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FOR OMCIAL USE ONLY

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PROJECT COMPLETION REPORT

REPUBLIC OF TUNISIA

GRAIN DISTRIBUTION AND STORAGE PROJECT(LOAN 2052-TUN)

DECEMBER 5, 1991

Agri. ulture Operations DivisionCountry Department IIEurope, Middle East and North Africa Regional Office

This document bas a restricted distribution and maay be u-sed by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit : Tunisia Dinar (TD)

EXCHANGE RATE

Appraisal year average (1981) US$1 - TD 0.50Intervening years average (1982-87) US$1 = TD 0.75Completion year average (1988) US$1 TD 0.86

WEIGHTS AND MEASURES

Metric System

ACRONYMS AND ABBREVIATIONS

ATI Agrotechnie-Ingdnierie, Consultant Engineers, FranceCCGC Cooperative Centrale des Grandes Cultures (Central

Cooperative for Basic Crops)COCEBLE Cooperative Centrale de Ble (Central Vheat Cooperative)CNEA Centre National d'Etudes Agricoles (National Center for

Agricultural Studies)OC Office des Cereales (Office of Cereals)OPNT Office des Ports Nationaux Tunisiens (Tunisian National Port

Board)PD Project DirectoratePCC Project Coordination CommitteeSAR Staff Appraisal ReportSCET Soci4td Centrale pour l'Equipement du Territoire (Central

Company for Territorial Development)SNCFT Socidte Nationale des Chemins de Fer Tunisiens (Tunisian

National Railroad Company)STPA Societe Tunisienne de Production Alimentaire (Tunisian Food

Production Company)TECI Tunisie Engineering et Construction Industrielle (Tunisian

Engineering and Industrial Construction Enterprise)

FISCAL YEAR

Republic of Tunisia January 1 - December 31Office of Cereals October 1 - September 30

TBN OFFICIAL USE ONLYTHK WOULD BANK

Washington, DC 20433U.S A

OVuice ni oireitn.C.fl41Opsmvws Ivakiattr-

December 5, 1991

MMORANDUM TO THE EXECUTIVE DIRECTORSANTEPRSDT

SUBJECT: Project Completion Report - TunisiaGrain Distribution and Storage Protect (Loan 2052-TUN)

Attached, for your information, is a copy of a report entitled"Project Completion Report on Tunisia - Grain Distribution and Storage Project(Loan 2052-TUN)", prepared by the Government of Tunisia, with an Overviewprepared by the Europe, Middle East and North Africa Regional Office. No auditof this project has been made by the Operations Evaluation Department at thistime.

Attachment I

This document hu a rstricted distribution and may be used by recipients only in the petformance Iof their official duties. Its contents may not otherwise be disclosed without World Bank authoriation.

FOR OFFICIAL USE ONLY

PROJECT COMPLETION REPORT

REPUBLIC OF TUNISIA

GRAIN DISTRIBUTION AND STORAGE PROJECT(LOAN 2052-TUN)

TABLE OF CONTENTS

Page No.

PREEACE . . . . . . . . . . . . . . . . . . . . . .BASIC DATA SHEET . . . . . . .. . . i.iEVALUATION SUMMARY . . . . . . . . . . . . . . . . . . vOVERVIEW . . . . . . . . . ..... . . . . . . . . . vlii

CNEA PROJECT COMPLETION REPORT

I. BASIC DATA . . . . . . .. . . . 1

A. Introduction . . . . . . . *. . . . . . . 1B. Agriculture in Tunisia: General Data . . . . . 1C. The Cereals Office and the Cooperatives . . . . 3D. Storage Infrastructure . . . . . . . . . . . . 6

II. IDENTIFICATION, PREPARATION AND APPRAISAL . . . . . 6

A. Origin .... . . . .. . . . . . . . . . . . 6B. Preparation and Appraisal . . . . . . . . . . . 7C. Description .... . . . . . . . . . . . . . . 8

III. PROJECT EXECUTION . . . . . . . . . . . . . . . . . 10

A. Project Start-up . . . . . . . . . . . . . . .. 10B. Amendments During Implementation . . . . . . . . 10C. Implementation Schedule . . . . . . . . . . . . 10

1. The Seven Silos . . . . . . . . . . . . . . 102. Port Works .... . . . . . . . . .... . 173. Railway Program . . . . . . . . . . . . . 184. Technical Assistance . . . . . . . . . . . . 205. Training .... . . . ...... . . . . . 22

D. Project Cost, Financing and Disbursements . . . 231. Project Cost . . . . . . . . . . . . . . . . 232. Financing and Disbursements . . . . . . . . 24

E. Benefits . . . . . . . . . . . . . . .. . . . 27F. Economic analysis . . . . . . . .. 32

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

TABLE OF CONTENTS (CONT'D)

ANNEX 1 . . . . . . . . . . 34Table 1 Population Structure by Broad Age Group 34

and SexTable 2 GDP, by Activity .. . . . . . . . . . 35Table 3 Areas, Output and Yields . . . . . . . . 36Table 4 Grain Imports, Collections, Demurrage . 37

