Document of The World Bank Report No: ICR00004087 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-82200) ON A SERIES OF PROGRAMMATIC LOANS IN THE AMOUNT OF US$360 MILLION (EURO 123.9 MILLION/ US$160 EQUIVALENT AND US$ 200 MILLION) TO THE KINGDOM OF MOROCCO FOR THE FIRST AND SECOND ECONOMIC COMPETITIVENESS SUPPORT PROGRAM DEVELOPMENT POLICY LOANS July 23, 2017 Trade & Competitiveness Global Practice Middle East and North Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective June 28, 2017) Currency Unit = Moroccan Dirham (MAD) MAD 1.00 = US$.10 US$ 1.00 = 9.77 MAD FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AMDI Agence Marocaine de Développement des Investissements (Moroccan Investment Development Agency) AMDL Agence Marocaine de Développement de la Logistique (Moroccan Logistics Development Agency) AREP Agence Régionale d’Exécution de Projets (Regional Agency for Project Implementation) CBI Common Business Identifier CC Competition Council CEM Country Economic Memorandum CI Commission des Investissements (Investment Commission) CGEM La Confédération Générale des Entreprises du Maroc (General Confederation of Moroccan Enterprises) CNEA Comité National pour l’Environnement des Affaires (National Business Environment Commission) CNSS Caisse Nationale de Sécurité Sociale (Social Security Administration) CNUCED Conférence des Nations Unis sur le Commerce et le Développement (United Nations Conference on Trade and Development) CPS Country Partnership Strategy CREA Comité Régional pour l’Environnement des Affaires (Regional Committee for Business Environment) DGI Direction Générale des Impôts (Tax Authority) DPL Development Policy Loan ECSP Economic Competitiveness Support Program FDI Foreign Direct Investment GPBM Groupement Professionnel des Banques du Maroc (Moroccan Banking Association) GIZ German Development Agency GoM Government of Morocco IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report ICT Information Communication Technologies IFC International Finance Corporation ISR Implementation and Status and Results Report MAGG Ministry of General Affairs and Governance M&E Monitoring & Evaluation MEF Ministère de l’Economie et des Finances (Ministry of Economy and Finance) MFN Most Favored Nation MFPMA Ministère de la Réforme de l’Administration et de la Fonction Publique (Ministry of Administration Reform and of Public Function) OECD Organization for Economic Cooperation and Development OMPIC Office Marocain de la Propriété Industrielle et Commerciale (Moroccan Office of Industrial and Commercial Property) PAI Pacte d’Acceleration Industrielle (Industrial Acceleration Plan) PDO Program Development Objective PJD Parti de la Justice et du Développement SARL Société anonyme à responsabilité limitée (Limited Liability Corporation) SME Small and Medium Enterprise SURR Social, Urban, Rural and Resilience USAID United States Agency for International Development Senior Global Practice Director: Anabel Gonzalez Practice Manager: Najy Benhassine Project Team Leader: Philippe De Meneval ICR Team Leader: Philippe De Meneval ICR Author: Zineb Benkirane Kingdom of Morocco First and Second Economic Competitiveness Support Program Development Policy Loans CONTENTS Data Sheet A. Basic Information ii B. Key Dates ii C. Ratings Summary iii C.1 Performance Rating by ICR iii C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) iii C.3 Quality at Entry and Implementation Performance Indicators iii D. Sector and Theme Codes iv E. Bank Staff v F. Results Framework Analysis vi G. Ratings of Program Performance in ISRs xii H. Restructuring (if any) xii 1. Program Context, Development Objectives and Design 1 2. Key Factors Affecting Implementation and Outcomes 11 3. Assessment of Outcomes 18 4. Assessment of Risk to Development Outcome 26 5. Assessment of Bank and Borrower Performance 27 6. Lessons Learned 29 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 31 Annex 1: Bank Lending and Implementation Support/Supervision Processes 32 Annex 3: Loan Series Analytical Underpinnings 40 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR 42 i A. Basic Information Program 1 Economic Country Morocco Program Name Competitiveness Support Program DPL Program ID P127038 L/C/TF Number(s) IBRD-82200 ICR Date 04/25/2017 ICR Type Core ICR GOVERNMENT OF Lending Instrument DPL Borrower MOROCCO Original Total USD 160.00M Disbursed Amount USD 162.66M Commitment Implementing Agencies Ministry of General Affairs and Governance Cofinanciers and Other External Partners Program 2 Morocco Second Country Morocco Program Name Competitiveness DPL IBRD-82200,IBRD- Program ID P128869 L/C/TF Number(s) 84730 ICR Date 04/25/2017 ICR Type Core ICR KINGDOM OF Lending Instrument DPL Borrower MOROCCO Original Total USD 200.00M Disbursed Amount USD 200.00M Commitment Implementing Agencies Ministry of General Affairs and Governance Cofinanciers and Other External Partners B. Key Dates Economic Competitiveness Support Program DPL - P127038 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/11/2011 Effectiveness: 06/17/2013 06/17/2013 Appraisal: 03/28/2012 Restructuring(s): Approval: 03/12/2013 Mid-term Review: Closing: 12/31/2013 12/31/2013 ii Morocco Second Competitiveness DPL - P128869 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 05/22/2014 Effectiveness: August 11, 2015 August 11, 2015 Appraisal: 12/08/2014 Restructuring(s): Approval: 03/02/2015 Mid-term Review: Closing: 03/31/2016 03/31/2016 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory Risk to Development Outcome Moderate Bank Performance Satisfactory Borrower Performance Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Performance Performance Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Economic Competitiveness Support Program DPL - P127038 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Satisfactory Closing/Inactive status iii Morocco Second Competitiveness DPL - P128869 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Moderately Closing/Inactive status Satisfactory D. Sector and Theme Codes Economic Competitiveness Support Program DPL - P127038 Original Actual Major Sector Public Administration Central Government (Central Agencies) 45 45 Industry, Trade and Services Other Industry, Trade and Services 55 55 Major Theme/Theme/Sub Theme Economic Policy Fiscal Policy 5 5 Tax policy 5 5 Trade 25 25 Trade Facilitation 25 25 Private Sector Development Business Enabling Environment 60 60 Regulation and Competition Policy 60 60 Public Sector Management Public Administration 5 5 E-Government, incl. e-services 5 5 Public Finance Management 5 5 Domestic Revenue Administration 5 5 Morocco Second Competitiveness DPL - P128869 Original Actual Major Sector Industry, Trade and Services iv Other Industry, Trade and Services 100 100 Major Theme/Theme/Sub Theme Economic Policy Economic Growth and Planning 2 2 Migration, Remittances and Diaspora Engagement 2 2 Fiscal Policy 5 5 Subnational Fiscal Policies 2 2 Trade 25 25 Trade Facilitation 25 25 Human Development and Gender Labor Market Policy and Programs 2 2 Labor Market Institutions 2 2 Private Sector Development Business Enabling Environment 60 60 Investment and Business Climate 17 17 Regulation and Competition Policy 60 60 Jobs 2 2 Youth Employment 2 2 E. Bank Staff Economic Competitiveness Support Program DPL - P127038 Positions At ICR At Approval Vice President: Hafez M. H. Ghanem Inger Andersen Country Director: Marie Francoise Marie-Nelly Neil Simon M. Gray Practice Najy Benhassine Simon C. Bell Manager/Manager: Philippe De Meneval Philippe De Meneval Task Team Leader: Jean-Pierre Chauffour Jean-Pierre Chauffour ICR Team Leader: Philippe De Meneval ICR Primary Author: Zineb Benkirane v Morocco Second Competitiveness DPL - P128869 Positions At ICR At Approval Vice President: Hafez M. H. Ghanem Gerard A. Byam Country Director: Marie Francoise Marie-Nelly Neil Simon M. Gray Practice Najy Benhassine Najy Benhassine Manager/Manager: Philippe De Meneval Philippe De Meneval Task Team Leader: Jean-Pierre Chauffour Jean-Pierre Chauffour ICR Team Leader: Philippe De Meneval ICR Primary Author: Zineb Benkirane F. Results Framework Analysis Program Development Objectives (from Program Document) The program development objective of the First Economic Competitiveness Support Program Development Policy Loan (ECSP DPL I) was to support policy reforms in three key areas of the Government’s comprehensive economic strategy: investment climate, trade policy and trade logistics, and economic governance. The program development objective of the Second Economic Competitiveness Support Program (ECSP II) is to support policy reforms in three key areas of the Government’s comprehensive economic strategy: (a) Improving the investment climate; (b) Furthering trade policy reform and trade facilitation; and (c) Strengthening economic governance. The Loan Agreements do not define the Program Development Objectives. Revised Program Development Objectives (as approved by original approving authority) Program Development Objectives were not revised Indicator(s) PDO Indicator(s) for DPL series─ from Program Document Economic Competitiveness Support Program DPL - P127038 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years vi Economic Competitiveness Support Program DPL - P127038 Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Number of newly created corporations identified through a unique business Pillar I identification code Indicator 1 : Since 1st July 2016, all existing firms have to request their Common Business Identifier. All SA/SARL Between January Value No firm has a unique 2015 and April created after N/A (quantitative or identifier 2017, 507,698 January 2015 Qualitative) firms (registered companies and individual traders) received a CBI from administration. Of these firms, 133,530 are SA/SARL. Date achieved 01/01/2013 03/31/2015 04/10/2017 Target achieved. Since January 2015, all newly created SA/SARL firms have received a unique identifier; furthermore, authorities mandated all existing Comments corporation to request and obtain a unique identifier by June 2016, hence going (incl. % beyond the initial objective for this action. achievement) Source: Tax Directorate (DGI) and Ministry of General Affairs and Governance (MAGG) Number of simplifications and standardizations of administrative procedures Pillar I made public on the Government website servicepublic.ma Indicator 2 : Value 40 administrative 52 procedures were 0 N/A (quantitative or procedures made public Qualitative) Date achieved 01/01/2013 12/31/2015 04/10/2017 Target exceeded. 52 procedures have been simplified and published in detail on the government national website service-public.ma. In parallel, with a view Comments to strengthen and unify the transparency and simplification efforts across (incl. % ministries, authorities have (i) linked the regional portals for investment achievement) (casainvest.ma; rabatinvest.ma; etc.) to the government national portal service- public.ma, and (ii) transferred to the MFPMA the management of the websites describing key procedures applicable to enterprises (e-regulation websites), vii with a view to merge these various web portals.(Source: MFPMA and CNEA) Pillar I Reduction of the formalities and duration for registering property for business Indicator 3 : Doing Business Value 8 procedures and 60 6 procedures and N/A 2017: 6 procedures (quantitative or days 40 days and 22 days Qualitative) Date achieved 10/01/2013 10/01/2015 04/10/2017 Comments Target exceeded. (incl. % achievement) Reduction by at least ten percent in average payment delay in sectors where Pillar I average payment delays is over 100 days. Indicator 4 : Average payment delays over 100 days in 10% reduction in industrial average payment Value manufacturing, real delays estimates in N/A Not achieved (quantitative or estate, public aforementioned Qualitative) construction and sectors professional services Date achieved 01/01/2012 12/31/2015 04/10/2017 Not achieved. Despite adopting the initial law following best international practices, and amending it recently to extend its scope to include commercial SOEs as per private sector demand, a recent June 20, 2017 report from Comments Moroccan Central Bank points to worsening situation of payment delays (incl. % overall, in particular in construction and real estate sectors. Manufacturing achievement) sector has remained stable since 2010. The Morocco Central Bank expects that the recent inclusion of SOEs within the scope of the law will contribute to actual improvement of payment delays across sectors within the next two to three years. Pillar I Number of companies that are reporting in certified accounts their average Indicator 5 : payment delays as per the new regulations. All companies with All companies certified accounts Value 0 firms reporting with certified N/A are reporting their (quantitative or average payment delays accounts for 2015 average payment Qualitative) delays as mandated under the new law Date achieved 01/01/2012 12/31/2015 04/10/2017 Target achieved. Compliance with the law is observed by practitioners. Source: Comments Association of certified accountants, and review of a sample of corporate (incl. % accounts published on the commercial registry managed by OMPIC. achievement) viii Pillar I Number of limited liability companies (SARL) formally registered Indicator 6 : 27 800 by the 35 700 companies end of 2011 Value newly created in 2768 3900 and target of (quantitative or 2015 across the 35000 by the Qualitative) Country (OMPIC) end of 2015 Date achieved 01/01/2010 12/31/2015 12/31/2015 04/10/2017 The initial program document included the number of firms registered only for the Rabat region, while it was intended to measure the number of corporations Comments registered across the whole country. Target was formally revised to correct this (incl. % typo. The target was achieved, both at national level and Rabat region level. achievement) (Source: OMPIC) Improvement in the governance and protection of minority shareholders in Pillar I corporations. Indicator 7 : Improvement in Morocco’s ranking, score and quality index (Distance to Morocco score in Improvement in frontier) measured Doing Business 2014 in Morocco score in in the Doing the protecting minority Doing Business Business Value investors indicator 2016 in the N/A (quantitative or (6/10 in extent of protecting DB 2017: 9/10 in Qualitative) disclosure index; 2/10 minority investors extent of disclosure in extent of director indicator index; 2/10 in liability index) extent of director liability index Source: Doing Business, CNEA. Date achieved 01/01/2014 10/01/2015 04/10/2017 Target achieved. Following the legal reform supported by the ECSP program, Morocco improved the governance and protection of shareholders by clarifying ownership and control structures, and requiring greater corporate transparency. Comments Morocco’s Protecting Minority Investors ranking improved by 28 slots in (incl. % Doing Business 2017 (87th place in DB 2017 vs 115th place in DB 2014). achievement) Distance to frontier rating is 67.5/100 compared to 64.38 in DB 2014 and score is 9/10 in extent of disclosure index. The distance to frontier score captures the gap between an economy’s performance and a measure of best practice across the indicators, where 100 is the frontier and 0 is the furthest from the frontier. ix Rationalization of tariff structure on imports through a reduction of maximum Pillar II tariff quota applicable to industrial products Indicator 8 : 25% applicable Value 30% 25% in 2012 N/A quota to industrial (quantitative or products Qualitative) Date achieved 12/31/2011 04/10/2017 Target achieved. Following this reform there are currently only four tariff Comments quotas applied in Morocco to industrial products, with a minimum tariff rate of (incl. % 2.5% and a maximum rate of 25%. achievement) Percentage of products put on the market that are randomly controlled which Pillar II complies with new security regulatory requirements Indicator 9 : Value 93% controlled 99 % controlled 95% N/A (quantitative or products products Qualitative) Date achieved 01/01/2014 01/01/2016 04/10/2017 Comments Target exceeded. Since March 2016, 99% of products were declared compliant (incl. % according to the new procedure. achievement) New petitions requesting the application of anti-dumping, anti-subsidy or Pillar II safeguard measures are formally processed and published according to WTO Indicator 10 : rules and procedures (Yes/No) Systematic publication of the Systematic stages of enquiry Value Piecemeal publication publication of the proceedings N/A (quantitative or of enquiry proceedings. stages of enquiry (notice, hearing, Qualitative) proceedings opening report, findings Date achieved 01/01/2013 04/30/2015 04/10/2017 Comments Target achieved. Periodic publication of petition procedures on the Ministry of (incl. % External Trade’s website (mce.gov.ma) achievement) Pillar II Reduction in average transit time for goods at Casablanca port. Indicator 11 : Value 10 days less than 7 days N/A 5.7 days in 2015 (quantitative or Qualitative) Date achieved 07/01/2013 12/31/2015 04/10/2017 Target achieved. As of March 2017, time of clearance at Casablanca port is Comments 6.12 days and remains under the target (Source: Official Portnet data). (incl. % Improvements are also recognized in the Doing Business, where Morocco achievement) improved its score in the DB 2017 report (Source: DB 2017 as published in October 2016: Morocco made trading across x borders easier by further developing its single window system and thus reducing border compliance time for importing.) Pillar III Assessment of costs and benefits of incentives granted to investment projects is Indicator 12 : included in the annual activity report of the Commission for Investments (CI). Annual review of Annual review of CI CII activity in Value activity in 2011 without 2015 includes an N/A Achieved (quantitative or assessment of costs and assessment of Qualitative) benefits of incentives costs and benefits of incentives Date achieved 01/01/2011 12/31/2015 04/10/2017 Comments Target achieved. New projects submitted to the CII includes an assessment of (incl. % costs and benefits, and a report consolidating 2015 and 2016 activity is achievement) completed and will be submitted to a dedicated CII meeting (Source: AMDI) Number of investment climate reforms accounted in the Doing Business report Pillar III that have been initiated and coordinated by the National Committee for Indicator 13 : Business Environment. 