Document of The World Bank

FtLE{tft] 8 y FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 3503-TUN

Public Disclosure Authorized

STAFF APPRAISAL REPORT OF THE

GRAIN DISTRIBUTION AND STORAGE PROJECT Public Disclosure Authorized

September 1, 1981 Public Disclosure Authorized EMENA PROJECTS DEPARTMENT Agriculture II Division

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (As of January 30, 1981)

Currency Unit = Tunisian Dinar (D)

D 0.40 Us$1 /l Dl = US$2.5 D 1,000 = US$2,500 D 400 = US$1,000 D 400,000 US$1,000,000

WEIGHTS AND MEASURES

Metric System British/U.S. System

1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles (mi) 2 1 square kilometer (km ) = 0.386 square miles (sq. mi) 1 hectare (ha) = 2.47 acres 1 litre (1) = 0.2200 Imperial gallons (I gal) 0.2642 U.S. gallons (gal) 1 ton (t) = 1,000 kg/2,205 pounds (lb) 1 quintal (q) - = 100 kg/220.5 pounds (lb) 1 cubic meter (m3) = 35.315 cu. ft

Fiscal Year

Republic of Tunisia: January 1 - December 31

Office of Cereals: October 1 - September 30 ¶

/1 The Tunisian Dinar is floating. The rate of US$1 = D 0.40 was average for 1980. FOR OFFICIALUSE ONLY

ACRONYMS AND ABBREVIATIONS

ATI = Agro Technic International Ingénierie (International Agro-Technical Engineering Company' BAC = Bureau Central d'Audit de Comptabilité et d'Organisation Industrielle, Commerciale et Agricole (Central Bureau of Auditing and Accounting and of Industrial, Commercial and Agricultural Organization) BNT = Banque Nationale de Tunisie (National Bank of Tunisia) CCGC = Coopérative Centrale des Grandes Cultures (Central Cooperative for Basic Crops) CGC = Caisse Générale de Compensation (Price Equalization Fund) COCEBLE = Coopérative Centrale de Blé (Central Wheat Cooperative) FAO = Food and Agriculture Organization MEN = Ministère de l'Economie Nationale (Ministry of the National Economy) MPW = Ministère de l'Equipement (Ministry of Public Works) MTC = Ministère des Transports et des Communications (0inistry of Transport and Communications) OC = Office des Céréales (Office of Cereals) OED = Operations Evaluation Department O&M = Operation and Maintenance Costs OPNT = Office des Ports Nationaux Tunisiens (Tunisian National Port Board) OTEP = Office Technique d'Etudes Portuaires (Technical Office of Port Studies) PCC = Project Coordination Committee PMU = Project Management Unit PPAR = Project Performance Audit Report SCET = Société Centrale d'Etudes Tunisienne (Central Company for Studies of Tunisia) SNCFT = Société Nationale des Chemins de Fer Tunisiens (Tunisian National Railroad Company) SNT = Société Nationale de Transport (National Transport Company) SRT = Société Regionale de Transport (Regional Transport Company) STAM = Société Tunisienne d'Aconage et de Manutention (Tunisian Lighterage and Stevedoring Company) STM = Société Nationale de Transport de Marchandises (National Freight Transport Company) STPA = Société Tunisienne de Production Alimentaire (Tunisian Food Production Company)

This document has a restricteddistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. s

A TUNISIA

STAFF APPRAISAL REPORT OF THE

GRAIN DISTRIBUTION AND STORAGE PROJECT

Table of Contents

Page No. I INTRODUCTION

A. Origin 1 B. Agriculture and Transport Projects Previously 1 Financed by the Bank and OED Comments

II THE GRAIN SUB-SECTOR

A. Demand 3 B. Supply 5 C. Distribution; Mills, Port Silos, Storage Silos, 8 Transportation D. Institutional Aspects: Office of Cereals, Grain Prices 15 and Subsidies

III THE PROJECT

A. Summary Description 20 B. Detailed Features 21 C. Status of Design and Implementation Schedule 23 D. Cost Estimates 24 E. Financing 25 F. Procurement 25 G. Disbursements 26 h. Environmental Effect 27

IV PROJECT IMPLEMENTATION

A. Organization and Management of the Project 27 B. Operation of Silos and Management of Grain 28 C. Studies 29 D. Monitoring, Reporting, and Evaluation 30 E. Accounts and Audit 31

V PROJECT BENEFITS

A. benefits 31 B. Economic Analysis 35 C. Employment Impact 36

VI SUMMARY OF RECOMMENDATIONS AND LOAN CONDITIONS 36

This report is based on the findings of an appraisal mission in February 1981 composed of Messrs R.B. Palmer (Mission Leader), S.Spencer (Railway Expert), A. Surier (Consulting Storage Engineer), B. Webber (Consulting Transport Economist), and Miss L. Meek (Financial Analyst). ANNEXES ATTACHED TO APPRAISAL REPORT

1. Documents in Project File 2. Implementation Schedule (Chart) 3. Cost Table

MAPS No. IBRD 15784 Tunisia - Soil Suitability for Crops No. IBRD 15785 Tunisia - Agriculture; Location of Main Crops No. IBRD 15783 Tunisia - Projected Grain Distribution and Storage, 1986

Annexes in the Implementation Volume

4. Domestic Supply of Grain 5. Demand for Grain 6. Grain Importing 7. Analysis of Grain Distribution, Transportation Costing, Storage Silo Operating Costs, Peak Storage Requirements, Silo Capacity and Location Analysis, Utilization of Area Silos, Costing of Mill Storage 8. Operation of Programmed Trains, Silo Rail Sidings, SNCFT 9. Location and Design of Silos 10. Office of Cereals; Legal Status, Finance, and Accounting 11. Prices and Subsidies in the Grain Sub-Sector 12. Economic Analysis 13. Technical Assistance, Training, Studies, and Implementation: Terms of Reference for: (a) consultants for OC program of institutional improvement and training (b) new organizational units in OC (c) study of OC's financial system and a plan of action for improvement (d) study to prepare a second-stage grain storage project TUNISIA

STAFF APPRAISAL REPORT OF THE

GRAIN DISTRIBUTION AND STORAGE PROJECT

I. INTRODUCTION

A. Origin

1.01 In 1976, FAO issued a report entitled "A Policy and a Plan of Action for Reinforcing National Security in Food in Tunisia". Subsequently, poor harvests, coupled with rapidly rising demand for industrially milled grain far in excess of normal domestic production, led to increased grain imports and strains on the government's system of grain importing, storage and distribution. An IBRD mission in May 1978 identified a grain storage project within a program of investments then being considered by the government. An FAO/CP mission undertook preparation in 1979 and a report was submitted in January 1980. In November 1979 the government requested Bank financing for the project. The project is designed to expand throughput and storage capacities and to largely complete the conversion from bag to bulk handling in Tunisia's distribution system for imported grain. The project also provides for preparation of a second project in about three years aimed at a similar improvement of the distribution system for domestic grain. The investments, technical assistance, and studies proposed under the project involve both the agriculture and the transportation sectors. The principal themes are the shift from bag to bulk handling and storage and from piecemeal to systematic management of distribution, supported by improvement of personnel development, maintenance, cost control, planning and evaluation.

B. Agriculture and Transport Projects Previously Financed by the Bank and OED Comments

1.02 The Bank has participated in ten agricultural and nine transportation projects in Tunisia, several of which have included components in both sectors.

1.03 Agriculture. The first of three irrigation projects (Irrigation Rehabilitation, Loan 1068-TUN, 1974, US$12.2 million) provided for rehabilitation of a 20,000-ha irrigation system in the Lower Medjerda Valley, which is now about 80% complete, and rehabilitation of irrigation, drainage, and road networks on about 5,000 ha in the Nebhana region around , for which physical implementation is satisfactory. The Second Irrigation Project (Sidi Salem Multipurpose Project, Loan 1431-TUN, 1977, US$42 million, included the irrigation of 10,600 ha in the /Medjez el Bab and Cap Bon areas, preservation of 6,000 ha of citrus in Cap Bon, improved agricultural production on 32,800 ha in the Lower Medjerda Valley, flood control, generation of electricity and the supply of about 100 million m3 /year of potable and industrial water to the Tunis area. Implementation is satisfactory. The Third Irrigation Project (Southern Irrigation, Loan 1796-TUN, 1980, US$25 million) has started satisfactorily. -2-

1.04 The First Fisheries Project (Credit 270-TUN, 1971, US$2 million) was completed at the end of 1979 with considerable delay. The local institution lending for boats (the National Bank of Tunisia, BNT) experienced low loan recoveries. The Second Fisheries Project (Loan 1746-TUN, 1979, US$ 28.5 million) became effective in May 1980 after agreement was reached on a strategy for improving BNT recoveries. The Cooperative Farm Project tl967, US$18 million), which was designed to develop production cooperatives as part of a 10-year national program of agrarian reform was delayed by technical, managerial, and financial problems, and then, following the government's abandonment of production cooperatives, was revised in 1970, and an amount of US$8.8 million cancelled. At completion in 1973, most project objectives, namely, productivity, production, worker incomes, and institutional viability, were attained (PPAR No. 968 of January 8, 1976).

1.05 The First Agricultural Credit Project (Loan 779, Credit 263-TUN, 1971, US$8 million) financed BNT lending for farm machinery, dairy development, date palm plantations, and dairy processing, but was not fully disbursed until 34 months after the original closing date because BNT lent Bank group funds at a higher interest rate than it did government funds; although the project achieved a good rate of return, livestock development did not yield the benefits expected, and dairy processing suffered major cost overruns (PPAR No. 2497, May 11, 1979). The Second Agricultural Credit Project (Loan 1340-TUN, 1976, US$12 million), under which uniformity of BNT lending terms was introduced, is nearly fully disbursed. The Third Agricultural Credit Project (Loan 1885-TUN, 1980, US$30 million) has been made effective. The Northwest Rural Development Project (Loan 1997-TUN, US$24 million), which includes a rural roads component, was signed on July 15, 1981.

1.06 Transportation. The First and Second Highway Projects (Loan 746-TUN, 1971, US$24 million and Loan 1188-TUN, 1976, US$28 million), and the First Railway Project (Loan 606/Credit 150-TUN, 1964, US$17 million) were focused on modernization and rehabilitation of primary and secondary roads, and renewal of track and purchase of railway equipment. Although execution of the Fîrst highway Project was satisfactory, only about half the roads were rehabilitated due to cost increases (PPAR No. 2772, December 26, 1979). Implementation of the Second Highway Project is behind schedule due to problems of property acquisition and local financing, but the government has recently developed a satisfactory financing and execution plan for the balance of the project. The First Railway Project was completed successfully (PPAR No. 2109, June 23, 1978).

1.07 Two smal] loans in the port sub-sector (Loan 380-TUN, 1964, US$7 million, and Loan 573-TUN, 1969, US$8.5 million) provided support facilities for port operations, mainly dredging, maintenance operations and cargo handling equipment. The Second Ports Project included the construction of the 30,000-ton bulk port silo at (Tunis), the only functioning port silo in Tunisia. Both these projects were implemented successfully and had an important institution-building effect (PPAR No. 1049, February 26, 1979). A Third Highway Project (Loan 1601-TUN, 1978, US$32 million) initiated an integrated program for improving about 1,000 km of rural roads, with direct 3 benefits intended for the agriculture sector. Implementation of complementary agricultural investments and extension services lagged initially but now is proceeding satisfactorily. A Third Port Project (Loan 1797-TUN, 1980, US$42.5 million) will assist the government in modernizing berth facilities at the main ports of La Goulette and and in providing support facilities for improved port operations. A Fourth Highway project (Loan 1841, 1980, US$36.5 million) will help the government in improving highway planning, maintenance, rehabilitation and safety.

II. THE GRAIN SUB-SECTOR

A. Demand

2.01 Human Consumption. Cereals are the basic staple of the Tunisian diet. Human consumption is about 60% durum wheat, eaten as pasta when milled finely or as couscous when ground more coarsely, 36% bread wheat and 4% barley. Over two-thirds of the cereal consumed is grain (coming from both local production and imports) which has been processed in industrial mills after entering the official marketing system controlled by the Office of Cereals (OC), a semi-autonomous agency responsible to the Ministry of Agriculture. The remaining one-third is local grain estimated to be about equally divided between consumption on-farm and sales in the souks or village marketplaces (the "parallel market") for grinding in homes or in small artisanal mills. Tolerated but not authorized by the government, the parallel market circumvents the official price system through sales at negotiated prices.

2.02 During the 1970's estimated consumption of uncontrolled wheat remained roughly constant, fluctuating between 0.28 million tons and 0.36 million tons. Consumption of industrially milled (officially controlled) wheat increased more than twice as fast as population, reaching 9% per year during 1975-80 while rising from 0.62 million tons to 0.95 million tons. This dramatic increase reflects pricing policy (para. 2.39) and changing tastes of Tunisian consumers, who increasingly prefer convenience in food purchasing and in meal preparation.

