AFRICAN DEVELOPMENT BANK

Public Disclosure authorized

TUNISIA

NORTH-WEST ROAD CONNECTIVITY SUPPORT PROJECT

Public Disclosure authorized APPRAISAL REPORT

RDGN/PICU

November 2017

Translated document

TABLE OF CONTENTS

Currency equivalents ...... i Fiscal year ...... i Weights and measures...... i Acronyms and abbreviations...... ii

I - STRATEGIC THRUSTS AND RATIONALE...... 1 1.1 Key Development Issues...... 1 1.2 Project linkages with country strategy and objectives ...... 1 1.3 Rationale for Bank intervention…………………………………………………… 2 1.4 Aid Coordination ...... 3

II -PROJECT DESCRIPTION ...... 4 2.1 Project objectives and components ...... 4 2.2 Technical solution adopted and alternatives explored ...... 5 2.3 Project type ...... 5 2.4 Project cost and financing arrangements ...... 5 2.5 Project area and beneficiaries ...... 7 2.6 Consideration of Bank Group experience and lessons learned in project design ...... 8 2.7 Key Performance Indicators ...... 9

III - PROJECT FEAISIBILITY...... 10 3.1 Economic and financial performance ...... 10 3.2 Environmental impacts, climate change and social issues...... 11

IV - IMPLEMENTATION...... 13 4.1 Implementation arrangements ...... 13 4.2 Procurement Arrangements ...... 13 4.3 Financial Management Arrangements ...... 15 4.4 Monitoring ...... 16 4.5 Governance ...... 16 4.6 Sustainability ...... 17 4.7 Risk mnagement...... 17 4.8 Knowledge building ...... 18

V - IMPLEMENTATION ...... 18 5.1.Legal instrument ...... 18 5.2.Conditions associated with Bank intervention ...... 18 5.3.Compliance with Bank policies ...... 21

VI – RECOMMENDATION ...... 21

Appendix I: Description of the planned developments Appendix II: Country Financing Parameters Appendix III: Project cost and financing arrangements Appendix IV. Supporting documents and scope of the requested authorization from the Board for the use of EIB's procurement system Appendix V: Regional development indicator Appendix VI: Tunisia: Comparative socio-economic indicators Appendix VII: AfDB Portfolio Table in Tunisia Appendix VIII: Project area map

LIST OF TABLES

Table 1.1: Donor contribution to the financing of the sub-sector road programme

Table 2.1: - Project components

Table 2.2: Alternative solutions explored and reasons for rejection

Table 2.3: Estimated cost by component, exclusive of taxes for AfDB financed

Table 2.4: Source of project financing

Table 2.5: Summary of the estimated cost per component of the entire project

Table 2.6: Summary of Cost per Categories of expense for ADB Financing

Table 2.7: Schedule of expenditure by source of funding (Million EUR) for the entire project

Table 3.1: Outcomes of the economic analysis

Table 3.2: Country Financing Parameters

Currency Equivalents (June 2017) Unit of account 1 = 3.38997 TND Unit of account 1 = 1.23369 EUR Unit of account 1 = 1.38432 USD EUR 1 = 1.1211 USD EUR = 2.747 TND

Fiscal Year

1 January – 31 December

Weights and Measures

1 metre (m) = 3.28 feet 1 millimetre (mm) = 0.03937 inch 1 kilometre (km) = 0.62 mile

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Acronyms and Abbreviations

ADEB Budget Decision Support AfDB African Development Bank AFESD Arab Fund for Economic and Social Development AGTF Africa Growing Together Fund ANPE National Agency for Environmental Protection BTP Public Works and Civil Engineering CBDs Competitive Bidding Documents CSP Country Strategy Paper DGPC Directorate-General for Highways and Civil Engineering DREHAT Regional Directorate for Infrastructure, Housing and Regional Development EIB European Investment Bank ERR Economic Rate of Return ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan EUR Euros GDP Gross Domestic Product GENIS Road Maintenance Management by Service Levels GHG Greenhouse Gases HDV Heavy Duty Vehicle MDICI Ministry of Development, Investment and International Cooperation MEHAT Ministry of Infrastructure, Housing and Regional Planning NPV Net Present Value PACR North-East Road Connectivity Support Project PADRCE Regional Development and Job Creation Support Programme PAP Project-Affected Person PDAI Integrated Agricultural Development Project PIA Project Impact Area PMIR Road Infrastructure Modernization Project PMU Project Management Unit PP Procurement Plan RPF Resettlement Policy Framework SDAG Sub-Directorate for General Affairs TAF/MIC Technical Assistance Fund for Middle Income Countries TND Tunisian Dinars ToR Terms of Reference UA Unit of Account USD United States Dollar VOC Vehicle Operating Cost WB World Bank

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Project Information Sheet

Client information BORROWER: Tunisia

EXECUTING AGENCY: Ministry of Infrastructure, Housing and Regional Planning, acting through the Directorate-General for Highways and Civil Engineering (DGPC)

Financing Plan Source Amount Instrument

AfDB EUR 122.000 million Loan

EIB EUR 123 million Loan

Government EUR 32.29 million Self-financing

TOTAL COST EUR 277.29 million

Key AfDB Financial Information

Loan Currency Euro (EUR) [or any other acceptable currency] Interest Type Fully flexible loan Maturity To be determined (up to 25 years maximum) Grace Period To be determined (up to 8 years maximum) Weighted Average Maturity **: To be determined (based on the amortization profile) Refunds Semi-annual installments after the grace period

Interest Rate Base rate + Margin on financing cost + Loan margin + Maturity premium. This interest rate must be greater than or equal to zero. Base Rate Floating (EURIBOR 6 Months revised on 1st February and 1st August or any other acceptable rate). A free option is offered to set the base rate Financing Cost Margin Revised Bank Financing Cost Margin on 1st January and 1st July and applied on 1st February and 1st August with base rate. Loan margin 80 basis points (0.8%) Maturity Primium To be determined: 0%, if the weighted average maturity <= 12.75 years - 0.10%, if 12.75 15 years Front End Fee 0.25% of the loan amount.

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Commitment Fee 0.25% per annum of the undisbursed amount. It begins to run 60 days after the date of signature of the loan agreement and is payable on the interest payment dates. Base rate conversion option * In addition to the free option to set the base rate, the option is offered to the borrower to return to the floating rate or reset all or part of the loan amount disbursed. Transaction fees are payable. Rate ceiling or tunnel option *: The option is offered to the borrower to put a ceiling or tunnel on the base rate for all or part of the amount disbursed from his loan. Transaction fees are payable Conversion option of loan currency *: The option is offered to the borrower to change the currency of all or part of his loan, disbursed or not, into another loan currency of the Bank. Transaction fees are payable

*Conversion options and related transaction fees are governed by the Bank Conversion Guidelines available on the website **A weighted average maturity calculator is available on the website

Timeframe – Main Milestones (expected) Activity Date Concept Note Approval April 2017 Loan Agreement Negotiations November 2017 Board Presentation November 2017 Effectiveness January 2018 Closing Date 31 December 2023 Completion Report December 2022

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EXECUTIVE SUMMARY

1. Project Overview 1.1. The North-East Road Connectivity Support Project (PACR) is part of Tunisia's road sub-sector strategy and supports two of the five pillars of the country's Development Strategy Plan for the period 2016-2020. The PACR consists of the construction of a 9 km-long two- way, two-lane (2x2) suburban highway on a new alignment bypassing the city of Bizerte to the southwest. The new bypass will link Highway 4 and National Road 8 to Local Road 438 at the western access to the city. The project also includes a 2.1 km-long viaduct bridge over Lake Bizerte and access roads at both ends of the structure totalling 7.4 km. It also comprises four interchanges, a new 1.5 km-long service road, an operations centre, a maintenance centre and ancillary developments, in particular: (i) the construction, on the south bank, of a 2.4 km-long asphalted road linking South Zarzouna and the Technopole in North Zarzouna and Menzel Abderahman; (ii) the construction of a 25 000 m² landscaped park under the bridge in Zarzouna on the left bank of the lake, which will serve as a green recreation area; and (iii) the construction of 14 km of secondary roads, 8 km of rainwater drainage system and provision of public lighting with the installation of 300 lighting points in the neighbourhoods crossed. 1.2. The total project cost, net of taxes and customs duties, is estimated at TND 761.72 million, equivalent to EUR 277.29 million. The project will be implemented over a period of 5 years. The project will be financed by the EIB, AfDB, and the Government of Tunisia. On 15 November 2016, the EIB approved financing for the project worth EUR 123 million. The Bank will provide supplementary financing amounting to EUR 122.00 million under the AfDB window. The Government will supplement the financing plan with the sum of EUR 32.29 million. 2. Needs Assessment

2.1. The PACR is a flagship project under the Development Strategy Plan (DSP). Its implementation will: (i) improve the competitiveness of the Tunisian economy by addressing the growing demand in terms of goods and passenger traffic, which currently crosses the Bizerte urban area, and help to ease congestion on the access road to the three industrial areas and the port, as well as ensure better sharing of network loads; and (ii) foster mobility and trade between the Centre, North Eastern regions of the country.

2.2. The PACR is consistent with the 2017-2021 CSP for Tunisia and is in line with the two pillars adopted, namely: (i) industrialization and value chains development; and (ii) improvement of the quality of life for the people of the priority regions. 2.3. In light of the expected benefits, the PACR is also in line with the Bank's Ten-Year Strategy for 2013-2022, especially with some of its operational pillars namely; infrastructure development, transition to green growth by reducing carbon emissions, and interconnection between centre and north-west regions of the country and between Tunisia and the rest of the world, and this implies developing the Bizerte port which will support Tunisia’s new economic orientation towards development with the rest of the continent. 2.4 Lastly, it is in line with three of the Bank's high fives, namely: (i) "Industrialize Africa" by enabling the development of the three industrial zones where more than 60% of the facilities are export-oriented; (ii) "Improve the quality of life for African People" by reducing congestion costs, rehabilitating certain neighbourhoods and creating a recreational area; and lastly (iii) "Feed Africa" by upgrading agricultural land in the project’s area of influence and processing production surplus. It is also in line with the thematic strategy for youth employment in Africa 2016-2025. v

3. Bank’s Value Added

The PACR would enable the Bank to consolidate its position as a partner of choice in Tunisia’s road sector. The Bank assists the Government through physical interventions in all three modes of transport: road, air and rail, as well as through support in the area of policy and institutional reform. However, this assistance is more pronounced in the road sector where the Bank, through its five previous interventions in the form of loans, has helped to modernize more than 70% of the Tunisia’s network of asphalted roads. Also, through the three grants already provided, the Bank is helping the Government to develop (i) a long-term vision for the sector through the implementation of a transport plan; (ii) roads sector management reforms; and (iii) new standards for road construction to improve the resilience of road infrastructure to climate change impact. 4. Knowledge Management

4.1. The project is the first of its kind and the most complex in Tunisia both in terms of its engineering and work site organization. Indeed, the nature of its foundations (piles 60 m deep and 2.5 m in diameter), the great length of its spans (270 m), and also the safety standards against possible ship collisions make it the first project of this magnitude in Tunisia and one of the longest viaducts in Africa. Its implementation will result in knowledge building in various fields. The measures taken within the context of the project, both in terms of the composition of the Project Management Unit (PMU) and end-of-course engineering projects and vocational training for young people will contribute to knowledge. The line ministry also plans to ensure the large-scale dissemination of best practices learned during the implementation of this project relating to major infrastructure construction projects. The dissemination will be carried out through a website dedicated for that purpose, briefing notes and conferences with professional and training organizations.

