Tunisia - Second Port Project

.oAA)J 673- rrAI FILE COPY RESTRICTED Report No. TO-648b This report was prepared for use within the Bank and its afflliated 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 The report may not be published nor may it be quoted as representing their views.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 APPRAISAL OF THE SECOND TUNISIAN PORT PROJECT REPUBLIC OF TUNISIA October 15, 1968 Projects Department  CURRENCY EQUIVALENTS US$1. 0 D 0.525 US$1. 905 D 1.0 UNITS Tons are metric tons of 2., 205 lbs .1 Kilometer = 0. 6Z miles 1 Meter = 3. 28 feet 1 Cubic Meter = 1. 31 cubic yards All depths of water are in meters below low water level. FISCAL YEAR January 1 - December 31 A C R 0 N Y 1il S GNP - Gross National Product BC'EOH - Bureau Central d' Etudes pour les Equipements d'Outre Ner SvbT_C - Societe d'Etudes Techniques et Economiques STI4 - Societe Tunisienne d ,Acconage et de Ilanutzntion OPiOT - Office des Ports Nationauc, Tunisiens UNDP - United Nations Deve:Lopient Prograrxne  REPUBTLIC OF TINTSIA SECOND TUNISIAN PORT PROJECT APPRAISAL REPORT TABLE OF CONTENTS SUMMARY i-il 1. INTRODUTCTION 1 2. BACKGROUND 1 A. General 1 B. Transport System 2 C. Existing Loan 380-TUN Port of La Goulette Project 3 3. EXISTING FACILITIES AND ORGANIZATION 4 A. Office des Ports Nationaux Tunisiens h B. Operations (i) General 5 (ii) Cargo-Handling 5 4. TRAFFIC AND PORT DEVELOPMENT 7 A. Shipping 7 B. Present and Future Traffic (i) General 7 (ii) Bulk Traffic 8 (iii) General Cargo 9 C. Port Development 9 5. THE PROJECT 10 6. ECONOMIC JUSTIFICATION 15 A. Capital Dredging 15 B. Dredger and Tug 17 C. Cargo-Handling Equipment 18 D. Breakwater at Bizerte 19 E. Bulk-grain berth and Storage Facility at La Goulette 19 7. TARIFFS AND FINANCES 20 A. Ta-rif-fs-s 20 B. Present Finar es 21 C. Future Finances 24 8. CONCLUSIONS AND RECOMMENDATIONS 29 This report has been prepared by Messrs. Aijt3r (Economist), Clark (Financial Analyst) and Hi'ginbottom (Engineer).  TABLE OF CONTENTS (cont'd.) TABLES 1. Port Data 2. Cargo-Handling Equipment owned by STAM and OPNT 3. Cargo-Handling Equipment to be provided to STAM and OPNT under the Project 4. Ship Calls. 1963 - 1967 5. Total Cargo Traffic all Ports by Major Category; Actual and Forecast 60 Cargo Traffic Tunis-La Goulette; Actual and Forecast 7. Cargo Traffic Bizerte/Menzel Bourguiba; Actual and Forecast 8. Cargo Traffic Sfax; Actual and Forecast 9. Cargo Traffic Sousse; Actual and Forecast 10. Alternative Costs of Purchasing Dredging Equipment versus Maintenance Dredging by Contract 11. Revenue for Years 1964-66, estimated for 1967 and forecast for 1968-1973 12. Estimate of Cash Flow 1967-1973 13. Balance Sheet for 1966 and Forecast Proforma Balance Sheets for 1967-73 14. Forecast of Debt Service 1967-1973 APPENDICES 1. Debt at December 31, 1966 2. Bases and Assumptions used in Financial Projections MAP 1. Tunisia, Commercial Ports (No. 2264R)  REPUBLIC OF TUNISIA SECOND TUNISIAN PORT PROJECT SUMMARY i. The Bank has been asked by the Government of Tunisia to help finance improvements to the ports under the control of the Office des Ports Nationaux Tunisiens (OPNT). ii. The project consists of a number of elements designed to ensure more efficient operation in OPNT's ports including: dredging at the ports of La Goulette, Bizerte-Menzel Bourguiba and Sfax; provision of a new dredger and tug; provision of tractors, forklift trucks, and mobile cranes at La Goulette and Sfax and the rehabilitation of the existing portal cranes at La Goulette; reconstruction of the island breakwater at Bizerte; con- struction of a new bulk-grain berth and storage facility at La Goulette; assistance in training OPNT staff in accounting and financial management; and necessary consulting services. The total cost is estimated to be US$10.73 million (D 5.63 million) of which the proposed credit of US$865 million (D 4.46 million) would finance the estimated foreign exchange cost. iii. An earlier Loan (No. 380-TUN of US$7.0 million) was made to the Government of Tunisia in June 1964, for extension of the port of La Goulette. The construction works have been satisfactorily completed and the loan was fully disbursed by the Closing Date of March 31, 1968. The law creating OPNT was passed as one of the conditions of the loan, and the new organization is functioning satisfactorily except for the Accounts Department which needs strengthening. One requirement under the loan has not been complied with: the construction of