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AFRICAN DEVELOPMENT BANK
MOROCCO
MOROCCO ECONOMIC COMPETITIVENESS SUPPORT PROGRAMME (PACEM)
APPRAISAL REPORT
OSGE DEPARTMENT June 2015
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TABLE OF CONTENTS
I INTRODUCTION: THE PROPOSAL .................................................................................................... 1
III COUNTRY CONTEXT ............................................................................................................................ 1 2.1. Political Situation and Governance Context ................................................................ 1 2.2. Recent Economic Trends, Macroeconomic and Fiscal Analysis ................................. 2 2.3. Economic Competitiveness .......................................................................................... 3
2.4. Public Finance Management ........................................................................................ 3 2.5. Inclusive Growth, the Poverty Situation and the Social Context ................................. 4
III GOVERNMENT’S DEVELOPMENT PROGRAMME .............................................................................. 5 3.1. Government’s Medium-Term Development Strategies and Priorities ................................. 5 3.2. Obstacles to Implementing the National/Sector Development Programme ......................... 5
3.3. Consultation and Participatory Process ............................................................................. 6
IV BANK SUPPORT FOR THE GOVERNMENT STRATEGY ..................................................................... 6 4.1. Linkage with Bank Strategy ............................................................................................ 6 4.2. Compliance with Eligibility Criteria ................................................................................. 7 4.3. Collaboration and Coordination with Other Partners ......................................................... 7
4.4. Linkage with Other Bank Operations ............................................................................... 7 4.5. Analytical Work Underpinning the PBO .......................................................................... 8
V THE PROGRAMME .................................................................................................................................. 9 5.1. Aim and Objective .......................................................................................................... 9
5.2. Programme Components ................................................................................................ 9
5.3. Policy Dialogue ............................................................................................................ 14
5.4. Loan Conditions ........................................................................................................... 14 5.5. Good Practice Principles for the Application of Conditionality ........................................ 14
5.6. Financing Needs and Mechanisms ................................................................................. 14 5.7. Application of Bank Group’s Policy on Non-Concessional Debt Accumulation ............... 15
VI IMPLEMENTATION ............................................................................................................................... 15 6.1. Programme Beneficiaries .............................................................................................. 15
6.2. Impact on Gender, the Poor and Vulnerable Groups ....................................................... 15 6.3. Impact on the Environment and Climate Change ............................................................ 16 6.4. Impact on Other Areas .................................................................................................. 16
6.5. Implementation, Monitoring and Evaluation ................................................................... 16 6.6. Financial Management,Disbursement and Procurement .................................................. 16
VII LEGAL INSTRUMENT AND AUTHORITY ........................................................................................... 17
7.1. Legal Instrument ................................................................................................................................ 17
7.2. Conditions Associated with Bank Intervention ..................................................................................... 17
7.3. Compliance with Bank Group Policies ................................................................................................ 18
VIII RISK MANAGEMENT ............................................................................................................................. 18
IX RECOMMANDATION............................................................................................................................. 18
i
CURRENCY EQUIVALENTS
(May 2015)
UA 1 = 13.72 Moroccan Dirhams (MAD)
UA 1 = EUR 1.25
UA 1 = USD 1.41
FISCAL YEAR 1 January- 31 December
ii
ABBREVIATIONS
AEO
AfDB
African Economic Outlook
African Development Bank
AMDI
ANPME
Moroccan Investment Development Agency
National Agency for the Development of Small- and Medium-Sized Enterprises
BAM Bank Al Maghrib (Moroccan Central Bank of Morocco)
CGEM General Confederation of Moroccan Enterprises
CNCP National Public-Procurement Commission
CNEA National Business Climate Commission
CPIA Country Policy and Institutional Assessment
CSI Core Sector Indicator
CSP Country Strategy Paper
DB Budget Directorate
DGEPP Directorate General of Public Enterprises and Privatization
DGI Directorate General of Taxes
DTFE Treasury and External Finance Directorate
EU European Union
GAP
HCP
Governance Strategic Framework and Action Plan
Higher Planning Commission
GDP Gross Domestic Product
GFCF Gross Fixed Capital Formation
GID Integrated Expenditure Management
IDE Foreign Direct Investment
IGF General Inspectorate of Finance
IMF International Monetary Fund
MAD Moroccan Dirham
MAGG Ministry of General Affairs and Governance
MCC Millennium Challenge Corporation
MEF Ministry of the Economy and Finance
MICIEN Ministry of Industry, Trade, Investment and the Digital Economy
MIC-FAT Middle Income Country Technical Assistance Fund
PAAFE Training-Employment Matching Support Programme
PACEM Economic Competitiveness Support Programme
PADESFI Financial Sector Development Support Programme
PARGEF Economic and Financial Governance Revitalization Support Programme
PARAP Public Administration Reform Support Programme
PEE Public Establishments and Enterprises
PEFA Public Expenditure and Financial Accountability Review
PFM Public Finance Management
PMV Green Morocco Plan
PPP
PLL
Public-Private Partnership
Precautionary and Liquidity Line
TGR General Treasury of the Kingdom
UA Unit of Account Unit
USD$ US Dollar
VAT Value-Added Tax
VSSME Very Small-, Small- and Medium-Sized Enterprises
WB World Bank
WEF World Economic Forum
iii
PROGRAMME INFORMATION
INSTRUMENT: General Budgetary Support
PBO MODEL: Self-Standing Programme-based Operation
LOAN INFORMATION
Client Information
BORROWER: Kingdom of Morocco
EXECUTING AGENCY: Ministry of Economy and Finance
Treasury and External Finance Directorate (DTFE)
Financing Plan
Source Amount (UA) Amount (USD) Instrument
AfDB
80 Million
112.5 Million
Loan
TOTAL COST 80 Million 112.5 Million
Basic Information on the AfDB Financing
Loan currency US dollars
Interest type * Floating base-rate with a free fixing option
Base rate (Floating) 6-month Euribor
Contractual margin 60 basis points (bps)
Borrowing cost margin: Bank's cost of borrowing relative to the 6-month
Euribor. This margin resets annually, on 1 January and
1 July.
Commitment In case of late payment relative to the initial schedule
(as specified in the loan agreement), a fee of 25 basis
points per year will be applied to the undisbursed
amounts. It will increase by 25 basis points every six
months, up to a maximum of 75 basis points per
annum.
Other commissions No
Duration Maximum 20 years
Grace period Maximum 5 years
Timeframe - Main Milestones (expected)
Concept Note Approval
March 2015
Appraisal April 2015
Programme Approval July 2015
Effectiveness August 2015
Disbursement September 2015
Completion December, 2016
Closing Date December, 2016
iv
EXECUTIVE SUMMARY
Programme
Overview
Programme Name: Morocco – Economic Competitiveness Support Programme (PACEM)
Expected Results: Improved private investment climate: Transparency and attractiveness of the investment environment;
strengthening the fight against corruption; coordination between public and private stakeholders; efficiency of the
commercial legal system; broadening of the entrepreneurship base. Strengthening of public investment efficiency: Good
governance of public investment; results-based public resource allocation; transparency in business relations between the
State and the private sector.
Overall implementation schedule: General budget support – Self-standing programme-based operation - 2015/2016
Programme cost: UA 80 million (USD 112.5 million)
Programme
Outcomes
The expected programme outcomes include: (i) improved competitiveness of the Moroccan economy; (ii) increased
number of sole proprietorships (“auto-entrepreneurs”); (iii) improved public investment management; and (iv) greater
transparency in the public procurement system.
The main beneficiaries of the programme are: (i) Moroccan SMEs, which will see several constraints on the development
of their activities lifted; (ii) investors with major projects who will have a more transparent investment and negotiation
framework with added incentives, as well as a clear system for PPPs; (iii) persons active in the informal sector and the
unemployed, many of whom are women.
Alignment with
Bank Priorities
The programme aligns with the Mid-term Review of the Bank’s Country Strategy Paper 2012-2016, the first pillar of which
is governance support. It reflects two priority focus areas identified by the Bank in its strategy for the period 2013-2022,
namely governance and private sector development. The proposed programme is also consistent with the first and third
pillars of the 2014 - 2018 Governance Action Plan (GAP II), i.e. public sector management and investment climate
improvement, respectively.
Needs
Assessment and
Rationale
The Bank's assistance is justified by the need to support the Government's reform priorities as part of its goal to structurally
transform the economy and improve its competitiveness. The Growth Diagnosis highlighted the low impact of investment
on growth and transformation of the social and economic model. The core focus of this programme is to improve public
and private investment performance. The reforms supported by the programme will contribute to enhancing
competitiveness, growth and job creation. Moreover, PACEM is a key activity planned in the Bank’s CSP for the period
2015-2016. It is a tool to support the authorities in their effort to remove constraints on investment identified in the Growth
Diagnosis.
Harmonization PACEM was designed in full coordination with the World Bank and the European Union. Indeed, the programme will
complement the World Bank’s Competitiveness Programmes launched in 2013 and 2015, respectively, and that of the
European Union currently on the drawing board. This is reflected particularly in ongoing consultations and the
harmonization of reform measures in common focus areas. Given the phased programming of various partner interventions,
the parallel programme approach was favoured. Moreover, the Moroccan authorities, through the Treasury and External
Finance Department, ensure at their level the harmonization of activities carried out by various donors.
Bank’s Value-
added
Through this operation, the Bank will support the Moroccan Government’s multi-year programme aimed at improving the
business environment and mitigating the micro-economic distortions identified in the Growth Diagnosis. PACEM seeks
to support cross-cutting policies driving the competitiveness of the Moroccan economy in all sectors. This is a means of
support for the Bank’s other ongoing activities in Morocco. The Bank’s value added is strengthened by a holistic approach,
which, based on the constraints identified jointly by the authorities and the Bank as part of the Growth Diagnosis, proposes
policy-based operations directly supported by targeted and complementary sector investments.
Contributions to
Gender Equality
and Women’s
Empowerment
PACEM supports cross-cutting reforms that will affect both women and men. However, two important levers, supported
under PACEM, will help to reduce gender inequalities and support women’s economic empowerment. These are the
promotion of sole proprietorship and budget preparation taking into account the impact on gender.
Policy Dialogue
and Related
Technical
Assistance
This operation is crucial to strengthening dialogue with the authorities on the diagnosis of constraints on growth,
particularly in terms of improving transparency and performance in public investment management, and strengthening the
national public procurement system. It will also help to reinforce dialogue on investment promotion support mechanisms,
support to SMEs as well as integration of the informal sector. Dialogue will be underpinned by technical assistance
operations, including the implementation of the PPP framework and enhancement of foreign exchange flexibility. These
different actions, carried out as part of high-quality dialogue with the Government, helped to raise the Bank to the level of
Morocco’s partner of choice. The Bank’s Field Office in Morocco and the Sector Department (Governance) will be
responsible for conducting the dialogue.
v
RESULTS-BASED LOGICAL FRAMEWORK
Country and Programme Name: Morocco – Economic Competitiveness Support Programme (PACEM)
Programme Objective: To help create conditions for accelerated and inclusive economic growth, by strengthening the
competitiveness of the Moroccan economy
I.
μ
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISK/ MITIGATION
MEASURES Indicators (including
CSI) Baseline Target
IMP
AC
T Accelerated growth
through improved
competitiveness of
the economy
Real GDP growth rate 2.7% in 2014 An average of more than 5% over the
period 2016- 2018
MEF
OU
TC
OM
ES
I. Improved private investment climate
Global Competitiveness Index
4.11 in 2013/2014 4.21 points from 2015 to 2016
Global Competitiveness
Report (WEF)
Risk
Unfavourable
international economic situation and climatic
risks that may affect the
achievement of programme outcomes
Mitigation
Budget Oversight Committee in place,
equipped to mitigate
exogenous risks (including climatic
risks) at the economic
level.
Members monitored as sole proprietors
(including percentage of
women)
No status in place 5,000 members by 2016 (30% women)
ANPME Report
II. Enhanced public investment
efficiency
PEFA Indicator PI-11 on public investment
management
Not assessed (new indicator)
PEFA B rating 2016
PEFA 2016
PEFA PI-19 on
competitive bidding, optimal use of resources
and monitoring of public
procurement (CSI)
B rating in 2009 (last
PEFA)
PEFA A rating in
2016 ( PI-23 replacing PI-19 in
the new
methodology)
PEFA 2016
OU
TP
UT
S
COMPONENT I - IMPROVE THE PRIVATE INVESTMENT CLIMATE Risks
- A flagging of
Government’s will to
implement reforms - Coordination between
the various ministries
involved in the implementation of
programme reforms
Mitigation
- A high level of commitment by the
authorities to implement
reforms to strengthen competitiveness has
been expressed.
