Tunisia - Economic development (Vol. 4 of 6) : Tourism and infrastructure

Report No. 274a-TUN FILE The Economic Development RETU2N TO of Tunisia REPORTS DESK Volume IIl: Annex-Tourism and Infrastructure WITHIN December 27, 1974 ONE WEEK EMENA Region Country Programs Department II Not ior Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Sank Group authornzation. The Bank Croup does noE accept responsibility tor the accuracy or completeness oi the report.  CURRENCY EQUIVALENTS Currency Unit = Dinar = 1000 aillimes Wlith effect frorm 1955 US $1.00 - 0.h2 Dinar Diriar 1.00 = US $2.381 With effect from September 28, 196ht UJS $1.00 - 0.52 Dinar Dinar 1.00 - US $1.90 With effect from December 20 1)71 US $1.00 - o.48 Dinar Dinar 1.00 - US $2.08 With effect from February 1973 US $1.00 - 0.44 Dinar Dinar 1.00 - US $2.27 . UNITS. AND WEIGHTS AND MEASURES: MERfIC British/U.S. Equivalents 1 m = 3.28 ft. 1 in ton = 0.981 g. ton = 1.1 US sh. tona 1 m2 10.76 sq. ft. 1. kg = 2.2 lb. 1 km 0.62 mi. 1 litre = 0.22 gal. 1 km2 0.386 sq. mLi. = 0.26 US liq.gallon 1 hectare 2.5 acres 1 m3 = 1.31 cubic yards  THE ECONOMIC DEVELOPMENT OF TUNISIA TABLE OF CONTENTS ANNEX III TOURISM AND INFRASTRUCTURE Page No. 16. THE TRANSPORT SECTOR: PROBLEMS AND PROSPECTS A. The Transport Infrastructure ..... ....................... 1 (i) Ports ................................... 1 (ii) Highways ................................. . 1 (iii) Railways ................................. . 1 (iv) Airports ................................... 1 B. Performance ............................................. . 2 (i) Investments ....... ................ . 2 (ii) Supply and Demand . ...... ...... ............ .............. . 3 (iii) Costs and Tariffs ...... ............... 4 (iv) Employment ....... ................ .5 C. Transport Policy ......................................... 5 D. Development Prospects: The Four-Year Plan 1973-76 .... ... 7 17. INLAND TRANSPORT A. General ............. ........................... 11 B. Past Transport Demand and Supply ............ ............. 12 (i) Vehicle Fleet ....................................... 12 (ii) Traffic Increase .................................... 13 (iii) Freight Traffic ..................................... 14 (iv) Passenger Traffic ................................... 15 (v) Urban Transport ..................................... 16 C. Evolution of Inland Transport, 1962-1972 .17 D. Road Transport ........................................... 18 (i) Road Transport Infrastructure ....................... 18 (ii) Road Transport Operation ............................ 19 (iii) Conclusions and Prospe'cts 'Infr'ast'ruc'ture ............ 23 (iv) Conclusions and Prospects: Road Transport Industry . 25 E. Rail Transport ..................... ...................... 28 (i) Railway Investment ................ .................. 28 (ii) Finantial Aspects ................. .................. 28 (iii) Railway Operation ................. .................. 29 (iv) Prospects of Rail Transport .......... .. ............. 30  18. AVIATION AND MARITIME TRANSPORT A. Aviation Transport ....................................... 31 (i) General ............................................. 31 (ii) Organization . ....................................... 31 (iii) Performance ......................................... 31 (iv) Development Prospects ............................... 34 B. Maritime Transport . . ............. 38 (i) General .......... ................................... 38 (ii) Organization ........................................ 38 (iii) Traffic ......... .................................... 39 (iv) Investments ......................................... 40 (v) Cost and Tariffs .................................... 41 (vi) Development Prospects ............................... 42 19. TOURISM A. The Sector ............................................... 43 (i) The Growth of Tourism and its Contribution to the Tunisian Economy ............................... 43 (ii) The Nature of Tourism Demand in Tunisia .... ......... 46 (iii) Tourism Accomodation ............................... 50 (iv) Incentive and Institutional Framework .... ........... 55 B. Development Prospects ...... .............................. 57 (i) Objectives of the Fourth Plan ....................... 57 (ii) Absorptive Capacity ................................. 59 (iii) Hotel Development and Financing ..................... 61 (iv) Demand Prospects - Leisure Activities - Promotion and Marketing .................................. 62 (v) Non-Quantifiable Costs of Tourism ................... 65 C. Spa Facilities in Tunisia ................................ 66 (i) Development of Spa Facilities during the Past Decade. 66 (ii) Forecasts for the Fourth Plan 1973-1976 .... ......... 67 20. EDUCATION A. Introduction ............................................. 68 B. The School System............ .......... 68 C. The 1959 Targets .............3.........., 7 D. An Appraisal of the System ............................... 74 (i) Primary Education .......I......... .................. 74 (ii) Secondary Education ............... .. ................ 75 (iii) Vocational Tralning ....................... 78 (iv) Higher Education ............. I ...................... 85 (v) Adult Education and Literacy ...... .................. 86 (vi) Private Education .................... 87 (vil) Pre-school Education ...n. ..........................n.. 87  -3- E. Cost and Efficiency of Education ......................... 88 F. The Fourth Plan 1973-1976 ................................ 92 G. Elements of a New Orientation ..... ....................... 94 21. SOME OBSERVATIONS ON HEALTH, NUTRITION AND FAMILY PLANNING A. Introduction ................... 98 B. Health .............. 98 C. Nutrition ................................................ 102 D. Family Planning .......................................... 103 ANNEX III LIST OF MAPS Map No. 10001 TransportationNetwork....... 10697 Tourism Areas... 3151 Proportional Distribution of the Population by Province 3153R1 Maternity Facilities and M.C.H. Network .................. LIST OF GRAPHS Graph No. 20.1 Growth in Enrollments, 1956-1976 .. .. 69 20.2 Educational Pyramid, 1958 and 1972 . . 70 20.3 Organization of the Office of Vocational Training and Employment..... 80 20.4 Agricultural Formation System . . . .83  I  16. THE TRANSPORT SECTOR: STRUCTURE, PROBLEMS AND PROSPECTS A. The Transport Infrastructure 16.1 On becoming independent in 1956, Tunisia inherited a relatively well developed transport system. Few additions were made until 1968-1969, when major improvements to ports, railways, highways and airports were undertaken in the light of the recommendations of a transport survey carried out in 1968 with the assistance of the United Nations Development Programme (UNDP). (i) Ports 16.2 With about 1200 km of coast, the country has four major commercial ports (Tunis-La Goulette, Bizerte, Sousse, and Sfax). A fifth port is under construction at Gabes for exports of phosphates and chemicals. Owing to recent improvements, which IBRD helped to finance, the present capacity of the Tunisian ports is adequate for the next five to ten years, except for the port of Sfax, which is approaching capacity. However, some redistribution of traffic between Sfax and Gabes might provide medium-term relief. (ii) Highways 16.3 There are about 16,000 km of roads, two thirds of which are sur- faced. The road network is most developed in the north, where the bulk of eco- nomic activity is concentrated. Although the road network is generally ade- quate, the most heavily travelled highways need major improvements, and there is a need for more feeder roads to stimulate agricultural production. Under the first highway project, partly financed by IBRD in 1971, the maintenance shortcomings were remedied on a number of road sections. However, recent traffic surveys show that traffic is growing faster than expected and there is a need for further major improvements, particularly in access roads to large cities. In the long run, new traffic patterns are likely to arise as the result of a more balanced regional development policy. (iii) Railways 16.4 The railway network consists of 479 route-km of standard gauge in the north and about 1520 route-km of narrow gauge linking Tunis and Gabes and serving the phosphate and iron mines of the interior. The two systems meet in Tunis. Because emphasis has been chiefly on the renewal of old equipment and the acquisition of new roLling stock, the condition of the track is poor, and major improvements are required. In 1969 the Societe Nationale des Chemins de Fer Tunisiens (SNCFT), the l,overnment agency which owns and operates the railways, began to carry out a rehabilitation program which is still under way, and which IBRD is helping to finance. (iv) Airports 16.5 There are three international airports (Tunis-Carthage, Sousse- Monastir and Djerba-Mellita), to serve the tourism demand. The domestic air- ports, with the exception of those at Sfax and Gabes, are not equipped for  -2- use by commercial aircraft. The three international airports have recently been expanded to accommodate jet services (Boeing 707 type). However, the aircraft parking and ground facilities of Tunis-Carthage Airport will have to be expanded further to meet the 1975-76 demand. There is also a need for im- provement of existing domestic airports, particularly in the south, to restore domestic services. B. Performance (i) Investments 16.6 From 1962 to 1971 total investment in the transport sector amounted to D 127 million and accounted for about 10 percent of total gross invest- ment over the same period. Of this total, public investment by the Govern- ment and its enterprises accounted for D 114 million, and private investment for D 13.0 million. Table 16.1: TRANSPORT INVESTMENT 1962-71 D Million % Government 29.3 23.0 Enterprises Public 84.8 66.7 Private 13.0 10.3 Subtotal 97.8 77.0 Grand Total 127.1 100.0 Although there are no general rules to determine what share of GDP or of total investment should go to transport, it appears that, at least until 1969-1970, investment in transport in Tunisia was relatively much less than in other countries at a similar stage of development, although this was partly due to the relatively extensive transport system already existing in 1962. 16.7 Until the end of the 1960s investment was allocated among the various branches of transport on an ad hoc basis as and when the need arose. Priority was given to road transport (equipment), which consistently received more than the planned allocations. The share of transport in gross investment rose to about 14 percent in. 1970 and 21 percent in 1971. Investment in inland trans- port, including automotive equipment, accounted for 65.5 percent of total in- vestment, the remainder being divided between air transport (16.5 percent) and maritime transport (18 percent). Except for ports, the emphasis was on equipment which, over the 1962-69 period, accounted for 60 percent of total investment. This was particularly true of maritime and air transport, in which Tunisia wanted to take a larger share of the traffic. The distribution of investment changed after 1968-69, following the recommendation of the transport survey, and large infrastructure projects (airport, railway and road rehabilitation) became preponderant.  -3- 16.8 Capital-output ratios 1/ in the transport :<ctor averaged 5.1 over the period, which is comparable to the average for .he entire economy. Ratios by mode varied widely from 6 for maritime transport to 3.5 for air transport. These figures should be regardecl with caution, however, as the nature of in- vestment in individual modes varies. 16.9 Infrastructure has been largely financed by multilateral and bilateral external loans and credits. IBID has made four loans and credits since 1964 to improve ports and port handling facilities and rehabilitate rail and road in- frastructure. The new airport (Tunis-Carthage) was financed by Eximbank and the port of Gabes by an Italian loan. Foreign assistance also helped to fi- nance expansion of the locomotives and rolling stock fleet of the SNCFT. Tunis Air and CTN mainly used suppliers' credits to finance their fleet. The financial difficulties of the SlRTs and SNT have compelled them to use suppliers' credits and short-term bank loans and, more recently, bank overdrafts to finance their fleet. The consequence has been heavy short-term indebtedness and a de- teriorating financial position. (ii) Supply and Demand 16.10 Apart from the haulage of mining products from the interior to the coast, traffic flows are influenced by the concentration of economic and ad- ministrative activities in the Tunis area. Most of the long-haul freight traffic (mining products excepted) originates from or terminates in Tunis. Port and airport congestion in the Tunis area is likely to become worse if Tunis is to retain its relative importance. While little can be done to by- pass Tunis by rail, because of the different gauges in the northern and south- central areas, direct trunk roads could be constructed to link the agricultural areas of the north with the south. More use could be made of the ports of Sousse, Sfax and Gabes for suppLying the south, although there is not much in- dication at present that this iS being considered. The growing problem of communication between the capital and main urban centers calls for a reconsi- deration of current infrastructure projects in the light of a more coherent approach to regional development. 