EU support to Morocco - Limited results so far

Executive summary

Morocco is a North-African country with steady growth and a stable political environment. The association agreement signed in 1996 strengthened the cooperation between Morocco and the European Union (EU). With the launch of the European Neighbourhood Policy (ENP) in 2004, Morocco gradually became a privileged partner of the EU in terms of political and economic cooperation as well as in trade, technical and development cooperation.

We assessed the effectiveness of EU budget support (BS) in Morocco from 2014 to 2018. The EU BS in Morocco totalled over that period about 0.37 % of the country’s total budgetary expenditure. We examined the Commission’s management and the degree to which the EU budget support objectives had been achieved. The sectors covered were health, social protection, justice and private sector development. During the period under review, contracts for all sectors covered by BS totalled €562 million and payments €206 million.

Based on an appropriate risk analysis and needs assessment, the Commission considered BS to be the right choice of aid delivery instrument. However, we concluded that its added value and ability to support reforms has been limited due to a sub-optimal focus, weaknesses in design and insufficient monitoring. In addition, donor coordination was uneven amongst the sectors.

After the judgement of the General Court of the EU in December 2015 on Western Sahara, Morocco suspended political dialogue from December 2015 until January 2019. The Commission did not use this standstill period to develop a clear strategy for its relations with Morocco. Although policy dialogue took place, it was not sufficient for all sectors. Furthermore, the Commission had not formalised strategies for policy dialogues.

BS had not sufficiently supported reforms and progress on key challenges was limited. The Commission’s management was hampered by weaknesses in the design of the BS programmes and their indicators. We also found shortcomings in the monitoring procedures and the Commission’s results assessment.

EU support targeted cross-cutting issues such as gender and human rights. Despite this targeting, limited improvement could be observed for the period under review.

We made a number of recommendations for the Commission to strengthen the EU approach and the political and policy dialogue, improve the design of the indicators and the monitoring procedures, enhance the verification procedures for disbursements and increase the visibility of EU support.

Introduction

An important partner

The Kingdom of Morocco is geographically Europe’s closest neighbour in North Africa (see Figure 1). Morocco was ranked 123^rd out of 189 countries in the 2018 United Nations Human Development Index list and its human development is therefore considered medium. With an annual gross domestic product of around €101 billion (2018) and approximately 35 million inhabitants, Morocco is the fifth largest African economy and an important political and economic partner for the EU. Reciprocally, the EU is Morocco’s most important trading partner, representing around 65 % of its exports and 57 % of its imports¹.

Source: https://en.wikipedia.org/wiki/Regions_of_Morocco

Source: Eurostat

Morocco is benefiting from its prudent macroeconomic management and the structural reforms undertaken in recent years. Growth has continued at a relatively steady pace and inflation is low. The external deficit of the current account and the budget deficit have continued to decrease in recent years.

Set against the background of the unrest in the region in the aftermath of the 2011 Arab Spring, Morocco enjoys a stable political environment. With its new constitution, adopted in July 2011, Morocco took important steps towards political modernisation and an open economy.

This constitutional reform emphasised the importance of fundamental rights and gender equality. However, the national legislation is not yet fully aligned with the United Nations conventions on human rights. For example, the United Nations Human Rights Committee recommended abolishing the death penalty, combating violence against women, increasing gender equality, improving the protection of children’s rights, ratifying the Rome statute establishing the International Criminal Court and eliminating the criminalisation of homosexuals. Morocco rejected most recommendations linked to women’s rights².

The EU and Morocco have had a stable relationship since their first trade agreement was signed in 1969. The partnership has developed and matured over the years (see Annex I), leading to the signature of a general association agreement in 1996³. This association agreement, which entered into force in 2000, represents the legal basis for EU-Morocco relations. Since the launch of the European Neighbourhood Policy in 2004, Morocco has gradually become a privileged partner of the EU in the field of political and economic cooperation as well as in trade, technical and development cooperation.

In the context of the European-Mediterranean partnership, the association agreement took a turning with Morocco acceding to advanced status⁴ in 2008, underpinning the special nature of its relationship with the EU. This provided a framework for high-level political cooperation in order to bring Moroccan legislation further into line with EU legislation and gradually integrate the Moroccan economy into the EU internal market.

A major recipient of ENI funding

Morocco receives more EU development support than any other North-African country, except Tunisia, and is one of the main beneficiaries of international development aid. The EU is its biggest donor, providing 25.2 % of official development assistance (see Figure 2).

Source: Organisation for Economic Cooperation and Development.

In addition to official development assistance, other development actors are also active in Morocco. The official statistics of the Organisation for Economic Cooperation and Development show for example that the World Bank (WB) and the African Development Bank (ADB) are important donors in the sectors of infrastructure projects and good governance, health and social protection.

The European Neighbourhood Instrument (ENI) is the key financial instrument supporting the Commission’s cooperation with Morocco. The Commission programmes the EU’s bilateral support for a period of seven years. The overall amount committed fell from €1 431 million for 2007-2013 to €1 399 million for 2014-2020 (see Figure 3). The main priority sectors stated in the Single Support Framework (SSF) for 2014-2017 were equitable access to basic social services, support for democratic governance, the rule of law and mobility, and jobs, sustainable, inclusive growth.

Source: European Commission.

Morocco is one of the biggest beneficiaries of bilateral ENI programmes in North Africa. From 2014 to 2018, the allocation for BS (see Box 1) resulted in contracts totalling €562 million and payments totalling almost €206 million (see Annex II). On average, BS constitutes 75 % of annual EU expenditure for Morocco. Morocco also receives additional funding under several thematic programmes and instruments (see Annex III) and EU support is also channelled via financial institutions and trust funds.

The EU Delegation in Rabat and the Directorate General for Neighbourhood and Enlargement negotiations are managing and implementing the programmes. The European External Action Service (EEAS) and the EU Head of Delegation are responsible for the political dialogue.

