The World Bank Group in Tunisia

THE World Bank Group IN TUNISIA INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION INTERNATIONAL DEVELOPMENT ASSOCIATION January 1967 i.. '1  BASIC STATISTICS 48,000 square miles POPULATION: 4.54 million (mid-1964 estimate) Rate of growth: 2.5 per cent per annum ( 1956- 1964 average) GROSS DOMESTIC PRODUCT 1964: $836 million Per capita: $200 Rate of growth: 3.5 per cent per annum 1950-1960 average at 1957 prices 5.9 per cent per annum 1960-1964 average at 1960 prices CONTRIBUTION TO GROSS DOMESTIC PRODUCT Percentages Sector 1960 1964 Agriculture 25 23 Mining and industry . . . . . . . . . . . . . . . . . 14 14 Construction . . . . . . . . . . . . . . . . . . . . . . . . 5 8 All other 56 55 THE WORLD BANK GROUP IN TUNISIA I anuary 1967 TUNISIA is the smallest of the North African countries, both in population (about 4.5 million) and in land area (roughly 48,000 square miles). The country has sizeable de- posits of iron ore, lead and phosphates but otherwise has few natural resources, although recent petroleum discoveries hold out hope for the future. It also suffers from the disadvantage that about half the land is infertile desert. On the other hand, the country is favorably situated to take advantage of the growth in tourism that the Mediterranean area has experienced in recent years. Earnings from tourism, which were less than $10 million in 1964, are expected to rise to twice that amount by 1968. Since the country gained independence in 1956, progress has been made in strengthening government administration and in expanding educational facilities. This has been achieved despite a drop from 250,000 to under 50,000 in the number of European residents of the country, which has caused a severe shortage of skilled manpower, particularly in the middle levels of administration and virtually all technical fields. This exodus of Europeans was accompanied by a large-scale repa- triation of private capital and contributed to a sharp fall in the amount of investment funds available during the late 1950s. The Government attempted to alleviate the situation by increasing public investment and by making efforts to attract new foreign private capital and management. Under the stimulus of a major increase in the public development effort the rate of output growth rose to nearly 6 per cent annually during the 1960-64 period as compared to a rate of 3.5 per cent throughout the 1950s. The first operations in Tunisia by the World Bank Group were in 1962. During that year the International Development Association (IDA), an affiliate of the Bank, extended a credit of $5 million for the construction of selected secondary and technical schools. The Bank's other affiliate, the International 1 Finance Corporation ( IFC), joined industrial interests in Sweden and the United States in financing a new company to construct and operate a triple superphosphate fertilizer plant at the Port of Sfax. In June 1963 the Bank agreed to join the Tunisian Government in financing the cost of en- gaging consultants to make a study of secondary school build- ing designs, standards and procedures and to design three prototype secondary schools. In June 1964 the Bank made another loan equivalent to $7 million to help in constructing a modern port at La Goulette. In May 1966 financial institu- tions in Tunisia, France, Germany and Italy joined the Bank and IFC in providing $6 million in share and loan capital to the Societe Nationale d'Investissement (SNI), a development finance company in Tunisia. The Bank loan was $5 million and IFC's investment $570,000. A further IDA credit for edu- cation facilities amounting to $13 million was announced in September 1966. SCHOOL CONSTRUCTION Tunisia's development planning lays great stress on edu- cation. On becoming independent in June 1956 the country in- herited an education system which was efficient but required expansion to meet modern needs. An Education Reform Act was passed in 1958 and a ten-year program ( 1962-71 ) was adopted with the object of making primary education universal and greatly expanding the secondary school system. The secondary system includes schools providing a general six-year high school course, specialized technical high schools, and middle schools intended to provide pupils relatively quickly with the basic skills needed in the lower ranks of industry, government and business. The ten-year educational program envisages an outlay equivalent to $210 million. During the first year of the program an IDA credit of $5 mil- lion was extended to help provide just over half of the financ- ing for the construction and equipment of six schools with places for 4,000 students. A