuses on key regulatory and institutional changes to facilitate private sector development, including the strengthening of the powers of the Competition Council. The Financial Sector DPL will continue to strengthen governance of the banking sector and, together with the MSME Project, will support greater MSME access to finance. To support the access to and the efficiency of the judiciary, which is a key priority of the government, the Bank is preparing a Judicial Sector Performance Enhancement project which is being delivered in FY12. For FY13 the Bank is preparing a Governance & Accountability DPL that is linked to the main governance pillars of the reform program of the Government. A range of different governance reforms are currently being considered in this context: * Improving transparency and public dialogue: (i) Supporting the implementation of the new constitutional right of access to information which will require the development of dedicated legislation that will specify key principles; (ii) Assisting government to increase the transparency of the budget to stimulate policy discussions about the priorities and underlying strategies of government spending; (iii) supporting efforts to improve government internal coordination and public debate about complex reforms. In particular, the Bank is providing advice on setting up a comprehensive consultation process for new legislation, and is contributing to the national dialogue on justice which aims at building consensus for a comprehensive justice reform program. * S1 iigL iii/ g government accountability and the delivery of public services: (i) Supporting the development and the implementation of new legal framework to improve expenditure management, in particular the introduction of program budget that would link public expenditures to clearly defined objectives and outcomes; (ii) Assisting in the development of a government-wide performance monitoring and evaluation system; (iii) Strengthening institutions of accountability, in particular the anti-corruption agency which has gained additional powers through the new constitution; (iv) Supporting the government's efforts to simplify and certify administrative procedures relevant for citizens, such as birth and residency certificates, driver's license or criminal records, to reduce existing delays and potential discretion in the delivery of these services; (v) Broadening the use of ICTs to improve access to and delivery of public services to citizens and businesses, also in remote areas of the country; and (vi) Supporting the development of a new administrative and fiscal framework for local government development which aims at strengthening 14 the powers and responsibilities of sub-national governments * S.'1 Ligthi 11 i /h sectoral governance will continue to be stressed in order to assure that the program bears results and is sustainable. The support will be provided through IBRD operations and those activities financed by the Bank budget or trust funds. For example, the energy sector engagement of the Bank has a strong emphasis on providing TA for the improvement of the regulatory environment (results expected are detailed in results matrix), and similar attention to sector governance is being provided in other sectors where the program is engaged. Strengthening Gender, Inclusion and Voice 45. The focus on gender, inclusion and voice will be heightened during the remainder of the CPS. The Bank will bring to bear its growing knowledge base on gender and youth issues in strengthening its partnership with the Government on data sharing that also contributes to understanding better the development constraints that these groups face. The Bank's program is stepping up its support to Morocco to strengthen citizen participation and voice and ensure greater inclusion of vulnerable groups. The envisaged approach for the rest of the CPS period in this area is two-fold: (i) Using knowledge as a platform for dialogue and advocacy, through disseminating data from the AAA program 14 These reforms contribute to the Government's open governance agenda and to Morocco's eligibility to the Open Government Partnership 15 to inform reforms, nourish public debate and ensure more effective targeting of these groups; and (ii) the implementation of the on-going portfolio continues to work with stakeholder and citizen groups with an emphasis on gender main-streaming where possible, and enhancing outreach and communication. Box 5: Strengthening the Gender Focus of the Program The flag-ship operation on targeting women, tackling vulnerahilirr and inclusion is the National Initiative for Human Development 2 (INDH2 - FY12). This project aims to address economic and social inclusion through a participatory and community-driven approach that promotes voice in development, using participatory mechanisms and social accountability measures, reaching out to marginalized groups (women and youth), and tackling poverty and vulnerability. It is one of the main instruments to support the second pillar of the CPS: "Increasing Access to and Quality of Service Delivery for All" and contributes directly to the results area: "Reducing vulnerability and social exclusion" (new indicators have been added to the results matrix for the INDH2 implementation period until the end of the CPS). It focuses on: (i) improved access to basic infrastructure, social services and economic opportunities for poor and vulnerable groups, including women and youth; (ii) provision of sustainable and improved quality of services to vulnerable groups; (iii) better coordination of national policies and institutional mechanisms to reduce vulnerability; and (iv) consolidation of participatory approaches to ensure that basic infrastructure and socio-economic services meet the basic needs of excluded and vulnerable groups, particularly women and youth. The M&E component is being designed to provide gender-disaggregated information on all measured inputs, outputs and outcomes and there will be a strong focus on generalization of social accountability tools (grievance redress mechanisms, participatory M&E, community scorecards, beneficiary studies). Using Knowledge as a Platform for Advocacy. The Concrete Examples. The Bank's report "Promoting Youth Bank's AAA program both in Morocco and at the MENA Opportunities and Participation" looks in greater detail at level is informing the dialogue on gender issues and different aspects of development challenges faced by youth youth. As Annex 4 details, the Bank has carried out groups. Along with the TA program in employment, the several innovative and far-reaching pieces of AAA in social protection strategy note, and statistical work on Morocco that are informing dialogue and operations. It poverty, this knowledge is informing the Bank's dialogue will take this knowledge base further and complement it on gender and inclusion. The Bank plans to conduct a by new analytics planned for FY13 and beyond. As gender Country Gender Assessment (FY13) that will lead to a knowledge becomes more programmatic, it is expected Gender Action Plan which itself can contribute to that it will be further mainstreamed into policy dialogue informing future operations. The MENA report "Opening and project design. Doors: Gender equality in MENA", an accompaniment to the WDR Gender report, provides a further strong analytical basis on which consultations and gender policy priorities can be predicated. On-going and planned Bank Group proects d are Concrete Examples. The MSME Project (FY12) endeavors strengthening the focus on women'sg inclusion and to have a gender focus, through targeting financing to citizen participation into Bank-financed operationss. The micro, small and medium-sized enterprises which have a Bank's engagement is a continual process of re-orienting high share of women-owned business. The Education the program to focus further on gender issues. The results DPL2 (FY13) is focusing on strengthening the delivery of of this enhanced gender-focused engagement of the education services to all, including with a gender dis- program will be more effectively captured and will be aggregated focus, and the results matrix for this area has continued and scaled-up in the next CPS. been updated to introduce gender indicators to track and__project_design. _Doors:_Gender_equalityin progress in this regard. ICs! key strategic focus of itst investment and advisory services is to empower women entrepreneurs especially in underserved regions. IFC has partnered with MFIs (FONDEP and Al Amana) which have a strong gender focus, through providing a total of $30 million in financing and capacity building in credit, risk and human resources management and business strategy. IFC efforts have contributed to increase these MFIs' outreach and resilience, and position them for growth and transformation. These interventions have been instrumental in increasing access to finance to women micro entrepreneurs. Al Amana, and FONDEP collectively provide annually close to $500 million in over 400,000 micro loans of which more than i0o are women borrowers - this is the largest gender outreach in MENA and has a significant impact on female empowerment. FONDEP and Al Amana also operate in rural and remote areas of Morocco, thus helping reduce income disparities and create jobs in underserved regions. Social Protection & Subsidy Reform 46. The Bank's program is already responding to the request for assistance for development of a clear vision for the reform of the social protection and subsidy system. As noted previously, the 16 social protection programs currently in place in Morocco are generally not targeted or poorly targeted and thus their beneficiaries include many who are not most at risk. Moreover, the universal subsidy system on energy and some food items is becoming financially unsustainable. The Government's medium-term program has put a priority on bringing down the cost of the subsidy system and carrying out a comprehensive overhaul of the social protection model to ensure better targeting, although details on this program have not yet been articulated. The World Bank has a long standing experience in supporting countries with these reforms in line with the specific institutional characteristics and political economy constraints each country is facing. International experience shows that reform of food and fuel subsidies can be politically explosive and must be done carefully and gradually to avoid political and social unrest. The political economy issues surrounding subsidy reform in Morocco are sufficiently complex that there is a need to remain realistic about what could be achieved: it would not be prudent to assume that many reforms could be completed in the remainder of the CPS period. The Moroccan Government is fully cognizant of the competing needs to move urgently on subsidy reform but, at the same time, to sequence the reforms adequately to protect the poorest. The Bank's support is through providing analytical support to inform the medium-term reform program, through advice on the phasing of reform implementation and the need for public outreach campaigns to ensure successful acceptance by the population, and through support to measures that ensure the introduction of an adequate safety net program that provides protection for those most at risk. 47. In the case of Morocco, tools and programs for more accurate targeting and improving impact and efficiency are available and the Bank has a strong experience and knowledge base that will nourish the reforms. The AAA program has assessed multiple dimensions of the social protection system through different lenses - the Social Protection ESW and TA, the impact evaluation of the Tayssir CCT, pension TA and poverty ESW. The INDH2 project is a critical pillar of the social protection system that the Bank is supporting through a planned $300 million project investment. The design of the second phase of the INDH has drawn extensively on the implementation experience to date, on new available data to allow for better targeting, and on Bank-wide global best practice. The Bank's assistance is thus pursuing different tracks in parallel, while supporting the dialogue on policy reforms that responds to the timing and complexity of the overall context, with a greater focus expected in the next CPS in line with the expected timing of Government reforms. 4.2 Preparing for Greater Consolidation of the Program 48. For the remainder of the CPS period, the Bank will work towards preparing the ground for greater consolidation, prioritization and sequencing of the program for the next CPS. The Bank's program has evolved during CPS implementation to encompass a greater focus on multi-sectoral operations (such as Skills and Employment DPL, Competitiveness DPL), and this focus on cross-cutting issues and greater consolidation of the program will be firmed up in the next CPS. For example, the Governance and Accountability DPL is shifting focus away from a more traditional administrative reform agenda, towards the improvement of transparency, accountability and quality of service delivery. The Climate Change/Green Growth DPL will target a package of interventions encompassing multi-sectoral aspects in energy, mining, transport, water and environment. The proposed enhanced TA support on improving implementation and coordination will underpin the multi-sectoral interventions. In the same way, the lessons learned from pilot approaches and the knowledge gained from the Country Gender Assessment will allow for better prioritization and mainstreaming of interventions targeting gender and inclusion. The experience of the P-for-R instrument will inform the design of the next CPS, through ascertaining if this instrument adds value, responds to client demand and thus merits further rolling out in other areas. Going forward, Trust Funds will be aligned with the main areas of Bank intervention (either DPLs or other projects), and other Bank Group instruments (guarantees, support to PPPs) will be considered as part of a package of support in specific areas (such as energy). 17 4.3 Lending Pipeline 49. The enhanced areas of focus of the Bank's program for the rest of the CPS period are agreed although financing volumes for FY13 will depend on the overall progress on program implementation and availability of IBRD. The FY12 lending (Table 3) is agreed with the Government, with a focus on investment lending/P-for-R. The CPS maintains its flexible approach going forward and the FY13 lending pipeline (Table 4) proposes several operations, some of which are at advanced stages of preparation. FY13 lending is expected to be above the annual $600 million amount and will depend on program performance and, in the case of DPLs, on the ambition of the reforms being supported. IBRD's capital constraints will also be a factor in FY13 lending volumes. Given the focus on investment lending in FY12, the Government has requested a greater proportion of DPLs in FY13 to respond to financing needs and to ensure support for accelerated policy reform (Annex 3 has full details on the program). Table 3: FY12 Lending Program $ million Ouarzazate Concentrated Solar Power Plant 200 Skills and Employment DPL 1 100 Judicial Performance Enhancement Project 16 National Initiative for Human Development 2 300 Micro, Small and Medium Enterprise Dev't 100 Total 716 Table 4: FY13 Pipeline of Potential Lending Competitiveness DPL 1 Governance and Accountability DPL 1 Financial Sector DPL 2 Plan Maroc Vert DPL 2 Urban Transport DPL 2 Solid Waste DPL 3 Education DPL 2 Climate Change DPL 1 Road Asset Management V. RISKS 5.1 Political and Governance Risks 50. Despite Morocco's political distinctiveness in the region, there is real pressure on the Moroccan state for meaningful and quick change, with high expectations that reforms will be implemented in a credible manner. Morocco is better positioned than other countries in the region to face these political risks successfully. A combination of factors makes it unique among the countries of the Arab spring - the Monarchy is supported by the majority of the population, it continues to manage effectively its close ties with Europe, Gulf countries and the international community, and the new Government has, at least in the short-run, the support of the population to push through on some critical reforms that will signal its commitment. Nevertheless, important cracks remain in the socio-political environment - bulging youth population, unemployment, weak governance and one of the largest gaps between rich and poor in the Arab world. This is a challenge for any Government, but more so for one that has a political party at its head for the first time, and that is a coalition of parties which could hamper the implementation of reform programs. The political risks for the PJD as regards delivering on expectations are significant as it must ensure that the governing coalition is a strong one, not divided by different priorities. The Government may fail to address these problems, which could set off renewed protests that might not be so peaceful or favorable. If the Government fails to address these problems, there is a risk that this could set off renewed protests that might not be so peaceful or favorable. 18 51. To mitigate this risk, the new Government's governance reform agenda is ambitious as regards the commitment. The new Constitution and the strengthening of the country's overall governance structure now provide the Government with an opportunity to address past shortcomings and consolidate the principles of modem governance. The new Constitution also obliges a participatory process in Government. The envisaged agenda has broad support and the Government has reiterated its willingness to continue to work for the quick implementation of key measures that should not be delayed in light of political constraints. However, while there is a strong degree of continuity - confirming that several sector plans remain valid - the new Government's program has not yet been fully articulated which raises some concerns about lack of concreteness. The Government is working towards articulating more clearly reform priorities, recognizing that this will demand more in-depth and substantive reforms rather than some of the more technical ones pursued to date, which will require political courage and building consensus amongst stakeholders. The Bank will help mitigate this risk though its dialogue and TA support to the further articulation of sectoral programs and reform priorities, and through more intensive efforts to ensure an effective accompaniment to reform implementation. It is advising on the sequencing of reform implementation and on critical communication aspects which aim for developing better shared ownership amongst players. Morocco also benefits from an active and vocal civil society with many mature and competent CSOs in action who can play a key role. 52. Further mitigation efforts will include continued focus on supporting all actors' efforts in these areas, recognizing the increased need for coherence and coordination and the importance of fostering public understanding and ownership of reforms. The emphasis will be on ensuring dissemination and follow-through on recommendations, piloting new accountability tools, and supporting key governance institutions. As many of these reforms are new, the Bank will provide technical assistance based on international standards and experience. The Bank team will continue to monitor the political evolution closely and will continuously assess the potential for political developments to influence the implementation of the Bank's program. The Bank will stand ready to adapt the program, and particularly specific reform operations supported by DPLs, to measures and reform areas that become relevant (including down-scaling the program as necessary). 5.2 Macro-Economic Risk 53. The macro-economic risks facing Morocco include: the possible deterioration of the on- going global economic difficulties; the further impact of poor weather on the agricultural sector, and the high prices of food and energy. Should the current global economic uncertainty further deteriorate, especially if European stagnation evolves into a recession, Morocco would face reduced growth prospects. Continued low rainfall could potentially further effect agricultural growth forecasts and overall growth rates. Furthermore, should oil prices remain at current levels for the year, Morocco would likely see its growth prospects reduced by about 0.5%. The management and mitigation of macro- economic risk are predicated on the new Government's strong commitment to fiscal and competitiveness reforms. The mitigating measures on agriculture include support to farmers and possibly suspension of import duties on cereals. The Government is devising strategies to cope with potentially sustained high oil prices, including requesting Bank support to develop mechanisms to hedge commodity price risk. The Bank's continued engagement in the CPS areas and other donors' stepped up engagement will support the Government in its efforts to ensure the overall medium term macroeconomic sustainability. 