AFRICAN DEVELOPMENT BANK

MAR/PTTA/2001/01Language: ENGLISHOriginal: FRENCH

APPRAISAL REPORT

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

KINGDOM OF MOROCCO

COUNTRY DEPARTMENTNORTH REGION DECEMBER 2000

TABLE OF CONTENTS

PROJECT BRIEF, CURRENCIES AND MEASURES, LIST OF TABLES, LIST OF ANNEXES,LIST OF ABBREVIATIONS, BASIC DATA, PROJECT MATRIX, EXECUTIVE SUMMARY.

1. PROJECT ORIGIN AND BACKGROUND 1

2. THE TRANSPORT SECTOR .......................................................................................... 1

3. THE AIR SUB-SECTOR……………………………………………. …………..….…34. THE PROJECT………………………………………………………..……………… .. 94.1 DESIGN AND JUSTIFICATION 94.2 PROJECT AREA AND BENEFICIARIES 114.3 STRATEGIC CONTEXT 124.4 PROJECT OBJECTIVE 134.5 PROJECT DESCRIPTION 134.6 OPERATION, MARKET AND PRICES 154.7 IMPACT ON THE ENVIRONMENT 184.8 SOCIAL IMPACT 19

4.9 PROJECT COSTS 204.10 SOURCES OF FINANCE AND EXPENDITURE SCHEDULE 20

5. PROJECT IMPLEMENTATION ................................................................................... 21

5.1 EXECUTING AGENCY 215.2 INSTITUTIONAL ARRANGEMENTS 225.3 IMPLEMENTATION AND SUPERVISION SCHEDULE 225.4 PROCEDURES FOR THE PROCUREMENT OF GOODS AND SERVICES 245.5 DISBURSEMENT PROCEDURES 255.6 MONITORING AND EVALUATION 265.7 FINANCIAL REPORTING AND AUDIT 265.8 AID COORDINATION 26

6. PROJECT RISKS AND SUSTAINABILITY ................................................................ 27

6.1 RECURRENT COSTS 276.2 PROJECT SUSTAINABILITY 276.3 MAJOR RISKS AND MITIGATING MEASURES 27

7. PROJECT BENEFITS ................................................... 28

7.1 FINANCIAL ANALYSIS 287.2 ECONOMIC ANALYSIS 347.3 SOCIAL IMPACT ANALYSIS 357.4 SENSITITY ANALYSIS 35

8. CONCLUSIOINS AND RECOMMENDATIONS……………………………………35

8.1 CONCLUSIONS 358.2 RECOMMENDATIONS 36

LIST OF TABLES

N° of Table Title Page N°

3.1 Actual and Projected Traffic in the three main airports 64.1 1994-1999 Overall airport traffic 144.2 Increase in Charter Traffic as part of Local Traffic 154.3 Actual and Projected Passenger Trafic 154.4 Direct and Indirect job Creation in the Tourism Sector 184.5 Summary of Project Costs by Component 194.6 Summary of Project Costs by Category 204.7 Expenditure by Source of Finance 204.8 Expenditure by Category and Source of Finance 204.9 Expenditure by Category and by Year 205.1 Provisional Schedule of Implementation 225.2 Schedule of Supervision Activities 225.3 Arrangements for Procurement of Goods and works 237.1 1995-1999 Consolidated Operating Accounts 267.2 ONDA 1999 Operating Accounts by Cost Center 277.3 1995-1999 Successive ONDA Balance Sheets 277.4 ONDA’s Debts 317.5 Summary of Projected Income Statements (2000-2010) 327.6 Summary of Budgeted Balance Sheets (2000-2010) 337.7 Resource Application 33

LIST OF ANNEXESANNEX N° N° of pages1. Organization Chart of ONDA 12. Implementation Schedule 13. Provisional List of Goods and Services 14. Basic Data: Trend of Operating Accounts and Balance Sheets 1995-99 25. Assumptions Underlying Financial and Economic Projects 36. Provisional Income Formation Account 2000-2010 37. Caculation of the Financial Internal Rate of Return, Econmic Internal 1

Rate of Return and Sensitivity Test 18. Environmental Impact 39. List of Annexes in Implementation Documents 110. Bank Group Operations in Morocco 2

This report has been prepared by Mr. BENDJEBBOUR, Engineeer - OCDN. 4, Head ofmission, and a Financial Analyst – consultant, following a mission to Morocco in November2000. All enquiries relating to this report may be addressed to him or to Mr. K.BEDOUMRA, Division Manager, OCDN 4 and Mr. Bisi OGUNJOBI, Director OCDN.

CURRENCY EQUIVALENTS, ACRONYMS AND ABBREVIATIONSCurrency Equivalents

(NOVEMBER 2000)

Currency Unit = Dirham (Dh)1 UA = 14.1366 Dirhams (Dhs)1 UA = 1.27934 USD1 UA = 1.51995 Euro

Financial Year1 January to 31 December

Acronyms and AbbreviationsACI = Association Internationale des AéroportsAIA = Académie Internationale de l'AviationASECNA = Agence pour la sécurité de la navigation aérienneADB = African Development BankBC = Bituminous ConcreteBCM = Banque Commerciale du MarocBCP = Banque Centrale PopulaireBCT = Bureau Central des TélécommunicationsBMCE = Banque Marocaine du Commerce ExtérieurPAC = Public Air CirculationCFD = Caisse Française de CoopérationCMM = Caisse marocaine des Marchés de l’EtatCCR = Centre de Contrôle RégionalCNCA = Caisse Nationale du Crédit AgricoleCNCSA = Centre National de Contrôle de la Sécurité AérienneCOMANAV = Compagnie Marocaine de NavigationDAF = Direction Administration et FinancesTD = Tender DocumentsDEPCT = Direction des Etudes Programmation et Contrôle des

TransportsDME = Distance MeasurerDH = DirhamEAS = European Air SpaceGOS = Gross Operating SurplusU.S = United StatesAFESD = Arab Fund for Economic and Social DevelopmentGB = Sand-gravel bitumenILS = Instruments Landing SystemIATA = International Air Transport AssociationICAO = International Civil Aviation OrganizationODI = Office de Développement IndustrielONCF = Office National des Chemins de FerONDA = Office national des AéroportsONT = Office National des transports

SAP = Structural Adjustment ProgrammeGDP = Gross Domestic ProductTSP = Transport Sector ProgrammeLOC = Line of CreditRAM = Royale Air MarocUA = ADB Unit of Account

AFRICAN DEVELOPMENT BANK01 BP 1387, Abidjan, 01Tel: (225) 20-20-44-44

PROJECT INFORMATIONFebruary 2001

The information given hereunder is intended to provide some guidance to prospective suppliers,contractors, consultants and all persons interested in the procurement of goods and services forthe projects approved the Boards of Directors of the Bank Group. More detailed information andguidance should be obtained form the Executing Agency of the Borrower:

1. COUNTRY : Kingdom of Morocco

2. PROJECT TITLE : Improvement and Extension of Airport Capacity

3. BORROWER : Office National Des Aéroports (ONDA)

4. GARANTOR : Kingdom of Morocco

5. LOCATION : National Territory

6. EXECUTING AGENCY : Office National Des Aéroports (ONDA);Mohammed V Airport: 212-22-53-90-40/22-53-91-40; Fax: 212-22-53-96-80 - Casablanca - Morocco

7. PROJECT DESCRIPTION : The project has five (5) components, namely:

A. Construction and equipping of the departure terminal of Casablanca airport;B. Construction of a second runway at Casablanca Airport and reinforcement of

the existing runway;C. Air Control;D. Airport Safety and Security;E. Service

8. TOTAL PROJECT COST : UA 98.07 million

9. ADB GROUP LOAN : a) Amount : UA 52.70 millionb) Conditions :

i) Duration: 20 years, including 5-year grace period

ii) Currency and interest rate: Floating interest rate and currencyto be determined (EURO or US Dollar)

iii) Commitment charge: 0.75% on the undisbursed loan amount,starting sixty (60) days following the signing of the loanagreement.

iv) Repayment: In thirty (30) equal and consecutive half-yearlyinstallments, starting from the sixth (6th) year and from the dateof signing of the loan agreement.

10. OTHER SOURCES OF FINANCE: AFESD: UA 26.70 millionONDA: UA18.67 million

11. DATE OF APPROVAL : March 2001

12. START-UP DATE AND DURATION : 2001 and 4 years

13. DISBURSEMENT : The loan will be provided mainly by thedirect disbursement method.

14. PROCUREMENT OFGOODS AND SERVICES: The works and supply contracts will be subject to

international competitive bidding while servicecontracts will be awarded based on shortlists.

15. ENVIRONMENTAL CATEGORY: The project is classified under category II.

i

EXECUTIVE SUMMARY

Background/Origin of Project

Given the rapidly increasing traffic in most of the airports in the Kingdom of Morocco,and particularly Casablanca’s Mohammed V airport, the airport infrastructure has been foundwanting in the past two years. In addition, compliance with international norms concerning theair sub-sector security requires urgent adaptation of the ground infrastructure and improvednavigation security through total coverage of Moroccan airspace. Objectives of theGovernment programme for the air sub-sector, as indicated in the 2000-2004 economic andsocial development plan, are to integrate Moroccan airspace into the European airspace duringthe plan period and develop the Casablanca base as a regional and international trafficexchange point (hub). An air transport plan and an airport master plan are being drawn upwith a view to defining an approach to the problems. The first findings of these studies havemade it possible to identify and chart the urgent action required, which is the object of thepresent project. The Bank, already present in Morocco’s air transport sector, has beenpproached by Office National des aéroports (ONDA) for assistance and has agreed to financethis project.

Purpose of Project

The Bank loan for an amount of UA 52.70 Million, representing 53.74% of the totalproject cost, will be used to finance 66.36% of the foreign exchange cost of the project.

Sectoral Aim and Project Objectives

The project will help increase the contribution of the Moroccan air transport sub-sectorto the national economy. It seeks to improve the capacity of Mohammed V airport inCasablanca as well as air navigation security within Morocco’s flight information region. Itwill thus make it possible to: (i) ensure the flow of traffic with optimal security and inaccordance with the relevant OACI standards, through passenger processing in 15 minutes forlong haul flights and 10 min for medium haul flights; (ii) expand the Mohammed V airportcapacity to 8 million passengers in 2005 and; (iii) provide air navigation security by 100%radar coverage of the Moroccan air space, and also normative ground security in 2005.

Summary Description of Project Outputs

To attain these objectives, the project will have the following components:

A. Construction of the departure terminal at Casablanca Airport;

B. Strengthening the existing main runway of Mohammed V and constructing a secondidentical 3,720 ml runway;

C. total radar coverage of the Moroccan airspace and improved airspace control with theprocurement of air navigation aids;

D. Increasing the security and safety in the Kingdom ’s airports by procuring the necessaryequipment required by OACI for airports corresponding to their respective categories.

E. the project control and coordination services.

ii

Project cost

The total project cost is estimated at UA 98.07million, with UA 79.41 million in foreigncurrency (80.97%) and UA 18.67 million (19.03%) in local currency.

Sources of Finance

The project will be parallel-financed with AFESD. The Bank participation will cover the entireforeign exchange cost, excluding that of the air terminal building, which is UA 52.70 Million,corresponding to 53.74% to the project cost net of taxes and duty. AFESD will finance theairport departure terminal sub-component for an amount of UA 26.70 million, which is 27.23%of the total cost net of taxes. ONDA will finance the local currency costs representing 19.03%of the total project cost, net of taxes, which is 18.67 million.

Project Implementation

Project implementation will take 4 years, starting from the date of approval of the Bankloan. A project coordination unit will be set up Within the organization’s “Direction del’Administration et des Finances - DAF”. DAF will be responsible for coordination projectactivities, both with donors, and internally, with the organization’s other operationaldepartments concerned with the project.

The Coordination Unit will be headed by a Project Coordinator. This person will beassisted by a team made up of engineers, technicians and accountants from ONDA. Under theauthority of Direction de l'Administration et des Finances (DAF), this team will oversee thetechnical and accounting aspects of the implementation and be in charge of preparing tenderdocuments for works and of contract administration and general works supervision.

During its implementation, the project will benefit from the contributions of specializedexternal services. The geo-technical inspection and quality control of works will thus beconducted by a specialized laboratory to be recruited. Similarly, an external firm will berecruited in accordance with Bank-approved procedures to annually audit the project accounts.

Conclusions and Recommendations

The project will make it possible to strengthen the existing infrastructure and improveits performance in such a way as to meet the demands of the constantly increasing traffic andmake it compatible with ICAO requirements relating to air navigation security. This is the pre-condition for integration of the Moroccan airspace into the European air space (EAS), as wellas transforming Casablanca into a hub.

From the standpoint of the environment, the project is not expected to cause any majornew negative impacts and will not represent an added threat to the environment of the areaconcerned. The mitigative measures envisaged are those normally adopted for projectsinvolving civil engineering structures (to be constructed within the airport right of way) andwill be provided for in the contracts to be signed with the contractors.

The project is financially and economically viable, with a financial rate of return of22.5% and an economic rate of return of 26.48%. The financial sensitivity tests havedemonstrated ONDA’s ability to maintain a good financial performance. This organization hascash reserves that it can fall upon in times of difficulty, which assures the donors that it will beable to refund its debts.

iii

It is recommended that a loan of UA 52.7 million be granted to ONDA with aGovernment guarantee. The loan will cover 66.36% of the foreign exchange outlays for theproject. Apart from the usual Bank terms and conditions, the loan will be granted subject tothe following conditions:

A- Conditions Precedent to Loan Effectiveness

Prior to the entry into force of the loan, the Borrower, (ONDA) is required to submit tothe Bank:

i) Proof of the signing of the debt management contract with EUROCONTROL(para. 7.1.7) ;

ii) The plan for recovery, over a period that should not run beyond 2004, of debtscontracted prior to the date of signing of the contract with EUROCONTROL,(para. 7.1.7) ;

iii) Proof of the appointment of a project coordinator, whose C.V should have beenapproved beforehand by the Bank (para. 5.2.1);

B- Other conditions

The Borrower should further transmit to the Bank, within six months following the endof each financial year, a report on the recovery of debts contracted prior to the signingof the contract with EUROCONTROL

MOROCCO

PROJECT FOR IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

Task Manager: A. BENDJEBBOUR

21/12/2000

Project Matrix

HIERARCHY OF OBJECTIVES OBJECTIVELY VERIFIABLEINDICATORS (OVI)

MEANS OFVERIFICA-TION

(MOV)

MAJORASSUMPTIONS

RISKS

1. SECTOR OBJECTIVES

Improve the contribution of airtransport to the Moroccan economy

Increase the contribution of air transport National statistics

to GDP

2. PROJECT OBJECTIVES

Improve airport capacities andguarantee air navigation safety

1-Increase air navigation safety Technical reporting 1- Maintaining thetraffic increaserate

air navigation:

100% of Radar coverage of Air spaceby 2005

Technical reporting

2005.

2-Improved passenger handling time in ONDA activity report- Audit 2- Effective

2005: FADES/

- Long haul: 15 mn. Technical Reports, etc ADBCoordination forconstruction ofMohammed Vdeparture terminal

- Medium haul: 10 mn. statistics

3-Increase of capacities of MohammedV:

8 million passengers in 2005

3. RESULTS

3.1 Extension of Departure facilities 3.1-Construction of the departureterminal

Report on Works and equipment 1-ContractSigning

3.2 Runway reinforcement 3.2- 3 720 metres of reinforced runway Progress, supervision, audit andcompletion reports,

3.3 construction of a second runway 3.3- 3 720 m/runway constructed, plusside roads

2- EffectiveWorks inspectionand supervision

3.4 Procurement of radars 3.4- Procurement of three radars .

3.5 Procurement of various items ofsecurity and safety installations

3.5-Security vehicles and various itemsof

. telecommunications equipment

4. ACTIVITIES (CATEGORIES) INPUTS/RESOURCES

A. Works Cost in UA Million Loan Agreement 4.1 Procurementactivities

4.1 Preparation of TD, conducted in goodtime

4.2 Tendering Financing (in UA Million) Contracts Signed

4.3 Bid Acceptance and Analysis F.C. LC TTL

4.4 Bid approval/ negotiation and ADB 52.70 - 52.70 Statement of Disbursement

contract award GVT - 18.67 18.67 4.2 Works

4.5 Works Implementation AFESD 26.70 - 26.70 Audit Reports breakdown and

B. Supplies TTL 79.41 18.67 98.07 disbursement

4.6 Preparation of TD and tendering Cost per component (in UA Million) Carried out ingood time

Tendering for equipment. DEV ML TTL

4.7 Bid Opening and analysis A- Airport 32.17 10.94 43.10 4.3 AdequateBank Supervision

4.8 Bid Approval/negotiation andcontract award.

B- Runway 9.18 1.58 10.76

4.9 Procurement of Equipment C- Control 17.81 1.63 19.44 Bank

C. Services D- Security 5.84 0.51 6.35

5.0 TD. (Geo-technical Control) E- Services 1.18 0.88 2.06

5.1 TOR, shortlist (Audit) Contingencies 13.23 3.13 16.36

5.2 Services TTL 79.41 18.67 98.07

1. ORIGIN AND BACKGROUND

1.1 As part of the Bank’s operations in Morocco, a loan was granted in favour of the airsub-sector in October 1987 to finance a Transport Sector Programme, whose airportscomponent involved upgrading airport taxiways, circulation tracks and parking areas andrenovating airports in Casablanca, Tangiers, Marrakech, El Hoceima and Oujda. The projectwas followed in 1992 by a second loan to finance the Airport Rehabilitation Project. This loanmainly financed procurement of radio navigation equipment to improve aeronautic securitythroughout the Kingdom’s airports and works on the runways, taxiways, tracks and parkingaprons.

1.2 The TSP and the Airport Rehabilitation Project have made it possible to upgrade theairport facilities, restructure ONDA and also rehabilitate the Kingdom’s airport infrastructure.However, given the progressive nature of aeronautic technology and the stringency ofinternational standards with regard to air navigation safety, ONDA has been obliged tocontinually adapt and extend the existing installations in order to effectively meet thesestandards and prepare to cope with the projected traffic increase.

1.3 The initial findings of the studies concerning the Civil Aviation Master Plan and theroad auscultation campaigns conducted in that connection, have revealed a relativelyvulnerable national airport system, owing to saturation of airport capacity and runways that areattaining a state of wear. Moreover, compliance with the international standards dictated byOACI requires reinforcement and extension of the existing security and safety facilities.Government perspectives reflected in the 2000-2004 development plan concerning the air sub-sector, mainly involve integrating the Moroccan airspace into the European airspace during theplan period, and transforming Casablanca into a regional and international hub.

1.4 Towards the end of 1988, the Mohammed V Airport traffic increased at a faster pacethan expected, leading ONDA to envisage extension of the departure facilities as rapidly aspossible. The arrival facilities had previously been renovated on Bank financing as part of theTSP. AFESD and the Bank were contacted for this financing. It was however necessary toawait the initial findings of the master plan studies so as to ensure that the project was properlyformulated and that it addressed the priority needs for development of the air transport sub-sector. Discussions concerning the project have continued between the Bank and theMoroccan side, resulting in definition and preparation of the project in 2000, with twomissions in June and September 2000. The appraisal mission was conducted in November2000.