4.2. The effects of the impacts, which will be quantified under the monitoring/evaluation sub-component, will ensure an assessment of the level of achievement of the project objectives, and will be integrated into the broader framework of all previous Bank interventions. In order to measure the impact on the development of Bank operations, particularly in its five priority areas of action.

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RESULTS-BASED LOGICAL FRAMEWORK Country and Project Name: Tunisia, North-East Road Connectivity Support Project Project Goal: Improve the movement of goods and people in the Bizerte and Beja Governorates PERFORMANCE INDICATORS RISKS/MITIGATION RESULTS CHAIN Indicator MEANS OF VERIFICATION Baseline (2017) Target (2021) MEASURES (including CSIs))

1. Global Competitiveness Index (GCI) 1. Global Competitiveness 1. GCI: 4.2 (i). World Bank/AfDB Improve the competitiveness of (ranking/score 1 to 7) Index (GCI): 3.9 (ii). National statistics the Tunisian Economy 2. Logistics Performance Index (LPI) 2. LPI: 3.0 (ranking/score 1 to 5) 2. Logistics Performance Index

IMPACT (LPI): 2.5 1. Reduce congestion at peak 1. Time saving 1. 8.5 million h/yr 1. 6.5 million h/yr. (i). Monitoring and periods evaluation 2. Number of fatal accidents on the 2. 8 2. 4 (ii). Statistics from ONSR 2. Reduce accidents existing urban network per year (iii). CO2 recording

(iv). CRP 3.1. Number of direct jobs created per 3.1. 0 3.1. 700 men/month, at least 3. Improve the living year during the construction 10% of performed by conditions of the population women of the Bizerte and Beja 3.2. Number of interns trained 3.2. 0 OUTCOMES Governorates 3.3. Regional Development Index (RDI) 3.2. 100 including 20 girls (0 to 1) 3.3. 0 3.4. Reduction of transport-related CO2 3.3. 0.70 and 0.65 emissions 3.4. 0 3.4. 33 000 t/yr. Output 1: New infrastructure 1.1. Length of roads constructed 1.1. 0 km 1.1. 7.34 km (iv) (i) Works acceptance Risks constructed 1.2. Length of viaduct constructed 1.2. 0 km 1.2. 2.11 km report (i) Implementation delays: The

1.3. Ancillary developments 1.3. 0 1.3.1. 14 km of secondary (v) (ii) Reports by the use of EIB procurement rules, the carried out roads Project Management project's lead financier, poses the (i) 1.3.2 8 km of rainwater Unit risk of delays in the mobilization drainage system built (vi) (iii) CRP of the project of companies, and lack of

(ii) 300 lighting points proactivity in the processing of installed (vii) (i) Works acceptance requests from the Executing (iii) 1.3.3 Development of a report Agency. recreational green space (viii)(ii) Supervision and

OUTPUTS of an area of 25 000 m² audit reports (ii) Cost overruns due to (ix) (iii) ESMP physical contingencies or slow implementation reports pace of project implementation.

Mitigation measures (i) Implementation delays: This risk is mitigated by (i) a

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2.1 ESMP implementation monitoring 2.1 0 2.1 48 reports ; protocol agreement between the Output 2: Mitigation of the report; 2.2 0 AfDB and the EIB identifying environmental and social impacts2.2 Strengthening of the canal bank 2.3 2.2 2 500 ml the roles and responsibilities of act of the project protection 2.4 0 each donor; and (ii) regular

2.4 Tree planting. 2.3 9 750 trees consultations during 2.5 Compensation and resettlement of supervisions or on an ad hoc project-affected persons 2.4 1 309 PAPs basis. compensated and resettled (ii) Cost Overruns: This risk is mitigated by the detailed studies conducted by experienced consultants. Cost estimates also provided for physical and financial contingencies which would cover possible cost overruns.

COMPONENTS RESOURCES (EUR MILLION) i. Works I. Works and services 249.81 ii. Project management and coordination II. Physical contingencies 17.49 iii. Physical contingencies III. Financial contingencies 9.99 Financial contingencies TOTAL RESOURCES 277.29

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IMPLEMENTATION PLANNING

Years 2017 2018 2019 2020 2021 2022 Activities / Months J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 1 - PRELIMINARY ACTIVITIES 1.1 - Project Appraisal by Bank staff 1.2 - Board Approval 1.3 - Entry into force 2 - ROAD WORK LOT N°1 2.1 - Procurment process and notification 2.2 - Work implementation of Lot 1: South road

3 - ROAD WORK ( LOT N°2): Viaduct 2.1 -Procurment process and notification 2.2 - Work implementation of Lot 2 3 - ROAD WORK LOT N°3: North Road 3.1 - Procurment process and notification 3.2 - Work implementation of Lot 3 4 - TECHNICAL ASSISTANCE TO THE PIU

4.1 - Procurment process and notification 4.2 - Contract implementation 5 - SUPERVISION OF LOT N°1, LOT N°2 AND LOT N°3 5.1 - Procurment process and notification 5.2 - Consulting services implementation 6 - TECHNICAL CONTROL OF LOTS N°1, LOT N°2 AND LOT N°3 6.1 - Procurment process and notification 6.2 - Consulting services implementation 7 - ANCILLARY WORKS 7.1 - Procurment process and notification 7.2 - Ancillary works implementation 8 - AUDIT 8.1 - Procurment process and notification 8.2 -Financial audit 9- PROJECT MANAGEMENT

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REPORT AND RECOMMENDATIONS OF THE BANK GROUP MANAGEMENT TO THE BOARD OF DIRECTORS ON THE PROPOSED AfDB LOAN FOR THE FINANCING OF THE NORTH-EAST ROAD CONNECTIVITY SUPPORT PROJECT IN TUNISIA.

Management hereby submits this report and the recommendations concerning the proposed grant of an AfDB loan of EUR 122.000 million to the Republic of Tunisia for the financing of the North- East Road Connectivity Support Project.

I - STRATEGIC THRUST AND RATIONALE

1.1 Key Development Issues

1.1.1 The Bizerte built-up area is experiencing high population growth that has not always been well planned and regulated. The expansion of its sub-urban areas (Zarzouna and the cities of Menzel Jemil and Menzel Abderrahmane), over the past decades, has increased its population to about 180,000 inhabitants from 120,000 in 1990. The analysis of Bizerte highlights the problem of congestion at the city centre and that of commuting between the two banks of the Bizerte canal and, by extension, between the country’s Centre and North West regions. This situation is exacerbated when the existing mobile bridge is opened to allow ships to access the commercial port at the city centre. This existing mobile bridge is the only connection between the two banks of the canal. Traffic across the canal is on the steady increase and will reach around 77,000 vehicles/day by 2030. Much of this flow, about 65%, is transit traffic on highway A4 from Tunis via the city of Bizerte to the North-west of the country.

1.1.2 Constructing a new bridge outside the city and linking it with highway A4 will help divert traffic headed for a destination other than the Bizerte city centre, thus easing the traffic transiting through the existing mobile bridge, which will drop to 26,000 vehicles/day by 2030. The project will also improve the connectivity between some sub-urban areas of the city of Bizerte (Menzel Jemil and Menzel Abderrahmen on the south side) and Greater Tunis.

1.2 Project Linkages with Country Strategy and Objectivespays

1.2.1. After achieving a successful democratic transition, Tunisia is striving to implement economic and institutional reforms that would allow a return to strong and inclusive economic growth in the country. Thus, in 2015, on a participatory basis, the Government prepared the Development Strategy Plan (DSP) for the period 2016-2020. This plan, which received the support of investors when it was presented to them in November 2016, aims to bring about structural transformation of the Tunisian economy towards sectors with higher value added. It is based on two pillars, namely: (i) Shifting to an economic hub, focused on increasing productivity for competitiveness and positioning Tunisian businesses in global value chains; and (ii) Tackling regional disparities and achieving the ambitions of internal regions, by building economic infrastructure and supporting entrepreneurship in lagging regions.

1.2.2. By the end of the DSP implementation period, these two pillars will be concretized, in particular:

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i) for the first, by developing infrastructure and logistics through (a) the reduction in the cost of logistics from 20% of GDP in 2015 to 15% in 2020; and (b) through the promotion of employment and employability, especially among graduates of higher education and in regions of the hinterland; and

ii) for the second, by ensuring a 30% reduction in the existing gap between the regions, reflected in the Regional Development Index (RDI) 1 .

1.2.3. Based on its benefits as outlined in paragraph 1.2.1 below, this North-East Road Connectivity Support Project (PACR) is in line with these two pillars. It is a flagship project for both the DSP and the investment plan of the Ministry of Equipment, Housing and Regional Planning (MEHAT), which underpins the DSP implementation.

1.3 Rationale for Bank Intervention

1.3.1 The PACR is in line with the 2017-2021 CSP for Tunisia and it aligns with the two pillars adopted, which, as already mentioned, are: (i) industrialization and the development of local agricultural value chains; and (ii) improvement of the quality of life of populations in priority regions. Indeed, the project's area of influence has, among others, strong agricultural potential, in particular, for industrial crops, market gardening, arboriculture, cattle breeding and milk whose evacuation for their processing is facing challenges due to the lack of good road infrastructure. Similarly, the development of these crops and future industrial sites will provide sources of labor income from Bizerte and Beja, selected as priorities with regional development indices of 0.49 and 0.39 respectively. Lastly, the underprivileged population of adjacent neighborhoods will benefit from the related developments planned in the project.

1.3.2 In light of expected benefits, the PACR is in line with the Bank's ten-year strategy (2013- 2022), including with some of its operational pillars, namely, infrastructure development, transition to green growth, and the integration of the centre and north-western regions of the country, and Tunisia with the rest of the world, with the development of the port of Bizerte which will support the new direction of the Tunisian economy oriented towards development with the rest of the continent. Finally, it is in line with three of the Bank's five main priorities: (i) "Industrialize Africa" by allowing the development of the three industrial zones where more than 60% of the units are totally export-oriented, (ii) "Improve the quality of life for African people" by reducing congestion costs, rehabilitating certain neighborhoods, and developing a recreational area, and finally "Feed Africa") by enhancing the potential of the local agricultural land in the project area, and the transformation of surplus production. It is also in line with the thematic strategy for youth employment in Africa 2016-2025 by creating jobs from construction, but especially by establishing future industrial units and services related to the Bizerte port development.

1.3.3 The PACR consolidates the Bank's position as a partner of choice in the road sector in Tunisia. The Bank assists the Government through physical interventions in all three modes of transport: road, air and rail, as well as through support in the area of policy and institutional reform. However, this assistance is more pronounced in the road sector where the Bank, through its five previous interventions in the form of loans, has helped to modernize more than 70% of

1 The Regional Development Index is a synthetic indicator of 17 variables referring to four areas, namely "wealth and employment", "knowledge", "health and population" and "justice and equity".

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Tunisia’s network of asphalted roads. Also, through the three grants already provided, the Bank is helping the Government to develop (i) a long-term vision for the sector by implementing a transport plan; (ii) roads sector management reforms; and (iii) new standards for road construction to improve the resilience of road infrastructure to climate change impact.

1.4 Aid Coordination

1.4.1 There is no formal framework for coordinating the operations of technical and financial partners (TFPs) in the transport sector, in general, and in the roads sub-sector, in particular. However, through the on-going contacts of the North Africa Regional Development and Business Delivery Office with the authorities in charge of the sector, the Bank is kept informed of the operations of other donors. Also, the Bank is continuing dialogue with PTFs represented or on mission in Tunis. The dialogue covers both reform assistance and the search for supplementary financing and reduction of transaction costs. This project, financed jointly with the European Investment Bank (EIB), is an example of such cooperation. The Bank is also funding the national study of the transport plan, which will serve as a framework for dialogue and the reference for future interventions by partners in Tunisia.

