AFRICAN DEVELOPMENT BANK. Public Disclosure Authorized Public Disclosure Authorized MOROCCO RAILWAY INFRASTRUCTURE REINFORCEMENT PROJECT

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized AFRICAN DEVELOPMENT BANK MOROCCO RAILWAY INFRASTRUCTURE REINFORCEMENT PROJECT APPRAISAL REPORT OITC DEPARTMENT January 2016 Translated Document

2 TABLE OF CONTENTS I. STRATEGIC GUIDELINES AND RATIONALE OF THE PROJECT Key Development Constraints Project Linkage with Country Strategy and Objectives Rationale for Bank Involvement Coordination of Technical and Financial Partners... 2 II. PROJECT DESCRIPTION Project Objectives and Components Technical Solutions Adopted and Alternative Solutions Considered Type of Project Project Cost Estimate and Financing Mechanisms Project Area and Beneficiaries Participatory Approach to Project Identification, Design and Implementation Bank Group Experience and Lessons Reflected in Project Design Key Performance Indicators... 7 III. PROJECT FEASIBILITY Economic and Financial Performance Environmental and Social Impact... 8 IV. IMPLEMENTATION Implementation Arrangements Procurement Arrangements Financial Management and Disbursement Arrangements Monitoring of Project Activities Governance Sustainability Risk Management Knowledge Development V. LEGAL INSTRUMENT Legal Instrument Conditions Associated with the Bank s Intervention Conditions Precedent to Loan Effectiveness Condition Precedent to First Loan Disbursement Other Conditions Commitments VI. RECOMMENDATION 16 Annex I: Comparative Socio-Economic Indicators of Morocco I Annex II: Table of Bank Operations in Morocco as of 14 Sept II Annex III: Main related Projects Financed by the Bank and other Development Partners of Morocco over the last ten years....iii Annex IV: Map of the Project Area...IV

3 LIST OF TABLES AND GRAPHS Table 2.1: Project Components... 3 Table 2.2: Alternative Solutions Considered and Reasons for Rejection... 4 Table 2.3: Summary of Estimated Costs per Component for the Whole Project... 4 Table 2.4: Summary of Costs per Expenditure Category for the Whole Project... 4 Table 2.5: Summary of Project Costs by Financing Source... 5 Table 2.6: Estimated Project Costs by Component and by Financing Source (in USD million)5 Table 2.7: Expenditure Schedule by Financing Source.. 5 Table 4.1: Project Monitoring and Supervision... 14

4 Currency Equivalents October 2015 UA 1 = USD UA 1 = MAD USD 1 = MAD Fiscal Year 1st January 31st December Weights and Measures 1 metric ton = 2204 pounds 1 metre (m) = 3.28 feet 1 millimetre (mm) = inch 1 kilometre (km) = 0.62 mile 1 hectare (ha) = acres

5 ACRONYMS AND ABBREVIATIONS ADB African Development Bank ADS Agency for Social Development AFD French Development Agency AFESD Arab Fund for Economic and Social Development APA Advanced Procurement Action CE-BSG Centre of Excellence for Gender-Sensitive Budgeting CGEM General Confederation of Enterprises in Morocco CSP Country Strategy Paper CWR Continuous Welded Rail DEPP Directorate for Public Enterprises and Privatization DFCG Directorate for Finance and Management Control DPD Detailed Preliminary Design EAP Environmental Action Plan EBRD European Bank for Reconstruction and Development EIB European Investment Bank EMS Environmental Management System ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan EU European Union GSB Gender-Sensitive Budgeting GWh Gigawatt/hour HCP High Commissioner for Planning HSL High-speed line IGF General Inspectorate of Finance INDH National Human Development Initiative inhab Inhabitants IRR Internal rate of return JICA Japanese International Cooperation Agency KFAED Kuwait Fund for Arab Economic Development LC Local currency LTS Long-term strategy (of the Bank) MAD Moroccan Dirham MEF Ministry of the Economy and Finance METL Ministry of Equipment, Transport and Logistics Mn Million NGO Non-governmental organization NPV Net present value NTCD Net of taxes and customs duties ONDH Human Development Observatory PA Project area PAP Project Affected Persons PEE Public Establishments and Enterprises PHSE Hygiene and Health Plan PIC Infrastructure and Traffic Pole i

6 PROJECT INFORMATION SHEET PSSE RP SDF UA UFA UIC USD WB Environmental Surveillance and Monitoring Framework Resettlement plan Saudi Development Fund Unit of Account Usable Farm Area International Union of Railways United States dollar World Bank Client Information Borrowers: Project Title: Project Area: NATIONAL RAILWAYS AUTHORITY (ONCF) RAILWAY INFRASTRUCTURE REINFORCEMENT PROJECT REGIONS OF CASABLANCA-SETTAT AND MARRAKECH-SAFI Executing Agencies: NATIONAL RAILWAYS AUTHORITY (ONCF) 1. Financing Plan Source Amount (MAD Amount (UA Amount (USD Instrument million) million) million) ONCF 2, Own resources AfDB Project loan TOTAL 3, Key Financial Information of the AfDB Loan currency Interest Type Base rate (floating) Contractual margin Funding margin Service commission Administrative costs Other Fees Tenor Grace period Dollar (USD) Floating base rate with a free fixing option 6-month LIBOR 0.60% (60 basis points (bp)) The Bank s cost of borrowing relative to six-month EURIBOR. This margin is reviewed every 1 st January and 1 st July Not applicable Not applicable None 20 years 5 years 3. Duration Main stages (projected) Activities (Month, Year) Approval of the concept note 5 September 2015 Project approval 27 January 2016 Date of signature of loan and guarantee agreements 3 April 2016 Effectiveness 25 May 2016 Completion date 31 December 2019 Date of last disbursement on the loan 31 December 2020 Last reimbursement of loan 15 June 2036 ii

7 EXECUTIVE SUMMARY General Overview of Project 1. The Tangier-Marrakech railway line covered by this project, comprises the Kenitra-Rabat- Casablanca and the Casablanca-Settat-Marrakech lines, linking the South to both the North and the East of the country. Given its strategic position within the national railway network, the Kenitra-Casablanca line is a vital link between the economic centres of Tangier (North), Oriental and Casablanca (Centre). Considering that it accounts for almost 50% of freight (excluding phosphate) traffic and 70% of passenger traffic, this line plays a significant commercial role in the activities of the National Railways Authority (ONCF). Meanwhile, the Casablanca-Marrakech line links Casablanca, the national economic megalopolis, to Marrakech, the tourism capital of the Kingdom. 2. Providing this railway line with infrastructure that is tailored to market needs in competitiveness terms (travel time and quality of service) was planned in several phases. The infrastructure currently under construction has a physical execution rate of 75%. The project comprises works on: (i) the Kenitra- Rabat-Casablanca line, comprising the reinforcement of existing tracks, including the construction of a third 148-km railroad for freight between Zenata and Kenitra; and (ii) the Casablanca-Marrakech line, which involves the upgrading and partial doubling of 38 km of the track between Settat and Marrakech. The phase targeted by the project relates to: (i) complete doubling of 141 km of the track between Settat and Marrakech; and (ii) the construction of 5 (five) modern railway stations between Tangiers and Casablanca. Its total estimated cost, net of taxes and customs duties, is MAD billion or USD million. It will be co-financed by ONCF for USD million and the Bank for a loan of USD million. The relevant activities will be implemented between 2015 and Apart from the benefits related to increased railway traffic between Casablanca and Marrakech, the project will generally help to enhance the logistical competitiveness of the national economy. Its direct beneficiaries are users of railway transport and project area communities. This project is expected to: (i) ease the traffic between Casablanca and Marrakech; (ii) increase the operational efficiency of the Casablanca-Marrakech line and expand the accommodation capacity of the Tangiers and Casablanca railway stations; and (iii) improve the living standards and socioeconomic conditions of project area communities. Needs Assessment 4. The Casablanca-Marrakech line has witnessed a sharp increase in transport demand, driven by the socioeconomic, cultural and tourism potential of both cities and the actions executed by ONCF to implement the commercial strategy. For instance, passenger traffic has increased by 20% in five years, rising from 3.82 million in 2010 to 4.6 million in 2014, representing an average yearly increase of 4.75%. Meanwhile, freight traffic surged from 142,000 tons in 2013 to 207,000 tons in 2014, representing an increase of approximately 47%. Passenger flows are projected to rise to 4.78 million by end-2015 and 7.41 million by This growth is expected to continue at an average annual rate of 4% during the next decade. Goods traffic is expected to rise to 217,000 tons by end-2015 and 504,000 tons by 2020, and then grow by a steady average annual rate of 5% subsequently. 5. The Settat-Marrakech segment currently has constraining characteristics, in particular a single 141 km track, partially doubled over 38 km with a low curve radius (300 metres) in certain places. If no action is taken, the outcome would be: (i) saturation of the line with 28 trains per day; (ii) delays and cumulative delays for passengers; (iii) difficulties in managing time slots reserved for track maintenance; and (iv) precarious safety along the track. The minimum capacity required to meet the demand for passenger traffic alone is estimated at 36 trains per day by Consequently, there is need to programme the operations to eliminate the constraints along this line in order to cope with the projected transport demand. iii

