Tunisia - Fourth Education Project

Document of The World Bank FOR OFFICIAL USE ONLY Repon No. P-2981-TUN REPORT 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 FOURTH EDUCATION PROJECT March 4, 1981 This document has a restricted distribution and may be used by recipients only In the performance of their offidal dutes. Its cotents may no othewse be disclosed witbout Wodd flnk antherizltion.  REPUBLIC OF TUNISIA CURRENCY EQUIVALENTS 1 Tunisian Dinar (DT) = US$2.50 I US Dollar = DT 0.4 FISCAL YEAR January 1 to December 31 PRINCIPAL ABBREVIATION AND ACRONYM USED OTTEEFP or the Office Office des Travailleurs Tunisiens a l'Etranger, de 1'Emploi et de la Formation Professionnelle (Office of Tunisian Workers Abroad, Employment and Training)  FOR OFFICIAL USE ONLY FOURTH EDUCATION PROJECT TUNISIA LOAN AND PROJECT SUMMARY Borrower: Republic of Tunisia Beneficiary: Office of Training and Employment (OTTEEFP), an agency of the Ministry of Social Affairs Amount: US$26 million equivalent in various currencies. Terms: 17 years, including 4 years of grace, with interest at 9.6 percent. Project Description: The project would support the Borrower's program for increasing the supply of skilled manpower through the expansion of training and upgrading opportunities for school leavers and adults in response to employment needs; institutional improvement in planning, managing and coordinating skill training is also supported by the project. It would consist of: (a) construction, furnishing and equipping of seven vocational centers and one apprentice center and extensions to fifteen existing centers. The proposed institutions and extensions will create 3,600 new places for training skilled manpower with annual outputs of 5,400; (b) re-equipping of five existing centers with a view to improving the quality of training; and (c) technical assistance to assist in the establish- ment of a long-term strategy for the development of vocational and apprentice training. Benefits and Risks: The project would make a significant contribution to meeting urgent manpower needs for skilled workers, craftsmen and supervisors. It would improve the administrative and technical capacity of the respon- sible authority to implement the project efficiently. The project faces no special risk. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii Project Costs: Local Foreign Total -----(US$ Millions)---- 7 Vocational Centers 8.9 7.8 16.7 1 Apprentice Center 1.7 1.7 3.4 Extensions to 15 Centers 4.8 6.5 11.3 Equipment for 5 Centers 0.2 1.0 1.2 Technical Assistance 0.2 1.1 1.3 Subtotal (base cost) 15.8 18.1 33.9 Contingencies: Physical 1.5 1.8 3.3 Price 3.7 6.1 9.8 Subtotal (contingencies) 5.2 7.9 13.1 TOTAL PROJECT COST* 21.0 26.0 47.0 Financing Plan: IBRD - 26.0 26.0 Government 21.0 - 21.0 Total 21.0 26.0 47.0 Estimated Disbursements: FY82 FY83 FY84 FY85 FY86 -----------(US$ Million)------------ Annual 0.3 6.5 8.8 7.3 3.1 Cumulative 0.3 6.8 15.6 22.9 26.0 Rate of Return: Not applicable Staff Appraisal Report: "Fourth Education Project- Republic of Tunisia" (No. 3090-TUN, dated February 25, 1981). * Project costs do not include taxes and duties.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR A FOURTH EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed loan for the equivalent of US$26 million to the Republic of Tunisia, to help finance the foreign exchange cost of a Fourth Education Project. The loan would have terms of 17 years, including 4 years of grace, with interest at 9.6 percent per annum. PART I - THE ECONOMY I/ 2. The last economic report entitled "Economic Position and Prospects of Tunisia" (No. 2201-TUN) was issued on November 16, 1978. An economic mission visited Tunisia in June 1980 and this part reflects its findings. Country Data sheets are attached in Annex I; present economic projections are provisional and strongly depend on the outcome of an ongoing study on the future of domestic oil production and energy demand and on the economic policies that will be adopted for the Sixth Development Plan (1982-86). 3. Tunisia is rather poorly endowed with natural resources. Much of the country is arid or semi-arid, and the limited areas where dry-land agriculture is possible are subject to seveTe year-to-year fluctuations in rainfall. The adverse effects of climatic fluctuations are alleviated by expanding irrigation. Tunisia's most important raw materials are phosphates, petroleum, and natural gas; however, the known exploitable reserves of oil and gas are small, and phosphate deposits are of relatively low quality. There is considerable tourism potential, and efforts have been made to develop it rapidly over the last decade. 4. Since independence in 1956, Tunisia has undertaken a massive effort towards development of its human resources, paying special attention to education and training as basic prerequisites for modernization. As a result, the adult literacy rate has increased from under 15 percent at the time of independence to 55 percent by 1980, and the health and nutrition status of the population has improved. Average calorie supply per capita increased from about 80 to 112 percent of requirements; life expectancy at birth increased from about 48 years in 1960 to 57 years in 1978. 5. Tunisia's economy is mainly dependent on rural activities to provide employment, but on petroleum and phosphate exports to provide foreign exchange earnings; manufacturing is rapidly becoming important in 1/ This part updates Part I of the President's Report No. P2846-TUN of June 6, 1980 for a Third Agricultural Credit Project.  - 2 - both respects. The relative sectoral composition of GDP shows a diversified economic structure. From the employment point of view (the country's most pressing social problem) Tunisia remains a largely agricultural economy, with the rural sector providing work for nearly two out of every five Tunisians actively employed. The direct employment effects of petroleum extraction, phosphate mining and tourism are small, but these sectors make a vital con- tribution to GDP, public revenues, savings, and exports. From the export point of view, Tunisia is largely a petroleum and mining economy with those two activities providing 37 percent of the country's foreign exchange earn- ings; all manufacturing activities and tourism together provide another 43 percent, while agricultural exports are rapidly declining in importance. The Main Economic Sectors in 1979 (in percent ) GDP /1 Employment Exports /2 Agriculture 16.2 36.5 6.8 Energy/Mining 12.1 1.8 37.1 Manufacturing 12.1 21.0 22.5 Tourism 4.8 1.5 20.2 Construction and Services 41.2 24.8 13.4 Government Administration 13.6 14.4 - 100.0 100.0 100.0 /1 At factor cost. /2 Goods and non-factor services. Recent Economic Developments 6. Tunisia's economy has grown relatively fast in recent years. GDP in constant prices increased at an average annual rate of 6.5 percent from 1976 to 1979. Although this is somewhat less than the 8.6 percent growth rate for the 1969-76 period, Tunisia's GDP growth of 8.0 percent for the entire decade places it among the top 10 middle-income countries; it also marks a substan- tial improvement over the relatively low growth (4 percent per annum) expe- rienced during the 1960s. GNP per capita reached $1,130 in 1979, which, in constant prices, is about 73 percent above the 1969 level. 7. The impressive growth achieved from 1969 to 1976 was largely attri- butable to changes in economic management introduced at the beginning of this period. In agriculture, stronger Government efforts to stimulate production, reoriented towards promotion of individual farming, together with favorable weather conditions resulted in a near doubling of production, a remarkable turn-around from the slow but continuous decline in agricultural production during most of the 1960s. In manufacturing, the degree of Government control declined and more incentives were given to private initiative. An increas- ingly export-oriented investment strategy coupled with a dynamic marketing effort led to a rapid growth of production, particularly in textiles, while tourism was promoted with marked success.  - 3 - 8. During the second half of the 1970s, the situation was quite differ- ent, not so much in terms of overall growth, which slowed down slightly, but in terms of the underlying growth factors: output in agriculture has virtually stagnated since 1976, partially as a result of bad weather condi- tions; growth in textile production dropped sharply in 1978 because of the imposition of import quotas by the EEC, and tourism development slowed down because of the 1977 slump in the European tourist market. By contrast, petroleum production and, to a lesser extent, phosphate processing expanded making these two sectors the main engine of economic growth over the 1976-79 period. After an exceptional low level in 1976, oil production increased by over 12 percent per annum up to 1979; more important, however, were the large profits reaped by Tunisia from the successive increases in crude oil prices, starting in 1974. These large additional foreign exchange earnings enabled the country to expand its investments from an average of slightly over 20 percent of GDP before 1975 to nearly 29 percent thereafter, and to expand public services at a rapid rate. These two factors in turn triggered a rapid growth in the construction industry and in local manufacturing of construc- tion materials. 9. ln spite of the considerable increase in domestic demand, partic- ularly in investments, the balance of payments situation remained favorable. Even in constant prices, and despite the EEC import restrictions on textiles, exports grew marginally faster than imports. In addition, the terms of trade improved significantly, due to higher export prices for oil and low import prices for grains. During 1978-79, as a result, the resource gap remained relatively small, and domestic savings financed on average over 72 percent oI the greatly increased investment effort. The current account deficit of $500-600 million (1978/1979) was easily financed: grant aid and private investments accounted for about 30 percent, while the remainder was covered by long-term foreign borrowing. The increase in lending to Tunisia from public sources allowed the country to reduce borrowing from financial markets and suppliers' credits. During the 1970s, therefore, total foreign debt disbursed increased little relative to GDP and the debt service ratio improved (para. 18). Net foreign exchange reserves increased in seven out ot the last ten years, but still represented only 1.5 months of imports at the end of 1979. 10. Since independence, the public sector has played a major role in mobilizing and redistributing domestic resources, an example of which is the creation of a social security system in 1977. General budgetary revenues were equivalent to one-third of GDP in 1978 and 1979, one of the highest shares among middle-income countries. Over one-fourth of these revenues were saved, and public savings financed close to two-thirds of total government capital expenditures. This comfortable public finance situation has led to a fast increase in subsidy payments to private consumers and to public enter- prises. Such transfers have nearly doubled over the last four years, accounting for 16 percent of total current budget outlays, or 4 percent of GDP. This level Df subsidies to cover the increasing operational deficits of public enterprises may not be sustainable in the long term; similarly, con- sumer subsidies for basic necessities will have to concentrate more syste- matically on the needy.  -4 Medium-term Prospects 11. The objectives of the Fifth Development Plan (1977-81) have a good chance of being achieved, except for the employment creation targets. The actual GDP growth will be just short of the planned rate of 7.3 percent per annum, while the investment objective of $9.8 billion in current prices, or 30 percent of GDP, will be fully met. Completion of some large projects in the public sector (steel, cement, expansion of the oil refinery) will, how- ever, be delayed. Private sector investments, both foreign and national, are likely to exceed Plan targets. The Government welcomes this shift from large capital-intensive projects in the public sector to medium-scale industries as a means to speed up employment creation. Open and hidden unemployment is currently considered the most serious problem for the Tunisian economy. During 1977-79, the domestic non-agricultural economy could only absorb three-fourths of new job seekers. In view of this and of the fact that migration to Libya and Europe is decreasing rapidly, the overall unemployment and underemployment rate, estimated at between 20 and 25 percent, has not declined markedly. 