Document of The World Bank
Public Disclosure Authorized Report No: ICR00001722
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-71540)
Public Disclosure Authorized ON A
LOAN
IN THE AMOUNT OF EURO 80.1 MILLION (US$78.4 million equivalent at appraisal)
TO THE CAISSE DES PRETS ET DE SOUTIEN DES COLLECTIVITES LOCALES WITH THE REPUBLIC OF TUNISIA AS GUARANTOR
Public Disclosure Authorized
FOR A THIRD MUNICIPAL DEVELOPMENT PROJECT
December 22, 2010
Public Disclosure Authorized
Sustainable Development Department Middle East and North Africa Region CURRENCY EQUIVALENTS Currency unit= Euros ( )
Exchange rate at appraisal US$1.00= 0.9787 (November 2002)
Exchange rate at ICR US$1.00= 1.0218 (December 2010)
FISCAL YEAR January 1- December 31
ABREVATIONS AND ACRONYMS
ADEB Municipal expense management computerized system (Aide à la Décision Budgétaire) AFD French Development Agency (Agence Française de Développement) ANPE National Environmental Protection Agency (Agence nationale de protection de l’environnement) CAS Country Assistance Strategy CFAD Decentralization Training and Support Center (Centre de Formation et d’Appui à la Décentralisation) CNPRCRM National Center for Improvement and Recycling of Regional and Municipal Managers (Centre National de Perfectionnement et de Recyclage des Cadres Régionaux et Municipaux) CPS Country Partnership Strategy CPSCL Municipal Development Fund (Caisse des Prêts et de Soutien des Collectivités Locales) DGAR General Directorate for Regional Affairs (Direction Générale des Affaires Régionales) DGCPL General Directorate for Municipal Development (Direction Générale des Collectivités Locales) EIA Environmental Impact Assessment FCCL Municipal Development Transfer (Fonds Commun des Collectivités Locales) GESCOM Municipal Participatory Management Program (Programme de Gestion Communale Participative) GoT Government of Tunisia GRB Municipal budget management computerized system (Gestion des Ressources Budgétaires) ICR Implementation Completion and Results Report ISR Implementation Status and Results Report MG-6 Sixth contract to acquire solid waste collection equipment for all of Tunisian municipalities (Marché Groupé 6) MTR Mid-Term Review M&E Monitoring and Evaluation PAD Project Appraisal Document MDP Municipal Development Project (Projet de Développement Municipal PIC Municipal Investment Program (Programme d’Investissement Communal) PCU Project Coordination Unit PDO Project Development Objective QAG Quality Assurance Group TCL Commercial and Industrial Tax (Taxe sur les Etablissements à Caractère Commercial et Industriel)
TD Tunisian dinar TIB Tax on Existing Buildings (Taxe sur les Immeubles Bâtis) TNB Tax on Vacant Land (Taxe Foncière sur les Terrains Non-Bâtis)
Vice President: Shamshad Akhtar Country Director: Neil Simon M. Gray Sector Manager: Anna Bjerde Project Team Leader: Alexandra Ortiz ICR Team Leader: Alexandra Ortiz ICR main author: Alicia Casalis
TUNISIA
MUNICIPAL DEVELOPMENT III
CONTENTS
Page No DATA SHEET A. Basic Information………………………………………………………………………… i B. Key Dates…………………………………………………………………………………. i C. Rating Summary…………………………………………………………………………...i D. Sector and Theme Codes………………………………………………………………….ii E. Bank Staff………………………………………………………………………………....ii F. Results Framework Analysis……………………………………………………………...ii G. Ratings of Project Performance in ISRs………………………………………………….vi H. Restructuring (if any)……………………………………………………………………..vi I. Disbursement Graph……………………………………………………………………..vii
1. Project context, development objectives, and design ……………………………………..1 2. Key factors affecting implementation and outcomes ……………………………………..6 3. Assessment of outcomes …………………………………………………………………11 4. Assessment of risk to development outcome …………………………………………….16 5. Assessment of Bank and Borrower performance ………………………………………..16 6. Lessons learned …………………………………………………………………………..19 7. Comments on issues raised by Borrower/Implementing agencies/ Partners …………….19
Annex 1. Project costs and financing ………………………………………………………20 Annex 2. Outputs by component ……………………………………….…………………..21 Annex 3. Economic and financial analysis …………………………………………………23 Annex 4. Bank lending and implementation support/ supervision process ………………...25 Annex 5. Beneficiary survey results ………………………………………………………..27 Annex 6. Stakeholder workshop report and results…………………………………………31 Annex 7. Summary of Borrower’s ICR or comments on draft ICR ………………………..32 Annex 8. Comments of cofinanciers and other partners/stakeholders………………………36 Annex 9. List of supporting documents …………………………………………………….37 Annex 10. PAD corrigendum…………………………………………………………………38
MAP…………………………………………………………………………………………..43
A. Basic Information TN-Municipal Country: Tunisia Project Name: Development III Project ID: P074398 L/C/TF Number(s): IBRD-71540 ICR Date: 12/22/2010 ICR Type: Core ICR Lending Instrument: FIL Borrower: CPSCL Original Total USD 78.4M Disbursed Amount: USD 102.4M Commitment: Revised Amount: USD 78.4M Environmental Category: F Implementing Agencies: CPSCL and Ministry of Interior Cofinanciers and Other External Partners: French Development Agency (AFD)
B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/12/2001 Effectiveness: 06/23/2003 06/23/2003 Appraisal: 07/08/2002 Restructuring(s): 08/14/2007 Approval: 12/05/2002 Mid-term Review: 04/08/2006 04/08/2006 Closing: 06/30/2008 06/30/2010
C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Unsatisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Satisfactory Agency/Agencies: Overall Bank Moderately Overall Borrower Moderately Satisfactory Performance: Unsatisfactory Performance:
i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately
Closing/Inactive status: Satisfactory
D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General water, sanitation and flood protection sector 30 25 Other social services 15 10 Roads and highways 30 25 Solid waste management 25 Sub-national government administration 25 15
Theme Code (as % of total Bank financing) Access to urban services and housing 75 Municipal finance 40 15 Municipal governance and institution building 40 10 State enterprise/bank restructuring and privatization 20
E. Bank Staff Positions At ICR At Approval Vice President: Shamshad Akhtar Jean-Louis Sarbib Country Director: Neil Simon M. Gray Theodore O. Ahlers Sector Manager: Anna M. Bjerde Hedi Larbi Project Team Leader: Alexandra Ortiz Charles Henri Malecot ICR Team Leader: Alexandra Ortiz ICR Primary Author: Alicia B. Casalis
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document) [from Project Appraisal Document corrigendum]. (i) To enhance the delivery of basic municipal services and infrastructure, through improving the financial and institutional
ii capacity of CPSCL for the provision of funding for municipal investments; and (ii) strengthening the institutional capacity of local governments and related central government agencies.
Revised Project Development Objectives (as approved by original approving authority) To enhance the delivery of basic municipal services and infrastructure through: (i) the financing of priority municipal investments included in the Municipal Investment Plan (PIC); and (ii) strengthening the financial and institutional capacity of the CPSCL, the local governments and related central government agencies.
(a) PDO Indicator(s)
Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Commitment rate for new municipal projects under the 10th PIC (considered Indicator 1 : committed when there are definitive agreements). Value quantitative or 0% 82% 86% Qualitative) Date achieved 11/07/2002 04/08/2006 12/31/2009 Comments (incl. % Target exceeded achievement) Number of restructuring plans signed between municipalities, central government Indicator 2 : and CPSCL: Value quantitative or 0 82 104 104 Qualitative) Date achieved 11/07/2002 01/09/2003 04/08/2006 12/31/2009 Comments (incl. % Target achieved achievement) Indicator 3 : Decrease in number of municipalities identified as in difficult financial situation. Value quantitative or 132 75 120 Qualitative) Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % Target not achieved achievement) Increase in collection of taxes Indicator 4 : - Average municipal collection rate of TIB - % of municipalities collecting the TCL at its base rate Value TIB collection rate: 58% TIB: 70% TIB: 72.4% quantitative or TCL: 0% TCL: 50% TCL: 27.8% Qualitative)
iii Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments TIB target achieved (incl. % TCL indicator improved but target not achieved achievement) Improved living conditions in municipalities as a result of investments: Indicator 5 : (accessibility, solid waste collection, and local environment).
70% of Not measured Value municipalities by (AFD-financed: quantitative or 0% the end of the impact evaluation Qualitative) project. pending). Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % achievement) Indicator 6 : Increase of local budget ratio to central budget. Value quantitative or 2.8% 3.5% 4.1% Qualitative) Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % Target achieved achievement) Financial indicators: CPSCL should maintain agreed levels for: return on equity; Indicator 7 : debt service coverage; administrative costs to total assets; net margin; arrears/incurred: dropped Tunis. return on return on equity>5% return on equity=1.7% equity=4.8% debt service debt service debt service coverage>1.5% Value coverage=3.7% arrears/incurre coverage=6.4% administrative quantitative or administrative costs to d without administrative costs costs to total Qualitative) total assets=0.6% Tunis to total assets=0.6% assets<0.9% net margin=2.9% net margin=4% net margin>1.5% arrears/incurred=5.9% arrears/incurred arrears/incurred<5 wthout Tunis=6.9% % Date achieved 11/07/2002 01/09/2003 08/14/2007 12/31/2009 Comments (incl. % 3 out of 5 target values met achievement)
(b) Intermediate Outcome Indicator(s)
Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Number of GESCOM projects completed.
iv Value (quantitative 0 40 55 or Qualitative) Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % Target exceeded achievement) Indicator 2 : Number of landfills constructed with the project Value (quantitative 1 6 14 or Qualitative) Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % Target exceeded achievement) m2 of recreational areas (public parks) per urban household provided through Indicator 3 : the project Value (quantitative 10 m2 15 m2 16.26 m2 or Qualitative) Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % Target exceeded achievement) Indicator 4 : CFAD - Revised strategy and capacity-building program. Value Revised/ (quantitative No strategy Implemented. operational. or Qualitative) Date achieved 11/07/2002 01/09/2003 12/31/2009 Comments (incl. % Target achieved achievement) Indicator 5 : Kilometers of streets and sidewalks completed with the project Value (quantitative 0 1,800 1,933 or Qualitative) Date achieved 11/07/2002 07/14/2008 12/31/2009 Comments (incl. % Target exceeded achievement) Indicator 6 : Luminous points (public lighting) provided by the project Value (quantitative 0 32,300 36,428 or Qualitative) Date achieved 11/07/2002 07/14/2008 12/31/2009 Comments (incl. % Target exceeded achievement)
v Indicator 7 : Kilometers of potable water network provided by the project Value (quantitative 0 14.7 35 or Qualitative) Date achieved 11/07/2002 07/14/2008 12/31/2009 Comments (incl. % Target exceeded achievement) Indicator 8 : Kilometers of drainage and sanitation channels constructed with the project Value (quantitative 0 84 79 or Qualitative) Date achieved 11/07/2002 07/14/2008 12/31/2009 Comments (incl. % Not achieved but difference is only 6% achievement)
G. Ratings of Project Performance in ISRs
Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 02/28/2003 Satisfactory Satisfactory 0.00 2 05/30/2003 Satisfactory Satisfactory 0.00 3 11/07/2003 Satisfactory Satisfactory 0.93 4 04/30/2004 Satisfactory Satisfactory 11.97 5 10/25/2004 Satisfactory Satisfactory 23.31 6 03/10/2005 Satisfactory Satisfactory 38.12 7 07/23/2005 Satisfactory Satisfactory 46.06 8 02/02/2006 Moderately Satisfactory Moderately Satisfactory 55.77 9 05/26/2006 Moderately Satisfactory Moderately Satisfactory 57.94 10 12/22/2006 Moderately Satisfactory Moderately Satisfactory 65.87 11 04/24/2007 Moderately Satisfactory Moderately Satisfactory 69.13 12 10/09/2007 Moderately Satisfactory Moderately Satisfactory 73.53 13 03/14/2008 Moderately Satisfactory Moderately Satisfactory 76.26 14 10/06/2008 Moderately Satisfactory Moderately Satisfactory 77.93 15 06/23/2009 Moderately Satisfactory Moderately Satisfactory 78.42 16 11/24/2009 Moderately Satisfactory Moderately Satisfactory 78.42 17 11/18/2010 Moderately Satisfactory Moderately Satisfactory 102.39
H. Restructuring (if any)
Restructuring Board ISR Ratings at Amount Reason for Restructuring & Date(s) Approved Restructuring Disbursed at Key Changes Made
vi PDO Change Restructuring DO IP in USD millions The PDO and components were slightly modified to clearly 08/14/2007 N MS MS 71.70 distinguish the project's infrastructure goals from the institutional goals
I. Disbursement Profile
vii
1. Project context, development objectives, and design
1.1 Context at Appraisal
Tunisia is among the most urbanized countries in the Middle East and North Africa Region. At the time of appraisal, 66% of the population lived in cities and towns, mainly in towns with over 50,000 inhabitants. This number was projected to reach 70% by the year 2020. With an urban growth rate of 2.1%1 between 1990 and 2007, the municipalities faced the challenge of increased demand to provide and maintain basic services for the growing urban population.
