Document of The World Bank Report No.: 18462-MOR PROJECT APPRAISAL DOCUMENT ON PROPOSED LOANS IN THE AMOUNTS OF FRF 40.9 MILLION TO THE KINGDOM OF MOROCCO AND FRF 40.9 MILLION TO THE MUNICIPALITY OF FES-MEDINA FOR A FES-MEDINA REHABILITATION PROJECT October 7, 1998 Infrastructure Development Group Middle East and North Africa Region CURRENCY EQUIVALENTS (as of September 1, 1998) Currency Unit = Moroccan Dirham (MAD) US$1.00 = 9.3 MD MAD 1 = US$0.107 FISCAL YEAR July 1 - June 30 GLOSSARY OF ACRONYMS ADER-Fes Agence pour la Dedensification et la Rehabilitation de la Medina de Fes (Agency for the Rehabilitation of Fes Medina) BITS Board for Investment and Technical Support (Conseil a l 'investissement et a I 'appui technique) BOT Build, Operate, Transfer (Construction, exploitation, transfert, CET) CAS Country Assistance Strategy (Strateigie d'assistance aupays) CDG Caisse de dcp6t et gestion (Savings Management Fund) CIH Cre'dit immobilier et h6telier (Real Estate and Hotel Credit Institution) CUF Communaute urbaine de Fes (Urban Community of Fes) FADES Fonds arabe pour le deiveloppement &conomique et social (Arab Fund for Economic and Social Development) FEC Fonds d'equipement communal (Municipal Fund) FES-SAIS Association pour le developpement culturel, social et economique de Fes (Association for Cultural, Social, and Economic Development of Fes) FIAHS Fund for Innovative Approaches in Human and Social Development (Fonds pour la promotion d'approches novatrices en matiere de developpement humain et social) GIS Geographical Information System (Systeme d 'information geographique, SIG) GoM Government of Morocco (Gouvernement du Maroc) MCA Ministry of Cultural Affairs (Ministere des Affaires Culturelles) NGO Nongovernmental Organization (Agence non-gouvernementale) OFPPT Office de laformation professionnelle et de la promotion du travail (Vocational Training and Labor Promotion Office) RADEF Regie autonome de distribution d'eau et d'electricite de Fes (Water Supply and Electricity Public Utility of Fes) UDC Unite de developpement communautaire (Local Development Unit) UNDP United Nations Development Programme (Programme des Nations Unies pour le Developpement, PNUD) UNESCO United Nations Educational, Scientific, and Cultural Organization (Organisation des Nations Unies pour l 'education, les sciences et la culture) VAT Value Added Tax (Taxe a la valeur ajoutee, TVA) Vice President Kemal Dervi, Country Director Christian Delvoie Sector Director Jean-Claude Villiard Team Leader Frangois Amiot KINGDOM OF MOROCCO Fes-Medina Rehabilitation Project Project Appraisal Document Contents Page No. BLOCK 1: PROJECT DESCRIPTION ....................................................................2 1. Project Development Objectives .....................................................................2 2. Project Components ....................................................................2 3. Benefits and Target Population ....................................................................3 4. Institutional and Implementation Arrangements .................................................................... 3 BLOCK 2: PROJECT RATIONALE ................................................................... 4 5. CAS Objective(s) Supported by the Project .4 6. Main Sector Issues and Government Strategy .4 7. Sector Issues To Be Addressed by the Project and Strategic Choices. 5 8. Project Alternatives Considered and Reasons for Rejection. 6 9. Major Related Projects Financed by the Bank and/or Other Development Agencies 6 10. Lessons Learned and Reflected in the Project Design ........................................................... 6 11. Indications of Borrower Commitment and Ownership .......................................................... 7 12. Value Added of Bank Support ..................................7 BLOCK 3: SUMMARY PROJECT ASSESSMENTS ........................................................... 7 13. Economic Assessment .....................................................................7 14. Financial Assessment .....................................................................8 15. Technical Assessment .....................................................................9 16. Institutional Assessment .....................................................................9 17. Social Assessment .................................................................... 9 18. Environmental Assessment .................................................................... 10 19. Participatory Approach .................................................................... 10 20. Sustainability .................................................................... 11 21. Critical Risks .................................................................... 11 22. Possible Controversial Aspects .................................................................... 12 BLOCK 4: MAIN LOAN CONDITIONS .. ............................. 12 23. Effectiveness Conditions ................................................................... 12 24. Other ................................................................... 12 BLOCK 5: COMPLIANCE WITH BANK POLICIES ........................................................ 13 ANNEXES Annex 1: Project Design Summary .................................................................... 14 Annex 2: Detailed Project Description .................................................................... 17 Annex 3: Project Cost Summary .................................................................... 21 Annex 4: Cost Benefit Analysis Summary .................................................................... 25 Annex 5: Financial Summary for Revenue Earning Project Entities ........................................... 36 Annex 6: Procurement and Disbursement Arrangements ............................................................ 40 Annex 7: Project Processing Budget and Schedule .................................................................... 43 Annex 8: Documents in the Project File .................................................................... 44 Annex 9: Status of Bank Group Operations in Morocco ............................................................. 46 Annex 10: Morocco at a Glance .................................................................... 48 Map: IBRD No. 29303 INTERNATIONAL BANK FoR RECONSTRUCTION AND DEVELOPMENT INTERNATiONAL DEVELOPMENT ASSOCIATION Middle East and North Africa Regional Office Infrastructure Development Group Project Appraisal Document Kingdom of Morocco Fes-Medina Rehabilitation Project Date: October 7, 1998 Team Leader: Francois Amiot Country Director: Christian Delvoie Sector Director: Jean-Claude Villiard Project ID: MA-PE-5524 Sector: Urban Lending Instrument: Specific Investment Loan PTI: [X] Yes [ I No Project Financing Data [X] Loan [] Credit [I [I Other [Specify] Amount FRF 81.8 million in two loans of 40.9 million each (US$14.0 million equivalent in two loans) Proposed Terms: [ Multicurrency [x ] Single currency (French Francs) Grace period: 5 years [ Standard variable [ Fixed [XI PIBOR-based Years to maturity: 20 Commitment fee: 0.75% Service charge: n/a Financing plan (US$m): 27.59 million Source Local Foreign Total Govermment 3.08 0 3.08 Municipality of Fbs-Mddina 3.37 0 3.37 IBRD 5.80 8.20 14.00 Grants to municipality of Fs-Jdid 0.59 0.54 1.13 Municipality of Fes-Jdid 0.22 0 0.22 Private beneficiaries 3.76 2.03 5.79 Total 16.82 10.77 27.59 Borrower: Government of Morocco for FRF 40.9 million and Municipality of Rs-Medina for FRF 40.9 million Responsible agency: ADER-Fes Estimated disbursements (Bank FY/US$): 1999 2000 2001 2002 2003 Annual 1.5 3.2 4.2 2.6 2.5 Cumulative 1.5 4.7 8.9 11.5 14.0 Expected effectiveness date: 01/31/1999 Closing date: 12/31/2003 Project Appraisal Dorument Page 2 Fes-Medina Rehabilitation Project Kingdom of Morocco Block 1: Project Description 1. Project development objectives (see Annex I for key performance indicators): Fes-Medina, a UNESCO World Heritage site since 1976 and center of Moroccan commerce and culture, also has a high concentration of poverty and substandard living conditions. Under a comprehensive defnition of cultural heritage as the historically built environment and the social structures which support it, the primary objective of the proposed project is to assist in the conservation and rehabilitation of the Fes-Medina, especially the historic housing stock and urban environment. To reach this objective, the project will: (a) expand and accelerate ongoing conservation efforts; (b) consolidate partnerships among the public and private sectors, World Bank, and other donors; and (c) use the rehabilitation process to alleviate poverty. 2. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The proposed project will support the above development objectives by: (a) conserving cultural heritage through a variety of priority rehabilitation activities aimed at upgrading the historic housing stock and expanding the tourism offering; (b) providing priority access for emergency public services extending to the center of the medina, and facilitating logistical activiffes for residents and businesses, thereby creating favorable conditions for efficient urban development and private sector investment; (c) improving the urban environment by instituting programs for solid waste collection and pollution reduction for small-scale industries; (d) reducing poverty by creating employment through a labor-intensive public works program linked with the rehabilitation process and a specific training program; and (e) strengthening the capacity of the municipality and responsible local agencies to plan and carry out proposed improvements. Component (including private sector) Category (main) US$ million incl. % of Contingencies Total Rehabilitation of built heritage Civil Works & Goods 3.7 14 Infrastructure rehabilitation - Historic and emergency network Civil Works 2.7 10 - Medina gates and logistic facilities Civil Works 11.9 42 Improvement of medina environment Civil Works & Goods 3.5 13 Poverty alleviation Civil Works 3.5 13 Institutional strengthening Consultants Services & Goods 2.3 8 Total 27.6 100 The loans will be shared between the State and the municipality of Fes-Medina as follows: A. STATE US$M Share by component (%) Rehabilitation of built heritage 2.7 100 Infrastructure rehabilitation 1.8 33 Improvement of medina environment 1.2 50 Institutional strengthening 1.3 77 Total 7.0 50 B. MUNICIPALITY Infrastructure rehabilitation 3.6 67 Improvement of medina environment 1.2 50 Poverty alleviation 1.8 100 Institutional strengthening 0.4 23 Total 7.0 50 Project Appraisal Document Page 3 Fes-Medina Rehabilitation Project Kingdom of Morocco 3. Benefits and target population: Extensive information on the composition, status, and income of the Fes-Medina's population and the actual physical condition of the built environment, integrated into a Geographic Information System (GIS), provides the basic data for the proposed project. Development and analysis of this social and urban data undertaken during project preparation have dispelled earlier assumptions and allowed a targeted approach to problem solving. A 1995 project survey indicates that 36 percent of the medina's population is below the poverty threshold, a proportion far exceeding the national average for both urban (10.4 percent) and rural (28.7 percent). Moreover, half of the housing stock is seriously decayed and housing occupancy levels surpass acceptable levels. This cycle of decline also affects the architectural heritage of Fes, despite recent efforts by Moroccan authorities to preserve selected monuments. However, data collected on the demand for building permits to rehabilitate the housing stock, as well as on land transactions, indicate a potential for reversing the cycle of decline among all segments of the medina's population. A good indicator of the long-term benefits expected from the project is the leveraging ratio computed under the project's economic analysis. It shows that for every dollar of public funds invested under the project, more than US$3.0 will be invested by the medina's population over the long term. The target population is the residents of the medina (150,500 inhabitants), with special attention to those living below the poverty threshold (52,700 inhabitants). About one third of the residents would benefit directly from improved infrastructure network, including an emergency network of some 14 km which would improve access to the medina for medical emergencies, fire brigades, security services, solid waste collection, etc. Another direct benefit would be the creation of some 10,000 jobs over the next fifteen years, in part targeted to the poor under a specific poverty alleviation component. Benefits of the project would also accrue to various professional and artisan groups working in the medina; those individuals receiving training and technical assistance; local institutions, universities, NGOs, and neighborhood associations involved in rehabilitation of the medina; and the tourism industry. A related institutional benefit would be the sharing of the Geographic Information System (GIS), which has been expanded during the preparation of the project among local institutions, including the agency in charge of the water and sewerage projects, and the medina municipality. The ultimate beneficiary, of course, would be the World Heritage city of FRs, which would benefit from the new rhythm of maintenance and rehabilitation and resulting inward investment. There would also be benefits at the national level, since the Fes experience would serve as a demonstration project that could be replicated in other medinas of Morocco. 4. Institutional and implementation arrangements: An agreement has been signed among State representatives (Ministers of Interior, Finance, and Cultural Affairs), the two municipalities (Fes-Medina and Fes Jdid), and ADER-FES which includes the following: role of ADER as executive agency; project coordination; project cost sharing between the State and the municipalities; procurement; and disbursement procedures. Under this agreement, ADER will execute the State's components on its behalf and will assist the municipality of Fes Medina on all technical aiatters (including control over technical studies and civil works) to implement its related components. To facilitate the flow of funds, the State will open a specific Treasury account located in Fes and in the name of ADER's managing director, while the Municipality of Fes-Medina will open a revolving fund (Compte d'affectation special), funded by the budget under a specific line, and identifying all sources and application of counter-part funds. To facilitate control over implementation, ADER's management information and accounting system will be reinforced, allowing the detail monitoring of each operation. Policy and overall project supervision will be performed by two separate steering committees (see below). Any operation directly related to the cultural and historic heritage will have to receive clearance from the Ministry of Cultural Affairs. Implementation period: Four years (FY 1999-FY 2003). Executing agency: ADER-Fes was the main agency in charge of preparing the project, and will act as executing agency for the project. For the State and the Fes Jdid components, it will be in charge- of preparing the bidding documents; and controlling and monitoring all rehabilitation projects, studies and training activities. For the Fes-Medina municipality, ADER will act as technical and monitoring agency (Assistance a la maitrise d'ouvrage), and will manage the poverty alleviation component under a specific unit (Unite de developpement communautaire, or UDC), with a separate accounting system. ADER's institutional, financial, and technical assessments are presented in block 3 below. Project coordination: A Technical Committee, chaired by the Governor of Fes-Medina, and comprising the two municipalities' chairmen and the regional representative of the Ministry of Culture, will have overall responsibility for project coordination and supervision in the following areas: project implementation, bidding procedures, selection of beneficiaries under the grant rehabilitation scheme (Annex 2). Project Appraisal Document Page 4 Fes-Medina Rehabilitaion Project Kingdom of Morocco Project oversight (policy guidance, etc.): A consultative steering committee (Comite de suivi), under the chairmanship of the Wali of Fes, and composed of representatives of local governments, central government main agencies (Agence urbaine, Ministere de la culture, Minist&re des habous, Ministrre des finances, RADEF etc.), University of Fes, UNESCO, and the World Bank has been formed to solve policy issues, particularly in conservation heritage. ADER-Fes will act as permanent secretariat for the two above committees. Accounting, financial reporting and auditing arrangements: All of ADER's accounting documents will be made available to Bank missions. Its financial statements will be audited annually by an independent auditor and certain specific and detailed information on all project operations. The municipality of Fes-Medina will make available to Bank missions its annual expenditure and investment budget, cleared by the Ministry of Interior (Direction des finances locales). Monitoring and evaluation arrangements: Quarterly reports done by ADER-Fes, on the basis of agreed key performance indicators, cleared by the municipalities and by the Governor of Fes-Medina; annual indicators on the indebtedness of the Fes-Medina municipality (debt to receipts ratio); and final evaluation report to be submitted by ADER-Fes within six months of the loan closing date. Block 2: Project Rationale 5. CAS objective(s) supported by the Project: Yes Document number and date of latest CAS discussion: N° R97-2 of 01/30/1997 The proposed project provides a window of :pportunity and necessity to support the CAS objectives, with particular focus on social development and environmental management. The former will be particularly enhanced by the launching of a component on urban poverty alleviation, which will be pilot in Morocco. The latter will encompass traditional activities such as solid waste management and reduction of pollution from traditional industries. It will extend to new areas such as conservation of cultural heritage resources. The project also emphasizes the importance of partnerships with other donors and the private sector. 