2. THE TRANSPORT SECTOR

2.1 SECTOR OVERVIEW

2.1.1 Morocco’s transport system covers 60,500 km of roads and railways comprising30,350 km of surfaced roads, a 1,907 km railway network, of which 1.003 km is electrified, 28airports open to Public Air Traffic (PAT), of which 16 are of international dimensions, and 12commercial airports. During the 1995-99 period, transport activities (all types) contributedapproximately 6% of GDP, employed 10% of the urban working population, accounted for25% of national energy consumption, and 15% of Government fiscal income. During theperiod 1995-99, measures were taken to boost the sector’s competitiveness, particularly bygradual liberalization of certain sub-sectors, protect the existing infrastructure and adapt it to

2

the ever-increasing needs. To that end, Morocco undertook reforms, initiated and executedprojects for upgrading and extending the infrastructure. These outputs made it possible to copewith a significant increase in traffic for each transport mode, be it passengers or goodstransport.

2.1.2 The Government strategy in the sector, as reflected in the 2000-2004 five-year plan,aims to restructure road transport of goods, specifically by liberalizing, the upgrading andmeeting of various needs, as well as development of rural transport and improvement of roadsafety. The objective defined for the sector is to attain an average annual growth rate of 5%for passenger transport and improve the public transport of goods. In the area of rail transport,the strategy adopted seeks to boost commercial activity, improve the quality of services,modernize maintenance procedures and improve security. In the air transport sub-sector, theobjective is to attain an annual growth rate of 11.6% by 2004, a 7% increase in passengers, a3% increase in freight activities. Regarding merchant shipping, the objective is to increase theoverall load transported to 55.6 million tonnes in 2004, including 6 million tons by thenational companies.

2.1.3 Among other aspects, the Bank’s strategy of intervention concerning transportinfrastructure for Morocco involves support to the projects for adapting and extendingtransport infrastructure and directly or indirectly contributing to the government’s efforts atopening up and decontrolling the sector.

2.2 THE DIFFERENT MODES OF TRANSPORT

Road Transport2.2.1 The road network under the Government’s responsibility comprises a total length of58,000 km, including 30,350 km of surfaced roads, and more than half made up of unsurfacedtracks. 35% of the network is in a poor to very poor state, while 31% of the road structuresrequire urgent repair, i.e., about 1,160 structures. The needs are therefore significant, be it formaintenance, modernization or extension of the network. In that regard, the Government isdirecting its policy for management of road networks in the coming years towards: (i)preserving the infrastructure (ii) adapting the network to the traffic trends; (iii) backing upeconomic and social development by opening up rural areas. Since 1985, the Bank hasfinanced two road projects and a sector programme which have been completed; the third roadproject is underway. Given its developed network, road transport complements the air sector.It in fact represents the continuity that is crucial for coastal tourism (Mediterranean, Atlantic),cultural tourism (historical sites), natural tourism (Atlas, Sahara) and adventure tourism(mountain climbing.

Rail Transport

2.2.2 Morocco currently has railway tracks totaling a total of 1,907 km, of which 1,003 kmare electrified, representing 53% of the total. All the tracks have the normal gage (1.435 m);for ease of circulation and to reduce travel time, double track lines have been installed in theheavy traffic routes. The Bank is currently financing the railroad rehabilitation project, underwhich the doubling of the Rabat-Kénitra-Méknès-Fès line has been 80% completed. Thisdoubling has provided Office National des Chemins de Fer (ONCF) an additional transportcapacity and prepared it for integration of the Maghreb rail networks s well as the Europeanone, with the envisaged Europe-Africa link through the Strait of Gibraltar. Like the roads, the

3

railroads comply with a new concept of rapid transport to and from flights. Indeed, with therail links at the Casablanca airport, the rail facilities effectively complement the air facilities.

Sea Transport

2.2.3 With the 3,500-km stretch of shores, Morocco’s port infrastructure currently comprisesover 24 ports, including 12 commercial ports with 150 quays distributed over a dual seaboard(Atlantic and Mediterranean). There is a total of 25,000 metres of quays. For 1999, seatransport recorded a total of 954,000 passengers and 4.85 million tonnes of goods. Theexisting installations are required to handle the demand for sea transport and activities. Theports largely cover the commercial links for external trade (import and export), and most ofthe local industries depend on sea transport. The relative inadequacy of the maritimeinfrastructure is explained by the level of maintenance which falls short of the expected degreeand pace, and the insufficient resources currently mobilized by the Government in that regard.In the context of the 2000-2004 five-year plan, particular emphasis is laid on regularmaintenance and upgrading of this infrastructure. Under the TSP, the Bank financed worksfor renovation of the Tangiers and Safi port jetties, dredging of the access channels and basinsof four ports and provision of adequate sea navigation aids.

3 THE AIR TRANSPORT SUB-SECTOR

3.1 The Supervising Ministry

3.1.1 Morocco’s air sub-sector is under the supervision of the Ministry of Transport andMerchant Shipping. The ministry is responsible for regulation, and supervision andenforcement of the texts, and also compliance with international agreements and with therelevant standards, through the civil Aviation departments and the air bases. The sector’s mainoperators are, at the national level, Office National des Aéroports (ONDA) and Royale AirMaroc (RAM). A second air carrier (private) was established 3 years ago. The air transportmarket is also served by 24 foreign airlines. The following paragraphs show the importance ofair transport and carriers in Morocco, the location of the airports and their management byONDA.

3.2 THE AIRLINE COMPANIES

3.2.1 Twenty-four foreign companies provide regular connections to Morocco, while somesixty conducted chartered flights in 1999. The movements of these companies increasedfrom 21416 in 1998 to in 1999, which gives a total growth rate of e 6.6%. In 1999, theyprovided transport for 2,100,935 passengers as against 1,928,128 in 1998. Their share of totaltraffic for 1998 and 1999 respectively were 31% and 30.9% for regular traffic and 54.95%and 52.8% for the charter traffic. These companies are of various nationalities. In 1999, theGerman, French, Belgian and Swedish companies accounted for 76% of the charter traffic offoreign airlines, i.e., 686,414 passengers as against 632,998 counted in 1998, giving anincrease of 8.4% against 24% recorded in 1998.

3.2.2 The national carrier, Royal Air Maroc (RAM) is the instrument set up by theGovernment to meet the air transport demand. It is a mixed company, 93% held by theGovernment, and the rest by Air France, Ibéria and private parties. In 1999, RAM carried3,427,000 passengers and 28,500 tons of freight, which, compared to 1998, is an increase of10.32% for regular traffic and 32.2% for chartered flights.

4

3.2.3 To meet the demand for internal and external air transport, RAM has a fleet of 31aircraft: 2 Boeing 757s, 2 Boeing 747s, 6 Boeing 737-200s, 7 Boeing 737-400s, 6 Boeing737-500s, 4 Boeing 727-800s and 2 ATRs. RAM operates the domestic routes exclusivelywith Regional Airlines, and shares the international links with some twenty foreigncompanies.

3.2.4 The carrier "Régional AIR LINES" is the number two Moroccan air transportcompany; it is private, and was authorized on 14 July 1996 by the Ministry of Transport andthe Merchant Shipping to provide public air transport. It has five 10-seater commercialplanes. Its role is to cover domestic flights and short links with neighboring countries. Thecompany in 1999 enjoyed a satisfactory increase of 101,122 passengers, as against 90,073 in1998, representing 1.5% of passenger traffic.

3.3 THE LEGAL AND INSTITUTIONAL FRAMEWORK OF ONDA

3.3.1 Office National des aéroports (ONDA) was established on 13 December 1989 by law14-89 promulgated by Dahir n° 1-89-237 of 30 December 1989, to replace Office desAéroports de Casablanca (OAC), as a public, industrial and commercial concern with a legalstatus and financial autonomy. The mission of this agency has been extended to cover all thecountry’s airports that are open to public air traffic, and entails: (i) construction, operation,maintenance and development of airports open to public Air traffic (PAT); (ii) control of airnavigation and (iii) passenger and freight transport. To that end, the agency collects airportduties and taxes as well as the fees for services rendered in connection with air navigationand related aspects, such baggage handling.

3.3.2 Decree n°2-89-480 of 30 January 1989 concerning application of law n°14-89 definesthe units in charge of administration and management of ONDA. ONDA is thus under thetechnical supervision of the Ministry of Transport and the financial supervision of theMinistry of Finance. It is administered by a Board of Directors, comprising, under thechairmanship of the Prime Minister or the Government authority delegated by the PrimeMinister, representatives of the Ministries of Transport, Finance and Tourism, the Interior,Trade and Industry, Public Works, and Economic Affairs, a representative of the Royal Armyfor the national defense aspects, and a representative of RAM. Other Board members withconsultative votes are: the Director of Air space Administration, the Director of Civilaeronautics, the Director of Air Bases, the Director of the National Meteorology Departmentand the Director of Studies, Planning and Transport Coordination. The Managing Director ofONDA attends Board meetings as a rapporteur.

3.4 ORGANIZATION AND MANAGEMENT

3.4.1 The Board of Directors meets at least twice yearly to review the accounts of theprevious financial year (before June) and also to adopt the budget and provisional programmeprior to 31 December. It may delegate part of its authority to a Steering Committee.

3.4.2 The day to day management of the organization is carried out by a Director appointedby Dahir. This person is given all necessary power and capacity and carries out the decisionsof the Board of Directors and manages all its services, acting on its behalf in dealings withthird parties, carries out or authorizes all acts and operations arising from the organization’smission, commits expenditure as the appropriator of funds, recruits and appoints staff, makes

5

proposals to the Board of Directors for appointment of directors of the airports under theorganization’s authority. To carry through the mission, the Managing Director runs anorganizational structure that covers the various duties and which has been put in place basedon an organizational study financed by the Bank as one of the conditions for the loan thatfinanced the Transport Sector Programme.

3.4.3 In terms of spirit, the current ONDA organization focuses on the major missionsindependently of their hierarchical level (directorate or department), and also the separationbetween activities (running airports, air navigation, activity areas, training, provision ofservices international cooperation) in order to better measure and monitor performances. TheManaging Director oversees six directorates, each one made up of departments, in turncomprising divisions. The existing organizational chart, designed with Bank financing, isadapted to the missions assigned to ONDA, and illustrates the operational hierarchy that willmake it possible to cover all the activities as well as the appropriate decision- making. TheONDA organization chart is shown in Annex 1.

3.5 STAFF AND TRAINING

3.5.1 ONDA has a staff of 2321 employees, with 18% women. This staff comprises 19.94%line staff, 24.21% principal employees, 17.95% firt-line supervisors, 8.53% middle-levelmanagers and 29.34% senior managers. The female staff contingent of 418 persons is madeup of 69.6% staff with training equivalent to or higher than baccalaureat level. From thegeographical standpoint, the ONDA staff is deployed to all the country’s airports; there areconcentrations at the head office (27.3%) and in the principal airports, like those ofCasablanca (31.3%), Agadir (7.3%), Rabat (6.6%) and Marrakech (4.3%).

3.5.2 To fulfil its mission and attain its objectives, the organization has mobilizedsignificant resources so as to have teaching facilities that will afford it autonomy with regardto training. The institute for training of inspectors and electronics technicians whichspecializes in air navigation and air security electronics has been established using Bankfunds. This is in addition to the airport training center for staff, making for more efficienthuman resources. The batch that completed the course in 1999 comprised 109 trainees,including 57 foreigners, and also 58 air inspectors, 17 meteorologists and 34 electronicsspecialists. The batch under training is made up of 57 students; 41 studying air control and16, electronics.

3.5.3 Continuing and refresher training is provided through organization of severalresidential and non-residential seminars in foreign institutions. The agency has furtherestablished pedagogic partnerships with the International Civil Aviation Organization(ICAO) and ASECNA (Dakar). For security training, the center organizes courses on variousaspects; in that context, its assistance is often sought by foreign aeronautics organizations.

3.6 ACCOUNTING AND AUDITING

3.6.1 ONDA accounts are kept according to the regulations of the Moroccan accountingplan, which has in turn been formulated in compliance with the accepted internationalaccounting principles. The accounting activities are computerized and the units have specialsoftware and competent staff appropriately trained to apply it. The organization has anefficient accounting information system with stock accounting, internal auditing, internalcontrol, management control and financial performance indicators. This operational system

6

was designed on the basis of the ONDA organization study financed by the Bank as part ofthe Transport Sector Programme (TSP). The financial and accounting management isundergoing double Government control by a financial comptroller concerned withappropriateness and an accounts officer checking compliance, as well periodical fiscalchecks. The ONDA financial Comptroller is appointed by the Minister of Finance. Workssupply and service contracts, other contracts and agreements, furniture procurement, grantsand donations require this officer’s prior approval.

3.6.2 The organization’s accounts undergo a yearly audit by an independent auditing firm:the accounts for the 1995 to 1999 financial years were duly approved. The certificationreports show that the «financial statements give a true picture of the property and financialsituation of ONDA as at 31 December» of the years concerned « as well as the results of itsoperations and the cash flow for the financial years ending on these dates, in accordance withaccounting principles generally accepted in Morocco. ».

3.6.3 The law establishing ONDA provides that the organization will have the immovableproperty necessary to run the airports that it manages and operates. For movables, the samelaw and its enabling decree provide for transfer of the items to the organization, on the basisof an inventory containing figures and approved by the Ministries of Transport and Finance.The fulfillment of these terms was a condition for Bank loan to finance the AirportRehabilitation Project. The items were transferred from the Government to ONDA in 1996,by transfer decrees jointly signed by the Minister of Transport and the Minister of Finance.The amount of this transfer was entered into the accounts and the provisions for amortizationthat were noted in previous financial years regularized.

3.7 AIRPORT FACILITIES

The Airports3.7.1 The Kingdom currently has 28 airports open to public air traffic, of which 16 are ofinternational dimensions and 12 are commercial. Out of this total, as regards airport activities,three (Casablanca, Marrakech and Agadir) are preponderant: they on their own attract 90% ofthe total traffic to and from Morocco. They are preferred destinations of tourists and are thusobliged to improve in order to keep up with the dense traffic and efficiently meet the ever-increasing demand. Casablanca and Marrakech will soon attain their saturation points. Thisproject takes account of Casablanca Airport, whereas for Marrakech, the Parliament hasalready requested the Government to conduct a transfer study. The Bank has been approachedto finance this study and bilateral financing is being sought. Table 3.1 shows the traffic ineach of these airports in 1999, as well as the projected traffic forecast:

Table 3.1Actual and Projected Traffic in the Three Main Airports

1999 2005AirportsMovements

N/anPassengers Freight

(in tonnes)Movements

N/anPassengers Freight

(in tons)Mohammed V 44,415 3,421,445 44,255.3 83,403 4,965,000 48,000(Marrakèch) 12,942 1,292,216 2,006 22,995 2,106,000 3,500Agadir 13,604 1,128,882 2,122.8 25,156 2,048,000 5,500

7

Air Security Control Facilities

3.7.2 The CNCSA equipment is made up of that in the airport, that in the Regional controlCenter (CCR) and that of Bureau Central des Télécommunications (BCT). Renewal offacilities as part of the airport rehabilitation project has made it possible to upgrade theavailable installations, significantly increase their capacity and efficiency and make themconform to the relevant ICAO requirements. The renewals concerned: (i) the transmissionand reception centers working 24hrs a day, for the Air-ground link of the aeronautics service;(ii) the volmet allowing for the dissemination of meteorological information concerningnational airports and certain foreign airports within proximity; (iii) advanced antennaeproviding partial coverage of the Moroccan airspace, and; (iv) the telephone switchboardproviding round the clock linkage with the units. With the increase in traffic, it is imperativeand urgent to provide total coverage of the Moroccan airspace through procurement ofapproach and en-route radars, in order to raise the levels of security and safety of the airports.

The Airport Site

3.7.3 Upgrading the airport facilities hitherto depended primarily on the income generatedfrom air traffic. ONDA developed initiatives aimed at improving the returns in the domain bydeveloping commercial activities. The first measure of this type was started at the Casablancasite with the establishment of the technopole area at Mohammed V Airport in four phases.To date, 21 companies have set up offices in it operating in various areas such as electronics,electricity, pharmaceutical products, medical equipment, etc. Fifteen others are in the processof setting up. Three have obtained their construction permits while nine are having theirtechnical documents studied. In all, the enterprises of the two first tranches have contributedto the creation of 3109 jobs. The 3rd and 4th tranches under preparation will make for creationof 1606 more jobs. The success of the technopole area project has led ONDA to considerextending this experiment to other airports and thus set up small units to create jobs andgenerate additional income.

3.8 MAINTENANCE AND INSTALLATION OF AIRPORT EQUIPMENT

3.8.1 Since December 1989, date of its establishment ONDA has organized maintenance andupgrading of all the aeronautic infrastructure and equipment, upon delegation by the Ministryof Transport and Merchant shipping. The organization has technically trained staff, who areregularly retrained and have sound experience in installation, operation, calibration andmaintenance of Morocco’s airport infrastructure. The budget earmarked for these facilities hasincreased from about Dh 30 million in 1998 to Dh 34 million in 1999.

3.8.2 Despite ONDA’s efforts to raise the level of service and security in the country’sairports, in 1990 a number of major needs were noted, which would without doubt adverselyaffect air security and traffic. In 1993, therefore, ONDA took a loan from the Bank to financethe airport rehabilitation project, which is 90% completed and scheduled for completion inAugust 2001. However, given the air traffic forecasts and its rapid increase, the pressingproblem of airport capacities soon to be exceeded arises, especially at Casablanca andMarrakech, which currently have capacities for 4 and 1.5 million passengers respectively,yearly. The Mohammed V and Marrakech airports are expected to be saturated in 2003.

8

3.9 INTERNATIONAL PERFORMANCE AND REGIONAL COOPERATION

3.9.1 On the strength of its training facilities and the caliber of its expertise with regard toairport works, ONDA has in recent years conducted measures and intervention in Sub-Saharan Africa and the Middle East. For example, the International Aviation Academy(IAA) at Mohammed VI Casablanca receives trainees from different countries at its trainingcenter financed by the Bank (civil and military air controllers, air security electronicstechnicians, airport managers and airport security staff…). With regard to technical assistancein renovation of the airport, the organization enjoys a solid reputation on account of itscontributions to the construction of Gaza (Palestine) and Syrte (Libya) airports. Negotiationsare underway with Senegal for the Dakar Airport transfer. ONDA has been consulted toparticipate in the construction of the Nouadhibou (Mauritania), Niamey (Niger) and Freetown(Sierra Leone) airports; These proposals are currently being examined by the organization.