2.03 In the coming decade, consumption of industrially milled wheat is projected to continue to rise rapidly, although at a decelerating rate. It is expected to reach an estimated 1.24 million tons or nearly 80% of total wheat consumption at project completion in 1986, and 1.48 million tons in 1991, as the level of consumption on-farm and in the parallel market begins a gradual decline. The following table gives summary projections of human consumption of wheat and barley. - 4

1975 1980 1986 Rate of Growth Actual Estimate Forecast 1975-80 1980-86

Population (millions of persons) 5.6 6.4 7.5 2.6 2.6 Human consumption (millions of tons) - Controlled wheat 0.62 0.95 1.24 9.0 4.4 - Non-controlled wheat 0.36 0.33 0.33 - 1.5 - - Barley /a 0.05 0.05 0.04 - - - Total, all grains 1.03 1.34 1.61 5.4 4.4 Per capita consumption of all grains (kg/head) 184 209 215 2.6. 0.7

/a Uncontrolled except for small part of forecast in 1986.

2.04 Animal Consumption. The 1970's witnessed a revolution in animal feeding in Tunisia. While direct consumption of barley, the traditional ruminant feed grain, declined slightly to about 0.12 million tons in 1980, consumption of feed concentrates for both ruminants and poultry increased at rates well over 30% per year, rising in total from 0.07 million tons of grain raw material (excluding soybean pellets) in 1975 to 0.31 million tons in 1980. These changes were induced largely by highly subsidized prices (para. 2.42) for concentrates, which have become a cheaper ruminant feed than on-farm barley and have made chicken the cheapest meat on the Tunisian market. Higher protein content and successful extension demonstrations of feedlot operations have also encouraged the use of concentrates. If current levels of price subsidies were continued, demand for concentrates would be expected to continue rising at a rapid but decelerating rate. With an adjustment of prices of concentrates to reflect the border prices for imported grain, growth in demand would slacken more sharply but not completely, given the absence of local corn for poultry production, the vested interest of feedlot operators, and the opportunity to pass part of any additional cost of concentrates on in the price of meat to higher-income consumers. On the assumption of progressive price adjustment (para. 2.42), the demand for concentrates is projected to rise at 5-10% per year up to a level of 0.46 million tons of grain raw material (excluding soybean pellets) in 1986 and 0.59 million tons in 1991. The following table gives a summary. Animal Feed Consumption (Millions of tons of grain)

1975 1980 1986 Annual Growth rates Actuai Actual Forecast 175-80 1980-86

(M0) (M0)

Concentrates 0.07 0.31 0.46 - Poultry 0.04 0.25 30 5 - Ruminants 0.03 0.12 0.21 38 10 On-Farm Barley 0.14 0.12 0.12 Total 0.21 0.43 0.58

2.05 Total industrialized consumption. On the basis of these assessments, total consumption of industrially milled grain (which will pass through the storage system) is projected at 1.7 million tons in 1986 at project completion and about 2.2 million tons in 1991. The projection is summarized in the following table:

Total Industrialized Grain Consumption (Millions of tons)

1975 1980 1986 Actual Estimated Forecast

Human 0.62 0.95 1.24 Animal 0.07 0.31 0.46 Total 0.69 1.26 1.71

B. Supply

2.06 Production. Grain is produced in two sharply contrasting zones. In the north, two long parallel valleys running south-west from Province through Beja to and from Province near Tunis through to Le Kef enjoy fertile soils, a mild mediterranean climate and 400-800 mm of rainfall well suited to wheat as well as barley, although the summer is too dry for corn. In the center and south is a large diffuse region between the Mediterranean and the desert of poor and rocky soils, hotter summers, and much lower and less certain rainfall. In the north, medium-sized and large farms are common and modern inputs including high yielding wheat varieties have been widely adopted. The last two years northern yields have averaged about 1.1 tons/ha for durum wheat, 1.4 tons/ha for bread wheat and 1.0 ton/ha for barley. In the center and south, where subsistence farming predominates, the harsh climate and greater risks have minimized the use of modern practices, and yields fluctuate more and tend to be only about one-third those of the north. The last two years center-south yields have averaged about 0.28 tons/ha for durum wheat, 0.51 tons/ha for bread wheat, and 0.37 tons/ha for barley. As a result of the contrasting conditions, acreage planted in the north has been relatively stable around an average of about 800,000 ha, whereas in the center-south plantings have fluctuated widely above and below an average of about 750,000 ha, and the area harvested has often been much less than the area planted. -6-

2.07 During most of the 1970's, total national grain production fluctuated considerably from year to year, but without significant trend, around an average of about one million tons following a rapid increase in productivity and production at the beginning of the decade under the government's renewed impetus to private initiative in agriculture. Peaks were reached of 1.25 million tons in 1975 and 1.17 million tons in 1980 when weather was very favorable. In 1976-79 four consecutive modest-to-poor harvests including a low of 0.74 million tons in 1977 resulted from unfavorable weather even in the north, which both offset and slowed down the increase in use of modern inputs and cultivation practices.

2.08 The prospects for increased production in the future are likely to be determined by the following factors. In the north, there is only limited scope for expanded planting and little likelihood of grain production in irrigated areas given the competitive position of fruits and vegetables. Medium-sized and large farmers in the north are generally following good patterns of input use, which can still be improved through better techniques of seedbed preparation and hence more efficient moisture utilization. This will lessen the decline of production in periods of low rainfall. Yields of small farmers in the north can probably be increased gradually within the constraints of their generally greater remoteness, poorer land and greater risk. In the center-south there is little prospect either for significant improvement of yields or for avoidance of fluctuations in yields, plantings and production. -

2.09 On the assumption of average weather, no significant change in acreage, and an increase in average yields of about 10% over the late 1970's, reflecting mainly improvements in the north, the projection of overall grain production by project completion in 1986 is about 1.2 million tons, or about 20 percent over the average for the decade of the 1970's. Varying weather, with an average of one very unfavorable and one very favorable year out of every four, will cause continuing fluctuations in production, projected to be in the range of 1.0 - 1.35 million tons in the mid 1980's. Continued extension efforts are expected to enable average-year production to increase gradually up to a level of about 1.5 million tons by the mid-1990's. The following table summarizes the projecton for 1986.

Grain Production (Millions of tons)

------1971-79 Average ------1986------Actual…------Projection------Durum Bread Barley Total Durum Bread Barley Total Wheat Wheat Wheat Wheat

North 0.50 0.13 0.12 0.75 0.66 0.14 0.15 0.95 Center-south 0.11 0.03 0.10 0.24 0.11 0.01 0.13 0.25 Total 0.61 0.16 0.22 0.99 0.77 0.15 0.28 1.20 2.10 CoiLection. OC has a legal monopoly over the marketing of grain and normally handles about 60W of the official collection itself, contracting out the remaining 40% to two grain producer cooperatives, CCGC and COEBLE_'. Durum wheat is usually about 65% of the collection, bread wheat about 20% aad barley 15%. During the 1970's, the collection fluctuated considera:ly from year to year- roughly with the level of production. It ranged between 0.23 million tons and 0.41 million tons, averaging about 0.34 million tons or about 34% of the harvest without significant trend.

2.11 Thus the rapid rise in national consumption of industrialLy milled grain in the 1970's did not result in any significant shift of local grain from on-farm and parallel market consumpzion into the official collectiorn M'oreover,the government has no explicit policy regarding the size of theŽ collection. In practice, whereas larger farmers tend to sell only to OC and the cooperatives, smaller farmers often sell in the parallel market to avoid the 7% production tax and to benefit from prices that respond more quickly to short-term or local supply conditions. Faster payment for small lots, barter opportunities, and proximity are also factors. However, in the future, increments above recent average grain production of one million tons are expected to be marketed increasing]y through the official collection, which is projected to rise gradually as a share of production to 40% or about 0.48 million tons in 1986 within a range of 0.35 - 0.56 million tons. Average year collections could rise to 50% of production or 0.60 - 0.70 million tons in 1991. The composition of wheats and barley is expected to remain about the same as at present.

2.12 Imports. The result of Tunisia's rapidly rising demand for industrially milled grain (10% per year in the 1970's) and stagnant domestic production has been a rapidly growing gap in the national grain supply. This gap could be filled only by imports which tripled from an average of 0.33 million tons in 1971-76 to nearly 1.1 million tons in 1980. This import demand is projected to increase further over the next decade, although at a slower rate, in respunse to the deceleration in consumption and the gradual rise in production described above. Average imports of 1.23 million tons are foreseen for 1986, within an expected range of fluctuation of 1.1 - 1.4 million tons depending on the effect of weather on domestic production. Average imports could reach 1.5 million tons by 1991. The following table summarizes the basis of the projection.

/1 CCGC is the Central Cooperative for Basic Crops (Coopérative Centrale des Grandes Cultures); COCEBLE is the Central Wheat Cooperative (Coopérative Centrale de Blé). OC - Controlled Grain: Summary of Demand, Collection and Imports (Millions of tons)

1975 1980 1986 Actual Actual Forecast

Demand Industrial milling 0.69 1.26 1.71 Sales to individuals and changes in stock .07 0.23 - Total 0.76 1.49 1.71

Local Supply (Collections) 0.41 0.40 0.48

Imports 0.35 1.09 1.23

2.13 Bread wheat, the principal grain import in the past, is expected to continue to dominate imports in the future. The rapidly rising demand for poultry feeds is expected to move imports of corn up into second place. Imports of durum wheat and barley, the two large domestic crops, have tended to fluctuate in response to harvests, and will continue to be significant. The following table summarizes the composition of imports.

Composition of Grain Imports (Millions of tons)

Average 1971-75 1980 1986 Actual Actual Forecast

Bread wheat 0.24 0.50 0.62 Durum wheat 0.04 0.29 0.20 Barley 0.02 0.06 0.11 Corn 0.03 0.24 0.30 Total 0.33 1.09 1.23

C. Distribution

2.14 General. OC Grain is distributed in two main circuits. First, domestic purchases in the north, mainly of durum wheat, enter local collection centers and are transported largely by rail in bags to storage silos around Tunis and thence by truck in bags and in bulk to nearby mills. About 15% of the collection is transported from collection centers to Tunis silos by truck, much of it in bulk. Another 15% is transported from collection centers in the Le Kef region largely by train in bags to the cities in the center and south. Second, OC's imports of bread wheat, durum wheat, corn, and barley (plus soybean pellets), enter through all five of Tunisia's main ports. About 60 % of grain imports enter through the La Goulette (Tunis) bulk port silo and the rest in bags at merchandise quays at Bizerte, Sousse, Sfax and the port of Ghannouch serving Gabes. About three-fourths of imports are transported by truck, mainly to local mills around the five port cities. Of these truck - 9- movements, about 30% are in bulk, mostly from La Goulette. One-fourth of the imports move by rail, mainly from Bizerte and La Goulette to the Tunis storage silos and from La Goulette to the southern cities. About 20% of these rail movements are in bulk, representing primarily shipments in hopper cars owned by the STPA mill in Sfax.

2.15 The larger and more rapidly growing import circuit poses more urgent problems because of the extreme congestion at the ports. For example, in each of the last two years La Goulette has handled imports of over 600,000 tons, or 20 times its 30,000-ton storage capacity. This turnover rate is well above the norm turnover of 10-12 for a port silo. This performance has been achieved at the cost of almost continuous ship occupancy of the grain quay, long ship waiting periods in the harbor, and high demurrage charges that must be paid in foreign exchange. At the other ports, the costs of congestion include not only demurrage, but also heavy fees for open-air storage of grain in bags on the quays as well as the high labor and bag costs of bag filling, weighing and handling operations. To correct this problem by providing additional port silo capacity necessitates also correcting downstream bottlenecks to assure a smooth flow through the import circuit. The physical bottlenecks include inadequate throughput capacity and poor condition of existing storage silos, some shortage of storage silo capacity outside the Tunis region, insufficient bulk rail cars, and insufficient bulk reception and storage capacity at mills. The institutional bottlenecks include inadequacies in silo maintenance, grain inventory control, transport scheduling, rail car handling, and coordination of investment planning.

2.16 Most of these problems of the import circuit have their counterpart in the collection circuit. There, however, grain volumes are smaller, and although activity is concentrated in a few harvest and post-harvest months, the cost penalties of inadequate storage and handling capacities are less than in the import circuit. OC's two-stage approach to dealing with Tunisia's grain storage problems reflects these differences. It also takes account of the need for further institutional as well as investment analysis to ensure an efficient modernization of the present system of 150 collection centers often representing OC and the two cooperatives in separate inadequate facilities in the same locality.