12. The Sixth Development Plan (1982-86) is presently in preparation. Employment generation, food self-sufficiency, and more rapid growth in the three most backward regions of the country (North-West, Center-West, and South) are likely to be among its major objectives. The outlook for overall economic growth during this period and beyond will depend upon future developments in the oil and natural gas sector. Based on known reserves, it is generally expected that oil production will decline after 1981 from its present level of 5-6 million tons per annum-and will come to an end during the late 1990s. The possible exploitation of some of the smaller fields that may soon become profitable will not delay the declining production trend by more than a few years. Some off-shore fields cannot be exploited for the time being, because they are located in areas disputed by Libya. Gas produc- tion in presently exploited fields (385,000 tons of oil equivalent--toe--in 1979) is expected to cease around 1990. Royalties from the Algerian/Italian pipeline will provide an additional supply of natural gas, rising from 200,000 toe in 1982 to 800,000 toe in 1986 and thereafter. Negotiations with Algeria on the purchase of additional quantities of natural gas are proceed- ing but have so far been inconclusive due to differences on quantities and prices. The Government is therefore considering the exploitation of the off-shore gas field of Miskar, despite its high production cost. The optimal use of all these resources is being studied with assistance from USAID within a comprehensive long-term policy framework. 13. While detailed macroeconomic growth projections beyond the mid-1980s will have to wait for the outcome of these studies, there can be little doubt that--except in the unlikely case of large new oil discoveries--Tunisia will have to face the consequences of a decline of oil and gas production over the next 10-15 years, turning the country into a net importer of hydrocarbons, perhaps as early as 1987-88. The Government is fully aware of these develop- ments. It agrees that the situation will require significant policy changes in the near future and is analyzing the areas where these changes will have  to take place in the context of the preparation of the Sixth Plan. Unlike many other developing countries, however, Tunisia has enough lead time to introduce these changes gradually until the mid-eighties. This will reduce the associated economic and social strains and should avoid major balance of payments problems. Assuming that the necessary measures will be implemented, it is reasonable to expect an overall GDP growth ot about 6 percent in constant prices until at least 1985. 14. The expected decline in oil production and exports is likely to have an impact on external debt and domestic savings, particularly public savings. Changes in domestic demand will thus be required to avoid balance of payments difficulties and to maintain satisfactory economic growth. In the public sector, the necessary restraint in current budget expenditures will require a reassessment of present price and subsidy policies, in partic- ular for energy, basic foodstuffs, and transportation. Considering the complexity and the pervasiveness of the present subsidy system, and the impact its dismantling will have on domestic inflation and on the standard of living (particularly on the 17 percent of the population still living in absolute poverty), the introduction of changes into the system will be a difficult endeavor, and ought to be initiated without delay. As part of this effort, the large subsidies to public enterprises, to a large extent stemming from managerial inefficiencies, ought to be phased out. In addi- tion, interest rate and fiscal policies will have to be used more ettectively to restrain final consumption, particularly of imports, and to stimulate savings. Finally, wage and salary policies will have to keep labor cost increases in line with productivity increases, particularly since Tunisia will have to stimulate tourism and make a greater effort to improve its competitiveness in international markets by promoting exports of manufactured goods other than textiles. 15. A successful and timely implementation of these policy changes, how- ever, cannot prevent a decline in the domestic savings rate. This, in turn, will require a corresponding adjustment in the-investment rate below the present average of 29-30 percent of GDP so as to maintain a manageable spread between domestic savings and investments. The need to compress investments will require reassessing the present investment patterns by allocating more resources to labor-intensive projects, particularly to small and medium manu- facturing enterprises, in order to ease the unemployment problem and reduce income disparities between rural and urban areas as well as within each of these areas. While social investments in education, health, housing and water supply will have to continue they should be focussed more on the neediest income groups, provided at lower costs (health, shelter), and made more relevant to the needs of the economy (education, training). Social Issues 16. In general, Tunisia's social performance has been impressive. Since independence, the country has come a long way towards meeting the basic needs of its population and reducing absolute poverty. About 16 percent of GDP is being devoted to social programs, but too many of the benefits accrue to the  - 6 - upper income groups. Education expenditures rank first among budgetary out- lays for improving basic needs. The comprehensive education system provides free access for all students, and the gross enrollment rate has reached 100 percent for primary education and 22 percent for secondary education. The performance of the system, however, could be improved by: (a) expanding vocational training programs, improving their relevance and their coordination with labor demand; and (b) catering more to poorer and rural groups. Public health services are second among social expenditures, and their overall beneficial effect has contributed to the improvement in the vital statistics (para. 4). There remain, however, regional disparities in the availability of hospital beds, doctors, and nursing personnel, and the medical referral system is not properly functioning. As a result, the rural poor are often excluded. Closely linked to nutritional deficiencies, infant mortality is still high. So far health services have concentrated largely on curative medicine; to achieve better and faster results, the Government is planning to allocate more resources to preventive medicine and health and nutrition education. Finally, Tunisia faces a difficult housing situation. Subsidized housing, the cornerstone of public intervention, has not reached the most deserving groups. The housing demand from households above the poverty limit should be satisfied by the private sector; to this end, adequate incentives need to be provided. 17. Absolute poverty still affects one out of every six people in Tunisia. Over the last fifteen years, the overall number of absolute poor remained stable but declined in rural areas as a result of internal and external migration. Most of the poor are unskilled seasonal workers in agriculture and industry, small farmers, and artisans. Income differentials between the coast (East) and the interior (West) widened, in part because the system of price controls and subsidies as well as the tax system and budget- ary expenditures had a weak redistributive impact. The Government is using the preparation of the forthcoming Plan as an occasion to focus on basic needs and poverty alleviation, with a view to abolishing absolute poverty before the end of this century. Maintaining a low demographic growth rate will be an important factor for a significant alleviation of poverty. External Assistance and Foreign Debt 18. As mentioned above (para. 9), foreign borrowing remained limited during the second half of the 1970s, and a growing share of foreign funds was provided by public sources at relatively soft terms. During the 1976-1979 period, foreign loan commitments averaged about $670 million per annum, two-thirds of which in the form of official assistance-ODA-($450 million or about $75 per capita). About 70 percent of ODA commitments came from bilat- eral sources, chiefly France, the Federal Republic of Germany, and Canada, but also some oil-surplus countries, whose contributions averaged about one-fourth of total bilateral ODA. About 17 percent of total ODA was committed by the Bank Group, and some 12 percent by other multilateral sources. Borrowing terms were favorable, averaging 6.1 percent interest and 18 years maturity, including a grace period of 4.8 years. At the end of 1979, debt outstanding and disbursed was estimated at about $2.4 billion, or one-third of GDP; debt service was 10.7 percent of exports of goods and services, as compared with 20 percent in 1970.  -7- 19. Direct foreign investments were small during most of the 1970s but have gained momentum during the last five years in line with increased activities in the petroleum sector and new incentives ottered to foreign investors in manufacturing. Such investments have increased from less than $20 million in 1969 to more than $100 million in 1976 and $165 million in 1979, with most of the increase going into the petroleum sector. 20. The balance of payments outlook remains favorable, at least up to the mid-1980s. Thereafter much will depend on the policy measures initiated during the next few years (para. 14). The main risk would be for Tunisia to attempt a continued policy of high investments and high current social out- lays in spite of the expected decline in foreign exchange earnings and domestic savings. Pressures to that effect will certainly exist. The new Government formed in the spring of 1980, however, is aware of this danger and recognizes the need for change. Considering its long record of prudent and skillful balance of payments and external debt management, there is every reason to assume that Tunisia will formulate and implement the necessary reforms and, thus, will continue to remain creditworthy for future Bank lending. PART II - BANK GROUP OPERATIONS IN TUNISIA 21. Since 1962, Tunisia has received forty Bank loans and eleven IDA credits amounting respectively to $739.6 million and $70.1 million (net of cancellations) of which fifteen loans and nine credits have been fully dis- bursed. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of December 31, 1980, and notes on the execution of on- going projects. Project implementation is generally satisfactory. In a number of sectors, important institutional improvements have been achieved, and autonomous agencies have been created or strengthened to ensure the efficient management of the related sectors or subsectors. 22. The Bank's lending strategy in Tunisia aims at supporting Government efforts to: (a) increase employment; (b) encourage more balanced growth and distribution of income among regions and income groups with particular emphasis on rural areas; (c) promote export-oriented policies and invest- ments; and (d) provide selective support for the development of basic infra- structure and for institution building in key public services. An important feature of this strategy is to support the Tunisian authorities in the timely and well-coordinated preparation of projects through advice by Bank staft, the assistance of the IBRD/FAO Cooperative Program and the use of the Bank's Project Preparation Facility. The Bank is also supporting the Government in its efforts to increase the mobilization of domestic resources and to secure cofinancing for its projects. The latter is particularly important in view of the extent of Tunisia's external resource needs.  - 8 - 23. Within this broad framework, past lending emphasized support for long-term investments in infrastructure and social development. Lending for urban and social development, including water supply, sewerage, education, family planning, urban low-cost housing, and the Tunis planning and public transport project has accounted for 25 percent of Bank/IDA commitments in Tunisia since 1971. Lending for transport, power and tourism infrastructure has accounted for 37 percent. Agriculture and tisheries have received 23 percent, and industrial and hotel financing, mostly through the Banque de Developpement Economique de Tunisie (BDET), 15 percent of total commitments. 24. In line with its lending strategy, the Bank will pursue its etforts in key sectors of the economy that offer prospects for economic and social development as well as regional integration and for reducing the gap between income groups, and urban and rural areas of the country. Particular atten- tion will be paid to employment creation and institution building. In addi- tion to the proposed vocational training project, the lending program includes projects in various stages of processing in the agricultural sector, in industry, power, highways, urban development, health and education. The Bank's economic and sector work will continue to focus on strengthening the macro-economic and sector base for our lending program, and will be more centered in the future on the analysis of economic issues and policies related to the necessary adaptation process from a petroleum exporting to a petroleum importing country. Two major reports in 1980 on the mechanical and electrical industries and on the social aspects of development provided a better knowledge of the country's industrial development base and prospects in these sub-sectors, and a better understanding of income disparities with an evaluation of the Government's social policies aimed at poverty allevia- tion. Future reports will include a review of the Sixth Plan (1982-1986) and of the agricultural, education and training, urban and energy sectors. 25. The Bank and IDA accounted for about 12 percent of total public commitments to Tunisia during 1970-1979. The Bank's share in total debt outstanding and disbursed at the end of 19.79 (including loans from private sources) was 10 percent and its share in debt service during 1979 was 11 percent. The Bank's share in Tunisia's disbursed external debt by 1986 is expected to decrease to about 7 percent, and its share in debt service would increase to about 16 percent. 26. IFC has invested in NPK Engrais (a fertilizer plant), in Banque de Developpement Economique de Tunisie (BDET, a development finance company), in Compagnie Financiere et Touristique (COFIT, a company to promote and invest in tourism projects), in Societe Touristique et Hoteliere RYM (a large hotel development), in Industries Chimiques du Fluor, which produces aluminium fluoride from local fluorspar for export, and in the Sousse-Nord integrated tourism development project. IFC's net commitments in Tunisia total $13.3 million, as of December 31, 1980.  - 9 - PART III - THE EDUCATION SECTOR Introduction 27. In the past two decades, Tunisia has rapidly expanded its education system at all levels and, in more recent years, attempted to move increas- ingly away from the model inherited at independence towards a system more relevant to the cultural, social and economic needs of a modernizing society. The formal education system in Tunisia is now quantitatively well- developed and educational opportunities are quite equitably distributed between sexes. Estimated gross enrollment ratios 1/ are 100 percent in primary (6-11 years), 22 percent in secondary (12-18 years) and 6 percent in higher education. Girls accounted for 44 percent of total primary and 37 percent of total secondary enrollments in 1979. Education policies have been directed successfully towards the "tunisification" of the teaching service, and they continue to focus on increasing the relevance of education through the introduction of practical work at the primary level, and increased emphasis on science and technology courses at the secondary and higher levels. Particular attention is being paid to the training needs of school leavers and the unskilled to increase their productivity and employability. To complement the policy of making education more practical and employment- oriented, and to assist in producing citizens attuned to the social and cultural values of the country, Arabic will continue to be promoted as the language of instruction, including skill training, and appropriate emphasis will be placed on Tunisian history, literature and arts in the schools. 28. The formal education system, under the Ministry of Education, comprises six years of primary schooling, a secondary level of seven years, and, under the Ministry of Higher Education, up to five years of higher education. On successful completion of primary schooling, students proceed- ing to the secondary level enter either the three-year lower secondary voca- tional program, or the three-year general program which leads to upper secondary technical schools or general secondary schools. For those who do not gain access to secondary schooling, primary grades 7 and 8 provide pre-vocational training (para. 37). Vocational training is also undertaken by the Ministry of Social Affairs, through the Office of Tunisian Workers Abroad, Employment and Training (OTTEEFP, henceforth referred to in this report as "the Office") and other technical ministries. Teacher training for the primary level is provided in four-year colleges for those completing the general program (9 years) and, for the secondary level in four-year general and technical training colleges attached to the University of Tunis. Higher education is undertaken in three universities and eight specialized insti- tutes of the Ministry of Higher Education in which 80 percent of students are enrolled. Higher technical education is also provided in about 30 other 1/ Gross enrollment ratio is the total students enrolled in a particular range of grades (including over and under-aged children), divided by the total number of children in the corresponding age group.  - 10 - post-secondary institutions controlled by the technical ministries. Private schooling is available at the primary and secondary levels but accounts for less than 1 percent ana around 6 percent ot total enrollments respectively. Problems and Policies 29. Although the formal education system in Tunisia is well-developed quantitatively, and "tunisification" of the teaching service has been almost achieved (95 percent of secondary school teachers were Tunisians in 1979), two qualitative problems encumber the system, namely low internal efficiency and lack of relevance of courses to employment needs. Internal inefti- ciency is reflected in high drop-out and repeater rates, especially at the primary level where they reach nearly 10 percent and 26 percent respectively in grade 5. Over 100,000 children leave the education system every year, of which 80 percent are primary school leavers. Educational policy theretore aims at retaining a higher proportion of students in the system and ensuring that those who leave the system are better prepared tor working lite. The technical/vocational training programs comprise full time pre-employment vocational training in specific trades leading to certitication/qualification for entry into industry, and apprenticeship programs providing part-time release training for untrained and uncertified workers already employed. Training policy is directed towards expanding opportunities for school leavers and adult workers to increase their productivity and employability; the project supports this expansion. 30. In primary schools, efforts focus on improving the school environ- ment to encourage children to stay longer in school in order to improve their chances of meaningful employment in the future. Class sizes and pupil/ teacher ratios are being gradually reduced (1:39 in 1980) and the quality of teacher training improved. Greater emphasis is also placed on making eauca- tion more relevant to the socio-economic environment, through increased attention to the development of basic skills in number and language, to serve as an improved foundation for later training for employment. In addition, practical work is being introduced in the fifth and sixth grades and extended to newly instituted seventh and eighth grades for those who would otherwise be forced to leave the system after the sixth grade (para. 37). The rate of admission from primary to secondary schools is being raised from 26 percent of grade 6 enrollments in 1976 to an expected 30 percent by 1981. Greater attention will be given to aptitude and motivation as criteria for graduation from primary and entry to secondary schools rather than age, as emphasized in the past. 31. The need to make secondary and higher education more relevant to the needs of the economy has been pursued in recent years through reorienting enrollments away from the general program towards lower secondary vocational courses accompanied by expanded opportunities for promotion from this level to higher level technical courses (para. 28). It is expected that 37 percent of new entrants will enroll in the vocational cycle in 1981, compared with 27 percent in 1974. In the same year, 73 percent of enrollments in the upper secondary program will be in math/science and technical courses, compared with 48 percent in 1972. Within the universities, a similar shiut is taking  - 11 - place witn enrollments in science and technology courses expected to reach 55 percent in 1981, compared with 50 percent in 1976. The government is well aware that the problem of eoucated unemployed is the inevitable consequence it courses are not relevant to the needs of the labor market, and that shifts from general to technical education, and from arts to math/science, are fundamental to the process of growth and modernization. There is scope for improving the relation between employment needs and the technical and voca- tional training programs. This is recognized and is being sought through introducing longer periods of on-the-job training for students, and greater exposure ot teachers to work situations. Coordination between training institutions and employers will be strengthened through greater emphasis on tne work of the national and regional employment commissions, and more direcLly through the creation of advisory councils of Government and employers representatives (para. 48). A directorate of programs has been established in the Ministry of Education to ensure that better information on the labor market, obtained as a result of improved coordination, will lead to more relevant curricula. 32. Government policies to improve the relevance of these programs to employment needs are soundly conceived, and will ease the adjustment of supply to demand for skilled labor. Nevertheless, the most serious problem facing the Tunisian economy is the persistent high level of unemployment and underemployment (para. 11). The major priority in the national development strategy is to generate sufficient employment opportunities to absorb the increasing annual aaditions to the workforce. Expanded employment opportuni- ties are being sought through incentives to encourage labor-intensive produc- tion, regional development plans to boost small-scale agriculture and indus- try, and creation of additional jobs in public enterprises. On the supply side, policies will focus on providing an expanded and improved regional distribution ot training opportunities for school leavers and for adults seeking employment and those currently employed who need to upgrade their skills and productivity. i3. In spite of the high unemployment and underemployment rate, signifi- cant shortages ot skilled manpower exist in Tunisia and, although demand for tecnnically trained manpower ranges across the whole spectrum of skills, the demand for skilled workers and independent craftsmen is quantitatively the most important. lt is estimated that the requirements for vocationally trained skilled manpower will be around 49,000 per annum through 1990; in 1978 the training system produced 37,000 trained workers. To close the gap between supply and demand, and ensure that the regional needs for skilled manpower are met in the long term, it is intended to rationalize the training system through a clearer definition of responsibilities and a better linkage between the various training agencies and programs, to broaden the range of specializations in the vocational centers, consolidate and expand apprentice training, aevelop training programs to allow workers to acquire higher levels ot skill, according to their needs and abilities, and improve the coordina- tion between the training system and employers, particularly in the indus- trial sector. The Office (para. 28) has been given the central role in pursuing these objectives. 