Investments in infrastructure and in basic services were a priority of the Government in order to achieve significant progress in poverty reduction and to improve living conditions in urban areas. Tunisia has made significant progress in economic and social development as a result of the sustainable reform efforts in place since early the 1990s, resulting in excellent economic and social indicators such as an increased life expectancy of 72.12 and a reduction in poverty rate to 8 percent at the time of appraisal.
The Tunisian investments in municipal infrastructure and in basic services have been implemented through a national intergovernmental plan. The Tunisian Government activities in the municipal development sector, which have been supported by the World Bank and other international institutions, need to be viewed in the context of a small country of 10.2 million inhabitants with a rather centralized system of government. The municipal3 investment priorities are set by a unitary led intergovernmental long term planning system which has identified priorities for local coverage of basic services. The Tunisian socio-economic development model is very much based on this intergovernmental planning system. The Government of Tunisia (GoT) established a national strategic plan to achieve equitable regional development, presenting the priorities and goals for the nation and for each region; the national planning system is aligned with the Presidential medium- to long-term vision program. Financing is extended to local authorities through the Municipal Development Fund (Caisse des Prêts et de Soutien des Collectivités Locales, CPSCL); decentralization has been on the political agenda since the nineties, with slow but steady progress. Municipal financial capacity building and managerial capacity-building have, however, remained weaknesses. Although the municipal development sector had evolved, municipalities were still not well equipped to provide the needed increase in infrastructure and services to their growing urban population. Their capacities to meet their investment responsibilities and to respond to the increased demand for services were, at appraisal, at a relatively early stage of development, and needed to be reinforced. Many municipalities were also in a weak financial situation, having
1 Population dynamics. World Development Indicators- 2009. 2 CAS - June 2004 3 Lessons for the Urban Century. Decentralized Infrastructure Finance in the World Bank. W.B.-2008. 1 difficulties in mobilizing the resources needed to carry out investment, repay debt, and maintain existing infrastructure. The General Directorate for Municipal Development (Direction Générale des Collectivités Locales, DGCPL), the CPSCL, and the Decentralization Training and Support Center (CNPRCRM/CFAD4), the main agencies of the local governance scheme, needed to be strengthened, to build up the technical and financial capacity of municipalities. Although the CPSCL had gained in autonomy, its main role continued to be executing the Municipal Investment Plans (PICs5) which encompass sub-projects for all 264 municipalities, acting on behalf of the Ministry of Interior. In an effort to redistribute expenditure and service responsibilities between the state and local authorities in the early nineties, the GoT, with World Bank support, initiated a gradual process of municipal sector reform. This reorganization was intended to provide municipalities with the necessary resources for them to assume greater roles in financing their priority investments at the local levels, as a first step of the process of the de-concentration of responsibilities. The Municipal Development III Project (MDP III) had been developed by the Government under the Tunisian 10th Economic Development Plan in order to support the IVth Municipal Investment Plan process (PIC), covering the period 2002-2006. However, MDP III would continue until the second year of the 11th Economic Development Plan (2007-2011), with an overlap with the start of Vth PIC. The World Bank through the 2004 Country Assistance Strategy (CAS) clearly identified the improved delivery/efficiency of infrastructure services as a key element to enhance the quality of life of Tunisian citizens. With MDP III, the Bank was able to support the implementation of the long-term strategy of municipal and regional development in Tunisia. The first operation to directly support local government was the First Municipal Sector Investment Project (MIP: 1992-1998); followed by the Second Municipal Development Project (MDP II: 1998-2003). MDP III (2003-2010) provided loans and technical assistance through the CPSCL in order to support the efforts of the GoT in creating the necessary mechanisms necessary to channel resources to municipalities and to improve municipal infrastructure services.
1.2 Original Project Development Objectives (PDOs) and Key Indicators (as approved) A Project Appraisal Document (PAD) corrigendum (see Annex 10) was submitted to the Board on June 30, 2009, to correct mistakes in the original appraisal document and to align the PAD Project Development Objective (PDO) and the PDO which were presented in the Loan Agreement. The corrigendum gave an exoneration to projects that had this problem. Hence, this ICR will assess this project based on the accepted PDO: “to enhance the delivery of basic municipal services and infrastructure through: (i) improving the financial and institutional capacity of CPSCL for the provision of funding for municipal investments; and (ii) strengthening the institutional capacity of local governments and related central government agencies.”
4 CNPRCRM (National center for Improvement and Recycling of Regional and Municipal Managers) changed its name in 2004 to become the CFAD (Decentralization Training and Support Center). The missions of the institutions remain essentially the same. 5 PICs are prepared in a highly consultative and participatory way allowing citizens to express their opinions early on in the process, and coordinating with local and central government agencies to ensure coherence and consistency. 2 The key performance indicators would measure: (i) the number of structuring contracts signed between municipalities, the central government, and CPSCL; (ii) the reduction in the number of municipalities identified as facing a difficult financial situation; (iii) the increase in collection of revenues from local taxes and fees; (iv) improved living conditions in municipalities as a result of investments; and (v) increased local budget ratio to central budget. Financial indicators would measure CPSCL performance through 5 ratios. Physical indicators would measure: (i) the increase in recreational areas per urban household; (ii) the increase in the number of controlled landfills; and (iii) the increase in kilometers of roads and sidewalks. The intermediate results would measure the number of completed GESCOM projects, the revised CFAD strategy and the CFAD capacity-building program.
Figure 1. : PDO definition and review
2002/2003 2007 2009
PDO PAD (11/07/2002) different PDO remains unchanged in Loan Agreement 6 Bank PAD corrigendum (06/30/2009) from PDO in the signed Loan Amendment (08/14/2007). Components were Agreement (01/09/2003) redefined.
The original PDO statement in the The main part of the PDO remains unchanged Bank team reported the inconsistency Legal Agreement was as follows: in the Legal Amendment: between PDOs in PAD and PDOs in Legal Agreement and a corrigendum “to enhance the delivery of “to enhance the delivery of basic was prepared and submitted to the basic municipal services and municipal services and infrastructure” Board on June 30th2009. infrastructure” through: through: This action gave an exoneration to (i) improving the financial and (i) financing the priority municipal investments projects with this problem. institutional capacity of CPSCL for included in the Municipal Investment Plan the provision of funding for (PIC); and Hence this ICR assesses this project municipal investments; and (ii) strengthening the financial and based on the accepted PDO: (ii) strengthening institutional capacity of the CPSCL, the local “to enhance the delivery of basic the institutional capacity of local governments, and related central agencies. municipal services and infrastructure” governments and related central *** through: government agencies. • The means to achieve the PDO were restated (i) improving the financial and to better align the components with the institutional capacity of CPSCL for activities included within. the provision of funding for • Indicators were aligned to better measure PDOs municipal investments; and (ii) strengthening *** the institutional capacity of local Loan Agreement Amendment (08/14/2007) governments and related central was approved by the Country Director. This government agencies. was not formally reported to the Board as it was considered by the team7, by the legal department , and by approvers in MNA as a clarification and refinement of the PDO.
1.3 Revised PDO and Key Indicators, and Reasons/Justification The main part of the PDO Legal Agreement remains unchanged after the 2007 Amendment. The PDO was slightly changed as follows: to enhance the delivery of basic municipal services and infrastructure through: (i) financing the priority municipal investments included in the Municipal Investment Plan (PIC); and (ii) strengthening the financial and institutional capacity of the CPSCL, the local governments, and related central agencies.
6 TUNISIA- Third Municipal Development Project (Loan No 7154-TUN). Amendment to Loan and Guarantee Agreements, August 14, 2007. 7 ISR 11/24/2009. 3 Project indicators were modified to reflect the new component structure, but were not significantly changed in substance. New intermediate indicators to measure municipal infrastructure investments were added. The following PDO indicator was added:
Measures of physical component objectives (new indicator): Commitment rate for new municipal projects under the PIC IV. 1.4 Main Beneficiaries
The beneficiaries were: (i) the urban population, particularly those living in under-equipped neighborhoods, through the provision and better management of basic public services and infrastructure; (ii) local governments, through capacity-building and strengthening support provided by CNPRCRM/CFAD and CPSCL; (iii) municipalities in financial distress, through targeted support to enable them to move forward to financial viability; (iv) DGCPL through the support of institutional and policy reforms; (v) CPSCL, through equipment and technical assistance; and (iv) CNPRCRM/CFAD, through management capacity improvements.
1.5 Original Components The project as presented in the PAD document had two main components.8 Component 1 – Capacity-building for the CPSCL to provide funding for municipal investments (Appraisal cost: Euro76.89 million equivalent to US$75.25 million). This component established a line of credit in CPSCL to finance the priority investments of the PIC and also financed institutional strengthening activities targeted at CPSCL. Sub-component 1: Credit Line to the CPSCL to finance priority municipal investments; most of these subprojects are part of the approved fourth PIC; Sub-component 2: Credit line to finance micro-projects; Sub-component 3: Institutional strengthening of the CPSCL through (i) carrying out an assessment of the requirements for the modification of the CPSCL’s legal status; (ii) implementation of an information technology plan; (iii) provision of technical advisory services and training to CPSCL staff for the improvement of account management; (iv) provision of equipment; (v) setting up computer systems for the strengthening of CPSCL’s five regional branches; (vi) improvement of coordination and relations between the CPSCL headquarters and the regional branches; and (vii) provision of training and technical advisory services for the improvement of environmental management evaluation of sub-projects and micro-projects. Component 2 – Capacity-building for urban local governments and related central agencies (Appraisal cost: Euro2.41 million equivalent to US$2.36 million). This component aimed to improve the ability of urban local governments and relevant central agencies to deliver basic municipal services. Sub-component 1: Strengthening the capacity of CNPRCRM/CFAD to deliver improved and focused training for municipal staff, through: (i) provision of computer equipment and software, and training of the Center staff; (ii) reorganization of the Center through new statutes as well as provision of computer equipment for the Center and its regional branch offices; (iii) improved training curriculum offered by the Center, targeting specific professional themes; (iv)
8 PAD November 07, 2002- Annex II, page 33. 4 establishment and support for a training research and evaluation unit in the Center; (v) development, implementation, and follow-up of training to improve the performance of municipalities; (vi) development, implementation and follow-up of training curricula targeted at municipalities in financial difficulty; (vii) diversification of training products and teaching methods; and (viii) evaluation of municipal restructuring programs and development of an agenda for further action. Sub-component 2: Enhancing the administrative and financial management capacity of municipalities through: ( i) consolidation and improvement of the management capacity for 128 general municipalities; (ii) development and implementation of restructuring plans and contracts to address the 132 municipalities in financial difficulty; (iii) computerization of tax rolls and collection to improve local tax billing and collection rates; (iv) a Geographic Information System (GIS) to establish baseline urban data and track the evolution; (v) extension of the inter-city cooperation program of the National Federation of Tunisian Cities; and (vi) technical assistance to the Project Coordinating Unit (PCU). Sub-component 3: Strengthening the staff capacity of DGCPL by improving both its working procedures and assistance to municipalities, through: (i) provision of training to DGCPL staff in evaluation and follow-up of municipal projects (begun under MDP II); (ii) provision of computer software and training; (iii) development of the DGCPL website; and (iv) equipment. Sub-component 4: Strengthening the capacity of the Regional Development Department within the Ministry of Interior (DGAR) by improving management of regional councils and their assistance to rural councils, through: (i) institutional strengthening of the Governorates (organization charts, job descriptions, recruitment plans, and improvement of procedures manuals); (ii) provision of basic office equipment for the benefit of rural councils, implementation of two national rural council conferences, and publication and dissemination of practical guides for Neighborhood Committees; (iii) completion of a computerized organization scheme for DGAR and the Governorates; and (iv) providing funding for studies to be conducted by DGAR. Sub-component 5: Provision of technical advisory services and training to staff of the Community Development Department within the Ministry of Interior (GESCOM) for the identification, development, and implementation of micro-projects.
