Document of The World Bank FOR OMCIAL USE ONLY Report No. 12431-TUN STAFF APPRAISAL REPORT REPUBLIC OF TUNISIA NORTHWEST MOUNTAINOUS AREAS DEVELOPMENT PROJECT December 6, 1993 Agriculture Operations Division Maghreb and Iran Department Middle East and North Africa Region This document has a restricted distrbution and may be used by recipients only In the performance of CURRENCY EOUIVALENTS (September 1993) Currency Unit = Tunisian Dinar (DT) UIS$1.00 = D 0.987 D 1.00 = US$1.01 FISCAL YEAR January I - December 31 GLOSSARY OF ABBREVIATIONS API Integrated & Participating Approach (Approche Participee et Integree) ASAL Agricultural Sector Adjustment Loan ASIL Agricultural Sector Investment Loan BNA Banque Nationale Agricolt CDA Centre de Dvreloppement et d'Animation (Extension-Development Center) CRDA Commissariat R6gional de Developpement Agricole (Regional Agricultural Development Commission) DCU Douar Credit Union DDC Douar Development Committee DDP Douar Development Plan DG Direction Generale (General Directorate) DR Direction Regionale EDA Extension - Development Agents EEC European Economic Community FAO-CP Food & Agricultural Organization - Cooperative Program FA Force Account GIS Geographic Information System GOT Government of Tunisia GTZ Deutsche aesellschaft fur Technische Zusammenarbeit (German Technical Assistance) IBRD International Bank for Reconstruction and Development KfW Kreditasstalt fMir Wiederaufbau of the Federal Republic of Germany ICB International Competitive Bidding IDA International Development Association INRAT Institut National de la Recherche Agronomique de Tunisie IRESA Institut de la Recherche et de l'Enseignement Superieur Agricoles LCB Local Competitive Bidding M&E Monitoring and Evaluation NGO Non-Governmental Organization NWMADP Northwest Mountainous Areas Development Project NWRDP Northwest Rural Development Project O&M Operations and Maintenance ODESYPANO Office du Developpement Sylvo-Pastoral du Nord-Ouest RC Research Committee RF Research Fund SMS Subject-Matter Specialist WFP World Food Program FOR OMCIAL USE ONLY STAFF APPRAISAL REPORT REPIBLIC OF TUNISIA NORTHWEST MOUNTAINOUS AREAS DEVELOPMENT PROJECT Loan and Project S _mma Borrower: Republic of Tunisia Beneficiaries: Ministry of Agriculture Office de Developpement Sylvo-Pastoral du Nord-Ouest Rural population of the Northwest region Amolunt: US$27.5 million equivalent loan Terms: Seventeen years, with a five-year grace period, at the Bank's standard variable interest rate. P'roject Obdectives: The project addresses the important problems of rural poverty and natural resource degradation. It would help restore sustainable range, forest and farming activities, reducing soil degraedation, erosion and sedimentation in reservoirs as well as increasing productivity and incomes in this impoverished region of 'unisia. By using a participatory approach, it would strengthen farmers' pling and implementation capacity, and improve the responsiveness of rural service agencies to farmers' needs. Project DescriptLon: The project would support development of a participatory approach to watershed rehabilitation in about 50 micro-atchments in the Governorates of Beja, El Kef, Siliana, Jendouba and Bizerte over a six-year period. Treatments would be into,grated across a micro-catchment, and selected and implemented with the participation of the local population. Treatments would include improved range management, improved fodder production, soil and conservation works. The project would also provide such basic infrastructure as feeder roads, potable water, health centers and schools. The projects would strengthen the planning, coordination, and implementation capacity of the executing agency and village groups. The project would provide for demand-driven, short-term applied research to address key development constraints in the region. The micro- enterprise development component would promote, on a pilot scheme basis, the development of the informal sector and the establishment of village credit associations. The Geographic Information Service (GIS) would support surveys and inventories, selection and management of conservation areas and monitoring and evaluation. The Project would finance land surveys needed for land titling. This document has a restricted distribution and n.ny be .tsed by recipients only in the performance of their official duties. Its contents may not otherw'se be disclosed without World Bank authorization. - ii - STAb_FF APASAL REPORT REP"LIC OF TNIS:A NORTHWEST MOUNTA0INOUS AREAS DEVELOPMENT PROJECT Low and Project Sunumary (continued) Benefits and sks: Project benefits focus on poverty reduction and sustainable resource management. The project would increase the incomes of poor farmers living in remote, mountainous and hilly areas in the Northwest region by increasing output of crops, fodder, and livestock products. It would also increase vegetative cover and control soil degradation. By adopting a participatory approach in planning and implementation, it would give village communities an important role in planning and managing their own development needs. It would also make rural service agencies r.ore responsive to village communities' priorities. Its success could provide a model for participatory poverty reduction and natural resource management in Tunisia and elsewhere. Nevertheless, the project has institutional and technical risks: poor participation by beneficiaries, slower adoption of improved farming practices and sustainability. The projects' participatory approacr. is designed to gain the trust and involvement of the benefliciaries, generate a sense of ownership, and ensure sustainability. Technologies have already been successfully introduced in the project area. However, in areas where this has not been the case, treatnents would be tested and adopted. The project design incorporates relevant experiences from completed and ongoing projects, adopts a conservative implementation schedule, and limits project interventions to viable priority activities. STAFF APPRA1SAL REPORT REPIBLC OF TUNISA NORTHIWEST MOUNTAINOUS AREAS DEVELOPMENT PROJECT Lean an, Prolect Summay costs. FInda and Disbursement Summary FtuLated Proiect Costs Local Foreign.oa -IJ S$ million)- COMPONENTS Agricultural Development 3.1 1.8 4.9 Watershed & Rangeland 7.7 1.2 8.9 Income Gen. Activities 1.0 0.1 1.1 Applied Research 0.5 0.7 1.2 Inst. Strengthening 2.1 2.4 4.5 Rural Infrastructure 9.6 7.2 16.8 Unallocated 1.3 1.0 3 TOTAL BASE COST 25.3 14.4 39.7 Physical Contingencies 2.2 1.4 3.6 Price Contingencies 5.9 15 7.4 TOTAL PROJECT COSTS 33.4/ 1. 50.7 *Totals may not add up due to rounding. La including US$8.2 million of taxes and duties Source Local Foreign Total -=----(US$ million)- World Bank 10.2 17.3 27.5 Beneficiaries 3.7 3.7 Goverrnent 11.3 - 11.3 Net Project Cost 25.2 17.3 42.5 Taxes & Duties 8.2 - 8.2 TOTAL 33A 17.3 50.7 Fstimated Disbureot IBRD Fiscal year 122.4 125 1996 1997 1998 1999 2000 2001 2002 Annual 0.04 2.7 3.2 5.5 4.4 5.5 4.4 1.0 0.5 Cunmulative 0.04 2.8 6.0 11.5 15.9 21.4 25.8 26.9 27.5 Economic Rate of Return: 14 percent Staff ARRWrS Report: No. 12431-TUN DUNs No.: IBRD 25128 IBRD 25129 STAFF APrrASAL RERORT REP ]BLIC OF SIA NORHWEST> OlUTAINOXUS AREAS DEVELOPMGMT PRQJX3T Table of Contents I. NTRODUCTION .. ................... I II. THE RURAL SECTOR ........................... . 2 A. MainFeaures ................. .3 B. Poverty and Basic Servim ...3 C. Constraints Relevant to the Projec ..4 D. Bank Lending in Agriculture and Lessons of Experience ................. 5 E. Bank's Lending Strategy for the Sector ............................ 8 M. THE PROJECT AREA ............................, 8 A. Location and Resources ........................... 8 B. Farming Practices and Potential ........................... 9 C. Population and Employment .............. ............. 10 IV. THE PROJECT ........................... 10 A. Objectives ................ ............... 10 B. Rationale for Bank Involvement ................................. 11 C. Main Components ............1........... 1 D. Detailed Features .... ................... 12 E. Cost Estimates ....................... 16 F. Financing ...................... 17 G. Procurement ....................... 18 H. Disbursements ......... ............. 20 I. Accounts and Audit ................... ..................... 21 V. ORGANIZATION AND IMPLEMENTATION ......... .. .............. 21 A. Inplementation Strategy ..................................... 21 B. Project Implementation ...................................... 23 C. Project Organization ........................................ 24 D. Monitoring and Evaluation .................................... 25 VI. PROJECT BENEFITS AND RISKS ..26 A. Project Benefits .26 B. Economic Analysis .28 C. Project Risks ............................................ 28 VI. AGREEMENTS AND RECOMMENDATION .......................... 30 This report Is based on the finns of an apprisal mision which viited Tunisia In June 1993, composed of Messrs. M. Woldu (Task Manager), Stier (Bank), Doolette, Mlly, Lazier, UIberg and Tiller (Consultants) (ii) STAFF APPRAISAL REPORT REPUBLIC OF TUNISIA NORTWEVST MOUNTAINOUS AREAS DFVELOPNENT PROJECT Table of Contents (continuedj Page No. Supporting Tables Table 1. Project Cost Sumr-ry ................................. 32 Table 2. Project Components by Year, Base Cost ..................... 33 Table 3. Project Components by Year, including Contingencies .... ......... 34 Table 4. Estimated Schedule of Disbursements ....................... 35 Annex 1. SupervisionPlan ......... ........................... 36 Annex 2. Implementation Schedule .............................. 43 CHART 1. ODESYPANO's Organizational Chart 2. Douar Development Plan Scheme MAPS 1. IBRD 25128 - Project Area Boundaries 2. IBRD 25129 - Sub-Project Areas (micro-zones) ANNEXES IN TIlE IM.LEMENTATION VOLUME 1. P.verty and Community Participation 2. Agricultural and Animal Production 3. Watershed and Rangeland Management 4. Organization and Management 5. Income Generating Activities 6. Financial and Economic Analysis 7. Project Cost Summary 8. Key Monitoring and Evaluation Indicators 9. Summary of Implementation Schedule 10. List of Selected Documents and Data Available in the Project File STAFF APPRAISAL REPORT REPUBLIC OF TUNISIA NORTHWEST MOUNTAINOUS AREhS DEVELOPMENT PROJECT I. INTRODUCTION 1.01 Despite impressive socio-economic progress, about 7 percent of Tunisia's population or an estimated half-million people still live in poverty. The majority of the poor live in rural areas with about one third of the rural poor situated in the Northwest region of the country. Average household expenditures in this region are less than 60 percent of the national average. The cause of this poverty is ,oth low productivity and lack of infastructure. Agricultural yields are low-the result of inappropriate farming practices, soil erosion, limited adoption of new technologies, and low levels of investment. Soil degradation is widespread lowering agricultural productivity and causing siltation of important dams in the region. Moreover, the region lacks productive-enhancing services such as extension and applied research and basic infastructure as feeder roads, potable water, health centers and schools. Unemployment is high resulting in large outmigration of male heads of household, further contributing to the ranks of the poor in urban areas and other regions. 1.02 To increase the income and improve the living conditions of the population of the region and to reduce future degradation of its natural resource base (thereby arresting the decline in agricultural productivity and sedimentation rate of the Sidi Salem reservoir), the Govermnent prepared a fifteen-year cievelopment program and launched in 1982, the Bank-funded Northwest Rural Development Project (NWRDP) (Loan 1997-TUN). The project, which supported the first part of a 15-year pregram, was completed in 1989. The Bank provided financing through the ASAL II (Loan 3078-TUN) for the interim period 1990-93. 1.03 Poverty reduction and development of the Northwest region remain top Government priorities. At a Government organized conference in Tunisia in July 1992, participants-including government officials, farners, NGOs, and external development agencies-reconfirmed the importance of the region and discussed poverty reduction strategies. The conference agreed on the need for: (a) an integrated approach which recognizes the interrelationship between decline in agricultural productivity, natural resource degradation, and rura! poverty; (b) a participatory approach to ensure the involvement of beneficiaries in project selection, preparation and execution; and (c) provision of enabling infrastructure and essential support services. 1.04 The Government requested that the Bank support a project that builds on the experience of the NWRDP and follows the principles agreed at the July 1992 conference. The proposed Northwest Mountainous Areas Development Project (NWMADP) was prepared by the Government with the assistance of the FAO/CP and is based on the lessons learned from the NWRDP and other poverty alleviation projects and utilizes, in particular, the successful experience of GTZ-financed pilot activities in the same geographic region. It was pre-appraised by the World Bank in January 1993 and appraised in June 1993. The project is consistent with the Bank's Country Assistance Strategy discussed at the Board in May 1993. This strategy identifies poverty reduction and natural resource management as key developmental issues for Tunisia in which the Bank will play a leadership role, helping the Government through lending, analytical work, and donor coordinaticn. - 2 - II. TlE RURAL SC R A. Mobheatg 2.01 Tunisia land area can be divided into three main ecological zones. The northern zone covers 25 percent of Tunisia's land area, and is characterized by high rainfal (400-1000 mnm), the most fertile land in the ccuntry. The Northwestern corner of this zone contains productive natural pastures and forests, and is the area in which the proposed Northwest Mountainous Areas Development Project is located. The central zone covers 15 percent of Tunisia and receives between 200-400 mm of rainfall and is used agriculturally primarily for cereals, olive trees, and as pasture-land for grazing. The region is dominated by alfalfa grass and large shrubs. The Southern region covers 60 percent of the country's total land area and is a pre-desert zone receiving less than 200 mm of rainfal each year. Vegetation is sparse consisting of primarily of low growiwg shrubs. h.ere is some extensive grazing, and some irrigated agriculture based on the use of ground water obtained from wells. 