JBIC ODA Loan Project Mid-Term Review 2006

Evaluator: Yoichi Hara (Mitsubishi UFJ Research and Consulting)Field Survey: July 2007
Project Title: The Republic of Tunisia “El Jem – Sfax Motorway Construction Project” (L/A No. TS-P23)[Loan Outline]
Loan Amount / Contract Approved Amount / Disbursed Amount
Loan Agreement
Loan Expiry Date
Executing Agency
Operation and Maintenance Agency
Selection Criteria for Mid-Term Review: 12,501 million yen / 7,380 million yen / 6,101 million yen (as of the end of May 2007): March 2002
: December 2009 (7 years following the effective date of L/A)
: Société Tunisie Autoroutes (STA): Société Tunisie Autoroutes (STA): Progress Report has not been obtained[Project Objective]
The objective of this project is to establish efficient production and distribution systems in the area south of Tunis, the capital of Tunisia, by building a highway (50.3 km long)
and an access road (6.0 km long) between the cities of El Jem and Sfax, and thereby contribute to the integrative economic development in the north and south of Tunisia.
Consultants: Nippon Koei Co., Ltd. (Japan), SCET Tunisie (Tunisia)
Contractors: Afrique Travaux/Soroubat (Lot 1: between El Jem and El Hancha), SBF/ETEP (Lot 2: between El Hancha and Sfax) (Tunisia)[Mid-Term Review Result]
Item
Relevance

Ex-ante Evaluation (March 2002)(1) National policy level
The government of Tunisia is currently working on its 10th Five-Year
Plan (2002–2006). In continuation of the policy it adopted in the 9th
Five-Year Plan (1997–2001), the government is considering the adoptionof “infrastructure building to enhance industrial competitiveness” as partof its policy guidance. The transportation sector plays a pivotal role in1

Result of mid-term review and ex-post evaluation results asestimated at time of mid-term review(1) National policy level
In the 11th Five-Year Plan (2007–2011), the government of Tunisia
sets the goal of achieving an annual economic growth rate of 6.1%
through, among other things, market opening, rise in productivity, andcreation of new jobs. In this plan, the transportation sector continues to
occupy an important position for strengthening the industrialinfrastructure building to strengthen industrial competitiveness byfacilitating and accelerating the distribution of goods.
Meanwhile, accompanying the conclusion of a free trade agreementwith the EU (1995), the tariff barriers that now exist between Tunisia andthe EU are scheduled to be gradually removed (and completely removed
by 2008); thus paving the way for the activation of trade and distributionof goods between Tunisia and the EU. Accordingly, building thetransportation infrastructure of the target area is an important task.

competitiveness of Tunisia. In particular, with regard to thedevelopment of a network of highways, it is important to continue
investing to further promote various forms of exchanges, including
economic exchanges with neighboring countries, activation of trade,and promotion of tourism. In connection with this, the plan points out
the need to promote the building of arterial highways and regionalroads, as well as the establishment of a network of roads for linking
industrial belts and commercial cities.
The schedule for removing all tariff barriers by 2008 remains ineffect. As was assumed at the time of the ex-ante evaluation, trade anddistribution are expected to remain brisk in 2008 and beyond. Thus theimportance of this project on a national policy level is recognized.

(2) Policy level
In light of the fact that within the transportation sector, roads accountfor more than 90% of passenger traffic and over 80% of freight traffic of
the total ground transportation, road maintenance and improvement have astrong impact on Tunisia’s economic activities. In the 9th Five-Year Plan,the largest portion of the transportation sector budget is allocated to theroad sector.

(2) Policy level
The position and importance of the road sector for the transportation
sector as a whole remain unchanged. The table below shows the amountearmarked in the National Development Plan (10th and 11th Five-year
Plans) for investments in the transportation sector after the ex-anteevaluation. At 57% and 31%, respectively, the government allocated thelargest part of its transportation sector budget to the road sector in boththe 10th Plan and the 11th Plan. Thus the importance of the road sector
remains high.

