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Public Disclosure Authorized ReportNo. Ms-.N

Public Disclosure Authorized STAF? APPRAISALREPORT

TUNISIA

GABESIRRIGATION PROJECT Public Disclosure Authorized

May 30, 1985 Public Disclosure Authorized Europe, Middle East and North Africa Projects Department

l-dsmmuha a resiuidmdiuibe._ md aybe wad byredplet onlyIn thepeifezee d ~~~brsfMdd l-.:- ;.mt ma ow odme be Alsd _ibu W dd Bak CURRENCY E-QUIVALENTS

Currency Tuit Tunisian Dinar (D) US$1.00 D 0.75 D 1.00-=US$1.33

WEIGHTSAND MEASURES

Metric System

GOVERNMENT OF TUNI;IA FISCAL YEAR

January 1 - December 31

INITIALS AND ACRONYMS

AIC Association of Common Interest (Association d'Interet Collectif)

BNDA : National Bank for Agricultural Development (Banque Nationale pour le Developpement Agricole)

BNT : National Bank of Tunisia (Banque Nationale de Tunisie)

CNEA : National Center of Agricultural Studies (Centre National des Etudes Agricoles)

CRGR : Research Center of the Rural Construction Department (Centre de Recherche du Genie Rural)

CRDA : Regional Agricultural Development Commission (Commissariat Regional ae Developpement Agricole)

CTV : local Extension Unit (Cellule Territoriale de Vulgarisation)

DGR : Department of Rural Engineering (Direction du Genie Rural)

DGPC : Highway Department of the Ministry of Public Works (Direction CGnerale des Ponts et Chauss6es)

DPSAE : Department of Planning, Statistics and Economic Analysis (Direction de la Planification, des Statistiques et des Analyses Economiques) FOR OMCUL USE ONLY

DRE : Department of Water Resources (Direction des Ressources en Eau)

DRS : Department of Soil Resources (Direction des Ressources en Sols)

FOSDA Agricultural Development Fund (Fonds Spiciaux de D&veloppeuent Agricole)

GIN : Group of Hydraulic Interest (Groupement d'Intqr&t Hydraulique)

GAF : Association of Fruit and Citrus Growers and Traders (Groupement Interprofessionnel pour les Agrumes et les Fruits)

GIL : Association of Vegetable ?roducers and Traders (Groupezent Interprofessionnel pour les LAgumes)

MiRAT Tunisian National Institute of Agricultural Research (Institut National de Recherche Agronomique Tunisien)

IRA : Arid Zone Institute (Institut des Regions Arides)

MOA : Ministry of Agriculture (Ministere de l'Agriculture)

MOF Ministry of Finance (Ministere des Finances)

OC National Cereal Board (Office des Cereales)

OFP National Livestock and 2ange Agency (Office de 1'Elevage et des Piturages)

OR Vegetable Oil Agency (Office des Kuiles)

OMVGM Gabes and Medenine Irrigation Development Office (Office de Mise en Valeur des Perimetres Irrigu6s de Gabes et MNd6nine)

PPI : Public Irrigated Perimeter (Perimetre Public Irrigue)

SONEDE National Society for Water Supply (Societe Nationale d'Explaitation et de Distribution des Eaux)

STEG Tunisian Electricity and Gas Company (Societe Tunisienne d'Electriciti et du Gaz)

STIL Tunisian Milk Processing Company (Societe Tunisienne d'Industrie Laitiere)

WUA Water User Associations

Thisdocument has a restricteddistribution andnmy beused by recipientsonly in the performance of their oficial dutie Its contents may nototherwise be disclsed without World Bank authorization. REPUBLIC OF TUSIA GABESIRRIGATION PROJECT

LOAN AND PROJECT SUMMARY

Bor-rower ; Republic of Tunisfa Amount : US$27.7million equivalent

Terms 17 years, including4 years of grace, at the standardvariable interestrate.

ProjectDescription: The proposedProject would rehabilitate 42 selectedoases of the Gabes Governorate, expand three existingoases and create a new one. To this end, the Projectwould includeof (a) replacementof deep wells and provisionof pumpingequipment, and constructionof piped water distributionsystems; (b) orchard and crop reconversionand intensification;(c) provision of equipmentand staff to the executingagency, the Gabes and Medenine IrrigationDevelopment Office (OMVGM);(d) provisionof technical assistanceto OMVGM and to existingfarmer associations;and (e) provisionof credit to farmersfor onfarm development. The Project would directlybenefit about 7,700 farm families,amoog the poorestin Tunisia. The principalrisk related to slow adoptionby farmersof new croppingpatterns are minimized by provisionof suitableextension services.

Estimated Project Costs: Local Foreign Total - --(US$ million)--

Buildings 0.6 0.4 1.0 Irrigationand on-farmworks 10.9 14.1 25.0 Equipment 2.0 3.1 5.1 Studies,training, technical assistance 0.1 0.1 0.2 Onfarm development(credit) 1.7 1.4 3.1 IncrementalOperating Costs 4.2 2.1 6.3

Total Base Costs 19.5 21.2 40.7 Physicalcontingencies 2.0 2.5 4.5 Price contingencies 7.2 5.9 13.1

Total Project Costs 28 .7'a 29.6 58.3'

/a Includes$14.3 million of taxes and duties. FinwnelumPkan Local F Total ': (USSmillion)-

World Bank _ 27.7 27.7 BNT 1.0 1.9 2.9 Beneficiaries 5.0 - 5.0 Government 8.4 - 8.4

Net ProjectCosts 14.4 29.6 44.0 Taxes and Duties 14.3 - 14.3 Total ProjectCosts 28.7 29.6 58.3

EstimatedDisbursements:

Bank FY 1986 1987 1988 1989 1990 1991 1992 -(US$ million)

Annual 1.0 2.0 3.0 6.7 8.5 4.5 2.0 Cumulative 1.0 3.0 6.0 12.7 21.2 25.7 27.7

EeononmicRate of Return 21X

StaffAppraisal Report: No..5111-TUN, dated May 30, 1985

M>apNo. IBRD 18405 USRD 18490 STAFF APPRAISAL REPORT

TEThNISLA

GABES IRRIGATION PROJECT

Table of Contents

Page No. INrTRODUCTION...... 1 II. YTHEAGRICULTURAL SECTOR ...... 2

A. Place of Agriculture in the Economy ...... 2 B. Previous Bank Involvement in Agricultural Projects ... 3 C. Sector Issues Relevant to the Project ...... 4

III. DTHEPROJECT AREA ... 7

A. Introduction ...... 7 B. Location, Climate, and Soil Resources ...... 7 C. Water Resources ...... 8 D. Population Structure and Trends ...... 9 E. Land Tenure and Cropping Systems ...... 10 F. Agricultural Support Services ...... 11 G. Infrastructure ...... 13

IV. 1THE PROJECT' ...... 14

A. Concept and Objectives .... 14 B. Components ..... 15 C. Detailed Features ...... 16 D. Status of Engineering .... 18 E. Costs ...... 18 F. Financing ..... 20 G. Procurement ..... 21 H. Disbursement ...... 22

V. PROJECT B&PILEMENTEATION ...... 24

A. Organization and Management .. 24 B. Project Implementation Strategy . .25 C. Execution of Project Works .. 26 D. Agricultural Support Services .. 27 E. Monitoring and Evaluation .. 28 F. Accounts and Audit.. 29

This report is based on the findings of an appraisal mission which visited Tunisia in November 1984 composed of Messrs. C. Gois (Mission Leader), P. van der Veen (Agriculturalist) and Ms. T. Riley (Economist). The appraisal team was assisted by Mr. B. Dussert (Financial Analyst). Table of Contents (Cont'd) No.

VI. BENEFrIS AND JUSTIFICATIONS ...... 29

A. Production ...... 29 B. Marketing ...... *a...... 31 C. Beneficiariesand Distributionof Benefits ...... 31 D. Cost Recovery ...... 32 E. FinancialImpact on Government ...... 36 F. EconomicAnalysis ...... 37 G. Risk and SensitivityAnalysis ...... 40

VII. AGREEMENTSREACHED AND RECOMMENDATIONS ...... 42

SUPPORTING TABLES

Table 1. ProjectComponents by Year .. 44 Table 2. ProjectCosts Summary...... 45 Table 3. EstimatedSchedule of Disbursementsof Bank Loan 47 Table 4. Major ProcurementPackages . . .48 Table 5. Vehicles .. 49 Table 6. List of Oases - Characceristics,Works, Costs,Cropping Pattern . .50 Table 7. OMVGM's IncomeStatement (1981-1985) 51 Table 8. SelectedDocuments and Data Available in the Praject File ...... 52 Table 9. Rent Recovery (Dinar1985 constantprices) 53 Table 10. Farm Budgets: (a) Model A - Date Intensification.54 (b) Model B -- Fruit and Vegetable Intensification 55 (c) Model C - Olives Intensification .56 (d) Model D - Olives and Crops Intensification. 57 (e) Model E - New Irrigation.58 (f) Model F - Fruit Developmentin VegetableFarms 59 Table 11. ConversionFactors for Project Costs . .60 Table 12. Economic Price of Fertilizer 61 Table 13. Prices Used in Economicand FinancialAnalysis 62 Table 14. Project Related Cash Flow ...... 63 "able 15. EconomicCost and BenefitStreams . .64

CHARTS

1. ImplementationSchedule .65 2. OMVGM - Organization Chart .66 3. IrrigationDevelopment .67

MAPS

IBRD 18405 - Gabes Irrigation Project IBRD 18490 - Gabes IrrigationProject: ProjectArea

691E/p51 STAFF APPRAISAL REPORT TUNIA GABESIRRIGATION PROJECT

L INTRODUCTION 1.01 During the 1970s,Tunisia experienced an impressiveeconomic growth. Gross DomesticProduction (GDP), in constantprices, increasedby about 7X p.a. and GDP per capitamore than doubled to US$1,420in 1981. Boostedby high revenuesfrom petroleumexports and a substantialimprovement in its terms of trade, the countrymanaged to sustaina massive increasein investmentsand a rapid growth in public and private consumptionwithout endangeringits balanceof paymentssituation. In 1982 and 1983, the economic situationsuffered set-backs. Adverse weather conditionsdepressed agriculturaland agroindustrialoutput and recessionin Europe affected Tunisianexports. The fall in petroleumrevenues affected the balance of paymentsand domesticsavings.

1.02 The medium term outlookfor investmentand growth, to a large extent, dependsupon future developmentin the oil and naturalgas sector. Current explorationprograms are not encouraging,and it is expected that domestic productionwill stabilizeat present levels. Therefore,net export earnings from hydrocarbonsare likely to decline over the comingyears, the country becominga net importerby the early 1990s. As a consequence,the main factor of growthwhich allowed Tunisiaover the last 10 years to simultaneously expandpublic expendituresand privateconsumption, will disappear progressively.

1.03 Given this macro-economicenvironment, the Governmentis giving more importanceto maximizingbenefits from existingassets.' The proposed Projectwould support these effortsby providingfor the rehabilitationof some 5,000 ha of irrigatedoases in the underdevelopedGabes region in the southeastof Tunisia where a sharp deteriorationof agriculturalproduction is underwaycaused by soil salinizationmainly due to water shortage. The Projectwould aim at slowingdown the populationexodus from the area by making possiblethe re-occupationof abandonedor partlyabandoned farm lands. The Project is the secondphase of executionof the TunisianMaster Plan for the developmentand use of water in the south. The first phase was also financedby the Bank (Loan 1796-TUN,see para. 2.06). It was identified by a Bank mission in October 1983 and preparedby CNEA, a Government consultingbody. It was appraisedin November 1984 by a mission composed of Messrs.C. Gois, P. van der Veen, and Ms. T. Riley.

1/ InvestmentStrategy. CountryEconomic Memorandum on a Mid-TermReview of the Sixth DevelopmentPlan (1982-1986),Report No. 5328-TUN. EL THE AGRICULTURAL SECTOR

A. Place of Ariculture in the Economy 2.01 Background. Tunisiahas a total land area of 16.4 million ha of which 8.4 millionha are suitablefor agricultureand grazing. The country can be dividedinto three main ecologicalzones. The northern 25% of Tunisia'sland area is the most fertile,receiving adequate rainfall (400-1,000mm). The centralzone (15% of total land area) receivesbetween 200 and 400 mm of rainfall. The southernpart (60Z of total land area) is a predesertzone receivingless than 200 mm of rainfallwith very extensive grazingand some irrigatedagriculture. Of the 5.0 millionha of cultivable land, 34% is planted in cereals,35% in fruit trees and the remainderin foragecrops, vegetables,grain legumesand industrialcrops; 201 is normally left fallow. Given the high variabilityin rainfall,important efforts have been made to developirrigated agriculture. However,water resourcesare scarceand the total irrigationpotential is estimatedat about 250,000 ha or some 5% of total arable land. About 205,000ha are presentlyequipped for irrigationof which about 160,000ha are irrigatedeffectively. This relativelysmall area currentlyaccounts for some 252 of the AgriculturalGDP.

2.02 Past Performance. Tunisia'sagricultural sector performedwell during the 1970s. The value of productiongrew at 4.4%p.a. in real terms between 1970 ane 1979, comparedto 31 p.a. for middle income countriesas a group. However,the pace of growth slowed down considerablynear the end of the period and early 1980s (0.5% p.a. for 1977-82),mostly because of drought which has repeatedlyaffected the country. While the more rapid growth in other sectors,particularly petroleum and tourism,induced a decline in the relativerole of agriculture,it still represents13% of Tunisia'sGDP and employsabout one-thirdof the labor force. The continuedgrowth of agriculturalproduction and rural migrationhas resultedin an increase in averageper capita income in agriculture(from US$173 in 1960/62 to US$380 in 1979, measuredin 1979 US dollars)and a reductionin the percentageof the rural populationliving below the absolutepoverty level (from 171 in 1975 to 13% in 1980).

2.03 NationalDevelopment Plans and GovernmentStrategy. Under the Fifth DevelopmentPlan (1977-81),the Government'smain objectivesfor the sector includeda balancedagricultural trade and increasedrural employmentand incomes. Partly due to the drought,Plan targetswere in most cases not fully met. Agriculturalvalue added increasedat an annual rate of 1.0 between 1976 and 1981, well below the plan targetof 2.5%. Potentialexports were divertedto local consumption,and importsin particularof cereals, increased. As a result,the ratio of food imports to exports increasedfrom 1.2 in 1976 to 1.8 in 1981. The basic objectivesfor agricultureunder the Sixth DevelopmentPlan (1982-86)have not changed. The need to resolve key issuessuch as employment,regional income disparitiesas well as increased efficiencyof investmentshas become even greater due to the necessityof adjustingthe economy to a post-hydrocarbonsituation. The Governmentis attemptingto achieve this adjustmentthrough inter alia: (a) a shift toward smaller,less capital intensiveinvestments, including rehabilitation of existinginfrastructure, thereby generating employment opportunities; and (b) the creationof an economicenvironment more favorableto agriculture, includingthe introductionof a more realisticprice structurefor -3- agriculturalproducts. Investmentsin agricultureare planned to increase from 132 of total investmentsduring the last Plan to 19L. Some 40S of investmentswould be for irrigation.

B. PreviousBank Involvementin Aieultiwa1 Proecs

2.04 Bank Group lendingfor agriculturein Tunisia startedin 1967, and to date 15 projectshave been approvedfor a total of US$358.2million of Bank/IDA funds. Of these,eight are ongoing includingthree irrigation projectaand the recentlyapproved Northwest Agricultural Production Project. Performanceunder these projectshas been mixed reflectingthe institutional constraintsin the sector. The First FisheriesProlect (Credit270-TUN) was completedat the end of 1979 with considerabledelays and low loan recoveries for boats. These problemswere addressedunder the Second FisheriesProiect (Loan 1746-TUN)and this project is now progressingwell. The First and Second AgriculturalCredit Proiects (Loan/Credit779/263-TUN and Loan 1340-TUN) financedBNT lendingfor onfarm development. While the projectsachieved good rates of return, the continuingproblem of higher interestrates on Bank funds than on Government-suppliedcredit and the lack of decentralizationof RNT caused disbursementsto be slower than anticipated. The Third Agricultural Credit Project (Loan 1885-TUN)is addressingpriority credit problems. Action has been taken to decentralizeBNT's operationsand raise interestrates (para.2.09), and the Governmentis preparinga plan of action to improve loan recoveryratios. The physicalimplementation of the poverty-orientedNorthwest Rural DevelopmentProject (Loan 1997-TUN)is proceedingsatisfactorily. The Grain Storage Project (Loan 2052-TUN)is also progressingwell after initial delaysand the recruitmentof new consultingengineers. Under the Technical AssistanceProiect (Loan 2197-TUN),strategies have been or are being developed for several subsectors including farm input distribution, farm mechanization, produce marketing, research and extension and improved operation and maintenance of existing irrigationinfrastructure. These strategieswill contributeto increasingthe efficiencyof investments under the Sixth and Seventh (1987-91)Development Plans.

2.05 Experiencewith Past IrrigationLending. Implementationof the irrigationprojects - First IrrigationRehabilitation Project (Loan 1068-TUN). Sidi Salem Project (Loan 1431-TUN),Southern rrrigationProiect (Loan 1796-TUN),Medierda/Nebhana Irrigation Proiect (Loan 2157-TUN)and Central TunisiaIrrigation Project (Loan 2234-TUN)- has generallybeen satisfactory and on schedule. The IrrigationDevelopment Offices (OMVs), the public enterpriseswhich manage the projects,have demonstratedtheir ability to carry out constructionworks efficiently,but their managementstill needs improvementand their performanceon operationand maintenanceof irrigation infrastructurehas been mixed. OED's audit of the first Irrigation RehabilitationProject (Loan 1068-1UN),dated November5, 1984, determined that the economicrate of return of the projectwas highly satisfactory(32X). A major findingwas that the increasedreliability of water supply brought about by rehabilitationworks carriedout under the projecthad a major impact on farm productionand incomesin the project area, by increasingfarmers' willingnessto take higherrisks by plantinghigher value crops. The recently negotiatedIrrigation %anagement Improvement Project (President'sReport No. P-4082-TUNof May 13, 1985) is designedto supportnationwide improvements of the operationand maintenanceof existingirrigation systems as well as policyand institutionalreforms to increasethe efficiencyand self-financing of the OMVs. The Projectwould inter alia (a) reducethe need for major costly -4- investmentsfor the rehabilitationof irrigationsystems; (b) ensure the sustainabilityof agriculturaldevelopment in public irrigationschemes; (c) aim at eliminatingOMVs' operatingdeficits.

2.06 The Southern IrrigationProject coveringthe implementationof the first phase of the SouthernTunisian Water Master Plan is expected to be completedon schedule,in December1985. The projectprovides for the rehabilitationand new constructionof desert oases in the south of the countryas well as some oases in the Gabes area similarto those proposed under the presentProject. Initialresults are already encouragingand indicatethat benefitswill be in line with expectations. On the cost side, however,some cost overrunshave been experiencedfor the desert oases due mainly to the unexpectedneed to strengthensand barriersand wind breaks. However,costs in the Gabes area have been in line with estimatesand useful experiencehas been obtainedfor the design of the proposedProject.

C. SectorIssus Relevant to the Projet

Land Tenureand AgrarianReform

2.07 In Tunisia,the size of holdings is a constraintto the intensificationof irrigation. Studies carriedout by the Ministry of Agriculturehave indicateda strong inversecorrelation between the size of holdingsand irrigationintensities. To rationalizethe use of available water resourcesand ensure fuller exploitationof its investmentsin irrigationinfrastructure, the Governmenthas enactedAgrarian Reform LawsL1 providingfor (a) land ownershiplimitation; (b) land consolidation; (c) inducementto irrigate;and (d) farmers'contribution to investmentcost. While some progress has been made, particularlyin the area of consolidation in some PPIs, farmer resistance and inadequate penalties have limited implementation of the Agrarian Reform Laws. A study on land issues is being carriedout under the Technical Assistance Project (Loan 2197-TUN), and an internal Government Commission has been establishedto review this matter. The lack of a proper NationalCadaster has affectedthe Government'sability to addressland issues,and the Governmenttherefore envisages a National Cadaster and CartographyProject. Projectstrategy to deal with the land issue is discussed in paragraph 3.10.

