Document of The World Bank

Report No: 52965-TN Public Disclosure Authorized FOR OFFICIAL USE ONLY

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

Public Disclosure Authorized IN THE AMOUNT OF US$36.10 MILLION

AND A PROPOSED GRANT FROM

THE GLOBAL ENVIRONMENTAL FACILITY TRUST FUND GRANT IN THE AMOUNT OF US$9.73 MILLION

TO THE

REPUBLIC OF TUNISIA

FOR A Public Disclosure Authorized SECOND NATURAL RESOURCES MANAGEMENT PROJECT

May 21, 2010

Department of Sustainable Development Middle East and North Africa Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective November, 2009) Currency Unit = Tunisian Dinars TND 1.30 = US$1.00 US$1.00 = SDR 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ADG Agricultural Development Groups / Groupement de Développement Agricole (GDA) AETA Agricultural Extension and Training Agency /Agence de Vulgarisation et de la Formation agricole (AVFA) AfD French Development Agency / Agence Française de Développement ALA Agricultural Land Agency / Agence Foncière Agricole (AFA) AC Annual Contract / Contrat programme (CP) CBT Central Bank of Tunisia / Banque Centrale de la Tunisie (BCT) CCU Central Coordination Unit / Unité Centrale de Coordination (UCC) CPS Country Partnership Strategy / Cadre de Partenariat Stratégique (CPS) DA Designated Account / Compte Désigné (CD) DEQL Directorate of Environment and Quality of Life / Direction Générale de l’Environnement et de Qualité de la Vie (DGEQV) DFIPO Directorate of Finance, Investments, and Professional Organizations / Direction générale du Financement, des Investissements et des Organismes Professionnels (DGFIOP) DPMCAL Directorate of Planning, Management and Conservation of Agricultural Lands/Direction Générale de l'Aménagement et de Conservation des Terres Agricoles(DGACTA) DREWU Directorate of Rural Engineering and Water Use / Direction Générale du Génie Rural et de l’Exploitation des Eaux (DGGREE) DRI Directorate for Rural Infrastructure / Direction Générale de l’Infrastructure Rurale (DGIR) DSAD Division of Studies and Agricultural Development / Division des Etudes et du Développement Agricole (DEDA) DWR Directorate of Water Resources / Direction Générale des Ressources en Eau (DGRE) ERR Economic Rate of Return FDESP Framework Document for Environmental and Social Protection / Document Cadre de Protection Environnementale et Sociale (DCPES) FMS Financial Management System FYDP Five-year Development Plan (2010-2014) / Plan quinquennal (2010-2014) GEF Global Environment Facility ICB International Competitive Bidding ICR Implementation Completion Report IGA Income Generating Activity / Activité génératrice de revenu (AGR) Imada Administrative Sector IPA Integrated Participatory Approach / Approche Participative Intégrée (API) IREA Institute of Research and Education in Agriculture/ Institut de recherche et d’enseignement supérieur agricole (IRESA) LDC Local Development Council / Conseil de local de Développement (CLD) MAWRF Ministry of Agriculture, Water Resources, and Fisheries / Ministère de l’Agriculture, des Ressources Hydrauliques, et de la Pêche (MARHP)

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FOR OFFICIAL USE ONLY

MENARID Integrated Natural Resources Management in the Middle East and North Africa Region Program MESD Ministry of Environment and Sustainable Development / Ministère de l’Environnement et du Développement Durable (MEDD) METAP Mediterranean Environmental Technical Assistance Program M&E Monitoring and Evaluation / Suivi-évaluation (SE) NCGE National Company for Gas and Electricity / Société Tunisienne de l’Electricité et du Gaz (STEG) NCB National Competitive Bidding SONEDE National Company for Water Exploration and Distribution / Société Nationale d’Exploitation et de Distribution des Eaux (SONEDE) NEPA National Environnent Protection Agency / Agence Nationale pour la Protection de l’Environnement (ANPE) NRMP Natural Resources Management Project/ Projet de Gestion des Ressources Naturelles (PGRN) NRMP2 Second Natural Resources Management Project / Deuxième Projet de Gestion des Ressources Naturelles (PGRN2) NSU National Sanitation Utility/Office National de l’Assainissement (ONAS) OSDNW Office of Sylvo-pastoral Development in the North-West / Office de Développement Sylvo- pastoral dans le Nord-Ouest (ODESYPANO) PDP Participatory Development Plans / Plans de développement participatifs (PDP) RC Regional Council / Conseil régional (CR) POPM Project Operational Procedures Manual / Manuel des Procédures Opérationnelles du Projet (MPOP) RCAD Regional Commisariat for Agricultural Development / Commissariat régional de développement agricole (CRDA) RPF Resettlement Policy Framework / Document Cadre sur les Questions Foncières (DCQF) SAP MED Strategic Action Plan for the Mediterranean Sea SBD Standard Bidding Document SDR Safeguard Diagnostic Review SLM Sustainable Land Management SSS Single Source Selection STU Socio-Territorial Unit / Unité soci -térritoriale (UST) WSIP2P2 Second Water Sector Investment Project / Deuxième Projet d’investissement dans le secteur de l’eau (PISEAU 2) TICET Tunis International Center for Environmental Technologies / Centre International des Technologies de l’Environnement (CITET) TSB Tunisian Solidarity Bank / Banque Tunisienne de Solidarité (BTS) UCS Use of Country Systems UNFCCC United Nations Framework Convention on Climate Change UNCCD United Nations Convention to Combat Desertification

Vice President: Shamshad Akhtar Country Director (Acting): Françoise Clottes Sector Director: Laszlo Lovei Sector Manager: Luis F. Constantino Task Team Leader: Lucie H.G. Tran

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

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REPUBLIC OF TUNISIA Second Natural Resources Management Project

CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE ...... 1 A. Country and sector issues...... 1 B. Rationale for Bank involvement ...... 2 C. Higher level objectives to which the project contributes ...... 3

PROJECT DESCRIPTION ...... 4 D. Lending instrument ...... 4 E. Program objective and Phases ...... 4 F. Project development objective and key indicators ...... 4 G. Project components ...... 5 H. Lessons learned and reflected in the project design ...... 7 I. Alternatives considered and reasons for rejection ...... 8

IMPLEMENTATION ...... 9 J. Partnership arrangements (if applicable) ...... 9 K. Institutional and implementation arrangements ...... 9 L. Monitoring and evaluation of outcomes/results ...... 10 M. Sustainability ...... 11 N. Critical risks and possible controversial aspects ...... 11 O. Loan conditions and covenants ...... 13

APPRAISAL SUMMARY ...... 14 P. Economic and financial analyses ...... 14 Q. Technical ...... 14 R. Fiduciary ...... 15 S. Social...... 16 T. Environment ...... 17 U. Safeguard policies ...... 18 V. Policy Exceptions and Readiness...... 19

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Annex 1: Country and Sector or Program Background ...... 20

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 24

Annex 3: Results Framework and Monitoring ...... 26

Annex 4: Detailed Project Description ...... 33

Annex 5: Project Costs ...... 47

Annex 6: Implementation Arrangements ...... 49

Annex 7: Financial Management and Disbursement Arrangements ...... 54

Annex 8: Procurement Arrangements ...... 65

Annex 9: Economic and Financial Analysis ...... 76

Annex 10: Safeguard Policy Issues ...... 87

Annex 11: Project Preparation and Supervision ...... 97

Annex 12: Documents in the Project File ...... 99

Annex 13: Statement of Loans and Credits ...... 100

Annex 14: Country at a Glance ...... 101

Annex 15: Incremental Cost Analysis ...... 104

Annex 16: List of Sustainable Land Management Techniques ...... 116

Annex 17: Maps (IBRD 37854, IBRD 37855, IBRD 37856, IBRD 37857) ...... 120

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REPUBLIC OF TUNISIA

SECOND NATURAL RESOURCES MANAGEMENT PROJECT

PROJECT APPRAISAL DOCUMENT

MIDDLE EAST AND NORTH AFRICA

MNSSD

Date: May 21, 2010 Team Leader: Lucie H.G. Tran Country Director (Acting): Françoise Clottes Sectors: General agriculture, fishing and Sector Manager/Director: Luis Constantino forestry sector (50%);Forestry (25%);Irrigation Project ID: P086660 and drainage (10%);Crops (10%);Animal Environmental Category: B production (5%) Lending Instrument: Specific Investment Loan Themes: Land administration and management (67%);Water resource management (33%) Joint IFC: Joint Level:

Global Supplemental ID: P112568 Team Leader: Lucie H. G. Tran Lending Instrument: Specific Investment Loan Sectors: General agriculture, fishing and Focal Area: I-International waters forestry sector (50%);General water, sanitation Environmental Assessment: Partial and flood protection sector (50%) Assessment Themes: Climate change (29%);Land Supplement Fully Blended?: Yes administration and management (29%);Water resource management (28%);Other rural development (14%) Joint IFC: Joint Level:

Project Financing Data [X] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: 36.10 For GEF Grant: 9.73 Total Bank financing (US$m.): 45.83 Proposed terms: VSL Financing Plan (US$m) Source Local Foreign Total BORROWER/RECIPIENT 14.12 0.49 14.61 International Bank for Reconstruction and 31.89 4.21 36.10 Development Global Environment Facility (GEF) 7.80 1.93 9.73 Local Communities 7.22 0.00 7.22 Total: 61.03 6.63 67.66

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The co-financing sources for GE supplemental are (All the amounts are in US$ million): GLOBAL ENVIRONMENT - Associated IBRD Fund=0; These amounts are not additional to the amounts shown in the Financial Plan table above Borrower: Republic of Tunisia Tunisia

Responsible Agency: Ministry of Development and International Cooperation Place Ali Zouaoui Tunis, Tunisia Ministry of Agriculture, Water Resource and Fisheries, Directorate of Finance, Investments, and Professional Organizations 30 rue Alain Savary Tunis, Tunisia Ministry of Environment and Sustainable Development Centre Urbain Nord Boulevard de la Terre, Tunis, Tunisia

IBRD Estimated disbursements (Bank FY/US$m) FY 11 12 13 14 15 Annual 2.75 7.51 12.11 8.55 5.18 Cumulative 2.75 10.26 22.37 30.92 36.10

GEF Estimated disbursements (Bank FY/US$m) FY 11 12 13 14 15 Annual 0.78 3.86 2.20 1.67 1.22 Cumulative 0.78 4.64 6.84 8.51 9.73

Project implementation period: Start November 15, 2010 End: July 31, 2015 Expected effectiveness date: October 15, 2010 Expected closing date: December 31, 2015

Does the project depart from the CAS in content or other significant respects? [ ]Yes [X] No Ref. PAD I.C. Does the project require any exceptions from Bank policies? Ref. PAD IV.G. [ ]Yes [X] No Have these been approved by Bank management? [ ]Yes [X] No Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No Ref. PAD III.E. Does the project meet the Regional criteria for readiness for implementation? [X]Yes [ ] No Ref. PAD IV.G.

Project development objective Ref. PAD II.C., Technical Annex 3

14. The Project Development Objective is to improve the living conditions of rural communities in the project areas in terms of access to basic infrastructure and services, sustainable increase the three agencies income, and improved natural resource management practices by fostering an integrated approach to community-based development. vi

Global Environment objective Ref. PAD II.C., Technical Annex 3

15. The Global Environment Objective is to reduce the threat of land degradation and climate change to vulnerable agricultural production systems in the target areas while developing options to address land-based pollution affecting the Mediterranean Sea.

Project description [one-sentence summary of each component] Ref. PAD II.D., Technical Annex 4

13. The Project is a fully-blended operation, financed with two instruments, a Specific Investment Loan ofUS$36.10 million and a GEF Grant of US$9.73 million, to be implemented over five years. The total project cost is estimated at US$67.66 million, with counterpart part funding estimated at US$14.61 million, and contributions from beneficiaries estimated at US$7.22 million.

Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10

OP/BP 4.00 - Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects

Significant, non-standard conditions, if any, for: Ref. PAD III.F. Board presentation: None.

Loan/credit effectiveness: Adoption of Project Operational Procedures Manual; effectiveness of GEF Grant Agreement

Covenants applicable to project implementation: Standard.

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STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Since independence Tunisia has successfully managed an ambitious development strategy with strong results. The overall economy has sustained an average growth rate of five percent over the past 20 years, with a steady increase in per capita income and social indicators. Access to basic socio-economic services such as water, electricity, and sanitation is widely available and a broad social protection system is in place. Tunisia is also recognized regionally as a leader in education and on gender issues. However, Tunisia still faces the development challenges of high unemployment, particularly for the young and educated, and the need to boost economic growth to increase productivity and competitiveness in the global market. These challenges are the focus of Tunisia’s Five Year Development Plan (2010-2014) which aims to generate employment by transforming the economy to one which is higher value-added and knowledge-based to consolidate its progress to date.

2. The agriculture sector plays an important role in Tunisia’s economy, contributing in 2009 about 10 percent to the country’s GDP and employing about 16 percent of the total labor force. Cereals and olives dominate agricultural production; livestock production, mostly by small farmers, contributes an important share. However, growth in the agricultural sector has not kept pace with the overall economy and averages about 2.8 percent annually. The rural population, as a percentage of total population, has declined from 45 percent (1986) to 35 percent (2001), and although rural poverty is relatively low (about 8 percent) regionally, it is twice that of the national level of 3.8 percent (2005). Among the measures taken by the Government to combat and reduce poverty nationally, public investments in infrastructure (roads, transport, and communications) and in human capital have contributed to reducing poverty (about 60 percent of Tunisia’s budget is allocated to the social sectors), and rural roads have been instrumental in connecting the rural poor to needed services and markets.

3. Tunisia’s Mediterranean climate is characterized by hot dry summers and cool moist winters that limit the growing period; precipitation is irregular and the rainfall varies considerably from the North (over 1,000 mm) to the South (less than 100 mm). Rainfed agriculture is dominant. Arable land is estimated at 5.4 million ha, about one-third of the national territory, while forests and grazing areas comprise another third. The decrease in the average size of landholdings over the years was due to a subdivision of properties through inheritance. This phenomena is more pronounced with small holdings (less than 5 ha) where the total has surpassed 133,000 units in the early sixties, to 251,000 in 1994, and to 281,000 currently.1

4. In terms of environmental conservation and water management in the sector, Tunisia has been a pioneer among developing countries since the 1980s. It has achieved impressive results in water conservation in the agriculture sector and has increased water use efficiency to the second highest in the region. However, despite decades of Government efforts to protect natural resources, over-exploitation and inadequate land management have led to significant resource degradation. Erosion, caused mainly by water in the North and Center, and wind in the

1 On-farm household survey 2004-2005. 1

Center and South, results in the loss of an estimated 13,000-23,000 hectares of topsoil per year. Water resources in all three regions, but especially in the Center and South, are at risk from salinity, which further exacerbates the losses. Autumn rains, in particular, because of their intensity, contribute significantly to soil erosion in the absence of vegetative cover which might otherwise limit water runoff.

5. The agriculture sector also remains vulnerable to climate change. With climate change, it is predicted that the level of rainfall will fall by 10 percent by the year 2030, increasing the risks of droughts and floods. With agriculture being the major consumer of water combined with the increase in demand for water use associated with economic growth, the Government is faced with the urgent need to increase water productivity while preserving fertile arable land (currently, it is estimated that about 47 percent of arable land is eroded). As an additional measure, the Government is also formulating a national strategy to expand the recycling of water through treated wastewater reuse.

B. Rationale for Bank involvement

6. The proposed Project is a follow-up operation to the Natural Resources Management Project (NRMP) which closed in June 2004 and which successfully introduced integrated methods to community-based local development in three targeted governorates (Jendouba, Kasserine and Medenine). The Project built the capacity of the Ministry of Agriculture, Water Resources, and Fisheries (MAWRF) for implementing this approach through its regional offices, the Regional Commissariats for Agricultural Development (RCAD). The NRMP’s Learning Implementation Completion Report (ICR) noted that the project’s objectives were met through improved natural resources management and improved local socio-economic conditions (improved soil and water conservation, small-scale irrigation, agroforestry, and pasture management, resulting in increased crop and livestock production). Demands for off-farm income-generating activities were higher than anticipated at the design stage. Under the NRMP, development planning and contracting through the involvement of local partners in the design and funding of local community Participatory Development Plans (PDPs) were instrumental in building capacity of local partners and stakeholders, community groups, and the RCADs concerned by the project. The combination of conservation with production activities gained the acceptance of the rural population for carrying them out. Complementary investments in the construction of rural feeder roads, water points, etc., for the beneficiaries added to these benefits.

7. Tunisia has maintained its dialogue with the Bank on rural development and natural resources management and has continued to involve the Bank in its rural operations in support of the national agricultural strategy. The Bank’s rural portfolio has supported the Government’s efforts in this area with such recent operations as the Northwest Mountainous Areas Project, and the Northwest Mountainous and Forested Areas Development (NWMFA) Project.

8. Based on the results and performance of the NRMP, the Tunisian Government has requested the Bank’s support in financing a follow-up operation or second phase in support of its national strategy on agriculture and sustainable management of natural resources, and economic growth and social stability. The follow-up operation will benefit from the lessons and achievements of the rural development projects mentioned above. In the second phase, the Government aims to deepen and mainstream into its institutions the integrated community-based

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development approach introduced under the NRMP. The operation would target the three governorates (Jendouba, Kasserine, and Medenine) of the NRMP, and reinforce the capacity of the RCADs in implementing this approach with their local communities and development partners. As in the NRMP, the governorates were selected for their different ecological zones, socio-economic levels, and political significance. In Jendouba, the Project will operate in the same Governorate as the NMFAD Project but will not overlap in the zones of intervention.

9. The Project will also benefit the follow-up operation to the NMFAD Project (the Fourth Northwest Development Project under preparation), and will collaborate with the ongoing Second Water Sector Investment Project (SWSIP) which emphasizes efficient national water resources management (public irrigation schemes, access to drinking water, and integrated water management), and the Northern Tunis Wastewater Discharge Project (to be approved before the end of FY10). The Project is earmarked in the Government’s Five-Year Development Plan (2010-2014) (FYDP), and the Government expects to maintain its commitment.

C. Higher level objectives to which the project contributes

10. The Project will contribute to the Government of Tunisia’s higher-level objectives and sector priorities by supporting activities to improve the living conditions of rural populations, protect the country’s land and water resources, and strengthen the rural economy’s resilience to climate change impacts. As such, it will be aligned with Tunisia’s FYDP which proposes a comprehensive development approach that guarantees sustainable growth and a harmonious balance among economic, social, and environmental priorities through the integration of environment into programs and rationalizing natural resources exploitation. It is also fully aligned with the recent Country Partnership Strategy’s2 (CPS) Strategic Objective 1 “Growth, Competiveness, and Employment” which supports agriculture and the rural population, and Strategic Objective 2 “Sustainable Development and Climate Change” which supports measures to strengthen management of natural resources and the impacts of climate change.

11. From the global environment perspective, the Project would contribute to the following programs: (a) MENARID3, a multi-focal and multi-agency program that adopts an integrated approach to natural resources management in the drylands to improve the economic and social well-being of targeted communities through the restoration and maintenance of key ecosystem functions; (b) the regional Mediterranean Strategic Action Program (SAP MED implemented by the United Nations Environment Program and World Bank); and (c) Tunisia’s National Action Plan (NAP; prepared in the context of SAP MED) which emphasizes priority actions needed to address land-based sources of marine pollution.

12. The Project would be eligible under three of the Global Environment Facility (GEF) Focal Areas: (a) international waters, (b) land degradation, and (c) strategic priority for adaptation, and is based on the principle that better management of natural resources will lead to improved soil fertility, agricultural productivity and groundwater recharge. Involvement of local communities and regional government institutions in such efforts will ensure their sustainability.

2 Country Partnership Strategy for the Republic of Tunisia for the Period FY10-13, November 13, 2009, World Bank, Maghreb Country Management Unit, Middle East and North Africa Region, Report No. 50223-TUN. 3 Integrated Natural Resources Management in the Middle East and the North Africa Region (MENARID) is a multi-agency program which is coordinated by IFAD and includes the World Bank, the AfDB, FAO, UNDP, UNEP, and UNIDO. 3

The Project will also provide opportunities for scaling-up successful interventions for integrated natural resources management, mainstreaming adaption to climate change, and piloting uses for treated wastewater on agricultural land, as well as contributing directly to land-based pollution reduction to the Mediterranean Sea. This would be carried out with GEF financing which has been approved and included in the GEF work program.

PROJECT DESCRIPTION

D. Lending instrument

13. The Project is a fully-blended operation, financed with two instruments, a Specific Investment Loan for US$36.1 million equivalent, and a GEF Grant of US$9.73 million, to be implemented over five years. The total project cost is estimated at US$67.66 million, with Government counterpart funding estimated at US$14.61 million, and contributions from beneficiaries estimated at US$7.22 million.

E. Program objective and Phases Not applicable.

F. Project development objective and key indicators

14. The Project Development Objective is to improve the living conditions of rural communities in three governorates in terms of access to basic infrastructure and services, sustainable increase in income, and improved natural resource management practices by fostering an integrated approach to community-based development.

15. The Global Environment Objective is to reduce the threat of land degradation and climate change to vulnerable agricultural production systems in the target areas while developing options to address land-based pollution affecting the Mediterranean Sea.

16. The Project will assist the RCADs and local development institutions with mainstreaming the Integrated Participatory Approach (IPA) to community-based, development planning and investments at the local level. The RCADs and the regional and local development partners would be supported with investments and activities which will reinforce their capacity to plan and implement rural development programs through Participatory Development Plans (PDPs) and Annual Contracts (AC). This would be carried out over the project implementation period in 72, and eventually other, rural Imadas (administrative sectors)4 of the three governorates. The global environment benefits are expected to be generated from the international water, land degradation, and biodiversity focal areas. Climate change adaptation financing will help Tunisia increase its resilience to negative climate change impacts.

4 The country is divided into 24 governorates, each governorate is divided into delegations which in turn is divided into administrative sectors also called “Imada” which represent the smallest administrative unit. On average there are eight sectors or “Imada” per delegation. 4

17. The Project’s key performance indicators for monitoring and evaluation are:

1. Improved access to basic infrastructure and quality of support services (% of rural Imadas targeted); 2. Income-Generating Activities (IGA) introduced generate positive income flow for communities (% of IGAs); 3. The IPA is adopted by development partners in local development planning (% of rural Imadas with PDPs implemented); and 4. Percentage of ACs that include investments in sustainable land management measures, including climate change adaptation measures.

G. Project components

18. The Project has three components: (a) support to PDP investments, (b) support to the development of treated wastewater use on agricultural land, and (c) institutional strengthening and awareness raising. Costs below are indicative and include contingencies.

Component 1 – Support to Participatory Development Plan (PDP) Investments - (Total Cost US$54.92 million, IBRD US$29.87 million, GEF US$6.16million).

19. This component will contribute to the Project Development Objective by supporting the financing of investments within the PDPs framework which reflect the priority needs of local communities in the project target areas. Funding would be provided for the following sub- component activities:

(a) Improving water access and water management through the construction and rehabilitation of water harvesting points (bore holes, building and deepening of wells, water tanks for both drinking and irrigation), the establishment and rehabilitation of public and private irrigated areas which are supplied by bore holes, hill lakes and wells, and the construction of drinking water supply systems.

(b) Construction and rehabilitation of rural feeder roads.

(c) Development of sustainable agricultural production systems through agricultural advice and support services, improvements of agricultural, pastoral, and sylvo- pastoral production on a sustainable basis in order to increase farmers’ incomes through climate-resilient farming practices, diversification of rural economic activities, and soil and water conservation practices. Funding would be provided for:

(i) activities which would assist farmers in exploiting better means of production, through the provision of agricultural services, support for tree crop development, livestock development, and land consolidation;

(ii) pastoral, sylvo-pastoral, and forested areas improvements in support of cattle rearing and increasing livestock productivity (creation of permanent

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pastures, plantation of cactus, improving rough grazing land with deferred grazing, and reseeding and forestry development);

(iii) the promotion of off-farm, income-generating activities, e.g., handicrafts and beekeeping, in particular activities which target women and women’s associations, young graduates, and landless farmers as beneficiaries; and

(iv) soil and water conservation measures to arrest and - where feasible - reduce or reverse degradation, by controlling land erosion and increasing water infiltration. Funding would be provided for a variety of soil and water conservation measures on private and public lands. On private lands, investments will focus on gully control, soil stabilization and prevention of sand intrusion on agricultural lands. On public and collective lands investments will support increases in groundwater recharge and water infiltration including: (a) soil and water conservation works on private agricultural lands as well as on state and collective lands in line with priorities identified in PDPs, and (b) enhanced groundwater recharge, through structural works and measures that increase water infiltration.

The GEF grant would fund the : (a) exploitation of non-wood forestry products; (b) application of water and land conservation techniques (water-saving olive tree plantation techniques, livestock food production made of olive residue); (c) organic and climate resilient farming (composting and greenhouse crops); (d) related training including study tours to other areas that have good practices of Sustainable Land Management (SLM) techniques; and (e) activities which would prevent further land degradation as farming intensifies and expands into marginal and vulnerable areas and to support structural soil and water conservation works financed under the Project.

20. Component 2 – Support to the Development of Treated Wastewater Use for Agriculture (Total Cost US$2.14 million, GEF US$2.05 million). The objective of this component is to support the National Program for Wastewater Reuse through the transfer of treated wastewater from the Greater Tunis area towards the interior of the country (south of the Tunisian Dorsal) where demand for water is high. In these areas demand for water is high and treated wastewater will help to increase yields on agricultural land, reduce fluctuations in agricultural production, and enhance adaptation to climate variability and change. GEF funding would support the incremental efforts on wastewater reuse which would directly reduce land-based pollution to the Mediterranean Sea. This includes activities for exploring options for wastewater reuse, mainly: (i) a feasibility study on the infrastructure for the transfer of treated wastewater from the Greater Tunis area, (ii) two pilot-operations (in Kasserine and Medenine) on maximizing the use of treated wastewater for agriculture, and (iii) developing models for the use of this water in other locations as well for communicating to farmers adaptation techniques to climate change.

21. Component 3 - Institutional Strengthening and Awareness Raising (Total Cost US$10.51 million, IBRD US$6.14 million, GEF US$1.52 million). The objective of this component is to support the mainstreaming of the IPA in rural development in the three governorates of Jendouba, Kasserine, and Medenine through institutional strengthening and

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capacity building of target groups involved in project implementation. The capacity building and institutional strengthening will be provided to Agricultural Development Groups (ADGs) and development partners (NGOs, civil society, micro-credit institutions, representatives of other Ministries) at the local level, RCADs at the regional level, and the Ministry of Environment and Sustainable Development (MESD) staff, MAWRF staff and the Central Coordination Unit (CCU) at the national levels. The component will also support the implementation of a monitoring and evaluation (M&E) system for project activities and for safeguards, and communication and sensitization on sustainable land management, and environmental issues. GEF funding will finance communication and awareness raising on environmental issues designed to sensitize stakeholders to SLM, wastewater reuse, adaptation to climate change, and sustainable management of natural resources in the context of NRMP2. GEF funding will also support environmental M&E associated with the MENARID program which supports a National Environmental Monitoring and Evaluation System, improved knowledge management, and provision of logistical support to leaders of rural development groups to enhance their participation in these efforts.

H. Lessons learned and reflected in the project design

22. The design of this operation reflects lessons learned from the NRMP and other similar operations in Tunisia. The main lessons learned are:

 The IPA is currently a best practice in Tunisia. Investments implemented with the IPA have yielded better economic results than those implemented using traditional methods. The results can be further enhanced, and farmers could benefit even more from such investments if quality agricultural services are provided and combined with appropriate financial resources.  Institutional sustainability is important for achieving sustainability of outcomes. This implies that the IPA should be mainstreamed within the RCAD. The process will require a long-term effort. During the early phase, the staff would be trained to work in multidisciplinary teams. In this way, the Project could reach about half of the rural Imadas with PDPs and ACs.  Enlarging the main planning process from clusters of villages (douars) to the Imada level would be beneficial because: (a) a minimum critical mass would allow significant time savings during the preparation of the PDPs and annual ACs, and generate synergy during their implementation, and (b) the development committees created at the Imada level were interlocutors who gained acceptance of the local authorities; this facilitated their transformation into Agricultural Development Groups (ADGs).  ADGs are private, socio-professional organizations, with legal status which enables them to represent their members effectively and take charge of their development priorities. However, they will require considerable capacity building.  Within the decentralization framework, the Government has established Local Development Councils (LDCs) at the Delegation level, and Regional Councils (RCs) at the governorate level. Their roles in promoting local development are continuously being strengthened; thus, their involvement in local planning is imperative. Within the framework of the IPA mainstreaming, the responsibility for submitting PDPs and

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ACs to the LDCs and RCs should be entrusted to the ADGs to allow elected local officials to review and approve them.  The results of income-generating activities (IGA) in agricultural projects have generally been lower than expected for two main reasons: (i) the IGAs were dispersed and did not generate sufficient income to support a family and, as a result, the beneficiaries were forced to maintain other work and neglect their IGAs, and (ii) the number of similar IGAs in a region was too small to form a critical mass. In order to create an interest group, a minimum of ten participants is needed, with similar work and interests to ensure group cohesion profitable ventures.  The RCADs’ responsibilities are being enlarged to take charge of local planning in rural Imadas, and address development problems in their territories. Although for all technical aspects the RCADs can rely on their various technical services (arrondissements) and other regional directorates they must also take on new tasks involving local promotion and planning, programming, budgeting, and monitoring and evaluation of outcomes depending on the contents and requirements of the ACs. These newer tasks will require sufficient resources (personnel and equipment) and training for existing and new staff.  In general, the monitoring and evaluation (M&E) systems implemented within a project framework have rarely provided satisfactory results since they are often established too late or did not fit the reporting requirements of the RCADs; there was little incentive for their maintenance. Therefore, if the M&E system established is to be sustainable it must first respond to the needs of the RCADs, before those of the donors. The needs of other users such as the governorates, other regional directorates, the RCs, LDCs, ADGs, etc., should also be taken into account. The M&E system should be established at the beginning of a project, the system developers should train the personnel using the data. Data input would be carried out by the operators of the data base (RCAD, CCU, and DEQL).

I. Alternatives considered and reasons for rejection

23. Stand-alone IBRD operation. The Tunisian Government initially requested financing for a follow-up operation to the NRMP to consolidate the successful lessons and experiences, continue with the natural resources management focus, but expand activities into new geographical areas within the same governorates of Jendouba, Kasserine, and Medenine, and primarily, mainstream the IPA into the RCADs. This option was not selected since the Government made a separate request later for a GEF Grant.

24. Fully-blended IBRD operation with GEF Grant on land degradation. The Government later requested a stand-alone GEF grant to deal with desertification. Following discussions with the Bank’s preparation team, it was decided that combining the grant with the loan would present a more attractive financial package for the country than a stand-alone IBRD operation. The GEF would fund incremental activities for sustainable natural resources management, complement the Project’s investments, and reduce the impact of soil erosion and climate change risk.

25. Capitalizing on the experience gained from the North-West Mountainous and Forested Areas (NWMFA) Project. In Jendouba where the proposed Project intervenes in the same governorate as the NWMFA Project, the option of entrusting the locally-based Office of Sylvo- 8

pastoral Development in the North-West (OSPDNW) (the implementing agency of the NWMFA Project) with full responsibility for local promotion and planning activities was rejected because its staff is already fully occupied in current development programs and with preparing a future program. In addition, this would have defeated the Government’s objective of mainstreaming the IPA process into its administrative institutions, beginning with the three RCADs of Jendouba, Kasserine, and Medenine under the NRMP2.

IMPLEMENTATION

J. Partnership arrangements (if applicable)

26. Not Applicable.

K. Institutional and implementation arrangements

27. The NRMP2 will follow the same institutional arrangements as the NRMP and will build on it to incorporate the GEF components. The MAWRF will be responsible for the Project’s implementation. The National Coordination Committee will be chaired by the Minister of MAWRF and have members from the MAWRF, the MESD, and other concerned ministries. It will be supported by the Central Coordination Unit (CCU) and staffed with three qualified professionals: a Project Coordinator and two assistants (one on planning, programming and procurement, and another on administration, financial reporting, and monitoring and evaluation). The CCU is established within the Directorate General of Financing, Investments, and Professional Organizations (DFIPO). The multi-project M&E system established in the three RCADs will be centralized in the CCU. The General Directorate of Environment and Quality of Life (DEQL) at the MESD, along with the National Sanitation Utility (NSU) will be responsible for the implementation of the study on the transfer of treated wastewater. The DEQL will be responsible for the sub-component on communication and environmental awareness, and for related training.

