Tunisia - Fourth Water Supply Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2088-TUN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO SOCIETE NATIONALE D'EXPLOITATION ET DE DISTRIBUTION DES EAUX WITH THE GUARANTEE OF THE REPUBLIC OF TUNISIA FOR A FOURTH WATER SUPPLY PROJECT May 20, 1977 This document has a restricted distribution and may be used by recipients only in the performance of their officlal duties. Its contents may not otherwise be disclosed without World Bank authoriation.  Currency Unit Tunisian Dinar (D) The exchange rate of the Tunisian Dinar is floating. The rate used in the appraisal report, which approximates the current rate, is US$ 1 TD 0.425 TD 1 US$ 2.35 TD 1,000 US$ 2,350 TD 1,000,000 US$ 2,350,000 Fiscal Year January 1 to December 31 Abbreviations BDET Banque de Developpement Economique de Tunisie COFITOUR Compagnie Financiere et Touristique DEGTH Direction des Etudes et Grands Travaux Hydrauliques (Ministare de l'Agriculture) IDA International Development Association KfW Kreditanstalt fuer Wiederaufbau OMVVM Office de la Mise en Valeur de la Vallee de la Medjerda ONAS Office Nationale d'Assainaissement PERT Project Evaluation and Review Techniques SOGREAH Societe Grenobloise d'Etudes et d'Applications Hydrauliques SONEDE Societe Nationale d'Exploitation et de Distribution des Eaux  FOR OFFICIAL USE ONLY TUNISIA FOURTH WATER SUPPLY PROJECT Loan and Project Summary Borrower: Societe Nationale d'Exploitation et de Distribution des Eaux (SONEDE) Guarantor: Republic of Tunisia Amount: US$21.0 million equivalent Terms: 17 years including 3-1/2 years grace, with interest at 8.2 percent. Project Construction of facilities to meet the potable water needs Description: of the governorates of Tunis, Tunis-Sud, Beja, Jendouba, and Nabeul to the year 1990; and technical assistance. The four major components are: (i) production facilities including the Saida dam-reservoir, two pumping stations, transmission pipelines and a water treatment plant; (ii) extension of the distribution system in Greater Tunis -including installation of two primary mains, the expansion and improvement of the secondary distribution network and upgrading of booster pumping stations; (iii) the extension of distribution systems including expansion of the primary systems, improvement of the secondary distribution networks and upgrading of storage and booster pumping in Beja, Medjez-el-Bab, Pont du Fahs, and South Nabeul; (iv) study to assist SONEDE in developing and adapting its management structures (including its computer and information systems) in accordance with the needs of its future expansion. The proposed loan would finance the total foreign exchange cost of the production component. Estimated Cost: The cost of the project is estimated at $102.9 million, with the following main components: This documenl ha a restricted distribution and may be usd by rwcipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World lank authoriation.  Foreign Local Total ------$ Million------- Production Facilities 13.3 15.1 28.4 Distribution System Greater Tunis 15.9 10.1 26.0 Distribution System Other Areas 2.6 2.0 4.6 Design and Construction Supervision 1.1 2.3 3.4 Consultants Design and Construction Supervision 0.2 1.2 1.4 Management Information System 0.2 0.2 0.4 Total Base Cost 33.3 30.9 64.2 Physical Contingencies 4.7 4.1 8.8 Price Contingencies 10.4 19.5 29.9 Total 48.4 54.5 102.9 Financing Plan: US$ Million Percent Total SONEDE Requirements 1977-82 422.9 100.0 Sources Net Cash Generation 87.7 20.7 Borrowings Proposed Bank Loan 21.0 5.0 Proceeds Existing Loans and Credit 14.0 3.3 Other Loan (Kuwait Fund) 23.4 5.5 Other Proposed Loans 56.4 13.4 Customers Contributions 102.8 24.3 Government Equity 117.6 27.8 Total Sources 422.9 100.0 Estimated Disbursements: 1978 1979 1980 1981 1982 ---------------US$ Million-------------- Annual 2.0 5.2 5.4 6.3 2.1 Cumulative 2.0 7.2 12.6 18.9 21.0 Procurement Procurement of equipment and civil works for the production Arrangements: facilities is expected to be divided into ten contracts. International competitive bidding procedures in accordance with Bank procurement guidelines would be followed for con- tracts for goods exceeding $150,000 and for civil works exceeding $450,000. competitive bidding advertised locally in accordance with SONEDE procedures which are acceptable would be followed for contracts for goods of less than $150,000 and for civil works of less than $450,000,  - iii - totalling not more than $1,500,000. In bid evaluation domestic manufacturers will receive preference of 15 percent or applicable customs duty, whichever is lower. Consultants: 480 man-months of consultants services (an average $3,750 per man-month) are foreseen in connection with the project for: (i) engineering design and construction supervision; and (ii) a study of SONEDE's management and computer information systems. Rate of Return: 8.6 percent. Appraisal Report: No. 1532-TUN, dated May 9, 1977   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO SOCIETE NATIONALE D'EXPLOITATION ET DE DISTRIBUTION DES EAUX WITH THE GUARANTEE OF THE REPUBLIC OF TUNISIA FOR A FOURTH WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed loan to Societe Nationale d'Exploitation et de Distribution des Eaux with the guarantee of the Republic of Tunisia, for the equivalent of US$21.0 million to help finance a fourth water supply project. The loan would have a term of 17 years, including 3-1/2 years of grace, with interest at 8.2 percent per annum. Additional financing for the project is expected to be provided by a loan of about $24 million equivalent from the Kuwait Fund for Arab Economic Development. PART I - THE ECONOMY 1/ 2. A special economic mission visited Tunisia in December 1976 to review the draft Tunisian Fifth Plan, 1977-1981. A special economic report entitled "Economic Position and Prospects of Tunisia, Review of the Fifth Development Plan, 1977-81" (No. 1539-TUN) was issued on May 2, 1977. Country data sheets are attached in Annex 1. 3. Tunisia's development has been hampered by scarcity of natural re- sources. Much of the country is arid or semi-arid, and agriculture is highly dependent on rainfall. Minerals are mostly of low quality and, apart from phosphates, limited in quantity. Relatively small quantities of petroleum were discovered in the mid-1960's and have since become an increasingly valuable source of revenue and export earnings. Industrial development has been handicapped by the small size of the domestic market as well as a lack of skills and experience. Tourism has developed rapidly and workers' remit- tances have become a significant item in the balance of payments. Tunisia has enjoyed a large amount of external aid and used it to expand economic and social infrastructure, broaden the industrial base, make available a wide range of social and welfare services to a large part of the population, and increase the rate of growth. Per capita GNP increased by 4.2 percent annually from 1961 to 1975. Like most countries, however, Tunisia has not yet found adequate ways to cope with unemployment and poverty and to achieve a balanced distribution of consumption among income groups, between urban and rural areas, and among regions. 4. Government strategy in the 1960's relied heavily on central plan- ning of investment and resource allocation, with the public sector playing a major role in production as well as providing infrastructure and services. Foreign exchange shortages and concern with inflation led to recourse to a 1/ Substantially identical to Part I of the President's Report (P-2074-TUN, May 12, 1977) for the Sidi Salem Multipurpose Project.  - 2 - pervasive system of price determination and controls. An unusually long series of poor crop years due to shortage of rainfall slowed the growth of output. Many investments in public enterprises proved to be uneconomic and private initiative in most sectors except tourism and petroleum was limited. 5. The Government's present development strategy was introduced in the early 1970s. Its principal objectives are: (a) accelerating growth based on export-oriented industries, by encouraging private initiative, reducing direct Government involvement in production and relaxing administrative regulations; (b) creating jobs, primarily in the expanding industrial sector, encouraging worker emigration, reducing population growth and improving education and training; and (c) maintaining internal and external financial stability. The 1973-76 Fourth Plan set a target rate of GDP growth of 7 percent, providing for a 5.4 percent growth rate in per capita private consumption. Investment was projected to increase by 80 percent above the level of the 1969-72 Plan. National savings were to finance three-quarters of investment. Exports of goods and services were projected to grow at 8.8 percent per year at constant prices and imports at 12.2 percent. The Plan foresaw net external capital inflows increasing by 55 percent over 1969-1972 average levels and providing 23.5 percent of total investment. Debt service was to be held to below 20 percent of exports. The original Plan targets were conservative in terms of both growth and savings potential, and have been significantly affected by the impact of the changed petroleum and phosphate prices on the Tunisian economy (paras. 9 and 10). 6. The real growth of GDP has accelerated since 1970, reaching 9.3 percent per annum during 1970-75, compared with 4.6 percent during the pre- vious decade. The acceleration can be attributed to fortuitous factors such as good weather, leading to record cereal and olive crops, to important growth in tourism, petroleum and phosphate revenues and workers' remittances, and to the general reorientation of Government policy since 1970 which re- newed self-confidence and initiative in the private sector. Expansion of manufacturing and phosphate production has been significant. By 1975, per capita GNP reached $760 (1976 Bank Atlas estimate). Investment remained high in relation to GDP, 24 percent in 1970-75 compared with 23 percent during the 1960's. National savings rose sharply from an average of 13.5 percent of GDP at current prices during the 1960's to 21 percent during 1970-75. Con- sequently, the share of external borrowing in financing investment dropped from 44 percent in the 1960's to 11 percent during 1970-75. 7. Because of price controls and Government subsidies of basic consumer goods, and prudent fiscal and monetary policies, Tunisia has maintained rela- tive price stability. Consumer price increases averaged 5.2 percent annually during 1970-75. The official GDP deflator rose at an average annual rate of 8.0 percent and average investment costs increased by 11.6 percent. 8. The balance of payments was in overall surplus from 1967 to 1974 and since late 1973 benefitted greatly from sharply improved terms-of-trade. How- ever, in 1975 the terms of trade began to deteriorate, the demand for Tunisian exports sharply decreased, and despite substantial disbursements on external borrowing, international reserves declined by 11 percent. At the end of 1976, net reserves amounted to $344 million, equivalent to about 3 months of imports.  - 3 - 9. Despite the terms-of-trade loss in 1975, Tunisia on balance still is a beneficiary of the changes in world market prices since late 1973. Mainly because of sharply higher prices for petroleum, phosphates and olive oil, export earnings rose from $714 million in 1973 to $1,254 million in 1974 and $1,356 million in 1975. On the other hand, increases in import prices, combined with higher domestic demand, caused payments on imports to grow from $782 million in 1973 to $1,242 million in 1974 and to $1,565 million in 1975. In the medium-term, Tunisia's current account balance is likely to be in- fluenced by slower economic growth in Western Europe. Taking into account probable capital inflows through direct investment and external aid, the level of net reserves is projected to remain equivalent to about 3 months of imports during 1976-81. 