Tunisia - Highways Maintenance and Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4687-TUN MEMORANDUM AND RECOMMEND)ATION OF THE PRESIDENT OF THE INTER1NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO USg63 MILLION TO THE REPUBLIC OF TUNISIA FOR A HIGHWAYS MAINTENANCE AND REHABILITATION PROJECT November 19, 1987 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherise be disclosed without World Bank authorization.  CURRENCY AND EQUIVALENT UNITS Currency: Tunisian Dinar DT I = 1,000 millimes Equivalents: October 1987 (Post-Appraisal) US$l = TD 0.83 DT 1 - US$1.20 WEIGHTS AND MEASURES Metric System British/US System I meter (m) = 3.28 feet (ft) 1 kilometer (km) - 0.62 miles (mi) 1 sq. kilometer (km2) = 0.386 sq. miles (mi3) 1 metric ton (ton) = 2,205 pounds (lb) ABBREVIATIONS DGPC - Direction G6nerale des Ponts et Chaussees (Highway Department) MEH - Ministere de l'Equipement et de l'Habitat (Ministry of Public Works and Housing) MT - Minist4re des Transports (Ministry of Transport) FISCAL YEAR January 1 - December 31  FOR OFF0IL US ONLY REPUBLIC OF TUNISIA RIGHWAYS MAINTENANCE AND REHABILITATION PROJECT Loan and Project Summary Borrower: Government of Tunisia Amount: US$63 million equivalent Terms: Seventeen years including a four-year grace period, at the Bank's standard variable interest rate. Financina Plan: Government: US$169.3 million IBRD: USs 63.0 million Total: US$232.3 million Economic Rate of Return: minimum 28% Staff Apraisal Report: Report No. 6247%-TUN, dated November 19, 1987 flu: IBRD 19680 Thi docu_a ts r estritde distibution and may be used by recipients only in the performance of tir oSWbl dutiL Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR A HIGHWAYS MAINTENANCE AND REHABILITATION PROJECT 1. The following memorandum and recommendation on a proposed loan for the equivalent of US$63 million to the Republic of Tunisia is submitted for approval. The pjroposed loan would help finance a Highways Maintenance and Rehabilitation Project and would have a term of seventeen years, including 4 years of grace, at the standard variable interest rate. 2. Background. Tunisia's transport infrastructure includes five major ports, about 1,900 km of railway lines, some 9,000 and 28,000 km of paved and unpaved roads respectively, and four international airports. Traffic has increased by about 8% per annum since 1970 for both freight and passengers with a marked shift from railways to road transport. Since 1970, the railway share of main line traffic passengers has declined from 17% to 6X, and its share of freight from 37Z to 13X, with phosphate rock transport accounting for about two thirds of total freight. The relatively small size of the country and the concentraticxi of economic activity in the Northeast have contributed to this decline. Port traffic now handles about 15 million tons, and domestic coastal shipping accounts for about 30% of total port traffic, primarily of petroleum products. Roads are now the dominant transport mode carrying more than 902 of passenger traffic, and almost 70% of freight, and traffic demand is increasing steadily. Overall, the transport sector does not constitute a bottleneck for economic and social development in the sense that important links are missing, or that demand far outweighs supply. In the past the transport system has served Tunisia's development process well, but as a large proportion of the network, especially the roads and railways, was built prior to independence (1956), the system no longer responds to actual traffic patterns and volumes. 3. The main issue in sector management is the lack of institutional responsibility for planning covering the whole sec.or. Planning, construction and operation of road infrastructure are managed by the Ministry of Public Works and Housing (HER), and the remainder of the sector is managed by the Ministry of Transport (MT). This affected particularly the coordination between road and rail transport. Weaknesses in planning and management, the importance of the resources devoted to railways with doubtful economic justification, and the consequent serious deficits affecting the whole sector were brought to Government attLation in a Bank Transport Sector Memorandum (1985), and in a recent analysis of the railways investment program in preparation of the Seventh Plan (1987-1991). This analysis will be followed by a more comprehensive review of railways for a possible future transport operation. A Transport Planning and Coordination Unit, established under the on-going Fourth Highway Project is now operating within the Planning Directorate of MT, with a special focus on modal coordination. This Unit has already played a positive role, particularly in the preparation of the Seventh Plan. 4. Because of the past emphasis on expansion and upgrading of the transport network, road maintenance and rehabilitation seriously lagged behind during the latter part of the 1970s. An increasing portion of roads deteriorated below the standard required by the rapidly increasing traffic volumes. In addition, a  dc"etntralization process initiated in 1981 contributed to lowering the efficiency _s road maintenance operations as the new Regional Directorates were not geared up for the task, and received inadequate support from central departments. In the context of its general stabilization and adjustment policy, the Government's objectives in the transport sector are to reduce public investments, and make the most efficient use of existing resourc4s by emphasizing maintenance and rehabilitation. The proposed project will support these objectives by focusing on highways maintenance and rehabilitation. 5. Rationale for IBRD Involvement. To assist the Government in achieving its objectives in the transport sector, the Bank has participated in nine transport projects since 1964. These included five highway projects, one railway project and three port projects. As a whole, the projects have supported the Bank's main concern in the sector, namely to modernize and rehabilitate existing infrastructure, to improve transport operations and to strengthen institutions. ln the highway sector, the Fourth Highway Project has been successful in re-establishing a road rehabilitation program as well as strengthening road maintenance orerations over the whole network. At the same time, balanced development of the network is being encouraged through the Third and Fifth Highway Projects, which together support a nationwide program of improvements to cover 2,000 km of rural roads combined with selected complementary agricultural investments in the areas served. The proposed Maintenance and Rehabilitation Highway Project is important for ensuring continuity of the long-term efforts currently underway. 