Tunisia - Second Urban Development Project

Document of The World Ban IFLE COPY FOR OFFICIAL USE ONLY Report No. 23r?a-TUN REPUBLIC OF TUNISIA SECOND URBAN DEVELOPMENT PROJECT STAFF APPRAISAL REPORT May 8, 1979 Urban Projects Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Official Rate 1 Tunisian Dinar (TD) = US$2.38 1 US Dollar TD .420 MEASURES AND EQUIVALENTS 1 meter (m) 2 39.37 inches (in) 1 square meter (mi) = 10.9 square feet (sq ft) 1 kilometer (km) = 0.62 mil (mi) 1 hectare (ha) = 10,000 m or 2.471 acres 1 acre = 4,047 m or 0.405 ha 1 kilogram (kg) 2.2 pounds (lbs) 1 pound (lb) = 0.454 kg 1 tonne (metric) = 2,205 lbs or 1,000 kgs ABBREVIATIONS AND ACRONYMS BDET - Banque de Developpement Economique de Tunisie CDMER - Constructions Individuelles de Maisons Evolutives Rationalise'es CNEL - Caisse Nationale d'Epargne - Logement CPSCL - Caisse de Prets et de Soutien des Collectivites Locales CPU - Central Project Unit FOPRODI - Fonds pour la Promotion et le Developpement Industriel FOSPROLOS - Fonds Social pour la Promotion du Logement des Salaries MPU - Municipal Project Unit ONAS - Office National d'Assainissement OTTEEFP - Office des Travailleurs Tunisiens a l'Etranger, de l'Emploi et de la Formation Professionnelle PDR - Programme de Developpement Rural PPF - Project Preparation Facility SNIT - Societe Nationale Immobiliere de Tunisie SNT - Societe Nationale des Transports SONEDE - Societe Nationale d'Exploitation et de Distribution des Eaux STB - Societe Tunisienne de Banque STEG - Societe Tunisienne d'Electricite et de Gaz USAID - US Agency for International Development FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY TUNISIA SECOND URBAN DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. BACKGROUND ......................................................... I A. Urban Development in Tunisia ....................... 1 B. The Project Cities ................................. 7 II. THE PROJECT ........................ *............. o.......... e A. Objectives ............................ 8 B. Main Features ...... .... . ........................... 9 C. Detailed Description ..... .......................... 12 III. PROJECT COSTS, EXECUTION AND FINANCING ....... o ..... 24 A. Cost Estimates ............................................. 24 B. Execution .......... ............ ..................... 24 C. Financing ................. .............. 26 D. Procurement and Disbursement ....................... 29 E. Accounts and Audits .. ................ ............... 31 IV. COST RECOVERY ........................................... 31 A. Cost Recovery and Pricing . ................31 B. Affordability Analysis and Urban Poverty Impact... . 35 V. ORGANIZATION, MANAGEMENT AND FINANCE .................... 37 A. Municipalities ...................................... 37 B. Office des Travailleurs Tunisiens a 1'Etranger, de l'Emploi et de la Formation Professionnelle ... 39 C. Societe Tunisienne de Banques ...................... 40 D. The District of Tunis .... .......................... 41 E. The Interministerial Coordination Committee ......... 42 F. The Central Project Unit - ......................... 42 G. Caisse de Prets et de Soutien des Collectivites Locales .......................................... 44 This report is based on the findings of an appraisal mission to Tunisia in October/November 1978. Mission members included Noel Carrere, Bernard Verdier, Peter Midgley, Arnaud Guinard (IBRD), Sandra Cointreau, Alain Bertaud, Joseph Calvet, Marcel Sintes, Benjamin Spiro (Consultants). The mission was also assisted by Sylvia Ruggeri, Claudine Morin (IBRD). This report was prepared by Noel Carrere, Bernard Verdier, Arnaud Guinard and Alain Bertaud. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  F Table of Contents (Continued) Page No. VI. PROJECT JUSTIFICATION AND RISKS ..... p ... .... ..... 46 VII. AGREEMENTS REACHED DURING NEGOTIATIONS .................. . 49 CHARTS I. Implementation Schedule II. Municipal Project Organization III. Central Project Organization ANNEXES I. Upgrading Table 1 - Slum Upgrading; Provisions under the Project Table 2 - Slum Upgrading; Unit Costs Table 3 - Slum Upgrading; Plot Options, Charges and Affordability II. Detailed Cost Estimates Table 1 - Upgrading and Site and Services Table 2 - Improvement of Education Facilities in Low-Income Public Housing Programs Table 3 - Small-Scale Business Assistance Table 4 - Improvements to Solid Waste Collection and Disposal Table 5 - Improvement to Traffic Conditions in'Sfax Table 6 - Consultant and Advisory Services III. Executing Agencies; Financial Statements Table 1 - CPSCL Summary Balance Sheet Table 2 - Municipality of Tunis - Actual and Projected Budgets Table 3 - Municipality of Sfax - Actual and Projected Budgets Table 4 - CPSCL - Projected Cash Flow IV. List of Documents Available in the Project File PHOTOGRAPHS I. Jebel Lahmar II. Aerial View of Saida Manoubia III. Typical Conditions in Saida Manoubia IV. Rbats in Sfax MAPS I. Saida Manoubia Upgrading Component II. Saida Manoubia Upgrading Component; Water Supply and Sewer Networks III. Jebel Lahmar Upgrading Component IV. Location of Project Components in Sfax V. Cimer-Nord Site and Services Component  TUNISIA SECOND URBAN DEVELOPMENT PROJECT I. BACKGROUND A. Urban Development in Tunisia Urbanization Trends 1.01 With a 1975 population of about 5.5 million, Tunisia is one of the less populated developing countries of the Mediterranean region, but one of the most urbanized. In 1975, about 47% of Tunisia's population lived in urban areas versus 31% in Libya, 38% in Morocco, and 50% in Algeria. 1.02 Most of Tunisia's population lives on the rich agricultural land along the coast and in the country's three largest cities, Tunis, Sfax and Sousse, where 66% of the urban population is concentrated. This pattern of urbanization has been reinforced since Independence (1956) when the Government started a comprehensive development policy to improve communications between the coast and the interior. A major achievement of this policy was to stimulate growth and activities in the interior, but it also increased rural- urban migration, particularly towards the coastal cities. The trend has not been reversed, and whereas Tunisia's population is growing at about 2.3% per year, urban population is growing at a rate of 4.2% per year. About 20% of the urban population, or 0.5 million people, have incomes below the Bank- defined 1978 urban poverty threshold of TD 45 (US$107) per household per month. Administration 1.03 Tunisia is divided into 18 governorates, under the direct supervision of the Mfinistry of Interior. Each governorate is managed by a Conseil de Gouvernorat whose members are not elected, but are representatives of profes- sional and social organizations. Executive powers in the governorate are entrusted to a Governor, who is appointed by the President. Governorates are local authorities, and constitute administrative subdivisions of the country. Budgets of the governorates are approved by, and are entirely funded through the Ministry of Interior. In urban areas, management is the responsibility of the commune or municipality, a subdivision of the governorate. Members of the municipal council are elected officials who, in turn, elect the President of the Municipality or Mayor, who assumes executive powers. Communes have financial resources of their own, funded from local taxes, but these are very limited; their implementation capacities are also limited due to difficulties in the civil service attracting competent professionals. 1.04 Responsibility for managing urban growth is divided among the Minis- tries of Equipment, Agriculture, Industry, Mines and Energy and Interior: - The Ministry of Equipment is responsible nationwide for housing development and for most urban infrastructure.  - 2 - Two public agencies operate under this Ministry: the Societe Nationale Immobiliere de Tunisie (SNIT) and the Office National d'Assainissement (ONAS). SNIT is the national housing agency responsible for public housing programs. ONAS is the national company responsible for the design, construction, operation and mainte- nance of all sewerage and drainage networks within the limits of communes. The Ministry is also responsible for regional planning through its Directorate of Regional Development, which has drawn up master plans for most Tunisian cities other than the capital, Tunis. The Ministry of Agriculture is responsible for water supply through Societe Nationale d'Exploitation et de Distribution des Eaux (SONEDE), the national water authority; SONEDE operates and maintains all water supply systems in Tunisia. The Ministry of Industry is responsible for power supply through Societe Tunisienne d'Electricite et de Gaz (STEG), and for the promotion of industry through Fonds pour la Promotion et le D6veloppement Industriel (FOPRODI). STEG is the national power company responsible for the production of electricity, and the construction and maintenance of elec- tricity networks. FOPRODI is a public fund established in 1974 to promote decentralization of industrial development outside the Tunis area. The Ministry of Interior, through governorates and communes, is responsible for providing public, local services such as solid waste collection and disposal. 1.05 The division of responsibilities among the above ministries has often led to some confusion in the design and implementation of urban develop- ment schemes. The Government has very cautiously embarked on a process of decentralization to delegate more initiative to local authorities. Important steps in this direction have been taken or are under consideration: first, the creation in 1972 of the Tunis District, and second, the creation in 1976 of five "economic regions", each comprising three to four governorates grouped according to their socio-economic characteristics. Also, the Directorate of Local Public Authorities in the Ministry of Interior is in the process of designing special training programs for local and municipal staff to improve the planning and execution capacities of governorates and communes, respect- ively. The delegation of responsibilities, and allocation of resources to the above "regions" is still very limited but is expected to grow in the future as (i) consensus is reached on the content and orientation of integrated regional development programs, and (ii) communes and governorates succeed in retaining competent staff. 1.06 The District of Tunis is the first regional planning authority created in Tunisia; its purpose is (i) to plan, coordinate and supervise public investments, and (ii) to attempt to direct private investments as desirable in the capital region. The Tunis District is under the authority  - 3 - of the Governor and under the supervision of a Higher Council chaired by the Prime Minister. The Bank and UNDP assisted in its creation through the 1973 Tunis District Urban Planning and Public Transport Project, which established the District's first three-year work program and provided for technical assistance to establish the institution, its staff and work methodology. In the first years of its existence, the Tunis District was able to complete its original work program established in consultation with the Bank, including the supervision of a series of studies, inter alia, housing feasibility studies in Tunis and Sfax, which provided the fundamentals for the proposed second urban development project. (For further details, see paras. 1.10 and 1.16.) Urban Conditions and Policies 1.07 Housing. Over the last decade, urban population growth has not been met by a comparable growth in the housing stock. Housing production, exclusive of the informal construction sector, totals 15,000 units per year; this represents only 62% of the total housing requirements currently esti- mated at 23-25,000 units per year, of which 18,000 units to meet the needs of new households formed each year. The total housing shortage in urban areas in 1977 was estimated at 32,000 units (equivalent to 6% of the existing housing stock of 516,000 units). About 80% of the housing stock comprises one- to two-room 2dwellings with an average occupancy of 2.3 persons per room averaging 9-10 m in size. Some 800,000 people in Tunisian cities live in squatter settlements which account for close to one-third of the total housing stock and are increasing in size by 9-10,000 units each year. Occupancy in uncontrolled settlements average 3.5 persons per room, and as many as 40% of the dwellings in these areas are structurally inadequate. 1.08 What are referred to as squatter settlements in Tunisia are uncon- trolled urban areas where rural migrants have settled illegally on private or public land. The first substantial migrations, from which squatter settle- ments like Saida Manoubia in Tunis (paras. 2.08-2.09) originate, developed between World Wars I and II. Other migrants moved to the largest cities after World War II, and settled in areas like Jebel Lahmar in Tunis (paras. 2.06- 2.07). After Independence (1956), the departure of Europeans made modern housing structures available to the middle- and upper-income groups, who moved out of traditional areas, especially the Medinas, which then became the main receptacle for rural migrants. Gradually, the Medinas became saturated and squatter settlements continued to develop on the edge of the built-up areas of most cities and on unused land within these cities. Most squatter settlements lack water supply, sewerage and electricity. Some settlements date back to the early 1930's and late 1940's and have become well-established communities (e.g., Saida Manoubia and Jebel Lahmar), and the municipalities were led occasionally into providing minimum water supply, access roads and electricity, despite the fact that residents held no title to the land they occupied. 1.09 The shortfall in the formal housing sector production relative to requirements has been caused essentially by two factors: (i) the limited supply of locally produced construction materials such as cement, lime, and wood, and (ii) the shortage of skilled labor due to emigration. The com- bination of these factors has pushed construction prices up, and led the  -4- Government to keep subsidizing heavily its housing programs (up to 29% of the capital value of the units) to make them more affordable to the bulk of the urban population. Nonetheless, the most economical, subsidized public housing units built under these programs, the "suburban" units, have remained too expensive to be affordable to the lowest 50% of the urban population, and until 1976, only represented 17% of all urban housing programs. 1.10 By 1976, analysis of the housing sector by the Tunis District (para. 1.16) was available and could have led to significant changes in housing policy (para. 1.18). The Bank-financed housing feasibility study executed in 1975-76 by consultants to the District and closely followed by the Bank, identified types of housing programs susceptible to contribute effec- tively to tackling the country's housing problems. Despite these studies and extensive discussions with the Bank, the Government remained hesitant to embark on substantial reforms of its policy in this sector, and the Fifth Development Plan (1977-81) shows only modest improvements compared to those proposed by the Tunis District and recommended by the Bank. The Fifth Plan puts more emphasis on the least expensive units; 29% of all urban units planned for the 1977-81 period are to be of the "suburban" type against 20% in the 1973-76 Plan, while the share of the most expensive units is to fall from 56% in the last Plan to 5%. Correspondingly, 16% of urban housing investments would be for "suburban" units against 7% in the last Plan, and 14% for the most expensive units against 72% previously. This move, however, was still insufficient to start addressing effectively the needs of the urban poor households (earning TD 45 per month, and less)--for whom even subsidized "suburban" units (costing about TD 3,700 or US$8,800) remain beyond their financial capacity--and the central Government remained hesitant about adopting site and services programs. This has led local authorities, like the Tunis and Sfax Municipalities--that are daily faced with the pressing shelter needs of the poor--to envisage (i) adopting squatter settlement upgrading programs as a means to improve the living conditions of lower-income groups, and (ii) embarking on municipal site and services programs, referred to as Constructions Individuelles de Maisons Evolutives Rationalis6es .(Cimer), to meet the ever increasing demand for new low-cost houses. 1.11 Infrastructure. Access to basic utilities is an acute problem in urban areas, especially for low-income groups. In 1968, only 43% of all urban households were supplied with potable water through a public piped system; the remaining 57% obtained their water from cisterns or from individual or communal wells. Since 1968, the Bank Group has become extensively involved in the water supply sector and has helped finance four projects (three loans totalling US$59 million and one credit of US$10.5 million) for SONEDE, for the expansion of water supply services in Tunis, Sfax and Sousse, and in 62 rural centers. As a result, substantial progress has been achieved in the provi- sion of water in urban areas so that, in 1976, 64% of the urban population in Tunisia had access to piped water. 1.12 By comparison with water supply, sewerage has received little atten- tion until recently. By 1969, only nine municipalities were equipped with partial sewer systems, which were overloaded and inadequately maintained, and served essentially high- and medium-income groups. Such a situation developed because prime responsibility for providing sewerage services was with the  - 5 - communes who lacked the funds and trained personnel to provide the necessary services. The creation of ONAS in 1974, to take responsibility for this sector, was a major step towards improving sewerage provision. ONAS' invest- ment program for the 1975-81 period will extend full sewerage service from 48% of the total urban population served at present to 64%. The Bank Group is assisting ONAS through the financing of (i) improvements to the existing sewerage system in Greater Tunis (Loan 1088-TUN), and (ii) further improvements to the Greater Tunis system and first improvements to that in Sfax, through the Second Urban Sewerage Project (Loan 1675-TUN). 1.13 Distribution of electricity is adequate: 62% of urban households have private connections, and STEG plans to connect 85% of urban households by 1981. However, street lighting is often inadequate, particularly in low- income areas. STEG has already received three loans from the Bank totalling US$34 million to carry out its electrification program. 