Extension and Applied Research

2.08 Since 1973/74, OMVs have made considerable efforts to set up effective extensionservices, supported by Applied ResearchStations, to cater to the specificneeds of the farmersin their sphere of influence. Although their impacton productionis difficultto assess,OMVs' extensionand research servicesseem to have performedreasonably well. They have been instrumental in selectingand introducingnew high yieldingvarieties, in particulartor vegetables,and promotingfodder crops with pure-bredmilk cows. However, the presentsystem still has drawbacks: (a) applied researchby OMV8lacks linkagesand coordinationwith other existingresearch services and programs, and concentratesmostly on providingadvice on specificcrops, without taking into considerationthe whole farm system or farmers'different needs,

1/ The Law 58-53 of June 11, 1958 as amendedby Law 60-6 of July 26, 1960 concerningthe Lower NedjerdaValley (LMV) and the Law 63-8 of May 27, 1963 as amendedby Law 71-9 of February16, 1971 for PPIs outsideLMV. motivationsand capabilities; (b) littleattention has so far been given to improvedwater managementat farm levzl; and (c) OMVs' extensionagents are burdenedby additionaltasks (input supply,credit, marketing, collection of statistics,etc.) that have divertedthem from their principalrole. The Goverwmentis preparinga National Extensionand ResearchMaster Plan under the Bank-financedTechnical Assistance Project (para. 2.04),which wiLl propose the measuresnecessary to improveTunisia's extension and research systems,including irrigated agriculture and is planned to be implementedin 1986 and beyond. In the meantime,measures are underway to facilitatethe introductionof an improvedsystem nationally. Under the Bank-financed NorthwestAgricultural Production Project, the Training and Visit (T&V) system is being introducedin a large rainfedarea on a pilot basis. The proposedProject would introducethe T&V system on 5,000 ha of irrigated areas (para.4.09). In addition,under the IrrigationManagement Improvement Project,measures would be taken to divest OMVs of some of their commercially- orientedactivities, which will facilitatethe future reformof the extension systemby allowingOMVs' extensionagents to devote more time to their primary function. Under the proposedProject, the Gabes and Medenine Irrigation DevelopmentOffice (OMVGM)would particularlytransfer to the private sector activitiesrelated to productionof seedlings(para. 5.13) and marketing services(para. 5.14). OMVGM would also concludewith the regionalresearch agenciesagreements to carry out selectedresearch programs essential for the Project(para. 4.15), thereby,contributing to better coordinatedand more meaningfulresearch efforts.

AgriculturalCredit

2.09 The institutionalstructure of formal agriculturalcreult in Tunisia is complex. The principalvehicle for medium- and long-terminvestment credit is the NationalBank of Tunisia (BNT). The main sourcesof short-termcredit are BNT (in the case of larger farmers,generally clients of long standing) and the Mutual GuaranteeSocieties (SCMs). SCMs grant seasonalcredit, using BNT funds but with Governmentguarantee, to small- and medium-sizefarmers. Supervisedcredit is also offeredby a number of agriculturaldevelopment projects financed by external donors. Some Government-owned enterprises operating outside the financial sector (e.g., Offices) provide credit in kind. A new agricultural bank (BNDA) was recently created to finance investmentsby large farmersor agriculturalenterprises. While access to credit is not a problem in the Projectarea, use of credit is constrainedby the farmers'lack of appreciationof investmentopportunities because of, inter alia, the ineffectiveextension system. The improvementof extension servicesprovided by OMVGM in the frameworkof the Projectwould motivate farmers to betterunderstand and participatein credit activities. The ongoingThird AgriculturalCredit Project (Loan 1885-TUN)is addressing prioritycredit problems,especially interest rates and loan recovery levels. As part of the 1985 general interestrate reforms. the interestrates of commercialbanks for short-termcredit to agriculturewere raised from 5.5-8.75to 6.75-9.5S.for medium-termcredit from 6.25 to 7S, and for long-termcredit from 7.5 to 9Z (the latter rates after deductionof a 3-point Governmentsubsidy). Interestrates of developmentbanks increasedby 0.5 percentagepoint more. In addition to these base rates,borrowers must pay a tax to the Government which adds about another point to the cost of borrowing. With an inflation rate of about 8.4S in 1984, many of these rates have now become positive in real terms. Some, however, remain somewhat negative, and the Government has indicatedits intentionto follow more flexible interest 6 rate policies in the future,with more frequentinterest rate adjustments based on, inter alia, inflation. The Governmentis also preparinga plan of measures to improveloan recovery levels.

Pricesand Subsidies

2.10 In an effort to provide food at low cost, most consumerprices are fixed by Government. Traditionally, farmgate prices in Tunisia have also been fixed artificiallylow compared to world prices, discouragingthe use of more productivebut higher cost techniquesand investment. Farm input subsidies, which the Governmenthas seen as a means of compensatingfarmers for low producerprices, benefit only a minorityof farmers-andtend to be provided for the most modern inputs (purebredcows, feed concentrate,irrigation water, fertilizer,pesticide, etc.). While this encouragesuse of these inputs, it also causes excessive use by farmers fortunate enough to obtain the subsidies. The Government recognizes the negative resource allocation and income distribution effects of its present pricing and subsidy policies and one of its objectivesis to move towards a pricing system that more closelyreflects the real costs and benefits of inputs and outputs to the economy. Some agriculturalproducer prices (milk and cereals)have thus been increasedmore rapidlythan average price inflationin the recent past, thus improving agricultural incentives. As a result, current producer prices are now for the most part reasonably in line with world prices (94%, 89X and 92X for durum wheat and l00X, 103Z and 107Z for bread wheat in 1981/82, 1982/83and 1983/84 respectively). Consumerprices for milk, beef and cereal productshave also been increasedrecently. The Project'smain outputs,fruits and vegetables, are not subject to price regulationsand thereforewould not require any specialprice policy recommendations.In the sector, the input which so far has receivedconsiderable subsidies is irrigationwater (para.2.11).

IrrigationCost Recovery

2.11 Governmentpolicy for recoveringinvestments in PPIs is embodied in the land reform legislation(para. 6.07),which calls for bettermentlevies aimed at recoveringpart of the increasein land value due to irrigation. Actual recoveryof farmers'contribution to investmentcosts has, to date, been very limited. As regards irrigationO&M costs, Governmentpolicy is to achievelO0Z cost recovery. Water chargeshave been substantiallyincreased since 1980, with average annual increasesin various OMVs ranging from 15-36% in current terms, or from 3-24X in constant terms. Despite this major effort, water charges currentlycover on averageonly about 40% of O&M costs. In the Gabes area, however,farmers do pay the full O&M costs for their irrigation systemsthrough their water user associations(para. 3.14). Bank-financed irrigationprojects have followeda consistentapproach to cost recoverybased on (a) the recoveryof investmentcosts accordingto land reform legislation, (b) the recovery of 100% of O&M costs within a reasonable time frame, and (c) recoverylevels consistentwith farmers'ability to pay. The Irrigation anagement Improvement Project will introduce comprehensive measures, consistentwith those already taken under ongoing projects,to achieve full repaymentof irrigationO&M costs nationallywithin 5 to 10 years, thus increasing the financial autonomy of the OMVsand encouraging a more rational use of availablewater. The proposedproject, in addition to maintainingthe current arrangements for full O&M cost recovery by farmers, would aim at achieving sustainability of the investments by creating from farmers' payments 7-

a reserve fund for replacementsand by recoveringpart of the investmentcost of new perimeterswithin the frameworkof the Land Reform Law (paras.6.10-6.14).

2.12 Input Supply and Output Marketing. Public marketingand input supply enterprisesexist for cereals,grain legumes,olives, wine, meat, fertilizer, seed and farm machinery. Several Governmentdevelopment authorities (Offices) participatein the collectionof milk, fruit and vegetables. All these institutionsrequire improvements in their efficiency. They are slow to respond to market signalsand to introducecost-cutting efficiencies. Farm inputsare frequentlynot availablein the quantitiesand at the time required. However,in the contextof the IrrigationManagement Improvement Project, the Governmenthas indicatedits intentionto start divestingthe Offices of many commercialactivities, and as noted in paragraph3.18, the private sector is alreadyactive in the Gabes area in supplyingbasic fertilizersand small-scale mechanizedequipment. An input supply study financedunder the Technical AssistanceProject has already led to urgentlyneeded increasesin fertilizer distributionmargins, and an agriculturalmarketing study, also funded from the TechnicalAssistance Project, is expected to lead to a series of output marketing measures for implementation during the SeventhPlan period.

IIL THE PROJECT AREA

A. Introduction

3.01 Until the seventies the economyof the Gabes Governoratewas essentiallybased on agriculture(oases) and fisheries. Since then, industrial developmenthas been graduallytaking place particularlyrelated to maritime commerceand tourism. The traditionaldate palm plantationsstarted at the beginningof the centuryhave been replacedby other fruit trees and vegetables to meet changingdemand patternswhich are largely influenced by the growing touristflow. Agricultureis still the most importantsector of the Governorate'seconomy. Given the dry conditionsof the area, irrigationis a necessity. In the past, water was obtainedeither from natural springsor from artesianwells. However,with increasedwater development,the springs have dried out and the artesianpressure has been decreasingdrasticallv causingshortages of water for irrigation.

B. Location. C;:mate. and Soil Resources

3.02 The 5,000 ha of oases to be rehabilitatedunder the proposedProject are situatedon the coastalstrip of the Gabes Governo-atecalled the Djeffara Region. This area is characterizedby a Saharanclimate, tempered by the maritimeinfluence which increasesaverage humidityand precipitation,and cuts extreme temperatures.The Projectzone of influenceis about 5,100 Km2 which representssome 3S of the country'stotal land area. The population averagesabout 210,000or 3% of the Tunisiantotal.

3.03 The land in the Djeffara slopes gently from the El Hbammaand Matmatas Mountainsin the interioracross the coastal plain to the sea. The soils are eitheralluvial with yellow and red sandy clay, or hydromorphicwith a crust of a variabledepth. The deeper the crust, the better for agricultueal development. Soils generallyshow good infiltrationrates and drainability -8- characteristics. However, in most cases natural drainage or existing drainage networksneed to be improved to avoid salinity problems. Soil capability analysis indicatesno major problems for growing fruit, forage, and vegetables on over 802 of the soils provided sufficient water is available for leaching while on some 20Z of the soils forage and vegetablesare the best crops (Annex 10).

3.04 The average annual rainfall is about 180 mm in the plains and 230 -m in the inland mountains. However, its distributionis irregularand is concentratedin the fall (40Z). Average monthly temperaturein the summer is 271C and in winter 11*C. In June, the temperatureis close to 400C. Strong winds and sand storms (from north, northwest, and southwest)which average 30 per year predominantbetween December and April. Frost may occur between 10-11 days per year. and as late as in April which makes it difficult to grow out-of-seasoncrops without cover. Potential evaporationaverages 1,470 mm of which 40% occurs during the three summer months. Hydrometricmeasures show relativelyhigh figures with an annual average of 67.5S, ranging from 632 in February/Marchto 71S in May.

C. Water Resources&'

3.05 Groundwater resources of Southern Tunisia are in two major aquifers: the Complex Terminal (CT), called Djeffara in the coastal area of Gabes, and the deeper Continental Intercalaire(CI). The Djeffara aquifer is fed from the CI through the geologic fault of El Hamma. The general groundwaterflow is towards the sea where it outcrops a few kilometers from the coast. Traditionallysurface water in the Djeffara has been available for use from naturally occurring springs with substantial flow rates at the outcrops. With the introduction of deep well drilling techniques, numerous wells were sunk close to these existing springs in order to increase the volume of water available for traditional date palm, fruit and vegetable cultivations; subsequentlywells were also sunk outside the traditional perimeters for the developmentof modern date palm plantations. A consequence of this increased exploitation of the water resources has been a decrease in the flow or drying out of natural springs and a decrease or disappearance of the artesian flow of the deep wells indicating a need for a more carefully planned approach to water development.

3.06 The water resources developmentpotential of the Project area has been assessed in various studies financed by UNDP, startingwith a study of the Algerian and Tunisian Northern Sahara region by UNESCOin 1968-1972which includedmathematical simulation models of the aquifer and an electrical analogicmodel of the coastal Djeffara aquifer. In 1976, a Master Plan for Water and Soil ResourcesDevelopment in Southern Tunisia was subsequently preparedand updated simulation models defined the limits of exploitation of the aquifers within acceptable salinity levels. Water resource estimates of the 1976 Master Plan have since been systematicallyupdated and refined as more detaileddata became available. This has confirmed that the finding of the basic studies are robust. A conservativeestimate of the potential available resourcesthat can be developed in the Project area is 4,450 1/s while present use of groundwaterin the area is estimated to be some 2,670 1/s. Current agricultureuses are 2,050 l/s and the balance used (620 1/s) is for domestic and industrialpurposes (SONEDE). Future planned uses by agricultureand for domesticand industries suppliesare within allowable limits. The following table gives details of the present and future water balance:

1/ Detailed analysis of water resourcesis made in Annex 6. -9-

WATER BALACE ZN TNE POJECT AREA

Potential Planned available Resources Present Water Use Reauirents (year 2010) Area (Aquifer) CT CI Total AGR SON Total AGR Son Total

El Hama/Chenchou/ Chott El Fedjej 900 1.000 1.900 470 200 670 750 950 1.700

Gabes North 1.600 - 1.600 950 340 1.290 1.100l 00 1.600

Gabes South 950 - 2M .1 630 Z710 900 - 90

Total 3.450 1.000 4.450 2.050 620 2.670 2.750 1.450 4.200

floe: CT: Conplex Terminal: CI: Continental Intercalaire; AGR: Agriculture; SON: Urban/Industry.

3.07 Ground water abstractions and its quality are being closely monitored by DRE which publishes yearbooks with the data collected from every deep well under exploitation. Water table levels of shallow aquifers are also monitored. Water from the deep CI aquifers have a salinity ranging between 2.7 and 3.1 g/l and a high temperature (60-70'C). Water from the Djeffara is much cooler (23-37'C) but salinity reaches as high as 4.1 g/l in the northwest part of the Project area.-' The Master Plan (para. 3.06) ensures that water resource use in the area can be carefully planned to avoid depletion and increased salinization of the water table. In 1975, the Government promulgated a new set of laws (Code des Eaux, Loi No. 75-16) regulating water resource exploitation, water use and water conservation. These laws are satisfactory and are being strictly enforced. In order to guarantee the availability of water for the Project and to assure a balanced water use for agriculture and urban/industrial purposes, assurances were obtained at negotiations that adequate monitoring of the use of water resources would be provided and that currently planned limits on water use in the region would not be exceeded. Government would keep the Bank informed of the situation annually.

D. PopuLation Structure and Trends

3.08 The total population of the five administrative zones of the Gabes Governorate is about 210,000 people or an average density of 42 inhabitants per kmz. About 91,000 people or 43Z of the total lives in the zone of Gabes 2 which has a density of 292 inhabitants per km . The standard of living in the region is lower than in other parts of the country. Nearly all farmers have outside farm income either from jobs within the region, from temporary out-migration, or from the migration of sons to Tunis or Europe. It is estimated that the majority of farmers in irrigated perimeters receive 3a-50% of their total average income from outside sources.

3.09 The population pyramid is characterized by a large stratum of young people which puts an additional pressure on the present unemployment situation. The development of industry, tourism, and services around the town of Gabes has drained part of the labor force of the surrounding oases, but this has been offset by influx of labor from other nearby oases and from inland.

1/ Salt tolerance of palm trees and alfalfa is over 7 g/l and vegetables generally cultivated in the oases can tolerate up to 4 g/l without a substantial decrease in production. - 10 -

E. Land Tenure and Cropping Systems

3.10 Land Tenure. The Project area consistsof about 4,800 ha of agriculturalland in 42 existingoases and 200 ha additionalland to be broughtunder cultivation. Of the existingarea under irrigationcommand, 365 ha is state domain, of which 100 ha is used for the professional training center (CFPA Zerkine) and 265 ha is leased to a dairy company (STIL). The remaining4,435 ha are owned by about 7,500 farmers. Generally,the small size of holdingsin the Project area is conduciveto intensivedevelopment of irrigationand, in addition,cropping systems (vegetablesand fruits)are such that land tenure is not a major constraintto agriculturaldevelopment. Size distributionof holdingsshows a predominanceof smallholders:

Size of holding (ha) 0-0.25 0.25-0.5 0.5-1.0 1 and over

Z of farmers 35 27 27 10 v of area 8 17 38 37

An additionalcharacteristic, in severaloases, is the large degree of farm fragmentation,found especiallyin oases close to Gabes where each hectare is typicallyfragmented into 3-4 parcels owned by differentowners. In some cases absentee ownership is a problem or extreme fragmentation is a cause of inefficientfarming. For example,the 2,291 parcelsof the Oudhref oasis covering263 ha belong to 1,200 owners,74Z of whom own between2 and 15 parcels. Optionsavailable to improveland ownershipthrough land consolidationare describedin Annex 10. Althoughavailable legal provisions would permit the enforcedexecution of a land reform programon the new developedareas, their applicationin the Projectarea would be resistedby the local farmers. Therefore,and because of the relativelysmall area where land reformwould be legallyapplicable (200 ha) the Project strategyfor land improvementfocuses on the extensionservices to motivatefarmers in promoting the necessaryarrangements for groupingfarms into more manageablesizes (para.5.11). Recent experiencesmade in this sense have proved to be satisfactory.

3.11 Irrigationand Land Use. In the Gabes Governoratearea there are approximately8,500 ha of irrigatedland (oases)of which 7,700 ha get water from deep wells and 800 ha from shallowwells. Shallowwells are all privately operated. Out of the 7,700 ha about 6,150 ha are operatedby the water user associations(AIC), which are groupedat the Governoratelevel in the GIH (Groupof hydraulicinterest); 800 ha are "statedomain" and the remaining750 ha correspondto 3 public irrigatedperimeters (PPI) operatedby the OMVGH. The total number of oases in the Governorateis 52, and there are 47 AICs.

3.12 The oases of the Project area can be subdividedin four different types: (a) the oases of El Hamma regionwhich are mainly occupiedby common varietiesof date palm trees,olive trees and forage;(b) the oases of Gabes wherevegetable production predominate; (c) oases of Gabes South where fruit trees (pomegranate)predominates; and (d) the oases of GhannoucheM'Ziraa - 11 - where there is only production of vegetables. There is direct connection between the availability of water and the willingness of farmers to use inputs. Because of shortage of water, use of agricultural inputs is relatively low. The use of farm machinery is very limited and was introduced only in the seventies. Most farmers still use animal traction or hand labor. Due to shortage of water and insufficient use of fertilizers and other inputs, yields are low (para. 6.01).

F. AgricultralSupport Services

Main Institutions

3.13 For the construction and assistance in the management of publicly financed irrigation facilities in the region, the Gabes and Medenine Irrigation Development Agency (OMVGM) was created by the Law 80-32 of May 26, 1980. In the irrigated perimeters developed by Government in the region the OMVGM is responsible for (a) the provision of extension and other services required to motivate farmers to participate in and reach the objectives of high agricultural production and efficiency; (b) assistance to farmers in obtaining agriculture credit and in creating storage and marketing facilities; and (c) assuring the O&M of irrigation networks. OMVGM is also responsible for providing support to farmers in privately built irrigation schemes. The OMVGM has its headquarters in Gabes and has jurisdiction over four governorates (Kebili, Gabes, Medenine, and Tataouine). Its area of intervention covers 18,500 ha of irrigation of which 14,100 ha are supplied by deep wells and the balance by surface wells. At the present time it comprises three regional directorates (Nefzaoua, Gabes and Medenine); two others (Tataouine and Mareth) are foreseen in the future. Separate from OMVGM,The Regional Agricultural Development Committee (CRDA) in the town of Gabes represents the several services of the Ministry of Agriculture at the provincial level. It is responsible for studies, statistics, credit evaluation and the coordination of agricultural development activities.

3.14 The Associations of Coumon Interest (AIC) are one of the four types of water users association (WUA) existing in Tunisia and it is the only one present in the Gabes region. The AICs are responsible for the operation and maintenance of the irrigation systems in the project area. The AICs are ruled by Decree of April 7, 1936. Their management is assured by a Director and a Coamittee composed of four elected members. The revenues of the AICs are from membership fees, sales of water, subsidies, and loans. Their expenditures are related to executing new works and maintaining and renovating the existing ones, and to operating the water distribution system. The updating of water allocation by users is ar; important role of the AICs. In principle, the Government provides any necessary technical assistance to the AICs and may execute new works or large repairs when necessary.

