Tunisia - Review of development plan 1965-1968 (Vol. 3 of 7) : Agriculture

RESTRICTED FILE CurO?RESTRN Report No. AF-39a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REVIEW OF 1965 - 1968 DEVELOPMENT PLAN TUNISIA VOLUME III Agriculture November 26, 1965 Africa Department  CURRENCY EQUIVALENTS Prior to September 1964 U. S. $ a . 420 Dinars Since September 1965 U. S. $ = . 525 Dinars  A G R I C U L T U R E Table of Contents Page A. The Central Issues 1 B. The Main Agricultural Regions 2 C. The Plan for Agriculture 4 The Investment Program 5 Finance 7 Production Targets and Prospects 8 Export Prospects 12 Import Prospects 14 Employment Objectives 14 D. Institutional and Policy Implications 14 Administrative Set-up 15 Organization of Cooperatives 15 Credit Organization 17 Training and Education 17 Price Policy 18 E. Development Projects and Programs 19 Statistical Annex:- A. Production - Main Agricultural Crops - tons B. Production - Main Agricultural Crops - millions of dinars. C. Agricultural Investments by Sector of Activities - Four Year Plan. D. Exports of Animal and Vegetal Products E. Imports of Animal and Vegetal Products F. Investments by Sector of Activities - For Integrated Projects in North and Central Tunisia  I. AGRICULTURE A. The Central Issues 1. Agriculture is the most important single economic sector in Tunisia, accounting for about a quarter of GDP. Moreover, industrial activity in the country is largely based on agricultural products, and fully two-thirds of exports originate in agriculture. Its importance to employment is even greater, with 56% of the labor force occupied in agriculture and fisheries, plus a further 3.4% in agricultural processing. Inevitably, at the present stage of development, this sector also acts as the main residual source of employment for manpower which other sectors are unable to absorb. Partly, be- cause of this there is much under-employment in this sector. 2. If the production and employment targets of the Four Year Plan for the non-agricultural sectors can be achieved, agriculture would have to absorb only a small part of the projected increase in the total labor force between now and 1968, permitting some reduction in the relative importance of agricultural employment. A significant reduction in the contribution of agriculture to GDP is also foreseen from 25% to 20% by 1968. Nevertheless, to achieve the total growth rates in employment and output projected by the Plan, the agricultural sector must turn in a strong performance in the years ahead. Table 1. Agriculture in the National Economy Targets 1960 1961 1962 1963 1964 1968 Total gross domestic product (factor cost - million dinars - 1960) 286,100 310,800 320,800 333,500 357,900 455,500* of which agriculture 75,900 86,700 79,900 85,600 88,500 92,400* Total gross domestic capital formation (million current dinars) 59,488 68,308 76,112 88,557 103,200 n.a. of which agriculture 11,248 12,033 16,822 20,120 23,100 37,500 Total employment (1,000 persons) 1,119 1,220 1,330 of which agriculture 647 680 699 * Rural households excluded.  3 There is undoubtedly a considerable potential for expanding output both for domestic consumption and for export of non-traditioral commodities. However, this depends primarily on increasing the productivity of land already uinder cultivaticr;, because the possibilities for bringing new land into culti- ration are comparatively small, and new irrigation possibilities are also limited. To aciiieve the necessary improvements in productivity, implies a major effort, and one which cannot be successful without making important changes in the present structure of agriculture in Tunisia. 4. The structure of agriculture is, in fact, the major determinant of the structure of the whole economy. The contrast between the traditional and the modern farming sector - covering about a third of the sown area in 1963 - are not only great in terms of organization, they are equally great geo- graphically. Independence and nationalization, brought to an end the division between Tunisians and colonists but the basic division of the econcmy remains. A major objective of the development effort is therefore to achieve a greater degree of national integration through internal integration within the agri- cultural sector. 5. This means that in addition to the requirements for investment and current inputs, there are technical and organizational requirements of a very difficult character. iNot only must technical manpower, both high and low, be rebuilt to previous levels, it must be increased. Furthermore, key institu- tions such as the National Agricultural Bank must be adapted to their new functions. The whole process of agrarian reform must, and is, being organized from center to ground level. 6. In this context, the choice of investments will present increasingly difficult problems, temptations and risks. An appropriate balance has to be struck between economic and social considerations, between the advantages of investments promising quick returns and the new long-term investments, such as forestry, soil conservation development and tree-planting. 