54. However, the most significant macroeconomic risk is that of deterioration of the fiscal balance which has been exacerbated by the increasing costs of the subsidy system. As noted earlier in this report, the Government's plan is to decrease the budget deficit in 2012 to 5.1% of GDP, through incorporating specific measures to contain public spending, further advancing the fiscal reform agenda, increasing revenues through better tax mobilization, pushing through on competitiveness reforms, and starting reform of the subsidy system. If consensus cannot be reached to take significant measures this 19 calendar year, there is a risk that the budget deficit could be even higher. Carrying out the proposed multiple interventions urgently should help mitigate the fiscal risk. Moreover, such a multi-pronged approach recognizes that several measures are needed in parallel as it is likely that expenditures on subsidies will remain high in the short-term due to the continued expected high prices of fuel and food, as well as the complexity of the political economy issues around subsidy reform. These measures are all key aspects of the Bank's program going forward and continued engagement should help mitigate the risk. 5.3 Financing Risk 55. Attainment of the Government's objectives needs to be accompanied by effective financing mobilization. There is a risk that the Government may face constraints in the next couple of years if continued instability in financial markets results in higher costs of financing. To mitigate this risk, the debt optimization strategy of the Government is to seek financing on the domestic market (expected to be 85% of total financing, as outlined in the 2012 Budget Law) as well as from increased support from donors. Given the overall sound economic fundamentals, the country's low external debt stock, and still adequate foreign reserves, this strategy is feasible and appropriate. External financiers have, to date, assessed Morocco as lesser risk than many other countries and donors have indicated their willingness to step up their support to Morocco (for example, in 2012, the African Development Bank expects to deliver $1.2 billion in new lending, EIB is aiming for the same lending levels of 2011 - $950 million, the EU will provide at least $300 million in grants, and AFD is increasing its support to between $400-600 million). To mitigate further this risk, the Bank and other donors will continue to pursue discussions on public finances with the Government to assist in further prioritizing their expenditure programs so as to better align them to the country's financial capacity and existing absorptive capacity. The focus of the Bank's program on DPL financing in the near term also allows the Bank to mobilize and disburse quickly (and with predictability) significant levels of financing. Given the current expectations regarding the quality of the macro-economic environment during the rest of the CPS period, the Bank could support a higher level of DPL financing if requested: this does not pose a significant risk given the very small size of DPL financing in the overall country budget. 5.4 Institutional Capacity Risk 56. Ensuring adequate institutional capacity to overcome implementation deficiencies, political interference and a lack of accountability remains a key challenge. While the regulatory and institutional framework for governance and anti-corruption efforts continues to be strengthened, there are still significant risks in the capacity to implement such an ambitious reform agenda. The Government is mitigating this risk by drawing from previous reform implementation experience to improve inter- ministerial coordination and identify a wide range of measures and actions, including the implementation of alternative approaches using more PPPs and outsourcing in service delivery. In addition, coordinated efforts have been deployed by the main donors to mobilize sizeable resources to support capacity building and technical assistance. 57. A significant part of the Bank's program is focused on a series of DPLs that provide support to sectoral reform programs which are sector-specific and are more easily coordinated and implemented across the administration. To date, this approach has enhanced performance and facilitated implementation as it recognizes the capacity limitations of the Moroccan administration and institutions. While the Bank will continue to pursue this sector-specific approach to mitigate some of the known institutional capacity risks in Morocco, the program is in parallel also stepping up support for key reforms that demand multi-sectoral coordination such as economic competitiveness, reform of the social protection system in general and subsidy system in particular, and governance reforms. This support encompasses more intensive TA to mitigate implementation difficulties. 20 Annex 1: Morocco CPS Progress Report Results Matrix Pillar 1: GROWTH, COMPETITIVENESS AND EMPLOYMENT 1.1 BUSINESS ENVIRONMENT Government Objectives: * Improve the business environment, especially for SMEs, via a comprehensive investment climate reform strategy supported by an effective reform implementation and coordination Key Issues Targeted : 1- Uneven quality of the business law/regulatory framework and its enforcement, leading to an unlevel playing field that reduces entry of new SMEs and diversification. 2- Weak and uninstitutionalized process of PSD reform identification, preparation, implementation and coordination. Progress at CPS-PR: Advanced progress recorded with 4 out of 5 milestones achieved and 2 indicators already achieved or surpassed. Amongst other achievements, Morocco improved its Doing Business indicators the most in 2011 compared to other global economies, climbing 21 places to 94. The Bank/IFC TA and IDF in support of business environment reforms has been a significant contributory factor to this improvement and will continue to be a core element of the program going forward. As a consequence, one indicator is being revised to link with the Doing Business rankings and thus align better with the focus of the Bank/IFC support. Outcomes the Bank Group expects to Milestones Progress to date Bank Group Program influence Instruments/Status Streamlined regulatory environment and a Online business registration is Milestones pLqgress Planned more equitable enforcement of rules, functional, for one regional one-stop- . IFC/Bank TA to support regulatory particularly for new entrants & SMEs. shop (CR1) location. Online business registration pending. reforms of the business environment. * Indicator: Minimum capital requirement S Potential Bank DPL with investment for a limited liability company. (as % of Procedures at the CR1 of Casablanca climate pillar. GNI per capita) simplified and streamlined. Casablanca achieved with the suppression of 9 Bank TA to the NBERC. Baseline: 2009: 11.8%. [Target 2013: less one procedure (Bank certificate regarding than 1%]. capital deposit when over I00,000dh). Delivered/Underway SIndicator: Administrative steps to create aregulatory i oMinimum capital requirement of reforms of the business environment. business/cost associated as % of GNI per limited liability companies reduced to Liability Companies was eliminated by 9 Altemnative dispute resolution advisory capita Baseline: 2009: 6 steps/6%. [Target 0/symbolic value. Parliament in June 2011 (IFC) Baseine:200: 6 teps16% [TagetThe modification of the law 53-85 in February 9 Corporate govemnance advisory(IFC) 2013: 3 steps/8%]. Legal procedures for minority 2011 has set up specific procedures allowing 9 IDF for national agency on business * Indicator: % of firms which claim that the shareholders suits are simplified and minority shareholders to have access to all environment -CNEA rules/regulations are applied in an minority investor protection information related to cases. 9 Competitiveness DPL (FY12) unpredictable and inconsistent way. strengthened. 9 Competitiveness TA Baseline 2009: 60%. [Target 2013: 40%]. At least 2 key administrative processes Morocco has simplified the procedure for * Indicator: Average of the Doing Business for registration or licensing are electroncxfilin an MEt se indices of extent of director's liability, simplified by introducing e-govemment 28 payment oer e- ease of shareholders' suit; and strength of tools (e.g. customs, CRI or one minority investor protection. license). government simplifications are in progress. Baseline: 2009: 3 [Target 2013. 4.5]. 21 Outcomes progress Minimum capital requirement for a limited liability company is 0 % of GNI There are still 6 administrative steps to create a business and the cost associated is 15.7% of income per capita. Updated DB data will be published in September 2012. % of firms which claim that the rules/regulations are applied in an unpredictable and inconsistent way was established in the ICA 2009 and evolution would need to be measured by a new ICA in 2013. Average of the Doing Business index on strength of investor protection increased to 5. Morocco's ranking overall in Protecting Investors increased from 153 to 97. More effective reform coordination and Milestones progress implementation in the business environment National Business Environment Head of government approved National action area. Commission (CNEA) formally plan of the CNEA in 2010 and 2011, which instituted, operational and has led to the includes 12 reform projects. * Indicator: Effectiveness indicators of creation of at least 10 dedicated reform investment climate reform commissions. project committees that are operational Outcomes prozress Baseline: 2009 baseline: average score and work on the doing business Improvement in the overall ranking in the among 4 existing reform commissions: indicators. Doing Business survey from 124 in 2009 to 1.7 [2013 target: 2.5 for CNEA] 115 in 2010 and to 94 in 2012. This indicator is being replaced by a new one : * Increase in Doing Business Ranking Baseline: 124 in 2009 (time of CPS preparation) 22 1.2 FINANCIAL SECTOR REFORM Government Objectives : * Improve further access to finance for households. * Strengthen access to finance for SMEs. * Promote financial stability. * Foster capital market development to improve access to finance, competition, and risk management. Key Issues Targeted : 1- More than half of the population does not have access to banking or postal accounts and MFI weaknesses could affect over 1.2 million customers. 2- SMEs remain underserved. 3- New risks generated by the development of the financial system (e.g. real estate, interest rate, etc.) 4- Limited development of long term market instruments. Progress at CPS-PR: Advanced progress recorded with nearly all indicators and milestones already met. Indicators and Milestones for the planned Financial Sector DPL-2 will be specified once the DPL is prepared and will be captured by the next CPS. The new MSME project's interim results are not expected until late-2013, beyond the timeframe of this CPS-PR: hence they will be incorporated into the next CPS, including indicators with regard to women's access to finance. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status A restructured financial sector allowing for Milestones prQgress Planned sustainable expansion of access to finance by S Financial Sector DPL. households. Post bank was set up. 9 Technical assistance, funded * Indicator: Increase in number of total deposit by country program and accounts relative to the population. Initiation of the restructuring of The restructuring of the MFI industry was initiated FIRST. Baseline: 43% (banks and the post office) inthe MFI industry. December 2008 IFC ongoing support to Regulation (e.g. on govemnance and classification) and banking sector and improved * Reduction in the NPL ratio of MFIs Strengthening of regulation and supervision (e.g. increased on-site verifications) of financial infrastructure. Baseline: 9% in June 2009. supervision of MFIs. MFI were strengthened Establihed crdit inrastrucureemoe condciveat SE Financial Sector DPL 1 toes proress(FY10) Number of total deposit accounts relative to the Financial Sector DPL 2 population is 52% (Dec. 2011) (FY 13) t MSME Investment loan The NPL ratio of MFIs is 6.2% (Dec. 2010) (FY12) S Strengthening Crisis Preparedness and Processes Established credit infrastructure more conducive to Milestones progress (FIRST) SME finance Operational new credit bureau. 9 Strategy and Instruments to New credit bureau is operational Establish Reliable Interest * Inicaor:Incrasein he umbe ofmonhly Reformed public credit consultations to the credit bureau. Reomdpbi rdtRate Benchmarks (FIRST) Baseline: 2,000 consultations in November 2009 guarantee scheme. Public credit guarantee scheme reformed 9 Introduction of Covered 23 Outcomes progress Bonds 9 Review of framework for The number of monthly consultations to the credit mobile payments bureau reached 79,609 in Dec. 2011 (the large increase Bank Govemance Review over baseline is because the credit bureau had just been s Access to finance advisory set up at the time of the baseline) creation of credit bureau and capacity building to the Better identification of risks in the financial system Fully independent insurance Milestones and Outcomes pLQgress microfinance (IFC). through the introduction of fully independen and securities supervisors. The two draft laws on the new capital market and 9 IFC investment in local banks su!pervisors. insurance authorities have made progress but are still and microfinance institutions Enhanced risk assessment tools pending Parliamentary approval (adoption by Council focused on women and * Indicator: Establishment of new insurance for banks and other financial of govemnment was in August 2011), as requested by MSMEs. supervisor institutions, the newly elected Govemment for all key draft laws Baseline: none * Indicator: Establishment of new capital market supervisor Baseline: none Improved liquidity of the benchmark yield curve, Milestones Progress creation of new instruments (e.g. covered bonds). Long term credits no more Long term credits no more indexed on rates at issuance * Indicator: Reduction in the number of lines of indexed on rates at issuance of of long term government bonds (MOF order dated 17 Treasury bills long term government bonds. March 2010) Baseline: 70utinessi Juner200 hAverage duration of Average duration of govemment debt stabilized or govemment debt stabilized or increasing: 2011 data is not yet available but should increasing. show a significant increase as the govemrment issued more MT-LT bonds. The average maturity was 5 years 10 months in 2008 and 5 years 2 months in 2010 (2011 likely to be above 5 years 10 months but data not yet available) Legislation introducing Legislation introducing covered bonds in progress covered bonds. Outcomes pLQgress Number of lines of Treasury bills - data not yet mobileeavailable 24 1.3 SKILLS AND EMPLOYMENT Government Objectives : * Improve access to and quality of higher education (and vocational education and training [VET]) system. * Improve labor market information systems. * Extend active labor market programs. * Set-up an unemployment insurance scheme. Key Issues Targeted: 1- Inadequacy of higher education (and VET) supply to demand. 2- Knowledge of labor market dynamics is insufficient to inform policies and program. 3- Labor market rigidity and lack of income protection mechanisms hamper labor mobility and productivity. Progress at CPS-PR: Moderate progress recorded to date although the recent delivery of the first DPL has greatly strengthened the Bank's assistance. Since the CPS was approved, the Bank's program has evolved with the delivery of the Skills and Employment DPL which necessitates revisions to the results matrix to capture this engagement. All previous indicators and milestones were dropped and replaced here by those supported by the Skills and Employment DPL. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Matching skills developed within the vocational training and Labor Ministry's Vocational Milestones progress Planned higher education systems to the needs of the labor market Training Department signs with Vocational training strategy under 9 Skills Development and Employment C f l-o ten ( 10) providers 15 (including preparation. Strategy will drive DPL. private providers) programmatic content of programmatic contracts to 9 AAA program envisaged. Indicator 1: Rate of intemal efficiency of vocational training contracts (with development be signed between Labor Ministry and programs covered by a programmatic contract plans) in line with the new providers. Delivered/Underway Baseline: 75% (2009/10) vocational training strategy 9 Skills Development and Employment Target: >90% (2012/13) The 15 public universities provide DP (FY12) Unieritis ntodue ouresto during the first 2 semesters, at least * Employment TA ongoing. Its Indicator 2: University graduation rate in open-enrollment improve intemal efficiency (i.e. 80%, on average, of their bachelor- objective is to strengthen faculties improve graduation rates) level academic'6 programs in their Govemment's capacity to: (i) design Baseline: 64% (2009/10) open-enrollment faculties, a course the 2012-2106 employment Target: 69% (20 12/13) module of 80 hours in foreign promotion strategy; (ii) strengthen languages, computer literacy, the labor market information system; communication and study skills, and (iii) prepare the Vocational These courses are designed to improve Training Law. leamning quality and intemnal efficiency 0 Growth, Employment and Poverty PESW Outcomes progress p IFC Indicators are revised in line with the design of the Skills & Employment DPL and the targets are set for 2012- ________________________1_____1__ 2013 15 Amongst the following providers: National Vocational Training Office; Agriculture; Tourism; Fisheries; Works; Crafts; Youth & Sport; Solidarity; Interior; Justice; Education; Chambers ofCommerce. 16 "Licencesfondamentales", as opposed to "licencesMprofessionnelles" 25 Improving the effectiveness of intermediation services, Milestones progress including active labor market programs ("stock") ANAPEC has implemented a 2009-2011 plan to increase its Increased number of ANAPEC offices Indicator 3: Number of new enrolments with ANAPEC, number of local offices and from 50 in 2008 to 77 in 2011. including proportion of non-graduates7, par year, by gender employment counselors. Government adopts in Cabinet a Increased number of job counselors Baseline: 130,000, including 1% of non-graduates (2011) draft law amending Law No. from 278 in 2008 to 349 in 2011 Target: 150,000, including 1000 of non-graduates (2013) 5 1/99 establishing ANAPEC, in Outcomes proZress order to extend ANAPEC Data not available, target set for 2013 coverage to non-graduates. Improving- eob quality Micro-enterprises have an Milestones crooress incentive to become formal; as a Finance Ministry implements a set of * Indicator4 : Number of firms, formerly operating in the result they benefit from public measures to encourage the informal sector, registered annually for professional tax services that will boost their formalization of micro-firms, namely: productivity. - income tax is reduced from 300 to Baseline : n.a. (2010) 150% for businesses whose after-tax Target: 14,000 (2012) - cumulative turnover is equal to or less than 3 million DH; - income tax amnesty upon registration for professional tax ("patente") (i.e. transition from informal to the first level of formality)18 Outcomes progress 6,449 of firms, formerly operating in the informal sector, registered annually for professional tax in 2011 17 Non-graduates are those who have not completed high school .1 1 i or do not have a vocational training diploma. This is a temporary measure, for 2011 and 2012, which maynbe renewed after evaluation. 26 1.4 TRADE AND COMPETITIVENES - Added to the CPS Results Matrix Government Objectives : . Modernizing the legal and institutional framework of foreign trade. * Streamlining trade logistics at the ports of entry . Strengthening the institutional framework for the competition policy Key Issues Targeted: 1. Enhancement of transparency and predictability on the regulatory framework applicable to safety and hygiene standards for local producers and importers 2. Reduction of administrative burden (time and costs) and increased transparency for importers and exporters. 3. Reduction of dominant positions and unfair competition. Progress at CPS-PR: This is a new results area that has been added into the CPS-PR which reflects the focus of the Bank's Competitiveness DPL. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Modernizing the legal and institutional framework of foreign trade The Head of Government has issued the Milestones progress Planned implementing Decree provided by the The law No 24-09 dated August 17, 2011 on Not planned in CPS Number of controls on imported products: Law 24-09 dated August 17, 2011 on the the safety of products and services. safety of products and services. Publication has been approved by Delivered/Underway Baseline : 71,000 (2011) Parliament and published in the National Competitiveness DPL Target (2013): over 100,000 Gazette No. 5984 of October 6, 2011. (FY13) Outcomes progress Outcome set for 2013 Streamlining trade logistics at the ports of entry The IT system managed by PORTNET Milestones progress AAA on data and for data exchange is operational and The company PORTNET in charge of statistics - including Reduce the total time (discharge outlet) for containers used by the key public authorities and operating/managing the IT system for data simulation of industrial private trade operators involved in exchange between public authorities and and trade policies Baseline: 2010 average import and export operations(Customs, private trade operators has been established Target (2013): Reduce by 25% by 2013 freight forwarders, banks, Foreign Trade by its shareholders on January 19, 2012. Department, National Office of Food Outcomes progress Sanitary Security (ONSSA)) Outcome set for 2013 Strengthening the institutional framework for the competition policy The Head of Government issues the Milestones progress implementing Decree provided by the The Government Council has approved the Number of cases of self-referral, investigation and sanctions Law establishing the National draft Law modifying the Competition and imposed by the National Competition Council. Competition Council (Conseil National Freedom of Pricing Law No 06-99, de la Concurrence). reinforcing the powers and independence of Baseline: 0 the National Competition Council (Conseil Target: 4 official investigations by end 2013 National de la Concurrence) Outcomes progress: Outcome set for 2013 27 Pillar 2: SERVICE DELIVERY TO CITIZENS 2.1 PUBLIC SECTOR MANAGEMENT Government Objectives: * Increase transparency, accountability and performance measurement of the budget. * Progress in implementing key components of HR reform. * Consolidate and control civil service payroll evolution. * Simplification of PA procedures and greater availability of on line services. Key Issues Targeted: 1- Insufficient visibility of policies in their medium-term budgetary implications which would allow for budgetary allocation decisions in a multiyear framework. 2- Need to improve HR management to enhance civil service performance including in deconcentrated entities. 3- Strengthen payroll management to foster control of overall public wage bill and promote macroeconomic stability. 4- Inefficient and nontransparent procedures undermine quality and reliability of PA processes. Progress at CPS-PR: Moderate progress recorded based mainly on PARL IV DPL actions. Some good progress on reducing the wage bill was achieved in 2010 but was then reversed due to Arab Spring pressures. Indicators and Milestones for the planned Governance and Accountability DPL-l will be specified once the DPL is prepared and will captured in the next CPS. The future results in this context will include some of the activities proposed in the main text. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Multiannual budgetary planning integrated with the process of Increase number of Milestones progmss Planned preparation of the Budget Law. departments that The number of departments that elaborate 9 PARL IV (FY09) -Delivered. elaborate performance performance budgets, at the level of paragraphs, 9 P-ESW. The objective is to consolidate the link of multi-year performance budgets from 25 has been extended to 34 ministries. 9 PER. budgeting with the annual budget law preparation process so that (October 2009) to 30 Outcomes progress 9 E-Govemment TA. MTEFs constitute the central tool of sectoral allocations of resources by end 2010. In progress. More than 16 ministries have based on sectoral priorities of the govemment. developed over 19 sector or sub-sector MTEFs. Planned/Underway * Indicator: Number of additional ministries that routinely do a Most ministries are familiar with this tool, but it 9 Govemance DPL being prepared Medum-ermExpndiur Frmewrk MTE).is not yet fully operational, in the absence of a (FY 13) Medium-Term Expenditure Framework (MTEF). global MTEF and multi annual budget ceilings. 9 E-Gov TA Baseline: 12 ministries, in October 2009. The new organic budget law intends to address 9 Compensation Reform this shortcoming, by introducing a multi annual 9PninRfr budget perspective and a programmatic approach. . Peon Roefrmac n ni The pending HRM policy adopted by the government. This concems Preparation of No data available Corruption the decree on Harmonization of Civil Service Status of "Editors- strategic staffing 9 Public Administration Reform TA R6dacteurs" and "Technicians." frameworks and * Indicator: Decree adopted by the govemment. generalized use of Baseline: Preparatory background work has started. GPEEC tools in HR management by key ministries. 28 The wage bill is in line with the government medium term target of Milestones progress 10 percent of GDP. Key ministries Although the payroll remains centrally managed * Indicator: Share of Wage Bill in GDP. actively involved in by the Ministry of Finance, key Ministries, such Baseline: 10.3% in 2009. Preliminary estimate. Final estimate the control of their as Education and Agriculture have taken a more available February 2010. wage bill and payroll active role (and increased their capacity) in the credit management. management of their personnel costs. Given the Government's response to the Arab Spring - including Outcomes prozress wage increases for civil servants - this indicator is being dropped The wage bill fell to 10.20 of GDP in 2010 but from the CPS. The focus of the Bank's program has shifled away increased again to 10.90 GDP in 2011 due to from a support for a traditional administrative reform agenda general increases in the salaries of all civil towards the improvement of transparency, accountability and spring. E-government is introduced to siMplify PA procedures including for Milestones prog0ress service delivery. Institutional On May 21, 2009, Morocco issued Decree 2-08- * Indicator: Number of Government Priority projects (15 listed) fully framework for e- 444, creating a new institutional framework for e- implemented. government in place government leadership, the National Council for Baseline: None in 2009. and operational. Information Technologies and digital economy. At least 80% of the central administration's E-procurement and e- procurement offers, terms of references, and customs systems are results of the public bids are available online. operational. All customs declarations are now processed online, excluding payments. Outcomes progress Over 9 Government Priority projects (15 listed) were fully implemented; e-Consulat, Integrated management of public expenditure, Online VAT claims, Paying Corporate Tax, Paying Income tax, Setting up and electronic certification authority, Employee online social claims, Customs declarations. Other applications are on their way to being implemented: Online bidding for public tenders, enterprise creation, Common identifier and inter- operability among administrations. 29 2.2 QUALITY AND ACCESS IN EDUCATION Government Objectives : * Achieve universal compulsory basic education by 2015. * Improve system performance (teaching, management and stewardship). * Mobilize and utilize resources effectively. Key Issues Targeted: 1- Large number of school-aged remains excluded from the system, with high repetition and dropout rates. 2- Weak external efficiency and quality of the education system. 3- Weak institutional performance in teaching, management and stewardship. Progress at CPS-PR: Moderate progress recorded. While there has been some progress towards the outcomes and milestones (particularly in the area of access), it is clear that it is falling short of what was expected (particularly in the area of completion, as an imperfect proxy for quality). The Bank is deliberately not changing the results matrix outcomes or milestones for this sector as the vehicle of support is the Education DPL which is fully based on the Government's program, indicators and targets. These have thus been maintained. The thrust of the Bank's support to education has evolved during the CPS and has been on quality and not on access so there are better results on putting in place the evaluation system rather than building schools or enrollment rates. The CPS PR has introduced gender disaggregated indicators given the enhanced focus on gender in the CPS-PR and the availability of this data as part of the program. Any outcomes linked with the future scale-up of the Tayssir CCT program (for which the Bank provides TA) will be captured as part of overall monitoring of the education program, especially as regards female enrollment, drop-out and repetition rates. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Increased net enrollment rates for primary and Number of new schools built under Milestones progress 9 Education DPL lower secondary education. Gov't Education Emergency Plan. Number of new schools built: 9 AAA: Impact evaluation of conditional * Indicator: primary education net enrollment rate. Primary education: 113 (2010), 46 cash transfer program in rural primary Baseline: 90.5% (2008/09). Primary education: 32 (2009 & 2010) schools Targets: 91.9% (2009/10), 93.2% (2010/11), ( Skills Development & Labor Market 94.6% (2011/12). Lower secondary education: 158 Lower secondary education: 39 (2009 & DPL SIndicator: lower secondary net enrollment rate.& Quality Assurance Baseline: 42.7% so renl t e (1 Community schools (i.e. combined Public Administration Reform DPL Baseline: 42.7% (2008/109)6.0%(001) primary/lower secondary) - 5 (2009 & 2010) AAA: PER-PEFA PETS-QSDF Targets: 51.5% (2009/10), 62.0% (2010/1 1), 74.7% (2011/12).________ 747 21/2.Outcomes p=ozess Planned/Underway Additional gender indicators added Primary education net enrollment rate: 93.9% * Education DPL (DPLI completed, " nictr:fmaeprmryeuctonnt(2009/10), 96.4% (20 10/11) DPL2 in preparation) * Indicator: female primary education net AAA: Impact evaluation of conditional enrollment rate: Baseline: 89.1% (2008/09).Loeseodredctoneenolntahtasfrpgamirulpiay Targets: 92.5% (2010/11), 94.2% (2011/12). rate: 48.0% (2009/10), 51.0% (2010/11) sh ta colected,rdra prt * Indicator: female lower secondary net enrollment Female primary education net enrollment completed, final report under way). rate: Baseline: 42.4% (2008/09)Skills & Employment (FY2) TrtBsel: 6 .4% (200/9) rate: 92.71 AAA: Evaluation & Quality Assurance Female lower secondary net enrollment rate: PER reports being finalized 47.3% (2009/10), 50.2% (2010/11) &PETS-QSDF (PETS TORs developed). 30 Reduced repetition rates for primary and lower Pupil-teacher ratios: Milestones progress . Governance DPL (FY13) secondary education. Primary education: 28:1 (2009/10), Primary pupil-teacher ratio: 28:1 (2009/10), * PPP in Education (IFC) * Indicator: Primary repetition rate. (2010/11), 27:1 (20 28:1 (2010/11) Baseline: 12.3% (2008/09). Lower secondary education: 24:1 Targets: 9.1% (2009/10), 6.7% (2010/11), 5.0% (2009/10), 24:1(2010/11), 24:1 Lower secondary pupil-teacher ratio: 24:1 (2011/12). (2011/12). (2009/10), 24:1 (2010/11) * Indicator: lower secondary repetition rate. Outcomes prozress Baseline: 15.2% (2008/09). Targets: 13.0% (2009/10), 11.1% (2010/11), 9.5% Primary euai ret rt:1.0 (2011/12).(2010,93o2101) Aditonl1ene/idiatrsade Lower secondary education repetition rate: Additional,zender indicators added16%(20/),6.%2001) * Indicator: Primary female repetition rate: 16i10o f20a1) 16e30o (2010/11) Baseline: 10% (2008/09). (2009/10), 7.3 (2010/11) Targets: 5.9% (2010/11), 4.5% (2011/12). Lower secondary female repetition rate: * Indicator: lower secondary female repetition 12.1% (2009/10), 12.3% (2010/11) rate: Baseline: 11.5% (2008/09) Targets: 8.92 (2010/1(1), 7.9/ (2011/12). Improved education quality with a focus on Continued engagement in Milestones progress restructuring teachers' training and learning international learning assessment Morocco participated in TIMSS 2011 & evaluation. surveys: Trends in International PIRLS 2011 * Indicator: Establishment of national learning Mathematics and Science Study Oucmspors assessment system. (TIMSS 2011); Progress inroress Baseline: Not yet established (2008/09). International Reading Literacy National Learning Assessment System Target: New upper secondary education strategy Study (PIRLS 2011). (PNEA) established and 2011 learning is developed and implemented by 2012; National outcomes survey to be held before end of learning assessment system has been established school year. and at least one learning outcomes survey has New upper secondary education strategy at been carried out (with analysis and dissemination) early stages of preparation by 2012. Improved management capacity and increased Implementation of performance Milestones progress accountability of results at all levels, within the evaluation system for school School principal performance evaluation context of decentralization. principals: Define job profile system not yet implemented. Job profile * Indicator: Proportion of lower secondary teachers (2010); Implement training plan in being defined. working the full complement of hours assigned. line with job profile (2011 + 2012). Baseline: 3.5%o (2008/09). Targets: 4O.5% Outcomes progress (2007/08), 53.8 (2009/10), 71.5 (2011/12). (these are triggers and indicatorsfor the DPL to aorinl fl co nary hrs they are being maintained even though no data woriengeal fu i available)atssigned:gnsssstn 31 2.3 HEALTH SECTOR REFORM Government Objectives: * Reduce the burden of major health conditions. * Reduce inequity in access to services affecting poor and rural populations. * Improve financing and efficiency of the sector. * Improve governance of the sector. Key Issues Targeted: 1- Dual burden of non-communicable diseases and poor maternal and child health outcomes. 2- Public financing of health services remains inadequate, resulting, among other things, in high out-of-pocket expenditures. 3- Limited access to affordable and quality pharmaceutical products (quantity scarce in public sector, prices high in the private sector). Progress at CPS-PR: Limited progress recorded. The Bank's Health DPL preparation was put on hold by the Government due to non-conclusive discussions between Ministry of Health and Ministry of Finance. Therefore, the results matrix outlined in the CPS in this area is no longer valid as all indicators and baselines were expected to be established during preparation of the Health DPL. Hence, they are all being dropped here. Should the DPL's preparation re-start, then Indicators and Milestones will be captured by the next CPS. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Integrated management of non-communicable disease National Commission on NCD set-up, Planned (NCD) prevention and treatment at primary provider level. and prevention and treatment included in primary care providers' cahiers de *Health DPL/TA * Indicator: Indicators and baselines will be set during charge. Management tools and PPP Health (IFC) preparation of the proposed Health DPL. protocols are in place, training and Delivered/Underw More comprehensive nutrition activities integrated in the dissemination conducted. * DPL preparation was initiated then provision of maternal and child health services, cancelled. Discussions are now aIndicator: Indicators and baselines will be set during progress with new Government preparation of the proposed Health DPL. i Public Expenditure Tracking Survey (PETS): Ongoing Indicators have been dropped due to change in Bank c Public Expenditure Review (PER): engagement protocoinearing completion Regional budgets are allocated based on need and Contrats programs level effectively Users of Public Facilities Survey: performance, and capacity of regions to plan and assess enforced in all regions. Results transmitted to the MoH in early service delive1y is enhanced. Monitoring system to assess capacity 2011. * Indicator: Indicators and baselines will be set preparation and performance of regions is in of the proposed Health DPL. place. Measureable improvements in Indicators have been dropped due to change in Bank governance m health facilities. engagement Good quality and affordable pharmaceuticals are accessible National Pharmaceutical Agency to the population in public health facilities.: Indicators and created. baselines will be set by March31, 2010 during preparation Following stakeholders' consultations, of the proposed Health DPL. a national pharmaceutical Policy Indicators have been dropped due to change in Bank revised and approved by parliament. engagement 32 2.4 VULNERABILITY AND SOCIAL EXCLUSION Government Objectives: * Reduce rural poverty, urban social exclusion and vulnerability. * Empower poor and vulnerable groups for their own development. Key Issues Targeted: 1- High level of rural poverty, social exclusion and vulnerability. 2- Insufficient access to/use of basic infrastructure, social services and economic opportunities, by poor and vulnerable groups. 3- Lack of convergence of poverty alleviation policies and implementation mechanism across government agencies. 4- Centrally-driven approach dealing with poverty and social exclusion, with little room for participation and empowerment of the stakeholders. Progress at CPS-PR: Advanced Progress recorded based on the successful completion of INDH-1 where many outcomes have surpassed their targets. Just after Board discussion of the CPS, and as per the Government's request, the four original PDO indicators of the INDH project were amended and increased to five to better capture the outcomes of inclusiveness, accountability and transparency, and to measure the impact on the target population. The reviewed PDO of the INDH are now reflected here as outcomes to ensure better alignment. New indicators have been added for the first year of implementation of INDH-2 (2012/13) which is covered by the CPS period. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Use of services and infrastructure Mstonesroress Planned * Number of persons (men, women and youth) reporting 9 Ongoing INDH Project increased use of basic infrastructure and socioeconomic Improved targeting of poor and Improved targeting of poor and (SWAP, 2007-2010). services created by INDH, broken down by program vulnerable groups. vulnerable groups occurred under 9 INDH 2, 2011-2015 (Request (rural/urban/vulnerable/ crosscutting) INDHI and has further improved in for WB's support received). Opinion/Household surveys conducted the design of INDH2. 9 PESW. Baseline: Target: every year. 9 Ongoing IFC support to Men 0% Men 70% Independent impact evaluation survey microfmance sector Women 0% Women 50% Indend acalutin survey conducted in 2011 (investment and advisory) Youth 0% Youth 30% 2013. - decentralization agenda has not evolved as expected in Transparency Convergent policies and Morocco and the new Constitution . INDH 2 (FY12) * % of CLDH, CPDH and CRDH's decisions published, relating implementation mechanisms for now structures this as a part of overall e Breaking Barriers to Youth to the projects approved/rejected and annual physical and poverty alleviation programs agreed regionalization - it is thus premature financial reports within the deconcentration to evaluate the milestone 9 Govemance of Service /decentralization agenda. Delivery to Citizens Baseline: 0% 9 Poverty PESW Tre:9%Outcomes progress 9 JSDF Grant $2.85m Target: 95% 73-84% of men, 66-75% of women Promoting Accessibility for Accountability & ownership and 41-65% of youth are reporting Persons with Limited 0 u/o Or projects implemented by communities, NGO, Communes increased use of basic infrastructure Mobility and socioeconomic services created by INDH, broken down by program (rural/urban/vulnerable/ crosscutting) 33 Baseline : Target: 100 of CLDH, CPDH and CRDH's Rural 0% Rural 60% decisions published, relating to the Urban 0% Urban 70% projects approved/rejected and annual Crosscutting 0% Cross-cutting 70% physical and financial reports 90% Rural, 72% Urban and 79% Inclusiveness Cross-cutting projects are * % of women in CLDH, CPDH and CRDH. implemented by communities, NGO and Communes. Baseline : Target: CLDH 0% CLDH14% 17% of women in CLDH, 17% in CPDH 0% CPDH 14% CPDH and 11% in CRDH CRDHO% CRDH7% 12% of youth in CLDH, CPDH and * % of youth in CLDH, CPDH and CRDH. CRDH Baseline: 0% Target :7% ADDITIONAL INDICATORS ADDED AT THE CPS-PR * Increase in the % of girls and boys who reside in the No milestone being introduced as Under Preparation educational dormitories (Dar Talib, Dar Taliba), graduating indicators are expected to be reached INDH 2 (FY12) to the next grade. Baseline: 45%, Target 50% by end-2012 at end-2012 as per the INDH-2 results * Increase in the % of women and youth (18 - 35 years old) in matrix local governance bodies: CLDH & CPDH. Baseline: 17% women and 12% youth. Targets: 20% women, 15% youth by end-2012 * Increase in % of IGA implementing agencies receiving capacity building. Baseline: 20% Targets 30% 34 2.5 TRANSPORT Government Objectives: * Rural Roads: Improve access of rural dwellers to basic infrastructure and social services with all weather roads. * Urban Transport: develop the institutional framework, improve efficiency of services and infrastructure, and ensure the environmental and social sustainability. Key Issues Targeted: 1- Rural Roads Accessibility: only 54% of the rural population has access to roads that can be used all times. 2- Responsibility over maintenance of the 3,000km of unclassified roads is unclear. 3- Inefficient provision of transport services and infrastructure due also to weak institutional capacity. Progress at CPS-PR: Advanced progress recorded. Indicators and milestones for the planned Urban Transport DPL-2 will be specified at the time of DPL preparation and will be captured by the next CPS. The CPS-Completion Report will provide information on the on-going social impact evaluation of the Rural Roads program as data will be available by then - especially as regards girls schooling and women's access to health facilities in project areas. However, indicators for these results are not being introduced here as they are not captured in the results framework of the Bank's current Rural Roads project. Should the Bank provide future financing for the next phase of the rural roads program, this will capture these socio-economic results and thus they will be included in the next CPS. The JSDF grant for supporting accessibility of people with reduced mobility expects to achieve results only by end-2013 which is beyond the time-frame of the current CPS: results of this activity will thus also be captured in the future CPS. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Increased accessibility of rural population to all-weather Rural Roads financed by the Planned roads - from 65% (2009) to 80% (2012). CFR -4,600 km of roads Milestones prqgress * Rural Roads Project; Indicator: Percentage of rural population that have launched under the program. 11,000 km of rural roads launched under the 9 Second Rural Roads Project access to all weather-roads. Rural Roads financed under the program. 7,000 km have been completed and and Additional Financing. Baseline: 65% (2009) DRCR - 3,200 km of roads open to traffic and 1,000 km partially open to 9 Urban Transport Sector Target: 80% (2012). launched (the total of 7,800 km Policy program (DPL 1 and represents the first phase of a Outcomes pnQgress 2). Sustainable maintenance of unclassified roads. program of approximately Percentage of rural population that has access to * TA to reinforce the Port * Indicator: Action plan for sustainability of unclassified 15,600 km of rural roads). all-weather roads: 72% (December 2011) Authority (ANP). rural roads in place. Sustainability of unclassified rural roads has fCilitaton ad Baseline: No plan prepared advanced with the constitution of an inter- Target: Plan implemented by 2012. sustainability of unclassified ministerial committee to finalize a series of infrastructure study for rural roads being prepared measures to secure sufficient financial resources Maghreb countries. and appropriate administrative arrangements for 9 PPP in transport (IFC) sustained maintenance of these roads. Efficient planning and management of the urban transpo Milestones prgress Rural Roads Project; sector. Establishment of urban 1 city (Casablanca) has established an urban 9 Second Rural Roads Project " Indicator 1: Number of cities over 500,000 inhabitants transport agencies in the main tasotgec.and Additional Financing. rbanprens and firt the tonal rnprgny which have established an urban transport planning and ation TA to reinforce the Port management authority level. authority (ANP) Baseline: 1 city (Casablanca) Formulation of adequate urban 5 cities (Tangers, Casablanca, Rabat, T&touan, 9 Cross-border trade and Target: 4 cities by 2013 transport strategies and Marrakech) have adopted adequate urban facilitation study for ina od eigpeae * Indicator 2: Number of cities over 500,000 inhabitants vestment plans in the main transport strategies (long term multimode urban Maghreb countries 35 which have adopted a long term multimodal urban urban area, transport master plan). Marrakech has * Urban Transport DPL 1 transport master plan formulated an investment plan. (FY11) Baseline: 1 city (Casablanca) * Urban Transport DPL 2 Target: 6 cities by 2013. Improved technical and The National Commission for Urban Transport (FY13) regulatory framework for (CNDU) has been established but is yet to * Transport and Energy public transport, urban roads, become fully functional. It is supposed to Efficient AAA and traffic. oversee the implementation of the national * JSDF Grant ($2.85m) with high economic returns strategies on urban transport and coordinate the Promoting Accessibility for * Indicator: Central Government share of urban transport technical and regulatory efforts between the Persons with Limited infrastructure investment funding in cities over 500,000 various relevant ministers. The regulation of Mobility inhabitants. public transport and traffic management is Baseline: To be established through the first UT DPL. awaiting the completion of important technical Target: 20%o in 2013. studies, particularly for traffic management and bus route restructuring. The studies are currently ongoing in Casablanca, Marrakech, and Rabat. Outcomes prozress 1 city (Casablanca) has established an urban transport planning authority. Its management functions are yet limited. 5 cities (Tangers, Casablanca, Rabat, T6touan, Marrakech) have adopted a long term multimode urban transport master plan. Two urban infrastructure investments are relevant for this indicator: 1) Tramway in Rabat, estimated to cost 3.8bn DH. The exact figure of the central government share of the funding is not available, but it is estimated to be over 200. Government funding towards the tramway is channeled through a company responsible for land planning, and is the entity which will be investing in the tramway as well as in other infrastructure projects. This funding amounts to 3bn DH 2) Tramway in Casablanca, estimated to cost 6bn DH. Central government funding is *a2,700bn DH, corresponding to a share of 45D 36 2.6 AGRICULTURAL SECTOR REFORM Government Objectives: * Increased competitiveness and diversification of the agricultural sector to sustain stronger agricultural growth and employment. Key Issues Targeted: 1- Low quality domestic marketing infrastructure (wholesale markets and slaughterhouses) that inhibits price formation. 2- Inefficient management of water resources in irrigation sector. 3- Under-performing public sector support and services. Progress at CPS-PR: Advanced progress recorded mainly due to successful completion of the first DPL Plan Maroc Vert. Indicators and Milestones for the planned Plan Maroc Vert DPL-2 will be specified when the DPL is prepared and will be captured by the next CPS. Outcomes the Bank Group expects to Milestones Progress to date Bank Group Program influence Instruments/Status Improved integration of smallholders into Milestones prqgress Planned domestic markets. Public private partnerships in Public private partnerships in wholesale markets and 9 Bank and FAO * Indicator: Million tons domestically wholesale markets and slaughterhouses not yet achieved (this milestone is now technical assistance produced fresh fruit and vegetable sold in slaughterhouses piloted. lined to the Plan Maroc Vert DPL2) on PPP models. national wholesale markets. Outcomes pror 9 Potential Bank DPL Baseline: 2.2 million tons Improved integration of smallholders into domestic markets: with domestic market Target: 4 million tons. 2.7 million tons sold in wholesale markets system pillar. IMproved irrigation water management. Milestones progress * World Bank and ADB " Indicator 1: area equipped with drip -Increased on-farm use of water -Increased on-farm use of water saving irrigation investment operations irrigation systems. saving pptechnolos technology: in irrigation sector. Basels-Increased cost recovery by -Increased cost recovery by ORMVAs: Partially achieved a tannoewoni Target: 2013: 360,000 ha. ORMVAs. -Inter-ministerial body has approved water resource plans modsael fo PPMAs SIndicator 2: % O&M cost recovery in 5DP ORMVAs Outcomes progress wi l pillar, Baseline: 2007: 76%. Drip irrigation water management: 249,605 ha (end 2010, no igation Target: 88% Water resource plans approved by data available for 2011) with Pillar 1 and Target for this indicator changed from 7 to 5 inter-ministerial body. %O&M cost recovery in the 5 ORM\VAs - no progress yet public services pillar. ORMVAs andfrom 100% to 88% to align with recorded. This indicator will now be linked to the DPL2. * IFC investment in indicators oPPlan Maroc Vert DPL2 agribusiness sector IMproved public sector sUpport and services to -Introduction of transparent, Milestones progress smallholders. competitive and participatory Introduction of transparent, competitive and participatory Delivered/Underway 9 Indicator: # of Pillar 11 projects procedures in the identification and procedures in the identification and implementation of PMV PMV DPL 1 (FY1 1) implemented in 2013. implementation of PMV Pillar 11 Pillar 11 projects: Achieved Oumn Er Rbia Irrigation Baseline: 50 Pillar 11 projects (2009) projects. Increased stakeholder involvement in the programming of Project (FY10) Target: 290 Pillar 11 projects (2013) -Increased stakeholder involvement public services: Achieved T nPP in the programming of public Introduction of Public Private Partnerships in public services PMV DPL 2 (FY 13) services, delivery: not yet achieved. Milestone linked to the DPL2 -Introduction of PPP in public Outcomes prPgress services delivery. -112 Pillar projects implemented by February 2012. 37 2.7 SOCIAL PROTECTION REFORM Government Objectives: * System reform to consolidate SP: (i) Design and implement a more equitable, efficient and coherent package of social protection programs; (ii) As part of the above, reform the oil and food subsidies programs. Key Issues Targeted: 1- Main safety net remains the general subsidies provided by the Caisse de Compensation which in the medium to long term may become unsustainable. In addition, the poor receive only about 10 percent of the allocated amounts (2007). Lack of coherent social protection strategy to inform reform options. 2- Current SP system is fragmented. The various targeting methods generate inequities. Efficiency and impact of most programs are unknown. 3- Less than 25% of the labor force has access to pensions, health insurance, and other social security benefits. Progress at CPS-PR: Moderate progress recorded. Indicators in original CPS were to have been established by the Targeting and Social Protection Strategy. This strategy has since been delivered and dialogue on its recommendations is on-going. Indicators and milestones have thus recently been established to reflect the current status ofBank's engagement - evaluation of progress on these indicators will be at the time of the CPS Completion Report. Outcomes the Bank Group expects to Milestones Progress to date Bank Group Program influence Instruments/Status A more coherent, equitable, and sustainable Milestones prqgress Planned supply of social protection programs available A Targeting and Social The Targeting and Social Protection Strategy prepared by 9 Targeting and Social Protection to poor and vulnerable groups. Protection Strategy is endorsed the Bank in coordination with an inter-ministerial technical Strategy (ongoing). by the government. committee, was endorsed by Government. Several 9 TA on social security extension reconmmiendations have been implemented (including (ongoing). * Number of beneficiaries of Tayssir program. expansion of Tayssir, RAMED, social insurance schemes) 9 PSIA. A PSIA on the subsidy reform was carried out in 2010-2011 9 Programmatic ESW/TA for SP Baseline: 80,000 students (2008/09) by the World Bank, and a communication campaign was strategy implementation Target: 400,000 (2012/2013) launched by the Government in 2011. envisaged. m iOutcomes progress * Social Protection Project AcPmmAnisctompe tof informy Number of beneficiaries of Tayssir program has reached envisaged. ceomuiaio. fsusd 340,000 (2011/2012) Delivered/Underway rfhe e Targeting and Social Protection oe efficient Bnak ectie saretin Milestones progress Strategy. Published. The household targeting system of RAMED (non- Dissemination strategy M&E. performing household targeting contributory insurance scheme) has been designed, prepared. * The RAMED targeting system has been system has been designed to evaluated, and improved. * Programmatic ESW/TA for SP implemented nationally and can be used by form the basis for a unified Outcomes progress strategy implementation oterscil sisaceprgam.registry of beneficiaries. Early 2012, the Government of Morocco has decided to ongoing. expanionsfoTaysir,RAMEistocalcisuranegscemes scale up the pilot RAMED nationally. TA on social security extension Ebpansion and diversification of social CNSS implements the Milestones progress at(Cancelled). security coverage, extension of Social Security Royal Decree no. 1. 11. 181 of November 22, 2011, GovI.Diernen t h 9 Number of non-salaried workers registered coverage to so me categories of aedn n opeigRylDce o 1 214 oenet nonsalrie wrkes, s er menin an copltin RoalDecee o.11.2.14, * Trowting andpomnandrteto with National Social Security Fund Roy-alaDere no.krs 11.72.18 dated July, 27, 1972, to extend social security coverage by PGoety, PEmpoyW tn the National Social Security Fund to licensed drivers, o S Baseline: n.a. (201 1).Target : 200,000 (2013) approved in 2011. Outcomes p=ess: No data available yet. 38 Pillar 3: SUSTAINABLE DEVELOPMENT IN A CHANGING CLIMATE 3.1 WATER MANAGEMENT Government Objectives: * Promote water demand management. * Improve water resources quality protection. * Adaptation to climate change impacts on water resources (see CC matrix). * Improve water supply and sanitation (WSS) service coverage and efficiency. * Pursue institutional reforms of the water sector. Key Issues Targeted: 1- Sub-optimal use of irrigation water, overexploitation of aquifers and weak enforcement of water abstraction regulation. 2- Inadequate sewerage, lack of wastewater treatment, environmental degradation and weak enforcement of water quality regulation. 3- Water resources management institutions not well prepared. 4- Inadequate access to WSS service in poor peri-urban and rural areas, need for enhanced cost recovery and investment capacity in WSS utility service and inefficient sector organization and operator regulation. 5- Weak inter-ministerial coordination. Progress at CPS-PR: Moderate progress recorded. The results matrix in this area has been fully revised to reflect better the Bank's program and align with the objectives of the 3 water/sanitation/irrigation investment projects that were approved by Board in June 2010 (after the CPS). Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Modernization of irrigation practices in agriculture and Start of works for the modemization of Milestones prozress Delivered/Underway better control of groundwater abstraction. irrigation networks in ORMVAs of Tadla, Oum er Rbia (OER) Irrigated Agriculture 9 Oum er Rbia (OER) * Indicator: area equipped with drip irrigation systems. Doukkala and Haouz. modemization project is effective since Irrigated Agriculture Baseline: 2008: 800 ha. September 2010. Works have started modemization Target: 2013: 15,000 ha. project. Design of control mechanisms of On-going, the consultant recruited with PHRD 9 OER sanitation groundwater abstraction on the Tadla Grant funds is working. Expected final delivery Project. aquifer. end of July 2012. 9 PHRD grant to the OER basin agency. Outcomes progres ESW on CC impacts Ongoing works for off-farm drip irrigation on water resources networks to equip 7,700 ha are expected to be management. completed by December 2012. Works launched Urban & rural water or being launched for the equipment in supply system project. modernized irrigation of 13,500 ha, to be WSS access support completed by end 2013. Installation of on-farm project (OBA scale- equipments expected to start in 2012. up). 39 Increased urban sewerage and wastewater treatment Start of works under the OER sanitation Milestones progress . PMV DPL-1/water coverage. (in project areas) Project Contacts under the on-going OER Sanitation component. * Indicator 1: Number of households with access to piped sanitation Baseline: 2008: 10,000 Completion of the OBA Urban Water Pilots The OBA Urban Water Pilots for service Baslie: 00: 1,00 hd.for service extension to poor pen-urban extension to poor peni-urban neighborhoods Target 2013: 40,000 hhd. neighborhoods. have reached the maximum number of * Indicator 2: Wastewater treatment capacity installed connections the Grant allowed subsidizing. Baseline: Zero in 2008. Outcomes prozress Target: 200,000 eq inhabitants. The OBA Pilots for service extension to poor pen-urban areas subsidized access of 9,036 households to piped sanitation. Further data on indicators 1 and 2 not yet available Better knowledge of CC impacts on water resources. CC impacts studies and adaptation strategies Milestones progress f Indicator: Action Plan for adaptation to CC in the prepared for the OER basin. CC impact studies launched - GCM OER basin prepared downscaling study already completed. Baseline: Zero. Hydrologic and water resources management Target: One action plan. modeling studies achieved at 60d. Outcomes prozress Study on the preparation of the CC Adaptation Action Plan launched in April 2012. Increased access to and efficiency of WSS services (in Milestones progress project areas). A National Program for service coverage Preparation of a national program for service extension in poor peni-urban areas has been * Indicator: 0 access to water service in rural and pe- coverage extension in poor pe-urban areas, developed. urban areas covered by project. Baseline: 2009: 000. Preparation of a program for the generalization Target: '70%. Peraiation of S prgamfrc thelvr of water supply service delivery through HC is through house connections (HC).unewy Outcomes prozress Increased access in the Rural Water Supply and Sanitation Project areas to 88,000 people by March 2012, which represents 31a of the population. Better coordination between ministries involved in the Milestones progress water sector. Start of preparation of three Integratedad ItActenvmn Plan prncediApred02 * Indicator: Number of integrated water mobilization- Investment Plans. irrigation investment plans prepared Interministerial Commission of Water (CIE) functional. Baseline: 2009: 0. Target 2013: 3(2011, 2012 and 2013).fucinl Outcomes prozress: Data not available 40 3.2 LOW CARBON ENERGY POLICY AND ENERGY SECTOR RESTRUCTURING Government Objectives: * Enhance energy security and ensure availability of energy to all households and businesses at competitive prices, while protecting the environment and mitigating climate change. Key Issues Targeted: 1- High import dependency and strong reliance on fossil fuels, resulting in a high carbon content of the energy mix. 2- Budgetary burden of price support schemes. 3- Finding the financial resources required by large investment needs of fast growing energy demand, especially to finance highly capital intensive low carbon technologies. 4- Avoiding a negative effect on the balance of trade because of the switch to more complex low carbon technologies. Progress at CPS-PR: Moderate progress recorded. Results matrix has not been updated as it remains valid, even though there is weak progress on some milestones and indicators: this is because their relevance is confirmed and the Bank's program continues to engage in these areas. The Bank's program continues the strong focus on TA in the energy sector although it will explore ways of being more innovative on issues such as pricing reforms and energy efficiency. Because the Ouarzazate project's effectiveness is contingent on the PPP being in place, this project is only expected to become effective toward the end of 2012. Thereafter, construction of the plant will start. Results for this project will thus be captured by the future CPS. Outcomes the Bank Group expects to Milestones Progress to date Bank Group Program influence Instruments/Status Reduction of energy intensity and increased Energy efficiency law enacted and Milestones progress Planned penetration of renewable, to transition the plans by sector defined and under Energy efficiency law (47.09) enacted on 9 ONE Support project Moroccan energy system to a low carbon path. implementation. 09/29/2011 and published (Official Gazette 5989). (transmission investment, * Indicator: Energy intensity. Implementing decrees in preparation company restructuring) -ongoing. Baseline (2007): 0.275 toe/$000 GDP Renewable law enacted and * Energy DPL. Note: Baseline rebased to use IEA statistics: implementing decrees adopted. Renewable law (13.09) enacted on 02/11/2010 and 9 GEF grant for Am Beni Mathar energy intensity was 0.275 toe per $000 GDP Incentive scheme defined. published (Official Gazette 5822). Implementing integrated solar combined cycle (GDP in constant 2000$). decree n 2-10-578 (04/11/201) adopted. Other power plant; decrees in preparation 9 Clean Technology Fund (CTF) * Indicator: Share of renewable in TPES. for low carbon investments Baseline (2007): 2.2% share of renewable in Outcomes prqgress - Line of credit to FDE. TPES. - Investment in CSP plant (regional Note: Baseline rebased to use Ministry of Energy intensity declined slightly until 2009 but CTF CSP scale-up initiative). Energy, Mines, Water & Environment statistics increased in 2011, to reach the 2007 level again TA on energy market reform. Share of renewable in TPES increased to 6.7% in 9 IFC investment in wind 2010 generation project Implementation of price reform, to reduce the budgetary burden of price subsidies and ensure Milestones progress Delivered/Underwa the financial viability of the energy operators. Consumer petroleum product prices Consumer petroleum product prices have not * Ouarzazate Solar Power Plant - * Indicator: Share of explicit energy subsidies in linked to international prices. changed since 2009 IBRD + CTF (FY12) GDP. Electricity tariff study completed, Electricity tariff study not completed and no price * ONE Support project-ongoing Baseline: 3.5% in 2008. implementation plan agreed. adjustment implemented supervision * Indicator: Profitability of ONE as measured by Energy regulator in place. Energy regulator planned for 2013 9 PSW on energy market reform EBITDA. Baseline: 2 1 % in 2007. _______________ leOutcomes proress and clean energy 41 Share of energy subsidies in GDP has increased to f TA on low carbon planning for 5% in 2011 due to high world oil prices power sector m ESMAP Energy Supply Strategy Profitability of ONE has deteriorated with EBITDA * Maghreb Vulnerability falling to 17 % in 2009 and 15% in 2011 (estimate). Assessment (power sector) Merger ONE/ONEP under way. Should produce . PESW on Maghreb Energy some cost reductions Market (regional market integration, Euro-Med market in Establishment of institutions and financial Fonds de D&veloppement de F'Energie Milestones progress *support of CSP) mechanisms to successfully implement energy (FDE) operational. 