1.14 Social Services. Provision of social services such as health and education is on the average adequate and improving. Over the last twenty years, public health and education services have been greatly expanded and many are provided free; the distribution of these services, however, remains very uneven and is inadequate in low-income areas. The distribution of health centers is one per 5,000 persons in squatter settlements compared with one per 1,000 in higher-income areas. Also, only 40% of the 6-10 year age group in squatter areas have access to schools located nearby, compared with 95% in the middle- and high-income areas. The Bank Group is assisting the Government in both the health (First Population Project - 1971, Credit 238-TUN; and forth- coming Second Population Project) and education sectors (Third Education Project - 1976, Loan 1155-TUN) to improve accessibility to health and family planning services, and to expand and diversify practical and prevocational training. 1.15 Employment. The most important problem facing the Tunisian economy is under-employment and unemployment. In the non-agricultural sectors, unem- ployment in 1976 amounted to 22% (265,000 people) of the registered labor force. This high rate of unemployment partly stems from the industrializa- tion process which has been based on capital-intensive industries. However, the gradually increasing attention paid by Government to small-scale industry should help improve this situation, and the Bank Group is assisting the Gov- ernment in promoting small industries (IDF 1978 project, Loan 1505-TUN). The Government has also attempted to assist artisans and small businesses through its Programmes de Developpement Rural (PDR; para. 5.10), and more recently, local banks (e.g., STB; para. 5.14) have expressed interest in assisting the same. This is particulary relevant for low-income settlements, where stimulating the informal sector through the provision of credit and technical assistance should help absorb the unemployed (para 2.22). The First Urban Project 1.16 Financial aid has been obtained from the Bank Group in 1973 to finance the first urban project in Tunisia (IBRD Loan 937-TUN, IDA Credit 432-TUN): the Tunis District Urban Planning and Public Transport Project. This project helped establish and strengthen the District of Tunis (para. 1.06 and 5.18). It also addressed the public transport needs in the Tunis  - 6 - District, by financing the renewal and expansion of the bus fleet owned by the public transport company, Societe Nationale des Transports (SNT), the renova- tion of the Tunis-La Goulette-La Marsa (TGM) suburban railway line, and the construction of a bus maintenance depot. It also helped improve traffic conditions in the center of Greater Tunis through the introduction of bus lanes, restricted pedestrian areas, and provision of signalization equipment for major intersections. Procurement of new buses, improved management and facilities, and restricted bus lanes have significantly improved bus services and resulted in a very substantial additional increase in the SNT clientele. In the first years of its existence, the Tunis District was able to complete its original work program established in consultation with the Bank, i.e., to: (i) carry out sectoral analyses resulting in the identification of deficiencies and leading to the design of priority action programs, (ii) develop a strategic regional development plan, (iii) establish more realistic and operational programming and budgeting mechanisms, (iv) initiate a number of important changes in investment programs, and (v) supervise a series of studies, inter alia, housing feasibility studies in Tunis and Sfax, which provided the fundamentals for the proposed project. Implementation of the first urban project has shown that great efforts were needed to create new agencies and to obtain that agencies coordinate their activities. This has led the prepara- tion team on the proposed project to: (i) minimize the number of entities to be created (Chapter III, Part B), and (ii) recommend that agencies involved in project execution establish protocols (paras. 3.13 and 5.04), convention (para. 5.17) and agreements (paras. 3.09 and 5.35) of collaboration. 1.17 Further to the Bank assistance, financial aid has also been obtained more recently from the Netherlands Government (US$2.4 million) and from USAID (US$10 million) to start upgrading two squatter settlements in Greater Tunis. Towards a Policy for the Urban Poor 1.18 Past Government responses to urban poverty have been inadequate, particularly in the shelter and employment sectors (paras. 1.09-1.10 and 1.15). The extended dialogue on related policies, which the Government and the Bank have maintained throughout the execution of the first urban project, has brought its results; the long standing uneasiness of central authorities to embark on upgrading programs, site and services schemes and small-scale business assistance programs, is now being superseded by the recognitiol that there are needs which present policies and programs cannot satisfy. A very significant step, therefore, has been taken by the Government when they agreed to launch schemes in the above-mentioned types of programs under the proposed project. Also, of real significance to the poor, are the Government's recent decisions to improve and expand pre-vocational training programs and low-cost public health services (para. 1.14). 1.19 Some of the project characteristics are expected to have substantial effects on the formulation of policies in the future: (i) careful design, to ensure replicability and take full account of financial capacities of low-income beneficiaries; all allocable costs will be recovered and no significant government subsidies are involved (Chapter IV); (ii) institutional setting (Chapter III, Part B), such that similar projects--and larger programs follow- ing the same basic concepts--could be launched soon with the sole constraint  - 7 - of the still limited implementation capabilities of most municipalities in Tunisia (paras. 1.03 and 1.05); finally, (iii) monitoring of project execution, to be carried out by a Central Project Unit (para. 5.25), which should faci- litate a prompt assessment of the effectiveness of this approach to provide shelter and services to the urban poor. The latter point, in particular, should permit the Government to firm up its present plans to have similar projects started in the cities of Sousse, Gabes and Bizerte, and should pave the way towards replication of such programs. B. The Project Cities Tunis 1.20 Greater Tunis (the District of Tunis) groups 15 municipalities, including Tunis; it is the largest metropolitan area in Tunisia, with a population of about one million, and grows at a rate of about 5% a year. In 1975, Greater Tunis had 50% of the country's car fleet, 57% of the medical doctors and almost all university students. About 60% of public investments, including 66% of public housing investments, took place in Greater Tunis and 42% of industrial jobs were located there. Further details on Greater Tunis can be found in the Bank Appraisal Report 157a-TUN presenting the Tunis District Urban Planning and Public Transport Project (IBRD Loan 937-TUN, IDA Credit 432-TUN). 1.21 The housing situation in Greater Tunis is deteriorating. The Medina, the old traditional city, is among the areas where migrants establish their first urban residence, and densities have reached 1,500 persons per ha in some places. Other migrants settle on the fringe of the city where squatter settle- ments are rapidly developing (para. 1.08). 1.22 Overall, the provision of water and electricity in Greater Tunis is adequate; about 84% of the population is served by the water supply system, and 90% of the population has access to electricity. In contrast, sewerage services are tar from adequate; about 90% of those connected to the water system have sewer connections, but the sewerage system needs improvements. Sewers are often overloaded; in the rainy season, they overflow and sewage stagnates in streets in the low-lying areas of the city. Within the next few years, however, this situation should be substantially improved as the Bank is assisting ONAS (Loan 1088-TUN) in its plan to address the above problems. Solid waste collection and disposal are also problems in Greater Tunis; waste collection needs serious improvements, and open dumping poses acute health problems. More than 30 illegal dumps have developed in and around Greater Tunis. Dead animals and dangerous industrial waste can be found in these dumps which constitute a serious health hazard for the settlements nearby. 1.23 The fast growing economic base of Tunis has not been able to absorb the growing labor force swelled by migrants. The unemployment rate in Tunis is about 13%, and is particularly high (25%) among the young and the unskilled. Unemployment is the basic problem faced by low-income families, from which stem the poor housing conditions in which they live but also their limited access to public and social services. The areas most affected are (i) old  -8- settlements like Saida Manoubia and Jebel Lahmar, but also (ii) about 14 other squatter settlements, most of them recent, smaller in size and located on the outskirts of the urban area, and (iii) urban districts that have gradually grown into pockets of poverty, like the Medina and the districts immediately adjacent to it, and areas in the western suburbs of Manoubia and Le Bardo, and La Goulette in the east. The Tunis District has made a census and a preliminary reconnaissance of these areas; it has also established priorities for a comprehensive upgrading program. It is expected that this program would be launched when the feasibility of rehabilitation schemes has been demonstrated, and when Government can mobilize sufficient funds. Sfax 1.24 With a population of about 350,000, Sfax is the second largest city in Tunisia. The Sfax region draws its main resources from agriculture, particularly from growing olives which provides a living for 65% of the population in the region, while the city of Sfax draws its resources from a dynamic tertiary sector (services and trades) which provides employment for 55% of the active population. 1.25 Sfax has grown at about 3.5% per year over the last 15 years. For decades, Sfax has been developing in a unique manner. As the population grew, the large area of gardens surrounding the city has been gradually subdivided and urbanized, the end results being: (i) the emergence of high-density settlements (Rbats) with a Medina-type urban fabric, at short distances from the city center and populated by low-income families, and (ii) a unique "suburbanization" of a large fraction of the medium- to high-income population. 1.26 The provision of urban services in Sfax is inadequate, particularly in the Rbats. About 60% of the total population has private water connections; the remainder gets water from cisterns, standpipes and wells. Sewerage is only provided in the Medina, the city center, and some high-income areas on the fringe of the city. Distribution of electricity is inadequate; the low-tension network is saturated and suffers from occasional breakdowns. Transportation is also a problem in Sfax due to inadequate management of the transport net- work and the competition between a variety of transport modes (trucks, donkey carts, buses, private cars, and a large fleet of bicycles and mopeds) for limited road space within the central area. II. THE PROJECT A. Objectives 2.01 The main objectives of the project are, first, to help develop and demonstrate alternative approaches to Tunisia's present policies in the sectors of shelter, employment and urban services for the poor, and second, to establish an institutional framework that could more systematically use this approach on a larger scale in the long-term. Two settlements in Tunis and three in Sfax have been selected as representative of the problems  - 9 - affecting low-income settlements in Tunisia, and provide an adequate basis for demonstrating the viability of the proposed approach. 2.02 The project would demonstrate (i) through squatter settlement up- grading and site and services, the feasibility of providing shelter and urban services to the lowest income groups at standards and costs they can afford; and (ii) through maximum recovery of shelter and related on-site infrastruc- ture costs, the possibility of making this approach replicable on a large scale without major Government subsidies. To further help improve the living conditions of the urban poor, employment opportunities would be provided in the construction of shelter and infrastructure, and through credit and tech- nical assistance to on-site small-scale enterprises. Moreover, low-cost solutions for solid waste collection and disposal and for transport would be developed to help alleviate both on-site and city-wide deficiencies in the delivery of these services. 2.03 The project would also assist in establishing a viable institutional framework through which the Government could implement new urban development and housing policies addressing the needs of the poor more effectively. For that purpose, the project would include: (i) creation of a Central Project Unit (CPU) which would initially help execute and monitor the project, and later on advise municipal authorities, inter alia, on similar urban schemes in other urban areas; and (ii) strengthening of the Caisse de Pr^ts et de Soutien aux Collectivites Locales (CPSCL) which would be the main financial intermediary for the channeling of Bank and Government funds, and in the long-term, is expected to evolve into a municipal bank. B. Main Features 2.04 Summary cost estimates of the project are shown in Table II-1. 2.05 To achieve the above objectives, the project would comprise: (a) Upgrading. The upgrading of five low-income settlements-- Jebel Lahmar and Saida Manoubia in Tunis, and three Rbats (Chichma, Oued R'Mel/Bir Karouba, Merkez Chaker Sud) in Sfax. These spontaneous settlements, with a total existing population of about 93,000 and covering about 230 hectares, are representative of the acute problems affecting low-income settlements in Tunisia and provide an adequate basis for initiating and developing low-cost upgrading schemes. Upgrading would be achieved through (i) providing security of tenure, (ii) improving existing, or providing new, infrastructure (including roads, water supply, sanitation, drainage, electricity and refuse collection) and community facilities (including schools, health centers and markets), and (iii) offering building materials loans for self-help home improvement or extension. About 1,960 infill plots would also be provided in the upgrading areas, benefitting about 16,800 persons.  TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table II-l: SUMMARY COST ESTIMATES TD ('000) US$ ('000) Percent Percent of Local Taxes Foreign Total Local Taxes Foreign Total Foreign Exchange Total Base Cost I. Municipality of Tunis A. Upgrading a) Saida Manoubia 1,678.1 419.5 1,478.9 3,576.5 3,995.5 998.8 3,521.2 8,515.5 41.3 22.6 b) Jebel Lahmar 1,746.6 436.7 1,530.4 3,713.7 4,158.6 1,039.8 3,643.8 8,842.2 41.2 23.5 182.8 32.2 215.0 430.0 435.1 76.8 511.9 1,023.8 50.0 2.7 B. Small Business Assistance __ 2 7 _ Total 3,607.5 888.0 3,224.3 7,720.2 8,589.2 2,115.4 7,676.9 18,381.5 41.8 48.8 II. Improvement of Education Services in Existing Low Income Public Housing Programs in Greater Tunis 156.8 39.2 84.0 280.0 373.3 93.3 200.0 666.6 30.0 1.8 III. Solid Waste Collection and Disposal in Greater Tunis 446.0 111.5 936.5 1,494.0 1,061.9 265.5 2,229.8 3,557.2 62.7 9.4 IV. Municipality of Sfax A. Upgrading 938.2 234.5 801.2 1,973.9 2,233.8 558.3 1,907.6 4,699.7 40.6 12.5 B. Sites and Services a) Cimer-Nord 642.3 160.6 581.8 1,384.7 1,529.3 382.4 1,385.2 3,296.9 42.0 8.6 b) Cimer-Sud 805.9 201.5 690.5 1,697.9 1,918.8 479.8 1,644.0 4,042.6 40.7 10.7 C. Small Business Assistance 29.8 5.2 35.0 70,0 70.8 12.5 83.4 166.7 50.0 0.4 D. Traffic Improvement 133.5 33.4 154.1 321.0 317.8 79.5 366.9 764.2 48.0 2.0 Total 2,549.7 635.2 2,262.6 5,447.5 6.070.5 1,512.5 5,387.1 12,970.1 41.4 34.4 V. Administration 293.4 73.3 - 366.7 698.6 174.5 - 873.1 - 2.3 VI. Technical Assistance 111.6 27.9 369.5 509.0 265.7 66.4 879.8 1,211.9 72.6 3.2 Total Base Cost 7,164.9 1,775.6 6,876.9 15,817.4 17,059.2 4,227.6 16,373.6 37,660.4 43.5 100.0 Physical Contingencies 377.7 94.4 405.3 877.4 899.3 224.8 965.1 2,089.2 46.2 5.5 Price Contingencies 875.0 218.8 1,125.3 2,219.1 2,083.4 520.9 2,679.2 5,283.5 50.7 14.0 TOTAL PROJECT COST 8,417.6 2,088.8 8,407.5 18,913.9 20,041.9 4,973.3 20,017.9 45,033.1 44.5 _  - 11 - (b) Site and Services Program. In Sfax, about 1,900 serviced plots, including about 95 workshops, would be provided with individual water supply and sewer connections, building materials loans and community facilities. About 40% of the plots would be provided with core houses, ablution units and perimeter walls. This program would benefit approximately 10,500 people in two areas--Cimer-Nord and Cimer-Sud--and would cover about 26 hectares. (c) Improvement of Education Facilities in Existing Low-Income Public Housing Programs in Greater Tunis. Construction of four primary schools of 6 or 12 classrooms, each with a capacity of 40 students and operating on double shift in three low-income public housing areas built by SNIT, the national housing agency. (d) Small-Scale Business Assistance Program. Provision at proj- ect sites of loans for workshop improvement and construction, and for equipment and working capital, together with extension services, benefitting about 700 small-scale entrepreneurs and retailers, and generating 940 jobs approximately at an estimated average cost of US$4,150 per job. Vocational training would also be provided. (e) Improvements to Solid Waste Collection and Disposal in Greater Tunis. Low-cost solutions to solid waste collection and disposal would be introduced through (i) improvement of equipment main- tenance, and of six transfer stations, (ii) procurement of collection vehicles, (iii) improvement to services organization and management, (iv) closure of some illegal dumps, and (v) opening of one public sanitary landfill. (f) Improvements of Traffic Conditions in Sfax. Provision of low- cost traffic improvements, including (i) special lanes for buses, and for bicycles and mopeds, (ii) a one-way street system in the city central area, (iii) improvement to major intersections, and (iv) provision of traffic control equipment; as part of a compre- hensive improvement plan. (g) Consultant and Advisory Services. Technical assistance would be provided for: (i) project implementation, to the Central Project Unit (CPU) and the Municipality of Sfax; (ii) preparation and implementation of the small-scale business assistance program, to the Office des Travailleurs Tunisiens a l'Etranger, de l'Emploi et de la Formation Professionnelle (OTTEEFP); (iii) finance and management assistance, to CPSCL;  - 12 - (iv) municipal staff training, to the Directorate of Local Public Authorities; (v) preparation and implementation of the solid waste collection and disposal improvement program, to the District of Tunis; and (vi) preparation of other similar projects, to CPU. Technical assistance under (ii), (iii) and (iv) above would be provided through CPU. C. Detailed Description Upgrading 2.06 Tunis - Jebel Lahmar. This settlement is located in the northern part of Tunis, adjacent to middle- and high-income areas like Belvedere (see Map IBRD 14143R). Jebel Lahmar started developing on quarried land in the late 1940's with the inflow of migrants and of families whose dwellings in other squatter settlements had been eradicated. Jebel Lahmar has gradually grown into a settlement of about 42,000 people and extends over 80 hectarese About 7,800 families live there on 4,230 plots. The median household income is about TD 57 (US$136) per month and 35% of the population is below the 1978 Bank-defined urban poverty threshold of TD 45 (US$107). Community facilities meet about 75% of the needs. Half of the houses are of good quality; 30% are in need of improvement, and 20% are of makeshift materials. 