Document of The World Bank · 2016. 7. 14. · PCS State-funded social insurance coverage (Prise en charge par l’Etat de la couverture sociale) ... Number of new enrolments with

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 68822-MA

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROGRAM DOCUMENT

ON A PROPOSED LOAN

IN THE AMOUNT OF EUR 75.1 MILLION (US$100 MILLION EQUIVALENT)

TO

THE KINGDOM OF MOROCCO

FOR A

FIRST SKILLS AND EMPLOYMENT DEVELOPMENT POLICY LOAN

May 14, 2012

Human Development Department

Maghreb Country Management Unit

Middle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official

duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Morocco - GOVERNMENT FISCAL YEAR

January 1st–December 31

st

CURRENCY EQUIVALENTS

US$1 = 8.4 Moroccan Dirham (MAD)

(Exchange rate effective as of April 25, 2012)

Weights and Measures: Metric System

ABBREVIATION AND ACRONYMS

AfDB

ALMP

African Development Bank

Active labor market policy

ANAPEC National Employment Promotion Agency (Agence nationale de

promotion de l’emploi et des compétences)

BAM Moroccan Central Bank (Bank Al-Maghrib)

CFAA Country Financial Accountability Assessment

CGEM Moroccan Employers‘ Federation (Confédération générale des

enterprises du Maroc)

CIP First employment contract (Contrat intégration professionnelle)

CNEA Public-Private Business Climate Committee (Comité national de

l’environnement des affaires)

CNEF National Education and Training Charter (Charte nationale de

l’éducation et de la formation)

CNSS National Social Security Fund (Caisse nationale de sécurité sociale)

CPE Pre-employment contract (Contrat de pré-emploi)

CPS Country Partnership Strategy

CSE Higher Council for Education (Conseil supérieur de l’enseignement)

DPL Development policy loan

EEP Education Emergency Program (Programme d’urgence éducation-

formation)

EU European Union

EU€ Euro (currency)

FCE Employment training contract (Formation contractuelle pour

l’emploi)

FDI Foreign direct investment

FQR Employment retraining contract (Formation qualifiante de

réinsertion)

FTA Free-trade agreement

GDP

GIZ

Gross Domestic Product

German Society for International Cooperation GNP Gross National Product

HCP National Statistics Office (Haut Commissariat au plan)

IBRD International Bank for Reconstruction and Development

ICT

IDB

Information and communications technology

Islamic Development Bank

IFC International Finance Corporation

ILO International Labor Organization

IMF International Monetary Fund

INE National Education Evaluation Agency (Instance nationale

ii

d’évaluation)

IPE Unemployment insurance scheme (Indemnité pour perte d’emploi)

JSAN Joint Staff Advisory Note

LDP Letter of Development Policy

MAD Moroccan dirham (currency)

MAGG General Affairs and Governance Ministry (Ministère des affaires

générales et de la gouvernance)

MCINT Trade Ministry (Ministère du commerce, de l’industrie et des

nouvelles technologies)

MDGs Millennium Development Goals

MEF Finance Ministry (Ministère de l’économie et des finances)

MEFP Labor Ministry (Ministère de l’emploi et de la formation

professionnelle)

MENA Middle East and North Africa

MEN Education Ministry (Ministère de l’éducation)

MESFCRS Higher Education Ministry (Ministère de l’enseignement supérieur,

de la formation des cadres et de la recherche scientifique)

MILES Macroeconomic performance, Investment climate, Labor market

policies and institutions, Education and skills, and Social protection

for workers

OCP Office chérifien des phosphates

OECD Organization for Economic Cooperation and Development

OFPPT National Vocational Training Agency (Office de la formation

professionnelle et de la promotion du travail)

ONDH National Human Development Observatory (Observatoire nationale

de développement humain)

PCS State-funded social insurance coverage (Prise en charge par l’Etat

de la couverture sociale)

PEFA Public Expenditure and Financial Accountability

PER Public Expenditure Review

PFM Public finance management

PNEI National Emerging Industries Agreement (Pacte national

d’émergence industrielle)

RAMED Health insurance for low income households (Régime d’assistance

médicale pour les économiquement démunis)

SEDP Skills Employment Development Program

SEDPL1 First Skills and Employment Development Loan

SEDPL2 Second Skills and Employment Development Loan

SME Small and medium enterprises

SOE State-owned enterprise

TIMSS Trends in Mathematics and Science Survey

TOT Terms of trade

US$ United States dollar (currency)

VAT Value-added tax

VSB Very small business

Vice President:

Country Director:

Sector Director

Sector Manager:

Task Team Leaders:

Inger Andersen

Simon Gray

Steen Lau Jorgensen

Yasser El Gammal

Nadine Poupart and Jeffrey Waite

MOROCCO

MOROCCO FIRST SKILLS AND EMPLOYMENT DPL

TABLE OF CONTENTS

LOAN AND PROGRAM SUMMARY ......................................................................................................... 2 I. INTRODUCTION ............................................................................................................................ 6 II. COUNTRY CONTEXT ................................................................................................................... 7

A. RECENT POLITICAL AND SOCIAL DEVELOPMENTS ......................................... 7 B. MACROECONOMIC ACHIEVEMENTS OVER THE LAST DECADE .................... 8 C. RECENT ECONOMIC DEVELOPMENTS IN MOROCCO........................................ 10 D. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ......................... 13

III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES ....................... 18 A. SECTOR BACKGROUND AND KEY ISSUES........................................................... 18 B. THE GOVERNMENT‘S PROGRAM ........................................................................... 23 C. PARTICIPATORY PROCESS ...................................................................................... 27

IV. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM ..................................................... 28 A. LINK TO COUNTRY PARTNERSHIP STRATEGY .................................................. 28 B. COLLABORATION WITH THE IMF AND OTHER DONORS ................................. 29 C. RELATIONSHIP TO OTHER BANK OPERATIONS ................................................. 30 D. LESSONS LEARNED ................................................................................................... 31 E. ANALYTICAL UNDERPINNINGS ............................................................................. 32

V. THE PROPOSED MOROCCO FIRST SKILLS AND EMPLOYMENT DPL ......................... 34 A. OPERATION DESCRIPTION ...................................................................................... 34 B. POLICY AREAS ............................................................................................................ 37

VI. OPERATION IMPLEMENTATION ............................................................................................. 46 A. POVERTY AND SOCIAL IMPACTS .......................................................................... 46 B. ENVIRONMENTAL ASPECTS.................................................................................... 49 C. IMPLEMENTATION, MONITORING AND EVALUATION .................................... 50 D. FIDUCIARY ASPECTS, DISBURSEMENT AND AUDITING .................................. 51 E. RISKS AND RISK MITIGATION ................................................................................ 52

ANNEX 1: LETTER OF DEVELOPMENT POLICY ................................................................................ 55 ANNEX 2: SEDP POLICY MATRIX ........................................................................................................... 73 ANNEX 3: FUND RELATIONS NOTE ....................................................................................................... 79 ANNEX 4: MAIN CONCLUSIONS OF THE ―MILES‖ STUDY ............................................................ 81 ANNEX 5. MACROECONOMIC DEVELOPMENTS OVER THE LAST DECADE ............................ 82 ANNEX 6: MOROCCO PUBLIC DEBT SUSTAINABILITY AND EXTERNAL FINANCING

REQUIREMENTS ......................................................................................................................................... 83 ANNEX 7: COUNTRY AT A GLANCE ...................................................................................................... 86

This Loan is being prepared by an IBRD team consisting of Nadine Poupart and Jeffrey Waite (Task Team Leaders),

Gustavo Demarco (Senior Economist), Stefano Paternostro (Lead Economist), Khalid El Massnaoui (Senior Economist)

Dorothée Chen (ETC), Alexandre Kolev (ITCLO), Ali Saana (Consultant), Rene Antonio Leon Solano (ETC), Anas

Abou El Mikias (Financial Management Specialist), Soukeyna Kane ( Senior Financial Management Specialist), Lamyae

Hanafi Benzakour (Financial Management Specialist), Jean-Charles de Daruvar (Senior Counsel), Hassine Hedda

(Finance Officer), Abdoulaye Keïta (Senior Procurement Specialist), Gael Grégoire (Senior Environement Specialist),

Eavan O‘Halloran (Senior Operations Officer ), Hana Salah (Consultant Social Safeguards), Fatiha Bouamoud (Program

Assistant) and Brigitte Franklin (Program Assistant). Peer reviewers were: Omar S. Arias Dias, Lead Economist,

(ECSH4); Jamil Salmi, Lead Education Specialist (HDNED); Truman G. Packard, Lead Economist (EASHD); and

Emanuela di Gropello, Lead Economist (EASHE). The team worked under the guidance of Simon Gray (Country

Director), Steen Lau Jorgensen (Sector Director), Roberta Gatti then Yasser El-Gammal (Sector Manager, Social

Protection and Employment) and Mourad Ezzine (Sector Manager, Education). Special thanks are due to the Ministry of

General Affairs and Governance of Morocco and the other concerned departments and institutions for their very

productive cooperation.

2

LOAN AND PROGRAM SUMMARY

MOROCCO

MOROCCO FIRST SKILLS AND EMPLOYMENT DPL

Borrower Government Of Morocco

Implementing Agencies Ministry of Labor and Vocational Training (Labor Ministry);

Ministry of Higher Education

Ministry of General Affairs and Governance

Ministry of Economy and Finance

Financing Data

IBRD Variable Spread Loan with 29 years maturity including

a 6-year grace period in an amount of Euro 75.1 million (US$

100 million equivalent).

Operation Type

Programmatic operation: First in a series of two operations

Number of tranches: One

Deferred Drawdown Option: No

Special Development Policy Lending: No

Crisis and Post-Conflict Situation: No

Main Policy Areas

I. Matching skills developed within the vocational training

and higher education systems to the needs of the labor

market (―flow‖)

II. Improving the effectiveness of intermediation services,

including active labor market programs (―stock‖)

III. Improving job quality

IV. Strengthening the labor market information system

Key Outcome

Indicators

Skills matching (“flow”):

Rate of internal efficiency of vocational training

programs covered by a programmatic contract, by

gender

University graduation rate in open-enrollment faculties,

by gender

Effectiveness of intermediation services (“stock”):

Insertion rate (term/open contract) for State-funded

social insurance coverage ( PCS) beneficiaries, by

gender, after 6 months

Total number of First employment contract (CIP)

beneficiaries, by gender

Number of National Employment Promotion Agency

(ANAPEC) local offices

Number of new enrolments with ANAPEC, including

3

proportion of non-graduates , per year, by gender

Job quality:

Number of firms formerly operating in the informal

sector, registered annually for professional tax

Number of pilot regions signing a programmatic

contract with the State for implementing the national

strategy for the promotion of micro-enterprises.

Number of non-salaried workers registered with

National Social Security Fund

Labor market information system:

Number of Active labor market policies (ALMPs) that

have been the subject of an impact evaluation or a

panel evaluation

A program of surveys and studies, aimed at responding

to the needs of the labor market and social protection,

is carried out.

Program Development

Objective(s) and

Contribution to CAS

The development objective of the Skills and Employment

Development Policy Loan (SEDPL1) program is to support the

Government of Morocco to implement its program of

improving skills, productivity and quality of employment.

Support to skills development and employment is a key

component of the Country Partnership Strategy (CPS).

SEDPL1 will contribute to achieving the first and second

pillars of the CPS: (i) encouraging growth, competitiveness

and employment; and (ii) improving the quality of service

delivery to citizens.

Risks and Risk

Mitigation

The following main risks are identified:

Political Risk. The events in Morocco since the Arab Spring

represent real pressure for meaningful and quick change and

there are high expectations among the population that

proposed reforms will be implemented in a credible manner.

The new Government‘s articulated reform agenda – and the

discussions that the Bank has held with key Ministries to date

– confirm that there is a credible and strong commitment to the

proposed reforms. The envisaged agenda has broad support

and the Government has reiterated its willingness to continue

to work for the quick implementation of key measures that

should not be delayed in light of political constraints. The

Bank team will continue to monitor the political evolution

closely and will continuously assess the potential for political

developments to influence the implementation of the Bank‘s

program and this operation. The Bank will stand ready to

adapt the program, and particularly specific reform measures

supported by this DPL, to measures and reform areas that

become relevant. In addition, the Government‘s 2012-2016

employment plan could raise large expectations among the

4

population that, if unmet, could have political and social

repercussions.

Macro-economic Risks. These risks include: the possible

deterioration of the on-going global economic difficulties; the

further impact of poor weather on the agricultural sector, and

the high prices of food and energy. Should the current global

economic uncertainty further deteriorate, especially if

European stagnation evolves into a recession, Morocco would

face reduced growth prospects. Continued low rainfall could

potentially further effect agricultural growth forecasts and

overall growth rates. Furthermore, should oil prices remain at

current levels for the year, Morocco would likely see its

growth prospects reduced by about 0.5%. The management

and mitigation of macro-economic risk are predicated on the

new Government‘s strong commitment to fiscal and

competitiveness reforms. The mitigating measures on

agriculture include support to farmers and possibly suspension

of import duties on cereals. The Government is devising

strategies to cope with potentially sustained high oil prices,

including requesting Bank support to develop mechanisms to

hedge commodity price risk. The Bank‘s continued

engagement through its program and other donors‘ stepped up

engagement will support the Government in its efforts to

ensure the overall medium term macroeconomic sustainability.

Governance Risk. Improving governance remains central to

Morocco development efforts as there are risks posed by

implementation deficiencies, political interference and a lack

of accountability. The new Government‘s governance reform

agenda is ambitious as regards the commitment to addressing

these issues. The new Constitution and the strengthening of the

country‘s overall governance structure now provide the

Government with an opportunity to address past shortcomings

and consolidate the principles of modern governance. The

new Constitution also obliges a participatory process in

Government. The envisaged agenda has broad support and the

Government has reiterated its willingness to continue to work

for the quick implementation of key measures that should not

be delayed in light of political constraints. However, while

there is a strong degree of continuity – confirming that several

sector plans remain valid - the new Government‘s program has

not yet been fully articulated which raises some concerns

about lack of concreteness. The Government is working

towards articulating more clearly reform priorities, recognizing

that this will demand more in-depth and substantive reforms

rather than some of the more technical ones pursued to date,

which will require political courage and building consensus

5

amongst stakeholders. The Bank will help mitigate this risk

though its dialogue and TA support to the further articulation

of sectoral programs and reform priorities, and through more

intensive efforts to ensure an effective accompaniment to

reform implementation. It is advising on the sequencing of

reform implementation and on critical communication aspects

which aim for developing better shared ownership amongst

players. Morocco also benefits from an active and vocal civil

society with many mature and competent CSOs in action who

can play a key role.

Implementation Capacity Risk. While the government

departments (Labor, Higher Education, General Affairs and

Governance, Economy and Finance) at the central level have

significant capacity in administration and oversight, much of

the success of implementing some of the policy measures will

rest with various decentralized entities (e.g., university

faculties, ANAPEC offices, and CNSS offices). These local

entities vary in their implementation capacity, but all will

require access to information about the policy measures (e.g.,

objectives, timelines, implementation steps, appropriate

guidelines and system tools) to enable them to respond

appropriately to instructions (e.g., legal texts) issued by the

central government. The Bank will take advantage of regional

TA activities (e.g., MENA university governance score cards)

to continue building technical capacity in these decentralized

entities. The Employment TA being delivered is strengthening

the capacity of the Ministry of Labor in the following areas: (i)

designing and implementing the 2012-2106 employment

promotion plan, including ALPMs; (ii) strengthening the labor

market information system; and (iii) preparing the Vocational

Training Law, which inter alia will provide for the governance

and financing of vocational training. CNSS already has a solid

capacity as evidenced by its success in implementation of the

2009-2011 extension strategy.

Program Coordination Risk. Both SEDP loans will be

implemented by a large number of Government entities. The

General Affairs and Governance Ministry (MAGG) will be in

charge of coordinating the program, a role that the ministry has

played satisfactorily in the past. Bank missions and day-to-day

follow-up by field-based staff will help MAGG perform this

role, as has been the case during preparation. The Bank will

also promote government ownership of program coordination

through thematic workshops that involve all parties laying the

groundwork for a common agenda. This has been done, for

example, on the labor market information system.

Operation ID P120566

6

IBRD PROGRAM DOCUMENT FOR A

PROPOSED FIRST SKILLS AND EMPLOYMENT DEVELOPMENT POLICY LOAN

TO THE KINGDOM OF MOROCCO

I. INTRODUCTION

1. As part of the World Bank program in Morocco outlined in the Country Partnership

Strategy (FY10-FY13), this Program Document proposes a First Skills and Employment

Development Policy Loan (SEDPL1) for an amount of EU€ 75.1 million (US$ 100 million

equivalent). This operation is the first of a series of two single-tranche operations of 18

months each which will support the Government of Morocco to implement its program of

improving skills, productivity and quality of employment through four pillars: (i) matching

skills developed within the vocational training and higher education systems to the needs of

the labor market; (ii) improving the effectiveness of intermediation services, including active

labor market programs; (iii) improving job quality; and (iv) strengthening the labor market

information system.

2. While Morocco has made commendable progress in bringing about a steady

reduction in the high unemployment rate, unemployment continues to remain one of the most

critical development challenges for the country. The creation of quality jobs, i.e., jobs that

make a greater contribution to poverty reduction, reduce risk, have above-average

productivity, and do not conflict with human rights is a primary concern to policy makers.

The lack of jobs, including ―quality jobs‖, has limited the extent to which the sustained

economic growth of the past decade can be widely shared and eventually translated into

poverty reduction. Unemployment rates are especially high among the highly-schooled youth

and new labor market entrants. Labor force participation among women is low. Informality

is rampant, involving the majority of the labor force, and is associated with low-quality/low-

value-added jobs. Low quality and insufficient employment pose a risk to social cohesion and

security, particularly in a region where a large cohort of unemployed and out-of-the-labor-

force young people may feel disillusioned about their ability to participate productively in

economic life. While addressing these issues was important for poverty reduction and social

inclusion before the Arab Spring, it has become even more important because it also

determines future political stability.

3. The creation of ―more and better jobs‖ requires a structural transformation of the

Moroccan economy, which in turn calls for a comprehensive and coordinated set of policies in

several key areas: (i) stability of the macroeconomic environment; (ii) an improved business

environment and a trade policy that supports the competitiveness of Moroccan products; (iii) a

financial sector that better serves smaller firms; (iv) a labor force that is better trained; (v)

effective social protection; and (vi) strengthened labor market institutions. The proposed

Skills Employment Development Program (SEDP) covers areas (iv), (v) and (vi). It is

complementary to other proposed operations within the Bank‘s program in Morocco, which

address areas (iv): The Education Development Policy Loans, and areas (i), (ii) and (iii): the

Competiveness Development Policy Loan, and the Financial Sector Development Policy

Loan.

7

4. In 2008, the Bank prepared a comprehensive analysis1 of factors impacting

employment in Morocco using the MILES2 framework, and provided a set of policy

recommendations to address them. The report, which was endorsed by the Government, was

prepared in consultation with a multi-sector steering committee set up under the chairmanship

of the Labor Ministry. It led the Government to request the proposed development policy

loan (DPL), and provides its conceptual framework. The proposed SEDP will support the

implementation of some of the report‘s short-term recommendations.

II. COUNTRY CONTEXT

A. RECENT POLITICAL AND SOCIAL DEVELOPMENTS

5. The Arab Spring has shown the powerful consequences of exclusion and high levels

of youth unemployment in the Middle East and North Africa (MENA) region. In particular,

jobs are at the forefront of attention and unemployment is the main political and economic

issue facing Governments. The wave of democratization that has swept the MENA region

since the start of the ―Arab Spring‖ has also enveloped Morocco. Morocco‘s experience of

the Arab Spring has been a reasonably peaceful one with social demonstrations taking place

regularly across the country and only sporadic outbursts of violence noted. This social

movement, known as the ―February 20 Movement‖, is calling for political change, a curbing

of corruption and a more inclusive development process. King Mohammed VI responded by

proposing, in March 2011, a broad and comprehensive package of political reforms that

gathered the support of the population through a constitutional referendum held on July 1,

2011. Early elections, held on November 25, were won by the ―Parti de la Justice et du

Développement‖ (PJD), an Islamist party that had traditionally been in active opposition and

has seen its support increasing steadily in recent years. The discussions among political

parties that followed led to the announcement, in early January 2012, of a four-party coalition

Government, with the head of the PJD becoming the Head of Government (previously Prime

Minister).

6. The new constitution sets the basis for a more open and democratic society, provides

mechanisms for the construction of a modern state of law and institutions, and lays the

foundation for extended regionalization.

7. The Arab Spring protests and constitutional changes represent real pressure on the

Moroccan State for meaningful and quick change. While the people seem to be willing to

support the new Government and its mandate, they are expecting and indeed demanding that

the new Government break with the past and usher in more credible and faster reforms,

notably in the areas of job creation and improvement of the quality of public services

delivered. Morocco is thus on the threshold of potentially profound social, political and

1 World Bank. 2008. Développement des compétences et protection sociale dans le cadre d’une stratégie

intégrée pour la création d’emploi, Mimeo, Washington D.C.: World Bank. (or ―MILES report‖) 2 MILES, the name of the framework, is the acronym summarizing five elements determining job performance:

Macroeconomic performance, Investment climate, Labor market policies and institutions, Education and skills,

and Social protection for workers. See Annex 4 for key conclusions of MILES study.

8

economic transformation. If the new Government can assume more ownership of the political

process and genuinely deliver, then this will go a long way to transforming the social and

political landscape of Morocco.

B. MACROECONOMIC ACHIEVEMENTS OVER THE LAST DECADE

8. Over the last decade, Morocco pursued sound macroeconomic policies and

continued a process of reforms. As a result, the growth pattern shifted to a higher level,

averaging 4.9 percent over 2001-10, much higher than the average rate of the 1990s (2.8

percent). The growth performance allowed gross domestic product (GDP) per capita to

almost double over the last decade to reach the equivalent of US$3,100 in 2011. Furthermore,

sound fiscal policies led to the consolidation of public finance, allowing the budget to run

surpluses in 2007 and 2008 (averaging 0.3 percent of GDP)3 and, in 2009 and 2010, to

withstand the impact of the global crisis and higher world prices of basic commodities.

Budget deficits were manageable at 2.2 and 4.7 percent of GDP, respectively. Debt declined

steadily from 62% in 2005 to 50.3% of GDP in 2010, before increasing to 52.9% of GDP in

2011. Annex 5 presents additional details of Morocco‘s economic achievements in the last

decade.

9. Monetary authorities pursued appropriate monetary policy geared towards

maintaining low and stable rates of inflation (an average 1.9 percent since 2005)4 and

maintained adequate financial sector supervision. Furthermore, the country sought to deepen

its integration into the world economy through the signing of many Free Trade Agreements

(FTAs) culminating with the recent ―Advanced Status‖ awarded by the European Union.

Overall, these efforts have led to a stable macroeconomic stance, and a sound financial sector.

Based on these achievements, Morocco gained an ―investment grade‖ rating in 2007 from

Fitch, which was confirmed again in 2009. In March 2010, it received the ―investment grade‖

again from Standard & Poor (BBB- with stable outlook). Investment ratings were confirmed

once more in 2011, despite ongoing world economic turmoil, further contributing to

reinforcing the confidence of investors, both domestic and foreign.

10. With the involvement of the private sector and SOEs, Morocco designed and is

implementing specific sector strategies to increase investment and employment in sectors of

the economy with high growth potential. Thus, investment in these sectors has increased,

strengthening the fundamentals of the economy. While gross investment hovered around 25

percent of GDP on average in the 1990s, it increased rapidly in the 2000s, to reach a rate of 38

percent of GDP in 2008 before receding to around 35 percent of GDP in 2010. Investment

has been characterized by strong participation of the private sector and State-Owned

Enterprises with a share of 63 percent of the total (Figure 1).

11. High Foreign Direct Investments (FDI) inflows (an average 4.3 percent of GDP over

the last five years) also contributed to reinforce gross investment. These higher investment

rates geared to dynamic sectors led to improved growth potential of the Moroccan economy

and reduced volatility. Higher investment also improved the employment situation with the

3 In this document Public Finance data do not include privatization receipts unless stated otherwise.

4 Inflation as measured by the Consumer Price Index.

9

number of jobless shrinking from 13.6 percent in 2000 to 8.9 percent in 2011, although efforts

are necessary to further reduce unemployment among young people, especially in urban areas.

Figure 1. Rising investment, in percent of GDP

Source: Moroccan Government and Staff estimates.

12. Reforms triggered positive changes in the Moroccan economic structure but

additional steps are necessary to improve performance in the manufacturing sector. The

structure of production changed in favor of services with both primary and secondary sectors‘

shares in GDP declining over time. The shrinking of the secondary sector‘s share is mainly

due to slower development of manufacturing whose share in GDP has steadily declined over

the last two decades, denoting a weakness of the productive fabric that reduces its productive

capacity and hinders its long-term growth and development. This weakness stems from the

slow structural transformation in the manufacturing sector, which also explains the modest

results of Moroccan exports. The latter continue to be concentrated around relatively

undiversified, low knowledge, low value-added, traditional products. Consequently, exports

do not fully benefit from trade dynamics of Morocco‘s partners and thus have been unable to

fulfill their potential for contributing to growth and job creation.

