4: ~~~~~~~~~~~~~~~~~~RES TR IC'TE D

ILIP_ DReport vein No. PTR-6a

r _.

I Thl;re;porlwas pi;epared formuse w-ithin hieiOunk unO ;S urriiiurea organizations. Public Disclosure Authorized They do not accept responsibility for its accuracy or completeness. The report may Ino be pubishied- nor m iT bybe quoteci as represenTing rneir views.

INTERNATIONAL BANK FOR REC'ONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

REPUBLIC OF TUNISIA

APPRAISAL OF A RAILWAY PROTJ.ET Public Disclosure Authorized

April il, 1969 Public Disclosure Authorized

Transportation Projects Department Currency Equivalents

Nationa1 rurren-ry is the Dinar (D) divided in 1, 000 Millimes (M)

US$ 1. 00 = DO. 525 US$ 1.905 D 1.0 US¢ 0. 19 M 1.0

Wei cits and Measuvres

i Metric ton = 2, 205 lbS 1 Kilogram (kg) = 2. 2 lbs 1 Kilometer (kin) = 0. 62 miles 1 Meter (m) = 3. 28 feet

Fis c 1 v ar

January 1 December 31

Acronyms

OPNT - Office des Ports Nationaux Tunisiens

*p1r- I. T ' *.'D 'JOV1:Aos'-Aes L, 0, Telgapz4 v^S%1L 4 s ATAe_nh A. w s4IJ A1V SNCFT - Societe Nationale des Chemins de Fer Tunisiens Sofomeca - Societe de Fonderie et de Mecanique REPUBLIC OF TUNISIA

APPRAISAL OF A RAILWAY PROJECT

TA'RTF OF rnvT1TNTrT;

Page

S_MAARY

1. INTRODUCTION 1

2. BAC1KGROULT 1 A e ,- -1 B. Transport System 2 CJ. . rTrars p±i±II -4.j ti Pno'licy andA Cood.,3Coo-IU~.JUUJ4LIM 43U.L'.LUo

3. r.TT-r- ¶n? ^sLAYflMSIu 4TTA~7' ifn~ £Uul d., L~.LAV II&Lt vJt.L0J L4 A. Organization, Management and Staff 4 D. rroper 6Y C. Operations 9 v. frali lC 5 E. Present Finances 11

U. THE PROJECT 16 A. The Second Four-Year Plan i6 B. Description of the Project 16 C. Execution of the Project and Procurement 18

5. F4U1L-UE TRAFFIC, EARNINGS AND FINANCES 20 A. Future Traffic 20 B. Future Operating Results 20 C. Project Financing and Proposed Bank Loan 22 D. Forecast Cash Flow 23 E. Forecast Balance Sheets 24

6. ECONCMIC EVALUATION 24

7. C' iI-;PD, T IO;NS 26

This report has been prepared by Messrs. Awar (Economist), Brechot (Engineer) and De Gryse (Financial Analyst). TABLE OF CONTENTS (eontinued)

CHART 1 Organization of SNCFT

TABLES

1. Track Characteristics 2. omnposition of MVotive Poe R i as at 31, 1'J67 3. Summary of Operating Statistics (Northern-Center Network)- l. Freight Traffic Statistics 5. Passenger Traffic Statistics 6 . Resp,ect+i;,M Cont-ribu,tion flrom Users andu Stuate 7. Summary Income Accounts 1962-67 (as shown in SNCFT's Books) 8.Ar,ed. -111 e k~ULIUhIC±Q--c y ±±''UITno-,;e- ~A__-._4t 1 UL4IIUk ±L7U-1962-67Z -Uf 9. Tentat;ive Evaluation of Gross and Net Fixed Assets as of

10. Summary Balance Sheet as of December 31, 1967 ii.L w . LII Tmiopoeru-uputuu A Projectr Jc 12. Track Renewal and Improvement Works included in the Proposed Project 13. Traufic Forecasts for Passengers 1968-1y75 14. Traffic Forecasts for Freight, per Main Commodities, 1968-1975 15. Summary of Traffic Trends 16. Forecast Income Accounts 1968-1975 (2 sheets) 17. Forecast Cash Flow Statement 1968-1975 18. Pro-Forma Balance Sheet as of December 31, 1967-1975 19. Forecast Long-Term Debt 20. Costs/Benefits Analysis for Line 6

ANNEXES

1. Amendments made to SNCFT's Income Accounts 1962-67 2. Tentative Evaluation of SNCFT's Fixed Assets as of December 31, 1967 3. Description of Measures taken or to be taken by the Government to improve SNCIT's Financial Position 4. Reasons for Elimination of Four-Year Plan Items from the Propbsed Project 5. Analysis of Traffic Forecasts 6. Notes on Forecast Operating Income and Expenditure 7. Methodology for Estimating Economic Benefits for the Northern- Center Network

MAP Tunisi.an Railways (IBRD-2496) REPUBLIC OF TUNISIA APPRAISAL OF A RAILTAY PROJECT

i. lThe Government of Tunisia and the Tunisian Railways have asked the Bank and the Association for a loan and a credit of US$ 8.5 miilion equir-- alent each to help finance a railway rehabilitation and modernization pro- ject which will be part of the Government's Second Four-Year Plan, 1969-J197 . The propose(d loan/credit would cover the project foreign exchange elemen't, estimated at 58% of the project total cost. ii. A UNDP-financed Transport Survey, covering all modes of trans- portation in Tunisia, was recently completed by the consulting firm Ital-- consult, wi-th the Bank acting as Executing Agent. The transport sector of the Government Four-Year Plan 1969-1972 will take into account the consul- tant's recoirmendations on transport policies and investment. The Plan i'3 being reviewed by the Bank. iii. Rail transport - performed on two networks, recently amalgamated - is the responsibility of the State-owned Societe Nationale des Chemins de Fer Tunisiens (SNCFT). SNCFT's management is reasonably competent and opera- tions are generally efficient. The financial relationship between the Gov- ernment and the Railways - as set forth in SNCFT's present Statutes - is in- adequate, and SNCFT's present financial position is unsatisfactory. MeaSures to correct the situation have been agreed upon. Submission of SNCFT's amended Statutes to the Tunisian National Assembly and implementation of tha agreed financial measures should be conditions for sizning of the proposed loan/credit. iv. Passenger and freight rail traffic has been growing steadily over the last 10 Years and is exDected to continue to increase at an overall annnu- al average of 8%. SNCFT's freight traffic is largely of a bulk nature, sai2> able for rail transport. vI The pronit consists of track re'npwal. thA purchase of motive nower and rolling stock, provisions for track equipment, workshops and consulting services, and interest drlring c-onstruction. It generally crovers the immediatp requirements of SNCFT to cope with present traffic demands. The consultant studies inclulded in the pronec-t will lard to the identification of a npcond railway project, the timing of which will depend. upon the satisfactory execu- +Jion ofr then nrreseQnt rjet

vi. The~pro ti. +is 4nicV11u asioun lnnrl is jifiedNrl onr, anomi,r grounds. In addition to the project investments, measures will be taken 'o ntcrease reven.ue prasets bvely wich will enable SNCFT +^ ezr a 71 return on the net fixed assets by 1973. -ii- vii. The project provides a suitable basis for a Bank loan and an IDA credit of US$ 8.5 million each. The proposed loan would be made to SNCFT with a term of 25 years, including 4 years of grace. The term is related to the economic life of the project items. The proposed credit would be made to the Government of Tunisia and relent to SNCFT on the terms and con- ditions of the proposed Bank loan. RP.PTMT.Tr OR 'TITTTTA

APPVATCZAT_ OF A pATTIJAV TmVThr'PP

1. INTRODUCTION

1.01~.JJ T,e nover-r.-,e.-1t ofL T- ar.d ',1U.teState-owned ±W-LL.n R1..Ll in August 1967 requested the Bank and the Association to assist in financing a railway, rehabil tation and modernization project which is part of th e Government's Second Four-Year Plan, 1969-1972. The proposed loan and c:red t. amounting to US$8.5 million each, cover the estimated foreign exchange cost of the project, or 58% of the total project cost (US$29.2 million equivaler-t). The project comprises track renewal, the purchase of motive power and rollIng stock, provisions for track equipment, workshops and consulting service3, and interest during construction due on the proposed Bank loan.

1.02 The proposed loan and credit would be the third Bank Group operatf,on in Tunisia for transportation. In 1964 and 1968 two loans totalling USS1T.$ million were made for ports development to the Office des Ports Nationaux Tunisiens '(OPNT). Construction of the project financed by the 1964 loan was satisfactorily completed in November 1967.

1.03 This appraisal report is based on (i) information supplied by the Government of Tunisia and the Tunisian Railways; (ii) the findings and recoYQ- mendations of the UNDP-financed Tunisian Transport Survey carried out by Italconsult in 1967/68; and (iii) the findings of a Bank appraisal missi.oll in June 1968 and a follow-up Bank mission in October 1968, when full project 1b.z became available. The latter mission reviewed Italconsult's recommendatioivs with respect to railway investment. Both Bank missions comprised Messrs. Awar, Brechot andi De Grvse, and this renort has been nrenared by them.

2. BACKGROUND

A. General

2=01 Tunisia, with an areanof 16hOA) kn 2, or about on2e-.qurt,er that o France, is bordered by the Mediterranean to the north and east, Algeria to the west, a1ndl T;bya t, -soh an-he southeAs IT4 o is_-4- 1a r .. .w~_V ovuJ"A , co< v, -v v us

2.02 Eleal output in the Tunisian economy grew by about 4% annually betweee. 19'U aud 1',67 so that, i.n tne iatter year the gross national product (GNPi amounted to US$963 million, or US$215 per capita.l/

2 03 hgriculture contributed some 18% to GNP, but provided abcut one.-haif of total etaployment. The prixvilpai agricultural products arc c;realsc voe,etables., citrus fnidt Lgraps and win.e. The sh-are -f agriclult La ii«C;J-' lv,ww-. Current Econcmac luAition and Prospects of Tunisia IJU,-.a7, March 19, 1968. - 2 -

has been declining as mining, manufacturing and tourism have grown more rapid-

ly in recent years. Tnisia's first oil refir. was openedein 1 A steel plant began production in 1964. Further development in industrializa- tion, particularly light manufacturing, is being encouraged. The growing vrolume of tourist traffic has stimulated building construction and associated actit- ies.. T,e principal sources of foreilg exchange earnings are tourism and phosphate.

B. Transport System

2.04 T'unisia, when it became independent in 1956, inherited a fairly ex- tensive and relatively well-developed transport system to which there have been modest additions over the past decade. With a coastline of about 1,200 km, the country has four major commercial ports: Tunis-La Goulette, Bizerte-Iienzel Bourguiba, Sfax and Sousse, all of which are under the control of an autono- rmous port authority, Office des Ports Nationaux Tunisiens (OPNTX._/ In addi- tion, the Government has decided on the construction of a new deepwater port at Gabes in the south-east as an outlet for phosphate exports.d/ The OPNT has been the beneficiary of two Bank loans; the first (380-TUN), amounting to US$7.0 million was made in June 1964 and construction works have been satis- factorily ccmpleted; the second (573-TUN), amounting to US$8.5 million was signed in November 1968.

2.05 there are about 16,000 km of roads in the country, almost two-thirds of which are surfaced. The road network is best developed in the north where industrial activities are concentrated. Road maintenance should be substantially improved. Many of the most heavily used main roads are in need of major improvements including higher standard surfacing so as to re- duce vehicle operating costs and to handle projected traffic increases. More agricultural access roads are required to stimulate agricultural production and exchange. The possibility of Bank assistance for the highways is under consideration. Despite these highway needs, the rail investments in this proposed project are of high priority. In 1966, road transport accounted for 900 million ton-km of freight, while the railway performed 1.3 billion ton-km, or 60% of the total; and of a total of 1.5 billion pass-km, road transport accounted for about two-thirds and the railway for one-third.

2.06 The railway network consists of 478 route-km of standard gauge and 1.522 route-km of meter gauge track. The two gauges link at Tunis. A de- tailed description of the railway system, its organization, management and operations is given in chanter 3 of this reports All rail transport is oDper- ated by the "Societe Nationale des Chemins de Fer Tunisiens" (SNCFT) except for an electric streetcar line serv1ng the northern suburbs of Tuni s.

2.07 Whi le there are several airfields located throughout the cownt:- internal air transport for cammercial purpose is insignificant. The prinici- pal international airport i9 located near Turns and, with the com.pletion. of the terminal building and other facilities relating to air traffic control now underway, this airport appears to be adequate. 1/ The port and maritime sector are discussed in detail in Report No. TO-6L8b. 2/ Since in-formation to assess the economic justification of this port is not fully available at the present time, the Government's request to include direct rail access to the port has been excluded frorm this project (see Annex 4, paragraph 1). - 3 -

C. Transport Itlicy and Coordination

6.08 The Government exercises a large degree of control over the trans- port sector. This is pa-ticularly true of rail and road trnisport where tariff approval, licensing of routes for road transport, traffic allocation ofL comma,odities, control1 of 34InVesta.ntS, f-Core4igr. eXch-.2ner allocation and taxa- tion are all instruments of control.

2.09 The road transport industry is organized on a geographical basis, eilh the operatirg uni ts largely beirg publicly ow.ned regional tran9port oMn- panies. The privately owned trucks are mainly employed in local and intra- regional trade . While most of the regiona'l pub±ic compan.es are fnanc-I self-sustaining, a number of the smaller ones are of doubtful viability. The trucking system suffers from rigid regulation with respec' to inter-zonal op- erations and the distribution of traffic "rights". A reorganization of the trucking industry,together with a review of existing traffic 1rights" is unoer consideration by the Government, and it is expected that competition between public and private truck transport would result in a more efficient utiliza- tion of the total vehicle fleet. The tax system applying to the road transport industry at present consists of nearly a dozen separate taxes and could be simplified. A main feature is the unbalanced tax distribution between cars and trucks, the former paying more than their share. Road user charges, in the sense of' the total taxes collected on the use and ownership of vehicles, (exclusive of those deriving from city streets) amount to about 80% of the total expenditures on highway maintenance and construction that Italconsult estimate as being desirable. In practice, however, the sums collected exceed the actual expenditure on highways largely because the highway network gen- erally has been inadequately maintained. The tariff structure regulating trucking is outdated and many official tariffs are below cos-ts. However, systematic exceptions to the official tariffs are tolerated. A new tariff structure mcre related to costs is under study by the Government. Finally, foreign exchange allocations for the purpose of replacement and expansion of the aging vehicle fleet have been tightly controlled and this has led to the import of large quantities of spare parts.

2.10 Despite the policy of favoring rail traffic through regulatory measures, with little reliance on competition and free consumer choice, the financial c(ndition of SNCFT remained poor until its recent take-over of the profitable 'Southern network serving the phosphate industry. Government inter- vention in the rai)ray hais aimed at subsidizing export commoditice (phosphate from Kalaa I)jerda, iron ore) and passenger services through an inadequate! tariff structure and this has been largely responsible for the past railway deficits.

2.11 Recent investment decisions in the transport sector have been taken largely on an unplanned, ad hoc, basis by the different operating agencies, Frequently without the application of economic criteria. Transport policies have not been conceived as an integral part of general economic policy. A major UNDP-i'inanced studv of transport planning and policies has recently been completed by the firm Italconsult. One of its main conclusions is thetE, notwithstanding the absence of coordinated policy planning, there is no ma;oi distortion of traffic allocation among the various modes of transport. The transport settor of the Second Four-Year Plan 1969-1972 will talce into a(-6ox'unt -talconsult's recommendations on transport investment and ccorAination. The Plan is being reviewed by the Bank, and agreement is expected to be reached on. transport pd-licies w.hich will form. the basis of *ul-re lending operations in the transport sector.

3 a THP1 TLTNIISTTCAT RDATT,,AY

A. 0 aani7,.4;or Mnagement and Staff

3.01 The first railway line in Tunisia was opened to traffic in 1876, and operated by prvate enterprise. 1922 theuTn uoverzrwnent purcnased the North- ern Center network which was then operated on a concession basis by the "Com- pagnie Fermlbre des Chei4ns de Fer Tunisierlns" until taken over, on January 1, 1957, by the Government-owned "Soci6te Nationale des Chemins de Fer Tunisiens". The Southern s,yst*em remained owned and operated by the "Compagnie des Phos- phates et du. Chemin de Fer de Gafsa" until January 1, 1967, when - in accord- ance withA1 thIle Concession Agreerm-LenI,s - it was also taken over by SNCFT. 3.02 SNCFT is admbiis'ered under Statutes dated December 27, I956, by a Board of Directors whose eight members are appointed by the Government. By Statute, four Board miemt-lbers (including the Chairman) are from Government, tvTo from railway staff, and two are persons of outstanding competence from public or private sectors. The present Board comprises five civil servants, two railway personnel representatives and the President of the National Mining Bureau, so that, in fact, six of the eight Board members are from Government. Although the main railway users (phosphate and iron ore) are present through the National Mining Bureau representative, SNCFT Board should be enlarged to include representatives of other users; a more balanced representation of all interests concerned would be achieved with the following Board composition, on which agreement has been reached during negotiations:

Government 4 (including the Chairman) Personnel 2 Users Total 10

3.03 Tne powers of the Board are lim'ted by the over-riding authority of the Government whose prior approval is required for: ti) decisions which, under the Corporation Law, require the approval of the general assembly of shareholders; (ii) the operating and capital budgets; (iii) the rules and regulations for personnel; (iv) tariffs; (v) the sale of assets; and (vi) bor- rowing. The freedom of SNCFT in day-to-day railway operations is not affected by these requirements.

