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The World Bank Public Disclosure Authorized Document of The World Bank Public Disclosure Authorized Report No. 13792-TON STAFF APPRAISAL REPORT Public Disclosure Authorized REPUBLIC OF TUNISIA RURAL ROADS PROJECT JANUARY 3, 1995 Public Disclosure Authorized Private Sector Development, Finance & Infrastructure Division Maghreb and Iran Department Public Disclosure Authorized Middle East & North Africa Regional Office CURRENCYEQUIVALENTS (As of December 1994) $1= D 1.03 FiSCAL YEAR January 1 - December 31 ACRONYMSAND ABBREVIATIONS CTN Compagnie Tunisienne de Navigation National Shipping Company DGPC Direction Generale des Ponts et Chaussees General Directorate of Bridges and Roads DREH Direction Regionale de I'Equipement et de l'Habitat Regional Directorate of Equipment and Housing ERR Economic Rate of Return GDP Gross Domestic Product HDM Highway Demand Model ICB International Competitive Bidding IWG Interministerial Working Group LCB Local Competitive Bidding MEH Ministere de I'Equipement et de 1'Habitat Ministry of Equipment and Housing MOT Ministry of Transport NPV Net Present Value OPNT Office des Ports Nationaux Tunisiens PDR Programme de Developpement Regional PDRI Programme de Developpement Rural Integre RC Regional Council SNCFT Societe Nationale des Chemins de Fer Tunisiens National Railway Company STAM Societe Tunisienne d'Acconage et de Manutention STIA Societe Tunisienne d 'Industrie Automobile This report was prepared on the basis of an appraisal mission in November 1994 led by Jaffar Bentchikou (Sr. Highway Engineer) and comprising Michel Loir (Sr. Transport Economist), Claudia Sadoff (Economist), Yasser Henda (Project Assistant), Claudia Pardifias (Legal Counsel) and Nicola Renison(Operations Assistant) and with the assistance of Michelle Detwiler, Brigitte Grant and Mireille Pagutalan. Peer reviewer was Antonio Cittati (Sr. Highway Engineer). The processing of the project was supervised by Amir Al-Khafaji, Chief, Private Sector Development, Finance and Infrastructure Division (MNlPI) and Daniel Ritchie, Director, Maghreb and Iran Department. REPUBLICOF TUNISIA RURALROADS PROJECT 7A[I1LE OF CONTrF-NT Page Table of Contents .1........................ .... ..... .... i Loan and Project Summary ................ .. .. ... .. ... .. .. iv I. The Transport Sector and The TunisianEconomy .... 1 A. Country Background .1............. .. .. .. .. .. .. .. .. 1 B. Past Economic Performance and Medium-term Prospects .... ...... 2 C. Main Characteristicsof The Transport Sector ................. 3 D. Past and Projected Transport Investments .................... 4 E. Transport Sector Issues ............................... 6 F. Bank AssistanceStrategy ............................. 11 G. Bank Transport Lending Strategy ......... 12 II. Rural Roads and AgricultureDevelopment ......... 15 A. The Rural Roads within the Road Network ....... 15 B. Transport Servicesin Rural Areas ......... 16 C. Rural Road Administration ........... .. .. .. .. 17 D. MaintenanceOrganization . .18 E. Funding of Rural Roads .............. .. .. .. .. ... .. 18 F. Organizationof AgriculturalDevelopment ........ 20 G. Bank Experienceof Previous Rural Road Projects ....... 21 III. The Project . ......................................... 23 A. Background,Objectives and Description ................... 23 B. InstitutionalReforms ................................ 24 Concept and Content ............................. 24 Cost and Financing .............................. 28 Implementation................................. 28 C. Pilot Periodic Rehabilitation ........................... 28 Concept and Content ............................. 28 Cost and Financing .............................. 29 Implementation................................. 29 D. UpgradingRural Roads .............................. 30 Concept and Content ............................. 30 Cost and Financing .............................. 31 Implementation................................. 31 E. Costs and Financing ................................ 33 Costs ......................... ..... ..... ... 33 Financing .................. ... .... ... .... ... 33 F. Procurement .................... .... .... .... .... 34 Works ....................................... 34 Consulting Services .............................. 35 General ..... ................................. 35 G. Disbursement.. ...... 36 H. Workshops, Implementation, Reporting and Auditing ..... 37 I. Environmental Impact ............. .. .. .. .. ... .. .. .. 38 IV. Economic Justification ............ .. .. .. .. .. .. .. .. .. .. .. 40 V. Agreements and Recommendation ......... .. .. 43 A. Agreements & Understandings Confirmed at Negotiations ..... 43 B. Conditions of Board Presentation ........ 43 C. Other Covenants ............ .. .. .. .. .. .. .. .. .. .. .. 