Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004322 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-82950- IBRD-85440) ON A LOAN IN THE AMOUNT OF US$406.73 MILLION EQUIVALENT TO THE KINGDOM OF MOROCCO FOR FIRST AND SECOND TRANSPARENCY AND ACCOUNTABILITY DEVELOPMENT POLICY LOANS (HAKAMA I AND II) February 26, 2018 Governance Global Practice Middle East and North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. i CURRENCY EQUIVALENTS (Exchange Rate Effective January 23, 2018) Currency Unit = Moroccan Dirham (DH) MD 9.22 = US$1 US$1.44 = SDR 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank ATI Access to Information CNPC National Public Contracts Commission CPS Country Partnership Strategy CSO Civil Society Organization DPL Development Policy Loan EU European Union GDP Gross Domestic Product GID Integrated Financial Management (IFM, Gestion Intégrée de la Dépense) IMF International Monetary Fund MAGG Ministry of General Affairs and Governance MEF Ministry of Economy and Finance MENA Middle East and North Africa NGF New Governance Framework OGP Open Government Partnership PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PPP Public-Private Partnership SGG Secretary General of the Government SOE State-Owned Enterprise TA Technical assistance TTL Task Team Leader ii Senior Global Practice Director: Deborah Wetzel Regional Vice-President: Hafez Ghanem Country Director: Marie Francoise Marie-Nelly Practice Manager: Renaud Seligmann Project Team Leader: Fabian Seiderer ICR Team Leader: Anne-Lucie Lefebvre ICR Main Authors: Richard Carroll and Lydia Habhab iii MOROCCO First and Second Transparency and Accountability DPL (Hakama I and II) Contents DATA SHEET A. BASIC INFORMATION B. KEY DATES C. RATINGS SUMMARY D. SECTOR AND THEME CODES E. BANK STAFF F. RESULTS FRAMEWORK ANALYSIS G. RATINGS OF PROJECT PERFORMANCE IN ISRs 1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN ......................................................... 1 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES ........................................................ 8 3. ASSESSMENT OF OUTCOMES ........................................................................................................ 15 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME ..................................................................... 20 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE .............................................................. 20 6. LESSONS LEARNED ....................................................................................................................... 22 7. COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS ................. 24 ANNEX 1: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES .................... 25 ANNEX 2: BENEFICIARY SURVEY RESULTS.......................................................................................... 27 ANNEX 3: STAKEHOLDER WORKSHOP REPORT AND RESULTS ............................................................ 28 ANNEX 4: SUMMARY OF BORROWER'S ICR ....................................................................................... 29 ANNEX 5. LIST OF SUPPORTING DOCUMENTS ................................................................................... 37 ANNEX 6: IMPLEMENTATION COMPLETION AND RESULTS REPORT MEETINGS WORLD BANK STAFF, GOVERNMENT, AND OTHER DONORS ............................................................................................... 38 ANNEX 7: MATERIAL CHANGES BETWEEN TRIGGERS AND PRIOR ACTIONS OF HAKAMA II.................. 40 iv A. BASIC INFORMATION Program 1 MA Accountability and Transparency Country Morocco Program Name: DPL (Hakama I) Program ID: P130903 L/C/TF Number(s) IBRD-82950 ICR Date: 2/15/2018 ICR Type: Core Financing Instrument: DPL Borrower THE KINGDOM OF MOROCCO Original Total USD 200.00M Disbursed Amount USD 206.73M Commitment Implementing Agencies: Ministries of Economy and Finance; General Affairs and Governance; Interior; Relations with Parliament and Civil Society; Civil Service and Administrative Reform; Industry, Commerce, Investment, and ICT; Secretary General of the Government. Co-financiers and Other External Partners: European Union, African Development Bank Program 2 MA: Transparency and Accountability Country Morocco Program Name: DPL2 (Hakama II) Program ID: P154041 L/C/TF Number(s) IBRD-85440 ICR Date: 228/2018 ICR Type: Core Financing Instrument: DPL Borrower MINISTRY OF ECONOMY AND FINANCE Original Total USD 200.00M Disbursed Amount USD 200.00M Commitment Implementing Agencies: Ministries of Economy and Finance; General Affairs and Governance; Interior; Relations with Parliament and Civil Society; Civil Service and Administrative Reform; Industry, Commerce, Investment, and Information and Communications Technology; Secretary General of the Government. Co-financiers and Other External Partners: European Union, African Development Bank B. KEY DATES MA Accountability and Transparency DPL 1 (Hakama I) P130903 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 09/04/2012 Effectiveness: 12/13/2013 Appraisal: 08/19/2013 Restructuring(s): Approval: 10/29/2013 Mid-term Review: Closing: 12/31/2014 12/31/2014 MA: Transparency and Accountability DPL2 (Hakama II) P154041 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/26/2015 Effectiveness: 12/21/2015 Appraisal: 07/28/2015 Restructuring(s): Approval: 10/22/2015 Mid-term Review: Closing: 12/31/2016 12/31/2016 v C. RATINGS SUMMARY C.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory Risk to Development Outcome Significant Bank Performance Moderately Satisfactory Borrower Performance Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Moderately Satisfactory Implementing Moderately Satisfactory Quality of Supervision: Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance Performance C.3 Quality at Entry and Implementation Performance Indicators MA Accountability and Transparency DPL 1 (Hakama I) P130903 Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Program at any time (Yes/No): No Quality at Entry (QEA) None Problem Program at any time (Yes/No): No Quality of Supervision (QSA) None DO rating before Closing/Inactive status Satisfactory MA: Transparency and Accountability DPL2 (Hakama II) P154041 Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Program at any time (Yes/No): No Quality at Entry (QEA) None Problem Program at any time (Yes/No): No Quality of Supervision (QSA) None DO rating before Closing/Inactive status Not rated D. SECTOR AND THEME CODES MA Accountability and Transparency DPL 1 (Hakama I) P130903 Major Sector Original Actual Public Administration 100 100 Other Public Administration 30 30 Sub-National Government 25 25 Central Government (Central Agencies) 45 45 1 Major Theme/Theme/Sub Theme Private Sector Development 10 10 Public Private Partnerships 10 10 Public Sector Management 86 78 Public Administration 58 50 1Note that original Theme totals add to 111% for both operations. Too high a value was placed on Public Sector Management. The ICR uses correct values that add to 100%. vi E-Government, incl. e-services 10 6 Transparency, Accountability and Good Governance 48 44 Public Finance Management 28 28 Public Expenditure Management 28 28 Social Development and Protection 15 12 Social Inclusion 15 12 Participation and Civic Engagement 15 12 MA: Transparency and Accountability DPL2 (Hakama II) P154041 Major Sector Original Actual Public Administration 100 100 Other Public Administration 50 50 Sub-National Government 15 15 Central Government (Central Agencies) 35 35 Major Theme/Theme/Sub Theme Original Actual Private Sector Development 10 10 Public Private Partnerships 10 10 Public Sector Management 86 78 Public Administration 58 50 Municipal Institution Building 10 6 Transparency, Accountability and Good Governance 48 44 Public Finance Management 28 28 Public Expenditure Management 28 28 Social Development and Protection 15 12 Social Inclusion 15 12 Participation and Civic Engagement 15 12 E. BANK STAFF MA Accountability and Transparency DPL 1 (Hakama I) P130903 Positions At ICR At Approval Vice President: Hafez Ghanem Inger Anderson Country Director: Marie Francoise Marie-Nelly Neil Simon M. Gray Practice Manager/Manager: Renaud Seligmann Guenter Heidenhof Task Team Leader: Fabian Seiderer, Khalid El Massnaoui Fabian Seiderer, Khalid El Massnaoui ICR Team Leader: Ann-Lucie Lefebvre - ICR Primary Author: Richard Carroll, Lydia Habhab - MA: Transparency and Accountability DPL2 (Hakama II) P154041 Positions At ICR At Approval Vice President: Hafez Ghanem Hafez Ghanem Country Director: Marie Francoise Marie-Nelly Marie Francoise Marie-Nelly Practice Manager: Renaud Seligmann Hisham Waly Task Team Leader: Anne-Lucie Lefebvre Fabian Seiderer, Khalid El Massnaoui ICR Team Leader: Anne-Lucie Lefebvre - ICR Primary Author: Richard Carroll, Lydia Habhab - vii F. RESULTS FRAMEWORK ANALYSIS Program Development Objectives The program development objective is to (i) strengthen mechanisms promoting transparency and accountability in the management of public resources and (ii) to support legal reforms fostering open governance in Morocco in line with the new Constitution. Revised Program Development Objectives No revisions were made to the program development objectives Indicator(s) MA Accountability and Transparency DPL P130903 and DPL2 (Hakama II) P154041 Original Target Actual Value Achieved at Values (from Formally Revised Indicator Baseline Value Completion or Target approval Target Values Years documents) PILLAR 1: STRENGTHENING TRANSPARENCY AND ACCOUNTABILITY IN THE MANAGEMENT OF PUBLIC RESOURCES A. Adopting Performance Informed Budgeting PEFA2 assessment and indicator related to performance information (PEFA Indicator 1: indicator nº8) Value (quantitative or D C B Qualitative) Date achieved 2012 2016 2016 Target exceeded. The PEFA methodology changed in 2016, but the definition Comments (incl. % of indicator no. 8 remained largely the same. The improvement in the indicator achievement) reflects better performance. (PEFA Diagnostic) Indicator 2: Department performance plans publicly available on the MEF Website Value (quantitative or None 10 Departments 11 Qualitative) Date achieved 2012 2016 2016 Target achieved. The prior action had five departments, but the target was Comments (incl. % increased to 10 during implementation. In fact, by 2017, more than 30 achievement) performance plans were posted on MEF website. (MEF - http://lof.finances.gov.ma/fr/budget/47/60) B: Improving Competition and Transparency in Public Procurement and Public-Private Partnerships Indicator 3: Number of procuring entities subject to the new procurement rules. Value (quantitative 1,571 3,345 3,589 or Qualitative) Date achieved 2012 2016 2016 2 PEFA is a multi-donor diagnostic instrument with 30 high level performance indicators measuring a country’s public financial management. An upgraded PEFA framework was released in 2015 and was being tested in Morocco to inform the Hakama results framework. Indicators are ranked from A to D; D being the lowest score. PI-8 covers service delivery performance information in the executive’s budget proposal or its supporting documentation in year-end reports. It determines whether performance audits or evaluations are carried out and if information is collected and reported on resources received by service delivery units. viii Comments Target achieved. 3589 includes public enterprises, agencies and local governments. (incl. % (Trésorerie Générale du Royaume/ DEPP) achievement) Percentage of savings on the procurement of standard supplies, through the Indicator 4: introduction of e-procurement and reverse auctions. Value (quantitative 0 10% 27.5% or Qualitative) Date achieved 2012 2016 2016 Target exceeded. 27.5% was reported to the ICR mission, however different Comments procurements realized different percentages. Savings were mainly due to clearer (incl. % specification of tenders, improved competition and fewer administrative steps. achievement) (Trésorerie Générale du Royaume). Indicator 5: New national Public-Private Partnerships follow the principles of PPP Law 86.12 Value (quantitative None 100% of new PPPs 100% or Qualitative) Date achieved 2012 2016 2016 Comments Target achieved. Indicator refers to central government, SOEs and agencies subject to (incl. % the new PPP law. Note that there are approximately 40 PPPs in the pipeline that are achievement) following the new rules. (DEPP) C: Enhancing Financial Control and Governance of SOEs and Public Agencies Number of SOEs and agencies that have implemented the following critical elements of the corporate governance code: (a) established a governance committee; (b) adopted a Indicator 6: risk framework; (c) published on their website up to date financial statements and the members and activity of their governance structure. Value a. 2 a. 20 a. 35 (quantitative b. 0 b. 10 b. 17 or Qualitative) c. 1 c. 15 c. 13 Date achieved March 2012 2016 2016 Target achieved. Sub-targets A and B have been exceeded. Sub-target C includes 13 Comments agencies which have published up to date financial statements, however, there are (incl. % many subdivisions within these agencies with their own financial statements published, achievement) thus amplifying the actual value achieved. The indicator overall is substantially achieved. (DEPP) D: Modernizing the Management of Local Finances and of Intergovernmental Fiscal Relations. Percentage of local governments with real time information on budget execution via GID Indicator 7: and production of consolidated administrative account annually. Value (quantitative None 100% 100% or Qualitative) Date achieved 2012 2016 2016 Comments (incl. % Target achieved. Note that this indicator target was reportedly met by 2014. (Treasury) achievement) ix Percentage of directly elected regional councils and their presidents in charge of their Indicator 8: own budgets. Value No direct elections with 100% of regional governments (quantitative regional budget managed by 100% established or Qualitative) governor Date achieved 2012 2016 2016 Comments (incl. % Target achieved. (Trésorerie Générale du Royaume). achievement) PILLAR II: FOSTERING OPEN GOVERNANCE A: Enhancing Fiscal Transparency and Access to Information Indicator 9: Eligibility in the Open Government Partnership - score on access to information (ATI) Value (quantitative 2 4 (out of 4) 3 or Qualitative) Date achieved 2012 2016 2016 Comments Target not achieved as the ATI law was only adopted February 6, 2018. This is expected (incl. % to be reflected in Morocco’s Open Government Partnership (OGP) score, which makes achievement) Morocco eligible for the OGP. This rescoring has not yet occurred. (OGP) Implementation of the unified information request form and the information exchange Indicator 10: mechanisms for information officers. Value (quantitative None At least 2 ministries 0 or Qualitative) Date achieved 2012 2016 2016 Comments Target not achieved. Note that implementing the request form requires that the access (incl. % to information law be passed beforehand. This indicator was selected to demonstrate achievement) implementation of the law once it was passed, which was recent to this ICR date. B: Improving Voice and Citizen Engagement Indicator 11: Number of draft laws and regulations made public. Value Expansion of number of draft legal (quantitative 45 texts published by 40% in 2016 >100 or Qualitative) compared to baseline (or 63). Date achieved 2012 2016 2016 Target exceeded. The baseline 45 draft legal texts, mainly focused on trade and Comments investment and were published between: 2009-2012. 