Location of New Port Silos

2.17 The location of proposed new port silo capacities is based on the projected pattern of regional demand of mills for grain supplies, the pattern of shipments of domestic grain, the comparative cost of ground transport and handling for alternative port silo locations, as well as certain practical considerations.

2.18 Regional Demand of Mills for Grain Supplies. Of Tunisia's 21 flour and semolina mills (all private, but many with government and OC participation), 13 are located in the Tunis region and account for over 60% of total wheat milling capacity compared to the region's 50% share of milled wheat consumption. To improve the regional balance, the government is - 10 - encouraging decentralization of mills. Two major new mills have started operations outside the Tunis region in the north and one in the south in the last three years. Four more are in planning or under construction in the center and south. The government is also encouraging, with financial incentives, the relocation of several old mills from congested sites in downtown Tunis to the outskirts of the city. However, these mills are also expanding their plants, and as a result surplus milling capacity will persist in the Tunis region. Animal feed mills, which are nearly all private and smaller scale than flour mills, have grown in number from less than ten in 1970 to 110 at present. They are distributed regionally in better balance with consumption, although interior regions still depend to some degree on mills in Tunis, Sousse, and Sfax.

2.19 Pattern of Shipments of Domestic Grain. The pattern of shipments of dom.estic grain is influenced by the government's policy of assuring an equitable distribution to the mills of local and imported grain. Under this policy about 407. of the collection in the north is projected for shipment to the center and south in 1986. These shipments would come almost entirely from the projected 0.20 million tons of collections in the Zaghouan-Siliana-Le Kef valley, which is linked to the southern cities by the narrow gauge railway line. Collections totaling an estimated 0.18 million tons in the Bizerte-Beja-Jendouba valley, which is served by the standard gauge railway line, would go partly to the new Beja flour mill and partly to Tunis. Collections in the Tunis and regions would go to local mills. The regional deficits in mill grain supply left after these projected shipments of domestic grain show import requirements in the north of 0.82 million tons, in the center of 0.18 million tons, and in the south of 0.22 million tons for an average harvest year. These requirements will vary substantially in years of very good and very poor weather and are projected to follow an upward trend into the l990's. The following table summarizes the projected 1986 regional demarldand supply pattern.

Projected Regional Distribution Pattern of Milling, Collections and Imports: 1986 (Millions of tons)

North Center South Tunis Beja Sub- Sousse Sfax Gabes Sub- Total Total Total

Demand (Milling) 0.99 0.13 1.12 0.26 0.21 0.06 0.05 0.32 1.71 Supply - Collections 0.26 0.04 0.30 .08 0.06 0.02 0.02 0.10 0.48 - Imports 0.73 0.09 0.82 0.18 0.15 0.04 0.03 0.22 1.23

2.20 Comparative Cost of Ground Transport. With this import distribution pattern, the most appropriate arrangement of port silos from the point of view of cost of ground transportation would be to have adequate capacities at La Goulette (Tunis) to handle upward of 0.8 million tons as the hub of the north and the link to the two railway gauges and at Sfax to handle upward of 0.4 million tons as the hub of the center and south. However, in the case of La Goulette, expansion of the existing port silo faces the problem of shipping traffic that is already - il - heavy, while at the nearby Bizerte port there is 20,000 tons of underutilized silo capacity designed decades ago for exports and not equipped for imports. In the case of Sfax, reconstruction underway of the quay that could be made available for the installation of a port silo will not be completed for several years, and there are also major unresolved problems of urban planning which would affect rail access to this quay. On the other hand, the new port of Gabes at Ghannouch, while somewhat distant from Sousse, is well located for the south, poses no problems of congestion, and is expected to have a sl'o quay available in 1982.

2.21 An analysis of comparative costs for transport (rail and road) and related transit handling costs at storage silos confirms the cost advantage of the construction of a new 30,000-ton port silo at Gabes/Ghannouch and the rehabilitation, equipping for imports and expansion of the Bizerte silo to 30,000 tons. The following table comparing the existing with the projected pattern of importation under the project shows the shift from bag to bulk and the achievement of sustainable satisfactory turnover ratios, averaging 13 for the total of 90,000 tons of port silo capacity.

Imports of Grain and Bulk Silo Turnovers by Port (Millions of tons)

1980 Actual 1986 Projected Imports Bulk Silo Imports Bulk Silo Turnover Turnover

Bizerte 0.14 (bags) 0.37 12 La Goulette (Tunis) 0.62 20 0.45 15 Sousse 0.05 (bags) - - Sfax 0.17 (bags) - - Gabes/Ghannouch 0.11 (bags) 0.41 13 Total 1.09 1.23 13

Location of New Storage Silos

2.22 The location of proposed new storage silo capacities takes into account the projected availability at mills of bulk receiving and storage capacity as well as the location of mills and the volume of grain to be handled in a given region.

2.23 Bulk Reception and Storage at Mills. Bulk reception and storage capacity is widely available at flour mills, with mills representing 80% of national milling capacity having bulk storage averaging ll days of milling operations. However, this storage is unevenly distributed, and 20-30 days would be a more prudent norm. In addition, only 6 out of 110 animal feed mills have bulk storage capacity, and introducing bulk receiving capacity, even if accompanied by only limited storage capacity, is important so as to eliminate costly bag operations. The need for more bulk reception and storage capacity at mills is recognized both by the government, which is considering various incentives and regulations, and by the wheat milling industry, which is planning a 120% expansion by 1986 that would provide bulk storage to all - 12 - f'lour mills and an industry average equal to 17 days of milling operations. Even the current level of bulk storage would permit virtually all wheat erliveriesto flour mills from the proposed project port and storage silos to bDe made in bulk since the four unequipped flour mills are in Tunis and could be served by bag from existing Tunis silos (para. 2.26) and La Goulette. Tntroduction of bulk reception and storage capacity equal to an average of 10 days of milling operations in 1986 in some 100 smaller scale animal feed mills would require an aggregate of about 12,000 tons storage capacity at an estimated total cost of US$4 million. Because of the dispersion of these miiils, bulk capacity will probably come gradually and require transitional bag deliveries of corn and barley from storage silos and warehouses (para. 2.25).

2e24L New Storage Silos at Beja, Gafsa, Kalaa Seghira, and Sfax. All four proposed silos are projected to receive both domestic and imported grain. The proposed silo of 10,000 tons at Beja in the northern production zone is deesigned to support the new flour mill at Beja and feedmills in the region. It will have a projected relatively high turnover of 10 at project completion in 1986 (compared to an acceptable standard of about five) which is balanced loycsation in a major production area and by the planned direct connection of the silo to the flour mill's own bulk storage capacity of 2,500 tons. It is exoected that the preparation study for the proposed second-stage project will saIalyzethe possibility of an additional role for the Beja silo as a czîliectioncenter for grain shipments to Tunis and make appropriate 2ecos.endat1ans regarding any increase in its capacity. The proposed silo of 0 000 tons at Gafsa is designed to serve a new adjacent flour mill and several regional feed mills and provide a measure of food security in the grai-n--deficit southern interior. It is projected to have a turnover of 5 at project completion.

,Z_É5 The proposed expansion by 20,000 tons of the existing 8,000-ton storage silo at Kalaa Seghira 6 km west of Sousse is designed to serve nuirerousmills in Sousse as well as in nearby coastal cities and the center hinterland. It is projected to have a 1986 turnover of 6. The proposed StOrage silo of 20,000 tons at Sfax will serve about 15 local feed mills and provide reserve storage capacity for two large flour mills connected to the saie rail siding which have their own bulk storage. The turnaoverof the Sfax silo is projected at 4.5 in 1986 and will increase thereafter as wider conversion to bulk handling permits the phasing out of remaining bag storage at CC's existing Sfax warehouse. All four silos also have satisfactory turnroverswhen measured in combination with nearby mill storage capacities. The following table summarizes the projected activity for each silo and nearby s Uitls - 13 -

Projected Storage Activity at Silos and Nearby Mills: 1986 (Thousands of tons)

Grain Arrivals Bulk Storage Capacity Turnover Silo Mills/a Silo Mills Silo Silo+Mills

Beja 96 36 10 2.5 9.6 10.6 Gafsa 52 12 10 2.5 5.2 5.1 Kalaa Seghira 190 29 28 4.0 6.8 6.6 Sfax 90 118 20 12.2 4.5 6.5

/a Arrivals of domestic grain at milis, which include some transshipments via warehouses, are projected to be 70% in bags at Beja and Gafsa, 50% at Kalaa Seghira and Sfax; these percentages would be expected to decline gradually under the second-stage project.

2.26 Rehabilitation of Storage Silo at Tunis. Bulk shipments direct to mills and to the four proposed new storage silos are projected to account for about 75% of the imports foreseen in 1986. The remaining 25% or about 290,000 tons, coming through Bizerte and La Goulette ports, plus about 190,000 tons of collections or a total of about 450,000 tons, would need to be handled in Tunis area silos. At present there are five storage silos with a combined capacity of 216,000 tons and two warehouses totaling 32,000 tons in and around Tunis. In 1979, they handled about 400,000 tons, much of it received and shipped out in bags, at a low average turnover of about 1.6. The two warehouses, which are old and ill-suited for bulk handling, are scheduled for early closing. The silos are also old (although they have some recent expansions of storage capacity), and their handling equipment is of limited throughput capacity and in poor repair. However, with minor maintenance actions, four of these silos totaling 166,000 tons of storage capacity are expected to be able to handle satisfactorily, partly in bulk, partly in bag, about 255,000 tons in 1986, including the remaining imports through La Goulette. The average turnover of these silos would be about 1.5.

2.27 The Manouba silo, with a capacity of 50,000 tons, and located on the standard gauge railway, is projected to handle in bulk about 73,000 tons of collections from the Bizerte-Beja-Jendouba region and 154,000 tons of imports shipped from Bizerte. This volume implies a turnover of 4.5, which is expected to increase after 1986. The proposed rehabilitation of the 4anouba Silo is designed to enable it to handle these projected grain volumes. It is expected that the preparation study for a second-stage project will analyze the future role and possible need for rehabilitation of the other Tunis area silos.

2.28 Transport of Grain from Port Silos: Programmed Trains. On the basis of inter-modal cost analyses, a large proportion of the grain imported through the proposed new port silos at Gabes/Ghannouch and Bizerte is planned to be shipped onward to mills and storage silos by programmed trains. These trains would consist of bulk cars and would be used exclusively for grain traffic on shuttle runs programmed on a priority basis to ensure 48-hour cycles to - 14 - maximize their cost effectiveness. From the Gabes/Ghannouch port silo, one programmed train is planned to run to the Kalaa Seghira storage silo at Sousse, and a second one to Sfax for deliveries to the storage silo and the large mills of STPA and Moulin du Sud on the same rail spur. Together, these two trains are projected to transport about 250,000 tons of grain per year, which is an approximate limit determined by turn-around times, rail line gradients and existing locomiotivetraction power. The average cost per ton of grain transported by these trains (plus the average cost of storage silo handling and reshipment by truck to mills) is estimated to be about 60Z of the average cost per ton for shipment by bulk trucks, even though a larger proportion of the latter shipments can go direct from Gabes/Ghannouch to the nills and avoid silo handling costs.

2.29 Fromnthe Bizerte port silo about 281,000 tons of grain is projected to be shipped in 1986 to Tunis area mills--127,000 tons by bulk truck direct and 154,000 tons by programmed train to the Manouba silo for transshipment to the mills by bulk truck. This pattern reflects the roughly equal cost per ton of the two modes, given their itineraries and the limits of projected storage capacity at the Tunis mills to absorb direct shipments from the Bizerte port silo. In the event that experience indicates that this programmed train cannot be operated competitively, then conversion to an all-truck option after five years can be carried out with a nominal penalty. On the other hand, in view of the higher initial cost of bulk trucks, the abandonment of an all-truck solution after five years to introduce a programmed train would incur a penalty of 5-10%. The mixed-mode solution also provides additional flexibility and security in the vital and congested Tunis area. The following table summarizes the comparative cost of road and programmed train transport.