Bilateral relations challenged

The EU and Morocco have enjoyed long-standing good relations. However, the EU-Morocco partnership had been strained since 2015, when the General Court of the EU made the first series of rulings that Western Sahara was not a part of Morocco. This meant that Western Sahara was not part of the fisheries and agriculture agreement between the EU and Morocco and could not benefit from the same tariff preferences. The Western Sahara issue (see Box 2) put the EU-Morocco partnership under stress and Morocco suspended political dialogue.

Political dialogue is held at the level of the EEAS, the EU Head of Delegation and the Ministry of Foreign Affairs in Morocco.The policy dialogue is held at sectoral level between the EU Delegation staff and the Moroccan authorities. Figure 4 explains the difference between political and policy dialogue.

Audit scope and approach

This audit assessed the effectiveness of EU BS to Morocco for 2014-2018. We asked the following questions:

• Did the Commission and the EEAS choose the priority sectors appropriately and design the programmes well?
• Did the Commission implement EU support appropriately in Morocco?
• Were the objectives of EU support to Morocco achieved?

The audit covered the period from the official decision setting up the European Neighbourhood Instrument (1 January 2014) up to the end of 2018. The audit focused on this period, as an external evaluation on BS to Morocco had already been carried out for the period 2005 to 2012 (published in 2014). Furthermore, this period is in line with the ENI-programming period. Amounts contracted and paid for this period are material. In addition, the Commission has not yet carried out a country evaluation covering support to Morocco.

The audit was carried out from September 2018 to February 2019, covering health, social protection, justice and private sector development (PACC: ‘programme d’appui à la croissance verte et la compétitivité au Maroc’). The majority of the ENI expenditure in Morocco between 2014 and 2018 was in these sectors (see Annex II)⁹. In addition to the BS programmes in these four sectors, we reviewed the 10 projects relating to the corresponding financing decisions (see Annex IV). We examined whether gender and human rights were addressed as cross-cutting issues in these BS programmes. Annex V summarises the objectives of the BS programmes audited and Annex VII provides an assessment by sector.

Our audit work consisted of a desk review, interviews with staff from the Commission Headquarters and the EEAS, and an on-the-spot visit. The visit enabled us to collect further information and interview representatives of the national authorities and staff at the EU Delegation and representations of EU Member States in Morocco (Spanish and French representations). We also interviewed international organisations and other donors, such as the World Bank, the ADB, Unicef and the Deutsche Gesellschaft für Internationale Zusammenarbeit. In addition, we visited beneficiaries including a detention centre for girls, a social protection centre and private companies that had received investment subsidies.

As one of the EU’s largest beneficiaries of external aid, Morocco is a strategic partner in key policy areas. The Commission can benefit from the conclusions and recommendations of this report by taking them into account for the next programming period (as from 2021). The relevance and potential impact of this report are therefore high.

Observations

Focus and design of the support were sub-optimal

Budget support spread too widely to maximise results

We looked at whether the Commission and the EEAS had consistently prioritised sectors for BS based on Morocco’s main needs. We checked whether an adequate needs assessment had been carried out. We also considered whether the Commission had coordinated its approach appropriately with other donors active in Morocco.

Budget support was based on an appropriate risk/needs assessment

The Commission considered BS to be the most appropriate instrument for supporting and sustaining the implementation of national and sectoral reforms. The Commission performs an annual risk analysis for the following categories: political governance, macroeconomic stability, development, public financial management and corruption/fraud. The eligibility criteria were clearly met at the design phase, and the fundamental values were not considered high risk. Morocco’s risk level was assessed as moderate.

According to the Commission’s risk analysis, however, one of the main residual risks concerned corruption. In the absence of an anti-corruption body, the Commission was not able to address corruption through this avenue. This meant that the Commission addressed corruption through some of its BS programmes. For example, the digitalisation of procedures in the PACC programme is contributing to reducing corruption as well as measures and indicators in the health and social protection BS programmes. In the justice programme, the organic law contains measures aimed at reducing corruption. However, some of these, such as the code of ethics for judges, had not yet been adopted.

The country reports of the International Monetary Fund and the Public Expenditure and Financial Accountability assessment of 2016 did not reveal major deficiencies and were in line with the Commission’s risk assessment.

The Commission had carried out a detailed needs assessment for the specific BS programmes in cooperation with the national authorities and consulted a wide range of stakeholders during programme formulation. The EU Delegation had also met with civil society organisations. However, the Moroccan Court of Auditors (which is an important stakeholder) was not consulted during the needs assessment for the sectors audited.

The BS programmes were complementary to other EU support, and coordination, in the form of bilateral and thematic programmes, was good. Technical assistance was included in the design of all BS programmes. The total proportion of complementary cooperation instruments (technical assistance, twinning, etc.) supplementing BS in Morocco had increased over time, from 5 % (2007-2010) to 13 % (2011-2013), then to 16 % (2014-2016) and then further to 18 % (2017-2018).

Important needs addressed but funding covered many areas

When programming bilateral support for Morocco, the Commission had addressed numerous priority areas. These areas responded to needs covered by sectoral strategies and reflected in both the national government plan and the EU action plan. In the programming documents, the Commission had demonstrated clearly why sectors required funding. The priority sectors remained the same for 2007-2013 and 2014-2020 (see Figure 5).

The Commission had defined the three priority sectors too broadly, as they consisted of 13 sub-sectors¹⁰, many of which could be considered as standalone sectors. There was therefore scope for reducing aid fragmentation. In addition, focusing on too many sectors reduces the potential impact of EU support. The agenda for change¹¹ states that the EU shall engage in no more than three sectors per partner country to increase the impact and leverage of its assistance.

