Announcement of Tunisia Reforms Public Enterprises on July 13, 1989

FOR IMMEDIAT[ RELFASI World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 90/2 Contact: Fawzi Rihane (202) 473-2675 TUNISIA REFORMS PUBLIC ENTERPRISES WASHINGTON, July 13, 1989 -- Tunisia's efforts to reform public enterprises and increase overall economic efficiency will be assisted by a $130 million World Bank loan. The reforms, part of a general macroeconomic restructuring program, aim at maximizing efficiency and reducing financial support for public enterprises through greater reliance on economic incentives and reduction of direct government control of the economy. The program is a major effort to make the public sector efficient, dynamic and competitive. It consists primarily of the privatization of public enterprises operating in areas where the government no longer sees a need for public ownership, and the establishment of a legal and regulatory framework that will substantially reduce the role of the government in the public sector. The program includes measures that will clarify and streamline the government's role in the remaining state-owned enterprises. The World Bank loan supports the implementation of a recent law governing public enterprises which aims at strengthening boards of directors, introducing performance contracts, reducing or abolishing administrative controls and adopting a well-defined budget-allocation process. The program will also restructure three major public enterprises--Compagnie des Phosphates de Gafsa (phosphate mines), the Groupe Chimique (fertilizer producers) and the Societe Nationale des Chemins de Fer Tunisiens (railway). The program envisages special budgetary allocations to address the social costs associated with implementing the privatization and restructuring measures. The World Bank loan will be disbursed in two tranches: $70 million as soon as the loan becomes effective and $60 million after the government has carried out specific actions, including an overall review of the ongoing adjustment program in the sector. The World Bank loan is for 17 years, including five years of grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. NOTE: Money figures are expressed in U.S. dollar equivalents.