Stakeholder Analysis on Moroccan Cereal Reform

1. Stakeholder Analysis on Moroccan Cereal Reform Nabil Chaherli (MNSRE) & Jennie Litvack (MNSED)

2. Outline • Need for the analysis, • Implementation of the analysis • Findings • Utility of the findings • Overall lessons

3. Pilot Summary • In anticipation of the CAS discussions, country team and PRMPS jointly proposed to examine cereal reform possibilities using a formal model of stakeholder analysis. • Consultants provided analysis of the interaction between stakeholders, how their positions may change as a result, and what reform measures are most likely to be agreed to given all the players’ positions and change across rounds of negotiations and trade-offs. • The analysis is expected to indicate for the country team the stakeholders, their interests, strength and acceptable options on cereals reform. • Work should help provide the basis for a systematic strategic vision within the CAS. The findings should also allow for better project-level design and implementation.

4. Goals of Stakeholder Analysis • Locate potential gainers and losers of the reform and their respective positions, strengths and likelihood of compromise. • Identify implementation challenges of compromise options and how supportive coalitions can be structured and maintained. • Create optimal reform policies, in particular in relation to policies pursued in other sub sectors in agriculture and within the general macroeconomic context.

5. Cereal Reform Issue Framing Issues & Critical Path Timing Structural Market Reforms • Abolish wheat flour subsidy • Marketing of wheat • Tariff Reduction WB Policy Initiatives Cereal Reform CompensationMechanisms • Direct Income Support • Investment Subsidies May 04 Summer 04 Long CAS

6. Abolish the FNBT (Wheat Flour) Issue Range of Policy Options 25 50 75 90 0 100 Abolish Status Keep some Reduce FNTBT to 50 Dh/b Subsidies Reduce FNBT to 100 Dh/b Subsidies Reduce FNBT to 75 Dh/b Subsidies the entire Quo segments of FNBT the FNBT (the southern provinces and the army) • The FNBT consumer compensation has many problems, including the fact that it is inadequately targeted, causes distortions and fraud, has an excessive net financial cost and constitutes a highly administered but poorly controlled system. • It is currently as high as 143.38 Dirham/quintal outside the southern provinces and reaches 38.38 Dirham/quintal in the southern provinces.

7. Marketing Range of Policy Options 0 5 40 60 65 75 80 100 Begin Status Introduce a Begin process Restructure Continue study of Quo standard cereals of developing or “divest” development SCAMs marketing contract a private SCAMs of a private and a dispute industry body industry body resolution procedure and decide Develop a market future oriented cereals of ONICL storage and Develop financial finance system instruments, e.g. forward contracting instrument or price risk insurance scheme • The FNBT compensation system brings Government agencies into pricing and procurement decisions causing the market to be static with no competition or risk management mechanisms. • ONICL is the wheat marketing board • Government subsidizes storage at the rate of 2 Dirham per quintal and transportation fees at the rate of 6.63 to 8.04 dirham per quintal. • The marketing scale includes various reform elements, from the easiest to implement on the short term to the more difficult structural reforms.

8. Tariff System Range of Policy Options Low 0 to 20 % Reduction implemented over 5-7 Years Medium 20 to 35% Reduction implemented over 10-15 Years Medium Reduction implemented over 2-3 Years Large 35 to 50% Reduction implemented over 5-7 Years 12 25 38 75 63 88 0 50 100 Low Reduction implemented over 2-3 Years Medium Reduction implemented over 5-7 Years Large Reduction implemented over 10-15 Years Low Reduction implemented over 10-15 Years Large Reduction implemented over 2-3 Years • Currently all imported cereals entering the market are aligned on the guaranteed procurement price of soft wheat purchased for the FNBT system. These tariffs have an amplifying effect of world price fluctuations. • The current tariff level on soft wheat is 55% for prices (C&F) below 1000 Dirham/ton and 2.5% for prices (C&F) above 1000 Dirham/ton. •   The issue scale is based on two dimensions, the level of tariff reduction, and the implementation time. The scale is divided into three reduction levels (Low for 0-20%, Medium for 20-35% and Large for 35% and above) then subdivided into three implementation periods (10-15, 5-7, and 3-2 years).