2.07 Access to the site is adequate. Part of the primary street network is surfaced; secondary streets and pedestrian paths are in bad condition. A water supply network serves the area through 21 standpipes, and 53% of the houses have individual connections. A small sewer network exists, which is in poor condition and serves about 50% of the houses; waste water from other houses is disposed of through open ditches. About 70% of the plots have electricity connections, but street lighting exists only on a few streets. The site is adequately provided with community facilities. On the site and in its immediate vicinity, there are (i) eight primary schools of an average size of 12 classrooms, each with a capacity of 40 students and operating on double shift, which meet 85% of the needs; (ii) one dispensary; and (iii) one playground. One polyclinic is under construction. 2.08 Tunis - Saida Manoubia. This settlement is located between the western edge of the Medina and the bank of the western Tunis lake, Sebket es Sejouni (see Map IBRD 14141R). Saida Manoubia started developing in the late 1930's and has extended further on swampy land along the lake. The site now covers about 90 hectares. It has a population of 34,000 persons, or 6,000 households, living on about 3,450 plots. The median household income is about TD 55 (US$131) per month and 30% of the population is below the 1978 Bank-defined urban poverty threshold of TD 45 (US$107). An estimated 15% of the active population is unemployed, and community facilities provide for the needs of only 25% of the population. Most houses are structurally sound and built along a regular street pattern.  - 13 - 2.09 The site is accessible by only one road running north-south along the lake. This road and all streets in the area are in bad condition. Water supply is inadequate; about 30% only of the plots have water connections and most of the settlers rely on 13 public standpipes. About one-fourth of the plots have sewerage connections, and only 26% of the residents have made individual investments in cesspits; a large collector sewer runs west of the site, along the lake and was financed under the First Urban Sewerage Project (Loan 1088-TUN). Most plots are connected to the power supply system, but street lighting is only provided on the main street. The lack of community facilities is particularly acute; there is only one primary school of two classrooms, each with a capacity of 40 students and operating on double shift, two small kouttabs (koranic schools) and one dispensary. 2.10 The two major problems affecting the living conditions of the residents in Jebel Lahmar and Saida Manoubia are: (i) limited access to basic services, and (ii) no security of tenure. In both sites, about 50% of the land is public property, the remainder is owned by non-residents. Procedures to acquire the land, or rights to the land to carry out the project, have been initiated by the Municipality of Tunis. All concerned authorities, local and central, have approved the upgrading scheme for Jebel Lahmar and a draft decree is with the Prime Minister's Office; local authorities have approved the upgrading scheme for Saida Manoubia and central authorities (i.e., the Ministry of Equipment) are now reviewing the related documents. Agreement was reached during negotiations that publication of decrees of the Prime Minister authorizing land expropriation in the project areas would be a condition of loan effectiveness. 2.11 Sfax - Rbats Chichma, Oued R'Mel/Bir Karouba, Merkez Chaker Sud. The three sites are located to the south (Oued R'Mel/Bir Karouba, Merkez Chaker Sud) and to the north (Chichma) of the city center. They extend over 60 hec- tares of flat land (Map IBRD 14144R), on the edge of the expanding built-up area. Their population is estimated at 17,000 persons or 2,930 households, living on about 2,200 plots. The median household income is TD 50 (US$119) per month, and 42% of the population is below the 1978 Bank-defined urban poverty threshold of TD 45 (US$107). Community facilities meet the needs of only 30% of the population. Land is owned by the residents. 2.12 Access to the sites is good, but on-site roads are unsurfaced and in very bad condition. About 50% of the plots are connected to the water supply system. Very few plots are connected to the water-borne sewerage system. Most of the plots are connected to electricity. Street lighting is either poor (Chichma and Oued R'Mel/Bir Karouba) or nonexistent (Merkez Chaker Sud). The lack of community facilities is particularly severe in Chichma. 2.13 Proposed Improvements. For each squatter settlement to be upgraded under the project (Maps IBRD 14141R, 14142R, 14143R), improvements have been designed taking into account financial capacities of the beneficiaries and their preferences, as well as the wishes expressed by the Municipalities. Upgrading would comprise: (a) provision of security of tenure to the residents in Jebel Lahmar and Saida Manoubia;  - 14 - (b) surfacing of primary and secondary circulation roads (and, for Saida Manoubia, construction of a new east-west access road to link the area to the city center); part of the ter- tiary access roads would also be surfaced, and all pedestrian ways would be graded and compacted; (c) improvement to the water supply system by extension of the existing network along through-streets, allowing about 80% of all plots to have individual connections immediately; fire hydrants would also be installed in the two project areas in Tunis; (d) improvement in sanitation--the existing sewerage network would be expanded to all streets, and all plots would be connected to the system to avoid later clandestine and hazardous hookups. The open ditch stormwater drainage systems existing in Jebel Lahmar and the Rbats would also be improved and extended; (e) extension of the existing public lighting network, and provision of one street light every 50 m on roads and pedestrian ways; (f) improvement to the existing transfer station for domestic waste in Jebel Lahmar, and Saida Manoubia; (g) provision of building materials loans up to an amount of TD 250 (US$595) each, for home improvement; (h) improvement of community facilities to the level of service prevailing in the District of Tunis (e.g., 95% of the 6-10 year old children enrolled in schools within an 0.8 miles radius from home) or in Sfax, through the provision of: (i) primary schools of 10 classrooms, each with a capacity of 40 students, and operating on double shift, (ii) health centers, and (iii) markets. Sites have also been reserved for construction of additional health centers which could be financed under the forthcoming Second Population Project; and Ci) development of about 1,960 infill plots with connections to the water supply and sewerage systems, ablution units, perimeter walls and core houses. In Saida Manoubia, however, about 30% of the serviced plots would be provided only with building materials loans up to an amount of TD 500 (US$1,190) each, allowing beneficiaries to build up to two rooms. In each site, the new plots would essentially be concentrated in one area and their design was developed in a way similar to that followed for site and services2in Sfax (para. 2.17-2.19), with the only difference tMat 144 m infill plots could be provided with core houses 19 m in area. Details on the above elements and on unit costs (per ha, household and capita) are shown in Annex I, Tables 1 and 2, respectively.  - 15 - 2.14 Plot options, chargeable costs and affordability in upgraded areas are shown in Annex I, Table 3. In Tunis, total costs chargeable to existing households, including land priced at the estimated market value, would range from TD 156 (US$317) to TD 527 (US$1,255) per household, and corresponding plot options would be affordable to households respectively at the 4th and 28th percentiles of the Tunis District income distribution. In Sfax, charge- able costs per household would range from TD 145 (US$345) to TD 495 (US$1,180), and corresponding plot options would be affordable to households respectively, at the 4th and 31st percentiles of the Sfax income distribution. Total costs for upgrading recovered from beneficiaries would account for about 80% of the upgrading components (para. 4.07). Further details on affordability are given in paras. 4.10-4.13. Site and Services Program - Sfax 2.15 The Site and Services Program in two areas--Cimer-Nord and Cimer- Sud--in Sfax covers 26 hectares and is designed to provide accommodations for about 1,800 low-income families and about 95 small-scale enterprises. Both sites are on flat land and have been selected on the basis of proxi- mity to suitable employment, availability of off-site infrastructure, and affordability of land prices. In both sites, land is in private ownership. Land in Cimer-Nord is being acquired through regular purchase, and Cimer-Sud would be acquired through expropriation. Agreement was reached during nego- tiations that (i) actual publication of the decree of the Prime Minister authorizing land expropriation in Cimer-Sud would be a condition of loan effectiveness, and (ii) submission of evidence that the Municipality has acquired the necessary land in Cimer-Nord would be a condition of disbursement for that part of the project which consists in developing a site and services scheme on the Cimer-Nord site. 2.16 Cimer-Nord located north of the city center on both sides of a large dirt road is directly accessible via an asphalted road. The site is within walking distance of a planned industrial area and of bus routes. It is served by a water main. A trunk sewer runs east of the site; the Second Urban Sewerage Project would provide for a main drain southeast of the site. Cimer-Sud is part of the expanding southern industrial area of Sfax. Located on the Agareb road, the site can be served by the existing water supply, sewerage and power networks running in its vicinity. 2.17 Site Layout and Land Use. Layouts for both sites have been designed to ensure the most cost effective use of land and infrastructure (see Map IBRD 14145R). Most residential plots would be provided with pedestrian access only. Vehicular access would be limited to primary and secondary roads, providing service to within 75 m of every plot. Residential areas would be distri 2uted in such a way as to provide vehicular access to the larger plots--144 m in area--which may eventually develop commercial frontages; correspondingly, developed land would be differentially priced according to location and accessibility. On the basis of market values, three price zones would be distinguished within the residential areas: Zone A, with no specific activity potential; Zone B, with small retail activity potential; and Zone C, with high commercial potential. Land use distribution for both sites would be the following:  - 16 - Table II-2: LAND USE; CIMER-NORD AND CIMER-SUD Area (m ) % of To_al A. Marketable Land (to which costs are allocated) 1. Residential (Zone A) (88,056) (Zone B) (41,360) (Zone C) (27,072) Total Residential 156,488 59.4 2. Workshops 6,696 2.5 3. Community facilities 13,130 5.0 Total marketable land 176,314 66.9 B. Non-marketable Land 1. Parks and open space 9,524 3.6 2. Vehicular and pedestrian circulation /1 77,762 29.5 Total non-marketable land 87,286 33.1 TOTAL 263 600 100.0 /1 Including primary roads crossing the sites. 2.18 Plot Size and Development. Some 1990 plots 2would be d2eveloped, and three plot sizes would be provided: 72 m , 110 m and 144 m . All plots would have individual water supply, sewer and electricity. An on-site sewer network would be connected to the existing main trunk sewer by 3,500 m of new pipes in Cimer-Nord, and 1,000 m in Cimer-Sud. Stormwater drainage would be through open ditches in each site. Street lighting would be installed on primary and secondary streets. 2.19 In addition to the above basic infrastructure, 40% of the plots would be provided with (i) an ablution unit consisting of a bucket flushed toilet in a brick wall enclosure, (ii)2a brick perimeter wall,2and (iii)2 a core house varying in size from 10 m on 72 m plots to 16 m on 110 m plots (Sketch II-1). Building materials loans would be made available to all plot allottees to enable them to build or expand their dwellings through self-help; these loans would be up to an amount of TD 250 (US$595) when a core house is being provided, and up to an amount of TD 500 (US$1,190) when no core house is provided. The various plot options, chargeable costs, and affordability are indicated in Table II-3. The minimum plot option would cost about TD 480 (US$1,143) and, together with a building loan of TD 250 (US$595), would be affordable to about 90% of Sfax's urban population. Total costs for site and services recovered from beneficiaries would account for about 76% of the total cost of the site and services component (para. 4.07).  - 17 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT Sketch II-1 - SITE AND SERVICES - SFAX ISOMETRIC OF CORE UNITS Common Bearing Wall /f0-/ Perimeter Wall Ablution Unit ttg/ f c o r e~~~~~~~~r House (10 m2) I 1 .. . < | / ~~~~~Perimeter Plot A 2X / /\ (Area =72 m)// /*'/ l Common Bearing Wa il X/// (Area = 110 m2) World Bank - 20287  TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table II-3: PLOT OPTIONS, CHARGES AND AFFORDABILITY (1978 Prices) SITE AND SERVICES; CIMER-NORD AND CIMER-SUD; SFAX .Plot Type BI C A. Physical Characteristics (%) Plot size 72 m2 72 m2 110 m2 110 m2 144 m2 (b) Core house size - 10 m2 - 16 m2 - B. Costs Per Plot (TD)/ (j) Plot cost /2 299.70 299.70 745.37 745.37 1,304.10 (ii) Connection cost/3 179.43 179.43 179.43 179.43 179.43 (iii) Core house cost - 561.55 - 909.15 - Total 479.13 1,040.68 924.8 1,833.95 1,483.53 Building materials loans- /4 250 500 0 250 250 500 0 250 250 500 C. Downpayment (TD) 71.87 187.32 138.72 330.11 296.70 D. Monthly Payment(TD) (i) for plot 3.04 6.36 5.86 11.21 8.85 (ii) for bldg. mat. loans 2.84 5.68 0 2.84 2.84 5.68 0 2.84 2.84 5.68 6.- - - 4-.5 Total MonthlyPayment 5.88 8.72 6.36 9.20 8.70 11.54 11.21 14.05 11.69 14.53 E. Affordability (a) Percent of income spent on housing 18 20 18 20 18 20 20 22 20 22 (b) Monthly income 33 44 35 46 44 58 56 64 58 66 Percentile Reached 10 - 16 11 - 18 16 - 30 28 - 36 30 - 45 Number of Plots 663 560 236 140 188 % of Beneficiaries /5 37.1 31.3 13.3 7.8 10,5 /1 Including physical contingencies, management costs, design and supervision, and interest during construction. /2 Landand basic infrastructure. /3 Water supply, sewerage and electricity. /4 Two cases are shown, reflecting a low or high demand for building materials loans. /5 The percentage is calculated on the basis of the total number of residential plots on Cimer-Nord and Sud sites. An additional 93 plots are provided for workshops.  - 19 - 2.20 Two primary schools of respectively 6 (Cimer-Nord) and 10 classrooms (Cimer-Sud), each with a capacity of 40 students and operating on double shift, would also be provided. Improvement of Education Facilities in Low-Income Public Housing Programs in Greater Tunis 2.21 Low-income housing programs developed in Greater Tunis by SNIT, the national housing agency, more than a decade ago, are under-equipped with community facilities. In order to improve this situation and as a first stage of a program designed to achieve full service coverage, the project would in lude the construction, furnishing and equipment of primary schools in thsee low-income areas as follows: (a) one primary school of 12 classrooms in Ibn Khaldoum; (b) one primary school of 6 classrooms in El Khadra; and (c) two primary schools of 6 classrooms in Hraria. Each classroom would have a capacity of 40 students and would operate on double shift. This program would cover the needs for primary education in these selected areas at the average service level currently prevailing in the District of Tunis. Small-Scale Business Assistance Program 2.22 The project would include: (i) small-business loans, (ii) exten- sion services, and (iii) vocational training. Small-business loans would be provided for workshop improvement and construction, equipment purchase and working capital in the upgrading and site and services areas. These loans, on the average, would be of an amount one-tenth of that of the loans offered to small industries under the 1978 IDF project (Loan 1505-TUN; para. 1.15) and would benefit artisans and small businesses in the project areas. A line of credit of TD 500,000 (US$1.2 million) is proposed for this purpose and is expected to meet the estimated demand. The Societe Tunisienne de Banque (STB) would consider providing additional funds if the demand exceeded this estimate. About TD 140,000 (US$330,000) are expected to be for workshop improvement and construction, and TD 360,000 (US$870,000) for working capital and equipment financing. Average loans for working capital and equipment would be about TD 500 (US$1,200) and the maximum loan amount would be TD 3,000 (US$7,150). 