8 Value-added of the Bank 6. In Morocco, the Bank financed many operations in all sectors, and especially in several transport sub-sectors. In the railway sub-sector in particular, the Bank financed three projects, namely: the transport sector rehabilitation project which had a rail component (1993), the railroad rehabilitation project (1998), and the project to increase the capacity of the Tangier-Marrakech railway line (2010) which is currently under construction. Execution of the first two projects helped to expand the operational capacity of the ONCF, thereby improving the quality of services offered and boosting its revenue. With the relevant gains from these projects and reorganisation of ONCF structures into different business poles, the ONCF is now equipped to satisfy customer needs. The relevant operational experience and technical expertise in implementing such projects have been factored into the design of this project and will also be considered during the implementation phase. Knowledge Management 7. The main potential lessons from this project will come from the monitoring mechanism that will be established to document its outcomes and impact. That mechanism will comprise: (i) monitoring of the various project activities executed by ONCF; (ii) impact assessment at project completion by beneficiaries, including rail transport users, through periodic opinion polls commissioned by the ONCF; and (iii) analysis of the level of attainment of targeted development objectives, to be executed by High Commission for Planning (HCP) and the Human Development Observatory (ONDH). The reports produced for this purpose should be widely disseminated to various project stakeholders. iv

9 KEY ACTIVITIES OUTPUTS OUTCOMES IMPACT RESULTS-BASED LOGICAL FRAMEWORK OF THE PROJECT Country and Project Title: Morocco - Railway Infrastructure Reinforcement Project. Project goal: To enhance the competitiveness of the Casablanca-Marrakech railroad as well as the living conditions of project area communities. RESULTS CHAIN Help to increase the volume of railway transport between Casablanca and Marrakech PERFORMANCE INDICATORS Indicators (including ISCs) Number of passengers transported Tonnage of freight transported 1. Easing of traffic between 1.1. Number of passenger trains Casablanca and Marrakech; 1.2. Number of freight trains 2. Operational efficiency is improved on the lines concerned; 3. Living conditions of PA communities improved; 2.1. Time gain 3.1. Number of jobs created during the works 3.2. % of PA women with less than MAD 1000 per month 1. Construction of rail infrastructure; 1.1 Railroad constructed and equipped; 1.2 Railway station constructed and equipped; 1.3 Repair workshop constructed and equipped; 2. Related Works; 2.1. Number of pedestrian overpasses constructed 2.2. Number of vehicular overpasses constructed 2.3. Number of automatic gates constructed; 2.4. Protective fencing constructed 2.5. Number of gender initiatives implemented. 3. Project management and coordination services COMPONENTS 1. Construction of rail infrastructure; 2. Related Works; 3. Project management 4. and coordination services 3.1. Number of progress monitoring and outcome assessment reports 3.2. Number of annual project account audit reports Baseline Situation In 2014: 4.6 million passengers 207,000 tons In 2015: trains/day trains/day h 37 min % Target In 2020: 7.41 million passengers, with 55% being women; 504,000 tons In 2020: trains/day trains/day h 59 mn ,000 man-days of work (including 22% for women) % In 2015: In 2020: km ,000 m ,000 m km v MEANS OF VERIFICATION Sources: Reports of MICIEN/METL/HCP/ ONDH Sources: Reports from ONCF/HCP/ONDH Sources: Consultancy offices / ONCF RISKS/ MITIGATIVE MEASURES Risks Competition with the pipeline for the transport of phosphate. Mitigative Measures The new passenger and freight strategies of the ONCF focus on the diversification of activities, including freight (oil, cereals, materials, etc.). Furthermore, all the product types from the OCP cannot be transported by pipeline. Risks RESOURCES (IN USD MILLION) (i) Delays in raising counterpart resources; (ii) Increase in construction costs; (iii) Procurement bottlenecks/delays that result in late commencement of works; (iv) Environmental risk. Mitigative Measures (i) The ONCF has sufficient self-financing capacity. Furthermore, the ONCF can also resort to bond issues; (i) Estimates based on current unit prices on the market, taking into account physical and financial contingencies; (ii) Sound knowledge of the Bank s procurement rules and procedures and recourse to APAs; (iii) Close monitoring of the implementation of the environmental and social management plan. 1. Construction of rail infrastructure; Related Works: Procurement of land and vacation of the project right-of-way: Project management and coordination services: 3.08 TOTAL RESOURCES:

10 INDICATIVE PROJECT IMPLEMENTATION SCHEDULE Activities Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec 1. Project approval and loan effectiveness 1.1. Project approval by the Board of Directors 1.2. Signature of loan and guarantee agreements 1.3. Effectiveness of the loan agreements 2. Construction of rail infrastructure 2.1. Complete doubling of the Settat-Marrakech track Construction works on infrastructure and bridge structures between Imfout and Skhours Rehabilitation works on bridge structures between Casablanca and Marrakech Laying of the track between Settat and Marrakech Laying of the catenary between Settat and Marrakech Refurbishment of stations between Settat and Marrakech Construction and equipment of sub-stations Supply of railway engines for doubling of the track 2.2. Refurbishment of the railway stations and the Casablanca triangle Refurbishment of the railway stations and the Casablanca triangle Refurbishment of the Casablanca passenger station 2.3. Construction of stations Construction of the Rabat Agdal station Construction of the Kénitra station Construction of the Casablanca passenger station Construction of the Rabat city station Construction of the Tangier station 3. Ancillary works 3.1. Safety at track crossings Construction of engineering structures 3.2. Construction of workshops for rolling stock Construction of a workshop for rolling stock at the Marrakech station Construction of a workshop for rolling stock at the Kénitra station Construction of a workshop for rolling stock at the Casa Voy station vi

11 REPORT AND RECOMMENDATIONS FROM BANK GROUP MANAGEMENT TO THE BOARD OF DIRECTORS CONCERNING AN ADB LOAN TO THE NATIONAL RAILWAYS AUTHORITY OF MOROCCO TO FINANCE THE RAIL INFRASTRUCTURE REINFORCEMENT PROJECT Management submits this report and recommendations on a proposal to award an AfDB loan of USD million to the National Railways Authority to finance the railway infrastructure reinforcement project. I. STRATEGIC GUIDELINES AND RATIONALE OF THE PROJECT 1.1. Key Development Challenges Morocco recorded robust economic performance with an expected growth rate of 5% in 2015, despite a difficult international and regional context. This growth, however, is mainly driven by the agricultural sector and does not create enough jobs for newcomers into the job market. Consequently, over the last 10 years, the country has embarked on transforming its economic model through the Emergence Plan (2006) and the Industrial Strategy (2014). This plan and strategy defined a general development framework, comprising sectors in which Morocco has a competitive advantage: offshoring, automobile, aeronautics, electronics, agro-food and textiles-leather. To support the implementation of this strategy, substantial quantitative and qualitative efforts were made to develop and modernize transport infrastructure However, the growth diagnosis conducted by the Bank in 2014 revealed the need to improve infrastructure access in rural inaccessible areas. In particular, it revealed that the railway network is inequitably distributed on the national territory. Furthermore, an effort has to be made to develop logistical poles that facilitate the higher volume of flows, cut goods transport costs and create employment within the country. Similarly, the transportation of goods by rail is relatively poorly diversified due to the lack of logistical connections. It follows therefore that the railway network presents enormous opportunities for economic and social development. The railway line covered by the current project links Casablanca to Marrakech, among others. Transport demand has skyrocketed on this line, driven by the steady socioeconomic, cultural and touristic dynamism of these cities. This trend is also driven by the actions executed under the trade strategy implemented by the National Railways Authority (ONCF) For instance, passenger traffic has increased by 20% in five years, rising from 3.82 million in 2010 to 4.6 million in 2014, or an average yearly increase of 4.75%. Meanwhile, freight traffic surged from 142,000 in 2013 to 207,000 tons in 2014, representing an increase of approximately 46%. Passenger flows are projected to rise to 4.78 million by end-2015 and 7.41 million by This growth should continue at an average annual rate of 4% in the next decade. Goods traffic should rise to 217,000 tons by end-2015 and 504,000 tons by 2020, and grow by a steady average annual rate of 5% subsequently. Given the current situation, especially on the Settat-Marrakech segment which has a single track over 141 km, that is partially doubled over 38 km with a low curve radius (300 m) in places, the maximum transport volume along the Casablanca-Marrakech line is only 28 trains/day. The minimum capacity required to meet the demand for passenger traffic alone is estimated at 36 trains/day by There is need therefore to eliminate the constraints along this line in order to cope with the projected transport demand. Besides, according to (i) various satisfaction surveys commissioned by ONCF and targeting railway transport users, and (ii) capacity analysis studies, there is an urgent need to improve on the quality of services and expand the intake capacity of the railway stations currently in operation Project Linkage with Country Strategy and Objectives This project is consistent with the priorities outlined in Morocco's economic and social development programme for It seeks to address the competitiveness challenge and preserve Morocco's macroeconomic viability with a view to generating sustained and inclusive growth that can sustainably improve the living conditions of the people. 1