4 new reforms in 15 new reforms Value 2013-2015 annual 0 N/A with positive (quantitative or Doing Business impact Qualitative) surveys Date achieved 10/31/2013 10/31/2015 04/10/2017 Comments Target exceeded. 15 reforms have been coordinated by CNEA in Doing (incl. % Business 2013 - 2017 reports (Source: CNEA and Doing Business) achievement) Number of investigations formerly launched by the Competition Council under Pillar III the new legal and regulatory Indicator 14 : Value 2 official 0 in 2013 N/A Not achieved (quantitative or investigations Qualitative) Date achieved 01/01/2013 12/31/2015 04/10/2017 Target not achieved. Despite the lack of nomination of the new board of the competition council according to the new legal framework, the operational team of the competition council remained active and 20 informal investigations Comments were conducted internally by concerned departments of the competition (incl. % council. However, these investigations cannot be formalized in compliance achievement) with the new legal framework as long as the new board of the competition council is not appointed in accordance with the new rules. Authorities expects the appointment of the board members to occur anytime soon under the new government. xi G. Ratings of Program Performance in ISRs Economic Competitiveness Support Program DPL - P127038 Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 07/18/2013 Satisfactory Satisfactory 162.24 2 05/10/2014 Satisfactory Satisfactory 162.24 Morocco Second Competitiveness DPL - P128869 Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/31/2016 Moderately Satisfactory Moderately Satisfactory 199.50 H. Restructuring (if any) N/A xii 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal Country Context Morocco made a major economic and social leap forward during the 15 years prior to the Second Economic Competitiveness Support Program (ECSP2). Morocco was able to achieve respectable per-capita income growth and preserve political stability, which in turn allowed for significant improvement in many social indicators. Morocco’s real per capita income almost doubled since the stagnating situation of the 1990s; the poverty rate was twice halved during the period; average literacy rate among adults more than doubled; and Moroccans’ life expectancy at birth soared to exceed 70 years. This performance was mainly due to the implementation of sound macroeconomic policies and structural reforms. Despite this performance, Morocco was being confronted with important social challenges. Poverty, inequality and vulnerability remained important hurdles, despite extreme poverty having been eradicated and relative poverty declining from 15.3 percent in 2001 to 6.2 percent in 2011. Morocco’s Gini coefficient at the time (.41) showed relatively high level of income inequality, which was also reflected in remaining gaps in access to services. Morocco still lags behind its peers in health and education achievements. It also had one of the lowest labor participation rates among emerging economies, with high levels of youth unemployment. Following the adoption of a new Constitution and the formation of a new coalition government headed by the Parti de la Justice et du Développement (PJD), Moroccan authorities decided to implement an ambitious program of institutional and economic reforms. Following King Mohammed VI’s speech of March 9, 2011, a broad and comprehensive package of political reforms that gathered the support of the population was adopted through a constitutional referendum held on July 1, 20111. The new Constitution introduced the following main changes: (i) strengthening the role of Parliament through greater oversight powers over the Government; (ii) elevating the Prime Minister’s status to that of Head of Government; (iii) enhancing the independence of the judiciary – autonomous from the executive and the legislative; (iv) respecting all human rights as they are universally recognized; (v) establishing important institutions, including the National Council for Human Rights, the Ombudsman, the Competition Council, the National Authority for Integrity and the Prevention and Fight against Corruption; and the Council for Youth and Community Work; (vi) adopting an advanced regionalization as a democratic and decentralized system of governance; and (viii) establishing an agency for gender parity and against discrimination. At the time of ECSP I approval, Morocco had undertaken significant measures to peacefully quell social pressures. However, as a result of social demands and an unfavorable external economic environment, the pace of the adoption of key pieces of legislation was slower than expected, especially in the areas related to investment climate, trade policy and economic governance. Government policy reforms had slowed due to changes in the government coalition in July 2013 when the second political party the coalition left and was replaced. This coalition, 1 The vote in favor of the proposed reforms was 98.5 percent with a participation rate of 73 percent 1 still led by the PJD, was established in September 2013 and reiterated its commitment to the implementation of the government program before the end of its term in 2016. Macroeconomic and Sector Context The Moroccan economy remained structurally oriented toward non-tradable activities (such as construction, public works, and low value-added services) and a volatile, weakly productive agriculture. The Moroccan economy was experiencing slow structural transformation, with industry having been stable since 1990, representing approximately 30% of GDP, agriculture representing a 6% decline and services experiencing a 6% of GDP increase over the past 27 years. Given this orientation, Morocco had made little productivity gains over the two decades prior to the ECSP DPL series despite high levels of investment. Investment efforts– dominated by publicly funded large infrastructure projects had not triggered a growth take-off through higher total factor productivity. Morocco had yet to guarantee the productivity gains needed to support the emergence of a larger middle class. The challenge of increasing and further sharing prosperity was paramount. Morocco’s weak productivity gains can be traced to its difficulty in benefitting from the wave of globalization. Morocco’s share of global exports had hovered around 0.15 percent since the mid-1970s, while most emerging countries had seen substantial increases in their shares. The price of the national export basket had generally been higher than that of key competitors and this gap had widened since the 2008 global financial crisis. High and rising export prices were symptomatic of persistent weaknesses in the competitiveness of Moroccan enterprises on the global market. Moroccan firms strive to improve the sophistication and quality of their export products. While existing firms increased their market share for existing products in existing destinations, the renewal of the exporter base with entry and exit of firms remained limited, and existing firms exhibited little product and market innovation. The competitiveness challenge faced by Moroccan firms has been compounded by a series of adverse external shocks. While the 2008 financial crisis has had limited direct effects on Morocco’s economy, the subsequent food and fuel price crises and Eurozone crisis had more serious repercussions. Morocco suffered a major deterioration of its terms of trade since 2008, combined with a significant increase in its food import bill (18 percent per year on average). With a strong trade exposure to the European Union (EU), Morocco was being adversely affected by the sovereign debt crises in neighboring Southern European countries and the subsequent slowdown of economic growth in Europe. As a result, economic growth beyond the agricultural sector decelerated to an average of 3.5 percent since 2009, compared to 4.7 percent during 2000- 2008. Growth has been driven mostly by debt-creating domestic demand, most notably by growing public expenditures. On the upside, the emergence of new growth drivers in higher value-added industries (such as car manufacturing and aeronautics) and the expansion of Moroccan companies in Western Africa were creating the conditions for Morocco to become a regional hub for investments between Europe and Sub-Saharan Africa. In response to deteriorating fiscal trends, the Government initiated the reform of the subsidy system and began to rein in other recurrent expenditures, while consolidating tax revenues. Morocco’s fiscal balance swung from a surplus of 0.4 percent of GDP in 2008 to the highest deficit in two decades, at 7.4 percent of GDP in 2012. However, the activation of a price indexation mechanism helped cut subsidies significantly. The fiscal consolidation measures also included limiting the rise of the wage bill by 2.2 percent through freezing of higher wages and limiting new hiring of civil servants. The consolidation also entailed improving tax collection through the extension of the tax base, harmonization of tax rates and fighting tax evasion. In this 2 context, the Government’s financing requirements had significantly decreased (also due to 1.1 Billion USD in grants from GCC countries). Consistent with the fiscal tightening, the balance of payments indicators had improved since 2013. After widening steadily since 2007 to reach its highest level at 9.7 percent of GDP in 2012, the current account deficit shrunk to 7.6 percent of GDP in 2013. Foreign trade indicators continued to improve in 2014, with exports of goods growing by 6.1 percent, while imports stagnated at -0.2 percent. Remittances also registered positive results, increasing by 2.2 percent in 2014 while tourism receipts slightly decreased, by -0.4 percent. Net foreign direct investment (FDI) inflows increased by 2.6 percent on top of an exceptional performance in 2013. Consequently, net foreign reserves increased by more than US$2.3 billion reaching US$20 billion at the end of November 2014. To achieve better economic and social outcomes, Morocco needed to strengthen policies in several key areas: maintaining the stability of the macroeconomic environment; reinforcing the governance and accountability framework; improving the business environment; developing a trade policy that better supports the competitiveness of Moroccan products; deepening a financial sector to better serve smaller firms; ensuring a labor force that is better trained, and effective social protection and labor market frameworks. To address these challenges, GoM embedded a strong competitiveness component in its 2012-2016 government program, namely through the reinforcement of the rule of law, the advancement of regionalization and governance, and job creation and enhanced economic governance. For the period 2012-16, the program aimed for a growth rate of 5.5 percent, an inflation rate of two percent, reducing unemployment to 8 percent and consolidating the budget deficit to 3 percent by 2016. The competitiveness dimension was anchored in the development of sector-level strategies aimed at structuring the reform process and developing the main sectors generating growth and jobs. For instance, the Industrial Acceleration Plan (“Plan d’Accélération Industrielle”) for 2014-2020, launched in April 2014 by the Minister of Industry, Commerce and Investment, aims at developing “ecosystems” to scale up and better integrate value chains, notably through improving linkages between large companies and SMEs. In addition, the Government aimed at simplifying rules and regulations that affected businesses, and furthering trade integration into the world economy while protecting national production from unfair practices. At the time of approval of ECSP1, Morocco had initiated a structured reform of its business environment. Until 2011, Morocco was poorly ranked in the Doing Business rankings, largely due to weak coordination and dialogue between public and private stakeholders in preparing and implementing reforms. In 2010, the World Bank worked with the Government of Morocco to establish a coordination mechanism and public private committee for reforming the business environment, which would gather periodically around a common action plan. The National Committee for Business Environment ("Comité National de l'Environnement des Affaires" - CNEA) was thus established through a Prime Minister Decree in October 2010 and assisted by a permanent secretariat to undertake technical coordination and follow up. This permanent secretariat was set up within the MAGG ministry. Rationale for Bank Assistance The design of the lending program was underpinned by multiple analytical and technical assistance work under each of the three pillars of the program. Engagement between the Bank and Morocco under these pillars dated back to 2005. The design of the Improving the 3 Investment Climate pillar of the loan series benefitted from Investment Climate Assessments (ICA) in 2005 and 2008, which were key in diagnosing key constraints to enterprises and quantified the firm-level productivity gap in manufacturing. Technical notes focused on Doing Business indicators and legal and regulatory constraints in the business environment helped lead to technical assistance projects on business entry and commercial laws. The design of the Program’s second pillar, Furthering Trade Policy Reform and Trade Facilitation, was informed by the 2006 Country Economic Memorandum (CEM) and the 2011 trade chapter update, which reinforced the core economy-wide issues facing Morocco, such as lack of diversification, lack of structural transformation of the industrial sector, need for sector-specific policies, etc. Other reports and technical assistance informing the design of the operation include, the MENA region flagship report on trade and FDI “From Political to Economic Awakening in the Arab World,” and a series of analytical notes on various trade and competitiveness issues was prepared. Pillar 3, Strengthening Economic Governance, was informed by MENA region flagship report on private sector development “From Privilege to Competition” (2009). The analysis in this regional report identified economic governance issues as a key impediment to private sector development in MENA. Most of the reports’ messages apply to the Moroccan context and the report itself built on Morocco-specific case studies and analysis. An analytical note on the draft investment law and technical assistance on AMDI on investment incentives also informed the design of the 3rd pillar. A table with the details on the various reports and technical assistance informing the design of the loan series can be found in Annex 3. The Economic Competitiveness Support Program loan series was requested by the government to support its policy reforms in three areas of the Government’s comprehensive economic strategy: improving the investment climate, furthering trade policy reform and trade logistics, and improving economic governance. The DPL program consisting of two single- tranche operations of 123.9 Million Euro (equivalent to US$160 Million) for the first loan in the series and US$200 million for the second loan in the series was developed to support the government’s reform program. It was the first DPL operation focused on enhancing business environment and competitiveness in Morocco. To this end, the ECSP DPL series was specifically set-up to support two of the five pillars2 of the government’s 2012-2016 program: (i) the rule of law and advancement of regionalization and governance and (ii) job creation and economic development. Details of the government program are described in Section 2.2: Key Factors Affecting Implementation. The ECSP DPL series was in line with the Country Partnership Strategies (CPS) for FY2010-2013 and FY2014-2017. The Program directly supported the first pillar of the FY2010- 2013 CPS aimed at “Enhancing growth, competitiveness and employment” while contributing significantly to the CPS cross-cutting governance theme. The Program contributed equally to the first and third pillars of the CPS for FY14-17, which aim at Promoting Competitive and Inclusive Growth; and Strengthening Governance and Institutions for Improved Service Delivery to All Citizens, respectively. The loan series was closely linked to three other lending operations that had been recently approved (i) Skills and Employment DPL series; (ii) the First Capital Market and SME Finance DPL; and (iii) the Accountability and Transparency DPL series. All three were 2 The 2012-2016 government’s program is structured around the following five pillars : (i) deepening national identity and social cohesion; (ii) the rule of law and advancement of regionalization and governance; (iii) job creation and economic development; (iv) national sovereignty and social development; and (v) strengthening social services, including those aimed at Moroccans living abroad. 