DOCUMENT OF

The World Bank Public Disclosure Authorized

Report No. 15432-TUN

STAFF APPRAISAL REPORT Public Disclosure Authorized

REPUBLIC OF

GREATER SEWERAGE AND REUSE PROJECT

Public Disclosure Authorized May 6, 1997

Private Sector Development, Finance and Infrastructure Operations Division Maghreb and Iran Department Middle East and North Africa Region Public Disclosure Authorized CURRENCY EQUIVALENTS (April 1997)

Tunisian Dinar, TD 1,000 millimes TD I = US$0 9367 US$1 = TD 1.0676 TD I= FRF 5.305 FRF I TD 0.1885

ABBREVIATIONS ft = foot m = meter ha hectare mm = millimeter 3 km = kilometer Mm = million of cubic meters 3 inh = inhabitant m /sec = cubic meters per second lcpd = liters per capita per day min = minute

MEASURES AND EQUIVALENTS

Metric System U.K. Svstem

Kilometer (km) = 0.62 mile (mi) Meter (m) = 3.28 feet (ft) Cubic meter (m3) = 220 gallons (g) Million cubic meters/year (Mm3/year) 0.603 million gallons/day (Mgd) Liter (1) = 0.220 gallon (g) Liters per second (1/sec) = 19,000 gallons per day (gd)

Vice President Kemal Dervi§ Director : Daniel Ritchie Division Chief Amir AI-Khafaji Task Manager Mohammed Benouahi GLOSSARY OF ACRONYMS

ANPE Agence Nationale pour la Protection de l'Environnement BOT = Build Operate and Transfer CRDA = Commissariat RKgional au Developpement Agricole DGR = Direction Generale du Genie Rural ERR Economic Rate of Return FODEP Fonds de Depollution FRF French Franc ICB International Competitive Bidding IBRD International Bank for Reconstruction and Development KfW Kreditanstaltfur Wiederaujbau LRAIC Long Run Average Incremental Cost LRMC Long Run Marginal Cost MoA Ministry of Agriculture NCB National Competitive Bidding OED Operations Evaluation Department ONAS Office National de l'Assainissement PSA Project Specific Assessment PSP Private Sector Participation RWB Receiving Water Body SA Special Account SEA Sector Environmental Assessment SOE Statement of Expenditures SONEDE Societe Nationale d'Exploitation et de Distribution des Eaux WHO World Health Organization WTP Willingness To Pay WWTP = Waste Water Treatrnent Plant

FISCAL YEAR January 1 - December 31

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

TABLE OF CONTENTS

LOAN AND PROJECT SUMMARY ...... i

L THE WATER SUPPLY AND SANITATION SECTOR ...... 1I Background, Water Resources, and Sector Organization ...... 1 Water Resource and Sewerage Sector Strategy ...... 2 Impact of the Sector on the Environment ...... 3 Reuse of Treated Waste Water ...... 4 Industrial Pollution...... 5 Private Sector Participation (PSP)...... 6 Bank Involvement in the Sector ...... 7

II. THE PROJECT ...... 8 The Sewerage Investment Program ...... 8 Project Objectives ...... 8 Project Description ...... 8 Project Cost Estimates ...... 10 Project Financing ...... 11 International Cooperation ...... 11 Procurement and Contract Review...... 12 Disbursements ...... 14 Special Account (SA)...... 15 Audits, Accounting, and Insurance ...... 16 Project Implementation and Monitoring ...... 16

IIL FINANCIAL ANALYSIS...... 17 Past and Current Financial Performance of ONAS...... 17 Future Financial Performance of ONAS ...... 18

IV. SOCIOECONOMIC ANALYSIS AND ENVIRONMENTAL IMPACT ...... 19 Economic Analysis...... 19 Demand Analysis...... 19 Long-Run Average Incremental Costs...... 20 Tariff Structure and Subsidies...... 21 Economic Analysis of the Greater Tunis Project ...... 22 Poverty Alleviation and Affordability ...... 24 Environmental Assessment...... 24

V. AGREEMENTS REACHED AND RECOMMENDATIONS ...... 25 TABLES

Table 2.1: Project Cost Estimates...... 10 Table 2.2: FinancingPlan ...... 11 Table 2.3: ProcurementMethod ...... 13 Table 2.4: Bank Loan Disbursement Categories ...... 14 Table 2.5: Estimated Schedule of Disbursements ...... 15

LIST OF ANNEXES

1. ONAS Organization ...... 30 2. Detailed Project Description ...... 31 3. Cost Estimates ...... 36 4. Estimated Schedule of Disbursement...... 46 5. Sewerage Tariffs...... 48 6. Performance Indicators ...... 49 7. Role of the Private Sector ...... 51 8. Assumptions of ONAS' Past Financial Performance and Projections ...... 55 9. Socioeconomic Evaluation and Economic Analysis of Subprojects ...... 89 10. Environmental Assessment and Mitigation Plan.109 I1. Implementation Schedule.125 12. Supervision Plan. 126 13. List of Contracts and Procurement Methods . 127 14. The Reuse of Treated Waste Water in Agriculture .129 15. Contrat-Programne between the Government and ONAS. 140 16. Selected Documents in Project File. 176

MAPS: IBRD Nos. 27729 and 27730

Vice President: Kemal Dervi~ Director: Daniel Ritchie DivisionChief: Amir Al-Khafaji Task Manager: Mohammed Benouahi

This reportwas preparedand writtenby MohammedBenouahi (Senior Financial Analyst,Task Manager), Laura Raimondo(Economnist), Dalila Tadjerouni(Urban and EnvironmentalSpecialist), and Johan Van Beuzekom (SanitaryEngineer, Consultant). It is basedon the findingsof an appraisal missionto Tunisia in December1996. Vincent Gouamneand David Hanrahan were the peer reviewers. The RegionalVice President is Mr. Kemal Dervi~;the Director,Mr. Daniel Ritchie (MNIDR);and the responsibleDivision Chief,Mr. Amir Al-Khafaji (MNIPI). -i-

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGEAND REUSE PROJECT

LOANS AND PROJECT SUMMARY

Borrowers Republic of Tunisia and Office National de l'Assainissement (ONAS), with the Guarantee of the Republic of Tunisia.

Beneficiaries The Ministryof Agriculture(MoA) and ONAS.

Poverty Categor: NA

Amounts : Republicof Tunisia: FRF 57 million(US$10 millionequivalent) ONAS: FRF 283 million(US$50 millionequivalent)

Terms : Fixed rate single currency, repayablein 15 years, including3 years of grace, with an expected disbursementperiod of sixyears.

CommitmentFee Standard.

FinancingPlan See para. 2.8

Economic Rate of Return 24 percent using the consumer surplus analysisto estimate benefits (lower case scenario)

Staff AppraisalReport : 15432-TUN

Maps No. : IBRD 27729 and IBRD 27730

Project Identification : 5731

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGEAND REUSE PROJECT

STAFF APPRAISAL REPORT

L THE WATER SUPPLY AND SANITATIONSECTOR

Back2round,Water Resources, and Sector Organization

1.1 Background. Tunisia is a middle-incomecountry located on the southem rim of the MediterraneanSea with a populationof approximately8.8 millionthat is growing at 1.9 percent a year. It occupies an area of 160,000 km2 that has few natural resources. The Atlas Mountains, which run from west to east about 280 km south of the northern coastline,separate the country into two distinct regions. To the north of the Atlas Mountains is a semi-aridarea where the majority of the population lives;this is where most of the fresh surface water and arable land is found. The majority of industrial and other economic activitiesare concentratedin the northern coastal areas. To the south of the Atlas Mountainsis the Sahara Desert, which has scant population, water, and industrial activity. Per capita availablewater resources in the country are 531 m3 a year. The mean annual rainfall is approximately 0.6 m in the northern region and approximately0.1 m in the southern region.

1.2 The Tunisianeconomy is a captive of both the weather and tourism. Economic growth averaged 4.5 percent a year between 1987 and 1994, 2.4 for 1995 and 6.9 projected for 1996. Tunisia has experienced three serious draughts in the last twelve years, each causing poor harvest and a concurrent drop in domestic consumption. Although there was a 24 percent reduction in agricultural output as a result of the 1988 drought, economic growth remainedpositive largelybecause of tourism, which is being actively developed. Tourism, concentrated in the seaside regions, is a very fragile industry that depends on clean beaches and sea water. The Government pays great attention to protecting the environmentand especiallyto the proper disposaland treatment of waste water.

1.3 Water resources. The annual total volume of exploitable water resources is approximately3 billion m3, consisting of 90 percent (2.7 billion m3) surface water and 10 percent groundwater. Sixty percent of these resources have already been tapped, with 20 percent of that amount allocatedfor potable water. By the year 2010, all the availableand exploitablewater resources are projected to be in use, with 25 percent to be allocated for potable water. Water demand for urban and agriculturaluse will exceed availableresources, particularlyin the southern part of the country, and it will gradually become necessary to resort to desalination of brackish water and sea water and to reuse treated waste water to supplementthe availableresources.

1.4 Sector organization. In 1975, with the assistance of the World Bank, the Government created l'Office National d'Assainissement (ONAS), the national institution in charge of sewerage subsector management, includingthe collection,treatment, and disposal of waste water in urban, industrial,and tourism zones. In 1993, its mandate was consolidatedunder the newly created (1991) Ministry of Environment and Land Planning, with increased responsibility for sewage operations. ONAS has also expanded into an institutionresponsible for protection of the hydrological environment, working in close cooperation with the National Environmental Protection Agency -2-

(ANPE, establishedin 1989), which is charged with developingand enforcing regulations concerning waste water discharge.

1.5 Responsibilityfor the water supply systems in urban areas and large rural centers is assigned to the Socite Nationale d'Exploitation et de Distribution des Eaux (SONEDE), a national water supply authority; it is an autonomous public entity under MoA. Planning, design, and supervision of small and medium water supply and irrigation works is the responsibility of the Direction Generale du Genie Rural (DGR), an MoA department. MoA's Direction Generale des Etudes et Travaux Hydrauliques is responsiblefor the constructionof hill dams and studies and design of irrigation infrastructure. Responsibilitiesfor managing investment planning and implementationof projects and agriculture activitiesare with the regional CommissariatsRegionauc au Developpement Agricole (CRDA). The municipalitiesare responsiblefor solidwaste collectionand storm drainage.

Water Resourceand Sewera2e Sector Strategv

1.6 Since the 1970s, the country's water resource strategy has given high priority to developingwater resources to provide drinkingwater for most of the population, and to irrigate large areas of agriculturalland. This strategy has also emphasizedimproved commercialand industrialwater supplies to accompany economic growth in these sectors. In this context, the sewerage subsector's main objectivehas been to bring sewerage servicesup to the level of water supplyin urban areas. This objectivehas been postponed over time because of budgetary constraints. Currently, ONAS, the main provider of sewerage services, is planning to reach a connection rate of 95 percent of the urban population served by SONEDE by the year 2011. In the meantime, ONAS has assumed increased responsibilitiestoward safeguardingthe environmentand controllingpollution by developing a larger waste water treatment capacity. The subsector'smain outstanding challengesinclude recycling treated water for agriculturaland industrialneeds and rechargingaquifers.

1.7 The sewerage service has been considered a public service that serves the national interest by conserving natural resources and protecting the environment. The targeted financial objective of recovering operating and maintenance costs is gradually being realized, although capital investmentsare still largely subsidized. To optimize the use of investments, the existing legislation requires all houses and enterprises to connect to the sewer system once it becomes available. To minimizepublic investmentsand facilitateONAS' tasks, the Government has been promotingthe use of individualsewage disposal systems whenever appropriate. This should enable ONAS to concentrate on large and more densely populated regions where collective sewage disposal systems are generally less costly.

1.8 The water supplyand sewerage sector in Tunisia is now being studied by the Tunisians, the Bank, and other donors. The studies cover overall strategy for the sector, includinginstitutional, technical, economical, and financial aspects. Under the Water Supply and Sewerage Project (Loan 3782-TUN), the Government is committed to preparing a comprehensivesector development policy letter encompassingboth water supplyand sewage by December 1998.

1.9 The proposed project is consistent with both World Bank and MENA strategy for managing water resources in that it takes into account both efficiency and social issues, within an environmentalperspective. The project will also be a catalyst for greater participation by the sewage subsectorin more comprehensivewater resource managementplanning. - 3 -

Impact of the Sector on the Environment

1.10 The environmentalaspect plays a central role in the proposed project for two major reasons. First, an environmentalaudit carried out at the sector level, for the first time in Tunisia, provided useful insights into Tunisia's well-establishedsewerage sector, includingits linkages to the water sector and its relative impact on the environment. This audit highlightedemerging issues and how they could be addressed in the context of future investments. Second, the specificassessments undertaken for each proposed treatment plant were based on the results of the sector study, incorporatingthe recommendationsmade into the planning,design, and location of the plants as well as the qualityand destinationof their by-products.

1.11 The Sector EnvironmentalAssessment (SEA) looked at different sources of pollution and their impact on the environment;treatment and discharge standards and how they are currently applied, priorities for sanitation, the current policy for recycling treated waste water, the pollution caused by industrialdischarges, and the related institutionaland regulatoryaspects. The SEA made specificrecommendations for each of these aspects and provided guidelinesto strengthen institutional and environmentalmanagement. The most prominentelements of the SEA are describedin paras. 1.12 and 1.14.

1.12 Main causes of impacts. Althoughurban sanitationhas made significantprogress in Tunisia,both treated and untreated waste water of urban/domesticand industrialorigin stillrepresent a major source of pollution,while the run-off of polluted rainwater has a lesser impact. It is estimated that 15 to 20 percent of the waste water collected in sewer systems is untreated and discharged in receiving water bodies (RWB), with a potential impact on public health. The direct discharge by households into lost wells and rainwater drains represents an important pollution load, resulting in infiltrationsinto groundwater resources that could cause irreversibledamage. The construction of treatmentplants and sewer systemsremains the most feasiblesolution, while septic tanks, culverts, and ditches connectingto the seweragenetwork could provide acceptablealtematives in low-densityareas.

1.13 Water quality and discharge standards. At the core of the SEA is the concept of vulnerabilityof the RWB. The different types of water bodies were defined and water quality objectives were determined to establish their respective level of protection against pollution. A classificationof all water bodies was establishedshowing their vulnerabilityto the differentsources of pollution. Hence, the current discharge standards in use in Tunisia could be adapted to this classificationin order to reflectthe vulnerabilitycriteria. A permanentmonitoring program is necessary to collect data on actual water qualityin order to establishwhether it is suitablefor the purposes and goals set by the water quality objectives.This would provide informationto decision-makerson the effectivenessof measurestaken and where remedialor additionalmeasures are required.

1.14 Importance of impacts and priority of sanitation. The SEA analyzes the main impact of discharges from pollution sources according to the vulnerabilityclass of the RWB, to establishthe relativeimportance of each type of impacton a national scale. In general,the most serious impacts occur in places where untreated urban and industrial sewage are discharged into Class A receivingwaters (highestvulnerability). For example,large quantitiesof nutrients (P and N) contained in the effluentwill lead to eutrophic conditions(growth of macro-algae)if discharged into the sea, causing the deterioration and disappearanceof the seagrass beds. As a result of this assessment, sanitationpriorities have been established,i.e., lists of the first 50 sources of domesticwaste water. One list indicatespriorities for the constructionof sewer systems, the other for the sewagetreatment. These - 4 - lists will help decisionmakersto determinethe measures needed and prioritize' the allocationof funds for investments.

1.15 It is confirmed that the effective way to reduce pollution requires the design and implementationof programs to control and monitor the qualityof ground and surface waters. There are currently no such programs on a national scale; they should be established based on the vulnerabilitycriteria proposed in the SEA. Tunisia has developed a sound overall strategy for environmentalprotection. What is missingis a more detailed elaboration and implementationof this strategyvia a numberof concrete programs (wviththe active participationof the concernedgroups) so as to effectivelyaddress each objective and to enforce regulation and discharge standards. It is also necessaryto strengthencoordination among the differentresponsible structures. Finally,it is necessary to adapt existing legislation,regulations, and standards to reflect the issues raised and solutions proposed in the SEA.

Reuse of Treated Waste Water

1.16 In view of the increasingscarcity of ground and surface water resources in Tunisia, water recycling could provide an appreciable alternative resource, especially for irrigation and the recharge of aquifers, while lesseningthe negative effects of discharge into the environment. It is estimated that by the year 2011, the volume of effluentproduced by the 120 operating WWTPs will amount to about 266 millions m3 a year, equivalent to 15-20 percent of available ground water resources.More than one third of this volumewill be produced by the WWTPs of Tunis and another third by the WWTPs of , , Gabes, , and ,in volumes of 5 to 11 Mm3 a year each. Reuse efforts should therefore be made in reuse areas that produce the largest quantities of effluent,where there is potentialfor irrigation(Annex 14) or recharge of the groundwater resources, and where RWBs are more vulnerableto pollution,provided that such efforts are economicallyviable (Annex9). This is important for the sea, most lagoons,the Mejerda River, and the Gulf of Tunis. It is worth noting that 75 percent of the WWTPs, producing more than 75 percent of the total amount of effluent,are situated along the coast. These estimates show the importance of treated water reuse, especiallyfor waste water that dischargesinto the marine environmentand into other water bodies vulnerableto eutrophication.

1.17 The reuse of treated water could undoubtedlybring substantialeconomic, social and environmentalbenefits. It should, however, be tackled soundly and effectivelyand be part of the national strategyfor the mobilizationof water resources. This calls for agreementand cooperationwith the user authorities, namely the ministries of agriculture, industry, and public health, about the standardsrequired for each specificpurpose for which the effluentis reused. New regulationsshould be establishedalong with revised Tunisianstandards to enable reuse for different types of irrigation (restrictiveor not) and other purposes. Once the standardsfor effluentquality have been set, it would be advisable,for instance,to lower the bacteriologicalstandards for reuse to the level set by WHO, and to lessenthe restrictionsfor use in agriculture.

1.18 Responsibilitiesfor further treatment shouldbe clearly defined between the concerned institutions. For instance, disinfectionby way of maturation ponds and transport of treated waste

1/ This prioritizationprocess also dependson other factors, such as the cost of these measures and their importanceto politiciansand the public.This process,however, provides the technicaljustification for the rational managementof waterresources and protectionof the environment. - 5 - water to the maturation sites could be assignedto ONAS. The MoA could take charge of transport from maturationsites to storage sites, and of constructionand exploitationof storage basins, irrigation infrastructure,infiltration, and distributionto farmers. The issue of cost recovery should also be worked out among the institutionsinvolved, as well as with the final users, the farmers. It is equally importantto educate farmers (and other populationgroups) about the reuse issue, and to encourage them to fullyparticipate in the process.

1.19 Within the framework of the existingpolicy for the conservationof water resources, the idea of reusing waste water in the scope of the project was greeted favorably by the Tunisian Government. Reuse has become,therefore, a fundamentalobjective of the proposed project, since the designof the WWTPs is directlytied to the potential for reuse. The largest potential is in Tunis West, where a contiguous irrigation zone of 6,000 ha was identified(see Annex 10, paras. 5.1-5.2). The prograrn foresees recyclingthe effluents of both WWTPs (Tunis-Southand West) for irrigation,the recharge of aquifers, and other specific purposes. An agreement has been reached between the Ministry of Environment and Land Planning and the MoA to establish a detailed outline of the recyclingprogram, which willbe fully implementedin the proposed project.

1.20 The means to carry out this program have been defined(paras. 2.4 and 2.6) but will be further detailed by appropriate studies. Divisionof responsibilitiesamong the MoA, the Ministry of Environment,ONAS, and the concerneddepartments have been worked out in such a way that each party will be in charge of what is directlyrelated to its activitiesdemonstrating a sound coordinationfor the implementationof every aspect of the program. The studies to be undertaken in the proposed project willfurther determinethe responsibilitiesof each department.

IndustrialPollution

1.21 Tunisia has a relatively important industrial base that involves some 10,000 establishmentsand represents 30 percent of its GDP. It has favorablycontributed to the development of the country but its rather anarchiclocation has created negative impacts on the environment. The major industrial poles (representing 90 percent of this activity) are concentrated along the coast, causingserious damage to the sensitiveecosystem of the coastalzone. About 1,200 of these industries2 are considered to be highly polluting. Despite awareness of this constant degradation of the environmentwith all of its extemalities,including the negative impact on tourism, not one industrial treatment plant has yet been built. Most industriescontinue to discharge their waste into the sea, the oueds, the sebkhas, and the lakes.

1.22 Tunisianlegislation sets the standardsfor dischargesfor three differenttypes of RWNB: the seweragenetwork, the hydraulicnetwork, and the marine environment. Industrial waste waters that do not conformto these standardsmust receivepretreatment before discharge.Industrial operators have encountered some technical and financial difficultiesin conforming to this legislation, and enforcementhas been rather difficult. Remedialactions are being taken by the Tunisianauthorities, the most important ones through FODEP, the industrialdepollution fund, which was created in 1992 to help the private and publicindustrial operators financeinvestments needed for pretreatment. Recently, FODEPhas helped a number of industriesto financeup to 80 percent of the needed investments.

2/ Only limited quantitative data exist about industrial pollution and discharges; comprehcnsivc work is still needed in this area. - 6 -

1.23 The environmentalmonitoring function is the responsibilityof ANPE, which has been instrumentalin identifyingthe increasingnumber of polluting industries. A recent study conducted jointly by the Ministry of Environment and Land Planning and ONAS on two important industrial zones, Tunis South (550 establishments)and Sfax (211), has confirmedthe low connection rate of these establishments. Very few (mainly in the agro-industrialsector) have installed pretreatment facilities. Affordablepollution control solutionsare beingworked out with these establishments. As a result of the study, an industrialtreatment plant for Tunis South is being planned and will be financed by the industrialprivate entrepreneursconcemed. Replicationof this approach is recommended for industrialzones throughoutthe country.

1.24 Withinthe scope of this project, the installationof the proposed waste water collection systemsand treatment facilitieswill provide an opportunityto reduce further industrialpollution by substantiallyincreasing the number of connections. Furthermore, the industries connecting to the systemwill be requiredto managetheir waste water effluentsin compliancewith the regulations.Non- compliant dischargeswill be identifiedand will undergo pretreatment, as required by Tunisian law. Further, a comprehensivelaw regardingthe discharge, control and managementof all waste (solid as well as liquid,including industrial waste) has just been passed -- Law No. 96-41, dated June 1996 and will be soon followed by the promulgation of a number of decrees. Decrees related to ONAS have alreadybeen approved.

PrivateSector ParticiDation(PSP)

1.25 To date, ONAS has had limitedinterest in the private sector, given its focus on startups and the expansion of its mandate. Now that it has a substantialscope of interest, however, it is increasinglyinterested in pursuing additionaloperational and financialleverage through private sector participation(PSD). ONAS' initial objective in this area is to assess the benefits of having private sector operators manage its distributionsystems and treatment plants, and building and operating treatment plants (concessions and BOT schemes). The current USAID program in the sector is financingthe development of three pilot PSD projects, two of which are underway. These two ongoing projects will focus on subcontractingthe managementof (a) 140 km of urban wastewater network in Tunis;and (b) three WWTPs in the tourism-drivenHammamet- area. The third pilot project being studied concerns a WWTP to be built on a BOT basis and implementedas part of the 1997-2001Ninth Plan. The Government is planning to build the Tunis West WWTP (one of the largest WWTPs in Tunisia) on a BOT basis, with a private operator being responsiblefor operation and maintenanceas well as for financingcapital expenditures. All three pilot projects will provide valuablelessons for ONAS' existingand expandingoperations, as well as a better understandingof how to deal with long-termprivate sector contractors so as to replicatebetter such arrangementson a broader scale throughoutthe network (Annex 7).

1.26 The Bank should encourage the above-mentionedprojects and the financingof any subsequent BOT projects so as to enhance their replication throughout the system. During negotiations, the Government has requested Bank assistance in preparing the Tunis West BOT operation. The Bank would assist the Ministryof Environmentand ONAS in selectinga consultant that would help in preparing BOT bidding documents and negotiations with potential bidders. The Project includes a TA component to cover consultant services. The Government will decide later whether to use a Bank Guarantee for this operation. The Government agreed to have the Bank Guaranteeevaluated in the biddingdocuments. -7 -

Bank Involvementin the Sector

1.27 The Bank Group has been extensivelyinvolved in the water supplysector since 1968, and has assisted in financingeight SONEDE projects (seven loans and a credit). SONEDE was establishedunder the first Bank operationin the sector. The first loan of US$15.0 million(Loan 581- TUN, January 1969) financedwater supplyworks in the areas of Tunis and Sousse. The International DevelopmentAssociation extended a credit of US$10.5 million(Credit 209-TUN, June 1970) to assist in improvingand expandingwater supplyworks in eight regionsof the country.

1.28 The Bank Group assistedin financinga tourism infrastructureproject (Loan 858-TUN and Credit 329-TUN, September 28, 1972) that included water supply works valued at US$18.5 million. The Sidi SalemMulti-purpose Project (Loan 1431-TUN), which covered the first construction phase of the Northem Water Master Plan, was undertaken to meet household and agriculturalwater demand in the northern and centralparts of the country. This projectwas completedin 1984, and since then, the qualityand quantityof water supplyto Greater Tunis have greatlyimproved.

1.29 The Bank has also been active in the sewerage subsector and has made three loans for sewerageworks. The first loan, of US$28.0 million(Loan 1088-TUN,First Urban Sewerage Project, February 1975),was for the expansionof sewer systemsand constructionof a waste water treatment plant in Greater Tunis. The second loan, of US$26.5 million(1675-TUN, 1979), financed sewerage works in Greater Tunis and Sfax. The third loan, of US$34.0 million(Loan 2255-TUN, June 1983), financedsewerage works in 30 citiesand towns.

1.30 The Bank-financedTourism InfrastructureProject (Loan 858-TUN and Credit 329- TUN) also includedUS$16.6 millionfor sewerageworks. In a closely related area, the Bank made a loan of US$25.0 million(Loan 2289-TUN,June 1983) for a flood protection project in Sfax. The most recent operation,a Water Supplyand SewerageProject (Loans 3782/3783-TUN)of US$58 million,of whichUS$9 millionwas for sewerage,was approved on September21, 1994 and became effectiveon January21, 1995. This project includesexpansion of the water supplyproduction facilitiesfor Greater Tunis and a rural water supply component,both for SONEDE, and the construction of three small WWTPs for ONAS. The proposed projecthas been delayedfor more than a year because of (a) time needed to reflect on strategic issues (sector studies) of the sector; (b) construction of WWTPs that were considered a priority (, , Jammel-Zarmeddine,and other WWTPs) and were included in the Water Supply and Sewerage Project (Loans 3782/3782-TUN);and (c) Government mobilizedgrants and loanswith soft terms from other donors (Japan, Germany,Europe, etc.).

1.31 ONAS and SONEDE have performed well under Bank operations, and have contributedto major improvementsin water supplyand sewerage. The percentage of urban population connected to the SONEDE system,which was only 43 percent in 1968, has now reached 92 percent. For the 1980-95 period, ONAS increasedits level of servicefrom 41 percent to 60 percent, with the number of communes covered increasingfrom 35 to 110. Today, SONEDE and ONAS are viable public entities managed by experienced and dedicated staff. The completed projects have been successfullyimplemented, as confirmedby OED. In October 1993, EMTIN undertook a review of the Bank Group's water supplyoperations in the MENA region. The review confirmedthat SONEDE and ONAS have achieved a great deal and are the best performersin MENA's water sector. However, more remainsto be done to improvethe efficiencyof their operations and cost recovery. - 8 -

IL THE PROJECT'

The SeweraeeInvestment Proeram

2.1 ONAS' yearly activityinvestment has seen major fluctuationsbetween 1983 and 1989, with amounts varying from TD 16 million to TD 20 million. The slowdown from 1986 onward correspondedto austeritymeasures taken duringthe structuraladjustment program. Investmentsbegan to increasesubstantially in 1990, with TD 32 million,and have continuedto increase steadily,reaching TD 61 millionby 1996.

2.2 The Government'sobjectives for the sewerage investmentprogram are: (a) expansion of the existingONAS network to provide 95 percent of the populationwith sewerage services by the year 2011, compared to 77 percent in 1995; (b) rehabilitationand maintenanceof existing networks and equipment; and (c) construction of new WWTPs to treat additional waste water, which are projectedto reach about 500,000 m3/d by 2011.

2.3 To reach this objective,the Governmentwill have to invest about TD 1.2 billion,an amount that neither the Government nor ONAS can likely afford in view of other priorities and budgetary constraints. TD 400 millionwill be invested by the end of the Ninth DevelopmentPlan (1997-2001), and the balancewill be invested between 2001 and 2011. Three-quartersof the Ninth DevelopmentPlan (i.e., TD 300 million)consists of the Fourth Urban Sewerage Project, which covers the four largest urban cities of Tunisia (Tunis, Sfax, Sousse, and Kairouan). The proposed project covers all of the Greater Tunis program except for the Tunis West WWTP, which would be financed by the private sector (BOT).

2.4 The Tunis West WWTP of the activatedsludge type, will have a capacity to treat the sewage of 850,000 populationequivalent. The main complexwill be situated at El Attar, near the Momag basin. A sewage collectioncenter, with preliminarytreatment facilitiesconsisting of sand and grit removal,and a pumping station,will be situated at a lower site on the shore of Lake Sedjoumi. A 7.5 km, 0.6 m 0 double-pressuremain will transport the sewage from the collectioncenter to the WWTP. The treated waste water will be conveyed via a pumpingstation and a pressure main to the Mornaguiabasin, where it will be used for irrigationor dischargedinto a tributaryof the oued Meliane.

ProjectObiectives

2.5 The proposed project will assist the Government in: (a) improvingservice levels of urban sewerage up to the average level of potable water service; (b) promoting efficient reuse of effluent from sewage treatment plants for agricultural purposes; (c) reducing urban and coastal pollution;(d) improvingONAS' cost recovery and financialcapacity, with the long-term objective of making it more autonomous and self-financing;(e) introducing appropriate new sewage treatment technology;(f) providingtechnical assistanceto develop private sector participationin the sewerage sector; and (g) acquiringenvironmental monitoring and managementequipment and tools, and studies.

Proiect Descriition

2.6 The proposed project, which is detailed in Annex 2, includes an urban sewerage componentfor ONAS and an agriculturecomponent for MoA. - 9 -

The urban sewerage componentfor ONAS includes:

(a) extensionand rehabilitationof the Tunis South (Meliane)WWTP in the southern basin of Tunis. The capacity will be increased from 300,000 to 675,000 population equivalent,applying the same extendedaeration treatment procedure;

(b) restructuring of the western Tunis sewage collection system to divert part of the sewageto the new TunisWest WWTP. This restructuringwill require the construction of 52 km of primarysewers;

(c) strengtheningof the Southern Tunis sewage collectionsystem and the connection of the villages of and Rades to the Southern Tunis WWTP, requiring the constructionof 48 km of sewers;

(d) extension of the Northern Tunis sewage collectionsystem by 33 km and construction of a liaison conduit of 4 km between the Northern Tunis and Choutrana WWTPs, replacingan open canal that obstructs groundwater drainageof the Soukra plain into Lake Ariana;

(e) extension,rehabilitation and resizingof the sewage collectionnetworks of Central and Northern Tunis ( and ), to prevent salty groundwater intrusion. This willrequire constructionof 45 km of sewers;

(f) strengtheningof all secondarysewer systems,requiring 230 km of sewers;

(g) constructionof pumping stations;

(h) acquisitionof miscellaneoussewer maintenanceand managementequipment; and

(i) technicalassistance, studies, and research work.

The reuse of treated sewage in the agriculturecomponent for MoA includes:

(j) the constructionof a multi-seasonalstorage basin with a capacity of one to two million m3 , in the El Attar valley,at about 4 km distancefrom the Tunis West WWTP, where treated waste water will be stored to be used for irrigation. The Bank should agree on the selected consultants, the design criteria, and the related studies (feasibility, environmentalimpact assessmentand final design). The generic safety measures that will be designed will be reviewed by the Bank, including the appointment of an independentpanel of experts;

(k) the equipmentof an area of 1,000 ha in the El Attar area, to be irrigated with treated sewage.This area can be expanded to 6,000 ha as more treated waste water becomes availablein the governoratesof Ariana and ; and - 10-

(1) carrying out of a pilot project for groundwater recharge with appropriately tertiary treated purified sewage. The depleted aquifer will be recharged to form a barrier against sea water intrusion.

Detailed studiesrelated to (i), (j), and (k) (feasibility,environmental impact assessment and final designs)will be carried out during 1998 and 1999. Agreementhas been reached to carry out the detailed studiesacceptable to the Bank by December 31, 1998 for the feasibilitystudy and environmentalimpact assessmentand by December31, 1999 for final designs.(para. 5.1(i)).

ProjectCost Estimates

2.7 Project cost estimates are summarized in Table 2.1 below. Total project cost is estimated at TD 119.7 million (US$106.7 million), with a direct and indirect foreign exchange component of TD 68.0 million (US$60.6 million). Identifiabletaxes and duties amount to about 9.7 percent of total cost. More detailedcost estimatesare given in Annex 3.

Table 2.1: Proiect Cost Estimates

-- US$ millions of which DT millions--- of which Description Local Foreign Total Taxes Local Foreign Total Taxes Sewerage SewageTreatment Plant South Tunis 5.553 12.798 18.351 1.502 5.928 13.663 19.591 1.604 SewerSystem Reornizati 6.375 7.782 14.517 1.034 6.806 8.308 15.114 1.104 Extensions 8.861 10.200 19.061 1.910 9.460 10/890 20.349 2.039 Rehabilitation 3.068 3.382 6.450 937 3.276 3.610 6.886 1.001 PumpingStations 1.638 3.369 5.008 456 1.749 3.597 5.346 487 RehabilitationSTP NorthTunis + Transfer 1.422 1.669 3.091 242 1.518 1.782 3.300 258 Subtotal 26.917 39.201 66.118 6.082 28.736 41.850 70.586 6.493 ConsultantServices and TA 1.700 1.700 3.400 309 1.815 1.815 3.630 330 Maitenance Equipment 515 2.061 2.576 146 550 2.200 2.750 156 Sub-totalONAS 29.132 42.962 72.094 6.537 31.101 45.865 76.966 6.979 ReuseofTreated Sewage n Agncultare 7.213 7.213 14.425 1.849 7.700 7.700 15.400 1.974 TotidProject Cost 36.345 50.174 86.519 8.386 38.801 53.565 92.366 8.953 PhyskalCondngencies 5.452 7.526 12.978 1.252 5.820 8.035 13.855 1.343 Price Contingencies 4.335 2.905 7.240 731 7.144 6.366 13.510 1.340 Total Project Cost (cu-entprices) 46.131 60.605 106.737 10.370 51.766 67.966 119.731 11.636

2.8 Cost estimates for the sewerage component are based on the recently completed feasibilitystudy and recent bid awards for similarworks in Tunisia. All costs have been adjusted to March 1997 levels. Physicalcontingencies have been estimatedat 15 percent.Price contingencieshave been calculatedbased on a projected local inflationof 3.5 percent a year and a foreign inflationof 2.3 percenta year. Cost estimatesfor the reuse componentare based on a preliminarystudy. Proiect Financing

Table 2.2: FinancingPlan-Total Costs (US$ millionequivalent)

FinancingPlan Local Foreign Total % of Total IBRD 3.0 57.0 60.0 56.1 Government 26.0 - 26.0 24.3 ONAS 17.0 4.0 21.0 19.6 46.050 1Q 1Q7.Q JQQ

2.9 Two Bank loans of an aggregate amount of FRF 340 million (US$60 million equivalent)will be made available:one to ONAS of FRF 283 million(US$50 millionequivalent), with a Government Guarantee for the sewerage sector; and one to the Republic of Tunisia for FRF 57 million (US$10 million equivalent) for the agriculture component. The two loans will be in single currency (FRF) with a fixed rate up to 15 years, includingthree years of grace, with an expected disbursementperiod of six years. The FEPS review meeting recommended a direct loan to ONAS taking into account its technicaland financialachievements. This issue was discussedduring appraisal with Governmentand ONAS, but the finaldecision was made later and confirmedduring negotiations. ONAS' financialsituation and creditworthinesswas assessedduring appraisal.A direct loan to ONAS with Governmentguarantee is fullyjustified.

InternationalCooveration

2.10 Technical assistance. ONAS has benefitedsince its creation from bilateraltechnical and financialassistance from several countries (includingGermany, the United States of America,the Netherlands,Belgium, Saudi Arabia, Kuwait, Japan, France, and Sweden). The technical assistance has covered different aspects of ONAS activities and dealt specificallywith providing equipment, trainingof technicalstaff, holding seminarsin Tunisiaand abroad, and implementingspecific projects. The Germancooperation has been the most active. Germanyhas had experts working with ONAS for the last 20 years. Their missionhas evolved over time (trainingin the fields of hydraulics,sanitation, civil engineering, maintenance and supervision of works). The present program for German cooperationis to set up and organizethe industrialpollution department of ONAS, provide equipment for WWTP laboratories,create regional laboratories, and help develop a national strategy for solid waste. Japan has financedthe feasibilityand environmentalstudies for the Fourth Urban Sewerage Project, whichincludes Greater Tunis, Sfax, Sousse,Kairouan, and and represents 60 percent of the Ninth DevelopmentPlan (1997-2001).

2.11 Financial cooperation. The sewerage sector has attracted many institutions, especiallyduring the last ten years. Loans outstandingas of December 31, 1996 from international financialinstitutions amount to TD 56 million, from KfW, Germany (TD 16 million), the European Investment Bank (TD 12.8 million), the World Bank (TD 11.6 million), and the Kuwait Fund (TD 7.7 million). These four institutionsrepresent 86 percent of the loans' balance. This investment - 12 - program regarding the Ninth DevelopmentPlan will be implementedin the years 1997-2001 (about TD 400 million). Agreementshave been or are in the process of being reached between the Tunisian Government and intemational fuindingagencies to cofinance a substantial part of the program: IBRD(US$60million for the proposed Greater Tunis Sewerage and Reuse Project), KfW (DM 28 million for the Bizerte area), Nordic Banks (US$11 million equivalent for Tataouine and Jammel-ZarTneddine),OECF, Japan (Yen 8,518 billion for Sfax, , , and ), and the IslamicDevelopment Bank (US$15million equivalent for Kairouan).

Procurementand ContractReview

2.12 All contracts financed by the Bank will be procured in accordance with the Bank's Guidelinesfor Procurement.

(a) For part A of the proiect: Contracts for civil works and pipe laying, larger than US$3 million equivalent per contract and US$50 million in the aggregate, and contracts for pipe supply larger than US$1 million equivalent per contract and US$20 million in the aggregate; and contracts for equipment supply, with or without installation, larger than US$500,000 equivalent per contract and US$7 million in the aggregate will be procured through international competitive bidding (ICB). Contracts estimated to be smaller than these ceilings, for which little international interest is expected, may be procured using national competitive bidding procedures (NCB), in which foreign firms may participate. Bidders for the construction of the Tunis South (Meliane) WWTP under paragraph 2.6 (a) will be prequalified.

(b) For Dart B of the project: Contracts for civil works and pipe laying larger than US$3 million equivalent per contract and US$10 million in the aggregate, and contracts for pipe supply larger than US$700,000 equivalent per contract and US$5 million in the aggregate; and contracts for equipment supply, with or without installation, larger than US$500,000 equivalent per contract and US$2 million in the aggregate will be procured through ICB. Contracts estimated to be smaller than these ceilings, for which little international interest is expected, may be procured using NCB, in which foreign firms may participate.

(c) For both parts of the project, contracts for the supply of goods procured through ICB, a margin of preference of 15 percent or the actual customs duty, whichever is less, would be allowed for domestic goods. The relatively high individual and aggregate ceilings for the use of national procurement methods is justified by an efficient local contracting business and a well developed network of local dealers representing foreign companies. Consultants would be retained in accordance with the Bank's Guidelines for the use of consultants. Annex 13 gives a detailed breakdown of the procurement method and contract review (para. 5. 1(a)).

2.13 Assurances were obtained during negotiations that NCB procedures related to this projectwill be satisfactoryto the Bank (para. 5. 1(a)). A list of contracts,including their estimatedvalue and the procurementmethod, is attached in Annex 13. The followingtable indicatesthe procurement method for Bank-financedcontracts for this project. - 13 -

Table 2.3: Procurement Method (US$ millionequivalent, including taxes)

Project element ICB NCB Other Total

1 Supply and install 25.20 25.20 (20.16) (20.16) 2 Civilworks 29.90 29.90 59.80 (16.06) (8.65) (24.71) 3 Goods 4.96 11.58 16.54 (2.98) (6.95) (9.93) 4 Consultant services 5.21 5.21 (5.21) (5.21) Total 60.06 41.48 5.21 106.75 (39.20) (15.59) (5.21) ( 60.00)

Note: Figures in parentheses are the amounts financed by the Bank loan.

2.14 The Bank's prior review will be required for: (a) contracts for goods estimated to cost the equivalent of $500,000 or more; (b) contracts for works estimated to cost the equivalent of $3,000,000 or more; (c) all contracts for consulting firms over US$100,000; (d) all contracts for individualconsultants over $50,000; and (e) all prequalificationprocedures and documents. After agreeingon the basic contract formulation,the Bank wil randomlycheck contracts not requiringprior Bank review during supervisoryfield missions. - 14 -

Disbursements

2.15 The proposed loans of FRF340 millionin the aggregate(US$60 millionequivalent) will be disbursedagainst the cost of the project as follows:

Table 2.4: Bank Loan DisbursementCategories

Category Amount of loansin % of expenditureto be financed FRF (and US$ million equivalent)

Part A: Sewerage 1. Works 136,000,000 100 percent of foreign expendituresand (24.0) 60 percentof local expenditures

2. Goods, includingequipment 102,000,000 100 percent of foreign expenditures, and its installation (18.0) 100percent of local expenditures(ex-factory cost), and 80 percent of local expendituresfor other items procuredlocally 3. Consultantservices, and 17,000,000 100 percent of total expenditures training (3.0) Unallocated 28,000,000 (5-0)

SubtotalONAS 283,000,000 (50.0) Part B: Agriculture 1. Civilworks and pipeline 23,000,000 100 percent of foreign expendituresand construction (4.0) 60 percentof local expenditures

2. Supplyof pipes,building 23,000,000 100 percentof foreign expenditures, materials,and electro- (4.0) 100percent of local expenditures(ex-factory mechanicalequipment cost) and 80 percent of local expendituresfor other itemsprocured locally

3. Studies,TA, and training 6,000,000 100 percent of total expenditures (1.0) Unallocated 5,000,000 (i 0) SubtotalMoA 57,000,000 (10.0) TOTAL 340,000,000 WU) - 15 -

2.16 Disbursementswill be fully documentedexcept for expendituresagainst contracts for goods costingless than $500,000 each, works costingless than $3,000,000 each, servicesof consulting firmscosting less than US$ 100,000 each; and contractsfor servicesof individualconsultants less than US$50,000each. All other disbursementswould be made on the basis of Statement of Expenditures (SOE) detailingthe individualtransactions. The documentationto support these expenditureswill be retainedby ONAS and MoA for at least one year after the Bank receivesan audit report for the year in which the last disbursementwas made. ONAS and MoA will make this documentationavailable for review by the auditors and the Bank upon request. Table 2.5 shows the estimated schedule for loan disbursements.

Table 2.5: EstimatedSchedule of Disbursements (UIS$million equivalent)

Bank FY and Disbursedper Cumulative % of total Semester Semester Disbursements 1999 1st semester 2.1 2.1 3.5 2nd semester 5.9 8.0 13.3 2000 lstsemester 3.8 11.8 19.7 2nd semester 4.3 16.1 26.8 2001 1st semester 4.3 20.4 34.0 2nd semester 5.0 25.4 42.3 2002 1stsemester 5.0 30.4 50.7 2nd semester 6.8 37.2 62.0 2003 1stsemester 6.8 44.0 73.3 2nd semester 5.1 49.1 81.8 2004 1stsemester 5.1 54.2 90.3 2nd semester 5.8 60.0 100.0

The project is expected to be completed by June 30, 2004. The closing date of the loan will be December31, 2004 to allow sufficienttime to releaseretention funds.

SpecialAccount (SA)

2.17 To facilitate implementationof Part B of the project, agreement was reached to establish an SA for the loan to the Republicof Tunisia at the Tunisian Central Bank, on terms and conditions satisfactoryto the Bank. Authorized allocations to the SA have been agreed upon at FRF 6,000,000. The authorized allocation will be limited to FRF 3,000,000 until the aggregate - 16 - withdrawalsfrom the loan account reach FRF 12,000,000. The SA will be replenishedon a monthly basis or when at least one third of the balance has been withdrawn, whichever occurs earlier. Documentation requirementsfor replenishmentapplications will follow the procedure described in para. 2.16 above. In addition, monthlybank statements of the SA reconciled by the Borrower will accompanyall replenishmentrequests.

Audits, Accountinz. and Insurance

2.18 Previous project agreementsamong ONAS, MoA, and the Bank providedfor the audit of financialstatements (ONAS accounts, project accounts, etc.) by independentauditors. Assurances were obtained during negotiations that financialstatements will be audited by independent auditors acceptableto the Bank. in accordance with appropriate auditing principlesconsistently applied, and that the audit reports will be submitted to the Bank within seven and six months. respectively,by ONAS and the MoA after the close of each fiscal year. Separate audit reports will be issued for the project accounts and the SOE (para. 5.1(b) . During negotiations,the Bank agreed also to accept the Government auditors to audit the MoA project account and the SA. The Government auditors in Tunisiaare competent and have done similarwork satisfactorily.

2.19 ONAS does not have a completeand adequatecost accountingsystem, and there is no reliable informationregarding costs of storm-water drainage, industry, or tourism. Agreement was reached that no later than December 31. 2000, ONAS will have a reliablecost accountingsvstem in place(para. 5.1(g)).

2.20 ONAS carries insurance covering the usual risks of public utility organizations. The policiesinclude workman's compensation and third-partyliability coverage on its operations.

ProjectImplementation and Monitoring

2.21 The Project Implementation Schedule in Annex 11 shows the timing and implementationphases of each component.ONAS and MoA will be responsiblefor implementingthe sewerage and the reuse parts of the project, respectively. They will be assisted by consultants whenever necessary. During project execution, appropriate indicators will be used for ONAS and MoA. Annex 6 includesthe monitoringindicators. Furthermore, assurances were obtainedthat:

(a) the Government and ONAS will report semi-annuallyto the Bank on progress in implementingthe project componentsand on the evolutionof the monitoringindicators (para. 5.1(c));

(b) the Governmentand ONAS shall carry out a midtermreview by December31, 2001 to evaluate project implementation(para. 5.1(i)); and that the Government and ONAS will take any reasonableremedial action, after discussionwith the Bank, that might become necessaryfor: (i) proper execution of the project, (ii) efficientmanagement of both components, or (iii) achievingthe targets set for ONAS and MoA perfornance indicators;

2.22 Within six months followingthe closing date of the loan, ONAS and the MoA will prepare and submitto the Bank a completionreport on the executionand initialoperation of all project components,the project'scosts and benefits,and the realizationof its objectives. - 17-

2.23 Project Supervision. Taking into account the nature of the project, particularly regarding institutionbuilding and technical assistance,tight supervisionwill be required. Supervision missionswill be carried out at least twice a year, preferablyin conjunctionwith the supervisionof the earlier Water and Sewerage Project (Loans 3782/3783-TUN).A detailed supervisionplan is attached in Annex 12.

IIL FINANCIL ANALYSIS

3.1 ONAS receivesrevenues from both direct and indirectconsumer charges. Sewerage tariffs, assessed on the basis of water consumption,and fixed contributionsfor the construction and maintenance of sewers, are charged directly to users and invoiced quarterly. Contributionsfrom municipalitiesfor constructionand maintenanceof storm water drainagesystems are indirect charges, passed on to users through property taxes. At present, such revenuesdo not cover ONAS' operating and depreciationcosts. The shortage is made up by Government contributions. ONAS allocates a portion of these Governmentfunds to its operatingcosts and uses the remainderas equity contributions toward the financingof its investment program. ONAS completes the financingof its investment program with borrowing.