3.15 The Group of Hydraulic Interest (GIl) are apex institutions for the AIC's which (a) carry out studies for the execution of hydraulic works of common interest; (b) associate the AICs involved in these works; and (c) coordinate the management of those &ICs. The GIH have a Board of Directors with representatives of the interested parties and Government departments. The Code des Eaux - CE (Water Law), dated March 31, 1975, specifies that GIHs are created in each Governorate as consultative bodies (a) to prepare programs for the best use of the water resources; (b) to review water management projects; and (c) to coordinate the WUAs of the Governorate. _ 12 -

Extensionand Research

3.16 Extension. Until 1980 extensionservices were providedby the CRDA throughits Directorateof Crop Production. After the creationof the OMVGM, extensionservices were centralizedin the ExtensionDirectorate of OMVGM which comprisesthree sections- credit,nursery and extensionwhich has separatedivisions for livestock,tree crops and vegetables. At the regional level OMVGM providesextension services through 31 CTVs of which 12 are in the Projectarea. However,the lack of staff (1 extension officerfor about 450 farmers),facilities and equipmentmakes it difficultfor OMVGM to provide adequateextension services. The Projectwould address this issue by financing the constructionof buildings,the supply of equipmentand vehicles, the provisionof demonstrationplots, and incrementalstaff salaries (para.4.09). Extensionwork on forage crops is carriedout in cooperationwith staff'of OEP, who also carry out extensionwork on animal production. OEP has 4 technicians stationedin Gabes, and additionalstaff at Chenchou in charge of an alfalfa pellet plant. Agriculturaltraining is providedat the Professional AgriculturalTraining Center (CFPA)at Zerkine which offers a two-yearcourse for farmers'sons, oriented toward irrigationand animal production. Specializedcourses are also provided in special subjectssuch as tractor operations,greenhouse cultivation, grafting and pruning. The staff consists of 10 instructorsand one coordinatorfor 59 students in the two-yearprogram and 28 studentsin the greenhouseand tractor courses.

3.17 Research. The Arid Zone Institute(IRA) at Medenineis in charge of agriculturalresearch in the Project area. It has a limitedresearch program at its substationsat Gabes and Chenchou. At the latter,research is carried out on milkinggoats, table olives, pistachiosand other fruit trees. Under a recentbilateral agreement with the Governmentof Italy, IRA will establisha substationat Kebili which would cover some of the researchrequirements of the Project (para.4.15). In addition,the Water ResourcesDepartment of the Ministryof Agriculture(DRE) has a regionallaboratory in Gabes for soil and water analysis. This laboratorywould expand its program to include systematic salinitytesting for the Project (para.4.16). Furthermore,OMVGM has conductedsome appliedresearch on greenhousevegetables.

Input Supply and Distribution

3.18 In contrast to mobt other parts of the country,basic fertilizersare sold by private retailersin the Projectarea. The proximityof the fertilizer productionplants and the consequentialsavings in transportc'sts, makes it a more viable operationthan anywhereelse in the country. Similarly,small- scale mechanizedequipment for orchardand vegetable productionis available on the privatemarket, because many developmentactivities in the Gabes, most non-agricultural,have attractedthe private sector. OMVGM, meanwhile,does provide inputs to farmersas credit in kind, especiallyfor tunnel and greenhousevegetables. In 1983, 13Z of the total number of seedlingsused for orchardestablishment in the Gabes Governoratewas distributedby OMVGM (7,000 seedlings). In 1984, the Office distributedseed, plant protectionchemicals, fertilizer,plastic and other material for coveredvegetable production, and agriculturaltools with an estimatedvalue of D 144,000. The share in value of each componentbeing respectively14, 7, 21, 55 and 3Z. Farmersmake a down paymentand are requiredto repay the remainderover two years. - 13 -

Government policy is currently to reduce the role of the Office by relying increasingly on the private sector for input distribution. This policy would be continued during the Project period.

Agricultural Credit

3.19 BNT is the main agency responsible for providing agricultural credit in the Project area from branches in Gabes. In 1983, a total of about D 600,000 in loans was approved in the Gabes Governorate. rr.addition, for greenhouse establishment in 1981-1984 OMVGM provided farmers with loans in kind amoanting to D 843,440, of which D 238,400 was onlent from a BNT loan. In 1983, OMVGMdistributed inputs for a value of D 126,000 as credit in kind.

Marketing

3.20 The GIL "Groupement Interprofessionnel des Legumes" (Association of vegetable producers and traders) promotes vegetable exports in various ways. It has established 14 packing and sorting plants, has a marketing agency in Marseille and sends reports on the customer's reactions to Tunisian produce. A 1Z charge on all vegetables passing through the Tunis wholesale market serves to defray its costs. It provides all packing stations participating in its export program with boxes and packing material, provides training, assists with purchase and installation of sorting and packing machines. It has seedling nurseries in Sfax, Monastir, and Bizerte, which can provide support to the Gabes area. SODEPRINE is a private company financed by local investment banks for the marketing of out-of-season fruits and vegetables. It has established a packing plant at Monastir and is offering to farmers production contracts for selected crops, including crops for export. I. has contacted OMVGM as a first step to promote farmers' interest in the Gabes area. The "Groupement Interprofessionnel des Agrumes et des Fruits (GIAF) is an association of fruit and citrus growers and traders, aimed at promoting and supervising exports. It provides technical information, assists in establishing grading and packing plants, supervises quality, and produces fruit tree seedlings in three nurseries. It also assists farmers with pest control. A 2 mill/kg tax was levied on marketed citrus and apricots to enable GIAF to assist farmers with spraying. These agencies would be associated with Project development (paras. 6.02, 6.03).

3.21 A network of 22 marketing cooperatives exist in the Project area with about 6,000 members, 10X of the agricultural population of the region. Only three of these cooperatives are functioning adequately to provide service to farmers. In order to improve the situation, the project for the Promotion of Small and Medium Agricultural Enterprises (PROPEM) is being financed in the Project area by the Tunisian Government and the European Economic Community, with the objective of providing technical assistance for the organization and management of service and marketing cooperatives. Given the activities of this project, the proposed Project would need to only offer limited further marketing assistance to the OMVGMto satisfy the marketing requirements of the Project (para. 5.14).

G. Iufrastructure

3.22 The Project area is relatively well provided with economic and social infrastructure. Paved highways connect Gabes to Sfax, to Medenine and to Kebili and serve most of the oases to be rehabilitated. Those oases which are - 14 - locatedaway from these main axes are interconnectedwith them through roads which are regularlymaintained by the DGPC. However,some minor rehabilitation works are needed on access roads. The nationalrailroad network serves Gabes with a daily train to and from Tunis. Runways in Gabes,Medenine and Yebel Melab can be used by small planes and in the islandof Jerba an international airportprovides regular flights to Europe. Telephone,telex and radio network servicesare availablein the urban centersand in some rural areas. Four hospitals,mobile clinics,and some 60 dispensariesand similarmedical facilitiesform the health network. The Project area is also well provided with educationalfacilities. The NaticnalSchool for Engineers (EMG) for civil engineeringand chemistryand a trainingcenter for specializedlabor are locatedin Gabes. In Mareth there is an agricultureschool. The important urban centershave high schools (6) and there are some 20 primary schools spread over the area. The nationalelectricity grid providedby STEG connects Gabes to Medenineto the south, Sfax to the north and Kebili to the west. Side branchesserve the rural population. Every existingoasis is provided with electricity. The urban water supply is based on the main conduit Fedjej-Gabeswhich brings water pumped from the CI in a series of deep wells in the Ben Chiloufarea, west of El Hamma. Side branchessupply the populationalong the way.

TV. THE PROJECT

A. Concept and Objectives

Rationale for Bank Involvement

4.01 The Project is a follow-upto the successfulpilot operationsin the Gabes regionfinanced under the SouthernIrrigation Project. Bank involvement during preparationof the second-phaseProject has been instrumentalin causing a carefulreview and optimizationof proposed investmentsand significant reductionsin investmentcosts, which is especiallyimportant in the present Tunisiancontext of austerityand rigorousselection of investments. The proposedProject will also support the Bank's dialogue,already underway in the contextof the IrrigationManagement Improvement Project, on key irrigation subsectorissues such as (a) improvingthe efficiencyof the public (Irrigation DevelopmentAuthority for Gabes and Medenine - OMYGM) and private (local farmers'organizations - AICs) organizationsconnected with the provisionof irrigationservices and with the productionand marketingof agricultural goods, and (b) establishmentof proper systems for the O&M of hydraulic structures.

ProjectConcept

4.02 The growing industrialdevelopment of the Gabes area in recent years is in contrastwith the decreasingagricultural production of the formerly prosperousoases. This is due mainly to (a) shortageof water (loweringof artesianhead of wells, deterioratingirrigation networks as the irrigation systemshave been abandonedor partly abandoned;increasing water losses and, aging of existingdeep wells); (b) increasingsalinity (poor drainageand insufficientleaching); and (c) aging of trees and subsequentpartial abandonmentby farmers. Unless correctiveand rehabilitativemeasures are taken within a short period of time to upgrade the situationthere will be a - 15 -

furtherrapid deteriorationand the area will become almost totally unproductivefrom an agriculturalviewpoint sometime in the 1990s with a seriouslynegative social impacton the Gabes Region. In order to relieve this situation,the Projectwould focus on resolvingtwo main issues - water availabilityand improvedcrop production- and would provide the physical infrastructure,the institutionalsupport and the assistanceto farmers requiredfor this.

ProiectObiectives

4.03 The objectivesof the Projectwould be to reverse the sharp decline of agriculturein the southeastof Tunisia,to ensure its sustainability throughthe rehabilitationof the oases of the Gabes Governoratewhere interventionis economicallyand sociallyviable, and putting into place adequatefinancial and institutionalarrangements to ensure maintenanceis achievedin the future. It would cover about 5,000 ha in 43 oases gathered in four groups with similarcharacteristics. In particular,the Project would aim to:

(a) providemore and betterdistributed water;

(b) increaseand diversifyagricultural production;

Cc) strengthenpublic (OMVGM)and private (AIC) organizationsdirectly connectedwith the productionand marketingof agriculturalgoods;

Cd) set up durablearrangements for the O&M of the hydraulicstructures; and

Ce) stop the exodus from the area, get farmersback to their land and improvethe socio-economicstandards of the farmers'community.

B. components

4.04 To achieve its overallobjectives the Projectwould implementover a six-yearperiod the followingactions:

(a) Developmentof Infrastructure: - rehabilitationof 42 oases totallingsome 4,800 ha locatedin the Gabes Governorate, - expansionof irrigationover new areas totalling200 ha (1 new oasis and expansionof 3 existingoases);

(b) InstitutionalDevelopment: - strengtheningof the central and regionaladministration of OMVGM; - strengtheningof the extensionservices of OMVGM, - increasingthe developmentof applied research, - support to marketing, - strengtheningthe financialand technicalcapacity of the AIC's; (c) SupportAction: - promotionof creditand input supplies, - strengtheningof servicesto supervisethe executionof the works and to monitor and evaluate project impact, and - provision of technical assistanceand training. - 16 -

C. Detailed Features 4.05 Rehabilitationof ExistingOases. The Projectwould provide for the rehabilitationof 42 oases covering4,800 ha. Rehabilitationaims at (a) improvingor renewingwater abstractionsystems by diggingnew deep wells or by installingpumps where artesianismis insufficientto allow for gravity flow; (b) diminishingwater losses and improvingwater managementin general by setting up a conduitdistribution system; (c) improvingsoil structureand decreasingsalinity by improvingthe drainagenetwork and by applyingadequate leachingprocedures; (d) changingcropping patterns to obtain higher yields and to orient productiontoward more valuablecrops by uprootingold and low productivetrees and by plantingothers according to practiceswhich can make the best use of the availablewater.

4.06 Rehabilitationworks, which would be implementedover a period of four years,would include: (a) digging of 21 new deep wells and their equipment with pumps; (b) installationof submergedpumps in 32 existingwells; (c) electrificationof all new installedpumping equipment;(d) executionof 3 artesianwells, one being providedwith a water coolingsystem; (e) branching to the SONEDE pipelineChott Fedjej/Gabesfor the supply of El Hamma with 150 lls; (f) executionof a buried piped water distributionsystem provided with regulatingreservoirs, valves, flow control devicesand hydrantson 4,870 ha; (g) improvementof the drainagenetwork and outletsby cleaning and deepeningor increasingthe density of the existing system; (h) rehabilitation of the farm access roads inside the oases; and (i) uprootingand removal of about 240,000palm trees and 30,000 olive trees which are old or unproductive.

4.07 Creationof New Oases. The Projectwould provide for a minor expansionof the irrigatedarea by about 200 ha by using availableextra yield of newly equippedwells and by digging one more well: Oued Nakhla (30 ha), Ben Chilouf (70 ha), Limaoua (70 ha) and Zrig El Ghandri (30 ha). Works also includethe conveyanceand distributionwater pipe system,drainage network and internalaccess roads.

4.08 Reserve Tubewells. The Project includesfinancing for five reserve wells totallingsome 1,500 m which are expectedto be needed to replace aging boreholesover the Project period. The number of tubewellswas determined after examiningall existingwells, their performanceand yield particularly those which are approachingthe end of their expecteduseful life.

4.09 ExtensionServices. The Projectwould strengthenthe extension servicesof OMVGM to achievean average ratio of about one extensionagent per 100 ha. This would require the recruitmentof 22 agents, the constructionof 10 extensioncenters and three regionaloffices, the purchaseof 9 cars and 10 mopeds. During four years, 750 demonstrationplots would be established at farm level. The principlesof "trainingand visit system" (T&V) would be applied by the extension services of the OMVGM (para. 5.11 and Annex 9). The Project would also finance the recruitmentof other technical(two agronomistsand two associateengineers) and administrativestaff (secretaries, accountants)to help restructurethe extensionservices department of OMVGK and provide technicalsupport in specificsubjects. The TechnicalAssistance and ExtensionSupport components of the Project (paras.4.12, 4.15) will also includeinvestments having a positiveimpact on extension. The Project ManagementUnit (para.4.14) to be establishedin OMVGM would measure the impactof the extensionservices in achievingProject objectives. - 17 -

4.10 MarketingSupport. The Projectwould finance equipmentfor an existingGovernment cold storage (300 m3), gradingand packing facility (3,000 t/year)to complete this installationin Gabes and two 10-tonand one 1-ton truck to provide for improvedcollection of produce from farmersand to transportthe products to the storageand market facilities. After an interim period and accordingto the agreed time frame to be providedby the Office by June 1986 facilitieswould be rented to the private sector under contract (para.5.14). The TechnicalAssistance Component (para.4.12) would also contributeto improvementof marketingperformance at the OMVGM and farmer levels.

4.11 Strengtheningof OMVGM. The strengtheningof the regionalinfra- structureof the OMVGM to provideadequate extension services (para.4.10) has to be accompaniedby a supportingeffort at the headquarterslevel in Gabes. This componenttakes into account the restructuringactivities foreseen in the IrrigationManagement Improvement Project for OMVGM. The Projectwould finance the recruitmentof additionaltechnical (three mechanics) and administrative staff (four secretariesand typists),the constructionof houses (4), and the provisionof workshopequipment, and of cars (4). Details of equipmentand vehicles to be providedby the Projectare given in Table 5.

4.12 Trainingand TechnicalAssistance. Trainingwould aim at providing OMVGM staff with the skills required to assist the AICs in dealingwith water managementand maintenanceof pumpingand water distributionstructures. OMVGM would organizestudy tours and attendanceat seminarsand workshopson electromechanics,hydromechanics and water managementfor a total of 11 man-months. The Projectwould also finance the trainingof a financial analyst to assist the DGR in the monitoringof the executionof works (cost, disbursement,administrative aspects). In addition,consultant services totalling25 man-monthswould also be financedby the Project to review and give recommendationson specific fields like marketing,organization and management,extension, and hydromechanics. Terms of referencefor these servicesare includedin Annex 8.

4.13 Onfarm Investment-Credit.The Project would provide for credit to be made availablethrough BNT for the acquisitionand plantingof new trees (450,000),small farm machinery,reservoirs and other small structuresaiming at making the best use of the availablewater and at improvingproduction conditions. OMVGM would functionas a channel for the partial financingof greenhouses(20 ha) and plastic tunnels (80 ha) (see para. 2.09 for current interestrates structure). Farmers would make a 20% equity contributionto the proposedinvestments.

4.14 Management,Monitoring and Evaluation. In addition to the monitoring of procurementand of contractsfor executionof works to be done by the supervisionteam and DGR headquarters,the Projectwould financea management and monitoringunit to be set up in OMVGM. This unit would be providedwith a full-timeagroeconomist and an assistantwhose qualificationsand experience would be approvedby the Bank prior to their appointment. This unit would be assistedby the expert to be financedin the contextof the Technical Assistancecomponent. Basic indicatorsto be monitoredduring project implementationare listed in Annex 3. The creationof this unit and the appointmentof its chief would be conditionsof effectivenessof the loan. - 18 -

The DPSAEof the Ministry of Agriculture would also carry out the role of periodically supervising and evaluating the Project. The DPSAE is adequately staffedand routinelyevaluates investment projects in the agriculture sector for the Ministry.

4.15 ExtensionSupport. The Project would provide for assistanceto OMVGM in pursuingongoing experimentation ir. those themes specificallyrelated to the Projectobjectives, particularly in the fieldsof producinggood quality seedlings,testing and disseminatingwater saving practicesand controlling water and soil sa'linity(in close collaborationwith DRE). In order to help improvingthe technicalmessages of extensionagents and providingfarmers to easy access to regionallytested technologicalinnovations, the Project would financethe constructionand equipmentof plastic greenhouses(nursery), other miscellaneousstructures (shades, etc.) and the equipmentof a emall soil and water laboratory. Four technicianswould be recruitedand they would work in close contactwith the OMVGM extensionservices to ensure that their applied researchprograms are the most suitableones, to obtain the feedbackand to improvethe use of messagesresulting from their researchactivities. The Government, through its researchprogram in the south, under the responsibilityof IRA, would carry out the selectedresearch programs essentialfor the Projectaccording to a protocol to be agreed between OMVGM and IRA. Assurancesfor the inclusionof these programs in the IRA's activitieswere obtainedat negotiations(para. 5.12).

D. StatusofEnineenny

4.16 Standardarchitectural plens and specificationsare availablefor most Projectbuildings. The Governmentthrough DGR has hired consultantsto preparethe detaileddesign and bidding documentsfor the rehabilitationworks and for the new oases (irrigationand drainage networkand roads). Detailed specificationsand bidding documentsfor the first year of works executionand for the supply of goods are being completedand bid resultsfor deep well executionconfirm Projectcost estimates. Particularattention is being paid to the definitionof the permeabilitycharacteristics of the soils for the designof the drainagenetworks, which will permit proper leachingand salinity control. The remainderof the documentsfor the other three years of the Projectwould be completedbefore December 1985.

E. Costs 4.17 Over the six-yearimplementation period (1986-1991),the total cost of the Project is estimatedto be US$58.3million (D 43.8 million)with an estimatedforeign exchange component of US$29.6million (D 22.2 million)or 51X of the total Projectcost. The cost estimatesinclude taxes and duties, totallingUS$14.3 million (D 10.8 million)or 25% of total Project costs. Projectcosts are summarizedin the followingtable and shown by year in Table 1 and by summaryaccount in Table 2. - 19 -

PRO3ECT COST SUIMARY

Local Foreign Total Local Foreign Total X Foreign X Total Costs Costs Costs Costs Costs Costs Exchange leas Costs ----- (O 000)----- (US$000°)------

EEI4AOLITATIOAOF EXISTING =rCIATION SYSTESS

Civil works 4."91.3 7,550.6 12.S41.9 6.655.0 10,067.5 16,722.5 60 42 Onfarm works 2,701.7 2.270.1 4,971.8 3.602.2 3.026.8 6,629.0 46 16 Irrigationequipment 1,073.5 1.821.8 2,89S.3 1.431.4 2,429.1 3,860.S 63 9 Operatingcosts 1.848.4 12.41.1 _2.LJA 2.46A4. 1,654.C 4112.3 la 1Q Subtotal 10.614.8 12,883.6 23.498.4 14,153.0 17,178.2 31.331.2 55 77

NEW rRRTCATXOUSYSTEM5 Civil works 396.4 688.9 1.085.3 528.5 918.5 1.447.0 64 4 Onfarm works 88.8 63.2 1S2.0 118.4 84.3 202.7 42 - Irrigationequipment 78.7 132.9 211.6 105.4 177.2 282.2 63 1 Operatingcosts .i9Z 47.2 117.0 92.9 63.0 155.J Ia Subtotal 633.6 932.2 1.565.8 844.8 1.243.0 2,087.7 60 s ONFAUR DEVELOPMENT 1,33S.2 1.015.3 2,350.5 1,780.2 1.353.8 3.134.0 43 8

IWSTITUTIONALDEVELOPMENT Construction 412.7 329.3 742.0 5S0.3 439.0 989.3 44 2 Vehicles 94.0 167.1 261.1 12S.3 222.8 348.1 64 1 Equipment 211.4 221.S 432.9 281.9 291.4 S77.3 S1 1 Studies. Tech. assistance 64.8 9S.0 159.8 86.4 126.7 213.1 60 1 Operating costs 1.241.5 738L4 17 655.1 17.9 l972.0 12 Is Subtotal 2.024.3 1.051.3 3.075.7 2.6"9.1 1,401.8 4.100.9 34 10 Total Base Line Costs 17,607.9 1S,882.6 30,490.4 19,477.2 21,176.7 40,653.9 S2 lO0 Physical contingencies 1.538.6 1.871.9 3.410.S 2.051.S 2.495.8 4.S47.3 SS 11 Price contingenctes 5-412.7 4L441.3 9.ZS4.D 72.216 29 5S21.7 13138.6 _5 12

TOTAL PROJECT COSTS 21.ss9.2 22.19S.8 43,7SS.S 28.745.6 29,S94.2 58.339.8 S1 144 - 20 -

4.18 Base costs expressed in June 1985 prices were derived from recent bidding and appraisal estimates. Physical contingencies have been allowed in general at the rate of 15 for civil works and 10% for equipment. No physical contingency allowance was provided for operating costs, studies, technical assistance and credit requirements. Price cantingencies have been calculated on the basis of the following annual percentage rates, applied to local and foreign costs, including physical contingencies:

1986 1987 1988 1989 1990 1991

Local costs 10 10 10 9 8 7 Foreign costs 7.5 8 8 8 8 5

F. Finaneixw

4.19 A Bank loan of US$27.7 million to the Government of Tunisia is proposed to finance 100% of the foreign exchange component of the Project, including the foreign exchange component of incremental operating costs but excluding the agricultural credit component, which would be financed by BNT through the available lines of credit. The balance of funds required would be financed by the Government and Project beneficiaries. The Bank loan would cover 48Z of Project costs (63X of Project costs net of taxes) and 94% of the full foreign exchange component. The Project costs would be shared in the following amounts and proportions.