7. These problems of choice are further complicated by the vicissitudes of the external sector. Export prospects are not very favorable for the tradi- tional agricultural exports which Tunisia can provide, mainly because the bulk of export output can no longer be geared to one special market, at favorable terms, as in the past. To diversify both the range of exports and the markets is no easy task for trade policy. B. The Main Agricultural Regions 8. Tunisia enjoys a typical MIediterranean climate where hot and dry summers alternate with cool or mild humid winters. Its agriculture is typical of that of Northwest Africa. In the most humid area, cereals, vineyards, tree crops and livestock are the main resources; in the arid and semi-arid region, extensive grazing and cereal growing, together with broadly-spaced olive groves characterize the economy; and in the desert, only nomadic grazing is found. Where irrigation water is available, vegetables, fruit trees (including date palm) and alfalfa facilitate the transition to a cash econcny among traditional farmers.  - 3 - 9. Of the total area of 16 million hectares mentioned in the Plan, i/ 43 percent is unproductive land and 57 percent is agriculturally productive area (SAU). / Of the 9 million hectares of SAU, 10 percent is forest, 40 per- cent is range and esparto grass and 50 percent is arable land and tree crops. Of the 4.5 million hectares of arable lando 44 percent is cereals, 29 percent is fallow, 22 percent tree crops and 5 percent other crops. 10. With a mild climate and precipitation between 400 and 600 mm, the region of Tunis and Cap Bon is the richest in the country. Most soils are of good quality. The region is the most dynamic in Tunisia, and supports a dense rural population, some of it traditionally trained to use irrigation; there was a previous settlement of small but active foreign farmers. The irrigated area is large (45,000 hectares) and cash industrial crops are important (35,000 hectares of vineyards). Tunis is, of course, the most important market for the region. Production is diversified and high-value crops such as citrus (12,000 hectares) and vegetables (20,000 hectares) provide a large percentage of the output. A major problem of the area is the salinity of irrigation water in the low Medjerda valley. The main public investments in this region include the extension of the low Medjerda valley (CMVVM), the completion of three middle-sized dams in the Cap Bon and drilling in El Haouria region. Private investments are foreseen for supplemented irrigation works and other facilities required to increase dairy and vegetable production. Marketing and transpor- tation services will have to be improved by the use of so-called "service co- operatives." (Cooperatives de service). 11. The plains and rolling lands of NJorthern Tunisia, along the M4edjerda valley and the hills along the Tell, are typical cereal growing areas. Rain- fall (400 to 600 mm) is highly variable but is suitable for relatively inten- sive annual cropping; soils are often subject to erosion under the present land-use system. Mechanized farming, established mainly by European colons, covers about half a million hectares; about 1-1/2 million hectares are culti- vated by traditional methods, with average yields of 400 to 500 kg. per ha and an extensive livestock system based on fallow and stubbles. Livestock raising hardly features in the modern sector. The employment situation in this region is poor, due to the periodic nature of cereal produiction. Modernization of traditional agriculture is hampered by the land tenure system, the size of the plots, insufficient training of the farmers and lack of capital. Mechani- zation alone makes it possible to prepare the soil, seed at the right time, and plough the land in summer. The Government is now developing new systems of farming, the Cooperative Production Units (UCP) and the Service Cooperatives which are being discussed at a later stage in this chapter. 12. The mountainous area of Kroumirie and Mogods, largely covered by forest, is the watershed of the Medjerda River and has valuable forest resources, while the drier Tell Mountains are partly cultivated or covered with "maquis" and pine woods. The population is poor and underemployed, living off live- stock and forest production. Tree planting has been successful in the Mogods and forestry could be more productive; forest grazing will become a useful re- source if well managed. The upper Medjerda valley and those of its tribu- taries are now the object of a careful water resource survey undertaken by AID. 1/ Total area of the country according to the UN Statistical Yearbook is 12.5 million hectares. SAU: Surface Agricole Utile.  - 4 - There are also projects for establishing triple-purpose dams north of Souk El Ehemis to sweeten the Medjerda water in summer, to increase water supply for Tunis, and to create two or three irrigation perimeters in the Medjerda valley. 