Mauritania - Nouadhibou Port Project

ILE COP.Y, DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1514a-MAU REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF MAURITANIA FOR THE NOUADHIBOU PORT PROJECT October 17, 1975 Western Africa Regional Office This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS Currency Unit = Ouguiya (UM) US$1.00 = UM 41 UM 1 = US$0.024 UM 1 million = US$24,000 WEIGHTS AND MEASURES EQUIVALENTS 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) 2 = 0.62 mile (mi) 1 square kilometer (km ) = 0.386 square mile (sq mi) 1 kilogram (kg) = 2.2 pounds (lb) 1 metric ton (m ton) = 2.204 pounds (lb) 1 liter (1) = 0.22 US gallon (gal) 0.26 British gallon (imp gal) ABBREVIATIONS AND ACRONYMS BCEOM - Bureau Central des Equipements d'Outre-Mer (consultants, France) CCCE - Caisse Centrale de Coop6ration Economique FAC - Fonds d'Aide et de Coop6ration KFAED - Kuwait Fund for Arab Economic Development MIFERMA - Mines de Fer de Mauritanie PAN - Port Autonome de Nouadhibou SOMAP - Societe Mauritanienne de Peche FISCAL YEAR (Government and Port Autonome de Nouadhibou) January 1 - December 31  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF MAURITANIA FOR THE NOUADHIBOU PORT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Islamic Republic of Mauritania for the equivalent of US$8.0 million on standard IDA terms to help finance a project for the expansion of Nouadhibou Port and for the improvement of its management and operations. The Kuwait Fund for Arab Economic Development (KFAED) and the Caisse Centrale de Cooperation Economique (CCCE) will provide cofinancing for this project. The KFAED loan for the equivalent of US$8.3 million will be for a term of 25 years, including 5 years of grace, at a 1 percent interest rate with an 0.5 percent service charge. The CCCE loan for the equivalent of US$5.7 million will also be for a term of 25 years with 5 years of grace but at an interest rate of 5.5 percent. PART I: THE ECONOMY 2. Based upon the findings of an economic mission to Mauritania in February/March 1973, a report entitled "The Current Economic Situation and Prospects of Mauritania" (243-MAU) was distributed to the Executive Directors on May 9, 1974. The following analysis is essentially based on that report. Though projections were later updated following worldwide price increases, particularly for oil, they do not reflect the recent nationalization of the Mines de Fer de Mauritanie (MIFERMA) iron ore operation which may have a substantial impact on both the public finance and balance of payments situa- tions. An updating economic mission which will, inter alia, address itself to these issues is scheduled for the end of this year. Country data sheets appear as Annex I. Background 3. Mauritania's economy is organized around three main imperfectly inter-connected centers from North to South: the port of Nouadhibou that services the modern mining activities in the northwest and the fish process- ing industries; the capital city of Nouakchott, important only as an admin- istrative center; and the northern bank of the Senegal River where livestock and agricultural activities take place. The rest of the country is desert, practically uninhabited and unexploited. 4. Mauritania's main political and economic links have traditionally been with France and the French speaking African countries south of the Sahara; however, it has established closer relations with its North African neighbors and, more recently, with other Arab countries, particularly members  - 2 - of OPEC. In June 1972, it asked for revision of the 1961 Cooperation Treaty with France in the economic, monetary, technical, cultural, and military fields, and a new agreement was reached in February 1973, except, however, for monetary affairs. As a result, Mauritania left the West African Monetary Union and the franc zone and it established its own central bank and intro- duced its own currency, the ouguiya, in June 1973, with financial support from Arab OPEC countries. However, it still wishes to keep and develop economic ties with all its West African neighbors and is a member of the West African Economic Community. Mauritania is a member of OMVS (Organiza- tion pour la Mise en Valeur du Fleuve Senegal) with Senegal and Mali. 5. The country is relatively rich in natural resources: iron ore and copper deposits, fertile land along the Senegal River Valley, large livestock herds, and fish resources. However, the factors limiting economic growth are many, as development of these resources is largely complicated by difficult natural and human conditions that cannot be overcome in a matter of a few years. Thus, iron ore activities after 1983 (when present mines will be exhausted), will largely depend on the feasibility of the exploitation of the Guelbs deposit which is known to have a low iron content. Copper mining continues to encounter major technical difficulties which seriously puts into question that activity. Mauritania has one of the harshest Sahelian climates and even in the South rainfall is low and irregular. The development of irrigation could be a major breakthrough, but it appears to be a very costly operation. Fishing is not a traditional activity in Mauritania, and the existing fishing operations have mostly been of an enclave type. More