- DTFE, in charge of monitoring the
programme’s
implementation, has demonstrated its
capacity to mobilize
various stakeholders in
previous programmes
I.1. Strengthen the legal framework governing private investment
Improved transparency and
attractiveness of the
investment environment
Adoption of the Investment Bill
Framework Law 18.95 of 1996 is no longer
consistent with the
country’s attractiveness
objective
Draft bill adopted by the Council of
Ministers before
end-2016
MICIEN Reports
Strengthen
instruments used in the fight against
corruption
Validation of the National
Anti-corruption Strategy
The Anti-corruption
Action Plan goes back to 2007
Strategy validated
by the National Anti-Corruption
Commission headed
by the Head of Government before
end-2016
SGG Reports
I.2. Improve the business climate for enterprises
Strengthened coordination
between public and
private stakeholders to improve the
business climate
Adoption of the National Business Climate
Commission (CNEA)
Action Plan
No Action plan approved for 2015
Action Plan adopted by the steering
committee before
end-2015
CNEA Reports
Improved efficiency
of the commercial legal system
Submission to the SGG of
the draft bill on arbitration and conventional
mediation
Slowness in enforcing
commercial justice
The Bill is submitted
to the SGG before end-2015
MJ Report
Improved liquidity
of businesses
Decree on the repayment
of the accumulated VAT
credit (2004-2013 period) to companies
Significant
accumulated VAT
credit owed companies
The decree on
refund of the
accumulated VAT credit is adopted
before end-2015
Reports by the
Directorate
General of Taxes
I.3. Support entrepreneurship, formalization of informal activities and job creation
Expanded
entrepreneurship
base
Adoption of two decrees
concerning the status of
sole proprietors
No specific framework
to support
entrepreneurship
Decrees adopted by
the Council of
Ministers before end-2015
ANPME Reports
Job creation
promoted
Reduced employment
cost through the introduction of income tax
exemption for up to five
employees of business start-ups and up to a
ceiling of MAD 10 000
Weak job creation in
business start-ups
Finance Bill
incorporating this reduction before
end-2015
Reports by the
Directorate General of Taxes
COMPONENT II - IMPROVE PUBLIC INVESTMENT EFFICIENCY
vi
μ
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISK/ MITIGATION
MEASURES Indicators (including
CSI) Baseline Target
II.1. Improve the public investment governance framework
Improved public
investment governance
Adoption of the Decree
on public-private partnership for
implementation of the
PPP Law (86.12)
PPP Law passed in
2014. It remains to be implemented at the
regulatory level
Decree adopted by
the Council of Ministers before
end-2015
DEPP Reports
Number of public establishments and
enterprises implementing
the Moroccan Code of Good Governance
Practices
Need to expand the use to main PEEs that are
key sponsors of public
investment (9 currently use the code)
15 PEEs implement the Code before end-
2015
DEPP Reports
II.2. Improved public resource allocation efficiency
Improved results-based allocation of
public resources
and performance
evaluation
Extension of the use of programme budgeting
Nine (9) Ministries use the programme
budgets in 2014
Six (6) more Ministries use the
programme budgets
as part of
preparation of 2016
Finance Bill (end-
2015) (15 Ministries using the
programme budgets)
DB Reports
Adoption by the Council of Ministers of the Decree
on the preparation and
execution of finance acts making it mandatory on
pioneering LOLF
departments to submit a performance draft and the
related monitoring-
evaluation system, including impact on
gender
Need for programming based on results and
monitoring-evaluation
of results, including impact on gender
Decree adopted by the Council of
Ministers before
end-2016
DB Reports
II.3. Strengthen the national public procurement system
Enhanced transparency in
business relations
between the State and the private
sector
Adoption of the decree establishing the CNCP
The decree on public procurement, adopted
in 2013, provides for
the establishment of the CNCP
Decree adopted by the Government
Council before end-
2015
GGS Reports
Facilitated access to
public procurement
Decree on e-procurement Access to information
and funding for public procurement is limited
The Order on e-
procurement is issued before the
end of 2015
TGR Reports
Key activities:
- Signature of the Loan Agreement and fulfilment of the conditions agreed during appraisal
- Implementation of reforms, quarterly performance report, Bank supervision report, and Programme Completion Report
Funding:
AfDB loan (USD 112.5 million)
Single tranche in 2015
II.
1
I. INTRODUCTION: THE PROPOSAL
1.1. Management hereby submits the following proposal to grant a loan of USD 112.5 million,
equivalent to UA 80 million, to the Kingdom of Morocco, to finance the Economic Competitiveness
Support Programme (PACEM). This is a general budget support operation to back the implementation
of reforms to make the economy more competitive, ensure its structural transformation and unlock its
significant growth potential.
1.2. The programme aims to help create conditions for accelerated and inclusive economic
growth, by strengthening the competitiveness of the Moroccan economy. The Moroccan economic
model is paradoxical in the sense that, despite an investment rate among the highest in the world (33.1%
of GDP in 2014), transforming the economic model is difficult (weak industrial sector development),
growth is creating few jobs and export sectors are insufficiently diversified. The 2014 Growth Diagnosisi
confirmed this finding and highlighted the constraints on investment in Morocco (see Table 2). The
proposed programme is designed to minimise these constraints, in order to meet the challenge of
improving public and private investment efficiency.
1.3. PACEM seeks to consolidate and deepen reforms implemented under the Economic and
Financial Governance Support Programme (PARGEF/Hakamaii). It will contribute to strengthen
Bank operations in other sectors in Morocco. PACEM represents a new phase of support, taking the baton
from PARGEF, and will be implemented over the 2015-2016 period. The choice of a self-standing
programme-based operation (see Section 7.6: Bank Group Policy on Program-Based Operations – PBO,
2012) is justified by the need to align the Bank’s intervention with Government’s current strategy
(Government’s economic and social programme) ending in 2016, and with the Bank’s Country Strategy
Paper for Morocco (2012-2016). The operation thus proposed, will help to maintain dialogue with the
authorities on the reforms planned for 2015-2016, while benefiting from strong commitment by the current
Government. As soon as the new national development strategy for 2017-2021 is launched following the
2016 parliamentary elections and the adoption of the new Bank country strategy (CSP 2017- 2021), a
medium-term programme could be engaged with the authorities.
III. COUNTRY CONTEXT
2.1. Political Situation and Governance Context
2.1.1. While implementing wide-ranging reforms, Morocco continues to enjoy good political
stability. The constitution was amended by referendum in July 2011, with the aim of reinforcing
pluralism, human rights and individual freedoms. A first coalition government was set up in January 2012
and a second one in October 2013, following the withdrawal of the Istiqlal Party from the government
coalition. The next parliamentary elections, which will determine the composition of the Government, are
planned for 2016iii. At the international level, commitment to the reform process was crowned in 2011
when Morocco was granted the Partner for Democracy status with the Council of Europe. The country’s
security situation remains under control, despite a worrying regional set up.
2.1.2. Regarding governance improvement, Morocco has embarked on a series of in-depth reforms
concerning public sector management, access to information, overhaul of the judicial system and
the fight against corruption. The new decree governing public procurement came into effect in 2014.
The role of the Kingdom’s Court of Accounts has also evolved towards performance and good governance
in public affairs managementiv.
2
Moreover, a bill on access to information is being finalized to implement Article 27 of the Constitution
on citizens’ right to information on public affairs management. These initiatives were supported by the
Bank as part of the series of public administration reform support programmes (PARAPs 2002-2011)
and the Economic and Financial Governance Revitalization Support Programme (PARGEF 2012-2014).
2.1.3. To strengthen the fight against corruption, a National Integrity, Corruption Prevention and
Control Authority will be set up. This new authority will replace the Central Authority for the Prevention
of Corruption (ICPC), and will have wider powers, particularly in terms of pre-judicial investigations.
This should help to complete the updating and adaptation of the institutional anti-corruption framework.
In this regard, Morocco was one of the first countries (as early as 2007) to sign and subsequently adopt
the United Nations Convention against Corruption. Thus, according to Transparency International’s
Corruption Perception Index (CPI) for 2014, Morocco has made significant progress in good governance
and fighting corruption. The country was ranked 80th (out of 175 countries) in 2014, up 11 points relative
to the previous year.
2.2. Recent Economic Trends, Macroeconomic and Fiscal Analysis
2.2.1. On the economic front, Morocco’s growth in 2014 contrasted with its good performance
over the period 2009-2013. Indeed, economic growth dropped from 4.4% in 2013 to slightly below 3%
in 2014. This slowdown is linked exclusively to the decline in agricultural value added. For their part,
non-agricultural activities improved gradually from 2.3% to above 3% year on year, despite the low level
of growth in Europe and the resurgence of tensions in the Middle East. This development is attributable
to the performance of the mining and industrial sectors, particularly in connection with the good
performance of Morocco’s global business lines (aeronautics, cars production) as well as services –
especially transport, communications, trade and financial services. However, other sectors have shown
some signs of deceleration, particularly tourism and construction.
2.2.2. In recent years, the Moroccan manufacturing sector has undergone a significant change,
especially in terms of the technological content of manufactured exports. This has led, on one hand,
to a significant increase in the share of manufactured exports of medium-to-high level technology products
(UNCTAD classification of technological level) from a 20% in 2001 to 52% in 2014, following the
emergence of Morocco’s new global business lines. On the other hand, it has resulted in the decline in
exports of manufactured low-level technology products from 63% in 2001 to 37% in 2014. Despite this
positive trend, the manufacturing sector remains well below its long-term average. The sector’s low
competitiveness is undermining its development and limiting its integration into global value chains. The
authorities have recently undertaken to deploy all possible means to support the sector, including through
the new 2014-2020 Industrial Acceleration Strategy whose main objectives are to raise the sector's
contribution to GDP from 14% to 23% in 2020 and to create 500,000 jobs.
2.2.3. Morocco has in recent years pursued a prudent monetary policy aimed at controlling
inflation while supporting economic growth. Inflation stood at a low 0.4% in 2014 compared to 1.9%
in 2013. This trend stems exclusively from the drop of 1.1% in food prices for the first time since 2001,
as opposed to a 2.4% increase a year earlier. In contrast, the prices of other products rose slightly from
1.5% in 2013 to 1.7% in 2014, in a situation marked by the gradual removal of subsidies from certain
energy products.
2.2.4. The public debt stock continued to increase, but at a slower pace, due to the reduction in
the primary and overall deficits. The treasury debt ratio stood at 64.3% of GDP at the end of 2014,
compared to 63.5% in 2013. However, despite this trend, an analysis of the main risks leads to the
conclusion that debt remains sustainable in light of the country’s economic fundamentals, provided
budgetary reforms (subsidies, payroll). In July 2014, the IMF approved a new agreement with Morocco
for a precautionary and liquidity line (PLL) of approximately USD 5 billion. The first review of the PLL,
conducted in February 2015, was deemed satisfactory.
3
Table 1 - Macroeconomic Indicators (% of GDP, unless otherwise indicated) - AEO 2014 2014 2015 2016 2017
GDP (real) 2.7 4.5 5 5.3
Consumer prices – end of period
1.6 1.8 1.5 2
Current account balance – incl. grants -5.8 -3.3 -3.2 -2.9
Broad money (M2) 4.8 5.5 5.7 5.7
External public debt 32.1 32.9 33 32.4
Central Government internal debt 66.4 68 67.3 66.2
Gross official reserves (import months) 5.3 5.6 5.8 5.9
Overall fiscal balance -4.9 -4.3 -3.5 -3.0
2.2.5. At the external level, the trade deficit continued to improve with a greater increase in
exports (+ 7.9%) than in imports (+ 0.6%) in 2014. Morocco’s absolute market share increased by 6.6%
in 2014 relative to 2013, and stood at 0.127 in 2014 compared to only 0.119 in 2013. Furthermore, sub-
regional integration remains sluggish, despite the stated desire of the Moroccan authorities to become a
regional trade hub. Foreign direct investment (FDI) flows rose by 8.5% over the same period. Based on
these trends, the current account deficit would fall to 5.8% of GDP at end-2014, against 7.9% in 2013 and
9.7% in 2012. With the reduction of the trade deficit, Treasury operations in the international financial
market (USD 1 billion) and grants raised from Gulf countries, net international reserves improved to cover
5 months and 8 days of imports of goods and services by end-2014, compared to 4 months and 9 days of
imports in late 2013.
