Mauritania - Technical Assistance Project

Document of The World Bank FOR OMCiAL USE ONLY Repwt Ne. 5629 PROJECT COMPLETION REPORT MAURITANIA FIRST TECHNICAL ASSISTANCE PROJECT (CREDIT 665-MAU) May 3, 1985 . Projects Department Western Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of | their officil duties. Its contents may not otherwise be disclosed without World Bank authsrizaion.  FOR OMCUL USE ONLY PROJECT COMPLETION REPORT MAURITANIA FIRST TECHNICAL ASSISTANCE CREDIT (CR. 665-MAU) TABLE OF CONTENTS Page No. Preface . ....................................... i Basic Data Sheet ......... ............ ii Highlights .................... ..... iv I. OBJECTIVES AND CONTENT. 1 II. UNDERTAKINGS AND THEIR FULFILLMENT. 2 III. PROJECT RESULTS AND BENEFITS ............ ......... 2 Economic Policy.. .. 2 Parapublic Sector ...... ... .... 3 Project Monitoring . ......... ....... 3 Planning ....................... 3 IV. CONCLUSION ....................... ............ ... 5 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -i~~~~~~~~~~~~~~~~~~~~~~ - PROJECT COMPLETION REPORT MAURITANIA FIRST TECHNICAL ASSISTANCE CREDIT (CR. 665-NAU) PREFACE Credit 665-MAU for the First Technical Assistance Project was approved in November 1976 and closed after a year's extension in June 1982. The Project Completion Report was prepared by the Western Africa Regional Office of the Bank and is based on a review of files and docu- ments, interviews with IDA and Borrower staff, and a field visit to Nouakchott in October 1983. The draft report was sent to the borrower for comments; however, none were received. The credit has not been audited by the Operations Evaluation Department. .  * ~~~~~~~~~- ii - PROJECT COMPLETION REPORT MAURITANIA FIRST TECHNICAL ASSISTANCE CREDIT (CR. 665-MAW) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estinate Total Project Cost (US$ million) 3.38 3.38 Underrun or Overrun (Z) 0X Credit Amount (US$ million) 2.70 2.70 Disbursed - 2.70 Cancelled _ 0.00 Repaid 1/ _ 0.00 Outstanding 1/ - 2.70 Date Physical Components Completed 12/80 6/82 Proportion Completed by Above Date (Z) 67 100 Proportion of time Underrun or Overrun (%) - 37.5 Economic Rate of Return (Z) NA NA Financial Performance NA NA Institutional Performance GOOD GOOD 1/ As of June 30, 1984. OTHER PROJECT DATA Original Actual or Item Plan Revisions Est. Actual * First Mention in Files or -- - 9/24/75 Timetable Government Application -- -- 9/75 Negotiations -- -- 10/8/76 Board Approval 6/76 -- 11/30/76 Credit Agreement Date -- 12/9/76 Credit Agreement Amended - 1/11/78 Effectiveness Date 3/9/77 -- 4/8/77 Closing Date 6/30/81 -- 6/30/82  - iii - Borrower Islamic Republic of Nauritania Executing Agency Ministry of Planning Fiscal Year of Borrower January 1 - December 31 Follow-on Project Name Second Technical Assistance Project Credit Number Cr. 1292-MAU Amount (US$ million) 4.6 (SDR 4.1 million) Credit Agreement Date 10/20/82 MISSION DATA Month, No. of No. of Date of Item Year Weeks Persons Manweeks Report Identification 11/75 0.6 1 0.6 12/9/75 Preparation 1/76 1.0 3 3.2 2/3176 Appraisal 3/76 3 9/27/76 Supervision I 12176 1.0 1 1.2 12/28/76 Supervision II 7/77 1.0 2 2.0 8/16/77 Supervision III 4/78 0.6 1 0.6 5/25/78 Supervision IV 10/78 1.0 1 1.0 1/19/79 Supervision V 2/79 1.0 1 1.0 5/29/80 Supervision VI 8-9180 2.0 1 2.0 10/10/80 Supervision VII 6-7181 2.0 2 4.0 8/4/81 Completion 10/83 3.0 1 3.0 COUNTRY EXCEANGE RATES Name of Currency (Abbreviation) Ouguiya (UM) Year: Appraisal Year Average Exchange Rate: US$ - UM 45 Intervening Year Average US$ - UK 45 Completion Year Average US$ - UK 47  * -~~~~~~~~~~~iv- PROJECT COMPLETION REPORT MAURITANIA FIRST TECHNICAL ASSISTANCE CREDIT (CR. 665-MAU) HIGHLIGHTS The First Technical Assistance Project was designed to respond to the need of the Mauritanian Government to strengthen longer term macro- economic management and to assist in the review and implementation of the Third Five Year Plan (1976-1980). Specifically, it aimed at supporting the Planning Ministry, which after a major Government reorganization in 1975 to improve macro-economic management, was made the focal point in the overall planning effort, policy formulation, sectoral programming and project implementation. The project was appraised in 1976, the Credit (US$2.7 million) made effective in 1977 and closed in 1982 following a one year extension. Disbursements were generally in line with appraisal estimates. At project inception, exogenous factors such as the escalation of the Saharan conflict and a substantial drop in budgetary support from Arab donors created acute short-term economic and public finance problems which required immediate attention. As a consequence, a change in the initial objectives of the project became necessary in order to concentrate the assistance on the macro-economic framework for the 1978 Financial and Economic Rehabilitation Program, the design of essential austerity programs and their implementation (paras. 