Tunisia - Forestry Development Project

Document of The World Bank FOR OFFICIAL USE ONLY /,{ rA 1i ,j e 8 Report No. P-4506-TUN MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOtTNT EQUIVALENT TO US$20.0 MILLION TO THE REPUBLIC OF TUNISIA FOR A FORESTRY DEVELOPMENT PROJECT July 2, 1987 ITis document has a restricted distribution and may be used by recipients only in the performance of their ofAcial dutes. Its contents may not othetwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit 5 Tunisian Dinar (D) US$ 1.00 = D 0.813 D 1.00 - US$1.23 WEIGHTS AND MEASURES The metric system ACRONYMS ASAL - Agricultural Sector Adjustment Loan (Pret a l'Ajustement au Secteur Agricole) DF - Directorate of Forests (Direction des Forets) DREF - Directorate of Forest Exploitation (Direction de la R6gie d'Exploitation Forestiere) INRF - National Institute of Forestry Research - (Institut National de la Recherche Forestiere) CFPR - Professional Training Center of Remel (Centre de Formation Professionnelle de Remel) GOVERNMENT OF REPUBLIC OF TUNISIA FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLV REPUBLIC OF TUNISIA FORESTRY DEVELOPMENT PROJECT Loan and Project Summary Borrower: The Republic of Tunisia Amount: US$20.0 million equivalent Terms: 17 years, including four years of grace, at the standard variable interest rate Financing Plan: US$ Million IBRD 20.0 Government 30.2 Total 50.2 Economic Rate of Return: 18Z Staff Appraisal Report: No. 6730-TUN Date: July 2, 1987 Map No.: IBRD 19893 This document has a restricted distribution and may be used be recipients only In the performance of their official duties. 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 FORESTRY DEVELOPMENT PROJECT 1. The following report on a proposed investment loan to Tunisia for US$20 million equivalent is submitted for approval. The proposed loan would have a term of 17 years, including 4 years of grace, at the standard variable interest rate. It would help finance a forestry development project that would establish the basis for comprehensive conservation, development and exploitation of the forestry resources and intensify wood production. 2. Background. Tunisia's 900,000 ha of forests are estimated to provide about 4% of the agricultural GDP, but at least 10,000 ha are being lost annually mostly because of over-grazing by livestock and uncontrolled cuttings for fuel. Poor forest management, unauthorized harvest of trees and lack of appropriate tree species and planting techniques are common problems of the subsector. In the absence of a clear national strategy to deal with these wide-ranbing problems, the funding for forestry has decreased sharply and annual planting for wood production has been reduced to one-fifth of its level of 15,000 ha in 1978. Izaorts now account for 95% of Tunisian needs for industrial wood, valued at some $38 million equivalent per year. The consequences of this neglect are severe on soil/water conservation. Roughly 80% of Tunis:a is subject to erosion. Although Tunisia cannot expect to become self-sufficient for wood and wood products, it could effectively meet a substantially larger part of its needs, thereby contributing to a reduced sector trade deficit, and better protect its environment. The Government's strategy is to rectify this situation through improved national forest grazing programs, reseeding, planting with appropriate species, and natural regeneration. In the framework of the medium-term sector adjustment program agreed under the Agricultural Sector Adjustment Loan (ASAL), the Government has prepared a program to achieve greater dynamism and cost effectiveness in the forest subsector. The Project would finance part of the program. 3. Project obiectives. The project objectives are to improve the cost effectiveness of a restructured forest resource development and management program which would help: (a) increase fuelwood and industrial wood production; (b) improve forest grasslands and range management to reduce damage to forest areas from grazing; (c) reduce soil erosion and increase water retention to protect productivity of agricultural lands; and (d) preserve and expand the country's nature and wildlife heritage. 4. Project description. The proposed Project would comprise five main components: (a) Forest Exploitation and Regeneration would include thinning of existing plantations, exploitation and regeneration of natural forests, improvement of exploitation means and techniques; (3 24 2E )  - 2 - (b) Forest Plantations and Private Tree Planting would establish fast-growing and linear plantations, thereby increasing production and contributing to soil conservation; simultaneously it would expand seed production and seedling sales to the private sector; (c) Intensified Forest Management would address the rehabilitation and management of two highly degraded natural forest areas; (d) Forest Pasture and Range Improvement would include the establishment of prairies and improved natural pastures adjacent to the regeneration and plantation areas, thus contributing to the success of these programs; and (e) Institutional Development and Support would provide participating agencies with technical assistance support and means to fulfill their assigned roles in the new forest strategy, particularly in the fields of inventory and planning for the development of forest resources, improvement of natioiial forest management and preservation of wildlife, applied research and training. The Project, to be carried out over seven years, provides funds for works, vehicles and equipment, training, technical assistance and incremental operating costs. The total cost of the Project is estimated at US$50.2 million equivalent with a foreign exchange component of US$20 million (401). A breakdown of costs and the financing plan is shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of the key project processing events and the status of Bank Group operations in Tunisia are given in Schedules C and D, respectively. A map is also attached. The Staff Appraisal Report No. 6730-TUN, dated July 2, 1987, is being distributed separately. 