The amount allocated to each programme depended on a number of parameters¹². Amounts allocated were based on negotiations, which were not documented. Therefore, the Commission was unable to demonstrate that the amounts had been allocated using a transparent method.

The Commission had not developed a clear strategy for future relations with Morocco during suspension of political dialogue

The CJEU judgment and institutional blocking after the parliamentary elections had a limited but noticeable impact on cooperation (see Box 2).

The initial CJEU judgment was issued in December 2015. The negotiations relating to the Deep and Comprehensive Free Trade Agreement, the Migration and Mobility Partnership and Security/Counter Terrorism cooperation had not progressed since then.

The Association Council¹³ is meant to meet annually to review bilateral relations and evaluate the progress of the implementation of the association agreement. However, there were no meetings between December 2015 and June 2019. Therefore, the last available progress report drafted by the EEAS related to 2014 activities. However, the EU Delegation continued to provide regular political reporting.

Morocco’s advanced status had been extended to the end of 2018 and a further extension to the end of 2020 was being considered. In addition, Morocco had requested a complete review of bilateral relations with the EU, with a new, tailor-made framework going beyond the advanced status.

In the absence of a formal political dialogue, the Commission had not addressed new priorities and/or challenges, anticipating the expiry of the SSF. In recent years, the EU Delegation had reacted to requests from the Moroccan Government on the basis of the existing SSF instead of using the political standstill to re-assess its operational priorities with Morocco and develop a clear, forward-looking strategy. The Commisssion and the Member States considered that the SSF priorities were still relevant and thus extended the 2014-2017 SSF to 2018. For 2019-2020 there would be no new partnership priorities. Instead, there would simply be a short-term framework similar to the current SSF which can serve as a legal basis for 2019-2020 programming.

The Commission did not suspend BS as the EU financial regulation, the BS guidelines, and the provisions of the financing agreements do not provide for the suspension of BS in the absence of political dialogue. Payments relating to BS continued as programmed and were higher in 2016 and 2017 than in the two preceding years (see Figure 6).

Source: DEVCO Data Warehouse.

Donor coordination was uneven

During the identification phase, the EU assesses which other projects are ongoing in the sector and holds meetings with the technical and financial partners to ascertain ongoing/planned financing in the sector. The ‘Groupe Principal des Partenaires’ had met every two months since 2016 to discuss sectoral issues at strategic level. However, not all donors in Morocco had met regularly (e.g. China and India).

In Morocco, there was a wide range of donors in most sectors. However, there was a lack of consistency between Member States’ objectives/priorities and those of the EU. Although the process of joint programming was introduced in 2014, Member States did not implement it until 2017, when agreement was reached over how to implement it in three sectors (migration, gender and vocational training). This was because Member States were keen to maintain their own visibility. The large number of sectors and donors involved did not contribute towards aid effectiveness.

Some sectors had effectively established arrangements for donors, particularly the health sector where objectives and performance assessment frameworks were shared. The Commission chaired the financial and technical partner group for health and social protection. For the PACC, there was no formal donor meeting group, but there was one coordination platform: the G20 Compact with Africa.

In the justice sector, formal meetings did not take place between the donors between 2015 and 2017. As the Ministry of Justice has ensured coordination of this sector since 2017, meetings have been organised with the technical and financial partners but only once a year, even though partners had expressed a wish to meet at least twice a year in order to avoid overlaps. There was little documentation of these meetings. The steering committee required by the financing agreement to ensure coordination between the ministries and the programme partners, had not been created.

For the sectors audited where both the EU and other donors were providing support, there were very few joint indicators. While in the health sector 11 of the 18 indicators were similar to those used by the World Bank, in the PACC programme there were seven similar and in the social protection programme, there was only one. Annual assessments and evaluations were not shared systematically for the sectors audited.

Budget support programmes not designed to maximise impact

We verified if the BS targets and indicators were aimed at supporting reforms.

A number of budget support targets not ambitious enough to support reforms

Although BS programmes were aligned with the country’s sectoral strategies, not all strategies had quantified targets for specific objectives or action plans. Consequently, it was not always possible to compare the targets of the BS programmes with national sectoral targets. However, as from 2019, the Budget Law requires ministries to accompany budget projections with performance targets set against their main strategic policy objectives.

The indicators related to the creation of institutions, drafting legislation and national plans did not focus on outcomes.

We found that 25 of the 86 BS targets were not ambitious enough to support reforms. For example, in the health sector, the main problems were insufficient medical staff and disparities between urban and rural areas. However, the BS programme focused mainly on reducing disparities between rural and urban areas and addressed the lack of human resources through only one target of the variable tranche which was not very ambitiousaiming to train just 13 doctors as “family doctors” over a period of two years.

Some of the challenges identified by various stakeholders (Ministry of Health, World Bank, etc.) in the health sector had not been directly addressed in the design of the BS programme: high staff absenteeism, low attractiveness of remote areas for medical staff and the structural underuse of hospital infrastructure.

In the social protection sector the target of bringing 25 % of social protection centers into line with the new law was not ambitious since it had already been achieved, as a higher percentage than this already met the stricter requirements of the previous law.

In the justice sector, the objectives, although broad, were in line with the objectives of the reform, for instance aiming for an independent sector and the judicial protection of rights and freedoms.

The PACC was built on three strategies, two of which were lacking time-bound objectives, making it difficult to define the most important/urgent needs. The programme covered too many sectors, providing support for small and medium-sized enterprises (SMEs), start-ups, land tenure, trade, sustainable development and energy.

Indicator design did not enable objective performance measurement

The Commission assessed Morocco’s monitoring and evaluation systems when designing BS programmes. In the absence of a framework assessment for evaluating sectoral progress, it applied existing guidelines. With the exception of the health sector, sectoral strategies were not always accompanied by a fully-fledged action plan, with baseline data, results indicators and pre-defined targets.