4 instrumental in supporting the Government of Morocco in accelerating growth and employment creation and have been developed in close coordination. Figure 1: Morocco CPS FY14-17: Strategic Results Areas and CPS Outcome Areas The objective of the loan also directly supported the World Bank Group’s twin goals of ending extreme poverty and boosting shared prosperity in a sustainable manner. The reforms supported by the ECSP II expected to energize investment and trade, two key engines of Morocco’s future growth performance and capacity to create high -value private sector jobs and grow the middle class. Improved competition, a more transparent investment framework and regulatory simplification, were set to improve equality of opportunities and inclusion through creating a level-playing field for all players, reducing corruption and encouraging the inclusion of the informal sector into the economy. The trade pillar set Morocco to better integrate into the global economy. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) The objective of the First Economic Competitiveness Support Program Development Policy Loan (ECSP DPL I) was to support policy reforms in three key areas of the Government’s comprehensive economic strategy: investment climate, trade policy and trade logistics, and economic governance. The program development objective of the Second Economic Competitiveness Support Program (ECSP II) is to support policy reforms in three key areas of the Government’s comprehensive economic strategy: (a) Improving the investment climate; (b) Furthering trade policy reform and trade facilitation; and (c) Strengthening economic governance. 5 The Loan Agreements do not define the Program Development Objectives. 1.3 Revised PDO (if any, as approved by original approving authority) and Key Indicators, and Reasons/Justification The PDOs were not revised. There was moderate change of substance and objective in the prior actions of ECSP 2 when compared to the indicative triggers envisioned under ECSP I, including the drop of indicative trigger Di6. Some indicators were strengthened or fine-tuned to better reflect the expected results of the actions. See detailed table in section 1.6 that summarizes and explains material changes affecting four indicative triggers of ECSP II (at the time of ECSP I approval) as reflected in the ECSP II prior actions. 1.4 Original Policy Areas Supported by the Program (as approved): The policy areas supported by loan series are (i) improving the investment climate; (ii) furthering trade policy reform and trade facilitation; and, (iii) improving economic governance. Table 1: Policy Areas and Key Outcome Indicators for ECSP Loan Series Key Outcome Indicators Policy Area ECSP I ECSP II Improving the  Reduced barriers to entry to  Number of newly created Investment Climate Small and Medium Enterprises corporations that are identified (SMEs) by abolishing the through a unique business mandatory minimum capital identification code requirement for creating a  Number of simplifications and limited liability companies. standardizations of administrative  Reduced room for discretion procedures made public on the and arbitrariness by Government website service- standardizing and simplifying public.ma a first set of 20 priority  Reduction of the formalities and administrative procedures duration for registering property for applicable to businesses. business  Strengthened administrative  Reduction by at least 10 percent in information sharing among average payment delay in sectors four key agencies interacting where average payment delay is over with firms. 100 days.  Reduced delays in payments  Number of companies that are to SMEs in commercial reporting in certified accounts their transactions. average payment delays as per the new regulations.  Number of SARL companies formally registered  Improvement in the governance and protection of minority shareholders in corporations. Furthering Trade  Reduced tariff rates for  Rationalization of tariff structure on Policy Reform and manufacturing goods. imports through a reduction of 6 trade facilitation  An updated and modernized maximum tariff quota applicable to legal and regulatory industrial products framework for import  Percentage of products put on the standards and their market and randomly controlled enforcement. which complies with the new  Reduced delays for trade security regulatory requirements operations by streamlining  New petitions requesting the port logistics. application of anti-dumping, anti- subsidy or safeguard measures are formally processed and published according to WTO rules and procedures.  Reduction in average transit times for goods at Casablanca port Improving Economic  Increased transparency and  Assessment of costs and benefits of Governance accountability in the process incentives to investment projects is by which investment included in the annual activity report incentives are granted and of the National Commission for monitored. Investments  Improved Government  Number of investment climate coordination and private sector reforms as accounted for in the involvement in investment Doing Business methodology that climate reforms. have been initiated and coordinated  Reduced monopolistic by the National Committee for behavior, by strengthening the Business Environment competition legal framework  Number of investigations formally and the Competition Council. conducted by the Competition Council under the new legal and regulatory framework. 1.5 Revised Policy Areas (if applicable) The policy areas remained unchanged for the duration of the DPL program. 1.6 Other significant changes As referenced in Section 1.3, the table below summarizes and explains changes affecting four indicative triggers of ECSP II (at the time of ECSP I approval) as reflected in the ECSP II prior actions. 7 Table 2: Material Changes in ECSP II Prior Actions Initial Prior Action Revised Prior Action Rationale for Change Contribution to ECSP (Indicative ECSP2 Objectives Trigger as Stated in ESCP1 Program Document) D3. Budget Law No. Substitution to reflect The new prior action Di3. Implementing 110-13 has been acceleration of policy aims at clarifying the tax regulations to regulate published in the changes. Latest treatment of late penalties for late National Gazette No. implementing payment penalties, a key payments provided 6217bis dated regulations (Arrêté step in the overall under Law No 32-10 December 31, 2013, No 3030-12) needed for upgrading of the legal have been issued. which inter alia implementing the Law framework applying to modified the Tax No 32-10 was late payments between Code (Code Général published in the enterprises in Morocco. des Impôts) to allow National Gazette the tax deductibility on November 15, 2012, of late payment right after negotiations penalties paid in of ECSP I but before its application of approval. Accordingly, Law No. 32-10. the wording of the prior action of ECSP II has been modified to refer to the follow up modification of the Tax Code needed to adapt the corporate tax to the new regime of late payment penalties. 8 Di6. The Law Prior action dropped. Prior action dropped. The new international modifying the Law Preparation of the draft trade law is part of a No 13-89 dated international trade law comprehensive November 9, 1992 on has been delayed (Law overhaul of the legal International Trade 91-14 was eventually framework applying to has been adopted and adopted in March 2016) trade. The program was is in force. and the lack of draft already supporting the implementing decrees implementation of the could not allow a Law on the safety of full assessment of its products and services potential impact and the Law on Trade regarding aspects that defense, which justified its initial transcribed inclusion in the international standards program. into the national legal framework. Compared to these laws, the Law on International Trade was not deemed an essential component of the ECSP program and its impact on liberalization (once the implementation decrees are adopted) would be modest given Morocco’s international and bilateral trade obligations. 9 Di8. The new D7. Circular No. Substitution of action. This substitution does Investment Law and 01/2015 relating to This action has been not impact the its implementing the guide for the substituted to reflect envisioned result of the regulations have been assessment of costs postponement of the initial trigger and adopted and are in and benefits to adoption of the new reinforces the outcome force, and provide for investment projects investment law in 2015, related to the improved a legal framework submitted for still pending. This delay assessment of impact of encouraging approval to the is resulting from the tax exemption and investment, bringing Investment ongoing comprehensive financial support granted more transparency on Commission overhaul of the by the National incentives and how (Commission des incentives framework in Commission for they are granted by the Investissements) has line with the recently Investments to National Commission been issued by the approved Industrial investment projects. for Investments (CI), Head of Government Acceleration Plan (“Plan and provide for the on January 16, 2015. d’Accélération modalities of the Industrielle”). To evaluation of costs and continue aligning the benefits of prior action with the investment projects initial focus of the submitted to the CI. indicative trigger on improving transparency in the way incentives are granted to investment projects, the prior action has been replaced by the adoption by the Head of Government of a circular regarding the guide on costs and benefits of incentives to be granted to investment projects prepared by the Moroccan Investment Development Agency (AMDI), in concert with other concerned ministerial departments, members of the technical committee in charge of preparation and monitoring for the CI, and with World Bank assistance. 10 Di10. The new legal D9. Decree No 2-14- Adjustment to reflect This change was made framework modifying 652 for the changes in the structure to reflect the change in the Competition and implementation of of the new legal the structure of the Freedom of Pricing the Law No 104-12 framework. Since legal framework that Law No 06-99 and of June 30, 2014 approval of the ECSP I, was adopted and take reinforcing the relating to the the legal into account delays for powers freedom of prices framework regulating the adoption of the and independence of and competition, competition now implementing decree of the CC has been which, inter alia, comprises two separate the Law No 20-13 on published in the reinforces the laws instead of one, the Competition National Gazette and powers of the both adopted by Council. The is in force. Competition Parliament in implementing Council (Conseil February 2014: the Law regulation of the Law de la Concurrence), No 104-12 and the Law No 20-13 on the was issued by the No 20-13. The actual Competition Council Head of measure relates to has been approved Government on implementing shortly after the December 1, 2014 regulations of the Law approval of ECSP 2 and published in No 104-12 defining (Decree 2-15-109 of the National freedom of competition June 4, 2015) Gazette No. 6314 and the powers dated December 4, of the Competition 2014. Council. 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance (supported by a table derived from a policy matrix) Both ECSP I and II were single tranche operations, which disbursed on effectiveness. The Government’s commitment to the reform program and measures supported by the DPL series, combined with the timely completion of the specific measures negotiated as prior actions have resulted in disbursement of the two operations in the program as foreseen. Tranche # Amount Expected Actual Release Release Release Date Date Tranche 1 Euro 123.9M 08/14/2015 08/14/2015 Regular PACE I equivalent US$ 160M (US$ 162,656, 322.68M actually disbursed) Tranche 2 US$ 200M 06/25/2013 06/25/2013 Regular PACE II The tables below present the prior actions by operation, all of which were completed. Tables 3 and 4: Key prior actions by operation DPL I First Operation in a Programmatic Series Prior Action Status Policy Area - IMPROVING THE INVESTMENT CLIMATE 11 Di1The Inter-Ministerial Committee in charge of Managing the Common Business Entity Identifier has appointed the Tax Administration to be in charge of hosting, managing and operating the database centralizing the common business identification Completed codes in accordance with Decree No 2-11-63. Di2. The National Business Environment Committee (Comité National de l’Environnement des Affaires - CNEA) has approved a priority list of at least 20 Completed administrative procedures for businesses that will be simplified and standardized. Di3. The Law No 32-10 modifying the Code of Commerce and imposing minimum standards in payment delays in commercial contracts has been approved by Completed Parliament and published in the National Gazette No. 5984 dated October 6, 2011. Di4. The Law No 24-10 amending the Law No 05-96 and abolishing the requirement of a minimum capital for incorporating a limited liability company (Société à responsabilité limité - SARL) has been approved by Parliament and published in the Completed National Gazette No 5956 bis dated June 30, 2011. Policy Area - FURTHERING TRADE POLICY REFORMAND TRADE FACILITATION Di5. The Ministry of Economy and Finance has issued Circular No. 5306/210 dated December 30, 2011 regarding the tariffs reduction on imports of industrial products Completed for 2012. Di6. The Head of Government has issued the implementing Decree regulating anti- dumping, anti-subsidy and safeguard measures in accordance with the Law No 15-09 Completed on Trade Defense published in the National Gazette No 5956 bis dated June 30, 2011. Di7. The company PORTNET in charge of operating and managing the IT system for data exchange between public authorities and private trade operators has been Completed established by its shareholders on January 19, 2012. Policy Area - STRENGTHENING ECONOMIC GOVERNANCE Di8. The Head of Government has issued a Circular providing for the mandatory preparation of cost and benefit assessments of investment projects submitted to the Completed National Investment Commission. Di9. The Ministry of General Affairs and Governance (MAGG) has issued a Decision dated October 29,2012 establishing within the MAGG a Department in charge of improving the investment climate and acting as the secretariat of the National Completed Business Environment Committee (Comité National pour l'Environnement des Affaires - CNEA). Di10. The Government Council has approved the draft Laws modifying the Competition and Freedom of Pricing Law No 06-99, reinforcing the powers and Completed independence of the Competition Council (Conseil de la Concurrence - CC). DPL II Second Operation in a Programmatic Series Prior Action Status Policy Area - IMPROVING THE INVESTMENT CLIMATE The database delivering the common identification codes for businesses in accordance with Decree No 2-11-63 published in the National Gazette No 5952 of Completed June 16, 2011 is operational and the first common business identifiers ( Identifiants Commun de l’Entreprise) have been issued. At least twenty (20) administrative procedures applicable to business were simplified and standardized on the official government website (service-public.ma), notably for the transfer of property. A supplementary list of at least twenty (20) new Completed simplification and standardization procedures were identified and validated by the public-private working group established by MFPMA under the National Business 12 Environment Committee Budget Law No. 110-13 has been published in the National Gazette No.6217bis dated December 31, 2013, which inter alia modified the Tax Code (Code Général des Completed Impôts) to allow the tax deductibility of late payment penalties paid in application of Law No. 32-10. The Government Council has approved on May 28, 2013 the draft Law No.78-12 modifying and completing Law No 17-95 on corporations (Sociétés anonymes), inter Completed alia simplifying the creation of corporations and improving their governance. Policy Area - FURTHERING TRADE POLICY REFORM AND TRADE FACILITATION Decree No. 2-12-502 for the implementation of Law No. 24-09 of August 17, 2011, relating to the safety of products and services was issued by the Head of Completed Government on May 13, 2013 and published in the National Gazette No. 6158 dated June 6, 2013. The state-owned company Portnet has put in place a computerized data exchange system for port operations that allows the electronic management of import documents through the interconnection of key public authorities and private trade Completed operators involved in external trade procedures (Customs, traders, banks, Commerce Department, Foreign Exchange Office). Policy Area - STRENGTHENING ECONOMIC GOVERNANCE Circular No. 01/2015 relating to the guide for the assessment of costs and benefits to investment projects submitted for approval to the Investment Commission Completed (Commission des Investissements) has been issued by the Head of Government on January 16, 2015. The National Business Environment Committee (Comité National de l’Environnement des Affaires) has approved on December 17, 2013, its annual Completed reform program for 2014 in accordance with Decree No. 2-10-259 dated October 29, 2010. Decree No 2-14-652 for the implementation of the Law No 104-12 of June 30, 2014 relating to the freedom of prices and competition, which, inter alia, reinforces the powers of the Competition Council (Conseil de la Concurrence), was Completed issued by the Head of Government on December 1, 2014 and published in the National Gazette No. 6314 dated December 4, 2014. 