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World Bank Document FILE COP | RETURN TO Report No. 274a-TUN REPORTS DESK The Economic Development ONE WEEK of Tunisia Public Disclosure Authorized Volume 11: Annex-Industry December 27, 1974 EMENA Region Country Programs Department II Not for Public Use Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS Currency Unit = Dinar = 1000 millimies With effect from 1955 US $1.00 = 0.42 Dinar Dinar 1.00 = US $2.381 With effect from September 28, 1964 US $1.00 - 0.52 Dinar Dinar 1.00 = US $1.90 With effect from December 20, 1971 US $1.00 = 0.48 Dinar Dinar 1.00 = US $2.08 With effect from February 1973 US $1.00 = 0.44 Dinar Dinar 1.00 = US $2.27 UNITS AND WEIGHTS AND MEASURES: METRIC British/U. S. Equivalents 1 m = 3.28 ft. 1 m ton = 0.981 g. ton 1.1 US sh. ton 1 m2 = 10.76 sq.ft. 1 kg = 2.2 lb. 1 km = 0.62 mi. 1 litre = 0.22 gal. 1 km2 = 0.386 sq.mi. = 0.26 US liq. gallon 1 hectare = 2.5 acres 1 m3 = 1.31 cubic yards FISCAL YEAR January 1 - December 31 THE ECONOMIC DEVELOPMENT OF TUNISIA TABLE OF CONTENTS ANNEX II INDUSTRY Page No. 13. INDUSTRIAL DEVELOPMENT TRENDS A. Review of 1961-1971 ................................ 1 B. The Structure of Tunisian Industry .... ............. 5 C. Economics and Operation of State Enterprises 6 D. The Fourth Plan - A New Deal ....................... 10 E. The Private Manufacturing Sector .... ................ 11 14. POSITION AND PROSPECTS IN KEY SECTORS A. Oil, Natural Gas and Petroleum Refining .... ........ 12 B. Phosphate Mining and Fertilizer Production ... ...... 16 C. Mining, other than Phosphates ...................... 18 D. Sugar .......... .................................... 20 E. Textiles, Clothing, Leather and Shoes .... .......... 22 F. Pulp and Paper ..................................... 26 G. Construction Materials (Particularly Cement) ....... 28 H. Steel .......... .................................... 28 I. Metal Manufacturing, Mechanical and Electrical Industries .................................... 31 J. Motor Vehicle Assembly ............................. 33 K. Electric Power ..................................... 36 15. AN INDUSTRIAL DEVELOPMENT STRATEGY A. Introduction ....................................... 41 B. The Proposals of the Fourth Plan ................ ... 41 C. Some Elements of a Production and Investment Strategy ........................................... 42 (i) Sector Priorities ............................. 42 (ii) Export Orientation and Liberalization .... ..... 43 (iii) Employment Creation ........................... 43 (iv) Role of Foreign Investors ...... ................ 44 (v) State Industrial Enterprises .... .............. 45 (vi) Small Scale Industrial Enterprises ............ 46 D. The Tools of Industrialization ..................... 47 (i) Project Identification and Development ........ 47 (ii) Industrial Licensing and Incentives Framework . 49 (iii) Institutional Infrastructure .... .............. 50 (iv) Manpower, Productivity and Labor Relations .... 51 MAP No. 10003 Mining, Manufacturing, Power ANNEX II: INDUSTRY 13: INDUSTRIAL DEVELOPMENT TRENDS A. Review of 1961-1971 13.1 During the period 1961-1971, industrial production increased by 150 percent, corresponding to an average annual growth rate of 9.9 percent. There was a remarkable 20 percent further increase in 1972, bringing the average annual growth rate to 10.4 percent, due, in part, to a record year for the olive oil processing industry. A substantial part of the growth over the decade is due to the rapidly increasing production of petroleum. The growth for the manufacturing sector alone was about 8 percent, but apart from food processing, growth has been dynamic: about 15 percent per year. The mining industry has stagnated because of difficulties in the exploitation of rock phosphate, to be described later, as well as dwindling reserves of iron ore. Food processing, which accounted for about 50 percent of industrial output in 1961, has been held back by unstable agricultural production, and by the relatively slow growth in certain subsectors where a processing potential was thought to exist (sugar, canned fruits and vegetables, wine and essential oils). About 240,000 people are employed in industry, of whom about 170,000 are in manufacturing and 19,000 in mining; roughly one-third of these jobs were created during the 1960s, mostly in manufacturing. Table 13.1: TRENDS IN INDUSTRIAL OUTPUT, 1961-1972 (Million Dinars at 1966 Prices) Value Added Growth Rate /1 1961 1971 1972 1961-71 1961-72 Power and water 4.0 13.2 14.5 13.4 13.0 Petroleum -- 23.5 25.8 -- -- Mining 8.9 11.6 12.1 1.6 1.7 Manufacturing 32.2 61.6 79.6 