65 new draft legal texts were (incl. % published in 2014 of which 40 new legal texts made available for public comment in achievement) 2014, but comments not posted on site. (SBG- http://www.sgg.gov.ma/Projetsdetexteslegislatifsetreglementaires.aspx) World Justice Project’s (WJP) Rule of Law Index sub-indicator 5.3 measuring access of Indicator 12: citizens to the right of petitions and participation. Value See comment – Sub-indicator 5.3: Score 0.48 (quantitative 15% increase in the score (or 0.552) original indicator not WJP OGI ranking or Qualitative) available Date achieved 2012 2016 2016 x Target not achieved/not available. A specific sub-score on right of petitions was not available at WJP. The policy matrix for Hakama II referred to “Target: Increased citizen Comments engagement, confirmed by an increase in country score by 15% in 2016.” WJP reports a (incl. % civic participation score of 0.51. WJP also reports overall rule law index of 0.53, and achievement) open government score of 0.47 (trending downward). (WJP- http://data.worldjusticeproject.org/#groups/MAR). See indicator 13 for additional evidence. Indicator 13: Percentage of public petitions that have received a response Value (quantitative None 75% of petitions received Not Available or Qualitative) Date achieved 2012 2016 2016 Target not achieved. However, the groundwork has been laid for the petitions platform Comments (see main text), as officials have been dismissed since 2017 in response to petitions (incl. % against them, which is new in Morocco. When the platform to receive and respond to achievement) petitions is operational, petitioning will be through this mechanism. C: Providing Online Access to Basic Administrative Services Statistics on the number of birth certificates ordered online and delivered by registered Indicator 14: mail (cumulative). Value (quantitative 531 delivered 5,000 delivered 11,024 delivered or Qualitative) Date achieved 2012 2016 2016 Comments (incl. % Target exceeded. (Ministry of Interior) achievement) G. RATINGS OF PROJECT PERFORMANCE IN ISRs MA Accountability and Transparency DPL P130903 Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 07/13/2014 Satisfactory Satisfactory 206.21 2 08/03/2016 No rating No rating 200.00 xi The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ICR Abstract In response to citizen demands for greater civic rights, accountability, and transparency, Morocco adopted a new Constitution in 2011, which strengthened its governance framework. In this context, the government’s requested World Bank support in delivering a comprehensive reform program to (a) strengthen transparency and accountability in the management of public resources and (b) support legal reforms fostering open governance. The table below summarizes key program indicators for Hakama I and II. Bank Government Overall Relevance Efficacy Risk Performance Performance Outcome PDO 1: PDO 2: Moderately Moderately Moderately HIGH Significant Substantial Modest Satisfactory Satisfactory Satisfactory Given the DPO objectives, the overall outcome rating is Moderately Satisfactory. The overall rating for project relevance is HIGH. The objectives remain highly relevant to country priorities, and the design of interventions reflects sound technical and analytic work, and was supported by technical assistance. Implementation helped to broaden ownership of policies by spreading work across ministerial lines and was adjusted appropriately to changing circumstances to enhance program impact. The project efficacy rating was substantial for PDO I and modest for PDO II. The Government’s commitment to advance reforms is reflected in most indicators being met (11 of 14). The program had moderate shortcomings particularly with respect to the second objective to foster open governance (namely enhancing transparency and citizen voice through access to information and the right to petition, both of which were delayed). Even for this PDO, there were positive achievements not fully captured by the results framework. The reform program continues to move forward but at a slower pace with delays in follow up actions needed to realize fuller impact of the program. This latter shortcoming is assessed as a significant risk to the sustainability of program outcomes. The Bank followed best practice by supporting the series with a well-designed TA operation. Through training and expert support, this TA helped develop reforms and translate them into new processes because government staff could follow. Several important lessons emerged from the Hakama series. The ratification of a new Constitution presented a window of opportunity to engage far reaching reforms by front-loading the legislative reform program. At the same time, follow-through measures need to be carefully considered for when reform momentum slows down. Program design, relevance, and resources can benefit when multiple donors work together and speak with one voice to the Government. Finally, it is a good practice to support a legislative reform agenda with a strong TA. xii The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN 1.1 Context at Appraisal 1. As the Arab Spring movement swept across the Middle East and North Africa (MENA) Region, Moroccans demonstrated in 2011 for greater civic rights, accountability, and transparency during 2011- early 2012. The government responded to citizen demands and sought to strengthen its governance framework through the adoption of a new Constitution on July 1, 2011. The new Constitution enshrines foundational changes to the social contract, of the kind only seen every few generations. It was thus natural at the time of the constitutional debates to witness some political pushback to the high expectations of the Moroccans in the street for greater administrative transparency, access to information and/or the right to petition. 2. The Hakama DPO series originated from the government’s request for assistance in delivering a comprehensive reform program in line with new Constitutional rights. Hakama I was appraised in 2013 and aimed to maximize the window of opportunity for transformational reforms. For example, it pursued principles of transparency in public procurement law to improve value for money and the issue of lagging regions through legislated mechanisms of decentralization. The second DPO, Hakama II, was appraised in 2015 and expanded on the new legislative framework. Its engagements were more technical and medium- term efforts such as adherence to the new procurement law and implementation of critical aspects of the corporate governance code for state-owned enterprises (SOEs). 3. The DPO series was supported by a technical assistance (TA) program called The New Governance Framework (NGF) Implementation Support Project. The NGF was effective in September 2013 as a trust fund sponsored by the MENA Transition Fund. The program aimed to (a) develop and implement the public consultation policy and law on petitions; (b) improve access to fiscal information and enhance of performance orientation in budget management; and (c) the strengthen fiscal decentralization. 4. The rationale for the World Bank’s assistance to the Government of Morocco was based on a commitment to improve governance expressed in the FY2010-13 Country Partnership Strategy (CPS). The rationale was also based on new constitutional provisions, and on long-standing engagements in public administrative reforms. The CPS focused on, among other areas, governance as a cross-cutting theme and strengthening inclusion and voice (covered under CPS Pillar 2). Engaging in the governance areas provisioned in the new Constitution increased transparency and citizen engagement through the right to access to information (ATI), petitions, and budget transparency is necessary to achieving the CPS agreement by stimulating policy discussions over the priorities and underlying strategies of government spending. The World Bank has also provided support through the Public Administration Reform Loan (PARL) series and the Open Government Partnership (OGP). PARL emphasized performance budgeting reform through the adoption and implementation of the new organic budget law and procurement decree. Assistance on the open governance agenda has focused on Morocco’s eligibility for the OGP through the ATI legislation. 5. In 2013, Morocco’s macroeconomic position faced three stresses. First, an unfavorable external condition of high oil prices and a sluggish European economy (the country’s main trading partner) 1 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) negatively impacted Morocco’s fiscal and external accounts. Second, strong social demands for public sector employment and subsidies led to high expenditures that were often not targeted towards intended recipients. Third, delays in the implementation of key fiscal and structural reforms also led to higher government spending and lower efficiency. Efforts to offset the stressors within the country were included, for example, the organic budget law which aimed at improving the efficiency and performance of public expenditures as well as strengthening fiscal discipline. 6. Despite stresses, the macroeconomic framework was adequate at the time of appraisal of both operations (Table 1). Gross domestic product (GDP) growth increased from 2.7 in 2012 to 4.4 percent in 2013, while inflation remained low at less than 2 percent. The general government balance including grants recorded a deficit of 7.4 and 5.6 percent in 2012 and 2013, respectively. The current account deficit fell from 9.7 percent in 2012 to 7.5 percent in 2013. Unfavorable external conditions of high oil prices and a sluggish European economy negatively impacted Morocco’s fiscal and external accounts. 7. During the implementation of the series, economic growth remained sensitive to agriculture output, while the fiscal deficit decreased. The vagaries of the weather continue to drive economic growth. After a record level of cereal production in 2015, Morocco was affected by a severe drought in 2016. Agricultural production, which still represents almost 15 percent of Morocco’s GDP, contracted by around 10 percent and pushed the overall GDP growth down to 1.1 percent in 2016. Despite large public investment efforts in recent years, nonagricultural growth remained sluggish at around 3 percent. The pursuit of prudent macroeconomic policies has helped reduce external and fiscal imbalances in recent years. The completion of the subsidy reforms initiated in 2014 coupled with a solid fiscal management and financial oversight contributed to further reducing the fiscal deficit to an estimated 3.9 percent of GDP in 2016 and to stabilizing the public debt at around 66 percent of GDP. Improvements in the government investment-saving balance and the fall in international oil prices led to a significant reduction in the external current account in recent years; which was only reversed in 2016 as a result of the effects of an accommodative monetary policy and a recovery in investment lending to the private sector. 8. Recent macroeconomic performance has improved, with GDP growth estimated at 3.8 percent for 2017. The cereal crop is expected to be above its historical average and agricultural GDP is expected to grow by close to 10 percent. Nonagricultural GDP is also projected to rise slightly above its recent trend due to the agriculture spillover effect and the rising confidence of both consumers and producers. However, these positive developments are unlikely to translate immediately into major improvements in labor market outcomes. In addition, the projected increase in international oil prices will contribute to deteriorating the current account but the external financing requirements will remain a moderate concern given Morocco’s relatively low external debt and access to international markets. During the period covered by the HAKAMA series, Morocco’s macroeconomic framework was supported by a series of PLL arrangements from the International Monetary Fund (IMF) as insurance against external risks. 2 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Table 1. Key Macroeconomic Indicators, 2012-2017 Estimated 2012 2013 2014 2015 2016 2017 Real Economy Annual percentage change, unless otherwise indicated Real GDP 2.7 4.4 2.6 4.5 1.1 3.8 Agricultural GDP −8.9 19.0 −2.3 13 −9.8 9.6 Non-Agricultural GDP 4.4 2.3 2.5 1.7 2.4 3 Per Capita GDP 1.6 3.3 1.1 3.1 -0.2 2.5 Contribution Consumption 3.4 2.8 2.4 1.8 1.7 2.6 Gross Fixed investment −0.9 −0.1 −0.6 0.4 1.1 1.1 Net exports 0.2 1.3 1.1 3.3 −1.7 0.1 Imports 1.7 −1.5 3.3 −3.1 7.9 4.5 Exports 2.6 2.4 8.4 6 4.5 5.9 Unemployment rate (ILO definition) 9.0 9.2 9.9 9.7 9.4 … GDP Deflator 0.4 1.0 0.3 1.7 0.2 0.6 CPI(pa) 1.3 1.9 0.4 1.6 1.6 2 Fiscal Accounts Percent of GDP, unless otherwise indicated Expenditures 36.1 33.9 31 28.7 29.1 28.3 Revenues, including all grants 28.7 28.3 26.2 24.4 25.2 25.3 Budget Balance −7.4 −5.6 −4.7 −4.3 −3.9 −3 Central Government Debt 59.7 63.5 63.5 64.1 66.2 66.3 Selected Monetary accounts Annual Percentage change, unless otherwise indicated Broad Money 4.5 3.1 6.2 5.7 6.0 6 Credit to non-government 5.1 3.5 2.5 1.9 4.8 5.1 Interest (key policy interest rate) 3.25 3.00 2.5 2.5 2.3 2.3 Balance of payments Percent of GDP, unless otherwise indicated Current Account balance −9.7 −7.5 −5.7 −1.9 −4.0 −4.2 Imports 49.0 45.6 44.7 40.6 43.5 44.3 Exports 33.7 31.4 32.5 32.5 32.9 33.8 Foreign Direct Investment 2.8 3.2 2.8 2.6 2.0 2.1 Gross official reserves in US$, billions (eop) 17.2 18.4 20.5 23.0 25.7 27.6 In months of imports 4.1 4.4 6.0 6.3 6.8 6.9 1.2 Original Project Development Objectives (PDO) and Key Indicators 9. The original PDO is based on two pillars: (1) to strengthen mechanisms promoting transparency and accountability in the management of public resources and (2) to support legal reforms fostering open governance in Morocco in line with the new Constitution. Table 2 presents the key program indicators for Hakama I and II. 1.3 Revised PDO and Key Indicators, and Reasons/Justification 10. There was a significant number of revisions to the key indicators in moving from Hakama I to Hakama II, mainly to improve the relevance of the results indicators to the program actions (Table 1). Baselines and targets for the indicators were not changed and are presented in the basic data sheet. Public 3 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Expenditure and Financial Accountability (PEFA) indicators were changed from a broader range of indicators (in Hakama I) to one focusing on the use of performance data (in Hakama II), which was more relevant to the prior actions of the program. These prior PEFA indicators as well as the indicator for budget execution rates were picked up by the NGF TA project which supported the implementation of Hakama DPO series. One governance indicator, Open Budget Index – OBI, was also replaced because it was not calculated for the program. Other changes and their justifications are identified in Table 2. In the transition from Hakama I to Hakama II, in total, six indicators were not significantly changed, four changed, four dropped and three new indicators added. Table 2. Hakama I and II Key Indicators by Pillar and Component Indicator-Hakama I Policy Matrix Indicator-Hakama II Policy Matrix Comment and Changes PILLAR I: STRENGTHENING TRANSPARENCY AND ACCOUNTABILITY IN THE MANAGEMENT OF PUBLIC RESOURCES A: Adopting Performance Informed Budgeting 1. PEFA23 indicators (PI) related to 1. PEFA assessment and indicators Replaced because PEFA budget transparency (nº6), policy based (PI) related to performance methodology change made budgeting (nº12) and external scrutiny information (nº8). indicators less comparable. (nº 26 and 27). Hakama 1 indicators picked up in NGF TA project 2.Introduction of performance M&E in 2. Department performance plans Hakama 2 revised to more the budget process measured by the publicly available on the Ministry of advanced indicator on number of parliamentary questions on Economy and Finance (MEF) agency performance. performance. Website. 