2.2 Major Factors Affecting Implementation Alignment with the Government’s program helped secure sound government commitment to the policy reforms supported by the operations. The timing of the preparation of ECSP 1 coincided with proactive measures, such as the constitutional referendum of 2011, taken by the Government in response to the February 20th demonstrations. The adoption of the new constitution and the election of a new coalition government resulted in a commitment from the Government to implement an ambitious serious of institutional and economic reforms that were included in its 2012-2016 government strategy, which included economic development and job creation components. These components consisted in the aforementioned sectoral strategies 3 , consisting mainly of tax incentives to specific sectors, combined with dedicated infrastructure investments. 3 Pacte National pour l’Emergence Industrielle, which was modified and renamed Industrial Acceleration Plan, Maroc Export Plus, Plan Maroc Vert, Plan Halieutis, Vision 2015 for Handicrafts 13 In the investment climate and economic governance areas, the Government was pursuing an ambitious plan to simplify regulations and increase predictability and consistency in the way rules are enforced. Among others, the Government was undertaking a comprehensive overhaul of the existing tax and legal framework supporting investment and strengthening the institutional framework for competition policy. In this respect, the new Competition Law approved by the Parliament in March 2014 benefitted from EU support (twinning with Germany) and integrated the Organization for Economic Cooperation and Development (OECD) principles on best competition regulation practice. In the investment climate area, the Government was pursuing an ambitious plan to simplify regulations and increase predictability and consistency in the way rules are enforced. These reforms were undertaken under the purview of the public- private National Business Environment Committee (Comité National de l’Environnement des Affaires – CNEA) chaired by the Head of Government. The CNEA was and still is instrumental in prioritizing the investment climate reform agenda and improving Morocco’s score in the annual Doing Business survey. In the trade policy area, Morocco had been pursuing its integration into the world economy while adopting a regulatory framework aimed at better protecting national production from unfair practices. The Government completed in 2012 a 4-year tariff reduction schedule to lower the tariff differential between the common tariff (MFN) and the preferential tariffs and to harmonize the tariff structure by lowering the number of MFN tariff bands to four (2.5 percent; 10 percent; 17.5 percent and 25 percent). The authorities also launched an ambitious legal reform agenda aimed at progressively aligning their legal and institutional framework of foreign trade and consumer protection on the new international trade rules. The soundness of analytical work and technical assistance provided to different ministries enhanced the design of the operation. As mentioned earlier in the document, World Bank assistance under all three policy areas was a success factor that contributed to the selection of the policy areas and key reforms therein. The first program pillar related to improving the investment climate was heavily influenced by prior ICAs and technical notes and World Bank and IFC technical assistance in the implementation of reforms such as the suppression of minimum capital requirements for LLCs (SARLs) helped in the attainment of indicators. The second and third pillars were also informed by conclusions from the 2006 CEM and MENA regional flagship reports citing the need for Morocco to engage in trade liberalization and enhanced economic governance. The third pillar benefitted from the technical assistance of the World bank to establish the CNEA and support its action plans, as well as assistance to the AMDI as secretariat of the National Investment Commission. See Annex 3 for more details. The role of the CNEA as the main coordinating body for business environment reforms was key to the successful implementation of several actions supported by the Program. The success of various sector-strategies largely depended on the ability of GoM to coordinate, implement and evaluate policies at various levels and through various agencies, which had proven to be especially difficult in the past when strong inter-agency coordination was required. In this respect, CNEA’s creation and subsequent role as a coordinator of business environment reforms implemented by concerned ministries with private sector involvement was a key success factor to the achievements of the ECSP Series. The CNEA played a strong role in the acceleration of reform implementation, which resulted in Morocco being the top reformer globally in the Doing Business 2012 and continuing to progress and gaining 29 places in the Doing Business ranking from 2013 to 2017. As an example, the CNEA was a central player for in establishing the Common Business Identifier (CBI), a reform supported by the ECSP series, whose process started in 2008 and lagged for years until it was included in the CNEA annual action plan in 2013. The CBI reform necessitated the coordination of several ministries and agencies, such as the Tax Authority (DGI), the Ministry of Finance, the Social Security Administration (CNSS), and the Intellectual Property Office (OMPIC). The CNEA was also instrumental in ensuring that 14 reforms aimed at simplifying administrative procedures for businesses and modernizing the commercial code and corporate law were duly implemented. The same goes for other business environment reforms under the ECSP Series. In spite of these successes, the coordination of the business environment reforms supported by the ECSP Series was somewhat lessened by the relocation of the CNEA team, between ECSP 1 and 2, from the MAGG Ministry to the Head of Government offices. While this transfer reflected increased momentum for the CNEA, it also blurred somewhat the ownership of the monitoring of the reforms supported by the ECSP program, that remained anchored in the MAGG Ministry. The strong implication of the private sector in reform preparation also helped pave the way for key results under all three pillars. CGEM and the Association of Moroccan Banks (GBPM) are active members of the CNEA. Representatives of their various chapters have participated heavily in the working groups established under the auspices of the CNEA to prepare and implement key business environment and trade reforms such as the Common Business Identifier, the law on payment delays, the law on LLCs, improving safety and hygiene standards for local producers and importers and the implementation of Portnet. All ministries and agencies involved in the implementation of these reforms applauded the private sector’s involvement in the details of each reform. Going beyond a mere support of the government reform programs, the CGEM also implemented its own reform initiatives, such as putting in place a “good payer” charter signed by multiple private sector companies that committed to paying invoices on time. At the same time, CGEM’s involvement in the identification and preparation of reforms supported by the CNEA and the ECSP series faced the challenge of mobilizing available private sector experts to support a process that was time consuming and required a high level of technical expertise. The modification of the commercial code aimed at reducing payment delays between companies needed several iterations following complaints by private sector companies on the feasibility of proposed reform. In this instance, the CGEM’s continuous involvement resulted in a legal amendment in September 2016 that called for the inclusion of government contracts in the scope of the law as well as additional provisions to further protect SMEs. The ECSP series design was informed by the broad lessons learned from other operations in Morocco as well as from similar reforms conducted in other countries. The design of the ECSP program was informed by lessons-learned from previous operations that were implemented under the FY10-13 Country Partnership Strategy. Such best practices include high-level government ownership and integration with government programs; participatory approaches; effective technical assistance (TA); and well-specified, operationally integrated, and regularly monitored outcome indicators. In addition, although significant sector advancements were made through single-sector DPLs, the FY10-13 CPS completion report pointed out the importance of supporting more ambitious second-generation reforms with cross-sectoral dimensions while continuing to focus on service provision, strengthening coordination to achieve tangible results, and enhancing citizen participation. The design of the series was also informed from similar business environment reforms undertaken in other countries, in particular with respect to reforms measured by the Doing Business, which were benefitted from a study tour of the CNEA’s team as well as regular participation to the public Private Dialogue Forum that gather annually several reforming countries following a similar reform approach. Donors involved in the competitiveness agenda were also consulted with respect to several actions included in the ECSP Loan Series. Donor coordination is also playing an important role in the success of lending operations, since it helps inter alia mitigating the reputational risk of some types of reforms. Accordingly, the ECSP Program was prepared in close coordination with 15 the EU, the main partner and TA provider active in the area competitiveness in Morocco.4 The Morocco Economic Competitiveness program of the United States Agency for International Development (USAID), supported the Moroccan Government’s policy to improve investment climate reforms in several respects, notably the development of the CBI that was a prior action of the loan series. The OECD was also consulted during the project preparation of ECSP I with respect to the findings of its report on the investment climate in Morocco, which offers specific recommendations on how the policy, institutional and legal framework can be improved to enhance the business climate. This report notably confirmed that the focus on economic governance issues, policy coordination failures, access to information and investment climate reforms is a priority to improve competitiveness in Morocco. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design: The objectives of the ECSP loan program were clearly specified, appropriately broken down by pillar and outcome area and adequately backed by strong World Bank analytics and technical assistance. The selection of prior actions and indicative triggers was appropriate and was based on extensive consultations with the Ministry of General Affairs and Governance, the Ministry of Economy and Finance and the Ministry of Industry, Commerce and New Technologies. Given the reform priorities of GoM under its 2012-2016 strategy and the renewed focus on governance and equitable reforms, the selected prior actions for ECSP I were suitable. Some indicative triggers selected for ECSP II, however, had to be modified and adapted to fit with the timetable and advancement of reforms followed by the government (See Section 1.6 for a review of detailed changes). Prior Action related to the new external trade law was dropped given that the World Bank considered the draft law actual impact difficult to assess in absence of implementing regulations at the time of preparation of the program, and overall only marginally relevant to the policy objective centered around trade liberalization. The approval by the Head of Government, also the president of the Investment Commission, of a mandatory guide to implement evaluation of cost-benefits replaced the indicative trigger of ECSP II relating to the adoption of the new Investment Law, which was delayed due to the change in the Government coalition and the launching of the new Plan d’Accélération Industrielle in April 2014 by the new Minister of Industry, Commerce, Investment and the Digital Economy. The draft of the new Investment Law has yet to be approved by the Government. The indicators for ECSP were adequately designed and reflected the expectations of various ministries regarding the results of each prior action for which they were responsible. Indicators were regularly tracked by the ECSP World Bank team through both MAGG and individual ministries. M&E Implementation and sustainability: M&E implementation was based on continuous communication and supervision missions by the Bank. World Bank staff conducted the formal supervision missions for both loans in the series. Monitoring was reinforced given that both TTL and Co-TTLs were based in Rabat, allowing for continuous supervision of the Program’s quantitative and qualitative results with MAGG and individual government counterparts that were responsible for implementing the prior actions of the program. The MAGG department for international cooperation was in charge of coordinating the relatively large number of 4 The EU has had a program in support of the competitiveness agenda in Morocco since 2009 including dedicated technical assistance to key Government agencies. Of particular relevance to the ECSP series, the strengthening of the capacity and powers of the Moroccan Competition Council took place within the framework of a twinning program between German and Moroccan Competition Authorities financed by the EU. 16 Departments and agencies involved in the program. While there was no systematic M&E resource and system in place at MAGG for the collection of data, MAGG assumed the overall coordination role with various interlocutors and systematically sent results of indicators to the World Bank team. The World Bank team ensured the veracity of results by collecting all supporting documentation such as official data, laws and decrees enacted, surveys conducted, etc. The team noted that while the absence of a systematic M&E system across Ministries and agencies involved in economic policies did not affect the ECSP Program, it would nevertheless be useful to allow monitoring with indicators systematically, centrally and transparently the progress of all reform actions affecting the economic environment of Morocco. The CNEA for instance could fulfill this task through adding an M&E framework with indicators to monitor the progress of its economic policy actions. M&E utilization: The data collected during the semi-annual supervision missions for the various indicators was appropriately used to assess the advancement of the program’s various prior actions as well as to inform various WB reports such as Doing Business as well as the trade and competitiveness chapters of the 2017 Country Economic Memorandum. 2.4 Expected Next Phase/Follow-up Operation Morocco’s competitiveness landscape is still suffering from hurdles at various levels, i.e. national, sectoral and territorial, that will require continuous support by the World Bank and other donors. Since the close of the ECSP loan series, the Trade and Competitiveness Global Practice, in partnership with IFC and other GPs such as Transport and ICT, SURR and Agriculture, has built an active advisory portfolio in Morocco that builds on the results of the ECSP DPL series and seeks to further enhance the investment climate, improve trade facilitation and logistics and focus on improving institutional governance that supports the competitiveness of the Moroccan economy. The active advisory services portfolio consists of technical assistance projects aimed at: a) Assisting the CNEA in undertaking a national survey of the private sector in order to identify key obstacles and reform priorities; b) Enhancing the territorial competitiveness and job creation potential in the Casablanca-Settat and Oriental regions of Morocco by (i) supporting the establishment of a structured public private dialogue platform similar to the CNEA (the CREA – Regional Committee for Business Environment), (ii) identifying local constraints to private sector development and designing programs tailored to the specific needs of the region ; (iii) connecting large investment projects with the local contractors and job market. In particular, the projects in the Oriental and Tangier- Tetouan-El Hoceima regions seek to assess the economic impact of the construction of the Tangier and Nador port projects. This work at the subnational level is aligned with the Advanced Regionalization strategy of Morocco, that is granting more autonomy to regional level governments; c) Improving logistics regulatory reform by supporting the Moroccan Logistics Agency (AMDL) in the drafting of a logistics law; d) Improving trade policy through the implementation of a trade portal that centralizes all regulations relating to import and exports in one common platform; e) Improving private sector provision of skills by working in key sectors of the Moroccan economy (tourism and logistics). 