Tunisia - Medjerda - Nebhana Irrigation Development Project

Document of E% The World Bank r L g FOR OFFICIAL USE ONLY Report No. P-3291-TUN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEN] TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR A MEDJERDA/NEBHANA IRRIGATION DEVELOPMENT PROJEC] April 29, 1982 { This document bhs a restricted distribution and may be used by recipients only in tde performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Tunisian Dinar (DT) The exchange rate of the Tunisian Dinar is floating. The rate which is used in the Staff Appraisal Report approximates the current rate. It is: * US$ 1 = DT 0.50 DT I = US$ 2.00 DT 1 million US$ 2.00 million REPUBLIC OF TUNISIA FISCAL YEAR January 1 through December 31 ACRONYMS AND ABBREVIATIONS BNT - National Bank of Tunisia (Banque Nationale de Tunisie) CRDA - Regional Agricultural Development Commission (Commissariat Regional du Developpement Agricole) DEGTH - Directorate for Hydraulic Studies and Major Works (Direction G4n4rale des Etudes et Grands Travaux Hydrauliques) GIAF Interprofessional Association for Citrus and Fruit (Groupement Interprofessionnel des Agrumes et Fruits) GIL - Interprofessional Association for Vegetables (Groupement Interprofessionnel des Legumes) OMIVAN - Nebhana Development Agency (Office de Mise en Valeur de Nebhana) OMVVM - Medjerda Valley Development Agency (Office de la Mise en Valeur de la Vallee de la Medjerda) STIL - Tunisian Milk Industry Company (Societe Tunisienne de l'Industrie Laitiere) .*  FOR OFFICIAL USE ONLY REPUBLIC OF TUNISIA MEDJERDA/NEBHANA IRRIGATION DEVELOPMENT PROJECT Loan and Project Summary Borrower: Republic of Tunisia Beneficiaries; Medjerda Valley Development Agency (OMVVM); Nebhana Development Agency (OMIVAN) Amount: US $22.0 million equivalent, including a capitalized front-end fee Terms: 17 years, including four years of grace, at an interest rate of 11.6 percent per annum Project Description: The project is designed to increase production and improve marketing facilities in Tunisia's Medjerda and Nebhana irrigation perimeters. It consists of investments in: irrigation infrastructure; farm access roads and related structures; fruit and vegetable processing centers, cold stores and milk collection centers; buildings, vehicles and equipment for OMVVM and OMIVAN; credit for farmers and cooperatives; extension services; training; fellowships; and technical assistance. About 7,800 farmers would directly benefit, and about 5,200 man-years of additional employment would be created; this labor would be supplied mainly from depressed areas of the country. The major risk to the Medjerda component - underutilization by farmers of the irrigation and marketing facilities - should be minimized by project provisions for improving OMVVM's water distribution practices and extension and marketing services, as well as by OMVVM's past experience with marketing. In Nebhana, a portion of whose production would be exported, Tunisia's lack of experience in vegetable export marketing presents a risk. However, the designation of the Interprofessional Associations for Citrus and Fruit and for Vegetables (GIAF and GIL) to promote and coordinate exports, along with the strengthening of OMIVAN's marketing services, should help assure success of this component. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Costs: Local Foreign Total -- US $ Million -------------- Medjerda Component Irrigation Infrastructure/ Road Works 5.3 2.9 8.2 Marketing Facilities 1.0 1.4 2.4 OMVVM Buildings, Vehicles and Equipment 1.1 1.3 2.4 On-farm Development Credit 1.7 4.7 6.4 Incremental Operating Expenses 0.7 - 0.7 Training and Fellowships - 1/ 1/ Base Cost 9.8 10.3 20.1 Contingencies - Physical 0.7 0.6 1.3 Price 3.7 3.6 7.3 Subtotal 14.2 14.5 28.7 Nebhana Component Irrigation Infrastructure/ Road works 4.3 6.9 11.2 Marketing Facilities 0.5 0.9 1.4 OMIVAN Facilities, Vehicles and Equipment, and On-farm Works 0.6 0.6 1.2 On-farm Development Credit 1.0 1.0 2.0 Incremental Operating Expenses 1.1 - 1.1 Training and Fellowships 0.2 1/ 0.2 Technical Assistance 0.2 0.8 1.0 Base Cost 7.9 10.2 18.1 Contingencies - Physical 0.5 0.9 1.4 Price 3.0 3.6 6.6 Subtotal 11.4 14.7 26.1 Aggregated Base Cost 17.7 20.5 38.2 Physical Contingencies 1.2 1.5 2.7 Price Contingencies 6.7 7.2 13.9 TOTAL PROJECT COST 25.6 29.2 54.8 Front-end Fee on Bank Loan - 0.3 0.3 TOTAL FINANCING REQUIRED 25.6 2/ 29.5 55.1 2/ 1/ Under $50,000 2/ Including $8.2 million of taxes and duties  - iii - Financing Plan: Local Foreign Total ----- US $ Million -------------- Bank - 22.0 22.0 Government 21.2 - 21.2 National Bank of Tunisia (BNT) 0.4 7.5 7.9 Farmers 4.0 - 4.0 Total 25.6 29.5 55.1 Estimated (Bank FY) Disbursements: 1983 1984 1985 1986 1987 1988 -----------------US $ Million----------------- Annual 0.5 3.0 5.2 5.6 4.6 3.1 Cumulative 0.5 3.5 8.7 14.3 18.9 22.0 Economic Rate of Return: 33 percent Staff Appraisal Report: No. 3807-TUN, dated April 20, 1982 Map Nos.: 16133 16134  i  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR A MEDJERDA/NEBHANA IRRIGATION DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed Bank loan to the Republic of Tunisia for US$22.0 million equivalent to help finance a Medjerda/Nebhana irrigation Development Project. The loan, which includes a capitalized front-end fee of 1.5 percent on the Bank loan, would be repaid over 17 years, including 4 years of grace, with interest at 11.6 percent per annum. PART I - THE ECONOMY I/ 2. The last economic report entitled "Tunisia - Country Economic Memorandum" (No.3399-TUN) was issued on September 15, 1981. Economic missions visited Tunisia in October 1981 and March 1982 to review a draft of the Sixth Development Plan (1982-86); this part reflects their preliminary findings. Country Data sheets are attached in Annex I. 3. Much of Tunisia is arid or semi-arid. Only three percent of arable land is irrigated, and areas where rainfed agriculture is possible are subject to severe year-to-year fluctuation in rainfall. Tunisia's most important raw materials are phosphates, petroleum, and natural gas; although the known exploitable reserves of oil and gas are approaching depletion, and those of phosphate deposits are of relatively low quality, there are recent promising indications of new reserves, but it is too early to assess their exact poten- tial. There is also considerable tourism potential, and efforts have been made during the last decade to develop it rapidly. 4. Since independence in 1956, Tunisia has undertaken a massive effort towards development of its human resources, paying special attention to family welfare, education, and technical and vocational training. As a result, the infant mortality rate declined from 150 in the early 1960s to 90 at the end of the 1970s, the adult literacy rate increased from under 15 percent to about 62 percent, and average caloric supply per capita increased from about 80 to 112 percent of minimum standard requirements. The sharp decrease in mortality rates was not fully compensated by the simultaneous decrease in fertility and birth rates, despite an active family planning policy pursued by the Govern- ment. Therefore, the annual natural demographic growth rate decreased only slightly from 2.6 percent in the 1960s to 2.4 percent in the 1970s. Moreover, after 1976, the net emigration of Tunisians abroad was sharply reduced by restrictive measures taken in the EEC countries and Libya. As a consequence, the residential population of 6.57 million by the middle of 1981 exceeds the level projected five years earlier by 130,000. 5. Agriculture still occupies nearly one out of every three Tunisians in the labor force. To accelerate job creation, more than half of total invest- ments of the Fifth Plan (1976-81) was allocated to directly productive sectors, but the direct employment effects of the leading sectors (petroleum, 1/ Part I is reprinted from President's Report No. P-3258-TUN of April 5, 1982 for a Sixth Water Supply Project.  - 2 - phosphate mining and processing, and tourism) are small. These sectors, however, make a vital contribution to GDP, public savings, and exports. They provided 65 percent of the country's foreign exchange earnings in 1980 while manufacturing activities, except phosphate-based chemicals, provided 17 percent. 6. Recent Economic Developments. During the Fifth Plan the growth performance differed from the impressive growth achieved from 1971 to 1976, not so much in terms of overall growth as in terms of the underlying growth factors: output in agriculture and in food industries has grown on average below the demographic rate since 1976, partially as a result of bad weather conditions; textile production and tourism development grew at a slower pace than projected both mainly because of the slump in European markets. By contrast, manufacturing industry other than textiles, as well as energy, phosphate processing, construction, and construction materials, expanded at a fast pace. 7. In spite of the considerable increase in domestic demand, partic- ularly in investments, the balance of payments situation remained favorable from 1976 to 1981. Imports in current prices grew at a slower pace than exports, and the terms of trade improved significantly due to sharply higher post-1974 export prices for crude oil. As a result, the resource gap remained relatively small, and domestic savings financed on average over 76 percent of investment, which increased from an average of 23 percent of GDP for 1972-76 to 30 percent for 1977-81. The current account deficit averaged $450 million per year (1977-81), and was easily financed; grant aid and private investments (mainly for oil exploration) provided about 30 percent, while the remainder was mainly covered by long-term foreign borrowing. Thus, during the 1970s total foreign debt increased little relative to GDP, and the debt service ratio dropped. 8. The public sector has played a major role in mobilizing and redistri- buting domestic resources. Central Government revenues were equivalent to about one-third of GDP on average for the Fifth Plan period, one of the highest shares among middle-income countries. Over 30 percent of these revenues was saved, and public savings financed close to two-thirds of total Government capital expenditures. This comfortable public finance situation permitted a rapid increase in subsidy payments to private consumers and public enterprises. Such tranfers including for social security accounted for 19 percent of total current budget outlays and over 7 percent of GDP in 1981. 9. The main objectives of the Fifth Development Plan were achieved, except for the employment target. The actual GDP growth fell short by 1.0 percentage point of the planned rate of 7.3 percent p.a., while the investment objective of $9.8 billion in current prices, or 30 percent of GDP, was fully met. Completion of some large projects in the public sector (steel, expansion of the oil refinery) were, however, delayed, but private sector investments, both foreign and national, exceeded Plan targets. 10. Open and hidden unemployment is a serious problem for the Tunisian economy at present. During 1977-81, although job creation objectives were achieved in all non-agricultural sectors except construction, these sectors could only absorb 76 percent of new job seekers at a time when migration to Libya and Europe slowed down. The overall unemployment rate, estimated at about 13 percent of the labor force in 1980, has therefore not declined.  - 3 - 11. Medium-term Prospects. The draft Sixth Development Plan (1982-86) has been prepared and should be discussed by the newly elected Parliament iL' June 1982. The main objectives are employment generation, export promotion, and more rapid growth in the three least developed regions of the country (North-West, Center-West, and South). Sectoral priority is to be given to agriculture, tourism, and electrical and mechanical industries. 12. The outlook for investment and growth during this period and beyond will partly depend upon future developments in the oil and natural gas sector. Oil and gas exploration programs under way have been encouraging. Based on known reserves, and with the possible exploitation of smaller fields that recently became profitable, it is generally expected that domestic oil and gas production would at best be stabilized at about its present annual level of 5-6 million tons of oil equivalent until the end of the decade. However, barring large new oil or gas discoveries, and given the rapid rise in domestic demand for energy, Tunisia will have to face the consequences of a relative decline in energy revenues. The Government considers that the situation requires immediate policy changes and is analyzing the most urgent ones to be included in the Sixth Plan. By introducing these changes on time, Tunisia expects to reduce the associated economic and social strains, and avoid major balance-of-payments problems. 