13. The Sahel region, extending all along the Tunisian coast from Cap Bon to Zarsis, has reached quite a remarkable degree of development considering the limitations of soil and the dry climate (200 to 300 mm per year. There are more than 18 million olive trees, sometimes interplanted with almond, around Sousse, Sfax and Zarzis. Coastal cases are found from north of Gabes to Ben Gardane. The rest of the region is either under rainfed cereals or is grazing land without much prssibility of improvement except through irrigation, which is difficult due to limited water economics which, moreover, often have a high degree of salinity. Population is dense along the coast and in the cases. Good marketing possibilities exist in this area. Development is linked to a fuller use of underground and Cued Nebana waters for high value crops (aspara- gus, early tomatoes and vegetables, fruit trees, bananas) and forage crops to supply a limited dairy industry near the main tourist centers and to supplement animal feeding. The rejuvenation of the old olive trees, the uprooting of un- productive palm trees, and the reorganization of the coastal oases have been started very recently with good chances of success. lb. Central Tunisia, south of the "Dorsale," is arid or semi-arid, with no permanent river; it is a vast steppe used primarily as grazing land for several million sheep in spite of the climatic irregularity which causes heavy losses in the flock, Olive planting is growing rapidly but at the expense of the best grazing land and without a corresponding decrease in the number of animalsO A large area under alfa (esparto) grass supplies the Kasserine paper factory0 The Nebana Dam will bring about 5,000 hectares under irrigation with- in the next 4 years. Salinity problems are acute in most of the permanently irrigated areas around Kairouan. The possibilities of further development are limited, but intelligent integration of grazing, planted and irrigated lands would not only increase production and labor opportunities but also regularize animal production, the basis of the local economy. The Government is now increasing the utilization of underground water through deep well drilling. A new farm structure, whereby the peasants are grouped in the "cooperatives de polyculture," is being set up to exploit both the grazing land and the irri- gated area, 15. In the desertic south, there are limited possibilities of organizing and extending the inland orses, in particular by planting more Deglat Ennour dates. The availability of water points (drinking water) remains the main bottleneck for making use of the vegetation for grazing camels and goats, Deep well drilling is an expensive undertaking in this area. For the next few years, efforts will go toward improving present production in the oases. C. The Plan for Agriculture - Cbjectives and Prospects i6. Although scme shift in emphasis has been introduced, the objectives of the Four-Year Plan are essentially the same as those expressed in the Ten-  - 5 - Year Perspectives. 2/ For 1960 to 1968, an annual growth rate of 2.8 percent (value added) had been planned. 9/ Official estimates put the growth during 1961-64 at 2,4 percent, I/ but the mission believes a more realistic estimate - based on production of the major commodities - would be that agriculture moved sideways during the pre-plan period (see Table A). It should be remembered that Tunisia is a small country and most crops are grown under rainfed condi- tions; the influence of changes in weather conditions from year to year have a tremendous effect on production, often much larger than the use of improved techniques. 17. The Four-Year Plan gives priority to reducing imports by increased output of traditionally produced commodities for the internal market (cereals, 'Livestock, vegetables, forages) and the production of raw products for industry (fruit, vegetables, sugar beets). It also provides for a limited export expansion of processed commodities (vegetables, oil and fruits). Most invest- ments planned in irrigation and plantation will only lead to an increase in production of exportable commodities after the plan period, The Investment Program 18. The dinars 150 million scheduled for agricultural investment in 1965-68 accounts for approximately a third of the total investment during the period. This one-third share is lower than the 40 percent planned for the pre- plan period, but projected investments are significantly higher than the actual level reached during the 1962-64 period. The difficulties that retarded progress are being overcome. Tunisian officials had had very limited experience in preparing projects for appraisal; they have now gained this experience and know how better to use "tied aid." In the past, the Government was still testing agricultural structures suitable for accelerating development; these have now been substantially agreed upon. And, finally, the lack of experienced technicians and farm managers was actingand would continue to act as a brake on the whole program; a dynamic educational and training program is now begin- ning to fill this gap, in the meantime expatriate technical assistance will strongly be needed. 19. The distribution of planned investment is as follows: Hydraulic works 33.0% Arable farming rainfed area (including some rural housing) 18.5% Tree planting 12.5% Soil conservation 10.5% Livestock production 7.0% Forestry 6.5% Fisheries 1.5% Education, research, studies 10.5% 100% 1/ These were discussed in IBRD Report No. AF8a, Restricted, April 11, 1963. g/ According to the revised national accounts figure for 1960, this rate would be 2.4 percent. 