16.11 There is no evidence that transport shortages have presented an ob- stacle to development over the last decade. However, the demand for passenger transport (rail and road) and urban transport carn only be met by overloading buses and rail cars, and the railways have had some difficulty in providing adequate capacity to carry building material and cereals. Despite the con- struction of a new airport terminal at Tunis-Carthage, airport facilities in Tunis are overcrowded during the.. peak summer season. Traffic on the main roads and at the approaches to large cities has increased, and some sections are approaching capacity. These problems should be eased as the large infra- structure projects proposed for the Fourth Plan period are completed. It is likely, however, that a new road improvement program will have to be started before 1976, and that the railways will have to continue to modernize their 1/ Expressed in terms of total investment divided by incremental value added at current prices.  - 4 - equipment so as to improve their competitiveness. There are indications that such programs are being prepared. TPH is studying the upgrading of about 400 km of main roads and SNCFT is about to make a study of the limited use of con- tainerization. However, there is no coordination between these efforts, and no in-depth study has been made of their impact on regional development. The Mi Ministry of National Economy (DT), as well as the Ministry of Planning, which should provide guidelines for transport development, are not sufficiently staffed to coordinate programs and operational problems at the same time. 16.12 The share of Tunis Air has reached almost 50 percent of regular air passenger traffic but has remained low, 15 to 20 percent, in charter traffic, although this has not handicapped the development of the tourism sector. Tunis Air is planning to capture a larger share of charter traffic, possibly through the creation of a charter subsidiary. While this would increase for- eign exchange earnings from tourism, it would require a strong infrastructure abroad which it would take some time to create. The development of tourism and of industry in the south have created a demand for improved communications between the large towns. Because of good road coverage and relatively short distances the demand has so far been satisfied by buses or private cars, in preference to rail which is slow and somewhat unreliable. Domestic air serv- ices were discontinued in the late 1960s because of inadequate infrastructure and demand. Tunis Air is at present considering the possibility of restoring air connections between Tunis and the south to promote Saharan tourism. While there is no evidence that regular domestic services would be justified, there is a need for some type of "on request" connections, which could be provided by an air-taxi service without need for much improvement of existing facilities. 16.13 Because of a progressive development plan, port capacity is generally adequate for some years to come without major improvements. The Compagnie Tunisienne de Navigation's (CTN's) share of maritime traffic has remained low; 5 percent of this share is carried by its own fleet and 10 percent by chartered vessels. CTN plans to expand its operations and acquire more vessels so as to increase its share in export (phosphate, chemicals, oil and agricultural prod- ucts) and passenger (car ferry) traffic. (iii) Costs and Tariffs 16.14 Air transport tariffs are fixed by international rules, and shipping rates depend on international market conditions and/or conference agreements. So far Tunis Air has remained competitive without loss of financial viability despite the use of promotional tariffs to improve its load factor. CTN has been less successful and, though profitable, has not been able to generate enough cash to finance its projected expansion. 16.15 The Government considers that inland transport should be operated in the public interept. Transport agencies are not autonomous and their op- eration and tariff policies are controlled by the Government. It is also accepted that transport agencies should only be concerned with operations and that the Government should finance at least part of their infrastructure. The Tunisian and French attitudes towards transport are very much alike, and have the same characteristics.  16.16 While the Government has followed these rules for road and rail transport, it has deviated from them for ports and airports by creating two autonomous agencies: Office des Ports Nationaux Tunisiens (OPNT) and Office des Ports Aeriens Tunisiens (OPAT) which, so far, are financially viable. SNCFT and the road transport companies, which are under direct Government con- trol, are not authorized to adjust their tariffs to rising costs, and have to apply preferential rates, without compensation, to certain commodities to pro- mote exports or to keep the cost: of living down. The result has been continuous financial problems and physical deterioration. 16.17 While the Government's wish to subsidize certain commodities, as an element of social policy, is understandable, this should not be done at the expense of the transport agencies, which cannot be expected to provide a re- liable and efficient service whi.le denied the means todo so. The present situation does not offer any incentive to improve management and productivity. In order to improve their financial situation, the following measures could be examined: (i) compensate transport companies for losses incurred through charging rates intended to subsidize particular goods or services, (ii) allow transport companies to revalue their assets periodically to take account of rising equipment costs, and (iii) allow periodic tariff increases when justified by rising costs. There is also a need for the agencies to improve their ac- counting systems so as to provite a better basis for calculating rates. The same applies to road .and airport infrastructure, where user charges bear little relationship to costs. 16.18 Some of these problems were identified by the "Commission Sectorielle des Transports" (CST) during the preparation of the Fourth Plan, and the draft plan indicates that in the future tariffs should be adjusted to costs, without indicating, however, how or when this would be achieved. (iv) Employment 16.19 Over the decade the number of employees in the transport sector grew at an average rate of 8.8 percent p.a. from 9,700 to 22,450. The largest in- crease was in road and air transport. Except in road transport, where some companies are under local pressure to increase their staff, there is no evi- dence of overstaffing or of Government pressure to increase employment. This is evidenced by the decline in number of SNCFT's staff. C. Transport Policy 16.20 Since 1962, the Government has controlled the transport sector either directly or indirectly. This is particularly true of -rail and road transport, where the Government approves tariffs, licenses routes, and allocates traffic. Government intervention in air transport and shipping has been limited to efforts to increase the share of the Tunisian airline (Tunis Air) and shipping company (Compagnie Tvnisienne de Navigation-CTN) in total traffic. 16.21 The Government's inland transport policy has not brought about the expected results. Despite regulatory measures favoring rail at the expense of road traffic, the financial situation of SNCFT has remained poor, because  - 6 - of the preferential tariffs enjoyed by certain goods, and a reluctance to ap- prove long overdue tariff increases. There are, however, indications that the Government is changing its attitude in these matters. 16.22 Since 1964, entry into the trucking industry and passenger bus service has been tightly controlled. In practice, private operators are limited to the transport of their own goods, while public transport (freight and passenger) is controlled by large public transport companies: Societe de Transport de Marchandise (STM), Societe Nationale de Transport (SNT), and a number of mixed (semi-public) companies, the Societes Regionales de Transport (SRTs). Because of poor management and inadequate tariffs the financial situa- tion of these companies has deteriorated and some of them can hardly be consi- dered as viable in the future. A reorganization of road transport (freight and passenger) is under consideration. 16.23 During the preparation of the Fourth Plan (1973-1976), emphasis was given to the potential role of transport as a means of opening up undeveloped areas, particularly in the south. It was suggested that large infrastructure projects, while not likely to be viable in the near future, would create de- velopment potential. These projects would be initiated and financed by the Government and would be integrated into regional development plans. If it is true that transport infrastructure projects could encourage regional develop- ment and decentralization, then to be justified they should also be based on an analysis of the resources and development prospects of the area, and form part of a regional development plan. 16.24 Over the past decade the responsibility for investment planning and transport coordination has been shared by several ministries. While the Minis- try of Planning was responsible for the overall development of the transport sector, insufficient coordination between the Ministry and the other Government agencies resulted in an unsystematic selection of projects. 16.25 These deficiencies were identified in the 1968 transport survey, which recommended: (i) The re-establishment of the "Conseil National des Transports" a consultative body to provide guidance in the formulation of transport policy; (ii) The creation of a transport coordination commission; (iii) The reorganization of the existing "Direction des Transports" (DT) to improve coordination between the various ministries and transport agencies and to improve investment planning; (iv) The reorganization of certain existing agencies; and (v) The creation new ones to deal with specific modes (air transport).  - 7 - 16.26 The "tConseil National des Transports" was in fact reactivated, and DT was transferred to the Ministry of Economy and made responsible for, inter alia: (i) transport coordination, (ii) control of publicly owned transport agencies, and (iii) investment planning. The responsibility of the DT ex- tends to the entire sector with the exception of infrastructure, which remained the responsibility of the Ministry of Works (TPH). As a consequence of this decision and in the absence of a clear definition of the responsibilities of each body, conflicts of jurisdiction have arisen between DT and TPH, and it has become evident that the changes, as implemented, are inadequate to solve all the problems of the sector. A recent analysis carried out by the "Commis- sion Sectorielle des Transports" 1/ concluded that reunification of the agen- cies dealing with transport under a single authority was urgently needed. 16.27 The following institutional problems can be discerned: (i) The existing division of responsibilities between ministries ignores the need to separate policy formulation, sector admin- istration, and project design, execution and supervision. (ii) No agency is specifically responsible for intermodal coordina- tion. (iii) The present procedure imposed on semi-public, mixed-capital transport companies (SRTGs), which requires Government approval for their operating <nd capital budgets, limits their inde- pendence and makes investment planning extremely difficult. (iv) There is a general shiortage of qualified staff at middle and uper managerial levels, which is made worse by a rapid turnover. This is particularly true of the administration, where salaries are well known to be low compared with those in the private sector. A part of thie staff of the Direction des Transports, for example, consists of officials seconded for limited periods by transport agencies, which continue to pay them. 16.28 The recommendations cf the CST, which include the creation of a single executive body to undertake the organizational and administrative reform of the sector have not yet been finalized. The importance of a consistent policy for inland transport appears to justify the establishment of a Ministry of Transport and Communications. D. Development Prospects: The Four-Year Plan 1973-76 16.29 While public enterprises and Government agencies will continue to play a leading role in transport, private operators will be permitted to 1/ The Commission Sectorielle des Transports is a consultative body con- sisting of representatives of the administration, of the various trans- port agencies and of users which meets on request to study specific problems and to prepare development plans.  - 8 - operate more freely in road transport. In order to raise productivity un- economic railway lines (Kasserine-Sousse) are to be closed. It is hoped that Tunis Air and CTN will be able to capture an increasing share of international traffic. While the development of air and maritime transport is not expected to present serious problems, energetic steps must be taken in inland transport to adjust tariffs to costs, to revise legislation, to improve management and to reform institutions if they are not to present obstacles to development. 16.30 In value added terms, the transport sector should grow at the rate of 9.4 percent per annum. Road transport should account for 33 percent of the growth, and ports, shipping and air transport for 14, 18 and 35 percent re- spectively. Rail traffic would not vary over the period. 16.31 To achieve these objectives it is planned to invest D 171.9 million, of which D 87.4 million would be for road transport, including vehicles, D 28.1 million for air transport, D 28.6 million for ports and shipping, and D 27.8 million for railways. (Statistical Annex, Table 9.3.6). Total investment projected for the four Plan Years would exceed total investment over the ten year period 1962-1972 by D 37 million, and would average 14.3 percent of gross fixed investment, compared with 10 percent over the same 10 year period. Out of the total of D 171.9 million, D 51.1 million is for the completion of on- going projects and the replacement of existing capacity ("A' projects), D 47.4 million is for projects that are about to start or have already been started ("B" projects), and D 73.4 million is for projects still under consideration and in respect of which no final decision had yet been taken ("C" projects) (Statistical Annex, Tables 9.3.7, 9.3.8 and 9.3.9). 16.32 The Government will contribute D 61.0 million to large infrastruc- ture projects (roads, ports and airports). Public and private enterprises will invest D 104 million and D 6.9 million respectively, and are expected to finance about 23 percent from internally generated funds, 12.5 percent from Government sources and 64.5 percent from external sources. External assistance is expected to contribute about 32 percent of total investment. 16.33 During the Plan period 1973-76 the effort undertaken at the end of the 1960s will be completed and, at the same time, the program will be prepared for the 1970s. Almost 60 percent of the available funds have been allocated to "A" and "B" projects. However, if a new series of projects is to be started by 1975, the preparatory work will have to be completed during that year, which will require a considerable effort. 16.34 The projects to be carried out would be based on the recommendations of the Commission Sectorielle des Transports, which had among other things: a) to analyze the performance of the past decade, identify possible obstacles to sector development and propose remedies, and b) to define the targets for the sector in the light of the planned development of the other sectors of the economy.  - 9- The results achieved by CST are of unequal quality, reflecting the differences in the availability of reliable data among the various agencies. The work accomplished by the Commission is more an indication of what transport agencies can offer in the short run under the given financial and institutional con- straints than an in-depth study of transport requirements in the context of general economic growth. The Commission has produced an investment program rather than a development plan.. 16.35 The CST has succeedecl in identifying the main institutional defi- ciencies, but has failed to provide solutions. Nevertheless, the usefulness of such a report should not be underestimated; it is the first attempt in years to analyze transport problems and to determine possible lines of development. The report should serve as the basis for further studies to update and comple- ment the 1968 "transport master plan". The knowledge of transport demand needs to be considerably improved to make it possible to formulate a coherent policy which would lead to an equilibrium between supply and demand at least cost. It is also essential that the analysis of the costs and benefits of alternative solutions be improved, if the objectives of that policy are to be attained. 16.36 Unless such an effort is made, improvements of regulations, revi- sions of tariffs or partial organizational changes will not produce the effect expected of them. A prerequisite to the success of such a reform is the creation of an agency with the task, initially of preparing the studies required for the formulation of a coherent transport policy and, subsequently, of coordinating their execution with the assistance of CST. Among other things, these studies should: a) define the respective roles of the public and private sectors in road transport, and the conditions under which private undertakings would be allowed to operate; b) assess the interrelations between the development of tourism and air transport and the alternative ways of meeting the demand for air transp-ort; c) indicate to what extent an increase of the capacity of the national shipping fleet will help to promote exports and reduce the cost of imports; d) establish social costs and benefits for urban as well as inter- urban public transport and decide how the cost should be appor- tioned; e) lay down financial guLdelines for transport agencies; f) indicate h9w the management and staff training of transport undertakings could be improved. At the same time, such an agency could recommend interim measures to restore the financial viability of road transport companies and the railway, and enable them to meet their obligations :in the short run. This agency would not ini- tially have executive power, bul: could be progressively upgraded to a Secretariat of State or possibly a Ministry of Transport and Communications.   - 11 - 17. INLAND TRANSPORT A. General 17.1 Before 1962, except for the Sfax-Gafsa line, the entire railway network was operated by the Societe des Chemins de Fer Tunisiens (SNCFT), a company fully owned by the Government. Road transport was privately owned and operated under a complicated licensing system which was very loosely en- forced. Passenger bus transport was mostly concentrated in the hands of three large companies, while freight transport was handled by some 600 operators, each owning one or two trucks. 17.2 Early in the decade, the Government decided that the operations of the various modes of transport (rail and road) should be coordinated to avoid unnecessary investment and provide the community with a good service at least cost. Although no detailed policy was formulated at that time, it was indi- cated in the "Perspectives Decennales" that this would be best achieved by (a) nationalizing the major bus transport companies and transferring their assets to a government-owned company, Societe Nationale des Transports (SNT), which was created In 1964, and (b) cancelling common carrier licenses to private operators and creating a series of semi-publicly owned regional transport companies (SRTGs) for each governorate; these companies were created between 1962 and 1964. Four private transport companies were allowed to continue operation in the Tunis area. Licenses for "own account" transport were limited to private operators. Tariffs are fixed and controlled by the Government. 17.3 The main purpose of the Government in taking control of road trans- port was to (a) rationalize operations and minimize costs by regrouping vehi- cles and maintenance facilities, (b) promote modern management techniques, and (c) avoid cut-throat competition and improve transport coordination. The measures implemented between 1962 and 1964 were the first steps towards a more sophisticated system which was to be defined in subsequent plans. 17.4 Until 1969, despite some minor changes in government services, the structure of inland transport remained basically the same. In 1967, when the Sfax-Gafsa concession expired, the entire southern railway network was taken over by SNFCT. In road transport, despite numerous requests from the SRTG and SNT to reconsider transport policy and to merge regional transport companies into larger agencies, no decision was taken; the reorganization of road trans- port, although repeatedly announced, did not go beyond the stage of broad re- commendations. Government control of tariffs became tighter and preferential rates were imposed, often withouit compensation, on SNCFT and road transport companies for essential commodit:ies (wheat, olive oil), minerals and certain categories of passengers (students, civil servants). Despite cost increases, tariffs have not been revised and a number of road transport companies have  -12 - run into acute financial difficulties. In 1969 the Government followed a more liberal policy in road transport. The number of licensed private operators increased to an average of about 5,400 in 1971, and there are indications that this trend will continue. B. Past Transport Demand and Supply (i) Vehicle Fleet 17.5 The total fleet in 1971 was estimated at about 114,000 vehicles, and grew at an average rate of about 5 percent p.a. since 1962, increasing from 4 percent p.a. in the first half of the decade to about 6 percent in the second half. Table 17.1: VEHICLE FLEET, 1962-71 -/ 1962 1966 1971 Private cars 47,000 53,700 72,100 Trucks 25,800 31,500 41,500 Total 72,800 85,200 113,600 17.6 Tunisia's 19.5 vehicles per 1,000 inhabitants is high compared with other African countries, and the figure is growing as a result of second-hand vehicle imports by expatriate workers, and the acquisition of light commercial vehicles by farmers and small businesses. Between 1970 and 1972 registrations of private cars and small commercial vehicles grew at 42 percent p.a. Table 17.2: VEHICLE REGISTRATION, 1970-1972 1/ 1970 1971 1972 Private cars 4,217 5,825 8,503* Others 2,436 4,383 5,580* Total 6,653 10,207 14,083 1/ Source: Statistical Annex, Table 9.3.5 * Estimates based on provisional figures, 1st semester 1972. 17.7 Recent traffic counts, which are still being processed, show that traffic is increasing faster than forecast in the transport survey carried out by consultants in 1967 and 1968. Recorded traffic shows an average annual increase of about 11,5 percent, while previous projections were of only 9 per- Gent p.a. Traffic increase has been particularly heavy on the access roads to Tunis and in the tourism areas, where rates of 12 to 14 percent are recorded, with an average daily traffic of 15,000 to 30,000 vehicles on the roads from Tunis to the GPI.  - 13 - 17.8 It is too early to predict whether this trend will last. It is ob- vious that part of the increase results from a more liberal import of vehicles and an easier access to transport licenses, and it is likely that, after a few years, the increase in the vehicle fleet will taper off. This might be en- couraged by government action aimed at reducing second-hand vehicle imports, which are considered dangerous and costly in repair and maintenance because of the lack of control of vehicle condition at the entry point. (ii) Traffic Increase 17.9 A large part of road traffic (private cars and transport for own account) is not recorded regularly, and reliable information on goods and passenger traffic is available only for public and semi-public transport agen- cies. These statistics should, however, be viewed with considerable reserva- tions. On the one hand, traffic measured in terms of unit-km tends to exag- gerate the importance of long-distance transport and, on the other hand, public road transport companies were created between 1962 and 1964 and do not have reliable records for the years preceding 1966. Also, as transport for "own account" is excluded, the shiare of rail transport tends to be artificially increased. 17.10 Data for freight and passenger traffic are summarized below: Table 17.3: SUMMARY OF TRAFFIC Average Rate of 1966 1968 1970 1971 Growth Per Annum Freight: (million ton-km) A. General Cargo Road 240 393 470 490 15.5% Rail 288 290 350 365 5.8% Subtotal 528 683 820 855 10% B. Bulk Rail 1,01 1,081 978 1,000 -- C. Total Freight 1,546 1,764 1,798 1,861 3.5% Passenger long-distance: (million pass-km) Road 629 758 860* 925* 8% Rail 384 312 293 312 -4.2% Total 1,013 1,070 1,153 1,237 4.1% * Estimates. Sources: Retrospectives Decennales; transport agencies.  - 14 - (iii) Freight Traffic 17.11 Over the 1966-1971 period freight traffic, bulk materials ex- cluded, grew at an average rate of 10 percent p.a., while passenger traffic, urban transport excluded, grew at 4 percent p.a. In both cases road traffic grew faster than rail traffic. 