10. The projected changes in Tunisia's balance of payments position and in Government savings do not call for a substantial revision in development strategy. They suggest rather that Tunisia should continue its efforts to achieve high investment and GDP growth rates. Since workers' emigration to Europe and Libya is now more limited, the effort to increase investment, par- ticularly in labor-intensive industry and agriculture, should be increased. With an adequate savings level and continuing external aid, the Tunisian economy has the financial resources that should enable it to sustain an average annual growth rate of between 7 and 8 percent during 1976-81. The level of future growth would also depend on continuing efforts to stimulate private investment, to increase the international competitiveness of industry, and to improve the planning and implementation of public investments. 11. Tunisia has made impressive social gains. By 1974, primary school enrollment had reached 88 percent, and secondary enrollment, 19 percent, of the relevant age-groups. Public health services have been greatly expanded with many provided free. A family planning program has been introduced. Total social expenditures during 1970-75 increased by about 10 percent per annum and on average accounted for 9 percent of GDP and for 30 percent of total public expenditures. Nonetheless, major social issues remain. Further progress is needed in land reform and in creating employment. The unemploy- ment rate is estimated to have been about 22 percent in the non-agricultural sectors in 1976; underemployment in the rural sector remains high. There has been a growing concentration of productive activities in a few urban areas, especially in Tunis. 12. So far as can be judged from available data, there has been a gradual improvement in income distribution. Real incomes increased in all sectors during the 1960's, yet by a higher percentage in the modern sector than in the rural sector, due partly to the series of poor harvests. In rural areas substantial income disparities remain, in part as a result of the structure of land tenure. In the modern sector, especially in industry, increases in real incomes in the 1960's exceeded the rise in productivity; the income distribu- tion trend has favored industrial workers. Thanks especially to the income redistribution effects of free social services, the proportion of the total population living in poverty, as defined by the Tunisians (i.e. earning less than D 70 per capita annually at 1975 prices), was substantially reduced during the decade. Most of this group continues to live in rural areas. Since 1970, higher agricultural output, increases in minimum agricultural  - 4 - wages, tax exemptions for low incomes, the inflow of workers' remittances from abroad and the stabilization of basic commodity prices through Government subsidies have improved the absolute, and possibly also the relative, position of the poorest groups. 13. During 1970-75, agriculture provided about half of total employ- ment, 28 percent of merchandise exports and 19 percent of GDP. Food process- ing accounted for another 3 percent of GDP and over a third of value added in manufacturing. During this period agricultural production rose substantially, largely as a result of favorable weather. Large infrastructure investments were made during the last decade. Current policy emphasizes projects that make a rapid and direct contribution to production and recognizes various constraints on agricultural development: absentee ownership, insecurity of tenure, inadequate access to agricultural credit, inadequate extension ser- vices, insufficient agricultural education, and underutilization of irrigation investments. Under the Fourth Plan, about $140 million was allocated to a rural development program which has been executed by the provincial adminis- trations. 14. During the 1960's, manufacturing production in Tunisia increased by 8 percent annually. There has been a remarkable acceleration of growth in the 1970's due in part to record years for the olive oil processing industry and to favorable developments in the textile and chemical industries. The early thrust of industrialization was supplied by large import substitution projects in the social sector. These suffered, however, from the limited domestic market and shortages of experienced staff and management. More emphasis has been put on export-oriented private industries since 1970. Under the Fourth Plan, private manufacturing investment, particularly in food processing, textiles, fertilizers and metals transformation, was ex- pected to average D 25 million per year, compared with D 12 million in 1972, and to account for. two-thirds of total investment in manufacturing; these targets have been exceeded. Foreign and domestic private investment is now stimulated by a comprehensive incentive framework, and facilitated by the streamlined approval procedures of the investment promotion agency. Foreign investors are expected to contribute know-how and overseas marketing. A new agreement between Tunisia and the European Community was signed in April 1976. It provides for duty-free entry into the countries of the Community of nearly all Tunisian industrial products. The Government has established a special fund to encourage growth of small industries and industrial decentralization, and has started a program to establish industrial estates. 15. The development of tourism in Tunisia is relatively recent. Foreign- visitor arrivals reached a level of 780,000 in 1972, with an annual rate of growth over the period 1961-1972 of 30 percent -- higher than that of any other Mediterranean country. While 1973 saw a drop in the number of visitor nights, and 1974 registered another overall drop, therc. was a very strong recovery in 1975, with over one million visitor arrivels. Since 1970, earnings from tourism have been a major source of foreign exchaiige, having reached $300 million in 1975. The rapid development of tourism in Tunisia has unfortunately been accom- panied by an inadequate development of infrastructure (particularly recrea- tional facilities), shortages of trained manpower and inadequate services. The Government is endeavoring to alleviate these constraints through a variety  -5- of measures, including revised investment incentives, increased marketing and training efforts, codes to enforce quality standards and more stringent zoning laws. 16. Since the early 1960's Tunisia has obtained relatively large amounts of official aid. A Consultative Group has provided a forum for aid-coordina- tion among major donors (see para. 25). During 1970-75, annual loan commit- ments from public sources averaged $155 million, or about $28 per capita. About 68 percent of these commitments came from bilateral public sources, chiefly from France (15 percent), Canada (13 percent), and the Federal Republic of Germany (10 percent). About 14 percent came from oil-producing countries, whose share rapidly increased from 8 percent in 1970 to 16 percent in 1975. Commitments from the Bank Group during 1970-75 accounted for 29 percent of total public commitments. Most aid has been obtained on concessionary terms: during 1970-75, the average terms of borrowing from bilateral sources were 3.5 percent interest and 23 years to maturity, including 6 years of grace; from multilateral sources, they were 6.0 percent interest and 26 years to maturity, including 5 years of grace. During the same period Tunisia also received annually some $40 million in grants. Loan commitments from private sources averaged $32 million a year. Direct foreign private investment has been com- paratively small, but recently it has picked up momentum following increased activity in the petroleum sector and new incentives offered to foreign in- vestors in manufacturing. Thus, net direct foreign investment increased from $19 million in 1970 to $48 million in 1975. 17. Tunisia's total public debt outstanding (including undisbursed) in- creased from $846 million in 1970 to $1,571 million at the end of 1975. The disbursed portion outstanding at the end of 1975 was $1,071 million, equivalent to 25 percent of GDP, compared with 40 percent in 1970. Debt service payments in 1975 were 7.6 percent of export earnings compared with 19.5 percent in 1970. This significant decline in the debt service ratio was mainly due to the sharp increase in export earnings following the changes in world market prices in 1973 and 1974; it also reflected Government efforts to change the structure of Tunisia's foreign debt. In the future, Tunisia will have to continue to rely heavily on foreign financial assistance in order to reach its development goals. Tunisia is capable of servicing substantial additional debt, and it is projected that Tunisia would be able to maintain its debt service at a manage- able level in the long run. PART II - BANK GROUP OPERATIONS IN TUNISIA 18. Since 1962, Tunisia has received a total of twenty-seven loans and ten credits amounting respectively to $341.4 million-and $70.1 million, net of cancellations and refundings. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1977, and notes on the execution of ongoing projects. While disbursements of some loans and credits have been slower than foreseen at appraisal, on the whole project execution has been satisfactory. In a number of sectors, important institutional improvements have been achieved and independent agencies have been created or strengthened.  -6- 19. The Bank's lending strategy in Tunisia aims at supporting Government efforts to (a) increase employment, (b) encourage more balanced growth and distribution of income among regions and income groups, (c) promote export- oriented policies and investments, and (d) provide selective support for the development of infrastructure and for institution building in key public serv- ices. The main supporting feature of this lending strategy is to encourage the Tunisian authorities in timely and well-coordinated preparation of proj- ects, with emphasis on technical assistance. The Bank is also cooperating with the Government in its efforts to increase the mobilization of domestic and foreign resources, in part through encouraging project cofinancing; the latter is particularly important in view of the extent of Tunisia's external resource needs, the large size of many priority projects, and the limited availability of Bank resources relative to the country's needs. 20. Within this broad framework, past Bank Group lending has emphasized support for long-term investments in infrastructure and social development. Lending for urban and social development, including water supply, education, family planning and the Tunis urban planning and public transport project has accounted for 32 percent of Bank/IDA commitments in Tunisia. Lending for transport, power and tourism infrastructure has accounted for a further 35 percent. Agriculture and fisheries have received 12 percent of total commit- ments. Industrial and hotel financing through the Banque de Developpement Economique de Tunisie (BDET) has accounted for 15 percent, and the Gafsa phosphate development project received 6 percent of total commitments. 21. In agriculture, Bank involvement, in several sub-sectors, has met in some cases with success, in others with difficulties. The first agricul- tural project financed by the Bank Group was the 1967 Cooperative Farms Project, completed in 1973 after substantial delays and revisions caused by changes in Government agricultural policy in 1969. The First Agricultural Credit Project (Loan/Credit 779/263-TUN, $8 million, of 1971) and a 1971 IDA-financed Fisheries Project (Credit 270-TUN, $2 million) for development of Tunisia's inshore fisheries, are expected to be fully disbursed in 1977 and 1978 respectively. A loan for an Irrigation Rehabilitation Project (Loan 1068-TUN, $12.2 million) became effective in September 1975. The Bank has also attempted to play a more active role in rural development in Tunisia, but no specific project in this field has as yet materialized. Our experience to date has, however, served to underline the necessity for very close coordina- tion and careful preparation of future projects in this difficult but high priority sphere. 