We noted the following weaknesses in the selection and use of indicators:

1. Indicators of the variable tranches were not appropriate to monitor progress of the specific objectives.
2. Nearly all indicators related to outputs or process (e.g. the proposal to draft a law), not to outcomes.
3. Two indicators were not sufficiently relevant as they did not measure the BS programme objectives. In the health sector, two indicators were related to the expected result ‘reduce disparities between urban and rural environments’. Both indicators reflected an absolute value, i.e. ‘increase in diabetic patients treated in rural areas’ and ‘increase in hypertensive patients treated in rural areas’. While an increase could mean that more patients in need were being treated (positive increase), it could also mean that the two conditions had become more prevalent in Morocco (negative increase). In any case, the indicators were not oriented towards measuring a decrease in disparity.
4. Indicators frequently had inaccurate baselines or none at all¹⁴. An accurate starting point is necessary for measuring progress and assessing whether targets are both realistic and sufficiently ambitious.
5. Indicators had outdated baselines and targets¹⁵. The programming process took about a year, so baselines no longer reflected reality and targets had sometimes already been achieved or were nearing achievement when the financing agreement was signed¹⁶. Failing to update baselines and targets when signing the financing agreement resulted in payments being made where development had deteriorated instead of improved.

Difficulties in implementing support

Delays affected implementation

We examined whether the activities had been implemented as planned and outputs delivered as intended.

Outputs and complementary support not always delivered on time

Overall, implementation of reforms did not always take place as planned in the sectors audited. Delays were mainly due to legislative proposals not being approved in time (social protection), the fact that Parliament had not yet adopted the penal law and penal procedure code (justice), the lack of a dedicated action plan (health) and the limited policy dialogue with the private sector (PACC).

As the implementation of reforms was delayed in the justice and PACC sectors, several of the disbursements were also later than originally planned. Despite the delay in social protection activities during the first year of implementation, the Commission did not consider it necessary to take corrective action as technical assistance was in place from previous BS programmes. The Commission had extended the PACC programme by one year and the justice programme by two years. The initial duration of the programmes was four years (and five for the justice programme).

In the sectors audited, the BS programmes were complemented by technical assistance and twinning (between 2 % and 13 % of the BS amount). Although this complementary support provided in the sectors audited was in line with the objectives of the BS programmes, it frequently started two to three years after the financing agreements were signed. Consequently, it did not reinforce BS appropriately.

Limited evidence of sector policy dialogue

We checked whether the Commission had a structured approach to policy dialogue that included setting clear objectives, interacting frequently with the Moroccan authorities and keeping progress logs.

Policy dialogue is an essential activity under BS. It is one of the main components of BS contracts, alongside the transfer of funds and capacity strengthening. It is expected to contribute towards achieving the objectives of BS programmes.

Despite the suspension of the political dialogue, the sectoral (policy) dialogue had continued between the EU Delegation and some ministries (e.g. Health and Social Development). However, the EU Delegation did not have a formalised policy dialogue strategy with clear objectives. There was no evidence that the dialogue addressed adherence to national sectoral strategies and documentation of the meetings held was poor. Meetings took place on an ad-hoc basis, taking into account the needs of both sides. For justice and PACC, the dialogue was minimal.

The Ministry of Foreign Affairs had advised the other ministries not to communicate openly about any EU support. Contacts between the ministries and the EU Delegation did not always take place at the appropriate level.

Poor results assessment by Commission

We examined whether the Commission had monitored the implementation and performance of the programmes appropriately and whether the conditions for disbursements had been met.

Variable tranches often paid when conditions were neither met nor verified

The disbursement of the variable tranches¹⁷ was based on sources of verification stipulated in the financing agreement and agreed at design stage between the Commission and the ministries, as well as other official sources provided by the government. Nevertheless, several sources¹⁸ of verification stated in the financing agreement did not exist or the ministries did not provide them.

In our sample of 54 targets, the Commission considered 33 of them to have been achieved. We looked at how the Commission assessed whether indicators had been achieved before making payments and observed that¹⁹:

1. The Commission made payments based on the achievement of 10 targets without checking the reliability of the data used for verifying this. For example, two disbursements under the PACC were made on the basis of the number of self-employed people, although the EU Delegation had not checked the accuracy of the database used. The main criterion used was self-employed people declaring themselves as such, but this was not sufficient, since this declaration is voluntary. Ministry of Finance data showed that the number of self-declared self-employed people was roughly double the number of self-employed individuals who declared their income for taxation.
2. The Commission made payments for seven targets achieved on the basis of baselines which were not up to date. For example, the baseline for an indicator relating to childbirth used for payments made in 2017 took 2012 figures as the baseline for a BS programme signed in 2015. However, had 2014 been used as a baseline, as childbirth was higher, it would have been clear that the situation had deteriorated, and BS payments would have been lower.
3. The Commission paid for five targets without having set an initial baseline to compare progress to. In a further six cases, disbursements were made based on inappropriate calculations. For example, the number of diabetic patients treated was calculated without adjusting for the situation before EU support began.
4. In 15 cases, the Commission paid for targets on which no progress had been made or when targets were not achieved. For example, one target was to increase the number of general practitioners in rural primary healthcare centres. Although the number decreased, the Commission paid the support. As a consequence of the Court’s audit, for two of these targets, the Commission has however initiated the necessary steps to recover the amount paid.

A total of around €88 million was paid in relation to variable tranches for the sectors audited. However, the lack of rigorous controls when assessing results had a financial impact of €6.79 million. Furthermore, regular payments amounted to €19.9 million, although the corresponding indicators were not contributing to the objectives of the BS programme. In addition, an amount of €15.28 million was paid out, although no sufficient checks were performed or inappropriate sources of verification were taken into account. Annex VI contains a detailed overview by sector.

