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The World Bank Group's Engagement in Morocco 2011-21

Overview

This Country Program Evaluation assesses the development effectiveness of the World Bank Group’s support to Morocco between fiscal year (FY)11 and FY21. Specifically, it investigates the Bank Group’s contribution in solving four systemic obstacles to Morocco’s development (CSMD 2021). These obstacles were identified by a national commission that was tasked by His Majesty King Mohammed VI to find the root causes of Morocco’s development challenges during the 2010s. The national commission conducted in-depth research and broad-based consultations with citizens, experts, development partners, and private sector stakeholders to arrive at a rigorous diagnostic. The report identified the four key obstacles as (i) an incoherent public policy with the country’s development aspirations; (ii) an uneven economic playing field that favors established firms and state-owned enterprises (SOEs), creates nonproductive rent-seeking behaviors, and discourages new entrants; (iii) weak policy implementation caused by the public sector’s weak capacity to carry out reforms; and (iv) weak citizen, labor force, and subnational participation in the country’s development. The Bank Group has emerged as the Moroccan government’s lead partner in a crowded donor environment, with a commitment of $11.2 billion over the evaluation period. This support concentrated on private sector–led growth, human capital development, resilience to climate change, and improved governance.

Getting to Policy Coherence

To shape Morocco’s policy reforms and impact policy coherence, the Bank Group needed to add value in key policy domains. The Moroccan government had a clear opinion of the Bank Group’s comparative advantage over other development partners, including its innovativeness, capacity to bring high-quality expertise across a range of topics to Morocco, ability to frame solutions for cross-sectoral challenges, readily available analytics, and knowledge-brokering power that facilitates South-South learning.

The World Bank’s data and knowledge work, paired with a flexible policy dialogue, had significant impact on policy reforms. To inform policy content, the Bank Group capitalized on its management of global benchmarking data to initiate dialogues on policy reforms. Specifically, the Bank Group was able to use the Changing Wealth of Nations indicators, the Human Capital Index, and the Doing Business rankings to initiate dialogues and influence Morocco’s policy agenda on public sector governance, education and early childhood development, and market competitiveness and the business environment. The World Bank’s data work also revealed the depth of development problems in several sectors, such as education, early childhood development, social protection, and disaster risk management, prompting policy action in each domain.

The World Bank had a significant impact on Morocco’s pension reform by strategically circumscribing its support to just-in-time analytics. There was evidence that the World Bank’s prominent involvement in pension reform may have antagonized some key stakeholders in civil society. In recognition of this situation, the World Bank agreed not to participate directly in the National Technical Commission, which oversaw pension reform. Instead, the World Bank limited its involvement to a just-in-time technical review of the proposed reform. The World Bank also provided budget support to the government through an operation that required the government to establish a pension program for various categories of workers. The World Bank’s involvement was again strategically minimalized during the law’s implementation.

The preparation and dissemination of the Country Economic Memorandum (CEM) was a major opportunity to engage with the government for in-depth policy dialogue. The CEM team had a high degree of autonomy to adjust the scope and substance of the product to Morocco’s interests, which enabled staff to produce a candid and ambitious document. The CEM spoke hard truths about the justice system, market institutions, human capital, and other critical topics while avoiding crossing lines that would have made the content of the CEM inaudible to policy makers. The effort was not wasted because the CEM substantively informed Morocco’s New Development Model, which will guide Morocco’s development until 2035.

Leveling the Economic Playing Field

The Bank Group capitalized on the Moroccan government’s desire to improve its Doing Business ranking to achieve wider business climate reform. In 2010, Morocco ranked 128th among 180 countries in the World Bank’s Doing Business rankings. This low rank catalyzed government action to improve its standing. In response, the International Finance Corporation (IFC) and the World Bank formed a Doing Business advisory team that helped Morocco reach 53rd place in 2020. However, IFC and the World Bank did not stop there. Drawing on the findings of Enterprise Surveys for Morocco, the Bank Group identified and helped the authorities address other important constraints to private sector growth, including inadequate labor skills, inadequate access to finance, and low institutional capacity.

