Tunisia - Tunis-La Goulette Port Project

Fi CO Y RESTR IC TED Report No. P-369 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR THE TUNIS-LA GOULATTE PORT PROJECT April 22, 1964  INTERNATIONAL BANK FOR RECONSTRUCTIO7N AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR THE TUNIS-LA GOULETTE PORT PROJECT 1, I submit the following report and recommendations on a proposed loan in various currencies equivalent to $7,0 million to the Republic of Tunisia for extensions and improvements of the port of Tunis-La Goulette. PART I - HISTORICAL 2. In September 1962, IDA made its first credit to Tunisia of $5.0 million equivalent to help finance the construction and equipment of secondary schools. Closely related to this credit is a technical assistance agreement between the Bank and Tunisia, concluded in July 1963, under which the Bank is to provide the services of consultants to study methods for lowering construction costus and im- proving standards of secondary and technical school buildings. 3. The Bank was first asked to consider a loan for the Tunis-La Goulette port project in early 1961. Since that time the project has been elaborated by consultants' studies of the economic, financial, technical and organizational aspects. A Bank mission In July 1963 concluded that the pert project was of high economic priority and IJas technically and financially well conceived, subject to receipt of certain data and to final decisions on port layout, Negotiations took place in Washington in March 1964.  - 2 - PART I1 - DESCRIPTION OF TIE PROPOSED LOAN 4. The main characteristics of the proposed loan would be as follows: BorrowFer: Republic of Tunisia Amount: The equivalent in various currencies of $7.0 million. Purpose: To meet the foreign exchange cost of extensions and improvements of the Port of Tunis-La Goulette. Amortization: In 44 semi-annual installments beginning August 1, 1967 and ending February 1, 1989. Each paym.ent of interest and principal taken together would be approximately equal. Interest Rate: To be determined at time of loan signing. Commitment Charge: 3/h of 1% per annum. PAR'T III - APPRAISAL OF TE, PROPOSED LOAN The Project 5. A report, "Appraisal of the Tunis-La Goulette Port Project, Tunisia,"l dated April 21, 1964, (TO-408b) is attached(No. 1). 6. The port of Tunis-La Goulette consists of the old port of Tunis at the landward end of a 10 kilometer channel across the Lake of Tanis and the new port of La Goulette, at the seawiard end, the two being administered as one port by the R6gie des Ports de Commerce, a department of the Ministry of Public IWorks responsible for all Tunisian ports. Tunis-La Goulette handles about 40% of all exports and 75% of all imports. The volume of traffic has increased by one third since 1953; a similar increase is expected over the next decade. 7. There is already serious congestion and the need for new port capacity has become urgent. At Tunis, the port is crowded, foundation conditions are poor and both basin and access channel require frequent dredging. Conditions at La Goulette, on the other hand, favor the develop- ment of a large modern port; five deep-water berths have already been built there but remain to be equipped. The Government has a long-term program to transfer port operations progressively from Tunis to La Goulette, and the project is part of this program.  - 3 - 8. The project includes the construction of twio fully equipped new berths at La Goulette and the equipment of the five existing berths by the provision of transit sheds, warehouses, office buildings and a passenger terminal. Also included in the project are the relocation of the access road to the port and of a breakwater at the harbor entrance, and the extension of the road and rail network within the port area. 9. The total cost of the project is estimated at $11.4 million equivalent. The proposed loan of $7.0 million equivalent would cover the foreign exchange component, including the cost of foreign consultants. The loan would be made to the Government of Tunisia, which would be responsible for construction of the project. The local currency component is to be financed out of the cash surplus accumulated by the Re4gie in recent years and held with the Tunisian Treasury. In case of a shortfall, the Government would be required to make available any additional funds required to complete the project. lo. Construction of the project will be the subject of a single contract, to be awarded on the basis of international competitive bidding. Construction will be under the supervision of consulting engineers satis- factory to the Bank. 11. The present Regio des Ports de Commerce wIll be rzplaned by a new port aurhority, the "Office des Ports Nationaux Tunisiens". Enactment of the legislation creating the Office would be a condition of effectiveness of the proposed loan. The Office will be an autonomous, commercia-Lly run bot-; -with a General Hanager reEponsible to a seven-man board, four members reprte-2nting economic groups directly concerned or affected cy port opera- tions and three representing interested ministries. The Bank would be consulted on the appointment of a General Manager. 