2.23 Implementation of this project component would be the combined responsibility of OTTEEFP, STB and the Municipalities of Tunis and Sfax. These agencies would advertise the program; OTTEEFP would identify candidates as well as centralize and process candidate files. Selection of candidates for financial and technical assistance would be the responsibility of a selection committee made up of representatives of these agencies. Selection criteria would include, inter alia, creditworthiness, low capital-labor ratio, technical ability, relevance of the proposed investments and residence. Specific responsibilities would be as follows: (a) the Municipalities of Tunis and Sfax would be mainly responsible for the promotion of the program and for allocating plots--when needed--to the candidates ulti-  - 20 - mately selected, and would advise OTTEEFP and STB on the economic activities best suited to the project areas; (b) OTTEEFP through its Employment Promotion Unit (parae 5.12), would be responsible for providing vocational training and extension services to selected candidates, and for monitoring the effectiveness of the program; and (c) STB, which would finance 50% of the line of credit (the rest being financed by the Bank; para. 3.08), would be responsible for reviewing the creditworthiness of the applicants and determining the terms and conditions of the loans granted. Solid Waste Collection and Disposal - Greater Tunis 2.24 The present annual generation of solid waste by households in Greater Tunis amounts to about 180,000 tonnes. Municipal departments respon- sible for solid waste collection and for its disposal, have not kept up with the needs of an ever increasing population and a growing waste generation. Poor maintenance of equipment and high absenteeism have further reduced their capacity to provide proper waste collection and street cleaning services. There is no regional authority to supervise, coordinate and control solid waste collection and disposal, and the operation of public landfills has worsened to a point where they differ little from illegal dumps. Animal carcasses, hospital wastes and toxic residues are disposed of in open fields, creating serious health hazards. The number of illegal dumps has increased and it is estimated that they receive about two-thirds of all the waste generated in Greater Tunis. 2.25 Public authorities in Greater Tunis have decided to tackle the above-described problems. Consultants to the Municipality of Tunis and to the Tunis District have carried out detailed studies on collection and disposal respectively, developed an integrated action program for collection, and established that sanitary landfill (area method) was the least-cost solution for solid waste disposal. Public authorities then have adopted plans to: (i) investigate alternative administrative and financial arrangements to ensure adequate solid waste management in the capital region, and establish a proper institutional setting for this purpose, i.e., a solid waste management regional authority, or two inter-municipal associations, responsible for the operation and management of the two sanitary landfills planned for the region; (ii) improve collection in Greater Tunis; (iii) establish properly set up and managed public sanitary landfills, and in parallel; (iv) close illegal dumps; and finally;  - 21 - (v) investigate the possibility of using solid waste to produce compost for agricultural purposes. Two important decisions have already been taken which demonstrate the commit- ment made by public authorities. First, an ad hoc interministerial commission composed of representatives of the Ministries of Interior, Equipment, Public Health and Agriculture has been set up to assist the Tunis District in organ- izing and following up tine design and implementation of the above program, until a regional authoritej is, or inter-municipal associations are established and start assuming full responsibility for solid waste management in the Greater Tunis area (para. 3.04). Second, following the estimates of the cost of operating sanitary landfills which were developed by the above-mentioned consultants to the Tunis District, the District Higher Council, in consultation with the Ministry of Finance, has decided to instruct the municipalities in the Tunis District to embark over the next few years on a program to increase the proceeds of the housing tax (especially through substantial improvement of the collection of this tax) to permit them to finance in full the expected operating costs of sanitary landfills (estimated at about TD 0.5 million per year) where all solid waste generated in Greater Tunis would be disposed of. 2.26 Following detailed discussions between public authorities in Greater Tunis and the Bank, the design of the above-mentioned program has been improved; in particular, its phasing and priorities have bedn clearly established. The project would assist the first phase of the program by: (a) the provision of consultant services to develop alternative designs of, and submit recommendations on, institutional and financial arrangements for the proper handling of solid waste collection and disposal at a regional level; (b) the improvement of solid waste collection, through: (i) the provision of advisory services to analyze and iimprove organization and management of collection, as well as maintenance of equipment; (ii) the overall improvement of maintenance facilities, i.e., purchase of spare parts, renewal of fixed equipment, and improvement of layouts and maintenance pits; (iii) the improvement of six critical transfer stations in Greater Tunis (of which two are located in the Saida Manoubia and Jebel Lahmar areas), through proper layout of these facilities, construction of a small building (office, shelter and shower room) and of a concrete base to lay down a compacting trailor provided as part of the improvement; and (iv) the procurement of additional vehicles for solid waste collection: 25 small vehicles for areas with narrow lanes (including the project areas of Saida Manoubia and Jebel Lahmar), and five standard truck compactors for other areas in Greater Tunis;  - 22 - (c) the improvement of solid waste disposal, through: (i) the provision of consultant services to prepare all detailed technical documents required to close 50 of the 200 ha of open dumps, and to establish a public sanitary landfill (with a capacity of 55,000 tonne per year, to dispose of one-third of all solid waste generated in Greater Tunis); (ii) the fencing, restoration (with transport of landfill from 15 km away) and replanting of 50 ha of open dumps; (iii) the provision of advisory services, and the procure- ment of necessary facilities (equipment and maintenance building), services (water, sanitation and electricity), materials (chain link fence) and equipment (2 bulldozers and 1 truck) to open and start operating the above- mentioned sanitary landfill; and (iv) the provision of consultant services to investigate the possible marketability, optimum conditions (including possible use of sludge from sewage treatment plants) and cost of production of compost for agricultural purposes. Improvements of Traffic Conditions in Sfax 2.27 Traffic conditions in Sfax have deteriorated in recent years due to an ever increasing competition for limited road space between private cars, buses, commercial vehicles and donkey carts (serving the port), bicycles and mopeds, and pedestrians. Inevitably, the impact of congestion and accidents has been particularly felt by lower-income groups--cyclists, pede- strians and bus passengers. The increases in delays and risks of accidents are basically due to the absence of consistent and systematic traffic control measures within the central area, and inadequate facilities for cyclists, pedestrians and bus passengers, the latter accounting for some 75% of motorized person trips during peak hours within the central area. 2.28 The project would include: (i) low-cost traffic improvement measures designed to reduce overall congestion and inter-modal conflicts, thereby improving facilities for non-motorized travel for low-income groups; and (ii) advisory services to strengthen the Municipality's capability for handling day-to-day traffic management within the context of the overall traffic management plan recently prepared by consultants. Specifically, the project would comprise the following components: (a) reservation of special lanes for bicycles and mopeds (5.8 km), and for buses (4.9 km); (b) upgrading of ten major intersections, including: (i) horizontal and vertical signalizations to improve vehicular movements;  - 23 - (ii) installation of traffic signals to regulate vehicle and pedestrian flows; and (iii) widening of footpaths, and clear definition of crossings for pedestrians; and (c) introduction of a one-way street system within the central area (64 ha) to improve vehicular flows and reduce acci- dents at intersections. 2.29 It is estimated that these measures would cost a total of TD 0.39 million (US$0.92 million) and would mostly benefit a population of about 150,000 at a total cost of TD 2.6 (US$6.1) per capita. Consultant and Advisory Services 2.30 Consultant and advisory services would be provided to the following agencies (detailed Terms of Reference acceptable to the Bank and the Govern- ment have already been prepared for all tasks, except (f) below): (a) The Municipality of Sfax (paras. 2.28 and 5.03), for assistance in the implementation of the traffic improvement scheme, and for municipal staff training. (b) The District of Tunis (para. 2.26 and 5.22), for preparation and implementation of the low-cost solid waste collection and disposal improvement scheme, including studies on waste man- agement, financing and taxation. (c) The Central Project Unit (CPU), for assistance in executing and monitoring the proposed project, and in preparing future similar projects (para. 5.26). (d) The Caisse de Prets et de Soutien aux Collectivites Locales (CPSCL), for finance and management assistance (para. 5.33). (e) OTTEEFP, for the implementation of the Small-Scale Business Assistance Program (para. 5.13). (f) The Directorate of Local Public Authorities in the Ministry of Interior (para. 5.26), for municipal staff training. To ensure overall coordination for execution, the last three agencies would receive technical assistance through CPU. 2.31 The project would also include refinancing of the US$250,000 advance granted under the Project Preparation Facility (PPF) in 1976 to complete preparation of the proposed second urban development project.  - 24 - III. PROJECT COSTS, EXECUTION AND FINANCING A. Cost Estimates 3.01 The total project cost including contingencies is estimated at TD 18.9 million (US$45.1 million) with a foreign exchange component of TD 8.4 million (US$20.1 million), or about 44% of total project costs including taxes estimated at 20% of total local costs. Summary cost estimates are given in Table II-1 and detailed cost estimates in Annex II. The base cost estimates are in November 1978 prices. Cost estimates are based on (a) preliminary engineering designs for civil works, and (b) latest quotations from suppliers or executing agencies for materials, vehicles and equipment. Average man- month costs for consultant and advisory services are estimated at US$7,000 for foreign services inclusive of local costs, and US$1,000 for locally obtained services. Physical contingencies have been included as follows: 10% for infrastructure and community facilities, 5% for connections and core units. No physical contingencies have been included for building materials, small- business credits, manpower training, and consultant and advisory services. Rates applied for price contingencies are the following: Civil Works Local Foreign Average Equipment 1979 11 7 9 6 1980 9 7 8 6 1981 9 7 8 6 1982 9 7 8 6 B. Execution 3.02 The Municipalities of Tunis and Sfax would share the main respon- sibility for the execution of most project components. Allocation of responsibilities would be as follows: Component Agency I. Upgrading and Site and Municipalities of Tunis and Sfax Services in Tunis and Sfax II. Improvement of Education Ministry of Education Facilities in Existing Low-Income Public Housing Programs III.Small-scale Business Assistance Municipalities/STB/OTTEEFP (a) Loans to Entrepreneurs - Appraisal of Loan Municipalities/STB/OTTEEFP Applications - Extension of Loans STB  - 25 - (b) Extension Services OTTEEFP (c) Vocational Training OTTEEFP IV. Waste Collection and Disposal District of Tunis V. Traffic Improvement in Sfax Municipality of Sfax VI. Consultant and Advisory Services Ministry of Interior (Central Project Unit), CPSCL, District of Tunis, OTTEEFP, Municipality of Sfax VII.Project Administration All agencies listed above 3.03 The project would be implemented largely by existing institutions. However, one new organizational unit--the Central Project Unit--would be established (para. 5.25), to provide guidance to municipalities (including Tunis and Sfax) on all aspects of design and implementation of low-cost urban development projects, and to help prepare and execute further low-income housing schemes. Also, the Caisse de Prets et de Soutien aux Collectivites Locales (CPSCL) would be strengthened (para. 5.33) to initiate its conversion into a full-fledged municipal bank. Further details on the executing agencies are given in Chapter V. 3.04 The solid waste collection and disposal improvement program in Greater Tunis would be implemented by the Tunis District until a solid waste management regional authority is, or two inter-municipal associations are established (para. 2.25) and takes up this responsibility. Assurances were obtained at negotiations that this responsibility would be actually transfered, but also that: (a) the Bank would be consulted no later than December 31, 1979 on the results of the study to be carried out under the Tunis District supervision (para. 2.26(a)), and in par- ticular, on consultants' detailed recommendations; (b) this authority (or inter-municipal associations) would be established no later than June 30, 1980 with (i) organization and staffing, (ii) financial resources, (iii) modes of operation, (iv) coordination with other agencies, and (v) terms of reference for possible advisers, acceptable to the Bank; and (c) until the creation of this authority (or associations), no Bank funds could be used to finance equipment or civil works to be procured for solid waste disposal (para.2.26(c)-(ii) and (iii)). 3.05 The project would be implemented over a period of about three years and a half: September 1, 1979 to December 31, 1982. Detailed engineering and tender documents for the Jebel Lahmar upgrading scheme in Tunis and for the traffic scheme in Sfax have been completed; calls for bids are expected in June 1979. Detailed engineering and tender documents for Saida Manoubia upgrading are being prepared and preparation of the same for other project components is scheduled to start in May 1979. All documents should be completed  - 26 - by late 1979 and calls for bids should immediately follow. Further details are shown in the implementation schedule (Chart I). Disbursements are expected through June 30, 1983 and the loan closing date would be December 31, 1983. C. Financing 3.06 The proposed Bank loan of US$19.0 million (TD 8.0 million) would cover 95% of the foreign exchange component of the project, i.e., 42% of total project cost or 47% of the project costs net of taxes. The remaining US$1 million (TD 0.4 million) of foreign cost as well as US$1.4 million of local costs would be financed out of a loan obtained from the Netherlands Government in 1976. The Government would finance US$16.2 million (TD 6.8 million) of local cost, or 36% of total project cost. The balance (about 17% of total project cost) would be financed by the Municipality of Tunis for an amount of US$4.9 million (TD 2.0 million), by the Municipality of Sfax for an amount of US$2.0 million (TD 0.8 million), and by Societe Tunisienne de Banque (para. 2.23(c)) for an amount of US$0.6 million (TD 0.3 million). The project financing plan is as follows: US$ Million Equivalent TD Million Equivalent Sources of Finance Local Foreign Total Local Foreign Total IBRD - 19.0 19.0 - 8.0 8.0 Netherlands Government 1.4 1.0 2.4 0.6 0.4 1.0 Central Government 16.1 - 16.1 6.8 - 6.8 Municipality of Tunis 4.9 - 4.9 2.0 - 2.0 Municipality of Sfax 2.0 - 2.0 0.8 - 0.8 STB 0.6 - 0.6 0.3 - 0.3 Total 25.0 20.0 45.0 10.5 8.4 18.9 3.07 The Government of Tunisia would make its counterpart funds and the proceeds of the Bank loan available to the executing agencies as follows (see Chart III-1): Government and Bank funds to finance expenditures for primary infrastructure, community facilities, waste collection and disposal scheme, and technical assistance to central government agencies (TD 5.9 million) would be made available as budget allocations to the ministerial departments concerned. These departments, in turn, would (i) pass on to the Municipalities funds for financing primary infrastructure and community facilities (TD 2.8 million), and (ii) retain funds for financing the waste collection and disposal scheme, the education facilities in existing low-income public housing areas and the technical assistance to central government agencies (TD 3.1 million). 3.08 Under the Small-Scale Business Assistance Program, the Bank would reimburse 50% of the loans made by STB, up to the agreed total. The Government would pass on the Bank funds to STB at Bank terms, including the commitment fee. Agreement was reached during negotiations that the signature of a convention between the Government and STB describing terms and conditions of  - 27 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT CHART IIl-1: FLOW OF FUNDS (TD Million) IBRD 8.0 3.0 . Netherlands Govt. 1.0 Ministerial Departments Tunisian Govt. 6.8 TOTAL: 5.9 TOTA L 15 .-8_ 2.9 _ IRTnisian Govt. & M. Agric. 0.1 M. Plan. 2.2 IBRD 0.2 48Netherlands Govt. M. Nat. Ed. 1.0 M. Int. 0.5 _ _ 4.9 M. Equip. 1.2 M. Nat. Ed. 0.4 Min stry M. Ind. 0.4 M. Pub. H. 0.1 Planning 2.8 _ 9.7 MUNICIPALITY OF TUNIS 5.3 CPSCL/IBRD 2.7 CPSCL/Govt. 2.6 Min. Dept. 1.7 Own Res. 2.0 TOTAL 9.0 MUNICIPALITY OF SFAX 4-4 | CPSCL/IBRD 2.1 CPSCL/Govt. 2.3 Min. Dept. 1.1 Own Res. 0.8 TOTA L 6.3 STB Min. Plan (IBRD) 0.2 Own Res. 0.3 TOTAL 0.5 Tunis District 2.0 |Min. of Nat. Ed. 0.4|t Min. of Interior 0.5 Min. of Plan. 0 TOTAL PROJECT COSTS: 18.9 World Bank - 20288  - 28 - 5STB participation to project execution (paras. 2.22-2.23) and, satisfactory to the Bank, would be a condition of effectiveness. 