6. Main sector issues and Government strategy: Conditions prevailing in the medinas: Morocco's 30 medinas have been largely overlooked for much of the 20th century, since investment has been concentrated in areas outside the traditional urban centers. The result has been a serious deterioration of the historic building stock, urban infrastructure, and the urban environment. This decline has been compounded by rural migration and the exodus of the original inhabitants of the medina so that population density in the medinas is high and income levels are often below national averages. The absence of a focused Government policy towards these historic cities and relatively low levels of investment have deterred their ability to provide satisfactory living conditions for their inhabitants. Cultural heritage conservation: Cultural heritage activity in Morocco is characterized by work on individual monuments, with little attention to the remaining built environment. Major constraints to developing an overall strategy for managing and utilizing the heritage, particularly the medinas include: the lack of a comprehensive and accessible inventory; cumbersome legal tools (particularly on listing); inadequate laboratory facilities for conservation works; weak understanding of the economic underpinnings of conservation policy; and the relative isolation of the Ministry of Culture from other Government agencies. The Ministry of Culture receives low levels of funding and is thinly staffed in its regional offices. Related issues of particular significance for the medinas are property rental and ownership issues, and the integration of the habous (religious trust) into the rehabilitation process. De facto residential rent control (ref. Decree no. 280-552, dated 1980) has resulted in very low rents which leave owners unable to afford proper maintenance, while offering no incentives for renters to carry out necessary repairs (some 10 percent of traditional buildings in the medina are on the verge of collapse). Until this law is changed, private investors are likely to prefer investing in commercial rather than residential space. Urban environment and infrastructure: Urban centers in Morocco, in particular the medinas, are typically the location of small-scale polluting industries. Air and water quality is frequently deficient in urban centers, with important negative health impacts including cholera. For the medinas, which are a subset of urban areas, there is a need to redress the imbalance of the last decades when medinas were overlooked in favor of new built areas, through increased allocation of expenditures to reduce the infrastructure and conservation backlog. In the medinas, infrastructure is often in need of replacement or modernization, particularly water supply, sewerage and solid waste disposal, telecommunications, and transport. Age and overloading are factors which put stress on infrastructure. The Government has made efforts to improve urban infrastructure, although a serious backlog of unmet needs remains. Progress on environmental work in Morocco has been slow: the Ministry of Environment is technically weak; the basic environmental legislation and regulatory framework are lacking; and incentives for improved resource conservation and use of clean technologies are not yet in place. Project Appraisal Document Page 5 Fes-Medina Rehablitallon Project Kingdom of Morocco Decentralization: Morocco is beginning to decentralize responsibility for urban management, especially in major cities. Local governments are now more likely to take greater responsibility for provision of services and resource allocation decisions. Considerable strengthening of local institutions is necessary to support the move to decentralization. Resource allocation to match new requirements is beginning through the Value Added Tax (VAT) transfer. Since the main criteria for the VAT allocation relies primarily on both population and commercial activities criteria, the municipality of Fes-Medina will benefit substantially from the VAT (up to about 35 percent of total source of funds), while the municipality of Fes Jdid will share only a residual portion of the VAT allocated among the poorest municipalities. 7. Sector issues to be addressed by the project and strategic choices: The strategic choices which led to the proposed development objective are summarized in Annex 1: Project Design Summary, using the logical framework approach. To empower the medina's inhabitants, as well as local institutions, to conserve and rehabilitate their historic city, the project aims at successfully achieve five expected outputs, which are also the five components of the project. Among these outputs, four address the above-mentioned sector issues, while one is targeted to alleviate the unusual level of poverty. The output related to public infrastructure improvements is key to providing rehabilitated or new public facilities, enabling the residents to invest in either residential or commercial space. The strategic approach adopted for selecting and designing the proposed infrastructure was to improve access to the medina, while minimizing resettlements, addressing traffic congestion, facilitating the fmancing of logistical activities by the private sector through small BOT schemes, avoiding the destruction or the modification of the historic built heritage, and improving key urban services. The underlying assumption was that such public and private investments would raise the medina property values, at least along or just around major works, enabling the medina residents to invest in the historic housing stock. Surveys on past building permits, on current housing renovation process, and on some 2,300 land transactions were conducted to document this assumption, which was ultimately confirmed by economic analysis. Arbitrage from an economic point of view is, however, not sufficient in this case, since maximization of benefits would lead to the rapid diminution of residents, to the advantage of commercial activities. Such a scenario would distort the fragile demo-economic balance that the medina enjoys, and would accelerate the pernicious effects of national legislation on the housing rent system. Beyond the goal of improving the medina infrastructure, the success of the project still hinges on the capacity to stimulate private investment in the rehabilitation of dwellings. The output related to cultural heritage conservation issues relies, first, on a pilot program (frontal grants to households) which is intended to create incentives, complementary to the rehabilitation program of public infrastructure, targeted to the medina's inhabitants, to encourage investment in the historic built stock. If successful, this program will be the starting point for a self- rehabilitation process. The heritage conservation strategy also includes a tourism program aimed at integrating the medina into a regional tourist network, while developing within the medina new tourist itineraries, implying rehabilitation works of historic buildings along tourist routes. This operation might also be labeled pilot, since its economic analysis provides a justification for the Bank or other donors to finance the rehabilitation of historic buildings, including the establishment of an Heritage and Cultural Animation Center. The output addressing environmental issues was designed to complement past or current actions undertaken by local authorities (resettlement of polluting activities in an area outside the medina, contracting solid waste collection to the private sector, etc.), without being in potential conflict with planned regulations to be issued by the Ministry of Environment. The underlying strategy of this component is to tackle simple activities which can benefit a large portion of inhabitants. This is the case for rendering more efficient the current solid waste collection system through the provision of specific equipment adapted to the new street network implemented by the project, and for the voluntary resettlement of traditional artisans willing to regroup together in view of pollution abatement. Beyond these rather simple activities, the project will launch a study aimed at defining specific environmental standards for the medinas. The fourth output addresses institutional strengthening at the local level, taking into account the active leadership of ADER-Fes as an institution specialized in heritage conservation. The strategic approach for the project is threefold: support the decentralization process; develop partnerships among local authorities, with the objective of rendering ADER more accountable to these authorities; involve private and possibly trained operators and existing associations in the provision of services to the bulk of the population willing to rehabilitate their dwellings. The strategy also aims at strengthening ADER's managerial and technical capacities in heritage conservation, with the long term view of providing assistance to other medinas of Morocco. As for the poverty alleviation component, the strategic choice was straightforward: use the rehabilitation process to alleviate poverty by creating a maximum number of labor-intensive jobs. The sustainability of such a program should benefit from the natural constraints imposed by the medina, which limit the use of capital-intensive methods, as well as from the commitment of the two municipalities to rehabilitate the medina. Project Appraisal Document Page 6 Fes-Medina Rehabilitation Project Kingdom of Morcco 8. Project alternatives considered and reasons for rejection: The proposed project benefited from the studies carried out under two PHRD grants, which have enabled activities to be tailored to respond to the specific conditions of the medina. Significant adjustments in preliminary design (UNDP prefeasibility study) were made in the choice of heritage conservation activities, road access, and the project's borrowing requirements. The accessibility of the medina has been closely studied, with the objective of maximizing the positive impact of access on the self- rehabilitation dynamic and minimizing resettlement. This led to the rejection of UNDP's prefeasibility study proposal for major new access routes in favor of improving emergency access network with a minimum of demolition. Two further grounds for preferring the revised project are: the sensitivity of the historic city to major new construction, and a sustained dialogue with UNESCO. A further change in the project was necessitated by the limitation on borrowing set by the Government of Morocco. The initial project cost of US$65 million was reduced, after extensive discussions with GoM, to the proposed core project cost. The latter is the base case scenario and is the minimum necessary for launching the rehabilitation process. 9. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Several Bank projects have contributed to the preconditions necessary for the rehabilitation of the medina. These projects include: the Fifth Water Supply (Loan 3664), which is helping to supply water to the medina; the Second National Sewerage Project (Loan 4010), in which the French, through the Agencefrancaise de developpement, are cofinancing work to rehabilitate the sewerage system in the medina; and the planned Low Income Housing Project (FY99) which would reduce the density of housing occupation. The proposed Sebou Watershed Project would have a direct impact on the water quality of FRs, while the Environment Management Project would have an indirect effect on Fes in terms of increasing institutional capacity to manage environmental resources. Other agencies which have been involved in Fes are UNESCO, UNDP, Fonds arabe pour le developpement economique et social (FADES), and several bilateral donors. FRs was put on the World Heritage List in 1976 and in 1980 UNESCO launched an intemational safeguarding campaign. The campaign raised awareness of the importance of FRs but did not succeed in generating the financial support needed to carry out significant rehabilitation works. UNDP financed the above-mentioned prefeasibility study in 1991. FADES has financed conservation of segments of the city walls, gateways, and parts of the traditional sewerage network. The Swedish Board for Investment and Technical Support (BITS) has done work on industrial pollution abatement. US-AID is carrying out studies on the medina's artisans. Under the PHRD grants, an expanded program of rehabilitation was prepared and will be presented to a donors conference after effectiveness, with the aim of supplementing the base case scenario and financing the Rs Jdid components. During this conference, particular focus will be put on financing activities which relate directly to the poverty alleviation component, as well as on the rehabilitation of historical buildings or monuments along the six tourism itineraries included in the project. 10. Lessons learned and reflected in the project design: Through an iterative process of analysis and consensus building, the project team, with its Moroccan counterparts, defned a program of strategic actions that are most likely to overcome existing constraints to the process of rehabilitating the medina. A first PHRD grant and FIAHS funds enabled a social assessment to be carried out, with the objective of establishing a forum for dialogue between residents and institutional stakeholders and identifying needs and concerns. Fes University, Harvard University (USA) and Association Fes Sais also participated in these actions. It is a pioneering example of the use of social assessment and participation techniques to measure community preferences in regard to the rehabilitation of the historic built environment. and has informed project conservation priorities. The high incidence of poverty revealed in the initial social assessment led, in turn, to a poverty assessment and the extension of the project boundaries to include Rs Jdid. The project also demonstrates the importance of collecting data on the physical condition of the historic and social structures in targeting interventions to maximize benefit to the residents of the medina. This data made possible an alternative design for improving emergency access to the center of the medina, which greatly reduces resettlement of residents. Through a variety of institutional audits and assessment of training needs, the project has considered ways to strengthen local govemment's ability to improve selection of development priorities, deliver services, and manage resources. Administrative and operational efficiency will be addressed by introducing a computerized GIS database on the medina into local govermnent administration, and by strengthening organizational structures for ADER and other related institutions. Project Appraisal Document Page 7 Fes-Medina Rehabilitation Project Kingdom of Morocco I1. Indications of Borrower commitment and ownership: Fes is one of Morocco's three World Heritage sites, and the King has shown particular interest in the city's preservation. The GoM sent a letter of interest to the Bank on the subject of a rehabilitation project for Fes. The Borrower and the Bank have engaged in continuous discussions on the design of the project during project preparation; discussions have been held with the national, regional, and local levels of government. In 1996 the Bank's president, Mr. Wolfensohn, visited Fes when the basic concept of the project was presented. Moroccan institutions, including ADER and Fes University, have carried out a good deal of the background preparation work. After open discussion with its Council, the municipality of Fes sent to the Bank its agreement on a proposed program to help mobilize local revenues and strengthen municipal management. Before negotiations, the municipality's council has voted for its institutional and financial participation in the proposed project. The commitment of the GoM to the project was reaffirmed by the signature of an Agreement, dated September 1, 1998, between the Ministry of Interior, the Ministry of Finance, the Ministry of Culture, the two municipalities, and ADER-Fes, specifying the respective role of each entity during project implementation. Delays between negotiations and Board presentation have occurred, however, due mainly to the setting up of a new government after general elections. 12. Value added of Bank support: The Bank has assisted the GoM for the last 25 years and has been active in the infrastructure and urban sectors, and more recently in environmental matters. The GoM asked the Bank to finance the proposed project so that the Bank would: (a) break the long standing deadlock which has deterred any comprehensive rehabilitation project in FRs; (b) encourage interagency coordination; (c) promote mobilization of other sources of support; (d) ensure that effort is invested in identifying the key issues requiring action and that measures to create an environment conducive to private participation would be implemented; and (e) provide professional advice. In so doing the Bank is initiating a dialogue to develop cultural heritage conservation policy and to reevaluate current assistance to other medinas in Morocco. Block 3: Summary Project Assessments (Detailed assessments are in the project file. See Annex 8) 13. Economic Assessment: [X] Cost-Benefit Analysis: [] Cost Effectiveness Analysis [ Other [Specify] (see Annex 4) NPV=MAD 155.0 million; ERR= 13.6% Several economic analyses were done to help design the project. First, an initial cost-benefit analysis was done on the medina access issue, using standard criteria of transport or circulation analysis to calculate the benefits. With an ERR of 17 percent, the key economic justification for improving the medina access (including the Boucle douch as a main access south of the medina and the emergency network) stemmed from introducing small motorized vehicles for solid waste collection in lieu of donkeys. This first assessment was helpful in justifying the emergency network, but not, however, in finding an optimum or balanced approach between improving accessibility and conserving cultural heritage (the medina is unique as a pedestrian historic city). Second, since the medina is facing serious congestion costs due to inadequate or insufficient parking spaces, another related economic analysis was done to help design the access component. Among the main results were: a careful screening of parking locations; a proposed strategy of mixing the construction of garages with commercial spaces to increase the return on investment; and a scheme to manage these parking lots through concessions or BOT schemes. Third, a specific cost-benefit analysis was conducted, in two stages, for the proposed tourism development program, under the constraint that all benefits should be captured locally (to avoid externalities). First, an internal rate of return was calculated under the assumption that the proposed program would increase the average number of nights per tourist visiting the medina, from the current low ratio of 1.9 to 3.5 by year 2000. The second stage consisted of interviewing tourism operators, either international or local, to validate the above key assumption. The result was an ERR of 17.3 percent, with an investment level reaching MAD 40.5 million, which includes rehabilitation of selected historic buildings to be financed by potential donors. Fourth, an overall economic assessment of