Investment in the transportation sector(Unit: million dinar)thth
9 Five-Year Plan
8 Five-Year Plan
(1992–1996)(1997–2001)
Road
487
781
Rail
290
336
Port
157
625
Air service
646
630
2

Investment in the transportation sector(Unit: million dinar)th
11th Five-Year Plan
10 Five-Year Plan
(2002–2006)(2007–2011)
Road
1,558
2,057
Rail
409
1,782
Port
178
1,003
Air service
527
1,685

Others
27
Total
1,607
Source: Ministry of Economic Development

Others
Total

43
2,415

55
2,727

80
6,607

Source: Ministry of Development and International Cooperation

Building highways is emphasized in road maintenance andimprovement as the backbone for strengthening Tunisia’s industrial
competitiveness by streamlining the distribution of goods and movementof people. Thus the government adopted a highway development plan in
September 1998. On the basis of that plan, the government is building ahighway system radiating out from Tunis, the capital, centering on threeaxes. The first axis extends southward for about 260 km, the second axis
westwards for about 140 km, and the third axis northward for about 50
km. The government’s goal is to build, by 2012, five highways covering a
total road length of about 520 km.

The highway development plan that was confirmed at the time of theex-ante evaluation is still being implemented, and this project is being
executed as part of that plan. The part that is being built under thisproject is the 50.3 km between El Jem and Sfax of the section“extending southward for about 260 km” from Tunis, as noted in the left
column. This route is being constructed concurrently with the
Msaken–El Jem Route, which is being built with assistance from theEuropean Investment Bank (EIB). When the 97.7 km route linking
Msaken to Sfax is completed, a total of 356 km of highway, or 68%, of
the overall highway construction plan (total length: 520 km) will be
opened to traffic.

(3) Planning level
The existing national road (GP1 Route [the section targeted in thisproject included]) that connects Tunis, the capital, to Sfax, Tunisia’s
second largest city, is an important arterial road in Tunisia, and as such,there is a lot of traffic (especially large trucks and other commercial
vehicles). The said national road is a two-lane (one-lane each direction)
public road, and accompanying the intensification of economic activitiesof the area, vehicle traffic is projected to increase on average by 4.6%
annually in the coming years, thus giving rise to concerns about, among
other things, an increase in the number of traffic accidents and travel time.
Thus, in order to solve this problem, as well as to increase safety andstreamline the distribution of goods, there is a strong need to build the
proposed new highway.

(3) Planning level
The overland route southbound from Tunis along the coast of theMediterranean to the Libyan border is very important. Sfax is
continuing to develop as a commercial city and is also becoming acenter of industrial development. This is evidenced by the formation ofa new urban district resulting from the development of the seaside area
and the plan to build a new petroleum refinery in a suburb south of thecity. In addition, in light of the plan to build a new airport in a suburb of
Sousse, which is located in the north of Msaken, the projection that
traffic will increase annually by 4.6% appears reasonable.
Consequently, the need for this project and the high priority placed on it
have not changed since the ex-ante evaluation.
Since this project is consistent with Tunisia’s national policies andmeasures and the strong need for highway construction has been
confirmed, this project is judged to be highly necessary and relevant.

3

Effectiveness (Impact)(1) Operation and effect indicators(i) Quantitative effects

Name of indicators(a) Operation indicator
Daily traffic
Existing national(average 1 day roadtraffic/year)
Highway to bebuilt under thisproject(b) Effect indicators
Reduction in
travel expense(dinar)Reduction in
travel time
Reduction in
Existing nationaltraffic
road
accidents (No. Highway to beof accidents)
built under thisproject(c) Internal rate of return
EIRR (Economic internal rate of
return)FIRR (Financial internal rate of
return)(1) Operation and effect indicators(i) Quantitative effects
Before thehighway isplaced inservice(2006)

7 years after
the highway
is placed inservice(2013)

14,338

10,762-

10,762

42.94

39.25

1 hr. 36 min

55 min

94.3

64.6

-

57.0

Name of indicators(a) Operation indicator
Daily traffic
Existing national(average 1 day
roadtraffic/year)
Highway to bebuilt under thisproject(b) Effect indicators
Reduction in
travel expense(dinar)Reduction in
travel time
Reduction in
Existing nationaltraffic
road
accidents (No.
Highway to beof accidents)
built under thisproject

At the timeof mid-term
review(2007)

7 years after
the highway
is placed inservice(2015)-

11,775-

11,775

-

39.25

-

55 min

-

64.6

-

57.0

With regard to the operation indicator, since none of the roads being
built under this project has been placed in service, there are no data
available on “the highway to be built under this project.” The Ministryof Equipment and Housing gauges the traffic volume on existing
national roads once every five years. At present, the Ministry is gauging