13. The draft Sixth Plan recommends a GDP growth objective in the range of 5.9 to 6.1 percent depending on agricultural performance. This growth rate is in line with recent trends. Projected growth of traditional exports (tourism, textiles, and phosphates-based chemicals) is insufficient to compen- sate for the projected decline in oil export revenues; these exports should be supplemented by new ones, in particular electrical and mechanical products. Production diversification and export promotion will, however, take time to bear fruit given, in particular, the depressed world market prospects. The Plan strategy therefore rightly aims at containing domestic demand in order to control import growth. The macroeconomic scenario assumes no improvement in terms of trade, as was brought about by oil price rises in 1973-74 and in 1979-80. This would not only affect the external account but also result in slower growth of domestic savings, particularly public savings. 14. Consequently, the draft Sixth Plan projects a drop in the fixed investment rate from 30 percent of GDP in 1977-81 to about 26 percent for the Plan period. This would still imply an increase of 24 percent in constant prices relative to the Fifth Plan investment. A major objective is to correct recent capital intensive biases in projects by appropriate sectoral allocation of investments. More resources would be allocated to small and medium manu- facturing enterprises in the underdeveloped regions, in order to ease the unemployment problem and reduce income disparities between rural and urban areas. Since June 1981, a new set of policy measures has targeted the incen- tive system toward this objective. The Investment Code was modified to offer free industrial zones and direct subsidies to job creation for new projects in underdeveloped zones, and a Promotion Fund for Handicrafts and Household Workshops was created. In order to promote a more efficient technical and financial management of the public and private modern sector, the draft Plan assigns a major role in project promotion and supervision to an expanded net- work of new Development Banks (two opened in 1981 and three are planned for  -4- 1982); they are to be joint ventures with foreign investors and should alleviate the pressure on the budget to finance too large a share of public investments. 15. Increasing budgetary constraints will require a reassessment of the present policies of subsidies for energy, basic foodstuffs, transportation, and public sector enterprises. In addition, interest rate policy and a better-adjusted fiscal system should be used to restrain final consumption and stimulate savings. As first encouraging steps in 1981 and in early 1982, sizeable price increases in energy and agricultural products were implemented, and the whole interest rate structure was revised upward, rates on saving accounts and term deposits being increased by 1.5 to 2 point~s. There was a sizeable increase of the legal minimum wage (30 percent) in March 1982, mainly to improve the low-wage earners' living conditions, but the Government recognizes that overall wage and salary policies should keep labor cost increases (including social costs chargeable to enterprises) in line with productivity increases, particularly since Tunisia wants to stimulate tourism, and improve its international competitiveness for exports of manufactured goods. 16. Social Issues. Tunisia's social performance has been impressive since independence, and the country has come a long way towards meeting the basic needs of its population and reducing absolute poverty. About 16 percent of GDP is now devoted to social programs. However, unemployment among the young and regional pockets of poverty still present serious social problems. 17. Recently published data show that the continued attention of the Government to poverty oriented social programs resulted in a reduction of the ratio of people under a minimum standard income from 17 percent of the total population in 1975 to 13 ercent in 1980. During this period, the overall number of this group declined in urban areas but increased in some rural zones in the center of the country, as a consequence of poor agricultural perform- ance. Income differentials between the coast (East) and the interior (West) widened, in part because the system of price controls and subsidies as well as budgetary expenditures had a weak redistributive impact. The Government is using the forthcoming Plan to focus on the largest zones of poverty, with a view to eradicating them before the end of this century. Reducing the demo- graphic growth rate is considered an important factor in this endeavor. 18. Education expenditures rank first among budgetary outlays. The comprehensive education system provides free access to all students, and the gross enrollment rate has reached 100 percent for primary education, and 22 percent for secondary education. The performance of the system could, how- ever, be improved by expanding vocational training programs, improving their relevance and responsiveness to labor demand, and to the special needs of the poor and rural groups. 19. Public health services are second among social expenditures, and their overall beneficial effect is reflected in the improvement of the vital statistics (para. 4). There remain, however, regional disparities in the availability of hospital beds, doctors and nursing personnel; health services have concentrated largely on curative medicine, and the medical referral system is not functioning properly. As a result, the rural poor are often excluded. Closely linked to nutritional deficiencies, infant mortality remains high relative to middle-income countries.  20. In the draft Sixth Plan, investment in education, health, housing and water supply is focussed more on deprived areas, provided at lower costs (health, shelter), and made more relevant to the needs of the economy (train- ing). In education, two reforms are under discussion: the first one would provide a nine-year schooling period for all children, and the second would create polytechnical high schools combining basic and technical education. In health, the draft Sixth Plan allocates more resources to preventive medicine and nutrition education. Finally, as regards housing, public sub- sidized programs will be directed to the neediest population groups. The housing demand from households above the minimum standard income limit will be satisfied by the private sector. 21. External Assistance and Foreign Debt. As mentioned above, the growth of foreign borrowing was modest during the second half of the 1970s, and a growing share of foreign funds was provided by public sources at relatively soft terms. During the 1977-80 period, foreign loan commitments averaged about $700 million per annum, 62 percent of which in the form of official assistance (ODA). About 65 percent of ODA commitments came from bilateral sources, chiefly France, the Federal Republic of Germany, Canada, and some oil-surplus countries. About 24 percent of total ODA was committed by the Bank Group, and some 11 percent by other multilateral sources. Borrowing terms were favorable, averaging 5.8 percent interest and 18.5 years maturity, including a grace period of 5 years. At the end of 1981, debt outstanding and disbursed was estimated at about $3.8 billion, or 40 percent of GNP; debt service was 12 percent of exports of goods and services, as compared with 17.7 percent in 1970. 22. The external trade deficit reached $464 million in 1981, and is projected to grow to about $1 billion in 1986. New loan commitments from abroad, projected at one billion dollars per year on average (at present dollar exchange rates), should not be difficult to obtain, with ODA providing half of the total. Leaving aside the possibility of major oil and gas dis- coveries, external debt service would be about 13 percent of total export revenues in 1986. 23. These relatively favorable prospects would depend on a timely imple- mentation of the already mentioned policy changes to curb domestic demand, promote exports, and improve public sector savings. It should be noted, however, that the draft Sixth Plan recommends a low growth scenario in order to preserve the country's relatively high financial stability and credit- worthiness. This objective is even more crucial if the country is to succeed in mobilizing the large inflows of direct foreign capital assumed in the Plan. Foreign investments were small during most of the 1970s but have gained momentum during the last three years in line with increased activities in the oil sector, and new incentives offered to foreign investors in manufacturing. Such investments have increased from $50 million in 1976 to about $200 million in 1981, and have been equivalent to 10 percent of total investments for 1977-81. The draft Plan's growth scenario estimates that about 15 percent of total investment could be financed by foreign capital, equivalent to an annual inflow of $400 million. The newly created Development Banks (para. 14) are expected to play a significant role in this context.  - 6 - 24. In conclusion, the balance-of-payments outlook can be considered favorable in the medium term. In the longer term, much will depend on the policy changes to be initiated during the next few years, and on developments in the hydrocarbon sector. Considering its long record of prudent and skill- ful balance-of-payments and external debt management, there are good grounds to assume that Tunisia will formulate and implement the necessary policy changes and will continue to be creditworthy for future Bank lending. The Bank's close dialogue with the Government on several policy aspects at the macro and micro levels will be pursued in connection with the implementation of the Sixth Development Plan. PART II - BANK GROUP OPERATIONS IN TUNISIA 25. Since 1962, the Bank has committed to Tunisia fifty-one loans and eleven IDA credits amounting respectively to $1,029.9 million and $70.1 million (net of cancellations) of which twenty-one loans and nine credits have been fully disbursed. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1982, and notes on the execution of ongoing projects. Project implementation is generally satis- factory. As of December 31, 1981, overall disbursements amounted to 62 percent of appraisal estimates, which compares favorably with other countries in the region. Disbursement performance for irrigation, industrial finance and port projects has generally been above the country average, while larger than average disbursement delays have been experienced for agricultural credit, education, highway, urban and fisheries projects, due to project specific problems that are being addressed through supervision missions and sector discussions. In a number of sectors, important institutional improvements have been achieved, and autonomous agencies have been created or strengthened to ensure the efficient management of the related sectors or subsectors. 26. The Bank's lending strategy in Tunisia aims at supporting Government efforts to; (a) increase employment; (b) encourage more balanced growth and distribution of income among regions and income groups with particular emphasis on rural areas; (c) promote export-oriented policies, technological changes and labor productivity; and (d) provide selective support for the development of basic infrastructure and for institution building in key public services. An important feature of this strategy is to support the Tunisian authorities in the timely and well-coordinated preparation of projects through missions and advice by Bank staff, the assistance of the IBRD/FAO Cooperative Program, and the use of the Bank's Project Preparation Facility. The Bank is also supporting the Government in its efforts to increase the mobilization of domestic resources, and to secure cofinancing for the projects it assists. The latter is particularly important in view of the extent of Tunisia's external resource needs. 27. Within this broad framework, past lending emphasized support for long-term investments in infrastructure and social development. Lending for urban and social development, including water supply, sewerage, education, health, urban development, and the Tunis planning and public transport project has accounted for 25 percent of Bank/IDA commitments in Tunisia since 1971. Lending for transport, power and tourism infrastructure has accounted for 34 percent. Agriculture and fisheries have received 23 percent, and industrial and hotel financing, mostly through the Economic Development Bank of Tunisia (BDET), 18 percent of total commitments.  - 7 - 28. In line with its lending strategy, the Bank will pursue its efforts in key sectors of the economy that offer prospects for economic and social development. It will also assist projects which address the needs of the least developed regions of the country, develop research capabilities, increase productivity, and help reduce the gap between income groups, and between urban and rural areas. Particular attention will be paid to employment creation, institution building, and agricultural development. In addition to the proposed project aimed at improving irrigation and marketing facilities in the Medjerda and Nebhana irrigation perimeters, proposed future lending would include projects in agriculture, industry, energy, urban development, education and technical assistance for project preparation. 29. The Bank's economic and sector work will continue to focus on strengthening the macroeconomic and sector base for our lending program; it will be more centered in the future on the analysis of economic issues and policies related to the necessary adaptation process from a petroleum export- ing to a petroleum importing country. A preliminary analysis of this issue was included in the last Country Economic Memorandum (Report No. 3399-TUN of September 15, 1981). The Plan Review Report, to be issued together with two sector surveys on agriculture and urban development towards the end of 1982, will deepen this analysis. Further economic and sector work will include a review of employment issues, of incentive and pricing policies (in association with the study on effective protection), of the long-term energy strategy and of the education, transport, and small scale industry sectors. 30. The Bank and IDA accounted for about 15 percent of total public com- mitments to Tunisia during 1979-1980. Their share in total debt outstanding and disbursed at the end of 1980 (including loans from private sources) was 10 percent and their share in debt service during 1980 was 11 percent. The share of the Bank and IDA in Tunisia's disbursed external debt is expected to increase to about 14 percent by 1986, and their share in the debt service to about 18 percent. 31. IFC has invested in NPK Engrais (a fertilizer plant), in BDET, in Compagnie Financiere et Touristique (COFIT, a company to promote and invest in tourism projects), in Soci6t6 Touristique et Hoteliare RYM (a large hotel development), in Industries Chimiques du Fluor, which produces aluminum fluoride from local fluorspar for export, and in the Sousse-Nord integrated tourism development project. IFC's net commitments in Tunisia total $11.3 million, as of March 31, 1982. IFC is currently looking into the possibility of a loan to COFIT, of expansion of a phosphoric acid fertilizer plant and of a new cement plant in the vicinity of Tunis. PART III - THE AGRICULTURAL SECTOR General Development 32. Tunisia's population is about 6.6 million (1980), of which 3.1 mil- lion live in rural areas. About 13 percent of the population lives at or below the absolute poverty level ($200 per capita in 1980 prices), of which 45 percent lives in rural areas. While still playing an important role in Tunisia's economy, agriculture's relative share has declined (24 percent of GDP in 1972 to 15 percent in 1980) mainly due to a more rapid expansion of industry, mining and petroleum. Agriculture now provides 35 percent of total  - 8 - employment, against 50 percent in 1972. Agriculture's share in total invest- ment, private and public, remained constant at about 14 percent during the 1970s, and its share in total Government expenditures averaged 9 to 10 percent during this period. 33. Of Tunisia's total area of 16.4 million ha, land suitable for agriculture and grazing totals 8.6 million ha. Of this, the cultivable area covers 5.2 million ha and forests and esparto grass cover 1.2 million ha, while 2.2 million ha are used for grazing. Out of some 250,000 ha of poten- tially irrigable land, about 165,000 are irrigated. Fruits (mainly citrus) and vegetables (mainly tomatoes, peppers and potatoes) are the fastest growing products of Tunisian agriculture, and production of off-season vegetables (November-April) under plastic greenhouses, begun in Tunisia in 1975, is developing rapidly. While Tunisia is a regular exporter of citrus, its exports of vegetables have been negligible since local demand has almost fully absorbed production. However, if greenhouse expansion continues at its present rate, some exports will become necessary to maintain prices at the local market at a level remunerative to farmers. 34. A primary objective of the Fifth Plan (1977-81) was to achieve self- sufficiency in food, defined as a balanced commodity trade in agricultural products, by 1981, which implied an average annual real increase of 6.5 per- cent in production. The Plan emphasized investment in irrigation, livestock and farm machinery. Its ambitious growth target was not achieved, nor was the goal of self-sufficiency in food, since expanding domestic demand, caused by population growth coupled with higher per capita income, surpassed production growth. However, agricultural value added did grow at 3.1 percent per year in real terms during the 1970s, compared to 1 percent per year during the 1960s. While favorable weather was a factor, a major role was played by increased use of modern inputs, irrigation development, extension of credit facilities to an increasing number of farmers, favorable agricultural prices and growth of public sector agricultural investment (40 percent increase in real terms during the 1970s as compared to the 1960s). 35. The overall objective for agriculture of the Sixth Plan (1982-86), currently under preparation, will remain progress towards self-sufficiency in food. This will involve: i) expansion of field crops like durum wheat, pulses and sugar beets, requiring increasing use of new technology, princi- pally high yielding varieties, fertilizers and chemical weed control, and investments in irrigation infrastructure, tractors and harvesting equipment; ii) expansion of the livestock subsector, primarily by improving the genetic quality of cattle through the introduction of high yielding cows from Europe; iii) expansion and diversification of tree crops; and iv) expansion of the areas planted in vegetables. Tree crop and vegetable expansion would both depend substantially on further development of irrigated perimeters. Greater emphasis would be given under the Sixth Plan to soil and water conservation, agricultural research and provision of farm input supply facilities. Atten- tion would also be directed towards improving rural roads which are important to the timely provision of inputs and marketing for agricultural production.  -9- Sector Organization 36. Overall responsibility for agricultural planning and development lies with the Ministry of Agriculture. Agricultural services are organized at the provincial level in Regional Agricultural Development Commissions (CRDAs). In addition, semi-autonomous special development agencies have been created to handle specific agricultural activities and projects, mainly those concerned with irrigation or with particular development strategies to be implemented in well-defined areas. This approach offers advantages for projects where cost recovery is an important element and/or where integrated project activities may extend over parts of several provinces. The Medjerda Valley and Nebhana Development Agencies (OMVVM and OMIVAN) manage the two areas to be developed under the proposed project, and have responsibility for enforcement of agrarian reform measures, equipment, operation and maintenance of irrigation infrastructure, supply of agricultural inputs, distribution and sale of water for irrigation, and provision of extension services. Sector Issues Relevant to the Project 37. Land Tenure. Major land tenure issues in Tunisia include skewed distribution of private land, fragmentation of individual farms, lack of land titles establishing land ownership, lack of security of land tenure for tenant farmers, a high incidence of absentee land ownership and the tendency for collectively-owned land to be poorly managed and over-exploited. While these problems have not been systematically attacked in non-irrigated areas, the Government has taken measures to correct them in irrigation perimeters by imposing a maximum and minimum farm size, undertaking land consolidation and issuing land titles. These measures are generally being well implemented and redistribution programs underway in the Medjerda and Nebhana areas are expected to be completed by the end of 1984 and mid-1983, respectively. 38. Credit. Agricultural credit is provided primarily by the National Bank of Tunisia (BNT). The special development agencies also provide short-term in-kind credit in irrigation perimeters. Major credit issues include: low loan recovery; lack of agricultural staff at BNT; lack of land titles for most farms, preventing them from obtaining long-term credit; centralization of loan decisions, resulting in an excessively long approval process; lending norms for loans financed by Government funds which do not adequately reflect either the costs of investments and inputs or the ability of farmers to contribute equity; interest rates lower than inflation; and the small number of farmers receiving credit. In Medjerda and Nebhana, credit coverage is better than the national average (43 percent and 62 percent of farmers receive credit, respectively, as compared to 10 percent nationally) and credit recovery is better than the 55 percent national average. The Third Agricultural Credit Project is addressing priority credit problems (paragraph 42). In addition, legislative action simplifying procedures for obtaining land titles has resulted in improvements in the provision of agricultural credit, and the Government is considering other ways to improve the credit system, including the establishment of a specialized agricultural lending institution. 39. Extension. Agricultural extension in Tunisia is provided mainly on an ad hoc basis, by the Ministry of Agriculture through the CRDAs and special development agencies. Irrigated areas tend to be covered more  - 10 - systematically than others. Extension is generally inadequate because extension agents spend too much time assisting farmers with credit applications, collecting statistics and doing administrative work; little extension effort is devoted to small and medium farmers; the work of extension agents is not systematic; there is little connection between technical advice regarding the use of modern inputs and the availability of credit to finance these inputs; and there is little specialized training for extension agents, despite the abundance of skilled administrative and technical manpower with agricultural training in the country. In view of these shortcomings, Bank-financed rural development and rural roads operations have included components to improve extension services in project areas. These components have shown positive results. Due to poor organization and lack of practical training, extension services in Medjerda are not satisfactory as far as irrigation and water management techniques are concerned. Although Nebhana does have a competent and well-equipped extension service, in view of the small size of land holdings, the use of greenhouses and intensive cultural practices, and the scarcity of water resources (paragraph 48), more extension agents are needed and special attention should be given to disease control and up-to-date irrigation techniques. These problems will be addressed under the proposed project (paragraph 62). 