3.10 Sector Constraints

The principal constraints to development of the sub-sector and which the presentproject aims to remove are:

(i) Saturation of the Casablanca and Marrakèch airports owing to the increase in traffic;(ii) The state of deterioration of the existing runway and the need for a second runway in

Casablanca;(iii) The inadequacy of the air control equipment in terms of need for total coverage of

Morocco‘s airspace and to provide the requisite level of security for air navigation;(iv) The lack of security equipment and the worn state of the vehicles for rapid and

massive intervention in certain airports limits the level of safety and security;(v) The high level of investment needed to strengthen the airport infrastructure.

3.11 GOVERNMENT POLICY AND STRATEGY

3.11.1 The Government policy seeks to upgrade the air transport sub-sector, with a view tomaking it competitive through future de-control of trade with the European Union. In thatregard, the 2000-2004 Economic and Social Development Plan provides for integration intothe European airspace during the Plan period and conclusion of an «open sky» agreementbetween Morocco and the European Union. Under the development plan, the Governmentoption for liberalization of air transport is clearly seen in its desire to carry out gradualprivatization of RAM, maintaining its majority shareholding (over 50%) in the initial stages.At the national level, this privatization will help make RAM more independent of theGovernment. Further proof of this opening up is the marked increase of international air trafficin Casablanca, making it possible to envisage the city’s development as a regional andinternational hub. The Kingdom’s significant airport infrastructure is considered by theauthorities as an indispensable support to the country’s ’opening up policy’. In this context,the integration of European airspace will unquestionably require preparation and developmentof a facility made up of reliable and high quality aeronautics equipment and infrastructureproviding a capacity to handle the rapidly growing air traffic and provide maximum security.Two important strategic studies are underway to help make appropriate decisions in thatregard.

9

Airports Master Plan

3.11.2 The airports master plan being drawn up under the joint technical supervision of theMinistry of Transport and Merchant Shipping and ONDA, will chart the strategic options to beadopted in the sector in the medium and long term; it goes beyond the five-year plan and willmake it possible, based on the traffic forecasts, to prepare Morocco’s airport map as well asthe development plan for each airport. The traffic aspect already completed confirms the trendof air transport activity, and thus argues the obvious need to extend Mohammed V Airport.The Government is expecting the results of the ongoing work on the Master plan for the firsthalf of 2001; These will particularly make it possible to decide the fate of all the Kingdom’sairports.

Air Transport Development Plan

3.11.3 The Civil Aviation Directorate is currently conducting a study on the air transportdevelopment plan, which will allow for reform of the legislative and regulatory framework.The aim of this study is to facilitate the development of air transport in order to further openMorocco up through a policy of liberalization by stages, particularly by getting closer to theEuropean Union. It will also allow for structural and functional adaptation of the airnavigation units to the demands of air transport, considering the increase in air traffic and thetechnological progress in this sector. It will mainly concern air circulation, aeronauticinformation, research, preservation and surveys.

Financing of the Sub-sector

3.11.4 In developing its airports, Morocco is seeking financing and technical assistance fromseveral international or bilateral institutions. The Bank is one of the main financiers in thesector. Others are AFESD, the World Bank and the French Government. The level ofdevelopment envisaged for the coming years will require a major mobilization of internal andexternal resources.

4. THE PROJECT

4.1 DESIGN AND JUSTIFICATION

Past Experience

4.1.1 Past Bank operations in Morocco’s air sector have concerned a loan approved inOctober 1987 to finance the TSP whose airport component involves the strengthening ofairport roads and improvement of the airports of Casablanca, Tangiers, Marrakech, ElHoceima and Oujda. In 1992, there was a second loan to finance airport rehabilitation. Theloan has mainly financed the procurement of radio navigation equipment to improve airsecurity throughout Moroccan airports and, works on the airport taxiways, tracks and parkingaprons. The implementation of these two projects has satisfactorily: (i) improved the qualityof service provided to the user and the security of airport facilities; (ii) improved control of theMoroccan airspace; (iii) provided ONDA with an effective center for training, andmanagement and implementation of projects and; (iv) adapted the infrastructure to the traffictrends.

10

4.1.2 This project is thus the logical sequence to previous Bank-financed projects. It seeksto: (i) continue to cope with the growing pressure of air traffic; (ii) continue and supplementthe adaptation of the facilities to the international technical norms and; (iii) comply with thestandards of the International Civil Aviation Organization (ICAO) with regard to security andsafety in airports.

4.1.3 The positive experience of these two projects and their contribution to the developmentof air transport in Morocco are a good basis for this project. Certain implementation problemsencountered in the two previous projects have been taken into account. The main problemrequires a very detailed and precise definition of the electronic equipment involved, whereasthe rapid technological development of this type of equipment calls for constant technicaladaptation. The discussions between the Bank and ONDA to reach agreement somewhatdelayed project implementation. To avoid this constraint, the present project has separated thegoods involved into homogenous and functional lots. Another problem is the quality of theproject audit reports. The Bank now has standard terms of reference that have been given toONDA and which should make it possible to resolve this problem.

Justification

4.1.4 The rapid increase in traffic throughout most of the Kingdom’s airports, particularlyMohammed V of Casablanca, has revealed the inadequacy of the country’s airportinfrastructure in the past two years. Several studies have been initiated by the Minister ofTransport and ONDA and conducted as part of the preparation of the Civil Aviation MasterPlan and the road auscultation campaigns. These studies particularly concern: i) extension ofthe Mohammed V airport requiring construction of a transit area; ii) the plan for developmentof a numerical system for multi-channel communication; iii) auscultation and evaluation of theload bearing capacity of landing and parking areas. They have brought to light a nationalairport system that is relatively vulnerable, owing to the saturation of airport capacities and therunways that are now attaining a state of wear.

4.1.5 These studies have shown the need for re-scaling the Mohammed V Airport byextending the buildings, acquiring new equipment (bridge heads), constructing the secondmain runway of Mohammed V Airport, strengthening the existing runway, additional radarcoverage of the Moroccan airspace and reinforcement of aspects relating to security and safetyin twelve airports (Marrakech, Agadir, Oujda, Tanger, Rabat, Fes, Ourzazate, Al Hoceina,Tétouan, Errachidia, Ifran and Casa-Anfa).

4.1.6 With the annual passage (1999) of over 3.4 million passengers and a multitude ofpeak periods of 20 movements hourly on the average, the saturation of the existing facilitiesof Mohammed V airport does not allow for handling passengers in accordance withinternational recommendations, since for long haul flights, the real handling time exceeds 45minutes and for medium haul flights, it is about 35 minutes, whereas these should be 15 and10 minutes respectively, according to international guidelines. Extension of the existingstructure will make it possible to address all these constraints relating to space andorganization and provide for the next 15 years, a functional structure with dimensionsadjusted to the air traffic needs.

4.1.7 The auscultation campaign conducted in 1999 on the existing main runway ofMohammed V Airport shows substantial deterioration, seen in cracks and crumbling, withtraces of dislodged materials and rubber smudges, for example in areas where the aircraft

11

make impact and brake on landing. The levels of service attributed to the structure in factrange only between fair and poor, since it is approaching the emergency action stage. Thisstate of affairs requires large-scale remedial measures as soon as possible. The high trafficlevels do not allow for works between peak periods, much less the diversion of that volumeof traffic to other bases.

4.1.8 The need for a second main runway of the standard length for class A airports (3 720metres) is dictated by the increase in air traffic and hence the objective to make Casablanca ahub providing connections, as a special transit point for the heavy traffic from America to therest of Africa and from Europe to the rest of Africa and vice versa. In addition, the increasedtraffic, which is heading fast towards saturation of Mohammed V Airport by 2003, willnecessarily require a larger capacity, with the construction of a second main runway.Because of Morocco’s strategic location, as it is near Europe and also given the inadequacyof air transport in countries in the sub-region, which therefore cannot serve as relay stationsfor the other continents, are all arguments for the establishment of Casablanca as a hub.

4.1.9 Areas not currently covered by radars, which are still found in the South East andSouth West of the country, and the interference in the areas of the Fès, Meknès and Ifraneairports, raise serious security problems that can only be resolved through procurement of theradars and the indispensable telecommunications equipment provided for in this project.

4.1.10 The project, which is part of the Government’s development plan for the air sub-sectoris in line with the Bank’s 2000-2002 strategy for Morocco. It consists in helping to financeprojects for adapting and extension of transport facilities, and backing Government efforts toopen up and liberalize the sector.

4.2 PROJECT AREA AND BENEFICIARIES

Project Area

4.2.1 The project concerns the regions of Casablanca, Marrakèch, Agadir, Oujda, Tanger,Rabat, Fès, Ourzazate, Al Hoceima, Tétouan, Errachidia and Ifrane, through radar coveragefor air security purposes. The radars and telecommunications equipment will be set up atsites to be developed, which will make it possible to cover the poor reception areas in thecountry’s airspace. Access roads will also be built to facilitate delivery of equipment andfuture servicing and maintenance operations.

Project Beneficiaries

4.2.2 The main project beneficiaries are:

- The organization, its staff and clients who will benefit from the improved conditionsof operation of airport ground facilities and considerable air security in terms ofcatering to airplanes flying in Moroccan airspace;

- The air lines, which will be provided appropriate infrastructure;- The Moroccan Government, which will be assured of the organization’s increased

contribution to its fiscal income;- The tourism sector, which will now play a decisive role in the country’s economic

growth, for example with the doubling of the number of foreign tourists by 2005;- The handicrafts sector, whose development and income are linked with tourism;

12

- The populations of the project area, owing to the expected relative increase in jobcreation when the sites are set up and upon the start of the operation phase;

- The national enterprises, which will benefit from the impacts of the ONDA orders andcontracts in the different sectors and;

- certain remote areas located around radar sites envisaged for that purpose.

4.3 STRATEGIC CONTEXT

4.3.1 The development strategies outlined by the Government in the 2000-2004 Five-Yearplan hinge on the traditional importance of the transport sector in the economic and socialdevelopment of the country. They aim to lay the bases for enhanced integration of thenational economy into the Euro-mediterranean space. The approach consequently definedcombines the imperative of safeguarding the existing potential and infrastructure and the needto give new impetus through extension and opening up of the transport network. The reformsalready underway and projected in the Plan aim at liberalizing and rendering autonomous thebulk of the transport activities, thereby contributing to optimal management of Moroccantransport.

4.3.2 The significant airport facilities available in the Kingdom are considered by theMoroccan authorities as an indispensable backbone for the country’s opening up policy. Inthat regard the integration of the European airspace necessarily requires prior preparation andprovision of reliable and high quality aeronautic equipment and infrastructure of sufficientcapacity to cater optimally to the rapidly increasing traffic.

4.3.3 As regards its air service relations, Morocco is party to certain conventions at theregional level, and at the European level, it is concluding agreements with a view to promotingair transport:

- At the continental level, it is a signatory of the 1998 Yamoussokro Declaration, revisedin 1994, which also provides for gradual elimination of restrictions on air traffic rightsin Africa.

- In November 1998, the Arab Board of Civil Aviation, of which Morocco is a member,adopted a programme aimed at liberalizing air transport between its member states, inaccordance with a programme for total traffic liberalization in phases from 1999 to2005.

- Concerning Europe, and since the signing in 1996 of the association agreement withthe EU, Morocco’s objective has been to integrate the European air space (EAS). Abilateral approach strategy is being applied to that end. It has so far concluded bilateralagreements with the following EU member states: Spain, Portugal, France, Germany,Greece, Belgium, United Kingdom, Holland, Italy, Luxembourg, Denmark andSweden.

- As a member of the Arab Maghreb Union, Morocco has always taken an active part inthe activities of the Air Transport commission.

4.3.4 In light of the growth objectives for the air sub-sector, RAM and ONDA aredetermined to meet the challenge of making Casablanca a hub between the United States ofAmerica and Africa and the Middle East (over 40% of RAM traffic from the United States isalready in transit to various African destinations). The other possibility for development ofthis hub would be to bring about an increase in transit traffic between Europe and Africa, so asto make its programme more operational.

13

4.3.5 In order to concretize this objective, an open sky agreement has been concludedbetween Morocco and the United States; other agreements will be negotiated betweenMorocco and the countries of the European Union, which would afford RAM and ONDAundeniable advantages.

4.3.6 A reform of the regulatory and institutional framework is required to back upattainment of this objective: this is why the Air Transport Development Plan will include acivil aviation code, which is being studied. Given the fact that three-fourths of the overalltraffic (regular and charter) coming from or going to Morocco is from or bound for theEuropean Union (EU), the government has undertaken negotiations with the Union forconclusion in the medium term of an agreement for integration of the Moroccan air space intoEuropean air space, which should be through during the Plan period. Among other conditions,this integration imposes on Morocco compliance with safety and security criteria for theairports and air space, in accordance with ICAO and EU standards. By way of preparation, andfollowing on the liberalized agreement between Morocco and Italy, the Government isenvisaging agreements between Morocco and each individual EU country, before finalizingthe open sky agreement with the European Union as an entity.

4.4 PROJECT OBJECTIVE

The project seeks to improve the airport capacities and air navigation security withinthe flight information region of Morocco. It will thus: (i) ensure free flow of traffic withmaximum security, in accordance with the relevant OACI standards, through passengerprocessing in 15 minutes for long haul flights and 10 mn for medium haul flights; (ii) toincrease the Mohammed V airport capacity to 8 million passengers in 2005 and; (iii) provideair navigation security by 100% radar coverage of the Moroccan air space, and also therequired ground security in 2005.

4.5 Project Description

Components

4.5.1 The project components are the following:

- Mohammed V Departure Terminal;- Reinforcement of the Existing Runway and construction of a second one;- Security and Safety;- Coordination, Audit and Geo-technical Control Services.

Outputs

4.5.2 This project will provide the following:

a) Mohammed V Departure facilities: (i) The departure terminal, on a built-up area of39,000 m2 (ii) the necessary equipment: control panel, moving pavements, bridge heads, etc...installed.

14

b) Main Mohammed V Runway: The existing 3,720 m long runway, reinforced by a 25cm GB base coat with a 20 cm BC binding coat and a 10 cm surface coat; and the secondrunway which will be built parallel to the first, with the following features:

- length 3.720 m;- width 45 m;- 7.50 m shoulders on either side;- 2 perpendicular feeder tracks, 305 m long and 23 m wide, with 10.50 m stabilized

shoulders on each side;- 2 rapid exits, 495 m long and 23 m wide with 10.50 m stabilized shoulders on each

side;- 150 m-wide surfaced area forming a rectanguar frame around the runway, and;- an outer rectangular area, 300 m wide and unsurfaced, framing the first rectangle.

c) Air control: An approach radar and two en route raiders, procurement and installationof telecommunications equipment on the built up sites accessible to the said raiders and well asat a central point (CNCSA) at Casablanca.

d) Security and Safety: The safety equipment acquired which will be made up of 31 x-rayfacilities (for hand luggage as well as hold luggage), 15 metal detector frames and 29 manualdetectors, in addition to 17 vehicles for rapid, large scale intervention, 12 equippedambulances, 9 runway sweepers, one telescopic crane, and 7 equipped cross country vehicles,will be allocated to Marrakech, Agadir, Oujda, Tangiers, Rabat, Fes, Ourzazate, Al Hoceina,Tétouan, Errachidia, Ifran and Casa-Anfa).

Activities

4.5.3 To attain these objectives, the following activities will be pursued:

A) Mohammed V Departure Section:- Civil works: departure terminal buildings (AFESD financing)- Infrastructure and procurement of electronic equipment for the departure section.

B) Second track at Mohammed V Airport and reinforcement of the existing track:- Reinforcement works on the existing main runway;- Earthfill works and construction of the second main runway;- Procurement and installation of the runway markers;- ILS-DME Air navigation equipment;

C) Air control:- Civil works (structures and access tracks around radar sites);- procurement and installation of radars and telecommunication equipment on the

CNCSA sites.

D) Security and Safety:- Procurement of security equipment and fire engines;

E) Audit and coordination service- Quarterly activity report prepared by the Coordination Unit- Annual Project Audit Report

15

- Quarterly Report on Control and project wrap- up report.

4.6 OPERATION, MARKET AND PRICES

Air Traffic

4.6.1 The upward trends in Moroccan air traffic statistics, continued through 1999,mirroring the world trend as observed by ICAO, despite the rather unfavorable nationaleconomic context. The rates of increase of aircraft movements and passenger traffic, thoughworthy of attention, are lower than those recorded in 1998. The analysis of past traffic for allthe national airports managed by ONDA covers the period 1994-99. The table below sums upthe trends of the various air traffic components during that period:

Table 4.11994-1999 Overall Airport Traffic

1 – Aircraft movements

Types of movements 1994 1995 1996 1997 1998 1999

National 38395

International 56366

Total 64060 61078 61273 72917 90618 94761

2 – Passenger Traffic (000)

National 1084 1099 1263 1438 1783 1877

International 3414 3245 3470 3750 4241 4777

Transit 239 220 187 155 196 150

Total 4737 4564 4920 5343 6220 6804

3 - Freight (in tonnes) 47292 50000 46686 48071 49335 52519

4 – Rate of Increase of traffic activities in %

Aircraft Movements 0.30% 19.00% 24% 4.5%

Flights 3.00% 5.00% 10% 8%

Passengers 7.70% 8.80% 16% 10%

Freight 6.72% 2.90% 3% 6%

4.6.2 During the 1994-99, the overall total of airplane movements increased by 48%, givingan average of 9.5% yearly. This trend was exceptional in 1997 and 1998 (+ 19% and +24%).In 1999, the upward tendency of airplane movements was maintained, however, slowing to

+4.5% as compared to 1998. On closer examination, the total movements are the combinedresult of a 4.6% increase in commercial movements and a 1.2% decline in non-commercialflights.

4.6.3 The commercial passenger traffic during the period also shows this upwardstendency: in 1998 and 1999, there were satisfactory increases of 16% and 10%, respectively.The number of passengers went from 5,343,357 in 1997 to 6,208,653 in 1998 and to6,803,963 in 1999.

4.6.4 The charter traffic today represents for Morocco a vital instrument for its tourismdevelopment policy. Several incentive measures have been taken in that regard, including thatby ONDA exempting charters from payment of landing charges at its tourist airports. As a

16

result, the charter traffic continued to increase in 1999, at a rate of 17% as against 22% in1998. In fact the five tourist airports, namely Agadir , Marrakech, Tangiers, Al-hoceima andOuarzazate, accounted for 92% of the charter traffic in 1999, with 1,571,178 passengers asagainst 1,341,578 in 1998. The table below shows the annual traffic rate of increase in theseairports and the share of charter traffic in the local total:

Table 4.2Increase in Charter Traffic as part of Local Traffic

Increase Rate Share of Local TrafficAirports 1997-98 1998-99 1998 1999

AgadirMarrakechTangiersAl-hoceimaOuarzazate

20.58%24.25%42.8%

169.9%

+6.8%28%4.1%26.9%7.9%

59.7%61.8%27.5%39.4%

59.23%64.8%26.6%46.2%21.6%

4.6.5 For the Moroccan authorities, the objective is to promote traffic growth as envisaged inthe Five-Year Plan, in other words 11.6% for regular traffic, 9.8% for charter flights and 9.9%of the total. This objective is in line with the « upper scenario » considered in the trafficforecast study and gives comparable results for the period of the Five-year Plan. Similargrowth rates were also projected under the Five-year Plan of the Ministry Tourism, whichindicates an annual increase of 12 % in the number of foreign tourists, bringing the total 2.1million in 1998 to 3.55 million in 2004. This might at first seem a bit ambitious, however, theactual increase in passenger traffic over the past five years (1994-99) has been quiterespectable and corresponds perfectly with the general tendency in the sector, which is 6 to 7%yearly and even a bit more, as seen in table 4.3 below. This increase is the direct result of theexpansion of RAM capacities. In 1999 (year ending October), RAM attained a traffic growthrate of 13.5%.