The World Bank and IFC complemented one another’s work with a comprehensive approach to helping to level the playing field in Morocco’s economy. In Morocco, micro, small, and medium enterprises do not compete on a level playing field with large established firms and SOEs. IFC and the World Bank worked on different parts of Morocco’s reform agenda; they both supported efforts to promote fair business practices, improve competition, establish alternative dispute resolution mechanisms, and improve transparency and accountability in public procurement. Together, IFC and the World Bank helped Morocco make its microfinance industry more inclusive, upgrade its regulatory and supervisory framework for capital markets, and develop a new trading window for micro, small, and medium enterprises. Despite this, Bank Group efforts to support the achievement of economywide impacts through SOE reform were not successful. IFC’s support to reduce payment delays from large firms and SOEs to micro, small, and medium enterprises showed limited progress, and IFC’s planned public-private partnership investment and advisory projects never materialized.

Enabling Policy Implementation

The Bank Group helped Morocco overcome policy implementation bottlenecks by introducing new practices. For example, the World Bank used novel approaches to help Morocco modernize the implementation of its social protection system. The Bank Group also used its convening power and financing instruments to mitigate the risks associated with introducing innovation into Morocco’s developing solar energy sector. The Bank Group brought new financing instruments to support Morocco’s central and local governments. For instance, in the most recent strategy period, the Program-for-Results (PforR) replaced development policy financing as the World Bank’s financing instrument of choice to match the government’s shift from first-generation policy reforms to second-generation reforms and results-based financing. For its part, IFC innovated at the subnational level with investments without sovereign guarantees.

The World Bank effectively used monitoring and evaluation practices to overcome implementation challenges and learn from past failures. For example, the World Bank used monitoring and evaluation practices to adapt the Modernization of Irrigated Agriculture series from one project to the next. As a result, the series’ focus expanded from infrastructure in 2012 to water management and modern irrigation technologies in 2014, and to climate adaptation techniques in 2021. Similarly, the World Bank’s first attempt at helping Morocco decentralize its education system did not yield the expected results because the development policy financing series to support Morocco’s Education Emergency Plan (2011–13) did not sufficiently anticipate the central government’s low capacity for steering reforms. In its second attempt, the World Bank adapted by providing complementary support through the education PforR in 2017. Conversely, results for a series on rural water and sanitation suffered when the World Bank did not sufficiently learn and adapt, thereby repeating past mistakes that led to unsatisfactory outcomes. It was not until the series’ fourth project that improvement took place, in part due to a more constructive dialogue instigated in relation to the preparation and dissemination of the World Bank’s flagship diagnostic report—Morocco Infrastructure Review.

More recently, the World Bank began to help the authorities address implementation bottlenecks linked to challenges in multisectoral coordination and policy uptake. As shown in detail in the report, limited uptake of specific programs and services undermined World Bank–supported projects on agriculture, e-petitions, and waste management. Similarly, challenges in coordination between some government agencies, especially between the central and local levels, slowed decentralization and led to incoherence in some complex multisectoral reforms, which contributed to inconsistent sectoral policies. After 2018, the World Bank notably invested in a Political Economy Facility that provided just-in-time diagnostics and recommended practical solutions, ranging from additional policy dialogue to additional capacity building to build trust and facilitate coordination. For example, the World Bank provided technical assistance to Regional Agricultural Development Offices to improve their capacity to coordinate with central government ministries, the World Bank helped develop mechanisms to facilitate coordination within Morocco’s early childhood development architecture, and the Bank Group supported the authorities in strengthening coordination between national and subnational actors by piloting two subnational operations in Casablanca and Marrakech.

Enhancing Citizen Participation

The World Bank has struggled with delivering on its objective to support authorities in strengthening citizen engagement mechanisms and subnational participation in the country’s development. The World Bank’s attempts to help authorities improve citizen participation in the justice sector failed because the World Bank did not adjust its approach to the country’s political changes. In 2009, the government of Morocco requested World Bank support to strengthen institutional capacity to deliver justice services to citizens and businesses. The $16 million Mahkamati investment project was being prepared when the 2011 protests swept across Morocco, leading to constitutional reform, parliamentary elections, and a new government coalition. The Justice Ministry’s priority shifted toward launching a comprehensive national dialogue on justice sector reform, which culminated in 2014 with the adoption of the National Charter for Judicial Reform. Instead of aligning the investment project design with the shifted vision of the new leadership, the World Bank finalized the project as originally designed in 2012. Implementation faced challenges from the beginning because the new leaders did not develop ownership of the project and the World Bank team was not sufficiently reactive. The Ministry of Justice put the project activities on hold as the European Union started supporting the implementation of the National Charter, leaving the World Bank unable to engage the government on further justice sector reforms. Similarly, the World Bank struggled to integrate the findings of its comprehensive diagnostics on youth employability and low female labor force participation into its support to the government. Its effort was unambitious and fragmented, with mostly small activities scattered across the portfolio.