28. At the regional level, the multi-sector, planning committee in each Regional Council (RC) ensures the coordination of activities at the governorate level. Generally, the PDPs and ACs are discussed first at the delegation level in the consultative Local Development Council (LDC) before being presented for validation to the RC of each governorate. This enables various activities to be coordinated at the regional and local levels as well as between different development stakeholders. The councils will facilitate the mobilization of partners and financing for the implementation of the ACs. Within each RCAD, periodic meetings between the Commissioner, Division Heads, and Heads of technical services ensure proper coordination of activities, and present an opportunity to take stock of the PDP and AP implementation as well as the IPA mainstreaming progress.

29. The IPA mainstreaming into the three RCADs implies that their structure, which was conceived for sector-specific work, must adapt to the multi-disciplinary nature of the local planning framework. Although, at this stage, no changes to their structure is planned, they will receive assistance with any internal reorganization to be able to work with the population on a territorial basis. The Division for Studies and Agricultural Development (DSAD), as the central structure for implementing the Project, will be strengthened for that purpose with the creation of

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three units: (a) territorial planning and promotion; (b) programming and budgeting; and (c) monitoring and assessment.

30. The DSAD -- which might eventually evolve into permanent services (arrondissements) units of the RCADs -- should process not only development activities within the framework of the PDPs, but also those which would be carried out in rural Imadas not yet covered by PDPs and ACs. The units should be supplemented with teams of animators composed of three persons, with at least one woman. These teams5 will ensure, in close collaboration with the relevant subject matter specialists, the preparation and implementation of PDPs and ACs, and the promotion of agricultural and non-agricultural IGAs.

L. Monitoring and evaluation of outcomes/results

31. The CCU within the DFIPO will have the responsibility for M&E of the Project. Data will be gathered and handled by the three RCADs and then sent to the CCU as well as to the MESD (DEQL and NSU). The computer M&E system will be implemented in the first year of the Project. The consulting firm selected will be responsible for developing the system, designing the data base, training personnel, and ensuring technical assistance over the initial period. Data input will be carried out by the operators of the data base (CCU, the RCADs, the DEQL and the NSU). The M&E system will facilitate the implementation and coordination of Project activities at the local, regional, and national levels and ensure better management in order to achieve Project objectives. The preparation of the PDPs will lead to a baseline study for the various Imadas involved and, at the end of each year, the results of ACs completed will be assessed jointly by the communities with the technicians involved. The results will be inputted into the M&E system and consolidated on a yearly basis at the regional and national levels to provide an initial assessment of outcomes.

5 Three teams are planned for Jendouba and Kasserine and two for Médenine.

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M. Sustainability

32. The NRMP2 is listed in the Government of Tunisia’s FYDP, an indication of Government interest in and commitment to the Project. The IPA is also being used by all rural development projects in the country, hence the strong interest in mainstreaming the approach to Government institutions. Sustainability will also depend on: (a) the level of satisfaction of the local communities with project activities, (b) the level of success in mainstreaming the approach into Government institutions such as the RCADs, and (c) the level of responsibility assumed by the newly created ADGs in representing their communities and taking charge of the development problems. If this is successful, the goal of the project is to have the ADGs eventually take over the promotion role with local communities that the RCADs are fulfilling under the Project. The long-term perspective of building capacity of Government institutions at the regional level and of communities at the local levels will also improve prospects for sustainability of the IPA approach. It is also more cost effective for the Government in the long run than maintaining project implementation units.

N. Critical risks and possible controversial aspects

33. The main risks that could impede the achievement of the project’s development objectives and the success of its main components are summarized in the table below:

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Rating Mitigating Measure Residual Risk Risk To Project Development Objective RCADs and regional partners H Approach was successfully tested on a M unwilling to participate or limited basis under the NRMP. Key uncomfortable with altering their project partners of all governorates were work habits or conditions in the consulted and actively participated in transition from a sectoral approach to current project preparation. They the multi-disciplinary approach indicated a strong interest in collaborating required for the IPA. in its implementation. Governors have pledged their support and willingness to facilitate this collaboration. Government does not provide M Level of political commitment to the L sufficient and timely resources for the project’s objectives is high. The budget public goods aspects of services for the project has been earmarked in the provided by the RCADs and regional Government’s Five-year Development partners. Plan (2010-20140). Government falters on its M The Government has decided to implement L commitment to the mainstreaming of the IPA in a growing number of the IPA agenda. governorates and sees the NRMP2 as an opportunity to demonstrate how this approach can be mainstreamed, whatever the source of financing. The Governors have indicated strong interest for this type of local planning and may intervene and show their support for such financing. To Global Environment Objective Initiatives, techniques and practices M Proposed measures and options on climate L introduced related to land change adaptation, wastewater reuse, land degradation, water conservation, and rehabilitation, and diversification of the options for water pollution reduction rural economy all aim at reducing these are inappropriate for country climatic negative impacts. New techniques conditions. proposed are linked to applied research programs. To Project Outputs Insufficient demand from M - Communication and awareness raising, L beneficiaries/communities for project demonstrations, agricultural extension activities to generate PDPs and ACs services, technical training and assistance, for investments, IGAs, adoption of logistics, and financial aid in terms of sustainable land and water agricultural credit, will be provided to conservation initiatives, etc.; communities to support sustainable natural beneficiaries/communities are resources management, particularly for unwilling to try unfamiliar land and water, income diversification approaches. activities, and to build capacity in community associations for empowerment in local decision making and planning.

- Pilots, e.g., for treated wastewater reuse, will be used to demonstrate potential and experience. Feasibility studies and

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communication strategy will address options and concerns of farmers.

- Governmental financial aid incentives available for co-financing investments; various kinds of initiatives adopted by the Project are designed to encourage farmers to participate in IGAs. Monitoring and evaluation with this M Training, including GEF-related activities L CDD and GEF project may be at an early stage of project implementation difficult as the baseline at both RCADs and sub-regional levels. data/information needs to be Using available M&E facilities created by confirmed/collected for some the NRMP and PISEAU2, if applicable. indicators at the beginning of project implementation. H M Financial management risk due to the - Roles and responsibilities of key persons project’s institutional arrangements will be elaborated in the project operational and organizational structure involving procedures manual being drafted; financial three regions, number of transactions and disbursements procedures will be and agencies involved, presents detailed. coordination and information flow - Use of a central and regional financial challenges. This may translate into reporting system. delays in financial reporting. - Technical directorates will be involved in supplying needed information. - Supervision missions will follow closely reporting progress and quality beginning at effectiveness. Overall Risk M H = High M = Medium L = low.

O. Loan conditions and covenants

34. Conditions of Negotiations. The following actions to be taken for negotiations were met, as follows: (a) the official nomination of the Project Coordinator for the project to head the CCU team at the DFIPO; (b) the official nomination of the regional coordinators for the project in each of the RCADs; (c) the official nomination of the representative from the Ministry of Environment responsible for the project; (d) a draft procurement plan for the first 18 months of the project implementation period is prepared; (e) a draft implementation plan for the project is prepared; (f) a draft Project Operational Procedures Manual is prepared.

35. Conditions of Effectiveness. The actions to be completed before effectiveness are: (a) adoption of the POPM; and (b) the effectiveness of the GEF Grant Agreement.

36. The special provisions for NCB are detailed in Annex 8 “Procurement Capacity Assessment” section.

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37. The safeguards covenants applicable to the Project reflect findings and conclusions of the SDR prepared under OP 4.00 for the purpose of the Project

APPRAISAL SUMMARY

P. Economic and financial analyses

38. The Economic Rate of Return (ERR) is estimated at 16 percent over 20 years and the sensitivity analysis indicates that the rate is slightly more sensitive to declines in profits than to cost overruns (comparable in magnitude). The relatively high ERR is explained mainly by three factors: (a) the introduction of substantially improved agricultural technologies/practices through the provision of significantly strengthened advisory services to farmers; (b) consequently, considerable increases in high value added crops, essentially for horticultural and irrigated tree crops; and (c) the establishment of improved rural infrastructures resulting in a more efficient marketing of agricultural produce. The rate is all the more satisfying because non-quantified benefits such as those discussed below are not included in the flows.

39. Financial profit margins are significant and basically driven by improvements in the high value-added cropping patterns promoted through the project. It is recommended that the technical-economic reference guides (référentiels) produced under the project and used by the advisory services, include calculations of profitability thresholds so as to ensure maximum margins whenever possible. Moreover, the financial analysis of two typical IGAs (lamb fattening and carpet making) show attractive benefits for beneficiaries.

40. Some other benefits are very difficult to quantify although they could be as important. First, improvements in soil/water conservation will reduce erosion as well as improve soil fertility and consequently increase horticultural and fodder productions. Second, investments in rural infrastructures, mainly roads and potable water supply, will improve the communities’ living conditions. In particular, more accessible rural roads will facilitate inputs supply and the marketing of agricultural produce. Finally, a substantial number of temporary and permanent jobs will be created following increases in agricultural productions but also because of the civil works carried out under the project.

Q. Technical

41. The technical solutions adopted by the project have been demonstrated by results achieved under the NRMP as well as other projects financed by the Bank, including the Water Sector Investment Project. Reviews of previous experience indicate that the technical solutions adopted under the predecessor project were appropriate, as was the quality of implementation. In addition, lessons learnt regarding the integrated approach, the timing and establishment of an M&E system, and gaps in capacity building at various levels (national, regional and local), have been incorporated into the design of this follow-up operation.

42. Estimates of project costs, including contingencies, unit prices, and quantities are based on relevant updated data from the previous project. Technical standards of project activities, particularly those for which community demand is high, will be ensured through the national, technical engineers of the RCAD of each governorate. The RCAD engineers and those of

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regional partners have the necessary qualifications and experience to implement the Project’s technical proposals and activities. These proposals are detailed in the annexes to the Borrower’s preparation report (available in documents sent to files). In addition, training programs and technical assistance will be offered to community association and leaders (ADGs) to build capacity to participate effectively in developing community development plans as well as to prepare, implement, and monitor projects at the community level. With GEF-funded activities, the grant will also offer investments and capacity building to raise the level of awareness to innovative techniques and practices for soil and water conservation as well as climate change resilience.

R. Fiduciary

43. Financial Management. An assessment of the financial management capacity of the MAWRF, the RCADs and the MESD was carried out during project preparation through meetings with MAWRF and MESD representatives and through field visits of two RCADs.

44. Given the particular requirements of the project where most activities will be implemented at the local level, the work carried out consisted mainly of ensuring that the establishment of proper procedures and criteria, upstream of expenditures, will lead to efficient financial management downstream, and that the reporting and control mechanisms a posteriori will ensure that project funds are used for the purposes intended.

45. The assessment confirms that the Project will be implemented using the national system in Tunisia regulated by the current budgetary laws in place, and will depend on the existing capacity and human resources available in the implementing units responsible for project execution. Expenses under the project fall under the budgets allocated for the MAWRF, MESD, and NSU; however, the existing national budgetary and accounting systems do not allow interim financial reports to be extracted for project management. Therefore, an independent financial reporting system will be established to ensure close monitoring of expenses and payments under the project. Such a system would be integrated into the management information and M&E system (SESAME) to be installed by the MAWRF for managing its projects.

46. The main risks identified by the assessment are: (a) coordination between the central and regional levels, (b) large number of transactions and executing agencies involved in the project, and (c) capacity for project management at the level of certain RCADs. Several measures have been put in place to mitigate these risks including: (i) installation of a financial reporting system at the central and regional levels, (ii) clear definition of the roles and responsibilities of each concerned party in the Project Operational Procedures Manual (POPM), and a description of the flow of information, (iii) capacity building of the units or teams responsible for financial management of the project at the central and regional levels, as well as of the relevant, qualified staff, with targeted training programs.

47. Based on the results of the assessment and the activities planned to reduce the risks and the weaknesses which have been identified, the residual risk for financial management generally is rated as Moderate.

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48. Procurement. The two executing agencies, DFIPO (Ministry of Agriculture, Water Resources, and Fisheries) and DEQL (Ministry of Environment and Sustainable Development) will be directly in charge of the selection for the largest contracts (Consulting services in this project). The DFIPO would coordinate and supervise the procurement and implementation carried out by the RCAD, except for those activities related to: (a) the procurement and implementation of the pre-feasibility study for the transfer of treated wastewater (the National Sanitation Utility (NSU) would be technically responsible) and (b) the environmental communication and awareness raising sub-component – which would be coordinated by the DEQL. Due to the specific nature of the project, the three regional RCADs locally representing MAWRF will, however, implement all the procurement activities planned in the field which would include a large number of small contracts and would be responsible for their procurement management and, reporting to DFIPO; DFIPO would update the procurement plan and submit it on a regular basis to the Bank for review and no objection. Initial training and technical assistance, implementation of procurement filing and monitoring systems would therefore need to happen early in the project implementation period, given the large number of contracts expected.

49. Procurement for the proposed project will be undertaken in accordance with the May 2004, modified in October 2006 version of the Guidelines. Procurement of Goods and Works should be carried out using the Bank’s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) and National SBD agreed with or satisfactory to the Bank for all National Competitive Bidding (NCB).

50. Selection of Consultants would be undertaken in accordance with the May 2004, modified in October 2006 version of the Guidelines. Single source selection (SSS) may be used with Bank’s no objection to contract some specialized institutions and research or training centers (Annex 8) with reference to the relevant paragraphs of the guidelines.

51. According to the capacity assessment, the executing agencies would have the capacity to carry out and manage the procurement under this project provided that the actions recommended in the Action Plan (see Annex 8) are taken before effectiveness. This does not apply to the initial Procurement Plan which should be provided before financing. The procurement risk has been rated as Moderate.

S. Social

52. The first phase of the Natural Resource Management Project (NRMP) constituted a pilot phase to test the implementation of the Integrated Participatory Approach (IPA) likely to be scaled up to the national level. The NRMP2 would consolidate the lessons of the NRMP, while seeking to launch the scaling up process of mainstreaming of a partnership approach for participatory and integrated development.

53. Seventy-two Imadas will take part and benefit from the NRMP2 planned activities. The project will seek to improve living conditions and increase revenues of rural communities, including youth and women, and enable sustainable natural resources management and institutional capacity building. The project will seek to benefit, low-income small farmers, women, and youth, as well as poor households impacted by an important rural migration. In

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these areas, the agricultural and forest activities rarely allow full-time employment or sustainable and long term sources of incomes. Farmers are confronted with limited investment opportunities, limited growth and diversification of cultures as well as limited ability to build capacity and benefit from local know-how. Strong community organizations are rare. Women, youth, and farmers have limited or no access to credit and do not have strong micro- entrepreneurial knowledge.

54. Considerable attention has been given to community voice and participation in the preparation of the Project. A participatory social assessment was conducted in the project areas through semi-structured interviews, by targeting a representative sample of project zones and referring to the NRMP final evaluation typology to ensure wide coverage of issues and stakeholders. Discussions were held with communities including local elected officials on their assessment of the NRMP, their interests, needs, motivations, and expectations as actors and potential beneficiaries of the NRMP2.

55. The social assessment focused on lessons learned from using an IPA and on aspects to take into account in the NRMP2 in order to consolidate socio-institutional and socio-economic dynamics of community development. Findings of this preliminary diagnosis were shared through stakeholder workshops in all three governorates.

56. Community dynamism, involvement, and appropriation will be sought. The IPA and the implementation arrangements, in particular, at regional and local levels will seek to ensure such participatory and community oriented engagement and ownership. During pre-appraisal, a social analysis was undertaken. Its findings appear in Annex 10.

T. Environment

57. The Project is classified as a Category B; it is expected to generate positive local and global environmental impacts. The Project aims to improve the livelihoods of rural communities in the targeted project areas through sustainable management of land and water resources using an integrated approach to community-based investments. Major environmental benefits are expected to be generated from reduced land degradation and reduced vulnerability of agricultural production systems to climate variability, while developing options to address land-based pollution affecting the Mediterranean Sea through its wastewater reuse study and pilot. In order to improve the rural population’s revenues in the selected Imadas, the Project will use an integrated rural development approach at the community level. The proposed integrated participatory approach (IPA) will address both development and environment needs, while the sustainability of Tunisian rural development is being seriously challenged by water scarcity, land degradation, and climate change impacts.

58. The principal possible negative environmental impacts are as follows:

(a) in the sub-component for improving water access and management, concerns relate to potential soil and water salinity, lack of proper design of hill dams, water quality issues, over-exploitation of aquifers, and management of drainage water as well as health and environmental concerns resulting from the use of treated wastewater in irrigation; and

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(b) in the sub-component of sustainable agricultural production systems, the major environmental concerns are related to the unsustainable use of natural resources, overgrazing, soil degradation, and the use of treated wastewater in the agricultural crops. Screening and mitigation measures are described in Annex 10. U. Safeguard policies

59. Physical involuntary resettlement of populations is not foreseen. OP 4.12 is triggered to address any potential use of and/or access to private land. The privileged procedures will be voluntary cession, amicable acquisition and temporary occupation. However, land expropriation is not excluded given the public utility nature of the project. Accordingly, a resettlement policy framework (RPF) has been prepared by the counterparts and shared with relevant parties in a consultative workshop in country. Both French and English versions were disclosed on specific government websites on January 27, 2010 and February 5, 2010, and other relevant places in- country, including project governorate offices. These documents were disclosed at the World Bank InfoShop on February 16, 2010. An Arabic version of the RPF can be made available upon request.

60. The project is being implemented under OP 4.00 Piloting the Use of Borrower Systems to Address Environmental and Social Safeguards Issues in Bank-Supported Projects. It triggers the Environmental Assessment and Forests policies. The Bank conducted a Safeguard Diagnostic Review (SDR) to determine the equivalence and acceptability of the national systems for environmental impact assessment and forests and identify any gaps. The consultation on the draft SDR took place on November 23, 2009, and after revision, taking into account the outcomes of the consultation, the SDR was disclosed on February 16, 2010, for project appraisal purpose both on the World Bank InfoShop and in country. The potential environmental and forestry issues and measures to address them are described in the SDR and in the Framework Document on Environmental and Social Protection (FDESP) also known by its French equivalent as the Document Cadre de Protection Environnementale et Sociale (DCPES) which was prepared by MAWRFP to address the gaps identified during the preparation and described in the SDR.

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Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [ ] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [ X ] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X ] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X] Projects on International Waterways (OP/BP 7.50) [ ] [X] Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank- [ X ] [ ] Supported Projects (OP/BP 4.00)

V. Policy Exceptions and Readiness

61. There are no policy exceptions.

* By supporting the proposed Project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 19

Annex 1: Country and Sector or Program Background REPUBLIC OF TUNISIA: Second Natural Resources Management Project

1. Tunisia’s population was estimated in 2007 at 10.2 million with an annual growth rate of one percent. The economy is fairly diversified with significant agricultural, mining, manufacturing, and tourism sectors. Real GDP growth, averaging almost five percent over the past decade, was projected to decline in 2009 because of an economic contraction, caused in large part by the ongoing international financial crisis and, in particular by Europe’s (Tunisia’s largest market) slowing import demand. However, the expected expansion of non-textile manufacturing, as well as strong growth in the services sector, should lessen somewhat this decline. The GNI per capita was estimated at about US$3,200 in 2007 which is substantially higher than the average US$2,794 in the MENA region for the same period.

2. The rural population has declined from 45 percent of the total population in 1986 to 34 percent in 2007. The agricultural sector now accounts for 10 percent of GDP (17 percent with agro-industries), a share that has decreased continuously over the last 20 years, but that employs more than a quarter of the rural labor force. Agricultural growth, although still sizeable (4.5 percent in 2007), is considered to be noticeably below its potential for pro-poor growth. Poverty remains a rural phenomenon. The country’s overall poverty level has gradually declined from 4.2 percent in 2004 to 3.8 percent in 2007, but government data estimate that rural poverty is twice that of the national level6. However, poverty in the Tunisian context should be seen in terms of vulnerability and risk for poor farmers rather than absolute deprivation.

3. Arable lands are estimated at around five million hectares (ha), slightly less than one third of the national territory. Forests and grazing areas represent another third of the territory. Rainfed agriculture is confined to the northwest region with over 1.8 million hectares, whereas only some 400,000 hectares are irrigated (in various regions) with an efficiency rate on some small perimeters of only 40 percent. The bulk of the agricultural production is thus subject to rainfall uncertainty where it can vary from less than 100 mm in the south to more than 1,000 mm in the northwest, and fluctuate drastically from one year to the next.

4. Droughts are becoming more frequent and last for longer periods. In years where they occur, there is a shortfall in agricultural output with a corresponding one percent decline in overall economic growth. On the other hand, encroachment by crops and fires provoke substantial losses to forests and grazing areas each year. The rapidly growing demand for water, caused mainly by economic and population growth, means that the country is reaching the physical limits in terms of water collection and storage; there is a need to manage demand and bring it in balance with supply. Agriculture uses around 80 percent of the available water, although the share of potable water is projected to increase from 13 percent in 2010 to 18 percent in 2030.

5. As a result of all the preceding factors and considerations, it is currently estimated that about half of the country’s arable lands are eroded, 20 percent of the rangelands have disappeared, and 24 percent of the shallow aquifers are overexploited. The fragile natural

6 Poverty is considered to be for persons earning less than TD 400 (slightly more than US$300) per year.

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resources (water, soil and forests) badly need better management, particularly in the form of integrated participatory planning with the populations. The challenge is further highlighted by the current consensus amongst experts that Tunisia’s climate will become warmer and drier over the coming decades, with precipitation possibly declining 10 percent by 2030.

6. The Government has in place various initiatives for dealing with threats to the natural resource base: (a) a soil/water conservation strategy which covers the period 2002-2011 and includes the construction of hill lakes as well as the carrying out of conservation works in watersheds and groundwater recharge operations, and (b) the implementation of a ten-year water sector support program (2001-2011) aimed essentially at improving integrated water management and conservation.

7. Tunisia also formulated in 2006 a national strategy for climate change, based on two pillars aimed at dealing with its adverse effects: (i) reduction of green house emissions, and (ii) adaptation to changes in the availability of biophysical resources. The Government’s FYDP includes, among the priorities in development planning: (i) a comprehensive development approach guaranteeing continuous and sustainable growth and a harmonious balance between economic, social and environmental priorities, and the rationalization of the exploitation of natural resources; and (ii) efforts which will focus on transforming the agricultural system and contribute to deepening trade, thereby facilitating the transformation of the economy as a whole.

8. The Government has also maintained a high level of public expenditures for environmental protection and natural resource management over the last decade, amounting to over 1 percent of GDP, which is the same as some European countries. Substantial progress has been made in this area where the annual cost of environmental degradation was estimated to cost around 2.1 percent of GDP in 2004. Since the 1980s, Tunisia has been a pioneer among developing countries in emphasizing environmental conservation and water resources management. However, important challenges remain, particularly in soil and water management, coastal protection, solid waste management, as well as in integrating long-term environmental impacts into sector development strategies and engaging public consultations on environmental investments.

9. The Government has requested Bank assistance for the purpose of supporting its strategies and initiatives in agricultural development and in sustainable management of natural resources. High priority is given to mainstreaming the IPA to rural development in three target governorates (Kasserine, Medenine, and Jendouba) and in using the regional government institutions to implement the project with communities. With regards to the NRMP2, the Government has allocated funds under the Government’s FYDP.

10. The proposed Project would be aligned with two of the three strategic objectives of the current Country Partnership Strategy (CPS), discussed at the Board in December 2009: Objective 1 - “Competitiveness and Employment” and Objective 2 - “Sustainable Development and Climate Change”.

11. The Bank is well-positioned to support the Government’s commitment to manage the consequences of climate change and to maintain the leadership position it has built in the region. The Bank’s broad experience in Tunisia, through its previous and on-going interventions on the

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environment, energy, agriculture and water sectors and our global knowledge of climate change issues, will enable it to ensure synergy across activities and projects, to strengthen environmental and natural resources management, and mobilize financial support for the country through various sources of funding. Under the proposed Project, greater use of country systems for environmental and other safeguards will also be implemented, making it the third7, Bank- financed project in Tunisia which will pilot the use of country systems.

Country Eligibility for GEF Co-financing

12. The Project is fully aligned with the Government’s FYDP. Following the guidance and recommendations of the National Commission on Sustainable Development, the Government has placed a priority on implementing initiatives aimed at mainstreaming actions to combat desertification and land degradation in the priorities of the FYDP. Focus has been on building capacity in participatory planning, integrated management of natural resources, and development of regional and local action plans to counter land degradation and desertification. Because the agricultural sector has a central role in the FYDP, making efforts to control land degradation and to optimize water use are key factors for achieving the country’s development targets. In this context, the Project will further support the objectives of the National Strategy for Adaptation to Climate Change in the Tunisian Agricultural Sector as part of the broader Tunisian Adaptation Policy Framework for Climate Change.

13. The Project also contributes to the FYDP’s objectives under the water resources and sanitation sectors, targeted on enhancing existing wastewater treatment capacity and improving the quality of treatment, improving protection of coastal areas, and expanding the use of non- conventional water, such as reuse of treated wastewater for irrigation. In this context, the Project will support the Government’s 2002 National Wastewater Reuse Policy by piloting the use of treated wastewater in agriculture and for aquifer recharge. As a result, the project will be contributing to the prevention of pollution of the Mediterranean Sea and support marine and coastal biodiversity conservation which are important, not only for global environmental goals, but also for the national fishing industry and the tourism sector. In the context of the regional SAP MED, Tunisia has prepared a National Action Plan (NAP), in which it identified point pollution sources affecting human health, coastal and marine ecosystems, biodiversity, and sustainability, and necessary actions to address pollution from land-based sources under SAP MED.

14. Tunisia is party to key international conventions including land degradation and desertification (UNCCD), climate change (UNFCCC), wetlands (Ramsar), and biodiversity (Convention for Biodiversity - CBD). The Project supports the objectives of Tunisia’s National Action Program (NAP), which is the core strategic framework for implementing the UNCCD at national level, and the Initial National Communication (INC) and Second National Communication (SNC) that reflect the country’s rising concerns with regard to climate change.

15. The participation of the Global Environment Facility (GEF) in this fully-blended operation will contribute further to the environmental agenda of the baseline project financed by

7 The other two projects are: the Sustainable Municipal Solid Waste Management Project, and the Second Water Sector Investment Project. 22

the IBRD. Incremental GEF funding will support key rural development sectors (water, environment, agriculture) and contribute to GEF-4 strategic priorities in the international waters, land degradation, and climate change focal areas. The Project aims to arrest or reduce the rate of land degradation, improving climate change adaptation and climate resilience of the productive landscape, reducing land-based coastal and marine pollution, determining the conditions for more effective water reuse for agriculture and aquifer recharge, and investing in capacity building and awareness activities that will enable rural land users to safeguard the productive capacities of cropland, rangeland and forest land. These activities will support the Government’s development objectives to ensure their sustainability.

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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Latest Supervision Sector Issue Project (ISR Ratings) (Bank-financial projects only) Implementation Development Progress (IP) Objective (DO) Bank-Financed Improving public irrigation scheme Second-Water Sector Investment S S management and water access through (PISEAU2) (P095847) (ongoing) stakeholders’ participation. Community-based forestry and natural Fourth Northwest Mountainous and resources management. Forested Areas Project (P119140) (under preparation) Treated wastewater use in agriculture, Improved Management Northers promoting recharge of over-exploited Tunis Treated Wastewater Discharge aquifers, and pollution reduction. Project (P118131). (under preparation) Climate change impact assessment on oak Addressing Climate Change Impacts S S forest; and develop a strategic framework in the Oak Forest Ecosystem for conservation of forests. (TF093089) (ongoing) Managing biodiversity degradation in the Gulf of Gabes Marine and Coastal S S Gulf of Gabes region. Resource Protection (TF54942) (ongoing) Integrated water resources management; Water Sector Investment Loan MS MS conservation of water resources and (PISEAU1) (Loan 7025) (closed) protection of the environment. Community-based forestry and natural North West Mountainous and S S resources management. Forested Areas Development Project (P072317) (closed July 2009) Upgrading public and private services to Agricultural Support Services S S agricultural producers, processors and (Loan 7063) (closed) exporters. Other development agencies Promote soil and water conservation. IFAD – Integrated Agricultural n.a. n.a. Development Project in the Governorate of Siliana – Phase 2 (ongoing) Land degradation, biodiversity losses in IFAD n.a. n.a. Tunisia’s northern ecosystems; protection of mountainous forest ecosystems. Water, soil, rangelands, forests AfD – Financement Cadre de n.a. n.a. conservation at the watershed level. Gestion des Bassins Versants (Watershed Management Framework) (ongoing)

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Natural resources management with AfDB - Integrated Agriculture n.a. n.a. strengthened infrastructures in Kasserine. Development Programme for Gabes, Gafsa and Kasserine. Soil and water conservation through the EU – Programme de Mise en Valeur n.a. n.a. construction of retention dams. en Petite Hydraulique autour des Barrage Collinaires (Improving Small Works on Hill Dams) (closed 2009) Improvement of rural livelihoods, and EU – Programme de Développement n.a. n.a. sustainable natural resources protection Rural Intégré et de Gestion des through participatory approach. Ressources Naturelles (Integrated Rural Development and Natural Resources Management) (closed 2009)

AfD: Agence Française de Développement. IFAD: International Fund for Agricultural Development. AfDB : African Development Bank. UNOPS: United Nations Office for Project Services. AFESD : Arab Fund for Economic and Social Development.

The Project would coordinate with the following ongoing Bank-financed projects in Tunisia which have direct linkages to its implementation:

Second Water Sector Investment Project (P095847) FY09. The linkages would include: (a) the M&E system used for water resources, (b) training programs on water resources which would target common beneficiaries and stakeholders of both projects, and (c) communication on treated wastewater use, lessons from the pilot operations.

Fourth Northwest Mountainous and Forested Areas Project (P119140) FY11. Potential collaboration and exchanges exist on the technical and methodological front, especially on land degradation, forest management, promotion of SLM techniques, and organic agriculture.

Improved Management Northern Tunis Treated Wastewater Discharge Project (P118131)FY10 (IBRD and GEF). The projects need to exchange information as both of them are expected to contribute to pollution reduction and water quality improvement in the Mediterranean Sea from different localities with different activities.

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Annex 3: Results Framework and Monitoring REPUBLIC OF TUNISIA: Second Natural Resources Management Project

1. Results Framework

PDO Project Outcome Indicators Use of Project Outcome Information Improve the living conditions of  Improved access to basic infrastructure To assess the effectiveness rural communities in three and quality of support services (% of of project design, governorates in terms of access to rural Imadas targeted). mechanisms, and activities basic infrastructure and services, in targeting the needs, increase in income, and improved  Income-generating activities introduced resources, and beneficiaries sustainable natural resource generate positive income flow for to make sound decisions for management practices by fostering communities (% of IGAs). the rural communities, an integrated approach to based on the IPA. community-based development.  IPA is adopted by development partners in local development planning (% of rural Imadas with PDP implemented).

GEO Reduce the threat of land  % of ACs that include investments in Assess the relevance and degradation and climate change to sustainable land management measures, replicability of sustainable vulnerable agricultural production including climate change adaptation land management and systems in the target areas while measures. climate change adaptation developing options to address land- approaches for scaling up based pollution affecting the nationally. Mediterranean Sea. Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Component 1: Support to PDPs Investments  No. of ACs implemented. Assess and monitor direct  % of communities’ needs articulated in investments and project 1.1 Improving Water Access and ACs met.8 outputs as a result of Management  Water storage capacity improved. effective PDP preparation.  Irrigation efficiency improved. Rural communities targeted have improved access to water.

1.2 Rural Feeder Roads See first KPI above, first bullet 1.3 Developing Sustainable Agricultural Production Systems  No. of farmers contracting with Assess and monitor quality advisory services. of agricultural services. Rural communities targeted have  Number of financially viable IGAs increased access to climate resilient, consistent with local development Assess operational progress sustainable and improved priorities (disaggregated by of community based pasture agricultural production systems. agricultural and non-agricultural /forest management. IGAs). Rural communities are able to  Representation of women and young Assess and monitor diversify income. graduates managing income-generating selection, implementation

8 Includes wells, boreholes, drinking water supply systems. 26

activities. and sustainability of  Number of new employment investments. opportunities generated by project activities.  % of all IGAs that include climate change adaptation techniques 1.4 Soil and Water Conservation Assess and identify  Increased area protected from erosion. successful soil and water Soil and water conservation conservation techniques technologies and/or approaches are  Reduction in soil loss in areas protected introduced for scaling-up introduced and adopted. from erosion. nationally.