Past and CurrentFinancial Performance of ONAS

3.2 ONAS' incomestatements, cash flow statements,and balancesheets for the years 1982 through 2006 are shown in Annex 8. Up to and including 1994, ONAS was unable to meet its financialcovenants under the previous Bank-financedprojects, especiallythe 13 percent of its annual average of capital expenditures,with its own internal sources (Loan 2255-TUN). Its operating ratio increasedfrom 80 percent in 1985 to 96 percent in 1995. The deteriorationof financialperformance prior to 1991 was due to rapidlyrising operating costs and the deferralof tariff adjustments. However, the tariff increases of 15 percent a year since 1992 have had a positive impact on ONAS' financial situation. Furthermore, 1995 closed with a net surplus of US$2.6 millionand a debt-to-equityratio of 14:86. Throughout the entire period, the debt service coverage ratio always exceeded 1.34. The future financialperformance is expectedto be positive.

3.3 ONAS' cost recovery policy is aimed at preserving its short and long-term financial viabilitywhile ensuring affordableservice for its less affluent household customers; and at creating incentives, through progressive tariffs for industries and other large consumers, to minimize the dischargeof waste water (Annex 5). ONAS' revenuesare expected to continueto cover a substantial part of its operatingexpenses and debt service,as well as a portion of its investmentcosts. In 1995, ONAS' income from tariffs covered about 80 percent of its operating and maintenance costs, comparedto 46 percent in 1989, a significantimprovement.

3.4 Substantialtariff increaseshave led to an average increasein revenues of 17 percent a year since 1992. However, ONAS still relies heavilyon Government subsidiesto finance part of its operations and its entire investment program. Total remittances from the Government (local and central) increasedfrom TD 12.2million in 1982 to TD 61.3 millionin 1993, with an aggregate amount of TD 412.8 millionfor the 1978-1993period. - 18 -

FutureFinancial Performance of ONAS

3.5 Financialprojections and their underlyingassumptions related to balance sheet, income statement, and Government subsidiesappear in Annex 8. Three basic annual tariff increase scenarios have been used to prepare the financialprojections until the year 2006: 8 percent, 10 percent, and 15 percent. Three objectiveshave been pursued in the analysisof the three scenarios:

(a) Cost recovery of operation and maintenance. The break-even point is reached when ONAS can generate sufficientrevenues to fully cover its total operationalcosts and the Governmentceases to contributeto these costs. This point occurs in the year 1999 with a 15 percent yearly increase, in 2001 at 10 percent a year, and at 2004 at 8 percent a year;

(b) Cost recoveryof capital investments. The level of Governnent subsidiesdepends on the annualtariff increases. With increasesof 15 percent a year, the Governmentwould subsidizeinvestments until the year 2001; at 10 percent a year, until 2004; and at 8 percent, until2006; and

(c) Cash equilibrium. This objective aims at measuring cash generated through the differenttariff scenarios. The 8 percent scenarioshows a positivecash situationof TD 1 millionby the year 2006; the 10 percent shows TD 4 millionby that year; the 15 percent shows a cash balance of TD 16 million. The cash balance at the end of 1995 was TD 10 million.

3.6 All three scenarioswould enable ONAS to become financiallyself-sufficient in the long term. The 15 percent annual tariff increasethat has been in effect since 1992 (and would be difficultto sustain over a long period) would be sufficientto cover 100 percent of ONAS' operations and investmentsby the year 2001. The lowest case scenario, 8 percent, would give the same results only by the year 2006, while the 10 percent annual tariff increasewould make ONAS fully self-sufficientby the year 2004.

3.7 In addition to tariff increases, ONAS will have to modify its tariff structure during implementationof the project to address the equity issue and the distortions used by the current progressivetariff system. The Contrat Programme (CP) between the Govemment and ONAS has been prepared for the Ninth DevelopmentPlan (Annex 15). The CP addresses all issues related to tariffs,financial and operationalperformance. The CP would be the basis for Bank conditionalities.

A2reementhas been reachedon the following:

3.8 The CP has been approvedby the Boards of Directors of ONAS. Approvalof the CP by the Governmentand executionof it on behalf of both the Govemmentand ONAS is a conditionof effectiveness. Three conditionalitiesare specificallystated in the Loan Agreementwith ONAS (para. 5.1):

(a) ONAS will increaseits seweragetariffs by at least 8 percent a year (4.5 percent in real terms) for each fiscal year until project funds are fully disbursed. Tariffs conceming 1996 have been increasedby 15 percent (10.5 percent in real terms), effectiveApril 1, - 19 -

1996, in line with Government's commitmentfor the Eighth DevelopmentPlan (1992- 96) (para. 5.1(d));

(b) The progressiveblock tariff systemwill be restructured to eliminateregressiveness of the tariff for the first block and to limit the benefits of cross subsidy to the poor identified in the first tranches of consumers, by no later than December 31, 2002 (para. 5.1(e)); and

(c) The financial covenants of the ongoing Water Supply and Sewerage project (Loan 3782-TUN) are reinstated; i.e., ONAS will have at least 1.3 times its projected debt service in each fiscal year on all of its debt, including debt to be incurred, and its internalcash generationto cover capital expendituresduring each fiscal year will not be less than 30 percent of the investment required (para. 5.1(f)). Furthermore, before November 30 of each fiscal year, ONAS will, on the basis of forecasts satisfactoryto the Bank, review whether it will meet such requirements,and if so, it will take all necessarymeasures to meet such requirements.

IV. SOCIOECONOMIC ANALYSIS AND ENVIRONMENTAL IMPACT

ECONOMIC ANALYSIS

4.1 Sanitation,until recently, was considereda public service. The State, mainlythrough ONAS, providedfor the serviceby covering the majorityof capitalexpenses. Expansionof the service in the future will have to consider more closely the consumers' willingnessand ability to pay for increasingcosts, as well as the opportunitycosts of the resources committedto the service. To this end, as part of project preparation,ONAS and a team of consultantscarried out an economicstudy to identify scenarios for rationalizingthe activity, optimizingsupply to demand, and integrating the efficiencyissue and the equity concern into program planning.

Demand Analysis

4.2 During the 1982-94 period, the number of ONAS customers increasedat an average rate of 9.8 percent a year, while consumptiongrew by 4.7 percent a year. Total revenues from sewerage chargesincreased during this period by 17 percent a year in nominalterms (10 percent a year in real terms). This substantialincrease in total revenues is the outcome of the following factors: (a) extension of the network to new customers,(b) increasein the connectionrate, (c) the progressive block structure and the important average tariff increases per volume over the last few years, and (d) the increase in consumptionper customer for the highest consumptioncategory. These factors were offset partiallyby: (a) a decrease in average consumptionper connection, in particular for the industrial (-13 percent a year) and tourism sectors (-10 percent a year); (b) the concentration of customersin the lowest consumptionbracket; and (c) the loss of customersin the highest consumption bracket.

4.3 Projectionsfor demand for aggregate and individualuses through 2029 are given in Annex 9. The elasticityof demand has been calculatedon the basis of an econometric model using quarterly statistics for the 1983/I through 1993/IV period. The main results are that: (a) globally, ONAS customers are sensitive to price adjustments (elasticity is set at 0.5 for all sewerage uses - 20 - combined),which explains the reduction in average consumptionper customer; (b) the reaction of customers consumingmore than 70 m3 per trimester to the marginaltariff is particularlyimportant, as this group could largely reduce its consumptionor disconnect;(c) customers are more sensitive to average tariffs than to marginalones; and (d) industrialusers, in particular, are very sensitiveto price adjustments,as observed in para. 4.2. The policy of cross-subsidization(see para. 4.10) among categoriesand consumptionbrackets could reach a limitif tariff adjustmentsinduce large consumersto decreasetheir consumption.

Long-RunAvera2e IncrementalCosts

4.4 To evaluate the extent to which current tariff policy provides incentives to invest optimallyin additionalsystem capacity and use current and future capacitymore efficiently,or to define the level of services for which consumers are willingto pay, the long-run average incrementalcosts (LRAIC) for the 1983-2000period were estimated (see Annex 9). In the case of ONAS, efficiency shouldbe interpretedto mean that the additionalcosts that ONAS bears in order to provide additional sewerageservices should be equal to the utilityaccruing to the consumerfor that additionalservice, the additionalservice being measured in additionalunits of waste water collected.

4.5 Estimateswere carried out for collection,transport, and treatment services as a whole and for each service separately. Investmentprojections were based on the following assumptions: (a) the connectionrate by the year 2011 will reach 95 percent of the populationin SONEDE'sservice area; (b) the estimated average demand growth rate for the ONAS populationwill be 5 percent a year for the 1994-2011period, decreasingto 3 percent a year between 2011-2021 and then to 2 percent a year during the 2021-29 period3; (c) an additional treatment capacity of 500,000 m3/day will be installed,resulting in a treatment rate of 75 percent and a capacity utilizationrate of 89 percent. The main results of the retrospective and prospectiveanalyses indicate that past and future LRAICs are higher than current tariffs, with a 1995 average tariff equivalentto approximately30 percent of the LRAIC. The tourism sector and the most polluting industries pay tariffs that cover, respectively, 62 percentand 50 percent of LRAICs (see tables 4.1, 4.2, 4.3, and 4.4 in Annex 9).

4.6 The observed gap between average tariffs and LRAIC would suggest that decisionmakershave incentivesto install excess capacity as compared to a system that encourages efficientallocation. It also suggeststhat the targeted objectivesof the investmentprogram do not take fully into account the consumers'willingness to pay and their sensitivityto price adjustments,which would be needed to sustainsuch an investmentprogram.

4.7 The unused capacityobserved in some of the country'sWWTPs, excludingthose in the Tunis area, indicatesthat ONAS could make better use of its existingproductive capacity. A better cost recovery of LRAIC could be obtained, even under the current tariff structure, through higher connection rates, which would optimnizethe use of existing infrastructure. This will require a coordinated effort to: (a) motivate polluting industriesto pretreat and to hook up to the sewerage system,and (b) reduce the impact of seasonal demand (tourism) on estimated capacity needs. Waste water treatment accounts for 30 percent of total LRAIC and providestreated water, which still has a

3/ A 5 percentaverage rate of growthof consumptionreflects a 3 percentincrease in the demand for potable water (consistentwith projectionsdone for SONEDE)plus a 2 percentincrease that capturesan improved connectionrate for ONAS. - 21 - very limitedmarket but very high potential in a country with scarce water resources. Until now, no treatment cost has been recoveredfrom the use of 20 percentof treated water for irrigation.

4.8 The proposed tariff increases will enable ONAS to cover around 50 percent of the estimatedLRAIC by the year 2003. Cost recovery will be higher, however, if treated water can be reclaimedmore extensivelyand priced to cover treatmentcosts.

TariffStructure and Subsidies

4.9 The tariff policy for ONAS was designedand evolved with the objectiveof recovering operatingcosts and adapting tariffs to the purchasingpower of its customers. This policy has enabled ONAS to cover, since 1995, about 80 percent of its operating costs, excludingstonn water-related expenses. However, ONAS does not yet recover the investmentcosts or the opportunitycost of the capitalthat the Governmenthas transferredto the utility.

4.10 ONAS, like SONEDE,has been usinga progressiveblock tariff structure, with the first block (0-20 m3 per quarter) designed for the poorest group. In the 1989-1994 period, the tariff adjustmentsfor the first two blocks were minor, while adjustmentsfor the last two blocks have been substantial,and have doubled for the tourism sector. The comparisonbetween the average tariff paid by householdcustomers who are in the first block and those who consume more than the first block revealsthat these tariffs are not as progressiveas the marginaltariffs. Furthermore, efforts to create a progressivetariff scheme are hindered by the regressivenature of the fixed charge. The variabletariff of 6 millimesper cubic meter for the first block becomes 136 mnilimesconsidering the fixed charge, which is double the tariff paid by the second block. For other categories, tariffs increase but at a relativelylow rate: the averagetariff for the fourth block is not even double that for the first block.

4.11 In 1993 the total subsidy transferred from the Government to consumers, through ONAS, amounted to TD 9 million, excludingthe opportunity cost of capital. If we consider the opportunitycost of capital, however,the subsidyamounts to TD 31 million4 (see Table 4.5, Annex 9). These subsidiesare regressivein relation to differentcategories of users. In 1993, for example, the subsidy was equivalentto TD 6.4 per connectionfor consumersbelonging to the first block and TD 190 per connectionfor consumersbelonging to the fourth block. Industry (with the exception of low- polluting industry)and the tourism sector are not subsidized,if we exclude the opportunitycost of capital. However, the measure of the subsidyin relationto the average cost hides the fact that costs associatedwith the transport and treatment of industrialand tourism waste water are generallyhigher than for domestic consumers. The current accounting system does not allow a direct link to be established between the cost of investment and the cost of service provided per category of consumption.

4/ The total subsidyis calculatedcomparing the averagecost of the activity to the average tariff paid by consumers. The opportunitycost of capital is estimatedat 8 percentwhich is equal to 4 percentaverage borrowing costs for ONAS during 1983-93plus 4 percent exchange losses due to depreciationof the dinar. - 22 -

EconomicAnalysis of the Greater Tunis Proiect

4.12 Least-costsolution. The feasibilitystudies carried out under project preparation, and the environmentalassessment done for each physical component, have jointly identified the most techno-economicallyfeasible altemative that satisfiesquality discharge standards. Tunisian standards are basically the same for effluents discharged into the sea, fresh water, and the municipal network, as well as effluents intended to be reused in agriculture5 . The comparison among technological alternatives was not therefore influenced by the final use of the effluent. Between the two sites identified as possible areas for the construction of the Tunis West WWTP, the first one on the shore of Lake Sedjoumi was eventually disregarded for numerous reasons that were technical and environmental: (a) complexity of the foundations on the sandy land surrounding the lake; (b) environmental vulnerability of the lake (as suggested in the EIA); and (c) proximity to the urbanized area, with a projected inclusion of the site in the urban area in ten years' time. The economic comparison among the feasible alternatives was then carried out for the second site at El Attar. Such a site was offering perspectives for treated water reuse in agriculture. The opportunityfor recyclingfor agriculturaluse, and the environmentalvulnerability of potential WWTP sites, stronglyinfluenced the selectionof the site for the TunisWest WWTP. The altemativesshowed no major differencesin investmentcost.

4.13 Project benefits. Major benefits will derive from the project, including:(a) reduced health hazards and improved well-being of the currently unconnected population through better sewerage services and treatment of waste water; (b) provision of capacity to meet future demand, (c) improved environmentalconditions through expansion of waste water treatment capacity and rehabilitationof existinginfrastructure; and (d) implementationof a waste water recyclingprogram in agriculture.

4.14 The project will providea total of 30,000 new connectionsand will financethe primary and secondarymains to accompanythe urban developmentof Tunis,where the populationwill increase from 1.7 millionin 1994 to 2.5 millionby 2011. To meet the need for additional treatment capacity (see para. 4.2 above), a new WWTP in TunisWest will be builtand the WWTP in Sud Melianewill be expanded, yielding additional waste water treatment capacity of 150,000m 3/d. Part of the treated water is expected to irrigate approximately6,000 ha of contiguous land. However, the first tranche of irrigatedperimeter will be limitedto 1,000ha.

4.15 Economic rate of return (ERR). The benefitsof the project can be measured by the satisfactionthat consumersderive from the additionalsanitation services, which they would not derive in the absence of the project. The insatisfactionis measured by their willingnessto pay (WTP). This concept refers to the price that consumersare willingto pay for one additionalcubic meter of water collectedand treated in differentsituations, with and without the project. In theory, given the demand curve of a consumer, consumer satisfactioncan be measured as the surface under the curve. The net benefitfor the consumerwill be such a value, discountedby the costs bome by society to produce the servicedemanded -- in this case, the quantityof water collectedand treated.

5! Effluent standards for discharge into the sea, fresh water, and the municipal network are in fact slightly more stringent (NT 106.002, 1989). - 23 -

4.16 In practice, the demandfor sanitationis nonseparablefrom that for potablewater. The satisfactionfrom the provisionof sanitation,therefore, had to be estimated indirectly,as the difference between the satisfactiononly from water supply services and from joint water supply and sanitation services (see Annex 9). It is very difficult, because of limited data, to isolate the impact of the introductionof the sanitationservice on the consumer demand curve. Three separate scenarios were thereforegenerated: (a) the consumptionof water does not change (hyp. 1); (b) consumptionincreases by 3 percent a year (hyp. 2); and (c) consumptiondecreases by 3 percent a year (hyp. 3). The WTP was then calculatedfor each category of consumer,by calendaryear, under these scenarios,using the demand curves (for both water and water-sanitation)estimated with the same methodologyas in para. 4.5.

4.17 The total costs of the Greater Tunis project have been estimated in constant 1996 prices, includingphysical contingenciesbut excludingtaxes and custom duties. The construction period is expected to be 1998-2005,and the effects of the project are expected to begin one year after the start of construction. The direct foreign component is estimated at 60 percent of total project costs, and will be converted into dinars at the official exchange rate. The investment costs were separated into imported goods, labor, and nontradables, and were converted into economic prices through conversionfactors respectivelyvalued at 1.2, 0.8, and 0.9. Since Tunisia'strade policy was recently liberalizedthrough the easing of quantitativerestrictions and the lowering of custom duties, the gap between border prices and domesticprices for imported goods consistsmainly of the customs duty, averagingapproximately 20 percent. Regarding labor costs, the labor force employedby ONAS belongs to the structured sector, which is subject to labor legislationwith respect to the minimum wage. Althoughproductivity has strengthenedsubstantially in recent years, the minimumwage is still higher than the shadow wage for unskilledlabor. Operating costs were transformed into economic costs by averagingthe conversionfactors for investments.

4.18 The net benefit of the projectwas then obtainedby estimatingthe benefitper customer as the differencebetween the satisfactionprovided by having access only to water and to water and sanitation. The benefit per cubic meter was calculated as total satisfactiondivided by the average consumptionper customer per category. The total benefit of the project was then obtained by multiplyingthe benefit per cubic meter for the additionalquantity of water collected and treated as a result of the project. With these assumptions,the ERR was estimated at 28 percent, 24 percent, or 33 percent, accordingto the scenariobeing considered. Under any of these three scenarios,the project is fullyjustified.

4.19 Positive environmentalexternalities, which may influence consumer satisfaction, are partiallycaught in the consumer surplus estimations. Other important benefits, such as those accruing from the treated water recyclingprogram in agriculture,have been only partiallyquantified (Annex 9).

4.20 Sensitivitytests were carried out on a set of pertinentvariables, as shown in Table 4.9 in Annex 9. The tests indicate that the ERR is more sensitiveto variationsin consumer income and consumption. These two variablesinfluence the consumerutility and willingnessto pay. On the basis of these results, the ERR will rise as real income rises and as more smallconsumers are connected to the network, since their utility will be higher. Even in the case in which pessimisticscenarios were considered, the ERR remained satisfactory. The ERR is not very sensitive to changes of up to 20 percent in the shadow exchangerate or to variationsof the same magnitudein the other conversion factors. - 24 -

4.21 Sousse investment program - economic justification. During the Ninth Plan, ONAS intends to proceed more aggressivelywith the privatization program by calling the private sector to participate in the constructionand managementof the Sousse Nord's new WWTP. The World Bank is ready to give its full assistanceto make such a program successful. For this reason, an economic evaluation of the prospective Sousse investment was carried out. The ERR results, as describedmore in detail in Annex 9, tables 4.10-4.11, indicatethat the investmentis filly justified.

4.22 An assessmentof the irrigationscheme componenthas shown, as reported in Annex9, that the investmentcosts, includingtreatment, of reusingtreated water in agricultureare lower than the economiccost of producingand bringingfresh water to the farm gate. Thisjustifies the introductionof the pilot componentin the project. The evaluationof the economic viabilityof the irrigationscheme depends on the differentcultivations developed in the perimeter and their internationalprices. In the case of cereals, a low value-added culture, the ERR ranges around 6 to 8 percent. The feasibility study for the reuse component, which is a condition of loan disbursement for that component, should include farm budget analysis to reduce the risk that farmers will not want to use treated waste water. Appropriate institutional arrangements for setting up a costrecovery scheme of the reuse component should be explored.

PovertyAlleviation and Affordability

4.23 According to the 1990 Household Consumption Survey carried out by Tunisia's National Institute of Statistics, 7 percent of the populationhad annual per capita expendituresbelow the poverty line (defined as TD 196 per person), and another 7 percent had per annual capita expenditures only 25 percent above the poverty line. Poverty in Tunisia is essentially a rural phenomenon;approximately two thirds of the Tunisianpoor live in rural areas. In urban areas poverty seems to be associated mainlywith the lack of human capital qualifications;the provision of basic infrastructurefor the whole population,however, does not seem to exclude the poor, particularlyin Tunis. The extensionof basic servicesto low-incomeareas, as in the case of the proposed project,will affect the well-beingof the urban poor6, although they might represent a small portion of the new connections. The project will most likelyprovide a large proportion of service to people livingjust abovethe poverty line.

4.24 As discussedin para 4.10, the first block (0-20 m3 per quarter) was designed for the poor. More than 40 percent of ONAS customers are in that block, which suggests that targeting the poor through the block structure is a difficulttask. Moreover, the current tariff structure is regressive compared with the first block, which pays a total tariff (includingvariable and fixed components) double that of the second block. Regressivetariffs shouldbe eliminatedthrough future adjustmentsto reduce the impact on the budget share of water sanitationexpenditures for the lowest consumption expendituregroup, estimatedto be 3.5 percent in 1990.

ENVIRONMENTAL ASSESSMENT

4.25 The project has been reviewed, screened, and proposed for Category A, consistent with the provisionsof OperationalDirective 4.01, AnnexE, "EnvironmentalAssessment." Preparation for this project was comprehensive,encompassing a Sector EnvironmentalAssessment (SEA) and

6/ There are an estimated60,000 urban poor in the biggestTunisian towns. Greater Tunis may accountfor one third of the urban poor. - 25 -

Project SpecificAssessment (PSA) for each of the WWTPs proposed for the Greater Tunis area. These ONAS assessmentswere based on studies,field work, and public consultationwith the different concerned populationgroups and with the many institutionsinvolved. In addition, ONAS is required by law to undertake an EnvironmentalImpact Assessment in conformitywith the requirements of ANPE.

4.26 These assessmentsshowed that numerous positiveimpacts will arise from this project, ranging from those related to public health to those directly affectingthe economy. Such effects are generallyassociated with the provisionof sewagetreatment facilitiesto a sizable part of a capital city, with coverage of more than a millioninhabitants equivalent; an increase of 30,000 connectionsto the sewer network; and protection of vulnerable receiving waters from polluting discharges. Other substantialbenefits concem the agriculturesector, sincethe proposed project will include the reuse of treated waste water for irrigation and other purposes related to the protection and preservation of groundwaterresources.

4.27 Few negative impactsassociated with the project have been studied. These are related to the constructionand operationof the treatment facilitiesand rehabilitationof the sewerage system. The environmentalanalysis is presented in detail in Annex 10, along with a plan to mitigate the identified negative impacts. These mitigation measures will be made part of the environmental strengtheningand educationalprogram to be developedwithin the scope of this project. The project willnot cause any resettlementdue to constructionof proposed facilities.

4.28 Public Consultation. In view of the assigned category and the importance of this project in the Greater Tunis area at the economic, social, and environmentallevels, the consultation process took place at an early stage of project preparation. It encompassed several institutions and population groups concerned with the project, including various NGOs, farmer groups and associations,governmental and professionalinstitutions. In addition, a one day seminarwas held under the auspices of the Minister of Environment.The seminar attracted a large audience to whom the project in its differentaspects and components,including the reuse of treated water, was presented and discussed. Valuable comments and recommendationswere received. The latter, examined and supportedby the Bank mission,were incorporated during appraisal into the final project. The public consultationresults are presentedin Annex 10.

V. AGREEMENTSREACHED AND RECOMMENDATIONS

5.1 During negotiations,agreements were reachedwith the Governmentand ONAS on the following:

(a) Procurementof goods and works shall be carried out in accordance with the Bank's guidelinesand procedures, and the employmentof consultants shall be in accordance with the Bank'sguidelines (paras. 2.12, 2.13, and 2.14);

(b) The auditors' annual reports, along with their opinion on the SOEs used for certain disbursementsunder the Bank loans, and on the Special Account (for the agricultural component), will be sent by ONAS and the MoA to the Bank within seven and six months,respectively, after the end of each fiscal year (para. 2.18); - 26 -

(c) The Governmentand ONAS will report on progress in project implementation,on the basisof an agreed-upon set of performanceindicators. These reports wi1lbe subrnitted semi-annuallyto the Bank duringproject execution(para. 2.2 1(a));

(d) ONAS shall increase sewer tariffs by 8 percent (4.5 percent in real terms) for each fiscalyear until project funds are fullydisbursed (para. 3.8(a));

(e) ONAS shall restructurethe progressiveblock tariff systemto eliminateregressiveness for the first block by December31, 2002 (para. 3.8(b));

(f) (i) ONAS' projected internal cash generation for each fiscal year will be at least 1.3 times its projecteddebt serviceneeds in each fiscalyear on all of its debt, and (ii) its intemalcash generation during each fiscal year will not be less than 30 percent of its capitalinvestment needs (para. 3.8(c));

(g) ONAS shall, by December 31, 2000, implement the cost accounting system (para. 2.19);

(h) The Governmentand ONAS shall carry out a mid-termreview by December 31, 2001 (para. 2.21(c));

(i) The Governmentwill prepare for the agriculturalcomponent studies satisfactoryto the Bank; including:(i) a feasibilitystudy and an environmentalimpact assessmentno later than December31, 1998;and (ii) final designs no later than December 31, 1999 (para. 2.6); and

(j) Adequatebasin or reservoir safetymeasures will be in place before the commencement of the works under subparas.(j) and (k) of para. 2.6, includingthe appointmentof an independentpanel of experts.

5.2 Condition of loan effectiveness. Approval of the CP by the Government and executionof the CP by both the Governmentand ONAS (para. 3.8(a)).

Washington,D.C. May6, 1997 -27-

ANNEX1 Page 1 of 4

REPUBLICOF TUNISIA

GREATER TUNIS SEVVERAGEAND REUSE PROJECT

STAFFAPPRAISAL REPORT

ONAS Organization

Background

1. ONAS, the national sewerageauthority, was establishedin 1974 to managethe seweragesector; its responsibilities,include wastewater collection, treatment, and disposalin urban agglomerationsand industrialand touristiczones. In 1993,its mandatewas consolidatedunder the newlycreated Ministry of Environmentand Land Planning(1991) with increasedresponsibility for sewerageoperations. ONAS has the statusof an industrialand commercialpublic company with financialautonomy. It has been the beneficiaryof Bank Group lending in the sector, channeled throughthe Government(Loans 1088-, 1675-, 2255-, and 3782-TUN).

Organiation and Management

2. The current organizationalstructure of ONAS is shown in page 4 of this annex. The 15-memberBoard of Directors, presidedover by ONAS' GeneralManager, supervises the company'sactivities. Nine Board membersare public officialsrepresenting Ministries and other agenciesinvolved in the water and seweragesector. The remainingsix Board membersrepresent municipalitiesand ONAScustomers. The Government'soverall controlover ONAS, aside from the appointmentof its Board members, comprisesapproval of ONAS's investmentprograms, procurementexceeding DT 1 mnillion,borrowing, and tariff levels.

3. Daily operationsof ONAS are handledby its five regionaldepartments (Greater Tunis, North East, North West, Center, and South) and four centraldepartments (development, coordinationand organization,finance, and administration). Six other service units, including internalaudit and budgetcontrol, report directly to the GeneralManager.

4. Underprevious Bank loans, ONASused consultantsto coordinatethe planningand designof its work program,and to developand set up a projectplanning and control system. It now has in place a good financial accountingsystem and effectivemanagerial and financial reportingprocedures. However, it has no reliablecost accountingsystem that gives a detailed accountof distinctactivities such as storm drainage,industry, and tourism. ONAS is presently workingwith consultantsto developsuch a cost accountingscheme, which will be in place by 1997. -28-

ANNEX1 Page2 of 4

Staff and Training

5. At the end of 1994, ONAS had 2,872 permanent staff, equivalentto 5.08 employeesper thousandhouse connections. This ratio is acceptablefor ONAS' decentralizedtype of operations,but staffproductivity should be increasedand the numberof employeesper thousand connectionsshould be reduced. ONAS' salarystructure and benefitsare adequateto recruit and retainqualified personnel.

6. A comprehensivetraining strategy has been developedby the Staff Training Divisionof ONAS (Conmmissionde la formationet du perfectionnementprofessionnel) with the assistanceof the Republicof Germany(GTZ) and EU trainingexperts. So far, twelve hundred staff have participated in short-term training seminars covering different aspect of ONAS operations,including nineteen engineerswho receivedgrants for overseas training in sanitary engineeringand other fields relatedto sewerageoperations. Plant operatorshave also received trainingby the equipmentmanufacturers responsible for operatingof plants the first year after construction.ONAS has also trainedthe staffin budgetplanning and cost accounting.

MiIIingand Collection

7. Seweragecharges are based on water consumption. SONEDEis responsiblefor billing and collection,and is generallyefficient, although in the past, there were delays in transferringthe paymentsto ONAS. Recently,this situationhas greatlyimproved. Now SONEDE generallytransfers the paymentswithin one month.

8. ONAS operatesa commercialaccounting system based on the TunisianGeneral AccountingPlan. All transactionsare recordedproperly, allowing identification of expendituresby majorcost categories. Generalaccounts, inventory control, and payroll are computerizedand up- to-date. The main problemis relatedto cost accounting,recording followup,and inventoryof fixed assets. ONAS is also developing,with outsideassistance, a proper plant register for the entire system,which will enableONAS to efficientlymanage its assetsand operationalcosts.

9. ONAS operationsare monitored by a Technical Controller and a Financial Controller,appointed by the Government,who are advisorymembers of the Boardof Directors. In addition, the agency'sfinancial statements are auditedeach year by independentprivate auditors acceptableto the World Bank, in keepingwith the audit covenant(Water Supply and Sewerage Project,Loan 3782-TUN). The covenantrequires that the certifiedaudit reportbe furnishedto the Bank as soon as available,but not later than nine monthsafter the end of each fiscalyear. This covenantwill be restatedin the projectagreement for the proposedloan.

10. ONAS carries adequateinsurance with differentTunisian insurance companies to cover the risks commonlyfaced by a public utility. The policies relate to motor vehicles operations,fire damage to buildings,and third party liability. ONASis self-insuredfor workmen's -29-

ANNEX 1 Page 3 of 4 compensation, maintaining a special insurance fund for this purpose. All supply and civil works contracts for the project will be insured by private companies against loss and damage in shipment, accidents, and fire and property damage.

11. The main operational achievernentsof ONAS as of December 31, 1995, were:

- Number of commnunestaken in the ONAS system # 100 - Connectionrate for communes in the ONAS system: 76.8 percent - Connection rate, all communes: 60% - Population served: 4.3 million - Number of connections ONAS-SONEDE: 600,000 - Infrastructure in place: - Network: 6,700 km - Pumping stations: 274 - WWTP: 48 - Volume of wastewater collected: 135 million cubic meters - Volume of wastewater treated: 117 million cubic meters. C:0 F CE -A T4I I C Fzt A. lvI NI E I.'OFFICE NATIONALDE L'ASSAINISSEUENT PRESIDENT DIRECI'EUR GENERA)

(DIRECTEUR GENERAL ~ADJOINT)

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Finncir eLtComptab Adminiatdet wridique (spControle de Cesioe Developpeentm

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o* &m.. 4 I. I * I - I e II.u F. _ I _..... II.

WAlSSt;|tS S @ t--iSW L W S A W W~~~~~~~~~~~~~~~~~,' 01 -31- ANNEX 2 Page 1 of5

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

DetailedProiect Description

Introduction

1. Tunis, the capital of the Republic of Tunisia, is a rapidly growing city; its population grew from 186,000 in 1926 to 685,000 in 1966 to 1,778,000 in 1996. Growth is expected to continue at 2.9 percent per year until the year 2000 and at 2.2 percent per year thereafter. Consequently, the population is expected to reach 2 million by the year 2000 and 2.54 million in the year 2011. The city has quite an effective infrastructure and provides all modem services, including water supply, a telephone network, and electricity to most of its inhabitants. Sewerage is slightly behind, however; only about 60 percent of the urban population is connected to the sewerage system. The Government created the National Sewerage Authority, ONAS, in 1974, with a mandate to provide adequate sewer services to the growing population. Over the last 20 years, ONAS has done an excellent job in fulfilling this mandate, but because of its relatively capital intensive investments, remains somewhat behind in service level compared with the water supply authority, SONEDE. The Government is planning important investments in this subsector, with the objective of attaining a service level of 95 percent by the year 2011. The proposed project is part of this effort.

Design Criteria

2. The project is part of the sewerage master plan for Greater Tunis for the year 2011, which in tum is based on the urban master plan for the same year. The target population of 2.54 million is distributed evenly throughout the service area, in conformity with the urban development plan. Water consumption is estimated to increase at a rate of 0.5 percent a year based on SONEDE statistics. Consumption is categorized by type of housing. Tourist areas are estimated to consume 680 liters per occupied bed. The sewage flow is rated to be 80 percent of the consumed volume of potable water. The biological oxygen demand (BOD) load is estimated to increase from 37 mg BOD per capita per day in 1996 to 42 mg BOD per day in 2010. Industrial flow is estimated to remain unchanged, at 20 m3 per ha per day per existing or newly developed industrial area, with a BOD load of 400 mg per liter.

PROPOSEDPROJECT ELEMENTS FOR ONAS

3. To minimize pumping costs and limit the time raw sewage remains in the sewers, sewers normally follow the natural drainage pattem of each area. For this reason, Greater Tunis -32- ANNEX 2 Page 2 of 5 is subdivided into four drainage basins: the Central Basin. the most important one, covering central Tunis; the Southern Basin, covering the southern part of Tunis, comprising the industrial area of Ben Arous and the suburbs of Rades, Hammam-Iif, and Mornag; the Northern Basin covering the northern suburbs Ariana, Choutrana, and Soukra, and the coastal zone from La Goulette to and Gammarth; and the Western Basin, covering the expansion area of Tunis towards the west, including and Bardo (see attached Maps IBRD 27729 and IBRD 27730). The sewerage infrastructure proposed to be constructed by ONAS in the framework of this project is described per sub-basin in the following paragraphs. Some miscellaneous project elements are described in para. 13 and the Agricultural elements are described in para. 14. More information is available in the feasibility study documents, available in the World Bank's project file.

The Central Basin

4. This basin, covering the old city, has a relatively well-functioning sewer system. Most of the system is of the separate type, except in the Medina, where combined sewers evacuate sewage as well as storm water. The sewer system is well-maintained, except for the portion in Medina, which is in a bad state of repair and needs to be rehabilitated. This project includes replacement of about 8,125 m of sewers with sewers of a larger diameter, and the construction of 1,650 m of culverts.

5. The sewage from this basin is treated in two sewage treatment plants (STEPs) at Cherguia and Choutrana. The latter one is now being expanded under EIB financing. The combined capacity of the two STEPs is sufficient to cover demand until the year 2010. The project will divert part of the Westem Basin's sewage, which is now treated in these STEPs, to the new Tunis West STEP, thus reducing their present load.

The Southem Basin

6. This basin covers the southem part of Tunis, comprising the industrial areas of Ben Arous and Megrine and the suburbs of Rades, Hammam-Lif, and Momag. The works for this basin will cover normal projected expansion, the suppression of industrial discharges in southem Tunis Lake, and the connection of the villages of Momag and Rades to the Tunis sewerage system. The projected work includes construction of 9,500 m of primary sewers with diameters of 250 mm to 1200 mm; 4,500 m of culverts with dimensions varying from 2.5x0.8 m to 4xI.4 m; and one pumping station with a capacity of 2 m3 /s against a head of 4 meters. Two storm water basins, with capacities of 30,000m3 and 35,000 m3 , will be constructed under another project, for which financing is still being sought.

7. The treatment capacity for this basin needs to be increased from the present 15,000 kg BOD/day to 30,000 kg BOD/day, or expressed differently, from 300,000 to 675,000 population equivalent. The present STEP of Sud-Meliane is of the extended aeration -33- ANNEX 2 Page 3 of 5 type, with carousel aerators. The original design foresaw expansion using two identical units. The feasibility study for the proposed project confirmed this option as the most economic solution.In addition to this, the treatmentplant needs some major rehabilitation.

The Northern Basin

8. This basin covers the northern suburbs of Ariana, Choutrana, and Soukra, and the coastal zone from La Goulette to La Marsa and Gammarth. The proposed works for this basin cover normal expansion to meet the demand of the growing population. In addition, many old sewers in the La Goulette - La Marsa area need to be rehabilitated. The sewers are of the vitrified clay type with cemented joints, and are often situated below the groundwater table. These joints are seldom watertight, and the groundwater, which is salty in this area, infiltrates in the sewers. This results in increased salinity of the raw sewage and hence of the effluent of the sewage treatment plant, rendering it less usable for irrigation. The proposed works for this basin amount to the construction of 32,550 m of main sewers and the rehabilitationof 35,000 m of secondary sewers.

9. The sewage of this basin is treated in the "Cotiere Nord" treatment plant, which is of the aerated lagoon type and has sufficient capacity for the foreseeable future. The effluent is transported through an open canal along the shore of Ariana Lake to the Choutrana treatment plant, where it is mixed with the effluent of that plant and used for irrigation. This canal forms a hydraulicbarrier to the normal drainage pattem of the Soukra plain, resulting in an elevation of the groundwater table and inundation of low areas and basements. To solve this problem, the open canal will be replaced by a closed conduit of about 4 km, which will have no negative influence on the groundwater flow.

The Western Basin

10. This basin covers the expansion area of Tunis, south of the road to and west of lake Sedjoumi, including Bardo, Manouba and . Most of the works included in the project are for this basin. Part of the basin is already urbanized and connected to the sewer system. The sewage is pumped over the divide into the Central Tunis basin and then treated in the Chergia and Choutrana treatment plants. Because of the long detention time in the sewers and the relatively high temperature in Tunis, the sewage becomes septic, causing odor problems and promoting crown corrosion of the pipes. The sewer system will therefore be restructured, with sewage being diverted to the new treatment plant that will be constructed for this basin. In addition to the restructuring of the present sewer system, new sewers will be constructed for new areas where future urbanization is planned to take place. The works proposed for the Western Basin comprise the construction of 52.5 km of primary sewers with diameters of 400 mm to 1200 mm, and the construction of 230 km of secondary sewers with diameters of 250 mm to 350 mm. The sewage flow will be directed to a low point of the basin on the shore of Lake Sedjoumi. ANNEX 2 Page 4 of 5

11. A new waste water treatment plant, not included in the World Bank project, will be constructed as a BOT operation, during the same construction period of 1998-2004. Two sites were considered for the construction of the new sewage treatment plant, the first one at the lowest point of the basin, on the shore of Lake Sedjoumi, and the second one 7.5 km to the west of this site, at Attar, just after the divide with Oued Chefrou and Oued Meliane basin. The second site was given preference, since the first one will be in the center of the urbanized area within ten years. Furthermore, the second site brings the treatment plant nearer to the plain of Momagia, where effluent from the treatment plant will be used for irrigation. The sewage will be treated in two stages - a preliminary treatment consisting of screening and grease and grit removal at the site on Lake Sedjoumi, to make the sewage suitable to be pumped to the second site. A pumping station with a final capacity of 2.6 m3/sec will pump the sewage through two steel pressure mains with a diameter of 1400 mm, over a distance of 7.5 km and against a head of 110 m (95 m static), to the treatment plant at Attar.

12. The Attar treatment plant will have a capacity of 34,000 kg BOD/day (or 850,000 population equivalent) and use an activated sludge process after primary sedimentation. Gas from the digested sludge will be recovered rendering the treatment plant self-sufficient in its energy requirements. The sludge, after treatment and drying, will be made available as a soil conditioner for agriculture. The treated effluent, after maturation, will be conveyed through a pumping station and a 15 km pressure main to Sidi Fraj in the nearby plain of Momagia, to be used for restricted irrigation (fruit trees, fodder and cereals). During periods in which no irrigation water is needed, the effluent will be discharged in a tributary of the Oued Meliane.

13. In addition to the works described above, the project will include several other elements:

(a) the construction of secondary sewers in the four basins with a total length of 230 km. Tertiary sewers are normally included in Tunisia's urban development projects and financed by the urban developer, (b) the acquisition of miscellaneous sewer maintenance and management equipment, and (c) consultant services for miscellaneous studies and works supervision, the updating of the sewerage master plans for several cities, and the preparation of the bidding documents and provision of legal and financial services related to the BOT for the Tunis West WWTP. -35- ANNEX 2 Page5 of 5

PROPOSED PROJECT COMPONENTS FOR THE MINISTRY OF AGRICULTURE

14. In order to efficiently implement the reuse aspects of the project, the Ministry of Agriculture has agreed to participate in the project and implement the following project components:

(a) the construction of a multi-seasonal storage basin of about 1 to 2 million m3 volume in the Oued El Attar valley, in order to make treated sewage available to local farmers for selected crops. The detention time of several months in this basin will improve the water quality and have a beneficial impact on the groundwater level, availability and quality; and avoid discharge of sewage (albeit treated) in the oued Medjerda;

(b) the equipment of 1000 ha in the El Attar area with an overhead irrigation system, to be used for irrigation with treated sewage from the El Attar WWTP. The equipment will include a pumping station, 3 overhead reservoirs, access roads, windbreaks and water supply and irrigation systems. These 1000 ha are part of the 6000 ha available, the remaining 5000 ha will be equipped at a later stage when more treated waste water becomes available; and

(c) the realization of a pilot project to experiment with the use of treated sewage, after tertiary treatment, for aquifer recharge. A recently constructed sewage treatment plant in the Cap Bon area, near Soliman, seems the most appropriate site. The expected benefits include the formation of a hydraulic barrier against sea water intrusion, and the availability of ground water for non-restricted irrigation. -36- ANNEX 3 Page 1 of 10 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRArSAL REPORT

Cost Estimates (in US doUars)

Local Foreign Total Taxes Local Foreign Total Taxes Nr. Description - USS mifi and Ou'es OTrmllion anda Duties I GREATER TUNIS SEWERAGE I Westem Tunis 1.1 RestructeringWestem Tunis ewr System 1.1.1 Excavationand pipelsying 3.560 3.560 7.120 1.034 3.801 3e801 7.601 t.1O4 1.1.2 Pip, supply 2.815 4.222 7.M37 3.005 4.508 7.513 1.2 Pumping Stations 1.Zt Civil Works 0.546 0.546 1.092 0.159 0.5Q3 0.53 7.186 0.189 1.2.2 Equipment 0.289 1.154 1.443 0.082 a30s 1.232 1.540 0.087 1.3 SecondarySewrs in WesternTunis 1.3.1 Excavationand Pipolaying 2.061 2.061 4.121 0.53 2.200 2.200 4.400 0.574 1.3.2 Pipe Supply 1.238 1.855 3.091 0.175 1.320 1.980 3.300 0.187 Sub-Total Westam Tunis 10.507 13.398 23.904 1.987 11.217 14.303 25.520 Z 122 SouthlemTunis 1.4 Extensionand RehabSTP Sud-eliane 1.4.1 CMI Works 3.137 3.137 6.275 0.818 3.350 3.350 8.9s 0.874 1.4.2 Equipment Z415 9.661 12.0?6 0.684 2.578 10.314 12.892 Q730 1.5 Sewagecollection System Southen Tunis 1.5.1 Excavationand pipelaying -Z061 2.061 4.121 0.599 Z200 2.200 4.400 Q.39 1.5.2 Pipe suppty 0.618 0.927 1.546 0 60 0.990 1.650 1.6 Pumping Statons 1611 Excavationand pipelaying 0.515 0.515 1.030 0.134 0550 0.550 1.100 01143 1.6.2 Pipe supply 0.289 1.154 1.443 0.082 0308 1.232 1.540 0.087 Sub-TotalSouthem Tunis 9.035 17.455 26.491 2317 9.646 18.635 2.281 2473 Northem Tunis 1.7 Extensionsand RehabNorthem Tunis 1.7.1 Excavationand pipelaying and desludging 2.061 Z2061 4.121 0.599 Z200 2.200 4.400 Q63s 1.7.2 Pipesupply 0.824 1.236 2.060 0.8Bo 1.320 2.199 1.8 RehabilitationSTP TunisNord and tansfor W 1.8.1 Civil Works 0.927 0.927 1.85 0.242 0990 0.990 1.80 0.258 1.8.2 Equipment 0.495 0.742 1.238 0528 0792 1320 Sub-Total Northern Tunis 4.307 4.966 9.273 O.8t 4.59 5.302 9.8 9 0.89 Central Tunis 1.9 RehabilIation CentralTunis 1.9.1 Excavationand pipelaying 2.442 2.442 4.884 0.710 2607 2.607 5.214 0.758 1.9.2 Pipe supply 0.626 0.940 1.568 0.228 0.88 1.003 1.672 0.243 Sub-Total Centrai Tunis 3.068 3.382 t.450 0.937 3.275 l.610 6.JS6 1.001

Sub-TotalTUNIS 26917 39.20t 6g118 toa2 2e.7 41eso 7 2 Miscellaneous 2.1 Studies and technicalassistance 17OO 1.700 3.400 0.309 1.815 1.815 3.30 0.330 2.2 MaintenanceEquipmnt 0.515 2.061 2576 0.146 0.550 2.200 Z750 0.156 Sub-TotalMiscellaneous 2 215 3.761 S7 04_4, 4 015 6M348

Sub-Total ONAS a 42962 72 094 _? 31101 tOt45 8 6 7

3 AcrlculturaJReuse 3.1 Mult seaonal storagedarns 0.773 0.773 1.548 Q202 0.825 0.825 1. 50 0215 3.2.1 Feasibilitystudy agricultural projact 0.258 0.258 Q515 0.047 0.275 0.275 0Q550 000 3.2.2 1st trancho agrhultumlproject 4.637 4.637 9.273 1.210 4.950 4.950 9900 1.291 3.3 Pilot Project AquiferRecharge 3.3.1 Studies O.1s5 0.155 0.309 0.028 0.165 0.165 0.330 Q030 3.3.2 Realisationof PilotProjec 1.391 1.391 z782 0.363 1.485 1.485 2.970 0.387 Sub-TotalAgriculture 7L 7?213 14J425 j"S 7 700 7 700 s4co 1t974

Total ProjectCost (Contant Prices) 365 50.174 esle a2.3u6 33.801 53.565 9n361 S. Physical Contingencies 5.452 7.526 1Z978 1.252 5.820 8.03 13.858 1.343 Price Contingencies 4.335 2.905 7.240 0.731 7.144 6.366 13.510 1.340 Total Project Cost(Current Prices) 4a131 60.605 106.737 10.370 51.76 7.94 111.31 11. -37- AN1NEX3 REPUBLIC OF TUNISIA Page 2 of 10 Greater Tunis Sewera2e and Reuse Project STAFF APPRAISAL REPORT