44 D. Recommendation ........... .. .. .. .. .. .. .. .. .. .. 44 A 3.1: Institutional Study, Outline TORs ........ 45 A. Concept, Objectives and Methodology ....... 45 Concept and Content ......... .. .. .. .. 45 Objectives ............. .. .. .. .. .. ... .. .. .. .. 45 Methodology ........... .. .. .. .. .. .. .. .. .. .. 46 B. Road Classification and Budgets ........ 46 C. Road Maintenance ........... .. .. .. .. .. .. .. .. .. 47 A 3.2: Sector Strategy Letter ........... .. .. .. .. .. .. .. .. .. 49 A 3.3: Road Standards Study, Outline TORs ....... 52 Objectives ............. ... .. .. ... .. .. ... .. ... 52 Methodology ............ .. .. .. .. .. .. .. .. .. .. 52 A 3.4: Agricultural Indicators ........... .. .. .. .. .. .. .. .. .. 54 A 3.5: Project Costs, Financing and Disbursement Schedule ...... 55 A 3.6: Procurement Arrangements ......... .. .. .. .. .. 64 A 3.7: Project Implementation Schedule ........ 65 A 4.1: Economic Evaluation Details ......... .. .. .. .. 66 A. Socio-Economic Framework of Project Roads ...... 66 B. Methodology of the Economic Evaluation ...... 86 C. Results of the Economic Evaluation ....... 87 MAP: IBRD 26534 Tahles and Figures Project Cost . ........................................... v Financing Plan . .......................................... v Estimated Disbursements ..................................... v Table 1.1: Transport Public Investments ........................... 4 Table 2.1: Classified Road Network ............................. 15 Table 2.2: Evolution of Road Budgets ............................ 19 Table 3.1: Pilot Periodic Rehabilitation, Indicators .................... 29 Table 3.2: Upgrading Rural Roads, Per km Average Base Cost .... ........ 31 Table 3.3: Upgrading Rural Roads, Indicators ....................... 31 Table 3.4: Project Cost Summary ............................... 33 Table 3.5: Project Financing .................................. 34 Table 3.6: Procurement Arrangements ........................... 34 Table 3.7: Allocation and Disbursement of the Loan ................... 36 Table 3.8: Disbursement Profiles ............................... 36 Table 4.1.1: Economic Evaluation Summary ....................... 87 REPUBLICOF TUNISIA RURALROADS PROJECT Borrower Republic of Tunisia. Amount $51.5 million. Terms Seventeen years, includinga five-year grace period, at the Bank's standard variable interest rate. Objectives The project objectives are public sector restructuring, budgetary reforms, privatesector development, the developmentof improved road standards, the reductionof disparitiesbetween urban and rural areas, the reductionof rural to urban migration, and improvingthe delivery of social services to poorer population.These objectives will be realizedthrough improvingmaintenance of rural roads, particularly unpaved ones; decentralizingroad management responsibilities to local governments, without developing new entities; establishing a link between budgets and road classification; strengthening budgetarydiscipline, transparencyand accountability;targeting specificroad maintenancetasks for executionby contractto improveefficiency and to create new development opportunities for a dynamic private sector; and finally minimizinglife-cycle costs by makingoptimum use of gravel road techniques. Project (a) the preparation and initial implementationof an institutionalreform Description program (3% of cost); (b) the periodicrehabilitation of approximately300 km of gravel roads in a pilot programto be carried out by contract in ten Governorates(9% of cost); and (c) the upgrading of about 715 km of priority rural roads to appropriate standards(88% of cost). Project The main benefits will involve savings in road transport costs; improved Benefits accessto remoterural areas, which will translate into lower consumer prices, higherfarm gate pricesfor agriculturalproduce and reductionin rural poverty; and better access to social services such as schools and hospitals. The provision of agricultural extension services will also be facilitated, with a complementaryimpact on agricultural production. Implementationof the in- stitutional reform program will clarify classificationand ownershipof local access roads as assets of local government, and a shift toward road maintenance works by contract should alleviate the financial impact of maintenanceworks on budgetary resources. Loan and Project Sunuwry Project Risks include both under-funding of parallel public agricultural investments Risks and inadequate institutional reforms. The project mitigates the first risk through a declared commitment from the Govermnent guaranteeing a steady follow-up on agricultural infrastructure investments and extension work in the project roads' zones of influence. The second risk is mitigated through a Letter
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