3.04 WhLle the Statutes state that SNCFT's main function is rail opera-- t_ ns, they nevertheless provide for the possibility to expand SNCFT's activi- tias to other fields. In the past, SNCFT has been made responsible for the collection and trading of alfa and for the setting-up and operation of a foundry./ SNICFT has since been freed from these activities which interfered with its main function and adversely affected its finances. During nego- tiations agreement has been reached that SNCFT shall not, except in accordance

TTS . T~Fo...eriede et de Mecanique (Sofomeca) with a financial plan satisfactory to the Bank, be made responsible for non- rail activities.' -

3.05 All executive functions are vested in the General Manager (President- Directeur Gene'ral) who must be chosen frcm the Government rpnresentatives of the Board; he is also the Board Chairman. He has adequate authority in all spheres of railway administration. Honwever, his reolacement in case of absence or temporary incapacity is made on an ad hoc basis, and there i9 need for the appointment of a Deputy General Manager. Agreement on thi-s has been reached during negotiations.

3.06 There are five departments reporting to the General Munager: General Studies AcLministr!tion, Finance, Sed Tch4 cal ts latter rehpone sible for Operations, Mechanical, and Permanent lWay Divisions. The internal organization - the details of which are in Chart I - is adequate.

3.07 There is a shortage of qualified senior staff- to improve the situa- tion, SNCFT has obtained, under a 1968 contract with Sofrerail, 12 French rail- way staff of inrte,m.ediate level for a period of tl-ree years. Although helpful for day-to--day operations, the assistance does not suffice to compensate for SNCFr's lack of experienced senior staff at managerial level. To correct this, SNCFI has agreed to the appointment of two high caliber experts, for a period of two years, who -ili advise the General Manager. Agreement should be reached during negotiations on the terms of reference of the experts, the foreign exchange cost of wnom is included in the proposed loan.and credit. In additiorn to these experts the project provides for the appointment of consul- tants3 to ccarr-y out frou specifiLP-c stu"di-es w.-h"Jh are Cd'iscussed later in tI-1h;isrepor-t.

3.08 The General Ivianager has full authority over the railway staff which he appoints, assigns, promotes and dismisses in accordance with the rule!s and regulations for personnel and within the budgetary authorizations. At the e:id of 1967, the total personnel establishment was about 7,850, with a producti- vity per nmLn employed of about 200,000 traffic units. These figures colpare favorably with the performance of many railways over the world.l/

3.09 ';NCFT permanent personnel comprises two categories: established staff (personnel titulaire) and unestablished staff (personnel auxiliare); the aver- age remuneration of the latter is about half that of the former. In addi- tion, there are seasonal workers. The total establishment as of March 31, 1968, was as follows:

1/Traffic LMits are ton-km + pass-km. On the basis of the most recent in- formation available in the Bank, productivity figures for railways chcsen at random were as follows: East Africa: 117,000; Wfest Pakistan: 133,000. India: 1'0,000; UK: 159,000; Italy: 182,000: South Africa: 266,000; France: 290,000; Morocco: 328,000 (mainly phosphate). -6 -

NoL0rt hern-Center SoUhIVIhLI Totu.a 'IL Network Network SNCFT

Permanent: Established 14,25i 8% l,39 55% 5,t,45 73% Unestablished 448 9% 559 22% 1,007 13%

Seasonal 516 10% 567 23% 1,083 14% Total 5T215 u00% 2 10i0% 7,73 iO0%

it has been the policy of SNCFV to transfer old staff from the unestablished to the established category, so that it can be entitled to pension. At March 31, 1968, unestablished staff on the Northern-Center network accounted for only 9% of total personnel while on the Southern network it totalled 22%. SNCFT intends to pursue this policy.

3.10 While the salary level has remained generally stable, the policy mentioned above has affected the average cost per employee, which increased by some 12% over the last 5 years. Over the same period, total staff cost (including cotribution for pension) averaged about 55% of working expenses, which is reasonable.

3.11 Established staff is entitled, at age 60, to a pension serviced by the Goverrment-owned Caisse Nationale des Retraites; there is also an early retirement plan, at age 55, for certain categories of established staff. There are no official pension arrangements for unestablished staff nor for seasonal workers.

3.12 In general, and taking into account; the agreement reached on the matters referred' to in'paras; 3.Q2, '3.04. Or3;tin1 3.07, the orgahizftibn"-f SNCFT is satisfactory, its management is reasonably competent,. and:ifts staffif policy is sound-. Staff display discipline and industriousness. Labor relations are satisf'actory. B. ProTertv

(i) Track

3.13 The Northern Center network is 16522 km long; 478 Ian, or 31% is standard gauge (1.436m) and 1,044 km, meter gauge (see Map). The entire system is single-track except for a 17 km suburban section, Tunis-Hanmam Lif. In gen- eral, the terrain presents no difficulties. Curves total 290 km,ibridges 13 km; and tunnels. 2.4 km. There are about 1,500 level crossings, mostly unprotected.

3.11 The Southern network totals 4'6 Im, all meter gauge and single-track. It comprises 379 kIm of main lines and 77 km of branch lines to the phosphate

3-15 Track on the Northern-Center network is laid with different types and weights of rail and largely overaged; ballasting is often inadequate. De- tails are given in Table 1. About 65% of rails are at least 50 years cld;l and 63% of the track is 30 kg/m or less, which is light and limits speeds and axle=lIoads. S.,hort-g of finan^e and equipr.en.t hn-s resulted in insufiin maintenance, and sections of the track are worn out. At SNCFT's request, the con.dition of th=e track was studied in 1966/67 bdy a group of French consultants - 7 -

(Sofrerail-Setec) who made a systematic survey of the Northern-Center network and prepared a detailed rehabilitation program. This program, together with Italconsult's findings, has been used to identify most of the track itemis of the proposed project described in chapter 4 of this report. 3.16 Track on the Southern system is largely all of the same type weight and and two-thirds of it have been recentlv relaid. Details are also given in Table 1. The main line Sfax-Gafsa-Metlaoui is in good condition and suitab:le for heavy phosphate traffic. Ramil on the two other mair lines (Graiba-Gabes and Metlaoui-Tozeur), although light (25 kg/m) is adequate for the low traffic carried. Most of the branch lines to thile Mir.es require com- plete renewal with heavier rail (36 kg/m) to allow for a 16-ton axle load. 3.17 The Statutes of SNCFT provide that track and structures on the Northern-Center s-ystem remain the propervy of the State and are put at the disposition of SNCFT. Maintenance and capital expenditure for track since January incurred 1, 1957, has been shared between State and SNCFT on a 60%--40% basis. This situation is largely inspired by the French Railways' thesis which considers that rail users sho-uld not be expected to pay fullly for rail- way infrastructure, and that tariffs based on total investment cost, including track, would lead to distortion in favor of the road. According to Ital.con- sult Transport Survey, road user charges in Tunisia cover almost 80% of what would be the proper level of expenditures if all the needed constructior. and maintenance of intercity roads were carried out. Since, in.fact, expend.itures for road construction and maintenance are lower than the estimated proper level of needs, it is considered that intercity road users pay their full share. To establish the basis for fairer road-rail competition the Government has agreed during negotiations to transfer to SNCFT full ownership of track and structures (including land) for which maintenance and capital expenditures will henceforth be charged to SNCFT. SNCFT's Statutes are being amended ac- cordingly.

3.18 Signalling consists of color lights on the Tunis-Sousse line and inadequate of mechanical signals on other heavy traffic lines; SNCFT is currently studying modernization to improve safety. Traffic is controlled by central telephone dispatch from Tunis. The communication system is unsatisfactory, mainly because of inadequate maintenance by PTT. Agreement has been reached during negotiations that the Government will reauire PTT to maintain the telephone lines of SNCFT in accordance with sound engineering practices.

(ii) Motive Power and Rolling Stock 3.19 SNCFT's motive power and rolling stock at the end of 1967 is de- tailed in Table 2 which also gives the age of the equipment. 3.20 The locomotive fleet is fully dieselized and 12 years old on the average. 3!n -I9OAF8 Q1\TPm. °0ece aAA,44 4ved --- I l ,r 1, -- ;--- lmo1;ive financed by French supplier's credit. At present, the most powerful locomo- +j p~ . - 4 4- 4-1h_.aol I.z _A. __-I I.n 1 _ T.T 4J1_ U-_S4 v -9 vv\^ L * VAL^G ULJ0UvsW-U ACIIZWVI'A. UI'U L4WW L*.P. VV2LUIL ULiC g I_wV -V00 .LL sion of heavier track and reinforcement of bridges, it is planned by SN(FT that new lo;comoti-ves on tlhe NorUhenI-CenTer network shou-d also be at leas.t 1,400 h.p., allowing for increased train loads and speeds. Except for ].oco- motives of 620 h.po purcnased in i950, to be replaced partly under une pro- posed project, the locomotive fleet is reasonably well maintained.

3.21 Most passenger traffic is carried by railcars and trailers wh.ch provide adequate service. The railcars average l8 years of age which is high, and 1their partial replacement, together with part of the trailer fleet, is urgentlr required and is provided for in the project. More than half of all passengrer cars are over 50 years of age; 20 cars are currently being procured frcm West Germany through supplier finance. SNCFT's policy is to replace passenger trains by railcar services as much as possible - which is reasonable - and to scrap the old passenger car fleet progressively.

3.22 Over half the total freight car fleet of 5,334 units is more than 50 years old. Most of these cars are of the two-axle type and their ave!rage capacity, of about 15 tons, is low. Cars over 40 years old, numbering 3,839, with a total capacity of about 60,000 tons, could be replaced by 2,400 cars of improve(d design, a reduction of 37%. As a first step, the 640 cars pro- vided in the projec:t will reDlace some l.hOO old cars.

3.23 T'he proDosed nroiAct nrovides nnlv for rpnlacements. Additional equipment will be necessary to meet the traffic increases forecast by the Italconsult Transport Suirvey. To determnne the technica1 chr-nranteristics of the equipment required to meet such increases, SNCFT has agreed to ap- consultants noint (probably Italconsul t) w.ho 1 A1 (i)review! the prssent conditiont of motive power and rolling stock, (ii) determine the units to be r ainer1 and those t-o be scrapped, (i .ake recom.nda" ons on the number and type of units required for future replacement and to meet ad-- ditionna traffic, a.nd (iv) prepare techical pecifictios fidin The Terms of Reference have been agreed upon during negotic tions. The study, the foreign e c o c is included in the4-'oposed loar4/cred;i will assislt SNCFE in the preparation, and subsequent review, of its devel-

3.,h The railway facilities in TuniS and Metlaoui (on the Souxiineiri iiil line) which include stations, marshalling yards, etc., are inadequate in capa- city and Layout, ard as a result one operations are decreasing in efficiency as the volume of traffic increases. SNCFT has agreed to appoint consultants (proLably ]:talconsult) who will ki) review the present layouts oI these sta- tions, (ii) define appropriate operations programs, and (iii) recommend modi- fications for the modernization of the facilities. The Terms of Reference have been agreed upon during negotiations. The foreign exchange cost of t;he study is included in the proposed loan/credit. - 9 -

3.25 CESCFT has two main workshops, one in Tunis with a staff of about 1,000, the other in Sfax with 340 men. Although the equipment in both shops is largely obsolete, performance remains generally satisfactory. The Tunis workshop serves only the Northern-Center network; the Sfax workshop, which came with the Southern network. serves the latter. This arrangement mav re- sult in duplication of specialized staff and spare parts, and it may be tech- nically and financially advantageous to redistribute work on a fumntional rather than a geographical basis. SNCFT has agreed to appoint consultants (orobablv Sofrerai I who will I() prepare A detailed inventory of nresent facilities in both workshops, (ii) analyze their operating efficiency and costs, and (iii) inqke rsommTntn+i.tonnq f-r +.h_ rtJr.i +.-rJwhi+Mnn r%f zr^'lr _n-*, f.nr f'+hIi'p i- lities and equipment required. The Terms of Reference have been agireed upon - during negotiations. The foreign excrhange eost of the studAv is a1so incluided in the proposed loan/credit. C. 0nPrnArm.,

4 A Q 1 -mmtsrnP -4-4- ;-AA -_;cAs -P - 4-T- ne 4--sA|A o 1, v.lu - fwv - WLs"E UW DVlL QVUs is-G IJl U V over the period 1957-1966 is given in Table 3. While operations generally hn-ve been Jumiprovi4 -. durj-. the- --s f-- the4ears u-till4zatio_of 4ti- have ~~~~ ~~ UAA.J. L~ LO L'±,W Yt;LI , Ulit: UULj.".±4L,.LUJI U.L IIIUUJL. VU power is unsatisfactory with low engine-km/engine-day ratio and availability. The average tuurn-round time of freight cars (l *7 and 7., days ons and meter gauge respectively) could also be improved. These results are, to some extent, due to the present poor condtion of the equipment and the track-

3.27 Thansfer of freight between the two gauges is possible only in Tunis and La Goulette stations. There is no axle-change installation. Transferred tor.age is about 30,000 tons per annum. Ailthough two gauges in an integrated system constitutes a restriction, this does not significantly impair SNCFT's operations.

3.28 Operational efficiency on the Southern network is good. In 1966, availability of locomotives was 90%, with an engine-km/engine-day ratio of 311; average tonnage hauled per phosphate train was high at 1,185 tons. Average turn-round time of freight cars, 3 days, was satisfactory, and it would have been even better with larger storage facliities for phosphate at the mines and at the port of Sfax.

3.29 On sane lines traffic is very light and it is not expected to grow significantly. This is particularly the case for the section between Mateur and Beja on line 3. During negotiations, the Government and SNCFT have -, agreed to close the section.

3.30 It is also questionable whether operations on line 15 - from Sousse to Henchir-Souatir - will be justified in the foreseeable future. In this connection SIJCFT has agreed to include in the terms of reference of the cost- ing consultant referred to in para. 3.44, provision far recommendations Dn the closing of uneconomic lines and for alternative solutions. During nego- tiations, the Government and SNCFT have also agreed to submit to the Bank the consultant's findings and recommendations, together witl thei.r own views: and intentions, and to.seek agreement with the Bank on future operations on uneconomic lines. - 10 -

D. Traffic

(i) Freight

3.31 Table 4 gives freight traffic statistics in tonnages and ton-km broken dowm by main commodities, over the period 1962-1967. Between 1962 and 1966, total freight traffic on the Northern-Center network grew from 2.18 mil- lion tons to 2.77 million tons, an increase of 27%, or 5.4% per annum; ton-km increased similarly from 404 million to 509 million, the average distance per ton carried averaging 184 km haul. Iron ore from Tamera and Djerissa and phosphate from Kaiaa Djerda averaged about 551% of total ton-km.. Becuise_ of crop failure and decrease in mineral production, traffic on the Northern- Center iletwork dropped in 1967 to;a level comparable to that of 1962/63. Provisionial figures for 196._show substantial ,pprovement 1/. In 1966, the best year of the period L964-l967, traific reacned 3h4,uuu ton-km per Km of track, which indicates under-utilization of the facilities..

3.32 On the Southern network, freight traffic grew from 2.60 million tons in 1962 to 3.97 million tons in 1967. an impressive increase of 53q,, OY- ahout 9% per annum. During the same period ton-km increased from 546 million to 767 million. an increase of hoW. Phnsnhat- now ancniints for 921 of total ton- km. In 1967, the average haul per ton was 193 km, and the density of traffic was a high 1.682.000 ton-km npr km of track=

3..33 Tnta.l SNCFT freight traffic in 1967 on hb+.thintn-rnWz ni..o1v+.rI too 6.24 million tons, which, with an average haul of 189 km, represents 1,182 million ton'-n", and about 6nn,000 ton-m per- km eof' +"ne.1r. 78%" of' +t+oal +on-.1r was phosphate and iron ore.

(ii) Passengers

3.34 Details of passenger statistics for both main line and suburban +rafficare inTab'e..) l'iZL-L-lne passengers on thet 1Nor'11thell.-Center__1 1ne.Q-wo1rk increased from 3.5 million in 1962 to 4.2 million in 1966, an increase of 5% per anniiy; rev,slm o«> fas+er fron in '1962 r'-, _~. aJI,- 9 tLJ flI -. J'J**-f-lJfE LatJV~J L . '.JI* OA'C&J. *.L-;""-;on L.L.LJ±j. _LI .L7 jCto JLP.J)4S31Xi3 k _il=.LL lion in 1966, an annual increase of 6%. The average distance travelled per rlain~~~~~Apasngr lin ab._ 80 is low of poo-eas -crops,- --1_ re- duced the earnings of a large portion of the population, traffic dropped sub- stuanttlia lly in 1967 Pr-isoa figre for- 1968 show-U-.povn-/ ~~ 4~~.L.± L.7IJf ±1. V%4.O±L0 Ld..L ± J4ULL±L0 .LU± .L7UU O)±1UW J4IIFILUVt:AI11i1b -

3.'< ~Sub'Uu rbLan traffic concenturaltedu around TLunl-s- is in.mportant r tl Tunis-Hammam Lif line, serving the southern area, traffic totalled 10.1 miil- ionI1 passengersXltDl-;> andue .L) IIU±b±±s_LUll X £uay CU Ur unat year, it accounto' for 74% of total passengers and 32% of total pass-km; the average distan(e brave'"'ed -W-US 13 hr(L.