3. Budget execution rate of these 5 Dropped Hakama 1 indicator picked ministries. up in NGF TA project. B: Improving Competition and Transparency in Public Procurement and Public-Private Partnerships 4. Number of procuring entities subject 3. Number of procuring entities No change. to the new procurement rules. subject to the new procurement rules. 5. Savings through the use of electronic 4. Percentage of savings on the No change. procurement and reverse auctions. procurement of standard supplies, through the introduction of e- procurement and reverse auctions. 6. A unified legal and regulatory 5. New national Public-Private Revised to update Hakama I framework for PPPs fostering Partnerships follow the principles of indicator. transparency and competition is PPP Law 86.12 operational. C: Enhancing Financial Control and Governance of SOEs and Public Agencies 7. Percentage of these SOEs and 6. Number of SOEs and agencies No change. agencies that have implemented critical that have implemented the elements of this code and: (a) following critical elements of the established a governance committee; corporate governance code: (a) (b) adopted a risk framework; (c) established a governance published on their website (i) up to date committee; (b) adopted a risk financial statements and (ii) the framework; (c) published on their website up to date financial 4 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) members and activity of their statements and the members and governance structure. activity of their governance structure. 8. Number of SOEs and agencies subject Dropped. Change for Hakama 2 to to ex ante financial controls. focus on increasing the number of SOEs and agencies implementing critical elements of the newly adopted corporate governance code, which is more relevant to the prior action. 9. Budget execution rate of SOEs and Dropped. Same as no. 8 above. agencies. D: Modernizing the Management of Local Finances and of Intergovernmental Fiscal Relations 10. Percentage of municipalities with 7. Percentage of local governments No change. real time information on budget with real time information on execution via GID budget execution via GID and production of consolidated administrative account annually (no change) 8. Percentage of directly elected Added at Hakama 2 to regional councils and their measure Hakama 2 prior presidents are in charge of their action. own budgets PILLAR II: FOSTERING OPEN GOVERNANCE A: Enhancing Fiscal Transparency and Access to Information 11. Open Budget Index (OBI) from the Dropped. Indicator was not available. International Budget Partnership (IBP) 12. Open Government partnership’s 9. Eligibility in the Open No change (OGP) score on access to information Government Partnership - score on access to information. 10. Implementation of the unified Added to better measure information request form and the operational ATI. information exchange mechanisms for information officers. B: Improving Voice and Citizen Engagement 13. Number of draft laws and 11. Number of draft laws and No change. regulations made public regulations made public (no change) 14. Gallup World Poll Survey indicator 12. World Justice Project’s Rule of Changed to have a more measuring citizen engagement in Law Index sub-indicator 5.3 direct measure of petitions government affairs: “Have you voiced measuring access of citizens to the reform. opinion to official in the past month?” right of petitions and participation 13. Percentage of public petitions Added to better measure that have received a response impact of petitions law. C: Providing Online Access to Basic Administrative Services 15. Statistics on the demand and supply 14. Statistics on the number of birth Minor change to make more of birth certificates online certificates ordered online and specific 5 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) delivered by registered mail (cumulative) 1.4 Original Policy Areas Supported by the Program (as approved) 11. The DPO series aimed to improve (a) government transparency and accountability in the management of public resources and (b) open governance through access to information and citizen engagement by: (a) Adopting performance informed budgeting. Budget reform enhances government transparency and accountability, strengthens parliamentary oversight, and represents a strong lever for the modernization of the management of public expenditures and services. The DPO supported the development of a multiannual budget framework and the introduction of managerial flexibility within programs to contribute to the improvement of operational efficiency, budget execution rate, and faster reallocation of resources. The performance documents prepared by each minister and program manager offered a baseline for performance contracting as well as for monitoring and evaluation by ministries and Parliament. (b) Improving competition and transparency in public procurement and public-private partnerships. E-procurement increases transparency and accountability in financial management, improves value for money, and reduces opportunities for corruption. The DPO supported the expansion of public procurement rules to the entire public sector, including certain SOEs, local governments and architect contracts. It also supported introduction of e- procurement and reverse auctions to increase competition and accelerate the tendering process to encourage competition and generate savings for the government. Finally, the DPO supported a unified public-private partnership (PPP) law and harmonized procurement rules to foster competition and enhance transparency of contractual arrangements. (c) Enhancing financial control and governance of SOEs and public agencies (including local governments). SOEs and public agencies have played an important role in the economic and social development of Morocco through the implementation of public policies and large infrastructure projects, and the delivery of basic services. The corporate governance code aimed to increase transparency, reduce potential conflicts of interest, and improve the unequal treatment of shareholders and stakeholders, and reinforce budget and ATI reforms. The DPO also supported the integrated financial management (IFM, gestion integrée de la dépense [GID]) which expected to increase the transparency and accountability of local government’s financial management by providing real time information on the budget execution, facilitate the production of consolidated accounts and foster greater transparency of inter-governmental fiscal relations. 12. The DPO series was designed to support open governance (Pillar II) by: (a) Enhancing fiscal transparency and access to information. Weak access to information by the public was highlighted as a major challenge for many years. The DPO built on the 6 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) constitutional provision to access to information (Article 27) by supporting a draft law to increase transparency, accountability, and facilitate the scrutiny of the country’s budget process by both the media and citizens. (b) Improving voice and citizen engagement. Extending the scope of public engagement in the form of an organic law on petitions strengthened dialogue between government, civil society, the private sector, and other stakeholders. The DPO series supported a law on access to information and the right to petition, as well as the regular submission of draft laws and regulations to the Council of Government on the website of the Secretary General of the Government (SGG) to mutually reinforcing and constitute the foundations of open government. (c) Providing online access to basic administrative services. Information and communication technologies are tools to enable these rights, modernize the delivery of public services, and improve the relationship between public services and citizens. The DPO series supported the online access to key administrative documents and services, such as birth certificates and criminal records, and delivery of these documents by registered mail to reduce the cost, time, and uncertainties associated with these indispensable administrative procedures. 1.5 Revised Policy Areas 13. No changes were made to the main policy areas supported by the program. 1.6 Other Significant Changes 14. The NGF TA project support to the implementation of the DPO series as a critical part of the operation package was delayed due to the complexity of coordination involving many ministries . The inter-ministerial steering committee significantly delayed fund disbursement and implementation. To date, only 50 percent of the funds have been disbursed and an extension of the closing date has recently been approved. To resolve the issue causing the delay, several measures were taken, including developing a reorganization plan, change of project director, team building retreat (2017) to build trust and communication among the committee members. 15. There were also changes to the program triggers for Hakama II in two areas. (See Annex 8.) The decree on fiscal transfers was replaced by a larger reform and organic law establishing directly elected and managed regions and a significant increase of their resources (from MD 2 billion MD 10 billion). Implementing regulations for SOEs were replaced with an increase in the number of SOEs subject to the new corporate governance code. This replacement included larger SOEs and could be viewed as a more results-oriented measure. While both original triggers remained relevant, the program team acknowledged that designing the fiscal transfers system and issuing implementing regulations for SOEs was going to be a longer process than was possible under the program timeframe. In addition, a sequencing issue arose whereby the Ministry of the Interior preferred to revise the legal framework and mandate of regions before issuing a decree on fiscal transfers. 7 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES 2.1 Program Performance 16. Table 3 provides basic data for Hakama I and II (DPO 1 and 2), which totaled US$406.73 million for the two-operation series. Table 4 shows the prior actions for the series and how they were sequenced from Hakama I to Hakama II. All actions were completed as required. Table 3. Basic Data for DPO 1 and 2 Disbursed Amount (SDR, Operation Approval Date Closing Date millions) DPO 1 10/29/2013 206.73 12/31/2014 DPO 2 10/22/2015 200.00 12/31/2016 Table 4. Completed Prior Actions for Hakama I and Hakama II Prior Actions for DPL 1 Prior Actions for DPL 2 PILLAR 1: STRENGTHENING TRANSPARENCY AND ACCOUNTABILITY IN THE MANAGEMENT OF PUBLIC RESOURCES A. Adopting Performance Informed Budgeting 1. The 2014 budget preparation Circular No. 12-2013 1. The organic budget law No. 130-13, introducing dated September 23, 2013, issued by the Head of the programmatic performance-oriented budgeting has Government, provides that at least three Ministries been published in the National Gazette No 6370 dated will start testing the new performance informed June 18, 2015. The implementing decree No 2-15-426 budgeting approach with the 2014 budget. of such law has been published in the National Gazette No 6378 dated July 16, 2015. 2. To strengthen managerial accountability and 2. The Head of Government has issued circular No flexibility, the Minister of Economy and Finance has 4/2015 dated June 18, 2015, introducing a issued six Orders (Arrêtés) dated December 26, 2012, comprehensive performance monitoring and and seven Orders (Arrêtés) dated June 3, 2013 evaluation policy comprising the establishment of alleviating ex-ante financial controls for qualified ministerial performance plans, performance audits authorizing officers and delegates and program evaluations. 3. Five (5) ministries have transmitted to Parliament (a) their 2015 programmatic budget proposals and (b) the corresponding performance plans. 4. The MEF has published on its Website the Government’s medium-term budget framework and the programmatic budget allocations for five (5) ministries. B. Improving Competition and Transparency in Public Procurement and Public-Private Partnerships 3. Public procurement Decree No.2-12-349 dated 5. The Council of Government has approved draft March 20, 2013 issued by the Head of Government to decree No 214-867 dated September 10, 2015 replace public procurement Decree No.2-06-388 dated establishing the National Public Contracts Commission February 2, 2007 to expand its scope to local (CNPC), with a mandate on oversight, complaints governments, architect’s contracts and some public handling and training, and including non-State actors. agencies (établissements publics) and to introduce e- 8 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Prior Actions for DPL 1 Prior Actions for DPL 2 procurement, has been published in the National Gazette No. 6140 dated April 4, 2013. 4. The draft law on public private partnership has been 6. The implementing decree No 2-15-45 dated May 13, transmitted by the Head of Government to Parliament 2015, of Law No 86.12 on Public Private Partnerships on February 21, 2013. Contracts, has been published in the National Gazette No. 6365 dated June 1, 2015. C: Enhancing Financial Control and Governance of SOEs and Public Agencies 5. Decision-making bodies of at least five State owned 7. Decision-making bodies of 15 additional State- enterprises and agencies among a list of ten pilot owned enterprises and agencies, have adopted a entities, have adopted a resolution and action plan to resolution and an action plan to implement the new implement the new code of corporate governance for code of corporate governance for State owned State owned enterprises. enterprises. D: Modernizing Local Governance and Financial Management 6. The Minister of Interior has issued Circular No. 3333 8. The organic law No.111-14 on regions has been dated March 5, 2013, extending the integrated published in the National Gazette No 6380 dated July expenditure management system (Gestion intégrée de 23, 2015. la dépense - -Integrated Financial Management - IFM) to local governments. PILLAR II: FOSTERING OPEN GOVERNANCE A: Enhancing Fiscal Transparency and Access to Information 7. The Minister of Economy and Finance has adopted a 9. The draft law No. 31-13 on access to information fiscal transparency policy through a decision dated has been transmitted to Parliament by the Head of June 12, 2013. Government on June 8, 2015. B: Improving Citizen Voice and Engagement 8. The Secretary General of the Government has 10. The draft organic law No. 44-14 on public adopted and is implementing a policy under which petitions, in line with the recommendations of the draft laws and regulations are published on its website National Dialogue has been adopted by the Council of prior to their submission to the Cabinet for adoption. Ministers on July 14, 2015. 