3.09 Funds to finance other expenditures (TD 12.5 million) would stem from the Government and the Bank through CPSCL (TD 9.7 million), and from the Municipalities' own resources (TD 2.8 million). Funds from the Government and the Bank would be passed on to the Municipalities as follows: (i) Bank funds (TD 4.8 million) would be on-lent by Govern- ment to CPSCL, and then on-lent by CPSCL to the Municipalities; the terms of these loans would be those of the Bank; (ii) Government counterpart funds (TD 4.9 million) would be passed on to CPSCL as equity for 50% of these funds, and for the remaining 50%, as a loan over 20 years at no interest; CPSCL, in turn, would lend theese funds to the municipalities at current CPSCL terms: 2% over 20 years. Assurances were obtained during negotiations that the decrees author- izing the Municipalities to borrow Government and Bank funds from CPSCL would be passed by September 30, 1979. Also,agreement was reached during negotiations that signature of a subsidiary loan agreement between the Govern- ment and CPSCL, and signatures of loan conventions between CPSCL and the Municipalities of Tunis and Sfax, describing-the above terms and conditions, and satisfactory to the Bank, would be conditions of effectiveness. Since CPSCL would recover from the Municipalities the counterpart funds alloc- ated by Government to CPSCL as equity, the surplus so generated (about TD 0.2 million per year; see Annex III, Table 4) would be credited to a special fund in CPSCL to help finance similar projects in the future. Assurances were obtained at negotiations that this fund would be established in CPSCL as soon as CPSCL receives the Municipalities' first repayments of the loans obtained under the proposed project. 3.10 The Municipalities of Tunis and Sfax would finance respectively TD 2.0 and 0.8 million of the project costs, out of their own resources. These municipal contributions were determined on the basis of budgetary pro- jections and past performances (Annex III, Tables 2 and 3). The amounts involved appear reasonable particularly in view of the fact that: - debts of all municipalities were written off in 1975 and, therefore, the debt service of the Municipalities of Tunis and Sfax is virtually nil; and - until recently, execution capacities of the Municipalities of Tunis and Sfax have been low and, therefore, planned investments which did not materialize translated in large amounts of savings now available for project financing. 3.11 The Government would bear the exchange risk on the Bank loan.  - 29 - D. Procurement and Disbursement 3.12 Contracts of individual values above US$350,000 and 75,000 equivalent for civil works and equipment respectively, for a total value estimated at US$29.8 million, would be let on the basis of international competitive bidding in accordance with Bank guidelines. A preference of 15% or the applicable customs duty, whichever is lower, would be applied to domestic bidders offering domestically manufactured goods. These contracts would consist first, of (a) equipment and vehicles for improvement to solid waste collection and disposal in Greater Tunis (US$0.9 million); (b) civil works for roads (US$6.3 million), community facilities (US$3.8 million), and core units (US$3.0 million), and (c) civil works for closure of dumps and opening of a sanitary landfill in Greater Tunis (US$2.1 million), for a total value of US$16.1 million. It is expected that most of these contracts would go to foreign contractors. 3.13 Second, civil works contracts for water supply, sewerage and elec- tricity works, for a total value of US$13.7 million, would be awarded accord- ing to the same procedures as above by SONEDE, ONAS, and STEG respectively. Under the existing regulation, these three agencies have the monopoly of providing these services in the project areas. Assurances were obtained during negotiations that procurement procedures for these contracts would be the same as those referred to in para. 3.12. To ensure that the low-cost standards for infrastructure works be met, the Municipalities of Tunis and Sfax would enter into protocols with ONAS, SONEDE and STEG for the execution of these works. Drafts of these protocols were reviewed and agreed upon during negotiations and assurances were obtained at that time that these protocols would be signed by the agencies involved by September 30, 1979. Due to the scattered location of the works and the difficult terrain of the sites, however, most of these works may be of little interest to foreign contractors, and may eventually be awarded to local contractors. 3.14 Contracts of individual values below the thresholds indicated in para. 3.12, for a total value estimated at US$3.3 million, would be awarded through local competitive bidding procedures satisfactory to the Bank, as the type of work and the scattered locations involved are such that those works would be of little interest to foreign contractors. They would consist of (a) equipment for solid wastes and traffic improvement (US$0.7 million), (b) civil works for education facilities in SNIT low-income housing programs (US$0.6 million), and (c) the installation of electricity and water connections, totalling US$2.0 million, which would be the responsibility of STEG and SONEDE, for the reasons given in para. 3.13. 3.15 Procurement of self-help building materials would be through local suppliers. Selection of the latter would be left to the initiative of benefi- ciary households. Such households would contract building materials loans from the Municipalities. The Municipalities would reimburse in full the bills paid for the purchase of building materials until their cumulated amount reaches the approved maximum amounts (paras. 2.13 (g) and (i), and 2.19). Assurances to this effect were obtained at the time of negotiations.  - 30 - 3.16 Consultant services totalling US$1.2 million would be procured individually by the agencies responsible, and awarded on terms and conditions acceptable to the Bank. Consultants to carry out studies related to solid waste have been selected by the Tunis District following procedures satis- factory to the Bank. The services of these consultants have been contracted only for the study elements described under paras. 2.26(a) and (c)(i) not accounted for as regards Bank financing; therefore, there will be no retro- active financing involved. 3.17 Disbursement of the Bank loan proceeds would be made against: (a) 45% of expenditures for civil works contracts and for building materials loans; (b) 100% of foreign expenditures for imported equipment and vehicles, or 100% of the ex-factory cost if manufactured locally; (c) 50% of disbursed loans to small-scale businesses; (d) 100% of expenditures for foreign consultant and advisory services; and (e) 100% of the funds withdrawn from PPF (para. 2.31). 3.18 Claims for disbursement for project components related to solid waste and improvement of education facilities would be done directly by the Tunis District and the Ministry of Education, respectively. All other claims would be done through CPU by the executing agencies involved. All executing agencies would retain the supporting documents for inspection by supervision missions. Disbursement for (c) above would be made against statements of expenditures. Upon loan effectiveness, the Bank would repay to itself, out of the loan proceeds, the funds under (e) above. It is expected that, by the loan signature date (June 1979), about US$4.5 million worth of contracts would be ready for award. A schedule of estimated disbursement of the Bank loan is presented in Table III-1. Any undisbursed balance at the end of the project implementation period would be used to provide further building materials and small-scale business loans if the demand warrants. Otherwise, the undisbursed balance would be cancelled.  - 31 - Table III-1: ESTIMATED DISBURSEMENT SCHEDULE Cumulative IBRD Disbursements Disbursements Fiscal Year Quarter Ending (US$'000) (US$'000) 80 March 31, 1980 350.0 1/ 350.0 June 30, 1980 350.0 700.0 81 September 30, 1980 450.0 1,150.0 December 31, 1980 800.0 1,950.0 March 31, 1981 1,450.0 3,400.0 June 30, 1981 2,000.0 5,400.0 82 September 30, 1981 2,700.0 8,100.0 December 31, 1981 2,900.0 11,000.0 March 31, 1982 2,100.0 13,100.0 June 30, 1982 1,800.0 14,900.0 83 September 30, 1982 1,800.0 16,700.0 December 31, 1982 1,200.0 17,900.0 March 31, 1983 700.0 18,600.0 June 30, 1983 400.0 19,000.0 1/ Including PPF. E. Accounts and Audits 3.19 Each executing agency, including the Treasury Department of each Municipality, would maintain separate accounts for the project; CPSCL would include within its accounts a separate consolidated account of project related transactions. Annual financial reports on these separate accounts would be made available to the Bank through CPU within eight months of the close of each fiscal year. CPSCL accounts and STB project accounts would be audited each year by independent auditors satisfactory to the Bank. CPU would provide quarterly project progress reports, including monitoring and evaluation sections, to the Bank within six weeks of the end of each quarter. Assurances to this effect were obtained during negotiations. IV. COST RECOVERY A. Cost Recovery and Pricing 4.01 Strong emphasis has been placed on cost recovery in order to (a) allow for the widest possible future replication of the project in other  - 32 - low-income areas, (b) ensure servicing of the municipal debts, and (c) build up the seed capital of the special fund within the CPSCL (para. 3.09 (ii)). Cost recovery sources by project components are shown in Table IV-1i Upgrading and Site and Services 4.02 Costs would be recovered through plot charges in site and services areas in Sfax (Cimer's) and in slum upgrading areas in Tunis. These charges would be based on the actual costs of the works and would cover the full cost of land, site preparation, on-site infrastructure, any structure erected on the plots (e.g., ablution unit), as well as design and supervision costs and interest during construction. Charges would also include an administrative fee (2.5%) to cover CPU administrative expenses. Basic plot charges in site and services would be differentiated to take into account the location, accessibility and commercial potential of the plots (see Tables II-2 and II-3). In addition to these charges, plot allottees will repay the building materials loans that they may have contracted from the Municipalities. 4.03 Repayment terms in slum upgrading and site and services areas would be at a nominal interest rate of 6.5% over 20 years, and those of self-help building materials loans at 6.5% over 10 years. In site and services areas, a downpayment of at least 15% would be required. Self-help building materials loans would be repaid by beneficiaries through monthly installments, the first being due on the month following the extension of a loan by the Municipality against the receipt submitted by the beneficiary (para. 3.15). Assurances were obtained at negotiations that the above terms and conditions would be adopted. 4.04 The terms attached to Government counterpart funds and to Bank funds on-lent by CPSCL to Municipalities (para. 3.09), would approximately result in a 5.15% interest rate charged to Municipalities over 20 years. The Municipa- lities, in turn, would charge an additional 1.35% to cover their administrative costs and would, therefore, charge beneficiaries a 6.5% interest rate over 20 years. The proposed financial charge of 6,5% for cost recovery would represent a substantial increase over interest rates currently charged under public housing finance programs. Current terms of public housing finance are those of FOSPROLOS: 3% (offered to families with a monthly income between TD 40 and 60) and those of CNEL: 4.5% (offered to families with monthly income larger than TD 60). Present interest rate in the private sector is about 8% for housing. The current inflation rate in Tunisia is estimated at 7% per year and the medium-term inflation rate is expected to be about 6% per year. The adoption of a 6.5% financial charge under the project would, therefore, represent a significant step towards reduction of subsidies in the sector. 4.05 Freehold titles would be given to plot allottees in Tunis slum upgrading and Sfax site and services areas. Titles would be freely transfer- able. However, for five years from the date of purchase of each plot, any such transfer would be allowed by the Division of Public Domain within the Administrative Department of each Municipality only in special circumstances, and this Division would have the first option. In case of default on payments, plotholders would be given six months' notice, then sued in accordance with existing law if they did not pay within this period. Draft standard sale  - 33 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table IV-1: MODES OF COST RECOVERY Cost Item in Rbats in Sfax in Other Locations 1. Land Frontage'tax Plot- charges 2. Site preparation " " 3. On-site infrastructure " - Water supply " " - Sewerage " - Drainage to - Roads " - Electricity " - Street lighting 4. Off-site infrastructure - Water supply Water tariffs Water tariffs - Sewerage/drainage " " - Roads Not directly recovered Not directly recovered - Electricity Electricity tariffs Electricity tariffs 5. Ablution units and core Frontage tax Plot charges houses, plot perimeterwalls 6. Water/sewer/electricity connections 7. Building materials for Loan repayments Loan repayments self-help construction and home improvement 8. Small-business loans 9. Design and supervision, Frontage tax(see para.4.06) Plot charges, except where project administration except where applicable to applicable to non-recoverable ,fti-directly recoverable items, e.g., health centers items, e.g., health centers 10. Interest during construction " " " 11. Community facilities Not directly recovered Not directly recovered 12. Solid waste improvement Not applicable Newly created surchage on housing tax 13. Traffic scheme Not applicable Not applicable 14. Municipal staff training Not applicable Not recovered 15. Consultant and advisory " it services  - 34 - contracts including the above clause were reviewed during negotiations, and assurances were obtained that standard contracts granting freehold titles and satisfactory to the Bank, would be adopted before September 30, 1979. 4.06 In slum areas in Sfax (Rbats), costs would be recovered through the contribution des riverains. In these areas, project beneficiaries own the land on which they dwell; thus, they would repay only infrastructure improve- ments through a frontage tax (contribution des riverains) for which there is a tax structure already available. Minor adjustments to the tax would be necessary, however, to bring charges in line with the terms mentioned in para. 4.03. First, the tax payment period would be extended from five years, as provided for under the current legislation, to twenty years; second, yearly payments would be converted into monthly payments, and third, monthly payments would be computed to recover the cost of the improvement works, at 6.5% over 20 years. The tax base would also be modified to include such items as interest during construction and administrative costs. A draft article on the contribution des riverains, to be inserted in the 1980 loi de finances, was submitted to the Bank and discussed during negotiations. At that time, assurances were obtained that the above terms and conditions would be adopted and that an article satisfactory to the Bank would be incorporated in the loi de finances to be passed some time after the beginning of the Tunisian fiscal year 1980 and certainly before January 1, 1981. 4.07 Direct cost recoveries--from sale of plots and repayment of building materials loans--discounted at 7%, would account for about 80% of the total cost of the upgrading scheme, and 76% of the total cost of the site and ser- vices scheme. The balance represents (i) costs of off-site infrastructure improvements recovered through utility tariffs: 11% for upgrading and 17% for site and services; and (ii) costs of community facilities which will not be recovered: 9% in upgrading areas, and 7% in site and services. Cost Recovery for Other Project Components 4.08 Improvements to solid waste collection and disposal would be recovered through existing taxes the collection of which would be substantially improved (para. 2.25). 4.09 The line of credit to small businesses in the project areas would be recovered by STB from loan beneficiaries, while OTTEEFP Services would be provided free of charge to beneficiaries under the proposed project as to all other beneficiaries of OTTEEFP assistance. Loans for workshop construction and improvement would carry a minimum interest rate of 8.25% and have an eight-year maturity, including one year of grace. Loans for working capital and equipment would carry a minimum interest rate of 8.25% and have a maximum three-year maturity. The interest on loans would include charges of 1% for credit insurance, and 0.75% for taxes. These interest rates would provide STB with an adequate spread, and be in line with those charged for industrial projects, which range from 8 to 8.25%. Loans could be secured by a mortgage on the plots or by liens on goods and raw materials. Confirmation was obtained at negotiations that financial terms of small business loans would be as described above. Since small business loans woud be repaid to STB over a period substantially shorter than that of the Government loan to STP, STB would  - 35 - re-use these funds for other similar small-scale business assistance programs. Assurances to this effect were obtained at the time of negotiations. B. Affordability Analysis and Urban Poverty Impact Affordability Analysis 4.10 The affordability analysis is based on detailed surveys of project areas conducted by consultants in 1977 and 1978 on household incomes and housing expenditures. In the slum upgrading areas, the monthly payments would vary for upgraded plots from 5% to 8% of household income, and for infill plots from 15% to 22%. These percentages seem reasonable in view of (a) rents paid at present by households in the target group, and (b) in the case of resident families, (i) the housing investments already made and those expected for shelter improvement, and (ii) the financial constributions that households declared they were ready to assume to obtain a title on the land and basic services. The impact of utility charges would be minimal and would only represent 2.5% of the average monthly payments. Plot options, corresponding monthly charges and percentiles reached for upgrading in each project city are shown in Annex I, Table 3. 