generally, Mauritania is handicapped by great distances and arduous and costly transport. Probably the most important factor is a definite lack of skilled manpower at all levels; adult literacy and school enrollments are among the lowest in the world, and furthermore school curricula are ill-adapted to the needs of the economy. Past Economic Performance 6. Between 1960 and 1968, the Mauritanian economy grew at 10-11 per- cent annually in real terms, mainly due to a rapid expansion of the mining and related sectors, but little of the value added generated in the modern sec- tor spilled over into rural areas; yet per capita income of the rural poor could still increase by about three percent annually during that period. From 1969 to 1973, overall economic growth slowed down to three to four per- cent per year as mining production levelled off and the country was struck by the Sahelian drought. 7. Mauritania was particularly affected by the drought. Between 1969 and 1973, agricultural production decreased by about 60 percent while the cattle herd was reduced by an estimated 40 percent. This wiped out all of the progress made in the rural sector in the early sixties and further widened the gap between per capita incomes in the traditional (US$70) and modern sectors (more than US$500). Widespread famine and human deaths were  -3- drastically limited thanks to exceptional aid, particularly from the U.S. Although rainfall in 1974 and 1975 was about normal, and food production returned to former levels, the consequences of the earlier droughts will be felt for many years in the form of: (i) lower output in the livestock sector; (ii) additional demands on the national budget for social and health services; and (iii) social problems created by the concentration of refugees around the emergency food supply centers. 8. The combined effects of the drought, the sharp increase in world market commodity prices, and accelerating world inflation led to a rapid increase in imports from about US$108 million in 1972 to an estimated average of US$162 million in the years 1973-74. Cereal imports alone in- creased from US$9 million in 1972 to an annual average of about US$30 mil- lion in 1973-74, while ref-ned petroleum imports increased from US$4 million in 1972 to an estimated annual average of US$10 million during that same period. 9. However, this increase in the import bill was largely offset by favorable prices for Mauritania's main exports (iron ore, copper, fish pro- ducts and livestock) and a 30 percent increase in iron ore production be- tween 1972 and 1974. As a result, the current account deficit increased by US$6 million only, or from US$26 million in 1972 to an estimated US$32 mil- lion average in 1973-74. Although substantial (20 percent of total export earnings), this gap was, as in the past, fully financed by foreign aid. Presently, foreign exchange reserves are high, about US$40 million at the end of June 1975 (i.e. the equivalent of 3-4 months' imports), but this figure is probably inflated by the fact that, over the last few months, sub- stantial financial transfers by MIFERMA were suspended pending the outcome of negotiations with shareholders. 10. The public finance situation improved in some respects in the 1960s. From a US$7 million deficit in 1960, budgetary savings reached a positive US$5 million in 1972/73 or about 15 percent of Central Government revenues. Public savings (after debt amortization) financed about 20 per- cent of the public investment programs in the past three years, the rest being financed by foreign aid (US$12 million per annum). However, this was only achieved by establishing very tight budgetary policies which resulted in insufficient current budget expenditures in the productive sectors, result- ing in a lack of material and supplies. Maintenance expenditures have also been insufficient. Strategy and Prospects 11. The Government's economic policy in the first decade after indepen- dence focused on the development of urban and transport infrastructure in an effort to equip Mauritania with a modern capital and the facilities needed to run the country and decrease the dependence of Mauritania on Senegal for the transport of goods into and out of the country. Thus, about 80 percent  of pu bic Inves.ment s iD e_ee. -, Iv ..an '972 we--e aLsorbed J projects in transport and urban sectors. ?uI-oc invesriaents irncreased steadily during this period to reach an annr.al average o't US$15 m_ilion in 1968-72, or 8 per- cent of GD?. However, inves.uents outside infrastructure have been small because of the limited capacfty of goverr.ment services to identify, prepare, and execute projects. 