3Rsseniger urallic on tihe Southern neTrwoiK is not1 important; niign- est figures attained were 521,000 passengers and 36 million pass-km in 1966. I/Duri-ng the period January-August 1968 tne Northern-Center network carr-LeOC 311 mil:Lion ton-km against 264 million ton-km during the corresponding period in 1967, an increase of 18%. 2/179 mil:Lion pass-km during the period January-August 1968 against 174 rnil- lion pass-Km during the corresponding period in 1967, an increase of 3%.. E. Present; Finances

(i) Statutory Regime

3.37 T'he financial relationship between the Government and SNCFT, and their respective financial responsibilities, are laid do-wn in SNCFT's Statutes of December 27, 1956. The main features are as follows:

(a) the Government, when imposing general or partial tariff reductions, is under obligation to compensate SNeFT;

(b) if, after receipt of above contributions, SNCiuris income account is still in deficit, the latter is compensated - after depletion of the reserve fund - by a Government sub- vention; in case SNCFT's income account shows a surplus, contributions under (a) above are reduced or cancelled so as to balance the account; if, after such cancellation, the income account still shows a surplus, the latter is to be used (i) to replenish the reserve fund up to 10% of gross operating revenue, and (ii) to reimburse past Government subventions. All surplus funds left after replenislnent of the reserve fund and reimbursement of subventions go to the Government.

3.38 These provisions are inadequate in that the Government's obligation to compensate for revenue lost as a result of its action applies only as long as SNCFT is in deficit. In addition, the above provisions limit funds left annually to SNUCFT to the armunt of the reserve fund and the annual depreciation provision. This would not allow SNCFT to undertake the financing of an :Ln- vestment program, such as the project, the execution of whic:h is' be spread over a number of years.

3.39 In practice, the financial provisions of the Statutes have not been fully implemented. Government compensation for loss of revenue has so far been granted only for iron ore transport; no specific compensation has been made, or requested by SNCFT, for passenger traffic where numerous fare reduc- tions are irmosed by the Government. The total Government contribution to balance SNOFT's accounts has nevertheless been substantial; it amounts to D 12.3 million for the period 1957-1967, and represents 20% of total gross receipts. Details on the past contributions from users and State are given in Tahle 6.

3.a40 The mntter was discussed with the Goverrnment and SNCFT who ackrLow- ledged that the present system did not promote the efficient allocation c,f transport resources of the coLuntry, and that it cn,Mtituted an inGreaqinp burden on the general budget. During negotiations it was agreed that SNCFT's Statutes will be a.mended on the basi the+of following principles:

(.) tariffs will be assessed ona basis reasonably related to costs;

(b) tariffs will be adjusted from time to time so as to produce re-vunues sufficient to cover all operating expenses, includ- ing depreciation, and to earn an adequate return on the value - 12 -

of net fixed assets in use;

(c) if, in exceptional circumstances, the Government should deem it necessary that certain services be provided at less than official tariffs, the resultant subsidy will not be a burden on SNCFT but will be paid for by the Government;

(d) internally generated funds (net operating revenues plus depreciation and other provisions) will be maintained by SNCFT at a level sufficient to (i) meet debt interest and amortization. (ii) provide adequate working capital, (iii) establish and retain adequate liquid reserves to meet accruing liabilities end future contingyencies. and (iv) cover a material part of the cost of capital invest- ments. including replareminfts;

(e) no dividends will be distributed before the requ7ir nmpen+t- under (d) are met;

(f) as a transitional measure, and until tariffs can be relanftr +.n pnr.C +,theGovrnn+. Tjwill p7a qWIFO Dr 'I1. million per annum, as a lump compensation for inadequate

JW'4 LUdUVLLUV-. jflUV..LUUz Uillct ~Jrfo, iast~I OLUJJIRLb UV) U1t~ UUV~VUf111LHji for approva.l its annual draft operating budget, together with proposals fo r ta.r-ilffU adJ usi.u. If tUle UoverVUr1iJ1t1 uisagrees with he proposed adjustments, it must decide on the amount of compensation and subvention. due to SNCFT. Tariff adjustments are by and large made on the bas.is of what the Government considers traffic can bear. In general, the tariff structure i.s inadequate and it requires an overa review by the consul- tants referred to in paragraph 3.44. Since January 1, 1957, there have ueenr no uar.i±1 Increases except for the selective increases made on October 1, 1966, which averaged 30% for passenger and 5% for freight.

3.42 Average receipts and costs per traffic unit calculated on the basis of SiUiuffis income accounts are shown below (in millimes): Receipts C o s t s 1966 after tax w.i th without Depreciation Depreciation

Northern-Center network .~ ~~~ ~ ~ ~ ~ ~ ~. ~ ~ ~ ~ ~ ~ ~~~~~~- Ton-km 6.3 7.1 6.1 ~~ 7TT' 4. I. E '7 Traffic l,niLi[LU 64.65.

1-L967.

Northe rn - C enter networ' Pass-km 3.8 6.9 6.0 Ton-km 6.0 8.1 7.0 Traffic 11nit 5.3 7.5 6.5 Southern network Pass-km 5.O N.A. N.A. Ton-km 4.6 N.A. N.A. Traffic Urnit 4.6 3.1 2.3

On the Northern-Center network average receipts, although increased as a re- sult of the 1966 tariff adjustments, remain below average costs. This is particularly evident for passenger traffic, where, because of numerous fare reductions imposed by the Government, the average receipt does not cover op- erating expenses excluding depreciation. On the Southern network costs are covered. The above figures are tentative and should not be considered as a suitable basis for tariff adjustments; however, they are indicative of the present position and underline the need for a fundamental review of the tar- iff structure.

3.43 The present situation on the Northern-Center network stems from the Government policy (i) to improve the competitive position of phosphate nCnd iron ore on the world market, (ii) to keep prices of food products low (main- ly cereals and flour), and (iii) to promote welfare through reduced fares. Export prornotion would be better achieved through reduction or cancellation of ad valorem export duties levied since 1964 on phosphate (10%) and iron ore (5%) rather than by imposing below cost rates on the railway. This was dis- cussed during negotiations, and the Government acknowledgt-d'that the-present system was inadequate, and confirmed that studies were presenrily undertakeft to review the overall export promotion policy_for minerals. 3.44 'The correct solution would be a cost-based tariff structure. As SNCFT's accounting system does not now provide the data for this purpose, SNCFT has agreed to appoint consultants (probably Sofrerail) who will e;tab- lish a detailed cost accounting system and recoimmend a structure and levrel of tariffs which would be such as to nrovide SNCFT with a satisfactory finan- cial rate of return on its net fixed assets within a reasonable period of time and suffieLent3 cash resourees (see nar .h0-b and d). The Terms of Reference were agreed upon during negotiations. The foreign exchange cost of the con.s--ai-t-s services i.s in-1c)luer in the propnsed 1-an/Yrediit. - 14h -

(iii) Operating Results

3.45 lThe income accounts for the years 1962-1967, as shown in SNCFT's books are in Table 7. Although until 1966 contribuitions from the State have increased steadily, SNCFT's operating ratio has deteriorated from 101% in 1962 to 110% in 1966. The situation chaneed in 1967 wit.h the take-over of the Southern network, which is operated at a substantial profit; the 1967 consoli- dated accounts for both networks show a small pnofit, the first for SNCFTT since 1960. However, the income accounts in Table 7, which are presented in accordance with the provisions of SNCFT's present Statutesj do not conform with generally accepted accounting principles, and they do not reflect the true earning position of SNCFT. To assess the latter the income ac^ounts have been adjusted by the exclusion of Government contributions and the inclusion of a depreciatiron charge more appropriate for the assets in use, as explainecl in detail in ALnnex 1; the amended results are given in Table 8. It shows an unsatisfactory position, -th an operatng r eueriorating frorn 12i-c$in 1962 to 139% in 1966, then improving substantially to 107% in 1967, largely because of the take-over of the Southern network, and to a lesser extent, because of the 1966 tariff increases. In 1967, the rates of return, 1 expressed as percentage of the net fixed assets as valued in Annex 2 and in Table 9, were -14.3% for the Northern-Center network, 13.8% for the Southern network, and -2.9% f'or SNCFT. They indicate a fundamental unbalance between the two networks and an unsatisfactory overall result. (iv) Financial Position

3.46 SNCFT's balance sheet as of December 31, 1967, as registered in the books, is summarized in Table 10. The balance sheet does not reflect SN'CFT's position in that only part of the fixed assets are taken into account (D 6.2 million net fixed assets as compared with D 21.4 million shown in Table 9). The balance sheet shows an unsatisfactory current position, at 0.66, and, because of undervaluation of capital, the debt/equity ratio is 55/45. The unsatisfactory current position is mainly due to (i) large receivables owed by the Government, State-owned companies and the Gafsa Phosphate Company, and (ii) current debts resulting from treasury advances and interest accrued thereon, and from payments made by the Government to the previous railway concessionnaire.

3.47 At the Bank's request the Government, on March 11, 1969, took the following measures:

(a) Clearing of outstanding current accounts, at December 31, 1968, between the Government, SNCFT, the Gafsa Phosphate Company, Government-owned companies, and the National Pension Fund; and

(b) Incorporation into SNCFT's equity of outstanding treasurv advances. In addition the Government agreed during negotiations to also incorporate into SNOUT's equity (i) the interest accrued on treasury advances, and (ii) payments made by the Government to the previous railway concessionraire. Details on the financial measures taken and to be taken by the Government are given in Annex 3. They will improve SNCFT's current and liquid position satisfactorily.

(v) Accounting and Audit

3.48 SNCFT's accounts are reasonably well kept, the anomalies described earlier resulting from inadequate statutory provisions rather than from the accounting system itself. There are presently no adequate cost accounts; to correct this, the setting up of a detailed cost accounting system has been included in the terms of reference of the consultants referred to in paragraph 3.44.

3.49 Audit of all Government agencies is carried out by financial comptrollers appointed by the Minister of Finance. All commitments of expenditures over D 5,000 are subject to the prior approval of the comptroller appointed to SNCFT. Although this does not result in serious delays in authorization, the figure is low and the prior apJproval of the comptroller should be required only for larger commitments, over D 20,000. Agreement on this has been obtained during negotiations. The comDtroller reports annually to SNCFT's Board on the balance sheet and related financial statements. After Board approval. the statements are submitted to the "Commission de Verification des Comptes," then for final approval to the Ministers of Public Works and Finance.

3.50 The audit carried out by the financial comptroller is largely of a budgetary nature; it confirms that expenses have been properly authorized and that the accounts are presented in accordance with the Statutes. The audit by the "Commission de Verification des Comptes" is carried out irregula rly The abo ve arrangements do not comply w.ith generally accepted auditing standards, and during negotiations SNCFT has agreed to have its accounts audited annually, commencing with the fiscal year 1969, by independent external auditors acceptable to the Bank, who will report to the Ministers of Pthblic Whorks and" Finance - 16 -

4. THE PROJECT

A. The Second Four-Year Plan 1969-1972

4.01 A railway nian - which -'c1-1 be incorporated in the transport sector of the Government's Second Four-Year Plan 1969/1972 - has been prepared. It calls for exmenditures of about D 25.3 mlllion Cu7ss 48 rIllion equivalent), with a foreign exchange component of about US$ 23 million. plan The railway is of the riaht order of magni+tude in that -t takes into account S"CFT's financial and technical resources during the plan period. During negotiations it was agreed that, unless the Bank otherwise agree, and -until the proposed project is completed, SNCFT shall not undertake any investments other than those prov ded for under the railway plan.

4=02 The railLway plan 1969 - 1972 includes;

D Iiiilion Estimated Total Cost Foreign Exchange

(a) The project as described below 15.3 8.9 (b) The Gafsa-Gabes Line 6.o 1.4 (c) Signalling works and Equipment 2.0 1.3 (d) Tunis Railway Station 1.4 0.4 (e) .,ano-ubia Tunnel 0.3 - (f) By-pass of Sousse 0.3 - TOTALS: 25.3 12.0

Although not without merit, proposals under (b) to (f) are considered to be of lower priority or for items for which adequate justification has not been adduced at the present time and they have been excluded from the proposed- project (see Annex L).

B. Description of the Project

4.03 The project consists of the high priority items of the railway plan. It anounts to D 15.3 million (US$29.2 million equivalent), with a foreign exchange component of D 8.9 million (US$17.0 million), or 58% of the total project cost. The proposed loan/credit will finance the foreign exchange caoponent, including interest during construction due on the proposed Bank loan. The project contains only replacement items which are urgently required and fully justified at the present traffic level. Additional equipment will be necessary to meet future traffic requirements and the consulting services provided in the project are intended to identify the future needs. The list of project items is in Table 11; they are summarized below anid described in the following paragraphs. - 17 -

(D 000) (US$ 000) % of Local Foreign Total Local Foreign Total Total

1. Track 4,270 4,000 8,270 8,134 7,620 15,754 53.9

2. Motive Power, Rolling Stock & spare parts 1,630 3,420 5,050 3,105 6,515 9,620 32.9

3. Workshops 60 190 250 116 360 476 1.6

4. Consulting Services 150 210 360 286 hOO 686 2.4 6,11o 7,820 13,930 11,641 14,895 26,536 90.d

5. Contingencies 5% 310 390 700 580 745 1,325 4.5 67,20 o,210 14,630 12,221 15,6 27 ;6Y 9-5.3

6. Interest; during construction - 715 715 - 1,360 1,360 4.7 Total 6A423 82925 15.3h5 12,22r 17,000 29,221 100.0

1/ D 4,25(,000 for local works and D 2,170,000 for custom duties. zi US$8,090,000 for local works and US$4,131,0VU for customQ, duties. 4.04 Track renewal and improvement works take into account tWhe present poor condition of the track and traffic density. Track will be renewed, totally or partially, on four main lines and on branch lilnes irl the Southern mLning area, over a total length of 352 km. Heavier rails, increased sleeper density, better ballasting and reinforcement of bridges Wili perirat higher speeds and axle-load, thus improving operating efficiency. Deta-ils of works to be performed on each line, with expected time schedule, are given in Table 12.

4.05 Motive power and rolling stock include seven mainline diesel locomotives (three for standard gauge and four for meter gauge'j oi 1,4'J 1p to replace 17 diesel locomotives of 620 hp purchased in 1950, which are uneconomic to maintain and operate; the new, more powerful locomotives will also make double and triple heading of trains unnecessary. Ten railcars of 600 hp, of modern design and increased capacity (four for standard gauge and six for meter gauge) will replace 17 units which must be scrapped; the five trailers (two for standard gauge and three for meter gauge) will replace an equivalent number of overaged units. 640 freight cars (all meter gauge) of improved design and capacity will replace 1,415 cars over 40 years of age. 34 ballast cars are for track works under the project and continuing : maintenance requirements. 4.06 Workshop equipment is limited to minimum requirements; more eauipment will be needed but it cannot be defined until the study of the workshops, to be undertaken as part of the project, is completed. - 18 -

4-. J Tile consulting services are th-iose described in paragraphs 3.07U (management), 3.23 (motive power and rolling stock), 3.24 (stations), 3.25 (workshops), and 3.414 (costing). Terms of reference for all studies have been agreed with SNCFT. Finalization of the contracts is expected soon and completion of the studies by mid 1970. it is expected that the consultants' studies will lead to the identification of a second railway project, the scope and timing of which will depend upon the performance in the execution of the present project.

4.08 For the reasons given below the proposed loan includes a provision for interest, and other financial charges due on the loan during the construc- tion period of the project:

(a) funds generated by SNCFT during 1969-72 will not be suf- ficient to finance SlNCFT's share of the project and simultaneously pay interest on the proposed loan;

(b) although SNCFT will progressively profit from cost reductions, the benefits resulting from the project will nevertheless not be fully felt until 1973;

(c) substantial pavments of Tunisia's foreigan debt fall due during 1969-72; postponement until 1973 of interest pay- ments on the nronosed loan will help spreading the burden.

C. Execution of the Prniesct on Pronmremsmnt h.09 SNOFT is competen.t to carry ouzt the pronect. It has requ_ested Italconsult to prepare the technical specifications for the motive power ^nA rnllinoh nfntlr ine-liieAA i-n +h^ ^." igno+ nInA +Mc< wizll h-o^ny-"inr .^.i+. 'h,tr rollg s k -included n- the project, a hs wl _ be a at the consultant in conjunction with the assignment described in paragraph 3.23, Track renmua1 and improvement works will be done by oM.- forces; concrete sleepers will be manufactured in SNCFTts workshops which are adequately

eq-pped - fo. VILt.L1.V%JO'*purposIeIAs.-ly of. freigh cars (ee .LUC 0), will also be carried out in SNCFT's workshops. Previous experience has oci^T.m" +In,+ 4.>- -, 5+,^A- -4- oP I -- 1 _ . -v ---- 4: A4., -- -"+ w--flS,^S VS--CV U4 % 1.V CL&AJ.. kLVUV LJ'0C" AIIZ.U..LO.L t V" I aO'J VU..LL' V' I. V WA. UV that of imported complete cars; in addition it reduces substantially the forleig.. exchlange co.-,ponent teef

4.L0 Cost estumcates of the foreign exchiange elerments of the project are based on the most recent quotations obtained under international comipetitive bidding for similar items financed by the Bank uroup. The provision for motive power and rolling stock includes an allowance ranging from 5 to 10% for spare parts. Although there is presently no indication that world prices for steel - the main component in the project items - would increase, such possiDility should not be ruled out because of the continuous increasing cost of labor in industrialized countries. An overall contingency allowance of 5% has been added to the foreign exchange estimated cost of the project, and consequently to the proposed loan/credit. Estimates for local works are based on actual costs for similar works recently carried out by SNCFT; ad valorem custom duties are those presently applied. A 5% contingency has been allowed for works payable in local - 19 -

currency tc allow for the nossibilitv of a general increase of the minimum legal salaries during the construction period of the project.