4.11 In the site and services areas, plot options, monthly charges and percentiles reached are shown in Table II-3. The majority of beneficiaries would not need to allocate more than 18% of their monthly income to assume these charges, which corresponds to the rents paid at present by households in the target group. In most cases, the expected downpayments would not exceed six months salary equivalent and would be affordable to beneficiary households; they would also correspond approximately to the amounts that families declared they were ready to contribute immediately. In these areas, the minimum plot would be affordable to about 90% of Sfax's population. Urban Poverty Impact 4.12 Charts IV-1 and IV-2 provide a comparison between the income distri- butions in the project areas and in each project city. In Greater Tunis, where 11% of the population is below the 1978 Bank-defined urban poverty threshold of TD 45 per month, 34% of the population benefitting from the upgrading component would be below the above threshold. These figures confirm the existence in the project areas of Tunis, particularly in Saida Manoubia, of medium-income families compelled to live in these areas by the acute housing shortage. In Sfax, where 18% of the population is below the absolute poverty threshold, about 44% of the population benefitting from the upgrading and site and services components would be below the above threshold. 4.13 As a first substantial step towards making Tunisia's present poli- cies more effective in the sectors of shelter, employment and urban services for the poor, the project would directly improve the living conditions of 23% and 32% of the urban poor in Greater Tunis and Sfax respectively. Taking into account the annual growth rate of Tunisia's urban poor (4.2%), it is estimated that the programs required Lu Eeet only the expected annual increase of the  - 36 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT Income Distribution and Project Beneficiaries Chart IV-1: Tunis Saida Manoubia 100 oJebel Lahmar 90 Tunis 8C 040 X/ 70- 60~~~~ 40 __ 30 OOOF 0" Monthly Household 20 40 60 80 100 120 140 160 180 200 Income TD Chart IV-2: Sfax Sites and Services Rbat Upgrading Sfax 80 -~~~~~- 70 - - 60~~~~ 50 a. 40- - 20 -___ 10 ~~World BankHo-20289 20 40 60 80 100 120 140 160 180 200 Household TD World Bank -20289  - 37 - urban poor in Tunisia, should be of a size 1.7 times that of the present project. A main prerequisite for carrying out such programs would be to strengthen the institutional framework set up through the project. V. ORGANIZATION, MANAGEMENT AND FINANCE 5.01 A main objective of the proposed project would be to strengthen the institutions in charge of project execution and lay the institutional basis for expanding low-income urban development programs. To achieve this objective, responsibilities for project execution would be delegated to a limited number of key existing institutions. The Municipalities of Tunis and Sfax will be responsible for the execution of the main project components (para. 3.02), while (i) technical assistance to CPU would be the responsi- bility of the Ministry of Interior, (ii) improvement of education facilities in existing low-income public housing programs, that of the Ministry of Education, and (iii) the waste collection and disposal component, that of the District of Tunis (para. 3.04). The Municipalities will share responsibility with OTTEEFP and STB for the implementation of the small-business assistance program (paras. 2.23 and 3.02). Coordination between the executing agencies will be insured at the central level by an Interministerial Coordination Committee and CPU which would provide guidance for the execution of the proposed project and for preparation of further low-cost housing schemes. Finally, financing for most project components would be through CPSCL. A. Municipalities 5.02 The General Secretaries of the Municipalities of Tunis and Sfax will be responsible to the Presidents of the Municipal Councils of these cities for the execution of the proposed project through the various municipal departments. Project financing will be according to paras. 3.06-3.11 and municipal cash-flows are shown in Annex III. Project implementation will be carried out within the functional organizational structure shown in Chart II, which would ensure effective coordination and interaction between the various departments of each Municipality. 5.03 The Director of the Technical Department will be the key project coordinator in each Municipality. He will chair the Municipal Project Steering Committee made up of all the municipal department heads involved in project implementation. The role of this Committee, which will meet at the Director's request, would be to ensure a timely involvement of all municipal departments concerned. The Director of the Technical Department would appoint the Director of the Municipal Project Unit, a special permanent body which has been set up within each Municipality (para. 5.08). In addition to the above, the Director of the Technical Department will be responsible for the project technical work, including project detailed engineering, cadastral survey (in collaboration with the administrative and financial departments), bids and contracts management. He will also be responsible for construction of housing cores and infrastructure, construction of schools, health and  - 38 - community centers, and for ensuring the provision of off-site infrastructure. In Sfax, he will also be responsible for implementing the traffic improvement scheme (para. 2.28), and will be assisted in this task by a traffic management expert financed under the project as part of the technical assistance component (para. 2.30). Assurances were obtained at negotiations that a traffic expert acceptable to the Bank is hired before December 31, 1979. 5.04 The Director of the Administrative and Financial Department would be responsible for land acquisition, issuance of freehold titles (para. 4.05), borrowing from CPSCL and Government, payments to contractors, settlement of disputes, determination of plot charges, and provision of building materials loans. He would also be responsible for the administration of the small-scale business assistance program, and for the coordination of activities with the two institutions involved in this scheme: OTTEEFP (para. 5.10) and STB (para. 5.14). A draft protocol, delineating clearly the responsibility of the various agencies involved in the small business scheme and ensuring effective collaboration and coordination was submitted and reviewed during negotiations. Assurances were obtained that this protocol, which includes a detailed descrip- tion of selection criteria for small business assistance beneficiaries (para. 2.23), would be signed by the agencies involved no later than September 30, 1979. 5.05 The Director of the Social Department would be responsible together with the Social Commission of the Municipality (para. 5.06), for (i) selecting site and services beneficiaries, (ii) conducting social surveys, (iii) moni- toring key aspects of the project, e.g., employment and health, (iv) helping solve disputes in thq case of default on plot charges, and (v) monitoring loan repayments by beneficiaries. A special responsibility of the Director will be to ensure that any family displaced as a result of the upgrading scheme will be relocated in the same project area and adequately compensated. Assurances to this effect were obtained during negotiations. 5.06 The Municipal Council, through its Social Commission, would select beneficiaries for site and services schemes and infill plots in upgraded areas. Assurances were obtained during negotiations that beneficiary selection criteria acceptable to the Bank would be adopted. They would include, inter alia, requirements that the candidates: (a) have income within the prescribed income ranges shown in Annex I, Table 3 and in Table II-3, i.e., between TD 33 and 66 (in 1978 prices) per family per month, (b) own no other dwelling, (c) intend to reside on the plot, and (d) are willing and able to pay a downpayment of at least 15%, and remit the balance by monthly installments. 5.07 Collection of plot charges and contribution des riverains would be the only element of the shelter components the execution of which would not be the Municipalities' responsibility. By law, the Public Treasury, which is under the Ministry of Finance and has staff within each municipality, must collect such charges and taxes. This collection would, therefore, be done by the Treasury Department in each Municipality, and their staff is presently large enough to cope with this additional task. The Public Treasury will pass on the proceeds of the collection to the Municipalities, as required by the law.  - 39 - 5.08 A Municipal Project Unit (MPU) has been created within each Munici- pality. The role of the MPU would be to: (i) ensure the day-to-day management and execution of the project, and (ii) prepare and execute future low-income housing schemes. The MPU would be staffed in the case of Sfax by qualified people from the three departments mentioned above, and in the case of Tunis by qualified people in the process of being hired. The Director of the Tunis MPU would appoint two of the newly hired staff as project managers for Saida Manoubia and Jebel Lahmar respectively. MPU Directors were appointed before negotiations, and assurances were obtained during negotiations that the minimum staff of each MPU would also include two engineers, one architect/ planner and one economist/financial analyst with appropriate qualifications and experience. 5.09 The MPU will work in close collaboration with all the municipal departments involved in project execution. It will also monitor project execution, and prepare and address progress reports to CPU. The MPU Director will nominate one staff as liaison officer with CPU. Assurances on the above were obtained during negotiations and Project Agreements with Municipalities include a section on the responsibilities of the MPU. B. Office des Travailleurs Tunisiens a l'Etranger, de l'Emploi et de la Formation Professionnelle (OTTEEFP) 5.10 OTTEEFP is a public enterprise under the tutelage of the Ministry of Social Affairs. Its present nationwide responsibilities of relevance to the project include: (i) provision of vocational training and assistance to trainees in finding employment and (ii) assistance and support to the execu- tion of Programmes de Developpement Rural (PDR's) of the Governorates and in particular, their job creation and consolidation subprograms. Over the last few years, OTTEEFP has been increasingly concerned with job identification for graduates of vocational training centers (see Third Education Project-1976, Loan 1155-TUN; para. 1.14), and with technical assistance under the above- mentioned PDR subprograms. Both activities have taken up most of OTTEEFP's staff time, especially since PDR's have taken an increasingly important political significance. OTTEEFP maintains a staff of about eight agents per governorate, each group headed by a section chief responsible before the Director General of OTTEEFP. 5.11 OTTEEFP would be cosignor of the protocol with STB and the Muni- cipalities (para. 5.04), and would be concerned with the following aspects of the small-scale business assistance program under the project: (a) identification of loan applicants including (i) registra- tion and interview, (ii) pre-selection on the basis of professional and personal credentials, (iii) provision of assistance to pre-selected candidates for establishing applications for financial assistance, (iv) presentation of applications to Municipalities and STB, and (v) final selection of beneficiaries;  - 40 - (b) vocational training in the fields of (i) electrical work and household electrical appliance repair, (ii) metal work and mechanics, and (iii) woodwork, furniture and carpentry; and (c) provision of extension services to selected small-scale entrepreneurs, in technical fields as well as in bookkeeping and other simple management aspects. 5.12 To carry out the above tasks, OTTEEFP will reactivate a special unit within its Directorate of Employment: the Employment Promotion Unit. This unit will consist of three sections: (i) a central section, responsible for the development of concepts and projects, inter alia, identification of candidates and their needs for technical assistance and vocational training, (ii) two local sections (one in Tunis and one in Sfax), responsible for the preparation of candidate files, and for their final selection in collaboration with STB and the Municipalities, and (iii) a monitoring section, responsible for providing extension services to selected candidates. Vocational training will be provided by OTTEEFP as part of its routine activities; OTTEEFP existing training centers in Tunis and Sfax have the necessary capabilities to provide courses in the field mentioned in para. 5.11(b), and to accommodate additional trainees, to cover project needs. 5.13 The staffing of the Employment Promotion Unit will include: one general economist and one engineer, for the central section; two economists, one per local section; and about six small-scale enterprise officers, for the monitoring section. A small-scale business development specialist will be hired by CPU (para. 5.26(iii)) for fifteen months to assist the Employment Promotion Unit;his services will be financed under the project (para. 2.30). Assurances were obtained during negotiations that, no later than November 30, 1979, (i) the staffing of the Employment Promotion Unit would be as above, and (ii) the above specialist would be hired. C. Societe Tunisienne de Banque (STB) 5.14 STB was created in 1957, superseding the Bank of Algeria and Tunisia. It is a mixed economy company in which the Government participates to the extent of 52%. It is a non-specialized institution which is, at the same time, a deposit bank, a merchant bank and a development bank. As of December 1977, STB accounted for 33% of Tunisia's bank deposits and 40% of the credits granted to the economy by the 14 banks of the banking system, making it the first bank in the country. STB operates a network of 52 regional offices with a staff of 1,400. 5.15 The lending activities of STB are large and diversified. In 1977, loans granted totalled US$160 million in short-term credit, and US$120 million in medium- and long-term credit. Tourism, industry, construction, and inter- national trade benefit from these loans. STB also shares in the capital of newly created enterprises, such as mechanical industries, and manages a stock portfolio of about US$140 million, i.e., 19% of its total assets (about US$750 million). These various activities have yielded a regular profit to STB which has increased by almost 50% per year over the last five years.  - 41 - 5.16 STB is well suited to appraise the financial soundness of small enterprises and their creditworthiness, considering that: - it is a major and well-established financial institution with branch offices in the project cities; - it has developed considerable experience in appraisal of a variety of projects; - it is genuinely interested in extending its activities with loans to small businesses. 5.17 STB would be responsible for (i) helping identify potential candi- dates whose files would be submitted to OTTEEFP for processing, (ii) reviewing loan applications after processing by OTTEEFP, (iii) selecting candidates in collaboration with OTTEEFP and the Municipalities, and (iv) extending loans and collecting payments. STB would be cosignor of the protocol with the Municipalities and OTTEEFP mentioned in para. 5.04; it would also sign a convention with the Government (para. 3.08). D. The District of Tunis 5.18 The District of Tunis was created in 1972; it groups 15 municipali- ties, including Tunis, and constitutes the most important economic region in Tunisia. The creation of the District was prompted by the need to coordinate public investments in the capital region and to ensure better planning of its economic future (paras. 1.05-1.06). The first Bank financed urban project (para. 1.16) was instrumental in this creation. A work program was estab- lished for the first three years of the District's existence. Seven experts joined the District as technical assistants for an average of 2.5 years, and helped establish gradually its organization, work methodology and competence. The District is now the established planning authority for the capital region. 5.19 The District of Tunis is under the tutelage of the Governor and the District Higher Council chaired by the Prime Minister. The management of the District is the responsibility of a Board made up of elected officials of the 15 municipalities; executive powers are invested into a Director General. 5.20 The District of Tunis includes three departments: (i) the Planning and Study Department, in charge of designing medium- and long-term development plans for the region, and initiating preparation of major projects in close collaboration with all public agencies concerned, (ii) the Public Investment Programming and Budgeting Department, participating in the elaboration of the investment budget for the region in collaboration with the Planning Ministry, and (iii) the Supervision Department, supervising and monitoring execution of major projects in the region. 5.21 The choice of the District of Tunis as the interim executing agency for the solid waste collection and disposal component of this project (para. 3.04) is logical since this component is expected to have an impact over the  - 42 - whole capital region. The District would assume this responsibility until June 30, 1980, at which date a regional authority or inter-municipal associa- tions should have been established to organize, supervise and manage all solid waste systems at the regional level. The principle of such a creation has been adopted by the District Higher Council, and work is already in progress to define in detail the statutes, organization and powers of this authority or these associations. Until such creation, the District would be responsible before the Tunis Governorate and the ad hoc interministerial commission (para. 2.25) for supervising the implementation of this project component, including related studies. 5.22 Past experience with the District has shown that this institution can easily be strained with staffing problems. Therefore, special attention has been given to this issue in the proposed project which provides for about 28 man-months of advisory services (para. 2.26, b(i) and c(iii)) to help the Tunis District carry out this component. Assurances were obtained during negotiations that (i) before September 30, 1979, the Tunis District would hire a waste collection expert and two assistants to this expert, with qualifi- cations and experience acceptable to the Bank, and (ii) within three months following the creation of the above-mentioned authority or associations, a waste disposal expert would be hired to help implement the solid waste disposal component of the proposed project. E. The Interministerial Coordination Committee 5.23 To ensure a swift execution of the project and effective coordina- tion in project implementation, the Government has set up an Interministerial Coordination Committee made up of representatives of the Ministries of Equipment, Planning, Finance, and Interior and of the CPU Director (para. 5.26) who-will be the Permanent Secretary of the Committee. The role of this Committee will be to (i) ensure timely involvement of the executing agencies in the imple- mentaton of the components which fall into their respective domains (para. 3.02), (ii) ensure that budgetary appropriations are actually allocated to the various ministerial departments, and passed on as needed to the Municipalities (para. 3.07), and (iii) settle conflicts which could arise in project execution. 