6. Project Objectives. The principal objectives of the project are to support the Government's policy to rationalize highway investments and to seek a more efficient use of resources, mainly through improved planning and management. Specifically the project aims at: (a) improving the efficiency of road maintenance through organization changes and institutional measures within the Highway Department (DGPC); (b) achieving a proper balance in highway expenditures between maintenanc3, rehabilitation and new construction; (c) red- ing the backlog of road rehabilitation; and (d) improving personnel management and training through the implementation of an important human resources development program. 7. Project Description. To achieve these objectives, the proposed project comprises: (a) a five-year routine and periodic maintenance program including procurement of maintenance equipment, and workshop and laboratory facilities and equipment (including vehicle weighing equipment); (b) a five-year program of road rehabilitation covering about 800 km of roads; (c) improvement of the human resources management system including the establishment of a training directora 3, the preparation and implementation of a five year training plan, and fellowships for overseas training; and (d) institutional development (in addition to strengthening the training function of DGPC) and studies for: (i) establishing an organization and methods unit; (ii) improving mechanical equipment maintenance; (iii) reinforcing laboratory services; (iv) economic studies and detailed engineering for implementing the rehabilitation program. The project, to be carried out over 7 years, provides funds for civil works, equipment, technical assistance and training. The total cost is estimated at US$232.3 million equivalent, with a foreign exchange component of US$95.5 million (41X). A breakdown of costs and the financing plan are shown in Schedule A. Details on procurement and disbursement are shown in Schedule B. A timetable of key project processing events and the status of Bank group operations in Tunisia are given in Schedules C and D, respectively. A map is attached. The Staff Appraisal Report, No. 6247a-TUN dated November 19, 1987 is also attached.  8. Agreed Actions. The Governement has agreed on the following actions: (a) carrying out the project in accordance with the agreed five-year Action Plan; (b) preparation of technical and economic appraisal reports for each road rehabilitation sulproject, and their submission to the Bank for prior approval; and (c) joint review and monitoring: the Government would make available to the Bank for review and comments by August 15th of each year, beginning in 1988, the annual programs for the roads subsector, including the maintenance, rehabilitation and training programs and the proposed budgetary allocations for the following year covering both capital and recurrent costs; and the Government would no later than February 15th of each year, starting in 1989, carry out with the Bank an updating review of the programs to be executed during the same year and of the associated budgetary allocations. 9. Additional conditions for Loan effectiveness include: (a) establishment of the Training Directorate and appointment of its director; (b) establishment of a Training Steering Committee; and (c) establishment of the Road Maintenance Organization and Methods Unit and appointment of its head. 10. Benefits. The main quantifiable benefitt. from improved road rehabilitation and maintenance are reduced vehicle operating costs benefitting all road transport users. Other benefits would be savings for the Gcvernment in avoiding frequent road construction, and increased availability and more efficient use of both human resources and maintenance equipment. In addition, the economy will benefit from reduced accidents and travel time savings. Economic analyses taking into account only vehicle operating cost savings over 15 years, show an economic rate of return (ERR) varying between 30 and 100% for the rehabilitation program for most road sections; and ranging from 28 to 48% for the maintenance program. 11. Risks. The economic analysis assumes that all the measures foreseen for the improved maintenance program will be taken in a timely manner so that efficiency increases are achieved. The key factor to achieve this is the timely availability of necessary funds. This is especially important for the maintenance activities. Delays to the road rehabilitation program would result in a substantial loss of benefits during the period of delay. The high priority accorded by the Government to the project together with the special institution building, expenditure forecast, budgeting and monitoring procedures included in tiz project should reduce the risk of insufficient funds. 12. Recommendation. I am satisfied that the proposed TLoan would comply with the Articles of A-reement of the Bank, and recommend that the Executive Directors approve the proposed Loan. Barber Conable President Attachments Washington, D.C. November 1987  Schedule A REPUBLIC OF TUNISIA HIGHWAYS MAINTENANCE AND REHABILITATION PROJECT ESTIMATED COSTS AND,FINANCING PLAN Estimated Costs ' Local Foreig Total --US$ million -------- CaRital Costs Rehabilitation 20.9 27.7 48.6 Asphaltic concrete overlay 3.3 5.5 8.8 Workshop buildings 1.5 1.0 2.5 Miscellaneous aquipment 1.0 3.6 4.6 Road maintenance equipment 3.2 i .3 14.5 Consulting services 0.3 1.3 1.6 Overseas training 0.0 0.4 0.4 Base cost 30.2 50.8 81.0 Contingencies Physical 3.0 5.1 8.1 Price 4.3 7.1 11.4 Total capital cost OA 10 0.5 Recurrent Costs MAI 32.3 TOTAL PROJECT COSTS 136. 9.2. a/ Includes $32.9 million in tax,s and duties. Financing Plan: Local Foreign Total ----(US$ million) -