Quay Storage FeesTable 5 Grain Unloaded, by Port . . . . . . . . . 38Table 6 Demurrage Charges - 1988 . . . . . . . . 39

ANNEX 2 . . . . .. . . . . . . . . . .. . . . . 40Table 1 Supplementary Works and Deductions in the 40

Silo Construction ComponentTable 2 Implementation Schedule . . . . . . . . . 41Table 3 Works Schedule: Seven Silos Program . . 42Table 4 Silo Construction: Delays in Completion . 43Table 5 Contract with BUhler-MIAG (Contract Amount) 44Table 6 Contract with BUhler (Detailed) . . . . . 45

ANNEX 3 . . . . . . . . . . . .. . .. . 46Table 1 Accounting Status of Project . . . . . . 46Table 2 Comparative Costs . . . . . . . . . . . . 47Table 3 Accounting Status . . . . . . . . . . . . 48

ANNEX 4 . ..................... 51Table 1 Handling of Imported Grain with and . . 51

Without Project (1,000 Tons)Table 2 Saving on Handling of Imported Grain . . 52Table 3 Transportation Costs for Imported Grain . 53Table 4 Annual Grain Transportation Costs Over . 54

Planned ItinerariesTable 5 Grain Transportation by Road in 1988 . . 55

ANNEX 5 . e . e. . . . . . . . . . . . .. . 56Table 1 Investment at Economic Prices (in D'0OO) 56Table 2 Staff Wages and Salaries at Economic . . 57

Prices (D'000)Table 3 Staff Wages and Salaries at . . . . . . . 58

Economic PricesTable 4 Electricity Consumption at 1988 . . . . . 59

Economic PricesTable 5 Annual Operating Costs at . . . . . . . . 60

Economic Prices

ATTACHMENT: Comments from the Borrower . . . . . e * 61

PROJECT COMPLETION REPORT

REPUBLIC OF TUNISIA

GRAIN DISTRIBUTION AND STORAGE PROJECT(LOAN 2052-TUN)

PREFACE

This Project Completion Report (PCR) reviews implementation of theGrain Distribution and Storage Project in Tunisia, for which Loan 2052-TUN in theamount of US$42 million was approved on October 6, 1981. The Loan was closed onDecember 31, 1988, two years behind schedule. The last disbursement was made onJuly 19, 1989 and an undisbursed balance of US$804,000 was cancelled at thattime. This brought the total amount cancelled under the Loan to US$9.41 million.

The PCR was prepared by the National Center of Agricultural Studies(CNEA) in Tunis. The overview prepared by the Bank provides additionalinformation obtained from a review of the project files including the preparationreports of the follow-on Project (subsequently dropped from the lending program).

This PCR was read by the Operations Evaluation Departme.nt (OED). Thedraft PCR was sent to the Borrower for comments on September 23, 1991. AnEnglish translation of their telexed response is attached to the Report(Attachment).

PROJECT COMPLETION REPORT

REPUBLIC OF TUNISIA

GRAIN DISTRIBUTION AND STORAGE PROJECT(LOAN 2052-TUN)

BASIC DATA SHEET

KEY PROJECT DATA

Appraisal Actual or Actual as X ofExoectation Current Estimate Aporaisal Estimate

Project Cost CUSS million) 93.9 60.00 64Underrun or Overrun 6X)

Loan Amount CUSS miltion) 42 m. 32.59 78Date Board ApprovaL 10/06/81Date Effectiveness 04/02/82Date Physical Components Completed 11/86 07/88Closing Date 12/31/86 12/31/88Economic Rate of Return 6X) 16.1 12.87

CUMULATIVE DISBURSEMENTSFY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90

Appraisal Estimate CUSS miLLion) 0.70 13.60 30.50 39.00 42.00ActuaL (USS miltion) - 0.40 0.80 7.54 20.65 30.51 32.34 32.38 32.59Actual as % of Estimate 0.00 0.03 0.02 0.20 0.50

Date of FinaL Disbursement JuLy 19, 1989CancelLation CUSS milLion) 9.40

STAFF INPUTS(staff weeks)

FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 TOTAL

LDV 3.4 6.1 9.5Identification/ 35.8 35.8Preappraisal

AppraisaL 44.0 5.2 49.2Negotiations 3.6 3.6Supervision 12.6 11.4 15.8 9.0 3.1 10.9 2.0 0.5 0.1 65.4Other 1.3 0.3 1.0 0.8 0.4 3.