Table. 4.3Actual and Projected PassengerTrafic

Annual Growth Rate (%) Number of passengers (in thousands)Flight 1994/98 2000/2004 1994 1998 1999 2004

Regular 8.9 11.6 3.400 4.787 5.035 7922Charter 1.7 9.8 1.327 1.419 1.707 2685Total 7.0 9.9 4.727 6.206 6.742 10.607Source : ADB Mission and ONDA

Impact of Tourism Sector on Air Transport4.6.6 The development of the tourism sector is closely linked with the air sub-sector; indeedof the 6.70 million passengers recorded in 1999 as having used the services of the air sub-sector, over 67% are tourists. In 1999, Morocco’s tourism sector generated the highestsurplus, i.e., 14 billion Dhs, with an increase of 16% as compared to 1998. The increase inthe sector’s income is due to resumption of the foreign tourist movements. The recent trendsin the sector were a clear signal to the public authorities and reflected the priority given thesector in the five-year Plan, for development of the national economy.

4.6.7 Morocco’s tourism sector is based on three types of captivating tourism: (i) coastaltourism (Mediterranean and Atlantic), drawing 25% of visitors; (ii) cultural tourism(Marrakèch and Fez) with 40% and; (iii) Saharan tourism which attracts 15%. The origins of

17

the current tourist flows to Morocco are Europe, with 83%, North America, with a 7%average, the Middle East with 4%, Africa with 2% and 4% for the rest. With thisconsiderable edge over other North African countries (Tunisia, Egypt) and the northernMediterranean areas (Greece, Turkey), the sector is required to play a decisive role in thecountry’s economic growth. The doubling of the numbers of foreign tourists visiting appearsto be feasible by 2005, giving the same number of tourist passengers.

4.6.8 Morocco’s classified hotel capacity, concentrated in Casablanca, Agadir andMarrakèch, has evolved only very slowly in the past five years. It is estimated at nearly91,000 beds, which remains below the demand. The 2000-2004 economic and socialdevelopment plan projects a GDP growth rate of 5.5%. Within that perspective, services, andin particular tourism are given special attention. A strategy for development of the sectorprovides for extension, rehabilitation and improvement of tourism as a tool, adapting it to thenew requirements, to enable it benefit from the trends of world demand and conquer newproduct markets.

The Tariffs

4.6.9 Morocco’s airport tariffs are fixed under the responsibility of the ONDA board ofDirectors on the proposal of the general management. According to agreements signed in1996 between IATA and ONDA, the organization’s management negotiates the rate ofincrease of tariffs with the latter institution each time the needs are significant and justified.The outcome of the negotiations are then submitted to the Board of Directors for the finaldecision. Generally speaking the tariffs are fixed in function of the aircraft, the nature of thetraffic (national or international), the quality of service and, to the extent possible, the costsincurred.

4.6.10 The ONDA tariff structure is the same as that of most institutions managing airportfacilities: it is based on collection of dues that generally represent the major source of airportoperating expenditure. For ONDA, they attained 92.3% of turnover in 1998 and 92.7% in1999. The tariff structure comprises three types of charges: (i) airport charges relating totraffic and (ii) commercial charges linked with utilization of terminal installations forcommercial purposes, and; (iii) overflight charges. In further detail :

a) Airport charges: these comprise the services relating to approach, landing, embarkingpassengers, airplane parking after the one hour free period, the passenger loadingbridge, the markings and security. This security consists in checking luggage using Xrays and metal detector frames

b) The commercial and government charges comprise: commercial fees relating to thecommercial activities of airlines, companies, petrol stations, etc. The governmentcharges derive from office rentals; the freight charges comprising Government taxesand taxes on loads embarked and disembarked, payable to the forwarding agents, andrenting of undeveloped land to various industries ;

c) The charges concern overflight of national territory and remunerate all the investmentand operating expenses for en-route control and meteorology equipment.

4.6.11 Analysis of the evolution of tariffs in the course of the past five years shows, for1995, an increase in the level of all services: the overflight and freight rates showed increases

18

of 1.22% and 5.74%, respectively, while all charges outside the approach charges increasedby 7%, starting from 1 July 1995. From 1 April 1996, a 5% increase was applied to airportservices, including ground charges. On the other hand, the charter landing charges fell 20%.It is also noted that, starting 1 November 1997, the charter traffic was exempted from landingcharges at Agadir and Tangiers airports, which considerably decreased the average rate oflanding charges. That same year, the parking charges were modified by a reduction in theaircraft parking periods. The airport services did not change in 1998 and 1999 and neitherdid the route charges, since the radar was not brought into service. The results of the studyconducted in 2000 show that airport charges, with the exception of those at Casablancaairport, are largely below those of many mediterranean countries for regular flights (France,Italy, Tunisia and Greece).

4.7 IMPACT ON THE ENVIRONMENT

4.7.1 The project components and the measures they entail are not such as will adverselyimpact the environment. The project has been placed in category II of the Bank’senvironmental rating, owing to the projected extension of the airport and construction of thesecond main runway of Mohammed V airport in Casablanca, which will be conducted withinthe established airport site (right of way), and thus not involve any expropriation ordemolition of the existing construction. It will therefore not entail any major environmentalimpacts. The total environmental impacts of this project are detailed in Annex 8. They areclearly positive, considering the economic repercussions and the absence of severe oruncontainable negative aspects.

The Positive Impacts

4.7.2 The positive impacts of the project are substantial and essentially economic and socio-cultural. They relate to the creation of jobs, with the opening of work sites and operationsfollowing the airport works handover. Also the modern fire-fighting equipment to beacquired and the tightened airport security will allow a high level of standard security for thefacilities concerned, once the project has been completed, and thus afford passengers as wellas employees a high degree of comfort and optimal security.

The negative Impacts

4.7.3 The negative impacts will entail very few significant risks. Indeed, as with allconstruction sites, the contractors will take steps to limit the classical inconveniences such ascirculation of heavy machinery and the dust blown about. Given the location of the airportconstruction site and the man runway (far from any built-up areas) there should be noparticular inconvenience for residents or for vehicle circulation, and the noise pollution,exhaust fumes and dust will be have a very limited effect on human and animal health.

4.7.4 The works contracts will provide for systematic rehabilitation of sites. This willconsist in (i) stabilization of the runway strips and verges of the taxiways, tracks, etc, plantingof trees and grass in the areas around airport buildings, adequate evacuation of run-off water.These measures are to rehabilitate and reasonably protect the environment, while protectinginfrastructure against erosion and contributing to sustainability.

4.7.5 The negative impacts of the works from the esthetic standpoint will be minor; no newquarries will be opened. The project will not affect the socio-cultural aspects to the extent

19

that the archaeological and religious sites and traditional water points will be protected.Seismic risks will be very low and will have been covered in the design of structures to be putup.

4.7.6 ONDA has the instruments required for effective maintenance of all infrastructure.These include detailed plans of water, electricity and drainage facility networks. All liquidwaste will be collected into a drainage system that serves the entire airport and its annexesand channeled to 9 lift stations (with active and standby pumps) and pumped to treatmentstations in which waste water will be about 90% purified.

4.7.7 A preliminary study taking account of the future main runway and the effect that itwould have with regard to disturbance during aircraft take off and landing, initiated byONDA and elaborated by a specialized firm in July 2000. The resulting isochrone curves forthe area of the planned runway show that the neighboring locations of Adarwa and Barrechidhave been spared any inconvenience from noise from the runway.

Recommended Mitigative Measures

4.7.8 The works specifications will systematically give descriptions of the mitigativemeasures envisaged in respect of all types of environment risks. Work sites will be organizedin accordance with labour legislation. Substances and materials will be stocked far from thebuilt-up areas and organized in such a way as to avoid ground or water pollution; the wastefrom work sites will be recycled or stocked in accordance with the standards in force.

4.8 Social Impact

Impact on Poverty

4.8.1 The project’s impact on poverty primarily concerns direct job creation in relation tothe airport works (+400 jobs) and also indirect job creation. The airport renovation will infact create jobs in the techno-area, whose job potential is 3400 positions by 2003. Inaddition, the tourism sector, with projections indicating 12% growth and double the numberof tourist visits by 2005, or thereabouts (seaside resorts, hotels, restaurants…) will generate30,000 new jobs each year. Job distribution is summed up in table 4.4 below.

Table 4.4Direct and Indirect Job Creation in the Tourism Sector

Structures % of contribution to direct jobs Indirect Links with:Lodging 32% Services, insurance, retailOther services 30% Services, transportHandicrafts 24% Textiles , leather, potteryRestaurant services 10% Food industries, retailTransport 4% Services

Source: Town Planning Document ; Study on Tourism Strategy

4.8.2 The handicrafts sector, which is traditionally spurred by any revival of touristactivities, will experience positive repercussions in terms of increased sale of its products anddevelopment of small individual production units.

20

4.8.3 Construction of access roads to radar installation sites will directly contribute toopening up of neighbouring villages, facilitate conveyance of goods and persons to thesurfaced roads and link the populations with major urban centers.

Impact on Women

4.8.4 The airport renovation will be a positive development for women, especially in termsof job creation, both amongst economic operators on the airport premises as well as withinONDA. Direct job creation concerns enterprises with significant female staff strengths, suchas airlines, travel agencies and stores. The increase in ONDA activities will also impact thepositions of women in the organization. With 418 women, 69% of trained personnel, therewill be some 620 women in professional activities in Mohammed V Airport.

4.9 Project Cost

The estimated total cost of the project, net of taxes is Dh 1,386,42 million (UA 98.07million). The total amount of taxes and customs duties applicable to the entire project cost isestimated at DH 123.56 million (UA 8.74 million), which is 9.24% of the total amount net oftaxes and excluding duty. These costs have been assessed based on unit prices obtained fromtendering for similar works and supplies in 2000. The physical contingencies representapproximately 10% of the base prices. The price escalation provisions have been determined,in light of the works schedule, based on the sector inflation rate, which is about 4%. Theestimated costs are given in the table that follows:

Table 4.5Summary of Project Costs by Component

In Million Dirhams UA MillionCOMPONENTSF E. L.C Total F. E L. C Total

A. Air Terminal 454.72 154.61 609.33 32.17 10.94 43.10B. Principal Runways 129.82 22.34 152.15 9.18 1.58 10.76C. Air Control 251.73 23.05 274.78 17.81 1.63 19.44D. Safety and Security 82.61 7.18 89.79 5.84 0.51 6.35E. Services (coordination, audit, geotech.) 16.70 12.43 29.14 1.18 0.88 2.06

BASE COST 935.57 219.62 1155.19 66.18 15.54 81.72Physical Contingencies 92.26 20.76 113.03 6.53 1.47 8.00Price Escalation 94.71 23.49 118.20 6.70 1.66 8.36

TOTAL 1122.55 263.87 1386.42 79.41 18.67 98.07

Table 4.6Summary of Project Costs by Category

In Million Dhs In UA MillionCATEGORY

F.E L.C Total F.E L.C Total

1. Works 511.05 171.99 683.04 36.15 12.17 48.32

2. Supplies 410.08 35.66 445.74 29.01 2.52 31.53

3. Services (Coordination, audit, geotech.) 14.44 11.97 26.41 1.02 0.85 1.87

Base Cost 935.57 219.62 1155.19 66.18 15.54 81.72

Physical contingencies 92.26 20.76 113.03 6.53 1.47 8.00

Price Escalation 94.71 23.49 118.20 6.70 1.66 8.36

TOTAL 1122.55 263.87 1386.42 79.41 18.67 98.07

21

4.10 Sources of Financing and Expenditure Schedule

4.10.1 The project will be parallel-financed with AFESD ; financing obtained from AFESDwas subject of an agreement signed on 23 November 1999 whose copy was transmitted to theBank. AFESD will finance the construction works on the Mohamed V departure terminal andthe Bank will bear the cost of the equipment of the said terminal and the remaining projectcomponents.The Bank’s participation will cover the entire foreign exchange costs of theproject excluding those of the departure building, or an amount of UA 52.70 Millionrepresenting 53.74 % of the cost, net of taxes and duties relating to the project . AFSED willfinance the departure terminal buildings sub-component to the tune of UA 26.70 million , or27.23% of the total amount, net of taxes . ONDA will be responsible for local currency costsrepresenting 19.03% of the total cost, net of taxes and customs duties. The financing plan bysources of financing and categories of expenditure is as follows :

Table 4.7Expenditure by Sources of Financing

In Million of Dirhams In UA millionSOURCES F.E L.C Total F.E L.C Total

% Total

ADB 745.05 0.00 745.05 52.70 0.00 52.70 53.74

AFESD 377.50 0.00 377.50 26.70 0.00 26.70 27.23

ONDA 0.00 263.87 263.87 0.00 18.67 18.67 19.03

TOTAL 1122.55 263.87 1386.42 79.41 18.67 98.07 100.00

4.10.2 The expenditure schedule by source of finance is shown hereunder :

Table 4.8Expenditure Schedule by Category and Source of Finance

(in UA million)

CATEGORY ADB AFESD ONDA TOTAL %1. Works 16.98 26.70 14.71 58.39 60.93

2. Supplies 34.78 0.00 3.01 37.78 37.02

3. Services 0.95 0.00 0.95 1.90 2.05

Total (UA) 52.70 26.70 18.67 98.07 100.00Total (%) 53.74 27.23 19.03 100

Table 4.9Expenditure by category and per year (in UA Million)

CATEGORY 2001 2002 2003 2004 2005 Total %1. Works 5.67 24.44 19.91 3.09 0.04 53.15 52.48

2. Supplies 7.88 20.88 3.25 2.86 0.00 34.87 32.33

3. Services 0.28 0.40 0.40 0.35 0.26 1.69 1.72

Base Cost + Phys. Cont. 13.83 45.72 23.56 6.30 0.30 89.71 86.54

Price escalation 0.55 3.73 2.94 1.07 0.07 8.36 13.46

TOTAL 14.38 49.45 26.50 7.37 0.37 98.07 100.00

5. PROJECT IMPLEMENTATION

22

5.1 Executing Agency

The Borrower which is the Office national des aéroports (ONDA). Is under the technicalsupervision of the Ministry of Finance . Its legal and institutional framework was developedin the preceding Chapter 3.3 . Under the present loan, the Office will obtain theGovernment’s guarantee. The Office has acquired sound experience in the management ofsimilar projects and particularly those financed by the Bank . It has an excellent knowledge ofthe Bank’s rules of procedure for the procurement of goods, works and services . As in thecase of previous projects and for the implementation of this project, a project co-ordinationunit will be created within the Finance and Administration department (DAF) which will becharged with the supervision and co-ordination of all project activities . The organisationchart of the unit is given in annex 1.

As indicated in paragraph 3.11.1. , the Government of Morocco’s option to liberalise airtransport is firm but gradual. The gradual implementation of the liberalisation of RAM is inkeeping and ranks highly in the air transport development plan . This plan does not providefor any statutory change of ONDA.

5.2 Institutional Arrangements

5.2.1. The Co-ordination Unit will be managed by a Project Co-ordinator appointed byONDA and whose CV will have been submitted for prior approval by the Bank. He will beassisted by a team composed of engineers, technicians and accountants from ONDA. Placedunder the authority of the Finance and Administration department (DAF) of ONDA, he willsupervise the technical and accounting aspects of the implementation and will be responsiblefor preparing the bidding documents for works, the administration of contracts and thegeneral supervision of works.

5.2.2 The Finance and Administration department (DAF) will ensure the co-ordination withthe donors on one hand , and the internal co-ordination with other operational departments ofthe Office involved in the project.

5.2.3 In accomplishing its task, the project will seek the assistance of specialised externalservices . Thus, the geotechnical inspection of works and quality will be carried out by aspecialised laboratory to be appointed. Similarly , an external auditor will be recruited for theproject’s audit in accordance with the Bank’s procedure.

5.3 Implementation and supervision schedule

5.3.1 The project’s implementation schedule based on the elementary duration of each ofthe project components shows that the project’s execution will spread over a 4-year periodfrom the date of loan approval by the Bank. The physical completion of works is scheduledfor 31 December 2004. The detailed project implementation schedule is given in annex 2.The summary schedule of the components financed by the Bank is as follows :

23

Table 5.1Indicative Implementation Schedule

Component Preparetion BD

Approv. BD Invitation totender

Section andApprov.

Commen-cement of

Works

Duration

(months)

Comple-tion ofworks/

Procure-ment

Donors

A) Departure Terminal- Building: Feb. 2001 March

2001May 2001 Oct. 2001 Sept 2001 30 March

2004AFESD

- Infrastructures: Feb. 2001 March2001

May 2001 July. 2001 July 2002 30 Dec 2004 ADB

- Equipment:- Steps/gangways Feb. 2001 March

2001May 2001 July. 2001 Sept 2001 12 Sept 2002 ADB

- Walkway Feb. 2001 March2001

May 2001 July. 2001 Jan. 2002 08 Sept 2001 ADB

B)Runways :- New lighting Feb. 2001 March

2001May 2001 June 2001 July 2001 8 March

2002ADB

- Re-loading and lighting Feb. 2001 March2001

May 2001 June 2001 April 2002 4 August2002

ADB

C) Air control :- Road radar + Satellite Dec. 2000 March

2001May 2001 July 2001 August

200118 Feb. 2003 ADB

- Approach Radar April 2003 Mai 2003 July. 2003 Sept 2003 Oct 2003 12 Oct. 2004 BAD-CNCSA. Telec. Equipment Sept. 2001 Oct. 2001 Jan. 2002 March

2002April 2002 8 Dec 2002 ADB

- CNCSA engineering August 2001 Oct. 2001 Jan. 2002 March2002

April 2002 6 Oct 2002 ADB

D) Security:- Fire-safety Vehicles Jan. 2001 March

2001May 2001 July. 2001 August

200110 June 2002 ADB

- Ambulances Sept. 2001 Oct. 2001 Jan. 2002 March2002

April 2002 3 July 2002 ADB

4WD vehicles Sept. 2001 Oct. 2001 Jan. 2002 March2002

April 2002 3 July 2002 ADB

- Cranes and Sweepers Sept. 2001 Oct. 2001 Jan. 2002 March2002

April 2002 12 April 2003 ADB

- X-Ray (safety) Sept. 2001 Oct. 2001 Jan. 2002 March2002

April 2002 12 April 2003 ADB

E) Services:- Audit Sept. 2001 Oct. 2001 Jan. 2001 Jan. 2002 March

20021/year March

2005ADB

- Co-ordination andGeotechnics

Feb. 2001 March2001

March2001

May 2002 June 2002 project Jan 2005 ADB

Supervision

5.3.2 The schedule of supervision activities of the components financed by the Bank is asfollows :

24

Table 5.2Schedule of Supervision of Activities

Approximate dates Activity Speciality ADB StaffMan/weeks

2001 (ADB/AFESD) Jointlaunching mission

Project officerProcurement officerDisbursement officer FLAD

3-1

(ADB/AFESD) Jointsupervision mission

Project officerFinancial Analyst.

