Critical Structural and Policy Issues

The establishment of the Ministère délégué chargé des Eaux et Forêt in 1998 was a necessary, but not sufficient, condition for government to demonstrate an increased priority for forestry in Morocco. Almost immediately, a contradiction presents itself with respect to a budget (general and special) that is totally inadequate for managing Morocco's forests. [It is noteworthy that, even as a department under the agriculture ministry, Eaux et Forêt budgets for a three year period about ten years ago were larger than they are now.]

Many aspects of Morocco's natural resource and social policies and structures are intimately intertwined - some in ways that are increasingly threatening those resources. For instance, rural populations have legal free access to local forest land resources and the products and revenues they yield - remarkably, at the cost of the rest of the country's tax payers. Such "open access" actually stimulates the massive destruction of the Moroccan landscape that users activities cause. With Ministry budget requirements 4 to 5 times higher that what government provides, it is unrealistic to expect this situation to improve - let alone reverse.

As forest degradation and, therefore, management costs continue to rise, efficiencies in forest management and greater cost recovery (user fees, etc.) are becoming increasing unreachable targets. Though financial self sufficiency may have been possible when populations where lower, demographic pressures have long ago removed such options.

The point at which all have now arrived in forest sector financing is to bring about a proportionately more equitable distribution of associated cost and benefits - which unavoidably means a dramatic increase in users fees and taxes as well. Adequate and secure financing is imperative to return the forest sector to more sustainable activities - for the benefit of the country as a whole as well as for the more immediate forest resource users.

As will be demonstrated elsewhere below, current resource use patterns in Morocco's forests are undeniably unsustainable. Therefore, inescapably, and by definition, its management must be subsidised by funds obtained from outside of the forest sector. This is not, of itself, a negative circumstance and, because of the many conservation and environmental services forests provide, is seen in many advanced forestry constituencies as well. In Morocco's case, however, the level of unsustainability of current resource use patterns verges on the irreversible in many instances and should be of grave concern.

The Ministry, as manager of the state's forest resources, would normally be expected to assume an appropriate fiscal responsibility towards managing these resources, including an obligation to optimise resource use and revenues. This means that the Ministry should promote mechanisms (governance and markets) that ensure that, amongst other things:

roundwood and other products are sold at competitive market prices

products are harvesting to maximise volume recovery (yield)

transformation (manufacturing) facilities maximise raw material utilisation and end product value-added.

The Ministry must also ensure the creation and maintenance of a commercial and resource environment conducive to forest sector stability and profitable performance. Key success factors in this regard are:

minimising / eliminating market distorting influences (subsidies, inappropriate taxation, free "open access" resource use

maximising biological productivity through appropriate investment in forest land "capital" (to demonstrate the ability to provide reasonably uniform annual raw material sales)

sustainable development of the country's forest land and environmental resources.

In many other forest constituencies, fiduciary and financial management legislation prescribes penalties for derogation from practices, instruments and structures designed and implemented to achieve the above.

Previous reports have suggested that, overall, the forest sector is plagued by performance that does not meet the full potential of the country's forest land resources. Biological and transformation productivity is sub-optimal. Forest land capital is being irreparably threatened and degraded - threatening its soil and water conservation and other environmental services. The extent of the damage is measurable in the billions (milliards) of dirhams and is reflected in the following:

programmes to combat forest degradation, erosion and desertification

reduced hydroelectric dam capacity through siltation

removing sand from rail and road transportation routes

loss of top soil and its productivity for rangeland and agriculture crops.

Relative to Ministry (and earlier DEFCS) financial requirements, past budgets have shown a consistent absence of progress of being at all capable of meeting MCEF needs. Ministry budgets have, throughout the last decade, experienced fluctuations sufficient to regularly cause disruptions to planned recurrent expenditures and investments. Total Ministry receipts for recent years are shown in Table 2.1.1.1 immediately below.

[Further details of Ministry budgets is presented in Section 3 of this report.]

Lack of government financial support to the Ministry has produced systematically deteriorating results - throughout the public and private forest sector. The dilapidated condition of processing plants and their poor performance can not be improved without major private sector investments and without a rationalisation of explicit and implicit subsidies that are now in place. There is otherwise little reason to anticipate increases in profitability or revenues of the commercial forest sector.