1.6 Revised Components (after restructuring) The components were relabeled by the Loan Agreement Amendment following the Mid-Term Review in order to align them with the PDO. Given that 96% of the project financing was for infrastructure investments, the new components were redefined to reflect the difference between the physical component and the institutional component. The only change was that subcomponent 1.3 in the original document became subcomponent 2.1; thus, all the institutional strengthening was now consolidated under one component.
Redefined Component 1: Financing of priority investments included in the PIC Sub-component 1: Credit Line to the CPSCL to finance priority municipal investments; Sub-component 2: Credit line to finance micro-projects
5 Redefined Component 2: Strengthening the institutional and financial capacity of the CPSCL, the local governments and related central government agencies Sub-component 1: Institutional strengthening of the CPSCL; Sub- component 2: Strengthening the capacity of CFAD; Sub- component 3: Enhancing the administrative and financial management capacity of municipalities; Sub-component 4: Strengthening the capacity of DGCPL; Sub-component 5: Strengthening the capacity of DGAR; Sub-component 6: GESCOM
1.7 Other Significant Changes In addition to redefining the components, the CPSCL requested the inclusion of the following modifications to the loan agreement: (i) adjustment in the financial clauses (compliance would be postponed until the close of the project rather than being carried out each fiscal year); (ii) a reallocation of proceeds among disbursement categories; (iii) the removal of the obligation to transform the CPSCL into a limited liability financial institution; and (iv) the indicator that committed the CPSCL to maintain arrears over the outstanding ratio of less than 5% was redefined; it would no longer include the municipality of Tunis (which held 43% of the non- performing CPSCL loans), thus allowing a more realistic target for CPSCL. Nevertheless, CPSCL continued to measure the indicator with and without Tunis until the end of the project to monitor the effect of the Tunis arrears on CPSCL’s financial situation The loan was in Euros and, due to substantial appreciation of the Euro, the original amount of US$78.4 million was equivalent at the closing date to US$102.4 million. This exchange rate gain allowed in particular the co-financing, along with AFD, of the solid waste equipment for Tunisian municipalities (a contract of Euro 29 million) and the financing of some of the new PIC V projects. The project was extended twice, for a total of 19 months, to June 30, 2010, in order to complete the purchase of the solid waste municipal equipment.
2. Key factors affecting implementation and outcomes
2.1 Project Preparation, Design, and Quality at Entry
Preparation Preparation of MDP III took place in the context of Tunisia’s long-term strategy regarding municipal strengthening of service delivery. MDP III drew on the lessons from the previous MDPs, which financed key development studies aimed at defining the appropriate strategies and actions for the institutions involved in municipal development. The MDP III preparation phase was used constructively to conduct necessary studies, such as financial studies of three municipalities in fragile situations and financial diagnoses for the city of Tunis; to establish
6 capacity-building programs in consultation with CPSCL and CNPRCRM/CFAD; and to define technical assistance as needed. MDP III responded to the objectives of the CAS regarding the intent of the GoT to raise the standards of living conditions of the urban population across the country through provision of basic infrastructure and services. The Bank’s intervention was justified by the experience acquired in MDP I and MDP II. During preparation, the GoT laid the groundwork for institutional reforms aimed at improving municipal taxation, government transfers, and local government financing. Design The overall PDO (as stated in the Loan Agreement) was highly relevant, focusing on improving delivery of priority urban infrastructure. To achieve this objective, the project directly financed basic services and infrastructure investments, and carefully targeted activities aimed at: (i) strengthening municipalities and sector institutions; and (ii) the use of improved financial, computerized, and legal tools for programming, implementing, and monitoring project investments. Above all, the municipal restructuring plans and contracts signed9 by municipalities, the central GoT, and CPSCL would improve municipal financial situations (i.e., reduce the overall number of municipalities in critical financial situations and restructure the financial situations of municipalities with financial problems) and reduce the overall arrears to the CPSCL, assuring the continuity of municipal investment.
The PAD does not mention triggering operational policy 8.30 on financial intermediary lending, although the policy was in use since 1998 and the operation was defined as a financial intermediary loan. In any case it is unlikely that the project could have complied with this policy given the limitations of the Tunisian municipal finance context (basically lack of decision making and financial autonomy of CPSCL). Indeed the team working in the preparation of the follow-up project, has requested an exemption for OP8.30 for this reason.
Quality at Entry At initial stage of MDP III, there were two different sets of PDOs: (i) there was a PDO given in the PAD; (ii) there was also a PDO given in the Loan Agreement signed with the borrower. The PAD corrigendum corrects this mistake. Nevertheless, it is important to point out that the inconsistency brought confusion and complications both in monitoring the project and in measuring the success in achieving the PDO during the implementation period preceding the exoneration.
9 The proposed methodology to implement these municipal financial tools includes: (i) preliminary assessment of the municipal finance situation (based on documentation sources); (ii) preliminary consultation with municipal representatives, to complete municipal information on the ground; (iii) diagnostic of the municipal financial difficulties which includes audits of municipal function, services and activities; (iv) definition of a detailed action plan; (v) definition of institutional support needed to carry out the action plan. -Méthodologie d’audit et d’élaboration des plans et contrats de redressement- B.M PDM III- 5 juillet 2004. 7 The PAD also presents a long list of indicators:10 many of them had unrealistic targets (e.g., timing expectations of recovery of municipalities in financial stress); others did not have clearly measurable target values (physical investments and number of inhabitants for whom living conditions would improve).
Another shortcoming of the design is the presentation in the PAD of a rather institutional project when in fact 96% of the cost was assigned to the development of municipal infrastructure. Following the PAD corrigendum and Loan Agreement Amendment, the project is now seen as a municipal financing investment project with a financial and institutional capacity building component.
New performance indicators were introduced in order to allow not only better accounting of the impact of the local investments, but also better evaluation of the impact of the project. However, indicators for improving living conditions related more to higher-level objectives, which depend on the effectiveness of other inputs that are outside the scope of the project, were not reviewed or clarified. The Bank team had expected that the client evaluation would include measures on improving living conditions; this lack of information measures will be corrected by an AFD full impact assessment of MDP III. The project identification of benefits and target population, institutional focus, mitigation measures, implementation arrangements and project risks were well chosen. However, the rate of progress of the GoT institutional reforms was overestimated, and the success of the outcomes was less than had been expected in the PAD. QAG assessment rated the Quality at entry Unsatisfactory. This is discussed further in Bank performance 5.1. 2.2 Implementation Project implementation encountered additional challenges, especially with regard to: (i) the evolving institutional and policy reforms, and introduction of new measures to redress the financial situation of municipalities; and (ii) development and implementation of municipal tools (such as the restructuring plans and contracts; the municipal expense management computerized system (ADEB); and the municipal budget management computerized system (GRB)). Moreover, and not least, were the challenges posed by the requirements of the PAD corrigendum, and also by the need to relabel the project components (Loan Agreement Amendment). All these activities were handled proactively by the PCU (Project Coordination Unit) and the Bank team in a manner that assured achievement of project outcomes. Responding to the institutional and policy reforms. MDP III supported and was carried out in conjunction with a number of important institutional and policy reforms. These included: (i) the revision of the municipal budget organic law (LOBCL)11, which introduced ADEB; (ii) the revision of the municipal organic law (LOC) which supports the de-concentration of the municipal supervision authority through empowerment of Governors and reinforcement of authority at the regional level; (iii) the modification of laws and decrees concerning municipal
10 PAD – ANNEX 1: Project Design Summary- Page 29. 11 Loi Organique sur le Budget des Collectivités Locales (LOBCL), revised in December 2007. 8 taxation (commercial and industrial tax--TCL;12 real estate taxes--TNB13and TIB;14 and indirect taxes), which simplified the taxation system (for example, for the TIB the number of criteria to determine the assessments was reduced from 46 to only 6); (iv) the sustained evolution of the central government transfers (FCCL)15; (v) the undertaking of administrative measures to improve the municipal training institute (CFAD); and (vi) the development of incentives to promote inter-municipal management. The GoT also undertook a much needed fiscal amnesty16 and a reassessment of the property tax rolls, two measures that were not part of MDP III, but demonstrated the importance that the GoT attributes to municipal financial development. All these reforms were aimed at strengthening the financial and institutional aspects of municipalities.
The introduction of the municipal restructuring plans and contracts was fundamental for sound municipal financial management. Operational adjustments were needed in each municipality in order to implement these plans and contracts. The introduction of municipal restructuring plans and contracts also required consensus building and support for buy-in to the necessary actions. In this context, the implementation on the ground of the municipal structuring plans took a long time. In terms of results, 104 out of the 132 municipalities17 that were under financial stress prepared, signed, and are now implementing the restructuring plans, and some success is starting to be seen. In addition, the city of Tunis is paying its arrears to CPSCL. The project has raised awareness of the issue of the financial viability and credit-worthiness of Tunisian municipalities. In addition to the development of software to improve the management of the municipal budget which was identified in MDP III, new tools were added to move towards the introduction of double entry accounting system and a system for electronic payments. This provided new tools for municipalities to implement the restructuring plans. The project provided funding for the development of information systems to help manage municipal budgets (GRB) and municipal expenses (ADEB). The GRB and ADEB are now in place to encourage municipalities under financial stress to better manage their financial situation; however, the results will not become concrete until the medium term. CPSCL made substantial improvements in providing a sufficient and effective source of investment funds; however, the financial situation of CPSCL remains fragile. CPSCL demonstrated that it is a fully operational institution able to channel project funds to local governments in a systematic and disciplined manner. CPSCL also made progress in clearing the municipal arrears. However, the progress in increasing the recovery of arrears has been slow. It should be noted that the autonomy of CPSCL depends on addressing structural weaknesses of the local governments. QAG’s assessment mentioned that the “Borrower retreated from the original aim of granting the CPSCL greater autonomy and the focus of municipal institutional capacity shifted to tackling the problems of financially distressed municipalities, rather than strengthening
12 Taxe sur les Établissements à Caractère Commercial et Industriel. 13 Taxe Foncière sur les Terrains Non-Bâtis. 14 Taxe sur les Immeubles Bâtis. 15 Fonds Commun des Collectivités Locales. 16 The tax amnesty was necessary to start enforcing payments under clean balance sheets. 17 Total number of Tunisian municipalities: 264. 9 municipalities as a whole.” Therefore, CPSCL committed to focusing on increasing the recovery and on enforcing more stringent lending criteria in order to tackle its financial situation. 2.3 Monitoring and Evaluation (M&E): Design, Implementation, and Utilization
Design The PAD presented three major performance indicators; i) the implementation of restructuring contracts; (ii) a reduction in the number of municipalities identified as in financial difficulty; and (iii) an increase in the collection of revenues from local taxes and fees. However, the M&E framework reflects the ambivalence of the design, with a set of key indicators aiming to measure institutional change, and no key indicator seeking to measure improved infrastructure services. The arrangement for monitoring and evaluation of the physical investments was vague. The Mid- Term Review (MTR) and the following Loan Agreement Amendment were used to improve the M&E framework and to introduce new indicators to measure physical investments, thus allowing better accounting of the impact of investments and achievements of the PDO. The key indicators to measure institutional changes remained as originally specified in the intended outcomes.