Comparative Cost of Bulk Grain Shipments from Port Silos to Main Milling Centers by Truck and Programmed Train (including Silo Handling and Transshipment Costs) (Dinars per ton)

Truck Programmed Train

Gabes to Sfax 7.6 4.2 Gabes to Sousse 11.1 5.9 Bizerte to Tunis 2.3 2.2 /a

|a Mixed train and truck. - 15 -

2.30 It is believed that the three proposed programmed trains are a realistic first step for improving grain rail transport that can be effectively carried out by OC and SNCFT under the project. After a period of successful experience with these trains, it is expected that OC and SNCFT would be able to extend programmed train service to additional itiner','rieso1 grain transport, including programmed trains that might serve two c - = itineraries with iower volumes of traffic. It is envisaged that the preposed preparation study for a second-stage grain storage project would incXAsd further intermodai transport analysis to help plan the future shipmerd of domestic grain as well as imported grain not covered by the three p ùcposed programmed trains. In the interim, the imports through Gabes/Ghannouch beginning in 1986 of upward of 150,000 tons not covered by the proposed programmed trains are expected to be shipped in trucks to nearby mills and in a mixture of regular trains and trucks to Sfax, Sousse, Gafsa, and . An estimated 89,000 tons of imports through Bizerte not covered by the proposed programmed train and bulk trucks to Tunis are expected to be shipped to Beja, about half each in trucks and regular trains. These shipments from Gabes/Ghannouch and Bizerte are likely to be both bag and bulk at first, but the share of bulk shipments is expected to increase steadily as truckers adapt to the availability of bulk handlîng facilities and as SNCFT and some of the larger mills adjust future freight car investment priorities to the results of the bulk programmed trains. During negotiations OC agreed to ensure that grain that is in excess of the capacity of the programmed trains would be transported in an efficient manner.

D. Institutional Aspects

The Project Entity: The Office of Cereals

2.31 Background. The Office of Cereals (OC) is the government's national agency for grain marketing. Established in 1962 by the merger of two agricultural service organizations stemming from the colonial period, OC is legally a public sector industrial and commercial enterprise, endowed with financial autonomy under the authority of the Ministers of Agriculture and of Planning and Finance. Its main responsibilities are to buy, store, distribute, and sell local and imported grain; administer the government's price control system for grains and their derivatives; make recommendations for changes in the level of these prices as well as of profit margins for milling; and supply technical assistance, seeds, fertilizer and other inputs to grain producers. In practice, OC carries out its physical operations as envisaged, but as discussed in paras. 2.34-2.39, OC's financial autonomy is inhibited by the government's complex price control and subsidy system and budgetary constraints.

2.32 Organization and Management. OC is controlled by a board of directors composed of eight members, including representatives of the parent Ministers of Agriculture and of Planning and Finance, the National Bank of Tunisia (BNT), the two wheat cooperatives, CCGC and COCEBLE, the milling industry, and the farming community. The board of directors is headed by a president-director-general (PDG) nominated by the parent ministers. The PDG, with the assistance of a deputy director general, is responsible for day-to-day management. OC has about 2,230 employees of which about 390 are middle and high level administrative and technical staff, about 1,050 are lower level staff and skilled laborers, and about 790 are unskilled and seasonal laborers. OC is organized into four main divisions--technical, administrative, financial, and marketing--and several separate services. The - 16 - technical division handles extension and demonstrations. The administrative division includes a construction service which heretofore has been in charge of design and contracting for the construction of new silos and has mianaged day-to-day r7lations with OC's French and Tunisian engineering consultants 1. Under a recent reorganization, a Project Management Unit has been established which has taken over these functions (para. 4.03). The marketing division is responsible for purchase of domestic grain and management of storage silos, stocks and sales. A separate import-export service manages the contracting and scheduling of imports of grains and of other supplies and equipment (exports of grain have occurred only occasionally in recent years). Another separate quay service monitors grain unloading and transfer operations at the La Goulette port silo and at the quays in the four other ports. The financial division is responsible for payments and receipts and a separate service is in charge of the budget and accounts. There is a statistical service, but no unit with a capability for economic analysis in the grain sub-sector.

2.33 Operations. OC is autonomous in its operations which permits it to act with flexibility in commercial transactions and in control and distribution of grain stocks. In spite of an antiquated distribution system, OC has until now succeeded in assuring the supply and distribution of grain throughout the country to meet the very rapid rise in demand for industrially processed grain. However, certain organizational, management, and financial deficiencies adversely affect OC's operations, and will need to be corrected to ensure cost-effective operations in the future, especially as more and more grain is handled in bulk. Control of grain stocks is a key problem. For example, OC management receives reports on stock availabilities only bimonthly, which impedes the placing of import orders when prices are most favorable. As a result of outmoded techniques of record-keeping, it is difficult to obtain reliable data on volumes of grain handled at individual silos, quantities stored outside, losses, and volumes and destinations of shipments by truck. Similar grain from different origins is often stored in separate cells, causing under-utilization of capacity. Poor stock control and divided responsibility for domestic and foreign grain purchases results in uneconomic transport patterns such as transshipments between two Tunis storage silos. Maintenanice is also a problem. Maintenance budgets are low and silo managers inadequately trained. As a result, broken handling equipment and unrepaired leaks inhibit operations or endanger grain in many installations.

/1t OC's prime engineerirng consultant is Agro Technic International Ingénierie (ATI) of France. ATI has a subcontract with the Office Technique d'Etudes Portuaires (OTEP) of Tunisia. - 17 -

2.34 Financial Situation. OC operates within the government's complex system of controlled prices, administered profit margins, rebates, losses, and subsidies that affect grain and grain produet prices at each stage of handling and processing from the farm gate to the retail bread counter. The central features of the system are twofold. First, in theory OC analyzes market conditions and determines prices and margins more or less in keeping with sound commercial and financial practice. In fact, OC's analytical capacities are limited, and its recommendations are often rejected by the Government especially when price increases are proposed. Second, the Government's policy to keep producer and retail prices roughly in line with world prices despite high intermediary costs, results in substantial losses and subsidies as grain passes from the farmer and from importers through OC's system to the miller and from the miller to the baker (para. 2.42).

2.35 Normally, in an industrial or commercial enterprise, this situation would call for a major financial reform as part of the project. OC, however, while created in the form of an independent financially autonomous public enterprise, serves in reality as an implementing agent of Government policy, with key financial and pricing decisions being made by the Ministries of Agriculture, Planning and Finance, and National Economy. As a result, there has developed a degree of imbalance between the operational results expected of OC and the financial resources placed at its disposàl. This imbalance, together with the uncertainty and the administrative complexity of financing arrangements, greatly handicaps OC's functioning and affects its relations with the milling industry. However, given the financial complexities and the sensitivity of the prices involved, it is desirable to have a much more comprehensive analysis of OC's financial system than is currently available. Accordingly, the project would provide for a cost control and financing study and the subsequent implementation of a program of improvement (para. 4.06(a)). The project also envisages certain financial reforms which appear feasible to implement even before completion of the study (para. 2.38).

2.36 Financial Structure and Performance. As of September 30, 1979, OC's balance sheet showed assets and liabilities of D 164 million (about US$400 million). About 10% was equity, including shares of its two predecessor organizations, about 70% interest-free short-term Treasury loans for working capital, and 20% short-term credit from Banks, suppliers, and other sources. Noticeably absent were medium- and long-term debt, a reflection of OC's low level of investment activity (new or replacement) prior to the proposed project. In addition to Treasury outlays, which cover most of OC's working capital needs including purchases of grain from farmers, loans to farmers, and operating expenses at collection centers, OC has two other major sources of funds; sales of grain to industrial mills and reimbursements from the Price Equalization Fund (Caisse Générale de Compensation--CGC - para. 2.38). A comparison of OC's balance sheets and income statements for the four years from 1975-76 to 1978-79 shows a continuing unbalanced financial structure as illustrated by two financial indicators. In this period current assets remained consistently below current liabilities, with the current ratio ranging between 0.81 and 0.86. In parallel with this, the ratio of capital plus reserves plus long-term debt minus losses to fixed assets ranged from - 18 -

0.24 to 0.45, indicating the financing of a substantial portion of fixed assets by short-term debt and the consequent desirability of replacing such short-term debt by long-term debt or equity. On the other hand, well over half of OC's short-term liabilities consisted of recurrent advances from the Treasury at no interest, giving them a quasi-equity character. Nevertheless, a restructuring of OC's debt seems desirable as is underscored by OC' s growing reliance on Treasury advances, which increased from 55% to 71% of total liabilities over the four years (see para. 3.13 regarding financing under the project).

2.37 During the same period, OC's liquidity was also generally tight. The operating ratio (total operating expenditures divided by total operating income) was between 1.00 and 1.01 for two years and at 0.98 for the other two years when reimbursements from CGC for OC's losses on subsidized grain sales are counted as part of OC's operating income. If these reimbursements are not included in operating income, OC's operating ratio for those years ranges between 1.3 and 1.4. The ratio of disposable liquid assets to total operating expenditures fell during the period from an acceptable 0.24 to a low 0.12. 0C's income statements show positive returns in all four years and an average positive return of D 2.4 million on the basis of production costs alone. however, performance is less favorable when administrative costs, taxes, depreciation and provisions are taken into account, with losses incurred in three of the years and an average loss over four years of D -0.9 million per year. Final financial results after all transfers show profits in three years and a four-year average of just breaking even.

2.38 Financial Relations with CGC. Tunisian law provides that the Caisse Générale de Compensation (CGC) should compensate OC for the costs of its grain operations to the extent they are not covered by OC's official grain selling price established by the government. However, CGC, which obtains its own revenues from excise taxes on gasoline, alcohol and other commodities, has been in budgetary deficit since 1976. As a consequence, in recent years it has made only partial reimbursements to OC, for example in FY 1978/79 only D 34 million out of D 91 million due. In addition, OC has received no interest on delayed payments, and the coefficients used to calculate CGC transfers have not fully reflected the costs borne by OC. The reimbursement margin ("marge de rétrocession") which OC receives from CGC on a per ton basis for each type of grain is meant to cover the difference between OC's purchase and sales price, plus the costs of handling, storage (silo depreciation) and maintenance. However, the reimbursement margin, which is determined by the government, has not been adjusted regularly to reflect annual increases in OC's actual costs. The inadequacy and the uncertainty of the amount and timing of CGC reimbursements have been a major constraint to OC's financial planning and cash flow management. As seen (para. 2.33), this constraint has also impeded silo maintenance.

2.39 Accounts. Price controls for grain and guaranteed profit margins for the mills and bakeries have necessitated the creation at OC of a complex accounting system for records of financial relations with these private sector organizations. For example, for each ton of grain purchased from OC by one of the 21 flour mills in Tunisia, the mill is liable for a series of specified taxes and fees to OC and OC is obligated to pay the mill a milling profit margin, as well as reimbursement for the actual transport costs incurred by the mill. These procedures were created partly to assure a uniform price of - 19 - bread throughout Tunisia. A similar network of financial obligations exists between OC and CCGC and COCEBLE (for collecting and storing grain) and between OC and the approximately 1,000 bakeries and 110 feed mills. With each of these organizations, OC keeps a running account and calculates a balance on a quarterly basis. The balances have usually been in favor of the mills, bakeries, and cooperatives, but OC has sometimes paid with considerable delay because of its tight cash flow situation. Disagreements over balances due have led to the lengthy suspension of accounts with several mills. The complexity of the system and the shortage of funds have placed a burden on OC's accounting staff and have diverted both OC and these other organizations from controlling and monitoring actual costs of grain storage, handling and transportation. The government has recognized the difficulties caused by the inadequacy of the CGC reimbursements to OC and by the complexity of OC's financing system. Accordingly, this year special budgetary provisions were made under which all of CGC's arrears to OC have now been paid. In addition, during negotiations, assurances were obtained that the government would cause CGC to transfer to OC all future arrears in reimbursements owed by CGC to OC within three months after the due dates; or, failing the availability of such resources to CGC, that the government would promptly make such transfers itself on a basis satisfactory to the Bank. It was further agreed that such payments would be recorded in OC's separate account for "market support". (See also para. 4.06(a) regarding a study and plan of action to improve OC's cost-control and financing system).

2.40 Audit. In 1978, OC began to prepare balance sheets and annual operating statements for outside auditing. Statements for the fiscal year from October 1, 1978 to September 30, 1979, were prepared in the fall of 1980. These accounts were reviewed and corrected by the Tunisian "Bureau Central d'Audit de Comptabilité et d'Organisation Industrielle, Commerciale et Agricole" (BAC). This semi-private group released a final verification of the revised statements on January 27, 1981. The audit performed by BAC appears to have been meaningful, as evidenced by their modifications of the preliminary statements prepared by OC.