9. The Minister in Charge of Relations with Parliament and Civil Society has adopted Decision No 076, on June 11, 2013, establishing a structured national dialogue for the implementation of the constitutional provisions on citizen participation. C: Providing Online Access to Basic Administrative Services 10. A new e-Government application (www.watiqa.ma), allowing citizens to access their birth certificates online has been developed and rolled out to twenty (20) provinces and one hundred (100) municipalities. Details of Program Achievements 17. The Hakama series supported several organic and other laws that have a potentially high positive impact on governance and transparency. These laws include: • The organic budget law No. 130-13, introducing programmatic performance-oriented budgeting which was published in the National Gazette No 6370 dated June 18, 2015. The 9 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) implementation of this law has already spread across the central government and is ensuring that budgets are required to be linked to performance. The organic law provides a foundation for public financial management (PFM) reforms for many years to come. • The law No 86-12 on public private partnership was published in 2015. The PPPs in the pipeline are following requirements of the law, including assessments of the financial viability of the proposed PPPs. Summaries of PPP contracts must also be published. • The organic law No.111-14 on regions was published in the National Gazette No 6380 dated July 23, 2015. This law is aimed at reducing regional disparities by increasing the power of local governments (LGs) through directly elected presidents and regional councils and management of their own budgets. • The law No. 31-13 on Access to Information was passed by Parliament on February 6, 2018. This law is a step forward in improving governance as it will allow citizens to access government’s information. The law will apply to LGs as well as the central government. • The organic law No. 44-14 on public petitions was published in July 2016. Additional details are provided below. Pillar I: Strengthening Transparency and Accountability in the Management of Public Resources 18. Fiscal Management. There was improvement in fiscal management through the passing of organic laws on finance and decentralization. There is now a 3-year budget cycle so the public can see ahead of time how the budget is allocated. This helps meet the objective of transparency in management public resources. Although it presents few restrictions, passage of the ATI law is also expected also to improve government accountability. 19. PFM including Programmatic Budgeting. The Hakama series contributed strongly to the establishment of programmatic budgeting and promoted it across all Ministries. MOF reported to the ICR mission (September 2017) that some ministries are doing better than others with performance budgeting, particularly ministries that deliver programs and projects such as the Ministries of Education and Agriculture. Roll out covered all regions, although the rapid deployment of the system strained the training capacity that was funded by the accompanying NGF TA project. This project has therefore been extended until March 31, 2019 (extension approved on January 22, 2018). It is also expected that all 42 ministries will present programmatic budgets for 2018, an increase from 16 ministries in 2016. 20. There have been important gains in some areas of procurement. The introduction of e- procurement and reverse auctions was reported to be highly successful in improving the efficiency of tenders and in savings to the public procuring entities (government, SOEs and local governments). The new public procurement decree (1-12-349, March 2013) also extends new procurement rules to LGs and some SOEs (under Hakama I). The Hakama II-supported draft decree (approved by the Council of Government-September 2015) to create the CNPC with oversight of procurement complaints and training. After some delay, the government has finally appointed the members of the new entity, a prerequisite for the CNPC to become a functioning agency. 10 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 21. The program (Hakama 1-prior action 6) supported improved PFM, as well as decentralization, by promoting the implementation of IFM at the LG level. Training for this rollout was completed rapidly in one year (2013), and the roll-out took place in 2014 (Circular 3333), covering 100 percent of the LGs (compared with 80 percent target). The LGs now have real time financial data to use for implementing their budgets. 22. Decentralization. In addition to the expansion of IFM to LGs, the government also decentralized budget responsibility, with a commitment of a meaningful level of resources. LGs now have authority over their own budgets. Just as importantly, there was a negotiation between the central and local governments as to how much the total allocation to the regions would be. The organic law on Regions (approved in May 2015) stated that financial resources to regions would be increased by a factor of 10 over a 10-year period. Based on this multiple of what LGs had previously received, the aggregate allocation to LGs would reach an estimated MAD 10 billion (US$1.1 billion equivalent, funded by a share of the value- added tax-VAT). These commitments demonstrate significant government support for decentralization because regions would have not only budget authority, but also substantial funds from the central government over time. 23. Successful fiscal decentralization t will depend on the capacity of the LGs to make efficient use of the funds. This process will be gradual, starting with smaller projects between the central government and the individual LGs. The MoF needs to determine that proposals from the LGs are sound before approving higher allocations. The King of Morocco has indicated in several his speeches that progress in decentralization is a top national priority. 24. The PPP law (implementing decree No. 2-15-45, May 2015) supported by the Hakama series brings transparency to this activity. Though there have been PPPs before this law in the transport, water or energy sectors, there was no dedicated legal framework. This hampered transparency and accountability as the terms of the PPPs were not public and performance was mixed. Under the new law, contracts must be vetted and summaries of contracts published. It was reported to the ICR mission (by DEPP) that there are approximately 40 PPPs in the pipeline which are going through the new process established by the PPP law. The use of PPPs has become a priority for the government because PPPs can help maximize finance for development, and encourage private sector financing for infrastructure. The incentives for sector ministries to use PPPs need to be strengthened as well as the PPP Unit’s leadership vis-a-vis that of sector ministries. 25. The reform program also made important strides in financial control of SOEs and other public agencies. OECD principles were used as guidelines to provide recommendations for the improvement of the SOE governance structure, internal control framework, financial accounting and reporting system, and transparency. These features were all part of the adopted and implemented Code for Corporate Governance and PPP law. 26. Leveraging Funds and TA Funding. The Hakama series mobilized development partners around a common reform agenda and leveraged additional funds for budget support, including an EU grant of Euro 100 million grant, and $200 million from the African Development Bank (AfDB), along with Bank resources (US$406K). These amounts do not include additional funds for TA and from Trust Funds to support reforms. Budget support is a key to reassure counterparts of substantial support from 11 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) development partners for the reform program. Funding for short TAs and seed money for other TA for the DPO were key to program success. Pillar II: Fostering Open Governance 27. ATI. An ATI Law No. 31-13 on Access to Information was passed by Parliament on February 6, 2018. The delay in passing the law reflect delay in forming a coalition government after the 2016 elections and for a new minister to take ownership. The concept of ATI is entirely new to the Moroccan polity and supporters of the law faced resistance, which was overcome as donors spoke with one voice. Adoption of the ATI law is a major step forward for governance in Morocco and provides the foundation on which to build for improving citizen information. Concerns linger that there may still be exceptions to the type of information that can be accessed and that procedures for accessing information are too cumbersome. 28. Direct Petition and Citizen Engagement. The right to petition is enshrined in the Constitution. The Organic Law No.44.14 determining the conditions and modalities for presenting petitions to the government was approved on August 18, 2016, and the Decree forming the Petition Commission was issued in July 2017.3 Opponents of the law argued that citizens had direct representation in the government (through Parliament), thus the right to petition was unnecessary. Following long and comprehensive consultations with an estimated 10,000 civil society organization (CSO) participants involved, the Government decided in the end to extend petition rights to all levels of government. Thanks to the HAKAMA program, the foundation is in place to build for the future. 29. Progress on basic services was also achieved through a new e-government application for birth certificates. The website www.watiqa.ma is operational and citizens can access birth certificates and have them delivered to where they live. This measure will make it possible to keep accurate records and help citizens apply for other services. 2.2 Major Factors Affecting Implementation 30. Pillar 1 benefited from long-term Bank support through analytical and technical work, whereas Pillar 2 reforms were newer endeavors that were introduced to ensure the new constitutional provisions were built upon. Given the innovation built into Pillar 2, many more processes (consultations, dialogue and TA) needed to take place to broaden ownership, which required more time to implement the reforms. These consultations were key towards mitigating resistance to change. 31. Citizen demands along with political will from the government were key factors for governance reforms. DPO I aimed to take advantage of this window of opportunity and momentum of change to pass transformational legislation. 32. Government commitment to reforms was evident in many areas. The CPS of 2010-2013, the King’s comprehensive roadmap of political, institutional, and social reform and the new Constitution all strongly signaled government commitment to the reforms outlined and implemented in the DPO series. Prioritization, design, and sequencing of the operation was informed by the comprehensive analytical and 3 See http://www.sgg.gov.ma/Portals/1/BO/2017/BO_6574_ar.pdf?ver=2017-06-06-141823-193. 12 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) technical work with the GoM in years preceding the operations. With these two factors, implementation was generally positive. 33. All major components of the program were informed by analytic work. The Public Expenditure and Financial Accountability diagnostic (PEFA, 2009) identified weaknesses that led to the design of performance monitoring, multiannual budget programming, and procurement reforms in the DPO series. The “Supporting Economic Governance Transition in Tunisia and Morocco” program supported the overall Hakama program and its complex consultative processes. The ATI draft law went through three versions of significant variances in quality over the course of a year and a half and is currently in the Second Chamber of Parliament. With the extension of the TA, there is continued support to the reform dialog. 34. Diagnostics informed the operational design also in the case of the decentralization, fiscal transfers, and equalization system. Sequencing was changed between DPO I and II in line with the recommendations of the consultative commission for regionalization to first strengthen and clarify the mandate and resources of empowered regional governments and hold elections, which was achieved from having no direct elections with regional budgets managed by governors to all regional governments established through direct elections and in charge of their own budgets. 35. A recurring theme in the feedback from stakeholders was the importance to stay engaged with the Government through TA and capacity building. The support to the DPO series by two TA trust fund programs helped achieve this engagement. There were still challenges in inter-ministerial coordination and communication issues stemming from the siloed nature of the government. An 18-month extension of the Transition Fund activities, including TA, capacity building and inter-ministerial team building will likely produce the sufficient conditions to successfully implement the program. 36. Donor coordination was adequately designed to ensure collaboration in meetings, and policy coordination and alignment of priorities. The IMF, European Union (EU) and the AfDB joined the World Bank team in joint meetings and missions, policy dialogue and leveraged resources for TA. While each donor follows its own decision-making process and operational procedures, TA was closely coordinated among the four institutions around the pillars included in the series. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 37. Design: The results framework contained indicators that were relevant to both the prior actions and the PDO (to improve mechanisms for transparency and accountability for managing public resources and to support legal reforms for open governance in line with the new constitution). The results framework dropped an indicator from Hakama I that measured budget execution rates (mitigated the fact that this measure was picked up by the accompanying NGF TA project), but other indicators in the results framework were adequate for capturing improved accountability and transparency, including ‘the number of ministries and agencies publishing performance plans’, and a PEFA indicator (no. 8) on the use of performance information. Other indicators of transparency included the number of procurements and PPPs following their new respective laws, and SOEs establishing governance codes with three key elements (a governance committee, a risk framework and financial statements published on their website). An indicator on procurement savings was also included to show impact of transparent, e- procurement and reverse auctions. Transparency and accountability at a decentralized level was 13 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) measured by two relevant indicators—IFM use by local governments, and regional director control of regional budgets. 38. For open governance, the results framework used the OGP score on ATI and the implementation of the ATI request form both of which were appropriate to the prior actions and the PDO. The indicator ‘Open Budget Index’ (OBI) from the International Budget Partnership (IBP), was dropped after Hakama I. Instead the program relied on the ATI score from OGP which was directly relevant to the prior action and helped measure the PDO. As part of citizen engagement, the framework also included an indicator on the number of draft laws and regulations made public, which was an important measure of ‘proactive’ disclosure. The World Justice Project’s Rule of Law Index (indicator 5.3) captured the right of citizens to petition, though this indicator was not available in the 2016 WJP report. The WJP did provide other indicators that measured citizen participation in Morocco, which was an important indirect indicator for the governance part of the PDO. The e-government application was implemented for birth certificates which provided a tangible benefit to Moroccans that also helped improve open governance. 