40. Vegetable Export Marketing. Until now, practically all vegetable production has been consumed locally through a well-established private sector market. However, as indicated in paragraph 33 above, with the expected substantial increase in production of off-season vegetables, export of part of the crop will be necessary. This will be true of part of the Nebhana project production. These vegetables have an excellent reputation in Europe. Moreover, export volumes are expected to remain relatively small as compared to other suppliers like Morocco and Israel. However, in order to successfully export to the highly competitive European market, an export strategy must be established. This issue will be addressed under the proposed project (paragraph 59). Previous Bank Involvement in the Sector 41. Bank Group lending for agriculture in Tunisia started in 1967 and to date, eleven projects have been approved for a total of $234.9 million of Bank/IDA funds. They include three irrigation projects - the Irrigation Rehabilitation Project in the Medjerda and Nebhana areas (Loan 1068, $12.2 million of December 1974); the Sidi Salem Multipurpose Project, the first stage of a development program for the northern water resources of the country, including construction of the major Sidi Salem storage dam on the Medjerda River (Loan 1431, $42 million of July 1977); and the Southern Irrigation Project, aimed at rehabilitating oases and creating new date palm plantations in southern Tunisia (Loan 1796, $25 million of February 1980) - two Fisheries Projects (Credit 270, $2 million of September 1971, and Loan 1746, $28.5 million of July 1979), a Cooperative Farm Project (Loan 484/Credit 99, $18 million of February 1967, of which $8.8 million was later cancelled), three Agricultural Credit Projects (Loan 779/Credit 263, $8 million of July 1971, Loan 1340, $12 million of December 1976, and Loan 1885, $30 million of August 1980), a Rural Development Project for the Northwest Region (Loan 1997, $24 million of July 1981) and a Grain Distribution and Storage Project (Loan 2052, $42 million of October 1981). The latter two loans became effective on March 23 and April 2, 1982, respectively. The Bank is also supporting  - 11 - infrastructure and on-farm investments through two Rural Roads Projects (Loan 1601, $32 million of July 1978, and Loan 2108, $35.5 million, approved by the Executive Directors on March 23, 1982). 42. Performance under these projects has been mixed, reflecting the institutional constraints in the sector. Implementation of the irrigation projects has been the most satisfactory; performance under the Irrigation Rehabilitation Project, the precursor to the proposed project in the Medjerda and Nebhana areas, is discussed in paragraphs 45 and 47 below. The Rural Roads Project is progressing on schedule. On the other hand, the First Fisheries Project was completed at the end of 1979 with considerable delay and low loan recoveries for boats. These problems were addressed during preparation of the Second Fisheries Project and agreement was reached on a strategy for improving recoveries under the First Project. However, these recoveries are still below expectations. The Cooperative Farm Project, which was designed to develop production cooperatives as part of a 10-year national program of agrarian reform, was delayed by technical, managerial and financial problems, and then, following the Government's decision not to proceed with production cooperatives, was revised in 1970 and an amount of $8.8 million cancelled. The PPAR (No. 968 of January 8, 1976) indicates that at completion in 1973, most of the project objectives, namely improved productivity, production, worker incomes and institutional viability, were attained, but that the objective to eliminate subsistence farming was not achieved. The First Agricultural Credit Project financed BNT lending for farm machinery, date palm plantations and dairy development and processing, but was not fully disbursed until 34 months after the original closing date because Bank Group funds were onlent at a higher interest rate than Government funds. The PPAR (NO. 2497 of May 11, 1979) indicates that while the project achieved a good rate of return, mechanization did not yield the benefits expected, and dairy processing suffered major cost overruns. This was taken into account in the Northwest Rural Development Project; farm mechanization was minimized, and only a small agro-industrial component (milk collection centers) was included. The interest rate problem was considered in the design of subsequent credit projects, which call for uniformity of lending terms for credit regardless of the financing source, but progress on this issue is below expectations. The Third Agricultural Credit Project, whose loan became effective in June 1981, is also addressing other priority credit problems: it requires BNT to increase agricultural staff, establish a staff training program and decentralize some subloan appraisal and approvals to branch offices. Progress so far has been slow. The project also requires that starting June 30, 1982, BNT undertake annual reviews of the adequacy of its agricultural interest rates compared to price inflation and make adequate proposals for their modification as necessary. PART IV - THE PROJECT Background 43. The Government has requested Bank assistance to finance a project aimed at continued development of irrigation, collection, processing, storage, extension and credit facilities in the Medjerda and Nebhana areas of Tunisia. The project was identified during a Bank mission in December 1978. The  - 12 - Medjerda component was prepared by FAO/CP and the Medjerda Valley Development Agency (OMVVM). The Nebhana component was prepared by the French consulting firm SODETEG in collaboration with the Nebhana Development Agency (OMIVAN). The project was appraised in September/October 1981 and negotiations were held in Washington from March 30 to April 3, 1982. The Tunisian delegation was led by the Director of Supervision, Ministry of Planning and Finance, and included the Presidents Director General of OMVVM and OMIVAN. The Staff Appraisal Report (No. 3807-TUN, dated April 20, 1982) will be distributed separately; the main features of the project are summarized in the Loan and Prcject Summary and in Annex III of this report. Maps showing the location of areas covered by the project are also attached. The Medjerda Project Area 44. The Medjerda irrigation perimeter covers about 32,900 ha in the Lower Medjerda Valley near Tunis. Average annual rainfall is about 450 mm, more than half falling during November-February; full irrigation is essential in the summer, and supplemental irrigation in the spring. Winter temperatures fall below freezing in inland areas, limiting production of citrus fruits and off-season vegetables. At present, the land is cultivated in irrigated vegetables, fruit trees (75 percent irrigated), forage (43 percent irrigated) and non-irrigated cereals. Tomato production is generally sold to private and cooperative processing plants at a Government fixed price. Most other vegetables and fruits are marketed through the Tunis wholesale market. Because they lack transport and direct access to the Tunis market or storage facilities, small farmers often have difficulties obtaining remunerative prices at peak production periods. Some 90 percent of the milk produced is sold to private merchants and milk collectors who then sell it house-to-house in Tunis. Only the small remainder is sold to the Tunisian Milk Industries Company (STIL), which has a dairy facility near Medjerda. Farmers prefer to sell to private collectors since, unlike STIL, they collect the milk, pay the farmers at each collection and pay by cash rather than check. However, this system does not provide dependable collection or sanitary protection. 45. Although the flow of the Medjerda River varies greatly during the year, existing dams and distribution systems can irrigate more than 35,000 ha. Water availability will increase with the Sidi Salem dam and water storage facilities, recently completed under the Bank-financed Sidi Salem Multipurpose Project. Development of irrigated agriculture in Medjerda started in 1958, and was largely completed by 1975. The Bank first became involved in the area in December 1974 by helping finance the Irrigation Rehabilitation Project to repair hydromechanical equipment on the main canal, replace and repair equipment and small structures for the distribution system and pumping stations, clean and remove mud from the drainage system, resurface secondary and farm roads, and provide credit for on-farm development. Although slower than expected, project implementation was generally satisfactory and the rehabilitation works are nearly completed. The 32,900 ha in Medjerda are now, with the following two exceptions, fully equipped with irrigation and drainage facilities. Some 2,930 ha (including a 600 ha state farm) were not equipped with tertiary and quaternary distribution networks because of land tenure issues, which are now being resolved (paragraph 37), and the distribution network on another 500 ha is inadequate. Also, although the facilities now exist for irrigation of nearly 30,000 ha, only 17,800 ha were actually irrigated in 1980, and yields have changed little. Among the  - 13 - reasons for this suboptimal utilization are OMVVM's policy of limiting water distribution to certain periods and its inadequate distribution techniques, and lack of knowledge and experience of up-to-date irrigation techniques by farmers. These issues will be addressed under the proposed project (paragraph 62). Of the on-farm development components included in the Irrigation Rehabilitation Project, the credit program for stables (for dairy cattle), farm construction and fruit tree plantation was smaller than expected due to lengthy administrative procedures and the collateral and downpayment requirements of BNT, and to lack of farmer demand, influenced by low milk prices and insufficient marketing facilities. As noted in paragraphs 38 and 42 above, efforts are underway to improve BNT procedures. In addition, recent milk price increases and fruit and vegetable marketing facilities to be built under the proposed project should increase demand for stables and fruit tree plantation. The Nebhana Project Area 46. The Nebhana project area consists of 14 separate irrigation peri- meters, covering about 5,000 ha in east-central Tunisia. It includes coastal and inland sections suitable for vegetable and fruit production, respectively. Annual rainfall averages 325 mm; full irrigation is essential in the summer, and water deficits in all other months except January necessitate irrigation for off-season vegetables and fruits. Due to an extended drought beginning in 1978, total area under production fell significantly from 4,266 ha in 1977/78 to 2,706 ha in 1979/80. At present, over 50 percent of the Nebhana project area is planted in olive trees, 30 percent in annual crops, mainly vegetables (hot pepper, potato, tomato, cucurbit, watermelon, bean, pea, onion and fennel), and 20 percent in fruit trees (apricot, citrus and peach). Off-season vegetable production under greenhouses has increased dramatically in recent years. Fruit production is marketed both in Tunisia and for export through 23 private exporters (including four cooperatives) and the Government-sponsored Interprofessional Association for Citrus and Fruit (GIAF). Virtually all the vegetables are marketed domestically, mainly by service cooperatives or private dealers at the wholesale markets in Tunis, Sousse and Sfax, or by the farmers themselves at local retail markets. In Nebhana, some nine service cooperatives with about 2,250 members have been created to distribute inputs (in collaboration with OMIVAN), market produce and represent the farmers' interests in dealing with Government institutions. * 47. Water resources for Nebhana come from the Nebhana River and one of its tributaries, Oued Bel Assoud, harnessed by the Sidi Messaoud storage dam and the Bel Assoud diversion dam, as well as from tubewells at Bled Sisseb and Ain Bou Mourra. There are no other readily available resources. Development of irrigation facilities in Nebhana began in 1962, and was largely completed by 1975. The Bank-financed Irrigation Rehabilitation Project was limited in this area to minor repairs of the main pipeline's hydromechanical equipment, rehabilitation of farm roads and ditches, provision of individual meters, land leveling, tree planting, installation of buried pipes to replace ditches on part of the perimeter, establishment of windbreaks, provision of credit and strengthening of OMIVAN. The rehabilitation investments are now satis- factorily completed, and yield increases have been impressive. Credit was provided under the project for storage basins, sprinkler irrigation, coop- erative storage facilities and a vegetable grading and processing facility. Credit demand for basins was less than originally expected, the sprinkler  - 14 - irrigation component did not develop as envisaged because cropping patterns adopted by farmers favored the development of low pressure systems (such as drip and trickle irrigation), and construction of the storage facilities has taken longer than anticipated. The grading and processing station, which was to be built and managed by the Nebhana Central Cooperative, did not materialize, because the Cooperative had neither the technical, financial or human resources to undertake it, nor the confidence of other cooperatives in the perimeter. With increased production under the proposed project and greater use of greenhouses, this station will become critical, and its construction by OMIVAN is therefore included under the proposed project. The funds allocated for it under Loan 1068-TUN will be cancelled. 