12 The project is also consistent with the Strategy of the Ministry of Equipment, Transport and Logistics (METL) for , especially its Pillar I on Transport Infrastructure Development. This strategy seeks to boost the harmonious development of transport infrastructure in accordance with international standards, in a manner that enhances the Kingdom's connectivity to major international centres that import and export goods and raw materials and, consequently, the competitiveness of the entire national territory. This will be done by constructing an efficient, profitable and durable multimodal transport system that facilitates passenger and goods mobility Rationale for Bank Involvement The Bank's involvement in this project is justified by its consistency with Pillar II ( Support to green infrastructure development ) of the AfDB s Country Strategy Paper (CSP) for Morocco. Indeed, it mirrors the Bank's determination to focus its operations, between 2015 and 2016, on aspects that support Morocco in the effective transformation of its economic model. Such aspects are the promotion of value chains especially in the export sector, improvement of the business environment, connection of businesses to markets through export zones, and hinterland development to boost the competitiveness of the economy and open up access to the various regions. Furthermore, the project is consistent with the Bank's Ten-Year Strategy which gives priority to infrastructure and private sector development. Moreover, this project is fully consistent with the Bank's new guidelines on transport infrastructure which recommend greater diversification of its portfolio and especially greater involvement in the railway sub-sector Coordination of Technical and Financial Partners The Technical and Financial Partners (TFPs) present in Morocco collaborate regularly through consultations at thematic meetings and sectoral working groups. Regular consultations among TFPs guarantee the synergy and complementarity of their various operations. Since it was opened in 2006, the AfDB field office in Morocco has played a key role in consolidating dialogue with the Government and with other development partners. To enhance the coordination of operations among TFPs, the Government established the Geographical Information System (GIS) which facilitates real-time monitoring of various operations by region, sector and invested amount. The GIS is managed by a steering committee composed of the Ministry of the Economy and Finance (MEF) and focal points of TFPs. Morocco's five leading TFPs, in addition to the Bank, are France, Spain, World Bank (WB), European Union (EU) and the European Investment Bank (EIB) with respective commitment levels ranging from EUR 1.9 to 2.2 billion. Aggregate TFP commitments amount to almost MAD 140 billion, or over EUR 12 billion Several donors operate in Morocco s transport sector. Apart from the Bank, there are the EIB, the Islamic Development Bank (IsDB), WB, EBRD, the Arab Fund for Economic and Social Development (AFESD), the French Development Agency (AFD), the Japanese International Cooperation Agency (JICA), the Kuwait Fund for Arab Economic Development (KFAED), the Saudi Development Fund (SDF), the Abu Dhabi Development Fund, Portugal, Italy, Spain and private French banks. Aid coordination is generally the responsibility of the Ministry of the Economy and Finance (MEF). More specifically, transport sector coordination is conducted among the main financial partners through a consultative mechanism that includes periodic meetings between the Bank and development partners represented in the country. Specific meetings between partners are also organized when necessary and during missions of various partners to share information on the sector and on the status of various projects and programmes. These meetings provided the Bank with an opportunity to coordinate and harmonize its sector operations with those of other partners during the preparation and appraisal missions of this project. Furthermore, since 2013, METL has undertaken to centralize the coordination of various partner operations within the cooperation unit. The Bank team held consultative meetings with the main TFPs, including EBRD, AFD and JICA. The working sessions aroused the interest of these partners in the project. 2

13 II. PROJECT DESCRIPTION 2.1. Project Objectives and Components This project is executed as part of the National Transport Sector Development Strategy for Specifically, it entails continuing with the upgrade and modernization of infrastructure and services in order to boost the logistical competitiveness of the national economy by cutting transport costs in domestic and external trade. The sector objective of the project is to increase the railway transport volume between Casablanca and Marrakech and enhance the accommodation capacity and quality of service in the railway stations between Tangiers and Casablanca, so as to address goods and passenger transport needs by Specifically, it seeks to: (i) facilitate railway traffic along the Casablanca-Marrakech line; (ii) enhance the operational efficiency and intake capacity of the railway stations along these segments; and (iii) improve the living conditions of project area (PA) communities The project comprises the following three components: (i) construction of railway infrastructure; (ii) related infrastructure; and (iii) project management. Table Project Components No. Name of Component Cost Detailed Description of Sub-components CONSTRUCTION OF USD A.1. Works: (i) construction of the sub-grade and engineering structures A RAILWAY INFRASTRUCTURE million between Imfout and Skhours (41 km); (ii) laying of the track, catenary, and sub-station equipment between Settat and Marrakech (141 km); (iii) refurbishment of the railway stations along the Settat-Skhours and Benguerir-Sidi Ghanem lines; (iv) construction of railway stations between Tangiers and Casablanca; and (v) implementation of environmental protection measures; B RELATED WORKS USD million A.2. Works Control and Supervision B.1. Consolidation of Gender Achievements in the PA : (i) incomegenerating activities, multipurpose centres, women's homes (delivery centres for women), youth support and student residential centres, day-care centres and preschool infrastructure in poor areas (INDH actions); (ii) development of local products, individual business platform, capacitybuilding through grassroots guidance and the socioeconomic integration of the youth (ADS actions de l ADS); B.2. Safety at Road Crossings: Construction of (i) railroad pedestrian overpasses; (ii) vehicular overpasses; (iii) protective fencing; (iv) automatic gates at level crossings; and (v) workshops for rolling stock. C VACATION OF THE PROJECT RIGHT-OF- WAY D PROJECT MANAGEMENT USD million 3.08 USD million B.3. Works Control and Supervision C.1. Land acquisition; C.2. Vacation of the project right-of-way D.1. Project monitoring and Coordination D.2. Audit of project accounts 2.2. Technical Solutions Adopted and Alternative Solutions Considered In 2008, ONCF initiated a study on the capacity of its Tangiers-Casablanca-Settat-Marrakech railway network, with a view to executing development works on the existing network and addressing freight and passenger transport concerns in 2015 and Several scenarios were analysed. Of the three scenarios (A, B and C) studied, Scenario C, which includes this project, was finally selected for investment cost optimization reasons relating to rail services and consistent with the strategy adopted by ONCF to execute its priority development programme under the programme contract ( ) The alternative chosen for 2020 is the complete doubling of the track between Settat and Marrakech and a speed increase, which entails making a few rectifications in the curve radius and raising the superelevations. This involves excavation works to develop a platform over 41 km and a lateral expansion of close to 4 m on average. Such expansion could go up to 15 m over a continuous segment of 6 km, in the areas where the curve radius has to be rectified. The works will be executed within the alignment of the current track and will include the extension of hydraulic structures and, in certain places, 3

14 the expansion of their section. There are also plans to double the bridge structures. Protection of the earthworks will require anti-contamination geotextiles to prevent the growth of mould and invasive weeds. The track body will consist of a ballast bed that is 45 cm thick that would ballast the track itself. The track will consist of a UIC60 continuous welded rail (CWR), supported and stabilized by concrete biblock sleepers. Scenario Scenario A Scenario B 2.3. Type of Project Table Alternative Solutions Considered and Reasons for Rejection Brief description By 2015 By 2020 Settat-Marrakesh High-Speed Line (HSL) Partial doubling between Settat and Marrakech Settat-Marrakesh Additional speed increase Partial doubling between Settat and Fès Speed increase between Casa HSL between Settat and and Rabat Marrakesh Reason for rejection High cost for the 2015 and 2020 time horizons High cost for the 2015 and 2020 time horizons The project is an investment operation. An AfDB loan is the financing instrument deemed to be the most adapted to the Bank's involvement in this operation Project Cost Estimate and Financing Mechanisms The total project cost, net of taxes and customs duties (NTCD), is MAD 3, billion or USD million. The provision for physical contingencies is 7% of the total base cost, while the provision for price increase is 4% of the total base cost plus physical contingencies. This cost was determined based on the final draft study (FDS) conducted in September 2014 and recent similar contracts. The summary of estimated costs by project component is presented in the table below: COMPONENTS 1. Construction of rail infrastructure Table 2.3: Summary of estimated costs per component for the whole project MAD million USD million UA million F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total , , Ancillary works Vacation of the project right-of-way 4. Project management and monitoring Baseline cost , , Physical contingencies Financial contingencies Total Cost NTCD 1, , , The summary of estimated costs by project category is presented in Table 2.4 below: Table 2.4: Summary of costs per expenditure category for the whole project EXPENDITURE CATEGORIES MAD million USD million F.E. L.C. Total F.E. L.C. Total 1. Works , , Goods Services Miscellaneous ? Baseline cost , , Physical contingencies Financial contingencies Total Cost NTCD 1, , ,

15 The project will be financed in parallel and in accordance with the projected schedule below by the ONCF, using own resources amounting to MAD 2,831,840,000, or 72.14% of the total project cost NTCD; and by the Bank, through an AfDB window loan of EUR million, or 27.86% of the total project cost. The Bank's contribution will cover approximately 23% of the component on "railway infrastructure construction" and approximately 76% of the related "related infrastructure component. Table 2.5: Summary of project costs by financing source Financing Source MAD million USD million UA million Percentage F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total ONCF - 2, , % AfDB % Total 1, , , % Table 2.6: Estimated project costs by component and by financing source (in USD million) Components ONCF AfDB TOTAL 1 Construction of rail infrastructure Ancillary works Vacation of the project right-ofway Project management and monitoring Total base costs Physical contingencies Financial contingencies Total Cost NTCD The expenditure schedule (in EUR million) by financing source is presented in the table below: Table 2.7: Expenditure schedule by financing source (in USD million) SOURCE Total ONCF AfDB Total Cost NTCD % of total cost 1.27% 16.15% 29.77% 20.85% 17.48% 10.43% 4.04% % 2.5. Project Area and Beneficiaries The direct project area (PA) covers the regions of Casablanca-Settat and Marrakech-Safi, and has an estimated population of over 8.6 million inhabitants, or over 28% of the national population. It includes the provinces of Settat, Kelaa des Seraghna and Marrakech. The Settat-Marrakesh railway study area covers the above territories and their resident population of 1,286,000 inhabitants, or 15% of the population in the three PA regions The economic activity in the Casablanca-Settat region is dominated by the primary sector (agriculture and stockbreeding) which employs approximately 50% of the labour force. Hence, agriculture is crucial to the promotion and development of the region's economic activity. Consequently, considering that it has a usable farm area (UFA) of 60% of the total regional surface area, the region is essentially geared towards agriculture. It is one of the most fertile regions in the country. With regard to stockbreeding, the region has approximately 1.9 million sheep, representing 12.3% of the national sheep population in It is home to approximately 389 industrial establishments, or 5% of the industrial units in the country. The industrial sector permanently employs 21,000 persons and accounts for 5.2% of the national output. In productivity terms, the leading sector is the agro-food industry with an estimated output of MAD 4 billion. 5