9. Selective and Broad - based region - specific income support, income income support, support, extended extended once (5+5 years) once (5+5 years) Income Support Range of Policy Options 32.5 80 0 20 45 60 100 None Selective and Broad - based Broad - based Selective and region - specific income support, income support, region - specific income limited time extended period income support, support, of time provided once (5 years period) extended over (15 years) time (15 years) • In order to make reform as income neutral for farmers as possible, an income support program is being advocated: 400 dh/ha with min of 1200 dh/exploitation and max of 4000 dh/exploitation • It is of limited duration, delinked from current farmer production decisions, with minimum and maximum levels, sensitive to time and areas of drought, based on the area historically sown to cereals in a reference year, and on a register of eligible farmers. •  The issue scale combines scope of income support and the duration of the support provided. It can be region-specific or broad-based, and can be limited to a 5 year period or renewed once or twice (that is 10 or 15 years total).

10. Agricultural Investment Subsidies Range of Policy Options 0 100 10 30 60 80 Subsidies for Small Farmers to motivate diversification Targeted Subsidies to motivate diversification Subsidies to all Farmers motivating diversification None Subsidies go to small farmers on cereals only Subsidies for all Farmers on cereals only • Agricultural investment subsidies include a wide range of options from financial facilities to seedling, fertilizers, machines, technology, etc. that focus on support services. •  The issue continuum combines two dimensions, the range of eligible farmers (whether small farmers are targeted or not), and the type of subsidies (whether they are aimed at motivating diversification or not). • The lower end of the scale advantages small farmers that do not have diversification capacity while the upper end of the scale is beneficial to large farmers with diversification potential.

11. Current Supporters & Opponents of Reform Pro, Neutral or Anti on the Issues

12. Summary of Results • Current Outcome indicates the results of the anticipated stakeholder dynamics on the issue given model results and analysis. • Opportunity for Reform indicates changes in approach and strategies to overcome implementation challenges given model results and analysis.

13. Detailed Case Analysis Cereal Tariff Reduction

14. Tariff Reductions Strengths, Weaknesses, Opportunities & Threats • Strengths: Support from key domestic stakeholders for a 30% reduction phased in over 5 to 7 years is likely to be maintained. As a result, USFP (major political party--socialist) will also warm up to the idea of moderate reductions. • Weaknesses: Most of civil society and Agriculture stakeholder, farmers, cereal producers, regions, as well as the syndicates will vehemently oppose any tariff reductions. • Opportunities: Few opportunities exist given the current reform landscape without a significant change in approach by the Bank.  • Threats: The Min of Ag’s compromise position of moderate (30%) reductions phase in over a long period of time (10-15 years) is politically untenable as the vast majority of cereal producers, farmers, intermediaries & collectors can force the Ministry to advocate minor reductions, thus losing implementation support for reductions in general.

15. Tariff Current Course Outcome Description • A large coalition, comprised of the Palace, PM, Minister of Commerce, Min of Economics and the High Commissioner for Planning support up to a 30% reduction phased in over 5 to 7 years to ease political adjustments. • However, such a reduction would significantly reduce revenue for the Ministry of Finance and the Min of Interior which only advocates small reductions phased in over a 10-15 year period. The rest of civil society, political parties and the agriculture producers will strongly oppose any significant tariff reduction phased in quickly. • Both APM & ONICL will likely exert pressure on both domestic & international groups to help implement some reductions. APM will approach both Spain & Italy to allow some adjustments on tariffs while ONICL will focus it’s efforts on garnering support from the main political parties, such as USFP. • However, pressure from the agricultural ministry will lessen ONICL’s demands for tariff reductions.

16. Tariff Reduction Strategy Summary • Both the Bank and the IMF can initially advocate large reductions quickly. • This gives leverage to both ONICL & Director of Econ in the Min of Ag to make a Moroccan based domestic compromise position of medium reductions over 5 to 7 years quite palatable to several opponents of tariff reductions. • Both the Bank & the IMF need to continue to advocate high reductions quickly to make ONICL’s compromise position more attractive than the Bank’s alternative of drastic & fast changes. •  This gives ONICL leverage to broker all opponents to accept at least moderate 30% reductions. • Even with this change in approach, analysis suggests that there will still be divisions on how fast to implement the reforms.

17. Utility of the general findings • (+) Need to change our partnership strategy! • (+) Reform is more/less difficult than we thought depending on the issue! • (-) Some specific results did not make sense! • (-) Pool of experts too limited! • (-) Potential courses of action unclear

18. Overall lessons • Stakeholder analysis should come at early stage; • Enlarge the circle of champions beyond line ministry (focus on Ag Ministry= big mistake); • Get to understand the dynamic rather than the static reform process; • Pro-reformers use the “radical” Bank position to help craft a compromise; • Better to train Bank staff to conduct the analysis rather than having consultants carry the task (skill mix and relation with client) .