the project was done by developing two overall approaches: (a) assessing the mobilization of private resources as a result of the project by calculating the leverage ratio of any amount invested by the public sector during project implementation. The two building blocks for such a calculation were: (i) a conservative assumption on the spatial impact of the project (mainly abutting properties along the improved access route, leaving aside habous properties); and (ii) an extensive survey of housing rehabilitation works, either legal or not, by owners and renters in the medina. Works investigated ranged from minor repairs to significant improvements (structural repairs). The result was a leverage ratio of 1:3 about fifteen years after the start of the project, increasing to 1:5 over fifteen years; and (b) a cost-benefit analysis based, as a proxy for the benefits, on the increase in property values attributable to the project. Data on land prices and transactions were provided by an exhaustive processing of all real estate transactions (notarial records) in the medina over the 1990-1996 period, supplemented by interviews with real estate brokers. Data on commercial activities (workshops, retail, and services) were derived from an exhaustive 1988 survey. Assuming, the flow of benefits is captured only at the end of a 15-year Project Appraisal Document Page 8 Fes-Medina RehabiltatIOn Projed Kingdom of Morocco period, under a discounted rate of 10 per cent, but under the constraint that legal caps on rent and tenant protection would not change, the IRR would be on the order of 13.65 percent. Should these benefits be captured annually, the IRR would be greater and would indicate that a 10 year period is sufficient to fully recover costs with a 10 percent discount rate, even with a cost increase of 20 percent. In both cases, benefits expected from tourism activities have been captured only by the increased land value due to new tourist itineraries. Finally, and using the project as a case study, new approaches were explored to better determine the benefits related to the intrinsic value of conserving the cultural heritage of mankind. A first exercise, the Contingent Valuation (CV) study, was undertaken to estimate, first, the direct benefits to foreign tourists visiting Fes of the proposed project and, second, the passive use (existence/preservation) values of foreign tourists visiting Moro,cco, but not visiting Fes. Another study (the Delphi study) was undertaken in Europe to estimate the non use value of European households to rehabilitate the Fes-Medina. All these three estimates are expressed in terms of consumer surplus/willingness to pay and these benefits are not captured by a study looking at the impact of the proposed project on Fes residents, or from a traditional benefits-costs analysis. The contingent valuation method has been often used to value environmental goods, but it has almost never been used to value cultural heritage sites. This exercise sets the stage for a wider utilization of this powerful method given the similar economic nature of environmental goods and cultural heritage sites. Once the use and non use values of this cultural heritage are considered the economic benefits deriving from the project are very high. Extremely conservative estimates show that: > for foreign visitors to Fes the total annual value of the Fes-Mddina is equal to US$11,233,000. > for non Fes foreign visitors to Morocco the total annual value of the Fes-Medina is equal to US$46,880,000. => for European (plus Norway and Switzerland) households the total annual value of the Fes-Medina is at least equal to US$310,335,000. For more details, see Attachment to Annex 4, and references on CV studies in Annex 8. 14. Financial Assessment: (a) Financial situation of ADER-Fes: Background: ADER's funds to operate within the medina come mainly from the development of public land outside the medina and the sale of plots at market prices. This scheme, based on a cross-subsidy principle (perequation), has been developed for years by Moroccan public developers. Sales in advance to future owners enable developers to operate under minimal self-financing. ADER started such an operation in 1992 to finance the resettlement of polluting industries out of the medina. This first operation turned out to be a serious threat to ADER's financial viability when the land title supporting it was repealed, despite important works in progress at both sites. By the end of 1995, ADER's cumulative losses had reached a peak of MAD 18.2 million, or 3.6 times its capital base. In early 1996, ADER started its financial restructuring under another per&quation scheme, after the allocation of two development sites by the Ministry of Housing. Current situation and prospects: ADER's financial and institutional situation was reviewed in early 1997 and again in early 1998 by independent auditors. On the liability side, its past three years' balance sheets (Annex 5) show important purchasers' advances (MAD 35.1 million at end 1996). AD]ER has, therefore, to quickly complete its works in progress, and conclude the corresponding sales. According to last estimates, ADER's cashflow will turn positive under favorable conditions of sale after 1998. ADER will then have to settle all arrears on its salaries (MAD 16.0 million), and part of its debt on the first land development operation. Once this debt is fully repaid, ADER will enjoy a cash surplus of some MAD 20 million. Beyond such operations, ADER's financial sustainability will come mainly from contractual fees-for technical services (design, engineering, procurement, and supervision) or from implementation of specific operations (emergency building repairs, community development, architectural supervision of historical monuments), most of which are part of the proposed project. Financial management, accounting and audit: A detailed assessment of ADER's management, staff, and organization is available in the project files. During project preparation, ADER management capacity has been strengthened through: (i) more efficient use of its GIS database; (ii) developing a project management system; (iii) internalizing the Costab system; and (iv) technical assistance from Harvard University. During the course of the project, each subproject will be monitored through standardized monitoring indicators (fiches de suivi) with direct links to ADER's accounting system, while ADER management capacity will be strengthened by establishing a management committee, with delegation of power from the ADER board. Finally, for all operations directly issuing from the Bank-financed project, ADER's manager will have to report to the Governor of Fes-Medina, who will act as president of the managing committee. The fnancial management will be reassessed at the end of 1998, taking into account the recommendation of the auditor. Project Appraisal Document Page 9 Fes-Medina Rehabilftalofn Projed Kingdom of Morocco (b) The municipality of Fes-Medina: General: FRs-Mddina shares three generic constraints with the two other local entities involved (Fes Jdid and the Communaute urbaine de Fes or CUF): (i) a high dependency on central government collection of local business tax and transfer of the value added tax, averaging 73 percent of their fiscal resources; (ii) low yield on the local fiscal base (10 percent); (iii) a low level of non-fiscal resources, due mainly to a lack of administrative or real estate properties; and (iv) a low nominal increase of resources since 1992. Specific constraints are the following: (i) for the CUF, a high level of indebtedness equivalent to 58 percent of its annual resources. The CUF will partly restore its borrowing capacity in FY2001; (ii) for the Fes-Medina municipality, a progressive erosion of its fiscal resources since 1994, which will be counterbalanced by the VAT transfer, fully allocated in FY98. Its current level of debt and arrears is rather low (26 percent of total receipts), and the municipality enjoyed cumulative savings up to FY97, which was the year of new municipal elections; and (iii) for the Fes Jdid municipality, a low level of indebtedness but a very low level of collected taxes (5 percent), and a VAT transfer which will be cut in half starting in 1998. The impact of the VAT cut (due to strict application of allocation rules at the national level) is such that the borrowing capacity of Fes Jdid is extremely low. The consolidated budget of the three entities reached MAD 88.3 million in FY95 (US$10 million), with the following distribution: 41.6 percent for CUF, 39.1 for Fes-Medina, and 19.3 percent for Fes Jdid. Prospects: Applying the Fonds d'equipement communal (FEC) criteria for assessing the borrowing capacity of a municipality (the annual payment of the outstanding debt to current revenue ratio should not exceed 40 percent), the municipality of Fes-Medina will not only be in a position to fully face its debt burden linked to the project, but will be able to self-invest or to borrow for additional operations (Annex 5). Two main factors are contributing to this situation: savings in expenditures starting in FY98, and the VAT transfer. These prospects do not take into account the municipality's potential for mobilizing additional resources. According to a proposed and agreed-upon Resource Mobilization Plan, Fes-Medina's municipal revenue could be increased by 40 percent in nominal terms over the medium term (four years). This plan encompasses management and institutional strengthening, such as training of key municipal staff, computerization of municipal services, and management assistance for concessions. 15. Technical assessment: The technical viability of subcomponents is assessed by ADER-Fes staff with inputs from various municipal agencies and Bank review. Part of project implementation will depend on scientific and cost-effective techniques. A conservation laboratory will be established, and a citizen's advisory service will be set up for owners and renters of historic properties who wish to improve their housing, shops, or workshops. Training will be provided for architects and craftspeople to improve their conservation awareness and skills. 16. Institutional assessment: Executing agency status: ADER-Fes was created in June 1989 as a joint stock company with a capital of MAD 5.0 million, and as the main executive agency for the rehabilitation of Fes-Medina. The State is the predominant stockholder (99.9 percent), along with the Communaute urbaine de Fes, the Caisse de dep6t et gestion (CDG), the Credit immobilier et hdtelier (CIH), Association FES-SAIS, and the two municipalities (Fes-Medina and Fes Jdid). In addition to each shareholder, eight ministers or their representative are members of the board. Since its creation, the Minister of Interior has been the president of the board. ADER's general manager has been appointed by the Minister of Interior, with a large degree of autonomy for managmig the company. ADER is, however, under the strict accounting and financial control of the Minister of Finance (ministerial instruction dated November 10, 1992, and ministerial order dated December 22, 1992, with the appointment of a financial inspector and an accounting officer). As of December 1997, there were 42 permanent staff working for ADER, of which 14 are high-level staff and 14 are short-term staff. Activities: (i) architectural, scientific and technical studies related to conservation heritage within the medina; setting up and monitoring the medina's GIS database; (ii) monitoring the rehabilitation of historic monuments with grant funds from various sponsors; (iii) emergency actions on decayed housing, whenever occupants are threatened and at the request of the municipality; (iv) delocalization of polluting activities; and (v) land development outside the medina, as a source of cross-subsidized activities for the financing of points i, ii, and iv. 17. Social assessment: The social assessment consisted of a social analysis of current behavior of the inhabitants of the medina and a participatory evaluation of the expected effects of the project. The aim of the assessment was to understand the dynarxiic behavior of medina residents with a view to maintaining and amplifying the positive effects to be induced by the proposed project, while minimizing negative impacts. Methodological choices made by the investigators gave priority to discovering the dynamic of the behavior of the medina residents, Project Appraisal Docutient Page 10 Fes-Medina Rehabilfteion Project Kingdom of Morocco positive and negative, and seeking out those dynamics on which improvement programs can be based. The assessment was carried out by a multidisciplinary team of researchers from Fes, divided into three subteams on housing, cultural heritage, and business. The assessment was based on an analysis of existing data in order to refme hypotheses and improve sample selection for surveys. The team used participatory surveying methods and workshops as the techniques of research and communication. Finally, a panel was convened to react to the findings and advise the research team. The social assessment was helpful in engaging the population and Government representatives in dialogue and beginning the process of consensus building. The main findings related to the priority placed by residents were as follows: creation of employment, provision of water and drainage, the elimination of ruined buildings, the need for improved street access, and better public security. The assessment revealed that the deteriorated state of housing is a central problem experienced by many families. Residents view the difficult access for vehicles in parts of the medina as a serious problem and an obstacle to improving living conditions. The social assessment demonstrates the strong ties that artisans have to the medina. These findings have been used to adjust and modify the composition of the project so as to respond more effectively to critical deficiencies in urban living conditions. 18. Environmental assessment: Environmental Category [ ] A [X] B [ ]C The environmental category of the project is rated B. The new project design avoids disruption of the historic fabric of the Medina, and minimizes negative impact on residents and economic activities. Under the project, basic services such as first aid, fire protection and security will be provided through the development of an emergency network within the old city. Currently, the pedestrian network of alleyways encompasses some of the narrowest pathways in urban settlements and are depriving residents of access to emergency services, devalorizing the historical, cultural and architectural heritage of the Medina. Minor adjustments to corners and facades on the ground of 33 buildings and 26 economic activities along the network will allow the creation of a comprehensive emergency network. Among these 33 buildings, which currently house 60 families, only three are of "significant" cultural value, and nine of "medium" value. Special care will be taken to ensure that they are restored to their original condition, or better, following the modification work. All structures affected by the project have been surveyed and a preliminary estimation of the modification works to be undertaken has been included in the project's cost. Interviews of households have been undertaken in coordination with the local authorities, the Wali of Fes, and the Govemor of Fes-Mddina. Data available on each household include: the number of members and relationship to the head of the household; employment information, including place of work; household income; and location of educational establishment attended by school-age children. Temporary Affected Buildings and Dwellings Buildings Dwelling Units Fes Bali 29 42 Fes Jdid 4 18 Total 33 60 Given the possibility of structural instability in structures to be modified, some households could be subject to short term loss of occupancy. Most of the works involving modification of commercial buildings will be done at night, and therefore do not require temporary move. There is no loss of income anticipated with potential temporary move of households. Should a temporary move occur, accommodations will be provided by local authorities who have already anticipated such accommodations for 29 households. This number covers contingencies by a very safe margin, since average temporary move, if any, should not last more than three weeks. A full environmental assessment, which includes detailed information on the affected households, is available in the project files. 