2.02 Out of a total land area in Tunisia of about 16.4 millioI hectares, land for agriculture and grazing totals 8.5 million ha (52 percent). Of this, the cultivable area covers 5.2 million ha; forests and grass cover 1.2 mnillion ha, and 2.2 million ha are used for grazing. In 1990-91, 33 percen of the cultivable area was planted in cereals, 33 percent under fruit trees, 5 percent under forage crops, 2 percent under pulses, 3 percent under vegetables and industial crops and 22 percent was left fallow. Widespread soil degradation is one of the most serious problems threatening a large proportion of the productive land. Most of the people who live in or around forests are dependent to varying degrees upon forestry for employment, fuel wood, grazing, and other forest products. In the forest .reas, population density ranges from 60 to 120 inhabitants per kIni exceeding the national average of 36 inhabitants per kma2. Erosion threatens about 3 million ha, of which about half is already badly eroded. 2.03 An estimated 3.0 million people, or 37 percent of Tunisia's population live in rural areas. For the majority of the rural residents, agriculture is the main source of income aud employment. Farming practices are traditional, predominantly rainfed, and prone to production risks linked to variable climatic factors. Mixed farming is common, with about 60 percent of the households raising livestock. The size of Tunisia's livestock herd is increasing with cattle and poultry the most rapidly. Milk and meat yields for cattle and sheep are low due to inadequate feed quality and quantity; a frequent lack of water; and local breeds of livestock which, though hardly able to survive under harsh conditions, are poor meat and milk producers, frequent incidence of poor livestock shelters, poor sanitary conditions, inadequate livestock health services and general absence of milk marketing outlets. 2.04 Unemployment and underemployment are high, estimated at 16 percent and 50 percent, respectively, and rising, resulting in large outmigration of predominantly adult male heads of household to urban areas and abroad. Migration has resulted in urban congestion, exerting pressure on housing, sewage, waste disposal, water distribution, transportation, and energy. While emigration has been a major outlet for surplus labor in the past and a source of remittances, prospects for significant net out-migration in the years ahead appear limited. -3- B. Povertv and Basic Services 2.05 Tunisia has achieved substantial gains in the incomes and living standards of its population, and the proportion of the population living in poverty declined significantly from 22 percent to about 7 percent between 1975 and 1990. This reduction is attributed to the country's rapid economic growth. Despite such an impressive progress, however, an estimated 0.5 million people live at or below the absolute poverty level of US$200 of which about 50 percent are in rural areas. Average household expenditurr re less than 60 percent of the national average. Among the poor, women and the landless are particu'ukiy disadvantaged. TLe concentration of the poor is significantly higher in the Northwest region where 33 percent of the nation's rural poor live. Within the region poverty is concentrated in mountaivous areas where erosion and deforestation are severe, the natural resource base is poor and basic infrastrucrure and social services are lacking. 2.06 Poverty in rural Tunisia and degradation of natural resources are closely linked. One of the most fundamental constraints to increased agricultural production and unproved well-being of the people of the rural population is soil erosion and deforestFion. Despite the potential to improve crop and animal production, agricultural yields remain low, the result of limited use of fa m technology, lack of services, and soil deterioration. In addition, off-farm incc-ne and non-traditional activities that could supplement agricultural incomes and employment have not been developed despite potential demand in nearby cities and tourist centers. 2.07 Despite significant improvements in socio-economic indicators, access to basic social services in the rural areas remams inadequate. Dnnking water remains one of the main constraints where as much as 50 percent of the rural population lacks access to safe water. The great majority rely on community wells, water peddlers, streams and reservoir which are usually unsanitary. The infant mortality rate in the rural areas is 95 per 1000 live births, compared with 66 for all of Tunisia, and illiteracy averages 60 percent, compared with 45 percent for the nation as a whole. The illiteracy rate varies significantly by gender with twice the proportion of females as of males classified as illiterate. Many villages do not have schools, and in those areas with schools, difficuldes renman in mainning school attendance among rural children, particularly girls, due to, among other things, inadequate saitary facilities. 2.08 The road network is linmted to rudimentary unimproved earth roads, most of which becomt impassable in winter. Most vilage communities remain isolated. The main rural roads lack maintenance and very often disintegrate shortly after construction due to poor workmanship. Most roads are unclassified roads, unimproved earth tracks which are outside the responsibility of the Ministry of Public Works. Limited access in the rural areas prevents efficient execution of agricultural extension services and hinders marketing activities and delivery of inputs to farmers. Largely due to lack of maintenance, an increasing proportion of the road network has deteriorated. 2.09 Agricultural services are organized at the regional (Govemorate) level in Agricultural Commissions ("Commissariat Regional de Developpement Agricole," CRDA). CRDAs are responsible to provide agricultural extension to farmers, undertake forest planting and management and coordinate the various public organizations and project authorities working in agriculture at the Governorate level. Because of weak institutional capability and limited resources, CRDAs are particularly ill-adapted to serving areas such as that proposed to be developed under the Northwest Mountainous Areas Development Project (NWMADP) characterized by mountainous terrain, a high rate of soil erosion, a poor population dependent on small fragmented holdings, and large tracts of land more suitable for forests -4 - and pastures than for cereal production. The proposed project would support and strengthen supplementary support services specifically directed at the problems of the Region C. C_rn, Re-InLant tO th Prolec 2.10 The main natural resource and Institutional constraints facing the rural sector which are of particular relevance to the project are: (a) scarcity of agricultural land; and (b) land tenure issues; and (c) inadequate agricultural support services. Scarity of ARIcuItura Land 2.11 The major constraint facing the rural sector in general and the Northwest mountainous areas in particular is scarcity of agricultural land relative to the rural population (2.4 ha of cultivable and pasture land per person). With a high household/land ratio, most farms are smal', often too small for viable faming under rainfed conditions. As the rural population increases, so does the cropping of marginal land and the size of livestock herds in pasture land. 2.12 About 1.5 millioni ha of arable land are seriously threatened by soil erosion and water run- off due to inappropriate agricultural techniques and lack of vegetation. This has resulted in high levels of sedimentation in the country's 13 major dams and a reduction of about 30 percent in their total storage capacity. The rangelands and forest areas are undergoing serious degradation, caused by overgrazing and uncontrollec tting for firewood. Marginal lands on steep slopzs which are prone to erosion are being increasingly brought under cultivation, and expanded livestock herds increasingly overgraze pasture land, destroying vegetative cover, and accelerating soil erosion. In the Region, the proposed project would assist in raising productivity and hence the viability of small farms while addressing the deterioration of the soil, pasture and water resources. Other efforts more broadly based in the country are being supported by the Agricultural Sector Investment Loan (ASIL). Land Tenure 2.13 Land tenure issues form one of the major constraints to agricultural developments. The most important manifestations comprise (i) lack of security of tenure, (ii) fragmentation of holdings, and (iii) poor management of resources by absentee landlords. Land tenure constraints lower the productivity of land; an absence of land titles (only partially compensated for by certificates of possession) impedes transactions in land, raises difficulties in using land as collateral for loans, and redtices incentives to invest in land improvement; increasing firgentation of fanms due to the inheritance laws represents one of the major constraints to improved environmental management by small farmers; and a long titling process discourages land registration. 2.14 The Government has recognized the severity of these problem and has imposed a maximum and niinimum farm size in irrigated areas, undertaken land consolidation, and issued titles. The Governnent is developing a strategy for tackling these problems by defining the legal and institutional framework for addressing constraints on agrarian land holdings in rainfed areas, particularly increasing fragmentation. Plans are to follow up with a pilot land consolidation program which will be supported by the ASIL. These issues are of particular importance in the Northwest region - the area in which the NWMADP would be located. The proposed project would support pilot land titling effort by carrying out land surveys. -5- Anictura SUf rSr 2.15 Agricultural support services remain weak, parnicularly in research, extension, and credit. The major problem of agricultural research is its excessively theoretical orienitation and lack of responsiveness to curren agricultural problems faced oy farmers. Ag-cultural extension is inadequate particularly to small and medium-scale farmers. The Bank-financed Re' -arch and Extension Project (Ln. 3217-TUN) is carrying out a nationwide restructuring of research and extension services with the aim of improving efficiency of research and quality of extension througb training. The proposed project would strengthen agricultural services in the mountainous areas (para. 4.054.10) and would support demand-driven applied research to address specific development constraints of tie region (paras. 4.17-4.19). 2.16 Major issues in rural credit include limited accessibility to small farmers to finance farm inputs, low loan recovery, long approval process and government-controlled low financing margins which are making lending institutions unwilling and unable to cope with the high transaction cost in the distribution and recovery of credit to small-scale farmers. The Government is taking action to remedy the situation through a new uniform investmnent code and the decision to let the banks determine lending terms in line with market forces. With assistance from the Bank through the proposed Rural Finance Project which is under preparation, the Government would strengthen the BNA and, in particular, would improve its monitoring and evaluation procedures. 2.17 Development of resource-poor rural areas facing problems of natural resource degradation continues to be a major preoccupation of the Government. The Government is addressing these constraints through appropriate policy measures and investment programs. These measures include: public investnent in the rehabilitation and maintenance of natural resources and rural infrastructure with participation of village communities, improving formal land titling and promoting the consolidation of farms into viable economic units through legal reforms and economic incentives, improving the efficiency of research and extension, strengthening rural financial markets, and strengthening agricultural support services. 2.18 The proposed project aims at reducing rural poverty through sound project interventions that integrate increases in agricultural productivity and support for non-farm production activities with conservation of natural resources and the provision of basic social infrastructure. Projects and programs which are well targeted focussing on priority activities and which also improve access by the poor to basic social services (education, water, health care) have proven to be most effective in improving living conditions of the poor. D. Bank Lending in AricuIture and Lessons of E xeience 2.19 The Bank has supported and is continuing to support Tunisia's agricultural sector through lending for agricultural credit, rural development, forestry, fisheries, irrigation, research and extension projects, and sectoral adjustment. To date 101 loans and credits have been made in all sectors, supported by US$4.4 billion Bank and IDA finds, net of cancellations. In agriculture, 16 projects have been completed and five are being implemented, totaling US$573 million in Bank lending. These include: (a) two loans for fisheries development (FY72 and FY80,both completed); (b) seven irrigation projecs, of which five have been completed: Irrigation Rehabilitation (FY75), Sidi Salem Multipurpose Irrigation (FY78), Southern Irrigation (FY79), Medjerda/Nebhana Irrigation (FY82), Central Tunisia Irrigation -6 - (FY83); two are on-going: Irrigation Management linprovement (FY86) and Gabes Irrigation (FY86); (c) four agricultural credit projects (FY72, FY77, FY81, and FY88), all completed); (d) three area development projects: Cooperative Farmn (FY67), Northwest Rural Development (FY82), and Northwest Agricultural Production (FY85); (e) a grain storage and distribution project (FY82). all completed; (f) two agricultural sector adjustment loans (FY87 and FY89), one of which has been satisfactorily comnpleted; and (g) an on-going forestry development (FY88) and agricultural research and extension projects (FY91). The Second Forestry Project has recently been approved by the Bank. The Agricultural Sector Investment Loan (ASIL) has been approved by the Board on Novernber 18, 1993 and the Rural Finance and the Rural Road Projects are in an advanced stages of preparation. In general, project performance in the agricultural sector has been goed to excellent with only a few exceptions. The agricultural portfolio is performing extremely well with all projects without significant problems. The policy dialogue is excellent with Bank missions having access to important policy makers. Performance of Related Projects 2.20 Performance of Bank-financed projects directed at the Northwest Region has been mixed. Recently OED reviewed projects in Tunisia which are of particular relevance to the proposed project include the Northwest Agricultural Production Project (Loan 2502-TUN), and the Northwest Rural Development Project (Loan 1997-TUN). The Project Performance Audit Report (PPAR) of the Northwest Agricultural Production Project (Loan 2502-TUN) noted that the project suffered from a top- down management structure and a frequent turnover of management and key staff. It highlights that for extension programs to work and be sustainable, projects need to be well-designed and tailored to the needs of the various categories of farmers who should actively participate in demonstrations of new technologies and training. The audit emphasizes the importance of realistic project preparation, and the need for technologies to have been tested in Tunisia before they are introduced on a large scale. The Agricultural Research and Extension Project has used the lessons of this projec. to carry out a nationwide reorganization of research and extension services. 