Local Foreign Total Z of Net (US$ '" equivalent)- Project Costs

World Bank - 27.7 27.7 63 BNT 1.0 1.9 2.9 6 Beneficiaries 5.0 - 5.0 11 Government 8.4 - 8.4 20

Net project costs 14.4 29.6 44.0 100 Taxes and duties 14.3 - 14.3

Total project costs 28.7 29.6 58.3

4.20 The proposed Bank loan would be for 17 years, including four years of grace. The Goverrment would earmark about US$7.5 million (27%) of the loan proceeds to OMVGM through its annual budgets to finance proposed Project activities. US$20.2 million would be included in GR's annual budget. The Government would also cause BNT to provide investment credit to farmers (US$2.9 million). Beneficiaries would share the Project cost through their - 21 -

downpayments for the credit component, and, through their quotas to the AICs to pay full O&M costs during the Project implementation period, and by paying their share of the tree uprooting operation (US$5.0 million). Government would finAnce the remaining Project costs (US$8.4 million).

G. Proeurement

4.21 Procurement arrangements are summarized in the following table:

Procurement Method Total Project Element ICB LCB Other NA Cost (US$ million equivalent)

A. Deep wells 5.1 (3.4) - - - 5.1 (3.4) B. Supply of conduits 13.4 (8.2) - - - 13.4 (8.2) C. Execution of irrg. and drainage works, roads - 11.2 (7.0) - - 11.2 (7.0) D. Supply of pumps, pipe accessories and hydromechanicequip. 5.0 (3.2) - - 5.0 (3.2) E. Electrification - 0.4 (0.3) - 0.4 (0.3) F. Buildings and Minor Civil Works - 1.1 (0.6) 0.3 (0.1) - 1.4 (0.7) G. Tree uprooting - 6.2 (3.8) - - 6.2 (3.8) H. Vehicles and other equipment - 0.7 (0.5) 0.6 (0.4) - 1.3 (0.9) I. Studies, T.Asst., Training - - 0.3 (0.2) - 0.3 (0.2) J. Onfarm investments - - - 4.7 (-) 4.7 (-) L. Incremental staff and other op.costs - - - 9.3 (-) 9.3 (-)

Total 23.5(14.8) 19.2(11.9) 1.6 (1.0) 14.0 (-) 58.3(27.7)

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

4.22 Procurement would be carried out by DGR (irrigation infrastructure and supply of major equipment) and by OMVGK (buildings, tree uprooting, vehicles, and miscellaneous equipment). Table 4 lists contracts to be awarded, methods of procurement, timing and responsibility of processing.

4.23 International Competitive Bidding. The drilling of deep wells (US$5.1 million), the supply or conduits (US$13.4 million), the purchase of pumps and hydromechanic equipme- (US$5.0 million) would be procured by '-CBin accordance with Bank guidelines published in August 1984. When bulking is not feasible, equipment contracts which do not exceed the equivalent of US$150,000 each, and totalling no more than US$1.0 million in aggregate may be awarded on the basis of local competitive bidding p'rocedures. Qualifying domestic manufacturers would be granted a margin of preference equal to 15% of the c.i.f. bid price of the imported goods or the actual custom duties and import taxes whichever is lower. - 22 -

4.24 Local CompetitiveBidding. Local competitivebidding proceduresare generallyconsistent with the need for economy and efficiencyin the execution of the Project. Laws and regulationsregarding local procurementprocedures and practicesin Tunisia are being reviewed in the Bank in order to reach a judgementas to whether local proceduresare acceptablefor Bank-financed contracts. The findingsof that reviewwill be discussedwith the Tunisian authoritiesand agreementswould be sought regardingany changesneeded to make the proceduresacceptable to the Bank. Tree uprooting(US$6.2 million) and civil works (US$11.2million) comprisingthe layingof pipes, the constructionof buildings,the constructionof the drainagenetworks and roads would be procuredunder local competitivebidding. Due to the scattered nature of these works they would not be of interest to foreigncontractors. Similarly,the constructionof buildings (U$1.0million) such as offices, houses,CTVs (small lots scatteredall over the projectarea) would not be of interestto foreign contractorsand they would also in principlebe awarded on the basis of LCB. The supply of vehiclesor miscellaneousequipment, such as minor farm machineryand tools and researchequipment (US$0.4 million), would also be subject to LCB. Representativesof importersare well representedas are local manufacturers.

4.25 Other procedures. Small dispersedcivil works such as drainage improvements, construction of windbreaks small isolatedbuildings, and minor civil works would not be suitablefor contractingand would be carried out by OMVGM by force account under standardGovernment procedures which are acceptableto the Bank, up to a total amount of US$800,000. Contractsfor electrificationand relatedequipment (US$0.4million) would be negotiated with STEG, a public company,solely authorizedto execute rural electrification works. Office and extension equipment, furnitureand other similar goods which are easily obtained off-the-shelf, and whose contract cost does not exceed US$20,000individually or US$500,000in aggregate,would be procured through local shopping based on at least three price quotations. Because it is advantageous to standardize the existing park and spare parts, small vehicles (US$0.06 million) would be procured throughdirect contractingwith the local assembling plants following procedures currently used by Government.

4.26 Contract Review. All bidding packages for works estimated to cost the equivalentof US$500,000or more and bidding packages for goods costing the equivalentof US$150,000or more would be subject to the Bank's prior reviewof procurementdocumentation resulting in a coverageof about 80Z of the total estimatedvalue of contractsfor both goods and works. The balance of contractswould be subject to randompost-review by the Bank after contract award. The first bidding documentof each agency for works or goods below those limitswould also be reviewedprior to the start of the bidding. Assurancesthat the above procedureswould be followedwere obtained at negotiations.

4.27 Consultantsfor technicalassistance (US$0.3million), with qualifications and terms and conditions of employment satisfactory to the Bank, would be appointedfollowing Bank guidelineson the use of consultants publishedin August 1981. H. Disbursement

4.28 The disbursementprofiles for Bankwidearea developmentprojects, EMENA agriculturalprojects, Bankwide agricultural projects and all Tunisia Projectsshow that full disbursementhas taken an average of eight years. - 23 -

In the case of the present Project,full disbursementis expectedto take place over seven years (Table3). The reasons for deviatingfrom the disbursement profilesare: (a) the existenceof standardplans and designsand bidding documentsfor all major disbursementitems (buildings,supply of conduitsand accessories,execution of deep wells, irrigationand drainagecivil works, supply of pumps and equipment);(b) the advancedstage of preparationof technicalspecifications and executionplans which will permit early procurementof key project items; (c) the fact that major investmentsare scheduledfor the first four years of the Projectperiod; and (d) the provision of a specialaccount which would permit expeditingpayment procedureslocally.

4.29 Disbursementswould be made after receipt of full documentation, except in the case of works by force account and goods and services provided under contracts valued at under US$50,000 equivalent for which disbursements would be made against certified statements of expenditure (SOE). The SOE would be certified by the Project implementingagency incurringthe expenditure. Supporting documentation would be retained by the implementing agency and made availablefor inspectionduring Bank supervisionmissions and by externalauditors. Except in the case of direct payments,no reimbursement applicationfor less than US$20,000would be accepted. Should STIL continue to rent the oasis El Aouinet, disbursementsfor work in this oasis would be conditionedto the signing of an agreementbetween STIL and OMVGM related to repaymentof investmentcosts (para. 6.19). Disbursementcategories, amounts allocatedand the share of expendituresto be financedwould be as follows:

Amount of the Z of Expenditures Category Loan Allocated to be Financed (US$ million)

1. Civil works for irrigation and 11.4 60% of local and 100% drainage,agricultural and of foreignexpenditures institutionaldevelopment

2. Equipment,materials and vehicles 11.4 65% of local and 100l of foreignexpenditures

3. Consultants,and training 0.2 70% of local and 1001 of foreignexpenditures

4. Unallocated 4.7

Total 27.7

4.30 To ensure the efficientand timely implementationof the Project, the Bank would depositafter loan effectivenessan initialsum of US$1.0million to set up a revolvingfund to financeeligible expenditures corresponding to the Bank's share of the average three months' Projectneeds. The Bank funds would be depositedin US dollars in a specialaccount at the CentralBank of Tunisia (BCT)and would be channeledas needed to the Projectthrough the - 24 -

Banque Nationale de Tunisie (BNT). For this purpose, a Project account would be opened by the DGRat BNT in Tunis, and the OMVGMwould have a similar Project subaccount at the BNT branch in Gabes. Government counterpart funds would be secured through appropriate budget allocations. Assurances were obtained that the Project'sannual budgets and financialplans, as proposedto the Ministriesof Planningand Financewould be presentedto the Bank for informationnot later than September30 of each year.

4.31 The Bank would replenishthe revolvingfund as requestedupon receipt of satisfactoryevidence that expendituresmade from it were eligiblefor financingout of the fund. A replenishmentrequest would normallybe sent to the Bank when 50Z of the revolvingfund has been disbursed,i.e. about every two to three months. Should any disbursement made from the special account not be acceptable to the Bank, Government would be requiredto deposit the corresponding ineligible amount into the specialaccount, or if the Bank so requests,refund to the Bank an amount equal to the amount not eligible.

4.32 No furtherdeposits into the specialaccount would be made by the Bank when the total unwithdrawn amount of the part of the loan that is expected to be disbursedat loan closurewould be equal to US$2.0 million. If it is determined that any amount outstandingin the specialaccount is not required to cover further paymentsfor eligibleexpenditures, the Governmentwould refund to the Bank such amount outstanding in the specialaccount. Assurances on the above points were obtainedat negotiations.

V. PROJECT EMPLEMENTATION

A. Organizaion and blanagement

5.01 The Ministry of Agriculturewould have overallresponsibility for the executionof the Project. OMVGM would be the primary executingagency operatingthrough a ProjectManagement Unit (PMU) set up under the Project. The MOA PlanningDepartment (DPSAE) would monitorProject activitiesat the centrallevel, supervisethe allocationof counterpartfunds and would be in charge of Projectevaluation.

5.02 Major Project civil works would be managedand supervisedby the Rural DevelopmentDirectorate of MOA (DGR). The DGR would be responsiblefor preparationof bidding documents,procurement and supervisionof the execution of the importantworks related to the hydraulicinfrastructure, including internalroads and purchaseof hydraulicand electricequipment, and vehicles for the supervision team. The OMVGMwould be responsible for procurement and supervisionof the works related to tree uprootingand removal,extension buildingsand miscellaneousconstruction, acquisition of miscellaneous equipmentand vehicles connectedwith supportactivities. The regionaloffice of the DGR in Gabes has experienced technical staff who would be strengthened and organizedinto a specialsupervision team for the Project. This local team would be supportedby the technicalassistance of DGRheadquarters in Tunis to which it would be accountable. Works and suppliesto be procuredand executed by OMVGMare of minor importance and are well within the scope of its presentcapabilities. - 25 -

B. Project Implementation Stra

5.03 The major objective of the Project is to stop the gradual degradation of the existing oases. This objective would be achieved through Project activities which would be supportive of private sector investment in the use and maintenance of the new irrigation and marketing infrastructure. The Government through the executing agencies would promote the necessary infrastructural changes, but the private sector - the traditional water user associations (AICs) - would be responsible for the adequate use and maintenance of the new infrastructure. The OMVGM would continue to play an important role in assisting the AICs in their activities by providing extension services, including the dissemination of inter alia, special themes of applied research for which it would be responsible, and other services not readily available in the area from the private sector. As for marketing, the Office would eventually cede the management of the collection and refrigeration centers to the AICs and marketing cooperatives while continuing to provide technical assistance as necessary.

5.04 The issue of the reorganization of the AICs and the creation of the legal framework to improve their operating procedures and to make them simpler and more flexible is being dealt with 4n the context of the Irrigation Management Improvement Project; thus the Project would only address in particular the following issues: (a) the organization of OMVGM support services to AICs and marketing cooperatives; and (b) definition of the framework under which both the OMVGM and the AICs would share responsibility for agriculture development.

The Organization of Support Services

5.05 OMVGM is already providing agricultural support services. To avoid the creation of inefficient state monopolies and unnecessary involvement of the Office in activities which could be provided by the private sector, the following principles would guide the Office's expansion of agricultural support services: (a) the OMVGM would only provide those services which due to their nature, the private sector cannot (extension, research); (b) services not readily available to farmers or farmers' associations by the private sector (marketing, special repairs and maintenance works) would be provided by the OMVGM at cost; the Office would encourage the private sector or farmers' associations to progressively take over this type of services. Consistent with agreements to be reached under the Irrigation Management Improvement Project, full costing would be achieved by the end of 1988, with interim arrangements to start in 1986. Acceptance of these principles was obtained at negotiations.

Agreement between the OMVGM and the AICs

5.06 An agreement defining the division of responsibilitiesbetween the OMVGM and the AICs with respect to water management and general agricultural development would be signed before the completion of the irrigation works. The major stipulations of these agreements would focus on the following principles: OMVGM would commit itself (a) to provide free extension services; (b) to advise and help on marketing of crops; (c) to help the AICs in preparing their annual programs of activities and budgets and in collaboration with the regional representative of the Ministry of Finance, monitor these budgets; (d) to provide free technical assistance and advice for the maintenance of works and - 26 -

of equipmentand in establishingwater distributionrules; (e) to provide any other servicerelated to agriculturaldevelopment at cost and at the request of the AICs; and (f) to monitor the annual budgets,and the incomeand expenditurestatements of the AIC's. The AICs would commit themselves(a) to maintainand operatethe pumpingsystems, the irrigationand drainagenetworks and to pay the respectivecosts; (b) to follow OMVGM's technicaladvice and to participatein the extensionand trainingefforts made availableto them; (c) to promoteland consolidation;(d) to facilitatethe reconversionprogram, in particulartree removal;(e) to pay for the servicesto be asked from and to be providedby the OMVGM in the fieldsof repairand maintenance,marketing and others; (f) to includein their annualbudgets the repaymentby associated farmersof loans and of the cost of uprootingand removingtrees; (g) to contribute to a fund to pay for major repairs and replacement of equipment; (h) to levy specialassessments for major repairswhich would be performedby the OMVGM; and (i) to permit the OMVGM to monitor the adequacyof O&M efforts and to pay OMVGM for servicesprovided to bring the state of O&M up to standard,if necessary. The above principleswere incorporatedin a model draft agreementwhich was reviewedat negotiationsand would be presentedand discussedwith the AICs before startingof works; specificagreements would be negotiatedwith each AIC before completionof the irrigationworks; the first five agreementswould be sent to the Bank for approval. C. Execution of Project works 5.07 IrrigationInfrastructure. Bidding documents for the equipmentof deep wells and supplyof conduits,and accessoriesare under preparationin the DGR which nas alreadysufficient experience and is acquaintedwith Bank's procurement requirements in this field. Consultants have been hired by the Government to prepare topographic maps and execution plans for the rehabilitation works (irrigation and drainage networks, internal roads). Bid invitation for the rehabilitation works to be executed in 1986/87 is foreseen for the third quarterof 1985. Separatebids would be invitedfor the supply of pumps, conduits, hydromechanic equipment and conduits accessories, and for executionof the irrigationand drainagenetworks, and other related civil works. Bids have alreadybeen invitedfor the executionof deep wells.

5.08 Supervisionof Works. The executionof works will be supervisedby a team of DGR staff specially appointed for the purpose. This team would operate out of its regional office in Gabes. This team, to be headed by an experienced engineer,will consistof two brigadeswith one technicianand two surveyors each. The Project would finance the provisionof vehiclesfor this supervisionteam.

5.09 Other works. The OMVGMis carrying out a detailed study of the reconversionprogram which would includethe identificationof the trees to be removed. Biddingdocuments for tree uprootingand removalwould be prepared by the Officewith the assistanceof the ForestDepartment. Wind breaks would be executedby force account followingmethodology and procedurescommon in the regionand under the guidanceof the ForestDepartment. Construction (CTV, houses,workshops, warehouses, etc.) would be executedfollowing available standard designs already acceptedby the Bank for other on-going projects. Procurement of vehicles or other miscellaneousequipment does not raise particular problems for the OMVGM which has already sufficient experiencegained in the contextof the SouthernIrrigation Project. - 27 -

5.10 Maintenance of the Irrigation Infrastructure. Whereas the irrigation networks will not require important maintenance works, drainage systems and equipment in general will demand routine cleaning and service. The AICs are already carrying out these maintenance activities on a small scale in the existing oases but the new infrastructure will require an additional technical and financial effort. The OMVGMwould provide this necessary assistance and the Project would address in particular (para. 4.12) the training of staff in the most critical related fields (pumping and hydromechanic equipment). In the framework of the agreement to be signed with the AICs (para. 5.06), the Office would help them to prepare annual maintenance programs and woulldgive technical advice during execution of works. Maintenance and repair activities requiring higher level of expertise would be the responsibility of the Office which would be paid at cost by the AICs. In constant 1985 prices annual operating costs at full development (1991) will average 103 D/ha, and full O&M costs would average 160 D/ha of which pumping represents 34X.

D. AgriculturalSupport Services

5.11 Extension. Extension in the past has not been effective due to organizational deficiencies and to the uncertainty of water supplies. The Project would reorganize and strengthen the extension services of OMVGM in order to achieve and maintain regular contact with farmers using the principles of the T&V system which the project authorities have already agreed to use. The individual farmer would be the ultimate beneficiary of the extension efforts. However, the extension services would also assist the AICs in those fields which are related to the organization of water distribution, preparation of budgets and financial control, and technical assistance for operation and maintenance of equipment and works. Particular attention would be devoted to motivate farmers in regrouping their plots into more manageable units within the spirit and in support of the application of the existing land reform law. Extension agents would visit farm groups on a regular basis, on one specific day of every other week. This would be posted and made known to farmers and extension supervisors. Extension agents would assist farmers and the AICs not only on technical matters, but they also would provide information on crop planning, marketing and water requirements, would disseminate the results and recowmendation of the applied research, etc. These additional extension agents would be recruited from the various training stations, which graduate sufficient candidates to meet the Project needs. They would benefit from annual two-weeks training sessions and they would attend monthly briefings and refresher courses by subject-matter specialists (SMS), conducted in the field according to a program established by Project management. Those sessions would be crop specific and relevant to the stage of the growing season. Since the OMVGM is short in SMS, the Project would provide for the recruitment of four specialists. In the framework of the technical assistance component, the Project would also provide necessary support for the OMVGM to carry out these training activities. Details and proposals of the methodology and guidelines for extension services are given in Annex 9.

5.12 In order to assess how the extension services would be dealt with after the Project implementation period, by December 31, 1990, OMVGM would prepare and submit to the Bank a plan for the organization and operation of the extension services covering the three years subsequent to the Project. This plan would include the staff and methodology adjustments resulting from - 28 - the Project experience. Agreement was obtained at negotiations that this plan would be submitted to the Bank for coment, and that it would be provptly implemented thereafter.

5.13 Extension Support. This component of the Project focuses essentially on providing for the supply of good quality seedlings, for promoting adequate water use, for monitoring soil and water salinity, and for carrying out research on themes of particular importance for the area. The Project would finance the execution of minor constructions (greenhouses, shades) and the acquisition of equipment (water distribution systems, laboratory). The OMVGM would be responsible for managing the nursery for the production of seedlings and for carrying out the ongoing water management and water saving tests. Assurances were obtained at negotiations that: (a) OMVGM would, by December 31, 1986, establish with IRA, DRS and DRE agreements to assure that the applied research which is required by the Project and the soils and water salinity monitoring would be carried out within their programs; (b) OMVGM's role in the production of vegetable and fruit seedlings would be handed over to specialized producers by Project completion; and (c) adequate arrangements be made to transfer its applied research activities to the appropriate research organization by Project completion.