19. Participatory approach: Identification/Preparation Implementation Operation Beneficiaries/community groups IS COL COL Intermediary NGOs IS/CON COL COL Academic institutions: Harvard and Fes universities COL COL COL Local government IS/CON/COL COL Ministry of Cultural Affairs IS/CON/COL COL Ministry of Habous CON CON Ministry of Tourism, Hotels & Tour Operators CON CON/COL UNESCO IS/CON IS/CON IS/CON Other Donors IS/CON COL COL Project Appraisal Document Page 1 1 Fes-Medina Rehabilitation Project Kingdom of Morocco 20. Sustainability: The sustainability of project benefits will be dependent on two main factors: (a) the reaction of the medina's residents to overall improvements brought about by the project. According to this criteria, a sustainable project would imply an increasing level of private investment in the medina, particularly in the housing stock and in commercial and tourism activity. Over the long term, reaching a leverage ratio of three for each dollar of project funds would ensure this sustainability. The participatory approach adopted during project preparation should contribute to this goal. The current law on housing rent, however, may impede it; and (b) the strengthening and effective participation of local entities, in particular the municipalities of Fes-Medina and FHs Jdid. Should the relationship between ADER-Fes and the municipalities be strengthened, as planned under the project, these key local entities would be in a better position to facilitate the empowerment of the medina's inhabitants in the self-rehabilitation process of the historic city. 21. Critical Risks (see fourth column of Annex 1): Project outputs to development objectives Risk Risk Rating Risk Minimization Measure Development Objectives National rent policy inhibiting private High to moderate Caps on rent increase, limitations on rent termination and other terms of Dahir 1-80-315 investment in housing (25/12/80) aimed at protecting renters are disincentives for owners to maintain and rehabilitate their properties. A draft reform law has been under consideration by the National Assembly for years. Mitigation under the project will come from supporting specific partnerships between owners and renters to rehabilitate historic properties. The impact of current laws and mitigation measures on project objectives will be assessed at mid-term review, with a full report to GoM. Cooperation with the habous Moderate to high The Ministry of Habous is the largest property owner in the medina. Public or private habous are involved in some 4,500 co-ownerships and own all religious buildings. Given the habous' internal rules and organization, conflicts with civil society may occur and impede their participation in the project. Since their commitment to cooperate has been partly reached, mitigation would only come by developing partnerships for selected operations, on a case by case basis. Project Components to Output Implementation of national law on Low to moderate Implementation of the law (Dahir 1-80-341 dated 12/25119980) is impeded by lack of heritage conservation management capacity and funds from the Ministry of Cultural Affairs (MCA). Mitigation would come from international pressure to apply World Heritage Convention (in coordination with UNESCO), by establishing specific incentives under the project, and by reinforcing the partnership between the MCA and ADER-Fes. Delays or time lag in upgrading key Low to moderate Most anticipated delays may come from lack of competent enterprises willing to work in infrastructures the medina's difficult urban environment. Part of this risk has been anticipated by dividing civil works operations into small packages. Another risk may come from the implementation of the BOT scheme for building and operating most of the medina's planned parking facilities, since the number of potential operators or concessionaires is unknown. Carefully reviewed bidding documents and concession agreements, imposing reasonable risk burdens upon the concessionaire, along with sound financial return, should encourage potential operators. Environmental policies either not yet Low to moderate Basic environmental legislation and a corresponding regulatory framework are lacking. defined at national level or not enforced The issue is, however, currently under consideration by the Government, with Bank at local level, particularly in medina assistance. A specific study on the medinas' environmental standards, to be conducted environment during the project, will help define an appropriate policy. Availability of grant and counterpart Low to moderate While the risks of the non-availability of counterpart funds is low, availability of grant funds funds from donors, particularly for the poverty alleviation component, is still unknown. The proposed donors' conference, with leading roles by UNESCO and the Bank, may moderate this risk. Project Appraisal Document Page 12 Fes-Medina RehabiliRation Project Kingdom of Morocco Financial sustainability of ADER-Fes Moderate ADER's funds will come mainly from fees paid by the State or the municipalities to implement project activities on their behalf. Assurance of effective payments would come from the contractual agreements linking the parties. Overall project risk rating Moderate To lower project risk, especially with regard to the central development objective, the Bank will use the mid-termn review to reassess the participatory approach and strengthen the institutional aspects of the project. The setting up of a Fes-Medina Foundation for Cultural Heritage, which would help to secure funding and partnership, will be discussed. 22. Possible controversial aspects: The project preparation period has allowed much discussion and consensus to take place. Controversial aspects may come from the dominant role of ADER-Fes. It is also possible that other Moroccan cities will see the project as favoring Fes over other cities. Block 4: Main Loan Conditions 23. Planned actions: * By December 31, 1998 (and each subsequent year thereafter): all land acquisition related to the work program of the coming fiscal year should be either completed or at a satisfactory stage. * By mid-term review (October 2000): ADER will issue a comprehensive mid-term review of the project, in consultation with the two steering committees and the two municipalities, with particular focus on parallel financing activities, relationships between owners and tenants, habous participation, the setting up of a Fes-Medina foundation, and a progressive shift in equity from the State to the municipalities to better ensure the sustainability of ADER-Fes. 24. Other: * As primary obligor, the Govermment will guarantee the due and punctual payment of the loan made to the municipality of Fes-Medina; * Establishment within ADER-Fes of a unit of community development satisfactory to the Bank, in charge ofthe poverty alleviation component (elffective). * Local authorities should provide temporary shelters to households affected by a short term loss of occupancy during rehabilitation works (commitment letter has been received). * Project records, accounts and Special Accounts should be audited each year; * ADER's fnancial statements should be audited each year by an independent audit; * Audit reports should be made available to the Bank no later than six months after each Fiscal Year; * Retroactive financing is authorized under each loan, up to an aggregate amount not exceeding US$700,00 equivalent for expenditures made after November 15, 1997. * Special Accounts under the Government and municipality loans are limited to US$700,000 and US$1.0 million equivalent, respectively. The Special Account for the municipality will be open in the Regional Treasury of Fes. * Withdrawals on the basis of statements of expenditures are authorized for goods, civil works, consultants' fmns, and individual consultants, with contracts not exceeding US$100,000, US$150,000, US$50,000 and US$25,000, respectively. * ADER's unit in charge of the poverty alleviation component (CDU) should have a separate accounting system; * A mid-term review will be hold by October 30, 2000 on the basis of a report prepared by ADER-Fes on or about April 30, 2,000. * A plan for the future operation of the project will be presented to the Bank not later than six months after the closing date, set for December 31, 2003. Project Appraisal Document Page 13 Fes-Medina Rehabilitaton Project Kihgdom of Morocco Block 5: Compliance with Bank Policies [XI This project complies with all applicable Bank policies. Team Leader: Francois Amiot Sector Director: Jean-Claude Villiard Country Director, Christian Delvoie Project Appraisal Docment Page 14 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 1 Annex 1 Project Design Summary Narrative Summary Key Performance Indicators1 Monitoring and Supervision Critical Assumptions and _ ____________________ Risks CAS Objective (CAS objective to Bank mission) Fes-Medina, as a pilot operation in Coordination within the medina of Fes wilaya steering committee, International aid is mobilized cultural heritage and conservation, related donors and Bank projects Bank missions, UNESCO reports (success of donors' with development of local and (water, sewerage, Sebou Basin), with conference) and partnerships intemational partnerships impact assessment on social, are consolidated environmental, and cultural conditions Project Development Objectives (Development Objectives to CAS Objective) Conserve and rehabilitate the Overall improvement of medina GIS database: review of demand National rent policy historic Medina of Fes through housing stock (referential rating from for rehabilitation permits (V2), inhibiting private investment empowerment of inhabitants and end 1996) and effective conservation and review of other construction in housing rehabilitation and local institutions. of key cultural assets along tourism permits through the munici- cooperation with habous itineraries. To stop the cycle of palities' files. Ministry of decline, rehabilitation permits should Cultural Affairs' and ADER's increase by 3% a year and repair data on effective funds mobilized permits by 5% a year starting CY2. for conservation of key cultural Key indicator over the long run (10 assets. to 15 years) is the public-to-private leverage ratio, including the financing of historic buildings by private sponsors and Habous, which should reach 1: 3. Project Outputs (Outputs to Development Objectives) 1. Development of an incentive Demand for rehabilitation of historic GIS database, quarterly reports, Implementation of the framework for cultural heritage properties and effective works on: 47 tourism office statistics; Tours national law on cultural rehabilitation units CY2; 56 units CY3; 65 units Operators; number of entries in heritage conservation CY4 and 75 units CY5. the Cultural Heritage Center. Six tourism itineraries implemented as follows: CYI: first itinerary (IT); CY2: 2 ITs & Heritage Center in operation; CY3: one IT; CY4: 2 last Its. Number of historic buildings or monuments re-used for economic or social activities. 2. Improvement of critical access Emergency access: 20% CY2; 40% Quarterly reports, Bank Delays or time lag in to the medina CY3; 20% CY4; 20% CY5. supervision reports, medina upgrading key infrastructures Access links: 20% CY3; 40% CY4; technical committee (water & sewerage). Efficient 40% CY5. procurement procedures Main access roads: 35% CY3; 45% under the tri-partite CY4; 20% CY5 agreement (Convention). Parking: 15% CY3; 25% CY4, 60% CY5; First BOT bids for private sector: CY3 Baseline and targeted values should be shown, with the latter divided into values expected at midterm, end of project, and full impact. Project Appraisal Document Page 15 Fes-Medina Rehablitation Project Kingdom of Morocco Annex I Narrative Summary Key Performance Indicators' Monitoring and Supervision Critical Assumptions and Risks 3. Improvement of medina Reduction of solid waste stock by Management contract with Environmental policies either environment 40% end of CY2; 40% end of CY3; municipalities and operators, not yet defined at national 20% end of CY4. Efficiency of ADER's quarterly reports. level or not enforced at local garbage collection by 40% CY3 level, particularly in the (add. 5 tons per day), and 40%/o by medina environment CY4. Eight five artisan units operating Monitoring indicators of under new environmental standards pollution abatement. end of CY4. Satisfactory implementation of the "short termn loss of occupancy" plan. 4. Use of rehabilitation process to Number of direct labor-intensive Directorate for community Counterpart and grant funds alleviate poverty jobs created through UDC development (ADER-Fes). available in sustainable way cumulating as follows: 100 (CYI); Monitoring indicators should 300 (CY2); 600 (CY3); 800 (CY4); include: social impact (no. of and 900 (CY5). Specific indicators beneficiaries from the medina); of cost per job created (should be average no. of bids per call for less than US$300). bids; average time of processing By CY3, emergency works on contracts (days following bids); collapsed buildings should leave percentage of payments to place to preventive works (50% contractors within 15 days of CY3; 75% CY4 & 100% CY5) invoice receipt. 5. Local institution strengthening Monitoring of ADER financial Annual analysis of municipal Financial restructuring plan indicators according to Annex 5; budgets and ADER balance of ADER completed by Monitoring of Fes-Medina sheet, expert reports, OFPTT effectiveness. municipality indicators according to revenue ratios in Annex 5; Training program as follows: high level staff: 60 (2/3 by mid-term); micro-enterprises' managers: 20 (1/2 mid-term); staff micro-enterprises: 40 (1/2 mid-term). Project Appraisal Document Page 16 Fes-Medina Rehabiilttion Project Kingdom of Morocco Annex 1 Project Activities Loan Amount (US$'000) (See Annex 2 for a detailed description). Satisfactory disbursement, according to estimated schedule: 1. Rehabilitation of built heritage 1.1 Rehab. facility GoMI 487.0 ADER & Direction regionale du Ministere de la culture 1.2 Tourism and Heritage GoM 2,181.0 ADER & Direction regionale du Ministere de la culture 2. Rehab. of infrastructure Satisfactory disbursement, according to estimated schedule: 2.1 Emergency access networl GoM 1,812.0 ADER & Direction regionale des Travaux publics 2.3 Improvement of access LGF 1,880.0 id 2.4 Transfer facilities LGF 539.0 Municipality 2.5 Traffic management LGF 343.0 id 2.6 Parking facilities LGF 891.0 id 3. Environment Satisfactory disbursement, according to estimated schedule: 3.1 Pollution abatement for traditional industries LGF 1,077.0 ADER & Association of Artisans 3.2 Solid waste collection LGF 1,152.0 Municipality (concession) 3.3 Community education LGF 155.0 Municipality and ADER 4. Community development Satisfactory disbursement, (labor-intensive works) according to estimated schedule: 4.1 Clearance of derelict sites LGF 452.0 Directorate for Community 4.2 Urban landscape LGF 310.0 Development (ADER) 4.3 Emergency works LGF 1,005.0 id 5. Institutional Satisfactory disbursement, according to estimated schedule: 5.1 Support to Fes municipalities LGF 460.0 Municipality (President) 5.2 Support to ADER-Fes GoM 457.0 ADER 5.3 Laboratories GoM 300.0 ADER 5.4 Training GoM 219.0 OPPRT, ADER 5.5 Further studies GoM 280.0 ADER TOTAL 14,000.0 1/ NOTE: The name of the financier appears in front of each activity: GoM (central govemment); LGF (local govemments of Fes-Medina and Rs Jdid); P (private sector). Projec Appraisal Document Page 17 Fes-Medina Rehabilitatlon Project Kingdom of Morocco Annex 2 Annex 2 Detailed Project Description Project Component 1 - Rehabilitation of Built Heritage This component includes the following complementary activities, which are described below: (a) establishment of a rehabilitation or grant facility to support private initiatives in historic building conservation, including innovative rehabilitation of historic housing; and (b) the development of new tourism itineraries, coupled with the conservation or rehabilitation of historic buildings. (a) Rehabilitation facility (State fnancing): This facility would amount to MAD 6.0 million (with potential extension under parallel financing) and is expected to induce private investment for the rehabilitation of about 250 historic domestic or commercial premises (souks, fondouks, workshops), according to the following pilot scheme: (a) a grant of 20 percent of total rehabilitation cost estimate (with an upward limit of MAD 40,000) will be allocated to any owner willing to: (i) rehabilitate a building listed as historically significant; or (ii) enter in a partnership agreement with co-owners or renters, including the habous, to facilitate such operation; (b) a grant of 10 percent of the estimated cost (with an upward limit of MAD 20,000 to improve or introduce amenities in dwellings (e.g., bathrooms, kitchen, independent entrance). Selection of units to be rehabilitated would start in the areas benefiting from infrastructure improvement, and would proceed over the longer term from quarter to quarter, with the assistance of local associations (associations de quartier). The selection process will be the following: any potential beneficiary will send three documents simultaneously to the municipality: a building permit issued after design and techniques are certified by a private expert; a demand for registration under the heritage list; and a demand for grant. These documents are then reviewed by an enlarged municipal building committee, with representatives of the Ministry of Culture, and the Governor of Fes-Medina and ADER-Fes as technical advisers. The list of selected beneficiaries is then sent to the Governor for approval. The grant may be used up front to pay for this expertise, and is then distributed according to the progress of the works. If demand exceeds available fumds, priority will be given to social considerations, particularly when local associations have been able to raise funds for the beneficiary. If, on the contrary, the demand is low, the project would provide partial funding for innovative operations aimed at improving renovation designs and techniques, and reducing costs by introducing new building materials. Priority would be given to key historic buildings in strategic locations, with potential reuse by community activities (training centers, crafts centers, children or women centers). Complementary funds may also be provided from proceeds of commercial lots sold along the new access network. (b) Tourism and preservation of cultural heritage (State financing): This critical activity, amounting to MAD 26.0 million, includes: (i) the creation of six new tourism and thematic itineraries within the medina; and (ii) the creation of a Heritage and Cultural Animation Center (Centre de patrimoine et d'animation culturelle). The former would lead to targeted investments in historic buildings (palaces, medersa, mosques, fountains), improvement of signs in the medina, and development of historic gardens. The center would be located in a rehabilitated palace (MAD 2.5 million) and would serve multiple functions such as information center, research center, international training on cultural heritage conservation, etc. It would be launched by ADER, then managed as an associative organization, with bylaws similar to those of the National Trust of Great Britain. The Centre de patrimoine would be self-financing. Along with this activity, several supporting actions would be implemented: establishing a monitoring and coordination unit to liaise with public and private partners; training professional guides and launching of information campaigns for the medina's residents; the marketing of the Medina of Fes among tour operators; etc. (see project document). Specific economic analysis of the tourism component is available in the project files. Project Appraisal Docurnent Page 18 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 2 Project Component 2 - Improving Critical Access to the Medina This key component, which represents 50 percent of total project cost, will: (a) provide access for emergency public services extending to the center of the medina; (b) improve critical links with medina entrances (there are eighteen gates along the medina wall, which delineates a pedestrian area of 270 ha, with the exception of some roads built at the beginning of the century); (c) facilitate ease of movement for residents, businesses, tourists, and goods; (d) increase parking spaces to the level of demand: and (e) increase traffic safety and improve traffic management. (a) Emergency Netvork and connecting links (State financing). Almost one quarter of Fes El Bali is inaccessible by motorized vehicles, i.e., located more than 200m from a street. Emergency vehicles (police, fire, ambulances) and public works vehicles (sanitary, waste collection) cannot access those areas. Street porters and animals are used for transporting goods within the medina, including the collection of solid waste, the transport of construction materials, and the disposal of scrapped materials. The presence of animals is a source of sanitary problems, not counting their abysmal living conditions. The project would finance the establishment of an emergency network that would be accessible to narrow vehicles, less than 1.7 m wide. Such