Cost Estimates

Total Total MOT Nr. Doscrption USSmill. 1999.05 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 I GREATER TUNIS SEWERAGE 1 Westen Tunis 1.1 RastructeringWestem Tunis Swr Systen 1.1.1 Excavationand pipe laying 8.790 9.837 0.450 1.391 1.909 1.965 2.023 1.563 0.536 1.1.2 Pipesupply 8.696 9.773 0.445 0.914 1.410 1.933 2.485 1.534 1.051 1.2 Pumping Stations 1.2.1 Civil Works 1.348 1.509 0.069 0.213 0.293 0.301 0.310 0.240 0.082 1.2.2 Equipment 1.765 1.985 0.091 0.187 0.287 0.393 0.403 0.413 0.212 1.3 SecondarySwerm in WesternTunis 1.3.1 Excavationand Pipe aying 5.066 5.654 0.521 0.805 1.105 1.138 1.171 0.603 0.310 1.3.2 PipeSupply 3.808 4.270 0.391 0.402 0.619 0.849 0.873 0.674 0.462 Sub-TotalWestem Tunis 29.473 33.027 1.967 3.911 5623 6.580 7.267 6025 Z654 SouthemTunis 1.4 Extnsion and RehabSTP Sud-Melians 1.4.1 CMI Works 7.747 8.670 0.397 1.226 1.682 1.732 1.783 1.377 0.473 1.4.2 Equipment 14.768 16.S96 0.761 1.S62 2.403 3.287 4.215 2.594 1.774 1.5 Sewaga collecion SystemSouthern Tunis 1.5.1 | Excavationand pipelaying 5.093 5.703 0.261 0.805 1.105 1.138 1.171 0.603 0.621 1.5.2 Pipe supply 1.911 2.149 0.098 0.201 0.310 0.425 0.437 0.449 0.231 1.6 Pumping Stations 1.6.1 Excavationand pipe laying 1.272 1.424 0.065 0.201 0.276 0.284 0.293 0.226 0.078 1.6.2 Pipesupply 1.765 1.985 0.091 0.187 0.287 0.393 0.403 0.413 0.212 Sub-TotalSouthem Tunis 3Z555 36.527 1.572 4.181 6.063 7.258 8.301 £663 3.388 Northom Tunis 1.7 Extonsionsand Rehab Northern Tunis 1.7.1 Excavationand pipe lying and dealudging 5.066 5.654 0.521 0.805 1.105 1.138 1.171 0.603 0.310 1.7.2 Pipe supply 2.538 2.848 0.260 0.268 0.413 0.568 0.582 0.449 0.308 1.80 RehabiltationSTP TunisNord and tansfer W 1.8.1 CMI Works 2.200 2.394 0.704 1.690 1.8.2 Equipment 1.464 1.593 0.469 1.124 Sub-TotalNorthem Tunis 11.269 1Z487 1.954 3.888 1.518 1.704 1.753 1.052 0.618 Central Tunis 1.9 RohabilitabonContral Tunis 1.9.1 Excavationand pipelaying 5.98 6.689 0.618 0.954 1.309 1.348 1.388 1.072 1.9.2 PIpe supply 1.928 2.160 0.198 0.203 0.314 0.430 0.442 0.455 0.117 Sub-TotblCntal Tunis 7.926 S.849 0.816 1.157 1.623 1.778 1.830 1.527 0.117

Sub-TotalTUNIS a1 Z23 90.890 LAU0 13.137 14828 17320 19.152 13.267 6.778 2 Miscellaneoul 2.1 Studies and technicalassistance 4.224 4.751 0.645 0.664 0.228 0.489 0.725 0.995 1.024 2.2 MaintenanceEquipment 3.093 3.420 0.650 0.666 0.683 0.701 0.719 Sub-TotalMiscollanous 7.317 8 170 1 29S 1.330 0.911 1.170 1 444 0.995 t.024

Sub-TotalONAS 88 540 99.080 7.703 14,468 15739 I89 20.596 14262 7 82Z

3 Acricultural Reuse 3.1 Mulidseasonal storage dams 1.974 2.262 0.659 0.904 0.698 3.2.1 Feasibilitystudy agricultural project 0.820 0.681 0.335 0.345 3.2.2 1st tranchearculual project 11.804 13.492 5.271 5.427 2.794 3.3 Pilot ProjactAquifer Recharge 3.3.1 Studies 0.366 0.397 0.195 0.201 3.3.2 Realisationof Pilot Project 3.433 3.841 11.19 1.58 1.186 Sub-ToelAgricultur 1J.196 20672 0.195 0537 t_4.2 13 . 6.33t 2392 Total ProjectCost (Current Prics) 106.737 1 iS.731 7.899 16.004 17.203 20.026 27.711 20.593 11.294 -38- ANNEX 3 Page 3 of 10 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRAISAL REPORT

Cost Estimates (in US dollars)

Local Foreign Total Taxes & Local Foreign Total Taxes & Nr. Description USS milli Duties DT million Duties i GREATER TUNIS SEWERAGE 1 Westem Tunis 1.1 Restructering Westem Tunis Sewer System 1.1.1 Excavation and pipe laying 4.498 4.292 8.790 1.277 5.035 4.802 9.837 1.429 1.1.2 Pipe supply 3.586 5.110 8.696 4.031 5.742 9.773 1.2 Pumping Stations 1.2.1 Civil Works 0.690 0.658 1.348 0.196 0.772 0.737 1.509 0.219 1.2.2 Equipment 0.368 1.397 1.765 0.100 0.414 1.571 1.985 0.112 1.3 Secondary Sewers in Westem Tunis 1.3.1 Excavation and Pipe lbying 2.589 2.477 5.066 0.661 2.890 2.764 5.654 0.737 1.3.2 Pipe Suppiy 1.568 2.240 3.808 0.216 1.759 2.511 4.270 0.242 Sub-Total Westem Tunis 13.299 16.174 29.473 2.449 14.900 1&6127 33.027 2.740 Southem Tunis 1.4 Extension and Rehab STP Sud-Meliane 1.4.1 Civil Works 3.964 3.782 7.747 1.010 4.438 4.232 8.670 1.131 1.4.2 Equipment 3.076 11.691 14.768 0.836 3.458 13.137 16.596 0.939 1.5 Swage collection System Southem Tunis 1.5.1 Excavation and pipe laying 2.607 2.486 5.093 0.740 2.920 2.783 5.703 0.829 1.5.2 Pipe supply 0.788 1.123 1.911 0.887 1.263 2.149 1.6 Pumping Stations 1.6.1 Excavation and pipe laying 0.651 0.621 1.272 0.166 0.729 0.695 1.424 0.186 1.6.2 Pipe supply 0.368 1.397 1.765 0.100 0.414 1.571 1.985 0.112 Sub-Total SouthemTunis 11.455 21.100 32.555 Z8528 12845 23.682 36.527 3.197 Northem Tunis 1.7 Extensions and Rehab Northem Tunis 1.7.1 Excavation and pipe laying and desludging 2.589 2.477 5.066 0.736 2.890 2.764 5.654 0.821 1.7.2 Pipe supply 1.045 1.493 2.538 1.172 1.674 2.846 1.80 Rehabilitation STP Tunis Nord and transfer W 1.8.1 Civil Works 1.111 1.090 2.200 0.287 1.208 1.186 2.394 0.312 1.8.2 Equipment 0.592 0.872 1.464 0.645 0.949 1.593 Sub-Total Northem Tunis 5.337 5.932 11.269 1.023 5.915 6.572 12487 1.134 Central Tunis 1.9 Rehabilitation Central Tunis 1.9.1 Excavation and pipe laying 3.064 2.934 5.998 0.872 3.418 3.271 6.689 0.972 1.9.2 Pipe supply 0.793 1.134 1.928 0.280 1 0.889 1.271 2.160 0.314 Sub-Total Central Tunis 3.858 4.068 7.926 1.152 4.307 4.542 8.849 1.286

Sub-TotalTUNIS 33.948 47.274 81.223 7.476 | 37.967 52.922 90.890 8.357 2 Miscellaneous 2.1 Studies and technical assistance 2.167 2.058 4.224 0.384 2.437 2.313 4.751 0.432 2.2 Maintenance Equipment 0.636 2.457 3.093 0.175 0.703 2.716 3.420 0.194 Sub-Total Miscellaneous 2.803 4.515 7.317 0.559 3.141 5.029 8.170 0.625

Sub-TotalONAS 36.751 51.789 88.540 8.035 41.108 57.952 99.060 8.982

3 Agricultural Reuse 3.1 Mult seasonal storage darns 1.022 0.952 1.974 0.257 1.171 1.091 2.262 0.295 3.2.1 Feasibility study agnculturalproject 0.314 0.305 0.620 0.056 0.345 0.335 0.681 0.062 3.2.2 1st tranche agriculturalprojed 6.103 5.701 11.804 1.540 6.976 6.516 13.492 1.760 3.3 Pilot Project Aquifer Recharge 3.3.1 Studies 0.184 0.181 0.366 0.033 0.200 0.197 0.397 0.036 3.3.2 Realisation of Pilot Projed 1.757 1.677 3.433 0.448 1.965 1.875 3.841 0.501 Sub-Total Agriculture 9.380 8.816 18.196 2.334 10.657 10.014 20.672 2.654 Total Project Cost (Current Prices) 46.131 60.605 106.737 10.370 51.766 67.966 119.731 11,636 -39 AANNEX 3 REPUBLIC OF TUNISIA Page4 of 10 Greater Tunis SeweraL2eand Reuse Proiect STAFF APPRAISAL REPORT

Cost Estimates

Total 1999-05 Ne. Descriotion USS mill. MDT(1997) FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 I GR.EATERTUNIS SEWERAGE I Westem Tunis 1.1 Rettructenng WestemTunis Sewer System 1.1.1 Excavationand pipe aying 7.120 7.601 0.380 1.140 1.520 1t20 1.520 1.140 0.380 1.1.2 Pipe supply 7.037 7.513 0.375 0.751 1.127 1.503 1.878 1.127 0.7o1 1.2 Pumping Stations 1.Z1 CMI WorKs 1.092 t.166 0.056 0.175 0.233 0.233 0.233 0.175 0.055 1.2.2 Equipment 1.443 1.640 0.077 0.154 0231 0.305 0.308 0.308 0.154 1.3 SecondarySewers in WestemTunis 1.3.1 Excavationand Pipe laing '.121 4.400 0.440 0.660 0.80 0.o180 0.880 0.440 0.220 1.3.2 Pipe Supply 3.091 3.300 0.330 0.330 0.495 o.660 0.ssP 0.496 0.330 Sub-Total Westem Tunis 23.904 25.520 1.et1 3.210 4.486 5104 5480 3.s6 raa4 Southem Tunis 1.4 Extensionand RehaoSTP Sud-Meriane 1.4.1 CMI Works 8.275 6.899 0.335 1.005 1.340 1.340 1.340 1.008 0.335 1.4.2 Equipment 1207s 12992 0,845 1.289 1.934 z576 .223 1.s34 1.289 1.5 Sewage collectonSystem Southem Tunis 1.5.1 Excavationand pipelaying 4.121 4.400 0.220 0.t60 0.880 0e860 a680 0.440 0440 1.5.2 Pipe suppy 1.s4 1.650 0.063 0.165 0.248 0330 0.330 0.330 m166 1.e Pumping Stations 1.6.,1 Excavationand pipelaying 1.030 1.100 0.055 0.188 0.220 0.20 0.220 0.168 0.0au 1.6.2 Pipe supply 1.443 1.040 0.07? 0.164 0.231 0.308 0.306 0.306 0.184 Sub-Total Southem Tunis 2e.4a1 28.281 1.414 3.436 4.882 5856 6.301 4.102 .46 Northem Tunis 1.7 Extensions and Rehab Northem Tunis 1.7.1 Excavatlon and pt?ie Jang and desludin 4.121 4.400 0.440 0860e.eo 0.o10 0.1880 0.440 0.220 1.7.2 Pipe supply 2.060 Z1t99 0.220 0220 0.330 0.440 0.440 0.330 020 1.8 RenabilitationSTP Tunis Nord and transhr V 1.8.1 CMI Works 1.85 1.980 0.594 1366 1.8.2 Equipment 1.238 1.320 0398 0924 Sub-Total NorthemTunis e.273 9.89 1.6s50 3.190 1.210 1.= 1.310 0.770 41440 Central Tunis 1.9 Renaoilitation Central Tunis 1.9.1 Excavabon and pipelaying 4.86 5.214 0.521 0.782 1.043 1.043 1.043 0.782 1.9.2 Pipe supply 1588 1.tJ72 0.167 0.167 0.251 0.334 0.334 0.334 0.084 Sub-Total CentralTunis 6.4 ,t8.6 o.s 0.948 1.294 1.377 1.377 7.117 0.01,4

Sub-Total TUNIS U.1it 70Z58. 5414 jfLJf tMZ t3fl47 h4ZI 9 7m 2 Miscallaneous 2.1 Stucies and technical assitance 3.400 3.830 0.545 0.548 0.182 0.3s3 o.U5 0.726 0.726 2.2 Maintenanca Equipmet Z576 2.750 0.550 0.5u0 0.580 0.5ff 0.550 Sub-Total MWcelaneous L.9 2o

Sub-Total ONAS ZzE705s6 5414 1Z M 2 13.467 t4.47812 I 3 A

3 Adncultural Reuse 3.1 Murt seasonal storage dams 1.84s 1.650 0.498 o.o0 0.498 3.2.1 FeasibIlity study agncuthtur pmject 0.51 0.550 0.275 0.275 3.Z2 1 st tranche agncultural project 9.273 9.900 3.960 3.96 1.960 3.3 Pilot Proect Aquifer Recharge 3.3.1 Studies 0.309 0.330 0.155 0.16a 3.3.2 Realisation of Pilot Project Z782 z970 0.691 1.185 0.a81 Sub-Tota Agriculture 14542 400 0.188 . 0440 1.166 1.168 5.346 4.820 1475

Total Proiect Cost (Constant PrKies) 381.611 s136 6.6n73 132.2 13136 1ts8 t0.616ta6 111.6114 Physica Contingencies 1Z97 13.85s 1.001 2oo1l.848 2334 la38 2.6 1.206 Pnce Contingencies 7.240 13.510 .258 0.834 1.403 2.134 3 t54 3 23o Total Proiect Cost (Currnt Prices) 101.737 119.731 7rs6 16.004 17.203 20.02 27.711 23.853 1l.214 REPUJBI.JC OF TUNISIA GrieaterTuinis Seweragean ReuisePrQjlect STAFF APPRAISAL REPORT

Cost Estimates

Total Total MDT Nr. Description US$ mill. 1999-05 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 1.1 Civil Works 34.845 39.244 1.756 4.136 4.475 4.991 10.673 8.777 4.435 1.2 Pipe supply 16.536 18.521 1.469 2.711 2.447 3.354 3.947 2.887 1.707 1.3 Excavation and pipe laying 24.947 27.883 1.850 3.954 5.428 5.589 5.754 3.840 1.468 1.4 Equipment 25.199 28.255 1.983 3.003 4.280 5.622 6.613 4.094 2.660 1.5 Consullant'sservices 5.210 5.828 0.841 1.201 0.573 0.469 0.725 0.995 1.024 Total base cost 106.737 119.731 7.899 15.004 17.203 20.026 27.711 20.593 11.294

Local Foreign Total Taxes & Local 'Foreign Total Taxes & Nr. Description ------US$ milli ------Duties ------DT million ------Duties 1.1 Civil Works 17.887 16.958 34.845 4.565 20.149 19.096 39.244 5.141 1.2 Pipe supply 6.805 9.731 16.536 0.280 7.624 10.897 18.521 0.314 1.3 Excavationand pipe laying 12.758 12.189 24.947 3.625 14.262 13.621 27.883 4.051 1.4 Equipment 6.016 19.182 25.199 1.426 6.748, 21.507 28.255 1.599 1.5 Consullant'sservices 2.665 2.544 5.210 0.474 2.983 2.845 5.828 0.530 _Total base cost 46.131 60.605 106.737 10.370 51.766 67.966 119.731 11.636

wZ *to mz

Ln 0

o0 -41- ANNEX 3 Page 6 of 10 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFFAPPRAISAL REPORT

Cost Estimates (in French Francs)

Local Foreign Total Taxes Local Foreign Total Taxes Nr. Description FFR mill and Duties DT million - and Duties I GREATER TUNIS SEWERAGE 1 Western Tunis 1.1 Restructering Westem Tunis Sewer Systen 1.1.1 Excavation and pipe laying 20.162 20.162 40.324 5859 3.801 3 801 7.601 1.104 1.1.2 Pipe supply 15.943 23.914 39.857 3.005 4.508 7.513 1.2 Pumping Stations 1.2.1 Civil Works 3.093 3.093 6.186 0.899 0.583 0.583 1.166 0.169 1.22 Equipment 1.634 6.536 8.170 0 462 0.308 1.232 1.540 0.087 1.3 Secondary Sewers in Westem Tunis 1.3.1 Excavation and Pipe laying 11.671 11.671 23.342 3.045 2.200 2.200 4.400 0.574 1.3.2 Pipe Supply 7.003 10.504 17.507 0.991 1.320 1.980 3.300 0.187 Sub-Total Western Tunis 59.505 75 880 135.385 11.256 11.217 14.303 25.520 2.122 Southern Tunis 1.4 Extension and Rehab STP Sud-Meliane 1.4.1 Civil Works 17.769 17.769 35.538 4.635 3.350 3.350 6.699 0 874 1.4.2 Equipment 13.679 54.714 68.393 3.871 2.578 10.314 12.a92 0.730 1.5 Sewage collection System Southem Tunis !1.5.1 Excavation and pipe laying 11.671 11.671 23.342 3.392 2.200 2,200 4.400 0.639 1.5.2 Pipe supply 3.501 5,252 8.753 0.660 0.990 1.650 1.6 Pumping Stations 1.6.1 Excavation and pipe laying 2.918 2.918 5.836 0.761 0.550 0.550 1.100 0.143 1.6.2 Pipe supply 1.634 6.536 8.170 0.462 0.308 1.232 1.540 0.087 Sub-Total Southem Tunis 51.172 98.860 150.032 13.122 9.646 18.635 28.281 2.473 Northem Tunis 1.7 Extensions and Rehab Northem Tunis 1.7.1 Excavation and pipe laying and desludgi 11.671 11.671 23.342 3.392 2.200 2.200 4.400 0.639 1.7.2 Pipe supply 4.667 7.001 11.668 0.880 1.320 2199 11.8 Rehabilitation STP Tunis Nord and transfe 1.8.1 Civil Works 5.252 5.252 10.504 1.370 o.990 0.990 1.980 0.258 1.8.2 Equipment 2.801 4.202 7.003 0.528 0.792 1.320 Sub-Total Northem Tunis 24.391 28.126 52.517 4.762 4.598 5.302 9.899 0.898 Central Tunis 1.9 Rehabilitation Central Tunis 1.9.1 Excavation and pipe laying 13.830 13.830 27.660 4.019 2.607 2.607 5.214 0.758 1.9.2 Pipe supply 3.548 5.322 8.870 1.289 0.669 1.003 1.672 0.243 Sub-Total Central Tunis 17.378 19 152 36 531 5.308 3 276 3 610 6 886 1.001

Sub-Total TUNIS 152.447 222.017 374 464 34 447 28.736 41 850 70 586 6 493 2 Miscellaneous 2.1 Studies and technical assistance 9,629 9.629 19.257 1.751 1.815 1.815 3 630 0.330 2.2 Maintenance Equipment 2.918 11.671 14.589 0.826 0.550 2.200 2.750 0,156 Sub-Total Miscellaneous 12 546 21.300 33 846 2 576 2 365 4 015 6 380 0 486

Sub-TotaI ONAS 164 993 243 317 408 310 37 024 31 101 45 865 76.966 6.979

3 Agricultural Reuse 3.1 Multi seasonal storage dams 4.377 4.377 8.753 1.142 0.825 0 825 1.650 0.215 3.2.1 Feasibility study agricultural project 1.459 1.459 2.918 0.265 0.275 0.275 0.550 0.050 3.2.2 1st tranche agricultural project 26.260 26 260 52.520 6.850 4 950 4.950 9.90o 1.291 3.3 Pilot Project Aquifer Recharge 3.3.1 Studies 0.875 0 875 1.751 0.159 0 165 0.165 0.330 0.030 3.3.2 Realisation of Pilot Project 7.878 7.878 15.756 2.055 1.485 1.485 2.970 0.387 Sub-Total Agriculture 40 849 40.849 81.698 10 472 7 700 7.700 15 400 1.974

Total Project Cost (Constant Prices) 206.842 284.166 490.008 47.496 38.801 63.666 92r366 8.963 Physical Contingencies 30.876 42.625 73.501 7.093 5.820 8.035 13.855 1.343 Price Contingencies 24.552 16.453 41.005 4.1 42 7.144 6 366 13.510 1.340 Total Project Cost (Current Prices) 261.270 343.244 604.614 68.731 61.7B6 67.966 119.731 11.636 ANNTEX3 -42- Page 7 of 10 REPUBLIC OF TUNISIA Greater Tunis Sewerage and Reuse Proiect STAFF APPRAISAL REPORT

Cost Estimates

Total FY 1999-O! Nr. Decnption FF mill. MOT 1997 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 I GREATER TUNIS SEWERAGE I Westem Tunis 1.1 Restructering Westem Tunis Sewer SysteM 1.1.1 Excavation and pipe laying 40.324 7.601 0.380 1.140 1.520 1.520 1.520 t.140 0.380 1.1.2 Pipe supply 39.857 7.513 0.376 0.751 1.127 1.503 1.878 t 127 0.751 1.2 Pumping Stations 1.Z CMI Works 6.1e6 1.16f 0.0o8 0.175 0.233 0.233 0.233 0.175 0.06a 1.2.2 Equipment a.170 1.540 0.077 0.154 0.231 0e308 0e308 o.308 0.154 1.3 Secondary Sewers in Westem Tunis 1.3.1 Excavation and Pipe laying 23.3A2 4.400 0.440 0.680 0.88010 0.88) 10 0.440 0.220 1.3.2 Pipe Supply 17.507 3.300 0.330 0.330 0.495 0.580 0.660 0.496 o.330 Sub-Total Westem Tunis 135.3a5 25.520 1.661 3.210 4.46e 104 e 4a0 3.eas 1.894 Southem Tunis 1.4 Extension and Rehab STP Sud-Meliane 1,4.1 CMI Works 35.538 6.esg 0335 1.005 1.340 1.340 1.340 1.005 o.335 1.4.2 Equipment 68.393 1Z.a92 0.645 1.269 1.934 Z57a 3.223 1.934 1.288 1.5 Sewage collecthn System Southern Tunis 1.5.1 Excavation end pipe laying 23.342 4.400 0.220 0 6e0 0.68 0.680 o880 0o440 0.440 1.5.2 Pipe supply 5.753 1.650 0.083 0.165 0.248 0.330 0.330 0e330 0.166 1.6 Pumping Stations 1.6.1 Excavation and pipe laying 5.836 1.100 0.055 0.165 0.220 0.220 0.220 0.165 0.055 1.6.2 Pipe supply 8.170 1.540 0.077 0.154 0.231 0.308 0.308 0.308 0.154 Sub-Total Southem Tunis 150.032 2z.281 14.14 3.438 4.852 5.e e.301 4.18t za4 Northem Tunis 1.7 Extensions and Rehab Noithem Tunis 1.7.1 Excavation gnd pipe laying and dedudgil 23342 4.400 0.40 o.a06 0.860 0.ao o88 .o440 o.20 1.7.2 Pipe supply 11.66a z21s 02.20 0.220 0.330 0.440 0.440 0(330 0.220 1.8 Rehabilitatin STP Tunis Nord and transfer 1.8.1 Civil Works 10 504 1980 0.594 1.388 1.8.2 Equipment 7.003 1.320 0e396 0.924 Sub-Total Northern Tunis szs,7 .899 1.eso 3.190 1.210 1.3x 1.320 arm a440 Central Tunis 1.9 Rehabilitation Central Tunis 1.9.1 Excavation and pipe laying 27.660 5.214 0.521 0.782 1.043 1.043 1.043 0782 1.9.2 Pipe supply 8.870 1.672 0.167 0.167 0.251 0.334 o 334 0.334 0.0o4 Sub-Total Central Tunis 36.53 6.88e 0.689 0.949 1.294 1.377 1.377 1.117 o.084

Sub-Total TUNIS 3744448 s 54 10fe 1184e 4 14.478 9.7s3 L04 2 Milscellaneous 2.1 Studies and technical assistance 19.257 3.630 0.545 0.545 0.162 0.3e3 0.545 0.726 0.726 2.2 Maintenance Equipment 14.589 1750 0.550 0.550 0.550 0.5s0 0.550 Sub-Total Miscellaneous 33 8l

Sub-Total ONAS 408 3 70.ss 5 414 10 7s 11 842 j 4_57 14 478 1

3 Acricullural Reuse 3.1 Multi seasonal storage dams t.753 1.SO 0.495 06.60 0.495 3.Z1 Feasibility study agncultural projet 2.918 0.550 0.275 0.275 3.2.2 1st tranche agnoultural project 51520 9s900 3.s0 396 1.980 3.3 pilot Project Aquifer Recharge 3.3.1 Studies 1.751 0.330 0 185 0.165 3.3.2 Realisation of Pilot Proect 15.756 2.970 0.e91 1.188 0.81 SubTotal Agriculture 81.ee 54 0.165 0.440 1.1e6 1.188 5.348 4^.e2 Z475

Total Proiect Cost (Constant Pricesl 480.000 0.386 8.a73 1.Z322 13.n7 16. 20.918 1606 Lo" Physical Contingencies 73.501 13.855 1.001 1.848 o.061 z334 3.138 2.2es 1.20 Pnce Contingencies 41.005 13.510 0.22s 0834 1.403 Z134 3.es6 3.22 Zo30 Total Project Cost (Current Pnces) 604614 11t 731 7.89 16.004 17.203 2021 27.711 20.0s 11114 -43- 5ANNEX3 REPUBLIC OF TUNISIA Page 810 Greater Tunis Seweraee and Reuse Proiect STAFF APPRAISAL REPORT

Cost Estimates

Total Total MOT Nr. Description FFR mil FY 1999-05 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 1 GREATER TUNIS SEWERAGE I Westem Tunis 1.1 Restructering Western Tunis Sewer System 1.1.1 Excavationand pipe laying 49.781 9.837 0.450 1.391 1.909 1.965 2.023 1.563 0.536 1.1.2 Pipe supply 49.248 9.773 0.445 0.914 1.410 1.933 2.485 t.534 1.051 1.2 Pumping Stations 1.2.1 Civil Works 7.636 1.509 0.069 0.213 0.293 0.301 0.310 0.240 0.082 1.2.2 Equipment 9.998 1.985 0.091 0.187 0.287 0.393 0.403 0.413 0.212 1.3 Secondary Swers in WestermTunis 1.3.1 Excavation and Pipe laying 28.694 5.654 0.521 0.805 1.105 1.138 1.171 0.603 0.310 1.3.2 Pipe Supply 21.584 4.270 0.391 0.402 0.619 0.849 0.873 0.674 0.462 Sub-Total Westem Tunis 166.922 33.027 1.967 3.911 5.623 6.580 7.267 5.025 Z 654 Southem Tunis 1.4 Extension and Rehab STP Sud-Mlliane 1.4.1 Civil Works 43.873 8.670 0.397 1.226 1.682 1.732 1.783 1.377 0.473 1.4.2 Equipment 83.638 16.596 0.761 1.562 2.403 3.287 4.215 2.594 1.774 1.5 Sewage collection System Southem Tunis 1.5.1 Excavationand pipe laying 28.843 5.703 0.261 0.805 1.105 1.138 1.171 0.603 0.621 1.5.2 Pipe supply 10.825 2.149 0.098 0.201 0.310 0.425 0.437 0.449 0.231 1.6 Pumping Statlons 1.6.1 Excavation and pipe laying 7.204 1.424 0.065 0.201 0.276 0.284 0.293 0.22S 0.078 1.8.2 Pipe supply 9.998 1.985 0.091 0.187 0.287 0.393 0.403 0.413 0.212 Sub-Total Southen Tunis 184.380 36.527 1.672 4.181 6.063 7.258 8.301 6663 13388 . Northem Tunis 1.7 Extensions and Rehab Northern Tunis 1.7.1 Excavation and pipe laying and desludging 28.694 5.654 0.521 0.805 1.105 1.138 1.171 0.603 0.310 1.7.2 Pipe supply 14.373 2.846 0.260 0.268 0.413 0.566 0.582 0.449 0.308 1.80 Rehabilitation STP Tunis Nord and transfer W 1.8.1 Civil Works 12.463 2.394 0.704 1.690 1.8.2 Equipment 8.293 1.593 0.469 1.124 Sub-Total Northem Tunis 63.823 tZ487 1.954 3.888 1.5 18 1.704 1. 7S3 1.052 0.618 Contral Tunis 1.9 Rehabilitation Contral Tunis 1.9.1 Excavationand pipe laying 33.972 6.689 0.618 0.954 1.309 1.348 1.388 1.072 1.9.2 Pipe supply 10.917 2.160 0.198 0.203 0.314 0.430 0.442 0.455 0.117 Sub-Total Cental Tunis 44.889 8.849 0.816 1.157 1.623 1.778 1.830 t527 0.117

Sub-Total TUNIS 460.014 90.8Q 6.409 13.137 14.828 17.320 1912 13267I L77 2 Miscellaneous 2.1 Studies and technical assinc 23.925 4.751 0.645 0.684 0.228 0.469 0.725 0.995 1.024 2.2 Maintenance Equipment 17.518 3.420 0.650 0.666 0.683 0.701 0.719 Sub-Total Miscellaneous 41,443 8170 1M I.9Q11t 1.170 1.444 09 124

Sub-Total ONAS 501.457 99.06Q 7.7 03 14.468 15.739 18.490 20596 14262 7L2

3 Aaricultural Reus 3.1 Multi seasonalstorage dams 11.180 2.262 0.658 0.904 0.698 3.2.1 Feasibility study agricutural project 3.510 0.681 0.335 0.345 3.2.2 1st tranche agricultural pojct 66.852 13.492 5.271 5.427 2.794 3.3 Pilot Project Aquifer Recharge 3.3.1 Studies 2.070 0.397 0.195 0.201 3.3.2 Realisation of Pilot Project 19.445 3.841 1.119 1.538 1.186 Sub-Total Agricutwr 103.057 20.672 0 195 0.537 1 464 1.538 71 63 32 Total Project Cost (Current Prices) 604.514 119.731 7.a9 16.004 17.203 20.026 27.711 20.593 11.294 ANNEX 3 -44- Page 9 of 10 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRAISAL REPORT

Cost Estimates (in French Francs)

Local Foreign Total Taxes & Local Foreign Total Taxes & Nr. Description FFR milli - Duties DT million Duties I GREATER TUNIS SEWERAGE 1 Western Tunis 1.1 Restructering Westem Tunis Sever Sy 1.1.1 Excavation and pipe laying 25.475 24.306 49.781 7.233 | 5.035 4.802 9.837 1.429 1.1.2 Pipe supply 20.308 28.940 49.248 4.031 5.742 9.773 1.2 Pumping Stations 1.2.1 Civil Works 3.908 3.728 7.636 1.110 0.772 0.737 1.509 0.219 1.2.2 Equipment 2.084 7.914 9.998 0.566 0.414 1.571 1.985 0.112 1.3 Secondary Sewersin Westem Tunis 1.3.1 Excavation and Pipe laying 14.663 14.031 28.694 3.743 2.890 2.764 5.654 0.737 1.3.2 Pipe Supply 8.880 12.684 21.564 1.221 1.759 2.511 4.270 0.242 Sub-Total Westem Tunis 75.318 91.604 166.922 13.872 14.900 18.127 33.027 2.740 Southem Tunis 1.4 Extension and Rehab STP Sud-Melian 1.4.1 Civil Works 22.452 21.421 43.873 5.723 4.438 4.232 8.670 1.131 1.4.2 Equipment 17.424 66.214 83.638 4.734 3.458 13.137 16.596 0.939 1.5 Sewage collection System Southem T 1.5.1 Excavation and pipe laying 14.765 14.078 28.843 4.191 2.920 2.783 5.703 0.829 1.5.2 Pipe supply 4.465 6.359 10.825 0.887 1.263 2.149 1.6 Pumping Stations 1.6.1 Excavation and pipe laying 3.687 3.517 7.204 0.940 0.729 0.695 1.424 0.186 1.6.2 Pipe supply 2.084 7.914 9.998 0.566 0.414 1.571 1.985 0.112 Sub-Total Southem Tunis 64.877 119.504 184.380 16.153 12845 23.682 36.527 3.197 Northem Tunis 1.7 Extensions and Rehab Northem Tunis 1.7.1 Excavation and pipe laying and des 14.663 14.031 28.694 4.169 2.890 2.764 5.654 0.821 1.7.2 Pipe supply 5.919 8.454 14.373 1.172 1.674 2.846 1.80 Rehabilitation STP Tunis Nord and tra 1.8.1 Civil Works 6.290 6.172 12.463 1.626 1.208 1.186 2.394 0.312 1.8.2 Equipment 3.355 4.938 8.293 0.645 0.949 1.593 Sub-Total Northem Tunis 30.227 33.596 63.823 5.795 5.915 6.572 12.487 1.134 Central Tunis 1.9 Rehabilitation Central Tunis 1.9.1 Excavation and pipe laying 17.355 16.618 33.972 4.936 3.418 3.271 6.689 0.972 1.9.2 Pipe supply 4.494 6.423 10.917 1.586 0.889 1.271 2.160 0.314 Sub-Total Central Tunis 21.848 23.041 44.889 6.522 4.307 4.542 8.849 1.286

Sub-Total TUNIS 192.271 267.744 460.014 42.342 37 967 52.922 90.890 8.357 2 Miscellaneous 2.1 Studies and technical assistance 12.271 11.654 23.925 2.175 2.437 2.313 4.751 0.432 2.2 Maintenance Equipment 3.602 13.915 17.518 0.992 0.703 2.716 3.420 0.194 Sub-Total Miscellaneous 15.874 25.569 41.443 3.167 3.141 5.029 8.170 0.625

Sub-Total ONAS 208.144 293.313 501.457 45.509 41.108 57.952 99.060 8.982

3 Aoricultural Reuse 3.1 Multi seasonal storage dams 5.788 5.393 11.180 1.458 1.171 1.091 2.262 0.295 3.2.1 Feasibility study agricultural project 1.780 1.730 3.510 0.319 0.345 0.335 0.681 0.062 3.2.2 lsttranche agricultural project 34.565 32.286 66.852 8.720 6.976 6.516 13.492 1.760 3.3 Pilot Project Aquifer Recharge 3.3.1 Studies 1.044 1.026 2.070 0.188 0.200 0.197 0.397 0.036 3.3.2 Realisation of Pilot Project 9.949 9.496 19.445 2.536 1.965 1.875 3.841 0.501 Sub-Total Agriculture 53.126 49.931 103.057 13.222 10.657 10.014 20.672 2.654 Total Project Cost (Current Prices) 261.270 343.244 604.514 58.731 51.766 67.966 119.731 11.636 ANNEX 3 Page 10 of 10

REPUBLIC OF TUNISIA Greater Tunis Sewerage and Reuse Project STAFF APPRAISAL REPORT

Cost Estimates

Local Foreign Total Taxes & Local Foreign Total Taxes & Nr. Descripton FFR milli - Duties - DT million Duties 1.1 Civil Works 101.303 96.046 197.349 25.855 20.149 19.096 39.244 5.141 1.2 Pipe supply 38.540 55.115 93.655 1.586 7.624 10.897 18.521 0.314 1.3 Excavation and pipe laying 72.258 69.032 141.290 20.529 14.262 13.621 27.883 4.051 1.4 Equipment 34.074 108.641 142.715 8.078 6.748 21.507 28.255 1.599 1.5 Consultant's services 15.095 14.410 29.505 2.682 2.983 2.845 5.828 0.530 Total base cost _ 261.270 343.244 604.514 58.731 51.766 67.966 1 119.731 11.636

Total Total MOT (CURRENT TUN. DIN. M!LL'ONS) Nr. Descripton FFR mil 1,997-'05 1998 1999 2000 2001 2002 2003 2004 1.1 Civil Works 197.349 39.244 1.756 4.136 4.475 4.991 10.673 8.777 4.435 1.2 Pipe supply 93.655 18.521 1.469 2.711 2.447 3.354 3.947 2.887 1.707 1.3 Excavationand pipe laying 141.290 27.883 1.850 3.954 5.428 5.589 5.754 3.840 1.468 1.4 Equipment 142.715 28.255 1.983 3.003 4.280 5.622 6.613 4.094 2.660 1.5 Consultant'sservices 29.505 5.828 0.841 1.201 0.573 0.469 0.725 0.995 1.024 Total base cost 604.514 119.731 7.899 15.004 17.203 20.026 27.711 20.593 11.294 -46-

ANNEX 4 Page 1 of 2

REPUBLIC OF TUNISIA

GREATERTUNIS SEWERAGEAND REUSE PROJECT

STAFF APPRAISAL REPORT

Estimated Scheduleof Disbursements

Bank FY and Disbursed Cumulative % Semester per semester Disbursements ------in US$ millions------1999 1st semester 2.1 2.1 3.5% 2nd semester 5.9 8.0 13.3% 2000 1st semester 3.8 11.8 19.7% 2nd semester 4.3 16.1 26.8% 2001 1st semester 4.3 20.4 34.0% 2nd semester 5.0 25.4 42.3% 2002 1st semester 5.0 30.4 50.7% 2nd semester 6.8 37.2 62.0% 2003 1st semester 6.8 44.0 73.3%

2004 1st semester 5.1 54.2 90.3% 2nd semester 5.8 60.0 100.0% REPUBLIC O1 TUNISIA Greater Tunis Sewerage and Reuse Project STAFF APPRAISAL REPORT

DISBURSEMENT PROFILES

70o%...... 9 6 0% - .5 ... ', 5 ...... j; 90% ......

20% :1 t -t . . .I ...... r~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ... I . .9Tuniia ' a.| z | |.. W9 iL 40% ...... I...... V I 4i 70% | 8 s < e; g i

20%. ' ~ *. 10%, ;.r Z,,,,f|eg9|...... i

0% I ...... ~~~~~~II I Popec 0 1 25 3 4 5 6 79 to 12 13 14 15 Tns A

* I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

S~~~~~~~~~~~~~~~~~~~~~~~~I I REPUBLICOF TUNISIA GREATERTUNIS SEWERAGEAND REUSEPROJECT STAFF APPRAISAL REPORT

Sewerage Tariffs

Design. Decree Decree Decree Byaws Byaws Byaws Bylws Bylaws Bylaw Bylaws Bylaws Bylaws Bylaw Bylws Bylaws 3/29/75 111/7/78 2/26/82 10W82 11/7/84 12/27/86 7/26/88 10/10/89 10/18/90 10/16/91 12/15/92 12/15/93 4/15/94 4/18/95 F1996 Fbod -Var. Fixe- Var Fixe- Var Fixe- Var Fbie- Var Fbie- Var Fbe - Var Fixe- Var Fixe- Var Fbe - Var Fixe- Var Fixe- Var Fixe- Var Fixe- Var Fixe - Var DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil DT/Tr Mil

Usage 0-20 0.75 0.75 0.75 0.75 0.85 1.05 5 1.05 5 1.22 6 1.31 6 1.31 6 1.31 6 1.31 6 1.31 6 1.31 6

21-40 0.75 0.75 10 0.75 20 0.75 25 0.85 30 1.05 45 1.05 45 1.22 50 1.31 60 1.31 60 1.31 60 1.31 60 1.31 60 0-20 1.31 6 21-40 60

41-70 8 0.75 20 1.00 40 1.00 45 1.50 60 1.60 65 1.70 73 1.95 85 2.24 98 2.58 112 2.84 123 3.12 135 3.12 135 3.45 152 3.86 171

70&150 8 0.75 25 2.00 60 2.00 65 2.50 90 2.90 105 3.05 130 3.50 152 4.03 175 4.65 200 5.35 230 5.90 265 0-70 5.90 135 6.67 152 7.60 171 71-150 265 300 345 oo 00

150&+ 8 0.75 25 2.00 60 2.00 65 2.50 90 2.90 105 3.05 130 3.50 152 4.03 175 4.65 210 5.35 252 5.90 290 0-70 5.90 135 6.80 152 7.82 171 71-150 265 300 345 150+ 290 334 389

USAGE Lit. Poll. 8 0.75 25 2.00 60 2.00 65 2.50 90 2.90 105 3.05 130 3.50 152 4.03 175 4.65 210 5.35 252 5.90 290 5.90 290 6.85 340 7.88 396 INDUSTRIAL Med. Poll. 23 0.75 35 2.00 75 2.00 80 2.50 120 2.90 140 3.05 170 3.50 200 4.03 230 4.65 265 5.35 321 5.90 385 5.90 385 6.85 455 7.88 531

HighPoll. 23 0.75 50 2.00 100 2.00 105 2.50 150 2.90 170 3.05 200 3.50 235 4.03 270 4.65 310 5.35 375 5.90 450 5.90 450 6.85 535 7.88 626

04R*ST. USAGE 23 0.75 25 2.00 140 2.00 150 2.50 180 2.90 200 3.05 240 3.50 280 4.03 322 4.65 370 5.35 451 5.90 545 5.90 545 6.85 648 7.88 758

…D

n0 -49- ANNEX 6 Page 1 of 2

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

PERFOPMANCE INDICATORS

ONAS

INDICATORS Actual Probable - - - Prj. - - - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

OPERATIONAL

- # of connections(000) 600 650 690 725 765 805 850 885 920 955 990 -%ofconnection cities/ONAS 77% 77% 78% 78% 79% 80% 81% 82% 83% 84% 85% -Water distributedm3 168 169 174 178 182 186 190 194 198 202 206 -Water collectedMm3 130 133 136 141 146 151 156 161 166 173 178 -Watertreated Mm3 117 120 124 130 136 142 148 153 158 164 170 -%ofwatercollected 77% 78% 79% 79% 80% 81% 82% 83% 85% 86% 86% -%ofwatertreated 90% 90% 91% 92% 93% 94% 95% 95% 95% 95% 96% -#ofWWTP 48 50 51 56 62 68 75 80 85 90 95 - Networkcleaned (km) 5000 5370 5790 6280 6790 7350 8000 8500 9000 9500 9950 -Network (km) 6700 7160 7620 8150 8700 9300 10000 10495 10975 11445 11845 -%ofnetworkcleaned 75% 75% 76% 77% 78% 79% 80% 81% 82% 83% 84%/ -%Pollutiontreatmentrate 92% 93% 93% 93% 93% 93% 93% 93% 93% 93% 93% -%reuseoftreatedwater 20% 22% 25% 28% 30% 32% 33% 34% 35% 36% 37% - #of employees 3953 4073 4203 4333 4463 4593 4723 4750 4750 4750 4750 -#ofemployeesperconnection(000) 6.6 6.3 6.1 6.0 5.8 5.7 5.6 5.4 5.2 5.0 4.8 FINANCIAL

Averagetariff 0.312 0.343 0.377 0.415 0.457 0.502 0.553 0.557 0.623 0.673 0.727 Averagecost 0.354 0.429 0.459 0.481 0.501 0.521 0.541 0.561 0.580 0.597 0.614 Capital investments (MDT) 52.3 58.3 61 80 80 80 80 80 80 80 80 -Workingcapital 1.4 1.4 1.3 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Debt coverage service ratio 0.9 1.6 1.8 1.7 1.6 1.8 2.1 2.0 2.0 2.0 2.0 Netcashgenerationratio 23% 47% 34% 51% 51% 56% 65% 71% 66% 78% 100% -50- ANX ANNEX 6 Page 2 of 2

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

PERFORMANCE INDICATORS

Ministry of Agriculture

PERFORMANCE INDICATORS Actual - - - Proj. - __ - _ - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

- % fanners adherence 10 30 30 - - -

- Equipped area (ha) - - - 100 500 400

- % Waste water treated and used 3 7 10 Tunis Ouest WWTP

- % cropping intensity ______- 5 10 15

3 - Aquifer rechargeQ m* ) ------0.5 0.5 05 0.5 -51-

ANNEX 7 Page 1 of 4

REPUBLIC OF TUNISI

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

Role of the Private Sector

THE PROJECT

1. ONASdoes currentlyanticipate private sector participation (PSP) in the Tunis West WWTP of the Greater Tunis program. This however, portends favorablyfor eventual PSP because it enhancesand expandsthe scaleof operationsfor the GreaterTunis area, making it a more attractive targetmarket for futurePSP.

2. ONAS is assessingPSP on a traditionally-prudentTunisian basis involvinga gradualistic approachwith pilot projects in the area of sub-contractingdistribution system management and processingmanagement (see subsequentsection), whose results will then be analyzedand which will then formnthe eventualbasis for operationalpolicy. This displaysprudent planning that focuses on the two principaloperational areas withinONAS and minimizesmiscalculations in futurepolicy making; the process, however, is more lethargicthan it needs to be, with even the Ministry of EconomicDevelopment having expressed a desireto ONAS for more expedientimplementation in the pursuit of savings by the Government. To parallel such a sentiment,the Bank has again emphasizedthe availabilityof fundingfor additionalPSP projects.

CURRENTPSP DEVELOPMENTS

3. USAID has a $30 mm programin place for environmentalprojects, which is availablein three tranchesof $10 mm. Each trancheis availablesequentially subject to performancecriteria being satisfied. The first tranche is being utilized to finance feasibilitystudies in the area of privatizationof waste-wateroperations. ONAS has acceptedcertain recommendationsand has acceptedtwo pilot projects involvingthe sub-contractingof (a) 143 kmnof urban waste-water networksin northernTunis (a contracthas been awardedto a foreignoperator, and works start in January 1997), and (b) three water treatmentplants built in the 1980-83period in the Nabeul- Hammametregion which is tourist-and agriculturally-oriented.USAID conservativelyanticipates cost savingsof 20% p.a. over the three-yearterm. ONASwill look eitherto apply internallywhat they will learn from the private operators and/or look to expand the sub-contractingprogram throughoutONAS.

4. In 1996, ONAS launcheda request for proposalsfor the refurbisingand operationof the three treatmentplants referred to in paragraph 3 above. The original budgeted amount for this -52-

ANNEX 7 Page 2 of 4 project was US$1 mm, which will now require up to $1 mm in supplementalsupplier financing from the prospectiverespondents. ONAS is consideringlaunching two BOT-typeprojects in Tunis- West and Sousse-Nord,whose parameters have not yet been determined. The Bank has also emphasizedthat funds will be availableto facilitatesuch projects.

PSP OUTLOOK

5. The potential for parallel PSP is substantial,especially in the area of sub-contracting. ONAS' payrollof approx. 3,400 is substantialfor a countryof 8 mm and 60% urbanization. The potential for successfulPSP is substantiallylimited by a series of revenue and operating cost constraintswhich have been imposedon ONAS. Theseare discussedbelow.

RevenueFactors

6. The principalarea for revenuesis recycling,where ONASexperiences a limitedpenetration rate of 20% (yieldinglittle revenue)versus a treatmentpenetration rate of 50%. This should be substantiallyhigher given the contiguityof agricultural, industrial,and tourism industriesto the ONASnetwork, and the current averagecost of fresh water of TD 0.35/ cubicmeter, which would be the Government'savoided cost to buyingrecycled water.

7. The agriculturalmarket would be an ideal candidate,as it consistsprimarily of cerealsand olive and citrus orchards. It is limited,however, by the artificially-pricedfresh water which is sold to farmers at approximately60 millimes/m3, well below the LRAIC. Clearly, the farmer has little incentiveto purchaserecycled water, especiallygiven the stigmathat it currentlycarries in Tunisia. However, the Ministry of Agriculturewho also controls SONEDEhas, to date, shown some interestin extendingits support to a coordinatedstrategy that would allow ONAS to optimizeits own networkand use its treatedwaste water in irrigation. A specificcomponent is includedin the project, the detailsof which have to be studiedduring projectimplementation.

8. The industrialsector would also be an ideal market, given that is a source of waste water and is not as demandingwith regards to the qualityof its water feed. Additionally,the costs of infrastructureand servicingsuch a client are substantiallyhigher, as the industrialclient requires highvolumes and continuousattention, which ONASacknowledges. A recyclingstrategy making the largerindustries self-sufficient would help ONASavoid these capacitycosts so as to reducethe differentialsbetween tariffs and LRAIC. Thismarket is, however,limited by ONAS's grid which is not exhaustivein the industrialareas. Again, another ministryis involved. Grid consolidation and expansionopporunities in these areas shouldbe explored.