22. Lending in the current fiscal year and in the period ahead emphasizes projects promoting agricultural and industrial production, such as the Second Agricultural Credit Project approved by the Executive Directors in November, 1976, and urban and social development. Complementary to this primary focus, the program would also finance selected priority infrastructure projects. Projects under discussion with the authorities include a second fisheries project, a rural roads project, a seventh development finance company project including a small industries component, a second sewerage project, a project for the development and transmission of Tunisia's off-shore gas resources, and an urban development project.  - 7 - 23. The Bank Group accounted for about 23 percent of disbursements of official assistance to Tunisia during 1970-75. The Bank Group's shares in total debt outstanding and disbursed at the end of 1975 (including loans from private sources) and in debt service during 1975 were 15 percent and 14 percent respectively. The Bank Group's share in Tunisia's disbursed external debt is expected to decrease by 1980 to about 13 percent, and its share in debt service to about 10 percent. 24. IFC has invested in NPK Engrais (a fertilizer plant), in BDET, in Compagnie Financiere et Touristique (COFITOUR, a company to promote and invest in tourism projects), in Societe Touristique et Hoteliere RYM (a large hotel development) and in Industries Chimiques du Fluor, which will produce alumin- ium fluoride from local fluorspar for export. IFC's most recent investment, in May 1975, was in the Sousse-Nord integrated tourism development project. IFC's net commitments in Tunisia total $15.8 million. IFC's Board has ap- proved the sale of IFC shares in NPK Engrais to the Tunisian Government. 25. Since 1962 the Bank has chaired a Consultative Group for Tunisia bringing together the principal donor countries and institutions concerned with the country's development. The most recent meeting of the Group, held in Paris in June 1975, welcomed new participants which included Saudi Arabia, Japan, the Arab Fund for Economic and Social Development and the Commission of the European Communities. This year, in lieu of a meeting of the Consulta- tive Group, a development conference is being organized by the Government in Tunis in early July 1977. PART III - THE WATER SUPPLY SECTOR Water Resources 26. Tunisia's water resources are scarce. The high salinity content of some of the country's surface and groundwater sources, particularly in the south, makes them unacceptable for potable and even agricultural use. A Bank-financed study is being carried out by SOGREAH (Societe Grenobloise d'Etudes et d'Application Hydrauliques) on establishing acceptable levels of tolerance for mixing brackish waters with fresh sources. The results have not been conclusive to date. Studies have also been carried out on the tolerance of crops to various salinity levels of irrigation water. Fresh surface and groundwater sources are located almost entirely in the northern part of the country. Surface waters are located'at considerable distances from the main population centers, Tunis, Sfax and Sousse, along the eastern coast. Their quality is irregular and their capacity is limited. These constraints necessitate the construction of impounding dams to increase safe yields and unusually long transmission pipelines to supply the major urban areas. With full-development of storage facilities, available resources might meet potable, industrial and agricultural needs only to the year 2000. After that, recourse will have to be made to more sophisticated and expensive methods such as desalination and wastewater recycling.  - 8 - 27. The Ministry of Agriculture is responsible for the overall manage- ment of Tunisia's water resources. The Government is aware of the limitation of these resources and has undertaken two major efforts to promote their rational use. The first is the execution of studies for three water master plans: in the North, the Center and the South. The Central Tunisia Study is presently being carried out; that for the South, completed recently, is being used as a basis for feasibility studies on projects to be financed under the Fifth Plan. The Northern Tunisia Water Master Plan (see para 28) is the most advanced and the first stage of works under the Plan is expected to be financed by lhe Bank (documentation has been distributed recently for Board considera- tion) and several other sources. The second major effort is the promulgation of a Water Code to establish priorities, regulate use and strengthen the conservation of existing resources. The Code provides for the creation of an advisory National Water Commission as well as water-users associations at the governorate level. 28. At the Government's request, the Bank made a technical assistance grant in 1969 for the preparation of the Water Master Plan for Northern Tunisia, and acted as Executing Agency for the study. The final results of the study, which was carried out by Italconsult, were submitted to the Govern- ment in June 1974; further sensitivity analyses were undertaken in 1975. The Plan is the most appropriate alternative for meeting national objectives of increasing agricultural production and contributing to meeting Northern Tunisia's potable and industrial water requirements to the year 2000. The Plan would be carried out in two stages: the first, for use of the Medjerda River waters, would consist of construction of an impounding dam (Sidi Salem), a 126 km interconnection canal (Medjerda-Cap Bon), irrigation infrastructure and rehabilitation, and related works; the second stage, expected to be imple- mented in the 1980's, would involve the development of the Ichkeul Basin, in- cluding the construction of several small dams, a canal to transmit potable water to Bizerte and Tunis and further irrigation infrastructure development. Bank Involvement in Water Supply 29. In 1966, the Government asked the Bank and the Kingdom of Sweden to assist in financing potable water supply; with the help of consultants a pro- gram of works was defined which formed the basis of the 1968-73 National Water Program. In support of this program a Bank loan (581-TUN) of $15 million and a Swedish credit of $5 million were made in 1969 to finance a first project consisting mainly of major supply works for Tunis and the Sahel (eastern coastal) region, the most densely populated areas. In conjunction with this project, the Societe Nationale D'Exploitation et de Distribution des Eaux (SONEDE) was created to manage the production and distribution of potable water. SONEDE is an autonomous public company under the authority of the Ministry of Agriculture and has been the borrower and beneficiary under all Bank loans/credits in the water supply sector. In 1970, an IDA credit (209- TUN) of $10.5 million and a second Swedish credit of $3.5 million were granted for a second project, which included water supply works for the rapidly ex- panding tourism areas. The two projects, which constituted the bulk of the works in SONEDE's 1968-73 Program, were successfully implemented and the loan and credit were closed as of December 31, 1976.  - 9 - 30. The second project included funds for the preparation of a water supply improvement project in Sfax, which then became the major component of a third Bank loan (989-TUN) of $23 million in 1974. The third project also provided funds for a study of the comparative costs involved in using water of increasing salinity (see para. 26). The works under the third project constituted the major components of SONEDE's Fourth Plan (1973-76) investment program. SONEDE's performance under the first two projects, now completed, has been satisfactory: the company itself has been significantly strengthened and water supply services in the project areas have been improved. The third project is being executed on schedule. SONEDE is also the executing agency for the water supply component of the Tourism Infrastructure Project (Loan 858-TUN and CrediL 329-TUN) jointly financed with Kreditanstalt fuer Wiederaufbau (KfW). To complement the water supply works being carried out, the Bank made a loan in 1975 (1088-TUN) of $28 million for a First Urban Sewerage Project, to upgrade and extend the sewerage system in the Greater Tunis District and assist in the establishment of the National Sewerage Authority, ONAS. Fifth Plan Sector Program 31. Tunisia's Fifth Development Plan (1977-81) gives first priority in the water supply sector to improved and expanded water supply services to the country's urban areas (over 2,000 inhabitants), which are growing at an annual average of over 4 percent, with secondary emphasis on supplying villages (500 to 2,000 inhabitants). SONEDE's and the Government's objectives are to serve by 1990 at least 80 percent of the country's expected total population with a potable water supply (63 percent are served at present), to provide 85 percent of the urban population with direct house connections (64 percent served at present), and to supply an increased number of the country's villages with running potable water at public taps (77 percent served at present). To help meet these objectives SONEDE has developed a water supply master plan for five northern governorates projected to the year 2000. In light of SONEDE's performance over the past ten years and the Bank's analysis of the past and future growth of sectoral demand, the company's projections for water sales and population to be connected appear both reasonable and within SONEDE's capacity. 32. SONEDE's investment program during the construction period of the proposed project (1977-82) foresees total investment requirements of about $423 million, of which about 23 percent would be to complete works initiated during the Fourth Plan period. SONEDE's net internal cash generation and customers' contributions would provide $190.5 million or /!5 percent of total requirements. Foreign exchange borrowinga (Including $14 million representing proceerls of. existing loans) would provide $58-.4 million or about 14 percent. The Government expects to on-lend to SONEDE about $56 million or about 13 percent, representing proceeds from bilateral borrowings, and to provide in the form of equity contributiori an additional $117.6 million, representing the balance, about 28 percent of recquirements. The GovE-s-,,T1ent would. provide an additional $15.3 million, of which about $6.8 million would be provided under a Bank loan for the the Sidi Salem Multipurpose project, to finance the reloca- tion of water mains necerditated by the construction of the Sidi Salem dam- reservoir.  - 10 - PART IV - THE PROJECT 33. The proposed project was prepared by SONEDE with the assistance of consultants. The project was first presented to the Bank in March 1976; a preparation mission visited Tunisia in October 1976 and the project was appraised in December 1976. Negotiations were held in Washington in April 1977. The Borrower was represented by Mr. Frih, SONEDE's General Manager and the Guarantor by Mr. Ennaifar of the Ministry of Planning. A report entitled "Appraisal of a Fourth Water Supply Project in Tunisia" (No. 1532-TUN dated May 9, 1977) is being distributed separately to the Executive Directors. A Supplementary Data Sheet is attached as Annex III; a map showing the location of project components is also attached. Description and Objectives 34. The proposed project would encompass the first stage of SONEDE's water supply master plan and aims to meet the needs of five northern gover- norates--Beja, Jendouba, Nabeul, Tunis and Tunis Sud--to the year 1990. Nearly half of the country's urban population (growing at about 4 percent annually) resides in the project area. The population served would include about 1 million urban dwellers and about 200,000 rural inhabitants. The project would consist of works for potable water production and distribution, and of technical assistance. The first component, the production facilities, would include construction of a dam-reservoir at Saida, west of Tunis, a treat- ment plant, two pumping stations and the installation of connecting transmis- sion pipelines. The second component, which involves the first phase of works to extend the distribution system in Greater Tunis, includes the installation of two primary mains, the expansion and improvement of the secondary distri- bution network, and related works. About 80 percent of the water from the production component would be used in Greater Tunis. The third component would include the expansion of the primary system and of the secondary distri- bution networks, and related works in the cities of Beja, Medjez-el-Bab, Pont du Fahs and South Nabeul. The fourth component would comprise a study to assist SONEDE in developing and adapting its management information systems and computer programs to the needs of the company's projected expansion (see para. 45). 