In addition, €14.64 million was carried over although the conditions for carry-over stated in the financing agreement were not met. The Ministries of Social Development and Justice had asked to carry over to the following year the evaluation of five indicators (representing €10 million) and three indicators (representing €4.64 million), respectively. However, the Ministries did not provide any written justification for this, nor was the delay related to external factors.

The Commission did not always monitor progress thoroughly

The advanced status granted to Morocco is of high political importance and constitutes an overarching framework for EU-Morocco relations. Its aim is to reinforce the relationship. However, there was no formal evaluation of the results achieved or areas covered.The Commission plans to perform a country evaluation in 2019 on the ‘EU support/assistance in Morocco’.

External experts paid by the Commission carry out field visits for each BS programme twice yearly and at the end of each BS programme. The follow-up of the recommendations is not systematically reflected in their reports.

The EU Delegation monitored programmes mainly when making payments related to the achievement of indicators. This was often too late to allow for the necessary corrections to be made when there were delays. However, in the justice sector, the EU Delegation did not carry out sufficient monitoring at operational level, which had an effect on the payment of the variable tranche (see Box 3).

No significant impact for budget support programmes

Budget support objectives only partially achieved

At the time of our audit, the BS programmes and related technical assistance contracts were still ongoing. We examined the extent to which the targets set for the BS programmes had been achieved. We assessed progress towards achieving the objectives of BS in the four sectors we examined for our audit as well as any links between this progress and EU support.

Less than half of budget support targets met

A majority of the targets of the BS programmes had not yet been achieved, but the BS programmes and related technical assistance contracts were still ongoing. Our assessment differs from that of the EU Delegation with regard to the achievement of targets. According to the EU Delegation, out of 54 targets, 62 % had been achieved by the end of December 2018, whereas we found the achievement rate to be 40 % (see Figure 7). The Commission had assessed several of the unachieved targets as low risk during the design phase.

Despite some improvements in the health sector (see paragraph 76), some important indicators of the BS programme had not yet been achieved: better access to health centres for the rural population, increase in the number of women giving birth in these centres, improved availability of medicines in health centres and health inspectors in every region.

For the social protection sector, five out of nine were process indicators and hence affected by the legislative delays (see paragraph 50). With regard to the results indicators, the following crucial targets had not yet been achieved: three-year budget plan for the social services sector, global medical coverage for employees and medical coverage for non-salaried workers.

For the justice sector, two process indicators were affected by the delay in the approval of the penal code. With regard to the results indicators, only one of the eight judicial centres to be activated was operational. It is impossible to assess whether or not the target relating to judicial assistance had been achieved, as the source of verification used to identify the beneficiaries (RAMED cardholders) was not appropriate.

According to the EU Delegation, most of the PACC targets had been achieved. However, due to a lack of documentation or the absence of checks by the EU Delegation, there was no proof of the achievement of five indicators at the time of payment (see Annex VI).

Despite the extensions for indicator assessment granted by the EU Delegation (see paragraph 51), target achievement was still low. In addition, in 2018, the Commission set less ambitious targets for five indicators in the justice sector, dropped one PACC indicator and reduced the targets of two others. As such, the Commission reduced the conditions for achievement.

Budget support had not sufficiently supported reforms

BS funds in Morocco are not linked to a specific budget line. According to the Commission²², this had generated growing discontent in some ministries due to the feeling that their efforts were not (or not always) rewarded with additional budgetary outlays. Although the national authorities favour BS as an aid delivery method, the sectoral ministries do not notice its added value, preferring to receive technical assistance as this is more tangible. Furthermore, up until 2018 there had been no multiannual budgetary forecasts. As from 2019, there is a three-year budget plan, which could be aligned with the multiannual BS programmes.

Although the budgetary executions rates were satisfactory, significant amounts remained to be spent in the budgets of the ministries audited for 2014-2016, and also for 2017 in the case of the Ministry of Industry (see Figure 8). The ministries’ annual budgets had not substantially increased, and had even fallen in the case of the Ministry of Energy (see Figure 9). This puts the added value of BS into question.

Source: EU Delegation.

Source: European Court of Auditors.

Moreover, EU BS only represents a fraction of the country’s gross domestic product, thereby limiting its overall leverage (see Figure 10).

For the PACC programme, only little statistical data for Morocco is publicly available. The reports provided by the national authorities do not allow sectoral progress to be monitored appropriately. For instance, the EU Delegation lacked annual statistics for a number of key figures to monitor the industrial acceleration plan. Consequently, it is difficult to determine the added value of the programme.

Health

Limited progress had been made towards the objectives of the health programme. Access to primary healthcare was still not equal as the differing conditions between the public and private sector, and between urban and rural environments, had not been addressed sufficiently via the indicators in the BS programme.

There was not sufficient emphasis on improving the skills of healthcare workers or attracting more medical students in the health sector. Furthermore, the specific objective of setting up an integrated, accessible electronic healthcare information system had not been achieved. BS can better address the main root causes (i.e. ratio of medical staff per inhabitant and disparities between urban and rural environments) in the long term, whereas its short term impact will remain limited.

Social Protection

EU support had prompted reforms in the social protection sector, but, given the early stage of the BS programme it was too early to see an overall impact. The BS led to the formulation of a single sector policy on social protection. However, policy implementation was affected by legislative delays.

A positive effect of the BS programme is that the introduction of individual social security numbers will be linked to an impact evaluation concerning the Tayssir²³, Régime d’assistance Médicale and DAAM²⁴ programmes. Thanks to this individual social security number, only eligible beneficiaries will benefit from these programmes, which will have a significant effect on programme costs. In addition, the social security number will be the starting point for all social services. In the near future, an anti-fraud component will be added to the individual social security number (via technical assistance provided by the EU).