Component 2: Support to Development of Treated  Feasibility study9 completed, and Assess and monitor direct Wastewater Use for Agriculture specifications identified for investments and project investments and implementation. outputs. Wastewater reuse options are identified for future investments and  % increase in volume of treated implementation. wastewater reuse in agriculture in Kasserine and Medenine. Pilot operations maximizing use of treated wastewater for agriculture are successfully applied in Kasserine and Medenine.

Component 3: Institutional Strengthening and Awareness  % of targeted Imadas with operational Assess and monitor progress Raising ADGs (technical directors, action plans in community participation implemented, adequate working and mobilization to identify Rural communities and their local equipment). gaps and training needs, to associations (ADGs) have increased strengthen the level of their capacity for planning and  Safeguards have been implemented in inclusion, community and implementing local investments. line with the FDESP. development partner involvement, and level of Increased participation of other  Data/information regularly updated into commitment at local development partners (other national M&E system. government, regional levels. ministries, civil society, LDAs) in the preparation of PDPs.  Performance reports and periodic reports on project activities and The capacity of the CRDAs and the indicators produced and disseminated CCU for managing the project on time. activities are improved.

9 Includes identification of areas susceptible to climate change. 27

2. Arrangements for results monitoring10

Target value Data Collection and Reporting Responsibility Frequency and Data Collection Outcome Indicators PDO Baseline Year 1 Year 2 Year 3 Year 4 Year 5 for reports Instruments Data Collection Project monitoring RCAD – M&E % of targeted rural Imadas targeted Annual Progress reports, beneficiary units, CCU, with improved access to basic 0 10% 20% 30% 50% 60% Report surveys, case studies, ADGs infrastructure and services.11 participatory M&E. Mid-term review RCAD – M&E % of IGAs introduced generating and final External economic and units, CCU, positive income flow for the 0 - - 30% 45% 60% evaluation financial assessment Consultant beneficiaries. reports. (consultant).

Project monitoring RCAD – M&E % of rural Imadas which have a PDP reports, beneficiary units, CCU, RC, validated by the Regional Council 0 5% 20% 35% 40% 45% Annual Progress surveys, case studies, LDC implemented through ACs. Report. participatory M&E. % of ACs that include investments in sustainable land management Annual Progress Mid-term review and RCAD – M&E 0 - - 10% - 30% measures, including climate change Report. final evaluation reports. Units; CCU adaptation measures.12 Intermediate Outcome Indicators per component Component 1: Support to PDP

Investments of PDPs

Mid-term review and RCAD – M&E Number of ACs implemented 0 8 40 56 64 72 Annual Progress final evaluation reports. Units; CCU Report.

10 Target values are indicative and may be revised during the course of implementation following development of community participatory development plans. 11 As measured by the number of basic infrastructure and services activities in the ACs that are financed under the project (from project and other development partner funding). 12 Total number (30%) of ACs targeted by the end of the project period is 240. This target would compare to SLM practices applied to an equivalent of about 242,512 ha in Year 5. 28

1.1 Improving Access to Water and

Water Management Annual Progress Project data base. DEQL; NSU;

Report. MESD; CCU 0 0 15 30 45 65 % of total ACs requested by communities implemented under the

Project Water storage capacity improved Annual Progress RCAD – M&E 0 6 000 12 000 17 000 22 000 24 000 Project data base. (m3) 13 Report. Units; CCU

Annual Progress RCAD – M&E Irrigation efficiency improved (ha)14 0 150 300 450 500 600 Project data base. Report. Units; CCU 1.2 Rural Feeder Roads (see KPI

above) 1.3 Developing Sustainable Agricultural Production Systems

No. farmers contracting with advisory Annual Progress Project data base; RCAD – M&E 0 1 500 4 000 7 500 10 000 14 000 services.15 Report. beneficiary assessment. units, CCU

Vulnerable beneficiaries organized into interest groups and manage: RCAD – M&E Annual Progress Project data base.  Agricultural IGAs : 0 700 1 500 3 000 5 000 6 400 units, CCU Report.  Non-agricultural IGAs : 0 50 80 120 140 150

IGAs which are managed by women Project data base; RCAD – M&E 16 0 0 75 250 1 000 1 800 Annual Progress and young graduates Report. beneficiary assessment. units, CCU

Number of small employment Annual Progress Project data base; RCAD – M&E contracts (tâcherons) generated by 0 40 200 400 500 700 Report. beneficiary assessment. units, CCU project activities. Mid-term and % of all IGAs that include climate RCAD – M&E 0 5% 8% 10% 12% 15% end of project Project data base. change adaptation techniques17 units, CCU reports

13 Estimated at 85% by Year 5 for: 200 private water tanks constructed and 50 collective water tanks rehabilitated with capacity of 100-150m3 each in governorates of Kasserine and Medenine. NRMP completed 366 tanks (85% of 431 tanks targeted). 14 Estimated for no. of ha of private irrigation perimeters rehabilitated in Kasserine (300 ha) and Medenine (300 ha) which use water saving equipment. 15 With a 7 teams of 4 agricultural advisers, it is estimated that about 14,000 persons could be trained, if ACs are prepared efficiently and farmers are organized into interest groups. 16 As % of IGAs created. 17 Includes such activities as application of water and land conservation techniques (water-saving olive tree plantation techniques, livestock food made of olive residue), organic and climate resilient farming (e.g., composting, greenhouse crops, etc.), and ecotourism activities (e.g., organic/locally produced food products such as honey, olive oil, butter, or carpet weavings etc.). 29

1.4 Soil and Water Conservation Annual Progress RCAD – M&E 207 413 211 613 220 013 232 613 249 413 270 413 Report. Project data base. Increased area protected from erosion Units; CCU

(ha) Reduction in soil loss in areas Mid-term and Based methodology RCAD – M&E protected from erosion (% decrease in Baseline - - 10 - 20 end of project such as that developed Units; CCU tons/ha) reports under LADA project18

Component 2: Support to Treated

Wastewater Reuse in Agriculture

Wastewater reuse options and 0 - Study Options Annual Progress Feasibility Study DEQL; NSU; specifications identified for - - completed identified Report. Report. MESD; CCU investments and implementation.

Increase in treated wastewater reuse 9% of Annual Progress Project data base; CCU; RCAD; in agriculture in Kasserine and govern- 0 0 0 10% 11% Report. beneficiary assessment. NSU Medenine (%).19 orate Component 3: Institutional Strengthening and Awareness Raising % of 72 targeted Imadas with operational ADGs (technical director, Annual Progress Mid-term review and RCAD – M&E action plan implemented, adequate 0 10% 20% 40% 55% 70% Report. final evaluation reports. Units; CCU working equipment).

Data/indicators regularly updated into Semi-annual Project supervision RCAD – M&E n/a X X X X X national M&E system. Reports. reports. Units; CCU RCAD – M&E Safeguards have been implemented in Semi-annual Mid-term review and n/a X X X X X Units; CCU; line with the FDESP Reports. final evaluation reports. GDESD Performance reports and periodic Mid-term Review; reports on project activities and Annual Progress RCAD – M&E n/a X X X X X Implementation indicators produced and disseminated Report. Units; CCU Completion Report. on time.

18 Land Degradation Assessment in Drylands Project (LADA), implemented by the DPMCAL (DGACTA) within the MAWRF, and funded by GEF implemented by UNEP and FAO. 19 The pilots are located in the two governorates of Kasserine and Medenine have irrigated perimeters where treated wastewater is underutilized, and only 9% of the treated wastewater available in the governorate is used for agriculture. 30

Arrangements for Results Monitoring

1. Monitoring and evaluation (M&E) of the Project’s achievements and impacts will be carried out by the Central Coordination Unit (CCU) using the multi-project M&E system being set up at the DFIPO and piloted in the context of an ongoing watershed management project financed by the Agence Française de Développement (AfD). The Second Water Sector Investment Project co-financed by the Bank is also using this M&E system. The CCU will have one qualified professional in charge of the NRMP2’s M&E. At the regional level, the DSAD of each RCAD will have a unit responsible for M&E (see implementation arrangements in Annex 6). The output and impact indicators used for monitoring the Project are illustrated in the results framework; they cover technical as well as social and environmental aspects. All stakeholders in the Project will participate in the management of the M&E system, from the local to the national/central levels, including key members of the community associations (ADGs), the RCADs, governorate administration representatives, and the CCU. Key members will be able to access to the M&E system on a selective basis to obtain information and data that directly concern them. Specific responsibilities for each of the key players will also be detailed in an Annex to the NRMP2’s POPM.

2. Most of the data needed for the Project’s M&E will be derived from the Imada-based PDP documents which would contain output and impact indicators required for monitoring and evaluating implementation of the PDPs. The indicators will be incorporated into the M&E system and maintained by the ADGs and/or RCADs, depending on their nature. For horizontal activities outside of the PDPs (e.g., strengthening the RCADs and CCU), the relevant data will be entered by the benefiting entity; the ultimate validation of all data will be the responsibility of the CCU. The modalities and arrangements for data collection will be established at project start up by consultants. The baseline will be established on the basis of the information contained in the Project’s preparation report as well as the content of the PDP documents. In order to evaluate certain impact indicators (e.g., family incomes), field surveys will need to be carried out at fixed intervals (e.g., at mid-term review, and at project completion). Customized support and means for strengthening the institutional capacity will be made available to all participants in the M&E system through resources, technical support and training.

3. The M&E system under the NRMP2 will provide regional partners and community leaders with the necessary information for monitoring the project’s activities in the Imadas. This system is not additional to the RCADs’ existing administrative monitoring system but will complement and computerize the system to provide punctual information and data to enable regional offices to manage a complex development program effectively.

4. The M&E system will provide opportunities to engage beneficiaries and rural communities in data formulation, collection and analysis, as well as participating in its monitoring and evaluation. The rural population or community members will be assisted by RCAD technical staff and regional development partners in analyzing current needs and situations, highlighting the main constraints, identifying opportunities, and in selecting which development activities to select and fund within the context of PDPs. They will participate in submitting the PDPs to local officials for approval. Local beneficiaries and rural communities will also participate in the implementation of certain activities, in monitoring their progress,

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supervising their operation and in evaluating results of the ACs in order to draw lessons for subsequent operations.

5. The NRMP2 GEF activities form part of the umbrella MENARID program financed by the GEF, which seeks to harmonize approaches to land degradation, climate change adaptation, and conservation of biodiversity as well as improving the sharing and management of knowledge at the national level and in the Middle East and North Africa Region. In particular, the performance indicators will be developed in collaboration with the Support to Sustainable Land Management Project in the Governorate of Siliana which is also part of the MENARID program in Tunisia. This project seeks to reinforce the national, environmental M&E system, on land degradation. The indicators will be integrated in the data base to be developed by the Project and will feed into the M&E system of the Project. The measuring of reduction in soil loss will be carried out in collaboration with the Directorate of Planning, Management and Conservation of Agricultural Lands (DPMCAL) responsible for managing the national LADA program supported by the FAO and the UNEP.

Data Collection

6. Data from the National Statistical Institute will be used to assess the increase in rural income in the project target areas. The Institute’s statistical surveys are generally considered to be viable.

7. Other means of data collection and monitoring for the purpose of collaborating with and with relevance to the MENARID Program and the LADA Project are detailed further in the POPM.

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Annex 4: Detailed Project Description REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Background 1. The First Phase. The first Natural Resources Management Project (NRMP), which closed in 2004, was a pilot project which successfully tested the Integrated Participatory Approach (IPA) to sustainably manage natural resources and improve agricultural productivity through the greater involvement of the resources’ users (rural communities). The NRMP’s most notable accomplishment was in the institutional area where it demonstrated that the RCAD staff, representing the Ministry of Agriculture, Water Resources, and Fisheries (MAWRF) at the governorate level, were able to promote local integrated development through a multi-disciplinary, participatory approach targeting specific populations in degraded zones. The NRMP also helped to establish a network of local development committees which played a significant role in the participatory development process and a planning and programming system.

2. The Participatory Development Plans (PDPs), which were developed with local communities, were implemented through Annual Contracts (ACs). These became the reference points for the allocation and use of financial resources in the governorates. Other project achievements were the following : (a) the project activities were greatly appreciated by the local populations who contributed substantially to their implementation; (b) a multi- disciplinary approach helped to better integrate natural resources management into farming activities; and (c) the rehabilitation of small-scale irrigation schemes and water saving measures helped in motivating local farmers to participate in project activities; (d) increased development of agricultural land and intensification of agricultural production systems helped curb the rural exodus in some of the project areas, (e) local communities became less isolated because of feeder roads construction and rehabilitation works; and (f) employment was generated through the use of small contractors ("tâcherons") who delivered works of good quality and involved the development committees and the beneficiaries in monitoring progress.

3. The Second Phase. The Second Natural Resources Management Project (NRMP2) will build on the experience and achievements of the first phase to support a long-term national strategy on scaling up and mainstreaming the IPA into local development planning (including natural resources management and agricultural productivity gains). Under the NRMP2, the objective is to improve the living conditions of local communities in the three governorates of the first project, Jendouba, Kasserine, and Medenine, through better access to basic infrastructure and services, sustainable income increase, and improved natural resources management practices.

4. The NRMP2 will maintain similar component activities of the first project to allow for a consolidation of those older activities and as a basis for beginning new ones in the same governorate. However, the NRMP2 will add activities to be funded by the Global Environment Facility (GEF) which will support a national strategy on developing/promoting treated wastewater reuse in agriculture and enhance the overall environmental dimension of the project. GEF will place a stronger focus on adaptation to climate change and climate variability and on strengthening the environmental dimensions of the Project. The salient differences between the first and second phase are the following:

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(a) The PDP process will be carried out on a program rather than a project basis, with a longer time horizon covering the medium- to long-term; (b) the RCADs will work with larger groupings of community associations at the Imada level to achieve a critical mass; (c) the development partners are brought in earlier in the participatory development planning process; (d) no project implementation units in order to mainstream of the IPA at the level of the RCADs; and (e) cofinancing by GEF for specific activities on land degradation, treated wastewater reuse for agriculture, soil and water conservation improvements, climate change.

The table below summarizes the main differences between the two phases:

Theme NRMP (first phase) NRMP2 (second phase

Approach  Project approach.  Program approach.  PDPs designed by RCADs subject  PDPs developed in partnership with matter specialists and validated by other institutions/organizations and the RCADs. validated by the Regional Council.  ACs are signed between the RCADs  ACs are signed between the ADGs and and the development committees. the local development council  Planning restricted to project  Planning horizon is medium to long- lifetime and financing. term and budgeting not limited by projects. Level of Socio-territorial unit (artificially Imada (administrative unit grouping with intervention delimited by the project). greater cohesion). Group Development committees (informal Evolution of development committees organization structures). into ADGs (independent, legal status, ensures legitimacy and representation for communities, private sector, financial autonomy). Development Parallel organizations interacting with Agricultural development objectives planning and different objectives, lack of integrated into local development partnerships coordination between organizations, planning ensuring sustainability. temporary project structures. Zones First phase NRMP zones Consolidation of first phase NRMP zones with additional administrative sectors determined by the Governorate. Project Project Implementation Units within RCAD staff. Implementation RCADs

Project Description

5. Project Area. The NRMP2 will intervene in the same project zones as the first project, each project area is representative of a major agro-ecological zones and socio-economic system: the humid and diversified North (Governorate of Jendouba), the dry agro-pastoral Center (Governorate of Kasserine), and the predominantly arid pastoral South (Governorate of Medenine). The selection criteria for the governorates included high poverty levels, vulnerability to land degradation including desertification, and increased drought risk (with water scarcity expected to worsen as a result of climate change). The Project would concentrate on the degraded zones of these areas.

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6. The key characteristics of the project areas are listed in the table below.

North Central South (Governorate (Governorate (Governorate Total of Jendouba) of Kasserine) of Medenine) Area (’000 ha) Total System 310 800 860 1970 Project Agricultural Area 109 330 205 644 Population (’000) Total System 440 440 420 1300 Project Zones 210 230 293 733 No. of farmers (’000) 36 40 39 115 No. of households (’000) 50 44 60 154 No. of Delegations 5 7 6 18 No. of Imadas 48 64 69 181 of which: rural 39 61 48 148 No. PDPs 27 27 18 72 Land use (’000 ha): Cultivated 80 269 226 575 Forests 10.7 108 4.3 123 Pastures 6.3 72 596 674 Irrigated 30 21,4 1.7 53,1

Principal Production(’000ha):

Wheat, Barley 50 103 50 203 Tree crops 11.7 55 175 241.7

Degraded land (’000ha) 133 180 203 516 % of restoration 37% 25% 51% 38%

Rainfall (mm)/yr. 400-1000 200-450 100-225

7. Sustainability. The NRMP2 is listed in the Government’s FYDP, an indication of Government interest in and commitment to the Project. The IPA is also being used by all rural development projects in the country, hence the strong interest in mainstreaming the approach to Government institutions. Sustainability will also depend on: (a) the level of satisfaction of the local communities with project activities, (b) the level of success in mainstreaming the approach into Government institutions such as the RCADs, and (c) the level of responsibility assumed by the newly created ADGs in representing their communities and taking charge of the development problems. If this is successful, the goal of the project is to have the ADGs eventually take over the promotion role with local communities that the RCADs are fulfilling under the Project. The long-term perspective of building capacity of Government institutions at the regional level and of communities at the local levels will also improve prospects for sustainability of the IPA approach. It is also more cost effective for the Government in the long run than maintaining project implementation units.

8. PDP Process. The PDPs are prepared by local communities with the assistance of the RCADs animator/facilitator team, and in partnership with local and regional development partners (NGOs, local development institutions, micro-credit institutions, representatives from

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other ministries). The PDP is submitted for approval at two levels: (i) the Local Development Council (LDC), and (ii) the Regional Council. Each PDP covers one Imada’s development priorities over various sectors, e.g., health, education, etc. The funding provided under the NRMP2 will co-finance only a part of a PDP or a selection of PDP activities which are eligible under the Project. Following endorsements from the councils, the PDPs are implemented through Annual Contracts (ACs) which are established and signed between the LDCs and the local community representatives, the agriculture development groups (ADGs). ACs form the basis for annual work planning and budgeting for parties concerned. Details of the PDP process are contained in the Project’s Operational Procedures Manual.

9. Beneficiaries. The main beneficiaries targeted by the Project are the rural communities, government departments at the local, regional, and national levels, civil society, and local development associations in the three Governorates of Jendouba, Kasserine and Medenine. The main beneficiaries for the income-generating activities (IGAs) are women, landless farmers, and young graduates.

10. Project Components and Cost Estimates. The Project has three components: (a) support to participatory development plan (PDP) investments, (b) support to the development of treated wastewater use for agriculture; and (c) institutional strengthening and awareness- raising.

11. Due to the demand-driven nature of the project where communities will take an active role in the decision-making process, specific description and quantification of project activities cannot be determined. Estimates of targets, outputs, and costs carried out by the Project’s preparation consultant team are indicative and are based on: (a) results from the final evaluation of the NRMP, on community needs identified in PDPs and on successful operations, (b) consultations carried out carried with RCADs and technical services units, and (c) consultations with a representative group of communities to assess their current needs.

Component 1 – Support to Participatory Development Plan (PDP) Investments - (Total Cost US$54.92 million, IBRD US$29.87 million, GEF US$6.16 million).

12. This component will support investments contained in the Participatory Development Plans (PDPs) which are developed by the local communities in the project areas and reflect their priority needs. Within the framework of these PDPs and on the basis of the annual contracts, the sub-component would support investments in:

(a) basic rural infrastructure which will provide communities with better access to water (water points, roads, wells, boreholes) and water management;

(b) rural feeder roads construction and rehabilitation ; and development of sustainable agricultural production systems (improved agricultural services, tree crop and livestock development, land consolidation, pastoral and sylvo-pastoral activities, forest management to promote sustainable use of forest products, income generating activities, and soil and water conservation techniques to combat land degradation and depletion of scarce resources).

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Sub-component 1.1 - Improving Water Access and Water Management - (Total Cost US$17.06 million, IBRD US$10.15 million).

13. The objective of this sub-component is to improve access to water (surface and subterranean) and water management to optimize its use in domestic consumption and irrigation. Improved access to water would contribute to improving the living conditions of rural communities, improve agricultural productivity by providing a more reliable source of water for irrigation, and mitigate against climate change risk through water capture and storage. The sub-component would seek to balance the socio-economic benefits against costs to the environment by promoting sustainable management of water resources.

14. The sub-component would support:

(a) the construction and rehabilitation of water harvesting points (bore holes for irrigation schemes/drinking, deepening/construction of wells, supply/rehabilitation of private and collective water tanks);

(b) investments in public irrigation schemes in the three governorates (pumping stations, reservoirs, equipment sheds) which could irrigate an estimated area of about 225 ha;

(c) the creation and rehabilitation of private small-scale irrigation schemes (about 200 in total) in Kasserine and Medenine, including improvement of canals, construction of small reservoirs for water storage and/or installation of equipment for localized irrigation, and the upgrading of equipment for shallow wells which have been deepened, which would service an estimated total area of about 780 ha; and

(d) the establishment of drinking water supply systems with water to be supplied through either boreholes or the national water supply agency (SONEDE) and consumption measured through volumetric meters. Investments funded would include electrified pumping stations, a reservoir for water storages, and a distribution network with stand posts and individual connections where bore holes serve as the water source.

The sub-component would finance works, equipment, materials and supplies, consultant services for feasibility studies and technical assistance, and operation and maintenance costs.

Sub-component 1.2 - Construction and Rehabilitation of Rural Feeder Roads (Total Cost US$4.82 million, IBRD US$3.28 million). 15. The sub-component would contribute to the Project’s objective by supporting the construction of new roads (estimated at 21 km), the rehabilitation of existing rural feeder roads, and road maintenance, which are in high demand from communities because of the social and economic benefits generated. In Jendouba, about half of the forest roads used by the local population are in need of repair. Improving rural feeder roads would facilitate access to inputs, provisions, and markets for agricultural products and contribute to agriculture development for rural communities. They also facilitate access to services such as health, education, administrative, and agricultural services.

16. The sub-component would finance works contracts including design and supervision for construction and rehabilitation of rural feeder roads, daily labor/workers’ fees for road maintenance, and materials for road maintenance.

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Sub-component 1.3: Development of Sustainable Agricultural Production Systems (Total Cost: US$23.93 million, IBRD US$12.12 million, GEF: US$0.34 million).

17. The objective of this sub-component is to improve agricultural, pastoral and sylvo- pastoral production on a sustainable basis by providing communities with opportunities to increase or diversify their incomes while putting in place measures to preserve natural resources. The sub-component would support methods which would intensify production using existing practices and explore or promote new practices or technologies through linkages with research and development programs. This would be carried out through improved delivery of agricultural advisory services, tree crop plantations, livestock development, rangeland and forest areas development, and support to income-generating activities.

18. In terms of meeting the objectives for sustainable land management (SLM), The sub- component would support measures which would: (a) develop local farmers’ knowledge and capacity in applying SLM techniques to increase soil organic matter, (b) enhance soil fertility and the productivity of crops and rangelands, (c) help communities build resilience against the climate fluctuations, (c) provide reference guides/manuals on SLM practices for related training with the collaboration of national and international research institutions, (d) contribute to regional SLM knowledge management in the framework of the MENARID initiative; and (e) provide advisory services to introduce appropriate practices for reducing climate change impact on agriculture.

19. Incremental GEF financing (US$0.34 million) will support the introduction and demonstration of innovative techniques and improved traditional agricultural and non- agricultural practices which will sustain land and water resources and adapt to climate variability.

20. The subcomponent would support the following activities:

(a) Improved Delivery of Agricultural Advisory Services. The objective is to improve agricultural extension and advisory services to local farmers and producers to strengthen their technical capacity and local knowledge and increase agricultural productivity. Assistance would be provided under the Project through provision of inputs, training programs, study tours and exchanges, technical assistance, and extension services to be provided by multidisciplinary teams which will be established under the Project within each RCADs. The multidisciplinary teams would be composed of four agricultural advisers (with at least one woman) and team staff would have specialized skills required to meet each governorate’s needs. To support the teams and increase the impact of services provided, the Project will support the updating/development of technical reference manuals and guides, which would serve as a training tool for the teams in their interaction with communities. These manuals/guides would also serve to identify viable and profitable agricultural activities (in crops and livestock) for farmers, as well as a means to identifying selective applied research programs which would be contracted out to such national research institutions as the Institute of Research and Education in Agriculture (Institut de recherche et d’enseignement supérieur agricole (IRESA)) and the Institute of Arid Regions (l’Institut des régions arides (IRA)).

(b) Tree Crop Development. The objective is to support the development of tree crops for olives, almonds, figs, and pistachios which are important for the farmers’ production

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systems but also serve as an effective sediment trap which contribute to erosion control, maintain good soil surface cover by the tree canopy, improve soil structure and infiltration rate, and thus reduce the amount of runoff and soil loss. About 7,200 ha of new orchards are planned for drylands (2,000 ha each in Jendouba and Medenine, 3,200 ha in Kasserine) and 1,000 ha on irrigated lands (120 ha each in Jendouba and Medenine, 800 ha in Kasserine).

(c) Livestock Development. The objective is to support activities which would encourage productivity gains in livestock development: improved animal husbandry and feeding, animal health care, and genetic improvements of stock. To meet anticipated demands from the rural farmers, an amount of TD 5,000/year has been set aside for each governorate for the animal health care services to be provided by the RCADs, while services for genetic improvement (breeding bulls) are carried out through contracts with livestock owners. An annual allocation of TD 5,000 has been set aside for each governorate for the genetic improvement of small ruminants including the annual provision of elite rams and goats for each governorate from the second year of implementation, and for small animal husbandry, including beekeeping.

(d) Land Consolidation Operations, which were successfully carried out in the first phase, would be supported under the sub-component with priority given to plots which hold good prospects for agricultural productivity but are excessively fragmented. Plots with difficult land tenure issues would be excluded. Total requests for land consolidation operations are estimated to amount to about 5,000 ha, of which 1,000 ha would be in Jendouba, 2,500 ha in Kasserine, and 1,500 ha in Medenine. Land consolidation would be carried out under the auspices of the national land agency (the Agence foncière agricole – (AFA)) responsible for overseeing these activities, through direct contracts between the RCADs and the AFA.

Incremental GEF funding (US$0.33 million) will finance the cost of contracts with the AFA for land consolidation operations which are proven to be an effective measure in increasing land productivity and ecosystem services.

(e) Development of Pastoral, Sylvo-pastoral, and Forest Areas. The objective is to support the rehabilitation of degraded land in the pastoral, and sylvo-pastoral areas through the following activities: the reseeding of pastures, planting of fodder trees (acacias, cactus), and soil/water conservation techniques such as establishing seasonal off-limits or closed areas (mise en défens). Technical support and advisory services would be provided by the RCADs and the Livestock and Husbandry and Range Management Office (Office de l’Elevage et des Pâturages).

In the forestry sector, forest users’ groups would be organized into ADGs and supported with additional capacity building to participate effectively in the planning and use of forestry resources. The ADGs would participate in the development of integrated forest management plans for the sustainable use of forest resources in 20 Imadas and in the preparation of the PDPs. Funding would be provided for organizing forest user groups into ADGs, training for ADG directors and group members, and related expenses to build their capacity. Funding would also be provided for forestry activities which have been identified in the forest management plans and approved in PDPs. Eligible activities would be those which contribute to increasing the incomes of the local communities and encourage their participation in the preservation of forest

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resources (pruning, thinning works, wildfire prevention measures), and harvesting of fuelwood and non-wood products.

Incremental GEF funding (US$1.84 million) will finance: (a) soil and water conservation measures and works (reseeding rangelands, planting of fodder trees); (b) creation of pastoral reserves designed to conserve rangeland (including mise en defense) and sustain livestock during food and water shortages; and (c) in the forestry sector, the development of forest management plans for the project zones, which should include integrated land management and climate change adaptation measures.

(f) Promotion of Income-Generating Activities (IGA). The objective is to support the promotion of IGAs for local communities to diversify their source of income through investments in on-farm activities (olive oil production, sheep fattening, green-housed crops, etc.) and off-farm activities (handicraft, harvesting/processing of non-wood forestry products, bee-keeping, mechanics repairs, etc. IGAs remaining from the first phase would be consolidated, with preference given to groups which have been formed around successful projects. The primary beneficiaries targeted would be women, landless farmers, and young graduates. Formal or informal interest groups would be organized in order to create the critical mass necessary for these activities to materialize.

For agriculture and forestry/on-farm activities under the Project, at least six interest groups of about 10 persons each are expected to be established in each of the 72 Imadas, resulting in about 4,320 IGAs. For non-agricultural/off-farm activities, the main target group for support would be the young graduates. Local workers (tâcherons) would be contracted where possible to carry out small-scale works. The promotion of IGAs will be carried out in close partnership with banking/micro-credit institutions, namely, the Tunisian Solidarity Bank (TSB), microfinance associations accredited by the TBS, the National Fund for Employment Promotion, and NGOs. These partners would be expected to participate in the preparation and implementation of the PDPs. The sub-component would finance technical support and advisory services, study tours, training (basic technical and business management) for beneficiaries, and direct investments in support of the IGAs.

Incremental GEF funding (US$1.47 million) will finance innovative and demonstrative IGAs which will help rural land users alleviate land degradation impact and strengthen resilience to the adverse impacts of climate change. Eligible IGA activity categories include: (a) non-wood forestry products; (b) application of water and land conservation techniques (water-saving olive tree plantation technique, livestock food made of olive residue); (c) organic and climate resilient farming (composting and greenhouse crops); (d) ecotourism; (e) alternative rural energy (biodigester, wind, solar); and (f) related training including study tours to other areas that have good practices of SLM techniques.

(g) Soil and Water Conservation. The objective is to arrest and - where feasible - reduce or reverse degradation, by controlling land erosion and increasing water infiltration. To ensure sustainability, the works need to be integrated into existing agricultural production systems so that the rural population have the continued financial incentives to maintain them.

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Funding would be provided for: (i) soil and water conservation works on private and public lands to reduce erosion, including protection against gully erosion (about 2,900 ha of gabion sills), and ravine protection (about 1,050 ha), both mechanically and biologically (vegetation), (ii) soil stripping prevention and control construction such as small dikes constructed with rustic trees (about 7,000 ha planned), gabion belts (47 works planned for the three governorates), individual basins (in Jendouba), (iii) construction of dune stabilization belts (for 230 km), and the rehabilitation of some 1,100 ha of soil/water conservation structures in Jendouba.

Funding would also be provided for investments in enhanced groundwater recharge, through structural works and measures which increase water infiltration such as spate water works (around 50 are planned in Medenine). However, works which would be carried out on river banks would be in gabion which would consolidate the river banks by controlling more efficiently water flows.

Incremental GEF funding (US$2.51 million) would be provided for: (a) soil stabilization works and materials on individual and community lands, including grass strips (vetiver grass), hedge barriers, and vegetative windbreaks; (b) small, low-cost structural measures including small flood banks, earth ridges, and plowing perpendicular to the slope; (c) the critical perimeters of existing hill lakes from erosion, siltation, and increase the rainwater storage capacity; and (d) scaling up good practices on agricultural lands to expand various plants with low water consuming tree crops (olive, almond and fig trees), cactus hedges, and other locally adapted plants. Emphasis will be placed on the establishment of arboriculture with local species that are climate-adapted and have attractive economic potential, i.e., olive, fig, and almond trees.

Component 2 – Support to the Development of Treated Wastewater Use for Agriculture (Total Cost US$2.14 million, GEF US$2.05 million).

21. The objective of this component is to support the National Program for Wastewater Reuse through the transfer of treated wastewater from the Greater Tunis area towards the dorsal, where demand for water is high, and where treated wastewater will help to increase yields on agricultural land, reduce fluctuations in agricultural production, and enhance adaptation to climate variability and change. In 2008, the results of an earlier government financed “Feasibility Study on the Transfer of Treated Wastewater from Greater Tunis Treatment Plants to Reuse Areas in the Interior of the Country” favored a scenario which combined the transfer of treated wastewater for agricultural reuse and for water table recharge. The Government wishes to build on these results to scale up and develop further the use of treated wastewater nationally over the next 20 years.