5.24 The Committee will meet regularly, and at the request of the CPU Director. The Committee may also request the attendance to its meetings of representatives of other agencies involved and of local and central authorities. F. The Central Project Unit 5.25 The Central Project Unit (CPU) would be established within the Directorate of Local Public Authorities in the Ministry of Interior before November 30, 1979 as agreed upon during negotiations. The functions of CPU would be to help plan and inplement, in association with all responsible agencies, integrated low-cost upgrading and site and services schemes in urban areas. Under this project, CPU would:  - 43 - (i) assist and advise public agencies involved in project execution, particularly the Municipalites of Tunis and Sfax, on all aspects of execution, maintenance, and monitoring of the project; (ii) monitor the performance of all agencies involved in the project execution, and regularly inform and advise the Government and the Bank thereon; (iii) help the Directorate of Local Public Authorities to identify training needs of municipal staff, and establish and start carrying out an appropriate training program.; (iv) submit to the Bank a Project Completion Report before the loan closing date. 5.26 To ensure that CPU can address all principal areas as per above, a permanent team of four officers and two operations assistants, assisted by three advisers would staff this unit. The composition of the CPU staff reflects areas where municipalities are in the most critical need of support. The staff will include: (i) a director with overall responsibilities on project operations. As mentioned in para. 5.23, the CPU Director will be the Per- manent Secretary of the Interministerial Steering Committee. (ii) a civil engineer, assisted by an operations assistant, to help (a) municipalities in preparing and carrying out low-income housing schemes and (b) the Directorate of Local Public Authorities in identifying training needs for municipal staff; this engineer would be assisted by an implementation adviser (with an engineering background) for about two years; (iii) an economist/financial analyst, assisted by an operations assistant, to help municipalities in (a) setting up more effective programming and budgeting systems, (b) gradually developing capabilities to evaluate project feasibilities, and (c) monitoring the effectiveness of the small-scale business assistance program; he would also help the implementation adviser mentioned under (ii) on municipal staff training questions. This economist/financial analyst would be assisted for about two years by a municipal finance and banking expert who would also help CPSCL in improving its mode of operation (para. 5.33), and for about fifteen months by a small-scale enterprise expert who would also advise the Municipalities, OTTEEFP and STB on small- business assistance (para. 5.13); and (iv) and architect/urban planner, to help municipalities design other upgrading and site and services projects. The short-term experts mentioned in (ii) and (iii) would be financed under the project as part of the technical assistance component (para. 2.30). On behalf  - 44 - of the Directorate of Local Public Authorities, CPU would also get the assist- ance of an expert for two years to identify municipal staff training needs, design a training program and start carrying it out. Finally, CPU will train an officer from CPSCL (para. 5.34) in project appraisal skill. 5.27 To carry out all these functions, CPU staff would be assisted by a support team drawn from existing administration staff, among which a part-time legal adviser and a part-time economic adviser. The proposed functional organization is shown on Chart III. The CPU Director was appointed prior to negotiations and participated in them. Some candidates to fill the other permanent positions in CPU were identified prior to negotiations. Assurances were obtained during negotiations that, before November 30, 1979, CPU would be created and staff with qualifications and experience satisfactory to the Bank would be hired. G. Caisse de Prets et de Soutien des Collectivitgs Locales (CPSCL) 5.28 CPSCL was established as a legal entity in May 1975 superseding the Caisse des Prets aux Communes created in 1902. CPSCL is under the tutelage of the Ministries of Interior and Finance; it is a financially autonomous institution under commercial law and, therefore, comparable to a specialized investment bank. Its Board of Directors is made up of two representatives of the Ministry of Finance, a representative of the Directorate of Local Public Authorities, and a representative of the Tunisian town confederation; it is chaired by the General Secretary of the Ministry of Interior, with the Director General of Local Public Authorities as its Permanent Secretary. 5.29 CPSCL is empowered to obtain resources through borrowings from local and international sources, from loan repayments and from government budgetary allocations. CPSCL has never borrowed since it was established, and Govern- ment appropriations have provided most of its resources since 1975, the rest stemming from loan repayments. In September 1978, Government budgetary allo- cations accounted for 91% of CPSCL's 1975-78 resources. The Government funds provided to CPSCL as equity contribution under the project (para. 3.09(ii)) would increase CPSCL's present resources by about 60%. CPSCL's balance sheets for the past three years are shown in Annex III, Table 1. 5.30 The role of CPSCL is to lend to public administrative bodies such as municipalities, governorates as well as to public companies (mainly utility companies). Loans are for the financing of public facilities (e.g., slaughter- houses, markets), infrastructure works and municipal housing development schemes. Loans for infrastructure projects carry a 2% interest rate and have a 20-year maturity. So far, CPSCL has concentrated its activities on lending to small- and medium-size municipalities. Because these municipalities have limited execution capacities, loan disbursements *have been limited (less than US$1 million a year) and CPSCL has accumulated a large cash balance, about 30% of its assets or TD 2.6 million. 5.31 The limited scale of CPSCL operations has never led the Tunisian authorities to hire a full and qualified staff to manage CPSCL. The day-to-day financial management of CPSCL is handed by the Banque de Developpement  - 45 - Economigue de Tunisie (BDET) which has appointed one full-time staff to deal with CPSCL operation. BDET treats CPSCL as a regular customer and keeps only a current account where all CPSCL resources are merged without distinction of origins. CPSCL has no regular bookkeeping despite the fact that such bookkeeping is required by law. Moreover, its loan procedures are those inherited from the Caisse des Prets aux Communes; its loans are not subjected to appraisal and it has no internal regulation regarding debt or equity levels, or debt equity ratios. 5.32 The wish of Government is to gradually convert CPSCL into a full- fledged municipal lending agency, which would advise municipalities on invest- ment priorities and ways to finance it, and could provide technical assistance to municipalities to (i) help strengthen their project preparation and execu- tion capacities, and (ii) ensure adequate project monitoring. 5.33 CPSCL's emphasis on municipal lending operations makes this insti- tution a suitable agency for channelling the project funds (para. 3.09) to the Municipalities of Tunis and Sfax. The proposed project is viewed by Government and the Bank as an opportunity to initiate the conversion of CPSCL into a full-fledged municipal bank; it would also provide the Government and the Bank an opportunity to acquire a better knowledge of financial municipal problems. The experience acquired by CPSCL over the project implementation period would also help Government to set up its decentralization policy (para. 1.05). As a first step, the financial management of CPSCL would be strengthened through technical assistance provided under the project (para. 2.30): - appointing an accountant, assisted for about two years by a municipal finance and banking expert (para. 5.26(iii)) to be hired by CPU, to set up appropriate banking and commercial accounting systems, including budgetary control and financial monitoring, and to study procedures to appraise infrastructure projects; they would liaise very closely with BDET staff in charge of CPSCL. - amending the agreement whereby BDET is entrusted with CPSCL financial management; loan procedures and disbursements would be streamlined and CPSCL would be made more directly involved in loan processing. An amended BDET-CPSCL agreement was prepared prior to negotiations and reviewed during negotiations. It is expected that the above-described changes would allow CPSCL to (i) meet its responsibilities in a more satisfactory manner, (ii) keep consolidated project accounts, and (iii) ensure the financial monitoring of the project (para. 3.19). 5.34 The appraisal capacity of CPSCL would also be strengthened through the appointment of an appraisal officer to be trained by CPU (para. 5.26) and to join CPSCL after project completion. During project execution, the main role of this officer will be to inform CPSCL on project progress and to see that all funds for project components financed by CPSCL are available. During the implementation period of the project, this officer--with the assistance  - 46 - of the municipal finance and banking expert--will gain an expertise in apprais- ing urban development schemes. After joining CPSCL on a permanent basis, this officer will, in addition to his project appraisal function, ensure constant liaison with CPU. 5.35 During negotiations, agreement was reached that signature of the amended BDET-CPSCL agreement acceptable to the Bank would be a condition of loan effectiveness, and assurances were obtained that, no later than October 31, 1979, the above-mentioned staff with qualifications and experience acceptable to the Bank would be hired. 5.36 A cash flow of CPSCL project related operations is shown in Annex III, Table 4. The surplus shown in this table arises from the fact that counterpart funds would be provided to CPSCL as equity (para. 3.09). VI. PROJECT JUSTIFICATION AND RISKS 6.01 The proposed project would represent the first attempt of the Tunisian Government to address in an integrated manner the needs of the urban low-income groups without calling for substantial public subsidies. It is also viewed by the Government as a means to build up the institutional framework within which the newly created or strengthened institutions (CPU, CPSCL) would carry out further low-cost upgrading and site and services schemes, and to initiate decentralization of responsibilities in the design and implementation of urban programs. Particularly important in this respect are: (a) the low unit-cost for housing under the site and services component of the project (only 20-25% of the cost of the least expensive housing unit available at present under public housing programs), (b) the initiation of low-cost upgrading programs for low-income areas, averaging TD 350 (US$850) per household under the project, (c) the incorporation of low-cost job crea- tion programs into shelter and upgrading schemes, (d) the initiation of a Greater Tunis solid waste collection and disposal scheme, and (e) the Sfax traffic improvement component whereby low-cost transport modes would be encouraged. Also of particular importance are the strengthening of CPSCL to help initiate its conversion into a full-fledged municipal bank and the delegation of most project execution responsibilities to the Municipalities of Tunis and Sfax. The appropriateness of project design is demonstrated by the fact that first, about 39% of the project target population (para. 4.12) is below the Bank-defined urban poverty threshold, and second, that 43% of project cost would benefit population below this threshold. 6.02 The economic rate of return for the upgrading and site and services components, representing about 65% of project cost, is estimated at 28% (para. 6.05). Rates of return were not computed for other project components due to difficulties in the measurement and quantification of benefits. However, other indicators of the economic merits of these components are discussed in paras. 6.06-6.09. Upgrading and Site and Services 6.03 Benefit evaluations in upgrading and sites and services areas are based on estimates of imputed rental values for housing and market sale prices  - 47 - for workshop plots. Information regarding rental values in areas with similar location characteristics was provided by the Municipalities, or obtained through direct surveys carried out by the project preparation team. Actual and estimated values came to the following: RENTAL VALUES IN NOVEMBER 1978 PRICES' (TD/Room/Month) Upgrading Without Project With Project A. Tunis a) Saida Manoubia 8 15 b) Jebel Lahmar 10 18 B. Sfax (Rbats) 10 17 Site and Services/Infill Plots A. Tunis a) Saida Manoubia - 22 b) Jebel Lahmar - 25 B. Sfax a) Rbats - 25 b) Cimer Nord - 20 c) Cimer Sud - 20 6.04 The project costs included in the analysis were: (a) land cost and site-development costs, including site preparation and on-site infrastructure costs; (b) the share of off-site infrastructure costs allocable to the site; (c) on-plot development costs, including costs of self-help building materials and related labor, water and sewer connections, core units and perimeter walls; (d) physical contingencies; (e) administrative expenses, and design and supervision costs; and (f) annual operation and maintenance costs estimated at 3% of total development costs. 6.05 The site and services and upgrading components combined would yield an economic rate of return of 28%. The site and services schemes would have a return of 18%, and the upgrading scheme (including infill plots) a return of 34%. Sensitivity analyses show that an increase of 10% in the benefits, or a decrease of 10% in the cost, would increase the rates of return by 3 and 6 percentage points for site and services and for upgrading, respectively. A 10% decrease in benefits or increase in cost, would decrease the rates of return by 3 and 6 percentage points. Employment-oriented Investments 6.06 Some 940 jobs are expected to benefit from the provision of serviced plots, credit and technical assistance in the project areas in Tunis and Sfax. Average total investments associated with these jobs are estimated at TD 1,740 (US$4,150) per job, compared to the 1977 Bank-defined poverty capital/labor threshold for Tunisia of US$10,890. This average comprises downpayments on  - 48 - plots, equity contributions, and loans offered for (i) the purchase of serviced plots and the construction or improvement of workshops (28%), (ii) the pur- chase of equipment (47%), and (iii) working capital (25%). Improvement in Solid Waste Collection and Disposal 6.07 The project would provide for improvement in solid waste collection in the Tunis District, especially in the low-income project areas. This would be achieved primarily through better organization and management of this public service, and through improvement of equipment maintenance. It is estimated that savings of about 16% of annual total operating costs, at present TD 0.70 (US$1.67) per capita, could be achieved, essentially through a substantial reduction of present absenteeism; this reduction would be achieved as a result of measures that advisers (para. 2.27 b(i)) will help define and implement. 6.08 Environmental quality and control would be noticeably improved through closure of 50 ha of dumps and opening of a first sanitary landfill. Least-cost solutions have been adopted (para. 2.25), and disposal services are expected to be provided at an annual cost of TD 0.44 (US$1.05) per capita. Expected costs of collection and disposal combined (TD 1.14, or US$2.72, per capita per year) compare favorably with costs in other countries, about US$2.30 in Accra (Ghana) and US$1.20 in Cairo (Egypt), considering respective levels of development as measured by GNP per capita. Traffic Improvement in Sfax 6.09 The major benefit expected from traffic improvement in Sfax is the preservation of, and possibly increase in, the presently extensive use of low-cost transport modes, i.e., two wheels and mopeds, and buses, (75% of all motorized trips) which deteriorating traffic conditions are making increasingly hazardous and ineffective. In parallel, it is expected that the adoption of a properly designed circulation plan and the introduction of traffic management will substantially improve overall transport conditions. Project Risks 6.10 The selection of project areas and the thorough preparation of project components have reduced technical risks to a minimum. The major risks are policy related. As noted in paras. 