12. The Goernment Us fficure strazegy s'rould be to develop the country's ,zauura resou- _a -,Yes f i;rcultureies. ceeS, a 1is o f the scverme-t 's iniestment progran for the Third Plar. per-od ('-197 -79\' are not yet known, the number of project presently under pre-aration in the rura secto; inkdicates that a much larger share of public investmenits w-.1 d na devotea to this sector than in the past. The developrment of irrigated agr:lzulture ina parLicular is expected to play an important role in ensur_.iig -hat le consequences oL a recurrence of the recent drought would not be so drastic. i3. Xu.ture growth in the modern sector is also essential to improve the public finance situatiorL and provide a substantial part of the revenues needed to fi-nance investment and recurrent expenditures for the development of the rural sector. Hotfever, while new iron ore investments are planned, mining alone cannot provide employment for more than a very small fraction of Mauritania's active population and its indirect effects on the rest of the economy will continue to remain limited. Similarly, establishment of manufacturing industries--so far strongly supported by the Government-- can- not raise the standard of living for the mass of the Mauritanian population, as high productLon and transport costs, limited skilled manpower, and small local markets severely limit possibilities. 14. Even assuming niormal rainfall conditions, growth in real terms in the rural sector wdill probably not exceed an estimated 2-3 percent per annum for the rest of the decade. Therefore, the standard of living on a per capita basis in the rural sector carnot be expected to reach its 1968 level again before the eariy 1980s as the reconstitution of the national herd will be a slow process and the effects of the investments planned in the agricultural sector will only be felt after a substantial lag. Growth in the modern sector during the same period could reach about five percent. As a result, economic growth for the country as a whole could be about four percent per annum between 1971/72 and 1980 or 2 percent more than population growth. Fin.acial Prospects and tha lieed for Aid 15. At this juncture prospects for che balance of payments appear particularly uncertain. no .ie --contrary to many African countries-- the outlook for -L'uorenia s e.port prLces is reasonably favorable, the pace at which it -au 2'caSe La ne vole O' both exports (maainerals, 'beef, and fish) aad imoort subs-- utees (anridcluLre) is severely constrained by physical factors as weil as cost- conLsierations. In this respect, M'auritania, like most ozher small African countries, is particularly vulnerable to 'mported ,:,rlation.  - 5 - 16. Local financing capability is expected to remain limited. Assuming continuing tight budgetary policies, except in a few key areas where some relax- ation of limits to current spending is needed, public savings could perhaps reach 10 to 15 percent of Central Government revenues or an annual average of US$12 million over the Third Plan period. However, public debt amortization will probably absorb about 50 percent of those savings and it is doubtful whether the Government could finance more than 10 to 15 percent of the public invest- ment program at a time when project opportunities, the need to broaden the base of economic development, and inflation combine to justify a public invest- ment program of about US$40 million during the Third Plan period, or a level two and a half times higher than under the previous plan. 17. In the meantime,the overall terms of foreign aid have progressively hardened as the share of grant aid decreased from 100 percent in the early sixties to about 35 percent in 1970-72. Terms of borrowing proper have, however, continued to be concessionary with an average interest rate of 3.8 percent on external debt outstanding as of December 1973. During 1970-72, the Bank Group was the third largest aid donor (providing about 18 percent of Mauritania's external capital assistance), after France (21 percent) and the European Community (19 percent). 18. The implementation of the public investment program in the coming years would require a trebling of foreign aid capital inflows from an annual average of US$12 million in 1970-72 to US$33-35 million in the Third Plan period. This appears to be a feasible target with the European Community, several Arab countries, France, the People's Republic of China and the Bank Group expected to be the main donors. 19. Several considerations justify lending on concessionary terms in Mauritania and also financing some local costs: (a) the very low-income level of the mass of the population, and expected slow growth of the economy; (b) the tight public financial situation; and (c) the uncertain balance of payments outlook. At the same time, while the debt service ratio based on outstanding debt will remain low (less than 5 percent) in the medium term, total public debt service could increase substantially as a result of the arrangements to be reached with MIFERMA's shareholders in respect of the nationalization last year. PART II: BANK GROUP OPERATIONS IN MAURITANIA 20. The Bank Group has had 9 operations in Mauritania to date. Total lending amounts to US$110.3 million, including one Bank loan of US$66 million for the MIFERMA iron ore mining operation in 1960 (now totally repaid), 7 IDA credits, totalling US$24.3 million, and one IFC operation of US$20.0 million for the development of copper mining in 1968. Three credits were for projects in the transport sector, one of US$6.7 million in FY 1964 for construction of the Nouakchott-Rosso road and two for road maintenance (US$3.0 million in  - 6 - FY 1969 and US$3.0 million in FY 1975); three in the rural sector (US$4.2 million for livestock development in FY 1972, US$2.5 million for a Drought Relief Fund Project in FY 1974 and US$1.1 m llion for an Irrigation Engineer- ing Project in FY 1974); and one for education (US$3.8 million, also in FY 1974). Annex II contains a summary statement of Bank loans, IDA credits, and IFC investments as of August 31, 1975 and notes on the execution of ongoing projects. 