2.2.6. Forecasts for 2015 and 2016 show growth recovery with estimated growth rates of 4.5%
and 5%, respectively. Growth is expected to benefit from the resumption of non-agricultural activities
and the improvement of agricultural value added. Indeed, rainfall conditions are favourable and 76%
higher relative to a “normal” year and 142% higher relative to 2014. However, medium-term
macroeconomic prospects will depend largely on the scope, depth and pace of reforms implementation,
including those supported by this programme, as well as the recovery of European economies. Morocco
should continue to benefit from the impact of structural reforms, initiated since 2000 and which will be
consolidated by ongoing reforms seeking to improve the overall competitiveness of the economy and
efficiency of sector policies.
2.3. Economic Competitiveness
2.3.1. The State plays a key role in supporting competitiveness and improving the general
conditions for economic activity. The 2015 Doing Business report ranked Morocco 71st (87th in 2014)
globally, demonstrating the country’s dynamism in terms of ease of doing business and the
competitiveness of its economy. In the 2014 annual Index of Economic Freedomv report, Morocco scored
76.2 out of 100 for ‘business freedom’ and was ranked 44th out of 185 countries. To improve both the
investment climate and economic competitiveness, key structural reforms supported by the Financial
Sector Development Support Programme (PADESFI), were implemented to facilitate access to the credit
market for businesses and private households. In addition, with the help of various technical and financial
partners, including the Bank, significant efforts have been made to develop infrastructure, particularly
roads and highways, railways, ports, airports, as well as improve water and electricity production and
distribution, all with the aim of reducing the cost of inputs. The structure of Moroccan exports shows a
lack of diversification and a specialization in low-level value-added products. Exports remain largely
marked by the predominance of so-called traditional products: textiles, food processing, and phosphates,
which represent over 60% of goods exports (2012). However, this trend is being reversed with the relative
rise in exports from new Moroccan businesses (motor industry, aeronautics) since 2013.
2.4. Public Finance Management
4
2.4.1. As regards public finances, the Moroccan government has continued its streamlining policy
while speeding up the pace of structural fiscal reforms. The authorities have carried on with the
reduction of subsidies while controlling salaries and capital expenditure. Spending on subsidies has been
reduced by 21.5%, thanks to the combined effects of the price-indexing system for petroleum products,
other subsidy removal measures and the continued decline in oil prices globally. Revenue has also
increased by 4.6% compared to 2013. This improvement in public earning is the result of increase in tax
revenue (+1.9%) and non-tax revenue (including proceeds from privatization) (+21.7%). Revenue was
also improved by transfers from the Gulf Economic Council (MAD 13.1 billion) and proceeds from
privatization. It is necessary in the short and medium term to continue the implementation of this public
finance streamlining and consolidation plan in order to ensure fiscal sustainability and achieve the 3%
deficit target set by the Government by 2017vi. Thus, taking these measures into account, the objective of
a budget deficit (excluding privatization) of 4.9% of GDP at end-2014 has been achieved, after a deficit
of 5.2% in 2013. Moreover, towards the end of 2014, the authorities adopted a new organic law on the
finance act (LOLF), which was supported under the PARGEF governance programme. Reform of the
LOLF which aims at enhancing transparency in public affairs management, is in line with the 2011
constitutional reform. An assessment of public finance management systems, processes and institutions
(PEFA), is planned in 2015, with the participation of the African Development Bank, the World Bank and
the EU.
2.5. Inclusive Growth, the Poverty Situation and the Social Context
2.5.1. Socially, in spite of good economic performance and rising living standards, Morocco is yet
to fully overcome the challenge of persisting social, spatial and gender vulnerabilities and
inequalities. This is confirmed by the trend of the Gini Indexvii, which in 2011 stood at 0.408, slightly
lower than the 2001 level (0.406). National strategies, such as the National Human Development Initiative
(INDH), were implemented to strengthen social cohesion and improve human development indicators in
all regions.
2.5.2. To guarantee equality among citizens, many legislative and regulatory advancements were
recorded during the 2012-2014 period. At the strategic level, the Moroccan government is committed
to promoting equal access to human development opportunities for men and women, within the framework
of the “Ikram” gender equality programme (2012-2016). Furthermore, the Government also put in place
the Gender Equality Agenda for the 2011-2016 period. At the institutional front, several structures have
been established, including the Authority for Parity and the Fight Against All Forms of Discrimination,
the Gender Equality Observatory in the Civil Service and the Centre for Excellence in Gender-Responsive
Budgeting. Moreover, Morocco has pursued gender-responsive budgeting since 2002 (see Technical
Annex 10). Thus, a gender-specific annex now accompanies all finance bills. The annex allows for
mainstreaming the respective interests of women, men, girls and boys during the drafting, implementation and
evaluation of public policies. In terms of indicators, MDG 3 on gender equality and women’s empowerments,
is deemed attainable for 2015, even if the gender-specific development index (0.625 in 2007) remains within the
average for developing countries (0.696)viii. According to the 2014 World Gender Gap Report, Morocco occupies
the 133rd position out of 142 countries with a score of 0.6. The first country is Finland with a score of approximately
0.85. Morocco’s low score is mostly attributable to the “economic participation” component (0.4), which puts the
country on the 135th position. This may be explained by women’s low representation within the active population
(25%). However, the “political participation” component puts Morocco on a higher position (98th).
2.5.3. With regard to the key public priority of combatting unemployment, the set objective is to achieve
an unemployment rate of 8% by 2016. To this end, several programmes have been put in place to reduce the
unemployment rate especially among young graduates, notably "Idmaj" (“Insertion”), "Moukawalati" ("My
business") and "Taahil" (“Qualification”). As a result, unemployment fell over the past decade to stand at 9.9% in
2014, after stagnating at around 9% between 2011 and 2013. However, certain categories remain at risk: the
unemployment rate is 15.5% and 20% among secondary school and higher education graduates, in that order.
Moreover, women’s participation in the labour market remains low (26% in 2014). In 2014, the authorities launched
5
a new sole proprietor status that will provide an adequate entrepreneurship promotion framework for absorbing
informal sector workers, unemployed persons and students capable of creating their own jobs. PACEM supports
the pursuit of the sole proprietor arrangement.
III. GOVERNMENT’S DEVELOPMENT PROGRAMME
3.1. Government’s Medium-Term Development Strategies and Priorities
3.1.1 PACEM falls within the context of Government’s 2012-2016 General Policy Declaration,
whose purpose is to pursue the deepening of economic and sector reforms, with a view to strengthening
competitiveness and fostering strong, sustainable, inclusive and employment-generating growth. This
Declaration was further clarified in October 2013, with greater focus on improving the business climate
and strengthening the competitiveness of the national industrial fabric. In particular, PACEM will support
the implementation of the third objective of Government’s general policy (“Establishment of a competitive
and diversified economy”). Aimed at promoting economic competitiveness and diversification, this third
pillar is supported by several crosscutting and sector programmes. Therefore, the review of the framework
for investment (supported by PACEM), the adoption of a new industrial policy in 2014, the
implementation of the Green Morocco Plan, the financial sector development programme, the launching
of the logistics strategy and the improvement of the business climate are some of the levers used by the
authorities to achieve the economic diversification objectivesix.
3.2. Obstacles to Implementing the National/Sector Development Programme
3.2.1. The Moroccan economic model is a paradox in the sense that despite having one of the highest
investment rates in the world (33.1% of GDP in 2014), the growth rate is below its potential and relatively
volatile (see Graph 1)x. The low impact of investment on growth and job creation is mainly attributable to the
weight of public and private investments channelled to the agricultural sector or to activities in the secondary sector
that generate little knock-on effect on the real economy (capital intensive, extractive sector). To speed up economic
growth and respond to the people’s aspirations, the country must boost the structural transformation of its economy.
Hence, the issue of improving overall economic competitiveness lies at the very heart of all considerations. To
overcome this challenge, the authorities have launched an ambitious reform programme to reduce constraints to
investment and competitiveness. Among the constraints revealed by the Growth Diagnosis, several are
microeconomic in nature and directly affect private investment. In contrast, others are more general and relate
mostly to public sector management and public investment efficiency.
3.2.2. The Moroccan private sector remains sluggish and is characterised by lack of medium-sized
enterprises. According to various international assessments, this "absent middle" is the business category with the
greatest capacity for innovation and job creation. The Growth Diagnosis highlighted several macroeconomic
constraints that hamper business development, among which the slow commercial law system and the distortion of
the tax system. Furthermore, general governance issues (for instance discretionary practices with regard to
investment incentives and the fight against corruption) could deter investment. The weight of the informal sector
also affects the dynamism of the private sectorxi. The educational and vocational training system identified as a
major constraint in the Growth Diagnosis, does not also allow for an adequate qualitative and quantitative response
to the needs of the private sector.
Graph 1 a – Investment Rate in Comparator Graph 1 b – Volatility of the GDP Growth Graph 1 c – Low Economic Transformation
6
Countries Rate
Despite an investment rate deemed among the highest in the world, growth remains relatively low and highly volatile, and economic transformation with
stability of sectors in the GDP over long periods is not forthcoming.
3.2.3. To support economic competitiveness, there is need to rehabilitate public investment. To support
infrastructure development which is required for any economic activity, this aspect is important. Inadequate public
infrastructure increases production and marketing cost for businesses, thus compromising their competitiveness
and, as a result, discouraging investment.
3.3. Consultation and Participatory Process
3.3.1. PACEM’s design was the subject of broad consultation with stakeholders, promoting a participatory
approach and the involvement of actors and beneficiaries throughout the process. Hence, the mission held
consultations with the General Confederation of Moroccan Enterprises (Confédération Générale des Entreprises
du Maroc - CGEM), the Moroccan Association of Women Business Executives (Association des Femmes Chefs
d’entreprises du Maroc - AFEM) and the National Business Climate Commission (Comité National du Climat des
Affaires - CNEA). This consultative process around the thrusts supported by PACEM was further consolidated
through the organization of a workshop with civil society representatives at the Bank’s Morocco Field Office.
Thanks to this approach, views were received from different stakeholders on constraints hindering Morocco’s
economic competitiveness and the relevance of measures agreed with the authorities within the PACEM
framework.
IV. BANK SUPPORT FOR THE GOVERNMENT STRATEGY
4.1. Linkage with Bank Strategy
4.1.1. The programme aligns with the Mid-Term Review of the Bank’s 2012-2016 Country Strategy
Paper, the first pillar of which is “Governance support” (see Table 2). Under this pillar, loan operations for the
remaining period (including PACEM) aim to improve public, economic and financial governance with a view to
improving economic competitiveness and creating jobs, while enhancing the efficient utilisation of public resources.
Lastly, it takes account of two intervention priorities defined by the Bank in its 2013-2022 strategy, namely
governance and private sector development. The proposed programme also addresses the first and third pillars of
the Governance Action Programme 2014-2018 (GAP), namely public sector management and business climate
improvement. Furthermore, the proposed programme seeks to support the authorities to mitigate the
microeconomic distortions identified in the Growth Diagnosis conducted by the Bank in 2014 at Government’s
request, within the context of preparing the Second MCC Compact. PACEM also aligns with: (i) the Bank’s Private
Sector Development Policy 2013-2017, especially the first pillar on improving the business and investment climate;
and (ii) the Bank’s Gender Strategy, particularly the second objective on women’s economic empowerment. It is
worth noting that North Africa has witnessed major political changes following revolutions that shook three
of the region’s six countries. As a result, the Bank only initiated the preparation of a new regional integration
strategy in 2015.
Table 2 - Linkage between PRSP/NDP, the CSP and PACEM
-10
-5
0
5
10
15
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
GDP Growth (annual %, 1970-2014)
0
10
20
30
40
50
60
70
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
In G
DP
pe
rc
en
t
GDP Sector Breakdown (1980 - 2013)
Agriculture, value added (GDP %)
Manufacturing, value added (GDP %)
Industry, value added (GDP %)
Services, etc. value added (GDP %)
In G
DP
%
Turkey
Morroco
RomaniaJordan Tunisia
Malaysia
7
4.2. Compliance with Eligibility Criteria
Morocco fulfils the requisite conditions for using the budget support instrument (Technical Annexes 1 and
3). The authorities maintain their commitment to implement structural reforms aimed at supporting growth and
reducing poverty (see Box 1). Furthermore, the country enjoys macroeconomic stability following reforms to
sanitize public finances and reduce the compensation cost. The public finance management framework has
benefitted from significant reforms in recent years to raise it to international standards, as reflected in the satisfactory
fiduciary ratings issued by the Bank and other partners. Political stability was consolidated following the 2011
constitutional reform that marked a major turning point in the wake of the period of instability that wrought North
Africa. It is also worth noting that donor intervention in Morocco is characterised by a high degree of harmonisation,
propelled by the strong ownership of projects and programmes by the authorities themselves.