Experience also suggests that, to preserve, let alone improve, the capacity of the Morocco's forest land to maintain its soil and water conservation functions, increasingly higher MCEF investments and management interventions will be necessary. Though, in fact, urban populations are increasing relative to rural populations, both are experiencing absolute increases - with rural growth rates reaching 4.8% in some areas. Increasing population pressures and the non-sustainable conversion of forest land to agriculture uses consumes over 31,000 hectares annually. The eventual consequences affect all of Moroccan society.

Within the Ministry, and elsewhere in government, it is recognised that it is not uncommon for well managed and operated forest sectors to be "subsidised" (net recipients) from state budgets. The challenge has become one of identifying further potential revenue sources within and beyond the forest sector to supply such funds. Levying user fees on goods and services provided by forest land resources (such as water, carbon monoxide sequestration, grazing, etc.) is being increasingly discussed in many areas of the world and may be unavoidable in Morocco as well.

Elements of the current structure of fees and taxes and their distribution were established in Moroccan forestry legislation enacted as long ago as 1917 (first amended in 1918 and dozens of times since the most recent amended in 1962). A significant example, also discussed later in this report, is the 1976 dahir specifying that receipts of forest products auction sales accrues to rural commune accounts. This same legislation, however, requires that a minimum of 20% of these receipts is to be invested by communes in forest capital (also discussed further below).

It is not difficult to quickly establish whether the commune forest revenue retention scheme is an opportunity for - or a threat to - the country's goal of improving forestry sector financial self-sufficiency. The financial benefits accrue only to tributary rural populations - yet Ministry budgets are expected to cover the management of these same resources.

Ownership of forest land was formally vested in the State in the 10 October 1917 dahir on the conservation and use of forests. However, through the provisions of the dahir of 1976, the historical Moroccan tradition of communal access to forest land resources ensures local population "user rights" almost equal to those of ownership - except in title. This extends not only to the direct access to forest products and services (particularly fuelwood and grazing) - but also to the legally prescribed retention of forest products selling prices. The impact of this is very significant as about 1300 the country's almost 1800 communes lie in rural areas.

This was less of a concern when the carrying capacity of the resource far exceeded the needs of local populations - a situation that is manifestly not the case today.

Effectively, the state has decreed the country's forests a free "open access resource" for rural populations - and there are few signals to these populations to the contrary. Nevertheless, the rest of Moroccan society is expected to pay the bill for this practice - that is:

 i) the direct cost to manage the resource, and

ii) the cost of the damage that unsustainable use by rural populations causes!

It is little surprise that MCEF budgets are inadequate. Such usage severely constrains the ability of the Ministry to assume certain positive or remedial management roles on State forest lands mismanaged by local users.

The communal selling price retention scheme and communal "open access" to forest resources clearly violates the notion that the nation's forest "patrimoine" should be managed "equitably" for the benefit of all of Moroccan society.

Unfortunately, the very people who benefit most from these resources are expected to reinvest a minimum of 20% of the forest product selling prices they earn back into the improvements to forests capital. Not unexpectedly, 20% has become the de facto maximum instead. In fact, though the Ministry responsible provides assurances that, technically, the letter of the law has been adhered to - there is the conviction elsewhere that investments actually relevant to "forest capital improvements" have totalled less than 1.5% of communal forestry receipts.

The level of communal forest revenue receipts for the last decade and their distribution in more recent years is shown in Tables 2.1.2.1 and Table 2.1.2.2 below. The highest average annual communal revenue, for the year sampled, was 6,751,368 DH for Sidi Abderrazak commune in Khemisset province, and the lowest 859,963 DH for Sidi Boukhalhal commune in the same province.

The distribution of retained forest receipts amongst Moroccan provinces - even amongst those that have ample forests - is very uneven. The three provinces - Kenitra, Khemisser and Khenifra - containing the top 50 forest revenue communes represent 66% of such revenues for the period sampled. [Of course, one source of new taxes would be to apply an "income tax" to these revenues.]

In spite of the 1976 dahir of 1976 - by some reported estimates, from 1977 to 1986 communal investment has averaged less than 13% of receipts. Again by reported estimates, the situation appears to be worsening as the rate of investment for the more recent period 1988 to 1992 has dropped below 8%. The remaining 12% of communal forestry receipts that were not invested represent an average during this period of 25,000,000 dirham annually!