9. The touristsector is also attractive, especiallywith the emphasisthat the Governmenthas placedon golf. Golf coursescan be designedto be self-sufficientand to also utilize recycledwater. The golf course in (in northem Tunis) has such a system in place. This potential is limited,however, by the liberty given to each developmentto establishits own wells, which are -53-

ANNEX 7 Page 3 of 4 often tappedfor free duringperiods of low rainfall. As the touristareas of Hammametand Sousse are the principalareas with such activity,the negativeexternalities in terms of groundwatercost for the contiguousagricultural and human needsmust also be considered. ONAS reportsthat there is little to no inter-ministerialsupport, which would be needed to overcomethe aboveconstraints. The Bankshould focus on overcomingsuch resistance.

Cost Constraints

10. The prospectiveprivate operator would also face the following cost constraints, thus limitingthe degreeof privateinvolvement. Below are someof the principalconstraints.

(a) Debt Costs. The capital-intensivenature of the businessand the long economiclife of the capital assets requiresthe access to long-termcapital in domesticmarkets. The Tunisian bank market is currently unequippedto provide such capital, which limits the purchasing power of the Tunisianprivate sectorand, if it were feasiblewith short-termdebt, it would require an uneconomicallyhigh tariff structureto servicedebt amortization. The Bankmust emphasizethe crucial importanceof an infrastructurefunding vehicle for future PSP. Absent such a fundingvenue, the solutionwould be to have the public sector retain the capital assets, with their operation and management being in private hands. The govenmment'scurrent costs of capital approximateLibor + 70 b.p.'s (most recent Euro- loan issue (1/26/96)),which would be very hard for any Tunisianor foreignprivate firm to competewith.

(b) ProductionCosts. Waste-watertreatment is, by its very nature, a joint or commnonactivity with other economicactivities. ONAS, however,is structuredand treated as a stand-alone entity dependententirely on a governmenttariff for its revenuesand unable to commingle its operatingcosts with other activitiesto enjoy common-or joint-costingstructures. A privateoperator would be expectedto assumesuch a cost structure. Greateremphasis must be placed on the co-productionof waste-water treatment, especially where there are thermally-intensiveprocesses (such as power generation,chemical recovery, or refining processes) and the possibility for industrial self-sufficiency. Again, inter-ministerial cooperationis an essentialmeans to achievingsuch ends.

(c) Equit Capacity. ONAS is currendy not allowed to invest jointly in water-treatment projects,which is also a disincentiveto any private investorwho would considerONAS's experiencein the sectorand would not investmore than a 50%, for balancesheet reporting purposes,toward any investment. -54-

ANNEX 7 Page 4 of 4 SUMMARY

11. ONAS has great potential eventuallyto become a management/concessionarycompany which could, over time, (i) sub-contractout substantialoperational and managerialservices to the Tunisianprivate sector, (ii) invest in joint ventureswith other privateor public sectorventures, or (iii) possiblylease certain fixed assetsover the long term. The means to achievingthese ends, includethe debottleneckingof certain structuralconstraints, so that the pilot projects result may enjoy a broader field for implementation.

12. The Bankhas re-emphasizedthe availabilityof funds for the BOT project. In the medium- term, the Bankmust pursuethe developmentof an infrastructurefinancing market and the enhanced co-operationbetween ministries as well as an expandednetwork role for ONAS. As indicatedin the economic analysis ONAS cannot expect its cost-orientedstand-alone nature to be entirely coveredby tariffsalone at least for the short term. -55-

ANNEX 8 Page I of 34

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISALREPORT

ONAS: Assumutions of ONAS' Financial Performanceand Projections

Assessment of Current Tariff Policy

1. Over recent years, average charges (both fixed and variable) have increased rapidly. The annual rate of increasefrom 1989 to 1995 averaged about 17%, marking a very significantchange in ONAS's tariff policy. This has resulted in a definite improvement in the coverage of collection, transportation and waste water treatment costs by user fees. In fact, although average charges to all categoriesof users previouslycovered only about 46% of average operating costs, this figure had risen to 80% by 1995. The degree of tariff adjustment has been considerable,with an average increase of about 8-10% in real terms, depending on whether the basis for calculationis the cost of sanitation or the users' purchasingpower.

2 . Nevertheless, the cost recovery problem has not yet been solved, particularly if one considers the opportunity cost of the capital that the Government has transferred to ONAS. Obviously,this opportunity cost must be factored into cost calculations,which must not be based on funding, because this allows cost entries to be reduced artificially by increasing financing from governmentsources, thus reducing the share of debt financing.

3 . The cost of capital used for the purposes of the study is 8%, consisting of a 4% average interest rate paid by ONAS from 1989 to 1993, and a 4% exchange loss caused by the fall in the value of the dinar resulting from the difference in inflation between Tunisia and the lending countries. If this estimated total average cost is factored in, it too shows an improvementin the rate of cost recovery from charges, although not to the same degree as in the case of operating costs. In 1989, average charges covered one third of these costs, whereas in 1993 they covered one half.

4 . Consequently, sanitation services are still highly subsidized, especially in light of the opportunity cost of the capital allocated to them. In 1993, subsidies totaled about D 31 million, allowing for the cost of this funding, or D 9 millionif it is disregarded. It must be emphasized that, because of the considerabledegree of tariff adjustmentover recent years and the uncovered cost of the transferred capital, subsidieshave definitelydecreased, totaling about D 16 millionin 1991. -56-

ANNEX 8 Page 2 of 34 5. These subsidiesare unevenlydistributed among the various users. In 1993, they rangedfrom about D 6.4 per user in the poorestof the residentialblocks (0-20m3) to D 190 for the highestblock (150m3+). Subsidiesper user in the other blocks were about D 28 (20-40m3), D 34 (40-70m3), and D 57 (70-150m3). Even comparedto the total expenditures(or incomes)of the householdsconcerned, the successionof rates from the lowest to the highest blocks is clearly degressive. However,this view of the figuresmust be qualifiedto someextent, since many of the users in the 150m3+ block are not individuals. The discrepanciesamong subsidiesbecome even largerif the opportunitycost of the capitaltransfer is taken into account. As regardsthe productive sector, it is chargedmore than the averagecost (disregardingthe opportunitycost of the capital), except in the case of industries which generate little pollution, since these are subsidized. Nevertheless,it shouldbe noted that these subsidieswere calculatedby applyinga single average cost to both householdusers and the productivesector. This is unrealistic,because the wastewater treatmentcosts for industry,hotels and cateringare probablyhigher than those for households.

6 . This unequaldistribution of subsidiesis combinedwith a tariff structurein which both the fixed and variablecharges are certainlynot progressive. The first impressionis that the consumersin the first block pay twice as much per m3 as those in the next block (2040n?), the reason for this digressiveeffect being the size of the fixed charge appliedto the first block. The rates appliedto the remainingblocks are fairlyprogressive, but only to a minordegree, becausethe average tariff for the 150m3+ block is not even double that charged to the lowest block. A reasonable objective, from the point of view of equity and social solidarity, would be to considerablyincrease the differentialsamong these tariff levels.

TariffScenarios

7. Alternativescenarios were prepared, taking into account the three objectives of efficiency,financial equilibrium, and equity. The first requiresthat tariffs be calculatedaccording to the long-termmarginal cost, whichwas found to be quite large (aboutD 1.100per m3 for 1996). The secondobjective depends on the approachadopted to the cost of sanitation;i.e. everything dependson how the cost of capitalis to be reckoned. Thus, financialequilibrium will be attained with much lower tariffs if the capital transfers are regarded as free of charge than if they are assigneda reasonablelevel of opportunitycost. Finally,the third objectivecalls for the adoptionof certain hypothesesregarding the social weightingsassigned to the various incomeor expenditure levelsassociated with the differentblocks. The hypothesisassmed in the variousscenarios is that theseweightings are in the sameproportion as the differentlevels of total householdexpenditure (as revealedby the National StatisticalInstitute's 1990 Survey of Consumption). As a result, the weightingsrange from 1 (for the lowestblock) to about5.3 (for the 150m3+ householdblock).

The followingscenarios were examined:

A tariff structurebased on averagecosts, withoutpayment of chargesfor the capital transfers; -57-

ANNEX 8 Page 3 of 34

a tariff structurebased on averagecosts, with payment of charges for the capital transfers;

a tariff structure providing for the payment of charges for capital transfers, beginningin 1996;

a tariff structurebased on marginalcosts and socialweightings;

10% annual increases in tariffs from 1996;

8% annual increases in tariffs from 1996;

15% annual increases in tariffs from 1996.

8. Particularattention was givento the final three scenariosin the financialprojections presentedseparately below.

9. The first and third scenarioshave first been analyzedon the assumptionthat demand is totally inelastic, and then that there is a negativedemand responseto tariff increases, with an elasticityof 0.3. The latter case is important, because it takes account of the impact of tariff adjustmentson the demandfor drinkingwater and sanitationservices, and on ONAS revenue. A modelwas preparedfor solvingthe problemof the overlappingeffect of averagecost and demand.

10. Accordingto the first scenario(average costs without any payment of charges for capital transfers,and no demandelasticity), the average tariff (both fixed and variable)for 1995 would have been D 0.372 per in3. In 1993, it would have been D 0.321, comparedwith the actualcharge imposed, which was D 0.251, a differenceof about 27%. If the proposed system of social weightingswere applied,the resultingdistribution of this averagecost amongthe variouscategories of consumerwould be very differentfrom the currentpattern. The averagetariffs for the first and second blocks would be reversed, and the tariffs applied to the remaining blocks would be increased. In particular,the 150m3+ block wouldhave paid D 0.325 per m3 in 1993, insteadof D 0.250. Under the alternativehypothesis (with a demandelasticity in responseto tariffsof 0.3), the average tariff should be increasedby between 3% and 4%. Financially, this scenario would producean operatingsurplus that would cover interestpayments and probableexchange losses, so that the break-evenpoint wouldjust be reached. Once the tariff matchesthis averagecost, it will be increasedevery year by a moderateamount that is very close to the projectedoverall inflation rate (5%). It is clear, from both this scenarioand the others, that the major problemsarise from the transitionfrom the current tariff structureto one based on average cost, and not from any subsequenttariff changes. -58-

ANNEX 8 Page 4 of 34 11. The other realisticscenario is that in which paymentsare made on capital transfers only from 1995, at an annualrate of 8%. This scenariogives an averagetariff of D 0.407 per m3 in 1996 (D 0.437 with an elasticityof 0.3), comparedwith the D 0.393 tariff in the preceding scenario,but the rate of increaseis comparativelyhigh (15% in 1997), becauseof the need to pay for an ever increasingamount of capital transfers. This scenarioshows a net positivebalance for the fiscalperiod from 1996, totalingD 2 millionthis year and rising to about D 16 million in the year 2000. Governmenttransfers will remainstable from 1996 to 2000 (totalingD 33 million in the year 2000, comparedwith D 50 million in scenario 1), despitethe quite ambitiousinvestment programplanned for this period.

12. The scenarioinvolving an increasein the averagetariff at the rate of 10% per year makesit possibleto cover the averagecost withoutpayment on the transferredresources by the year 2001 and subsequentlyprovide payments on those resources. The scenariobased on an 8% rate of increase would enable the average cost to be met only from the year 2006. For these two scenarios,the tariff scheduleshave been drawn up on the basis of the same social weightingsused for the other scenarios.

13. The other scenariosprovide tariff adjusmewntsthat can as theoretical references (particularly,the scenariorelating to tariffsat marginalcost), but implementationof these could not be envisionedin the short or mediumterm.

14. Finally,it shouldbe emphasizedthat it is importantto correctthe current extremely digressivetariff system operatingbetween the first and second blocks. This can be done by restructuringthe billing in the first block by reducingthe fixed charge (for example,from D1.3 to D.05), and increasingthe variable charge from D 0.006 to about D 0.080. This would make it possibleto make the followingblock pay a larger averagevariable charge thanat present. This adjustmentcould be spreadover a numberof years, so as to softenthe impacton this category.

FinancialProjections for the ThreeScenarios Involving Tariff Inurase of 8%, 10%and 15% per Year

15. Three scenanos were preparedfor balance sheet, income statement,and cash-flow statement,based on the followinghypotheses of tariff rates:

- 8 % annualincreases in the averagetariff from 1994;

10% annualincreases in the averagetariff from 1994;

15% annualincreases in the averagetariff from 1994.

In all three cases, the projectionswere madeup to the year 2006. -59-

ANNEX 8 Page 5 of 34 16. It should be noted that the tariff policy adoptedhas an impactnot only on ONAS' revenueas this is shownin the incomestatement, but also on indebtednessand inventories,and on the commercialdebts and equipmentsubsidies received on capitalinvestments.

HypothesesRelating to Itemsin the BalanceSheet

17. Gross fixed assetsincrease every year by the amountof capitalinvestment. For the first three years (1994-96),investment is concernedwith activitiesrelating to "waste water" and "storm water". Subsequendy,investment is madeonly in "wastewater" activities. The volume of investmentis equivalentto D 80 millionper year (in currentdinars), and the processcontinues up to the year 2006.

(i) Current and other capital investmentshave been assumedto remainconstant. The level for the years from 1995 to 2006 is as shownin the balancesheet for 1994.

(ii) Inventorieshave been assessedon the basis of average inventoryturnover ratios over a periodof years (i.e. from 1989to 1993).

(iii) Receivableshave beenprojected assuming an averagecollection period of 120 days. This is basedon calculationsof the averagecollection periods in recentyears.

(iv) Changesin other liquid assetshave been assumedto be at the rate of 5% per year (i.e. the inflationrate).

(v) Equity increases by the amount of new investment,plus the amount of debt repayment,and minusnew withdrawalsand amortization.

(vi) Projectedlong-term and medium-termdebt and debts for periods of less than one year are based on the scheduleprovided by ONAS. In the case of debts for periodsof less than one year, the figureshown on the balancesheet for any given year is equivalentto the repaymentsplanned for the followingyear.

(vii) Other short-termdebts have been assumedto increaseat the same rate as inflation (5%)

AssumptionsRelating to operatingcosts and revenues

18. Forecastsrelated to revenuesand expendituresare as follows:

(i) Income from services is assumedto increaseat the rate of D 300,000 per year. These activitiesare secondary,and the assumptionseems realistic,in light of performance over recentyears. -60-

ANNEX 8 Page 6 of 34

(ii) Other revenues(i.e. Communes)are assumedto correspondto revenuefrom storm water activitiesand give rise to an equivalentlevel of costs. The latter are calculatedto be 12% of ONAS's total costs. This breakdownis based on the assumptionthat 1 km of the storm water system is two times less expensive in costs than 1 km of the waste water system. The storm water system constitutesonly 20% of ONAS's total network, and therefore12% of costs are allocatedto this activity.

(iii) The State is supposedto cease providingoperating subsidies once the averagetariff exceedsthe averagecost. Thesetwo parametersare includedin the tableof overalldata for each of the three scenarios. Once the averagetariff exceedsthe cost, the State no longer pays the subsidy shown in the profit/loss account (under the heading "Autres produits" [otherrevenues]). It must also be emphasizedthat the State also contributesto investment in the form of an equipment subsidy, which is shown in the table of sources and applicationsof funds (under the heading "Apportde l'Etat" [Governmentcontribution]). Onceinvestment needs can be coveredby the funds generatedby the tariff policy, the State will cease to providethis subsidy. Any surplusfunds not used to financesuch investment must be paid to the State (under the heading "Versementa l'Etat" [Payment to the Government]),as shownin the tableof sourcesand applicationsof funds.

(iv) The depreciationrate appliedto fixed assets is a weighted average of the rates applicableto the variousfixed assets. The averagerate is 4%, with an averagedepreciation periodof 25 years. Sincethe investmentpolicy is the samein all three cases, the rate gives the same totalfor depreciationin all three scenarios.

(v) The annual amountof interestpayments is taken from the debt repaymentschedule preparedby ONAS.

(vi) Exchangelosses are calculatedto be 4% of the debt level, this being the difference betweeninflation rates in Tunisiaand the rest of the world, the local rate being about 4.5%, while elsewhereit is from 2.5% to 3%.

(vii) Exceptionalitems appear only prior to 1995, since real figures are given for this year. This headingis left blank for other years, since such items, by their very nature, are unforeseeable.

Definitions:

19. The followingdefinitions are used for the variousparameters selected:

- Internal cash generationratio: intemal sourcesof funds/Fixedassets. This indicatesthe rate at which capitalcosts are being recoveredfrom tariffs. -61-

ANNEX 8 Page 7 of 34

Debt servicecoverage ratio: intemal sourcesof funds/debtservice.

Net workingcapital (fonds de roulementnet): equity + mediumand long-termdebt -fixed assets. It can be interpretedto be the surplusof investedcapital (capitauxpemanents), consistingof equityand debt with maturitiesbeyond one year, that is usablein the operating period becauseit is not used in financingthe capital investmentappearing in the balance sheet.

Operating ratio: operating expenses (excludes expenses on financial resources/Gross revenues).

Workingcapital requirement(besoin en fonds de roulement): inventory + receivables - payables. When positive, it can be interpreted as representing the total financing requirementsfor an enterprise'soperations. Generally,it is brokendown into a "cyclical" workingcapital requirement(the level of this dependingon the volume of activity)and a "non-cyclic"requirement, essentially depending on contingencies. A reduction in the balancesheet can be interpretedas a reductionin ONAS' financingneeds, and therefore as a resourceor intemallygenerated capital that can be addedto the cashflow.

Cashflow (tresorerie): net working capital - working capital requirement. Financial equilibriumis reflectedin a balancedcash flow (i.e., one that is slightlyin surplus).

Gross cash flow: total revenues(charges to consumers + services + local govemment contributions+ environmentsubsidies - operatingcosts alreadypaid (wastewater + storm water).

20. The debt service coverage and intemal cash generation ratios were calculated from forecastedfinancial statements. These two ratios are the ones covenantedin the previous loan agreements. They focuson two objectives: ONAScapacity to contributein its investmentprogram and the repaymentof its debt. conclusions

21. The three scenarioscan be assessedin light of variouscriteria. The results appear in the tablesannexed to this report, and lead to the followingmain conclusions:

Operatingequilibrium: In light of the hypothesesassumed, the three scenariosproduce results that are at least equivalent to zero. In fact, the balancing subsidy that the Governmentdonates to ONAS is supposedto equal the differencebetween the averagecost and the average tariff. It is no longer to be providedonce the latter increases. At this point, ONASbegins to makea profit. Financialequilibrium, without an operatingsubsidy, -62-

ANNEX 8 Page 8 of 34 is achievedin 1999 with the 15% scenario,in the year 2001 with the 10% scenario,and in 2004 with the 8 % scenario.

Paymentof subsidiesfor investmentsby the Govermnent:According to the hypotheses adopted,the Governmentannual subsidyequals the differencebetween, on the one hand, annual total investmentand debt repayments(i.e. applications)and, on the other, new borrowings, depreciation, contributions from consumers, and surpluses (which are resources). Changesin these capital investmentdepend on the particulartariff scenarioin question. With the 8% scenario,the Governmentcontinues to providesubsidies until 2006, indicatingthat until that time ONAS will be unable to finance its investmentsthrough intemallygenerated funds or by borrowing. With the 10% scenario,subsidies end in 2004, and in 2001 in the case of the 15% scenario.

- bnancialequilibnum as measuredby the level of cash on band shown in the balance sheet: From this point of view, the three tariff scenarios(8%, 10% and 15%) enable ONASto achievea positivecash on hand, risingfrom D 10 millionin 1995 to D 1 million, D 4 millionand D 16 million, respectively,in 2006. The level of cash on hand achieved under the 15% scenariomay appearexcessive.

- Changesin financialparameters: The first paramneteris internal cash generationratio which affects the ratio betweeninternally generated funds and averageinvestment. It dependson ONAS's self-financingcapacity. It standsat about 23% in 1995, and reaches 100%, 150% and 320% by the year 2006 for the 8%, 10% and 15% scenarios,respectively. These trends confirm the conclusionsdrawn with regard to the Government'ssubsidy for investments. The second parametercalculated is the debt service ratio, i.e. internallygenerated funds/debt servicing, the latter being the total for interestpayments, exchange losses, and repaymentsof debt principal. From a level of 0.8 in 1995 for all three scenarios, this ratio rises in 2006 to 2.6 for the 8% scenario,3.8 for the 10% scenario, and to 8.0 for the 15% scenario. The third parameter is the ratio of equity and total indebtedness. This rises from 25% in 1995 to 34%, 36% and 45%, respectively.This is logical, sincethe substantialrate of increasein tariffs resultsin a considerable level of financialindependence. The final ratio to be consideredis the working capital ratio, consistingof currentassets/short-term debt. This ratio also providesa useful tool for measuringnet workingcapital. There are two importantcomnments to be made. First, in all three scenariosthe ratio is at all timesgreater than 1, indicatingthat the workingcapital ratio is positivethroughout the period. Second,assumptions relating to debt and investmentare identicalin all three cases, and the surpluscash on hand resultingfrom increasedtariffs is assumedto be offset by a reductionin the Government'scontribution in the form of capital investment. The combinationof these various elementsproduces curves that are practicallyidentical, i.e. becausethe levelsof current assetsand short-termdebts are of the sameorder. -63-

ANNEX 8 Page 9 of 34 22. The main conclusionto be drawn from these calculationsis that, in all three cases, ONAS achieves operatingequilibrium by the year 2006; dependingon the size of the rate of increase in tariffs. The 15% scenario suffers from the disadvantage of producing liquidity disequilibrium,in additionto requiringa rate of increasein tariffs that consumerscould probably not afford. -64-

ANNEX 8 Page 10 of 34

CHANGESIN TEE WOREING CAPITAL RATIO (8% SCENARIO)

14

0,6 0,4 *4.

-1984 885 1988 19¶7 1838 1998 2000 2001 2002 2003 2004 2005 2006

CHANGES IN THE WORKING CAPITAL RATIO (10% SCENARIO)

1,4

0,4 0.2

1884 8s5 1996 1887 1888 1998 2000 2001 2002 2003 2004 2005 2001

CHANGES IN TBE WORKING CAPITAL RATIO (15% SCENARIO)

1,2-

0,1 0,4

1884 985 1886 1997 1898 1899 2000 2001 2002 2003 2004 2005 2006 -65-

AMNX Page 11 of 34

REPUBLUCOF TUNISU

GREATER TUNIS SEWERAGE ANDREUSE ]PROJECI

STAFF APPRAISAL REPORT

ONAS

Financial Statements. Proiections 1994-2006 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT DONNEES GLOSALES STAFFAPPRAISAL REPORT

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r-r LJ4 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRAISALREPORT *cmsMIA * % INLANSPREV15IONNELS

!'a' ! at- . isslt tt1yii4i2 1*14 tI .itni. ^ i zsT*,li J 'Setiiiltit I zU -,.4Uasest.t i0 . Ilg^;.

A4M0015A101SOUrIS 4,4.00 405.672 441.213 O l in, AbOSSMAIOSI0111 AMOSIUSUOV4TS 125.241 1.2 64.2222 102t.22 11 252.142 ~~~~~~~~045*44 ~~~~~~14i.22251t111.62.2,1 52*191102.111 222.117 217.nj n.21 2 m 4 _o outelttr 401.011 624.055 20001152 34.110sr 114,25,na, 4,bo nt I w. ws,n 4sOki I as~~~~~~~~~~~~~~uu iouu41 53,1628,14222,s" s 1519.22s.v41 o5 M5 tol cC,3 $3.0 $Is,*" "I'm sm £6955,AltO.I 52A27 56.20? 1.11 74t. Mr" ,0 as1 t.014 11 11.3? .241 4141.2 0.1 ,12 1.02 0.102 to 11.251 4,2117 t21 kw15 41.1f3 5.6 .516 3 .. SIIOTAL 16 .153 0.163 111.33 4(561o 495e"1 tnUt7 | 2105 094 "flt M7AN 443Itn m.rr VNEIM4 IX9IO(7ATUI40 3.4 #31,9 05.419 d.2091t341209m6.*.ohm..4 4.52* 4.110 11 of30 0 .4k4. 0011)Xtelett 11.12| 1.151 5.03*26 4.42 A05761SVMr5UEMlS 2S 05.02 4C1.401 5 20.654 1.4 245 2101.1 ArS0. 21315 2tl,11 20.0 34.42 35.0 35.509 21C,1S 20.240 ^41.21 44.1091 011 t 4.3422 #44) 41.0 I' . 12e3 55211 j 50043

tA11o10*A1,W | 11t4 | E.N trottttt1ttA1nF tJt, || t22 . 4102.719 1it4 1t9J, 1t4.ntl N6t,in ILr 1...6I roreAcrtr n I r,m 7,447 7.214 *tH t tleto u I 7,I02 nr I rittn iettSi.4 tFt4,trt4 tiu,ffin zin,tt I th4"'nsi 1 11tttr~~~~~~~~~~~~~614OI 14 rAxtttt- . ______.1 ., .5)0 -_- _ PASSe

1rOT4 352n 404.W4 421.41 4"21W MAW2 543,1 64U,021 59,.21 A70r [s,XWW4r4 ha,1 72.2 743.114 Cm 54609f W^ t§13|AI*S 0.430 * .. 1*0zw 0 4t4CSn,rm 5409 5,0* 6110 '4.31 1421 0 36.n i4.0 0. | 40.00 48159 62t 100341 40.11 1.1 7.1104 6L340 6.11 1 1.3245 11.025 36.01 0211 0.40 2.01 5190140.S 22125 43.501 55,211 90100 041 PAaSOMAs 6.0 301 15.0 1210 0413 22.344I'm 24.002 f421 4.0 2.22.1 .WtIIS90t 1i8AolMTtt6M5 25,250 2.2 346 3.2 10.046 4504, 40.002 412 4.1 214 1.4102 U10.10 17.tl3 15,406 49,236t0 3.111 15.217 5.1 "22, 2I.4t0 14.45 20.302 600645ff.0114*5504091 5.110 5.502 5.400 0.63 5,01* 3.63 515551001001195A.piSSIN 42.16' 5.500 0,000 2.21* 2.1.0 6.009 0.220 11.410 42.411 00.011 2'so1,000 2.4112.5Co75 2.051000 0.100 11.140 44.405 12.*40 1I101*1 42.30$41*011 1104141,405 14 65.014 41.104 1547 1A 5211 6.0 9552 6.0 ue3.0 1646171125* TOTALPA~0 465.11 1540.6145 459 1410 5551 1114 95)4 1391 553 4.1 2)2 1595 lns

I$"fg^.t^"1s, | ,"t S *,1 Xa. { ta | *.rz s,ue ze, | 3.§1 zt-l $s,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~$

t V"TAt. 4t.tt4 4s t44 t4,4n nJ 4ttrrIt,titIN.44~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.ptKN*tr,"Ct,|tEUt4 ft t,40 GnP -P, REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND-REUSEPROJECT

STAPF APPRAISALREPORT

COMPTESDE RESULTATS SCONARIOAI %

*~~~~6VM0266 31.36 2616~~~~~~~~~~~~~~~~%Y46* 04.1 62.6 10.40 7114.6 60.53 402.66 116.42 132,02 146.1 146,77 SUR%4CU6IU.NUdU.BMhi606 10 1.54 AUTNES107 1.44 214 244 274 S.04 334> 36 3 424 STAT 4.| 4.84 1.64 I' m 14.32 C0OMtW, 1X 176 10.65 1.47 4.00 7.60 70 .1 0.50 0.e. 10 7 7.6 7.60 0.e 7.0 7. 7D 74 6floTAI 76 7.0 53.7 sky6 74.92 74.111 66.1 62.5 161.32 504.86 114.0? INA,4 dhwV.faidbIm(--#.dvWd-) 444.6 lot."5 18 26.37 32.10 3* 26.02 ChIwg- fapilabibn(se.*) 4,401 47,4 2 52,21 61.64 1.66 1. 1,4 63,55 70.01 7|.2 651 214 2.44 X.04Zn 4 63,0r 0 3.34 364 3,64 t0'2OTAL 4.24 4* 4.84 3436 37.2 41.15 ^445 ski 6432 64166 67,11 t4,66 61.46 M,inW,66. iwS gAw l76 6.3 16.76 2)32 24, 22 20.41 33.67 311,8? 40.07 43.2 461,4? "'v 526? 66.07 610toTAL 51.34 ski" 61.1 6441 75,6 88 8,16 16.6 114M 124.4? 131,1 14251 itUULTATNW UZPLOrITATfON 154. 3SO 04Tm1 1k 4i1 11.1 44.1i 4.87 kI13 4.60 ti,t 3 .8 154 6.7 7.66 12.11 lo2 7,4t P&l" _ 7.0 7.45 7.J2 8.22 2.31 1 4.4 73 |.1.31 *Om4 6L*Mt UCElPYtI UU 5,4 .n 6.18ILI6 . 4.54 5.4 6 86 7 7.45 NESIITAT WiTtOULIUK CIC r.54 1,411 2.611 _4 .1J .37 ,t 4 .7,1 , _4* 7 %I,7Rr

IDtoW Z -u b

0

-4'~ REPUBLICOF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISALREPORT

SCENAROA8 % TABLEAU EMPLOIS-RESSOURCEB

R..*re mImesC CSttW&hk 2Wt24 2;320 'AM0 37.2 464 R ..qi*sjiss_din 4.? 4. 48,2 1.6 4,542 5.423 34.44 6233 1241 83.471

$^0jfflSX 23,6 is,"?1 24.1)0 213#0 Isf.o0 1,e0 1S,010 18l.30 ll '31 47.9 11.7 1s,110 18,160 18,010 18.360 PWao08t_h 41 4.3 44A 403 18.810 e1, 37,42 37.28 40,132.8 1.700 0,50 . . 22.0, 10.4? .

7.1.8 4,583 8 ,8 7 rr,on 10t124 OZ1t.16.138 _16188 164.8 704.4L t4 12.16 11&SU 1 t11,2 n6 ,. lSaFI1Xua tj ltS t^ ww l,i ,,W ai.E StRli a lit tqdlitdJ ' l:Oi*tqll' I W2iit-*stl4''fI - -, tiinl!!I,;8.ItJ§ Emphlo - - Chi,u. de In i. tftt.s lm 3.086 p 55140 O.760 T,0 7.450 7 Y12.M0 t7i20 0 8,720 O,070 1.617 4.432 5.424 5.1?0 o.310 *,O40.3 AM206 e.m O *JNIRS 8.684 1l T55 tt320 11120 7.231 1.440 7.832 7. 12,110 .0 8,100 1130 VYtntm 1S,838 1tY7 1.880 U0 lb t ...... VsI0Itda1MRT 8.06 8.3 4.083 .3.41 4,2 | ,4 8.406 -1.41 8;.8 78.l,15s, 4.5| 1.34 8.02 185.18 183.1 851,54 85,5ttt.6 St$e 1.6 4.89 414.48 4183 11468t 811,68

Jf~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(

z

m xM

tpA REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

SCENARIO A * DVOLUTIODUCERTAIWtIND4TEups nIa walili 1I[ItzI1.4 i it! j =iUnli

1.11* 1.110 1.111 1.102 1.127 1.415 1*1 lawt 12 law 1,222 202 i,18 ITtPttIACOURTITO I1TTtSeACOUNTTIIWU 11i1 0.35 0.300 1121 0.214 6.21 at216 9.31r 0.11104 20. D6IT flIFOID. P1OPRl 6.2* @0.0 025* 71U6 24.5 24.40 11.264 27217 .2.526 22.062 11.601 1RV6CtULAD TE01 2..77*. 1*.40 14,929 21.624 34.120 4t.171 40.300 44.5 50.443 "A" A13. 62.24* Ms"6 62.5s TONAl0Omit gNilN 13.515 1.6*,r 24.6171 3.66 >' 14 i L:2I, l"lCtit1 t I1A I,liis14.tj1iildiS l!lelli dhtlll-iEil0EldluWrlpol¶ .1 4.II iL tW htiiDeiii lJ .i SWX1iikX AIIII 2.634 2.4 1.112 1.70 1.1 1.14 2.06 26 1,06 1.617 TAIXDOCXOUVRTURE 0.50 0.6? 11.11t 0.517 0.55? 0.631 0.711 0.064 0.77r 0.,t2 1.045 001405umoItNtlTEru6IuIvunuamet utTi bOY. e0. 0.230 0.477 o.

EVOLUTIONDES INDICATEURS CONTRACTUELS

2.500

|D000 I T _ll

2002 2003 2004 2005 2000 1994 1995 1990 1907 1991999 2 2001

U3 Z>

4 {X

-- REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFFAPPRAISAL REPORT DONNEES GLOBALES SCENIARIOA 10 %

CON6o r4Afl 10,eo 134.50 14.1 10,4 1M.=2 1651 174.21 162.2 192,07 201W1 211.75 222.34 233.44 TAM MOVEN 0.271 0.312 0.242 0.377 0,415 0.45? 0.52 00i0,s 0,o, o.a 00e30 lRDEvAJ6CSTOTALS ,25.214 3,156 41.111 50461 6s5 7W,76l 67.500 1o01. 1ii1634 14.621 152.27 IE 64 207.743

NUMOU1ATIO0N6O4UTbPE rIOD6 44.43 053.41 543.41 *41.4 721t, 801S6 al," g61a.4" 10416 1121D64 1201* 1261.51 125I." 666641IS863661118 50.2411 ' 474 54.25 4 .00 60.05 60.00 6O.00s0.00. M0.00 10.40 40.00 80.00 6uom6i6AT10NS 730a46 P63100 515.6? 56145 6,41.46 721M.6 60.4 661.66 0to.66 104.16 1121i.6 1201.66 1211.11 121. 1441061 mvEa milySmoTEIG:I01240o3 60.74 GO.6 7275 o0,00 0,o00 BOO0 *0,00 60,00 10000.00 01.05

AMRIOUMEITs DE5UTDE PlROoe 141.321 165.624 1l636 223.557 257.224 214,005 M14. 35.4n21 421.050* 417.5s4 502,421 AMoRITIuES T DtSL4ANNE6 10,405 . 1,46 24,501 271266 0.46 T3.6 26.806 40,066 4,26 46,460 4.1611 52.666 56.066 ArDrThSe T6 MN6Ar4NEl 120.s11 141.221 165.24 163.091 22355 29.224 234.000 314,157 377.423 423,s00 4131554 526,423 54t,401

CHAROGSDZXP. EAU VEWJ Ui 0.1t 4.20e7 0,21 0,22m p.240 0625 0.254 0.2?7 0.291 0,206 0,21 0.JJ 0.354 _ CHMARGODES?. EfAUUStES I46S 25.445 24.246 32.142 34.224 7.053 41.733 46,010 50.727 65,53 61450 67.676 74.644 *2.424 CHARGESDEPJAU USE!E PLUILEr 2.3?r J2.10 "3".1 3J.02 41.01 47,42 52,2J 57.54 63.53 70.07 77,25 65.17 53,90 |-! 1;;Rs 4t1!...1i%,1%..l8a ...... mimi .....nmilnwt;rie4§"¢lkim 2 1 404W15. .i:l,iij2.!1l' it k42e..;rs-t;, e

FONDSrROF60E 3152.27 404.514 4Z1,44t 46t,512 005,110 545.62D 5t1.423 612,t46 *44.120 175,43 70,367 72,130 748,574

DmE11N DEAUTDA4NE1 6.070 4S"452 4.6O,3 "An0 1e02s6 10Us 1116w% 122M 121b.66O 125S07 1322.6 134.458 NOUVIEAUXETlRETAS NUN ISRUNT8 22.160 1s36 24.0 2.66 1M100 16.000 16,030 1.1110 1M,160 1.060 1.11010 15,020 SItMOURSMENI4 AIINUEL 20.66 1t.J75t *.65? *a220 111t0 12.1tl 10J50 t.700 115ts 650 10 .7NM 15.0 14.330 * ETTFIN ANNEI 61,452 65.464 0.624 2.06 100.151 104.3SS 113.61 , 122,106 124.681 123.576 1326 134.45t 134.145 DITTAPLUOINMOU14AN t7 Dt467 *.Jt 1510 12,ttO 1650 tJO0 1t,550 1D.850 15,770 15.610 14.220 14.330 DSTTUAPI.UIDUNtAN 45.867 54.200 71.666 6t2.421 66.11 6,644 101,666 10.656 16so1 111.06 11,66 120.26 1224sts11 tADtWA L75 UAM AN ,0.6 ,1.290 11.070 21.40 26.430 34.660 40*.60 45.50 *2.2co SUMD1A 664DMsIIAN , t70e0 ti6o 2.010 2.40 2.070 AUT7 D0m6 AnLUS DUNAN 46.67 66,206 71.616 2,43.6 *1.7 00.216 0.526 "AGO ' 3.3 7. 546 74.541 7.134 70.470 AuTRtDtTTsIAN tW6 AN 13.75 8.43? 6.3320 tt.fre 12.1a 0 1teu.700 e.550 14.150 1U.010 1Me0 *1,400 1f.460

COOTtOD tN 0.oast 0.54 0.423 0.45s 0.461 6,601 0.521 0.545 0.6 0.50 0S5W7 484 0.52 SU6NT1ON DtEEPLOTAT 06W LiTAT 4.3D t.t60 12t0 12 10.471 t1 1.32176

to Z t* 2

X

00 0 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRAISALREPORT 8CINAAIOAIs % BEANSPREVIIONNELS

"~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 PDFE _~~~~~~~~~~~~~~~~~~~~~~4 In. 11OUUB6 W P1 120,? WA_ 1341.2 1.842 6. 2 7 26|.x2 24.6 A41N1 2n7.4 8O64UAUI2IC0U610 42.101 4so* 40.41,4 68248 ? .3 A738AUt lt?UM6m02801 .161 86* I0.26? 8.88 6414 88t"6 '822 8,182 6.8 | 418 6.18 '86 81 I021? 6.68 .16 8.162 8.68 AV_TWTAL ILAA61 RELAU | 418 | .13 68 .2 |6 44X"o69WAt e 416.622J,479 4Xt4tt* 8t81t41. 8,4.43. MU??"I 1318847$2 08"1 VAL?SM8D22DC1.0TA1F * Ir.ntZ | X t I s GkI 688,161Ot auJIALU 4.50 rn CUU6641161..4...6w.488**l680In 818 4.32 6.60 I .7 I7.766T 6.67 6.412.602 546,84362.418 08,6 I .0 60.ttZt260 11.67 2fnaln 60.28 14110.8) | 688US SI. 68.2 11.71 15.3 18.280 rEta& 28,26?26.6 4486 6806 U.7026. 8.3 2 21 .268z 600 2474 U.4 lIMtli89.80 721808668 746.7780.24 44.1 4;t26 46t.6 412.62 8 8tlltxn.26 866.34)

ItOTAL to 451664 W368ON3l MVt t81I? 8468 8tt834" 1.0 2 12)6 t08t tt6t6 TOTALACltf 8. ape 8,8t | 04? tT46 1nl. *16.t IUl2s 45416 8,24| t24 8,656 8.824 808,45 048,016_ 80t26 10?." 4ttt ttnt 48,646 718,02 _83808,21 84180 308,21 34,1 80tt.t41 1d)tl?'

Fadtm El 522,61 4 t3 422.446 462m5 AUM~~~~~~~~~~li 6.16 tt4tt0 686422 662.846 ! KW.t 87) 4001 ? fs tlhf tfttt?St!tiWOB7|z;t+1,918'th!! r B ..i 43 716 7,2 746t WfaTAL . W.37 ! {jtSi ____46.007 "Al ; l2to n3e 70.4, E 0 "I 6 i?il m23t1 1Xil.t i! ".I6TI "WI" f100s" 6110134 4 35.27 4641 022446 462.642 568, 64821 80442 661.90 68512 6738 ?J0t3 76110 618,W

10.87016 8454 4680 | 8, 76.6 62.421 6772 68.21 8882 56.8t08 828 7648 18,56 72.62 78.698

AUE0 DE17E01A. C? T4EI W 4 66U41,14055 1 1 40 668 A0J7618061116 AOU* # 1T0 4t 166.644 J s I fwtlW?-l.A6sm IlU 18,14 1,43*t 6 l l |21 428,2405 125. 0,72K 68,64 6080 6.23? 13.5)2 8 6.o68 01.54 66N 6626Ilm 020 141.4101o1 *78?2A.2 46.8O144 18t4.061 2.7s2.8 24.80 16.432?10. 86 4TAL.2.114 48,044 6,4 7 64 882 | 740 |84 644 t1448 1 7 TOWN. ASA4" 4188 4U 1 $41"tlU 1 2 tllJ Two" TtU tlu 44 u 2 |t4 2

iw

00b4 -I l REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFFAPPRAISAL REPORT

COMPTESDE RESULTATS 6CENARIOA 10 %

REDIYANCE0 ~ ~ ~ ~ ~ ~ ~ II ieu' '' t 9421 n. I a,n66 hi nJ1 11f 1nt REMAME11 Ie,1 r WIN2 2576 46.17 wh, 00, 75.161 51.? M0A.Y 116.11 I54,83 1615.73 176K" 2057.7

S&ICUfv4 X 0,3do 5. 1.6l UP | 6 X.4 2.44 AIJISU P300L4IMB 2t4 3.04 35,4 3M 3,14 4.24 4,5 4.64 ETAT 6.54 9.1t1 . t2XtO CWAWJhEIS 1 740 3 0.00 6.00 7,5 0°00 0. 0o ~~~~~ ~~~~~,0 ~~~~~~~~~~~~~070 2*6?7,6 0.00 IN9 ?A60 7,60 srerOTA I,076 6127 6796 ?, 66,t1 l56 fix" 1tttO7,7 141,31 16.56 1, i1 0wVo eve~ ompow mlrd deN) 2_1.1 2.0.iC45 26.0 C, desiaspbbIa (Saivi ) f 45,01 47.4 62.26 S74 1.06 1,54 14 61.3l 76.07 77.20 a5.1 14 244 X 3,64 3;. 35.4 3.64 3,54 4.24 W?OTAL 44 4.5 U14S 3 | si2 41.1£ 4,4 Ok1 | 95 1 UN* 67.0 7400 MAN A4us.m s67 | 523 wodwoI4l 1I.1 21,22 24.50 721 50,42 33.67 36,67 40|07 42.31 46,47 46.67 12,1 66.07 SeTOTAL 4*1)4 76 68 61* 65 4 1 1$1,43 145,6 4S4|11 A5ITAT N WET TA I 1. | 61!*I.n .16 15 tt 617 Ii 3.2 r t 1U I 741 Pl., 3.00 6.54 6,76 I 7,. 44 . 1 4.43 6.4 ,INT O UC3709*6t 67 6 44 5,4 .. 1S 7,63 1.6r KSULTATNE tCOf LYiNaC"z ,,,,40 5.1 .07 s.1. *5,7 .6,7 ,,r 52.26§ts 17,4

co , Z

O00 REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFFAPPRAISAL REPORT

SCENARIOA 10 % TABLEAU EMPLOIS-RESSOURCES Ill; q,i ti'l,1 qrjiI.111 1'. ll'DIiiiiSi trii 1e 2) .....t! 2 J.i'04J .). IIj 'e ources.-,,_.-. jil 006.

cashamb'd 22.,24 23.220 33,600 3752 40,6t4 hrod o7d u 4.26 43r7 3.023 6W.AS* 2302 4,342 5.423 . 107 102.26 12l,447

wim. mpu0s 15.361 At1O 223I 24.130 2M.M0 18.100 Is,o 361.9 1s,030 10.110 0wte,u to.ee 47.91 W7.7 41,0 4%3 16,000 6,06 16,020 P.4 .*btA. 44.2S 40.66 35.26 26.31 223 1.60IM t.700 6,37 0.600 I ......

told 6t4.056 "A,"3 77,e07 136.374 194.126 105.536 jUl" lt4,46 1et,ra 112,1r 112,326 120,365! 616,47

EmIplols Ghw dto deft W&* MY 3D t30 rP4s Use 7.M 1.460 7.720 dip _ 1220 *.3t,970 9.2f0 2,31 1f.ir 4,422 5.424 * $.54*960* FX1w .700 $.M 817e .5 $,M 20.1 3755 6S.3 7, r251 7.446 7,2 7,040 320 11,676 12.186 10.0 ,70 e 1to,oza t50D 160 MM 160 V omenti0 1?. 14,330 ...... 726 27,499 6'.66bu*Om sw.66.23 W,7,4 1",25 600.0 0 s00 Vn,allon du OFRr 050,0 10,0 0000 0 6.20 9.2 -14060 -1,443 0.3660 60.30 3. 4,3 1714 6,204 -.1.3 .0 .4.443 1| .0.tK2

Di 2 eL 2:

Co * 0 -0, L~~~~~~~~~~~~~~~~~~~~~~~~~J~~~~~ REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT SCENARIOA 10 %

UVOLI.UT IoDS C5RTAS M4aIoCAT6URS 3 ~ 4 It ~ I 1 1 . . i~6A A X1AtouIff*13nIn>coUuxAt0,MUn6t oUTTEWNONS 1.427 .41 4.5105 PN"gCU 1204 1.1 145 0*iMt1 0.M0 0.240 5.210 1.23 1.10 4.10 M UDE177g410 0503 O.= 0.501 14 l,oe.o 1.00t9 26,775 88,40 05306 0.310 0)26 1.0, F011101 = 1OJ37T0III 18.029 21.524 24.40 0.33 0.33? 0.34 M3 23A50 24510 24.40 0.364 ts5.827 34.750 30. 2.r2 33.17F 32.526 44,xt6 415 44.?02 33.441 31170 sso 68.068s F1,430 80.5f2 ioe.m ,2 122 w YAUXE0 COIUVtTURE 0.s 0,85t FOlND.WOfloINEWtlERhUt'/liYIOOtUl@B"IYT 1A40 1,610 1.742 . 0,2U4 1D124 1,822 .154 0.230 0,411 0,405 2424 2.153 25,0 0.510 0,51n 0e,#e 3.03 3.52 0.02o 0.0o, 1P.02 CM210 1,52

EVOLUTIONDES INDICATEURS CONTRACTUELS

39P0 1995 109t 1997 1098 M2001119 200t 2002 2003 2004 2005 2006

l'ooo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ o

I Z NeT'

a Oa2 -h REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFFAPPRAISAL REPORT

DONNEESGLOlALES SCENARIO A 1%

143602 46362 114.21 162,12 102.01 201r 21.76 222.24 223.46 CC t 430.00 36.56 143.33 130.46 0.65 4.06? C.m 1.314 0.271 6.312 0.356 0.483 0.474 0.964 0.627 0.1`21 0.6.0 2A6*1MoVES 7433 60506 W.21t 131.142 156.344 162,4D 23.2 2lOMI .53 N66VAIC TOTAL 25256 3.56 51.406 6.n 420436 123s6 1361.6 1l Wm 44%ss M1A 6613 WAS 564* 46*136 44210 5h6OmU*OI3WITD to 450.1 60366 6s.00 5M,25 "AD o0.6e0o0 60.00 66.66 10.60D .60,06 WV" 6 1 5,z246 61,74 1441.6 636 53 561. 1041.10 1121,6s 120.6 12613 163 06JAn11mtNf *p6o* 515.61 6341 6*636 121.S no,0 q000 80360 603 60.60 6036 600 0.00 6WIT361ins61 MOTEl eI4d#bpV 6074 It." 72s7 6060.00

1t6 223,T 2224 214.00 334.157 37,4n 4121 473.6 $2,6423 AMOR1SIN1T6 EStUTDe P111001 140.323 . 124 30.466 33.0 36. 40,e6 43,26 41.4i6 46,666 2,666 56.6 A11065"6 0!V6 %4646 146.14 24 tt 2736 222. 25.224 254,090 334.15 31.42 4223.00 47336 526.423 s124s5 626RT1 5 sT6Ot 0 ma* 120.21n 14U.2 1405.24 1t*309

0,251 0,306 0,321 0337 0.354 0.16 0.20T 0,2tt 62 0240 0,252 6,264 0.277 cHARM4 ?. 1WWtEF*to 62.626 37.M 4t,133 .010 50.722 J5.927 I1S56 *76 74.646 CHGES UVW. 05lEAU (t) 2'J45 2624 3t142 34334 4t.01 41,42 12,2t UN 63,55 70N0 7T,25 5s.1?7 93.8 ' CHARtoMWW.EA U186661pLUnAlE 29.3T 3210 xX 3502