vehicles could also be adapted as transport vans, and would replace animals in most instances. In addition, 15 kilometers of pedestrian streets would be improved, in coordination with RADEF in charge of improving the water and sewerage system of the Medina's network with Bank support. (b) Access network (Municipalityfinancing). The project would also finance the construction of four streets accessible to motorized vehicles, with widths of 6.0 m or more and proper sidewalks, to improve the traffic pattern within the medina, segregate pedestrian and vehicular flows, and reduce the area inaccessible to motorized vehicles. The following access streets were identified as showing the most acute problems of congestion and/or accessibility, and are included in the project: Ain Azliten, Oued Zhoun, Bin Lamdoun, and Andalus Axis. All of these streets have no outlets, to discourage through traffic within the medina (see maps). (c) Transfer (logistic) facilities (Municipality financing). There is a lack of proper passenger and goods transfer facilities at the gates of the medina, hence the congestion and the delays incurred by all traffic at those locations: taxis, buses, trucks, and pedestrians The project would finance the establishment of facilities such as goods transfer areas, pedestrian waiting facilities, and bus and taxi stations for the main Medina gate (place Boujloud), while private investors would be sought to finance the construction of commercial spaces and warehouses in the vicinity of the transfer facilities to increase their productivity. Such facilities would have to be built not only at Place Boujloud, but also at Bin Lamdoun, Talaa Kbira, and Place Fes Jdid. (d) Parkingfacilities (Municipality andprivate sectorfinancing). There were approximately 3,100 parking spaces in the medina and vicinity, excluding the 250 illegally parked vehicles on sidewalks and other public property, at the time of the surveys. Analysis showed that there is a need for 400 additional spaces to satisfy the current demand, and that this figure will increase to 600 by the year 2000. Currently there is no incentive, for instance through an adequate fare structure, to utilize the available parking spaces in a more efficient manner. This results in parking facilities, especially within the medina, being saturated and crumbling from lack of maintenance. The project would finance the construction and/or the rehabilitation of three strategic parking lots or garages (Talaa Kebira, Derb Ameur and Place R'Cif), while six other parking areas (Oued Zhoun, Ben Lamdoun, My R'Chid, Makhfia, Bab J'Did, and Fes-Jdid) would be financed by private operators under Build, Operate and Transfer (BOT) or concession schemes. These parking lots and garages have been selected to provide the highest level of service possible to their users, the inhabitants of the medina, its visitors, and the people who work there. Under the BOT schemes, property acquisition and design of facilities would be the responsibility of the municipality, and construction, maintenance and operation would be the responsibility of the concessionaire. Concession packages should be small enough to be of interest to local entrepreneurs. Although foreign operators should not be prevented from bidding for a concession, the size of the operation is not large enough to generate much interest from foreign bidders. In some cases, the Municipality could develop a concession package in which one clearly financially viable parking concession would help subsidize a marginal operation that has some other benefits from the point of view of the municipality. Project Appraisal Document Page 19 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 2 (e) Traffic management (Municipality financing). The lack of local expertise in traffic planning and operations often prevents the solution of even the simplest problems. There is also the problem of traffic safety within the medina itself, especially with regard to pedestrians. On the highway loop that circles the medina, numerous conflicts among passenger cars, buses, and trucks, especially at intersections, are a major cause of accidents involving pedestrians, and a source of delays. The project would recommend simple interventions to improve traffic safety: horizontal and vertical traffic signing, pedestrian markings, traffic signals, and channeling of traffic flows. The establishment of a Traffic Bureau within the Public Works Department of the Fbs-Medina municipality would support small projects that would take into account local particularities: street, alley and intersection design, traffic signing and traffic signals; parking entrances and exits; bus stops; truck loading and unloading facilities; pedestrian waiting areas. The Traffic Bureau could also propose improvements to the RATF bus network, with a view to optimizing bus service to and from the medina. Project Component 3 - Improvement of the Urban Environment In addition to ongoing water and sewerage rehabilitation (Loans 3664-, 4010-MOR, and FADES), the project aims to: (a) improve solid waste collection through provision of equipment; and (b) minimize polluting industry within the medina by providing improved workshop facilities (fondouk) for the most polluting traditional activities (copperware manufacturers and retailers) within the medina. The construction of two planned fondouks would provide space for customary activities, such as metal working, an exhibition space for arts and crafts, and a training center to ensure the continuity of the city's handicrafts. This last activity has been investigated by the Swedish Cooperation and would be financed by the State. Solid Waste Disposal (Municipalityfinancing) The production of household waste in the medina is 75.2 tons a day, and that of the craft industry is 63.7 tons a day. It is expected that this last figure will drop to 20.55 tons a day once the polluting activities are transferred to Ain Nokbi (works in progress). This would result in 95 tons of solid waste being generated in the medina each day. The collection would be done by a private contractor, under concession arrangements, with the municipality (currently under discussion). The topography of the city and the narrowness of the streets impose considerable constraints on the collection of household wastes. Collection must be adapted to the existing and projected circulation network, depending on its category: access, emergency roadway, pedestrian link. Households will be expected to set out their waste in plastic bags at a fixed hour every evening, immediately prior to collection. This will take place either with carts, in the areas where descending slopes are gentle, or with donkeys, where slopes are steep (step 1). The collected bags will then be deposited along the emergency roadway network and the access roads in rolling plastic bins (step 2). Small dump trucks that are no wider than 1.4m will unload the bins and deposit them in waste compactors or open containers (step 3). Trucks will then pick up their loads and transport them to the public waste dump. Changes or extensions planned for the existing dump will be carried out by the Urban Community of FRs (step 4). Total investment in equipment will be approximately MAD 27.0 million, of which 14.5 million of basic equipment will be fmanced by the project. Most of the equipment will be leased to the contractor. In addition to these actions, a public awareness campaign around the environmental problems will be launched among the inhabitants of the medina, as well as among the artisans. Project Component 4 - Poverty Alleviation (Municipality financing) The goal of this component is to use the rehabilitation process to promote labor-intensive job opportunities, particularly among the unemployed and poor population of the medina and surrounding areas. It will also promote small-scale private sector contractors. Partly built on current experience in ADER rehabilitating the medina wall and launching emergency action for occupied housing falling in ruins, the component would be managed by a specific directorate of ADER-Fes (CDU, or Community Development Unit), under terms and conditions satisfactory to the Bank. The proposed program to be implemented by the CDU would cover the following activities: clearance of derelict sites; emergency works on housing; clearance of solid waste stock, particularly in the historic sewerage system and in the medina rivers (oueds); urban landscape; and rehabilitation of community facilities. Subprojects were selected on the basis of the following eligibility criteria: to reflect priority needs (as reviewed by the social assessment); labor intensive (equivalent to 70 percent of project costs); to be easily divided into work packages averaging MAD200,000 each; a potential for the creation of micro-enterprises; to involve mainly basic rehabilitation works and routine maintenance. Taking into account other labor-intensive works financed under the Project Appraisal Document Page 20 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 2 project or through agreed-upon parallel financing, it is estimated that the proposed program would culminate in providing 900 persons/year with job opportunities. This figure represents almost 30 percent of the employment needs of the poor and unemployed active population in the medina of FRs. The expected average monthly cost per job created is estimated at US$290, which is largely below the current cost of standard employment-generation programs run by the Government. Training for staff of micro-enterprises will be provided under the Institutional component. If the results match expectations, this component could be used as a pilot project for poverty alleviation in other urban centers and medinas of Morocco. Component 5 - Institutional Strengthening (mostly State financing) This component encompasses the following four activities: (a) resource mobilization program for the two involved municipalities (Fes-Medina will finance its own program), with focus on municipal management and organization (computerization of key municipal services, monitoring system for concessions, addressing tariff issues, etc.), municipal finances (fiscal policies and para-fiscal resources), and training of municipal agents; (b) strengthening of ADER-Fes through management assistance, and technical assistance; (c) setting up of a conservation laboratory to improve conservation teclmiques in the medina, and also at the national level; and (d) training programs managed by OFPPT and ADER, and adapted to various professional skills involved into the rehabilitation process in three priority areas: (i) construction and rehabilitation, with three workshops (architects, engineers, archeologists; technical staff; and unskilled workers); (ii) traditional craft industries, with particular focus on women; and (iii) labor-intensive methods, with training of managers of micro or small enterprises. Each training program will be implemented under a tripartite agreement among the ADER-Fes, the OFPPT regional office, and the trainers. KINGDOM OF MOROCCO FES MEDINA REHABILITATION PROJECT (07/13/97) Components Project Cost Summary (DH 000) (US$ '000) % % Total % % Total Foreign Base Foreign Base Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs A. Rehabilitation of built heritage 17,626 11,298 28,924 39 13 1,895 1,215 3,110 39 13 B. Road Infrastructure Rehabilitation 1. Historic and Emergency Networks 13,337 7,512 20,849 36 10 1,434 808 2,242 36 10 2. Iniprovement ofAccess to Medina 17,964 7,760 25,724 30 12 1,932 834 2,766 30 12 3. Equipment of access ways 3,688 2,222 5,910 38 3 397 239 635 38 3 4. Parkings 35,518 19,608 55,125 36 26 3,819 2,108 5,927 36 26 5. Traffic Improvements 3,064 1,788 4,852 37 2 329 192 522 37 2 Subtotal Road Infrastructure Rehabilitation 73,571 38,889 112,461 35 52 7,911 4,182 12.093 35 52 C. Medina Environment Improvement 14,042 13,788 27,829 50 13 1,510 1,483 2,992 50 13 D. Community Development 16,510 10,511 27,021 39 13 1,775 1,130 2,905 39 13 E. Institutional Strenghtening 7,659 10,359 18,018 57 8 824 1,114 1,937 57 8 Total BASELINE COSTS 129,407 84,845 214,253 40 100 13,915 9,123 23,038 40 100 Physical Contingencies 12,941 8,485 21,425 40 10 1,391 912 2,304 40 10 N2 Price Contingencies 22,550 12,176 34,726 35 16 1,520 730 2,251 32 10 Total PROJECT COSTS 164,898 105,506 270,404 39 126 16,826 10,766 27,592 39 120 i g h1 KINGDOM OF MOROCCO FES MEDINA REHABILITATION PROJECT (07/13/97) p Expenditure Accounts Project Cost Summary St (DH '000) (USS '000) iT % % Total % % Total Loca ForignForelgn Bass Foreign Bass Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs I. Investment Costs A. Land acquisition 1. Govemment of Morocco 3,592 - 3,592 - 2 386 - 386 - 2 2. Municipality of Fes Medina 5,812 - 5,812 - 3 625 - 625 - 3 3. Private Beneficiaries 2,250 - 2,250 - 1 242 - 242 - 1 Subtotal Land acquisition 11,655 - 11,655 - 5 1,253 - 1,253 - 5 B. Civil Works 1. Civil Works Government of Morocco 30,142 16,230 46,373 35 22 3,241 1,745 4,986 35 22 Municipality of Fes Medina 31,031 16,709 47,740 35 22 3,337 1,797 5,133 35 22 Private Beneficiaries 23,012 12,391 35,404 35 17 2,474 1,332 3,807 35 17 Municipality of Fes Jdid 4,499 2,422 6,921 35 3 484 260 744 35 3 Subtotal Civil Works 88,685 47,753 136,438 35 64 9,536 5,135 14,671 35 64 C. Goods 1. Government of Morocco 2,913 5,929 8,842 67 4 313 638 951 67 4 2. Municipality of Fes Medina 2,931 7,805 10,736 73 5 315 839 1,154 73 5 4. Municipality of Fes Jdid 81 215 296 73 - 9 23 32 73 - Subtotal Goods 5,925 13,949 19,874 70 9 637 1,500 2,137 70 9 D. Consultant Services 1. Govemment of Morocco 7,167 7,167 14,333 50 7 771 771 1,541 50 7 2. Municipality of Fes Medina 5,164 5,164 10,329 50 5 555 555 1,111 50 5 3. Private Beneficiaries 2,079 2,079 4,157 50 2 224 224 447 50 2 4. Municipality of Fes Jdid 912 912 1,825 50 1 98 98 196 50 1 Subtotal Consultant Services 15,322 15,322 30,644 50 14 1,648 1,648 3,295 50 14 E. Management Fees Govemment of Morocco 2,671 2,671 5,342 50 2 287 287 574 50 2 Municipality of Fes Medina 2,950 2,950 5,901 50 3 317 317 634 50 3 Private Beneficiaries 1,450 1,450 2,900 50 1 156 156 312 50 1 Municipality of Fes Jdid 750 750 1,500 50 1 81 81 161 50 1 Subtotal Management Fees 7,821 7,821 15,642 50 7 841 841 1,682 50 7 Total BASELINE COSTS 129,407 84,845 214,253 40 100 13,915 9,123 23,038 40 100 Physical Contingencies 12,941 8,485 21,425 40 10 1,391 912 2,304 40 10 i Price Contingencies 22,550 12,176 34,728 35 16 1,520 730 2,251 32 10 Total PROJECT COSTS 164,898 105,506 270,404 39 126 16,826 10,766 27,592 39 120 Price Coningencies22,550 12176 34,76 35 16 1520 730 2251 32 1 KINGDOM OF MOROCCO X y FES MEDINA REHABILITATION PROJECT (07113197) o Expenditure Accounts by Components - Base Costs 3 a (US$ '000) 0 w Road Infrastructure Rehabilitation Historic o Rehabilitation and Improvement Equipment Medina Physical 2 of built Emergency of Access of access Traffic Environment Community Institutional Contingencies eD heritage Networks to Medina ways Parkings Improvements Improvement Development Strenghtening Total % Amount 1. Investment Costs A. Land acquisition 1. Government of Morocco - 94 - - - - 292 - 386 10.0 39 2. Municipality of Fes Medina - - 553 - 72 - - - - 625 10.0 62 3. Private Beneficiaries - - 242 - - - - 242 10.0 24 Subtotal Land acquisition - 94 553 - 314 - 292 - - 1,253 10.0 125 B. Civil Works 1. Clvil Works Govemment of Morocco 2,344 1,774 - - - - 869 - - 4,986 10.0 499 Municipality of Fes Medina - - 1,815 526 849 356 - 1,522 66 5,133 10.0 513 Private Beneficiaries - - - - 3,807 - - - - 3,807 10.0 381 MunicipalityofFesJdid - - - - - 101 - 628 15 744 10.0 74 Subtotal Civil Works 2,344 1,774 1,815 526 4,656 457 869 2,150 81 14,671 10.0 1,467 C. Goods 1. Govemment of Morocco 115 - - - - - 308 - 528 951 10.0 95 2. Municipaiity of Fes Medina - - - - - - 1,021 - 133 1,154 10.0 115 n 4. Municipality of Fes Jdid - - - - - - - - 32 32 10.0 3 Subtotal Goods 115 - - - - - 1,329 - 693 2,137 10.0 214 D. Consultant Services 1. Govemment of Morocco 368 233 - - - - 97 - 843 1,541 10.0 154 2. MunicipalityofFesMedina - - 261 70 134 23 152 275 195 1,111 10.0 111 3. Private Beneficiaries - - - - 447 - - - - 447 10.0 45 4. Municipality of Fes Jdid - - - - - - 51 105 40 196 10.0 20 Subtotal Consultant Services 368 233 261 70 581 23 300 380 1,078 3,295 10.0 330 E. Management Fees Government of Morocco 284 141 - - - - 97 - 53 574 10.0 57 Municipality of Fes Medina - - 137 39 65 28 80 259 25 634 10.0 63 Private Beneficiaries - - - - 312 - - - - 312 10.0 31 Municipality of Fes Jdid - - - - - 14 25 116 6 161 10.0 16 Subtotal Management Fees 284 141 137 39 377 42 202 375 85 1,682 10.0 168 Total BASELINECOSTS 3,110 2,242 2,766 635 5,927 522 2,992 2,905 1,937 23,038 10.0 2,304 Physical Contingencies 311 224 277 64 593 52 299 291 194 2,304 - Price Contingencies m Inflation Local 318 235 333 67 669 57 217 292 116 2,305 - - Foreign 97 60 67 19 175 16 119 89 88 730 - - 0 Subtotal Inflation 416 296 400 86 844 73 335 381 205 3,036 - - Devaluation -108 -84 -116 -23 -225 -19 -74 -101 -33 -785 - Subtotal Price Contingencies 307 212 284 63 619 54 261 279 171 2,251 9.1 205 Total PROJECT COSTS 3,728 2,678 3,326 762 7,139 628 3,553 3,475 2,302 27,592 9.1 2,508 6 Taxes 577 388 417 115 1,025 93 589 540 485 4,227 9.1 384 > Foreign Exchange 1,434 949 985 282 2,494 227 1,749 1,332 1,314 10,766 9.1 979 KINGDOM OF MOROCCO X V FES MEDINA REHABILITATION PROJECT (07/13197) Disbursement Accounts by Financien -t (OH 000) (US$ 000) Municipality Municipality Municipality Municipality 0 Govemment Municipality Private of Fes-Jdid of Fes-Jdid World Govemment Municipality Private of Fes-Jdid of Fes-Jdid To_ World Bank of Morocco of Fes-Medina Beneficiaries (grant) (taxes) Total Bank of Morocco of Fes-Medina Beneficiaries (grant) (taxes) Total Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount A. Land Acqulsitlon 1 Govemment of Morocco - 4,418 4,418 - 451 - - - 451 2. Municipality of Fes Medina 0 7,442 - - - 7,442 - 0 759 - - 759 3 Private Beneficiaries - 0 - 2,826 - - 2,826 - 0 - 288 - 288 Subtotal Land Acquisition - 4,418 7,442 2,826 - - 14,686 - 451 759 288 - - 1,499 B. Clvil Works 1 Government of Morocco 40.373 18,309 - - - 58,681 4,120 1,868 - - - - 5,988 2. MunicipalityofFesMedina 41,563 0 18,848 - - - 60,412 4,241 0 1,923 - - 6,164 3 Private Beneficiaries - 0 - 45,092 - - 45,092 - 0 - 4,601 - - 4,601 4 MunicipalityofFesJdid - 0 - - 7,506 1,222 8,727 0 - - 766 125 891 Subtotal Civil Works 81,936 18,309 18,848 45,092 7,506 1,222 172,913 8,361 1,868 1,923 4,601 766 125 17,644 C. Goods 1. Govemment of Morocco 8,535 2,501 - - 11,035 871 255 - - - 1,126 2. Municipality of Fes Medina i0,710 0 2,675 - - - 13,385 1,093 0 273 - 1,366 4 Municipality of Fes Jdid - 0 - - 288 72 361 0 - - 29 7 37 Subtotal Goods 19,245 2,501 2,675 288 72 24,781 1,964 255 273 - 29 7 2,529 3. Consultant Services 1. Govemment of Morocco 14,320 3,580 - - - - 17,900 1,461 365 - - - - 1.826 2. MunicipalRy of Fes Medina 10,390 0 2,598 - - - 12,988 1,060 0 265 - - 1,325 3 Private Beneficiaries - 0 - 5,226 - 5,226 - 0 - 533 - - 533 4. Municipality of Fes Jdid - 0 - - 1,805 451 2,257 - 0 - 184 46 230 0 Subtotal Consultant Services 24,710 3,580 2.598 5,226 1,805 451 38,369 2,521 365 265 533 184 46 3,915 N, E. Management Fees 1. Govemment of Morocco 5,373 1,343 6- - - ,717 548 137 - - 685 2 Municipalty of Fes Medina 5,936 0 1,484 - - - 7,420 606 0 151 - - 757 3 Private Beneficiaries 0 - 3,643 - - 3,643 - 0 - 372 - - 372 4 Municipalityof Fes Jdid - 0 - - 1,500 375 1,875 - 0 - - 153 38 191 Subtotal Management Fees 11.309 1,343 1,484 3,643 1.500 375 19,655 1,154 137 151 372 153 38 2,006 Total 137.200 30,151 33,047 56,787 11,099 2,120 270.404 14,000 3,077 3,372 5,795 1,133 216 27,592 oa a, Project Appraisal Document Page 25 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 4 Annex 4 Cost Benefit Analysis Summary MAD million, mid-1997 Present Value of Flows Fiscal Impact Economic Financial Analysis Analysis Taxes Subsidies Benefits 564.9 Costs 409.8 Net Benefits 155.1 IRR 13.62 Main assumption: 1. The underlying assumption of the cost benefit analysis is that property values, either residential or commercial, would rise as a result of improved accessibility, the creation of an emergency network with fire hydrants and first aid stations, the repaving of streets, installation of additional street lights, collection of solid wastes, landscaping of new spaces, the availability of parking facilities matching demand, and new nonpolluting activities. Under the base case scenario, the flow of benefits is treated as a stock appreciating over a fifteen year period. 