2.21 The Northwest Rural Development Project (Loan 1997-TUN) was directed at poverty reduction and environmental conservation. The project becane effective in 1982 and was closed in 1989, two years behind schedule and after two extensions. The project successfully provided badly needed basic services including water supplies and schools and raised consumption levels. Access roads financed by the project made a big difference in the lives of the isolated rural people in the mountains. Efforts to slow down degradation had mixed results: control efforts succeeded in ravines; installation of gully plugs and plantings on banks exceeded targets; construction of stone terraces along contours met targets, but vegetative contour bands disappeared later; stone contour terraces were accepted on fallow land because the collection of stones made the land fit to cultivate; and targets on pasture improvements were met partially; but measures on private lands were not accepted. Project activities to increase agricultural production were less satisfactory due mainly to shortages of extension staff, frequent management changes and weak farmer participation. Lessons from Experience 2.22 The main lessons are: (a) sustainable development of resource-poor areas can only be achieved through beneficiary participation in project planmng and implementation; (b) projects which depend on a participatory approach through promotion of village groups require longer preparation period; and (c) the need for a thorough understanding of prevailing farming practices and the importance of testing technologies before they are introduced on a large scale. -7- 2.23 Lessons from the above two projects, particularly the NWRDP, and from other relevant international experiences with poverty and environmental projects have been considered in the design of this project. Four features, derived from these lessons, have been incorporated in the design of the proposed project. First, unlike the first project, a participatory approach has been adopted since the early stages of preparation of this project, as evidenced by the participation of beneficiary representatives, government officials and donors in workshops organized by the Govenmment. In 4ition, to methodically include as wide a participation as possibte, the project was prepared over a four-year period of intensive discussion and reflection. The resulting participation approach would ensure the commitment and cooperation of the beneficiary population. 2.24 Second, in view of the project authority's "Office du Developpement Sylvo-pastoral du Nord-Ouest" (ODESYPANO) overly centralized structure and top-down management approach, it has been reorganized into a decentralized structure more adapted to the participation of village communities. Furthermore, an action plan and timetable has been agreed with the Government on the disengagement of ODESYPANO from certain activities (e.g., input supply, credit, milk collection) in order to meet the challenges under the newly defined mandate of participatory development. The implementation strategy envisages a participatory approach which promotes village organizations and local NGOs in decision making and execution of project activities. In the course of planning and implementing, villagers would be consulted and invited to participate in the definition of their priority development needs, detailed investment opportunities and implementation arrangements. This strategy combines a centralized definition of objectives, management and M&E within ODESYPANO, with a decentralized execution including public and private organizations (NGOs and village organizations). This approach allows for much greater flexibility than the strategy under the first project. Purthermore, by relying on the ability, experience and motivation of village organizations, it would promote intensive participation of beneficiaries at all levels. 2.25 Third, because of the implementation experiences gained in the NWRDP, ODESYPANO staff have a better understanding of the ecological conditions in the project area's various micro-regions. Furthermore, technical opportunities exist that could address major constraints in crop and animal production in the project area. To improve the chances of adoption of imoroved farming systems, the project would promote technological packages that have already been tested in the area. For certain technical constraints for which no technological package exists, the project would support applied research to address priority areas. The project would strengthen the agriculture extension network, by putting in place subject matter specialists and extension agents (male and female) and by enriching their competence with additional training. 2.26 The proposed strategy would demonstrate to the village community technological opportunities in farming systems, soil conservation methods and range management practices. The experience under a pilot scheme provided valuable experience in integrated farming systems approach linking crop, animal production and soil conservation activities and in developing a participatory approach. Furthermore, using the experience of the on-going Forestry project, pilot improved pastures would be established on state land for use by herders and as compensation for traditional forest use which is increasingly unavailable. Local participation is actively promoted in the establishment and use of these improved pastures, which is proving successful. 2.27 Fourth, to promote the participation of women in the planning and management of their resources, the project would recruit and train women development agents and wonld support specific actions designed to improve their social conditions (potable water, school and health services) particular -8- women's needs and benefit women's groups in these rural areas. To supplement agrcultural incomes, the project wculd support, on a pilot basis, off-farm and non-traditional activities the products of which are demanded in nearby cities and tourist centers. The main beneficiaries are expected to be women and the landless. E. Bank's Lending Stea for the Sector 2.28 The Bank's lending strategy for the sector has aimed at increasing output productivity and exports, and supporting the necessary policy and institutional refonms in the sector (Agricultural Sector Assistance Strategy Brief No. 1 1579-TUN). This has included: (a) supporting institutional strengthening and particularly technical support services of research and extension, improving implementation capabilities especially at on-farm level and reforming government enterprises involved in agricultural marketing; credit and input supply; (b) rationalizing the public sector investment program especially in irrigation, forestry, soil and water conservation works; and (c) expanding credit supply, especially for small and medium farms, together with increasing the efficiency of credit institutions, and improving fnancial sector policies to encourage greater private investment in the sector. 2.29 Also important in the Bank's lending strategy are measures to reduce subsidies and price supports to promote increased use of market forces, interest rate refonns and more private sector involvement in agricultural marketing, increased focus on environmental concerns to ensure that in the long-rnm Tunisia preserves the natural resource base for sustainable agriculture; and increased focus on poverty reduction with the active involvement of the population by supportng measures to unprove the income and living conditions of the disadvantaged population tirough improved agricultural productivity and promotion of off-farm income supporting activities, and provision of basic social services (primary education, potable water and health services) and access roads. M. THE PROJECT AREA A. Location and Resources 3.01 The NWMADP's development actions would cover an area of about 310,000 ha, mainly in the Northwest region of Tunisia. The project area extends into five governorates: Beja, Bizerte, Jendouba, Kef and Siliana with significant variations in rainfall and slopes. The area to be developed contains three distinct agro-ecological zones named after significant geographical features, namely, Kroumirie-Mogods, a mountain range, and Oued Zarga-Oued Khil and Oued Tessa, which are rivers. The physical environment of the project area is described in detail in Annex 5. 3.02 The Kroumirie-Mogods sub-project area is the northernmost part covering 154,000 ha of rugged mountainous terrain with extensive forests, high rainfall (600-1500 mm), limited arable land (40%), and a population of over 100,000 people. The zone specifically targeted in the sub-project area total 64,000 ha. This zone covers the northwest portions of the Govemorate of Beja, Bizerte, and Jendouba. The lower slopes and plains are cropped intensively and have a good tree plantation potential, while the cleared land on steeper slopes is heavily eroded and is most suited for pastoral or sylvo-pastoral production systems. -9- 3.03 The Oued-Zarga-Oued Khil sub-project area covers 65,000 ha in Beja and Bizerte Governorates. It is mountainous, with an anmual rainfall of 500-800 mm, a large cultivated area (80%) with serious erosion problems. The target zone covers a .4=1 of 49,000 ha. The proportion of cleared land is much greater than in the Kroumirie-Mogods area. The scrubland has sparse vegetation, and natural grassland is very limited. Much of the area is too steep for annual crops. The Lower Oued Tessa sub-project area, which covers the middle and lower reaches of that river basin, is the soutiernmost of the project area covering parts of Beja, Kef and Siliana Govemorates. It covers 91,000 ha of hilly country, receives lower rainfall (400-550 mm), and it is extensively cultivated (65%). The area is generally steep and heavily gullied. The zone targeted for project action totals 57,000 ha. The farm types are mainly distinguished by size, being essentially the same from an agro-ecological standpoint. In moving from the first to the third sub-zone, the extent of mountains, the natual forest and the average rainfall decreases. B. FEamr ng Practices and Potenal 3.04 Despite marked variations in agro-ecological conditions, the traditional farming systems are surprisingly similar across the project area. The general pattem is subsistence agriculture on small farms with cereal (durum wheat,barley), pulses, and some fodder cropping integrated with livestock production. Soil preparation consists of light plowing. Manual weeding is common on small- and medium-sized farms. The average yields of crops are low: wheat, 0.6-1.1 ton/ha; fodder crops of vetch oats, 2.20-3.40 tons of hay/ha; and food pulses, 0.6 ton/ha. The lowest yields are in the lower Oued Tessa region, while the highest are in the Oued Zarga and Oued hil regions. 3.05 Livestock management is extensive and semi-extensive. The relative importance of cattle to sheep/goats varies with rainfall, with catde (mainly indigenous breeds) being more important in the more hunuid regions and sheep and goats dominating in the semi-arid areas. Small farms possess an average of half a cow, five sheep, and two goats. Medium-sized farms in general have only three times those numbers, in spite of their proportionately greater land resources. Nutrition is the major constraint to improved livestock production because natural pastures are degraded due to overgrazing and lack of management. Major livestock productivity increases could be achieved by cross-breeding with more productive stock, improvements in fodder availability, and animal health services. 3.06 The main sources of fodder are forests and naual pastures which have been degraded by overgrazing and consist maily of herbaceous and shrubby species with low nutritional value. Fallow, cereal stubble, and fodder crops also supply significant quantities of fodder. During the winter when there is a shortage of natural fodder, grain, straw and hay are often fed as supplements. Applied research is currently being carried out to identify management systems which can improve the nutritional value of the natural pastures on forest lands. 3.07 Settlement is scattered and the villages contain a number of smaller settlement units or "douars".' Land distribution is skewed, with the smallest farms often non-viable. About 83 percent of farms in Kroumine-Mogods and 65 percent of farms in Oued Zarga/Oued Khil and Oued Tessa are less [/ A "douar" is a rural settlement of interrelated extended families linked by tribal ties and having its own defined territory. The "douar" represents the unit of intervention for the project. - 10- than 10 ha as a result of considerable fragmentation. The project area was selected on the basis of the criteria which consists of severe soil erosion and deforestation problems, lack of infrastructure and basic social services and the willingness of the douar members to participate in the project. Of its 310,000 ha, 170,000 ha (or 55 percent) are seriously threatened. The remainder is already under forests and pastures (30 percent), used for non-agricultural proposes (7%), cultivated in the plains (8%). Project's intervention on soil conservation and agricultural intensiftcation would be undertaken on the 170,000 ha which are threatened and can be improved with available technical packages . 