6-7). Instead of preparing new projects for implementation under the Third Five Year Plan, the project's Technical Assistance Team helped review the economic and financial viability of on- going and planned investment projects. Moreover, as a spin-off from the review of the financial problems faced by the Treasury, the project's team with the assistance of short term consultants carried out a major evalua- tion of public agencies and parapublic enterprises (paras. 8-9) which became the basis for the Public Enterprise Technical Assistance and Rehab- ilitation project scheduled to be presented to the Board of Executive Directors in FY85. Assistance was also provided to help the Government reorient industrial policy towards labor-intensive small scale enterprises and revise the Investment Code, which led to a small and medium scale enterprise component under another IDA Credit (MAU-88 of 1979). Finally, the project's team contributed to the development of the Fourth Five Year e Plan (1981-1985) which resulted in better country priorities than in previous plans (para. 11) and helped form a group of competent high level officials in the Planning Ministry capable of applying sound project evaluation techniques. The project showed some weaknesses in that the project's team appeared unable to prevent the start up of a few large uneconomic projects (para. 11). This was unavoidable due to political pressures, both internally and in foreign aid. It also failed to expand training beyond those who were closely associated with the project's team because of  limited time of the consultants and lack of Mauritanian officials with sufficient academic background suitable for such training (paras. 13-15). Moreover, it appeared difficult to replace timely some consultants with specific economic expertise, which delayed necessary macro-economic advice during the latter part of the project period. Although several of these shortcomings had been foreseen at appraisal as possible risks it was difficult to avoid them because of the troubled times in which the project was implemented. Training of Mauritanian officials is now being strengthened under the follow-up Technical Assistance Project (MAU-1292) (para. 16). In conclusion, while the project could not achieve all its initial objectives due to the adverse circumstances under which it was carried out it did contribute substantially to improving Mauritania's public finance and investment performance.  I. Objectives and Content 1. Although the Government of gauritania (GOX) and the Bank had frequently exchanged views on the desirability and the possibility of Bank financing for a technical assistance project for planning, it wasn't until September 1975, during the Bank's annual meeting in Washington, that GOM formally requested the Bank to consider financing such a project and to initiate preparation as speedily as possible. By that time, a major reorganization of the Government, focussed on improving the country's economic management, had taken place. Seven super-ministers had been appointed; each supervised the work of several ministries. The Ministry of Planning had become part of the complex of ministries supervised by the new super-minister of National Economy, who also supervised the !iinistries of Finance, Commerce, Transport and Tourism, Industry and Vines and Fisheries. 2. In this reorganization, the Planning Ministry was expected to become the central agency which would integrate overall planning and policy formulation, along with preparation and financing of sectoral programs and related projects. The Planning Ministry was to work in close collaboration with other departments and agencies. Although it appeared likely that this ambitious reorganization would overtax the availability of national managerial talent, it nonetheless reflected awareness on the part of Mauritanian leaders that economic management was to be seriously reconsidered. This awareness, and the coordinating role recognized for the Planning agency, essentially prompted the Bank to respond favorably to Mauritania's request. 