4.11 All foreign exchange project items will be procured through intorn.+0fIaorAnl competitive bidting, in accord-ice with the procedArPe oef the Bank Group, except for concrete sleeper clips which will have to be procured frr +he Fre-ah p Cat ntee; eP + h1. c g 4yir.volved 4is e.s+.mn,oat about US$300,000 equivalent. Project items to be imported through interna- tion1 competitive;1 ,4dAA: ar e Wi U - X VIIi' VJ. X p-L VI; V A| AUL4Ar,CL e.

(a Trck 35,enno &on of rd,l ir.clu-1-:4s, r po,-4 crossings and welding material; 110,000 steel sleepers; U.l4As ariU fLodrULAr 2UwVAJV UoIJLA sleepers; U.L-iLUdge steel elements; and track maintenance equipment.

(b) Motive Power and Rolling Stock: 7 diesel locomotives, 10 ralcars, 5 trailers, -4 Dallast cars, and componernbs for- the manufacture of 640 freight cars.

(c) Workshops: Various machine tools and equipment.

4.12 Under the present SNCFT regulations bids over D 50,000 must be approved successively by SNCFT's Board, a special Award Board for railway contracts and the National Board of Award. The average delay for final approval is about six months which hinders seriously managerial action. During negotiations ageement was reached on simplified procedures, namely:

(a) Contracts up to D 100,000 will be entered into by the General Manager, without prior approval from SNCFT Board, or Government.

(b) Contracts over D 100,000 will be approved by SNCFT Board, after consultation with a Railway Award Committee.

4.13 The project is expected to start by mid-1969 and its completion is forecast for theern of 1972. All the foreign exchange items are ex- pected to be imported in 1969/71, with the proposed credit funds fully disbursed in 1970 and the proposed loan funds fully disbursed in 1971, except for interest during construction. Progress payments in foreign ex- change and local currency are scheduled as follows:

nl 000 $COO Local Currency Foreign Exchange Equiva- Total Works Customs Imnorts Interest Dur- lent ing Construc- Foreign Rxchange _ton 1969 2 -94f Jo00 500 2l0 30'i86o 1970 7,700 1,300 1,300 5,000 100 9,720 1971 3,080 1,300 370 1,210 200 2,6(0 1972 1,635 1,250 385 730 Total L5,345 4,250 2,i70 8,20 715 i17,000 Disbursements from the loan/credit accounts will be made on the basis of actual approved foreign exchange expenditures. IDA funds being usedr firqst.

4.14 Contracts for the consulting services incl'ide in t.he project are expected to be finalized soon, which might imply down payments by SNCET before the proposed loan/credit cnn be signed Baus +.he cr.tacts are urgent and will have been entered into in agreement with the Bank, it is recommended that they should he reimhburseed ou of cdite.s;o e r. -n e-, reimbursements would not pre-date April 1, 1969 and the total amount involved would not exceed Tstnnlfnnn PmiJ-uvn1nrn+.

L.15 The proposed lo4n/credit provides for 4 fri e . , n cost of items required for present traffic levels. If there are savings in the Bank/IDA-financed i+em, it i8 proposed that teeb -ud -o ±n a the foreign exchange cost of additional but similar project items to be deternnined in agreem.ent wivh Lhe Ba1n, and on the basis oI the recommendations of the consultants. Any additions would help SNCFT to deal with the expected traf-

5. FUTURE TRAFFIC, EARFNINGS AND FINANCES A. Future Traffic

5.01 Traffic prospects for SNCFT are good. A study made by Italconsul.t, as part of the Tunisian Transport Survey. shnws tht.rnil +.trffic is ex- pected to increase steadily, although unevenly, for all categories of pas- sengers and goods. Details of traffic forecasts for the period 1968=1975 are in Tables 13 and 14; an analysis per category of traffic and groups of coin- modities is given Annex C; it+ takee in irt a "ccoA++h-"- devlopen -of a mr,ore competitive transport sector. The summary of traffic trends shown in TabLe 15 indicates that the actu.al 1966-1967 and expeted 196Q-1975 average anual increases are 6% on the Northern-Center network, 11% on the Southern network, with An over-ll weighted 8% for SNOFT These averages are considered to b)e realistic.

5.02 Phosphate traffic projections on the Southern network are based on the assumption t.ht thQ C-afsa=G-abes railway 'lr.eid,nheand the port of Gabes wiuL be operative by 1973. From 1973 on, phosphate traffic has been apportioned be+tween the 'fx and G-abes routes; ,.7 fL.L±ion twnS (3.0 million tons for export; 0.7 million tons for the fertilizer plants) are expected to be carried on t.he existing Sfax route and the remainder, about 2 million tons, on the new Gabes rouite. This distribution is consistent with the Government intention) ~ ~ .4_ T-. -, te orth cor"I..Med AM uui 1968 during tne negotiations Second Tunisian Port Project, to continue exporting some 3.0 million tons of phosphate through Sf,ax. TYwevr, itV rmay be that continued export through Sfax will prove un- economic, anci in this event it is understood that the Bank and the Government will review the situation.

B. ruture Operating Results

5.-03 A detailecl operating income and expenditure forecast 1968-1975 is given in Table 16. The revenue forecast is based on the traffic forecast - l1 -

using present tariffs; the forecast expenditures take into account the cost of movina the -row.i.n traffic expected over the period. Notes on t.i-ir compi- lation are in Annex 6. Gross operating revenue is expected to rise from 9.c D mnilion in 1968 +o D 1 1 rnlion 4,- 1 07e , - of 59A wi t]e operating expenses, including a provision for depreciation, would increase from D 9.6 milI';on.in 1968 to D 12.e million i17 an icrease OI 31A. 5.04 Depreciation. although Talhul-ated at the hich figu"re of 175 of gross operating revenue, remains nevertheless low (2.0O) - 2.5-;)

5.05 The following is a summary of income account forecasts during the period 1968-1975 (D 000):

G3ross Operating Ex- Operating penses Exclud- Cash Depre- Inter- Net Revenue ing Depreciation Surplus ciation est Surp'Lus

1968 9m,543 7,984 1,559 1,622 170 (233) 1969 10,387 8,335 2,052 1,766 204 82 1970 11,516 8,745 2,771 1,958 178 63' 1971 12,335 9,o53 3,282 2,097 155 1,030 1972 13,354 9.383 3,971 2,270 128 1;573 1973 13,730 9,510 4,220 2,334 389 1,3497 1974 114538 9.777 14?61 2;172 648 ,6)4:L 1975 15,157 9,971 5,186 2,577 614 1,995

The operating ratio which was 107% in 1967 is expected to improve to 87% in 1972, at the end of the project period, and to 83% in 1975. However, as shown in Table 16, improvement of SNCFT's operating ratio is due to the Southern network the Northearn-C-Gnter netw.^.ork continlinrg to operate at a deficit. ThLs indicates that, on the basis of present tariffs, phosphate from the South would continiue subsidizi1g other traffic, -d in -rtic- -ar passenger traffic, on the Northern-Center network. Measures to correct the situation are discussed in para. 5.07.

5.06 The interes~coverage ratio would improve progressively to 13.3 times in 1972, and decrease to about 4.0 times thereafter when interest on the loan/cre.dit…roposed ic.hrgea to rever.ue. hueudebt coverage ratio would improve to 7.7 times in 1972, and decrese to about 4.5 times thereafter when repa-m.e-t of th.e proposed loan/crei t staUts. These are satisfactory levels.

5.07 The expected rates of return on the average net fixed assets given below show the fundamental unbalance between Northern-Center and Southern netLw1ork-s. 22 -

Year Northern- Southern SNCFT Center Network Network 1968 -10.8% 16,0% -0.3% 1969 - 9.0% 18.3% 1.2% 1970 - 6.1% 20.V4 2.9% 1971 - 4.3% 19.3% 3.4% 1972 - 3.6% 19.5% 4.5% 1973 - 3.2% 19.4% 5.7% 1974 - 2.9c% 23.0% 6.1% 1975 - 2.5% 26.5% 7.2%

While, on the basis of present tariffs, SWICFT's rate of return is expected to improve steadily, and reach an overall satisfactory level by 1975, the rate of return on the Northern-Center network remains negative. It has been agreed durirg negotiations that the rates of return on both networks will. be progressively balanced, with SNCFT yielding by 1971 a rate of return of not less than 4%,, and by 1973 - when the full benefits of the project will be felt - a rate of retturn of not less than 7% on the net fixed assets in use. It has also been agreed that the rate should improve further in subsequent years. The financial tAr Ats for 1971 and 1973 will be calculated on the new valuation of the fixed assets arrived at by the costing consultant, in agreement with SNGFT. The target for 1971 woul-d require only an overall tariff increase of about 1.5%. However, to attain a better balance between SN.FT IQ t.To netnorks, +twff+ or. +)-he No-thev4- -- er r.et..o.-kwi 11 h t+o be increased more sLubstantially, while tariffs on the Southern network may w-ell be decrea-ed *cg~ 1) T~ 5.08 During negotiations confirmation was obtained that, subject to approval by the "Commission d'Approbation des Investissements"t, net operating revenues - if reinvested n Tuir.sia - are exempted from income tax. Since SNCFT's revenues will be fully used to finance part of the railway plan, iLncJLLuJI g thle project, arusiriCe SMNT is expectedu t.o self-finance a mat,lrii-ia part of futture investment, the forecast income accounts do not provide fcor payment of incorme tax.

C. Project Financing and Proposed Bank Loan and IDA Credit

5.09 The foreign exchange element of the project cost is estimated at D 8,925,000 (US$17,000,000 equivalent), or 58% of the total project cost. It is proposed that the project be financed by a Bank loan and an IDA credit of US$8.5 million each. SNGFT does not benefit from exemption and custom duties to be levled on the project import components are included in the project local cost. They are estimated at D 2,170,000. The Governmint has agreed during negotiations that the custom duties will be reinvested in the project through capital contribution to SNCFT's equity. The balance of the project cost, D 4,250,000, will be financed by SNCFT's own funds. The financing plan of the project would thus be as follows: (D 000) Proposed BP-n loan and IDAT credit 8,925 58% Government Cont-ibution 2,170 1 1 SNCFT's own Funds 4,250 28% 1;3L5 100% - 23 -

5.10 The proposed Bank loan would be made to SNGFT which has the right to borrow, Subject to Government approval. A term of 25 years, including a 4-year period of grace, would be appropriate. The proposed term is related to the expected average economic life of the Droject items. estimated at about 27 years. T'he proposed IDA credit would be made to the Government who would relend the troceeds to SNGWP on the terms and conditions of the proposed Bank loan. Durirng negotiations agreement has been reached on a subsidiary loan agr"eement. hbefwf>p the~ flern,rn"mpnt and SNCFT,,

D. Forecast Cash FlPm

5.11 I'.e cash flowI forecast for 1968-1975 is ivrn, i.n rpble 17. Ex- pected sources of funds take into account Government contributions of (i) D) 2 170 f)O U 4o.S- c-sto dui,so.pr4eie. ;( T) )D eqon, JJ4 C Iul y t"ziq -- .~ 4-VW I.J V & AL ".J WJAIA W " k.A.W _~ "_ - ---n -Mn-/-' ~j-' - to 60% of track expenses in 1968 on the Northern-Center network, as provided .'..or 4n. C!TTfE1V.Li ...... 04..4-,,4.._. -- (444%~ TN 0 (V'An rnA(~. ~ ,~ for ln V..L s presen.t Statutes,Ja l C.LUL.A.1(ii IJD L,00UA,', as . cor.e,r.atio for imposed below-cost tariffs during 1969 and 1970 (para 3.40-f). Alsc

i1nc1LUU isUI t-ILe^,ec,t LD 2 I ILUrl UceditLU Lrom R,umania for VLI1e finani Wf signalling works and equipment. The cash flowi allows for the investments included in the railway- plan 1969-72, ad in particular for the construction of the new railway line Gafsa-Gabes, at an estimated total cost of D 6 million. Whnile the Gcovernment has decided on the construction of the 'lne dUr--ing the project period, no arrangements have so far been made for its financing and, although a Government participation shouid not be ruled out, the cash flow assumes that the full cost of the construction would be borne by SNCFT. In any event, it has been agreed during negotiations that, during the project period 1969-72, investments outside the project, to be fully financed by SNCFT's own funds, shall not exceed D 6 million.

5.12 A summary of the forecast cash flow for the periods 1968-72 and 1968-75 is Els follows: (D 000) Sources of Funds 1968-1972 1968-1975 Opening Cash 1,221 1,221 C_ash from ruperat+vons I13,635' 27,-809 Crovernment It,590 4,590 IDA Credit a,925 8,925 Other Brrowing 9-71 92-718 Total 45_25

hRL.ication of Funds T'he Project 15,345 15,345 Other Railway Plan Items 10,000 10,000 Dther Capital Expenditure 1,718 1/ 4,718 1/ Increase in Stores 412 712 I]ncrease 39 Wlorking Capital 398 398 Debt Service 5,950 Closing Cash 464 Total 31,089 45,256 1/ D 1718..000 in 1968, and D 3,000,000 in 1973-75. - 24 -

5.13 Cash availability, although generally satisfactory, is expected to lower towards the end of the project period. Therefore it is possible that during the proiect period Si}GFT will need financial assistance outside the Government contributions referred to in para. 5.11. It has been agreed. during negotiationa that; should the need for some asistanrse arise; the Government will provide SNCFT with funds on terms and conditions satisfactory to the BLank.

5.1h If traffic and revenue levelop a.nas ePectpd. a quhqtantial cash surplus should accumulate from 1973 on. Part of the surplus is expected to finanGe a nortion of the capital inveAtmPnts which will he rmnirpwd to cone with the expected increases in traffic.

E. Forecast Balance Sheets

5.15 The pro-forma balance sheet position, 1968-1975, is given in Table 18 and the r8+n for 1968R 1972 and 1975 are smm.arized below: (D 000)

1968 1972 1975

Net Current Assets 1,3h5 2,46h 10,h03 Net Fixed Assets 22,uLl 39,665 35,-82 Total 23,756 L2,129 h5,685

Debt 4,273 12,723 11,1h6 Equity 19,483 29,406 3j439 Total 23,756 12,129 45,685

Although debt is expected to increase from D 4.3 million in 1968 to D 12.7 million in 1972, an increase of about 300,, the debt/equity ratio will not exceed 30/70 which is satisfactory. Details on debt service over the period 1968-1979 are given in Table 19. During the project period the current ratio would vary between 2.0 and 3.0 and the liquid ratio between 0.7 and 1.7. The latter may result in inadequate working capital and, as explained in para. 5.13, may require Government assistance.

6. ECONOMIC EVALUATION

6.01 A major objective of the proposed project is to reduce the costs of handling traffic at existing levels of output on SNCFT. A small, but incidental, increase in the total capacity of the system will result, how- ever, from the improved track conditions, more powerful motive power and newfer rolling stock as well as from the improvements in managerial and general operating efficiency envisaged under the project. For reasons explained in para. 3.23 the focus of the project has been limited to existing requirements and not future needs.

6.02 I'he major elements of the project are highly integrated, with slightly over one-half of tlhe total cost being for track improvements and one-third for more powerful locomotives and new rolling stock. Accordingly the method of analysis used was that of comparing the totals of the various elements of costs - operating, maintenance, and overhead - wizth and withDut the project. Because particular parts of the project consist of items with unequal economic lives (such as track improvements and locomotives), the benefits were evaluated on the basis of the shorter-life item and appropriate adjustments made for the residual value of the longer-life item.

6.03 The main measurable benefits of the project stem from: (a) a reduc- tion in the cost of maintaining track, locomotives, and rolling stock: (b) savings in traction costs; (c) savings resulting from a general increase in operating efficiency over the entire railway system through a better uti- lization of equipment - e.g. decreased turn-around time and less deadweiight of freight cars hauled; and (d) passenger time savings. The benefits under these headings were initially estimated by Italconsult as part of the recent Transport Survey and subsequently reviewed and revised by SMCFT and in tie Bank.

6.o0 On this basis, the principal elements in the project were evaluated separately, i.e. line by line including track; motive nower and rolling stock (see Annex'7). The economic returns for the four lines in the iNorthern- Center network are as follows:

Tine I Ai L ne 5 12, Tine 6 Line TA 13,'

A sample of the costs/benefits analysis for Line 6 is given in Table 20.

6 o5 In view of the high degree of interdependence of track renewal and motive nower and equipment renewa1 on these four lines, each can be cons:i'ered as a sub-project of a larger one for which the overall rate of return is slightlv over 12,3.

6.o6 TI the .Souther.n region, t.he project provides for co.mlete renewal of 49 km of track for the branch lines serving the phosphate mining industry. The total 1eng+'h of the branch lines is 77 km of whiJch 28 k, have already, been renewed and upgraded. The renovated lines have a capacity of 36 kg,/m versus 25 kg/yn on the remaining lines. GiMven the present and prospectivt, levels of phosphate traffic, these lines would have to be replaced about

once ere-. t.hree y-ears unless +..rcapaclUy A. upgradeUU UV _ lg/mL. their complete renew¢al and improvement as provided for in the present project would result in considerable saWvinrgs in recurrent capital out'lys estira-ted at D 250,000 annually over a period of 30 years, as well as some possible reduction in normal maintCenance cost. OnuthU basis of estimated -sviJgs in recurrent capital outlays alone, the benefits from this investment would yil aA- rate4- , ofl re-taus, iL% -P about1.L -4UI 2/J.'-2A'.

6.07 Th^.e proj`ect will have obher benefits to the national econoxmy and which will accrue to railway users in the first instance rather than to SNCFT. LTese are impvuved quality of service in terms of frequency, regularity and reliability, less damage to goods, etc. The value of these - 26 - additional benefits, however, has not been quantified. To this extent, therefore, the above estimated rates of return understate the full economic benefits of the proposed project which is economically justified.