741,574 50t."I 5"4126 5i1.423 S1246 643120 673,343 703m6? f6330 PONDIIrttor)t M32M7 404.74 422.449 462.S12 132,266 124.453 80o. ".A" 400 106.395 113t,6 122,1t6 126.S6 129.676 GTTr IEIt UUT68 tN1 30.67o0 2452 63,064 1O.to,0o 1,o0 1,030 It'll0 16.0to 16.160 16.66 16.01 16.026 WOIV!AUXURTRTS 6l1.8 rREuStI 23,116 I5.7 - 24.720 21. 11110 12,110 W0I6N *700 11500 1650 157o lIWo 14.2e tOREOIM MIs A1061KsB 20.1o6 13.755 .637 6320 1 e5 1016.30 112,65 122,110 1222 12MO 12 14. 1 DETT tI 0At1rt 6S45i2 65i64 ".13 60 t2.1i 10.690o 0.700 11.90 16,650 1S.T77 15390 14.320 14O UttUA OMOhSNA*A 137ns 6.657 9.320 I.N 66.s6 666 403366 "06 111 12 "' 120.26 423.6 MEUA ft16WINM 4A.61 6.2"6 74346 6236 0.360 6.260 13.070 24.1110 26.430 24.660 40.630 46.90 M2,26 650ONAPL USD AN 2.706 2.160 2,710 2,10o 2i70t lMOINUA m6nSo AN - 611 60.626 "'66 63.26 76.14 76.66 12.13 70.64 AUITMRUMIO tAPIISAS 4.72 71316 62.486 . 1066,700 11,553 t4.130 12.010 13.06 11.410 11.460 AIITMU6S6T ANM016P AN 13.756 6.657 6.320 11.170 12.166

6.461 0-301 0.521 0.541 6.5 e 634 0.6O2 COOTUol 0,31 6.24 0.426 0.466 61114N110 &UPIMOWAMl PKLIlAAI 4.626 6.96 W0o07 S.663 1.116

iD Z m N X co 0 -h t ~~~~~~~~~~~L4W. REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFFAPPRAISAL REPORT MWEARI A if % 9LANSPANYWNWA MP

114066 1066VIIl* il 3668 IU so I I92 lOice 214ks M0A1568J6~3T* 120,110 541.223 145.124 593.369 223.897 OUUMt Jow"tgo 231.3241 294.300,42l460 334,161 31742) 27 .143 N4W 4 ,3t6 423.600 473.38 66.42" t_Ad n4 68ac e 4Mil 4111,0 $31.13 51113 .1125 "Altr 011 151.71t33 U2 AO IMVALSI6611063A6S 1".M3 ".1 6AS2 3A6 1 W6 TrIeuw 6.6 6.251 so,") 43.25? ",1 .1 6.3,13 3.163 9.112 111.251 .2 1 915) 63,t 3.183 9.13 INTOAL 9.16 ,j 6.la 9.1 .33 4423a * ^8" S ll 4 6 OMAN 61412 W."s 744.1 T777112 603.16 V'AL.a b30f0CfllA l4 "U2 61 4.004, 112 0.31 CLOlt 120 *d,w J I 9t 7.92 0.200 li.116 13,42 12* ) 82.49 57.125 t4.P 1071 2.031 ' A43U V8W30 9 6 34 14 30.104 3.,39 U 4.4<3 M9I06M.S 29.21 3 36,420 43.137 6.115 04.116 0 .47 .4 *4. 16 77.444 903.164 592.95 43,392 40.51 4t.420 6,20 62.721 1.38 632 61.43I

6tl1aAl T839036RMA.68 V 81 s4. . 113.84t 6.10 426 1812.1113 11.11 *33.17= tOtALAC1T 3.4 3.3 It'll3205. 12.1172 4L4.1 t 1 1.5 14.1148 13.231373 MI.2 US,21 . l ,H m157.1416,414 1#,1! 1814.21 10,6"l" |f ptit;!8+Yltwl 7'h 969 1iislg R *IIItI200.'JI ±4J2Ol4 i'.2;1 ii!, j!i tj,t *14 ttl's'l ii'! '174ilsItllti 41 ; 14

tt,p_'w6 36&227 4041T14 42.4 42.12 1"kil I406 U11423 0123 041, 274 7W.W? | 231

ttToT7. SW I 48814 444 414702 7m. 34.6 12 Ittl4 412 elm T6 3.1 14 m *.9.r0 MII 8VIOt 3.eo Ass 11.no 11303.070 211 | ,430 48.661 88,4." 1110 34n149 40.120 486n2W C 0,1 T 3 |7.3" 16,64" On111 11.66 11.538 711|.40 4.6 661 ol4.6l 6148 a" 6306 50.0 1598 111.1116 | Pt3SS66)3* 1*3 I1t3" 12J653 0*2.8t6 23.311 SIP "An AU MDTUACaU.31191 31471 36*" 4754 07,1t 14.10 141 86,02 61,351 1,1" 1212* 0,.062 "1 517 t3.46 046.71 171". I,3 n3,1 21.310 32,210 fMPa-'r OIMMU0DN 2140 24666 29.112 000 eP0 Wl bW0 $1J1195U094rA.018A- L8A 61 6.1D om o.oo 52.m1 6.85 8,2 2raO. 2.71 2,510 2,870 15' 14100 556 1.011.14. .30 2.190IDA51.660 2,310 "VrAL. 19.44,60 81.460flA I6224 43.13 424 413 6662al 16.44 sk.in6 56391 1*1.11 41313 163.98 11 i.7 25.441

ttYTr- -" TOTALP"W -: - -. -w - - - 41116,114 - - - "Wil "011,2114~~~~~~~~~~~~~~~~~~~~~~~~~fi~

N0 X

-vL-JI 00 -h AIA REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFFAPPRAISAL REPORT

COMPTESDE RESULTAT8 SCEAROR A 165%

ritmmWeVEM 56 2.6 5.41 25 74.6 80.5 166.2 5m013 112.41 122 8.4107

AtTEIPPOPTI SUNV1C38(mx.ds0.3i.qmhusd.).54 2.447 3Mso 313 , 4 .448

CGUIUAIU 0. 110 1 1 1.50~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A 1N FAD0 10 7.0 MfOTAL 7.50 Tim T." IN5 832 M 62 1.16.5 136 1.2150165 5.5541 1.5215 O~~wgu,E.I~da*uam480iS.) i ~SAS 25,17 23. 21.26 26.32 Clwgadsqiorblkan(SW*"cs) 41.01 41.42 52.26 87.64 1 1021 53.55 70.07.li 10.1730 ZI 2.44 Z,14 3SM 334 3.54 2304 4.24 &MOAL AM5 4.4 -3 3I 364123 419 43.86.631 06 61.13 14.6 6In4 33.6 .7 pd0.1640dpuSds 10.76 21.22 ~~~~~~~~212 ~ ~~~~~~~~~~24011.1386.3 00 3 45.4 43.07 56.0

hSN.WTATrNIVDOZPLOffAW6N 3.4 46 .1 1323 13.16 11.3 An. 41.65 60.1 Pods,didinp of4536 15341i 16'0. .2 .24.204201 .4604 .8 B61TA MT adLUOUnmit .87 1.41 7.6 410 54 1I0 V tXI f

-o to m N

0 -5, LX4 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISALREPORT

SCENARIOA 15 % TABLEAUEMPLOS-RESSOURCES

w ZS24 32 360 3 PC*&-ON 405"24 513 6 4S42 6.42 . 1 125 . 2524 . . . . __muam6IYfl6I .2.8 156 AV 011301 243 2166 11 3136 u8.p" 81 * 4ON6 V,r4 4110 1t1 10.1m kWh P6uM 45.36 53 216 tun 1.6 l 1ah M.Y1 . 3.3 - ...... TIW 64.63 35,663 77.313 tZ186.674 168.12J 166513 164566 134AM 121.561 1466M" 1 6,_ 22IM325 216.411

ElllPhb aaVpe ldento --- ~8 . _ 3.27 30 pmod_ A ILI Xw ?.A 236 1317 rXrs kn &I A4Iep~~~~~~~~~ 4,132 8.424 56 l,w ks" I"l 36366 586 .4116 6.51 1~~~~~~~~~~3.75637 6.2 63604 i1n 7446 14.116 12.110 1336 133 14 3710 It,5$6 "AD66 V ehus 1is"1 18. 14.33 I fIaI ...... 14,233 64325 8U.2#2 113 Ism vwtsIkaijaBJRr 3X 6 -.22 | ' .11 .1312 13563- 6333 2 56 F 113 .2320 033 4361 4o 651 46.92 46,1 16,1 . .4.61 4454 1613 113.1 141.1 1166 295,3 26t12

va,*"n cm rfI r AM 12 f -tlm~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ia:

ID Z

m N X IA

Ott

W REPUBLIC OF TUNISIA

GREATERTUNIS SEWERAGE AND REUSE PROJECT

STAFFAPPRAISAL REPORT

SCENAIO IS %

AaWrACOMT ?m3XOUTUSA* CCTTa*h .21 1.415 1 1 *1 t.22" I.M U.? 1.1" I.. tIns t*u lint scsi vmnsa.PS Paee.ue ease e, ss 11s. 5.351 5.315Ms SAY slMs s, em pm S.46 0.4, st5.lMOSMOL 206f5 20.11 . 10.46 18.60" 23.3 24.120 20.50 24*00 24.41 27.35 W"11 22.5 33n52 VAN6 roles *3s'OUUUTIDM 13.615 05.62? 34941 3."5062 41.605 4$X46372 $t,ft6434.453" tM2 30*4Z 20496? 25"5

lAUS9CWJ TUf 6.5 0*.1 sS *2 ).I 32 24Z4 3.448 4.O5 92n A5N O.2n MaoS romps Vouiniu mllltawlSEnsSuntlOiY. 0.224 ease p.400 6.452 0*21 0*11 @900 1.6It O3n t1*20 2.0t0 2251 3.16

0o

EVOLUTION DE9 INDICATEURS CONTRACTUEL8

9.000 4.0W0 PI1111] i' i r . 2 1

n ,.00 ,;m.,t'.QtA!;!litii',NlTk.IL.1I *'j)!'tuilRW"ASrlI.lE '5 N r t I I w S M T B6:w

3,000 I

1994 1995 H 19t 1997 1698 16n 20 m1 202 2003 2004 2000 2000 .. ~~~~~~~~~~~~~~~~IU _Tss do- _ sd._ UFensOA mat

ID Z *t mX

0

LoiW- -81- ANNEX 8 Page 27 of 3 4

REPUBLIC OF TUNISIA

GREATERTUNIS SEWERAGEAND REUSE PROJECT

STAFFAPPRAISAL REPORT

ONAS Financial Statements 1982-1993 -82- ANNEX 8

Page 28 of 34 REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

SILANS DE SYNTHESE ANNEES 1982-1993

1Je2 1163 . 184 18as 1886 1887 6ss8 11s81 11o 1181 1192 1183

ACTIF

IMMOSIISATSONSBRUTES 75.0 54.8 110.0 120.0 138,4 160,0 182.7 195.9 202,9 254.4 303.7 342.6 AMORTISSEMENTS 1S.8 19.8 24,9 30.2 36,1 43.6 54.8 63.5 70,9 816 93.1 105.5 IMMOSILISATONSNETTES 59M4 65.0 8s51 89.8 102.3 116.5 128,0 132.4 132.t 172.8 210.6 237.0 IMMOBILISATIONSEN COURS 34.7 40.9 37,4 45,4 40.3 40,9 53,9 71.5 91,|0 637 96f5 112.2 AUTRESVALEURSIMMOSILISEES 1.4 1.9 2.2 2.4 2,5 2.5 1.9 3,4 3.6 4.1 5.1 5,4

SrTOTAL e,ss 107,8 124.7 137.8 145.1 150,6 183,7 207,3 226.6 2MI, 31Z21 34.6

VALEURSOEXPL0ITATON 1.0 1.4 1.6 1,5 1.7 2.5 2.1 2.2 2.6 3,1 3.9 4.1 CLIENTS 1.5 2.3 2.9 5.4 4.8 5.8 5.2 8,2 8,4 7.5 9.0 11.0 AUTRESVALEURSREAUSABLES 9,7 Is,8 3,7 5.2 5,2 9,3 11.1 12,2 20.7 26.0 17.8 28.0 OISPONISLE 0.3 0.6 0.6 6.9 8.9 5s. 7.1 5.7 ,5s 6.4 5.2 1.5

SITOTAL 125 23,1 8,8 18,1 20,1 Z2.7 25.5 28.3 3a.3 43ao 35,9 55.1

TOTAL ACTIF 108,0 130,9 133.5 15t.7 165,7 182.8 209.2 23.6, 264.s 303.8, u8.0 4102,

1982 8s83 1864 19ss lo86 1987 1986 1188 11st 1t11 1192 1913 PAS31F

OoTATIONSETAT ET AUTRES 48,8 56.5 66.8 77.3 89,1 94.2 118.8 137,5 179,4 208.0 242.4 276.2 APPORTS OESTIERS 5,6 6.6 7.8 10,0 11,o 13.2 14.7 19,8 24.6 27,9 30.4 36.: RESERVESET PROVISIONSLONGUES 5.2 6.4 7.1 5.9 7.8 7,1 4.3 4.8 5s. 5.2 6,0 9,1 RESULTArS 0.5 -0.9 -4,8 0o, -1,4 .1,4 .N4 .7,9 .4 *S,0 -7,0 .J.2

SITOTAL 60e, 68.$ 7e6. 83.8 106.4 113.1 131.4 154,2 201.4 232.2 n71.8 3172

EMPRUNTaIRO I.II*I 14,2 1S.8 16.8 19.8 19.7 21,0 22.6 21,4 20.1 17,7 16,5 20.2 sIRO IV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0,0 0.0 0.0 0.0 AUTRES EMPRUNTS 19.9 28.1 18,4 18.3 18.4 30. 32.3 33.2 11,4 10,7 15.s 20,1

SITOTAL 34,1 43,9 35,2 37,9 38,2 51,7 s4, 54.6 31s, 28, 32.2 40,3

FOURNISSEURS 6.1 6,5 6.2 6.2 5.2 e,1 8.2 7.3 9,9 14,1 15.s 19.4 AUTRESOETTES A COURTTERME 5,5 8,7 12.3 15,7 11.8 6,4 7.4 9,5 9.6 13.4 t,9 12.8 EMPRUNT* TUNAIN BIRO1.11.1 2.2 3,0 2,9 3.0 4,2 9.4 4.1 5.5 e,t 5.6 4,5 6.9 EMPRUNT . lJUNAN BRD IV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 AUTRESEMPRUNTSA-OJUNAN 0.0 0,0 0,0 0.0 0.0 3.1 4.5 6,4 9.8 14,2 13,8

SrTOTAL 13,8 18,2 21.4 24.9 21.2 17,0 22.9 26.8 32.0 42,0 44.1 52.7

TOTAL PASSIF 106,0 130,1 133,5 166,7 158.8 182,6 201,23 35. 284.1 30St 3A8,0 410.2

8.F.ROULEMENT | G1,41 4.27 (13,11wl (12.80w 18,54(1(0.09) (4.501 14.14)1 0.151w 16.45) (1344l) (8.f58) FONOS o0 ROULEMENT :1,33) 4,92 (12.56)1 (S,87J (0.S41 .9,141 2.38 1.98 6. | (83 .20) 2.94 TRESORERIENETE .31 0,64 0,60 6.1 o. S5.03 | 7,o 5,72 8,45 6.42 S.24j 12.53 -83- ANNEX 8 REPUBLIC OF TUNISIA Page 29 of 34

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

BILANS EN POURCENTAGES(ANNEES 1982.19931

ACTIF 1982 1 198994 1S85 1956 1987 1988 1989 1990 19S1 1992 1t"3 MOYENNE

IMMOSILISATIONSBRUTES 69%1 65% 82% 77% 84% 88% 87% 83% 77% 84% 87% 84% 81% AMAORTISSEMENTS 14% 15% 19% 19% 22% 24% 26% 27% 27% 27% 27% 26% 23% IMMOBILISATONSNSrrES 55% 50% 64% 57% 62% 64% 61% 56% 50% 57% 61% 58% 58% IMMOBIULSATIONSEN COURS 32% 31% 28% 29% 24% 22% 26% 30% 34% 28% 28% 27% 28% AUTRES VALEURSIMMOSILISEES 1% 1% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1%

SrTOTAL 88% 82% 93% 88% 88% 88% 88% 88% 86% 86% 90% 86% 88%

VALEURS0EXPLOITATON 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% CLIENTS 1% 2% 2% 3% 3% 3% 2% 3% 3% 2%1 3% 3% 3% AUTRES VALEURSREALISABLES 9% 14% 3% 3% 3% 5% 5% 5% 8% 9% 5% 7% 6% DISPONIBLE 0% 0% 0% 4% 5% 3% 3% 2% 2% 2% 2% 3% 2Y/

S/TOTAL 12% 18% 7% 12% 12% 12% 12% 12% 14% 14% 10% 14% 12%/

TOTAL ACTIF 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

PASSIF 1982 1983 1984 1985 1986 1 987 1988 1989 1990 1991 1992 1993 MOYENNE

DOTATIONS ETAT ET AUTRES 45% 43% 50% 49% 54% 52% 57% 58% 68% 69% 70% 67% 57S APPORTS OES TIERS 5% 5% 6% 6% 7% 7% 7% 8% 9% 9% 9% 9% 7% RESERVES ET PROVISIONSLONGUES 5% 5% 5% 4% 5% 4% 2% 2% 2% 2% 2% 3% 3% RESULTATS 0% -1% -4% 0% -1% -1% -3% -3% -3% -3% -2% -2% -2%

S/TOTAL 56% 53% 58% 60% 64% 62% 63% 65% 76% 76% 78% 77% 66%

EMPRUNT lIRDO.1-lil 13% t2% 13% 13% 12% 11% 11% 9% 8% 6% 5% 5% 10% BIRO IV 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% AUTRES EMPRUNTS 18% 21% 14% 12% 11% 17% 15% 14% 4% 4% 4% 5% 12Y

&TOTAL 32% 34% 26% 24% 23% 28% 26% 23% 12% 9% 9% 10% 21%

FOURNISSEURS 6% 5% 5% 4% 3% 3% 4% 3% 4% 5% 4% 5% 4% AUTRES DETTES ACOURTTERME 5% 7% 9% 10% 7% 3% 4% 4% 4% 4% 3% 3% 5% EMPRUNT. DUN AN BIROI1el4I11 2% 2% 2°S 2% 3% 3% 2% 2% 2% 2% 1% 2% 2% EMPRUNT - YUN AN BIRO IV 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% AUTRES EMPRUNTSA - D'UNAN 0% 0% 0% 0% 0% 0% 1% 2% 2% 3% 4% 3% 1%

5/TOTAL 13% 14% 16% 16% 13% 10% 11% 11% 120% 14% 130% 1% 10%

TOTALPASSIF 0%10 100% 100% 10%I00 00% 100%.100% 10% 10% 100% 00 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRAISAL REPORT COMPTESDE RESULTAT SYNTHETISES EN MD

1982 1983 1984 1985 1986 1987 1988 1959 1990 1991 1992 1993 MOYENNES PRODUITS

REDEVANCES 4,49 5,57 5,90 8,14 8,39 9.84 TRAVAUX& SERVICES 10.30 12,83 15.03 17,44 22.17 27.21 12,28 0.39 0,67 0.54 0,89 0,63 0,62 CHIFFRED'AFFAIRES 0,89 i.49 1.55 4,67 2,79 2,93 4,88 6.24 6,44 9,03 1,49 9,02 10,46 10.99 14,33 16.58 22,11 UTRESREVENUS 0.36 24,96 30,14 13.76 0,63 0,45 1,07 0,73 0,53 1,40 AUTRESPRODUITS 3.38 3,40 2,11 1,89 2,47 1.54 ETAT 3.84 4,01 4.02 4,25 4,61 4,72 COMMUNES 4.76 5,00 5,40 5,52 6,79 7.65 5,05 3,44 4,24 4,e0 5,60 5,27 5,38 5,38 5,38 5,38 5,38 7,68 8.00 5,50 SITOTAL 12,52 15,12 15,71 19,95 19,64 21,09 22,54 28,10 30,76 35,13 41,33 48,25 25,84 CHARGES

00 PERSONNEL 3,70 4,24 5,49 (5,91 8,33 B,51 7,23 8,52 BIENSCONSOMMES 9,96 11,15 13,20 15,70 8,16 1,16 1.58 1,66 2,07 1,75 2,15 3,21 4,95 4,88 3,94 4,27 5,15 ELECTRICITE 0,97 1,15 3,06 1,27 1,50 1,71 2,12 2.12 2,22 AUTRESSERVICES CONSOMMES 2.44 2,65 2,66 3,14 2,00 0.84 1,03 0.96 1,23 1,39 1,49 1.49 1,69 2.40 5,42 3,91 3,98 2.15 SITOTAL 6,67 8,01 9,38 10,70 11,17 12,26 14,06 17,37 19,68 23,17 24,04 27,96 15,37 AMORTISSEMENTSET PROVISIONS 3,40 4,08 4,75 5,34 6,25 7,02 10,89 9,49 10,37 10,94 13,58 16,79 8,57 S/TOTAL 10,07 12,09 14,13 16,04 17,42 19,28 24,94 26,87 30,05 34,10 RESULTATNET O'EXPLOITATION 2,44 37,62 44,75 23,95 3,03 1,57 3,91 2,23 1,81 (2,41) INTERETS 1,23 0,71 1,02 3,71 3,51 1,90 2,01 2,49 3,35 3,08 3,40 3,64 3,86 3,68 3,25 2,97 3,09 3,97 RESULTATHORS EXPLOITATION 0,09 (1,43) 3,23 (2,09) (0,09) (0,20) 1,84 (0,15) 0,95 RESULTATNET DE L'EXERCICE 2,04 1,36 1,38 1,29 0,42 0,53 (0,89) (3,87) 0,74 (1,38 0,01 (6,41) (1,50) (0,50) (059) 2,00 0,82 (0,92)

OiD D' m zZ W rn

-4,O 0 LA REPUBLIC OF TUNISIA GREATER TUNIS SEWpERAGSEAN USE PROJECT

ELEMENTS DE CHARGESET DE PRODUITSEN POURCENTAGEDU CHIFFRE D'AFFAIRES 1982 1983 1934 1985 1986 1987 198 1989 PRODUITS 1990 1991 1992 1993 MOYENNE

REDEVANCES 92% 89% 92% 90% 93% 94% 94% TRAVAUX& SERVICES 90% 91% 79% 89% 90% 90% 8% 11% 8% 10% 7% 6% CHFRE0'AFFAIRES 6% 10% 9% 21% 11% 10% 10% 100% 100% 100% 100% 100% 100% 100% 100% 100 100% 100% AUTRESREVENUS 7% 10% 100% 100% 7% 12% 8% 5% 13% 0 AUTRESPRODUITS 24% 20% 10% 8% 8 | 11% ETAT 79% 64% 62% 47% 51% 45% COMMUNES 43% 35% 33% 25% 27% 25% 45% 71% 68% 75% 62% 58% 51% 49% 38% 32% 24% 31% 27% 49% SrTOTAL 257% 242% 244% 221% 218% 202% 205% 196% 186% 159% 166% 160% 205% CHARGES

PERSONNEL 76% 68% 85% 65% 70% 62% 66% BIENSCONSOMMES 59% 60% 50% 53% 52% 64% 24% 25% 26% 23% 19% 21% > 29% 35% 29% 18% 17% 17% 24% ELECTRICITE 20% 18% 20% 17% 19% 20% 19% 16% 15% 12% A1JTRESSERVICES CONS0MMES 11% 10% 16% 17% 17% 15% 14% 15% 14% 14% 12% 14% 25% 16% 13% 15% SrTOTAL 137% 128% 146% 119% 124% 117% 128% 121% 119% la5% 96% 93% 119% AMORTISSEMENTSET PROVISIONS - 70% 65% 74% 59% 69% 67% 99% 66% 63% 49% 54% 56% 66% SITOTAL 207% 194% 220% 178% 193% 184% 227% 188% RESULTATNET D'EXPLOITATION 181% 154% 151% 148% 185% 50% 49% 24% 43% 25% INTERETS 17% -22% 9% 4% 5% 15% 12% 41% 40% 52% 34% 19% 38% 35% 35% 26% 20% 13% 12% RESULTATHORS EXPLOITATION 2% -23% 13% 30% -32% -1% -2% 18% -1% 7% RESULTATNET DE L'EXERCICE 12% 6% 6% 4% 0% 11% -14% -60% 8% -15% 0% -58% -10% -3% -3% 8% 3% -11%

-U iu 2: mawrn 2

0 0o -4' LAJ REPUBLIC OF TUNISIA GREATER TUNIS SE STAFF APPRAISAL REPORT

ANALYSEDES CHARGESET PRODUITSPAR M3

1982 1953 1984 1985 1986 1987 1988 1989. 1990 1991 1992 1993 VOLUME D'EAU CONSOMMEE MOYENNE 72,95 78,42 81 8i,31 88,8 90,98 96,12 95,39 lEn millions de m3 107,12 109,38 118,68 127,7 96,15 PRODUITS

REDEVANCES 0,062 0,071 0,073 0,093 0,095 0,10B 0,107 0,135 0,140 TRAVAUX& SERVICES 0,159 0,187 0,213 0,12 0,005 0,009 0,007 0,010 0,007 0,007 0,007 CHIFFRED'AFFAIRES 0,016 0,014 0,043 0,024 0,023 0,01 0,067 0,080 0,079 0,103 0,102 0,115 0,114 0,150 AUTRESREVENUS 0,155 0,202 0,210 0,236 0,13 0,005 0,008 0,006 0.012 0,008 0,006 0,015 0,035 AUTRES PRODUITS 0,032 0,019 0,016 0,019 0,02 ETAT 0,053 0,051 0,050 0,049 0,052 0,052 0,050 0,052 0,050 COMMUNES 0,050 0,057 0,060 0.05 0,047 0,054 0,059 0,064 0,059 0,059 0,056 0,056 0,050 0,049 0,065 0,063 0,06 SrTOTAL 0,172 0,193 0,194 0,229 0,221 0,232 0,234 0,295 0,287 0,321 0,348 0,378 0,26 CHARGES 0* PERSONNEL 0,051 0,054 0,068 0,068 0,071 0,072 0,075 0,089 0,093 0,102 0,111 0,123 0,08 BIENSCONSOMMES 0,016 0,020 0,021 0,024 0,020 0,024 0,033 0,052 0,046 0,036 0,036 0,040 ELECTRICITE 0,013 0,03 0,015 0,016 0,017 0,019 0,023 0,022 0,023 0,023 AUTRES 0,024 0,022 0,025 0,02 SERVICESCONSOMMES 0,011 0,013 0,012 0,014 0,016 0,016 0,015 0,018 0,022 0,050 0,033 0,031 0,02

SfTOTAL 0,091 0,102 0,116 0,123 0,126 0,135 0,146 0,182 0,184 0,212 0,203 0,219 0,15 AMORTISSEMENTSET PROVISIONS 0,047 0,052 0.059 0,061 0,070 0,077 0,113 0,100 0,097 0,100 0,114 0,131 0,09 SrTOTAL 0,138 0,154 0,174 0,184 0.196 0,212 0,259 0,282 0,280 0,312 0,317 0,350 0,24 RESULTATNET D'EXPLOITATION 0,034 0,039 0,019 0,045 0,025 0,020 (0,025) 0,013 0,007 0,009 0,031 0,027 0,02 INTERETS 0,028 0,032 0,041 0,035 0,038 0,040 0,040 0,039 0,030 0,027 0,026 0,031 0,03 RESULTAT HORS EXPLOITATION 0,001 (0,010) (0,026) (0,001) (0,002) 0,020 (0,002) 0,010 0,019 0,012 0,012 0,010 0,00 RESULTATNET OE L'EXERCICE 0,007 (0,01 1) (0,048) 0,008 (0,016) 0,000 (0,067) (0.016) (0,005) (0,005) 0,017 0,006 (0,01)

ro z m w x 00

4-I REPUBLIC OF TUNISIA

GREATEIRTUNIS SEWERAGE AND REUSE PROJEC T

STAFF APPRAISAL REPORT

TABLEAUDES EMPLOISET DES RESSOURCES

1985 1986 1987 1988 1989 1990 1991 1992 1993 MOYENNE RECETTES CASHFLOW BRUT 9.25 8,47 8.83 8.48 10.72 11,08 11,96 17,29 20,29 11,82 PARTCONTRIBUTIVE 0,90 0,90 1,80 1.50 3,10 4,30 3.30 2,50 1,50 2,20 SITOTAL(A) 10,15 9.37 10,63 9,98 13.82 15.38 15.26 19.79 21.79 14,02

SERVICEDE LA DETTE INTERETS 3.08 3,40 3.64 3,86 3.68 3,25 2,97 3,09 3,97 3,44 PRINCIPAL 2,90 3,00 4,20 6.50 7,20 9,70 12,40 '5.50 18,70 8,90 S/TOTAL(8) 5,98 6,40 7.84 10,36 10.88 12,95 15,37 18,59 22.67 12,34

VARIATIONB.F.ROULEMENT (C) 0,39 3,26 9,45 (4,41) 0,36 3,99 (6,30) (6,99) 3,85 0,40

SOLDEDISPONIBLE: A - B . C D 3,78 (0,291 (6,66) 4,03 2,58 (1,56) 6,19 8,19 (4,73) 1,28

FINANCEMENTEXTERNE EMPRUNTSBIRD 1+11+111 4,80 3,10 5,20 5,90 3,00 4,70 2,20 3,50 18,70 5,68 AUTRESEMPRUNTS BIRD

EMPRUNT BIRD IV - - . . . . - AUTRESEMPRUNTS 0,90 1,40 13,60 5,80 6,60 4,10 10,30 18,80 13.50 8,33 APPORTDE L'ETAT 12,50 11,70 5,30 9,40 11,10 22,30 16,00 14,80 25,50 14,29 APPORTDES COMMUNES 2,00 . 10.10 5,50 9.60 0,50 12,60 19,60 6,20 7,34 S/TOTAL(E) 20,20 16,20 34,20 26,60 30,30 31,60 41,10 56,70 63,90 35,64

TOTAL RESSOURCES: D + Ei F 23,98 15,91 27,54 30,63 32,88 30,04 47,29 64,89 59,17 36,93

INVESTISSEMENTSONAS 16,00 13,30 2Z,60 20,60 20,90 26,20 3t,40 4Z80 51.00 27,20 APPORTSDES COMMUNES 2,00 - 10,10 5,50 9,60 0,50 12,60 19,60 6,20 7,34

TOTAL EMPLOIS: G 18,00 13,30 32,70 26,10 30,50 26,70 44,00 62,40 57,20 34,54 TOTAL EMPLOIS-TOTAL RESSOURCES 5,98 2.61 (5,16) 4,53 2,38 3,34 3,29 2.49 1,97 2,38

WX , 0Z 0 REPUBLIC OF TUNISIA GREATER TUNIS SEWERAGE AND REUSE PROJECT STAFF APPRAISAL REPORT

TAUXDE CROISSANCES DES DIFFERENTS POSTES DES COMPTES DE RESULTATS

1913 1984 1985 1986 1987 1998 1989 1990 199 1992 1993 MOYENNE

REDEVANCES 24,2% S28,% 38 .1% 12%137,2% 41,7% 241,6% 17,1% 16,0% 2-7,1% TRAVAUX&SERVICES 72,2%-19,3% 64,5% 22,7% 17,8% -29,2% -1,8% 11,2% 117,3% 3,4%202,3% -40.f3% 4,9% 20,1% ClISFFRED'AFFAIRES 28.0% 3,F1% 40¢3% -0,1% t159S% 5.1% 30,4% t15,7% 33.4% 12,9% 20,7% 1820% AUTRES PRODUIfTS ETAT 4,4% 0.2% 5,7% 8,5% 2,3% 0.8% 5,0% 8,0% 2,2% 23.0% 12,7% 6,5% COMMUNES 23.3% 13.2% 16.7% -5,9% 2,1% 0,0% 0,0% 0,0% -0,1% 42,8% 4,2% 8,0% SITOTAL 20,7% 399% 27,0% 4,6% 7.4% 8,9% 24,7% 9,5% 14,2% 17,7% 16.8% 13,0%

CtURGES

PERSONNEL 14,6% 29,4% 7,6% 7,0% 2,9% 11.1% 17,8% 16,9% 11,9% 18,4% BiENSCONSOMMES 18,9% 14,0% ? 35,8% 5,2% 24,4% -15,4% 22,9% 49,6% 54,0% -1,3% -19,2% ELECTRICITE 18,7% 10,6% 17,6% 8,3% 20,6% 14,5% 14,0% 24,0% 0,3% 4,7% 9,7% 8.9% 0,2% 18.0% 11,3% AUTRESSERVICES CONSOMMES 23,2% -7,2% 28,2% 12,9% 7,2% 0,0% 13,3% 42,3% 126,1% -27,9% 1,7% 15,2% S(TOTAL 19,9% 17,2% 14,0% 4,3% 9,8% 14,6% 23,6% 13,3% 17,7% 3,8% i6,3% 13,9%

AMORTtSSEMENrSETPROVISIONS 20,0% 16,3% 12,5% 17,0% 12,3% 55,1% -12,8% 9,2% 5,5% 24.2% 23,6% 15,6% SfTOTAL 20.0% 16,9% 13,5% 8,6% 10,7% 29,4% 7,7% 11,8% 13,5% 10,3% 18,9% RESULTATNET OEXPLOITATION 14,5% 24.0% -48,0% 148,2% -43,1% -18,7% -233,0% -151,0% INYERETS -42.0% 43,8% 262,3% -5,4% 3,3% 24,2% 34,5% -8,1% 10,5% 6,9% 6,1% -4,6% -11,6% -8,8% 4,1% 28,5% 6,4% RESULTAT HORS EXPLOITATION -1671,4% 46,1% -95,7% 127,0% -1008,9% -108,1% -738,6% 115,2% -33,6% 1,8% -6.7% ESULTAr NET DE LEXERCICE -268,8% 333,3% -119,2% 27,2% -286,3% -100,5% -91868,1% -76,6% -66,7% -17,4%439,5% -58,7% 4,1%

o z

0x

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ANNEX 9 Page 1 of 20

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

Socio-Economic Evaluation and Economic Analysis of Subnroiects

The Demand Function and Demand Projections

1. A model was created to evaluate the sensitivityof demand to price variations of both water and sewerage services.The estimated elasticitiesprovide informationon customers' behavior by their nature and by their need and could be helpful in simulatingthe effects of changes in the tariff policy for water and sewerage. The elasticity of demand relative to prices is generally the same for water as for sewerage. However, since the ONAS customer base is only a fraction of SONEDE's customer base, it is possible that the parameters of the demand of ONAS' market are different from those relevant to SONEDE's market. Separate estimateswere calculated for household customers, the tourism industry and industrialusers. Within the household category, estimates of the demand were obtained for each volume of consumptionbracket. For the industrial users, the three brackets of pollutionintensity were used.

2. Different price indicators were taken into consideration as follows: (i) the average tariff at constant prices paid by the consumer, includingthe fixed and variable component of the tariff plus taxes applied by ONAS and SONEDE during the 1983.I-1993.IV period for each consumption bracket. This indicator impliesthat the consumer, taking his/her consumptiondecision, considersall the components of the water bill; (ii) the marginal price paid for each consumptionbracket in constant prices; (iii) the difference,D, in absolute terms, between what the consumer would have paid if he/she had paid all the water consumed and discharged at the marginalprice and what he/she actuallypays.

3. For household consumption,the income effect was taken into consideration by using (a) SMIG, for the estimate of the demand relative to the first consumptionbracket; (b) the average wage, for the middle consumptionbrackets; and (c) per capita income for the highest consumption bracket and the estimate of the total demand function. For industrialconsumption, the industrialadded value was considered as an indicator of the sector's revenue. For tourism consumption,revenue was approximatedusing the number of nights and the capacity utilization.

4. Details of the econometric models and results are in the project files. The estimate of the price and income elasticityof the total water demand for ONAS is, respectively, around 0.5 and 0.3, revealing a considerable sensitivity to price variation. The following table summarizes the elasticityvalues obtainedfor differentconsumption brackets: -90-

ANNEX 9 Page 2 of 20

Estimate of the elasticities of domestic consumptionper customer for different consumptionbrackets

Variables 0-20 m3 21-40 m3 41-70 m3 >71 m3 Total Cons. PMR -0.63 -0.17 PM R(-1) -0.58 PMR (-4) 0.32 SMIG 1.15 Real av. wage 0.36 0.71 0.83 0.39 PMGR -1.06

5. It appears that customers react to price variations with a temporary lag. Customers in the lowest consumptionbracket seem to be sensitive to price adjustmentsand very sensitiveto SMIG variation. Price elasticity decreases in higher consumption brackets; however, the highest consumption bracket is very sensitive to marginal price variations. For the industrial sector price elasticitiesare generallyhigh rangingaround 1.2, 0.8, 0.6 for low, average and high pollutingindustries respectively. The tourism sector seems to be less sensitive to price adjustments, with an estimated price elasticityof demand of 0.3.

6. The projections of the demand were based on the trend observed during the 1983-93 period. Other methodologies were used, includingusing the elasticityresults commented on above. All methodologiesconverged on a total demand projection of 302 M m3 , all categories included,by the horizon 2011. That means that the demand for water of ONAS' market should increaseby 5% a year on average. This result is consistent with the demand projections made during the preparation of the Water Supply and Sewerage project (1994) which indicates a yearly average demand growth of 3%. The 2% difference is explained by the improvement of the connection rate of ONAS, expected to expand from 75% to 95% of SONEDE's market by year 2011.

Long-Run Marginal Cost (LRMC) of Sanitation

7. The tariff policy of ONAS has been designed to address three main concerns: (a) the recovery of operating costs; (b) the yearly adjustmentof tariffs to reduce the impact on the consumers' bill;and (c) the incidenceof such readjustment on purchasing power of customers with the adoption of a progressiveblock rate structure where higher consumptionrates are charged higher marginal tariffs. This tariff policy has not taken into consideration,however, the economic criterionof efficiency. -91-

ANNEX 9 Page 3 of 20

8. From an efficiencystandpoint, the long-runmarginal cost (LRMC) is the soundest basis for a rationalpricing policy. It is defined as the incrementin capital and current cost needed to meetthe relatedprojected increases in demand. As the followingformnula shows, both the costs and the incrementalquantities of treated water have to be properly discounted. The practice of LRMC pricing is designedfor greater efficiencyof existingcapacity, as well as for an optimized capacityexpansion in the future, since no quantityof water will be collectedand treatedunless it is worth to users at least as much as its marginalcost. If tariffsare fixed at much higher levels than the LRMC, the existingcapacity risks to remain unutilized. If, on the contrary, they are fixed at much lower levels, the increasingdemand could push decisionmakers to increasecapacity, which may not be the best allocationchoice. A tariff policy basedon LRMC would allow the production capacityexpansion to be tailoredto the evolutionof the demandwhich takes into accountthe costs of resources. It can therefore reveal if consumersare willing to pay for the real cost of those resources. There are other considerationsthat may shapepricing policy (financialequilibrium of the ONAS, the equity or the social objective) which are not taken care of by using the LRMC approach;however, efficiencyremains a very important objective;for this reason, LRMC is a meaningfulbenchmark by which one can assess the reasonablenessof the pricing policy. The followingestimates are designedto determinesuch a benchmark.

9. LRAICformula

The LRMC is estimated using as best approximation the long run average incrementalcost (LRAIC). Applied only to a cubic meter of water collected,the LRAIC is as follows:

LRAIC = 2 [(Rt + j - Rt-1) / (1 + iy] + , [(It + j-1) / (1 + iY]

2 [(Qt +ji-Qt-1) /(1 + i)l

10. Rt and Rt-1 represent the operatng costs, excluding depreciationand financial charges, for the years t and t-1, respectively; Qt and Qt-1 the quantitiesof water collected, transportedand treatedin years t and t-1, and It investmentcost in year t. The parameteri is the discountrate applicableto the charges and the quantitiesconsumed; T is the calculationhorizon used, whichmust be sufficientlylong in the case of seweragein view of the fairly long life of the investments.The LRAIC for year t is thus equal to the ratio between:(a) the sum of the current valueof the operatingcosts that will be incurred from year t onward and that of the investment expendituresincurred from year t-1 onward (assuminga maturationperiod of 1 year); and (b) the discountedsum of the incrementalvolumes of water collected,(transported and treated) calculated in relationto year t-1. -92-

ANNEX 9 Page 4 of 20 11. Application

Estimatesof LRAIC were carried out for the collection,transport, and treatment services,both aggregatelyand individually. Operatingcosts (Rt+j values)were estimatedon the basis of ONAS' operatingaccounts for similarcapital investnents, using operatingcosts excluding depreciation,financial charges, and foreign exchangelosses; in accordancewith marginalcosting principles,the latter three cost categoriesmust be excludedsince they representcapital expenditures incurredin the past. The LRMC concept, is being gearedto the future ("forward-looking"),takes into accountonly future investmentexpenditures. With this approach, current charges must be limited to the costs of non-investmentrelated operationalactivities: namely direct and indirect chargesthat relate to the sewerageactivity. Connection(including maintenance) charges were also excludedfrom the estimatesince they relate to an ONAS activity that generatesa separatebilling and, therefore,do not enter into water pricing policy considerations. Recurrentcosts related to storm-waterinvestments, estimated to represent 12% of total recurrent costs, were also excluded from the calculation.Expenditures for capital investmentsduring the 1983-1993period were taken into account(see Table 4.1), to which projectionsfor the Eighth Plan and the Ninth Plan were added. Thesedata allowedfor a retrospectiveanalysis of the LRAIC. Preliminaryprojections for the 1997-2011period, derivedfrom "L'Etude de faisabilite2011" and from the masterplans for the main urban areaswere considered. Detailsof the data availableare in the projectfiles.

12. Investmentprojections are based on the hypothesisthat: (a) the connectionrate of ONAS, by the year 2011, will reach 95% of SONEDE'smarket; (b) the estimateddemand growth rate will be 5% for the 1994-2011period decreasingat 3% between2011-2021 and to 2% during the 2021-29period; and (c) an additionaltreatment capacity of 500,000 m3/d of waste water will be installed,resulting in a treatmentrate of 75 % of the water consumedand a capacityutilization of 89%. To achievethe above-statedobjectives, a total investmentcost of 1,500 M (in 1994 TD) is estimatedto be neededto financethe followingcategories of investment;

a) Primarynetworks MTD 300 b) Secondarynetworks MTD 400 c) Treatnent plants MTD 450 d) Rehabilitationof the existingnetwork MTD 310 e) Equipmentfor rural areas MTD 40

13. Investments in storm-water-relatedinfrastructure were not included in the calculationssince they are a responsibilityof the local governmentand ONAS is supposed to recover fully the costs associatedwith these activities. As shown in Table4.1, investmentsin the 1990'saveraged much lowerthan the projectedinvestments for the 1997-2011period. -93- ANNEX 9 Page 5 of 20 Table 4.1: Investments carrled out by ONAS In the 1983-1993 period millions of dinars at 1994 prices) YEARS TOTAL INVEST. INVEST. INVEST. INVEST. STORM TREATMEN7 COLLECTION WATER 1983 30.004 8.444 3.237 18.323 1984 29.996 7.915 3.228 18.853 1985 26.251 9.142 2.909 14.200 1986 21.222 7.227 1.616 12.379 1987 27.314 2.813 1.403 23.099 1988 25.131 1.597 1.949 21.585 1989 22.881 0.858 2.231 19.792 1990 38.217 1.917 10.731 25.568 1991 40.712 2.415 13.95 24.347 1992 48.422 1.687 21.107 25.628 1993 47.415 1.654 17.84 27.921

Table 4.2: Evolution of the LRAIC at current prices in the 198-2000 period YEARS LRA-C OPERATING INVEST. OPERATING INVESTS. mUm3 COSTS COSTS COSTS COSTS

.______mLnm3 mlJm3 (%) (%) 83 500.4 125.4 375.0 25.1% 74.9% 84 580.1 169.6 410.5 29.2%/ 70.8% 85 610.0 191.8 418.2 31.4% 68.6% 86 702.5 220.8 481.7 31.4% 68.6% 87 712.5 218.2 494.3 30.6% 69.4% 88 735.3 209.0 526.3 28.4% 71.6% 89 791.7 229.0 562.7 28.9% 71.1% 90 760.5 200.3 560.2 26.3% 73.7% 91 861.5 197.8 663.7 23.0% 77.0% 92 842.4 171.1 671.3 20.3% 79.7% 93 931.3 194.4 736.9 20.9% 79.1% 94 998.2 202.3 795.9 20.3% 79.7% 95 1043.8 212.4 831.4 20.3% 79.7% 96 1101.0 223.0 878.0 20.3% 79.7% 97 1155.2 234.2 921.0 20.3% 79.7% 98 1200.0 245.9 954.1 20.3% 79.5% 99 1235.0 258.2 976.8 20.9% 79.1% 2000 1273.9 271.1 1002.8 21.3% 78.7% -94- ANNEX 9 Page 6 of 20 Table 4.3: Evolution of the LRAIC of collection and transport for the period 1983-2000 at current prices YEARS LRAIC OPERATING INVEST OPERATING INVEST. ml/m3 COSTS COSTS COSTS COSTS mIUm3 ml/m3 mUm3(%) JM 83 398.0 125.4 272.6 31.50% 68.50% 84 465.6 169.6 296.0 36.40% 63.60% 85 488.7 191.8 296.9 39.30% 60.70% 86 556.7 220.7 336.0 39.60% 60.40% 87 558.1 218.1 340.0 39.10% 60.90% 88 565.9 209.4 356.5 37.00% 63.00% 89 600.3 229.0 371.3 38.10% 61.90% 90 561.8 200.2 361.6 35.60% 64.40% 91 618.8 197.8 421.0 32.00% 68.00% 92 593.6 171.1 422.5 28.80% 71.20% 93 657.9 194.4 463.5 29.50% 70.50% 94 707.6 202.3 505.3 28.60% 71.40% 95 741.8 212.4 529.4 28.60% 71.40% 96 779.9 223.0 556.9 28.60% 71.40% 97 816.0 234.1 581.9 28.70% 71.30% 98 846.4 245.9 600.5 29.10% 70.90% 99 870.1 258.1 612.0 29.70% 70.30% 2000 896.1 271.1 625.0 30.30% 69.70%

Table 4.4: Evolution of the LRAIC at current prices .for the period 1988-2000 YEARS LRAIC OPERATING INVEST. OPERATING INVEST. COSTS COSTS COSTS COSTS mUm3 mllm3 ml/m3 (%) (%) 88 290 66.4 223.6 22.90% 77.1% 89 299.6 68.3 231.3 22.79% 77.2% 90 326.8 67.7 259.1 20.71% 79.3% 91 357.9 59.6 298.3 16.65% 83.4% 92 377.1 58.4 318.7 15.49% 84.5% 93 372 63.6 308.4 17.10% 82.9% 94 370.2 65.8 304.4 17.77% 82.2% 95 337.6 69.1 268.5 20.47% 79.5% 96 379.2 72.5 306.7 19.12% 80.9% 97 397.6 76.1 321.5 19.14% 80.9% 98 412.5 79.9 332.6 19.37% 80.6% 99 424.6 83.9 340.7 19.76% 80.2% 2000 438.2 88.1 350.1 20.10% 79.9% TABLE4.5: DISTRIBUTION OF SUBSIDIESPER CONSUMPTION BRACKET AND CATEGORY TotalSubsi y (withouthe opportunItycost of capital) ANNEES 020 20-40 40-70 70-180 160 t + Ind. 1 Ind. 2 Ind. 3 Tour. 1989 1038494 32885092598224 Total es ct Ip 1984436 4305143 332314 324264 524580 453200 14847163 1990 898522 3`1596592374830 1049951 0.295 4354947 293378 1509552 96398 -353080 12025557 0.269 1991 1853876 4362385 3414910 2535424 3871694 314193 120570 -360046 543448 15893558 1992 1124216 40670912607547 1712768 0.295 2594033 109747 -139584 -700085 -1952821 9422913 0.294 1993 1379769 493426 3165735 1958745 1998582 48053 -359299 -1268847 -2885130 8972434 0.321 TotalSubs Iy (withthe pportunity ost of ca it) ANNEES 0-20 20 40 40470 __ 70-150 150at + Ind. I Ind. 2 Ind.3 Tour. 1989 1690242 4864878 4221365 Total ct fp 3332710 7398324 585027 655766 1242317 163102 25624729 0.411 1990 1676029 5128127 4582775 2145712 9369013 690559 5708481035518 1074068 26272649 0.402 1991 1738252 5396144 4521117 3471272 7119192 610284 428404 706421 366594 24357680 0.444 1992 2271334 6961119 5793358 4254096 7302706 853901 451879 609617 32950 28530960 0.455 1993 2687206 8345642 7116404 5094586 6923095 938753 466027 373548 -647070 31298192 0.496 Tariffas pe centageof theaverage cost (witho t opportunitycost ofcapital __ ANNEES 0-20 2040 40-70 70410 160et + Ind.1 Ind. 2 Ind. 3 1989 37.3 Tour. 18.0 36.9 42.0 45.4 48.1 61.7 71.2 84.7 1990 42.8 20.8 46.8 52.8 56.9 63.6 82.2 94.8 112.3 1991 44.4 21.4 49.2 58.3 61.4 74.6 90.2 103.1 1992 46.3 122 23.1 55.1 62.9 69.7 91.8 112.91 129.3 1993 42.4 153.7 21.2 56.4 66.01 77.9 97.2 123.7 142.1 170.4 Tariffas percentageof theaverage cost (with o pportunitycost of capital) ANNEES 0-20 20-40 40-70 70-150 150S|d Ind. I 1989 d. 2 Ind. 3 Tour. 26.76 12.90 26.52 30.17 32.60 34.55 44.28 1990 28.61 51.09 60.831 13.93 31.34 35.32 38.06 42.54 54.98 63.43 1991 29.50 75.121 14.19 32.66 37.39 40.77 49.55 59.91 68.47 1992 29.89 81.081 14.95 35.60 40.66 45.05 59.34 72.97 83 52 99 1993 27.421 341 13.71 36.49 42.741 50.40 62.901 80.041 91.941 110.28] >Jz o'c -96-

ANNEX 9 Page 8 of 20 amountingto TD 43 M p.a. The projectedinvestment needs reflect the ambitiousobjectives already stated. TD 70 p.a. (in 1994 TD) to be implemented,however, this investmentprogram will require an even strongerpolitical support for the sub-sectorand a clear socialpreference for the objectivesof the program. Moreover, if investmentcosts are to be substantiallyrecovered, the consumers' willingnessto pay for sewerage serviceswill have to be taken into considerationas a main criterionfor investmentchoices. The main resultsof the analysisare sumarized, as follows:

(a) Past and futureLRAIC are estimatedto be far higher than current tariffs. In 1993 and 1994the averagetariffs paid by consumerswere respectively0,214 and 0,248 TD/m3' respectivelyequivalent to 23% and 25% of LRAIC. Both compare favorablyto the 1985level of 16%.