Financial CPSCL indicators were redefined to allow a realistic target, dropping the municipality of Tunis from the arrears over the outstanding ratio. The high rate of municipal arrears had prevented CPSCL from meeting the ratio of less than 5%.
Implementation The project was implemented in the Tunisian inter-government planning system with strong focus on results, particularly physical investments, to meet PIC objectives. The M&E responsibility was given to the PCU, with inputs from various implementing agencies (overly dependent on government agency reports); CPSCL was responsible for M&E information on disbursement, procurement, and fiduciary information. M&E was collected by the PCU and shared with the Bank, as evidenced by the regular updates to the Implementation Status and Results reports (ISR). The ICR team has not been able to find documentation to show that MDP III did in fact conduct regular M&E to measure the number of inhabitants whose living conditions were improved by the project. This can be explained by the absence of clear target values of PAD indicators and the difficulty of measuring the impact of improving conditions throughout a specific project. However, new intermediate indicators were added to the original two (number of landfills and m2 of green spaces/inhabitant) by the GoT in order to monitor the project investments that directly improved living conditions, such as kms of streets and sidewalks constructed; kms of drainage and sanitation channels constructed; and public lighting points.
Utilization The MTR was used to review project progress and to revise the project, confirming the progress toward meeting physical components. Most of the tools used to assure regular data collection regarding the financial situation of municipalities and the performance ratio for the CPSCL will
10 continue to be useful tools to follow the performance of the local governments, both in terms of self-evaluation and oversight; such as municipal restructuring plans and restructuring contracts; GRB; and ADEB.
2.4 Safeguards and Fiduciary Compliance
Safeguards This project fully adhered to the requirements of OP-BP 4.01 and Tunisian Law No. 115 of 1992. The EIA Directorate of ANPE is the body responsible for Environmental Assessments (EIA) in Tunisia. ANPE is responsible for administering, reviewing, and monitoring EIAs. The CPSCL screened all sub-projects for compliance with environmental safeguards. This process was thoroughly reviewed during the MTR supervision mission and was considered satisfactory.
Fiduciary compliance Procurement and financial management are rated Satisfactory. The Bank supported municipal development by making funds available through the CPSCL for investments. The Bank carried out at least one post-procurement review per year; all ISRs noted procurement and financial management as Satisfactory with one exception for which the rating was Moderately Satisfactory18. However, it should be noted that the project was extended twice, to a total of 19 months, because of the delay in the MG-6 (Marché groupé-6) procurement process to finance a large contract to acquire solid waste collection equipment for municipalities.
The CPSCL was responsible for the fiduciary and safeguard aspects of the project. Additionally, the CPSCL was responsible for evaluating and financing local government investments, following eligibility criteria for subprojects and beneficiaries which are satisfactory to the Bank.
Supervision of fiduciary and safeguard aspects was considered by QAG to be Moderately Satisfactory. This included procurement (MS), financial management (S), and social aspects (MU). Procurement is rated MS because “procurement functioned reasonably well and the oversight was reasonably good. The documentation of the Bank’s oversight and ex-post reviews could have been better”. The quality of oversight of the Social Aspect is rated MU “because the monitoring of the multi-stakeholder participatory approach in GESCOM sub-projects was not a high priority for supervision.”
The ICR team differs with the QAG assessment because all post-procurement reviews were documented and the GESCOM sub-projects were executed early on in the life of the project and surpassing targets. In addition MDP III was never considered a social project.
18 ISR #12- 10/09/2007. Prepared during the process to acquire municipal equipments for all Tunisian municipalities under one single contract. 11
2.5 Post Completion Operation/Next Phase The 11th National Development Plan (2007-2016) stresses the importance of enhancing the coordination of investment plans among each region’s municipalities; and giving large cities the necessary tools to plan their broad development strategies and project investments in accordance with their financial capacities. The GoT requested a new municipal development project in May 2010 which will be built on the lessons learned from the previous MDPs. The overall PDO is to improve local service delivery through financing priority infrastructure projects (PIC projects) and institutional support and through promoting inter-municipal projects. A draft PCN was prepared for internal Bank discussions in September 2010.
3. Assessment of outcomes
3.1 Relevance of Objectives, Design, and Implementation The objective remains highly relevant and reflects the proper diagnosis of development priorities, which also remain relevant. The long-term and sustained effort in the municipal development sector has resulted in substantive improvements in infrastructure and local service provision. Currently, in 2010, 99%19 of the Tunisian urban population has access to improved drinking water and 96% has access to improved sanitation facilities. While the access of the Tunisian population to services and infrastructure is among the highest in the region, there is still a need to assure the sustainability of investments in infrastructure, to develop inter-municipal coordination (in large agglomerations composed of many municipalities), to complement financial municipal tools with urban development tools (as city contracts), and to assure efficient service delivery.
The current Country Partnership Strategy (CPS), Fiscal years 10-1320confirms that one of the main challenges for the Tunisian government remains the improvement of the quality of service delivery to citizens. The culture of financial discipline, which MDP III has helped to inculcate through the use of new financial management tools, supports the focus of the CPS on improving the capacities of the municipalities.
As described above (Section 2.1), the design was relevant to the challenges identified at appraisal. The restructuring plans, contracts and other tools provided by MDP III to monitor municipal debts and to prevent an increase in the number of municipalities in fragile financial situations are key success factors.
During implementation, the project responded to the challenge of revising the results framework. The new framework was well aligned with the PDO, and relevant to measuring improvements in investments in infrastructures and basic services.
19 Source: The Little Green Data Book- The World Bank; 2009. 20 CPS for the Period FY10-13- November 2009. 12
3.2 Achievement of Project Development Objectives Achievement of the PDO is Moderately Satisfactory The main PDO was to “enhance the delivery of basic municipal services and infrastructure” and this objective was achieved. MDP III accomplished concrete and tangible results by contributing to the financing of the 5 year municipal investment plans (PIC), to cover all of the country’s urban areas (264 municipalities) with basic infrastructure and services. The Borrower evaluation shows that in the 20 sample municipalities (representing 7.5% of the Tunisian municipalities, including 1.2 million of the urban population) 425 projects were carried out, during the period 2002-2009. The project also supported many national reforms as explained above (para 2.2, Implementation). The project also achieved very important targets regarding the development and implementation of municipal management tools (such as ADEB, GRB, and electronic payments).
The completion of the specific activities of two components, outlined in the PAD and reviewed by the Loan Agreement Amendment, is summarized below.
(i) Financing of priority municipal investments projects included in the PIC. The key indicator of a commitment rate of 82% for new municipal projects under the PIC has been exceeded, with a rate of 86% for committed projects. MDP III completed the construction of 1933 km of roads and sidewalks; 79 km of drainage and sanitation pipes; 36.428 street lights; 35 km of water pipes; and 14 sanitary landfills; and increased the m2 of green spaces by inhabitant, among other infrastructure works. For the micro-projects, GESCOM completed 55 projects, representing 137% of the end of project target.
(ii) Strengthening the institutional and financial capacities of the CPSCL, the local governments, and related central agencies. The activities under this component have been completed for the CPSCL and related central agencies. However, the project achieved only partial success in developing a sustainable program of financial recovery for the municipalities in financial distress.
CPSCL is a fully operational institution able to channel funds to construct municipal infrastructure. The central role of CPSCL in the provision of funds to local governments as well as the efficacy and reactivity of CPSCL to municipal demands has been strengthened. Three of five target values of financial indicators for CPSCL were met by the closing date. However, the modification of the status of CPSCL has been postponed through a loan agreement amendment because the GoT wanted first to address the financial situation of the municipalities. The institutional support had concentrated on the implementation of the IT development plan, which includes the strengthening of the five regional branches of CPSCL through equipment computerization; improving the coordination with headquarters; and advancing relations with the municipalities. These activities were accompanied by training and technical assistance in order to improve account management. CPSCL will continue funding the future PIC investment projects.
13
Strengthening the local governments. The project developed a sustainable program of financial recovery for municipalities in financial distress. Of 132 municipalities in distress, 104 municipalities were supported by the project in the implementation of restructuring plans and subsequent contracts at the closing date. Encouraging results are taking place in many municipalities, but these have not yet translated into changes of financial status, except in the cases of a few municipalities. The number of municipalities in difficulty was reduced from 132 to 120;21 however, the target indicator of a total of 75 municipalities identified as being in a difficult financial situation at the end of the project was not attained. Some signs of positive recovery are already tangible. That the design was unrealistic with regard to the timing of financial improvement must be repeated.
Overall, annual financial resources (revenues) have improved at an annual average of 6.7% (between 2003-2009) through: (i) changes in TIB/TNB tax brackets; (ii) an increase in tax collections based on the results of 2006 reassessment; (iii) an increase of numbers of tax rolls; and (iv) the taxation amnesty which allowed the collection of former arrears. However, these financial improvements had mixed results regarding the targets in the PAD: (i) TIB achieved with a an average municipal collection rate of 72.4% (target 70%) by end of project (ii) TCL partially achieved with a percentage of municipalities collecting the tax at its base rate of 27.8% (target 50%).
MDP III also financed a study to diagnose the situation in the city of Tunis and to propose mitigation measures. Recommendations have been implemented (improvement in collection of industrial and commercial taxes; increased income generated through rental of advertisement spots; a decrease in personnel expenses; and refinancing of debt with public societies and private enterprises), thus allowing the city to pay part of its arrears with the CPSCL. The project supported the inter-communal development strategy of Greater Sfax, in which the Bank financed, through the Public Private Infrastructure Advisory Facility (PPIAF), the technical assistance to define the slaughterhouse project and AFD will finance its construction as the first inter-municipal management infrastructure project in the country. Strengthening of CFAD. This was achieved through the provision of computer equipment and the training of center staff; reorganization of the center; improved training curriculum; establishment and support for a training evaluation unit; development of general training services to municipalities; and diversification of training and teaching methods. Through a partnership with a Canadian institute, training on these aspects has been provided to a wide range of categories of staff, covering all municipalities.
Support to central agencies: DGAR, DGCPL, GESCOM. This was achieved particularly through the provision of technical assistance and equipment to diverse institutions. Efforts made during implementation have led to reconsideration of institutional support to specific institutions in coherence with main objectives.
21 Borrower’s Evaluation Report. 14
Most indicators have been achieved and many have surpassed the original targets (please refer to the datasheet for a complete list of indicators).
3.3 Efficiency In agreement with the Bank, CPSCL uses a simplified guide to evaluate municipal sub-projects from the economic point of view. This guide is based on the following principles:
- Sub-projects are clearly classified by the nature of the works required (revenue generating facilities, social infrastructure, basic infrastructure, housing, administrative buildings, environmental amenities) and by their size - The requirements to determine the feasibility of a sub-project vary depending on the category of the sub-project - For revenue-generating activities and for large sub-projects (costing more than 1 million TD), the economic internal rate of return needs to be calculated and exceed 10% - Mostly two methodologies are used for the economic analysis: revealed preferences for sub- projects in which a demand function can be estimated and hedonic prices for sub-projects that have an impact on land prices in the surrounding area - For all other projects three comparable solutions must be presented along with their detailed costs, and the option with the least cost chosen
Since all sub-projects are subject to this screening, efficiency in the use of resources is justified (please refer to Annex 3 for more details).