3.08 Agricultural yields are low - the result of the cultivation of crops in unsuitable conditions (high slopes, poor soil), and limited adoption of new technologies, and low levels of investment. Livestock development is constrained by limited feed than can be supported. A large proportion of arable land is being exploited beyond sustainable levels forcing cultivation in marginal lands on steep slopes prone to severe soil erosion. Off-farm and non-traditional activities that could supplement income and employment from traditional activities have not been developed despite potential demand in nearby cities and tourist centers. The proposed project would strengthen extension services to promote adoption of new technologies and increased feed availability and animal health services. It would also promote pilot miicro-enterprise development schemes. C. Population and Emplovment 3.09 Population density varies from 32 people per Km2 in Oued Tessa, 45 people per Km2 in Oued Zarga/Oued Khil to about 70 in Kroumirie-Mogods. The project area has a total of about 170,000 people area, or about 20,000 farm families including the landless. There is a significant migration from the Northwest to urban areas and abroad. About 15-20 percent of the male population leaves the region at least once per year looldng for temporary work. As a consequence, the population of the region is growing at about 1.5 percent per year compared to 2.2 percent per year for Tunisia as a whole. The reason is poverty, with an estimated 25 percent of the area's rural families having incomes at or below the absolute poverty level compared to 7 percent for Tunisia as a whole. Agriculture work occupies only 60 percent of the available work time of the area's agricultural labor, suggesting considerable underemployment. IV. THE PROJECT A. Obiectives 4.01 The principal objectives of the Proposed NWMADP are to alleviate poverty, improve the well-being of the region's population, and to arrest degradation of the natural resource base with active involvements of the population. To this end it would: (i) promote measures to increase on-farm productivity and off-farm income supporting activities; (ii) improve the management and productivity of range and farm land; (iii) promote measures to reduce erosion, run-off, and reservoir sedimentation; (iv) miprove social conditions of the disadvantaged population by providing basic infrastructure and social services; and (v) promote increased involvement of village organizations to take on development responsibilities. 4.02 Other parts of Tunisia face problems of rural poverty and natural resource degradation sminiar to those in the project area. The project is thus expected to provide a usefil model for a sustainable poverty alleviation and enviromnental improvement which could be replicated in other regions of Tunisia and in similar socio-economic conditions in mountainous areas elsewhere in North Africa. B. Rationale for Bank Involrement 4.03 The proposed project fits well wit, the Bank's Country Assistance Strategy, discussed by the Board in May 1993, and addresses four pillars of this strategy, which are: (i) focus on poverty alleviation and support for social sectors; (ii) protection and better management of the country's fragile natural resources and the environment; (iii) restructuring of the public sector; and (iv) development of the private sector. Because of its broad experience with poverty reduction and natural resource management projects, the Bank is well-placed to assist the government in guiding and supporting a rural poverty reduction project with a strong emphasis on natural resource improvement. The Bank's participation has served as a catalyst in mobilizing other donor's funds and assistance (e.g., GTZ and EEC) to finance complementary activities in the same geographic region. Finally, this project complements the Bank's operations under the ongoing Research and Extension Project (Ln 3217-TUN) and the Second Forestry Development Project (Ln 3601-TUN) as well as under proposed projects: the Agricultural Sector Investment Loan (ASIL) recently approved, the Rural Finance and National Rural Roads projects, in an advanced stages of preparation. Each of these would support complementary activities in the region. The Country Enviromnental Study and National Action Plan's (Report no. 8198- TUN) conclusions and recommendations have been taken into account especially with respect to rangeland management, land use practices, and soil and water conservation measures. C. Main ComDonentS 4.04 The project is designed to address important problems of rural poverty and natural resource degradation by assisting the population in making better use of the limited natural resources available to them. The main components would include: (a) AgAicultural Development which would enhance farm productivity through improved crop production practices and increase emphasis on livestock; it would also support land titling efforts through land surveys; (b) Watershed and Rangeland Management which would involve, with the participation of village communities, measures to reduce erosion, run-off, and reservoir sedimentation, and to improve rangelands management by restoring and sustaining vegetative cover; (c) Income-Supporting Activities which would support, on a pilot basis, the creation of credit unions for "douars' (groups of settlenents) to promote financially viable on-famr and off- farm rural enterprises with the support of local NGO's which would establish, manage and supervise these credit unions; (d) Applied Research which would support demand-driven short-term research on key technical and socio-economic development constraints of the region; - 12 - (e) Rural Infrastructure which would involve the construction of rural roads to provide access to isolated villages, schools, health centers and potable water sources to improve the social conditions of the disadvantaged population; and (f) Institutional Stren2theninu which would strengthen the technical and implementation capability of the executing agency and the planning capability of village committees through technical assistance and training. D. PIW_fed FEMdU= (1) Ariciutural Development (Base Cost US$4.9 milion) 4.05 To improve and sustain agricultural production within the project area's diverse agro- ecosystems, the project would introduce and promote technical packages which increase sustainable productivity and control erosion. These techniques essentially involve changing crop varieties; improving fertilizer use; changing cropping patterns to reduce cereals and fallow and increase fodder crops; cultivating on the contour. The technological opportunities and options are described in more detail in Annex 5. 4.06 The project would strengtien ODESYPANO's agricultural extension service, particularly its technical capability. The Department of Rural Development at headquarters would have six subject- matter specialist (SMS) coordinators in the fields of community development, watershed and rangeland management, crop production and horticulture, animal husbandry and fodder production, and rural engineering, and women in development. 4.07 Regional offices would be staffed by a team of six subject-matter specialists (SMS) in the areas of community development/training, watershed and rangeland management, agronomy, animal husbandry and fodder production, women in development and rural engineering. Extension would be undertaken through the deployment of male and female extension/community development agents ("animateurs-animatrices") who would be responsible for disseminating improved techniques, extension messages and marketing information to villagers. With the support of the subject-matter specialists (SMSs) based in the three regional offices and at the headquarters, the agents would assist in preparing extension and training programs for village groups. 4.08 In order to reach as many village groups as possible, the service would rely on popular participation through the training and management of male and female "douar extension agents" who would be selected by the village and supported to carry extension messages from the animaurs and subject-matter specialists direcdy to the douars. The project's approach to women's concerns is to integrate them on all levels and in each aspect of the project's extension activities. Female extension agents (animatrices) would be based at each of the CDAs (Extension-Development Centers) to facilitate this process. 4.09 The project would provide short-term consultants of 18 person-months (p.m.) that would be required during project implementation. The project would also provide training to strengthen the extension service to enable the staff to carry out the above activities. Training would be mostly in- country but would also comprise short overseas courses. Major emphasis would be on training extension staff in the principles of the participatory approach, credit management, and improved animal production - 13- and husbandry techniques. Funding would be provided for a mobile communication unit, with extension kits and materials, and video equipment. 4.10 The project would finance incremental extension staff salaries and recurrent cost; housing, vehicles, mopeds and equipment for extension agents; seeds, fertilizers, materials and equipment for demonstration; pilot animal insemination program, and surveys for land titling. (if) Watershed and Rangeland Maaement (ase Cost USSS.9 m9 ln) 4.11 Environmental degradation is a major problem in the project area. Because of the importance of protecting the watershed areas and downstream infrastructure, the project would develop and carry out soil conservation and erosion control activities on a total of about 19,000 ha in selected areas of severe degradation to reduce run-off, soil erosion and downstream sedimentation, to improve water infiltration into the soil, and to restore sustainable vegetative cover in areas capable of responding to such treatments. The project would also promote on-farm conservation measures through the application of simple erosion control practices. Project activities would be carried out within the area of influence of the douar development committee with the participation and contribution of the beneficiaries. The areas treated depend on the demands identified in the douar development plan (DDP) and the douar action plan signed between the beneficiaries and the project executing agency. 4.12 Activities would consist of improved management, including enclosure and the use of rotational grazing to allow regeneration of the vegetation; fertilization and grazing management of areas with adequate seed populations and better soils to improve hay and forage production; seeding with native forage species, and fertilization and grazing management in areas with degraded vegetation to reestablish productivity and agro-forestry. (iii) IH9comWe-Sunortina Activities (US$1.1 million) 4.13 The project would support rural enterprises which cannot be financed by the existing formal credit schemes. As part of the douar action plan and with the objective of organizing self- managed finacing schemes to promote productive activities in the informal sector and of building the communities' capability to manage their own resources, the project would support the creation of Douar Credit Unions (DCUs) and studies to identify potentials and constraints of the informal sector and to devise an action plan for its development and to define lending terms and conditions of the DCU. The proposed scheme is included in the project because existing formal financing schemes do not meet the working capital and investment needs of the informal sector either because the loans are too small, or they do not meet the standard lending criteria and collateral requirements of the lending institutions. 4.14 The proposed pilot scheme would be managed by a local NGO(s) under an agreement with ODESYPANO. The NGO would be responsible for (i) the organization of the DCU, (ii) provision of training and technical assistance to the DCU managers, and (iii) the identification and appraising of investments (in coordination with ODESYPANO extension staff and monitoring the execution of the sub- loans. The NGO would (i) ensure that lending criteria agreed with are adhered by DCUs; (ii) establish the DCUs ability to appraise credit demands with sound financial criteria; (iii) develop simple accounting procedure to record and monitor all transactions made by the DCUs. The NGO(s) would submit quarterly progress reports to ODESYPANO. There are several good examples in Tunisia where local NGOs working at douar level have successfully developed ways and procedures to orgamze credit schemes to promote the informal sector. - 14 - 4.15 The capital of the DCU would consist of participants membership fees and, in proportion of these fees, funds allocated by the project executing agency for this purpose. The DCU would make loans to members, under agreed procedures and criteria, to finance productive activities in the informal sector not satisfied by the banking system. The project funds would be a one time allocation of funds to build the working capital of DCU. Project funds would be made available to the DCU following a confirmation by the DDC and NGO that a DCU has been created and membership fees collected, and agreements have been reached by members that they accept the principles, their rights and obligations of their membership in the newly created DCU. In the initial period of DCU development, the NGO(s) would assist the DCU in considering and approving loans applications to members meeting agreed criteria and if approved, loan amounts would be made available to borrowers under agreements signed between borrowers and DCU. These loans would be repaid to DCU according to sub-loan agreements. With the support of the selected NGO, DCU would be responsible for recovering these loans. Assurances were obtained that the ODESYANO will conclude a contractual arrangement with local NGOs for the management of the income sup.orting activities as described in this paragraph in accordance with terms of reference agreed wit the Bank. and that at least one such NGO will be emnloyed not later than December 31. 1994. 4.16 The establishment of DCUs would be a pilot operation. The Bank and Government have agreed that DCUs should have a recognized legal statute and by-law and several existing laws may provide a suitable legal structure. Based on the progress made by the project to organize DCU along the lines described above, during the first interim review, the Government would determine which of the existing laws would be more appropriate to define the legal structure of the DCU. The objective is to ensure that douar communities would abide by the credit agreements with the DCU. To identify potentials for and constraints to rural micro-enterprises development and to formulate an action plan including training program, short-term studies would be undertaken by a consultant. Assurances were obtained durin2 pe otiations that the ODESYANO will carr out studies, not later tAn Decemnber 3 1. 