12. To prepare for the creation of the Office, the Government has engaged consultants to recast the accounts of the Regie in commercial form and to prepare an up-to-date valuation of existing assets. On its inception, the Office will take over these assets as revalued and the cash balances standing in the name of the R6gie. The Office wrill similarly take over the outstanding debt of the former Regie, the excess value of assets over this debt representing the Government's equity in the Office. U]hen the project is completed, the physical assets will be transferred by the Government to the Office, payment being made by the Office partly out of its cash balances, partly by way of a loan from the Government in an amount equivalent to the proposed Bank loan. The Office should start life in a strong financial position. The R6gie consistently made profits and the draft Loan Agreement provides that adequate port charges and rates will be maintained. The Office should find no difficulty in meeting its debt service commitments and in accumulating reasonable reserves.  The Economy 13. A report, "Reviewl of Plan Progress and Prospects - Tunisia,' dated April 22,196h, (AF-21a) is attached (No. 2). 14. Tunisia is the smallest and least favored in natural resources of the three French-speaking North African countries. Its population of about 4.3 million has an average Gross Domestic Product per capita estimated at around $200 equivalent. 15. In 1962, the Government adopted a set of development "perspectives" for the ten years 1962-1971, and a three-year "pre-plan" for 1962-196h. The levels of investment and output contemplated, particularly in the 1962-1961 plan, were deliberately ambitious and assumed that substantial foreign assistance wsould be available. In fact, quite large amounts of foreign aid were promised, but actual disbursements fell short of expectations. Nevertheless, the achievements of the twio first years of the "pre-plan" have been impressive and Gross Domestic Product increased by around one quarter between 1961 and 1963. However, to sustain this effort the Tunisian Government made substantial use of treasury resources and borrowi- ing from the Central Bank to make up for the shortfall in aid realized. 16. To continue financing economic development in this way threatened major financial difficulties in early 196b. After a thorough review of the prospects for the econony, the Government has informed the Bank of its intention to decrease the rate of investment by eliminating the leasb urg&r:t and least productive investments and to cut back impvrts, thereby redu <n' the foreign payments gap. The Government also hopas to be able to finmance a greater proportion of investment through domestic savings. Uhile these decisions are certainly in the right direction, it will be difficult if not impossible to close the investment financing and foreign payments gaps completely this year unless a greater part of the foreign assistance already committed can be dravm down. The Government is begin- ning negotiations oni these lines with major donors. A new factor in the situation is the resumption of French aid to Tunisia. 17. Given Tunisia's satisfactory economic performance in the past, the energetic efforts she is making to develop, the still tolerable level of the present debt burden, and rather promising long-term prospects, I consider that Tunisia can still bear some part of her external capital requirements on conventional terms. The amount of the proposed loan is within these limits. PART IV - LEGAL INSTRWUPNTS AND AUTHORITY 18. Attached are a draft of a Loan Agreement (No. 3) and the Report of the Committee provided for in Article III, Section h(iii) of the Articles of Agreement (No. 4). The draft Loan Agreement follows the form generally used by the Bank, with the follow.ing additions:  - 5 - (a) In Section 5.Oh, the Borrower undertakes to establish the Office des Ports Nationaux Tunisiens (hereinafter called the Office) as an autonomous authority (see also No. 5). (b) Sections 5.07 and 5.08 provide respectively for the transfer of port facilities by the Borrower to the Office and the settlement of accounts between the Borrower and the Office when all such transfers shall have been made (see also No. 6). (c) In Section 5.10, the Borrower undertakes to construct and maintain access roads to the Port of La Goulette. (d) The enactmient of the law authorizing the creation of the Office is made an additional condition of effective- ness of the Loan Agreement under Sectiore7.01 and 7.02 of the draft Loan Agreement. PART V - COMPLIANCE ITMH ARTICIES OF AGREEMENT 19. I am satisfied that the proposed loan will comply with the Articles of Agreement of the Bank. PART VI - RECOIMIM1ENJDATIONTS 20. I recommend that the Bank make available a loan to the Republic of Tunisia in an amount in various currencies equivalent to $7.0 million, for a term of 25 years including a grace period of 3 years, and on such other terms as are specified in the attached draft Loan Agreement and that the Executive Directors adopt a resolution to that effect in the form attached (No. 7). Attachments: 7 George D. Woods President Washington, D.C. April 22, 1964 By: S. R. Cope