13. As a result of all these efforts, absolute poverty has decreased sharply. However,

economic vulnerability remains widespread and progress is necessary to improve lagging

human development outcomes. Absolute poverty decreased from 15.3 percent to roughly 9

percent between 2001 and 2007, but economic vulnerability (near-poverty) remains

widespread, meaning that a quarter of population - 8 million people - remains either in

absolute poverty or under constant threat of poverty. Moreover, the partial closure of the

rural-urban gap has not cancelled entrenched disparities: 70 percent of poverty in Morocco is

still rural. In 2007, the urban poverty rate was 4.8 percent compared to 14.5 percent in rural

areas. As inequality increased in both urban and rural areas to reach unprecedented levels,

growth for the poor was slower than the average growth and it was still below the levels

needed to reduce poverty by half in 20 years. There has been a remarkable increase in access

to education, but overall illiteracy rates and gender disparity in access to secondary education

remain very high. Both education quality and learning outcomes lag behind those of other

countries with similar income levels. Even with progress in increasing overall life expectancy

and reducing average infant mortality rate, levels of infant and maternal mortality remain

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2004 2005 2006 2007 2008 2009 2010

Private & SOEs Households Public Administration

Changes in stock FDIs, gross (right axis)

10

high, and lag MDG targets. In sum, inequality and urban-rural disparities in poverty and

social outcomes remain a challenge.

C. RECENT ECONOMIC DEVELOPMENTS IN MOROCCO

14. Despite the global economic slowdown, the Moroccan economy has proved resilient

in 2011. The economy grew at an estimated 4.8 percent,5 recovering from the lower 3.7

percent registered in 2010. In a context of economic slowdown in European countries, the

main driver of Moroccan growth has been domestic private consumption (up 6.5 percent)

supported by public policies implemented in early 2011. In addition to the stimulus package

implemented over the 2008-2010 period to support the income of the population and help the

most affected sectors,6 the Government implemented a new set of measures in the spring of

2011. These additional economic and social measures were implemented to respond to

demands for political and economic reforms. Thus, the Government decided to increase

salaries of public employees by MAD 600 net per month7 and minimum wage by 15 percent

in two steps (10 percent in July 2011 and 5 percent in July 2012). It also decided to raise the

minimum pension by almost 67 percent to the benefit of some 700,000 retired employees and

their families, and to provide them with easier access to consumption credit.

15. The Government also devised employment strategies to help young unemployed

graduates have better access to jobs suited to their skills both in the public and private sector.

First, the Government redesigned its planned hiring policy to reserve for young graduates

some 4,300 positions, mostly in key priority sectors (including the social sectors). Second, it

supported large state-owned enterprises (SOEs) to create additional job positions to absorb

part of the unemployed, including offering the option of government financing to help

improve their skills. In addition, the Government adopted measures for the very small

businesses (VSB) to enhance their job-creation potential. These include a simplified taxation

system, adapted schemes to reduce employer share of social security coverage, and specific

bank financing backed by a guarantee fund. Already the Finance Act 2011 had introduced

major incentives for VSB, which included reduced corporate profit tax to 15 percent instead

of 30 percent, a tax amnesty for businesses that integrate the formal sector, and tax incentives

for individual VSB opting to transform into a corporation.

16. The reform efforts of expenditure and tax management and active debt management

over the last few years have been critical in maintaining public finance on a sustainable path.

In recent years, public finances continued to be well managed despite the impact of the global

crisis and higher world prices of basic commodities. Key reforms translated into better

control of the Government‘s recurrent public expenditures, enhanced tax collection, and

5 Source: HCP.

6 The income support package implemented over 2008-2010 was mostly benefiting low income employees. It

included an increase in 2008 of 10 percent in the wages of civil servants at the lower end of the salary scale and

the minimum wage for private sector employees. Furthermore, the marginal income tax rate was progressively

cut from 42 percent to 38 percent. At the same time, the upper end of the exempt income bracket was extended.

Measures were also implemented to ensure employment preservation and to support firms most affected by the

crisis (such as guarantees on loans; rescheduling of debt; and help with export insurance). The total budgetary

gross cost of the stimulus package has been estimated by the Government at MAD 21 billion (over the 2008-

2010 period) or 2.7 percent of 2010 GDP. 7 Salary revalorization for public employees represents more than 28.5 percent of the legal minimum wage in the

private sector.

11

declining public debt ratio to GDP. In this context, the budget deficit was limited to 2.2

percent of GDP in 2009 and 4.7 percent in 2010, despite the reduction of corporate and

personal tax rates, the slow-down of economic activities following the global crisis, and the

introduction of the stimulus package. These deficits were manageable thanks to the fiscal

space resulting from good performance of public finances that were in slight surplus in 2007

(0.2 percent of GDP) and in 2008 (0.4 percent of GDP).

17. However, data on budget execution for 2011 show that the budget deficit has now

reached high levels. Available data indicate a total budget deficit of around 6.8 percent of

GDP, much higher than the targeted 3.6 percent set by the Budget Law 2011. In addition to

the implementation of public wage rises, the high deficit is mainly explained by increasing

subsidy expenditures due to high world prices of food and fuels. The current open subsidy

system represents a worrisome contingent liability that undermines the medium term

sustainability of public finances. Nevertheless, despite its clear shortcomings, in the absence

of a targeted, efficient, and well managed social protection system, subsidizing basic food and

fuels constitutes in the eyes of the Government the best second option to prevent exacerbating

the ongoing demands for better living conditions and more jobs in a delicate social context.

Although the costly and inefficient universal subsidy system benefits mostly the non-poor (the

population in the two lowest consumption deciles benefit from 12.5 percent of subsidies

only), the small share accruing to the poor and vulnerable remains to date the key social

protection mechanism in place. There are, however, concrete indications that the Government

is now planning to reform the overall system and design a new social protection model that is

more cost effective and better targeted.

Table 1- Subsidies in percent of GDP

Commodities 2007 2008 2009 2010 2011 Food 1.0 1.1 0.7 0.7 0.9 Fuels 1.7 3.5 1.1 2.9 5.1 Total Subsidies 2.7 4.6 1.7 3.6 6.0

Source: Moroccan Authorities and Bank staff estimates

18. The deficit would have been much higher without the measures taken by the

Government to improve tax revenues and reduce non-priority recurrent expenditures. In an

effort to bring the budget deficit to reasonable levels, the Government identified expenditure

items that would not endanger the good functioning of public services and asked most of the

ministries to reduce related spending by 10 percent. The outcome was positive, as non-wage

recurrent expenditures dropped by 1.5 percent. This effort, however, was not enough to

compensate for the outstanding rise of subsidies and wages. Subsidies increased to a

historical record level of US$6 billion (MAD 48.8 billion) in 2011, which is 79.6 percent

higher than that of the previous year. In terms of GDP, they represented 6 percent, compared

to 3.6 percent in 2010 (Table 1). In addition, the revalorization of salaries for public

employees undertaken by the Government increased wage outlays by 12.4 percent, thus

reversing the downward trend of wage-to-GDP ratio triggered since 2005. As a result, current

expenditure growth reached a high 19.4 percent. At the same time, investment spending also

gained 6.1 percent, which is a positive sign in the sense that expenditure containment is not

achieved through cutting down investment.

12

19. Financing the budget deficit is likely to have added only limited pressure to the

domestic money market thanks to substantial revenues from privatization operations. To ease

the budgetary pressures, the Government, on an exceptional basis, resorted to ceding 20

percent of its shares in a leading public bank - Banque Populaire - to privately-owned

affiliated regional banks. The operation generated the equivalent of US$690 million (MAD

5.3 billion).8 Overall, the central government debt increased by only 2.6 percent of GDP in

2011 to around 52.9 percent of GDP (of which 12.1 percent of GDP is hard currency

denominated). This debt level remains manageable provided the Government takes measures

to consolidate public finances, notably through progressively reforming the subsidy system

and controlling the evolution of the wage bill, while scaling up its tax reform.

20. The Government and the Central Bank (BAM) showed continued commitment to

control inflation. Subsidizing basic food and fuels remains one of the key policies of the

Government to control inflation. Helped by prudent monetary policy, domestic markets

protection from increasing world food and fuel prices and enhanced domestic food supply,

inflation was low in 2011 ( 0.9 percent). This rate is the same as that of 2010 but much less

than the average of last 5 years (1.9 percent). Higher food prices (up 1.3 percent) explain most

of the inflation, while non-food prices have been low (up 0.6 percent). Inflation would be

considerably higher if the current subsidy system were not in place.

21. The trade deficit deteriorated significantly over 2011. In terms of GDP, the trade

deficit worsened by 3.6 percentage points, from 19.5 percent in 2010 to 23.1 percent in 2011

following an increase of nominal imports (20.1 percent) compared to a less pronounced

growth in exports (16.3 percent). The deterioration is largely explained by the soaring world

prices of basic commodities, mainly food and fuels, but also by increasing imports volume to

meet the needs of the productive fabric, which continues to suffer from high import content.

The performance of exports continued to be lackluster (exports volume stagnated in 2011)

reflecting their low diversification and overall lack of competitiveness of the Moroccan

economy. This largely explains why Moroccan exports have not been able to fully benefit

from the many FTAs signed over the last decade, such as those with the EU, the USA, and

Turkey.

22. The current account deficit significantly deteriorated over 2011; foreign exchange

reserves also decreased but remain at acceptable levels. The current account deficit

represented the high level ratio to GDP of 8.0 percent compared to 4.5 percent of GDP in

2010. The current account deficit would have been even higher without the positive evolution

of worker remittances (up 7.6 percent) and of tourism receipts (up 4.8 percent). On the

financing side, gross FDIs continued to flow (MAD25.7 billion or US$3.2 billion) but

regressed by 26.8 percent compared to 2010, while net FDIs increased by 122 percent.

Overall this indicates improved confidence in the Moroccan economy as FDI disinvestments

were low in 2011 (US$0.6 billion) compared to those of the previous year (US$2.7 billion).

Net international reserves also declined by US$3.4 billion by end 2011. They amounted to

US$19.7 billion end 2011, down from US$23 billion in December 2010. They remain,

8 This sale should be viewed as a one-off option for the authorities given the particular ownership structure of the

Banque populaire. By law 50 percent of privatization receipts must be allocated to the Fond Hassan II (an off

budget public entity) The other 50 percent is devoted to a special account for public investment that in principle

could be used to finance budget expenses should at the end of the year produce a positive balance.

13

however, at a comfortable level of 5.1 months of imports of goods and services versus 6.8

months the previous year.

23. Monetary policies remained appropriate. In 2008, the BAM resorted to raising the

reference lending rate (plus 25 basis points in September 2008) to contain soaring credit and

inflation, while it relaxed its policy to enhance liquidity in the face of the global crisis. As

liquidity tightened and inflationary pressures started to ease over the second half of 2008

through 2009, BAM relaxed gradually the money reserve rate reducing it from 15 to 12

percent January 2009, and then to 10 percent in July 2009. BAM decided to further cut the

money reserve rate to 8 percent in October 2009 and to 6 percent starting April 2010 to ease

the pressure on liquidity, thereby allowing Banks to be able to cope with the new money

demands while contributing to keeping interest rates close to the BAM‘s policy rate. It has

also cut its policy rate by 25 basis points in March 2009 to reach 3.25 percent, and cut it again

in March 2012 to 3 percent after predicting an economic slowdown for the year.

24. In 2011, monetary policy has been less restrictive than in 2010. As BAM was more

receptive to liquidity requests from the banking sector, money supply accelerated to 6.8

percent at end-December 2011, up from 4.9 percent registered in 2010. Nevertheless, credit to

the economy slowed marginally to 10.3 percent compared to 10.7 percent registered in 2010

mainly due to a decline in equipment credit (5.1 percent in 2011 compared to 16.9 percent in

2010). Credit to all other sectors increased and most notably for rolling capital (up 19.9

percent compared to 5.9 percent), credit to housing (up 10.1 percent versus 8.7 percent), and

credit to consumption (up 10.5 percent versus 8.1 percent). The share of non-performing loans

in total loans increased marginally to 4.2 percent instead of 4.1 percent.

25. The authorities are considering a possible move to a more formal inflation targeting

system in conjunction with a more flexible exchange rate and the BAM has the necessary

prerequisites to manage such a change. However, the timing of this reform should be taken in

careful consideration as it requires measures to ensure fiscal sustainability especially with

regards to reforming the subsidy system so as to prevent a negative impact on financial

stability.9 The current exchange rate regime has contributed to macroeconomic stability yet,

given the rigidities of the economy, the recent trends in the current account balance would

suggest that it could possibly be undermining international competitiveness. Recent IMF

estimates, however, are not conclusive as the analysis of the deviation from the equilibrium

exchange rate provides diverging results depending on the methodology implemented. Hence

additional scrutiny would be in order to fully appreciate among others the impact of the

current exchange rate on the external competitiveness of the Moroccan economy.

D. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY

26. Medium term macroeconomic prospects of Morocco will be partially affected by the

developments in the global economy and particularly in Europe – Morocco‘s main trade

partner. The anticipated stagnation of economic activities in Europe in 2012 and its slow

recovery thereafter, will negatively impact Moroccan exports and thus growth. In addition, for

2012 current forecasts indicate that growth will be adversely affected by the agricultural

sector which accounts on average for about 15 percent of GDP. However, to partially

9 See also: Staff Report for the 2011 Article IV Consultation. IMF; October 2011.

14

compensate for the sluggish external demand, Morocco is expected to benefit from the effect

on domestic demand of the fiscal stimulus programs implemented over the last few years and

maintained for 2012 as well. Indeed, the outlook is predicated on the Government sustaining

the reform momentum of the last few years to achieve the ambitious public investment

programs it devised and to continue implementing the main sector strategies, thus further

consolidating economic diversification, growth potential, and domestic demand. Under these

conditions, the growth rate will slow-down to around 3.0 percent in 2012, before improving to

around 5.1 percent in 2014.

27. Should the underlying sources of growth be slow to materialize, growth prospects

would have to be adjusted downward. A potential deterioration particularly in Europe, would

negatively impact the medium term macro-economic outlook through reduced prospects on

exports, including tourism, as well as on workers‘ remittances and FDI flows. Similarly,

sustained high commodity prices, a deterioration of the regional context and prolonged global

financial uncertainties would have an adverse impact on Morocco‘s prospects. Moreover,

there is a potential risk that even pre-crisis growth levels might not be sustainable over the

medium term if internal demand remains the key driver of growth.

28. The budget deficit is expected to decrease to 5.1 percent of GDP in 2012 but remains

relatively high, mainly reflecting the continued impact of the social measures taken in 2011

and the persistent pressure of the subsidy system. The new Budget law10

presented to

Parliament in March 2012 reaffirms the commitment made in 2011 on a series of social

measures taken to ease social pressures. In addition, it envisages to (i) scale up new

recruitments particularly in key social sectors while maintaining the wage bill at the same rate

with respect to GDP registered in 2011; (ii) new measures to improve job insertion and (iii)

additional funding for specific programs target to the poor and vulnerable segments of the

population such as the scale up of the medical insurance program RAMED. Subsidy expenses

are also budgeted at more realistic levels if compared to 2011 as the allocation has been

increased from 17 billion MAD in 2011 to the current 32 billion MAD.11

Public investment is

planned to increase in 2012 by 21 billion MAD and continues to be directed to key

infrastructure programs. This is accomplished with an increase in extra budgetary investment

programs12

that more than compensates the reduction of the investment allocations budgeted

for 2012. The rationalization of public expenditures already started in 2011 is further scaled

up including additional decreases in non-priority expenditures. On the revenue side, additional

efforts are devoted to improving revenue collection through strengthened controls13

and

progressive elimination of exonerations.

29. In line with the new Constitutional requirement, the Government has further

committed to fiscal stability and to progressively decrease the budget deficit to the medium

term target of about 3 percent of GDP by 2016 through the implementation of a set of critical

reforms.14

The key measures include:

10

Morocco‘s budget is published in a timely fashion. 11

This amount however may still not be sufficient to cover potential subsidy expenses if oil prices remain at

current levels for the reminder of the year. 12

Key extra-budgetary entities are SOEs Public establishments and local authorities 13

One key measure stipulates additional compliance and controls for enterprises that report a loss or zero profit. 14

See the inaugural speech delivered by the Head of Government Mr. Benkirane to Parliament in January 2012

and the Presentation Note of the Draft Budget Law 2012 submitted to Parliament in March 2012. The attached

15

Reforming the universal subsidy system. Fully aware of the considerable financial

burden the current system imposes on public finances, the government has committed

to investigating options for reform aimed at improving overall efficiency by targeting

the most vulnerable groups within the population;

Implementing civil service reform including the realization of a new remuneration

system. Following a long preparation phase the Government has now reiterated its

plans to roll out a comprehensive civil service reform including a clear and well

defined remuneration system. Complementarily with measures foreseen in the new

Organic budget law soon to be submitted to Parliament, these measures will result in

better management and control of the wage bill;

Further advance the fiscal reform agenda. Key measures include maintaining

momentum of the ongoing tax reform to broaden the tax base, improving the

efficiency of the VAT, strengthening tax administration, and removing unproductive

tax exemptions. These measures would offset the negative impact of the reduced top

rates on corporate and personal income taxes. Under these assumptions, revenues are

projected to stabilize at a little more than 26 percent of GDP.

30. These measures underlie the medium term fiscal framework as their implementation

would result in gradual decrease of the budget deficit towards the medium term Government

objective. As a result, central government debt should increase to 54.7 percent of GDP in

2012 and to 54.9 percent of GDP in 2013 before following a downward trend to 52.5 percent

of GDP by 2016.15

Table 2. Base-line Medium Term Macroeconomic Indicators Est. Proj. Proj. Proj. Proj. Proj.

2010 2011 2012 2013 2014 2015 2016

Growth Rates in percent

Real GDP 3.7 4.8 3.0 4.9 5.1 5.4 5.6

Real private consumption 2.2 6.5 6.2 5.8 5.6 5.9 4.9

Real Fixed Domestic Investment -0.7 4.5 8.4 3.4 3.8 4.3 4.7

Export Volume (GNFS) 3.6 8.7 3.3 6.5 7.4 7.6 7.7

Import Volume (GNFS) 18.1 6.0 3.6 6.6 6.4 6.4 6.4

GDP deflator 0.6 1.3 2.2 2.2 2.3 2.0 2.0

Ratios to GDP Gross Domestic Investment 35.1 36.0 37.0 36.5 36.1 35.7 35.4

Fiscal Balance -4.7 -6.8 -5.1 -4.4 -3.8 -3.6 -3.2

Central Government Debt 50.3 52.9 54.7 54.9 54.4 53.7 52.5

of which foreign 12.1 12.1 12.3 12.5 12.5 12.4 12.3

Current Account balance -4.5 -8.0 -6.9 -6.0 -5.6 -5.3 -4.5

FDI, gross 4.6 3.2 3.5 3.8 4.1 4.2 4.3

External Debt (public and private) 28.0 28.4 32.7 33.9 34.4 34.4 33.8

Source: Moroccan Government and Staff estimates.

See also Annex 7 for additional Macroeconomic indicators.

31. The financing needs stemming from the relatively high 2012 budget deficit and

declining deficits over the medium term would be mostly financed through the domestic

Letter of Development policy further reiterates Government commitment to macroeconomic stability and

reduced budget deficit in the medium term. 15

The Outlook presented in Table 2 and annex 7 further assumes commodity price forecasts and European

Union growth prospects as currently estimated by the Development Prospects Group of the World Bank

16

market, as well as from steady drawings on external sources (Table 3). In this context,

domestic financing would remain the main source, although external financing would

improve its contribution. Indeed, since 2006, net external financing reversed its long negative

trend and became positive, reflecting the Government‘s strategy to change the debt

composition in favor of external borrowing. This financing strategy will ease the pressure on

domestic financial markets and reduce the risk of crowding out the private sector‘s investment

now that the money market is less liquid than in previous years. At the same time it is

consistent with the intention to maintain a comfortable level of foreign reserves.

Table 3. Morocco: Financing Requirements of the Treasury (in percent of

GDP) Est. Proj. Proj. Proj. Proj. Proj.

2010 2011 2012 2013 2014 2015 2016

Financing required 16.5 16.6 16.2 16.2 15.6 14.8 14.4

Budget deficit (+) 4.7 6.8 5.1 4.4 3.8 3.6 3.2

Amortization 11.9 9.7 11.1 11.8 11.8 11.2 11.2

Domestic 11.1 8.9 10.3 10.9 10.9 10.4 10.4

External 0.7 0.8 0.8 0.8 0.8 0.8 0.8

Total Financing available 16.5 16.6 16.2 16.2 15.6 14.8 14.4

Domestic financing 13.2 14.0 13.4 13.5 13.1 12.5 12.2

External disbursement 2.8 1.5 1.7 1.8 1.7 1.6 1.6

Others (Privatization, capital grants, CST*) 0.5 1.1 1.1 0.9 0.7 0.7 0.6

Source: Moroccan Government and staff estimates.

(*) CST: Comptes Spéciaux du Trésor

32. The Government‘s debt strategy is to diversify financing sources and take on a

greater proportion of external financing. Three main factors underpin the decision of the

Government to reinforce its external sources, especially multilateral and concessional. The

first is linked to Morocco‘s public debt maturity structure. The maturity of public debt has

fallen in recent years and will fall further given that the Government mostly financed its needs

through issuing T-bills of up to one year in the domestic market. The main reason behind this

choice is to avoid affecting long-term floating rates for Banks‘ domestic lending to the private

sector, especially housing credit, as they are indexed to primary market rates on long-term

securities (10 and 15 year bonds). The second relates to the higher balance of payments

needs although the level of foreign reserves remains relatively comfortable. The third is due

to the current higher borrowing requirements of the Budget, in a context of tightening

liquidity of the domestic financial markets after a long period of an over-liquid money market.

33. Additional external lending is consistent with prudent debt management, while

maintaining a comfortable level of foreign reserves and at the same time avoids pressure on

domestic financial markets. In September 2010, Morocco successfully completed a ten year

bond issue for one Billion Euros against a total market purchase offer of over 2.2 Billion,

further attesting to international market confidence in Morocco‘s macroeconomic stability. As

the investment ratings were confirmed again in early 2011, Morocco continues to have

adequate access to the international market to eventually finance domestic needs, although the

current international turmoil may negatively affect market response.

34. The external position is expected to remain sustainable over the medium term

provided that key critical reforms under implementation take hold. The current account

deficit is expected to improve but remains high in 2012 (6.9 percent of GDP) and

progressively edge downward to around 4.5 percent of GDP in 2016, as the impact of reforms

17

and sector strategies take hold. Indeed, the balance of payments is expected to progressively

improve, with lower trade and current account deficits, which would benefit from improved

export potentials and a recovery of tourism activities and workers‘ remittances. This scenario

critically assumes that Morocco would benefit from its continued reform efforts in trade and

competitiveness as supported by this operation. These reforms, along with sector strategies16

already under implementation, would translate into higher private investments, including

FDIs, and progressive gains in competitiveness of its exports, including tourism. In this

context, external debt is expected to follow an inverted U path reaching a maximum at 34.4

percent of GDP in 2014 from 28 percent of GDP in 2010 before steadily dropping to 33.8

percent by 2016 while net foreign reserves will progressively improve from 5 months of

imports in 2011 to around 5.6 months by 2016.

35. Balance of payments financing requirements do not constitute to date a serious

concern given the economic fundamentals, the country‘s relatively low external debt stock,

and still adequate foreign reserves. As the current account deficits are projected to steadily

improve in the medium term, there are no constraints on financing them through multilateral

and bilateral credit lines along with other private capital flows, including FDIs. The latter is

expected to gradually increase, attracted by an improved business environment and the

opportunities offered by important structural projects and the devised privatization program of

the country (see Annex 6).

36. A comprehensive public debt sustainability analysis indicates that the fiscal

framework remains sustainable although it would weaken under some medium term downside

risks, notably those related to ―no policy change‖ assumption (A2) and growth shock (B2).

Indeed, when the debt sustainability analysis was run under the assumption of ‗no-policy-

change‘ scenario, the debt stock increased over 2012-2017, before inversing the trend, while

under the scenario of ‗reduced GDP growth by half standard deviation‘ the debt stock steadily

increases, albeit with declining intensity over time. All the other scenarios17

proved fully

sustainable over the medium term (see Annex 6).

37. In sum, on the assumption that key fiscal and structural reforms described above are

implemented in a timely fashion, Morocco‘s macroeconomic framework remains adequate

and sustainable in the medium term. The effects of the global uncertainty on the Moroccan

economy have been muted by good economic fundamentals resulting from sound

macroeconomic policies carried out over the last years and by the Government‘s current

response which is supporting investors‘ confidence and domestic demand. If compared to the

2008 crisis, the Government today has smaller margins for maneuver, but its commitment to

increase and expand reform efforts supports positive prospects for investment, growth, and

employment and underpins the current positive view on macroeconomic prospects.