1994. in accordance with terms of reference satsfator to the Bank: (i) to define potential for.,n constraints to the development of rural enterprises in the proiect area and formulate an action plan: and (ii) to define lending terms and conditions of ggerations of the DCUs. Furthermore, assurances have been-obtained that the recommnendations of such studies shall be imnletnented not later than June 30. 1995. (iv) Applied Research (Base Cost USS1.2 million) 4.17 To develop, test, and disseminate relevant technologies suited to conserve the area's fragile natural resources, to improve and sustain rural productivity, and to enhance farmer's incomes, the project would establish a Research Fund (RP) to support applied research on topics of major concern to the region, usually of short duration, with the objectives of realizing the results during the life of the project. The investigations would essentially test and adopt technologies developed in similar environmental conditions elsewhere and generate information about the region and its resources. This demand-driven, adaptive research would deal with a wide range of topics, such as the effectiveness of the participatory approach as an extension and development tool, natural resource management, agriculture, socio-economic matters pertaining to the role of women, and micro-enterprise development. 4.18 The research would be demand-driven and undertaken by contract with national organizations, institutes, and individuals. The research topics would be developed initially from the expressed needs of the DDCs as obtained through formal meetings and from the needs of the project - 15 - regional staff. Many simple, small contracts with individuals for the collection of data and descriptive information are also envisaged. 4.19 To administer the RF, a committee would be established consisting of the General Manager of ODESYPANO or his representative as its chairman, and representatives from CRDA, IRESA, NGO, and ODESYPANO and an independent researcher. To support the research commnittee, a full-time research administrator would be appointed to perform routine administrative functions. The project would finance six (6) person/months research consultant who would review the work plan, the progress of the research, and the resulting reports. Annex 7 provides details on the responsibilities of the comunittee, its terms of reference, and reporting requirements for contracted research. Assurance was obtained during negotiations that. as a condition of effectiveness, a Research Committee would be set uR by the Government to manage the RF in accordance with ternms of refer_nce acceptable to the Bank. (v) Institutonal Senfthenim! (Base Cost US$4.5 million) 4.20 The project would strengthen the planning and implementation capability of the executing agency, ODESYPANO, to meet its newly defined mandate as well as support the promotion and strengthening of village groups for active participation in planmng and execution of project activities. An estimated 21 person-months of short-term technical assistance would be provided to assist in planning, monitoring and evaluation, provide support in project implementation and to promote community participation. Short-term consultants and local technical assistance would also be provided for training in watershed and rangeland management (GIS) and community participation, and ls p-m of study tours and 200 p-m of in-country training mainly for development agents. Provision is made for the procurement of equipment, mainly bulldozers, compactors and tractors to strengthen ODESYPANO's capability to maintain rural infrastructure works. The project would also strengthen ODESYPANO's Geographic Information System (GIS) through provision of training, and technical assistance essental for planning, monitoring, and evaluating project activities, including watershed and rangeland management activities. 4.21 The project would fimance incremental staff salaries, vehicles, office equipment, and incremental operating expenses and training. Six key staff positions would need to be filled to ensure satisfactory implementation of project actions. These consist of the Director of Planning, Chief of Accounts, and four subject-matter specialists, and seven male (animateurs) and 12 female (animatrices) development agents. During negotiations. assurance was obtained that these key staff positions will be filled according to the following timetable: Director of Plan. and Head of Accountants unit not later than March 31. 1994: the necessary Subject-Matter Specialists not later than June 30. 1994: and 19 Extension agnts: seven not later than December 31. 1994, other seven not later hn December 31. 1995. and five not later than December 31. 1996. (vi) Rural Infrastucture (Base Cost US$16.8 million) 4.22 To provide isolated villages access to markets and potable water and to improve basic education and health services to the population of this impoverished mountainous region, the project would finance the construction and maintenance of such basic infrastructure as rural roads, schools, health centers, and potable water sources. Beneficiaries would contribute labor and in kind estimated at 10-15 percent of the cost of infrastructure works. The project would provide for the construction of some 300 km and mainace of 650 kms of feeder roads; 6 development centers and staff housing; the construction of eight schools, 25 classrooms; 10 health centers; water supply systems consisting of 19 - 16- wells equipped with a pump and a reservoir; the drilling of 28 wells in areas without water supply; the installation of 60 water tanks; and the building of 15 farm ponds. The proposed farm ponds would have a maximum capacity of 50,000 n3 and would not exceed 10 meters in height.. Given the size and likely location of these farm ponds, expropriation of land and resettlement of population are not envisaged. Specific proposals for construction woutd be evaluated by ODESYPANO before being included in the douar action plan and qualifying for bank's financing. Assuances were obtained at negodiations that ODE PANO woud prepag: (i) a detailed nrotram of construction, for the first year of the project by June 30. 1994. aI d that the program for the remainin? years would be available by Se,tember 30. for each of the followingyears: and (ii) for ah fann pond proposed to be const cted. a feasibility studv covering teWhnical and -environmental aspects. including sUfety and socio-economic iustifications, will be submtted to the Bank for revie and arov. including confitmation that the ptoposed farm ponds to be constructed would not cause any resettlenent of people in the area. In addition. ODESYPANO will closely follow an environmentl guuideline a_red to with the Bank to screen and mitigate any potentially adverse envitronmental effect in the construction of rural infrastructure Wworks (vi) Unallocated (Bae Cost US$2.3 million) 4.23 Project implementation would be carried out through an interactive participatory planning process where ODESYPANO staff together with villagers prepare and implement a DDP, defining project interventions. The costs of these interventions cannot be determined in advance with any accuracy because the specific interventions and their scope will be established progressively with the preparation of DDP and under specific action plan between the douar members and project authorities. To provide flexibility, US$3.0 million (representing about six percent of total project cost) would be set aside under unallocated category. Based on progress made, the use of these funds would be determined during the interim evaluation period. E. CtF e 4.24 Total project costs, including physical and price contingencies, are estimated at DT 50.0 million (US$50.7 million equivalent); the foreign exchange com-ionent represents about 34 percent (or US$17.3 million) of total project costs. The cost estimates are indicative figures based on a work program prepared by ODESYPANO staff on the basis of experience gained from the first- phase, and on projections from ongoing activities using the participatory stgy (para. 5.01). Taxes and duties are estimated at 16 percent of total project costs. The project would be implemented over six years (1994-99), while disbursement woud be over eight years. (1994-2001) - 17 - Table 4.1 PrQet Cost SuM r* (US$ million) Local Foreign Total % Foreign %Base Exchange Cost COMPONENTS Agricultural Development 3.1 1.8 4.9 37.4 12.4 Watershed & Rangeland 7.7 1.2 8.9 14.4 22.4 Income Supporting Activities 1.0 0.1 1.1 10.3 2.8 Applied Research 0.5 0.7 1.2 56.3 2.9 Instit. Strengthening 2.1 2.4 4.5 57.8 11.4 Rural Infrastructure 9.6 7.2 16.8 43.5 42.2 Unallocated . 18 2.3 A5 8 5.7 TotalBase Cost 25.3 14.4 39.7 36.4 100.0 Physical Contingencies 2.2 1.4 3.6 37.5 9.1 Price Contingencies S.9 1.5 7.4 20.Q 18.6 Total PrXo ect Cost Xh X V7 4 127.7 * Totals may not add up due to rounding. F. tdnaisn 4.25 The financing plan for the project costs of DT 50.0 million (US$50.7 million equivalent) would be as follows: The proposed IBRD loan of US$27.5 million would finance about 55 percent of total project costs or 100 percent of the estimated foreign exchange cost and 40 percent of the local cost portion of the project cost net of taxes. The Government would provide US$19.5 million equivalent in local currency, including taxes and duties estimated at US$8.2 million, while the beneficiaries would contribute in the form of their labor esthmated around US$3.7 million equivalent, repreenting 8 percent of total costs or about 14 pecent of watershed and rural infrastru cost. The financing plan is as follows: - 18- Table 4.2: Prolect Fin ai Elan So u r ce Foreinn Total % of Net ..-.---..(US$ M Equivalent)------ Project Cost World Bank 10.2 17.3 27.5 64.7 Beneficiaries 3.7 - 317 8.7 Government 11.3 - 11.3 26.6 Net Project Costs 25.2 17.3 42.5 100.0 Taxes & Dudes . 8.2 16.2 Total Project Costs 33.4 17.3 50.7 116.2 G. Pfrwmx t 4.26 The table below summarizes the project elements and their estimated costs and proposed methods of procurement. Table 4.3 Summarv of Pronosed Procurement Ammements (US$ million eqivalent) Procurement Method Poject Elements ICB LCB LSIPA I NBF Toal 1. Works 1.1 Soil Conservation 12.3 12.3 (7.3) (7.3) 1.2 Buildings 1.1 2.0 3.1 (0.8) (1.0) (1.8) 1.3 Roads 4.7 8.2 12.9 (3.6) (4.0) (7.6) 1.4 Water Supply 4.2 1.0 5.2 (3.1) (3.1) 2. Goods 2.1 Vehicles 1.2 0.3 1.5 (0.8) (0.1) (0.9) 2.2 Materials & Equipment 2.7 2.2 4.9 (1.8) (0.5) (2.3) 3. Consultancies 3.1 Coltants 3.3 3.3 /a (1.0) (1.0) 3.2 Trainig 1.3 1.3 (1.0) (1.0) 3.3 Studies 0.2 0.2 4. Unallocated 3.0 3.0/b (2.5) (2.5) S. Recurrent Cost 5.1 Incremental Staff 1.1 1.1 5.2 Operatn Costs 1.9 1.9 Total 3.7 10.0 26.0 7.8 3.0 50.7 (2.6) (7.5) (12.9) (4.5) (-) (27.5) Note: figures in parndses are the amounts financed by the Bank loan. N.B F: Not Bank-Financed. Works and Goods shall be procured in accordance with World Bank Guidelines: Procurement under IBRD and IDA t Cdits; and Services should be procured in accordance with World Bank Guidelines: USe of Consultants by World Bank Borrowers and by World Bank as Executing Agency. a/ includes US$I.1 million for conuract research and US$1.1 for income supportng activities component undecontract with NGO. b/ use of funds to be determined during the interimevaluationperiod. - 19- 4.27 Civil Works (US$33.5 million) include soil conservation works (US$12.3 million) and the construction of project buildings such as CDA offices, primary school buildings, dispensaries, and staff housing (US$3.1 million); construction and repair of access roads (US$12.9 million), and water supply works (US$5.2 million). These works would be small, remote, and dispersed both geographically and over time and, based on *xperience from the previous NWRDP, would be unlikely to be of interest to foreign bidders. Only limited packaging of contracts is feasible and contracts will not exceed US$2M each. These would -be awarded in accordance with local competitive bidding (LCB) procedures satisfactory to the Bank. For small works, impossible to package, contracts not exceeding US$ 100,000 each, and in aggregate amounting to about US$1.7M for buildings, roads, and water supply would be procured through local shopping, involving the comparison of at least three price quotations. Soil conservation works (US$12.3 million) and other civil works (US$9.4M) in difficult terrain and in remote dispersed locations, which according to experience from the completed NWRDP project would not be of interst to local contractors, would be carried out through force account by ODESYPANO, which has established a capacity for this purpose with Bank support under the NWRDP and which has experienced in these types of works. Force account would result, however, only if there is no local contractor identified, and upon the Bank's prior approval. This approach is particularly important in the case of rural roads. 4.28 Contracts for vehicles (US$1.2 million) and heavy equipment (US$2.7 million) would be procured through international competitive bidding. Smaller vehicle packages, if needed urgendy, estimated to cost the equivalent of US$50,000 per contract up to an aggregate amount not exceeding US$300,000, may be procured according to local shopping. Minor office, field and laboratory equipment, computers,mopeds, farm inputs and materials (US$1.1 million) of an assorted nature and not exceeding US$100,000 each, per contract required at different times in small lots throughout the project area, would be procured through local shopping following Govermnent local procurement procedures acceptable to the Bank. In cases of proprietary or highly specialized items, such as veterinary products, animal feed supplements, seeds requiring special qualities, wax, bees, and beehives and books, direct purchase would be used in accordance with procedures acceptable to the Bank; the amount involved is estimated at US$1.1 million. Consultants, studies and training (US$3.5 million) would be procured in accordance with Bank guidelines. Fund for the Douar Credit Union (US$1.0 million) and contract research (US$1 .1 million) would not involve procurement and would follow procedures set up under the project for this purpose. Incremental staff salaries, operating and maintenance costs (US$3.0 million) would be Bank financed by the Government and would be handled following normal Government practices. 