part of the credit financed an ex- 2 • • It 3 tension of the "Ecole Normale de Professeurs Adjoints" in Tunis, a training college for teachers. The credit also has helped to build the "Lycee Technique de Rades'', designed to provide a six-year secondary education with emphasis on mathematics and technical subjects, and to construct the new "Lycee de Jeunes Filles de Rallia Pare'', a secondary school for girls. In Sfax it financed expansion of the "Lycee Technique de Sfax." The remainder of the credit was utilized to build two large middle schools. In June 1963 the Bank agreed to pay $375,000 to meet part of the cost of engaging a team of consultants to assist the Tunisian Government in standardizing school building de- signs, reducing building costs and designing three prototype secondary schools. The Tunisian Government agreed to bear the balance of the cost, estimated at $180,000. The study was completed in early 1966. With the help of the knowledge gained from this study, a further expansion of Tunisia's education facilities is being carried out. Total cost will be about $20 million, about two- thirds of which will be covered by an IDA credit of $13 mil- lion, approved in September 1966. The new project will help to relieve the acute shortage of trained manpower at the middle level and to prepare a suffi- cient number of students for entry into universities. The scheme includes the construction and equipping of 15 sec- ondary schools and three agricultural training centers. It will also provide equipment for an additional 16 secondary schools. About 20,000 new school places will be created. PORT DEVELOPMENT The port of Tunis handles over half the country's foreign trade and serves an area containing about half of Tunisia's population. The port complex at Tunis consisted of the old port of Tunis on the landward end of the six-mile long canal across the shallow Lake of Tunis, the newer port of La Goulette at the seaward end, and facilities at Rades on the south side of 4 the harbor for bulk handling of iron ore, phosphates and petroleum. The Tunis port, which at present handles most of the traffic, is crowded, foundation conditions are poor, and there is no room for expansion. Both the basin and access canal require frequent dredging. The width and depth of the canal restrict shipping movement to single line traffic and limit the size of ships using the port. Although La Goulette has five deep-water berths, they are not equipped with transit sheds and warehouses and so are not being used to fullest advantage. Conditions at La Goulette favor the development of a large modern port and the Govern- ment intends to transfer port operations progressively to it from the old port. In June 1964 the World Bank made a loan of $7,000,000 to assist in creating a modern port for Tunis. The project being financed by the World Bank loan consists of the con- struction of two new fully equipped berths at La Goulette and the equipping of the five existing berths with transit sheds, warehouses, a passenger terminal and office buildings. It also includes the relocation of the access route to the port and of the breakwater at the harbor entrance. With its two new berths and installations, La Goulette will be able to handle a total of about 1 million tons of cargo annually, including 300,000 tons of cargo of a bulk nature, such as oil and wine. Passenger liners and cruise ships will also be diverted to La Goulette. The total cost of the project is estimated at the equivalent of $11.4 million. The Bank loan will cover the foreign exchange requirements. The construction of the port is proceeding at a rapid pace and the project is expected to be completed on schedule at the end of 1967. FERTILIZER PLANT In November 1962 the International Finance Corporation joined Aktiebolaget Forenade Superfosfatfabriker, a leading Swedish manufacturer of chemical fertilizers, and Freeport International, Inc., a subsidiary of the major American sul- 6 phur producer, in financing NPK Engrais, SAT. This new Tunisian company was formed to set up and operate a triple superphosphate fertilizer plant at the port of Sfax. The plant, which began operations in 1965, uses local rock phosphate and imported sulphur to produce a concentrated chemical fertilizer for export. With an annual capacity of approximately 150,000 metric tons of triple superphosphate, NPK Engrais is making a significant contribution to the country's foreign exchange earnings. The total investment in the company is the equivalent of $14.1 million including $6 million in share capital. Forenade and Freeport International have provided a total of $7,250,000 in loan and equity investments, and IFC has invested $1.5 