3.4 Justification of Overall Outcome Rating
Rating: Moderately Satisfactory The project is rated Moderately Satisfactory (MS) as its main objectives were achieved, and the physical component (96% of project financing went to infrastructure investments) was achieved with no shortcomings. The project achieved very important targets regarding the development and implementation of municipal management tools such as ADEB and GRB which have been applied to all the municipalities. The project supported many national reforms and the modernization of CFAD, a key institution in municipal capacity-building.
The project supported the development of restructuring plans and contracts. However, the results are not yet apparent in the improvement of the financial situation of municipalities in distress. The ISRs’ MS rate is explained by the fact that MDP III did not achieve the indicators related to improving the situation of municipalities under financial distress. Targets now seem to be ambitious and unrealistic with regard to the timing expectation for financial improvement of municipalities, as noted in several ISRs, and did not take into account that institutional reforms are complex and have medium- as well as long-term achievements. While the institutional environment for municipal service delivery has certainly improved under the project, the final outcome is likely to be more modest than anticipated in the PAD.
3.5 Overarching Themes, Other Outcomes, and Impacts
15
(a) Poverty Impacts, Gender Aspects, and Social Development The integration and quality of social development aspects written in the PAD22 summary project analysis were not well integrated into the design of the project itself. Social aspects of the project were confined to the GESCOM (community-based participatory development program) subcomponent, which completed 55 projects and surpassed its target indicator, but did not achieve the expected levels of community participation within the target population.23 (b) Institutional Change/Strengthening MDP III contributed to strengthening the financial discipline of local governments through restructuring plans and contracts agreed upon and signed between the municipalities and the GoT. The project contributed to building the human resources of municipal sector institutions and to developing skills in the local consulting industry. With the evolution of the municipal responsibilities, additional computer equipment, and new tools, the municipalities have been able to hire more qualified professionals and to improve the quality of services.
(c) Other Unintended Outcomes and Impacts (positive or negative) The financial information and knowledge base at municipal levels have been significantly strengthened. A set of tools was developed to establish a baseline and to ensure that municipal budget information would be regularly updated. Physical and other investment and financial information databases are linked, encouraging the development of municipal sector analysis which can prevent financial bottlenecks. The restructuring municipal contracts are being internalized as a tool of central-local reciprocal interaction at this stage of the fragile municipal institutional and financial situations.
3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshop Interviews were held in a sample of 20 municipalities during the Borrower’s evaluation study completed in June 2010 and the details are provided in Annex 5. The municipal representatives expressed overall satisfaction with the project and with the implementation agencies. The relevance of the new tools and equipment was also stressed by the municipal staff participating in the interviews. The mayors who were interviewed recommended continued training of municipal staff in the use of the management tools provided by the project.
4. Assessment of risk to development outcome
Rating: Moderate The risks to development outcome are related primarily to (i) a slow improvement in the municipal financial situation; (ii) some municipalities in financial distress being unable to implement the financial restructuring plans laid out for them; and (iii) less than optimal maintenance of infrastructure.
The CPSCL’s exposure to financial risk was addressed under MDP III. Following the GoT request, during the 2006 MTR, to remove the obligation to transform the CPSCL into a limited liability financial institution due to the delicate financial situation of Tunisian municipalities, the
22 PAD, page 25. 23 Borrower’s Evaluation Study. 16
Government and Bank team collaborated closely to strengthen the support to municipalities in financial distress. In addition, the CPSCL financial indicators were improved following the adoption by the GoT of a set of measures including local tax reforms, enhancement of local collections, rescheduling of arrears, and restructuring of municipalities in financial difficulties.
The satisfaction of mayors and national authorities is another element that has contributed to an expansion in the number of restructuring plans. There is a strong commitment by the GoT and involved institutions to extend the implementation of restructuring plans to all municipalities under financial stress. This provides a measure of assurance that improvements will continue. Further, municipalities in financial distress, and thus with financial problems in implementing the restructuring plans, will have access to the FCCL fund provisions. The increased levels of subsidies are conditional on the commitment of municipalities to increase their local financial resources while limiting their administrative expenses. Measures to increase local revenue collection have been implemented. Despite these improvements, the increase in municipal budgets remains modest, and some municipalities, due to their limited natural and economic assets, simply cannot generate any significant income. The general economic crisis has had a minor impact on municipal budgets which also poses a risk to development outcomes.
Regarding operations and maintenance, the PIC includes two budget lines for rehabilitation of infrastructure and municipal budgets have a dedicated line for routine maintenance, which are good measures and a better situation than the one found in many developing countries. Nevertheless operations and maintenance budgets are usually fungible and end up being used for other urgent needs. Moreover a culture of maintenance does not exist among municipal staff.
5. Assessment of Bank and Borrower performance
5.1 Bank Performance a) Bank Performance in Ensuring Quality at Entry Rating: Unsatisfactory The ICR’s assessment of overall quality at entry is rated as Unsatisfactory (U), which fully coincides with QAG’s assessment, since the design presented major shortcomings: (i) the inappropriate specification of DOs in the PAD; (ii) inconsistencies between the PAD and the original Loan Agreement; (iii) the lack of consistency within the different parts of the PAD: the main part of PAD describes a project aimed primarily at moving forward an institutional reform agenda. However, the technical annexes of the PAD and the allocation of funds show the project primarily financing municipal infrastructure; (iv) the weakness of the results framework, which has several indicators to measure institutional change but only a few to measure improved services; (v) performance indicators for physical investments that measure progress only in terms of commitments were utilized; and (vi) of the long list of indicators, only a few had realistic targets, and others did not have clearly measurable target values. The design also underestimated the time needed to implement the municipal finance program, and hence was overly optimistic about the rapid strengthening of financial and institutional outputs. The QAG supervision assessment, undertaken in 2008, rated the quality of design as Unsatisfactory, on the basis of: (i) the way the project was described in the PAD; (ii) the problems that were to follow from inappropriate specification of the PDO in the PAD; (iii) a lack 17 of coherence in project design; (iv) the inconsistency reflected by the results framework; and (v) the lack of precision of performance indicators to assess progress and outcomes. (b) The Bank Quality of Supervision Rating: Moderately Satisfactory The Bank provided good continuity both in team composition throughout the implementation period and in regular interactions with the client and partners. Bank supervision missions were executed on a regular basis (generally two per year) jointly with AFD; joint review aide- memoires were shared; and cooperation has been good. The deficiencies in M&E and the difficulties in measuring progress did not facilitate supervision before MTR. However, the slowdown in the institutional aspect agenda was apparent enough in the ISRs. During the first part of the project, supervision missions did not act proactively to move the institutional component forward. Although the reviews in the ISRs detailed many issues, the project ratings were not candid in all categories. ISRs continued to rate as satisfactory the progress toward meeting the PDO until February 2006 and to rate as satisfactory the implementation project until March 2005, in spite of the slow progress of the institutional component. After the project redefined the components and indicators (2007), ISRs gave a reasonable account of project implementation; and in this respect, ISRs became candid. The Bank team has continuously supported the client through preparation and implementation. The Bank was responsive to the client when the GoT decided not make the CPSCL fully autonomous and to focus institutional efforts mainly on financially distressed municipalities. It was responsive to the client during the MTR when it decided to relabel components and introduce new physical indicators to better reflect the project that the Borrower was implementing, although more proactivity to encourage the Borrower to request the corresponding amendment , right after the MTR, would have helped solve the inconsistencies in project design earlier in the life of the project. Although the Bank’s support in terms of procurement was good throughout the project, during the MG-6 process it fell short of standard as there was no expert in the region in the procurement of large and complex contracts of goods and therefore advice was hesitant and slow at times. In 2008, a quality supervision assessment rated the overall performance of the Bank’s supervision as Moderately Satisfactory. Supervision was considered by QAG as adequate with regard to: (i) ensuring timely disbursements; (ii) the implementation of municipal investments financing; and (iii) the responsiveness of the Bank team to the Borrower’s concerns about the weak financial situation of municipalities. However, the QAG believed that more could have been done by the Bank in view of the continuing delays in the timely implementation of the institutional component of the project. This rating did not take into consideration the PAD corrigendum of 2009. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory The rating reflects the U rating for quality at entry and the MS for supervision. 5.2 Borrower Performance
18
(a) Government Performance. Rating: Moderately Satisfactory Government funds have been provided in a timely manner through CPCSL and the GoT’s commitment to the project has been constant. The GoT has been effective in resolving routine implementation issues and coordination between different agencies worked well. The institutional reforms adopted by the GoT will ensure that management tools developed by the project will continue to be used. However, project implementation has been slowed in the institutional component, in part because of the crucial need for the PCU to be reinforced. The PCU team, even though it was reinforced with two new staff members, remains understaffed vis- à-vis the complexity of activities of the institutional component. The PCU Coordinator is the Director of the DGCPL enabling coherence between the national municipal development programs and the project, but generating important delays due to conflicting timetables. These national programs are under the responsibility of the DGCPL for implementation. At the same time, a high level of technical support to the PCU coordinator could have improved efficiency in the implementation of the institutional component of the project.
(b) Implementation Agency or/ Agencies Performance Performance of CPSCL Rating: Satisfactory Overall, CPSCL has shown commitment to providing and channeling sufficient project funds to local governments and has progressively been improving its structure and procedures. Projects improved in quality and the agency improved in efficacy and in reactivity, as confirmed by the survey of the Borrower’s Evaluation Report. However, the increase in the speed of project realizations has limited municipality participation in the process of making final decisions regarding investment plans.24 The agency has met three out of five key performance indicators, and has shown improvement in the remaining two.
(c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory The rating reflects the MS rating for Government performance and the S rating for Implementation Agency performance.
6. Lessons learned
Increasing the percentage of the urban population with access to basic services and infrastructure requires a wholesale approach and a long-term strategic plan. In Tunisia, the improvement of access to basic services is facilitated by the centrally guided inter-government long-term planning system. Municipal investments are implemented to cover the basic needs of all 264 municipalities, with equitable regional distribution. The sustainability of the effort is supported by: (i) the provision of sufficient and reliable sources of financing; and (ii) the strengthening of the municipal development institution which channels the funds. The MDP III experience offers many lessons regarding how to finance municipal infrastructure in order to increase the rate of urban services with equitable regional distribution.
24 Borrower’s Evaluation Report. June 2010. 19
Municipal development funds can work well within centralized countries. This was stressed in the report LESSONS FOR THE URBAN CENTURY/ Decentralized infrastructure finance in the World Bank 25. Tunisia’s well-structured approach to financing basic municipal infrastructure (PIC), shows positive results to successfully promoting access to a sound level of infrastructure in the entire country. The support of the GoT and the Bank to the municipal financial sector should continue to yield more improvements with the introduction of new tools at the municipal and inter-municipal levels.
Institutional reforms require a strong political will and sustained monitoring of different phases of the implementation by the institutions involved. Institutional reforms represent complex medium- to long-term endeavors, particularly in Tunisia, where the GoT is very cautious about undertaking reforms. Projects with institutional reform components in Tunisia should remain modest and flexible in terms of the scope of reforms. The implementation of MDP III confirms lessons learned from preceding projects, i.e., that institutional reforms require: (i) strong political will; (ii) a long preparation period (including studies, tests, and pilot cases); (iii) sustained monitoring; and (iv) accepting that results will only be apparent in the medium and long terms.
Municipal restructuring plans and information systems to monitor municipal budget and expenses can be efficient tools to improve municipal financial management. The project approach and its tools can be used to effectively link infrastructure financing, maintenance, and capacity-building. In the case of MDP III, the timing of availability of these tools has been satisfactory, as they were ready almost simultaneously. However, the tools were implemented late and thus had little impact at the time of project closing.
The process for PAD design should ensure that: (i) PDOs are realistic in terms of scope and timing; (ii) monitoring indicators are few, realistic, measurable, and objective; (iii) the project design incorporates and generates a well-designed evaluation system for assessing the project outcomes and the priority needs of the project; and (iv) the project documents are reviewed for consistency.