4.3. Collaboration and Coordination with Other Partners
PACEM was designed in close coordination with the World Bank and the European Union. The programme
will complement the Competitiveness Programmes launched respectively by the World Bank and the European
Union in 2013 and 2015 (the EU programme is being prepared). Given the phased programming of various partner
interventions, the parallel programme approach could not be avoided. Generally, all economic and financial
governance programmes were conducted in collaboration with the World Bank and the European Union, in
compliance with the guidelines of the Paris Declaration on Aid Effectiveness. This is particularly reflected in the
harmonisation of reform measures in common intervention areas (see Section 5.2). The World Bank programme
focuses further on external trade and the business environment, whereas that of the European Union supports the
authorities in renewable energy development and implementation of actions to facilitate external trade within the
context of free trade with the Euro Zone. Moreover, the Moroccan authorities ensure the harmonization of
operations from various donors through the Treasury and External Finance Directorate.
4.4. Linkage with Other Bank Operations
CSP 2012-2016 & Growth Diagnosis
2015
Government Economic and Social Programme
2012-2016
PACEM Intervention Areas
Pillar I: Strengthen a unified
national identity
Pillar II: Consolidate the rule of
law, advanced regionalisation and
good governance
Pillar III: Put a competitive and
diversified economy in place
Pillar IV: Develop and implement
social programmes
Pillar V: Strengthen Morocco’s
international position
CSP Pillar I: Governance
=> Improve economic
competitiveness and create
jobs; improve the efficient
utilisation of public resources
CSP Pillar II: Infrastructure
=> Essential factors of
production: water, energy and
transport.
Diagnosis :
Constraints :
=> Legal system
=> Tax system
=> Land
=> Labour market
=> Governance,
transparency & corruption
I. Private investment climate
II. Public investment
efficiency
I.1. Private investment
framework (Charter, justice,
corruption)
I.2. Procedures, tax
environment and support for
job creation (land,
employment, VAT)
I.3. Support entrepreneurship
and formalisation of informal
activities
II.1. PPP / PEE framework
II.2. Public investment
governance framework
II.3. National public
procurement system
Low Efficiency of Investment
8
4.4.1. The Bank’s active portfolio in Morocco comprises 30 ongoing operationsxii for a net commitment
of approximately UA 1.6 billion. The overall performance of the portfolio remains satisfactory, with an average
rating of 2.53 on 3 in 2014. The portfolio covers seven sectors of intervention: energy (48.6%), transport (22.3%),
water and sanitation (15.7%), private sector (10.4%) and agriculture (2.9%).
4.4.2. Complementarity with other operations: PACEM is a vector of support to other Bank operations in
Morocco. As such, its impact will consolidate public administration gains obtained through previous programmes
(PARAP and PARGEF), especially the establishment of the automated customs database (base de données
automatisée de la Douane - BADR) to facilitate trade by reducing the time taken to clear merchandise (a key
competitiveness factor). It also complements the Financial Sector Development Support Programme (PADESFI),
given the need to establish a framework conducive to investments at the same time as vehicles for investment
financing. Furthermore, the programme will support actions planned under the Green Morocco Support Programme
– Phase II (PAPMV II), by helping to improve the modernization and competitiveness of the agro-industrial sector,
especially in terms of enhancing the strategic allocation of public resources to the agricultural sector. PACEM will
benefit from outputs generated by the Training-Employment Matching Support Programme (PAAFE). PAAFE is
designed to help the authorities to fill the human capital deficit and respond to the challenge posed by weak
education and vocational training system which is unable to respond to private sector employment needs. PACEM
also complements investment projects in infrastructure sectors supported by the Bank. Such projects seek to
improve the country’s infrastructure supply in order to reduce production costs in the private sector, strengthen
economic competitiveness (water, energy, transport) and facilitate external trade by better connecting the hinterland
to trade infrastructurexiii. The Bank’s value added is strengthened through this holistic approach which, based on
constraints identified jointly by the authorities and the Bank within the Growth Diagnosis framework, proposes
reform support operations backed directly by targeted and complementary sector investments.
4.4.3. Linkages with technical assistance projects: PACEM will benefit from major leverage effects through
its linkage with institutional support operations intended to: (i) strengthen the quality of reforms monitoring at the
Treasury and External Financing Directorate (DTFE), which is responsible for executing the programme and
coordinating reforms implementation; (ii) build the capacity of the Court of Accounts – a body solely charged with
evaluating public policies; and (iii) promote PPP operations by supporting the establishment of the PPP institutional
framework (see the technical annex on PPPs).
4.4.4. In terms of lessons drawn from previous operations, the Bank has so far financed several budget
support programmes in Morocco. The completion reports on these programmes, especially PADESFI, PARAP and
PARGEF, concluded that the country performed well in terms of implementation and ownership of programme
measures. However, the reports also highlighted difficulties regarding the slow process of implementing regulatory
and legislative texts due principally to the political will to undertake reforms within a participatory framework
involving all stakeholders (which makes a lengthy consultative and approval procedure mandatory). PACEM’s
design took these key lessons into account, especially by spreading the programme over two years (2015 – 2016).
This approach will help to maintain dialogue on reforms to ensure effective implementation.
Table 3: Lessons from Previous Bank Operations in the Country
Sources Key Lessons Reflection in PACEM
PARGEF
Completion
Report
Follow the programme-based approach to consolidate
reforms that take time to implement, and enable decision-
makers to have good visibility on financial resources
associated with Bank and TFP support operations.
PACEM continues certain key PARGEF actions with a
view to consolidating and deepening the achievements,
and ensuring full implementation of reforms. Moreover,
from 2017 (PACEM’s completion), another programme
will be designed using the same approach.
PARAP IV
Completion
Report
Accompany reforms implementation with technical
assistance, principally in order to better understand and define
certain instruments, or speed up the implementation of
reforms.
PACEM will be accompanied with technical assistance
projects, particularly to establish the PPP framework.
4.5. Analytical Work Underpinning the PBO
4.5.1. PACEM’s design tapped from several studies conducted by the Bank and other technical and
financial partners. Specifically, the Growth Diagnosis helped to highlight the major challenges facing the
9
Moroccan economy and to identify constraints on investment and the country’s competitiveness. The programme
aims to contribute to efforts by the authorities to reduce microeconomic constraints, including those on efficient
public and private investment, tax system distortions and the slow enforcement of court decisions on business-
related cases. Table 4 - List of Analytical Work
Study Contribution
Growth Diagnosis (AfDB, 2015) Reveals the constraints to private investment and the country’s capacity to attract new investments.
Accelerating Job Creation and Growth
through MSMEs (AfDB, 2015)
Helps to analyse constraints to the development of small- and medium-sized enterprises in Morocco
and the mechanism put in place by the authorities to lift said constraints.
PEFA (WB, EU and AfDB, 2009) Highlights weaknesses in financial governance, especially the public procurement component.
African Economic Outlook (AfDB,
2014)
The 2014 AEO for Morocco stresses the need to put a fair and equitable tax system in place to promote
business competitiveness. This was included among PACEM measures.
Morocco: Private Sector Development
Study (JICA, 2014)
The report highlighted the strengths and weaknesses facing Morocco’s private sector development,
particularly in terms of access to infrastructure and government’s support mechanism.
Doing Business Report (WB, 2015) Highlights weaknesses and progress made by the country with regard to the business climate.
V THE PROGRAMME
5.1. Aim and Objective
5.1.1. PACEM aims to contribute to create conditions for accelerated and inclusive economic growth by
strengthening the competitiveness of the Moroccan economy. Specifically, its objective is to improve the
efficiency of private and public investment, with a view to maximizing the impact on growth, economic
transformation and job creation. PACEM is a single-tranche disbursement reform support programme to be
implemented over two years (2015 and 2016). Hence, while addressing the country’s financing needs for 2015,
PACEM will allow for continuation of dialogue on competitiveness-supporting reforms with the Moroccan
authorities, before engaging in a medium-term programme-based support. Such an operation could be launched
immediately after the adoption of the new National Development Strategy 2017-2021, following parliamentary
elections in 2016. The Bank will back the implementation of the National Development Strategy in line with the
pillars retained in the next CSP.
5.1.2. The Bank’s assistance is justified by the need to support Government’s priority reforms within the
context of the latter’s objective to transform the economy and strengthen competitiveness. Issues emphasized
by the Growth Diagnosis included the limited impact of investment on growth and transformation of the economic
and social model. Furthermore, PACEM is a key activity scheduled in the Bank’s 2015-2016 CSP, and constitutes
a tool for supporting the authorities in their effort to overcome constraints on investment as identified in the Growth
Diagnosis. 5.2. Programme Components
5.2.1. The programme is designed around two main thrusts: (i) support the authorities in implementing
reforms to lift constraints on private investment as identified in the Growth Diagnosis and related mostly to the legal
framework for business, integration of the informal sector, facilitation of procedures and the fight against corruption;
(ii) help the State to better play its role as public authority and major economic actor vis-à-vis the private sector,
notably by improving public investment efficiency through: better governance of public enterprises and
establishment, implementation of sector budgets with objective-based programmes, and improvement of public
procurement management. Hence, to execute the two thrusts, PACEM comprises two complementary components:
(I) Improve the private investment climate; and (II) Improve public investment efficiency. Various measures
supported by the programme are described in the reforms matrix (Annex 1).
Component I – Improve the Private Investment Climate
5.2.2. The first programme component comprises three sub-components: (I.1) strengthen the legal framework
for private investment; (I.2) improve the business climate for enterprises; and (I.3) support entrepreneurship,
formalisation of informal activities and job creation. It aims to lift the microeconomic constraints on private
10
investment, with a view to stimulating and improving its efficiency.
Sub-component I.1 – Strengthen the Legal Framework for Private Investment
5.2.3. Problems and constraints: Morocco has taken a new turn on its economic transformation path. A new
industrial strategy was launched in 2014 and is further consolidation of the desire by the authorities to diversify the
economy and strengthen competitiveness. Moreover, there is need to improve the country’s attractiveness.
Governed by the 1995 Charter, the investment framework no longer responds to the new ambitions set by the
authorities. Furthermore, considerable fiscal expenditure is deployed in the form of incentives to encourage
investment. These efforts should be better targeted to primarily support innovative and transformation-bearing
investments capable of creating jobs. In addition, to improve the overall investment framework, the fight against
corruption is particularly important.
5.2.4. Recent measures adopted by the Government: The Moroccan authorities undertook major reforms to
improve transparency and the attractiveness of the investment framework. The Morocco Investment Development
Agency multiplied efforts to sell Morocco as a choice investment destination nationally, regionally and
internationally. A new Law on Investment is being prepared. The objective of the new law is to: group together
provisions regarding benefits and facilities extended to investors; (ii) propose a horizontal and unified benefits
regime, taking into account sector and regional specificities; and (iii) introduce possibilities of extending additional
benefits to exceptional projects, i.e. judged by the investment amount and/or the number of jobs created. Moreover,
to better target investment incentives, a consistent framework for assessing the costs and benefits of investment
projects that could benefit from the conventional regime has been prepared. Hence, the Inter-ministerial Committee
on Investments has a decision support framework that takes into account the content of investments in terms of
innovation value added, regional anchoring and job creation. The authorities also plan to lower the threshold of
investment projects that could benefit from VAT exemption, so as to improve the country’s attractiveness for
investors. Regarding the fight against corruption, the authorities have launched the preparation of a corruption
control strategy matched with sector programme action plans, to enable public action in this regard to be better
targeted and effective.
5.2.5. Programme activities and expected outcomes: (i) To improve transparency and the attractiveness of
the investment framework, PACEM will support the adoption of the Investment Bill and its implementing decree
by the Council of Ministers; (ii) To improve the efficiency of public assistance to private investment, the programme
will support the following measures: issuance by the Head of Government of a Circular on the cost/benefit analysis
of investment agreements, and reduction of the investment threshold in the new conventional regime from MAD
200 million to MAD 100 million for newly established enterprises, for 36 months; (iii) Lastly, to consolidate the
fight against corruption, PACEM will support the adoption of the National Anti-Corruption Strategy and Action
Plan by the National Anti-Corruption Commission (CNAC), presided by the Head of Government. The
implementation of measures agreed under this programme component will help to strengthen Morocco’s
attractiveness for investments, improve its global competitiveness index and propel the transformation of the
economy, thus resulting in increased industrialisation.