34. Establistied in 1967 within the Ministry of Social Affairs, the Ottice carries the major responsibility for advising the Government on  - 12 - employment and training policies and for providing the major economic sectors with the required skilled manpower. Its activities include vocational and apprenticeship training as well as upgrading and certification. The Office currently controls 60 vocational training centers with about 350 sections and 3 apprenticeship centers. These facilities, however, cover a limited number ot disciplines and are generally poorly equipped. In the field of appren- ticeship, ambitious expansion plans have given way to a more prudent and realistic approach. It is now intended to upgrade the three existing appren- ticeship centers, and establish a new one to form a network of four properly stafted and equipped centers to test new methods for training and coordina- tion with industry, before embarking on wider expansion plans. With regard to vocational training, the Fifth Plan envisages the establishment, under the Ottice, ot eight new vocational centers and 57 new sections to be added to the existing centers, as well as a program to renew annually about 10 percent of the existing equipment stock. Special emphasis is given to the provision ot training opportunities in skills that are closely related to regional and sectoral needs. Kegional priorities focus on areas currently less well- served by training institutions, and on priority sectors such as manufactur- ing, construction and road transport. It is expected that the Sixth Plan (1982-1986) will carry on the same priorities. The proposed project would make a major contribution to achieving these expansion plans, and would also substantially improve the Office's planning, management and coordination capacity. bank Group Assistance for Education 35. bank group lending in the education sector (two credits and one loan) has been consistent with the Government's objectives as perceived at the time. Early lending, in the first two credits, supported manpower development and the qualitative improvement of education. Later, lending begun to tocus on making education more relevant to employment needs and ensuring that further training is available to those leaving the education system, thereby increasing their productivity and employability. The first credit ($5 million in 1962) supported the expansion of secondary education to assist in meeting middle level manpower needs, and to increase the supply of inputs to post-secondary institutions through the financing of four secondary schools and the expansion of one other. The credit also financed extensions to a teachers' college to increase the supply of properly qualified lower secondary teachers. The project was implemented satisfactorily and completed in February 1967. 36. The second credit ($13 million in 1966) continued the emphasis on the expansion ana qualitative improvement of secondary education through the financing o. nine new secondary schools, expansion and equipping of six existing schools, and equipment for 16 secondary schools. Savings resulting largely from favorable contract prices allowed for the financing of indus- trial equipment for an additional 11 secondary schools, and of technical assistance for experts to assist in upgrading the planning capacity of the Ministry of Education. The Project Performance Audit Report (No. 2226 of september 29, 1978) found that the project was generally in line with Tunisia's needs tor expanding secondary education, but that greater emphasis on vocational courses in the project schools would have increased their rele- vance to manpower needs. Physical aspects of the project were implemented satisfactorily, but the later addition of the technical assistance program in  - 13 - education planning was less successful because Tunisia and the Bank were not fully agreed on the terms of reference of the team of specialists, nor were these specialists of appropriate calibre. This led to lack of cooperation with the specialists concerned, and resulted in the impact of their efforts being much reduced. 37. The lack of clearly defined objectives posed problems for the third project, a loan for $8.9 million in 1975 (No. 1155-TUN). The project aimed at supporting the introduction of practical work in grades 5 and 6 (together with associated teacher training) to improve the relevance of the primary curriculum to the socio-economic environment. The project also included technical assistance for planning studies, and an experimental extended pri- mary training scheme, as a pilot program for the later development of a general scheme, to serve the growing number of primary school leavers. After the loan became effective, the Government indicated that, having reconsidered its priorities, it did not wish to proceed with the project as appraised. Lengthy discussions ensued in which the Bank tried to retain the focus of the project on the objectives for which loan money had been allocated. A satis- factory solution was finally reached in which the major emphasis was placed on the expansion of practical work in grades 5 and 6, with a two-year exten- sion to grades 7 and 8, to provide appropriate pre-vocational training for those who would otherwise be forced out of primary school. The project is financing workshops in 325 primary schools, and the expansion and/or equip- ping of seven teachers' colleges to train practical teachers; project imple- mentation is now proceeding satisfactorily. The emphasis on improving the capacity for education planning runs through both the second and third proj- ects and, in spite of early problems, education planning is now well estab- lished in the Ministry of Education. 38. Planning studies financed under the previous projects contributed to the elaboration of the Government's education/vocational training strategy. A socio-economic study of skill training needs, including a detailed manpower assessment for major industrial sectors, and the implications for the expan- sion of the Office's functions and responsibilities contributed to the formu- lation of the fourth education project; a study related to the development of a nine-year basic education cycle will provide the necessary data for the identification of a possible fifth project. The proposed fourth education project supports the policy of expanding training opportunities for school leavers and for skill upgrading of the workforce through the expansion and improvement of apprentice and vocational training under the Office, and through the strengthening of the Office's planning, management and coordina- tion capabilities. It is expected to make a major contribution to meeting urgent manpower needs. In view of the past project difficulties related to planning and commitment, particular attention is given to ensuring Government support for the project, and to provide the Office with appropriate technical expertise. The project fits clearly into the priorities of the Fifth and those which are contemplated for the Sixth Development Plans, and the Govern- ment's long-term development objectives.  - 14 - PART IV - THE PROJECT Project History 39. The proposed project would assist the Government in meeting Tunisia's increasing demand for skilled manpower. It was identified during Bank missions in May and November 1978 and prepared by the Government with the assistance of the Bank and consultants financed under the Third Education Project. Preparation assistance missions visited Tunisia in January, May, September and December 1979. The project was appraised in June 1980 and negotiations were held in Washington in December 1980. The Tunisian delega- tion was led by Mr. Taoufiq Cheikh Rouhou, Director, Department of Human Resources in the Ministry of Planning and Finance. A report entitled "Staft Appraisal Report, Fourth Education Project-Republic of Tunisia," No. 3090-TUN, dated February 25, 1981 is being distributed separately to the Executive Directors. A Loan and Project Summary is provided at the beginning of this report. Annex III summarizes key events leading to Board presentation, and special conditions provided for in the Loan Agreement. A map showing the location of the institutions to be constructed or extended under the project is attached. Project Objectives and Description 40. The proposed project would: (a) increase the supply of skilled manpower through the establishment of eight new centers and the addition of 30 new sections to existing centers; (b) improve the quality of vocational and apprentice training through re-equipping poorly equipped workshops; and (c) assist in the establishment of an institutional framework and a long-term strategy for vocational and apprentice training in Tunisia. The proposed project would provide 2,800 additional vocational training places and 800 apprentice places. 41. The project consists of: (a) construction, furniture and equipment for 7 vocational training centers, I apprentice center, and extensions to 13 existing vocational and 2 apprentice centers; (b) furniture and equipment for existing workshops in 4 vocational centers and 1 apprentice center; and (c) technical assistance (expert advice and training fellowships) to strengthen the Office's capacity in the planning, coordination, management and operation of vocational and apprentice training, and improve the effi- ciency and relevance of its training programs. 42. Vocational Training Centers. Three of the new vocational centers would be located in the northern industrial region centered on Tunis, three others in the major coastal cities of Sfax, Sousse and Gabes, and the seventh in the inland transportation and mining center of Gafsa. The centers would offer courses in the building trades, particularly masonry, metal trades, auto maintenance and repair, electricity and secretarial skills; courses for building supervisors would also be offered at Gabes. The courses would be of 3-24 months duration with a minimum entry age of 18 years. Entry standards  - 15 - would vary according to course, with a minimum level of six years of school- ing for less complex courses such as welding, and eight years for the more demanding courses in the electrical and mechanical trades. The provision of courses with entry after six years of schooling would open training oppor- tunities for poorer, unskilled persons, who hase had to terminate their education after primary schooling. The new institutions would provide 2,050 additional training places and are e>pected to produce about 2,640 skilled workers per year including 680 secretarial staff. Trainees in the centers would receive the normal financial assistance available to trainees under the Office, which appears adequate to meet individual needs. Although all courses in the project institutions are open to females, there is a marked tendency for women to enroll in traditionally female-oriented courses, such as secretarial or hairdressing. The National Women's Organization has consistently encouraged a move away from this trend, and has recently established a center which trains women in non-traditional occupations. Boarding facilities for about 1,225 trainees would be provided to serve the needs of students from poorer homes and to allow trainees to be drawn from beyond the cities in which the centers are to be established. These facilities have been designed to allow, with minor modifications, for appropriate separate quarters for women. All the courses to be taught in the new institutions are already being offered in existing centers, and these have an acceptable balance between practical and theoretical studies, and adequately reflect the needs of industry. The training program would include recycling and upgrading courses, and some centers will also provide trade testing and certification for industrial workers. 