2.41 Program of Improvement. OC has recently initiated efforts to improve its control of stocks and its financial and accounting practices. A Tunisian consulting firm (SCET) did a study on the computerization of OC inventory data, proposing a comprehensive system for the reporting and coding of information. However, the study recommended a degree of sophistication that will be difficult to implement in small collection centers and did not adequately outline practical steps for a transition to the proposed system. OC has nevertheless taken preliminary steps to implement the SCET system and has budgeted for acquisition of computer facilities and additional personnel. In the financial field, BAC has been contracted to evaluate OC's accounting and control system, to set up new bookkeeping procedures, and to assist OC in preparing a budget for 1981/82. BAC has been asked to assemble a working group of current OC staff to help carry out these tasks as a first step toward the creation of a new unified financial department. The contract provides for work to be completed by the end of October 1981. - 20 -

Prices and Subsidies for Grain and Grain Products

2.42 Producer prices and retail prices for wheat and wheat-based products are maintained by the government approximately in line with world market prices. However, these price levels are achieved at the farm gate partly as a result of heavily subsidized inputs. At the retail level, prices of flour, semolina and bread are set at levels some 35-40% below actual costs as a result of subsidies applied to reduce intermediary expenditures on transport, storage, milling, and baking. Meat production is stimulated both by the heavy subsidization of imported animal feed grains and by the low price established by the government for bran sold by flour mills to animal feed factories. The consequences of these policies include fiscal burdens on the government, administrative burdens on OC, disincentives to improved efficiency in the intermediary organizations, and the development of a beef-fattening industry that is expensive in terms of domestic resources and foreign exchange and that neglects Tunisia's comparative advantage in extensive grazing and forage crops. In the long run animal feed pricing policies could also generate additional requirements for expensive port silo investments. The potential difficulties inherent in these pricing policies, particularly as regards animal feed grains, are recognized by the government, and these policies are currently under review. During negotiations, assurances were obtained that the government will communicate to the Bank by June 30, 1982, for the purpose of an exchange of views, the strategy adopted for the livestock sector for the Sixth Plan period (1982-1986). The government also agreed to take all measures necessary for the progressive elimination of price subsidies on animal feed grains in accordance with a schdule to be agreed on with the Bank by December 31, 1982 (See also para. 4.01).

III. THE PROJECT

A. Summary Description

3.01 The objectives of the project are to:

(a) increase grain storage capacities;

(b) reduce the congestion, handling costs, demurrage charges and grain losses incurred at the five main ports because of insufficient bulk port silo handling and throughput capacity;

(c) reduce the cost of transport and handling of imported grain resulting from insufficient bulk rail transport, poor transport programming, and outdated and insufficient downstream silo storage and throughput capacity;

(d) strengthen the technical capacity and financial management of OC;

(e) prepare a second project designed to modernize the system of collection, storage and transport of local grain. - 21 -

3.02 The components of the project are:

(a) rehabilitation, adaptation for imports, and expansion to 30,000 tons of the existing export port silo at Bizerte, implementation of related port works, and construction of a 30,000-ton port silo at the new port of Ghannouch on the outskirts of the city of Gabes;

(b) construction of four storage silos, two of 10,000 tons each at Beja in the north and Gafsa in the south, one of 20,000 tons at Sfax, and one an expansion to 28,000 tons of an existing silo of 8,000 tons at Kalaa Seghira near Sousse; and rehabilitation of an existing 50,000-ton storage silo at Manouba (Tunis);

(c) construction and rehabilitation of rail sidings at project silos and acquisition of about 50 bulk rail hopper cars for use in three programmed trains to transport imported grain from Bizerte and Gabes/Ghannouch to downstream storage silos and mills;

(d) technical assistance for programming of imports and domestic transport of grain, management and maintenance of silos, control of stocks and costs, and preparation of a second project.

B. Detailed Features

Port Silos

3.03 Bizerte. The existing silo with a storage capacity of 20,000 tons would be expanded to 30,000 tons. The new cells would be of reinforced concrete, slipform construction and would be integrated with the existing cells by a new handling, cleaning, weighing, and dust control system. Pneumatic equipment for unloading of ships and a conveyor system to the silo would have a throughput capacity of 300 tons/hour -. Simultaneous loading capacities of 200 tons/hour for rail hopper cars and trucks would be installed. Reserve receiving capacity at 100 tons/hour for occasional deliveries by rail hopper cars and trucks and a reserve bagging capacity of 20 tons/hour for emergency outshipments would be included. The existing quay would be modified by the construction of three dolphins for mooring of ships. Limited quayside dredging would be carried out to accommodate ships of up to 30,000 tons.

3.04 Gabes/Gannouch. A port silo with a storage capacity of 30,000 tons would be constructed on the north quay (berth four) of the new harbor located at Ghannouch just outside Gabes. The cells would be of reinforced concrete, slipform construction, and pneumatic ship unloading capacity would be 300 tons/hour. To avoid conflict with general merchandise unloading equipment shared by berth 4 and the adjacent berth 3, the conveyor system

/1 All throughput capacities shown are rated capacities; actual capacities during operation may be 20-30% lower. All capacities are for bulk handling unless indicated for bags. 22 -

(300 tons/hour) would be installed underground. Handling equipment would include cleaning, drying and dust control. Simultaneous loading capacities of 200 tons/hour for hopper cars and 100 tons/hour for trucks would be installed. Reserve receiving capacity of 100 tons/hour for hopper cars and trucks and a reserve bagging capacity of 20 tons/hour for emergency outshipments would be included.

Construction and Rehabilitation of StoragSilos

3.05 All four new storage silos would consist of cells of reinforced concrete, slipform construction. Beja would have a storage capacity of 10,000 tons and two interconnected handling circuits of 100 tons/hour each, permitting either simultaneous unloading of trains and trucks at 100 tons/hour each or unloading at 200 tons/hour for one transport mode alone. The same flexibility would apply to loading of trains and trucks. Gafsa would have a storage capacity of 10,000 tons and two separate circuits of 100 tons/hour each, one for unloading either trains or trucks, the other for loading either trains or trucks. Sfax would have a storage capacity of 20,000 tons and two separate circuits, one of 200 tons/hour for unloading trains, the other of 100 tons/hour permitting either unloading of trucks, loading of trucks, or loading of trains. Kalaa Seghira would have a capacity of 28,000 tons (20,000 tons new plus 8,000 tons existing). It would have two circuits permitting simultaneous unloading of trains and loading of trucks each at 200 tons/hour. Unloading of trucks and loading of trains would be at 100 tons/hour. The rehabilitation of the Manouba silo would involve no increase of its existing storage capacity of 50,000 tons. Present low throughput capacities would be replaced by simultaneous unloading capacities of 200 tons/hour for trains and 100 tons/hour for trucks. Loading capacity would be either 200 tons/hour for trucks or 100 tons/hour for trains. Bagging capacity of 40 tons/hour at Kalaa Seghira and 20 tons/hour at the four other silos is envisaged.

Rehabilitation and Construction of Silo Rail Sidings

3.06 At Bizerte, Manouba, and Kalaa Seghira, the existing rail sidings would be rehabilitated, and at Gabes/Ghannouch, Beja, Sfax, and Gafsa, new sidings constructed, in most cases with a view to accommodating programmed trains with a minimum of manoeuvering. At Bizerte, a new siding link to the main line at the western approach to the silo would eliminate the need for manoeuvering grain trains in the merchandise port area east of the silo.

Acquisition of Bulk Rail Hopper Cars

3.07 The project would provide about 50 bulk grain rail hopper cars (26 narrow gauge and 24 standard gauge) of about 64 tons gross weight and 47 tons net load capacity. These would be augmented by 12 similar cars (narrow gauge) owned by STPA and currently operated in bulk grain service by SNCFT. The total of 62 cars (including three standard and four narrow gauge spares) would be used in programmed trains between Bizerte and Manouba, Gabes/Ghannouch and Sfax, and Gabes/Ghannouch and Kalaa Seghira. -23 -

Technical Assistance and Training

3.08 An estimated 66 man-months of consultant services would be financed to assist OC to introduce new organizational units, improve operations, carry out a study of its financial system and a study for preparation of a second-stage grain storage project, and organize training programs. The latter would include an estimated 40 man-months of training abroad (see paras. 4.04-4.05).

Credit for Financing Mill Storage Capacity

3.09 Ancillary to the project, it is also envisaged to encourage the use of credit available under the Third Agricultural Credit Project (Loan 1340-TUN) for financing the introduction of bulk receiving and storage capacity in animal feed mills. The credit would help support government policies to encourage the inclusion of such storage capacity in future investments in milling capacity.

C. Status of Design and Implementation Schedule

3.10 Detailed functional designs have been prepared by OC's engineering consultants, Agro Technic International Ingénierie (ATI) and Office Technique d'Etudes Portuaires (OTEP), for the five silos at Bizerte, Beja, Gafsa, Sfax and Kalaa Seghira and for the rehabilitation of Manouba. Performance specifications and a general layout site plan for Gabes/Ghannouch are in preparation. Tender documents for single-responsibility contracting in accordance with OC's designs and performance specifications (with an option for bids based on alternative solutions in addition to the required basic designs) for the seven silos are under final preparation for submittal to the Bank for approval and issuance by OC in the fall of 1981. Bid evaluation and selection of lowest evaluated bidders are planned for mid 1982. Contract signing is envisaged for late-1982. Construction and rehabilitation of silos is expected to be carried out on a phased schedule between late-1982 and mid-1985. Construction of the quay at berth 4 at Gabes/Gannouch is currently in progress under the responsibility of the Ministry of Equipment, and is expected to be completed by February 1982, after which the ownership of the quay would be transferred to OPNT. During negotiations, assurances were obtained regarding the prompt completion of the quay and its transfer to OPNT.

3.11 The design and construction of the three dolphins and the execution of quayside dredging at the Bizerte port silo quay would be carried out by OPNT on a schedule permitting the unloading of grain ships beginning in Mid- 1984. Detailed designs of railway sidings for five of the new silos have been prepared by SNCFT. Detailed designs for Gabes/Gannouch and Manouba are in preparation. Construction is expected to begin shortly after silo contracts are awarded and be completed over a period of about 12 months, well before completion of silo construction. Procurement of rail hopper cars would be - 24 - phased to assure delivery of the standard gauge cars for the Bizerte-Manouba train in February 1984 and of the narrow gauge cars for the two Gabes/Gannouch trains in February 1985.

D. Cost Estimates

3.12 The estimated total cost of the project, including physical and price contingencies, is D 37.5 million (about US$93.9 million), of which D 16.8 million equivalent (US$42.1 million) or 45% is in foreign exchange. Import duties and taxes included in the total cost are estimated at D 5.9 million (US$14.7 million). The unit costs are based on estimates obtained in February-March 1981 from local and foreign suppliers of equipment and civil works. Price contingencies amount to 20% of base costs plus physical contingencies. Price contingencies have been estimated on the basis of expected annual rates of increase of prices for local costs ot 7% in 1982 and 6% in 1983-86 and for foreign costs of 8.5% in 1982, 7.5Z in 1983-85, and 6% in 1986. Foreign technical assistance is costed at US$8,700 per month. Cost estimates are provided in detail in Annex 3 and in summary in the Table below.

Project Cost Estimates

Project ------D Millions------US$ Millions---- Total Foreign Components Local Foreign Total Local Foreign Total as % of as % of Base Cost Total

Port Silos 5.9 4.9 10.8 14.7 12.4 27.1 40 46 Storage Silos 5.6 3.4 9.0 14.0 8.4 22.4 33 39 Silo Rehabilitation 0.8 0.9 1.7 2.1 2.2 4.3 6 52 Subtotal Silos 12.3 9.2 21.5 30.8 23.0 53.8 79 43

Port Works 0.2 0.4 0.6 0.6 0.9 1.5 2 58

Railway Sidings 1.1 0.6 1.7 2.7 1.7 4.4 6 38 Bulk Cars 0.3 1.0 1.3 0.8 2.5 3.3 5 77 Subtotal Railways 1.4 1.6 3.0 3.5 4.2 7.7 il 54

Engineering 0.9 0.5 1.4 2.2 1.3 3.5 5 38

Technical Assistance 0.3 0.3 0.6 0.7 0.7 1.4 2 48 Total,Base Cost 15.1 12.0 27.1 37.8 30.1 67.9 100 44

Physical Contin- gencies (15%) 2.3 1.8 4.1 5.7 4.5 10.2 15 44

Price Contingencies 3.3 3,0 6.3 8.3 7.5 15.8 23 47

Total Cost with Contingencies 20.7 16.8 37.5 51.8 42.1 93.9 138 45 - 25 -

E. Financing

3.13 The proposed Bank loan of US$ 42 million equivalent would be made to the government and would finance the full estimated foreign exchange cost of the project. During negotiations assurances were obtained on the following matters: that the Bank's loan would be on-lent to OC on the same terms and conditions as the Bank loan (the authorization and ratification of a Subsidiary Loan Agreement satisfactory to the Bank by the Government and OC would be a condition of effectiveness of the Bank's loan); that the government would bear the foreign exchange risk; that local costs of the project would be financed through the government's annual budget as grant transfers to OC, so that the new silos, rail sidings, and rail cars would become additions to OC's equity; that arrangements satisfactory to the Bank would be made by OC with OPNT and SNCFT to make available to them the portions of the proceeds of the Bank's loan and the local funds necessary for the execution, respectively, of port works and railway activities under the project. The Tunisian budget for 1981 contains US$ 10.7 million equivalent in dinars for initial costs of silo construction and rehabilitation.