17.12 Although there is no real transport coordination, the Government's policy has been to protect SNCFT against road competition by allocating certain commodities to rail: (phosphate 4.0 million tons, iron ore 1.0 million tons, building materials 600,000 tons). Phosphate and iron ore account respectively for most of the traffic of the southern and north cen- tral lines. In 1972 these commodities accounted for 80 percent of t1ae ton- nage transported by rail and 90 percent of the ton-km. As a result there is no obvious misallocation of traffic; the average haul on rail is about 200 km for bulk commodities and 120 km for general cargo, compared to an aver- age haul of less than 100 kmn by road. Road traffic consists mostly of agri- cultural products, supplies, fuels and, recently, quarry materials (crushed stone, sand) for large infrastructure projects. Road transport companies also provide rail terminal-customer delivery service, although there are complaints of the lack of trucks and of delay in clearing the goods from railway terminals. 17.13 Rail traffic patterns are relatively simple, bulk material being transported by rail from the mines to the coast (see map) and agricultural products moving from the producing areas to Tunis and the south (cereals) while equipment and supplies travel from Tunis to the interior and the south. Traffic flows are unbalanced because of the importance of bulk material move- ment toward the coast, except in the northern area. Recent origin and desti- nation data on road traffic is not available. however, a 1968 survey of road transport companies shows that long haul traffic accounts for some 60 percent of the total tonnage transported. Transport originating and terminating in Tunis accounted for respectively 44 percent and 37 percent of long haul ton- nage, the remainder being inter-governorate movement, most of which took place in the south from Sfax and Gabes to Medenine and Gafsa. This pattern is re- presentative of general cargo movement and is likely to be so for some years to come unless more effective measures are adopted to make the ports of Sfax and Gabes more attractive for the supply of the center and the south respec- tively. 17.14 Generally, freight transport demand has been satisfied, though with some delays, during the peak periods of agricultural campaigns. While users are reasonably satisfied with the services provided by SRTG and SNFCT, the wagon fleet is old and, despite operational improvements in wagon turn-around time, SNFCT recently experienced difficulties in meeting transport demand for building materials and cereals and had to curtail its services to less profit- able customers pending the arrival of new rolling stock. 17.15 Road transport capacity is adequate to serve the needs of the econ- omy and delays in collecting and delivering goods are not frequent and do not exceed two or three days on the average. The main weaknesses are in short haul  - 15 - service, which, according to SRTG, is not financially attractive and is there- fore neglected. This affects particularly the final distribution of products transported by rail; delays in clearing goods at rail terminals slow down wagon turn-around time and affect the efficiency of the railway as a whole and have resulted in some long haul traffic being diverted to road. (iv) Passenger Traffic 17.16 Over the past five years public passenger transport grew at an aver- age rate of 4.5 percent p.a. hlile rail transport decreased slightly, road transport increased at an average rate of 8 percent p.a. The predominance of road transport, which accounts for about 75 percent of total public transport, is explained by the relatively short distances between the main cities, and the small number and specialized nature of railway lines. However, the Gov- ernment's objective that road transport should complement rather than compete with rail has generally been achieved. bus lines have to be authorized by the Direction des Transports, and buses are not generally allowed to compete with rail on parallel routes except for short distances. Buses are predominantly used for short distances and the average distance travelled by bus is one-third of the average distance travelled by rail. However, there are certain lines where the two modes compete directly, more particularly around Tunis, where the bus service to Nabeul and Bizerte is much more efficient than the rail service. 17.17 Public transport compmnies operate regular services between the major urban centers and within governorates. They also operate low fare serv- ices on market days and "on request" services which in 1971 accounted for 25 percent of total passengers transported and 20 percent of the income. Most of the companies also operate long distance limousine services between tiie major cities. The geographical distribution and the frequency of service is generally satisfactory and so far the demuand has been satisfied, though because of a shortage of buses transport companies have been authorized to overload their buses by 20 percent. Because of lack of funds the fleet has not been adequately maintained and replacement has been continuously postponed; buses are breaking down more frequently, and over the past two years the qual- ity of service lias declined. The same problems prevail in rail transport, and SNCFT is using dilapidated coaches, some of them of over 30 years of age, which cannot be properly maintained and contribute to the diversion of passengers to road transport. 17.18 The efficiency of public road transport also suffers from the dis- proportion between SNT and the SRTG. SNT, which transports some 40 percent of total passengers, has taken over the lines of three large companies which were nationalized in 1960. These cover the whole territory, and in many in- stances SNT is competing with the local SRTGs. Several proposals have been made to reorganize passenger tremsport and to redistribute bus lines more equitably, but so far nothing has been done. 17.19 Until recently two semi-publicly owned companies, TRANSTOUR and TOURAFRIC, were in charge of tourist transport from airport to hotel and on excursions. Regional transport companies participated marginally in this  - 16 - type of transport. Beginning in 1972, a number of travel agencies and hotels have been authorized to operate buses for tourists on their own account. At the request of the "Office du Tourisme," the "Direction des Transports" is also studying new regulations to be applied to car hire companies, which could be given tax privileges and be exempted from custom duties on cars and spare parts. These measures would enable travel agencies to offer a greater choice of tours and to increase thie mobility of tourists, who have been complaining that Tunisia did not offer sufficient entertainment. (v) Urban Transport 17.20 Urban transport is particularly important in the three major cities, Tunis, Sfax and Sousse, which together accounted for over 95 percent of total passengers transported in 1971. Urban transport growth has been steady over the years and averaged 8 percent p.a. over the decade. Table 17.4: URBAN TRAFFIC, 1967-1971 (million passengers) Average Rate 1967 % 1971 % of Growth TUNIS SNT 85.8 59 118.2 59.5 8.3 TGM /1 12.5 9 15.7 8.0 5.9 Rail 9.6 6.5 13.4 7.0 8.7 Subtotal 107.9 74.5 147.3 74.5 8 Sfax 25.4 17.5 31.7 16.0 5.7 Sousse 11.8 8 18.9 9.5 12.5 Total 145.1 100.0 197.9 100.0 8.0 /1 1 TGM = Tunis Goulette-Marsa, electrified railway line operated by SNT. 17.21 With the exception of TGM and of two railway lines in Tunis, all urban transport is done by buses. The area served by public transport is substantially wider than municipal limits and in Sousse and Sfax bus lines connect the center of the cities with villages up to 20 km away. 17.22 In recent years, urban public transport has deteriorated consider- ably as a result of under-investment in new vehicles to replace and expand the fleet. Buses are dangerously overloaded and the frequency of breakdowns and repairs is increasing rapidly. Despite efforts to improve operating con- ditions, reschedule the services and accelerate maintenance, SNT and the SRTG's of Sfax and Sousse cannot meet the demand, especially since they have to provide several school bus services and to expand their lines at the request of tne  - 17 - municipalities. These problem; were brought to the attention of the Government and measures have been taken to improve the operation of SNT which, if they are successful, could be extended to the SRTGs of Sfax and Sousse. C. Evolution of Inland Transport, 1962-1972 17.23 At the beginning of the 1960s inland transport infrastructure was considered adequate in length and coverage to serve the needs of the country for some years. It was therefore planned that the major effort would be di- rected towards the modernization of equipment and vehicles. The Perspectives Decennales published in 1962 emphasized the importance of an adequate road transport service for freight, as well as passengers, and it was estimated that an investment of D 17.2 million, excluding vehicle replacement, would be re- quired to meet future demand. Railway investment for the decade was projected at D 9.4 million, 60 percent of which would be used to modernize motive power and rolling stock. Table 17.5: PROPOSED INVESTMENT IN INLAND TRANSPORT, 1962-71 D '000 % Road Infrastructure: 15,000 87 Equipment 2,200 /1 13 Subtotal 17,200 100 Rail Infrastructure 3,800 40 Equipment 5,600 60 Subtotal 9,400 100 Total Inland Transport: 26,600 - /1 Excluding replacement of vehicles. Source: Perspectives Decennales. 17.24 The projections of the Perspective Decennales were not based on a detailed analysis of transport requirements and of alternative ways of meeting the demand. A master plan for transport investment was prepared in 1967-1968, following a transport survey undertaken by consultants on behalf of the Govern- ment, with the assistance of UNDP. The main conclusion of the survey was that, while there had been relatively few cases of obvious misallocation of resources, past investments had not been directed to the most urgently required projects and it was necessary rapidly to rehabilitate road and rail infrastructure and to modernize and increase the vehicle fleet if inland transport was not to become an obstacle to development. The consultants recommended an investment for the period 1969-1972 of D 100 million, of which D 40 million was for infra- structure and D 60 million for equipment.  - 18 - 17.25 In addition, the consultants identified a number of institutional deficiencies as serious obstacles to the operation and development of the sec- tor. The absence of a clearly defined transport policy and the inexperience of existing institutions had led to distorted pricing. Cumbersome legislation and unnecessary controls, which were often applied by several agencies, and complicated administrative routine had contributed to inefficient management. 17.26 The consultants' analysis of the situation led to the preparation of a coordinated investment program which was carried out with the assistance of the World Bank. In addition, a number of studies of the problems of inland transport were initiated. While significant results were achieved in highway maintenance and construction, action in other fields has been delayed by the 1969 changes in general economic policy. In particular, the inland transport policy has not been defined and no substantial changes have been made in prices. However, the Government recently took steps to increase tariffs and revise transport regulations. The SNCFT tariff should be increased by 17 percent early in 1974, and the Direction des transports has commissioned consultants to make a study of road regulations and taxation. D. Road Transport 1/ (i) Road Transport Infrastructure 17.27 About 1,500 km of roads were constructed and upgraded over the decade, more than 50 percent of them being main roads. The balance consisted of feeder roads, tourism and industrial infrastructure and municipal roads in the ratios of 13 percent, 25 percent and 12 percent respectively. Total highway expendi- ture amounted to D 25.4 million, of which 77 percent was for roads; D 1.8 mil- lion went for highway feasibility studies and D 4.0 million for construction equipment. Foreign assistance amounted to D 7.5 million, representing 18 per- cent of the construction program, and 100 percent of the cost of construction equipment. In 1970 the World Bank participated in the development of the high- way sector with a loan of US$24 million equivalent, of which only US$1.0 million has been disbursed so far. 17.28 Before 1969, roads investment planning was almost nonexistent and maintenance was insufficient. This had resulted in the execution of a number of projects which were not economically justified (Cap Bon and Ksar Lamsa- Queslatia) and rapidly deteriorating road conditions. Highway construction and maintenance were undertaken by the Ministry of Public Works' own construc- tion company under complicated and ineffectual procedures. Construction equip- ment was ill-maintained. Funds for highway construction and maintenance were allocated from the national budget and bore little relation to actual needs. 