18.9%
4.5%

4

the traffic on existing roads to determine the average daily traffic for2007. As for numerical calculations of the operation indicator, after
consultation with the Société Tunisie Autoroutes (STA), the executing
agency of this project, it was judged that the targeted value establishedat the time of ex-ante evaluation would continue to be valid. On theother hand, owing to the construction delay, the highway will not be
placed in service until 2008 or later. Consequently, the target year is
now projected to be 2015 (or 7 years after the highway is placed inservice). If the traffic is calculated by applying the demand forecast at
the time of ex-ante evaluation (4.6% annual increase in traffic volume)and on the basis of the 2006 forecast, the tentative results for 2015
would be 11,775 vehicles (for both the existing national road and thehighway to be built under this project).
With regard to effect indicators, the target values are set for after the
highway is placed in service. However, in light of the fact that the scaleof the road is the same as the scale adopted in the original plan and thefact that the target values of the project at the time of ex-ante evaluation
are judged to continue to be valid, it will not be necessary to change theeffect indicators.
(ii) Qualitative effects
Building a highway connecting Tunis, the capital, to the commercial
and industrial city of Sfax, the second largest city in Tunisia, can be
expected to spur economic activities and promote industrial developmentof the region.

5(ii) Qualitative effects
Intensification of economic activities and promotion of industrial
development can be expected due to a host of factors. They include: theredevelopment of the section of Sfax along the seaside and theformation of a new urban, the progress of industrialization in thesuburbs, the plan to build a new airport in a suburb of Sousse, and theactivation of trade with Libya. At present, there are no foreseeable
external factors that threaten these qualitative effects. Thus it isexpected that these qualitative effects will be fully expressed when it
becomes time to conduct the ex-post evaluation.

(2) Factors that may influence the effectiveness and impact(i) Environmental and social consideration
It has been confirmed that there will be no marked impact on theenvironment along the highway. This is because: there are no homes andother noise sensitive targets (e.g., schools, hospitals, or libraries) within
the range that might be subjected to noise impact; and during
construction, the waste water that will be generated will be treated at an
effluent treatment facility and solid waste will be treated at a waste
treatment facility.
The consultant that will be hired for this project will monitor theenvironmental and social impacts of the project.

(2) Factors that may influence the effectiveness and impact(i) Environmental and social consideration
The impact on the environment is the same as the impact that was
assumed at the time of ex-ante evaluation discussed in the left column.
The noise damage inflicted during construction, the contamination
caused by wastewater, the problem accompanying the treatment of solid
waste, and other problems have not materialized. The project is being
implemented as all necessary approvals and licenses required forconstruction have been obtained.
The consultants are monitoring the environmental and social impactsof the project in an appropriate manner.

(ii) Resident relocation and land acquisition
While this project will require acquisition of 392 ha of land andrelocation of poultry houses of a poultry farm along the access road, there
will be no need to relocate residents. With regard to the land acquisition,
the Ministry of Equipment and Housing will carry out the land acquisition
based on the calculation of the value of the land in question. The landacquisition committees set up by the various local governments of thearea covered in the project (also with participation of the government of
Tunisia, farmers’ organizations, etc.) will be handling the various aspectsof land acquisition, including explaining to the landowners the need forsuch acquisition and negotiating with them to bring the acquisition about.
Calculation of the value of land slated for acquisition was completed by
the time of appraisal, and by mid-2002, it is expected that an agreementwith landowners regarding land acquisition will be reached.

(ii) Resident relocation and land acquisition
The Ministry of Equipment and Housing completed the acquisition ofland as planned. None of the residents have been required to relocate.
In the end, the need to relocate the poultry houses from the poultry
farm did not materialize. Parts of the poultry farm were on the land thatwas used for the road construction, but these parts were acquired bypaying the owners compensation money. Thus construction of the roadhas progressed without a hitch. In the process of inspecting the sites, it
was confirmed that there was sufficient distance from the poultry
houses to the targeted parts of the road construction, and also in the
hearings held for the employees, it was confirmed that there was noproblem.

(iii) Sharing of roles with other donors
EIB is scheduled to finance the construction of the Msaken–El Jem
Route, the northern section of this project. The route is scheduled to becompleted at the same time as this project, so it will be necessary to(iii) Sharing of roles with other donors
The section targeted for EIB investment (the Msaken–El Jem Route)and this project (the El Jem–Sfax Route) are projected to be completed
at virtually the same time (March 2008). Thus it is projected that the6follow up the progress.

effectiveness of this project will not be influenced.

