Tunisia Agricultural Credit Project Banque Nationale De Tunisie Organization Chart
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Loiq'A/FLr< C~ PY1 RESTRICTED Report No. PA-79a Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracyor completeness.The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized AGRICULTURAL CREDIT PROJECT TUNISIA Public Disclosure Authorized May 7, 1971 Public Disclosure Authorized Agriculture Projects Department CURRENCYEQUIVALENTS US$1 = D 0.525 D 1 - US$1.905 D 1,000 = US$1.905 D1,000,000 = US$1,905,000 WEIGHTSAND MEASURES Metric System ABBREVIATIONS BNT : Banque Nationale de Tunisie STIL : Societe Tunisienne de l'IndustrieLaitiere BCT : Banque Centrale de Tunisie BIRH : Bureau d'Inventairedes RessourcesHydrauliques OMVVM: Office de Mise en Valeur de la Vallee de la Medjerda DLF : DevelopmentLoan Fund TUNISIA AGRICULTURALCREDIT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ......................... I. INTRODUCTION.................... .,., ...... II. BACKGROUNDOF AGRICULTURE .. 2 III. THE PROJECT .. 4 A. Description .. 4 B. Detailed Features .. 5 C. Cost Estimate and Financing . 7 D. Procurementand Disbursement . .10 E. Project Administration. 11 IV. BANQUE NATIONALE DE TUNISIE (BNT) .. 11 V. PRODUCTION, MARKETS, PRODUCER BENEFITS, AND REVENUE GENERATION.. 16 VI. BENEFITS AND JUSTIFICATION . 18 VII. RECOMMENDATIONS .. 19 ANNEXES 1. GDP, Cereal Production,and Exports and Imports Table 1 Gross Domestic Product by Sectoral Origin Table 2 Cereal Production and Requirements Table 3 AgriculturalExports and Imports 2. InstitutionalFramework for Credit Table 1 Banking Law Requirementsand Central Bank Regulations Table 2 AgriculturalLoans, 1962-1969 Table 3 BNT's Yearly AgriculturalLending This report is based on the findings of a Bank/IDA appraisal mission to Tunisia in June/July 1970 composed of Messrs. H. von Oppenfeld and J. Gregor (Bank/IDA)and Messrs. A. Bonnier and M. Delavalle (consultantsto the Bank/ IDA).. - 2- 3. Banque Nationale de Tunisie (BNT) Table 1 SummarizedBalance Sheets Table 2 Financial Analysis of Balance Sheets Table 3 Investmentin Shares and Stocks Table 4 indebtednessof Farming Cooperatives Table 5 Project Cash Flow Table 6 Cash Flow Projections Table 7 Comparativeand Forecast Operating Results Accounts Table 8 Projected Balance Sheets Table 9 Summary of Revenue and Expenses Appendix 1 Statement of Policy Appendix 2 OrganizationChart Appendix 3 Terms of Reference for Farm Management Specialist 4. Grain Farm Mechanization Table I Basic Data and Financial Rate of Return 5. Dairy Farm Sub-project Table I Milk Received, Processed and Sold, by Principal Milk Products Societe Tunisiennede l'IndustrieLaitiere (STIL) Table 2 Basic Data and Financial Rate of Return Table 3 Dairy Extension Service Appendix 1 Cropping Pattern for Irrigated Area 6. Date-Palm DevelopmentSub-project Table 1 Date-Palm DevelopmentCost Table 2 Basic Assumptions Table 3 IncrementalNet Value and Financial Rates of Return Appendix 1 Societe Tunisiennede l'IndustrieLaitiere (STIL) Table 1 STIL: SummarizedBalance Sheets Table 2 STIL: Summarized Earnings Appendix 2 GroundwaterSupply in Nefzaoua and Djerid Region Table 1 Cost of Borehole and Pumping - Nefzaoua Region Table 2 Investmentand Operating Cost for Water Supply - Nefzaoua Region Table 3 Cost of Borehole - Djerid Region Table 4 Investmentand Operating Cost for Water Supply - Djerid Region Appendix 3 Terms of Reference for AgriculturalExpert 7. Estimated Schedule of Disbursement 8. Economic Rate of Return I4APS 1. Project Areas 2. Date-Palm Plantations TUNISIA AGRICULTURALCREDIT PROJECT SUMMARY AND CONCLUSIONS I. This report appraises an agriculturalcredit project for which a Bank loan of US$5.0 million equivalentand an IDA credit of US$3.0 million equivalent,a total of US$8.0 million equivalent,is proposed. The Project would support a three-yearlending program for grain farm mechanization and dairy farm and date-palm development. Governmentwould be the borrower of the IDA credit which it would on-lend to the Banque Nationale de Tunisie (BNT) while the Bank loan would be extended to BNT directly. BNT would be responsiblefor Project administration. This would be the second agricul- tural project the Bank/IDA has helped finance in Tunisia. ii. BNT, a multi-purposebank establishedin 1959 and mainly owned by Government,is the major source of agriculturalfinance in Tunisia. It has used funds from its own sources -- share capital, reserves and deposits -- and has also been the agent for Governmentfinancing in agriculture. To implementthe proposed Project, BNT would develop a small, appropriately staffed unit, headed by a qualifiedand experiencedfarm managementspecialist. Technical