43. Apprentice Training Center. This center would be established in the expanding southern industrial suburbs of Tunis. Courses would be of two years duration, with each apprentice spending one day per week in the center. Courses would be offered in the building, metal work, electrical and mechanical trades as well as in hairdressing. Age of entry would be around 14-15 years for those who have completed primary schooling, and courses would provide an ideal opportunity for further training for the outputs of the grade 8 extension to primary school, which is being expanded to provide two years prevocational training for those not proceeding to secondary schools. The center will create 710 training places with an output estimated at about 1,650 per annum. About 100 boarding places would be provided to allow apprentices from outlying areas to stay overnight and also to provide facili- ties for special short courses and seminars; in addition kitchen and dining facilities would also be financed to provide a mid-day meal for apprentices. All facilities will be equally accessible to female apprentices. Curricula would be well-balanced, providing four hours each of theory and practice per day, the latter being closely linked with work conditions. 44. Extensions to Existing Centers. Extensions to existing centers would focus on the provision of new workshops for courses related to local employment needs, and also on upgrading social and administrative facili- ties. The latter would allow the centers to become fully functional and efficient institutions through the provision of boarding facilities, kitchens and dining rooms, storage and office facilities. The project would provide  - 16 - for the construction and equipping of 30 new sections in the construction, metal work and automotive trades, including a course for building super- visors. This represents a major contribution to the expansion of the Office's vocational training system, which calls for the creation of 57 new sections during the current plan (para. 34). The new sections are to be established in 15 centers (13 vocational and 2 apprentice); they are widely distributed to reflect regional employment needs and the policy of improving the distribution of training opportunities, and would add a total of 840 places to the Office's skill training capacity. Total outputs from the new courses are estimated at 1,130 per annum. Boarding for about 575 trainees in five of the centers, with appropriate facilities for female trainees, would be provided. 45. Re-equipping of Existing Centers. Although vocational courses and the apprentice program are satisfactory in terms of content and relevance, teaching effectiveness is often greatly reduced because workshops are poorly equipped. In response to this problem, the Office plans to renew its equip- ment stock. The project would support this policy by providing equipment for four vocational and one apprentice centers, thus improving the quality of instruction. The focus of equipment would be in the building, shoe-making, and automotive trades. 46. Instructor Requirements. The new vocational training centers and the extensions to the existing centers, at full capacity, would require about 120 instructors. As regards apprenticeship centers, staff requirements are estimated at around 35 to be recruited and trained in the same way as for the vocational centers. The proposed project institutions would require a total of about 155 new instructors to be recruited from among experienced craftsmen and technicians in Tunisia, and among Tunisians returning from work abroad. Instructor recruits would receive a six-month course at the Rades instructor training center where sufficient capacity exists for this purpose; a stipend would be paid during training. The Government is giving priority attention to the timely recruitment and training of instructors. In order to ensure competitiveness with industry and enhance the prospects of satisfactory recruitment, the Government has agreed to offer all instructors under the project terms and conditions of employment competitive with similar levels in industry (draft Loan Agreement, Section 4.03(c)). 47. Employment of Graduates. The Office places great emphasis on find- ing employment for the graduates of its vocational centers; currently over 80 percent obtain employment in the first year after completion of training. The director of each center is responsible for maintaining close links with local employers, evaluating local job opportunities and placing graduates. This role would be reinforced in the new project institutions by the opera- tion of the proposed advisory councils (para. 48). The broader perspective of regional employment needs would be provided by regional employment commissions which comprise representatives of Government, employers and the Office. The joint efforts of the commissions and the advisory councils would assist in ensuring that the project's vocational centers trainees would be adequately trained in relation to industry's needs, and would secure employ- ment in jobs for which they had been trained. To monitor the situation, the  - 17 - Government has agreed to establish, in consultation with the Bank and before the graduation of the first group of trainees, an appropriate evaluation system for each project institution. Evaluation results would be made available to the Bank for information at regular intervals for a period of five years starting with the graduation ot the first group of trainees from each center (draft Loan Agreement, Section 4.04). The problem of finding employment does not arise in the case ot apprentices, who are already employed. 48. Advisory Councils. To ensure close links with industry and the continued relevance of training to labor market needs, the Government has agreed to establish an advisory council for each new project institution, representative of Government and local employers, within six months after opening date (draft Loan Agreement, Section 4.05). These councils will advise on manpower needs, course content and standard of proficiency. Similar councils will be established for all other training institutions in the country, as required by the location and needs of each institution and related industries. 49. Technical Assistance. The project would finance about thirteen man years of expert services and three man years of fellowships. The technical assistance program would focus on strengthening the role of the Office as the organization responsible for coordinating vocational training in Tunisia, on improving the efficiency of the planning organization and management of its training operations, and its ability to implement projects. The experts would assist the Office in establishing a long-term strategy for the develop- ment of vocational and apprentice training in Tunisia, and the most efficient system to operate and coordinate such training; their qualification, experience and terms and conditions of employment will be agreed upon with the Bank (draft Loan Agreement, Section 3.02(a)). The fellowships would be awarded to officials involved in apprentice training for overseas study of apprentice training techniques. To ensure the timely provision of specialist services of high quality, and reduce the risk of difficulties encountered in the second education project (para. 36), an understanding was reached during negotiations on the specific objectives, timetable, and modalities of selec- tion of technical assistance experts. It was also agreed that the Bank will review to its satisfaction the appointment of fellows and the details of their training programs (draft Loan Agreement, Section 3.02(b)). Project Cost and Financing 50. The total cost of the project, which does not include import duties and taxes, is estimated at $47 million, of which $26 million, or 55 percent is foreign exchange. Physical contingencies are calculated at 10 percent of the estimated cost of civil works, furniture and equipment, and 5 percent of technical assistance. Price contingencies have been estimated at 26 percent of baseline cost plus physical contingencies. Cost estimates assume that all civil works contracts would be awarded to local firms, about 80 percent of the furniture contracts would be awarded to local suppliers, and that almost all equipment would be imported. The proposed Bank loan of $26 million woula  - 18 - cover the full foreign exchange cost of the project, with the balance being provided by the Government. In line with recent experience in Tunisia esti- mated technical assistance costs are based on average costs per man-month of about $7,700 for experts (consisting of fees and per diem), about $2,200 for fellowships and average travel costs of about $750 per round-trip. 51. Recurrent costs, when the project will be fully operational, are expected to be about DT 0.4 million annually, corresponding to about 0.2 per- cent of projected public recurrent expenditure on education and training in 1985. In view of the high priority accorded to the project by the Govern- ment, these expenditures are expected to be fully met. Project Implementation 52. The project is expected to be implemented over about 5 years. All project sites have been acquired. Design work has been reviewed during negotiations. Final architectural designs for the first phase of project implementation are being finalized. The project would be implemented by experienced officials at the Office under the direction of the Project Director, a technical educator in the Office who has been closely involved in the project's preparation, and who will be assisted by an education planner and a specialist in apprenticeship training financed under the project. Physical implementation would be undertaken by a technical division in the Office comprising an architect and supporting technicians who handle con- tracts, bids and the physical supervision of the Office's ongoing projects, and which will be reinforced by a procurement unit with technical advisors to be established under the project. Procurement and Disbursement 53. Due to the relatively small size of civil works contracts (averaging $1.9 million per new center and $0.25 million per extension, including con- tingencies), the dispersed nature of the sites and the well-developed state of the Tunisian construction industry, all these contracts, amounting to $20.5 million including contingencies, would be awarded on the basis of local competitive bidding procedures which are satisfactory to the Bank, and do not exclude foreign bidders. Equipment and furniture items (amounting to $18.4 million including contingencies) would be grouped, to the extent possible, in large packages to permit bulk procurement. Contracts for furniture and equipment in excess of $100,000 would be awarded on the basis of ICB, and in accordance with Bank guidelines. Small items or groups of items estimated to cost less than the above figure, items of specialized nature for which ICB would not be practical, and items which must be compatible with other equip- ment procured under ICB would be procured under normal Government procurement procedures acceptable to the Bank, and would include, to the extent possible, quotations from at least three manufacturers or suppliers; these items would not exceed an aggregate total of $1.8 million or about 10 percent of esti- mated costs including contingencies. In ICB comparisons, local manufacturers of furniture and equipment would be allowed a margin of preference equal to the existing rate of customs duties applicable to competing imports, or 15 percent of the CIF price, whichever is lower.  - 19 - 54. The proposed loan would be disbursed against: 26 percent of total expenditures for civil works; 100 percent of foreign expenditures for directly imported and of local expenditures ex-factory for locally manufac- tured furniture and equipment, and 85 percent of local expenditures for locally-procured imported items. Disbursements would be made against 80 percent of total expenditures for experts' services, and 100 percent of foreign expenditures for fellowships. Benefits and Risks 55. Although lack of reliable basic data makes estimates of future man- power needs difficult, it is nevertheless clear that requirements for skilled workers will be substantially in excess of supply in the foreseeable future (para. 33). The development of the Tunisian economy will continue to be crucially dependent upon the availability of skilled workers to operate and maintain the economy's complex machinery and equipment, to work in a more independent role as craftsmen, and to act as supervisors and foremen. At full capacity, the project institutions would create a total of about 3,600 additional training places, and boarding facilities for about 1,900 addi- tional trainees; they would produce nearly 5,400 skilled workers mainly in the metal, building, electrical and mechanical trades and in secretarial services. The proposed project would make a significant contribution to alleviate poverty among unskilled workers and craftsmen (para. 17). The project also includes a substantial component directed towards the training of women who would have equal access to all the project's training and board- ing facilities. The planned outputs of the project institutions would add about 29 percent to the current output capacity of the Office. Qualitative improvement of the training system would also be effected through the re-equipping of workshops in existing centers. The project would assist in improving the regional distribution of training opportunities for school leavers and adults, contribute to an increased capacity for planning, manag- ing and coordinating training efforts in Tunisia, and would make a major contribution to the expansion of the vocational and apprentice training system controlled by the Office. No undue risks of delay are foreseen in project implementation. This view is reinforced by the strong Government backing for the project, and by the support and commitment of personnel in the Office, and their clear understanding of the contribution that the project would make to the expansion and development of the training system controlled by the Office. PART V - LEGAL INSTRUMENTS AND AUTHORITY 56. The draft Loan Agreement between the Republic of Tunisia and the Bank and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. Special features of the draft Loan Agreement are referred to in the text, and listed in Section III of Annex III. There are no special conditions of effectiveness.  - 20 - 57. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART IV - RECOMMENDATION 58. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President by Ernest Stern Attachments March 4, 1981 Washington, D.C.  - 21 - Annex I TABLE 3A Page 1 of 5 TUNISIA - SOCIAL INDICATORS DATA SHEET TUNISIA REFERENCE GROUPS (WEIGHTED AVERALCES LAND AREA (THOUSAND SQ. IQ..) - MOST RECENT ESTIMATE)S TOTAL 164.0 HIDDLE INCOME AGRICULTURAL 76.6 MOST RZCENT NDRTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE lb MIDDLE EAST LATIN AMERICA & CARIBBEAN GNP PER CAPITA (USS) *- 360.0 1120.0 818.5 1562.9 ENERGY CONSIRPTION PER CAPITA (XILOGRAMS OF COAL EQUIVALENT) 190.0 261.0 543.0 545.0 1055.9 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 4.2 5.1 6.0 URBAN POPULATION (PERCENT OF TOTAL) 36.0 43.5 50.1 45.7 63.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 9.0 STATIONARY POPULATION (MILLIONS) 14.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. KM. 26.0 31.0 37.0 40.7 28.1 PER SQ. IM. AGRICULTURAL LAND 55.0 67.0 78.0 598.6 81.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 43.3 46.2 42.6 44.0 41.4 15-64 YRS. 52.5 50.0 53.8 52.5 54.7 65 YRS. AND ABOVE 4.2 3.8 3.6 3.5 3.9 POPULATION GROWTR RATE (PERCENT) TOTAL 1.8 /c 1.9/c 2.0 2.6 2.7 URBAN .. 3.8 3.9 4.5 4.1 CRUDE BIRTH RATE (PER THOUSAND) 49.0 42.0 3Z.0 41.6 34.8 CRUDF DEATH RATE (PER THOUSAND) 21.0 15.0 12.0 13.7 8.9 GROSS REPRODUCTION RATE 3.1 3.4 2.2 2.9 2.5 FAMILY PLAMING ACCEPTORS, ANNUAL (THOUSANDS) .. 29.2 73.5 USERS (PERCENT OF MARRIED WOMEN .. 8.0 18.0 16.2 FOOD AND NUTRITION 2DFEI OF FOOD PRODUCTION PER CAPITA (1969-71-100) 97.0 98.0 126.0 93.5 106.9 P.ER CAPITA SUPPLY OF CALORIES (PERCENT OF REiUIREMENTS) 80.0 88.0 112.0 103.6 107.4 PROTEINS (GRAMS PER DAY) 50.0 57.0 73.0 69.8 65.6 OF WHICH ANIMAL AND PULSE 12.0 14.0 22.0 17.5 33.7 CHILD (AGES 1-4) MORTALITY RATE 29.0 20.0 15.0 17.5 8.4 NEALTR IFE EXPECTANCY AT BIRTH (YEARS) 48.0 54.0 57.0 54.4 63.1 INFANT MORTALITY RATE (PER THOUSAND) 148.0/d 135.0 .. .. 66.5 ACCESS TO SAFE WATER (PERCENT Of POPULATION) TOTAL *- 49.0 70.0 62.5 65.9 URBAN .. .. .. 82.9 80.4 RURAL .. .. .. 45.1 44.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. . .. .. 62.3 URBAN .. .. 30.0 .. 79.4 RURAL .. .. .. .. 29.6 POPULATION PER PHYSICIAN 10000.0 5950.0 4800.0 4688.7 1849.2 POPULATION PER NURSING PERSON .. 730.0 1070.0 1751.5 1227.5 POPULATION PER HOSPITAL BED TOTAL 373.0/e 410.0 439.0 635.5 480.3 URBAN .. 280.0 RURAL .. 930.0 ADMISSIONS PER HOSPITAL BED .. 24.1 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 5.1 if 6.0 URBAN .. 5.1 7! 5.8 RURAL .. 5.1 7! 6.1 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 3.2 tf URBAN .. 2.7 7 .. RURAL .. 3.6 7 .. ACCESS TO ELECTRICTITY (PERCENT OF DWELLINGS) TOTAL .. 24.0 /f URBAN .. .. RURAL .. ..  - 22 - ANNEX 1 TABLE 3APae2o TUNISIA - SOCIAL INDICATORS DATA SHEET Page 2 of 5 TUNISIA REFERENCE GROUPS (ADJUSTED AyLRAGES - MOST RECENT ESTIMATE) - SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 66.0 100.0 100.0 85.0 102.5 101.7 MALE 88.0 120.0 118.0 103.7 108.6 110.0 FEMALE 43.0 79.0 81.0 66.0 97.1 92.8 SECONDARY: TOTAL 12.0 23.0 20.0 27.6 33.5 51.2 MALE 19.0 33.0 26.0 39.2 38.4 56.4 FEMALE 5.0 13.0 14.0 20.8 30.7 43.7 VOCATIONAL ENROL. (X OF SECONDARY) 24.0 12.0 17.0 4.3 11.5 18.3 PUPIL-TEACHER RATIO PRIMARY 61.0 48.0 40.0 32.6 35.8 27.1 SECONDARY 16.0 28.0 23.0 23.4 22.9 25.3 ADULT LITERACY RATE (PERCENT) 15.5 24.0/i 55.0 41.4 64.0 86.1 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 11.0 13.0 18.0 16.7 13.5 53.4 RADIO RECEIVERS PER THOUSAND POPULATION 41.0 77.0 141.0 147.9 122.7 225.9 TV RECEIVERS PER THOUSAND POPULATION 0.1 10.0 27.0 36.0 38.3 102.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 19.0 16.0 33.0 17.9 40.0 78.5 CINEMA ANNUAL ATTENDANCE PER CAPITA 2.0 .. 2.3 2.9 3.7 3.6 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1400.0 1300.0/i 1700.0 FEMALE (PERCENT) 6.1 7.7 8.5 8.6 25.0 24.5 AGRICULTURE (PERCENT) 56.5 49.8 43.0 43.0 43.5 28.9 INDUSTRY (PERCENT) 17.6 21.0 23.0 23.7 21.5 30.6 PARTICIPATION RATE (PERCENT) TOTAL 27.0 23.7 23.7 26.7 33.5 33.8 MALE 50.2 44.2 44.0 46.4 48.0 51.3 FEMALE 3.3 3.6 4.0 5.1 16.8 16.3 ECONOMIC DEPENDENCY RATIO 1.4 1.8/i 1.4 1.8 1.4 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. 17.0 21.4 20.8 HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. 42.0 48.6 52.1 57.6 LOWEST 20 PERCENT OF HOUSEHOLDS .. .. 6.0 5.3 3.9 3.4 LOWEST 40 PERCENT OF HOUSEHOLDS .. .. 15.0 15.0 12.6 11.0 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US5 PER CAPITA) URBAN .. .. 204.0 201.3 270.0 RURAL .. .. 97.0 134.2 183.3 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 193.0 288.6 282.5 550.0 RURAL .. .. 193.0 170.0 248.9 403.4 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 20.0 22.9 20.5 RURAL .. .. 15.0 31.2 35.3 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. /c North Africa & Middle East; /d Intermediate Middle Income (S551-1135 per capita, 1976); /e Upper Middle Income (51136-2500 per capita, 1976); /f Due to emigration, population growth rate is lower than rate of natural increase; /g Av. 1964-66; /h 1962; /i 1966; /j 1972; /k Official intercensal (1966-75) estimate; /1 Government hospital establishments only. May, 1979  ANNEX I - 23 - Page 3 of 5 TUNISIA - ECONOMIC INDICATORS Population: 6.2 million (mid-1979) GNP per Capita: $1,130 (1979) Amount Annual Growth Rates (million US$ Actual (at 1972 prices) Projected (at 1977 Prices) Indicator at current prices) 1979 1975 1976 1977 1978 1979a/ 1980 1981 1982 1983 1984 NATIONAL ACCOUNTS Gross domestic product b/ 7080.0 8.1 7.4 4.3 8.3 6.9 8.0 7.2 6.6 6.4 6.6 Agriculture 984.7 3.9 5.2 -7.5 8.6 0.5 8.0 7.6 3.1 3.1 3.1 Industry 1982.0 7.4 7.8 7.0 9.1 8.4 11.6 8.5 8.5 8.0 8.0 Services 3102.9 10.6 5.4 5.8 7.7 8.4 6.6 6.2 6.5 6.5 6.5 Consumption 5440.3 2.7 8.8 9.5 9.3 6.0 7.8 9.9 10.0 6.9 9.1 Gross investment 2069.0 20.2 16.9 5.8 6.6 9.7 7.2 3.1 -2.9 1.3 0.1 Exports of goods and GNFS 2655.6 5.0 9.6 5.6 9.1 12.6 5.0 4.1 7.4 7.3 8.8 Imports of goods and GNFS 3084.9 2.2 19.3 16.5 10.2 8.5 4.6 7.5 7.5 4.6 9.6 Gross national product 7030.7 8.6 6.0 4.8 9.1 6.3 7.8 7.2 6.5 6.4 6.6 Gross national savings 22.5 -6.3 -1.7 21.2 35.8 17.6 -0.9 -4.1 7.6 0.8 PRICES GDP deflator 134.2 137.7 151.4 158.6 171.9 - - - - - Exchange rate 2.49 2.33 2.33 2.40 2.46 Share of GDP at market prices (X) Average Annual Increase (%) (at current prices) (at constant prices) 1970 1975 1979 1985 1970-75 1975-79 1980-85 Gross domestic product 100.0 100.0 100.0 100.0 8.5 6.5 6.6 Agriculture 16.7 18.2 13.9 13.1 8.8 1.3 3.7 Industry 20.5 27.1 28.0 29.2 9.0 7.8 8.1 Services 49.3 42.7 43.8 43.2 8.7 6.6 6.4 Consumption 84.8 75.5 76.8 82.8 8.6 8.3 9.0 Gross investment 19.7 29.3 29.2 20.9 11.8 6.5 -0.4 Exports of goods and GNFS 21.9 31.3 37.5 40.3 12.5 12.2 6.9 Imports of goods and GNFS 26.4 36.1 43.6 44.0 11.3 12.7 7.4 Gross national product 97.9 99.9 99.3 99.4 8.7 6.5 6.7 Net factor income 2.1 0.1 0.7 0.6 - - Gross national savings 13.2 24.3 22.4 17.9 7.5 5.9 -1.7 As % GDP (at current Prices) 1970 1975 1979 a/ PUBLIC FINANCE Current revenue 23.5 25.7 33.3 Current expenditure 20.4 19.9 24.4 Surplus (+) or deficit (-) 3.1 5.9 9.0 Capital expenditure 9.5 10.8 13.5 Foreign financing 5.0 1.8 1.6 1970-75 1975-79 1980-85 OTHER INDICATORS GNP growth rate (%) 8.7 6.5 6.7 GNP per capita growth rate (%) 6.3 3.9 4.2 ICOR 2.6 4.3 4.0 Marginal savings rate 30.5 17.6 0,0 Import elasticity 1.24 2.01 1.12 a/ Estimate. h/ GDP at market prices and components, at factor cost. EMENA CP 2C October, 1980  ANNEX I - 24 - Page 4 of 5 TUNISIA - EXTERNAL TRADE Population: 6.2 million (mid-1979) GNP per Capita: 91,130 (1978) Amount Annual Growth Rates (million 1S9 Actual (at 1972 prices) Projected (at 1977 Prices) Indicator at current prices) 1979 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 EXTERNAL TRADE Merchandise exports 1762.6 -9.0 5.8 -5.0 16.0 10.1 6.1 1.3 7.i 6.8 9.3 Crude oil 800.0 27.7 -15.0 1.9 14.0 91.3 11.6 -4.5 9.0 6.6 0.0 Other primary 123.0 -26.7 21.8 -17.9 34.7 10.0 -11.7 5.8 2.7 2.6 2.5 Manufactures 839.6 -14.6 37.2 -1.5 21.9 14.8 1.3 6.3 6.0 5.7 18.8 Merchandise lmports 2827.3 -0.4 13.6 30.4 5.5 11.7 4.3 7.6 7.7 4.6 10.0 Food 358.9 7.7 -13.5 25.5 11.1 22.2 7.2 9.9 10.0 6.0 8.9 Petroleum 493.5 43.1 -24.8 -8.5 -3.9 25.7 -9.8 11.0 12.5 -3.4 37.0 Machinery and equipment 704.8 33.3 19.1 2.4 5.2 -11.0 -1.3 1.3 0.0 1.3 0.0 Others 1270.2 -8.0 31.2 36.0 2.9 14.1 9.9 9.0 9.1 7.3 8.3 Price Index (1972 - 100) Price Index (1977 - 100) PRICES Export price index - 191.0 181.2 197.9 215.0 267.9 196.4 218.8 241.2 264.2 293.2 Import price lndex - 170.4 163.7 171.4 180.6 205.6 146.6 160.7 175.4 187.4 203.1 Terms of trade index - 112.1 110.7 115.5 119.0 130.3 134.0 136.2 137.5 141.0 144.4 Composition of Merchandise Trade (%) Average Annual Increase (X) (at current prices) (at constant prices) 1970 1975 1979 1985 1970-75 1975-79 1980-85 Fxports iOO.0 100.0 100.0 100.0 11.6 9.4 6.1 Crude oil 24.5 41.8 45.3 54.9 23.2 3.0 0.0 Other primary 21.2 18.0 7.1 5.2 6.7 2.0 3.0 Manufactures 54.3 40.2 47.6 39.9 6.2 14.3 9.9 Imports 100.0 100.0 100.0 100.0 13.4 12.4 7.6 Food 20.6 15.8 12.7 17.9 8.9 7.5 8.8 Petroleum 4.0 9.8 17.5 22.6 36.5 23.2 14.5 Marchirry mod Equipm-nt 23.0 30.2 24.9 27.6 15.7 8.3 -0.1 Others 52.4 44.2 44.9 31.9 10.6 13.2 8.4 Share of Trade with Share of Trade with Share of Trade with Industrial Countries (X) Developing Countries (%) Capital Surplus Oil Exporters (X) 1970 1975 1979 1970 1975 1979 1970 1975 1979 DIRECTION OF TRADE Exports 62.6 48.6 74.1 23.4 41.4 n.a. 14.0 10.0 n.a. Imports 62.9 67.1 73.5 33.7 25.7 n.a. 3.4 7.2 n.a.  