2. The impact area of the project is delineated only by abutting properties or parcels along the improved network (including the tourism network), as well as by pedestrian alleys opening onto the improved streets. However, a combination of physical factors, including steep grades, sudden narrowing of the alley, etc., would tend to restrict the positive benefits of the improved access (see attached map). 3. The incremental value attributed to the project is computed as the difference between the projected value of land in the impact area and the value of land outside the area, plus the value of the improvements to the property (rehabilitation works). Data on the evolution of land prices in Fes and the information on the sale and rental market in the Medina obtained through interviews with real estate brokers provided were supplemented by the exhaustive processing of all real estate transactions in the Medina over the 1990-1996 period for which notarial records were deposited at the registry. The data show appreciating values rather than disinflation even in the presence of deterioration and inadequate maintenance. It also clearly shows the impact of rent control on residential values, artificially deflating them. Because there is no vacant land other than ruins, transactions concern apartments (approximately 180 to 240 per year), commercial properties and shops (25 to 30 per year), and buildings (40 to 60 per year). This detailed data provided a solid statistical base for the computation of property values (Table is presented below). 4. The analysis was carried out on the premise that relative prices would remain constant through the 15 year timeframe of expected benefits. 5. The official exchange rate is assumed to reflect the opportunity cost of foreign exchange in Morocco. 6. The market price for each input adjusted for taxes and subsidies is assumed to represent a reasonable estimate of the economic cost. This assumption applies to property values recorded in official transaction documents, presumably underreported to avoid taxes. 7. The discount rate is the expected real interest rate of 10 percent. Project Appraisal Document Page 26 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 4 8. Maintenance costs are based on a schedule of I percent for the first three years, 2 percent for the second three years, and 5 percent thereafter. They applied to the value of completed public works and building improvements. 10. The base case scenario (cumulative flow of benefits) leads to an average growth of land prices of 5.25 percent in real terns for properties impacted by the project (versus 3 percent for those not impacted, as shown by the analysis of 2,288 transactions), and an average one-time jump in land value of 2 times the current value. Under these assumptions the project would reach a satisfactory IRR of 13.6 percent, despite additional costs in implementing civil works in the medina (mainly due to transport costs and archeological constraints). Switching values of critical items 11. The following critical assumptions were scrutinized through a sensitivity analysis: (a) an increase in costs by 10 percent and 20 percent; (b) a real growth in land prices for impacted properties decreasing to 5 percent, or increasing to 6 percent; (c) variation in the rising factor of properties impacted by the project versus those not impacted, established between 1.7 and 3; and (d) switching from a cumulative flow of benefits to an annual flow. 12. The sensitivity analysis of the base case scenario shows remarkable robustness to change in costs, meaning that inadequate access is a critical constraint on economic potential. The project is more sensitive to changes in the appreciation of property values: the low case (combination of two negative factors) would decrease the IRR down to 10.5, while the high case would raise the IRR up to 19.6 percent. The low case would occur if delays in the implementation of public works are significant. In any case, the average IRR would be much higher if a change in national housing policy were applied to the current tenant protection system. Results are presented in the following pages. 13. If the flow of benefits is annualized, the IRR would be higher and would reach 23.8 percent by year ten, when the development impact of the project has only reached 68 percent of its potential. As shown below, the annualized method is also very robust to change in costs. Year Base Cost Cost Increase of 10% Cost Increase of 20% ____ |_ NPV (MAD 000) IRR (%) NPV (MAD 000) IRR (%) NPV (MAD 000) IRR (%) Year 6 (12,550) 4.9 Year 8 31,182 18.4 9,402 12.3 (12,379) 7.2 Year 10 68,105 23.8 45,166 18.3 22,227 13.8 Year 15 | 155,052 l 28.81 132,683 | 24.3 110,314 20.7 * Value of land made accessible rises to 2,000 MAD/m2 and grows at an annual rate of 5.25%. 14. The above results indicate that tradeoffs between conservation heritage and economic development in such historic cities as the Medina can be solved by developing appropriate incentives to induce private investment both in housing and economic activities. Improvement of legal procedures to facilitate such investment, but also progressive actions to simplify complex tenure and occupancy should support the objective of improving accessibility while alleviating poverty and preserving the cultural heritage of the Fes-Medina. Project Appraisal Document Page 27 Fes-Medain Rehab1Uton Prjec Kingdom of Morocco Annex 4 Real Estate Values 1990-1996 1990 1991 1992 1993 1994 1995 1996 Total Buildings Mean Value Dh/m- 1,730 1,526 1.669 | 1.410 3.332 1.908 2.233 1.884 Average area m- 125 119 170 128 | 91 86 71 121 Transactions [44 1 63 62 I 53 1 43 _ [49 12 326 Dwelling Units/Apartments . Mean Value Ditm- 1,186 1.250 1,804 1.630 1.595 | 1,716 1,621 1,532 Average arca m- 60 60 80 50 56 | 52 38 57 Transactions 169 246 123 231 244 270 82 1,365 Shares in Undivided State Mean Value Dh/mr [ 1.531 1,540 2.262 2.005 1.892 | 2.176 1,448 | 1,857 Average area m- 37 41 ] 63 52 33 39 36 42 Transactions 34 42 21 45 58 46 18 264 Part in Joint Ownership Mcan Value Dh/m- | 1.185 3 3.244 3.500 2.290 1.727 1.846 3.582 r 2,310 Averagearea rn' 20 | 26 20 18 44 21 10 23 Transactions 6 J 8 1 13 6 7 4 J 45 Stable Mean Value Dh/m- f 1.657 1,052 1 1,497 | 2.254 T | 1 1,520 Averageareamm- 30 29 j 25 1 36 j 1 j 28 Transactions 2 2 3 1 j 7___8 Commercial Premises Mean Value Dh/m-r 5.676 f 5.646 6,253 8,043 | 7,611 8,687 5j828| 6,981 Averageaream-1 34 23 45 21 | 26 | 26 10 1 27 Transactions f 26 1 24 1 25 133 27 1 29 15 179 Commercial Properny in Individual Estate Mean Value Dh/m- 1 2,250 | 5.777 2.996 6.373 10.428 | 5.343 8.681 5,698 Averageareamn m 40 4 47 44 1 32 1 7 1 4 2 7 33 Transactions ] 2 [ 8 [ 2 6 [ 2 | 3 | 2 _ 25 Commercial Property -zina" Status MeanValue Dh/m- |12.918 f 5.727 9.343 9.813 11.802 10.502 { 28.751 13,732 Average area m- I i3_ 1 9 _ _13 ____5___ 4 _ S Transactions 7 3 5 6 6 6 7 40 Commercial Ground Floor + Residential Floor Mean Value Dhim- I . 1.278 916 8 867 | | | 978 Average area m- T f 1 90 187 44 1 1 139 Transactions [ _ C I __ 3_ _ I ______S Shop Mean Value Dhimn 17.292 5.444 _ 3 6.099 2.500 7,968 Average area m- | I T I I 29 _ _ 8 | | 17 Transactions [ 2 3 3 1 9_ 1 3 i i I i: j 9 Other Activitn Space _ Mcan Value Dh/rm- _ 8.508 3.333 3 3.250 3.700 T 6,528 1 9.298 7,171 | _Average area m _ [ | 6 | 6 | 20 10 [ 12 | 10 | 10 Transactions [ ] 3 I [ I I 2 [ 4 _12 Storage/Varehouse Mean Value Dh/mr' 1.071 .000 1 1 096 __1 775 j _ I 1.986 Averageaream' | 140 r 6 | 178 [ | 129 | |_ |_ 113 Transactiorns I ] I J I 4 | I !_____4 Ruins Mean ValueDh/m- _ 7 1.247 700 983 L | 571 _ |9SS 3 Average area m- ___ 211 3200 { 0 ___ I 01-140 3___ 3162 Transactions r_ T 2 T 2 1_ i_ 1 1 1 6 TOTAL Mean Value Dh/mrn 4,650 3.980 T 3.130. 3.692 4.038 4 4178 7.680 3 4.319 Average area m' 37 2983 3 56 46 40 24 T 60 Transactions A 294 3 408 3245 j 401 j 91 j 415 j 144 32,298 SL Uulit fur lluusbisi & tUrbasiztui/stt Ageole te dc l)densirkucalati . : ' v'z (I raduate Schoolof Desigy e*{lRhhltlhl :l ?ilet-AOs5** lirai iicst d aNiitnd i Economiiic Asscss,iieiit CII,I,,I.Ifiv'c Plowl, of lle fllts DIltlnItIslk U˘vtfptt ttiSvarIn' . - - IIASE YE.Alt I VE.l 2 YEAR 3 YEiAt. 4 V.AR 5 l'EAl 6 'EIAR 7 VlEAR f YEAR 9 VI'ARl IU iiI 1YEAIl12 YEARIi YEAR 14 YEAR IS _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Y E A ___ _ _ _ _ HIF:NEFITS (D1) FM01). I.mlnuI anattl llttIlttIhIg V altir _ | | - -._ 26,62,942 Liquidaltio Value of , _ . . _ _ . - 24,941 Otlhr Inves5nenls. Valuae of New .Jtti, 724 721 2.108X 2,08X8 2,088 3, 1i 3,143 3,143 3,1 '8 3,198 3,198 2,943 2,943 2,943 2,543 TOTAl. IIENEFi:S 724 724 2i,i88 2,088 2,088 3,1.i3 3,'143 3,143 3,198 3.198 3,198 2,943 2,943 2,943 2,289,977 'r1o-1'Ai. iENEIT S _ 65 598 1,569 1,426 1,297 1,774 1,613 1I,166 1,356 1,233 1,121 938 852 775 548,202 I)lSCOUN I FI) (:)S I'S I)l~Il0} '_.__._.___.. Projecl Coilst _s___ Sludikl 3,964 9,019 59O 5,1 19 1,60i Cvil Vork 825 27,695 48,670 45,054 30,573 _ _ _ _ lVork Supervlslon 3,108 4,376 4,281 3,553 2,560 __ Equlptailt 3,931 12,684 404 98 _ _ _ - - 'lelunicilt 354 832 1,109 277 _ . . _ _ - Asslstuic-e I Orgunizaltlun 184 276 369 92 _ - Irsinilug 5406 38 8I i 273 273 _ _ I'rlvate IniveslInteul In _ . . _ . . Illullnlltgs 16,655 16,655 16,655 23,980 23,981) 23,980 22,178 22,178 22,178 21,S62 21,S62 21,862 19,559 19,559 19,559 8rivale Invts1iitnt In Conuanerclil Enlerprlses 1,3331 1,333 3,116 3,116 3,116 4,938 4,938 4,938 5,479 5,479 5,479 5,479 5,479 5,479 5,479 Mlalntenonce Coss ts l('ublic antd 'rIivat) 1 57 601 1,254 2,028 3,018 3,911 5,239 7,337 9,759 12,071 14,148 15,308 16,468 1 7,548 18.627 TOIA tOSDS I 13,1 7Z3,845 80,19 i75,491 64,1i 30,113 32,829 32,355 34,453 37,415 39,412 41,489 42,648 41,506 42,585 43,665 l ItI.C(:SI' 13,112 67,132 66,272 56,718 '13,61.1 18,698 18,531 16,603 16,073 15,863 15,195 14,542 13,589 12,023 11,214 10,453 I)ISCOUJNTIM ) 1/ SWI= / = =1 = - - ___ .. - . = , NE'IT IIENEI:IrIS (13,112) (73,121) (79,465) (73,103) (62,016) (28,025) (29,686) (29,213) (31,310) (34,218) (36,214) (38,291)1 (39,705) (38,563) (39,642) 2,246,312 NE'' IIENEFIS (13,112) (66.474) (65,671) (55,149) (42,378) (17,401) (16,757) (1l4,991) (14,607) (14,512) (13,962) (13,421) (12,651) (11,170) (10,439) 537,749 I)ISCOUNrED _ NI'V a'l'otil BIenefits 564,878 NrV o'l'olatl Cosis 409,826 NP'V of Net lienenlis 135,052 ElRlt 13.62% I'tilIte of hrl,n mnole atccessible rise;s io 2, 000 D)h/n t tmndgroais ai (In a,lnatil raIle of5 .25%, Prjec Appraisal Docurent Page 30 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 4 Economic Assessment Annual Flow of Benefits ReYaistic Development Scenario* BASE YEAR I YEAR 2 YEAR 3 YEAR 4 VEAR S YEAR 6 |FYEAR 7 YEAR 8 YEAR 9 I-EAR 10 YEAR BENEFITS (Dh 000) Land and Building Value - 48.397 48.559 49.017 75,336 76,727 78,553 73,579 76,252 79,543 82,124 Liquidation Value of - - - - - - - - Other Investments Value of New Jobs - 724 724 2.088 2.088 2.088 3,143 3,143 3,143 3,196 3,196 TOTAL BENEFITS - 49.121 49.282 51,106 77,425 78.816 81,695 76,722 79.395 82,741 86.321 COSTS (Dh 000) Project Costs Studies 3.964 9,019 5,950 5.119 1,604 Civil Work S25 27.695 48.670 45.054 30,573 _ _ Work Supervision 3,108 4.376 4,281 3.553 2,560 Equipment 3,931 12,684 404 98 . Tecbnical 554 832 1,109 277 - Assistance Organization 184 276 369 92 - - Training 546 818 S18 273 273 - Private Investment in _ Buildings 16.655 16.655 16.655 23.980 23.980 23.980 22,178 22.178 22.178 21,862 Private Investment in _ Commercial Enterprises 1.333 1.333 3.116 3.116 3.116 4.938 4.938 4.938 5.479 5.479 Mlaintenance Costs (Public and Private) 157 6011 1.254 2,028 3.018 3.911 5.239 7,337 9.759 12,071 TOTAL COSTS 13.1121 73.845 80.1891 75,491 64.134 30,113 32.829 32.355 34.453 37,4 I 9,41 NET BENEFITS J (13.112) (24.724)| (30.907)1 (24,385) 13.2911 48,7021 48.867 44.367 44,941 45-3 45,910 NPV 68.105 EIRR 23.82% Ialze of land made accessible rises to 2,000 Dhlm and growvs at an annuial rate of /.25%. Unil for hlousing & Urbaitizullon Agence tie 0):deinsullmali (.ruluadle Scool of D)eslgn ci de ltl [bllilt aoll' . '.. Iturvard Unilversity die la NMeiliati Fle ias Jr +~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ FES - BALI.,' IMIPACTSURl LE DEVELOPP~EMFINT Thsu Rh-ddinIiati El~~~~~I I,~* jl S)t41 ~ ~ ~ ~ ~ ~ ~ . ~~*\'$s ~ -~ ~~ ~, .V - 0L'INFRAsTRUCTURE VIAIRE 2 . Arcds EItlsSaaI &Aaitiliurar ".11 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~/ ,II Prsionpemeni d'Atcch ~~~~~~4'i~~~~~~~d :~~~~~~~..&j.~~~~~~~~~~''W ~~~~~~REsesu de VWrid d'tJrgence _Lr Velrd de IJ.ioso PJet Appraisal Document Page 32 Fes-Medina RehabiltaWon Pject Khigdom of Morcco Annex 4 Economic Assessment - Cumulative Flow of Benefiis NARROW RANIGE OF VARIATION SCENARIO 1: COST INCREASES 0% NPV (Dh 000) _ EIRR (%) Difference in Growth in Land Prices Difference in Growth in Land Prices Land Prices 3-5'% 3-5.25% I 3-5.50% Land Prices 3-5% 3-5.25% 3-5.50% 1000-1750 67,086 85,735 105,015 1000-1750 11.7 12.2 12.6 1000-2000 133,739 155,052 177,086 1000-2000 13.2 13.6 14.0 1000-2250 200,392 224,370 249,157 1000-2250 14.5 14.9 15.3 SCENARIO 2: COST INCREASES 10% NPV (Dh 000) _ EIRR (%) COST INCREASES 10% COST INCREASES 10% Difference in Growth in Land Prices Difference in Growth in Land Prices Land Prices 3-5%Yo 3-5.25% 3-5.50% Land Prices 3-5% 3-5.25% 3-5.50% 1000-1750 44,717 63,366 82,646 1000-1750 11.1 11.5 11.9 1000-2000 1 11,3,70 132,683 154,717 1000-2000 12.5 12.9 13.3 1000-2250 178,023 202,000 226,788 1000-2250 13.7 14.2 14.6 SCENARIO 3: COST INCREASES 20% NPV lDh 000) EIRR (%) Difference in Growth in Land Prices Difference in Growth in Land Prices Land Prices 3-5% 3-5.25% 3-5.50% Land Prices 3-5% 3-5.25% 3-5.50% 1000-1750 22,348 40,997 60,277 1000-1750 10.5 10.9 11.3 1000-2000 O 89,001 110,314 132,348 1000-2000 11.9 12.3 12.7 1000-2250 155=,654 179,631 204,419 1000-2250 13.1 13.5 _ 13.9 _________ ~WIDE RANGE OF VARIATION SCENARIO 1: COST ]INCREASES 0% NPV (Dh 000) _ EIRR (%) Difference in Growth in Land Prices Difference in Growth in Land Prices Land Prices 3-5% | 3-5.5% 3-6% Land Prices 3-5% 13-5.5% 3-6% 1000-2000 149,748 195,135 243,635 1000-2000 13.5 14.4 j 15.2 1000-2500 j289,3128 346,061 406,687 1000-2500 16.0 [ 16.8 1 17.7 1000-3000 1428,908 496,988 569,739 1000-3000 I 8.0 I 8.T 19.6 SCENARIO 2: COST INCREASES 10% NPV Dh 000) _ _ EIRR (%) COST INCREASES 10% COST INCREASES 10% Difference in Growth in Land Prices Difference in Growth in Land Prices Land Prices J 3-5% 3-5.5% 3-6% Land Prices J 3-55% 3-5.5% 1 3-6% 1000-2000 J 127,379 172,766 221,266 1 1000-2000 12.8 13.6 j 14.5 1000-2500 266,959 323,692 384,318 1000-2500 15.2 16.0 16.9 1000-2250 [406,539 474,619 547,369 1000-3000 r 17.1 18.0 18.8 SCENARIO 3: COST INCREASES 20% NPV (Dh 000) EIRR (%) Difference in Growth in Land Prices [Difference in | Growth in Land Prices Land Prices 3-5% 3-5.5% 3-6% [ Land Prices | 3-5% 3-5.5% 3-6% 1000-2000 105,010 150,397 (198,897 [ 1000-2000 12.2 13.0 13.8 1000-2500 244,590 f 301,323 361,949 1000-2500 14.5 15.3 16.1 1000-3000 ,384,169 452,250 (525,000 i j 1000-3000 16.4 17.2 18.0 iVotes: (1) Discount rate - expected iral interest rate of 10. 