Sub-component I.2 – Improve the Business Climate for Enterprises
5.2.6. Problems and constraints: The country recently recorded major advances in business climate
improvement as reflected in its international rating in this regard (see §2.3.1). However, it is necessary to strengthen
coordination between public and private actors, to further enhance the business climate and boost the private
sector. Moreover, to improve the effectiveness of the business support mechanism, reliable information on
businesses should be made available to all accompanying structures. The common identification of businesses
through a modern and dynamic system will help to facilitate the implementation of reforms geared towards easing
business procedures. This should also help to considerably reduce transaction costs for private operators during their
interaction with the administration. In this context and as pointed out by the Growth Diagnosis, the business climate
in Morocco continues to be characterised by the slow enforcement of court decisions. Moroccan businesses
continue to suffer from the fact that VAT collection often results in the issuance of tax credit (instead of
11
reimbursements), thus affecting their liquidity. This hampers business development possibilities and also deprives
the economy of additional financing in terms of productive investment. Moreover, in connection with exchange
operations, the applicable legal texts no longer respond to ambitions of opening Moroccan enterprises to the
international market.
5.2.7. Recent measures adopted by the Government: To strengthen coordination between public and private
actors with a view to improving the business climate, the Moroccan authorities set up the National Business Climate
Commission (CNEA), with representatives from the public and private sectors. The CNEA planned to simplify 70
business procedures. Thus, major reforms concerning the simplification of property transfers and construction
permit regulations, as well as the opening of the online tax payment system to additional enterprises (especially
SMEs) have been finalised. Under the CNAE action plan, provision has been made to implement twenty or so
simplification projects in 2015. Furthermore, the authorities adopted Decree No. 2-11-63 establishing the Common
Business Identifier (CBI). This system will simplify the exchange of information on businesses among various
administrative departments, in order to facilitate relations between public administration and businesses. To reduce
delays in executing business-related court decisions, the authorities plan to implement a series of structuring reforms
within the context of the 2013 judiciary system reform. The most important of such reforms aims to encourage
recourse to alternative means of settling commercial disputes, especially arbitration and conventional mediation.
Plans have also been made to review the framework for dealing with businesses in difficulty. The goal is to support
business entry and exit, so as to strengthen private sector dynamics and, as a corollary, innovation and
competitiveness in the sector, while protecting the rights of creditors. To improve the liquidity of businesses, the
authorities decided from 2014 to reimburse to the private sector the VAT credit accumulated over the 2004-2013
period. Until then, such credit was only reimbursed to export enterprises. The authorities also intend to introduce
more flexibility into exchange operations. The system will be reformed with a view to authorising all operations,
while maintaining a negative list of operations that will be subject to authorisation in order to preserve
macroeconomic balances and combat illegal financial transfers.
5.2.8. Programme activities and expected outcomes: (i) To strengthen coordination between public and
private actors to improve the business climate, PACEM will support the adoption of the 2015 Action Plan of the
National Business Climate Commission and operationalisation of the Common Business Identifier (CBI). (ii) To
improve the efficiency of the commercial law system, the programme will support transmission of the bill on
arbitration and conventional mediation to the SGG, and adoption of the bill modifying Volume V of the Commerce
Code on procedures for preventing and addressing difficulties facing businesses. (iii) To improve liquidity and
exchange operations for businesses, the programme will support measures related to the adoption of the Decree on
the reimbursement of accumulated VAT credit (2004-2013) to businesses and the bill on exchange operations.
Thus, PACEM will help to improve the business climate and create suitable conditions for boosting the private
sector, particularly SMEs.
Sub-component I.3 – Support Entrepreneurship, Formalisation of Informal Activities and Job Creation
5.2.9. Problems and constraints: Despite the satisfactory economic performance, the Moroccan economy
continues to grapple with low job creation in the private sector. The economy is also characterised by the
engagement of a high percentage of the active population in the informal sector. The country counts more than one
million unemployed persons and two million others in the informal sector, not to mention the 700 000 students and
the 73 000 apprentices entering the labour market. To absorb these aspiring workers, the authorities must encourage
broad-based entrepreneurship that would absorb all categories of job seekers. Newly created businesses also
confront labour market rigidities that limit their capacity to create jobs or encourage their recourse to informal
employment. Therefore, incentive measures to spur job creation in favour of new businesses should be put in place.
5.2.10. Recent measures adopted by the Government: To encourage entrepreneurship, the authorities adopted
a new law establishing the special status of sole proprietor. The law will help to simplify procedures for setting up
business, simplify taxation and open access to social security. In pursuit of its goal to integrate the informal sector
into the formal economy, the authorities decided to extend the tax amnesty to informal sector actors who approach
the administration to regularise their situation. This measure produced significant results in 2013 and 2014, reaping
in 28 000 or so beneficiaries. To support job creation by the private sector and reduce tax distortion constraints
affecting the labour market as identified in the Growth Diagnosis, the authorities undertook to reduce the cost of
12
employment for new businesses.
5.2.11. Programme activities and expected outcomes: (i) Within the framework of expanding the
entrepreneurial base, PACEM will support measures to adopt the implementing provisions of the law on the status
of sole proprietor and offering support for new sole proprietors. (ii) To encourage the integration of the informal
sector, it was decided that within the PACEM framework, the tax amnesty extended to businesses migrating from
the informal to the formal sector will remain in force until end-2016. (iii) Lastly, to promote job creation, PACEM
will support government effort to reduce the cost of employment through the introduction of income tax exemptions
for up to five employees for new businesses, and for a salary cap of MAD 10 000. The implementation of measures
under this sub-component will boost job creation, especially self-employment, with a significant number of sole
proprietors and informal sector workers crossing over to the formal sector, including at least 30% women.
Component II: Improve Public Investment Efficiency
5.2.12. The quality and scope of the infrastructure network are essential for ensuring the smooth operation of the
economy. They play a crucial role in better connecting the value chains of the Moroccan economy to the global
economy (development of the hinterland and trade infrastructure, for instance ports and airports), and encourage
economic activity to match the local potential. Hence, in addition to their significant impact on economic
competitiveness, they contribute to the reduction of poverty and inequality. Conscious of the double challenge to
develop infrastructure and improve access to social services, the Government has made considerable effort to
strengthen public investment. The investment budget increased from MAD 116 billion in 2008 to 186.6 billion in
2014. On average, public agencies and enterprises absorb 68% of the investment budget, and local governments
6%. However, the increase in public investment has not systematically led to a significant rise in basic social
indicators. To improve public investment efficiency, PACEM will support reforms focused on three sub-
components: (II.1) improve governance of the public investment framework; (II.2) improve the efficiency of public
resource allocation; and (II.3) strengthen the national procurement system. PACEM revisits several thrusts of
reforms undertaken under the previous PARGEF/Hakama Programme to help in consolidating and deepening the
achievements. Most of the measures decided under this component match those being pursued under the World
Bank programme.
Sub-component II.1 – Improve Governance of the Public Investment Framework
5.2.13. Problems and constraints: The increase in public investment expenditure is limited partly due to lack of
financial resources. Therefore, the Government must explore additional sources of financing (e.g. public-private
partnerships – PPPs) to maintain the pace of economic growth and improve the efficiency of services rendered to
citizens and businesses. Morocco has had PPP experiences in such sectors as transport, energy and water. The
inadequacy of the old legal and regulatory framework on private sector participation limits transparency and
competition, and creates legal and budgetary uncertainties. In addition, public enterprises and establishments
(PEEs) are the main sources of public investment. They also represent a major client to the private sector in terms
of public procurement, and are also the key suppliers of infrastructure and public services. Hence, improved PEE
governance is capital to sustaining the competitiveness of the Moroccan economy.
5.2.14. Recent measures adopted by the Government: The Government adopted a modern framework for
PPPs in February 2014. The implementing text is in the approval phase. Through PARGEF/Hakama, several PEE
governance reforms were initiated. Specific mention should be made of the adoption of the Moroccan Code of
Good Corporate Governance Practices, which most of these structures currently follow.
5.2.15. Programme activities and expected outcomes: To address the constraints identified, PACEM plans to
implement the following measures: (i) adoption by the Council of Ministers of the Decree implementing the Law
on public-private partnerships (PPPs); and (ii) adoption of a bill on PEE governance and financial control. By
putting a consistent framework for public-private partnerships in place, public investment will be better evaluated
and play a more catalytic role in attracting a larger number of private sponsors, thus paving the way for the provision
of more efficient and better quality services. This will particularly facilitate the reduction of the country’s
infrastructure gap. In short, it will help to improve the business climate, reduce factor costs, increase the country’s
13
attractiveness and strengthen economic competitiveness.
Sub-component II.2 – Improve Efficiency in Public Resource Allocation
5.2.16. Problems and constraints: The budget is fragmented with more than 25 000 paragraphs and budget
lines, based on functional and economic classification. The adoption of a multi-year results-based programme
budgeting approach is necessary to strengthen public expenditure efficiency and offer better visibility to the private
sector with regard to the public procurement trend. Public actors will be guided by performance objectives.
5.2.17. Recent measures adopted by the Government: The Government prepared a new organic law on
finance acts ("Loi Organique relative à la Loi de Finances" - LOLF) now before Parliament for adoption. The
LOLF will help to strengthen the system by enshrining the programme-based budget logic, the three-year multi-
year budget planning and the performance culture. This logic will be applied to State structures and public
enterprises and establishments (PEEs). The Head of Government issued a circular dated 12 June 2014 to announce
the rollout of the performance-based budget approach. Nine (9) ministerial departments have already prepared
programme budgets and draft performance plans within the context of the 2015 Finance Act.
5.2.18. Programme activities and expected outcomes: Provision has been made to extend the use of
programme budgeting and preparation of draft performance plans to more ministerial departments. In 2015,
PACEM will principally support the extension of programme-based public budgeting to 15 departments already
using programme-based budgets, within the framework of preparing the 2016 Finance Bill and as a precursor to
LOLF. This measure will be taken jointly by the Bank and the World Bank. Furthermore, since 2012, the
Government has been preparing a gender-responsive budget report to accompany the Finance Act. Within the
PACEM framework, plans have been made to reflect the regional dimension in the gender-responsive budget report
that will accompany the 2016 Finance Act. It is also expected that in 2016, the Council of Ministers will adopt the
draft decree on preparation and execution of finance acts, making the preparation of draft performance plans and
the related monitoring/evaluation system mandatory for departments pioneering the LOLF rollout. The programme
budgeting approach allows public resource budgeting for objective-based programmes, thus contributing to
improving the transparency and performance of public policy. As such, for various key sector departments such as
infrastructure, energy or education, public investment will be more efficient and will contribute to improving the
competitiveness of the economy.
Sub-component II.3 – Strengthen the National Public Procurement System
5.2.19. Problems and constraints: Major challenges persist in connection with public procurement, especially:
(a) financing and access to public procurement by small- and medium-sized enterprises; (b) the existence of an
independent recourse and grievance management mechanism that system actors trust; (c) the overlap of
implementation and regulatory functions; (d) the lack of capacity in technical ministries, and the lack of clear
guidelines on the way in which public procurement is aligned with the budget planning process in ministries.
5.2.20. Recent measures adopted by the Government: The Government adopted a new decree on public
procurement in March 2013 (effective since 01/01/14) to correct certain weaknesses noted in the previous decree,
improve the legal and regulatory framework, strengthen its integrity, introduce modern tools (e.g. online
procurement) and broaden its scope of application (to the entire public sector, including public enterprises and local
governments). In March 2014, the Government issued an Order on mobilization fees and in 2015, Parliament passed
a bill on collaterals. The two texts facilitate SME financing and access to public procurement. Furthermore, the
adoption of Order No. 1872-13 concerning publication of documents and information on the public procurement
portal helped to guarantee equal access to information and contributed to strengthening transparency (mandatory
online publication of bid planning, business opportunities and bid outcomes).
5.2.21. Programme activities and expected outcomes: PACEM will support the implementation of the national
public procurement system reform particularly through: (i) the adoption by the Council of Minister of the Decree
establishing the National Public Procurement Commission charged with resources and grievance management; (ii)
14
the issuance of the Order dematerialising public procurements; and (iii) the issuance of the Order implementing the
law on public procurement collaterals. These measures will be taken jointly by the Bank and the World Bank.
Reforms supported will help to strengthen integrity, transparency and competition, as well as ensure the optimal
use of resources and enhanced public procurement control. All these factors will help to improve public investment
efficiency and strengthen economic competitiveness.
5.3. Policy Dialogue
5.3.1. PACEM is crucial for consolidating dialogue with the authorities to diagnose constraints to growth
and reforms implemented under PARGEF (2012-2013), especially with regard to improving transparency and
performance in public investment management, and strengthening the national public procurement system.