Recently, the Bank Group started experimenting at the subnational level with instruments to address financing and capacity issues. The 2011 constitution enshrined subsidiarity and advanced regionalization principles. However, subnational governments have struggled to deliver on these mandates because of financing challenges and weak institutional capacity. High regional imbalances in wealth, human capital, and access to quality services also persist. The FY19–24 Country Partnership Framework made reducing regional imbalances a priority, and since then the Bank Group has tested various ways of engaging subnationally to address financing and capacity gaps. For example, the World Bank is testing performance-based approaches through PforR to help municipalities address their financing gaps. For its part, IFC is financing a $100 million operation for Casablanca’s two new tramway lines—the first such investment with a local government in the Middle East and North Africa Region without a sovereign guarantee.

Lessons

This evaluation identified the following lessons to guide future Bank Group engagement in Morocco. These lessons may also be of relevance to other countries facing similar development challenges:

  • At times, the World Bank traded recognition for influence to gain traction in Morocco’s policy reforms. The World Bank’s impact hinged on its ability to frame policies on sensitive topics in ways that were palatable to government decision makers. This was the case when the World Bank used the preparation of the CEM as a platform to engage authorities on sensitive reforms, such as investing in market institutions and strengthening the rule of law, which informed Morocco’s reshaping of its development model. In other areas, such as the politically sensitive subsidy and pension reforms, the World Bank was willing to limit its role to providing just-in-time analytics when a more prominent role might have jeopardized reforms.
  • The Bank Group effectively used global benchmarking data to motivate reforms. In Morocco, the Bank Group used the Changing Wealth of Nations indicators, the Human Capital Index, and the Doing Business rankings to enter into wide-ranging reform dialogues. In the case of the climate for doing business, the Bank Group successfully convinced the authorities to integrate the findings of the Enterprise Surveys to expand the agenda for reform.
  • IFC was successful in Morocco by effectively deploying its advisory work to influence major companies, including SOEs, in making institutional changes. IFC had significant impacts on Morocco’s business environment and financial architecture reforms. It achieved these goals by providing advisory and investment support to clients and collaborating with key national institutions and business associations over many years. Its advisory work, in particular, influenced major companies in raising environmental, social, and governance standards and improving corporate governance of SOEs.
  • PforR operations in Morocco provide lessons on how to maximize their effectiveness. PforR has gained traction in Morocco in the second part of the evaluation period. There are two main lessons that emerge from the World Bank’s experience with preparing PforR operations in Morocco. First, the lack of resources to provide technical assistance to the ministries in charge of implementing reforms and reporting on disbursement-linked indicators limited the effectiveness of health and education PforR operations. As such, the World Bank needs to proactively identify trust funds or other resources to fill this technical assistance gap. Second, the World Bank teams need to proactively involve the full range of stakeholders while preparing the PforR operations to facilitate productive dialogues between the Ministry of Economy and Finance and line ministries to define ambitious but achievable disbursement-linked indicators and maintain a predictable disbursement schedule.
  • To start engaging directly at the subnational level in Morocco, the Bank Group has taken new risks and has been willing to experiment with new approaches. The FY19–24 Country Partnership Framework made addressing territorial inequity a priority. Since then, the Bank Group has started experimenting with various ways of engaging subnationally. Some notable experiments include IFC’s investments without sovereign guarantees in Casablanca and Fès-Meknès, the World Bank’s Casablanca Municipal Development PforR for which funds go to municipal budgets, and the Municipal Development PforR (cofinanced by Agence Française de Développement [French Development Agency]), in about 100 urban municipalities. Although it is too early to assess outcomes, the Bank Group’s ability to engage with subnational governments depended on its willingness to take more risks to engage with higher-need territories, adapt its instruments to subnational needs and clients, and coordinate with other development partners.