Tight curbs on spending trim activity

14 June 1996

AS the government seeks to rein in spending to reduce the budget deficit, capital expenditure is being cut. The 1996/97 budget calls for a 9 per cent reduction in investment spending, to MD 15,129 million, including loans from the World Bank and the African Development Bank.

The need to balance the budget is a paramount aim of financial policy, but the need for more infrastructure is equally urgent. Towns and villages have outgrown their water and sewerage systems and companies need access to more electricity and better communications if they are to compete in the new European free trade area.

The government wants the private sector to fill the holes left by its own inability to fund infrastructure projects. The first private power project, at Jorf Lasfar, was initialed in April. The government is also in the process of negotiating a deal to transfer the management of water and electricity in Rabat to France's Lyonnaise des Eaux, and more schemes are planned.

Power. The obvious candidate for private projects, this sector will receive less and less money for generation projects. Power utility Office National de l'Electricite (ONE) wants to halve its own production of electricity and treble the amount it buys from other sources by the year 2000. The first build-operate-transfer (BOT) project has already been signed, with the Zurich-based ABB Asea Brown Boveri and the US' CMS Energy Corporation, and construction of two additional 330-MW units is to start at the end of this year. Tenders for a 300-650MW combined-cycle power station in Mohammedia are to be issued soon afterwards, to be followed by a 300-500-MW combined-cycle plant at Kenitra. Next in line for signature is a 50-MW wind power station in Tetouane, to be financed by Electricite de France and other private investors.

ONE will concentrate on bringing electricity to rural areas under a programme to spend an average of MD 1,000 million a year until 2010. This will start with MD 700 million of spending in 1996, rising to MD 1,500 million next year. The only generation project ONE will finance is a hydropower plant at the Al-Wahda dam. In the longer term, research being carried out be Israel's Pama may lead to the construction of a large oil shalefired power plant at Tarfaya.

Telecommunications. The 1996 investment budget provides for MD 4,300 million to expand and modernise the network. The programme calls for 250,000 switching units to extend the automation system to more than 300 towns. It also includes expanding the global standard for mobiles (GSM) network to remote provinces and raising the number of subscribers by 30 per cent to 1.3 million.

Motorways. Construction of the Rabat-Fez and Larache-Tangier motorways has been progressing at a steady pace. Two sections are still outstanding from each of the two projects before they can be completed. Section lB of the Rabat-Fez road and a 27-kilometre section of the Larache-Tangier road are to be awarded before the summer holidays. Other plans call for a motorway between Rabat and Larache. According to the 1996/97 budget, the government is to spend MD 1,900 million on roads and motorways this year.

Industrial estates. The government wants to find international companies to develop and operate industrial estates in Jorf Lasfar, Nouaceur and Tangier. An estimated total investment of $200 million will be needed to provide infrastructure and build warehouses. Bids have recently been invited for the Jorf Lasfar and Nouaceur projects, and Spain's Sociedad Estatal de Promocion & Equipamientode Suelo and the local Caisse de Developpement & de Gestion have expressed an interest in the Tangier scheme

Water & wastewater. The World Bank and other international institutions are financing most of a programme to carry out urgent modernisation and expansion work in most of the large cities and in rural areas. Spending under the programme will exceed $1,000 million.

Contractors have recently been invited to bid for the rehabilitation of the water supply system in Marrakech and equipment for 20,000 new water connections in greater Casablanca. More contracts will be bid this summer in Kenitra. In addition to these projects, which are tendered by the regional water management companies, national utility Office National de l'Eau Potable buys large amounts of equipment for rural projects and other cities. Projects in the planning stage include a $75 million wastewater scheme in Fez, which is to be awarded in 1997, and a water distribution masterplan for Tangier.

Irrigation. With half the population dependent on agriculture and production largely relying on erratic rainfall, the extension of irrigated areas is of paramount importance. The largest project is the $700 million Abda Doukkala scheme, which is to irrigate more than 100,000 hectares in total.

Contract awards under the $150 million second phase will start in the second half of this year, starting with an overground canal.

Fishing. Under the new fisheries agreement with the EU, a large part of the fishing and unloading operations previously carried out by the Spanish fishing industry will from now revert to Moroccan trawlers and local ports. A MD 1,300 million programme to upgrade the fishing fleet is to be financed mainly by the private sector, with incentives provided by the government. The aim is to replace 400 fishing boats over the next four years. The government has pledged to modernise the existing fishing ports of Agadir, Tan-Tan, Sidi-Ifni, Tarfaya and Laayoune, all in the south, and to build a new port at Dakhla in the disputed Western Sahara.

Housing. The programme to build 200,000 social housing units, launched by King Hassan in early 1995, continues to suffer from delays. Analysts blame the lack of finance. So far, work has started on 37,500 units. The largest private project is a 11,000-unit scheme in Casablanca, largely funded by the local Bedaya Finance Corporation. The company is still waiting for approval to build a further 9,000 apartments elsewhere. The largest construction contract was clinched by France's Bouygues, for 20,000 apartments in Sale.

Railways. The 1996/97 budget shows MD 550 million is to be invested in railways during the financial year, with additional funds to come from loans. The only significant project planned at the moment is the modernisation of the line from Kenitra to Sidi Kassem. Discussion of two large-scale projects - the fixed link to Spain and the Casablanca underground-has recently been revived. The idea of a bridge across the Strait of Gibraltar has now been discarded in favour of a tunnel. Most of the funding is to come from the private sector, modelled on the Channel Tunnel concession concept, but the two governments plan to approach the EU for funding of the first phase later this year. The project would cost more than $10,000 million.

The lack of finance has long delayed the Casablanca metro project, estimated to cost MD 3,000 million. Renewed discussions started earlier this year with Bouygues, after France's President Chirac said that Paris might help with finance for the scheme.

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