16 2.5.3 The Marrakech-Safi region is predominantly rural and reliant on agriculture for the development of its economic fabric. The UFA is 1,554,500 hectares, or 17.3% of the national UFA. The main product of the region remains cereals with almost 2.2 million quintals. Moreover, the region s citrus output is 65,300 tons, or 5.1% of the national output. It has close to 475 industrial establishments, or 6.1% of the industrial units in the country. The industrial sector permanently employs over 18,200 persons and generates a turnover of MAD 6.5 billion. The agro-food sector generates the highest output with a little over MAD 3.5 billion, followed by the chemical and para-chemical industry, and the textiles and leather industry Participatory Approach to Project Identification, Design and Implementation It should be recalled that this project is part of the ONCF programme contract for , which itself derives from the government s railway strategy in particular and the transport sector in general. Consequently, the project was designed through a broad participatory approach involving elected representatives, members of associations, the local community and railway users at various levels. After the adoption of its programme contract, the ONCF organized information seminars on its investment programme, as well as sensitization programmes targeting the civilian population, local elected representatives, government officials, the General Confederation of Enterprises in Morocco (CGEM), NGOs and associations The local population was involved in the selection of various railroad alignment options, in order to reduce expropriations to a minimum and adopt measures and investments that mitigate noise pollution and accidents. Satisfaction and traffic surveys targeting the current railroad users concerned also contributed to the sizing and development of optimal options for ensuring the functionality of railway stations and enhancing the level of service. The participation of various stakeholders to the project will be sought during project implementation. Support to consolidate gender achievements will be provided through a participatory approach as in the other projects/actions of the National Human Development Initiative (INDH)/Social Development Agency (ADS) Bank Group Experience and Lessons Reflected in Project Design The last review of the Bank's portfolio in Morocco conducted in June 2014 revealed satisfactory performance with a score of 2.56 out of 3. This performance has remained stable since The portfolio is new with an average age of 3 years and contains no project at risk. The main constraints noted in the execution of investment projects in Morocco relate to: (i) protracted procurement delays; (ii) poor data quality at commencement for certain operations; (iii) occasional late commencement of certain operations; and (iv) late submission of audit reports The Bank finances several similar operations on the continent. More specifically, it has already supported three projects in Morocco s railway sub-sector. These are: (i) rehabilitation of the transport sector which included a railway component (1993); (ii) railway rehabilitation (1998); and (iii) expansion of the capacity of the Tangier-Marrakesh railway line (2010). Implementation of the first two projects contributed to developing the operational capacity of the ONCF, with an improvement in service quality and an increase in revenue. With the relevant gains from these projects and reorganisation of the structures of the ONCF into different business poles, the ONCF is now equipped to satisfy customer needs Operational experience and technical expertise in implementing such projects were factored into project design and will also be considered during the implementation phase. Hence, to mitigate the consequences of long procurement delays, advance procurement actions (APA) were adopted to ensure the rapid commencement of works upon approval of the project by the Bank. Furthermore, the ONCF has sought the Bank's agreement to resort to retroactive financing. Similarly, the project appraisal mission team was informed that a new external audit firm had been recruited by ONCF for , based on the Bank s standard terms of reference. 6

17 2.8. Key Performance Indicators In accordance with the components and activities envisaged for this project, the main expected achievements are: (i) 25 actions/initiatives to build on gender achievements; (ii) 141 km of railway constructed and equipped; (iii) 10,000 m 2 of stations constructed and equipped; (iv) 5000 m 2 of rolling stock repair shops constructed; (v) 5 pedestrian overpasses constructed; (vi) 40 vehicular overpasses constructed; (vii) 3 automatic gates installed; and (viii) 150 km of protective fencing constructed To gauge the achievement status of the project s development targets, the following outcome indicators will be monitored: (i) volume of passenger traffic generated by gender; (ii) volume of freight traffic generated; (iii) gains in travel and waiting times; (iv) number of jobs created by gender; (v) volume of traffic generated per station; (vi) road safety gains; and (vii) user satisfaction rates per gender To ensure that these activities are implemented within the prescribed deadlines, performance indicators, other than results and impact indicators, were set relative to the Bank's institutional performance indicators. These include: (i) loan effectiveness deadlines; (ii) deadline for fulfilment of conditions precedent to first disbursement; (iii) procurement deadlines; (iv) average project progress status indicator (PI); and (v) changes in the disbursement rate in accordance with the expenditure schedule. These indicators will be monitored during supervision missions and in the daily management of the project. III. PROJECT FEASIBILITY 3.1. Economic and Financial Performance Economic Feasibility The economic evaluation of the project is based on a cost-benefit differential analysis between the "no project" and "project" situations. Its economic life span is 60 years for the infrastructure, 30 years for the railway infrastructure and 50 years for the stations. In keeping with the recommendations of the High Commission for Planning in Morocco, a discount rate of 5% was adopted for basic infrastructure with long-term depreciation. In the baseline (i.e. no project) situation, the values considered for "passenger traffic are 24 trains per day, for a travel time of 2 h 45 min between Casablanca and Marrakech. This yields a volume of 3.48 million passengers/year, at an annual growth rate of 4%. With regard to "goods traffic, the daily statistics are five trains per day, with a total freight volume of 207,000 tons/year in 2014, at an annual growth rate of 5% In the "project" situation, "passenger" traffic will increase to 36 trains per day, for a travel time of 2 h 37 min and a waiting time reduced by 30 min. This yields total time savings of 38 minutes, in terms of reduced travel and waiting times. "Passenger" traffic at commissioning will consist of the normal traffic, traffic generated by the expanded transport capacity and the improved quality of customer services (stations and trains) and diverted traffic resulting from the modal shift of passengers from road to rail transport. Overall, it is estimated at 5.31 million passengers/year in "Passenger" activity will grow gradually over a period of 4 years, before reaching cruise speed. The annual traffic growth rate will then be 4%, corresponding to the variations observed over the last few fiscal years. With regard to goods traffic, the volume that would be generated by the project is evaluated at 99,000 tons/year at commissioning. It will grow progressively over a period of 4 years, after which it would reach saturation point. The annual growth rate will then be 5%, in line with previous trends The overall economic investment costs factored into the analysis include: (i) direct investment costs for infrastructure rehabilitation, procurement of railway equipment and the development of railway stations; and (ii) indirect costs for infrastructure servicing and maintenance, as well as heavy mid-life refurbishment of infrastructure and equipment. They were calculated based on financial costs, less taxes and domestic transfers to the economy. The economic benefits expected by the community can be subdivided into: (i) time gains for travellers; (ii) value-added in terms of direct, indirect and induced jobs during infrastructure construction and operation; and (iii) externality gains from the modal shift of 7

18 "passenger" and "goods traffic from road to rail transport (reduction of road accidents, reduction of air pollution on the roads and motorways, reduced road maintenance costs, etc.) The economic benefits of project implementation during the analysis period yield a 13.5% economic rate of return (ERR) and a net present value (NPV) of MAD 9,397,900,000. A summary of the economic analysis is provided in the table below. After conducting the sensitivity test (10% increase in project costs and 10% reduction in benefits), the project s ERR finally stands at 11.6%. Hence, the project is economically profitable to the community and the investment is largely justified. Economic Parameters Analysed Values Obtained Economic rate of return (ERR) 13.5% Net present value (NPV) in MAD million 9,397.9 ERR sensitivity test (+10% of costs and - 10% of benefits) 11.6% Discount rate 5% Residual value of the investment after 60 years 1, Financial Feasibility The financial internal rate of return (FIRR) is the base indicator retained to assess the project s financial performance. This rate is determined based on investment costs (net of customs duties and taxes), operating and maintenance costs and revenue generated by the project (passengers and goods transport, lease of the commercial facilities in the stations). Assuming that the real discount rate is 8% (rate based on the weighted average cost of capital as calculated by ONCF), the FIRR for the base case scenario is 10.6% and the financial net present value (FNPV) is MAD 1,367 million. A sensitivity test yielded a FIRR of 8.9%. The financial analysis results show that the project is financially justified Despite an investment rate that is unprecedented in the history of the ONCF and the resulting debt level, the financial situation of the ONCF remains solid for the period under consideration. This situation is characterized by: (i) substantial self-financing capacity; (ii) a working capital fund that improves from year to year; (iii) an improving cash position despite a rapid disbursement rate driven by investments and debt servicing; (iv) a comfortable debt ratio; and (v) a good debt service coverage ratio Environmental and Social Impact Environment The project was classified under Category I, in accordance with the Bank's Integrated Safeguards System requirements. The Environmental and Social Impact Assessment (ESIA) and the accompanying Environmental Surveillance and Monitoring Plan (ESMP), were drafted in March It was recognized as environmentally compliant by Morocco s Department of the Environment in March The ESMP was published in January 2015 on the website of the ONCF and Morocco s Department of the Environment/Secretariat of State for the Environment and in August 2015 on the Bank s website. All works are carried out within the right-of-way of the existing line, which will simply be expanded without any particular environmental and social consequences. The works phase will generate the following major negative impacts: (i) prior compensation of 384 projects affected persons (PAPs), including for loss of agricultural assets; (ii) displacement of various networks, infrastructure and fencing; (iii) disruption of certain transverse access roads or motorways (level crossings, overpasses), as well as pedestrian paths; (iv) disruption of rail traffic by works on the track; (v) gas and dust emissions; (vi) risk of accidental spillage of pollutants; and (vii) risk of accidental discovery of archaeological or cultural vestiges In the operational phase, the main negative impacts will be generated by usage of built infrastructure and installed equipment, especially the increased frequency of trains and higher traffic speed. These relate to: (i) risk factors and possible accidents for local residents and road users especially at level crossings; (ii) greater noise pollution in localities situated near the railway line. 8