9Maghreb Fossil Fuels (CCS) sector reform (FDE, ESCOs, etc.). Fonds de Dveloppement de Energie (FDE) MENA local manufacturing study Framework for ESCOs established operational. and workshop (delivered FY11) icat: a reeo ss o - t Study on Morocco strategy and B naslin: Zoerof 2008. tinstrog No ESCO framework established roadmap for local manufacturing * Indicator: and establishment of CIC (under Baseline: Zero in 2008. of renewable Volume of operations of FDE(. 2009: 167.5 MDH, 2010:160.9 MDH 2011: 324.4 MDH Volume of EE operations through ESCOs: negligible Development of a local manufacturing capability Strategic study of Morocco's Milestones progress for renewable technologies and energy efficient comparative advantage in equipment - a green stimuluspackage-therefore manufacturing of renewable equipment. Regional local manufacturing of renewable contributing to job creation, equipment study completed and disseminated (Skhirat workshop). Follow-up study on road map 9 Indicator: Share of renewable PG equipment implementation and creation of Climate Innovation produced locally and exports of renewable Center (CIC) under way equipment. Creation of IRESEN for R&D collaborative Baseline: Zero. projects in February 2011. Convention for the creation of three renewable energy and energy efficiency training institutes in Tangiers, Oujda and Ouarzazate, signed Outcomes progress Share of renewable PG equipment produced locally and exports of renewable equipment: negligible aSource: MEF t data collected for the Climate Change PER, 2011 42 3.3 SOLID WASTE MANAGEMENT Government Objectives: * Provide legal and institutional basis for effective establishment of integrated municipal solid waste systems. * Enhance the sustainability of the municipal solid waste sector through the introduction of financial mechanisms and incentives. * Upgrade and operationalize the existing EIA system and improve the environmental and social performances of the solid waste sector. Key Issues Targeted: 1- Lack of policy planning and coordination in the sector, and ineffective implementation of the national solid waste law. 2- Ad-hoc, limited and inefficient allocation of financial resources to the sector and modest cost effectiveness of the services. 3- Poor waste disposal practices with huge environmental and social negative impacts. Progress at CPS-PR: Advanced progress recorded, mainly due to the successful completion of the DPL-2 for Solid Waste. Indicators and Milestones for the planned Solid Waste DPL- 3 will be specified at the time of DPL preparation and captured by the next CPS. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Effective inter-ministerial coordination of the National Solid Milestones progress Planned Waste Program (PNDM) and strengthened regulatory framework A National Solid Waste 9 Solid Waste DPL 1 (FY09) through the enactment of executive regulations for SWM Commission involving key The National Commission of the PNDM (CN 9 Solid Waste DPL2 (FY11) planning, norms and standards. ministries for coordination, PNDM) was established and has been meeting 9 PPIAF/PSP Study * Indicator: Issue of decrees on SWM norms and standards, and planning, resources allocations regularly with key players on board. This 9 PSIA I (FY09) regional planning. and M&E of the PNDM is in Commission systematically reviews and 9 PSIA 11 (under Baseline: 2008: None. place and operational. approves annual action plans that detail planned preparation) funding allocations and implementation progress Regulations regarding sector of the PND, as well as recommends regulations Delivered/Underw planning, norms and standards are on the sector. enacted. Oucmspors Municipal Solid Waste toesSector DPL2 (FY1) Morocco has now almost completed the required 9 Municipal Solid Waste legislation in the municipal solid waste sector, Sector DPL3 under building on the enactment of its first solid waste preparation law. It had published the decree related to waste PSIA py completed classification; the decrees related to Solid Waste Carbon administrative procedures and technical Finance program prepared specifications for sanitary landfills (Official and appraised. Gazette dated January 7, 2010), and the decree Negotiations of ERPA to related to procedures for the elaboration of be held by Carbon Unit. provincial and prefectural MSW master plans (Official Gazette dated July 22, 2010) 43 Better financial sustainability of SWM sector Allocation of Milestones progress financial resources are consistent with the sector policies and 1000 of resources granted to 800 of resources granted to municipalities under programs, municipalities under PNDM are PNDM are consistent with the new eligibility * Indicator: Percentage of financial resources allocated to consistent with the new eligibility criteria. municipalities based on transparent eligibility criteria criteria. Baseline: 2008: 0% Revised bidding documents and Bidding documents and contacts models were Improved cost effectiveness of private sector involvement in contact models developed and revised and being used. providing MSW services; and additional sources of revenues being used. generated through Clean Development Mechanism (CDM). Outcomesoress * Indicator: Average cost of MSM services provided by private PNDM are consistent with the new eligibility operators. criteria. Baseline: 2008: 441 DH/ton. The average cost of MSW services provided by private operators in 2011 is 3 80 DH/ton Additional sources of revenues generated through Clean Milestones and Indicator mrozress Development Mechanism (CDM). Number of CDM projects A Solid Waste Carbon Fund program has been SIndicator: Number of CDM projects developed in solid waste miltoe s nd D developed and appraised by the Bank in sector. roppe February 2012. The program targets 16 landfills Baseline: 2008: Zero projects. as it is the same as the indicator and is expected to cover a total volume of waste of approximately 3.38 million tons per year and representing more than 50 of municipal solid waste collected in urban areas. The emission reductions are estimated to an average of 838,000 tCO2e per year, amounting to '7.5 million tCO2e over nine years (2012-2020) . The proposed Emission Reduction Purchasing Agreement will enable the Bank as trustee of CPF to purchase 2 million tCO2e. Disposal practices coMply with international social and Milestones progress environmental standards. A national EIA commission and 3 Regional ETA committee is now established and * Indicator: Percentage of collected waste is being disposed of in regional ETA commissions are fully operational throughout the Kingdom. sanitary landfill, operational by 2011. Baseline: 2008: lo evenu Outcomes rozress Target (2011): 30%o of collected municipal wastes are disposed soal aeniierompntlyigwit 30%o of collected waste is being disposed of in of in sanitary landfills, smcil ad inmen sanitary landfill at the end of 2011. * Indictor: Nmber ofCDM prjectsidvelopeeinisoldlwast This milestone is being dropped as it is the same as the indicator 44 3.4 CLIMATE CHANGE ADAPTATION Government Objectives: Improve resilience to climate variability and change through the integration of adaptation actions across and within sectors. Key Issues Targeted 1- Limited interagency coordination and policy coherence on CC adaptation; 2- Limited ability to design climate-resilient sector policies; 3-Few experiences on the ground of viable adaptation options Progress at CPS-PR: Mixed progress recorded. Indicators for the planned Climate Change DPL will be specified at the time of DPL preparation and captured by the next CPS. Outcomes the Bank Group expects to influence Milestones Progress to date Bank Group Program Instruments/Status Improved inter-agency coordination on climate change Climate change impact Milestones pLqgress Planned adaptation by mainstreaming climate adaptation in the national analysis in key sectors Climate change impact analysis completed for Agrculture, 9 ESW on CC issues m: development planning process. completed and validated. Fisheries, Transport, Water (only for Doukkala river WRM, agriculture, * Indicator: development of a national climate change basin),Coastal Cities transport, coastal cities strategy; ZeoOutcomes prozress towards development of national climate adaptation, risk chaze strate management strategy, Baseline:The 2d National Communication to UNFCCC completed and climate migration and * Indicator: at least one adaptation action plan adopted in at submitted; displacement. least one of the key vulnerable sectors (agriculture, urban; White Paper on Climate Change currently under preparation; GEF- Capacity building transport or others) Integration of article on CC policy in Framework Law of for Adaptation in WRM Brasnoro Environment (currently under preparation) and Agriculture. Baseline: Zero In agriculture, an action plan has been put in place by the Agence pour le Developpemnent Agricole (ADA) for Delivered/Underway prioritizing the public financing of projects directed to small 9 ESW on CC issues in: farmers (Pillar 11 Projects under the Plan Maroc Vert) that WRM, agriculture, include climate change adaptation measures, transport, coastal cities Adaptation pilots initiated in selected areas. Outcomes progress Three pilots have been launched in 2011 adaptation, climate * Indicator: adaption pilots launched in at least 2 regions in in two regions (Chaouia - Ouardigha and Rabat - Sa - migration and the context of Plan Maroc Vert; Zemmour - Za&) concerning the implementation of displacement. Baseline: Zero adaptation measures in agriculture, as part of the GEF project - GEF- Capacity building "Integrating Climate Change in the implementation of the for Adaptation in WRM Plan Maroc Vert". A total of nine pilots are expected to be and Agriculture. launched by 2014 under the same project, with an overall 9 Adaptation Climate involvement of five regions. Change Coastal Cities Development of tools and mechanisms to increase resilience Risk management Milestones progress of North Africa and alertness. strategy completed, Risk management strategy completed. Pilot early warning 9 Risk Management AAA * Indicator: Establishment of climate early warning systems Including pilot early system to be launched soon (e.g. forecasting of spring cereal harvest based on winter warning systems Outcomes proZress precipitation data); implemented. Climate early warning system still being designed. Baseline: Zero 45 Annex 2 Macro-Economic Developments I. OVERVIEW 1. Despite the economic turmoil in the EU and globally, Morocco's economy proved resilient in 2011, registering moderate growth, stable inflation, and slightly decreased unemployment. Economic growth improved from 3.7 percent in 2010 to 4.8 percent in 2011. The main drivers of growth were domestic private consumption (up 6.5 percent) and total investment (up 4.5 percent). Inflation was contained in 2011 (up 0.9 percent) primarily as a result of food and fuel subsidies. Unemployment decreased slightly in 2011 (8.9 percent), due to the dynamism of the services and construction sectors. 2. Public finance worsened in 2011 due in large part to high subsidies; however financing the deficit remains manageable. The budget deficit reached 6.8 percent of GDP, almost double the targeted deficit set by the Budget Law of 2011 (3.5 percent of GDP). The high and increasing cost of the subsidy system, along with the higher Government wage bill, accounts for the deterioration of the budget deficit. Investment spending gained 6.1 percent, which is a positive sign in the sense that expenditure containment is not achieved through investment restraints. Overall, the central government debt increased by only 2.6 percent of GDP in 2011, bringing it to about 52.9 percent of GDP. 3. The balance ofpayments ran a record current account deficit in 2011 (8 percent of GDP), which resulted in declining foreign exchange reserves; the latter, however, remain at acceptable levels. Net international reserves declined to US$19.7 billion, down from US$23 billion in December 2010. Nonetheless, the reserves remain at a comfortable level of 5.1 months of imports of goods and services versus 6.8 months the previous year. The major rating agencies have maintained Morocco's investment grade. 4. Macroeconomic prospects in the medium term will be partially affected by the developments in the global economy, particularly in Europe. However, Morocco is expected to benefit from the effect on domestic demand of higher public investment and of the fiscal stimulus programs implemented over the last few years. Thus, its economic growth will slow down in 2012 (3 percent) before progressively reaching 5 percent in 2014. The budget deficit is expected to decrease only moderately to 5.1 percent of GDP in 2012, reflecting the continued impact of the social measures taken in 2011 and the persistent pressure of the subsidy system. The Government has reiterated its adherence to fiscal stability and commitment to progressively decreasing the budget deficit to the target of 3 percent of GDP by 2015-16. The external position is expected to remain sustainable over the medium term although the current account deficit may stay high in 2012 (6.9 percent of GDP). In 2016 the deficit will likely edge downward progressively to around 4.5 percent of GDP. In this context, external debt is expected to follow an inverted U path reaching a maximum of 34.4 percent of GDP in 2014 before dropping to 33.8 percent by 2016, while net foreign reserves will progressively improve from 5 months of imports in 2011 to around 5.6 months by 2016. 46 II. REAL SECTOR Output and Demand 5. In 2011 the Moroccan economy proved resilient in 2011 despite the economic turmoil afflicting its main trade partners in the EU who are facing their worst sovereign debt crisis to date (Figure 1). The economy grew at an estimated 4.8 percent in 2011, recovering from the lower 3.7 percent registered in 2010. In the context of an economic slowdown in European countries, the main drivers of Moroccan growth have been domestic private consumption and to a lesser extent investment. Private consumption (up 6.5 percent) was in part supported by public social policies20 implemented in early 2011 in response to population demands for political and economic reforms and by improved access to consumption credit (up 10.5 percent). Investment demand rebounded by 4.5 percent after its decline the previous year (down 0.7 percent), thanks in part to vigorous public investment in public works and social housing, and in part to higher than expected net FDIs, which increased by more than 51 percent. Net exports continue to be disappointing, down by 5.2 percent in 2011 (following the 39 percent drop registered in 2010). 6. On the supply side, services continued to be the main engine of growth followed by agriculture and phosphate products. Housing and services provided to businesses contributed the most to economic growth. Services grew by 5 percent in 2011, recovering from its sluggish performance over the preceding few years. General administration and social security services gained 7 percent, reflecting two initiatives: a higher public employment rate geared to social sectors and to rural areas and efforts to improve the processing of overdue insurance and pension cases. Education and health services continued their last year's performance (up 5 percent) with Government efforts to enhance the quality of service delivery to improve social indicators (low, but improving) compared to the region's standards. Thanks to favorable weather conditions over the last 5 years and sector reforms encouraging hardy, high-productivity crops that can withstand weather vagaries, the agricultural sector produced its best output ever, jumping 5.3 percent in 2011. Although the manufacturing sector still suffers from low productivity and low Figure 1. Economic Growth Resilient in 2011 (percent) diversification, phosphate product activities performed well, thanks to high world demand and 40 the elevated prices of fertilizers. Fertilizer and 30 phosphoric acid activities gained 5 percent in 2011. - 20 10 Inflation 0 * -10 7. Inflation remained limited in 2011, primarily due to food and fuel subsidies that -5 -20 insulated domestic markets from high world prices. -o Inflation kept the same low rate as recorded a year earlier (up 0.9 percent) (Figure 2). In addition, the GDP -- - Non-AgricuIturIGDP Agriculture (rightaxis) easing of food prices for fresh produce in the second Source: Government of Morocco and staff estimate and fourth quarters following improved agricultural supply, significantly helped to maintain food prices at a moderate level throughout the year (up 1.3 percent). Lower prices for services also played into the deceleration of non-food prices (up to 0.6 percent compared to 0.8 percent the previous year). A decline in prices was seen in health services (0.3 percent vs. 0.9 percent the previous year). Transportation services and communication services registered negative rates (-0.1 percent and -5.4 percent, respectively), due to a healthy competition in these sectors. 20 The Government decided to increase salaries of public employees by MAD 600 net per month and minimum wage by 15 percent in two steps (10 percent in July 2011 and 5 percent in January 2012). It also decided to raise the minimum pension by almost 67 percent to the benefit of some 700,000 retired employees and their families. 47 8. Subsidizing basic food and fuels remains a key Government policy to control inflation and forestall social unrest. Inflation may have been much higher without the Government's decision to insulate the domestic market from higher world prices of food and fuels through the costly subsidy system. In the absence of a targeted, efficient, and well- managed social protection system, subsidizing Figure 2. Inflation is Subdued Year Cumulated Averages basic food and fuels constitutes, in the eyes of the (percent) Government, the best available option to contain 10.0 ongoing protests for better living conditions and more jobs. Although the costly universal subsidy 6.0 system benefits primarily the middle-class (an estimated 80 percent of the subsidies), the small share accruing to the poor and vulnerable remains 00 the most important available public transfer to A2.0 v improve their wellbeing. -4.0 Labor Market Development -----Food - - Non-Food CPI 9. Unemployment declined slightly in 2011 Source: Government of Morocco and staff estimates due to the dynamism of services and construction sectors. Unemployment improved to 8.9 percent in 2011, down from 9.1 percent the previous year. This was the lowest rate ever registered and can be attributed to the ability of the economy to create 105,000 net new jobs: land transportation services offered 44,000 new jobs; retail trade offered another 40,000; the construction sector, despite less than ideal conditions, provided 30,000 new jobs (down substantially from the yearly average of 63,000 positions over the period 2008-2010). Job loss was registered in two sectors: the industrial sector, faced with a sluggish external demand, particularly in regards to handicrafts, lost 31,000 positions, while the primary sector also lost 9,000 jobs. Unemployment continues to be a predominantly Figure 3. High unemployment in urban, especially for urban phenomenon and affects mostly women and youth (percent) youth (Figure 3). Although declining, urban 25% 40% unemployment is still high (13.4 percent in 2011 vs. 13.7 percent in 2010), and actually increased for the 20% 32% most fragile population groups: women and youth. 1S% 24% Female unemployment increased 1.4 percentage points 9 .6. c, 10%16 to reach 21.2 percent. Youth (15 to 24 years of age) E unemployment increased from 31.3 percent in 2010 to 8% 32.2 percent in 2011, and unemployment of university 0% 0% graduates increased 1.5 percentage points, a 1999 2001 2003 2005 2007 2009 2011 development that is particularly worrisome in light of national left axis) M rban (left axis) the Arab Spring. -F urban youth (rightaxis) in urban educated (right axis) Source: Government of Morocco and staff estimates 10. Employment remains dominated by unskilled labor. The predominance of low-skilled employment is explained by the structure of the economy and the low productivity of its sectoral components. Although economic growth has been good over the last decade, it has not been accompanied by a significant structural change in favor of activities with higher technological content. Agriculture, construction, and public works and services-weighing in at about 80 percent in total value added- continue to be the main drivers of economic growth. However these sectors are characterized by low employment multipliers, especially with regards to skilled employment. For every 10 jobs created in such sectors, only 2 to 3 indirect jobs are generated. While the unskilled activities are labor-intensive, they contribute little, 48 directly and indirectly, to the creation of skilled employment. On average, 65 percent of total employment created by these sectors is composed of an unskilled workforce and 30 percent for non paid family workers. 