39. Implementation and Utilization: All results indicators could be measured once adjustments were made during Hakama II. Still the recording of actual values for the indicator of the results matrix was uneven. The 2016 Implementation Support and Results Report (ISRR) mixed up indicators between the TA and Hakama II which might be because it was a joint supervision mission. The ICR mission had to remedy this by tracking down all results indicators. While the indicators were not recorded in a single M&E document for every program area, the indicators were maintained by the individual agencies responsible. The results indicators also served the purpose of helping to define the anticipated benefits of the transparency and governance actions. For example, the indicator targeting budgetary savings from new procurement reforms around e-procurement and reverse auctions gave implementers a goal to pursue that was tangible and immediately beneficial to the government. Another example was related to ATI which was the OGP score reaching a level of 4 indicating that the ATI law had been passed and that the OGP score is adjusted to take that into account. This results target reached beyond the prior action which was to transmit the draft ATI law to Parliament. This was a good use of the results framework to incorporate an indicator that captured the expectation that the reform would be more fully followed through. However, as the passage of the law was delayed until just recently, the target could not be met, and so the results framework recorded the lack of impact to date (though positive impact is expected shortly). 2.4 Expected Next Phase/Follow-up Operation 40. The World Bank continues an active dialog in supporting the government’s constitutional rights and governance principles, building on the foundations led by the Hakama series through the following five programs: • Support for New Governance Framework (P143979): The TA and capacity building arrangement of the DPO series is in the process of extension. The NGF TA project will continue to assist follow up implementation for the Hakama series, over the next 18 months. The NGF TA project will continue to focus on (a) supporting processes to develop public engagement laws and policies; (b) improving access to fiscal information and 14 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) enhancing performance orientation in budget management; and (c) strengthening the role and functions of local governments, particularly through fiscal decentralization. • Strengthening Parliamentary Oversight (P158011): To build technical capacity in the government for the new reforms of citizen engagement, ATI, and performance oversight, this project aims to (a) support open parliament in the area of public access to information and strengthen avenues for public engagement; (b) improve parliamentary budget oversight linked to budget analysis and the newly adopted performance based budgeting approach to increase accountability; and (c) reinforce knowledge development and dissemination of the value and impact of ongoing reforms among citizens and civil society. • Morocco Education Support Program (P155222): To address issues related to the DPO such as a decentralization and lagging regions, this program-for-results aims to improve quality and efficiency of education services in selected regions of Morocco. • Programmatic Economic Governance TA (P131928): Provided substantial implementation support to the DPL’s key reforms and thus limited the issue of the delay in the inception of the transition fund project. • IFC Private Sector Diagnostic: IFC will conduct a private sector diagnostic in 2018Q2 that aims to pinpoint constraints to the growth of SMEs (both intensive and extensive margins) The Diagnostic will encompass SME procurement. It may also examine the lack of new PPPs since the new law came into effect. 41. Governance reform remains high on the government’s agenda, including as a foundation of the Country Partnership Framework (CPF), 2019-2021, with the World Bank. Specifically, the Bank will continue supporting: (i) transparency and accountability in the management of public resources; and (ii) fostering open governance. Activities will comprise developing a national monitoring and evaluation system; enhancing e-government, modernizing public financial management and procurement reforms; and strengthening transparency, accountability and participation. 3. ASSESSMENT OF OUTCOMES 3.1 Relevance of Objectives, Design, and Implementation Overall Rating: High Relevance 42. Objectives. The objectives of this DPO series remain highly relevant to the country priorities as indicated in the Systematic Country Diagnostic, Country Economic Memorandum, and through the OGP agenda. The Systemic Country Diagnostic and Country Economic Memorandum of 2017 both stress the need for Morocco to achieve greater efficiency through improved market allocation of resources and improved efficiency of public policies and expenditures. Investment in institutions and improvement of governance of public services are also needed to achieve economic emergence. The need to continue to build on the new constitutional rights in the areas of budget transparency, citizen engagement, and ATI remain highly relevant to national priorities, which includes entering the OGP. 15 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 43. Design. The project interventions were timely and backed by sound technical and analytic work to ensure relevance. Complementing reforms (laws and regulations) with measures to operationalize is a highly relevant approach in addressing the current country priorities and Bank assistance strategy. This is particularly true in a context of “reform fatigue” when there may be a tendency to leave transformat ive efforts on paper instead of translating them into action. Another program design has maintained relevance is in the modified sequencing of SOE reforms. The Bank and the GoM agreed that the implementation of critical elements of the Code for Corporate Governance in 15 SOEs should be implemented ahead of an action in the original trigger related to the law on governance and control of SOEs. This change in sequencing allowed the program to demonstrate more concrete results in SOE reform. 44. Implementation. The approach to program implementation helped maintain relevance throughout the series. First, spreading the work across ministerial lines helped broaden ownership of policies: at least seven ministries were involved and they needed to understand the cross-cutting nature of the operation, particularly governance reforms, but also PFM and transparency. Second, government priorities and changing circumstances made it appropriate to change program triggers. 3.2 Achievement of Program Development Objectives 45. The program has been generally successful, but some impacts on the ground will take more time to materialize than expected. The PDO was to “To strengthen mechanisms promoting transparency and accountability in the management of public resources and to support legal reforms fostering open governance in Morocco in line with the new Constitution.” This section assesses the each of the two parts of the PDO based on achievement of results targets and performance detailed in section 2.1. Note that the ratings provided in Table 5 are based not only on the percentage of targets met, but also on a broader set of evidence that includes the experience with respect to follow up actions that are required to achieve program impact. Table 5. Summary of Achievement of Results Indicator Targets by Program PDO/Sub-component Not Pillar Exceeded Achieved Total Rating Achieved I. Transparency and accountability in managing 2 6 0 8 Substantial public resources Adopting Perform. Informed budgeting 1 1 High Competition & Transparency-Procure. & PPP 1 2 Substantial Financial control & governance-SOEs & Agencies 1 Substantial LG finance and fiscal relations 2 Substantial II. Open Governance 2 4 6 Modest Fiscal transparency and Access to Information 2 Modest Improving voice and citizen engagement 1 2 Modest Online access to basic administrative services 1 Substantial Total 4 6 4 14 Substantial 46. Overall evidence supports a substantial rating for Pillar I, transparency and accountability in managing public resources. With respect to the results framework, all eight of the results indicators for 16 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Pillar I were met or exceeded. The PFM part of the program was generally strong with performance budgeting implementation exceeding expectations. The Government pushed for a full roll out for all agencies (and extended to public enterprises as well—Circular of July 2017). This will help improve the accountability for public resources which was part of the PDO. The IFM expansion exceeded expectations as well and helps address weaknesses in the accountability and transparency of local governments, which was reflected in the 2013 PEFA (low) score of C for transparency of inter-governmental fiscal relations. The use of IFM in LGs will contribute to an improved system of fiscal transfers and resources allocations from the central government over time through greater clarity and predictability of financial data at the regional level. E-procurement reforms also exceeded expectations with substantial savings realized and expectations of continued savings as e-procurement becomes a permanent part of government operations. 47. The institution of a corporate code of governance for SOEs and public agencies was a significant advance for transparency and accountability for public funds. The number of SOEs and agencies that implemented critical elements of the corporate governance code generally exceeded the targets: (a) established a governance committee (35 vs. 20 target); (b) adopted a risk framework (17 vs. 10 target); (c) published on their website up to date financial statements and the members and activity of their governance structure (13 vs. 15 target-slight shortfall). Thus, at least 35, compared with a target of 20, SOEs and public agencies established a governance committee. As additional elements of the governance code are implemented improved accountability for public funds is expected. 48. Other areas (PPPs, CNPC, decentralization, etc.) will need continued capacity building to realize the full impact of the Hakama program. The new PPP law is expected to have a strong positive impact on governance and transparency (as well as fiscal benefits), but it is difficult to measure results before PPPs in the pipeline come to fruition. For procurement, the new CNCP has become fully operational and can fulfill its mandate to oversee procurement issues and handle complaints. Because of CNPC’s greater level of independence, this reform should lead to greater transparency and accountability in the use of resources. The legal framework for decentralization is in place, and transfers from the central government to the regions have followed the schedule of gradual increase that had been agreed. The Organic Law on LGs still requires several decrees for full implementation. The reform for greater budget autonomy and resources for LGs contributes to the government’s decentralization agenda, but improved capacity is needed at the LG level. 49. For Pillar II, the foundations are laid for significant progress, even though the measured impact remains modest so far. The subcomponent for online access to administrative services was fully successful and exceeded the target for provision of birth certificates (more than 11,000 compared with a target of 5,000 certificates). This is an important achievement for governance because it is now easier for citizens to obtain important documents allowing them to access government services. The encouraging progress made on the other two subcomponents of Pillar II augurs well for the future, though the results framework captures these possibilities imperfectly (one of five indicator targets met). 50. Parliament passed the ATI law despite delays. ATI is implied in Article 27 of the constitution, on which basis Hakama pursued this foundational reform. While the two ATI-related results indicator targets (OGP score and information request form) have not been achieved, passing the ATI law removes the remaining obstacle to reaching an OGP score of 4 (needed for OGP membership) and paves the way to 17 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) meeting the requirement for the information request form. Governance and transparency were significantly promoted through the consultative process that led to the ATI law. The Bank continues to work with the GoM to ensure that the law will be applied with a continued dialog with key stakeholders. Despite the challenges encountered with this important part of the reform program, the risk of reversal on ATI is viewed as low by officials interviewed for the ICR. Further evidence of improvements in transparency is that Morocco is a best practice country in terms of proactive disclosure of regulations, and this has had a positive impact on Morocco’s trade agreements (in particular regarding the free trade agreement with the U.S.). 51. Petitions reforms have made encouraging progress, including passage of the Law on Petitions, but have not yet met all the results targets. As with ATI, the right to petitions is in the constitution and the petitions reform also went through a substantial consultative process. However, the implementation, such as operationalization of petition platform, is running behind schedule. Hence, not all results targets were met. Nonetheless, there is a clear change in the tone of governance, and encouraging signs that the law is being implemented in spirit: citizens have expressed grievances against officials in several regions and these led to high-level firings that were hitherto unheard of in Morocco. Further evidence of improved governance under this subcomponent is that draft laws are published (>100 actual vs. >45 target). It is also possible for citizens to comments on draft laws published on the Secretary General of Government website. For example, in the case of the procurement law, substantial public comment (129 comments) were taken into account in the revision of the draft law before approval. 52. Additional evidence of strong interest in improved governance. The Bank supported an internet 4 survey (Morocco Citizen Engagement Nano-Survey Data. 2014) that produced some initially encouraging findings. 63 percent of respondents were aware of the constitutional right to AI. This alone is significant progress in a country where previously this concept was non-existent. 43 percent were unaware that a citizen has the right to petition the government. This survey was conducted in 2014 so these numbers may have improved as a result of subsequent implementation of the program. 