Justice

The Moroccan government had already initiated reforms in 2011, but given the complexity of these reforms, implementation was slow, especially for the penal code, which has been under parliament scrutiny for over two years. The reforms are however particularly important as regards the protection of human rights (detention conditions, etc.). According to Freedom House²⁵ reports²⁶, the justice sector is not yet considered independent.

The International Commission of Jurists pointed out in one of its reports²⁷ that investigative judges and prosecutors routinely disregard provisions of the Code of Criminal Procedure that provide for pre-trial detention to be used only in exceptional cases. In 2017, 42 % of prisoners were held under preventive detention. It also confirms the reports by Freedom House, stating that police custody procedures fail to comply with Morocco’s obligations under international law.

Overall, there had been limited progress towards the achievement of the objectives of the BS programme: an independent justice sector, improved access to rights and justice, increased judicial protection of rights and freedoms and an increase in the effectiveness and efficiency of the justice sector.

PACC

In general, Morocco’s competitiveness was improving, with an increase in exports, GDP growth, an increase in foreign direct investment and a reduction in the current account balance deficit. Morocco had also risen 27 places in the World Bank’s ‘Doing Business’ index between 2014 and 2019 (see Annex VII). Box 4 shows a positive achievement linked to the PACC programme.

There was also a strong political will to implement the industrial acceleration plan²⁸. According to the Organisation for Economic Cooperation and Development, despite the high number of reforms and the support for start-up and innovation, more international companies than SMEs had been set up in Morocco.

The informal sector is extensive in Morocco (around 2.38 million business units²⁹). Consequently, even if the PACC were to formalise 45 000, this would not be significant. Nor is there any guarantee that ‘auto-entrepreneurs’ officially register their activities after obtaining the relevant card (see paragraph 59, point (a)). PACC support is limited to 250 SMEs, whereas there are about 735 000 SMEs in Morocco.

In addition, only 100 export companies with a turnover below 5 million dirham (approximatively €460 000) received support. The current ceiling (5 million dirham) meant that 4 260 companies were potentially eligible (i.e. 69 % of the export companies). As the goal was to support smaller companies and funds allowed to support only 100 companies, it would have been sensible to set a lower ceiling.

Acknowledgement of EU support not sufficiently visible

Visibility of the EU’s financial cooperation, in particular as regards the results achieved, was insufficient. For example, no joint press releases were issued and there were no signs acknowledging EU support. While the political dialogue was suspended, the Ministry of Foreign Affairs had asked the other ministries not to communicate openly about any EU support received.

The social protection programme had a condition in the financing agreement relating to communication and visibility. The health programme had a specific budget line dedicated to visibility. However, events in the health sector were only organised as from 2019. An additional indicator, ‘Reinforce communication on the reform of the justice sector and the visibility of EU support’, had been added to the justice programme via an addendum on 20 December 2018, with a deadline for achievement of 31 December 2018. However, the conferences on the reform of the justice sector had already been organised before the addendum was signed, and it was mainly the Ministry of Justice that benefited from the increased visibility.

The PACC financing agreement included a communication and visibility condition. The ministry was required to draft and submit a communication plan as a condition for disbursement of the first variable tranche. The ministry also had to provide a report on the implementation of the communication plan before or upon submitting its request for disbursement of the next variable tranche. The ministry had provided a plan, which was approved by the Commission, but none of the proposed actions was implemented by the end of December 2018. This did not entail any financial consequences for the ministries.

The EU logo did not appear on beneficiary websites for the programmes audited. Consequently, the visibility of EU support to Morocco did not reflect its presence as one of the biggest donors.

Limited progress on key challenges

We examined whether the BS programmes made a positive contribution to cross-cutting issues and regional disparities.

There is evidence that poverty reduced but not social disparities

The poverty level³⁰ in Morocco had decreased significantly since 2001 (see Figure 11), although no data was available beyond 2014. Despite this reduction, there was no evidence that social disparities had improved, neither at national, urban or rural level.

Source: World Bank.

A comparison of the Gini coefficient³¹ (2010-2017) for Morocco and all other middle-income countries for which data was available, as well as other recent studies, such as the one carried out by the Organisation for Economic Cooperation and Development and the African Union³² indicates that social disparities in Morocco remained high. However, Morocco’s performance was average compared to other middle-income countries (see Figure 12).

Source: World Bank.

Limited improvement in gender equality and human rights

Although Morocco has made advancements in women’s rights over the last two decades, it still ranks 137th out of 149 countries according to the 2018 World Economic Forum’s Global Gender Gap Report. Morocco’s 2011 constitutional reforms included several proposals to increase women’s political and economic participation. Despite these pronouncements, women remain underrepresented in managerial positions, leave school at younger ages than male students, and are still an underutilized economic resource in Morocco.

EU support targeted cross-cutting issues such as gender and human rights as follows:

1. The EU action plan (advanced status) had a strong focus on gender equality, as did the SSF. The Commission monitored the expected results through the annual reporting exercise on the Gender Action Plan.
2. Morocco is the only country that benefits form a dedicated BS programme on gender equality. Despite the mixed results of the 2012-2016 BS programme, with only 48 % disbursed, a new programme was launched for 2018-2020. The evaluation of the first gender-related BS programme revealed that, due to the lack of results indicators, the gender programme had a limited effect on other sectors. In addition, gender mainstreaming could have been carried out more effectively and gender-based economic disparities had not decreased.
3. Gender had been taken into account in BS for social protection (two out of 15 indicators), justice (two out of 10 indicators) and health (three out of 18 indicators). For the PACC programme, the EU Delegation had not managed to have it included, as the ministry was against including it.
4. Human rights had only been specifically addressed in the justice sector (three out of 10 indicators), but none of these targets had been achieved so far.

Despite this targeting, no improvement could be observed for the period under review. Moreover, the EU’s assessment of fundamental rights indicated that the situation had not improved since 2014.