(3) Factors that may influence the sustainability(i) Operation and maintenance system of Société Tunisie Autoroutes(STA)
Established in 1992 with the aim of building, operating and maintaining
the nation’s highways, STA builds, operates and maintains highways on
the basis of concession agreements it concludes with the government. Asof end of 2001, 87% of its capitalization was funded by the government;
the rest was funded by public organizations, including state-run banks.
As of end of 2000, STA was staffed by 217 employees.
With regard to the toll collection and operation and maintenance of
highways, the executing agency plans to set up within the STA an
Operational Sub-division for each highway (comprised of 50 tollcollectors and 20 operation and maintenance personnel for each highway).

(3) Factors that may influence the sustainability(i) Operation and maintenance system of Société Tunisie Autoroutes(STA)
As of end of 2005, the government of Tunisia owned 95.99% of the
STA’s shares, up from the 87% it owned at the end of 2001.
As of end of 2006, STA was staffed by 363 employees. The change
in the number of personnel and the projected increases in the coming
years are shown in the table below. The cost of employing andincreasing the STA staff as well as its general administration cost are, asa rule, borne by STA, and in no way, directly or indirectly, is thegovernment involved. Consequently, the feasibility of increasing thestaff level after 2007 will largely depend on how well STA manages its
financial affairs. Thus STA’s financial standing in the coming months
and years will need to be monitored very carefully.

2003

Changes in the number of STA personnel andprojected increases in the coming years
2008
2004
2005
2006
2007
(projected )

353
358
360
363
377
Source: Société Tunisie Autoroutes (STA)

2009(projected)(projected)

446

530

The Operational Sub-division for the Msaken–Sfax Route, which
includes the section being built under this project, has not been set up asof this moment, but it is scheduled to be set up when the construction iscompleted and the route is opened to traffic. In the current plan, theOperational Sub-division was to be staffed by a total of 84 members(those assigned to the toll collection group and operation andmaintenance group.) The infusion of personnel with technical7

know-how is expected, thereby ensuring a distribution of personnel
appropriate for the length of the route (97.7 km).
The progress report is to be written by the director of the field officein Sfax belonging to STA and checked by the person in charge in the
STA head office in Tunis. After the report is checked, it is to besubmitted to JBIC under the name of the president of STA. The first
installment of the progress report was delayed, but it was submitted to
JBIC’s Paris office in June 2007, that is, before the date of the fieldsurvey.
(ii) STA’s financial status and management conditions
As of 2002, STA was operating in the black, with a robust financial
standing. In 1990, highways in Tunisia began collecting toll, and on thebasis of a request made by STA, it is projected that the toll will be raisedin the future. Under its efficient operation system, it is projected that theratio of operating earnings to operating costs will generally be balanced at
the preset 2 to 1 ratio. Thus there is no particular concern about Tunisia’sability to service the debt.
At the request of the Tunisia side, the toll gates that will be installed
under this project will be built with STA’s own funds.

8(ii) STA’s financial status and management conditions
STA’s capital adequacy ratio has been moving steadily within therange of around 46%–50%.Thanks to the increase in capital provided by
the government, the amount of paid-in capital from 1998 to 2006
increased by about 32 fold. The liquidity ratio, which indicates theability to make short-term payments, was 376% as of 2006, while therate of net worth to fixed assets, which roughly indicates the ability tomake long-term payments, at 140% as of 2006, was at a reasonablelevel. There is no problem from the viewpoint of the security of thefinancial structure.
However, the profit ratio has been deteriorating every year due toincreases in operating costs including the general administration cost,reconsignment cost and operation and maintenance expenses of existing
infrastructure (see table below), and as a result, the operating cash flow
has not been stabilized. In 2003, in an effort to increase profit, STA
applied to the government, and was given permission, to raise the toll
on highways as well as to lower the concession fees, but as of thismoment, this has not led to an improved financial standing for STA.
Given that STA is a direct borrower of the Japanese ODA loan, it isimportant to continue carefully monitoring of its financial standing.

2003
2004
Gross earnings
100%
100%
Operating costs
86.5%
96.6%
Operating earnings
13.5%
3.4%
Source: Société Tunisie Autoroutes (STA)

2005
100%
94.9%
5.1%

2006
100%
99.3%
0.7%

Toll gates in the section financed by the Japanese ODA loan arescheduled to be built with funds provided by EIB together with the tollgates slated to be built in the adjacent section, which is being supported
by EIB. (In order to put to good use the reduction in construction costthat was achieved in the EIB supported section, the original plan inwhich STA was initially supposed to fund the undertaking was changed
so that the toll gates could be built as part of an EIB project.)

Information forreference
Efficiency(iii) Technical capacity of STA in operation and maintenance
STA has excellent ability in operation and maintenance as evidenced by
its introduction of an automatic toll collection system using electronic
cards.