1.4.2 Pending the recommendations of the plan, the TFPs were involved in the development of the road sub-sector programme (2016-2020), of which this project is an integral part. This programme is estimated at TND 12 billion, including an expected donor contribution of TND 9.2 billion. So far, the funding that has been mobilized or is in the process of being mobilized, pending the project approval, amounts to TND 3.12 billion, or 34% of the projected amount.

Table 1.1 Donor contribution to the financing of the road sub-sector programme (TND million)

Status Donor Amount (%) AFESD 1,322 14% Acquired/ in the course of AfDB 417 5% being acquired EIB 1,205 13% WB 180 2% Sub-total 3,124 34% To be sought 6,107 66% Total 9,231 100%

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II- PROJECT DESCRIPTION

2.1 Project objectives and components

2.1.1 The project objective is two-fold: (i) improving the competitiveness of the Tunisian economy by addressing the growing demand in terms of transporting goods and people across the urban area of Bizerte, thus helping to ease congestion on access roads to the three industrial areas and the port, and to equalize network loads; and (ii) fostering mobility and trade between the Northern and Eastern regions of the country.

2.1.2 Indeed and in line with the Bizerte Urban Development Master Plan, its implementation will help channel traffic away from the Bizerte city centre and will thus ease traffic congestion on the existing mobile bridge. The project will therefore help to promote intra- and inter-regional trade as well as reduce regional social disparities. Lastly, it will reduce accidents, CO2 emissions, improve the quality of life of the populations and facilitate access to social and economic centres. To achieve these objectives, the project operations have been grouped into three (3) components summarized in the table below.

Table 2.1 Project components (EUR million) No. Name of component Description

1.1. Development of a new South sub-urban two-way, two-lane (2x2) 1 expressway from PK 0+000 to PK 4+639, connecting road A4/RNr8 to the Viaduct; ROAD WORKS 1.2. Construction of a 2,070 km viaduct from PK 4+639 to PK 6+749 ; (263.77) 1.3. Development of a new North suburban two-way, two-lane connecting road from PK 6+749 to PK 9+446 linking the Viaduct to RL 348; 1.4. Release of the right-of-way and displacement of networks; 1.5. Management as well as control and supervision of roadworks and the structures. 2 2.1. Construction on the South bank of a 2.4 km-long paved road linking the city of South Zarzouna and the Technopole to North Zarzouna and Manzel ANCILLARY Abderahman; DEVELOPMENTS 2.2. Development of a 25,000 m² landscaped park under the viaduct; (5.66) 2.3. Rehabilitation of cities crossed. 2.4. Management as well as the control and supervision of ancillary works.

3.1. Technical assistance and project management; PROJECT 3.2. Project technical audit; 3 MANAGEMENT 3.3. Project accounting and financial audit; (7.86) 3.4. Operation of the management entity; 3.5. Project-centred communication.

The description of project developments is provided in Appendix I.

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2.2 Technical Solution Adopted and Alternatives Explored

2.2.1 From the technical standpoint, the project was designed to: (i) solve the congestion problem in Bizerte city centre, generated mainly by transit traffic, and that of mobility on the canal crossing, stemming from the fact that the two shores are connected by a single road; and (ii) help to lift the constraints imposed by these problems on the socio-economic development of the Bizerte and Beja regions.

2.2.2 In this context, technical and economic feasibility studies compared seven (7) crossing corridors, each comprising a variant that crosses the canal by means of both a viaduct and a tunnel and meet the following criteria: (i) a two-way, two-lane (2x2) urban expressway that can accommodate heavy duty vehicles; and (ii) compliance with the clearance allowance with a view to maintaining navigation on the canal. These variants were the subject of a multi-criteria analysis, integrating socioeconomic, environmental and economic returns. From this analysis, a variant was selected consisting of a viaduct crossing of approximately 2,070 m-long, having three spans of 270 metres each. It will have a composite meshwork deck and a 25 metre-wide double composite structure, designed to accommodate a 2x2 expressway with sidewalks.

2.2.3 The alternative solutions explored and the reasons for rejection are indicated in the following table:

Table 2.2: Alternative solutions explored and reasons for rejection

Alternative Brief description Reasons for rejection solutions

Increasing the Broadening the This alternative (i) involves complex structural capacity of the bridge into a two- interventions; (ii) entails a risk for the structure in the existing bridge way, two-lane event of a vessel collision; and (iii) does not resolve the crossing problem of urban traffic congestion.

Viaduct Cable-stayed This type of structure was not selected because of the bridge proximity of the aerodrome which imposes height restrictions.

Viaduct Arc bowstring Cost 18% higher than the adopted solution. bridge

2.3 Project Type `

2.3.1 The project is a standalone investment operation, co-financed with the EIB and the AfDB. For the Bank, the proposed financing instrument is an ADB loan.

2.4 Project Cost and Financing Arrangements

2.4.1 The estimated cost of the project is TND 761.72 million, or EUR 277.29 million (at the exchange rate of EUR 1 = TND 2.747 in June 2017). This total cost was calculated by discounting the cost of the technical study. Physical contingencies were estimated at an average of 7% of the base cost. The provision for price escalation was estimated at an average of 4% and according to 5

the works implementation schedule. The summary of the total estimated project cost is given in the table below. Table 2.3 Estimated Costs by Tax-free Component (AfDB Financing) Million TND Million EUR* Composantes Currency ML Total Currency ML Total

A- Works A1 LOT1: Development of the South Link Road 27,72 18,46 46,18 10,09 6,72 16,81 A2 LOT2: Viaduc construction 124,16 60,68 184,85 45,20 22,09 67,29 A3 LOT3: Development of the North Link Road 24,56 16,37 40,93 8,94 5,96 14,90

A4 : Related works. A4.1: 2.4 km paved road 1,20 1,80 3,00 0,44 0,66 1,09 A4.2: Rehabilitation of a landscaped park 1,60 2,40 4,00 0,58 0,87 1,46 A4.3: Neighbourhood rehabilitation 1,10 1,90 3,00 0,40 0,69 1,09 S/Overall Works 180,34 101,61 281,96 65,65 36,99 102,64 B- Services B2: Project management mission for the Lot 1 (including the related A4.1 works) 3,46 1,48 4,94 1,26 0,54 1,80 B4: Project Management Mission for Lot 3 3,17 1,36 4,53 1,16 0,50 1,65 B5: Technical Inspection Mission for Lot 1 (including A4.1 related works) 0,42 0,18 0,60 0,15 0,07 0,22 B6: Technical Inspection Mission for Lot 2 (including A4.2 related works) 6,15 2,64 8,79 2,24 0,96 3,20 B7: Technical inspection mission for Lot 3 0,40 0,17 0,58 0,15 0,06 0,21 B8: Project management and technical control mission for A4.3 related works 0,52 0,52 0,19 0,19 S/Overall Service 13,61 6,36 19,97 4,96 2,31 7,27 Basic cost (works & services) 193,96 107,97 301,93 70,61 39,30 109,91 Physical contingencies (7 %) 13,58 7,56 21,13 4,94 2,75 7,69 Financial risks (4%) 7,76 4,32 12,08 2,82 1,57 4,40 Overall Total 215,29 119,85 335,14 78,37 43,63 122,00 Percentage 64% 36% 100% 64% 36% 100%

2.4.2 The project will be financed by the EIB, AfDB, and the Tunisian Government according to the following table indicating the financing sources. On 15 November 2016, the EIB approved financing for the project worth EUR 123 million. The Bank will provide supplementary financing amounting to EUR 122.00 million, being a loan under the AfDB window. The Government will supplement the financing plan to the tune of EUR 32.29 million.

Table 2.4: Source of financing, exclusive of taxes (EUR million)

Sources of financing L.C. F.E. Total (%) AfDB 43,63 78,37 122 44,00% EIB 29,81 93,19 123 44,36% Government 32,29 32,29 11,64% Total project cost 105,73 171,56 277,29 100%

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2.4.3 The EIB contribution will fully cover the out-of-tax costs of the PMU technical assistance, and will contribute to the co-financing with the ADB for the construction of the viaduct and the supervision mission of the viaduct. The government will finance the releasing of the right-of-way, the relocation of the networks, the operation of the PMU, and will co-finance the rehabilitation of the districts with the ADB. The Bank's contribution will fully fund the other works and services in accordance with the table 2.3.

2.5 Project Area and Beneficiaries 2.5.1 The broad project impact area comprises the Bizerte and Beja Governorates. With an area of 3 740 km², the Beja Governorate has 303,032 inhabitants, a population growth rate of 0.05% and an urbanization rate of 44.3%. Its active population stands at 108 228 people. The Bizerte Governorate, for its part, has a surface area of 3,750 km², a population of 568,219 inhabitants, a population growth rate of 0.81% and an urbanization rate of 65.3%. The active population is 198 112 people. 2.5.2 The level of development of these two Governorates may be captured by the regional development index (RDI), defined in Annex 5. On this index, the Beja and Bizerte Governorates scored 0.39 and 0.49, respectively, on a scale of 1. These below-average scores reflect the disparities in their disfavour. The knowledge index is more than 3 times higher in Tunis than in Beja than and almost twice as high as in Bizerte. The scores are the same for the wealth and employment index, and 2.42 times higher for health and population.

2.5.3 The project's direct impact area is the Bizerte built-up area. In recent decades, the city has witnessed an unplanned and regulated urban development and expansion towards the outskirts, notably with the development of the locality of Zarzouna, the cities of Menzel Jemil and Menzel Abderrahmane, on the other side of the city canal, and Belvedere, Pêcherie and Kharrouba, on the northern and north-western sides. This area has multiple and diversified potential, and is known mainly for its strategic position in the middle of the Mediterranean, its important commercial port, its agricultural, livestock and fishery activities, as well as its industrial traditions and its tertiary sector. The economic activity of the region is mainly focused on agriculture, industry and fisheries. In the region, there are 368 industrial enterprises - of which 248 are totally export-oriented – employing over 50,000 people. These enterprises operate mainly in the textile, leather and footwear, agri-food, mechanics and electronics sectors.

Project Beneficiaries 2.5.4 The project will improve the movement of people and goods in the Bizerte and Beja built- up areas, as well as traffic towards Jendouba. Indeed, at the local level, the project will meet the needs of road users crossing the urban area of Bizerte. The interchanges to be created will link the communes and areas on the outskirts of the city of Bizerte, including Menzel Jemil and Menzel Abderrahmane on the southern side. 2.5.5 Bizerte is the second port of Tunisia after Rades. Eventually, the project will help remove the constraint imposed by the fact that the existing mobile bridge is opened three times a day to allow ships to access the commercial port at the city centre. The removal of this constraint will enable Bizerte to take the place of Rades as the leading port in Tunisia. Indeed, unlike the Rades Port, Bizerte has 4 hectares of quayside land, making it possible to double the available area of commercial docks. This development will not only reduce logistics costs for the region and its export enterprises, but will also encourage the establishment of other export-oriented industries.

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2.5.6 As part of the ancillary developments, the rehabilitation works in the neighbourhoods will facilitate accessibility for the 9 000 residents, since the works will entail the construction of 14 km of secondary roads, 8 km of rainwater drainage system and the improvement of lighting with the installation of 300 lighting points. Lastly, in terms of socio-professional integration and employment promotion, the project will enable 700 men/months to be recruited for works implementation. It will also enable 100 young people enrolled in work-study programmes, including at least 20 young women, to undertake internships designed to promote their employability.