F. Procurement

3.14 By OC: ICB. Contracts for construction and rehabilitation of silos (estimated to cost US$ 53.8 million) would be awarded after international competitive bidding which would be carried out by OC in accordance with the Bank's Guidelines for Procurement. The silos would be grouped in three separate contracts for (i) the three northern silos of Bizerte, Manouba, and Beja (estimated to cost US$ 20.0 million), which include most of the rehabilitation work; (ii) the three center-south storage silos of Kalaa Seghira, Sfax, and Gafsa (estimated to cost US$ 17.9 million); and (iii) the new port silo at Gabes/Gannouch (estimated to cost US$ 15.9 million). The bid documents would provide for single-responsibility contracts for construction of civil works, supply and installation of equipment, start-up testing, and training of local staff in operation and maintenance of the silos. This approach is designed to ensure more effective coordination of structures and equipment and better standardization of both equipment and training. Bidders would be required to submit bids for Bizerte, Beja, Gafsa, Sfax, Kalaa Seghira and Manouba based on the detailed designs prepared for those silos by OC's consulting engineers and for Gabes/Gannouch based on OC's performance specifications and technically compatible with OC's designs for the other silos. Bidders would also be free to submit their own designs for the seven silos as additional variant solutions. Some 20 groups of firms representing some 10 Bank member countries and Switzerland have been prequalified according to procedures consistent with the Bank's Guidelines. All prequalified groups contain foreign firms. Some groups include Tunisian firms, and most bidders are expected to seek to subcontract much of the civil works to local contractors in view of the latters' knowledge of local conditions.

3.15 By OC: LCB. Miscellaneous equipment and supplies not exceeding the equivalent of US$100,000, and up to an aggregate maximum of US$500,000, would be procured by OC under local competitive bidding procedures acceptable to the Bank or after quotations had been sought from at least three suppliers.

3.16 By SNCFT AND OPNT. OC would enter into contractual agreements with SNCFT and OPNT, satisfactory to the Bank, pursuant to which, respectively,

(a) SNCFT, on behalf of OC, would: - 26 -

(i) procure about 50 rail hopper cars (estimated to cost US$3.3 million) under international competitive bidding, and

(ii) provide new or rehabilitated railway sidings .estimatedto cost US$4.4 million) at the seven silo sites, using local competitive bidding procedures acceptable to the Bank for civil works and earth moving costing less than US$0.5 million, international competitive bidding procedures for civil works and earth moving costing US$0.5 million or more and for siding rails and equipment. SNCFT itself would do any other work necessary to complete the sidings.

OC's contractual agreement with SNCFT would also provide for Bank review of SNCFT's procedures for international competitive bidding for conformance with the Bank's guidelines.

(b) OPNT, on behalf of OC, would:

(i) provide three dolphins and dredging (estimated to cost US$1.5 million) at the Bizerte silo quay, using local competitive bidding procedures acceptable to the Bank.

3.17 Consultants for technical assistance would be recruited on terms and conditions acceptable to the Bank.

G. Disbursements

3.18 The proposed Bank loan would be disbursed on the following basis:

Amount of the Loan Allocated US$ million Z of Expenditures Category Equivalent to be financed

(1) Construction and rehabilitation of silos (a) at locations other than Manouba 23.5 40% of total (b) at Manouba 2.5 50% of total

(2) Port works 1.0 60% of total.

(3) Construction of silo railway sidings 2.0 40% of total

(4) Purchase of bulk hopper cars 3.0 100% of foreign

(5) Engineering services 2.2 80% of total

(6) Studies and technical assistance 1.2 80% of total

(7) Overseas training 0.2 100% of foreign

(8) Unallocated 6.4

Total 42.0 - 27 -

3.19 Loan disbursement requests would be supported by full documentation. Retroactive financing estimated not to exceed US$300,000 equivalent is proposed for engineering consultant costs incurred since the return of the appraisal mission March 1, 1981. The entry of OC into satisfactory arrangements with CCGC, OPNT, and SNCF1, respectively, for the rehabilitation of Manouba, the carrying oux of port works at Bizerte, and the implementation of the railway siding and hopper car component of the project would be conditions of disbursement of funds for these purposes. The schedule of estimated disbursements is given below. The projected completion of disbursements in five years and relatively heavy disbursements shown for FY83 reflect the fact that procurement of silos is underway and contract signing is expected in late 1982. Down payments are expected in mid FY83. A group of eight completed Bank-financed Tunisian projects featuring comparable large-scale construction and equipment installation had a composite disbursement profile covering six and a half years, with 91Z disbursement after five-and-a-half years.

……--…______---……Bank FY…------FY82 FY83 FY84 FY85 FY86

Annual 0.7 12.9 16.9 8.5 3.0 Cumulative 0.7 13.6 30.5 39.0 42.0

H. Environmental Effect

3.20 The project is not expected to have any significant adverse environmental effect. Silo design would provide for satisfactory cleaning of stored grain, which should result in an improvement in the average quality of grain delivered to flour and animal feed mills. Silo design would also provide for satisfactory dust and humidity control, which, together with technical assistance in silo management and maintenance, should reduce to a minimum the risk of silo explosions.

IV. PROJECT IMPLEMENTATION

A. Organization and Management of the Project

4.01 Responsibilities for Implementation. Under the general authority of the Ministry of Agriculture, OC would have responsibility for the project with the assistance of OPNT and SNCFT. The authorization and ratification of the Project Agreement by OC, OPNT, and SNCFT would be a condition of effectiveness of the Bank's loan. OC would own all the project silos except Manouba which is owned by CCGC (para. 4.03). OC would carry out the construction and rehabilitation of silos, the study of its financial system, and the preparation of a second-stage grain storage project. During negotiations, assurances were obtained that OC would enter into arrangements with OPNT under which OPNT would construct and maintain the dolphins at the Bizerte silo and carry out the necessary dredging at the Bizerte port silo. The Ministry of Equipment is in charge of ongoing construction of the Gabes port silo quay (para. 3.10). During negotiations, assurances were obtained that OC would enter into arrangements - 28 - with SNCFT tnder which SNCFT would carry out the construction of silo railway sidings and the procurement, maintenance, and operation of the 50 bulk grain cars, which would be owned by OC. These arrangements would also set out the obligations of both parties for the operation of the programmed trains and provide for an arrangement to be made with STPA for t'neintegration of STPA's existing 12 cars into the Gabes-Sfax programmed train. It is expected that the National Freight Transport Company (STM), the main road transport company in the Tunis region, or OC itself would handle the increased trucking of grain from Bizerte to the Tunis mills (a small increment to STM's total traffic) (paras. 2.29 and 2.30).

4.02 Project Coordination Committee. Overall coordination of the project would be provided by a Project Coordination Committee (PCC), already functioning during project preparation, and including the Ministry of Agriculture, OC, SNCFT, and OPNT under the chairmanship of the Director of Projects of the Ministry of Plan and Finance. The committee would meet as necessary but at least once every six months to review OC's work program and progress, to ensure coordination among the agencies and ministries concerned and to resolve inter-agency questions. During negotiations, assurances were obtained on these points, and since then the PCC has been formally established by the government.

4.03 Silo Construction: Project Management Unit (PMU). Management of silo construction and coordination with other project agencies on a day-to-day basis would be provided by a Project Management Unit (PMU) which has been formally established in OC for the period of project implementation and reports to OGCs President Director General and his deputy. The director cL PMU serves as secretary of the Project Coordinating Committee. Management of silo construction by PMU would cover remaining preparation of bid documents, bid evaluation and award, erection and start-up. It would be carried out primarily through PMU's supervision of OC's engineering consultants, ATI and OTEP. Under the terms of the OC-ATI contract and the ATI-OTEP subcontract, ATI has primary responsibility for design of silos, preparation and evaluation of bids, and erection of silos, while OTEP has responsibility for detailed design of civil works and day-to-day site supervision of erection. PMU would also be responsible for the monitoring of training and studies under the project. During negotiations, agreement was obtained on a satisfactory staffing plan, including, in addition to the director, who is a qualified engineer with management experience in major infrastructure contracting and construction, at least one qualified technician posted at each of the seven silo sites to monitor construction on a full-time basis. During negotiations assurances were obtained that OC would make suitable arrangements with CCGC providing for OC management of the rehabilitation of CCGC's Manouba silo and reimbursement by CCGC of the costs on appropriate terms and conditions.

B. Operation of Silos and Management and Planninig of Grain Distribution

4.04. Technical assistance would be provided and organizational modifications introduced to help OC improve the maintenance of silos, management of imports, control of grain stocks, scheduling of transport and planning of investment (para. 2.33). During negotiations, assurances were obtained that, to improve - 29 - maintenance, a central silo maintenance service would be established by December 31, 1982 with technical assistance support to set standards for silo and warehouse preventive maintenance, introduce a silo inspection system, carry out major repairs, and organize a training program in maintenance and minor repairs for silo managers and technicians. Technical assistance in import management would be aimed at strengthening the knowledge and capacity of OC's existing export-import service in domestic harvest forecasting and long term planning of import needs, import contracting, ship contracting and scheduling, port silo management, and patterns of domestic transport of grain, with the objective of achieving better contract pricing, avoidance of demurrage charges, and coordination of port of destination with domestic requirements. Technical assistance in grain stock management would be designed to strengthen OC's existing marketing division and, following evaluation of SCET's proposals (para. 2.41), to help introduce more systematic stock recording and information retrieval aimed at permitting better utilization of storage facilities, reduction of losses, more effective transport planning, and preparation of the collection center network for a transition to bulk handling under the second-stage project.

4.05 To improve transport scheduling, and in particular to ensure effective initiation and operation of programmed trains, a transport unit would be created by June 30, 1983 with technical assistance support to manage requests to SNCFT and the trucking companies for grain transport, establish transport productivity targets, monitor and evaluate transport performance, and undertake long term transport planning. To improve investment planning and facilitate the preparation of a second-stage storage project, a planning and evaluation unit would be established in OC by March 31, 1982 with technical assistance support and staff qualifications in silo engineering, transportation economics and grain production and marketing. During negotiations assurances were obtained that OC would employ management consultants by April 30, 1982 to furnish expert advisors, prepare related training programs (which would be furnished by OC to the Bank for approval), and help launch the institutional improvements described in paras. 4.04-4.05. Consultant services would total an estimated 42 man-months and overseas training an estimated 40 man-months. Assurances also were obtained that OC would, by April 30, 1982, make suitable ar-rangements with CCGC and COCEBLE for their participation in the new maintenance service and stock control systems and the related training programs.

C. Studies

4.06 OC would carry out the following two studies:

(a) Cost Control and Financing. Drawing on the work already done by BAC (para. 2.40-2.41), a comprehensive cost-control and financing study of OC's operations would be carried out and a plan of action for improving cost control and OC's financing system prepared, discussed with the Bank and presented to the government by September 30, 1983. Assurances were obtained that the government and UC would implement the plan of action by March 31, 1984. To assist in the preparation of the study and plan of action, assurances were obtained that OC would hire financial consultants by April 30, 1982 on terms and conditions satisfactory to the Bank. The consultant services would total an estimated 24 man-months and would be in addition to the 42 man-months referred to in para. 4.05. - 30 -

(b) Preparation of a Second-Stage Projec. This study would be carried out by the planning and evaluation unit, in close collaboration with the Ministry of Agriculture, CCGC, COCEBLE, SNCFT and other interested agencies and with the support of an estimated 12 months of consultant assistance included in the services proposed in para. 4.05. It is expected that the study, which would focus especially on the storage and distribution of local grain, would span the June-October harvest-collection period in 1982 and that a final report would be transmitted to the interested agencies and the Bank by June 30, 1983.

D. Monitoring, Reporting, and Evaluation

4.07 These functions would be carried out as follows;

(a) Monitoring and Reporting would be the responsibility of PMU (para 4.03). With the assistance of the consultant engineers, PMU would prepare a quarterly report on the progress of procurement and construction of silos. PMU would obtain a similar quarterly report from OPNT on construction of dolphins and dredging at Bizerte, from the Ministry of Equipment on construction at berth four at Gabes, from SNCFT on construction of sidings and procurement of bulk grain rail cars, and from the responsible units of OC on staffing, studies and training. PMU would compile these reports and prepare a summary assessment for transmittal to the members of the Project Coordination Committee and the Bank. The second and fourth quarterly report each year would be discussed at the semi-annual meeting of the Project Coordination Committee, and minutes of the Committee's discussion would be promptly sent to the Ministers of Plan and Finance, Agriculture, and Transport and Commmunications and to the Bank.