21. Implementation of the more recent projects has been complicated by both administrative difficulties, which have sometimes substantially delayed project execution, and large cost overruns due to the combination of the dollar devaluation, steady inflation since project appraisal, and the excep- tionally difficult conditions prevailing in Mauritania (extreme poverty of the country, very unfavorable climate, large distances, insufficient transport network, and a lack of trained manpower). Project implementation is, however, expected to improve. The recent creation of a super Ministry of National Economy which will include both the Ministries of Finance and of Economic Planning should help to alleviate many of the administrative difficulties experienced in the past. In addition, substantially greater experience with the conditions prevailing in Mauritania should lead to better project cost estimates in the future. 22. In line with the development strategy outlined in Part I above, the primary objectives of Bank Group operations in Mauritania are to help the Covernment (i) develop the potential of the rural sector and decrease its vulnerability to drought, (ii) expand activities in the fishing sector and (iii) imDrove and expand the education/training system in order to make it more relevant to the country's needs. These objectives will be achieved by supporting the development of mining activities and the channeling of benefits from these activities into other productive sectors, of which the rural sector is the most important. 23. During 1970-72, the Bank Group accounted for about 18 percent of Mauritania's external capital assistance. This is expected to decrease over the next decade with the expected substantial inflow of capital from Arab countries. As of December 1973, the Bank Group held 23 percent of Mauritania's external public debt of US$50 million and accounted for about 3 percent of total debt service payments in 1973. PART III: THE PORT AND FISHING SECTORS The Fishing Sector 24. The main fishing grounds off the coast of Northwest Africa are located near Mauritania. However, only about 5 percent of the approximately 1.5 million tons of fish caught annually are landed at the port of Nouadhibou.  - 7 - The only purely Mauritanian fishing activity is carried out by 200 fislher-.,e-. belonging to the lraguen tribe; their catch is about 1,000 tons per year with a value of possibly US$100,000. 25. In 1965, Government decided to establish a mixed corporation, the Societe Mauritanienne de Peche (SOMAP), to purchase and operate a fleet of fishing vessels to supply the local processing industry wjth fish. However, the inadequacy of boats and equipment, poor management, the lack of trained local personnel and crews, and the high cost of operations led to SOMAP's failure and the processing industry is now almost completely dependent on foreign fleets for its supply of fish. Spanish, Japanese and Russian trawlers presently land demersal (bottom living) 'ish at Nouadhibou for the freezing and salting industries, while Dutch and Norwegian vessels bring pelagic (mid- depth and surface-swimming) fish for meal and oil production. 26. There are six (largely foreign-owned) processing plants in Nouadhibou for fish salting, drying, freezing, canning and fishmeal and oil production. These plants employ about 1000 persons of whom 800 are Mauritanians. The plants have an effective capacity of about 140,000 t p.a. but in 1973 received only about 80,000 t of fish; exports of fish products totalled about 34,000 t with a total value of US$16 million (i.e. about 5 percent of GDP and about 8 percent of total exports). This low utilization of the processing plants reflects a mixture of physical constraints combined with Nouadhibou's relative unattractiveness to foreign fleets in comparison with other ports. Thus, in- sufficient berthing and vessel servicing facilities, inadequate storage facilities, lack of skilled local labor, the high cost of fuel oil, water, and ice, inadequate shore facilities for shipst crews and harsh (and sometimes uneven) enforcement of customs procedures have combined in the past to limit use of the port. 27. Since 1970 the Government has taken several measures to increase landings at Nouadhibou: territorial jurisdiction has been extended from 20 km to about 55 km, territorial waters are being policed, and, coupled with the licencing arrangements permitting fishing in national waters, agreements have been signed with foreign companies to land part of their catches at Nouadhibou. These agreements were expected to yield minimum annual landings of approximately 160,000 t of fish by 1973. However, although landings did increase (from 52,000 t in 1970 to 80,000 t in 1973), the full potential of the agreements has not been realized due to the limitations enumerated above. 