16

Key trade and competitiveness reforms and specific sector reform strategies are described in greater detail in

the next section. 17

The Scenarios are as follows: A1. Key variables are at their historical averages; A2. No policy change

(constant primary balance); B1. Real interest rate is at baseline plus one standard deviations; B2. Real GDP

growth is at baseline minus one-half standard deviation; B3. Primary balance is at baseline minus one-half

standard deviation; B4. Combination of B1-B3 using one-quarter standard deviation shocks; B5. One time 30

percent real depreciation in 2012 and B6. 10 percent of GDP increase in other debt-creating flows in 2012

18

III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES

A. SECTOR BACKGROUND AND KEY ISSUES18

38. Morocco‘s unemployment rate has fallen during the last years, thanks mainly to the

good economic growth that was brought about by the expansion of the service, commerce and

public works sectors and lower labor force growth. The unemployment rate was reduced

from 13 percent in 2000 to 8.9 percent in 2011. The difference between female and male

unemployment has also significantly diminished (9.6 percent for women, 8.9 percent for men,

in 2009). Unemployment rates are higher in urban areas (13.7 percent) than in rural areas (3.9

percent), for young people (17.6 percent for those aged 15-24), especially those living in

urban areas (31.3 percent), and for skilled workers (Figures 2 and 3). Higher education

graduates, however, represent only 20 percent of unemployed workers aged 15-34, while one-

third of the unemployed population has no diploma (National Statistics Office [HCP], 2010).

Overall, it appears that unemployment is much higher for graduates from ―open enrollment‖

university programs (22.3 percent), secondary education (21.7 percent) and vocational

training (19.7 percent), particularly short vocational training programs (25.2 percent).

Unfortunately, detailed information on the labor market entry rates of higher education

graduates – broken down by characteristics such as region, discipline and level – is not yet

available. Better information is available for vocational training graduates, where

employment rates are significantly higher in some areas (construction, engineering, fisheries

and tourism) than in others (textile, information technology and management).

Figure 2. Evolution of the Unemployment Rate by Age 2005-2010

18

World Bank, 2008 MILES report.

15-24 years 25-34 years 35-44 years 45 years and older

17.0% 16.8%

7.6%

2.1%

17.6%

12.8%

5.5%

2.1%

2005 2010

19

Figure 3. Evolution of the Unemployment Rate by Type of Diploma between 2005-2010

Source : Haut Commissariat au Plan, 2011

Middle Level: Basic education certificates; short-course technical and professional certificates.

Superior Level: Secondary school leaving certificates; long-course technical and professional diplomas;

university degrees.

39. School-to-job transition is a major problem, with first-time job-seekers representing

half of the unemployed population. Unemployment spells are mainly of long duration,

especially in the case of skilled workers. In fact, the incidence of long-term (i.e., longer than

12 months) unemployment is 83 percent among skilled workers, compared with 60 percent

among the unskilled unemployed. This situation points to the structural nature of

unemployment in Morocco and the need for targeted interventions to retrain the long-term

unemployed and facilitate the job search process. Indeed, long-term unemployment can

reduce the chances of finding a job as workers lose skills and because of negative signaling.

40. Youth unemployment co-exists with a high level of inactivity. According to a recent

World Bank study,19

the proportion of young men who are inactive (25 percent) is, in fact,

greater than the percentage of those who are unemployed (16 percent). Most young men are

inactive because they are discouraged. Ninety-three percent of young women with no

education are out of the labor force, compared to only 37 percent of young women with

higher education, suggesting higher returns to education as well as their greater ability to

overcome social barriers to participating in the labor force.

41. Low employment quality is also a troublesome feature of the labor market in

Morocco. Informality rates are high (80 percent) compared to the MENA region average (67

percent). Informality, defined as ―lack of social security coverage‖ (usually understood as

pensions, or if pension system does not exist, as health insurance) is widespread, with rural

areas being more affected than urban areas. In 2009, 41.1 percent of urban women were

registered with social security, compared to only 1.6 percent of women in rural areas.20

As

women often work in unpaid/subsistence agriculture, being a woman is positively associated

with informality.21

Informality is very high among youth (15-24) and decreases rapidly with

19

World Bank. [Ongoing]. Promoting Youth Opportunities and Participation. 20

Troisièmes assises, Royaume du Maroc, 2011 21

Gatti, R.; Angel-Urdinola, D.; Silva J. and Bodor, A. 2011 (forthcoming). Striving for better jobs: The

challenge of Informality in the Middle East and North Africa. Washington D.C.: World Bank

Without Diploma

Middle Level Superior Level

5.2%

21% 26.6%

4.5%

16% 18.1%

2005 2010

20

age until age 55. 22

Informality is also strongly and negatively correlated with education (93.5

percent of private sector workers with primary education work informally vs. 50.7 percent of

private sector employees with tertiary education). As is the case in other countries in the

region (Egypt, Jordan or Syria), this correlation is largely driven by more educated workers

joining the public sector. In terms of size of employment, employment in the informal sector

increased from 1.9 million in 1999 to 2.22 million in 2007 (annual creation of 40,000 jobs).

The trade sector accounts for most of these jobs (53.2 percent), followed by industry (21.4

percent) and services (19 percent).

42. More than 75 percent of informal workers can be found in small firms (less than 5

workers) that engage in low productivity activities. The most important external factor

influencing the decision to become formal is the tax burden. Morocco‘s corporate tax rate is

one of the highest among developing countries: in 2007, it was second only to Pakistan and

remained significantly above the average for developing countries in 2008.23

Informality is a

trap for micro-enterprises in Morocco. Firms that start up informally have a very low

probability of ever becoming formal, since formality only decreases with firm maturity.24

43. It is important to note, however, that the informal sector is heterogeneous and that

some informal jobs could be considered of quality. For example, the self-employed may

decide to work informally because of greater flexibility. Others may simply distrust public

institutions, which may cultivate a social norm of noncompliance with taxes and regulations.

However, the MENA Informality Report25

provides evidence that informality in the region is

mainly a product of exclusion, not "exit‖.

44. Low quality of education is one of the reasons explaining poor labor market

outcomes. For example, the scores for Moroccan students in the 2007 TIMSS international

Grade 4 and Grade 8 mathematics and science learning achievement survey were low

compared to other participating countries. In Grade 8 mathematics, for example, 59 percent

of Moroccan students did not even reach the lowest of four benchmark levels, while none at

all reached the highest benchmark level. This compares with the international median of 25

percent not reaching even the lowest benchmark and 2 percent reaching the highest

benchmark. Figure 4 shows the percentages of students from Morocco and other Middle East

and North Africa countries attaining each international benchmark for Grade 8 mathematics,

compared with a high-performing country (Japan) and the international average (Figure 4).

At higher education levels, just one-quarter of the students are enrolled in science-based

programs.26

22

This decrease goes hand in hand with an increase in public sector employment, suggesting that workers opt out

of informal and into public employment as they reach prime-working age 23


challenge of Informality in the Middle East and North Africa. Washington D.C.: World Bank 24

Saadani, 2008 25


challenge of Informality in the Middle East and North Africa. Washington D.C.: World Bank 26

I.e., sciences (17.4 percent), applied sciences (3.5 percent), medicine and pharmacy (2.9 percent), engineering

(1.6 percent), technology (1.5 percent) and dentistry (0.4 percent) (Source: MENESFCRS 2006/07).

21

Figure 4.: TIMSS 2007 Mathematics (Grade 8) Scores: proportion by benchmark level

45. Low quality of education appears, in general terms, to translate into a low skilled

labor force. According to the 2008 World Bank‘s Investment Climate Assessment (ICA),

approximately 31 percent of firms that participated in the study identified the low skilled

labor force as one of the major constraints to doing business in Morocco. In fact, 35 percent of

participating firms identified hiring a skilled worker as an important constraint, a figure that

was only 20 percent in 2004. In particular, entrepreneurs in the professional services sector

report major shortages of accountants, financial analysts, health services professionals and

engineers. Morocco is in fact the country with the lowest number of engineers per capita

among its competitors.27

46. Employment levels among the high-skilled are particularly affected by public sector

compensation policies. Compensation packages in the public sector, including in SOEs, are

considerably higher than in the private sector. In fact, the net wealth generated by the average

worker in the private sector is around 60 percent of the wealth generated by the average

worker in the public sector. One problem is that, even with restrictive hiring policies in the

public sector, there are incentives for individuals, particularly higher education graduates, to

queue for public sector jobs, which increases the unemployment rate. In general, public

sector wages increase reservation wages for educated workers.

27

World Bank, 2008 MILES report

-100

-80

-60

-40

-20

0

20

40

60

80

100

Jap

an

Inte

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ion

al M

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ian

Du

bai

UA

E

Iran

Alg

eri

a

Tun

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Mo

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o

Ku

wai

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ar

Yem

en

% s

tud

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ts s

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at e

ach

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TIMSS 2007 Mathematics (Grade 8):

Advanced

High

Medium

Low

<Low

22

47. Low labor mobility and a fragmented social security system also play an important

role in explaining poor labor outcomes. Pensions in the public sector are considerable higher

than in the private sector. In addition, they are managed by a range of different institutions,

which limits portability of benefits and hinders labor mobility. On the other hand, current

income protection policies, based on a large extent on the regulation of dismissal procedures

and severance pay, are not effective for a large segment of the labor force and in fact

constrain the management of those human resources who are covered. Some evidence

suggests that firms are either bypassing the regulations or moving to short-term contracts.

Those firms that will be more likely to play by the rules (e.g., foreign companies in strategic

sectors) will, on the other hand, be unnecessarily constrained in the management of their

human resources. In the end, the large majority of workers are lacking access to formal

income protection, which not only leaves them vulnerable to unemployment risks, but also

constrains their ability to move between jobs and/or engage in higher risk/higher return

activities. This may affect labor productivity growth over the medium term.

48. One of the factors limiting firms‘ operations is the high level of the tax wedge,

which can reduce employment levels and provide incentives for the informalization of the

economy. At 36 percent of labor costs, the tax wedge in Morocco is among the highest in the

region. It reflects high payroll and income taxes, as well as high social security contributions.

In the absence of reforms to the social security system, and in particular pensions, the tax

wedge will continue to increase and could reach 46 percent by year 2020. Evidence shows

that a high tax wedge is associated with lower levels of employment and can affect the

competitiveness of firms.

49. The level of unemployment is also determined in part by the limited employment

opportunities; tremendous economic growth and job creation will be needed to absorb new

and existing graduates. In terms of the sources of new jobs, the service sector (including

public administration) is the first contributor (106,000 new jobs annually during 2005-2010),

followed by the construction sector (69,000) and the agricultural sector (33,000) (although the

latter creates less jobs than in the past (51,000 annually during 1999-2005)). The industry

sector only creates 12,000 new jobs per year.

50. The pressures on the labor market will depend on the evolution of female

participation rates. The labor force is expected to grow at an annual 1.8 percent over the next

ten years. This means that there will be around 260,000 net new entrants to the labor force

each year between now and 2020. With current employment-growth elasticities, the economy

would need to expand by at least 6 percent per year to absorb the new entrants. This scenario

assumes that the female participation rate, which stood at only 25.9 percent in 2010, increases

very gradually. However, if as a result of better access to education and lower fertility rates,

the change in female participation rates accelerates (e.g., converging to OECD levels in three

decades), labor force growth could approach 2.5 percent per year. The demands on economic

growth would then be considerably greater.

23

B. THE GOVERNMENT‘S PROGRAM

51. The challenge of job creation can only be addressed through a comprehensive

strategy that has both economic and social elements focusing on labor supply and demand.

The MILES report concluded that more jobs will have to come mainly from more investments

in the private sector and faster growth, and that good quality jobs require these investments to

take place in high-value added sectors and be accompanied by innovations that boost

productivity. This requires parallel improvements in macroeconomic and investment climate

policies, labor market policies and institutions, the education and training sector, and the

social protection system. The Government has embarked on a series of reforms/actions on

each of these sectors.

52. Investment Policies: Following the broad economic framework described above, the

Government has launched an ambitious investment program and sustained policies for an

improved business environment.

53. Since the start of the decade, Morocco has pursued a process of strategic reform with

international, political, social and economic objectives. The international dimension is one of

increased and progressive integration in regional, European and global markets, and of a

strategic partnership with the European Union (EU). Politically, the emphasis lies on respect

for human rights, the fight against corruption, consolidation of electoral democracy and

acceleration of the decentralization agenda. Economically, the vision aims to achieve strong,

employment-creating growth through economic opening and liberalization, support to private

sector development and foreign direct investment, major infrastructure works and selective

sector priorities.

54. The Government elaborated a national program, centered on enhancing growth and

competitiveness and improving social outcomes and launched its Social and Economic

Development Program for the period 2008-2012. The first objective of the program was to

improve social outcomes, particularly in education, health, access to services including

housing, and in due course to establish targeted safety nets mechanisms as a substitute for

ineffective subsidies. The second objective was to enhance growth, export potential, and

investment in the country by focusing simultaneously on key productive sectors (industrial

emergence, agricultural and fisheries development), on infrastructure sectors contribution to

growth (energy, transport, water) and on cross-cutting enablers (export strategy, information

and communication technology (ICT) strategy, and business environment). The third

objective was to implement the cross-cutting reforms needed to deliver results in all sectors:

(i) improving governance; (ii) reforming public administration; and (iii) deepening

decentralization and deconcentration for better service delivery.

55. The Government has developed a new comprehensive approach to private sector

development and competitiveness that aims at addressing past weaknesses in the conduct of

partial, uncoordinated reforms. By formally adopting in February 2009 the National

Emerging Industries Agreement 2009-2015 (PNEI), the Government has established a public-

private agreement aimed at undertaking 111 specific commitments over the period 2009-

2015, taken both by ministries (Justice, Interior, Finance, Agriculture and Fishing, Education,

Labor, Trade and Industry, International Trade, General Affairs and Governance) and

representatives of private sector organizations, such as employers‘ federation, banks‘

24

professional organization). These commitments are organized within ten different pillars: off-

shoring, automobile, air and space, electronics, textile and leather, agro-industry, small and

medium enterprise (SME) competitiveness, investment climate, training, and industrial zones.

56. Education and training. The Government's policy statement highlights the

importance of linking training to labor market needs, through diversifying training programs

and taking account of local priorities. In 2009, just over 700,000 students were enrolled in

post-secondary levels of education, with 400,000 in higher education (equivalent to 9.1

percent of 18-24 year-olds) and just over 300,000 in vocational training28

(equivalent to 9.3

percent of 15-19 year-olds).29

Almost half the total number was enrolled in public

universities and a further quarter in training with the National Vocational Training Agency

(OFPPT). Public professional training institutes (including engineering, architecture, judicial

training, teacher training and health care training) account for just 3.2 percent of students and

other public vocation training providers take in 6.2 percent of students. Private training

providers, higher education and vocational training combined cover 16.5 percent of the

student market. University graduation rates, which averaged 63.3 percent in 2009/10, vary

from discipline to discipline (from 55.6 percent for law, economics and social sciences to 98.6

percent for engineering, 99 percent for technology and 100 percent for translation).

Figure 5. Post-secondary education by type of provider (2009)

Source: Agence française de développement (2011), Formation et emploi au Maroc: Etats des lieux et

recommendation, Document de travail No. 116

28

Vocational training covers five levels: 1. Apprentice (13% of all vocational training students), 2. Specialized

Trainee (13%) and 3. Qualified Trainee (24%) (the first three levels following on from lower secondary school);

4. Technician (28%) and 5. Specialized Technician (22%) (the last two levels following on from upper

secondary school). 29

Projected population figures: National Statistics Office (HCP) [www.hcp.ma].

Public Universities (48.8%)

Public Professional Training Institutes

(3.2%)

Private Higher Education Institutions

(5.0%)

Public Vocational Training (OFPPT)

(25.3)

Public Vocational Training

(other providers) (6.2%)

Private Vocational Training (11.5%)

25

57. Increased enrollment in compulsory education has placed pressure on higher levels

of education, leading to substantial increases in student enrollments in post-secondary

education institutions. Since 1999, the Government has embarked on an ambitious reform of

the education and training system but its implementation has encountered delays. Higher

education reforms in particular concentrate on: (a) improving quality and relevance to labor

market needs in order to reduce unemployment among university graduates; (b) the promotion

of research to meet the needs of a knowledge-based economy; and (c) system improvement

(governance, human resources and monitoring/evaluation). The Higher Education Ministry

has chosen to focus on the use of ―contracting‖ with public universities to achieve these goals.

Seventeen such multi-year contracts were signed in October 2009 – with fifteen public

universities and two public agencies (National Science and Technology Research Center and

National Office for Social and Cultural Affairs In Higher Education) – that provide targets in

terms of student numbers, student orientation (particularly in favor of science/technology and

professional programs), graduation rates (including at doctoral level), research financing and

output, industry-linked research and development (as measured, for instance, through

patents), and staff training. The Government provides public financing and the contracting

universities and centers produce six-monthly reports. Since 2009, public universities have

enjoyed greater autonomy, with their rectors (still appointed by royal decree) answerable to a

university council that comprises faculty and student representatives as well as local

government and private sector representatives; the rector manages most notably the university

budget, once it is approved by the council. However, the university management autonomy

remains limited. Human resource management (including setting staff remuneration levels)

remains with the Higher Education Ministry, while open-enrollment faculties are required to

accept all students with a secondary school leaving certificate. Moreover, weak systems and

human resources mean that universities often do not spend their full investment budget.

58. Over the past decade, the Labor Ministry‘s Vocational Training Department has

introduced a number of vocational training policies that aim to better match training outcomes

to economic needs. The National Emerging Industries Agreement (PNEI) foresees the need

for skilled workers in a range of industries, including off-shoring, automobile, textile, agro-

business, aeronautics and electronics, while other sector-specific plans call for more skilled

workers in industries such as distribution, tourism, fisheries, logistics, crafts and agriculture.

These policies include: improving links between training providers and industry groupings

(for example, by delegating training center management to such groups), favoring workplace-

based training options (including recognition of prior learning), structuring training programs

and modules around skills delivery (including the publication of professional skill

descriptions by levels), promoting private training provision options, and developing training

programs targeted at vulnerable groups (disabled youth, prison-based trainees), and setting up

qualifications in the areas of workplace-based training advice.

59. Labor market policies. The Government‘s Employment Creation Initiative (2005-

2011) provided a framework to facilitate employment creation through intermediation

services and Active Labor Market Programs (ALMPs). They include subsidies for

employment (Idmaj), training and retraining (Taehil) that focus on training to meet specific

recruitment needs FCE) and retraining of graduates who have difficulty entering the labor

market (FQR), and micro-enterprise development (Moukawalati). These programs replaced

and built upon the experience of previous programs that have been implemented since the late

26

1980s. They are implemented by ANAPEC (Agence nationale de promotion de l’emploi et

des compétences) that was established in 2001.

60. The newly formed Government has set a new target for employment (cf.

Government‘s January 2012 declaration). It aims at reducing the unemployment rate to 8

percent between 2012 and 2016, particularly for post-secondary graduates. The Labor

Ministry is currently preparing a new employment promotion plan for 2012-2016. The

strategy is expected to be well grounded in a robust analysis of the labor market trends, define

priorities, programs, budgets, monitoring indicators, and should clarify responsibilities in

monitoring its implementation. The program approach was discussed during a workshop

organized by the Labor Ministry with World Bank support, gathering a core team from key

ministries and agencies (Labor, Education, General Affairs and Governance, Finance,

ANAPEC and the main public vocational training provider [Office de la formation

professionnelle et de la promotion du travail (OFPPT)]). The main policy reforms under

development may be articulated around the following axes: (i) responding to the skills needs

of the strategic sectors identified in the PNEI (possibly including employment prospects,

supply and governance of the training system, training policies and mechanisms to adapt

profiles to labor market needs); (ii) promoting salaried employment (including promoting

employment in the private sector, public sector employment, and ―decent work‖30

including

social insurance coverage and unemployment insurance); (iii) promoting self-employment

(including entrepreneurship spirit; support to pre- and post firm creation, financing

mechanisms, support to micro-enterprises); and (iv) improving governance of the labor

market and intermediation systems (including public and private intermediation agencies,

labor market information systems, and national, regional and local consultation committees).

61. Social protection. The Government has undertaken a series of initiatives in the

social protection sector that affect the labor market. First, it has engaged in actions to close

the coverage gap of social insurance. The Government is seeking to expand social security

coverage for salaried workers through the Social Security Fund (CNSS), for independent

workers (new scheme under design), and the poor (through health insurance for low-income

households -- or régime d’assistance médicale pour les économiquement démunis [RAMED]).

62. Second, because there is considerable mobility in the Moroccan labor market and

loss of income due to loss of employment has become a major social risk, coverage of this

risk has been a Government priority for the past decade. In 2000, the Government signed an

agreement with employers‘ and workers‘ representatives to establish an unemployment

insurance scheme (indemnité pour perte d’emploi [IPE]) for private sector workers affiliated

with CNSS, and in 2011, design scenarios were elaborated and are still under discussion. The

IPE would consist of a benefit payable: (i) upon loss of employment beyond the worker‘s

control when an enterprise is closed or restructured and/or (ii) when the worker is laid off

following a unilateral decision of the employer (involuntary loss of employment). Funding

arrangements, and particularly the State contribution, remain undecided. The income

protection that IPE would offer would need to be accompanied by more flexibility in labor

30

The Decent Work concept was formulated by the ILO‘s constituents (governments, employers and workers) as

a means to identify the Organization‘s major priorities. It is based on the understanding that work is a source of

personal dignity, family stability, peace in the community, democracies that deliver for people, and economic

growth that expands opportunities for productive jobs and enterprise development.

27

regulations because failure to do so may lead to a further increase in the labor cost, thereby

reducing competitiveness. No revision of the Labor Code, however, is currently envisaged.

63. Third, the pension system has structural problems that undermine its viability. The

Government is aware of these problems and has initiated a social dialogue on reform options.

To this end, a national commission and a technical commission for pension reform were

established in 2007. The technical commission ordered an independent study from a

consultancy firm, which submitted its report in mid-2010, and on which the Bank and the

International Labor Organization (ILO) provided comments. The technical commission is

now expected to submit its recommendations to the national commission so that a decision

can be taken on the reform option to be implemented.

C. PARTICIPATORY PROCESS

64. Education and training. In June 2011, the Labor Ministry‘s Vocational Training

Department launched a process to develop a new strategy for vocational education in

Morocco. The first phase of this process consists of establishing a benchmark and a

diagnostic of the current system; it involves a series of consultations with Government

departments and agencies, public and private vocational training providers, and employers‘

federations. The final phase is designed to communicate the proposed strategy and will

require consultations at the national, regional and local levels with a range of stakeholders,

including providers, industry groups, trainees and donors.

65. As part of the development of its Education Emergency Program 2009-2012 (EEP),

the Government engaged in consultations with various stakeholders. In the fall of 2007, the

King of Morocco instructed the Government to develop the EEP to speed up the

implementation of the education reform agenda. During the first round of program

development, the consulting firm hired to provide technical assistance to the Government

consulted with regional and provincial education officials, focusing on a number of pilot sites.

In a second round, the Education Ministry (which at the time included a Higher Education

Department that has since become a separate Higher Education Ministry) met with

parliamentarians and teacher union representatives to present the draft program and receive

feedback. With the third round of development, the Education Ministry tested the feasibility

of the final draft by consulting with governors, as well as regional and provincial education

officials, in a series of regional forums, again in pilot sites.

66. Labor market policies. The current ALMPs were launched in 2005 after

endorsement by a large range of stakeholders, including unions, civil society, and elected

representatives during the September 2005 Employment Summit (Assises nationales pour

l’emploi). The Labor Ministry could repeat this consultation process once the 2012-2016

program is prepared. Also, the two new ALMPs that are being introduced, as supported by

this program,31

were presented during the May 2011 youth employment summit which

brought together some 800 young people. The draft national strategy for micro-enterprises

31

Namely (i) social insurance coverage for CPE program beneficiaries; and (ii) the introduction of a new

subsidies for employment program (Contrat d‘intégration professionnelle of CIP) targeting long-term

unemployed graduates.

28

development (to be approved shortly) was developed using a highly participatory process that

involved the private sector, the civil society, local authorities, and institutional partners.

67. The World Bank and the ILO, on their side, with support from the Labor Ministry,

consulted on the Moroccan labor market information system. A workshop was organized in

March 2011, gathering data producers and users (union representatives, chamber of

commerce, National Human Development Observatory [ONDH], National Statistics Office

[HCP], ANAPEC, Education Ministry‘s Higher Education Department, Labor Ministry and

Economy and Finance Ministry). During the workshop, it was widely agreed that the severe

limitation of access to the labor market information system negatively impacted policy

formulation. The workshop‘s key recommendations included: (i) building the system to track

the insertion of university graduates into the job market, with considerably more detail than is

currently available; (ii) improving access to individual data sets produced by public

institutions, including HCP, to facilitate and strengthen the analysis of the labor market,

including its dynamics; (ii) strengthening the institutional framework for labor market

analysis, including the operationalization of an employment observatory.

68. Social protection. CNSS is a tripartite organization with a Board equally constituted

of government, private sector employers, and workers representatives. As such, the CNSS

extension strategy reflects a consensus among these various stakeholders. In addition, it was

presented to and discussed with a large range of stakeholders during a workshop32

in

November 2009.