00% Projed Appraisal Document Page 33 Fes-Medina Rehabiltation Project Kingdom of Morocco Annex 4 Attachment to Annex 4 Non-Moroccan Values for Rehabilitating the Fes-Medina Using Contingent Valuation to Value the Medina's Cultural Heritage A contingent valuation (CV) method and a Delphi exercise were used to measure some of the economic benefits that would be created by the project in order to capture use and nonuse benefits deriving from the project. The contingent valuation method has often been used to determine the value of environmental goods, but it has almost never been used to value cultural heritage sites. This exercise sets the stage for a wider utilization of this method given the similar economic nature of environmental goods and cultural heritage sites. The method is aimed at eliciting the willingness to pay (WTP) of the medina's users, in dollars, if the proposed rehabilitation program is implemented. One interesting feature of CV is that it captures both the use and nonuse class of benefits that an agent expects to enjoy from the public good. The use class of benefits consists of all the current direct and indirect ways in which an agent expects to make physical use of a public good. These benefits can be measured by observing changes in market prices. Nonuse benefits are also referred to as "existence" values. Here people often obtain utility from an amenity for various reason other than their expected personal use. In contrast to use values, existence values involve the notion that a person does not have to visit a recreational site or a cultural site to gain utility from its maintenance or improvement. The capability of generalization is a powerful feature of the sample survey method. In this way the responses given by, say, 500 people can be used to represent the responses that everybody in a region or a country would give if they were all interviewed. Overview of Economic Benefits Economic benefits accruing from the project involving the Fbs-Medina can be divided into five beneficiary categories (see Table 1.1). In category I are those benefits which accrue directly to residents of Fbs. In category 2 are those benefits which accrue to Moroccans who are not residents of Fbs. In category 3, benefits accrue to foreign visitors to Fes. In category 4 are the benefits accruing to the foreign visitors to Morocco who do not visit Fes during their current trip. In category 5 are benefits accruing to non-Moroccans who do not visit Morocco. This exercise does not consider any of the potential benefits to Moroccans (categories I and 2) but rather attempts to quantify to various degrees the benefits likely to accrue to non-Moroccans if the project is undertaken. Table 1.1 Categories of Economic Benefits Category Beneficiary Source I Fbs Residents 2 Other Moroccans 3 Foreign Visitors to Fbs 4 Other Foreign Visitors to Morocco 5 Foreigners Not Visiting Morocco In fact, the project involves a rapidly deteriorating UNESCO World Heritage site which is an important tourist destination. In such instances it has long been known (Dixon and Sherman, 1990) that a substantial portion of the benefits of an improvement project may accrue not to local residents but rather to foreign visitors to the site. Less frequently measured are the potential benefits accruing to other foreign visitors to the country (category 4) and to those not living in or visiting the country where the project is being considered (category 5). Benefits may accrue to agents in these two categories due to passive use considerations (Krutilla, 1967; Carson, Flores, and Mitchell, 1997). These considerations include an appreciation for the existence of the cultural resources in Fbs or a possible desire to visit Fbs in the future. Proect Appraisa Document Page 34 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 4 Attachment to Annex 4 Methodology of CV Survey A multi-stage sample of 600 adult visitors was designed to represent visitors (including both tourists and those visiting for business or other purposes) to Morocco who visited the country during June-July,1997. Of the total of 600 interviews, 400 interviews were allotted to be completed in Fes. One hundred and twenty of the remaining 200 interviews were allotted to Casablanca and 80 to Tangier on the basis of their respective visitor flows. Equivalent subsamples received a different payment amount in the willingness-to-pay question. This design makes it possible to use the pattern of answers to the WTP question to trace the demand curve. The first section of the survey consists of 16 questions about the person's visit to Morocco and to Fes. The material in the second section contains the FRs scenario, which consists of a short narrative supplemented by showcards featuring colored photographs of the Medina. The purpose is to provide each respondent with a standardized set of information about the character and condition of the Fes-Medina today. It concludes by saying that without a major rehabilitation effort, the Medina will continue to decline. The third section of the instrument describes the conditions of the willingness-to-pay choice the respondents were asked to make. It presents a plan to rehabilitate the Fes-Medina, which is described as having been developed by "the Moroccan Government in collaboration with experts from international agencies' to accomplish three goals: First, improve the Medina's condition. Buildings, streets, sewers, public spaces, and monuments will be repaired and cleaned up. Second, preserve the Medina's traditional character and cultural heritage for future generations. Third, ensure that the Medina will continue to be a productive and vibrant living city. These prospective accomplishments represent the public goods that the proposed rehabilitation plan will provide. The respondent is then told that "one way to help pay for it" would be for visitors such as him or her to pay a special fee. Fes visitors were then asked what decision they, as consumers, would have taken about including Fes in their itinerary, if they had to pay a Fes preservation fee of a specified amount when they register at their Fes hotel. Each respondent was randomly assigned to one of six price-point subsamples, which varied between 25 and 2000 dirhams (between $25 and $200). The six amounts were chosen to bracket the anticipated range of median willingness to pay and to give information about the tails of the WTP distribution. It was assumed that those who were visiting Fes would be willing to pay more than those who are not visiting Fes. The upper ranges for these two groups were fuxed at the equivalents of $200 and $100, $200 for the hotel fee for the Fes visitors and $100 for the departure fee for the non- FRs visitors. These were likely to be the highest plausible amounts the Government might contemplate charging for hotel and departure fees. Interviewing began in Fis on June 16, 1997 and continued until July 3. The Casablanca and Tangier interviews were conducted between July 15-25. Project Appraisal Document Page 35 Fes-Medina Rehabaion Proed Kingdom of Morocco Annex 4 Attachment to Annex 4 Methodology of the Delphi Exercise In its simplest formulation, the Delphi method is a solicitation of the opinions of experts. Most Delphi exercises administer one or more questionnaires interspersed with information to a group of experts. Typically, the experts are polled one or more times; and between pollings, information about the opinions of the group of experts as a whole is disseminated among the group. Given budget constraints to carry out a CV survey in Europe, the very practical approach was to carry out a Delphi analysis asking European CV experts what are, in their opinion, the mean and median WTP for the rehabilitation of the Fes-Medina in Europe. This Delphi exercise was conducted using a stratified random sample of 30 attendees at the June, 1997 meeting of the European Association of Environmental and Resource Economists (EAERE) in Tilburg, Netherlands. This meeting was chosen because it was likely to contain the largest concentration of European economists familiar with contingent valuation. After the first round, when data had been collected and examined, the participants were contacted by e-mail and fax and asked to reassess their earlier answers in light of the results of the first round. Results Aggregate Estimates for Foreign Visitors to Fes. An aggregate estimate of the annual benefits to foreign visitors to Fes can be obtained by multiplying the desired statistic (mean and median WTP) by the number of foreign visitors to Fes. An estimnate of 161,419 adult visitors to Fes who stayed overnight in hotels was provided by the Ministry of Tourism. Multiplying the estimated number of adult visitors, 161,419, by the estimated lower bound on mean WTP ($69.5) yields an annual aggregate estimate of $11,233,148. Aggregate Estimatefor Non-Fes Foreign Visitors to Morocco. The World Tourism Organization estimates that in 1996 there were 1,516,169 adult foreign tourists arriving in Morocco who stayed in hotels and similar establishments. This number multiplied by the estimated lower bound on mean WTP ($30.9) yields a benefit estimate of $46,879,945. Probably the most important factor in determining the aggregate estimate for the non-FFs foreign visitors is the number of years over which individual WTP should be aggregated. The key issue is whether there is effectively additional competition for the amount of value for the Fes project held by foreign visitors to Morocco. Over one year the answer is likely to be no. Over a longer time period there are likely to other similar rehabilitation projects put forth by the Moroccan Government and/or international organizations. Thus aggregation of the point estimate over many years would likely overestimate total benefits by a substantial amount. One very conservative way to avoid this issue is to only use the first year. Quantitative Results of the Delphi Exercise. The results of the second round of the Delphi exercise, aimed at estimating the mean and median WTP for a Fes contingent valuation in Europe, provided a range of values from $12.1 (the mean WTP) to $2.1 (the median WTP). To be as conservative as possible, the estimate of the median ($2.15), which is the lower estimated value, was used. These estimates were applied to 144,342,000 households (Eurostat, 1991). This implies an estimnate for the total value of Fes-Medina to European households of at least US$310,335,300 (it could be 6 times higher if the estimate of the mean WTP were used). This figure indicates that Europe has a fairly high magnitude of WTP for restoration of the Fes-Medina. Furthermore, even though the Delphi estimates of mean WTP are reasonably large, the responses of the Delphi participants indicate that the distribution of public WTP would be very highly skewed. About 30 percent of the participants expect the median to be zero. While a highly skewed distribution of public values for a nonlocal cultural resource that few will ever visit seems reasonable, it poses certain difficulties in fashioning an appropriate payment mechanism. This amount of skew indicates that the values for the rehabilitation of the Fes-Medina are not likely to be broadbased. This lack of broad-based value will make it difficult to design any compulsory payment mechanism that would have widespread public support. The only alternative to some sort of compulsory mechanism would be voluntary contribution. While such a mechanism may enjoy widespread public support, it is not a practical way to collect Europe's WTP for restoring the Fes-Medina, since it invites massive free-riding. Proect Appraisal Do-ren Page 36 F-edIha RehablWton Project KW*dom o Moo Annex 5 Annex 5 Financial Summary for Revenue Earning Project Entities ADER-Fes Balance Sheet and Income Statement (000 MAD) ASSETS 1994 1995 1996 Cash in bank 1,133.6 7,734.2 1,782.3 Accounts receivable 10,302.5 10,814.9 15,153.9 Total current assets 11,436.1 18,549.1 16,936.2 Work in progress 7.781.0 7,391.3 14,323.1 Other assets (net of dep.) 2,565.2 2,421.8 2,685.4 Total Assets 21,782.3 28,362.2 33,944.7 LIAB]ILITIES Accounts payable 7,430.1 7,160.1 8,404.2 Purchasers advances 16,042.6 26,407.3 35,105.7 Total current liabilities 23,472.7 33,567.4 43,509. Long-term liabilities 201.5 12.8 5.1 Provisions for losses 10,377.6 12,978.5 15,548.6 Quasi equity 168.6 84.3 - Paid in capital 5,000.0 5,000.0 5,000.0 Retained earnings (11,932.7) (17,438.1) (23,280.8) Net earnings ofthe year (5,505.4) (5,842.7) (6,838.1) Total Liabilities and Equity 21,782.3 28,362.2 33,944.7 FINANCIAL INDICATORS Debt mtio 1.08 1.18 1.28 Equity ratio 0.22 0.16 0.14 Liquidity ratio (acid test) 0.44 0.32 0.35 Note - Definitions Debt ratio = Total liabilities / total assets Equity ratio Total stockholders equity / total assets Liquidity ratio (acid test) Cash + marketable securities + accounts receivable + other liquid assets (excluding inventories) / current liabilities. Proect Appraisal Docuernt Page 37 Fes-Medina RehabiItioln ProecI Kkgdomn of Morocco Annex S Budget of the FRs-MWdina municipality OPERATING EXPENSES RECETTES FY93 FY94 FY95 FY96 8 first Semes. 97 IMPOTS ETTAXES RETROCEDES 5,185,537 5,443,227 4.783,292 5,587,345 TAXES LOCALES PROPRES 1,133,671 1,305,178 1,169,483 2.807,046 PRODUITS DES SERVICES 3,104,115 3,431,411 4,458,236 6,200,153 PRODUITS DOMANIAUX 376,132 312,440 376,655 360,192 OCCUPATION DE LA VOIE PUBLIQUE 1,798,286 1,770,903 2,308,803 3,189,346 PRODUITS DES CONCESSIONS 0 0 0 0 RECETTES DIVERSES ET 653,005 1,007,060 1,141,926 1,251,183 ACCIDENTELLES ATTRIBUTION DES PATENTES 17,537,803 19,640,039 20,314,819 20,715,913 PARTS DE TVA 0 0 0 6,560,930 COTE PART DES HABBOUS 0 0 0 0 TOTAL DES RECETTES COURANTES 29,788,549 32,910,258 34,553,214 46,672,108 PRELEVEMENT SUR EXCEDENTS PRECEDENTS 1,626,284 TOTAL RECETTES COURANTES DISPONIBLES 36,793,430 48,298,392 RESULTATS 96 DEPENSES RESULTATS 93 RESULTAT RESULTATS ET 1ER SEM 97 S 94 95 CONSEIL MUNICIPAL 154,891 86,400 178,335 215,000 DEPENSES DE PERSONNEL 10,803,993 10,925,203 14,711,499 23,148,166 FRAIS DIVERS DE GESTION 739,486 428,855 858,664 1,326,727 AUTRES DEPENSES 242,120 99,994 245,286 546,728 FONCTIONNEMENT DES VEHICULES 601,202 549,445 1,272,370 1,167,592 EAU ET ELECTRICITE PUBLIQUES 2,500,000 5,725,000 5,942,940 4,851,170 VOlES ETTRAVAUX ENTRETIEN 7,442,025 7,161,404 7,519,243 9,113,157 EXPLOITATIONS EN REGIE DIRECTE 54,328 14,850 61,790 41,984 CHARGES ET ENT.DES PROPRIETES COMMUNALES 1,306,535 101,618 ASSISTANCE SOCIALE 50,000 89,892 98,410 74,833 SUBVENTIONS ACCORDEES 30,000 85,500 92,500 137,500 DEPENSES DIVERSES ET IMPREVUES 219,097 85,500 35,814 49,325 DETTE RADEEF 2,969,367 2,969,400 4,470,044 4,470,044 AMORTISSEMENT DES AUTRES 0 0 0 3,054,548 CREDITS TOTAL DES DEPENSES COURANTES 26,809.826 29,043,481 36,793,430 48,298,392 VERSEMENTS A LA DEUXIEME PARTIE DU BUDGET 0 0 TOTAL DEPENSES COURANTES BUDGETISEES 36,793,430 48,298,392 PROJECTIONS COMMUNE URBAINE DE FES-MEDINA I,' Assessment of Project Costs on the Municipality's Budget (assuming no variation on Interest rate) Dirhems Annual Counterpart Security Payment Funds Loan amount: 65,100,000 -1 8,271,883 | 27S Interest rate: 60% of disbursed loan of loan amount ConuStnwnt fees Maturity lyeara) |affter 5 years grace period FISCAL DISBURS. ANUAL CUMULATIVE COMMITMENT INTERET LOAN TOTAL COUNTER- GUARANTEE LAND TOTAL YEAR PERCENT DISBURS. DISBURS. FEE PAID AMORT. LOAN PART DEPOSIT ACQUISITION PROJECT REPAYMENT COMMUN. CHARGES 1997/98 3% 1,905,000 1,905,000 158,750 0 0 158,750 514,350 3,175,000 2,673.822 6,521,922 1998199 39% 24,765,000 26,670,000 153,988 127,635 0 281,623 6,686,550 2,673,822 9,641,996 1999100 27% 17,145,000 43.815,000 92,075 1,786,890 0 1,878,965 4,629,150 6,508,115 2000/01 20% 12,700,000 56,515,000 49,213 2,935,605 0 2,984,818 3,429.000 6,413,818 2001/02 11% 6,985,000 63,500,000 17,463 3,786,505 0 3,803,968 1,885,950 5,689,918 2002/17 6,271.883 6,271,883 6,271,883 & U_ Assessment of the Municipality's financial capacity to payback the Bank Loan "i (without project benefits) Accumulated savings of current revenue Starting 1997198 Incrse 3_ 3S 3S__ 3S 3S 6% 1000 DIRHAMS Statng: EX. 1995 FX. 1995 EX 1995 EX. 2001102 EX. 1995 EX.1995 FISCAL CG TRANSF LOCAL BUSINESS VALUE TOTAL STAFF OTHER OUTSTAND. TOTAL PROJECT CAPACITY ANNUAL CUMUL. SELF YEAR TAXES TAXES & MISC TAXES ADDED REVENUES EXPENDIT. EXPENDIT. LOANS CURRENT CHARGES FOR NEW SAVING SAVING FINANCE TAXE (VAT) Repayment EXPENDIT. PROJECTS RATIO 1,993 5,185 7,067 17,537 0 29,789 10,804 13,037 2,969 26,810 0 0 2,979 2,979 9.97% 1,994 5,443 7,827 19,640 0 32,910 10,925 14,468 3,650 29,043 0 0 3,867 6,846 11.09% 1,995 4,783 9,455 20,315 0 34,553 14,711 17,612 4,470 36,793 0 0 -2,240 4,606 12.94% 9811S.97 5,687 13,809 20,715 6,581 46,672 23,361 17,412 7,526 48,298 0 0 -1,626 2,980 16.12% 1997/98 3,836 9,482 21,336 13,500 48,156 16,041 12,304 8,245 36,591 7,198 7,346 -2,980 0 47.32% ; 1998199 3,951 9,767 21,977 13,905 49,600 16,522 13,043 9,201 38,766 6,134 4,700 0 0 40.39% 1999/00 4,070 10,060 22.836 14,322 51,088 17,018 13,825 7,700 38,543 4,295 8,249 0 0 39.63% 2000/01 4,192 10,361 23,315 14,752 62,620 17,529 14,655 6,414 38,598 4,577 9,446 0 0 38.84% 2001/02 4,318 10,672 24,014 15,194 64,199 18,055 15,534 3,466 37,055 4,371 12,773 0 0 38.03% 2002/03 4,447 10,992 24,735 15,650 56,825 18,596 16,466 3,350 38,412 6,272 11,141 0 0 37.19% 2003/04 4,581 11,322 25,477 16,120 57,500 19,154 17,454 3,350 39,958 8,272 11,270 0 0 36.33% 2004/05 4,718 11,662 26,241 16,603 59,225 19,729 18,501 3.350 41,580 6,272 11,373 0 0 35.45% 2005106 4,860 12,012 27,028 17,101 61,001 20,321 19,611 3,350 43,282 6,272 11,447 0 0 34.54% 2006/07 5,006 12,372 27,839 17,614 62,831 20,930 20,788 2,867 44,585 6,272 11,974 0 0 33.60% 2007108 6,156 12,743 28,674 18,143 64,716 21,558 22,035 1,377 44,971 6,272 13,474 0 0 32.64% 2008/09 5,310 13,126 29,535 18,687 66,658 22,205 23,358 45,562 6,272 14,824 0 0 31.65% 2009110 5,470 13,519 30,421 19,248 68,658 22,871 24,759 47,630 6,272 14,756 0 0 30.63% 2010/11 5,634 13,925 31,333 19,825 70,717 23,557 26,245 49,802 6,272 14,644 0 0 29.58% 2011/12 5,803 14,343 32,273 20,420 72,839 24,264 27,819 52,083 6,272 14,484 0 0 28.50% 2012t13 5,977 14,773 33,241 21.033 75,024 24,992 29,488 54,480 6,272 14.272 0 0 27.38% a 2013/14 6,156 15,216 34,239 21,664 77,27S 25,741 31,258 56,999 6,272 14,004 0 0 26.24% 2014/15 6,341 15,673 35,266 22,313 79,593 26,514 33,133 59,647 6,272 13,674 0 0 25.06% 2015/16 6,531 16,143 36,324 22,983 81,981 27,309 35,121 62,430 6,272 13,279 0 0 23.85% 2016/17 6,727 16,627 37,414 23,672 84,440 28,128 37,228 65,367 6,272 12,811 0 0 22.60% V PMJe AppMaIl Doumeno Page 40 Fes-Medina Rehabilitation Pject K-hgdom of Morocco Annex 6 Annex 6 Procurement and Disbursement Arrangements Procurement The Loans will finance the procurement of goods (including laboratory equipment, waste collection vehicles, etc.), civil works for infrastructure or housing rehabilitation subprojects, and consultants' services, according to arrangements agreed during appraisal. Procurement under the Loan will be carried out in accordance with the Bank's Procurement Guidelines. The Bank's standard bidding documents will be used for all procurement under International Competitive Bidding (1CB). Civil Works ICB will apply to all contracts exceeding USSI million. Works contracts below US$1 million will be awarded following National Competitive Bidding (NCB) procedures acceptable to the Bank. Given the specificity of the medina, and based on recent experience under the Fifth Water Project implementation in FRs, it is likely that most contracts will fall under NCB procedures. Grouping the contracts into large packages to attract intemational bidders would not be feasible. For contracts below US$150,000, quotations shall be obtained from at least three contractors. Goods All contracts for goods costing US$300,000 or more will be awarded following ICB procedures. Contracts below US$300,000 will be awarded following NCB procedures acceptable to the Bank. Contracts costing less than US$150,000 may be awarded through local shopping after receiving quotations from at least three suppliers. Consultants' Services Consultant activities will consist mainly of technical assistance to the municipalities and ADER-Fes, and training. Consultant services will be contracted on terms and conditions in accordance with the Guidelines for the Use of Consultants by World Bank Borrowers and the World Bank as Executing Agency - January 1997. About half the contracts would be procured under quality and cost-based selection, while the following three other procedures would apply for the remaining contracts: selection based on qualifications (mostly for the laboratory and for the taining program); single source (Harvard University, and fees paid to the executive agency); and individual consultants (mostly for management assistance to the municipalities, and part of the training program). Review of Contracts All contracts for civil works costing US$1 million and above, goods valued at US$300,000 and above, consultant contracts awarded to firms valued at US$100,000 and above (US$50,000 for individuals consultants), and sole source contracts, as well as the first two contracts under each of the works, goods, and consultant categories, irrespective of