bulk-grain handling facilities. This is due to lack of finance, and the Bank is now including it in the new project. iv. OPNT controls all shipping entering its ports, but cargo-handling is carried out by concessionaires, the most important of which is the Societe Tunisienne d'Acconage et de Kanutention (STIUi). OPMT provides portal cranes on the quays, floating cranes, and some equipment for use by consignees or their agents on taking delivery of cargo. STAM generally provides the tractors, forklift trucks and mobile cranes for cargo-handling on the quays. v. Total traffic through OPNT ports has grown irregularly from 5.6 million tons in 1963 to 8.2 million tons in 1966 and was 7.5 million tons in 1967 due to the situation in the Middle East. Most of the increase has been in bulk traffic. Future traffic is expected to grow at a modest rate of about four per cent per annum, taking into account the expected increase in economic activity and changes in demand. Future exports of phosphates from southern Tunisian mines cannot be clearly determined at this time. They will depend upon further investment in the mines and Tunisia's share of the world market. vi. The present project covers the immediate development requirements of O?NT. Certain capital expenditure will be incurred by OPTT in the normal  - ii - course of operations and a further extension of Tunis/La Goulette is expected to be required about 1972. The Government intends to develop a newJ port at Gabes. Before this port is completed it will be neces- sary to consider incorporation of the new port in OPNT, to review the distribution of traffic between Sfax and Gabes, and to consider the effects on OPNT's finances. vii. All the proposed items in the project are operationally and technically justified. The economic rates of return on the different items range between 10% and 25' and these are considered satisfactory. viii. The cash position of OPNT is satisfactory and is expected to continue to be so. Consultants are reviewJing OPNT's tariff structure and rates and their recommendations, due in 1968, are expected to include changes that will result in increased revenues. The specific changes and expected results are not known but the Bank will require that tariffs be applied to produce revenues sufficient to assure a rate of at least six per cent in 1971 on the average value of net fixed assets and seven per cent in 1973, and increasing thereafter. ix. The project provides a suitable basis for a Bank Loan to OPNT of US$8.5 million, for a period of 30 years, including 10 years' grace at D6, per annum interest. The Government of Tunisia would be the Guarantor.  FEPUBMIC OF TUHISIA SECOND TUIESIAN FORT PROJECT 1. INTRODUCTION 1.01 The Government of Tunisia in August 1966 requested the Bank to assist in financing improvements to the ports operated by the Office des Ports Nationaux Tunisiens (OPNT). The proposed loan of US$8.5 million covers the estimated foreign exchange costs out of a total estimated cost of US$10.7 million equivalent, and will be made to OPNT at 6-Va interest rate for a 30-year repayment period including 10 years' grace with the Government as Guarantor. The project consists of dredging at the ports of La Goulette (Tunis), Bizerte-Menzel Bourguiba and Sfax; provision of a dredger and attendant tug for maintenance dredging; replacement of cargo-handling equipment, provision of additional equipment, and re- habilitation of quay cranes; reconstruction of the island breakwater at Bizerte; construction of a bulk-grain berth and storage facility at La Goulette; training of accounting staff; and the provision of accounting and engineering consultants. Details are given in Chapter 5. 1.02 Tunisia has previously received a Bank loan of US$7.0 million for port improvements at Tunis-La Goulette. Construction of the project was satisfactorily completed in November 1967. Further details are given in paras. 2.09 - 2.12. 1.03 The following appraisal report is based on the findings of a preliminary Bank mission to Tunisia in May/June 1967, an appraisal mis- sion in November 1967, and a follow-up mission in March 1968, to settle the details of the project and to update the information. The missions have included at various times, Messrs. Clark, Dobie, Higginbottom, Muth and Pusar., Tlis report has been prepared by Messrs. Awar, Clark and Higginbottom. 