5. Rationale for Bank involvement. The Bank's lending strategy aims to support Tunisia's transition from reliance on petroleum exports to a sectorially balanced development program. Bank lending, therefore, concentrates on projects that have a direct and rapid impact on production, employment, exports and/or import substitution, and that minimize government net contributions. The Bank has been working closely with the Government in reviewing past agricultural expenditure policies and in developing the strategy for investments under the VIITH Development Plan, with particular focus on the adjustments needed to maintain growth and to reduce the sector trade deficit. The improved management of forestry resources is an integral part of this program. While the reorientation of sector policies is being addressed through the ASAL, a forestry development project would both strengthe-. this policy reform effort and provide the essential mechanism to develop, implement and monitor the detailed technical and managerial innovations needed to achieve the full benefit of the agreed reorientation in subsector expenditures. The Bank's involvement would also facilitate the transfer of experience gained in other Mediterranean countrie8 and help ir preserving natural resources. 6. Agreed Actions. The Government has agreed on the following actions: (a) to promulgate the new Forest Code and to create within the Directorate of Forests (DF) a special unit to prepare the Forest/Pastureland Inventory before the loan effectiveness; (b) to open its auctions for all categories of wood to all licensed wood buyers before December 31, 1988; (c) each year starting with (3242E)  - 3 - 1989, to determine reference prices for all types of wood to be sold directly to wood users, based on prices obtained under auctions undertaken the preceding year, and taking into account the ability of such users to pay; (d) by December 31, 1989, to sell cork through auctions, open to both the parastatal and the private sector; (e) to select any new major investment in the forestry sector in accordance with criteria set forth in its program for the adjustment of its agricultural sector; (f) by December 31, 1988, to sign a protocol between the DF and the National Institute for Forestry Research (INRF' to assure the inclusion of selected research programs considered essential for the project in INRF's work program; (g) by December 31, 1988, to ensure the preparation and implementation by the Professional Training Centre at Remel (CFPR) of a training program for staff of DF and the Directorate of Forest Exploitation (DREF) in forest exploitation; (h) to complete a Forestry/Pastureland Inventory and a Master Plan for Development of the Forestry Resources by December 31, 1990; (i) to estimate the operation and maintenance costs of improved pastures implemented under the Project and set up procedures to recover such costs from the beneficiaries, taking into account their ability to pay, by December 31, 1991; and (j) to identify in the DF and DREF annual budgets the cost of forestry programs financed under nationally subsidized programs not later than December 31, 1988. 7. Justification and Risks. The Project would have an important long term positive impact on the environment and in the near term would help reduce the sector trade deficit by increasing wood production, starting as early as 1989, while laying the basis for medium-term improvement in efficient livestock production and longer-term protection of the productivity of agricultural lands. The ERR is 18X. Net foreign exchange savings are expected to reach some $6 million/year within two years. Some 10,000 man-years of employment would be created during the project period. The main risks are associated with the participation of the beneficiaries in the range management program and in rationalizing stock grazing in forest regeneration areas. In spite of new legal measures adopted to help minimize this risk, it is expected that populations which have traditionally used forest rangelands may be slow to respond to measures designed to protect forest undergoing regeneration or to provide improved range quality. To minimize these risks further, measures will be taken under the Project to ensure that local authorities will work closely with and seek to strengthen producer organizations, and extension efforts will be intensified to introduce alternative livestock production systems. 8. Recommendations. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Barber Conable President Attachments Washington, D.C. July 2, 1987 ( 3 24 2 e)  Schedule A THE REPUBLIC OF TUNISIA FORESTRY DEVELOPMENT PROJECT Estimated Project Costs Local ForeiKn Total