ANNEX I - 25 - Page 5 of 5 TUNISIA - BALANCE OF PAYMENTS. EXTERNAL CAPITAL AND DEBT (million USD at current prices) Population: 6.2 million (mid-1979) GNP Per Capita: 51,130 (1979) Actmal Irciected 1970 1975 1976 1977 1978 1979_L 198D 1981 1982 1983 19B5 BALANCE OF PAYMENTS Net emports of goods & services -104.5 -208.8 -417.1 -567.0 -599.7 -478.5 -350.8 -499.5 -567.2 -427.8 -744.7 EIports of goods & services 355.6 1,529.2 1,479.4 1,695.5 2,090.6 2,913.9 3,548.4 4,062.4 4,746.0 5,503.1 7,384.3 Imports of goods B services 460.i 1,738.0 1,896.5 2,262.5 2,690.3 3,392.4 3,899.2 4,561.9 5,313.2 5,930.9 8,129.0 Net transfers 53.0 47.4 52.8 46.4 33.6 31.0 36.0 36.0 36.1 36.1 36.1 Cusrest account baiance -51.5 -161.4 -364.3 -520.6 -566.1 -447.5 -314.8 -463.5 -531.1 -391.7 -708.5 DIrect private lo-estmeot 25.5 50.2 102.6 92.3 91.1 164.8 181.3 199.4 219.3 241.3 292.0 MLT b a.ss (set) 43.4 124.5 161.1 557.1 468.6 383.0 324.0 346.9 405.7 227.6 559.7 Official 41.7 102.9 131.5 286.7 184.8 256.8 364.9 366.4 397.4 328.6 280.0 Private 1.7 21.6 29.6 270.4 283.8 126.2 -40.9 -19.5 8.3 -101.0 279.7 Other capital 2.0 -53.0 58.6 -185.5 41.4 32.4 - - - - - Cha-ge in reserves -19.4 39.7 42.0 56.7 -35.0 -132.7 -190.4 -82.8 -93.9 -77.2 -143.3 Inter-atio-al reserves 15.4 347.5 304.5 247.8 282.8 415.5 605.9 688.8 782.7 859.9 1,134.7 Reserves as months of imports 0.4 2.4 1.9 1.3 1.3 1.5 1.9 1.8 1.8 1.7 1.7 Actual 1970 1975 1976 1977 1978 1979a/ GROSS DISBIIRSEMENTS Official grants 43.0 50.2 53.2 47.3 32.7 31.0 -rons disbussements of MLT looms 88.8 191.8 227.2 646.7 575.1 661.6 Concessio-al 45.2 100.1 108.7 178.4 182.5 279.6 Otber multiloterel 1.0 5.5 - 0.3 7.6 12.7 Rllateral 41.3 82.0 99.8 172.5 174.1 266.7 IDA 2.9 12.6 8.9 5.6 0.8 0.2 Non--oncemsional 43.6 91.7 118.5 468.3 392.6 382.0 Privete 33.1 49.8 52.2 311.8 334.8 243.0 Official export credits 1.3 15.0 16.5 100.6 12.0 16.3 IBRD 9.2 26.9 25.3 47.5 33.0 55.4 Other uiltilateral - - 24.5 8.4 12.8 67.3 EXTERNAL DEBT Debt Outstanding and Dlsbormed 544.8 1,038.9 1,175.2 1,780.1 2,358.9 2,893.9 Official 370.9 862.2 987.5 1,308.6 1,567.1 1,931.3 IBRD 70.1 109.8 127.9 167.3 189.4 232.0 IDA 36.7 55.3 64.1 66.8 67.4 67.3 Other 264.1 697.1 795.5 1,074.5 1,310.3 1,632.0 Private 173.9 176.7 187.7 471.5 791.8 962.6 Undisb-roed debt 308.9 725.3 1,260.4 1,551.5 1,708.9 1,569.9 DEBT SERVICE Total debt service payments 63.2 101.6 104.6 143.7 201.6 310.3 Interest 17.8 35.1 38.7 53.9 95.0 142.0 Payments an % emports 17.8 6.7 7.1 8.5 9.6 10.7 Payments an X GNP 4.4 2.4 2.4 2.8 3.4 4.4 Average interemt rate on new Lasn (%) - 3.9 5.1 6.2 7.1 6.3 Official - 3.3 4.3 4.7 4.8 6.3 Private - 6.7 8.0 7.7 9.8 - Average maturity of sew loans (years) - 24.0 20.7 16.3 14.9 19.4 Officlal - 27.1 23.9 21.4 19.5 19.4 Private - 9.1 8.9 10.7 9.4 - As Z of Debt Outntanding at End of Mont Recent Year (1979) DEPT STRUCTURE Matarity struct-re of debt .stntandig (Z) Amotization dun witnin 5 years 49.0 Amortza-tion doe within 10 years 92.7 Isterest struct-re of debt outstanding (%) Interest due within first year 6.5 0 / i stilmat ens.  - 26 - ANNEX II Page 1 of 9 A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of December 31, 1980) US$ Million Loan or Amount (less Credit Cancellation) Number Year Borrower Purpose Bank IDA b/ Undis. Twenty-four Loans and Credits Fully Disbursed 162.36 60.47 238 1971 Republic of Tunisia Population 4.80 1.14 858 1972 Republic of Tunisia Tourism Infrastructure 14.00 2.52 937 1973 Republic of Tunisia Urban Planning & Public 11.00 1.42 Transportation - 1029 1974 Republic of Tunisia Hotel Training 5.60 0.39 1042 1974 Compagnie des Phosphates Phosphate Development 23.30 1.63 et Chemin de Fer de GAFSA 1068 1974 Republic of Tunisia Irrigation Rehabilitation 12.20 4.73 1088 1975 Republic of Tunisia Urban Sewerage 28.00 13.74 1155 1975 Republic of Tunisia Third Education 8.60 8.20 1188 1975 Republic of Tunisia Second Highways 28.00 23.14 1189 1976 Banque de Developpement Sixth Development Finance Co. 20.00 0.68 Economique de Tunisie (BDET) 238-1 1976 Republic of Tunisia Population 4.80 1.12 1340 1976 Banque Nationale de Tunisie Second Agricultural Credit 12.00 4.10 1355 1976 Societe Tunisienne de Second Power 14.50 0.62 l'Electricite et du Gaz 1431 1977 Republic of Tunisia Irrigation Development 42.00 18.56 1445 1977 SONEDE Fourth Water Supply 21.00 16.26 1504 1977 BDET Development Finance Co. 30.00 7.59 1505 1977 Republic of Tunisia Small-Scale Industrial Project 5.00 4.20 1601 1978 Republic of Tunisia Rural Roads (Third Highways) 32.00 31.54 1675 1979 Republic of Tunisia Second Urban Sewerage 26.50 26.40 1702 1979 Societe Nationale Fifth Water Supply 25.00 19.92 d'Exploitation d'Eau 1705 1979 Republic of Tunisia Second Urban Development 19.00 19.00 1746 1979 Republic of Tunisia Second Fisheries 28.50 28.15 1796 1980 Republic of Tunisia Southern Irrigation 25.00 24.84 1797 1980 Office des Ports Nationaux Third Port 42.50 35.98 1841 1980 Republic of Tunisia Fourth Highways 36.50 36.50 1864a/ 1980 Societe Tunisienne de Second Natural Gas Pipeline 37.00 37.00 l'Electricite et du Gaz 1885 a/ 1980 Banque Nationale de Tunisie Third Agricultural Credit 30.00 30.00 TOTAL 739.56 70.07 399.37 Of which has been repaid 73.46 5.13 Total now outstanding 666.10 64.94 Amount Sold 14.41 of which has been repaid 10.13 4.28 Total now held by Bank and IDA b/ 661.82 64.94 Total Undisbursed 397.11 2.26 399.37 a/ Not yet effective b/ Prior to exchange adjustment  - 27 - ANNEX II Page 2 of 9 B. STATEMENT OF IFC INVESTMENTS IN TUNISIA (as of December 31, 1980) Amount in US$ Million Year Obligator Type of Business Loan Equity Total 1962 NPK Engrais Fertilizers 2.0 1.5 3.5 1966 Societe Nationale d' Investissement Development Finance Co. 0.6 0.6 1969 COFIT (Tourism) Development Finance Co. 8.0 2.2 10.2 1970 Societe Nationale d'Investissement (SNI) now (BDET) Development Finance Co. 0.6 0.6 1973 Societe Touristique & Hoteliere RYM SA Tourism 1.6 0.3 1.9 1975 Societe d'Etudes & de Developpement de Sousse-Nord Tourism 2.5 0.7 3.1 1974 Industries Chimiques du Fluor Chemicals 0.6 0.7 1978 BDET Development Finance Co. 1.3 1.3 Total Gross Commitments 14.1 7.8 21.9 Less cancellations, terminations, repayments and sales 6.7 1.9 8._ Total commitments now held by IFC 7.4 5.9 13.2 Total undisbursed 0.5 0.5  - 28 - ANNEX II Page 3 of 9 C. PROJECTS IN EXECUTION 1/ Cr. 238; Population Project; US$4.8 million credit of April 5, 1971; Date of Effectiveness: December 29, 1971; Closing Date; (Original) June 30, 1976; (Current) December 31, 1981. Cr. 238-1; Population Project: US$4.8 million Supplemental Credit (NORAD grant) of October 13, 1976; Date of Effectiveness: March 21, 1977; Closing Date: (Original) December 31, 1979; (Current) December 31, 1981. After many delays, construction of the maternity hospitals in Sousse, Tunis and Sfax is completed. These facilities are expected to be staffed and fully operational by mid-1981. The construction of the fourth hospital at Bizerte is likely to be completed by end 1981. Twenty-five of the 29 maternal and child health/family planning centers have been com- pleted; three are expected to be completed by mid-1981. One center (La Hafsia) has been deleted from the project because the Government has been unable to obtain a suitable site. Ln. 858: Tourism Infrastructure Project; US$14 million loan of September 28, 1972; Date of Effectiveness: June 29, 1973; Closing Date: (Original) December 31, 1977; (Current) December 31, 1980. The project is in its final implementation stage. The remaining minor works are expected to be completed by April 1981. Disbursements are being made only on commitments prior to December 31, 1980. Ln. 937: Tunis District Urban Planning and Public Transport Project; Cr. 432: US$11 million loan and US$7 million credit, both of October 5, 1973; Date of Effecriveness: September 24, 1974; Closing Date: (Original) December 31, 1976; (Current) December 31, 1981. The project has been completed except for construction of a bus depot which is expected to be ready by October 1981. The project helped establish and strengthen the Tunis District, the first regional planning authority in Tunisia. Work carried out by the District in the housing and 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 29 - ANNEX II Page 4 of 9 transport sectors has been instrumental in bringing about substantial changes in public programs and policies, such as the adoption of measures to encourage the use of buses and restrain the use of private cars. The project also assisted the public transport company Societe Nationale des Transport (SNT) in renewing its bus fleet and railway rolling stock, improv- ing its organization and finance, and upgrading the maintenance of its vehicles with the construction of a new bus depot. In parallel, the city of Tunis adopted a new traffic plan with a one-way street system, reserved bus lanes and restricted parking zones, which contributed substantially to the improvement of bus services in Greater Tunis. This, combined with an increase in the SNT bus fleet, and improved bus maintenance has led to an increase in the use of SNT transport facilities by about 27 percent above the level which would have been achieved in the absence of the project. Ln. 1029: Hotel Training Project; US$5.6 million loan of July 17, 1974; Date of Effectiveness; November 4, 1975; Closing Date: (Original) October 31, 1978; (Current) December 31, 1980. The hotel schools at Hammamet and Sousse Nord are now operational. The training curricula have been introduced in September 1979 and extended to all training schools in the country. Procurement of minor equipment and furniture items will be completed by end March 1981. Disbursements are being made only on commitments prior to December 31, 1980. Ln. 1042: Gafsa Phosphate Project; US$23.3 million loan ot October 1, 1974; Date of Effectiveness: March 14, 1975; Closing Date; (Original) June 30, 1979; (Current) December 31, 1981. Underground mining operations using the longwall method were intended to supply phosphate rock to the Sehib washing plant which was commissioned at the end of 1979. Following the initial failure of the mining tests to reach satisfactory production levels, the company hired experienced consultants whose services are financed by the Bank loan. The services include; (i) 6 months' technical assistance in further testing the longwall method, (ii) a feasibility study on open pit mining of an alterna- tive deposit from which the supply of rock to the washing plant could be supplemented, and (iii) the design and implementation of an improved cost control system. The longwall test has not achieved a continuous good performance. The first phase of the open pit feasibility study is completed. The second phase will be started after completion of additional geological and beneficiation work. Cost control in the company is still inadequate.  - 30 - ANNEX II Page 5 of 9 Ln. 1068: Irrigation Rehabilitation Project; US$12.2 million loan of December 31, 1974; Date of Effectiveness; September 18, 1975; Closing Date: (Original) December 30, 1981; (Current) June 30, 1982. Progress in construction and rehabilitation works in the Medjerda sub-project area continues to be satisfactory, except for the marketing center in Nebhana for which bids are called again, and for water supply to farmers on which a common decision is expected by SONEDE and OMVVM, regard- ing the farmers' contribution to the investment costs. Land reform is progressing slowly, especially in the Medjerda area. In Nebhana, the land consolidation program is developing well and farmers have been settled on nearly 60 percent of the total area. OMVVM continues to encourage large owners to improve cultivation of land and marked progress has been reported in the distribution of medium and short-term credit. Progress in construc- tion and rehabilitation of irrigation, drainage and road networks continues to be satisfactory. Ln. 1088: First Urban Sewerage Project: US$28 million loan of February 18, 1975; Date of Effectiveness: August 15, 1975; Closing Date: (Original) December 15, 1979; (Current) December 15, 1981. The project suffered considerable delay as a result of a number of factors, some beyond the control of the project entity, ONAS. As a result, considerable cost escalation occurred, chiefly in local cost components. However, all components of the project are now under construction and project completion is expected by mid-1982. One of its major benefits will be release of land for development around the Lake of Tunis, which until now has been impossible because of the pollution of the lake waters by untreated sewage. Consultants financed under the project have produced a land-use plan for the area, and acquisition of the land by Government is in progress. Ln. 1155: Third Education Project; US$8.9 million loan of August 13, 1975; Date of Effectiveness: March 1, 1976; Closing Date: (Original) June 30, 1980; (Amended Project) March 31, 1983 Implementation of this project was delayed following a change in education priorities in Tunisia. The project was subsequently amended to reduce the number of ITM centers to be equipped under the project, increase the facilities to train teachers for ITM, and increase technical assis- tance. The total cost of the amended project is estimated at $11.3 million and the Bank loan has been decreased by $0.3 million to $8.6 million, rep- resenting the full foreign exchange cost of the amended project. Imple- mentation of the project is proceeding satisfactorily; designs for the extension of the five teacher training colleges have been approved and invitations for local bidding are scheduled for April 1981. Equipment procurement for the teachers' colleges and the ITM centers is proceeding satisfactorily.  - 31 - ANNEX II Page 6 of 9 Ln. 1188: Second Highways Project; US$28 million loan of January 26, 1976; Date of Effectiveness: June 16, 1976; Closing Date; (Original) December 31, 1979; (Current) December 31, 1982. Civil works of Lots 9 and 10 of the Tunis-Bizerte highway have been completed. Construction is in progress on Lot 6 in Nabeul. Construction works of Lots 5, 7 and 11 have started. The local financing issue has been discussed with the Ministries of Public Works and of Planning and Finance, and a satisfactory physical and financial execution plan now exists for the remaining items, except for Lot 8 on which there is a difficult problem of expropriation which may result in deleting this element from the project. The final report of the transport coordination study has been completed. The Government is now reviewing the consultants recommendations, and has agreed to set up a transport planning unit. Ln. 1189; Sixth Development Finance Company Project; US$20 million loan of January 26, 1976; Date of Effectiveness: June 7, 1976; Closing Date: March 31, 1981. BDET has shown consistent improvements over the past three years in the key areas of management effectiveness, arrears recovery, financial practices and resource mobilization. The institution plays an increasingly important role in financing industrial development, extending about one-third of all term credit available to the industrial sector in Tunisia. Ln. 1340: Second Agricultural Credit Project; US$12 million loan of November 23, 1976; Date of Effectiveness: July 19, 1977; Closing Date: June 30, 1981. About 75 percent of the loan amount is disbursed and more than 100 percent is committed; amounts in excess will have to be financed from the Third Agricultural Credit project. Disbursements in Categories 1, 2 and 4 - subloans to small and medium farmers, commercial farmers and agro-industrial investors - are progressing rapidly. They will commence shortly in Category 3, subloans to farmers' associations for the establishment of date palm plantations, after BNT and Government have approved six subprojects. The present Closing Date of June 30, 1981 may have to be extended to December 31, 1981. Ln. 1355: Second Power Project; US$14.5 million loan of January 12, 1977; Date of Effectiveness: May 4, 1977; Closing Date: June 30, 1981. The Project has been completed and the seven gas-turbines have been commissioned. Measures are being taken to overcome difficulties in operating the turbines, which have arisen due to excessive use and lack of spare parts. The energy pricing study has been extended in scope to include an overall assessment of the country's energy resources and is now expected to be completed by the end of 1981.  - 32 - ANNEX II Page 7 of 9 Ln. 1431: Sidi Salem Multipurpose Project; US$42 million loan of July 5, 1977; Date of Effectiveness: July 31, 1978; Closing Date: June 30, 1984. For the project as a whole, progress in implementation con- tinues to be satisfactory. The land reform and consolidation program is underway. The Sidi Salem dam is expected to be completed on schedule. The new railroad, including superstructure, is now completed and will soon be operational. Construction of the Medjerda-Cap Bon interconnection canal, which started one year behind schedule, is proceeding slowly due to some extent to the force account method of construction adopted, and to manage- ment difficulties resulting from conceptual differences in methods of construction between the Tunisian and Chinese workers, and lack of expe- rience in using modern technology and modern equipment for tunneling and canal lining. Ln. 1445: Fourth Water Supply Project; US$21 million loan of July 5, 1977; Date of Effectiveness: January 30, 1978; Closing Date: December 31, 1982. The procurement process under the fourth project is now completed. Project execution has accelerated during the last six months and the proj- ect is now expected to be completed by end 1982, about six months behind the appraisal schedule. Having increased the average water rates in 1979 by about 44 percent, the borrower's financial situation is expected to remain satisfactory for the next two years. Ln. 1504/1505: Industrial Finance Project consisting of Seventh Loan to Banque de Developpement Economigue de Tunisie (BDET) and a Pilot project for assistance to SSI; Loans of $30.0 million to BDET and of $5.0 million to the Government of January 25, 1978; Date of Effectiveness; October 13, 1978; Closing Date: December 31, 1981. The $5 million pilot loan is fully committed; the $28 million com- ponent to BDET is also fully committed, and the $2 million allowed for the financing of SSI extension is half committed. Disbursements are in line with appraisal estimates. Under the project, BDET is giving priority in its financing to projects which are located in the least developed regions, sponsored by new entrepreneurs, characterized by high labor intensity or export-orientation. Under the SSI pilot project, the commercial banks' initial reluctance to utilize Bank funds for SSI financing has been over- come. Considerable progress has been made by the Tunisian authorities toward setting up a network of Tunisian and foreign technical assistance experts, specifically catering to the needs of SSI, as agreed under the project. Ln 1601: Rural Roads Project; US$32.0 million loan of July 24, 1978; Date of Effectiveness: April 30, 1979; Closing Date: June 30, 1984. Road construction is now underway in all the provinces to be covered under the project. The Government wishes to accelerate implementa- tion so as to complete construction works by end-1982. Progress on  - 33 - ANNEX II Page 8 of 9 the complementary agricultural component, after an initial delay, is now proceeding satisfactorily. Ln 1675: Second Urban Sewerage Project; US$26.5 million loan of April 13, 1979; Date of Effectiveness: August 31, 1979; Closing Date: December 31, 1984. Consultants have been contracted and detailed design is proceed- ing. Tenders have been called for the first civil works, and construction has started. Ln 1702: Fifth Water Supply Project; US$25.0 million loan of May 31, 1979; Date of Effectiveness: October 19, 1979; Closing Date: December 31, 1982. The physical execution of the project is progressing well and according to schedule. SONEDE has already approved eight urban and seventeen rural sub-projects for a total investment cost of $28.5 million. Procurement is expected to be completed by June 1981. Ln. 1705: Second Urban Development Project; US$19.0 million loan of May 31, 1979; Date of Effectiveness: December 1, 1980; Closing Date: December 31, 1983. Staffing of the project units and preparation of tender documents are progressing satisfactorily. Civil works have started on two Tunis sites and one Sfax site and service areas. All technical work on the civil works component is progressing well. Ln. 1746: Second Fisheries Project; US$28.5 million loan of July 20, 1979; Date of Effectiveness: May 14, 1980; Closing Date: June 30, 1985. All contracts for port infrastructure have been awarded. Detailed design for the boats has been delayed due to delays in contract finalization with the consultants. Tender documents for procurement of hulls will therefore not be available before March 1981. Engines are being procured under ICB; analysis of bids is still in progress. Ln. 1796: Southern Irrigation Project; US$25.0 million loan of February 8, 1980; Date of Effectiveness: September 30, 1980; Closing Date: June 30, 1986. The implementation of the project is proceeding according to schedule. A contract has been awarded for the sinking of the first 13 deep wells of the project. Bidding documents and bids have been reviewed by the Bank for procurement of asbestos-cement pipes.  - 34 - ANNEX II Page 9 of 9 Ln. 1797: Third Port Project; US$42.5 million loan of February 8, 1980; Date of Effectiveness: June 25, 1980; Closing Date: June 30, 1985. The loan agreement has been amended to reflect changes in OPNT's financing plan. The main changes are: (i) the reduction in the amount to be financed by export credits from $20.3 million to $7 million, and (ii) the percentage of expenditures to be financed by the Bank; i.e. 100 percent of foreign expenditures and 6 percent of local expenditures instead of 48 percent of total expenditures. The contracts for civil works construction have been awarded. Work has now commenced at La Goulette after delays in agreement on an acceptable location of a site for depositing material to be dredged from the project area. No work has yet commenced at Sfax due to delays in moving the Chantiers Navals from their present location to the new fishing harbor nearby, and checking of final design. Consultants to supervise the works at Sfax have been appointed. Ln. 1841: Fourth Highway Project; US$37.5 million loan of May 22, 1980; Date of Effectiveness: November 21, 1980; Closing Date: September 30, 1984. Project implementation is progressing well and according to schedule. All the elements of the 1981 program for rehabilitation and maintenance have now been received and reviewed. Ln. 1864: Second Natural Gas Pipeline Project; US$37 million loan of October 22, 1980; Planned Date of Effectiveness: July 22, 1981; Closing Date: December 31, 1983. The original project scope has been modified because of uncertainties related to the purchase of gas from Algeria; the project is being redesigned to utilize royalty gas as a substitute to premium liquid fuel products. Amendment to legal documents is under preparation. Ln. 1885: Third Agricultural Credit Project; US$30.0 million loan of August 6, 1980; Planned Date of Effectiveness: April 30, 1981; Closing Date: December 31, 1983. Loan effectiveness is pending ratification of the Guarantee Agreement, signature of an agreement between BNT and the Ministry of Planning and Finance, and receipt of the legal opinions.  - 35 - ANNEX III TUNISIA: FOURTH EDUCATION PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I - Timetable of Key Events (a) Time taken by the country to prepare project: 18 months (January 1979 to June 1980) (b) Agencies responsible for project preparation: Office of Training and Employment (OTTEEFP), Ministry of Social Affairs, with assistance from Bank and consultants (c) Project Identified: May and November 1978 (d) Date of Bank appraisal mission: June 1980 (e) Date of completion of negotiations: December 19, 1980 (f) Planned date of effectiveness: May 1981 Section II - Special Bank Implementation Actions None Section III - Special Conditions (i) terms and conditions of employment for instructors under the project will be competitive with similar levels in industry (para. 46 - draft Loan Agreement, Section 4.03(c)); (ii) a monitoring system to evaluate the employment situation of graduates of the project institutions will be established for each new institution in consultation with the Bank prior to the gradua- tion of the first group of trainees in each center; evaluation data would be submitted to the Bank for five years following the first output from the institutions (para. 47 - draft Loan Agreement, Section 4.04); (iii) advisory councils with Government and industry representation will be established for each new project institution within six months of opening dates (para. 48 - draft Loan Agreement, Section 4.05); (iv) an understanding was reached during negotiations on the specific objectives, terms of reference and modalities of technical assis- tance (para. 49).   tSEOJE ANE EnZ~ Tv ,\u S E AOUARIA 37- SO LI SS F F~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~LII NEFTA TOZEUR~ ~ ~ ~ ~~~ NZE FOURTH EDUCATION~~~ PRJC FOU N= Art Ce ntes