4.29 Procurement of contracts estimated to cost the equivalent of US$1.0 million or more for civil works,and US$300,000 or more for vehicles and equipment, and consultant, training and studies contracts greater than the equivalent of US$100,000 would require the Bank's prior review. Consultant contracts below US$100,000 which are critical or specific in nature would also require prior review. Terms of reference for consultant services (contracts with NGOs) would require the Bank's prior review irrespective of the contract amount. For civil work contracts procured under LCB procedures, the Bank would make an ex-post review of all documents related to Bank financed sub-projects (goods and works) for the first two contracts for each type of civil works. Furthermore, during supervision missions, the Bank would review sub-project contracts, focusing on procurement arrangements. All other procurement would be reviewed ex-post on a selective basis; thus ODESYPANO would be required to retain all procurement documentation. Because most contracts would be small, the prior review process would cover about 50 percent of total contract value procured under the project, but in view of arrangements described above, review of the first two co.tracts in each project element, this percentage is considered acceptable. - 20- 4.30 Procurement would be carried out by ODESYPANO, which has demonstrated its capacity for efficiently handling procurement matters in the context of the completed NWRDP. The project has a small element of procurement of goods through ICB, a large element of civil works by LCB or by force account, and direct purchase or purchase through local shopping of materials such as seed and fertilizers. A large number of small contracts for civil works and purchase of materials and goods would be carried out over the life of the project. Tunisian ICB and LCB procedures are generally acceptable to the Bank. However, there are some aspects which need to be amended to be consistent with Bank procedures. Assurances were obtained at negotiations that,procurement for Bank-financed items would be carried out under procedures accsptable to the Bank. H. Dkb sent 4.31 The proposed Bank loan of US$27.5 million is expectd to be disbursed over eight years, which corresponds with the historical disbursement profile of agricultural projects in Tunisia. The proposed time span is also in line with the experience gained from the completed NWRDP, which confirmed the satisfactory implementation capacity of ODESYPANO for physical investments. Project completion is expected by December 31, 1999; however, in order to encourage efficient use of Bank's resources, Loan closing is set forth on June 30, 2000. 4.32 The Bank loan would disburse funds for the following items at the rates indicated: Table 4.4 Disbursements Amount of Loan allocated % of Expenditure (US$ milion) To Be Financed 1. Civil Works (a) Soil Conservaion 7.3 60 percent (b) Buildings 1.8 (c) Roads 7.6 (d) Water Supply 2.2 (e) Farm ponds 0.9 2. Equipment, Vehicles and Materials 3.2 100 percent of foreign expenditures 100 percent of Local expenditures (ex-factory cost) and 80 percent of local expenditures for items procured locally 3. Consultant services, Traning, Studies 2.0 100 percent 4. Unallocated 2 Total 27.5 4.33 Disbursements against expenditures for the following items would be based on certified Statements of Expenditures (SOE): - 21 - (a) payments for civil works under contracts not exceeding US$500,000 equivalent and for force account works; (b) locally procured equipment and materials under contracts costing US$300,000 or less; and (c) payments for consultants services for contracts not exceeding US$100,000 and training and costs of studies. 4.34 Supporting documents for these items would be retained by the inplementation agency and made available to the Bank mission for inspection. Withdrawal applications for other items would be fully docunented. To ensure efficient and timely project implementation, a special account would be established. The authorized allocation (initial deposit) to the special account representing about four months of project expenditures, would be the equivalent of US$1.5 million. To the extent possible, all loan disbursements would be channeled through the special account except for large expenditures representing 10% of the initial deposit, which would be submitted for payment directly. I. Acco and Audit 4.35 The Borrower and ODESYPANO will ma inn project-related accounts in accordance with sound accounting principles. Project accounts (including the special account) and SOE used to justify disbursements under the Bank loan would be audited annually by independent auditors acceptable to the Bank. The NGO(s) would supervise and maintain accounts of the village fund's credit/savings operation. Assurances have been obtained to this effect and audited financial statements would be submitted to the Bank within six months after the end of each fiscal year. V. ORGANIZATION AND IMPITION A. Imnlenmenton Strateg 5.01 To ensure active participation of the villagers and sustainability of project results, the project would adopt an "integrated and participatory approach" (PA) - an interactive process which involves village communities in the selection, planning, and iimplementation of project activities. To promote Lhe particiration of women, the project would recruit and train women development agents. The basic premise of this strategy is that development requires a long-term effort which hinges on the active involvement of the concerned population in the development process. This experience grew out of the lessons learned on a Bank wide basis and specifically from a pilot operation under the completed NWRDP which has shown that through a participatory strategy, villagers who are aware of the benefits of participating in project activities would actively engage in project actions once they are fully convinced of their benefits and relevance of such actions to their own particular situation. The participatory strategy involves a partnership between the project's executing agency - ODESYPANO - and the beneficiaries, who would be organized in groups of "douars." 5.02 To achieve project objectives, the douar communities would be divided into effective agro- socio-economic units - namely "douars" or a group of douars. The mnclei of such units are the families who in their activities, individually or collectively, utilize land, the natural resources and the - 22 - infrastructure which is common to the unit. Such units cover 2-3 douars, corresponding to an area of 200-300 ha and comprising about 40 households each. For each intervention unit, resource use studies would be undertaken and would require relatively little time. These studies, which are initiated through rapid rural appraisal would permit the identification of the production systems currently practiced as well as the major constraints and potentials. This would help guide the work and discussions with the beneficiary population. 5.03 The IPA is an interactive process which involves: (i) the organization of douar conununities and the establishment of Douar Development Coumittees (DDCs), which are elected by the population concerned. Members of the DDC would include all segments of douar population, in particular farmers, herdsmen, women, and the landless; (ii) a survey of douar development potentials and constraints to development; the survey identifies the needs in terms of basic infrastructure required (water supply, feeder roads), environmental constraints (soil erosion), input supply, credit accessibility, and extension services; (iii) preparation of a Douar Development Plan (DDP) which specifies actions and specifically investments envisaged by the douar members with the project's support; and (iv) the establishment of a douar action plan which spells out respective obligations of both parties (ODESYPANO and population) to execute sub-projects agreed upon. This new approach has been well-accepted by the por.lation in the area where it was tested on a pilot basis. Details on the participatory approach and the functions and responsibilities of the douar and DDP appear in Annex 1. 5.04 The IPA process is expected to ensure that the interventions respond to the perceived local needs and priorities and that a genuine commitment to and responsibility for the success of the project is generated. The outcome of this interaction would be DDP and specific sub-project activities to be implemented. Specific sub-project investments included in the DDP would be evaluated by DDESYPANO to ensure technical, economic and environmental soundness. Detailed annual implementation plans would be agreed on with the participating village organizations, and their agreements would be recorded in writing. During negotiations. assurances were obtained that by December -31 each ye-ar. an a_nnualwr rga ealn roec ativities wyill be DRegared for submission to the Bank covering trinin. procurement. formation of village ,roups. studies. and research. The glan would be reviewed annually jointly with the Bank. 5.05 Project activities would be based essentially on the implementation of activities agreed upon between the executing agency and the village organizations and recorded in douar action plans. The agreement with the douars would specify specific work program, and the obligations of each party. The douar's obligations would include construction and maintenance, of erosion control works; introduction of new farming methods designed to reduce erosion and water run-off and to improve yields; partial or full payment (in cash or in labor) for the activities undertaken by the project; and maintenance of basic infrastructure constructed under the project. 5.06 In the selection of douars to be developed, isolation, non-availability of essential services, and the willingness of the village groups to participate in project activities would be primary considerations. Areas with a larger proportion of range and forest land would be given priority, and the selection criteria would be largely based on the severity of problems in terms of vegetative degradation and soil erosion and the prospects for achieving a satisfactory return on the treatments under the project. Assurances have been obtained that in selecting douars. ODESYPANO shall utilize criteria acceptable to the Bank throughout groiect implementation - 23 - 5.07 Women play an important role in rural household economies in the project area, where, due to low farm income, men are frequently involved in occasional, seasonal, or full-time employment away from rural areas. Besides playing a leading role in the well-being of their families, women are managers of farming operations. It is therefore important that women receive extension messages and that those messages be received directly by them. Women extension agents ("animatrices") would have the special responsibilities of assisting women in identifying their needs, of developing contacts between women and the project, and of ensuring that the project responds to women's needs. B. Proiect ImMlnemtation 5.08 The project would be implemented under the overall coordination of ODESYPANO, which would be responsible for the project's technical supervision, procurement, and the beneficiary douar communuities would be responsible for selecting sub-projects and would assist in the execution of project activities under the technical supervision and guidance of the ODESYPANO's regional offices. Specific investments carried out by the project would be evaluated by ODESYPANO to ensure their technical, economic and environmental soundness. Technical assistance financed under the project would assist the executing agency, the DDCs, local NGOs, and the research committee in implementing project programs. 5.09 The operation, and maintenance of the rural infrastructure and the watershed and rangeland management components would be the responsibility of the Office and the beneficiaries through their DDCs. The success of this operation and its sustainability would depend largely on the level of beneficiary participation in the design and execution of specific measures. Therefore, the participatory strategy will be incorporated throughout the project cycle. The project would provide for the training of private auxiliaries who would carry out, within the context of the douar organization, simple animal health care and artificial insemination services. Following the establishment of the DDC and two years of operation, existing bulls of the genetic improvement program would be sold to the DDCs at reasonable cost. Assurances have been obtained that ODESYPANO shall ensure that Douar Action plans which include rural infrastructure works shall clearly specify villagers' contributions in the construction by force account, and maintenance workts. 5.10 The research fund (RF) would be administered by ODESYPANO guided by a Research Committee (para. 4.19). Research proposals on technical, economic and social issues would be demand driven and of short-term nature focusing on priority development problems of the region. Technical assistance and training provided under the project would assist the executing agency, the DDCs, local NGOs and the research committee in implementing project activities. 5.11 The DCU would be established by one or several NGOs which have been involved in the promotion of village credit/saving schemes. The NGO would be responsible for (i) the establishment of DCUs, (ii) the provision of training and technical assistance, and (iii) the monitoring and execution of the sub-comnponents including the identification, promotion and selection of informal activities for financing. Contract agreements between ODESYPANO and the selected NGO(s) would be reviewed and approved by the Bank. There are some local NGOs with experience in implementing small douar investments financed under either govenunent funds or grants. -24 - C. Project Oraniton 5.12 To achieve satisfactory performance and sustainablity in project actions, the project would be implemented by the ODESYPANO, but in a reorganized and decentralized structure - and through beneficiaries' participation. Based on the experience in the NWRDP, the reorganization of ODESYPANO would be required to ensure that the executing agency's organizational structure would provide the means and opportunities to fulfill its newly defined mandate and responsibility of executing development actions with the active participation of the beneficiary conumunities. The reorganization would involve decentralized decision making, reduction of hierarchical levels, reduction of administrative staff and strengthening of ODESYPANO's technical, planning and monitoring and evaluation capability. The reorganization woutd also mean that many functions presently perfonned by ODESYPANO such as milk marketing and agricultural input supply would be transferred to the private sector; and rural credit to the BNA. Assurances were obtained that the disengagement plan would be imolemented in accordance with a timetable aureed with the Bank. 5.13 The reorganized structure would remove the 'agence" as a hierarchical level and would consist of: the village level (the Extension-Development Centers -CDAs), the regional level ("Regional Directorates) and central level (General Directorate). Details on ODESYPANO restructuring are provided in Annex 4. 