Sibotael 83.2 28.8 11.4 15.8 9.3 4.1 11.7 2.0 0.9 0.i 167.3

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MISSION DATA

Date No. of Staff/Days Specialization Performance Types of Date oftmoLyr) Persons _infield_ represented a/ Reting b/ Trend c/ PLRE d/ Report

Identification 3/79 FAO 06/15/79Preparation 6/79 5 12 FAO 07/26/79Preparation 10/79 4 19 FAO 10/26/79-01/18/80Preparation 9/80 2 7 EC, GRS 10/20/80Preappraisal 11/80 4 14 EC (2), GRS, TREC 12/03/80Appraisal 2/81 5 21 EC (2), GRS, TREC (2) 03/11/81Post Appraisal 5/81 3 5 EC, GRS, PR 06/03/81Supervision 1 12/81 2 5 EC, GRS 2 1 M 01/29/82Supervision 2 4/82 1 8 EC 2 2 M 05/05/82Supervision 3 12/82 1 8 AG. ENG. 3 2 M 01/27/83Supervision 4 4/83 1 5 EC 05/19/83Supervision 5 5/83 1 4 EC 2 1 M 06/03/83Supervision 6 10/83 2 6 EC, FA 11/02/83Supervision 7 2/84 2 17 EC, GRS 2 1 FO 02/27/t4Supervision 8 5/84 1 6 EC 05/08/84Supervision 9 10/84 2 6 EC, SIC 2 2 FM 11/03/84Supervision 10 5/85 2 13 EC, TREC 2 2 FM 06/21/85Supervision 11 5/86 1 4 PA 06/03/86SIR 7/86 3 4 DC, FA, AG 07/31/86LENP Grain Storage 2 4/28/86 4 12 P EC (1), GRST (3) 05/07/87Supervision 12 6/87 1 14 GRST 07/87Supervision 13 12/87 1 5 FA 01/05/88SIR 6/85 1 2 EC 06/13/85SIR 1/89 2 5 FA, OA 03/04/89

OTHER PROJECT DATA

Borrower Republic of TunisiaBeneficiary Office of Cereals (OC)FiscaL Year of OC October 1 - September 30Name of Currency Dinar (DT)Currency Exchange Rate:AppraisaL Year Average (1981) US$1.00 = TDO.50Intervening Years Average (1982-87) US$1.00 = TD0.75Completion Year Average (1988) US$1.00 = TDO.86

Cofinanciers None

Follow-on Projects Grain Storage II was prepared but subsequently dropped from the lending program.

a/ AG = Agronomist; AG. ENG. = Agricultural Engineer; DC = Division Chief; EC = Economist; FA = FinanciaL Analyst;FAO - FAO/CP; GRS e Grain Silo Specialist; OP = Operations Assistant; PA a Project Advisor; PR = ProcurementSpecialist; SIC = Silo Consultant; TREC = Transport Economist.

b/ I = Problem free or minor problems; 2 c Moderate problems; 3 = Major problems.

c/ 1 = Improving; 2 = Stationary; 3 = Deteriorating.

d/ F = Financial; H = Managerial; T = Technical; P = PoLitical; 0 = Other.

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PROJECT COMPLETION REPORT

TUNISIA

GRAIN STORAGE AND DISTRIBUTION PROJECT(Loan 2052-TUN)

EVALUATION SUMMARY

Objectives

The project was designed to expand grain storage and throughputcapacity, improve the related domestic transport system and largely completethe conversion from bag to bulk handling in Tunisia's distribution system forimported grain to meet the increased demand for grain. In addition, theproject was to provide assistance for strengthening the technical capacity andfinancial management of the Office of Cereals (OC). The main projectcomponent, accounting for more than 80 percent of total project costs, wasconstruction, rehabilitation and expansion of port and storage silos andrelated facilities.

Implementation Experience

The project had a slow start due to the difficult relationsbetween the OC and its consulting engineers and the time taken to select afirm for silo supervision. This delayed the infrastructure program by twoyears and the loan closing date was extended from December 31, 1986 toDecember 31, 1988. Despite the delays, all the project silos were constructedand/or rehabilitated as foreseen at appraisal and hence the project's physicalobjectives were met. The institutional component was less successful due toweak support for the policy and institutional aspects of the project withinthe OC, staffing problems and the generally poor working conditions at the OC.However, the various organizational units were created within the OC and thestudies were completed and became useful guides for the reform programinitiated under the project. The project has contributed to the reduction ofdemurrage charges through the eliminAtion of bags and to savings from theelimination of quay storage.

Results

The project generally met its objectives. The infrastructureprogram was completed as fores6en, the silos have performed very well and wereable to handle the exceptionally ia~iie volumes of imports arriving at theports in 1988. Although the objectives of the institutional component weremore difficult to achieve, important reforms were initiated under the projectand are still on-going in the context of the Second Agricultural SectorAdjustment Loan. The reestimated economic rate of return (ERR) of the wholeproject is satisfactory at 12.87 percent.

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Sustainability

Provided reasonable standards of operation and maintenance aremet, sustainability is virtually assured throughout the assumed economic lifeof the project investments.

Lessons Learned

A number of lessons can be drawn from the experience with thisproject.

(a) Institutional objectives of a project can be difficult toachieve if the project institutions operate in a regulatedpolicy environment. This is starting to change with reformsbeing implemented under the ASAL-Il.