(b) The tourismsector tariffs cover approx. 60% of LRAICwhile the tariff applied to the most polluting industrial consumers covers only 48%. The average tariff of householdcustomers set at 0,152 TD/m3 in 1993 is approximately17% of LRAIC. The highestconsumption block, representingthe marginalconsumption which is the most suitableto marginalpricing tarification,approximates 30% of LRAIC.

(c) LRAIC of collectionand transport accounts for 70% of the total cost. If we comparethe average current tariff for all users only with this componentof the LRAIC, it still covers only 32% of LRAIC which is estimatedat TD 0.37/r3. It was impossibleto distinguishthe total investmentcosts accruingto the treatmentof industrialwaste water for differentlevels of pollution;however, it is evidentthat the tariff applyingto the higher polluting industries,exceeding by 20% the LRAIC of treatment,is far below the marginalcost of collectionand treatment.

(d) The observeddifferential between average tariffs and LRAICwould suggestthat the decisionmakers are motivatedto installexcessive capacity. It also suggestsalso that the targetedobjectives of the investrnentprogram do not take fully into account the consumers'willingness to pay and their sensitivityto price adjustments,which will be neededto sustainsuch an investmentprogram. The unusedcapacity observed in someof the WWTPsin the country, except for the Tunis area, indicatesthat ONAS currentlyhas difficultiesin optimizingthe use of its existingcapacity. This may be due to: (i) technicalproblems in channelingwater to the WWTPs where customers are spatiallydispersed; (ii) the existenceof cheaper altemativesfor customers, an aspectnot taken intoconsideration in the planningprocess; (iii) an overestimationof people'swillingness to connect; and (iv) a lower-than-expectedconnection rate for the pollutingindustries due to the necessarypre-treatment requirements. A better cost recoveryof LRAICcould be obtained,even under the current tariff structure, through higher connection rates that would optimize the use of the existing infrastructure. This does require a coordinated effort among institutions, in particularin the case of industrialconsumers. Additionalcauses of excess capacity -97-

ANNEX 9 Page 9 of 20 includethe high seasonalityof demandin the coastalareas where the tourismsector is quite developed.

(e) Wastewater treatmentaccounts for 30% of LRAIC and providesfor a good, treated water, which still has a very limited market. Until now, no treatment cost is recoveredon the provisionof 20% of treatedwater for irrigationpurposes. This is inconsistentfor a countryof scarcewater resources.

EconomicAnalysis of the GreaterTunis Sewerage Project

14. Overview. The Greater Tunis Sewerageand Reuse Project consistsof three main groupsof components: (a) rehabilitation,strengthening, and expansionof the network to fill the gap in the connectionrate accumulatedin some areas, mainly low-incomeareas to meet future demand and to improve the overall performanceof the network; (b) increasingwaste water treatmentcapacity; and (c) rehabilitationand extensionof the unitary network for storm water. Fromthe capitalcost standpoint,all three componentsare consideredan integralentity becausethey all contributeto meet the objectivesstated in the MasterPlan preparedby ONAS. On the basis of theseobjectives, the investmentsize is determined.

Rehabilitation,Strengthening and Expansionof the Collectionand rport Network

15. The development of the primary and secondary network will allow for an improvementof the connectionrates from 50% to 75% in the Tadhamenand Sedjoumiareas, while in other areas the hypothesisis to connect 95% of the SONEDEmarket, by year 2011. The rehabilitationand recalibrationof the networkin severalareas comprisesapproximately 100 km of primary network and 490 km of secondarynetwork that will be instalWedunder the proposed project. This program is justified by the increasein consumptionand maintenanceneeds of the existingservice.

WasteWater Treatment P1ants

16. The urgentneed for treatmentcapacity in the Greater Tunis area and the projected populationincrease of approximately800,000, by the year 2011, requires an extension of the existing capacitywhich will be accompaniedby the developmentof the network. The project providesfor the constructionof a new WWTP in the El Attar area west of Tunis. The area was chosen because it had the highest potentialfor the recyclingof water for agriculturaluse and because the site is environmentallycompliant. The new treatmentplant will provide for an additionalcapacity of 34,000 kg DBO5tj. The project will also provide for the extensionof the WWTPof Sud-Meliane.The treatmentcapacity will be increased15,000 kg DBOs/j. -98-

ANNEX 9 Page 10 of 20

Unitary Network and Storm Water Related Investments

17. The projectwill provide for equipmentand rehabilitationof the unitary network of downtownTunis and of the surrounding"oueds." In addition, storm water from the industrial areasof Ben Arous and Meguinewill be evacuatedfrom Lake Sud as part of a long- term program to reducethe pollution levelsin the lake.

BenefitEstimates.

18. The benefitof the projectis measuredas the utilityor satisfactionthat the consumerderives from the project, whichwould not materializewithout the project. The utilityor satisfactionof the consumeris measuredby the interesthe/she has for having a sewerageservice. This interest is measuredby the willingnessto pay for that service(WTP). Graphically,the utility is represented by the surfacebeneath the demandcurve of the sewerageservice. The demandcurve negatively sloped,indicating that utility decreasesfor additionalunits of service provided. The WTP is the price that the consumeris ready to pay for a given quantity. From the consumer'spoint of view, if the price he/she pays is equal to his/her WTP, then the consumer's surplusis indicativeof the net benefitof the project.

19. In practice,the demandfor sewerageservices is inseparablefrom the demand for potablewater to the extentthat a distinctdemand for sewerageservices does not exist. The current regulationsrequire that each consumerbe connectedto the ONAS system,once it is available. In order to have an estimateof the expectedbenefits of the project, an indirect demand curve was derived. The official statistics from SONEDE and ONAS distinguishbetween the group of customers(around 50% of SONEDE customers)who are only connectedto the potable water system(customers for which there is no ONASnetwork available) and the groupof customerswho benefitfrom both services,namely water and sanitation,provided by SONEDEand ONAS. For this group, ONAS has quarterlystatistics on the number of customers, their consumptionand their tariffs. For each category,an averageprice of water and seweragewas then calculated. Through an econometricmodel, the demand curve for water and sewerage relative to prices, income, season,weather variability, and other relevantvariables, was then estimated.

20. The secondgroup of customersbenefit only from the water service. For this group quarterly consumptionwas reconstructed,deducting the consumptionper category by ONAS' customersfrom the total consumptionper categoryby SONEDE's customers.The averageprice of water by categoryand the demandcurve were then estimated. Since, it is very difficultto know if the introductionof sewerageincreases or reducesthe consumptionof water for a singlecustomer, three differenthypotheses were taken into consideration:(a) consumptiondoes not change(hyp. 1); (b) a variationof + 3% in water consumption(hyp. 2); and (c) a variationof - 3% in water consumption(hyp. 3). -99- ANNEX 9 Page 11 of 20 21. Within the household category, the statistics available at SONEDE are only availablefor customersconsuming less than 70 m3 per quarter, includingapproximately 92% of householdcustomers and 55% of total consumption'. Theestimates for bothgroups (SONEDE and ONAS-SONEDE)were done on homogeneouscustomer categories. This limitationcan be acceptedknowing that futurecustomers of ONAS are expectedto be low-consumptioncustomers. The best econometricestimates of demandare the following:

LCOS = 1.48 - 0.165 LPOS + 1.103 LSMEANR - 0.074 S1 + 0.054 S2 + 0.18 S3 (-2.73) (4.7) (2.74) (2.03) (7.4)

LCS = -1.8 - 0.511 LPS + 0.729 LSMIGR (-4) - 0.0461 Si + 0.236 S2 + 0.285 S3 (-1.98) (1.86) (-1.83) (6.93) (7.54)

Where:

LCOS = logarithmof consumptionfor the water seweragegroup (SONEDE-ONAS) LCS = logarithmof consumptionof the watergroup LPOS = logarithmof the averageprice paid to SONEDE-ONAS LPS = logarithmof the averageprice paid to SONEDE LSMEANR = logarithmof the averagewage LSMIG = logarithmof the SMIG S1, S2, S3 = dummyvariables for 1st, 2nd and 3rd quarters

The price elasticityof demand for the water group is, therefore, 0.511, while for the water seweragegroup, is 0.165.

22. From the demandestimates, it is possibleto calculatethe WTP that representsthe price that the consumersare willingto pay in each group for receivinga givenquantity of service. Given the value of the other variables,it is possibleto obtain the WTP for the quarterlyaverage consumption.Table 4.6 indicatesthe WTP for the averagecustomer in each of the four quarters for the three scenarios. To estimatethe total net benefitof the project, the followingsteps were followed:

(a) calculationof the net benefitper customer(difference between the average water consumer'ssurplus and the averagewater-sewerage consumer's surplus);

(b) calculationof the net benefitper rn3 accordingto the three scenarios(ratio between the totalbenefit of the averagecustomer divided by his/heraverage consumption);

(c) calculationof the total net benefit by multiplyingthe net benefitper rn3 with the additionalwater treated by the project.

The total shareof domesticconsumption for the firstthree blocks has been steadilyincreasing since 1983. -100- ANNEX 9 Page 12 of 20

23. Theadditional water treated by the projectis estimated,assumning that the collection of 80% of the water consumedby each customer,and that the connectionrate willgrow from 75% to 95% by the year 2011. The use of the system's capacitywill vary accordingto the scenario considered.

Cost Estimates

24. Project costs, net of taxes, duties and price contingencies,are equivalent to TD 156M (end-1996).They have been transformed to constant1994 prices and then brokendown into tradeables,non-tradeables, and labor. The conversionfactors estimatedin the economic analysisof the Water Supplyand SewerageProject were used to transformthese three categories intoeconomic prices. Theconversion factors for the exchangerate, labor, and non-tradeableswere estimatedat 1.2, 0.8 and 0.9. Sensitivitytests were then appliedto thesevalues.

25. Recurrentexpenditures were estimated at TD 0.22/rn3, based on ONAS' actual experienceover the last three years. They were then transformedinto economicprices by applying the averageconcession of 0.9 factorfor investments.

ERRand sensitivityanalysis

26. The economicrate of return is estimatedat 28 %, 24 % and 33%, respectivelyto the hypothesis(hyp 1, hyp 2, hyp 3) listedin para. 14 of this Annex. Sensitivitytests were carriedout on a set of variablesas shownin table4.9.

Sousse- Economicanalysis of the investmentproject

27. Amongthe urbanareas which will benefitof the IV SewerageProgram during the IX' Plan Sousseis the municipalitywhere ONAS is thinkingto launchits privatizationprogram. The World Bank is availablefor assistingONAS with the necessarytechnical assistance to make such a program successful. For this reason, a cost-benefitanalysis of the investmentsforeseen in Soussewas carriedout and the resultsare shown in Tables4.10 and 4.11. The samemethodology describedin this annex was appliedto Sousse, adapting it to the appropriateconsumption and investmentcosts foreseenin this case. As the ERR results indicate(23%, 19%, 27%, each rate relatingto each of the threehypothesis considered), the investrnentsin Sousseare fullyjustified.

The Economicand FinancialViability of Re-usingTreated Water in Agriculture

28. The decisionof recyclingwaste water for agriculturalpurposes should be basedon a comparisonamong alternativesand on a detailed analysis that is site-andproject-specific. In Tunisia, treatmentof waste water has to meet specificeffluent standardsthat are defined at the nationallevel. Let us consider,however, a systemwhere minimumeffluent standards could be definedaccording to the vulnerabilityof the area and recipientbody beingconsidered and according to the use mnadeof the water in the recipientbody. This minimumstandard should be the resultant of the consumers'WTP and the socialpreference for that qualitativeobjective. -101- ANNEX 9 Page 13 of 20

29. Let us supposethat, the least-costsolution, C, is chosenand that this solution is site- specific. Let us suppose that the decision makers want to explore recycling of water for agriculture. It is then possible that new sites and new technologiesneed to be considered. A differential cost, Ci, should be estimated for the i combinations of, site technology, that are available. The differentialcost is the additional cost (saving) that can be estimated as directly linked to the decisionof re-usingwater in agriculture. This means a differentialin treatment costs, storage and transfer costs. For the sake of simplicity, let us suppose that there is only one site- technologyalternative, i = 1, with potential for re-use in agriculture. The choice between using treated water or using fresh water should be made comparing the marginal cost of bringing fresh water to the farm gate, and the differentialcost Cu of treating, storing, and transferring the treated water to the farm gate. If the LRAIC of water is higher than Gi than it would be economically viable to re-use treated water in agriculture in that area. Another step of analysis is, however, needed. Once it is understoodwhich source of water is more viable to use, this cost should be comparedto the benefitsof irrigation. If the net return on the cultivationg are higher than the cost of irrigating, then it will be economicallyviable to invest in the irrigationscheme. The latest step could be worked out differentlyif it is estimated that the presence of nutrients in the treated water can produce a substantialbenefit as compared to the use of fresh water. In this case, the full economic analysis for the two alternatives,fresh water applied to cultivationg, and, treated water applied to cultivationg, should be carried out and the results compared. This step is necessary when LRAIC of water is lower than Cui. The complexity of the issue suggeststhat decisions on which strategy to use for waste water re-use need to be made in close coordinationwith all parties concerned and that a clearer understanding is necessary regarding options for irrigated crops and their future marketdevelopments.

30. From ONAS' financialperspective, if the differentialcost Ci is positiveand exceeds the current price of water (as it is likely to be) there is little chance that ONAS will be able to recover even part of the G costs. In areas where private farmers have to pump water from wells or where fresh water cannot meet the peak demand, the waste water re-use option could produce not only economic but also financial benefits. Other issues relative to the increment in land value brought about by the availabilityof water (treated or fresh) and therefore of irrigation should be consideredwhen lookingat how ONAS could cost-recoverthe differentialcost, Ci. Capturing that benefit (or part of it) could be looked at as a possible solution to the cost-recoveryissue.

Benefitsof re-use of treated waste water

31. An attempt to evaluate the economic opportunity of irrigating with treated water a pilot perimeter was made. The cost estimates are however complex due to the multipurpose nature of the waste water treatment investment. In this particular case, the location and the technological alternative are influenced mainly by environrmentalquality standards that are quite stringent. The estimated cost of treatment would have been met with or without the re- use of treated water in agriculture, since quality standards are basically the same for restrictive irrigation and discharge of treated water into water bodies (in fact, slightly more stringent in the latter case)2 . Treatmentcosts are not considered , therefore, while calculating the additional

2 The difference between currenttunisian standards for effluent discarge into water bodiesfor coliform level (2000/lOOml)and the WHO recommended level for unrestrictive use of treated water in agriculture (1000/llOOml) induce only minor additional costs. Tunisian standards for restricve use of effuents in agriculture do not foresee any limit for coliforms. -102- ANNEX 9 Page 14 of 20 costs of irrigating the perimeter. Another difficulty is linked to the different volume for which some investments are designed; the investments within the irrigated perimeter are calculated on the basis of equipping only 1000 ha. The pipe transporting treated water to the irrigated perimeter and the pumping station are on the contrary able at full capacity to satisfy the full extension of the perimeter up to 6,000 to 8,000 ha.

32. Taking into consideration all these factors, it was estimated that an additional cubic meter of treated water used at the perimeter level has an additional economic cost ranging between TD 0,150/m3 and TD 0,350/m3 . Compared to the opportunity cost of water in the "Tel Inf6rieur" (Bizerte, Tunis and Cap Bon areas)of about 350 DT/m33 (being such a value an average, one would expect it to be higher in the Cap Bon area), the use of treated water in the greater Tunis area appears to be economically feasable. Such estimates (the opportunity cost of water in the "Tel Inf6rieur" and the additional cost of treating water in agriculture) have to be however considered preliminary and need to be studied in much higher detail.

33. We have then considered that the treated waste water could be used for the cultivationof cereals. The increasein productivity due to irrigation is between 20 to 30 quintalsper hectare; the irrigationneeds are around 2,000 m3/ha. Consideringan internationalprice for cereals of TD 19-20 quintal,the ERR of the pilot scheme ranges between 6% to 8% accordingto different hypothesison investmentcost share. The benefits and the ERR of this componentcould be higher if one considers highervalue crops such as citrus or other tree fruits. Ad hoc data indicate that the net return for these crops could be as high as TD 0.230 to 0.400/m3 while that of cereals ranges between TD 0,054/n3 to TD 0.066/n3 . The feasibility study for the re-use component, which is a condition of loan disbursement for that component, should include farm budget analysis to reduce the risk that farmers will not want to use treated waste water while appropriate institutional arrangements for setting up a cost-recovery scheme of the re-use component should be explored.

3 Draftsector study on "Natural resourcepriorities"prepared by the Bankassisting GoT in the discussionsfor the Ninth Plan. -103- ANNEX 9 Page 15 of 20

Table 4.6 Estimate of the Willingness to pay (WTP) for the Water Group and the Water and Sewerage Group

1ST QTR 2ND QTR 3RD QTR 4TH QTR

WTP for water

Hyp I Qty (m3/connection) 18.3 25.2 27.5 20.1 WTP (TD) 0.379 0.353 0.328 0.346

Hyp 2 Qty (m3/connection) 19.2 26.5 28.8 21.1 WTP (TD) 0.344 0.321 0.298 0.314

Hyp 3 Qty (m3/connection) 17.8 24.4 26.6 19.5 wrP (TD) 0.402 0.374 0.348 0.367

WTP for water and seweraae

Hyp I Qty (m3/connection) 18.3 25.2 27.5 20.1 WrPl (TD) 2.178 0.686 0.873 1.947

Hyp 2 Qty (m3/connection) 19.2 26.5 28.8 21.1 WTP2 (TD) 1.620 0.510 0.649 1.449

Hyp 3 Qty (m3/connection) 17.8 24.4 26.6 19.5 IWTP3 (TD) 2.619 0.824 1.05 2.3421 TABLE 4.7: SUMMARY OF ECONOMICCOSTS AND BENEFITSOF THE PROJECT (MTD96) Total Benefit of EconomicCost of RecurrentCosts the Project the Project

(1) (2) (3) (4) (5) (6) (7) (O) (9) (10) NYP I NYP2 HYP3 OPrIONI OPTIO 2 OPION 3 w3 en O OPTION I PTION2 OPTION3 199 0.0 0.0 0.0 29.2 29.4 29.7 0.220 0.219 0.222 0.224 1999 6.7 5.5 O.Z 38.4 38.9 39.3 0.220 0.219 0.222 0.224 2000 13.7 11.2 16.7 34.6 35,0 35.4 0.220. 0.219 0.222 0.224 2001 21.0 17.2 25.7 27.3 27.7 28.1 0.220 0.219 0.222 0.224 2002 28.7 23.5 35.2 20.0 20,2 20.5 0.220 0.219 0.222 0.224 2003 36.8 30.1 45.1 11.4 11.5 11.6 0.220 0.219 0.222 0.224 2004 42.9 35.1 52.6 2.4 2.4 2.4 0.220 0.219 0.222 0.224 2005 49.3 40.3 60.3 0.0 0,0 0.0 0.220 0.219 0.222 0.224 2006 55.9 45.8 68.5 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2007 62.8 51.4 76.9 0.0 0,0 0.0 0.220 0.219 0.222 0.224 2008 70.0 57.3 85.8 0.0 0,0 0.0 0.220 0.219 0.222 0.224 2009 75.3 61.7 92.2 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2010 80.7 ".1 98.9 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2011 86.3 70.7 105.8 0.0 0,0 0.0 0.220 0.219 0.222 0.224 2012 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2013 89,3 73.1 109.3 14.6 14,7 14.8 0.220 0.219 0.222 0.224 2014 89.3 73.1 109.3 19.2 19.4 19;7 0.220 0.219 0.222 0.224 2015 89.3 73.1 109.3 17.3 17.5 17.7 0.220 0.219 0.222 0.224 2016 89.3 73.1 109.3 13.7 13.9 14.0 0.220 0.219 0.222 0.224 2017 89.3 73.1 109.3 10.0 10.1 10.2 0.220 0.219 0.222 0.224 2018 89.3 73.l 109.3 5.7 5,8 5.8 0.220 0.219 0.222 0.224 2019 89.3 73.1 109.3 1.2 1.2 1.2 0.220 0.219 0.222 0.224 2020 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0:224 2021 89.3 73.1 109.3 0.0 0.0 0.0 0.220 02 0.222 0.224 2022 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2023 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2024 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2025 89.3 73.1 109.3 0.0 0,0 0.0 0.220 0.219 0.222 0.224 2026 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2027 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2028 89.3 73.1 109.3 14.6 14.7 14.8 0.220 0.219 0.222 0.224 2029 89.3 73.1 109.3 19.2 19.4 19.7 0.220 0.219 0.222 0.224 2030 89.3 73.1 109.3 17.3 17.5 17.7 0.220 0.219 0.222 0.224 2031 89.3 73.1 109.3 13.7 13.9 14.0 0.220 0.219 0.222 0.224 2032 89.3 73.1 109.3 10.0 10.1 10.2 0.220 0.219 0.222 0.224 (>' 2033 89.3 73.1 109.3 5.7 5.8 4 5.8 0.220 0.219 0.222 0.224 2034 89.3 73.1 109.3 1.2 O Z 1.2 1.2 0.220 0.219 0.222 0.224 2035 89.3 73.1 109.3 0.0 O 0.0 0.0 0.220 0.219 0.222 0.224 2036 89.3 73.1 109.3 0.0 O%O 0.0 0.0 0.220 0.219 0.222 0.224 2037 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 2038 89.3 73.1 109.3 0.0 0.0 0.0 0.220 0.219 0.222 0.224 'LM D . r0z ti BtNEkll OF THE PROJECT (MTD96)

Hypothesis 1 Hypothesis 2 Hypothesis 3

oPI. OPT.2 O0T.3 W1.1 OPT.2 0PT.3 oPT.1 Wt.2 oPT.3

1998 -29.2 -29.5 -29.8 -29.2 *29.5 -29.8 -29.2 *29.5 *29.8 1999 -31.8 -32.3 -32.7 -33.0 -33.5 -33.9 *30.3 *30.8 -31.2 2000 *21.1 -21.4 -21.8 -23.5 -23.9 -24.3 -18.0 -18.4 -18.8 2001 -6.4 -6.8 -7.1 -10.2 -10.6 -10.9 -1.7 -2.0 -2.4 2002 8.6 8.4 8.1 3.4 3.2 2.9 15.1 14.8 14.6 2003 25.3 25.1 25.0 18.6 15.5 18.4 33.5 33.4 33.3 2004 40.3 40.3 40.3 32.5 32.6 32.6 50.0 50.0 50.0 2005 49.1 49.1 49.1 40.2 40.2 40.2 60.2 60.2 60.2 2006 55.7 55.7 55.7 45.5 45.5 45.5 68.3 68.3 68.3 2007 62.6 62.6 62.6 51.2 51.2 51.Z 76.7 76.7 76.7 2008 69.8 69.8 69.7 57.1 57.1 57.1 85.5 85.5 85.5 2009 75.1 75.1 75.1 61.4 61.4 61.4 92.0 92.0 92.0 2010 80.5 80.5 80.5 65.8 65.8 65.8 98.6 98.6 98.6 2011 86.0 86.0 86.0 70.3 70.3 70.3 105.4 105.4 105.4 2012 88.9 88.9 88.9 72.7 72.7 72.7 109.0 109.0 109.0 2013 74.4 74.2 74.1 58.2 58.0 57.9 94.4 94.3 94.2 2014 69.7 69.5 69.2 53.5 53.3 53.1 89.8 89.5 89.3 2015 71.5 71.3 71.1 55.3 55.1 54.9 91.6 91.4 91.2 2016 75.1 74.9 74.8 58.9 58.8 58.6 95.2 95.0 94.B 2017 78.9 78.7 78.6 62.7 62.6 62.4 98.9 98.8 98.7 2018 83.1 83.1 83.0 66.9 66.9 66.8 103.2 103.2 103.1 2019 87.6 87.6 87.6 71.4 71.4 71.4 107.6 107.6 107.6 2020 88.7 88.7 88.7 72.5 72.5 72.5 108.8 108.8 108.8 2021 88.8 88.8 88.8 72.6 72.6 72.6 108.9 108.9 108.9 2022 88.8 88.8 88.8 72.6 72.6 72.6 108.8 108.8 108.8 2023 88.7 88.7 88.7 72.5 72.5 72.5 108.8 108.8 108.7 2024 88.6 88.6 88.6 72.5 72.4 72.4 108.7 108.7 108.7 2025 88.7 88.7 88.7 72.5 7Z.5 72.5 108.8 108.8 108.8 2026 88.7 88.7 88.7 72.5 72.5 72.5 108.8 108.8 108.8 2027 85.6 88.6 88.6 72.4 72.4 72.4 108.7 108.7 108.7 2028 74.0 r3.8 73.7 57.8 57.6 57.5 94.1 93.9 93.8 2029 69.4 69.2 69.0 53.3 53.0 52.8 89.5 89.3 89.1 2030 71.3 71.1 70.9 55.1 54.9 54.7 91.4 91.2 91.0 2031 74.9 74.7 74.5 58.7 58.5 58.3 94.9 94.7 94.5 2032 78.5 78.4 78.2 62.3 62.2 62.0 98.5 98.4 98.3 2033 8Z.9 82.8 82.8 66.7 66.6 66.6 103.0 102.9 102.8 2034 87.4 87.4 87.4 o 71.2 71.2 71.2 107.4 107.4 107.4 2035 88.4 88.4 88.4 -. 72.3 72.2 72.2 108.5 108.5 108.5 2036 88.4 88.4 88.4 72.2 0O 72.2 72.2 108.5 108.4 108.4 2037 88.5 88.5 88.5 72.3 72.3 72.3 108.6 108.b 108.6 2038 88.5 88.5 88.5 72.3 0 ko 72.3 72.3 108.6 108.6 108.6 TABLE 4.9: SENSITIVITYTESTS

Hypothesis I Hypothesis 2 Hypothesis 3

ECONOMICRATE OF RETURN OPT. I OPT.2 OPT. 3 OPT. I OPT. 2 OPT. 3 OPT. I OPT. 2 OPT. 3

ERR- Basiccase 28.6% 28.4% 28.1% 24.4% 24.2% 24.0% 33.6% 33.3% 33.0%

Incomereduction by 5% 20.8% 20.6% 20.5% 17.5% 17.3% 17.1% 25.7% 24.5% 24.3%

Consumptionchange by +/- 4% 28.6% 28.4% 28.1% 23.2% 23.0% 22.8% 35.4% 35.1% 34.8%

Demandelasticity of waterof 0.4 28.2% 27.9% 27.7% 24.0% 23.8% 23.6% 33.1% 32.8% 32.6%

Demandelasticity of water and 25.2% 25.0% 24.8% 21.4% 21.2% 21.0% 29.6% 29.5% 29.1% sewerageof 0.2 l Benefitreduction by 20% 24.0% 23.8% 23.8% 20.4% 20.2% 20.1% 28.2% 27.9% 27.7%

Costincrease by 20% 24.9% 24.7% 24.5% 21.2% 21.0% 20.9% 29.3% 29.0% 28.8%

Recurrentcost increase by 100% 28.5% 28.3% 28.0% 24.3% 24.1% 23.9% 33.4% 33.2% 32.9%

All variationsincluded 12.2%| 12.0% 11.9% 8.8% 8.7% 8.5% 16.0% 15.9% 1575.0% Withoutincome reduction 17.8% 17.7% 1i.5% 13.9% 13.8% 13.7% 22.5% 22.3% 22.1%

Optionson conversionfactors: Opt. 1 Opt. 2 Opt. 3 Conversionfactor for the exchangerate: 1.2 1.2 1.3 Conversionfactor for labour 0.8 0.7 1.3 Conversionfactor for nontradables: 0.9 0.8 0.7

Hypothesis1: Introductionof sewerageservices does not affect consumptionbehavior for averageconsumer oo z Hypothesis2: Introductionof sewerageservices affects positively water consumption (3% increase) om Hypothesis3: Introductionof sewerageservices affects negatively water consumption(3% decrease) -107- ANNEX 9 Page 19 of 20

TABLE 4.10: Summaryof Economic costs and benefits of the project (MTD96)- Sousse

Total Benefitsof the Project Economiccost of the project Recurentcosts (MTD96) (MTD96) (M 96)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Year HYP 1 HYP 2 HYP 3 OPTION1 OPTION2 OPTION3 m3 en D OPTIONI OPTION2 OPTION3

1998 0.000 0.000 0.000 2.245 2.233 2.221 0.220 0.228 0.226 0.225 1999 0.482 0.389 0.597 4.184 4.158 4.132 0.220 0.228 0.226 0.225 2000 1.000 0.807 1.239 3.286 3.265 3.245 0.220 0.228 0.226 0.225 2001 1.556 1.256 1.928 2.724 2.699 2.675 0.220 0.228 0.226 0.225 2002 2.153 1.738 2.668 2.727 2.716 2.705 0.220 0.228 0.226 0.225 2003 2.743 2.214 3.399 2.104 2.101 2.097 0.220 0.228 0.226 0.225 2004 3.373 2.723 4.179 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2005 4.046 3.266 5.013 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2006 4.765 3.847 5.904 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2007 5.533 4.467 6.856 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2008 6.312 5.097 7.822 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2009 7.143 5.767 8.851 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2010 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2011 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2012 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2013 8.027 6.481 9.947 1.122 1.116 1.111 0.220 0.228 0.226 0.225 2014 8.027 6.481 9.947 2.092 2.079 2.066 0.220 0.228 0.226 0.225 2015 8.027 6.481 9.947 1.643 1.633 1.622 0.220 0.228 0.226 0.225 2016 8.027 6.481 9.947 1.362 1.350 1.337 0.220 0.228 0.226 0.225 2017 8.027 6.481 9.947 1.363 1.358 1.353 0.220 0.228 0.226 0.225 2018 8.027 6.481 9.947 1.052 1.050 1.049 0.220 0.228 0.226 0.225 2019 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2020 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2021 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2022 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2023 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2024 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2025 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2026 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2027 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2028 8.027 6.481 9.947 1.122 1.116 1.111 0.220 0.228 0.226 0.225 2029 8.027 6.481 9.947 2.092 2.079 2.066 0.220 0.228 0.226 0.225 2030 8.027 6.481 9.947 1.643 1.633 1.622 0.220 0.228 0.226 0.225 2031 8.027 6.481 9.947 1.362 1.350 1.337 0.220 0.228 0.226 0.225 2032 8.027 6.481 9.947 1.363 1.358 1.353 0.220 0.228 0.226 0.225 2033 8.027 6.481 9.947 1.052 1.050 1.049 0.220 0.228 0.226 0.225 2034 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2035 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2036 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 2037 8.027 6.481 9.947 0.000 0.000 0.000 0.220 0.228 0.226 0.225 -108- ANNEX 9 Page 20 of 20

TABLE4.11: Net Benefit of the project (MTD 96) - Sousse

H spothesisI ___ othesis 2 H pothesis3

Year OPT.1 OPT.2 OPT.3 OPT.1 OPT.2 OPT.3 OPT.1 OPT.2 OPT.3

1997 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1998 -2.2 -2.2 -2.2 -2.2 -2.2 -2.2 -2.2 -2.2 -2.2 1999 -3.7 -3.7 -3.7 -3.8 -3.8 -3.8 -3.6 -3.6 -3.6 2000 -2.4 -2.3 -2.3 -2.6 -2.5 -2.5 -2.1 -2.1 -2.1 2001 -1.3 -1.3 -1.2 -1.6 -1.6 -1.5 -0.9 -0.9 -0.9 2002 -0.7 -0.7 -0.7 -1.2 -1.2 -1.1 -0.2 -0.2 -0.2 2003 0.4 0.4 0.4 -0.1 -0.1 -0.1 1.1 1.1 1.1 2004 3.1 3.1 3.1 2.4 2.4 2.5 3.9 3.9 3.9 2005 3.7 3.7 3.7 2.9 2.9 2.9 4.7 4.7 4.7 2006 4.4 4.4 4.4 3.5 3.5 3.5 5.5 5.5 5.5 2007 5.1 5.1 5.1 4.0 4.0 4.0 6.4 6.4 6.4 2008 5.8 5.8 5.8 4.6 4.6 4.6 7.3 7.3 7.3 2009 6.6 6.6 6.6 5.2 5.2 5.2 8.3 8.3 8.3 2010 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2011 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2012 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2013 6.2 6.3 6.3 4.7 4.7 4.7 8.2 8.2 8.2 2014 5.3 5.3 5.3 3.7 3.7 3.8 7.2 7.2 7.2 2015 5.7 5.7 5.8 4.2 4.2 4.2 7.6 7.7 7.7 2016 6.0 6.0 6.0 4.5 4.5 4.5 7.9 7.9 8.0 2017 6.0 6.0 6.0 4.5 4.5 4.5 7.9 7.9 7.9 2018 6.3 6.3 6.3 4.8 4.8 4.8 8.2 8.2 8.2 2019 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2020 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2021 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2022 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2023 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2024 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2025 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2026 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2027 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2028 6.2 6.3 6.3 4.7 4.7 4.7 8.2 8.2 8.2 2029 5.3 5.3 5.3 3.7 3.7 3.8 7.2 7.2 7.2 2030 5.7 5.7 5.8 4.2 4.2 4.2 7.6 7.7 7.7 2031 6.0 6.0 6.0 4.5 4.5 4.5 7.9 7.9 8.0 2032 6.0 6.0 6.0 4.5 4.5 4.5 7.9 7.9 7.9 2033 6.3 6.3 6.3 4.8 4.8 4.8 8.2 8.2 8.2 2034 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2035 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2036 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3 2037 7.4 7.4 7.4 5.8 5.8 5.8 9.3 9.3 9.3

ERR 23.1% 23.2% 23.4% 19.2% 19.3% 19.4% 27.6% 27.8% 27.9% -109-

ANNEX 10 Page 1 of 16

REPUBLICOF TUNISIA

GREATERTUNIS SEWERAGEAND REUSE PROJECT

STAFFAPPRAISAL REPORT

EnvironmentalAssessment and MitigationPlan

1. INTRODUCTION

1.1 Under the environmental guidelines of the World Bank (Operational Directive 4.01), the Greater Tunis Sewerage Project has been classifiedas a Category A project. This report is an enviromnentalreview which summarizesthe environmentalimpacts of the proposed project and provides recommendationsfor impact mitigationunder Annex C of the Directive.

1.2 Greater Tunis Program: The program, focusing mainly on the Tunis area, consists of the following:

SewerageTreatment Facilities:

* The constructionof a WWTP in the Tunis West area for a capacity of 850,000 inhabitants equivalentto be constructedon a BOT basis.

* The doubling of the capacity of the existingWWTP of Sud Meliane in the southernpart of Tunis by additionaltreatment capacity of 375,000 inhabitantsequivalent

Rehabilitationand Extensionof SewerageNetworks:

* The reorganizationof the existing seweragenetwork of Tunis West area in order to revert a sizablepart of the waste water flow to the new basin.

* The strengtheningof the primary network of Tunis south and the constructionof a liaison pipe betweenthe WWTP's of Cotiere Nord and Choutrana.

* The constructionof sevenpumping stations.

1.3 The preparation of the project has benefited from a comprehensiveenvironmental study. The Sectoral EnvironmentalAssessment (SEA) has provided a qualitativeframework on the situationof waste water managementand disposaland how it could be improved, not only in the scope of the project at hand but also for future investment in this field. The Project Specific Assessments(PSA) have examinedthe different site locationalternatives, determiined the design of the treatment process for each of the plants for the selected locations and identified the related -110-

ANNEX 10 Page 2 of 16 environmentalimpacts and possiblemitigation measures. In additionto this environmentalanalysis, ONAS is required by Tunisian law to undertake an environmentalassessment to satisfy the requirementsdefined by ANPE.

1.4 This environmentalreview is based on results of the environmentalassessments (PSA's) undertakenfor each of the treatmentplants proposed, the technicalstudies and the findings of the pre-appraisalmission. A series of technicalmeetings were held with ONAS, ANPE, the concerneddepartments in the respectiveministries of Environmentand TerritorialPlanning, and Housingand Equipmentand Agricultureto discuss the differentalternatives of projectdesign and their respectiveimpacts on the environment. Anotherseries of meetingswere conductedwith the Consultantswho undertookthe SEA and PSAs. A numberof field visits to investigatethe potential problemsof the siteswere also made.

2. DESCRIPIIONOF THEPROGRAM

2.1 The WasteWater Treatment Plant of TunisWest

2.1.1 The project envisagedfor the area of Tunis West has been designedto reach full capacityby the year 2011. The amountof collectedwaste water is estimatedat 59,000 cubicmeter per day witha pollutionload of 34,000 BOD5. It will comprisethe constructionof:

(a) a primarytreatment plant at the dischargepoint, includinga major pumpingstation on the shoreof SebkhaSejoumi;

(b) a secondarytreatment plant on a site near the village of El Attar located7,5 km west uphillof the Sejoumisite; and

(c) a pressurepipe for waste water betweenthe plant in Sejoumiand the plant at El Attar.

The treatmentforeseen is the activatedsludge process after primary sedimentation.The methane producedby the anaerobicdigester for sludge mineralizationwill be used in the treatmentplant makingit self-sufficientin energyrequirement.

2.1.2 Also envisaged are the constructionand rehabilitationof 213 km of sewerage systems,allowing for 20,000 new hook-ups.For some parts of the existingsystems, the direction of flow will be revertedfrom existingovercharged treatment plants of CotiereNord and Choutrana to the proposed Tunis West plant. The plant as describedwill cover a large area of the capital serving850,000 inhabitants equivalent; making it one of the largesttreatment plants in Tunisia.The achievablehook-up rate is estimatedto reach 75 percent. The type of teatment chosen is the activatedsludge process with anaerobic digestion of sludgeand energyrecovery. -111-

ANNEX 10 Page 3 of 16

2.1.3 Site Selection: The site selectionprocess for the locationof this treatmentfacility was based on three major factors: (a) the traditionalcost-benefit analysis for optimizationof the choices both from the environmentaland the economic feasibility standpoints; (b) the recommendationsmade by the SEA and the provisionsof the planningtools in exercise;and (c) the decisionto integratethe reuse of treatedwater as the viable environmentaland economicoption (see paragraph3.4 of this annex). Four site locationswere analyzedand on the completionof this process,the alternativedescribed (in parag 2.1.1 of this Annexand in Annex2) was selected. The site and the whole circuit of the effluent, which was inspectedin the field, presents the best locationmainly due to:

* the potentialfor treatedwater reusefor agricultureis the greatestwith the possibility of creating6,000 to 8,000 hectaresof newlyirrigated land ( para 5.1- 5.2);

* the effluent(the excess effluent that may not be reused) will have a longer route before reachingthe sea. This has the advantagethat more nutrientswill be naturally purified;

* the site is large and isolated,and presentsalong the effluentroute the potentialfor naturalstorage of the treatedwater for reusein agriculture;and

* lack of conflictingland uses.

2.1.4 The primary site of the plant is locatedon SebkhaSejoumi. The latter, mostlydry except where untreatedwaste water is discharged,occasionally floods the residentialareas on its banksduring rainy weather. A protectiondike is projectedin the zone where the plant is planned. The land, a lot of 10 hectares, is publicly owned and is in the process of being transferredto ONAS. The whole area is denselyurbanized with a number of substandardsettlements. In the southerndirection is the villageof Sidi Hassineand in the other directions,the site is surroundedby busy roads (MC 37). Beyondthese roads to the North lie the residentialareas and some light industriesto the west. The secondarysite at El Attar is a farmlandcultivated (cereals) by a public owned cooperative.The land area needed for this part of the plant amountsto 100 hectares. The nearesthouses are at a distanceof 800 meters in the villageof El Attar. It is a semi arid area with saline,unusable ground water.

2.2 The Waste Water Treatment Plant of TunisSouth

2.2.1 The plannedtreatment plant of Tunis South has been conceivedas an extensionof the existingplant of Sud Meliane. It has been designedto reach full capacityby the year 2011, when the amountof collectedwaste water is estimatedat 60,000 m3 per day with a pollutionload of 30,000 per day BOD5. The site of the current plant is sufficientenough to harbor the proposed extensionwhich will double existingcapacities. The achievablehook-up rate is estimatedat 75 percent. It will be composedof:

(a) a pumpingstation and a pressurepipe of 4 km; -11 2- ANNEX 10 Page 4 of 16

(b) the rehabilitationof the sewer systemof Ben Arous, currentlyovercharged; and

(c) a secondtreatment unit along side, and identicalto the existingone using the same oxidationditch treatmentsystem, as it has been provenmost feasible.

3. SUMMARY OF ENVIRONMENTALAND SOCIAL IMPACTS

3.1 The proposed project will improve the quality of sanitation services, reduce environmentalpollution and mitigate health hazards from waste water dischargesin the national capital region through the facilitiesdescribed above. The most significantpositive and negative impactsthat the projectwill generateare summarizedbelow.

PositiveImpacts

3.2 The constructionof the treatmentfacilities will have a strong positiveeffect on the overallenvironment at each proposed location. It will prevent the intense negativeimpacts on human health and urban nuisancesassociated with the dischargeof untreatedsewage directly into the environmentfrom the sewagecollector system at dischargepoints and, hence, decrease the exposureto waste water related diseases(e.g., gastro-intestinal)of the affectedurban population. The rehabilitationand constructionof new sewers will enhance further the qualityof life in the urban areas, especiallyfor those settlementswith insufficientinfrastructure networks and higher housingdensity. More than 150,000low incomepopulation are expectedto directly benefitfrom the project.

3.3 There will also be improvementof the water quality in the streams that flow throughout the city. A major benefit is the protection of the groundwater resources from contaminationby untreated sewage and the preservationof the marine environmentand other vulnerablewater bodies (lagoons,oueds and sebkhas)from further eutrophization. As a result, economicbenefit will occur in terms of increasedwater volume of good quality, and increased fisheriesand tourismactivities along the coast near Tunis.

3.4 Furthermore,the treatmentfacilities will provide an opportunityto improve the control of the industrialdischarges through pretreatmentand connectionto ONAS sewers, as requiredby the Tunisianlaw. For the Sud Melianeplant, potentialindustries with non-compliant waste waters have already been identified.Within the frameworkof the FODEP activity, these industrieswill benefit from a programwhich has materializedin the constructionof an industrial pretreatmentunit that will be connectedto the proposedplant.

3.5 Finally, above all, the environmentalaspect which lays at the heart of the whole conceptionprocess of this project,has, iteratively,influenced the design of this project and of the WWTP's, their site locationsand the qualityand use of their by-products. Two major elements aroundwhich this processhas revolvedare the protectionof the environmentand the valorization of the scarcewater resourcesthrough the reuse of the treatedwater. Indeed, in the case of Tunis -113-

ANNEX 10 Page 5 of 16

West' WWTP(para 2.1.1 to 2.1.3) the flow of the existingsewerage system, for a sizablepart of the coveredarea, will be revertedto the newly identifiedwestern basin where it will be treatedin the proposedWWTP. This, on the one hand, preventsthe effluentfrom being dischargedinto the Gulf of Tunis, the sea and other vulnerableRWB. On the other hand, it offers the advantageof using this effluentfor irrigationor rechargeof the groundwaterresources (para 5.1-5.4). Hence, generatingsignificant economic and socialbenefits, in additionto the environmental

Negative Impacts

3.6 During the constructionand rehabilitationof the sewernetwork and the construction of the treatmentfacilities, impacts of minor importanceand magnitude are expectedto occur. These impactsare temporaryand will include: disruptionof traffic patternin the servicedareas of the city, interferencewith other urban infrastructures,disrupted access to residentialor/and other buildings,change in the landscape(loss of vegetation), noise nuisancesand air pollution due to dust formation. The projectactivities do not require any resettlement. During operationof the treatmentplants, someof these minorphysical impacts will continueto occur. It is, actually,the case for odor and gas emissionsand noise.

4. M1TIGATIONMEASURES

4.1 Mitigationof the possiblenegative impacts of the WWTPs was approachedas an on-goingprocess that was made part of the conceptionand the technicaldesign of the different componentsand aspectsof the project. As a result,most mitigationmeasures are alreadyimbedded and reflectedin the choicesmade from site selectiontill routingof the effluentand its reuse.

4.2 Furthermore,the mitigationplan on pages 7 to 15 of this annex, presentsa detailed list of all the possible impactsthat could occur in this project during the differentphases of the project implementationcycle, comprising:(a) rehabilitationand constructionphase of the sewer networks;(b) the constructionphase of the treatmentfacilities; and (c) the operationphase of the plants. For each of the possible source of impactsor type of project activity, the nature of the impact is described and actions for remedy are listed. The responsibilitiesfor these actions are defined and the concerned agencies identified. An environmentalmanagement plan is also proposed.

4.3 A monitoringprogram is recommendedfor the sewer networksand the treatment plants (mitigationplan). In additionto what is currentlydone by ONAS, throughits laboratories, specific monitoringof the properties of both the influent and effluent will be performed and assessedagainst the norms for agriculturereuse. The use of the sludge as fertilizer is strongly recommended The monitoringprogram will also continueto evaluateall possibleother impactson the environmentincluding ambient air, soils and vegetation,and the RWBsdownstream effluents.