69. Country Partnership Strategy (CPS) consultations. During the CPS preparation in

2009, the World Bank conducted a wide range of consultations with representatives from

professional associations, civil society, academia, and the private sector. Private sector

representatives strongly underlined the weakness in the correspondence of education to the

labor market, the lack of qualified staff, and the need to strengthen human capital through

educational reforms and professional training. Other consultations, including with youth

groups, made the following relevant conclusions: (i) training should respond to the needs of

the private sector; (ii) inequalities, particularly in terms of economic opportunities and

employment, are high; (iii) the performance of the education sector at all levels should be

improved; (iv) access to survey data should be facilitated; and (v) the evaluation and

monitoring system in the entire education sector is necessary and quality norms should be

established.

IV. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM

A. LINK TO COUNTRY PARTNERSHIP STRATEGY

70. The Country Partnership Strategy (CPS, 2010-2013) places the employment

challenge squarely at the center of Morocco‘s development. The importance of this

development issue has been confirmed through the Arab Spring civil protests in Morocco

since February 2011 and through the CPS Progress Report (CPS-PR) that is being discussed

at Board at the same time as this operation. Support to skills development and employment is

a key component of the Bank‘s program and the SEDP is a central instrument of the Bank‘s

32

CNSS, « Sécurité sociale du monde du travail : bilan et perspectives", Casablanca, November 19, 2011.

29

lending support. The SEDP series will contribute to achieving the first and second pillars of

the CPS, namely: (i) encouraging growth, competitiveness and employment; and (ii)

improving the quality of service delivery to citizens. By doing so, it will contribute to

achieving the CPS outcomes related to Skills and Employment.33

The SEDP is designed in

close collaboration with the Bank‘s other activities that target growth, private sector

development and employment creation – namely the proposed Competitiveness DPL and the

proposed Financial Sector DPL. As underscored in the CPS-PR, this operation is a

fundamental part of the Bank‘s multi-pronged response to addressing employment and it

complements the Bank Group‘s work in the following areas: (i) service delivery that is

pursued through the Governance and Accountability DPL (which itself builds on the past

Bank engagement in the Public Administration Reform program) and through the Education

Sector DPL; (ii) revenue generating activities that target job creation that are being supported

by the Bank-supported second phase of the National Initiative for Human Development

Project (known by its French acronym INDH); and (iii) the IFC‘s program on employment

(called the ―E4E Initiative‖) that engages the private sector to create opportunities and

enhance labor market skills for Arab youth. The Bank team is pursuing this multi-DPL

approach to provide for sufficient reform depth in each sector, while still ensuring clear

complementarity between the different operations.

B. COLLABORATION WITH THE IMF AND OTHER DONORS

71. The World Bank and the IMF maintain close collaboration in Morocco. Regular

contacts between the IMF and World Bank country teams are customary, with discussions

focused on the respective work programs, country priorities, recent developments and

prospects, and reflecting the growing weight of DPLs in the Bank's Morocco portfolio.

Collaboration between the Fund and the Bank has been seamless, with general understanding

on the division of labor and a shared assessment of the critical macroeconomic challenges

facing the country.

72. The Fund participates in Bank project review meetings where relevant. The ongoing

analytical work being carried out by the Fund team, which was welcomed by Bank

counterparts, focuses on the medium-term outlook for public finances in Morocco and the

macroeconomic implications of the global financial crisis and economic downturn. Morocco's

most recent Article IV consultations were discussed in the IMF's Board and concluded on

October 6, 2011.

73. The proposed SEDP operation was prepared in consultation with donors active in

Morocco's skills and employment sector. SEDP preparation was coordinated with the

European Union (EU) Advanced Status Program (under preparation) which includes an

employment and social protection strategy component. This component would support

mainly: (i) the legal framework of the decent work agenda (works, safety, unions right,

conflict resolution, seasonal work, etc.), and strengthening of the labor inspectorate which the

SEDP would not cover; (ii) the labor market information system on which the two institutions

33

Namely: (i) Better match between labor market needs and higher education and vocational education /training

(VET) schemes; and (ii) M&E system of labor market policies and programs established. The third and last

outcome (Introduction of income protection mechanisms to improve labor mobility) is not supported by the

SEDPL1 but rather by the Employment TA.

30

agreed to coordinate; and (iii) social insurance, including health insurance extension to

independent workers. The ILO Training Center in Torino has contributed to the design of the

SEDP‘s labor market information system component.

74. In addition, the Bank coordinates closely with the European Training Foundation

(ETF) on its strategic advice to the Labor Ministry‘s Vocational Training Department, and

seeks complementarities with the French Development Agency (AFD) in its support for high-

end industry-specific vocational training centers. The AFD, the African Development Bank

(AfDB), the Japanese International Cooperation Agency (JICA), and the Islamic

Development Bank have all expressed interest in financing the program. AFD and ADB have

joined the appraisal mission. Finally, the German Society for International Cooperation (GIZ)

is providing support to MAGG on the microenterprise development strategy.

C. RELATIONSHIP TO OTHER BANK OPERATIONS

75. Engagement between the Bank and Morocco on employment has strengthened and

deepened since 2006 in large part through the preparation of the MILES report. In parallel

with the proposed SEDP operation, the Bank is providing technical assistance on

employment, particularly on (i) the preparation of the third employment summit and the

design of the new generation of ALMPs; and (ii) strengthening the labor market information

system. Under the Poverty Economic and Sector Work, the Bank has also signed an

agreement with the HCP to collaborate on a research program pertaining to growth, poverty

and employment.

76. As mentioned above, the proposed operation is complemented by other DPLs under

preparation that seek to address other key constraints to promoting the type of growth that will

create good quality jobs in Morocco and that target service delivery improvements in

education and skills and in other areas of the public administration system. The dialogue

across these different operations has been closely coordinated.

77. The Competitiveness DPL (FY13) will contribute to the creation of ―more and better

jobs‖ by: (i) improving the investment climate, in particular by removing barriers to entry and

competition, simplifying the regulatory environment for doing business and reducing

discretion in the implementation of the rules by increasing transparency and access to

information; (ii) furthering trade policy reform and trade facilitation, in particular by pursuing

the ongoing tariff rationalization (levels and bands), strengthening the regulatory framework

for import standards and easing logistics at ports of entry; and (iii) improving economic

governance, by strengthening significantly the Competition Agency‘s missions and

prerogatives, increasing transparency and accountability in the way the investment incentives

are granted and sectoral policies conducted, and strengthening the public-private coordination

body for investment climate reforms.

78. The Second Financial Sector DPL (FY13) will contribute to job creation notably by

ensuring that the financial sector better serves smaller firms. It will continue to support the

reform agenda already initiated under the first DPL approved by the Board in January 2010;

specifically, it fosters: (i) household and SME access to financial services; (ii) increased

financial stability, supervision and regulation; and (iii) capital market development. Key

31

reforms supported include a new guarantee scheme targeting micro-enterprises and measures

to strengthen the functioning of private equity markets.

79. The Education Development Policy Loan (EDPL) series (FY10 and FY13) aims to

improve the effectiveness and efficiency of service delivery and learning outcomes at the

primary and lower secondary education levels. The EDPL program achieves this through

support for the implementation of the Government‘s ―Education Emergency Program‖.

Whereas the EDPL series looks to improve skills development in the early stages of the

education system, the SEDP series picks up the skills development agenda in vocational

training and higher education in order to improve the training-to-work transition.

80. The National Initiative for Human Development (INDH) – Phase 2 Support Project

is also being prepared for delivery in FY12. The launch of the INDH program in 2005 aimed

to ameliorate the conditions of poor and vulnerable groups by establishing a more inclusive

mode of governance. Phase 2 will extend INDH‘s geographic scope, and move the focus

from building the program‘s institutional architecture to delivering actual results. It will

support, inter alia, economic inclusion of the poor and vulnerable groups by strengthening

associations and cooperatives, and strengthening the job creation potential of INDH

infrastructure and income generating sub-projects. By targeting poor non-qualified workers,

INDH fills a gap as the Ministry of Labor‘s ALMPs have not catered to non-graduates so far.

D. LESSONS LEARNED

81. The SEDP series design was informed by lessons learned from sectoral DPLs in

Morocco. Main lessons learned are summarized below.

82. As noted in the CAS Completion Report FY06-09,34

the programmatic support of

DPLs created a dynamic of institutional and financial incentives which were conducive to the

achievement of program reforms, and the quality of technical analysis underlying the reforms

was essential to a successful outcome. The SEDP has been designed drawing from this broad

experience in DPL engagement and will continue to benefit from the technical analysis

undertaken in the Bank‘s AAA program through the ongoing Employment TA, and the

research program on employment carried out with HCP.

83. The CAS Completion Report FY06-09 also notes that, for a reform approach

involving several actors, it is essential to have the right level of coordination and to have a

shared understanding of the institutional incentives. As set out in Section VI below, both

SEDP loans will be implemented by a large number of Government entities and the MAGG

will be in charge of coordinating the program, a role that MAGG has played satisfactorily in

the past. The Bank will also promote government ownership of program coordination

through thematic workshops that involve all parties laying the groundwork for a common

agenda.

84. The CPS-PR has noted other lessons learned from the Bank‘s program in Morocco,

namely that effective service delivery requires attention to transversal issues - such as

34

Country Partnership Strategy for the Kingdom of Morocco for the Period FY10-13 (Report No. 50316-MA),

Appendix 3.

32

employment generation - that call for efforts across the board to realize national priority

objectives. It also notes that the Bank‘s program is increasingly responding with the design of

operations, such as the SEDP - that support the Government on mobilizing multiple

institutions and actors and ensuring better coordination and communication of reforms that

impact several sectors at once.

85. Donor coordination was recognized by the CAS Completion Report FY06-09 and

the CPS-PR as playing an important role in the success of lending operations, since it helps

inter alia on mitigating the reputational risk of some types of reforms. As stated above, AFD,

AfDB, the Islamic Development Bank (IDB) and JICA have all expressed interest in

financing the Government‘s skills and employment program and may therefore be in a

position to complement the Second Skills and Employment Development Loan (SEDPL2).

86. Finally, the success of a reform program is due, according to the CAS Completion

Report FY06-09, not only to the legal measures taken by the Government but also to the

strength and capacity of the institutions involved in the reform. With this in mind, the SEDP

loans place considerable emphasis on reform implementation (or ―how to‖) measures.

E. ANALYTICAL UNDERPINNINGS

87. In 2008, the World Bank prepared the MILES report, which is a comprehensive

analysis of the employment issue in Morocco‖.35

This analysis forms the main conceptual

basis for the proposed SEDP series. It recommends a set of parallel policies and actions in

terms of education and training, labor market policies, and social protection which the

proposed program would support (Annex 5). The MILES report concludes that to support the

creation of more and better jobs, and to reduce the unemployment rates, Morocco needs to put

in place an integrated and well coordinated package of policy interventions that would seek

to: (i) increase investments and faster growth in high-value added sectors; (ii) increase

internal efficiency in the basic education sector; (iii) foster total factor productivity growth as

a result of better quality and the better relevance of the diplomas/specialization supplied by

the higher education and vocational training system, as well as better incentives to invest in

in-service training; (iv) improve cost/efficient active labor market programs through better

monitoring/evaluation and capacity building; and (v) increase labor market mobility and

control labor costs through a reformed social security system. Such a package, if well

designed, could also reduce the size of the informal sector which implies, in Morocco, an

improvement in the average quality of the jobs created.

88. Additional analytical work has been carried out in each of these areas. In education,

the Bank analytic program has included reports on higher education financing36

and private

higher education,37

the findings of which helped shape the sectoral dialogue. More broadly,

the World Bank‘s Flagship Report in 2008 (―The Road Not Traveled‖)38

contributed to a

35

World Bank, 2008 MILES report 36

Carnoy, M., LaRocque, N., Tahraoui, M. 2004. Les coûts et le financement de l’enseignement supérieur au

Maroc. Washington D.C.: World Bank. 37

LaRocque, N. 2004. L’enseignement supérieur privé au Maroc : potentiel et contraintes. Washington D.C.:

World Bank. 38

Report No. 46789: http://siteresources.worldbank.org/INTMENA/Resources/EDU_Flagship_Full_ENG.pdf

33

public debate on the level of education sector outcomes, by emphasizing the need to improve

design and accountability measures in the sector.

89. Other development partners carried out analyses that have contributed to the

formulation of Government policy, namely: an USAID report on skills development,39

a

European Commission report on vocational training,40

an ETF report on vocational training41

and a GIZ report on labor market entry from enterprise-based apprenticeship training.42

AFD

recently produced an analysis of the transition from the education and training system to the

labor market.43

These analyses highlight the importance of clearly linking learning outcomes

to the needs of the labor market, by channeling more students into professionally-oriented

programs and by increasing opportunities in apprenticeship and job-based sandwich

programs.

90. On the Borrower‘s side, the Higher Council for Education 2008 Annual Report44

provided a comprehensive and frank diagnosis of the state and performance of the education

sector and laid out recommendations for improving the country‘s education outcomes. The

Higher Council for Education recommended inter alia: (i) improved learning achievement

assessments; (ii) a more open policy concerning the language of instruction as a quality

improvement mechanism; and (iii) the promotion of the private sector in improving access

and quality.

91. In Employment, and prior to the MILES report, the Bank prepared a Gender/Labor

Market Study (2007).45

Its main policy recommendations included: (ii) increase training

opportunities for women; (ii) support women entrepreneurship; and (iii) improve access to

national statistical data to allow gender-based analysis of employment characteristics and

program and policy evaluation.46

More recently, the Youth Study47

confirmed the concern

about the magnitude of the youth population that is neither at school nor at work or looking

for a job, and the low coverage of ANAEPEC services. This program also builds on several

regional studies on employment that have just been completed or are ongoing, most covering

Morocco.48

39

Education Development Center. 2003. Morocco Workforce Development Assessment. Rabat:

USAID/Morocco. 40

Bouoiyour, J. 2008. Evaluation de la qualité du système de formation professionnelle et son impact sur le

développement : comparaison Maroc-Tunisie. Brussels: European Commission. 41

European Training Foundation. 2011. Processus de Turin : Maroc. Turin: European Training Foundation. 42

Baayood, M. 2010. Etude relative à l‘insertion et au cheminement professionnel des lauréat(e)s des centres de

formation par apprentissage intra-entreprise. Eschborn: Deutsche Gesellschaft für Internationale

Zusammenarbeit. 43

Agence Française de Développement, septembre 2011, Document de travail n° 116, Formation et emploi au

Maroc. 44

Conseil supérieur de l‘enseignement. 2008. Rapport annuel 2008: Etat et perspectives du système d’éducation

et de formation. Rabat: Conseil supérieur de l‘enseignement. 45

World Bank. 2007. Genre et emploi au Maroc : parvenir à un plus grande égalité entre les genres à travers le

marché du travail. Washington D.C.: World Bank. 46

World Bank. 2007. Genre et emploi au Maroc : parvenir à un plus grande égalité entre les genres à travers le

marché du travail. Washington D.C.: World Bank. 47

World Bank. 2011 (Draft). Promoting Youth Opportunities and Participation. Washington D.C.: World Bank. 48

World Bank. 2011 (Draft).Opening Up Job Opportunities For All: Employability in the Middle East and North

Africa Region.Washington D.C.: World Bank .

Gatti, R.; Angel-Urdinola, D.; Silva J. and Bodor, A. 2011 (forthcoming). Striving for better jobs: The challenge

of Informality in the Middle East and North Africa. Washington D.C.: World Bank.

34

92. On the Government‘s side, the Labor Ministry produced a note ―Troisièmes Assises

pour l’emploi - Note introductive‖ (May 2011) that provides an analysis of the current

situation of the labor market, based inter alia on the latest labor force survey results, some of

which are being presented in this document The Labor Ministry also issued an impact

evaluation of the Idmaj program (2011).49

The newly established Economic and Social

Council (Conseil économique et social) that comprises 99 members of associations and union

groups, as well as scientific experts and intellectuals, is preparing a report on youth

employment based on existing data and consultations of youth groups.

93. On social protection, the Bank has recently produced a Strategic Note on Targeting

and Social Protection that reviews social assistance and social insurance programs in

Morocco. The note makes specific recommendations on the necessity to reform the insurance

system and extend its coverage. It also calls for a much larger coverage of social assistance

programs, including ALPMs, to meet the needs of the population. In addition, the Bank has

provided technical assistance on social insurance, especially pension reform.

V. THE PROPOSED MOROCCO FIRST SKILLS AND EMPLOYMENT DPL

A. OPERATION DESCRIPTION

94. In line with the MILES report recommendations, the Government intends to

implement key measures in the relative short-term, and has requested the Bank‘s support to a

coherent program in the areas of higher education and vocational training, labor market

policies and social protection. Hence, the objective of the SEDP is to support the Government

of Morocco to implement its program of improving skills, productivity and quality of

employment through:

I. Matching skills developed within the vocational training and higher education systems

to the needs of the labor market;

II. Improving the effectiveness of intermediation services, including active labor market

programs;

III. Improving job quality; and

IV. Strengthening the labor market information system.

95. This is the first in a series of two programmatic DPLs. The SEDPL2 will be

prepared in 2013 and will continue to support further reforms in these four areas. Moreover,

Angel-Urdinola, D. and A. Kuddo. (2010). ―Key Characteristics of Employment Regulation in the Middle East

and North Africa.‖ World Bank SP Discussion Paper No. 1006. Washington, DC: World Bank.

Angel-Urdinola, D., A. Semlali and S. Broddman. (2010). ―Non-Public Provision of Active Labor Market

Programs in Arab-Mediterranean Countries: An Inventory of Youth Programs.‖ SP Discussion Paper No. 1005.

Washington, D.C.: World Bank. 49

Ministère de l‘Emploi et de la Formation Professionnelle, Département de l’Emploi, Enquête auprès des

bénéficiaires du programme Idmaj, rapport d’analyse, June 2011.

35

the new Government may identify additional measures that could be supported by the

SEDPL2 DPL as appropriate.

50

Among the following providers: National Vocational Training Office; Agriculture; Tourism; Fisheries; Works;

Crafts; Youth & Sport; Solidarity; Interior; Justice; Education; Veterans‘ Affairs; Chambers of Commerce

[TBC].

Box 1: Prior Actions for SEDPL1

The Government has agreed on implementing the following prior actions before the presentation of the Loan to

the World Bank Executive Board:

1.1 In the academic year 2010/11, four (4) public universities, covering 75% of their member institutions, (a)

have set up an information system capable of monitoring students‘ progress, by features such as discipline,

level and geography, with a view to improving the internal efficiency of higher education, and (b) and have

produced regular reports for each university and for the group of universities as a whole

1.2 In the academic year 2009/10, the fifteen (15) public universities have provided in at least 80% of their

bachelor-level academic programs in their open-enrollment member institutions, a course module of 80 hours

in foreign languages, computer literacy, communication and study skills

1.3 The Ministry of Labor and Vocational Training, Vocational Training Department, has established three (3)

new vocational training institutes, in high-demand sectors (namely, fashion and air/space industries in 2010

and automobile in 2011), under the management of (private or public-private) sector professionals

1.4 The Ministry of Labor and Vocational Training, Employment Department, has developed and

implemented in 2011: (i) an active labor market program aimed at labor market insertion of hard-to-place

unemployed (Contrat intégration professionnelle) and (ii) an improved wage subsidy program for the

unemployed (Prise en charge par l’Etat de la couverture sociale)

1.5 ANAPEC has implemented a 2009-2011 action plan to increase its number of local offices and

employment counselors.

1.6 The Ministry of Economy and Finance has implemented since January 2011 a set of measures to encourage

the formalization of micro-enterprises, namely: (a) income tax is reduced from 30% to 15% for businesses

whose after-tax turnover is equal to or less than 3 million DH; and (b) income tax amnesty upon registration

for professional tax (―patente‖)

1.7 Royal Decree No. 1.11.181 dated November 22, 2011, amending and completing Royal Decree No.

11.72.184, dated July, 27, 1972, to extend social security coverage by the National Social Security Fund to

licensed drivers, has been published in the National Gazette No. 5998 dated November 24, 2011

1.8 The National Education Evaluation Agency has developed in 2011 a survey instrument on short- and

medium-term labor market status of graduates of universities and professional schools

1.9 The Ministry of Labor and Vocational Training, Employment Department has institutionalized in 2011, via

memoranda, with the National Social Security Fund, and the Ministry of Industry, Commerce and New

Technologies the exchange of labor force data

Box 2: Triggers for SEDPL2

Under the programmatic development policy operations series, the Government has agreed on the following

triggers for moving to the next operation in the series:

2.1 Labor Ministry‘s Vocational Training Department signs with ten (10) providers50

(including private

providers) programmatic contracts (with development plans) in line with the new vocational training strategy.

2.2 Government adopts in Cabinet a draft Vocational Training Law, which inter alia provides for the

governance and financing of on-job vocational training

2.3 Labor Ministry‘s Vocational Training Department operationalizes the National Qualifications Framework,

with a view to enabling users to interpret vocational training qualifications

2.4 Labor Ministry‘s Vocational Training Department develops, on the basis of the results of a technical audit

of 50 NGOs, a support mechanism aimed at NGOs intending to offer vocational training programs to out-of-

36

Box 3: Good Practice Principles for Conditionality

Principle 1: Reinforce ownership. The design of this program has been fully client-driven and thus enjoys

solid country ownership. The civic protests undertaken since February 2011 as part of the Arab Spring have

underlined the central importance of employment to Morocco‘s development and how it is the key priority both

economically and politically. The importance of the employment challenge has garnered the over-whelming

support of all levels of Government and stakeholders in Morocco. King Mohammed VI, in his February 21,

2011 speech, has underlined the necessity to improve training to meet the needs of labor demand, particularly the

industrial emergence sectors. The ultimate goal ―is to ensure a decent life for all Moroccans, especially the most

vulnerable, and […to develop] productive employment especially for the youth which are at the heart of the

country‘s political development‖. The Government embarked on a set of reforms in higher education, training,

labor policies and social protection that will affect this outcome and that are supported by the SEDP.

Principle 2: Agree up front with the Government and other financial partners on a coordinated

accountability framework. In preparing the SEDP, the World Bank team has taken into consideration other

donors‘ on-going operations. In particular, program preparation was coordinated with the EU Advanced Status

Program (under preparation) which includes a pillar on employment and social protection. Both operations share

one trigger related to the labor market information system. The ILO Training Center in Torino has contributed to

the design of the SEDP‘s labor market information system component. In addition, the Bank coordinates closely

with the ETF on its strategic advice to the Labor Ministry‘s Vocational Training Department, and seeks

complementarities with AFD‘s high-end industry specific vocational training centers. No other donor is active

on higher education.

Principle 3: Customize the accountability framework and modalities of Bank support to country

circumstances. By design, the program fully reflects the country‘s circumstances, priorities and institutional

responsibilities, as indicated by the Government. The Program accompanies the implementing ministries in the

implementation of their own sector strategies. The SEDP is also benefiting from the lessons learned from the

previous operations and other DPL operations in Morocco, including in the HD sector (Education Development

Policy Program) and benefits from the flexibility embedded in the CPS.

Principle 4: Choose only actions critical for achieving results as conditions for disbursement. Prior actions

and benchmarks have been identified through a process of extensive consultations with the Ministry of Labor

and Vocational Training (Labor Ministry); Ministry of National Education, Higher Education, Civil Service

Training and Scientific Research, the Ministry of General Affairs and Governance, Ministry of Finance, Ministry

of Commerce, ANAPEC, OFPTT, HCP, employers and workers‘ organizations. The number of prior actions

and triggers (less or equal to 10), and the number of benchmarks (less or equal to 20) are aligned with good

practice examples.

Principle 5: Conduct transparent progress reviews conducive to predictable and performance-based financial

support. Progress reviews will take place twice a year, timed so as to allow for a predictable review of progress

and announcement of support levels at the beginning of the budget year.

Box 2 (continued)

school youth from disadvantaged backgrounds

2.5 An independent entity is established to carry out institutional evaluations of universities.

2.6 Labor Ministry‘s Employment Department adopts and implements the 2012-2016 employment promotion

plan, which defines priorities, programs, budgets, monitoring indicators, and clarifies responsibilities in

monitoring its implementation.

2.7 Government adopts in Cabinet a draft law amending Law No. 51/99 establishing ANAPEC, in order to

extend ANAPEC coverage to non-graduates.

2.8 Government implements, in pilot regions, the institutional plan of the national strategy for the promotion of

micro-enterprises.

2.9 Labor Ministry‘s Employment Department establishes an impact evaluation mechanism for the new

employment measures 2012-2016.

2.10 An institutional mechanism is established, with sufficient funding for its work program, for monitoring

and analyzing the labor market and social protection.

37

B. POLICY AREAS

Area 1. Matching skills developed within the vocational training and higher education

systems to the needs of the labor market

96. Description. The Government aims to upgrade its vocational training and higher

education systems, in terms of both quantity (capacity) and quality (relevance), to ensure that

graduates from these two systems have the knowledge and skills that enable them to obtain

appropriate employment and respond to demand in an open and competitive economy.