7. RECOPMENDATIONS

7.01 During negotiations of the proposed loan and credit, the followring matters were discussed and agreed writh the Government of Tunisia and SNCFTs

(i) Increase of user re-resentation on SNCFT's Board (para. 3.02); (ii) Non-rail activities by SNCFT to be limited (para. 3.04); (iii SNCFT to appoint a Deputy General manager by not later than JuLy 1, 1970 (para. 3.05); (iv") Annointment and terms of reference of consultants (paras._".07. 3.23, 3.24, 3.25 and 3.44 (v) Transfer of track omnership to SMCFT' (para. 3.11): (vi) Improved maintenance of SNCFT's telephone lines hy PTT (para. 3.18); (iii) Abandonment of uneconomic lines (para. 3.29 and 3.30)! (viii) Financial relationship between Government and NCT\rVT'm (ix) Review of export promotion policy for minerals (para., 3.43); (x) MIeasr es to improve S.MCFis fimencia position (para,u 3.,7 and Arnec 3);

YA.J _ :a_- igX .L_ _rU ArdA JAJ;.L.JVO.J UJA. > SNCFT's comptroller (para. 3.49);

(,u.± aLpp(Jiinte,b ofAiiUeAle. I L.inUdep.deU,.t a-'i.±.ors (r :.50) (iii) Contents of railway plan 1969-72 (para., 4.01); (,d_v) iddin1L1g pr-oced-aes 'Lor BUan1rC/-financen +t. pr, +1) (xv) Simplification of approval procedure for SNCFT contracts (para 4.12); (xvi) SNCFT's depreciation policy (para,, 5.04); (xvii) Financial targets (para 0 5.07); (xvLii) Income tax exemption (para,, 5.08); (LX) Re-investment buy UGvernme-nt,W as equaty . °NOCFT of proceeds froni custom duties (para,, 5.09); (xx) Re-lending conditions of iDA funs (a (xxi) Limitation of capital expenditure outside the project (para.. L-LI); (x:;ii) Government financial assistance to SNCFT (para. 5.l3).

7.02 Some of the conditions listed above recuire the amendment of SNCFT's Statutes, and it is recommended that the submission oI the Sltatutes -to the Tunisian National ALssembly, as well as the completion of the agreed financial measures, be made conditions of signing of the proposed loan and credit.

7.03 The project provides a suitable basis for a Bank- loan and an IDA credit of US$18.5 riillion equivalent each. Thae proposed loan would be made to SNCFT with a term of 25 years, including 4 years of grace. The proposed credit tiould be made to the Government of Tunisia and relent to SNCFI on the terms and conditions of the proposed Bank loan.

April 11, 1969 TUNISIAN RAILWAYS

ORGANIZATION OF SNCFT

K BOJRD

|GEN]3RA L lnUMER

L3 __ GENERAL5UIE NI[SITRTI PLSF 'y ECHANIICALM OCM ULON PE l

Statistics Salaries and Wages Central] Accounting Contracts Admini stration Traffic Costing Per sonnel Administration Administration Budiget Stores Rolling Stock Operations Personnel Policy Claims General. SignalLirng and Accounting Administration Motive Power Cnarcial Document at io Social Welfare and Punch Card Telecoemmnication Unit Technical Health i Permanent Wasr General Matter s Bridges and - Buildings

February 3, ].969 TUNISIAN RAILWAYS

Track Characteristics

20 25 30 31 3 75 38 146 100 1. Type of Rails kg/m kg/nm kg/nm kg/rmn lb/yd kg/m lb/yd Total Norther.n-Center Network Km of standard gauge 8 198 46 5 115 97 9 478 Km of meter gauge 105 1433 215 6 252 9 24 1,044

Km total 105 441 413 6 298 14 139 97 9 1.522 7% 29% 27% 1% 19% 1% 9% 6% 1% 10nn_ Southern Network KTn of meter gauAge 213 243 1456 48 % 52% 100%

2. Age of Rails 50 years 30 to 149 20 to 29 10 to 19 Less than and over years years years 10 years Total Northern-Center Network Km of standard gauge 275 111 15 59 18 h78 Km of meter gauge 714 132 157 19 22 L 044 Km total 989 2143 172 78 40 1,522 65% 16% 11% 5% 3% 100% Southern Network Klm of meter gauge 136 13 307 )l56 30% 3% 67% 100% 3. Tvne of Sleeners Wood Steel Concrete Tc,tal Northern-Center Network Km of standard gauge 122 328 28 478 Km of meter gauge, 265 677 102 0 Km total 387 1.005 1 25% 66% 9% 1o0% Southern Network

Km of meter gauge 200 256 456 43% 57% 1.00%

February 3, 1969 TSBLE 2

TUNISIAN RAILWAYS

Co-.ositior of Motive Power and Rolling Stockc as at Itecember 31, 1967

I. L0COMOTIVRS Weight No. (tone) H.P. Year Age Roty

a Northern-Center network

Standard gauge 8 55 620 ' ) 1950 17 Line freight and pas oengern s0b00 1958 ( a 9 SwStch, freight an) pavsengers -A(&,erase 14)

Meter gauge 2 67 620 1938 29 Switch 25 5b 620 1950 17 Line: freight and pcoo igrg-, ii 119 L,o 1958 9 Switch. frelght ant p--nw -r- 12 59 950 1965 2 Line: freight and passengers 5-70 (average 12)

b 501trern network 6 92 i,boo ic64-66 1-3 Linei fraIght 17 51 600 1950-51 16-17 Line: freight aid pr -hq,,ers (Miter gauge) 4 h1.5 560 1962 5 Switch, freight and p---reni.- 4 49.5 650 1965 2 2 26 160 1955 12 - Totali (average 10) Total

II. RAILCARS Weight No. (tone) H.P. Year _ALty

a. Northern=Zentrr netwtrk

Standard gauge 5 33 300 1935 32 Nain line 6 33 300 1949 18 Main line 6 U3 &o 16 anln 17 ((average 17)

Meter gauge 6 42.14 600 1961 6 Main line 6 17 6AO 1951 16 Suburban 6 39 300 1952 15 Suburbhn 12 115.5 400 1937 30 - 3 (average 19)

). Southern network (meter gauge) 4 h1 370 1946 21 Main line

Totail ______

II. PASSENG0R CARS No. Age a. Nvrthe.rrn-Cinter netweork Standard gauge 27 L2 to 58 Meter gauge 60 42 to 72

b. Southern network (meter gauge) . 1 40 to 68

Total 118

[V. VANS No. a. Northern-Center network Standard gauge 18 h4 to 64 Meter gauge 28 bb to 62

b. Southern network (meter gauge) 28 h6 to 68

Total

11.n 7?AI. R a. Northern-Center network Standard gauge 10 6 'Seter gauge 27 6 to 16

b. Southern network (meter gauge) 2 13

Total

T. FRIGHT TARS Years of Life No. Urder 25 25 to D. .lOto 50 Over 50

a Northern-Center network

Standard gauge: hox zare 359 flats 173 gondolas 276 minerals 85 tar-' 23 othe rs 9Se 330 165 L46 317

4eter gauge: box oars 571 flat., 888 gorn) lae 400 minierals 548 tank,i 46 othtre 6 2,sl8 539 249 196 1,534

b. Southern -toork (meer gauge)

box cars 123 flat's 80 minerals 1,532 tanrkh 39 others 84 nlOi212 _ 449 1,197

Total i 1,081 (20%) 11 (8%) 791 (15%) 3,048 (57%)

February 3, 1969 TABLE

TUNISIANRAILWLTS

Sutry of Operating Statistica (all traffic) (Northarn-enter Network)

1957 1958 1959 i9( 1961 1962 1962 1964 1965 1966 1* TRLFFI C

Pass-km (million) 261.7 255.0 295.1 320.9 334.8 380.3 409.7 426.7 441.7 483.7 Net ton-km (million) 421.3 413.4 427.8 488.1 433.2 41i.6 433.1 438.7 48S.5 514.0 Traff ic-units (ton-km 0 pass-b) (-!llion) 683M1 -6684. 722.9 80-9.v0 768.v 791.9 842.8 865.4 923.2 997.7

I1I. OPERATIONS

Train-Im (000) St _ 1,419 1,400 1,433 1,561 1,488 1,581 1,622 1,691 1,707 1,726 M 3,754 _ 3,62 3.89 3,996 3.849 3.788 4.018 3.8hl11A h Total 5173 38w 37l1 -r 2 5n37 537 5,640 3_r -r7-2 Elngine-km (000) Diesel St 63'; 611 676 763 709 678.8 675.2 742.4 775.5 786.0 M 2,190 2,576 3,144 3,223 3,117 2,771.3 2,877.7 2,800.2 Railcars 3,063.5 3,026.0 5t 943 1 052 -3h 999 1,040 1,407.6 1,466.8 1,421.4 M 1,31(1.7 1,233.J 2,160 2,043 1,848 1,822 1,828 2,348.6 2,b59.4 2,207.2 2,069.8 2,201.0 Number of engines in fleet Dcaaol St 5: 11 11 11 11 11 11 M 11 13 13 30 40 40 40 40 40 40 Railcars 40 50 SC St 11 11 11 11 16 17 17 17 Ns 11 24 17 17 2 24 29 30 31 30 30 35 Total motive poer units ______70 et 86 66 96 98 OR o8 .1 Engine-km per engine-day in fleet Diesel St 347 152 168 190 176 169 168 M 184 1.63 165 200 176 215 220 213 189 197 Railears 191 '368 165 St 23. 262 2; 248 178 n.a. n.a. 229 .11 198 M 246 233 210 207 172 n.a. n.a. 201 i.88 201 Traffic-units per motive power UDit(million) irl Cleet 9.7 o.d 8.4 9.4 8.0 8.0 8.6 8.8 6.4 9.0 Traffic-units per train-kc (million) 132 132 136 lb5 Lbb 147 149 156 i62 174 Pass-kn per passenger car in fleet (million) 1.9 1.8 1.9 2.4 2.0 2.2 2.3 2.5 2.5 2.8 To-okm per freight or iJ. fleet (000) 129 124 133 146 12b 124 123 124 141 146 Freight cars loaded (000) St 38.6 27.3 27.8 38.7 35.3 n.a. n.a. 46.o b8.5 58.6 M 103.4 1i1.7 127.1 ,41k . 127.0 n.a. Total JIiPD2 n.a. 123.0 12b.2 12b.3 iru 15IU9 17T 13153 n.e. n. 169.0 172.72 Available freight car days (000) St 322 315 345 333 300 n.a. n.a. 340 _24 m 799 782 338 836 884 900 n.a. n.a. 914 $0p ?1 Average torn-round tIme oJ freight cars (days) St 8.2 13,6 12.3 8.4 8.5 n.-. n.a 7.3 6.6 5.7 7.7 6.pt 6.5 6.5 7.0 n.a. n.a. 7.4 7.1 7.3 Average load of freight cars (tons) St 14.6 11.9 1..5 12.8 11.8 n.a. n.a. 13.6 16.0 14.7 M 16.4 18.2 15.8 15.7 14.7 n.a. n.a. 14.0 15.7 16.3

III. STAFF

Number of employees 9 (total) 4u,767 4,81i 4,741 4,948 5,063 5,333 4,683 4,908 5, 0%) 5,452 Traffic-unit OO/employse 143 138 152 163 151 148 178 176 1132 183

11'S Standard gauge; M * Meter gauge

Febr-uary 3. 1969 TAtBL 1,

TUNISIAN RAILWAYS

Freight Traffic Statistics

Iron Phosphte %CerealsFlour Oh oa

1049 7t, I 284L0.4052353 .COJ3 . ii71Q 592,87 LUE41

19ti,3 25)2 393 i50 743 2,768

197Northeni-Cenuler iNetwork Oyu 2i 90 17 0 22f

Doutiherni Netwoik 3,393 577 3,970

T-ota:i SNCFT: Oyu 3,611l 290 lb-( 1,202 6.,240

TON-. I (MIILION)

1962 160 56 L49 34 105 401

1963 175 51 62 28 109 1X25

1964 174s 67 36 22 132 4z31

1965 193 86 43 24 134 ,80

1966 231 63 51 29 135 509

1967 Northern-Center Network 168 52 38 33 128 ,15

Southern Network 708 59 767

Total SNCFT 164 736 38 33 187 1,182 TABLE 5

TUNISIAN RAILWAYS

Passenger Traffic Statistics

Northern-Center Network Southern Main Suburban Network Total Lines Line

PASSENGERS (MILLION)

1962 3.5 7.7 11.2

1963 3.9 8.3 12.2

1964 4.0 8.9 12.9

1965 4.1 9.5 13.6 1966 4.2 10.5 14.7 1967 3.2 10.4 .4 14.0

PASS-KM (MILLION)

1962 280.8 99.5 380.3

1963 301.8 107.9 409.7

1964 310.4 116.3 426.7

1965 318.5 123.2 441.7 1966 3h7.5 136.2 483.7 1967 262.2 134.9 25.6 422.7

Fe-uruary 196lYU TUNISIAN RAILWAYS

RespE ctive Contr ibution frmn Users anct State

______(D 000)

Total 1957 1958 1959 1960 1961 19?62 1963 19614 1965 1966 L967 19'7-67

A. Contribution from users 3,762 3,715 14,172 14,660 4,345 4,1421 4,519 4,346 4,722 5;,252 4,842 48 ,756

B. Contribution from. State:

1. CompensatiQn for loss

of revenue on iron

ore transport ------119 178 195 238 173 903

2. Track e:penditure 513 524 565 557 626 678 663 686 814 987 901 7,5i4

1. Subvention 915 860 - - 98 139 158 249 617 812 - 3 .848

S/total 1,028 1,384 565$ 557 724 817 940 1113 1626 :2037 ,074 12.265

C. TOTAL 5,1920 5,0929 1,737 5,217 5,069 5,238 5,1459 5lt59 6,348 7289 5,916 61.021

B/C 9 28% 2 7% 12%5 11% 114% 16% 17% 20% 26%' 28% 18% 20%

Febnzary 3, 1969 RJNISIAN RAILWAYS

SnLwary Income Accounts 1962-67 (as shown in SNCFT Books) (Dinars 000)

9~ 7- N orthern Southern 1962 1963 196L 11965 1966 Center Total Revenue

Traef ic revenue: Paaseengeris 1,190 1,284 1,333 1,415 1,598 1,594 8 8 134 1,728 Fre:Lght 2, 4 3,C051 2,991 3,323 3,648 3,142 3,708 6,850 Othesr 383 303 199 i80 243 279 101 380 S/total 147,2T f7l,523 ;t91 8' ; ,9tM

Non-traffic revenue 169 1.68 277 156 2351 324 324 State contribution for track expendliture 678 663 686 814 9877 901 901

Total revenue .5,268 5,4.69 5,486 5,888 6,715 6,240 3,943 10,183

Extpenses Working Epenses 4,916 5,C92 5,201 5,825 6,669) 6,042 1,913 7,955 Taisson grogiss reverme 208 224 225 _256 407' __2_ 193 _ 8

Total workling pnses 5,124 5,316 5,426 6,081 7,076 6,331 2,106 81437

Uorking surplus/deficit 1144 153 60 (193) (361) (91) 1,837 1,746

Depreciation: on Government initial contribution 80 76 72 68 64 500 500 on fixed assets acquired since 1/1/57 127 139 135 :198 219 580 45D 3 030 Total d,preiation 207 215 7 --; 0

Total operating expenses '5,331 5,531 5,633 6,347 7,359 71_ 2,556 9 967

Operatirg def:Lcit/surplus (63) (62) (1147) (1459) (644.) (1,171) 1,387 216

Interest charges 76 96 102 158 168 134 - 134

Net defi.cit/surplus ( 139)( 58) (249) (617) (812) (1,305) 1,387 82

Operating ratiLo: 101% 101% 103% 1o8% 110% 119% 65% 98%

February 3, 1569 TUNISIAN RAILWAYS

Amended Summary Income Accounts 1962-67 (Dinars 000) 1 9 6 7 Northern Southern Total 1962 1963 1964 1965 1966 Center

Revenue

Traffic Revenue: Passengers 1,190 1,284 1,333 1,415 1,598 1,594 134 Freight 2,848 2,932 2,813 3,128 3,410 2,969 3,708 6,677 Other 83 303 199 180 243 279 101 380 S/Total 1 4,519 4 ,345 4 -,723 5,251 4J2 3,943 8,785

Non-traffic Revenue 169 168 277 156 239 324 - 324

Total Revenue before Taxes 4,590 4,687 4,622 4,879 5,490 5,166 3,943 9,109

Less Taxes on Gross Revenue 208 224 225 256 407 289 193 482 Total Revenue after Taxes 4,382 4,463 4,397 4,623 5,083 4,877 3,760 8,S27

Expenses

Working Expenses L,916 4,898 4,944 5,553 6,197 5,868 1,913 7,781 Depreciation 745 759 747 786 864 829 637 1 466

Total Expenses 5657 5-,61691 6X39 7,061 6.697 2.550 9,247

Operating Deficit/Surplus (:1,279) (1,194) (1,2914) (1,716) (1,978) (1,820) 1,200 ( 620)

Interest Charges 76 96 102 158 168 134 - 134

Net Deficit/Surplus (1:,355) (1,290) (1,396) (1,874) (2,146) (1,954) 1,200 754)

Operating Ratio: 129% 127% 129% 137% 139% 137% 68% 107%

February 3, 1969 TUNISIAN RAILWAYS

Tentative Evaluation of Gross and Net Fixed Assets

as of December 31, 1967 (Dinars OO)