Participatory approach to project identification, design and implementation

2.5.7 The project was adopted as part of the implementation of the Development Strategy Plan (PDS), which was drawn up in a context of broad consultation at both the regional and national levels. The project study was conducted using a participatory approach. During the preparation of environmental and social impact assessment and the technical and economic studies, the various stakeholders were also consulted. The consultations were carried out at the national level, as well as at the level of the Bizerte Governorate, delegations and residents of the project area: (i) from 6 April 2013 to 8 October 2013 and 3 June 2014 for the preliminary project design phase; (ii) on 3 April 2016, 14 November 2016, and 26 May 2017, specifically with respect to the project-affected persons (PAPs) in the context of the Environmental and Social Impact Assessment (ESIA) and the Comprehensive Resettlement Plan (CRP).

2.5.8 The inventory of the affected persons and expropriated property was based on an individual resettlement survey of all households located on the right-of-way, conducted from February to April 2016. Consultation and awareness meetings were held with the project-affected populations on the sidelines of the survey.

2.5.9 During the Bank's preparation and evaluation missions, the key players and institutions were met to collect their opinions and complaints in order to address them in the project formulation, particularly with regard to ancillary developments, the ESMP and the CRP.

2.5.10 This participatory approach, which led to the ownership of the project by the beneficiaries, will be maintained and strengthened during project implementation through a stakeholder engagement plan (SEP) at the national level, Bizerte Governorate, delegations and the population of the project area. This plan, which provides for the setting up of a Monitoring, Mediation and Accompaniment Committee, will allow: (i) regular meetings with the population of the two Governorates (Bizerte and Beja), in an effort to increase awareness and social mobilization of these local populations, and public and private operators; (ii) dissemination of key information on a dedicated website of the Ministry of Equipment and Habitat and in national and local media.

2.5.11 Finally, during the appraisal mission, the Bank organized a workshop with the EIB, DGPC and MDICI to address all co-financing risks with the EIB and the Government, as well as to validate the operational arrangements for monitoring the project.

2.6 Consideration of Bank Group Experience and Lessons Learned in the Project Design

2.6.1 The design of the PACR incorporated the Bank's experiences in Tunisia and on the continent. In Tunisia, the recent evaluation of the Bank Group's strategies and intervention programmes over the period 2004-2015, carried out by IDEV, highlighted the relevance of the 8

objectives of the transport projects insofar as they focused on concerns critical to the country. Similarly, it noted that operations in the sector were fully in line with the Bank’s various strategic orientations for Tunisia, especially those for the periods of 2003-2007 and 2008-2012, as well as the 10-Year Strategy (2013-2022) and, since 2015, the High Fives.

2.6.2 However, the review highlighted two shortcomings in the sector: (i) lack of a mechanism for infrastructure maintenance; and (ii) weak coordination among different TFPs. In addition, the recent completion reports for road projects V and VI, dating from 2016, recommended the establishment of a monitoring and evaluation system for measuring the impact of projects and the development of a maintenance strategy. Lastly, the sector review of Bank operations for the 2004- 2014 ten-year period added the improvement of quality at entry to the recommendations below. These shortcomings are compounded by the sluggish pace at which the grant-funded studies are conducted.

2.6.3 The issue of sustainability is addressed through the Bank's dialogue with the country's authorities and the Government has understood the importance of sustainability and has been mobilizing significant budgetary resources since 2015. The recent Road Infrastructure Modernization Project (PMIR), approved in 2015, envisaged a Government-financed road maintenance component worth EUR 116 million. Also, the Bank is financing a study aimed at proposing an action plan for the establishment of a road fund, which will thus help to secure resources dedicated to maintenance. Regarding the lack of coordination and sector strategy, the Bank is also financing a national transport plan that will serve as a reference for all future interventions by all TFPs and sector dialogue. This project has been the subject of a detailed study enabling significant improvement in its quality at entry.

2.6.4 Lastly, after 2011, projects in the sector experienced delays due to expropriation problems. This constraint has been lifted by the recent law of July 2016, relating to expropriation for public utility. Indeed, the Law introduces expediency in the treatment of expropriation procedures and the ownership of land for public purposes, while preserving the rights of citizens to bring claims on compensation benefits. For this project, the process is overseen by the Governorate of Bizerte, and is at a stage of payments or compensation of those affected (see para. 3.1.16). Finally, with regard to studies, the Tunis Regional Office has come up with an action plan to support implementing agencies in order to speed up implementation.

2.7 Key Performance Indicators

2.7.1 The project’s performance will be measured using the performance indicators that are explained in the results-based logical framework. There are eight (8) such indicators: the Global Competitiveness Index (GCI), the Logistics Performance Index (LPI), time saving, , number of fatal accidents, direct employment created per year during construction, number of trainees, the regional development index (RDI), and the reduction of transport-related CO2 emissions. These indicators are consistent with the outcomes defined by the 2017-2020 CSP which are themselves in line with the framework of the DSP objectives.

2.7.2 In order to carry out these operations within the planned timeframes, in addition to these outcome indicators, performance indicators have been established in relation to the Bank's institutional performance indicators. These are mainly: (i) the loan effectiveness period; (ii) the period of fulfilment of conditions precedent to the first disbursement of funds; (iii) contracting

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timeframes; (iv) the average project status indicator (PI); and (v) changes in the disbursement rate depending on the expenditure schedule. These indicators will be monitored during joint supervision missions by the Bank, the EIB and the Government and in the day-to-day management of the project.

III- PROJECT FEASIBILITY

3.1 Economic and Financial Performance

3.1.1 The economic analysis of the project was carried out using the cost-benefit method based on the “with” and “without” project situations, over a 25-year period following the commissioning of the structures. The costs include capital expenditures, annual and periodic maintenance, as well as expropriations and the displacement of networks. The benefits of the project were assessed by differentiating between generalized transport costs with and without the project, that is, the vehicle operating costs and the travel time, reduced number of accidents, and reduced CO2 emissions.

3.1.2 Vehicle operating costs (VOCs) were calculated using the HDM 4 Road Use Costs model, based on two representative categories of traffic vehicles, namely, light vehicles, and heavy duty vehicles. The time, accident and CO2 emission values were estimated from existing national studies or by reference to other countries.

3.1.3 The average annual daily traffic volume on the projected highway in the year of commissioning is estimated at 27,000 vehicles, of which 7% are heavy duty vehicles. On the basis of socioeconomic and demographic changes in the trade emission and attraction areas, traffic growth rates were calculated. Thus, under conservative assumptions, traffic in the light vehicle category will increase annually by 4.4% and 4%, respectively, during the 2021-2028 and 2029- 2040 periods. For the heavy duty vehicle category, these rates will be slightly lower, standing at 4.1% and 3.7%, respectively, for the same periods.

3.1.4 Economic performance of the project: The project’s performance was measured by the internal rate of return (IRR) and the net present value (NPV). Based on the assumptions, the IRR is 16.7% and the NPV, at the rate of 8%, amounts to TND 817 million. The robustness of these results was tested by varying the two key parameters: investment costs and benefits. Thus, a 10% increase in costs, coupled with a 10% decrease in benefits, slightly reduces the IRR to 14.7% and the NPV to TND 656 million, thus confirming the project’s positive economic rate of return. The details of the economic analysis can be found in the technical annexes to the report.

Table 3.1: Outcomes of the economic analysis

NPV (TND Scenario IRR (%) million) Baseline (1) 16.6 817 +10% costs (2) 15.8 779 -10% benefits (3) 15.5 693 Sensitivity test: (2)+(3) 14.7 656

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3.2 Environmental Impacts, Climate Change and Social Impacts

Environment

3.2.1 Its size and the main environmental and social impacts identified, the project was classified in Category 1, in accordance with the Bank's environmental and social assessment procedures. An ESIA was carried out in 2015 and 2016 respectively for the permanent link and its extension and finalized in 2017. A Comprehensive Resettlement Plan (CRP) was also prepared and finalized in 2017. The ESIA reports were approved by the National Environmental Protection Agency (NEPA) and the notices of compliance were issued on 31 December 2016 and 10 May 2017 respectively for the permanent link and its extension. Summarized versions of the ESIA and CRP were posted on the Bank's website in July 2017. The project will generate significant environmental benefits, including: (i) land recovery at the Zarzouna shoreline and the creation 25 000 m2 of urban green space under the bridge; (ii) improved air quality in the project area through the reduction of air emissions (see Para 3.1.8); (iii) significant improvement in urban mobility while preserving existing urban forests (Nadhour and Béchateur on the north side and Errimel forest on the south side); (iv) the addition of another major tourist attraction to the 'Bizerte destination, and considering its proximity to the Ichkeul park, will boost the development of ecotourism.

3.2.2 The main risks and negative impacts during the works are: (i) loss of vegetation - mainly grass, shrubs and 250 trees at the level of the bypass, macrophytes and benthic macro-fauna in the canal area. No status and protected area species will be affected; (ii) qualitative degradation of water resources, temporary change in turbidity/sedimentology during the canal works; (iii) an archaeological vestige in the Ramadia area, located 100 metres from the axis of the projected road could be impacted.

3.2.3 The enhancement of the positive environmental impacts and the mitigation of the above- mentioned negative impacts will be achieved by applying the following measures: (i) strict adherence to the measures stipulated in the ESMP, including the sediment quality control plan, waste management plan, spill emergency response plan, etc.; (ii) planting of 9,750 alignment trees and development of green spaces; (iii) implementation of the protection plan for the Ramadia archaeological site. The cost of implementing the ESMP measures, excluding expropriations, is estimated at TND 3.4 million.

Climate Change

3.2.4 In terms of climate, the project was classified in Category 2, in accordance with the Bank's Climate Safeguard System. The main risks concern: (i) the presence of flood-prone areas (around wadi Abbes and wadi El Marj and in the Bizerte canal area), coupled with the absence of proper drainage structures; (ii) the strength and frequency of prevailing winds (of the North-West sector). Regarding the first risk, the project design includes appropriate measures, including: (i) flood- proofing the road at the areas concerned; (ii) ensuring that the size of the hydraulic and drainage structures constructed are such that they will not only protect the road infrastructure but also improve environmental sanitation for residents of the areas concerned. The second risk will be mitigated by the 3 metre-high transparent windbreak screens planned to be put up along his viaduct. In terms of mitigation, the project implementation will reduce CO2 equivalent (CO2 eq) emissions by an average of 61 000 tonnes per year, according to the average traffic growth scenario of the assessment.

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Gender and Vulnerability

3.2.5 The development strategy implemented in Tunisia considers women not only as a fundamental vector for the preservation of social cohesion, but also as key players for social and economic success. Women account for 50.2% of the population of the Bizerte built-up area, which is the project's direct impact area. Despite a 28.5% female unemployment rate in the area, women are favoured for jobs because of the presence of textile, footwear and leather industries, which hire them far more than men.

3.2.6 The inhabitants of Atomouh, Ben Nigro, El Massida, HaferMahr, and BirMasyougha – all localities crossed by the project - live in extremely precarious conditions due to the fact that the poor sanitation network in these neighbourhoods exposes them to flooding and the absence of public lighting puts their safety at risk. Given the prevailing situation and the needs expressed locally, the project has an ancillary development component. With regard to the socio-professional integration of women and young people, the project also intends to develop the initiatives outlined in the chapter below.

Employment

3.2.7 The unemployment rate in the direct impact area is 13.1%, of which women account for 28.5% and higher education graduates for 20.8%. In view of this situation, the project plans to promote direct employment during the construction and operation phase, particularly through the green spaces that will be created, but above all indirect employment by encouraging the establishment of new industrial units in the project area and the development of the Bizerte Port.