2. BACKGROUND A. General (see Map 1) 2.01 Tunisia, with an area of 164,000 sq km or about one-quarter of the area of France, has a population of about 4.5 million, estimated to be increasing at an annual rate of 2.3%. It is bordered by the Mediter- ranean to the north and east, Algeria to the mest, and Libya to the south and southeast. The coastline is some 1200 km, and there are four major ports: Bizerte-Menzel Bourguiba, Sfax, Sousse and Tunis-La Goulette all under OPNT control. Tunis is the capital and, mith La Goulette, is the country's largest port. The Government is building a new port at Gabes for the development of southern Tunisia.  - 2 - 2.02 The gross national product (GNP) in 1967 amounted to US$963 million, or US$215 per capita. ,eal output grew by about four per cent annually between 1960 and 1967.2J 2.03 Agriculture contributed some 18% to GNP, and provided about one-half of all employment in 1966. The principal agrLcultural products are cereals, olives, vegetables and citrus fruit, and wine. The share of agriculture has been declining as mining, manufacturing and tourism have grown more rapidly. Tunisia's first oil refinery (1963) and steel works (1964) have started production and further increases are ex- pected. The growing volume of tourist traffic has stimulated construction and related activities. B. Transport System 2.04 Tunisia is served by a relatively well-developed transport system. In 1966, there were about 16,000 km of roads, almost two-thirds of which were surfaced. The road network is best developed in the north where in- dustrial activities are concentrated. 2.05 The railway network consists of 1,110 route-km of standard-gauge and 911 route-km of narrow-gauge track. The two systems link up at Tunis. Until the end of 1966 the standard-gauge system and part of the narrow- gauge system were operated by the government-owned Railroad company, and the rest by a privately-owned company on a concession basis. All systems are now government-operated. Part of the narrow-gauge network serves largely the transport of phosphates from Gafsa to Sfax and is linked to the port of Gabes. The possibility of a direct connection between Gafsa and Gabes is under consideration by the Government and has been referred to the Bank for possible inclusion in the proposed Railway Loan at present under appraisal. 2.06 The Government has a large degree of control over rail and road operations through the fixing of tariffs, licensing of routes for road transport, dispatching of commodities, control of investments, etc. Prior to independence, Government policy aimed to regulate transport by adminis- trative means with little reliance on competition and consumer choice, and favored the railways. The shortcomings of this system are being increasing- ly recognized by the Government. An important development was the establish- ment in 1966 of the Directorate of Transport within the M1inistry of Public Works with responsibility to formulate and recommend transport policies. In addition, a UNDP study of the transport sector, with the Bank as Executing Agency, has been undertaken. One of the objectives of the study was to establish a transport policy offering a better balance between all modes of transport. 1/ Current Economic Position and Prospects of Tunisia (Ma - 3a) dated March 19, 1968.  2.07 The only major airport of the country is at Tunis, which is connected by scheduled air services with cities in Europe, Africa and Asia. 2.08 OPilT's four above-mentioned ports ancd their respective ser- vice areas are in general well served by roads and railroads. The access routes are generally adequate even for growing traffic volumes, with the exception of the existing road linking Tunis and La Goulette, and the access to La Gouletbe from the south, which are being improved. C. E>dsting Loan - 380-TUNq Port of Tunis-La Goulette ProJect 2.09 A loan of US$7.0 million was made to the Government of Tunisia in June 1964 to improve the general-caxgo facilities at La Goulette. The project consisted of extending the 730 m quay to 1100 m and constructing transit sheds and ancillary works. The originally estimated total cost was D 4.8 million (US$l11.4 million) at the then rate of exchange. Final contract costs have not yet been agreed but are presently estimated at about D 6.2 million. Approximately half of the increased cost is due to the increased Dinar equivalent of the foreign exchange costs following de- valuation of the Tunisian Dinar on September 28, 1964, and the balance to increased quantities and prices. 