35. At the present rate of consumption growth of the five governorates, averaging 6 percent annually, and without new facilities, demand is expected to exceed water production by mid-1979. The deficit betweeen 1979 and 1982, when the proposed project as well as the new Medjerda-Cap Bon canal are ex- pected to be operational, would be met by drawing water from the existing Medjerda canal and treating it at an existing plant whose installed capacity can meet demand to 1982. 36. In light of the complexity of design of the production component, SONEDE sought technical and financial assistance from the Bank for the project. While its financial support of SONEDE continues to decline, the Bank's role in attracting other sources of financing and in strengthening SONEDE's technical  - 11 - and management capability becomes increasingly important. The latter role is particularly important in light of the demnands which will be made on SONEDE to plan and implement the ever more complex and expensive water supply works necessitated by the sectoral constraints. The Bank's contribution to SONEDE's investment programs, which represented 52 perceat of the 1968-72 program and 25 percent of the 1973-76 program, would decrease under the proposed project to about 5 percent of the company's requirements for investment during the period of project execution (1977-82). 37. The proposed project ^-iould allow the Dank's continued though indirect association with the District of Tunis, created in 1972 to plan and coordinate the development of Tunisia's largest urban agglomeration. The Bank has been directly involved with the District under both the Urban Planning and Public Transport and First Urban Sewerage projects. The District has prepared a master plan for housing and land development on which SONEDE's design for the Greater Tunis distribution system was based. The District has indicated its concurrence with the proposed project. SONEDE and the District would sign an agreement, no later than December 31, 1977, for the purpose of coordinating their activities in the execution of the project in Greater Tunis (draft Ludn Agreement, Section 3.06 and draft Guarantee Agreement, Section 3.07). Project Execution 38. The project would be carried out by SONEDE. The company s technical staff is competent to supervise the bulk of construction works; during negotia- tions an understanding was reached on a PERT program and construction schedule, which would be updated in light of final design studies. Because of the com- plex design of the production facilities, engineering consultants acceptable to the Bank would be retained, on terms and conditions satisfactory to the Bank, for periodic supervision of construction of the treatment plant and the Saida dam-reservoir (draft Loan Agreement, Section 3.02). SONEDE would also employ experts to carry out annual inspections of the Saida dam to ensure its continuing structural stability; the first such inspection would be made no later than July 1983 (draft Loan Agreement, Section 4.05). Consultants would be retained under the project to recommend changes in SONEDE's information systems with a view to the company's future expansion (see para. 45). The Government has provided assurances that it will expedite the acquisition of land and rights-of-way for the production and distribution facilities, to be acquired in 1977 and 1978 respectively (draft Guarantee Agreement, Section 3.03). 39. The final design of the production facilities and of the distribu- tion facilities in Greater Tunis would be carried out in 1977; the first tenders would be called in October 1977. Construction would begin in 1978 and would be completed at the end of 1981. The project facilities would be opera- tional by July 1982. To ensure SONEDE's ability to operate the proposed proj- ect effectively, the Government has provided assurances that all action neces- sary would be taken to complete the construction of the Sidi Salem dam on the Medjerda River and a conveyance system linking the dam with the pumping sta- tion to be constructed under the proposed project, and that SONEDE would be  - 12 - authorized to draw water from the existing Medjerda canal, and eventually from the proposed conveyance system, in an amount sufficient to cover the needs of the project (draft Guarantee Agreement, Section 3.06). Studies to determine the allocation of and cost recovery charges for the waters to be impounded in the Sidi Salem reservoir, for agricultural, potable and industrial use, would be undertaken in the context of the Sidi Salem Multipurpose project. Cost Estimates and Financing Plan 40. The total project cost is estimated at $102.9 million including physical and price contingencies, of which $49.9 million is for the production component, $44.8 million for the Greater Tunis distribution system, and $8.2 million for distribution systems in other areas. The foreign exchange com- ponent of the project, which represents about 47 percent of the total cost, is estimated at $48.4 million. Project costs include 480 man-months of consultant services, totalling about $1.8 million (an average of $3,750 per man-month), of which the Bank loan would finance $1.2 million. Price contingencies on local construction expenditures have been estimated to increase at 15 percent per annum to 1980 and 12 percent in 1981. For foreign expenditures, the assumed per annum rates are 9 percent in 1977, 8 percent in 1978 and 1979, and 7 per- cent thereafter. 41. The proposed Bank loan of $21 million would represent about 20 per- cent of the estimated total project cost and would finance the full foreign exchange cost of the production component including consultant services for engineering design and construction supervision. The foreign exchange cost of the Greater Tunis distribution component, currently estimated at about $23.4 million, is expected to be financed by the Kuwait Fund,which carried out its appraisal in May 1977. As the timely execution of the Greater Tunis component would determine the financial viability of the Bank-financed production com- ponent, the signing of a loan providing SONEDE sufficient foreign exchange to cover the foreign exchange costs of the Greater Tunis distribution component would be a condition of effectiveness of the proposed loan (draft Loan Agree- ment, Section 7.01). The Bank would have the right to suspend if the other loan is not effective by March 31, 1978; the two loans would be subject to cross default (draft Loan Agreement, Section 6.01 (c)(i)(A) and (B)). The total cost of the third component, the distribution systems in other areas, would be covered by SONEDE and the Government. SONEDE would provide from its own funds $35.5 million of the total project cost. The Government has agreed to make available to SONEDE any additional funds required to carry out the proposed project (draft Guarantee Agreement, Section 2.02). These funds are estimated to amount to about $23 million and would be provided in the form of equity according to an agreed schedule. Procurement and Disbursement 42. For the production component, major civil works and equipment con- tracts would be awarded on the basis of international competitive bidding pro- cedures in accordance with the Bank's procurement guidelines. Contracts for  - 13 - goods and civil works estimated to amount to less than $150,000 and $450,000 respectively, and totalling not more than $1,500,000, would be awarded on the basis of competitive bidding locally advertised in accordance with SONEDE's procedures, which are acceptable. The number and size of contracts to be placed for the production component would be reviewed with the Bank when final design studies and cost estimates have been completed. A 15 percent preference margin or existing customs duties, whichever is lower, would be granted in the evaluation of bids for equipment manufactured locally. A foreign contractor is expected to win the bid for construction of the water treatment plant and supply of equipment for the pumping stations, local contractors for supply of pipes for the production component. 43. The proposed Bank loan would be disbursed for the production com- ponent against: 100 percent of the c.i.f. cost of all direct imports, 39 per- cent of total expenditures for civil works construction, and 100 percent of foreign expenditures for consultant services for engineering design and super- vision of construction. The Bank loan would be disbursed over five years. Operations and Management of SONEDE 44. SONEDE employed 2,500 people at the end of 1976; conditions of serv- ice are satisfactory and salaries competitive. The company employs sufficient administrative and engineering personnel to meet its requirements of further expansion; some modifications of the organization structure such as the separa- tion of administration and finance, and the addition of a commercial department may be needed in future and can be implemented progressively. SONEDE's provi- sions for personnel training are sufficient. The company's accounting system is comprehensive. 45. SONEDE's information reporting and computer programs could be used more efficiently to serve as a tool for management decision-making. Provision has thus been made under the proposed project for consultants to assist the company in developing and adapting its management reporting mechanisms (in- cluding its computer programs and information systems) in accordance with the needs of its future expansion. SONEDE personnel and the consultants would review and recommend specific remedial action on such elements of the present systems as standards, the responsibility for preparation, the frequency with which reports are produced and their ultimate distribution. Assurances have been obtained that SONEDE would retain consultants whose qualifications, experience and terms of reference are acceptable to the Bank to assist the company in carrying out such a study; a copy would be submitted to the Bank no later than June 30, 1978 (draft Loan Agreement, Section 3.02(b)). SONEDE's Financial Position 46. SONEDE's equity capital has been provided by the Government in the form of assets turned over to SONEDE at its formation in 1968 and by further contributions to the company's development programs since that time. Over the past four years the Government's contribution has represented 26 percent of the company's investment program while SONEDE has financed 46 percent from  - 14 - internally generated funds and customers contributions. The remaining 28 percent was financed by external lenders. The average return on SONEDE's net fixed assets in operation, calculated using the covenant agreed under the Third Water Supply Project (see para 49), was 7.7 percent in 1975 and 6.4 percent in 1976. By the end of 1976, SONEDE had tripled its initial assets. Financial statements are audited by a locally based independent firm which is acceptable. Audited financial statements would