Northern-Center Network Southern Network Replacement Accrued Depreciated Replacement Accrued Depreciated Val-1ue Depreciation V 'ueLLO Value £Jepreci o Value Track Standard Gauge 11,000 9,200 1,800 - - - Meter Gauge 20,900 18,100 2,800 9,100 3,500 5,600 Telecommunications 1,8500 800 700 500 200 300

S/Total 33,400 28,100 5,300 9,600 3,700 5,900 Motive Power and Rolling Stock Locomotives 6,300 3,600 2,700 3,300 1,550 1,750 Railcars 3,750 2,700 1,050 300 250 50 Trailers 1,500 600 900 100 50 50 Passenger Cars 2,400 2,200 200 850 800 50 Vans 45h0 400 0 300 250 50 Freight Cars 8,700 6,900 1,800 4,650 4,200 450

S/Total 23,100 16,400 6,700 9,500 7,100 2,400

Building.s.Wnrkshop;. nnd Miscellaneous 15°00 800 700 900 500 _400

Total 58,000 45,300 12,700 20,000 11,300 8,700 ======78===, ======

February 3, 1969 TUNISIAN RAILWAYS TAL 10' Sunery Balance Sheet as of ;ecaimber 31, 1967

As tn SPCFT's Books (Dinars 000)

Fixed Assets

Northere-eeter Netw.rk State Contribution: Track Moti-e Power and Rolling Stock Miscellaneous 3,000 Less depreciation 1,320

S/total 1,680

Acquisitions since 1/1/57:

Motice Power and Rolling Stock 5,252 Miscellaseous 763

Less cepreoiation 1.484 S/total 4,531

Southern NetwDrk Track Motice Power and Rolling Stock Miscellaneous

loss deprec-ation 450 S/tota.' (450) Total Bet Fixed Assets in Use 5,761

s sdrorure t in Progmass 1,395

In-estments 44

Stores 2,744

Turrent Assets Cash and Banks 111 Station Accourts 1,110 State 231 Gafsa Company 1,244 Sn^fo.-ecL 52C53 Other 258 Total Currert Assets 3,462

A43

TOTAL ASSETS 13,448

LIABILITIES

Corrent Liabilities: State 950 National Pension Foid 783 Suppliers 1,175 Bank Overdraft 87 Other Total Currect Liabilitie 8 ,375 .ong-Term Debt lo*mestic: Trae... c Adoanees 952 Treasury Ad,cnces for Sofomeca 400 National Pension Fund 215 S ocidt TunisiSnne de Banque 210

S/total 1,766

Foreign: DLF 1,088 E,nhback 791 Osreral Motors 124 Coface 649

S/total 2.652

Total Long-Term Debt v,.18

Suspense Account: Interest doe on Treasury Advances 251 Interest doe -c Treasulry Advances fcr Sof5p_ca 50 Government Paynents to Concessionaire 1,211 Other 496

TottaLSaapenae Account 1,998

Io: Funds Stote Contribution I frev isoor,s! 575

Total Our.Fooleds 2,575 turnings of tie ':ear 9 T2

TOTA1. LIAi3ILITIES 13,4h8l TABLE 11 TUNISIAN RAILWAYS

THE PROPOSED' PEOJECT

D'0000v <1v. $ '000 1/ 1/ Local Currency Foreign Foreign CR RR Total Exchange Exchange

I - TRACK

Linie 1/4 (7.3 km) 27.1 - 680 300 80 300

Line T.A. 11.2 - 280 125 35 120 (194 ion) - 33.1 550 200 75 275

Line 5 67.8 - 1,500 680 180 640 (278 km) - 117.3 1,860 690 255 915

Line 6 28.6 - 715 230 105 380 (2:32 Im) - 17.8 275 105 35 135

Bramnch Lines:

Gafsa-M'Dilla 13.0 - 290 130 35 125

"abeditt-Redeyef 36.0 - 985 290 150 5b5 &k Seldja-Moultres

Br.dge Rei-force- nent 810 4O5 90 315

Track Main.tenancqe Equipment 325 10 250 183f.7 68.2 7Y0 3,165 1 64,000 7,620 II - MOTIVE POWER ROLLING STOCK & SPARE PARTS

7 Main line 1400 HP Dieisel Locomotives (:; stG-4MG) Z/ 1,160 - 230 930

10 Railcars (600 HP) (botG - 6MG) 1,100 - 220 880

5 Trailers (2 StG - 3 MG) 260 - 50 210

Freight & Service Cars: (a) Totally imported:

20 StG Ballast. Cars 135 - 30 105 14 MG Ballast Cars 95 - 20 75

(b) Corinponents "or and Manufacture of: 130 (bogies) Mineral Cl-rs (Ml) 830 190 150 490 90 Open Cars (MG) (two-axle) 305 110 45 150 360 flat cars (MG) (two-axle) 945 350 130 465 60 box cars (MG) (two-axle) 220 70 35 114 5,050 720 910 3,420 6,515

III - WDRKSHOPS 250 10 50 190 360

V- - CNstrTurN qy.Rvrpq 360 150 - 210 O 13,930 4,075 2,065 7,820 1578 5

V - CONTINGENCIES (about 5F) 700 205 105 390 745 TE7,-3o 4,250 2,170 T,2io 157,640 VI - INTEREST DURING CONSTRUICTION a - - .as. .. 360

Total 15,345 4,250 2,170 8,925 17,000

RR/ - Complete trk renewal RR = Rail Renewal

S t! = Standard Gau e MqG Meter Gauge

April 11, 1969 TUNISIAN RAILWAYS TABLE 12

Track Renewal and Improvement Works included in the Proposed Project

Sections (mileage point Length of 1/ to mileage point working Sites Year Nature of Work No. of Line (m) (Km)

1969 RR (36 kg/m rail) 5 28.6 to 38.6 10.0 47.7 to 78-1 30=4 78.1 to 122.1 a4.0

CR (36 kg/m rail concrete sleepers) Gafsa-M'Dilla 13.0 97.4

1970 CR (36 kg/rm rail 5 142.3 to 187.5 L5.2 concrete sleepers) 192.3 to 214.9 22.6

CR (36 kg,/n rail Tabeditt - steel sleepers) Redeyeff 17.0

1971 RR (36 kg/m rail) 5 187.5 to 192.3 4.8 214.9 to 235.5 20.6 270.7 to 278.2 7.5 32.9 \CR'(39k/m r 1-L steel sleepers) 6 206.4 to 235.0 28.6

RR (36 kg/m rail ballast cleaning) 6 162.2 to 180.0 17.8

CR (36 kg/m Seldja- steel sleepers) Moulares 19.0 98.3

1972 CR (46 kg/m rail 85.2 to 92.0 6.8 concrete sleepers) TA 104. 8to 109.2 4.4 11.2 RR (46 kg/m rail TA 49.9 to 72.7 22.8 ballast cleaning) 74.8 to 85.1 10.3 33.1

CR (46 kg/m rail 1/4 24.7 to 49.4 24.7 concrete sleepers) Tindja-Menzel 2.4 Bourguiba 27.1

71.4 To UU51.9 Km

'/CR = Cornplete renewal (rail, sleepers,ballast) FR = rail renewrjal only

February '3,1969 TABLE 13 TUNISIAN RA LWAYS

Traffic Forecasts for Passengers 1968-1975

1ain Suburban Lines Line Total

PASSENGERS (MILLION)

1968* 3.6 10.9 ___A

1969 4.6 123 16.9

1970 5.h _ 19.2

1971 5.9 15.3 21.2 1972 6.3 16.6 22.9 1973 6.5 17.8 24.3

197? 6.8 19.2 26.0

1975 7.1 20.4 27.5

PASS-EM (MILLION) 1968* 304 142 446 1969 383 160 543 1970 46o 179 639 1971 506 199 705

1972 544 216 760

1973 575 232 807 1974 605 249 854 1975 635 265 goo

* Based on 8 months actual figures.

February 3, 1969 TtFNISIA2N RAILIAYS

Traffic Forecasts for Freiht per Wain Commodi.ties 1968-:L975

N Q R T H E R N - C E N T E R N E TW O R K S O U T H E R N N E T W O R K-- Iron Phosphate Cereals Flour Other TotaL_ P H 0 S P H A T E _ Grand[ Ore __ _ SFA1 Rcu te GABES Rcute Other Total Total TONS CrM0D)

1968* 1,120 220 350 180 820 2,69o 3,400 75( 4,150 6,84o 1969 1,230 230 360 182 828 2,830 3,600 83( 1970 1,270 2'50 4,430 7,26C1 370 184 846 2,920 4,100 950) 1971 1,310 285 5,050 7,97C 380 186 854 3,015 4,,400 1,070 5;,470 1972 1,340 29S0 8,485 390 188 872 3,080 5,000 1,210 6,210 1973 1,340 31]0 400 9,290 190 88D 3,120 3,700 1,600 1,290 6,,590 9,710 19714 1,350 314o 410 192 908 3,200 3 ,700 2,100 1,41t) 7,210 10,1410 1975 1,350 360 420 195 9145 3,270 3,700 2,300 1,500 7,500 I0O,770

TON-K_(CMILLION) 1968* 210 53 62 32 146 5031 867 90 1969 230 55 957 1,460 66 33 15i 535 918 10() 1970 237 60 1 ,018 1,553 70 35 160 562 1,045 111 1,,159 1971 245 68 1,721 75 37 163 593 1,122 12El 1,250 1972 251 7D 78 1,843 33 176 611 1,275 1145 1,420 2,033 1973 251 74 82 39 179 625' 944 3:12 155 11,411 2,036 1974 252 82 85 40 19D 6149 944 410 169 1,523 2,172 1975 252 86 89 41 21DO 66d 944 418 18CI 1,572 2,240

* Based on 8 moniths acLtual figures.

February 3, 1969 February 3, 1969

TUNI SIAN RAILWAYS Summary of Traffic TrenrcLs i96e6 TF'affi 6 -I 1.72 L97i _7 Average Traffic Units Iriex Traffic Units ] ndex Traffic Units Index Traffic Units Index Annual (Million) (Million) (Million) (Million) Increase

Nor thern-Center Network

Passengers: Main Lines 348 100 262 75 493 142 .574 165 7% Suburban Line 136 100 135 99 216 159 195 11%,

S/total 484 100 397 82 709 1]46 839 173 8%

Freight: ]:ron C)re 231 100 164 7L 251 109 252 109 1% E'hosphate 63 100 52 83 70 111 86 137 4% Other 215 100 199 9:3 292 136 330 154 6%

S/total 509 100 415 82 613 121L 668 131 3%

Total 993 100 812 8,2 1,322 133 1,507 152 6%9

Southerrn Network

Passengers 36 100 26 7:2 51 141 61 169 8%

Freight: P'hosphate 727 100 708 97 1,275 175 1,392 191 10% Other 66 100 59 89 145 220 180 273 19%

S/total 793 G10 767 97 1,420 179 1,572 198 11%

Total 829 100 793 96 1,471 177 =1,633 197 11%

GRAND TOTAL 1,822 100 1, 605 88 2,793 153 3..140 172 8%

To-tal Passengers 520 100 423 E,l 760 14S 900 171 E8%

172-f. Total Freight 1,302 IOU 1,12 72,0_ '5S 2,0

To]tal Freight witout Southern 575 100 47L 83 758 132 848 14 5% Phosphate TUNISIAN RAILWAYS

Fcrecast Income! Accounts 1968/1975 (Dinars 000)

- 1 9 6 1 -..9; . _ 1 9 7 0 _1 9 7 1 ___ Northern- Scouthern Total Northernr- Southern Total Northerri- Southern Total Northern- Southern Total Center Center 0eTer

RE.VENUE Traffic Revenue Passengers 1,683 140 1,823 2,057 186 2,243 2,428 228 2,656 2,678 249 2,927 Freight. 3,590 4,235 7,825 3,805 4,494 8,299 3,999 5,081 9,080 4,210 5,466 9,676 Other 250 100 350 250 100 350 250 100 3'0 250 100 350

S/Total 5,523 4,475 9,998 15,112 4,780 10,892 6S,677 5,4°9 12,086 7,138 5,815 12,953 Non-i9Faffic Revenue 100 - 100 100 - 100 100 - 100 100 - 100

Total 5,623 4,475 10,098 6,212 4,780 10,992 15,777 5,409 12,186 Less Tax on 7,238 5,815 :13,053 Gross Revenue 309 246 555 342 263 605 373 297 670 398 320 718

Total Operating Revenue 5,314 1L,229 9,543 5,870 4,517 10,387 65,404 5,112 ]L,516 6,840 5,495 12,335 EXPENSES

Wor-king IE>enses Passengers and Freight .5,542 1,992 7,534 '5,828 2,057 7,885 6S,101 2,194 8,295 6,322 2,281 8,603 Other Traffic 250 100 350 250 100 350 250 100 350 250 100 350 Non-TraLffic 100 - _100 10 - 100 100 - 100 100 - 100

3/TotaL .5,892 2,092 7,984 6,178 2,157 8,335 65,451 2,294 8,745 6,672 2,381 9,053 Depreciation 903 - 719 -W622 998 768 1,766 L,089 869 1,958 1,163 934 2,097

rotal Operating Expases 65,795 2,811 9606 :7,176 2,925 20,101 7,540 3,163 1.0,703 7,835 3,315 'Li,150

Operatingtrs rplus/Defilt (1,481) 1,418 ( 63) (1,306) 1,592 286 (1,136) 1,949 813 ( 995) 2,180 1,185 In1;erest Charges - _ _1701 - -_- 20d _ 18 -- .

Net Surplus/Deficit (233) 82 635 1,030

Operating Ratio 128% 66% 101% 122% 65% 97% 118% 62% 93% 115% 60% 90% Times Interest earned - 1.4x 4.6x 7.6x Debt Coverage Ratio 2.8x 3.5x 4.9x 6-lx

Ratesi of Return on AverEage Net =;rrsssets -10.8% 16.0% -0.3% -9.0% 18.3% 1.2% -6.1% 20.4% 2.9% -4.3% 19.3% 3.4%

L/ Excluding interest dlurirg construction which is eapitalizeld through 1972.

April 11, 1969 TUNISIAN RAILWAYS

Forecast Iricosm Accounts 1968/1975

(Dinars 000) 1 97 7 i 1- 9 7 3 1 9 T7F4_ 1 9 7 5 liorthern- Southern Total Northerni- Southeirn Total Northern- Southern TotaLL Northern- Southern Total Center Center Center Center

REVENUE Traffic Revenue Passengers 2,889 264 3,153 3,060 285 3,345 3,223 300 3,523 3,403 316 3,719 Freight 4,361 6,167' 10,528 4,447 6,28'7 10,734 4,617 6,794 11,411 4,767 7,1104 11,871 Other 250 100 350 250 100 351D 25O 100 350 250 100 _5 3 S/Total 7,50C 6, 537. 14, 7, 757 6 67231 14A, 2'8, o90 7194 15, 2 820 7 5 i1 0 Non-Traf-ric Revenue 10c - 100 100 - 100 100 - 100 100 - 100

Total 7,600 6,531 14,131 7,857 6,6'12 14,529 8,190 7,194 15,384 8,520 7,520 16,040 Less Tax on Grcoss Revenue 41.1 3559 777 432 36'7 799 450 396 8146 469 414 883

Total Oprat ng Heause 7,182 6,172 13,354 7,425 6,305 13,730 7,740 6,798 14,538 8,051 7,10i6 15,157

EXPENSES W-rkig l:penses Passengers and Freight 6,493 2,440 8,933 6,624 2,436 9,06D 6,785 2,5b2 9,327 6,932 2,5B9 9,521 Other Traffic 250 10C) 350 250 100 35) 250 100 350 250 100 350 Non-Traffic 10C - 100 100 - 10D 100 _ (0o 100 - 100

S/Total 6,843 2,540 9,383 6,974 2,5365 9,51) 7,135 2,612 9,777 7,282 2,689 9,971 Depreciation 1,221 1,0459 2,270 1,262 1,072 2,331 1,316 1,156 2,1472 1,369 1,208 2,577

Total Operatng penses 8,064 3,5859 1,653 8,236 3,6031 11,8114 8L 3,79 12,21,9 8,651 ,89, 12,518

Operating 3wpu /Deficit ( 882) 2,5831 1,701 ( 811) 2,69'7 1,886 ( 711) 3,0O0 2,289 ( 600) 3,2)9 2,609 6 Interest Charge ; 128 389 18 6_

Net Sorplu /Deficit 1,573 1,497 1,614 1,995

Operating Ratio 112% 58% 87% 111% 57% 86% 109% 56% 844% 107% 55% 83%

Times Inteirest earned 13.3x 4.8x 3.5tc 4.2x

Debt Coverage Ratio 7.7x 4.9x 4.oxo4.4x

tsof Retm c AWwwo.o % LR W -3.6% 19.5% 14.5 -3.2q 19.4%9 5.7% -2.9% 23. q 6.1, -2.5% 26.5- 7.2%

rG= bg ir!;;e-st NuRi-g ems tion which is capLtalized through 1972.