7.9 8.8 of which: Food processing (22.3) (24.9) (34.2) (1.3) (3.2) Other manufacturing (9.9) (36.7) (45.4) (15.0) (14.8) Total 45.1 109.9 132.0 9.9 10.4 /1 Least squares method. Source: Annex Table 2.7. - 2 - 13.2 The thrust of industrialization during miost of this period, except for the last three years,was supplied by large projects in the state sector. Tunisian industrialization has hitherto been focussed on a relatively small domestic market. Exports accounted for about one-quarter of manufacturing growth (other than food processing) in 1960-67 and for about only one-eighth of the increase in 1967-72. Industrial exports are represented mainly by phosphate fertilizers, esparto pulp, one-half of carpet production, one-third of canned vegetables production, and relatively minor exports of hides and essential oils with a low industrial processing component (Annex Table 8.4). 13.3 Table 13.2 reviews the progress during the past decade in greater detail. It shows the predominance of petroleum and phosphate rock in the mineral sector. In contrast, manufacturing expanded over a wide front. Petroleum refining, textiles and clothing and pulp and paper showed the highest rates of growth, but from a low initial production base. Further detail is provided in Annex Tables 2.7, 8.1 and 8.2. Some of the above manufactures are based upon imported raw materials (e.g. coking coal for the steel industry, cotton, tinplate for canning, and sulfur for the production of superphosphate). In the main, however, the products showing rapid growth are made from domestic materials, and thus have greater developmental impact. This is clearly true for pulp (esparto grass), canned goods (vegetable and fish), cement (limestone), and carpets (wool). In other raw material process- ing industries, domestic use has simply replaced exports. This is true for iron ore and hides, for example. 13.4 In this respect, the phosphate fertilizer industry is in an inter- mediate position. Tunisia encountered considerable difficulties in exporting phosphate rock in the 1960s. While some of them are likely to continue, it is at least conceivable that the rock will have a higher value when locally processed, and the Tunisian phosphoric acid plants can be specifically adapted to the character and quality of Tunisian rock. Furthermore, the rehabilita- tion and partial mechanization of some existing mines, the development of two new mines, one using highly mechanized methods, and the recent increased emphasis on reducing costs and increasing competitiveness, plus the recent rise in phosphate prices, should improve the financial position of this industry in the Fourth Plan period (1973-1976). 13.5 Until the late 1960s, the main poles of industrial growth were about a dozen major state manufacturing enterprises, private investment playing a relatively minor role. -3- Table 13.2: INCREASES IN MINING AND MAiNUFACOTURING PRODUCTION, 1961-1?72 1 9 6 1 1972 Percentage Change Volume Value Volume Value th. tons D. mill. th. tons D. mill. Volume Value Mining Crude oil - - 3,964 43.2 - - Phosphate rock 2,347 6.6 3,37c 15.3 44 132 Iron ore 861 L.1 896 3.0 4 -27 Lead concentrate 19 o.6 32 1.9 68 217 Zinc concentrate 8 0.2 1.2 163 500 Salt 401 o.6 385 1.4 -4 133 Fluorspar - - 121 1.5 - - Total 12.1 67.5 Manufacturing Value Added at 1966 Prices 196' 1972 Increase D million D million D million Food Processing 22.3 34.2 11.9 53 Textiles, clothing & leather 2.2 13.9 11.7 530 Wood, paper & misc. 1.4 7.2 5.8 L14 Construction materials 2.2 6.1 3.9 177 Chemical industries 2.1 7.8 5.7 271 Steel and Bhgineering and electrical industries 2.0 10.4 8.4 370 Total 32.2 79.6 47.4 147 Texcl. Food processing) 9.9 73 -3-57- Manufactured Products Showing Major Growth Production Value 1972 19i61 1972 (D. million) Sugar, th. t. 12 84 8.3 Canned fruits & vegetables, th.t. 18 36 7.3 Yarn, th. t. 0.1 10.0 10.2 Fabricks, mill.m. o.6 49.5 25.1 Carpets, th.t. 0.3 1.1 5.0 Shoes, mill. 1._8 4.7 5.7 Steel, th.t. - 350 9.6 Cement, th.t. 350. 619 4.5 Triple superphosphate, th.t. 135 457 11.1 Esparto pulp, th.t. - 20 2.2 - 4 - Table 13.3: INVESTMENTS IN MANUiVACTURING (Million Dinars at current prices) Total Private Public 1961 6.3 0.6 5.7 1962 5.8 0.8 5.0 1963 7.2 1.7 5.5 1964 22.3 2.9 19.4 1965 26.2 0.1 26.1 1966 10.1 1.6 8.5 1967 12.9 3.3 9.6 1968 10.7 2.8 7.9 1969 15.5 4.8 10.7 1970 18.2 6.3 11.9 1971 21.6 6.8 14.b 1972 20.4 Source: M1inistere du Plan. Public investment in industry started with a beet sugar factory cum sugar refinery and an esparto cellulose plant in 961-63, followed by the El Fouladh steel mill and big new textile mills in 1964-65.
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