97. Challenge. As noted earlier, the low level of education and skills of the workforce

figures among the main factors constraining the country‘s economic growth and long-term

competitiveness. The labor market is imbalanced with notable mismatch between job

demands and graduation qualifications and skills. The national unemployment rate has

decreased substantially in the last 10 years (9.8 in 2007) but remains high in urban areas

(around 15.4 percent in 2007), particularly among young post secondary graduates with 58

percent and 33 percent for the 15-24 and 25-34 age group, respectively. At the same time,

the labor market is characterized by skill shortages that affect mainly new firms, large firms,

and those in the export sector. Hence, for 30 percent of these firms, the main constraint to

their business is the lack of workers with the right skills. Among firms with the most rapid

growth in sales (top quintile), 40 percent identify workers‘ skills as the main constraint.

98. In addition to its low external efficiency, the higher education sector continues to

perform poorly in internal efficiency. In 2009/10, 63 percent of university students graduated,

with rates by discipline ranging from 56 percent in law, economics and social sciences to

above 90 percent in numerus clausus disciplines such as medicine, dentistry, engineering,

technology and translation; moreover, only 21 percent of students graduated within the

standard number of years allocated to the relevant qualification, with rates ranging from 15

percent in sciences to above 75 percent in the numerus clausus disciplines of engineering,

technology and education. Also in 2009/10, just 13 percent of university undergraduates were

enrolled in professional programs, although this share is growing. The main challenge here is

to enable and encourage universities to provide linkages to the economic environment in ways

that ensure training opportunities match labor market needs. This requires improvements in

information systems, governance arrangements (with enhanced institutional autonomy),

financing instruments and quality assurance mechanisms.

99. The vocational training system remains limited in scope. Only 30 percent of the

revenues from the training tax are allocated to on-the-job training, with the bulk allocated to

pre-employment training Moreover, the system is not well articulated with the government

strategy to promote economic restructuring and competitiveness. It is not clear that current

financing mechanisms and governance structures are allocating resources towards the most

productive training programs. Also, small enterprises and those in the informal sector are

excluded from the system. Weak (or limited access) information systems constrain the ability

to carry out solid analysis and develop policies – at the macro and micro levels – that would

address these issues.

100. Government measures. In higher education, the Government, through its

―Education-Training Emergency Program 2009-2012‖, aims to (i) improve system

38

governance, primarily through a process of multi-year contracting with public universities; (ii)

increase the number of places offered in public and private universities, particularly in the

scientific and technological fields, and raise the graduation rate; (iii) diversify the range of

qualifications, in particular by promoting the introduction of more professional diplomas and

degrees at the bachelor‘s and master‘s levels; (iv) respond to the needs of the economy in

specific areas, notably engineering and medicine; (v) promote scientific research through

better linkages to economic sectors; and (vi) improve the quality of social services provided to

students.

101. In vocational training – both initial training and on-the-job training (including

apprenticeship training) – the Government is now preparing a new strategy, with key elements

likely to focus on: (i) rethinking the governance and financing of public provision to better

respond to the needs of the economy, including extending the model that involves delegating

management of training centers to the relevant industry federations, (ii) orienting investments

into sectors identified by sectoral strategies such as the National Emerging Industries

Agreement (PNEI) (e.g., off-shoring, automobile manufacturing, aerospace industries,

electronics, textiles, agribusiness), the National Energy Strategy (energy), the National

Tourism Strategy (tourism), the Plan Maroc Vert (agriculture), the Plan Halieutis (fisheries),

and the Vision 2015 (crafts).

102. SEDP prior actions and triggers. The prior actions under the SEDPL1 ―skills‖ pillar

are as follows:

1.1 In the academic year 2010/11, four (4) public universities, covering 75 percent of

their member institutions: (a) have set up an information system capable of monitoring

students‘ progress, by features such as discipline, level and geography, with a view to

improving the internal efficiency of higher education, and (b) have produced regular

reports for each university and for the group of universities as a whole. It is critical

that universities have in place their own information systems that enable them to make

sound decisions based on local information; it is important also that core information

is made available by universities, in comparable format, to central monitoring agencies

for purposes of accountability and as the basis for financing decisions.

1.2 In the academic year 2009/10, the fifteen (15) public universities have provided in

at least 80 percent of their bachelor-level academic programs in their open-enrollment

member institutions, a course module of 80 hours in foreign languages, computer

literacy, and communication and study skills. These skills, only recently introduced in

a systematic fashion into academic programs, are designed to enable students to

perform better in their disciplinary studies, which would in turn result in higher

qualification rates. These skills areas are moreover often amongst the cross-

disciplinary skills that employers typically indicate that they are looking for in new

recruits, across a range of professions. These skills should in the future be expanded to

include more ―behavioral skills‖, such as self-discipline, perseverance, conflict

management and other interpersonal skills.

1.3 The Ministry of Labor and Vocational Training, Vocational Training Department,

has established three (3) new vocational training institutes, in high-demand sectors

(namely, fashion and air/space industries in 2010 and automobile in 2011), under the

management of (private or public-private) sector professionals. Through management

by sector professionals, it is expected that these institutes will respond better to

39

business needs, either in terms of delivering training programs constructed around the

skills set that industry truly requires or of providing greater opportunities for trainees

and graduates to have internships and other on-job training experiences.

103. The triggers under the SEDPL2 ―skills‖ pillar are as follows:

2.1 Labor Ministry‘s Vocational Training Department signs with at least ten (10)

providers (including private providers) programmatic contracts (with development

plans) in line with the new vocational training strategy.

2.2 The Labor Ministry‘s Vocational Training Department operationalizes the

National Qualifications Framework, with a view to enabling users to interpret

vocational training qualifications in terms of skills acquired. While the Higher

Council for Education will have policy oversight responsibility (e.g., establishing

domains, levels and procedures), the Labor Ministry‘s Vocational Training

Department will be charged with developing the content of the vocational training

elements in association with industry representatives. The information made available

through the Framework would enable employers to better understand the skills content

(by type and level) of different qualifications and would also enable existing and

prospective students to make better decisions about the content of study programs and

the applicability of skills acquired through those programs.

2.3 Government adopts in Cabinet a draft Vocational Training Law, which inter alia

provides for the governance and financing of on-job vocational training. The law

would separate the financing from the provision of training, and thereby avoid

―provider capture‖, by placing the management of the vocational training tax with a

newly created entity (rather than, as at present, with the National Vocational Training

Agency, which is also the dominant public provider of vocational training). This

change would allow for the emergence of initial (pre-service) and on-job (in-service)

training programs that are more responsive to the needs of employers and the labor

market.

2.4 Labor Ministry‘s Vocational Training Department develops, on the basis of the

results of a technical audit of 50 NGOs, a support mechanism aimed at NGOs

intending to offer vocational training programs to out-of-school youth from

disadvantaged backgrounds.

2.5 An independent entity is established to carry out institutional evaluations of

universities. Despite some success in promoting accountability by ―contracting for

results‖ with individual universities, the Higher Education Ministry has relied on

administrative data as the basis for this quality assurance mechanism and only a loose

relationship between performance and public financing. Providing objective

information on universities‘ institutional performance, based not only on

administrative data but also on interviews and observations, enables prospective

students and their families to make better choices about program offerings and allows

prospective employers to better understand the quality of the qualifications presented

by graduates. The information also serves as feedback to the universities themselves

as part of an on-going self-improvement cycle and to Government as an input into

decisions about sectoral policies and funding.

104. This pillar is expected to result in an improved flow of trainees through higher

education and vocational training to graduation and into employment, as measured by the

40

proportion of students in professionally-oriented programs, graduation rates and graduate

employment rates, by gender.

Area 2. Improving the effectiveness of intermediation services, including active labor

market programs

105. Description. The Government seeks to address unemployment by improving the

efficiency of the current Active Labor Market Programs (ALMP) and the intermediation

services.

106. Challenge. Employment promotion programs implemented by the Government of

Morocco through ANAPEC, its public employment agency, include: (i) Idmaj, a wage

subsidy program that enables unemployed graduates to acquire relevant experience through a

paid internship for a maximum of 24 months, and provides enterprises with human resources;

(ii) Taehil, a program that seeks to improve the employability of unemployed graduates

through complementary training or re-training/certified training; and (iii) Moukawalati, an

entrepreneurship program that provides job seekers with technical and financial support (in

the form of a loan of MAD 25,000) so that they can set up their own businesses. These

programs target unemployed51

graduates and cover only about 60,000 people per year i.e., a

tiny fraction of the unemployed population.

107. A recent evaluation of employment promotion programs conducted by the Ministry

of Employment and ANAPEC (2009) revealed that while these efforts have had a positive

effect on beneficiaries‘ employment outcomes, serious challenges remain. For example, Idmaj

has benefited more than 287,000 people during 2006-2011, helping eighty three percent of

those who complete the program land a job. However, forty percent of the total number of

beneficiaries fails to complete the program either because they drop out or because their

contract is suspended. More importantly, the survey revealed that twenty five percent of the

total beneficiaries were ―worse off‖ as a result of the program, mostly because they went from

being ―inactive‖ to ―unemployed.‖ Nevertheless, those beneficiaries who either did not finish

the program or are now ―worse off‖ consider that the program helped them to at the very least

improve their knowledge about the job market.

108. The evaluation yields similar results for the other two active labor market programs.

For example, Taehil has benefited about 69,000 beneficiaries during 2006-2011. Seventy

percent of those beneficiaries who receive complementary training under the Formation

Contractualisée pour l’Emploi or FCE sub-program (complementary training to meet specific

recruitment needs identified by the private sector) obtain a job, and eighty seven percent of

them do so in less than 3 months after the training. However, only twelve percent of those

who undergo re-training and/or certified training under the Formation Qualifiante ou de

Reconversion or FQR sub-program (retraining graduates based on an assessment of market

needs by regional committees) land a job.

Yet, 76 percent of Taehil beneficiaries benefited

from the FQR sub-program. This renders the program ineffective in addressing the skills

mismatch affecting the labor market. Employers who do not extend program beneficiaries a

job offer after the training cite beneficiaries‘ lack of experience and/or capacity as one of the

51

To the exception of Moukawalati that was opened in 2009 to non-graduate unemployed (primary school

certificate level).

41

main challenges. In fact, fifty nine percent of employers consider the program only to be

―partially efficient.‖ Finally, Moukawalati has been quite effective at identifying projects that

have ―potential‖ and providing its beneficiaries with technical support (35,000 projects during

2006-2011). However, only 8,200 projects have been assessed for financing by a bank and

4,300 have been approved. While these new enterprises have created 12,000 jobs, the number

of projects that have been financed by a bank constitutes less than fifty percent of the project

considered for financing and less than ten percent of the projects identified by the program to

have ―potential‖.

109. While important and revealing, these results are insufficient to make targeted

recommendations on how to improve the impact of these programs. A comprehensive

monitoring system to track beneficiaries upon exiting these programs and, more importantly,

an evaluation strategy must be set in place during the programs‘ inception and prior to their

implementation.

110. Finally, the Government recently completed an institutional audit of ANAPEC, to

identify key operational challenges as well as major areas of reform. While important to

improve the delivery of public employment services, ANAPEC only plays a minor role in job

intermediation. ANAPEC has an extremely low number of counselors per registered

unemployed (1 for 1,126 job seekers), and has a limited number of local offices. With these

constraints, ANAPEC focuses mostly on the high-skilled unemployed and does little to

provide employment services to the non-graduates, the bulk of the unemployed.

111. Government measures. The Government has engaged in an in-depth review of its

ALMPs and labor market intermediation policies. It has recognized the necessity to extend

coverage of ALMPs to low skills unemployed youth, and long term unemployed, and to

improve program design to reduce drop out, substitution and deadweight loss effects.

Tailoring these programs to regional specificities and giving regions a stronger role in their

implementation is also envisaged. A draft proposal of 19 measures for the period 2012-2016

has been prepared. It will need to be refined and developed.

112. The Labor Ministry has decided, however, to launch immediately two of the 2012-

2016 new measures. The first one - prise en charge par l’Etat de la couverture sociale (PCS)

- is an improved version of the Idmaj program (tax breaks on the salaries for the duration of

the contract) which seeks to improve employability of young graduate job seekers through the

development of professional skills and competencies in the course of their enterprise contract.

To encourage firms to offer an open-ended contract at the end of the period, the enterprise

will now be exempted from social security contribution (employers‘ contribution) for a period

of 12 months. The second measure - contrat d’intégration professionnelle (CIP) - targets

long-term unemployed graduates (more than 12 months) or unemployed graduates from study

programs having a record of low labor market insertion rates (list under preparation in

coordination with the Higher Education Ministry). It consists of providing subsidies to firms

that will provide an open-ended contract to this target population after a 6- to 9-month

contract within the enterprise.

113. Success of these new ALMPs will depend on the capacity of ANAPEC to monitor

training and insertion of the unemployed efficiently and transparently, as well as its capacity

to effectively match job seekers to vacancies. The Labor Ministry is considering options to

42

reinforce public employment services. Strengthening ANAPEC, in terms of geographical

coverage, adapting its services to different population profiles (profiling), developing

partnerships and facilitating access through various means (internet, transportation vouchers,

etc.), is a necessary step. The Labor Ministry is also reflecting on developing private

intermediation services as the few private job placement services existing in Morocco target

high-end skills and/or concentrate on short-term contracts (e.g., Manpower).

114. SEDPL1 prior actions and triggers. The prior actions under the ―public employment

policies and programs‖ pillar are as follows:

1.4 The Ministry of Labor and Vocational Training, Employment Department, has

developed and implemented in 2011: (i) an active labor market program aimed at

labor market insertion of hard-to-place unemployed (Contrat intégration

professionnelle) and (ii) an improved wage subsidy program for the unemployed

(Prise en charge par l‘Etat de la couverture sociale)

1.5 ANAPEC has implemented a 2009-2011 action plan to increase the number of

local offices and employment counselors.

115. The triggers under the SEDPL2 ―public employment policies and programs‖ pillar

are as follows:

2.6 Labor Ministry‘s Employment Department adopts and implements the 2012-2016

employment promotion plan, which defines priorities, programs, budgets, monitoring

indicators, and clarifies responsibilities in monitoring its implementation.

2.7 Government adopts in Cabinet a draft law amending Law No. 51/99 establishing

ANAPEC, in order to extend ANAPEC coverage to non-graduates.

116. The expected results of this pillar are as follows: (i) ALMPS are more efficiently

inserting stock of unemployed in the job market; and (ii) intermediation services have become

more accessible, especially for the non graduate youth unemployed, and are able to match a

larger number of job seekers to vacancies. Increased efficiency of ALMPs as well as

improved intermediation services will benefit women who represent 45 percent of the

population who register with ANAPEC each year.

Area 3. Improving job quality

117. Description. The Government seeks to improve the quality of employment and,

specifically, to promote policies and programs that create high value-added and high-paying

jobs, as well as jobs that provide access to risk management instruments that households can

use when exposed to shocks (illness, death of family breadwinner, disability, occupational

accidents, dismissal, loss of income due to maternity leave, etc.).

118. Challenge. Informality rates are high compared to a typical country in the MENA

region, which is partly due to a relatively larger share of employment in the agricultural

43

sector.52

As women often work in unpaid/subsistence agriculture, being a woman is

positively associated with informality. Informality is also very high among youth (15-24).

More than 75 percent of informal workers can be found in small firms (i.e., less than five

workers) which engage in low productivity activities.53

Informality is also strongly and

negatively correlated with education. Finally, there is low labor mobility due to regulations

that protect jobs and not individuals as well as poor access to formal income protection

mechanisms.

119. Government measures. The Borrower is tackling poor quality of employment from

different angles. First, the General Affairs Ministry would like to encourage the progressive

formalization of micro-enterprises (defined as enterprises having a revenue below MAD 3

million per annum), and to enhance their productivity and employment creation capacity. The

draft National Strategy For Micro-Enterprise Development, currently under the new

Government‘s review, includes four priority axes: (i) access to financing; (ii) fiscal incentives;

(iii) support for social insurance registration; and (iv) support and facilitation pre-and post-

enterprise creation through coaching, advisory services, administrative support, etc. The

previous Government has already implemented some of the strategy recommendations related

to the fiscal axis.

120. Second, the Government is seeking to expand social security coverage for salaried

workers, independent workers, and the poor. For salaried workers, The CNSS expected to

increase the number of contributors by 150,000 between 2009 and 2011. However, it

surpassed this objective, reaching 500,000 new contributors during the same period.54

A

2012-2104 extension program is being prepared, based on lessons learned from this first

extension phase. For independent workers, a new Law No. 84.11 expanding social security

by CNSS to some categories of non-salaried workers in the transport sector has been

published. In early 2012, the Government also extended the pilot health insurance scheme

for the poor at the national level.

121. Finally, the Government is revising its regulatory framework to comply with the EU

decent work agenda including: a law on occupational health and safety (draft Law 03-11), a

law on domestic employment (draft law 34-06), a law on purely traditional work (draft law

20-11), a ministerial decree on seasonal work, a ministerial decree on dangerous work for

children, etc. These legal texts, in addition to strengthening the labor inspectorate, may be

supported by the EU under the employment component of the Advanced Status Program.

122. SEDPL1 prior actions and triggers. The prior actions under the ―job quality‖ pillar

are as follows:

52

Angel-Urdinola, D. and Tanabe, K. ―Micro-Determinants of Informal Employment in the Middle East and

North Africa Region.‖ Mimeo. Washington, DC: World Bank, 2011. 53

Gatti, R., Angel-Urdinola, D., Silva, J. and Bodor, A. ―Striving for better Jobs: The Challenge of Informality

in the Middle East and North Africa Region.― Washington, DC: World Bank, 2011. 54

CNSS achieved its target coverage through: (a) the development of communication through radio, television

and written press campaigns and a mobile unit intervening directly in the rural marketplaces; (b) proximity

policy with creation of new branches and establishment of mobile branches; (c) overhaul of management rules

and procedures with streamlining of wage reporting procedures on paper and in digital form; and (d)

improvement of relations with farmers (who are self-employed and not eligible to CNSS) and declared workers

so as to improve data reliability.

44

1.6 The Finance Ministry has implemented a set of measures to encourage the

formalization of micro-enterprises, namely: (a) income tax is reduced from 30 percent

to 15 percent for businesses whose after-tax turnover is equal to or less than 3 million

DH; and (b) income tax amnesty upon registration for professional tax (“patente‖),

i.e., transition from informality to the first level of formality.

1.7 Royal Decree No. 1.11.181 dated November 22, 2011, amending and completing

Royal Decree No. 11.72.184, dated July, 27, 1972, to extend social security coverage

by the National Social Security Fund to licensed drivers, has been published in the

National Gazette No. 5998 dated November 24, 2011.

123. The trigger under the SEDPL2 ―job quality‖ pillar is as follows:

2.8 The Government implements, in pilot regions, the institutional plan of the national

strategy for the promotion of micro-enterprises.

124. The expected results of this pillar are that: (i) more micro-enterprises will have an

incentive to become formal; as a result, they will benefit from public services that will boost

their productivity, Given that being a woman is positively associated with informality, this

measure should largely benefit this segment of the population; and (ii) some non-salaried

workers from the transport sector and their families will have access to risk management

instruments thereby reducing the vulnerability of their households to shocks.

Area 4. Strengthening the labor market information system

125. Description. The Government would like to address the lack of information and

systematic analysis of labor market data that hinders evidence-based policy making.

126. Challenge. The definition of labor policies is constrained by a weak information

base. The current labor force survey provides limited information about the dynamics of

labor supply and demand. It is not possible to know, for instance, what the rates of job

creation and job destruction are across economic sectors or how individuals transit from the

education system to the labor market and then move between employment and unemployment

within and across economic sectors. While the survey collects information on wages, the data

are not reliable and therefore are not published.

127. In addition, access to data for policy makers is limited. For example, the Labor

Ministry does not have access to individual data of labor force surveys, or firm surveys, and

cannot perform its own analysis. The dialogue between data producers and data users is not

formalized and does not allow a full use of the survey instruments.

128. Government measures. To meet the need for a labor market information system and

for monitoring and evaluation of various employment initiatives, the Government would like

to: (i) improve strategic system oversight with a view to better integrate information systems

across education, employment and social security; (ii) promote users‘ access to individualized

data;55

and (ii) establish a national Employment Observatory. The Observatory, which was to

55

The most relevant data bases available in Morocco for Labor Market Information System are the labor force

surveys carried out by HCP, the surveys on firms carried by the Trade Ministry, the tracer surveys of vocational

training graduates carried out by the Labor Ministry‘s Department of Vocational Training, the regional studies

45

be created in 2006, remains to date a small working group within the Labor Ministry‘s

Employment Department, and struggles to mobilize other government stakeholders. Initially,

the Observatory will have to operate on the basis of existing information systems that are

available in various Ministries according to their respective areas. However, the Ministry of

Labor is determined to broker agreements with several entities to access their individual data

for improved labor market analysis, namely: the CNSS and the Ministry of Industry of

Commerce in a first phase, then ANAPEC, the employers‘ organization (CGEM -

Confédération Générale des Entreprises du Maroc), and HCP in a second phase.

1.8 The National Education Evaluation Agency has developed in 2011 a survey

instrument on short- and medium-term labor market status of graduates of universities

and professional schools.

1.9 The Ministry of Labor and Vocational Training Employment Department has

institutionalized in 2011, via memoranda with the National Social Security Fund and

the Ministry of Industry, Commerce and New Technologies the exchange of labor

force data.

130. The triggers under the SEDPL2 ―labor market information system‖ pillar are as

follows:

2.9 Labor Ministry‘s Employment Department establishes an impact evaluation

mechanism for the new employment measures 2012-2016 within the appropriate

institutional framework.

2.10 An institutional mechanism is established, with sufficient funding for its work

program, for monitoring and analyzing the labor market and social protection

131. The expected result of this pillar is that employment-related policies and programs

are based on solid empirical evidence and analytical work carried out in a coordinated

manner.

132. Measures outside the present operation. Other important recommendations of the

MILES study, however, are not addressed under this reform program but do require

Government‘s attention. In particular, the DPL does not address the tax wedge issue which is

among the highest in the MENA region. Yet, a high tax wedge can reduce employment levels

and provide incentives for the informalization of the economy. Reforming the pension system

is therefore urgently required to control the tax wedge, but also to ensure financial

sustainability, and to address the fragmentation of the social insurance system. Different

on emerging needs carried out by ANAPEC, and on-going studies carried out by the Labor Ministry‘s

Employment Department. The administrative data on employers‘ social contributions collected by CNSS as well

as the data collected on job seekers and ALMP beneficiaries collected by ANAPEC are an important source of

information on insertion and job quality.

129. SEDPL1 prior actions and triggers. The prior action under the ―labor market

information system‖ pillar is as follows:

46

institutions manage social insurance plans for different segments of the labor force. This

fragmentation can affect labor mobility. 56

133. The DPL also does not address labor regulations or income protection mechanisms.

The MILES study shows that labor regulations remain focused on job protection, i.e.,

dismissal procedures and a severance pay system which is among the most generous in the

world. These regulations are either becoming irrelevant due to institutionalized evasion (and

therefore not providing adequate income protection for workers) or constraining the

operations of firms that abide by them. The study recommends reforming regulations for

hiring and dismissal procedures and severance pay while studying options for implementing

an appropriate income protection system for workers. The previous Government launched the

preparation of an unemployment insurance scheme (Indemnité pour Perte d’Emploi).

However, this scheme is being designed outside any revision of labor regulations, which may

result in an increase of the formal sector labor cost, and further institutional evasion. Finally,

developing staff incentives in the higher education system, which would likely contribute to

better outcomes, does not yet constitute a Government priority.

VI. OPERATION IMPLEMENTATION

A. POVERTY AND SOCIAL IMPACTS

134. The social impact of the policies supported by SEDPL1 is expected to be positive.

No negative poverty impacts are envisaged. Many groups of stakeholders are likely to benefit

from the policy measures supported by this program, in particular young graduates, the

unemployed, and those with poor quality jobs. The measures on matching skills to labor

market needs are expected to promote both the social and economic inclusion of the

unemployed. For example, the prior action seeking to improve students’ non-cognitive and/or

non-technical skills will enable them to develop their communication, personal, and social

skills, thus increasing their employability and long-term earnings.57

The social impact of the

measures aiming at improving the effectiveness of intermediation services are also

expected to be positive. The prior actions to strengthen ANAPEC’s capacity and

design/implement two new ALMPs will increase coverage and improve efficiency of

employment services, thus reducing the risk of unemployment for both VET and HE

graduates, as well as making access to training and job opportunities more equitable. The

measures seeking to improve job quality will also have a positive social impact. For

example, the prior actions to implement a set of measures to increase access to social

insurance and encourage the formalization of micro-enterprises will help to improve working

conditions among workers, thereby addressing labor market segmentations, improving labor

market outcomes and, in general terms, alleviating social exclusion.58

Finally, the measures

to strengthen the labor market information system will likely have positive social impacts

in the medium/long-term, as the institutionalization of the exchange and use of labor force

56

First, because relative compensation packages between sectors are distorted. Second, because in the absence

of full-portability of benefits, workers might be ―locked‖ in their jobs. Workers might have little incentives to

move, for instance, from the public to the private sector, even if salaries were comparable. 57

Stepping up Skills for More Jobs and Higher Productivity. The World Bank, 2010. 58


challenge of Informality in the Middle East and North Africa. Washington D.C.: World Bank.