17 In parallel, three new loan operations are currently under preparation. These focus on 1) improving the competitiveness of the agribusiness sector and 2) supporting the creation of economic opportunities for youth by working on demand and supply side factors for more and better jobs for disadvantaged youth and 3) improving the competitiveness of the city of Casablanca. These operations are expected to materialize in FY18 and will be supported by downstream advisory support to relevant authorities. Further, a review of the Moroccan’s experience in developing and implementing its industrial strategy, has only recently begun in partnership with the Ministry of Industry, Commerce and Investment. Morocco embarked on a decentralization strategy (“régionalisation avancée”) which transferred responsibilities of economic development and job creation to the subnational level. For the first time in 2015, regional elections were held and 12 heads of regions appointed, with a first mission being to prepare regional development strategies (“Plans de Développement Régionaux”) aiming at promoting local socio-economic development. This new context, allowing a more territorialized approach to addressing development challenges, provides the opportunity for changing the way youth employment, job creation and economic development are tackled. The local institutional system has yet to be adjusted within the new regionalization framework, as existing governments departments and agencies have to share or transfer responsibilities to the newly elected executives of the regions and its own implementing agency, the Regional Agency for project Implementation (Agence Régionale d’Execution de Projet - AREP). Various institutions operating at the regional level could benefit from improved collaboration in order to improve the business climate and improve the attractiveness of the region. Strengthening the relationship between national and sub-national authorities, and implementing a bottom-up approach to identify and address the constraints facing specific sectors and economic clusters will be key to alleviate the challenge posed by the youth bulge and corresponding pressure on the job market. To this end, it will be crucial to understand the socio- economic landscape of each region, and assess properly the potential for job creation and business development in existing or new sectors. Given GoM’s strategic orientation towards decentralized reform, the outcomes of the various technical assistance programs implemented by the Bank at the regional and local levels could potentially inform the design of a support operation covering economy-wide business environment reforms as well as sub-national competitiveness reforms. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Substantial Overall Relevance Relevance of Objectives Rating: High The objectives, design and implementation of the ECSP DPL series were relevant to GoM’s development priorities and the Bank’s priorities as expressed in both CAS for FY10-FY13 and CPS for FY14-FY17 and remain highly relevant today. As described in the rationale for Bank assistance and sector contexts earlier in the document, the DPL series was timely and appropriate given the Government’s macro-level and numerous sector strategies and its strategic positioning to increase exports. The objectives, outcome areas and design still apply today, as the GoM still places the competitiveness agenda as a priority at both the national and regional levels. Further, the success of the various ongoing Government sectoral plans hinges upon a strong 18 investment climate and a liberalized trade regime underpinned by robust economic governance arrangements. This is evidenced by the fact that Morocco is struggling to increase its export volume and improve the level of sophistication of its exports despite its positive growth in the technological content of new exports supported under the Industrial Acceleration Plan (PAI). In addition, as mentioned previously in the document, the ECSP Program fit under the FY10-FY 13 CPS pillar “Enhancing growth, competitiveness and employment” and of the CPS FY14-17 pillar, which aim at Promoting Competitive and Inclusive Growth; and Strengthening Governance and Institutions for Improved Service Delivery to All Citizens. Relevance of Design Rating: Substantial Several actions supported by the ECSP program aimed at supporting the modernization of key pieces of legislations, notably the law of corporations, the trade legal framework and the competition legal framework. Other actions A strong analytical base complemented by technical assistance in the competitiveness arena allowed the ECSP Program to remain relevant throughout implementation. As described above and as outlined in detail in Annex 2, the design of the loan series was supported by numerous analytical pieces and technical assistance in each of the three policy areas. The continued relevance of the objectives is further demonstrated by the current active World Bank group technical assistance portfolio in the trade and competitiveness space, focusing on a) further enhancing the trade and logistics policy regime by working on a draft logistics law and a trade portal that harmonizes all procedures to import and export in one single portal b) working on improving the investment climate with CNEA c) working at the regional/sub-national level to help enhance private sector competitiveness through business environment reforms and institutional strengthening. This technical assistance portfolio is complemented by the preparation of two lending operations focused on supporting the agro-industry strategy supporting Plan Maroc Vert and improving access to economic opportunities for youth. During the appraisal mission December 2014, the design of the ECSP II loan was adjusted to accommodate the actual competitiveness landscape in Morocco, without affecting the envisioned results of the program. It was agreed to drop the adoption of the new Law on external trade modifying the Law No 13-89 dated November 9, 1992, as the adoption of the draft law on external trade had been postponed by authorities and the lack of draft implementing decrees could not allow a full assessment of its potential value-added regarding aspects that justified its inclusion in the program. Both the government and the Bank team agreed at the time that this action was not an essential component of the program and its impact would be modest given Morocco’s international and bilateral trade obligations. In addition, the Bank team worked with authorities on identifying the appropriate prior action to strengthen transparency on the costs and benefits of investment incentives, per the program's objective. In light of the latest draft of the investment law shared by the authorities in December 2014, and delays in its adoption, it was agreed to retain a new prior action focusing on establishing a systematic process of assessing costs and benefits of investment projects benefitting from incentives approved by the Inter- ministerial Investment Commission. This change of action does not impact the initially envisioned results for the program, which still aims at improving transparency in the way incentives are granted to investment projects. Relevance of Implementation 19 Rating: Substantial The Bank’s latest Country Economic Memorandum (CEM) for Morocco, published in June 2017, identifies competitiveness and inclusive growth as a key challenges for Morocco. The CEM focused on the human capital, in particular the issue of education, as well as on improving decentralization, governance and administration/public services management. One of the main thrusts of the report was to focus on the need to do development differently, particularly in the approach to the design, implementation and monitoring of public policies, which requires a more integrated approach between the public and private sectors. In this respect, the CNEA and reforms such as the CBI represent important steps in that direction. The CEM also emphasizes that promoting private sector development in Morocco requires policies to enhance productivity, encourage innovation, and ensure an enabling doing business environment. The report’s recommendations were to encourage a closer collaboration between the private sector and the government to tackle key bottlenecks and foresee a more ambitious future for the sector’s development. 3.2 Achievement of Program Development Objectives Rating: Moderately satisfactory In many respects, GoM effectively laid the groundwork through the passing of robust laws, regulatory simplifications and operational processes that set the stage for a significant improvement in the country’s business enabling environment, trade liberalization and economic governance regimes as explained in more detail below. Successful reforms include, for instance, the creation of the CBI, the modification of the Corporation law, the development of Portnet, the implementation of robust trade laws and the strengthening of the CNEA. However, the outcomes relating to the reduction of payment delays and the actual implementation of the new powers conferred to the Competition Council under the new legal framework have yet to be met. On payment delays, there is a strong government and private sector will to continue addressing this issue that is not unique to Morocco. The reform aiming a reducing anti-competitive behavior was considered an important element of the ECSP Series and slow progress on the front of the competition policy has contributed to an overall moderately satisfactory rating for the ECSP DPL series. A detailed analysis of the results under each policy area is below. Rating by Policy Area: Policy Area 1: Improving the Investment Climate Rating: Substantial The ECSP program was overall highly successful in supporting key reforms for modernizing and simplifying the investment climate. The four areas of intervention under this policy area are (i) enhancing e-governance for regulatory and administrative simplification (ii) simplifying administrative procedures and improving transparency (iii) reducing the financial burden of SMEs resulting from excessive payment delays; and (iv) modernizing the regulatory environment for corporations and reducing barriers to entry and operations for SMEs. An important reform supported by the ECSP was the implementation of the Common Business Identifier (CBI) that increased transparency and facilitated access to firm-level information by concerned administrations and non-governmental users. The ECSP program 20 supported the setting up of a common identifier for businesses, notably through the appointment of the Tax Administration as the agency in charge of hosting, managing and operating the database centralizing the common business identification codes. Prior to ECSP, this action had been delayed pending the creation by decree of an Inter-Ministerial Committee in charge of overseeing the management and implementation of the CBI. The implementation of CBI has increased transparency and facilitated access to firm-level information by concerned administrations and non-governmental users. The online identifier delivery system was launched by the Head of Government in 2014 and since March 2015, a CBI is automatically delivered to any new business. Further, in July 2016, government made it compulsory for firms and regulated professionals to use the CBI on invoices and tax declaration documents, improving tax compliance enforcement as different agencies will be able to share between themselves easily updated firm-level information. The implementation of this reform has already started to demonstrate positive spillover effects, as described in the Lessons Learned section. Following implementation of the CBI, the Regional Center of Investment for the Region of Casablanca- Settat requested the Bank to undertake an in-depth survey and assessment of enterprises created during the past ten years in the region, through interconnecting the databases of the Social Security, the Tax Department and the Commercial registry (OMPIC); the survey is ongoing and will be finalized in September 2017. The ECSP supported Government policies that increased transparency on formalities applicable to businesses and reduced the administrative burden of selected procedures. The Government had launched an ambitious transcription and simplification of administrative procedures that resulted in the establishment of a national portal describing more than 700 hundred procedures, mostly applicable to citizens. These procedures are often not detailed enough or not up-to-date, and most do not include a downloadable form. The main objective of the ECSP was to pilot a new approach that would focus on establishing common quality standards in the way procedures are presented, hence improving transparency, readability and predictability for enterprises. To this end, a first batch of 20 procedures, followed by a second batch of 20 procedures applicable to businesses were selected as pilots for a new approach, that represented various degrees of priority and complexity, some already included in the national portal while others were new.5 Eventually, the level of information was improved and simplifications were applied to around 50 procedures following common quality standards developed beforehand. The effect of the standardization and simplification on businesses has yet to be measured as it takes time, communication and training for procedure change to be utilized. The indicator relating the simplification of the procedure relating to the transfer of immoveable property was met according to the Doing Business data surveys. The MFPMA is about to start an awareness campaign and is in the process of redesigning the whole “service-public.ma” portal. Following recommendations made during supervision to ensure harmonization of information on procedures for end-users, the MFPMA will integrate in the national portal a set of regional websites describing with a high level of detail a set of key procedures, developed by the CRI of Casablanca region with assistance from the CNEA, GIZ and CNUCED. The outcome relative to reforms aimed at improving transparency and reducing payment delays has yet to be felt, in spite of strong level of commitment by both the Government and the private sector. The Code of Commerce was modified to impose limits in payment delays in commercial contracts and provide mandatory penalties in case of late payment. In addition, 5 These procedures apply to creating a business, operating a business (registering with social security, paying taxes, registering intellectual property rights, transferring corporate headquarters, etc.), transferring property and trading across borders (customs procedure). 21 businesses with audited accounts were mandated to produce and publish statistics on their average payment delays in their certified accounts. The outcome of these actions is measured by two indicators: 1) a reduction by at least 10 per cent in average payment delay in sectors where average payment delay is over 100 days and 2) the number of companies that are reporting in certified accounts their average payment delays as per the new regulations. The latter indicator has been achieved, as certified accountants are reporting that companies are broadly complying with the law and including this information in their financial statements. However, the former indicator measuring actual reduction in payment delays has most likely not been met yet, as the latest report published by the Moroccan Central Bank in June 2017 states that payment delays have not improved since 2010, especially for construction and manufacturing sectors. Payment delays between private operator average 85 days, with higher averages for SMEs (152 days) and MSMEs (232 days), and payment delays in the construction sector averaging 557 days. Fully aware of the importance of reducing payment delays for the development of MSMEs, the government and the private sector represented by CGEM have committed to continue addressing the issue. A recent amendment to the law on payment delays for commercial contracts was recently adopted in September 2016, which expands the scope of the law to include commercial contracts by SOEs, effective January 1, 2018, as well as other measures. Further, the CGEM and the Ministry of Finance have agreed to implement a number of concrete actions to reduce payment delays in public contracts, which is deemed to have in turn a positive indirect impact on the payment to private suppliers, often SMEs. As demonstrated by international experience, the issue of payment delays is complex and cannot be solved merely by modifying the legal framework as it also depends on macroeconomic factors, access to banking credit and business to business lending practices. However, authorities expect that the new measures regarding late payment of SOE and public contracts could start positively impacting payment delays within the next two to three years. The ECSP supported an important modernization of the corporate law, to facilitate SARL company creation and strengthen governance of SA corporations. The reform of the SA corporations law facilitated the disclosure and e-filing of accounts, strengthened the regime of prior disclosure and approval of related party transactions, making it mandatory for listed firms to establish an audit committee, improved the level of disclosure of companies to their shareholders in case of merger and acquisition, and limited the purchase by a SA of its own shares. This ambitious legal change is in line with recommended international best practices and resulted in an improvement in Morocco’s ranking in the Protecting Minority Investors by 31 slots in the Doing Business 2017 published in October 2016 (87th place in DB 2017 vs 118th place in DB 2016). While it is not possible to measure its concrete impact on investment and business expansion at this stage, it is expected that increasing the transparency and disclosure in SA corporations will in the long term prove positive for reenergizing equity investment for listed companies in the Casablanca Stock Exchange. Further, creation of a company was facilitated following the suppression of the legally-binding minimum capital requirements that existed for creating a SARL. While it is difficult to attribute the increase in creation of companies in Morocco to this mere legal change, it is worth noting that the SARL corporate form, in particular with a single partner, has continued to strive as the main corporate vehicle for entrepreneurs. Policy Area 2: Furthering Trade Policy Reform and Trade Facilitation Rating: High The three areas of intervention under this policy area are (i) harmonizing trade policy by reducing distortions in tariff structure (ii) modernizing the legal and institutional framework of foreign trade and consumer protection and (iii) streamlining trade logistics at the ports of entry. 