The 1.5% of communal forestry receipts that have been invested in projects that have any meaningful relationship to forestry would then amount annually to about 3.1 million dirham - for all of Morocco.

It is meaningful to seek explanations as to why this situation is allowed to prevail. The inequity is dramatic.

As the steward of the States public forests, the MCEF has basically two ways to provide users with access to forest land resources.

Firstly, user access can be sold (auctioned, licensed, leased, etc.) to interested entrepreneurs who can then undertake all the necessary road and trail construction and harvesting activities themselves. The harvesters' activities would be managed by strict guidelines and regulations to ensure that all activities undertake by the user are carried out on a sustainable basis according to prescribed national forest practices and standards.

Secondly, the ministry could also engage and manage contractors to do the harvesting on its behalf. The harvested products would then be sold at Ministry auctions. Direct ministry supervision is particularly suited to:

areas where there are multiple resource values under consideration, or development requiring a more permanent Ministry presence

situations where the quality of work and infrastructure must necessarily be of a higher standard (e.g. in National Parks, SIBEs, etc.)

to areas that have not before been under development

in pilot or research projects or where other new techniques are being implemented.

This second approach is similar to what the state is currently doing with its continued valorisation of its cork (liege) sales.

MCEF intervention can make a difference where local capacity or commitment is insufficient to meet resource management objectives. The valorisation of cork in Morocco represents one instance where Ministry controlled production and marketing operations were introduced to replace unacceptable local performance and practices in cork harvesting. A resource (cork oak forests) was being degraded (killed), harvest yields where decreasing, product values were markedly reduced and the cork industry was under threat of total disruption - a circumstance almost identical to the existing and threatened forest degradation arising from fuelwood and grazing by rural populations.

The Ministry now assumes management and administration roles for cork production, and - through the use of contractors - it also manages harvesting and other production and sales activities. The proceeds of the sale of cork go to the respective communes. The state retains an amount equal to only the cost of production and marketing. This approach may serve as a model for improving other forest resource use and development. Advisedly, once a sector reaches an acceptable level of performance and stability, the Ministry should devolve its role to private sector operators under mechanisms suitable to the continued achievement of overall Ministry and social objectives.

The structure of a constituency's taxation policy provides important signals to investors. It impacts directly on their profits and investment decisions. Taxation policy should be flexible and realistic. It should be consistent with other aspects of government's commercial development strategy. It should demonstrate an equitable distribution of rentes amongst legitimate stakeholders. Taxation policy and practices that are reasonably equitable and predictable contribute to social and commercial stability. Flawed taxation policy frustrates economic development efforts.

In Morocco, there is evidence to suggest that there is scope for elaboration and consolidation of aspects of the nation taxation regime. Taxes affecting the forestry sector are not sufficiently consistent to promote efficient sectoral development. Some concerns over tax evasion appear to have merit.

Integrating and rationalising taxation policies and instruments in Morocco is necessary to increase both the perception and the implementation of equitable taxation, and to increase the overall amounts collected.

An MCEF schedule of taxes and laws applicable to local forest products - sold at auctions by the Ministry - is reproduced in Table 2.2.1.1 below.

Trade related taxation is also in need of review - primarily because of distortions it causes in investors decisions - one of the major reasons for the poor physical condition of Morocco's transformations sector. [This relates to the low rate of revenue government can therefor generate from it - directly (through low corporate income taxes) and indirectly (through low employee income taxes, VAT, etc.).]

Domestic demand for certain forest products (e.g. sawn wood and veneer) exceeds supply. For example, domestic supply covers less than half the demand for sawn wood and a quarter of that of mine timbers. In contrast, "short fibre" pulp, industrial wood and cork are exported. Overall there is a strong and growing dependence upon imports to satisfy domestic demand for wood and wood products - though current taxation policy has an influence on the balance. Imports have exceeded their 1990 value of 2,135,000 dirham in each year of the current decade - and have exceeded exports by a factor of at least 3 to 1 in each of those years.

The taxes levied on exports and imports are presented in Table 2.2.1.2 that follows.