3.3 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 53. The achievement of the PDO relating to accountability and transparency was substantial with all results targets met. The governance part of the PDO made encouraging progress, but achieved only two of the results targets, hence results appear modest. However, progress overall has been tangible. These include: (i) the approval of the ATI law, (ii) exceeding targets for delivery of online services; and (iii) the publication of draft laws and proactive release of documents. 4 From March 21 through April 10, 2014 a nano-survey was “live” in both French and Arabic. In total 54,441 randomly sampled internet users across Morocco were exposed to the survey with 15,020 participating and providing at least partial responses. 3,942 participants provided complete responses to the 9 primary questions in the survey (all raw response data has been made available in open data format). It is important to note that while the methodology and technology used are extremely powerful, a key limitation of this methodology is that it only measures the sentiment of internet users. 18 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 54. The Hakama series laid solid groundwork for further governance reform for the government to build on. With the relevance rating as high overall, and the achievement of objectives as substantial for one part of the PDO and modest for the other, the overall outcome rating is moderately satisfactory. 3.4 Overarching Themes, Other Outcomes, and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 55. While it does not directly target poverty or social development, indirectly, institutional capacities and efficiencies for ministries to address poverty are strengthened. This would then allow for the potential for the improvement of public expenditure allocation towards targeted social development or pro-poor policies. Gender aspects in the operation are weak and there are noticeable gender disparities in awareness of rights. A 2014 survey noted “forty-five percent of women are not aware of their right to ATI compared to 34.5 percent of men.5 A similar gap exists for awareness of the right to petition and motion: 60 percent of women are not aware of their rights compared to 50 percent of men.6 This is of course couched in the prominence of having the ability to read and comprehend the information once citizens understand their rights.” Illiteracy remains a large hurdle to overcome with 66 percent of women and 30 percent of men illiterate in Morocco.7 (b) Institutional Change/Strengthening 56. The core of this program was fundamental institutional change, including the legal framework for transparency, accountability and governance. Embedded in the PDO was the objective of strengthening mechanisms for accountability and transparency in managing public resources. The prior actions of Pillar I pushed Morocco toward a new level of transparency, and accountability, concepts that were almost non-existent prior to the new Constitution and the Hakama program. Performance budgeting was an important step in the way the Ministries in Morocco plan and allocate their budget resources. Financial controls were deepened by the expansion of IFM throughout the local governments. PPPs now must undergo a review process to demonstrate the costs and benefits of any given PPP. The summary of the PPP contracts must also be made available for public scrutiny. 57. Even in areas where progress was slower than expected, there is a new way of doing business in Morocco. Draft laws are now published and available to be commented upon by average citizens, which has been done extensively in some cases (for example, procurement decree). There are also heightened expectations from the public for further governance and transparency reforms. The participatory process was extensive for several the laws, such as the law on petitions and the draft law on ATI, with the 5 Women (n=3,295); Men (n=8,691). World Bank Morocco Citizen Engagement Nano-Survey (Access to information and Right to Petition/Motion). World Bank Group: https://finances.worldbank.org/dataset/Morocco-Access-to-Information-by- Gender/ka4z-zcu7 6 Women (n=1,483) men (n=4,238) World Bank Morocco Citizen Engagement Nano-Survey (Access to information and Right to Petition/Motion). World Bank Group: https://finances.worldbank.org/dataset/Morocco-Access-to-Information-by- Gender/ka4z-zcu7 7 Morocco Country Economic Memorandum, 2017. http://pubdocs.worldbank.org/en/873111494618941322/Morocco- CEM2017-summary-ENG.pdf 19 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) involvement of CSOs on an unprecedented level. This process has helped fuel the view that citizen participation is important for the government and can promote reforms. (c) Other Unintended Outcomes and Impacts 58. Two positive outcomes that were not fully expected were the high level of savings through e- procurement and the rapid deployment of IFM in the communes. Procurement savings reached 27 percent (compared to the costs of regular purchases of the same standard items), well above the 10 percent target as gains in quality of tender information (more precisely defined), access of procurement information by more bidders, and the speed of the process exceeded expectations. The deployment of IFM in the LGs also proceeded far more rapidly than the Bank team had envisioned, attesting to strong government commitment in that area. 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME Rating: Significant 59. The GoM engaged in foundational reforms with the support of the Hakama program, though some steps as HAKAMA envisioned them have yet to be taken. Government agencies are gradually becoming familiar with the new procedures initiated by the new legal framework, and there is no indication of reversal of any reforms. There is clearly a demand in Morocco for the government to provide information on its activities and, with the help of the ATI law, this becomes an increasing part of normal government relations. Performance budgeting and IFM are already part of the government’s way of doing business. The 2018 Budget Law the first to be presented under the new Organic Budget Law and will be the regular practice going forward. Procurement and PPP legislation also have moved significantly forward and are governing operations in these areas. Procurement savings from e-procurement and reverse auctions should incentivize the government to expand these more efficient and transparent approaches to procurement. The delay in appointing CNCP members does not jeopardize improved accountability in the management of public resources.8 Delays in passing the ATI law reflect the high expected impact of the law along with the lack of familiarity in some parts of government with a high level of openness. The ongoing NGF TA and the Parliamentary Support TA will continue to provide essential capacity building and other technical support for the major reforms supported by the Hakama program. Therefore, the overall risk to development outcome is assessed as significant. 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 60. Quality at entry was satisfactory. There was ample analytic work to support the Program that was initiated under the previous public administration reform loans and covered all areas of the program (Hakama I PD, pp. 19-20). The program and the Bank team were ambitious. For example, the Bank was not afraid to build platforms for reform even though the risk was high that related impacts of these 8 Recent indications from the authorities is that these appointments will be made soon. 20 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) platforms could not be measured until well after the close of the program. The Bank followed a good practice by supporting the reform program with the New Governance Framework TA. This proved critical to translating the reforms into new practices by the government at both central and local levels because government staff needed support in implementing the new laws and regulations. The results framework was also appropriate and relevant to the prior actions and to the PDO. (b) Quality of Supervision Rating: Moderately Satisfactory 61. The Bank did a good job working with the invaluable help of the accompanying NGF TA (and other TA support) to ensure follow up with the completed prior actions and this was key to program success. Supervision was regular and there was a great deal of day-to-day support as evidenced in the supervision records. Sector specialists (Financial Management and procurement, for example) followed up on the reforms and tracked whether they were keeping pace and pushed for implementation. These efforts included much guidance and technical support, particularly if actions were lagging, such as in the case of the appointment of members for the CNCP. One shortcoming, was the lack of maintaining an aggregated results framework and to keep it up to date for actual indicators values. The ICR mission had to fill many data gaps that should have been dealt with during supervision. The communication plan for the Program could also have been stronger given the novelty of some of its concepts. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 62. With the Bank’s rating of satisfactory for preparation, and moderately satisfactory for supervision and an outcome rating of moderately satisfactory, the overall rating for Bank performance is moderately satisfactory. This rating reflects the strong performance in Pillar I (meeting all targets) and the weaker performance in Pillar II for which most of the targets were not met, in part, because of slow follow up in governance related reforms. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 63. The Government performance was moderately satisfactory. The Ministry of General Affairs and Governance (MAGG) was responsible for overall implementation and coordination of the DPO series. The MAGG’s experience and its efforts for inter-ministerial coordination were reasonably effective in the face of two significant challenges: the large number of ministries involved throughout the various reform processes and the need to implement a large number of significant reforms. An important shortcoming was the slowdown in the necessary follow up actions needed to realize fuller impact from the reforms. There was a mitigating factor in that with the change of government during the program, some of the reforms lost their champion, especially with respect to ATI. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 21 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 64. Given the accomplishments of the Hakama series, both in terms of legislative texts and implementation, the performance of the implementing agencies was moderately satisfactory . Implementing Agencies for Hakama I and II included the Ministries of Economy and Finance; General Affairs and Governance; Interior; Relations with Parliament and Civil Society; Civil Service and Administrative Reform; Industry, Commerce, Investment, and ICT; and the Secretary General of the Government. 65. Two areas in which performance could have been better are public procurement and ATI. The Council of Government approved draft decree to establish the CNCP in September 2015, but this action was not followed through until January 2018with the appointment of its members by Chief of Government. With respect to passing the ATI law, the delays were long and the revisions to the draft law in some instances made the law more difficult to apply. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 66. The overall results of the DPO indicators being met reflects the commitment of the government to advance reforms in a timely manner. 6. LESSONS LEARNED 67. The time period following the ratification of a new Constitution offers a strong opportunity to make far reaching reforms and should be aggressively seized. To a large degree, the Hakama series took advantage of the opportunity during which there was a high level of energy for reforms to push for key organic laws in several areas. These might not have been passed were it not for the spirit of reform in the early post-Constitution days. Concerns, such as those of implementation details in the short-term were considered, but the Hakama program still pursued changes in policy that would take more time to ingrain in the government than was the timeframe for the program. The rapid reform caused some disruptions in the government amongst people who needed more time to figure out how to implement, mainly for Pillar II reforms, but also for reforms such as PPP. 68. A cautious approach on reforms should be resisted if there is a once-in-a-lifetime opportunity for reform and instead frontload reforms to the extent possible. The motivating factor of fear of instability from the Arab Spring Morocco would eventually subside. Thus, reforms should be pushed aggressively. The government can continue to pursue reforms, but it is wise to establish the foundation for the subsequent implementation of reforms as early as possible. 69. A continued strong policy dialog between the Bank and the Government is important to ensure sustainability of reforms. After an initial surge of foundational reforms, it is necessary to nurture the process of reform through country dialog, so that reforms are implemented on and citizens can benefit. The continued country dialog follow-up on Hakama has produced important achievements including continued progress on grievances and petitions, and appointment of the CNCP members. 22 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Lessons Related to Results Indicators 70. Program design may help reduce the risk of lack of follow-through on implementation by assigning a results indicator to actions which might not necessarily have an impact. For example, in the case of the completed procurement prior action to approve the establishment of the National Public Contracts Committee, there was no follow up indicator relating to the actual operationalization of the Commission. Appointment of board members would have been a reasonable results indicator that would have come closer to the real output of making the commission operational. The choice of a Program-for- Results (P4R) instrument would offer another option to ensure impact. 71. The use of global or composite results indicators should also be carefully considered and/or qualified as necessary. Global indicators and composite indicators such as the PEFA may be subject to methodology changes or difficulties in “unpacking” the changes of the sub-indicators making it difficult to evaluate and attribute the indicator results to the impact of a particular reform. PEFA Assessments are also usually conducted every three to four years which is often not convenient to measure the achievement of Development Policy Operations monitored on an annual basis. 72. Lessons related to the value of joint donor budget support, communication with the public and supporting TA to the success of a reform operation. 73. Program design and relevance can be enhanced when multiple donors work together on a joint reform program. In the case of Hakama, the program’s ties to the national program were strengthened because the World Bank, the EU and the AfDB all worked together and spoke with one voice in favor of the reforms. An additional benefit was that with the unified approach, there was less burden on the Government because it did not have to comply with three different bureaucracies. Rather the burden of coordination fell more on the development partners. 