2.10 The loan did not become effective until June 1965, awaiting passage of the law creating the Office des Ports Nationaux Tunisiens (OPNT) to replace the former "Regie des Ports". (See Chlapter 3). Work was com- pleted in November 1967 and the Closing Date was extended from June 30, 1967 to March 31, 1968. 2.11 OPNT was responsible for carrying out the project which was done satisfactorily with the help of engineering consultants Bureau Central d'Etudes pour les Equipements d'Outre Mer (BCEOM). Accounting Consultants, HoweLl & Co., are helping to establish and operate financial and costing systems, and are training OPNT's accounting staff. 2.12 The Government and OPNT have met the requirements of the loan except for the provision of bulk-grain handling facilities at La Goulette which they have been unable to finance; this item is now included in the present project at the request of the Government.  3. EXISTING FACILITIES AND ORGAI\ZATION A. Office des Ports Nationaux Tunisiens (OPNT) 3.01 Prior to Loan 380-TUN the ports of Tunisia were controlled by the "Regie des Ports de Commerce", a division of the Ministry of Public Works. The law of February 12, 1965, established OPNT as an independent authority, managed by a Director General who is responsible to a Board of Directors composed of three representatives of the Government and four representatives of port users and related interests. The Government rep- resentatives are appointed jointly by the Ministry of Planning and National Economy and the Mlinistry of Public Works. The M4inister of Public lWJorks is the president of the Board. OPNT is responsible for the opera- tion, development and maintenance of the ports of Bizerte, Tunis-La Goulette, Sousse and Sfax; and the jurisdiction of Bizerte has been ex- tended to cover the adjacent port of Menzel Bourguiba. OPNT also provides pilotage, towage, and navigational aids within the port limits, controls and supervises the quays and harbors and provides railway service within the port limits. OPNT has a satisfactory degree of autonomy in both administrative and financial matters. The Government intends to develop a new port at Gabes and the necessity for its inclusion under OPNT's jurisdiction and the consequent necessity to amend the existing law will be discussed and agreed between the Government, the Bank and OPNT. (See also 4.16). 3.02 With few exceptions (see paras. 3.09 - 3.11) OPNT does not operate cargo-handling services although it provides some equipment for that purpose. Health and immigration services, police and customs are the responsibility of separate government agencies. 3.03 The general organization of OPNT has proved adequate to the tasks required of it. I-lowever, strengthening of the Accounts Department is required, both to enable the new financial and costing systems to be operated efficiently and to enable OPNT to take over responsibility for collecting its own revenue; this latter f2unction is at present under- taken by Customs at a cost of one percent of revenue collected. The accounting consultants provide practical and advisory assistance and conduct training programs for the accounts staff. Loan 380-TUN helped finance the foreign exchange costs of these services up to March 31, 1968. 3.04 OPNT appreciates the importance of providing an efficient ac- counts department, using modern commercial accounting methods, and able to produce financial data for the use of management. This is a relatively long-term process and management must be able to understand and use the reports. Consequently, the present project includes pro- vision for further training and advisory services.  B. Operations (i) General 3.05 The locations of the ports now controlled by OPNT and the port of Gabes are shown on HMap Ho. 1 and details ofOPINT's facilities are given in Table 1. Day and night pilotage is provided at all ports and tug services are provided as necessary either by OP;IT or privately. Bulk- loading facilities are available at La Goulette for iron ore and phos- phates, and at Sfax for phosphates. Crude petroleum is imported in bulk for the refinery at Bizerte and refined products are distributed by coastal tanker. Tunis-La Coulette is the principal port for general cargo. All ports have adequate transit shed and open storage facilities provided by OPMT. 3.06 Cereal imports are handled at La Goulette by discllarging grain in bulc from ship to ordinary transit sheds, where it is bagged by hand for distribution to the flour mills in Tunis. It takes about 28 days for a consignment of 20,000 tons to be handled in this way. Large ships have to be lightered outside the port in order to enter. Bagged export grain is hoisted aboard ship and then emptied into the ship's hold. Such methods are expensive, wasteful of labor, and entail uneconomic use of general cargo facilities. This situation will be alleviated when the new bulk-grain berth and storage facility to be provided in the project (5.02 (e)) are available. 