3 At factor cost and constant 1960 prices.  20. Of the main sectors of investment, institutional investments are relatively high, but justifiably so. There is no question of the need to ex- tend the applied research program (2.4 million dinars), to improve extension services (dinars 5. million), and to prepare an inventory of resources. The program for local and regional studies (dinars 8 million) might be too ambitious, and it could be linked more closely to the equipment program. In view of the need for trained people in agriculture, the expenditures on education and training are fully justified. Foreign assistance is needed in research and in teaching, 21. Half of the investment in irrigation and drainage (dinars 25 million) is intended to complete or carry on already initiated projects such as Nebana, Lower Medjerda Valley. Another dinars 12 million is for financing new private wells and digging new deep wells in central and eastern Tunisia. Returns from these investments are expected to be very rapid, and the mission suggests that both actions be accelerated as much as possible. About dinars 13 million are intended for starting long-term projects in Upper Medjerda and Ickheul areas and for protecting towns in central Tunisia. Given the long gestation period of major irrigation works, a start will have to be made in the short-term, if and when their economic justification is proved. For the time being, most of the large projects foreseen are not sufficiently well-known to determine their priority. Part of this prcgram will thus have to be reappraised in a year or two. 22. Investments in arable farming in northern Tunisia include mainly the purchase of agricultural equipment (dinars 16 million) 1/ farm buildings (dinars 4 million), and rural housing (dinars 8 million). The limited investment in farm building will enable the existing substantial stock of modern farms to be used more fully. The program of rural housing (dinars 8 million) could per- haps be postponed or reduced by stimulating the farmers in the cooperatives to insist on building their own houses. 23. Fruit tree planting, one of the most successful undertakings daring the pre-plan period, will require expenditures of dinars 8,5 million for agri- cultural equipment and dinars 10 million for seedlings and trce e-tablistn:ent during the Plan period. Plantings of about 250,000 hectares (190,000 in central Tunisia) will bring the total area under fruit crops to l.4 million hectares in 1968. Such an increase seems justified because in several areas no alternative land use can provide comparable incomes: pasture in central Tunisia gives low return with the present production system, and in the north there are alarming decreases in soil fertility. Because of the marketing situation, the 5.5O0 hectares vineyard plantation program has already been cancelled. Citrls, palm trees, and apricots give high yields under irrigation, but as will e discussed later on, marketing problems might be damaging to the whole program unless suitable agreements can be concluded with importing countries, / As mentioned earlier, mechanization is required to solve the problems of timing involved in efficient farming under permitting climatic conditions.  - 7 - 24. Although it might, at first sight, appear that investments in soil conservation are too large for a country with limited financial resources, the program has been carefully prepared. Works will be undertaken mainly in the north, to slow the progressive degradation of cultivated land, and on grazing and tree-planted lands in the center which would give relatively rapid returns. Since the program is based on the establishment of cooperatives, progress here is the key factor. With three-fourths of investment consisting of labor costs, the program will have an immediate effect on employment. The same can be said for forestry, with investments involving a little less than a million hectares of forest. The investments are intended to upgrade present resources and to plant 20,000 hectares of fast growing species for local industries. 25. Livestock will benefit from direct investment (improving pasture, importing animals, erecting stables) as well as from the increased production of fodder in irrigated areas and in northern Tunisia. Although the production program has been very carefully designed, it is running behind schedule; thus the phasing of investment in livestock importation and pasture improvement may have to be reconsidered. Finance 26, Finance for the agriculbural investments w;ill have to be provided for about 90 percent by the Government, either directly (exploitation of water resources, research, education, services) or indirectly through medium and long-term loans via the agricultural bank, About 60 percent of the investments should give its first, though usually not its full, anrnual returns during the period; the other 40 percent are aimed at reversing the deterioration of soil fertility, thus preparing the w