5.14 Marketing Services. Given the ongoing marketing activities in the Project area by other donors (para. 3.21), the responsibility of the OMVGM with respect to marketing under the Project would therefore be as follows: (a) to develop a marketing intelligence service and inform farmers, before planting, of potential marketing constraints based on an analysis of the intention to plant various crops; (b) to organize on behalf of farmers the assistance of GIL and GIAF (para. 3.20); (c) to operate for a limited period the existing collection center and the refrigeration and transportation facilities financed by the Project; and (d) to continue ongoing activities to assist and train cooperatives, which would eventually take over the management of these facilities and the collection center. Assurance was obtained at negotiations that the Office will prepare an action plan defining the marketing strategy and its support role for the marketing cooperatives by June 30, 1986. This action plan would include (a) a timetable for the signing of a letter of understanding between itself and GIL and GIAF or other marketing organization; (b) agreement that they will operate the collection and refrigeration centers and charge fees which will progressively cover their real costs of transport and of running the centers; and (c) agreement that they will, not later than June 30, 1989, transfer the management of the marketing facilities to cooperatives or lease them to private operators.

E. Monitoring and Evalution

5.15 Management and Monitoring. The Project would be managed by a special unit (PMU) to be created in the OMVGMdirectly dependent on its President Director General, headed by an expert whose qualifications would be acceptable to the Bank and whose appointment should be a condition of loan effectiveness. The PMU would be responsible for the overall coordination and monitoring of Project activities, but it would not be directly involved in carrying out specific Project activities which would be the responsibility of existing OMVCM departments. The PMU would collect the necessary information from the supervision team of the major hydraulic works (DGR) and from the several departments of the OMVGMinvolved in Project execution (extension, accounting. - 29 -

engineering,research). Early in the beginningof Projectimplementation, and within the frameworkof the technicalassistance component, the PMU would receiveassistance from an expert in managementand informationin order to set up the Projectmanagement information system. In addition,the DGR would also set up a supervisioncontrol unit in Tunis which would be responsiblefor monitoringthe financialexecution of the large contractsconnected with the irrigationinfrastructure. This unit would report periodicallyto the PMU. The Projectwould provide funds for traininga financialanalyst who would be assignedto the DGR controlunit.

5.16 Reportingand Evaluation. The DPSAE would be responsiblefor evaluatingthe Project. It would focus in particularon the impactof the Projecton farm income,the distributionof benefitsamong farm beneficiaries and progressin attainingself-reliance of farmersassociations. The PMU would prepare the semi-annualProject progressreports in accordancewith mutuallyagreed guidelinesand would submit them to the Bank. The DPSAE would also preparea Projectcompletion report within six months of the closingdate. Assurancesto this effect were obtainedat negotiations.

F. Accounts and Audit

5.17 OMVGM,in designing and setting up its new cost accounting system under the IrrigationManagement Improvement Project (para. 2.05), will also establishseparate accounts for the Project. These accountswould be maintainedin accordancewith the same sound and acceptableaccounting principlesand practicesthat will be adopted by all OMVs by December 31, 1985. OMVGM would establishits operatingfinancial statements as of December 31, 1985 accordingto the new standardaccounting principles. These statements includingthe project financialposition would be auditedby independent auditorsacceptable to the Bank along with the Statementsof Expendituressent to the Bank for disbursementsunder the Bank Loan. The auditorswill be the same for this projectas those to be selectedfor the IrrigationManagement ImprovementProject to avoid double auditing. The auditors'annual long-form reports,and audited OMVGM'sand Project'sfinancial statements would be sent to the Bank within six months after the end of each fiscalyear. Assurances to this effectwere obtainedat negotiations.

5.18 Assuranceswere also obtainedat negotiations(i) that OMVGM would provideassistance for the design and installationof an appropriateaccounting systemfor the AICs, and trainingof local bookkeeperscapable of running the system,and (ii) that at least three randomlyselected AICs would be chjsen every year startingin the first year after loan effectivenessto have their accountsaudited by an independentauditor. The accountingsystem to be proposedfor the AICs will includea chart of accountsclearly distinguishing betweencosts of operationand maintenance,reserve accounts for the renewal of equipment,investment expenses and revenues.

VI. BENEFITS AND JUSTIFICATIONS

A. Production

6.01 Through increasedwater availability,decreased salinity, and thinningof dense date orchards,the Projeotwould enable farmers to intensify productionof fruits, vegetables,dates and forage. Due to the Project area's - 30 - comparative ecological advantage, production is expected to be oriented towards early and late season fruits and vegetables mainly for the domestic market. In about 20% of the Project area, intensification would be achieved by thinning of dense and low productive date orchards, combined with leaching following drainage and irrigation improvements, and subsequent development of inter- cropped fruit trees and vegetables. In about 60X of the Project area, date palm density has already been reduced; a more secure and adequate supply of irrigation water and better drainage would enable farmers to achieve higher yields and cultivate more demanding crops. Part of the olive trees in certain areas now mainly under this crop (about 16S) would be grafted with table olive varieties and intercropped with vegetables, fruit trees and forage crops once irrigation conditions have improved. Fruit trees and vegetables will be the main crops of the new irrigation areas while fruit trees would be iutroduced after drainage works have been carried out in an area now predominantly under vegetables. Apart from traditional crops such as dates, pomegranates, apricots, summer and winter vegetables, the Project would promote some recently introduced crops such as table olives, pistachios and late season potatoes. Only a limited expansion of greenhouse vegetable production is foreseen. Estimated production of the main crops in the Project area without and with project at full development is given below:."

ESTIMATED CROPPED AREA, YIELD AND PRODUCTION

Without Project With Proiect Area Yield Production Area Yield Production (ha) (t/ha) ('000 t) (ha) (t/ha) ('000 t)

Dates 977 7.2 7 977 13.3 13 Pomegranates 300 10 3 615 13 8 Apples, Pears, Peaches 100 10 1 230 13 3 Apricots 64 7 0.4 200 20 4 Olives 250 12 3 67 15 1 Table Olives - - - 83 12 1 Pistachios - - - 83 1.2 0.1 Summer Vegetables 700 10 7 1,000 15 15 Winter Vegetables 570 14 8 900 20 18 Potatoes (late) - - - 167 12 2 Marrow (tunnel) 40 25 1 114 35 4 Cucurbits 125 8 1 150 20 3 Greenhouse Tomatoes 2 60 0.1 20 80 1.6 Henna 192 1.2 0.2 330 2 0.6 Forage 500 30 15 860 50 43

Total Cropped 3,820 5,796

1/ Yields are based on the CNEA preparation report (Table 8) and on data collected by appraisal mission among the farmers in the Gabes region. - 31 -

B. l

6.02 The Project is based on the expectationthat incrementalproduction resultingfrom the Project wiil be absorbedby the internalmarket. With a projectednation-wide increase of stone fruit consumptionbetween 22 and 37,000 tons over the next 16 years, and the Gabes productionbeing earlier than the other main producingareas (Kairouan,Cap Bon), the internalmarket would easily absorb the Project'sexpected 4,000 t incrementalproduction of apricotsbetween 5 and 11 of projectedincremental demand. However, it is expected that amounts producedbefore April could also be exported due to lack of competitors on the European market at this time. To ensure a homogeneous and quality product acceptable for export, GIAF technicianswill collaborate with OMVGMextension staff to advise farmers on the varieties to be established and provide guidance to ensure adequate care during harvesting, transport and handling. GIAF would handle any possible export to France by refrigerated semi-trailersfrom the gradingand packing center to be establishedby the Project.

6.03 With an estimatednational increaseddemand for tomatoesof some 60,000 tons by year 2000, the Project'sincremental output of greenhouse tomatoes would also basicallybe sold on the nationalmarket. OMVGM has been promotinggreenhouse vegetable production for about four years. It has establisheda gradingand packing center in collaborationwith GIL, which handlesexports. In 1983, the Gabes area suppliedabout 50 tons or 9Z of total exportshandled by GIL. In addition,a new privatecompany, SODEPRINE, establishedwith financingfrom severalArab investmentbanks, has been establishedin 1983 for the marketingand export of vegetablesand fruits. Productioncontracts will also be made with farmersin the Gabes area for other productsrequired by foreignmarkets, and contactshave already been made with OMVGM for this purpose.

6.04 Similarly,the incrementalproduction of pomegranates,miscellaneous other fruits,and late season potatoesis expectedto be marketed nation-wide. A large part of the Gabec incrementalproduction is expected to be transited through the Tunis wholesalemarket due to the comparativeadvantage of the Gabes area as regardsearliness. With a projectedincremental consumption of seed fruits over the next 16 years estimatedat between 227 and 468,000 tons,'' the incrementalproduction of 7,000 tons in the projectarea should be easily absorbed,being between 3 and 1.52 of the projectedincremental demand. In-season(summer and winter)vegetables, however, are expected to be marketedmainly in the Gabes and Sfax areas and in the urban centersof the southerngovernorates of Gafsa, Tozeur,Medenine and Tataouine,which now receivesome of their vegetablesfrom such distant locationsas Cap Bon. An importantrelatively nearby year-roundmarket is the island of Jerba with its flourishingtourist industry.

C. Benefieiaries and Distribution of Benefits

6.05 Irrigationrehabilitation would benefitabout 7,500 farm families in the 42 oases,while irrigationexpansion would benefit some 200 farm families.

1/ 'La demande interieuredes produitsalimentaires en Tunisie : evolution et perspectives". Ministry of Agriculture, Department of Planning, Statisticsand Economic Analysis, May 1984. - 32 -

Supportservices, such as applied research,nurseries and marketingfacilities are expectedto benefit an additional3,000 farm familiesin other oases and in areas served by shallowwells.

6.06 Farm budgets have been developedfor six representativegroupings of oases which have common situationsas regards soil and ecologicalconditions, estimatedirrigation water availability,present and expectedfuture density of date palms and fruit trees, farm size, and estimatedfarmers' uptake of improvedfarm technology. The estimatedchanges in income resultingfrom the Projectare:

Farm Income No. of Farm Without Farm Income X Farm Model Farmers Size Project With Project Increase (ha) (D) (D)

A. Dates intensification 920 1.0 201 1,952 871

B. Fruit and vegetable intensification 5,568 0.5 493 1,049 112

C. Olives intensification 422 1.0 231 1,838 695

D. Olives and crops intensification 311 1.0 949 3,412 259

E. New irrigation 200 1.0 - 2,655 -

i. Fruit tree development in vegetablearea 231 i.0 1,007 2,475 145

The above incomesper farm do not includeoff-farm income,income from adjacent rainfed land, rangelandand livestock. A survey conductedin 1984 shows 121 of farmershaving off-farmincome ranging from 50 to 1,440 D/family. The survey,however, did not include the largelyabandoned oases of El Hamma and the oases with a high degree of land fragmentation,where most farmersare obliged to seek off-farmemployment. Income from rainfedagriculture varies greatlybetween oases;an average of 25Z of the farmersin the area carry out rainfedfarming. Due to high inter-annualvariability of rainfalland run-off needed for dryland crops,annual farm income from drylandcrops varies much from year to year. The farm budget analysis shows that farmers will have a substantialcapacity for repaymentof Project costs.

D. Cost Recovery

CurrentCost RecoveryPolicy

6.07 Governmentpolicy for the recoveryof investmentsin new public irrigationperimeters is embodiedin the Land Reform Legislation(Annex 10). Benefitting farmers are charged a bettermentlevy fixed by decree at the time - 33 - a perimeteris officiallyestablished. The levy is based on investmentcost per hectare.soil productivity,proposed cropping pattern and projectedincome and other socio-economicfactors. Bettermentlevies aim at recoveringfrom benefittingfarmers part of the increasein land value due to irrigation. Recoverylevels have been fixed at 25-70S of estimatedland value-addedin the Lower MedjerdaValley (LMV) and much less (about20Z) for other PPIs. The proceduresfor recoveringfarmers' contributions include payment in kind (transferof land to the State) for farmers owning more than the ceiling imposedon holdingsby the Agrarian Reform Legislation,and cash payments (over a 10-yearperiod, at 5X interestwith a 2-year grace period). Although there is no explicitframework for the recoveryof irrigationoperation and maintenancecosts, Government'sstated policy is for volumetricwater charges paid by farmersto cover at least 1001 of irrigationO&H costs. So far Governmenthas had limitedsuccess in enforcingthe applicationof capital cost recoveryfor new irrigationprojects in PPI's. Actual recoveryof investmentdoes not generallyexceed 1-8% of costs. For rehabilitationof existingirrigation systems Governmenthas been consideringit as deferred maintenancecosts creatingno new incomesources for farmersand therefore no provisionis made for recoveringinvestment costs.

6.08 In additionand particularlyfor already existing irrigated developments,the "Code des Eaux" of 1978 is a key piece of the Tunisian legislationwhich governs "Le domaine public hydraulique". Some important provisionsof that legislationwhich relate to the cost recoveryissue refer to water propertyrights, water user rightsand to integratedwater development programs. It establishesthat expendituresresulting from the provisionof hydraulicinstallations for those programsshould be coveredby the State and that operatingcosts are the responsibilityof beneficiarieson a prorata basis to the water volumes distributed.

6.09 Irrigationprojects financed by the Bank in Tunisia (para. 2.05) have adopteda consistentapproach to cost recoverybased on (a) the recovery of investmentcosts accordingto AgrarianR form Laws; (b) the recoveryof 100X of O&M costs;and (c) recovery levels consistentwith farmers' abilityto pay. The two most recent Bank-financedirrigation projects provide, in particular, for full O&M cost recoveryof the water distributionnetwork beOore December 31, 1987 in the PPI of the Nebhana in the MedjerdaNebhana Project (Ln. 2157), and for full O&M cost recoveryby December31, 1989 in the PPIs of the Kairouan and KasserineOMVs included in the Central Tunisia Project (Ln. 2234). The IrrigationManagement Improvement Project introducescomprehensive reforms, consistentwith the measuresalready taken, to increasethe financialautonomy of the Officesand encouragea more rationaluse of water available.

ProiectCost Recovery

6.10 The proposedproject goes beyond existingcost recoveryachievements in Tunisiaand would aim at immediaterecovery of 100X O&M costs of the irrigationschemes in the Projectarea; and recoveryof an average of approximately50% of the tree uprootinginvestments. Cost recoverywould be implementedin the proposedProject as follows.

6.11 Operationand Maintenanceand ReplacementInvestments. Operationand maintenancecosts consistingof the cost of pumping,personnel (ditchriders and pump assistants), maintenance of hydromechanical equipment and maintenance - 34 - of the irrigationand drainagenetwork would be borne directlyby the farmers through their membershipin the AICs. The AICs would be responsiblefor the financialand technicalmanagement of O&M with the assistanceof the GIH and the OMVGM. O&M chargeswould be establishedin a yearlybudget for each AIC from which individual farmer levies for O&H would be determineddepending on their ownershipof irrigatedland.

6.12 Included in O&Mcharges would be a charge approximating 5Z of total O&M costs which would finance a reserve fund to be held in th.e AIC's bank account to accumulate to provide for replacement pumps and for the replacement of other equipment and accessories. Future responsibility for major investments not adequately financed by the reserve fund would be financed by specialassessments to be paid by farmers and/or by BNT credit available to the AICs for such purposes. The annualbudgets to be establishedwould also includeprovision for emergencymajor repairswhich would be carried out by the OMVGM at cost. These provisionswould contributeto long-term sustainabilityof project investmentsand Govenment shouldbe relievedof future financialresponsibility for irrigationrehabilitation investments in the Projectarea. Assuranceswere obtainedat negotiations: (a) that the agreementsto be negotiatedbetween the AICs and OMVYM (para.5.06) would provide for repaymentof 100X O&M costs and for suitable levies to be used to establish reserve funds to be used to pay for emergencyrepairs and replacement investments; and (b) that OM-VGMwould provide the necessary assistance to ensure the preparation of the annual AIC budgets, which would reflect these provisions.

6.13 Repayment of Project Investment Costs. Farmers would be expected to repay a portion of investment costs for new perimeters consistent with existinglegal provisionsfor cost recovery (para. 6.07). As a guideline for the establishmentof the bettermentlevy foreseenin Land Reform legislation, the farmer'scapacity to pay for investmentshas been assessed. It has been estimatedthat if up to 35Z of the farmers'project rent were recoveredfrom direct charges for both O&M and investment cost recovery, this would allow an average repayment of the full O&M cost and 40% of investment costs, i.e., 3,600 D/ha of total average per ha investmentof 9,000 D in 1985 prices. It was confirmedat negotiationsthat for new perimetersmeasures would be taken within the frameworkof the Land Reform Law to establishthe betterment levy which would determinefarmer contributionfor repaymentof investmentcost before completionof work.

6.14 In addition,present tax legislationprovides for a 4X agricultural sales tax. The revenueswhich would be collectedon incrementalproject productionwould result in the indirectrecovery of an average of 2Z of investmentsin all perimeters,new or rehabilitated.

6.15 The followingtable summarizesthe impact on farmerrent of cost recovery. Calculationsshow the case of maximum paymentfollowing the affordabilitycriteria. Tables 9 and lOa through LOf at the end of the report summarizethe derivationof the rent recovery analysis and present the incremental cash flows of each farm model to demonstratethe affordabilityof the cost recovery. - 35 -

RECOVERY IDOICES

FARM MODEL A B C D E F 1,089 ha 2,800 ha 418 ha 283 ha 200 ha 231 ha

Rent Recovery

(a) From 100% cost recoveryfor O&M 15 21% 141 101 71 181

(b) From 100% cost recovery for O&Mplus 40% investment cost recovery for new perimeters - - - 25Z -

(c) From 4X sales tax 91 8% 71 7Z 71 7X

Cd) Total at full development 24X 291 211 171 391 25%

6.16 The above table and the cash flows show that 1001 O&M cost recovery and the indicatedlevels of investmentcost recoveryare acceptableobjectives in terms of farmeraffordability. Between 7 and 211 of farmer project rent would be recovered if 1001 O&M recoverywith provisionfor a reserve fund were established [line (a)]. In addition, if the indicated level of investment cost recoverywere practicedfor new perimetersand the sales tax were consideredan indirectmethod of recoveryof investmentcosts for rehabilitated perimeters,between 17 and 391 of farmer rent would be recovered. The cash flows (TableslOa - lOf) indicatethat even after cost recovery that net incomeremaining to servicedebts, consumption and other on-farm costs is substantially above the Tunisian rural povertylevel of 300 D/family as estimated by the "Enquete sur le budget et la consommation des mnaages, 1980".

6.17 Monitoring of Cost Recovery Performance. Cost Recovery would be monitoredas follows: (a) AICs would establish yearly budgets covering O&M and investmentcosts as described;and (b) incomeand expenditurestatements would be preparedannually by the AICs and submittedto the OMVGK. These incomeand expenditurestatements would be preparedaccording to the requirementsof an accounting system that will allow the differentfinancial responsibilitiesof the AICs to be tracked (para.5.18). The income and expenditure statements would be audited annually or a randomsample of 3 AICs per year end by the same independent auditors who would audit OMVGM accounts (para.5.17). The incomestatements would be monitoredby the OMVGM and by the regional representative of the Ministerof Finance to ensure payments to provide for adequateO&M and investmentcost recovery. The budgets and income statements would be made available to Bank supervision missions for review. - 36 -

6.18 Cost Recovery for Tree Uprooting Investments. Present legislation providesfor a subsidy for tree uprooting in order to encouragethe upgrading of production. Uprootingof palm treeswill be carriedout by contracton behalf of farmersby the Office in order to assure promptand efficient executionof these activities. The total cost per uprootedtree is estimated at 10 D for palm trees and 5 D for other trees. The farmerwould pay lOZ as an initialdownpayment and would subsequentlyrepay 40% of the total cost of tree uprootingunder a repaymentschedule to be agreed with OMVGM and satisfactoryto the Bank. Principlesof repaymentto be followedin the draft contractsbetween the OMVGM and farmersfor tree uprootingwere agreed at negotiations.

Cost Recoveryfrom STIL

6.19 STIL, a public enterpriseinvolved in the productionof dates and the processingof dairy products,has a long-termrental agreement with the Governmentfor use of the El Aouinet oasis. Assuranceswere obtainedat negotiationsthat should STIL continueto rent the oasis, an agreementwould be signedbetween OMVGM and STIL by which STIL would repay all investment costs for works at El Aouinet. STIL would submit an investmentplan for reviewby the Bank, contribute20X equity as an initialdownpayment, and firnancethe remaininginvestment cost with medium-termcredit from a bank of its choosing. The signing of an agreementalong the above lines between STIL and OMVGM would be a conditionof disbursementfor works at El Aouinet.

