3. the Context of Private Participation in Infrastructure in Tunisia
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30757 VOL. 1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Minist6re Tunisien du DL&veloppement et de la Coop6ration Internationale The World Bank mPoPMI I~ E REPUBLIC OF TUNISIA MINISTRY OF DEVELOPMENT AND INTERNATIONAL COOPERATION AND THE WORLD BANK AND THE PROGRAMME ON PRIVATE PARTICIPATION IN MEDITERRANEAN INFRASTRUCTURE (PPMI) STUDY ON PRIVATE PARTICIPATION IN INFRASTRUCTURE INTUNISIA VOLUME I WITH THE SUPPORT OF THE PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY (PPIAF) Table of Contents Preface ........................................................................ ix Foreword ........................................................................ xi Abbreviations and Acronyms ........................................................................ xiv 1. Introduction to a Strategy for Private Participation in Infrastructure in Tunisia ........................................................................ 1 Objectives of Private Participation in Infrastructure .............................................................. 1 Tunisian Infrastructure Assets ................................................................. 2 Objectives of the 10th Development Plan and Current PPI Strategy ...................................... 2 Proposals for Complementing the Current Strategy ............................................................... 3 Proposed Action Plan - Horizontal Aspects ................................................................. 9 2. Foundations and Principles of Private Participation in Infrastructure ......... 11 International PPI Trends ............................................................... 11 Advantages and Risks of PPI ................................................................ 14 The Importance of Introducing Fair Competition ............................................................... 16 A Range of Options for the Participation of the Private Sector ............................................ 18 Subsidies and Private Participation ................................................................ 19 The Regulation of Infrastructure Services ................................................................ 20 3. The Context of Private Participation in Infrastructure in Tunisia ................. 27 The Macroeconomic Context, the Business Environment and the Privatisation Programme ................................................................................................................................................27 The 101h Development Plan ................................................................. 28 The Experience of Tunisia with PPI ................................................................. 29 Involvement of the Tunisian Private Sector in the Provision of Infrastructure Services ...... 32 Employment Issues ................................................................. 32 Equity and Infrastructure Services in Tunisia .................................................................. 33 Regional Integration and Infrastructure Sector Reforms ...................................................... 35 The Legal Aspects of PPI ................................................................. 37 PPI Financing by the Tunisian Financial Sector ................................................................. 44 Simulating the Economic Effects of the Liberalisation of Infrastructure Services .............. 46 4. Sectoral Aspects of Private Participation in Infrastructure .51 Telecommunications .51 Transport .56 Electricity and Gas .65 Water .69 Sanitation .71 Solid Waste .76 Suggested Reading .8 Boxes Box 1: The Risks of Fiscally Constrained Governments .................................................. 16 Box 2: Subsidies as Incentives for Better Performance ...................................................... 20 Box 3: The Value For Money Test - An Innovative Approach ........................................... 23 Box 4: Examples of Infrastructure Regulatory Agencies in the World ................................ 25 Box 5: International Experience with Laws on Public-Private Partnerships ......................... 39 Figure Figure 1: Range of Privatization Techniques ............................................................... 18 Graphs Graph 1: Countries with PPI in At Least One Sector .............................................................. 12 Graph 2: Total Private Participation in Infrastructure in Developing Countries, 1990 to 2001 (US$ Billions) ................................................................ 13 Graph 3: Total Investment in PPI projects, 1990-2001 ........................................................... 14 Graph 4: Value for Money Cost Comparison ................................................................ 23 Graph 5: The Macroeconomic Gains of Alternative Scenarios for the Liberalisation of Services in Tunisia ................................................................ 49 Tables Table 1: Benefits of PPI and Prior Conditions for their Realisation ........................................ 15 Table 2: Risks of PPI and Measures for Reducing Them ........................................................ 15 Table 3: Competitive and Non-Competitive Infrastructure Sectors ........................................ 17 Table 4: Models for Private Participation in Infrastructure ..................................................... 18 Table 5: Key Macro-Economic Indicators of the 9 th and 1 0 th Plan ......................................... 28 Table 6: PPI Transactions concluded in Tunisia ................................................................ 29 Table 7: Investments In Infrastructure Sectors ................................................................ 31 Table 8: Coverage Rates of Water, Sanitation and Electricity in Tunisia, Algeria and Morocco ................................................................ 34 Table 9: Relevance of Regional Integration for Infrastructure sectors and vice versa ............ 36 Table 10: Private Participation and Tunisian Law per Sector of Activity - Strengths and Weaknesses ................................................................ 43 Table 11: Summary of the Telecommunications Sector Diagnostic ....................................... 52 Table 12: Proposed Action Plan for the Telecommunications Sector ..................................... 55 Table 13: Summary of the Air Transport Diagnostic .............................................................. 57 Table 14: Proposed Action Plan for Air Transport ................................................................ 58 Table 15: Summary of the Maritime Transport Diagnostic ..................................................... 58 Table 16: Proposed Action Plan for Maritime Transport ........................................................ 60 Table 17: Summary of the Road Transport Diagnostic ........................................................... 61 Table 18: Proposed Action Plan for Road Transport ............................................................... 61 Table 19: Summary of the Urban Transport Diagnostic .......................................................... 62 Table 20: Proposed Action Plan for Urban Transport ............................................................. 62 Table 21: Summary of the Rail Transport Diagnostic ............................................................. 63 Table 22: Proposed Action Plan for Rail Transport ................................................................ 64 Table 23: Proposed Action Plan for Multimodal And Postal Transport .................................. 64 Table 24: Summary of the Electricity and Gas Diagnostic ...................................................... 66 Table 25: Proposed Action Plan for Electricity And Gas ........................................................ 68 Table 26: Summary of the Water Sector Diagnostic ................................................ 70 Table 27: Summary of the Sanitation Diagnostic ................. ............................... 72 Table 28: Proposed Action Plan for Water Supply and Sanitation .......................................... 74 Table 29: Summary of the Solid Waste Management Diagnostic ........................................... 77 Table 30: Proposed Action Plan for Solid Waste Management .............................................. 79 Preface Tunisia has changed considerably over the last few years and has achieved substantial gains with regard to economic and social development. Statistics on the incidence of poverty, income per capita (which currently exceeds USD 2,500), and life expectancy at birth (which is 72.1 years), as well as the coverage and quality of the majority of its infrastructure services, show the substantial progress this country has made. These achievements were made possible by the desire of the Tunisian authorities to lay the foundations of a modem competitive economy that is open to the outside world and better integrated in its environment. While these achievements confirm the ability of the Tunisian economy to adapt to new requirements, it also underlines the challenges that the country still has to face in the future. The recent emergence of new economic competitors on the international scene and the coming free trade zone with the European Union have increased the competitive pressure on Tunisian industry and emphasise the importance of continuing and intensifying reforms in the infrastructure