Decision-makers must balance the objective of stimulating the development of an internationally competitive industry against its continued "subsidised" operation under the protection of import taxes. A sound application of the "infant industry" justification for import taxes clearly establishes a term over which such protection is phased out. And, if the import tax is imposed solely to collect revenue, this should be examined in the context of the long-term benefits of rationalising taxation so as to support the development of a self-sufficient forest sector. A rate of tax collection that captures "economic rents" that do not permit the operator to earn a "normal profit" depresses and distorts private commercial sector investment and development.

For example, the price of a locally produced roundwood species will quickly rise to match the price of higher priced imported (taxed) substitutes - an event that would not have otherwise occurred and that will have unplanned negative consequences for the rest of the sector. Demand for roundwood - harvested legally and illegally - increases, as does its selling. Local manufacturers may be driven out of their activities because the prices of their raw materials have become excessive.

Export taxes effectively subsidise local consumption and distorts the rational efficient flow of raw materials and investments that would otherwise take place. Such taxes can remove opportunities for the development of an internationally competitive sector. Instead of contributing to foreign exchange balances, the "economic rents" are being consumed at a wasteful rate that would not otherwise take place. Export taxes remove any incentive to optimise / maximise domestic consumption. The government policy to tax forest products exports can; i) decreases value added, ii) increases consumption, and, iii) potentially increase the rate of harvest - legal and illegal - that would otherwise have taken place.

A consequence of the above is an overall decrease in the level of domestic taxes collected. Distorting "border" taxes (import and export) also discourage foreign direct investment - which might otherwise constitute an effective means of upgrading "fixed capital" and raw material utilisation and product recovery rates and, therefore, sector profits and government tax revenues.

A summary of the impact of trade taxes is presented in Table 2.2.3.1 immediately following.

The allocation of Morocco's timber and other forest products is implemented through auctions (adjudications). The Ministry uses a reverse (au rabais) or "Dutch" auction wherein the price at which the sale is actually executed is approached from above a pre-determined "reserve price" and the successful bidder is actually the only bid. Previous experience with conventional verbal public auctions resulted in what are sometimes called "bidding frenzies" prompting irrationally high bids. The consequences included:

non-performance by the successful bidder whose auction bid price (DH/m³) was often above the selling price of his finished products - therefore leading to losses and business failure when the coupe was actually harvested.

retention of the bidders security deposits

extra cost and time spent on subsequent re-advertising of the appel d'offre and of holding a second auction

delays in achieving the Ministry's "annual allowable cut" (possibilité réalisable) targets

loss of supply of both raw materials and finished products to intermediate and end-product markets.

The switch to reverse auctions effectively introduced a discipline to the auction process which observers suggest overcomes a regional cultural reflexive response to "bargaining" situations.

During this project, most aspects of the Ministry's approach to and implementation of auction sales and their post-sale administration were reviewed in detail. In most respects, Morocco's roundwood sales system is identical, in principal and application, to those of major forest producing countries of North America and Europe. There are, however, aspects of the allocation system that most observers recognise as problematic and beyond simple resolution.

Morocco's forests feature both consumptive and non-consumptive (e.g. conservation and environmental) values. Soil and water conservation, aesthetic or recreation experiences and biodiversity are examples of non-consumptive values. Biodiversity values have particularly relevance in Morocco due to the high number of endemic species found here.

Environmental services generally:

do not have market prices

are not "traded" and

do not appear in national accounts,

which frustrates their routine incorporation into economic analysis. In fact, the UN SNA (System of National Accounts) established over 50 years ago has no means to actually deal with such "intangible" environmental resources values. The consequence of this is that natural asset "depreciation" costs, (i.e. the cost of maintaining the income producing natural capital) are not included in financial calculations and GDP (PIB) is overstated.

The order of magnitude of the "missing" accounts for Morocco is reflected in the discussion that follows.

Statistically the "official" contribution of the forest sector to agricultural GDP is given as 2% (therefore, .4% of overall GDP). More inclusive approaches suggest that the figure is closer to 10% (therefore 2% of overall GDP).