4.3 A program for institutionalstrengthening of ONAS' technical,organizational and managerialcapacities is also foreseen. It will cover the regionaldepartments and will include a -114- ANNEX 10 Page 6 of 16

Geographic Information System component. Furthermore, reinforcement of the existing institutionalmachinery is recommendedalong the lines of the SEA's findingsas describedin para 1.10 to 1.15 of the SAR.

4.4 The main impacts and related mitigationmeasures for the treatment plants are summarizedbelow:

The Tunis West Treatment Plant:

Emissionof pollutedwater: The proposedproject will prevent emissionof raw waste water in the served areas from currently overchargedplants to a very importantextent and, hence, improve considerablythe sanitationof a sizablepart of the capitalurban areas. It will also relieveSebkha Sejoumifrom the currentdischarges and possibleflooding of its banks. However, it may present some risks. The major one remainsthe dischargeof the effluentinto the environmentif the reuse optionis not pursued. The plant is designedto producea disinfectedeffluent with a qualityto meet the standardsfor irrigation. It will, however, contain high nutrient concentrationswhich will contributeto the ongoingaccumulation of nutrientsin the Gulf of Tunis. The latter, being highly vulnerableto eutrophization,this will cause furtherdeterioration of the sea grass fields and bloom of algae. The effluent, if dischargedin the closeby Oued El attar will also affect the Mejerda downstream,but to a lesser extent than the Gulf of Tunis. It is estimatedthat the effluentwill increaseby 1% the flow of this sectionof the Mejerdaadding to its alreadyrich loadof nutrients.

Mitigation: The projecthas integrateda componentto be implementedby the Ministry of Agriculture(para. 2.6) consistingof a programfor reuse of the treated water. This programwill be designedand implementedin close coordinationwith the Ministryof Environment, ONAS and the ANPE. In order to avoid completely any possible dischargein the Mejerda, the routing of the effluent(in case it is not entirely used for irrigation)will be divertedfrom Oued El Attar area in the WestemBasin to a tributary of Oued Meliane in the Southern Basin. It would be still advisableto remove the nutrients,by means of additionaltreatment, if the effluent is to be dischargedinto the Oued and, in final stage, into the Gulf. Alternatively,other destinationsof the effluent shouldalso be exploredby the studyplanned in this project.

Emissionof waste: The plant will also produce an estimated90 m3 per day of stabilized,dried sewagesludge that will be sold to farmers in the irrigationarea or else transportedto a controlled dumpingsite. Constructionof a solid waste treatmentplant under study is proposedfor the close vicinityof El Attar site.

Mitigation: The sludgeproduced so far by ONAS' existingtreatment plants has been of good quality and has been in high demand by farmers. However, irregular emissionsinto the sewer systemscould drasticallychange its quality as well as the qualityof the effluent,which in turn will be damagingto the environmentand public health. ONASmonitors carefully sewage collected at each of its operatingWWTP's, throughon-site laboratories and a sophisticatedcentral laboratory. -115-

ANNEX 10 Page 7 of 16

Emissionsinto the air: The waste water treatmentplant will also have localimpacts in the form of odor and gas emissionsinto the ambientair as well as noise. At El Attar, odor will be emittedby the sedimentationbasins causing nuisance up to 500 meters beyondthe plant's limits. The methane- driven generatorfor aerationwill cause emissionof NO, et C02. A torch (5 m height) will be neededtoo for flaringmethane surplus.

Mitigation: At the Sejoumiplant, odor emissionswill be controlledby coveringthe equipmentand treatingthe air in a biofilter.In El attar, the site is isolatedand there are no housesin the close vicinity.

Urban PlanningAspect: In additionto the alreadyexisting urban settlementsin the vicinityof the plant at Sejoumi,the area is planned,according to the provisionsof the MasterPlan, to be further developedinto a residentialquarter with averageto high density.

Mitigation: It is foreseento installa buffer zone of no less than 500 meters around the site to prevent any negativeimpacts to the health of the inhabitantsof the planned residentialdevelopment. Within the scope of this project, the Departmentof Urban Planningwill be notifiedin order to makeprovision for such measureinto the Master Plan, currentlyunder study.

The Sud Meliane Treatment Plant

Emissionof pollutedeffluent: The effluentwill be pumped from Sud MelianePlant and diverted backwardto the hinterlandarea constitutedfirst by the Mornagplain and further southand west by the plain of Bou Rbii and that of Sidi Shrif. The effluentwill be used in the Mornagarea where an irrigation perimeter of 1000 hectares is currently in use and planned to be extended with an additional1000 hectaresperimeter. This diversionprevents from dischargingthe sewage directly into Oued Melianeand in a relativelynear distanceto the Gulf. Furtherreuse for irrigationis also a valuableoption in the plain of Bou Rbii and at a later stage in the area of Bir Mchergua.

Mitigation: These and other alternativesfor the use of the effluentwill be further exploredin the studyto avoid any direct dischargein Oued Meliane,which in such a case would necessitateadditional treatment to prevent adverse effect on the marine ecosystem.

Emissionof waste: It is estimatedthat the productionof sludge will reach 38 m3 per day. In this area of Tunissouth, the sludgecurrently produced is beingused entirelyby farmers.

Mitigation: If unused,the sludgewill be dumpedinto controlledlandfills.

Emissionof other nuisance: The plant will produceregular emission of odor into the air and noise.

Mitigation: The odor emissionwill be unacceptablewith the doublingof plant capacityin highlyurbanized area. In additionthe intemationalsport complexwill be -116- ANNEX 10 Page 8 of 16

locatedjust in front of the plant, acrossthe road. Simplemeasures such as covering, evacuatingand treatingthe air withbiofilters will be used.

5. THEREUSE OF TREATEDWASTE WATER

5.1 ReusePotential in Tunis West. El Attar is locatedjust over the water separation of the Mejerdariver basin with a large area of land suitablefor irrigation,located on the sides of the hills overlookingthe Chaffrou valley. This land (6,000 to 8,000 hectares) is suitable for cultivationof fruit trees, fodder and cereals. Within this project a program of reuse has been workedout with the Ministryof Agriculturein coordinationwith ONAS. It will consistof an initial phase coveringan area of 1000hectares to be graduallyextended. Consultation with the concerned agriculturedepartments proved that there are no technical,socio-economic or cultural obstaclesfor effluent irrigationin this area. The activatedsludge treatmentprocess coupled with disinfection will producean effluentwith a suitablequality for irrigation.

5.2 To be able to use the effluent,construction of a storagebasin and distributionworks will be required. These will be the responsibilityof the agriculturesector (see Annex 2). Preliminarystudies have located a suitablesite for a storage basin close to the plant. Increased storagecapacity, using the naturaldepressions of the land nearbythe site of the plant could also be achievedat reasonablecost. Thesebasins, of a total capacitynot to exceed 2 million m3, of low volumneand fully integratedin the geomorphologyof the site of the irrigationarea, are not expected to generatenegative impacts. There is no vegetationin the whole area and very few scattered housesare to be found in the far vicinityof the site. No resettlementis foreseen. It is sought to make the effluent available for non-restrictiveirrigation when the recommendedchanges in legislationare made. In the meantime,only restrictiveirrigation will be allowed. The full debit could be reusedby 2011, creatingup to 8,000 hectaresand possiblyextending to the neighboring zone.

5.3 ReusePotential in Sud Meliane. For the existingplant of Sud Meliane, the reuse has currentlyattained 40 percent of the identifiedirrigable land (fruit and olive trees), counting 1000 hectaresand locatedin the plain of Momag. This low percentageis due to the defectivestate of the irrigationinfrastructure in place. Investmentsneed to be done to renew and/or rehabilitate this infrastructure.This could result in an increase in the present potentialof reuse to a higher percentageand open up the possibilityof extending the current irrigationarea by another 1000 hectares, that have alreadybeen identified. Further south, the Bou Rbii plain could also benefit from the reuseprogram.

5.4 OtherReuse Applications. The Ministryof Agriculturewill undertakewithin this projecta pilot operationto experimentthe use of treatedwater for rechargepurposes. The aquifer recharge for the renewal of the ground water resources necessitatesrefined treatment of the effluent.The pilot operationto be locatedin the Cap Bon area usingthe effluentfrom a local newly built treatmentplant is meant to explore the possibilityof creating a hydraulicbarrier to stop the intrusionof the sea water. Otherreuse applicationswill also be studied. -117-

ANNEX 10 Page 9 of 16

6. PUBLIC CONSULTATION

6.1 PublicConsultation. Due to the environmentalcategory of this projectbut mostly to the importantrole the plannedinvestments will play in the Tunis area at the economic,social and environmentallevels, a consultationwith the public was conducted. It took place and at an early stage of projectpreparation and encompassedat differentstages severalinstitutions and populations groups concerned by the project , including various NGO, farmers groups and associations, governmentaland professionalinstitutions. Particular attention, through repeatedvisits, was given to the local farmers and inhabitantsand the municipalauthorities. The recommendationsof the consultedgroups were integratedin the designof the project.

6.2 In addition, a one day seminar,organized by ONAS, was held on July 23, 1996 under the leadershipof the Ministerof Environmentand TerritorialPlanning. The seminarattracted a large audienceto which the projectin its differentaspects and components,including the reuseof treatedwater, was presentedand discussed.Valuable comments and recommendationswere drawn. The Bank missionexamnined and supportedthese recommendations,that covered essentiallythe areas of industrialpollution and the reuse of treated water. Most of these recommendationswere alreadyembedded in the designof the projector proposedto be furtherexamined in the contextof the ReuseStudy to be financedby the Loan.

7. MlTIGATION PLAN

7.1 A detailedmitigation plan coveringall aspectsof the projectin its differentphases from constructionto operationis presentedbelow. In this plan, mitigationmeasures are proposed for each environmentalimpact (that could eventuallyoccur) according to its source, and the originatingactivity. The responsibilitiesfor each agency(ONAS, ANPE, etc..) are also definedand the relatedspecific tasks are preciselydetermined. The implementationof this plan dependson the effectivecollaboration on the groundsof all the agenciesinvolved. An estimateof the cost for the implementationof this plan is presentedbelow. The financingof ONAScomponent is madepart of its operatingbudget. Any specificmaterial needed to be purchasedcould be done under the Loan (miscellaneous).Theremaining components will be financedby each responsibleagency from their own budget.

ResponsibleAgencies Cost per Year TD (inmna ONAS 120-150 ANPE 80-100 Ministryof PublicHealth 50-60 Ministryof Agriculture 50-60 -118-

ANNEX 10 Page 10 of 16

Migation Plan

Activitiesand Origins of | Environmentallmpacts Mitigation Measures hnpacts _ l Rehabilitationand Constructionof the Sewerage Network 1. Site Preparation (before and after) Positive lmpacts Actions/Responsibilities

* excavation of trenches © improvement of roads &-ONAS will ensure works conditions do not takeplace at night l accessto undevelopedareas v- minimizedust formation * openingaccess roads by meansof water spraying NegativeImpacts t minimizeareas of * rehabilitationof roadsand de-vegetationand restorethe pathways Q increasednoise levels, landscapeafter completionof mud and dust works

l disruptionof accessto '- work out acceptable homes alternativetransport l localtraffic patterns and routing transportroutes disrupted -ONASwill makesure that © deteriorationof the these measuresare adheredto landscapeand the visual duringimplementation as part aspectsof the affected of the enforcementof the areas utilityand buildingcode (reflectedin the bidding documents) 2. Constructionand InstallationPhase PositiveImpacts Actions/Responsibifflies

( Creationof employment 3 Sameset of actionsas © generationof local above * Installationof sewersand revenues(supply of v impactstied to storageof pressuremains materialsand services) buildingmaterials and * storageand transportof equipmentcould be avoided materials NegativeImpacts throughsite planning * constructionof pumping ® sameset of impactsas stations above * wastemanagement ® risk of wastewater spills and contamination ® obstructionof roads, side- -119-

ANNEX 10 Page 1 1 of 16

walks by the storage of site materials and equipment.

3. User Hook Ups Positive Impacts Actions/Responsibilities

w through site and time * excavationon streets and © improvementof sanitary planning, in-home works and, sidewalks. and health conditions therefore, disruption of © creation of local household activitiescould be employment minimized. * installationof home-to- street conduits. Negative Impacts wONAS will ensure that contractorswill make proper ® disruption of household provisions of these measures. activities 0 access to homes and buildings disrupted

4. Maintenance Positive Impacts Actions/Responsibiliies

* sewer repairs © generationof local Time and site planning to revenues and employment minimizedisruptions * maintenanceof electric t' Personnel training mechanical equipments Negative Impacts restore damage done to other infrastructure * leaks and spills 0 increasedday time r' apply emergency and nuisances (noise, dust,traffic safety procedures and access disruption) CrONASwill assume training of personnel and the applicationof above measures along with the municipalities for other infrastructures. Waste Water TreatmentPlant ConstructionPhase Actions /Responsibilities PositiveImpacts Pr Same set of actions as * pretreatmentplant on the i generationof local stated above, in addition: bank of Sebkha Sejoumi revenues and employment specificbuilding -120- ANNEX 10 Page 12 of 16

* treatmentplant at El attar NegativeImpacts regulationsfor this typeof soil exist are appliedas well as * In additionto this, what ® risks of constructiondebris properprovisions against the was describedabove in the dumpedin the Sebkha risk of flooding site preparationand ® soil of Sebkha'sbank makesure that the debris constructionphases for the could engenderstability are not dumpedinto the sewernetwork applies. problems alreadysensitive Sebkha l potentialflooding of the t ONASto makeprovision Sebkha'sbank of theseitems in the bidding documentsand cr ONAS and the Municipalitycontrol the issue of waste discharge. Waste water Treatment Plant OperationPhase 1. PhysicalEnvironment Actions/Responsibilities For both VWVWP's UndergroundlWater PositiveImpacts t the sewersand pipes UndergroundWater plannedor to be rehabilitated l protectionof underground in the projectwill be made water and improvementof and installedwith high * sewernetwork quality waterprofnessto minimizeany © improvepublic health and leak into the aquifers * the WWTPitself, environmentconditions especiallythe drying beds 't- The same applies to the NegativeImpacts buildingand installationsof * the dischargeof treated the plants. waterin the environment ( possibleleaks and contamination "ONAS is in the processof * infiltrationthrough the completinga computer reuseof treatedwater ® waterproofWWTP assistedsystem for the installationsis a deterninant managementof the sewer factorfor contaminationrisk network. of groundwater l ONASand Ministryof ® contaminationthrough the Agriculturemake provisions infrastucturefor to minimnizeinfiltrations reuse(conduitsand basins)and throughinfrastructure for after irrigation treatedwater reuse(pipe connections,waterproof E in case of dischargein the materials) environment,possible aquifer -121- ANNEX 10 Page 13 of 16

contamination L ONAS will make sure that levels of nutrients kept very low in case of discharge in the environment. In Tunis West, azote concentration would be kept lower than25mg/i Surface Waters Positive lInpacts Actions/ RespondbMes

i the project will reduce - in the absence of sea • Sebkha Sejoumi considerablythe impact on the outfall, additional treatment Sebkha since the waste water for the removal of P and N of the Tunis West area will be is essential. reverted to the plant P This risk is to be © the project will reduce minimized by means of considerablythe impact on the security precautions * the Lac Sud lac Sud since the waste waters incorporated in the design of of the Tunis South area, the plants and a sound daily currently discharged in the monitoring process during Lac will be treated in Sud operation. Meliane.

Negative Impacts t This impact will be eliminated by means of ® in case of discharge in the tertiary treatment. ONAS is * the gulf of Tunis Gulf, there is risk of responsiblefor this task eutrophization. including regular testing to be monitored by ANPE. ® Accidental disfunctioning in the pumping stations and pressure mains or/and emergency situationscould cause spills or voluntary discharge in the Sebkha, in Oued Sud Meliane and the environment with potential health hazards

® in the absence of reuse for * Other receiving water Tunis West, the discharge of bodies the effluent will flow in the oueds downstream the Gulf, causing additional pollution. -122- ANNEX 10 Page 14 of 16

Air Poilutionand Other Positive Inpacts Actions/ Responsibilities nuisances

* Odor emissions © Quality of the ambient air This will be controlled and will be improved by the minimizedby covering the project in all the residential sources of odors and treating areas to benefit from the the captured air form these sewerage infrastructure. sources by a biofilter. This also requires sound Negative Impacts managementof the plant.

* noise and vibrations ® In the WWTP site and its eg Noise will be reduced by vicinity, the odors will be placing the related equipment inevitable. This is quite into insulatedbuildings. important for Sud Meliane ONAS already being in an urbanized area and made provision to incorporate in view of the projected sport this measure in the design. facility in the close vicinity. Urban planning measure to ® The impacts of NO,, S02 be enforced in the form of a and C02 are not very buffer zone around the plant important due to the low along with vegetation to Other emissions. concentrations. mitigate these impacts, the visual nuisance and risk for contamination. Sludge Disposal In case of concentrationof ONAS will traceback the pollutants in the sludge, there source of pollutants and take is risk of soil contarni-nation appropriate measures. Sludge when used for agriculture or to be disposed of in controlled other risks when disposed of. landfills. Enviromental Management

Monitoring of the WWTP Performance

Negative Impacts Actions/ Responsibilities * for operation of all proposed treatmentunits. © Although ONAS has set introduce the monitoringof up a decentralizedsystem at these parameters: N-Kj, pH, the plant level with a alkalinity, greasy materials, laboratorytaking daily MES, gaz formation and the measurementsof the different drainage systemsof the drying -123- ANNEX 10 Page 15 of 16

treatmentoperations, beds (min 1/month). monitoredby the Regional J'- The water qualityof the and centrallaboratories, these maturationbasin to be additionalsteps are monitoredby recommended: ONAS/Agriculturefor the relatedparameters. l Reporfingsystem of this nmonitoringactivity to be established.ONAS to request detailedmonitoring plan for each plant as part of plant design l -ANPE to controlthe results and rmakeown checks3 to 4 times/year. l ' ONAS concerned personnelto undergotraining for soundmanagement of treatmentplants Monitoringthe Receiving water Bodies

NegativeImpacts Actions/Responsibilities

* The water bodies © potentialnegative impacts ONASwill take measures downstreamfrom the of the effluentson the to monitorthe impactsof the dischargepoint receivingbodies in case of dischargeof the effluents * Soilsand vegetationthat dischargewithout appropriate outsidethe plantboundaries in receivethe effluent. treatment,especially for those coordinationwith ANPE, and classifiedas very vulnerable the Healthand Agriculture authoritieswith a reporting systemand proposalsfor remedialactions when needed.

Conceptionof Treatment t ONASto cooperatewith the concemeddepartments of Agriculture,PublicHealth, EnvironmentMinistries and localauthorities to determine the systemof treatmentof each new plant projectand its desiredlocation. -1 24-

ANNEX 10 Page 16 of 16

8 CONCLUSIONS

8.1 The environmentalreview concludes that the proposed project will generate overwhelminglypositive environmental, social and economic impacts. With its mitigation measures,the projectdoes not present negativeenvironmental consequences. The mitigationplans stress the importanceof project planningduring the different implementationphases, institutional strengtheningand technicalperformance. ONAS, ANPE and the Ministry of Agriculturewill overseeand evaluate,for their respectivepart, the complianceand the effect of these plans. They will also ensureproper coordinationduring implementationof theseplans. -125- ANNEX 11

REPUBLICof TUTNIAL

GreaterTunis Swermereand Reuse Pro lect

STAFFAPPRAISAL REPORT

Implementation Schedule

Nr. Description 1997 1998 1999 2000 2001 2002 2003 2004 ASSAINISSEMENT GRAND TUNIS 1 1 .2 Extensionet rdhabilitation STEP Sud-Meliane 1.2.1 Travauxdegenie cMil | p __B A c cC __X 1.2.2 Equipement p I _B A _c c c X 1.3 R6seau Tunis Sud 1.3.1 Terrassementet pose p |_P I B _ A c__c | c c X 1.3.2 Foumitures P I B _ A c__ c C Cc _ X 1.4 estructurationReseau Primaire Tunis Ouest 1.4.1 Termssement et pose p pP I B _ A _ c _ C | X 1.4.2 Foumitures _ p I B _ A c_ c c__c C _ X 1 .5 Exdensionet RehabilitationTunis-Nord 1.5.1 Terrassement,pose P P I _ B A c c c c X 1.5.2 Foumntures _ p_P I _B A c =c c c X 1.6 R6habilitationTunis Centre 1.6.1 Terrassementet pose P | _B _A c_ c _c _ X 1.6.2 Foumitures P I B_ A c c c _ X 1 .7 Stations de pompage Sud 1.7.1 TravauxLdegeniecil Dp |_P I B A c c c c _ X 1.7.2 Equipement P_ I B _ A c_ c c_ c _X 1 .8 Stations de pompage Ouest 1.8.1 Travauxde genieCMi _P P I B A _c c c _X 1.8.2 Equipement P I B A c c c X 1.9 RdhabilitationSTEP Nord et transfert EE 1.9.1 Travaux de G6nie CMI p IB _A_c_ X 1.9.2 Foumitues PIB A_c c X 1.10 Reseauxsecondaires Tunis Ouest 1.10.1 Travauxdeg6nie cMil _P_I B A c __ c c c c c X 1.10.2 Equipement p_ B A=c c= =c= =c c c =X

2 ReutilisationAoncoI 2.1.1 Stockage p I B A c X 2.2.1 Etude de factibilit Projet Agricole P 2.2.2 ere tranche Proje Agncole p 1 8_A c _X 2.3 Projetpilote de rechargede la nappe 2.3.1 Etudes P P 2.3.2 R6alisationdu Projet Pilote I B_A c_ X

3 3.1 Etudes divers at Assistance Technique P p __P P P p _X

3.2 Matebel d'exploitation I B_A _ I 8_A

p=project preparation A=Bid Award c=construction X=compltion LU~ ~ ~ Uu

C., -

0 <~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. LU

dU d 0)g a.on(Ja)nE

U)

C14 U) C. 0U -J~ ~ ~~~~~~~

W 0 ~ - LU Z .0 +1 ~ o ~ o

O\ 0' W~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-m ~ - ~~~~~~U

4) -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1- -127- ANNEX13 Page1 of 2 REPUBLICOF TUNISIA

GREATERTUNIS SEWERAGE AND REUSEPROJECT

STAFFAPPRAISAL REPORT

List of Contracts Amount Subject Item Contracts Proc.Meth. TD millon Remarks

TreatmentPlant Equipment(supply & install) 1 contract PQ+ICB 17.679convential Tunis-Sud(Meliane) CivilWorks 1 contract ICB 9.520

Sewersystem supplyof pipes 4 contracts ICB 8.018reorganization westemTunis supplyof specials 8 contracts ICB 0.891and extensions pipelaying 8 contracts LCB 10.714 pumpingstabons 2 contracts LCB 3.126cw+equipment

Sewersystem supplyof pipes 4 contracts ICB 1.011extensions southemTunis supplyof specials 8 contracts ICB 0.112and MORNAG pipelaying 8 contracts LCB 2.772 pumpingstations 1 contract LCB 1.581cw+equipment

Sewersystem supplyof pipes 4 contracts ICB 2.677extensions northemTunis supplyof specials 8 contracts ICB 0.297and lIaison 2 pipelaying 8 contracts LCB 5.955treatment plants anddesudging

Sewersystem supplyof pipes 1 contract ICB 9.304rehabilitation centralTunis supplyof specials 2 contracts ICB 1.033 pipelaying 1 contract LCB 3.730

Secondary supplyof pipes 4 contracts ICB 4.016in all zones sewers supplyof specials 8 contracts ICB 0.446 pipelaying 8 contracts LCB 5.955

Mobilelaboratory supply 1 contract ICB 0.755

Aquiferrecharge I contract ICB 4.375pilot project

MaintenanceEquipment supply 4 contracts ICB 6.84

Studies 8 contracts N/A 1.852

Workssupervision 2 contracts N/A 3.208for treatmentplants

Total 159.675 -128-

ANNEX 13 Page 2 of 2

REPUBLIC OF TUNISIA

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

List of Contracts and Procurement Methods

Thresholds for Procurement Methods and Prior Review by the Bank (US$ thousand)

Categorv Contract value Procurement Contracts subject to Method Bank's Prior Review

Works >3,000 ICB All contracts>3,000,000

Pipes Part (A) >1,000,000 ICB All contracts>l,000,000 Part (B) >700,000 ICB All contracts>700,000

>500 NCB All contracts >3,000,000 <250 National shopping None

Goods >500 * ICB All contracts>500,000 100 to 500 * NCB All contracts>500,000 <250 National shopping None

Consulting Services

Firms>100 Consultants TOR's, short list, LOI guidelines and contracts

<100 " TOR's only

Individuals>50 " TOR's, short list, LOI and contracts

<50 TOR's only

* 1,000,000 for pipe supply. -129-

ANNEX 14 Page 1 of 11

REPUBLIC OF TUNISIA MINISTRY OF AGRICULTURE DIRECTION GENERALE DU GENIE RURAL

GREATER TUNIS SEWERAGE AND REUSE PROJECT

STAFF APPRAISAL REPORT

T'HE REUSE OF TREATED WASTE WATER IN AGRICULTURE

SUMMARY

1. In viewof the growingscarcity of water resourcesin relationto increased agriculturalrequirements in particular,and given the arid climate,irregular rainfall patterns and increasingpressures on groundwaterresources, the developmentof treated waste water for agriculturalpurposes is consideredto be a criticalcomponent of the integratedwater resources managementpolicy.

2. With an irrigablepotential of close to 20,000 ha projectedfor the year 2000, existingirrigation schemes cover some 6,500 ha, mostly(55%) in the area surroundingTunis. Theseschemes draw on an exploitablequantity of 35 Mm3.

3. The reuseof treated waste water in irrigationschemes runs into certainproblems in terms of psychologicalacceptance, agronomic considerations and sanitation,which tend to limit its full development(to 15 to 18%)despite the significantpresence of fertilizingsubstances in such waste water. Usingtreated waste water under restrictiveconditions that limitfarmer incomesis one constraintto the developmentof irrigationschemes.

4. Followingthe fillingof the legislativegaps concerningthe reuse of treated waste water (bid documents,a list of crops that can be irrigatedwith treated waste water), the Ministry of Agriculture,which is awareof the significantirrigation potential at stake, has formulateda strategyto developa modelthat is adapted to the specificconditions of the country. Thismodel, whichwill makeit possibleto greatlyexpand the reuse of treated waste water in the futureunder totally safe conditions,will addressall major technical,social and environmentalconcerns (dimensionsof irrigationschemes, irrigation techniques, choice of crops, size of farms,operating conditions,extension, monitoring, etc.).

5, Large-scaleprojects (such as Tunis West)warrant a thorough examinationof the averagesurface area of operatingentities, the type of developmentsto be advocated(storage -130-

ANNEX 14 Page 2 of 11

basins, lakes, recharging of aquifers) and the most appropriate method of irrigation, which depends on the type of infrastructure adjoining the scheme (housing, surface wells, roads, etc.).

6. In addition, it is important that improvements in transport, storage and maturation facilitiesand the disposal of treated effluents should not have a negative impact on the natural productive environmentof the region. Compensatory improvements that prove necessary, for example urban and industrialzone waste water treatment plants located downstream from discharge areas, should be studied and carried out before the main project is implemented.

INTRODUCTION

7. The last two decades have witnessed major urbanization, followed by a wave of industrial and tourism development that threatens the natural environment due to the effluents produced, which represent a growing source of pollution in terms of both quality and quantity.

8. The volume of potable water distributed, and from which the effluents originate, is 230 Mm3, of which more than 100 Mm3 is currently treated at treatment plants near major urban areas and tourist sites in order to protect the environment.

9. In view of the growing scarcity of water resources in relation to increased agriculturalrequirements in particular, and given the arid climate, irregular rainfall pattems and increasingpressures on groundwater resources, the development of treated waste water for agriculturalpurposes is considered to be a critical component of the integrated water resources managementpolicy.

REUSE OF TREATED WASTE WATER: THE TUNISIAN EXPERIENCE

Level of Development

10. Since 1965, waste water treated at the Charguia plant has been used for the Soukra irrigation scheme, covering 1200 ha north of Tunis (now reduced to 600 ha as a result of urbanization), in order to safeguard the citrus orchards traditionally irrigated from the over- exploited aquifer.

11. Since the 1980s, the Government of Tunisia has focused heavily on the reuse of treated waste water, both to protect the existing productive potential (i.e. citrus from Cap Bon - Oued Souhil) and to develop new irrigation schemes.

12. Existing irrigation schemes cover some 6,500 ha, mostly (55%) in the area surrounding Tunis. These schemes draw on an exploitablequantity of 35 Mm3 .

13. However, the reuse of treated waste water in irrigation schemes runs into certain problems in terms of psychologicalacceptance, agronomic considerations and sanitation, which tend to limit its full development (to 15 to 18%) despite the significant presence of fertilizing substances in such waste water. -131-

ANNEX 14 Page 3 of 11

14. Using treated waste water under restrictive conditions that limit farmer incomes is one constraint to the development of irrigation schemes.

15. Rejection of development is most evident in cases where the irrigation areas are new (i.e. with no tradition of irrigation) or were originally designed for vegetable crops.

16. Accordingly,intensification rates are highest for citrus growing schemes, which involve highly yield crops, whereas they are below 35% for other irrigation schemes. Of the latter, the Sfax schemes are an exception because they are largely state-held (El Hajeb irrigation scheme).

17. Apart from user reluctance stemming from the above-mentioned constraints, irrigation schemes that use treated waste water have encountered other problems of various sorts: project design, land reform, new system of production, maintenance, extension, etc. In a certain number of cases, the problems cannot be attributed to the use of treated waste water and are in fact found in new irrigation schemes that use conventional water sources.

Research

18. Progress has been made regarding the reuse of treated waste water in Tunisia, and significantresearch results have been obtained. However, constraints related to the properties of the treated waste water have not yet been fully addressed.

19. The results obtained by CRGR since the 1980s relate in particular to the physico- chemicaland bacteriologicalcomposition of treated waste water and residual sludge, as well as their effect on soils and plant life. An evaluation of their significance as a fertilizer and as a pollutant has also been performed.

20. But studies on reusing treated waste water and sludge need to be pursued in order to evaluate the long-term effects on the soil-plant-aquifer system of various irrigation techniques.

21. Another use for treated waste water has also been shown to hold promise: the artificialrecharging of aquifers when hydrogeological conditions are favorable (DRE project in Oued Souhil - Nabeul). This operation offers the advantage of additional purification of waste water due to a process of filtration through unsaturated soil. Sanitary precautions must, however, be taken if water from the aquifer is used for human consumption. Research on this subject should be pursued in differenttypes of terrain.

Legislation

22. In Tunisia, a variety of statutes and laws have been enacted to regulate the disposal and use of treated waste water: -132-

ANNEX 14 Page 4 of 11

- The Water Code (Law 75-16 of March 31, 1975), prohibiting the use of raw sewage and the irrigation of edible crops with treated waste water.

- Decree 85-56 of January 2, 1985 regulating the disposal of waste water into the environment.

- Decree 89-1047 of July 28, 1989 setting conditions for the use of treated waste water for agricultural purposes and, in particular, requiring that distribution agencies monitor the quality of the water distributed.

- Two Tunisian standards: one established in order to regulate the quality of water released into the environment (Tunisian Standard 106-002 of July 20, 1989) and one concerning the use of treated waste water in agriculture (Tunisian Standard 106-003 of May 18, 1989). The water quality standards are based on various FAO and WHO recommendations.

- The Order (Arr&e) of the Minister of Agriculture of June 21, 1994, establishingthe list of crops that can be irrigated with treated waste water.

- The Order (Arrete) prescribed by Decree 89-1047 concerning specifications regulating the use of treated waste water, issued on September 28, 1995.

- Law No. 96-41 of June 10, 1996, concerning the control, collection, transport, treatment and elimination of solid and liquid waste.

Institutional and Organizational Structure

23. A variety of ministries and entities are responsible for collecting waste water and recyclingwaste water for agriculture:

- The Office National d'Assainissement (ONAS) is responsible for waste water collection, treatment and disposal. The mission of this institution is to study and implement urban sanitation projects and then operate them.

- The Ministry of Agriculture, through its central and regional units (CRDA), is responsible for implementingirrigation development projects, operating and maintainingthe facilitiesand equipment, distributingwater to irrigators and monitoring the health of personnel involvedin distributing and monitoring water. A few users' associations (AICs) have been created to handle water distribution (e.g. in Monastir).

- The respective missionsof the Ministry of Public Health and the Ministry of the Environment (oversees the ONAS activities) are to provide health and environmental controls in accordance with the applicable regulations.

24. The possibilityof working through AICs to involve farmers in health monitoring should be explored. In addition, as the number of irrigation schemes increases, the need for -133-

ANNEX 14 Page 5 of 11 coordination among the various stakeholders has grown more and more evident. For this purpose, regional monitoringcommittees have been set up with representatives from the various organizations (CRDA, ONAS, Ministry of Health, etc.) in order to ensure broader consultation whenever a new irrigation scheme is developed. Nevertheless, there is a need to ensure structural coordination at the national level and stimulate the regional committees in order to more effectivelyinvolve the various partners in the creation and management of irrigation schemes.

Water Supply and Quality

25. Very large daily and seasonal variations have been observed in water supply and agricultural requirements as a function of climatic conditions and cropping patterns followed by farmers. Solutions for managingthe discrepancy between supply and demand should therefore be identified to cover all situations: occasional release into the environment versus artificial recharging to store significantquantities underground versus the identification of economical dam sites for surface accumulation. It has not yet been possible to put the latter alternativeinto practice. The major waste water treatment plants are located in the coastal regions, where there is a lack of favorable sites for developing such dams. However, establishingwaste water treatment plants upstream from urban centers may, in the future, shorten the distance between waste water treatment plants and storage or consumption sites.

26. The quality of the treated waste water furnished to irrigation schemes is often problematical. Continuous monitoring by the distribution agencies (CRDA) has not uncovered any microbiologicalor parasitologicalrisks, but the physico-chemicalprofile presents certain deficiencies:

- variable color and odor over time (causing a psychological effect and rejection by users);

- a sometimes high rate of suspended matter (due to premature wear and tear of hydro- mechanical equipment in irrigation networks, as well as deposits in tanks);

- the excessive salinityof some treated waste water (which has an impact on soils and crop yields).

Health Aspects

27. The public health service provides health monitoring and disease control. Nevertheless, a lack of health coverage for irrigators handling treated waste water has been observed. They do not systematicallyreceive health education concerning the risks they incur, nor do they adopt the preventive measures that are advocated (periodic physical exams, vaccination, etc.). -134-

ANNEX 14 Page 6 of 11

STRATEGY FOR REUSING TREATED WASTE WATER

Potential Use

28. 3 It is projected that tlhe annual availability of treated waste water will reach 200 Mm by the year 2000 and 300 Mm by 2010. The irrigable potential is estimated at nearly 20.000ha based on the current level of treatment, the chemicalproperties of the water (salinity) and the laws currentlyin effect, which do not allow the reuse of all treated waste water.

29. Potential use may increase in the long run as the level of treatment is improved, whether directly for irrigationpurposes or to recharge aquifers or develop surface storage interseasonal use. In addition, an irrigation system that avoids all contact with the actual fruit could lead to fewer restrictionson crops that are irrigated with such water. Looking beyond the year 2000, if the above-mentionedimprovements are made and assumingthat irrigable land is availablein the vicinityof waste water treatment plants (i.e. the economic aspect), then it would be possible to reuse as much as 60% of treated waste water.

30. During the period of the eighth economic and social development plan, there was a hiatus in the development of irrigation schemes. Two statutes regulating such activity were enacted at this time: bid documents establishing the particular procedures and conditionsthat apply to the use of treated waste water for agricultural purposes (Order of September 28, 1995) and the Order of the Minister of Agriculture of June 21, 1994 establishingthe list of crops that can be irrigated with treated waste water.

31. Followingthe filling of the legislative gaps concerning the reuse of treated waste water, the Ministry of Agriculture, aware of the significanthydraulic potential at stake, is planning to develop 2000 ha in the near future, in the form of new or expanded irrigation schemes covering small areas (60 to 310 ha). Thus, potential irrigation projects now being studied throughout the various regions of the country take several criteria into account: dimensions of irrigation schemes, irrigation techniques(sprinkling versus gravity-feed), choice of crops (trees, forage, cereals, industrial crops), size of farms, operating conditions, extension, monitoring, etc.

32. The specificproblems encountered in existing irrigation schemes are not insurmountable and technicalsolutions to these problems remain possible (additional improvements, rehabilitationof facilitiesand equipment, preventive maintenance, etc.). Although agricultural developmentultimately depends on the beneficiariesof such development, for a certain time, the state will be required to play the role of catalyst, for example through a differentialfee scale for water used to irrigate crops, investment incentives, intensive extension efforts, free health coverage, etc.

Elements of the Strategy

33. To develop a strategy for the reuse of treated waste water, Tunisia has relied on its own experience at the Soukra irrigation scheme in Tunis area and the results of the CRGR -135-

ANNEX 14 Page 7 of 11 research, as well as the experience of certain other countries (Australia, Mexico) and the expertise of international organizations(WHO, FAO, IBRD).

34. The strategy is based on developing a model adapted to the specific conditions of the country. This model, which will make it possible to greatly expand the reuse of treated waste water in the future under totally safe conditions, will address the following major elements:

- Irrigation schemes of manageable size should constitute a priority in areas of scant water resources in order to safeguard existing schemes that are encountering excessive pressures on conventional resources.

- Given the discrepancybetween supply and demand and in view of the slow rate of development, recyclingwaste water for agricultural purposes cannot in and of itself constitute a miracle cure for absorbing all waste water as presently treated. Recourse to tertiary treatment would probably be the best solution for agriculture over the long run, provided that the physico- chemicalproperties of the treated waste water remain appropriate for profitable irrigation.

- Studies of projects to reuse treated waste water must address all aspects (technical, social and environmental)to avoid all possible risks of contamination and pollution.

- With respect to the environment, large-scale projects (such as Tunis West) warrant a thorough examinationof the average surface area of operating entities, the type of developments to be advocated (storage basins, lakes, recharging of aquifers) and the most appropriate method of irrigation, which depends on the type of infrastructure adjoiningthe scheme (housing, surface wells, roads, etc.).

- In addition, it is important that improvements in transport, storage and maturation facilitiesand the disposal of treated effluents not have a negative impact on the natural productive environment of the region. Compensatory improvements that prove necessary, for example nearby urban and industrialzone waste water treatment plants, should be studied and carried out before the main project is implemented (e.g. the treatment plant in the case of Tunis West).

- Organizationaland institutional elements also need to be strengthened in light of the deficienciesobserved (monitoring, coordination among stakeholders, etc.).

- There is a growing need to elicit the participation of irrigation beneficiariesthrough educational outreach, extension work and the training of user associations, from the project identification phase forward.

- Standards and laws need to be carefully observed through widespread circulation of information among all stakeholders (e.g. the results of physico-chemicaland bacteriological monitoring), such that necessarymeasures can be taken in a timely fashion. -136-

ANNEX 14 Page 8 of II

- The necessary material, human and financial resources must be assembled to implement the specifiedpreventive measures (monitoring, vaccination, etc.).

In light of the fact that the use of treated waste water in agriculture is an important tool for stemmingthe increasing shortage of resources in certain regions, major efforts are still required at all levels to meet actual needs.

THE USE OF TREATED WASTE WATER FROM THE TUNIS WEST WASTE WATER TREATMENT PLANT

35. The daily output of the Tunis West Treatment Plant is 59,000 cubic meters per day during a peak month, i.e. 1.77 Mm3/month. Assuming 60% use of available volume, the maximumirrigable area (based on an average requirement of 3 mm/day) is 1200 ha.

PROPOSED IMPROVEMENTS

Maturation Basin

36. The primary reason to develop maturation basins is to improve the bacteriological properties of treated effluents, whether intended for agricultural purposes or to recharge aquifers. The level of suspended matter would also be reduced. The basin would flood 50 ha at a depth of I to 1.5 mn,with a retention period of 17 days. Possible proliferation of algae is however a concern. The maturation basin is needed because effluents that are released could pollute runoff in the region and could be used for unauthorized agricultural purposes by those residing along watercourses. Responsibilityfor the maturation basin would lie with ONAS.

Storage Basin

37. A storage basin is desirable to provide the flexibilityof postponing the reuse of treated waste water for agriculturalpurposes from one season to the next. The length of storage for effluents would probably range from 3 to 6 months. The surface area depends on the topography of the land and the length of storage. As an example, the basin might be bound by hills or hillocks and cover 170 ha at an average depth of 5 mn,i.e. a storage capabilityof 8.5 Mm3 assuming a length of storage of 100 days. The environmentalimpact of such a major reserve of marginalwater would of course have to be carefully studied.

Location of Irrigation Scheme

38. Two potentiallyirrigable areas have been studied: - an upstream portion of the Medjerda catch basin, located in the western El Attar area;

- the Mornag area, located within the Oued Meliane catch basin. -137-

ANNEX 14 Page 9 of 11

The possibilityof recharging the aquifers has not been pursued, pending the results of research now being conducted on treated waste water from the Sud Meliane treatment plant.

Treated Effluent Disposal Areas

39. The possible locations for discharging effluents from the Tunis West treatment plant are:

- into Oued El Attar, connecting to Oued Medjerda via Oued Chaffrou;

- directly into Sebkha Sejoumi;

- into Oued Meliane through a delivery pipe. In this case the water would enter the Gulf of Tunis at a distance of 4 km from the discharge area.

PRECAUTIONSAND RECOMMENDATIONS

40. The various options for reusing and discharging waste water all have significant environmentalconsequences over the long run. However, precautions can be taken to minimize any possible negative effects. Solutions that call for disposal into Oued Chaffrou or Sebkha Sejoumirequire further study in view of the following considerations:

- Sebkha Sejoumiis a closed body of water and would require major drainage facilities to avoid disturbing its natural balance (drainage toward the Gulf of Tunis through a tunnel);

- similarly,disposal of water from the maturation basin into Oued El Attar, connecting to Oued Medjerda via Oued ChaffTou,poses a potential danger of pollution because of the multiple uses of the Medjerda (potable water, irrigation perimeter schemes, individual pumping, etc.) and there is no way to eliminatethe risks of an operational failure or of overloading the waste water treatment plant, or to dilute toxic, uncontrolled discharges in Oued Chaffrou that would ultimately reach the Medjerda.

41. Accordingly,the Ministry of Agriculture favors a more thorough examination of the following solutions:

- discharging effluents into Oued Meliane, which is a marginal watercourse in comparison to Oued Medjerda (this option has been retained for the project);

- possible use of the Bir M'cherga reservoir on Oued Meliane to dispose of treated effluents and mix them with water impounded by the dam for irrigation;

- exploration of the Mohammedia area for the potential use of effluents for agricultural purposes; here again, the outlet for treated waste water would be toward Oued Meliane. -138-

ANNEX 14 Page 10 of II

REPUBLIC OF TUNISIA Ministry of Agriculture Direction Generale du Genie Rural

IRRIGATED PERIMETERS WITH TREATED WASTE WATER

Sewerage Existing New Area Governorate Station Perimeter | Area (ha) Extension(ha) JCreated (ha) Ariana Coast- North Borj Touil 3146 Charguia Choutrana Soukra 600 Ben Arous SudMeliane Mornag 1087 Nabeul SE 2 + SE 3 Bir Faiedh,Oued SouhilBni 236 70 SE 4 Khiar-Messadi,Bir Romana 120 134 Sousse Sousse- South ZaouietSousse 160 63 Monastir Moknine 100 Ouerdanine Ouerdanine 50 Kairouan Kairouan Draa Tamniar 240 Sfax Sfax OTDHajeb 300 160 Gafsa Aguila 120* Medenine Lalla Mariem OTD Sidi Chammakh 24 HoumtEssouk Sidi Salem 5 Beja Beja Beia (IJCP+rvatS) ---- _____-______- 310 MedjezElBab 80 (UCPJedidi & Ghanem) Jendouba- West Jendouba 144 Kasserine Oued Essid 100 Gabes Bouchemmma Dissa 230 100

Total 6068 547 964

* 82 ha, 1st trancheof which30 ha in temporaryuse. -139-

ANNEX 14 Page 11 of 11

REPUBLIC OF TUNISIA Ministry of Agriculture Direction Generale du Genie Rural

USE OF TREATED WASTE WATER IN THE IRRIGATED PERIMETERS

TArea 3 Governorate Irrigated Perimeter Total | Irrigated | m /ha

|______| Area (ha) | (ha) | ____ | (m3)

Citrus- Ariana Soukra 600 450 0.75 Pomegranate 904 807 2011 ...... Borj Touil Cereals-Forage 3146 2617 0.83 Arboriculture 4743445 1812

Ben Arous Mornag Fruit Trees- 1019000 2381 1087 428 0.39 Large Crops

Nabeul Bir Romana-Messadi- Citrus- Beni Khiar 120 120 1 Annual Cr9 pj-s ------_ Souhil-Bir Faiedh 236 236 1 Citrus

Sousse Olive-Fodder- 160 148 0.92 Fruit Trees 221440 1496 Arboriculture- Monastir Moknine 100 72 0.72 Fodder- 254957 3541 Ouerdanine 50 50 1 Industial Crops Cotton-Vesce Kairouan Draa Tammar 240 185 0.77 Oats

Sfax Henchir El Hajeb 300 203 0.67 Fodder-Olives 3739077 18419

Gafsa Aguila 30 1 Arboriculture- 256320 8544 Cereals

Medenine Sidi Salem 5_ 2 0.4 Alfalfa-Grapes . ______OTD Sidi Chanmakh 24 8 0.33 Cotton Total 6068 4499 [| ] 11139046 [ 38204 -140- ANNEX 15 Page 1 of 36

Tunisian Republic

Ministry of Environment and Land Planning

NATIONAL SANITATION OFFICE (Office National de l'Assainissement-ONAS)

CONTRAT - PROGRAMME

BETWEEN

THE GOVERNMENT AND ONAS

1997-2001

(Draft)

January 1997 -141- ANNEX 15 Page 2 of 36

ONAS CONTRAT PROGRAMME FOR THE PERIOD 1997-2001 PROJECT BRIEF

INTRODUCTION

Pursuant to Law no. 89-9 of February 1, 1989 and in implementation of Prime Minister's Circular no. 32 of August 12, 1996 conceming preparation of the contrat programme (CP), the draft ONAS CP for the period 1997-2001 is appended hereto.

The CP comprises three parts. The first part relates to ONAS's mandate, the second part to the objectives and obligations incumbent on ONAS, and the third part to the obligations of the Government.

L MANDATE OF ONAS

The purpose of ONAS is to protect the water environment. It is responsible in particular for waste water collection and treatment and the utilization of treatment by-products.

IL OBJECTIVES AND OBLIGATIONS OF ONAS

ONAS's objectives encompass the technical, financial and commercial, organizational and institutional and social aspects.

Technical Aspects

Upgrading the level and quality of ONAS services, through development of: * the connection rate and the percentage of the volume of waste water collected and treated; * preventive activities and mechanization; * loans to new subscribers and assistance to users.

Optimizing the functioning of the sanitation works, by: * raising the cleaning rate and rehabilitating the wom-out network; * improving infrastructure control and optimizing equipment utilization. * Strengthening control of water treatment plants' products and pollutant waste. * Improving treated water reuse. * Implementing the investment program (TD 395 million for the period 1997-2001). -142- ANNEX 15 Page 3 of 36

Financial and Commercial Aspects

Achieving annual equilibrium of resources and application of funds and improving self-financing capacity.

Reducing costs and improving operating revenues.

* Optimizing inventory management and improving customers' arrears.

Organizational, Institutional and Social Aspects

* Strengthening ONAS's organization and information, audit and management control systems.

* Private-sector participation in sanitation works operation, execution and financing.

Maintaining a healthy corporate climate within the enterprise. m. RESOURCES TO BE DEPLOYED

Financial Resources

These resources are estimated at TD 798.5 million.

Physical Resources

The cost of the equipment to be acquired is estimated at TD 13.0 million.