continue to be submitted not later than six months after the end of each financial year. 47. Practically all of the water distributed by SONEDE is metered. New customers pay for the cost of the connection, contribute to the capital cost of the distribution networks and deposit an advance payment covering about three months of service. SONEDE also levies a Government tax of 4.3 percent on water sales and a 6.15 percent charge on services rendered. Accounts re- ceivable from private customers and Government offices presently stand at an acceptable 2.7 months of sales, while those from municipalities are at 9 months of sales, in an amount of about $1.6 million, of which about $1 million have been due for more than four months. When water tariffs were raised in 1974, the municipalities' budgets were not increased to compensate for the difference, leading to increasing arrears. To resolve the matter, it was agreed during negotiations that the Government would take all steps required, including annual budget appropriations, to ensure that all national, regional and municipal authorities would make full payment to SONEDE of all water and related charges (draft Guarantee Agreement, Section 3.02). Thus, beginning with the 1978 budget SONEDE would receive an advance payment from the munici- palities representing at least 75 percent of their forecast water consumption, based on the preceding year, and the balance would be paid to SONEDE not later than four months after the end of each year. This budgetary prepayment scheme was applied earlier to Government offices, with good results. Existing arrears for the municipalities, which at the end of 1976 represented about $1.6 million equivalent, would be paid off gradually, according to the follow- ing schedule: October 31, 1977, $468,000; December 31, 1977, $235,000; April 30, 1978, $936,000. All outstanding water charges, including arrears, up to June 30, 1977 and not covered by the new mechanism would be settled by June 30, 1978. It is expected that the proposed budgetary system would prevent any future build-up of overdue payments. 48. SONEDE's present tariff structure and rates were introduced in 1974 and reflect the rising cost of water production and distribution. Private consumers pay 68 millimes/m3 for the first 160 m3/year and 90 millimes for consumption in excess of that. This benefits the small, low-income consumer and penalizes excessive consumption. The rate to industry is 70 millimes/m3 and to tourism 150 millimes/m3, the latter reflecting the high cost of meeting peak demand in tourism areas. These rates should be sufficient to allow SONEDE to meet to the end of 1977 the 6 percent rate of return covenant which was agreed under the third water supply project (see para 49). Periodic adjustment of these rates would be needed after that, however, to take into account inflationary pressures on operating costs. In addition, SONEDE's tax exempt status, which is expected to be renewed shortly for a third and final time, will expire at the end of 1982 and financial projections assume that the company will be required to pay corporate income taxes from 1983. lo  - 15 - comply with the rate of return covenant, it is estimated that the average rate per m3 would be 96 millimes in 1978, increasing to 132 millimes in 1980 and to 160 millimes in 1982. 49. Under the third project, it was agreed that SONEDE's rate of return would be calculated using a rate base which excluded the net value of fixed assets in operation in villages of population of under 2,000 and the net value of new domestic connections and related extensions financed by SONEDE loans after January 1, 1974. It has been agreed under the present project that to conform to current practice for public utilities in Tunisia under existing Bank loans, effective January 1, 1978, the base for the rate of return calcula- tion would be changed to exclude the net value of assets in villages of less than 2,000 population and the average value of customer contributions. In view of the resulting lower asset base, the required rate of return would be increased from 6 percent to 7.5 percent to ensure that SONEDE's overall financial performance would remain substantially the same as that projected under the former covenant (draft Loan Agreement, Section 5.05(a) to (d)). SONEDE should encounter no difficulty in maintaining a 7.5 percent rate of return by adjustments of its tariffs along the lines indicated in para. 48 above. 50. The financial projections suggest that SONEDE's debt service cover- age is not expected to drop below 2.7. The existing commitment to obtaiL Bank approval before incurring any long term debt unless net income is at least 1.5 times the maximum debt service in any future year has been reaffirmed (draft Loan Agreement, Section 5.04). Agreement was reached during negotiations that SONEDE would review and submit to the Bank, by December 31, 1977, a system of key indicators and targets prepared by the Bank pertaining to the company's technical, financial and administrative performance. The evolution of these monitoring indicators would be reported to the Bank by SONEDE quarterly during project execution and annually thereafter for five years (draft Loan Agreement, Section 4.04(a)). Benefits and Risks 51. About 37 percent of the country's total population and over 45 per- cent of its urban dwellers live in the project area. The water supply situa- tion in this area is critical. At present, direct connections are insthlled in only 20 percent of houses in Nabeul, 18 percent in Beja and Tunis Sud and 12 percent in Jendouba. In addition, existing production facilities can assure sufficient supply only to 1979. The proposed project would help SONEDE meet its objectives for- 1990 of increasing the population served with direct house connections to 87 percent in Greater Tunis (about 75 percent at present), 85 percent in Beja, Jendouba and Tunis Sud, and 75 percent in Nabeul. As a result of the installation of piped water supply systems, the sanitary condi- tions in these areas would be substantially improved. Provision of a large number of house connections would enhance living conditions, promote a better environment and improve public health. Further development of industry and tourism in the five governorates is also dependent on an adequate water supply. Although the project would result in an increase in wastewaters, there is no immediate need for sewage treatment in the project area beyond the works being carried out in Greater Tunis under the First Urban Sewerage Project (Loan 1088-TUN).  - 16 - 52. The proposed project is the least cost alternative for meeting water supply needs in the project area. The estimated financial rate of return is 8.6 percent; were such benefits as health and environmental improvement quan- tifiable, the economic return would certainly be even higher. The return on the proposed investments is sensitive to the level of water sales, less sensi- tive to increased capital costs. Under the most pessimistic assumptions, a 20 percent decrease in water sales combined with a 20 percent increase in cost, the return would decrease to 4 percent which, given the social nature of the project, would still be acceptable. It is more likely that water sales would exceed rather than fall short of projections. The proposed project will permit continuing support for SONEDE and assistance in strengthening its technical capability and improving its management's decision-making process. With close monitoring of project progress and the assistance of consultants to supervise construction and to update the company's information and computer systems in line with future expansion, SONEDE should be able to carry out its program and the project on schedule with minimum risk. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Loan Agreement between the Bank and Societe Nationale d'Exploitation et de Distribution des Eaux, the draft Guarantee Agreement between the Republic of Tunisia and the Bank, the Report of the Committee pro- vided for in Article III, Section 4 (iii) of the Articles of Agreement and the text of a draft resolution approving the proposed loan are being distributed to the Executive Directors separately. The agreements conform to the usual pattern for Loans for Water Supply Projects. Features of the loan of partic- ular interest are discussed in paragraphs 37, 38, 39, 41, 45, 47, 49 and 50. Special conditions of the project are listed in Section III of Annex III. A special condition of effectiveness of the proposed loan is the signature of another loan providing SONEDE sufficient funds to cover the foreign ex- change cost of the Greater Tunis distribution system. 54. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 55. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments May 20, 1977  U U~~~~~~~~~~~~~~~~~~ -U C~~~~~~~A X- 40 a a w I ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 0 -0'0 N 'N - U- - U~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o-c 5-. U C~~~~~~~~~~~~~~~~~~~~~~~~~~~ 7 nV LA 0 UO 4 00~ ~~~ -0 ONIP N,O 0 03 -0 Ca 70 00 0-00 o o 'M hi CCC 0 NN 05.400 .0N 0S ON - N 5 0 U~~~~~~~~~~~~~~ciC, 3c a O C 0~~~~~~~~~~~~~~~~~~~~~~~~~~ o ..i cc vie .t-r - . . cow, cc * 000~~ ~ ~~~~ ~~ . W~ 000 00 0 0 0*, Ico * U C UO Iii cUi t-t- cUSS:- WC -S o 54 000 In UiZ NSA N Ei ctt -n.ea mU C U~~~~~~awa M hi. U~~~~~~~~~~~~~~~~~~~~~~~~~~8.0X I:n a ma ' I C -X C,C I IUaa j n . dUJU U. CCI USt 41U 00 54. OUU4 0 N r r- s-C U U-S Ut- N C 10Cc N *~~~~~~~~~~~~~~~~~~~~~~~~~~~  ANNEX I page 2 of 4 pages Unless otherwise noted, data for 1960 refer to any year betw,een 1959 and 1961, for 1970 between 1968 and 1970 and for Moat Secant Estimate between 1973 and 1975. * Due to emigration population growth rate is lower than the rate of natural increase. G* reece has been selected as an objective country, on the basie of the size of its population, mediterranean grographical situation and5 its economy, which presents soca sinilarity with Tuniaia'e with respect to national resources, market saxa, agricultural and services activities. TUNISIA 1960 /a 1936; lb Ratio of population under 15 and 65 and over to total labor force; Lc 1963; /d 1962, including rural hospitala. 1970 /a 1956-66; lb 1966; /i Ratio of population unLder 15 and 65 and over to total labor force; Ld Covering 4.5 nillion hectares of private l7and, excluding 0.8 million hectares in public ownership, and 2.1 million hectares of collective land; /e Personnel in government services only; If Governmcent hospital establishmei.te only; LI 1964-66; /h Registered only. MOST RECENT ESTIMATE: 1966-75; /b Ratio of population under 13 and 65 and over to total labor force; Li Including dentists; d 1972; /a Personnel in goverront servicea only; j,f Governmnt hospital esiablialesnts; La 1969-71 average. JORDAN 1970 I a East Sank only; /b Ratio of population under 13 and 65 and over to total labor force; Li 1964-66; /d 1966; Le Including UIOfA schools. IRA 1970 La Ratio of population under 15 and 65 and over to total labor force; /b 1964-66. GREECE 1970 Ia Due to emigration population growth rate is lower than the rate of natural increase; /b 1967. R12, May 5, 1977 DEPINMTOgE OF SOCIAL IDMICATORS Lend Area (thou ke2) Posul:tion or nursing person - population divided by eu,aber of practicing To2tal - Total surface area comprinins land are and inland waters. eaeed femle graduate cnurse, 'trained or "eatified" nurses, end Astric. - Most recent estimate of agricultural area usd temporarily or Forms- auxiltary personnel. itb traiming or axperience. costly for crops, pastures, market &, kitchen gardena or to lie fallow population Per hospital bad - Peplstiton divided by number of heepita1 beds "avalable in public and privete genera and specialised hospit.1 and GNP ear capita (US01 - ON?P per caPita -stimatee at current market pri.sa, rehabilitation centers; secludes nuring homs and entblislment for calculated by pane conversion method so World Beak Atlas (1973-75 basis); custodial and preventive care. 1960; 1970 and 1975 data. Per capita supply of calories Cl of requirmsenste) - Coput.ed frem eaergy equivalent of Met food supplie, a-ilable in .