2-22002

Supervision mission Project officer. 1-2Mid-term review Project officer

Environmental ExpertDisbursement officer FLAD

3-12003

Supervision mission Project officerFinancial Analyst

2-2

2004 Supervision mission Project officer. 1-22005 Completion mission Project officer

Environmental Expert FinancialAnalystTransport Economist

4-2

5.4 Procedures for the procurement of goods and services

5.4.1 All Bank-financed procurement will be in accordance with the relevant rules ofprocedure using the appropriate bidding documents. Provisions for all the differentprocurements as well as the estimated amounts are summarised in Table 5.3 hereunder.

5.4.2 Procurement for infrastructure works and for the two major runways as well as thedifferent equipment will be through international competitive bidding . Works on theapproach roads to radar sites , rehabilitation of CNSA, adaptation of sites and green areas willbe subject to local competition since they are local firms perfectly equipped for this type ofworks and the amount for each contract is lower than UA 300.000 . With regard togeotechnical and technical services , these will be carried out by specialised laboratories orfirms and will be awarded on the basis of a short list prepared and recommended by theExecuting agency and approved by the Bank.

5.4.3 The categories of goods and works to be procured were broken down in homogenousbid packages. Each package may be subject of a contract whose amount will range betweenUA 2.50 and UA 5.00. Several similar packages may also be subject of one contract.

5.4.4 As in the case of the ongoing airport rehabilitation project, the supervision of theinstallation and the starting up of the radar and telecommunication equipment will be done bythe ONDA Co-ordination unit which is specialised in this kind of works.

25

Table 5.3Procedures for the procurement of goods and works

Category Amount in UA MillionADB Financing in brackets (..)

ICC LC Short List Non-ADBFinancing

Total

1. WORKS1.1 infrastructures, main runways (4 contracts) 17.69 (15.90) 17.691.2 Approach roads to sites, for radarmaintenance dais and mounts, CNCSAinstallations. Installation of sites and greenareas (8 contracts)

2.31 (1.92) 2.31

1.3 Terminal buildings 38.15 38.152 – GOODS

Supplies (15 contracts) 37.78 (34.78) 37.783 – SERVICES3.1 Geotechnical Control 0.18 (0.15) 0.183.2 Audit 0.14 (0.14) 0.14

General Procurement Information Notice

5.4.5 The text of a General Procurement Information Notice (GPN) was agreed upon withONDA during the appraisal and will be published in the "Development Business" as soon asthe Board of Directors has approved the loan proposal.

Procedures for Analysis

5.4.6 The following documents shall be submitted to the Bank for consideration andapproval before being published ,namely : (i) the specific procurement information notice;(ii) bidding documents; (iii) appraisal reports and reports of judgements on submissionscontaining the recommendations on the award of contracts. ; (iv) drafts contracts if thosecontained in the bidding documents have been amended .

5.5 Disbursement procedures

The various services of ONDA involved in the implementation of the project are veryfamiliar with the Bank’s rules of procedure for disbursement .The direct payment method isenvisaged for works, consultancy services and for procurement of goods . If necessary, otherdisbursement methods will be negotiated and will be included in the disbursement letter.

26

5.6 Monitoring and Evaluation

5.6.1 The monitoring of the project’s implementation will be under the responsibility ofONDA’s Finance and Administration department through the Co-ordination and Supervisionunit set up for that purpose. The activities to be carried out in that respect are :- Co-ordination between ONDA and the different financiers ;- Preparation of BD, invitation and opening of tenders, management of contracts and

monitoring of their performance;- Control and monitoring of commitments ;- Control and monitoring of regulations for suppliers of services, works and equipment;- Debt management (loans from donors).

5.6.2 ONDA will send to the Bank quarterly reports concerning the implementation andstatus of works based on , inter alia, data obtained from the progress reports on sites preparedby the co-ordination unit with the assistance of the agency in charge of quality control.

5.6.3 Furthermore, to ensure the smooth implementation of the project and put to use thelessons learned from previous projects, the Bank will organise a launching mission to theOffice ; in this connection, the procurement procedures and provisions made to meet theproject’s execution requirements will be underscored. A mid-term review as well as regularsupervision missions of the project will also be conducted.

5.6.4 On project completion, ONDA will prepare a project completion report which will besent to the Bank. This report will serve as a reference document for the Bank in preparing thecompletion report.

5.7 Financial Reporting and Audit

5.7.1 The Project co-ordination and supervision unit established within the Finance andAdministration department will be responsible for keeping the accounts and producing theproject’s accounts. ONDA which has wide experience in project management has establisheda satisfactory system and data is processed in real time . The financial statements are incompliance with the provisions of the Moroccan chart of accounts

5.7.2 The project’s accounts will be audited yearly by a firm of external auditors to berecruited in accordance with the Bank’s procedures and the results will be communicated tothe Bank .

5.8 Aid Co-ordination

The project being subject of parallel-financing between ADB and AFESD, particularattention must be paid to the co-ordination of works ; hence, the launching missionscheduled for 2001 and the first supervision mission of the project in 2002 will be joint(ADB/AFESD) to ensure that the works have effectively started and to examine theconstraints on site. Besides these missions, the Bank will pursue the exchange of informationwith this institution within the context of the project, either directly or through the Executingagency.

27

6. PROJECT RISKS AND SUSTAINABILITY

6.1 Recurrent Costs

Past experience has shown that ONDA has always met its commitment to pay itscontribution to projects .Its financial position shows its capacity to provide financing underthis project. The operating and maintenance costs of the infrastructure and equipment put inplace under the project including the costs of the personnel assigned for their operation willbe financed by ONDA from its equity capital. The Moroccan Government will not financeany of the expenses estimated at 90 million Dhs/annually, of which 50 million Dhs/per yearconsists of payroll costs. ONDA is in a position to pay these amounts as shown by thefinancial statements presented in annex 4.

6.2 Project Sustainability

6.2.1 In the past, ONDA has always ensured the upkeep and maintenance of all theinstallations; hence, in 1999, expenditures under this item amounted to nearly 10% of theOffice’s earnings (see annex 4). Concerning the project, the earnings expected from itsimplementation will enable the Office to pay the recurrent costs generated by the upkeep andmaintenance operations as well as the expenses relating to the procurement of spare partsneeded for the normal functioning of installations. The operating accounts given in annex 5show clearly this aspect.

6.2.2 ONDA has the necessary human,administrative and technical skills as well as theexperience required to guarantee the sustainability of the project after its completion.Withregard to the area of air navigation safety, the Office has a good reputation with internationalinstitutions such as the IAA.

6.3 Major Risks and Mitigating Measures

6.3.1 The traffic estimates made within the scope of the Airports Master Plan are based onthe analysis of air traffic recorded in Morocco over the last 10 years. This analysis reveals theclose correlation between the air sub-sector and the tourism sector. The interdependence ofthe two sectors entails a potential risk for this project should the tourism sector not attain itsprojected objectives of increase of tourists ; such a scenario is illustrated by the ‘’ lowassumption’’ taken into account in calculation of the projected traffic. Although thispossibility seems very pessimistic in the case of Morocco, given that the data on thisexceptional situation proves to be well within what Morocco has experienced in terms oftourists flow over the last ten years , this risk is quite real even though the probability of itoccurring is very limited.

6.3.2 The departure air terminal building is being subject of parallel-financing betweenADB/AFESD, and delay recorded on the part of each party (civil engineering works /equipment) will have direct implications on the period of implementation of the component.Consequently, good co-ordination by the donors is essential.

28

7 PROJECT BENEFITS

7.1 Financial Analysis

A) Retrospective Financial Analysis

7.1.1 The retrospective financial analysis of ONDA will be based on accounting andfinancial documents for the years 1995-99 and the related audited accounts issued byreputable independent audit firms. The Table below gives a summary through theconsolidated income statement whose details are found in Annex 4.

Table 7.1Consolidated income statements : 1995-1999 (in thousand Dhs)

Item 1995 1996 1997 1998 1999

Revenues 635 957 564 436 770 847 916 991 433

Intermediary consumption 178 845 158 820 161 523 193 634 214 291

Value added 457 112 405 615 609 324 723 282 777 142

Other revenues 1 249 19 54 5

Operating charges 235 355 266 473 300 503 312 092 348 207

Gross operating surplus 221 758 139 391 308 839 411 243 428 941

Allocations to reserves 241 025 304 607 256 441 273 387 285 076

Total charges excluding reserve allocation 655 225 729 901 718 468 779 113 847 574

Operating profit -19 268 -165 465 52 379 137 803 143 859

Non operating income -57 198 314 440 -42 900 -167 390 -83 893

Revenues for the period -76 466 148 975 9 479 -29 587 59 967

Taxes 4 271 3 725 42 912 16 448 5 410

Net Income -80 737 145 250 -33 432 -46 035 54 557

7.1.2 This table exhibits a satisfactory trend in revenues, in the value added and the grossoperating profit. Indeed, the growth rates of these performance indicators during the periodstood at 11.74% for sales. 14.19% for value added and 18 % for the gross operating profit.During the same period, the rate of growth of intermediate consumption stood at 4.6% andthat of operating charges at 10.29%. The operating income which was negative in 1995 and1996 (-19.2 million of DH and –165.4 million of DH respectively) turned positive in 1997with DH 52.3 million and reached DH 143.8 million in 1999. The marked improvement inONDA's financial situation through the positive results of the past three years is attributed to :(i) a better control of operating expenses with an average growth rate of personnel expenseskept at 6.6% per annum; (ii) a marked improvement in sales volume stemming from theconstant growth in traffic observed over the same period, (iii) the 3% increase in all aerialnavigation charges, including the over-flying in 1977 and ; (iv) the exemption of chartersfrom payment of landing fees on Agadir and Tangiers.

7.1.3 ONDA's cash flow which represented only 32% of realised investments in 1995,registered a growth rate of + 273 % over the period 1995-99 leading to a coverage ratio of117% of investments in 1999 as shown in Annex 4 page 2. Concurrently, the burden offinancial expenses diminished, going from 41.8% to 16.85%. A more detailed analysis of theobserved trend in the items making up the turnover reveals a structure composed of nearly47% of airport fees, 43% of flyover charges and 9% of marketing and property fees.Passengers and landing fees are among the largest contributors to the turnover, representing

29

respectively 18% for CNCSA, 32% for Mohammed V airport, 8.5% for Agadir, 7.2% forMarrakech and the remaining 9.3% were provided by the other airports. The Table belowshows results by cost centre for the year 1999.

Table 7.2Income Statements of ONDA by Cost Centre in 1999 (in millions of Dhs)

ITEM Mohammed V CNCSA Agadir Marrakech Tangier Others ONDAOperating revenues 351 526 420 731 65 352 76 917 20 021 56 886 991 433

% 35% 42% 7% 8% 2% 6% 100%Intermediate Consumption 125 873 15 272 9 192 5 776 4 418 53 759 214 291

% 59% 7% 4% 3% 2% 25% 100%

Value added 225 653 405 459 56 159 71 141 15 603 3 126 777 142% 29% 52% 7% 9% 2% 0% 100%

Other revenues 2 0 3 0 0 0 5Operating expenses 111 620 42 037 19 419 11 068 12 955 151 108 348 207

% 32% 12% 6% 3% 4% 43% 100%Gross operating profit 114 035 363 422 36 744 60 073 2 648 -147 981 428 941

% 27% 85% 9% 14% 1% -34% 100%

Source : ONDA and ADB Mission

7.1.4 The marked contributions by the CNCSA and by Mohammed V airport in theformation of value added are clear : they approximate 52% and 29%, respectively. Theairports receiving charter flights (Agadir, Marrakech and Tangier) account, on the average,for a total of 18% of the sales volume, while the weight of the « other airports » is low. Thelatter, owing to a low traffic they register, make up the only cost centre to have recordednegative gross operating balances in 1999; for only 6% of operating revenues, they register25% of intermediate consumption and 43% of operating costs. It is worth noting that theseairports have a vital strategic value for the security of the air navigation, owing to the factthat, in 1999, they received 100% of aircraft diverted from the airports of original destination.

7.1.5 The review of the financial structure of ONDA relies on that of the balance sheets andis shown in Table 7.3 below.The details are provided in Annex 4.

30

Table 7.3ONDA's historical balance sheets :1995-1999 (in thousands of DH)

ASSETS 1995 1996 1997 1998 1999

Gross fixed assets 1 853 201 3 019 707 3 220 009 3 378 396 3 672 317

Depreciations 521 869 1 342 677 1 598 660 1 781 368 2 041 568

Net fixed assets 1 331 332 1 677 030 1 621 349 1 597 028 1 630 749

Stocks 26 247 19 711 30 827 44 311 93 477

Receivables 855 181 735 521 795 557 804 542 839 500

Liquid assets 7 015 15 335 42 431 56 555 82 275

Total Assets 2 219 775 2 447 597 2 490 164 2 502 435 2 646 000

LIABILITIES

Amount brought forward -235 310 -316 046 -170 547 -203 912 -249 959

Allowance fund 947 591 947 591 947 591 947 591

Net income -80 736 145 499 -33 413 -45 981 54 562

Gross subsidies 510 591 560 296 595 298 347 300 702 101

Subsidies listed with CPC -174 309 -462 565 -509 860 -154 992 -475 324

NET SUBSIDIES 336 282 97 731 85 438 192 308 226 776

Provisions for risks and charges 576 227 42 250 57 665 42 825 74 385

Owners Equity 596 464 917 026 886 735 932 832 1 053 356

Long-term liabilities 723 555 813 186 1 027 030 987 211 967 267

Short-term liabilities 899 756 717 384 576 399 582 392 625 378

TOTAL LIABILITIES 2 219 775 2 447 597 2 490 164 2 502 435 2 646 000

Source : ONDA and ADB Mission

7.1.6 The analysis of major items of the balance sheets structure from 1995 to 1999 bringsout the following characteristics :

a) The importance of airport infrastructure and equipment (fixed assets) whose net valueaccount for more than half of the total assets (59.9% in 1995). The variousrehabilitation, maintenance and capital investments realised during the period havestrengthened this rate which reached 65% in 1997. This rate was brought down to61% in 1999, owing to deduction for depreciation; which is an indication of the agingof equipment;

b) A positive working capital as from 1996 which sufficiently covers the requirement forworking capital, yielding a positive volume of liquidity during the period;

c) At the level of current assets, the heavy weight of receivables held against thirdparties (+90%) is observed; this is likely to make the company's cash position prone topressures. Indeed, the low level of liquid assets made it possible to meet short-termdebts only up to 7.36% in 1997, 9% in 1998 and 13%. This situation is such as tojeopardise daily management, despite a positive cash position;

d) The cash flow stood at DH 270.5 million and DH 332.78 million in 1998 and 1999respectively, whereas the ratio of financial charges to gross operating profits fell from17.99% to 16.85% and the debt ratio from 105 % to 91%. This means that ONDAmanaged to maintain a debt capacity practically intact despite ongoing investments.This policy puts ONDA in a viable banking position for access to external financingfor profitable projects. ONDA's preference for the Bank loans in line with this policyframework and is justified considering the benefits to be gained given the maturitiesand grace periods of these loans.

31

7.1.7 ONDA's debt situation and its trend since 1996, whose details are in annex to theproject implementation report, is summarised in Table 7.4. Of these debts, 40% is owed bytwo Moroccan Companies : RAM and Regional Air Ligne; 35% by European companies and25% by other companies. The current direct billing system gives rise to quite substantialirrecoverable amounts due to the fact that the headquarters of the bulk of these companies arelocated in Europe. In view of difficulties encountered by ONDA in debt recovery, a bilateralagreement is in the process of being concluded with EUROCONTROL* with the view totaking over the Office’s future debt management. The improvement of this situationrepresents one of priority actions that ONDA must undertake and which will be one of theloan conditions, namely : (i) to set up a schedule for the recovery of outstanding debts, and(ii) to assign the management of future claims to EUROCONTROL.

Table 7.4ONDA 's Debts (in Dirhams) by age

Years 1995 1996 1997 1998 1999 2000 Total

Amount 13.896.922.05 72.567.319.02 45.677.705.17 92.402.356.69 161.312.512.30 441.929.099.00 827.765.914.23

B) Projected Financial Analysis

7.1.8 The financial projections made to enable the assessment of the project viability coverthe period 2000-2010. The underlying assumptions are provided in the chapter 4.6 and inAnnex 5, page 4.These are the following :

a) Air traffic forecasts were based on findings from various studies and analyses carriedin the sector;

b) traffic projections are based on the analysis of the growth rates observed at each airportover the period 1995-1999;

c) the maintenance of airport traffic at their 1999 level, which mitigates the effects of ahigh vision of the traffic growth trend and brings down the related projections to asomewhat pessimistic proportion;

d) the intermediate consumption and operating expenses are estimated taking into accountactivities developed by the project: intermediate consumption will grow at the rate of7% during the execution of works, before rising to 10% after the beginning ofoperation of the new equipment.

e) With regard to operating expenses 98% of which consists of personnel expenses, a 7%growth rate is assumed for the entire period. Furthermore, debt recovery byEUROCONTROL (agreement in the process of being signed) will lead to a markedincrease in cash balances, notably through the improvement in the rate of recovery offuture claims, and thus in the reduction in claims and other provisions for risk. Theevidence of signature of this agreement will be one of the loan conditions;

f) However, previous claims on clients will not be covered by this agreement (due to non-retroactivity). It is advisable, therefore, for ONDA to engage in ways of reducing itsclaims by setting up of an adequate recovery plan which enables the recovery of these

* EUROCONTROL is a unique European Institution established in 1960 to monitor and control air traffic using air space of 17 member countries. In addition to its mission

to provide solutions to common problems in the area or air security in Europe, with a view to ensuring the fludity of traffic and savings for passengers; its is also responsible

for the management of claims of member countries airlines, through the billing and collection of funds from road and approach charges of the 17 European Member

countries. It should be pointed out that the billing system adopted by EUROCONTROL is in conformity with the principles and recommendations of ICAO.

EUROCONTROL is empowered by its charter to block and seize equipment belonging to debtor companies.

32

debts within a 4 year-period. The setting up of this plan will be a made a loancondition;

g) The financing of the project will be secured from AFESD, on the one part, at theinterest rate of 4.5%, and from a Bank loan at the average interest rate of 7.5% with a20-year maturity, including a 5 years grace period;

h) On-going loans and non-project investments projected and budgeted for by ONDA forthe equipment of its airports, the renewal and maintenance of its equipment.