(b) Evaluation would be performed by OC's planning and evaluation unit, which would maintain close contact with PMU and participate in the meetings of the Project Coordination Committee. The planning and evaluation unit would prepare and present for discussion at the Project Coordination Committee by no later than June 30, 1984, an interim evaluation of the progress of works, studies, institutional improvements, and financial reforms provided for under the project. This evaluation together with the minutes of the committee's discussion would be transmitted to the Ministers of Plan and Finance, Agriculture, and Transport and Communications and to the Bank promptly after the Committee's meeting. Within six months after completion of the project, the planning and evaluation unit would prepare a project completion report, also for submission to the interested ministers and the Bank. - 31 -

E. Accounts and Audit

4.08 The Office of Cereals, OPNT, and SNCFT would maintain separate accounts for expenditures under the project. OC's accounts are currently audited by an independent auditing firm (para. 2.40). Assurances were obtained that OC would continue this auditing practice and would furnish its auditea accounts and a report of the audit to the Bank for the fiscal year ending in September 1980 by December 1981, for the fiscal year ending September 1981 by July 1982, and thereafter within ten months after the close of each fiscal year.

V. PROJECT BENEFITS

A. Benefits

5.01 Introduction. In broad terms the main project benefits are improved efficiency of the grain distribution and storage system and a greater capability for that system to deal with a potential crisis in grain supply. More specifically, the project would generate a series of benefits in the form of economic cost savings as compared with the grain storage and distribution system which would prevail in the absence of the project. The profile used for the "without project situation" starting in 1986 resembles the current pattern of grain handling and distribution with the exception of certain palliative improvements which OC would be expected to make. The rising pressure of congestion is expected to force OC to find substitutes in several ports for the traditional method of unloading ships by sending teams of workers into the holds to fill grain into bags with small shovels. By 1986 ships arriving at Bizerte are expected to be unloaded instead through an intermediate technology involving mobile pneumatic equipment for bulk unloading into a hopper on the quay which could serve to load trucks in bulk or be connected to a bagging machine. This equipment already exists at Bizerte but had not been successfully used as of early 1981 because of mechanical difficulties and worker resistance. It is assumed that these difficulties would be overcome by 1986. This system would allow faster ship unloading and reduced handling costs. Shipments out of the port area would then be made in bags and in bulk trucks. It is expected that in the absence of the project this type of mobile system would also be introduced to unload about half the imported grain arriving at Sfax by 1986. At Sousse and Gabes/Ghannouch, where volumes are smaller, the traditional unloading method would be continued. These improvements would be expected to permit these four ports to handle all increments in total imports, but not to lead to any reduction in the present high level of imports and quay occupancy at La Goulette.

5.02 The major project benefits are closely related to the volume of imports, and the measurement of those benefits is affected by the behaviour of imports in two important ways. First, imports of grain in years of average weather are projected to increase to 1.2 million tons in 1986, 1.5 million tons in 1991 and 1.6 million tons in 1996. However without the project, it is estimated that the limit of effective handling capacity of the palliative investments described above would be about 1.4 million tons. At about that volume, the government would essentially have to choose between making major investments like those under the project or curtailing further increases in - 32 - grain imports, which would constrain consumption. Second, within a generally rising trend, imports are expected to fluctuate substantially from year to year in response to weather and the level of official collections from the local harvest. Thus project benefits would also fluctuate from year to year. However, some benefits from avoidance of congestion, such as reduced demurrage, accrue after a certain threshhold level and tend to rise geometrically as congestion increases. As a result, the fall in benefits in years of below-trend imports is expected to be less than the rise in benefits in years of above-trend imports. In view of these considerations and the uncertainty of the pattern of fluctuations, the basic analysis of benefits and costs has been made on the simplifying assumption of constant imports of 1.2 million tons from 1986 through the life of the project. An assumption of rising imports is treated in the sensitivity analysis in para. 5.16.

5.03 Under these assumptions, the major savings under the project would be obtained from (a) reductions in freight charges resulting from the capacity to unload a greater number of large ships, (b) reductions in demurrage charges as a benefit of better scheduling and more rapid unloading of ships, (c) savings in the labor costs of grain handling, and (d) savings from the elimination of quay storage. These and other benefits and their relative importance are shown in the following table. Because these benefits depend upon an integrated package of investment components designed to improve the efficiency of the imported grain circuit from the ports to the mills, separate rates of return for these components have not been calculated.

Benefits Share

Savings in freight with more large ships (in foreign exchange) 0.27 Savings in ship demurrage (in foreign exchange) 0.27 Savings in grain handling (labor costs) 0.29 Savings from eliminating quay storage 0.10 Savings in bags 0.04 Avoided palliative investments in import handling 0.01 Avoided investments in boxcar fleet 0.02 1.00

5.04 Beneficiaries. The savings created by the project in both foreign exchange and local currency would accrue first to OC and the government, making it possible to reduce the operating deficit of OC as well as the CGC's subsidy transfers that finance that deficit. It is not expected that savings would be passed on directly to the consumer in the form of lower prices for grain and grain products, given that consumer prices for these products are fixed at levels roughly in line with world prices and below in the case of animal feed grains (para. 2.42). Consumers would benefit indirectly by greater certainty of a steady delivery of grain products, especially in the event of a breakdown of one of the port silos. - 33 -

5.05 Savings in Freight Cost of Imports. With the project Tunisia would have three 30,000-ton port silos, without the project only one. The project capacities together with improved scheduling would permit OC to order a larger proportion of its imported grain in big ships and to increase average cargo size substantially above the current average of 15,800 tons. Although freight rates fluctuate in response to many factors, over the long run it is estimated that the average premium paid in freight costs for receiving a 15,000-ton rather than a 25,000-ton ship is about US$15 per ton. Without the project, some 606,000 tons of imports not going to La Goulette would be likely to arrive in small lots. With the project, it is estimated that OC would succeed in buying one-half of this volume in larger cargo sizes, for which the annual freight savings would be US$4.54 million.

5.06 Savings in Ship Demurrage. Tunisia's grain imports are carried almost entirely in chartered foreign ships, so that the virtual elimination of demurrage charges that is envisaged under the project would be a direct foreign exchange benefit. OC has been paying large and increasing amounts of demurrage. At the merchandise quays at Bizerte, Sousse, Sfax and Gabes/Ghannouch, demurrage stems from the time required for bag unloading of ships well in excess of standard contract unloading periods which are based on bulk handling. Factors such as priorities for general merchandise and passenger ships (at Bizerte), and prohibition of even temporary quay storage (at Sfax) all tend to lengthen bag unloading periods and generate additional demurrage for ship waiting time in the harbor despite OC's best efforts at scheduling. At La Goulette demurrage reflects OC's aim to maximize the use of Tunisia's only port silo, which has resulted in nearly 90% quay occupancy there the last two years (compared to a normal maximum of 60-65%) and much consequent ship waiting in the harbor despite bulk unloading usually within contracted periods. OC's efforts to trade off demurrage at La Goulette against high bag handling costs at other ports has also resulted in much redirecting of ships (at a cost) and partial unloading at two ports. As grain import volumes have risen, the compounding effect of port congestion has tended to result in a rise in average demurrage payments per ton of grain imported as seen in the table below. Between 1977 and 1980 average demurrage per ton tended to increase by about US$0.13 per ton for each increase of 100,000 tons in imports. Without the project, it is estimated that average demurrage payments per ton would continue to increase in the same ratio to rising imports, an otherwise expected acceleration being averted by OC's palliative investments (paras. 5.01-5.02). With the project, the elimination of bagging and the improvement of ship scheduling resulting from the increased port silo capacity and technical assistance are expected to reduce demurrage to nominal levels. Annual savings are estimated at US$4.41 million, beginning in 1986.

Years Grain Imports Demurrage ('000 t) (Us$M) (US$/t)

1977 742 2.26 3.05 1978 825 2.21 2.68 1979 904 2.62 2.90 1980 1,091 3.83 3.51 1986 (Projected) 1,226 4.41/a 3.68/a

/a Without project estimates. - 34 -

5.07 Savings in Grain Handling. It is estimated that the project would completely eliminate grain handling in bags in ship unloading and largely complete the conversion to bulk handling for truck and train transport from the ports to mills and from the ports to storage silos. The expansion of bulk handling would lead to savings in the labor costs associated with filling, weighing, carrying and emptying bags of grain. Savings were calculated using actual wages paid to workers for various tasks on a per bag basis, adjusted to reflect the shadow wage of semi-skilled and unskilled labor. Total annual savings from conversion of grain handling to bulk is expected to be about US$4.82 million.

5.08 Savings from Eliminating Quay Storage. By the construction of bulk port silos, the project would eliminate storage of bags of imported grain on the quays ("stationnement"). OC now pays to the Office of Ports (OPNT) fees for prolonged quay storage, which represent OPNT's estimated opportunity and inconvenience cost of having the quay blocked with merchandise. Aggravated by lack of available transportation to move grain from the quays to silos, these fees also include the cost of covering the piles of bags with tarpaulins and guarding them from theft. There are no quay storage costs when grain is unloaded from the ships in bulk directly into a silo. Without the project, it is estimated that quay storage costs would be cut in half at Bizerte (where some improvements in port handling would be made) but would continue at current levels at Sousse and Gabes/Ghannouch. With the proiect, these reduced costs, amounting to US$l.58 million per year, are expected to be eliminated.

5.09 Savings in Bags. Bulk grain handling would lead to savings in jute bags, most of which are imported. It is estimated that the 80-kilo bags are used on average about twelve times before being discarded and that the project would eliminate about 536,000 tons/year of bag handling. These savings would amount to about US$0.71 million annually.

5.10 Savings in Port Handling Equipment. The project would avoid costs estimated at US4-250,000 recurring every 6 years for mobile bulk unloading equipment and US$1.0 million every 8 years for trucks as well as nominal annual operating and maintenance costs.

5.11 Savings in Rail Box Cars. Because of their two-day turn-around times, the programmed trains proposed under the project would be able to transport an estimated 404,000 tons of grain per year on their itineraries. In the absence of the silos provided under the project, programmed trains would not be feasible, and the existing 12 nearly new bulk cars of STPA would be operated in regular trains with estimated four-day turn-around times and would transport an estimated 44,000 tons. The remaining 360,000 tons of grain would be transported in bags and would require about 220 forty-ton box cars operating under an estimated eight-day turn-around time. It is assumed that SNCFT would use box cars representing a cross-section of the age distribution of the entire fleet. At an estimated cost of US$40,000 per box car, savings of US$8.8 million from avoided periodic purchases of replacement box cars are therefore estimated to accrue with the project, in three equal tranches at 10-year intervals over the life of the project. - 35 -

B. Economic Analysis

5.12 Costs and Rate of Return. Project costs include all investments in silo construction and rehabilitation, port infrastructure, rail cars and sidings, and technical assistance, phased over the five years beLween 1982 and 1986. The annual operating and maintenance costs of the new silos and the incremental costs expected at the rehabilitated silos have also been charged to the project. On the basis of these costs and the benefits as discussed above, the economic rate of return is estimated at 16%. The economic analysis is not substantially affected by changes that have occurred in the exchange rate since the time of the appraisal mission.

5.13 Other Benefits. The project would create a number of additional benefits for Tunisia which have not been included in the rate of return calculation because they are difficult to quantify. The expansion of port facilities and storage capacity together with technical assistance would give OC more flexibility and skill to arrange the purchase of imported grain when prices in international markets are advantageous. Reduced congestion in the ports would provide relief to non-grain traffic, reduce operating costs and possibly permit postponement of other port investments. The technical assistance to be provided to OC in stock control and silo management would lead to improved use of existing silo capacity, minimized outdoor storage, and less double handling of grain (transfers from one storage silo to another before shipment to a mill). Losses due to spills or spoilage during bag handling and quay storage would also be reduced. The use of programmed trains would release locomotive time for traction of other goods. Use of rail cars for storage of imported grain (currently occurring for up to two weeks in some locations) would be eliminated. Construction and rehabilitation,of storage silos would permit increased amounts of local grain to be shipped and handled in bulk at lower cost.

5.14 Sensitivity Analysis and Risks. The economic analysis is most sensitive to the import forecast, given that the return on project investments depends directly on the volume of grain handled. Import levels will continue to fluctuate, reflecting the swings in Tunisia's harvest output due to weather variation. While such fluctuations would affect the capacity utilization of project facilities in. any given year, they would tend to be mutually offsetting over a longer period, and average annual import levels have therefore been used for the economic analysis.

5.15 Under a low import scenario, in which average imports level off at the current volume of about one million tons per year, the ERR would drop to 11%. This scenario would be likely to unfold only if: (a) local production were to attain an average of 1.3 million tons per year in the 1980's, meaning a consistent 30% improvement over the harvests of the past decade, and (b) animal feed consumption were to be held essentially constant at current levels, which would mean a decline in per capita consumption. - 36 -

5.16 A more likely scenario is that imports will continue to rise beyond the projected 1986 level of 1.2 million tons. Allowing for a growth rate of 3Z per year, grain imports would reach a volume of over 1.4 million tons by 1991, and the project ERR would increase to 17%. Because 1.4 million tons is estimated to be the limit on imports without the project (para. 5.02), higher import volumes have not been used in the calculation of project benefits.