Some estimates suggest as much as 18% of agricultural is directly and indirectly dependent upon forest land services and outputs. This is not surprising given that a full 17% of livestock nutrient requirements are produced by forest land - equal to 15,000,000 quintaux or 1 500 000 000 animal unit months (unites de fourrage) annually. Based upon the barley (orge) equivalent of this forage, forest capital is here providing forage worth over 2 million dirham annually.

If forest soil conservation services prevent dam sedimentation then one measure of their loss to Morocco is the cost of the 800,000,000 m³ of sediments now deposited behind Morocco's dams. Current rates of sedimentation are of 50 000 000 m³/an - translating into 500 tonnes/km²/an for the 200 000 km² affected. This rate is anticipated to reach 100 000 000 m³/an within the next twenty years.

Siltation has already reduced dam capacity by more than 10% to date and will result in significantly reducing their overall useful live. To the extent that the number and timing of new dam construction must be increased and advanced, these costs represent the cost of the loss of the forest land's soil conservation services. Based upon the costs that proper forest management could have avoided, forest capital is here producing over 700 million dirham annually.

Increasingly, governments are budgeting for the protection, management and improvement of environmental services provide by natural resources - recognising that in the long-term - their costs will be relatively smaller compared to the cost of replacing such services. The services provided by the environment in many cases have exceedingly high replacement values - if in fact they can be replaced. Degradation is frequently irreversible - except over a geological time horizon.

It is clear that the economic relevance and contributions of Morocco's forests to its actual GDP is far greater than official figures suggest. Effective and realistic development planning depends upon realistic and accurate sectoral capitalisation and performance figures. Without producing a more comprehensive model - which includes the impact of the current levels of forest capital depreciation - effective forest resource management and sectoral development is constrained by lack of credible analysis and achievable objectives.

As virtually the only seller in the "market place" for forest raw materials in Morocco, the Ministry must administratively determine how much of its products it can actually sell and also the resource "rentes" it should be receiving. The maximum that it should sell is established by the "sustainable" harvest or "allowable annual cut" (possibilité réalisable). Beyond this, the goal is to, as much as possible, create a raw material allocation / auction mechanism that uses and produces realistic selling pricing signals reflective of existing competitive influences. Some of the factors influencing this outcome are discussed below and in sections 2.3.3 and 2.3.4.

Most government schemes based on a role for government in natural monopolies would suggest that the resource be offered at "fair market value". The emphasis is on creating an administrative mechanism - auction, tender, competitive bidding - or other approach that simulates the economic outcome of the competitive environment (many buyers and sellers). The socially optimum quantity to offer is when marginal benefits equal the marginal costs. Since we can seldom estimate well either the value or the marginal benefits or the marginal costs, the fallback position is to offer the resource in sizes, qualities and locations that will attract competition. Set a reserve price that at least covers administration costs but could be as high as the last selling price minus 10-15%. Establish terms and conditions of payment. Post publicly the characteristics of the commodity to be sold, the terms and conditions of payment and announce the reserve price. Avoid collusion among bidders by insisting on the receipt of more than one active bid. After the sale is awarded, publish again the bids, the winning bid and the final terms and conditions of payment.

The Ministry's revenues from its forest products derive from the conversion of raw materials into marketable products. All of the costs of manufacturing, transport and marketing are paid for from product selling prices. In this respect exploitation and transformation are "value-adding" activities to the raw material. Without such activities the inherent resource values ("economic rents") can not be realised.

An operator's profit also derives from economic rents - eventually realised through product selling prices. Annex C provides detail on the approach used to establish and maintain "administratively" determined forestry fees. In summary, however, if profits are too low the operator will invest his money in something else. A profit that is just adequate (but no more than that) to ensure operators remain interested in continued participation in the sector is termed a "normal profit".

Of course, efficient operators in any established industry make the highest profits because their product recovery, and therefore their sales, are higher - and their costs are equal to or often lower than industry averages cost. The costs used to calculate "normal profits" are, therefore, those of the "operator of average efficiency" for the activity under consideration. Such operators are realising "above normal profits" which are considered acceptable under such circumstances. Normal market forces tend to ensure that above average efficiencies eventually become the industry average and, similarly, that "above normal profits" eventually become the industry averages.

