Historically, Public-Private Partnerships in Tunisia have faced significant challenges - particularly the shortage of expertise and resources within the civil service to carry out quality project preparation, tendering, and monitoring. To address these issues, the World Bank has been providing technical assistance to set up a PPP Project Development Fund (PDF), which aims to improve the readiness of the public sector in dealing with PPP contracts through enhanced project governance, better monitoring, and a greater emphasis on capacity-building.
Genesis of the Project Development Fund (in french).
1) Context: Tunisia, Infrastructure, and PPPs
The use of Public-Private Partnerships (PPPs) has been limited in Tunisia, a missed opportunity to improve infrastructure. Between 1999 and 2020, only five major PPP projects worth US$1.2 billion were approved due to insufficient capacity and scarce resources available to conduct PPP project preparations, tendering, and follow-up. [1]
Tunisian infrastructure has deteriorated in recent years. Tunisia tumbled from 33rd-best infrastructure globally and the 4th-best in the MENA region in 2008 to the 85th position globally and 8th in the MENA region in 2019.
Tunisia’s public finances have worsened, limiting the capacity to invest in infrastructure, which in turn negatively affects the economy’s competitiveness. Tunisia’s public debt increased from 40,7% of GDP in 2010 to 84.5% in 2021. [2] Tunisia’s road infrastructure and the efficiency of its air transport and seaport services have deteriorated; therefore, logistics costs represent an estimated 20% of GDP, higher than those of the emerging countries (15%) and developed countries (7%). [3]
Pub·lic-pri·vate part·ner·ship.
\'pə-blik 'pri-vət 'pӓrt-nər-ship\. Noun.
A long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance.
Public-Private Partnerships are an opportunity to accelerate private investment in infrastructure. A comparison with countries at a similar level of development suggests that Tunisia could benefit from annual infrastructure investments of US$200-300 million through PPPs. [4]
Public-Private Partnerships can increase efficiency by better allocating risks in infrastructure investment. Project selection improves as potential projects must undergo a market test to attract private financing. Moreover, PPP projects can minimize risks to taxpayers as some financial risks and commitments are transferred to private investors. [5]
Public-Private Partnerships can lead to better infrastructure, stronger local capacity, and a more competitive economy. PPPs are more likely to be completed on time and on budget as well as better maintained over the long run. [6] PPPs can introduce technology, innovation, and operational efficiency to local actors. [7] PPPs create jobs in infrastructure industries as well as a conducive growth environment for all industries through a high-quality infrastructure network. [8]
2) A Project Development Fund to accelerate PPPs in Tunisia
Since 2020, the World Bank has been providing technical assistance for the design and set-up of a Tunisian PPP Project Development Fund (PDF) through the Compact with Africa Trust Fund. The PDF will address some of the challenges that have historically blocked PPPs in Tunisia, particularly the lack of expertise and resources available to the civil service to conduct high-quality PPP project preparations, tendering, and follow-up.
The total operating budget of the PPP-PDF is estimated at US$31 million. The budget will be composed of US$5 million from Tunisian public funding, US$17 million from international donations, and US$9 million from expected cost recovery. The PDF is expected to be operational for at least five years, with a possible extension.
Tunisia is developing an ambitious PPP project pipeline for over US$3.5 billion in total investments. The objective of the PDF is to sign at least 10 new PPP contracts. Some of the foreseen projects are in renewable energy (1500 Mw of solar and wind energy), water sanitation, green hydrogen, the Sfax tram network (Tunisia’s 2nd largest city), as well as water desalination and water treatment programs.
The PDF will prepare and promote PPP contracts by implementing three main activities:
1) PPP capacity-building: training of civil servants, formulation of project screening and prioritization criteria among other capacity-building activities.
2) Project preparation: developing business cases, feasibility studies, and public tenders, reviewing and evaluating proposals, negotiating PPP contracts plus carrying out the commercial and financial close with equity investors and debt providers.