22 ECSP successfully implemented a rationalization of the import tariff structure through a program to reduce most-favored nation (MFN) tariffs and the number of tariff bands for industrial goods. The government implemented, in 2009 and 2012, a program to decrease tariffs for most favored nation (MFN) and the number of tariffs brackets for industrial commodity. This prior action was set under PACE I, which targeted a 25% decrease of the maximal tariff quota applicable to the industrial products in 2012. The decrease of the maximal tariff quota applicable to the industrial products was effectively implemented and is still applied. As for any tariff reduction, measuring with accuracy the economic outcome of this change is not possible due to the number of factors that can impact the level of imports. However, this change is in line with best international practices and is considered a key element for a long term integration of the Moroccan private sector in global value chains. The Government adopted a series of legal and regulatory changes supported by the ECSP, which transcribed international standards into the national legal framework and enhanced the transparency and predictability of control mechanisms. The Government adopted on May 13, 2013 the implementing regulations relating to the safety of products and services. These regulations apply to domestic products as well as to imported products. Safety standards help bring Morocco’s legal and regulatory framework into line with international practices and foster better integration of the Moroccan private sector into international trade. The Department of Commerce reported on the track record of the control of industrial products importation for the year 2014: 100,304 importation files were processed and 224 products destroyed or rejected according to new rules and procedures. Accordingly, the objective for the conformity of 95% of controlled products under the new standards defined by the ECSP indicator is achieved. In addition, the Government’s adoption of the decree regulating anti-dumping, anti-subsidy and safeguard measures strengthened transparency and predictability measures of the legal framework for trade defense, which aimed at strengthening the tools to protect the Moroccan market from dumping and other non-competitive or illegal practices, while ensuring compliance with WTO rules. In accordance with this decree, the investigations and the decisions of trade defense are carried out in accordance with domestic regulations that comply with the rules and procedures of the WTO. The various stages of the investigation procedures are systematically published, and the Department of Commerce publishes regularly in its website the most recent opinions, investigations reports and results of the antidumping and safeguard measures. Therefore, the indicator measuring the first impacts of this measure is also considered attained. The state-owned company Portnet has put in place a computerized data exchange system for port operations which successfully reduced the administrative burden and increased transparency for importers and exporters. This system allows the electronic management of import documents through the interconnection of key public authorities and private trade operators involved in external trade procedures (Customs, traders, banks, Commerce Department, Foreign Exchange Office). Under the ECSP I, the company Portnet was established in January 2012 by concerned public authorities and private trade operators in order to develop and manage the computerized data exchange system for port operations. Following the computerization of the data exchanges for the port landing phase, the ECSP II supported the interconnection of main public and private operators involved in port procedures in order to allow the electronic management of import documents. This system facilitates the procedures, accelerates the international importing and exporting operations and improves the maturity of the supply chain. The indicator aimed at measuring the decrease of the time to import to less than an average seven (7) days in the Casablanca Port by the end of 2015. The most recent data communicated by PORNET estimates the average stay time of a container in the port to be 6.12 days. Interviews with officials and private operators also led the mission to ascertain that the automation of trade operations may have also contributed to a reduction in discretion and corruption in port operations. 23 Policy Area 3: Improving Economic Governance Rating: Moderate This policy area consisted of three areas of intervention, namely, (i) increasing transparency and effectiveness of the Government’s interventions in support of investment and selected sectors; (ii) improving the public-private coordination for the monitoring and implementation of business environment reforms; and, (iii) strengthening the institutional framework for competition policy. Under the first area, the ECSP supported an improvement in the assessment of the impact of tax exemption and financial support granted by the National Commission for Investments to investment projects. Under ECSP I, the Head of Government issued a Circular clarifying the conditions according to which the AMDI, as secretariat of the Investment Commission (CI) shall undertake assessments of investment projects with the assistance of concerned ministerial departments and public bodies, and prepare an annual report on investment agreements. AMDI’s capacity to evaluate investments was reinforced with the preparation of an operational cost-benefits assessment manual with World Bank assistance. The assessment compares the incentives (grants and tax relief) to the expected economic impact (job creation, spillover effects, etc.). The approval of this common methodology for applying ex ante cost benefit assessments to incentives allowed a more effective implementation of the Government subsidized interventions as all projects submitted to the CI in 2015 and 2016 were accompanied by an ex ante cost benefit assessment that allowed the CI members (Head of government and ministers) to better assess the impact and relevance of projects applying for incentives. AMDI published a first report on cost and benefits of incentives to investment projects at the end of 2014, which analyzed all investment agreements covering the period 1996-2014. This first analysis allowed AMDI to obtain baseline figures prior to proceeding with the annual reports as per the requirements of the government circular number 22/2012. During the completion mission, AMDI shared with the World Bank costs and benefits of projects submitted in 2015 and 2016 (confidential). The report covering 2015 and 2016 is to be approved during the next meeting of the Investment Commission to be held in the coming months. The delay in its approval results from a government vacancy that lasted for five months after the legislative elections of October 2016. The outcome related to this sub-policy area is considered achieved, given that AMDI has officially communicated to the World Bank that the 2015 report is finalized and awaiting formal validation during the next CI. The establishment of an effective public-private policy dialogue and better coordination of reforms is fully met following the strengthening of the CNEA and its effective impact on the reforms it coordinates and monitors. Under ECSP I, the MAGG established formally a dedicated unit in charge of coordinating investment climate reforms and acting as the secretariat of the CNEA. Supported by a strong dedicated team, the CNEA was able to significantly improve inter-ministerial coordination and speed-up the implementation of business environment reforms. The CNEA has played an important role in coordinating and monitoring the implementation of complex reforms to improve the business climate, whether through reform of business law, simplification of procedures, or the development of e-government solutions. It continues to meet annually under the chairmanship of the Head of Government to discuss and approve its annual reform program. The CNEA has contributed to improved transparency on the reforms as it developed a website that includes its annual action plans, results to date, seminars, etc. (www.cnea.ma). The CNEA was instrumental in Morocco’s progress as registered in the Doing Business. In particular, it played a key role in ensuring the coordination and implementation of at least six business environment reforms taken into account by the Doing Business annual reports dating from 2013 to 2015, surpassing the initial target of four reforms for the ECSP indicator 24 during this period. The outcome of the sub-policy area is therefore considered as highly satisfactory. The outcome of the last sub-policy area aimed at ensuring that the Competition Council (CC) had the regulatory powers to investigate and sanction anticompetitive behaviors has not been attained. The ECSP program was supporting a transition of the CC from a mere advisory body to an independent agency with the power to investigate and sanction monopolistic behavior, mergers and collusion to address long lasting entrenched monopolistic situations that exist in Morocco. The legal and regulatory framework supported by the ECSP integrates best practices on regulating competition and it is in line with the new Constitution that provides specifically for the independence of the CC and enlarges its scope of responsibilities. However, these reforms did not allow the CC to play an active anti-trust role yet, as the President and board members of the Competition Council have yet to be nominated. Accordingly, there has been to date no investigations formally finalized by the Competition Council under the new legal and regulatory framework. This has not prevented the Competition Council permanent staff to carry- out internal investigations for complaints it received. To date, twenty investigations have been conducted, with an additional ten still in process. The investigations mostly emanate from the agribusiness, banking, hydrocarbons, insurance, and telecommunications sectors. These evaluations cannot be made public nor any formal decision be taken as long as the new board of the Competition Council is formally appointed. 3.3 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs) Rating: Moderately satisfactory The ECSP DPL series was successful in setting the stage for an improved competitiveness landscape in Morocco focusing on the major policy areas of the program. ECSP policy reforms are supported by robust laws which remain in effect and have set solid foundations for implementation which are strongly supported by the government and stakeholders through follow up actions. Outcome targets in policy areas have been fully achieved or exceeded except in two instances concerning investment climate and economic governance. Current shortcomings are being followed by the Government and expected to be rectified post-project. Achievements are considered to be substantial in improving the investment climate; high in furthering trade policy reform and trade facilitation; and moderate in strengthening economic governance. On balance, achievement of the ECSP Program Development Objective is considered to be moderately satisfactory for the period of the ECSP implementation and on the path for full accomplishment post-project. Further, the high relevance of objectives, design and implementation, and Bank support through the DPL instrument and through strong analytics and technical assistance in the design of the operation contribute to the rating. 3.4 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development The ECSP loan series did not support reforms that were expected to have significant negative distributional impacts. Investment climate and economic governance reforms were expected to generate direct positive effects on productivity and/or employment and unambiguously lead to positive poverty and social outcomes. 25 Policies supported under the ECSP DPL were expected to contribute to reduce gender-based occupation segregation and help remove barriers that still prevent women from working in high productivity sectors. In 2015, women’s economic participation in Morocco stood at 26 percent, among the lowest in the world, and had not changed since 1990. Measures to improve the investment climate, especially through the reduction of barriers for formal business establishment, were expected to directly help address many of the problems experienced by informal firms, the majority of which are owned and managed by women. Measures aimed at facilitating trade and improving economic governance should boost the creation of export- oriented firms and disproportionally benefit women. Indeed, young and exporting firms – in the manufacturing sector alone- hire five times more women than non-exporting firms. In manufacturing, sectors such as garments and wearing apparels are particularly ‘female -friendly’. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) One of the major successes under the ECSP loan series is the institutional strengthening of CNEA, which has been successful in improving the coordination and efficiency in the implementation of business environment reforms. Under the ECSP loan series, CNEA, as a public-private platform, identified, accelerated and sustained investment climate reforms, especially the Common Business Identifier and other Doing Business reforms that have led to the sharp increase in its Doing Business ranking since its creation in 2010. As mentioned in Section 2.2 on key factors affecting implementation, CNEA’s role can be further strengthened through a) giving it decisional authority vis-à-vis reform identification and institutional roadblocks concerning other ministries b) improving coordination with other agencies and entities in charge of business simplification, such as MFMPA, and c) intensifying the linkages with regional investment climate centers (CREA) whose importance will likely increase within the framework of the regionalization strategy. The most significant shortcoming of the ECSP loan series in regards to institutional strengthening concerns the paralysis of the Competition Council for 3 years to effectively execute its new prerogatives, due the lack of appointment of its new members since the enactment of the revised law in 2014. This is especially unfortunate given the robustness of the new law, which is aligned with international best practices, and which many emerging economies are looking to emulate. The fact that the new authority of the Competition Council cannot exercise its prerogative does not fare well, as corruption and an unfair playing field are cited as the major constraints to doing business in Morocco in various firm surveys (Enterprise Survey, Global Competitiveness Index, etc). The nomination of the new government in April 2017 was shortly followed by the nomination of the members of the Constitutional Court. There is hope that the Competition Council will soon have its new members nominated and therefore be able to execute its prerogatives. (c) Other Unintended Outcomes and Impacts (positive or negative) No other unintended outcomes and impacts of the program. 