E. Fimncial Impact on Government

ProjectRelated Cash Flow

6.20 Inflowsdue to the proposedproject will accrue from incrementaltax revenueson agriculturalproduction, import duties on equipment,income taxes on salaries,loan disbursement,farmer's direct contributionsto project costs throughpayment for O&M costs, investmentcost recovery,downpayments and credit repayments,equity contributionsfor tree uprooting,repayments of advancesfor tree uprooting,and paymentby STIL for the full cost of rehabilitationof the El Aouinet oasis. Outflows includeGovernment financing for projectcosts, and debt serviceon the Bank loan.

6.21 Government'snet cash flow (Table 14) attributableto project activitieswould show a negativebalance, due to the partial repayment of investmentcosts as well as concessionalrepayment terms for credit and investmentcosts. By PY7 the cumulativenegative balance would be D 16.0 million (US$21.4million).

Impactof the Project on the OMVGM

6.22 The proposedproject would have very little financialimpact on OMVGM because it is not involvedin the collectionof water chargesnor does it have financialresponsibility for O&M of the irrigationsystems financed by the Project. The OMVGM would be responsiblefor managingadvances and repayments for tree uprootingunder similar terms and conditionsas advanceswhich are made for input supplies. OMVGM would also handle on a fee for service basis major repairsdone at the requestof the AICs. - 37 -

6.23 Currently,the Office'smain Project responsibilityis to manage the Southern IrrigationProject (Ln. 1796). This projectwill be completedby June 30, 1986 at which time the Office would be expected to undertake the proposedproject. Thus, the investmentbudget to be managedby the Office would not changesubstantially. The operatingbudget of OMVGM would, however, have to expandby about 35% by the end of the projectand this would be due mainly to the transferto OMVGM of 22 additionalextension staff under the OMV's staffingplan of 1987-1991.

F. Economic Analysis

General

6.24 The overalleconomic rate of return is estimatedto be 21% over a period of 20 years which is the estimatedaverage life of the investments. The economicanalysis has been done in two parts. First, the investmentand recurringcosts for the rehabilitationworks, the on-farm investmentcosts and the resultingbenefits for the 43 oases were grouped into six characteristic farm model types. General Project costs such as extension,supervision, extensionsupport, etc., were allocatedon a hectarebasis to each of the models. An economicrate of returnwas calculatedfor each of these farm model types. Second,all net incrementalbenefits for the 6 farm models were aggregatedand a rate of return was calculatedfor the total project. Since the economicrates of return of the farm model types were highly satisfactory, separaterates of return were not calculatedfor each one of the 42 oases. However,for those whose investmentcosts per hectare equalledor exceeded25X of the averagecost per hectare or those which faced specialdevelopment constraintsdue to land tenure issueswere selectedfor individualrate of return analysis. The analysisindicates that all of the oases includedin the Projectwould have satisfactoryeconomic rates of return. All benefitsand costs have been converted to economic prices based on a set of integrated conversionfactors calculated for Tunisiaduring sector work carriedout in 1980 and 1981, and updatedas necessaryfor key products. A detailed discussionof the methodologyused in the anlaysis is found in Annex 8 and is brieflysummarized here.

6.25 The large range of conversionfactors reflects a substantialamount of distortionsin the economymany of which result from the high protectionof the local market. As a result, potentiallyexportable fruits and vegetables are overvaluedrelative to world prices. Most projectcosts, except for farm inputssuch as fertilizersand machineryservices, have a low accounting ratio,i.e., financialprices higher than their economiccosts, due largelyto the effect of protectivecustoms duties and tariffs. The low ratio for labor reflectsthe fact that the minimumwage overstatesthe opportunitycost of unskilledlabor. Tables 11-13 presentsthe economicand financialprices used in the economicanalysis.

6.26 ProiectInvestments. A conversionfactor of 0.63 has been applied to most equipmentand vehicle costs reflectingprotective custom duties (25X) and indirecttaxes (10%). A conversionfactor of 0.55 has been used for civil works reflectingdistortions in the cost of unskilledlabor (0.45),equipment (0.63)and materials(0.65). -38 -

6.27 RecurrentCosts. The principalrecurrent costs in the Projectare salaries and energy costs for pumping irrigation water. Thus the economic cost of water has been derivedby valuing projectcosts of operating and maintainingthe irrigationworks at economicprices.

(a) Pumping was valued using the conversionfactor of approximately1.38 for energy costs. Energy costs were valued for diesel fuel at its bulk border price and for electricityat its long-runaverage incrementalcost of supply, as estimatedby EMENA's Power and Energy Development-Divisionin mid-1983.

(b) A conversionfactor of .8 is used for labor to reflect the oversupply of unskilled labor and the growingoversupply of technicalmanpower in Tunisia.

(c) Network maintenancewas valued using the conversionfactor for general expenses(0.75).

This yieldsan overallconversion factor of 0.87 for water. As for the conversionfactors used for key inputs, those for fertilizerare notable and representthe substantialdivergence between farmgateand world prices. This is despite large increasesin domesticfertilizer prices relativeto the world market since 1980 which has been more than offsetby the depreciationof the dinar vis-a-visthe dollar. The net effect has been an increasein the level of subsidiesfor phosphateand nitrogen-basedfertilizer. The conversion factorfor urea (46%) is 2.5, for phosphate (TSP) is 2.7 and for potassium chlorideis 0.56 (Table12).

6.28 Project Benefits. Projectbenefits result separatelyfrom two types of projectactions, namely: (a) the provisionof increasedavailability of a reliablesupply of water which would allow expansionof the irrigatedarea to the full irrigablepotential and which would also allow higher,more consistent yields;and (b) the effortsof the researchand extensionservices which would be essentialto changingcropping patterns from those which are less productive and remunerativeto those which are more so. It is estimated that 60-70% of Projectbenefits would result from the availability of water and that the remainingbenefits would resultfrom the activitiesand the qualityof technical advice of the extension service which would promote more profitable cropping patterns and improved techniques of production. The benefits included in the Project consist mainly of increased production of fruits, vegetables and forage. The net present value of incrementalproduction of the rehabilitated perimeters is D 16.1 million and on new perimeters is D 0.74 million. The projected build-up in net incrementalbenefits is consideredto be conservative due to: (a) a relatively modest projected pace of increase in yields; (b) the use of conservative assumptions of expected farmers' adoption rates (full development attained after 16 years; for oases with potential land tenure problems participation rates have been assumed to be 501 of the normal Project participation); and (c) only for about 201 of the area do incremental benefitsinclude the effectof a decreasein productionin the without project situation. Such a decreasewould be certainfor most of the Project area if the presentdeterioration of the irrigationschemes would continue. Since the Projectrate of return is favorable,it is consideredthat not having used the additionalnet incrementalbenefits of a deterioratingwithout project situationgives additionalinsurance against projectrisks. - 39 -

6.29 Fruits and vegetableshave been valued using the wholesaledomestic market prices to derive economicand financialfarmgate prices. The economic value of fruitsand vegetablesis on average about 30% higher than the financialprices reflectingthe impact of taxes and commissionsand the low accountingratios for marketing.

6.30 At full developmentin Year 16 incrementalproduction would represent a 1.7 fold increasein the value of production. The Projectwould create directlysome 567,000man-days or 1,890 additionalfull time jobs in agriculture(about 10% of the present availableagricultural work force).

6.31 The overall estimatedeconomic rate of returnof 21% is consistent with the relatedhigh rates of return obtainedin general for irrigation rehabilitationprojects which have substantialsunk costs and which do not have large investmentsin new perimeters. It is estimatedthat the project investmentcost of new perimetersis approximately50% higher than the average projectinvestment cost of the rehabilitatedperimeters (including 21 new wells). This 501 representsthe amount of sunk costs in project rehabilitation investmentswhich is 951 of the projectarea. The economicrate of return estimatedfor the individualfarm investmentmodels are as follows:

Economic Net Rate of Return PresentValue (D Million)

Farm Model A: (most saline,needs drainage,date palm uprootingand replacement with fruits and vegetables;920 ha) 17 1,989.9

Farm Model B: (fruitsand vegetables intensification;2,762 ha) 23 8,940.4

Farm Model C: (rainfedolives to be irrigated with additionof fruitsand vegetables;422 ha) 19 1,284.5

Farm Model D: (olives/vegetablesintensification; includessubstantial greenhouse investments;311 ha) 43 3,015.5

Farm Model E: (new perimeters;200 ha) 17 740.7

Farm Model F: (introductionof fruit trees into existingvegetables; 231 ha) 24 899.7

Given the high degree of divergenceof economicprices from financialprices, the issue of farmer financialincentives to invest in the projectwas verified throughcash flow analyseson each of the farm models (TableslOa through lOf). Even includingthe proposedlevels of investmentcost recovery,the proposed Projectoffers substantialnet incrementalbenefits to the farmers. The - 40 -

financialrates of return to the farmer on all farm models are in excess of 502. The incrementalcompensation per incrementalman-day of labor averages about 13 Dlday and is far above the rural wage of 2.8 D/day. This level of financial return to the farmer is considered fully adequate to ensure far er participation in the Project.

G.Ri a Sensitity Analysis

6.32 The principal risks are those related to increased investment or operating costs or to delays in investmentsresulting in delayed realization of productionbenefits. Other risks are: (a) the possibilityof a fall in the price of some Prolect production. In general, however, prices have been estimatedconservatively on the basis of a five-year average of Gabes wholesale market prices for 1977-1981 and inflated forward using an inflation factor of 8Z. This methodologyyields financialand economic prices which are in some cases significantly below current wholesale prices. The use of a five year average is considered appropriatebecause of large fluctuationswhich can be experienced in the price of fruits and vegetables from one year to the next; (b) inadequate response of marketinR channels to the increased supply. However, consumption and overall production forecasts for the region and the country as a whole indicate that the Project output would fill a substantial deficit (Annex 10). The increased export of apricots is an additional possibilityalthough the Project would not rely on this export for its success. GIAF has a program to train farmers, in collaborationwith the Office, in techniques of production, harvesting and packaging to ensure export quality produce. In general, with the modest project investments in refrigeration and packing houses, adequate market infrastructure exists to respond to increased project production; (c) slow adoption by farmers of new cropping patterns due either to lack of interest or to adherence to traditionalhabits. This would be the case particularlywith regard to grafting table olives onto producingoil olive trees and with regard to the uprootingof unproductivedate palm trees to make way for new fruit and nut tree plantations. However, neither of these risks is substantialand arrangementshave been made in the project design to minimize this risk. For example, uprootingof palms will be done by contract under the guidance of the Office and later partly reimbursedby the farmers. Palms to be uprooted are mostly unproductiveoffshoots or low productivepalms on very saline soil. Grafting can be done on half of an oil olive tree without disturbing productionon the other part of the tree. Further, cash flow analysis indicatesthe high financialprofitability to farmers of participationin the Project, thus reducing the likelihoodof their reluctance to participate.

6.33 Nevertheless,several sensitivitytests were done to analyze the robustnessof the projectwith respect to (a) price assumptions;(b) farmer participationin investmentsrecomuended for farm Model A which contains the highest level of farmer financialparticipation and risk; (c) possible lags in participationand project benefits; and (d) cost overruns. The results of the switchingvalue analysis on the projectas a whole confirm the general robustnessof the Project. Switchingvalues represent the percent change in the relevantvariable which would reduce the project rate of return to 12%, the estimatedopportunity cost of capital.

Variable 2 Change

Overall Benefits - 53 Investment Costs and General Project Cost + 114

The resultsof the sensitivitytests are as follows: - 41 -

Variable Rate of Return

Base Case 21

Prices'' reduced by 20X 18.45 reduced by 50% 12.75

Farm Model A Participation reduced by 502 20.5 lagged by 2 years 20 lagged by 3 years 19.5

Variable Rate of Return

Project Benefits reducedby 50S 13.0 lagged by 1 year 19.0 lagged by 2 years 17.2 lagged by 3 years 15.7

InvestmentCosts up 20X 18.9 up 50S 16.1

Project Benefits down by 50S and InvestmentCosts up by 50% 8.52

Additional rates of return were calculated on some individualoases which faced land tenure problems due to severe fragmentationand resulting abandonmentof plots. For the three oases with land tenure problems the risk of lower farmer participationrates were tested by reducingexpected benefits to half of what would be expected under ideal conditions.

Rate of Return

Oudref 122 Metovi.a 14X Chenchou 302

A separate sensitivityanalysis was run on the effect of poor maintenance which would reduce the life of the irrigationinfrastructure investments. The result of that analysis indicatesthat although this is an importantrisk which deserves specialattention, the Project is sufficientlyrobust to remain viable, even if project life is reduced to 10 years in place of the 20 years assumed in the base case analysis.

Rate of Return

Poor maintenance reducing the life of PPI's to 15 years 172 to 10 years 152

/1 Historical trends from L977-1981 on prices indicate that average price drops have not exceeded 35S. - 42 -

VIL AGEEMENTS REACHEED AND RECONMENDATIONS

7.01 At negotiations, assurances were obtained that:

(a) Government would monitor and annually inform the Bank of the use of water resources in the area, and that current planned limits on water use would not be exceeded (para. 3.07);

(b) Government would cause BNT to provide credit funds to meet Project needs (para. 4.13);

(c) The Project annual budgets and financial plans would be presented to the Bank for information, not later than September 30 of each year (para. 4.30);

(d) A revolving fund with an initial deposit of US$1.0 million would be set-up (para. 4.30);

(e) The OMVGM would encourage the private sector to take services over where and when feasible; services provided by OMVGM would be paid at cost (para. 5.05);

Cf) The OMVGM and the AICs would establish agreements to define their share of responsibilities in operating and maintaining the works. Principles to be agreed at negotiations, contract agreements to be signed prior to completion of irrigation works, and first five agreements to be sent to the Bank for approval (para. 5.06);

,g) OMVGMwould prepare and submit to the Bank a plan for organization and operation of extension services covering three years after Project completion (para. 5.12);

(h) Government would give assurances that Ci) selected applied research and salinity monitoring considered essential for the Project would be included in the IRA, DRE and DRS work programs by December 31, 1986; and (ii) production of seedlings and applied reseaxch program by OMVGM would be transferred to specialized producers and proper research organizations by Project completion (para. 5.13);

(i) The OMVGMwould prepare an action plan defining the marketing strategy by June 30, 1986 (para. 5.14);

(j) The Project Management Unit (PMU) would prepare and send to the Bank semi-annual Project progress reports in accordance with mutually agreed guidelines (para. 5.16);

(k) The DPSAE would prepare a Project completion report within six months of the closing date (para. 5.16);

(1) Separate Project accounts would be kept by PMU and Government would hire independent auditors and transmit their reports to the Bank within six months after the end of each fiscal year (para. 5.17); (m) the OMVGMwould assist AICs to set up appropriate accounting system and a few AICs would be selected to have their accounts audited by independentauditors (para.5.18);

(n) Farmers would be responsible for repayment of part of the tree uprooting and removal costs in accordance with draft contracts. followingprinciples to be agreed upon (para.6.18);

(o) The AICs budgets would contain provisions to assure full payment of O&M costs by the AICs and OMVGMwould have the right to inspect work and execute repairs at the AICs expense if needed (para. 6.11 and para. 5.06);and

(p) Prior to execution of rehabilitationworks STIL would (i) submit an investment plan and (ii) make credit arrangements to finance the full costs of investments in the El Aouinet oasis. These would be conditions of disbursement for El Aouinet oasis. (para. 6.19).

7.02 As a condition of effectiveness of the proposed loan, Government would be requiredto create the PMU and appoint its chief. The Project ManagementUnit would be created in the OKVGM (para.4.14).

7.03 Based on the above agreements,the proposedProject is suitablefor a Bank loan of US$27.7million to the Governmentof Tunisia for a term of 17 years including 4 years of grace. The Project is expected to be completed by December 31, 1991.

691E - 44 -

Table 1

TUWNSIA GAMESIRRIGTIN PRJECT Project Coampnts bi Year (D 'I00)

kws Cost TOa

1936 193 1998 1939 190 1991 I (USI '000)

SIBILITATZUNOFEXISTIN IRRIOATnIO SYSTEMS 59302.4 9,150.2 3w652.O3,169.6 1,342.2 892.1 23m499.4 319331,2 jW IRRIGAIIIONmmSIE - 1,257.3 126.1 110.2 33.2 3B.9 1,5S5.8 2W087.7 UWMADE PEINEMT 311.9 514.1 592.0 602.9 318.6 21.0 2,350.5 3,134.0 ZMSTITUTIUWIIEELOPNT 715.5 21.9 511.1 390*0 321.2 315S9 3,075.7 4P100.?

Total DUIE COSTS 6,329.8 11P743.64,371.2 4,272.7 2015.1 125B.0 30,490.4 40,453. flucal Cmntinimnies 767.8 1,482.5 563.3 460.2 123.9 13.0 3,410.5 4547.3 Pticu Contin ncie 893.7 2,973.4 1433.0 2,14&8 1236.98 37.3 9v84.0 13,133.6

Total PROJCCSIS 7,991.316099.5 7267.3 6391*7 3375. 2,14.2 43,754.9 53,339.3 vmzu _ u-- -,- -ca uuin uu--- Tames 29161.2 4,494.4 1,576.6 1473.8 639*2 363.1 109758*2 14.344,3 Forsi*n Exdhl 4,778.3 9.195.2 3,184.4 2p929.9 1.315,7 802.3 229195*7 295942

NMt1. 15B515:51 - 45 -

1 1141 PawCr Table 2 cm mm Page 1

to 140111 CI. 'U6 t IdO

Lieu F*uig Total Locl ftmuoiiToW Eaghai Cinst 1.~~~~~~~~~~~~~~~~ ahn Fmls

2. mI con

A. CUUTU 1.N1011 IL.7 42.0 %6. 71.4 57.1 121.7 44 0 2. WFIE 61.1 43.9 110.2 1.7 65.2 146.9 44 0 3. cth 1E113I13I 164.5 147.2 331.7 2463 196.2 442.2 44 1 4. am . OM OD 113.3 "A.4 262.6 151.0 123.5 271.5 44 1 WkTsIu1U111UET 412.7 32.3 742.0 210.3 4A.0 99.4 2 3. iJW nol IDL1761113 CM 1. UYL IO 6U2.219.646 24K? We. 2.43.7 3,316.2 75 3 2. .1M113 244.4 3,95.3 6,2.4 3.3W.2 5,275.0 If04.2 *0 22 3 gm P31 131.4 14.7 3X.l 175.2 259.7 44.9 d0 1 4.1 1.5464 112.l 39102.5 2,41.2 2904.1 4.61.3 49 10

liTOW 231n"_13 u TInJ cl I_ 4r,991.21, 2 6.431 10o07.1s do 41 C. la 331Wl CIIL _I1K

1. I1lL JJrIWO 16.4 362.2 462. 133. 402.6 SA4 75 1 2. IaTS 135.6 275.1 46.7 247.4 16.3 644 0 2 3. 101.lel 93.l 1"9? 114. 131. 26.6 49 1 4. g M 9.3 13.Bl .1 12.4 18.4 2.6 40 0

-Tdd la 2 101WCII. IS 396.4 M.9 1.32.3 2.! 136 1447.1 63 4

is 2313 I,72.1 0494 1,746.3 1,431.13 926. 227.A 3 6 2. 41U 136. 133,1 2706. 112.4 1.4 240.3 49 1 3. U IIm 14.2 1945.9 2,93.1 1.A 114.5 3612.1 49 10 4. IDUIU 23.2 1. 21. 3.9 7.5 36.4 i9 0 lTdd MM 1115 ULITUllUl 2.7026 2.210.1 4,971.6 3.612.232.9 6,629. 46 16 E. zulNM=vm=_

1. -um 3.3 3.1 %.9 7MA 0.1 129.2 3t 0 2. _1 24.3 23.3 43.1 32.1 31.7 64.2 49 0 3. IIIN 5.4 1.3 6.? 7.4 1.3 9.2 19 0

i-ToW MM U E1 WW2n P 0.7 U3.2 15.0 113.3 84.3 202.6 42 0 F, FEEMM F. NU

1. IITDI E I IUTATNIII

P I U OS3S 274.3 25.9 73.2 365.7 674.! IO,40.3 U5 3 B.E . EIIUIPIINWtU 3 L 32.4 12.2 23.6 109.9 201.6 312.5 65 1 11W1_I1 EWIMIIT.WALE . 615 53 3L9.9 1.453.7 733.4 1.19.9 1.930.3 6 5 P373"M142.9 264.8 427.7 27.3 353.0 570.3 6 1

Si-Totl 1310=101ECUIET UIW4An1 1,073.51.22.9 2,W5.3 1.431.3 29429.0 3660.4 a 9 2. IIDII E171fW/MM M314m11