5.14 The extension-development centers (CDA) would serve as the main contact points at which collaboration between village groups and the Office on specific project activities would take place. The number of CDAs to be established would vary according to the population size and characteristics of the particular micro-zone. In each CDA, there will be a team consisting of one male and one female development agent and the head of the center. The team would also be responsible for establishing fornal partnerships between the project and the population by collecting data for planning and monitoring, helping the village groups to organize themselves and to set clear priorities and work programs, and assisting in the development of the appropriate DDP. The team would also assist in the establishment of douar action plan, provide technical assistance and interactive trauiing, and undertake periodic monitoring surveys. The CDAs would be strengthened over the period of the project by the recruitment of seven male ("animateurs") and twelve female ("animatrices") development agents. 5.15 The Regional Directora: is responsible for the preparation of plans and physical execution and monitoring of project activities at the regional level. At each of the three regional offices in Beja, Kef and Sejenane, a multi-disciplinary team of SMSs in community developmentltraining, animal husbandry-fodder production, agronomy-horticulture, mral engineenng, and resource conservation (watershed and rangeland management) would prepare the douar development plan and supervise execution of project components. Their main responsibility would be to work as a team in assisting the DDC in the preparation of DDPs and the resulting douar action plan between ODESYPANO and the DDCs. The team would be responsible for the identification of priority areas, preparation of the DDPs, coordination of field work, and the selection of treatment options including technical packages for extension based on experience and the results of adaptive research. The team would also be responsible for providing technical support and training for the field staff. The regional offices would be strengthened with the necessary SMS staff (para. 4.07) and the project would finance a training program, vehicles, and equipment to assist these offices in implementing the project. 5.16 The General Directorate would be responsible for the overall coordination, management, and monitoring of the project. ODESYPANO bas also been the executing agency for other projects in -25 - the same geographic area financed by GTZ, KfW, EEC, and the World Food Program (WFP). A team of qualified and experienced staff (para. 4.06) would prepare work program and provide technical support to the regional offices, prepare technical packages for trial in the field, and monitor progress in the agricultural production and watershed and rangeland management components. The central office would be responsible for keeping accounts and for monitoring and controlling the execution of contracts and the flow of funds. An experienced accountant would be recruited to head its account unit. To assist in the overall planning, and implementation of the project, a GTZ team consisting of an institutional development adviser, a planning expert, and a rural sociologist has been assigned to provide technical assistance and assist with staff training. 5.17 Technical staff at headquarters would operate as a team in providing support and training for the staff based at the regional offices and CDAs, preparing training courses and training Materials for beneficiaries, serving as a link between the project and research institutes, and disseminating information on research developments. This technical staff would handle questions relating to their respective areas of expertise in a farming system context and would be expected to spend considerable time in the field assisting the regionally based subject-matter specialists (SMSs) and the development agents. D. Monitors and Evaluation 5.18 The monitoring and evaluation M&E unit in ODESYPANO would be strengthened to coordinate M&E activities at the regional level and to maintain records and monitor the physical and fimancial progress of the project at the central level. Project management at the regional directorate level would be responsible for the collection and compilation of data in the region ane for submitting annual reports to the General Directorate to be prepared according to a specified format. The prinary objectives would be to generate management information to guide project implementation and on-going planning, and to provide the basis for an accurate evaluation of progress during implementation. Basic technical and socio-economic data concerning the community in the micro-zone would be collected against which project impact would be evaluated. The M&E unit would prepare annual reports which would include covering all aspects of the project including potential implementation problems requiring corrective action. Such reports would be submitted to the Bank, along with reports on project finances and procurement. Assurances have been obtained that ODESYPANO shall establish a M&E system in accordance with indicators acceptable to the Bank not later than June 30, 1994. 5.19 Because of its nature, the project would be supervised two to three times a year, particularly during the early stages of implementation. Bank supervision missions would visit in particular villages where douar development committees are at different stages of fonnation. Conmmnities in the process of forming development committees, identifying development priorities, negotiating douar action plans with ODESYPANO would be visited. Supervision requirements are estimated at 14 person-weeks per year in the first two years, 12 person-weeks in the next three years, decreasing to 10 person-weeks in the last year of project implementation. These estimates take into account the need for more intensive supervision at the beginning to ensure a successful start-up. The supervision missions would include a monitoring and evaluation specialist, a rural sociologist, and technical specialists as appropriate and would focus mainly on initial results with the participatory approach and douar planning and on institutional, financial, techical and socio-economic project constraints. A project launching workshop would be organized shortly after loan effectiveness. - 26 - 5.20 To assess the success of the project in responding to community needs, two interim reviews would be carried out by the Bank jointly with ODESYPANO, on the basis of an outline agreed by the Bank the first after the project has been operating for two years and the second after five years of implementation using surveys and M&E data as input. Targets, implementation methods adopted, and sub-projects including the establishment and operation of village funds would be reviewed, and modifications to the project would be made as necessary. 5.21 Evaluation. The project's impact on the development of the Northwest region would be evaluated by the Bank, based on data collected by the M&E unit, Bank review missions, and other agencies or institutions. The Bank would evaluate the degree of achievement of project objectives with regard to increase in income and employment and impact on arresting or slowing down natural resource degradation. Assurances have been obtained at negotiations that ODESYPANO will oranize such interim evaluations and prepare and furnish to the Bank two reports: the first, not later than June 30. 1996 and the second. not later than March 31. 1998 detailing progress in project implementation. VI. PROJECT BENEFITS AND RISKS A. Project Benefits 6.01 The project would improve the living conditions of about 170,000 people in the impoverished Northwest region by increasing income and employment opportunities and by making critical investments in rural infrastructure and conservation of natural resources. The main project benefits would be: (i) increase in agricultural and non-agricultural incomes, (ii) improved enviromnent; (iii) improved social services; and (iv) institutional impact of enhanced popular participation. The project's success could also serve as a model for participatory poverty reduction and natural resource management for possible replication in other regions of Tunisia and elsewhere. 6.02 Increased Income. The project would increase the farm income through increases in farm productivity in crop yields and livestock production. Increase in farm productivity would derive from the combined effect of improved technology and on-farm soil conservation works. The productivity levels to be achieved are presented in Annex 5. 6.03 Analysis of returns for representative farm models indicates that the financial rate of return for the farm models ranges from 20-45 percent, which would provide adequate incentives for farmers to adopt the technical packages proposed by the project. Based on farm model analysis, all but the smallest farms (2-4 ha) would be able to increase their annual net incomnes above the poverty level as the result of this project. The appraisal mission estimates a net income of DT 200 for the small-scale farmers who make up about 50 percent of beneficiaries, DT 350 for medium-scale farmers (4-10 ha), and DT 700 for large-scale farmers (10+ ha). With an estimated 20percent supplementary income from non-agricultural sources, average income would reach about DT 240, DT 420, and DT 840 for small-, medium-, and large-scale farmers, respectively. These incomes exceed the poverty level for small-, medium-, and large-scale farmers. Even when non-farm income is included, per capita total income of small and medium farmers would still be lower than per capita income of about DT 1300 in 1993 for Tunisia as a whole. - 27 - 6.04 The project would also increase off-farm income by supporting the creation of DCUs, and the formation of a pilot credit scheme to promote viable and productive informal sector activities. The main beneficiaries are expected to be landless farmers and women who derive a large proportion of their income from informal sector. It is estimated that about 2500 families would participate in the DCU and would have access to DCU loans to finance viable productive activities which would result in supplemental income and create more employment opportunities for the disadvantages population. The rural roads would provide isolated villages access to markets, which would induce higher levels of agricultural production and marketing. In addition, through construction of labor-intensive basic infrastructure, the project would generate about 300 man-years of direct employment to area inhabitants. 6.05 Improved gEironment. The project would have a positive environmental benefit through sub-project investments in improved watershed and rangeland management works, agro-forestry, and on- farm soil and moisture conservation works which would reduce further degradation of the fragile ecosystem, restore natural vegetative cover, reduce runoff and soil loss, and improve soil fertility. The increase in fodder availability due to the project is expected to reduce pressure on the rangeland, thus contributing to better conservation of natural resources. The project would promote environmentally friendly interventions with minial negative environmental side effects. The project has been classified "B", requiring limited environmental analysis. 6.06 Improved ,Social Services. The planned investment in basic social services such as schools, water supply and health centers would provide basic education, health services and potable water thus improving the quality of living of the population of this impoverished region. They would reduce the burden on women by providing access to markets, health services, and - most importantly - drinking water, reducing the time and labor which women are forced to spend. The rangeland improvement works in the long run would reduce the burden on women by providing larger quantities of fuel and fodder closer to home. This would also mean enhanced economic opportmities for women. Women would also be able to earn supplemental income from rural enterprises such as beekeeping, poultry and rabbit husbandry, and cottage and handicrafts which have traditionally been women's domain. In the project design, particular attention has been given to ensuring that women are actively involved in the project and derive positive benefits. The participatory planning process has been designed to give women an important role in the defining of their development priorities. 6.07 Enhanced Popular Participation. By adopting a participatory strategy in which the villagers themselves would be responsible for the definition of their priority development needs; selection of sub-projects at the village level; and community participation in sub-project implementation, maintenance, management, and utilization, the project would promote and strengthen grassroots organizations (village organizations, village funds and local NGOs). By supporting douars in the creation and establishment of DCU, the project would have an important institutional impact of strengthening the capacity of village organizations to manage dteir own resources. The village funds, once established and consolidated, could become a key factor in rural savings mobilization, delivery of informal credit to their members. The project would also encourage beneficiaries contribution in cost sharing in watershed rehabilitation and rural infrastructure works. 