5.17 Over the longer term, Tunisia's physical capacity to meet its grain import requirements without the project is uncertain. Forecasts show demand for imported grain increasing to 1.6 million tons by 1996. Without the major investments in import handling and storage included in the project, these future levels of demand could not be met. The government would be forced to increase grain prices to establish an equilibrium between limited supply and increasing demand. The costs of this outcome would be borne directly by Tunisian consumers in low-income groups for whom grain products are the staple food.

5.18 The technical assistance and training included in the project are expected to minimize any risks of poor management of handling, storage and transportation facilities which might affect benefits. The greatest risk in the grain sub-sector appears to arise without the project, in particular the failure to construct the proposed new port silos. In this case, a breakdown at the La Goulette port silo would reduce Tunisia's capacity to receive imported grain by 60%, and national food security would be threatened.

C. Employment Impact

5.19 The major civil works investments associated with the project would create construction and administrative jobs at the silo locations. Once the project is onstream, the introduction of bulk handling would mean the elimination of the equivalent of an estimated 250 full-time jobs for piece workers who presently fill, weigh and carry bags of grain at the four ports of Bizerte, Sousse, Sfax and Gabes/Ghannouch. This effect would be partially offset by the creation of an estimated 140 jobs for technicians, administrative personnel, and skilled workers to operate and maintain the project silos at the new sites of Beja, Gafsa, Sfax, and Gabes/Ghannouch. The social costs of a small net reduction in the long run of employment in this sector is more than offset by the advantages of increased labor productivity, foreign exchange savings, and greater food security.

VI. SUMMARY OF RECOMMENDATIONS AND LOAN CONDITIONS

6.01 During negotiations, assurances were obtained from the Republic of Tunisia that it would:

(i) cause the Ministry of Equipment to complete by December 31, 1982 the construction of the quay at Berth four at the new port of Gabes at Ghannouch and upon completion to transfer ownership of the quay to OPNT (para. 3.10); - 37 -

(ii) communicate to the Bank by June 30, 1982, for the purpose of an exchange of views, the strategy adopted for the livestock sector for the Sixth Plan period (1982-1986), and take all measures necessary for the progressive elimination of price subsidies on animal feed grains in accordance with a schedule to be agreed on with the Bank by December 31, 1982 (para. 2.42);

(iii) maintain in operation the existing Project Coordination Committee for the duration of project implementation (para. 4.02);

(iv) cause CGC to transfer all future arrears to OC within three months after the due dates, or failing the availability of resources in CGC, to make such transfers itself on a basis satisfactory to the Bank, such payments to be recorded in OC's separate "market support" account (para. 2.39);

(v) implement by March 31, 1984, a plan of action to improve OC's financing system (para. 4.06(a)); and

(vi) provide local cost financing for the project through the annual budget in the form of grant contributions to OC (para. 3.13).

6.02 During negotiations, assurances were obtained from OC that it would:

(i) maintain in operation the Project Management Unit for the duration of project implementation (para. 4.03);

(ii) arrange procurement of silos under single-responsibility contracting through ICB in accordance with the Bank Guidelines for Procurement (para. 3.14);

(iii) hire management consultants by April 30, 1982 and with their assistance carry out a program of institutional improvement and training in maintenance of silos, management of imports, control of grain stocks, scheduling of transport, and planning of investment (including the preparation of a study for second-stage grain storage project) (paras. 4.04, 4.05 and 4.06(b)j;

(iv) hire financial consultants by April 30, 1982 and with their assistance carry out a cost-control and financing study of OC's operations, present a plan of action to the government and the Bank by September 30, 1983 and implement said plan by March 31, 1984 (para. 4.06(a));

(v) maintain separate project accounts, and have its accounts audited by an independent auditing firm (para. 4.08).

(vi) ensure that grain in excess of the capacity of the programmed trains would be transported in an efficient manner (para. 2.30);

(vii) prepare quarterly project progress reports, an interim evaluation of the project by June 30, 1984, and a project completion report (para. 4.07(a) and (b)); and - 38 -

(viii) make suitable arrangements with CCGC and COCEBLE by April 30, 1982 for their participation in the silo maintenance service, stock control system and training programs (para. 4.05).

6.03 During negotiations, assurances were obtained from OC and SNCFT that they would:

(i) arrange for procurement, ownership, management, maintenance, repair, and operation in programmed trains of the bulk hopper cars in accordance with specific guidelines which were agreed on during negotiations (paras. 3.16 and 4.01);

(ii) arrange with STPA for the integration of STPA's 12 existing bulk hopper cars into the Gabes-Sfax programmed train (para. 4.01).

6.04 During negotiations, assurances were obtained from OC and OPNT that they would enter into an agreement satisfactory to the Bank for the procurement and maintenance of dolphins and dredging at Bizerte (paras. 3.16 and 4.01).

6.05 Conditions of Effectiveness of the Bank's loan are the authorization and ratification of the Project Agreement by OC, OPNT, and SNCFT and of the Subsidiary Loan Agreement by the government and OC (paras. 3.13 and 4.01). Conditions of disbursement for the Manouba silo rehabilitation, construction of port works at Bizerte, and implementation of the rail siding and hopper car component are, respectively, the entry of OC into satisfactory arrangements with CCGC, OPNT, and SNCFT (para. 3.19).

6.06 Subject to the above assurances and. conditions, the project is suitable for a Bank loan of US$42 million equivalent with a term of 17 years, including a four-year grace period. - 39 -

ANNEX 1 Page 1 TUNISIA

STAFF APPRAISAL REPORT OF THE

GRAIN DISTRIBUTION AND STORAGE PROJECT

DOCUMENTS IN PROJECT FILE

A. Implementation Volume of the Grain Distribution and Storage Project Appraisal Report (see Table of Contents for Annex titles).

B. Selected Reports and Studies Related to the Grain Sub-Sector in Tunisia

1. "Projection de la Demande Intérieure des Produits Agricoles à l'Horizon 1986", Ministère de l'Agriculture, mars 1980.

2. "Statistiques Céréalières", Ministère de l'Agriculture, mars 1980

3. Note sur la Campagne Céréalière 1979-80", Ministère de l'Agriculture, aôut 1980.

4. "Perspectives de Développement du secteur céréalier de 1979 à 1986", Ministère de l'Agriculture, février 1980.

5. "Méthodologie et Organisation des Enquêtes Agricoles 1975-1980", Ministère de l'Agriculture, avril 1980.

6. "The Tunisian Cereal Distribution and Milling System", Christopher Allen Mock, Case Study: Tunisia from "Global Malnutrition and Cereal Fortification", James Austin, Editor, Ballinger Press, Cambridge, March, 1979.

7. "Memorandum: June Field Trip to Tunisia", Marko and Winkelmann, CIMMYT, August 17, 1977.

C. Selected Reports and Studies Related to the Transport Sector

1. "Etat Analytique du Trafic", SNCFT, décembre 1980

2. "Ventilation du Trafic Marchandises Diverses des Gares", SNCFT, 1980

3. "Tableau de Bord, Division du Transport Sud", SNCFT, janvier 1981

4. "Etude de la Coordination des Transports: Rapport Préliminaire, Volume 4: Economic des Transports", Louis Berger International, Inc. Mars 1979

5. "Besoins en Wagons, Vleme Plan: 1982-1986", SNCFT, juillet 1980

6. "Trafic Maritime", OPNT, 1979 - 40 -

ANNEX 1 Page 2

D. Studies and Reports Directly Related to the Project

1. "Rapport d'idendification d'un projet de stockage des céréales en Tunisie", rapport FAO/Banque Mondiale No. 27/9 TUN 11, 15 juin 1979

2. "Rapport de la mission de préparation du projet de stockage des céréales en Tunisie", rapport FAO/Banque mondiale No. 6/80 TUN-14, 18 janvier 1980

3. Rapport de la mission ferroviaire de M. Pierre Severin, 20/77, septembre 1980

4. "Localisation d'un Silo Portuaire", note de la Banque Mondiale, février 1981

5. Dossier d'Appel d'Offres pour les silos de Beja, Gafsa, Sfax, Kalaa Seghira, et extension du silo de Bizerte, Office des Céréales, décembre, 1980

6. "Silos de Tunisie", rapport technique de M. Albert Surier, mars 1981 TUNISIA STAFF APPRAISAL REPORTOF THE GRAIN DISTRIBUTION AND STORAGEPROJECT IMPLEMENTATIONSCHEOULE

15RD-FY82 IBRD-FY83 | IBRD-FY84 | IBRD-FY85 J 1BRD FY86i

CY81 CY82 CYE3 CY84 CY85 CY86

Bank Loan Sl-natare O Effect,uenene CIosmgqPane Silo Contractef

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ACY 81C Y 82 -_ CY 83 C_4Y c_ 85 _4 CY86

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Wo-id 8ank - 23073 - 42 -

ANNEX 3 Table

TUNISIA

STAFF APPRAISAL REPORT OF THE

GRAIN DISTRIBUTION AND STORAGE PROJECT

Prnject Cost Estimates

D ThousandUsS - Thousandhousands-…- Total as X Foreign Project Components Local Foreign Total Local Foreign Total of Base as Z of Cost Total

Port Silos Bizerte 2,261.5 2,232.0 4,493.5 5,653.8 5,580.0 11,233.8 Gabes/Ghannouch 3,618.8 2,738.0 6,356.8 9,047.0 6,845.0 15,892.0 Sub-total 5,880.3 4,970.0 10,850.3 14,700.8 12,425.0 27,125.8 39.9 45.8

Storage Silos Beja 1,158.7 649.0 1,807.7 2,896.7 1,622.5 4,519.2 Gafsa 1,133.9 629.5 1,763.4 2,834.8 1,573.7 4,408.5 Sfax 1,571.9 961.4 2,533.3 3,929.8 2,403.5 6,333.3 Kalaa Seghira 1,718.5 1,134.4 2,852.9 4,296.2 2,836.0 7,132.2 Sub-total 5,583.0 3,374.3 8,957.3 13,957.5 8,435.7 22,393.2 33.0 39.0

Silo Rehabilitation hanouba 822.4 898.5 1,720.9 2,056.0 2,246.3 4,302.3 6.3 52.2

Sub-total, Silos 12,285.7 9,242.8 21,528.5 30,714.3 23,107.0 53,821.3 79.2 42.9

Port Works Bizerle 255.0 350.0 '^5.C 637.5 875.0 ,'12.' 2.2 57.9

Railway Investments Sidings Bizerte 162.6 94.6 257.2 406.5 236.5 643.0 Gabes/Ghannouch 352.7 200.0 552.7 881.7 500.0 1,381.7 Beja 84.0 76.0 160.0 210.0 190.0 400.0 Gafsa 176.4 100.0 276.4 441.0 250.0 691.0 Sfax 143.9 68.1 212.0 359.8 170.2 530.0 Kalaa Seghira 108.7 84.6 193.3 271.8 211.5 483.3 Manouba 70.6 40.0 110.6 176.5 100.0 276.5 Sub-total 1,098.9 663.3 1,762.2 2,747.3 1,658.2 4,405.5 6.5 37.6

Rail Cars 298.7 1,000.0 1,298.7 746.8 2,500.0 3,246.8 4.8 77.0

Sub-total, Railways 1,397.6 1,663.3 3,060.9 3,494.1 4,158.2 7,652.3 11.3 54.3

Engineering Consultants 880.0 520.0 1,400.0 2,200.0 1,300.0 3,500.0 5.2 37.5

Technical Assistance Consultants 248.8 229.7 478.5 622.0 574.2 1,196.2 Training 52.0 48.0 100.0 130.0 120.0 250.0 Sub-total 300.8 277.7 578.5 752.0 694.2 1,446.2 2.i 48.0

Total, Base Cost 15,119.1 12,053.8 27,172.9 37,797.8 30,134.4 67,932.2 100.0 44.3

Physical Contin- gencies (15%) 2,267.9 1,808.1 4,076.0 5,669.7 4,520.2 10,189.9 15.0 44.3

17,387.0 13,861.9 31,248.9 43,467.5 34,654.6 78,122.1 Price Contingencies 3,346.1 2,973.1 6,319.2 8,365.2 7,432.9 15,798.1 23.3/a 47.3 Total Cost with Contingencies 20,733.1 16,835.0 37,568.1 51,832.7 42,087.5 93,920.2 138.3 44.8

/a Price contingencies are 20.2% of base costa + physical contingencies. -~~~~~~~~~~~~~~~~~S lI

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