1/ The basic data on road transport appear in Table 9.3.5 of the Statistical Appendix.  - 19 - 17.29 Most of these deficiencies have now been corrected and the present program is based on sound project evaluation. Highway maintenance funds have been substantially increased and the maintenance department reorganized. To increase construction capacity, a semi-publicly owned construction company has been created and the bidding procedures for highway projects have been revised. However, the highway department in the Ministry of Public Works is short of qualified staff and has difficulty in coping with the workload, as is evidenced by delays in carrying out and preparing projects. 17.30 During the decade a number of specialized road projects were under- taken to promote industrial, tourism and agricultural development. While the effort in the field of industrial and tourism infrastructure appears to have been sufficient, there is a need for stepping up the construction and mainten- ance of agricultural roads. Local agencies of the Ministry of Public Works (TPH) do what they can at the request of local authorities, but this is often barely enough to keep the roads open during the rainy season. The situation became worse after the floods of 1969 and 1973 and quite a number of feeder roads which were provisionally repaired are in need of permanent improvement. Although some priority was given to road and bridge rehabilitation after the floods, there are still some main road sections to be repaired. 17.31 Although significant improvements to municipal roads were carried out during the decade, access roads to large urban areas are becoming con- gested. This is particularly true of the Tunis area where some improvements to the northern and southern access to Tunis are required. The problem is being studied on the basis of the traffic survey carried out in 1972. (ii) Road Transport Operation (a) Investment 17.32 Public sector investment in the vehicle fleet over the decade amounted to D 27.5 million, of which 85 percent went into vehicle replacement and expan- sion. The balance was used to finance road terminals, workshops and studies. No precise information is available on capital expenditure by the private sector. (b) Vehicle Fleet and Operation 17.33 The freight fleet increased from 3,200 tons capacity in 1963 to about 12,200 tons in 1971. In 1971 it consisted of 1,360 vehicles of some 12 different makes, 50 percent of which were over 6 years old. The average truck capacity increased from 5.5 tons in 1963 to 9.0 tons in 1971, but truck productivity, which had been increasing until 1968, decreased thereafter to an average of 40,200 ton-km per ton of capacity in 1971.  - 20 - 17.34 Because of the lack of preventive maintenance, breakdowns are fre- quent, and 25 to 30 percent of the trucks are immobilized, one-third of them for long periods, because of the lack of spare parts. Capacity utilization is usually good and loading ratios average 85 to 95 percent. Overloading is rare because of efficient road control. Vehicle operation on the average is low and empty mileage accounts for 30 to 45 percent of total mileage. This is due partly to unbalanced traffic patterns between Tunis and the major urban centers, but also to lack of coordination between companies. 17.35 The total bus fleet increased from 46,500 seats in 1966 to about 85,000 seats in 1971. Between 1966 and 1971 the number of inter-urban buses remained about constant although their average capacity grew by 20%. The num- ber of urban buses more than doubled while the traffic increased by 77 percent. Between 1966 and 1971, productivity expressed in terms of passenger-km per unit of capacity decreased by 25 percent in urban transport, while it increased by more than 20 percent in intercity bus transport. Table 17.7: URBAN AND INTERCITY TRAFFIC Inter-Urban Transport Urban Transport 1966 1971 1966 1971 Passenger-km (million) 629 925 155 275 Seats offered 21,373 25,580 25,126 59,680 Productivity (pass-km/seat) 29,430 36,161 6,169 4,600 Index 100 122.5 100 75 Source: Retrospectives Decennales; transport agencies. The productivity increase in intercity bus transport can be explained by the overloading of buses which appeared some years ago and is officially tolerated up to 120 percent of the normal load. The drop in the productivity in urban transport results from deteriorating traffic conditions in the three main cities, and more particularly Tunis and Sfax, and from the generally extremely poor state of repair of the fleet and hard operating conditions (urban buses operate 16 to 18 hours a day, seven days a week). The fleet is relatively old, 35 per- cent of the buses being more than 10 years old, and maintenance standards low. Therefore, the immobilization rate may be as high as 40 to 45 percent. Buses which should have been written off a long time ago are kept on the books as a source of spare parts. (c) Cost and Tariffs 17.36 Vehicle operating costs are difficult to assess, as most of the companies do not have proper cost accounting systems. The concept of vehicle operating cost is generally not well understood, and most of the companies draw their information from general accounts which do not reflect realities. Depreciation, for example, is done on a straight line and based on the purchase value of the vehicle and not on the replacement value as it should be. Some companies, notably STM, are introducing cost accounting systems, but it is not yet clear whether these systems will be satisfactory.  - 21 - 17.37 Officially, tariffs are fixed by the Government and cannot be ex- ceeded. However, while companies do follow official tariffs for passenger transport, their rates for freight are much more flexible. They have been authorized, unofficially, to increase the rates by 20 to 30 percent for cer- tain government organizations (particularly public works). They also charge higher rates when they are in a monopoly situation. However, except for the STM, there is no rate policy, and freight is accepted even at rates below cost in order to obtain cash to meet claily obligations. It is generally felt that the prevailing rates, which have not been increased since 1959, should be raised to cover cost increases. However, no company appears to be in a posi- tion to make a concrete proposal to the Direction des Transports. 17.38 Government policy has been to subsidize certain categories of pas- sengers (students, civil servants, military personnel). Transport companies are required to provide school bus services, for example, at a nominal fee which is far below the cost of operation. Fees collected on this service in Sfax do not cover fuel expenses. No compensation is paid by the Government or the municipality; on the contrary, transport companies pay sales taxes on the subsidized as well as on the non-subsidized services. This has imposed a heavy burden on the SRTGs of Siax and Sousse. SNT, being fully owned by the Government, is entitled to a direct subsidy to the extent of the losses result- ing from concessional tariffs, though it has not claimed such compensation so far. However, a recent project for the rehabilitation of Tunis Urban Transport, prepared with the assistance of t:he World Bank, provides for both tariff in- crease and compensation in order to restore SNT's viability. 17.39 The difficulties of the SRTGs and more particularly of SORETRAS (Sfax) and STS/Sousse cannot be solved by subsidies, which are not provided for in their charters. SORETRAS and STS should therefore be compensated for their losses. Pending settlement of this question, immediate steps should be taken to improve the situation by, for example, exonerating them from custom duties on the equipment needed for and sales taxes on the income derived from subsi- dized services. (d) Financial Performance and Management 17.40 As already mentioned, accounting practices in road transport com- panies are inadequate. Most of the companies suffer from constant funds shortages resulting from heavy short-term indebtedness and inadequate tariffs. Returns on net fixed assets are extremely low and preclude access by the com- panies to medium- and long-term credits to finance their expansion. 17.41 As a result of increasing costs of vehicles and supplies, finan- cial results have deteriorated over the past five years, and at least two com- panies are facing bankruptcy. In the absence of tariff increases, the situa- tion is likely to become worse, particularly as labor pressure has led the Government to approve important wage increases to SNT personnel which will be followed by corresponding increases in the other companies.  Table 17.6: SUMMARY OF INVESTMENTS IN INLAND TRANSPORT, 1962-1971 (Private Sector Excluded) 000 Dinar Actual Difference Forecast Realization In Percent in 1962 1962-1971 Of 1962 Dinar Percent Dinar Percent Forecast Road Infastructure: Main Roads 10,000 37.5 9,000 13.0 - 10.0 Industrial Roads - 700 1.0 Feeder Roads 1,300 2.0 Touristic Roads - 1,900 2.5 Mmnicipal Roads 3,500 13.0 2 650 3.5 - 24.0 Subtotal 13,500 50- 15, 22.0 + 15. Briges 1 500 5.5 4,050 5.0 +150.0 Subtotal T5tT .O 19,600 T2T.0 + 30.0 Studies - - 1800 2.5 - Total Infrastructure 15,000 56.o 21,400 0 + 425 Road Equipment: Construction Equipment - 4,000 6.o Vehicles and Maintenance and Repair Facilities 2,200 J 8.5 27.500 39.5 Total Equipment 2,200 .5T 31,500 45-5 +1330.0 Total Road 17,200 64.5 52.900 76.0 +207.0 Rail: Infrastructure 3,800 14.5 5,600 8.0 + 47.0 EBuipment 5 600 21.0 11 200 16.0 100.0 Total Rail 9,00 355 16800 24. 785 Total Inland Transport: 26,600 100 , 69,700 100 162.0 / Original forecast including only the cost of the projected increase in the vehicle fleet. Replacement of vehicles and maintenance facilities not included.  - 23 - 17.42 There is very little management can do to improve the situation. Operational improvements, reduction of stock and tighter control of overheads will improve the situation only temporarily. An increase of capital would provide cash to renew the fleet: but, in the absence of drastic reforms in accounting, revision of tariffs and compensation for losses resulting from subsidized rates, viability will not be assured. 17.43 Urgent measures are required to improve management information sys- tems and to train the accounting staff. The concept of return on investment is not well understood, and profitability is usually measured by positive operating surpluses. There is no idea of financial planning. Firms are reluctant to incur long- and medium-term indebtedness and tend to finance capital expenditure through short-term credits. It would be advisable for the Direction des Transports to organize management seminars with emphasis on the financial policy and investment planning. (iii) Conclusions and Prospects: Infrastructure 17.44 During the late 1960,, expenditure on road construction and mainten- ance increased steadily in an effort to catch up with a backlog in road main- tenance and modernization. This trend will continue for the four years 1973- 1976 and the draft Fourth Plan recommends that a higher level of expenditure be maintained over the next decade to enable the Ministry of Public Works to bring the road system up to the standards required by the volume of traffic. 17.45 The draft Plan outlines a program which basically consists of a con- tinuation and strengthening of actions undertaken since 1968-1969. The two priority fields are: (i) maintenance and improvement, for which the Ministry has re- quested an annual allocation of 500 D/km for main roads and 200 D/km for secondary roads; (ii) modernization of the eKisting network based on feasibility studies and traffic growth. Lower priority is given to the extension of the road network, as it is estimated, rightly, that its length and coverage will be adequate for some time to come. 17.46 Improvement of urban and suburban roads and of access roads to the capital will be carried out as a special program within the framework of an integrated urban development policy, to be formulated before 1976, which would coordinate the development of housing, urban transport and utilities. The draft Plan recognizes the need to construct new feeder roads and upgrade existing ones, and indicates that research will be undertaken to determine what maintenance and construction techniques would be most appropriate to improve and expand the feeder road network. 17.47 Total infrastructure investment for the next four years amounts to D 53.9 million, of which D 26.9 is for the continuation of ongoing projects, D 1.2 million for improvement of urban roads, D 14.5 million for local bodies  - 24 - and flood damage repairs and D 11.3 for studies and new projects in preparation. These projects consists of: (a) the modernization of about 500 km of roads; (b) the improvement of the access to Greater Tunis; (c) the construction of about 150 km of feeder roads and other small projects; (d) the completion of the Sfax-Gafsa road; and (e) the construction of tourism roads infrastructure. 