The limited progress in gender equality is confirmed by data from the United Nations Development Programme with regard to the gender inequality index³³ and the human development index (HDI)³⁴ for men and women (see Figure 13).

Source: United Nations Development Programme

Freedom House also confirms the negative situation in Morocco with regard to human rights (see Figure 14). The main issues they mention are the restrictive press laws, lack of internet freedom, failure to allow free assembly, and the lack of independence of the justice sector. In 2018, the score for Morocco’s civil liberties declined due to harsh state responses to major demonstrations throughout the year. Morocco is considered ‘partially free’ (see Figure 15).

Source: Freedom House.

Aggregate score: 0 = least free / 100 = most free

Source: Freedom House.

Conclusions and recommendations

The audit examined the effectiveness of EU BS to priority sectors in Morocco. Based on an appropriate risk analysis and needs assessment, the Commission considered BS to be the right choice of aid delivery instrument. However, we concluded that its added value and ability to support reforms was limited due to sub-optimal focus, weak implementation and insufficient monitoring.The main weaknesses related to indicator design and results assessment. Not all expected outputs were delivered, nor were disbursements always based on the achievement of targets. Donor coordination was uneven. Moreover, there was no evidence that BS had supported the effective implementation of reforms.

The Commission addressed needs identified in national and EU strategies. However, we found that the three priority sectors were too broadly defined, meaning BS was distributed across too many areas. This could weaken its impact (see paragraphs 25 and 26). The Commission had not used a transparent method to allocate amounts to sectoral BS programmes (see paragraph 27). The Commission had not used the political standstill to reassess its operational priorities for Morocco and develop a clear strategy (see paragraphs 32 and 33). With regard to donor coordination, Member States were keen to maintain their own visibility instead of aligning their objectives with those of the EU (see paragraph 35). Furthermore, very few joint indicators, missions or evaluations were in place between the EU and other donors for the sectors audited (see paragraph 38).

For the next single support framework, the Commission and the EEAS should:

1. reduce the number of sectors and prioritise them in order to take into account the objective of maximising the impact of EU assistance;
2. apply a more transparent and better documented method to allocate amounts to sectoral BS programmes;
3. reinforce joint programming with Member States to increase aid coordination and effectiveness.

Timeframe: June 2021

The Commission had not developed fully-fledged action plans with baseline data, results indicators and pre-defined targets. We noted weaknesses in the selection and use of indicators, as well as the use of output instead of outcome/impact indicators and outdated or missing baselines (see paragraphs 47 and 48).

The Commission and the EEAS should strengthen its use of conditionality by:

1. defining specific and relevant performance indicators with ambitious targets to support reforms and demonstrate progress/results;
2. making greater use of outcome-oriented indicators;
3. setting clearer, more relevant and more up-to-date baselines for all indicators.

Timeframe: December 2020

The EU Delegation had not formalised policy dialogue strategies with clear objectives, nor were the meetings with the ministries systematically documented. Contacts between the ministries and the EU Delegation did not always take place at the appropriate level (see paragraphs 54–56).

The Commission and the EEAS should strengthen their policy dialogue framework by adopting a policy dialogue strategy for all areas in which the EU provides support. This requires:

1. a clear and appropriate definition of the objectives and expected results of the dialogue;
2. minutes should be drafted;
3. assessments of the achievements of the policy dialogue strategy.

Timeframe: December 2020

The Commission’s assessment of the achievement of indicator-related targets was hampered by weaknesses such as payments made without verifying the reliability of the data, inappropriate calculations, payments made when targets had not been achieved and disbursements made despite a lack of progress. In addition, € 14.64 million was carried over to the next financial year, although the conditions stipulated in the financing agreement were not met (see paragraphs 58–61).

The Commission should enhance its payment verification procedures by:

1. applying appropriate calculation methods (where relevant);
2. disbursing funds only when there is reliable evidence that the target has actually been achieved;
3. carrying over targets and related payments to another period only when beneficiaries have provided justification that the delays were due to external factors.

Timeframe: December 2020

We found weaknesses in the Commission’s monitoring of BS operations. For example, the Commission monitored programmes mainly when making payments related to the achievement of indicators, which was often too late to allow corrections to be made when there were delays (see paragraphs 47 and 62–64).

The Commission should improve the monitoring of its BS operations by:

1. making greater use of field visits when monitoring programmes;
2. strengthening assessments of sectoral strategies and monitoring their implementation using the indicators of the sectoral strategies;
3. formally following up recommendations made by external experts and implementing those that are considered relevant.

Timeframe: December 2020

Less than half of the BS targets had been achieved (see paragraphs 66–71). Although progress had been made towards the objectives of the BS programmes in the sectors audited, it was limited (see paragraphs 72–86). The implementation of ministries’ budgets had improved, but significant amounts remained to be spent. This puts the added value of BS into question (see paragraphs 73–74).

Visibility of EU support in Morocco was insufficient. The social protection BS programme had a general condition relating to visibility. The required action plan stipulated in the PACC financing agreement had been drafted, but not implemented. In the justice sector, an indicator relating to visibility had been added at a later stage, but targets had already been achieved when the addendum was signed. In the health programme, a budget was provided for visibility, but events only took place as from 2019 (see paragraphs 87–90).

The Commission and the EEAS should stipulate visibility conditions or indicators in its BS programmes in order to ensure that the EU support provided in Morocco is publicised. This should be a mandatory condition for disbursement in the financing agreement.

Timeframe: June 2020

EU support targeted cross-cutting issues such as gender and human rights. Despite this targeting, only limited improvement could be observed for the period under review. (see paragraphs 94-98).

This Report was adopted by the Court of Auditors in Luxembourg at its meeting of 14 November 2019.

For the Court of Auditors

Klaus-Heiner Lehne
President

Annexes

Annex I – Important EU-Morocco cooperation phases

Source: European Court of Auditors.