(iii) Technical capacity of STA in operation and maintenanceAt present, 16% of the toll is collected under an automatic tollcollection system using electronic cards, compared to 84% which iscollected manually. STA’s policy is to continue to promote the spreadof the electronic card system.
As a matter of fact, a drive on the existing Tunis–Msaken Route andthe Tunis–Bizerte Route revealed that roads and toll gates are in goodcondition, thus attesting to STA’s high technical capacity in operationand maintenance.

(1) Outputs(a) Civil engineering work(i) Highway (length: 50.3 km [asphalt pavement], width: 34.0 m, twolanes each way: 3.5 m × 4 = 14.0 m, central divide:(1) Outputs(a) Civil engineering work
The scope is virtually the same as in the original plan, and so no
significant change has been made. (As a minor change, the number of9

12.0 m, road shoulders: 4.0m × 2 = 8.0 m)(ii) Access road (length: 6.0 km [asphalt pavement], width: 26.0 m, twolanes each way: 3.5 m × 4 = 14.0 m, central divide:
6.0 m, road shoulders: 3.0 m × 2 = 6.0 m)(iii) Exits: 3 locations(iv) Bridges: 4 locations(v) Overbridges: 27 locations(vi) Other structures (culverts, traffic safety facilities, etc.)

bridges was changed from 4 locations in the original plan to 3 locations.
This change was necessary because the 80-m bridge scheduled to bebuilt in the Qued Cherita district was changed to a box culvert (anunderpass that runs underneath the road.)(b) Consulting services(i) Construction management (site supervision, progress management,
preparation of the progress report, etc.)(ii) Environment consideration (management and monitoring; items to bemonitored include: quality of surface water and ground water, state ofdust and other sources of air pollution, noise, soil pollution, impact on
animal and plant life, etc.)(b) Consulting services
Both TOR and M/M are as originally planned.

The total assumed consulting services M/M is 343 M/M (including
foreign and local consultants).
(2) Project period
March 2002—March 2008 (73 months) (planned)
Construction was started in April 2005 and is scheduled to be completed
in March 2008.
The implementation period for the project as a whole was delayed
mainly because selecting the consultants and contractors took longer
than expected. (The selection of consultants was delayed for 2 years and4 months, while that of contractors was delayed for 1 year and 6
months.)Meanwhile, at the time of the site inspection (July 2007), 60% of theconstruction work was completed, and as of the end of November 2007,
about 80% has been completed. So now the goal is to complete theconstruction work by March 2008.

(2) Project period
March 2002–March 2006 (49 months)

10Lessons Learned andRecommendations[Lessons learned]
・ This project involves construction of a new highway, but because the highway is still under construction, and the highway has not yet beenplaced in service, no data are available on traffic volume. In the future, in preparing the ex-post evaluation after the completion of such a project,
it is advisable to remind the executing agency to collect data required for measuring the operation and effect indicators and to develop a system
necessary for this data collection. Additionally, in particular, in cases where a project is being implemented in countries where there are no local
JBIC offices staffed with resident officers, or where the executing agency is implementing the Japanese ODA loan project for the first time, itwill be necessary to remind the executing agency to periodically submit a progress report and strengthen the monitoring.
[Recommendations]・ At the present moment, although this project is expected to be completed at the same time as the section being built with funds provided by EIB(March 2008), since there is a possibility that the construction in this project may not be completed as scheduled, it is necessary to follow up on
the progress of the project so as to ensure proper expression of its effects.
・ Since the profit ratio of STA, a direct borrower of the Japanese ODA loan, is deteriorating, it will be necessary to continue to carefully monitor
its financial standing, especially its profit and loss standing and the movement of its cash flow. In order to ensure adequate cash flow in the
future, two factors are required. First, as it did in FY2003, the government should approve necessary raise in the highway toll and reduction inconcession fees that STA requests in the future. And second, STA should make certain that the operating expenses do not increase significantly.

Indicators set for use attime of ex-post
evaluation

Indicators assumed at the time of ex-ante evaluation(1) Daily traffic (average 1 day traffic/year)(2) Reduction in travel expense (TD)(3) Reduction in travel time(4) Reduction in traffic accidents (No. of accidents)(5) Internal rate of return: EIRR 18.9%, FIRR: 4.5%

While there are no changes in the items included in the evaluation
indicators established at the time of the ex-ante evaluation listed in theleft column, there is now a need to change the target year.

11