(a) Feasibility Study on the Transfer of Greater Tunis Treated Wastewater (second phase). Under the Project, the second phase of the feasibility study will be carried out on the preliminary design of the transfer and usage of treated wastewater from Greater Tunis to areas in the interior of the country where demand is high. The objective of the feasibility study is to develop investment and implementation options for maximizing the benefits from wastewater produced in Greater Tunis, to improve water availability for agricultural purposes in arid areas, especially during periods of water shortage, and at the same time to reduce the load of land-based pollution into the Gulf of Tunis. The study will address technical, environmental, and economic aspects,

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including investment and operating costs. This activity will be closely coordinated with Component 1.1 as well as with the Greater Tunis Project.

Complementary to the feasibility study, an assessment of the areas most vulnerable to climate change, yet most favorable for water reuse, will be carried out. The assessment will review social, economic, and environmental impacts of wastewater reuse, identify necessary training and awareness needs for reluctant end users, recommend potential incentives to encourage wastewater use, and identify most appropriate crop varieties that meet national restrictions on crops to be irrigated with wastewater1 and that are also adapted to local conditions. As such, the assessment will identify adaptation and mitigation options to climate change based on improved land management techniques, appropriate crop varieties, and options for more efficient use of water resources within the restrictions of health and salinity risks associated with wastewater reuse. This sub- component will be implemented by the NSU under the lead of the Directorate for Environment and Quality of Life (DEQL) of the Ministry of Environment and Sustainable Development (MESD). It will be fully financed by the GEF grant.

(b) Pilots for the use of treated wastewater for agriculture. The objective is to demonstrate the value of using treated wastewater to preserve and intensify agricultural production systems in areas where use of surface and subterranean water resources has been stretched to its limits and where soil degradation and droughts aggravated by climate change are threatening livelihoods and leading to abandonment of agricultural activities and rural migration. Treated wastewater use for agriculture has remained below expectations and potential despite the financial incentives offered by the Government. In 2009 only 30 percent of treated wastewater is used in agriculture, primarily for irrigation of tree crop plantations. Potential operators for wastewater irrigation systems as well as beneficiaries will be grouped and organized in ADGs and supported with capacity building as well as awareness raising on the strategic scope and expected outcomes of the pilot operations. Operators of wastewater irrigation systems will benefit from various planning and training efforts. The Project will fund two pilot operations, one in Kasserine (a semi-arid zone), and the other in Medenine (an arid zone) and associated costs of demonstrations, training and consultant services associated with the demonstrations. The pilots will be implemented by the Directorate of Rural Engineering and Water Use (DREWU) under the MAWRF.

Incremental GEF financing (US$ 2.05 million) will fund the cost of the feasibility study and the cost of conducting the two pilots in Kasserine and Medenine for the use of treated wastewater for agriculture.

Component 3: Institutional Strengthening and Awareness Raising - (Total Cost US$10.51 million, IBRD US$6.14 million, GEF US$1.52 million).

22. The objectives of this component are to: (a) strengthen the capacity of institutions at the national, regional, and local levels to participate effectively in the implementation of project activities in support of mainstreaming of the IPA in rural development; and (b) support communication and sensitization on natural resources management and environmental issues such as land degradation, soil and water conservation, and climate change.

1 The Ministry of Agriculture, Water Resources, and Fisheries (MAWRF) restricts irrigation with treated wastewater to: industrial crops (cotton, tobacco, etc.), cereals, fodder, fruit trees, forest trees, and floral plants. 42

Sub-component 3.1 - Institutional Strengthening at the Local and Regional Levels (Total Cost US$8.18 million, IBRD US$5.73 million).

(a) Strengthening the Capacity of ADGs. At the local level, the sub-component would support the organization of interest groups into ADGs and reinforce their capacity so that they can participate effectively in the PDP process. The sub-component would support the creation of ADGs for the 72 Imadas targeted (27 in Jendouba, 27 in Kasserine and 18 in Medenine), and their reinforcement including: (a) the recruitment of technical directors for the ADGs (1 director for every 2 ADGs recruited from amongst young graduates); (b) training related to the roles and responsibilities of ADGs with regards to the development and implementation of PDPs, study tours for exchange of information with other socio-professional associations, technical assistance in the preparation of action plans, (c) the provision of logistical means to facilitate their work (motorcycles for directors, offices, computers, equipment, supplies, etc.).

(b) Strengthening the Capacity of the RCADs. At the regional level, the component would strengthen the institutional capacity of the RCADs to implement and manage project activities at the regional level, including planning, budgeting, programming and monitoring and evaluation. To facilitate this work, three units will be established in each of the regional commissariat’s DSADs to oversee: (a) territorial planning and community facilitation, (b) programming and budgeting, and (c) monitoring and evaluation. Teams of animators reporting to their regional commissariat will lead the PDP preparation process and facilitate their implementation in each governorate. RCADs would need to contract with specialized consulting firms, NGOs, and private consultants to fill any gaps in specialized skills, particularly for non-traditional areas. During project preparation, it was estimated that such additional personnel would be needed for: (i) specializations mentioned for the three units above (one consultant per unit over five years for each commissariat, or nine in total), and (ii) the animator teams of regional commissariat for the preparation and implementation of PDPs. In terms of logistical support for the RCADs, the Project will finance vehicles, office and computer equipment and materials. To support the process of mainstreaming the IPA, specialized training of key staff in RCADs will be provided on various levels.

Methodological training, mainly in the use of IPAs, would be the following:

(i) retraining/upgrading/additional training to provide a broader set of skills for the heads of district services, subject matter specialists, and staff of DSAD; (ii) participatory planning, project management, and monitoring/evaluation; (iii) in-field for animators, members of the three RCAD units, subject matter specialists and key persons in the regional and local councils; (iv) classroom training for animators in communication and animation techniques, participatory monitoring/evaluation of activities, promotion of income- generating activities, etc.; and (v) study tours for senior staff in each of the three regional commissariats.

Technical training for the RCAD senior staff and agricultural advisers would be:

(i) formal training to support three engineers to graduate to the level of senior engineers in fields currently under-represented in public services (e.g., agro- economy, tree cropping, horticulture or animal production); 43

(ii) refresher courses in technical fields to allow subject-matter specialists and agricultural advisers to respond more efficiently to requests for advice from farmers; and (iii) technical training on sustainable land management and protection of ecosystem services.

General training will be provided to all staff of the RCADs on various subjects including IT-training, work organization, event planning, management of large meetings, etc. .

(c) Institutional Strengthening for other development partners (other sector ministry staff, NGOs, ADLs, etc.) will be supported to foster partnership in local development planning by major stakeholders. To ensure effective and productive participation in project implementation, it is important that all project implementation partners (governmental and non-governmental) have a sound understanding and knowledge of the principles of the IPA applied by the Project, including the preparation and implementation of PDPs and ACs to guide community-driven project investments in rural development. The sub-component would finance consultation workshops, methodological training, visits and exchanges, and study tours to foster knowledge sharing. A consultant at the level of each commission will be needed to assist the DSADs in organizing training sessions.

(d) Sensitization to the IPA Process. The objective is to take stock of the IPA experience and lessons learned for the purposes of improving and deepening the knowledge/interest on community-driven development nationally, and for scaling up good practices. Funding would be provided for: (a) the preparation of background documents on the impact and sustainability of the community-based approach/IPA on rural development in Tunisia, including social and environmental aspects, (b) national and regional roundtables to discuss background documents and means to promote good practices, (c) consolidation of various project-level or regional-level guide books and manuals into an official, approved operations manual or similar document.

Sub-component 3.2 - Institutional Strengthening at the National Level (Total Cost US$0.17 million, IBRD US$0.97 million).

23. The sub-component would support the Central Coordination Unit (CCU) at the MAWRF for project management, M&E of project activities, environmental impact, and of safeguards compliance, and to the MESD for implementing the communications and sensitization component on environmental issues, and monitoring the results of feasibility study on the use of treated wastewater. The sub-component would support the activities below.

(a) Project Management. The national management unit created in 1998 for projects implemented by the DFIPO CCU (the Unité centrale de coordination) will be responsible for overall project coordination and management. The unit will be composed of three qualified professionals, a project coordinator and two assistants (one on programming, budgeting, and procurement, and another on administration, financial reporting, and M&E). One of the positions will be funded directly under the Government budget to the DFIPO, and the other will be recruited on a contractual basis from project funds for the five-year project implementation period. Project financing will further provide for specific training, operational, and logistical support,

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including the provision of one vehicle, limited office and computer equipment, and materials. The Project will also contribute a share of the operation and maintenance costs of the multi-project monitoring/evaluation system (SESAME) now being set up in the MAWRF (DFIPO and RCADs).

(b) Monitoring and Evaluation (M&E). The sub-component would provide funding for the installation of a national M&E system which would link reporting on project activities, financial management, and procurement at the regional level to the national CCU. The system planned would be a multi-project system currently used by other projects and which would be refined to include monitoring of NRMP2 activities. Training would also be provided along with technical assistance for the users.

(c) Safeguards Compliance and Implementation of the Framework Document for Environmental and Social Protection (FDESP). Funding will provided for monitoring compliance with the recommendations contained in the FDESP. This would include: (a) the preparation of the environmental impact studies for activities related to the feasibility study for treated wastewater transfer and the two pilots on treated wastewater reuse on agricultural land to be carried out in Kasserine and Medenine; (b) preparation and evaluation of the Simplified Environmental Diagnostic (fiche environnementale de diagnostic simplifié – FEDS) and the Environmental and Social Information Form (fiche d’information environnementale et sociale (FIES) for the three governorates; and (c) related training, technical assistance, and sensitization.

Incremental GEF Funding (US$0.12 million) will support environmental monitoring and evaluation of the Project, including logistical support at the local level (ADGs) to build capacity for participating in M&E, and training and workshops of stakeholders on safeguards. (Training on safeguards will be carried out by the DEQL under the sub-component 3.3). GEF funding will also contribute to monitoring environmental and climate adaptation benefits. This activity will be conducted in line with the MENARID programmatic approach whose objective is to improve the National Environmental Monitoring and Evaluation System and knowledge management. Specific arrangements for knowledge management will be coordinated with other relevant projects in Tunisia in order to build synergies.

Sub-component 3.3 - Communication and Sensitization on Sustainable Land Management and Environmental Issues (Total Cost US$1.77 million, IBRD US$0.01 million, GEF US$1.4 million).

24. The objective of this sub-component is to communicate and raise the awareness of stakeholders on sustainable land management, wastewater reuse, adaptation to climate change, and sustainable management of natural resources in the context of the Project. The MESD will be the agency responsible for implementing this sub-component.

Incremental funding by GEF (US$1.4 million) will the main activities of the action plan on communication, sensitization, and training on environmental aspects and sustainable development. This action plan, which will be developed by the MESD (DGEQL) in collaboration with the MAWRF will be based on the results the stocktaking and identification of communication needs and to identify gaps based on initiatives in Tunisia on SLM, wastewater reuse, climate change adaptation, and conservation of biodiversity and of ecosystems, which have direct relevance to the Project. The main activities to be included for implementation under the action plan would be:

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(a) organization of training and information dissemination sessions on thematic and sustainable environmental development targeting project beneficiaries (governmental partners, ADG, RCAD staff, communities, schools, and wastewater users), to reinforce and raise the level of awareness on the impact of land degradation on agricultural production systems, the benefits of SLM, the threats posed by climate change to agricultural production, adaptation measures to climate risks, and the advantages of using treated wastewater for irrigation in order to change farmers’ perception on such use;

(b) best practices on sustainable development and sustainable agriculture which target ADGs, RCAD staff, NGOs, and other service providers. The focus focus will be placed on climate change adaptation, sustainable land management, biodiversity conservation, renewable energy (solar pumps, biogas, improved cooking stoves, etc.), treated wastewater use, integrated water management, and others environmental themes that are relevant in the three Governorates;

(c) Strengthening environmental education, training sessions, coaching, logistical means, and equipment needed to support their operation during the project implementation.

(d) Knowledge-sharing workshops for decision makers at the national level to strengthen cross-sectoral discussions, and exchange information for policy planning on relevant sectors (agriculture, forestry, water resources management, local development, etc.); and

(e) Documentation and dissemination of good practices, thematic workshops, on themes related to community-based land degradation prevention and control, natural resources management, profitable SLM practices, climate change adaptation measures in agricultural production systems, low-cost soil and water conservation technologies, sustainable pastoral land management, sylvo-pastoral management, and forest management in line with national policies and strategies.

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Annex 5: Project Costs REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Local Foreign Total US US Project Cost By Component $million US $million $million

1. Support to PDP Investments 44.64 3.27 47.91 2. Treated Wastewater Use on Agricultural 0.65 1.41 2.06 Land 3. Institutional Strengthening 8.44 1.15 9.59 Total Baseline Cost 53.73 5.83 59.56 Physical Contingencies 2.18 0.22 2.40 Price Contingencies 5.11 0.50 5.61 Total Project Costs1 61.02 6.55 67.57 Interest during construction 0.00 0.00 0.00 Front-end Fee 0.09 0.09 Total Financing Required 61.02 6.64 67.66

1 Identifiable taxes and duties are US$8.08 million, and the total project cost, net of taxes, is US$59.55 million. Therefore, the share of project cost net of taxes is 88.05%.

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Financing Plan (US$ Million)

By Project Component

Government Project Cost By Component of Tunisia Beneficiaries GEF IBRD Total

1. Support to PDP Investments 11.66 7.22 6.16 29.88 54.92 2 Treated Wastewater Use on Agricultural Land 0.09 0.00 2.05 0.00 2.14 3. Institutional Strengthening 2.86 0.00 1.52 6.13 10.51 Front-end Fee 0 0.00 0.00 0.09 0.09 Total 14.61 7.22 9.73 36.11 67.66

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Annex 6: Implementation Arrangements REPUBLIC OF TUNISIA: Second Natural Resources Management Project

1. The NRMP2 will use the same institutional arrangements as the NRMP and will build this arrangement to incorporate the GEF components. The two implementing agencies will be the MAWRF and the MESD. Day-to-day implementation of the Project’s activities and the GEF Grant’s activities will be carried out through the Ministries’ directorates, the DFIPO (MAWRF) and the DEQL (MESD). The CCU within the DFIPO (MAWRF) will be responsible for Project implementation, management and coordination, and the DEQL in the MESD will be responsible for managing and coordinating the GEF grant activities which fall under the responsibility of the MESD.

2. A National Steering Committee will ensure the coherence of the NRMP2 with other existing programs in the country. A multi-sectoral, planning committee in the Regional Council (RC) level will ensure coordination of activities at the level of each governorate and will facilitate the mobilization of partners and funds for implementing the ACs. At the delegation level, proposals for each Imada PDPs and ACs are discussed at the Local Development Council (LDC) before submission to the RC of each Governorate for validation. The heads or technical directors of the ADGs will participate in the local development planning process as representatives of their communities’ interests.

3. IPA mainstreaming into the three RCADs implies that their structure is more suitable for sector-specific work and must adapt to the multi-disciplinary nature of the local development planning. Although, at this stage, no modification to the structure of the three RCADs is planned, it is proposed that the Regional Commissariats be assisted in organizing themselves internally so that they can work with the population on a territorial basis. Under the Project, this is reflected in the proposed institutional arrangements for the DSAD which will include three units, one each for: (a) planning and promotion, (b) programming and budgeting and (c) M&E. These three units may eventually evolve into permanent technical services of the RCADs, should the Government decide to support this transition. The units will be reinforced with teams of animators, and subject matter specialists and will play an important role in managing the preparation/implementation of PDPs and ACs.

4. The roles and responsibilities of the key implementing institutions are detailed below.

At the National Level

MAWRF:

5. Central Coordination Unit (CCU). The CCU, established in the DFIPO under the MAWRF, will be responsible for overall project management and coordination as well as the monitoring and evaluation of project activities in close collaboration with the three RCADs. Specifically the CCU would : (i) carry out procurement procedures as needed at the national level, (ii) manage the Project’s special accounts, and (iii) manage the monitoring and evaluation system at the national level, including safeguards, (iv) prepare consolidated annual work program and budgets, (v) coordinate and consolidate procurement and financial management reporting; and (vi) coordinate and consolidate periodic progress reports for the project activities funded both by the Loan and by the GEF Grant. The CCU is staffed with qualified individuals, a Project Coordinator who is assisted by two professionals, one for

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programming, budgeting, and procurement, and one to assist the Project Coordinator on administration, financial reporting, and M&E.

6. National Steering Committee (NSC) under the MAWRF The NSC is responsible for monitoring the Project’s implementation results and progress, and for approving the Project’s work programs and annual budget, and ensuring the coherence of the NRMP2 with other programs/projects in the sector. It is chaired by the Minister of Agriculture (or his representative) and is composed of technical and financial departments of the MAWRF, as well as other ministries (environment, finance, international cooperation, etc.) involved in the Project.

MESD:

7. The General Directorate of Environment and Quality of Life (DEQL) under the MESD is responsible for the overall coordination and implementation of GEF Grant activities which fall under the responsibility of the MESD. Along with the NSU (see below) and the DREWU, the DEQL will be responsible for the implementation of the feasibility study on treated wastewater transfer for agriculture, as well as for the communications and awareness- raising on environmental issues. The DEQL will collaborate with the CCU, and the RCADs to carry out training, communications and awareness-raising on land degradation, soil and water conservation, climate change, and treated waster reuse to support the effective implementation of Project and GEF-funded activities.

8. The MESD will be responsible for carrying out training and workshops for stakeholders on safeguards as required by the FDESP. The DEQL will submit information of Grant-funded activities under MESD responsibility as well as procurement and financial reporting information to the CCU of the MAWRF for consolidation of Project and Grant reports.

9. The National Sanitation Utility (NSU)/Office National de l’Assainissement (ONAS). The technical, economic and environmental feasibility study on the transfer of Greater Tunis treated wastewater (from Tunis’ treatment plants) above will be carried out by specialized consulting firms under the close supervision of the NSU and the Directorate for Environment and Quality of Life (DEQL) of the MESD. The NSU will also be responsible for monitoring the study’s implementation.

At the Regional Level

10. Regional Commissariats for Agricultural Development (RCAD). The RCADs of the MAWRF are the key implementing institutions for the project activities at the governorate level. On the basis of the PDPs and ACs to be implemented, the RCADs will prepare their annual work programs and budgets and submit them to the CCU at the central level for approval. They are also responsible for implementing work programs and monitoring budgets, monitoring and evaluating project activities, and ensuring direct payments to service providers and entrepreneurs in the regions. RCADs are responsible for mobilizing partnerships for the Project and for ensuring that the Project’s activities and programs are coherent with those of other local and regional partners.

11. Each RCAD is headed by a Commissioner (or Commissaire) who is supported by a consultative committee. RCADs are staffed with technical specialists and administrative personnel. The Director General of RCADs will hold periodic meetings with the participation

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of the technical services units to: (i) review annual work plans and budgets, including results and progress reports prepared by the DSAD; (ii) evaluate progress achieved with respect to expected outcomes and specific objectives; and (iii) facilitate execution by coordinating activities and mobilizing appropriate specialists and partners in developing PDPs and implement ACs by supporting local implementation teams.

12. The Division of Studies and Agricultural Development (DSAD) will reinforce institutional capacity within each RCAD through three units of distinct but complementary functions: (a) territorial planning and rural animation, (b) programming and budgeting, and (c) monitoring and evaluation. The territorial planning and rural animation unit would be staffed with teams of animators1 which would collaborate closely with relevant subject matter specialists from the technical services units (see below). The specialists could be contracted to provide additional agricultural advice and support2 to back up the work of the animators in the development of PDPs and ACs, to provide operational support, to promote such activities as the IGAs, etc..

13. Technical Services Units (arrondissements) within the RCADs. RCADs provide the technical guidance, assistance, advice to local communities through their technical services units (arrondissements) on various themes (soil and water conservation, SLM, irrigation, forestry, etc.). These units are staffed with technicians and engineers who contribute as subject matter specialists to the preparation of PDPs in collaboration with local communities and the animator teams. They are also responsible for developing and implementing the work program of planned activities (mobilization and evaluation of water resources, creation and rehabilitation of irrigation schemes, agricultural/pastoral production, SLM, IGAs, etc.) under the Project.

14. The Directorate for Administrative and Financial Affairs with each RCAD will provide accounting, financial management, and procurement support. The division is also responsible for implementation of the annual procurement plan and supervising procurement activities, in collaboration with other technical services units and the regional procurement commissions.

15. Regional Council (RC). The RC is responsible for officially validating the contents and partnership arrangements proposed in the PDPs and ACs. A multi-sectoral planning committee within the RC reviews the PDPs and facilitate the partnerships with other development institutions/stakeholders which are involved in the PDPs and/or ACs preparation/implementation. The RC is headed by the Governor and composed of: the Governor, elected representatives of the Chamber of Deputies, presidents of municipal and rural councils, unit chiefs of other administrative services, and representatives with technical, economic, social, cultural, and educational expertise. The RCs are responsible for the preparation and monitoring of regional development plans, and meets about four times per year for this purpose.

1 Each team will be composed of 3 animators including at least one woman; 3 teams in Jendouba and Kasserine, respectively, and 2 in Medenine. 2 Each team will be composed of 4 advisers including at least one woman; 3 teams in Jendouba and 2 in Kasserine and Medenine, respectively (see the operation manual for the preparation and implementation of PDPs). 51

At the Local Level

16. Local Development Councils (LDCs) are consultative bodies which review and discuss the local economic and social development priorities, local development programs, and projects within its area of jurisdiction. The LDCs: (i) mobilize local partners and additional funding for the project at the local level through PDPs and ACs; (ii) constitute the first level of validation for PDPs and ACs, ensuring consistency with development priorities; and (iii) supervise and monitor the implementation of PDPs and ACs within its area of jurisdiction. Reviews and discussions are held in working meetings with participants including representatives of the local population, government, and non-government partners affected by the Project. The LDCs are headed by the Delegate and composed of: delegates nominated by the Governor, presidents of rural communes, and councils of the delegation, administrative section chiefs, and representatives of regional technical services including the RCADs.

17. Agricultural Development Groups (ADGs). The ADGs are associations of interest groups which play a key role in facilitating agricultural development and in representing their communities within the framework of the Project. They will serve as the interface between the populations involved in the PDP process and the RCADs, and be the institutional channel through which the animator teams initiate dialogues with the populations for the preparation and implementation of the PDPs. The ADGs will be reinforced with a Technical Director hired from the existing pool of young graduates. The groups will be supported under the Project with training, logistical support, motorcycles, office and other equipment to participate effectively in the preparation and implementation of the PDPs and ACs.

18. Under the Project, the setting up of ADGs will be encouraged to lend more voice and representation to the informal groups formed under the first project which supported Socio- territorial units and Development Committees. These will be supported to evolve into ADGs which are private sector associations, financially independent, and have legal status in Tunisia. Tunisian legislation also allows for informal groups to become ADGs. Therefore, the objective behind the creation of ADGs is to develop production systems, manage natural resources, and foster agricultural and non-agricultural IGAs. Interest groups act as the foundation for forming ADGs since a framework already exists through institutionalized partnerships with operators such as the TBS, local development association, the National Employment Fund (Fonds National de l'Emploi (FNE)), and NGOs. ADGs would serve as social/moral guarantors for investments and the recovery of loans provided by partners such as the TBS, Local Development Agencies (Agences de développement locaux (ADL)), and NGOs.

19. Local Implementation and Animation Teams. Based locally, implementation teams and agricultural service advisers would provide technical assistance and advice to beneficiaries in developing their PDPs and annual programming of their ACs, as well as in implementing the various project activities including M&E. Other responsibilities include: (a) identifying programs according to PDP sectors; (b) developing annual programs by AC and by delegation within the framework of the program; (c) preparing and signing annual contracts with community representatives; and (d) gathering essential data for the monitoring and evaluation of project-related AC and PDP implementation.

20. The institutional flowchart and organizational structure for the Project are detailed below:

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NRMP2 - INSTITUTIONAL FLOW CHART

Coordination Implementation Partners

MDIC and MoF At National Steering MAWRF Committee (chaired by (through the CCU of its DFIPO) OLPD and TBS central MAWRF and with MESD and MESD ALA and NSU level other partners) (through its DEQL) Others RCADs Governorate authorities RCADs (for coordination with (through their DSADs and technical partners) / Regional Councils services such as for land/water Regional directorates of At (through its multi-sectoral conservation, irrigation, forestry, etc.) technical ministries planning committee) for regional [Territorial Planning and Rural Animation Unit] coordination of level [Programming and Budgeting Unit] Regional offices of OLPD and preparation/implementation of [Monitoring and Evaluation Unit] TBS PDPs Regional representative of MESD NGOs and others Agricultural Extension Agricultural Extension Centres Centres of the RCDAs (for Animators Teams Local authorities At local coordination with partners) / Subject-Matter Specialists ADGs and LDAs level Local Development Agricultural Advisors Teams NGOs and others Councils (for coordination of PDPs)

MAWRF=Ministry of Agriculture, Water Resources, and Fisheries CCU = Central Coordination Unit MESD = Ministry of Environment and Sustainable Development PDP = Participatory Development Plan RCAD = Regional Commissariats for Agricultural Development ALA = Agricultural Land Agency DFIPO = General Directorate for Financing, Incentives and Professional Organizations DEQL = Directorate for Environment and Quality of Life NSU = National Sanitation Utility DSAD = Directorate for Studies and Agricultural Development MoF = Ministry of Finance OLPD = Office for Livestock and Pasture Development TBS = Tunisian Bank for Solidarity MDIC = Ministry of Development and International Cooperation ADG = Agriculture Development Groups LDA = Local Development Association

RCAD Organization Chart

RCAD General Directorate

Directorate for Extension Directorate fo r Studies Other and Prom otion of and Agricultural Directorates Agricultultural Production Development (DEPA P) (D SDA )

Technical Studies and Territorial Pla n nin g An im ator Services Agricultural Statistics and Ru ra l A n im atio n Teams Services Unit

Agricultural Program m ing and Extension Bud geting Unit C oordination Unit

Monitoring an d Agricultural Evaluation Unit Advisors Team

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Annex 7: Financial Management and Disbursement Arrangements REPUBLIC OF TUNISIA: Second Natural Resources Management Project

1. Evaluation Summary of Financial Management and Related Arrangements

A. The Project

1. The Second Natural Resources Management Project (NRMP2) was designed to improve the sustainable management of natural resources and the living conditions of the populations in the RCADs of Jendouba, Kasserine, and Medenine. The project selected small and medium sized agricultural operators in these three regions as the target group. As in the case of the NRMP, implementation of this project will be based on the Integrated Participatory Approach (IPA).

2. Project Objective. The Project aims to improve the living conditions of rural communities in three governorates in terms of access to basic infrastructure and services, sustainable increase in income, and improved natural resource management practices by fostering an integrated approach to community-based development.

3. The Project consists of three components, the details of which are outlined in Annex 4.

4. Program Cost and Duration. The total cost of the project is approximately US$67.66 million, of which US$36.10 millions (53.3%) will be financed by the International Bank for Reconstruction and Development (IBRD), and US$9.73 millions (14.4%) by the Global Environment Fund (GEF). The balance will be financed by the Government and the beneficiaries (32.3%). Project implementation will begin in 2010 for period of 5 years and will take place in the three RCADs mentioned above. A detailed breakdown of the total cost by component is presented in Annex 5.

5. Area of Intervention. The NRMP2 will be implemented in the geographic area covered by the Governorates of Jendouba, Kasserine, and Medenine through the regional structures of the Ministry of Agriculture, Water Resources, and Fisheries (MAWRF) in all three RCADs. The cross-cutting components will be implemented through the centralized MAWRF structures.

6. Institutional Arrangements. Project management has been entrusted to a Central Coordinating Unit (CCU) housed within the DFIPO and staffed with personnel from this Directorate. A Project National Coordinating Committee (NCC) chaired by the Minister for Agriculture, Water Resources, and Fisheries (MAWRF) or his representative will provide overall monitoring. In addition, a Project technical monitoring unit within each Technical Directorate concerned and a multi-sector planning committee already set up within each Regional Council have been set up to coordinate program activities at the national and regional levels.

7. In addition, the Ministry of Environment and Sustainable Development (MESD) is responsible, within the project for implementing a number of activities. Thus, the DEQL at the MESD, in collaboration with NSU is responsible for carrying out the feasibility study on the transfer of treated wastewater. The DEQL will be responsible for sub-component on

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communication and sensitization, including related training. These activities will be budgeted independently within the Ministry of Environment (MESD) and NSU and will not be coordinated by the CCU.

8. Details of the institutional arrangements are presented in Annex 6.

9. The structures involved in project management are as follows.

At the Central Level

The MAWRF through the technical directorate and DFIPO, the MESD, and the National Sanitation Agency (NSU). Both the DEQL and the NSU, under the MESD, will participate in delivering the relevant activities financed by GEF Grant.

At the Regional and Local Levels

At the regional and local levels, the RCADs will be responsible for implementing the various Project activities.

B. Summary of financial management arrangements

10. The evaluation confirmed that the Project will be implemented in Tunisia using the country-based system governed by the budgetary legislation, and will use the existing skills and human resources within the units responsible for implementation. The Project expenditures will be part of the MAWRF, MESD, and NSU budgets, although at this point the country's budget and accounting systems do not allow for the generation of the interim financial reports necessary for project management. For this reason, an independent financial reporting system will be established to ensure rigorous monitoring of project expenditures and payments. This system will be integrated into the information monitoring and evaluation system and will be used by MAWRF for the management of its projects.

11. The DFIPO hired a consulting firm to develop this system which will be operational in October 2010 at the central level, in the three RCADs, as well as in the MESD and the NSU

12. The following were the primary risks identified during evaluation: (a) coordination between national and regional levels; (b) the complexity of the project due to the significant transaction volume and to the number of agencies involved in project implementation; and (c) the management capacity of some RCADs. Several actions have been planned to mitigate these risks, in particular:

(i) implementing a reliable financial reporting system at the national and regional levels. The RCADs would be responsible for data collection at the decentralized level and the UCC would be responsible for coordinating, approving, and consolidating the reporting; (ii) developing an Operational Procedures Manual for the project that clearly describes each participant’s tasks and responsibilities as well as the information distribution chart; a consultant has been recruited and has drafted the manual); and (iii) building the capacities of the teams responsible for the financial management of the project at the national and regional levels, with qualified executives and targeted training programs.

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Based on the results of the evaluation and the actions implemented to manage and reduce the identified risks, the remaining overall financial management risk is deemed to be moderate at this point.

2. Detailed evaluation of financial management and related arrangements

13. An evaluation of the financial management capabilities of MAWRF, of the RCADs responsible for delivering the Project, and of MESD was conducted as part of preparations for the Project through: (i) a series of meetings held with various representatives from MAWRF and MESD; and (ii) field visits to two RCADs. Given the specific nature of this Project, which will be delivered largely at the local level, the task consisted primarily of ensuring the establishment of procedures and criteria to ensure satisfactory financial management upstream and of reporting and retroactive audit mechanisms downstream to ensure that funds are used for the intended purposes.

A. Detailed evaluation of financial management

14. The country system. Given the experience acquired by the World Bank in the country and the primary conclusions from the Public Expenditure and Financial Accountability (PEFA) work currently in progress, it is evident that the Tunisian public finance system is governed by a detailed legal and regulatory framework that ensures that reliability and transparency is safeguarded. This system relies not only on the principle of the strict separation of the functions of authorizing officers and finance officers but also on key internal controls rules governing ex-ante expenditure as well as upon internal and external auditing rules. The Tunisian system also relies upon high quality, administrative structures and strong human and material resources. Overall, the Tunisian public expenditure system can be considered to present a low budgetary and financing risk factor.

15. Past experience in the sector. The World Bank and MAWRF have had previous experience in the sector through the NRMP, of which the current Project is a continuation. NRMP was managed by MAWRF and the same Directorate (DFIPO). This Directorate was also entrusted with several other projects financed by the World Bank and other donors. Thus, it has acquired significant experience in managing projects implemented through external financing. Therefore, this Project can capitalize upon the experience acquired by DFIPO.

Analysis of identified risks

16. The evaluation identified the following risks.

(i) Coordination between national and regional levels.