Dialogue will be sustained through technical assistance operations, particularly for implementing the PPP
framework and increasing the flexibility of exchange operations. Dialogue with the Moroccan authorities is
conducted transparently and consultatively, as was the case during the implementation of reforms in earlier policy-
based operations. Moreover, this dialogue has resulted in substantial progress in budget implementation
transparency, especially in connection with public procurement reforms, thanks to which the Bank has opted to
progressively make use of the national system. Policy dialogue was also conducted as part of enhanced
coordination mechanisms with other development partners, especially the World Bank and the European Union.
5.4. Loan Conditions
5.4.1. Measures precedent: Following dialogue with the Government, it undertook to roll out a series of
measures prior to PACEM’s presentation to Bank Group Board of Directors. These measures were selected based
on their status of progress and structuring nature. As such, it would be possible to implement them prior to the Board
meeting. The said measures are presented in the table below.
Table 5: Measures Precedent to Board Presentation
Component Measures Precedent
Component I Adoption of the 2015 Action Plan by the National Business Climate Commission’s Steering Committee
MEF’s letter forwarding the letter from the Head of Government attesting to the adoption of the 2015 Action Plan by the
CNEA Steering Committee
Component I Adoption of the Decree on reimbursement of the accumulated VAT credit (2004-2013) to businesses
MEF’s letter forwarding the adopted Decree on reimbursement of the accumulated VAT
Component II Adoption by the Council of Ministers of the Decree implementing the Law on public-private partnerships - PPPs
MEF’s letter forwarding the report of the meeting of the Council of Ministers during which the decree on PPPs was approved
Component II Issuance of the Order dematerialising public procurements
MEF’s letter forwarding the Order dematerialising public procurements
5.5. Good Practice Principles for the Application of Conditionality
5.5.1. In designing PACEM and in line with Bank policy on programme-based operations (PBOs), the
five good practice principles for the application of conditionality were followed: (i) ownership, given the fact
that the Programme is designed with the active collaboration of the authorities; (ii) existence of active coordination
among TFPs; (iii) alignment of the Bank’s support on national priorities; (iv) reduced number of conditions
precedent to Board presentation; and (v) alignment of Bank’s support on the country’s budgetary cycle, especially
the 2015 fiscal year.
5.6. Financing Needs and Mechanisms
5.6.1. Based on estimates, the financing needs of the Treasury of the Kingdom of Morocco for 2015 stand
at approximately MAD 103.789 billion, i.e. about USD 10.66 billion (see table below). These needs will be
covered by Morocco’s own resources and external financing. The external resource needs amount to MAD 24.35
billion (USD 2.5 billion). Coverage of the external financing needs would be provided through loans obtained for
investment projects and reform programmes. The loan for PACEM amounting to USD 112.5 million (MAD 1.072
billion) represents nearly 4.4% of the external resource needs for 2015. Moreover, the budget support will represent
2.8% of the balance of payments financing needs
.
15
Table 6: Estimated Financing Needs and Sources (in MAD billion) Chapters 2015 (MAD million) 2015 (USD million)
A Total receipts and grants 213 114 22 374,2
Including: grants (excluding budget support) 13 000 1 364,8
B Total net expenditure and loans 316 903 33 270,7
Including: interest payments 26 560 2 788,5
Including: capital expenditure (*) 54 091 5 678,8
C Overall balance (cash basis) (A - B) -103 789 -10 896,5
D Arrears accumulation 0 0,0
E Overall balance (commitment basis) (C + D) -103 789 -10 896,5
F External financing (net – minus Bank’s contribution) 23 278 2 443,9
G Domestic financing (net) 42 000 4 409,4
H Bank’s contribution 1 072 112,5
I Financing (F + G+H) 66 350 6 965,9
O Residual financing gap -37 439 -3 930,6
Source: 2015 Finance Act; A: Budgetary income excluding borrowing, plus grants; B: including loan repayments; (*) Appropriations
for investment; F: Gross long- and medium-term financing minus AfDB contribution of MAD 1072 million; G: Gross long- and medium-term
domestic financing
5.7. Application of Bank Group’s Policy on Non-Concessional Debt Accumulation
5.7.1. Morocco is a middle-income country according to Bank classification and is therefore eligible for ADB-
window resources. The country has received several sovereign loans from the Bank and other technical and
financial partners to fund policy-based programmes and structuring investment projects. Furthermore, Morocco
resorts to external finance mobilisation through bond issue on the international financial market, based on a prudent
debt management strategy. Its recent forays into the international market were crowned with success, especially
thanks to the “investment grade” category ratings awarded by two agencies (Standard & Poor’s and Fitch Ratings).
In 2014, Morocco launched a EUR 1 billion bond issue on the financial market at 10-year maturity and 3.5% interest
rate.
VI. IMPLEMENTATION
6.1. Programme Beneficiaries
PACEM will benefit the entire Moroccan population by improving competitiveness that will underpin
growth and job creation. Specifically, it will benefit: (i) Moroccan SMEs that will witness the lifting of several
constraints hampering the development of their activities, especially provision of public procurement collaterals and
additional incentives to employ workers; (ii) major project investors, who will have a more transparent and
encouraging framework for investment and negotiation, as well as a clear system for PPPs; (iii) informal sector
workers and the unemployed, mostly women, who will make the most of the tax amnesty and the new incentives
system set up as part of the sole proprietor arrangement.
6.2. Impact on Gender, the Poor and Vulnerable Groups
PACEM supports crosscutting reforms of concern to both women and men. In this regard, two major levers
supported under PACEM will contribute to reducing gender inequalities: promotion of the sole-proprietor status
and preparation of results-based gender-sensitive programme budgeting (see Technical Annex 9). The sole
proprietor status proposes an integrated monitoring and training, tax simplification and social security framework.
This framework should enable informal sector workers (a good percentage of which women) to join the formal
sector, organise their professional activities with a view to developing them, and thus improve their income and
living standard. Although it is difficult to precisely evaluate the activities of women and youths in Morocco’s
informal sector, the National Survey on the Informal Sector (2007) indicated that women and youths aged 35 and
below accounted for 10% and 31.5% of employment in that sector, respectively (out of 1.55 million informal units).
Therefore, this population would be able to benefit from the sole proprietor status and make the best of the
advantages offered by that status, especially medical insurance coverage and the possibility of having access to
financing. With regard to results-based programme budgeting, the goal is to improve public investment efficiency
in order to meet the expectations of the population and the private sector. This justifies PACEM’s impact on gender
promotion. Hence, the budgets of ministerial departments will be drawn around gender-sensitive programme
objectives. Thanks to this, the distinctive interests of women, men, girls and boys will be given consideration during
16
the design, implementation and evaluation of public policies.
6.3. Impact on the Environment and Climate Change
PACEM is a budget support operation targeting reforms, with no direct impact on the environment and
climate change (Category III). Morocco was classified 9th globally among the best countries in terms of
environmental and climate protection, according to Climate Change Performance Index 2015 prepared by the
Climate Action Network (Europe).
6.4. Impact on Other Areas
PACEM will contribute to improve transparency and efficiency in budget resource allocation. Through
objective-based programme budgeting supported by PACEM, public resources will be strategically allocated to not
only meet the population’s expectations in terms of access to basic public and social services, but also those of the
private sector as regards access to public infrastructure.
6.5. Implementation, Monitoring and Evaluation
6.5.1. The Ministry of Economy and Finance (Treasury and External Finance Directorate) will be
responsible for implementing the programme. The same ministry satisfactorily implemented the three phases of
PADESFI over the 2009-2014 period. It also has the capacity to mobilise various stakeholder participating in the
programme, including employers’ representatives, for consultation, coordination and reporting on the
implementation of programme measures. The agreed macroeconomic monitoring framework and the matrix of
measures will be the common frameworks for monitoring and evaluating PACEM (Annex 2). MEF will be charged
with collecting data and coordinating monitoring/evaluation, and will put the information so gathered at the Bank’s
disposal. Plans have been made to field missions in the course of PACEM execution to evaluate the status of
implementation. The Morocco Field Office will continuously monitor reforms implementation under the
programme. At the end of the programme, a completion report will be prepared jointly with the Government.
6.6. Financial Management, Disbursement and Procurement
6.6.1. Evaluation of the country’s fiduciary risk: The Bank issued an update on the public finance management
fiduciary risks in June 2014 during the CSP 2012-2016 mid-term review. It concluded that the country’s overall
fiduciary risk was moderate generally due to the satisfactory public finance management (budget planning and
budgeting, budget implementation control, management accounting and preparation of reports, review and external
auditing). The outcome of previous reviews, PEFA (2009), CFAA (2007) and CPAR (2008), as well as the public
expenditure review reached the same conclusion. However, the few weaknessesxiv noted (planning, preparation of
reports, etc.) enabled Morocco to further prime its entire readiness to put the LOLF reforms in place. To comply
with the effectiveness date set following various LOLF reforms, Morocco initiated and/or formalised a number of
reforms of the regulatory and implementing texts in anticipation, including those on: (i) budget programming and
multi-year programming; (ii) the limited nature of staff appropriations; (iii) certification of the accuracy and
reliability of State accounts by the Court of Accounts; (iv) annual performance drafts and reports, and performance
audit; and (v) programme-based nomenclature of the State capital budget. Crosscutting reforms meant to
accompany the LOLF have already been implemented, especially the establishment of a new public finance
management monitoring committee in Parliament.
6.6.2. Financial management and disbursement mechanisms: Given the nature of the operation (general
budget support for PACEM implementation), the financial resources will be used in accordance with national public
finance regulations. Through the single-tranche disbursement in 2015, this budget support will help to cover the
2015 budget deficit, the excess of expenditure over resources of which is 10%. In this regard, the Ministry of
Economy and Finance will be responsible for managing the operation’s financial resources.
6.6.3. The UA 80 million loan will be disbursed in one tranche, subject to the Borrower’s fulfilment of the
17
general and special conditions governing the operation (see §7.2.2). At the Borrower’s request, the Bank shall
disburse the resources in foreign currencies into an account in the Central Bank of Morocco (Bank Al Maghrib),
which in turn will credit the single treasury account (STA) with the equivalent of the resources received in local
currency. The Bank’s disbursement will be made for the 2015 financial year. Within 30 days following the
disbursement, MEF will provide the Bank with a letter confirming the transfer, indicating that the total loan amount
was received, accompanied with the notice of transaction issued by Bank Al Maghrib. The flow of funds (including
foreign exchange transactions and transfer timeframes) will be subject to standard public finance procedures.
6.6.4. The Government makes a yearly submission of the Audited Accounts on the Finance Act to Parliament
within two years following the execution of the relevant Finance Act. The Audited Accounts are accompanied with
a report of the Court of Accounts on the execution of the Finance Act and the general declaration of conformity
between the management accounts and the Kingdom’s general account.
6.6.5. PACEM’s internal audit will use the national ex-post internal audit mechanism used by the Inspectorate
General of Finance (IGF). IGF will conduct a special audit of the financial flows related to the Bank’s operation
and a performance audit of PACEM. The IGF shall submit the report on the special audit and the performance audit
to the Bank within six months following PACEM’s completion.
6.6.6. Procurement: The Moroccan public procurement system has witnessed several qualitative reforms
in the past decade. The dynamism infused by successive reforms demonstrates the desire of national authorities to
modernise and constantly improve the legislative and regulatory framework of public procurements in Morocco to
bring it up to international standards. Public procurements are currently governed by Decree No. 2-12-349 of 30
March 2013. The Bank conducted an assessment of national procedures in 2011-2012, with a view to using them.
The evaluation determined a number of national procedures acceptable to the Bank and led to the signing of the
first Letter of Agreement (with the Bank) in May 2013 on the use of Moroccan procedures to conduct local
competitive bidding (LCB) for good and works financed by the Bank. Apart from the Bank, many institutionsxv
also conducted several assessments in recent years. All of them concluded that the national system was satisfactory
overall, but also identified areas needing improvement, many of which have recently been addressed or are ongoing.
In this regard, the following is worth mentioning: (i) effectiveness from 1 January 2014 of the new Decree No. 2-
12-349 of 30 March 2013 on public procurements, which introduced major innovations particularly on: (a) partial
unification of the regulatory framework; (b) simplification and clarification of procedures; (c) improvement of the
recourse and grievance mechanism; (d) introduction of modern mechanisms into the regulatory framework (for
instance e-procurement) to improve efficiency and transparency; (ii) the right of access to public information and
promotion of good governance, transparency and integrity in public procurements enshrined in the new constitution.
Over the period covered by this budget support operation, the Government has undertaken to implement a series of
actions to operationalize the objectives mentioned earlier (see §5.2.20). In conclusion, the new public procurement
decree, its implementing texts and the fiduciary environment observed in Morocco guarantee a transparent use of
resources released for this operation, thanks to the clear, transparent and acceptable procurement procedures and a
reassuring control mechanism.