7.1.9 The provisional income formation accounts (income statements and balance sheets)which result from the projections are provided in tables of Annex 6. The Table below gives asummary through consolidated income statements. It highlights the maintenance of thepositive trend in the volume of revenues, which after a period of project implementation(2001-2005) characterised by a seesaw trend (+38% in 2002 . -3.55% in 2003 and +13% in2004), is projected to stabilise. The value added generated during the successive periods areprojected to be positive, and as a result of the economies of scale realised on intermediateconsumption, will register higher annual growth rates (+8.52% on average). From 2000 to2010 gross operating surplus is projected to grow at 102.3%, representing an average annualgrowth rate of 10.23%. Projected income statements are presented in Table 7.5 below.

Table 7.5

Summary of Projected Income Statements (2000-2010)(in thousand Dhs)

LINE ITEM 2000 2003 2005 2008 2010PRODUCTION FOR THE PERIOD 1 173 713 1 515 015 1 743 277 2 156 055 2 485 558Intermediate consumption 312 773 310 222 400 457 499 614 579 397

VALUE ADDED 860 940 1 204 793 1 342 820 1 656 440 1 906 161Tax and Levies 50 612 55 305 63 319 77 568 88 808Payroll costs 316 556 422 136 527 208 694 987 818 000

GROSS OPERATING PROFIT (GOP) 493 772 727 352 752 293 883 885 999 353Allowance for operations 317 741 358 548 438 160 558 160 527 997

OPERATING PROFIT 176 031 368 805 314 133 325 725 471 356Non operating revenues -64 421 -63 958 -52 121 -29 223 -15 170Current profit 111 610 304 847 262 012 296 502 456 186Non-current profit 45 480 69 203 84 150 107 795 125 880Profit tax 37 626 130 917 121 157 141 504 203 723

NET INCOME FOR THE PERIOD 119 464 243 132 225 005 262 793 378 343

Source : ONDA and ADB mission

7.1.10 From the analysis of major projected balance sheet items during the period, it appearsthat there is (i) a consolidation of fixed assets due to the project investments (ii) aconsolidation of the working capital which sufficiently covers the working capitalrequirement and generates cash flow as indicated in the Table below, and (iii) animprovement in the status of claims from clients owing to EUROCONTROL's intervention(from 21% of assets in 2000 to 14% in 2005) to the benefit of an immediate satisfactoryimprovement in liquidity, which from negative in the year 2000, is projected to representnearly 26.5% of total assets in 2005 and 29.8% in 2010.

33

Table 7.6Summary of Budgeted Balance Sheets 2000-2010 (in thousand Dhs)

ASSETS 2000 2003 2005 2008 2010FIXED ASSETS ( GROSS) 4 773 160 6 134 453 6 934 453 8 434 453 9 434 453DEPRECIATION 2 359 856 3 394 076 4 230 396 5 784 876 6 860 225FIXED ASSETS ( NET) 2 413 304 2 740 377 2 704 057 2 649 577 2 574 228STOCKS 195 513 195 513 195 513 195 516 195 518CLAIMS 677 177 639 072 735 585 975 778 1 125 108LIQUID ASSETS -61 946 764 313 1 312 026 1 045 009 1 658 311TOTAL ASSETS 3 224 048 4 339 275 4 947 180 4 865 880 5 553 166

LIABILITIESALLOWANCE FUND 1 247 591 1 247 591 1 247 591 1 247 591 1 247 591Amount B/F -198 771 316 548 789 116 1 490 233 2 076 453REVENUE FOR THE PERIOD 119 464 243 132 225 005 262 793 378 343Subsidies on equipment 767 791 1 009 632 1 208 539 1 568 605 1 857 939Recoveries on subsidies -524 804 -715 195 -884 002 -1 195 404 -1 445 771Net subsidies on equipment 242 987 294 437 324 538 373 201 412 168Provisions 75 781 75 781 75 781 75 781 75 781OWNERS' EQUITY 1 487 053 2 177 489 2 662 032 3 449 599 4 190 336Financing Debt (LT) 962 821 1 472 752 1 433 964 1 119 659 978 433Short-term Debt 774 174 689 034 851 186 296 622 384 397TOTAL LIABILITIES 3 224 048 4 339 275 4 947 182 4 865 880 5 553 166

Source : ONDA and ADB Mission

7.1.11 The table below summarises the source of ONDA's resources and their use during theperiod under study. Equipped with its earlier results and management, ONDA's cash flowfinancing will represent more than 50% of resources as from the year 2002. Other financingsources consist of outstanding borrowings and borrowings in connection with the presentproject (AFESD and ADB), as well as airport taxes. A gradual improvement in ONDA'sliquidity is observed which goes rising. At the end of the period, ONDA's financial structureregains its natural status which is one of an airport service enterprise, characterised by heavyfixed assets, less operating values and an abundant liquidity owing to its daily operationsmarked by flight peaks and, therefore revenues.

Table 7.7Resource Application (in thousands of Dhs)

RESOURCES 2000 2003 2005 2008 2010CASH FLOW 387 575 528 477 575 015 709 158 776 460Allowance fund 300 000Borrowings 252 746 230 398 0 0 0Airport taxes for equipment 65 691 88 898 103 155 129 125 150 120Variation BFG 257 395 0 0 0 0TOTAL RESOURCES 1 263 407 847 773 678 170 838 283 926 579

APPLICATIONFixed Assets (Non financial) 696 692 400 000 400 000 500 000 500 000Radar transfer 300 000Repayment on borrowings 68 191 78 777 76 880 104 718 54 052Repayment of debt swaps State-ONDA 148 759VAR BFG 0 127 156 20 707 47 968 34 107TOTAL APPLICATION 1 213 642 605 933 497 587 652 687 588 158VARIATION LIQUIDITY 49 766 241 840 180 584 185 596 338 421CASH AT BEGINNING OF PERIOD -111 712 522 474 1 131 442 859 413 1 319 890CUMULATIVE LIQUIDITY -61 946 764 314 1 312 026 1 045 009 1 658 311

Source : ONDA and ADB Mission

34

Return on Equity

7.1.12 ONDA's financial rate of return can be evaluated through the determination of someratios drawn from the projected operating statements, notably those relating to the rate ofreturn on invested capital, to the debt and to the coverage of debt service, which are providedin Annex 6. It is clearly pointed out that invested capital will contribute to the gradualimprovement of ONDA's profitability and that it would be able to meet its debt service.

7.1.13 The internal financial rate of return of the project is measured by the gross operatingprofit (excluding financial charges and depreciation) which corresponds to the differencebetween gross operating profit (GOP) with and without the project. The assumptionsunderlying the financial projections are provided in Annex 5. They refer to the situation ofairport activities, the trend in traffic based on the assumption of an average growth rate, tothat of CNCSA and that of ONDA's expenses for which the impact of non realisation of theproject will be expressed in terms of foregone earnings.

7.1.14 The internal financial rate of return computed on the basis of assumptions laid downin Annex 5 stands at 22.50% and is shown in Annex 7. This rate whose level is linked to theintensity of Moroccan tourist and airport activities in full growth is largely higher than that atwhich capital will be borrowed for the financing of the project.

7.2 Economic Analysis

7.2.1 The economic evaluation of the project is based on the determination of costs andbenefits of the situation with and without the project. The economic benefits will derive fromtaking into account : (i) the increase in the volume of activities in the airports as well as at theCNCSA, based on the assumption of an average growth rate, and (ii) the reduction inproduction costs measured by the level of intermediate consumption. The economic rate ofreturn will be calculated by determining the effects of the project on ONDA's value added. Itwill be based on the consideration of the following elements detailed in Annex 5:

- maintenance expenses and major repairs relating to infrastructure as well asequipment will be taken into consideration;

- supplementary operating expenses are those related to the strengthening of the workforce present at Mohammed V and the CNCSA and the miscellaneous expenses suchas electric energy consumption and telecommunications.

- the economic cost of the project is assessed by taking into account investments relatedto infrastructure projects financed by AFESD, to CNCSA's radar equipment (52% ofproject cost), to security and safety equipment and those of the second runaway atMohammed V airport (18% of total cost). These costs are marked up forcontingencies. These investments will be realised according to a schedule described inparagraph 5.3.

- the economic gains result from (i) the increase in the volume of activities at airports aswell as at CNCSA, and (ii) from the reduction in production costs represented byintermediate consumption. The project economic rate of return is estimated throughthe computation of its effects on ONDA's value added.

7.2.2 On this basis, the internal economic rate of return has been estimated at 26.43%, asshown in Annex 7.

35

7.3 Social Impact Analysis

Since the airports concerned by the project are spread throughout all the countriesregions, the impact area is considered to be the entire national territory. The envisagedextensions, new developments and acquisitions will make it possible, in particular, toimprove the airline sub-sector tool and tourism in such a way as to actively contribute to thesocio-economic development of the country.

7.4 Sensitivity Analysis

7.4.1 Several sensitivity tests were conducted in order to measure the financial sensitivity ofthe project. Thus, a reduction in the gross operating revenues by 10% reduces the rate ofreturn from 22.50% to 17.69%, representing a deviation of 5% downward, whereas anincrease in the project costs by 10% reduces this rate to 20.09%. These tests show therefore,that the project rate of return is assured and this is linked to the very nature of the project(sector of activity, the context of growth in traffic, existing infrastructure, etc…). The highestsensitivity of the rate of return to variations in gross operating income leads to determining ofthe responsibility of the project executing agency, ONDA, in the success of the projectthrough its management capability. As observed in chapters 3 and 7, ONDA's organisationand management and its achieved financial results do not suffer from any misgivings in thepositive assessment of its competence, both technically as well as human resources. ONDA isequipped to successfully carry out this project which aims at strengthening its capacity.

7.4.2 The sensitivity tests which were also conducted at the level of the economic rate ofreturn (Annex 7), show that the project remains economically viable in the case of a reductionin value added by 10% and the case of an increase in project costs by 10%. The rate of returnstands at 23.37% and 18.16%, respectively.

8. CONCLUSIONS ET RECOMMENDATIONS

8.1 Conclusions

8.1.1 The present project aims at putting in place adequate, reliable and safe infrastructureto meet increasing traffic demand and ensure a harmonious development of the air sub-sector.

8.1.2 The technical design of the project is coherent and is line with the preceding projects .Its implementation will enable ONDA to remove all the constraints connected with theconsiderable traffic flow transiting via Casablanca in particular, and the navigation safetyrelating to the coverage of national airspace. The intake capacity at the Mohamed V airportwill reach 6 million passengers by the end of the project (2005) and the time for handlingpassengers as well as luggage will then become normative.The improvement of air controlthrough the procurement of radar and telecommunications equipment will enhance theperformance of the Office and the quality of CNCA’s services ; this will generate additionalreceipts by sizeable tariffs. The project is financially and economically viable in view of thefinancial and economic rates of return of 22.5% and 26.48% rates respectively obtained for theproject

8.1.3 ONDA’s financial position recorded a net improvement given the positive results overthe last three years. These performances led to : (i) a better control of operating costs ; (ii) asignificant increase in sales owing to the constant traffic; (iii) the 3% increase on all

36

aeronautical charges including over-flight in 1997 ; (iv) The incentive measure consisting inthe exemption of landing fees for charters at the Tangier and Agadir airports .

8.1.4 ONDA has a vital and strategic importance for the country . It has appropriatemanagement autonomy and is under the authority of the Ministry of Transport and MerchantNavy with respect to technical standards for control and supervision for putting in placestandard civil aviation procedures . The strategy to increase the capacities of its workinginstrument and its improvement and update in tandem with the requirements of ICAO willmake it possible to consolidate its marketing position toward Europe and will facilitate itsobjective of making Casablanca the Hub station for Africa .

8.1.5 From the environmental standpoint, the project is not expected to cause any majornegative impacts and will not represent any added threat to the environment of the areaconcerned . Concerning the study of noise propagation carried out at Mohamed V airport , itrevealed that the areas close by the airport will not be in any way exposed to aircraft nuisanceand the mitigating measures that are normally adopted for construction works will beprovided for in the arrangements that will be made with the contractors so as to limit theusual disturbances connected with heavy works machinery and the spread of dust.

8.2 Recommendations and Conditions for Loan Approval

8.2.1 It is recommended that a loan of UA 52.7 million be granted to ONDA with aGovernment guarantee. The loan will cover 66.36% of the foreign exchange outlays for theproject. Apart from the usual Bank terms and conditions, the loan will be granted subject tothe following conditions:

C- Conditions Precedent to Loan Effectiveness

Prior to the entry into force of the loan, the Borrower, (ONDA) is required to submitto the Bank:

iv) Proof of the signing of the debt management contract with EUROCONTROL(para. 7.1.7) ;

v) The plan for recovery, over a period that should not run beyond 2004,of debtscontracted prior to the date of signing of the contract with EUROCONTROL,(para. 7.1.7) ;

vi) Proof of the appointment of a project coordinator, whose C.V should havebeen approved beforehand by the Bank (para. 5.2.1);

D- Other conditions

The Borrower should further transmit to the Bank, within six months following theend of each financial year, a report on the recovery of debts contracted prior to thesigning of the contract with EUROCONTROL.

Annex 1, Page 1 of 1

KINGDOM OF MOROCCO

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITYORGANIZATION CHART OF ONDA

REGIONALCONNECTIONS

PROJECTCOORDINATION

& MONITORING UNIT

LOGISTICSRECORD AND

ORDER OFFICE

SECRETARIAT

SECRETARIAT

PLANNINGMONITORING

AND EVALUATIONSERVICE

BUDGETSERVICE

ASSETS ANDINSURANCE

SERVICE

BUDGET ANDPLANNINGDIVISION

SECRETARIAT

THIRD PARTYMANAGEMENT

SERVICE

PRODUCTIONCONTROL SERVICE

CASHMANAGEMENT

SERVICE

CASH AND THIRDPARTY MANAGEMENT

DIVISION

SECRETARIAT

SYNTHESISSTATEMENTS AND

ACCOUNTSVALIDATION

MANAGEMENTCHARTS AND

COST ACCOUNTINGSERVICE

TAX ANDACCOUNTS

AUDIT SERVICE

ACCOUNTSMANAGEMENT

DIVISION

FINANCEDEPARTMENT

FINANCE ANDADMINISTRATION

DIRECTORATE

Annex 2, Page 1 of 1

KINGDOM OF MOROCCOIMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

IMPLEMENTATION SCHEDULE

Annex 3, Page1 of 1

ROYAUME DU MAROCIMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

APPRAISAL REPORT

Provisional List of Goods and Services

In Dhs Million In UA Million COFINANCIERSCATEGORIESF.E. L.C. TTL F.E. L.C. TTL ADB AFSD ONDA

1. GOODS1.1 Electronic Equipment 85.61 7.44 93.05 6.06 0.53 6.58 6.06 0.531.2 Radars 118.68 10.32 129.00 8.40 0.73 9.13 8.40 0.731.3 CNCSA/Equipment/Commu. 123.19 10.71 133.90 8.71 0.76 9.47 8.71 0.761.4 Safety Equipment 13.33 1.16 14.49 0.94 0.08 1.02 0.94 0.081.5 Fire-Proof Vehicles 67.34 5.86 73.20 4.76 0.41 5.18 4.76 0.411.6 Vehicles 3.43 0.17 3.60 0.24 0.01 0.25 0.24 0.012. WORKS2.1 Terminal Works 312.20 133.80 446.00 22.08 9.46 31.55 22.08 9.462.2 Infrastructures 81.30 16.65 97.95 5.75 1.18 6.93 5.75 1.182.3 Runways 115.29 21.07 136.36 8.16 1.49 9.65 8.16 1.493. CONSULTANCY Services3.1 Geotechnics/Labo and Audit 3.77 0.46 4.23 0.27 0.03 0.30 0.27 0.034. OPERATING COSTS4.1 Staff 0.00 6.80 6.80 0.00 0.48 0.48 0.484.2 Operation 11.44 5.17 16.60 0.81 0.37 1.17 0.81 0.375. BASE COST 935.57 219.62 1155.19 66.18 15.54 81.72 44.10 22.08 15.54Provisions for Price Escalation andContingency Reserves forImplementation

257.26 44.25 231.23 13.23 3.07 16.36 8.61 4.62 3.13

TOTAL 1122.55 263.87 1386.42 79.41 18.67 98.07 52.70 26.70 18.67

Source ONDA-ADB

Annex 4, page1 of 2

KINGDOM OF MOROCCOIMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

ORGANIZATION CHART OF THE PROJECT

Basic Data: Trend of Operating Accounts and Balance Sheets 1995-1999 (In Thousand DHS)

ITEM 1995 1996 1997 1998 1999

Operating Income 635 957 564 436 770 847 904 756 977 614

Change of Goods Stocks 12 159 13 819

Total Income 635 957 564 436 770 847 916 916 991 433

Purchase of a Project for Resale 12 159 0

Total Purchases Used Up 62 017 74 931 62 882 71 110 93 375

Other External Expenses 116 828 83 889 98 642 110 365 120 916

Value Added 457 112 405 615 609 324 723 282 777 142

Taxes and Duties 15 245 30 643 50 601 50 775 54 969

Payroll Costs 219 794 235 599 249 750 261 176 293 497

Gross Operating Surplus 222 074 139 374 308 973 411 330 428 677

Other Operating Income 1 249 19 54 5

Other Operating Expenses 317 231 153 141 -259

Nonoperating Costs 414 200 425 293 462 027 505 726 562 498

Total Allocations 241 025 304 607 256 441 273 387 285 076

Total Operating Expenses 655 225 729 901 718 468 779 113 847 574

OPERATING INCOME -19 266 -165 216 52 399 137 856 143 865

Financial Income 7 165 4 733 4 968 5 710 3 518

Financial Charges 92 829 58 057 75 790 74 005 72 232

Reserves for Contingencies 20 029 1 029 15 909 -15 335 31 952

Financial Income -105 693 -54 353 -86 732 -52 959 -100 667

Current Results -124 960 -219 569 -34 333 84 897 43 198

Non-Current Income 90 528 413 356 94 296 -68 298 39 081

Non-Current Expenses 42 033 44 562 50 464 46 132 22 306

Non-Current Results 48 495 368 793 43 832 -114 430 16 774

NET INCOME FOR PERIOD -76 465 149 224 9 499 -29 534 59 972

Corporation Tax 4 271 3 725 42 912 16 448 5 410

NET INCOME -80 736 145 499 -33 413 -45 981 54 562

Annex 4, Page 2 of 2

KINGDOM OF MOROCCOIMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

Basic Data: Trend of ONDA’s Balance Sheets 1995-1999 (in Dhs Thousand)

ASSETS 1995 1996 1997 1998 1999

Gross Fixed Assets 1 853 201 3 019 707 3 220 009 3 378 396 3 672 317

Depreciation 521 869 1 342 677 1 598 660 1 781 368 2 041 568

Net Fixed Assets 1 331 332 1 677 030 1 621 349 1 597 028 1 630 749

Stocks 26 247 19 711 30 827 44 311 93 477

Claims 855 181 735 521 795 557 804 542 839 500

Cash Position 7 015 15 335 42 431 56 555 82 275

Total Assets 2 219 775 2 447 597 2 490 164 2 502 435 2 646 000

LIABILITIES

Balance Carried Forward -235 310 -316 046 -170 547 -203 912 -249 959

Allocation Fund 947 591 947 591 947 591 947 591

Net Income -80 736 145 499 -33 413 -45 981 54 562

Gross Subsidy 510 591 560 296 595 298 347 300 702 101

Subsidies Listed in CPC -174 309 -462 565 -509 860 -154 992 -475 324

NET SUBSIDY 336 282 97 731 85 438 192 308 226 776

Provisions for Liabilities and Charges 576 227 42 250 57 665 42 825 74 385

EQUITY CAPITAL 596 464 917 026 886 735 932 832 1 053 356

Long-term Liabilities 723 555 813 186 1 027 030 987 211 967 267

Current Liabilities 899 756 717 384 576 399 582 392 625 378

TOTAL LIABILITIES 2 219 775 2 447 597 2 490 164 2 502 435 2 646 000

Long-Term Working Capital -11 314 53 182 292 415 323 016 389 874

Operating Capital -18 329 37 848 249 984 266 461 307 599

Cash in Hand 7 015 15 335 42 431 56 555 82 275

Net Income / Equity -14% 16% -4% -5% 5%

Cash Flow/Investsments 32% 66% 102% 99% 117%

Financial Charges /GDS 41.8% 41.65% 24.52% 17.99% 16.85%

Value Added / Turnover 72% 72% 79% 80% 79%

Cash Flow / Turnover 14% 26% 25% 30% 33%

Gross Operating Surplus / Total Income 35% 25% 40% 45% 43%

Annex 5 Page 1 of 3

KINGDOM OF MORROCO

IMPROVEMENT AND EXTENSION OF AIRPORTCAPACITIES

Assumptions underlying financial and economic projections

I – PROJECTED FINANCIAL STATEMENTS

A - Traffic

The assumptions used about trend in the rates of traffic for the project in agreement with ONDA'smanagement are based on :

(i) the observed trend in traffic from 1995 to 1999 ;(ii) the results achieved and the prospects for the air transport sector published in 1999 which

was used in preparing the Five-Year Plan 1999-2003 ;(iii) the conclusions of the Master Plan for the Aerial Navigation Equipment disigned by the

Management of Airport Bases Directorate of the Moroccan Ministry of Transport andMerchant Navy :

(iv) the finding that Casablanca Airport is saturated and the requirement for extensioninvestments envisaged by the project ;

(v) the determination to make Casablanca the hub between the USA, Africa and the MiddleEast (more than 40% of RAM's traffic originating from the USA is already on transittowards other African destinations) ;

(vi) Morocco’s forthcoming access to the European airspace.