11. The main characteristics of the unemployed are as follows: four out of five are in urban areas; among 15 to 29-year-olds, two out of three are jobless, and one in four graduates is a job seeker; one in two unemployed is searching for a job for the first time, and nearly two in three have been unemployed for over a year. Furthermore, 29.5 percent of unemployed lost their jobs because their employer lost his or her job, and 16.8 percent are school drop-outs without a diploma. III. PUBLIC FINANCE 12. Public finance worsened in 2011 and the budget posted its highest deficit since the mid-eighties (Figure 4). The budget deficit stood at 6.8 percent of GDP21, almost double the targeted deficit set by the Budget Law of 2011 (3.5 percent of GDP). The Figure 4. The high budget deficit in 2011 is driven by deterioration of the budget deficit stems from the increasing cost of the subsidy system and, to a lesser 1e r oGD extent, from the higher wage bill. The universal and open subsidy system supporting prices of fuels and 10% . . 25% cereals continues to negatively impact the budget and ....* constitutes a major risk to the sustainability of public finance. Indeed, subsidy outlays almost doubled (US$6 0% billion) with respect to those of 2010 and quadrupled 5 compared to 2009 (Table 1). This exponential trend of 10 0% subsidies since 2009 is worrisome, more so in view of a global economic and political context characterized by Budget defi Wages & high and increasing prices of basic commodities. - Total oeve-es (Right However, although the costly and inefficient universal Source: Moroccan government and staff estimate. subsidy system benefits primarily the non-poor (the population in the two lowest consumption deciles benefit from only 12.5 percent of subsidies), the small share accruing to the poor and vulnerable remains to date the key social protection mechanism in place. There are, nevertheless, concrete indications that the Government is now planning to reform the overall system and design a new social protection model that is more cost effective and better targeted. The wage bill also contributed to the increased budget deficit, jumping by 12.4 percent in 2011, reflecting the revalorization of public salaries starting in May 2011 as part of a social package in response to the Arab Spring. As a result of the revalorization, the wage bill increased to 10.9 percent of GDP, 0.6 percentage points more than in the previous year, thus reversing the downward trend of wage-to-GDP ratio under way since 2005. Table 1. Increasing fuels and food subsidies US$ million 2007 2008 2009 2010 2011 Food 732 942 593 642 865 Fuels 1,263 3,116 988 2,589 5,171 Total Subsidies 1,996 4,058 1,581 3,231 6,036 In % of GDP Food 1.0 1.1 0.7 0.7 0.9 Fuels 1.7 3.5 1.1 2.9 5.1 Total Subsidies 2.7 4.6 1.8 3.6 6.0 Source: Government ofgMorocco and StaffEstimates 21 Contrary to budget classification of the Government, this deficit rate is calculated without privatization proceeds, which are considered by the IMF Guide on Public Finance as financing item rather than non-tax revenues. With privatization receipts, the deficit would be 6.2 percent of GDP. 49 13. The deficit would have been much higher without the measures taken by Government to improve tax revenues and reduce non-priority recurrent expenditures. In an effort to bring the budget deficit to reasonable levels, the Government intensified its effort to improve tax collection mainly through fighting tax evasion and fraud, and by enforcing collection of overdue taxes. It also required that profitable commercial SOEs scale up their contributions to the budget. This effort bore fruit as total revenues gained 7.2 percent, driven by good performance of business taxes (up 14.6 percent), VAT (up 10 percent), and non-tax revenues (up 23 percent). In addition, the Government identified expenditure cuts that would not endanger the good functioning of public services and asked most of the ministries to reduce related spending by 10 percent. The outcome was positive, as non-wage recurrent expenditures dropped by 1.5 percent. This effort, however, was not enough to compensate for the rise of subsidies and wages. Consequently, current expenditure growth reached a high of 19.4 percent. At the same time, investment spending also gained 6.1 percent, a sign that expenditure containment is not achieved through reductions in investment. 14. Financing the expected budget deficit is likely to have added only limited pressure to the domestic money market thanks not only to substantial revenues from privatization operations, but also to subsidy arrears. To ease the budgetary pressures, the Government resorted to ceding 20 percent of its shares in a leading public bank -Banque Populaire- to privately-owned affiliated regional banks. The operation generated the equivalent of US$690 million (MAD 5.3 billion). The Government also ran payment arrears on subsidies due to fuel distributors amounting to the equivalent of 1.2 percent of GDP. Overall, the central government debt increased by only 2.6 percent of GDP in 2011 to around 52.9 percent of GDP, of which 12.1 percent of GDP denominated in hard currency, the same share as in 2010. This debt level should remain manageable provided the Government takes measures to consolidate public finances, notably through progressively reforming the subsidy system and controlling the evolution of the wage bill, while scaling up its tax reform. IV. MONEY AND BANKING 15. Monetary policy has been less restrictive in 2011 than in the previous year, despite a decline in international reserves. Growth of M3 stood at 6.8 percent at end December 2011, as compared to 4.9 percent at the same period of 2010. Despite a less restrictive stance of the monetary policy, credit to the economy slowed down slightly (10.3 percent), compared to the previous year (10.7 percent). With the exception of slowing credit to equipment (5.1 percent in 2011 vs. 16.9 percent in 2010), all credits to other activities progressed favorably, including that for working capital of firms, which gained an outstanding 19.9 percent in 2010 compared to 5.9 percent the previous year. Such a gain could reflect an anticipated recovery of business. Housing credit was also up by 10.1 percent compared to 8.7 percent, and consumption credit was also up to 10.5 percent compared to 8.1 percent. While nonperforming loans as a share of total loans slightly increased (from 4.1 percent to 4.2 percent), the trend has been downward over the last years. 16. The Central Bank of Morocco (BAM) kept its policy rate unchanged throughout the year. In line with the objective of price stability and a balance of risks on the downside, BAM decided to keep the policy rate unchanged at 3.25 percent, the same as that of the previous last year. BAM also decided to keep this rate unchanged for the first Quarter of 2012. However, for the second quarter 2012 BAM decided to lower the policy rate to 3 percent after predicting a slow-down in economic activity mostly due to a bad agricultural year and a sluggish external demand. 17. The authorities are considering a possible move to a more formal inflation targeting system in conjunction with a more flexible exchange rate, and the BAM has the necessary tools to manage such a change. However, the timing of this reform should be considered with care as it will require certain 50 measures to ensure fiscal sustainability, especially with regards to reforming the subsidy system so as to prevent a negative impact on financial stability. V. EXTERNAL POSITION 18. The trade deficit deteriorated significantly in 2011. In terms of GDP, the trade deficit worsened by 3.6 percentage points, from 19.5 percent in 2010 to 23.1 percent in 2011, reflecting a rise of nominal imports by 20.1 percent while exports gained 16.3 percent only. This deterioration was explained in large part by the soaring world prices of basic commodities, most importantly food (up 27.2 percent for imported cereals) and fuels (up 31 percent for imported oil), but also by an increase in import volume (up 14 percent) to meet the needs of domestic demand (a demand which continues unabated). The performance of exporting sectors continues to be lackluster, with little diversification and little competitiveness from within the Moroccan economy. This is why Moroccan exports have not been able to fully benefit from the many FTAs signed with the EU, the USA, and Turkey, among others, over the last decade. 19. The balance of payments ran a record current account deficit in 2011, which resulted in declining, though acceptable, foreign exchange reserves. The current account deficit ran a record-high ratio to GDP of 8.0 percent, compared to 4.5 percent in 2010. The current account deficit would have been even higher without the positive evolution of workers' remittances (up 7.6 percent) and of tourism receipts (up 4.8 percent), an excellent performance in an unfavorable global context. On the financing side, gross FDIs receded, but net FDIs increased by 122 percent to reach US$2.3 billion compared to US$0.985 billion the previous year. Overall this indicates improved confidence in the Moroccan economy as FDI disinvestments were low in 2011 (US$0.91 billion) compared to those of the previous year (US$3.2 billion). Net international reserves also declined by US$3.4 billion by end 2011. At US$19.7 billion (down from US$23 billion in December 2010), they remain at a comfortable level of 5.1 months of imports of goods and services versus 6.8 months the previous year. 20. In 2011, the dirham appreciated against the dollar and slightly depreciated against the euro. After two years of depreciation against the dollar (a cumulated 8.7 percent), the local currency turned around and appreciated by 3.9 percent. On the other hand, it lost 1 percent of its value against the euro. The appreciation of the dirham vis-d-vis the dollar may also have contributed to the poor performance of Morocco's exports to its main markets in the European Union, as it may have led to an additional loss of competitiveness vis-a-vis countries whose currencies are pegged to the dollar rather than the euro. Although the current exchange rate regime has contributed to macroeconomic stability, the recent trends in the current account balance, given the rigidities of the economy, would suggest that it might be undermining international competitiveness. Recent IMF estimates are not conclusive on the subject as the analysis of the deviation from the equilibrium exchange rate provides diverging results depending on the methodology implemented. Additional analyses will be needed to fully appreciate the impact of the current exchange rate on the external competitiveness of the Moroccan economy. 21. Despite the country's difficult external environment and internal social tensions requiring political change, Morocco retained its investment rating. The major rating agencies responded positively to Morocco's relatively good macroeconomic performance, its solid efforts to address main economic challenges, and its demonstrated commitment to continue reform. The confirmation of the rating should encourage international investors to scale up their investments in Morocco. The rating should also help Morocco access international financing on favorable conditions. VI. OUTLOOK 22. Medium term macroeconomic prospects of Morocco will be partially affected by the developments in the global economy and particularly in Europe - Morocco's main trade partner. The 51 anticipated stagnation of economic activities in Europe in 2012 and its slow recovery thereafter, will negatively impact Moroccan exports and thus growth. In addition, forecasted weather conditions (drought) for 2012 indicate that growth may be adversely affected by an expected decline of agricultural output which normally accounts on average for about 15 percent of GDP. To partially compensate for a sluggish external demand, Morocco will lean on benefits from the effect on domestic demand of higher public investment envisaged in the Budget Law of 2012 and on the fiscal stimulus programs implemented over the last few years, including wage revalorization that will have their full effect in 2012. It is hoped that, under these conditions, the growth rate will slow to about 3.0 percent in 2012, before progressively improving to around 5.5 percent in 2015. 23. Should the underlying sources of growth be slow to materialize, growth forecasts would have to be adjusted downward. A potential deterioration, particularly in Europe, would negatively impact the macro-economic outlook through reduced prospects on exports, including tourism, as well as on workers' remittances and FDI flows. Similarly and/or simultaneously, sustained high commodity prices or a deterioration of the regional context and prolonged global financial uncertainties would have an adverse impact on Morocco's prospects as well. Finally, there is a potential risk that even pre-crisis growth levels might not be sustainable over the medium term if internal demand remains the main driver of growth. 24. The budget deficit is expected to decrease to 5.1 percent of GDP in 2012, but to date it remains relatively high, reflecting the continued impact of the social measures taken in 2011 and the persistent pressure of the subsidy system. The new draft Budget law presented to Parliament in March 2012 reaffirms the 2011 commitment to implement a series of social measures to ease social pressures. However, in line with the new Constitutional requirement, the Government has also reiterated its adherence to fiscal stability and to a progressively decreased budget deficit, aiming for a medium term target of 3 percent of GDP by 2015-16 through the implementation of a set of critical reforms. The key measures include progressively reforming the universal subsidy system, implementing civil service reform including the realization of a new remuneration system, and further advancing the fiscal reform agenda. Under these conditions the budget deficit would progressively decline and meet the medium term objective. 25. Declining deficits over the medium term would be financed primarily through the domestic market, as well as from steady drawings on external sources. Domestic financing would remain the main source of public financing, although external financing would improve its contribution. In this context, central government debt will increase to 54.7 percent of GDP in 2012 and to 54.9 percent of GDP in 2013 before shifting to a downward trend to 52.5 percent of GDP by 2016 (Table 2). Table 2. Central Government Debt Stock, in percent of GDP 2008 2009 2010 2011 2012 2013 2014 2015 2016 Foreign 9.9% 10.7% 12.1% 12.1% 12.3% 12.5% 12.5% 12.4% 12.3% Domestic 37.4% 36.4% 38.2% 40.9% 42.3% 42.4% 41.9% 41.2% 40.3% Total 47.3% 47.1% 50.3% 52.9% 54.7% 54.9% 54.4% 53.7% 52.5% 26. The external position is expected to remain sustainable over the medium term provided that key critical reforms currently being implemented take hold. The current account deficit is expected to improve in 2012 to 6.9 percent of GDP and progressively edge downward to around 4.5 percent of GDP in 2016. In this context, the external debt is expected to follow an inverted U path reaching a maximum at 34.4 percent of GDP in 2014 from 28 percent of GDP in 2010 before easing to 33.8 percent by 2016, while net foreign reserves improve progressively from 5 months of imports in 2011 to around 5.6 months by 2016. 27. In sum, on the assumption that key fiscal and structural reforms described above are implemented in a timely fashion, Morocco's macroeconomic framework remains adequate and 52 sustainable in the medium term. The effects of global uncertainty on the Moroccan economy have been muted by good economic fundamentals resulting from sound macroeconomic policies carried out over the last years and by the Government's current response which is supporting investors' confidence and domestic demand. If the Government has smaller margins for maneuver today (as compared to the 2008 crisis), its commitment to increase and expand reform efforts nevertheless supports positive prospects for investment, growth, macroeconomic development, and employment. 53 Annex 3 CPS Lending Program Annex 3: CPS LENDING PROGRAM CPS PLAN (December 2009) IBRD $IV CPS Progress Report (June 2012) IBRD $I FY10 Sustainable Access to Finance DPL2 10C Delivered (amount increased) 20C Education Sector DPL 60 Delivered 60 Public Admin Reform DPL- IV 10C Delivered 10C Rural Roads Additional Financing 80 Delivered (amount increased) 81.5 Urban and Rural Water 15C Delivered (amount increased) 175 Oum Er Rbia Irrigated Agriculture 70 Delivered 70 Oum Er Rbia Sanitation 40 Delivered (amount increased) 43 Total 60C Total 729.5 FY11 Urban Transport Sector DPL Delivered 136. Support to Plan Maroc Vert DPL Delivered 205 Solid Waste Sector DPL Delivered 138.E National Initiative Human Dev. II Planned for FY12 Energy Sector DPL Not pursued by GOM Energy Development Fund Not pursued by GOM Health Sector DPL Not pursued by GOM Total 600 Total 480.3 GEF Integrating Climate Change in PMV 4.35 Delivered 4.35 FY12 Delivered: Ouarzazate Concentrated Solar Power 20C PROGRAM TO BE DEFINED Scheduled for delivery: AT MID TERM CPS REVIEW First Skills and Employment DPL 10C Judicial Performance Enhancement 16 National Initiative for Human Development II 30C Micro, Small and Medium Enterprise (MSME) Dev. 10C Total 600 Total 716 Other delivered Ouarzazate Clean technology Fund (CTF) 97 Other not yet delivered IGEF Integrated Coastal Zone Management 5.18 FY13 Competitiveness DPL1 Governance and Accountability DPL Urban Transport Sector DPL2 PROGRAM TO BE DEFINED Financial Sector DPL2 AT MID TERM CPS REVIEW Plan Maroc Vert DPL2 Solid Waste Sector DPL3 Education Sector DPL2 Climate Change DPL Road Asset Management Total 600 GEF Social and Integrated Agriculture 6.3 54 Annex 4 CPS AAA Program Highlights of the Bank's AAA Program - Cutting Edge Knowledge Informing Reforms Targeting and Social Protection Strategy Note. This Note responded to the Government's request as part of the preparation for the food and fuel price subsidies reform. It followed up on a high level workshop (April 2008) and on study tours in Mexico, Chile and Indonesia (July 2008), organized by the Bank for inter-ministerial Moroccan representatives. Delegations concluded on the need to review existing social assistance and poverty programs in Morocco, and identify a package of programs for those who would be affected by the reform, including CCTs programs. The ESW is now completed, approved by the government, published, and is being disseminated. A key recommendation is to reform subsidies which would free up the resources needed to scale up better targeted and more cost/efficient social protection programs. More specifically, the study proposes 14 priority actions under the following four strategic goals (i) : Improve targeting in order to use resources more effectively; (ii) Extend coverage of risks and at-risk social groups; (iii) Clarify roles and responsibilities and strengthen institutional capacity; (iv) develop M&E systems, analyze the political economy and communicate on the reform. Expanding Youth Opportunities and Participation. This is an innovative ESW - launched in 2010 prior to the Arab Spring - analyzing the aspirations of young Moroccans aged 15 to 29 years, their economic and social circumstances, as well as the institutional factors that impede their economic and social inclusion. It utilized a new instrument, the Morocco Household and Youth Survey, which allowed for age and gender-disaggregated analysis, combining qualitative and quantitative perspectives on youth poverty and social exclusion. The survey thus gathered information on understudied issues related to youth, such as labor force participation and intermediation, career choices and perceived employment opportunities, use of free time, and use of youth-oriented services. Impact Evaluation of Education Conditional Cash Transfer (CCT) Pilot. CCTs are recognized to be a powerful tool in reducing drop-outs in education. A pilot CCT program in education - Tayssir - was implemented by Morocco in order to learn how best to design the program before it could be scaled up at the national level. The Bank partnered with the MIT Poverty Action Lab to evaluate the impact of this CCT pilot. The analysis covered (i) the impact of CCTs on school enrolment, attendance and academic achievement, (ii) whether the transfers needed to be conditional on active school participation and (iii) how the effectiveness of the cash transfer varies depending on whether the transfer is given to the mother or the father. The five poorest regions of Morocco were chosen and 320 schools from those regions participated. The results showed that the Tayssir program reduced drop-out rates significantly by 57% for those schools targeted. Re-insertion rates of kids who had previously dropped out increased by 37%. These rates were even better when the CCT was given to the mothers. Drop-out rates were 30% lower where the mother had received the transfer compared to schools where the father had received it, and were 15% higher for re-insertion. The evaluation also studied learning outcomes and concluded that children in Tayssir communities performed better on the standard arithmetic tests than children in communities without Tayssir. The results of the Bank's work are