48. There are several factors which adversely affect the availability of water in Nebhana, whose water resources are limited at all times and have been futher reduced by drought (paragraph 46). The water in the Sidi Messaoud Dam reservoir is being depleted by evaporation and seepages, part of which are repumped into the reservoir by a station at Ain Kebrite. This station, however, operates much under its capacity because of poor design, inadequate maintenance and corrosion. The wells at Bled Sisseb and Ain Bou Mourra could also produce more water, but their pumping systems are poorly equipped. The 120 km main pipeline is insufficient to serve the entire perimeter, and at the farm-level, the water distribution system is inadequate and there are considerable losses between the hydrants and irrigated plots. Finally, one area of about 400 ha has drainage problems. Project Objectives and Description 49. The major objective of the proposed project is to increase production of seasonal and off-season vegetables, fruits, meat, milk and industrial crops in the Medjerda and Nebhana irrigation perimeters, thereby helping achieve the Government's goal of self-sufficiency in food. This objective would be achieved by i) providing needed water through extension and improvement of the irrigation distribution network in both areas, and better mobilization of scarce water resources and reduction of water losses in Nebhana, and ii) investing in those areas - access roads, extension services, marketing facili- ties, on-farm development and credit - where deficiencies have constrained farmers from making maximum use of irrigation facilities. 50. The project components in Medjerda would include: (i) extension of tertiary and quaternary irrigation facilities to about 2,400 ha of privately-owned land not included in previous development projects, and improvement of the distribution network on some 500 ha scattered throughout the perimeter; (ii) improvement of about 100 km of farm access roads; (iii) construction of and provision of vehicles and equipment for a fruit and vegetable processing center at El Bathan, including a cold store, as well as construction of another cold store at Mornag; (iv) construction and equipment of four refrigerated milk collection centers, including farm-to-farm collection units and an extension team to improve milking and milk handling under sanitary conditions;  - 15 - (v) strengthening of OMVVM through provision of additional extension staff, an irrigation training unit, fellowships, tractors, stores for inputs, shelters for agricultural equipment, and offices and houses for extension staff; and (vi) provision of credit to farmers for small-scale mechanization, development of livestock and fruit tree plantation. 51. The project components in Nebhana would include: (i) improved mobilization of existing water resources by improving the Ain Kebrite, Bled Sisseb and Ain Bou Mourra pumping stations, establishing a second pumping station at Oued Aich on the other side of the Sidi Messaoud dam, and continuing experiments to recharge the aquifer at Old Teboulba through existing wells; (ii) reduction of water losses by providing hydrants, pressure and flow regulators, and water meters and by replacing ditches with pipes over about 1,100 ha; (iii) improvement of water distribution by constructing 11 additional reservoirs, adding 16 km to the main pipeline, and extending and improving facilities on the 455 ha of perimeter extensions; (iv) improvement of drainage on one area of about 400 ha; (v) improvement of about 95 km of access roads and related water control structures; (vi) construction of and provision of vehicles and equipment for a fruit and vegetable processing center at Sahline, including a cold store, as well as construction of a small sizing, grading and packing chain for fruit at Sbikha; (vii) strengthening of OMIVAN through provision of two disinfection units to provide assistance to farmers for greenhouse treatments, a 5 ha vegetable nursery, equipment for land clearing and leveling and windbreak plantation, additional extension staff, subject matter specialists, new staff for the marketing unit, vehicles, equipment, training, fellowships and 84 man-months of consultant services; and (viii) provision of credit to farmers and cooperatives for modern water- saving irrigation equipment, fruit tree plantation, and storage centers. Project Cost and Financing 52. The total estimated cost of the project expressed in end-1981 prices is $55.1 million, of which $29.5 million is in foreign exchange. Taxes and duties estimated at $8.2 million have been included, as well as physical con- tingencies of 10 percent for civil works and equipment. Price contingencies, totalling about 34 percent of the base cost plus physical contingencies, have  - 16 - been estimated on the basis of price increases of 8.5 percent for 1982, 7.5 percent for 1983-85 and 6 percent for 1986-87 for both the local and foreign costs. The cost of the 84 man-months of consultant services, all expected to be foreign, has been estimated at $11,000 per man-month, including travel, fees and per diems. 53. The proposed Bank loan of $22.0 million would finance about 75 per- cent of the foreign exchange cost, representing about 40 percent of total project cost, for civil works, vehicles, equipment, fellowships and technical assistance, and the front-end fee of $325,123. The loan would be made to the Government and passed on to OMVVM and OMIVAN on a grant basis through annual budget allocations. The balance of the foreign exchange cost, included under the credit program, would be financed by BNT from various funds at its disposal, and local costs would be financed by Government budget allocations to OMVVM and OMIVAN (including incremental operating expenses and working capital for the processing and milk collection centers and nursery, totalling $210,000 in 1983, $550,000 in 1984 and then tapering down to $330,000 in 1987), and farmers' contributions. Details of costs and financing are con- tained in the Loan and Project Summary. Procurement and Disbursement 54. With the two exceptions noted below, international competitive bid- ding (ICB) procedures according to Bank guidelines would be applied for the purchase of all vehicles and equipment, valued at $17.4 million equivalent including contingencies. These would be grouped in appropriate bidding pack- ages. Qualifying domestic manufacturers would receive a preference in bid evaluation of 15 percent or the import duty, whichever is lower. The only exceptions to the application of ICB procedures would be in the case of (i) contracts under $100,000 which could be purchased under local or international shopping or local competitive bidding (LCB) procedures already determined to be satisfactory to the Bank, provided that the aggregate cost of all contracts procured in this manner does not exceed $2.0 million ($1.0 million each for the Medjerda and Nebhana components), and (ii) NEYRTEC specialized modules, totalling $0.4 million, which control the water flow to each irrigated section and which would be bought directly from NEYRTEC SA (France). This equipment is already in use in Nebhana and is performing satisfactorily. No similar equipment presently exists on the market. Tender documents for all bidding packages above $250,000 and for the NEYRTEC equipment would be reviewed by the Bank, resulting in a coverage of about 80 percent of the total value of all equipment contracts. Except for minor works, civil works totalling $17.2 million including contingencies would be procured through LCB. Since there are many contracts scattered throughout the project areas and since these will be executed over several years, it is not expected that foreign contractors would be interested. Foreign bidders do, however, have the opportunity to participate in LCB in Tunisia. The Bank's prior review threshold for civil works contracts would be $500,000, expected to cover about 80 percent of the total value of all works contracts. Minor civil works such as land leveling, upgrading of access roads, drainage improvements and windbreak plantation, valued at $4.7 million including contingencies, are not suitable for letting under contract because of access difficulties and would be carried out by OMVVM and OMIVAN under force account in accordance with OMVVM, OMIVAN and Ministry of Equipment guidelines which are acceptable to the Bank. Consultants would be employed in accordance with the Bank's guidelines.  - 17 - 55. The proposed Bank loan would be disbursed over a period of six years as follows: 35 percent of total expenditures for civil works; 100 percent of foreign expenditures and 65 percent of local expenditures for vehicles and equipment; 100 percent of foreign expenditures and 80 percent of local expend- itures for fellowships and technical assistance; and 100 percent of total expenditures for the front-end fee. Disbursements would be fully documented except for civil works executed by force account, for which disbursements would be made against certified statements of expenditures and the documenta- ticn would be retained by OMVVM and OMIVAN for inspection by Bank supervision missions and by independent auditors. Project Implementation 56. The project would be carried out by OMVVM and OMIVAN over a period of five years. Both of these agencies have carried out their tasks under the Irrigation Rehabilitation Project successfully, and are considered capable of handling the responsibilities of the proposed project. However, while OMVVM has consultants permanently on its staff to assist in key areas, OMIVAN does not. OMIVAN plans to start procedures immediately to hire consultants to help prepare tender documents, evaluate bids, draft contracts and supervise works. Furthermore, assurances were obtained at negotiations that OMIVAN would hire consultants (i) no later than December 31, 1982, to plan project management and implementation; (ii) no later than June 30, 1983, to improve training and extension in water-saving up-to-date irrigation practices, and (iii) no later than December 31, 1983, to help promote creation of a regional marketing cooperative and define its organization and management (OMIVAN Project Agreement, Section 2.02(a)). 57. Designs and Civil Works. With the exception of the El Bathan pro- cessing center, project works either have detailed designs or are relatively small and simple or similar to other structures which already are in operation in the area. OMVVM and OMIVAN would prepare final designs, handle contracting and supervision of the principal works, with consultant assistance as required, and directly execute minor irrigation, drainage and road improvement works. The El Bathan processing center is practically identical to the center which will be built at Sahline, for which detailed designs exist, and assurances were obtained at negotiations that tender documents for it would be submitted to the Bank for approval no later than June 30, 1983 (Loan Agreement, Schedule 4, paragraph A.3(l)). Operation and maintenance of irrigation works upstream of secondary canals is presently the responsibility of the Directorate for Hydraulic Studies and Major Works (DEGTH). However, because DEGTH has widespread responsibilities all over the country with priorities which do not necessarily coincide with those of the Nebhana perimeter, assurances were obtained at negotiations that DEGTH would progressively transfer to OMIVAN, in accordance with a timetable satisfactory to the Bank, the operation of main and secondary pipelines, and the operation and maintenance of pumping stations and tubewells (Loan Agreement, Section 3.02, and OMIVAN Project Agreement, Section 2.09). 