the values, will be subject to prior Bank review. All other contracts will be subject to random post- review during supervision missions by Bank staff. Procurement Monitoring and Supervision General responsibility for procurement activities will lie with the Governor of Fes-Medina, acting as chairman of the Technical Committee. He will be, inter alia, in charge of supervising the procurement methods. For each operation, a designated and ad hoc local procurement committee will be in charge of reviewing and evaluating the bids, on the basis of ADER's analyses. Labor intensive works, implemented by the ADER-FRs directorate of Community Development, will be procured according to agreed conditions spelled out in a specific document cahier des charges. Project ApprIDoal D Page 41 Fos-Medna Rehabitin Projet Kindo of Maocco Annex 6 Disbursement The proceeds of the two Bank loans will be disbursed against similar conditions for goods and consultants' expenditures, and separate conditions for civil works: (a) civil works: 80 percent of contract amounts for eligible subprojects; (b) goods: 100 percent of foreign expenditures, and 100 percent of local ex-factory costs and/or 80 percent of local expenditures, for items procured locally; and (c) consultants' services: 100 percent of expenditures Disbursements against civil works contracts exceeding US$150,000 equivalent, goods contracts exceeding US$100,000, and consultants' contracts exceeding US$50,000 for finms and US$25,000 for individuals, will be fully documented. For all other expenditures, disbursement can be made against Statement of Expenditures (SOEs). Supporting documents for SOEs will not be submitted to the Bank, but will be retained by ADER-Fes and made available to Bank staff during supervision. ADER will record all contracts so that the Bank can monitor them for prior or ex-post review as needed. To facilitate project implementation and disbursement, the following has been agreed upon during negotiations, and is part of the tripartite agreement to be signed among the State, the municipalities, and ADER-Fes (the Convention). First, and under the loan to the Government, the Ministry of Finance will open a revolving account to the regional Treasury of Fes in the name of ADER-Fes (compte particulier), and will make periodic transfers from the public expenditures budget to this account, in amounts equivalent to the total cost of the Governnnent's project. Disbursements, fully documented, will be made directly out of this account by ADER's general manager. Second, a Special Account will be established at the General Treasury with an authorized allocation of US$ 0.7 million, to be withdrawn as eligible expenditures are incurred and prefinanced by the Government. ADER will be charged to prepare all relevant documentation for the central Treasury, which will in turn submit relevant applications to the Bank under procedures specified in the Convention and the loan agreement, which include SOEs for labor intensive works. Second, and under the loan for the municipality of Fes-Medina, related counterpart funds will be funded by the budget and made available in a separate revolving account or compte d'affectation special, while a Special Account will be established at the regional Treasury, under the responsibility of the President of the Municipal Council. The Special Account will cover eligible expenses under the municipality loan, up to US$1.0 million, and will be used as a revolving account to disburse the loan to the municipality. Applications for withdrawal will be send to the Bank by the municipality, with a possible delegation to ADER, and will include SOEs, particularly for the poverty alleviation component (numerous small contracts). Project Appraisal Document Page 42 Fes-Medina Rehabilitation Project Kingdom of Morocco Annex 6 Table B: Thresholds for Procurement Methods and Prior Review Expenditure Category Contract Value (Threshold) Procurement Contracts Subject to Prior US$ Equivalent Method Review Expenditure Category 1. Civil Works 150,000 & less Local Shopping First two contracts 150,000 to I million NCB First two contracts above I million ICB Yes 2. Goods 150,000 & less Local Shopping First two contracts 150,000 to 300,000 NCB First two contracts above 300,000 ICB Yes 3. Services 100,000 & above for firms Yes 50,000 & above for Yes individuals 4. Miscellaneous n.a. n.a. n.a. Table C: Allocation of Loan Proceeds Expenditure Category - Amount in French Francs (000) Financing Percentage A. Loan to the Government Civil Works 24,500 80% Goods 2,340 100% of foreign expenditures, 100% of local (ex-factory costs); and 80% of local expenditures Consultants' services 7,000 100% Management fees 2,920 100% Unallocated 4,140 Total 40,900 B. Loan to Fes-Mddina municipality Civil Works 24,500 80% civil works Goods 5,250 100% of foreign expenditures, 100% of local (ex-factory costs); and 80% of local expenditures Consultants' services 4,090 100% Management fees 2,920 100% Unallocated 4,140 Total 40,900 Proeof AppraIl Doae Pi43 FeAdw* RaehebOMon Prae Kigdom of MAoAmex 7 Annex 7 Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) Bank Budget 544 586 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) First Bank mission (identification) 04/01/1994 04/01/1994 Appraisal mission departure 03/15/1997 06/04/1997 Negotiations 05/15/1997 11/28/1997 Planned date of effectiveness 10/31/1999 Prepared by: ADER-Fes, Governorate of Fes-M6dina, Harvard University, Fes University and the World Bank Preparation assistance: [PPF, trust funds, cofinanciers, etc.] Bank staff who worked on the project included: Francois Amiot (Team Leader), Claude Archambault (MNSID), Kathleen So Ting Fong (MNSPF), Yoko Eguchi (MNSRE)1, Dan Aronson (ENVSP)I, June Taboroff(ENVSP). 1/ Note: Up to pre-appraisal stage. Project Appraisal Document Page 44 FesMedina Rehablllaion Projec Kingdom of Morocco Annex S Annex 8 Documents in the Project File* A. Project Implementation Plan Al ADER-Fes Rapport de Strategie et Plan de mise en oeuvre, Dec. 1996 A2 ADER-Fes: Microsoft Project: Planning of civil works and studies. A3 ADER-Fes: Rapport de Synthese (Mars 1997); B. Bank Staff Assessments Bl. Mission Supervision reports: April and Sept.1994; March 1995; February and June 1996; April and June 1997. B2. Assessment on the circulation and parking feasibility study (April 1996); Notes on concessioning parking facilities in the Medina (June 1997). B3. Social Assessment (FIAHS Fund): Feb-May 1995 (4 reports, in French, in partnership with Fes University: Synthese; Habitat; Patrimoine: Activites); B4. Costab and Microsoft Project, in partnership with ADER-Fes. C. Other Cl. Resume de l'Evaluation Sociale. Francoise Navez Bouchanine (June 1995). C2. Harvard University and ADER-Fes: Strategie d'allegement de la Pauvrete dans la Medina de Fes (August 1995); Profil des Revenus et de la Pauvrete en Medina (Nov. 1995); Dynamique de la rdhabilitation: Enquete sur la Strategie des Menages (Janv.1995); Examen du Contexte Institutionnel (March 1996); Examen du Contexte Juridique et Reglementaire (March 1996); Enquete Renovation (March 1996); Dynamique Fonciere et Rehabilitation de I'Habitat (Mars 1997); Environmental Assessment (June 1997). C3. Bernard Tagournet:Mobilisation des Ressources Locales (Nov.1994-Dec.1996); simulation du budget de la commune de Fes-Medina (June 1997). C4. Sati Arnaout: Community Development Component (July 1996). C5. ECOGES: Audit Institutionnel d'ADER-Fes (July 1994); Montage et Renforcement Institutionnel (March 1995). C6. Dominique Achour: Rapport d'Expertise (Oct.1994 and March 1995). C7. Groupe Huit: Etude des Acces, Circulations, Stationnement et Collecte des Ordures Menageres. Rapport Final. December 1996. C8. Michel Couillaud: Valorisation du Patrimoine de Fes par le Tourisme. Rapport Provisoire (Jan. 1997) et Rapport Final (June 1997). C9. Cooper & Lybrand: Evaluation du redressement fmancier et administratif d'ADER-Fes (Jan. 1997). C 10. Catherine Ecolivet: "Fes, un Projet d'Espoir" (a ten-minute video film on the project), with collaboration of UNESCO. *Including electronic files. Project Appraisal Document Page 45 Fes-Medina RehabilitinUon Project Klngdom of Morocco Annex 8 REFERENCES ON CONTINGENT VALUATION STUDIES AND DELPHI METHOD Carson, R.T., N.E. Flores, and R.C. Mitchell (1997), "The Theory and Measurement of Passive Use Value," in 1. Bateman and K. Willis, eds., Valuing Environmental Preferences: Theory and Practice of the Contingent Valuation Method in the US, EC and Developing Countries (New York: Oxford University Press.) Carson, R.T., RC. Mitchell, M.B. Conaway, and S. Navrud (1997), "Non-Moroccan Values for Rehabilitating the Fes- Medina", World Bank Report, Washington DC. Dixon, J. and R Sherman (1990), Economics of Protected Areas: A New Look at Benefits and Costs (Washington: Island Press). Krutilla, J. (1967), "Conservation Reconsidered," American Economic Review, 57, 787-796. Mitchell, RC. and RT. Carson (1989), Using Surveys to Value Public Goods: 7he Contingent Valuation Method (Baltimore: Johns Hopkins University Press). Navrud, S., Pedersen, P.E., and J. Strand (1995), Valuing our Culuual Heritage: A Contingent Valuation Study of the Nidaros Cathedral, Landbruksoekonomisk Forum, 2-95, 53-65, summarised in English in Navrud, S., ed. (1992), Pricing the European Environment, Scandinavian University Press/Oxford University Press, 110-111. Zigio, E. (1996), "The Delphi Method and its Contribution to Decision-Making," in Adler, M. and E. Ziglio, eds., Gazing into the Oracle: The Delphi Method and its Application to Social Policy and Public Health (London: Jessica Kingsley). Status of Bank Group Operations in Morocco IBRD Loans and IDA Credits in the Operations Portfolio Difference Between expected Original Amount in USS Millions and actual Loan or Fiscal disbursements a/ Project ID Credit Year Borrower Purpose No. IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Number of Closed Loans/credits: 198 Active Loans MA-PE-42414 IBRD4026A GOVT OF MOROCCO COOR/MON SOCIAL PRO 26.58 0.00 0.00 25.90 2.42 0.00 MA-PE-42415 IBRD4025A GOVT OF MOROCCO SPI - HEALTH 62.26 0.00 0.00 55.98 -.31 0.00 MA-PE-5435 IBRD3664A KINGDOM OF MOROCCO/ONEP WATER SUPPLY V 57.30 0.00 0.00 53.30 64.38 2.15 MA-PE-5435 IBRD36650 KINGDOM OF MOROCCO/ONEP WATER SUPPLY V 32.00 0.00 0.00 - 26.20 64.38 2.15 MA-PE-5440 IBRD3171A KINGDOM OF MOROCCO HEALTH SECTOR INVEST 13.36 0.00 5.00 8.36 13.35 0.00 MA-PE-5462 IBRD3587A GOVERNMENT SECOND LSI IMPROVEME 96.74 0.00 19.12 61.81 33.48 3.69 MA-PE-5489 IBRD3901A KINGDOM OF MOROCCO SECONDARY ROADS 55.28 0.00 0.00 53.67 38.13 0.00 MA-PE-5495 IBRD33660 MOROCCAN BANKS FINANCIAL SECTOR DEV 29.50 0.00 0.00 16.49 33.30 16.47 MA-PE-5499 IBRD3688A GOV. OF MOROCCO IRR. AREAS AGR. SERV 16.51 0.00 0.00 15.50 16.28 6.59 MA-PE-5501 IBRD4024A GOV. OF MOROCCO SPI - EDUCATION 41.95 0.00 0.00 36.85 2.99 0.00 MA-PE-5504 IBRD3647A KINGDOM OF MOROCCO ENVIRONMENT MANAGEME 4.09 0.00 0.00 3.99 3.32 0.00 MA-PE-5514 IBRD3618A GOV. OF MOROCCO LAND DEVELOPMENT 48.91 0.00 0.00 46.86 62.93 39.82 MA-PE-40566 IBRD42540 1998 GOVT OF MOROCCO RURAL W.S.& SANITATN 5.00 0.00 0.00 5.00 1.67 0.00 3 MA-PE-40566 IBRD42541 1998 GOVT OF MOROCCO RURAL W.S.& SANITATN 5.00 0.00 0.00 4.86 1.67 0.00 MA-PE-5521 IBRD42890 1998 GOVT OF MOROCCO WATER RESOURCE MGMT. 10.00 0.00 0.00 10.00 1.17 0.00 MA-PE-5521 IBRD42891 1998 GOVT OF MOROCCO WATER RESOURCE MGMT. 10.00 0.00 0.00 9.73 1.17 0.00 MA-PE-5523 IBRD42310 1998 FEC MUNICIPAL FINANCE II 35.00 0.00 0.00 25.49 14.66 0.00 MA-PE-5523 IBRD42311 1998 FEC MUNICIPAL FINANCE II 35.00 0.00 0.00 33.81 14.66 0.00 MA-PE-38978 IBRD40910 1997 GOVERNMENT OF MOROCCO PSD III-VOC TRG. 11.50 0.00 0.00 10.62 7.79 .54 MA-PE-38978 IBRD40911 1997 GOVERNMENT OF MOROCCO PSD III-VOC TRG. 11.50 0.00 0.00 9.45 7.79 .54 MA-PE-43725 IBRD41280 1997 ONCF RAILWAY RESTR & PRIV 42.50 0.00 0.00 31.21 -.92 0.00 MA-PE-43725 IBRD41281 1997 ONCF RAILWAY RESTR & PRIV 42.50 0.00 0.00 35.45 -.92 0.00 MA-PE-5503 IBRD40100 1996 KINGDOM OF MOROCCO SEW.& WATER REUSE II 40.00 0.00 0.00 39.21 4.27 0.00 MA-PE-5517 IBRD36170 1993 GOV.OF MOROCCO/FEC MUNICIPAL FINANCE I 100.00 0.00 0.00 3.96 7.64 -2.49 Total 832.48 0.00 24.12 623.70 395.30 69.46 Active Loans Closed Loans Total Total Disbursed (IBRD and IDA): 167.00 6,171.75 6,338.75 of which has been repaid: 2.28 2,951.76 2,954.04 m Total now held by IBRD and IDA: 806.08 3,284.54 4,090.62 Amount sold : 0.00 20.11 20.11 Of which repaid : 0.00 20.11 20.11 3 Total Undisbursed : 623.70 51.34 675.04 U I a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Rating of 1-4: see OD 13.05. Annex D2. Preparation of Implementation Summary (Form 590). Following the FY94 Annual Review of Portfolio performance (ARPPI, a letter based system will be used (HS - highly Satisfactory, S - satisfactory, U - unsatisfactory, HU - highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Note: Generated by the Operations Information System (OIS) Project Appraisal Document Page 47 FesMedlna RehablIlton Projet Kingdom of Moroco Annex 9 Morocco STATEMENT OF IFC's Committed and Disbursed Portfolio As of 3 1-Aug-98 (In US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1987/90 CIH 21.56 0.00 0.00 1.58 21.56 0.00 0.00 1.58 1987/93 SETAFIL 2.93 1.20 0.00 0.00 2.93 1.20 0.00 0.00 1990 ENNASR .94 0.00 0.00 0.00 .94 0.00 0.00 0.00 1994/96 Mediafmance 0.00 1.16 0.00 0.00 0.00 1.16 0.00 0.00 1995 Attijari 0.00 .49 0.00 0.00 0.00 .26 0.00 0.00 Total Portfolio: 25.43 2.85 0.00 1.58 25.43 2.62 0.00 1.58 Approvals Pending Conunitment Loan Equity -Qu Partic Total Pending Commitment: 0.00 0.00 0.00 0.00 Generated by the Operations Information System (OIS) on 10/05/98 Project Appraisal Document Page 48 Fes-Medina Rehabilitation Project Kingdom of Moroco Annex 10 Morocco at a glance 10/1/98 M. East Lower- POVERTY and SOCIAL ' & North middle- Morocco Africa Income Developmentdiamond 1997 Population, mid-year (millions) 27.5 283 2,285 Life expectancy GNP per capita (Atlas method, USS) 1,250 2,060 1,230 GNP (Atlas method, US$ bilions) 34.4 583 2,818 Average annual growth, 1991-97 Populabon tX) 1.9 2.3 1.2 Labor force t%) 2.5 3.2 1.3 GNP Gross per / primary Most recent estimate (latest year available, 1991-97) capita enrollment Poverty (% of population below nathonal poverty line) 13 Urban population (% of total population) 53 57 42 Life expectancy at birth (years) 67 67 89 Infant mortality (per 1,O0 live births) 51 48 36 Child malnutritbon (% of children under 5) 10 .. .. Access to safe water Access to safe water (% of population) 52 71 84 illiteracy (% of population age 15+) 56 39 19 Gross primary enrollment (% of school-age population) 83 97 111 Moilcco Male 94 102 116 Lower-middle-income group Female 71 91 113 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic ratlos GDP (USS billions) 9.3 17.0 36.7 33.5 Gross domestic investmentUGDP 28.1 22.8 19.8 20.6 Trade Exports of goods and serviceslGDP 18.5 22.1 25.7 30.4 Gross domestic savings/GDP 8.7 16.7 15.9 16.8 Gross national savings/GDP 14.6 17.4 19.0 20.0 Current account balance/GDP -14.9 -1.0 -1.1 -0.4 Domestic vsmn Interest paymentslGDP 1.2 3.8 3.6 3.8 Savings Investment Total debVGDP 33.2 103.6 59.2 57.0 Total debt servicelexports .. .. 27.7 24.4 Present value of debtWGDP .. .. 53.8 Present value of debtlexports .. .. 189.7 .. Indebtedness 1976-86 1987-97 1996 1997 198-02 (average annual growth) GDP 4.3 2.6 12.6 -2.0 4.6 Morocco GNP per capita 1.6 0.7 10.9 4.4 2.9 Lower-middle-income group Exports of goods and serviess 4.3 6.9 8.4 6.3 7.3 STRUCTURE of the ECONOMY 1976 1986 1996 1997 Growth rates of output and Investment (%) (% of GDP) 20 Agriculture 19.2 19.1 19.3 15.3 Industry 32.5 32.3 30.3 33.2 10 Manufacturing 16.5 17.2 17.0 17.6 Services 48.3 48.6 50.4 51.5 o 09s Private consumpbon 68.9 68.0 68.0 65.3 -Ia General govemment consumption 22.5 15.4 16.7 17.9 GDI --*-GDP Imports of goods and services 37.9 28.2 30.0 33.9 (average annual growth) 197646 1987-97 1996 1997 Growth rates of exports and Imports 1%) Agriculture 3.6 -0.2 78.0 -25.6 is Industry 2.5 3.0 3.4 8.4 10 Manufacturing 4.3 3.3 3.0 3.1 Services 5.6 3.2 4.9 0.0 \ Private consumpbon 3.1 3.3 19.3 -10.1 a General govemment consumpton 5.0 1.1 -15.2 5.2 . 92 4 95 Gross domestic investment 0.6 2.1 12.1 2.2 Imports of goods and services -1.1 5.9 -4.0 1.6 - Exports rImports Gross national product 3.9 2.7 13.2 -2.0 Note: 1997 data are preliminary estmates. The diamonds show four key indicators in the country (n bold) compared with its income-group average. If data are missing, the diamond will be inoomplete. Project Appraisal Document Page 49 Fes-Medina Rehabilhation Project Kingdom of Morocco Annex 10 Morocco PRICES and GOVERNMENT FINANCE 1976 1986 1996 1997 Inflation Domestfc prices 1 (% change) 10 Consumer pices .. .. 3.0 1.0 Implicit GDP deflator 1.5 10.3 0.8 2.0 4 Government finance 2 (% of GDP, includes current grants) o,, Current revenue 20.3 18.8 24.3 26.2 92 93 94 95 96 97 Current budget balance 0.8 -1.7 0.9 1.6 GDP deflator r CPI Overall surplus/deficit -18.1 -8.6 -3A -3.7 TRADE (US$ millions) 1976 i198 1S9B i97 Export and Import levels (US$ millions) Total exports (fob) .. 2,608 6,893 7,039 12,500 Other agricutture .. 792 1,646 1,374 Phosphorus .. 412 348 435 1000 Manufactures .. 654 1,531 1,469 7.500 Total imports (cif) .. 3,925 9,728 9,521 siU Food .. 476 1,287 1,065 Fuel and energy .. 596 1,294 1,296 2500 Capital goods .. 906 1,781 1,660 o Export price index (1995=t00) .. 67 80 84 01 92 93 94 ss 9s 97 Import price index (1995100) .. 76 95 89 *Exponts Imports Terrs of trade (1995=100) .. 89 85 95 BALANCE of PAYMENTS (USS millions) 1976 1986 1996 199 Current account balance to GDP ratlo (%) Exports of goods and services 1,696 3,757 9,433 9,483 o Imports of goods and services 3,450 4,796 10,991 10,632 _ Resource balance -1,754 -1,039 -1,559 -1,148 Netincome -127 -688 -1,211 -1,179 Netcurrenttransfers 499 1,549 2,352 2,205 Current account balance -1,382 -178 -418 -123 4 Financing items (net) 1,365 545 485 679 -s Changes in net reserves 18 -367 -47 -556 48 memo: Reserves including gold (USs millions) .. .. 3,968 4,154 Conversion rate (DEC, local4USS)' 4.4 9.1 8.7 9.5 EXTERNAL DEBT and RESOURCE FLOWS 1976 1986 1996 1997 (US$ millions) Total debt outstanding and disbursed 3,084 17,601 21,710 19,096 IBRD 289 1,859 3,732 3,271 IDA 35 42 32 31 G: 2,053 A: 3,271 Total debt service . .. 3,219 2,817 Composto Ions) IBRD 34 233 599 532 IDA 0 1 2 2 Composition of net resource flows F: s.074 Oficial grants 47 57 356 100 OfMicial creditors .. .. 124 -490 Private creditors .. .. -190 -140 Foreign direct investment 38 89 397 1,210 Portforloequity ,, 0 134 0 .667 World Bank program Commitments 150 366 213 155 A-18RD E-Bilateral Disbursements 84 383 380 141 B-IDA D - Oler mutibteral F - Private Principalrepayments 15 109 342 295 C-IMF G-Short-tenn Net fows 49 254 38 -154 Interest payments 20 125 258 238 Net transfers 29 128 -221 -392 Development Economics 10/1/98 I-~~~~~~~~~~~~~~~~~~~~~~~~4 ;.rT- s.. 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