3.2.8 700 men/months of employment, of which at least 10% for women in terms of direct employment will be created per year during the construction phase. To this end, the local workforce, both skilled and unskilled, will need to be identified and mobilized by the Regional Directorate of the Ministry of Vocational Training and Employment (MFPE) through the employment offices of the localities concerned. Preference will be given to the recruitment of young engineers in accordance with the relevant Tunisian regulations.

3.2.9 In order to promote the employability of young people undergoing vocational training, the MFPE Regional Directorate will help the construction company and local training institutes to organize internships on the project site for 100 young people registered in work-study programmes, including at least 20 girls. An agreement defining the objectives and ideal implementation conditions will be established between the company, training institutes and possibly the Regional Directorate of MPFE.

3.2.10 The project also plans to promote youth entrepreneurship and socio-professional integration in sustainable development activities. In this context, cooperation will be established with the "Green Jobs Platform in Bizerte (EPI)" project, funded by the Islamic Development Bank, to help 850 job-seekers, of whom 100 will be helped to start their own businesses and 750 will benefit from job placements (giving preference to girls). Thus, in the context of the development of the landscaped park and recreational areas envisaged under ancillary developments, the companies being established as part of the PEV project will be given special preference to carry out the works. Moreover, the executing agency will also ensure that, in the recruitment, priority is given to the 750 young people mobilized.

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Involuntary Resettlement

3.2.11 The project will involve 319 households, or 1,309 people, located in the project’s right- of-way. Expropriations will involve residential houses (125 households), agricultural land with and without crops (198 owners and farmers), and businesses (11 traders). In this regard, a comprehensive resettlement plan (CRP) has been drawn up on the basis of the new Tunisian Law No. 2016-53 of 11 July 2016 relating to expropriation in the public interest, which is much more favourable than the previous one.

3.2.12 The relocation of project-affected persons (PAPs) and the actual start-up of works will not take place until these persons have been compensated and the resettlement issue resolved. It is worth noting at this juncture that the regional authorities of Bizerte have already made operational arrangements in that regard. The PAPs will have to choose, especially regarding their houses, whether to be compensated in kind or in cash. The total cost of implementing the CRP is TND 52 million, to be funded by the Tunisian Government.

IV- IMPLEMENTATION

4.1 Implementation Arrangement

4.1.1 Just as for previous sector-based projects, MEHAT is responsible for the implementation of the project, through the agency of the DGPC which has already set up a project management unit (PMU). It will be based in Bizerte, the project location. This PMU, which was already actively involved in the project preparation, was instituted by a Decree. It is headed by a director and comprises 11 engineers of various specialties and a financial expert. Ancillary activities in other sectors not covered by MEHAT will be carried out through project contracting delegation agreements.

4.1.2 The PMU will be supported by a technical assistance mission whose terms of reference have been approved by the Bank and EIB and are attached in the technical annexes. The assistance will consist of: (i) 4 permanent experts in procurement, monitoring and evaluation, environmental, social, and legal supervision; and (ii) experts hired on a short-term basis when the need arises. In addition to this assistance, the PMU will use consulting firms mandated to perform project management and works control tasks.

4.2 Procurement Arrangements

4.2.1 The PACR is characterized by a large volume of works contracts (65.95%) and consultancy services (10.39%) to be concluded at the national and/or international levels2. To facilitate the implementation of the project, the following arrangements were agreed upon.

4.2.2 Applicable procurement policy and framework: All procurement of works and consultancy services financed or co-financed3 with Bank resources (AfDB and AGTF) will be done in accordance with the Procurement Policy for Operations Financed by the Bank Group ("AfDB Procurement Policy"), October 2015 edition, and in accordance with the provisions set out in the

3 There is provision for EIB co-financing for the viaduct construction 13

Financing Agreement. Pursuant to this policy and following the various assessments carried out, it was agreed that:

(a) All procurement of road rehabilitation works of the cities crossed will be carried out in accordance with the Borrower's procurement system ("National System") and using the Competitive Bidding Documents (CBDs) commonly utilized in Tunisia;

(b) Works procurement for the North-bound and South-bound connecting roads (including the asphalting of roads as part of ancillary developments) and the choice of consultants shall be done in accordance with the Bank's procurement system ("AfDB System"), using the Bank’s competitive bidding documents (CBDs); and

(c) The procurement of the viaduct construction works (contiguous landscaping included), to be co-financed with the EIB, will be in accordance with the EIB's Procurement System. In this respect, insofar as the Mutual Reliance Agreement (MRA) negotiated between the Bank and the EIB to supervise the procurement of projects jointly financed by these two institutions is not yet approved, a formal waiver by the Bank's Board of Directors for the application of EIB's procurement policies for the procurement of the viaduct works has been requested. To oversee the implementation of the project, a specific agreement will be signed between the Bank and the EIB for the implementation of the tender for the viaduct works to: (a) endorse the choice made by the Bank for this project, to designate the EIB as co- financier-lead; (b) set the conditions governing the delegation of the fiduciary responsibilities of the Bank to the co-financier-lead in connection with the tender for the viaduct. Since the EIB does not have a standard Tender Dossier, it was agreed between the two partners that the Bank's Standard Solicitation Files be used after adjustment to fit the context. The implementation details of the agreed procurements between the Borrower, the Bank and the EIB have been provided in Table B.5.d and the Procurement Plan (Section B.5.8) of Technical Annex B. 5.

4.2.3 Efficient organization of procurement: All procurements within the context of the project implementation will be carried out by the PMU set up within MEHAT's DGPC. This unit has been provided with qualified staffs who have in the past been involved in projects financed by the national budget, the Bank and the EIB.

4.2.4 Assessment of procurement risks and capacities: In order to address the specificities of the project, the Bank assessed: (i) the risks at the national, sector and project levels; and (ii) the capacities of executing agencies. The results of these assessments led to the conclusion that the overall level of procurement risk was substantial and to the identification of the mitigation measures proposed in paragraph 5.9 of Annex B.5. The resources required for the implementation of these measures are loans secured from the AfD and the EIB.

4.2.5 Advance procurement actions: Given the time constraints related to the Borrower’s agenda and in an effort to address the concern raised in Presidential Directive DP02/2015 on speeding up project implementation, a reasoned request for advance procurement actions relating to the viaduct construction works was received by the Bank, which proceeded to authorize it on 4 April 2017.

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4.2.6 Special arrangements: Use of the EIB procurement system: In the absence of a Mutual Reliance Agreement formally approved by the Bank's Board of Directors, the use of EIB’s procurement system for the implementation of the viaduct-related invitation for bids envisaged under the project co-financed by the Bank, requires that a waiver be requested and obtained from the Board contained in the note in Appendix IV of this report..

4.2.7 Other specific terms proposed: In an attempt to secure the resources required to fulfil its fiduciary obligations under the National System, the Bank and the Borrower agreed on a series of measures whose rationale, objectives and details are presented in paragraph B. 5.7.1 of Annex B5. These measures include: (i) monitoring and management of complaints; (ii) provision by the Borrower of the names of the owners of companies that win high-value contracts, and publication of contract awards by the Bank using these names; (iii) maintenance of prices at a reasonable level in relation to the estimates of the contracting authority; (iv) submission of quarterly reports on the progress of the project, which should include the list of contracts signed and the companies that won them, the complaints filed and how they were handled; and (v) the integrity of the electronic bid submission platform.

4.3 Financial Management Arrangements

4.3.1 The DGPC will be responsible for the project implementation and the management of project resources. An evaluation of the project's financial management system was carried out in accordance with Bank guidelines and covered aspects related to budget management, accounting, internal oversight, financial reporting and external audit. It took into account the assessment of Tunisia’s fiduciary risk conducted by the Bank in 2016 within the context of the CSP and the conclusions of the audit and financial supervision reports of previous road projects carried out by the DGPC. The evaluation found that the initial fiduciary risk posed by the project for the Bank was moderate due to the DGPC’s sound knowledge of the procedures of the Bank and other donors, gained from having implemented various Bank projects. In addition, given the scope and technical complexity of the project, the PMU will be supported by international consultants through technical assistance in the areas of procurement, technical and financial monitoring and external supervision and independent technical control of works. However, specific arrangements are required to ensure reliable and up-to-date project accounting, timely submission of audit reports and satisfactory follow-up to the auditor's recommendations. Thus, the Sub-Directorate of General Affairs (SDAG) will be responsible for the financial management of the project with the support of the Project Management Unit (PMU). The latter will prepare disbursement requests, quarterly financial reports and annual project financial statements. In that regard, the DGPC will furnish, prior to the first loan disbursement, evidence of the appointment of a financial officer at the SDAG with qualifications, experience in the financial management of projects and terms of reference deemed satisfactory by the Bank.

4.3.2 Project resources will be partly managed using the national public finance management system. Thus, expenditure financed with loan resources and counterpart contributions will go through the public spending circuit and will be subject to national procedures and control concerning: (i) expenditure commitment using the ADEB system, subject to approval by the expenditure controller; (ii) settlement of expenditure by the technical and financial services after acknowledgement of the service performed (acceptance of works or services by the external supervisors and technical works controllers); (iii) authorization of expenditure payment by the duly empowered authorizing officer (the Director-General of DGPC for payments from AfDB and EIB

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resources, and the MEHAT Finance Director for payments from the national budget); and (iv) payment of expenditure by the public accountant attached to the Ministry of Finance (MF) for expenditures financed from the national budget.

4.3.3 The DGPC uses a budgetary accounting system and does not keep the accounts of the projects it manages. Thus, project financial information will be compiled using a computer application duly configured to monitor resources by source of financing, and expenditure by component and by category. Quarterly financial reports will be prepared using the format provided by the Bank. Annual project financial statements will be prepared in accordance with the Bank’s ToR. The project’s financial management will be supervised once a year and quarterly financial and audit reports will be reviewed.

Disbursement arrangements

4.3.4 The disbursements of the Bank’s loans will be subject to the Bank's disbursement rules in force as set out in the Bank’s Disbursements Handbook. The project will use the direct payment method for the settlement of eligible expenditure from the loans, given the limited number of contracts envisaged and the relatively high amounts of individual disbursements. The financing plan detailing the funding percentages of each donor per contract will be recorded in the tripartite agreement (AfDB-EIB) specific to the project’s implementation.

Audit arrangements

4.3.5 The General Finance Control (CGF) will audit the project's financial statements covering all the sources of financing (AfDB, AGTF, EIB and counterpart contributions) on a year-on-year basis, in accordance with the terms of reference for auditing investment operations financed by the Bank Group. The project audit reports, including internal audit reports, should be submitted to the Bank and the EIB within six months of the end of the fiscal year concerned. The PMU will ensure proper planning of the audit mission and the monitoring of the implementation of the auditor's recommendations. Furthermore, the project may be subject to verification by State control institutions. The Bank will obtain and utilize such control mission reports.

4.4 Monitoring

4.4.1 The PMU will include a multidisciplinary team which will be responsible for monitoring the implementation of all project components. This team will produce semi-annual reports to be forwarded, through the DGPC, to the AfDB and the EIB. These reports will provide an update on the level of physical and financial implementation of each project component. Specific reports will be prepared on the ESMP and CRP implementation. Lastly, separate reports will also be prepared on the monitoring and evaluation of project impacts based on the identified indicators, depending on the status of implementation. The Bank, through the Tunis Regional Office, will monitor, on an on-going basis, the implementation of the project, which will be supplemented by two annual field supervision missions, conducted jointly with the EIB.

4.5 Governance

4.5.1 In terms of governance, with a score of 66.9 out of 100, Tunisia ranks 8th out of 52 countries in the Mo Ibrahim Index of African Governance (IIAG). This score is up 2.6 spots from 2010, attesting to the country’s unquestionable progress in that area. In the 2016 Transparency 16

International ranking, Tunisia scored 41 points versus 38 and 40 in 2015 and 2014, respectively. This score of 41 points places Tunisia 75th out of 176 countries. The improvement, although still fragile, is the result of the major anti-corruption measures taken in 2015, such as the passing of the Information Access Act - one of the most progressive laws in the region - and the adoption of a national anti-corruption strategy.