The RCADs do not systematically send accounting documents and signed contracts to DFIPO. This does not provide DFIPO with the assurances that it received all contracts signed by all implementing agencies at any given time, and it does not allow it to request reports on reliable commitments. In order to mitigate this risk, it was agreed that DFIPO would: (a) ask the Information Technology Center in the Ministry of Finance to give it access to the Budgeting Decision Aid System/Public Administrative Services (Système d'Aide à la Décision Budgétaire/Etablissements Publics

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Administratifs (ADEB/EPA)) system used by all RCADs so that it could consult it at any time to find out the extent of all Project commitments; (b) put in place a periodic reporting system during the preliminary phase, allowing it to receive a spreadsheet from each implementing agency summarizing commitments by contract, component, and category; (c) use an IT system linking the three RCADs that would allow suitable financial reporting for Project commitments and payments.

(ii) Multiple participants and high transaction volume of the Project.

The second risk identified relates to the complexity of the Project, its scope at the regional level, the significant transaction volume, and the number of implementing agencies involved.

This risk will be mitigated by: (a) project management through the CCU at the MAWRF level with personnel who are familiar with Bank-financed projects – the person responsible for financial management has managed other donor-financed projects is available; (b) defining eligibility criteria for financing; (c) describing financial management and disbursement procedures in a POPM which covers the organization chart, the rules, procedures, and payment methods for expenses; information flow, and financial and audit reporting mechanisms for project accounts, as well as disbursement flow; and (d) using the institutional plan in force including rigorous controls of public expenditures and additional controls carried out by the CCU and the Central Bank of Tunisia (CBT) (Banque Centrale de Tunisie – BCT) before any payment is made from external resources. (iii) RCAD capacity. The third risk identified relates to the RCADs' management capacities. The RCADs are government bodies with financial autonomy and with budgets that are hierarchically linked to the National budget. The organization and operating procedures of the RCADs are established by decree. They have general experience of managing projects financed by the World Bank and by donors but they lack sufficiently qualified accounting and financial staff.

The capacities of the MESD and NSU were not identified as risks because of their previous experience in managing Bank-financed projects, and because of the small number of transactions which will be entrusted to the MESD and NSU.

17. To reduce this risk and account for the size and specificity of the Project, capacity building is necessary and will be achieved through the nomination of qualified and dedicated accounting and financial personnel from the present RCAD staff, and through targeted training for these staff who will be responsible for project management. This training, which will be carried out before or during project launch, will cover World Bank guidelines on the content, presentation, and frequency of interim financial statements. MESD and NSU will each designate a person responsible for the component under their respective responsibilities who will be responsible for sending interim financial statements to the CCU for consolidation. The material resources of specific RCADs (information technology equipment and Internet connections) will also need to be strengthened.

18. The overall mitigating measures have been discussed and agreed upon with the project stakeholders. 57

19. Evaluation of Overall Risk. In view of all of the measures that will be put in place to lower the level of exposure and to manage and reduce the risks identified and the weaknesses observed, the overall residual financial management risk is deemed to be Moderate at this point. 3. Financial management arrangements Financial management system

20. Overall Framework. The financial management system in place at MAWRF and MESD is based on the principles and procedures defined by the legal framework applicable to the public sector and, more specifically, to government institutions. The primary characteristics of this system are as follows:

21. Budgeting System. MAWRF and MESD each present an annual budget for financial commitments. In terms of funding sources, the overall budget relies on contributions from the National Government as well as on funds made available to it by various donors in order to carry out specific projects. The budget is submitted to the Ministry of Finance for approval and should be approved by the National Parliament by December 31 each year and passed as an appropriation bill. Budgetary control is implemented through an IT system (ADEB). Payment procedures

22. In order to facilitate payments, two Designated Accounts will be opened at the CBT. For the designated account opened under the Bank loan, the MAWRF will designate an authorizing officer. The officer will be authorized to sign withdrawal applications for all eligible activities financed by the Loan. For the designated account opened under the GEF grant the same MARWF officer will be authorized to sign withdrawal applications for activities implemented by the MARWF, and the representative of the NSU will be authorized withdrawal applications and to make direct payments for activities implemented by the MESD and the NSU. Payment requests will then be sent to the CBT, the management authority delegated by the Ministry of Finance for the two Designated Accounts (DA) from which payments will be made. The CBT will verify the supporting documents and will then proceed with payment.

23. For expenses made under the Loan, financial data will be inputted by the CCU into the Automated Public Debt Information System. The CCU will save copies of documents supporting the transactions made by MAWRF, and the three RCADs after granting authorization for payment and after the Director General of DFIPO has reviewed and approved the documents received. The MESD and NSU will keep each statement of expense for all the transactions they will incur.

4. Institutional Arrangements

24. The CCU, created within the DFIOP in 1998 through a Decree from the Prime Minister, will be staffed with three qualified professionals: a Project Coordinator, and two assistants, one responsible for programming, budgeting, and procurement, and the other for providing assistance on administration, financial management and reporting, and M&E. The CCU will be responsible for the following:

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(a) preparing consolidated financial management and accounting activities in compliance with public accounting principles; (b) preparing periodic consolidated reports related to physical data on Project implementation progress and financial data on disbursements (by component and by category) as well as on commitments of the World Bank, the GEF Grant, and budgetary resources; (c) consolidate data supplied by the RCADs, MESD, and NSU, and produce annual consolidated financial statements and half-yearly interim financial statements; (d) send copies of these documents to the DFIPO Director, who will be responsible for forwarding them to the World Bank through the Ministry of Development and International Cooperation (MDIC) (Ministère du Développement et de la Coopération Internationale (MDCI)) and the National Steering Committee (NSC) within 45 days of the end of each calendar semester; (e) furnish a single six-monthly interim unaudited Financial Report (IUFR) for the entire project; and (f) maintaining a financial management system that is acceptable to the World Bank and in compliance with World Bank procedures for awarding contracts, disbursements, and financial monitoring.

25. Organization of implementation agencies. Each implementing agency (the three RCADs, MESD, and NSU) should designate a person who will be responsible for Project follow-up. This person will be responsible for entering financial data and for periodically sending all project documentation and implementation progress reports following accepted information transmission procedures. Each implementing agency will be responsible for the technical implementation of the project component in which it is involved.

26. The organization of the CCU, RCADs, MESD, and NSU as well as the information channels linking all project participants are described in the POPM being prepared by DFIPO. This manual covers all provisions for project implementation, and in particular: management structures, eligibility criteria, action implementation procedures, contract award procedures, and financial management as well as templates for the financial reports that should be produced. 5. Project Accounting System

27. The general accounting principles for the Project are as follows:

(a) Project accounting will cover all sources and all uses of project funds including payments made and expenses incurred. All transactions related to the Project will be entered into the accounting system and the appropriate reports. Disbursements made from the two DAs opened with the BCT will also be entered into the project accounting system. The counterpart funds will be subject to separate accounting.

(b) Project transactions and activities will be distinguished from the other activities undertaken by the RCADs, MAWRF, MESD, and NSU. Financial statements summarizing the commitments, receipts, and expenditures made under the Project should be produced every semester by each implementing agency using the templates established for this purpose and sent to the CCU along with supporting documentation. The CCU will be responsible for consolidating these data.

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(c) The project chart of accounts will be compliant with the classification of expenditures and sources of funds indicated in the project documents (POPM, project evaluation document, COSTAB) and the general budget breakdown. The chart of accounts should allow for data entry to facilitate the financial monitoring of project expenditures by component and sub-component, expenditure classification, and disbursement category.

6. Project Reporting System

28. Interim unaudited Financial Reports (IUFR). Consolidated Interim financial reports must include data on the financial situation of the Project. These reports should include: (a) a statement of sources and uses of funds for the reporting period and with a cumulative figures, including a statement of the project balances of accounts; (b) a statement of use of funds by component and by expenditure category; (c) a reconciliation statement for the given designated accounts; and (d) a variance analysis indicating forecasts and discrepancies relative to the actual budget. MESD, NSU, and each RCAD should produce these statements every semester and send them to the CCU. The CCU will be responsible for consolidating the data provided by the implementing agencies, and will send these to the World Bank within 45 days from the end of each semester. Templates for these tables have been appended to the POPM.

29. Project Consolidated Financial Statements (Etats Financiers du Projet (EFP)). The CCU should produce project financial statements annually and submit these to NCC for approval. The EFPs should include: (a) a cash flow statement; (b) a closing statement of financial position; (c) a statement of ongoing commitments; and (d) an analysis of payments and withdrawals from the loan and grant accounts.

30. Information Technology (IT) System. The interim financial reports and consolidated project financial statements should be produced using the M&E system that will be put into place so as to limit risks of delays and errors and to ensure data integrity. The complete implementation of this IT system will take place, at the latest, within the first year of project implementation. During the transition period, the CCU will use spreadsheets. The RCADs, MESD, and NSU should submit simplified summary statements that will be entered by the CCU. The template for these statements has been appended to the POPM.

7. Funds Flow

31. Payments on the Loan Designated Account will be made by the Central Bank of Tunisia (CBT) on the instructions of the CCU, while payments on the GEF Grant Designated Account will be conducted by the CBT either upon instruction from the CCU, or from the NSU.

32. Counterpart funds will be available from the Government budget. Payments from the budget will be made under the responsibility of the implementing agencies by payment authorization from the public accountant for withdrawal of funds from the Treasury or from the Regional Treasuries by the beneficiaries.

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8. Internal controls

33. The internal control system in place within the CCU conforms to the Government system and has been deemed satisfactory by the World Bank. The MESD and NSU also possess a reliable internal control system.

34. The BCT has an adequate internal control system for managing payments from the DAs and for fund withdrawals. 9. Audit of the Project Financial Statements

35. An annual audit of the Project accounts will cover all aspects of the Project, all sources of funds including funds from the GEF contribution, and all uses to be made of these funds. It will also cover the financial operations, internal control and financial management systems at the central level as well as at the three RCADs level, the MESD, and NSU. An auditor acceptable to the World Bank will conduct the audit, which will cover all operations implemented under Project incompliance with professional international auditing standards. The auditor will produce: (a) an annual audit report containing an opinion on the Project's annual financial statements of the whole project, regardless of the financing resources; and (b) a report on internal weaknesses observed while carrying out its assignment. These reports should be submitted to the World Bank by Ministry of Development and International Cooperation (MDIC) within six months from the closure of each fiscal year.

10. Disbursement Procedures

36. Loan and rant funds will finance project activities in accordance with the World Bank Disbursement Gidelines of May 2006. Withdrawal of loan and grant proceeds will be made through requests for advances, direct payments, reimbursement or Special Commitments accompanied by the required supporting documentation.

37. Designated Accounts (DAs). In order to facilitate the management of funds and disbursements for eligible project expenditures , the Government will open two designated accounts denominated in Dollars at the Central Bank of Tunisia (BCT), which will receive deposits from the IBRD loan and GEF grant, respectively.

38. The authorized allocation for the designated accounts will be US$3.6 million for the IBRD loan and US$900,000 for the GEF grant, which represent about four months of eligible expenditures. The BCT will be responsible for submitting regularly replenishment requests, accompanied by appropriate supporting documentation for expenditures made and reconciled bank statements.

39. Statements of expenditures. All requests for withdrawals of loan funds should be fully documented, with the exception of: (i) works under contracts costing US$3,000,000 or less; (ii) goods under contracts costing US$300,000 or less; (iii) consulting firms under contracts costing US$100,000 or less; and (iv) individual consultants or training programs contracts costing US$50,000 or less, for which reimbursement may be requested based on statement of expenditures Documentation for the expenditures incurred under contracts in an amount below the above SOE thresholds will be maintained at the PCU and will be made available for review by Bank supervision missions and by project auditors.

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40. All disbursements will be subject to the terms of the Loan and Grant Agreements as well as to the procedures defined in the disbursement letters.

Allocation of IBRD Loan Proceeds

Disbursement Category Proposed Financing (%) Allocation (exclusive of taxes) Amount (US$) Works 15,000,000 70% Goods, Consultant Services, 17,500,000 100% Training and Workshops Front-end Fee 90,250 Unallocated 3,509,750 Total 36,100,000

Allocation of GEF Grant Proceeds

Disbursement Category Proposed Financing (%)1/ Allocation Amount (US$) Works 3,800,000 100% Goods, Consultant Services, 5,000,000 100% Training and Workshops

Unallocated 930,000

Total 9,730,000

1/ Grants are tax exonerated.

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Summary of Funds Flow Diagram

Stage Action Management

Request for replenishment of the designated accounts sent to the World Bank 1 Central Bank of Tunisia

Replenishment of the World Bank designated accounts by the World Bank

2

Invoices sent to the CBT for MAWRF/ MESD payment from the designated accounts NO

NO

Approval Central Bank of Tunisia

YES

3 Payment of suppliers Central Bank of Tunisia

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11. List of actions for implementation or continuation

41. Project implementation support actions are summarized below:

Actions to be Taken: By when:

Finalization et adoption of the POPM Project Effectiveness

Designation of responsible persons for the Project by the MESD, NSU, and each RCAD and targeted training of project staff on Project Effectiveness financial management procedures of the project.

Strengthening the capacity regarding computer equipment of the Project Effectiveness RCADS.

Installation and establishment of M&E system Project Effectiveness

Targeted training for accounting and financial staff responsible Project Effectiveness for monitoring the project at central and regional levels.

Secure access to the ADEB EPA system by the DFIPO Project Effectiveness

12. Supervision Schedule

42. The frequency and scope of World Bank supervision missions will be adapted to the needs of the Project and will be carried out mostly at in the regions. Supervision missions will take place every six months, but may be more frequent if needed.

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Annex 8: Procurement Arrangements REPUBLIC OF TUNISIA: Second Natural Resources Management Project

General

1. The project supports investments in income-generating activities, basic infrastructure to improve access to services for rural communities (water, rural roads), agricultural production systems, pastoral and sylvo-pastoral activities, forest resources management, capacity-building of the rural community associations and groups, local and regional government, civil society, and local development associations. In support of GEF funding, the project will fund initiatives in land degradation and soil conversation, specific activities on wastewater reuse to explore the possibilities for scaling up the use of treated wastewater in agriculture and contribute to de-pollution of the Mediterranean Sea. 2. The main beneficiaries targeted by the project are the rural communities, government departments at the local, regional and national levels, civil society, and local development associations in the three Governorates of Jendouba, Kasserine and Medenine. The project has three components: (a) support to PDP investments, (b) support to the development of treated wastewater use on agricultural land, and (c) institutional strengthening and awareness raising. 3. Institutional setting. There will be two executing agencies: the DFIPO (of the MAWRF) and the DEQL (MESD). The DFIPO will coordinate the project implementation except those activities related to (i) the implementation of the feasibility of wastewater transfer (of which NSU will be technically responsible for the management) and (ii) the “environmental communication and awareness raising” sub-component – which will be coordinated by the DEQL. The three RCADs (MAWRF) will otherwise implement all the activities planned in the field and would be responsible for their procurement management.

4. Procurement for the proposed project would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006, and the provisions stipulated in the Legal Agreements. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

5. Procurement of Works: Works procured under this project would include: (i) Infrastructures: feeder roads (new and rehabilitation), drinking water connection projects including rehabilitation or new projects, etc.; (ii) works to mobilize water (drillings, wells, construction or rehabilitation water storage cisterns or tanks etc.); (iii) works for the conservation of water and soils ; (iv) plantations (arboriculture and pastoral plantations, consolidation works); and (v) works to set irrigated perimeters. The procurement will be carried out using the Bank’s Standard Bidding Documents (SBD) for all ICB and National SBD agreed with and satisfactory to the Bank. Services related to connection to water and electricity public networks could be procured through direct contracting respectively with the National Company for Gas and Electricity (STEG) and the National Company for Water

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Exploration and Distribution (SONEDE) as these two companies are unique and monopoly providers of this kind of services in Tunisia.

6. Procurement of Goods: Goods procured under this project would include: office equipment including computer equipment, sensitization equipment, vehicles (buses, cars and motorcycles), agriculture equipment, other equipments and materials and inputs including livestock for pet income generating activities as well as for experiments and demonstration kits. The procurement will be done using the Bank’s SBD for all ICB and National SBD agreed with or satisfactory to the Bank. 7. Selection of Consultants : Consultancy services financed under by Loan or the Grant will include: preliminary study for the transfer of the treated wastewater of Great Tunis, feasibility studies for the execution of the works (see description above) as well as the technical supervision of their execution ; preparation of forestry management plans; support to their implementation, recruitment of animators and technical advisors to the farmers, animators and trainers services for the benefit of agricultural development groups (ADG), RCAD staff and stakeholders; studies for the preparation of communication and environmental action plans and support to their implementation, assistance to strengthen the capacity of the RCADs in fiduciary aspects (part time recruitment of specialists in procurement, financial management, etc.); setting of M&E system in DFIPO.. Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultancy Guidelines. 8. Single Source Selection (SSS). In some RCADs, there are teams of consultants already performing satisfactorily; their recruitment may be made by Single Source Selection individually, following approval by the Bank when they are financed through the loan. SSS may also be used to contract some specialized institutions and research and training centers. The institutions that are Government Agencies have legal and financial autonomy. They deal with commercial transactions. However, they are – like all specialized agencies in all sectors – not really independent since their heads (the Managing Director or “Directeur Général) are nominated by the overseeing Minister (in this case it is the Minister of Agriculture). Apart from that, the agencies are responsible for running their business in accordance with their by- laws. So they can be considered as broadly independent and eligible in line with paragraph 1.11 (b) of the Consultants Guidelines. In terms of justification of the SSS, paragraph 3.10 (d) of the Guidelines apply as these agencies are the only source that can provide the required services and have skills and experience of exceptional worth in the field of the assignment. In addition, as many contracts will be well below the equivalent of $100,000, then 3.10 (c) would also apply. For the research and training centers the eligibility is justified on the basis of paragraph 1.11 (c) as they have a unique and exceptional knowledge of the context and skills and their participation is critical to the project implementation. These agencies and research and training centers are: (i) Office for Livestock and Pasture Development (OLPD) (Office de l’Elevage et des Pâturages) Regional directorates for the specialized extension work in livestock development and milk production (estimated contract amount is $190,000, Jendouba only). The OEP is uniquely placed to provide the services expected (subject specialists) because of its organization, infrastructure and long experience in the field (location and knowledge) – level of sophistication beyond capacity of RCAD, long experience promote livestock development and milk production; (ii) Agriculture Land Agency (ALA) (Agence Foncière Agricole) for land consolidation, being the only organization officially habilitated to provide the services expected, they 66

are represented in each Governorate, have a methodology and a level of specialization for consolidation techniques that gave them a reputation and trust with the communities (estimated contracts are $90,000 for Jendouba, $220,000 for Kasserine and $130,000 for Medenine); (iii) The Tunis International Center for Environmental Technologies (CITET) for capacity building of beneficiary stakeholders and knowledge transfer in relation to environment. CITET is unique and specialized in this field It was set up to satisfy the needs of Tunisia and other countries in the Arab-African and Mediterranean region in terms of transferring, adapting and promoting ecologically friendly technology. The CITET aims to provide help in strengthening skills and capacities building in protecting the environment, managing natural resources and mastering environmentally friendly technologies, in accordance with options taken at national level and regional priorities. Sustainable development is at the heart of the CITET’s mission. CITET has relevant materiel and human resources to deliver this service in an efficient and economic manner. (iv) Institute of Research and Education in Agriculture (IREA), a network of research and educations institutes, (estimated contracts are $160,000 per RCAD); (v) Regional Agricultural Training Centers (RATC) -- $110,000 per Governorate -- for dispensing specialized training (recycling, upgrading, etc.) to regional governmental organizations as well other stakeholders; (vi) Other types of trainings related to farming or non-farming skills to beneficiaries of income generating activities support may be delivered by vocational training centers or by private consultants (in that case the latter will be selected competitively based on their qualifications). These institutions are selected for being the best equipped (in infrastructure and training grounds) and having reasonable rates compared to private sector; and (vii) some regional Universities Research Centers.

B. Assessment of the agency’s capacity to implement procurement

9. The three RCADs and DFIPO’s capacity to execute procurement activities in the framework of this project has been assessed in May 2009 by I. Abdelghani, and then updated by S. Ben-Halima in November 2009. The report is filed with the project documents. The executing agencies would have the capacity to carry out and manage the procurement, under this financing, provided that the actions recommended in the Action Plan are taken before effectiveness. This does not apply to the Procurement Plan which should be provided before the approval of the financing. The risk has been rated as Moderate.

10. The analysis of procurement capacity, the issues and risks are summarized in the Action Plan shown in Table A below.

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Table A. Procurement Capacity – Risk analysis and Action Plan

Analysis of Procurement Issues/Risks Mitigation Measures Capacity 1. Organization. RCAD are not committed to - Make the implementation this responsibility and the arrangements including tasks that it entails There coordination and are some doubts about the reporting responsibilities full availability of the other clear in the Project staff. Operation Manual. - Ensure that a project focal staff is designated in each RCAD 2. Facilities, Support Capacity Capacity to produce - Available before and Staffing/Professional adequate procurement implementation start a Experience. documentation in a timely project implementation manner. manual, - Train the RCAD staff, including their Heads, on the specific applicable procedures, and the use of the Manual and of Standard Bidding Documents for NCB (as approved by the Bank). - Train a DFIPO staff member on procurement to help in the preparation of the documents for procurement and selection of consultants. - Ensure that project staff involved in procurement will have regular training to update their knowledge - 3. Record Keeping and Filing Capacity to cope with the Instructions and training given System. project volume of to ensure that project specific transactions and records files are kept for all keeping requirements. procurement and related transactions and recorded contract by contract. 4. Procurement Planning. Procurement Plans will not The executing agencies (and be ready before the RCADs) should finalize the implementation start. project detailed Action Plan (or PIP) with full costing and draft the project Procurement Plan. 5. Monitoring/Control Systems. Procedures used are not Have a Procurement Operation fully compliant with the Manual, describing in a clear Bank ones. manner the adequate procedures to follow for the implementation of the project.

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C. Procurement Plan

11. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on May 15, 2010 and is available at DFIPO. It will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. As agreed during the appraisal, a Project Operation Manual will be prepared and will include the description of applicable procurement procedures, as well as the detailed procurement plan for the first 18 months of activity approved during negotiations.

D. Frequency of Procurement Supervision

12. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended two supervision missions every year to visit the field and to carry out post review of procurement actions.

E. Details of the Procurement Arrangements Involving International Competition

13. Goods, Works, and Non Consulting Services

(a) List of contract packages to be procured following ICB and direct contracting: No ICB for Goods or Works are foreseen in this project.

(b) However for contracts estimated to cost above $3,000,000 per contract for Works and $300,000 for Goods ICB will apply and will be subject to prior review by the Bank, as well as for all direct contracting.

14. Consulting Services

(a) List of consulting assignments with short-list of international firms. Note that Farming Advisory Services contracts may be provided through smaller size contracts which could be lower than $200,000.

1 2 3 4 5 6 7

Ref. No. Description of Estimated Selection Review Expected Comments Assignment Cost Method by Bank Proposals (‘000 US$) (Prior / Submission Post) Date Preliminary Study 1,330 QCBS Prior for wastewater reuse Farming Advisory 1,300 QCBS Prior Services Médenine Farming Advisory 2,000 QCBS Prior Services Jendouba Farming Advisory 1,300 QCBS Prior Services Kasserine

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(b) Consultancy services estimated to cost above $100,000 per contract and all single source selection of consultants (firms) will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

15. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, are presented in the POPM., (financial; management, etc..). The methods to be used for the procurement under this project, and the estimated amounts for each method, as well as the threshold contract values for the use of each method are set in Table B below.

Table B. Thresholds by Method and Prior Review

Contract Subject to Threshold of Procurement or Bank Prior Review (for Category of Contracts Cost Selection each RCAD and Expenditures Estimate Method Implementing Agency) (‘000 $US)

1. Works >=3,000 ICB All Contracts <3,000 NCB First Contract <=50 Small Contracts Then Post review (3 quotations) First Contract 2. Goods >=300 ICB All contracts <300 NCB First Contract Then Post review <=50 Shopping First Contract (3 quotations) Then Post review 3. Consultant Services - Firms >=200 QCBS All Contracts >100 <200 CQS/LCS/FBS All Contracts <= 100 CQS/LCS/FBS First Two Contracts Then Post review SSS All Contracts regardless of value

- Individual >=50 Consultants Evaluation report Consultants Guidelines comparison of CVs, Section V TORs and draft contract. <50 Consultants First Contract as above Guidelines Then Post review Section V SSS All Contracts regardless of value

QCBS = Quality- and cost-based selection - LCS = Least cost selection - CQS = Selection based on consultant’s qualifications - FBS = Selection under a fixed budget - SSS = Single-source selection

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Procurement Capacity Assessment (May 2009 by Inal Abdelghani, updated November 2009 by S. Ben-Halima)

General

1. The project supports investments in income-generating activities, basic infrastructure to improve access to services for rural communities (water, rural roads), agricultural production systems, pastoral and sylvo-pastoral activities, forest resources management, capacity-building of the rural community associations and groups, local and regional government, civil society, and loc development associations. In support of GEF funding, the project will fund initiatives in land degradation and soil conversation, specific activities on wastewater reuse to explore the possibilities for scaling up the use of treated wastewater in agriculture and contribute to several de-pollution of the Mediterranean Sea.

2. The main beneficiaries targeted by the project are the rural communities, government departments at the local, regional and national levels, civil society, and local development associations in the three governorates of Jendouba, Kasserine and Medenine. The project has four components: (a) improving water access and management in rural areas, (b) supporting sustainable agricultural production systems, (c) supporting soil and water conservation, (d) capacity building and awareness-raising.

Institutional setting

3. There will be two executing agencies: the DFIPO (of the Ministry of Agriculture, Water Resources and Fisheries) and the DEQL (Ministry of Environment and Sustainable Development). The DFIPO will coordinate the project implementation except those activities related to (i) the implementation of the preliminary study for the transfer of the treated wastewater of Great Tunis, (of which NSU will be technically responsible for the management) and (ii) the “environmental communication and awareness raising” sub- component – which will be coordinated by the DEQL. Each of the three RCADs (in the governorates of Jendouba, Kasserine and Medenine) will otherwise implement all the activities planned in the field and would be responsible for their procurement management.

4. The RCADs’ procurement capacity is known by the Bank through the implementation of the on-going Second Water Sector Investment Project. They have specific staff in charge of procurement and are organized in such a way that they can deal with procurement management and keep records of all transactions. However, for this project to ensure that the specific applicable procedures are well understood and applied, it is recommended that (i) before implementation a POPM is made available, and (ii) training for the RCAD staff, including their Heads, be carried out on the specific procedures applicable, and on the use of the Manual and of Standard Bidding Documents for NCB (as approved by the Bank).

5. Since the MAWRF has several projects financed by the Bank, it would be very helpful that the DFIPO supports the various implementing agencies in procurement processing. This could be done by training a staff member in this Directorate. This trained person would: (i) train and advise the executing agencies on procurement; (ii) review and monitor all procurement plans and execution of contracts; and (iii) review and follow up all contracts subject to Bank prior review.

6. As to the DEQL, they will be involved only in the procurement process related to the “environmental communication and awareness raising” sub-component. They have the

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capacity to cope with the management of all related procurement as well as keeping properly the records and reporting, as they are presently managing the coordination and procurement of the “Gulf of Gabés” project which includes way much more activities of the same type.

7. Finally, it should be reminded that the NCB procedures have been reviewed by the Bank which subjected their use to the following exceptions – that will be spelled out in the PAD, the Financing Agreement and the POPM. To ensure broad consistency with the Procurement Guidelines, the following provisions would be applied when using NCB under the future Project.

(a) The bidding document clearly explains the bid evaluation, award criteria and bidder qualification criteria;

(b) Any bidder registered in an eligible country, as defined in paragraphs 1.6 to 1.8 of the Procurement Guidelines will be eligible to bid; therefore no restriction based on nationality of bidders or origin of goods shall apply and foreign bidders shall not be subject to any unjustified requirement which will affect their ability to bid;

(c) Government-owned enterprises in the Borrower’s country may participate only if they can establish that they (i) are legally and financially autonomous; (ii) operate under commercial law, and (iii) are independent from contracting entity;

(d) Bidders will be allowed to deliver their bids by mail or by hand before the expiration of the deadline for submitting bids;

(e) Technical and financial envelopes are submitted together and opened in public, simultaneously during a unique session open to the public for works, goods and non- consulting services; amounts shall be read aloud during the public session; bidders or their representatives are authorized to attend the bid opening session. The date, time and place for bid opening shall be announced in the invitation to bid; these date and time shall be the same as for the deadline for receipt of bids or immediately thereafter;

(f) Bids are evaluated on price and any other criteria disclosed in the bidding documents and quantified in monetary terms and contracts are awarded to the qualified bidder having submitted the lowest evaluated responsive bid, and price would not be negotiated with the lowest evaluated bidder except under the provisions stated in paragraph 2.63 of the Procurement Guidelines;

(g) Procedures would include the publication of the evaluation results, the contract award and provision for bidders to protest;

(h) If foreign firms wish to participate, they would be allowed to do so and no provision for preferential treatment of national firms or mandatory association with a national firm or prior registration in the country of the Borrower would be applied;

(i) Prior to issuing the first call for bids, a draft standard bidding document to be used under National Competitive Bidding procurement must be submitted to and found acceptable by the Bank; and

(j) Each bidding document and contract for goods and works to be financed from the proceeds of the future Loan would provide that the supplier, contractor and subcontractor would permit the Bank, at its request, to inspect their accounts and 72

records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to obstructive practice.

Summary of Findings and Actions

The analysis of procurement capacity, the issues and risks are summarized in the Action Plan shown in Table A below.

Table A. Procurement Capacity – Risk analysis and Action Plan

Analysis of Issues/Risks Mitigation Measures Procurement Capacity 1. Organization. RCADs are not - Make the implementation committed to this arrangements including responsibility and the coordination and reporting tasks that it entails. responsibilities clear in the There are some doubts Project Operation Manual. about the full availability - Ensure that a project focal of the other staff. staff is designated in each RCAD 2. Facilities, Support Capacity to produce - Avail before implementation Capacity and adequate procurement start a project implementation Staffing/Professional documentation in a manual, Experience. timely manner. - Train the RCAD staff, including their heads, on the specific applicable procedures, and the use of the Manual and of Standard Bidding Documents for NCB (as approved by the Bank). - Train a DFIPO staff member on procurement to help in the preparation of the documents for procurement and selection of consultants. - Ensure that project staff involved in procurement will have regular training to update their knowledge. 3. Record Keeping Capacity to cope with - Instructions and training given and Filing System. the project volume of to ensure that project specific transactions and records files are kept for all keeping requirements. procurement and related transactions and recorded contract by contract.

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4. Procurement Procurement Plans will - The executing agencies (and Planning. not be ready before the RCADs) should finalize implementation start. the project detailed Action Plan (or PIP) with full costing and draft the project Procurement Plan. 5. Monitoring/ Procedures used are not - Have a Procurement Control System. fully compliant with the Operation Manual, describing Bank ones. in a clear manner the adequate procedures to follow for the implementation of the project.

Overall Risk Assessment Moderate Prior Review Thresholds Proposed

Goods: US$ 300,000 (equivalent) Works: US$3,000,000 (equivalent) Consulting: US$ 200,000 (equivalent) Frequency of procurement supervision missions proposed: One every six months (includes special procurement supervision for post-review) Comments:

Exceptions for use of NCB To ensure broad consistency with the Procurement Guidelines, the following provisions would be applied when using NCB under the future Project.

a. The bidding document clearly explains the bid evaluation, award criteria and bidder qualification criteria;

b. Any bidder registered in an eligible country, as defined in paragraphs 1.6 to 1.8 of the Procurement Guidelines will be eligible to bid; therefore no restriction based on nationality of bidders or origin of goods shall apply and foreign bidders shall not be subject to any unjustified requirement which will affect their ability to bid;

c. Government-owned enterprises in the Borrower’s country may participate only if they can establish that they (i) are legally and financially autonomous; (ii) operate under commercial law, and (iii) are independent from contracting entity;

d. Bidders will be allowed to deliver their bids by mail or by hand before the expiration of the deadline for submitting bids;

e. Technical and financial envelopes are submitted together and opened in public, simultaneously during a unique session open to the public for works, goods and non- consulting services; amounts shall be read aloud during the public session; bidders or their representatives are authorized to attend the bid opening session. The date, time and place for bid opening shall be announced in the invitation to bid; these date and time shall be the same as for the deadline for receipt of bids or immediately

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thereafter;

f. Bids are evaluated on price and any other criteria disclosed in the bidding documents and quantified in monetary terms and contracts are awarded to the qualified bidder having submitted the lowest evaluated responsive bid, and price would not be negotiated with the lowest evaluated bidder except under the provisions stated in paragraph 2.63 of the Procurement Guidelines;

g. Procedures would include the publication of the evaluation results, the contract award and provision for bidders to protest;

h. If foreign firms wish to participate, they would be allowed to do so and no provision for preferential treatment of national firms or mandatory association with a national firm or prior registration in the country of the Borrower would be applied;

i. Prior to issuing the first call for bids, a draft standard bidding document to be used under National Competitive Bidding procurement must be submitted to and found acceptable by the Bank; and

j. Each bidding document and contract for goods and works to be financed from the proceeds of the future Loan would provide that the supplier, contractor and subcontractor would permit the Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to obstructive practice.