By contrast, these same forces ensure that operators experiencing cost above industry averages and experiencing "below normal profits" would normally not survive. One of the attractions of such a mechanism is that, once the market and governance parameters of the sector have been established, the levels of Ministry intervention to maintain the mechanism is lower than under more "governed" mechanisms.

To reiterate, the goal of the Ministry is to maximise its capture of the forest resources' "economic rents". This is done by selling forest products at prices at which buyers earn only "normal profits". This concept is reflected in the Ministry's practice of suspending an auction where offers fall below a "reserve price". The Ministry recognises that if it sells its forest products at below the reserve price, the buyer is making a profit at the expense of the Ministry.

Where there is insufficient "market" price data upon which to base the sale of their forest products, "administrative" prices must be used to establish the minimum price at which the owner will sell. The Ministry calculates its reserve price using the buyers "market" input costs to determine the buyers' profit margins (see Annex C).

In reality, "rational" buyers calculate their bid prices in exactly the same way. This is reflected in the fact that buyers bids usually range within plus or minus 20% or the Ministry's reserve price - even though the results of the Ministry's calculations are not made public.

The "reserve" price is dependent upon many input charges (fuel, labour, etc.) that change over time. Payments are generally due in four instalments distributed over the duration of the buyer’s contract (usually from 8 to 18 months).

It becomes evident, upon understanding the above mechanisms, that, how the Ministry calculates its raw material selling prices has a very direct influence upon its revenues.

The "single seller" status held by the State must be deliberately managed to ensure that an equitable equilibrium selling price prevails. Market inefficiencies can arise where the volume of forest products offered for sale is either too high or too low - with respect to market demand. Morocco's experience of the last two decades shows the confusion that can be imposed upon the forest sector through fluctuating quantities and qualities of forest products offered for sale in conjunction with the distorting influences of both import and export taxes.

The principles of sustainable development should be applied to determining the annual exploitation rate for all forest products. The harvest of any forest product should be equal to (or, conservatively slightly less than) a volume that the forest can actually sustainably produce from year to year. Once this volume is determined, it should actually be made available on a yearly basis - or some other appropriately periodic period. If this is not done there will be little incentive for the commercial sector to invest in technology and training capable of maximising their product recovery and their profits - both of which are necessary for the state to maximise its revenues.

The confidence of the forest sector in the Ministry's ability to provide reasonably uniform volumes and quantities of forest products at auctions has been tested in the past. Routinely, the single most critical element in attracting investment is a reasonable assured supply of raw materials under reasonably competitive arrangements. Except in some specially created favourable circumstances - which do not reflect normal competitive market mechanisms - there has been reluctance by industry to invest.

Where profits are not particularly high and where payback periods are relatively long - as in the forest sector - it is a demonstration of common business sense to limit investments where severe problems with access to raw material supply and distorted pricing has been demonstrated.

Imposing equipment and employment (main d'œuvre) requirements on prospective bidders/ operators, though not totally proscribed, should be done cautiously. The risks are that; i) the state's sanction of preferred bidding rights to modern facility owners translates into a commitment by the state to ensure their success - which is a risk the state should never assume (as evidenced by the example of Morocco’s pulp mill), and ii) other legitimate and potentially successful investors are excluded.

The state's role in the forest sector is to create a "level playing field" for all potential investors. This can translate into a number of mechanisms with respect to tenures and licenses including:

Prescribing reasonable pre-qualification requirements for bidders. For sales of a given level, demonstration of involvement in (or partners with) previous experience is reasonable. For larger long-term sales the Ministry may specify access to transformation facilities may be required.

Structuring the size (volumes) of the auctions and the number of each size to flexibly match the "configuration" of industry operators (i.e. annually providing many relatively small sales and very few relatively large sales. Segmenting the market in this way ensures access to raw material for a wide range of operators - small to large.

Cancelling auctions sales if the number of bidders in attendance is inadequate, or if the bids do not exceed an economically calculated "reserve price", or if "collusion" practices are suspected. Too few bidders will not constitute a normal "market" - with the obvious consequence of below market bid prices.

Subsidies can mask the poor performance of inefficient unprofitable operators. The risks of prolonged use of subsidises includes raw material and energy waste, unrealised product and market development, and below maximum profits and, therefore, tax revenues for government.