47

data as well as the carrying out of a survey on labor market entry of graduates will improve

the targeting, design, governance, and accountability of employment programs, thereby

enabling the Government to identify and reach out, in a more efficient/effective manner, to

the most marginalized in society.

135. The Government implemented a stimulus package between 2008-2010 to provide

income support to the most vulnerable segments of the population as well as to the most

affected sectors in the economy. The Government complemented this effort with a new set of

measures approved/implemented in the spring of 2011. While SEDPL1 does not support any

of these measures, they may have a direct or an indirect impact on the policies supported by

this DPL. As such, the likely social and poverty impacts of the measures included in the

stimulus package as well as those approved in the spring of 2011 need to be noted.

136. The income support package implemented as of 2008 is mostly benefiting low

income employees. For example, it provided for an increase of 10 percent in the wages of

civil servants at the lower end of the salary scale as well as an increase in the minimum wage

for private sector employees. An increase in the wages of civil servants and in the minimum

wage for private sector employees tend to increase wage earnings for a selected group of low-

skilled workers, who generally have a high marginal propensity to consume. Therefore, the

poverty and social impact of this policy is positive as it likely contributed to higher

consumption and therefore lower poverty among this population. Producers of basic

consumption goods, food, and services could also have benefited from this policy, as poorer

segments of the population tend to consume these goods at higher rates. As a result, the

Government likely benefited from higher income and consumption tax revenues. However,

an increase in wages of civil servants often requires important fiscal expenditures that are, for

the most part, not offset by the positive effects of an increase in income and consumption tax

revenues. This implies that the Government needed to either cut the budget of other programs

and/or engage in a higher level of expenditures that require new taxation and/or financing,

with implications to the nation‘s debt. On the other hand, and due to rigidity of the labor law

in Morocco, an increase in the minimum wage could lead to a decrease in the demand for

labor in the formal sector, which could in turn contribute to higher informal employment. The

magnitude of the effect on unemployment and informality usually depends on how binding

the minimum wage is (i.e., how close the minimum wage is to the average wage and to the

extent it is enforced). In Morocco, since the minimum wage is not binding (in the vicinity of

50 percent of average wage earnings, with an unknown level of enforcement), the adverse

effects are modest.59

Nevertheless, youth are particularly affected since employers prefer

more experienced workers for the same level of skills and wages. In addition, the effects on

producer revenues and taxation are significant for labor intensive firms (such as textile firms).

This could prompt employers to protect their revenues through adjustments in their workforce

and/or through higher prices, thus having significant social impacts.

137. The stimulus package also included a cut in the marginal income tax rate from 42

percent to 38 percent, as well as an extension of the upper end of the exempt income bracket.

Numerous studies have found that high marginal income tax rates reduce people‘s willingness

to work up to their potential, to take entrepreneurial risks, and to create and expand a new

59

World Bank. 2008. MILES report.

48

business.60

Lowering marginal income taxes is thus likely to increase labor supply for high

skilled workers and to promote self-employment among that population. However, lowering

marginal tax rates can contribute to higher inequality between low-income and high-income

workers. On the other hand, extending the upper end of the exempt income bracket is likely

to entice high-wage earners to work harder, employ people, and invest more, thus contributing

to economic growth. However, this policy may also exacerbate existing inequalities and lead

to social tension and even unrest. Government revenues are negatively affected by both of

these policies.

138. Finally, the stimulus package included measures to ensure employment preservation

and to support firms most affected by the crisis (such as guarantees on loans; rescheduling of

debt; and help with export insurance). This policy is likely to have enabled firms affected by

the economic shocks to remain in the market and to maintain their workforce level. In other

words, this policy benefited workers who would have lost their jobs as a consequence of the

economic adjustments, thus mitigating revenue shocks at the household level and preventing

an increase in poverty and social unrest. However, the ―losers‖ of this type of policy are

usually those entities financing the (often expensive) preservation support packages and/or

debt rescheduling programs (mainly the Government and banks).

139. While not formally part of the stimulus package, the Government also increased

subsidies for food and petroleum products as a result of the food and fuel crisis. In general

terms, an increase in food subsidies can have some positive social and poverty impacts,

especially for countries whose population relies largely on staple foods. This is also the case

for fuel subsidies, as they help countries to not fully pass along the recent sharp increases in

international petroleum product price to producers and/or producers. In Morocco, subsidies

constitute the principal form of ―social protection‖ in terms of public expenditures, and can

help to stabilize commodity prices and to preserve consumer purchasing power.61

In fact, the

removal of the subsidy system in Morocco has been estimated to increase the level of poverty

by 4 to 6.5 percent.62

The current subsidy system, however, is universal and is benefiting

mostly the middle class (an estimated 80 percent of total beneficiaries). For example, the fifth

quintile (20 percent of households with the highest revenues) monopolizes approximately 75

percent of the diesel fuel and gasoline subsidies (about one-third of the country‘s subsidy

budget), with the poorest quintile being almost completely excluded, receiving 1 percent of

this subsidy.63

In other words, the subsidy system covers very few of the needs of poor and

vulnerable populations, and their beneficiaries are not necessarily those most at risk, because

programs are poorly targeted. Finally, an increase in subsidies can have a negative impact on

public finances, further exacerbating the nation‘s budget deficit.

140. In the spring of 2011, additional economic and social measures were implemented to

respond to demands for political and economic reforms. For example, the Government

increased public sector employment for unemployed graduates. This policy is likely to

60

Karabegovic et. al., 2004. 61

Strategic Framework Paper on Targeting and Social Protection, Kingdom of Morocco. Human Development

Department Middle East and North Africa Region (MNSHD). World Bank, April 2011. 62

Yemtsov, 2008. 63


Department, Middle East and North Africa Region (MNSHD). World Bank, April 2011.

49

benefit individuals from middle and upper-middle income households, some of whom would

otherwise be dependent on their families. This policy would probably increase consumption

(through the provision of wage earnings) among wealthier segments of the population, which

would in turn benefit producers of secondary goods and services. Although this is not

necessarily a progressive policy, this intervention can have important social impacts, as a

large stock of young unemployed graduates constitutes an important risk for social and

political stability. Investments on training – if well designed –increase productivity and

contribute positively to employment creation and economic growth.64

However, due to the

rigidities of labor regulation in Morocco, an expansion in government employment could

contribute to permanent increases in expenditures, which would affect short term and medium

term fiscal sustainability of public enterprises.

141. The Government also adopted measures for the very small businesses (VSB) to

enhance their job-creation potential. This policy is likely to increase net revenues for medium

and large formal enterprises in the non-tradable sector, which has positive effects on private

investment and employment creation. For firms in the tradable sector, this policy would help

to mitigate the impact of the financial crisis (since the Euro zone remains the main purchaser

of Morocco‘s exports). This policy would also improve the investment climate in the

medium-term, attracting foreign investment and thus promoting employment creation and

economic growth.65

However, fiscal revenues are likely to be negatively affected. This effect

is somewhat offset by raising income taxation that results from the creation of new

employment.

142. Finally, the Government decided to raise the contributory public and private

minimum pension by almost 67 percent. In general terms, raising the contributory public and

private minimum pension is likely to benefit low-middle income senior citizens, a segment of

the population that is usually vulnerable to poverty risks. However, Morocco has a

segmented pension system that is mostly benefiting those who are relatively better off, thus

decreasing the potential positive poverty impact.66

More importantly, this policy could

potentially incentivize workers to retire early, as they do not have further incentives to

continue contributing, thus putting an extra burden on the country‘s pension system. Given

that no changes in the contribution rates are envisaged, this policy may lead to higher

government expenditures. Nevertheless, the impact on the Government‘s budget is likely to

be moderate due to the relatively low program coverage rates (16 percent of the population in

retirement age).

B. ENVIRONMENTAL ASPECTS

143. The SEDP is not expected to have any significant environmental implications. The

project is a development policy loan in support of a broad program of policy and institutional

reforms. Although the environmental requirements of OP/BP 8.60 apply, the policies

supported by the proposed operation are unlikely to cause significant effects on the country‘s

environment, forests, and other natural resources, as they are oriented toward improving skills

64

Stepping up Skills for More Jobs and Higher Productivity. The World Bank, 2010. 65

Doing Business Report. Making a Difference for Entrepreneurs. World Bank, 2011. 66


Department.

50

and employment and do not include an investment lending subcomponent or physical

investments. In respect of the measure involving the establishment of new vocational training

institutes, World Bank support emphasizes the measure‘s institutional innovation (i.e.,

management delegated to private or public-private sector professionals) rather than any

physical infrastructure associated with the new institutes. The operation is likely to have

some positive environmental impact, inasmuch as one of these new sector-managed training

institutes will be set up to support renewable energy/energy efficiency industries.

144. The measure aimed at encouraging existing informal non-agricultural micro-

enterprises to become formal is not expected to result in an increase in the actual number of

such micro-enterprises which, depending on their nature and location, could have had

potentially negative impacts on environment and natural resources. Rather, the measure will

encourage the formalization of existing firms that have been operating in the informal sector,

and as such will not encourage the creation of new firms. Over the past few years, Morocco

has achieved substantial progress in (i) developing its environmental strategy and National

Environment Action Plan (NEAP), (ii) preparing and implementing related national

investment programs, particularly in water pollution and municipal solid waste; and (iii)

building its environmental institutions and reinforcing the associated legal framework. Given

these advances, the Bank has made use of the Country System approach for Environmental

Safeguards in Morocco. The challenge remains the appropriate implementation of this

improved environmental policy and institutional framework. An environmental charter has

been prepared and, as a consequence, a new environmental framework law is under

preparation. Ultimately, all major environmental laws and regulations (air, water, etc.) will be

updated, but this process will be lengthy.

C. IMPLEMENTATION, MONITORING AND EVALUATION

145. SEDP implementation will be under the overall coordination of the General Affairs

and Governance Ministry (MAGG), through regular contact with the four implementing

ministries: the Labor Ministry (MEFP) (for the labor market programs and training programs,

the labor market information system, and the social protection program), the Higher

Education Ministry (MESRSFC) (for the higher education program), the Finance Ministry

(MEF) (for the microenterprises program under SEDPL1), and MAGG itself (for the

microenterprise program under SEDPL2). These four ministries will form the Inter-

ministerial Coordination Committee. They will be responsible for monitoring and evaluating

reforms they implement directly or indirectly. Indeed, parts of the various programs are under

the direct responsibility either of entities that have a hierarchical relationship with one of the

abovementioned agencies (the National Social Security Fund [CNSS] and the National

Employment Promotion Agency [ANAPEC] with the Labor Ministry, and public universities

and professional schools with the Higher Education Ministry) or of the Higher Council for

Education (CSE) (body charged with the oversight of the National Education Evaluation

Agency [INE]), the CSE being an independent entity operating in the education/training field

(Figure 6). For example, university faculties will be responsible for implementing and using

the information system on students‘ progress, ANAPEC offices will be responsible for

implementing the ALMPs, and CNSS offices will implement the social security coverage

extension program. SEDP implementation progress will be monitored based on a results

framework which comprises the results/outcomes indicators highlighted in the policy matrix

to measure progress regarding the four policy areas (see Annex 2). These indicators will be

51

disaggregated for gender, wherever possible. They will be closely monitored during

supervision and review missions.

Figure 6. SEDP Implementation and Coordination: Organizational Structure

D. FIDUCIARY ASPECTS, DISBURSEMENT AND AUDITING

146. A Public Expenditure and Financial Accountability (PEFA) assessment was

undertaken in 2009 jointly by the European Commission and the Bank. The PEFA report has

confirmed substantial progress in Public Finance Management (PFM) reforms in Morocco.

The results, based on the PEFA ratings, indicate in particular that Morocco has an overall

credible, comprehensive, and transparent budget (which is published in the Official Bulletin).

The PFM system also supports the achievement of aggregate fiscal discipline, strategic

allocation of resources and efficient service delivery. The main strengths of the Moroccan

PFM are the following aspects: (i) credible and transparent budget; (ii) transparency of

taxpayer obligations and liabilities; (iii) timeliness and regularity of reconciliation of the

Government‘s bank accounts; (iv) accurate and timely in-year budget reports covering

expenditures at both commitment and payment stages, and (v) strong cash and debt

management. The main challenges of the Morocco PFM relate to: (i) improvement of the

budget classification, since despite the level of detail, accuracy, and reliability, it does not yet

allow for reliable direct tracking of program-related spending being financed under priority

programs; (ii) timeliness of annual statements which are submitted for external audit 15

months after the end of the fiscal year; (iii) the limited extent of legislative scrutiny of

external audit reports; and (iv) the frequency and scope of audits rated average and the follow-

up of audit recommendations. The Government is committed to addressing these challenges,

and, in order to do so, has introduced measures to: (i) move to a performance based budgeting

framework; (ii) develop a Medium-Term Expenditure Framework to assist in fiscal

sustainability; (iii) modernize its accounting and internal audit framework; and (iv) improve

revenue management. The 2009 PEFA is also contributing to the Government‘s reform

process by providing information on the extent to which reforms are yielding improved

MAGG

(Interministerial Coordination)

MEFP MESRSFC MEF MAGG

Tax Micro-

Employment Vocational enterprises

Training

CNSS ANAPEC CSE / INE Universities

& Professional Schools

KEY Interministerial Coordination Committee

Hierarchical relationship

Non-hierarchical relationship (coordination, collaboration, consultation)

52

performance. In conclusion, the strength of Morocco‘s PFM system and the Government‘s

commitment to reform, taken together, are, in the Bank‘s view, adequate to support this DPL.

147. No safeguard assessment of the BAM was conducted by the IMF. However, the

Central Bank is audited on a yearly basis with the audit report being disclosed publicly. The

2009 and 2010 audits were unqualified. However, the Bank was not able to review the

Management Letter, and therefore has limited information on the foreign exchange control

environment.

148. With reference to the flow of funds, the proposed loan will follow the Bank‘s

disbursement procedures for development policy support. Once the loan is approved by the

Bank‘s Board of Executive Directors and becomes effective, the proceeds of the loan will be

disbursed in compliance with the stipulated release conditions as defined in the Development

Loan Agreement and in a single installment. The flow of funds (including foreign currency

exchange) is subject to standard public financial processes. The Government budget is

comprehensive, unified and subject to centralized Treasury account. Loan proceeds will be

deposited in a Government dedicated account at the Central Bank and the equivalent of the

funds in local currency will be transferred to the Treasury current account. The Ministry of

Finance will then furnish to the Bank a confirmation of this transfer, advising that the total

sum of the loan has been received in an account that forms part of the country‘s official

foreign exchange reserves and credited to the account used to finance budget expenditures.

149. If the proceeds of the loan are used for ineligible purposes as defined in the

Development Loan Agreement, the Bank will require the Borrower to promptly upon notice

refund an amount equal to the amount of said payment to the Bank. Amounts refunded to the

Bank upon such request shall be cancelled. The loan proceeds will be administered by the

Ministry of Finance.

Figure 7. Flow of SEDP Funds

150. Although an audit of the use of the funds may not be required, the Bank reserves the

right to ask for a transaction audit. This audit, when asked for, will cover the accuracy of the

transactions i.e., receipts and payments of the dedicated account, including accuracy of

exchange rate conversions; confirming that the dedicated account was used only for the

purposes of the operation where no other amounts have been deposited into the account. Also

the auditor will have to obtain confirmation from corresponding bank(s) involved in the funds

flow regarding the transaction. The time period for submission of the audit report to the Bank

is 6 months from the date a request for such audit is issued.

E. RISKS AND RISK MITIGATION

151. Political Risk. The political and social events in Morocco since the Arab Spring

represent real pressure for meaningful and quick change and there are high expectations

among the population that proposed reforms will have to be implemented in a credible

World Bank

CBM

Euro Dedicated

Bank Account

MOF

MD Budget

Account at CBM

Budget

Morocco PFM

System

53

manner. The new Government‘s articulated reform agenda – and the discussions that the

Bank has held with key Ministries to date – confirm that there is a credible and strong

commitment to the proposed reforms. The envisaged agenda has broad support and the

Government has reiterated its willingness to continue to work for the quick implementation of

key measures that should not be delayed in light of political constraints. The Bank team will

continue to monitor the political evolution closely and will continuously assess the potential

for political developments to influence the implementation of the Bank‘s program and this

operation. The Bank will stand ready to adapt its assistance program, particularly with

respect to specific reform measures supported by this DPL, to measures and reform areas that

become relevant.

152. Macroeconomic Risk. The macro-economic risks facing Morocco include: the

possible deterioration of the on-going global economic difficulties; the further impact of poor

weather on the agricultural sector, and the high prices of food and energy. Should the current

global economic uncertainty further deteriorate, especially if European stagnation evolves into

a recession, Morocco would face reduced growth prospects. Continued low rainfall could

potentially further effect agricultural growth forecasts and overall growth rates. Furthermore,

should oil prices remain at current levels for the year, Morocco would likely see its growth

prospects reduced by about 0.5%. The management and mitigation of macro-economic risk

are predicated on the new Government‘s strong commitment to fiscal and competitiveness

reforms. The mitigating measures on agriculture include support to farmers and possibly

suspension of import duties on cereals. The Government is devising strategies to cope with

potentially sustained high oil prices, including requesting Bank support to develop

mechanisms to hedge commodity price risk. The Bank‘s continued engagement through its

program and other donors‘ stepped up engagement will support the Government in its efforts

to ensure the overall medium term macroeconomic sustainability.

153. Governance Risk. Improving governance remains central to Morocco development

efforts as there are risks posed by implementation deficiencies, political interference and a

lack of accountability. The new Government‘s governance reform agenda is ambitious as

regards the commitment to addressing these issues. The new Constitution and the

strengthening of the country‘s overall governance structure now provide the Government with

an opportunity to address past shortcomings and consolidate the principles of modern

governance. The new Constitution also obliges a participatory process in Government. The

envisaged agenda has broad support and the Government has reiterated its willingness to

continue to work for the quick implementation of key measures that should not be delayed in

light of political constraints. However, while there is a strong degree of continuity –

confirming that several sector plans remain valid - the new Government‘s program has not yet

been fully articulated which raises some concerns about lack of concreteness. The

Government is working towards articulating more clearly reform priorities, recognizing that

this will demand more in-depth and substantive reforms rather than some of the more

technical ones pursued to date, which will require political courage and building consensus

amongst stakeholders. The Bank will help mitigate this risk though its dialogue and TA

support to the further articulation of sectoral programs and reform priorities, and through

more intensive efforts to ensure an effective accompaniment to reform implementation. It is

advising on the sequencing of reform implementation and on critical communication aspects

which aim for developing better shared ownership amongst players. Morocco also benefits

54

from an active and vocal civil society with many mature and competent CSOs in action who

can play a key role.

154. Implementation Capacity. While the government departments (Labor, Higher

Education, General Affairs and Governance, Economy and Finance) at the central level have

significant capacity in administration and oversight, much of the success of implementing

some of the policy measures will rest with various decentralized entities (e.g., university

faculties, ANAPEC offices, and CNSS offices). These local entities vary in their

implementation capacity, but all will require access to information about the policy measures

(e.g., objectives, timelines, implementation steps, appropriate guidelines and system tools) to

enable them to respond appropriately to instructions (e.g., legal texts) issued by the central

government. The Bank will take advantage of regional TA activities (e.g., MENA university

governance score cards) to continue building technical capacity in these decentralized entities.

The Employment TA being delivered is strengthening the capacity of the Ministry of Labor as

set out above. CNSS already has a solid capacity as evidenced by its success in

implementation of the 2009-2011 extension strategy.

155. Program Coordination. As noted above, both SEDP loans will be implemented by a

large number of Government entities. MAGG will be in charge of coordinating the program,

a role that the ministry has played satisfactorily in the past Bank missions and day-to-day

follow-up by field-based staff will help MAGG perform this role, as has been the case during

preparation. The Bank will also promote government ownership of program coordination

through thematic workshops that involve all parties laying the groundwork for a common

agenda. This has been done, for example, on the labor market information system (cf. par.

71). Coordination of employment policies will also be developed through the establishment of

a core inter-ministerial committee (Employment, Training, Education, Higher Education,

Trade and Industry, Statistics) to plan and monitor surveys and studies on skills and

employment.

55

ANNEX 1: LETTER OF DEVELOPMENT POLICY

56

, .. -. 0._ .......... "tt' '" "'",....,.".., "'~ "" OM ''''0 '" """'_ "''''- ~ O~.,., .... ,"

MOl1s;o., Rob. rt ZOElLlCK, President do II Banque Mondl~l .

iBU H StreM- H.W. W05hinglon

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65

(UNOFFICIAL TRANSLATION)

Mr. Robert ZOELLICK,

President of the World Bank

1818 H Street, N.W. Washington

SUBJECT: Letter of Development Policy pertaining to the First Loan for Skills and

Employment Development Policy

Dear Mr. President,

Among its national priorities, the Government accords particular attention to employment. In

addition to creating wealth, employment constitutes the main form of social inclusion.

Thus, economic and social policies having an impact on the creation and promotion of

employment have played a significant role in combating unemployment, particularly among

youth.

For these policies to be able to respond to the challenges that are emerging in the areas of

employment and skills enhancement, efforts already under way will need to be consolidated

and innovative reforms developed.

Within this framework, the Government will take care to maintain fiscal equilibrium in

accordance with the requirements of the new Constitution.

In its 2012-2016 Program, adopted by Parliament, the Government committed itself to

safeguarding fiscal and macro-economic equilibrium, in order to guarantee an attractive

business climate for national, as well as international, investors.

To ensure external economic equilibrium, the Government will correct the external structural

imbalances that exist within the balance of trade and the balance of payments current account.

This will be achieved by identifying and eliminating constraints on investment and

competitiveness through an integrated approach, including constraints linked to factor costs in

production, logistics, exports, education and training, and investment climate.

The objective of this policy letter is to present the conditions and challenges that exist in the

areas of employment and employability, as well as the program that will be put into place to

respond to these challenges.

66

I – REVIEW OF THE EMPLOYMENT SECTOR

Morocco is faced with a certain number of problems affecting the labor market. These

problems are linked particularly to:

- The quality of jobs created and the predominance of low quality jobs impacting

productivity. Increases in growth have not seen significant improvements in the economic

structures the favor high technology activities. The agricultural, housing, public works and

services sectors, which make up 80 percent of total value-added, continue to be the principal

engines of economic growth. At the same time, the informal sector represents 37.3 percent of

non-agricultural jobs and 81 percent of jobs in commerce.

- Unemployment does not equally affect all segments of the active population. The

unemployment rate has declined over the last several years, falling from 13.4 percent in 2000

to 9.1 percent in 2010, in part due to accelerated economic growth. The employment rate is

more pronounced among youth, especially graduates, and among urban women.

Youth unemployment is all the more disconcerting because it co-exists with a scarcity of

skills in strategic sectors.

Unemployment rates vary with qualification levels, with post-secondary education graduates

standing at 18.1 percent in 2010 and youth with average skill levels at 16 percent. The

unemployment rate is higher for university graduates (22.3 percent) than for vocational

training graduates (19.7 percent).

This negative correlation between qualification level and unemployment rate is explained in

part by the inadequate education system and the tendency of the productive system to employ

low-qualified personnel.

As a result, the composition of the active population of 15 to 59 years of age, mainly urban

(60 percent), young (45.2 percent for 15-29 year olds), with a slight female bias (51 percent),

is a an important element of the overall employment situation in Morocco.

- Geographic disparity in employment. Although the national employment rate reached 9.1

percent in 2010, it remains at a relatively higher level in urban areas, (13.7 percent in 2010).

In rural areas, the unemployment rate stood at just 3.9 percent, mainly as a result of

underemployment, which reached 13.2 in 2010.

Moreover, the employment situation is closely linked to that of initial training and the

acquisition of scientific and vocational skills provided by the education and training system at

all levels.

Faced with these challenges, and with a view to promoting employment, the Government has

put in place measures for improving private investment, competitiveness, education and

training.

67

Morocco is in addition pursuing an accelerated public investment policy, focused at major

projects that contribute in large measure to the promotion of employment and the further

creation of hiring opportunities. It essentially consists of large infrastructure projects (roads,

highways, ports, railroads, etc.), urban planning and social housing.

Morocco has also put in place medium- and long-term strategies for emerging sectors, such as

the ―Emergence Plan‖ for certain industry and service subsectors, ―E-Government‖, ―Tourism

Vision 2010‖, ―Handicraft Strategy 2015‖, the ―Rawaj Plan‖ for the commerce sector, the

―Moroccan Wind Energy Program‖, the ―Integrated Solar Electric Production Program‖, and

the ―Green Morocco Program‖ for the agricultural sector.

Program contracts have been equally concluded with several key sectors, such as clothing &

textiles, leather, information technology, aero-transport, etc.

Structural reforms have been adopted for support services to businesses and preparing youth

for better inclusion in the job market. In addition, the Government has taken on major

reforms in education and training to further address adapting workers‘ skills to labor market

demands, taking into account the new impetus of the national economy.