Improvement of the procurement management by: - adopting a manual of procedures for project implementation; - use of SBDs for NCB agreed by the Bank; - use of World Bank procedures and standard bidding documents for ICB; - use of Bank procedures and standard RFP documents for the Selection of Consultants; - training in procurement a staff at the coordinating unit; - designating the person responsible for procurement in each executing agency; - distribution of electronic documentation (loan agreements, Manual, SBD for NCB and ICB, appraisal report) to all the executing agencies; - training sessions to all the procurement specialists of the executing agencies, including at the central level, in addition to the key members of the “commissions des marches”; and - preparing and monitoring proactively procurement plans.

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Annex 9: Economic and Financial Analysis REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Introduction 1. This Annex presents the financial and economic analysis hypotheses and results. The financial analysis aims at demonstrating that income-generating activities - on farm (cereal production and other) as well as off-farm (beekeeping, handicrafts, etc.)– as proposed in NRMP2, are financially profitable. On the other hand, the economic analysis aims at demonstrating that, from an economic perspective, the project as a whole is viable, taking into account, as much as possible, all quantifiable and additional costs and benefits in a situation without project. To that end, financial prices are converted into economic values. Table 1 in the Appendix shows the main results.

Financial and economic prices

2. On the subject of Tunisian national currency (Tunisian Dinar [DT]), it should be noted that official currency exchange into foreign currencies is free, and there are no parallel markets. Thus, the average exchange rate as of December 2009 (1 US dollar = 1.3 Tunisian Dinar) has been used for conversion calculations into economic values (TD versus US$).

Financial prices for major agricultural products: cereals (wheat and durum wheat, barley), garden produce, olive oil and fodder, are "border field" prices. The financial value of livestock production, mainly meat and dairy products, is expressed through the (parallel) value of forage production, more specifically in terms of fodder unit (Unités Fourragères - UF).

3. There are no significant distortions in commercial markets for agricultural products in Tunisia, except for wheat, barley, olives, and some fertilizer. As a result, financial prices are considered valid approximations for the products economic value, except for the mentioned crops for which shadow prices were calculated. For example, fruits and vegetables financial prices are very good approximations of their economic value because the entire production, at least in the areas of project intervention, is destined for local markets.

Tunisia being a net importer of wheat and barley; their economic prices were thus calculated on an import parity basis. In the case of olive oil for which Tunisia is a net exporter, the economic price has been calculated on an export parity basis to member states of the European Union. In the case of imported inputs (nitrogen fertilizer, DAP, superphosphate 45), economic costs were calculated on the basis of FOB GULF / UE projected prices in 2015.

4. The average financial cost for agricultural labor per day in the project areas is 7 DT / day. Given the non-negligible unemployment rate in these rural areas, the workforce economic value (shadow-price) has been estimated using a conversion factor of 0.9 to account for underemployment. In the case of fodder, the economic value of a UF is based on the parity price of one kg of barley. The economic value of irrigation water is estimated at 0.3 DT/m3, almost twice its financial (official) cost (see Table 1). Indeed, the latter cost represents only part of the value of the resource because it covers only the cost of energy, management and maintenance of installed infrastructures. Amortization of drilling and other types of equipment (other than hydro-mechanical) are not included in the water fees, hence a substantial subsidy from the state.

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Project benefits and costs

5. Benefits. Project (quantifiable) benefits are mainly agricultural production increases in the project areas (see Table 2). These increases, although significant in absolute terms, represent only a small portion of the domestic production – for example : about 17,600 tons of olives, or 2.5 percent of total production - and therefore won’t constitute a problem in terms of commercialization. Moreover, in the project areas as in the rest of the country, the marketing of agricultural products is done either through traditional local markets, or regional markets. With a relatively well-developed road infrastructure and a sufficient network of specialized private establishments and cooperatives, farmers usually don’t have a problem marketing their produce.

6. Tables 3, 4, and 5 show financial profit margins for the main crops concerned by the project and by area of intervention (governorate). (See below for comments on these operating profits). Moreover, the economic benefits of the project are shown in Table 6. They result from increases in agricultural production to which profit margins are applied after translation into economic terms using prices in Table 1.

7. Costs. In order to calculate economic profitability, project costs (shown in Table 7) consist of basic costs in (2009) constant TD and before taxes, plus their physical contingencies as extracted from COSTAB tables. Investment costs include all project components, and replacement costs concern repetitive renewal - in time and based on their respective lifetime – of transportation means, equipment/materials (office, computer, and others) acquired under the project. Recurrent costs consist mainly of operation and maintenance of transport means, equipment and materials.

(Costs of agricultural production under the project are already taken into account in the calculation of profit margins for each crop).

Financial and economic analysis

8. Financial analysis. Profit margins in Tables 3, 4, and 5, are in line with the evolution of cropping patterns as will be promoted by the project - that is to say, they are substantial for crops with high value added we want to promote (mainly horticultural and irrigated tree crops), and more modest for cereals and fallow (necessary for crop rotations but with lower value-added). Although the results show significant profitability, or at least acceptable for almost all crops, it is recommended that the preparation of technical-economic reference books (for use in providing agricultural advice) include calculations of profitability threshold for each crop (e.g. minimum areas to be sown or minimum yields to achieve), so as to ensure maximum profit margins when possible.

9. Economic analysis. Tables 8 and 9 include the project Economic Rate of Return (ERR) and an analysis of its sensitivity to adverse situations. The ERR is 16 percent over 20 years and the analysis indicates that this rate is slightly more sensitive to declines in profits than to cost overruns (comparable in magnitude). The relatively high level of profitability is mainly explained by three factors: (i) the introduction of improved agricultural technologies/practices through significantly strengthened advisory services; (ii) as a consequent, substantial increases in high value added crops - mainly olives, fruits, and vegetables; and (iii) establishment of rural infrastructures resulting in improved marketing. Moreover, the ERR should be considered an absolute minimum because non-quantified benefits such as those discussed below are not included in the flows.

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Revenues generated by Income-Generating Activities

10. It is very difficult to predict the exact types and numbers of Income-Generating Activities (IGAs) which will be requested and successfully initiated during project implementation. Therefore, these activities were not taken into account in calculating the ERR. However, Tables 10 and 11 show the possible benefits that can be derived from two standard IGAs: lamb fattening and carpet making. In the first case, the profit margin (almost 17 DT per lamb or 935 DT for two litters per year) is not necessarily the result of sales. It is indeed possible that the benefit is in the form of food consumption by the family. In the second case, the profit margin is 1,200 DT per year for an activity that can be conducted in parallel with agricultural activities.

Non-quantified benefits (and hard to quantify)

11. The main benefits difficult to quantify - and thus not quantified in preparing this project – concern the following:

Improvements in soil/water conservation. These improvements will result in a gradual reduction of erosion, as well as improved soil fertility, and, consequently, of fodder and horticultural production.

Improvement of rural infrastructures. Investments in Rural Feeder Roads and potable water supply will result in an improvement of the populations’ living conditions. In particular, the rehabilitation and/or construction of Rural Feeder Roads will facilitate access to some areas virtually landlocked, boosting input supply and marketing of agricultural products, mainly for horticultural and tree crops.

Increases in employment. A substantial number of temporary but also permanent jobs will be created following increases in agricultural production and IGAs but also because of the many civil works planned under the project.

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Table 1 (TD of 2009) Inputs and Outputs Financial Conversion Unit Economic price price rate Seeds and plants Selected durum wheat Kg 0.65 1 0.65 Local durum wheat Kg 0.54 1 0.45 Selected barley Kg 0.41 1 0.41 Local barley Kg 0.54 1 0.45 Local oats Kg 0.95 1 0.95 Selected oats Kg 1.08 1 1.08 Field bean Kg 0.95 1 0.95 Broad bean Kg 1.35 1 1.35 Chickpeas Kg 2.7 1 2.7 Lentils Kg 2.16 1 2.16 Lucerne Kg 11.5 1 11.5 Lucerne (gabésienne) Kg 18.9 1 18.9 Sulla (unhulled) Kg 4.05 1 4.05 Ray-grass Kg 5.4 1 5.4 Maize Kg 1.35 1 1.35 Sorghum Kg 3.36 1 3.36 Prickly pear cactus double 0.34 1 0.34 Tomato plants Unit 0.04 1 0.04 Improved tomato plants Unit 0.081 1 0.081 Late fall potato plants Kg 0.95 1 0.95 Potato plants Kg 1.96 1 1.96 Olive plants Unit 4.46 1 4.46 Acacia plants Unit 0.14 1 0.14 Apple plants Unit 2.16 1 2.16 Pistachio plants Unit 4.72 1 4.72 Peach plants Unit 1.08 1 1.08

Fertilizers and ameliorators Urea 46 Kg 0.58 0.5 0.29 * Nitrogen Kg 0.46 0.8 0.39 * Super 45 Kg 0.47 0.9 0.44 * Potassium sulfate Kg 0.23 1.3 0.31 * DAP Kg 0.59 0.8 0.46 * Manure Kg 0.03 1 0.03

Treatment products Fungicide for potatoes For 1 ha 203 1 203 Phytosanitary treatment for apple trees For 1 ha 945 1 945

Mechanization Plowing H 24 1 24 Backcross H 18 1 18 Seeding with seeder (Semis avec semoir) H 18 1 18 Phytosanitary treatment H 18 1 18 Fertilization H 18 1 18 Hay harvesting H 18 1 18 Combine-harvester H 95 1 95

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Baling 100 bales 108 1 108

Work Seasonal work J 9.5 0.9 8 Supervisory staff J 19 1 19

Water Irrigation water m3 0.16 1.9 0.3

Products Durum wheat Q 74 0.9 67 Soft wheat Q 61 0.7 42 * Barley Q 54 0.9 50 Broad bean Q 54 1 54 Field bean Q 88 1 88 Chickpea Q 169 1 169 Lentils Q 203 1 203 Olives Q 95 0.9 86 * Tomato Q 20 1 20 Potato Q 40 1 40 Apple Q 122 1 122 Peach Q 81 1 81 Melon Q 45 1 45 Water melon Q 34 1 34 Green almond Q 74 1 74 Dry almond Q 324 1 324 Pistachio Q 945 1 945 Pastoral production UF 0.54 0.68 0.37 Dry matter (pasture, etc.) Q 38 0.68 26 Forage oats Q 41 0.68 28 Forage straw Q 31 0.68 21 Field bean and lentils forage Q 15 0.66 10 Coppicing acacia Q 11 0.63 7 Note : « * » indicates price projection for 2015.

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Table 2

Increase in production in the three governorates areas of intervention

Products unit Year 1 Y. 2 Y.3 Y. 4 Y. 5 Y. 10 Y.15 Y. 20

Olives q 1,245 4,440 12,280 24,555 49,595 132,875 165,080 176,360 Peaches q 0 0 1,300 6,450 14,100 81,700 107,600 107,600 Apples q 2,188 4,375 10,088 17,988 27,225 35,250 35,250 35,250 Wheat (durum) q 5,220 12,090 24,930 44,790 64,050 52,200 52,200 52,200 Barley q 3,005 7,810 14,720 22,835 31,250 12,050 12,050 12,050 Fruit & vegetables (tomatoes) q 26,500 53,000 106,000 185,500 265,000 265,000 265,000 265,000 Fruit & vegetables(potatoes)vvegetable (chickpeas) q q 8,715 -25 17,430 -50 34,860 250 61,005 1,225 87,150 3,250 87,150 3,250 87,150 3,250 87,150 3,250 LeguminousForage (oats) q hay 9,728 19,455 38,910 68,093 97,275 97,275 97,275 97,275 Forage (green) q MS 1,993 8,005 12,028 18,064 24,100 24,100 24,100 24,100 UF (pastoral) UF 22,500 81,250 216,375 400,750 763,625 1,567,000 1,417,000 1,432,750 Straw q 4,499 8,998 17,996 31,493 44,990 44,990 44,990 44,990 Wood (sylvo-pastoral perimeters) q 0 0 0 0 5,000 5,000 5,000 5,000 Source: PGRN2 preparation report

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Table 3: Profit margins – Jendouba

Investment Without With Type of farming Margin Costs Project Project Dry Arboriculture (old olive trees) 379 543 164 Arboriculture (young olive trees in place) -76 543 619 Arboriculture (extension olive trees) 2660 543 543 Wheat (durum) 925 1255 330 Barley 586 885 299 Forage (oats) 481 914 433 Forage (sulla) 0 970 970 Leguminous (chickpeas) 92 398 306 Fallow land 224 Sylvo-pastoral perimeters (UF) 950 460 Permanent meadow 1211 675 675 Grazing land improved through deferred 55 240 240 grazing Grazing land improved through sowing 180 400 400

Irrigated Arboriculture in place (olive trees) 3000 694 1183 489 Arboriculture (peach trees) 5600 5628 5628 Fruit & vegetables (tomatoes) 7701 7907 206 Fruit & vegetables (potatoes) 3000 1775 2821 1046 Forage (oats) 575 1383 808 Forage (ray-grass) 1859 1859 Leguminous (peas, broad beans) 550 Wheat (durum) 1991 2393 402

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Table 4 : Profit margins – Kasserine

Investment Without Type of farming With Project Margin Costs Project

Dry Arboriculture (old olive trees) - 401 405 4 Arboriculture (young olive trees) - 16 405 389 Arboriculture(extension young olive 2170 405 405 trees) Wheat (durum) - 306 543 237 Barley - 283 546 263 Forage (oats) - 468 595 127 Forage (green oats) - 374 974 600 Forage (sulla) - 849 849 Fallow - 140 -140 Sylvo-pastoral perimeters (UF) 950 349 349 Cactus plantation 890 376 376 Grazing land improved through deferred 57 120 120 grazing Grazing land improved through sowing 166 160 160

Irrigated Arboriculture (apple trees) - 9384 10643 1259 Arboriculture (peach trees) 5600 4404 4404 Fruit & vegetables (tomatoes) - 4112 6810 2698 Fruit & vegetables (potatoes) - 1453 2392 939 Forage (oats) - 952 1592 640 Forage (green oats ) - 296 974 678 Forage (alfalfa) 2500 1802 1802 Wheat (durum) 2500 1945 1945

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Table 5: Profit margins – Medenine

Type of farming Investment Without With Margin Costs Project Project Dry Arboriculture (old olive trees) 255 271 16 Arboriculture (young olive trees) 45 271 226 Arboriculture (old olive trees -Jessours) 921 1050 129 Arboriculture (young olive trees Jessours) 151 980 829 Arboriculture (extension young trees) 840 271 271 Wheat (durum) 50 -50 Barley 50 -50 Grazing land improved through deferred 71 48 48 grazing

Irrigated Arboriculture (apple trees) 3203 8224 5021 Arboriculture (peaches) 6880 0 5171 5171 Fruit & vegetables (tomatoes) 2745 4158 1413 Fruit & vegetables (potatoes AS) 2652 2963 311 Forage (lucerne) 1139 2348 1209 Forage (green oats) 2500 236 236 0 Barley 2500 543 768 225

Table 6: Additional Project Benefits (‘000 TD)(2009)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20

Jendouba -1,225.1 -1,006.7 81.8 1,977.6 4,108.6 6,328.0 7,310.7 8,165.5

Kasserine -2,051.2 -2,262.1 -1,539.0 -320.7 1,819.4 9,697.8 12,559.7 12,752.3

Medenine -115.8 -225.0 -1,118.9 -496.0 1,097.1 4,360.1 5,518.3 5,901.4

Total -3,392.1 -3,493.8 -2,568.0 1,160.8 7,025.2 20,386.0 25,388.8 26,819.2

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Table 7: Project Costs with “Shadow Pricing” (in thousands of TD – 2009 prices)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20

Investment 5,900.5 16,999.5 22,462.2 1,5437.3 9,356.6 Replacement 7.3 653.6 Recurrent 36.9 75.0 93.4 158.9 261.2 313.6 313.6 313.6 Total 5,937.4 17,074.5 22,555.6 15,596.2 9,617.8 320.9 967.2 313.6

Table 8: Economic Rate of Return

(‘000 TD) Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 (2009)

Total Benefits -3,392.1 -3,493.8 -2,568.0 1,160.8 7,025.2 20,386.0 25,388.8 26,819.2

Total Costs 5,937.4 17,074.5 22,555.6 15,596.2 9,617.8 320.9 967.2 313.6

Cash Flow -9,329.6 -20,568.3 -25,123.6 -14,435.4 -2,592.6 20,065.1 24,421.6 26,505.6

Note: see Tables 6 and 7.

Table 9: Sensitivity Analysis

ERR 16%

Cost overrun by 15% 15%

Cost overrun by 30% 13%

Decrease in benefits by 15% 14%

Decrease in benefits by 30% 12%

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Table 10: Potential benefits for lamb fattening

Fattening period 90 days Age in the beginning 3 months Weight in the beginning (kg) 20 Sale weight (kg) 35 Weight gain 15

Sales value (DT) 90 Expenditure 73 Feeding 50 Labor 22 Veterinary expenditures 1.5 Profit margin per lamb 16.7

Lambs per rotation 30 Losses per rotation 2 Stratum per year 2

Total benefits for 56 lambs (TD) 935

Table 11: Potential benefits for handicraft

Sales (TD) Total (TD) Carpets 1000 Margoums (Berber carpets) 1000 Other items 500 Total 2500 Expenses (TD) Raw materials 500 Labor 800 Total 1300 Profit margin (TD/year) 1200

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Annex 10: Safeguard Policy Issues REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Safeguard Policies

1. Physical involuntary resettlement of populations is not foreseen. OP 4.12 is triggered to address any potential private land acquisition issues. A Resettlement Policy Framework (RPF) has been prepared by the counterparts and shared for consultation on November 23, 2009. Both French and English versions were disclosed on specific government websites on January 27, 2010 and February 5, 2010, and other relevant places in-country, including project governorate offices. These documents were disclosed in country on January 27, 2010 and at the World Bank Infoshop on February 16, 2010. An Arabic version of the RPF can be made available upon request.

2. The RPF was prepared by the Tunisian Ministry of Agriculture, Water Resources and Fisheries (MAWRF) to address the requirements of the Operational Policy 4.12 for land acquisition and/or potential loss of economic activities or other assets by affected persons as a result of land acquisition for Project activities. It is not expected that the NRMP2 will result in any displacement or involuntary “physical” resettlement of populations; however, it will require the use and /or access to private lands for drilling purposes, construction of potable water supply networks (AEP) and Rural Feeder Roads construction or rehabilitation, new or rehabilitated irrigation systems with surface water and/or treated wastewater (eaux usées traitées - EUT).

3. The various procedures for land mobilization for NRMP2 implementation include: (a) voluntary transfer; (b) amicable acquisition; (c) temporary occupation, and (d) expropriation for public purpose investment

4. The first three procedures will be the privileged procedures of land acquisition; however land expropriation is not excluded given the public utility nature of the project. The RPF provides the Tunisian legal framework, the institutional framework for NRMP2 land issues, the procedures applied by the Tunisian government for voluntary cession, amicable cession, temporary occupation, and land parcels expropriation, the terms and conditions for land mobilization for sub-projects, the survey of affected persons, the determination of right-holders, eligibility on land acquisition process and other relevant information, the evaluation methods for assets and compensation, as well as grievance mechanisms of affected persons, in case of unsatisfactory arrangements.

5. The RPF describes the resettlement abbreviated plan and the process leading to their preparation and approval. The RPF includes institutional arrangements, outlining the roles and responsibilities for the various stakeholder groups involved, as well as implementation and monitoring of their mitigation measures. The RPF compares the above to Bank’s OP 4.12 requirements and define additional measures needed to reach compliance. In order to implement the RPF, the following accompanying measures are planned :

- four one-day training sessions for MAWRF staff involved at the headquarters level, as well as the three RCADs; training will focus on: (i) the Tunisian legal framework relating

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to land purchase, transfer, and temporary occupation; (ii) OP 4.12 procedures that will apply to NRMP2 land issues; and (iii) the RPF , and

- consultants’ assistance: if the human resources available to the three RCADs do not prove sufficient to implement the land acquisition framework plan in compliance with Safeguard Policy OP 4.12, consultants may be recruited for a total of 6 person months; they also will have to follow the same training as MAWRF staff mentioned above.

6. Environmental Assessment and Forests policies are triggered. The Project applied the Bank’s Operational Policy 4.00 on Piloting Use of Borrower Systems for environmental assessment safeguards and for Forests. In accordance with OP4.00, the Bank conducted a Safeguard Diagnostic Review (SDR) to determine the equivalence and acceptability of the national systems for environmental impact assessment and forests and identify any gaps. The SDR was subject to consultation with Stakeholders in Tunisia and disclosed. It includes Equivalence Analysis, Acceptability Assessment and appropriate gap-filling measures. The gap- filling measures were all included in a Framework Document for Environmental and Social Protection (FDESP) also known by its French acronym as the Document Cadre de Protection Environnementale et Sociale (DCPES) which constitute an Annex to the SDR.

7. The Equivalence Analysis concluded that most of the Tunisian laws and regulations applicable to environmental assessment in the water sector are aligned with the objectives and operational principles listed in OP4.00, and that gaps can be filled through Project-based measures. The principal gap relates to public consultation and disclosure of EIA reports as well as a lack of environment analysis of subprojects in forestry and in irrigation and agriculture using surface and groundwater. The Acceptability Analysis shows that environmental assessment is only conducted for projects that are using treated wastewater in agriculture and irrigations that are in conformity with the Tunisian legal and administrative requirements, however, no environmental assessment or analysis was conducted for agriculture and irrigations projects, rural and forestry rods and hill dams other than those that are using treated wastewater. There are, therefore, significant gaps between the Tunisian legal environmental system and its application in the forestry and irrigations projects. Such weaknesses are a lack of quantification of impacts and mitigating measures for all activities, a lack of capacity at the RCADs for environmental assessment, and an absence of monitoring and enforcement mechanism. These gaps can be filled in with the actions that the Government has defined in the framework document for environment and social protection (FDESP) which requires: (a) an EIA will be prepared including consultation and disclosure for all investments using treated wastewater; (b) preparation and disclosure of sub-project-specific Environment Management Plan (EMP) for investments using surface and groundwater, hill dams, forestry management and for which the magnitude and severity of impacts are significant; and (c) the establishment of a system to monitor and follow up on the implementation of mitigating measures identified in the sub- project-specific EMP.

8. Environmental Protection Measures. MAWRF took the following actions to fill in the equivalence and acceptability gaps before negotiations: (a) the preparation of the FDESP which include an environmental screening systems consisting of four categories for all subprojects to be financed under the Project, as well as the detailed description of the environmental documentation, consultation and disclosure pertaining to each of the categories; (b) the

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integration of the FDESP into the project implementation manual; (c) the assignment of staff from the soil department of the three RCADs who will oversee the implementation of the FDESP; (c) training of staff from the three RCADs in environmental assessment and social safeguards. An amount of $274,000 has been allocated in the loan for the gap-filling measures. Annex 10 shows the executive summary of Equivalence and Acceptability Assessment (EAA).

9. Public Consultation and Disclosure. The MAWRF and the Bank jointly organized a public consultation workshop to discuss the environmental and social safeguards documents. The workshop took place in Tunis on November 23, 2009 and included representatives of public and private sector entities, NGOs and the media.

Social Analysis

10. Running from 1998 to 2004, NRMP covered the three Governorates of Jendouba, Kasserine, and Medenine in the North, Center, and South of the country, respectively. It comprised a pilot phase to test the implementation of a participatory development approach designed to improve the living conditions and incomes of rural populations and ensure the sustainable management of natural resources. NRMP2 consolidates the achievements of NRMP by launching the gradual institutionalization of this partnership approach to participatory and integrated development.

1. Introduction of NRMP2 intervention areas

11. NRMP2 interventions will involve 72 Imadas spread across 16 delegations (27 in Jendouba, 27 in Kasserine, and 18 in Medenine), and eventually other Imadas. These Imadas were selected based on: (i) the need to consolidate NRMP achievements, namely, current socioeconomic development levels; (ii) the severity of natural resource management problems; and (iii) the degree of interest among communities in joining the participatory and integrated development process and their ability to do so.

12. These three regions of Tunisia are considered among the most vulnerable to various phenomena relating to natural resource degradation and a decline in agricultural and forestry potential. The populations affected by NRMP2 generally reside in mountainous and forested areas (in Jendouba and Kasserine) or in range areas (in Medenine) and thus require specific interventions. These areas are characterized by a high number of small-scale producers and significant rural-urban migration. Many households cannot depend solely on agricultural and forestry activities for an adequate income and full employment. The difficulties faced by farmers and cattle ranchers hinder the rehabilitation and preservation of current production potential as well as the development of human resources and local expertise. Such constraints primarily stem from: (i) limited investment capacities; (ii) difficulties in accessing credit; (iii) lack of training and supervision; and (iv) the absence of socio-professional organizations capable of meeting the needs of small-scale farmers and vulnerable groups.

13. The populations are divided into socio-geographic units comprising extended families with common socio-economic interests centered around natural resource utilization (water, pasture, forests). Despite the existence of relationships based on mutual aid and solidarity at the family and wider social levels, these groups do not constitute structured organizations that can

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represent the population before administrative authorities or help them resolve development constraints. The areas affected by the project have the following characteristics:

 In hilly areas, community organizations revolve around managing a few water supply sources used for small-scale irrigation or as drinking water and using common grazing lands and forestry or pasture areas.

 In forested areas (such as Souk Ejemaa and Eddir), household source of income is related to the right of use exercised by the population through the management of some forest resources (grazing land, firewood, medicinal plants, harvesting and processing of specific products). Available labor is partially absorbed by forestry related works and by employment with logging companies (cork and wood processing, myrtle distillation, mushroom picking). Users also collect a range of products that they sell in small quantities (umbrella pine seeds, mushrooms, some forest fruits). These populations use forest clearings where they have set up small orchards for home consumption and semi-forest trees (walnut, cherry, bay), the products of which are generally marketed. These plantations are used to grow vegetables for family consumption and sometimes for marketing.

 Border areas are a major Government concern. These regions are generally rugged landforms with an abundance of forest areas. Given that they are less well equipped to access services, this creates disparities between these areas and the rest of the country. Their residents, especially men, are more inclined toward trading. Due to very difficult conditions (no access to micro-credit, poor supervision by technical services, supply and trading difficulties resulting from the absence of access roads), farming and craft activities engaged in by women are largely unprofitable. Commercial activities with Algeria play a significant role in improving the sources of income of many families. This trade involves some agricultural products, especially pastoral products, vegetables, and fruits.

14. In Medenine, agricultural production systems focus on developing small-scale irrigation around shallow and private wells. Its inhabitants are very keen on these agricultural activities, which have become widespread in some farms due to private investments resulting from migration (family members working abroad or in other sectors such as trade). Imadas in this region generally cover larger areas and homes within the same douar are isolated. However, such seclusion does not lead to a lack of social cohesion as members of the same community usually help one another. Due to this dotted settlement pattern, the mobilization of populations during NRMP required developing a strategy tailored to this particular context.

2. Communities and key stakeholders involvement in NRMP2 design

15. During NRMP2 preparations, a participatory diagnosis was conducted with stakeholders (RCADs, communities, potential partners) in the Governorates of Jendouba, Kasserine, and Medenine. This was carried out in two phases from June 18 to July 8 and from September 6 to 28, 2008. The analysis focused on assessing NRMP implementation experiences relating primarily to the Integrated Participatory Approach (IPA) and on issues to consider in NRMP2 in

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order to consolidate achievements and ensure the sustainability of community-based development dynamics at the socio-economic and socio-institutional levels.

16. Semi-structured interviews were carried out in former NRMP Socio-Territorial Units (STU). Thematic analysis focused particularly on: (i) community perceptions and viewpoints relating to the NRMP experience and perspectives on NRMP2, (ii) the communities' interest in getting involved in a participatory and integrated development dynamics, and (iii) their expectations and their needs should they opt to join the process.

17. Technical staff, resource persons, and local officials in areas that are potential NRMP2 beneficiaries were interviewed regarding: (i) the relevance of extending the organization area to communities in an entire Imada while taking into account the uniqueness of STUs; (ii) the benefits of creating ADG and conditions relating to their sustainability as well as support needs; (iii) the methodological approach to the elaboration and implementation of PDP ; (iv) the promotion of interest groups and measures to help them develop sustainable production systems; and (v) local and private initiatives developed beyond project completion and prospects for expanding and consolidating these.

18. Assessment results for each region were presented and shared during three workshops held in Kasserine, Medenine, and Jendouba, respectively, in which all NRMP2 stakeholders took part.

19. The populations were very interested in consolidating NRMP achievements and they expressed the wish that NRMP2 will: (i) continue efforts to open up and supply water sources to some localities (by opting for individual connection systems); (ii) extend Soil and Water conservation (CSW) operations and systematically ensure the consolidation of related structures through tree planting (especially olive trees); (iii) extend agricultural land consolidation and land development operations while helping operators develop their land (especially by encouraging the planting of olive trees); (iv) continue supporting small-scale farmers to rehabilitate their irrigated perimeters (well deepening and rehabilitation, electrification, irrigation pond construction, purchase of drip irrigation equipment); (v) assist farmers in obtaining high quality crops and suitable crop and fruit tree treatment products; (vi) strengthen and develop IGA by targeting rural women, young school dropouts (both girls and boys) and young people with a professional qualification or training, and assist entrepreneurs in organizing themselves into interest groups to acquire inputs and market their products; and (vii) train ADGs to facilitate development activities.

3. Presentation of target groups

20. Poor families and vulnerable groups without steady incomes constitute the primary targets of NRMP2 interventions. Unemployed women and young people are particular project target groups.

The Youth

21. The Governorates of Jendouba, Kasserine, and Medenine are among the regions with the highest number of unemployed new graduates. The persistent hurdles associated with finding

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employment have resulted in rural-urban migration and a migratory movement of young people toward Tunis and the larger coastal cities. Youth employment thus poses a major problem for rural households and the Tunisian Government, which has responded by developing a range of strategies and programs. For example, RCADs reserve on average 50 percent of their project budget for the implementation of forestry projects and SLM operations to help reduce rural- urban migration and youth unemployment in order to alleviate the social pressure generated by this phenomenon. Moreover, RCADs support initiatives to help higher education graduates launch agricultural projects by participating in the review of proposed projects, granting awards, and providing technical monitoring for these projects. Given that the current rural population is aging, youth involvement in agriculture is crucial. The project thus aims to support young people launch viable agricultural or non-agricultural projects.

The Women

22. In most cases, women in rural areas work on the family farm where they take care of multiple domestic and productive tasks. They play a predominant role in maintaining agricultural production systems by ensuring continuity in agricultural activities.. However, women's work is unrecognized and unappreciated their participation in market activities and marketing channels is limited. Actions taken in favor of this group must align with the family farm strategy by diversifying the women's range of activities, taking into account farming potential and characteristics, and local farmer expertise. NRMP2 focuses on: (i) raising awareness among both men and women; (ii) providing hands-on training and close technical supervision; (iii) supporting IGAs by facilitating access to capital goods; (iv) organizing production flows through both formal and informal Interest Group (IG) structures; and (v) participating in ADG community organizations.