The effect of the subsidies provided to Morocco's cellulose producer at least in part provides an example of some of the negative consequences of such a measure (see section 5.1.2). Subsidies provide protection to inefficient operators by contributing directly to their profits - where there might not otherwise be any. If unavailable to other operators, this signal, like some taxes and tax policy, discourages investment by other more efficient operators interested in the same activities. It can also discourage a wide range of investments in other activities that might otherwise effectively compete for the same raw materials, labour and other production inputs. In this respect subsides can delay or permanently discourage the development of an efficient internationally competitive forest sector.

Morocco's ability to produce cellulose that can compete effectively with imports can be determined by detailed economic analyses. The overall decision to continue to subsidise this operation should be reviewed in the context of the results of such an economic review and of the political, developmental, sectoral and financing issues that, unavoidably, also form part of that context.

Overall, ministry and sectoral financial issues can not be comprehensively examined without reference to the policy, institutional and structural context within which these reside. Many structural issues have been discussed above in this section. Morocco’s scope to change the circumstances surrounding the financing of its forest ministry and the development of its forest resources and forest sector is also unavoidably affected by:

political will and commitment

national legislation and regulatory issues

administration and governance structures

social development targets

national economic development strategies.

As a minimum, these issues should be reassessed to determine how they dominate Ministry mandates and objectives, and the achievement of sustainable forest management and development, and the reversal of forest land degradation. Optimally, forest resource management and development decisions should be routinely integrated to accommodate consideration of each of the above issues according to their current relevance.

In the past the MCEF has frequently had to deal in a reactive way to unforeseen events affecting its management of forest land resources. For example, three times this decade droughts have had a dramatic impact on the priorities for forest land use and, therefore, on where the Ministry's already inadequate budget must necessarily be expended to react to such unplanned events. In general, the Ministry undertakes programme and activity planning pursuant to existing policies, with the intention of seeking an adequate level of government financing to implement them.

Policies having a direct and major impact upon the biophysical and economic viability Morocco's forest sector include (and therefore on the sector's own potential contribution to financial self-sufficiency) include:

inflexible and incomplete regime of "droit d'usage" and "droit foncier"

Significantly, import and export taxation policies, raw material subsidies, and limited tenure (droit d'usage) arrangements - constitute a fundamental barrier preventing efficient market prices to develop for forest products. The barrier is situated visibly between the private sector investor and the public sector forests - and effectively discourages (if not entirely eliminating) FID (IED) investment in Morocco's forest sector. This situation is further aggravated by the fact that the state is the only seller of forest raw materials. All of the above conspire to exclude the establishment of a "competitive market" within Morocco's forest sector.

The issues listed above are evident in a complex relationship with each other and often demand the least government intervention where effective and efficient freely competitive open market mechanisms prevail. As stated earlier, ideally, government's intervention should be limited to the usual task of maintaining the "level playing field" necessary to stabilise the operation of any commercial sector.

In Morocco, there is considerable scope for realigning and consolidating approaches and programmes - within MCEF and other ministries - to improve forest land and environmental management. This may be unavoidable if it is to successfully implement many of its own national strategies for these resources. It would also be consistent with the commitments demonstrated by government's ratification of the following international environmental agreements:

Convention on Biological Diversity (UNCED, 1992)

Convention to Combat Desertification Those Countries Experiencing Drought and/or Desertification, Particularly in Africa (Paris, 1994)

UN Framework Convention on Climate Change (UNCED, 1992)

Convention for the Protection of the Ozone (Vienna, 1985)

Convention on International Trade in Endangered Species of Wild Flora and Fauna (Washington, 1973)

Convention on Wetlands of International Importance (Ramsar, 1971)

The sustainable development and management of its forest land and environment does feature in the implementation of many of the above treaties.

As stated earlier, an analysis of the correspondence between Ministry budget requests and général and spéciale budget allocations reveals a huge discrepancy. To address its national forest sector deficiencies and support its international commitments to the environment will require government to:

reorder, to a much higher priority, its financial support for its Ministère délégué chargé des Eaux et Forêt

introduce a number of other effective and integrated policy initiatives to rationalise and stabilise the sector.

Measures that do not address many of the above issues will be inadequate to prevent continued poor sectoral performance and resource degradation - let alone to reverse damage that has already occurred.