Tunisia - Second Agricultural Sector Investment Loan

Report No. PIC5291 Project Name Tunisia-Second Agricultural Sector Investment Loan (+) Region Middle East and North Africa Sector Agriculture Project ID TNPE50418 Borrower Government of Tunisia Implementing Agency Ministry of Agriculture Contact Mr. Abdallah Malek Directeur General Direction Generale du Financement et des Encouragements, Ministere de l'Agriculture 30, rue Alain Savary Tunis, Tunisia.. Tel. 216.1.842.687 Fax. 216.1.784.447 Date this PID prepared May 1997 Project Appraisal date September 1997 Project Board date December 1997 Background 1. The agricultural sector has undergone considerable structural adjustment in the past 10 years but structural problems persist. Policy decisions to promote trade liberalization lag behind the pace established for other sectors of the economy, mainly due to concerns over social consequences in rural areas. While the Government prepares for negotiations with the European Union on trade liberalization of agricultural products, to reopen in 2000, and for which the Bank has identified both Economic and Sector Work and a lending activity separate from the present project, the Government is implementing strategies to strengthen the capacity of the sector to respond flexibly and positively to an eventual reduction of border protection. The main sector challenges in this regard are: (a) increasing competitiveness of farm enterprises; (b) implementing sustainable resource management; (c) ensuring efficient support services to agriculture; and (d) achieving poverty reduction. 2. The project will address all four of these areas. Sustainable resource management will be addressed through groundwater prospecting and monitoring, by prudent, small-scale irrigation expansion where resources and opportunity costs permit, by hill dam construction and operation for groundwater recharge and by support of resource management components - of national research, extension and training programs. Support for irrigation users' associations will improve management of water resources and mobilization infrastructure, and tariff policy measures will continue the Government's consistent reduction in irrigation subsidies. Efficient support services to agriculture will be addressed by  moving research, extension and training strategies in the direction of public-private provision compared with the current state-only provision strategy, and by focusing on overall delivery cost efficiency. Poverty reduction will be addressed directly by production-related investments in small-scale irrigation and hill dams, and indirectly through the research, extension and training components. Competitiveness in agriculture is a multi-faceted issue, and the project would affect a portion of it by improving production efficiency through the research, extension and training components. Project Objectives and Description 3. This bridging loan has two main objectives: (a) to increase rural incomes derived from sustainable use of water resources and through effective development, delivery and adoption of improved farming practices; and (b) enhanced institutional responsiveness to user demand for agricultural research, extension and training. 4. The proposed project will consist of: (a) an investment component - (i) construction of hill dams; (ii) small-scale tubewell irrigation creation and drainage rehabilitation and modernization of several large-scale irrigation perimeters; (iii) groundwater prospecting and monitoring activities; and (iv) physical strengthening of agricultural research, extension and training institutions through construction, equipment and vehicle procurement; (b) policy and institutional actions - these condition the sub-sectoral investments and make progress towards strategic objectives; and (c) technical assistance - to support irrigation associations' assumption of management responsibilities from the public sector. Benefits and Target Population 5. Direct beneficiaries would be farmers practicing irrigation on the basis of the small-scale irrigation perimeters and wells benefiting from hill dam groundwater recharge. Experience during the existing ASIL project is that these projects demonstrate an economic rate of return in the 12-18% range. The total irrigation area created, rehabilitated and modernized will be approximately 7,000 ha., disbursed geographically in small units typically of 50- 150 ha. each. Groundwater prospecting and monitoring is a key component of groundwater management as it is presently practiced, and as it needs to improve in the future. It is the foundation for water resource inventories (quality and quantity) which define sustainable extraction rates for economic uses. It also provides the data needed for groundwater modeling, which Tunisia needs to expand in the near future as part of establishing groundwater management plans for its at-risk aquifers The national research, extension and training activities would benefit farmers at large in the agricultural sector by assisting them to adopt improved farming techniques that increase productivity and quality of output, and to manage their natural resource inputs more sustainably. Implementation Arrangements -2-  6. The project implementation arrangements will replicate much of the existing ASIL. Improvement will be sought in the following areas: (a) monitoring and evaluation expectations and mechanisms need clear definition from the outset of project implementation; (b) institutional strengthening of water users' associations and of government support units needs to be provided for in project design. Users' associations need to be implicated in irrigation perimeter projects from the initial design stage; and (c) for the hill dam component: (i) environmental impact assessments should, in selected cases, analyze cumulative impacts of groups of dams, in addition to the currently practiced, site-specific assessments; and (ii) the current resettlement process provides a good framework for the proposed project but may need strengthening. 7. The loan would support component activities that are initiated under the Government's 1998 and 1999 budget exercises. The Ministry of Agriculture (MOA) will be the executing agency for implementation of the project, specifically: (a) Directorate General of Rural Engineering (DGGR); (b) Directorate General of Water Resources (DGRE); (c) Directorate General of Studies and Water Works (DGETH); and (d) the National Agricultural Extension and Training Agency (AVFA); the National Institute of Agricultural Research and Education (IRESA). Project coordination among these implementing units would be assured by the DGFE (Direction Generale du Financement et des Encouragements) and a Coordinating Committee chaired by the Minister of Agriculture. The hill dam component would involve two other Ministries: (a) for environmental aspects, the National Environmental Protection Agency (ANPE) has approval authority over mitigation plans proposed in response to environmental impact assessments; and (b) regional representatives of the Ministry of State Property and Land have authority over the expropriation and indemnisation process and are involved in the social impact process of expropriation. The technical assistance (TA) component to support irrigation associations would involve mobilizing a second mobile, multidisciplinary team, to be coordinated and supervised with minor modifications to an existing TA component financed by another donor. Project Cost and Financing 8. Total project cost is currently estimated at US$100 million, with a Bank loan tentatively placed at US$60 million. Sustainability 9. The project directly addresses water use and management sustainability issues. The groundwater prospecting and monitoring component addresses the need for Government to develop a more precise understanding of renewable groundwater resources (quantity and quality), which represent 45 percent of exploitable national water resources. The irrigation component is explicitly promoting beneficiary involvement from the earliest stages of project conception and establishment of financially autonomous user associations for operation of irrigation infrastructure such that the irrigation activity is sustainable with minimal additional - 3 -  public intervention and cost. Environmental Aspects 10. Category B has been proposed for this project. Please see attached Annex. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington, D.C. 20433 Telephone No.: (202) 458-5454 Fax No.: (202) 522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending June 6, 1997. - 4 -  Annex Environmental Aspects The hill dams are designed to reduce sedimentation of larger empoundment dams, to recharge overdrafted aquifers, and to supply new small-scale irrigation networks. Possible environmental drawbacks include reduced flood and stream flows to downstream aquatic systems, reduced runoff to larger empoundment structures, mosquito breeding in or eutrophication of the hill dam reservoirs, and excessive sedimentation due to inadequate soil conservation. Environmental impact studies conducted on a site-by-site basis under an ongoing project (Loan 3661) indicate modest negative environmental impacts of the construction and operation phases. Aggregate impacts of hill dam clusters on downstream surface flows and aquifer recharge are less well understood. The proposed project will implement regional environmental impact studies for hill dam groups to provide input on the environmental criteria that will condition Loan commitment for specific hill dam investments. Tubewell irrigation will only be pursued for sites where the Directorate General of Water Resources has certified that the tubewell and its proposed operation will not lead to overdrafting of the concerned aquifer. A portion of the research, extension and training component focuses on strengthening the generation, delivery and adoption of resource management technologies and strategies by farmers that improve sustainability of land and water resource use. - 5 -