7. Comments on Issues Raised by Borrower/ Implementing Agencies/Partners (NA)
25 Lessons for the Urban Century. (Decentralized Infrastructure Finance in the World Bank). World Bank 2008.
20
Annex 1. Project costs and financing
(a) Project cost by component (in Euro million) Actual/Latest Appraisal Estimate Percentage of Components Estimate (Euro millions) Appraisal (Euro millions) Component 1: Capacity building for 76.89 CPSCL Redefined component 1: Financing of priority investments included in 77.41 the PIC Component 2: Institutional Strengthening of Government and 2.41 Public Entities Redefined component 2: Strengthening the institutional and financial capacity of the CPSCL, the 1.89 local governments and related central government agencies Total Baseline Cost 79.30 79.30 100% Physical and Price Contingencies Total Project Costs Front-end fee 0.80 0.80 100% Total Financing from IBRD 80.1 80.1 100%
(b) Financing
Appraisal Actual/Latest Percentage Type of Source of Funds Estimate Estimate of Cofinancing (Euro millions) (Euro millions) Appraisal Government Contribution 76.37 76.37 100% IBRD Loan 80.10 80.10 100% AFD Loan 47.66 47.66 100%
21
Annex 2. Output by components26
The loan was for 80.1 million Euros and was totally disbursed.
Component 1 – Financing of priority municipal investment projects included in the PIC27. (Actual cost: 77.41 million Euro, equivalent to 97% of total actual project cost) • PIC projects realized in 264 municipalities • 1933 km of roads and sidewalks • 79 km of drainage and sanitation pipes • 36,428 public lamps (street lights) • 35 km of water pipes • 14 sanitary landfills, exceeding the target value of 6 • Recreational areas • Acquisition of solid waste collection equipment for all municipalities
LOT No 228: 69 tipper trucks (PTAC 15 to 16 tons) LOT No 3: 28 tipper trucks (PTAC 18 to 19 tons) LOT No 4: 37 compactor trucks (11-12 m3) LOT No 5: 88 compactor trucks (16-17 m3) LOT No 6: 77 backhoe loaders (80-100 CV) LOT No 7: 28 loaders LOT No 8: 270 farm tractors
Component 2 - Strengthening the financial and institutional capacity of the CPSCL, the local governments, and related central agencies (Actual cost: 1.89 million Euro, equivalent to 2% of total actual project cost29)
CPSCL • Modification of CPSCL status: studies undertaken but actual change postponed through loan amendment • Implementation of an Information Technology (IT) development plan
26 Project description: from Loan Agreement Amendment. 27 Approved subprojects include: (i) construction and maintenance of municipal infrastructure such as streets and sidewalks, public lighting, potable water, drainage, and sanitation; (ii) land management and beautification activities; (iii) economic infrastructure; (iv) social-cultural infrastructure and projects; (v) acquisition of equipment and supplies; (vi) construction of administrative buildings; (vii) National Program for Rehabilitation of Low-Income Neighborhoods; (viii) solid waste management; (ix) rural council support; and (x) studies. 28 Lot 1 was not financed by the project 29 The front-end-fee accounts for the remaining 1% 22
• Training and technical assistance to improve account management • Strengthening of the five regional branches of CPSCL through computer equipment and technical assistance
MUNICIPALITIES • 104 municipal restructuring contracts signed • Expense management system [ADEB]; and income management system [GRB] developed, tested and implemented in all municipalities • Study on Tunis Municipality’s financial situation • Development, testing and implementation of geographic information system (SIG) in 8 pilot municipalities • Development of two additional computer tools: (i) an information system of all municipal projects including budget allocation, bidding documents and process, financial management, studies and works ; and (ii) a database of all municipal contracts with concessionaires of urban services • IT development plan
CFAD • Provision of computer equipment and training of center staff • Support to the reorganization of the center • Establishment of and support to a training evaluation unit • Development of general training services to municipalities • Design of a distance learning site
DGCPL • Provision of computer equipment • Design of a system for the electronic payment of taxes • Studies and assistance to develop the following institutional reforms: revision of the Municipal Budget Organic Law, revision of the Municipal Organic Law, modification of the texts ruling local finance, modification of legal texts related to FCCL, and inter- municipal projects (more detail in Annex 7) DGAR • Establishment of an IT development plan for governorates and rural councils • Provision of computer equipment to 10 governorates and 97 rural councils • Establishment of a Data warehouse with three applications to track information related to economic activities, project monitoring, and political affairs, in 10 governorates
GESCOM • Financing of over 50 micro-projects at the neighborhood level (out of 40 originally planned).
23
24
Annex 3. Economic and financial analysis
In agreement with the Bank, CPSCL uses a simplified guide to evaluate municipal sub-projects from the economic points of view. This guide is based on the following principles:
- Sub-projects are clearly classified by the nature of the works required and by their size - The requirements to determine the feasibility of a sub-project vary depending on the category of the sub-project - For revenue-generating activities and for large sub-projects (costing more than 1 million TD), the economic internal rate of return needs to be calculated and exceed 10% - For all other projects three comparable solutions must be presented along with their detailed costs, and the option with the least cost chosen
The following table contains the categories of sub-projects and the requirements for the economic analysis
Categories of projects
Category Sub-projects Economic analysis Methodology Revenue-generating Markets, Full economic Revealed preferences facilities slaughterhouses, analysis and parking spaces, sensitivity analysis Benefits estimated using the demand amusement parks required curve and taking into account: full inventory of existing and similar facilities, demand study for new facilities including estimated consumption levels for 10 years according to demographics and economic trends, products and prices
All costs considered: investment, operation, maintenance Social infrastructure Sports arenas, Least cost selection community centers, among 3 alternatives cultural centers, recreational centers Basic infrastructure Roads, sidewalks, Full economic Hedonic prices public lighting, analysis and drainage, water sensitivity analysis Benefits estimated through increases in connections, sanitation required for large land values in the surrounding areas sub-projects attributable to the specific investment, using regression analysis
All costs considered: investment, operation, maintenance Housing Urban upgrading Full economic Hedonic prices analysis and sensitivity analysis Benefits estimated through increases in required for large land values in the surrounding areas sub-projects attributable to the specific investment, using regression analysis
All costs considered: investment,
25
operation, maintenance Administrative Mayor’s headquarters Least cost selection buildings among 3 alternatives Environmental Beautification green Least cost selection amenities spaces, parks among 3 alternatives
The methodologies used by CPSCL are deemed correct and consistent and are applied to all sub- projects. A study is currently reviewing these methodologies in detail as well as their application to a sample of sub-projects to determine improvements to this approach in the context of the new project preparation.
26
Annex 4. Bank lending and implementation support/supervision process
(a) Task Team members Names Title Unit Lending Charles Henri Malécot Municipal finance specialist, TTL MNSIF Jean-Jacques Soulacroup Urban specialist ECSIE Sybille Crystal Operations analyst MNCMG Samir El Daher Municipal development regional advisor MNSIF Meskerem Brhane Consultant Nicole Glineur Environmental scientist MNSRE Douglas Graham Financial management specialist MNSIF Claude Archambault Procurement specialist MNSID Dominique Bichara Counsel LEGMS Dominique Dietrich Program assistant MNSIF Hedi Larbi Sector manager MNSIF Françoise Brunet Consultant Thouria Nana-Sinkam Language program assistant MNSIF Ferid Belhaj Counsel LEGMS
Supervision/ICR Charles Henri Malécot Municipal finance specialist, TTL Sateh Chafic El Arnaout Sr. Municipal development specialist MNSUR Alexandra Ortiz Sr. Urban economist, TTL MNSUR Jean Denis Pesme Manager FPDFI Anas Abou El Mikias Sr. Financial management specialist MNAFM Alaleh Motamedi Sr. Procurement specialist OPCPR Radia Benamghar Operations analyst SASDT Salim Benouniche Lead Procurement specialist MNAPR Jaafar Sadok Friaa Lead urban specialist MNSUR Lamis Aljounaidi Junior professional associate MNSTR Salim Rouhana Junior professional associate MNSUR Special representative to the United Dominique Bichara EXTUN Nations Jean-Charles de Daruvar Sr. Counsel LEGEM Dominique Dietrich Program assistant MNSSD Sylvie M. Pittman Temporary MNSSD Ahmed Basti Consultant- Municipal finance MNSSD Caroline Bollini Consultant- Team support MNSSD Françoise Brunet Consultant- Institutional development MNSSD Alicia Casalis Consultant- Urban development MNSSD
27
Moez Makhlouf Consultant- Financial management MNAFM Mohamed Mehdi Consultant- Financial management MNAFM Walid Dhouibi ET consultant- Procurement MNAPR Slaheddine Ben Halima Consultant- Procurement MNSHD François Noisette Consultant- Urban development MNSSD
(b) Staff Time and Cost
Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No. of staff weeks USD Thousands (including (estimated) travel and consultant costs)
Lending FY02 21.08 NA FY03 10.76 68.78
Supervision/ICR FY04 13.11 85.08 FY05 17 109.29 FY06 24.82 161.36 FY07 12.83 88.41 FY08 20.4 136.52 FY09 14.65 96.17 FY10 8.02 53.66 FY 11 1.98 22.16
Total: 144.77 821.43
28
Annex 5. Beneficiary survey results
A beneficiary survey was conducted in the context of the Borrower’s evaluation report of June 201030. Annex 5 presents the main results of this survey. Interviews of municipal representatives and technical staff were conducted in a sample of 20 municipalities, representing more than 7% of the Tunisian municipalities and more than 15% (around 1.2 million people) of the urban population31.
Methodology The selection of the sample municipalities, presented in Table 1, was based on three criteria: • Financial autonomy • Size of population in the municipalities • Geographical distribution
Table 1. Sample of municipalities according to the level of subsides Municipalities without any Municipalities partially Municipalities totally subsidies subsidized subsidized Marsa Mornaguia Kalaat Landlous Ezzahara Mhamdia-Fouchana Bardo Nabeul Hammam Laghzez Borj El Amri Bizerte Kalaa Sghira Kodar Sousse Enfidhia Testour Sfax Béja Hammam Lif Ariana Menzel Bourguiba
The municipalities were grouped in three categories according to the number of inhabitants: (i) nine large municipalities, with more than 50,000 inhabitants; (ii) four medium-sized municipalities, with between 20,000 and 50,000 inhabitants; and (iii) seven small municipalities, with fewer than 20,000 inhabitants.
The interviews focused on four themes: • Physical achievements of PICs 2002-2006 and 2007-2011 • Satisfaction of beneficiary municipal personnel with regard to: (i) new management tools; and (ii) capacity-building training and programs • Municipal financial achievements concerning tax recovery: TIB, TNB, TCL, and hotel tax activity • PIC development process and evaluation of the work relationship between the municipalities and the CPSCL
Survey results a) Physical Achievements: The analysis of the survey shows that 425 sub-projects were carried out in the 20 sample municipalities during the period 2002-2009. The survey also documented that each local
30 Borrower’s Evaluation Report- June 2010. 31 Census INS 2004. 29 authority defined its own project priorities based on its specific needs. For example, the municipality of Sousse is a tourist destination and thus had dedicated an important part of the budget to city embellishment projects. On the other hand, the investment priorities for Borj El Amri, a totally subsidized municipality, were socio-cultural infrastructures (a sports stadium, play areas for children, and youth center).