4.5.2 In the road sector, good governance practices are intended to result in projects that are: (i) more efficient, (ii) more relevant, (iii) more sustainable, and (iv) more beneficial to vulnerable groups. Undeniable progress has been made in this direction. Thus, the sector’s development plan for 2016-2020 has been widely participatory and was appropriated by various civil society categories at all territorial levels. Project distribution and allocation were made with a view to fairness towards the most deprived regions and included accompanying measures for women and vulnerable groups. Transparency and accountability are also progressing at both the State and legislative levels. The same applies to the national procurement system and procedures which have moved closer to international standards.

4.6 Sustainability

4.6.1 Over the past two decades, the Government has been working to upgrade the existing road network with Bank support and now intends to focus its policy on the preservation of the network rather than on its extension. Since 2015, despite the scarcity of budgetary resources and the needs of other sectors, the government has allocated a substantial amount for the maintenance of the road network, estimated at 629 million TND, and the planned allocation for 2018 is estimated at 219 million TND in a net increase compared to previous years. Besides increasing allocations, the Government is seeking to improve the resource use efficiency by (i) gradually privatizing road maintenance through transfer of the activity to SMEs which will be supported in terms of professionalization; and (ii) initiating pilot experiments in road maintenance management by service levels, which will be generalized if they prove to be positive.

4.6.2 These measures for ensuring the sustainability of investments will be supplemented by the recommendations of the on-going study to upgrade the road sub-sector, financed by the Bank under the Road Infrastructure Modernization Project (PMIR). This study will review, among other things, the issue of road financing and maintenance, and the possibility of establishing new structures for commercializing road management and ensuring the sustainability of road maintenance financing.

4.6.3 Regarding this project, the funding needed for the maintenance of the planned facilities and the viaduct, in particular, was estimated at TND 2.10 million per year. This will be covered by the resources fromthe State Budget. Lastly, revenues from the rental of the planned recreational infrastructure will be used to ensure the sustainability of the landscaped park.

4.7 Risks Management

4.7.1 The project implementation poses minor risks in view of: (i) the detailed studies involved in its preparation; (ii) the capacity and experience of the DGPC which will be supported with technical assistance; and (iii) the high competition expected in the procurement process. Thus, the risks of cost overruns and delays will be minimal. The rights-of-way release problems hindering the successful implementation of projects in Tunisia were addressed by the law of July 2016 relating to expropriation in the public interest and the advanced stage of the process for the project which is at the level of paying or compensating affected persons (see paragraphs 2.1.24 & 3.1.6). 17

In this respect, the first installments will be budgeted in the 2018 financial year, and work on a given area is subject to proof of compensation of affected persons in that area. The two potential risks relate to the co-financing of the project:

 Implementation delays: the use of EIB procurement rules, the lead financier for the viaduct construction, poses the risk of delays in the mobilization of enterprises and of lack of proactivity in the processing of requests from the executing agency. This risk is mitigated by the decisions of the joint meeting which agreed to: (i) a protocol agreement between the AfDB and the EIB defining the roles and responsibilities of each donor; and (ii) regular consultations during supervision or on an ad hoc basis;

Cost overruns due to physical contingencies or performance delays. This risk is mitigated by the detailed studies which were carried out by experienced consultants. In addition, cost estimates provided for physical and financial contingencies to cover possible cost overruns.

4.8 Knowledge Building

4.8.1 The project is the first of its kind and the most complex in Tunisia both in terms of its engineering and work site organization. Indeed, the nature of its foundations (piles 60 m deep and 2.5 m in diameter) and the great length of its spans (270 m) make it the first project of this scale in Tunisia. Its implementation will result in knowledge building in various fields. The measures taken within the context of the project, both in terms of the composition of the Project Management Unit (PMU) and end-of-course engineering projects and vocational training for young people will contribute to knowledge. The line ministry also plans to ensure the large-scale dissemination of best practices for major infrastructure construction projects learned during the implementation of this project. The dissemination will be carried out through a website dedicated for that purpose, briefing notes and conferences with professional and training organizations.

4.8.2 The effects of the project, which will be quantified under the monitoring and evaluation sub-component, will allow an assessment of the level of achievement of project objectives and will be integrated into the broader framework of all previous Bank interventions in order to measure the impact on the development of the Bank's operations, particularly in its five priority areas of action.

V- LEGAL FRAMEWORK 5.1 Legal instrument

The Bank will finance the project through the following instruments:

i) An agreement for a loan from ADB resources concluded between the Tunisian State and the Bank in the amount of EUR 122.000 million;

5.2 Conditions associated with the Bank's intervention A) Conditions precedent to the effectiveness of the ADB loan agreement 5.2.1 The effectiveness of the Loan Agreement shall be subject to compliance by the Borrower with the provisions of Section 12.01 of the General Conditions Applicable to Loan Agreements and Guarantee Agreements of the African Development Bank.

18

B) Conditions precedent to the first disbursement of ADB loan

5.2.2 The Bank's obligation to make the first disbursement of the ADB loan shall be subject to the effectiveness of the Loan Agreement in accordance with Section 5.2.1 above , and the fulfillment, to the satisfaction by the Borrower, of the following condition, to the Bank's satisfaction.

5.2.3 The provision of evidence of the appointment of a financial officer within SDAG with the qualifications, experience in project financial management and the terms of reference that are satisfactory to the Bank.

C) Special condition prior to disbursement of loan resources for works involving expropriation

In addition to the entry into force of this Agreement and the fulfillment of the condition precedent to first disbursement of Loan resources, the disbursement of Loan resources for works involving expropriation shall be subject to the performance by the Borrower, to the satisfaction of the Bank, subject to the following condition:

5.2.4 Provide, as the works progress and prior to the start of works in any area concerned, evidence of compensation of the project-affected persons in that area and/or of procurement of the land required for the construction, in accordance with the Environmental and Social Management Plan (ESMP), the Complete Resettlement Plan (CRP) and the Bank's relevant rules and procedures, including the Policy on Involuntary Displacement and its integrated safeguard system.

5.2.5. It is specified that where such compensation or resettlement is not feasible because of the impossibility of identifying the beneficiaries or in case of dispute, litigation or other duly justified reasoning acceptable to the Bank (hereinafter referred to as the "Contentious Case"), the condition may be considered fulfilled if the Borrower provides evidence that the resources allocated to the compensation and / or relocation of the Contentious Cases, as defined in the PCR, are deposited in an account dedicated to the Public Treasury assigned to this compensation and / or resettlement, or to a bank account acceptable to the Bank specifically earmarked for this indemnification and / or resettlement, or deposited with a trusted third party acceptable to the Bank.

D) Undertakings

5.2.6 The Borrower undertakes, to the satisfaction of the Bank, to:  Implement the project, the CRP and the ESMP and ensure their implementation by its contractors, in accordance with (a) Bank rules and procedures; (b) national legislation; and (c) recommendations, requirements and procedures contained in the ESMP, and CRP;  Not to start work on an affected area without having fully compensated the affected persons in that area; and  Provide the Bank with semi-annual reports on the implementation of the ESMP and the CRP, including any shortcomings and corrective actions undertaken or to be undertaken. 19

5.3 Compliance with Bank policies

The project complies with all applicable Bank policies.

VI- RECOMMENDATION

Management recommends that the Board of Directors approve, subject to the conditions set out in this report: (i) in the case of the procurement of the viaduct works and the technical inspection mission of Lot 2, exceptionally waive the application of the Bank's procurement rules and authorize the application of the EIB's procurement policies; and (ii) approve, subject to the conditions stipulated in this report, grant the Tunisian government an AfDB loan of EUR 122.00 million to help finance the implementation of the North-East Road Connectivity Support Project.

20

APPENDIX I

DESCRIPTION OF PLANNED WORKS

I. Development of the two new South and North suburban connection roads: The development works will cover a linear of 7,270 km, corresponding to the geometric characteristics of a 2x2 lane expressway at a speed of 80 km / h. The route will include four interchange points, three of which are completely leveled by interchanges, and the connection at the end of the project through a roundabout.

II. Construction of the viaduct: The proposed viaduct will be a crossing structure of 2,070 km in length that will cross the canal with three spans of 270 m range. It will have a 25 m deck to accommodate a 2x2 expressway pavement with sidewalks for maintenance and safety passage. The viaduct was designed to cope with the strictest seismic and safety standards, with occasional connections every 400 m to allow traffic diversion from one roadway to another in case of emergency and a system of video surveillance to control the emergency stop band. Likewise for safety reasons and because of its fast track nature, its use by pedestrians and cyclists is not envisaged.

III. Related Works: related works will be carried out in neighborhoods crossed by the connecting roads and hosting interchanges, including crossing areas whose populations live in unsettling precariousness. These include: (i) the construction on the south banks of a 2.4 km paved road linking the Zarzouna South city and the Zarzouna Nord Technopole and Menzel Abderrahmane; (ii) the development of a 25,000 m² landscaped park under the bridge in the Zarzouna banks area, on the left banks of the lake, giving rise to a recreational green space; (iii) the construction of 14 km secondary roads, the construction of 8 km of rainwater drainage network and public lighting with the installation of 300 light points in neighborhoods crossed.

IV. Project management. It will be supported by technical assistance which will also provide monitoring and evaluation services for the socio-economic and environmental impacts of the project; the road safety audit and the technical and financial audits of the project and project implementation communication.

I

APPENDIX II

COUNTRY FINANCING PARAMETERS Introduction 1. This Note presents the country financing parameters for Tunisia in accordance with the Bank’s policy on expenditure eligible for financing46. This policy enables the Bank to finance the necessary expenditure to be able to achieve the development objectives of the operations financed by the institution’s resources. The Note is designed as a framework for assessing the risks concerning the viability of public finances with a view to ensuring that the Bank’s resources are used appropriately and in accordance with the terms of its mandate. Moreover, the new policy offers greater flexibility in the use of loans and grants to finance expenditure.

2. Macroeconomic context and public finance situation. Tunisia has suffered from a lack of growth since 2011. The growth rate fell from 3.6% in 2010 to 0.8% in 2015 but could reach 1.6% in 2016. The fall in growth has been mainly due to uncertainties concerning security, the different strike actions which have affected the production rate in the mining and hydrocarbons (phosphates and gas) sector but also weak public investment. Since 2011, the composition of public expenditure is mostly focused on current expenditure. The civil service wage bill has more than doubled since 2010 as a result of recruitments and consecutive salary increases. In 2015, it accounted for 46% of the budget and 13% of GDP. This deterioration is also linked to the continuing subsidies on some staple products and energy, which represent about 16% of the annual budget. In all, current expenditure accounts for between 60 and 65% of the overall budget and between 75% and 80% of the budget net of debt servicing. The five draft budget laws have all been passed with deficits since 2011 and the cumulative financing gap stood at 42 billion dinars in 2016.

For its part, the public debt increased significantly from 40.7% to 62% in 2016, i.e. an average annual growth rate of 7.4% much higher than the 1.76% economy growth rate. Moreover, 70% of outstanding debt is composed of external debt and Tunisia is exposed to an exchange rate risk since the Tunisian Dinar has lost 32% of its value since 2010.