19 3.2.3 The main positive impacts of the project are: (i) greater mobility of passengers between the Grand Casablanca region and the tourist metropolis of Marrakech; (ii) improved services in the stations; (iii) job creation; and (iv) facilitation of access to the socioeconomic centres between Grand Casablanca, Ben Guerrir and Marrakech The main mitigative measures scheduled are: (i) the commitment of businesses to comply with the ONCF Environmental Management System (EMS) certified as ISO 14004; (ii) provisions governing work organization and environmental best practices, whose terms of reference and ESMP require the development of Environmental Action Plans (EAPs) and Hygiene and Health Plans (HHPs). Each of them will be supplemented by emergency intervention procedures. The mitigating measures for the works phase, specified in the ESMP, will be included in the terms of reference for contractors and control missions for implementation. The following technical measures were also factored into project design: (iii) 33,000 m 3 of ballast will be recovered and reutilized; (iv) 3,600 rails of 18 ml will be recovered and reused for secondary lines and stations; (v) 150,000 m 3 of excavated material will be reused for backfilling. Details on measures taken during the construction and operational phases are provided in the annexes presenting the ESMP The cost of the environmental and social measures outlined in the ESMP shall be included in the total cost of works. It amounts to MAD million, or 1.6% of the net project cost (excluding chance factors and physical contingencies). Costs relating to surveillance and environmental monitoring activities shall be borne by the monitoring unit (MU) attached to the ONCF project supervision structure. They represent a net amount of MAD 0.7 million. Monitoring of the execution of project components and implementation of the ESMP shall be ensured by the ONCF through its project supervision department. That department comprises a project impact surveillance and monitoring unit (MU). Climate Change Despite the average sensitivity of the region traversed by the railway (heavier rainfall, longer droughts and higher temperatures), the nature of the railway infrastructure and the specific geometry of the railway alignment makes it possible to avoid the effects of these changes. The raised railroad bed is adequately drained. Hence, the continuous welded rail (CWR) makes it possible to safely resist temperatures of almost 85 C and the new suspended catenary absorbs both winds and dilations caused by high temperatures. Curve rectification zones will have their embankments stabilized over a stretch of 70 metres. Moreover, the envisaged infrastructure will result in a modal shift from road to railway transport for a significant share of current and future transport demand between Grand Casablanca and Marrakech. Hence, the project will contribute to the reduction of emissions, with 6.5 million tons of carbon dioxide equivalents of greenhouse gases (GHGs) avoided per year. This result should be considered for the entire life of the infrastructure and compared to the "no project" situation which entails continuing to use the road network to transport goods and passengers. This reduction of emissions is made possible by the annual generation of almost 240 GWh of energy by two wind farms (emission-free renewable energy), for the operation of the ONCF electrical traction network. Gender and Vulnerable Persons At the end of 2012, Morocco had 2.74 million employed women (1.03 million in urban areas and 1.71 in rural areas). The female employment rate in 2013 was 22.7% (compared to 66.4% for men). Within the public service, women accounted for 38.6% of the 860,000 civil servants in 2012 (4.6% higher than in 2002). They are heavily present in the health (56.61% of the workforce) and justice (48.56%) departments. Almost seven female civil servants out of ten (67.65%) are managers and two out of 10 (20.88%) are supervisors. The proportion of women executives is higher in regional services (68.81%) than in the central services (53.41%). It should be noted that the employment rate for women is characterized by wide regional disparities. It exceeds or is close to 30% in predominantly agricultural areas: Doukkala - Abda (34.4%); Chaouia-Ouardigha (32.4%); Souss-Massa - Drâa (31.1%), El Gharb (30.8%) and Marrakech - Tensif-El Haouz (29.3%). 9

20 3.2.8 Despite persistent inequalities between men and women, it is clear that Morocco has made significant efforts in gender promotion. Indeed, over the last two decades, constitutional and statutory reforms have facilitated and driven the participation of Moroccan women in development. Examples include: (i) implementation by the Government of Morocco, since 2006, of a national strategy for mainstreaming gender into all public and sectoral policies, as well as a "national strategy to combat violence against women"; (ii) a State budget "genderization" process launched by MEF as part of public expenditure reform; and (iii) gender-sensitive budgeting (GSB), introduced since 2005, which has made it possible to generate knowledge and tools for evaluating public policies from the gender standpoint. When GSB was launched, it covered four ministries. In 2013, it was extended to over 27 ministries. In June 2013, MEF and UN-Women signed an agreement for on the establishment and development of a centre of excellence for gender-sensitive budgeting (CE - GSB) based on capitalization, innovation, learning and sharing As regards combating poverty and social exclusion, Morocco has implemented major structuring programmes that have had a significant impact on the socioeconomic situation of the poor. Examples include the actions carried out by the "Pole genre" of ADS and implemented in tandem with INDH operations. The INDH is currently on its second programme ( and ). These actions made it possible to identify: (i) 403 rural councils deemed eligible on the basis of their poverty rate which is close to or exceeds 30% (from the poverty mapping prepared in 2004); and (ii) 264 urban neighbourhoods in cities and towns with a population exceeding 100,000 inhabitants Within the immediate PA, INDH has, over the past 10 years, funded 2276 projects and 597 actions for the benefit of 367,349 associations, of which 178,781, or 48.7%, are women's associations. To support efforts aimed at improving the socioeconomic conditions of women and enhancing their economic empowerment, the project will help to consolidate INDH actions in the PA. To that end, provision is made for financing projects and actions that have a significant impact on women. These include: (i) income-generating activities; (ii) women's homes (delivery centres for women); (iii) support to the youth and student residential centres; and (iv) day-care centres and preschool infrastructures in poor neighbourhoods. In this regard, a collaboration agreement will be signed between ONCF and INDH for the execution of its activities using governance and implementation techniques that have proven their worth since the launch of INDH activities in The ADS also has four socioeconomic development support programmes in the PA as follows: (i) development of local products; (ii) individual entrepreneurship platforms; (iii) capacity-building through grassroots guidance; and (iv) socioeconomic integration of the youth. It solicited support for the consolidation of the gender dimension in these programmes. An agreement will eventually be signed between ONCF and ADS to establish this gender support in the PA. Social According to the results of the 2014 general population and housing census, the legal population of Morocco, as of 1 September 2014, was 33,848,242, composed of 33,762,036 Moroccans and 86,206 foreigners. The number of households is 7,313,806. Relative to the 2004 census, Morocco s population has increased in absolute terms by 3,956,534 inhabitants, representing a general growth rate of 13.2% and an average annual growth rate of 1.25% from 2004 to 2014, compared to 1.38% for the intercensal period ( ) As regards poverty, the various programmes implemented to improve the living conditions of the people, have had notable effects in this area. Indeed, between 2004 and 2007, the poverty rate was reduced in all regions of Morocco. Over this period, there was a significant decline in poverty levels. In absolute terms, this decrease is most notable in the poorest regions according to the 2004 poverty survey. It is -43.6% in the region of Chaouia-Ouardigha and-41.8% in Marrakech-Tensift-Al Haouz, two areas which fall within the PA of this project. For their part, almost all the provinces recorded a decline in poverty (93.5%) between 2004 and