feeding into the Government's scale-up of this program at national level. Statistical Work. In February 2011, the Bank and the Government statistical agency - HCP - signed an agreement for cooperation with the objective to work jointly on research activities aimed at informing policy about strategic areas of policy reforms. This agreement is the first of its kind signed by the HCP and represents a real step forward in data access and dissemination. The research activities were agreed as priorities for the Government and the World Bank's program and cover poverty analysis, employment and labor market analysis, simulation of industrial and trade policies, and equity analysis of access to public services. One important result is the work on poverty that is estimating for the first time the poverty rates in Morocco for the period 2001-2009, including poverty rates on a quarterly basis. Such quarterly monitoring will make it possible to observe the short-term effects of economic shocks on household welfare. The labor market work is allowing for in-depth analysis of labor mobility and the work on equity of access to public services has started with a focus on health. The Bank's work has also provided TA to the HCP for preparation of nutritional maps and TA to the National Observatory for Human Development. Public Expenditure Tracking Survey (PETS) for Health. The Moroccan Ministry of Health requested the Bank to carry out a Public Tracking Expenditure Survey (PETS) and Quantitative Service Delivery Survey (QSDS) in the 55 health sector. The ultimate goal of the PETS/QSDS is to improve service delivery and the impact and equity of public expenditure, acting as a useful complement of the health sector Public Expenditure Review. The PETS/QSDS data are expected to add significantly to our understanding of the issues and problems that arise in the front line delivery of public health services to poor people in Morocco as well as in the MENA region. Risk Management. The Bank is helping Morocco manage its exposure to risks that may have potential dramatic impact on its budget as well as may severely affect local community and social stability. These risks are commodity price volatility, natural disaster risk and agricultural sector risk. The work covers a three-phase approach: (i) preliminary identification and assessment of risks and their impact on the economy and assets, (ii) development of a comprehensive risk management strategy and its related action plans, and (iii) execution of the strategy and the action plans. This initiative looks at several types of risks simultaneously in order to provide a comprehensive analysis of risk management. There is potentially tremendous value for the Bank to replicate this work in other countries. Switzerland and GFDRR have been providing critical financing to this work. ICT. The Bank's TA to the ICT sector has helped launch several important activities in support of eGovernment surveys, M&E, cooperation and information sharing across Ministries and agencies, and the establishment of the Ministry of Industry, Trade & New Technologies (MICNT) observatory, a joint public-private partnership. The Bank is supporting the implementation of the national ICT strategy - Maroc Numerique - as well as providing TA for better governance of the sector, strengthening project management, and piloting shared services, especially those that have an important citizen interaction (e.g. digitization of the civil service registry). The TA is advising on ICT for social accountability, using citizens and beneficiaries to help empower citizens, monitor projects and provide feedback. 56 Annex 4 CPS AAA Program Continued 1.1 BUSINESS ENVIRONMENT Reforming the Business Environment (FY10-12) Maghreb Cross Border Constraints (investment/trade) (FY09-12) Trade Capacity Building (FY11) Competitiveness TA (FY12) EU-Trade and Integration (FY12-13) E-Govt and Broadband (FY10-11) ICTStrategy Implementation (FY12) 1.2 FINANCIAL SECTOR REFORM FIRST: Strengthening Crisis Preparedness Policies and Processes (FY11) FIRST: Strategy and Instruments to Establish Reliable Interest Rate Benchmarks (FY12-13) FIRST: Introduction of Covered Bonds (FY11-12) Bank Governance Review (FY10-11) 1.3 SKILLS AND EMPLOYMENT EmploymentTA (FY12-14) E-Govt and Broadband (FY10-11) 2.1 PUBLIC SECTOR MANAGEMENT Public Administration Reform (FY10) Justice Public Expenditure Review (FY12) E-Govt and Broadband (FY10-11) Justice TA (FY10-11) Country Governance and Anti-Corruption (FYO9-10) Use of Country System Initiative Pilot (FYO9-11) Governance and Territoriality (FY11) ICTStrategy Implementation (FY12) 2.2 QUALITY AND ACCESS IN EDUCATION SIEF Impact Evaluation Primary School (FYO8-10) Impact Evaluation E-Monitoring CCT (FYO9-10) Education Public Expenditure Review (FY12-13) 2.3 HEALTH SECTOR REFORM Health Public Expenditure Review (FYO9-12) 2.4 VULNERABILITY AND SOCIAL EXCLUSION Regional Dev. for Disadvantaged Areas (FYO8-10) Breaking Barriers to Youth Inclusion (FYO8-11) Governance of Service Delivery to Citizens (FY11-12) 57 Annex 4 CPS AAA Program Continued 2.5 TRANSPORT Transport and Energy Efficiency (FYO8-10) Transport TA (FYO9-11) Support to Port Regulation (FYl-11) 2.6 AGRICULTURAL SECTOR REFORM Agricultural Sector Review Update (FYO9-10) Adaptation to Climate Change in Agriculture (FYO8-10) GFDRR TA Risk Prevention and Management (FYO9-13) Community-Based Disaster Risk Management (FY12-13) 2.7 SOCIAL PROTECTION Targeting and Social Protection Strategy (FYO9-10) Pension Reform (FYO9-11) Poverty PESW (FY09-11) Growth, Employment and Poverty PESW (FY11-14) Compensation Reform (FY12-13) 3.1 WATER MANAGEMENT Climate Impact on Water Resources (FY11-12) 3.2 LOW CARBON ENERGYPOLICY AND ENERGY SECTOR RESTRUCTURING ESMAP Energy Supply Strategy (FY09-10) Maghreb Vulnerability Assessment (power sector) (FY09-10) Clean Energy (FYO9-11) Maghreb Energy Market Study (FY08-11) Maghreb Fossil Fuels (FY11-13) 3.3 SOLID WASTE MANAGEMENT Urban Development Strategy (FY10) 3.4 CLIMATE CHANGE ADAPTATION Adaptation Climate Change Coastal Cities of North Africa (FY09-12) Climate Change PESW (FY10-14) 58 Annex 5 Trust Fund Management 1. The Bank's program makes use of Trust Fund (TF) financing, mainly in support of analytical work and for GEF projects. The TF program has helped the Bank deliver a broader knowledge program, including in some cutting-edge areas, and to pilot innovative approaches. This knowledge then feeds into the design of Bank projects and programs. The initial stages of the CPS had witnessed a proliferation of trust funds - particularly small ones - in the program but this is now being reined in and trust funds are being pursued only where they are specifically linked to priority areas of the Bank's engagement. 2. The TF program is organized according to CPS pillars. This alignment facilitates assessment of results. The total TF portfolio amounts to $169.2 million in ten sectors (public sector management, social protection, transport, health, education, human development, climate change, agriculture, water, energy and inclusion). Of this, the CTF-financed project for the Ouarzazate Concentrated Solar Power Plan Project - at $97 million - is the largest project. Other sizeable activities in the TF portfolio in terms of financing include the GEF projects, GPOBA pilots for water supply and sanitation (total of $7 million), a JSDF grant for capacity building to improve schooling for the poor ($2.2 million) and a new PHRD grant of $2.85 million for Accessibility of Persons with Limited Mobility. The rest of the portfolio is aimed at capacity building and knowledge sharing. 3. TF supported activities provide valuable analytical underpinnings for IBRD's DPL programs. Areas that benefit include public sector management, the energy sector, and the water sector. The education sector is making innovative use of TFs by supporting the testing of Conditional Cash Transfer (CCT) pilots for rural schools which aim to improve the transparency, accountability and effectiveness of service delivery in the education sector. Related analytical work influences education policy reforms supported through the Education DPL. The lessons learned from the CCT pilot and its evaluation are being used by the broader development community in Morocco. TFs on climate change, a priority CPS area, have expanded. They help develop a better understanding among Moroccan decision makers and development partners of the impacts of CC, the policy measures or other actions. GLOBAL ENVIRONMENT FACILITY & CLEAN TECHNOLOGY FUND Transport 5M-GEF Southern Mediterranean Marine Highway (P127569) 8 000 000 RE Water Regional Coordination on Improved Water Resources 1 050 000 RE TF010251 Management and Capacity Building (with NASA) Agriculture GEF Social and Integrated Agriculture 6 440 000 RE TF099539 Integrating Climate Change in the Implementation of the PMV 4 345 454 RE Environment MENA- Desert Ecosystems and Livelihoods Program (DELP) Knowledge Sharing and Coordination (ASIMA) Energy TF058314 GEF FSP - Integrated Solar Combined Cycle 43 200 000 RE Energy TF010916 Ouarzazate I Concentrated Solar Power Plan Project - CTF 97 000 000 RE Environment I Integrated Coastal Zone Management # Mediterranean Coast pr. 5 180 000 RE TOTAL 165,215,451 59 CPS BE! TF Number Trust Fund us$ Pillars RE Public sector management TF094459 ID - Modernization of Public Procurement 11 307700 BE TF094712 GPF - Improv. Governance in social services delivery impact 750000 BE > TF096444 National Catastrophe Risk Assessment and Strategy 125000 BE TF097271 ID - Institutionalizing a Reform Process for the Business Envt. 348750 RE TF097557 Introduction of Covered Bonds 180870 BE TF011405 Strengthening Trade and Competitiveness 130000 BE TF011436 Strategy for Reliable Interest Rate Benchmarks 422499 BE TF096171 Capacity Bldg in ex-ante trade policy/export trade policy assess. 80000 BE TF097392 Strengthen Crisis Preparedness Policies and Processes 160000 BE TF098509 Support the law on Catastrophe Insurance 250000 BE 9 TF098895 PPIAF-Morocco PPP Unit Support 250000 BE STF099362 Poverty and Social Impact Analysis of Climate Policy 80 000 BE National Initiative for Human Development TF090194 IDF - Imrovin Local Governance Thr M&E 229 000 RE S Agriculture TF094209 nd - Institutional Capacity Bldg for Cooperative 382500 RE Health TF095651 Avian Influenza Preparedness Proect 888 490 RE Education TF093691 E-Monitoring of Conditional Cash Transfer Rural prog. 386 000 BE TF093303 CCT - Impact Evaluation 350000 BE TF093996 JSDF - Cap. Bld./Mgmt. to Improve Schooling for Poor 2 179410 RE Social Protection TF090592 ITFESSD - Promoting Effective Local Gov. in M2NA (Mor) 375000 BE Water TFO10093 GPOBA (W3 SPN): Morocco Urban Water 80000 BE TF096698 GPOBA (W2): Dissemination of Morocco OBA 70 000 BE TF096701 GPOBA (W I): Scale Up Urban Water& Sanitation 170000 BE TF057598 GPOBA - Urban WS&S Access Pilots 2 100 000 RE C TF057599 GPOBA - Urban WS&S Access Pilots 4900 000 RE TF099166 GPOBA (W I) Morocco Rural Water OBA Schemes 280 000 BE TF099582 PPIAF: Documentary Film on OBA Pilots 60 000 BE W TF011520 Political Economy Analysis of the Irrigation Sector Reform 80000 BE TF092827 Oum Er Bia Irrigated Agriculture 1 000 000 RE W Agriculture TF095204 Rural land titling and female ownership 18000 BE Transport > TF010735 MA-Promoting Accessibility of Persons with Limited Mobility 850 000 RE Inclusion TF057391 TFESSD - Breaking Barriers to Youth Inclusion 200 000 BE - TF057358 TFSSD - Adaptation to Climate Change in Ag (Mor) 200 000 BE < TF093328 TFESSD - Climate Change Ecosystems Assessment (Mor) 450 000 . TF093136 NTFPSI - Adaptation Climate Change Coastal Cities of NA(MI/T) 150 000 BE TF093062 TFESSD - Adaptation to Climate Change Coastal Cities Morocco 198 000 BE TF092688 TFESSD - Managing social change in CC in MNA (M/T) 400 000 BE TF098528 Increasing resilience to climate shocks through risk management 200 000 BE TF097663 Integrated Coastal Zone Management # Mediterranean Coast 200 000 RE Water TF092827 Capacity bldg. adapt/CC impacts on water management in Oum Er Rbia 1 000 000 RE Energy TF093067 ESMAP - Transport and Energy Efficiency 96 900 RE TF093443 ESMAP - Energy Supply Strategy 185000 BE TF092736 ESMAP - Maghreb Energy Market 50 000 RE TF098543 Preparation of the Municipal Solid Waste Carbon Finance Project 520 000 RE TOTAL 169,200,000 60 Annex 6 Outreach Events - Civil Society Engagement 1. In an effort to extend the World Bank communication and exchange with the external public and with active CSOs in Morocco working in the areas of interest of the World Bank, the Bank's team has organized, during the course of the CPS implementation, a series of events and consultations to involve CSOs in a global reflection over Morocco's latest political and social events and to survey their development visions and expectations. 2. In order to make the CPS widely available, copies were distributed in January, 2011, to universities, libraries, foundations, donors, associations and research institutes. Every two months the World Bank Maghreb Newsletter, which provides the latest information on all of the region's programs, is sent to an extensive list that includes the Bank's partners, the media, Civil Society Organizations (CSOs), and academics. Face-to-face encounters have also played an important role during CPS implementation, as a means to develop new partnerships, gain valuable input on the design of appropriate strategies and gauge the effect of current programs. 3. The World Bank Morocco Country Office stays in regular contact with civil society organizations, journalists and members of the business community through informal dinners and brown bag lunches. A team is currently making physical visits to the locations of Bank programs, to gather first- hand testimony on their progress and impact through direct engagement with beneficiaries. World Bank MENA has launched a blog and a Facebook page that carries reports, along with opinion pieces, from both staff and external authors, in French, Arabic and English. It also solicits comments and feedback in the three languages, in an effort to provide more opportunities to engage with the Bank, and establish a virtual proximity with important social actors whose voice and opinions have not always been clearly heard. 4. The World Bank has taken an important step towards translating its outreach into support for one of the defining processes to emerge from the Arab Spring, the rebuilding of the social contract. From March 12 to 15, 2012, in Rabat, the Bank drew on its power as a convening authority, in partnership with CARE International, to bring together civil society groups for the launch of the Arab World Affiliated Networks for Social Accountability (ANSA Arab World.) ANSA Arab World will be developed as a regional network promoting active citizen participation in policy formulation, implementation and the monitoring of how public resources are spent. Empowering civil society as a source of public accountability has long been a goal of the Bank, but with the inauguration of ANSA Arab World this effort moves to a new level. At the global level in the Bank, an initiative is underway to formalize and consolidate the growing relationship with civil society through the Global Partnership for Enhanced Social Accountability, which is evaluating the need for a dedicated division. As part of the evaluation, an event was organized on February, 2012, in which Moroccan civil society groups offered their opinions on how such a dedicated organization might be structured, and what support it might offer. 5. In parallel with these outreach and dissemination activities, there has also been a long history of consultations. Morocco's commitment to reforms, together with its active civil society, has made it a sough after interlocutor during the drafting of World Bank reports. In 2009, through a consultation organized in Rabat, Morocco provided valuable input for that year's World Development Report (WDR) based on its experience with, and policies to cope with, the report's central theme of the economic relations between growing and lagging regions. An event was organized in June, 2011, to discuss the current World Development Report and a MENA companion report, which focuses on gender, and extensive consultations for a report on Moroccan youth were held in May of the same year, in Rabat and Casablanca, to which a variety of youth organizations and young professionals were invited to share their views. The WDR has already been shared; the other reports will be widely distributed and promoted once 61 published, and serve as platforms for future engagement and consultations with key populations on critical issues. 6. Since 2010, there have been a series of official visits, and both formal and informal encounters. The World Bank President visited Morocco in May of 2011, as part of a listening tour of the region following the political upheavals earlier in the year, with the specific goal of hearing from civil society groups about their vision for the future. In February, 2011, a consultation was organized in Fez between World Bank Executive Directors and local authorities, academics, and representatives from cultural and social associations, to exchange views on the development challenges facing Morocco. CSOs OUTREACH EVENTS Consultations 7. Report/Studies consultations (Previous and current FY): * May 26th/27th, 2011 - Consultation on Morocco youth ESW. Youth organizations working in social, political, educational and revenue generating activities as well as young professionals associations were invited in two separate consultations in Rabat and Casablanca. The objective was to collect their opinions and youth demands in terms of freedoms, work, education and support to complete the report. * June 15th , 2011: Consultation on gender issues for the next WDR issue. The consultation was divided into two groups: government representatives and CSO representatives. On the consultation with Civil society, as the report covers various arrays of gender issues, representatives of Unions, associations for the defense of women rights, gender specialists, academics and economists were invited to bring their vision and thoughts on Morocco's main challenges in terms of gender equality and women access to the job market, health infrastructures and strategic positions (political, administrative and private). T * June 27 th, 2011: Consultation on the project to improve service providing in Moroccan tribunals. In this consultation, representatives from professional unions and associations, as well as law academics and representatives from Foundations, governance and anti-corruption organizations were invited. The guests brought both a technical/legal vision on the justice sector main issues and more concrete experiences on the difficulties regular citizens find in accessing legal information and dealing with the judicial system in Morocco. * September 7th, 2011: Civil society consultation on the WB Support to the second phase of INDH. The consultation outcomes have been compiled, cleared by the TTL and sent out to the participating and invited CSOs for potential comments. * February 2nd, 2012: further to an informal consultation in November 2011, an enlarged CSO consultation has been organized to gather civil society recommendations on the governance structure and mechanisms of the Global Partnership for Enhanced Social Accountability Initiative (GPESA). A follow-up on this consultation is still pending. * March 12 th-15 th: Official launch of the ANSA-AW initiative (Affiliated network for Social accountability in the Arab World) in Rabat. Various Moroccan CSOs were invited, along with other Arab counterparts to share their views on the structure and mission of this new pan-Arab network for social accountability. 8. Report disseminations: 62 * October 12th, 2011: Official presentation to local authorities, Medias and CSOs of the results of the Gender and transport in Casablanca study. The event was co-organized with Casablanca city hall. Documentation was distributed to participants and interviews were given to the invited Media. * December 12 th, 2011: Presentation to CSOs, Medias and donors via VC of the MENA gender and transport study. The study was distributed to the invitees and recommendations have been formulated by participants on the ways to improve public transportation taking into consideration the gender dimension. * February 2012: Through the WB newsletter Manara, dissemination of the Flagship report on financial access and stability in MENA. Interview with the report TTL on the main findings of the study, widely distributed throughout the Maghreb region. (2009-2010): * October 16, 2009: WDR consultation in Rabat - Reshaping economic geography * October 30th, 2009: Women Arab Investors summit in Skhirat. * January 21st, 2010: MENA PSD flagship report. * June 22nd, 23rd, 2010: Seminar on climate change adaptation and natural disasters preparedness in the coastal cities of North Africa - Casablanca. * June 7th th , 2010: WB broadcasting in Rabat, Marrakech, Azilal, Ain Beni Mathar and Oum Azza. * October 26 th-28th , 2010: MENA World Economic Forum in Marrakech. * November 1st - 2 d, 2010: INDH international forum - Agadir. * October 2011: WB Access to information policy - PMV counterparts. 9. Upcoming reports disseminations in current FY: * Youth Inclusion study (planned for mid-May 2012). * Social protection study (underway). * Global and regional WDR study (planned for May 2012). 