-mtry par ..pic. Per day; PocPla-mon, and vitai otati.ti.! available euppliea conp,is- don-stic prodoction, importa lees exports, end PoPulation (mid-year million) Aam of July first: if Oct -vil.bla, avraes changes in stock; net supplies e..clude animal feed, seda, quatities need of two end-year e-timete.; 1160, 1970 eand 1975 dota. is food processing and looses in distribution; requireosets were, estimated by FAD based on physiological needs for normal activitY and health consid- Pogulation density peor square km - Mid-year population per square kilometer ering envirormental temperature, body weighta, age and sex distributions of (100 hettares) of totsl area, population, end allowing 101 for ests at bh--hold leve. Population densia, Pare squara, k. of agri.. laud - tmputed as above for Per topics sup-l of ertein (eram per day) - Protein centent of Par caPita agricultural lend only. net supply of food per day; net supply of food is defined as above: require- mania for all countries established by USDA Econoin gesearab Services vital statiatico Provide for a minimum allowance of 60 grams of total protein per day, and Crude birth rate per thousand, average - Annual live births per thousand of 20 grams of animal and pulse protein, of which 10 grm sbould be animal mid-year Population; ten.year aritheetic avrages ending in 1960 and 1970, protein; thee. standarda ar lower than thoos of 75 grtw of total protein end fiv-yea average ending in 1975 f or most recent estimate, and 23 goS- of anmlprotein aso an average f or the world, proposed by_ FAD Crude death rate per thouisand. av ...it - Annual deaths per thousand of aid-year in the Third World Food Survey. population; ten-year aritlusetic averages ending in 1960 and 1970 and five- For capita protein supply frno animal and pulse - Protein supply of food year average ending in 1975 for most recent estimate, derived from animals and pulses in grams per day. Infant mortality rate f/thou) -Annual deaths of infants under one year of age Death rate (/thou) astes 1-4 - Annual deatho Per thousnd in age group 1i4 per thousand live births. yerars, to children in this age group; .Snggeted as an indicator of Life -e,petancy at birth (yra.) Averge nmabar of years of life reaining at malnutrition. birth; usually five-year averageo ending ia 1960, 1970 and 1975 for develop- ing countries. Education Grs reproduction rate - qveroge -baer of lIve daughters o woman will hear Adjusted enrollment ratio - primar school - Enrollment of all agSM as Far- is her normal reproductive period if she experiences present age-specific centgs of Primary school-age population; includes children aged 6-11 yerar fertility rates; usualy five-year avrgsending in 1960, 1970 and 1975 but sd3ustd far different lengths of primar education; far countries with for developing countriese. universal education, enrollmnt may ecasd loot since soo Pupils are balow Population arouth rate Cl) - total - Co,mponad annual growth -ates of sid-year or ahovs the official school age. population for 1950-60, 1960-70 and 1970-75. Adiusted enrollment ratio - secodary school - Casputed as above; secondary Population growth rate (%) - urban - Computed like growth rate of total education requires at least fou years of approved primary inetruction; population; different definitiona of urban area may affect comparsbility of Provides genra, voctional. or teether training ietruction for pupils data samng countries, of 12 to 17 years of age; correapondenc.e corses are generally excluded. Urken population (% of total) - Satin of urban to total population; different Year of sehoILx iried (first end secon levels) - Total year of definitions of urban areas may affect com parability of data among countries. acbsoling; t sec aWy lane1, vocational instruction may he pertielly or copletely excluded. Am structure (percent) - Children (0-14 years), working-age (15-64 years), Vocational enrollment Cl of secondary) - Vocational inatitutions inclde and retired (65 years and ovr) as percetagea of mid-year population. techeical, industrial or other Programs which operate independently or a AA. dependency ratio - Ratio of pop.lation under 15 and 65 and ovcr to thoae depa~m.nna of secondary institutiona. of ages 15 throgh 64. Adult lIter-cy rate (l) - Literate adults (able to red and write) as per- ftconic dependency ratio - Satin of population under 15 end 65 and over to centage of total adult population aged 15 years end over. the labor force in age fr-up of 15-64 years. Family Planning-acceptors (-lncitiva . thou) - Cuoulative .-ousr of acce ptors m ij5n1g of birth-control device under ..uopicec of national family Planting program Persons, par rome (urban) - Average nushr of persona per room in occupied since inception, conventional dwellings in urban areas; dwellings mexlude non-peramaent Family p1annini - users Cl of married w-cn) - Perentagen of married woman of atructures and unoccupied parta. child-bearing age (15-44 years) who use birth-control devices to all married Occupied dwellig.x without piped water Cl) - Occupied conventional dwellings amove i, sam age group. in urban end rural areas without inside or outside piped water facilities as percntage of all occupied dwellings. ftployment Access tO electricity Cl of all dwellinga) - Conetiona dwellings with Total lnbor force (thousan.d) - icononicaily active Persns, including aarmed electricity In living quarters as Percent of total dwellings is urban and forcao and unemployed hut e..cluding ho-oeive-, atdent, etc.; definitions ruralaras in aroc countries are not Comparable. Sursl dwlliig coennetd to electricity (%) - Computed as above for toral Labo force in arculture Cl) - Agricultural labor force (in farming, forestry, dwlig ony bunting and fishing) as percentage of total labor forc.. Usamployed (% of Iebor force) U- Ueployed are usually defined aso persons who Causaption are able and willing to take ajob, out of a job on a given day, remained out Radio receivers (per thou sop) - All typac of receivers for radio broadcasts of a Job, and seeking work f or a specified minimum period not exceeding one to general public per tosaand of population; excludes -lice-aed receivers week; may sot be conparable betwee n counrriea due to different definitions in countries and In years when registration of radio sets -as in effect; of uneployed and asrce of data, e.g., employmet office statistics, sample data for recent years, may not he comper-ble since eat coutries abolishad aurveys, conpulsory unemploymest insur-ce.. licensing. Pass-meer cars (per the,, pop) - Passeger cars ecmprise .otor car seating Incoms distribution - Perceontge of private income (both in cash and kind) lees then eight Person; sec lodes ombulance, hearses and military received by richest 51, richest 201, poorest 201, and poorest 401 of hous- vehicles. holds. Ele-tricity fbkh/yr per cap) - Amouel consmption of industrial. coasreisl, public man private electricity in kilowatt hour per capita, generally Distribution of leand ownership - Percentageo of land owned by wealthiest 101 based on production data, without allowanc for lases In grids hot slim- and poorest 101 of land owners, Log far imports and exports of elentricity. Newsprint (kg/yr per cap) - Per capita armua ca,suption in kilograms H-sith and Nutrition estimated fron domestic production plus net Imports af newsprint. Population per physician - Population divided by numer of Practicing physicians qualified fron a ndical school or university leve.  TUJNISIA - ECONOMIC DEVELO0PMENT DATA NSRELT Actual Eat. Pro leeted 'I1965- 1970- 1976- 1965 1970 1975 1976 1977 1978 1981 1970 1975- 1981 1976 Dinears Millions at Cons.teant 1972 Prices Ave..R.a Ac-u1 Growth Rate Share of CDP A. NATIONiL ACCOUNTS Grasa Dometic Product 656 824 1,286 1,444 1,527 1,655 2,084 4.7 9.3 7.6 100.0 Grates from Terma of Trade -6 -2 53 39 36 36 60 ...2.9 Gross Dometic lo-m 650 822 1,339 1,483 1,563 1,691 2,144 4.8 10.3 7.6 102.9 Inpurts (C and EFS) 179 221 384 409 433 467 373 4.3 11.7 7.0 27.5 REports (C and NGS) (Import capacity) 105 183 333 339 .369 361 468 11.7 12.7 9.3 22.5 Resorc Cap 74 38 51 70 64 70 75 ...3.6 Co...uoptloo 549 696 1,061 1,191 1,280 1,395 1,759 4.9 8.8 8.1 84.4 Inve.nmeot 162 164 330 362 346 366 430 0.2 15.0 3.5 20.6 Domstic Savings 88 126 278 282 283 296 385 7.4 17.1 3.7 18.5 Notional SavisRe 67 104 274 280 268 276 347 9.2 21.4 4.4 16.7 COP at correct prices CUSS millions) 1,004 1,444 4,324 4,782 5,456 6,359 9,899 7.5 25.0 15.7 N. SECTOR OUTPUT Share to CUP at Constant 1972 Prices in Percant Average Annul Groth Rate Agriculture 22.1 20.4 21.0 21.5 19.4 19.2 17.7 - 10.3 3.5 Gedustry 22.8 24.9 23.4 25.2 26.6 27.4 30.3 6.3 10.1 11.6 Services 55.1 54.7 53.6 53.3 I54,0 53.4 52.1 5.8 12.3 7.1 C. MERCHALNDISE TRADE Millions of US Dollara Average Annua Croth Rate Ecpurt to 01lir Oil 26 17 78 82 58 60 70 -9.0 36.0 -3.2 Crude Petrolesm - 45 359 296 361 433 294 . 52.0 - Refined Petroleom - 5 13 16 16 19 266 . 23.0 75. 0 Phosphace Rock 22 24 113 75 OR 64 101 1.7 37.0 6.1 Phouphate Derivates i8 17 80 92 139 159 437 -1.2 36.0 36.5 Agriculturl Products 32 40 92 85 93 ill 180 4.6 18.1 16.2 Teotilee 2 2 53 90 105 141 354 - 93.0 32.0 Other Maeofsctured Coeds 21 38 67 70 96 118 184 12.6 12.0 21.0 Total Coods 121 188 859 806 928 1,107 1,886 9.2 35.5 18.5 Son Pactor OS.ivcee 68 67 497 319 638 742 .1&12 -0.4 49.0 16.0 Total toperts 169 255 1,336 1,323 1,566 1,849 3,015 6.2 40.0 17.9 Seports (elf) Pood.tuffa 34 80 223 188 225 307 503 18.7 23.0 22.0 Other Consumer Coods 42 41 218 217 262 309 481 -0.3 40.0 17.3 Energy 11 13 140 139 13 16 18 3. 600 -3 Setermedtate Goods ~~~ ~~~ ~~88 113 411 410 489 583 981 3.1 29.5 19.0 Capital Coeds 77 73 430 489 515 586 847 -1.1 43.0 11.6 Total Coeds 252 320 1,424 1,443 1,646 1,954 2,930 4.9 33.0 15.2 Other NPS 68 61 141 158 190 222 345 -2.2 18.2 16.9 Total Goods sod NPS 320 381 1,565 1,601 1,836 2,176 3,273 3.6 32.5 13.4 S. PRICES 1972 * 100 Average Assu..l Growth Note Eoport price iodeu 75.3 89.7 194.9 189.6 201.8 219.8 276.6 3.5 16.8 7.9 Inport price indro 83.8 90.7 164.1 167.9 182.0 200.0 243.2 1.1 12.6 7.9 Term of trade indec 88.0 98.9 118.8 112.9 110.9 109.9 113.8 2.4 3.7 - CUP deflator 70.7 92.0 133.2 142.0 153.4 164.3 203.9 3.4 8.0 7.3 Average aechange rate (TS per 9) 0.325 0.323 0.402 0.429 0.429 0.429 0.429 - 5.5 - E. PUBLIC, PENANCE Is pecan..t of COP at Current Prices P. DETAIL ON GOV'T Go percent of Total 1963 1970 1975 1976 SECTOR GNVESTMENT -1968-71 1972-71 Current Revenue 19.6 21.8 24.4 22.7 Current Enpeodit-r 13.0 17.9 18.0 18.0 Social Sectors 10.6 15.6 Current Surplus (Central GovIt) 4.0 3.9 6.4 4.8 Agriculture 23.8 13.0 Other Govt Sector SavIngs 0.9 -0.3 0.6 0.3 Transp. ort and Co,meuotistt 12.2 15.5 Central Cove Iovnscment 7.5 3.9 4.0 4.6 Gnrsccuc16.0 16.4 Total Govt lovesotrt 3/ 11.7 8.1 8.2 8.7 Other2 29.4 39.3 C. DETAIL ON CURRENT EXPENITURE In Percent of TotalTt1 -o 10. (CENTRAL GOV'T) 1965 1970 1975 1976 2/ Financing Ed-rtien 23.7 32.1 22.3 26.3 Pulite Sector Sovings 29.9 59.2 Other Social Serviess 13.3 16.7 11.1 13.1 Other Fio..o.to8 15.1 20.8 Agriculture 3.5 3.4 5.4 7.2 Dometic Dorrowing (net) 1.8 -2.1 Other Economic Services 17.7 17.7 16.2 14.5 Poreign Borrowing (net) 32.8 22.1 Adnicistration and Defence 36.1 30.1 45.0 38.9 Tutal Financing 100.0 100.0 1O00.0 1-0-0.0 10-0.0 100.0 N. IArR X9RCE thoiosf d.). 