(b) In a complex, multi-sectoral project requiring theparticipatior. of various agencies and ministries, moreattention should be paid to ensuring the effectivecoordination of the different actors.

(c) Complex projects of this nature require intensivesupervision both at project start-up and duringimplementation. A greater supervision effort might havehelped resolve inter-agency conflicts at their early stagesand have moved forward difficult institutional reforms(financial and management).

(d) Consultants' qualifications and terms of reference should bechecked carefully to ensure that they have the requiredexperience and sufficient time to carry out their work, andthat they are familiar with the local context.

(e) Continued attention needs to be paid to operation andmaintenance (O&W1) which are crucial to ensure thesustainability and effective utilization of projectinvestments.

PROJECT COMPLETION REPORT

REPUBLIC OF TUNISIA

GRAIN DISTRIBUTION AND STORAGE PROJECT(LOAN 2052-TUN)

OVERVIEW

INTRODUCTION

1. The Project Completion Report (PCR) of the Grain Distribution andStorage Project was prepared by the National Center of Agricultural Studies(CNEA) in Tunisia. The CNEA report provides a detailed and exhaustiv3 reviewof the technical aspects of the project. However, less attention was given toinstitutional issues and the lessons to be derived from the project. TheEvaluation Summary supplements CNEA's report with the Bank's observations.

2. Project Origin. An IBRD mission in May 1978 identified a grainstorage project within the program of investments then being considered by theGovernment. This project was considered to be urgent because rapidly risingconsumption of grain, brought about by rising per capita income, increasedurbanization and a high population growth rate, was increasingly being met byimports and this was putting strains on the Government's systems for grainimporting, storage and distribution.

3. The project included the following components:(a) rehabilitation, adaptation for imports, and expansion to 30,000 toncapacity of the existing port silo in Bizerte, and construction of a 30,000ton port silo in Ghannouch (near Gabes); (b) construction of three storagesilos in Sfax (20,000 tons), Beja and Gafsa (10,000 tons each), and expansionfrom 8,000 tons to 28,000 tons of the storage silo in Kalaa Seghira (nearSousse); (c) rehabilitation of the Manouba (near Tunis) storage silo(50,000 tons); (d) construction and rehabilitation of silo rail sidings;(e) acquisition of about 50 bulk rail hopper cars; and (f) studies, technicalassistance, and training. The OC was to be responsible for silorehabilitation and construction, and the execution of the studies includedunder the Project. The OC was to be assisted by the Tunisian National PortAuthority (OPNT) for port works at Bizerte and by the Tunisian NationalRailroad Company (SCNFT) for components in (d) and (e) listed above. The SARproposed that the OC would work with two grain cooperatives, the Central WheatCooperative (COCEBLE) and the Central Cooperative for Basic Crops (CCGC), for

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establishing an integrated silo maintenance and stock control system. Day-to-day management and coordination with other project agencies was to beprovided by a Project Management Unft (PMU) established in OC, A ProjectCoordination Committee (PCC) was to provide overall project coordination andresolve possible inter-agency conflicts.

4. Proiect Cost and Financing The project was to be implementedover a five year period from 1981 to 1986. Total project cost (includingtaxes and duties of about $14.7 million) was estimated at TD 37.5 million(US$93.9 million equivalent) with a 45 percent foreign exchange component ofwhich the Bank would finance $42 million and grant transfers to the OC fromthe Government would finance the balance.

PROJECT IMPLEMENTATION AND IMPACT

5. Project Implementation. The project start-up was slow due to thedifficult relations between the OC and its consulting engineers, which delayedthe issuance of bid invitations for silo construction (para. 10). Despite thedelays, all of the project silos w:tre constructed and/or rehabilitated by mid-1988 aiid hence the project's physical objectives were largely met. Theinstitutional component was less successful (paras. 13-17). The iotal projectcost at completion was DT 47.8 n'llion (US$60 million equivalent) or127 percent of the appraisal cost estimate in Dinar terms and 64 percent indollar terms. The higher costs were incurred mainly for silo construction andsupplementary works. Costs in dollars terms were lower than those in Dinarterms due to the fall in the value of the Dinar.

6. A Project Coordination Committee was created as intended(para. 3). Unfortunately, it did not convene regularly as envisaged and wasnot very effective in coordinating the various project components andfostering communication and team work. This affected the smoothimplementation of the phys .cal and institutional components of the project.

7. kroiect Design. The basic design of the project was not modifiedduring implementation. However, the Project Agreement was amended in 1984 toprovide new deadlines for submission of 1981-85 audited accounts, and the LoanAgreement was amended twice, in 1984 to increase the local trainingdisbursement percentage to 100 percent, and in 1985 to increase to 60 percentthe disbursement percentage for expenditures on silo construction and silorail sidings and to provide for an expansion of the Beja silo capacity from10,000 to 18,000 tons. A total of about $9.4 million was cancelled from theLoan. The Loan closing date was extended by a total of two years to December31, 1988.