Human Resources

ONAS's human resources will be strengthened over the period 1997-2001 by the recruitment of about 650 staff and improvement of the manager/staff ratio from 9.1% in 1996 to 9.5% in 1997.

Regulatory Resources

Upgrading of the legal instruments relating to sanitation service charges, sanitation violations control procedures, concession of sanitation works, and utilization of treated sludge.

Performance indicators have been identified and defined for annual monitoring of performance over the contract period. -143- ANNEX 15 Page 4 of 36

IV. OBLIGATIONS OF THE GOVERNMENT

In order to achieve the objectives listed in Article ( I ), the Ministry of Environment and Land Planning will implement the following actions:

1. Raise the average sanitation services tariff by 10.5% a year over the period 1997-2001.

2. Increase the receipts deriving from the local authorities fund by at least 6% a year over the period 1997-2001, in accordance with the following table:

Item l 1997 1998 1999 l 2000 [ 2001 Total ONAS receiptsfrom the commonfund 8.2 8.7 9.2 9.7 10.4 46.2 (TDmillion) l

3. Raise the compensatory receipts rate by 6% a year over the period 1997-2001, in accordance with the following table:

Item 1997 1998 1999 2000 2001 Total Compensatoryreceipts (ID 0.001 per 65 69 73 77 80

Totalvalue of compensatory 11.3 12.3 13.4 14.4 15.3 66.7 receipts(TID million)

4. Progressive collection of ONAS's arrears (sanitation, works and services charges) owed by government agencies and local authorities.

5. Maintenance of ONAS's financial and budgetary equilibrium and allocation of the necessary financial resources for implementation of the present CP. These resources amount to TD 304.5 million for the period 1997-2001, with the following breakdown:

Item | 1997 | 1998 | 1999 2000 2001 | Total | Govemnmentfinancial operations plus 41.2 62.2 65.3 65.9 69.9 304.5 commonfund receipts(CI million)

6. In the event that the rates of increase of the costs borne by ONAS exceed those adopted in this CP, the resulting gap will be entirely covered by the government budget.

7. In the event that the Government requires ONAS to carry out a specific operation not provided for in this CP (solid waste, storm water, industrial waste water, etc.), the cost of such operation will be compensated in accordance with arrangements to be decided on case by case. -144- ANNEX 15 Page 5 of 36

TABLE OF CONTENTS

PREAMBLE

1. Description of ONAS 2. Functions of ONAS

ARTICLE 1: OBJECTIVES OF ONAS

A. Technical Aspects

1. Upgrading the level and quality of the service 2. Optimizing the functioning of the sanitation works 3. Strengthening control of Waste Water Treatment Plants' (WWTP) products and pollutant waste 4. Improving treated water reuse 5. Implementing the proposed investment program

B. Financial and Commercial Aspects

1. Ensuring annual equilibriumof resources and application of funds 2. Improving self-financingcapacity 3. Maintaining financial equilibrium 4. Reducing operating costs 5. Improving operating revenues 6. Optimizing inventory management 7. Improving arrears collection

C. Organizational and Institutional Aspects

1. Improving ONAS' organization and information system 2. Private-sector participation in the operation and construction of ONAS' sewerage works

D. Social Aspects

ARTICLE II: RESOURCES TO BE DEPLOYED

1. Financial resources 2. Physical resources 3. Human resources 4. Regulatory resources

ARTICLE HI: OBLIGATIONS OF THE GOVERNMENT -145- ANNEX 15 Page 6 of 36

ARTICLE IV: PERFORMANCE INDICATORS

1. List of Performance Indicators 2. Definition of Main Performance Indicators 3. Trend of Performance Indicators

ARTICLE V: CONTRAT PROGRAMME IMPLEMENTATION ARRANGEMENTS

ARTICLE VI: DOCUMENTS APPENDED

ARTICLE VII: ENTRY INTO EFFECT OF THE CONTRAT PROGRAMME

ANNEXES

1. Technical Conditions 2. Financial Conditions 3. Organizational Conditions 4. Corporate Conditions -146- . iANNEX15 Page 7 of 36

1997-2001 CONTRAT PROGRAMME

The present CP is concluded between the Ministry of Environment and Land Planning, acting in the capacity of jurisdictional authority and represented for all relevant purposes by the Minister of Environment and Land Planning, party of the first part, and the Office National de l'Assainissement, having its head office at 32 Rue Hedi Nouira and represented by its President-Managing Director, party of the second part.

Having regard to:

* Law no 74-73 of August 3, 1974, establishing the Office National de l'Assainissement, as amended and amplified by Law no. 9341 of April 19, 1993;

* Law no. 89-9 of February 1, 1989, concerning participations and public enterprises, as amended and amplified by Law no. 94-102 of August 1, 1994 and Law no. 96-74 of July 29, 1996;

* )Decreeno. 89-378 of March 15, 1989 concerning representation of the government on the management and deliberative organs of the public enterprises and the conditions of exercise of jurisdictional authority over the said enterprises;

* Prime Minister's Circular no. 6 of January 11, 1989;

* Prime Minister's Circular no. 47 of September 14, 1992;

* Prime Minister's Circular no. 42 of July 1, 1995;

* Prime Minister's Circular no. 32 of August 12, 1996, the Ministry of Environment and Land Planning and the Office National de I 'Assainissement have agreed upon and drawn up the following CP for the period 1997-2001. -1 47- ANNEX 15 Page 8 of 36

PREAMBLE

1. DESCRIPTION OF ONAS

Corporate Title: The Office National d'Assainissement(ONAS) is a public establishmentof the industrialand commercialcategory endowedwith juridical personality and financialautonomy.

CorporateHeadquarters: 32 Rue Hedi Nouira, Tunis

Referencedata for year 1995:

* Equity capital TD 404.97 million * Net operatingresult for the period TD 2.61 million * Total salarybill TD 20.50 million * Workforce 2,986 permanentstaff 904 temporarystaff

2. FUNCTIONS OF ONAS

ONAS' main functionis the protectionof the water environment. Withinthat framework its responsibilitiesare, in particular,to:

* combatall sources of water pollution;

* manage,operate, maintain,renew and buildurban sanitationworks;

* promote the distribution and sale of treated water, sludge produced by the treatmentsystem and all other by-products;

* draw up and implementintegrated projects relating to waste water, storm water and householdsewage treatment;

* take all necessaryactions for achievementof the objectivesencompassed by its mission.

In addition, ONAS may furnish assistance and advice to local and other authorities concerning the combating of pollution of every kind capable of adverselyaffecting the water environment.

In the case of sanitationworks studies and construction,ONAS may act throughoutthe territory of the Republic.

In the case of sanitationinfrastructure operation and maintenance,ONAS acts only in the areas servicedby decree. -148- ANNEX 15 Page 9 of 36

ARTICLE I -- OBJECTIVES OF ONAS

ONAS' objectives for the period 1997-2001 fall into the following categories:

A. Technical aspects B. Financial and commercial aspects C. Organizational and institutional aspects D. Corporate aspects

A. Technical Aspects

* Upgrading level and quality of services * Optimizing the functioning of the sanitation works * Strengthening control of WWTP products and pollutant waste * Executing the proposed investment program

1. Upgrading Level and Quality of Services

During the period 1997-2001 ONAS plans to:

X execute about 120,000 connection boxes and lay 1,800 km of sanitation piping, within the communes serviced at the end of 1996;

* absorb 40 new communes, provided with a sanitation network of approximately 600 km and 45,000 connection boxes;

* put 25 new WWTPs into service;

* produce about 100 master sanitation plans;

* implement a priority tranche of the rural areas sanitation program.

1.1 Relative rate of connection (TRB*) to the ONAS-operated network

* (TRB) = Urban Ropulationconnected and operatedby ONAS networkin the cities serviced Total urban populationof the cities serviced

The target for 2001 is a connection rate of approximately: - 85% in the 111 communes already serviced (end of 1966), against 77% in 1996 - 50% in the 40 new communes to be serviced during the period 1997-2001

The average connection rate for the whole of the communes already or to be serviced will reach 82% in 2001. -149- ANNEX 15 Page 10 of 36

Table 1 EVOLUTION OF THE RELATIVE CONNECTIONRATE

Item 1996 1997 1998 1999 2000 2001

UrbanPopulation (000 inhabitants)

In the communesserviced at the end of 1996 4560 4640 4720 4810 4900 4990

In the communesto be servicedin 1997-2001 60 180 260 340 480 Total (1) 4560 4700 4900 5070 5240 5470 PopulationConnected to the Network(000 inhabitants) In the communesserviced at the end of 1996 3510 3640 3780 3920 4070 4240

In the communesto be servicedin 1997-2001 30 90 130 170 240 Total (2) 3510 3670 3870 4050 4240 4480 Relative Connection Rate (2/1) In the communesserviced at the end of 1996 77% 78.5 % 80 % 81.5 % 83 % 85 %

In the communesto be servicedin 1997-2001 50 % 50 % 50% 50% 50 % All Communes 77 % . 78 % 79 % 80 % 81% 82%

1.2 Potable water consumption and waste water collection

Having regard to the investment program and to the new communes to be serviced:

- The number of ONAS-SONEDE subscribers will rise from 653,000 in 1996 to 850,000 at the end of 2001, representing an average annual growth of 5.4%.

- The volume of waste water collected will rise from 133 million m3 in 1996 to 156 million m3 in 2001, an average annual increase of about 3.2%.

1.3 Waste water treatment

The number of treatment stations in service will rise from 50 units in 1996 to 75 at the end of 2001, with additionally over 20 stations under construction.

The volume of water treated will rise from 120 million m3 in 1966 to 148 million m3 in 2001, an average annual increase of about 4.2%.

The volume of waste water collected, as a percentage of the volume of water consumed by ONAS-SONEDE subscribers, will reach about 82% in 2001, against 78% in 1996.

The volume of water treated, as a percentage of the volume of waste water collected, will reach about 95% in 2001, against 90% in 1996. -150- ANNEX 15 Page 11 of 36

Table2 EVOLUTION OF VOLUME OF POTABLE WATER CONSUMED, VOLUME OF WASTE WATER COLLECTED, AND VOLUME OF WATER TREATED (Millions of m3 )

Item 1996 1997 1998 1999 2000 2001

Volumeof PotableWater Consumed 169.5 173.5 178.5 182.5 186.0 191.0 in the citiesserviced by ONAS (1)

Volume of Waste Water Collected (2) 133.0 136.5 141.0 146.0 151.0 156.0

Volumeof WasteWater Treated (3) 120.0 125.0 130.0 136.0 141.5 148.0

Percentageof volume of water collected 78 % 78.5 % 79 % 80 % 81 % 82 % (2/1) or collectionrate

Percentageof volume of water treated (3/ 2) or treatment rate 90 % 91.5 % 92% 93 % 94 % 95 %

1.4 Connection and network maintenance

In light of the resources available, ONAS will continue its efforts of:

* improving the connection rate and making operation of the sanitation works economically efficient; * developing the means of systematic control of networks and private connections; * preventive actions and execution of the necessary rehabilitation work; * increasing equipment base work for operations of the sanitation networks.

1.5 Customers' relations

ONAS plans to further improve its relations with its customers. To that end, it proposes to:

* pursue the process of simplifyingadministrative procedures, in particular by:

* setting up a "single window" for complaints, connection requests, etc.; * assigning regional public relations officers; * reducing complaint response times; * computerization;

* update the ONAS customers' guide;

* carry out a feasibility study on the setting up of a system of financing of loans to new domestic customers; -151- ANNEX 15 Page 12 of 36

* improve awareness of assistance activities targeted to industrial, tourism and other customers to encourage them to install and maintain pretreatment facilities.

2. Optimizing the Sanitation Works Operations

During the period 1997-2001 ONAS proposes to strengthen its program of preventive maintenance of sanitation networks (pipes and related works), pumping stations and WWTPs.

2.1 Sanitation works maintenance

ONAS will focus its efforts on the following activities:

raising the average frequency of cleaning of pipelines and related works (inspection holes and discharge outlets):

Table 3 DEVELOPMENT OF CLEANING OPERATIONS

item 1996 1997 1998 1999 2000 2001 ______|Probable Pipelines in Operation (km) (1)

In the communesserviced at the end of 1996 7100 7530 7930 8330 8830 9350 In the communesto be servicedin 1997-2001 90 220 370 470 650

Total (1) 7100 7620 8150 8700 9300 10000 Working Pipelines Cleaned (km) (2) i In the communesserviced at the end of 1996 5300 5740 6220 6630 7110 7660 In the communesto be servicedin 1997-2001 10 60 150 240 340

Total (2) 5300 5750 6280 6780 7350 8000 Pipelines: Average Cleaning Frequency (2/1) In the communesserviced at the end of 1996 75 % 76.5 % 78 % 79.5 % 80.5 % 82.0 % In the communesto be servicedin 1997-2001 12% 27 % 40 % 51% 52 %

Total, all Communes 75 % 75.5%/e 77% 78% 79 % 80% Ancillary Works: Average Cleaning Frequency (Number of cleanings per year) In the communesserviced at the end of 1996 2.80 2.85 2.90 2.95 3.00 3.05 In the communesto be servicedin 1997-2001 0.5 1.0 1.5 1.9 2.0

Total, all Communes 2.80 2.83 2.89 2.93 2.96 3.00

Note: Accordingto internationalstandards the averagepipeline cleaning rate is equal to (1) whereasfor other workscleaning frequency is equal to at least (4). -152- ANNEX 15 Page 13 of 36

* remaking, repair and rehabilitation of about 350 km of worn-out network during the period 1997-2001;

* general application of systematic maintenance of pumping and WWTP;

* introduction of leak detection devices in the sanitation network;

* stepping-up of camera monitoring of new sanitation networks.

Table 4 DEVELOPMENT OF NETWORK CAMERAMONIIORING (km)

Item l 1996 1! 1997 l 1998 l 1999 l 2000 l 2001 Camera-controlled Network(m) 80 100 120 140 170 200

2.2 Optimization of use of the "equipment fleet"

To this end, ONAS proposes to:

* ensure preventive and systematic maintenance of rolling stock; * minimizebreakdown idle times; * improve maintenance workshop management.

2.3 Control of electric power consumption

ONAS will focus on better control of electric power, particularly for operation of the pumping and WWTPs.

ONAS will adopt a plan of action designed to:

* provide a better choice of the type of electric power contract (time or flat-rate tariff);

* optimize the functioning of WWTP ventilators, pumping stations and other equipments;

* reduce the penalties incurred for exceeding subscribed capacity and/or lowering the cosine below the coefficient 0.8, which represents the penalty threshold

In collaboration with the Energy Control Agency (Agence de Maitrise d'Energie), ONAS will draw up a program of optimization of electric power use in WWTPs and utilization of the biogas generated by them. The average energy output of the treatment stations (kWh/kg DBO5 eliminated) will have to be held at or below 0.8. -153- r~~ANNEX15 Page 14 of 36

3. Strengthening WWTP Products and Pollutant Waste

To further strengthen pollution control, monitor the functioning of the WWTPs and ensure that the treated water meets waste and reuse standards, ONAS proposes to:

* strengthen treated water quality control;

* diversify the types of analyses, by:

* phasing in the introduction of sludge and hydrocarbon analysis; * broadening the range of heavy metals analysis; * instituting routine parasitological analysis of treated water to be used for irrigation.

Table 5 EVOLUTIONOF THE NUMBEROF SAMPLESTAKEN PER CUBICMETER OF WASTEWATER COLLECTED BY ONAS

Item 1996 1997 1998 1999 2000 2001 Total number of samplestaken (A) 20000 21000 22500 24000 25600 27300 Volumeof waste watercollected 133.0 136.5 141.0 146.0 151.0 156.0 3 (millions of m ) (B) * Numberof samplestaken per million 150 155 160 165 170 175 m3 (A/B) _

4. Improving treated-water reuse

The aim is to step up the current efforts devoted to improving the rate of reuse of treated water.

To this end ONAS plans to carry out a new project during the period 1997-2001, in coordination with the Ministry of Agriculture, which will allow irrigation of about 870 ha. Project cost is estimated at TD 10 million.

Table 6 EVOLUTIONOF THERATE OF UTILIZATIONOF TREATEDWATER

Item 1997 1998 1999 2000 2001 Volumeof water treated (millionm ) (A) 120 125 130 136 141.5 148 Volumeof treated water utilized* 25 30 35 40 45 50 (millionm) (B) * Treatedwater utilizationrate (A/B)* 21 ee 24 % 27 % 29 % 32 % 34 % -154- ANNEX 15 Page 15 of 36

5. Implementing the proposed investment program

The total amount of the investment planned for the period 1997-2001 is TD 360 million at constant 1996 prices, i.e. about TD 395 million at current prices.

The breakdown of this total investment by project category is as follows (in constant dinars):

==------I ---- _g-- L Waste Water Sanitation Projects Network expansion 128.0 36.0 % Networkrehabilitation and recalibration 30.0 8.4 % Construction of new WWTPs 112.0 31.2 % Rehabilitation and expansion of existing WWTPs 20.0 5.5 % Studies 13.0 3.6 % Strengtheningof physical resources 13.0 3.6 % Reuse of treated water (Transfer+ storage) 10.0 2.7 % Rural sanitation 4.0 1.1 % Reuseof treated water 10.0 2.8 % Total (1) 340.0 94.4 % IL UrbanStorm Water Drainage (2) 15.8 4.4 % m Solid WasteProject (Mejerda) (3) 4.2 1.2 % GRANDTOTAL 360.0 100 %

The breakdown by project classification is as follows (in constant dinars):

Item TD -l-en . L WasteWater SanitationProjects Ongoingprojects 165.5 46.0 % New projects,1997-2001 174.5 48.4 % S/Total (1) 340.0 94.4 % IL UrbanStorm Water Drainage Ongoingprojects 5.8 1.7 % New projects,1997-2001 10.0 2.7 % S/Total (2) 15.8 4.4 % S/Total (1+2) 355.8 98.8 % mL Solid WasteProject (Mejerda) (3) 4.2 1.2 % GRANDTOTAL 360.0 100 %

(See projectdetails in the TechnicalConditions annex). -155- ANNEX 15 Page 16 of 36

B. Financial and Commercial Aspects

The objectives under this heading relate to:

1. Annual Equilibrium of Resources and Application of Funds

ONAS will strive to maintain an annual balance between resources and application of funds by avoiding deficits that could adversely affect its general cash position.

2. Improving self-financing capacity

ONAS will strive to achieve adequate self-financing to cover its financial charges and partially finance its investment program (sanitation projects).

Table7 EVOLUTION OF SELF-FINANCINGCAPACITY

Item 1997 1998 1999 2000 2001 Total

+ Gross self-financing(TD million) (1)* 13.5 14.5 15.8 17.3 18.8 79.9

- Financialcharges (TIDmillion) (2) 4.6 5.7 6.9 9.8 9.0 34.2

= Net self-financing(TD million)(1-2) 8.9 8.8 8.9 9.3 9.8 45.7

Net sanitationinvestments (3) 60.5 76.3 79.9 84.6 89.4 390.7

Self-financingrate (1-2)/(3) 14.7% 11.5% 11.1% 11.0% 11.0% 11.7%

(1)* Gross self-financingis equal to gross operating result (gross cash-flow), excluding state subsidies, increasedby third-partyparticipation.

3. Maintaining financial equilibrium

The essential purposes are to: - maintain a positive working-capital; - safeguard ONAS' financial independence vis-a-vis donors and suppliers.

4. Reducing operating costs

ONAS will pursue optimum utilization of its human and physical resources, particularly through: * raising of the manager/staff ratio; * energy-saving measures * the use of other management methods such as subcontracting operations of the networks and WWTPs. -156- ANNEX 15 Page 17 of 36

5. Improving operating revenues

The following are ONAS' main sources of receipts, in addition to sanitation service charges, compensatory receipts and the common fund:

* Promotion of the sale of treated water and treated sludge:

The objective here is to continue the efforts accomplished and carry out a supplementary feasibility study in order to design a program for marketing WWTP by-products.

This program will include, in particular, identification of:

* the facilities to be installed at the WWTPs; * the necessary marketing structures; * a tariff system.

* Continuation of the customers' recoding system:

* Improving ONAS' technical cooperation and strengthening its technical assistance to third parties, through the general utilization of agreements pertaining to the remuneration of its studies, works supervision, infrastructure operations and training services.

6. Optimizing inventory management

In this area ONAS will strive, taking into account procurement constraints and service needs, to reduce the Inventory Turnover Rate (ITR) from 291 days in 1995 to 200 days in 2001, by:

* clearing out items that have become obsolete and optimizing inventory turnover;

* transferring certain items considered as fixed assets from inventory account to fixed assets account;

* improving the ongoing plant rehabilitation efforts on the basis of the units taken out of service.

Table8 EVOLUTION OF INVENTORYTURNOVER RATE (ITR*)

ITR* | 1995 l 1996 * 1997 l 1998 | 1999 l 2000 | 2001 Indays 291 280 278 260 240 220 200

*ITR = I OS(Opening Stock) + CS (Closing Stock)]* 365 days/2)/ Goodsconsumed during the year. -157- ANNEX 15 Page 18 of 36 7. Improvingarrears collection

To this end, ONASwill take action to strengthenthe current customers' arrears collection proceduresand step up its efforts to reduce the share of unpaid amountsin current assets.

* Service charges

ONASwill combineits efforts with those of SONEDEto improvethe average collection time from Governmentagencies and local authoritiesthrough control of their water consumption and increasingof the state budget appropriationsfor water supplyand sanitation.

* Extension and technical assistance work

In order to reduce the amount of arrears and improve the average collectiontime for extensionand technicalassistance work, ONAS plansto:

* pursue its efforts of reschedulingof the debts of local authoritiesand third parties in difficulty;

* regard settlement of arrears as a precondition for commitmentof new projects agreed upon with third parties (Governmentagencies, local authorities, etc.).

C. Organizationaland InstitutionalAspects

ONAS will develop the necessary measures to improve the services provided to the customersthrough the followingaction.

1. Improvingits organizationand informationsystem

To this end, it is plannedto:

* strengthendecentralization;

* improvethe internalorganization of the existingstructures in order to upgrade the reliabilityand circulationof information;

* strengthenthe audit and managementcontrol instruments;

* strengthenthe data-processingfacilities;

* coordinate the efforts of ONAS and the other partners in order to set up a GeographicInformation System (GIS). -158- ANNEX 15 Page 19 of 36

2. Private-sector participation in the operations, execution and financing of ONAS' sanitation works

Participation by the private sector in operation of the sanitation works makes it possible to: * improve the services provided in this sector; * mobilize other sources of financing; * ensure optimum and efficient management of the works and resources currently used.

In this area ONAS has carried out a study on private-sector participation in sanitation works management and plans to launch a pilot operations program.

This program will be evaluated in step with execution of the operations in order to make the necessary corrections to it.

(See Organizational Conditions).

D. Social Aspects

Improving personnel productivity is based on, in particular, maintenance of a good social climate within the company. To that end, ONAS will work to:

* develop dialogue and consultation between the administration and the statutory staff representation structures within the enterprise;

* promote increased staff participation in the associative life of the enterprise;

* improve the personnel skills to the ONAS' needs;

* strengthen social assistance in order to improve information flow about the concerns of the various categories of staff;

* pursue the company policy of granting loans and improve the financial capacity of the social fund to improve its ability to meet the demand;

improve staff working conditions and security;

* strengthen the medical service by providing it with adequate resources to furnish improved preventive and curative care for the whole of the staff;

* develop and strengthen the activities of the social-type associations. -159- ANNEX 15 Page 20 of 36

ARTICLE II -- RESOURCES TO BE DEPLOYED

1. Financial Resources

The necessary expenditureS during the period 1997-2001 to maintain the sanitation infrastructures in good operating condition, implement the planned investments and service the debt is estimated at TD 798.5 million, with the following breakdown (at current prices):

Expenditure TD million

-- Investment program 395.0 49.5% -- Maintenance program 312.3 39.1% -- Interest payment 34.2 4.3% -- Debt amortization 57.0 7.1% Total 798.5 100%

The necessary financial resources to cover these expenditures comprise:

Receipts TD million %

- Governiment financial operations (subsidies) 258.3 32.3% - Loans and grants 148.0 18.6% - Common funds 46.2 5.8% - Seweragetariffs 299.2 37.5% - Worksand services 42.5 5.3% - Third-parlyparticipation 4.3 0.5% Total 798.5 100%

(Seethe incomestatement and the Resourcesand application of fundsin the FinancialConditions annex)

2. Physical Resources

The cost of the equipment to be procured is estimated at TD 13.0 million. It is accounted for essentially by:

* Maintenance equipment: * water works cleaning, mini-cleaning and suction devices; * tractors, trucks, vehicles, tricycles, mopeds; * motor pumps, compressors, electricity generating sets plus other measuring, inspection, security, etc. equipment; * procurement of data-processing equipment: * PCs; * multistation PCs, ordinary PCs, specific types of software, etc. -160- ANNEX 15 Page 21 of 36

3. Human Resources

3.1 Staff

At the end of 1996 ONAS had a workforce of 3,951 with the following breakdown:

276 managers 643 supervisors 3,032 operating staff (temporary and full-time)

In light of the new communes to be serviced and the development of ONAS's activities, its human resources will be strengthened during the period 1997-2001 by:

recruiting an additional 650 staff, not including loss replacements;

* holding the absenteeism rate to 3% or less;

* raising the manager/staff ratio from 9.1% in 1966 to 9.5 % in 2001.

(For further details, see the Corporate Conditions annex).

3.2 Basic and further training

Under this heading, ONAS proposes to:

update the personnel basic and further training master plan; strengthen the decentralization of training to the regional level; implement a number of training activities in the administration, finance, procurement, engineering, maintenance, operation, data processing, management, etc. areas.

The following table shows the development of the training rate:

Item 1997 1998 1999 2000 2001

- Number of participations (1) 460 520 570 630 720 - Average ONAS workforce (2) 3091 3221 3351 3481 3611 - Training rate (1 / 2) 15% 16% 17% 18% 20%

(2) See the Conorate Conditions annex. -161- ANNEX 15 Page 22 of 36

4. Regulatory Resources

To enable ONAS to achieve the above objectives, action is needed to revise and harmonize the regulations concerning:

* sewerage tariffs (extension of the field of application, etc.); * sanitation violations control procedures; * granting of sanitation works concessions; * treated-sludge utilization. -162- ANNEX 15 Page 23 of 36

ARTICLE m -- OBLIGATIONS OF THE GOVERNMENT

To facilitate achievement of the objectives listed in Article ( I ), the Ministry of Environment and Land Planning will implement the following measures:

1. Increase in the average sewerage tariff by 10.5% a year over the period 1997-2001.

2. Increase in receipts from the local authorities fund of at least 6% a year over the period 1997-2001, as follows:

Category 1997 1998 [ 1999 2000 2001 | l ONAS receiptsfrom the common 8.2 8.7 9.2 9.7 10.4 46.2 fund (IDmillion)

3. Increase in the compensatory receipts rate of 6% a year over the period 1997-2001, as follows:

Category 1997 1998 1999 2000 2001 |_ l 3 Compensatoryreceipts in millimes/m 65 69 73 77 80 - Total value of compensatoryreceipts 11.3 12.3 13.4 14.4 15.3 66.7 (TD million)

4. Phased clearing of customers' arrears (works, sewerage tariffs, and other services) owed to ONAS by Government agencies and local authorities.

5. Maintenance of ONAS's financial and budgetary equilibrium and allocation of the necessary financial resources to implement this CP. These resources total TD 304.5 million for the period 1997-2001, as follows:

Category 1997 1998 1999 2000 2001 Governmentfinancial operationsplus 41.2 62.2 65.3 65.9 69.9 304.5 commonfund receipts(TD million) I

6. In the event that the rates of increase of the costs borne by ONAS exceed those adopted in this CP, the resulting gap will be covered entirely by the government budget.

7. In the event that the Government requires ONAS to carry out a specific operation not provided for in this CP (solid waste, storm water, industrial waste water, etc.), the cost of such operation shall be compensated in accordance with arrangements to be decided on case by case. -163- ANNEX 15 Page 24 of 36

ARTICLE IV -- PERFORMANCE INDICATORS

1. List of Performance Indicators

To facilitate evaluation of the efforts accomplished by ONAS in order to improve its management, it will determine the values for the following indicators for each fiscal year:

1.1 Volume of activity indicators

* Number of communes serviced * Population serviced * Length of the network in operation * Number of pumping stations in operation * Number of treatment stations (WWTPs) in operation * WWTP dimensioning capacity * Number of ONAS-SONEDE customers * Volume of water collected * Volume of water treated

1.2 Output indicators

Connection rate Collection rate Treatment rate Network cleaning rate Number of staff per 1,000 customers

1.3 Cost and average tariff indicators

Average sanitation cost per m3 of water Average sanitation tariff per m3 of water Rate of collection of average sanitation cost

1.4 Financial indicators

* Cash flow -- immediate liquidity rate * financial equilibrium -- working capital rate * self-financing -- debt service coverage rate - self-financing rate -- indebtedness rate -164- ANNEX 15 Page 25 of 36

2. Definition of Main Performance Indicators

Indicator Defiition Volumeof water collected (a) = Volumeof water consumedby ONAS-SONEDE customersin the areas servicedby ONAS

Volumeof water treated (b) = Volumeof water treated by ONAS WWTPs

(c) = Volumeof potablewater consumedby SONEDE Volumeof waterconsumed customersin the areas servicedby ONAS

Urban populationconnected to the ONAS networkand Relativeconnection rate in the areas servicedby ONAS Urban population in the areas servicedby ONAS

(a) I(c) Collectionrate (b) / (c) Treatmentrate Networkin operation/ networkcleaned Networkcleaning rate (d) = Operationalcost per m3 of water collectedand Averagesanitation cost per m3 of water treated

(e) = Seweragetariff revenues Averagesanitation tariff per m3 of water Volumeof water collected

(e) / (d) Rate of coverageof averagesanitation cost Cash / Short-termliabilities Immediateliquidity rate Short-termassets / Short-termliabilities Workingcapital rate Operatingresult beforedepreciation and financial Grosscash flow charges (interest)

Financial charges+ Amortization Debt service (Grosscash flow+ third-partyparticipations Debt servicecoverage rate Debt service

Grosscash flowexcl. govt. subsidies+ third-party Self-financingrate participations-financialcharges Sanitationinvestments

Long-termdebt ITotal liabilities Indebtednessrate -165- ANNEX 15 Page 26 of 36

EVOLUTION OF PERFORMANCE INDICATORS

Category 1996 1997 1998 1999 2000 2001

1. ACIVITY-LEVEL _ - Numberof communesserviced 1ll 118 127 135 143 151 - Populationserviced 4560 4700 4900 5070 5240 5470 - Length of the networkin operation(km) 7100 7620 8150 8700 9300 10000 - Numberof pumping stationsin 293 293 300 307 314 320 operation _ - Numberof WWTPs in operation 50 51 56 62 68 75 - Dimensioningcapacity (million m 3) 155.6 165.2 177.9 190.8 197.6 205.7 - Numberof customers 653000 690000 725000 765000 805000 850000 - Volumeof water collected(niIion m3) 133.0 136.5 141.0 146.0 151.0 156.0 - Volumeof water treated (million m3) 120.0 125.0 130.0 136.0 141.5 148.0 2. OUTPUT _ - Connectionrate 77% 78% 79% 80% 81% 82% - Collectionrate 78% 78.5% 79% 80% 81% 82% - Treatmentrate 90% 91.5% 92% 93% 94% 95% - Cleamingrate 75.0% 75.5% 77.0% 78.0% 79.0% 80.0% - Numberof staff per 1,000customers 6.05 5 .91 5.81 5.67 5.55 5.41

3. AVERAGE SANITATIONCOST AND TARIFF _ - Averagesewerage cost (TD.001/m 3) 458 _ 481 522 566 614 666 - Averagesewerage tariff (TD .001/m ) 311 330 365 403 445 492 - Rate of coverageof averagesewerage 68% 69% 70% 71% 72% 74% cost 4-4. FINANCLALINDICATORS - Immediateliquidity rate 15.5% 16.5% 17.5% 18.5% 19.5% 20.5% - Workingcapital rate 1.3 1.3 1.4 1.4 1.4 1.5 - Debt servicecoverage rate 2.06 1.9 1.6 1.4 1.6 1.6 - Self-financing rate, net of subsidies 15.3% 14.7% 11.5% 11.1% 11.0% 11.0% - Indebtednessrate 15% 15% 15% 15% 15% 15% -166- ANNEX 15 Page 27 of 36

ARTICLE V - CONTRAT PROGRAMME IMPLEMENTATION ARRANGEMENTS

1. Monitoring of the CP

Each year, in parallel with the budget review, ONAS will submit a document, duly supported by figures, on the progress of this CP implementation to a steering committee. The composition of the steering committee shall be as follows:

A Representative of the Ministry of Environment and Land Planning Chairman

A Representative of the Ministry of Economic Development Member

A Representative of the Ministry of Finance Member

The President-Managing Director of ONAS Member

The Government Controller of ONAS Member

2. Revision of the CP

This CP may be revised at the request of either of the parties and by common agreement between them when circumstances so require and in particular in the event of any appreciable change in the factors on which preparation of the CP was based. -167- ANNEX 15 Page 28 of 36

ARTICLE VI -- DOCUMENTS APPENDED

The annexed tables recapitulate the current and projected data pertaining to the technical, financial, organizational and social conditions described in the foregoing articles. -168- ANNEX 15 Page 29 of 36

ARTICLE VII -- ENTRY INTO EFFECTIVENESS OF THE CP

This CP shall enter into effect after approval by the competent authorities and joint signature by the President-Managing Director of ONAS and of the Minister of Environment and Land Planning, the Minister of Economic Development and the Minister of Finance.

PRESIDENT-MANAGING DIRECTOR OF ONAS

MINISTER OF ENVIRONMENT AND LAND PLANNING

MINISTER OF FINANCE

MINISTER OF ECONOMIC DEVELOPMENT -169- ANNEX 15 Page 30 of 36

DOCUMENTS APPENDED

TECHNICAL CONDITIONS

Table 1: Evolution of Technical Conditions

* Level of Service * Investment Program * Level of Activity * Capacity Utilization

Table 2: Proposed Investment Program

FINANCIAL CONDITIONS

Table 3: Resources and Applications of Funds

Table 4: Income Statement

ORGANIZATIONAL CONDITIONS

Table 5.1: Organizational Conditions

* Organization Chart and Procedures Manual * Staff Regulations (Lois des Cadres) • Information System - Cost Accounting * Audit and Management Control

Table 5.2: Organizational Conditions

* Private-Sector Participation in the Operation, Construction and Financing of Sanitation Works

SOCIAL CONDITIONS

Table 6: Corporate Conditions:

* Development of the Workforce * Absenteeism Rate * Manager/Staff Ratio * Compensation -170- ANNEX 15 Page 31 of 36

Table 2 - TECHNICAL CONDITIONS

Description 1996 1997 1998 1999 2000 2001

1-LEVELOF SERVICEl Conununesserviced 111 118 127 135 143 151 Total Population Serviced ('000 inhabitants): 4560 4700 4900 5070 5240 5470 * in cities serviced at end 1996 4560 4640 4720 4810 4900 4990 * in cities to be serviced 1997-2001 0 60 180 260 340 480 Total Population Connected ('000 inhabitants): 3510 3670 3870 4050 4240 4480 * in cities serviced at end 1996 3510 3640 3870 3920 4070 4240 * in citiesto be serviced1997-2001 30 90 130 170 240 Connection Rate: 77% 78% 79% 80% 81% 82% * in cities serviced at end 1996 77% 78% 80% 81% 83% 85% * in citiesto be serviced1997-2001 50% 50% 50% 50% 50% 2- INVESTMENT PROGRAM in TD 58.25 61.50 77.40 81.00 85.20 89.90 MILLION (currentprices) INVESTMENT PROGRAM in TD MILLION 58.25 61.50 74.00 74.20 74.80 75.50 (constantprices _ Waste Water Sanitation Projects 51.95 56.70 69.00 70.35 71.60 72.40 Urban Storn Water Drainage Projects 5.70 3.80 4.00 2.85 2.50 2.60 "Mejerda" Solid Wastes Projects 0.60 1.00 1.00 1.00 0.70 0.50 3- LEVEL OF ACTIVITY Volume of Water Collected (m3 million) 133.0 136.5 141.0 146.0 151.0 156.0 Operating Network Length in km 7100 7620 8150 8700 9300 10000 Number of Pumping Stations 284 293 300 307 314 320 Number of Customers 653000 690000 725000 765000 805000 850000 Volume of Water Treated 120.0 125.0 130.0 136.0 141.5 148.0 Number of WWTP in operation 50 51 56 62 68 75 Dimensioning Capacity 155.6 165.2 177.9 190.8 197.6 205.7 4- CAPACITY UTILIZATION Treatmentplants (WWTPs): l STEPWater capacity utilization between60 and80% Operatingnetworks: No. of connections per km of secondary network 100.0 101.0 102.0 103.0 104.0 105.0 Employees per 1,000 customers 6.05 5.91 5.81 5.67 5.55 5.41 -171- ANNEX 15 Page 32 of 36

Table 3: FINANCIALCONDITIONS

SOURCESAND APPLICATIONOF FUNDS TD million

Item 1996 1997 1998 1999 2000 2001 Total probable l 97-2001 APPLICATIONS l

INVESTMENTS 58.3 61.5 77.4 81.0 85.2 89.9 395.0

DEBT AMORTIZATION 7.3 8.6 11.0 13.9 11.6 11.9 57.0

Total 65.6 70.1 88.4 94.9 96.8 101.8 452.0

RESOURCES ______=

GOVERNMENT FINANCIAL 28.2 33.0 53.5 56.1 56.1 59.6 258.3 OPERATIONS

LOANS AND GRANTS 28.6 28.2 26.1 29.9 31.4 32.4 148.0

THIRD PARTY CONTRIBUTIONS 1.3 1.4 1.2 0.9 0.6 0.2 4.3

CASH FLOW NET OF SUBSIDIES 7.5 7.5 7.6 8.0 8.7 9.6 41.4

TOTAL 65 6 70.1 88.4 94.9 96.8 101.8 452.0

BALANCE 0.0° 0.0 I° 0.0 I 0.0° 0.0 0.0 I 0.0 -172- ANNEX 15 Page 33 of 36

Table 4: FINANCIALCONDITIONS

INCOMESTATEMENT

Item 1996 | 1997 1998 1999 2000 2001 TOTAL l______97-2001 REVENUES

SEWERAGE TARIFF 41.4 45.0 51.4 58.8 67.2 76.8 299.2

WORKS AND SERVICES 7.3 7.7 8.1 8.5 8.9 9.3 42.5

COMPENSATORY PAYMENTS BY 10.9 11.3 12.3 13.4 14.4 15.3 66.7 THE STATE . COMMON FUND 7.6 8.2 8.7 9.2 9.8 10.3 46.2 TOTAL 67.2 72.2 80.5 89.9 100.3 111.7 454.6 EXPENSES I

PERSONNEL COSTS 24.4 27.9 31.8 36.2 41.0 46.6 183.5

GOODS CONSUMED 6.8 7.4 8.3 9.2 10.2 11.5 46.6

ELECTRICITY 4.6 4.9 5.4 5.9 6.5 7.0 29.7

FINANCIAL CHARGES 4.4 4.6 5.7 6.9 8.0 9.0 34.2

OTHER EXPENSES 6.8 7.3 8.0 8.8 9.6 10.6 44.3

SUB-TOTAL 47.0 52.1 59.2 67.0 75.3 84.7 338.3

DEPRECIATION AND PROVISIONS 20.2 20.1 21.3 22.9 25.0 27.0 116.3

TOTAL 67.2 72.2 80.5 89.9 100.3 111.7 454.6

Net Result for the Year 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -173- ANNEX 15 Page 34 of 36

Table 5.1 ORGANIZATIONAL CONDMONS

Item 1996 1997 1998 1999 2000 2001

I - ORGANIZATION CHART, STAFF REGULATIONS AND PROCEDURES MANUAL

1.1 Staff Regulations Introduced Updated Updated Updated Updated Updated

1.2 Organization Chart Updated Updated Updated Updated Updated Updated

1.3 Procedures Manual Updated Updated Updated Updated Updated Updated

II - INFORMATION SYSTEM = == =

11.1 Updating of current Launching Introduced computerized Master Plan

II.2 Development of computer Ongoing Ongoing Introduced Updated Updated Updated applications

11.3 Study and implementation of Launching Ongoing Ongoing Introduced

III - INTRODUCTION OF COST Launching Ongoing Ongoing Ongoing Introduced ACCOUNTING

IV - INTERNAL AUDIT AND MANAGEMENT CONTROL

IV. 1 Internal Audit Exists e

IV.2 Management Control Launching Ongoing Ongoing Ongoing Introduced (Performance Charts) I -174- ANNEX 15 Page 35 of 36

Table 5.2 ORGANIZATIONAL CONDITIONS

PRIVATE SECTOR PARTICIPATION IN THE OPERATION, CONSTRUCTION AND FINANCING OF SANITATION WORKS Actions 1997 1998 1999 2000 2001

1- Subcontracting 1.1) Citynetwork: El Executionof the of the operation Manazeh,Notre operation xxx xxx xxx xxx xxx of a sewerage Dame,Mutuelle Ville network and El Manarm (150 km. of pipes, 6500 manholes,6400 connection boxes) Evaluation xxx xxx xxx

Feasibilitystudies xx xx

1.2) Networkin five Biddingcompetitions other zones not yet and contractaward x xxxxxx xxxxxx xxxxxx identified procedures

Executionof the 5 x xxxxxx xxxxxx operations

2- Subcontracting 2.1) Threetreatment Executionof the xxx xxxxx xxxxxx xxxxxx xxxxxx rehabilitationand plants SEI, SE2 and operation x operationof plant SE3 in the Nabeul- Hanimammetregion

Evaluation xxxxx xxxxxx x

2.2) Five other Feasibilitystudies xx xxxxx treatmentplants x

Biddingcompetitions and contractaward xx xxxxxx xxxxxx xxxxxx procedures

Executionof the 5 operations

3- Concessionfor (Financing, Feasibilitystudies a treatmentplant construction, operationand transfer) . Preparationof the biddingcompetition xx xxxxx DAO x

Contract negotiation xxxx

Executionof the xx xxxxxx xxxxxx operation -175- ANNEX 15 Page 36 of 36

Table 6 - CORPORATE CONDITIONS

Employees(year-end) 1996 1997 1998 1999 2000 2001

Pennanent Workforce

Managers 276 291 304 318 333 349

Supervisors 643 673 700 721 742 765

Staff 2107 2192 2282 2377 2471 2562

Sub-total 3026 3156 3286 3416 3546 3676

TemporaryStaff (2) 925 925 925 925 925 925

3951 4081 4211 4341 4471 4601 TOTAL (1+2) | l MANAGER/staff ratio T 9.1% 9.2% 9.25% | 9.3% 9.4% 9.5% Absenteeismrate 3% 3% 3% 3% 3% 3%

1 Emvlovees(avera e 3922 4016 4146 4276 4406 4536 1 +2.40% I +3.24% I +3.14% I +3.04% I +2.95%

III Averageannual salryin TD/employee 6221 6951 7670 8460 9238 10284 I +11.7% j +10.4% I +10.3% 7+10.3% I +10.3%

IV Total salary in TD '000 24400 27900 31820 36170 41070 46600 I +14.3% I +14.1% r+13.7% 7+13.5% I +13.5%

Total salary increasesby 13.8%between 1996-2001,as a result of: - an averageannual increaseof 3.1% in employees - an averageannual salaryincrease of 10.7%,of which: * 3.5% statutoryincrease * 7.2% increasedecided by the State -176- ANNEX 16 Page 1 of 3

REPUBLIC OF TUNISIA

GREATER TUNIS SEVVERAGEAND REUSE PROJECT

STAFF APPRAISAL REPORT

SelectedDocuments in Project Fie

- WaterResources Management, policy paper, WorldBank, September1993.

- A strategyfor ManagingWater in the MiddleEast and NorthAfrica, WorldBank, 1994.

- Water and WasteWater Utilities,Indicators and 2nd Edition,World Bank, May 1996.

- Extrait des principaux textes reglementant l'Environnement en Tunisie, Ministry of Environmentand Land Management,October 1994.

- Rapport national, 1'etat de l'environnement, Ministry of Environnement and Land Management,1995.

- Rapportd'activite, ONAS, 1995.

- Fonds de Depollution(FODEP), Ministry of Environnementand Land Management,March 1994.

- La valorisationdes eaux uskes,ONAS, September1996.

- Etudede factibilite technico- &onomique du GrandTunis, ONAS, February 1995.

- Etude d'Impact du Secteur de l'Assainissementsur l'Environnement(EIS), Rapport G6n6ral Tome 1, ONAS, December1995.

- EIS RapportGen*al, Tome2, ONAS, December1995.

- Etuded'Impact Environnemental (EIE), Station d'Epuration de Tunis Ouest,ONAS, December 1995.

- EIE, Stationd 'Epurationde SudMeliane, ONAS, December1995.

- EIE, Stationd'Epuration de SfaxNord, ONAS, December1995.

- EIE, Stationd'Epuration de SousseOuest, ONAS,December 1995.

- EIE, Stationd'Epuration de Kairouan,ONAS, December1995. -177- ANNEX 16 Page 2 of 3

- EIE, Stationd'Epuration de Nefza, ONAS, December1995.

- StationPilote pour l'4uration des eaux industrielles,ONAS, December1995.

- Etudes sur l'optimisationdes investissementset le recouvrementdes coiks, ONAS, December 1995: * Bilande la situationactuelle * Analysede la demandeet estimationsdes cozt marginaux * Politique tarifaire * Enquetesur l'interventionde l'ONAS * Evaluation&onomique des projets d 'assainissementurbain.

- EtudeEconomique sur l'Eau Potableen Tunisie,SONEDE, 1993.

- Etude dActualisation du Plan Directeur d'Assainissementdu Grand Tunis, Ministry of Environmentand Land Management,Tunisia, December, 1992.

- Gunnerson,Charles G., IntegratedResource Recovery, Wastewater Management for Coastal Cities,The OceanDisposal Option, The WorldBank, February, 1988.

- AnalyseEnvironnementale Cinquiene Projet Eau Potable,Royaume du Maroc, OfficeNational de l'Eau Potable,Direction Planification et Developpement,ONEP - UniversiteMohammed V en collaborationavec deux expertsde SNC Lavalin,January, 1993.

- The Economicof Project Analysis,A Practioner'sGuide, The World Bank-EDI,Willliam A. Ward and BarryJ. Deren with EmmanuelH. D'Silva, 1991.

- EnvironmentalAssessment Sourcebook, Volume 1, Policies, Procedures and Cross-Sectoral Issues,World Bank Technical Paper Number 139, The WorldBank, December1991.

- Munasinghe, Mohan; Water Supply and EnvironmentalManagement, Developing World Applications,Westview Press Inc., 1992.

- Etude d'Impacts sur l'Environnement, Projet de Station de Dessalement de Jerba, SONEDE/DET,September, 1993.

- Listorti, James A.; EnvironmentalHealth Componentsfor Water Supply, Sanitation, and Urban Projects, World Bank TechnicalPaper Number 121, The World Bank, September, 1990.

- Water Supplyand SanitationProject (Loans 3782/3783-TUN) SAR, WorldBank, July 6, 1994.

- AgriculturalSector Investment Loan (ASIL),October 29, 1993.

- Third UrbanProject, PCR, WorldBank, December1994. -1 78- ANNEX 16 Page 3 of 3

Projet Contrat Programme entre l'Etat et l'ONAS (1997-2001), December 1995.

- La valorisationdes Eaux Usees Traitees en Tunisie, ONAS, September 1996.

- Perimetres irrigues a partir des Eaux traitees, Ministere de l'Agriculture, April 1996.

- Etude de faisabilite de la concession d'une station d'euration, USAID, HG-V, January 3, 1997.

- Joumee d'etude sur l'Assainissement dans le Grand Tunis, Ministere de l'Environnement et de l'Amenagement du Territoire, Juin 1996. ErR,-o

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ReportNo.: 15432 TUN Type: SAR