6.08 In the construction of the rural infrastructure (e.g., rural roads and water points) environmental mitigation plans and checklists would be followed which would carefully screen for potentially adverse environmental effects. Financing of the construction of farm ponds would require feasibility studies which would cover technical and economic justification including environmental aspects and require prior approval by the Bank. Chemical fertilizers would be used in the vegetative - 28 - rehabilitation efforts, but application would be mainly of a one-shot nature and quantities would be small and rapidly absorbed. B. Economic Analysis 6.09 Economiic Pices. Economic farm gate prices were calculated for tradable commodities and inputs using border prices as reported in the Bank's commodity price forecasts adjusted for tranSportation and marketing margin. For non-tradable items, financial farm gate prices were assuned to represent economic prices where markets are not regulated. The shadow wage rate for unskilled labor has been estimated at 55 percent of the market rate, reflecting high unemployment in the project area. 6.10 Benefits and Cost Streams. The cost stream used for the economic analysis of the project includes the agricultural production component, the watershed and rangeland management component excluding the soil conservation aspects, and the cost of rural roads. It is assumed that two thirds of the rural roads would have economic justification whereas the remaining are constructed to meet basic social needs. Investment and operating costs were expressed in economic values through the application of standard conversion factor of 0.94. A project life of 30 years is assumed. The benefits stream includes benefits from (a) incremental agricultura production, (b) increases in output of fodder and (c) savings in vehicle O&M costs as a result of the construction of rural roads. The benefit stream does not include significant long-term environmental benefits from the watershed rehabilitation works, namely reduced run- off and sedimentation with a likely increase in the economic life of the Sidi Salem dam. Calculations of separate ERRs for each component was not considered useful since benefits from particular intervention are freo'Jently complementary to other interventions. 6.11 Some of the important benefits not included in the benefit stream for the economic analysis include improvements in the quality of life derived from the availability of basic infrastructure (water points, primary health, and education) and the indirect effect of promoting and strengthening village organizations (douar organizations and NGOs). The benefits and cost streams are presented in Annex 6. 6.12 Rate of Return and Sensitivity. The economic rate of return (ERR) is estimated at 14 percent. Switching tests indicate that expected benefits would have to decline by 10 percent or costs increase by 15 percent to reduce the ERR to 10 percent, the assumed opportunity cost of capital. Furthermore, the ERR falls to 12.5% when it was assumed that the bene'Its would be delayed by a year. C. Prect RisW 6.13 The project addresses problems of rural poverty and natural resource degradation. Project actions require the integration of farming system changes including improved integration of crop and livestock production and resource conservation through a participatory approach which would promote the fill partnership between the project executing agency and the beneficiaries in sub-project planning and inplementation. As such, such modes of operation wUIl always carry institutional and technical risks. Risks include the possibility of weak participation by beneficiaries, a slower adoption of improved farming practices,and sustainability of project actions. - 29 - 6.14 The project's participatory approach is designed to gain the trust and involvement of the beneficiaries and to generate a sense of ownership in project activities. The douar planning process provides a franework for the involvement of the village in project activities, with the villagers defining problemns and setting priorities. This approach has been successfully tested in the project area in a NWRDP pilot progran, and the lessons of the completed NWRDP in this respect have been taken into account in the design of the project, which seeks to focus on comnponents which meet the priority needs of the population and promote their full participation. 6.15 Projects such as this one always risk a slower than expected adoption of improved farming practices, resulting in slower realization of economic and enviromnental benefits. Many of the improved techniques are well integrated with the local farming practices and require limited material inputs. The intervention technologies have already been successfully introduced in the project area on a pilot basis. The project's emphasis on strengthening the extension service through technical assistance and provision of required subject-matter specialists, training for the development agents, and development of douar extension agents is designed to minimize these risks. 6.16 The conception and preparation of this project have benefited from a high degree of Government commitment and from the experience of the staff of the executing agency gained in the implementation of the NWRDP. Beneficiary participation in the design and preparation has already ensured strong political momentum at the grassroots level, already raising expectations in tle project area. The sustainability of the project will depend heavily on the full participation of the rural commnunities, including the integration of women in project activities through the participatory process. By promoting and strengthening village-level organizations, putting emphasis on grass-roots participation and local NGOs in project implementation, the project is expected to ensure sustainability. Pilot schemes supported through NWRDP and bilateral assistance have successfully tested the approach and the use of both male and female development agents in vesting ownership and decision making in village groups. 6.17 To assess progress toward implementation, two inerim reviews would be organized using surveys and case studies as inputs, the first after the project has been operating for two years and the second after it has been operating for five years. The review, which would be carried out jointly with ODESYPANO, would cover implementation methods adopted and progress in implementation of sub- projects, and appropriate modifications would be made as necessary. VII. AGRE:MENTS AND RECOMMENDATIONS 7.01 During negotiations, assurances have been obtained that ODESYPANO would: (a) conclude contractual arrangement with at least one local NGO, not later than December 31, 1990, to establish, manage and supervise the Douar Credit Unions (DCUs) on the basis of terms of reference satisfactory to the Bank and all other NGOs shall likewise be employed under arrangements satisfactory to the Bank (para. 4.15); (b) carry out, not later than December 31, 1994, in accordance with terms of reference satisfactory to the Bank: (i) a study to define lending terms and conditions of operations of the DCU; and (ii) a study to identify potental for, and existing constraints to the development of rural enterprises in the project area and formulate a suitable action plan; - 30- and the recommendations of such studies as agreed with the Bank shall be implemented not later than June 30, 1995 (para. 4.16); (c) put in place key project staff essential for project implementation in accordance with the following timetable: director of plan, head of Accounts unit not later than March 31, 1994; the necessary subject-matter specialists not later than June 30, 1994; and 19 extension agents: seven not later than December 31, 1994, other seven not later than December 31, 1995 and five not later than December 31, 1996 (para. 4.21); (d) follow environmental guidelines and checklists for the implementation of the infrastructure works to screen and mitigate for potentially adverse environmental effects (para. 4.22); (e) ensure that fann ponds to be constructed shall not: (i) exceed ten (10) meters in height above stream bed; (ii) create a reservoir with a storage volume of more than 50,000 cubic meters; (iii) involve expropriation of property or any resettlement of the local population; or (iv) present unusual design features involving difficult geological conditions or be situated so as to significantly be destructive to the population in the event of failure; and prepare a feasibility study for Bank prior review and approval (para. 4.22); (f) procure goods and works and employ consultants in accordance with Bank Guidelines and Government procedures acceptable to the Bank (para 4.30); and (g) have project accounts audited by an independent auditor acceptable to the Bank, and audit reports would be sent to the Bank not later than six months after the end of each fiscal year (para. 4.35); (h) prepare, by September 31 of each year, an annual work program for the following year detailing project activities covering training, procurement, formation of douar groups and DDCs and DCUs, studies, on-fann demonstrations and research; and would review the plan annually jointly with the Bank (para. 5.04); (i) follow criteria acceptable to the Bank throughout project implementation in the selection of douars for the purpose of carry out the project (para. 5.06); (j) ensure that infrastructure works to be constructed under the project would be dependent upon the signing of the douar action plans which would spell out the specific obligations of each party particularly in the constuction and maintenance of rural infrastructure works (para. 5.09); (k) implement a suitable disengagement plan agreed upon with the Bank (para. 5.12); (I) establish and put into operation by June 30,1994 a monitoring and evaluation system in accordance with indicators acceptable to the Bank (para. 5.18) and - 31 - (m) carry out two interim reviews jointly with the Bank to assess progress in project implementation, the first after two year, but not later than June 30, 1996 and the second after five years, but not later than March 31, 1998 (paa. 5.21); 7.02 As a condition of effectiveness of the proposed loan, the Government would: establish a Research Committee to nage the research fund created under the project in accordance with a terms of reference satisfactory to the Bank (para. 4.19). 7.03 As a condition of loan disbursement for civil works for farm ponds only, the Government would carry out feasibility study covering technical and envirownental aspects and present to the Bank for its review and approval before construction of farm ponds (para 4.22). 7.04 Based on the above agreements, the proposed project is suitable for a Bank loan of US$27.5 million to the Government of Tunisia. The project is expected to be completed by December 31, 1999 and closed by June 30, 2000. STAFF APPRAISAL REPORT Table 1 TUNISIB Northwest Mountainous Areas Development Project Cost Sumuary 000 PT 000 is$ 8 Total ___ __ __----_-_______-_______-____ -________------------ 8 Foreign Base Lccal Foreign Total Local Foreign Total Bxchange Costs A.. Developpement Agricole 1. Appui product. vegetale 82.8 155.7 238.5 85.3 156.4 241.6 65.3 0.6 2. Appui product. anicale s98.6 394.4 992.9 613.8 302.2 1006.0 39.7 2.5 3. Appui apurement foncier 135.2 127.4 262.6 138.6 127.5 266.1 48.S 0.7 4. Vulgarisation & Animation 2231.0 1144.9 337S.8 2276.4 1144.9 3420.3 33.9 0.6 Sub-Total 3047.5 1822.3 4869.9 3113.1 1820.9 4934.0 37.4 12.4 B . Conservation/eau et sol 7S23.7 1261.6 8785.3 7659.7 1241.3 8901.0 14.4 22.4 C . Micro-enterprise Develop. 990.5 114.3 1104.8 1006.4 112.9 1119.3 10.3 2.8 D Rechercheappliquee 503.7 647.8 11S1.S S19.1 647.5 1166.6 56.3 2.9 B . Renforcement/Institution 1. Plan, ME., GIS 669.3 324.4 993.7 683.9 322.9 1006.7 32.6 2.5 2. Formation 517.1 503.9 1021.0 531.6 502.8 1034.4 49.4 2.6 3. Assistance Technique 53.3 265.1 318.5 55.1 267.6 322.7 83.3 0.8 4. Rquipment Chantier (o4A) 827.7 1315.3 2143.0 843.4 1327.9 2171.2 61.4 5.5 Sub-total 2067.4 2408.7 4476.1 2114.0 2421.1 4535.1 53.8 11.4 F . Infrastructures Rurales 1. Plstes 6176.8 3790.9 9967.7 6328.8 3770.2 10099.0 38.0 25.4 2. Points d'eau 1845.6 2309.9 4155.6 1891.8 2318.5 4210.3 5S.6 10.6 3. Datinents 1324.9 1105.7 2430.7 1359.3 1103.4 2462.7 4S.S 6.2 Sub-Total 9347.4 7206.5 165S3.9 9S79.9 7192.1 16772.0 43.S 42.2 1 0 . Ponds appui (API) 1219.6 1028.6 2248.2 1252.8 1025.0 2277.8 4S.8 5.7 Total BASBLINB COSTS 24699.9 14489.8 39189.7 25245.1 14460.8 39705.9 36.4 100.0 Physical contingencies 2226.9 1333.4 3560.4 2256.3 1351.0 3607.3 37.5 9.1 Price Contingencies 6060.2 1241.9 7302.1 5920.2 1478.1 7398.3 20.0 18.6 Total PROJECTS COSTS 32987.0 17065.1 50052.2 33421.5 11289.9 50711.4 34.1 127.7 12/6/1993 16:29 STAFF APPRAISAL REPORT Table 2 TUNISIE Worthwest Mountainous Areas Development 000 DT Project Components by Year Ease Costs Total 01 02 03 04 05 06 000DT 000US$ ....... !.I ....... 0-.2 -.--...... ---- ....... --- ....... ---- ....... --. .... !0V -.-08 A. Developpement Agricole 1. Appui product. vegetale 23.7 33.2 40.3 46.3 56.7 38.4 238.S 241.6 2. Appui product. animale 193.1 212.2 178.8 161.5 147.5 99.8 992.9 1006.0 3. Appui apurement foncier 86.0 50.4 50.4 24.7 24.7 24.7 262.6 266.1 4. Vulgarisation & Animation 1104.3 775.5 412.2 373.7 373.7 336.3 3375.8 3420.3 sub-total 1409.1 1011.3 661.7 606.1 602.6 499.1 4869.9 4934.0 B. .onaervation/eau et sol 7.6 1700.3 1769.4 1769.4 1769.4 1769.4 8785.3 8901.0 C. Micro-enterprise Develop. 141.5 231.0 231.0 180.6 180.6 140.0 1104.8 1119.3 D. Recherche Appliquee 281.4 276.2 276.2 276.2 20.8 20.8 1151.5 1166.6 S. Renforcement/Institution 1. Plan, K&B, GIS 515.4 312.0 15.9 30.1 30.1 30.1 993.7 1006.7 -2. Pormation 15.1 657.5 148.9 66.5 66.5 66.5 1021.0 1034.4 3. Assistance Technique 113.9 68.2 68.2 68.2 0.0 0.0 318.5 322.7 4. Equipment Chantier 2143.0 0.0 0.0 0.0 0.0 0.0 2143.0 2171.2 Sub-total 2787.4 1037.7 293.0 164.8 96.6 96.6 4476.1 4535.1 F. infrastructures Rurales 1. Pistes 1528.6 1707.4 2065.1 2065.1 2065.1 536.5 9967.7 10099.0 2. Points d'eau 0.0 827.0 833.8 S40.5 877.6 776.5 4155.6 4210.3 3. Batiments 691.8 723.5 279.3 297.8 232.4 205.8 2430.7 2462.7 Sub-total 2220.4 3257.9 3178.2 3203.3 3175.3 1518.8 16553.9 16772.0 G. Fonds appui (API) 0.0 102.2 459.9 562.0 562.0 562.0 2248.2 2277.8 Total BASJENB COSTS 6847.3 7676.6 6869.3 6762.S 6407.3 4606.7 39189.7 39705.9 Physical Contingencies 562.7 681.2 639.6 626.3 615.6 434.9 3560.4 3607.3 Price Contingencies 322.0 847.9 1135.9 1506.6 1835.1 1654.6 7302.1 7390.3 Total PROJECT COSTS 7732.0 9205.7 864.8 8095.4 8S85.0 6696.1 50052.2 50711.4 Taxes 2104.4 1772.9 1620.2 1683.2 1709.8 1106.1 9996.5 10128.2 Foreign Rxchange 3565.4 3095.7 2863.6 2880.1 2740.2 1920.1 17065.1 17289.9 12/6/1993 15:29 STAFF APPRAISAL REPORT Table 3 TunISia Northwest Mountainous Areas Development Projects Components by Year Totals including Contingencies Totals Including Contingencies 000 DT 000 US$ 01 02 03 04 05 06 Total 01 02 03 04 05 06 Total
Groupe de la Banque mondiale · Staff Appraisal Report
Tunisia - Northwest Mountainous Areas Development Project
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Groupe de la Banque mondiale
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Staff Appraisal Report
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Tunisie
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Banque mondiale