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8. Physical ComRonent. The silos performed very well and were ableto handle the exceptionally large volumes of imports arriving at the ports in1988 (2.04 million tons versus 1.25 million projected by the SAR for 1986).They have led to considerable efficiency gains in import and handling of grain-- a major project success. The railway program was also highly successfuland 912,000 tons were moved in 1988 versus 570,000 estimated in the SAR for1986. The project has, in addition, contributed to the reduction of demurragecharges through the elimination of bags and to savings from the elimination ofquay storage. The Project director was able to very competently supervisesilo operations once the works were completed. As mentioned in paras. 9-11,the process of achieving the physical results described above was, however,fraught with difficulties and delays caused by the poor relations of thepartnership of consultants selected to carry out silo supervision.

9. Silo Consulting Engineers. At the time the project was beingprepared, it was recognized that no Tunisian firm had adequate experience totake overall responsibility for major silo supervision. The Bank thusrecommended, and the OC agreed, that for supervision of silo construction acontract with a joint venture of two partners (Tunisian and foreign) would beestablished with the senior level expertise provided by the foreign firm.

10. However, the project inherited a major problem of incompatibleconsulting engineers and subcontractors. In 1978, prior to the Bank'sinvolvement with the project, the OC had hired an engineering consulting firmto prepare detailed designs for the Bizerte port silo and the storage silos ofBeja, Gafsa, Kalaa Seghira and Sfax. At the OC's insistence, the firmsubcontracted a large share of the engineering work to a Tunisian firm and ajoint contract was signed in early 1979. A Bank preparation mission reportsthat relations between the OC and the international firm were strained andrelations between the two firms (internptional and local) were antagonistic.In fact the international firm, which was vested with legal responsibility forthe planning and supervision of all project works, did not receive a full setof the implementation designs for civil works prepared by the Tunisian firmnor the latter's notes on calculations of quantities of materials required.When these problems became apparent, it was decided that the OC wouldcoordinate the work of the two consulting firms. The Bank felt that acontinuation of the consulting arrangement with coordination by the OC was farfrom ideal but could be tried on an interim basis. OC management was,however, unable to settle the problems between the engineering firms. InFebruary 1983, the OC decided to award the entire engineering assignment tothe sister firms of the original partners. However, due to refusal of thosefirms to include adequate numbers of staff in the proposed contract and to anincrease in the contract amount at the last minute, the OC decided to severall relations with the firms and, on the basis:of a short list provided by theBank, selected a joint venture of new international/Tunisian partners. It wasonly then, when the OC entered into this new contract, that silo bidding couldstart and the project could begin to be implemented.

11. The effectiveness of OC's earlier consultants had been impaired asa result of the problems described above (lack of communication and sharing ofinformation between the partners) and the designs which they prepared had tobe modified to improve certain technical deficiencies (in the case of theManouba silo the execution plans had to be completely redone and sent back toFrance). Negotiations of appropriate amendments took place after signature ofthe contract with the civil works contractor in July 1984.

12. Project Works. Project works were awarded to an internationalfirm following international competitive bidding. The firm was slow inpreparing detailed construction plans and this delayed the start of the works.A large part of the delays were made up, however, during construction. In thecase of the port silos of Bizerte and Gabes, the contractor did not adequatelystudy local conditions. Draft plans did not take into account thepeculiarities of certain sites (e.g., at Bizerte, the depth of foundations wasunderestimated) or reflect sufficient coordination with government agenciesinvolved such as OPNT, SNCFT and the Tunisian Electricity and Gas Society(STEG). In addition, local sub-contractors in some cases proved to beovercommitted and in other cases did not provide fully reliable equipment.Delays were longest for the rehabilitation of Kalaa Seghira and Bizerte portsilos. For Kalaa Seghira, this was due to the fact that supplementary worksfor rehabilitation were needed in addition to expansion of the silo capacity.Bizerte port silo works were affected by a dispute between OPNT and thecontractor concerning delayed payments; additional dredging also becamenecessary and this led to an amendment of the works contract in July 1986. Areallocation was approved by the Bank in October 1986 to cover the additionalcosts incurred (about $590,000). Despite these delays, the infrastructureforeseen at appraisal was all completed: the Ghannouch port silo wasconstructed, the Bizerte port silo was expanded, three storage silos (Sfax,Beja and Gafsa) were constructed, two were rehabilitated (Manouba and KalaaSeghira) and one was expanded (Kalaa Seghira). The 50 bulk grain hopper carswere purchased and the silo rail sidings were constructed to permit rapidloading and unloading of programmed trains.

13. Institutionai Component. Problems of management and organization inmany areas of the OC's operations were identified during preparation of theProject. To correct these deficiencies, new organizational units were to becreated in the OC to fill voids in planning and evaluation, maintenance andtransport. Second, the project provided for two technical assistance studies,one in accounting and finance, the other in the management of OC's operations.Third, the project included a study for the preparation of a second Projectwhich would focus on the rehabilitation and conversion to bulk handling of thedistribution circuit of locally produced grain and on the integration of thiscircuit with that for imported grain. The various organizational units wereeventually created within the OC and the studies were completed during thecourse of the Project and became useful guides for the reform program.Although a number of the reforms recommended by the studies were started underthe Project, progress was slow and was hampered by weak support for the policy

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and institutional aspects of the Project within the OC, staffing problems andthe generally poor working conditions at the OC. This is described below(paras. 14-18). The Second Agricultural Sector Adjustment Loan is followingup on some of the recommendations of the management study (para. 17) and goodprogress has been made recently with maintenance (para. 19).