It has been agreed to use as working hypothesis the assumption of an average growth rate; in fact, itcorresponds to rates close to those established by IATA and the manufacturers. The growth rates in thiscase are :

Average Growth Rate HypothesisITEM 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Aircraft Movements 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 5.5% 5.5% 5.5% 5.5% 5.5%

Passengers Volume 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 5.5% 5.5% 5.5% 5.5% 5.5%

Cargo Load Tonnage 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Number of service units 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Tariff Assumptions

For the period covered by the projections, the assumptions about tariff revaluation rates take intoaccount recommendations made by the OACI Council which concern the relation direct connectionbetween the level of fees and the cost of services rendered, on the one hand, and the difference on thebasis of cost accounting between airport and airline navigation accounts. Thus:

-

Annex 5 Page 1 of 3

The variation in tariff setting was not taken into account at the level of airports operations due tosignificant growth rates of traffic (11% and 8% for movements and 8% for passengers), in order to avoiddistortion effects in the forecasts ;

- As for air navigation fees, the growth rate of 7% was retained to take into account theimprovement in control owing to the acquisitions of new radar;

- In general, as from 2001, the charges recovery rate will register a net improvement as itsmanagement will be entrusted to Eurocontrôle, a EU specialized company which operateson the entire European territory and has the means of coercion vis-à-vis bad payers.

Revenues

The operating income depends on one hand, on traffic and the level of tariffs with regard to the aeronauticcomponent, and on property and marketing charges, on the other. The latter are estimated on the basis ofairport receipts. A rate of 11% has been used for their determination for the period.

Expenses

Project outputs through the extension of Casablanca airport infrastructure and the acquisition of radar willhave a definite effect of increasing operating expenses (intermediate consumption and operatingexpenses). However, their growth will remain within proportions compatible with the level of activities.Thus :

- Intermediate consumption will grow at an annual rate of 12% from 2002 to 2005, thenstabilize at the rate of 7% annually with effect from the delivery of infrastructure andequipment in 2005. It is worth noting that intermediate consumption include energy, spareparts, various services, 15% of the road fees and 4% of the landing fees paid to the NationalMeteorological Department;

- Operating expenses 97% of which consists of payroll costs will register growth rates of12% and 14% during project implementation (gradual delivery of equipment andinfrastructure), then will stabilize at a 7% average annual growth rate;

- Financial and depreciation charges for each period computed on the basis of outstandingborrowings, including new borrowings from AFESD and ADB for the financing of thepresent project. The Bank lending terms are comprised of 7.5% interest rate and a 20 yearmaturity, including a 5-year grace period as from the date of signature of the loanagreement;

- Allowance for depreciation for each accounting period was computed on the basis of fixedassets existing in 1999, project capital investments and fixed assets acquired outside theproject, but budgeted for within the scope of ONDA's investment program for the period2000-2005.

The resulting income statements are provided in detail in Annex 6.

Annex 5 Page 3 of 3

II – THE PROJECT FINANCIAL RATE OF RETURN

The project internal financial rate of return is measured by ONDA's gross operating surplus (excludingfinancial charges and depreciation ) which corresponds to the difference between Gross Operating Surplus(GOS) in the cases of with and without the project :

The case of <without the project> is characterized by :

- Stagnation of intake air traffic at the Casablanca Airport with effect from 2002, owing to thesaturation of its handling capacity .

- Decline in activities in the other airports owing to the lack of, and sometime the obsolescence ofsafety and fire-control equipment ;

- Maintenance of CNCSA receipts at their current level, due to the intervention of Eurocontrol inthe claims management, but the fall in traffic to Morocco and over-flight traffic. ;

- Maintenance of minimum capital investment for maintenance and renewal of equipment andinfrastructure for the preservation of the existing capital goods;

The trend in the major key items of management (value added and gross operating surplus) is providedin Annex 6

III - ECONOMIC RATE OF RETURN

The analysis of the economic rate of return is based on taking into account the following elements :

- The economic cost of the project is computed by taking into consideration investments accountin connection with infrastructure financed by AFESD and CNCSA's radar equipment (52% ofthe project cost), security and safety equipment;

- Those of the second runway at Mohammed V airport (18% of the total project cost ). Thesecosts are increased to cover contingencies. These investments will be realized according to aschedule described in paragraphs 5.2 and 5.4.

- revenues linked to the project are those in connection with the approach, lighting, landing,parking, passageway, security , passengers and over-flight . The place of Mohammed V airportin the current Moroccan traffic distribution between airports in Morocco will be maintained,with notably 50% of the aircraft and passengers movements and 80% for freight ;

- maintenance expenses and major repairs in connection with infrastructure and equipment will betaken into account;

- supplementary operating expenses in connection with the strengthening of the work force atMohammed V and at the CNCSA together with the miscellaneous expenses such as theconsumption of electricity and telecommunications.

Annex 6 Page 1 of 3

KINGDOM OF MOROCCO

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

Provisional Income Formation Account 2000-2010

Table : Provisional Operating Accounts 2000-2010

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010PRODUCTION FOR THE PERIOD 1173713 1,284,873 1,394,845 1,515,015 1,625,651 1,743,277 1,871,045 2,008,393 2,156,055 2,314,824 2,485,558Sales of Goods and Services Produced 1173713 1,284,873 1,394,845 1,515,015 1,625,651 1,743,277 1,871,045 2,008,393 2,156,055 2,314,824 2,485,558CONSUMPTION FOR THE PERIOD 312773 247,960 277,909 310,222 351,077 400,457 431,043 464,032 499,614 537,995 579,397Purchase of Consumables and Supplies 170671 96,389 111,737 128,457 147,835 169,062 182,587 197,194 212,969 230,007 248,407Other External Expenses 142103 151,570 166,172 181,765 203,242 231,395 248,457 266,839 286,645 307,988 330,990VALUE ADDED (I+II+III) 860940 1,036,913 1,116,937 1,204,793 1,274,574 1,342,820 1,440,002 1,544,361 1,656,440 1,776,829 1,906,161Taxes and Levies 50612 52,130 53,694 55,305 59,176 63,319 67,751 72,494 77,568 82,998 88,808Payroll Costs 318556 340,715 384,987 422,136 483,092 527,208 590,473 631,806 694,987 743,636 818,000GROSS OPERATING SURPLUS (GOS) 493772 644,068 678,256 727,352 732,306 752,293 781,778 840,060 883,885 950,195 999,353Other Operating Expenses 0 0 0 0 0 0 0 0 0 0Operating Allowances 392245 336,874 338,798 358,548 398,160 438,160 478,160 518,160 558,160 547,352 527,997OPERATING INCOME (+or-) 101377 307,193 339,457 368,805 334,146 314,133 303,618 321,901 325,725 402,843 471,356FINANCIAL RESULTS -64421 -76,436 -70,396 -63,958 -57,824 -52,121 -46,695 -37,952 -29,223 -21,749 -15,170CURRENT INCOME 36956 230,757 269,062 304,847 276,322 262,012 256,923 283,948 296,502 381,094 456,186NON-CURRENT PROFIT (+or-) 45480 50,061 59,127 69,203 76,657 84,150 91,859 99,749 107,795 116,487 125,880Income Tax 11487 98,286 114,866 130,917 123,543 121,157 122,074 134,294 141,504 174,153 203,723NET INCOME 70939 182,531 213,323 243,132 229,436 225,005 226,708 249,404 262,793 323,428 378,343

Annex 6 Page 2 of 3

KINGDOM OF MOROCCO

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

Table : Budgeted Balance Sheets 2000-2010

ASSETS 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010FIXED ASSETS (GROSS) 4,773,160 5,334,453 5,734,453 6,134,453 6,534,453 6,934,453 7,434,453 7,934,453 8,434,453 8,934,453 9,434,453DEPRECIATION 2,359,856 2,696,730 3,035,529 3,394,076 3,792,236 4,230,396 4,708,556 5,226,716 5,784,876 6,332,228 6,860,225FIXED ASSETS (NET) 2,413,304 2,637,723 2,698,924 2,740,377 2,742,217 2,704,057 2,725,897 2,707,737 2,649,577 2,602,225 2,574,228STOCKS 195,513 195,513 195,513 195,513 195,513 195,513 195,514 195,515 195,516 195,517 195,518CLAIMS 677,177 541,616 588,172 639,072 685,876 735,585 846,640 908,869 975,778 1,047,728 1,125,108CASH IN HAND -61,946 242,069 522,474 852,394 1,131,442 1,312,026 740,495 859,413 1,045,009 1,319,890 1,658,311

TOTAL ASSETS 3,224,048 3,616,921 4,005,084 4,427,355 4,755,048 4,947,180 4,508,546 4,671,534 4,865,880 5,165,361 5,553,166LIABILITIES

F.ALLOWANCE FUND 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591 1,247,591BALANCE CARRIED FORWARD -198,771 -79,306 103,225 316,548 559,680 789,116 1,014,121 1,240,830 1,490,233 1,753,026 2,076,453NET INCOME 119,464 182,531 213,323 243,132 229,436 225,005 226,708 249,404 262,793 323,428 378,343EQUIPMENT SUBSIDY 767,791 840,398 920,734 1,009,632 1,105,384 1,208,539 1,319,691 1,439,481 1,568,605 1,707,819 1,857,939RECOVERY/SUBSIDIES -524,804 -578,865 -641,992 -715,195 -795,852 -884,002 -979,860 -1,083,610 -1,195,404 -1,315,891 -1,445,771

EQUIPMENT SUBSIDIES (net) 242,987 261,533 278,741 294,437 309,533 324,538 339,830 355,871 373,201 391,928 412,168PROVISIONS 75,781 75,781 75,781 75,781 75,781 75,781 75,781 75,781 75,781 75,781 75,781

EQUITY CAPITAL 1,487,053 1,688,130 1,918,662 2,177,489 2,422,021 2,662,032 2,904,032 3,169,476 3,449,599 3,791,754 4,190,336DEBT FINANCING 962,821 1,160,754 1,321,131 1,472,752 1,510,844 1,433,964 1,329,208 1,224,377 1,119,659 1,032,484 978,433SHORT-TERM LIABILITIES 774,174 768,036 765,290 777,115 822,183 851,186 275,306 277,680 296,622 341,123 384,397

TOTAL LIABILITIES 3,224,048 3,616,921 4,005,084 4,427,356 4,755,049 4,947,182 4,508,546 4,671,534 4,865,880 5,165,361 5,553,166WC 36,570 211,161 540,869 909,865 1,190,649 1,391,939 1,507,343 1,686,117 1,919,681 2,222,013 2,594,540WCR 98,516 -30,908 18,395 57,470 59,206 79,912 766,848 826,704 874,672 902,123 936,229

CASH IN HAND -61,945 242,069 522,474 852,395 1,131,443 1,312,027 740,495 859,413 1,045,009 1,319,890 1,658,311WCR VARIATION -257,395 -129,423 49,302 39,075 1,735 20,707 686,936 59,856 47,968 27,450 34,107

Annex 6 Page 3 of 3

KINGDOM OF MOROCCO

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

Provisional Income Formation Accounts

Table : Calculation of Some Financial Indicators

FINANCIAL INDICATORS 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010OPERATING RATIO 76.09% 75.66% 75.66% 79.45% 81.98% 83.77% 83.97% 84.89% 82.60% 81.04%COVERAGE RATIO : DEBT SERVICE 426.18% 460.10% 484.14% 514.15% 551.13% 491.84% 558.99% 624.91% 816.16% 1302.56%DEBT EQUITY RATIO 68.76% 68.86% 67.64% 62.38% 53.87% 45.77% 38.63% 32.46% 27.23% 23.35%LIQUIDITY RATIO 70.52% 76.86% 82.24% 83.42% 86.42% 307.53% 327.31% 328.96% 307.14% 292.69%FINANCIAL RETURN 10.81% 11.12% 11.17% 9.47% 8.45% 7.81% 7.87% 7.62% 8.53% 9.03%INVESTED CAPITAL RETURN 13.54% 14.77% 15.98% 14.98% 14.73% 14.51% 15.57% 16.36% 19.96% 23.20%RETURN ON EQUITY 19.44% 19.48% 19.64% 19.51% 19.36% 19.37% 19.46% 19.64% 19.89% 20.20%DEBT-TO-EQUITY RATIO 145.43% 145.23% 147.85% 160.31% 185.64% 218.48% 258.86% 308.09% 367.25% 428.27%FINANCING COST 6.45% 5.55% 4.72% 4.02% 3.42% 2.90% 2.26% 1.70% 1.26% 0.91%DEBT SERVICE 362.79% 384.21% 399.33% 429.87% 464.93% 417.24% 471.95% 527.34% 669.58% 1041.59%TIME LIMIT FOR PAYMENT OF THIRD-PARTIES

7 7 6 6 6 2 2 2 2 2

TIME LIMIT FOR RECOVERY OF CLAIMS 6 5 5 5 5 5 5 5 5 5

Profit + 182,531 213,323 243,132 229,436 225,005 226,708 249,404 262,793 323,428 378,343Operating Allowance (1) 336,874 338,798 358,548 398,160 438,160 478,160 518,160 558,160 547,352 527,997Non-Current Recoveries (2) 54,061 63,127 73,203 80,657 88,150 95,859 103,749 111,795 120,487 129,880INTERNAL CASH GENERATION 465,345 488,994 528,477 546,939 575,015 609,009 663,814 709,158 750,293 776,460SELF-FINANCING 465,345 488,994 528,477 546,939 575,015 609,009 663,814 709,158 750,293 776,460

Annex 7 Page 1 of 1

MOROCCOIMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

CALCULATION OF THE FINANCIAL INTERNAL RATE OF RETURN(In DHS Million)

2000 2003 2005 2010 2015 2020 2025Gross Operating Surplus with Project 0 444.675 463.195 635.479 827.359 959.136 1.111.901Gross Operating Surplus without Project 0 390.644 388.437 303.925 122.250 141.721 164.294Differential Gross Operating Surplus 0 54.030 74.758 331.554 705.109 817.414 947.607Investment with Project 0 515.922 70.000 70.000 70.000 70.000 70.000Investment without Project 0 134600 30000 30000 30000 30000 30000Differential Investment 0 381322 40000 40000 40000 40000 40000Net Financial Flow 0 -327.292 34.758 291.554 665.109 777.414 907.607

IRR 22.50%

CALCULATION OF THE ECONOMIC INTERNAL RATE OF RETURN(In DHS Million)

Designation 2000 2003 2005 2010 2015 2020 2025Value Added with Project 0 880560 988183 1342103 1409208 1479668 1553652Value Added without Project 0 812403 855771 908369 953788 1001477 1051551Differential Value Added 0 68157 132412 433734 433734 433734 433734Investments with Project 0 567514 77000 77000 77000 77000 77000Investments without Project 0 134600 30000 30000 30000 30000 30000Differential Investments 0 432914 47000 47000 47000 47000 47000Net Financial Flow 0 -364757 85412 386734 386734 386734 386734

ERR 23.37%

Sensitivity Test

Assumptions IRR Assumptions ERRIRR of Project 22.50% ERR of Project 26.43%GOS Less 10% 17.69% Fall of Value Added by 10% 18.16%Project Cost Increases by 10% 20.09% Project Cost Rises by 10% 23.37%

Annex 8 Page 1 of 3

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

ENVIRONMENTAL IMPACT

1. INTRODUCTION.

1.1 With regard to air transport, Morocco's airport assets consist of about 30 platforms. Currently,out of the 28 airports open to public air traffic, sixteen airports have an international dimension, twelveof which are purely for commercial purposes. These air bases are distributed throughout the country;nevertheless, all the airports with high density traffic that generate air pollution are located near bigurban areas and tourist cities.

1.2 The air transport sector is particularly a source of noise for the residents and of pollution of thefields around the airports during the forced release of fuel required for the safety of passengers andequipment owing to excess weight on landing. The sector is also energy –consuming and uses up aconsiderable share of energy. The annual air traffic gas pollution has been estimated at 25,000 tons ofnitrogen oxide, 10,000 tons of volatile organic compounds and 2 million of carbon dioxide.Nevertheless, it should be pointed out that the air pollution rate remains below the prescribed valuelimits as shown by the tests carried out by the laboratories.