74. A strong communication plan is necessary to win public support particularly when the reforms include behavioral changes because they need a sustained and strong demand to realize full implementation and impact. In the case of Hakama, the MoF did have a communications plan. There was also substantial coverage of the reform program in the TV and print media. Still, the concepts of governance and transparency were new in Morocco and it would have benefited the reform program if the communication plan had been stronger to help the public better understand why certain things were being done. The loss of momentum also has created some frustration amongst the public. The supporting TA project was delayed and so was key training for the MoF and for the Parliament which was taking on a new, more responsible role, which may have affected stakeholders’ readiness to implement the reform process at the ground level. 75. It is a good practice to provide complementary TA for a reform program, particularly one that entails many changes in the basic workings of government. While many DPO evaluations may cite this lesson, it is particularly true in the case of Hakama. The New Governance Framework Implementation Support Project played a key role in supporting ground level implementation of the important Hakama reforms. Critical training and guidelines were funded by the TA which helped the reforms produce real benefits in the transparency and improved governance. The one shortcoming was the delay in getting the TA going as the reforms were beginning to be approved. It is arguable that instead of linking a DPO with 23 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) a TA program, the Program for Results tool may be better equipped through its use of disbursement linked indicators to provide more of an incentive for follow through. 7. COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS 76. The ICR in in fundamental agreement with the description of the Hakama Program as provided by the GoM. 24 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 1: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES (a) Task Team members Names Title Unit Responsibility/Specialty Lending Vickram Cuttaree Program Leader ECAPF Team member Fabian Seiderer Lead Public Sector Specialist GGO18 Task Team Leader (TTL) Anas Abou El Mikias Consultant GGO17 Khadija Sebbata Program Assistant MNCMA Team member Lida Bteddini Public Sector Specialist GGO17 Team member Philippe De Meneval Lead Private Sector Specialist GTC09 Team member Tracy Hart Sr. Environmental Specialist GEN01 Team member Bouchra Belfqih Assistant Project Manager GSTDI Team member Vivek Srivastava Lead Public Sector GGOPS Khalid El Massnaoui Senior Economist GMF05 Supervision/ICR Lefebvre, Anne-Lucie Sr. Republic Sector Specialist GGO17 TTL Fabian Seiderer Lead Public Sector Specialist GGO18 Former TTL Lida Bteddini Public Sector Specialist GGO17 Team member Renaud Seligmann Practice Manager GGO23 Richard J. Carroll Consultant GGO17 Team member Lydia Habhab Public Sector Analyst GGO17 Team member Ali Salamah Program Assistant GGO17 Team member (b) Staff Time and Cost P130903 Stage of Project Cycle Staff Time and Cost (Bank Budget Only) US$, thousands (including Travel No. of Staff Weeks and Consultant Costs) FY12 12.06 46767.01 FY13 37.27 123983.29 FY14 51.62 198984.42 FY15 24.71 86873.79 FY16 2.55 9417.66 Total: 128.21 466026.17 Supervision / ICR FY15 10.66 51798.42 FY16 4.86 23789.77 Total 15.52 75588.19 25 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Staff Time and Cost P154041 Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$, thousands (including Travel and Consultant No. of Staff Weeks Costs) FY15 4.49 21675.94 FY16 23.78 98323.16 FY17 2.05 6814.2 Total: 30.32 126813.3 Supervision/ICR FY16 2.43 12607.08 FY17 6.45 36098.38 FY18 3.4 18255.72 Total: 12.28 66961.18 26 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 2: BENEFICIARY SURVEY RESULTS Not applicable. 27 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 3: STAKEHOLDER WORKSHOP REPORT AND RESULTS Not applicable. 28 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 4: SUMMARY OF BORROWER'S ICR For several years now, Morocco has embarked on a large administrative reform program to promote the moralization and modernization of public management, based on the principles of efficiency, transparency, and results-based management. This program was designed to address the challenges resulting from a changing international landscape and from existing economic and social issues. It also aimed at strengthening trust between the citizens and their administration; a trust built on participation, transparency, and accountability, as well as on public sector’s ability to meet the citizens’ expectations. Important progress has been made in this area, namely with the support of the World Bank, through the implementation of the first stage of a Public Administration Reform Program (PARAP), and, in the second stage, the implementation of a program for transparency and accountability (Hakama). The Hakama program aims at supporting government’s efforts and consolidate – as well as institutionalize – the implementation of new modes of public management. It also intends to steer the reforms towards new priorities of accountability, transparency, and public-service improvement, with the objective of ushering in concrete advances that are felt first-hand by the citizens, as per the principles evoked in the 2011 Constitution. This reform program has been supported by the World Bank through two Development Policy Loans: a $200 million loan in 2013; and another $200 million loan in 2015, with the objective to foster further reform efforts through program-based support. Context of the Development Policy Loan Program for Transparency and Accountability – “Hakama” The 2011 Constitution has prioritized the moralization of public life and good-governance practices. Several fundamental principles have also been constitutionalized, such as, equal citizens’ access to services, equitable services coverage across the country, and the promotion of transparency, accountability, and participation. Main Achievements Since 2003, administrative reforms have been carried out with the support of the World Bank through the Public Administration Reform Program (PARAP). These reforms have allowed for developing and trying new methods and tools to improve government’s budget and human-resource management. In this regard, PARAP has highlighted two components: • The first component focused on the modernization of the state budget system through budget reforms centered on results, performance, and accountability. It focused mainly on the implementation of a medium-term (three-year) rolling expenditure framework, intended to help strengthen performance by introducing credit globalization and setting performance indicators; moving towards adopting performance audits focusing on the 29 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) effectiveness and efficiency of public spending; developing integrated information management systems; and initiating a discussion on the Organic Budget Law reform. • The second component of the program focused on HR management reform, which mainly consisted of adopting forward-looking management of human resources, based on the development of standardized jobs and skills requirements, the launch of a study civil service compensation system, and the study on job classification. Given the reforms carried out and the lessons learned, and with a view to consolidating the gains made and focusing more on activities benefiting citizens directly, the Hakama program launched by the government in 2013. It includes the following pillars: • Strengthening transparency and accountability in the management of public resources; and • Promoting open governance. In this regard, government action under the Hakama program is bringing about a change in scope, design and approach by supporting the legal, institutional and operational strengthening of reforms, and by focusing primarily on the principles of accountability, transparency, and management of public action in line with the provisions of the Constitution, putting the citizen at the heart of this reform’s concerns. This reform program was jointly developed with the World Bank, the European Union, and the African Development Bank (AfDB). Objectives of the World Bank-supported Project The Hakama program for transparency and accountability aims to strengthen the mechanisms of transparency and accountability in the management of public resources, and to support reforms with view to an open governance in Morocco, in accordance with the Constitution. The Hakama program has also been supported by a TA project to support the new governance framework, through a $4 million donation from the Transition Fund, which supports the implementation of policies based on public consultation and request, budget reform, public procurement reforms, and budget decentralization. Progress Made in the “Hakama” Program The Hakama program consists of two axes focusing on: • Strengthening transparency and accountability in the management of public resources, and; • Promoting open governance and transparency. Focus Area 1: Strengthening transparency and accountability in public-resource management 30 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) The first focus area of the program is about a reform aiming for a programmatic performance-based budgeting, reforming public procurement, the legal and institutional framework of public-private partnerships, governance of public businesses and establishments, as well as financial decentralization and local governance. Within this focus area, the following measures have been undertaken: 1.1 Adopting performance-based budgeting: Budgetary reform is one of the main levers to improve public-services delivery and government accountability with regard to the use of public resources. A performance-based budgeting has been adopted to promote a greater accountability and efficiency in public-resources management. The implementation of the budgetary reform has been achieved through developing coordination bodies and structures ensuring strategic and operational support to its implementation. An inter-ministerial steering committee for budgetary-reform implementation has been set up, supported by a dedicated department, in charge of providing operational support to reform implementation. Within this framework, an orientation circular on the 2014 Finance Law, under No. 12-2013, dated September 23, 2013, has been signed by the Head of Government, and has introduced a steering mechanism for inter-ministerial reform, providing for the trial – by four ministerial departments – of a new approach of performance-based budgetary management for the 2014 budget. Furthermore, measures have been taken regarding modulated expenditure control to strengthen the flexibility and the managerial accountability of authorizing officers and their delegates. This step has been formalized when the Minister of Economy and Finance signed six qualification decrees on December 26, 2012, following management-capability audits carried out by the Inspectorate-General of Finance and the General Treasury of the Kingdom. Following through with this reform, the Organic Law relative to Finance Law No. 130-13 was approved by parliament on April 28, 2015, and published in the Official Gazette No. 6370, dated June 18, 2015. Implementation Decree No. 2-15-426, pertaining to this law, was published in the Official Gazette No. 6378, dated July 16, 2015. This Organic Law provides performance objectives and indicators for different ministerial departments aiming to improve the effectiveness and efficiency of public policies and programs, as well as the quality of public services. It also stipulates adopting gender-sensitive performance objectives. In this regard, an OLF implementation framework with a defined timeline has been developed to guarantee a step-by step roll-out for all administrations. A second round of preparations, launched under the 2015 Finance Law, by the Head of Government’s Circular No. 06/2014, dated June 12, 2014, has been carried out by nine ministerial departments. Then, the Head of Government expanded the preparations for performance-based budgeting in successive ministries, via Circular No. 4/201, including 16 ministerial departments under the 2016 Draft Finance Law. 31 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) In fact, following three preparation operations that have been carried out under financial years 2014, 2015, 2016, and have covered 16 ministerial departments, a fourth round of performance-based program budgeting, as part of the OLF’s implementation, has been launched by the Head of Government’s Circular No. 06/2016, dated May 23, 2016, enabling its circulation to all ministerial departments and institutions (42) in 2017. Performance-based budgeting within the OLF framework has allowed for: • Establishing the performance culture; • Adopting new budgetary benchmarks; • Sharing good practices between ministerial departments; and • Simplifying budgetary tangles. Furthermore, a stronger follow-up and evaluation framework for performances has been adopted in order to improve accountability and promote a culture of performance in management. For this purpose, the Head of Government issued Circular No. 4/2015, dated June 18, 2015, which introduces an overall performance follow-up and evaluation policy, and which includes ministerial performance-projects, performance audits, and program evaluations. Moreover, the Organic Law on Finance envisages plans for the implementation in 2019 of the multi-year budget started in 2014 with the Ministry of Economy and Finance, as well as five sector ministries. In 2015, the first overall ministerial framework for medium-term expenditure was prepared and published, in addition to the medium-term expenditure provisions for budgetary programs of the first set of ministries which have adopted the performance program-budget and projects. All these documents have been published on the Ministry of Economy and Finance’s website. This experience was expanded and strengthened in 2016, and has allowed to have useful feedback to develop policies. In addition, benchmarks and tools for the operational implementation of OLF provisions have been developed through: • Developing the performance guide, the guide for establishing budgetary programs, the guide regarding expenditures, the guide for management dialogue and operational steering, and the practical guide for payroll estimation; • Publishing the Head of Government’s Decree No. 3-221-16, dated December 27, 2016, laying down the rules of budgetary and accounting management required to conform to the restrictive character of appropriations under the personnel chapter. • Publishing the Minister of Economy and Finance’s Decree No. 811, dated February 20, 2017, setting up models of documents supporting expenditure propositions, under the personnel chapter of the fiscal year. 32 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 1.2 Improving competitiveness and transparency in public procurement and PPPs. For this purpose, regulatory provisions have been adopted: Decree No. 2-12-319 on public procurement was adopted, and was published on March 20, 2013, and implemented on September 1, 2013. It extends the scope of public-procurement regulation to include public entities and local governments, and establishes a regulatory base for introducing procurement- related electronic procedures. Furthermore, Decree No. 2-14-867 on creating the National Commission of Public Procurement, dated September 10, 2015, has been approved by the Government Council. This commission oversees setting up an appeals system, and of bringing the private sector, civil society, and good-governance entities into its membership. 