28. The measures that were taken are only part of a wider Government strategy in the fishing sector which also includes expanding facilities at Nouadhibou and making the port generally more attractive to fishermen by improving port administration, customs procedures, and fishing port opera- tions. Achieving these objectives is the purpose of the present project which provides for expanding port facilities as well as technical assistance to improve port activities. The recent increase in oil prices combined with an adjustment in the price of diesel oil (which is now slightly lower in Nouadhibou than in Dakar and Las Palmas) has increased the cost of diversion  from fishing grcn'nds near Nouac.'nL.'Du to zhose por.s, and -as p?t ua-;nu in a much better competitive posic-On. ..-;rved sericing and expanded ber.;.- ing facilities at Nouadhibou should permiC full implementation of the agrec- ments with foreign fleets and help tne developm.,ent of a rational fleet. Thc value added by the fishing sector could increase by as much as 13 percent pp:- annum (in constant prices) over the next decade and amount to about 9 percen. of C(;DP in ;1980. By then, landings at Nouadhibod would represent about 15 percent of total cacches along the northwester-n coast of Africa. 29, Lxt-enslon of che e:istin,g cozmerciaib ertrhs is also included in the ?roposed Droject in conjunction with -he expected growth of exports of pro- cessed fish, and in view of the expected expansion of regional mining opera- tions and the urdertaking of new industrial deveiopnments in the area, in- cluding an oil refir.ery. Port of Nouadhibou 30. Nouadhibou is basically a fishing port where landing of the fisl, catches and comunercnal traffic generated by the fishing industry togethler comprise about 70 percent of total cargo tonnage. In 1973, total traffic at Nouadhibou was about 210,000 t, including 80,000 t of fish landings, 21,000 of petroleum products for fishing vessels, and 108,000 t of dry cargo traffic. Of the dry cargo traffic, 40 percent is generated by the fishing industry (including 17,000 t of frozen fish and 12,000 t of fishmeal and oil); and the rest mostly by MIFERMA. 31. Port facilities consist of two commercial berths which form an island 80 m long and 22 m wide, linked to the shore by a piled approachway; fishing berths, which are on a 290 m long piled quay; a lighterage wharf used mainly for heavy lifts; three 20 m long ramps which lead off the approachway to the commercial berths and which accommodate small fishing craft; and a marine slipway with a hauling capacity of 250 t but without a workshop. These facilities are beccrmIng increasingly inadequate to handle the fishing traffic. The major bottlenec,k is the shortage of berthing space at the fishing berthls and ramps which accommodate about three-quarters of all ships berthing at Nouadhibou. 32. All port equipment is owned by port users. Bulk oil is handled through pipelines. General cargo is handled by mobile equipment which is adequate; transit and storage sheds and stacking yards are sufficient, although located far from the commercial wharf. Fish for fishmeal is un- loaded by fixed pumps; fish foGr human consurption is unloaded by the fishing ves.els' own gear. Ice is `istributed by both fixed and mobile icecrusaers. Operations at the port are complex Decause they involve many firms and various types of services. Fishing vessel and fish carrier operations are conducted by locai firms, whichl have a very low productivity (one ship per day per berth) caused by inadequate Dort equipzr.ent ann poor port- organization. General cargo operations are carried out by a iGixed company, and are satisfactory.  - 9 - 33. The port is administered by the Port Autonome de Nouadhibou (PAN), which was established in 1973, taking over the operations of the local de- partment of the Ministry of Equipment. Its management needs improvement, primarily because of lack of experience and training. In addition, its accounting and financial systems need to be reorganized. The present project provides technical assistance to meet these needs. PART IV: DESCRIPTION AND OBJECTIVES OF THE PROPOSED PROJECT 34. In 1971, the Government of Mauritania asked the Association to help finance a project to expand Nouadhibou's fishing port facilities to accommo- date increased fish landings. In 1972/73, a feasibility study was carried out by the Bureau Central des Equipements d'Outre Mer (BCEOM, France) with financing by a grant from the French Fonds d'Aide et de Cooperation (FAC). On the basis of these studies, the present project was appraised in March 1974. Negotiations began on November 25, 1974. The Mauritanian delegation was led by Mr. Ibrahima Ba, Director of the Ministry of Planning and Economic Development. In view of the difficulty in finding comparable recent civil works in Mauritania on which to base a cost estimate, it was decided to post- pone the conclusion of negotiations and subsequent Board presentation until bids for the civil works had been evaluated. Bids were called for in February of this year and received in June. Negotiations were resumed from September 3-4, 1975, and an agreement reached with government and the co- financers on the scope of the project and its financing. A credit and project summary is attached as Annex III. The project Appraisal Report (No. 548a-MAU) is being circulated separately to the Executive Directors. 