17.48 While the objectives of the Plan are sound and correctly reflect priorities in the highway sector, it seems unlikely that they can be fully attained before 1976; the modernization of the road network will continue as on-going works are completed. However, the Plan gives no indication of the maintenance expenditure required for the next four years. Moreover, no attempt is made to relate road expenditures to user charges and no analysis is presented of the adequacv and relevance of the existing charge for this purpose. Recently the Direction des Transports appointed consultants to carry out a study of the existing road regulations and user charges. The Ministry of Public Works and the Ministry of Plan should be closely associated with the study in order to reflect its findings in investment and tariff policies. 17.49 Although the draft Plan indicates that a new policy should be for- mulated regarding urban and suburban roads as well as feeder roads, an executing agency has not yet been designated to make the necessary studies and no schedule of execution has yet been prepared. It is urged that a committee composed of representatives of the parties concerned be constituted to select executing agencies, prepare terms of reference and fix time tables for the completion of these studies. This work could be coordinated and supervised by the "Comite Superieur des Transports". Table 17.8: INVESTMENT IN ROADS INFRASTRUCTURE, 1968-1976 (million Dinars) Actual Projected 1968-1972 1973-1976 "A" Projects ) 26.9 (ongoing) ) "B" Projects ) 8.6 1.2 "C" Projects ) 6.0 Studies 1.6 0.3 Subtotal 10.2 34.4 Tourism Infrastructure 5.0 Local Bodies _ 14.5 Total 10.2 53.9  - 25 - (iv) Conclusions and Prospects: Road Transport Industry 17.50 A number of the present difficulties in road transport stem from the lack of follow-up in the reorganization of the industry and in operational and financial decisions. As indicated above, the purpose of creating semi- public transport companies was to rationalize operation and avoid overinvest- ment in road transport. Part of this objective has been achieved: private operators have been eliminated and are now shareholders of the SRTGs, the fleet has been standardized, though there are still too many makes and types of ve- hicles, and the quality of service has improved. It is, however, not certain that unnecessary investment has been avoided. On the one hand, there is some evidence of excess capacity in the SRTGs as far as freight vehicles are con- cerned. On the other hand, private and public companies own a large number of vehicles and prefer to use their own trucks rather than public transport. 17.51 Road transport is going through a critical period of transition. The draft Plan proposes a recovery program based on three premises: (a) entry should be liberalized and some degree of competition restored; for this purpose the existing regulations and taxa- tion should be revised; (b) tariffs should also be revised and transport companies com- pensated by the State for the losses resulting from conces- sionary rates; (c) the administration should promote new management techniques; and (d) the number of transport licenses should be restricted to that which the market can bear. These objectives provide answers to most of the problems of the industry, yet they are not translated into a detailed program. In addition, no solution is proposed for solving the immediate difficulties of the transport companies. 17.52 It will take a sustained effort going far beyond a mere proposed plan of action to reorganize road transport, and it is doubtful whether this could be achieved within the next three or four years. While the draft Plan recommendations are broadly adequate, they should be complemented by a realistic program which would aim at: (a) defining the future structure of the sector; (b) establishing a modern and realistic regulatory environment; (c) reestablishing the financial viability of the existing companies; (d) studying the possibility of merges; (e) studying the practicability of separating urban, interurban and freight activities.  - 26 - 17.53 On the basis of this appraisal an interim investment plan for the next two years could be prepared. Concurrently, a working group, consisting of representatives of the industry and of the users, could prepare a long-term Plan which would inter alia define: (a) transport requirements in the long run, including the needs of specialized transport (quarry materials, equipment) and of interurban and urban passenger transport; (b) the optimum structure of the sector and the optimum size of enterprises to satisfy the demand at least cost; (c) transport regulations suitable for the normal operation of the sector and which would include provisions for new types of transport such as tourist transport and car hire; (d) management standards to be applied to road transport companies; (e) a technical and business training program; and (f) an implementation timetable to ensure that the objectives are achieved on schedule. Such a program could be undertaken by the Direction des Transports. There would be a serious staffing problem in the short run but this could be alle- viated by the temporary employment of consultants. 17.54 Total investment by public transport companies (including the three private companies in Tunis and the tourist transport companies) for the period 1973-76 amounts to D 33.5 million of which D 32.0 million is for replacement of vehicles and D 1.5 million for infrastructure projects (road terminals, workshops, etc.).  - 27 - Table 17.9: SUMMARY OF INVESTMENT IN ROAD TRANSPORT, 1972/76 (000 Dinars) On-going Projects (-'A" Projects): SNT 4,100 "B1' Projects: Infrastructure SNT 1,500 Buses replacement 3,100 Trucks replacement 1,700 Subtotal 6,300 "'C" Projects: Bus fleet expansion 10,300 Truck fleet expansion 3,100 Transport of tourists 4,700 TGM 5,000 Subtotal 23,100 Grand Total 33,500 Of the total investment, D 26.7 million is for passenger transport, while D 4.6 million is for freight transport. Priority has been given to passenger transport to eliminate overloading and provide spare capacity. The relatively low amount going to freight transport'is justified by the low utilization rate of the pri- vately owned fleet which, in the light of the more liberal approach to the role of the private sector, should be able to assume a larger share of freight traffic in the future. 17.55 The investment plans for the public sector should be treated with considerable reserve. They resu:Lt from an evaluation made jointly by the Ministry of the Plan and the transport companies, and reflect what the companies think they would be able to invest, under certain assumptions regarding traffic growth and financing, rather than what would be required to modernize the fleet and meet future demand. The amounts allocated to vehicle replacement appear to be too low; under the assumpt:ion of replacement after 10 to 15 years of service, they account for only 40 to 50 percent of what would be required for passenger transport and 30 to 40 percent of what would be required for freight transport. Moreover, future requirements have been calculated on a global basis and do not take into account possible changes in the pattern of traffic. In any case, it is doubtful whether the transport companies would be able to find the necessary finance. Given the present returns on their investments, it is doubtful whether medium-ter-m credits would be available and, in the absence of any tariff revision, t:he alternative would be short-term credit or a reduction in the investment plmn.  - 28 - E. Rail Transport 1/ 17.56 Until 1967 the railway network was divided into three different single-track systems: the Northern system consisting of about 420 km of metric gauge lines, and the Central and Southern systems, consisting respec- tively of 1044 and 456 km of narrow-gauge lines. The first two systems were operated by SNCFT. The Southern system was operated under concession by the "Compagnie des Phosphates et du Chemin de Fer de Sfax Gafsa" (Sfax-Gafsa). The concession agreement expired in 1967 and since then SNCFT has been in charge of the whole railway network. (i) Railway Investment 17.57 Between 1962 and 1971 a total of D 16.8 million was invested in rail transport of which D 5.6 million was for infrastructure, D 8.5 million for equipment and D 2.7 million for flood damage after 1968. Half of the investment (excluding flood damage) took place after 1968. From 1961 to 1968, priority was given to rolling stock and equipment, while toward the end of the decade (1968-71) the emphasis was on infrastructure; 75% of expenditures in equipment were made before 1968 and 75 percent of expenditures in infra- structures took place in the last three years. In addition to the investment made by SNCFT, Sfax-Gafsa has invested about D 2.6 million of which D 2.0 mil- lion was for locomotives and D 0.6 for rolling stock and handling equipment. Prior to 1969, rolling stock and equipment were financed by suppliers' credit; after 1969 the World Bank participated for D 9.0 million in the financing of railway investments consisting mainly of track rehabilitation, and replacement of motive power and rolling stock. So far an amount equivalent to about D 4.2 million has been disbursed; completion of the project, which has been delayed by floods, is expected for mid-1975. (ii) Financial Aspects 17.58 Prior to 1969, the main features of the financial relationship be- tween the Government and SNCFT were for the Government to compensate SNCFT: (a) when imposing general or partial tariff reductions, and (b) if SNCFT still operated at a deficit after receipt of the above compensation. Moreover, if SNCFT's income account showed a surplus, the compensation under (a) was reduced or cancelled so as to balance the accounts. If after such cancellation or reduction there was still a surplus, SNCFT had to reimburse previous Government subsidies. All sur- plus funds went to the Government. In addition, tracks and structures on the Northern Center system were the property of the State, maintenance and capital expenditure being shared on 1/ The basic data on rail transport appear in Tables 9.3.2 and 9.3.3 of the Statistical Appendix.  - 29 - a 60 percent-40 percent basis between the State and SNCFT. Tariffs were fixed by the Government, which also approved the operating and capital budget, sales of assets and borrowing. This system did not promote efficient allocation of resources, and it limited the funds available to SNCFT for depreciation, pre- venting SNCFT from participatirLg substantially in the financing of its invest- ment. More recently the statute of SNCFT has been changed to include inter alia the following provisions: (a) SNCFT will be the full owner of tracks and structure; capital and maintenance expenditure will be charged to SNCFT; (b) Tariffs will be cost-based and adjusted from time to time to produce enough revenues to cover operating expenses, including depreciation, and earn an adequate return on the value of net fixed assets in use; (c) If the Government decides that certain commodities should be subsidized by low transport rates, SNCFT should be compensated for the loss of revenue. It was also agreed that pending the first tariff revision the Government will pay SNCFT D 1.0 million p.a. as a lump-sum compensation for inadequate tariffs. 