58. Operation of Marketing Facilities. As noted in paragraph 44 above, accessibility and reliability of marketing facilities has been a constraint to development in Medjerda, especially for small farmers. In Nebhana, with  - 18 - increased availability of water resources under the project, existing market- ing facilities would be insufficient to handle growing production. The col- lection and processing facilities to be built under the project are designed to overcome these constraints in both areas. In addition, the storage facili- ties to be provided would allow farmers to sell over a longer period and thereby help avoid seasonal price fluctuations. It is important that these facilities be well managed. The processing and cold storage centers at El Bathan and Mornag would initially be supervised by OMVVM, which already has experience from marketing the production of its own farm at Bordj el Amri. Assurances were obtained at negotiations that, no later than three months before the start of their operations, OMVVM would employ managers for these centers, with qualifications and experience acceptable to the Bank (OMVVM Project Agreement, Section 2.06(b)). Fellowships for training would be provided to managerial staff. The El Bathan center would collect and process produce, which farmers would then sell either directly or through OMVVM's sales agent at the new Tunis wholesale market. Assurances were obtained at negotiations that the Government would take all necessary measures to reserve suitable space for farmers at the market (Loan Agreement, Section 3.05). Assurances were also obtained that, in order to involve farmers in the marketing operations and allow them to monitor all operations and transactions, a supervisory and advisory board including five farmers chosen from all potential users and two OMVVM staff would be created six months prior to the center's start of operations (OMVVM Project Agreement, Section 2.06(a)). After the start-up period of the center, it is expected that farmers would create a service cooperative to take over its operation. The milk collection centers and collection units would also initially be managed by OMVVM. This component of the project would (i) permit milk collection at farm level, with weekly payments in cash, (ii) guarantee a regular outlet for milk at any season and (iii) ensure a farmgate price consistent with that paid by the dairy industry. It is expected that the collection centers would be leased or sold to the milk industry when production and higher fresh milk prices create conditions justifying such a step. 59. Nebhana's production under the project is expected to be largely absorbed domestically and marketed at Tunis, Sousse, Sfax or Bekalta. However, especially in the later project years, an exportable surplus will be produced and, at full development, about 25 percent would be exported. The Sahline processing center would provide marketing facilities for the Nebhana production and be operated either by the regional marketing cooperative which will be created with consultant assistance (paragraph 56) under the project or by a private operator. Assurances were obtained at negotiations that, upon its completion, the Government would lease the center on the basis of a management contract which is satisfactory to the Bank (OMIVAN Project Agreement, Section 2.08). Fellowships for training would be provided to managerial staff. OMIVAN's marketing unit would be strengthened under the project to provide support to the center, and the regional marketing cooperative would provide technical assistance to member farmers in adapting production calendars, meeting quality standards and planning cropping patterns. In view of Tunisia's limited experience in the export market to date, it is also important that attention be given to export marketing. The Government has designated the Government-sponsored Interprofessional Associations for Vegetables and for Citrus and Fruits (GIL and GIAF) to define a national export strategy and handle Government negotiations with importing  - 19 - countries, assist private exporters in finding market outlets and negotiating contracts, and provide market intelligence to export traders. Assurances were obtained at negotiations that GIL and GIAF would present their strategy for export marketing to the Government and Bank for review no later than December 31, 1983, and that the Government would promptly implement the recommendations resulting from this review (Loan Agreement, Section 3.06). 60. Land Tenure. As noted in paragraph 37 above, land redistribution programs are underway in both the Medjerda and Nebhana irrigation perimeters. Since these measures are important to assure optimal use of irrigation facilities, assurances were obtained at negotiations that land distribution would be completed and provisional titles granted no later than June 30, 1983 in Nebhana and December 31, 1984 in Medjerda (Loan Agreement, Section 3.04). 61. Credit. In view of the importance of credit, particularly to small farmers, assurances were obtained at negotiations that BNT would make credit available to farmers under terms and conditions satisfactory to the Bank (Loan Agreement, Section 3.03). Initially, subloans would be based on BNT's existing interest rates of 6 percent to small and medium farmers, and production and service cooperatives, and 7 percent to commercial farmers. This credit falls under the annual review process established under the Third Agricultural Credit Project, which provides a formula to determine the adequacy of interest rates, with a view to providing a positive margin based on inflation and covering BNT's operating costs and provisions for bad debts. These reviews would culminate in recommendations to be adopted by BNT which would ensure the economic and financial viability of BNT's agricultural lending program. The first review is scheduled to be held by June 30, 1982. 62. Extension Services and Water Use. Production development in both project areas would depend on expanded and improved extension services. Assurances were obtained at negotiations that new extension agents would be hired in accordance with a timetable satisfactory to the Bank (Project Agreements, Section 2.10). In Medjerda, an irrigation training unit for extension agents would be established within OMVVM's Agricultural Development Department. This unit's managers would receive fellowships for special training abroad in training programming and management. The unit would manage a training center on one of OMVVM's farms, receive special equipment for field training in irrigation, provide one to two week sessions in theoretical and practical issues and short refresher courses in the field during the growing season, and regularly monitor and support extension agents in the field. Assurances were obtained at negotiations that this training unit would be established, with staff and a work program satisfactory to the Bank, no later than June 30, 1983 (OMVVM Project Agreement, Section 2.09). With this training, the extension agents would be able to encourage greater use of inputs and cultivation of new crops, as well as promote improved water management and greater use of irrigation facilities. A more efficient program of regular field visits to all farms would also be established. Finally, in order to support the extension agents' encouragement of greater water use, assurances were obtained at negotiations that OMVVM would distribute water for at least 16 hours per day at all times and promote night irrigation at peak irrigation periods through 24-hour service (OMVVM Project Agreement, Section 2.07). In Nebhana, OMIVAN's extension activities would be carried out by its  - 20 - Development Department. Extension services would be strengthened to provide farmers with assistance to improve crop rotation and cultural practices, and use more efficient irrigation techniques. Four subject matter specialists in irrigation, fruit tree cultivation, greenhouses and pest control would be recruited to train extension agents and help them in the field. These specialists would organize refresher courses prior to critical periods of the growing season, and special care would be given to training in greenhouse management. 63. Cost Recovery. The current policy of the Tunisian Government is that the State is responsible for financing major infrastructure works, but that beneficiaries should contribute to financing the capital and recurrent operation and maintenance (O&M) costs of the distribution network. O&M costs are recovered through volumetric water charges. In Medjerda, farmers currently pay DO.011/m3 for irrigation water. With an expected 50 percent increase in water consumption and minimal increases in O&M costs under the project, this rate would permit full recovery of O&M costs by 1987, which is considered acceptable. In Nebhana, farmers currently pay DO.012/m3 for irrigation water, the highest rate charged in public irrigation perimeters in Tunisia. Because much of the additional water to be provided in Nebhana under the project would have to be pumped, 0&M costs would increase substantially. Assuming a doubling of water consumption under the project, it is estimated that water charges would have to be increased to DO.023/m3 in constant terms, in order to fully recover O&M costs for the distribution network, and assurances were obtained at negotiations that water charges would be increased progressively in order to achieve full O&M cost recovery for this network by December 31, 1987 (Loan Agreement, Section 3.07 and OMIVAN Project Agreement, Section 2.07). An understanding was reached that by September 30, 1982, the Government would agree with the Bank on the amount and timing of the first water rate increase. Given the profitability of irrigated fruit and vegetable production in the area, the required increases are well within the ability of farmers to pay. 64. As regards recovery of capital costs under the project, this would be achieved in both areas through a 3 percent sales tax on incremental agricultural production. This tax would recover over 30 percent of incremental capital costs in both Medjerda and Nebhana. In addition, farmers would make direct payment for 50 percent of the costs of installing pipes between the hydrants and their farm plots, and would finance by their own contributions and credit all investments in on-farm irrigation equipment. 65. Operating expenses, including transportation, of the processing and milk collection centers and cold stores would be recovered by charging farmers fees. Costs of operating the processing facilities in Nebhana would be detailed in the management contract between the Government and the operator of the facility. In Medjerda, assurances were obtained at negotiations that fees would be charged at a level sufficient to recover O&M costs from the start of operations, and would be progressively increased to cover depreciation. Full recovery would be achieved when the facilities are operating at 90 percent capacity (OMVVM Project Agreement, Section 2.08). Extension services provided by OMVVM and OMIVAN would continue to be subsidized by the Government. 66. Accounts and Audits. Both OMVVM and OMIVAN keep satisfactory accounts audited by independent auditors acceptable to the Bank. Assurances  - 21 - were obtained at negotiations that the annual reports of both agencies, their project accounts, the sub-accounts of the processing and milk collection centers, the sub-accounts for certified statements of expenditures, and the auditors' reports would be sent to the Bank no later than eight months after the end of each fiscal year (Project Agreements, Sections 4.02). 67. Production and Benefits. The greater availability and use of irriga- tion facilities is expected to significantly increase production and income in the project areas. In Medjerda, the volume of total production is expected to increase by 50 percent by full development under the project; this includes increases in vegetable, cereal, fruit, industrial crop, milk and meat produc- tion. These production increases are expected to be readily absorbed by increasing local demand. At full development under the project, about 3,800 farmers would benefit from higher incomes. Farm incomes for small farmers would rise from D360 to D995, those for medium farmers from D2,008 to D3,038 in the presently equipped area and from D1,424 to D2,735 in the newly served area, and those for large farmers from D2,107 to D6,137 in the present area and from D2,032 to D7,195 in the new area. Without the project, it is assumed that incomes would remain the same, reflecting low production intensities in the past and continuing lack of water use. In Nebhana, agricultural production is expected to shift out of olive and low-value vegetable production into higher-value off-season vegetables and fruits for which the area is ideally suited. Total vegetable production would almost double and production of new fruit trees would be 9,000 tons by full development. In total, about 4,000 farmers would directly benefit from the project. Farm incomes of vegetable growers would increase form D1,105 to D3,145, in contrast to D1,760 without the project, and those for fruit growers from D980 to D6,155, in contrast to D3,100 without the project. Since internal demand for off-season fruits and vegetables is strong, about 75 percent of the production is expected to be absorbed domestically, with the balance, an estimated 25,800 tons by 1991/92, to be exported to Europe and neighboring North African countries. 