Pam 1N1711 14.4 26.9 41.5 145 352. 35.3 65 0 rU1 . SWMWT 7LUIUU IIES a.3 16.1 22.0 U.? 21.5 3.3 as 0 1111m . EWIPEN M.WII31 11 46.6 75.7 122.3 42.1 161.0 163.1 U 2 0 ?W1t43 3.7 14.1 22.6 11.6 1.O 30.4 62 0

iT a 1MAITI5 141 on0 M33116 73.7 12.t 2114 104.9 177.2 22.1 a 1 3. .ama

CW13NR3D 49.3 7. 1369 .J 116. 112.5 64 0 iDI3*~ *U 9.3 14 29 12A.4 22.1 X35 64 0 33.9 40.3 42 45.2 3.4 13.6 64 0 NInu rOB1 1.5 2.6 4.1 2. 3LI 5.5 64 0

SOW Im l9 ".0 167.1 261.1 1233 m. 343. 64 1 4. 013 II01 -46- -46- Table 2 Page2

W= 11.9 1n4 23 11.9 JJ 1.4 4 0 a 5 V. '.u la. 11.4 U4 US 4 6 _ 1 I, W 217.7 WJ 27. 1.9 49 wmum ,.4 a 4uJ .t un .a eJ s 3.4 n.9 .3 3163 3.1S 0.3 49 =740 724 141.5 W7 %. S9 4 4.01.4 n .S 4 .9 3 2 17.1 4 I

1h4a m F 17.5s 73.1-.421.13 17.904 .344 1.37.7 2 2 N.RIMs iAmmimiinin mWuu 1.m.Au . U.93Z 71. 11.1 3S. 11. 174.1 19 0 2.L 1.9 17.4 27.2 1a 2562 3.6 N 0 M4i.1 II AM ID.36331 m 44. 11.0 13., MA4 23. 212.2 N 1

1 4fl 719.0 0.S l62 1.63h47 11. S1.5 N I UI1WI 3.I 3.9 15.9 92. 14.1 1S1.9 44 S

hTdu U1 m 3111 ,now wi1.22,11. 1.36.2 1934.9364136. 42 a

II. _ nom

mIn = t 3 3.6M 76.4 9442 - ".2 -|4 4."a n 44. E.0 got39 $NEW 11113K IRA. it14. MA. IW1.$ TEN " 1W 24 4.7 4. SPA -9.4 *7 N I SW141_111m 1MA .S 4.1 4.2 U 0 --amok wa.I1T -* a . 4. - 0m44d, 173 1.9 3.9 0 VNIVMmcmi INU319.2319.2401CI.2

_*1-" j 2.. - 2.4 -. 45.2 - 7

C160=3 IL1 12.1 V.2 2642 16.1 132 44 S1

INDIme=n a 141DUoUCih.133 44.6 61.1 15.9 3.6 1.2 31647 a6 -32 -M1V 173 6M.6 92.9 49.7 6 11A.4 a wi Mm 411.9 -. 7 19351.6 10.2 1.34 19.35. is 4 M1. 121 1~~~~~~~~~~~~~~~~.42. s.4 Ina .9 132.I7.5 4 6.U IGA 241.1"A I 644 5

I- Wm n w ~~ ~ ~ ~ ~ ~~~ U . 2114. 26.n6.2 1.361..4 115.7I 1 2.212.3 4au4 1 75U1!3-ROu1 541 19.16.7 U32144- 7.17.2 34711Nl.6 13I16. 442 S 311236i 4.1 1e.9 1e2.4 4.0DJ. 126. 4U 0 el14 Vl="A6l3 42 4.6 12.9 2.9 61.1 3169 69 6 3. F1U

4. 93 131 MI Ca2 4242.4 I 4.72 a3. 15 33 64 S

_2 _zn m n 16.6 S114 12.9l 24 22.4 242. i 1 U141323 14.02.9J11.5. 1h410. 29.4742.1. *4.6 12 6

Da -5 m -4 364own con 3U24651.91.A54 42- 1916.2D 671.22I17.36 2&A.V2. SI I

Phlml CNAuANifu 2.t6.A UMA1. .3*41 243.5 2.4W1.4v.14. 33 Is P"= Cutiumwe.1.4224 4,461.3 PABLO 72.369 59.? 12. I. MU @ 144.1 cI 6 ;7M.7.4.5 t .7 291.2 U 144 - 47 -

STAFF *P~aISAL UFORET

TUNISISA

CARES hgRICAT!OlUPRIJECT Esti1ted Scheduleof DiburM.nt_ ot _anak Loan

RelevantDisbursement Profile IBRO ank DtihursemntsrUsS millianl /a (Ctumlative ¶ Dishurmedl/h Fiscal Year By end of CLmulattve Bankwlde ENEMA Bankwide Somester Cumlative % Disbursed Area Dev. Agriculture Agriculture Tunisia

Decsnbur1985 0 0 0 0 1 0 0 June 1986 1.0 1.0 4 2 2 2 2 Dec. 1986 (end PYl 1.5 2.5 9 S 5 6 6 June 1987 OS 3.0 11 10 11 12 20 Dec. 1987 (end PY2) 1.0 4.0 14 1S 16 17 29 June 1988 2.0 6.0 22 21 23 24 40 Dec. 1988 (end PY3) 3.0 9.0 32 29 31 32 SO June 1989 3.0 12.7 46 37 40 41 59 Dec. 1989 (end PY4) 4.0 17.0 61 45 49 SO 68 June 1990 4.0 21.2 77 54 S7 58 7S Dec. 1990 (cnd PYS) 3.0 23.S 85 62 65 67 8t June 1991 1.0 25.7 93 70 72 74 86 Dec. 1991 (end PY6) 1.3 26.7 96 77 79 81 90 June 1992 OS 27.7 100 84 84 87 93 Dec. 1992 89 89 91 96 June 1993 83 83 95 98 Dec. 1993 87 86 98 l0 June 1994 99 88 100 Nu.er of Projects 102 427 52

/a Expected date of signing: July 1915. Expected date of effectiveness:December 1985. Expected completion date: Decunber19"1. /I The ENKMAArea Developmentwprotile is not an appropriate guide because the oldest loan is only 8 1/2 years old.

691E/p44 48

Table 4

STAFFAPPRAISAL REPUIT ,,= , .~~~~~~~~~IKU ~~~~~~~~~~~~~~~TUNISII GARESIRRIGATrON PROJECT

Major Procurement Paekages

(in thousand of Dinars)

Respon- Method sibility 1986 1987 1988 1989 1990

A. Deep wells ICB GR 1.650 1.Soo - - -

B. Supply of conduits and accessories ICB GR 2.800 7.400 - -

C. Execution of irrigation and drainage works and roads LCB GR 1.000 1,300 3,500 2.800

0. Supply of pumps and hydromechanic equip. ICS GR 1,000 2,700 - -

E. Electrification DC GR 140 240 - -

F. Buildings LCR OHY6M 400 670 - -

G. Tree uprooting LCB OMYGH - 2.200 2.500 -

H. Vehicles and other equipment LCB ONVGM 160 125 215 - LS OMVGM 144 172 36 48

1. Studies, technical assistance, training DCI OMVGM 160 100 - -

ICB: InternationalCompetitive Bidding LCB: Local Competitive Bidding DC : Direct Contracting DCN: Direct Consultation IS : Local or International Shopping

691E/p45 - 49 -

rable 5

STAFF APPRAISAL REPORT nIISIA

GABES IRRIGATION PROECT

Vehicles

(in thousand of Dinars)

------Sector - …----_- ---- Project Unit Strengthening Managt. Type Price Supervision Extension Marketing of OVGM Unit Research Total

Car Tour 7.3 1 - - - 1 Car 9 CV 5.3 1 - - 4 - - s Car S CV 4.1 2 4 - - 1 l 8 Car TT 18.6 2 4 - - - - 6 Moped 0.4 - 10 - - - - 10 Minibus 25.9 - 1 - - - - 1 Truck 10-Ton 36.2 - - 2 - - - 2 Truck I-Ton 7.2 - - 3 - - - 3

691EJp1S8 STAFFAPPRAISAL REPQRT IIUA GQRESXRRIGATIOM PROJECT

List of Oasps - Characteristics. Works. Costs. Cron.ina Pattarn

------COSTS(0'000) ------______-_____-_ Area Pras & Irrigation Farm Model Jhal Deep Electrical Drain * Tree Spare lhal IL Gina QLL bk1 Wall £i9m nL JtxknhL 29A" Rainal EVartSt d A JL c L .L L

1. HARETHS - l1S 281 57 336 8 17 22 720 - 115 - - - - 2. ARRMN - 160 290 70 436 11 24 27 858 - 110 SO - - - 3. ZARATHZ - 174 246 31 500 12 lJ0 24 992 - 174 - - - - 4. HARETH2 - 30 112 25 105 2 So 8 311 15 1S - - - - 5. HARETI41 - 100 112 25 338 7 242 17 740 55 45 - - _ _ 6. KARETH6 - a8 - 25 241 6 84 13 369 - a8 - - - - 7. MARETH2 - 180 210 51 431 12 737 26 1,455 180 - - - - - 8. ZRIG BARRMIA - 71 - 27 257 5 14 14 317 - - - 71 - - 9. 2ERKINE1-3 - 116 - 27 398 5 18 23 471 - 116 - - - - 10. ZERKINE2 - 156 112 28 556 9 48 26 777 - 156 - - - - 11. KEtTANA4 - 125 134 28 378 10 40 la 608 - 125 - - - - 12. KETTANAI - 98 - 26 309 7 31 16 390 - 98 - - - _ 13. KITTANA3 - 140 - 32 419 10 56 23 539 - 140 - - - - 14. AIWONEZERKINE - 30 67 27 85 2 - 8 18 - - - - _ 30 15. CFPA - 100 89 27 257 7 20 14 415 - S0 5O - - - 16. 8ECHIIA1 - 250 - 44 1,369 22 197 65 1,698 - 280 - - - _ 17. ELHMAMAZIRAA - SO - 22 290 6 14 IS 347 80 - - - - - 18. EL AMHMAOASIS - 430 72 27 1,319 35 1,899 56 3,407 430 - - - - - 19. EL HAA KSAR - aS 120 32 295 7 107 15 577 85 - - - - - 20. IECIIIKA2 - 270 - 6 1,598 22 - 53 1,679 - 270 - - - - 21. GLIBDOKHANE (CF2) - 70 161 - 421 6 - 5 592 - - 28 42 - - 22. KHEAIET (CFI) - 71 - - 639 6 - 5 649 - - - 71 - - 23. TEKOURI - 32 24 26 103 3 - 8 163 .- 32 - - - - 24. CHECIOUI - 57 - 22 222 5 - 12 260 36 - 21 - - - 25. GEN CHILOUF(S - 36 83 26 111 3 - 7 220 - 26 - -. - - 26. BEN CHILOUF(PI - 34 77 - 229 3 - 12 321 - 34 - - - - 27. CHENCHOU2 - 40 - 27 125 3 - 9 165 - - 40 - - - 28. OJED NAKKLA1 - 30 85 23 216 2 - 1S 341 - - - 15 15 - 29. OUEONAKHlA 2 30 - 84 24 239 39 - 10 395 - - - 15 - 15 30. BEN CHILOiJf (Ext) 70 - 161 - 608 13 - 24 806 - - - - 70 - 31. TMOJLA 2 - 20 - 29 85 .2 1 8 124 - 1S - - - 5 32. CHOTTEL FERIK - 31 - 7 300 2 - 10 319 - 32 - - - - 33. EL MOOU - 40 - 22 167 4 34 10 237 - 40 - - - - 34. LIMAOA - 78 - 34 320 7 39 17 414 - 78 - - - - 35. LIHAOUA(Ext) 70 - 144 34 273 12 - 10 474 - - - - 70 - 36. ZRIGOAKNLANSA - 30 - 27 105 3 39 8 182 - 30 - - - - 37. GHANNOUCHM2IRAA - 280 - 33 a85 25 - 35 951 - - - 84 - 196 38. TEHOULA1 - 40 - 28 148 35 2 10 222 - 12 28 - - - 39. AIN ZRIG - 105 - 29 447 14 - 19 509 - 105 - - - - 40. OUCHEtU - 143 - 52 498 13 187 26 774 43 100 - - - - 41. ZRIGEL G/ANDRI 30 - 144 32 152 12 - 12 352 -- - - s3 42. HATHATA - 60 - 60 245 5 - 18 328 - 33 27 - - - '. 43. EL AOUINET - 265 144 82 839 23 - 42 1,131 - 132 133 - - - 0 44. OUOREF - 263 48 85 1,100 23 496 55 1,80J 79 1S5 Z6 - - - 45. METOUtA _ 268 - 77 407 _n 52 79 1.639 8A6 . _ _ - _ TOTAL 200 4,821 2,990 1,416 19,773 489 4,632 947 30,246 1,089 2,800 418 283 200 231 691E/p61 MUISIAMTUNT GAMESIRRIGATION PROJECI PmOJgToia'iRRATION GMBE SIAN4Y ENCOtiESTATMENT/C014EI 011XILQ!TAT!ON STIPLIFIE 1. b (in thousandof Dinars)

1981 1982 1983 1984 1985 --- M-ctual/ ------Budget/--- RMalisations Pr6isions

Salesprice of a m' of water (millimes)to PPI a 10 10 and 14 14 14 Prix de ventsdu a' d'eau(f.1111ms aux PPI Wages and salaries 362 580 572 600 675 Fra1sde personnel Otheroperating expenses /a 220 271 304 310 350 Autrusfrais d .xploitation/a Total *xnensas Il ALL AlA 21Q l IT25A- dtLlidhnses Water sales 103 140 232 240 275 Ventesd'eau Other revenues 16 31 60 70 75 Autresrecettes Operatinssubsidies 220 435 497 600 675 Subv*ntiond'explo1tation Tntal Inome iii ill KRi 1LQU tal retates

Surplus(Deficit) /h (243) (245) (87) _ - Excident C06ficit) 1k

/a Depreciationnot Included. /A A.ortisseeentsnon Copris. /b Deficitfinanced by supplier. /1 04ficittinanc par creditfournisseurs.

691E/p62

.. 1!.. -- :* -52-

Table 8

STAFF APPRAISALREPORT

TUNISIA

GABES IRRIGATIONPROJECT

SelectedDocuments and Data Availablein the Proiect File

1. Plan directeurdes eaux du Sud (2eme tranche). Projet de renovationdes oasis de Gabes, February 1984. CNEA (3 volumes)

2. Gabes IrrigationProject PreparationMission to Tunisia. Contributionof L.W. Alferink (DrainageConsultant) (August 1984)

3. L'exploitationde la Nappe du CI (ContinentalIntercalaire) dans le Sud Tunisien. DRE, February 1984.

69lE/p57 STAFF APPRAISAL REPORT

"R.ESIRBICATION PROJECT

Rsnt Recovery lO1nars 195 constant nric.s) /g ------AFTER INVESTMET ------Farm A Farm - Farm C Farm 0 - Fanr I Farm F Year 8 Year 14 Year 8 Year 14 Year 8 Year 12 Year O Year 14 Year I Year 14 Year 6 Year 14 1. Net income (CAM costs not deducted) 1,517 1.730 1.160 1.206 1.408 1,632 2.623 2,803 2,470 2.672 1.509 1,561 2. Cost of tree uprooting: - Date pals 130 /a 130 /A 30 /a 30/ 8//l 8 /l - Olive trees 12 12 3 Allowance for risk uncertainty 102 151.7 173 116.0 120 140 163 262 260 247 267 150 156 4. Inputed return on.capital 20X 303 346 232 240 280 326 524 560 494 534 300 312 S. Depreciation for trees (depreciation for irrigation system is included in the OUm charges for water) over 15 years 4 4 2.7 2.7 IS 15 7 7 17 17 12.3 12.3 6. Farm Rent/Per Hectare 92d 1,077.0 767.3 801.3 965 1,120.0 1,830.0 1,956.0 1,712.0 1,854.0 1,047.0 1,080.7 7. 041 Costs 158 162 166 166 154 159 183 183 124 131 200 8. Rent recovery from 100X cost recovery for O0H (lines 7 - 6) 172 15X 22X 21X 16X 14X 10X 9.42 7.22 7.1X 19.1S 18.5X 9. Rent Recovery for new perimeters at 40X cost recovery for investments/t ------27.22 25% - -

10. Rent recovery from 4% sales tax - 9.2X - 7.62 - 7.32 - 7.3S - 7.1X - 7.0% 11. Total rent recovery at full developnent - 24.22 - 28.62 - 21.32 - 16.7X - 39.2 - 25.52

Amount of investment per ha to be recovered for new perimeters: 3,600 0 (average). /a This amount Is to be paid annually for 10 years assuming 02 interest. /6 Investment costs Including physical contingencies is 1.5 million dinars. The annual payment per hectare assuming 402 investment cost recovery is 466 dinars per annun over a 10 year period at 52 interest. The appropriate grace period is to be decided by Governemnt. /c The methodology used to calculate the table Is in Annex 5.

691E/p63

1-4. t 0-' STAFF APPRAISAL IPOQT

AIES IERfAIl OJI Farm Rudiak /a. SMdel A Nat&Intensifigatian, Firm Sili._it h (Otnars)

Years after Completionof Irrigation RehabilitationWorks . WI W ~4 -~ a 2 i0 ±L 12 J1 14

Valueof Production as 290 745 1,199 1,568 1,744 1,994 2,232 2,319 2,393 2,393 2,393 2,432 2,484 2. outflows Tree Planting Costs 61 ------Production Costs /1 416 373 457 149 6I3 654 666 661 659 691 691 691 693 693 S. Cash FlowB for.Financina (1-I) (389) (83) 2ia 650 933 1,090 1,128 1,551 1,630 1,702 1,702 1,702 1,739 1,791

4. Flnanim

(a) Souce o F1nane /l Loan 53 66 1 Subsidy 11 17 A Sub-total 64 as (b) Loan Repanants Principal - - 19 20 21 2 24 25 27 Interest 19 Is 17 16 14 13 11 Sub-total 35 35 38 25 33 35 (ci Not Finaneindia-bh 64 83 - - - - - (38) (38) (35) (35) (38) (38) (38) 5. CainFlaw After Financing 132cI (325) - 286 650 933 1,090 1,325 1,513 1,592 1,664 1,664 1,664 1,701 1,753 6. Reoaynt of Advancefor Tree UonratniaId - 104 104 104 104 104 104 104 104 104 104 - 7. Mat Farm Benefit(cast) After eoawantaf Advance(5-61 (325) - 288 546 629 986 1,224 1,409 1,415 1,560 1,560 1,60 1,597 11763

Total Incremental Labor Requirements: At year a - 164.5 IncrementalCompensatian Per Handayof Incremental Labor: At year 5 - 7.6 At full development- 205.5 At full development- * S

/A Incremnntal 2b Includes inputs, UNHcharges, hired labor and farmers equity cost'oftree uprooting. /e Loan and subsidyfor fruittree planting. /d To be paid over 10 yearswith 3 years grace assumi"ngno Interest. 14f3E/p23 C STAFF APPRAISAL REpORT

GABESIRRICATION PROJECT

Farm iudaet La. Model n

Fruit and Vegetable Intmnsification,firm Si2g (.5 hal (oinars)

Yearsafter Completionof Irrigation RehabilitationWorks 1 2 3 4 5 6 7 a 9 10-21

1. Znflmws Value of Production 167 337 479 547 605 642 693 737 751 762 2. QuWflws TreePlanting Cost 41 ProductionCost /b 74 121 152 166 161 165 193 200 202 202 3. Cash Flow Beforg Fiaancing(1-2) 52 216 327 S81 424 457 5oo 537 549 560 4. F1nancin (a) Raure:sof Finance/r Loan 19 Subsidy s0 UV Sub-total 69 (b) LoanPaLnts Oebt Service - 4 4 4 (c) Met finaninga (a-b) 6 - - - - - (4) (4) (4) S. CashFlow After Financina (3+c) 121 216 327 381 424 457 500 533 545 556

6 *Remawant of Advancefor Tree 6.Rnuatin.af/dWAuDrotn /d le frTe - - 37 37 37 37 37 37 37 37 7. Met FarmBgnefit After Reoavmentof Advance 121 216 300 344 377 420 463 496 508 519

Total IncrementalLabor Requirements:At year S - 33.8 At full development- 33.8 Incremental CompensationPer Nandayof Incremental Labor: At year a - 14.7 At full development- 15.4 /a Incremental. /l IncludesInputs, GIN charges, hired labor and farmer's equity cost of tree uprooting. l; Loan and subsidy for fruit tree planting,and subsidy for tree reroval. /d To be paidfor 10years with 2 yearsgrace assuming no interest. 1443E/p24 STAFF APPRAISAL REPOERT

TNSIA ClARESIRRTIQAT!N PRO3[CI Farm Budeat la. Hadg C OlivesIntensification, Farm Size 11 hal (1Dnars)

Yearsafter Completion of IrrigationRehabilitation Works 1 2 3 4 - 6 7 a 9 10 11 12-21