3. At the same time, the Government embarked on the ambitious investment plan reflected in the Third Five Year-Draft Development Plan (1976-1980), which was still being finalized. During the Plan period, the amount of investment was to average 50% of GDP (over $200 million per year at 1975 prices). Although large concessional foreign inflows, mostly from OPEC countries, had been made available to Mauritania, these inflows seemed unlikely to cover the entire cost of planned investments. Two large industrial projects (oil and sugar refineries) were already being hastily implemented before start of the Plan; not only were these projects unviable, but they were financed on very hard terms (loans from commercial banks and suppliers' credits). Three additional projects (copper refinery, textile mill and iron ore pelletization plant) of similar scope and magnitude were also contemplated for the Plan period. This situation worried several Mauritanian economic managers, an assessment that was entirely shared by the Bank, and led to a Government request for assistance in investment planning. 4. The Technical Assistance Project was prepared during early 1976 and approved by the Board by November 1976. The project's major objective was to alleviate the critical shortage of experienced economists and sectoral advisors in Mauritania. The project provided financing for a team of expatriates to assist the Government in (i) overall economic planning and policy formulation; (ii) preparation and implementation of sectoral programs and specific projects; (iii) economic, financial and technical analysis; and (iv) on-the-job training for Mauritanians. To accomplish these tasks, the Technical Assistance credit provided funds for five internationally recruited professionals: one macroeconomist/team leader, one general economist, and one adviser each in the fields of (a) industry, (b) transportation and  -2- telecommunication infrastructure, and (c) agriculture. In addition, the Credit provided sufficient funds for approximately 10 man-years of foreign study for Mauritanian nationals and about 48 man-months of consultant services in connection with specific sectoral programs. Funds were also included for the construction of office space, and the purchase of office cars and equipment. II. Undertakings and their Fulfillment 5. Government counterpart fund financing for the project was provided in the early stages in the amounts agreed. On the other hand, the Government was unable to recruit during the life of the Project the 10 young Mauritanians with Master's degrees in Economics as stipulated in the Credit agreement. The main reason for the Government's failure Government to attract these young diploma holders to public service was that parapublic enterprises offered more attractive working conditions to the very few fully trained Mauritanian economists. This lack of highly trained counterpart staff somewhat weakened the training aspect of the Project (see paras. 13-16). Also, the budget for scholarships for existing staff was heavily underutilized because no staff could be spared for longer periods. The general economist was never appointed because the mix of competence of the four experts recruited was giving sufficient coverage; the related budget was spent on the other permanent assignments. Except for a severe underestimation of required office equipment, the Credit's disbursements were more or less in line with the initial estimates. III. Project Results and Benefits 6. The environment in which the Project was implemented was very different from the situation that existed during preparation. Escalation of the Sahara conflict in 1977-78, coupled with a sharp reduction in budgetary support from Arab countries, destroyed the country's political stability and caused acute short-term economic and public finance problems which needed urgent solutions. In response to this situation, the project team shifted its emphasis from long-term investment programming and project work to macroeconomic work. In a later phase, and as an outflow of the macroeconomic work, the team concentrated on the problems in the parastatal sector. i Economic P3licy 7. In early 1978, after the FY78 budget presentation, the Project staff report concluded that the Treasury would soon be unable to meet its payment obligations. This report convinced the authorities of the need for economic and financial rehabilitation and also prompted them to ask the Bank to help draft a plan for this purpose. In response, the Bank sent two staff economists to Iouakchott snd a Rehabilitation Plan was approved by the authorities before the mission's departure. The Government asked the Project team to monitor and comment upon the implementation of the Rehabilitation Plan. Within this framework the team produced, in April 1979, a report that was instrumental to the Government launching a policy of strict austerity which significantly reduced the budget deficit.  -3- Parapublic Sector 8. The pressing financial problems of the Treasury led the Project team to suspect that similar problems might be encountered by public sector enterprises. In mid-1978, assisted by short-term consultants hired under the project, the Government launched a comprehensive review of the situation as well as prospects for 20 major public agencies and parapublic enterprises. The Project team acted as Secretariat for the Committee responsible for this task. The report was issued by end-1978 and the Government endorsed its main recommendations. At this point, the Project staff recommended that the Government ask the Bank for an IDA project in this field. However, not enough high-level decision-makers were yet sensitized to the magnitude of the problems. In mid-1979, the Government decided to aim for rehabilitation plans for each enterprise. In the first phase, work started on nine enterprises. The rehabilitation plans were limited to solving the most immediate problems which hindered normal functioning of these enterprises. The main results immediately derived from this work were tariff increases to aimed at improving the financial situation. During the same period, the Government also created an interministerial committee to formulate a global policy for the parastatal sector. The conclusions reached by the Committee were endorsed by the Bank and adopted by the Government at the end of 1983. Thanks to this preparatory work, the Association is now in an advanced stage with the preparation of a proposed parapublic sector rehabilitation project ($32.9 million) whose target is implementation of the new policies in two major parapublic enterprises (the Nouakchott port authority and SETELEC, the public utilities company). The parapublic project will also provide for institution building to assure the application of this rehabilitation approach to other public enterprises that are viable and cannot be transferred to the private sector. 9. Since many public sector enterprises managed whole sectors of the economy, the enterprise study allowed a de facto review of sectoral policies (e.g., prices, investments, institutional environment). Investment proposals were carefully reviewed, some rejected, some amended. These sectoral policies will continue to be monitored within the framework of the proposed parapublic enterprises project. In the industrial sector, the Project was instrumental in bringing about significant changes in the Investment Code, a condition of effectiveness of another IDA project (MAU-888), whose purpose was to set up a Development Bank in Mauritania. Project Monitoring 10. There was no centralized and systematic project monitoring; project follow-up relied mostly on supervision by the donors. Towards the end of the Project, all ongoing projects were manually recorded and filed. Initially, the Second Technical Assistance Project (Cr. 1292-MAU) followed up this work and started to computerize the monitoring system, but in the absence of permanent Project staff during the interval between the two projects, this task shifted to a French TA team that was put in place in 1983. Planning 11. The project contributed to the Fourth Five-Year Plan through participation in the preparatory work and heavy involvement in the final write-up. The sector strategy developed in this Plan can be considered as a  -4- 4 major contribution to the direction of present economic decisions in this field. The investment program adopted under this Plan, although still too large and uneven in quality, corresponds better to the country priorities than in previous plans. But, at that time, the Mauritanian decision makers attached little value to economic criteria and the Project staff could not halt all politically inspired projects with low or negative rates of return. The team succeeded, however, in builiing in the Ministry of Planning a core group of high civil servants that is now actively promoting sound project evaluation techniques, and is trying to implant these techniques in the technical ministries. Recently, in response to the current debt crisis and related donor's impatience, the Government has changed its attitude on the use of economic criteria. It removed unprofitable projects from the list of new undertakings and asked the Bank to endorse this program in a donors" conference that it hopes to organize. Under these improved conditions, our follow-up technical assistance project will continue the project-related work. 12. The Third Five-year Plan was also weak on the macroeconomic side and paid insufficient attention to the impact of the proposed investment program on the main macroeconomic variables. Due to the sudden illness of the project leader/macroeconomist and the impossibility of quickly replacing his macroeconomic competence, the te-m was unable to give the Government strong macro-support at this stage, a type of assistance that is still very necessary and is being resumed under the ongoing follow-up project. 