1.10 and 1.18, the project is the result of a two-year dialogue between the Government and the Bank on policy questions. This project represents a commitment by Government to develop a new approach to solve the shelter and employment problems of the urban poor. The major risk is that this commitment lessens, resulting in (i) lack of enforcement of cost recovery procedures in the upgrading areas, and (ii) higher income groups benefitting from the site and services scheme. At the present time, however, these risks appear limited. First, because security of tenure would be provided to population residing in areas to be upgraded and this provision would be contingent on repayment of the upgrading costs. Second, because municipal authorities appear genuinely committed to the provision of low-cost housing to their low-income populations and because socio-political will exists for meeting the needs of the urban poor. Another  - 49 - risk rests with the capacity of the selected agencies to carry out and coor- dinate project works. This risk, however, is limited since special attention has been given to staffing, particularly for the two MPU's which are respon- sible for most of the work. VII. AGREEMENTS REACHED DURING NEGOTIATIONS 7.01 The following main assurances were obtained during negotiations: (i) the Bank would be consulted no later than December 31, 1979, on results of the study carried out by consultants on alter- native institutional and financial arrangements for solid waste management in Greater Tunis, and by June 30, 1980, an authority or inter-municipal associations satisfactory to the Bank would be established to assume this responsibility (para. 3.04); (ii) the surplus generated in CPSCL by the repayment of loans by Municipalities would be credited to a special fund to help finance similar projects (para. 3.09); (iii) protocols between the Municipalities, ONAS, SONEDE and STEG, satisfactory to the Bank, would be signed by these agencies no later than September 30, 1979 (para. 3.13); (iv) terms and conditions of (a) cost recovery for upgrading in Tunis and for site and services in Sfax, and (b) building materials loans would be as described in para. 4.03; (v) standard sale contracts acceptable to the Bank would be adopted by September 30, 1979 (para. 4.05); (vi) terms and conditions of cost recovery for the upgrading of the Rbats in Sfax through contribution des riverains would be as described in para. 4.06, and would be made official before January 1, 1981, through an article in the 1980 loi de finances. (vii) terms and conditions for small business loans would be those described in para. 4.09; (viii) STB would re-use the funds reimbursed for small business loans to finance similar small-scale business assistance programs (para. 4.09); (ix) a traffic management expert with qualifications and experience acceptable to the Bank would be retained by the Municipality of Sfax no later than December 31, 1979 (para 5.03);  - 50 - (x) a protocol between the Municipalities, STB and OTTEEFP, including a detailed section on criteria for selection of small business loan beneficiaries and satisfactory to the Bank (para. 5.06) would be signed by the agencies involved before September 30, 1979 (para. 5.04); (xi) Municipalities would adequately compensate families displaced as a result of upgrading schemes, and would relocate them in the same project area (para. 5.05); (xii) criteria for selection of beneficiaries for site and services and infill plots would be satisfactory to the Bank (para. 5.06); (xiii) the MPU's in the Tunis and Sfax Municipalities would be staffed as indicated in para. 5.08, before September 30, 1979; (xiv) before November 30, 1979, OTTEEFP would appoint the necessary staff, and CPU should have hired in consultation with OTTEEFP a small-scale enterprise expert with qualifications and experience satisfactory to the Bank to assist OTTEEFP and CPU (para. 5.13); (xv) a waste management expert and two assistants with qualifications and experience satisfactory to the Bank, would be hired by the Tunis District no later than September 30, 1979 (para. 5.22); (xvi) before November 30, 1979, CPU would appoint the necessary staff and retained advisers with qualifications and experience acceptable to the Bank (para 5.25); and (xvii) before October 31, 1979, CPSCL would hire an accountant, and CPU should have hired in consultation with CPSCL a municipal finance and banking expert with qualifications and experience acceptable to the Bank (para 5.33) to assist CPSCL and CPU. 7.02 Agreements were reached during negotiations on the following condi- tions of loan effectiveness: (i) submission of evidence that the land, or rights to the land to carry out the project, in the Jebel Lahmar, Saida Manoubia and Cimer-Sud areas have been acquired by the Municipalities (paras. 2.10 and 2.15); (ii) signature of a convention between the Government and STB, satisfactory to the Bank (para. 3.08); (iii) signature of a subsidiary loan agreement between the Government and CPSCL, satisfactory to the Bank (para. 3.09);  - 51 - (iv) signatures of loan conventions between the CPSCL and the Municipalities of Tunis and Sfax, acceptable to the Bank (para. 3.09); and (v) signature of an amended BDET-CPSCL agreement acceptable to the Bank (para. 5.35). 7.03 Finally, agreements were reached during negotiations on the following conditions of loan disbursements: (i) evidence that all land in Cimer-Nord has been acquired by the Municipality of Sfax should be submitted to the Bank before Bank funds can finance the implementation of the site and services scheme on the Cimer-Nord site (para. 2.15); and (ii) a regional authority (or inter-municipal associations) should be created before Bank funds can finance the procurement of equipment and civil works for solid waste disposal (para. 3.04(c)). 7.04 Subject to the above conditions, the proposed project is suitable for a Bank loan of US$19 million equivalent to the Government of Tunisia, for a term of seventeen years including four years of grace.  - 52 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT CHART 1: IMPLEMENTATION SCHEDULE 1978 1979 1980 1981 1982 Project Element 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1. MUNICIPALITY OF TUNIS A. Upgrading 1. Saida Manoubia Studies Bid Preparation Call for Bids + Bid Evaluation * Execution- m - - 2. Jebel Lahmar Studies Bid Preparation _ Call for Bids + Bid Evaluation mm. Execution - - - m _ B. Small Business Assistance - - - II. IMPROVEMENT OF SOCIAL SERVICES IN EXISTING LOW-INCOME PUBLIC HOUSING PROGRAM Bid Preparation Call for Bids + Bid Evaluation Execution III. SOLID WASTE COLLECTION AND DISPOSAL Studies Bid Preparation Call for Bids + Bid Evaluation -Equipment 0 _ C -Civil Works * _ (Collection) IS * (Disp osall Execution - - - - IV. MUNICIPALITY OF SFAX A. Upgrading Studies Bid Preparation Call for Bids + Bid Evaluation * Execution B. Sites and Services 1 . CIMER Nord Studies Bid Preparation Call for Bids + Bid Evaluation MM Execution 2. CIMER Sud Studies Bid Preparation Call for Bids + Bid Evaluation t MR. Execution C. Small Business Assistance _ - - - D. Traffic Improvement Studies MR Bid Preparation _ Call for Bids + Bid Evaluation Execution V. TECHNICAL ASSISTANCE AND ADVISORY SERVICES A. Ministry of Interior 1. Central Project Unit - _ - - - - 2. CPSCL - - _ - - - - 3. OTTEEFP - - - - - _ 4. Training-- - - 5. Third Project Preparation - - - _ B. District of Tunis lectio (Disposal) (Solid Waste Collect. + Disposal) l (Disposal) C. Municipality of Sfax (Traffic Improvement) World Bank - 20290  - 53 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT Chart II: MUNICIPAL PROJECT ORGANIZATION GENERAL SECRETARY MUNICIPAL STEERING COMMISSION PRESIDENT: DIRECTOR OF TECHNICAL DEPARTMENT MUNICIPAL PROJECT UNIT [ | l l ~~~~~~ADMINISTRATIVEl SOCIAL TECHNICAL AND DEPARTMENT DEPARTMENT FINANCIAL DEPARTMENT Chart III: CENTRAL PROJECT ORGANIZATION MINISTRY OF INTERIOR DIRECTORATE OF LOCAL PUBLIC AUTHORITIES CENTRAL PROJECT UNIT DIRECTOR TECHNICAL TEAM SUPPORT TEAM - ENGINEER - IMPLEMENTATION ADVISOR - FINANCIAL - MUNICIPAL FINANCE AND - LEGAL ADVISOR ANALYST BANKING EXPERT -ECONOMIC - URBAN PLANNER - SMALL-SCALE ENTERPRISE ADVISOR + OPERATIONS EXPERT - CPSCL OFFICER ASSISTANTS (2) World Bank - 20291  - 54 - ANNEX I TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 1: SLUM UPGRADING; PROVISIONS UNDER THE PROJECT Tunis Sfax Jebel Lahmar Said Manoubia Rbats 1. Roads and Footpaths - Linear meters of pri- mary and secondary circulation roads, to be asphalted 6,900 m 5,800 m - - Linear meters of ter- tiary roads, to be surfaced 3,400 m 3,800 m - - To be graded and all all all compacted footpaths footpaths footpaths 2. Water Supply - Linear meters of pipes by which system will be extended 3,200 m 3,000 m 10,800 m - % of plots to be connected 75% 85% 80% - Number of fire hydrants installed 15 8 - 3. Sewerage - Linear meters of extension of network 8,000 m 5,900 m 11,500 m - % of plots to be 100% 100% 100% connected 4. Drainage Stormwater drain- Stormwater drain- age system through - age system through open ditches open ditches 5. Street Lighting 1 street light 1 street light 1 street light every 50 m every 50 m every 50 m 6. Domestic Waste Number of transfer stations to be 1 1 improved 7. Building Loans /1 - Maximum amount TD 250 (US$595) TD 250 SU5$595) TD 250 (US$595) - Number of bene- 1,650 1,975 /1 650 ficiary households 8. Community Facilities - Primary schools (10 class rooms) 1 5 1 - Dispensary 1 1 - - Market 1 1 - 9. Number of Infill Plots to be developed on vacant land 997 838/1 121 /1 238 infill plots will be provided without core units, and beneficiary house- holds will be entitled to building loans of up to TD 500 (US$1,190).  TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table-2: SLUM UPGRADING UNIT COSTS (1978 PRICES) ('000) Total Estimated Cost Cost per ha-/ Cost per household- Cost per capita TD US$ TD US$ TD US$ TD US$ Land 955.7 2,274.6 4,155 9,889 51.2 121.9 9.2 21.9 Roads and footpaths 1,621.3 3,858.7 7,049 16,777 86.9 206.8 15.6 37.1 Water supply 989.6 2,355.2 4,303 10,241 53.0 126.1 9.5 22.6 Sewerage 1,444.2 3,437.2 6,279 14,944 77.4 184.2 13.9 33.1 Drainage 120.3 286.3 523 1,245 6.4 15.2 1.2 2.9 Electricity 487.9 1,161.2 2,121 5,048 26.1 62.1 4.7 11.2 Street Lighting 201.4 479.3 876 2,085 10.8 25.7 1.9 4.5 Core units on infill plots 1,199.7 2,855.3 5,216 12,414 64.3 153.0 11.5 27.4 Self-help building materials 996 6 2,371.9 4,333 10,313 53.4 127.1 9.6 22.8 Community facilities 831.8 1,979.7 3,617 8,608 44.6 106.1 8.0 19.0 Studies, interest during construction, supervision, and management 647.2 1,540.3 2,814 6,697 34.7 82.6 6.2 14.8 Physical contingencies 525.5 1,250.7 2,285 5,438 28.2 67.1 5.1 12.1 TOTAL 10,021.2 23,850.5 43,570 103,697 537.0 1,278.1 96.4 229.4 NB Infrastructure cost components include on- and off-site network elements (i.e., chargeable or not). connections (when applicable). /1 Total estimated cost divided by total project area: 230 ha. /2 Total estimated cost divided by total households: 18,660 (16,700 existing and 1,960 expected). /3 Total estimated cost divided by total expected population: 104,000 people.  - 56 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT ANNEX I Table 3: SLUM UPGRADING AREAS - PLOT OPTIONS, CHARGES AND AFFORDABILITY (1978 PrIce.) Monthly Payment IncoRe Loweet percentile et a X of Level of reached is the EetO "ted Cost per Down- MonthlY Target Target incose distribution number household payment payment Monthly Households in project in project of Plot Options (TD)_,/ (TD) (TD) /2 Income (TD/month) ores city Plots TUlZS-JEBEL LAHMAR 1. Existing Plots A. Land + basic infras;ructure* - MinA mum Plot (30= ) 160 - 1.15 52 24 10th 3rd ) - Average Plot (60L2) 289 - 2.15 6X 36 19th 7th ) B. Option A + Water and Electricity Conem-tione - Minimum Plot 30m1 248 - 1.85 6% 31 12th 5th 2 - Average Plot (60m ) 377 - 2.82 7% 40 27th Bth ) C. Option B + Building Loaned - Minimum Plot (3D ) 398 - 3.55 7% 51 41Bt 17th ) 1,000 - Average Plot (60m2) 527 - 4.51 bX 56 51st 22nd ) It. Ibfill Plots S. Typo A (7202) + connections + core coit 1,212 182 7,60 15% 51 17th D1 Option D + Building leons- 1,362 182 9.3E 16% 59 24th E. Type B (10802) + connectiona + core unit 1,600 288 9.78 16% 61 28th 100 E Option E + Building loansl3/ 1,750 208 11.48 18% 64 32nd F. Type C (144a ) + connoctieo. + corn unit 2,336 467 13.94 20% 70 40th 3/ ) ~~~~~~~~~~~~~~~~~~~~~~~~~~40 N' Option F + Building leona- 2,486 467 15.64 22% 71 41ct) TUNIS-SAIDA MANOUBIA 0. Eniting Plots A. Land + Pseic Infraetructuret - Minimum Plot (30') 156 - 1.16 5% 23 6th 3rd - Average Plot (60D2) 262 - 1.95 6% 33 15th 6th ) 627 S. Option A + Water and Electricitv Coumecntion - Minimum Plot (30Dm) 245 - 1.83 6% 31 12th 5th ) - Average Plot (6Dm2) 350 - 2.61 7% 37 20th 7th ) C. Option B + Building Leone 2! - Miimucm Plot (30m') 395 - 3.53 7% 50 41st 16th ) 825 - Average Plot (60m2) 500 - 4.31 6% 54 49th 20th ) II. Infill Ploto D. Type A(72m2) + conneotions + building leo.n 4/ 740 74 5.94 15% 40 8th 167 E. Typo A (72) + cennections + core unit 1,189 178 7.54 15% 50 16th 420 P. Type B (10082) + connections + building lons 4/ 867 111 6.61 15% 44 11th 38 G. Type B (1C8m2) + cnonections + core unit 1,549 279 9.47 18% 53 19th 96 R. Type C (144,2) + connections + building leon 4/ 993 149 7.27 15% 48 12th 33 I. Type C (144,2) + conoectiono + core .cit 2,258 452 13.47 20% 67 38th 84 SFAX - RBATS I. EmistinR Plots A. Lend + Basic Infrasjruotcreoo - Minimum Plot (40m ) 145 - 1.08 5% 22 8th 4th,) 780 - Average Plot (85.2) 271 - 2.02 6% 34 26th lOth) B. Option A + Water Connection - Minimum Plot (4Dmz) 219 - 1.63 5% 33 25th 9th) 890 - Average Plot (85n2) 345 - 2.57 7% 37 28th 13th) C. Option 0 + Building Loae21 - Miimum Plot (4Dm ) 369 - 3.33 7% 48 46th 21ct) 550 - Average Plot (85O2) 495 - 4.27 8% 53 52nd 24th) II. Infill Plot1 D. Type A (72n2) + co.nectiens + core meit 1,241 180 7.87 15% 52 _ 23rd 65 e. Type B (10m2) + cennectiona + core unit 1,654 331 10.11 18% 56 _ 27th 23 F. Type C (1442) + connections + core unit 2,417 483 14.42 20% 72 _ 49th 33 I/ Including physteol contingencies. nagement costs, design end superviseln, interest durins construction. 2/ All itmec will bh roe-verod at 6.5% iso,rm.. over 20 yence except fur building lens. recovered at 6.5% interest over 10 years. 3/ Computed on the basis of an average building loan of TD 150. M Computed on the basis of an overage building loan of TD 250. e Incl dino sw-rage conneotions.  - 57 - TUNISIA SECOND URBAN-DEVELOPMENT PROJECT ANNEX II TABLE 1: DETAILED COST ESTIMATFS UPGRADING AND SITE AND SERVICES (TD '000) TUNIS SFAX JEBEL LAHMAR SAIDA MANOUBIA RBATS CIMER NORTH CIMER SOUTH A. Land Acquisition 440.7 373.0 142.0 170. 225.0 B. Studies 40.0 35.0 25.0 10.0 10.0 C. Off-Site Infrastructure 1. Roads 115.3 187.0 148.2 109.5 178.3 2. Water Supply 8.8 50.5 - 10.1 14.9 3. Sewerage - - 15.0 110.4 21.8 4. Drainage - - 65.3 28.1 2.0 5. Electricity 144.6 72.3 18.3 25.5 25.9 6. Street Lighting 7.4 14.9 24.2 4.8 3.9 7. Transfer Station 23.4 23.4 - - - Subtotal C 299.5 348.1 271.0 288.4 246.7 D. On-Site Infrastructure 1. Roads 465.3 257.2 448.3 105.7 139.8 2. Water Supply 162.0 152.6 121.1 34.7 45.8 3. Sewerage 390.1 316.3 272.4 58.4 77.0 4. Drainage - - 55.0 4.9 6.4 5. Electricity 81.4 61.9 12.9 9.2 12.2 6. Street Lighting 58.8 24.4 71.7 9.7 12.7 Subtotal D 1,157.6 812.4 981,4 222.6 293.7 E. Connections /I 1. Water 185.6 231.7 77.3 71.6 94.5 2. Sewerage 144.9 242.6 62.9 31.7 41.9 3. Electricity 49.8 41.9 4.8 31.9 42.1 Subtotal E 380.3 516.2 145.0 135.2 178.5 F. Core Units 662.0 437.5 100.2 163.4 216.0 G. Self-Help Building Materials 459.3 382.5 154.8 293.0 386.4 H. Community Facilities 1. Schools 100.0 500.0 85.0 55.0 85.0 2. Health Centers 20.0 20.0 - - - 3. Markets 30.0 30.0 - - Subtotal H 150.0 550.0 85.0 55.0 85.0 I. Design and Supervision 150.0 121.8 69.5 46.3 56.2 J. Base Cost (A-I) 3,713.7 3,576.5 1,979.9 1,384.3 1,697.5 K. Project Management 92.9 89.4 49.3 34.6 42.4 L. TOTAL BASE COST (A-K) 3,806.6 3,665.9 2,023.2 1,418.9 1,739.9 Physical Contingencies 193.8 193.0 138.7 64.8 73.4 Price Contingencies 478.0 584.4 268.5 150.5 179.5 M. TOTAL COST 4,478.4 4,443.3 2,430.4 1.634.2' 1.992,8 /1 Including those for the infill plots in the areas to be upgraded.  ANNEX II -58 - TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 2: Detailed Cost Estimates Improvement to Education Facilities in Low-Income Public Housing Programs Estimated Cost (TD'O00) Primary Schools 280.0 Project Administration 7.0 Sub-total 287.0 Physical Contingencies 28.0 Price Contingencies 47.9 TOTAL COST 362.9 Table 3: Detailed Cost Estimates Small-Scale Business Assistance (TD'000) A. Credit Line a) Tunis - Handicrafts 410.0 - Traders, retailers 20.0 Total 430.0 b) Sfax - Handicrafts 65.0 - Traders, retailers 5.0 Total 70.0 Total credit line 500.0 B. Technical Assistance - Base cost 70.0 - Price contingencies 8.7 Total 78.7 C. Project Administration 1.7 TOTAL (A+B+C) 580.4  - 59 - ANNEX II TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 4: Detailed Cost Estimates Improvemenents to Solid Waste Collection and Disposal Estimated Cost (TD '000) A. Improvement Programs A.1 Collection - Equipment/l 316.0 - Civil Works 32.0 (Subtotal A.1) (348.0) A.2 Disposal - Civil Work - Civil Works/2 1,056.0 - Equipment 90.0 (Subtotal A.2) (1,146.0) Subtotal 1,494.0 Project Administration 37.4 Subtotal 1,531.4 Physical Contingencies 149.4 Price Contingencies 170.9 Total Cost (A) 1,851.7 B. Technical Assistance B.1 Collection 64.0 B.2 Disposal 57.0 Subtotal 121.0 Project Administration 3.0 Subtotal 124.0 Price Contingencies 14.0 Total Cost (B) 138.0 Total Cost (A + B) 1,989.7 /1 5 truck compactors a TD 36,000, 25 small vehicles a TD 2,400, 6 compacting trailors a TD 11,000, spare parts for TD 5,000 and new maintenance equipment for TD 5,000. /2 Closure of illegal dumps (para. 2.27, c (ii): TD 746,000; opening of sanitary landfill: TD 310,000.  ANNEX !I -60- TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 5: Detailed Cost Estimates Improvement to Traffic Conditions in Sfax Estimated Cost (TD'OOO) A. Traffic Program Civil Works 180.0 Vertical Signalization 25.5 Lane Marking 4.6 Traffic Signals 36.3 Street Lighting 22.8 Drainage 51.8 Sub-total 321.0 Project Administration 8.0 Sub-total 329.0 Physical Contingencies 32.1 Price Contingencies 33.1 Total Cost (A) 394.2 B. Technical Assistance Consultant Services 37.0 Training 6.0 Sub-total 43.0 Project Administration 1.1 Sub-total 44.1 Price Contingencies 5.3 Total Cost (B) 49.4 TOTAL COST (A + B) 443.6  -61- ANNEX II TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 6,: Detailed Cost Estimates Consultant and Advisory Services Estimated Cost (TD'OOO) A. Project Preparation Fund (Second Project) 100.0 B. Assistance to Small-scale Businesses 60.0 C. Preparation and Implementation of Schemes to Improve Solid Waste Collection and Disposal in the Tunis District 121.0 D. Implementation of the Traffic Scheme in Sfax,and Training of Municipal Traffic Engineer 24.0 E. Financial and Management Services to CPU 72.0 F. Financial and Management Services to CPSCL 72.0 G. Municipal Staff Training 60.0 Sub-total (A-G) 509.0 H. Project Administration 20.4 Sub-total (A-H) 529.4 1. Price Contingencies 48.2 TOTAL COST (A-I) 577.6  - 62 - ANNEX III TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 1: CPSCL SUMMARY BALANCE SHEET (TD, Million) 1976 1977 1978 (September) T. ASSETS - loans granted before 1976 2.4 2.4 2.4 - " " in 1976 0.6 0.6 0.6 - " " " 1977 - 2.5 2.5 - ' 1978 - - 1.5 C tash on Hand 0.9 0.6 2.7 TOTAL 3.9 6.1 9.7 II. LIABILITIES - Equity 2.0 2.0 2.0 - Budgetary appropriations 1.4 3.6 7.0 - long term loans 0.4- 0.3 0.2 - operating profit- . 0.2 0.5 TOTAL 3.9 6.1 9.7 1/ Interest on loans.  TUNISIA SECOND URBAN DEVELOPMENT PROJECT Table 2: MUNICIPALITY OF TUNIS ACTUAL (1972-1977) and PROJECTED (1978-1987) BUDGETS (TD, Millito) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 198L