The evaluation report concluded that, overall, municipal investments were allocated as follows, in order of priority: • To infrastructure: streets, sidewalks, public lighting, potable water, drainage and sanitation; and to maintenance and rehabilitation of the infrastructure • To the construction of socio-cultural infrastructure: public libraries, social centers for the young, sports clubs, etc. • To the embellishment of the municipalities to improve public places, and to the provision of cleaning and maintenance material • The acquisition of computerized equipment, to install GRB, ADEB, and to track the implementation of projects in order to improve the capacity of the municipality and the quality of services • To economic projects such as municipal markets, community centers, and commercial centers, all of which contribute to economic development • The financing of studies for municipal projects in order to improve the quality of the projects
For national projects integrated in the PIC: • Priority was given to the rehabilitation of under-equipped neighborhoods, in coordination with the Urban Rehabilitation and Renewal Agency (ARRU). These projects are financed at a rate of 15% through auto-financing by the municipality; of 15% by a CPSCL loan; and of 70% by AFD, under the loan agreement between the GoT and AFD; • Priority was also given to the implementation, along with the Solid Waste Management Agency (ANGED), to a national program for landfills, solid waste collection, and solid waste transfer stations. Under PDM III, 14 landfills were constructed. In addition, a budget was also allowed for inter-municipality projects. • The XIth Plan also aimed to support an economic network for distribution of national products (agriculture, fishing, etc.), in association with the EU. This program covers rehabilitation of markets, slaughterhouses, fish markets, wholesale markets, etc.). b) Degree of satisfaction • CFAD capacity-building sessions. The municipal representatives expressed overall satisfaction with the sub-projects and with the implementing agencies. The relevance of the new tools and equipment was also stressed by those participating in the interviews. The Mayors interviewed recommended the continued training of municipal staff in the use of the management tools provided by the project. The exchange of experiences between participants was very much appreciated. A distance learning site is operational and is currently being tested; this new tool will facilitate access to sessions and information without travel.
• Managerial tools and computerized material. The survey noted that: (i) the quality of projects has improved; and (ii) the installation of computerized equipment, the application of
30
ADEB and GRB, and the possibility of projects tracking implementation now facilitate better project management and a rationalization of expenses in municipalities.
c) Municipal financial achievements; main conclusions Impact on municipal budgets of the census and tax amnesty. The 2006 reassessment was accompanied by a tax amnesty. This allowed tax payers to pay arrears at discounted rates. The analysis of the information in the survey shows that the amnesty and the census had significant impacts on municipal budgets as illustrated below. Annual variation of tax collection:
- On municipalities under stress: Municipalities 2005-2006 Annual variation of tax collection Testour +221.53% Boorj El Amri +205.38% Hammam-Lif +127.8% Bardo +48.34% Kalaat Landlous +113.46%
- And also on municipalities without subsidies: Municipalities 2005-2006 Annual variation of tax collection Sousse 186.57% Sfax 48.64% Bizerte 82.25% Nabeul 58.6%
• Improvement in the financial situation of municipalities.. The survey concluded that the municipalities with a restructuring plan believed their financial situations to be improved as a result of the monitoring system introduced by MDP III, allowing improvement in managing financial resources, setting objectives, reducing arrears, and rationalizing expenses. However, fully subsidized municipalities, while benefiting from a restructuring plan, are faced with a lack of potential resources, such as touristic, industrial, and commercial activities, all of which could improve their income through taxes. The representatives of these municipalities are asking for the development of economic activities at the inter-municipal level to generate local taxes.
• Strengthening of human resources. The evaluation report confirmed an improvement in the quality of projects due to the improvement of municipal staff capacity-building. The strengthening of the municipalities with new equipment and more financial resources and tools has permitted local authorities to hire new professionals such as engineers, architects, accountants, and computer specialists.
• Evaluation of tax recovery. The main conclusions of the survey show:
31
- An increase in the tax recovery for 2006 due to the 2006 reassessment, which enabled updating of the taxable base; and due to the 2006 tax amnesty. - A decrease in the recovery of some taxes in 2007 due to the end of the tax amnesty and to the inhabitants’ practice of refusing to pay taxes, particularly TIB and TNB. - A modest level of financial resources in small municipalities: small municipalities, particularly those with rural profiles, are totally subsidized by the State, due to both the modest resources of the inhabitants and the absence of economic activities (hotels, industries, commerce, etc.); for example, the rural municipality of Kondar, created in 2005, has only 4000 inhabitants.
d) PIC development process and evaluation of work relationship between the municipalities and the CPSCL The evaluation report noted that during the development of MDP III, CPSCL worked closely with the municipalities and the relationship was considered positive.
32
Annex 6. Stakeholder workshop report and results (NA)
33
Annex 7. Summary of Borrower’s ICR/ or comments on draft ICR32
The Borrower prepared an implementation completion report in June 2010, which includes a beneficiary survey, presented separately in Annex 5 of this ICR. The borrower’s report is summarized below.
1. Background The total cost of the PDM III was 204.13 Million Euros, of which 80.1 were financed by the World Bank, 47.66 by the French Development Agency (AFD), and 76.37 by the Government of Tunisia. The PDM III was developed by the GoT in support of the Fourth Municipal Investment Plan (PIC) 2002-2006, executed under the Tenth Economic Development Plan. However, the PDM III continued until the second year of the Eleventh Economic Development Plan (2007- 2011).
2. Achievements The assessment of PDM III’s achievements considers three aspects: (i) construction of key municipal infrastructure; (ii) institutional support to municipalities and central government agencies; and (iii) support to institutional reforms.
2.1 Construction of key municipal infrastructure (see Annex 5: Beneficiary Survey) A beneficiary survey was conducted in the framework of the Borrower’s evaluation report in June 2010. Annex 5: a) Construction of key municipal infrastructure presents the main results of this survey as well as the overall conclusions of the evaluation of the physical aspects of the MDP III.
2.2 Key performance indicators concerning municipal finances
(i) Implementing (signature) of restructuring plans/contracts The target of 104 signed municipal restructuring contracts was achieved by the end of the project.
The municipal financial recovery has been a major challenge because half of the municipalities were in financially vulnerable situation or in a weak financial state, and thus were partially or totally subsidized. At the MDP III starting stage, 132 municipalities were concerned by restructuring measures and of these, 60 were subsidized.
The financial restructuring activities began at the preparation stage of the project through a diagnostic and restructuring plan for three pilot municipalities and consequent refinement of the proposed methodology. The effort continued throughout the project with the following steps applied to 104 municipalities: (a) detailed diagnostics of the financial situation; (b) preparatory restructuring plans and contracts; and (c) signing of restructuring contracts and implementation. The execution of the restructuring plans and contracts has mobilized a significant number of consultants and DGCPL staff in order to support the municipalities.
32 Etude d’Evaluation du 3ème Project de Développement Municipal (PDM3) Juin 2010 34
The report concludes that a majority of the municipalities had partially operationalized the measures established in the restructuring plans. The restructuring plans have not yet attained the expected impact in financial improvement; however, some signs of positive recovery are already tangible. The DGCPL is currently performing an evaluation study concerning the municipalities that had restructuring plans, and the results of this study will be used in the definition of follow- up activities in the new operation.
(ii) Reduction in the number of municipalities in difficulty33 The project has contributed to the reduction in the number of municipalities under financial distress, from132 to 120, through a) the restructuring plans, and b) technical assistance, particularly the provision of computerized tools to manage budgets and expenses.
(iii) Increase in the collection of municipal taxes Overall municipal revenues increased by 6.7% per year from 2003 to 2009, equivalent to an average annual rate of increase of 6.6%. As a percentage of the total government budget, municipal revenues increased from 72.3 in 2003 to 75.1 in 2009.
• TIB: increase in collection from 24.7 MTD in 2003 to 36.2 MTD in 2009. The report noted that the annual amount of tax collection throughout the project was not stable, due to the taxation amnesty and the revision of assessment rolls in 2006. • TCL: increase in collection of the TCL from 52MDT in 2003 to 90.4 MDT in 2009, equivalent to an average annual rate of increase of 9.6%.
Evolution of taxes and FCCL, 2003-2009 (in millions of TD, all municipalities included)
2003 2009 Average increase Municipal revenues 323.7 478.8 6.7%
TIB 24.7 36.2 6.6% TNB 6.4 13.5 13.1% TCL 52.0 90.4 9.6%
FCCL 89.6 119.2 4.9%
33 The GoT had divided the municipalities, based on their financial health, in three categories to implement the 10th Development Plan: i) municipalities in financially vulnerable situations: this included 71 municipalities not able to borrow; ii) municipalities in a weak financial state; this category comprised 61 municipalities that faced financial problems; these municipalities benefited from a mix of loans and grants; iii) financially healthy municipalities: this included 128 municipalities. The re-arrangement of financial mechanisms (loans, grants, and self-financing) for each of the three categories of municipalities assured the financing of basic local investments for all municipalities. 35
2.3 Institutional reforms supported by the MDP III
The project also supported many national reforms, such as the revision of the municipal budget organic law (LOBCL)34; the revision of the municipal organic law (LOC); the modification of laws and decrees concerning municipal taxation; the sustained evolution of the central government transfers (FCCL); and the undertaking of administrative measures to improve the municipal training institute (CFAD).
Revision of the Municipal Budget Organic Law (LOBCL) Law No. 65 of December 18, 2007
• Improvement of the procedures related to discussion and approval of municipal budgets • Changes in the municipal budget nomenclature to harmonize it to the national budget nomenclature • Introduction of the municipal expense management system “ADEB” • Adoption of mechanisms to manage municipal debt
Revision of the Municipal Organic Law (LOC) Law No. 57-2008 of August 4, 2008
Following the promulgation of the LOC amendment in August 2008, eight application texts were submitted. However, the amendments and the application texts went into force only in January 2009; thus, the impact of this law and its amendments are difficult to evaluate at the time of this ICR. The main changes were: • De-concentration of the municipal supervision authority to governors and reinforcement of competent authority at the regional level • Increased citizen participation through a mandatory open assembly before any municipal council assembly • Precisions concerning the responsibilities of mayors and general secretaries • Establishment of approaches to promote inter-municipal cooperation, notably inter- municipal agencies
Modification of texts ruling local finance • Article 53 Law 106-2005 of December 19, 2005: establishment of conditions linking certain administrative authorizations with local tax payments • Decree 33-60 of December 25, 2006: increase in the maximum ceiling of TCL • Decree 1187 of May 14, 2007: definition of TCL rates by m2 for different types of commercial buildings • Decree 1186 of May 14, 2007: review the base of calculation of the TNB • Fiscal amnesty in 2006 • Decree 1185 of May 14, 2007: review the base of calculation of the TIB
34 Loi Organique sur le Budget des Collectivités Locales (LOBCL), revised in December 2007 36
Sustained increase of FCCL The FCCL transfer increased at an average annual rate of 4.9%, from 2003 to 2009.
Improvements in the CNPRCRM/ CFAD CNPRCRM (Centre National de Perfectionnement et de Recyclage des Cadres Régionaux et Municipaux) became the CFAD (Centre de Formation et Appui à la Décentralisation) in May 2004 through Decree 2004-1181. The missions of the institutions remained essentially the same. The main improvement contained in this decree is the administrative reorganization of the center and the definition of financing operating modalities. The decree also established the framework for capacity building programs and trainer profiles.
Inter-municipal cooperation The MDP III also supported the inter-municipal development strategy of Greater Sfax, in which the Bank financed, through PPIAF, the technical assistance necessary to define the slaughterhouse project; the AFD will finance its construction as the first inter-municipal management infrastructure project. This example introduces a new approach for municipal cooperation in infrastructure projects.
3. Recommendations for a new municipal development project
• Implementation of the restructuring plans and contracts to all municipalities in financial distress • Creation of a preventive mechanisms to monitor the finances of municipalities that would alert the authorities when certain indicators reach defined thresholds • Provision of financial incentives for well performing municipalities • Reduction of the CPSCL financial charges and the debt of the municipalities by integrating in the municipal self-financing the cost of the plots of land needed for infrastructure construction • Evaluation of loan interest rates according to the project type, the financial situation of the municipality, and the general context of the financial markets • Institutional strengthening of CPSCL’s regional branches • Test inter-municipal cooperation in specific sectors such as solid waste collection, slaughterhouse construction and operation • Support large cities in the preparation of sustainable city strategies • Modernization of public urban services, in particular the management of municipal solid waste • Strengthening of municipal human resources, particularly in the management of computerized tools and electronic government • Implementation of the Presidential program concerning the development of a specific status for the city of Tunis and its generalization to other large cities • Development of a special program to provide municipalities with urban planning tools.