3. Portfolio. The Bank Group’s active portfolio currently comprises 43 operations, representing total commitments of UA 1.25 billion. There are 13 public sector operations representing 85a % of commitments. Tunisia’s portfolio also includes twenty-five (25) technical assistance operations for a cumulative amount of UA 20.8 million. The lending portfolio’s performance is deemed satisfactory overall despite slippage on the implementation of the technical assistance portfolio due to the complexity of the functioning of the public procurement system.

4. Cost sharing. Due to the specific macro-fiscal context described above, increased vulnerability of the economy and public finances and pressure on the budget which is expected to continue during implementation of the PSD up to 2929 concerning current expenditure, the Tunisian government’s fiscal leeway and ability to increase its counterpart funding of Bank- financed operations is expected to remain limited. Consequently, in a prudential and pragmatic approach, the Bank proposes to apply two (2) rates for financing its projects and programmes: the Bank will finance 50% of the cost of projects with an immediate return in the productive sector II

(water, agriculture, industry and services) and 60% of projects with a high social content (education, health, employment, women, etc.) with a limited and /or gradual rate of return. The balance will be covered by the Government and/or other donors. The Tunisian Government will undertake to finance at least 10 % of all project costs.

5. Financing of recurrent costs. The Bank will not finance recurrent expenditure of projects financed by it. Such expenditure should normally be covered by the Government. However, the Bank may consider the possibility of financing them on a case-by-case basis.

6. Financing costs in local currency. The Bank’s practice is to finance the foreign exchange costs of projects financed by it and consequently, most disbursements are made in foreign exchange. In view of the deep public finance deficit and the existence of large construction companies and the use of savings on loans, the financing of local currency costs should not be limited and actual amounts should be fixed on a project-by-project basis.

7. Taxes and duties. Projects financed by the Bank are not generally subject to specific taxes. The Bank consider on a case-by-case basis the possibility of financing taxes and duties for its projects. The financing parameters for Tunisia are described below.

Table 3.2 : Country Financing Parameters Item Parameter Explanation/Comments Productive sector with a high The effective share of Bank Cost sharing. Maximum economic rate of return financing will be limited to proportion of project costs (structures, public services, 60% of all costs for projects that the industries, agriculture, of a social nature and to 50% Bank can finance. mines, etc.): 50% of all costs for projects in the Social sector with a limited productive sector (in and gradual rate of return particular, infrastructure). (education, health, The balance will be covered employment, women and by co-financing. The youth, etc.): 60% Government shall undertake to finance a minimum of 10% of the total project cost excluding wages and salaries Financing of recurrent costs. Flexible The Bank can finance some Limits if necessary recurrent costs on a case-by- concerning the total amount case basis of recurrent expenditure the Bank may finance Financing of costs in local YES The financing conditions for currency. The Bank’s local currency costs are met. financing conditions for The Bank may finance local expenditure in local currency currency costs in order to are met, in particular: (i) the achieve the objectives of financing requirements of the individual projects country’s development

III

programme exceed the own resources of the public sector (for example, tax and other revenue) planned borrowings on the domestic market; and (ii) the financing of expenditure in foreign exchange alone would enable the Bank to contribute to the financing of individual projects Taxes and duties. Are there YES There are no unreasonable taxes and duties that the Bank taxes and duties. would not finance? There is, however, a slight probability that the Tunisian Government may borrow to pay taxes and duties. The Bank will not finance the payment of taxes and duties by borrowings

IV

APPENDIX III

PROJECT COST AND FINANCING DEVICES

Table 2.5: Summary of the estimated cost per component of the overall project Components Million TND Million EUR*

Total Currency Total Currency ML Total A- Works

A1 LOT1: Development of the South Link Road 27,72 18,46 46,18 10,09 6,72 16,81 A2 LOT2: Viaduc Construction 350,19 87,55 437,74 127,48 31,87 159,35 A3 LOT3: Development of the North Link Road 24,56 16,37 40,93 8,94 5,96 14,90 A4 : Related works.

A4.1 : 2.4 km paved road 1,20 1,80 3,00 0,44 0,66 1,09 A4.2 : Rehabilitation of a landscaped park 1,60 2,40 4,00 0,58 0,87 1,46 A4.3 : Rehabilitation of neighborhoods 2,20 3,80 6,00 0,80 1,38 2,18 B- Services

B1: Support Mission to the PMU 11,15 4,78 15,93 4,06 1,74 5,80 B2: Project Management Mission for Lot 1 (including A4.1related works) 3,46 1,48 4,94 1,26 0,54 1,80 B3: Project Management Mission for Lot 2 (including A4.2 layout) 29,04 12,44 41,48 10,57 4,53 15,10 B4: Project Management Mission for Lot 3 3,17 1,36 4,53 1,16 0,50 1,65 B5: Technical Inspection Mission for Lot 1 (including A4.1 related works) 0,42 0,18 0,60 0,15 0,07 0,22 B6: Technical Inspection Mission for Lot 2 (including A4.2 related works) 6,15 2,64 8,79 2,24 0,96 3,20 B7: Technical inspection mission for Lot 3 0,40 0,17 0,58 0,15 0,06 0,21 B8: Project management and technical inspection mission for A4.3 related works 0,52 0,52 0,19 C: Release of Right-of-way 59,00 59,00 21,48 21,48 D: Network displacement 8,00 8,00 2,91 2,91 E: PMU operation 4,00 4,00 1,46 1,46 Basic costs 461,27 224,96 686,23 167,92 81,89 249,81 Physical contingencies (7 %) 32,29 15,75 48,04 11,75 5,73 17,49 Financial Risks (4%) 18,45 9,00 27,45 6,72 3,28 9,99 Overall Total 512,01 249,71 761,72 186,39 90,90 277,29 Percentage 67% 33% 100% 67% 33% 100%

V

The project will be financed by the EIB, the AfDB and the Tunisian Government according to the table below giving the financing sources. As at 15 November 2016, the EIB has approved EUR 123 million for the project. The Bank will provide additional financing of EUR 122.00 million through a loan from its ADB window. The Government will complete the financing plan with EUR 32.29 million. The tables below provide a summary of the cost by category of expenditure and the expenditure schedule by source of funding respectively:

The tables below provide a summary of the cost by expenditure category and expenditure schedule by financing source respectively:

Table 2.6: Cost Summary by Spending Categories for AfDB financing Million TND Million EUR Components Currency ML Total Devise ML Total Works 180,34 101,61 281,96 65,65 36,99 102,64 Services 13,61 6,36 19,97 4,96 2,31 7,27 Various 0,84 0,84 0,31 0,31 Basic cost 194,80 107,97 302,77 70,91 39,30 110,22 Physical contingencies an financial risk 20,49 11,88 32,37 7,46 4,32 11,78

Total Général 215,29 119,85 335,14 78,37 43,63 122,00

Table 2.7: Schedule of expenditure by financing source (Million EUR) for the entire project SOURCE 2018 2019 2020 2021 2022 ADD 14,12 32,34 40,34 27,13 8,07 EIB 5,88 35,29 40,29 35,66 5,88 Tunisian Government 8,69 8,69 8,69 4,12 2,1 Overall Total 28,69 76,32 89,32 66,91 16,05

VI

APPENDIX IV

RATIONALE FOR AND EXTENT OF THE WAIVER SOUGHT FROM THE BOARD FOR THE USE OF THE EIB PROCUREMENT SYSTEM

Context and Rationale:

To facilitate the implementation of projects co-financed with other partners and in accordance with the requirements of the Bank's New Procurement Policy, the relevant Bank services have initiated discussions with several financial partners with whom the institution co-finances projects. A Mutual Reliance Agreement governing the implementation of procurement aspects of projects to be co-financed with the EIB was discussed and negotiated with the EIB. This document is awaiting approval by the Boards of the two institutions. Pending such approvals, and in the absence of a Mutual Reliance Agreement formally approved by the Board of Directors of the Bank, the use of the EIB's procurement system for invitation for bids relating to the viaduct planned under the project and co-financed by the Bank requires the adoption of the following special measure based on the rationale detailed below:

 Request for a waiver allowing the use of EIB's procurement system: In accordance with the provisions of Article 8.1 of the Bank's new Procurement Policy, Bank- financed goods and services may be procured using the borrower's procurement system (if certain conditions are met) or following the Bank's procurement policy. This requirement is also applicable in a co-financing situation unless the Bank's Board of Directors ("the Board") grants a waiver allowing the implementation of the procurement policy, regulations, and guidelines of another co-financier (see Art. 10.3 of the Bank's Procurement Policy). Accordingly, in order to enable the EIB's procurement policy to be applied to invitation for bids for the viaduct construction works, a formal waiver will be sought from the Bank's Board of Directors for:

(i) the implementation of EIB procurement policies;

(ii) the application of the EIB's eligibility rules which are broader than those of the Bank's AfDB window;

(iii) the extension of the list of sanctionable practices of the Bank to include "money laundering" and "terrorist financing" as defined by the European Community Directives and the anti-fraud policy of the EIB.

If this waiver is formally obtained, the EIB's procurement policy, as well as its eligibility and integrity rules, could legally apply to the invitation for bids in question even if it is co-financed with Bank resources. The advance procurement action authorized by the Bank refers to the need to obtain the waiver.

VII

APPENDIX V

REGIONAL DEVELOPMENT INDICATOR

Regional Development Index I Introduction In 2012, the Tunisian Ministry of Regional Development and Planning developed a comparative study of the country's regional development. Due to the unavailability of data required to build a regional GDP, the Department developed one that incorporates 17 variables, grouped into four areas: (i) knowledge, wealth and employment; (ii) health and population; (iii) wealth and employment; and (iv) justice and equity.

In order to ensure proper monitoring/evaluation, this index, the first version of which is in progress, will be updated periodically. II Definition of variables Dimension Sub-dimension Weight Variables Education 1 i. Success at the “A” Level (Baccalaureat) (in 2010) ii. Enrolment rate among 6 to 14-year-olds (in 2010) Knowledge Index iii. Literacy rate (in 2010) Communication 1 iv. Percentage of households with internet access (in 2007) v. Telephone density (Landlines and GSM) by Governorate (in 2004) Population 1 vi. Total fertility rate (TFR) (in 2009) Population and Health Index Health 1 vii. Number of physicians per 1,000 inhabitants (in 2008) viii. Number of hospital beds per 10,000 inhabitants (in 2008) Employment 1 ix. Unemployment rates by Governorate (in 2008) x. PME density (Number of PMEs per 1,000 inhab.) (in 2009) Wealth and Employment Index Wealth 1 xi. Poverty rates (in 2005) xii. Drinking water access rates (in 2010) xiii. Rate of household connection to the water supply system (in 2010) xiv. Number of cars per 1 000 inhabitants (in 2010) Justice 1 xv. Crime rate 1, 000 inhabitants (in 2009) Justice et Gender Equity Index Equality 1 xvi. Disparity between male and female enrolment rates (in 2005) xvii. Disparity between male and female employment rates (in 2010)

VIII

APPENDICE VI: TUNISIA - COMPARATIVE SOCIO-ECONOMIC INDICATORS

Develo- Develo- Year Tunisia Africa ping ped Countries Countries Basic Indicators GNI Per Capita US $ Area ( '000 Km²) 2016 164 30 067 97 418 36 907 Total Population (millions) 2016 11,4 1 214,4 6 159,6 1 187,1 4500 4000 Urban Population (% of Total) 2016 66,9 40,1 48,7 81,1 3500 Population Density (per Km²) 2016 73,2 41,3 65,1 33,8 3000 2500 GNI per Capita (US $) 2015 3970 2 153 4 509 41 932 2000 Labor Force Participation *- Total (%) 2016 47,7 65,7 63,5 60,0 1500 1000 Labor Force Participation **- Female (%) 2016 25,1 55,7 48,9 52,1 500

Sex Ratio (per 100 female) 0

2005 2012 2009 2010 2011 2013 2014 2015 2016 97,6 100,1 106,0 105,0 2000 Human Dev elop. Index (Rank among 187 countries) 2015 97 ...... Popul. Liv ing Below $ 1.90 a Day (% of Population) 2010 2,0 ... 18,3 ...

