Tunisia - Fourth Urban Development Project

 Fourth urban development project Report No: ; Type: Report/Evaluation Memorandum ; Country: Tunisia; Region: Middle East And North Africa; Sector: Urban Development Adjustment; Major Sector: Urban Development; ProjectID: P005668 Tunisia: Fourth Urban Development Project (Loan 2736-TUN) The Implementation Completion Report (ICR) on the Tunisia Fourth Urban Development Project (Loan 2736-TUN, approved in FY86), prepared by the Middle East and North Africa Regional Office, with the Annex contributed by the Borrower, was reviewed by the Operations Evaluation Department (OED). The loan, for US$30.2 million equivalent, was approved on July 3, 1986 and closed on June 30, 1995, six months after the original closing date. The loan was fully disbursed. This was the fourth Bank project in the urban sector and it followed on the model of the previous loan (recently audited by OED)/1, which helped start housing rehabilitation on six sites. The project objectives were: (i) to expand Tunisia's program of improving the stock of urban housing and urban services for low-income households; (ii) to increase the supply of affordable serviced land for households choosing self-construction; and (iii) to strengthen the capacity of sector institutions dealing with land development, upgrading infrastructure of existing settlements, and providing additional housing. There were three components; (a) the upgrading of infrastructure and rehabilitation of existing settlements in 26 municipalities, executed by the Urban Upgrading and Renewal Agency (ARRU); (b) the development of 8,500 serviced lots for low-income households, done by Land Development Agency (AFH); and (c) technical assistance to improve AFH. In 1988, to accelerate disbursement the Loan Agreement was amended to include the financing of low-cost housing construction. The project was successful in upgrading housing and urban services but fell short of meeting the other objectives. It benefited directly 134,000 low-income people in 25 municipalities. In some of those cities it provided community facilities including 8 health centers, 10 schools and a market, and equipment for improving solid waste disposal. The housing upgrading component was replicated through a government-sponsored national program. About 3,200 social housing units were built throughout the country, about half by the private sector, but housing built by developers was too expensive for the low-income target group, even though buyers had access to subsidized loans from non project sources. ARRU proved again its inability to execute complex rehabilitation operations. The National Housing and Savings Fund (CNEL), which later became the Housing Bank (BH), was uncooperative and slow in granting subloans (35 percent of the Loan)--which made it difficult for AFH to sell its serviced plots. Despite technical assistance, AFH met only 27 percent of its quantitative target to sell its served plots. Despite technical assistance, AFH met only 27 percent of its quantitative target (servicing 2,262 lots over 13 sites). As with the previous project, cost recovery was dismal. Less than four percent of total project costs allocated to serviced lots housing construction and home improvements were recovered. CNEL/BH collected only 23 percent of the mortgage repayments that were due. The frontage tax that was to be raised on properties did not materialize, and ultimately the only costs fully recovered were those directly charged as a fee for the connection to utilities. OED concurs with the ICR in rating the project's outcome as unsatisfactory and sustainability as uncertain due to insufficient cost recover. It rates institutional development impact as negligible, because the partial achievements discussed in the ICR (e.g., computerization of AFH's operations), did not significantly improve the way AFH, BH and CPSCL deal with low-income housing development. OED rates Bank performance as unsatisfactory: as noted in the ICR, the design of this project suffers from the same weaknesses that hampered the performance of the previous two on institutional and cost recovery issues, even though addressing those became increasingly prominent in the rationale for Bank lending. The main lessons are basically the same as those drawn from the shortcomings of the previous projects; they all relate to minimum standards of quality at entry to address these shortcomings, namely: (i) once a reasonable target for cost recovery is chosen, the legal and administrative mechanisms to recover costs should be firmly established before the project is approved and a system for monitoring these achievements should be implemented; and (ii) ownership of the project's development objectives and poverty focus by the key participant agencies, such as CNEL/BH, should also be secured at the outset through appropriate incentives. The ICR is satisfactory; it provides good data and analysis, and it covers all areas well, with the exception of the measures needed in the future to improve the likelihood of the project's sustainability. No audit is planned. /1. Performance Audit Report, Third Urban Development Project (Loan 2223-TUN), Report No. 15713, June 10, 1996.