21 Implementation of this project will further improve the living conditions for the affected communities and major users of this railway line. Indeed, as already indicated in the section on environmental impact, this project will (i) create 269,000 man/months of work during the construction phase (including 22% for women) and 50 permanent jobs during the operational phase; (ii) yield global time gains (travel and waiting periods) of 38 minutes; and (iii) further increase access to basic socioeconomic services (administration, health centres, schools), and the main tourist centre of Marrakech. The construction of these planned facilities (overpasses, footbridges, automatic gates and protective fencing) will enhance security and safety for passengers and the local population. Actions to consolidate gender achievements will contribute to improving the socioeconomic conditions of women and other vulnerable groups. Involuntary Resettlement A Comprehensive Resettlement Plan (CRP) was designed in July 2015 and published on the ONCF website, and its summary was published on the Bank's website in August The census conducted by ONCF did not identify any need for population resettlement or displacement of homes. It solely and exclusively identified the expropriation of strips of land along the existing railroad right-ofway. The CRP identified 384 landowners who will be affected by the project, for a total land surface area of almost ha. All decrees of expropriation in the public interest, together with the list and status of the plots concerned, are published in the Official Gazette. They can also be consulted at the ONCF. The cost of land procurement and vacation of the right-of-way was estimated at MAD 100 million. IV. IMPLEMENTATION 4.1 Implementation Arrangements Project implementation will be steered by the Infrastructure and Traffic Pole (PIC) of ONCF which shall also ensure project management and supervision. This Pole is appropriately organized and has qualified and experienced staff to carry out this duty through its various services. In this regard, it will rely, inter alia, on the Projects Department, the Directorate for Project Supervision and the Directorate for Engineering. Field supervision of the project will be carried out by the Directorate for Project Supervision which has the competent services and has the necessary means to perform its duties. These teams will also receive technical assistance from external consulting firms. The measures adopted have proven their worth in recently completed and ongoing projects, including the construction of Tangier Med and Taourirt Nador lines, as well as the ongoing project to expand the capacity of the Tangier-Marrakech railway line. 4.2 Procurement Arrangements All international competitive bidding (ICB) for works and goods procurements, fully or partially financed with AfDB loan resources, shall be conducted in accordance with Bank rules and procedures using its appropriate standard bidding documents. Meanwhile, pursuant to the provisions of the letter of agreement signed on 31 May 2013 between the Kingdom of Morocco and the Bank on the use of national procedures for national competitive bidding (NCB) in projects financed by the Bank, all NCBs may be executed in accordance with Moroccan procurement procedures, using standard BDs jointly prepared to that end by the Bank and the Kingdom The ONCF, through the Directorate for Procurements, will be responsible for the procurement of goods and works scheduled under this project as detailed in Annex B5. The procurement capacity of the ONCF was evaluated during project preparation. The evaluation revealed that ONCF has the requisite resources and experience, meaning that the risk is low. The resources, capacities, expertise and experience of the ONCF are detailed in Annex B5. 11

22 The ONCF has made a commitment to the authorities to ensure that the second track between Settat and Marrakech is fully operational by early 2018, at the latest. To that end, and in accordance with the provisions of Article 1.9 and Annexes 4 and 5 of the Bank s Rules and Procedures on the Procurement of Goods and Works, the ONCF sought and received from the AfDB, an agreement in principle to resort to advance procurement actions in the procurement of works and goods for the construction of this track. Similarly, an indicative procurement plan, covering the first 18 months of project implementation, was also submitted to the Bank which approved it For the execution of sub-component B.1 (Consolidation of gender achievements in the PA), provision is made for the signing of project supervision delegation agreements between the ONCF and specialized human development agencies in Morocco, such as the INDH and ADS which have wide experience in this domain. This measure is expected to lead to the appropriate formulation and harmonious implementation of specific activities in support of women (women s homes, students residential centres, day-care centres, etc.) identified under this project. To that end and given the nature of such activities, the relevant procurements will be executed through national procedures, in accordance with the letter of agreement of 31 May 2013 and subjected to an ex poste review by the Bank. Besides, each project supervision delegation agreement will be accompanied by an appropriate procurement plan. 4.3 Financial Management and Disbursement Arrangements Financial Management ONCF will be accountable to the Bank for the implementation and financial management of the project. Financial management was evaluated in accordance with the Bank s new guidelines and took into account the current management system as well as the experience acquired by the Directorate for Finance and Management Control (DFCG) in the management of similar ongoing projects, including the project to expand the capacity of the Tangiers-Marrakech line. This approach points to the conclusion that the initial global financial management risk is deemed to be low by the Bank. Nevertheless, the ONCF should continue with the permanent and efficient use of the existing financial management mechanisms highlighted in the action plan presented in the annex Financial management arrangements: The project will be financially managed by the ONCF, through DFCG which currently has a staff strength of 72 persons serving in four departments (payment orders, financial management, accounting and management control). It follows therefore that its financial management will be fully integrated into that of the ONCF which operates through the following mechanisms: i. budget planning by the projects department of the Infrastructure and Traffic Pole (PIC); ii. monitoring of investment budget execution by the management control departments of DFCG and PIC; iii. an internal audit process that is fully integrated into the expenditure approval and control circuits of the ONCF; iv. progress reports, including detailed statements on the monitoring of project status (by component, by contract and by category); v. management of disbursements denominated in local currency or in foreign exchange; vi. an information system composed of several integrated applications capable of generating, inter alia, interim and annual project financial statements based on accounting entries of commitments and payments in accordance with the accounting system in force; and vii. an external audit of ONCF and project accounts by an independent audit firm These mechanisms utilized and formalized in the ONCF organization manual guarantee transparency, traceability, asset protection and reliable financial information on funds invested to execute the project. Nevertheless, sometimes there are delays in the submission of project audit reports to the Bank. Furthermore, the surveillance of budgetary risk, which is deemed to be low, is ensured by MEF, the 12

23 Audit Office, the ONCF Board and its various committees (audit and governance committee, investments committee). The Board is composed of representatives of various ministries, including the Directorate for Public Corporations and Privatization in MEF (DEPP) whose main mission is to enhance the governance and efficiency of public corporations. The financial sustainability of the ONCF is ensured through annual cash-flows and fund-raising on the local bond market. Hence, following this appraisal mission, the overall project management risk is deemed to be low by the Bank. Given the level of fiduciary risk, the project will receive only one annual financial management supervision mission External audit: The financial statements of the project, prepared by DFCG, will be audited annually by an external and independent audit firm that will be recruited for the period. The audits shall be conducted in accordance with the international audit norms of IFAC and the Bank's terms of reference (TORs), a copy of which was sent to the ONCF and to the auditor. The audit report, accompanied by the letter to management on the internal audit of the project, must be transmitted to the Bank no later than 6 (six) months after closure of the fiscal year concerned. Furthermore, the ONCF, by virtue of its 100% public shareholding is subject to several financial audits by the State (State auditor from DEPP) with the possibility of an audit by the Inspectorate General of Finance (IGF) and the Audit Office (audit operation underway) Harmonization: The project is financed with Bank loans and self-financing from the ONCF. Disbursements Disbursement requests for Bank loan resources shall be presented in accordance with the provisions of the ADB s disbursement handbook. In view of the planned activities and procurements, disbursements will be made through the special account method, the reimbursement method and the direct payment method. The ONCF has requested and obtained the Bank's permission to resort to advance procurement actions under the project and sought the Bank's agreement to retroactive financing of up to EUR 14 million for the procurement of works: construction of infrastructure and of small and medium-sized engineering structures for doubling of the track between Imfout and Skhours; laying of the track between Settat and Marrakech; laying of the catenary between Settat and Marrakech; construction and equipment of sub-stations between Settat and Marrakech; and refurbishment of stations between Settat and Marrakech The Bank s authorization for retroactive financing will ensure the financing of expenditures made after the date of project approval by the Board of Directors and prior to the date of signature of the funding agreement, within the limits of the ceiling indicated above. 4.4 Monitoring of Project Activities The (physical and financial) implementation of the project will be monitored by ONCF and the service providers that will be selected to execute various project activities. The information collected will be used to produce periodic project status reports. The project implementation schedule is presented on Page vii of this report. It especially takes into account the relevant experience of the executing organ in managing works execution and procurement deadlines and the Bank s experience in processing files from similar previous projects. Project activities started after the Bank approved recourse to the APA procedure (07/10/2015) and are scheduled to end in late At the Bank, the activities scheduled before and after loan approval will be monitored according to the indicative schedule below As regards assessment of the socioeconomic effects of the project, ONCF could benefit from studies conducted by several institutions in this domain. These include the High Commission for Planning (HCP) and the National Human Development Observatory (ONDH). Indeed, the HCP has a mandate to 13