14. Creation of organizational units in the OC proved to be difficultmainly because of the lack of technical personnel at the OC with the resultthat new senior staff (Directors of PMU, transport, etc.) had to be secondedfrom other Ministries (the private sector was not interested because of thelow salaries). There was also no incentive for incumbent managers to stay atthe OC because they were overworked, had to undertake multiple tasks and wereprovided with poor administrative support and inadequate office facilities. Aproject management unit (PMU) had been established by the OC in September1981. However, a permanent PMU Director was not assigned to the project untilMarch 1983. Although recruited late, he performed well in the job(sea para. 8). His unit produced 11 reports on project progress. TheDirector of Planning and Evaluation came on duty as scheduled in March 1982.As mentioned in the PCR, he took charge in the Fall of 1984 of the division ofcomputerization and management information and the division of statisticswhich gave him the tools to create in the OC an organized planning andmonitoring system. The Director of Transport and Logistics was recruited onloan from the SCNFT only after prolonged intervention by the Bank. He waswell qualified, efficient and dynamic but was not provided with necessarystaff and had to work out of his old office at SCNFT. A silo maintenance unitwas established in late November 1982 (on schedule) and a division chief ofthe unit was appointed about three months later. However, he was not relievedof his previous post in charge of non-Bank financed new construction.Despite the Bank's recommendations, little action was taken to recruit newstaff or to improve working relations and conditions. This had adverseconsequences particularly for the implementation of the maintenance reforms, aproblem which was eventually rectified (in 1989, a decision was taken not tocreate a separate unit for the provision of maintenance services but to hirethe OC's silo contractor for ad-hoc assistance. See para. 19).

15. Studies. Consultrat recruitment for the technical assistancecomponent was planned for April 30, 1982 but was delayed by the laterecruitment of directors of PMU and Plan and Evaluation. A contract wassigned on November 11, 1982 with a partnership of French/Tunisian firms forexecution of the financial and management studies and for the study to preparea second phase project. For all three studies, the degree of complexity andthe time required to carry them out appears to have been underestimated atappraisal. However, all of the studies were eventually completed and providedvery useful recommendations and guidance to the OC.

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16. Audit and Rehabilitation of Financial and Accounting Systems ofthe OC. In 1984, a Tunisian auditing firm examined OC's accounts andconcluded that (a) they were unauditable and that no credibility could begiven to OC financial statements; (b) generally accepted accounting principleswere not followed and a new accounting system needed to be designed and setup; (c) the accounting, financial management, procurement and administrativefunctions of OC should be reorganized; and (d) the internal control functionshould be strengthened at the OC. After an unsuccessful attempt to reorganizethe OC's accounts in 1984 (financial study), it was decided to abandon theproposed approach of bringing accounts up-to-date chronologically, and to hirean accounting firm to restructure the OC's accounting and financial systems.As a result, in March 1987 the OC signed a turnkey contract with a Tunisianaccounting firm of international caliber to carry out this task in cooperationwith OC staff. One of the objectives was to make end-1987 OC accountsauditable. This task was carried out on schedule. The first audit report byan independent auditor was due June 30, 1988 but was not received by the Bank.Nonetheless, satisfactory audits of the project accounts for 1982-87 wereprepared and received by the Bank.

17. Management study. In January 1984, a draft report (finalizedNovember 1984) on the management of OC's operations presented a number ofuseful reform proposals concerning maintenance and the management of grainimports and stocks. However, for 18 months following the completion of thereport, no significant action was taken on its recommendations. The marketingdirector (appointed part-time in the summer of 1985) prepared an overallreorganizational plan for the OC. The plan was a sound one and was approvedby the OC's Board of Directors in the Fall of 1985 as foreseen.Recommendations were made to (a) improve the management and contracting ofgrain imports; (b) simplify the system of quality bonuses and penalties ingrain pricing; (c) improve the Government's system for financing costs ofgrain storage services; (d) rationalize the formula for equalizationreimbursements (transport); and (e) provide for the joint operations ofcollection centers by the OC and the cooperatives with the better existingfacility in any given locality being rehabilitated and the poorer onesabardoned. This would tend to shift some operational management away from theOC. The objective would be for the OC to progressively withdraw from theoperation of silos which would be turned over to the cooperatives or privatesector and to let the OC assume more of a policy role in the cereals sector.A number of these objectives and recommendations (e.g. in (c), (d) and (e)above) are being pursued under the Second Agricultural Sector Adjustment Loan(ASAL-II) (see para. 20). In addition to restructuring, the plan included anumber of urgently needed improvements in management practices designedi toincrease delegation of authority, provide for better financial controls,improve bilateral communication and provide for full participation of seniorstaff in policy advice to each other and to OC management. Little action wastaken to introduce the improved management techniques included in the plan. ANovember 1985 supervision report noted that senior managers at the OC did notcommunicate adequately with each other, and that the OC's relations with otheragencies, the grain cooperatives, consulting firms and ministries (Plan,Agriculture and National Economy) were not good.