Since 2006, three major programs aimed at promoting youth participation in the active labor

market have been implemented by the Government. They include:

- the TAEHIL Program to improve employment and new vocational skills acquisition;

- the IDMAJ Program to facilitate access to vocational opportunities for young graduates;

- the Moukawalati Program to assist in business creation using an integrated and focused

approach, aimed at increasing productive employment and further reducing

unemployment.

Furthermore, improvements were made to the judicial framework governing economic

activities and to the institutional framework dedicated to providing support services to

businesses, particularly small and medium enterprises.

Likewise, the fiscal and customs system was revised to facilitate investment and improve

sectoral competitiveness.

Given the importance of very small job-creating businesses, Morocco intends to better

integrate this type of business into the national productive sector, by promoting the

formalization of Very Small Businesses (VSB).

Despite the achievements, Morocco is currently facing challenges of stable and quality

employment for a large segment of the population, with an important gender and regional

dimension.

68

II - GOVERNMENT PROGRAM ON SKILLS DEVELOPMENT AND EMPLOYMENT

The objective of the reform program on skills development and employment is to increase

employability, productivity and work quality, through support provided by the

implementation of priority reforms in higher education, vocational training, employment

policies and social insurance.

This reform program, the object of this letter, follows the reflections made on the conclusion

of the study ―Skills Development and Social Protection within the Framework of an

Integrated Job Creation Strategy‖, prepared by your institution in partnership with Moroccan

authorities.

The reform objectives in skills and employment essentially aim to: improve the skills

adequacy produced by the higher education and vocational training systems to labor market

needs; increase the efficiency of active labor programs and reinforce labor market

intermediary services; and, improve work quality and reinforce labor market information

systems.

To solidify these objectives, the Government will put into place actions focused on:

1 - The improvement in skills adequacy produced by higher education and vocational

training systems to labor market needs.

The Government, with its policies in non-formal education, vocational training and higher

education, is focusing especially on providing youth with the skills to integrate into the job

market and adequately meet the needs of the economic environment.

So as to improve the internal and external productivity of training facilities to ensure a better

adequacy between training supply and economic environment demand, the Government will

undertake the following actions:

- The adoption and implementation of a new vocational training strategy to move sector

policies toward more effective and coherent measures. The objective would be to sign a

program-contract with 10 operators, including private vocational training providers. This

contract would be based on the new strategy and include development plans.

- The Government will also work to improve the suitability of incomers to the labor

market, through:

The elaboration of an integrated information system which will be utilized on-line by

different involved (Ministries, Training Departments, Regional Delegations and

Facilities), drawing reliable information in real time directly from the training facility,

thus allowing assistance in the decision making. The proposed system will allow:

- reduction in the risk of errors and anomalies;

- availability of information and statistics on vocational training in real time;

- reduction in costs and data processing time;

69

- improvement in the implementation of monitoring instruments and their availability to

different partners;

- establishment of an information system based on Apogee software in four public

universities, covering 75 percent of their facilities, which will dynamically monitor

students by characteristics, area of study, level and region, in such a manner to

improve their internal efficiency. Individual reports for each university, as well as

consolidated reports for the groups of universities, can be regularly generated.

The establishment of an 80 hour module of foreign languages, computers,

communications, and university methodology in 15 public universities during the

2009/2010 academic year, with at least 80 percent on average of basic studies in their

open access facilities.

- The establishment of an effective system on adapting training to market needs, through:

The creation of three institutes of vocational training in key sectors identified by the

National Pact of Industrial Emergence, through three signed Conventions in 2010 &

2011 (Superior School of Fashion and Design in Casablanca, 2010, Institute of Skills

Training in the Automobile Industry in Tangiers, 2011 and the Institute of Aeronautic

Skills in Casablanca, 2011). Management was delegated to private sector

professionals or joint involvement.

The coordination with social partners on a draft law on continuing education reform

which oversees, among other things, its governance and financing.

In the medium term, the adoption by the Government Council of a draft law on

reforming the continuing education system.

- The ease of mobility for vocational training graduates in the labor force. The objective to

implement the National Qualifications Framework in 2013 will allow for open access into

vocational training certification content, in terms of acquired skills, and increase effectiveness

in the choices made by youth and businesses.

- Broadening the coverage of vocational training (type, urban/rural, people in precarious

situations, etc.) to ensure equal opportunity. This objective will be developed in 2013, based

on results from a technical audit carried out by 50 NGOs, as a framework mechanism

intended for NGOs wishing to offer vocational training programs to uneducated youth from

underprivileged areas.

- Developing vocational training in business communities, notably through apprenticeship and

alternative training.

- Developing a re-engineering for training according to the Competency-Based Approach.

- Carrying out studies on specifications for skills needs.

Since 1987, the Ministry of Employment and Vocational Training has carried out monitoring

surveys on the inclusion and career paths of vocational training graduates in order to:

measure the inclusion level of graduates in work life;

70

identify information on the employment rate and characteristics of occupied jobs,

as well as the unemployment rate and its primary causes;

determine the level of adequacy in job training.

Another objective forecasted for 2013 is the creation of an independent body charged with

university evaluations, having at its disposal, readily-available, accurate information to allow

it to make effective decisions on university policies.

2 - Improvement in the effectiveness of intermediary services, including active labor

market programs.

The Government studied the active policies on employment and intermediation on the job

market, and recognized the need to restructure the current mechanisms to promote inclusion

opportunities for the active population, given the intense pressure stemming from the high

rate unemployment among youth.

For this purpose, a 2012-2016 jobs promotion sectoral plan is being developed, defining

priorities, programs, budgets and monitoring indicators, as well as clarifying the

responsibilities for monitoring and implementation.

This program component focuses on:

- Adoption of new employment promotion programs and the consolidation of existing

measures, taking into account evaluation results and the changes in job seekers‘ profiles,

notably the Professional Integration Contract (PIC), aimed at the inclusion of the unemployed

and the taking over of the employment subsidy program by the State of Social Insurance

Coverage. With the aim of safeguarding a greater efficiency in these programs,

conditionalities will be put in place to limit the substitution or windfall effects.

- Strengthen public intermediation on the job market, by consolidating ANAPAC‘s

capabilities and modifying Law no51/99 to reorganize ANAPEC so it extends its benefits to

non-graduates.

3 – Improvement in work quality

In order to improve work quality, the Government will undertake measures to improve the

productivity of the informal sector on one hand, and expand social coverage on the other.

To this effect, the measures retained concern:

- Incentive for formalizing Very Small Enterprises and creating better quality jobs. Thus, a

national strategy for VSE development was elaborated in 2011 and is in the process of being

adopted. This strategy includes priority objectives, especially access to financing, social

coverage, taxation and the accompanying assistance provided in close proximity to VSE.

Certain fiscal measures have already been executed in the framework of the Finance Law

2011. These include the reduction of tax rates on companies from 30 to 15 percent on profits

71

of companies with a turnover of less than or equal to 3 million dirhams (gross), as well as tax

amnesty from the time of initial registration with the tax professional.

- In 2013, the national promotional strategy of VSE within an institutional framework in

pilot regions will also be implemented.

- The expansion of social coverage to other categories of workers, especially non-salaried

workers in the road transport sector, such as licensed, professional drivers. This new system,

regulated by the CNSS is governed by Law no84.11 modifying and completing the dahir

supporting Law no1-72-184 of 15 joumada II 1392 (27-07-1972) pertaining to the social

security system. This Law was published in the Official Bulletin no5998 of November 24,

2011. This measure will also allow for the improvement in access to risk management

mechanisms for this category of workers.

4 - Strengthening labor market information systems

This component aims to produce data allowing for stakeholders, at all levels, to make efficient

decisions on employment and employability policies, to systematically evaluate active labor

market programs and to establish the institutional framework for labor market information

systems.

To achieve these objectives, the priority measures concern:

- Establishing, within an institutional framework, an evaluation mechanism on the

impact of new employment measures for 2012-2016.

- Institutionalizing exchange and use of labor market data through signed conventions

with partners producing data on the job market.

- Capacity building on labor market trend analyses by launching a program of studies

and surveys on minimum wage, labor mobility in the private sector, as well as in its

companies, working hours and cost.

- Establishing a monitoring and analysis mechanism for the labor market and social

protection.

- Elaboration of a survey mechanism on the short and medium term inclusion of higher

education and vocational training graduates.

At the same time in the field of vocational training, satisfaction surveys directed at employers

will be carried out in order to:

Measure the level of satisfaction of employers in relation to the acquired skills by

the VT graduates;

Determine the suitability of training to the needs of the company;

Disclose the difficulties met by the graduates and adapt them to the job;

72

Gather suggestions from employers on improving training quality.

III - Monitoring and Implementation Modalities

A Steering Committee at the Ministry of General Affairs and Governance and a regrouping of

representatives within the involved departments will oversee monitoring of this program‘s

implementation.

In view of the interest devoted to this program, the Government relies on the support of your

institution through a Development Policy Loan.

In thanking you for your support in carrying out this important program, I ask you to accept,

Mr. President, the expression of my highest consideration.

SIGNATURE

Mohamed Najib Boulif

Minister to the Head of Government

for General Affairs and Governance

73

ANNEX 2: SEDP POLICY MATRIX

Strategic Objective Prior actions for SEDP 1 & Triggers for SEDP 2 Expected results

and indicators

SEDPL1 SEDPL2

Area 1. Matching skills developed within the vocational training and higher education systems to the needs of the labor market (―flow‖)

1.A Developing and implementing a

new vocational training strategy, with

a view to orienting sectoral policy

measures in a coherent and efficient

manner

2.1 Labor Ministry‘s Vocational

Training Department signs with ten

(10) providers67

(including private

providers) programmatic contracts

(with development plans) in line with

the new vocational training strategy

Result : Improving the flow of

trainees through higher education and

vocational training

Indicator 1: Rate of internal efficiency

of vocational training programs

covered by a programmatic contract,

by gender

Baseline :75%. (2009/10)

Target : >90% (2012/13)

Indicator 2: University graduation

rate in open-enrollment faculties, by

gender

Baseline : 64% (2009/10)

Target : 69% (2012/13)

1.B Increasing the relevance of new

labor market entrants‘ qualifications

1.1 In the academic year 2010/11,

four (4) public universities, covering

75% of their member institutions, (a)

have set up an information system

capable of monitoring students‘

progress, by features such as

discipline, level and geography, with a

view to improving the internal

efficiency of higher education, and (b)

have produced regular reports for each

university and for the group of

universities as a whole

1.2 In the academic year 2009/10, the

fifteen (15) public universities have

provided in at least 80% of their

bachelor-level academic programs in

their open-enrollment member

institutions, a course module of 80

hours in foreign languages, computer

literacy, communication and study

skills

67

Amongst the following providers: National Vocational Training Office; Agriculture; Tourism; Fisheries; Works; Crafts; Youth & Sport; Solidarity; Interior; Justice;

Education; Veterans‘ Affairs; Chambers of Commerce [TBC].

74

1.C Setting up a high-quality training

system that continually adapts training

programs to labor market needs

1.3 The Ministry of Labor and

Vocational Training, Vocational

Training Department, has established

three (3) new vocational training

institutes, in high-demand sectors

(namely, fashion and air/space

industries in 2010 and automobile in

2011), under the management of

(private or public-private) sector

professionals

2.2 Government adopts in Cabinet a

draft Vocational Training Law, which

inter alia provides for the governance

and financing of on-job vocational

training

1.D Facilitating the mobility of

vocational training graduates within

the labor market


Training Department operationalizes

the National Qualifications

Framework, with a view to enabling

users to interpret vocational training

qualifications

1.E Extending vocational training

coverage for increased equity


Training Department develops, on the

basis of the results of a technical audit

of 50 NGOs, a support mechanism

aimed at NGOs intending to offer

vocational training programs to out-

of-school youth from disadvantaged

backgrounds

1.F Carrying out evaluations on

specific themes that enable

stakeholders at all levels to take

decisions efficiently in universities

2.5 An independent entity is

established to carry out institutional

evaluations of universities

75

Area 2. Improving the effectiveness of intermediation services, including active labor market programs (―stock‖)

2. A Developing an employment

promotion plan 2012-2016, including

ALMPs,68

to address the stock of

unemployed workers with inadequate

skills

2.6 Labor Ministry‘s Employment

Department adopts and implements

the 2012-2016 employment promotion

plan , which defines priorities,

programs, budgets, monitoring

indicators, and clarifies

responsibilities in monitoring its

implementation

Result : ALMPs are more efficiently

inserting stock of unemployed in the

job market

Indicator 1: Insertion rate (term/open

contract) for PCS beneficiaries, by

gender, after 6 months

Baseline : 40% (2011)

Target : 45% (2013)

Indicator 2: Total number of CIP

beneficiaries, by gender

Baseline : n.a. (2010)

Target : 1,500 (2013)

2. B Preparing a new set of ALMPs

that incorporate lessons learned from

evaluations of existing programs and

take into account the evolution of the

unemployed population profile


Vocational Training, Employment

Department, has developed and

implemented in 2011: (i) an active

labor market program aimed at labor

market insertion of hard-to-place

unemployed (Contrat intégration

professionnelle) and (ii) an improved

wage subsidy program for the

unemployed (Prise en charge par

l’Etat de la couverture sociale)

68

Active labor market programs.

76

2. C Strengthening public

employment services

1.5 ANAPEC has implemented a

2009-2011 action plan to increase its

number of local offices and

employment counselors.

2.7 Government adopts in Cabinet a

draft law amending Law No. 51/99

establishing ANAPEC, in order to

extend ANAPEC coverage to non-

graduates.

Result: Intermediation services are

more accessible, including to non-

graduates

Indicator 1: Number of ANAPEC

local offices

Baseline: 50 (2009)

Target: 77 (2012)

Indicator 2: Number of new

enrolments with ANAPEC, including

proportion of non-graduates69

, par

year, by gender

Baseline: 130,000, including 10% of

non-graduates (2011)

Target: 160,000, including 15% of

non-graduates (2013)

69

Non-graduates are those who have not completed high school (baccalauréat), or do not have a vocational training diploma.

77

Area 3. Improving job quality

3. A Informal non agricultural micro-

enterprises are encouraged to become

formal and create better quality

employment

1.6 The Ministry of Economy and

Finance has implemented since

January 2011 a set of measures to

encourage the formalization of micro-

enterprises, namely:

(a) income tax is reduced from 30% to

15% for businesses whose after-tax

turnover is equal to or less than 3

million DH; and

(b) income tax amnesty upon

registration for professional tax

(―patente‖)70

2.8 Government implements, in pilot

regions, the institutional plan of the

national strategy for the promotion of

micro-enterprises

Result: More micro-enterprises have

an incentive to become formal; as a

result they benefit from public

services that will boost their

productivity.

Indicator 1 : Number of firms,

formerly operating in the informal

sector, registered annually for

professional tax


Midterm : 6,449 (2011)

Target : 8,000 (2012)

Indicator 2: Number of pilot regions

signing a programmatic contract with

the State for implementing the

national strategy for the promotion of

micro-enterprises.

Baseline: n.a. (2011)

Target : 2 (2013)

3. B Extending social security

coverage to non-salaried workers

1.7 Royal Decree No. 1.11.181 dated

November 22, 2011, amending and

completing Royal Decree No.

11.72.184, dated July, 27, 1972, to

extend social security coverage by the

National Social Security Fund71

to

licensed drivers, has been published in

the National Gazette No. 5998 dated

November 24, 2011.

Result: Increased access to risk

management instruments for non-

salaried workers.

Indicator: Number of non-salaried

workers registered with National

Social Security Fund


Target : 200,000 (2013)

70

I.e. Transition from informal to the first level of formality. This is a temporary measure, for 2011 and 2012, which may be renewed after evaluation. 71

Caisse nationale de sécurité sociale.

78

Area 4. Strengthening the Labor Market Information System (LMIS)

4.A Produce the data allowing

stakeholders at all levels to take

decisions on employment and

employability policies

1.8 The National Education

Evaluation Agency72

has developed

in 2011a survey instrument on short-

and medium-term labor market status

of graduates of universities and

professional schools

Result: Employment-related policies

and programs are based on solid

empirical evidence and analytical

work carried out in a coordinated

manner.

Indicator 1:

Number of ALMPs that have been the

subject of an impact evaluation or a

panel evaluation

Baseline : Two (Idmaj and Taheil) out

of three ALPMs have been evaluated

a posteriori; the third on is ongoing

Target: An evaluation (impact or

panel) has been launched for each

new ALMP.

Indicator 2: A program of surveys

and studies, aimed at responding to

the needs of the labor market and

social protection, is carried out. 73

4. B Systematically evaluate ALMPs 2.9 Labor Ministry‘s Employment

Department establishes an impact

evaluation mechanism for the new

employment measures 2012-2016

4. C Establish the LMIS institutional

framework


Vocational Training, Employment

Department has institutionalized in

2011, via memoranda, with the

National Social Security Fund, and

the Ministry of Industry, Commerce

and New Technologies the exchange

of labor force data

2.10 An institutional mechanism is

established, with sufficient funding

for its work program, for monitoring

and analyzing the labor market and

social protection74

72

Instance nationale d‘évaluation 73

(i) Study on minimum wage [study under way]; (ii) Study on sectoral mobility of the labor force in the private sector [launch under way]; (iii) Survey on labor force

mobility in private sector firms [study under way]; and (iv) Survey of cost and duration of labor [launch under way] 74

This action may also be a trigger of the EU Advanced Status Program, under the Employment and SP component.

79

ANNEX 3: FUND RELATIONS NOTE

MOROCCO—Assessment Letter for the World Bank

Macroeconomic Performance and Policies75

Despite sluggish growth in Europe and regional tensions, real GDP growth accelerated

from 3.7 percent in 2010 to 4.9 percent in 2011. The negative impact of weak external demand

was more-than-offset by strong investment in manufacturing and construction, as well as robust

private consumption supported by an increase in real wages, low inflation, and an acceleration of

private sector credit growth. Unemployment declined slightly from 9.1 percent in 2010 to 8.9

percent in 2011, but remained high among the youth at 17.4 percent.

Rising oil prices have led to a widening of the current account deficit from 4.3 percent of

GDP in 2010 to about 8 percent in 2011, despite strong export performance, and high

growth of remittances and tourism. Notwithstanding a 50 percent increase in net FDI, the

financial account also weakened somewhat, resulting in a decline of gross international reserves

from US$23.6 billion (equivalent to 5.8 months of imports of goods and services) at end-2010 to

US$21.4 billion at end-2011 (equivalent to 5.1 months of imports). As of March 30, reserves

stood at US$19.6 billion. The dirham depreciated by 1.9 percent in real effective terms,

remaining broadly in line with fundamentals.

Higher oil prices also contributed to a widening of the fiscal deficit from 4.4 percent of

GDP in 2010 to 6.9 percent of GDP in 2011. While an increase in the wage bill in response to

pressing social demands was offset by a reduction in nonessential current spending, higher oil

prices translated into higher subsidy outlays (from 3.6 percent of GDP in 2010 to 6.1 percent of

GDP in 2011) and a widening of the fiscal deficit. As a result, government debt increased from

51 percent of GDP in 2010 to about 54 percent in 2011. The cyclically-adjusted deficit increased

from 3.3 percent of GDP in 2010 to 4.4 percent in 2011, reflecting a significant increase in

discretionary spending, which contributed to support domestic demand.

Monetary and financial conditions have remained supportive of growth. Despite a slight

decline in liquidity associated with higher cash in circulation and lower international reserves,

the growth of credit to the economy accelerated from 7.4 percent in 2010 to about 9.9 percent in

2011, driven by high housing and private consumption credit, while nonperforming loans have

remained stable at 4.9 percent of total loans. To mitigate the decline in structural liquidity, the

central bank expanded its money market intervention, increased its refinancing to banks to 5

percent of bank deposits at the end of July, and lowered progressively reserve requirements to 6

percent while exempting passbook savings account from the reserve base. Interbank and short-

term government yields stayed close to the policy rate. Long-term government bond yields also

remained stable at about 4.2 percent—0.3 percent lower than at the time of the last international

75

This assessment reflects the conclusions of the 2011 Article IV Consultation with Morocco, completed in October

2011, as well as more recent official information. The next Article IV Consultation with Morocco is tentatively

scheduled for September 2012.

80

bond issuance in September, 2010. The financial system remained resilient to the financial

turmoil in Europe.

Domestic demand is expected to support strong nonagricultural GDP growth of about 4½-5

percent in 2012. Despite sluggish growth in advanced economy trading partners, nonagricultural

GDP growth is projected to decline only slightly in 2012, reflecting an increase in government

productive spending, supportive monetary conditions, robust remittances and tourism receipts,

and strong FDI inflows. However, a projected large drop in cereal production due to poor

rainfalls is expected to be only partly mitigated by progress in arboriculture and horticulture,

resulting in a decline of agricultural production, and lower overall real GDP growth. The outlook

is subject to significant downside risks from a possible deterioration of economic activity in

Europe, and from a possible spike in international oil prices.

The current account deficit is expected to decline to less than 7 percent of GDP in 2012.

Higher energy imports associated with higher international prices are projected to be more-than-

offset by a significant increase in export volumes of phosphates and derived products (of up to

20 percent annually), the export production of new industrial plants (including Renault), and

positive data on early bookings for tourism in 2012. FDI is also expected to increase markedly

from 2012 onwards, highlighting Morocco‘s welcoming environment for FDI.

The authorities had planned to reduce the fiscal deficit to 5.4 percent in 2012, but are

currently revising the draft budget to account for higher international oil prices. The

authorities are also contemplating measures that could— partially—offset the negative impact of

higher international prices. It is unclear at this stage what will be the expected budget deficit for

2012, but the risks are to the downside. Under preliminary projections, tax revenues should

remain broadly stable as a percent of GDP, reflecting improved control and monitoring, despite a

moderate slowdown of the economy. Non-essential recurrent spending is expected to continue to

be reined in, offsetting an increase in the wage bill related to upgrading of the public workforce

in priority areas, and the full-year effect of the wage increase effected in May 2011. Public

investment spending is also projected to increase slightly. Under the assumption of a fiscal

deficit of 5.4 percent in 2012, and the planned further fiscal consolidation over the medium term,

including through a reform of the generalized subsidy system, the public debt position would

peak at 57.5 percent of GDP in 2014, and is sustainable in the medium term with a high

probability.

The authorities are deepening structural reforms to boost growth, enhance

competitiveness, and reduce unemployment. To this end, the authorities will continue to

implement the ambitious investment program initiated in recent years, and sustained policies to

improve the business environment. In addition, the government is strengthening ongoing active

labor market programs, and developing policies to address labor market mismatch.

81

ANNEX 4: MAIN CONCLUSIONS OF THE ―MILES‖ STUDY

The main conclusions of the study are outlined in the following paragraphs.

More jobs will have to come mainly from more investments in the private sector and faster

growth. Good quality jobs, moreover, require that these investments take place in high-value

added sectors and are accompanied by innovations that boost productivity. This requires parallel

developments in terms of macroeconomic and investment policies, labor regulations, the

education sector, and the social protection system. At the same time, because a large share of the

employed population operates in the informal and agricultural sectors, interventions are needed

to improve working conditions and promote productivity growth in these sectors. Three sets of

policies can be distinguished.

The first set of policies focuses on guaranteeing the accumulation of production factors. At the

macro level, this implies policies that facilitate domestic and foreign investments and promote

savings. It also necessitates securing the accumulation of human capital and this involves critical

interventions in primary and secondary education to improve internal efficiency and quality.

Interventions within the social protection system are also needed to increase rates of return to

investments in education among low income population groups. Also, to stimulate domestic

savings or keep them from falling, it is necessary to control the accumulation of unfunded

liabilities of the mandatory pension funds and to reduce their mandate.

The second set of policies is needed to enhance the ability of entrepreneurs to better appropriate

the returns on their investments. The general pre-conditions are keeping macroeconomic and

microeconomic risks at manageable levels, inducing fair competition, and promoting a business

environment that keeps operation costs for firms at low and predictable levels. The social

protection system has an important role to play here by facilitating the mobility/reallocation of

the labor force and by keeping labor costs at sustainable and competitive levels. Social insurance

and active labor market programs play a key role here.

The final set involves policies to promote innovation and productivity growth. The

Government‘s program for the promotion of strategic sectors is a move in this direction, as are

policies aimed at promoting trade liberalization, export promotion and economic diversification.

For these programs and policies to work, however, reforms are needed to improve the external

efficiency of the higher education and vocational training systems. These two supply the large

majority of skilled workers who are required to support the productive transformation of the

economy. But because a large segment of the labor force is low-skilled and operates in low

productivity sectors, it is also important to utilize ALMPs and retraining programs in a more

effective way to target workers/production units in the informal and agricultural sectors. Small

enterprises in the formal sector would also need to receive special attention.