68. Based on estimates of the benefits from increased production, and the investment costs and incremental operating, maintenance and production costs attributable to the project, the economic rates of return for the Medjerda and Nebhana components are calculated at 38 and 28 percent for the 35-year life of the project. Costs and benefits were calculated using conversion factors to adjust for taxes and subsidies. For Medjerda, if net benefits fell by 70 percent or if incremental costs increased by 250 percent, the project would still earn a 10 percent rate of return. For Nebhana, if net benefits fell by 50 percent or if incremental costs increased by 110 percent, the project would also still earn 10 percent. The aggregated rate of return for both components is estimated to be 33 percent. The project would also provide significant new agricultural employment, estimated at 5,200 man-years at maximum development. Most of this labor would come from the depressed highland areas to the west and south of the project areas. These increased employment opportunities would contribute to the Government's goals of reducing rural urban migration and improving rural income distribution. Furthermore, urban consumers would benefit from a more regular supply of higher quality fruits and vegetables at more stable prices, as well as from an increased supply of high quality fresh milk. Risks 69. The major risk associated with the Medjerda component is that farmers  - 22 - might underutilize irrigation facilities. The project provisions for improving OMVVM's water distribution practices, providing expanded and improved extension services in irrigation techniques, and establishing collection, processing, storage and marketing facilities are designed to encourage farmers to make full use of available water. A major delay in carrying out any of these activities would slow this project objective. An additional risk is that farmers might not take advantage of the marketing facilities provided under the project. The success of this component would depend on the degree to which OMVVM can respond to the needs of farmers not currently being met by the private sector. OMVVM's experience in marketing production from its own farm at Bordj el Amri should enable it to expand its marketing activities without undue risk. 70. The principal risk associated with the Nebhana component is Tunisia's lack of experience with vegetable export marketing. In view of the importance of this aspect, the project provides for GIL and GIAF to handle export promotion and coordination. Furthermore, the project's marketing and extension components will strengthen this effort by promoting the development of a regional export cooperative to provide technical assistance and marketing services to member farmers producing for export and strengthening OMIVAN's capacity to provide management support to farmer marketing cooperatives. If these components are successfully carried out, they will considerably reduce this risk. The additional risk of an abrupt fall in domestic prices for off-season vegetables cannot be dismissed if the present rate of expansion of area under greenhouse production continues indefinitely, and is not fully taken up by exports. The results of the sensitivity analysis show, however, that even if prices fall significantly (30 percent over the next ten years) below those projected, project investments would still be economically justified. PART V - LEGAL INSTRUMENTS AND AUTHORITY 71. The draft Loan Agreement between the Bank and the Republic of Tunisia, the draft Project Agreements between the Bank and OMVVM and OMIVAN, and the Report of the Committee provided for in Article III, Section 4 (iii), of the Articles of Agreement are being distributed separately to the Executive Directors. Speciai features of the project are listed in Section III of Annex III. 72. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 73. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachments April 29, 1982 Washington D.C.  - 23 - ANNEX I IUNISIA - SOCIAL INDICATORS DATA SHEET Page 1 of 6 TUNISIA REFERENCE GROUPS (WEIGHTED AVERAGES LAND AREA (THOUSAND SQ. KM.) - HOST RECENT ESTIMATE )La TOTAL 164.0 MIDDLE INCOME AGRICULTURAL 76.7 ' MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE lb MIDDLE EAST LATIN AMERICA & CARIBBEAN GNP PER CAPITA (US$) 220.0 370.0 1120.0* 865.5 1616.2 FNERGY CONSUMPTION PER CAPITA (KILoGRAMS OF COAL EQUIVALENT) 173.4 304.2 618.1 758.3 1324.1 PUPULATION AND VITAL STATISTICS POPULATION, HID-YEAR (THOUSANDS) 4221.0 5127.0 6194.0* URBAN POPULATION (PERCENT OF TOTAL) 36.0 43.5 50.9 45.2 64.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 9.4 STATIONARY POPULATION (MILLIONS) 16.0 YEAR STATIONARY POPULATIUN IS REACHED 2070 POPULATION DENS ITY PEK SQ. KM. 25.7 31.3 37.8 36.3 34.3 PER SQ. KM. AGRICULTURAL LAND 55.0 67.0 78.7 442.7 94.5 POPULAIION AGE STRUCTURE (PERCENT) 0-14 YRS. 43.4 46.2 41.9 44.2 40.7 15-64 YRS. 52.5 50.0 54.5 52.4 55.3 65 YRS. AND ABOVE 4.1 3.8 3.6 3.4 4.0 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 jc 1.9/c 2.1* 2.7 2.4 URBAN 3.2 3.5 3.8 4.6 3.7 CRUDE EIRTiH RATE (PER THOUSAND) 46.6 38.4 31.0 41.5 31.4 CRUDE DEATH RATE (PER THOUSAND) 18.9 13.8 10.7 12.8 8.4 GROSS REPRODUCTION RATE 3.5 3.2 2.2 2.9 2.3 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 29.2 180.9 USERS (PERCENT OF MARRIED WOMEN) .. 10.0 21.3 POUD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71=100) 97.0 96.0 112.0 96.3 108.3 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIkEMENTS) 80.0 88.0 112.0 110.4 107.6 PROTEINS (GRAMS PER DAY) 50.0 57.0 73.0 73.4 65.8 UF WHlIH ANIMAL AND PULSE 12.0 14.0 22.0 17.1 34.0 CHILD (AGES 1-4) MORTALITY RATE 28.0 18.4 12.5 14.9 7.6 HEALTH LIFE EXPEGTANCY AT BIRTH (YEARS) 47.6 54.0 58.4 55.9 64.1 INFANT MORTALITY RATE (PER THOUSAND) 148.0/d 135.0 90.0 .. 70.9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 49.0 70.0 59.4 65.7 URBAN .. .. .. 83.9 79.7 RURAL .. .. .. 40.8 43.9 ACCESS TO EXCRETA DISPoSAL (PERCENT OF POPULATION) TOTAL .. 62.0 .. .. 59.9 URBAN .. 100.0 .. .. 75.7 RURAL *- 34.0 60.0 .. 30.4 PoPULATION PER PHYSICIAN 10026.1 5934.0 3576.2 4174.5 1728.2 POPULATION PER NURSING PERSON .. 727.5 1167.8 1780.5 1288.2 PoPULATION PER HOSPITAL BED TOTAL 373.0/e 409.1 427.2 647.4 471.2 URBAN .. 290.2 341.4 547.2 558.0 RURAL *- 1269.3 1273.1 3361.1 ADMISSIONS PER HOSPITAL BED .. 24.1 .. 25.3 hOU slN1 AVERAGE SIZE OF HOUSEHOLD TOuAL *- 5.1 If 6.0 URBAN .. 5.1 If 5.8 RURAL .. 5.1 Tf 6.1 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 3.2 /f URBAN .. 2.7 /f RURAL 3.6 /f ACLESb TO ELLCTRICITY (PERCENT OF DWELLINUS) TOTAL .. 24.0 /f URBAN .. .. RURAL .. ..  - 24 - ANNEX I TUNISIA - SOCIAL INDICATORS DATA SHEET Page 2 of 6 TUNISIA REFERENCE GROUPS (WEIGHTED AVERAGES - MOST RECENT ESTIMATE)- MIDDLE INCOME MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 66.0 100.0 100.0 85.1 101.7 MALE 88.0 121.0 116.0 101.5 103.0 FEMALE 43.0 80.0 83.0 67.5 101.5 SECONDARY: TOTAL 12.0 23.0 30.0 38.0 35.3 MALE 19.0 33.0 38.0 48.1 34.9 FEMALE 5.0 13.0 22.0 28.3 35.6 VOCATIONAL ENROL. (% OF SECONDARY) 24.0 11.0 35.0 11.3 30.1 PUPIL-TEACHER RATIO PRIMARY 61.0 47.0 39.0 34.9 29.6 SECONDARY 16.0 28.0 30.0 23.8 15.7 ADULT LITERACY RATE (PERCENT) 15.5 24.0/f 62.0 43.0 80.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 11.0 13.0 18.3 18.3 42.6 RADIO RECEIVERS PER THOUSAND POPULATION 40.3 75.7 147.3 121.0 215.0 TV RECEIVERS PER THOUSAND POPULATION 0.1 9.9 36.2 37.4 89.0 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 19.0 16.0 40.4 35.9 62.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 2.0 .. 1.5 3.0 3.2 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1137.9 1214.8 1581.7 FEMALE (PERCENT) 6.0 7.7 8.2 10.5 22.6 AGRICULTURE (PERCENT) 56.0 49.8 35.0 43.5 35.0 INDUSTRY (PERCENT) 18.0 21.0 32.0 27.3 23.2 PARTICIPATION RATE (PERCENT) TOTAL 27.0 23.7 25.51 26.4 31.8 MALE 50.2 44.2 46.1 47.0 49.0 FEMALE 3.3 3.6 4.3 5.7 14.6 ECONOMIC DEPENDENCY RATIO 2.8 2.1 1.8 1.8 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS ,. .. 17.0 HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. 42.0 LOWEST 20 PERCENT OF HOUSEHOLDS .. .. 6.0 LOWEST 40 PERCENT OF HOUSEHOLDS .. .. 15.0 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 204.0 271.4 RURAL .. .. 97.0 144.6 187.6 ESTIMATEI RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) U,REAN .. .. 193.0 400.8 513.9 RURAL .. .. 193.0 290.9 362.2 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 20.0 22.1 RURAL .. .. 15.0 29.2 Not available Not applicable. .iOTZ /a The group averages for each indicator are population-weig ted aritl Coverage of countries among the indicators depends on availability of data and Ls not oni )rm. lb Unless otherwise noted, data for 1960 refer to any year between 19' and A61; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c Due to emigration population growth rate is lower than rate of natural increase; /d 1960-65 average; /e 1962. /f 1966. * The updated 1980 GNP per capita and population estimates to be shown in the 1981 World Bank Atlas are $1310.0 (at 1978-80 prices) and 6354 thousand, with a population growth rate of 2.4.  - 25 - ANNEX I Page 3 of 6 DEFINITION$ OP SOCIAL INDICATORS Notes: Although the data are droan frp teourcas generaiiy judged the moot -unhorisati-e and reliable, it should also be noted that they nay cat be inter- nationally -emparabbe becauao cf eta bank of otdaediced defi-ttioca and .oe.epns need by different canrtre to cellecting the dana. The data art, -o thelene, asefol nt describe oeder- of magnitude, iodi-ate trends, end characterize certait m joe diffaerenae benceen aoannriea The ecference .eeups sre (1) the *s e nontey group of che sub Jen cotnnry aad (2) a counny grnop ninh aneahat high-ee overage inlnme thae the countey gronp of the nobject nounory (eannoy far "Capital Surplu- Oil Eoyarters" group vhern. "iddle Ioote North Africa and Middle host" i chosen Ie.ane. of ttronger seata-aulnaral affinities). In the referente lennp data the averagen are popolation _cighted arithmetic rears for each indtaaor and sho._ only when _ejonity af the countries in t rop toe dant fat that tndicator. Since the,eenrage of aountries a.nne the itdicvatrs depends an tbe araiobilltyy of dana and in non antfoe=, cantion ast he exercised in relating averages nf one indicator a to aother. these verogeT are only aseful In syara.g ate ralue a none idicatne at n tine s=ong the nu.ntry and referenre irnops. LAND AREA (thoanand sqin.) Popalaninn per Horpioal Bed - -ntel, -rban, and rura1 - Pypalacion tracal, Total - Total nanfean are aco=yrising load aroe atd inlbad naners. rban, end rurtl) divided by thier renyoniva t=bter of honpilal heds Aigi-I-1ural - Eininuti of agricaltural area aaed nemyorarily or permanently available in ptblit and private general and nyahaltioed hoyital andpre- far cropa, paasture, traket and kitchen gordens no to lie fallen; 1978 data hbilitanion cenoers. Hsyttals are estahlishpen yermanently staffed aaatrd hy sane conversion nmethd aa World banknAtlas (1977-79 basin); 1960, end medical acenters noan permanentiy staffed by a phynician (utt hya 1970, and 1979 dana. nedical asnstoant, nurse, =idnife, eta.) vhiab offer in-yatiennicc=o damton atd provide a linited rEage ef nedical faciliien. yPor ta-io- GNP ENEGY O'TIO PEi CAfITA - Annual cananeptian af anarnatal etergy (anal tical ysryosen urban hoopitale iPtlnde Walt princiyal/general bospttaal, and litgit , pet m ntural gaa and hydra-, natlear and georhernal e1cr- and real bnpitoal iocal or rurai hosyitalt and oedital and Paternity trioity) in kilagrams of anal equivalent per capitc; 1965, 19710 and 1979 tentera Specialized hospitals are icluded only under natal. data. Adninsiona per bo-Pical ted - Totai nymber of adihasionn to or dbsaharona free haspinals divided by ntheanuber an teds. fOfULATION ANfD VITAL STATISTICS Total ftpaiation, hid-Tear (thoanando) - ho of Jaly li 19tO, 1970, end 1979 BOUSItNG dataR Average hire of thousehald (pernors oar taptehaldi - totalu. Fran, end eural- Urban fopulation (percene ef ronul) - Ratio of arbacnto avola poyalation; A houseobld uonniotn af a group of individoual vho share lining qaunors diffeeret defininbas of urban areno may affert co=porahility an data and their t hn peals. A hoarder or idoor nay no napy not be iptluded in a=nag annetrien; 1960, 1970, and 1979 data. tbe onsehold far ntatsical purpses. faealntinn Pel)mttians Average cntter nf persons per roan- total. urhan and rnral - Average