24 conduct national studies on various aspects of socioeconomic life in Morocco. In 2012, the ONDH evaluated the impact of INDH actions for Finally, it should be noted that the ONCF regularly conducts opinion surveys on customer satisfaction levels. These surveys provide a permanent beneficiary assessment of the effects of its projects. The studies conducted by these various institutions provide the necessary information on the socioeconomic impact of this project. Table 4.1: Project Monitoring and Supervision Timeframe Stage Process Feedback Q3 to Q & 2016 & to Q Procurement Approval of BD by the Bank; launching of competitive bidding by ONCF and bid assessment and award of contracts Q Launching of project Field mission Status reports/ Aide mémoire 2016 to 2019 Construction works Field mission/ Supervision Status reports/ Aide mémoire Q Guarantee Term Field mission Status reports/ Aide mémoire Project completion report Q Governance The level of Morocco's fiduciary country risk is moderate, generally due to its satisfactory public finance management processes (budget planning and budgeting, budget implementation control, management accounting and preparation of reports, external review and audit). The same applies to budget risk surveillance (State budget) conducted by DEPP whose main mission is to improve the governance and efficiency of public establishments and enterprises (PEEs). The governance pattern of DEPP is based on the following three pillars: (i) professionalization of the PEE Board; (ii) quality of the PEE; and (iii) utility of State control for the State and for the PEE (modulated control based on the risk level of the PEE). It follows that DEPP continues to promote the widespread use of internal audit within the PEEs and certification of their annual accounts by auditors. Furthermore, DEPP has established multi-year programme contracts aimed at restructuring or developing PEEs, where necessary. It is within such a governance environment that ONCF operates as one of the public establishments, executing the missions of public authority delegated to it by the State. With regard to the ONCF in particular, it should be noted that no complaints have been lodged so far by the bidders after the procurement of works and goods under the project to increase the capacity of the Tangiers-Marrakech railway line funded by the Bank and currently underway. The supervision and audit reports have not revealed any particular irregularities. 4.6 Sustainability Project sustainability depends, to a large extent, on: (i) the technical and financial capacity of the infrastructure management services to engage in regular and timely routine and periodic maintenance; (ii) operating conditions; and (iii) the quality of its technical design and works execution. Following a reform process to streamline its structures, repair and maintenance operations on the infrastructure and facilities have been outsourced. The hierarchy of operations distinguishes three levels: Level 1 (servicing); Level 2 - light refurbishment (rehabilitation, partial replacement/major operation); and Level 3 - light/heavy refurbishment (complete replacement, renewal and major operations). The programme is established in advance and its financing is included in the annual operating budget for routine maintenance, in the investment budget for rehabilitation of facilities (level 2) and in the five-year budget for complete renewal Depending on the level of complexity, operations management and monitoring services are provided using internal resources at the regional and central levels. Based on the maintenance programmes carried out by the ONCF, the maintenance costs for the track and catenary are MAD 50,000/km for the continuous welded rail (CWR) of Settat-Marrakech and MAD 20,000/km for catenaries. This decline stems from savings in the annual operating budget of the ONCF. Furthermore, analysis of the project's financial performance shows that the ONCF has sufficient equity to finance additional maintenance needs generated by the project. Moreover, the technical solutions adopted during project design comply with the required standards, thus ensuring the sound performance of the facilities, given their operating costs and the effects of their environment. Furthermore, the steps taken to ensure 14

25 works control, surveillance and monitoring guarantee their good quality. All these arrangements augur well for the sustainability of the investments to be made. 4.7 Risk Management The main risks likely to jeopardize the expected project outcomes and its smooth performance are: (i) delays in the provision of counterpart resources; and (ii) a decline in phosphate traffic. Indeed, ONCF generates nearly 50% of its revenue from its commercial contract with OCP to transport phosphates; (iii) the increase in the cost of works relative to the estimated budget; and (iv) long lead times and significant delays in the execution of procurements for ongoing projects The mitigative measures are as follows: (i) as concerns counterpart funds, the ONCF has sufficient self-financing capacity estimated at an average of EUR 90 million per year during the project execution period. Furthermore, the ONCF can also resort to bond issues. The last two operations (October 2011 and July 2015), for a total amount of MAD 1.5 billion each, were successful. (ii) New passenger and freight strategies of the ONCF focus on the diversification of activities. On this last point, the Board adopted measures aimed at intervening in the national logistics development strategy in sectors such as cereals and oil products, and specifically: (a) the development of cereal silos in the railway stations; (b) the development of platforms for the installation of hydrocarbons storage facilities; (c) the development of dry ports connected to the main consumption centres (the MITA logistical area in Casablanca currently operational); and (d) development of the logistical integrative role for freight in Morocco. Furthermore, all OCP product types cannot be transported by pipeline, hence the need to resort to the railway. (iii) There are detailed design studies, a realistic cost estimate, an adequate provision for price contingencies, measures taken to ensure wide competition during the bidding process. (iv) Lastly, there is perfect understanding by the project management team, of the Bank's procurement rules and procedures and recourse to advance procurement actions. 4.8 Knowledge Development The main potential lessons from this project will come from the monitoring mechanism that will be established to document its outcomes and its impact. That mechanism will comprise: (i) monitoring of the various project activities executed by ONCF; (ii) impact evaluation at project completion by beneficiaries, including rail transport users, through periodic opinion polls commissioned by the ONCF; and (iii) analysis of the level of attainment of targeted development objectives, to be carried out by the High Commission for Planning and the Human Development Observatory. The reports produced for this purpose should be widely disseminated to various stakeholders in this project. V. LEGAL INSTRUMENT 5.1. Legal Instrument To finance the project, the Bank will use an AfDB loan of USD million granted to ONCF with a guarantee from the Kingdom of Morocco Conditions Associated with the Bank s Intervention Conditions Precedent to Loan Effectiveness The AfDB loan agreement shall become effective on its date of signature. The AfDB loan guarantee agreement shall become effective on the date of fulfilment by the Guarantor, to the Bank s satisfaction, of the conditions provided for in Section 5.01 of the General Conditions for Loan Agreements and Guarantee Agreements (sovereign entities). 15

26 Condition Precedent to First Loan Disbursement. Apart from the effectiveness of the Loan Agreement and the loan guarantee agreement, the first disbursement of loan resources shall be subject to fulfilment by the Borrower, to the Bank s satisfaction, of the conditions provided for in Section 12.02(a)(i) and (ii) of the General Conditions Other Conditions Furthermore, the Borrower must provide, to the satisfaction of the Bank, as the works progress and before any commencement of works in a given area, proof of compensation of persons affected by the project in the area, in accordance with the Bank's applicable rules and procedures, the environmental and social management plan (ESMP) and the Comprehensive Resettlement Plan Commitments The Borrower undertakes, to the satisfaction of the Bank, to: (i) (ii) cover the financing gap if the contract amount exceeds the amount of financing raised; execute and ensure execution of the project, ESMP and CRP by its contractors, in accordance with: (a) the Bank's rules and procedures; (b) national laws; and (c) recommendations, prescriptions and procedures contained in the ESMP and CRP; (iii) refrain from commencing works on a given area until the affected persons in that area have been fully compensated; (iv) provide the Bank with half-yearly reports on ESMP and CRP implementation, including, where applicable, any shortcomings and corrective actions initiated or to be initiated; and (v) provide the Bank with any document that is reasonably necessary for monitoring project implementation. VI. RECOMMENDATION Management recommends that the Board of Directors should approve the AfDB loan of USD million to the National Railways Authority, with a guarantee from the Kingdom of Morocco, to finance the rail infrastructure reinforcement project, in accordance with the terms and conditions set forth in this report. 16

27 ANNEX I: COMPARATIVE SOCIOECONOMIC INDICATORS OF MOROCCO Morocco COMPARATIVE SOCIO-ECONOMIC INDICATORS Year Morocco Africa Develo- ping Develo- ped Countries Countries Basic Indicators Area ( '000 Km²) Total Population (millions) , ,9 6,0 1,3 Urban Population (% of Total) ,1 39,9 47,6 78,7 Population Density (per Km²) ,0 37,8 73,3 24,3 GNI per Capita (US $) Labor Force Participation - Total (%) ,7 66,1 67,7 72,3 Labor Force Participation - Female (%) ,0 42,8 52,9 65,1 Gender -Related Dev elopment Index Value ,828 0,801 0,506 0,792 Human Develop. Index (Rank among 187 countries) Popul. Liv ing Below $ 1.25 a Day (% of Population) ,6 39,6 17,0... Demographic Indicators Population Growth Rate - Total (%) ,5 2,5 1,3 0,4 Population Growth Rate - Urban (%) ,1 3,4 2,5 0,7 Population < 15 y ears (%) ,9 40,8 28,2 17,0 Population >= 65 y ears (%) ,0 3,5 6,3 16,3 Dependency Ratio (%) ,3 62,4 54,3 50,4 Sex Ratio (per 100 female) ,8 100,4 107,7 105,4 Female Population y ears (% of total population) ,6 24,0 26,0 23,0 Life Ex pectancy at Birth - Total (y ears) ,2 59,6 69,2 79,3 Life Ex pectancy at Birth - Female (y ears) ,0 60,7 71,2 82,3 Crude Birth Rate (per 1,000) ,5 34,4 20,9 11,4 Crude Death Rate (per 1,000) ,3 10,2 7,7 9,2 Infant Mortality Rate (per 1,000) ,1 56,7 36,8 5,1 Child Mortality Rate (per 1,000) ,4 84,0 50,2 6,1 Total Fertility Rate (per woman) ,7 4,6 2,6 1,7 Maternal Mortality Rate (per 100,000) ,0 411,5 230,0 17,0 Women Using Contraception (%) ,1 34,9 62, ,0 2,5 2,0 1,5 1,0 0,5 0, GNI Per Capita US $ Morocco Africa Population Growth Rate (%) Morocco Africa Health & Nutrition Indicators Phy sicians (per 100,000 people) ,0 46,9 118,1 308,0 Nurses (per 100,000 people)* ,0 133,4 202,9 857,4 Births attended by Trained Health Personnel (%) ,6 50,6 67,7... Access to Safe Water (% of Population) ,6 67,2 87,2 99,2 Healthy life ex pectancy at birth (y ears) ,0 51, Access to Sanitation (% of Population) ,4 38,8 56,9 96,2 Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS ,2 3,7 1,2... Incidence of Tuberculosis (per 100,000) ,0 246,0 149,0 22,0 Child Immunization Against Tuberculosis (%) ,0 84,3 90,0... Child Immunization Against Measles (%) ,0 76,0 82,7 93,9 Underw eight Children (% of children under 5 y ears) ,1 20,9 17,0 0,9 Daily Calorie Supply per Capita Public Ex penditure on Health (as % of GDP) ,0 2,7 3,1 7, Life Expectancy at Birth (years) Morocco Africa Education Indicators Gross Enrolment Ratio (%) Primary School - Total ,5 106,3 109,4 101,3 Primary School - Female ,5 102,6 107,6 101,1 Secondary School - Total ,9 54,3 69,0 100,2 Secondary School - Female ,4 51,4 67,7 99,9 Primary School Female Teaching Staff (% of Total) ,1 45,1 58,1 81,6 Adult literacy Rate - Total (%) ,1 61,9 80,4 99,2 Adult literacy Rate - Male (%) ,1 70,2 85,9 99,3 Adult literacy Rate - Female (%) ,6 53,5 75,2 99,0 Percentage of GDP Spent on Education ,2 5,3 4,3 5,5 Environmental Indicators Land Use (Arable Land as % of Total Land Area) ,0 8,8 11,8 9,2 Agricultural Land (as % of land area) ,7 43,4 43,4 28,9 Forest (As % of Land Area) ,5 22,1 28,3 34,9 Per Capita CO2 Emissions (metric tons) ,2 1,1 3,0 11, Infant Mortality Rate ( Per 1000 ) Morocco 2010 Africa Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports. Note : n.a. : Not Applicable ; : Data Not Available. janvier 2016 I