1.3 The project for improvement and extension of the airport capacity has been classified by theADB in Category 2 from the environmental viewpoint. It consists of the following works:(i) construction of the departure terminal involving infrastructure works for preparation of the site;(ii) construction of the second principal runway and strengthening of the existing runway at MohamedV airport;(iii) procurement of air navigation aids equipment and(iv) small-scale civil engineering works involving the installation of support bases for future radar andlodges for maintenance and inspection of installations.

2. ENVIRONMENTAL PROTECTION IN MOROCCO

2.1 Within the scope of this project, environmental protection is governed by the fundamental lawon the protection of air quality n 2-97-377 of the 29 Ramadhan 1418 (28 January 1998) completingthe order of 8 Joumada I 1372 (24 January 1953) and its enforcement decrees. Two important draftbills were recently prepared in this area concerning (i) atmospheric pollution and (ii) the obligationto carry out preliminary impact studies for certain types of projects; the content of the studies to beconducted are specified. These draft bills are currently being considered by the Government'sGeneral Secretariat and their promulgation is scheduled for the year 2001. In addition to theseprovisions, several codes of good conduct have been prepared which cover the following areas inparticular : water, forestry, health, mining, navy etc… whose standards are based on internationalrecommendations. The current study on the deterioration of natural resources was written in 1995.

2.2 The implementation of development projects is governed by strict regulations to protectnatural, socio-economic and cultural environment against any form of degradation and deterioration.All the projects that may have an impact on environment are presented by the authorities concerned tothe National Environment Council (CNE), an interministerial structure, for consideration andcategorization which will determine the mitigating measures to adopt and the type of environmentalmonitoring to be done.

Annexe 8 Page 2 of 3

2.3 The environmental monitoring of development and public utilities projects is carried out byexpert-inspection officials from the Direction des Etudes de la Plannification et du Controle desTransports (DEPCT) in the Ministry of Transport and Marchant Navy, and by the technical services ofthe new Environment department (former Secretariat in charge of Environment).

3. ENVIRONMENTAL ISSUES IN AIRPORT PROJECTS

Where airport works are concerned, specific environmental measures are provided and governed byseveral texts. In accordance with this legislation, each air base of this project is currently subject of aspecific environmental study requested by the DEPCT.

4. IDENTIFICATION AND SYNTHESIS TEST OF POTENTIAL ENVIRONMENTALIMPACTS CONNECTED WITH AIRPORTS IN MOROCCO

Identification of potential impacts as a result of the project's implementation.4.1 The positive impacts that will be generated by the project are essentially economic and socio-cultural: (i) improvement of traffic fluidity; (ii) improvement of air navigation security; (iii)improvement of safety at terminals; (iv) improvement in passenger's comfort; (v) socio-economicbenefits due to jobs created at the start-up of works and at the completion of the project.

4.2 The expected negative impacts are: noise, road traffic, and risks of aircraft crash on residentialareas.

Identification of impacts during the execution of works- The execution of works will only generate some negative impacts entailing few significant

risks ; in fact, the works will be carried out within the flight altitude of the bases concerned andthe open works will only take six months. Nevertheless, more specifically, the followingelements are worth pointing out :

- Slight noise pollution generated at the second principal runway; however, the study carried outon the propagation of noise made is this connection show that the nearest locations (Berrachidand Adarwa) are far from the service and will not suffer from this pollution;

- Slight increase of atmospheric pollution (discharge of gas by the works machinery and theaircraft, dust);

- No risk of interference with hydraulic systems and the ecology of humid areas near theairport during and after the works;No risk of erosion of ancillary areas on which there is grass and plants ; besides, drainageinstallations function perfectly and are designed for pluviometry of 10mm for 24 hours;

- Some risks of pollution of the groundwater table due to works (discharge of used oils and fuel;runoff on building materials) although the water is collected and directed to a controlled hollowwithin the airport; these risks are taken into account by the works contractors;

- Little possibility of health risk for human beings and animals through the inhalation of gas inview of their expected low level;

- Very low risk of various pollution owing to the installation of living quarters on the sites ;- local degradation of soil over nearly 1 ha by surface compaction and contamination at the

storage and handling areas of construction materials ;

Annex 8, Page 3 of 3

- some displacement of infrastructures (electrical or telephone distributions, water and gassystems etc…) within the airport premises;

- very low seismic risks induced by the vibrations caused by the aircraft (taken into account);- no socio-cultural impact through the destruction of religious or archeological sites;

potential esthetic impacts owing to the opening and the operation of quarries, structures to beerected were designed to fit in with the existing landscape ;

- no expropriation and compensation are to be taken into consideration given that the works willbe carried out within the limits of ONDA's property.

The works phase of the project will also generate positive socio-economic impacts given that theexecution of the works will create a total of 550 jobs.

Identification of negative impacts during the operating phase of the structures erected4.4 During the operational phase, the negative impacts identified will be directly linked to: (i) theincrease in air traffic and on the approach roads creating atmospheric pollution and noise; (ii)management quality; (iii) the quality of maintenance and upkeep of installations.

Organization and nature of the mitigating measures recommended4.5 As part of the management of the works, the nature of mitigating measures to be taken tocompensate for the negative impacts are contained in the specifications for contractors. Theverification of their implementation will be done by the Project coordination and monitoring unit aswell as by the experts form DEPCT and DNE together with the project's management. This unit willbe provided with adequate technical and financial means to conduct the inspection of the works andcheck their conformity with the specifications.(i) the living quarters and the works will comprise the health facilities provided by labor law; the

workers will have the required protection equipment;(ii) the used lubricants and oil products will be recovered and recycled; the machinery will be

equipped with anti-pollution devices provided by the manufacturer;

(iii) deposits of construction materials will be located in distant and protected areas; if required, thebasement will be protected against any eventual infiltration; they will also be protected fromthe erosive action of the wind; on completion of the works, the soils will be put back in theirinitial state;iv - the works will be planned in such a way as to disrupt , as little as possible, the economy ofthe impact area; the works will be lighted night and day; the traffic will be regulated;

iv) at the completion of the second main runway, grass will be planted around the runways;vi) in the event of accidental pollution of water or soils, chemical and bacteriological tests will be

organized in collaboration with the Ministry of Health;vii) liquid and solid wastes from the works will be stored and recycled or directed to the cleaning

station of the Mohamed V airport in accordance with the law;viii) regional seismicity has been taken into account during the design of the airport.

5. CONCLUSION.

In view of the environmental policy of the Kingdom of Morocco and the existing legislation,the project for the improvement and extension of the airport capacity will not have any particularimpact that would compromise the country's natural resources or disturb the residents. On thecontrary, it will benefit from the socio-economic spillovers which are highly positive.

ANNEX 9

LIST OF ANNEXES IN IMPLEMENTATION DOCUMENTS

No. of ANNEXNo. of Pages

1. Organizational Chart of ONDA 12. ONDA’s Development Plan (1999-2000) 23. List of items 44. Requirements in telecommunication and advanced antennae 15. Estimated budget for specialized links 16. Detailed costs of items by site 27. Detailed costs by component 58. Detailed costs by Component E : services 19. Trend of aeronautical activities in major airports 110. Overall traffic trends and data 111. Data on Income statements by airport 312. Financial data of ONDA 313. Financial projection assumptions 514. Provisional income formation accounts 315. Calculation of the financial internal rate of return 1916. List of people met 117. List of documents consulted and/or reported 118. Detailed list of ONDA’s claims 1

Annex 10Page 1 of 2

IMPROVEMENT AND EXTENSION OF AIRPORT CAPACITY

BANK GROUP OPERATIONS IN MOROCCO AS AT 31/12/2000

GROSS COMMITMENTSP R O J E C T APPROV.DATE

SIGNAT. ENTRYINTO

FORCE

COMPLE-TION

ADBADF TAF TOTAL CANC.

*

NETCOMM.

DISBURS. %DISB.

STATUS

1. AGRICULTUREWidening of the DOUKKALACanal

13/09/74 05/12/74 30/09/75 30/09/79 4.00 4.00 2.73 1.27 1.27 100.0 Completed. PCR notrequired

SIDI DRISS Dam 27/06/78 29/11/78 31/12/79 31/12/83 5.00 5.00 5.00 5.00 100.0 Completed. PCR notrequired

Gharb Irrigation Tranche II 29/05/79 01/10/79 20/02/92 30/06/94 8.00 8.00 0.00 8.00 7.99 99.9 Completed. PCR notrequired

Agricultural Line of Credit 16/03/82 07/10/82 30/06/83 30/06/86 10.00 10.00 10.00 10.00 100.0 Completed. PCRdone

Agricultural Line of Credit (II) 23/08/83 22/03/84 31/12/84 31/12/88 30.00 30.00 30.00 30.00 100.0 Completed. PCRdone

Rehab. of the AgriculturalSector

24/10/85 18/11/85 30/09/86 30/09/90 45.00 45.00 45.00 45.00 100.0 Completed. PCRdone

SETTAT Province IntegratedRural Development

12/03/85 23/12/85 30/06/85 31/12/97 41.63 41.63 32.94 8.69 8.69 100.0 Completed. PCR notdone

Agricultural Line of Credit (III) 17/06/86 25/06/86 30/06/87 30/06/94 62.40 62.40 62.40 62.40 100.0 Completed. PCRdone

LOUKKOS DRMVAL 26/10/87 10/03/88 31/12/88 30/06/99 21.60 21.60 21.60 20.98 97.1 Completed. PCR notdone.

Agricultural Sector AdjustmentProgramme

14/12/87 10/03/88 10/03/88 30/06/94 117.00 117.00 117.00 117.00 100.0 Completed. PCRdone

IV Line of Credit to the CNCA 16/10/89 22/02/90 01/07/90 30/06/94 56.16 56.16 56.16 56.16 100.0 Completed. PCRdone

Eastern Pastoral Development 14/05/90 31/10/90 23/05/91 31/12/00 5.46 15.47 20.93 2.37 18.56 9.83 53.0 In progressNatural Resource ConservationProgramme

14/05/90 30/11/90 06/06/91 31/12/99 8.33 3.79 2.44 14.57 5.17 9.39 8.74 93.1 Completed. PCRdone

Doukkala Irrigation Project 29/10/91 05/03/92 21/10/93 12/31/00 130.00 130.00 54.63 75.37 75.37 100.0 Completed, PCR notdone

GHARB Studies (TAF) 31/08/93 19/11/93 10/11/95 31/12/99 2.44 2.44 2.44 1.34 55.0 Completed. PCR notrequired

Total 544.58 19.26 4.88 568.73 97.84 470.88 459.77 97.62. TRANSPORTSecondary/Tertiary Roads 11/12/85 23/12/85 31/12/87 31/12/94 49.00 49.00 0.17 48.83 48.83 100.0 Completed. PCR

doneTransport Sector Programme 25/11/87 10/03/88 30/03/88 31/12/98 94.00 94.00 94.00 94.00 100.0 Completed. PCR

doneSecond Road Project 11/06/90 05/12/90 31/12/92 31/12/97 25.75 25.75 4.14 21.61 21.61 100.0 Completed. PCR

doneAirport Rehabilitation Project 14/12/92 06/06/93 31/12/95 08/31/01 70.00 70.00 19.24 50.76 34.01 67.0 In progressThird Road Project 15/12/94 19/05/95 10/11/95 31/12/00 60.00 60.00 22.00 38.00 22.59 59.5 In progressRail Rehabilitation 12/16/98 08/03/99 8/30/99 12/31/02 59.06 59.06 59.06 0.00 0.0 In progress

Total 357.81 0.00 0.00 357.81 45.55 312.26 221.05 70.83. PUBLIC UTILITIESElectricity I 20/03/70 28/07/70 31/12/71 30/06/72 2.80 2.80 2.80 2.80 100.0 Completed. PCR not

requiredElectricity II 24/01/73 30/07/73 30/06/74 31/12/76 3.00 3.00 3.00 3.00 100.0 Completed. PCR not

requiredElectricity III 20/12/76 18/02/77 31/12/77 31/12/80 5.00 5.00 5.00 5.00 100.0 Completed. PCR not

requiredMARAKECH Water Supply 08/06/78 29/11/78 31/12/79 31/12/83 5.00 5.00 0.71 4.29 4.29 100.0 Completed. PCR not

requiredElectricity IV 27/11/79 05/02/80 31/12/80 31/12/84 7.60 7.60 7.60 7.60 100.0 Completed. PCR not

requiredElectricity V 27/10/81 18/03/83 06/12/83 30/12/86 10.00 10.00 10.00 10.00 100.0 Completed. PCR not

requiredTANGIERS Drinking WaterSupply

13/06/84 09/05/85 31/12/85 30/06/88 10.70 10.70 3.87 6.83 6.83 100.0 Completed. PCRdone

Micro-Electric Station Study 18/06/86 14/01/87 16/01/88 30/06/94 0.00 0.79 0.79 0.79 0.79 100.0 Completed. PCRdone

TANGIERS DWS (Charf ElAkab)

18/08/87 10/03/88 31/12/88 31/12/96 7.95 7.95 1.37 6.58 6.58 100.0 Completed, PCRdone

MATMATA Hydro-ElectricProject

18/10/88 07/02/89 31/12/89 31/12/96 51.00 51.00 1.91 49.09 49.09 100.0 Completed, PCRdone

Electrification VII 23/03/89 28/04/89 31/12/89 31/12/94 39.00 39.00 1.05 37.95 37.95 100.0 Completed. PCRdone

Electricity NetworkRehabilitation Project

14/10/97 28/05/98 13/04/99 31/12/01 20.48 20.48 20.48 0.00 0.0 Cancelled

El Hachef Dam 21/05/91 29/11/91 07/09/92 31/12/97 44.00 44.00 21.95 22.05 22.05 100.0 Completed. PCRdone

Fifth Driking Water Project(RADEEF)

23/03/92 13/05/92 31/12/92 31/12/00 4.20 4.20 1.30 2.90 2.44 84.2 In progress

Fifth Drinking Water Project(ONEP)

23/03/92 13/05/92 31/12/92 31/12/00 55.80 55.80 6.00 49.80 47.57 95.5 In progress

Telecommunications 14/12/93 06/06/94 04/11/94 31/12/97 42.75 42.75 29.16 13.59 13.59 100.0 Completed. PCR not

Annex 10Page 2 of 2

GROSS COMMITMENTSP R O J E C T APPROV.DATE

SIGNAT. ENTRYINTO

FORCE

COMPLE-TION

ADBADF TAF TOTAL CANC.

*

NETCOMM.

DISBURS. %DISB.

STATUS

Development Project doneSixth Drinking Water Project 26/05/94 20/07/94 03/02/95 31/12/00 30.00 30.00 10.00 20.00 14.68 73.4 In progressTelecommunication SectorAdjustment

08/12/98 10/05/99 27/05/99 31/12/02 79.18 79.18 79.18 69.50 87.8 In progress

Sanitation and Drinking WaterSupply

09/06/99 12/13/1999 12/29/00 12/31/03 19.60 19.60 3.62 15.97 0.00 0.0 In progress

Total 0.00 0.79 438.84 80.95 357.90 303.77 84.94. INDUSTRY AND BANKSLine of Credit I 08/05/74 25/06/74 01/07/75 30/06/77 4.00 4.00 0.09 3.91 3.91 99.9 Completed. PCR not

requiredLine of Credit II 16/07/76 03/08/76 01/01/78 30/06/79 3.00 3.00 0.15 2.85 2.85 100.0 Completed. PCR not

requiredLine of Credit III 21/11/78 29/11/78 30/06/80 31/12/82 5.00 5.00 5.00 5.00 100.0 Completed. PCR not

requiredLine of Credit IV 24/11/81 16/02/82 31/12/90 30/06/94 11.30 11.30 1.70 9.60 9.60 100.0 Completed. PCR not

requiredLine of Credit V 24/09/86 18/12/86 31/12/87 31/12/96 50.00 50.00 50.00 50.00 100.0 Completed. PCR

doneLines of Credit to 4 Banks 29/10/91 05/03/92 30/06/92 31/12/96 90.00 90.00 33.75 56.25 56.25 100.0 Completed. PCR

doneMining Plan Study (TAF) 23/06/93 19/11/93 31/12/95 30/03/00 0.00 1.66 1.66 1.66 1.28 77.1 Completed. PCR not

requiredSixth Line of Credit to BNDE 06/05/93 13/05/93 30/06/97 30/06/98 70.00 70.00 26.59 43.41 43.41 100.0 Completed. PCR

doneTotal 233.30 0.00 1.66 234.96 62.28 172.68 172.30 99.8

5. SOCIALIntensification of VocationalEducation

11/12/85 23/12/85 31/12/87 31/12/97 25.50 9.21 34.71 7.83 26.88 25.45 94.7 Completed. PCRdone

Reform of the EducationSystem

27/11/86 4/01/87 31/12/87 30/06/94 60.00 60.00 60.00 60.00 100.0 Completed. PCRdone

Basic Education 23/03/89 11/08/89 30/06/90 30/06/97 31.00 31.00 4.08 26.92 26.91 100.0 Completed. PCR notdone

Education in the Rural Area 29/10/90 08/05/91 31/01/92 31/12/98 37.00 37.00 23.00 14.00 12.55 89.6 Completed. PCR notdone

Strengthening of Health care in10 Rural Provinces

28/08/92 25/01/93 02/08/93 12/31/01 18.50 18.42 36.92 36.92 12.23 33.1 In progress

Education (V) 24/11/93 13/03/95 31/12/99 12/31/01 30.00 10.13 40.13 12.87 27.26 1.36 5.0 In progressSupport for the Generalizationof Quality Education

11/30/00 - - 54.54 54.54 54.54 0.00 0.0 Not yet signed

Development of Technical andScientific Education

11/30/00 - - 25.33 25.33 25.33 0.00 0.0 Not yet signed

Total 202.00 37.76 0.00 239.76 47.78 191.98 138.50 72.16. MULTISECTORS.A.P 22/08/89 11/09/89 31/12/89 30/06/94 100.00 100.00 100.00 100.00 100.0 Completed. PCR

doneFinancial Sector AdjustmentProgramme

27/01/92 05/03/92 11/09/92 31/12/93 75.00 75.00 75.00 75.00 100.0 Completed. PCRdone

Consolidation of the StructuralAdjustment Programme

31/08/93 23/09/93 31/12/94 31/12/94 100.00 100.00 100.00 99.99 100.0 Completed. PCRdone

Financial Sector AdjustmentProgramme (II)

22/11/95 30/11/95 31/12/98 31/12/98 150.00 150.00 150.00 150.00 100.0 Completed. PCRdone

Savings InstitutionDevelopment Programme

19/11/97 28/05/98 10/06/98 31/12/00 130.05 130.05 130.05 128.92 99.1 Completed. PCR notdone

Economic and Social ReformProgramme

08/12/98 10/05/99 16/07/99 31/12/01 148.46 148.46 148.46 82.71 55.7 In progress

Total 703.50 0.00 0.00 703.50 0.00 703.50 636.62 90.5

GRAND TOTAL 2041.19 57.02 7.33 2543.60 334.40 2209.20 1932.00 76.0GRAND TOTAL NET OF CANCELLATIONS 2209.20 1932.00 87.5