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18. Economic Impact. The project generally met its objectives. As notedin para. 8, the infrastructure program (representing more than 80 percent oftotal project costs) was carried out as foreseen and the silos constructed orrehabilitated are performing well. The institutional component was lesssuccessful (para. 13). The reestimated economic rate of return (ERR) of thewhole project is satisfactory at about 12.87 percent compared with the16.1 percent calculated in the SAR. The rate of return is most sensitive tolevels of imports which, as noted above, were at a record high level in 1988,the date of completion of the project. As a result, the return on investmentscalculated by the PCR is probably slightly higher than it would be in a yearof lower imports. Moreover, the PCR calculations include among the benefits"elimination of palliatt ve investments" that the Government would have had tomake if the project had not taken place. If the savings from not making theseinvestments is to be added as a benefit in the economic analysis, then thebenefits that those investments would have generated would have to besubtracted. Proper treatment of this issue would reduce the ERR marginally.However, these reductions would be outweighed by the fact that, when the PCRwas prepared, some of the silos had just become operational and with minoradjustments can raise their performance levels (e.g., the PCR mentions thatthe rate of operation of the Gabes silo was slow in 1988 due to the latecompletion of the rail siding serving the silo). In short, even with theadjustments to the economic analysis discussed above, the ERR would likelyremain satisfactorv.

19. Sustainabilitv. The SAR had recommended the establishment of anintegrated central maintenance service. The OC and the two cooperativesdecided, however, that the creation of a separate unit for maintenance wascostly and unnecessary, especially since the silo contractor, who had beenresponsible for civil works under the project, had trained technicians of theOC and the two coopeiatives in the operation and maintenance of the silos.Those technicians were then operating and maintaining the silos. Additionalassistance was sought from the silo contractor on an ad-hoc basis as needed.In 1989, a renewable contract with the firm was signed by the OC. This willhelp ensure that project investments are sustained and utilized efficiently.

CONCLUSION

20. Follow-un nroiect and recent nrogress on reforms (nara. 17). In1988, the Bank decided not to finance a second phase grain storage projectbecause it was felt that, in the future, emphasis should be given to buildingup the private, rather than public sector grain storage and handling. Thisshould be financed through the credit system. Through the Fourth AgriculturalCredit Project, the National Agricultural Bank:(BNA) is currently providingcredit to farmers for the construction of on-farm storage facilities. BNAwi'll need to mobilize new resources to expand this type of investment in thefuture. A Second Agricultural Sector Adjustment Loan (ASAL-II) was approved

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in 1989 and aims to focus the OC on its primary role of regulator of thecereals subsector and stimulate the private and cooperative sectors to play alarger role in domestic cereal collection and feedgrain imports. This processis underway. The OC is starting to withdraw from cereal collection andstorage activities and imports of animal feedgrain are being opened up to theprivate sector. The OC is also disengaging from activities and investmentsnot directly related to the cereals subsector. The medium-term objective forthe cereals subsector supported by the ASAL-II is to create a more liberalizedsystem with the free market playing the predominant role and the Governmentproviding a regulatory and sector monitoring function. Further efforts topromote private sector participation in the cereals subsector are plannedunder a proposed Agricultural Sector Investment Loan (ASIL).

21. Lessons Learned. A number of lessons can be drawn from theexperience with this project.

(a) Institutional objectives of a project can be difficult toachieve if the project institutions operate in a regulatedpolicy environment. At an early stage of projectpreparation, the Bank recognized the need to strengthen theinstitutional capacity of the OC and this prompted theinclusion in the project of technical assistance, trainingand policy studies. This objective was difficult to achievedue to the complex policy environment in which the OCfunctioned (fixed prices, subsidies) and the fact that,while created in the form of a public enterprise, the OCalso served as an implementing agent of Government policy.As discussed in para. 20, the progressive withdrawal of theO from grain storage and collection activities and thestrengthening of its policy role will improve the efficiencyof the cereals subsector.

(b) In a complex, multi-sectoral project requiring theparticipation of various agencies and ministries, attentionshould be paid to ensuring the effective coordination of thedifferent actors. The project dealt with many issues indifferent sectors (grain storage, marketing, transport,financial). As a result, the project was complex andrequired different types of skills and expertise from boththe Tunisians and the Bank. For that reason, more attentionshould have been paid to ensuring that a qualified directorwas appointed to the PMU at project start-up and that theProject Coordination Committee (established before Loansignature) met regularly and;that it was effective inresolving inter-agency conflicts and fostering communicationand team work.