35. The objectives of the project are: (a) to help provide additional physical capacity at Nouadhibou port, and (b) to assist PAN in improving its administration, organization, and operations. Specifically, the project would include: (a) civil works for: - extension of the fishing berths by 300 m, - extension of the commercial berths by 48 m, reconstruction and widening of the approachway linking the berths to the shore, and extension of one of the ramps for fishing craft, - construction of a sewerage scheme, - construction of administrative and residential buildings, and a sailors' club, - consulting services for supervision of construction;  - 10 - (b) equipment consisting of a harbor master's launch and navigation aids maintenance equipment; (c) technical assistance to PAN for port administration, operations and reorganization of accounting and financial systems; and (d) consulting services for studies on the need for and development of ship-repair facilities. Civil Works 36. Implementation of the proposed civil works would (i) extend the total length of the fishing berths from 290 m to 590 m and increase the capa- city to 230,000 t p.a.; (ii) extend the length of the commercial berths from 80 m to 128 m with an alongside depth of 8 m on one side and 7 m on the other; and (iii) widen the 210 m approachway linking the commercial wharf to the shore from 12 m to 17.5 m. 37. New administrative buildings will be constructed to replace existing light or temporary buildings that will be demolished to make room for the pro- posed extensions. The new buildings planned are: (i) the marine services office; (ii) administrative buildings for the Port Authority and for the Merchant Navy/Fisheries; (iii) Police/Health Station; (iv) three lodgings for port officers; and (v) a sailors' residential club. 38. A sewerage scheme will be constructed to serve the industrial fish processing plants and the administrative and other buildings in the port. The works include the lift stations, a treatment plant and a sea outfall for the treated effluent. Technical Assistance 39. Technical assistance to be provided under the project will help the Government and PAN to establish and implement a coordinated plan of action aimed at reorganizing port operations so as to increase productivity, improv- ing the port administration and finances (including revision of the accounting system and establishment of cost-based tariffs), establishing a manpower plan for development of the port and maritime sector, and estimating the need for additional port facilities. The project also includes funds to finance studies on the need for and development of ship repair facilities in Nouadhibou. Cost Estimates and Financing Plan 40. The total estimated cost of the project is US$27.55 million (includ- ing taxes) with foreign exchange costs of US$18.09 million. Taxes are esti- mated to amount to US$5.55 million. The bulk of the above costs are based on tenders for the civil works received in June. The Government received 4 bids and selected the lowest one. Since no bid was received for the sewerage com- ponent, it is Government's intention to ask the contractor selected to build  - 11 - the berths to also undertake the construction of the sewerage scheme. Other costs have been estimated by the Association. 41. The project will be cofinanced by IDA, US$8.0 million; the Kuwait Fund for Arab Economic Development (KFAED), US$8.3 million; and the Caisse Centrale de Cooperation Economique (CCCE), US$5.7 million. The Government's contribution, US$5.55 million,represents the value of the taxes and duties. Project Cost and Financing (Millions of US$) Local COST FINANCING (excl. taxes) Foreign Taxes Total KFAED CCCE IDA GOVT. I. Civil Works (incl. contin- gencies) 3.79 16.77 5.44 26.00 7.90 5.31 7.35 5.44 A. Commercial and fishing berths and approachway 2.70 12.15 4.14 18.99 2.70 5.09 7.06 4.14 B. Sewerage scheme 0.35 1.59 0.54 2.48 1.94 - - 0.54 C. Buildings 0.64 2.09 0.76 3.49 2.73 - - 0.76 D. Supervision 0.10 0.94 - 1.04 0.53 0.22 0.29 - II. Equipment - 0.44 0.11 0.55 0.40 0.04 - 0.11 III. Technical Assistance 0.07 0.63 - 0.70 - 0.35 0.35 - IV. Ship Repair Study 0.05 0.25 - 0.30 - - 0.30 - TOTAL 3.91 18.09 5.55 27.55 8.30 5.70 8.00 5.55 42. Excluding government's contribution, the financing plan calls for: - IDA, KFAED and CCCE to jointly finance the total costs of civil works for the commercial and fishing berths and the approachway in the proportions shown above.  - 12 - KFAED to finance 100% of the sewerage and buildings. KFAED and CCCE to finance 100% of the equipment on a parallel basis. IDA, and CCCE to jointly finance the technical assistance. IDA to finance 100% of the ship repair study. Details of cost estimates and the financing plan are set forth in Annex III. Project Execution 43. The Government's Ministry of Construction would be responsible for carrying out the project with the assistance of consultants. Construction is scheduled to start by end 1975 and to be completed by end 1977. The techni- cal assistance component is expected to be completed by end 1978. With regard to supervision, the Government, PAN and the cofinancers have agreed that Bank Group procedures would be followed and that the Association would have the principal role in supervision. Procurement 44. Construction of civil works would be executed by contract. Inter- national competitive bidding in accordance with Bank Group guidelines has already taken place. Each bidder was