1972 1976 Agriculture - 760 764 Industry 300 440 Services 345 413 Unemployed 279 264 1,684 1,881 1/ Projected by bolod Dock StaffEEN CPG 2/ Dudget MEAy 1977 I 3/ locludes transfers to Public enterprisesMy 97 -4/ Residual  ANNEX I Page 4 of 4 pages TUNISIA - BAIANCE OF PAYMENTS AND EXTERNAL ASSISTANCE (Amounts in millions of US dollars) TT Actual Eat. Projected 1 1970 1971 1972 1973 1974 1975 1-97-6 1977 1978 1979 1980 1981 SUMMARY BALANCE OF PAYMENTS Exports (cine. NFS) 316 408 567 714 1,254 1,356 1,325 1,566 1,649 2,138 2,546 3,015 Imports (inc. NFS) 381 442 593 782 1,242 1.565 1t601 1.836 2.176 2.526 2,882 3.274 Resource Balance -65 -34 -26 -68 12 -209 -276 -270 -327 -388 -336 -259 Net Interest Payments -50 -18 -18 -13 2 -5 -42 -50 -65 -86 -114 -140 of which: interest on Public Loans (-17) (-20) (-22) (-27) (-31) (-37) (-40) (-48) (-69) (-94) (-126) (-157) Direct Investment Income -9 -10 -25 -35 -36 -37 -35 -47 -58 -70 -81 -93 Workers' Remittances 29 44 62 98 119 146 135 142 149 156 164 172 Other Net Factor Services -8 -39 -41 -82 -103 -116 -107 -118 -130 -143 -157 -173 Currant Transfers (net) 10 16 6 4 1 -3 2 7 7 7 7 7 Balance on Current Account -93 -41 -42 -96 -5 -224 -323 -336 -424 -524 -517 -486 Private Direct Investment 19 24 31 57 49 48 63 75 86 110 121 133 Official Capital Grants 43 35 37 45 43 50 42 45 40 40 40 38 Public M + IT Loans: Disbursements 82 107 140 153 174 211 285 407 470 590 622 661 - Amortization -45 -49 -70 -59 -59 -66 -70 -73 -87 -128 -177 - 248 Net Disbursemvents 37 58 70 94 T115- 145 2i1-5 T334 383 46_2 445 413 Capital Transactions n.e.i. 3/ 13 24 -19 -8 -99 -62 3 -3 - - - - Change in Net Reserves (increase - ) -19 -100 -77 -92 -103 43 - -115 -85 - 88 -89 -98 Net Foreign Reserves 15 115 192 284 387 344 344 459 544 632 721 819 (months of imports equivalent) 0.5 3.1 3.9 4.4 3.7 2.6 2.6 3.0 3.0 3.0 3.0 3.0 B. PUBLIC LOAN COIMMITMENTS Actual Debt Outstanding on Dec. 31. 1975 IBRD - 37 36 25 64 37 65 Dish. Only In Percent of Total IDA 10 10 10 7 - - - C. EXTERNAL DEBT Other multilateral - - 1 - 12 11 24 World BanTk 109.8 10.2 Governuments 100 84 106 138 68 130 104 IDA 55.3 5.2 Suppliers 8 5 7 12 2 27 49 other Multilateral 8.6 0.8 Financial Institutions 21 28 28 17 12 20 7 Governments 691.8 64.6 Total Public M + LT Loans 139 164 18-8 1979 15-8 -225 2~49 Suppliers 86.8 8.1 Financial Institutions 99.3 9.3 Bonds 1.1 0.1 Public Debt n.e.i. 18.6 1.7 Total Public M L T Debt 1,071.3 100.0 D. DEBT AND DEBT SEIRVICE Public Debt Outst. + Disbursed 524 604 680 807 954 1,071 1,280 Interest on Public Debt 17 20 22 27 31 37 40 Amortization 45 48 70 59 59 66 70 Total-Public Debt Service 62 68 92 86 90 103 110 Burden on Export Earnings 4/ (7.) Public Debt Service 19.6 16.7 16.2 12.0 7.2 7.6 8.3 TDS + Direct Invest. Inc. 22.5 19.1 20.6 16.9 10.0 10.3 10.9 Average Termsa of Public Debt Iot. as 7. of Prior Year DO + D 3.3 3.8 3.6 4.0 3.8 3.9 3.7 Amort. as 7. Prior Year DO + D 9.5 9.1 11.6 8.7 7.3 6.9 6.5 IBRD1 Debt Out. A- Disbursed 26 39 52 70 89 110 128 IBRD as 7. of Public Debt 5.0 6.5 7.6 8.7 9.3 10.3 10.0 IBRD as 7. of Public Debt Service 4.2 5.3 6.5 9.4 12.0 13.3 12.9 IDA Debt out, and Disbursed 16 21 28 57 43 55 64 IDA as 7, of Public Debt 3.1 3.5 4.1 4.6 4.5 5.1 5.0 IDA as 7, of Public Debt Service 0.1 0.2 0.3 0.4 0.4 0.4 0.5 I/ Exchange rates used for the various stocks and flows correspond to those published in IFS. 2/ Projected by World Bank Staff. ENENA CP II 3/ Including erros and omissions. Nay 1977 '4/ Including non-factor services.  ANNEX II Page 1 of 7 pages A. STATEMENT OF BANK LOANS AND IDA CREDITS (as ofL__arh i1,_l_7) Loan or Credit Amount (less cancellation) Number Year Borrower Purpose Bank IDA Undis. Eighteen loans and credits fully disbursed 87.9 37.0 238 1971 Republic of Tunisia Population 4.8 1.0 746 1971 Republic of Tunisia Highways 24.0 3.9 779 1971 Banque Nationale de Tunisie Agricultural Credit 5.0 270 1971 Republic of Tunisia Fisheries 2.0 U 798 1972 Societe Nationale d'Investissement Development Finance Co. 10.0 0.9 858 1972 Republic of Tunisia Tourism Infrastructure 14.0 14.0 329 1972 Republic of Tunisia Tourism Infrastructure 10.0 2.2 881 1973 Societe Nationale d'Investissement Development Finance Co 14.0 0.7 937 1973 Republic of Tunisia Urban Planning & Public 11.0 5.8 Transportation 989 1974 SONEDE Water Supply 23.0 8.1 1029 1974 Republic of Tunisia Hotel Training 5.6 5.6 1042 1974 Compagnie des Phosphates et Chemin de Fer de CAFSA Phosphate Development 23.3 20.4 1068 1974 Republic of Tunisia Irrigation Rehabilitation 12.2 10.5 1088 1975 Republic of Tunisia Urban Sewerage 28.0 27.1 1155 1975 Republic of Tunisia Education 8.9 8.9 1188 1976 Republic of Tunisia Highways 28.0 28.0 1189 1976 Banque de Developpement Economique de Tunisie aevelopwent Finance Co. 20.0 238-1 1976 Republic of Tunisia PopuLaEion 4.8 1340 1976 Banque Nationale de Tunisie b/ Agricultural Credit 12.0 12.0 1355 1976 Societ6 Tunisienne de l'Electricite Power 14.5 14.5 et du Gaz TOTAL: 341.4 70.1 185.2 of which has been repaid 28.4 0.3 Total now outstanding 313.0 69.8 Amount Sold 4.8 of which has been repaid 3.0 1.8 Total now held by Bank and IDA a/ 2384.5 69.8 Total undisbursed 176.5 8.7 185.2 a/ Prior to exchange adjustment, Not yet effective - B. STATEMENT OF IFC INVESTMENTS IN TUNISIA (as of m_h 1 1977 Amount in US $ Million Year Obligor Type of Business Loan Equity Total 1962 NPK Engrais Fertilizers 2.0 1.5 3.5 1966 Socift6 Nationale d'Investissement Development Finance Co. 0.6 0.6 (SNI) now (BDET) 1969 COFITOUR (Tourism) Development Finance Co. 8.0 2.2 10.2 1970 Socift6 Nationale d'Investissement (SNI) now (BDET) Development Finance Co. 0.6 0.6 1973 Societ6 Touristique & Hoteliere RYM SA. Tourism 1.6 0.3 1.9 1973 Societe d'Etudes & de Developpement de Sousse-Nord Tourism X 1975 Societe d'Etudes & de D6veloppement de Sousse-Nord Tourism 2.5 0.6 3.1 1974 Industries Chimiques du Fluor - Chemicals 0.7 0.7 Total gross commitments 14.1 6.5 20.6 Less cancellations, terminations, repayments and sales 3.3 1.5 4.8 10.8 5.0 15.8 Total commitments now held by IFC Total undisbursed 10.5 0.3 10.5 8.1 - 8.1 Less than $50,000.00  ANNEX II Pavo 2 -' C. PROJECTS IN EXECUTION 1/ Cr. 238: Population Project; US$4.8 million credit of April 5, 1971; Date of Effectiveness: December 29, 1971; Closing Date: (Original) June 30, 1976; (Current) June 30, 1978. Cr. 238-1: Population Project: US$4.8 million Supplemental Credit of October 13, 1976; Date of Effectiveness: March 31, 1977; Closing Date: June 30, 1978. A capable administration is helping the National Family Planning Office maintain the progress of the national program. Acceptor rates show a steady quarterly increase: April to June, the second quarter of the pro- gram year, show: 1974, 17,740; 1975, 21,452; and 1976, 26,187. The education/ motivation division is increasing its emphasis on the production of materials designed to help the educators with their work of informing leaders who are in a position to influence the people. Eight of the planned 29 MCH clinics have been completed and the remaining 21 will be finished by September 1977. The Avicenne midwifery school is in full operation and in 1976 gave diplomas to 35 midwives and 62 nurses. Three of the maternity hospitals will be com- pleted by the end of 1977, but the fourth at Bizerte will not be completed until the end of 1978. The additional sum of US$4.8 million provided by NORAD will contribute to financing the project cost overruns which the Government has agreed to underwrite. Cr. 270: Fisheries Project; US$2 million credit of September 24, 1971; Date of Effectiveness: May 24, 1972; Closing Date: (Original) December 31, 1976; (Current) July 31, 1978. As of January 31, 1977, 89 of 180 project vessels had been delivered to fishermen with financing provided under the credit through BNT. Progress of implementation continues to be hampered by slower than expected demand for project vessels attributable to construction and after-sales service problems. The latter have in turn contributed to an unsatisfactory rate of sub-loan re- covery by BNT. To overcome the technical problems, the Government has recently agreed to set up a mobile service team, has undertaken to provide better train- ing to new boat owners, and has been encouraged to shift the orders for the remaining boats to the best of the three boatyards. BNT is introducing mea- sures to improve loan recovery. The project is now expected to be completed by September 1978. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any prob- lems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II l'ge 3 of 7 Ln. 989: Third Water Supply Project; US$23 million loan ot May 29. 19'/1; Date of Effectiveness: September 24, 1974; Closing Date: June 30, 1979. Bidding has been completed for all major components of the project. All pipe supply contracts have been awarded; contracts for civil works and pipe installation are being evaluated. Construction is on schedule and disbursements are higher than anticipated. Ln. 746: First Highways Project; US$24 million loan of June 9, 1971, Date of Effectiveness: October 26, 1971; Closing Date: (Original) June 30, 1976; (Current) June 30, 1977. Ln. 1188: Second Highways Project; US$28 million loan of January 26, 1976; Date of Effectiveness: June 16, 1976; Closing Date: December 31, 1979. Progress in reconstruction and rehabilitation of roads and bridges is good under the first project. All works are expected to be completed in the. first half of 1977. The delays have mostly been caused by delayed acquisition of right-of-way. Cost overruns have required the elimination of the Tunis-Turki section of the Tunis-Hammamet expressway and considerable reductions of the withdrawal percentages. Construction of the expressway section is now being financed by the Kuwait Fund. After prequalification of contractors under the second project, the Government has invited bids for the improvement of one road; other improvement works are expected to be executed in accordance with the agreed timetable, Consultants are now in the field to prepare proposals for a pilot rural roads project. Arrangements are now being completed for the updating of the 1968 transport survey. Ln. 779: Agricultural Credit Project; US$5 million loan and US$3 million Cr. 263: credit, both of July 12, 1971; Date of Effectiveness: January 25, 1972; Closing Date: (Original) July 31, 1975, (Current) June 30, 1977. Ln 1133: Second Agricultural Credit Prolect; US$12 million loan of November 23, 1976; Terminal Date for Effectiveness: May 31, 1977; Closing Date: December 31, 1980. Implementation of the project components under the first project has been progressing at a satisfactory pace and is nearly completed. Disburse- ments in the grain farming category have continued normally and will be picked up by the second agricultural credit project after the remaining funds are ex- hausted; the dairy plant is nearing completion and test runs are scheduled for June 1977; all 886 ha of date plantations in the Djerid and Nefzaoua areas have been completed. As of March 31, 1977, 96 percent of the loan/credit funds had been disbursed, and the new closing date of June 30, 1977 can very likely be met.  ANNEX II Page 4 of 7 Upon request of the Borrower, the date by which the conditions for effectiveness of the Bank loan for the second project have to be met was post- poned from March 16, 1977 to May 31, 1977. One condition, the receipt of an audit report for 1975, has been met, whereas the second one, the effectiveness of revised lending terms for subloans extended by BNT from Government funds, has not been met as yet. Field appraisal procedures and eligibility criteria for the small farmer component are being worked out by BNT and will be agreed with the Ministry of Agriculture. Ln. 1355: Second Power Project; US$14.5 million loan of December 27, 1976; Date of Effectiveness: May 4, 1977; Closing Date: June 30, 1980. The project comprises 150 MW of gas turbine capacity in seven units of equal size to be installed at different locations and is estimated to cost US$29.3 million equivalent including a foreign exchange component of US$25.1 million equivalent. Contracts have been awarded and progress in physical execution of the project is satisfactory. In view of the proposed development of offshore natural gas resources, the substituion of gas for oil for power generation in future and STEG's likely responsibility for distribution of off- shore gas throughout the country, STEG is undertaking a study to establish its organization structure, its training needs and investments for the gas program. Government is also undertaking a study with a view to determining an appro- priate pricing policy for oil, gas and electricity and will submit the recom- mendations to the Bank by September 1978. STEG is expected to earn an 8 per- cent rate of return beginning in 1977. Ln. 858: Tourism Infrastructure Project; US$14 million loan and US$10 million Cr. 329: credit, both of September 28, 1972; Date of Effectiveness: June 26, 1973; Closing Date: December 31, 1977. After considerable delays in 1975 caused by the redefinition of the project, the project is now moving ahead expeditiously. Following completion of final design of most of the project infrastructure works, ONTT is awarding construction contracts. Almost 60 percent of the infrastructure works are under construction and some 20 percent have been already completed. Enact- ment of the land-use plans for all of the tourism zones and the review of the incentives legislation according to the results of the study of investment incentives carried out under the project have not yet been completed but do not jeopardize project implementation. Since infrastructure in the project zones will shortly be available for tourism accommodation and related facili- ties, the main emphasis of Bank supervision of the loan will shift to moni- toring of Government policies to promote investments in the project zones.  