nun- Poyalanien in year 2070 - Carrent ypoplation projecaions are based an 1907 her of yerstnsn yet race in all urhan, and turn) ottupied aconent-ional natal poyulanion by ago and snn and nteir =ornality and fertilityerates dvellitga, resprotively. Dvellingsehlade non-pePanetnt sratres and frojectton parusrocen for oenal any tates comyrise of ebrec levelasad19 - a ln-tapued paean. hog lifs enpetanany an bientb increcasing nitb cononryt- per no pita iooaae Acness no ilrctriainv (percnen of doellinas) - canal, urban, and rurol - levlN, and femle life expectnncy ntabilizing at 77.5 yeats. he para- Conventional doellings vitb electririny to 'ivng qautr an pctt ntern far ferniliny ratc a..o tne -thee levely ansaming decline in af renal, urban and raral dt -lling rsopectively fertil icy accoarding n to ico=e level and pant family planning yerforcsnce. fatc coactry to eher atotaned one of these nine rombinacinna of menrtality tDUCATIOt Uad fertility trendt for projection uryoses. Adjusted Enrollment tati.o Stationary voyalanion - In a stationary population there is an groith tiner feiturv school - total sale and fonale - iron nanal, nal and female the birth rote it equal no the death rtoe, and alaontbetgoestuctuee re- eneolineni of all ages an athe primary level an percentages of reapertine maI.n costant. Thin in achieved only after fertility rates decline no primary ochool-age poyulati_on normally includes childrrn aged 6-11 the replace=ent ievel of unit net reyroduction rats, athen eath generaian years but adjuhed foe different lengeta of -Ymavy educantion f ir of anmen renplates itself sxattly. The snanionary popalation mine Was countrienavirt unineesal eduaraion enrollment =ay excred 100 penrcent rotimated no the basSo of the projected taroanenisnirn of tte papuletice sinne none pupilo are belov an ave the official school age. in the year 109, and the rate of decline of fertility rate en reylace- Snrondaev nchsol - natal nal ad femle - Camputed an ahove sacodary sent level. educationarequiees an least foar yearsof anpproved ynimary instructhen; Tear snatinnary fpoulethOn at reached - The year vean otstionury populstion provides general, vocational, or teacheCr tealnief instruc thoco for pupis tine boo hantreabed. usually of 12 no 17 years an age; aorrebyandeat croarbo are generally fopulstion Density excluded- Per en ha. - Kid-year yopulatleo pdr square haloonse (lit becrares) af Vocational enroilnenr inarceny of secdondry) - torantanel inst-unuions natal area; 1960, 1970 and 1979 donsa tnolude tnchnicali indasrtral, or other pragrano chiab operate tndeyend- Per anq bi agricultural lad - C laputed 00 above for agricultural land ently or as departments ad secondary instinutons. Only; 1960, 1971 and 1979 data. PIil-neather ratio - prirv- and secondary - Total studnets anrolled to Population hoe streacture (peercent) - Children (0-i4 years). corking-age (11- prieury and secoondary levels divided hy casters cf nearhero in the 64 years), and retired (6i years and aver) as pencentages of mid-year popn- toneesponding levels. lotion; 1969, 1971. and 1979 data. Moule lit enact rane iprmcent) - Literateeadulns (able Lo read and ovine) Peonlacian Iranth fans (percent) - natal - Annual groeth rates of tetel mid- as aperreetago of nonal adult ypoplation oged 15 yeavn and ever. yeae populations for 195i-60. 1960-70, sand 1970-79. fopulation Grovath into (pracent - urban- Atnual groanth eses ad urban papa- COSb'SitPTitf laciaon far 1950-60, 1960-70, and 1970-79. Passensar Cars (pesr thoussod naopultion) - PanssgaEr cauto comprise motor Crude Birth lure lose tbennandl - donavl live hieths per tbhousand of mid-year caes assning less than eight persons; excladrs netnlanacs, tearses sod popalueatn f -i 1970, and 1979 data millnary vehicles Crude leach late (per thousand) - Annual deaths pee ntonsande of mid-year Sadie iReceivers (pee thousand opoolanion) - All nypen of yeceivers far radio population; 1960, 1970, and 1979 dana. brooduetas no gco-r-l public per tobusand nof population; eocludes an- rnoss Reprducrtion Rate -hAeetue numter of daugttessaawsmaovill bear in licensed receivers in counnries end in years abet registration of radio her nortul reproductive yperiod if she exprtrenors present ag-epspecifinc fen- menaces in effsct; data fan recena yeors may not be cnmpurshleasince nil tey ranas; annally five-year uncragem endiog in 1960, 1970, and 1979. most naovtries aboliehed lirenetag. Penily flanning- Acceptors, Annual (rhousanda) - Ansual nambee of accyentr- hTV icenivers (ten thoasand populanion) - hTV receivers for broadcaast to of tirth-oantrol devices under auspices of notional family pluategn pengss. general patlia yen thousand population; encladen unliceased TV recreivers Pasaly Ploanino -Usarn (percent of married wease) - Percentage en married in contriees and in yearn ahen regisorantry of TV sets vas in effecte nmna nof child-hearing age (15-44 fears) vob use birth-aontrol devices no ineararar Ciryounaion (eer thonoand rralantion) - ibnos the average air- all married awoen in same age grpup. caletion of 'daily general interest neotsyopr" defined astayperiodical putlicanion devoted primarily no recording gsnoral ena. In in cnsnidered f000 ANl Nt d t-TRITI to be "daily" if it oappers at least four tije aveekh loden of Pond Pradanriac ret Canito (1969-71-100) - Index of perunlpiss annoal Cine=a Annual Attendance pear Capito nor teart-Sbaned on the number of prodnction of all fond conmoditteo Praduatien encladesnseed and feed sod tickers sold duning the ycear including admiosions to delva-tn aleemtu to at calendor year bnois. Cateandities caret yrimary gooda (e.g. sagancner and mebila anito. macnod of auger) atich ore edible and chntain nubi-ern (e.g. toffee and tea are excluded). Aggregate production ef can country is hoard on bAdIl PORCR national average pr:daler price teigs; 1961-61, 1970 and 1979 dana. Tnal Labor forte (ethousds) - Roan.inally active peronn iclading P -r hapita supylv of calories Ipereni af rnnuirenenns) - Cohp,ned fro= armed foenes and .ncoplayed tat excluding huteivesa stdnent, eta., energy equivalens of ner fond suyplies available in nountry per noitpa covering yoyulation of oll ages. lefeinitao In various countries art per day. Availablo etuplies namrise domestic yroduction impaa less sat comparable; 1960 1970 and 1979 data. exports. and changes in steck. Set suyplies eclade antmal feed, sneds, Pomala (oercent) - Pesule leabr forme as percentage of tonal Sober farce. quantities used in fend prossiog, and lasses he disnribution. inquire- Agninolnams lycrosee) - Later forme in farming, fornatey, banning and scent note ostimaed by AOt based no pbysiological n..ads fon namal ansi- fishing as ph.eneage of natal labor farce; i960, 1970 and 1979 data. S viny and hoalth anenderifg en_iranmey nol temperature, body ceights, ags Indentry bennet) - Later force On mining, acestratine snuafacturtng and sea diotribution of population, and ollahing 10 percent foe Yasse an and eletriciny eater and gas us -e9cettage of total laort farce; 1960 haouehold level; 1961-65, 1970, and 1977 data. 1970 and 19)9 danas Per capita supyly of protein (grains per day) - Protein content of peersyaita Pseniolontior Rten (percent) - tonal, male, and fonale - fartiniponian an oat sepply of food per day, Net supply of fond is defined as tone. Sa- activity rates are co=puned as tonal =sle and fesale labor froonas quirtnes for all conrtrihs established by URDA provide for y iefatot perentnages of total, mle and female poyulation of all agot repoectve_ly; allae of tO goons of total protein pee day and 29 grams nf an"il and 1960, 1970, and 1979 data. VT ear are based an CLO's particlpotion rates * yular protein, of vhich 10 grams sheald be animal protein. Theps stand- refl-nag afe-sex structure of the popalation, and long ine treed. A ards aye lancer than these of 75 gross of total yrotein and 23 gnome of fee estimates are from national sourrces anitul protean as an average fan the wrld, proposed by PAO in the hind Rconoeic Dependency Santo - Santo of payIo iPPan ander 15 and 65 and aver World Pood turvey 1f61-65 1971 and 1977 data o the total labor farce. Pee caspina protein oufaly fins animal end raise - Protein sopply of fpnod de- rived from animalt and yulaeo in grana pan dsp; 1961-65, 1970 and 1977 dana. lNCOtKi DISTRIBUTION Child lases 1-4) Kofrtality Sate Iero thousaod) - Annoal deeths per th-esand in Percencane of frivnte Inco=e (ott inoos and kind) - Received by rachest age group 1-4 years, to hildren in this age group; for mest develpin ton dana derived from ife tables; 1960, 1970 and 1979 done of ho ustehods . IhaICti POi'OOht fualoh 00bPS~~~~~~~~~~~~~~~~~~~~~~~ilti.t.. t birth; 1960, 1970 and 1979 daa. and aldf hestin terpareted verh ntidatIe t au of Ie d iPfu tta prily SaPtea leer tooud e dethifrthRoodr n ya onimnd bselonbt itPoverty manse hoevel (Ci)$ per caPita) - urban and rural - ofes toe RP aer (pesedlrenbit o ouait-to.a,nbn n us = Absolate poverty macme mtel is itee taname loyal belov vhich a miniral AbereaSf utrbene of peyoapleS naotal, urban, and rural) -it 9eanbeacst am- nutritionally adequate diet plua eosential nan-fond requiremonto io non ba Sf-epl totl, srbsn, and euoh dn0n 1 yeaonalears o eeefodt eaten uapyly (t_cludes treated anefany natera or ontreoted bta unnantosoatad ardale P le I eater nuct us than fran protecceed btrehPles, springs, and aanitaey ace71) 05 mealze relative poverty i ncome4 lvel in one-third of average per no pita p 1rnentagno of their _eane yapolotiots. In an urbanoreaapublipe fnounatain or oandpns- located noa mor than 200 meters from a house may ho levet l incb odm t f highery obnaf linn li ishrb aroea considered an oing ainhin reasonable acceso of that banse. Co erorl areas lsaede vithnleutient feon Absoluer costeflvin Inom level aprveas -un reasonable acreas nould isyly than tht bansealfe or sombers of the bpu-ehald aniPtd Poapularei f aption luntan andlt Pve Incota Leve aprent"a-o urban do non have to spend a dipeoprtio e pn f ho d y in fnitg the fnte family'se naner nee do.ueato tcn epo Access en Excrena lisa7 sal (percent of population - ll eal, urban ad eanal - NOtbeenof people(total, urban.and rural) served tyontreta diaposal as peenrenages of their respRctiv; populationa. imt ttta disposal mAY inolude bti colleotihn and disoofli vith at vithout treatment, of hs ac and onste-sster by estee-borne systema or the use of yin privies and stat- OEonpomi and can frDjata Depar lar installations. Sayomi 9lss 81 rneton eartn Paeulaninn yen Phveieian - Poyulation dividnd ty castor of yracticing physl- Nyl nisne qualified from a medical school en university level. Population Peon Nursings Person - Population divided by ==mber of preeniateg male snd female gradutnoe nurses, practical nurses, and assisnoant nrses.  - 26 - ANNEX I Psge 4 of 6 TUNISTA - ECONOMIC TNDT1ATORS Population: 6.4 million (mid-1980) .1NP per Capita: $1,310 (1980) Amount Annual Growth Rates (million US$ Actual (at 1972 prices) Actual/l Projected (at 0970 prices) Indicator at current prices) 1980 1976 1q77 1978 1979 1980 1Q81 1q82 1983 1984 1985 NATIONAL ACCOUNTS Gross domestic product /2 8,493.8 7.4 4.3 8.3 7.6 7.3 6.4 6.4 6.6 6.5 6.3 Agriculture 1,211.4 5.2 -7.5 8.9 0.5 8.6 5.0 5.0 415 4 4.0 Industry 2,579.8 7.8 7.0 9.2 11.9 7.6 6.8 7.0 8.0 8.n 7.5 Services 3,512.6 5.4 5.8 7.7 8.2 6.7 6.5 6.S 6.5 6.5 6.4 Consumptiun 6,400.0 8.8 9,5 9.3 7.1 6.9 6,.7 8.8 6.9 5.n 6.6 Gross investment 2,345.7 16.9 5.8 6.6 8.7 0.5 8.4 3.8 6.1 5.7 5.4 Exports of goods and NFS 3,444.4 9.6 5.6 9.1 19.8 5,b 4.7 3.1 3.7 q.7 9.0 Imports of goods and NFS 3,696.3 19.3 16.5 9.6 14.4 3.9 6.4 6.0 4.3 9.6 P.5 Gross national product 8,437.0 6.0 4.8 9.2 8.0 6.3 6.5 6.5 6.5 6.4 6.2 Gross national savings 2,037.0 -6.3 -1.7 71.2 35.8 6.3 4.9 -27n 5.0 12.9 5.9 Py ICES GDP deflator 137.7 151.4 158.6 174.2 190.3 - - - - - Exchange rate 2.33 2.33 2.47 2.46 2.47 - - - - - Share of GDP at market prices (Y) Average Annual Increase (.) (at current prices) (at constant prices) 1870 1975 1980 1986 1991 1970-75 197S-80 1980-85 19F1-86 1986-01 Gross domestic product 100.0 100.0 100.0 100.0 100.0 8.5 7.0 6.5 6.5 5.8 Agriculture 16.7 18.2 14.3 17.7 11.1 8.8 1.0 4.5 4.2 3.0 1Idustry 20.5 27.1 29.5 31.2 32.8 9.0 7. 7.5 7.7 6 .8 Services 49.3 42.7 42.2 42.2 42.2 P.7 6.0 6.5 6.5 S., Consumpt'on 84.8 75.5 70.0 70.8 71.8 8.6 8.3 9.8 6.6 6.7 Gross investment 19.7 29.3 28.3 27.2 25.4 10.8 6.8 5.7 5.4. 4.3 Exports of goodS and NFS 21.9 31.3 38.5 25.9 33.3 12.5 9.7 5.7 6. 5.1 Imports of goods and SFS 26.4 36.1 41.4 40.3 38.7 11.3 12.1 5.9 5., 5.l Gross national product 97.9 99.9 99.5 99.3 97.9 8.7 7.0 6.4 6.4 5.5 Net factor income 2.1 0.1 0.5 0.7 1.9 - - - - - Gross national savings 13.2 24.3 23.6 21.F '