23. Young girls dropping out of school are in a fragile situation. These girls work on the family farm or are employed on other farms. Moreover, they constitute a cheap labor reservoir. They have a very limited access to credit since they have no collateral or guarantees to enable them to acquire financing. For various reasons ranging from the appeal of urban or tourism- related zones to getting married, they are less stable, migrate more easily, and are hence less diligent in their micro projects. It is, therefore, important that the most motivated and most stable young women be identified. Interventions in favor of this group must, above all, aim to inform and communicate with young women and their families, offer short vocational training, support credit provision in connection with Local Development Associations (LDA), and technically and financially monitor IGAs particularly as regards the supply of raw materials and marketing.

24. A range of projects and NGOs have already contributed to the training of an embryonic nucleus of female micro-entrepreneurs in agriculture and crafts. Women working in the latter have benefited from credit which enable them to engage in IGAs. As a result, they have gone beyond self-subsistence and sometimes made substantial profits to the point where some have become micro-entrepreneurs that hire labor and create jobs. Activities for female micro- entrepreneurs should be achieved by support to technical training, training in management and marketing, research on new products or improved production quality, access to credit from the TBS or other commercial banks to expand production or trade activities, participation in social and professional organizations, and especially the search for national and international marketing networks. NRMP2 should also consider some more vulnerable women including those who are

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headof households, particularly in areas of high migration, those in border and forested areas, and those in areas severely impacted by climate change and natural resource degradation.

25. While the project gives priority to the most vulnerable groups, contributions required of IGA beneficiaries should also include the most disadvantaged. The project will also encourage current mutual aid and solidarity practices such as partial transfers of ADG profits to social and community activities (schools, health centers) or support for the most underprivileged households.

26. Through its Ministry of Women’s Affairs, Tunisia has developed a national strategy for rural women under a national action plan that is expected to be updated. The strategy emphasizes literacy and training for rural women, access to IGAs, and participation in public life. As IGAs were relatively limited and the involvement of community facilities for women was somewhat ineffective under NRMP, challenges for NRMP2 will involve: (i) building up the production capacity of women; (ii) increasing their income; (iii) developing organizational structures around IGAs; and (iv) improving their representativeness in ADGs.

27. Considerations of gender (especially as regards younger women and those in vulnerable groups) should bring about: (i) institutional agreements at national, regional, and local levels to strengthen collaboration and partnerships with this sector’s stakeholders; (ii) gender-related capacity building for various MAWRF actors, RCAD personnel, leadership teams, partners, and ADGs; and (iii) the choice of gender-specific indicators and a gender assessment by beneficiaries at mid-project and at project completion.

28. Ideally, the objectives and specific interventions of the gender-related project should be combined with research narrowly targeted on operations and seeking to strengthen the productive capacities of women by taking into account unique local features such as traditional skills development, literacy applied to IGA management, and marketing-oriented structures. This would support and strengthen both project actions and expertise. The use of country-based expertise including the Center for Research, Study, Documentation, and Information on Women (Centre de Recherche, d'Etudes, de Documentation, et d'Information sur la Femme (CREDIF)) and NGOs should be encouraged.

4. Description of the Integrated Participatory Approach (IPA) and its institutional set-up

29. Both the results obtained by NRMP and the interest shown by communities and national actors in taking part in the participatory approach by preparing and implementing development plans have led the Tunisian Government to initiate a process institutionalizing a partnership approach to integrated and participatory development.

30. Within the framework of NRMP2, this approach is being implemented by drawing up PDPs at the level of each Imada and implementing them as part of ACs. Led by leadership teams and RCAD experts in close collaboration with regional committees (RC) and Local Development Council (LDC), this planning and scheduling process involves all regional and local partners (technical services, NGOs, ADLs) at each step.

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31. Being both a medium- and long-term planning tool, the PDP unifies and integrates all development activities and aspects of natural resource management at the level of Imadas. The content of the PDPs and ACs and related funding processes are discussed and approved at two levels: first at the level of LDCs and then at that of RCs. Development partners, government technical services, NGOs, and local development associations are involved throughout the entire process and should allocate financial resources as a supplement to NRMP2 for ACs implementation. With the support of other partners, leadership teams and RCAD technicians should facilitate AC implementation, monitoring, and evaluation. Rural women, young people, and vulnerable groups should be systematically included in the elaboration of PDPs and ACs to ensure that their needs and expectations are taken into account.

32. The IPA methodology and conditions for its implementation are recorded in a POPM. The preparation of pilot PDPs to test and refine the approach, the creation of leadership teams, each comprising three experts (including a woman), building the participatory approach capacity of all actors involved in NRMP2 interventions, and monitoring and evaluating the participatory process should ensure the quality of the approach and facilitate its implementation.

33. IPA implementation should promote more participatory and harmonious development since: (i) actions carried out within the framework of ACs constitute a more appropriate response to community needs; (ii) it is likely that relations and collaboration among the population, RCAD services, and local authorities will improve; (iii) the participation and contribution of populations in investment activities should lead to the consolidation of achievements and significantly mitigate a charity-dependent mentality; and (iv) this approach should facilitate the success of interventions that often lead to conflicts such as land reparceling.

5. Setting up basic community organizations

34. IPA institutionalization requires setting up local organizations that are representative of all existing social and socio-professional subgroups within the Imada. In collaboration with their partners, RCADs will provide the populations of each Imada with the support necessary for organizing themselves into an ADG in compliance with the regulations in place, notably Bill 2004-24 of March 15, 2004, stating the adoption and widespread application of uniform ADG regulations. Assistance offered by RCADs in setting up ADGs is part of a process aimed at promoting local development, which is supported and strengthened by the Tunisian Government.

35. The RCAD leadership team will help communities officially set up ADGs by informing and raising awareness among potential members and providing assistance with administrative procedures including preparing administrative documents, special status preparation, convening the general assembly, and publishing in the official gazette. RCADs will also strengthen ADGs as required to create adequate conditions for their operation and sustainability. This consolidation will include: (i) training ADG members in various fields related to their roles and duties; (ii) technically assisting ADGs to develop, implement, and monitor their action plans; (iii) recruiting technical directors (one per two ADGs) among higher education graduates, who will be trained and closely supervised so that they can fully play their various roles; and (iv) providing the required working equipment (office space and equipment, motorbikes to facilitate mobility).

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36. Lessons learned from NRMP clearly show that interest groups play a key role in facilitating agricultural development. Therefore, the objective behind the creation of IGs is to develop production systems, manage natural resources, and foster agricultural and non- agricultural IGAs. The design and implementation of these IGs are provided for within the framework of an institutionalized partnership approach involving all operators including STB, ADLs, the National Employment Funds (Fonds National de l'Emploi ( FNE)), and NGOs. These IGs will act as the foundation for ADGs, serving as moral guarantors for investments and the recovery of loans provided by partners such as BTS, Development Agencies (AD), and NGOs. IGs will be given the assistance they require in the form of training, technical and financial assistance, and close advisory support.

6. Expected results and social impacts of the project

37. NRMP2 will improve water management, which is a major concern in Tunisia, quantitatively and qualitatively increase agricultural and animal production, and increase and diversify the income of rural populations. Irrigated land will provide job opportunities and will contribute to reducing rural-urban migration. Drinking water supply will improve the quality of life for populations by reducing women and children’s workload and improving human and animal health. The rehabilitation of paths will open up some douars by facilitating the supply of consumer goods and inputs and especially by improving product distribution thanks to better market access. In addition to economic opportunities, such opening up will facilitate access to primary social services (education and health care). In addition to soil conservation, NRMP2 should encourage land consolidation operations, which ranks high on the wish list of farmers, thereby increasing incomes and securing land tenure. The promotion of agricultural and non- agricultural IGAs, which will target the most vulnerable groups, promote knowledge and expertise, introduce new techniques and activities geared toward poverty reduction, and improve the employment situation especially with regards to young people.

38. However, NRMP2 would also result in encouraging population movements and in putting added pressure on resources. Conflicts of interest may arise from newly developed water supply points. The participatory approach will facilitate the settlement of potential conflicts, encourage reconciliation between various different groups, and improve collective equipment management.

39. Major social risks may be mitigated by: (i) ensuring a cross-sectoral approach aligning all local and regional actors with development dynamics; (ii) promoting social cohesion within an Imada by involving all social components and by encouraging the creation of farmers’ organizations to protect their economic interests; and (iii) creating a more sustainable development dynamics going beyond the project's lifespan through local development planning mechanisms, IPA institutionalization, and the implementation of the participatory approach by communities.

7. Participatory monitoring and evaluation

40. The implementation of a participatory and integrated development approach requires the effective involvement of all target groups (including women, young people, and vulnerable groups) in the monitoring and evaluation of the actions undertaken. The participatory monitoring and evaluation system combines the advantages of traditional monitoring and evaluation

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methods with an assessment made by the target groups themselves regarding all project components and their effects. Through its involvement, the population is encouraged to subscribe to a development dynamics. NRMP2 participatory monitoring and evaluation is achieved through:

 The monitoring of ADGs and their action plans, which are to be distributed among their members (ADG efficiency, proper operation of resource management methods, degree of membership and participation of various IGs);

 An annual evaluation of ACs, aiming to assess the results of activities, on the basis of which necessary adjustments are made and that are to be included in the following ACs as part of an IG/ADG/RCAD/local and regional partners dialogue mechanism. This mechanism helps monitor and improve the effectiveness of interventions and partnership mechanisms in compliance with final objectives.

 An evaluation by beneficiaries that includes considerations of gender at mid-project and end-of-project to assess the impacts of the actions undertaken.

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Annex 11: Project Preparation and Supervision REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Planned Actual PCN review November 5, 2009 Initial PID to PIC November 24, 2009 Initial ISDS to PIC November 24, 2009 Appraisal March 1, 2010 Negotiations May 15, 2010 Board/RVP approval June 15, 2010 Planned date of effectiveness October 15, 2010 Planned date of mid-term review April 15, 2013 Planned closing date December 31, 2015 Key institutions responsible for preparation of the project: DFIPO, Ministry of Agriculture, Water Resources, and Fisheries. Regional Commissariats for Agricultural Development. DEQL, Ministry of Environment and Sustainable Development. NSU, Ministry of Environment and Sustainable Development.

Bank staff and consultants who worked on the project included: Name Title Unit Lucie Tran TTL MNSAR Song Li Environment Specialist MNSEN Fatou Fall Social Dev. Specialist MNSSO Philippe Marin Sr. Water and Sanitation Specialist MNSWA Marie-Françoise How Yew Team Assistant MNSSD Kin Salim Benouniche Lead Procurement Specialist MNSSD Nina Doetinchem Environment Specialist AFTEN Anas Abou El Mikias Senior Financial Mgt. Specialist MNAFM Aziz Bouzaher Country Sector Coordinator (peer reviewer) ECSSD Grant Milne Senior Natural Resources Mgt. Specialist (peer reviewer) SASDA Taoufiq Benouna Sr. Natural Resources Mgt. Specialist (peer reviewer) AFTEN T. Mpoy-Kamulayi Lead Counsel LEGEM Jean-Charles de Daruvar Senior Counsel LEGEM Brenda Morata Paralegal LEGEM Mohammed Bekhechi Lead Counsel LEGEN Siobhan McInerney-Lankford Counsel LEGEN Jean-Marc Bisson Agricultural Economist FAO Alexandra Sokolova Economist FAO Sherif Arif Safeguard Specialist Consultant Slaheddine Ben-Halima Procurement Specialist Consultant Abdelghani Inal Procurement Specialist Consultant Moez Makhlouf Financial Management Specialist Consultant Abdelkrim Oka Natural Resources Mgt. Specialist Consultant Abderhamanne Ben Boubaker Community Development Specialist Consultant Chantal Lewis Sustainable Land Mgt. Specialist Social Development Consultant Catherine Toure Specialist Consultant

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Bank funds expended to date on project preparation: 1. Bank resources: $435,000 2. Trust funds (PHRD Preparation Grant): $480,000 3. Total: $915,000

Estimated Approval and Supervision costs: 1. Remaining costs to approval: $25,000 2. Estimated annual supervision cost: $35,000

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Annex 12: Documents in the Project File REPUBLIC OF TUNISIA: Second Natural Resources Management Project

1. Deuxième Phase du Projet de Gestion des Ressources Naturelles, Rapport Provisoire de Préparation, Ministère de l’Agriculture et de Ressources Hydraulique, DFIPO, Tunis, Mai 2009.

2. Background note on the transfer of treated wastewater from Greater Tunis.

3. Standard Diagnostics Review (includes the Framework Document for Environmental and Social Protection in an annex).

4. Resettlement Framework Paper.

5. Project Operational Procedures Manual.

6. Procurement Plan for the first 18 months.

7. Mission Aide-Memoires.

8. MENARID – Support to Sustainable Land Management.

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Annex 13: Statement of Loans and Credits REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P104266 2009 TN-ENERGY EFFICIENCY AND 55.00 0.00 0.00 0.00 0.00 54.86 3.00 0.00 RENEWABLE INV. P095847 2009 TN- WATER SECTOR INVESTMENT II 30.60 0.00 0.00 0.00 0.00 27.18 -0.86 0.00 P095388 2009 TN-Integration and Competitiveness DPL 250.00 0.00 0.00 0.00 0.00 124.38 -125.00 0.00 P099811 2007 TN-Tunis West Sewerage 66.80 0.00 0.00 0.00 0.00 42.65 36.91 0.00 P095012 2007 TN-Sustainable Municipal Solid Waste Mgt 22.00 0.00 0.00 0.00 0.00 6.61 2.00 0.00 P064836 2006 TN-Urban Water Supply 38.03 0.00 0.00 0.00 0.00 25.10 12.10 0.00 P075809 2006 TN Higher Education Reform Support II 76.00 0.00 0.00 0.00 0.00 64.80 58.13 0.00 P088929 2005 TN-ICT Sector Development Project 13.13 0.00 0.00 0.00 3.28 3.76 6.33 0.00 P082999 2004 TN-Education PAQSET II 130.30 0.00 0.00 0.00 0.00 17.90 10.68 -0.45 P071115 2004 TN-Export Development II 42.00 0.00 0.00 0.00 0.18 10.38 0.06 5.88 P074398 2003 TN-Municipal Development III 78.39 0.00 0.00 0.00 0.00 4.47 -18.22 -18.19 P048825 2001 TN-Cultural Heritage 17.00 0.00 0.00 0.00 0.00 6.50 1.50 0.00 Total: 819.25 0.00 0.00 0.00 3.46 388.59 - 13.37 - 12.76

TUNISIA STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2004 BIAT 0.00 0.00 52.91 0.00 0.00 0.00 52.91 0.00 1986 SITEX 0.00 0.90 0.00 0.00 0.00 0.90 0.00 0.00 1998 SITEX 0.00 0.32 0.00 0.00 0.00 0.32 0.00 0.00 1998 Tuninvest 0.00 2.54 0.00 0.00 0.00 2.54 0.00 0.00 Total portfolio: 0.00 3.76 52.91 0.00 0.00 3.76 52.91 0.00

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

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Annex 14: Country at a Glance REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Tunisia at a glance 12/9/09

M . East Lower- POVERTY and SOCIAL & North middle- Development diamond* Tunisia Africa income 2008 Population, mid-year (millions) 10.3 325 3,702 Life expectancy GNI per capita (Atlas method, US$) 3,480 3,242 2,078 GNI (Atlas method, US$ billions) 36.0 1,053 7,692

Average annual growth, 2002-08 Population (%) 0.9 1.9 1.2 Labor force (%) 1. 9 3 . 0 1. 6 GNI Gross per primary M ost recent estimate (latest year available, 2002-08) capita enrollment Poverty (% of population below national poverty line) ...... Urban population (% of total population) 65 57 41 Life expectancy at birth (years) 75 70 68 Infant mo rtality (per 1,000 live births) 18 32 46 Child malnutrition (% of children under 5) 3..26 Access to improved water source Access to an improved water source (% of population) 94 88 86 Literacy (% of population age 15+) 78 73 83 Gross primary enrollment (% of school-age population) 10 8 10 6 10 9 Tunisia M a l e 10 9 10 9 112 Lower-middle-income group F e m a l e 10 6 10 4 10 6

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1988 1998 2007 2008 Economic ratios* GDP (US$ billions) 10.1 19.8 35.0 40.3 Gross capital formation/GDP 20.7 26.9 24.8 27.0 Exports of goods and services/GDP 42.0 43.0 54.1 61.0 Trade Gross domestic savings/GDP 21.1 23.6 22.4 22.7 Gross national savings/GDP 21.7 23.6 22.6 22.5 Current account balance/GDP 1.0 -3.4 -2.6 -4.2 Interest payments/GDP 4.0 2.8 2.6 2.4 Domestic Capital savings formation Total debt/GDP 67.3 54.7 58.4 51.5 Total debt service/exports 21.9 15.3 11.3 7.7 Present value of debt/GDP .. .. 56.2 47.4 Present value of debt/exports .. .. 89.2 69.7 Indebtedness 1988-98 1998-08 2007 2008 2008-12 (average annual growth) GDP 4.6 4.8 6.3 4.5 4.0 Tunisia GDP per capita 2.8 3.8 5.3 3.5 3.0 Lower-middle-income group Exports of goods and services 4.8 4.4 8.5 3.5 1.8

STRUCTURE of the ECONOMY 1988 1998 2007 2008 Growth of capital and GDP (%) (% of GDP) 20 Agriculture 11.8 12.7 10.3 9.9 15 Industry 30.6 28.4 29.6 32.6 10 5 M anufacturing 16.8 18.5 17.2 17.9 0 -5 Services 57.6 58.9 60.0 57.5 -10 03 04 05 06 07 08 -15 Household final consumption expenditure 62.3 60.8 63.2 62.8 General gov't final consumption expenditure 16.6 15.6 14.4 14.6 GCF GDP Imports of goods and services 41.7 46.4 56.5 65.3

1988-98 1998-08 2007 2008 Growth of exports and imports (%) (average annual growth) A griculture 4.4 2.3 2.1 0.5 9 6 Industry 4.7 -0.7 7.2 -59.9 3 0 M anufacturing 3.5 -15.8 6.4 -98.9 -3 Services 4.7 7.0 6.7 33.7 -6 03 04 05 06 07 08 Household final consumption expenditure 4.0 5.2 5.0 6.8 General gov't final consumption expenditure 4.0 4.4 4.1 4.6 Gross capital formation 5.4 2.7 7.1 7.3 Exports Imports Imports of goods and services 4.1 3.7 6.1 8.3

Note: 2008 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. 101

Tunisia

PRICES and GOVERNMENT FINANCE 1988 1998 2007 2008 Inflation (%) Domestic prices (% change) 8 Consumer prices 7.3 3.2 3.1 5.0 6 Implicit GDP deflato r 7.7 3.0 2.4 5.9 4 Government finance 2 (% of GDP, includes current grants) 0 Current revenue 28.3 24.7 24.3 26.9 03 04 05 06 07 08 Current budget balance 4.9 3.5 3.9 5.7 GDP deflator CPI Overall surplus/deficit 0.0 -3.2 -2.8 -0.8

TRADE 1988 1998 2007 2008 Export and import levels (US$ mill.) (US$ millions)

Total exports (fob) 2,396 5,725 15,147 19,184 25,000 Fuel 386 367 2,449 3,311 Agriculture 299 551 1,469 1,750 20,000 M anufactures 1,179 4,033 10,177 11,565 15,000 Total imports (cif) 3,692 8,334 19,071 24,544 10,000 Food 554 705 1,594 2,111 Fuel and energy 243 396 2,342 3,988 5,000 Capital goods 618 1,918 4,053 4,694 0 Export price index (2000=100) 48 87 182 .. 02 03 04 05 06 07 08 Import price index (2000=100) 73 121 182 .. Exports Imports Terms of trade (2000=100) 66 72 100 ..

BALANCE of PAYMENTS 1988 1998 2007 2008 Current account balance to GDP (%) (US$ millions) Exports of goods and services 4,242 8,481 20,056 25,198 0 Imports of goods and services 4,206 9,131 20,826 26,565 02 03 04 05 06 07 08 -1 Resource balance 36 -650 -769 -1,367 -2 Net income -498 -856 -2,028 -2,509 Net current transfers 558 831 1,880 2,164 -3

Current account balance 96 -675 -917 -1,712 -4

Financing items (net) 282 482 1,640 3,278 -5 Changes in net reserves -378 193 -723 -1,566

Memo: Reserves including gold (US$ millions) 908 1,861 7,863 8,946 Conversion rate (DEC, local/US$) 0.9 1.1 1.3 1.2

EXTERNAL DEBT and RESOURCE FLOWS 1988 1998 2007 2008 Composition of 2008 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 6,799 10,845 20,445 20,776 IB RD 1,019 1,458 1,571 1,353 A: 1,353 IDA 62 43 24 22 G: 4,327 B: 22 Total debt service 1,058 1,431 2,496 2,117 IBRD 199 268 236 347 D: 4,545 IDA 2 2 2 2 Composition of net resource flows Official grants 124 65 169 118 Official creditors 208 -152 9 -115 Private creditors 37 -20 37 29 E: 3,282 Foreign direct investment (net inflows) 61 650 1,532 2,638 F: 7,247 Portfolio equity (net inflows) 9 58 30 -39

World Bank program Commitments 241 222 34 0 Disbursements 173 142 161 70 A - IBRD E - Bilateral Principal repayments 112 180 172 275 B - IDA D - Other multilateral F - Private C - IMF G - Short-term Net flows 61 -39 -10 -205 Interest payments 89 91 67 74 Net transfers -28 -129 -77 -280

Note: This table was produced from the Development Economics LDB database. 12/9/09

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1987 1997 2006 2007 Growth of capital and GDP (%) (% of GDP) Agriculture 16.5 13.2 11.1 10.9 10 Industry 29.5 28.6 27.8 27.5 5 M anufacturing 15.1 18.5 17.0 16.9 0 Services 54.1 58.2 61.1 61.6 02 03 04 05 06 07 -5

Household final consumption expenditure 60.6 60.2 63.0 63.6 -10 General gov't final consumption expenditure 16.9 15.8 13.4 13.4 Imports of goods and services 35.8 46.2 53.1 52.2 GCF GDP

1987-97 1997-07 2006 2007 Growth of exports and imports (%) (average annual growth) Agriculture 3.9 2.7 3.0 4.5 15

Industry 4.8 3.8 3.8 4.1 10 M anufacturing 3.0 4.0 4.2 4.4 Services 4.2 5.7 7.1 7.7 5 Household final consumption expenditure 3.7 5.2 4.8 7.4 0 02 03 04 05 06 07 General gov't final consumption expenditure 3.8 4.4 2.6 6.4 -5 Gross capital formation 5.9 3.0 5.6 5.5 Exports Imports Imports of goods and services 5.1 3.4 1.4 5.3

Note: 2007 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

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Annex 15: Incremental Cost Analysis REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Background on land and water management in Tunisia

1. Out of a Tunisia’s total area of 16.4 million ha, 40 percent are covered by the Sahara Desert and less than 30 percent (4.8 million ha) are suitable for agricultural use. Of this, 3.7 million ha are farmland and 1.1 million ha consist of permanent grassland, pastures, and perennial crops (vineyards, orchards). Only one third of farmland is located in the areas with adequate rainfall, i.e., in the semi-dry zone (30 percent of farmland), where yearly rainfall is between 300 and 600 mm and in the wet zone (3 percent), where annual yearly rainfall exceeds 600 mm. However, two thirds of farmland is located in the dry zone with less than 300 mm of average annual rainfall or even in areas where rainfed farming is not viable and even irrigation possibilities very scarce. Climate change is predicted to further reduce precipitation by some 6 percent nationally by the middle of the century. Based on high resolution Global Climate Models (GMC)23, the climate will generally become warmer and drier by mid-century, with more frequent heat waves and fewer frost days. Predictions of increased temperatures (1-2oC) and reduced precipitation (5-10 percent) will increase water demand while reducing supply. Rainfall intensity, however, is expected to increase, thus leading to flooding events. Further, the maximum period between rainy days is expected to increase.

2. Precipitation in Tunisia already tends to be irregular, with periods of long droughts frequently followed by short but intense rainfall. This combination results in heavy erosion and flooding. Runoff prevents rainwater infiltration into the soil, and leads to soil erosion, insufficient groundwater replenishment, and increased sedimentation and nutrient run-off into the Mediterranean Sea and other water bodies. Climate change will increase the risks of droughts and floods, and thus intensify pressures on already-stressed aquifers. In the Central and Southern regions of the country that are characterized by low precipitation, not water but wind erosion will continue to be the main problem.

3. One of the key constraints to Tunisia’s agricultural sector as well as other economic sectors is water scarcity. Available water resources vary greatly over time, both inter-seasonally as well as inter-annually, as well as in terms of spatial distribution across the country. Interior regions (Northwest and Center-west) supply the most water, while demand is primarily concentrated on the East coast, thus requiring expensive water rerouting infrastructure. The agricultural sector accounts for 83 percent of water demand, thus making the sector the largest consumer of water by far. Although only 6 percent of farmland is irrigated, irrigated farms account for 32 percent of the country’s agricultural output. This further emphasizes the extensive nature of agricultural practices on most of the remaining 94 percent of rainfed lands.

4. In Tunisia, approximately 35 percent of the population lives in rural areas, and 77 percent of rural land users largely depend on livestock, rainfed agriculture, and other use of natural resources for their livelihoods. The average amount of farmland per inhabitant is less than 0.5

23 Climate Change Projections are based on Japanese High Resolution GCM comparing historic climate of Tunisia in 1981-1990 with model predictions for 2091-2100). 104

ha. When only the rural population is considered, the amount rises to a little more than 1 ha. With this low farmland/population ratio, combined with a climate which is not conducive to farming, the limits to profitable, sustainable farming will soon be reached. The situation is intensified with Tunisia’s population of 10 million growing by 1.9 percent per year and the area of farmland further shrinking due to urban spread. Consequently, farmland is overexploited, cover crops are reduced or not planted at all, and agricultural practices continue to extend into marginal and fragile areas typically reserved for forests. Unsustainable land management practices are also widespread in Tunisia and are further contributing to degradation of cropland, rangeland, and forest land, while demand for food, fodder, freshwater, and household energy is increasing with population growth. Unsustainable practices include continuous cropping with reduced fallow, soil nutrient mining, plowing parallel to the slope, continuous overstocking and overgrazing of rangelands, and also over-exploitations of woodland for agricultural purposes. All these factors are severely affecting the livelihoods of rural land users. Land productivity is declining from the combination of water scarcity, desertification, and degradation of pasture and sylvo-pastoral areas. Threats are further intensified by climate variability and climate change risks, which are likely to worsen droughts and erratic weather patterns, and thus magnify the impact of erosion, accelerate degradation and desertification, and lead to a further drop in agricultural output.

5. According to the Global Assessment of Soil Degradation (GLASOD) of 1990 about 49 percent of Tunisia’s total land area is characterized as degraded with agricultural productivity greatly reduced. This is among the highest rates in the Middle East and North Africa region. Country sources estimate that today more than two-thirds of all farmland in the Tunisia is affected by some degree of degradation. As a result of land degradation and desertification, the sustainability of the land’s productivity is undermined, the resilience of natural habitats is reduced, ecosystem services are compromised, and agro-biodiversity is lost. The loss of the land’s production potential is intensified by the challenges of erratic rainfall patterns, the intensity of weather events, and thus undermining food security efforts by the Tunisian government.

6. Based on the results of a study conducted in 2004, the estimated cost of environmental degradation in Tunisia is 2.1 percent of GDP24, with the largest cost of degradation related to water resources (0.6 percent of GDP). Key root causes for water degradation stem from soil salinization due to farming practices and overexploitation of groundwater resources. Costs of degradation were measured based on the impacts of salinity, logging, silting of dams, and insufficiently treated wastewater on the yield of irrigated areas; the impact of water pollution on the production of the fishery sector, on human health, on tourism, and biological diversity; and the overexploitation of groundwater resources to meet the needs of major economic sectors (mainly irrigated agriculture). Recommendations to reduce the cost of water degradation focus on: stepping up control of pollution sources, strengthening the incentive mechanism to combat

24 The Ministry of Environment and Sustainable Development (MEDD) conducted in 2004, via the Tunisian Observatory of Environment and Sustainable Development (OTED) and in cooperation with the World Bank, an evaluation of the cost of environmental degradation in Tunisia based on data for 1999. The rate of 2.1% of GDP for cost of environmental degradation is considerably better than the rate of other countries in the region (Algeria, Egypt, Syria, Lebanon, etc.) which range between 3-6% of GDP, and instead more comparable with rates in OCED countries (1-2%). 105

pollution, promoting the use of treated wastewater, and improving coordination of the various agencies operating in the field of water utilization.

7. Having nearly reached the upper limit in possible water mobilization, the country will have to rely on using conventional water more effectively, in particular in the agricultural sector, and making more widespread use of treated wastewater. Today, only a small portion of treated wastewater can be utilized for irrigation25 (18 percent), while most wastewater is discharged into the Mediterranean. Often inadequately treated, the wastewater is leading to pollution of the sensitive coastal and marine ecosystems and further impacting the fisheries and tourism sector. However, theoretically, the volume of treated wastewater available (223 Mm3) could provide for about 10 percent of water demand of the agricultural sector (2,132 Mm3). Further, artificial recharge of groundwater reservoirs could be boosted, as currently only 1 percent (0.72 Mm3) of the recharge volume comes from treated wastewater.

8. To sustainably improve the living conditions of its rural poor, Tunisia must counter the dual threat of water scarcity and degradation of the productive agricultural, pastoral, and sylvo- pastoral lands, both of which are exacerbated by climate variability and climate change risks. In order to counter these threats, rural land users will need support to improve the sustainability of agricultural practices and to identify and adopt other profitable, non-agricultural activities. Increased efforts will be necessary to maintain the productive qualities and climate-resilience of the landscape and to preserve the capital base of soil, water, and biological diversity. This cannot be done without the active and engaged commitment of the rural population as the custodians of the land, as well as other actors, as part of an IPA.

Consistency with national priorities and plans

9. The Project is fully aligned with the Governments’s FYDP. Following the guidance and recommendations of the National Commission on Sustainable Development, the Government has placed a priority on implementing initiatives aimed at mainstreaming actions to combat desertification and land degradation in the priorities of the FYDP. Focus has been on building capacity in participatory planning, integrated management of natural resources, and development of regional and local action plans to counter land degradation and desertification. Because the agricultural sector has a central role in the FYDP, making efforts to control land degradation and to optimize water use are key factors for achieving development targets. Under the framework of the national plan, Government investments for soil and water conservation, combating desertification, and rationalisation of energy use are set to reach a total of 5.6 billion TND (US$4.3 billion). Generally, the Government of Tunisia has committed to allocating at least 1.2 percent of GDP for environmental protection to emphasize the priority position of environmental sustainabily objectives in Tunisia’s development policies and plans26. The objective of the Presidential program (2009-2014) is to reach a rate of 1.25 percent of the GDP allocated to

25 In 2009, the volume of treated wastewater is estimated as 238 million m3, produced by 98 secondary treatment plants, operated by the National Sanitation Authority (ONAS). According to the pumping equipment capacity, some 60 million m3 may be reused for agricultural purposes. The area currently equipped for treated wastewater reuse comprises about 8,555 ha, distributed over 25 areas. The actual use depends on multiple factors, including climate conditions and farmer’s acceptance. 26 Government of Tunisia, National Report on the State of Environment, 2007. 106

environmental protection by the end of 2014, emphasizing the priority being given to environmental sustainability of national political and development plans of the country.

10. The NRMP2, and GEF investments specifically, will contribute to the objectives of the National Water and Soil Conservation (CES) Plan. The second CES Plan was adopted for the period of 2002-11, for which the Government has allocated funds of about 278 million TND (US$213 million). A key component of the National CES Plan is the development of hill lakes, which are aimed to reduce erosion, to support recharge of aquifers, and to allow for the mobilization of large quantities of runoff water, thus contributing to local agricultural development via the creation of irrigated areas around them, based mainly on supplemental irrigation.