ANNEX II Page 5 of 7 Ln. 798: Fourth Development Finance Company Project; US$10 million loan of February 9, 1972; Date of Effectiveness: April 13, 1972; Closing Date: (Original) March 31, 1976; (Current) July 31, 1977. Ln. 881: Fifth Development Finance Company Project; US$14 million loan of February 20, 1973; Date of Effectiveness: May 24, 1973; Closing Date: March 31, 1978. Ln. 1189: Sixth Development Finance Company Project; US$20 million loan of January 26, 1976; Date of Effectiveness: June 7, 1976; Closing Date: June 30, 1980. Of Loan 798, $0.3 million remain unallocated and $0.9 million un- disbursed-due to cancellations which occurred after the final date for sub- project submission. Loan 881 is fully committed and $0.7 million remain to be disbursed: the utilization of the loan has been generally in line with the appraisal report's projection, which foresaw the loan to be fully dis- bursed by March, 1977. Disbursements on Loan 1189 had reached $4.3 million as of April, 1977, about 6 months behind schedule compared with the appraisal report's projection. This is largely due to the loan having become effective only 5 months after approval. The loan is however being committed on sched- ule, with only $4.6 million remaining unallocated as of April, 1977. BDET has shown considerable improvement since early 1976 in the key areas of man- agement effectiveness, arrears recovery, financial practices and resource mobilization. The institution plays an increasingly important role in fi- nancing industrial development, extending about one-third of all term credit available to the industrial sector in Tunisia. As regards appraisal capab- ility, BDET is among the best of Bank-financed DFC's. Quality of project supervision, however, still needs improvement. Ln. 937: Tunis District Urban Planning and Public Transport Project; US$11 Cr. 432: million loan and US$7 million credit, both of October 5, 1973; Date of Effectiveness: September 24, 1974; Closing Date: (Original) December 31, 1976; (Current) December 31, 1977. Execution of the project is proceeding satisfactorily. The Tunis District has been well established and operates with residual technical assis- tance only. The District is finishing its work on the Tunis strategic regional development plan and is now regul-arly associated with or consulted on all major public investment decisions 'in the Greater Tunis area. The Societe Nationale des Transports (SNT) has renewed its bus fleet, as well as its main- tenance services. SNT's clientele has increased in an unprecedented manner; combined with improvements in routes and tariff structures and with regular payment by the Government of compensation for social tariffs, this has resulted in increased revenues sufficient to offset the effect of a substantial salary raise. SNT has also completed all necessary preparation for the delivery of the rolling stock to modernize its suburban railway line. Finally, supple- mentary financing has been found to finance the construction of the third bus depot and the cost overruns on the railway rolling stock. The civil works for the traffic improvement program of the Municipality of Tunis are now in execu- tion; new traffic and parking regulations have been established, as have spe- cial bus lanes and pedestrian areas.  ANNEX II Page 6 of 7 Ln. 1029: Hotel Training Project; US$5.6 million loan of July 17, 1974; Date of Effectiveness: November 4, 1975; Closing Date: October 31. 1978. The project continues to progress well. The courses prepared by the ILO team are being tested in the Nabeul school and will be introduced into other training schools during the 1977-78 school year. Evaluation of bids for the first two training centers is underway and should be completed shortly; contracts are expected to be signed soon, with construction to start shortly thereafter. After considering dropping the third center because of changes in tourism policy, the Government has decided to proceed with the third proj- ect center. Transfer of land for the third center to ONTT is almost complete; work on architectural designs has started. Ln. 1042: Gafsa Phosphate Project, US$23.3 million loan of October 1, 1974; Date of Effectiveness: March 14, 1975; Closing Date: June 30, 1979. After many difficulties with the trial of the longwall method in the Sehib mine, with as a consequence over one year of delay in project implementa- tion, some positive results have now been obtained. On that basis, GAFSA is preparing itself for the generalization of the longwall method with the pur- chase and installation of additional longwall equipment. The Bank has recom- mended that GAFSA reinforce the project's technical management with outside assistance in longwall mining. GAFSA has embarked on a vast expansion program with the Sehib project, the modernization program and a new open pit project. As a result of the severe drop in phosphate prices, most of these investments are planned to be financed by debt. The Government has been made aware that some additional equity would have to be brought in. Ln. 1068: Irrigation Rehabilitation Project: US$12.2 million loan of December 31, 1974; Date of Effectiveness: September 18, 1975; Closing Date: June 30, 1982. Progress in the Medjerda subproject area has been satisfactory, with the exception of enforcement of certain provisions of the land reform legisla- tion. Intensification of cropping has been started. In Nebhana, land reform implementation continues and work is now underway to intensify agricultural production. Consultants have been recruited and are preparing various studies necessary for project implementation and for expansion into a second stage project. Rehabilitation and construction works are progressing satisfactorily. The Government and the agricultural credit bank (BNT) have concluded an on- lending agreement setting the terms and conditions of sub-loans under the credit component of the project.  ANNEX II Page 7 ot I Ln. 1088: First Urban Sewerage Project; US$28 million loan of February 18, 1975; Date of Effectiveness: August 15, 1975; Closing Date: June 15, 1979. A delay of about six months was experienced at the beginning of proj- ect execution as a result of the legislative measures required formally to establish the new national sewerage authority (Office National de l'Assainisse- ment - ONAS), followed by the numerous minor administrative problems involved in the physical transfer to ONAS of systems and employees from the centers taken over. In spite of these delays it is still expected that the works will be completed within six months of the date foreseen at the time of appraisal. However, disbursements are not expected to reach forecast levels until the end of 1978. Revised cost estimates indicate that total project cost may increase by 33 percent over appraisal estimates, most of the increase being in the local cost components. Procedures for granting government subsidies to ONAS are being reviewed, to ensure financial discipline and autonomy. The report of consultants retained for studies of the Tunisian construction industry will particularly address the problem of measures to reduce construction costs; the report is expected by the end of June 1977. Ln. 1155: Third Education Project; US$8.9 million loan of August 13, 1975; Date of Effectiveness: March 1, 1976; Closing Date: June 30, 1980. Since the last mission to review project implementation in July, 1976, there has been no progress. The Government has indicated that owing to a change in its education priorities, it no longer wishes to proceed with the project items as they were conceived during appraisal, and to use the loan proceeds to extend post-primary education. The rationale for the change in educational priorities and suggested steps for the future of the loan have just been conveyed to the Bank officially by the government. A dialogue is progress to clarify and determine possible ways to deal with the situation.  ANNEX III Page 1 TUNISIA FOURTH WATER SUPPLY PROJECT Supplementary Prolect Data Sheet Section I: Timetable of Key Events (a) Time taken to prepare Project: About 1 year between November 1975 and December 1976 (b) Agencies which prepared Project: Societe Nationale d'Exploitation et de Distribution des Eaux (SONEDE) (c) Project first presented to Bank: March, 1976 (d) First Bank mission to review Project: Preparation Mission, October 4, 1976 (e) Departure of Appraisal Mission: November 29, 1976 (f) Completion of Negotiations: April 28, 1977 (g) Planned Date of Effectiveness: Mid-October, 1977 Section II: Special Bank Implementation Action An understanding was reached during negotiations on a PERT program (Project Evaluation and Review Techniques) and construction schedule for proj- ect implementation prepared by the Bank; these documents would be updated in light of final engineering design studies. An understanding was also reached on a system of key indicators prepared by the Bank to monitor SONEDE's tech- nical, financial and administrative performance. Section III: Special Conditions (a) For effectiveness, the signature of another loan providing SONEDE sufficient foreign exchange to cover the foreign exchange cost of the distribution component in Greater Tunis; all conditions prior to disbursement of the other loan to be fulfilled by March 31, 1978; cross default with the other loan (para 41). (b) SONEDE to enter into an agreement with the Tunis District by December 31, 1977 for the purpose of coordinating their activities in carrying out that part of the project in the District of Tunis (para 37).  ANNEX III Page 2 (c) SONEDE to set and maintain water tariffs sufficient to enable the company to earn in 1978 and successive years a minimum return of 7.5 percent on net fixed assets in operation, valued in a manner acceptable to the Bank (para 49). (d) Government to provide the muncipalities with the financial means neces- sary to assure timely payment of their water bills, beginning with the annual 1978 budget (to cover charges of water consumed as of July 1, 1977) and to settle municipality arrears outstanding as of February 28, 1977, in the equivalent amount of $1.6 million, according to the follow- ing timetable: October 31, 1977 $468,000; December 31, 1977, $235,000; April 30, 1978, $936,000. The balance of all charges for water consumed to June 30, 1977 to be paid by June 30, 1978 (para 47). (e) Government to make available to SONEDE for financing the project a con- tribution of $23 million, disbursed as follows: $1.2 million in 1977 (already disbursed); $4 million in 1978; $7 million in 1979; $6.1 mil- lion in 1980; and $4.7 million in 1981 (para 41).   IBRD 12714 Area hMmdoneS jeasn mm rAlr MMP db no' ~ / W TE# iF D / ? i A NEA N S A Northern TUN IS I A FEBRUARY 1977 Area -1rl -nd -lmta;erM Y t' J T n,s > 7 of W adbk