Tu nisia Afr ica Demographic Indicators Population Grow th Rate - Total (%) 2016 1,1 2,5 1,3 0,6 Population Grow th Rate - Urban (%) 2016 1,3 3,6 2,4 0,8 Population < 15 y ears (%) 2016 23,5 40,9 27,9 16,8 Population Growth Rate (%) Population 15-24 y ears (%) 2016 15,1 19,3 16,9 12,1 3,0 Population >= 65 y ears (%) 2016 7,8 3,5 6,6 17,2 2,5 Dependency Ratio (%) 2016 45,5 79,9 54,3 52,0 Female Population 15-49 y ears (% of total population) 2016 27,0 24,0 25,7 22,8 2,0 Life Ex pectancy at Birth - Total (y ears) 2016 75,2 61,5 69,9 80,8 1,5 Life Ex pectancy at Birth - Female (y ears) 2016 77,6 63,0 72,0 83,5 1,0 Crude Birth Rate (per 1,000) 2016 17,6 34,4 20,7 10,9 0,5

Crude Death Rate (per 1,000) 2016 6,6 9,1 7,6 8,6 0,0

2009 2014 2005 2010 2011 2012 2013 2015 Infant Mortality Rate (per 1,000) 2015 12,1 52,2 34,6 4,6 2000 Child Mortality Rate (per 1,000) 2015 14,0 75,5 46,4 5,5 Total Fertility Rate (per w oman) 2016 2,1 4,5 2,6 1,7 Tun isia Afr ica Maternal Mortality Rate (per 100,000) 2015 62,0 476,0 237,0 10,0 Women Using Contraception (%) 2016 66,4 31,0 62,2 ...

Health & Nutrition Indicators Phy sicians (per 100,000 people) 2005-2015 164,8 41,6 125,7 292,2 Life Expectancy at Birth Nurses and midw iv es (per 100,000 people) 2005-2015 318,9 120,9 220,0 859,4 (years) Births attended by Trained Health Personnel (%) 2010-2015 98,6 53,2 69,1 ... 80 Access to Safe Water (% of Population) 2015 97,7 71,6 89,4 99,5 70 60 Access to Sanitation (% of Population) 2015 91,6 39,4 61,5 99,4 50 Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 40 2015 0,1 3,4 ...... 30 Incidence of Tuberculosis (per 100,000) 2015 37,0 240,6 166,0 12,0 20 Child Immunization Against Tuberculosis (%) 10

2015 97,0 81,8 ...... 0

2009 2013 2005 2010 2011 2012 2014 2015 Child Immunization Against Measles (%) 2015 98,0 75,7 83,9 93,9 2000 Underw eight Children (% of children under 5 y ears) 2010-2015 2,3 18,1 15,3 0,9 Prev alence of stunding 2010-2014 10,1 33,3 25,0 2,5 Tu nisia Afr ica Prev alence of undernourishment (% of pop.) 2015-2016 5,0 16,2 12,7 ... Public Ex penditure on Health (as % of GDP) 2014 4,0 2,6 3,0 7,7

Education Indicators Gross Enrolment Ratio (%) Primary School - Total 2010-2016 114,2 101,2 104,9 102,4 Primary School - Female 2010-2016 112,5 98,4 104,4 102,2 Infant Mortality Rate Secondary School - Total 2010-2016 88,2 52,6 71,1 106,3 ( Per 1000 ) Secondary School - Female 2010-2016 94,2 50,2 70,5 106,1 100 90 Primary School Female Teaching Staff (% of Total) 2010-2016 60,0 47,1 59,8 81,0 80 Adult literacy Rate - Total (%) 2010-2015 81,1 66,8 82,3 ... 70 60 Adult literacy Rate - Male (%) 2010-2015 89,7 74,3 87,1 ... 50 Adult literacy Rate - Female (%) 2010-2015 72,8 59,4 77,6 ... 40 30 Percentage of GDP Spent on Education 2010-2015 6,3 5,0 4,0 5,0 20 10

0

2009 2005 2010 2011 2012 2013 2014 2015 Environmental Indicators 2000 Land Use (Arable Land as % of Total Land Area) 2014 18,7 8,7 11,2 10,3 Agricultural Land (as % of land area) 2014 64,8 41,7 37,9 36,4 Forest (As % of Land Area) 2014 6,6 23,2 31,4 28,8 Tu nisia Afr ica Per Capita CO2 Emissions (metric tons) 2014 1,9 1,1 3,5 11,0

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : June 2017 UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports. Note : n.a. : Not Applicable ; … : Data Not Available. * Labor force participation rate, total (% of total population ages 15+) ** Labor force participation rate, female (% of female population ages 15+) IX

APPENDIX VII

TABLE OF AfDB OPERATIONS IN TUNISIA AS AT 30 SEPTEMBER 2017 Approval Effective Date 1st Disbursement Completion Project Title Sector Date Date disbursement Commitment Rate Date Age NATIONAL GAS TRANSPORTATION AND DISTRIBUTION NETWORK DEVELOPMENT Energy 04/01/2015 09/23/2015 03/02/2016 41,511,527.24 0.00 12/31/2017 2,52 SOUTH TUNISIAN GAS PIPELINE - TUNISIA Energy 06/26/2014 02/23/2015 03/18/2015 52,657,445.76 100.00 08/19/2027 3,28 Total Energy 94,168,973.00 56% STUDY - -RISK MANAGEMENT AND ESTABLISHMENT OF AN AS SYSTEM Agriculture 08/02/2016 09/28/2016 02/08/2017 325,000.00 1.93 12/31/2018 1,18 GAFSA NORTH INTEGRATED AGRICULTURE DEVELOPMENT PROJECT Agriculture 02/13/2013 02/14/2014 03/07/2014 18,587,313.73 41.41 06/30/2019 4,64 GABES II INTEGRATED AGRICULTURE DEVELOPMENT PROJECT (PDAI) Agriculture 11/26/2014 06/23/2015 09/07/2015 17,357,684.97 22.98 06/30/2020 2,86 MIC GRANT FOR THE PREPARATION OF ZAGHOAUN PDAI Agriculture 10/27/2014 11/28/2014 09/07/2015 390,000.00 45.37 12/31/2018 2,85 Total Agriculture 36,659,998.70 32% Water and RURAL DRINKING WATER SUPPLY PROGRAMME Sanitation (RWSSI) 10/12/2011 02/24/2012 02/24/2012 79,694,736.05 88.87 12/31/2018 5,99 Water and Sanitation RURAL DRINKING WATER SUPPLY PROGRAMME 09/06/2016 05/29/2017 05/29/2017 103,967,927.11 4.04 12/31/2021 1,08 Water and Sanitation RURAL DRINKING WATER SUPPLY PROGRAMME 09/06/2016 03/01/2017 03/01/2017 840,484.46 10.00 12/31/2021 1,08 Water and DEVELOPMENT OF TUNISIA’S WATER VISION AND Sanitation STRATEGY 2050 06/20/2016 02/01/2017 02/14/2017 1,130,451.59 0.00 12/30/2018 1,29 Water and TREATED WASTE WATER QUALITY IMPROVEMENT Sanitation PROJECT 01/11/2012 02/29/2012 05/15/2013 27,273,720.57 37.89 12/31/2018 5,74 Total Water and Sanitation 212,907,319.78 40% INCLUSIVE REGIONAL DEVELOPMENT SUPPORT PROGRAMME (PADRI) Social 11/02/2016 12/19/2016 12/19/2016 151,287,201.94 100.00 12/31/2017 0,92 MIC - INVESTMENT PROMOTION SUPPORT PROJECT AND Social 06/03/2015 08/11/2016 296,373.00 0.00 06/30/2018 2,34 Total Social 151,583,574.94 100% 0,00 INDUSTRIAL POLICY DESIGN SUPPORT PROJECT Ind/Mini/Quar 08/14/2015 11/19/2015 791,380.00 0.00 08/31/2017 2,15 STRUCTURAL TRANSFORMATION AND GROWTH Ind/Mini/Quar 08/14/2015 11/19/2015 04/24/2017 798,310.00 3.17 02/28/2018 2,15 X

SECTOR

Total Ind/Mini/Quar 1,589,690.00 2% 0,00 STUDY TO DEVELOP A NATIONAL TRANSPORT MASTER PLAN Transport 07/14/2014 11/28/2014 01/23/2015 800,000.00 11.30 06/30/2017 3,23 GABES-RAS-JEDIR HIGHWAY CONSTRUCTION PROJECT Transport 06/21/2011 09/19/2011 04/13/2012 115,432,135.08 43.34 10/31/2019 6,30 ROAD INFRASTRUCTURE MODERNIZATION PROJECT (PMIR) Transport 10/28/2015 02/25/2016 03/09/2016 121,029,761.55 18.30 12/31/2020 1,94 ROAD INFRASTRUCTURE MODERNIZATION PROJECT (PMIR) Transport 10/28/2015 02/25/2016 03/09/2016 38,763,143.08 18.76 12/31/2020 1,94 ROAD INFRASTRUCTURE MODERNIZATION PROJECT (PMIR) Transport 10/28/2015 11/19/2015 12/23/2015 1,200,000.00 0.00 12/31/2020 1,94 ENFIDHA AIRPORT PROJECT Transport 01/14/2009 03/13/2009 03/13/2009 57,097,655.05 100.00 01/01/2023 8,73 Total Transport 334,322,694.76 41% FAPA TUNISIE PME BFPME Finance 08/05/2013 02/27/2014 02/27/2014 666 994,31 4.08 06/30/2018 4,17 FINANCIAL SECTOR MODERNIZATION SUPPORT PROGRAMME Finance 07/13/2016 10/10/2016 10/10/2016 225,249,834.00 100.00 12/31/2017 1,23 AFRICAN SME PROGRAMME - LOC HANNIBAL LEASE Finance 07/14/2017 6,723,875.64 0.00 07/08/2018 0,23 II° LINE OF CREDIT FOR THE BANQUE DE L'HABITAT Finance 02/27/2002 08/27/2002 08/27/2002 23,953,806.97 100.00 12/31/2006 15,61 BANQUE HABITAT TUNISIE - LOC II Finance 07/21/2003 12/18/2003 12/18/2003 67,238,756.42 100.00 03/31/2008 14,22 SME APEX FACILITY TUNISIA Finance 07/13/2011 02/24/2012 04/10/2013 35,104,963.84 70.43 07/22/2021 6,24 TRADE FINANCE LINE OF CREDIT TO BHT Finance 10/19/2016 02/27/2017 03/28/2017 50,429,067.31 100.00 08/27/2020 0,96 Total Finance 409,367,298.49 95% PUBLIC PROCUREMENT REFORM ACTION SUPPORT PROJECT Multi-Sector 12/27/2013 04/02/2014 10/17/2014 530,100.00 41.40 12/31/2017 3,78 OPERATIONALISING PPPS IN TUNISIA (PPP ADVISORY) Multi-Sector 06/14/2013 10/15/2014 10/15/2014 789,000.00 23.09 06/30/2018 4,31 Total Multisector 1 319 100,00 30% GRAND TOTAL - (EXCLUDING MENA TF and TFT) 1,241,918,649.67 67%

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APPENDIX VIII Project Area Map

This map has been provided by the staff of the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown on this map do not imply on the part of the AfDB Group and its members any judgement concerning the legal status of a territory nor any approval or acceptance of these borders.

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