17.59 Following these measures, the financial situation of SNCFT improved in 1970. However, in 1971 costs increased by 7 percent whereas revenues in- creased by only 4 percent, and the SNCFT surplus decreased. In 1972, SNCFT showed a loss after Government subsidy. The main reason for the deteriorat- ing financial situation is the reluctance of the Government to increase tariffs and to make a firm decision on the rates to be applied for the transport of phosphate. The Government is conscious of the difficulties and has decided (i) to pay the arrears of the Sfax-Gafsa phosphate company; (ii) to increase existing subsidies to cover actual losses in 1972 and 1973, and (iii) to in- crease tariffs from January 1974. However, since discussions are under way to revise wages in the transporl: sector, it is doubtful that the across-the- board tariff increase of 17 percent which was considered will be enough to restore the financial viability of SNCFT. (iii) Railway Operation 17.60 In the first part of the decade railway operation was not satisfactory, because of the poor condition of the equipment and the track. On the average, the utilization of motive power was below accepted standards, and wagon turn-round time, which averaged 6 to 7 days, was too slow. The existence of two different gauges does not appear to have impaired SNCFT's operations. While the opera- tional efficiency in the Northern system'was poor, results in the Southern system were good, and could have been better with larger storage facilities for phosphate at the mines and at the port of Sfax. Over the past five years operational results have improved significantly; average wagon turn-round time is now satisfactory and improving, despite some considerable discrepancies be- tween the North and the South which can probably be explained by the nature of the traffic. Total staff continues to decrease and traffic units per employee have improved from 200,000 in 1969 to 283,000 in 1972. Demand has generally  - 30 - been satisfied although recently SNCFT has had some difficulties in the trans- port of building materials and phosphates. This is mainly due to an aging wagon fleet which will need replacement soon. SNCFT is presently negotiating the ac- quisition of about 500 new wagons. Some lines, particularly the line Sousse- Kasserine, carry minor traffic and it is questionable whether they should be kept in operation. SNCFT is considering their closure but no final decision has been made yet. (iv) Prospects of Rail Transport 17.61 Recent investments in rail transport have aimed mainly at restoring the operational capacity of SNCFT by track rehabilitation and equipment replace- ment. There is no doubt that rail transport performs, and will continue to perform, a useful function in the South in providing an efficient link from the phosphate mining areas to the coast. It is, however, questionable whether in the long run the Northern and Central systems, other than the coastal line, will still be justified. (It is already considered that the Sousse-Kasserine line should be closed because of its high maintenance and operating costs and the low level of traffic). 17.62 Rail transport is generally more economical than road transport over long distances, but this advantage is of little interest in Tunisia where the distances between the interior and the coast and between major cities are re- latively short. International traffic with Algeria is negligible and is not expected to increase substantially in the future. Because of insufficient staff in the Transport Directorate and government mandatory allocation of traffic, the problems of the future of rail transport have not been analyzed, although it is felt that the role of railways should be reviewed in the light of future development in transport demand. Studies are currently under review for limited containerization and door-to-door service; however, there is no integrated approach which would review the impact of such changes on operations and an the respective roles of rail and road transport. This is reflected by the considerable difficulties experienced during the preparation of the Fourth Plan in defining future railway investments. A study of the development pro- spects of rail transport needs to be carried out in the near future. Such a study should analyze in detail the economic and financial viability of each line, recommend alternative development plans and propose an investment pro- gram for the next five ten years.  31 - 18. AVIATION AND MARITIME TRANSPORT A. Aviation transport (i) General 18.1 Tunisia is served by three international airports, with a total capacity of about 2.4 million passengers per year, and a number of very prim- itive domestic airports which, with the exception of Sfax and Gabes, are not presently used. In addition to Tunis Air, the national airline, about a hundred international airlines connect Tunisia with the rest of the world. Over the past decade civil aviation has experienced outstanding growth due mainly to the development of tourism. According to recent forecasts, this trend is likely to continue for the medium-term. (ii) Organization 18.2 The Office des Ports Aeriens Tunisiens (OPAT) is in charge of airports and infrastructure operation and development. OPAT was created in 1970 following the recommendations of the 1968 Transport Survey, and has so far taken over air traffic control and operation of the three international airports, at Tunis-Carthage, Skanes-Monastir and Djerba-Mellita. OPAT is an independent legal entity, fully owned by the Government. Tunis Air is a joint venture between the Tunisian Government and Air France, which own res- pectively 51 percent and 49 percent of the capital. These two agencies are supervised by the Ministry of blational Economy (Direction des Transports) for all matters related to operation and by the Ministry of Public Works and Housing for all matters related to infrastructure development and safety regulations. 18.3 This dual control is responsible for delays in decision-making and has resulted in a lack of coordination which adversely affects operations. (iii) Performance (a) Traffic 18.4 Over the past decade passenger and freight traffic grew at average rates of 25 percent and 11 percent per annum respectively and aircraft move- ments at 18.5 percent per annum. In 1972, the total number of passengers recorded at the airports was about 1.8 million, more than two-thirds of whom used Tunis-Carthage airport, the remainder being about equally divided be- tween Skanes and Djerba.  - 32 - Table 18.1: AIR TRAFFIC MOVEMENTS, 1962-1972 Average rate of 1962 1966 1971 1972 Growth Passenger Traffic (000) Scheduled 185 257 533 730 14.5% Charter 8 196 842 1,047 63% Subtotal 193 453 1,375 1,777 25% Freight Traffic (tons) Scheduled 2,480 2,930 4,650 n.a. - Charter 45 300 430 n.a. - Subtotal 2,525 3,230 5,080 7,308 11.2% Aircraft Movements 4,950 10,983 22,650 27,185 18.5% Source: OPAT and Tunis Air (Statistical Appendix Table 9.3.4) 18.5 While passenger traffic on scheduled flights is growing at a normal rate, charter traffic has increased substantially, following the development of tourism after 1966. This trend is likely to continue and it is estimated that charter traffic will account for, respectively, 60 percent and 70 percent of the total passenger traffic in 1975 and 1980. 18.6 Since 1970, Tunis Air has operated only one domestic line, from Tunis to Djerba, which in 1972 accounted for less than 3 percent of the total traffic. Most of the passengers on this line are tourists. 18.7 In 1971, Tunis Air accounted for an average of 44 percent of the traf- fic on scheduled service; its share in charter traffic dropped from 57 percent in 1962 to about 15 percent in 1971. This reflects the commercial policy of Tunis Air, which has been to share equally with other countries in international scheduled services and remain marginal in charter traffic, which is considered .to be seasonal and not financially attractive. There are, however, indications that Tunis Air now expects to increase its share in charter traffic to about 30-35 percent by 1980. (b) Investment policy 18.8 In 1962 infrastructure and equipment were inadequate to meet the future needs of the sector. The only international airport, located at El Aquina, some 8 km northwest of Tunis, was old and not equipped to accommodate jet aircraft. Tunis Air's fleet consisted of DC3s and DC4s. To prevent civil aviation becoming an obstacle to the development of tourism, since more than 80 percent of tourists enter Tunisia by air, it was necessary to invest heavily in infrastructure.  - 33 - 18.9 Improvement of infrastructure was undertaken by steps. Modernization of the old airport was followed by the creation of two new airports, at Skanes- Monastir and Djerba-Mellita. Whi:Le the old airport continued to be used for most of the scheduled services, the two new airports were used mostly for charter flights. Early in the decade it was decided to build a new airport near Tunis, close to the old one. The capacity of the new airport was based on studies undertaken in 1961 which pointed to a traffic of 780,000 passengers in 1975. This forecast was very soon exceeded. 18.10 Eventually the airport was planned and built to accommodate 1,000,000 passengers per annum; modifications were made during construction to increase the capacity to about 1,700,000 passengers. The airport was completed in 1972 and received more than 1,300,000 passengers the same year. The two other air- ports were progressively expanded to accommodate modern aircraft. Skanes- Monastir and Djerba-Mellita have a capacity of 500,000 passengers per annum and can accommodate aircraft up to the Boeing 727 and 707 sizes. 18.11 As early as 1964, Tunis Air had undertaken the modernization of its fleet. The old DC3s and DC4s were replaced by three "Caravelles" and recently Tunis Air acquired a Boeing 727/200 which was put into service in April 1972. In addition, Tunis Air acquired two Cessnas and a Nord-262 for its domestic routes. Ground equipment was also modernized in order to maintain and service the newly acquired aircraft and satisfy the needs of international airlines. 18.12 Total investment in civLl aviation for the decade amounted to D 22.5 million, of which D 13.5 million was for infrastructure and D 8.2 million for equipment; the remainder covered ithe modernization of the Ecole de l'Aviation Civile et de Meteorologie and other minor works. Infrastructure development was financed by the Government with foreign aid (60 percent), while the equip- ment was financed by Tunis Air from internally generated funds for more than 50 percent, by suppliers' credits, and by a loan from EXIMBANK for the ac- quisition of the Boeing 727.  - 34 - Table 18.2: SUMMARY OF INVESTMENT IN AIR TRANSPORT, 1962-1971 (000 Dinars) Total Foreign Aid I. Infrastructure Tunis-Carthage 9,600 6,600 Skanes Monastir 1,700 780 Djerba Mellita 2,350 950 Subtotal 13,650 8,330 II. Equipment Aircraft /1 5,700 Equipment 500 Building 600 Subtotal 6,800 Total 20,450 /1 Boeing 727 not included. Source: OPAT and TUNIS Air. (c) Financial Results 18.13 It is too early to judge the financial viability of OPAT, which was created in 1970 and which has not yet taken over the Tunis-Carthage airport (as construction is not yet completed, it is still under the Ministry of Civil Works and Housing, TPH). However, in 1970 and 1971 OPAT incurred operating losses of D 290,000 and D 90,000 respectively, and it is doubtful whether in future it will be able to cover its operating expenses and depreciation, let alone any contribution to future investments; it will probably have to be sub- sidized by the Government. 18.14 Tunis Air has remained profitable over the decade and has generated enough cash internally to finance about 50 percent of its investments. Finan- cial performance has been satisfactory despite low tariffs to promote air travel. (iv) Development Prospects 18.15 Great progtess has been made in improving and modernizing infrastructure. However, this effort has been concentrated entirely on improvement of the inter- national airports to meet the needs of tourism. Nothing has been done to improve domestic airports, especially in the south, and in 1970 Tunis Air dis- continued its domestic services other than Tunis-Djerba. Improvement of infrastructure has been hampered by lack of comprehensive studies, and by the rapid growth of tourism, as evidenced by the new airport at Tunis-Carthage, which will reach full capacity less than three years after its completion.  - 35 - 18.16 Tunis Air's operation has generally been satisfactory. Aircraft capacity utilization rose from 63 percent in 1962 to about 69 percent in 1971, and the share of the value added in the total turnover from 53 percent in 1962 to 68 percent in 1971. Civer the decade, staff increased in proportion to traffic. A continuous training effort has enabled Tunis Air to satisfy its needs with Tunisian nationals except for pilots. 18.17 As already mentioned, the development of air transport, and more par- ticularly of charter traffic, is linked to the development of tourism. More than 80 percent of the tourists visiting Tunisia arrive by air, and though there has been an increasing demand for sea transport (car ferry), the trend is unlikely to change substantially in the near future. Freight transport is not important and is not likely to increase rapidly in the near future, as the marketing infrastructure will have to be developed before Tunisia can enter the overseas markets for fresh and early fruits and vegetables. 18.18 Traffic projections prepared separately by OPAT and Tunis Air differ substantially as to the likely number of passengers in 1976. Table 18.3: AIR TRAFFIC PROJECTIONS, 1976 (000 Passengers) Tunis Air - higher projection 2,860 - lower projection 2,700 OPAT 3,730 Even if transit passengers are included, OPAT's projections remain high and exceed the Office National du Tourisme (ONTT) target of about 1.3 million tourists in 1976. Nevertheless it seems reasonable to count on a total pas- senger movement of about 3.0 million by 1976, representing an average in- crease of 14 percent per annum comipared with 1972. About 63 percent of pas- senger traffic will pass through Tunis-Carthage airport, the capacity of which will be exceeded by 1975/76; the remainder will be divided about equally between Dierba and Skanes-Monastir. Scheduled flights are expected to account for 40 to 45 percent of total passenger traffic, while charter flights will supply the balance. Given the potential development of tourism, these projec- tions are not unreasonable. 