April 11, 1969 TUNISIAN RAILWAYS

Forecast Cash Flow Statement 1968-1975

(Dinars 000C) Tat al Total 1968 1L969 15970 1971 1972 1968/72 197:3 1974 1975 1968/75 Soarces of Funds

Operating Surplus (Deficit) (63) 286 c113 1,185 1,701 3,922 1,886 2,289 2,609 10,706 Depreciation 1,622 1,766 1,9558 2,097 2,270 9,713 2,331± 2,472 2,577 17,096 Government (Culstom Duties) 500 1, 300 370 2,170 2,170 Governent (Contribution for Track) 4.20 :20 1420 Government (Lump Contribution for Tariffs) 1.,000 1,C000 2,000 2,000 Proposed Bank Loan and IDA Credit 2;,030 5,100 1,410 385 8,925 8,925 Other Loans 718 7l8 718 Rumanian Cred:it - -- 0o0 750 750 2,000 2,000

Total 2,697 5,,582 10,671 5,812 5,106 29,868 4,220 h,761 5,186 44,035 AppLicatiLon of Faunds

The Railway Plan 1969 - 72: The Project 2j,930 7,700 3,080 1,635 15,345 15,345 Gafsa - Gabes Line 500 1,000 2,000 2,500 6,ooo 6,ooo Signalling '500 750 750 2,000 2,000 [unis Station 4.00 500 500 1,4()0 1, 400 Hanoubia Tunnel 300 3(0 300 By-Passing of Sousse 300 3(0 300

Subtotal Railway Plan 3 ,430 10,200 6,330 5,385 25,3145 25,345

Othejr Capital Expenditure 1,718 1,718 1,OOC) 1,000 1,000 4,718 Increase in Stores 12 100 100 100 100 4L2 lOC) 100 100 712 Increase (Decrease) in Aorking Capital ]1,089 (691) 398 398 Debt Service: Interest Chlarges on: Proposed Bank Loan and IDA Credit 2859 570 556 1,415 Other Loans 170 204 178 155 128 835 100 78 58 1,071 Repayment of: Proposed Bank Loan and IDA Credit 10C) 205 220 525 OthLer Loans 384 _381 383 38h 385 1,917 373 339 _340 29 Subtotal Debt Service 554 585 561 539 513 2,75;2 862 1,192 1,174 5,986

Tot-Il 373_ 3l2, I P,61 A Q690 . 998 'in2z 1 0Q, 9 9I9 9 97), 37,153

Cash, at Beginning of Year 1,221 545 2,703 2,513 1,356 1,221 464 2,722 5,191 1,221 Cash. at End of Year 545 2.703 2,513 1,356 464 464 2,722 '5,191 8,103 8,103 p1

April 11, 1969 TUNISIAN RAILWACS

Pro-Forma Balance Sheet, as of December 31, 1967-1975 (Dns0)

1967 1968 1969 1970 1971 1972 1973 1L974 1975 ASSETS

Current Assets:

Cash, Banks and Station Accounts 1,221 545 2,7(3 2,513 1,356 4h6 2,722 5,191 8,103 Receivables 1/ 2,284 l,000 1,0()0 1,100 1,200 1,300 1,400 1,500 1,600 and Stores Investmients 2,788 2J800 2,900 3,000 3,100 3,200 3,300 3,00 3,500 TotaZL Current Assets 6,293 7,345 6,6(3 6,613 5,656 4,964 7,422 10,091 13,203 Fixed Assets:

Gross Value 79,3941/ 80,633 84,063 94,263 100,593 105,978 106,978 107,978 108,978 Less AccumuLated D)epreciation 5S,600 58,222 59,9d8 61,946 64,043 66,3L3 68,6L17 71119 73,69 Tota:L Net Fixed Assetis 22,794 22,411 2405 32,317 3j6550 39,665 _8,331 36859 35,2132 TotaLL Assets 29,087 29,756 30,678 38,930 42,206 44,629 145,753 46,950 48,485 LIABILI TIES

Curresnt Liabilities 3/ 5,373 6,ooo 2,200 2,300 2,400 2,500 2,600 2 ,700 2,800 Long-Term Debt 4,418 4,273 4,980 10,197 11,973 12,723 12,250 11,,706 11,1146 Equity:

Capital Contributions 18,639 18,639 22,572 24,872 25,242 25,21t2 25,242 25,,242 25,2142 Reserves and lRevenue Account Balance 657 8414 926 1,561 2,591 4,1164 5,661 7j,302 9,297

Total Equiy 19,296 19,483 23,1498 26,433 27,833 29,406 30,903 32,5414 34,539

Total Liabilities 29,087 29,756 30,678 33,930 42,206 U41,629 45,753 146,950 148,485 Ratios:

Current Assets to Current Liabilities 1.2 1.2 3.0 2.9 2.4 2.0 2.9 3.7 4 ,7 Current Assets Less Stores anci Investments to Current Liabilities 0.7 D.8 1.7 1.6 1.1 0.7 1.6 2.5 Debt to Equity 3.5 L9/81 18/82 17/83 28/72 30/70 30/710 28/72 26/74 24/76

1/TIncluding assets suspense account. T/ As valiaed in Table 9 (D 78,(00) + works and procurement in progress (D, 1,3914). 3/ Including Liabilities suspense account.

April 11, 1969 7UNISIA.NRAILMA S

(D' 0100)

freau.ry Na.Lional Soc ie te Banqu 0,ucral EZected Treas.wy Adwmwe 1'oisi 7lunisinc~ RatIonale DLF Vxlinhwk %D~tors Cafae., M.A.N. Proposed Ru-nian

1968 January 1 94.2 4.00 2)1. 210 - 1,088 791 124. 64.9 - - 41,418 ,)itbdrayal,s - - - - 250 - - - - 1.68 - - 718 Repaysfeors - 400/ 69 35 25 13 71., 23 652 - - 863wV Dftemete 31 94.2 1U5 175 225 916 717 1L01 594 4.39 - - 1.,273

1969 Januar-y 1 94.2 - 10. 175 225 9459 717 101 581 1.39 - - 4.,273 Wilbdr.awal, ------2,030 - 2,030 Re;.aynnts 1,2w ixafls 942.? - 35 35 25 65 71. 23 65 99 - -1321 Dwemeer 3. - - un 11. 200 880 64.3 78 51.9 380 2,030 - 4.,96o

1970 Januaryl - - Ufl 21. 200 880 61.31 78 93.9 380 2,030 - 4.,980 Withdree.alg - - - - - 5, 100 900560 ResxW=nUat - - 36 35 25 66 71. 2 65 59 - 383 ~~,ber31. ~~~~- - 71. 105 175 811 569? 99 1.51 321 7,130 900 ID,197

1571 January 1 - 71. 1.09 175 811 569~ 99 454 321 7,130 900 :10,197 WJL,2hdrwAal9 ------1,43.0 750 2,160 Remau-te - - 37 35 25 67 71. 22 65 59 - - 381. Deceeber 31 - - 37 70 150 71.7 495 33 389 262 8,54.0 1,250 11,973

1972 Jan.uary 1 - - 37 70 190 71.7 1.95 33 389 262 8,5140 1,290 U1,973 Wil2idxvals ------385 750 1,139 Rejq'nant - - 37 35 25 68 71, 22 65 59 - - 385 Dscemb 3:1 --- 39 125 679 1.3. U 321. 203 8,929 2,OD0 12,723

1.973 .Jrauar 1 - - - 35 1.25 679 1.21 U- 321. 203 8,925 2,000 12,723 Wilt1dra~ls ------Reixayts - - - 35 25 91, 89 3.1 65 98 Inc - 1.73 Dememb..r31. - - - - 100 985 3365 - 259 1459 8,825 2,000 12,250

1971. JmzmaryI - - - - 100 585 336 259 1145 8,829 2,000 12,250

RapmW-~ta - - - - 25 95 96s - 65 98 205 - 9.1 Decem.k,e 3L - - - - 75 1.90 21.0 - 191. 87 8,620 2,000 11,706

1975 J.unary 1 - - - - 75 1.% 2414 - 191. 87 8,620 2,000 11,706 Wili±drami.2------Repa2 uute 25 96 965 - 65 98 220 - 560 December 31 - 0 391. 11... - 129 29 8,1.00 2,000 i1,1146

1976 January 1 - 0 391. 11.1 - 129 29 8,1.00 2, 000 3-1,14.6 wiq8ldrual,3 ------Repayunts - - - 25 91 9.6 - 65 29 236 290 798 Decambw 31 - - - -25 297l 13 - 64. - 8,2.61 1,750 10,31.8

1977 Janury 1I - - - 25 297 1. - 64. 8,161. 1,790 10,31.8 WiIJ.drawals ------RejxVynant - - - 25 98) 143 - 61 21.7 250 732 D.cember 31. - - - - 199 -- - 7,917 1.,9500 9,616

1978 January 1 - - - - -199 -- - 7,917 1,900 9,616 Wilhdrwals ~ ------Repayeents - .- - - - 99 - - 268 250 617 Dweme~ 31 - - - - - 1lo(- - 7,61.9 1, 250 6,999

1979 Jawnary 1 - - - - - ic -- 7,64.9 1,250 8,99'9 WiIJ.drawale ------Repaymants - - - - - 10oO- - 281. 250 634. Dmemeber 31L------7,365 1, 000 8,365

A./ Treeferred to eqeity. ,Z/ Trane rred to Sofoenca. ~/Transfer tD Sai'aeca - 0 79,000; repayenot 0 64.,000. ~/Of wt.ich 0 1.79,000 ar treeferred t Sofo.e,:a, ard D 381.,000 -r -epaye.ts. 5/Of whIch D 91.2,000 are tranfe~rred to equity,, and 0 381,000 are repayeantn.

April. LI. 190< TUWISIAN RAILWAS COSTS/BENEFITS ANALYSIS FE:R LINE 6 (thouasad Dioar,)

a-~~~~~e- j - - ~~~~~~C----B-cfita- - --

I I T~~~~ ~ ~~~~~~~~~rackf SavgI.ngt.: I I ~~~~~~~~~ - ~ ~ ~ ang~~maimte-.__ Sa.vingia. Sa- igi Saving to" Srving-~. 1tak W-k- I OF general gear *7 Locom ~ ailcar. TraUler. aon |mth.pae t c o on of ojCm of I .agon coot for : MgOPet. | %P T| Yeaeqipq p_CeDatfo e plLpLeamentfry- fa- frr-eupetrailcar. place*ent placement andllneq rpm line. an,d 1.0c- masilte- LowZeripmt -d atn;w- ge- oanteu wagon iz &.d .w a. baLlAst eqipment moti,,.. trailers tare mira. oalladt U - - - wag~a.ag -____ ------,- - -wgon. --

S 1.150.0 329.5 s.a8 1Z.6 1.000.0 211.2 93.6 Z.a49.7 ------. . _ ------3. _.2 54.0 112.1 85.0 3Z. 0 115.0 32.0 6.4 101.4 461.1 33 _-l ______-_ 2.3. 1 53.0 12.2 86.0 32.0 140.0 32.0 7.2 - 38S.!; I 973 - -m- - - - 2:3.0 52.1 112.2 86.7 32.0 163.6 32.0 8.0 - 409.6 nn13 - - - . - - . - 2 3.0 51.7 1L2.3 89.3 32.0 163.6 32.0 5.6 - 441.5. |_ _-74 _ _ _ _-_ _ 22. 9 St- 0 IZ. 2 89. 3 32. 0 163. 6 3Z21 9. 2 - 41Z. 3 J _- ______22. 7 50.8 2LZ.1 89.2 32. 0 163.6 3Z. 2 9. 6 - 412.2 |_ _-ts _ _ _ _-_ _ 22. 6 50.7 1.2. 1 89. 4 32.0 163.6 32.3 10.2 - 412.9 tS77p ______' -_ _ 22U.6 50.3 1.1.8 89.4 32.0 163.6 32.4 11.0 - 413.1 t _8 ______Zi!22.4 49.3 11.6 89.7 32.0 163.6 32.4 11.6 - 412.6 ITV9 - ______221.2 48.3 10.7 90.0 32.0 163.6 32.6 12.0 - 411.4, 1980 - ______22. 0 47.7 10.0 90.6 32.0 163.6 32.7 12.4 - 411.0 198 ______21,. 7 46. 7 9.7 91. 3 32.0 163.6 32. 8 12.4 - 410.2 198Z - ______. 21.5 41.6 9.4 92.3 32.0 163.6 32.9 12.4 - 405.7 3953 - - '- - - - 21. 3 :0 9. Z 93. 3 33. 0 163. 6 33. 0 12.4 - 405. 8 R.sido,al Val.. .6"5.4 -99.2 -l v -7.5 .596. 3 -51. C, 1,3457.4

Residua.l __r_<_

Interna it rate at returc. 12. 99%.

February 3, 1969 ANNEX 1

TUMISIAM RILWAYS

Amendments made to SNCFT's Income Accounts 1962-67

Revenue

1. The Government compensations for iron ore transport referred to in Paragraph 3.LO and in Table 6 - have been ec.luded.

2. The 601 Government. ontrihnti nn for track expenditiirc - refPrred to in Paragraph 3.17 - have also been eliminated.

3. Taxes on gross revenue which are dealt with in SNCFT"s books as opera- tAc- i n-v inncz . ~h -trc i-nQ+.cn A )-a-ncc.' Atmr1nr+.czA fie'rrn~ 'r? o -: Tn l .i.t, -. p-ns- h.ave instead beendeutdfomgrs ee..

4. Track expenses of a capital n.ature (renewals and im,.provements) whi-ch, by Statutes, must be charged to revenue have been excluded.

5. Fixed assets taken over from the Government on January 1, 1957, and

fronm lte Gafsa Cor,ifanLy on January 1L, 1967, not--Jve 4e beeni vd.-. To include in the income accounts an adequate depreciation allowance, the latter has beUli calculated as a percentage - L7; --of gross re- venue.

6. Taxes on gross revenue, since now deducted from revenue, have been eliminated from operating expenses.

April 11, 1969 TUNISIAN RAILWJAYS

Tentative Evaluation of SNCFT's Fixed Assets as of December 31, 1967

Northern-Center Network

In accordance with SNCFT's present Statutes, fixed assets on the Northern-Center netwgork taken over from the Government on January 1, 1957, have been evaluated nominally at D 3.0 million for the purposes of the opening balance sheet. The initial contribution of the Government to SNCFT's equity was assumed to be the same amount. Although the Statutes provide for the revaluation of the initial fixed assets within a given period of time, this has not been finalized so far. A tentative evaluation of gross and net fixed assets, as of December 31, 1967, has been made in the Bank; it includes all track works - the ownership of which is to be transferred to SNCFT - as well as acquisitions made by SNCFT since January 1, 1957. The evaluation is based on present replacement costs to which annual depreciation allowances, calculated on generally accepted percentages, have been applied. The results are in Table 10.

Southern Network

The Agreements between the State and the Gafsa Phosphate Comnanr provide that- at the end of' the Goneession for thp onpration of the Southern railway system, the surrender value of part of the f'ix assets w-ill be reimbu,rsed hyr the State±. to~- t-he co.mpn. The inventory of these assets has been made and the Government and the companmr hauv areed on a sett.1 rnent o'f ) 2.8 millionn Sinee this surrencler value covers only part of the fixed assets, it cannot be ed as a basis for valuation of the Southern network. Therefore, a tentative evaluation of the gross and net fixed assets has been made

w _- VV- _ n'I lhTfi wm- w-" +Inn Mm- +Ihow_.n _+te.in hs-v n--:u1 L- on,wV9 th.bseh >co indicatedA no abv -o the NorthernCne network. The results are also shown in Table 10.

April 11, 1969 ANNEX 3

TUNISIAN RAILWAYS

Description of Measures taken or to be taken by the Government to improve SNCFT's financial position

1. Introduction

Although SNCFT's 1968 accounts have not been finalized, and the balance sheet as of December 31. 1968 is not yet available, the measures descr:ibed below are based on the tentative position as of December 31, 1968.

2. Receivables and Current Liabilities

Clearing of outstanding accounts bhtvtnPn thhe Go)vrnmPnt, SNOFT, tihe Gafsa Phosphate Company, Government-owned companies and the National Pension Fuind, as indicatepd below (D 000):

Debtors Creditors Gsa Cert.= Cvv W.= -ntl SNCF'r Phos- ment ment Pension

pI,at e o d4 I. A Co. Cos.

Gafsa Phosphate

'.J.JLLJaI.1y2,1

Go ve rri nent - owned companies 312

Governnent 2,800 403 National Pen- sion Fund

S-NCFT o53r,44'

Thnis results in improving SNCFT;s liquid position by D 639,000.

3. Government Additional Contributions to Equity

Incorporation into SNCFTls equity of:

(a) Treasury advances amounting to D 942,000 2/ (b) Interest accrued on (a), amounting to about D 230,000 '/ (c) Payments made by the Government to the previous railway concessionnaire7 the "Compagnie Fenriiere des Chemins de Fer Tunisiens", amounting to D 1,211,000. 2

1/ Shown in Table 10 under "Lone-Term Debt" 2/ Shotrm in Table 10 under "Suspense Account"

April :Ll, 1969 TUNISIAN RAILWAYS

Reasons for ELimination from the Proposed Project of the Following Four-Year PDr tan

1. Construction of the Gafsa-Gabes Line

(a) Phosphate output from Southern Tunisia is presently about 3.4 million tons per annum. About 2.7.,mLillion tons are exported througa the port of Sfax and 700,000 tons are used by fertilizer plants instalLad at Sf ax.