11. The Project further contributes towards meeting some of the main objectives of the water resources and sanitation component of the FYDP, including boosting existing wastewater treatment capacity and improving of the quality of treatment; enhancing coastal protection; and expanding the use of non-conventional water, such as reuse of treated wastewater in irrigation. The Project is also aligned with the objectives of the National Irrigation Water Saving Program implemented under the lead of the MAWRF, including promoting non-conventional water, providing financial incentives towards irrigation water saving, optimizing water resources, and building capacity and expertise on water effective irrigation. The Project will support the Government’s national strategy on wastewater reuse that recommends: (i) the development of additional treatment, less restrictive reuse of treated wastewater in the agricultural sector, increase of reuse options including groundwater recharging, inter-seasonal storage, ecological reuse, and inter-regional transfer; (ii) monitoring of the quality of aquifers and increase of health control and respect of hygienic specifications; (iii) the coordination between the various water actors, the need to work through an integrated water resource management (IWRM) approach to maximize the value of wastewater reuse; and (iv) the involvement of the private sector in reuse activities and promotion of wider awareness to overcome reluctance to reuse treated wastewater. By contributing to the objectives of the wastewater reuse policy, the Project will further help to prevent the pollution of the Mediterranean Sea and support marine and coastal biodiversity conservation, important not only for global environmental goals, but also for the national fishing industry and the tourism sector. In the context of the regional SAP MED, Tunisia has prepared a National Action Plan (NAP), in which it identified point pollution sources, which may affect human health, coastal and marine ecosystems, biodiversity, and sustainability, and necessary actions to address pollution from land-based sources under SAP MED, which this project will help implement.

12. At international and regional levels, the Government of Tunisia has made significant commitments towards the sustainability of its natural resources and to safeguard ecosystem services that underpin the livelihoods of rural communities in the country. As such, Tunisia is party to key international conventions including land degradation and desertification (UNCCD), climate change (UNFCCC), wetlands (Ramsar) and biodiversity (CBD). The Project supports the objectives of Tunisia’s National Action Program (NAP), which is the core strategic framework for implementing the UNCCD at national level; and the Initial National Communication (INC) and Second National Communication (SNC) that reflect the country’s rising concerns in respect to climate change.

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Project Objectives, Project Area, and Expected Outputs

13. The Project Development Objective is to improve the living conditions of rural communities in the project areas in terms of access to basic infrastructure and services, sustainable income increase, and improved natural resource management practice by fostering an integrated approach to community-based development.

14. The Global Environment Objective is to reduce the threat of land degradation and climate change to vulnerable agricultural production systems in the target areas, while developing options to address land-based pollution affecting the Mediterranean Sea.

15. Incremental GEF funding to this multi-sector investment Project will address key rural development sectors (water, environment, agriculture) and contribute to GEF-4 strategic priorities in the international waters, land degradation, and climate change focal areas. The project will play an important role in assisting the Government of Tunisia in achieving sustainability of its development objectives by reducing the rate of land degradation, improving climate change adaptation and climate resilience of the productive landscape, reducing land- based coastal and marine pollution, determining the conditions for more effective water reuse for agriculture and aquifer recharge, and investing in capacity building and awareness activities that will enable rural land users to safeguard the productive capacities of cropland, rangeland, and forest land.

16. On the ground, the Project will impact 72 Imadas located in three Governorates of Jendouba (27), Kasserine (27), and Médenine (18), and eventually other Imadas. As the Project builds on initial achievements with capacity building for integrated and participatory rural development under its predecessor project, the same three Governorates were selected as target areas for scaling up sustainable management of land and water resources. The 72 Imadas were selected in consultation with regional authorities and agricultural offices (RCADs) on the basis of highest rates of poverty, degree of desertification and land degradation, and resulting drop in potential for agricultural and sylvo-pastoral production. Together, these districts cover an arable area of 639,000 ha (109,000 ha in Jendouba, 330,000 ha in Kasserine, and 200,000 ha in Médenine). The total target population is 733,000 (210,000 in Jendouba, 230,000 in Kasserine, and 293,000 in Médenine), broken down into 154,000 households (50,000 in Jendouba, 44,000 in Kasserine, and 60,000 in Médenine) and including 115,000 farmers (36,000 in Jendouba, 40,000 in Kasserine, and 39,000 in Médenine).

17. In the project target areas, small farms dominate the agricultural landscape, with farms mainly corresponding to family units and usually covering less than 10 ha. Customary land tenure and inheritance systems are leading to further fragmentation of these farm units and unsustainable agricultural practices, such as ploughing parallel to slopes, are accelerating erosion. In addition to the over-fragmented land tenure structures resulting in small farm sizes, the sector is characterized by insufficient technical capacity and know-how of farmers on suitable land management practices, resulting from an under-capacitated extension system and a lack of access to finance for agricultural investments. Instead, farming is dominated by extensive practices that combine grain growing mainly for subsistence purposes and animal husbandry as the main source of income. Extensive production is leading to ever-increasing intensity of land

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degradation and seriously threatening the long-term potential for agricultural, pastoral, and sylvo-pastoral production.

18. For example, excessive land clearing and biomass loss resulting from poorly adapted management methods, such as unsuitable tillage practices with inadequate rotation, insufficient nutrient replenishment, etc., are leading to loss of soil organic matter and reduced soil fertility. Increased vulnerability to erosion due to loss of vegetation cover is resulting in loss of topsoil and increased risk of landslides on steep slopes, with corresponding rapid water build up and flooding in the plains. This is leading to gully erosion and stream bank destruction, and further loss of arable lands. Overstocking beyond land carrying capacity and overgrazing combined with continued deforestation is leading to further loss of vegetation cover and impoverishment of rangeland and forest areas and negatively affecting aquifer recharge. Increasing climate variability and climate change are further exacerbating these effects.

19. The proposed Project is designed to address factors limiting sustainability of agricultural production in rural areas, in particular in the three target areas, with four closely interlinked components. The Project will address water availability and land degradation as a major limiting factors to productivity in the arid and semiarid landscape. It will improve the provision of agricultural extension and advisory services as well as agricultural input to rural land users based on a more demand-driven approach. The Project will further assist the RCADsand local Governments to adopt an integrated and participatory approach to local development planning that is also responsive to women and unemployed youth and that further follows a more holistic and sustainable approach to land management. As such, the Project will invest in critical soil and water conservation measures that are aimed to stabilize and reverse land degradation which is threatening to undermine the productive qualities of the land, upon which the livelihoods of rural land users are reliant. Finally, the Project will support capacity building and awareness-raising of key stakeholders at local, regional, and national levels in support of its integrated participatory approach.

20. The proposed Project will combine a GEF-financed $9.73 million grant that will be fully blended with the Bank-financed Second Natural Resource Management Project (NRMP2 - P086660), implemented under the lead of the MAWRF. GEF financing will maximize the global environmental benefits of proposed NRM investments under the NRMP2, and incorporate adaptation measures to climate change risks in development investments under the Project. GEF interventions will contribute to the integrated approach to water resources management, including the use of non-conventional water sources for agricultural purposes and groundwater recharge. More specifically, the GEF grant will contribute to the broader objective of reducing land-based pollution of the Mediterranean Sea from arid agricultural lands and includes a technical study of a major scheme to transfer treated wastewater from the Greater Tunis area as well as pilot activities for re-using treated wastewater and communication campaigns to encourage economic use of treated wastewater in agriculture.

21. The GEF Grant would be coordinated with the Second Water Sector Investment Project (WSIP2P) (P095847) which continues to support the transition towards integrated management of supply and demand, of water quantity and quality and of surface and groundwater, promoting a mix of policy innovations, physical investments and strengthening of local, regional and national institutions. Complementary activities with this Project will include: (a) capacity

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building of irrigation management at the national, regional, and community levels; (b) environmental protection involving soil and water pollution monitoring; and (c) establishment of a national information system on water resources which will also be used by the NRMP2.

22. The GEF Grant will fund a feasibility study on the transfer and use of treated wastewater from the Greater Tunis area to rural areas towards the interior of the country. The objective of this activity is to support the Tunisian Water Reuse Strategy which aims at transferring treated wastewater to the more arid zones south of Greater Tunis. In this way, the GEF funding under the Project will complement another GEF-funded operation, the Greater Tunis Treated Wastewater Reuse Project, whose objective is to reduce treated wastewater discharge from into the Gulf of Tunis, an environmentally sensitive area of the Mediterranean Sea, and scale up the use of treated wastewater in agriculture as well as promoting recharge of over-exploited aquifers. Thus, both projects will contribute to pollution reduction and water quality improvement in the Mediterranean Sea.

23. The Project will further aim to enhance synergies with other initiatives and key national and international players involved in NRM, environment, and climate change in Tunisia. With a view to climate change, the Project will build on the “Strategy for Adaptation to Climate Change in the Tunisian Agricultural Sector” that was developed by the Tunisian Government with support from GTZ as well as the Tunisia Adaptation Policy Framework for Climate Change (APF) that is supproted by UNDP. In the land degradation sector, the Project will establish operational linkages with the new IFAD-led GEF Strategic Partnership on Sustainable Dryland Management in the MENA Region (MENARID), including a parallel GEF-financed project to support SLM in the Siliana Governorate.

Fit with the GEF Strategies, the MENARID, and SAP MED

24. The Project is designed to move beyond a single focal area approach, and instead follows an integrated, cross-cutting approach aligned with strategic objectives of the Land Degradation, Climate Change, as well International Water’s Focal Areas in order to achieve greater impacts. The Project is aligned to the objectives of the GEF’s focal areas as follows:

Land Degradation: The Project is aligned with the Land Degradation focal area by specifically contributing to: (1) Strategic Objective 1 that supports the enabling environment to improved SLM, through mainstreaming SLM within agricultural sector policy and practice at national and local level; and (2) Strategic Objective 2 that aims at up scaling SLM investments on the ground to generate both global environment benefits as well as increase the income and strengthen the livelihoods of Tunisia agricultural producers and communities.

This Project is part of a series of projects identified by the MENA Region at the Bank for inclusion in the GEF/MENARID program. The development objective of the Project is aligned with MENARID’s overarching objective: to promote integrated SLM (ISLM) in the drylands of the MENA region while improving the economic and social well-being of the targeted communities through the restoration and maintenance of ecosystem functions and productivity. The Project, following MENARID’s approach, will work towards further mainstreaming ISLM, improving the governance of natural and water resources

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(ground water and trans-boundary water systems), and coordinating investments that will: (i) promote enabling environments to mainstream the ISLM agenda at national and regional scales, and (ii) generate mutual benefits for the global environment and local livelihoods through catalyzing ISLM investments for large-scale impact.

Climate Change: The Project is consistent with the objectives of the Strategic Pilot on Adaptation (SPA) that supports measures to increase capacity of GEF beneficiary countries to adapt to the adverse impacts of climate change and variability and to maintain or increase ecosystem resilience. In the context of land and water management, the priority lies on integrating climate risk management into sustainable land and water management and planning. More specifically, the Project will support improved water resources management and assist in building adaptive capacity in an effort to reduce vulnerability of the agricultural sector to extended droughts and reduced precipitation. Further, the Project will enhance resilience of productive lands to floods and droughts in the context of local development planning.

International Waters: The Project is consistent with the Strategic Objective 2 of the International Waters Focal area in terms of addressing transboundary water concerns, more specifically nutrient over-enrichment and oxygen depletion from land-based pollutions of coastal water in Large Marine Ecosystems. The Project adheres to the Strategic Program 2 of the GEF-4 IW Focal Area Strategy by supporting action to reduce land-based input of nutrients and pollutants to sensitive coastal ecosystems through investments to reduce non-point pollution from the agricultural sector and improving sanitation and treatment targets for wastewater discharge. The Project will further contribute to Strategic Program 3 by supporting an integrated water resources management approach to better balancing use of water resources and increasing aquifer recharge, and thus improving the basis for adaptation to fluctuating climatic conditions. Integrated water resources management will also entail reforestation to protect groundwater recharge areas and to control erosion and soil loss in the upper reaches of watersheds to improved flow regulation.

25. The Project will assist the government of Tunisia towards meeting pollution reduction targets agreed under the SAP MED that are aimed at reducing land-based sources of marine pollution of the hotspots along the Tunisian Mediterranean coast. The Project will further benefit from the coordination and consultation with partners and countries under the coordination of the Mediterranean Sea Large Marine Ecosystem Partnership that brings together the UNEP, FAO, UNESCO, WWF, UNIDO, Mediterranean Environmental Technical Assistance Program (METAP)27, GWP, Horizon 2020, the EU, and the World Bank. The Regional Partnership supports domestic and industrial wastewater treatment; wetland restoration and/or construction;

27 The METAP program was established in 1990 and initially designed to identify fundable actions to halt environmental deterioration. In time, the focus shifted to defining sustainable development indicators for the region, to assessing the impact of policies, programs and projects on the state of the environment, and to reinforcing the technical capabilities and resources of both public and private entities. METAP's four operational phases have kept the spotlight on the regional dimension, building the capacity of national and local institutions, whilst fostering support between nations to limit transboundary environmental impacts, disseminate knowledge and nurture best practice. Today, METAP projects and activities focus on water quality, solid waste, cost of environmental degradation, trade and environment, banking and environment, environmental impact assessment and knowledge management. METAP covers projects in Tunisia.

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improved management of watershed and aquifers for habitat conservation and pollution reduction; and protection of endangered natural habitats and sensitive areas.

Incremental Analysis

Baseline Scenario: The baseline project would not adequately address the key constraints that have thus far limited the wider adoption of SLM practices in Tunisia and dampened efforts to counter the ongoing trend of land degradation. The development priority of the baseline scenario would be on improving livelihoods of rural communities by supporting income-generating activities and by delivering advisory services aimed to increase rural productivity.

26. The baseline project would address water availability and access, as water presents a major limiting factor in the arid and semi-arid production landscape. However, the baseline project would not explore opportunities to use treated wastewater for agricultural purposes and aquifer recharge. The baseline project would further aim to improve agricultural production with the provision of agricultural advisory services focused on profitable land management practices as well as input support to production systems. However, support to more sustainable agricultural production will be limited as the main focus would lie on the promotion of alternative income generation to diversify rural livelihoods. Efforts to mainstream climate risk adaptation into the agricultural sector would be limited. The baseline project would be designed to address land degradation with investments in soil and water conservation works aimed to stabilize and reverse erosion and restore soil fertility on public and private lands. However, focus would lie on structural measures aimed to halt erosion, rather than low-cost measures to prevent land degradation. The baseline project would further provide the underlying institutional strengthening and capacity building for key ministries and partners involved in project implementation at national, regional, and local levels. Capacity building and awareness-raising would strengthen the ability of all partners to foster innovations in local development planning and support structures for delivery of community demand-driven investments in rural development. Under the baseline scenario, the environmental sustainability dimension of increased rural productivity would be limited. Focus of investments would lie on physical infrastructure development for productive use, such as water supply and irritation, income- generation and livelihood improvements, and related transfer and adoption of technological know-how. Yet, there would be limited stimulus to adopt a more integrated and holistic approach for investments in agricultural, livestock, and sylvo-pastoral production systems and thus limited impact in reversing existing land degradation threats. Knowledge fragmentation would continue to limit opportunities for adoption of improved land management practices at the local level. Further, under the baseline scenario, no efforts to explore the use of treated wastewater for agricultural purposes would be made and the sustainability scenario of Tunisia’s need for increased water provision for the agricultural sector would continue to be fragmented. Without catalytic efforts of GEF financing, further operationalization of Tunisia’s water reuse strategy would only pay marginal attention to the objectives of the SAP for the Mediterranean and thus have limited results in terms of pollution reduction into the transboundary marine environment.

27. Without GEF support, investments under the baseline scenario would thus have a much weaker long-term sustainability dimension to halt and reverse land degradation, address climate risks, and maintain ecosystem services. Less efforts would be devoted to improved management of soil quality, as well as other measures to improve land and water management. The baseline

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scenario would further provide limited opportunities to enhance climate change adaptation abilities of rural land users.

GEF Alternative Scenario

28. The added value of the proposed GEF involvement in the Project will be three-fold. GEF incremental activities will help to: (i) halt and reverse the land degradation trends in the target areas and consequently help maintain the productive capacity of the productive landscape, (ii) improve the climate resilience of the agricultural production systems to climate risks, and (iii) pilot use of treated wastewater for irrigation and thereby pave the way for scaling up wastewater transfer and use to improve drought preparedness, recharge aquifers, and reduce effluent discharge in the sensitive Mediterranean Sea. Generally, the Project would increase awareness of rural communities on the benefits of sustainable land management practices and the important role farmers and other land users play in terms of maintaining the quality of the land.

29. Under the alternative scenario, incremental GEF financing will support operationalization of the national water reuse strategy and the advancement of an implementation framework for scaling-up cost-effective reuse of treated wastewater for agricultural purposes and aquifer recharge. More specifically, a feasibility study on the transfer and usage of treated wastewater from Greater Tunis to rural areas in the interior of the country will be financed. The feasibility study will lay the groundwork for scaling up reuse of wastewater for irrigation and will support climate change adaptation and mitigation capacity of irrigated agriculture on productive lands prone to water shortages, especially during dry seasons and periods of extended droughts. The increased utilization of treated wastewater produced in large amounts in urban areas, especially Greater Tunis, will also reduce the high load of nutrients and other land-based pollutants that are currently discharged into the sensitive Mediterranean Sea, specifically the Gulf of Tunis. The feasibility study will be complemented with two wastewater pilots in Medenine and Kasserine aimed to demonstrate how careful use of treated wastewater for irrigation can contribute to water conservation and decrease the adverse effects of soil erosion and climate change on agricultural productivity.

30. GEF incremental funding will further invest in advisory services aimed to encourage the adoption of irrigation and farming techniques that support sustainable soil and water management, such as using organic fertilizers, intercropping legumes for added value, preventing the salinization of agricultural land, as well as other sustainable land management techniques that help to rehabilitate and preserve soil fertility. Such measures will help increase water infiltration, reduce evaporation, and increase storage of rainwater in soils and improve adaptation to extreme temperatures and lower or erratic precipitation patterns. Soil management will be complemented with the provision of seeds for drought-resilient crop varieties with high yields and reduced water requirements. As part of the advisory services to ADGs, awareness raising and training activities will aim to increase awareness and knowledge on sustainable land management practices and their associated climate change adaptation and mitigation potential. The aim is to increasingly incorporate drought and flood prevention and mitigation activities in participatory development plans.

31. To add value to structural investments aimed to reduce and reverse land degradation, and specifically soil erosion (i.e., terraces, bank, bunds, palisades, etc.) financed by IBRD and the

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Government of Tunisia, GEF incremental funding will invest in variety of complementary vegetative and agronomic measures for soil and water conservation on private as well as public lands, such as stabilization of top soil with vegetative cover, windbreaks to protect marginal lands from topsoil loss and crust formation from wind erosion, and dune protection to reduce sand intrusion to agricultural lands. Measures will be planned and developed jointly with ADGs and landowners to ensure sound integration in existing agricultural activities and to enhance ownership and sustainability of investments. Participatory planning exercises will further aim to operationalize the recently finalized National climate change adaptation strategy for Tunisian agriculture and ecosystems at the local level and thus contribute to implementation of the road map for the national strategy.

Global Environmental Benefits

32. This Project seeks to mainstream sustainable land and water management in demand- driven investments to increase productivity and optimize use of land and water resources. Adopting a multi-sectoral approach, the Project will deliver global environmental benefits relevant to land degradation and desertification control, climate change adaptation and mitigation, as well as reduced land-based pollution of the marine environment.

33. GEF-financed activities will leverage increased awareness, knowledge, and capacity of communities organized in ADGs to apply sustainable land management practices that help to restore ecosystem functioning and productive qualities of the land, thus delivering closely intertwined local economic and global environmental benefits. By encouraging the mainstreaming of SLM practices and approaches in participatory development plans, communities will increase investment in sustainable agricultural, pastoral, and sylvo-pastoral activities, that contribute to halt and reverse land and water degradation. For example, pasture improvement by control of overgrazing, will not only provide private benefits with favorable impacts on livestock productivity, but also slow and reverse soil loss and desertification, thereby providing public environmental benefits. Changes in land cover in rangelands, tillage management in croplands, and avoided deforestation in sylvo-pastoral lands, will improve the infiltration capacity of the soil and provide improved fresh water availability. A mix of horticulture crops with optimal crop rotations will improve soil fertility and thus productivity and further promote carbon sequestration. Application of animal manure will improve soil structure and water-holding capacity and also reduce the need for fertilizer application. In summary, SLM practices will support rehabilitation of degraded production landscape, protection of watershed functions, expansion of carbon stored above and below ground, prevention of forest degradation, and control of desertification. Transboundary benefits will further be achieved in terms of reduced damage caused due to wind erosion and sandstorms and reduced nutrient depletion and downstream pollution and sedimentation caused by water runoff.

34. Sustainable land management activities will further generate global environmental benefits by increasing the amount of biologically sequestered carbon in biomass and soil organic matter. By restoring cultivated organic soils, carbon dioxide emissions from the soil are reduced and carbon increasingly stored in soil organic matter. Increasing soil organic carbon is the main mitigation potential in the agricultural sector, and increased soil organic matter content leads to improved soil fertility, nutrient supply, and a host of other vital soil functions. These soil functions further increase the resilience of the soil to threats posed by climate variability and

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future climate change. Adopting sustainable land management practices will thus improve livelihoods of rural land users and increase their ability to adapt and cope with the effects of climate impacts. As such, soil carbon sequestration not only mitigates climate change, but also reduces the vulnerability to climate risks.

35. It is essential that farmers gain enhanced knowledge and understanding of climate change risks and how sustainable land management can assist to cope with the impacts. Conservation agriculture and crop-related SLM practices will help farmers to adapt to intensified droughts as well as increased precipitation. For example, the reduction of tillage intensity combined with improved residue management will help to increase soil moisture and support restoration of degraded soils, thus sustaining production potential under a changing climate. Small-scale farmers, agro-pastoralists, and pastoralists in Tunisia are important custodians of the sustainability of the productive lands and natural resources, and technical support and capacity building will support them to manage their lands sustainably, adopt management practices that build resilience to increased climate change variability and climate change, and to restore ecosystem services that increase yields.

36. Improved land management will further reduce the effects of water erosion, such as nutrient runoff. As such, sustainable land management practices will not only protect the integrity of the land, but also of downstream water bodies, especially the Mediterranean Sea, by reducing land-based pollution and nutrient overload leading to eutrophication. The Project will further create an enabling environment conducive for follow-up investments in wastewater treatment and reuse, which will reduce effluent discharge into the Mediterranean Sea. With a feasibility study and pilots for wastewater irrigation financed by GEF, the Project will pave the way for scaled-up investments to transfer treated wastewater to the interior of the country for both agricultural purposes and for aquifer recharge. This will reduce surface water scarcity during dry seasons and periods of extended droughts, help to preserve wetlands, and support more sustainable use of groundwater reserves.

Incremental Costs

37. The total project cost under the baseline scenario, where only the baseline Project based on the IBRD loan would be implemented, is US$57.93 million. The total cost under the GEF alternative for the Second Natural Resources Management Project is US$67.66 million. The incremental cost under the GEF alternative is therefore US$9.73 million, corresponding to a GEF co-financing ratio of 1:6.

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Annex 16: List of Sustainable Land Management Techniques REPUBLIC OF TUNISIA: Second Natural Resources Management Project

Soil Degradation Control Techniques Promoted by the Project

1. Soil degradation in the project area can be explained by both natural factors (intense rainfall, soil structure, and wind speed) and anthropogenic factors: socioeconomic context, population concentration of farmers and stock breeders on foothills and djebel (mountain) zones, resulting in the cultivation of land on excessively steep slopes, poor land allocation, and the persistence of unsustainable farming practices leading to soil degradation. Rapid erosion and desertification in arid areas are the result of forest loss and degradation, disruption in the agro- sylvo-pastoral balance, and the cessation of longstanding land use practices. Multiple sustainable land and water management techniques will be implemented, all of which will be based on the Tunisian experience and/or adjusted to the local context. They will be selected based on the following criteria:

 where there are traditional techniques, these may be improved upon; where traditional techniques are not yet in place or not adequate, focus will be on techniques already applied elsewhere and familiar to users;

 techniques must be simple to implement, i.e. with little operating constraints.

 investment and recurrent costs must be low and/or manageable;

 techniques cannot call into question the foundations of the farming system, but they must seek to prevent and/or mitigate resulting land disturbances;

 proposed techniques must generate an income supplement, e.g., by boosting production or providing supplementary income.

2. The main techniques considered include:

(1) Gully erosion control, which aims at: (i) reducing land loss on slopes and stopping upward erosion; (ii) reducing water run-off and resulting erosion and downstream damage; (iii) seepage; (iv) trapping sediments in ravines to serve as fertile soils for planting fodder or fruit trees. Such control will involve:  Dry masonry walls: With the objective of developing farmland and promoting contour plowing, these small structures can be managed by having the local population carry out maintenance. The structures to be set up are designed at the level of land belonging to communities that subscribe to the project, strongly favor the operation, and see its usefulness in terms of agricultural development and farmland conservation;

 Gully head and embankment consolidation: This measure aims to slow the advance of gullies at the expense of farmland. This consolidation will be carried out through backfilling and shaping using fascines, stones, bales of straw, or other available materials.

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 Embankment revegetation and gully fills. This aims at protecting farmland from landslides and from the collapse of surrounding farmland. It also aims at improving plant cover and pastoral and fodder resources. (2) Interfluve treatment: These structures aim at entirely stopping erosion through superficial stripping. They ease infiltration and reduce run-off water concentrations that cause significant damage downstream. Development types vary with soil characteristics (permeability, depth), slope gradient and length, agricultural utilization type, and pluviometry. These development structures are significant in semi arid and arid zones since they increase soil humidity on land under cultivation. The diverse techniques and methods used to achieve this include:

. Manual bench terraces, which consist of an excavated trench and an embankment of benched furrows set at right angles to the slope at regular intervals. Retaining bench terraces are constructed along contour lines and are suitable for low-rainfall areas with deep and permeable soils and a slope gradient of less than 6%. On soils with higher gradients, diversion benches can be set up along a gentle longitudinal slope to ease excess water drainage. This type of structure is more complex to set up as it is difficult to precisely control flows resulting from intense rainfall. In addition to exploiting the trench upstream, for example through arboriculture, benches are consolidated wherever possible by layers of dry masonry (especially at the edges of embankments) and a double row of shrubs such as cactus, acacia, atriplex, tree alfalfas, or Mauritanian grass, depending on the region. However, consolidation through hardy fruit trees is increasingly preferred by the communities. In addition, although olive and fig trees are most commonly used, almond trees may also be suitable.

. Dry masonry barriers involve the revegetation of structures using trees and shrubs. Stone barriers and dwarf walls slow down run-off, trap sediments, and improve soil humidity, whose effect on yields has now been demonstrated in semi-arid areas with low pluviometry. Clearing plots of stones also meets a frequent request by farmers. While clearing stones off plots unsuitable for agriculture (gradient above 30%, presence of an unstable flange, skeletal soils, etc.) should be avoided, consolidation through revegetation with forage-type species (acacia, atriplex, cactus, tree alfalfa, etc.), herbaceous species (Mauritanian grass, sulla, etc.), or arborescent species consolidated by hardy fruit trees (olive, fig, and almond trees) should be encouraged. While an alternative involves mechanically breaking down a strip about twelve meters wide to harvest the stones required for constructing a barrier, the band carved out upstream of the barrier may, depending on soil characteristics and the wishes of farmers, be used for planting fodders or fruit trees.

. Individual basins for arboriculture: The exposed flank upstream is covered with stones, where these exist. Generally, basins are prepared individually during new planting and are included in planting costs.

. Pastoral and sylvo-pastoral improvement: This is accomplished through a localized and dense planting (1,600 plants per hectare) of forage shrubs (acacia, tree alfalfa, cactus, atriplex), depending on local conditions and the interest level among the user population. This creates an environment suitable for the development of natural forage species either

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by including herbaceous speciesin plantations or by rest-rotation grazing. This deferred grazing includes samplings derived from mowing or pruning. Small additional structures may be necessary to control gully erosion. Basic pasture land improvements are carried out by: (i) simple rest-rotation with fertilizing; (ii) improved rest-rotation by scarification, fertilizer, and reseeding; and (iii) planting local or introduced forage plants such as spineless cactus, Acacia cyanophyla, atriplex sps, Medicago arborea, mulberry, oxyphyllous ash, or Russian olive, depending on the ecological region.

. (3) Agroforestry, through the planting of different tree species that are mainly used to consolidate soil and water conservation structures and, in some cases, to set up windbreaks for the protection of specific agricultural sites (e.g., small irrigated areas, orchards, etc.). The project will attempt to diversify the range of suitable species and provide advice to better target species, depending on agro-ecological conditions (soil, pluviometry, temperature, etc.) and marketing opportunities. In addition to the familiar olive and almond tree, other species such as the fig or carob tree may also be considered

. (4) Siltation control: This is done through dune fixation in the case of sand movement in tree plantations resulting from frequent plowing and from the use of inappropriate tools for working on disc soils. In this case, the process identifies and proposes a more appropriate agro-technology package comprising specific protection techniques (hedges, windbreaks, etc.). When sand poses a threat to farmed areas (olive groves or small irrigated perimeters, for example), sand fixation will be carried out by setting up dune belts and consolidating these with plants such as Tamarix aphylla

. Water mobilization facilities: Distribution and groundwater recharge facilities are designed to strategically mobilize surface water. Sometimes called tabias, these jessours constitute additional small-scale water mobilization facilities. They comprise huge, high embankments mechanically constructed in glacis and discharge areas bordering mountains. Their effectiveness on plateaus is considerable, and land improved in this way are used for planting olive, fig, and other fruit trees.

. Concerted forest management plans: These plans, which will be used as management tools by the forestry service and which will serve as a basis for developing Participatory Development Plans (PDPs), aim to rehabilitate and suitably manage forest resources in partnership with forest users.

. Agricultural business improvement, especially by promoting appropriate organic fertilizer use, organic farming, and crop rotation systems.

. Land consolidation schemes will increase plot sizes and allow for improved farm operations and limit unsuitable practices such as plowing parallel to the slope.

. Promotion of customized salinity control techniques and varieties, which is a problem in areas further south.

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. Hillside farming involves land with gradients within a 5-15% range and combines light development plans (contour line marking, setting up weed-covered bands, etc.) with appropriate farming techniques (contour plowing, appropriate tillage equipment, crop rotation, planting perennials, etc.).

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Annex 17: Maps REPUBLIC OF TUNISIA: Second Natural Resources Management Project

IBRD No. 37854 IBRD No. 37855 IBRD No. 37856 IBRD No. 37857

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TATAOUNINE

ALGERIA LIBYA IBRD 37856 This map was produced by the Map Design Unit of The World Bank. MAY 2010 0 10203040 The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank KILOMETERS Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. DJERBADJERBA MellitaMellita TUNISIA HOUMETHOUMET TUNISIE Golfe de Gabès NRMP PHASE I SECOND NATURAL RESOURCES MidounMidoun PGRN PHASE I MANAGEMENT PROJECT DJERBADJERBA ADJIMADJIM DJERBADJERBA AdjimAdjim NRMP PHASE II DEUXIÈME PROJET DE GESTION MIDOUNMIDOUN PGRN PHASE II DES RESSOURCES NATURELLES GOVERNORATE CAPITAL CAPITALE DE GOUVERNORAT MÉDENINE GOVERNORATE GOUVERNORAT DE MÉDENINE SIDISIDI MAIN ROADS ROUTES PRINCIPALES MAKHLOUFMAKHLOUF BouBou GraraGrara SidiSidi ZarzisZarzis DELEGATION BOUNDARIES MakhloufMakhlouf LIMITES DES DÉLÉGATIONS ZARZISZARZIS GOVERNORATE BOUNDARIES MÉDENINEMÉDENINE FRONTIÈRES DES GOUVERNORATS NORDNORD INTERNATIONAL BOUNDARIES MÉDENINEMÉDENINE MÉDENINEMÉDENINE FRONTIERES INTERNATIONALES SUDSUD

BeniBeni KhedecheKhedeche ElEl MarsaMarsa RasRas AdjirAdjir BENIBENI KHEDECHEKHEDECHE MEDITERRANEAN SEA BenBen GuerdaneGuerdane BIZERTE ARIANA TUNIS JENDOUBA BEN NABEUL BÉJA AROUS ZAGHOUAN

EL KEF SILIANA SOUSSE

BENBEN GUERDANEGUERDANE ALGERIA MONASTIR KAIROUAN MAHDIA

KASSERINE SIDI BOU ZID SFAX

GAFSA

TOZEUR

Chott el GABÈS Jerid LIBYA MÉDENINE GBELLI

Area of Map

TATAOUNINE

0 10 20 30 40

KILOMETERS ALGERIA LIBYA This map was produced by the Map Design Unit of The World Bank. IBRD 37857

MAY 2010 The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.