million in NPK shares and has loaned $2 million. Some $3.3 million has been obtained through suppliers' credits and other loan sources. ASSISTANCE TO INDUSTRY In May 1966 the World Bank made a loan equivalent to $5 million to the Societe N ationale d'Investissement ( SNI), while IFC and European and Tunisian financial institutions invested in share capital as follows: IFC, 300,000 Tuni- sian dinars ( $570,000); European institutions, D120,000 ($230,000); Tunisian banks, D89,000 ($170,000). The new funds, together with a substantial loan from the Tunisian Government ( $3.8 million) will increase SNI's total capital resources from D2 million to about D6 million ($11.4 million), of whkh Dl.5 million ( $2.85 million) will be share capital. SNI was established in 1959 on the initiative of the Tunisian Government with funds provided mainly from Gov- ernment sources. SNI's operations have consisted chiefly of equity investments; these made up about 80 per cent of its portfolio of approximately D2.4 million ( $4.6 million) at the end of September, 1966. SNI's reorganization in 1966 stemmed from a study carried out by IFC in 1964 to determine Tunisia's industrial financing needs. The Government and IFC subse- 7 quently agreed on the reorganization of SNI on the lines which have now been adopted. The Government is giving its full support to SNI by granting it a number of tax concessions, as well as by direct financial aid. Industrial production in Tunisia has been increasing at an average rate of about 6 per cent annually since 1960. The Government is taking measures to accelerate industrial growth, and in particular to encourage private investment. The Tuni- sian Four-Year Development Plan of 1965-68 envisages an acceleration in the rate of investment in industry. The strengthening of SNI is one of the measures taken to increase the role of the private sector in achieving this target. The proceeds of the World Bank loan will enable SNI to ex- pand its operations considerably. In addition to equity invest- ments, it will make medium and long-term loans to private entrepreneurs. Where appropriate, SNI will assist them in pre- paring investment proposals, obtaining suitable partners, or by guaranteeing credits from other sources. SNI will support the development of the local capital market, in particular by reactivating the securities market through underwritings and the sale of investments from its portfolio. COORDINATION OF ASSISTANCE Since 1962 the Bank has been chairman of a Consultative Group of governments and institutions exchanging informa- tion on present and prospective assistance to Tunisia. This Consultative Group last met on December 13 and 14, 1965, in Paris. The following countries were represented: Belgium, Canada, Denmark, Finland, France, Germany, Italy, Nether- lands, Spain, Sweden, Switzerland, United Kingdom and the United States. A representative of the International Monetary Fund, as well as observers from the United Nations Special Fund and the European Investment Bank, were also present. The Group discussed a report on the Tunisian Four-Year Plan prepared by the World Bank and, in the light of this discus- sion, agreed that Tunisia's recent economic performance and 8 prospects warranted substantial assistance from the members of the Group. ECONOMIC DEVELOPMENT INSTITUTE The Economic Development Institute (EDI) of the World Bank is a staff college for senior officials of less developed countries who are concerned with the formulation and ad- ministration of policies, programs, and projects related to eco- nomic development. The courses organized at the EDI are an attempt to broaden the competence and perspective of senior officials from the developing countries in the light of the ex- perience gained by the World Bank Group in the course of its operations. Since 1963 four Tunisian officials have attended such courses. BANK LOANS, IDA CRED-ITS AND IFC INVESTMENTS As of December 31, 1966 Amounts expressed in thousands of U.S. Dollars BANK IDA IFC PURPOSE LOANS CREDITS INVESTMENTS SCHOOL CONSTRUCTION 18,000 FERTILIZER PLANT 3,500 DEVELOPMENT FINANCE COMPANY 5,000 570 PORT DEVELOPMENT 7,000 TOTAL WORLD BANK GROUP: $34,070 9  PHOTOGRAPHS Page 3. The courtyard of the College Moyen et Secon- daire-a new school at Grombalia. Page 5. Maintenance work being carried out on a boiler unit at the NPK-Engrais, S.A.T. triple superphosphate plant at the port of Sfax.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H Street, N.W., Washington, D. C. 20433 U.S.A. Telephone number: EXecutive 3-6360 Cable address: INTBAFRAD 0 ffice for Europe : 4, Avenue d'Iena, Paris 16e, France Telephone number: KLEber 25-10 Cable address: INTBAFRAD PARIS