I. Inflows Value of Production 170 418 732 1,025 1.445 1,524 1.657 1,815 1,894 1,969 1,994 2,044 Saleof Wood 50 2. Outflows TreePlanting Costs 226 ProductionCosts /h 102 164 232 291 383 390 407 415 421 423.0 420.0 421.0 3. Cash Flow ofoarsFinancina(1-2) (108) 254 500 734 1,062 1,134 1,250 1,400 1,473 1,546.0 1,574.0 1,623.0 4. Fnancins (a) Sourcesof Finance/L Loan 81 Subsidy 53 U' Sub-total 134 (b) LoanReoavnents 16 16 16 16 16 OebtService (c) NetFinancina (a-b) 134 (16) (16) (16) (16) (16) 5. Cash FlowAfter Financina (3tc) 26 254 SOO 734 1,062 1,134 1,250 1,384.01,457 1,530 1,558 1,607 6. Remawmntof Advancefor Tree UDrOatinl/j 6 6 6 6 6 6 6 6 6 6 A. aetFarMhnsfAt. After Reaaymntof Advane- 26 254 494 726 1,056 1,126 1,244 1,378 1,451 1,534 1.552 1,601

TotalIncremntal Labor Requirements: At year8 - 104.1 At full development- 107.1 Incremental CompensationPer 14anday of Incremental Labor: At year 8 - 13.2 At fulldevelop_nt - 14.9 /a Incremental. /h Includesinputs, OEM charges,and hiredlabor. /_ Includesloan andsubsidies for fruittree planting, and subsidyfor olivegrafting and for tree removal. /d To be Paid over 10 yearswith 2Z graceassuming no interest. 1443E/p25 0 o STAFF APPRAISALREPORT TUNISIA

GABES iRRiGATioN PRoJECT

Farm Uuduotk /a. Indal a OliveS and CrOps Intansciecatian, FarM Siza i1 ha' (o1nars)

Years after Completion of Irrigation Rehabilitationworks 12 _ 3 4 5 6 7 9 1l 1L 12 4i 14

Value of Production 977 1.694 2.343 2.754 3J210 3.248 3.298 3,373 3.410 3.485 3.510 3,560 3.560 3 560 2. DuUflns Tree PlantingCosts 673 300 315 330 615 105 105 105 105 105 673 300 s3S 330 ProductionCosts /a 21S 378 530 583 703 705 718 720 724 726 723 723 723 723 3. Cash FlowBefore Financing (1-2) 89 1.016 1l498 1.841 1.892 2,438 2.475 2.548 2,581 2.654 2.114 2,137 2,622 2,507

4. Financin

(a) Sources of Finance /a Loan 396 357 Subsidy 52 7 8 8 a 8 8 8 8 8 8 a S a f Sub-total 448 (b) LoanRepayment Debt service - - - 67 67 67 67 67 67 67

(e) Net Financina(a-b) 448 7 8 8 8 a 8 (59) (59) (59) 298 (69) (59) (59) 5. CashFlow After Financina (3+c) 537 1.023 1,506 1,849 1,900 2U446 2.483 2,489 2.522 2595 2.412 2,478 2,463 2.448

TotalIncremental Labor Requirements: At year8 - 153.1 IncrementalCompensation Per Kanday of IncrementalLabor: At year8 - 16.3 At full development- 156 At full developnt - 11.7

/a Incremental /b Includesinputs, OH costsand hiredlabor. /_ Includesloam for fruittree planting, and for areenhouseestablishment and subsidy for fruit tree planting olive grafting and for greenhousecrop establishment.

1443Elp26 STAF. APPRAISALDEPORT

GABESIRRIGATIO PROJECT

Fare-Budiat /a. IkdelC Now Irreiaation. Farm S12c 1( ha I (01nars)

Years afterCompletion of IrrigationRehabilitation Works l 2 l 4 9 6 7 a 9 1Iz21

1. Inflows Valueof Production 313 644 995 1.314 1,751 2,075 2,598 3,069 3.293 3,293 2. Dukflaws Tree PlantingCosts 256 ProductionCosts /a 184 289 346 450 545 S68 589 597 611 611 3. Cash FlowBefore Financina(1-2) (1273 355 649 864 1,203 1,507 2,009 2,472 2,682 2,682 4. Financina (a) Sourcesof Finance/, Loan 123 46 23 U' Subsidy 62 25 16 9 11 11 11 11 11 11 Sub-total 1M5 71 39 9 11 11 11 11 11 11 (b) Loan Remavments 24 33 36 Debt Service Cc) ietFlnatnIn (a-b) 1S5 71 39 9 11 11 11 (13) (22) (27) 5. Cashflow After Financing (3+c) 58 426 688 873 1,214 1,611 2,020 2,469 2,660 2,65S

6. Investmnt Cost Recovery /d - - 466 466 466 466 466 446 466 446 7. Not Farm laneift After InvestmntCost Recoverv (5-6) 58 426 222 407 745 1,02 1,554 1,993 2,194 2,189

Total IncrementalLabor Requirements:At year 8 - 161.9 At full development- 166.9 IncrementalCompensation Per Iandayof IncrementalLabor: At year 8 - 13.1 At full development - 11.1

/_ Incremental * lb Includes inputs, 081 costs,and hired labor. /_ Includesloan and subsidyfor fruit tree planting,and tunnelcrop planting. /d 40% of investmentcosts. 1443E/p27 0 STAFF APPRAISAL REPOfT

TUNIS

GABESIRRIGATION PROJECT

Farm BLudet Ia. ModelF Fruitz D.vuloamnt JimVegetable aM. farm SJ28 (I hi) (Olnhrs)

Yearsafter Completion of IrrigationRehablittation Works 1J- 2~ 1 A S~ i 7 8 9 10 11-21

1. InLlnwi Valueof production 428 823 1,173 1,340 1,611 1,565 1,673 1,606 1,660 1,660 1,860 2. Outf1dwm TreoPlanting Costs 184 ProductionCosts /a 151 256 334 370 367 395 401 408 410 410 410 3. CashFlow BRfgrmFinaneina 93 567 639 970 1,124 1,170 1,272 1,396 1.450 1,450 1,430 4. tinansin (a) foureasof Financg /r Loan 95 Subsidy 25 7 7 7 7 7 7 7 7 7 7

(b) Loan *amnants - - - - - 11 11 11 11

(c) Not Fjnancna 120 7 7 7 7 7 7 (4) (4) (4) (4) 5. Cash Flow After Financin.(3+c) 213 574 646 977 1,131 1,177 1,265 1.394 1,44G 1,446 1.446

TotalIncremental Labor Requirenets: At year8 - 77.6 At full devolopment- 77.6 IncrerentalCompensation Per Handayof IncrementalLabor: At year 8 - 16.1 At fulldevelopment - 16.8

/I Incremental /l Includesinputs, OLM costs,and hired labor. /a Includesloan and subsidyfor fruittree planting,and tunnelcrop planting.

1443E/pz2 - 60 -

Table 11

STAFF APPRAISAL REPORT

TUNISIA

GARES IRRIGATION PROJECT

Conversion Factors for Proiect Coats

Investment Inputs

Construction (other than roads) 0.54 Road construction 0.74 Agricultural machinery 0.77 Vehicles (locally assembled) 0.40 Vehicles (imported) 0.36 Trucks (imported) 0.63 Miscellaneous manufactures 0.65 Miscellaneous non-tradeables 0.60

Operatina Expenses

Road transport (and vehicle operating costs) 0.85 Gasoline 0.60 Diesel 1.38 Electricity 0.77 Marketing 0.45 Skilled labor 0.80 Unskilled rural labor 0.75 General expenses 0.75 Spare parts 0.63

Sources: Except where indicated. conversion factors are taken from Gordon Hughes' 1980 study of shadow prices in Tunisia. These factors were calculated to reflect medium-term price relationships, included projected trends in world market prices for tradeables; where these relationships have substantially changed since the study, the factors have been adjusted accordingly.

691E/p64 - 61 - Table 12

STAFF APPRAISAL REPORT

TUNISIA

GABES IRRIGATION PROJECT

Economic Price of Fertilizer

(Potassium) Urea (46% N) Phosphate (TSP) Chloride

International price FOB (US$)Y 250 - 100 Tunis FOB (US$) - 170 Tunis CIF (US$) 257 - 107 Tunis CIF (D)Y 205 136 86 Unloading and local port charges 11 11 11 Export parity price (phosphates) - 125 Inland transport (average)yA 12 12 12 Marketing costs'" 30 18 14

Economic price at faragate 258 155 123 Financial price at far.gate 104 56 220 Accounting ratio 2.5 2.7 0.56

In 1990 prices in 1984 constant prices (Source: World Bank Commodity Price forecasts, September 1984). lb Exchange rate used in US$l a D 0.8. Jc D 14/ton adjusted by the service conversion factor (0.75). /d D 0.07/ton-km on an average distance of 200 km, adjusted by the road transport conversion factor. /e 131 of total costs.

691E/p65 - 62 - Table 13 STAFF APPRAISALREPORT

TUNISIA

GAIES IRRIGATIONPROJECT

Prices Used in Economic and Financial Analysis (Dinars)

Financial Economic Price Price - (per ton)

Production Olives 125 159 Table Olives 250 317 Dates 130 165 Apricots 221 281 Pomegranates 125 158 Pears 432 .549 Pistachios 5,000 6,350 Peppers 215 273 Green Onions 103 131 Carrots 58 74 Squash (marrow) 24 284 Alfalfa 30 38 Green Barley 30 38 Henne 2,500 3,175 Melon 156 198 Potatoes 200 254 Greenhouse Tomatoes 215 273

Inputs Seed Potatoes 'ton) 240 240 Carrot Seed (kg) 6 6 Squash Seed (kg) 55 55 Alfalfa Seed (kg) 2 2 Green Barley Seed (kg) 0.2 0.2 Melon Seeds (kg) 25 25 PomegranateSeedlings (seedlings) 0.3 0.3 ApricotSeedlings :seedlings) 0.5 0.5 Pear Seedlings(seedlings) 0.9 0.9 Apple Seedlings(seedlings) 0.9 0.9 PistachioSeedlings (seedlings) 2 2 Table Olive Graft 0.3 0.3 Manure (ton) 7 7 TomatoesSeedlings (1,000 seedlings) 20 20 Pepper Seedlings(1.000 seedlings) 6 6 Green Onion (1,000seedlings) 5 5 Henne (1,000 seedlings) 70 70 Anonniumnitrate (ton) 77 192.5 Potassiumsulphate (ton) 235 131.6 Triple superphosphate (ton) 56 151.2 Animal Traction (animal/day) 6 .6 Mechanization(tractor/hour) 4.8 4.9 Irrigation Water ('000 a) 15 13

691E(p66 STAFFAPP3A!SAi REPMT

AU :,IRDIaATION PE.1E.T PrglactRelatad Cash Flgaw/a (D0 000)

1986 1992

A. S.ur.cfasnfla. ZINC Loan 750 1,500 2,ZSO 5,025 6,375 3,370 1.500 FarmersDirect Contributions: Payumntsfor GIM and Reservefund lb 174.2 452.0 779.7 968.6 1,146.3 1,333.3 Investament Cost Recovery/P New Perimeters 93.2 93.2 93.2 93.2 92.2 93.2 TreeUprooting /d 50.4 107.0 38.1 34.1 8.8 1.5 Repaymnts for TreeUprooting 201.6 428.2 152.4 136.2 35.5 6.04 2ownDaynientsfor Credit 61.0 110.8 127.7 115.1 59.0 6.1 CreditRepa3¶imnts /a 69.2 150.0 240.7 342,8 281.0 359,6 347.3 316.5 264.6 245.8 Repaymentsby STIL 5.7 Taxes Agriculturallax If 1.7 11.3 37.0 83.5 143.2 207.3 261.4 307.3 344.9 397.5 421.9 ialtosale Market Tuaes /a 3.6 22.5 74.0 180.1 309.6 414.5 522.8 514.5 689.7 795.0 842.7 OtherTaxeS /h1 2,161.2 4,494.4 1,576.6 1,473.8 689.2 263.1 120.0 120.0 120.0 120.0 120.0 120.0

8. Analiaations/Outflows ProJectCost /a 7,981.3 16,099.5 7,267.5 6,681.7 3,375.7 2,149.2 600.0 600.0 600.0 600.0 600.0 600.0 Debt Service 18RD Loan 100.0 300.0 600.0 3,87996 3,899.6 3,899.6 3,399.6 3,899.6 3,899.6 3,899.6 1 9 4 TotalAnal Icat ians 7,f81. 16199.J 7.I5Z7L5 7,A8121 7.275.3 LI04Ll &J 4 9 .499,6 4,49LA 4L4MJ. 4.4ILh .60. C. uralusJn.ftCoit /A/ Anwal (4,778.8) (9,127.4) (2,264.2) 588.3 1,674.0 (142.7) (1,777.6) (3.142.6) (3,117.2) (2,935.3) (2,829.3) 1,123.6 Cumulative (4,778.8)(14,106.2)(169360.4)115.772.1)(14.098.1)(14,240.8) (16,018.4) (19,161.0) (22.278.3) (25.213.6) (28,042.9)

/a In currentterms until PYI a,%din constantterms thereafter. Al As this is a Project-related cash flaw there is no provision in Project coat.sfnr 08 of irrigation works after ti Project period, and similarly no provision In the table for 08M payments after the Project period. I ForC new erJkgter: 40% of total investment cost (including contingencies) of 1.8 million dinars, repaid over 10 years at St interest. For rehabilitatedperimeters: an averageof 50% of distributionnetwork investments (including contingencies) of 11.2 million dinars, repaid over. 10 years at 5% Interest. /A Farmerequity contribution to tretuprooting. /a The termsand conditionsfor varioustypes of creditis definedIn para.4.13. /f 4% of the estimatedvalue of agriculturalproduction. Ag8% of the estimatedvalue of marketedagricultural production. -21 /h General taxes and duties. I. /j Including all investment,operating and taxcosts of theProject (see Table 1). AfterYear 6 the recurrentcosts are forDWVGM salaries and Can of .a facilitiesother than the Irrigation system.. (3 w 1B This also represents the Goverrment cash flow.

1312E, Page 16 - 64 -

Table 15

STAFF APPRAISALREPORT

TUNISIA

GABESIRRIGATION PROJECT

Economic Cost and Benefit Streams

(in thousands of Dinars)

Total Total Net Incremental Incremental Incremental Periods Benefits Costs Benefits

1 0.0 3,920.0 -3,920.0 2 53.1 8,551.3 -8,498.2 3 314.2 2,706.4 -2,392.3 4 956.3 2,245.6 -1,289.3 5 1,995.8 661.4 1,334.3 6 3,164.4 175.3 2,989.1 7 4,236.5 0.0 4,236.5 8 5,343.0 0.0 5,343.0 9 6,281.2 0.0 6,281.2 10 7,048.7 0.0 7,048.7 11 7,681.8 0.0 7,681.8 12 8,204.6 0.0 8,204.6 13 8,552.0 0.0 8,552.0 14 8,627.7 0.0 8,627.7 15 8,805.0 0.0 8,805.0 16 8,704.4 0.0 8,704.4 17 8,612.1 0.0 8,612.1 18 8,625.5 0.0 8,625.5 19 8,593.5 0.0 8,593.5 20 8,594.0 0.0 8,594.0

1312E/pI8 Chart lI

STAFFAPPRAISAL REPORT

GASES IRRIGATIONPROJECT

Inlmmieentation Schedule

PYl _ PY PY Y Y 1986 _ t '915-T-1-81 r- le 1918 1 zTsr 17

1. IrrtqatIonWorks and Eguioment Tube wells (+) ...... Tubewells (3+4) Supplyof conduits(1+2) ...... Supplyof conduits(3.4) ...... Puwps and hydroequipment(1+2) ...... Pumpsand hydroequipment(3+4) Electrification - Works (1) - 847 ha ...... Works(2) - 836 ha ...... _ Works (3) - 1,769ha Works ...... (4)- 1,469ha U Tree uprooting(1+2) ...... Tree uprooting(3+4) ...... _ _ 2. gutldinas 3. VAhicl-s 4. TechnicalAssistance S. Tra1nina

Procuremmnt Execution

(1, 2, 3, 4) ProJectyears.

691E/p46

t1H - 66 - STAFF APPRAISAL REPORT TUNISIA Chart 2 GABESIR3XGA=TION PROJECT

OMI GAZES-MEDENE - PROJET D'ORGANIGRAL2E

PRESIDENTOIRECTEUR GENE.RAL

CELLULEDE GESTION . PLANIFICATIONET ET SUIVIDES _ CONTROLEGESTION

|~~~r------r------DIRECTIONADMINISTRATIVE DIRECTIONMISE DIRECTION ETFINANCIERE ENBVALEUR IRRIGATION

SERVICEADMINISTRA- SEVICE GONOMIUE StRVICE _ TIF(PERSONNEL, JU- l _ ' Er STATIONO'APPUI EXPLOET,ATGCN RIDIQUE, DOMANIAL)I______1______

SERVICEFINANCES ISERVICE" COOPERATION SRIE-A I BUDGET(ET CREDITS) IET APPUIA LIA ET APPU AUX AIC

______COMJ'ERCI-ALISA 71ON______

SERVICECOMPTABILITEI SEqvrc- sEvrcE¢ MMES GENERACLEEC, YULGARISATION ElET l=JAUX IANALYTTOUE __

SERVICEACHATS I IMARCHE

Liaison hlierarchiaue / DIRECTIONSRESIONALES

SERVIICESIAC.MjI*STRA77F Liaison fo tionnelle FI=ANC7ZER

EXPLOr,ATION I IM'AINTENANCE- UARSTOI APPUIAUX AIC I L__UL__ _I_AT_GN_I

SUTION U INTEMIENTION CENTRESDE VUL3 R:- IEW IPES D1E.NTRri tENI SATTRESDE VULSAh3'R:: &MAGASINPARC -ATEIERI-rRANSPCq-j I'A SCNEIETSATOAuETAEPols.c IIPRO:| STAFFAPPRAISAL REPORT

TUNIStA

GiAmES IRRIGATION4 PROJECT

IrrigationDevelonient

1 ~~~~2 3 4 56

Sector Area 1986 - 1987 - | 1988 - - 1989 - | 19901 1981 1~~~847…--~iI~~

2 836 ...... xxx ~~~~xxxxxx xxx xxx xxx xxx xxx xxx xxx xxx xxx i XXXXXXXXXXXXXXX XXX XXX XXX XX XX XXX XXXXX XXX XXXXXX===-===7 === 3 18769.... - - - - - xxx - I- XXXXX XXX x XXX xxx XXX x x xXXX XXX- x XXX

3 1,769 .*.....

XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

PartialIrrigation 1,683 4,174 3,338 1.569 -

Full Irrigation - 847 1,683 3,452 5,021 5,021

UnderReconversion 560 1672 1,674 ,113 -

AreaReconverted - 560 2,234 3,908 5,021

...... Pumps operational. No new distributionnetwork. _Full operationof the irrigationsystem xxxxxxxx Reconversionperiod ======Full reconversion

0691E,p.45

IF IBRD18406 GABES ~TUNISIA GABESIRRIGATION PROJECT \ / ,GA, 7UDA PROJECTIOUNOARIS.. LANORNIFILDS

TI _____~~~~~~~~~~~ ROADS ~~.. ~ ~~~MAINoDWANonATR A - :~~~~~~~~~~~~~~~~~~ECONDARYROADSat GUOtAJARImX

0' ~~~4444RAILROADS SPOTZ&WVAnom

4. INTERNATIONALAINFORT wy.sms 0 ATIONAL APITAULI I7N!ERNATIOIINALIOLOOAHIII In~~.

*. MEDITERRANEN s

m

I~~~~~~~~~~~~~~~~~~5 'h :IL,.iRS 1ORD 18490

TUNISIA ......

N3~~~~~~~~~~~~~~~~~~~~

BECHIM~ An~ ~ ~ ~ ~ ~ 17 ~iCHENC EF KHE AE .HAAN DOKH4ANE 71 ha TKOURI A -A RAT 11 70 ha _ 472 156 h~~~~~~~~~~~~~~~~~~a32ha10 /

HL 30h3Oha b. R 13BENGaTsh.4LOUF 24 3 I VI 30 ha ex 0 aR. |F74h ArA OR MARETH~ T¶MO -

ELMD ~TE JUA AT ¶ a ~ ~ 4ha *ZR ¶ 0 at. TOUI ~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~OTO3R18 ZERtO KETTANA - boi Lmao ARRANIA KETTAN MAOUA ~~~~ZERKIINE

60 ha ~~~~~~~~~~~22h

472 ZERKINE II PkRATI

AIOUN ZEIR KINE 30 ha 14h MARETH MTsnlW A.sb.. a-a-.-d h TNeWi a-a0"' $Ulf 4%do*. bw cof ug I tCIvV V*fmd .*.. i.e TV. i *'Cl a-513m ha

OCTOBER 1964