10. Official visits - Consultations with CSOs: * February 20th , 2011 in Fez: Executive Directors official visit to Morocco. A consultation was organized with Fez local authorities, academics and representatives from local cultural and social associations. They had the opportunity to exchange with the EDs their vision of Fez and Morocco development challenges. * May 5th, 2011 in Rabat: World Bank President official visit to Morocco. A consultation with CSOs was organized to enable Mr. Zoellick to have a clear idea of Morocco civil society demands and visions of the country's latest events and future developments. Informal talks 11. Brown Bag Lunches Two BBLs were organized in the past fiscal year to provide an exchange forum between the World Bank staff and representatives of the civil society. The talks focused mainly in Morocco's latest political and social developments in a sensitive political regional context. Driss Ksikes, 63 journalist, writer and director of a research institute (CESEM) and Sanaa El Aji, journalist were invited respectively on March 30th and April 14th to an informal talk with WB staff 12. Informal dinner A dinner was organized on July 12th, 2011 with Country director, World Bank representatives and two CSO representatives: Mrs. Bouthayna Iraki, feminist and businesswoman and Mr. Zouaoui, economist, to exchange on Morocco's development perspectives. 13. Information and outreach * January 2011: Copies of the CPS were sent to universities, libraries, foundations, donors, associations and research institutes. * Every two months: A copy of the new World Bank Maghreb Newsletter is sent to the World Bank partners, Medias, CSOs and academics. * Face book: A MENA WB page has been created in the social facility Face book where daily reports are posted on the main highlights of the WB activities and projects in the region (blogs, interviews, news...). * Photo-shooting mission: A photo-shooting mission was carried out in March 2012 in Morocco to expand the MENA photo database and to communicate visually and through interviews with WB- supported project beneficiaries in Morocco on the WB endeavor in the country. The photos and reports will be published soon and photos will be used to illustrate future WB reports and studies. 64 Morocco at a glance 4/18/12 M.East Lower Key Development Indicators & North middle Morocco Africa income Age distribution, 2009 (2010) Male Female Population,mid-year (millions) 32.0 331 3,811 75-79 Surface area (thousand sq. km) 447 8,778 31,898 60-64 Population growth (%) 1.0 1.8 1.2 U rba n po p u latio n (% o f to tal po pu latio n ) 5 7 58 41 , 46 GNI (Atlas method, US$ billions) 92.5 1,130 8,846 30-34 A GNI percapita (Atlas method, US$) 2,890 3,597 2,321 GN I per capita (P P P,international $) 4,400 7,911 4,784 0-4 6 4 2 0 2 4 5 GDP growth (%) 3.7 3.4 7.1 percent of total population GDP per capita growth (%) 2.6 1.6 5.9 (most recent estimate, 2004-2010) Poverty headcount ratio at$1.25aday(PPP,%) 3 4 U. Poverty headcount ratio at $2.00 a day (PPP, %) 14 V. Under-5 mortality rate (per 1,000) Life expectancyat birth (years) 73 71 68 Infant mortality(per 1,000 live births) 32 27 43 90 Child malnutrition (%of children under5) 10 7 24 so 70. 60 " Adult literacy, male (%of ages 15 and older) 69 82 87 o- Adult literacy, female (%of ages 15 and older) 44 66 74 40 Gross primary enrollment, male (%of age group) .. 106 109 20 Gross primaryenrollment,female(%ofagegroup) .. 104 105 20 10 Access to an improved watersource (%of population) 96 87 86 0 . Access to improved sanitation facilities (%of population) 51 84 50 1990 1995 2000 2009 amorocco 0Middle East &North Africa Net Aid Flows 1980 1990 2000 2010 a (US$ millions) Net ODA and official aid 897 1,048 419 912 Growth of GDP and GDP per capita (%) Top 3 donors (in 2008): European Union Institutions 12 29 117 282 15 France 135 217 155 238 Spain 0 33 -1 191 10 5 Aid (%of GNI) 4.4 3.7 1.2 1.0 o Aid percapita(US$) 46 43 15 29 Long-Term Economic Trends -lo 95 05 Consumer prices (annual %change) 9.4 7.0 1.9 1.0 GDP implicit deflator (annual %change) 15.2 7.8 -0.6 0.6 GDP - GDP pr capita Exchange rate (annual average, local per US$) 3.9 8.2 10.6 8.4 Terms of trade index(2000 = 10) 80 75 100 100 1980-90 1990-2000 2000-10 (average annual growfh %) Population,mid-year (millions) 19.4 24.2 28.8 32.0 2.2 1.8 1.0 GDP (US$ millions) 21,079 28,839 37,022 90,803 5.1 2.9 4.9 (%ofGDP) Agriculture 1B.4 19.3 14.9 15.4 6.8 0.3 5.9 Industry 29.8 30.4 29.1 29.7 2.4 3.0 3.8 Manufacturing 15.9 18.9 1.5 15.3 3.3 2.6 3.0 Services 51.1 50.3 56.0 55.0 1.5 1.7 4.9 Householdfinalconsumptionexpenditure 61.8 60.0 61.4 57.3 5.0 2.8 4.7 General gov't final consumption expenditure 15.0 16.8 1.4 7.5 5.2 2.3 3.9 Grosscapitalformation 28.5 28.7 25.5 35.1 2.3 34 8.3 Exports of goods and services 19.9 25.7 28.0 33.0 6.2 5.5 6.0 Imports of goods and services 28.2 31.2 33.4 42.9 3.5 4.4 8.5 Gross savings 22.1 28.3 24.3 30.8 Note: Figures in italics are for years other than those specified. 2010 data are preliminary. Group data are for2009. ..indicates data are not available. Pa. Aid data are for 2009. Development Economics, Development Data Group (DECDG). 65 pr Morocco Balance of Payments and Trade 2000 2010 Governance indicators, 2000 and 2009 (US$ millions) Total merchandise exports (fob) 7,419 17,771 Total merchandise imports (cif) 11531 35,296 Voice and accountability Net trade in goods and services -2,085 -9,884 Political stability Current account balance -475 -4,078 as a %of GDP -1.3 -4.5 Regulatory quality Workers' remittances and Rule of law compensation of employees (receipts) 2,161 6,270 Control of corruption Reserves, including gold 5,138 23,099 0 25 50 75 100 Central Government Finance *2009 Country's percentile rank (0-100) 02000 higher valu- irn#y bdtor rateng (%ofGDP) Current revenue (including grants) 23.6 25.3 Soume Kauftnann-Kray-Mastruzz, World Bank Taxrevenue 21.7 23.2 Current expenditure 23.4 23.8 Technology and Infrastructure 2000 2009 Overall surplus/deficit -4.8 -4.7 Paved roads (%of total) 56.4 67.8 Highest marginal tax rate (%) Fixed line and mobile phone Individual .. .. subscribers (per 100 people) 13 90 Corporate .. .. High technologyexports (%of manufactured exports) 11.3 7.1 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 20,674 25,403 Agricultural land (%of land area) 69 67 Total debt service 2,610 3,286 Forest area (%of land area) 12.7 12.7 Debt relief (HIPC, M DRI) - - Terrestrial protected areas (%of land area) Total debt (%of GDP) 55.8 28.0 Freshwater resources percapita (cu. meters) 983 929 Total debt service (%of exports) 20.3 8.7 Freshwater withdrawal (billion cubic meters) 12.6 Foreign direct investment (net inflows) 470 4,173 C02 emissions per capita (mt) 1.2 1.5 Portfolio equity (net inflows) 30 544 GDP per unit of energyuse (2005 PPP $ per kg of oil equivalent) 8.3 8.4 Composition of total external debt, 2010 IBRD, 2,468 Energy use per capita (kg of oil equivalent) 355 474 Shor-term, 1,800 IDA, 13 IMF, O World Bank Group portfolio 2000 2009 Pnvate, 69 Other multi- (US$ millions) ateral, 7,668 IBRD Total debt outstanding and disbursed 2,837 2,543 Disbursements 138 241 Principal repayments 307 238 Interest payments 190 93 Bilatera, 7,085 US$millions IDA Total debt outstanding and disbursed 27 14 Disbursements 0 0 Private Sector Development 2000 2010 Total debt service 2 2 Time required to start a business (days) - 12 IFC (fiscalyear) Cost to start a business (%of GNI percapita) - 15.8 Total disbursed and outstanding portfolio 29 152 Time required to register property(days) - 47 of which IFC own account 29 152 Disbursements for IFC own account 1 23 Ranked as a major constraint to business 2000 2010 Portfolio sales, prepayments and (%of managers surveyed who agreed) repayments for IFC own account 7 7 ' Access to/cost of financing .. 84.4 Pr Taxrates .. 62.6 M IGA Gross exposure - - Stock market capitalization (%of GDP) 29.4 76.2 New guarantees - - Bank capital to asset ratio (%) 9.8 8.0 Note: Figures in italics are for years other than those specified. 2010 data are preliminary. 4/18/12 ..indicates data are not available. - indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 66 Millennium Development Goals Morocco With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2years) Morocco Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2009 Poverty headcount ratio at $1.25 a day (PPP, %of population) 2.5 .. 6.3 2.5 Poverty headcount ratio at national poverty line (%of population) 13.1 .. 15.3 8.8 Share of income or consumption to the poorest qunitile (%) 6.6 .. 6.3 6.5 Prevalence of malnutrition (%of children under 5) 9.0 Goal 2: ensure that children are able to complete primary schooling Primaryschool enrollment (net, %) 58 72 79 91 Primarycompletion rate (%of relevant age group) 51 48 57 80 Secondaryschool enrollment (gross, %) 38 38 38 56 Youth literacy rate (%of people ages 15-24) 55 62 67 80 Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primaryand secondary education(0) 67 72 80 87 Women employed in the nonagricultural sector (%of nonagricultural employment) 20 22 Proportion of seats held by women in national parliament (%) .. 1 1 11 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortalityrate (per 1000) 85 47 38 Infant mortalityrate (per 1,000 live births) 66 57 40 32 Measles immunization (proportion of one-year olds immunized, %) 80 88 93 94 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) 332 228 228 12 Births attended byskilled health staff (%of total) 31 34 48 83 Contraceptive prevalence (%of women ages 15-49) 42 50 Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases Prevalence of HIV (%of population ages 15-49) 0.1 0.1 0.1 0.1 Incidence of tuberculosis (per 100,000 people) 110 113 95 81 Tuberculosis case detection rate(%, all forms) 76 73 91 93 Goal 7: halve the proportion of people without sustainable access to basic needs Accessto an improved water source (%of population) 75 .. 80 96 Access to improved sanitation facilities (%of population) 58 .. 68 51 Forest area (%of land area) 6.8 12.7 12.7 12.7 Terrestrial protected areas (%of land area) CO2 emissions (metric tons percapita) 0.9 11 1.2 1.5 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) 9.7 8.2 8.3 8.4 Goal 8: develop a global partnership for development Telephone mainlines (per 100 people) 16 42 4.9 11. Mobile phone subscribers (per 100 people) 0.0 0.1 8.1 79.1 Internet users (per 100 people) 0.0 0.0 0.7 322 Personal computers (per 100 people) .. 0.3 1.2 5.7 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 100 100 100 75 ri 75 70 50 60 50 50 25 40 0 2520n 2000 2005 2009 0 0 1990 1995 2000 2009 2000 2005 2009 Primary net enrollment raio - Ratio ofgirsto boysin prmary& secondary OMorocco OMiddle East & North Afrial OFixed + mobile subscnbersmintenet users educationI Note: Figures in italics are for years other than those specified. ..indicates data are not available. 4/18/12 Development Economics, Development Data Group (DECDG). 67 Morocco CAS Annex B2 Selected Indicators* of Bank Portfolio Performance and Management As Of Date 4/26/2012 Indicator 2009 2010 2011 2012 Portfolio Assessment Number of Projects Under Implementation a 7 12 12 8 Average Implementation Period (years) b 3.1 2.4 2.3 2.9 Percent of Problem Projects by Number ', c 14.3 16.7 16.7 0.0 Percent of Problem Projects by Amount a, c 4.7 15.0 13.0 0.0 Percent of Projects at Risk by Number a, d 14.3 16.7 16.7 0.0 Percent of Projects at Risk by Amount a, d 4.7 15.0 13.0 0.0 Disbursement Ratio (%) e 21.4 21.7 14.1 15.7 Portfolio Management CPPR during the year (yes/no) No No No No Supervision Resources (total US$'000) 1208 1147 1516 1447 Average Supervision (US$'000/project) 103 75 77 90 Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 125 9 Proj Eval by OED by Amt (US$ millions) 7,778.9 581.2 % of OED Projects Rated U or HU by Number 26.4 44.4 % of OED Projects Rated U or HU by Amt 26.8 37.5 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. Note: CAS Annexes B3 and B4 not presented here-after as this information has previously been presented for IBRD Program and AAA Program in Annexes 3 and 4. 68 Morocco Social Indicators Annex B5 Latest single year Same region/income group MNA M. East Lower- LMC & North middle- 1980-85 1990-95 2004-10 Africa income POPULATION SP.POP.TOTL Total population, nid-year (millions) 21.8 26.4 32.0 330.9 3,810.8 SP.POP.TOTL.ZG Growth rate (% annual average for period) ' 2.3' 1.8' 1.0 1.8 1.2 SP.URBTOTL.IN.ZS Urban population (% of population) 44.9 51.9 57.3 57.6 40.9 SP.DYN.TFRT.IN Total fertility rate (births per oman) 4.7 3.6 2.4 2.7 2.5 POVERTY (% of population) SI.FOV.NAHC National headcount index 26.0 13.1 8.8 SI.POV.URHC Urban headcount index 17.3 7.6 4.7 SI.POV.RUHC Rural headcount index 32.6 18.0 14.2 INCOME NY.GNP.PCAP.CD GNI per capita (US$) 670 1,280 2,890 3,597 2,321 FP.CPI.TOTL Consumer price index (2005-100) 54 91 120 124 130 FP.FPI.TOTL Food price index (2000=100) 53 97 127 INCOME/CONSUMPTION DISTRIBUTION Share of income or consumption SI.POV.GINI Gini index 39.2 39.2 40.7 SI.DST.FRST.20 Lowest quintile (% of income or consumption) 6.7 6.6 6.5 SI.DST.05TH.20 Highest quintile (% of income or consumption) 46.3 46.4 48.1 SOCIAL INDICATORS Public expenditure SH.XPD.RJBL.ZS Health (% of GDP) .. 1.0 1.3 2.7 2.1 SE.XPD.TOTL.GN.ZS Education (% of GNI) .. .. .. 4.6 4.1 SI.XPD.SOSE.ZS Social security and welfare (% ofGDP) 1.7 2.3 Net primary school enrollment rate (% of age group) SE.PRM.NENR Total 61 72 91 89 87 SE.PRM.NENR.MA Male 73 81 92 91 88 SE PRM. NENR FE Female 48 63 89 88 86 Access to an improved water source (% of population) SH.H20.SAFEZS Total .. 75 96 87 87 SH.H20.SAFEUR.ZS Urban .. 94 100 95 95 SH.H20.SAFERU.ZS Rural .. 58 90 80 81 Immunization rate (% of children ages 12-23 months) SH.IMMMEAS Measles 45 88 94 87 79 SH.IMM.IDPT DPT 51 86 .. 88 79 SH.STA.MALN.ZS Child malnutrition (% under 5 years) .. 9 10 7 24 Life expectancy at birth (years) SPDYN.LEO0.IN Total 59 68 73 71 68 SPDYN.LEOO.MA.IN Male 58 66 72 69 66 SP.DYN.LEOO.FEIN Female 60 70 74 73 70 Mortality SP. DY N. IMRT. IN Ifant (per 1,000 live births) 83 57 32 27 43 SH.DYN.MORT Under 5 (per 1,000) 115 76 38 33 58 Adult (15-59) SP. DYN.AMRT.MA Male (per 1,000 population) 264 234 .. 155 201 SP.DYN.AMRT.FE Female (per 1,000 population) 207 184 .. 104 136 SH.STA.MMRT Maternal (per 100,000 live births) .. 228 132 88 230 SH.STA.BRTC.ZS Births attended by skilled health staff (%) 24 34 83 80 67 CAS Annex B5. This table was produced from the CMU LDB system. 04/05/12 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due tc change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. 69 Annex B6: Morocco - Key Economic Indicators Actual Estim Projected ate Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 100 Agriculture 14 15 16 15 15 15 15 14 13 Industry 27 30 29 30 30 29 29 29 30 Services 59 55 55 55 55 56 56 57 57 Total Consumption 77 75 75 75 76 78 78 78 78 Gross domestic fixed investment 31 33 31 31 32 32 32 32 32 Government investment 4 5 6 6 6 5 5 5 5 Private investment 28 28 25 25 26 26 26 26 27 Exports (GNFS)b 36 37 29 33 36 36 36 36 37 Imports (GNFS) 45 51 40 43 48 49 49 49 49 Gross domestic savings 23 25 25 25 24 22 22 22 22 Gross national savingsc 32 33 30 31 30 28 29 29 29 Memorandum items Gross domestic product 75223 88879 90554 90803 100312 98660 104285 110726 117883 (US$ million at current prices) GNI per capita (US$, Atlas method) 2310 2570 2830 2940 3000 3050 3200 3290 3460 Real annual growth rates (%, calculated from 98 prices) Gross domestic product at market prices 5.6 4.8 3.7 4.8 3.7 4.8 5.2 5.5 Gross Domestic Income 3.0 4.4 8.5 5.3 3.1 3.3 4.7 5.0 5.2 Real annual per capita growth rates (%, calculated from 98 prices) Gross domestic product at market prices 4.5 3.7 2.6 3.0 2.7 3.8 4.2 4.5 Total consumption 2.8 4.7 5.1 0.5 3.6 3.4 3.5 4.3 4.5 Private consumption 2.7 4.9 3.6 1.1 4.6 2.1 3.5 4.5 4.5 Balance of Payments (US$ millions) Exports (GNFS)b 27268 33430 26182 30308 35456 35536 37650 40072 42779 Merchandise FOB 15129 20095 13973 17577 21969 20567 21032 21701 22438 Imports (GNFS)b 34610 46267 37026 40192 49507 49202 51606 54775 58330 Merchandise FOB 29206 39573 30189 32648 40818 39912 41800 44415 47347 Resource balance -7342 -12837 -10844 -9884 -14050 -13666 -13956 -14704 -15551 Net current transfers 7661 8727 7360 7265 7992 8372 9109 9945 10899 Current account balance -70 -4637 -4930 -4078 -7986 -6814 -6205 -6240 -6256 Net private foreign direct 2183 2002 1476 1574 2382 3000 4000 4500 4950 investment Long-term loans (net) 370 1445 2249 1600 3057 3743 3349 2945 2564 Official 821 1758 1903 1130 2300 3066 2892 2608 2394 Private -451 -313 346 470 757 677 457 338 169 70 Morocco - Key Economic Indicators (Continued) Actual Estim Projected ate Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 Indicator Other capital (net, inc. errors & ommissions) -291 630 559 2091 -13 208 213 142 Change in reservesd -2067 1481 575 345 456 84 -1352 -1418 -1399 Memorandum items Resource balance (% of GDP) -9.8 -14.4 -12.0 -10.9 -14.0 -13.9 -13.4 -13.3 -13.2 Real annual growth rates ( YR98 prices) Merchandise exports (FOB) 5.2 -4.3 -1.5 33.5 5.3 2.3 5.7 5.7 5.8 Primary 1.2 -9.4 0.2 27.5 -3.4 3.0 8.0 8.0 7.7 Manufactures 7.1 1.3 -4.0 40.0 5.2 1.4 2.7 3.4 3.9 Merchandise imports (CIF) 20.7 6.5 3.2 -5.5 5.8 5.0 7.0 6.8 6.8 Public finance (as % of GDP at market prices)e Current revenues 27.4 29.7 26.0 25.3 25.7 25.4 26.0 26.6 26.6 Current expenditures 24.1 25.5 23.1 23.8 26.6 25.5 25.4 25.0 24.7 Current account surplus (+) or deficit (-) 4.2 3.0 1.6 -0.9 -0.1 0.5 1.6 1.9 Capital expenditure 4.6 5.5 6.3 6.2 6.2 5.4 5.5 5.6 5.7 Foreign financing 0.6 1.6 1.7 2.1 1.7 1.8 1.5 1.4 1.3 Monetary indicators M2/GDP 115.2 117.0 117.8 118.3 118.3 119.4 120.5 121.9 123.2 Growth of M2 (%) 17.4 13.5 7.0 4.8 6.2 6.2 8.2 8.7 8.7 Private sector credit growth! 70.2 63.0 63.9 100.6 115.2 75.1 75.8 76.7 76.9 total credit growth (%) Price indices( YR98 =100) Merchandise export price index 212.9 295.6 208.6 196.5 233.4 213.7 206.8 201.9 197.3 Merchandise import price index 139.9 173.2 130.1 149.0 162.9 151.7 148.5 147.8 147.5 Merchandise terms of trade index 152.2 170.7 160.3 131.9 143.3 140.8 139.2 136.6 133.7 Real exchange rate (US$/LCU)t 87.0 80.3 82.8 87.0 89.9 89.9 89.9 89.9 89.9 Real interest rates Consumer price index (% change) 2.5 3.7 1.0 1.0 0.9 1.9 1.8 2.4 2.3 GDP deflator (% change) 3.9 5.9 1.5 0.6 1.3 1.5 2.3 2.1 2.0 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 71 Morocco - Key Exposure Indicators Actual Estima Projec ted ted Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total debt outstanding and 20543 20825 23751 25403 28475 32238 35387 38133 40496 disbursed (TDO) (US$m)a Net disbursements (US$m)a 651 1102 1842 2534 3072 3763 3149 2745 2364 Total debt service (TDS) 4018 4204 3411 3065 2773 3075 3179 3315 3543 (US$m)a Debt and debt service indicators (%) TDO/XGSb 58.8 50.4 71.3 67.6 62.8 72.7 74.4 74.7 73.8 TDO/GDP 27.3 23.4 26.2 28.0 28.4 32.5 33.7 34.2 34.1 TDS/XGS 11.5 10.2 10.2 8.2 6.1 6.9 6.7 6.5 6.5 Concessional/TDO 29.4 34.5 33.8 34.2 36.3 37.6 38.7 39.7 40.7 IBRD exposure indicators (%) IBRD DS/public DS 16.5 15.8 18.9 12.1 12.0 11.4 10.7 11.4 12.3 Preferred creditor DS/public 34.2 39.0 49.8 43.5 54.0 52.5 50.4 49.8 46.9 DS (%)c IBRD DS/XGS 1.1 0.9 1.0 0.7 0.7 0.7 0.6 0.7 0.7 IBRD TDO (US$m)d 2578 2540 2543 2468 2842 3428 4066 4673 5247 Of which present value of guarantees (US$m) Share of IBRD portfolio (%) 2 2 2 3 3 4 5 5 IDA TDO (US$m)d 17 16 14 13 12 10 9 8 6 IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 72 MOROCCO CAS Annex B8 -1 Operations Portfolio (IBRD/IDA and Grants) As Of Date 4126/2012 Closed Projects 154 lBRD/IDA * I Total Dsbursed (Active) 202.37 of which has been repaid 1.16 Total Dsbursed (Cosed) 2,416.01 of which has been repaid 2,842.90 Total osbursed (Active + Cosed) 2,618.38 of which has been repaid 2,844.06 Total Undisbursed (Active) 613.29 Total Undisbursed (Cosed) 13.73 Total Undisbursed (Active + Cosed) 627.02 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements Project ID Project Name Development Implementation Fiscal Year IBRD GRANT Cancel. Undisb. Orig. Frm Rev'd ProectID rojct ameObjectives Progress P117081 GEF Integrating CC in the PMV S MS 2011 4.345454 4.3 0.5 P093719 Modem. of Irrig. Agric.in OER Basin MS MS ' 2010 70.0 69.4 14.6 P 104265 ONE Support Project MS MS ' 2008 150.0 87.5 79.4 P 122028 Ouarzazate Concentrated Solar Power S S ' 2012 200.0 200.0 P098459 Oum Er Rbia Sanitation S MS ' 2010 43.0 42.9 7.6 0.8 P100397 Regional Potable Water Supply Systems S MS ' 2010 175.0 174.6 58.9 2.2 P094007 Rural Roads II S S ' 2006 141.5 14.3 (77.1) (23.9) P086877 Rural Water Supply and Sanitation S S ' 2006 60.0 24.6 18.6 (0.9) Overall Result 839.5 4.345454 617.6 102.6 (21.7) 73 CAS Annex B8-2: IFC Investment Operations Program Morocco Committed and Disbursed Outstanding Investment Portfolio As of 3/31/2012 (In USD Millions) Committed Disbursed Outstanding **Quasi Partici **Quasi Partici FY Approval Company Loan Equity Equity *GT/RM pant Loan Equity Equity *GT/RM pant 2007 Al Amana - Maroc 0 0 2.43 12.44 0 0 0 2.43 1.06 0 0 Altermed Maghreb 0 6.05 0 0 0 0 1.18 0 0 0 2010 Arif 0 10.68 0 0 0 0 0.56 0 0 0 2008 BMCE 0 0 93.33 0 0 0 0 93.33 0 0 2008 Capital n africa 0 5.76 0 0 0 0 4.06 0 0 0 2010 Kasbah 0 4.91 0 0 0 0 4.91 0 0 0 2000 Maghreb inv. mgt 0 0.02 0 0 0 0 0.02 0 0 0 2008 Mixta africa 0 0.89 0 0 0 0 0.89 0 0 0 2012 Saham finances 0 70.96 0 0 0 0 70.96 0 0 0 Total Portfolio: 0 99.27 95.76 12.44 0 0 82.58 95.76 1.06 0 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 74