3.07 Now that the La Goulette project is completed, traffic will be diverted from the old congested wharves in Tunis to the extent possible. liaintenance of the Tunis-La Goulette canal has been stopped and the canal will find its own bed-level. This is expected to limit the use of the canal to ships drawing 5.5 m and reduce cargo traffic using Tunis to about 453,ooo tons per annum. Passenger ships have started to use the new passenger terninal at La Goulette. 3.08 OPUT maintains the ports, the breaknjaters, and the entrance channels; dredging is done by one bucket-dredger which is in poor condi- tion and beyond economic repair, and by one grab-dredger for operations alongside the quays. Except for the island breakwater at Bizerte, the breakwaters are in good condition. (ii) Cargo-Handling 3.09 Movement of cargo from ships and within the ports to the sheds or stacking areas is done by cargo-handling companies which employ all necessary labor. The most important of these companies is STAM, in which Government has a majority share interest, the balance being held privately.  - 6 - STAM operates in all OPNT ports and provides exclusive service at Tunis- La Goulette, where it employs 1,200 permanent and 600 casual dockers. Separate charges are made by the cargo-handling companies for stevedoring and for cargo movement in the ports. 3.10 STM4 normally hires portal or floating cranes from OPNT for its stevedoring operations or uses ships' gear. The reliability of the portal cranes is such th,at their use is limited particularly at La Goulette, and this results in slow handling of vessels. The floating cranes are also old and slow, but their use is generally limited. STAM has its own tractors, forklift trucks, and mobile cranes for cargo movement from ships' side to shed or stacking area but much of this is beyond its economic life. Details are given in Table 2. The regulations governing STAM's operations in the ports require it to obtain approval from OPNT to operate new equip- ment in excess of its present holding. Authorization is not required to replace existing equipment. 3.11 ONT's cargo-handling equipment, also detailed in Table 2,is essentially for hire to consignees and their agents for handling goods onto or from their own vehicles, or to STAM for its operations. Much of this equipment is also beyond its economic life and OPNT has been unable to meet the requirements of importers and exporters in recent years. Con- signees are not normally permitted to use their own equipment except in the case of special consignments. OPNT does not handle cargo in the ports it controls, but recently at Bizerte, Sousse, and Sfax it has undertaken the protection of goods in sheds and on open storage areas; if this proves successful it will probably extend this to Tunis-La Goulette. 3.12 Labor relations in the ports are good. There is, however, a labor surplus in the country and efforts to reduce port labor are resisted. The permanent labor force employed by STAM (1200 men) is consistent with present traffic handled, and may need to be increased, or additional machires purchased, to meet forecast traffic increases. However, the need for casual labor over and above the existing permanent labor force will be reduced by the introduction of more efficient equipment, as is proposed under the project. The need to reduce the existing casual labor force by retirement through natural causes over the next ten years and limitation of recruitment has been discussed with the Government which agrees with the Bani'ts viei% on this matter. 3.13 Port regulations, including those relating to cargo-handling procedures, are presently under review. The new regulations, when pro- mulgated, will give OPNT sole jurisdiction in these matters within the port areas. 3.14 OPNT has taken out and maintains adequate insurance against insurable port operating risks consistent with sound business practice.  - 7 - 4. TRAFFIC AiD PORT DEVELOMENT A. Shipping 4.01 In 1967, 4,112 ships totalling 6.0 million nrtL entered Tunis- La Goulette, Bizerte-Menzel Bourguiba, Sfax and Sousse. Tunis-La Goulette accounted for about 45