Annex II – Budget support programme decisions, contracts and payments (2014 to 2018)
[European Neighbourhood Instrument – budget line 22 04]

Annex III – Funding by other EU instruments (2014-2018)

Annex IV – Overview of contracts/projects audited

Annex V – Budget support programme objectives

Annex VI – Variable tranche disbursement issues

Annex VII – Evolution of key indicators

Source: European Court of Auditors.

Annex VIII – Budget support contract ratings by sector

Acronyms and abbreviations

ADB: African Development Bank

BS: Budget Support

CJEU: Court of Justice of the European Union

EEAS: European External Action Service

ENI: European Neighbourhood Instrument

ENP: European Neighbourhood Policy

EU: European Union

PACC: Programme d’appui à la croissance verte et la compétitivité du Maroc

SME: Small- and Medium-sized Enterprise

SSF: Single Support Framework

WB: World Bank

Audit team

The ECA’s special reports set out the results of its audits of EU policies and programmes, or of management-related topics from specific budgetary areas. The ECA selects and designs these audit tasks to maximise impact by considering the risks to performance or compliance, the level of income or spending involved, forthcoming developments and political and public interest.

This performance audit was carried out by Audit Chamber III, External actions/Security and justice, headed by ECA Member Bettina Jakobsen. The audit was led by ECA Member Hannu Takkula, supported by Turo Hentila, Head of Private Office; Helka Nykaenen, Private Office Attaché; Kim Hublé, Head of Task; and Aurélia Petliza and Dirk Neumeister, Auditors.

Endnotes

¹ Source: Commission figures for 2017 (DG Trade).

² United Nations Human Rights Council – Universal Periodic Review Morocco May 2017.

³ "Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Kingdom of Morocco, of the other part" – OJ L 70, 18.3.2000, p. 2.

⁴ Document conjoint UE-Maroc sur le renforcement des relations bilatérales/ Statut Avancé (13653/08).

⁵ Judgment by the General Court of the EU of 10 December 2015 (Case T-512/12).

⁶ 2012/497/EU: Council Decision, (OJ L 241, 7.9.2012, p. 2).

⁷ Judgment by the CJEU of 21 December 2016 (Case C-104/16 P).

⁸ Judgment of the CJEU of 27 February 2018 (Case C-266/16).

⁹ 65 % of allocated expenditure and 72 % of payments.

¹⁰ Single Support Framework 2014-2017. The sub-sectors include for example health, education, justice and rural development.

¹¹ Increasing the impact of EU Development Policy: an Agenda for Change (COM(2011) 637 final).

¹² The indicative allocations provided for in the SSF, the level of funding at which the EU can ensure sufficient policy leverage, additional funding required for strategy implementation, absorption capacity and other stakeholder interventions.

¹³ Meeting between the Moroccan authorities led by the Minister of Foreign Affairs, the EU High Representative for Common Foreign Security and Policy, the EU Commissioner for European Neighbourhood Policy and enlargement negotiations and the Member States’ representatives.

¹⁴ Of the 54 targets considered for disbursement, 24 should have had an appropriate baseline. However, a baseline was set for only seven targets. Eight targets had an inaccurate baseline or none at all, and nine targets had an outdated baseline.

¹⁵ Of the 24 targets that should have had a baseline, nine had an outdated baseline. Of the 54 targets considered for disbursement, eight had already been achieved before the financing agreement was signed.

¹⁶ The design phase is time-consuming (about a year) and is subject to various levels of approval. The Commission does not have the flexibility to change the targets or indicators at the end of the negotiation procedure.

¹⁷ See Box 1.

¹⁸ Twelve out of the 42 targets for which this was applicable (i.e. 29%).

¹⁹ A target can belong to one or more of the following sub-headings.

²⁰ Which included the creation of a Court of Appeal in Guelmim and 13 Courts of First Instance (through the creation of a Court of First Instance in Tahenaout and the transformation of 12 judicial centres into Courts of First Instance, including Sidi Ifni).

²¹ According to the expert mission report (November 2017) approved by the European Commission, this implementation rate of 60 % results from the reduction of the number of judicial centres from 120 to 72 (eight of which had to be activated) as provided by a ministerial decision.

²² European Commission - Issues Paper: a review of the budget support instrument in Morocco, March 2015 and October 2018.

²³ National programme for learning support.

²⁴ National programme for direct support to widows with children.

²⁵ Freedom House is a non-governmental organisation that conducts research and provides advocacy regarding democracy, political freedom and human rights.

²⁶ E.g., https://freedomhouse.org/report/freedom-world/2018/morocco.

²⁷ International Commission of Jurists, ‘Reform the criminal justice system in Morocco: strengthen pre-trial rights, guarantees and procedures’ (April 2017).

²⁸ It is one of the Moroccan Government’s major strategies aimed at (i) increasing the number of jobs in the industrial sector, (ii) changing the structure of the Moroccan economy by increasing the share of industry in the GDP, (iii) increasing exports of industrial products, (iv) increasing foreign direct investments in industry and (v) improving the productivity of the sector.

²⁹ Based on a survey by the General Confederation of Companies in Morocco in 2014.

³⁰ All individuals whose consumption expenditure is below the national poverty line ($2.15 per day) are considered poor (World Bank country diagnostics June 2018).

³¹ The Gini coefficient is used to measure income distribution across percentiles in a population. The higher the Gini coefficient, the greater the country’s inequality, with high-income individuals receiving much larger percentages of the total income of the population than the average percentage per capita.

³² African Development Dynamics 2018 (11 July 2018).

³³ A composite index reflecting inequality between women and men in three dimensions of achievement: reproductive health, empowerment and the labour market; 100 % = inequality and 0 % = equality.

³⁴ A composite index measuring average achievement in three basic dimensions of human development — a long and healthy life, knowledge and a decent standard of living.

Timeline

Contact

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