VII. LEGAL INSTRUMENT AND AUTHORITY
7.1. Legal Instrument
7.1.1. The Loan Agreement shall the legal instrument used in the context of this programme. Parties to this
Agreement are the African Development Bank and the Kingdom of Morocco.
7.1.2. Conditions precedent to loan effectiveness: loan effectiveness shall be subject to fulfilment of conditions
set forth under Section 12.1 of the General Conditions Applicable to Loan Agreements.
7.2. Conditions Associated with Bank Intervention
18
7.2.1. Conditions precedent to programme presentation to the Board: Following dialogue with the
Government, it was understood that the Government will implement the measures precedent, prior to programme
presentation to the Bank’s Board of Directors. Progress has been made in fulfilling these conditions precedent listed
in Table 5.
7.2.2. Conditions precedent to disbursement: The disbursement of the single loan tranche amounting to USD
112.5 million, shall be subject to fulfilment of the following condition precedent:
Forward to the Bank acceptable proof of the existence of a Treasury account opened at Bank Al Maghrib (Central
Bank of Morocco), into which loan resources will be paid.
7.3. Compliance with Bank Group Policies
7.3.1. The main Bank Group Guidelines and other directives applicable to this Programme include: (i)
Guidelines on Programme-Based Operations (2012); and (ii) Guidelines on Flexibility and Billing of Financial
Products in Favour of MICs (2009). No waiver of these Guidelines is requested for this proposal.
VIII RISK MANAGEMENT
8.1. Several major risks could hamper the attainment of programme outcomes and could emanate, on
the one hand, from: (i) an unfavourable international economic situation and the negative impact of climate
variations on the Moroccan economy; and (ii) a flagging political will to implement programme measures due to
other political priorities. Such other priorities could change Government’s reform agenda to the detriment of
PACEM measures. There is also another risk related to: (iii) inadequate coordination among various ministerial
departments involved in PACEM reforms.
8.2. Concerning mitigation measures, the Moroccan Government has already taken the necessary
measures to anticipate and tackle these risks. As regards the risk resulting from unfavourable international
economic situation or climate variations, key structures have been put in place to prevent and anticipate major risks.
To this end, a Monitoring Committee headed by the Minister of Economy and Finance was set up to keep an eye
on the Kingdom’s budgetary trend. Concerning mitigating the negative impact of climate variations on the
Moroccan economy, the implementation of the Green Morocco Plan (supported by the Bank) will contribute to
strengthen the resilience of the economy to these variations. As for the risk of flagging political will, the highest
authorities voiced their commitment to implement structural reforms in order to improve the competitiveness of the
economy. Regarding the last risk related to the coordination of reforms implementation, the DTFE which is
responsible for monitoring programme implementation, demonstrated its capacity during previous programmes to
mobilise different stakeholders.
IX. RECOMMENDATION
It is recommended that the Board approve an African Development Bank loan not exceeding USD 112.5 million
to the Kingdom of Morocco for financing the Economic Competitiveness Support Programme (PACEM) as
described in this appraisal report.
ANNEX I
Page 1 /4
LETTER OF DEVELOPMENT POLICY
[stamped: 29 May 2015]
To: Donald Kaberuka,
President of the African Development Bank
Immeuble CCIA, Plateau District
Avenue Jean-Paul II
01 B.P.1387 – Abidjan 01
Côte d’Ivoire
Subject: Development Policy on Morocco’s Economic Competitiveness Support Programme.
Mr. President,
The Kingdom of Morocco is firmly committed to an ongoing process of building a strong,
inclusive, wealth-creating and employment-generating national economy. Morocco remains
engaged on the path of reforms in order to leverage growth opportunities in a context of
openness to the outside world and integration in international markets by improving the
competitiveness of Moroccan businesses.
This approach was retained under the Government programme for the period 2012-2016, by
which the Government is committed to further deepen economic and sector reforms while
increasingly focusing on strengthening the competitiveness of the overall Moroccan economy.
In this context, I would like to note that, during the 2014 mid-term review of the Country
Strategy Paper (CSP) for 2012-2016, additional emphasis was laid on competitiveness under
the two focus areas retained in the said CSP, namely (i) strengthening of governance and social
inclusion, and (ii) support for green infrastructure development.
In this respect, and as in previous successful programmes in other highly strategic and priority
sectors of the Moroccan economy, we seek your institution’s support and backing for the
implementation of a new competitiveness support programme, which will build on the
following main objectives:
1. Removing constraints on private investment, especially those relating to the
legal business framework, integration of the informal sector, consistency of tax
incentives and the fight against corruption;
2. Improving public investment efficiency, in particular, by enhancing the
governance of businesses and public institutions which are the main bearers of
infrastructure development, implementation of programme- and results-based
sector budgets, and improvement of public procurement management.
These two objectives are reflected in the two pillars of the competitiveness support
programme proposed for financing by your institution.
Pillar 1: Improve Private Sector Investment Climate
This pillar focuses on three strategic objectives, namely: (i) strengthening the private
investment legal framework; (ii) improving the corporate business climate; and (iii) supporting
entrepreneurship, formalization of informal business activities and job creation.
Page 2/4
Regarding the strengthening of the legal framework governing private
investment, the Government undertakes to continue efforts already made to
reform Law No. 18-95 on the Investment Charter, with a view, in particular,
to improving the attractiveness and competitiveness of the Moroccan economy,
simplifying procedures, reducing the time taken for the administrative
processing of projects, and developing and strengthening the economy’s
productive fabric.
Therefore, in order to contribute to improving the effectiveness of public assistance to
investment, the Head of Government will issue a circular laying down guidelines for the
costs-benefits assessment of investment agreements.
Similarly, in continuation of Government’s efforts to increase the attractiveness of
investments, both in terms of the contractual regime and common law, the investment
threshold, under the contractual regime, shall be lowered from 200 million dirhams to 100
million dirhams, for business start-ups for up to 36 months.
Moreover, given the importance that the Government attaches to the fight against corruption,
works on the preparation of an anti-corruption strategy started in 2014. Accordingly, the
draft anti-corruption strategy is expected to be adopted by the National Anti-corruption
Commission in 2015 and an action plan for the implementation of this strategy by the end of
2016.
Regarding improvement of the corporate business climate, Government
action focuses, in particular, on the following:
Strengthening coordination between public and private stakeholders
through simplification of administrative procedures and enhancement of
the business legal framework. As such, the 2015 Action Plan of the
National Business Environment Commission (CNEA) includes the
abovementioned elements identified jointly by the public and private
sectors.
Therefore, with a view to increasing transparency and simplifying access
to business information by all administrative bodies concerned and non-
government users, the Inter-ministerial Common Business Identifier (CBI)
Management Committee designated the Directorate General of Taxation to
ensure operationalization of the central database of the identifier and to host
its management and operation.
Improvement of judicial system efficiency as part of the resolution of
commercial disputes, through the introduction of flexible mechanisms for
out-of-court conflict settlement in order to circumvent the shortcomings and
bottlenecks of the current system. In this regard, arbitration and
conventional mediation are some of Government’s priorities, along with the
reform of Section V of the Commercial Code relating to firms in difficulty,
based on the principle of salvaging companies to reduce the risks to their
environments, particularly creditors’ rights.
Improvement in the corporate liquidity, notably through the continuation of
tax reform by implementing the recommendations of the National
Conference on Taxation held in 2013, including those relating to VAT credit
accumulated within the framework of the “Buffer”.
Page 3/4
Improving the flexibility of exchange operations, by overhauling the
exchange operations framework. The new law governing these operations
groups together all legislation in this area into one instrument. The new law
enshrines the principle of freedom of exchange operations, and includes
other additions notably, the definition of terms to avoid problems of
interpretation and the implementation of a well-defined framework on
infringements.
With regard to support for entrepreneurship, formalization of informal
commercial activities and job creation, Government action focuses on the
following:
Reduction of the informal sector by minimizing costs and simplifying
administrative procedures associated with individual business start-ups. In
this context, Law No. 114-13 on the status of the Sole Proprietor, adopted
by Parliament, provides a simplified legal status to the Sole Proprietor. As
such, the implementing decrees of this Law will be adopted by the Council
of Ministers before the end of 2015. It is worth noting that the Sole
Proprietor, having been registered in the national sole proprietors’ register,
will enjoy a set of benefits, in particular, in terms of the tax regime and
social and medical coverage.
In order to foster informal sector formalization, the tax amnesty for
businesses moving from the informal to the formal sector will be extended
until the end of 2016.
Promoting job creation through reduced payroll charges for business start-
ups, by the introduction of income tax exemption for up to five employees,
with a salary cap of MAD 10 000.
Pillar 2: Improving public investment efficiency
This pillar focuses on: (i) improving the public investment governance framework; (ii)
improving public resource allocation efficiency; and (iii) strengthening the national public
procurement system.
Concerning improvement of the public investment governance framework,
Government action consists in:
The enactment of instruments allowing for greater efficiency, speed and
transparency such as the bill on public-private partnerships (PPP) that
specifies a unified and incentive framework designed to strengthen the
involvement of private operators in the development of public projects.
The implementing decree of this Law was adopted in May 2015 by the Council of Ministers.
In this context, there are plans to establish a National PPP Commission that will be in charge,
in particular, of prior appraisal of PPP projects.
Extension of application of the Moroccan of Good Corporate Governance
Practices Code, from 9 PEEs in 2014 to 15 in 2015.
Regarding the improvement of results- and performance-based public
resource allocation efficiency and with a view to implementing the provisions
of the new Organic Law on Finance Acts, Government intervention will concern
the following:
Extension of programme-based budgeting to 15 Ministries, using
programme budgeting in the preparation of the 2016 Finance Act.
Consideration of the regional dimension in the gender-sensitive budget
reports to accompany the 2016 Finance Bill.
Page 4 /4
In connection with multi-year programming, the decree relating to the
preparation and enforcement of finance acts establishing the requirement
to produce the performance plan and its evaluation system for the
pioneering Ministries under the aforementioned Organic Law, will be
adopted by the Council of Ministers in 2016.
In terms of strengthening the national procurement system, Government
support will focus on the following aspects:
Increased transparency in business relations between the state and the
private sector through the adoption, in 2015, of the decree establishing the
National Public Procurement Commission, expected to go operational
before the end of 2016.
Facilitation of access to public procurement through the adoption, in 2015,
of the Order on e-procurement. The adoption of this decree, applicable
from 1 January 2015, will allow for significant savings.
Issuance of the Order to implement the Law on public procurement
security, which mainly aims to secure the rules and procedures of setting
up security for public contracts, updating and adaptation of the public
procurement guarantee mechanism to the changing administration and
business environment, and strengthening of the right to information for the
beneficiary of the security.
Mr. President, these are the main thrusts of the new Morocco’s Economic Competitiveness
Support Programme which is also supported by the World Bank.
Thank you in advance for your invaluable support towards the implementation of this ambitious
programme
Yours faithfully,
ANNEX II
Page 1 / 4
MOROCCO - ECONOMIC COMPETITIVENESS SUPPORT PROGRAMME - PACEM
MATRIX OF MEASURES
Data Sources: DS; Institutions Responsible: RI (*) Measure precedent to PACEM presentation to the Board of Directors; (Σ) Joint Action with the World Bank).