assistancein establishingthis post and others under the Project would be provided in the proposed loan/credit. Although BNT is a mature institution,its financialsituation was not entirely satisfactoryand some correctivemeasures were needed before the Project is presented to the Board. iii. From Tunisia's independencein 1956 until 1969, Government's policy was to increase and diversifyagricultural production through cooperatives,wherever possible. The Bank/IDA's first agriculturalproject (484/99-TUN),approved in 1967, was in line with this policy. In January 1969, however, attempts to extend cooperativesto cover all arable land met with such opposition from private farmers and disillusionedcooperative members that Governmentreversed its policies and is now determinedto encourageand support individualfarmers. For the period 1965-1969,the total value of agriculturaloutput has declined in real terms by 22%, while the overall economy has expanded. Its contributionto GDP has declined from 23% in 1965 to 16% in 1969. To some extent, this deteriorationhas been due to adverse weather but more significanthas been the poor performance, in general,of productioncooperatives and the lack of confidenceof private farmers. Notwithstanding,agriculture is importantto the Tunisian economy, accountingfor a quarter of total exports and employinghalf of the working population. iv. The proposed Project is designed to finance individualfarmers for the productionof grain and dairy products in Northern Tunisia. In addition, it would support date-palm productiondevelopment in southern Tunisia by lending through BNT to the Societe Tunisiennede l'Industrie Laitiere (STIL). The Project would increase productionof wheat for import substitution,dates for export, and milk for local consumption. Investments would be mainly in tractors and combines,livestock, tubewells, and land - ii - improvement. Annual net foreign exchange earnings at full development are estimated at US$8 million. v. Total Project cost would amount to US$15 million equivalent. Sub-borrowerswould contribute about 30% and BNT about 17%. The proposed loan and credit, equivalent to about 53% of total Project cost, would finance the estimated foreign exchange component. Sub-borrowerswould be charged 8% per annum interest. Governmentwould bear the foreign exchange risk and on-lend IDA funds at 1% for 15 years, including five years of grace. vi. The range of items to be financed under the Project is varied and most of it unsuitable for bulk procurement. With regard to agricultural machinery and pumpsets, a number of foreign firms are represented through local dealers, supplies are adequate, and prices competitive. Procurement would, therefore,be through normal commercial channels. However, contracts for large deep well drilling amounting to about US$400.000would be awarded on the basis of internationalcompetitive bidding. vii. The financial rates of return on individual sub-projectsare esti- mated to range between 14% and 26%. The overall economic rate of return is estimatedat about 22%. Appropriate assurances were obtained during negotia- tions. The Project is suitable for a Bank loan of US$5.0 million for a term of 15 years, including a five-year grace period, and for an IDA credit of US$3 million on IDA's standard terms. AGRIC}lLTURALCREDIT PROJECT I. INTRODUCTION l.0l In 1967 Tunisia received a Bank loan of US$12 million and an IDA credit of US$6 million for the developmentof agriculturalproduction cooperatives. Implementation of theL p ro ect was substantially affected by changes in agriculturalpolicies during 1969. Ir.January of that year Government announced a greatly accelerated coOperativ;t development that went far beyond agreement reached with Bank/IDA, but, afte-zopposition by private farmers as well as cooperativemenbers and in recognitii;nof the strain which such a policy put on scarce human and finaincialresources, drasticallyre- vised this policy in September 1969. At that time, a law was enacted that stipulated that, henceforth, state farms, cooperatives,and private farmers would coexist. This had the effect of removing cooperativesfrom the central role they had been expected to play in Tunisia's development. The change in the basic situation instigated a review by a Bank/IDA mission in October 1969, which, in turn, led to a reduction of its loan/credit from US$18 mil- lion to US$9.2 million. The change in the project was œiproved by the Bank/IDA in November 1970. 1.02 In the course of renegotiatingthe cooperative farm project, the Bank/IDA offered to study the problems and needs of small farmers, including the former production cooperativemembers. The study was designed to review what could be done to improve