37
Annex 8. Comments of cofinanciers and other partners/stakeholders (NA)
38
Annex 9. List of supporting documents
• Implementation Completion and Results Report Guidelines, Updated--May 25, 2010 • Country Assistance Strategy- For the Republic of Tunisia, June 3, 2004 • Country Partnership Strategy- For the Republic of Tunisia--November 23, 2009 • Third Municipal Development Project (Loan No. 7154-TUN). Amendment to Loan and Guarantee Agreements--August 14, 2007 • Quality Assessment of Lending Portfolio, MDP –September 22, 2008 • Borrower’s Evaluation Report, June 2010 • Project Appraisal Document • Project aide-mémoires • Implementation Status and Results Reports (ISRs) • MDP I and MDP II, ICRs • Lessons for the Urban Century. Decentralized infrastructure Finance in the World Bank. World Bank 2008 • The Little Green Data Book- The World Bank; 2009 • Méthodologie d’audit et d’élaboration des plans et contrats de redressement. Application aux 3 communes test: Kalaa Sghira, Menzel Abderrahmane, Le Bardo - B.M. PDM III- 5 Juillet 2004.
39
Annex 10. PAD corrigendum
FROM: Vice President and Corporate Secretary DATE: June 2009
Tunisia Third Municipal Development Project Corrigendum
1. The Loan (Number 7154-TUN) to the Caisse des Prêts et de Soutien des Collectivités Locales (CPSCL), with Guarantee from the Republic of Tunisia, for a Third Municipal Development Project was approved by the Executive Directors on December 5, 2002 and became effective on June 23, 2003.
2. Four references/statements in the PAD are inconsistent with the Loan/Guarantee Agreements. To remedy these inconsistencies, the following corrections should be made in the PAD:
(i) The PDO in the PAD (page 3) should be aligned with the PDO of the Loan Agreement. Right now the PDO reads as follows: “To strengthen the institutional environment for the delivery of municipal basic services and infrastructure through: (a) enhancing the financial and institutional capacity of the Municipal Development Fund (Caisse des Prêts et de Soutien des Collectivités Locales, CPSCL) that provides financing for municipal investments, and (b) increasing institutional capacity of both local governments and related central agencies”. The PDO should be re-stated as: “The objective of the Project is to enhance the delivery of basic municipal services and infrastructure, through: (i) improving the financial and institutional capacity of CPSCL for the provision of funding for municipal investments; and (ii) strengthening the institutional capacity of local governments and related central government agencies”.
(ii) On page 27 of the PAD, the following condition of effectiveness should be added: “The Subsidiary Loan Agreement has been executed on behalf of the Borrower and the Guarantor”.
(iii) On page 27 of the PAD, Dated covenants section, the first covenant should be modified as follows: instead of reading :
1. Modification of CPSCL legal status into a Corporation (Société Anonyme), by June 30, 2006, providing the fulfillment of the key performance indicator (stated in Annex 1, section 2a).
The covenant should read:
1. Modification of CPSCL legal status into a Corporation (Société Anonyme), by December 31, 2006, providing the fulfillment of the key performance indicator (stated in Annex 1, section 2a).
40
(iv) On page 28 of the PAD, the fifth financial covenant should be changed. Right now this reads as: “Gross margin rate of at least 1.5%”. The covenant should be changed to read: “Net intermediation margin of not less than 1.5%”.
3. A revised PAD can be made available on request.
4. Questions on these documents should be referred to Anna Bjerde, ext 33541.
Distribution: Executive Directors and Alternates President Bank Group Senior Management Vice Presidents, Bank, IFC and MIGA Directors and Department Heads, Bank, IFC and MIGA
41
A. Project Development Objective
1. Project development objective: (see Annex 1) The objective of the Project is to enhance the delivery of basic municipal services and infrastructure, through: (i) improving the financial and institutional capacity of CPSCL for the provision of funding for municipal investments; and (ii) strengthening the institutional capacity of local governments and related central government agencies.
2. Key performance indicators: (see Annex 1) • Implementation (signature) of restructuring plan contracts between municipalities, central government and CPSCL: - 30% of most financially vulnerable municipalities by end of first year (2003), - 100% of municipalities with financial situation problems by end of 2nd year (2004). • Reduction in number of municipalities identified as in difficult financial situation: - most financially vulnerable municipalities, from 71 baseline to 60 by end of 3rd year, and to 30 by end of project, - municipalities with financial situation problems, from 61 baseline to 55 by end of 3rd year, and to 45 by end of project. • Increase in collection of revenues from local taxes and fees: - TIB: increase in collection rate from 58% baseline (with the period analysis) to 62% by Mid-Term Review, and to 70 % by end of project, - TCL: 25% of municipalities collect the TCL at its base rate by Mid-Term Review, and 50 % by end of project.
B.Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: R2000-46 Date of latest CAS discussion: April 27, 2002 The CAS emphasizes the role of the Bank and its involvement in municipal and urban development. It specifically underscores that: "In the longer run, Tunisia's growth poles would appear to be in the urban areas and along the coast. With nearly two thirds of the country's population now urbanized and with unemployment pressures felt in urban peripheries, municipal and urban development needs to be consolidated in the CAS. This would be pursued with: (a) maintaining involvement in municipal development projects, (b) strengthening municipal finance and decentralization, and (c) preparing to expand integrated urban development in low-income areas."
3. Main sector issues and Government strategy: The Primacy of Tunisia's Urban Areas. Tunisia is among the most urbanized countries in the Middle East and North Africa Region. Presently, 64% of the population live in cities and towns, the vast majority of which are in cities with over 50,000 inhabitants. Between 1995 and 2000 urban population grew by 3.35% and is projected to reach 70% by the year 2020. This demographic pressure will create further demand on municipalities to provide and maintain basic services. An Evolution of the Municipal Sector to strengthen. The Tunisian municipal sector has developed over the last decade, yet its capacity to meet its investment responsibilities and 42 respond to the increased demand for services is still at a relatively early stage of development, and needs to be reinforced.
of its general manager, senior staff has been fully on board and the proposed institutional changes have been internalized. In addition, corporatization of CPSCL will be directly linked to the improvement of municipalities’ financial situation. Annual investment amount is reduced, and ineffective, and lending by CPSCL is limited Municipal adjustment programs are ineffective.
M From Components to Outputs Specific technical assistance in improving collection Municipalities are not able to provide their S of local taxes and fees would be implemented at an counterpart contribution for investments. early stage of the Project. The practice of larger loans to compensate for lack of counterpart funds would be terminated and municipal creditworthiness criteria applied more strenuously.
Overall Risk Rating S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk); N(Negligible or Low Risk) 3. Possible Controversial Aspects: The preparatory study on social impact did not identify any possible controversial aspects. We do not anticipate any negative impact on municipal personnel as a result of the restructuring plan for the most financially vulnerable municipalities and municipalities with financial difficulties. Enforcement of tax laws on recalcitrant tax payers may cause political discontent. This issue will be carefully addressed through timely information of people coupled with concrete improvements in municipal services.
G. Main Loan Conditions
1. Effectiveness Condition 1. Project Implementation Plan adopted (by the MoI). 2. CPSCL’s Operational Manual Finalization. 3. The Subsidiary Loan Agreement has been executed on behalf of the Borrower and the Guarantor.
2. Other [classify according to covenant types used in the Legal Agreements.] Dated covenants: Executing agencies: 1. Modification of CPSCL legal status into a Corporation (Société Anonyme), by December 31, 2006, providing the fulfillment of the key performance indicator (stated in Annex 1 section 2.a). 2. Modification of the 1997 decree ruling CPSCL in order to enable CPSCL to freely determine its interest rates for non-PIC loans, by December 31, 2005. 3. Modification of CPSCL’s Status in order to allow it to lend to non-municipalities borrowers (for local development projects), by June 30, 2006.
43
Sectoral regulatory actions: 1. Draft revised Organic Law on Municipalities in order to improve managerial flexibility, by December 31, 2006. 2. Improvement of the texts ruling Local Taxes in order to introduce flexibility at the local level, by December 31, 2006. 3. Measures to sustainably increase the FCCL, by December 31, 2005.
Financial covenants: CPSCL should maintain the following ratio during the whole life of the project 1. Rate of return on equity of at least 5%. 2. Debt service coverage of at least 1.5 times. 3. Administrative costs/total assets ratio of at most 0.8%. 4. Arrears/outstandings ratio of at most 5%. 5. Net intermediation margin of not less than 1.5%.
H. Readiness for Implementation 1. a) The engineering design documents for the first year’s activities are complete and ready for the start of project implementation. x 1. b) Not applicable. 2. The procurement documents for the first year’s activities are complete and ready for the start of project implementation. x 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 4. The following items are lacking and are discussed under loan conditions (Section G):
1. Compliance with Bank Policies x 1.This project complies with all applicable Bank policies. 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies.
------Charles Henri Malecot Hedi Larbi Theodore Ahlers Team Leader Sector Manager Country Director
44
7° 8° 9° 10° 11° Mediterranean 600 Bizerte Sea
BIZERTE 1000 37° Gulf of Tunis 37° Nefza
ARIANA Ariana BEJA TUNIS NABEUL Beja Ben Arous JENDOUBA Medjerda BEN 400 AROUS Miliane TUNISIA Jendouba Zaghouan 1000 Nabeul TUNISIE H. Zriba Mellegue ZAGHOUAN 600 ELEVATIONS IN METERS: El Kef ALTITUDES EN METRES: SILIANA 1000 Siliana Gulf of Hammamet 36° 600 200 EL KEF 36° 0 Sidi Bou Ali Maarouf CHOTTS Sousse CHOTTS SOUSSE Monastir RIVERS OUED A ECOULEMENT PERENNE SEASONAL RIVERS Kairouan OUED A ECOULEMENT INTERMITTENT MONASTIR Jemmel ANNUAL AVERAGE RAINFALL IN MM. 200 400 Zermedine PRECIPITATION ANNUELLE EN MM. KAIROUAN Mahdia EXPRESSWAYS AUTOROUTES MAIN ROADS KASSERINE El Hateb ROUTES PRINCIPALES Zeroud MAHDIA SECONDARY ROADS ROUTES SECONDAIRES RAILROADS Kasserine CHEMINS DE FER 35° INTERNATIONAL AIRPORTS 35° AEROPORTS INTERNATIONAUX PORTS Sidi PORTS Bou GOVERNORATE CAPITALS Zid CAPITALES GOUVERNORATS SIDI BOU ZID NATIONAL CAPITAL SFAX CAPITALE NATIONALE GOVERNORATE BOUNDARIES 200 FRONTIERES DES GOUVERNORATS Sfax Maknassy Kerkenna Islands INTERNATIONAL BOUNDARIES GAFSA FRONTIERES INTERNATIONALES Gafsa
Gulf 34° of Gabes ° TOZEUR 34 Tozeur Metouia Djerba Island Gabes Houmt Souk
100 GABES Chott el Jerid Kebili 200
MEDENINE KEBILI Medenine
33° ALGERIA 33° Tataouine
100
TUNISIA TATAOUINE 32° 32°
7° 8°
SPAIN ITALY GREECE Mediterranean LIBYA Tunis Sea MALTA 31° ° TUNISIA 31
This map was produced by the Map Design Unit of The World Bank. ALGERIA The boundaries, colors, denominations and any other information shown on 0 25 50 75 100 this map do not imply, on the part of LIBYA The World Bank Group, any judgment KILOMETERS on the legal status of any territory, or IBRD 32056 JULY 2002 any endorsement or acceptance of such boundaries.
9° 10° 11° NIGER