3) Project monitoring: supervising the private partners’ compliance during the projects’ construction and initial operations.
Expected impact of the PDF on PPP investments in Tunisia
3) Achievements and Next Steps
The Tunisian government legally established the PDF through the 2022 Finance Law. It was published in Article 13 of Decree-Law No. 2021-21 of December 28, 2021.
The Tunisian government has approved its TND 15 million donation. It will be provided via the ‘Caisse des Dépôts et Consignation’ and fulfills the US$5 million public contribution to the PDF’s operational budget.
Essential tools have been finalized or are already in development. Completed tools include the list of prioritization criteria, a PPP pipeline and prioritization tool (PPP radar), and materials to present the project. Moreover, initial versions of the PDF operating manual and business plan have also been prepared.
The PPP-PDF project was presented at the Tunisia Investment Forum (June 2022). It was showcased to the public, international donors, and other private stakeholders. This marks the start of the fundraising phase to attract the expected US$15 million in international donations.
About the Compact with Africa Multi-Donor Trust Fund
Compact with Africa (CwA) is a Multi-Donor Trust Fund associated to the TERI Umbrella Program that is supported by contributions from Germany, the Netherlands and Norway. The CwA MDTF aims to support the Government of Tunisia (GoT) in the implementation of the policy reform matrix related to the investment and business environment within the framework of the G20 Compact with Africa Initiative. The main purpose of this initiative is to support Compact Countries in attracting more investment through the implementation of relevant reforms and a general improvement of communication and marketing of investment opportunities. Learn more about the work supported by the World Bank's Compact with Africa (CwA) Multi-Donor Trust Fund in Tunisia here!
Case Studies
Tunis Lac Project (1983)
This PPP project between the Tunisian State and Saudi investors led to the holistic transformation of two contaminated lakes adjacent to the city of Tunis. The lakes were cleaned and hundreds of hectares of water were backfilled, creating new business, commercial, and residential areas for the city. The World Bank Tunisia office is now located in one of these newly created areas.
Rades II Power Station (1999)
A successful PPP project in Tunisia - this combined cycle gas-fired power plant became functional in May 2002 and produced 18% of all electricity in Tunisia as of 2019. The power station was managed until recently by the private Tunisian Carthage Power Company and has since been transferred to the state-owned utility company.
Water Sanitation (2022)
This recently approved project constitutes a first step in the implementation of the long-term strategy of the Tunisian national wastewater utility company (ONAS) to enhance the quality and efficiency of wastewater collection and treatment services. The project will partially finance the first two concession contracts for the management of sanitation facilities: one for Greater Tunis and one for four southern governorates (Sfax, Gabes, Medenine, and Tataouine)
References
[1] PPP-PDF Project Appraisal Document
[2] https://www.worldbank.org/en/country/tunisia/overview
[3] OECD, OECD Economic Surveys Tunisia, March 2018, https://www.oecd-ilibrary.org/sites/eco_surveys-tun-2018-5-en/index.html?itemId=/content/component/eco_surveys-tun-2018-5-en
[4] PPP-PDF Project Appraisal Document
[5] PPP Reference Guide Version 3, The World Bank, 2017
[6] PPP Reference Guide Version 3, The World Bank, 2017
[7] https://ppp.worldbank.org/public-private-partnership/overview/ppp-objectives
[8] https://ppp.worldbank.org/public-private-partnership/overview/ppp-objectives
[9] https://www.albuhairainvest.com/en/historical/
[10] H. P. Noppen, WIT Press, 2003, Restoration and development of the lakes of Tunis and its shores: looking back upon an acceptable form of contract?
[11] http://www.carthagepower.com.tn/rades.php
[12] http://www.igppp.tn/fr/node/494
[13] https://documents1.worldbank.org/curated/en/099435001112318592/pdf/P162957077e9bd0c0806d05f4aa325ad7b.pdf