18.19 Freight traffic is expected to grow at an average rate of about 7 percent per annum, from 7,400 tons in 1972 to 9,500 tons in 1976. Most of the freight will pass through Tunis-Carthage, and some difficulties are ex- pected in meeting the demand, as the existing handling and storage facilities are already inadequate. 18.20 Although the Tunis-Carthage airport is fairly new (construction will be completed during the current Plan period), some difficulties are ex- pected in meeting the projected demnand over the next four years. Passenger- handling capacity should be adequate, although police and Customs formalities  - 36 - may cause some delay. However, the capacity of the aircraft parking and serv- icing areas is inadequate. OPAT is conscious of this problem, which it inher- ited on its creation, and has undertaken, with the assistance of consultants, the preparation of a master plan for the future development of the Tunis- Carthage airport. This plan should enable OPAT to increase the capacity of the existing airport by stages until 1985, when a second airport, likely to be located south of Tunis, might be considered. No major capacity problems are envisaged at Skanes-Monastir and Djerba. However parking and servicing areas will have to be expanded during the Plan period to provide safer landing conditions at Djerba and to make it possible to utilize Skanes-Monastir as an overflow facility for Tunis. 18.21 Domestic airports have been neglected up to now, partly because there was no obvious demand for domestic services and partly because the main effort was concentrated on the development of international airports to encourage tourism. It is envisaged, although no detailed study has yet been undertaken, thiat the Sfax, Gabes and Gafsa airports should be reopened to light aircraft (40 seats) to satisfy the demand created by tourism development, largely in- dustrial projects in the south and stepped-up oil exploration. These airports would be served by domestic services operated by Tunis Air. 18.22 One of the objectives of ONTT is to diversify tourism and to offer a year-round program to potential tourists. For this purpose ONTT is consider- ing the development of Saharan tourism and is planning to build an airport for medium-sized aircraft at Tozeur. This project, as well as the modernization of tile airports of Sfax, Gabes and Gafsa, is subject to further studies. lHowever, the Tozeur project has been given a higher priority than the other airports. 18.23 A total of D 14.2 million will be invested in infrastructure proj- ects over the next four years, of which D 6.9 million is for the completion of on-going projects, D 0.75 million for projects which have been decided upon and are ready to start, including the study of a master plan for the Tunis-Carthage airport, and D 6.55 million for projects which are still being studied. These new projects include the extension of Tunis-Carthage airport (D 3.0 million) and various improvements at Djerba and Skanes-Monastir (D 1.25 million) and domestic airports (D 2.3 million). 18.24 The civil aviation investment program appears reasonable, although the total cost of the Tunis-Carthage expansion is high. (This is the result of poor planning in the past and should not be repeated once the airport master plan is completed). New projects which are being launched only ac- count for 5 percent of the total investment, and projects under consideration for 45 percent of the total program. Ilowever, the total investment required is far beyond the financial possibilities of OPAT and 35 percent of the total cost of the program will be financed by the Government. Even so, OPAT's resources will have to be supplemented by government operating subsidies amounting to about D 3.0 million over the period. The problem of the financial viability of OPAT has not been studied in detail, as the agency has only been recently created. However, there is a need to define more precisely OPAT's task and its financial responsibilities toward the Government. Some of the installations to be financed by OPAT will be used for services to be provided  - 37 - by the Government within the framework of international conventions (traffic and air control). The capital as well as operating cost of these services should not be borne by OPAT as now. 18.25 As the development of air traffic is closely linked to tourism, it would seem reasonable that part of this infrastructure cost should be borne by tourism agencies. This approach has not yet been considered, but the taxation of tourism could be used to provide OPAT with funds to facilitate the finance- ment of the investment program. Alternatively, the Government could agree, as it has for the port of Gabes, that the construction of new airports (Tozeur) and the modernization of existing ones (Sfax, Gabes, Gafsa) are development projects and that OPAT would be responsible only for operation of the facilities, without having to bear depreciation or loan service. 18.26 Tunis Air's objectives for the next four years are to increase its share in scheduled traffic slightly and to enter charter operation seriously. To realize the first part of its program, Tunis Air lhas acquired a second Boeing 727 and is planning to replace its Caravelles by new aircraft to be purchased between 1974 and 1976 as the need arises. These new aircraft will be financed to the extent of 50 percent by internally generated funds, the remainder being financed by suppliers' credits. 18.27 For a long time, Tunis Air has been considering moving into charter operations, which at present account for only 17 percent of its total traffic. The main reasons are: (i) to obtain a share of foreign exchange which now goes to foreign operators, and (ii) to make Tunisia's tourist traffic less dependent on foreign tour operators. Tunis Air aims at obtaining about 25 percent of total charter traffic by 1976, which would mean more than doubling the number of passengers transported between 1972 and 1976. Although it has not yet been decided how the charter activity would be organized, Tunis Air and the Government apparently favor the creation of a subsidiary company dealing exclusively with charter flights. However, other solutions are being studied. 18.28 Tunis Air knows that it will be difficult to introduce a new charter company in an already very competil:ive market, but expects to be able to es- tablish a foothold in such markets as Scandinavia and the UK. The project is only in the very early stages and other studies will no doubt be undertaken. Nevertheless, there is a need for closer coordination between the tourism agency (ONTT) and Tunis Air. The success of a charter company will depend greatly on the capability of the travel agencies to supply passengers, and it is doubtful whether the TunisiarL tourism organization abroad is suffi- ciently well staffed and organized for this purpose. Moreover, charter ac- tivity is seasonal, at least in Tunisia's case, and there is little opportun- ity to use aircraft during the off-peak season except for very short periods, to supplement the ordinary fleet. While in principle the idea of a charter company is attractive, it is a risky venture which, at least in the early years, might not be profitable and could possibly endanger the viability of the parent company.  - 38 - 8.29 Although the Fourth Plan recognizes the close links between air transport and the needs of tourism, it is not based on any analysis of the relative costs and benefits of increasing the national fleet compared with relying on foreign airlines and travel agencies. It would be advisable to create a subcommittee for air transport, consisting of representatives of the administration and of the transport and tourism agencies, to study this problem further and to prepare an integrated plan for the development of air transport in Tunisia. B. Maritime Transport (i) General 18.30 With more than 1200 km of coastline, Tunisia is served by the four major ports of Tunis-La Goulette, Bizerte, Sfax and Sousse and a new industrial port under construction at Gabes. In addition, there are a number of fishing ports which are not commercially important. While Bizerte and Sfax are special- ized ports, handling petroleum and phosphate respectively, Tunis-La Goulette is the main port for general cargo and grain. Sousse is of regional importance only; in 1972 it handled 8 percent of total traffic (petroleum and phosphate excluded). Gabes will mainly serve the chemical industry to be developed in the south. (ii) Organization 18.31 Since 1963, Tunisian ports have been controlled by the "Office des Ports Tunisiens" (OPNT), an independent authority managed by a Director-General responsible to a Board of Directors consisting of three representatives of the Government and four representatives of port users. OPNT is responsible for tihe development and maintenance of Tunis-La Goulette, Sfax, Sousse and Bizerte (in- cluding Menzel Bourguiba) and has recently been made responsible for the opera- tion of Gabes. OPNT has a reasonable degree of autonomy in all administrative and financial matters. 18.32 With few exceptions, OPNT does not operate cargo handling services, though it holds part of the equipment. These services are provided by cargo handling companies, the most important of which is the Societe d'Acconage et de Manutention (STAM) in which the Government has a majority interest. STAM operates in all OPNT ports and provides exclusive services at Tunis-La Goulette. Except for floating cranes and portals, STAM owns its own handling equipment. 18.33 Tunisia's only shipping company, Compagnie Tunisienne de Navigation (CTN) was created in 1959. The Government owns 55 percent of its capital, the remainder being divided between public enterprises and some private interests. CTN has shares in a number of companies closely related with port operation and shipping, and more particularly owns 55 percent of the capital of STAM and 25 percent of that of Chimie Gabes Transport. 1/ CTN provides all kinds of shipping services except passenger transport. In 1972 it handled about 30 percent of Tunisia's total external trade. 1/ Chimie Gabes Transport is a subsidiary company of ICM and CTN for the transport of chemicals and particularly of phosphoric acid.  - 39 - (iii) Traffic 1/ 18.34 From 1963 to 1972 total port traffic increased from 5.6 million tons to 8.9 million tons at an average rate of 5.3 percent per annum. How- ever, in the past five years total traffic has remained almost constant, the increase in petroleum being offset by the decline of iron ore. Total tonnage loaded in 1972 accounted for less than 45 percent of total traffic, compared with 63 percent in 1966 and 75 percent in 1963, the changes being mainly due to the increase in the import of crude oil to supply the Bizerte refinery. Table 18.4: SUMMARY OF CARGO TRAFFIC IN TUNISIAN PORTS BY MAIN CATEGORIES 1963 1968 1971 1972 -(000 tons) General Cargo 1,308 1,223 1,010 1,166 Grain 272 379 277 328 Crude oil and petroleum products 655 2,056 2,988 3,171 Iron ore 738 1,385 957 537 Solid fuels - 79 101 141 Iron and steel products - 33 112 195 Building materials 97 36 23 140 Phosphates 2,202 2,521 2,797 2,702 Sulphur - 128 41 148 Salt 297 289 197 317 Otlhers - 27 35 36 Total 5,569 8,156 8,538 8,871 Unloaded 1,528 2,668 3,493 3,809. Loaded 4,041 5,488 5,046 5,062 Owing to an adequate development program, port capacity has generally been sufficient to meet the demand, although in Sfax the traffic is approaching capacity. The Tunis-La Goulette port, which handles 65 percent of general cargo traffic and 50 percent of total traffic, is affected by (i) the delay in completing a bulk grain berth; (ii) the reluctance of port users to transfer their storage from the old Tunis Port to La Goulette; (iii) the lack of housing for dockers; and (iv) the inefficiency of STAM in clearing goods and using transit sheds as semi-permanent storage. Nevertheless, these deficiencies are not yet severely affecting the traffic, as the port is operating at considerably less than optimum capacity, but they should be resolved to avoid congestion as traffic grows. The Government is presently studying measures to enable OPNT to change port regulations and to improve port operations. 1/ The basic data on maritime t:ransport appear in Table 9.3.1 of the Statistical Appendix.  - 40 - 18.35 From 1962 to 1971, the total tonnage transported by CTN increased from 1.4 million tons to 3.4 million tons per annum. CTN has a quasi- monopoly of petroleum coastal shipping, which grew at an average rate of 22 percent per annum over the period, and its share of international crude oil traffic is about 50 percent. CTN's share in bulk material and general cargo traffic is only about 10 percent, half of which is transported under the Tunisian flag and the remainder chartered. Table 18.5: SUMMARY OF CTN TRAFFIC 1962 1966 1970 1971