82

ANNEX 5. MACROECONOMIC DEVELOPMENTS OVER THE LAST DECADE

Figure A. Growth shifted to higher path and is less

volatile and less dependent on agriculture (in percent) Figure B. Unemployment declined, but remains high

for urban youth and educated (in percent)

Figure C. External position is deteriorating with

vulnerability in trade (in percent of GDP) Figure D. Public Finances have improved before the

global crisis but are now under pressure

(in percent of GDP)

Figure E. Inflation remains subdued Cumulated year over year (in percent)

Figure F. After a steady decline, Central Government

debt increased in 2011, but is sustainable in the MT

(in percent of GDP)

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

-7.0

-4.0

-1.0

2.0

5.0

8.0

11.0

14.0

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

GDP Agriculture (right axis) Poly. (GDP)

0%

8%

16%

24%

32%

40%

0%

5%

10%

15%

20%

25%

1999 2001 2003 2005 2007 2009 2011

un

em

plo

yme

nt

rate

s

national (left axis) urban (left axis)urban youth (right axis) urban educated (right axis)

-28

-18

-8

2

12

22

32

-8

-6

-4

-2

0

2

4

6

8

10

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

per

cen

t of

GD

P

Current account balance Net reserves in months of GNFS

Foreign direct investments, Gross Trade Balance (right axis)

0%

5%

10%

15%

20%

25%

30%

35%

-10%

-5%

0%

5%

10%

15%

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

Pro

j. 2

012

Series4 Wages & salaries

Consumer subsidies Total revenues (Right Axis)

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Jan

-07

Mar

-07

May

-07

Jul-

07

Sep

-07

No

v-0

7Ja

n-0

8M

ar-0

8M

ay-0

8Ju

l-0

8Se

p-0

8N

ov-

08

Jan

-09

Mar

-09

May

-09

Jul-

09

Sep

-09

No

v-0

9Ja

n-1

0M

ar-1

0M

ay-1

0Ju

l-1

0Se

p-1

0N

ov-

10

Jan

-11

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Food Non-Food CPI

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

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

Foreign Domestic Total

83

ANNEX 6: MOROCCO PUBLIC DEBT SUSTAINABILITY AND EXTERNAL

FINANCING REQUIREMENTS

Figure G- External debt sustainability analysis, main scenarios

Figure H- External debt sustainability analysis, alternative scenarios

34.0

39.0

44.0

49.0

54.0

59.0

64.0

69.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Base Line Key Variables at their Historical Averages No Policy Change

40.0

45.0

50.0

55.0

60.0

65.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

B1 B2 B3 B4 B5 B6

84

Table A: Public Sector Debt Sustainability Framework, 2006-2020

(In percent of GDP, unless otherwise indicated) Est. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

I. Baseline Projections

Public sector debt 1/ 57.3 53.5 47.3 47.1 50.3 52.9 54.7 54.9 54.4 53.7 52.5 51.2 49.8 48.3 46.7

o/w foreign-currency denominated 11.3 10.7 9.9 10.7 12.1 12.1 12.3 12.5 12.5 12.4 12.3 12.0 11.7 11.4 11.0

Change in public sector debt -4.8 -3.8 -6.2 -0.2 3.2 2.6 1.7 0.2 -0.5 -0.7 -1.1 -1.4 -1.4 -1.5 -1.6

Identified debt-creating flows (4+7+12) -4.9 -5.2 -5.6 -0.9 3.4 3.3 2.6 0.7 -0.1 -0.3 -0.7 -1.0 -0.9 -0.9 -0.9

Primary deficit -1.3 -3.3 -3.1 -0.2 2.4 4.6 2.7 2.1 1.5 1.4 1.1 0.9 0.9 0.8 0.7

Revenue and grants 25.1 27.4 29.7 26.0 25.3 25.6 25.3 26.0 26.4 26.3 26.3 26.2 26.2 26.2 26.2

Primary (noninterest) expenditure 23.8 24.1 26.6 25.8 27.7 30.2 28.1 28.0 27.9 27.7 27.4 27.1 27.1 27.0 26.9

Automatic debt dynamics 2/ -3.2 -1.5 -2.5 -0.7 1.0 -0.7 0.2 -1.1 -1.4 -1.5 -1.7 -1.7 -1.8 -1.8 -1.9

Contribution from interest rate/growth differential 3/ -2.1 -0.5 -3.0 -0.5 0.3 -0.7 -0.3 -1.3 -1.5 -1.6 -1.8 -1.8 -1.9 -1.9 -2.0

Of which contribution from real interest rate 2.3 1.0 -0.3 1.7 2.0 1.6 1.2 1.2 1.1 1.1 1.0 0.9 0.8 0.7 0.6

Of which contribution from real GDP growth -4.4 -1.5 -2.7 -2.1 -1.7 -2.3 -1.5 -2.5 -2.6 -2.7 -2.8 -2.8 -2.7 -2.7 -2.6

Contribution from exchange rate depreciation 4/ -1.1 -1.0 0.5 -0.3 0.7 0.0 0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Other identified debt-creating flows -0.4 -0.5 0.0 0.0 0.0 -0.7 -0.4 -0.2 -0.2 -0.2 -0.2 -0.2 0.0 0.1 0.3

Privatization receipts (negative) -0.4 -0.5 0.0 0.0 0.0 -0.7 -0.4 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.1 -0.1

Recognition of implicit or contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.2

Other (specify, e.g. bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.2

Residual, including asset changes (2-3) 0.1 1.5 -0.6 0.8 -0.2 -0.6 -0.8 -0.5 -0.4 -0.4 -0.4 -0.4 -0.5 -0.6 -0.7

Public sector debt-to-revenue ratio 1/ 228.6 195.5 159.2 181.2 198.5 207.0 215.9 211.2 206.1 203.8 199.9 195.1 189.8 184.0 177.9

Gross financing need 5/ 15.2 16.2 15.8 20.3 25.6 21.8 19.7 19.5 18.6 17.5 16.7 15.9 15.2 14.4 13.7

in billions of U.S. dollars 10.0 12.2 14.0 18.4 23.3 21.9 19.5 20.4 20.6 20.6 21.0 21.4 21.7 22.0 22.4

Key Macroeconomic and Fiscal Assumptions

Real GDP growth (in percent) 7.8 2.7 5.6 4.8 3.7 4.8 3.0 4.9 5.1 5.4 5.6 5.7 5.7 5.8 5.9

Average nominal interest rate on public debt (in percent) 6/ 5.7 5.8 5.5 5.3 5.1 4.7 4.7 4.6 4.5 4.3 4.2 4.0 3.9 3.7 3.5

Average real interest rate (nominal rate minus change in GDP deflator, in percent) 4.2 1.9 -0.3 3.8 4.4 3.4 2.5 2.4 2.2 2.3 2.1 2.0 1.8 1.7 1.5

Nominal appreciation (increase in US dollar value of local currency, in percent) 9.4 9.6 -4.8 3.0 -5.9 -0.2 -4.0 -1.3 -1.1 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0

Inflation rate (GDP deflator, in percent) 1.5 3.9 5.9 1.5 0.6 1.3 2.2 2.2 2.3 2.0 2.0 2.0 2.0 2.0 2.0

Growth of real primary spending (deflated by GDP deflator, in percent) -0.2 3.9 16.7 1.5 11.4 14.0 -4.2 4.8 4.7 4.7 4.2 4.7 5.6 5.4 5.5

Primary deficit -1.3 -3.3 -3.1 -0.2 2.4 4.6 2.7 2.1 1.5 1.4 1.1 0.9 0.9 0.8 0.7

II. Stress Tests for Public Debt Ratio

A. Alternative Scenarios

A1. Key variables are at their historical averages in 2011-2016 7/ 52.9 51.7 50.5 49.5 48.4 47.5 46.5 45.6 44.7 43.9

A2. No policy change (constant primary balance) in 2011-2016 52.9 55.5 57.7 59.4 61.1 62.6 63.9 62.8 61.8 60.9

B. Bound Tests

B1. Real interest rate is at baseline plus one standard deviations 52.9 54.9 55.7 55.6 55.3 54.6 53.6 52.6 51.4 50.1

B2. Real GDP growth is at baseline minus one-half standard deviation 52.9 55.2 56.4 57.0 57.6 58.0 58.4 58.9 59.4 60.0

B3. Primary balance is at baseline minus one-half standard deviation 52.9 55.4 56.6 57.0 57.1 56.9 56.3 55.7 54.9 54.0

B4. Combination of B1-B3 using one-quarter standard deviation shocks 52.9 55.4 56.6 57.0 57.1 56.8 56.3 55.6 54.8 53.9

B5. One time 30 percent real depreciation in 2012 9/ 52.9 59.5 59.7 59.0 58.1 56.8 55.3 53.7 52.1 50.3

B6. 10 percent of GDP increase in other debt-creating flows in 2012 52.9 54.4 54.7 54.1 53.4 52.3 50.9 49.5 48.0 46.4

1/ Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.

2/ Derived as [(r - p(1+g) - g + ae(1+r)]/(1+g+p+gp)) times previous period debt ratio, with r = interest rate; p = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency

denominated debt; and e = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).

3/ The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g.

4/ The exchange rate contribution is derived from the numerator in footnote 2/ as ae(1+r).

5/ Defined as public sector deficit, plus amortization of medium and long-term public sector debt, plus short-term debt at end of previous period.

6/ Derived as nominal interest expenditure divided by previous period debt stock.

7/ The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.

8/ The implied change in other key variables under this scenario is discussed in the text.

9/ Real depreciation is defined as nominal depreciation (measured by percentage fall in dollar value of local currency) minus domestic inflation (based on GDP deflator).

10/ Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.

85

Table B: Morocco’s External Financing requirements (in percent of GDP)

Actual

Projections

2009 2010 2011 2012 2013 2014 2015 2016

Financing Requirements 9.3 7.2 6.8 9.6 9.2 8.7 8.3 8.1

Current account deficit 5.4 4.5 8.0 6.9 6.0 5.6 5.3 4.5

Long term amortizations 3.0 2.7 2.0 2.2 2.1 2.0 1.9 2.0

Reserves Changes of Monetary Auth. 0.9 0.0 -3.1 0.5 1.1 1.1 1.0 1.6

Financing sources 9.3 7.2 6.8 9.6 9.2 8.7 8.3 8.1

Official capital grants 0.4 0.0 0.2 0.4 0.3 0.3 0.3 0.3

Private investment, (FDI+Portfolio) (net) 1.6 1.2 2.0 3.5 4.0 4.2 4.4 4.5

Long term Disbursements 5.0 5.5 5.1 6.0 5.1 4.4 3.9 3.6

Other capital flows 2.3 0.5 -0.4 -0.3 -0.3 -0.3 -0.3 -0.3

86

ANNEX 7: COUNTRY AT A GLANCE

SELECTED ECONOMIC INDICATORS

Est. Proj. Proj. Proj. Proj. Proj.

2008 2009 2010 2011 2012 2013 2014 2015 2016

Real sector

Real GDP 5,6 4,8 3,7 4,8 3,0 4,9 5,1 5,4 5,6

Real agriculture GDP 16,3 30,4 -1,6 5,3 -5,0 4,0 1,5 2,0 2,0

Real non-agriculture GDP 4,1 1,1 4,5 4,7 4,2 5,0 5,6 5,8 6,0

GDP sectoral composition

Agriculture 13,4 15,4 14,4 14,5 13,5 13,3 12,7 12,2 11,7

Non-agriculture 86,6 84,6 85,6 85,5 86,5 86,7 87,3 87,8 88,3

Secondary 31,6 29,6 30,6 30,6 30,2 30,2 30,3 30,6 30,8

Tertiary 55,0 55,0 55,0 54,9 56,3 56,6 57,0 57,2 57,5

Money and prices

GDP deflator 5,9 1,5 0,6 1,3 2,2 2,2 2,3 2,0 2,0

Broad money 13,5 7,0 4,9 6,8 8,0 8,4 8,8 9,3 9,7

Investment & saving

Total investment 38,1 35,6 35,1 35,2 37,0 36,5 36,0 35,7 35,4

Gross national savings 32,9 30,2 30,8 28,7 30,5 30,7 30,6 30,5 30,9

Central Government 4,2 3,0 1,6 -0,9 -0,1 0,5 1,6 1,9 2,4

Private and other Public sectors 28,7 27,2 29,2 29,6 30,6 30,2 29,0 28,6 28,5

Government finance

Revenue (excl. privatization receipts) 29,7 26,0 25,3 25,6 25,3 26,0 26,4 26,3 26,3

Tax 27,4 23,5 23,2 23,1 23,0 23,6 23,9 23,8 23,8

Non-Tax 2,4 2,5 2,1 2,5 2,3 2,4 2,5 2,5 2,5

Total expenditure (excl. Special Acc) 30,9 29,4 29,9 32,7 30,8 30,7 30,4 30,1 29,6

Current 25,5 23,1 23,8 26,5 25,4 25,3 24,8 24,4 23,8

of which wage bill 10,2 10,3 10,3 10,9 10,9 10,7 10,5 10,4 10,1

Subsidies 4,6 1,7 3,6 6,0 3,8 3,7 3,4 3,1 2,8

Capital 5,5 6,3 6,2 6,2 5,4 5,5 5,6 5,7 5,8

Overall balance (deficit(-)) 0,4 -2,2 -4,7 -6,8 -5,1 -4,4 -3,8 -3,6 -3,2

Incl. Privatization receipts 0,4 -2,2 -4,7 -6,2 -4,7 -4,2 -3,6 -3,4 -3,0

Central Gov. debt stock 47,3 47,1 50,3 52,9 54,7 54,9 54,4 53,7 52,5

External sector (US$, million)

Current account -4 637 -4 930 -4 078 -7 986 -6 814 -6 205 -6 240 -6 256 -5 622

Exports of goods and services 33 430 26 182 30 308 35 456 35 536 37 650 40 072 42 779 46 318

Imports of goods and services 46 267 37 026 40 192 49 507 49 202 51 606 54 775 58 330 62 231

Gross reserves (months of imports of GNFS) 6,6 7,7 6,8 5,1 5,4 5,5 5,5 5,5 5,6

Current account balance (% of GDP) -5,2 -5,4 -4,5 -8,0 -6,9 -6,0 -5,6 -5,3 -4,5

Memorandum items:

Nominal GDP (MAD billion) 688,8 732,4 764,3 811,5 854,3 915,6 984,1 1 058,5 1 140,5

Exchange rate, average, (MAD/US$) 7,75 8,09 8,42 8,09 8,66 8,78 8,89 8,98 9,07

GDP (in billion US$, Average rate) 88,9 90,6 90,8 100,3 98,7 104,3 110,7 117,9 125,7

Unemployment rate 9,6 9,1 9,1 8,9 … … … … …

Urban Unemployment rate 14.7 13,8 13,7 13,4 … … … … …

Source: Moroccan Government and Bank staff estimates

87

Morocco at a glance 4/18/12

M . East Lower

Key D evelo pment Indicato rs & North middle

M orocco Africa income

(2010)

Population, mid-year (millions) 32.0 331 3,811

Surface area (thousand sq. km) 447 8,778 31,898

Population growth (%) 1.0 1.8 1.2

Urban population (% of to tal population) 57 58 41

GNI (Atlas method, US$ billions) 92.5 1,190 8,846

GNI per capita (Atlas method, US$) 2,890 3,597 2,321

GNI per capita (PPP, international $) 4,400 7,911 4,784

GDP growth (%) 3.7 3.4 7.1

GDP per capita growth (%) 2.6 1.6 5.9

(mo st recent est imate, 2004–2010)

Poverty headcount ratio at $1.25 a day (PPP, %) 3 4 ..

Poverty headcount ratio at $2.00 a day (PPP, %) 14 17 ..

Life expectancy at birth (years) 73 71 68

Infant mortality (per 1,000 live births) 32 27 43

Child malnutrition (% of children under 5) 10 7 24

Adult literacy, male (% of ages 15 and o lder) 69 82 87

Adult literacy, female (% of ages 15 and o lder) 44 66 74

Gross primary enro llment, male (% of age group) .. 106 109

Gross primary enro llment, female (% of age group) .. 104 105

Access to an improved water source (% of population) 96 87 86

Access to improved sanitation facilities (% of population) 51 84 50

N et A id F lo ws 1980 1990 2000 2010 a

(US$ millions)

Net ODA and official aid 897 1,048 419 912

Top 3 donors (in 2008):

European Union Institutions 12 29 117 282

France 135 217 155 238

Spain 0 33 -1 191

Aid (% of GNI) 4.4 3.7 1.2 1.0

Aid per capita (US$) 46 43 15 29

Lo ng-T erm Eco no mic T rends

Consumer prices (annual % change) 9.4 7.0 1.9 1.0

GDP implicit deflator (annual % change) 15.2 7.8 -0.6 0.6

Exchange rate (annual average, local per US$) 3.9 8.2 10.6 8.4

Terms of trade index (2000 = 100) 80 75 100 100

1980–90 1990–2000 2000–10

Population, mid-year (millions) 19.4 24.2 28.8 32.0 2.2 1.8 1.0

GDP (US$ millions) 21,079 28,839 37,022 90,803 5.1 2.9 4.9

Agriculture 18.4 19.3 14.9 15.4 6.8 0.3 5.9

Industry 29.8 30.4 29.1 29.7 2.4 3.0 3.8

M anufacturing 15.9 18.9 17.5 15.3 3.3 2.6 3.0

Services 51.1 50.3 56.0 55.0 1.5 1.7 4.9

Household final consumption expenditure 61.8 60.0 61.4 57.3 5.0 2.8 4.7

General gov't final consumption expenditure 18.0 16.8 18.4 17.5 5.2 2.3 3.9

Gross capital formation 28.5 28.7 25.5 35.1 2.3 3.4 8.3

Exports o f goods and services 19.9 25.7 28.0 33.0 6.2 5.5 6.0

Imports of goods and services 28.2 31.2 33.4 42.9 3.5 4.4 8.5

Gross savings 22.1 28.3 24.3 30.8

Note: Figures in italics are for years other than those specified. 2010 data are preliminary. Group data are for 2009. .. indicates data are not available.

a. A id data are for 2009.

Development Economics, Development Data Group (DECDG).

(average annual growth %)

(% of GDP)

6 4 2 0 2 4 6

0-4

15-19

30-34

45-49

60-64

75-79

percent of total population

Age distribution, 2009

Male Female

0

10

20

30

40

50

60

70

80

90

1990 1995 2000 2009

Morocco Middle East & North Africa

Under-5 mortality rate (per 1,000)

-10

-5

0

5

10

15

95 05

GDP GDP per capita

Growth of GDP and GDP per capita (%)

• •

n • •

- -

•

88

Morocco

B alance o f P ayments and T rade 2000 2010

(US$ millions)

Total merchandise exports (fob) 7,419 17,771

Total merchandise imports (cif) 11,531 35,296

Net trade in goods and services -2,085 -9,884

Current account balance -475 -4,078

as a % of GDP -1.3 -4.5

Workers' remittances and

compensation of employees (receipts) 2,161 6,270

Reserves, including gold 5,138 23,099

C entral Go vernment F inance

(% of GDP)

Current revenue (including grants) 23.6 25.3

Tax revenue 21.7 23.2

Current expenditure 23.4 23.8

T echno lo gy and Infrastructure 2000 2009

Overall surplus/deficit -4.8 -4.7

Paved roads (% of to tal) 56.4 67.8

Highest marginal tax rate (%) Fixed line and mobile phone

Individual .. .. subscribers (per 100 people) 13 90

Corporate .. .. High technology exports

(% of manufactured exports) 11.3 7.1

External D ebt and R eso urce F lo ws

Enviro nment

(US$ millions)

Total debt outstanding and disbursed 20,674 25,403 Agricultural land (% of land area) 69 67

Total debt service 2,610 3,286 Forest area (% of land area) 12.7 12.7

Debt relief (HIPC, M DRI) – – Terrestrial protected areas (% of land area) .. ..

Total debt (% of GDP) 55.8 28.0 Freshwater resources per capita (cu. meters) 983 929

Total debt service (% of exports) 20.3 8.7 Freshwater withdrawal (billion cubic meters) 12.6 ..

Foreign direct investment (net inflows) 470 4,173 CO2 emissions per capita (mt) 1.2 1.5

Portfo lio equity (net inflows) 30 544

GDP per unit o f energy use

(2005 PPP $ per kg of o il equivalent) 8.3 8.4

Energy use per capita (kg of o il equivalent) 355 474

Wo rld B ank Gro up po rtfo lio 2000 2009

(US$ millions)

IBRD

Total debt outstanding and disbursed 2,837 2,543

Disbursements 138 241

Principal repayments 307 238

Interest payments 190 93

IDA

Total debt outstanding and disbursed 27 14

Disbursements 0 0

P rivate Secto r D evelo pment 2000 2010 Total debt service 2 2

Time required to start a business (days) – 12 IFC (fiscal year)

Cost to start a business (% of GNI per capita) – 15.8 Total disbursed and outstanding portfo lio 29 152

Time required to register property (days) – 47 o f which IFC own account 29 152

Disbursements for IFC own account 1 23

Ranked as a major constraint to business 2000 2010 Portfo lio sales, prepayments and

(% of managers surveyed who agreed) repayments for IFC own account 7 7

Access to /cost o f financing .. 84.4

Tax rates .. 62.6 M IGA

Gross exposure – –

Stock market capitalization (% of GDP) 29.4 76.2 New guarantees – –

Bank capital to asset ratio (%) 9.8 8.0

Note: Figures in italics are for years other than those specified. 2010 data are preliminary. 4/18/12

.. indicates data are not available. – indicates observation is not applicable.


0 25 50 75 100

Control of corruption

Rule of law

Regulatory quality

Political stability

Voice and accountability

Country's percentile rank (0-100)higher values imply better ratings

2009

2000

Governance indicators, 2000 and 2009

Source: Kaufmann-Kraay-Mastruzzi, World Bank

IBRD, 2,468

IDA, 13IMF, 0

Other multi-lateral, 7,668

Bilateral, 7,085

Private, 6,369

Short-term, 1,800

Composition of total external debt, 2010

US$ millions

• •

• •

89

Millennium Development Goals Morocco

With selected targets to achieve between 1990 and 2015(estimate closest to date shown, +/- 2 years)

Go al 1: halve the rates fo r extreme po verty and malnutrit io n 1990 1995 2000 2009

Poverty headcount ratio at $1.25 a day (PPP, % of population) 2.5 .. 6.3 2.5

Poverty headcount ratio at national poverty line (% of population) 13.1 .. 15.3 8.8

Share of income or consumption to the poorest qunitile (%) 6.6 .. 6.3 6.5

Prevalence of malnutrition (% of children under 5) 9.0 .. .. ..

Go al 2: ensure that children are able to co mplete primary scho o ling

Primary school enro llment (net, %) 58 72 79 91

Primary completion rate (% of relevant age group) 51 48 57 80

Secondary school enro llment (gross, %) 38 38 38 56

Youth literacy rate (% of people ages 15-24) 55 62 67 80

Go al 3: e liminate gender disparity in educat io n and empo wer wo men

Ratio of girls to boys in primary and secondary education (%) 67 72 80 87

Women employed in the nonagricultural sector (% of nonagricultural employment) .. .. 20 22

Proportion of seats held by women in national parliament (%) .. 1 1 11

Go al 4: reduce under-5 mo rtality by two -thirds

Under-5 mortality rate (per 1,000) 85 .. 47 38

Infant mortality rate (per 1,000 live births) 66 57 40 32

M easles immunization (proportion of one-year o lds immunized, %) 80 88 93 94

Go al 5: reduce maternal mo rtality by three-fo urths

M aternal mortality ratio (modeled estimate, per 100,000 live births) 332 228 228 132

B irths attended by skilled health staff (% of to tal) 31 34 48 83

Contraceptive prevalence (% of women ages 15-49) 42 50 .. ..

Go al 6: halt and begin to reverse the spread o f H IV/ A ID S and o ther majo r diseases

Prevalence of HIV (% of population ages 15-49) 0.1 0.1 0.1 0.1

Incidence of tuberculosis (per 100,000 people) 110 113 95 81

Tuberculosis case detection rate (%, all forms) 76 73 91 93

Go al 7: halve the pro po rt io n o f peo ple witho ut sustainable access to basic needs

Access to an improved water source (% of population) 75 .. 80 96

Access to improved sanitation facilities (% of population) 58 .. 68 51

Forest area (% of land area) 6.8 12.7 12.7 12.7

Terrestrial protected areas (% of land area) .. .. .. ..

CO2 emissions (metric tons per capita) 0.9 1.1 1.2 1.5

GDP per unit o f energy use (constant 2005 PPP $ per kg of o il equivalent) 9.7 8.2 8.3 8.4

Go al 8: develo p a glo bal partnership fo r develo pment

Telephone mainlines (per 100 people) 1.6 4.2 4.9 11.0

M obile phone subscribers (per 100 people) 0.0 0.1 8.1 79.1

Internet users (per 100 people) 0.0 0.0 0.7 32.2

Personal computers (per 100 people) .. 0.3 1.2 5.7

Note: Figures in italics are for years other than those specified. .. indicates data are not available. 4/18/12


M o ro cco

0

25

50

75

100

2000 2005 2009

Primary net enrollment ratio

Ratio of girls to boys in primary & secondary education

Education indicators (%)

0

10

20

30

40

50

60

70

80

90

100

2000 2005 2009

Fixed + mobile subscribers Internet users

ICT indicators (per 100 people)

0

25

50

75

100

1990 1995 2000 2009

Morocco Middle East & North Africa

Measles immunization (% of 1-year olds)_

---- • • • •

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Document of The World Bank · 2016. 7. 14. · PCS State-funded social insurance coverage (Prise en charge par l’Etat de la couverture sociale) ... Number of new enrolments with