invited to prepare a combined offer for the marine works, sewerage scheme and the various buildings included in the project and another offer for each of these components separately; the latter arrangement to encourage local contractors who could undertake building construc- tion to bid on this part of the project. However, the acceptable low bid for the major portion of the civil works (the berths and approachway) does not involve a local contractor although it is almost certain that the build- ings component (on which bids are being called for a second time with the expectation that lower bids will be submitted) will be carried out by local contractors. All consultants/technical assistance experts would be selected on terms and conditions acceptable to the Association. Economic Justification 45. The proposed project as a whole is expected to yield an economic rate of return of about 26 percent for Mauritania over a 25 year period. The fishing berths will provide a rate of return of 30 percent which reflects (a) increased landings of fish due to doubled berthing capacity which would enable Mauritania to take advantage of existing and proposed landing agreements with the major foreign fishing fleets, (b) greater revenue from fish products in the form of taxes and benefits retained in Mauritania due to an expected increase in productivity in and expansion of the fish processing plants, and  13 - (c) employment opportunities for the local population both on foreign vessels as well as in the fishing plants. Extension of the commercial berths and re- habilitation of the approachway are expected to yield an 18 percent rate of return. Benefits accruing from the additional berths (including the approach- way) consist mostly of the reduction in ship waiting time, lower costs for stevedoring and shore handling, and savings on loss and damage as a result of decreased lighterage. 46. Sensitivity analysis confirms that even under exceptionally un- favorable conditions where all expected benefits streams are reduced by 30 percent from the best estimate (due to lower than expected traffic at the commercial berths or a smaller than anticipated increase in operational pro- ductivity at the fishing berths), the project would still yield a satisfactory return of 19 percent. The port extension is also expected to generate sub- stantial indirect benefits which are not quantified in the economic evaluation. Most important of these would be additional employment in sub-contracting activities of the fishing industry, and training of local labor. Financial Results 47. Until the recent establishment of PAN, there was no separate port budget, and therefore no significant conclusions can be drawn from past financial data. The Government has agreed that tariffs will be adjusted to allow PAN to cover operating, maintenance, replacement, depreciation, taxes and administrative and other expenses, including payment of interest and other charges on debt, if any (section 5.05 (a) of the draft Credit Agreement). It has also agreed that PAN will achieve a minimum rate of return on fixed assets of not less than 6 percent up to 1977 and of not less than 2-1/2 percent thereafter (section 5.06 (a) of the draft Credit Agreement). PAN will, in addition, earn interest on cash surpluses retained for expansion and renewal purposes which, combined with the return of 2-1/2 percent on fixed assets, will enable it to pay from 1977 a required annual dividend of not less than 3 percent on the Government's total equity (section 5.08 of the draft Credit Agreement). 48. The proposed reorganization of the accounting system will enable a cost-based revision of the tariffs. The extent to which tariffs can be increased has to be carefully assessed keeping in mind the port's competitive position vis-a-vis nearby attractive ports. Pending this assessment, which will be conducted by technical assistance experts under the proposed project, the financial forecasts assume that the entire project cost will be financed by an equity contribution from the Government, and that PAN will generate additional revenue of at least US$0.33 million in 1977 with some tariff revision. The project should enable Government to realize additional net income over the period 1977-80 from fishing rights' fees and taxes on the fishing sector as a whole which, combined with the annual dividend from PAN, will enable the Government to recover the entire project cost within 7 years of its implement- ation and to earn after 1979 an annual return of about 21 percent on its equity contribution to PAN through the proposed project.  - 14 - PART V: LEGAL INSTRUMENTS AND AUTHORITY 49. The draft Development Credit Agreement between the Islamic Republic of Mauritania and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the text of a draft resolution approving the proposed Credit, are being distributed to the Executive Directors separately. 50. Features of particular interest include (i) cross remedies in case of suspension or default under the CCCE and KFAED loan agreements (sections 6.01 and 6.02 of the draft Credit Agreement) and (ii) additional conditions of effectiveness, namely that the CCCE and KFAED loan agreements are fully effective (section 7.01 of the draft Credit Agreement). 51. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. 52. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments Washington, D.C. October 17, 1975  ANNEX I Page 1 of 3 poegm COUNTRY DATA -MAURITANIA ABEA POPULATION1 mmsI l, M,70 to2 .2 il TIlion (,sid-1972) Per kw2of arable land SOCIAL INDCATORS Mauritania ua, Snp GNP PER CAPITA US& (ATLAS BASIS) aI 80 /a 180 /b 120 /b 260 35 / -r76'rth rate (per thousand) 41-17c 41. 1 4Lqj 19 7i 16 4-e-f 50/4euf- Crud. dth rote(per thoueand 29 3 1 2323 71 2 f Infant mortality rate (per 'thOimnd 11,. birth.) 181a, .167 Life expictacy at birth (years) LO0 71 1 71 51 71 161. I Z1 Gross reprudtuoti2 9r3te 0 Populationgrovi riteL2.1182_9 Population growth rate - urban 5/f.k f 51 Age structure tpervfL - 0-IL4 Z 11 15 a 15 -a1 531 52 511 65 nd over a I-E 3 I Age dependency ratio /409f1. . Eco-oIc dependency ratio /4 -.f i617' Urban population as percent of total 7 /d.f 10 /I..a 13 /oX 29 7 31 '. Fealty Planning. No. of acoeptor. onoulitive (thuci.) . No. of users (% of married -owen) ... __ot brforee (thousands) 300 530 71 7100 'if 1,700 IL 1,2107 P--oetage employed in agriculture 91 1 85 /f 805' 73 6971 Peroentage unemployed .. . . IN.A4g DISTRIBUTIONI 7ut 1income reouired by highest 5% Percent of national Income receIved by highest 20% . Percent of national income received by Iowaet 20% . P.-oent of national income received by lco-at 10% . MISTRIBUTION OF LAND OImgNINIP PL owned by top 10B of eowners S owned by mealls.t 10% of own,ers .. HEALTH AND NUTRITION Population per phyaician 30,000 17,6507 13,6 1,507 10 Population per noraing pereon 1,900 L,130 1,0 203 71 2,0 Populatioc per hoepit.1 bed 110 2,730 1,6010 ":"0L 'lt310) Per capita calorie supply a. % of requiretents 85 89 91 92 88 Per opita protein eupply, total (grams per day7-L 73 75 63 6186b Of which, animal and pulse .. i ,be 21 /a. 28 /aL 25 &g. Death rate 1-1 years /71 . EDUCATION Adjust;d prtmary echool enrollment ratio 8 15 ~ seute condary school enrollment ratio 0.1 2 71 /f 12 Years of schcoolng Provided, first and second la,el 11 1 12 13 1? Voca ti onal enrollment as % of eec. school enrollment 71L Adult literacy rats % hS91 HDUSII5 Average No. of prersns per room ("rban) 2.5/fe as 2171L. Percent of occupied units without piped water ... 6 = .. 51 /...I Acces ttofelectricity (as % of total PoPulation) ...26 /f .a.k Percent of rural poPulatise conneted to electricity 2. Radio recivers per 100 population 16 64/ 80/ b 67 , 23 1 Passenger care per 100 pepulAtis 0.1 1' 21 Ii7 2.5 glct ic poDer consumption (kat p.c.) 1~ /ad 614 187 I7 1, 071 7 Nesrint consumption p.c. kg Per year 1. .27 oi1 7 .6 7 Notes, Figures rfer either to the latest period.s or t. ~ accout ofZf anlrnotlt~r tion,ald P eiP het and the lotet yarn.Latet periods refer in principle to dis.tributionbyag-e and slea of " oamel opla an. the yearn 1956-60 or 1966-70; the latest years in prn A1Protein itandards (requiremenst) for all countries as sitab- ciple to 1960 and 1920. listed by uSDA Eomonmie Research Service proride for a .1iol.e /I The Pe r Capito GAP eetimate is at neret pric.. for allowance of 60 gram.a of total protein per day, seal 20 grossi of year oth-r than 1960,.oa.l.elt.d by the aene corn"relon anieal and polses protein , of which 10 ges%. should be animal technicZoe as the 1972 World tank Atleo. protein. Theee staWdar.ae - omeshat 1ow than those of 75 12 Average ...oaer of deughters per woman of reproductive gramus of total protein and 2) grame of animal protein as an ago. average for the world, proposed by FAO in the Third Vorld Food 71 96pulati.. groseth rates ar for the decodes ending in Survy. 1960 and 1970. 71 Somo studios hav. suggested that crude death rates of children /1 Ratn0 of population under 15 and 65 and over to popula- age 1 through 4 say be used as a first appracimation idale of tine of ages 15-61 for age dependency ratio and to labor salnutrition. force of ages 15-& for economic dependency ratio. AtPeroetage enrolled of sorreapending population of school age a1 FAO referece standards represent physiological re- as defined for each countrlr. qui rementa for Cereal activity and health, taking 71 Computed by applying to the 1970 figure the growth rtot of GNP/cap. in real terme from 1960 to 1970; /b 1972; 71 Estimate for 27 urban centers, bawed on births during 12-moth period preceding urban census; 7d 1961-62; Lg. 1965-70; 71 Estimate; 71 1964-65; 71198; 7 1970-75; a11960-72; A1Urban centers; 71 Over i0,00 population; 71Sicty-vight towns; 7 1965-73196; 7 Cap-Sort regIon and the citiee of Saint-Louis, Thios, Kanlack, Diourbel and Zigiunchoz; L19 !~65S69 7 ain twn and as many snal townhips ascould be Separately identified; L7_ 15-59 years; /a 1969; /t 60 years and overe; 71 Ratio of plopulation under 15 and 60 and over to population 15-59 years; 71 Ratio of population coder 15 and 60 and -ovr to total labor force; /1 1971; /x 1973; 71 1970-71; 71z Pereons seeeking work; /ma 1962; 7b11 incldigadveanassttnre; /aC G.vorMmont only; /ad 1961; 1961-66; laf Unadjusted; L. oe eodary level; /ah iS years and over; /ai Definition cot &avalable; ~ne1965; /ak Urban only; 71j Piped water inside. Z .acia ban been chosen as an objective country becauee it has a large export oriented mining sector which, like Kauritania, constitutes the bulk of GDP end accounts for .a,s eaprte. 83 Oc-ober 15, 1975  ANNEX T EC