1.3 Improving transparency and competitiveness in economic and financial partnerships between state, institutions, and private businesses Within this framework, the government has adopted Law No. 86.12 (published in the Official Gazette No. 6365 in January 2015) regulating Public-Private Partnerships (PPP). This law completes the decree on procurements, and aims to mobilize private-sector investors to implement public policies and services. Implementation Decree No. 2-15-45, dated May 13, 2015, has been adopted; this decree regulating Public-Private Partnerships covers rules of procurements, and the criteria for selecting and evaluating projects from private institutions and businesses. 1.4 Strengthening corporate governance and transparency within state-owned businesses and institutions On March 19, 2012, the good governance code for state-owned businesses was officially initiated via a circular issued by the Head of Government, and was implemented in 25 pilot entities. This code incorporates principles and recommendations to improve the governance and accountability mechanisms of state-owned institutions and businesses. These principles include measures for a responsible and transparent management of state-owned businesses, for the reliability, integrity, and effectiveness of their actions, as well as the accountability and transparency of the decision-making process. As a first step, decision-making bodies of at least 5 state-owned businesses and institutions, which have a significant contact with citizens and provide basic public services, have adopted a resolution and an action plan to implement the new corporate governance code. Subsequently, 15 additional state-owned businesses and institutions followed their lead, adopting a resolution and an action plan to implement the code of good governance practices. It should be noted that the initial trigger in the 1st DPL (“the adoption of regulations related to the governance and control of state-owned businesses and institutions (SOEIs)”) was replaced by “an action plan adopted by the managing bodies of SOEIs providing public services, to implement the good governance code.” 33 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 1.5 Modernizing local finance management and financial relations at various government levels Developing regionalization is an essential pillar for governance transition in Morocco. Thus, the financial management system for local governments was boosted by the use of an integrated system of financial management (IEM-LG) in 2014. This system is linked to the national system by virtue of the Interior Minister’s Circular No. 3333, dated March 5, 2013, aiming at using an Integrated Expenditure Management (IEM) system across all local governments. Concerning the management of local finances and financial relations across government levels, three organic laws related to the regionalization strategy, decentralization, and local governance were adopted in 2015: Organic Law No. 111-14 on Regions; Organic Law No. 112-14 on Prefectures and Provinces; and Organic Law No. 113-14 on Communes. It should be noted that the initial trigger (“the decree on transfers to local governments”) was replaced by the “the Organic Law on Regions adopted by the Ministerial Council.” Other actions were undertaken by the government in 2016: • Conducting a diagnosis on the transfer and equalization system for local governments; • Adopting an approach to – and work plan for – the introduction of tools for regional dimensioning, planning, and contracting; and, • Developing a work plan to design a frame of reference and a set of tools to improve and strengthen the financial governance of local governments. Focus Area 2: Promoting open governance The second focus area aims to support the implementation of good governance principles that are presented by the Constitution regarding transparency, ATI, consultation, improving the access to good public services, both at the central administration and local governments. Significant achievements were made in this focus area: 2.1 Adopting a budget-transparency policy through the proactive publication of the essential budgetary information concerning the budgets of ministries, programs of local governments, and state-owned businesses prior to their referral to the parliament, as well as the development of an online open-budget platform. In this regard, the Ministry of Economy and Finance adopted a budget-transparency policy by decision dated June 12, 2013. This new policy is an important lever for promoting transparency and accountability in the public sector. It is also crucial for having a significant participation of the citizens and for improving the business climate. 34 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) 2.2 Adopting and implementing a policy for publishing draft laws and regulations on the website of the General Secretariat of the Government prior to their adoption by the government. In this respect, the General Secretary of the Government has adopted and implemented a policy, according to which draft laws and regulations are published on its website, prior to their referral to the Government and Ministerial Councils for approvals. (…) 2.3 Adopting a policy on citizen participation through the adoption of decision No. 076 issued by the ministry in charge of relations with parliament on June 11, 2013. This decision initiates the establishment of a structured national dialogue to implement and develop regulations, policies, and a legal framework that sets out citizen participation mechanisms. In this regard, an independent steering committee was set up with a view to supervising the process development. This committee, composed of representatives of the government, civil society, media, and experts, has drawn up the roadmap and the internal regulation of the National Dialogue. Civil society organizations took part in the development of new policies on citizen participation through this inclusive and structured national dialogue, allowing the creation of a favorable environment for the participation of citizens in state affairs, and building trust between the public administration and the citizens. In this regard, a national dialogue platform with the civil society was established. In addition, the right to petition was enshrined in line with the constitutional principles of participatory democracy. This new right was formalized under Organic Law No. 44-14 on petitions, which was approved by the Ministerial Council on July 14, 2015 (and published in the Official Gazette on August 18, 2016). Other actions were carried out by the government in 2016 and 2017: • Organic Law No. 64-14 on legislative motions (published in the Official Gazette on August 18, 2016); • The right of both male and female citizens and civil society to submit petitions to different local councils is stipulated in organic laws on local governments, published in the Official Gazette on June 23, 2015; • The three executive decrees outlining the procedure for the petitions submitted to local councils were adopted by the Government Council and published in the Official Gazette on October 24, 2016; • A call and support center for civil society associations was set up to provide advice and legal information related to the legal framework of citizen participation. 2.4 Promoting open governance The draft law on access to information – along with ancillary regulations, and in accordance with Article 27 of the Constitution and with international good practice – was submitted to parliament. 35 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) In addition, Morocco has launched a process for developing a National Plan for Open Government. This national plan, with its 17 commitments, involves 4 strategic themes: • Access to information and e-government; • Integrity and combating corruption; • Budget transparency; and, • Citizen participation. In 2016, Morocco submitted its accession request to the OGP during the OGP Global Summit. In this respect, it is important to mention the Watiqa project (www.watiqa.gov), which covers both central administration and local governments. It allows citizens to order birth certificates and other administrative documents online and receive them via registered mail. Furthermore, the concept note of the 2018 Finance Law provides for continuing the reform of the Organic Law on Finance, along with its transparency and public-management performance provisions. Thus, 2018 will be marked by program-based budgeting generalization and drawing up performance reports. Implementing a new management approach to public investment projects was also presented in the concept note, citing the aim to improve the effectiveness of these investments and their role in wealth and employment creation, and to increase their direct impact on the living standards of citizens. Finally, as part of Advanced Regionalization, the concept note of the 2018 Finance Law provides for the adoption and implementation of an administrative decentralization charter. 36 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 5. LIST OF SUPPORTING DOCUMENTS 1. Chauffour, Jean-Pierre. Morocco 2040: Emerging by Investing in Intangible Capital. World Bank. 2017. http://pubdocs.worldbank.org/en/873111494618941322/Morocco-CEM2017-summary- ENG.pdf 2. Mendel, Toby. Introduction to the Open Government Partnership Morocco. (presentation) 3. “The right to petition in Morocco in light of its practice in the comparative constitutional Systems”, Professor Abdelmajid ASAAD Professor in the faculty of law of Casablanca and Settat. 4. Program Appraisal Document for the New Governance Framework, 2013. 5. Program Document for a Proposed Loan in the Amount of EUR 151.1 Million (US$200 million equivalent) to the Kingdom of Morocco for a First Transparency and Accountability Development Policy Loan (Hakama). September 30, 2013. 6. Program Document for a Proposed Loan in the Amount of US$200 million to the Kingdom of Morocco for a Second Transparency and Accountability Development Policy Loan (Hakama), September 22, 2015. 7. Public Expenditure and Financial Accountability (PEFA) Report in the Kingdom of Morocco. European Union, World Bank, African Development Bank. Not yet published. June 2016. 8. Systemic Country Diagnostic for the Kingdom of Morocco. Not yet published. World Bank. 2017 9. World Bank Morocco Citizen Engagement Nano-Survey (Access to information and Right to Petition/Motion). World Bank Group: https://finances.worldbank.org/dataset/Morocco-Access- to-Information-by-Gender/ka4z-zcu7 37 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 6: IMPLEMENTATION COMPLETION AND RESULTS REPORT MEETINGS WORLD BANK STAFF, GOVERNMENT, AND OTHER DONORS World Bank Staff Fabian Seiderer Lead Public Sector Management Specialist, TTL Khalid El Massnaoui Senior Economist & co-TTL Abdoulaye Keita Senior Procurement Specialist Laila Moudden Financial Analyst Ousmane Maurice Megnan Kolie Senior Financial Management Specialist Jean-Pierre Chauffour Lead Economist Marie Francoise Marie-Nelly Country Director Renaud Seligmann Current Governance MENA Practice Manager Lida Bteddini Senior Public Sector Specialist Government MAGG Aziz Ajbilou Secrétaire Général (SG), MAGG Abdelkrim El Amrani Directeur de la Coopération Internationale, MAGG Ismail Alaoui Ismail Directeur des Ressources, des Affaires Juridiques et des Systèmes d’Informations, MAGG Mouhcine Daoudi Coordonnateur de Projet, MAGG MEF Fouzi Lekjaa Directeur du Budget, (MEF) Ahmed Belfahmi Direction des Entreprises Publiques et de la Privatisation (MEF) Fouzia Zaaboul Directeur du Trésor et des Finances Extérieures, (MEF) Mohamed El Gholabzouri Adjoint au Directeur du Trésor et des Finances Extérieures Direction du Trésor et des Finances Extérieures (MEF) Aziz Khayati Adjoint au Directeur du Budget, (MEF) Ahmed Berrada Adjoint au Directeur du Budget, (MEF) Youssef Farhat Adjoint au Directeur du Budget, (MEF) 38 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) Oucible Chef de Division à la Direction du Budget (MEF) Trésorerie M. Guirir Directeur de la Reglementation de la Recherche et de la Cooperation International Trésorier Général du Royaume Noureddine Bensouda Trésorier Général du Royaume Noureddine Bamou Chef de la Division de la Cooperation International Trésorier Général du Royaume SGG Abdelilah Fountir Directeur des Affaires Generales (SGG) Tangi Adviser, (SGG) Ministere de la Reforme de l’Administration et de la Fonction Publique (MSP) Ahmed Laamoumri Secretaire Generale, MSP Donors, Consultants, and Others Gerhard Krause Head of economic section, EU Pablo Cendoya Revenga Governance Specialist, EU Mamadou Yaro Economist, AfDB Toby Mendel International Consultant Franck Mordacq Technical Expert, INTRADEF, France Anas Abouelmikias Local Consultant 39 The World Bank First and Second Transparency and Accountability Development Policy Loans (Hakama I and II) ANNEX 7: MATERIAL CHANGES BETWEEN TRIGGERS AND PRIOR ACTIONS OF HAKAMA II Indicative trigger 7: Implementing regulations of the new law on the governance and financial control of agencies and state-owned enterprises aimed at modernizing State oversight and increasing their managerial flexibility and accountability have been adopted. Prior action 7: Decision-making bodies of 15 additional State-owned enterprises and agencies, have adopted a resolution and an action plan to implement the new code of corporate governance for State owned enterprises. Rationale. This change brings the number of SOEs and agencies implementing the code up from five (supported by prior action #5 of DPL I) to a total of 20 and thus increase the results of this series. The lessons learned from implementation will inform the finalization of the SOE governance law and allow for appropriate public and inter-ministerial consultations and the law’s alignment with the new organic budget law and the performance approach (prior action #1 of DPL2). Indicative trigger 8: The Minister of the Interior has prepared and submitted the draft decree revising the financial transfer system to local governments for consultation, in order to strengthen the legal framework and transparency of the rules as well as their impact in terms of incentives and equalization, in line with the new regionalization strategy. Prior action 8: The organic law No.111-14 on regions has been published in the National Gazette No 6380 dated July 23, 2015. Rationale. The Government revised the sequencing and ambition of the decentralization reform, in line with the recommendations of the consultative commission for regionalization. It decided to first strengthen and clarify the mandate and resources of empowered regional governments, hold elections, and then revise the current transfer and equalization system. This change is consistent with the Bank’s policy advice and diagnostic of the transfer and equalization system finalized in 2014. This overhaul of the legal framework for local governments represents an opportunity to strengthen their mode of governance and to align it with the core PFM and open governance reforms supported by this program, thereby substantially enhancing its ambition and coherence 40