(b) The present maximum capacity of the Gafsa-Sfiax railway line is about 5 million tons of phosphate per annur; the present phosphate exporting capacity of the port of Sfax is estimiated by Italconsult at 3.6 million tons a year. With rclatively minor investments the capacity of the railway line could be increased to 8 million tons a year, t'hat of the port of Sf a, to 7 mi:Llion tons. (c) The Government long-range plans provide for substantial increases of t'he phosphate production of Southern Tunisia; the latest figures available are: 1972: 5 million tons 1975: 6-8 "i 1980: 18 1 1

This would require improving extractive techniques in the existing mines and opening new mines which would be operative from 1970 on; the estimated cost would be at least US$ 100 million equivalent. The Government expects to obtain financing through barter arrangements drith East European countries. Negotiations with Bulgaria for a US$ 30 m:illion financi ng are reported to be cormpleted; ne,otiat,,ions with other countries are at various stages of progress. (d) Since the Government long-range forecasts for phosphate product;ion go substantially beyond the capacity of the Gafsa-Sfax line and the port o.' Sfax, the Government wants to keep investments for t1;ese facilities to a minimum. Instead it has decided on the construction of a deep water port at Gabes and the construction of a new railway link between Gafsa-PI'Dilla and Gabes (see Map). The cost of Gabes port i.s estimated at about US$ 16 million equivalent, of which about 80% wi]l be financed through Italian bilateral aid; constructicn is expected to start, by early 1969 and to be completed by 1972. Simultaneously with the construction of the port the Government intends to build at Gabes a nower station and a chemical complex (Industries Chimiques Maglarebines) which would utilize part of the phosphatue produced in the South. The construction of the Gafsa-Gabes railwav line of about llhC 1Ti is estimated at D 6 rmllion (US$ 11.4 million equivalent); it is alsc schedled for cornpletion hy 1Q72. ANNEX 4 Page 2

(e) The Government has recently submitted to UNDP a request for a long-range study of tihe phosphate problem in Southern Tunisia. The study will assess whether (i) extractive teclmiques and productivity of the mines could sufficiently be improved to reduce costs. (ii) the quality of phosphate could be improved, possibly by calcination, at a cost which keeps it; worldwide competitive; and (iii) market nronnPetf would allow Tunisia to increase substantially its share. The study should then make recommendations as to whether Tunisia shouldi pursue its nresent policy towards increasing production and quality, or review its targets.

(f) Because of the many uncertainties involved it is preferable to postpone consideration of possible Bank participation in the financing of the investment (mines, railwiay, port) until more data is available. Therefore, the rGafsa-Gabes railway line has been excluded from the proposed project.

2. Signalling Works and Equipment

This item covers signalling improvement on the main lines and at var_s small stations- SNFT execus 4Uo obUtaiLn financing . vmm luMIILC±Lnia. 3. Tunis Railway Station

This station is particularly old anrd inadequate for present and future traffic. However, the item is of lowier priority when compared with thie urg-entr requiremients of tracki, motive power and rolling stock.

4. Manoubia Turnel

The Government is building a road bricie across the railway line in Tunis. Clearance will be insufficient 2nd lowering of the railway track is required.

5. By-passing of Sousse

Tne track presently crosses the inner city close to the sea shore where tDurism facilities are being developed. The new track will by- pass thle city.

April 11, 1969 ANNEX. 5 r.ge 1

TUNISIAN RAILWAYS

Analysis of Traffic Forecasts

IntJrodu c.tion- 'L

Belcause ofLIlhle poor crop ar.dA lowr Inneral production. in 97 which resulted in distortion of traffic trends, 1966 is taken as reference year.

Nortnern-Center Network-

Passengers

1. Main line passengers are expected to increase fro-1--4 .2 rllion in 1966 to 7.1 million in 1975, while pass-km grow from 348 million to 574 million, an increase of 65%, or 7% per annum. T-he a-verage dlstance travelled per passenger is expected to increase slightly from 82 km to 90 km. The projected 7% grawth is somewhat higher than the 'O average annual growth for the period 1962-66 because of the continuous, although slow, increase of GNP.

2. Commuter passengers on the Tunis-Hammnan-ULif suburban line are expected. to increase from 10.5 million in 1966 to 20.4 million in 1975, with pass-km increasing from 136 million to Y65 million. The projected growth is 11% per annum as compared with 9% during 1962-66. The high average annual increase results from the expected development of servicd activities in Tunis.

3. The average annual growth of all passenger traffic on the Nlorth- ern-Center network is expected to be 8%o per annum as compared with 77 dur- ing 1962-66.

Freight

Prospects for iron ore are not encouraging and rail traffic for this commodity is not expected to increase substantially. An increasing portion of the output is expected to be utilized locally, at the El Fouladh steelworks and the cement plants, while exports would remain practically a.4 the same level. The expected traffic growth over the period 1966-75 is 1% per annium.

5. Phosphate output from Kalaa Djerda is expected to increase from 25?.000 tons in 1966 to 360.000 tons in 1975. with ton-km increasing from 63 million to 86 million, an average annual increase of 4%. The pro;!ec- tion is hased on the latest estimates prepared by the Government which are reasonable.

6. Other goods increase from about 1.3 million tons in 1966 to about 1.6 11niIin 1.os in 19Q7 Ton-km are projected to grow from 215 million to 330 million, an average arnual increase of 6%.

htPri- -1-i 1969- ANNEX 5 Page 2

7. Total 1reight traffic on the Northern-Center network will in- crease from 509 million tons in 1966 to 668 million tons in 1975, at c! 3% annual growth.

Southern Network

Passengers

8. Passengrer traffic is expected to increase at a substantial aver- age annual rate of 8d hecause of the aoknowledged intention of the Govern- ment to devote an increasing portion of resources to the development of the South Tncreased phosp.hnte production, as well as t.he oonstruction and operation of the Gabes chemical complex and port, will generate employ- m.ent. wtih-h in .ivrr will rei1t. in increse pnssTnoTpn movmpnt.-q

09 4 - The:, r Yn n"+ aoVTe'+ a tonirt n c h o.-lnne prouc+t4 n + 'C T'ril - lion tons in 1972. Although this will require substantial financing, which Ai no C ytO flu ran--A +s,i +n,,n+ 4theis-.4 c-mniee AtageA i a Pne, fig- ure of 6 million toms has been adopted for 1975. As explained in paraLgraph E1.2 no0 C, +rfiVS ~,n4been has4.IlC - -oa, a--I- orioned-l.n+ --nA btel-,n+,snnr tVheL+1, Qi-n4V f and -rn1- A fl.'I-ine--C-as r-n,aa .tesi'r.nm.1 1973 on.

10. Other goods are expected to increase to 180 million ton-km in 1975, -n press--4 --rg --- 'I increase of 19%. A substantial -o.+i of the increase is to come from equipment required for the opening of new

LIsUoi:>Laut-, ILLne al cuit v onostrucvi-us X us1n UlOf Gabe poUtrtsv.

11. Tle total freight traffic on thile Southern network will increase by an average annual rate of 11%.

SNCFT

12. Traffic units on both networks which totalled 1,822 million in i966 are forecasAi to increase to 3,140 miiiion in i97, an average annuuai growth of 8%. The expected development of the Southern phosphate mines substantially affect the projected traffic increases, wnich, without phos- phate, would average a more modest annual growth of 5'%.

April Ia9 1969 hAJ:TE 6

TUNISIAN RAILWAYS

Notes on Forecast Operating Income and apenditure Table 18) A. Income

1. Revenue! from passengers has been calculated on the basis of the 1967 average receipts per pass-km for each category of traffic (Northern- Center main lines, Tunis-Hamman-Lif commuter line, Southern main lines).

2. The same rule has been applied to compute revenue from each category of freight on the Northern-Center network (iron ore, phosphate, "other" goods). For phosphate on the Southern main line M'etlaoui-Gafsa- Sfax the new tariff imposed by the Government since January 1, 1968 has been applied. (El 1 per ton up to 3 million tons, D 0.9 per ton for ton- nages in excess of 3 million). The same rate prorated on a distance basis, has been applied for phosphate to be hauled, from 1973 on. on the new Gaf- sa-Gabes line.

3. Other traffic revenue (mail, parcels, LCL, etc.) has been esti- mated at D 350,000 per year; non-traffic revenue at D 100,000 per annum.

14. Tax on gross revenue has been deducted from income; the presen' 5.5% rate has been applied.

B. Exenditure

5. Operating expenses for passengers and freight on the Norther:n- Center network have been calculated on the basis of the amended 1966 income account figures shown in Table 8. (Because of substantial de- crease in t.raffic in 1967, traffic unit costs for that yrear are higher than normal; therefore, they have not been used as reference for future cost projections). After elimrination of epenses relating to "other" traffic and non-traffic activities, total operating expenses have been ap- nlied 45% to passenger traffic anrd 5% to freight traffic 1/. In 1066, variable costs on the Northern-Center network amounted to ET% of total passenger costs and 38% of total freight costs 1/. These percentages av been applied through the period 1968-75 to assess the expected cost per pass-km and ton-a..

TMe-se percentages result fCro. a costustuu-.iy made by Ialconsult as part of the Tunisian Transport Survey.

April 11, 1969 An1X 6 Page 2

the Southern 6. Since no detailed cost information is available for the 1967 amended networK, future costs on this system have been based on at 40%; income accounts shown in Table B, with variable costs estimated this is a generally accepted percentage for most railways. 7.As stated ea.'-er, theovalu2t50n of gross and net fixed assets from the tentative has not been completed, and the final results may deviate is difficult to relate, in vaLuation made in the Barnk. For this reason, it depreciation to gross fixed assets. Instead, annual terms of percentage, at 17% depreciation allowances for tLhe period 1068-75 have been est.imated of the gross operating revenue of each year. loans, Interest takes into account financial charges on existing 8. financial the details of which exe in Table 19. In addition, it includes the during the project charges of the proposed Bank loan, except for interest proposed Bank construction period 1969-72 which has been capitalized. The term of 25 years loan has been assumed at 614 interest per annum with a been including a 4- year period of grace. Ihe proposed ITD Credit has terms and assumed to be relen-t by the Government to SNCFT at the same conditions.

April 11, 1969 ATNNEX 7

TUNISIAN RALWAYS

ethodolo-,, for E-stirtimt.ng Ecoarn,ic 11enefits for the Northern-Central Network

feS ;en_arncn-4k Eiconv-ioJ2tJ±U .Lt~ on'jI. ± a. - ,-;. . I.A

ost for +he noten(n l ne-twork l.~~r* ±LUCL,~.L 4-ta trackUI-MUMb 1=..I±iU~UJ4UZ.Irartrac 0 v A.W1J. Vl-_ L4'- -- -_** . in 1966 was estimated at D 600,000, or D 400 per km. Based on engineering a~s.esnents, an in'tial anrual average maintenance cost of D 200 per km for new track has been assumed as a reasonable estimate. This figure would in- crease over 5-year iLtervals to reach D 1400 at the endL of 40 years, the average life expectancy of the rails. Given the advanced age of existing lines (over 40 years), and assuming that in -heabsence of renewal proposed in the project they would continue in use up to 60 years, successive main- tenance cost increases during the years 140 to au ha-ve been estirmated at an annual rate of 2-2.5%. Thus, savings in track maintenance costs have been estimated for each line to be renewed, considering its age and com,lparing the projected maintenance costs with and without the investment in reneiwal. To these annual savings was added a further reduction in annual maint.enance cost estimated for each year at 1% of the investment in renewal and upgrading of structures, to be performed concurrently with the work on the track quip-- ment. The annual sum of these two elements thus represents the expectedi bene- fit stream stemming from the investment in track renewal.

Economies on Maintenance of Rolling Stock and Motive Power a) Locomotives

2. The annual maintenance cost of locomotives was estimated at D 6155CC)0 or an overall average of D 10,000 for each of the 63 existing units. For each new locomotive the estimated average saving in maintenance cost is D 6,ooo per annum. But since each new locomotive will provide enough traction capacity to replace about Eke of the existing locomotives, the "avoidable cost" of mai.n- taining the replaced locomotives is also added to the initial savings in nzan- tenance cost. The distribution of these total savings per line was estimatea separately for the standard gauge and the meter-gauge networks, on the basis of gross ton-km hauled (GTKH).

b) Railcars

3. The annual maintenance cost of railcars is about D 460,000 or an overall average of D 9,700 for each of the 47 existing units, and D 75,000 for trailers, or about D 2,000 per unit.

4. For each new railcar the estimated average annual saving is D 4,500. To t+h.i- i9 Adedp the "avoidable maintenance cost" resulting from the replace ment of 17 old units by 10 new units. For new trailers, the annual savingil in ra nter.ancn e-cos. was estimated at an average of D 800 per unit. Distribut:iin of savings by line was a]so made on the GTKH basis, for DtandaId gauge and mrter gauge separately. ANNE,7 Page 2 c) Freight Cars

5. "MTe annual cost of freight cars maintenance is D 340,000 for 3,476 cars on the MIorthern-Central network, or about D 97 per unit.

6. Based on engineering analysis, an initial maintenance cost of D h7 per new wagon has been estimated. This cost would increase over 5-year intervals to D 97 at the end of 40 years. Between the age of 40 and 60 yearst successiirmaintencnce cost wonild increase at 2-2.50 n.a. and level off be- yond 60 years.

7. Since new cars will have a greater capacity than the existing units. the nnmhbr of new ivnnS ,-ireivi-rei for n aiven volrlme of traff_c will be less. This would result in additional savings equivalent to D 97 of avoidable main- terarce Ct perut, applied to the 94ifp"ence in thei n^m.r ufunits re- quired to meet present traffic. This additional saving of D 97 per "unlt vo-I ded' b- been added +o +-he a=.na' benefit stream fo-r a per o of 1-5 y'eal only.

8. Since the project life has been geared to that element namely,, en- gir,sih LaLg Ute siorUtest usefuL life of l5 years, bUene-fitJ s fo.l. - _all e of the project (except for branch lines in the south) have been estimated over- thisor'yerio altoughsor,s benfitswoul coInt-ue lo arise b-eyond +7lnl- time. As for the Longer-life elements, e.g. track and rolling stock, their rasdual values were es"-LaetJ as of t hte en' of the .jt5Ih year on t1h Ua;;-. U. historical cost minus depreciation. The residual values were thus treated as a `negatlve cost" in computing the intermad- rate of ret-uri.

Savings in Operating Costs and Overhead

9. rne average cost per GT.i of freight trains was estimated at D 0.001, which is equivalent to the saving per GTKH empty wreight arising7 from the reduced number of cars required for present traffic. Lhis saving stems from the smaller tare weight of new cars with a greater net capacity. 10. Additional savings in general operating and overhead costs result- ing from the overall increased operating efficiency of the railway system, and attributable to the combined investment in the various elements of the project have been estimated at about D 241,000 for the year 1970, or 28-- of estimated overhead cost. About 1h% of these savings represent reductions in overhead costs attributable to passenger services, the balance of 869 being equally divided between similar cost reductions attributable to freight services and to general adiministrative expenses. Passenger Time Savings

11. The value of time savings accruing to passengers as a result of A TNFX 7 Page -

increased speeds wias estimated for each line separately on the basis o2 the volume of' nass-km. The unit. value of imp qavirng was estqmated a; D 0.20 per hour, the same as that used by the consultant for highway pro- iects. This f'igure however- -rtTq5was n1ne i +nnltonly 30% ofpen traffic on the assumptions that a large percentage of railway passenger movements cim-and little econ…om-ic *a¼le and +h-t onlyJ a part of thiJs t.-- fic will benefit from increased speed.

Conclusion

12. To illustrate the above analysis, Table 2.0 provides a breakdown of th>.e various cost "and en.efit streamis estim-ated f or ALire 6, yielding an internal rate of return of about 13%.

13. Based orL a similar analysis performed for each of the remaining Xlis, th;e ollowUingV tUable pI deVsU a sulmary Uof the total Cos anu benefit streams attributable to the total investment for the Northern-Central Net- worn, yie]ldn an , v1ra'>e of retuUi of over ±e4;

Year Total Costs Total Benefits (Thousand Dinars)

1969 8,287.3 - 1970 1,705.0 1,595.9 1971 442.4 1,357.7 1972 1,380.3 1973 1,370.7 1974 1,371.3 1975 1,373.4 1976 1,373.4 1977 1,373.1 1978 1,372.3 1979 1,355.8 1980 1,349.5 1981 1,34109 1982 1,323.3 1983 1,318.1 Residual Value -5,829.7

Internal Rate of Return 12.26,

A 4I n ,r-n4n lHprLJ.L I..±g 7J. 7 L.nia Mr:a I'd I BoI Said

H a h o L lSoletie JE - | y 78habBek 5uttea Sa L_ _Atlr astouta GULF OF TUNIS

Nassan Naanaaa LIŽaB.CadNlba D.".aa Dje e ___UNIS, Go usalette

Ban doXAraus~ :/Kh~ela iauaBls = L(lljda) BeCF.DJej/ N.daEi 'cu l< U OHenchir Leb.a

- ,Oci t a oe d 1 t t p. -= Ga r sa p ,- ---. . ' , d M ...... Saraaau haaua e.N(

La KaY ( G~~~~~~~~~~~~~ULFF AMAS I {~~~~~~~~~~~~~~_ I _rj -Ss I

Sidi BA.or L f Fad Etianaur / Soas~~~~~Eta.a,

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Patadia *er~~~~~P...... BdI

0 'U

Basnerina

I # AwoS td'D Sllal-s ' *---'-Sa .ath

c,aiba

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S)ITNAIOAEDS. -'-|

/| R R-. l...... --- - Ga F, JANUARY- 1-9-69 -- Gabeseena 249 REPUBLIC OF UNSI SOCIE-E …AIN L E

CH RMPUBLIC OFE TUNISIA N

(SNCFT) NORTHERN &CENTRAL SYSTEM ~ Standard gauge(l.435.) SOUTHERN SYSTEM iSBnm gauge

1' PROPOSED aAFSA - OABES LINE l55n,0 gauge S ii 20 30 .0

LINE NUMBER

OIBER RAILWAY SYSTEMS ______20______~~~~~~O~~~~I LB GOULEVTE - LB MARSA RAILWAY 4*...4..q....-4~5tandardgauge

ALGERIAN RAILWAYS...... _...... 00SB gsa- -

JANUARY 1969 IFD2q