28 ANNEX II: TABLE OF BANK OPERATIONS IN MOROCCO AS OF 14 SEPTEMBER 2015 MAROC - PORTEFEUILLE DES OPERATIONS EN COURS D'EXECUTION AU 14 Septembre 2015 Nbre Nom du Projet Date d'approbation Date de signature Date de mise en vigueur Date de clôture Age moyen projet (an) Age relatif du projet (an) delai mise en vigeur (mois) Monnaie du prêt Montant approuvé en monnaie du en Unités de prêt (total par compte sect. en EUR) Décaissement cumulé en monnaie du prêt par projet / en euro par secteur Montant non Annulation en décaissé en monnaie du monnaie du prêt prêt par projet /en EUR par secteur Taux décaissements cumulés (en %) Part dans le portefe Project. Actuel uille 2015 SECTEUR AGRICOLE 4,7 0,9 3, ,7% 70,6% 2,4% Projet d'ap. tech. prom. jeunes entrepreneurs janv May-12 4-May déc.-15 3,7 0,9 3,8 UC ,0% 100,0% DON PRI Projet d'ap. au Prog. nat. d' eco. d'eau d'irrig déc mai-14 2-Jul Dec-16 5,8 0,8 6,7 EUR ,6% 70,0% (PAPNEI) 3 Appui tech. dév. Infrastr. d irrigation - DON PRI 21-févr mars mars juin-15 4,6 1,0 0,8 UC ,0% 100,0% SECTEUR TRANSPORTS 5,6 0,9 6, ,3% 50,2% 23,7% 4 3ème Projet aéroportuaire 16-avr mai oct déc.-15 6,4 1,0 6,3 EUR ,0% 63,0% 5 Projet d'augm. de capa. Ferrov. Tanger-Marrakech 17-déc mars Jun déc.-16 4,7 0,8 6,5 EUR ,5% 40,0% SECTEUR ENERGIE 2,7 0,4 3, ,5% 50,8% 46,0% 6 Progr. déve. réseau transp. et réparti. élect. 02-déc déc Apr déc.-17 5,8 0,7 4,9 EUR ,5% 67,0% Projet de la centrale solaire de Ouarzazate 16-mai nov nov déc.-16 3,3 0,7 6,2 EUR ,6% 100,0% 7 Projet de la centrale solaire de Ouarzazate (CTF) 16-mai nov nov déc.-16 3,3 0,7 6,2 USD ,0% 100,0% 8 Complexe Solaire Ouarzazate NOORo II 03-déc déc déc déc.-19 0,8 0,1 0,5 EUR ,0% 15,0% Complexe Solaire Ouarzazate NOORo II (CTF) 03-déc déc déc déc.-19 0,8 0,1 0,5 USD ,0% 40,0% Complexe Solaire Ouarzazate NOORo III 03-déc déc déc déc.-19 0,8 0,1 0,5 EUR ,9% 15,0% Complexe Solaire Ouarzazate NOORo III (CTF) 03-déc déc déc déc.-19 0,8 0,1 0,5 USD ,0% 40,0% PERG 13-juin déc déc déc.-16 3,3 0,7 6,3 EUR ,0% 86,0% Parc Eolien AL KOUDIA AL BAIDA 13-juin déc déc déc.-16 3,3 0,7 6,3 EUR ,7% 30,0% Complexe Hydro M'Dez El Menzel 13-juin déc déc déc.-16 3,3 0,7 6,3 EUR ,0% 0,0% Parc Eolien Tanger 2 13-juin déc déc déc.-16 3,3 0,7 6,3 EUR ,0% 0,0% 9 Step Abdel Moumen 13-juin déc déc déc.-16 3,3 0,7 6,3 EUR ,0% 0,0% Parc Eolien AL KOUDIA AL BAIDA (FTP) 13-juin déc déc déc.-16 3,3 0,7 6,3 USD ,0% 38,0% Complexe Hydro M'Dez El Menzel (FTP) 13-juin déc déc déc.-16 3,3 0,7 6,3 USD ,0% 0,0% Parc Eolien Tanger 2 (FTP) 13-juin déc déc déc.-16 3,3 0,7 6,3 USD ,0% 0,0% Step Abdel Moumen (FTP) 13-juin déc déc déc.-16 3,3 0,7 6,3 USD ,0% 0,0% SECTEUR SOCIAL 2,9 1,2 1, ,2% 57,7% 0,1% 10 Appui strat. dével. enseig. Privés - DON PRI 11-mars mars juin déc.-14 4,5 1,2 3,0 UC ,0% 100,0% 11 Système Information Carte Sanitaire Don PRI 30-juil dec dec dec-16 2,1 0,2 UC ,7% 60,0% 12 Université numérique UIR 10-oct fev fev dec-17 1,9 0,2 UC ,8% 31,8% SECTEUR EAU ET ASSAINISSEMENT 3,6 0,7 4, ,9% 40,8% 15,4% Onzième Projet d'aepa Rabat-Casa 12-mai août janv déc.-16 5,3 0,8 8,2 EUR ,8% 60,0% 13 Onzième Projet d'aepa Rabat-Casa 12-mai août janv déc.-16 5,3 0,8 8,2 USD ,0% 60,0% 14 Douzième projet d'aep de Marrakech 7-nov déc déc déc.-18 2,9 0,5 1,4 EUR ,7% 10,0% Douzième projet d'aep de Marrakech 7-nov déc déc déc.-18 2,9 0,5 1,4 USD ,3% 10,0% 15 Etude schéma directeur AEP MOULOUYA- DON 10-janv mai mai déc.-15 2,7 0,9 4,4 UC ,0% 100,0% SECTEUR MULTISECTEUR 3,6 0,9 2, ,9% 77,7% 3,8% 16 Projet d'améliorat. du syst. de garantie - DON PRI 19-janv mars mars déc.-15 4,7 0,9 1,9 UC ,0% 100,0% 17 Projet de renf. du contr. marché. fin. - DON PRI 13-déc mars mars déc.-14 4,8 1,2 3,1 UC ,0% 100,0% Appui à la modernisation du cadre organisationnel févr mai mai déc.-18 2,5 0,4 3,1 UC ,8% 30,0% de gestion de la dette - DON PRI Etude sur la croissance et l' emploi au Maroc juin-12 7-sept sept déc.-15 3,2 0,9 2,4 UC ,0% 100,0% DON PRI PACEM 8-juil juil déc Appui à la Primature (Don PRI) Etude Stratégique DTFE (DON PRI) 21-mai juil déc.-17 UC Projet d'appui à l'élaboration du code monétaire et sept déc déc déc.-15 3,0 0,9 3,0 UC ,8% 60,0% financier marocain - DON PRI SECTEUR PRIVE 4,9 0,9 7, ,3% 95,3% 8,7% Fond Argan pour le développement 5,6 0,6 5, ,7% 30,7% 21 des infrast. 17-févr juil juil déc.-18 EUR 22 Prêt à l'office Chérifien des Phosphates 29-juin mai mai mai-15 4,2 1,1 10,5 USD ,0% 100,0% Récapitulatif: Répartition sectorielle des opérations Approbations (millions EUR) Situation des décaissements Montant du portefeuille Total % Agric; Multisect.; En Unités de compte ,0% 2,5% Tx déc. prév. fin 2015 Tx de décais. 09 Juin ,1% Prêts (11 projets) ,7% Sect. privé; Dons (11 projets) ,3% 95% 95% 9,0% Sect. En Euros privé; Agric; Multisect.; 8,8% 6,6% Transp.; 78% Actuel Proj ,6% Eau/ass.; 5,2% 71% 69% Montant Total des décaissements en Euros % 15,9% Transp.; 60% Prêts ,3% Dons % 50% Eau/ass.; 41% Taux de décaissement global 44,69% 57,2% 21,3% % 30% Prêts 44,62% 22% Dons 63,65% 321 Montant moyen par prêt (en UC) Delai moyen de mise en vigeur (mois) 4,2 Energ.; 158 Prêts 5,7 33,7% Dons 2,3 Energ.; 47,7% Age relatif du portefeuille (an) *** 0,8 Social; 0,1% Age moyen du portefeuille (an) 4, Prêts 4,4 Dons 3,4 35% II