Objectives Indicative measurements in 2015 Indicative measurements in
2016
Output Indicators Outcome Indicators RI / DS
I. Improve the Private Investment Climate
I.1. Strengthen the Private Investment Legal Framework
Improve transparency
and attractiveness of
the investment
framework
Submission of the Investment Bill to
the Secretariat General of the
Government (SGG)
Adoption of the Investment Bill by
the Council of Ministers of
Ministers
The Investment Bill is submitted to SGG
before the end of 2015 and adopted by
the Council of Ministers before end-
2016
The Global
Competitiveness Index
is improved from 4.11 in
2013-2014 to 4.21
points in 2015-2016
RI: AMDI
DS: Forwarding
Letter to the SGG
Adoption by the Council of
Ministers of the Decree of
implementation of the Investment
Law
The Decree of implementation of the
Finance Act is adopted by the Council of
Ministers before the end of 2016
RI: AMDI
DS: Council of
Ministers’ Report
Improve public
investment efficiency
Issuance by the Head of
Government of a Circular on the
cost/benefit analysis of investment
agreements (Σ)
Circular on the cost/benefit analysis of
investment agreements is issued by the
Head of the Government before the end
of 2015
The 2-point increase in
industrial share of GDP,
from 14% in 2014 to
16% in 2016
RI: AMDI
DS: Prime Minister’s
Circular
Lowering of the investment
threshold, under the contractual
regime, from MAD 200 million to
MAD 100 million for business start-
ups, for a period of 36 months
The threshold for investments eligible
for VAT exemption lowered before end-
2015 for a period of 36 months, as part
of investment agreements, from 200 to
100 million dirhams
RI: Directorate of
Taxation
DS: 2015 Finance Act
Strengthen anti-
corruption efforts
Adoption of the national anti-
corruption plan by the National
Anti-Corruption Commission
(CNAC) chaired by the Head of
Government,
The national anti-corruption strategy is
adopted by CNAC before end 2015
RI: MFPMA
DS: Minutes of the
CNAC meeting
Adoption of the national anti-
corruption strategy
implementation plan by the
National Anti-Corruption
Commission (CNAC), chaired by
the Head of Government
The national anti-corruption strategy
implementation plan adopted by the
CNAC before end-2016
RI: MFPMA
DS: meeting of the
CNAC
ANNEX II
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I.2. Improve the Corporate Business Climate
Strengthen
coordination between
public and private
stakeholders to
improve the business
climate
Adoption by the steering
committee of the 2015 of the
National Business Environment
Committee (CNEA) Action Plan (Σ) (*)
The 2015 National Business
Environment Action Plan built on 21
projects adopted by the Steering
Committee before the end of 2015
RI: CNEA
DS: Letter confirming
the CNEA adoption
Operationalisation of the Common
Business Identifier (CBI) database
pursuant to Decree No. 2-11-63 of
2012 (Σ)
CBI is operational before the end of
2015
Number of companies
registered in the CBI
(500,000 in 2016:
200,000 legal entities
and 30,000 individuals)
RI: DGI
DS: MEF letter
confirming the
operationalization of
CBI
Improve judicial
system efficiency for
business
Submission of Bill on arbitration and
conventional mediation to SGG
The Bill on arbitration and conventional
mediation is forwarded to the SGG
before end -2015
RI: MJ
DS: forwarding letter
to the SGG
Adoption by the Council of
Ministers of the bill amending
Section V of the Commercial
Code relating to the procedures for
the prevention and handling of
business issues
The bill amending Section V of the
Commercial Code relating to the
procedures for the prevention and
handling of business issues is adopted by
the Council of Ministers before end-
2016
RI: MJ
DS: Council of
Ministers’ Report
Improve corporate
liquidity and flexibility
of exchange operations
Adoption of the Decree on the
refund of accumulated VAT credit
(2004-2013 period) for companies
(*)
The Decree on the refund of
accumulated credit VAT (2004-2013
period) is adopted before end-2015
RI: DGI
DS: Decree on the
“Buffer”
Adoption by the Council of
Ministers of the Bill governing
exchange operations
Bill governing exchange operations is
adopted by the Council of Ministers
before end -2016
RI: DTFE
DS: Report of the
Council of Ministers
I.3. Support Entrepreneurship, Formalization of Informal Sector Activities and Job Creation
Broaden the
entrepreneurship base
Adoption by the Council of
Ministers of the two decrees
implementing the law on the status
of the sole proprietor
The two decrees implementing the law
on the status of the sole proprietor are
adopted by the Council of Ministers
before end -2015
At least 5000 persons
registered as sole
proprietors monitored
by the ANPME (30%
women) by the end of
2016
RI: ANPME
DS: Letter from MEF
forwarding copies of
Council of Ministers’
reports
Establishment of a support
mechanism for sole proprietors
The support mechanism for sole
proprietors is in place before the end of
2016
RI: ANPME
DS: Descriptive
record of mechanism
ANNEX II
Page 3 / 4
Encourage
formalization of the
informal sector
Extension of the tax amnesty for
businesses switching from the
informal to the formal sector up to
the end of 2016
The tax amnesty for businesses moving
from the informal to the formal sector is
extended
Increased number of
beneficiaries of the tax
amnesty from 28,000
beneficiaries at the end
2014 to 40,000
beneficiaries at the end
of 2016
RI: Directorate of
Taxes
DS: 2015 and 2016
Finance Acts
Promote job creation Reduced payroll costs through the
introduction of income tax
exemption for up to five employees
with a salary cap of MAD 10,000,
for business start-ups
Income tax exemption for business
start-ups (maximum of five employees
with a salary cap of MAD 10000) is
introduced before end-2015
RI: Directorate of
Taxation
DS: 2015 Finance Act
II. Improve Public Investment Efficiency
II.1. Improve the Public Investment Governance Framework
Improve public
investment governance
Adoption by the Council of
Ministers of the Decree
implementing the Public Private
Partnerships Law - PPP (86.12) (Σ) (*)
The Decree to implement the Public-
Private Partnerships Law - PPP (86.12)
is adopted by the Council of Ministers
before end-2015
Global competitiveness
index, adjusted for
social sustainability, is
improved from a score
of 3.71 in 2013-2014 to
3.91 in 2015-2016
RI: DEPP
DS: Council of
Ministers’ Report
Publication of the decision
establishing the National PPP
Commission.
The decision establishing the National
PPPs Commission is published before
the end of 2016
RI: DEPP
DS: Decision
establishing the
Commission
Strengthening of good governance
in PEEs by an increase in the number
of PEE implementing the Moroccan
Good Governance Practices Code,
from 9 PEEs in 2014, to 15 in 2015 (Σ)
Moroccan Good Governance Practices
Code for Public Establishments and
Enterprises is implemented by 6 more
PEEs (from 9 in 2014 to 15 in 2015)
before end-2015
RI: DEPP
DS: List of PEEs
implementing the
Moroccan Good
Governance Practices
Code
II.2. Improve Public Resource Allocation Effectiveness
Improve results- and
performance-based
public resource
allocation
Extension of programme-based
public budgeting as part of LOLF
pioneering to 15 Ministries using
programme budgeting as part of
preparation of the 2016 Finance Bill (Σ)
Programme-based public budgeting as
part of LOLF pioneering is used by 15
Ministries before end -2015
PEFA PI 11 Indicator
concerning public
investment management
RI: DB
DS: Draft Finance
Act 2016
Consideration of the regional
dimension in the gender-sensitive
budget report to accompany the
2016 Finance Bill
The gender-sensitive budget report,
including aspects of regionalization, is
prepared and accompanies the 2016
Finance Bill
RI: DEPF
DS: Gender Report
Adoption by the Council of
Ministers of the draft decree on the
The decree concerning the drawing up
and implementation of Finance Acts is
RI: DB
DS: Decree on the
ANNEX II
Page 4 / 4
preparation and enforcement of
Finance Acts, establishing the
requirement to produce a
performance plan and its
monitoring system for the LOLF-
pioneering Ministries
adopted by the Council of Ministers
before the end of 2016
preparation and
enforcement of
Finance Acts
II.3. Strengthen the National Public-Procurement System
Enhance transparency
in business relations
between the state and
the private sector
Adoption by the Council of
Ministers of the decree establishing
the National Public Procurement
Commission (Σ)
The decree establishing the National
Public Procurement Commission is
adopted by the Council of Ministers
before end -2015
Improvement of the
PEFA PI-23 indicator
(new) on competition,
optimal resource use and
monitoring of public
procurement, from
Score B in 2009 to Score
A for PEFA 2016
RI: GGS
DS: Council of
Ministers meeting
report
Operationalization of the National
Public Procurement Commission
The National Public Procurement
Commission is operational before the
end of 2016
RI: GGS
DS: Report of the first
meeting of the CNCP
Facilitate access to
public procurement
Issuance of the Order on e-
procurement (*)
The order on e-procurement is issued
before the end of 2015
RI: National General
Treasury
DS: Decree on e-
procurement
Issuance of the order to implement
the law on public procurement
security
The order implementing the public-
procurement security Law is issued
before the end of 2016
RI: TGR
DS: Decree on
implementation of the
Public Procurement
Security Law
ANNEX III
NOTE ON RELATIONS WITH THE IMF
IMF Executive Board Concludes First Review of the Precautionary and Liquidity Line for Morocco
Press release 15/39 - February 2015
On February 6, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the first
review of Morocco’s economic performance under a program supported by a 24-month Precautionary
Liquidity Line (PLL) arrangement. The PLL was approved in July 2014 in an amount equivalent to SDR
3.23 billion (about US$5 billion or 550 percent of Morocco’s quota at the IMF).
The access under the arrangement in the first year will be equivalent to SDR 2.9 billion (about US$4.5
billion), rising in the second year to a cumulative US$5 billion. Morocco’s first 2-year PLL arrangement
was approved on August 2, 2012.
The Moroccan authorities have stated that they intend to treat the arrangement as precautionary, as they
have done with the 2012 PLL, and do not intend to draw under the arrangement unless Morocco
experiences actual balance of payments needs from a significant deterioration of external conditions.
The PLL was introduced in 2011 to meet more flexibly the liquidity needs of member countries with sound
economic fundamentals and strong records of policy implementation but with some remaining
vulnerabilities.
Following the Executive Board discussion on Morocco, Mr. Naoyuki Shinohara, IMF Deputy Managing
Director and Acting Chair of the Board, made the following statement:
“Despite headwinds from external environment, decisive policy action by the authorities has helped in
rebalancing Morocco’s economy and in reducing fiscal and external vulnerabilities. Nonetheless,
significant external risks remain and sustained implementation of reforms is essential to consolidate gains
in macroeconomic stability and foster higher and more inclusive growth. The arrangement under the
Fund’s Precautionary and Liquidity Line (PLL), which the authorities treat as precautionary, has supported
the authorities’ efforts by providing an insurance against those risks.
International Monetary Fund 700 19th Street, NW Washington, D. C. 20431 USA 2 “The fiscal deficit
declined in 2014 and reached the authorities’ objective of 4.9 percent of GDP. Commendable progress
was made in subsidy reform with the removal of subsidies on all liquid petroleum products, while support
to the most vulnerable was expanded. The new organic budget law is expected to strengthen the budgetary
framework once comments from the constitutional council have been addressed. The parametric reform
of the public pension system is urgent to ensure the viability of the system. Continued tax reform is also
important to bolster the contribution of the fiscal sector to growth.
“The current account deficit contracted significantly in 2014 while the reserve position strengthened,
benefiting mainly from the rise in newly developed export sectors and a positive terms-of-trade shock
following the fall in international oil prices. To sustain these gains, structural reforms to enhance
competitiveness continue to be a priority. A transition to a more flexible exchange rate regime would also
help. The business environment has improved but much remains to be done to enhance transparency and
governance. The new banking law is welcome to support the continued soundness of the banking sector.
The labor market needs further reform to help reduce unemployment.”
END NOTES
i Growth Diagnosis 2014, prepared by the African Development Bank, the MCC and the Moroccan Government. ii Hakama: Good governance iii The municipal and regional elections of prefecture and provincial councils, the House of Councillors, and professional chambers and employee
representatives, should take place by end-2015. iv In 2014, the Court of Auditors published several important reports, including ones on the compensation system, the funding of political parties and debt
management. v Wall Street Journal and the Heritage Foundation. vi This objective of a 3% deficit, initially scheduled for 2017, could be achieved in the second half of 2016, thanks to the continued fall in oil prices. vii National Moroccan Statistics Office (High Commission for Planning - HCP). viii This index is 0.91 in developed countries. ix The Government is also implementing several other sector strategies to improve sector competitiveness: the Azur Plan for the tourism sector, the Halieutis
Plan for the development of maritime fishing sector, the Morocco Solar Plan and the Morocco Digital Plan, which aims to position Morocco among
dynamic emerging countries in the information technology field. x ICOR (Incremental Capital-Output Ratio) fell in Morocco between 2005 and 2010, but remains relative high compared to comparable countries. This
reveals the existence of factors of inefficiency in the production process. A high ICO reflects a low efficiency of investment. xi The High Commission for Planning conducted a survey on the non-agricultural informal sector in 2007, which revealed that the sector participated in
creating 14.3% of wealth and provided 37.7% of non-agricultural employment. The results of the 2014 informal sector survey have not yet been published. xii The portfolio comprises 30 operations: 9 sovereign operations, 2 non-sovereign operations and 19 technical assistance projects. xiii Road and rail network development, with port (Nador Port in the preparation phase) and airport investments. xiv For detailed explanations, please refer to Section G on evaluation of the fiduciary risk and mitigation measures, using the related table (see Technical
Annex 1). xv For instance, the Maghreb Conference on Public Procurements which conducted a large benchmarking study; the World Bank which produced: (i) Country
Financial Accountability Assessment (CFAA) on Morocco in 2003 and 2006; (ii) a Country Procurement Assessment Report (CPAR) in 2000 and updated
in 2007; (iii) an assessment using OECD/DAC methodology conducted by the Bank, in 2008 which produced an Assessment of the regulatory framework
for public procurements in 2011.