13. Expectations at the time of project appraisal that ten Mauritanians, who studied economics at the Master's level in Canada on UNDP fellowships, would join the Ministry of Planning on their return did not materialize. Only three of them did so. Two of these Mauritanians currently head, respectively, the Directorates of Studies and Programming and Projects; the others entered the parapublic and banking sectors, attracted by the greater advantages offered there. The Project teanm worked very closely and successfully with these three counterparts, since they had the same educational standing as the members of the team. Although Iauritanians were recruited, their academic background was limited. The resulting educational gap made a true transfer of expertise difficult, while Government was unwilling to release them for complementary studies. 14. Four of the graduates, joined by a professional already in service with the Ministry of Planning, came to the Bank in June-July 1977 for a intensive instruction in the classic project cycle (identification, preparation, appraisal and evaluation), problems associated with balance of payments and external public debt, problems associated with development in such sectors as stockraising and agro-industry, and the macro-economic impact of projects on national development plans. The training they received focused on Mauritanian cases (the Livestock Development Project, the Gorgol Basin development scheme and the Guelbs Project). 15. Finally, the Project financed two three-month training courses, for two staff members of the Ministry: - the first, an assistant administrator in the Directorate of Projects, studied project evaluation with IDEP in Dakar;  . - 5- - the second, a geograpt-y teacher Eeconded to the Directorate of Studies and Programming, attended a training session on in'egrated rural development organized by as entity cal'ed "Cooperation et Amenagement," an economic interest group formeda by the Ministry of Cooperation and Agriculture and a number of consulting firms. 16. This formal trainiag has been very luseffl to the extent that it helped to build the decisionmakers of tomorrow. In the short-term, however, the newly acquired skills did not sufficiently translate into improvement of the Ministry's performance because the number of people trained did not reach the critical mass which would have permitted a change ir. the work environment. This assessment has led the Second Technical Assistance Project to adopt an integrated training program which combines four elements: (a) C-overnment or top management commitment; (b) training of working teams rather than of individuals by an integrated training team rather than by individual lecturers; (c) transfer of experience based on knowledge and skills to contribute to the organization and management of the development process; and (d) continuing support and systems development for a variety of activities. IV. Conclusion 17. Since the project's main objective was to alleviate the critical shortage of experienced economists and sectoral advisors, it is difficult to compare the achievsments of the Project team with the initial goals. The team was well integrated in the Ministry of Planning and adapted its work program to the most urgent needs. In this approach, the Project team initially emphasized the work of pressing macroeconomic and financial issues and later shifted the focus on the development and implementation of a rehabilitation plan for the parapublic sector which resulted in highly productive policy changes and practical measures to prevent breakdown of essential services. The team could not prevent the start of some large uneconomical projects because in the existing environment of highly politicized foreign aid, the economic reasoning of the Project team was not always accepted. Also, in the second part of the project period, macroeconomic advice was weak because the r Bank could not find a replacement in time (with the particular competence needed when project leader/economist suddenly fell ill). Both types of risks were foreseen during appraisal, but could not be avoided. The progress with the build-up of local staff was slow, but given the nature of the problem, the scarcity of experienced local staff could not be remedied over the life of the project. Efforts will be intensified under the follow-up project. 18. Given the good use Government made of the Technical Assistance funds, the project can be called successful and fully justifies the ongoing follow-up project.