4. Assessment of Risk to Development Outcome Rating: Moderate The risk that the development outcomes achieved within the framework of the ECSP 2 loan series is rated as moderate for the reasons explained below. Overall, it is unlikely that any single risk 26 below will hamper the sustainability of those outcomes already achieved or will block the attainment of those development outcomes that remain to be achieved. Further, the government remains fully committed to the program, justifying an overall risk of moderate. Government commitment to reform: The reform program of the newly formed coalition government of April 2017 places a strong emphasis on improving national competitiveness, through business environment, institutional governance and macro-fiscal reforms, with some reference to trade liberalization measures. The new government program places the greatest priority on improving the business climate and ambitions to place Morocco among the top 50 reformers in the Doing Business ranking by 2021. It seeks to achieve this through further simplifying business procedures, addressing access to land issues, and promoting entrepreneurship and innovation through a cross-cutting focus on SMEs and MSMEs. It has further committed to tax reform by further simplifying procedures, broadening the tax base, combating tax evasion, and enforcing legal payment deadlines by ministries, public institutions and local and regional authorities. The government program also places a renewed focus on increasing transparency and reducing corruption by reinforcing the judiciary and institutional governance. The reinforcement of the powers of the Competition Council is specifically mentioned in the new government program, indicating that the nomination of the members should occur during the post implementation phase of the ECSP DPL series. Further, the government seeks to put in place an evaluation mechanism, under the Head of Government, to follow-up on reports emanating from various institutions and monitor the implementation of their recommendations. On trade and logistics, the government program alludes to increasing the export potential of enterprises through the implementation of fiscal and investment incentives and improving the logistics and transport regime. It also refers to protectionist measures such as national preference that might endanger the achievement of outcomes under Policy Area two related to trade liberalization. On the macro-fiscal side, the government has started to liberalize its exchange rate in June 2017. Sector Strategies and Policies: The new government program commits to improving the efficiency of public policy with a view of improving their performance and ensuring the effectiveness of public investment. This will be done through institutionalizing the evaluation of the management of various sector strategies, notably the industrial acceleration programs. The World Bank is currently in the beginning phases of an evaluation of the industrial policy, in collaboration with the Ministry of Industry and Trade, to determine key learnings of the program and how to refine policies going forward to improve exports and productivity. As mentioned above, the government program reflects a more protectionist stance to trade liberalization to strengthen national production. This substitution of national production for imports could ultimately benefit vested interests at the expense of public interest, notably the final consumer. Institutional Capacity for Implementation and Sustainability: While government commitment to reform is high, sustainability of the monitoring and evaluation of the outcomes achieved in the program remains fragile due to the limited institutional capacity of MAGG to continuously track results under the different policy areas. This risk is being partially mitigated as CNEA has assumed the coordination of the business environment actions of the ECSP DPL series. A more holistic approach, which sustains the actions called for in the program, is required that encompasses the different policy areas such as economic governance and trade liberalization in order to fully capitalize on the results of the program. 5. Assessment of Bank and Borrower Performance 27 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The World Bank’s performance during preparation for both phases of the loan series was satisfactory. The design of the operation was underpinned by a strong analytical base as well as technical assistance to support the achievement of key prior actions. The Bank team closely ensured that the key policy areas were in line with the Government’s program and with the CPS and ensured that outcome areas, such as economic governance that went beyond the traditional business environment reforms were taken into consideration. The Bank team also ensured complementarity with other Bank operations that were under preparation at the time, such as the Second Skills and Employment DPL, The First Capital Market and SME Finance DPL and the Accountability and Transparency (Hakama) DPL. The design choice of a series of single tranche DPLs governed by triggers for the second operation allowed for flexibility in achieving programmatic objectives. The Bank team clearly identified and appropriately rated the risks to achieving the PDO, which are still relevant today. Finally, the ECSP series design was informed by lessons learned from other operations in Morocco that were encapsulated in the FY10-13 CPS. During preparation, the Bank team also ensured close coordination with donors who were consulted with respect to the design of the operation. For instance, the operation was linked to USAID’s Morocco Economic Competitiveness program, which embedded a strong component of investment climate reform, notably the development of the common business identifier. The Organization for Economic Cooperation and Development’s investment climate report on Morocco further helped in the selection of key outcome areas to develop in the operation, especially those related to economic governance. Further, program preparation was aligned with the overall objectives and supported the activities of the European Union, especially those related to the strengthening of the Competition Council, which was supported by a EU-funded twinning agreement with the German Competition Council, and the EU Advanced Status program that was under preparation at the time of program design. The IMF was also strongly involved in program design, as IMF staff participated in Bank project reviews and the analytical work at the time that was conducted by the IMF on the macro-economic informed the design of the operation. (b) Quality of Supervision Rating: Satisfactory During the ICR mission of April 2017, implementing agencies were pleased with the Bank’s performance during implementation and the ease of access to Bank staff. The World Bank’s performance during implementation of the operation was satisfactory. Both TTL and Co-TTL of the operation were based in-country during the entire duration of the loan series, allowing for close monitoring and frequent contact with the Government and entities responsible for each of the outcome areas. The Bank team openly reported on progress of the operation in semi-annual supervision documents and in detailed aide-memories addressed to the Government, with a clear focus on development impact. The Bank team’s close interaction with government counterparts enabled the identification of policy areas, such as business environment and trade facilitation and logistics, for which the Bank designed downstream technical assistance programs. Further, the Bank was able to proactively identify and address program performance issues with relevant authorities. While the World Bank was proactive addressing such problem areas with the highest levels of government, especially the one specific to the nomination of the members of the competition council, reasons beyond the influencing power of the Bank led to the nonfulfillment of this indicator. 28 (c) Justification of Rating for Overall Bank Performance Ratings: With a Satisfactory rating for both quality at entry and quality of supervision, the overall World Bank performance is rated as Satisfactory in accordance with the Independent Evaluation Group’s harmonized rating criteria. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory Government commitment and ownership to the policy areas under the ECSP loan series was strong during the design of the loan series, and momentum for reform was maintained throughout implementation of the program. Given the constitutional referendum of 2011, the government placed a strong focus on implementing the reforms called for in the above-referenced 2012-2016 government strategy that included strong dimensions of economic development and job creation. The major exception to this relates to the reduction of payment delays and the operationalization of the competition council, which affects the government performance rating. During the design of the program, and especially during ECSP I, multiple ministries, public agencies and the private sector represented by CGEM, were consulted with respect to the quality of the proposed legislative reform and regulations. Public-private consultations coordinated by CNEA helped improve the dialogue during both preparation and implementation. Beyond business environment reforms, the Competition Council played a key role in organizing consultations to prepare the law that served as a prior action to ECSP I. Further, all new laws and regulations are required to be published on the website of the Secretary General of Government for a minimum of two weeks for public consultation. This was the case of the law competition law and all of the laws in the ECSP loan series that are within the bounds of the trade agreements such as the Morocco – US FTA and the Deep and Comprehensive FTA with the EU. During implementation, the Government stakeholders involved in the operation were highly supportive during all supervision missions and consistently provided feedback, data, and supporting documentation necessary to assess the program’s progress. The government’s fiduciary performance was highly satisfactory, as financial management, governance and compliance with the covenants experienced no shortcomings and the loan tranches were disbursed as foreseen. Shortcomings in the Government’s performance relate to project management arrangements, with neither a formal project management unit set-up for the loan series nor a systematic M&E system in place at MAGG for the collection of data and for the proactive identification of program shortcomings and implementation issues. Given that the implementing agency is indistinguishable from the government for the ECSP loan series, there is only one program performance rating in this section. Policy actions were implemented by several ministries, coordinated by MAGG, but they are not evaluated in connection with the reform program supported by the Bank. 6. Lessons Learned The following lessons have been learned from the implementation of the ECSP DPL loan series and should be taken into consideration when designing future lending operations with a competitiveness dimension: 29 The DPL loan series should be accompanied by downstream technical assistance to increase development impact. The upstream phase of the loan series consisted of strong Bank technical assistance for several key prior actions, notably those related to increasing the institutional and coordinating capacities of CNEA, designing legal reforms of the corporate laws, and developing a methodology and a guide for assessing cost and benefits of investment decisions by the National Investment Commission. As previously mentioned, downstream support in achieving the program indicators should also be envisioned in the future to help maximize the impact of the program. Within the framework of the CSP loan series, advisory support was provided to CNEA from IFC/ World Bank to help in the achievement of a number of key business environment reforms that improved Morocco’s score. Further, for future operations in the competitiveness space, the Government could consider reinforcing the impact potential of policy lending with requests for downstream trust-funded technical assistance, as implementing successful reforms is contingent upon reinforcing the capacity of implementing ministries and agencies, who are not the recipient of funds in development policy operations. The satisfactory involvement of the private sector proved to be a key factor in delivering strong reforms. During the April 2017 ICR mission, the private sector was satisfied with their collaboration with the Government on the implementation of business environment reforms, especially those related to the Common Business Identifier, the revised law on payment delays, and the suppression of minimum capital requirements for limited liability companies. CNEA has also gone beyond just involving the private sector in the implementation phase, but has now started involving the private sector in the identification phase of reforms to undertake. Going forward, the World Bank should ensure that private sector is involved in defining prior actions and reform areas with the government. Strong ownership, coupled with robust coordinating body at the implementing agency level, needs to be a prerequisite for loan disbursement. In the case of the ECSP loan series, the implementation agency was not responsible for driving the key reforms of the program. This created a somewhat dispersed program, involving multiple ministries, without one that fully owns the program and that lacks the necessary human and material resources to ensure its effective implementation and proactive monitoring. Going forward, CNEA should be considered as the implementing agency in charge of cross-cutting competitiveness topics, considering its specific role for business environment reforms and its mandate as coordinator of reforms across multiple ministries in the competitiveness space. Also, loan operations should focus on a limited number of issues in the competitiveness and private sector development realms to avoid such disparity and to ensure strong ownership. Continued coordination among ministries and a reinforced dialogue at the national-regional level is key for the competitiveness agenda going forward. The World Bank was able to act as a catalyst to harness a strong coordination of business environment reforms through providing upstream and downstream technical support to CNEA. The World Bank should continue to push for inter-ministerial coordination beyond the realm of business environment and push for inclusion of other competitiveness topic areas within the framework of a robust inter-ministerial dialogue. Further, going forward, coordination and collaboration needs to also occur at the national-regional level, in light of the new advanced decentralization program that is a key priority area of the new Government program. The World Bank and IFC have already begun working with the government to support regional and city-level competitiveness, through both technical assistance and a loan program under preparation. The World Bank should leverage the learnings of this new work to potentially inform a future competitiveness program focusing on regions. 30 The implementation of a monitoring and evaluation system is key to determine the efficacy of reforms beyond the ICR. A strong monitoring and evaluation system is key to track program results in a timely manner, proactively identify issues with program performance and continue tracking results beyond the life of the program. The limited resources dedicated to M&E for this program resulted in Bank-driven data-collection efforts at the request of the Bank team conducting supervision missions. Alignment with donors proved to be a strong asset of program design. As detailed above, the design of the loan program took into consideration the ongoing operations of other donor’s such as the EU with regards to the Advanced Status Program, USAID’s competitiveness and business environment program, OECD on the economic governance and investment climate pillars and the IMF the macro-economic front. This alignment on key reform areas that the Government needed to tackle served as strong leverage for the delivery of results, notably in the Pillars I and II of the program. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies N/A (b) Cofinanciers The project had no cofinanciers. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 31 Annex 1: Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending Jean Francois Arvis Lead Economist GTCTC Najy Benhassine Practice Manager GTCME Sanaa Bouchikhi Program Assistant MNCMA Jean-Pierre Christophe Lead Economist GMF05 Chauffour Jean-Charles Marie De Daruvar Senior Counsel LEGAM Philippe De Meneval Program Leader MNC01 Hassine Hedda Senior Finance Officer WFALA Mariem Malouche Senior Economist GTC05 Stefano Paternostro Practice Manager GSP07 MNSRE - Youssef Saadani Consultant HIS Youssef Saadani Hassani Consultant GMF05 Steve W. Wan Yan Lun Operations Analyst GFM05 Supervision Philippe de Meneval TTL and Program Leader MNC01 Jean Pierre Chauffour Co-TTL and Lead Country Economist GMF05 Completion Philippe de Meneval TTL and Program Leader MNC01 Zineb Benkirane Sr Private Sector Specialist GTME Henri Gannat Consultant GTC05 Abdurrahman Bashir Karwa Program Assistant MNC01 32 (b) Staff Time and Cost 33 Annex 2: ECSP Results Matrix Prior Actions Prior Actions Expected Results Results (ECSP I) (ECSP II) PILLAR 1 : IMPROVING INVESTMENT CLIMATE 1. The Inter-ministerial Committee in D1. The database delivering the common Outcome: Increasing transparency and facilitating charge of Managing the Common identification codes for businesses in access to firm-level information by concerned Business Entity Identifier has appointed accordance with Decree No 2-11-63 administrations and non-governmental users. Indicator: the Tax Administration to be in charge of published in the National Gazette No Achieved hosting, managing and operating the 5952 of June 16, 2011 is operational and Indicator: Number of newly created corporations database centralizing the common the first common business identifiers identified through a unique business identification Total of companies identified business identification codes in (Identifiants Commun de l’Entreprise) code through an ICE in April accordance with Decree No 2-11-63. have been issued. Baseline: 0 in 2013 2017:507,698 including 133 530 Target: all SA/SARL created after January 2015 SA/SARL created after January Source: Tax Department 2015 (source DGI and MAGG) 34 2. The National Business Environment D2. At least twenty (20) administrative Outcome: Reducing the administrative burden on Committee (Comité National de procedures applicable to business were businesses and improve transparency on applicable l’Environnement des Affaires - CNEA) has simplified and standardized on the formalities. approved a priority list of at least 20 official government website (service- administrative procedures for businesses public.ma), notably for the transfer of Indicator 1: Number of simplifications and Indicator 1: that will be simplified and standardized. property. A supplementary list of at least standardizations of administrative procedures made Exceeded targets (52 procedures) twenty (20) new simplification and public on the Government website service- standardization procedures were public.ma identified and validated by the public- Baseline: 0 in 2013 private working group established by the Target: 40 by end 2015 Ministry for Civil Service and Source: MFPMA Modernization of Public Administration under the National Business Indicator 2: Reduction of the formalities and Indicator 2: Environment Committee (Comité duration for registering property for businesses Exceeded targets National de l’Environnement des Baseline: 8 procedures and 60 days (Doing DB 2016: 5 procedures, 30 days Affaires). Business 2014 published in October 2013) DB 2017: 6 procedures, 22 days Target: 7 procedures and 40 days (Doing Business 2016 published in October 2015) Source: MFPMA and CNEA 3. The Law No 32-10 modifying the Code D3. Budget Law No. 110-13 has been Outcome: Improving transparency on payment of Commerce and imposing minimum published in the National Gazette No. delays and reducing payment delays in sectors standards in payment delays in 6217bis dated December 31, 2013, which where average payment delay is above the commercial contracts has been approved inter alia modified the Tax Code (Code maximum set under the new applicable legislation. by Parliament and published in the Général des Impots) to allow the tax Indicator 1: National Gazette No. 5984 dated October deductibility of late payment penalties Indicator 1: Reduction by at least 10 percent in Not achieved 6, 2011. paid in application of Law No. 32-10. average payment delay in sectors where average payment delay is over 100 days. Baseline: Average payment delays over 100 days in industrial manufacturing, real estate, public construction and professional services (2012 estimates) Target: 10 percent reduction in average payment delays estimates in a aforementioned sectors in 2015. Source: Estimates by BAM, OMPIC 35 Indicator 2: Number of companies that are reporting Indicator 2: in certified accounts their average payment delays Achieved as per the new regulations. Baseline: 0 in 2012 Target: all companies with certified accounts for 2015 Source: OMPIC 4. The Law No 24-10 amending the Law D4. The Government Council has Outcome: Facilitating business creation and No 05-96 and abolishing the requirement approved on May 28, 2013, the draft Law strengthening governance of SA companies. of a minimum capital for incorporating a No. 78-12 modifying and completing Law limited liability company (Société à No 17-95 on corporations (Sociétés Indicator 1: Number of SARL formally registered Indicator 1: responsabilité limitée - SARL) has been anonymes), inter alia simplifying the Baseline: 27800 by end 2011 Achieved (35700 SARL formally approved by Parliament and published in creation of corporations and improving Target: 35000 by end 2015 newly registered in 2015) the National Gazette No 5956 bis dated their governance. Source: OMPIC June 30, 2011. New data were selected for baseline and target as the data initially included were mistakenly selected and did not correspond to the indicator. Figures above represent updated target data. Indicator 2: Indicator 2: Improvement in the governance and Achieved protection of minority shareholders in corporations. DB 2017: 9/10 in extent of Baseline: Morocco score in Doing Business 2014 in disclosure index; 2/10 in extent of the protecting minority investors indicator (6/10 in director liability index) extent of disclosure index; 2/10 in extent of director liability index) Target: Improvement in Morocco score in Doing Business 2016 or in DB 2017 in the protecting minority investors indicator Source: Doing Business, CNEA. PILLAR 2. FURTHERING TRADE POLICY REFORM AND TRADE FACILITATION 36 5. The MEF has issued Circular No. Outcome: Rationalization of tariff structure on 5306/210 dated December 30, 2011 imports regarding the tariffs reduction on imports of industrial products for 2012. Indicator: Rationalization of tariff structure on Indicator: imports through a reduction of maximum tariff Achieved (25% percent) quota applicable to industrial products (chapter 25 to 97 of customs duties) Baseline: 30 percent in 2011 Target: 25 percent in 2012 Source: Customs authorities The law No 24-09 dated August 17, 2011 D5. Decree No. 2-12-502 for the Outcome: Enhancement of transparency and on the safety of products and services. implementation of Law No. 24-09 of predictability on the regulatory framework Publication has been approved by August 17, 2011, relating to the safety of applicable to safety and hygiene standards for local Parliament and published in the National products and services, was issued by the producers and importers Gazette No. 5984 of October 6, 2011. Head of Government on May 13, 2013 and published in the National Gazette Indicator: Percentage of products put on the market Indicator: Exceeded target No. 6158 dated June 6, 2013. and randomly controlled which complies with the Achieved (99 percent of controlled new security regulatory requirements products are compliant) Baseline: 93 percent of controlled products are compliant. Target: 95 percent of controlled products are compliant. Source: MICIEN 6. The Head of Government has issued Outcome: Adaptation of the national legal the implementing Decree regulating anti- framework with the international trade agreements dumping, anti-subsidy and safeguard signed by Morocco, and enhancement of measures in accordance with the Law No transparency and predictability on mechanisms for 15-09 on Trade Defense published in the adapting local industries to the competition with National Gazette No 5956 bis dated June imports (commercial defense) 30, 2011. Indicator: New petitions requesting the application Indicator: of anti-dumping, anti-subsidy or safeguard Achieved measures are formally processed and published according to WTO rules and procedures Baseline: Piecemeal publication of enquiry proceedings. 37 Target: Systematic publication of the stages of enquiry proceedings (notice, hearing, opening report, findings report) Source: Commerce Department 7. The company PORTNET in charge of D6. The state-owned company Portnet Outcome: Reduction of administrative burden (time operating and managing the information has put in place a computerized data and costs) and increased transparency for importers and technology system for data exchange exchange system for port operations that and exporters. between public authorities and private allows the electronic management of trade operators has been established by import documents through the Indicator: Reduction in average transit times for Indicator: its shareholders on January 19, 2012. interconnection of key public authorities goods at Casablanca port Achieved and private trade operators involved in Baseline: 10 days (July 2013) 6.12 days 2017 external trade procedures (Customs, Target: Fewer than 7 days (End 2015) traders, banks, Commerce Department, Source: Customs, Portnet Foreign Exchange Office). PILLAR 3 : STRENGTHENING ECONOMIC GOVERNANCE 8. The Head of Government has issued a D7. Circular No.01/2015 relating to the Outcome: Improved assessment of impact of tax Circular providing for the mandatory guide for the assessment of costs and exemption and financial support granted by the preparation of costs and benefits benefits to investment projects submitted National Commission for Investments to investment assessments of investment projects for approval to the Investment projects. submitted to the National Commission Commission (Commission des for Investments. Investissements) has been issued by the Indicator: Assessment of costs and benefits of Indicator: Head of Government on January 16, incentives granted to investment projects is Achieved 2015. included in the annual activity report of the Commission for Investments Baseline: Annual review of Commission for Investments activity in 2011 without assessment of costs and benefits of incentives to investment projects Target: Annual review of Commission for Investments activity in 2015 includes an assessment of costs and benefits of incentives to investment projects Source : AMDI 38 9. The MAGG has issued a Decision D8. The National Business Environment Outcome: Public and private sector policy dated October 29, 2012 establishing Committee (Comité National de stakeholders are able to carry out better dialogue within the MAGG a Department in l’Environnement des Affaires) has and coordinate more efficiently business charge of improving the investment approved on December 17, 2013, its environment reforms. climate and acting as the secretariat of annual reform program for 2014 in the National Business Environment accordance with Decree No. 2-10-259 Indicator: Number of investment climate reforms as Indicator: Committee (Comité National de dated October 29, 2010. accounted for in the Doing Business methodology Target Exceeded l’Environnement des Affaires - CNEA). that have been initiated and coordinated by the National Committee for Business Environment Reforms accounted for in the Target: 4 reforms in 2013-2015 annual Doing Doing Business survey that have Business surveys been initiated and coordinated by Source: CNEA and Doing Business the National Committee for Business Environment between 2013-2015:6 2016: 5 2017: 5 10. The Government Council has D9. Decree No 2-14-652 for the Outcome: The Competition Council has the approved the draft Laws modifying the implementation of the Law No 104-12 of regulatory powers to investigate and sanction Competition and Freedom of Pricing June 30, 2014 relating to the freedom of anticompetitive behaviors. Law No 06-99, reinforcing the powers prices and competition, which, inter alia, and independence of the Competition reinforces the powers of the Competition Indicator: Number of investigations formally Indicator: Council (Conseil de la Concurrence - CC). Council (Conseil de la Concurrence), was conducted by the Competition Council under the Not achieved issued by the Head of Government on new legal and regulatory framework. December 1, 2014 and published in the Baseline: 0 in 2013 National Gazette No.6314 dated Target: 2 official investigations by end 2015 December 4, 2014. Source: Competition Council 39 Annex 3: Loan Series Analytical Underpinnings Pillar 1: Improving investment climate The following analytical products informed the debate about the reforms supported under pillar 1:  Periodic surveys of industrial firms, including notably the Investment Climate Assessment surveys conducted in 2005 and 2008. These surveys were instrumental in diagnosing key constraints to enterprises and quantified the firm-level productivity gap in manufacturing, which can partly be explained by high factor costs (particularly high labor costs and low labor productivity).  Business legal and regulatory reviews focused on the Doing Business indicators and regulatory simplification (2009, 2010). These technical notes identified legal and regulatory constraints in the Moroccan business environment as measured by the Doing Business indicators. It later led to technical assistance that focused in particular on simplifying business entry (reducing and then abolishing the mandatory minimum capital requirement) and commercial law (including alternative dispute resolution).  OECD’s report on the investment climate in Morocco (2011). This comprehensive report provides a detailed overview of investment climate and competitiveness issues in 12 distinct areas, ranging from the legal and regulatory environment, to trade policy issues and competition and economic governance issues. Its findings reinforce the overall messages from the other analytical work conducted by the Bank, and confirm that the focus on economic governance issues, policy coordination failures, access to information and investment climate reforms is a priority to improve competitiveness in Morocco Pillar 2: Furthering trade policy and trade facilitation reforms The following analytical products informed the debate about the reforms supported under pillar 2:  Country Economic Memorandum (CEM) (2006) and Trade Chapter Update (2011). The issues identified at the time of the Morocco CEM (lack of diversification, lack of structural transformation of the industrial sector, need to have sector-specific policies, uncertainty and discretion in how the business environment rules apply, competition issues and trade policy distortions) remain valid today, even if improvements have taken place in a number of areas  MENA region flagship report on trade and FDI “From Political to Economic Awakening in the Arab World: The Path of Economic Integration” (2013). The analysis in this regional report identified (inter alia) the FDI regime, the business climate and economic governance as key issues to foster competitiveness and diversification in the Arab countries in transition, including Morocco.  A series of analytical notes on trade and competitiveness has been prepared, covering the following issues: (1) Current account sustainability; (2) Exchange rate role as determinant of firm performance; (3) How do Moroccan exporters adjust to exchange rate movement?; (4) A product space perspective on structural change in Morocco; (5) Linking firms’ intermediate input imports and export performance; (6) Does input tariff reduction impact export performance? (7) Standards harmonization as export promotion; and (8) Institutional assessment for good governance over trade regulation.  An analytical note reviewing the draft International Trade Law has been prepared by the team and shared with the Department of Commerce. It concluded that while the new law would clarify certain aspects of the legal framework initial envisioned, the potential added value of the draft law against the program objectives could not be fully evaluated because of the lack of draft implementing decrees. Nevertheless, the impact of the new law once its implementing decree is adopted would remain modest given Morocco’s international and bilateral trade obligations. Pillar 3: Strengthening economic governance  The following analytical products informed the debate about the reforms supported under pillar 3:  7uMENA region flagship report on private sector development “From Privilege to Competition” (2009). The analysis in this regional report identified economic governance issues as a key impediment to private sector development in MENA. Most of the reports’ messages apply to the Moroccan context 40 and the report itself built on Morocco-specific case studies and analysis. The report highlighted in particular the gap between business regulations as they appear on the books, and their implementation. Issues of discretion, arbitrariness, competition and lack of transparency and accountability were prominent in the report’s findings.  The ECSP series explicitly build on these findings to address concretely these issues in the proposed policy matrix (in the areas of investment incentives, standardization of regulatory processes and forms, sharing of firm-level information between administrations and competition policy).  An analytical note reviewing the draft Investment Law has been prepared by the World Bank and shared with the MICIEN The Government is still in the process of reviewing the draft Investment Law and its implementing decree in light of these comments.  An advisory service has been provided to the AMDI and stakeholders from other departments involved in the process of granting incentives to investment projects. This assistance supported the AMDI in designing and drafting a guide for coordinating the assessment of cost and benefits of incentives to investment projects submitted to the Commission for Investments. 41 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR Government has neither submitted its ICR nor commented on draft ICR. 42 43