(c) Complex projects require intensive supervision at start-upand during implementation. For reasons explained in (b)above, the Bank should have supervised the project moreintensively particularly when it became apparent that the

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procurement arrangements which had been agreed to atnegotiations had changed, and that OC management was havingdifficulties making a firm commitment on awarding of thecontract for silo supervision. It would also have beenuseful if senior managers of the Bank had been more involvedin later stages of project implementation to help deal withinstitutional issues (studies, financial sector reforms).

(d) Consultants' qualifications and terms of reference should bechecked carefully to ensure that they have the requiredexperience and sufficient time to carry out their work, andthat they are familiar with the local context.

(e) Continued attention needs to be paid to operation andmaintenance (O&M) which are crucial to ensure thesustainability and effecitive utilization of projectinvestments.

CNEA PROJECT COMPLETION REPORT

REPUBLIC OF TUNISIA

GRAIN DISTRIBUTION AND STORAGE PROJECT(LOAN 2052-TUN)

O. ASC DATA

A. INIRODUCTIO

1.01 The Grain Distribution and Storage Project (Loan No. 2052-TUN, in

an amount of US$42 million for a period of five years) was approved in )ctober1981. The project was identified in March 1979 during an identificatio,nmission for an agricultural credit project ln Tunisia. Its objectives were toimprove collection, handling and storage of imported grain, as well astransportation within the country.

1.02 This document is the final version of the Project CompletionReport, and was prepared by a multidisciplinary CNEA team, using the followingsources

(i) documentation furnished by PD (the Project Directorate);

(Li) contact with the staff of the OC, particularly in the Directorateof Planning and Appraisal, the Directorate of Supply, and theDirectorate of Logistics;

(iii) data from the Technical Directorate of OPNT;

(iv) data from the Directorate of Studies and the Financial Directorateof SNCFT;

(v) a CNEA survey of port and storage silos, carried out in order togather information on flows of imported grain;

(vi) comments by the OC on the provisional report.

B. AGRICULTURE IN TUNISIA: GENERAL DATA

Ponulation

1.03 The general population and housing census of March 30, 1984 showedthe population of Tunisia to be 6,975,450. From 1975 to 1984, the annual rate

of increase was about 2.5%, this being higher than the rate between 1966 and

1975 (2.3%). The main demographic features are as follows:

(i) a masculinity ratio of over 100 (malea constitute 50.9% of thepopulation, in spite of the considerable number working abroad);

(Li) the population is young; in 1984, 40% of the population was under15 years of age, and those aged 65 or over constituted only 4.3%of the total; the median age was only 19.5, and the average agewas 24.5;

(iLL) 53% of the population is urban;

(iv) demographic growth varies from one region to another (Tunis region' 3.2%; South - 3.1%; Center/West - 2.7%; Northwest = only 1.4%).

The estimated population in 1986 was 7.4 million, and by 1991 itwill be about 8.372 million, assuming an annual growth rate of 2.5% from 1986to 1991.

Expenditure

1.04 The 1985 household budget and consumption survey showed annualexpenditure per person for the country as a whole to be D 471, i.e. an annualaverage per household of D 2,665. In general, expenditure in urban areas ismuch larger than in rural areas (D 619 per person per year, compared withD 294). This gap is becoming much more marked as the urbanization rateincreases.

1.05 In the structure of total annual expenditure per person, foodstands out as the largest item (D 184, or 39%). Grain accounts for 15.8% ofexpenditure on food, an annual D 28.9 per person, or 6.1% of the total budget.

GDP and Agriculture

1.06 From 1982 to 1987, GDP at factor cost increased by an annualaverage of 4.06% (at constant 1980 prices) to D 3,959 million. In 1987, theshare of agriculture and fishing in GDP was only about 17%, the remaining 83%being divided between industry (33.5%) and services (49.5%). Over the sameperiod, the annual rate of increase for the primary sector was 7.6% atconstant prices. Tabie 2 in Annex 1 shows trends in GDP from 1982 to 1987.

1.07 Outstanding debt in 1987 totaled D 4.47 billion, equivalent to 56%of GDP at market prices. Debt servicing was D 860 million, and the debt-service ratio was 26.8.

1.08 The external trade balance is perpetually in deficit. In 1987 itwas D 738.4 million, and in 1984 it had risen slightly above D 1 billion. Theimport coverage ratio was 70.6%. This is the highest level recorded since1975.

1.09 In 1987, the trade balance for agricultural products and foodshowed a deficit of D 21 million, and a coverage ratio of 91.4%. The samelevel of performance can certainly not be expected in 1988, because of thedrought that affected the 1987/88 crop year, and which is still continuing.In fact, the falloff in agricultural output in 1988 meant that a considerablevolume of imports was necessary in order to meet the needs of humanconsumption. Projections for 1988 show a defipit of about D 210 million and acoverage ratio of about 54%.

Grain Production

1.10 Grain continues to be a major item in the country's economicpolicy, both as regards production/imports and consumption.